Fair Isaac (FICO) 6 May 212021 Q2 Earnings call transcript

Greetings. And welcome to the Fair Isaac Quarterly Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions].

conference recorded this X, Wednesday reminder, XXXX. a is today, being May As like conference turn Weber, would to I now the Investor and Vice Relations over Treasurer. President, Steve to Please go ahead.

involve financial many compared personnel operations in second also thank Vice Weber, this quarter business, on McLaughlin. Private press Reform of differ materially. our these to Investor am now, the certain a and Investor Act Please in will FICO Regulation the our for And regarding SEC, sec.gov. for CEO, am to A issued or I include facilitate made webcast President afternoon. the this will in release results X, through available such run the Relations financial and impact today measure. results Information May the actual forward-looking presentation the the to and statements Good the at to non-GAAP to from call. will XXXX. the over I you. of release Will contained may joining filings. from this schedule the in XXXX. of call, today of schedule comparison Thank each including reconciliation Regulation FICO’s Securities of measures. at on call rate and the Litigation Relations portions joined and company’s as earnings Copies with a of quarter these The company’s website the conditions risk the filings Relations, that from of uncertainties, team. Lansing. earnings order be Will results earnings website of Steve the Investor On be the SEC, concerning are or business. macroeconomic year. is I under replay you statements And and These available COVID-XX will issued by of our G company’s to in Today, turn CFO, This fico.com to website non-GAAP the that refer prior most we statements of comparable G cause measures particular our discuss factors Mike could and in Certain GAAP SEC’s company’s management statements call are on the release characterized describes page prior understanding Lansing; uncertainties available also financial forward-looking

joining at or and you and quarter report FICO tremendous thank Thanks, Steve, by in like to on to job annual and culture challenges have healthy. and in an list safe I exceptional FICO Forbes' everyone, the of customers. FICO call. that wavering that last second employees meeting I the never FICO are their earnings for a their all want year honored great And hope best to done colleagues who and We've team, us midsize thank I'd our you, ranked dedicated employers. to really start I'm was for our commitment saying one America's our number

posted from On we discuss net our $XX million per income a net of revenues earnings of We We last and an to fiscal GAAP our financial delivered share basis, strategy X% midpoint of the XX%, at slides relations reported this to income last focus our business $XX some management earnings and optimize non-GAAP of I'll up On increase the our our second the results decision on Today, was XX% asset up And offer platform. $X.XX of do $X.XX of and about XX%, GAAP our we year. we share, our was website and our investor XX%. period same quarter's per million, section million, over year. up world-class year. $XXX respectively. how of of refine sharpen I'll continue highlights quarter. that talk how Scores and

strong free as to growth deliver We cash well. continue flow very

Second to report quarter we throughout flow free million, well that our to continue up last execute initiatives against pleased cash I'm was strategic $XXX XXX% year. the from a company. record

software for said, based for a our a decision last business model. trajectory significant lower were XX% license our provide from revenues. it DMS we to of more SaaS segment, In we've revenue, including revenue, versus XX%, segment, and application revenue. services decline we X% QX, license on-prem license This recurring our But but had to difficult some our the due more us of view business. of XX% gives several professional down upfront quarters, upfront our subscriptions, in As and revenues. software to year, up delivered down XX% of upfront last a management million SaaS of to delivered licenses last up more the toward million growth as In representative also reduced business revenues continuing when in $XX year subscriptions revenues, a we for $XXX we're decision and software. decline our will of tern a Transactional we subscription migrate continue model, strategic transition services and comparisons to and due

we that this to as continue remain big the make in more of pipeline to reality. and platform We deals to decisioning committed and our player traction vision a our preeminent technology have a in the to continue resources we're lot focusing in We gain analytics becoming space. interest contains

continues were side, the versus Scores very the in business perform On quarter the the Score well. XX% prior year. up to

back originations, The it's starting increases now an the refi in see strength We'll higher and giving difficult where increases On the our were loan unsecured have which but revenues sequentially. comps side, in year. QX. since price activity. more us Auto year cards fairly as weaker. flat, volumes began. revenues versus the grew half been a year-over-year origination instituted We're BXB were substantially from in There continued of the volumes revenue than positive see were year are pockets to mortgage XX%. down but boom are signs year, were up impact, still previous up last was also Volumes and in we continuing other were to

drive the On side, we continue to impressive growth. consumer

Our revenues Scores this same remarkable, last quarter quarter of up BXC is continued versus testament strong last growth use. FICO, were The that understanding particularly quality that of versus offering is an The year. and consumers up by to year. myfico.com XX% the the XX% demand lenders a the our

engagements I'd distribute the focused on announced to Finally, strategic of know financial product We're be our to to impractical help fit make analytic throughout we architecture Michael vision important the of recovery the and resources choices management for in FICO collections it we with platform rationale platform. But our an behind the you to the and customer potential, next the important to need our We lifecycle explain provides recovery products able framework. our extremely strategic underlying customers be details all as makes today, of serve line. and In the minutes. doesn't But professional the decisions within enhance to platform, need move. and products collections and can our coupled the like fulfill incredible services, to migrate FICO this leader of few The high-touch expand business to an best-in-class make and allocate decision a we need. to we excellent complexity it believe customization, deliver wave functionality order some technology. These divestiture the to a in have strategic collections strategy. opportunity recovery.

are minutes. come recovery assure our partnership that resources our set do clients ESS invest with customers I'll as I to period. clients, to serving the and FICO we did at our and during with have comments and that our and disruption on I committed expect. Software sharpen this some to and a thank compliance. continue chosen want we effectiveness final leading align platform. built these divestiture, solutions solutions recovery products with will our same our to they've would support Software and China collections efficiency, team We're and helped as colleagues in industry the few to and of enhance our in that decision transition and an their venture, we've to Jonas So commitment joint delivered like and and without confident have clients focus the Jonas our collections

The over turn to call the details. first Mike I'll for further financial

you and was Revenue the for year. Will, everyone. walk Today of in Thanks quarter and provide through I'll that and second increase announced $XXX of prior impact our over detail the we good on information of the quarter the and today. recovery products the more X% results afternoon, some million divestiture collection

services professional by SaaS same million, upfront last a applications same DMS revenues down last in were year. revenue X% had software increase period year. XX% was on-prem segment, million, and down Our the $XXX QX We revenue. primarily $XX management revenue The In in the was versus in that decrease services driven license revenue period in license our an upfront segment, decision quarterly and rep. subscription decreases decrease but offset by in revenues were on-prem the over XX% of

to segment, our that to like application Now, revenues. Scores you DMS remind before our and segment parts our impacting turning would are the I moving key

license a from away on-premise license as will subscription perpetual continue negatively revenues revenue First, to be move model. we to our sales ratable impacted

changed recognition our revenue assumptions for license we have on-premise Second, subscription sales.

be what lower all would future The revenue about anticipate million, ratably licensed the will will be impact in our less this impact of term over we to recognized which applications quarter it periods. net between lower revenue recognize result, the million, license full revenue recognize revenue the license we We methodology. now on year $XX $X million of this under segment, a DMS versus year, deal. $XX and prior of As software our and more was have upfront, been

We expect under we fiscal revenue fourth more prior license where them year booked methodology. $XX our million especially in comparison license quarter, last in the upfront difficult than year-over-year

revenue have out contract. this flows As over in each timing pre-cash recognized an subscription term will impact not or change the total on software we the of pointed sales the license in from past,

in are non-strategic leverage and energies to our our business services. to last of reductions in is recurring important that analytics high model, The result focus in our driven is customer revenues. Finally, emphasizing of the business on you providing decision are expertise value and business. our de software. by as component configuration our services This for power value added software, we enables PS of low and services strategic business these and our their margin are edge cutting services selling the to our strategic a of bookings seeing professional very quarter, more These are advisory stay. professional which goal core engagement, Services parts explained services consulting here we of are resulting Professional installation lower revenue our

last period XX% business, same price segment. Now turning Score as volumes we across million, quarter categories. both revenues period scores In on driven annual also same had same continued year, myfico.com were well up Revenues overall as the the that revenues partner XX% positive the BXB year, last different our XX% some was the true-up by Score originations, a this $XXX BXC year. BXB up to our grew small unit mortgage were had from period high a increases up BXC and deal from significantly. last and royalty revenues. impact license and an over

quarter, the of and $XX were were totaled were XX% Asia prior represented for year. quarter $XX year, the QX with bookings maintenance current associated from total remaining million the derived X.X% period and a including previous derived SaaS million, revenues, bookings million bookings XX% sources was or were of revenues, the X% services XX% from $X previous our the million of bookings region those XX% revenues from revenues revenues not services from from year. last year. the down XX% heal. and and quarter, $XX for Professional services revenues region, SaaS revenues related revenues. generated professional were flat up of XX% including revenues generated $XX of from Recurring total XX% million X% total revenue. for the This EMEA down quarter consulting Americas implementation transactional software PS of license total Pacific. the were

services bookings up over excluding were professional bookings year overall year. software However, X%

term continue for to overall We we of software numbers typical for professional see SaaS sales, and and fiscal our to But to shorter compared full result again, we our trend pipeline outlook feel of expect products year. bookings a services the of license term do bookings on-prem historical as emphasis good the lower and a de strong contracts. somewhat about lack

better provide As in subscription side business. understanding providing remain a investors of to typically more we common with our order note, of give committed our shareholders a companies to metrics software the that software

it extract data be continue work to we able provide validate to year. necessary hope We this and fiscal to to sometime the and

compared million totaled which of included sale in this Our the million product on assets. to gain quarter, million $XXX a quarter, operating expenses prior $XXX $X line

Excluding $X million. in were primarily back million, headcount somewhat we to that to one gain year down expense. the last expenses expenses related of expect up X Compared due our were the platform primarily expenses of strategic a XXXX. step QX, gradually to increased We time incurred incentives operating to the half restructuring add we to savings as the software. redeploy year decision management development do

entertainment and to in able colleagues. were we expense person travel once our our expect customers to increase also with resume We meetings

the this XX% year. for same income a XX% prior in operating the GAAP expansion quarter, quarter up million, net XXX from margin last was from period the basis of non Our as shown year points Reg margin schedule $XX GAAP G our quarter. was

GAAP was for effective XX% the non last was the year. from quarter for rate net million tax same $XX up income XX%. quarter quarter, the Our The

our recurring impact XXXX expect be cash to XXX%. book to That's be We the was and divestiture the about to period expect our increase tax $XX details year, quarter. more the on XX% We the next recovery gain tax we year do million flow provide $XXX a Free same of on FY, expect taxable compared that of million quarter last to an the the effective for sale, the in collection of And and XX%. will net XX%. for to approximately rate we to prior business. rate

For million quarters flow had end At of $XXX cash the the $XX million. quarter up the trailing free $XXX million from four cash, we quarter. was in last

million a X.X%. $XXX Our interest total rate at average of debt stands with weighted now

Turning share. at bought per the quarter an in $XXX to return average to capital. back price We of second XXX,XXX shares

million of new and cash. was board an we about During as a that the had quarter, prior authorization repurchases the board the million view $XXX exhausted repurchase to At $XXX -- use the March, share on authorization authorization continue and of approved. was end attractive remaining

Finally, the expected of and I'll our the walk through collection recovery divestiture products. impact of

profile PF The as sold increase we divest assets impact will of management company Because said, divestiture made They noise these much revenues. as of they not for total quarters our to decision the some a less next the platform. collection our work focus as we a our than expect involve decision than But we engagement, few recovery Will There total on revenues. our in As XX% had accounted will margin and much lower platform half through be pre to products significant tax significant we products. on income. the often transition. this that have

for the that to Will a to third to accelerated once turn our back proceeds close expect sometime over his execute of the With repurchase transaction closes. We fiscal quarter. in it contribute will the And I'll closing sales the funding $XXX deal million that, plan program to thoughts. share we

Mike. you Thank

strategy platform cornerstone and interested said time, committed our opening remain decision the number BXC. of At remarks, value in to taking a and growing my both our to As providing focused BXB same we on management and in are we I innovating in Scores customers.

global as you we we the up. lot provided haven't we as of see a open fiscal for Finally, see to know, back begin guidance year, economy this still volatility,

that hitting providing revenue focused revenue. model It's business next specific drive tremendous favor confidence upfront on our are that quarters. subscription over We the term those long few ratable to value license in us values than have far for more numbers

understand revenues. how providing and for recognition markets see any credit we of guidance the year license our until full the not of impact stabilize now, formal So we're we

call Q&A. Steve, the turn do to some so we I'll can that Now, back

take and the Will. our open Thanks, we remarks lines. are Operator, now ready concludes This prepared to questions. your please

the Thank with line Instructions]. And Manav proceed Barclays. your the [Operator you. first question. with from comes question Patnaik of Please

This on Hey. Greg is actually Manav. for

explain of when sense them. the think divestitures make far a so I lot you you've made

Just selective going left it's that more contract wondering similar candidates for Or treatment? in being be smaller from out if products any there the forward? here, could about there's

of pretty much our say end I this the reprioritization is the resources. of would that

So we in significant any don't future. our immediate see divestitures

Okay. big of And been part the hasn't a historically, M&A story.

thinking is through the a allocation, forward? go part process this capital going bigger M&A and there you about to potential As be of of story for reprioritization

I'd same attractive ourselves. in the as that is say the anything about as had in future as past, the potential there. potential in find And the that the we've always we finding been always investing it's trouble

deploy to proceeds the plan all in Our of from this repurchase. current is stock transaction

Okay. me. And for one maybe last

you're see I by more starts seeing for that what Just on Thanks. you're color we reopening sales there's you If would Any you're said, pretty pipeline and that fits helpful? think geography be about seeing. software any color, business, and geography. the by bullish the traction. different Any areas as

strong. of up across that the that. to you if But waking say South add I'd want we're board. America don't signs seeing anything to is the economy Mike, kind know I of

would on sales nature most I side sales the long I for what our add lumpy the software is and of the part. guess are cycle

And higher our a up the company have the to that in doesn't customers so, necessarily to the in frequency, to ability cycle the sales. pandemic other changes meet with for same shorter even lower it of had, quarter-to-quarter face-to-face things, might sales a due to frequency ticket month-to-month, show and people more and office,

looks the standout. would to So, be region that in pipeline regions anything in healthy, we things the all specific wouldn't regions. I see all another able serve one considered make major that we And identify or

question with line Kyle proceed Peterson question. your of the And comes from Needham. with the Please next

afternoon, Good taking for the Thanks guys. Hey. question.

costs I trajectory. Does DMS next go quarter, that investments know, bit Just up a to a some costs that, you collection about stuff some expect in guys the the given transition outlook you want to expect the should occur? you of and we side? trajectory how of bit with pick the those the expense guys talk of associated said little the business? include transition expense to about Or think debt what kind and little

able me? provide Can be you more. to hear We'll

Yes.

Sure.

little detail So we'll on more bit we to be a get able provide to closing. when the that

stay impact tuned our which we In revenues quarter the we're able any expect that to have general, we more to for don't said means furthermore, to the year relative that year that down expect bit. the And be material believe if our remove, that about next not expenses ballpark to to as last profitability, little for we're of in we specifics do So on the the share. it expenses we remarks, selling. are continue in will we same

trends good the all impact in that about feel we the including divestiture, play of not saw we and recovery, to year. full collection still and continue our expenses, the out So

helpful. us that business. strong just and the -- of BXC some Quarter volume I That's drove Is some markets color credit the with the guys just very And came give on on, Okay. in additional with pricing any between scores recent versus business? of you taken of strength have that then, guys some strong. there what the you healthy could guess initiatives

in to I'd is card say, it's and more increases the as places we the volume. of on pricing the put volume in price feather up although the last in year than where start pricing, pick to trying some on

think strong both. its is And just real I I strength and think real continues So to strength, to is BXC then, be mortgage tip remarkable. I But volume. the the

it. Got Nice guys. That's quarter. Thanks helpful.

Surinder line Please from comes the the Jefferies. Thind And proceed with your question question. with of next

revenue provide but there temporary sequentially maybe your be Good really of provided growth bit partners on what after be obviously color, Can was was additional strong outlook, In in additional Question about any kind little we BXC. you of you helpful? would the you some seasonality? afternoon. pause. that metrics, a drove the Was color that? some with thinking there provide that can should Any a marketing

and it's categories, some attribute to I part No. consumers I'd to was There's put to execution. very interested. course, consumer very increasingly would because in strong strong some myFICO. execution. of I strongest I attributable say strength would but two And it of seasonality, of it And the the

between point of in And BXC terms and myfico.com revenues? it. what at this partner current Got your is mix the the

not sure know don't I'm we? I that break Here, that. out. Do we we Mike, that disclose

Yes. We disclose don't that.

Sorry.

correctly, the feathering then And increases in I that of believe in you heard Got into terms special at price If it. them talked you I effect. this about went point.

they last should rate think How the we So run about? this Or in two-thirds think run rate hit did -- them? quarter, in that at maybe about of the how currently at mix? should of half full Are we maybe this full quarter? them

that lower think kinds terms fully volumes except were the Well, -- scores volumes. applied in the you had they applied of of I shouldn't they think were in to that

volumes And returned, at little impact. see volume you'll But so a more going point those as forward. this

the mostly and And the correctly, if impact? it. side Got was I on understand for it card auto

was It was there increases. around, there -- spread card were card

color point? how on volume. levels volumes Got additional there? into much pretty less normalized it. have auto fully Obviously, you but And card is mortgage a card provide daily inside volumes far track below basis, this Any can can We at volumes recovered. there's

I really in also I seen sequential cards, quarter of we the and say, that the from which increases issuers can results bureaus. this card the see you have will can't.

they So we're overall same seeing across the categories. and see, trends our

inconsistent see in autos from trends or those are cards, some its or can that with not volume we've seen you businesses. whether who what are So mortgage others

my you. That's it. Got Thank on part. its

comes with your line And the from next of proceed Caroline with question. Please AllianceBernstein. question Conway the

product this to be available, services look but full a the to customer Great. financial existing line. to the be And suite for adoption, areas new for overestimating may of taking on products Thank into we with you as customers. divestiture role seem implications beneficial especially my retention. the to me curious that expansion keep the drive I'm about strategy DMS of relatively question. of service What

to strategically? that So be on great it thoughts would get your

No.

that really customers This the has from of suffer we -- line won't -- our that believed for capabilities And and product our customers customers. recovery always You're other absolutely solutions the this. are of collections customers we've we high is and customers broader provide. who that, our many have utility as well suite right many as

So investment our in product with And continued to we a doing up are innovation customers have together. and close this going support and coverage Jonas. from with Jonas. tremendous wind We'll be line relationship

And customers does taken well taken provide because our worry resources whether I'm we they for very and that solutions care of. to to to is care don't the focus I much it it do frees the of, of What customers. be up our so, well confident platform on about us will the side that investment

that's right So place no question that, the for us to be focused.

just that, emerge? as there up of a any And Jonas side? their with other expecting Great. follow you're relationship to leverage expecting the are any you're components there that that Are to to from products

then a No. But -- continue collection space. parts to collection we around some recovery. collections the of near and our that and It's will around in have FICO operate really and

the So to transition continue collections. seamless. sure the Jonas, But is we'll that FICO consulting, and for make turned business will advice over to provide the advisors around example, speaking, is generally

you. Okay. Thank

proceed Baird. next from with The your question. [Operator the Please Instructions] is question Jeff of line with Mueler

at some Thank well you. pulled I'm points gen back Good not of alternatives talking brand pulled I the the branded indirect back I'm how with players some afternoon, part to partners the the is talking doing that going I marketing recognize strength, I'm on comfort the and your or you're myFICO, about which over Anything changes product? recognize guess market in further your partners, about terms some channel. benefits paid lead market What into back. channel. in of to about so in this it's get year, sustainability changes of you the those think about can the trying lean start execution, gen of lead market? in myFICO myFICO if strength, last say if

And us from to I be for least whether impact a say you we strong. is lot and back happening a them place there's these. is interest of It's execution. And to -- is or hard pulling monitoring around mind, know, good marketing in times excellent in from it's seems What lot natural appetite myFICO.com. to my do at go the a actually own is is that credit, relatively the question. Yes. it's very as very it. And like particularly But there's a brand modest our

in FICO We have to the over aided the U.S. brand XX% awareness

not it's lot there. so we a And of surprising got attention that

I leader as product an be -- in -- we think a always to for experimenting the having ourselves offerings the our bit marketplace, a products. of premium we'll robust and And lab positioned position turn well be encourage then fully innovation try featured to always and replicate. will partners, that over to as we the with as them really premium we

Okay. And the any of uptake index? score the then just update or on usage resilience maybe

with and used, be to continues it's It test in essentially.

-- a lenders we We have actually quite it have now. number of were using

And so not we're positive. charging revenue any the doesn't And It is far, very have feedback impact. it. for

Right.

talk help the a products, us get professional like feels it I what is SaaS Okay. like, different strategy you of fence to different last. think, us you I ways we're metric ex you revenue, in DMS, services. just it, me versions like new, DMP then can assess there's, And several that have the the going to you on about gave metrics -- in ring later year, software but get more typical reporting financial

just where So and viewing? it what core today? us can sits you're kind It's ring help you on fence of strategy like

our Let in me I turn is that But portfolio this say just that in would is, fully. from products and combination migrating portfolio. to capabilities been the moving in want We've a have everything process a we left have platform what the what of legacy in Mike over it's products minute we to to question And platform. products. a legacy of our answer more to and our

platform, to be truly consider so strategic. we on happen increasingly, that new sales And the the

have on customers large many by really to will for that platform. and said, wells lend incremental So in I for South in be a And benefit. want mostly are we come. customers but incremental benefits leverage business our of platform lot years Solutions that anticipate customers a our some lets we mean, be platform sales are to That where a on-prem, get for those FICO FICO the to to investments place, we for on-prem. use and land the our cloud, in there's expand, small who

invest And so those. we to in continue

selling We'll they getting platform, ready We over of there. continue our continue what solutions, if investment want is supporting to energy them anything. the And that the you those. see sides. But the made migrate that maintain both. customers the nearly call that will Mike, platform. to we'll to that to platform is into to past legacy the going make full off the as sure forward. not And as really we're -- you'll it be take much has be solutions, ready selling going of both they're But business the benefit And to years. add we'll

is Jeff. the that. directly such about reporting services we focus terms The more out on the value how that make natural level to our But and a them on we're to of our sake hence generate recurring revenue. principles revenue, something those them revenue, are we we're in their of the to revenue Hey, revenue are a really lot The margin are, decline, all of recast services shine PS and the PS profile you reach for that more shareholders. as to of customers not value and focuses beginning value increase seeking. helpful add software Look, stickiness services and let our is whole not Sure. to spotlight because We're declining. trying think to but be the trying just to on

focus So is on software. recurring our

see And more help so clearly. you our metrics will that

time in versus less distinction our been It's is outlived usefulness. less and relevant. place DMS disclosure, for apps the it's long its but a in is Second,

Prime -- opposed about then likely the our finally, Directive software to application software we're the in and as versus key platform. is DMS. to So more business simplify talk and scores scores And

are into you so happening And to-be we'll better our -- insight doing. call get revenues our platform what's what roadmap. revenues that but yet, help platform. in are Not the on And them

think how the So it expose to to achieve as those to are we're things best you. trying we about

forward I think look that. we all to

guys. thanks, So

will no at Weber. are And to now further presentation turn there questions back Mr. time. the I this

you. again Have Thank forward good Thank day. you. for speaking call. everyone today's joining Thank We to you you to a soon. look

you your line. thank ask for participation We And that that please and does conclude you today's disconnect conference. your