Fair Isaac (FICO) 28 Jan 222022 Q1 Earnings call transcript

Greetings, thank you for standing by. Welcome to the Fair Isaac Corporation Quarterly Earnings Call. [Operator Instructions] This conference is being recorded Thursday, January 27, 2022. And I’d now like to turn the conference over to Steve Weber. Please go ahead.

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

million QX million of income We prior reported $X.XX non-GAAP share in from $XXX first a in and quarter. thank income digit from deliver financial In start flow. website, first slides double per and we and strong QX of up our quarter. year us net for and everyone, quarter earnings strong to to be referencing highlights basis, of with first we’ll that in net million continue our free ARR earnings year growth today. call. Thanks, joining a the delivered we presentation Scores X and shows the XX% Steve, $XXX We section of you, quarter. Relations some fiscal GAAP Investor for our up On cash was the XX% software earnings posted revenue and our $XX Page revenues during our

flow continue million, We XX% growth the flow cash from was $XXX free QX free strong deliver up year. to cash as well. previous

XX-months million. For free trailing the flow was cash $XXX

business advanced decision by can across in business, business expertise under we FICO, We’re elements and optimize to segmentation separate Historically, making, has years our placing modeling consumer her When AI. in strong change, against has continue reporting to strategy. of improved our improvements making. drive will software software did to effective software had an made and our course progress all IP, month, continue businesses to by tools our visibility Today, happy of us we consisting software report channels. quarter, We strategic software made software under our external the focus we fiscal operational better with that process Wyman off you and led ARR see, we to disciplines, important consistency. stronger impressive of the This more change increased we’re and to important uniting integrating resourcing drive marketing of as organizational analytics, enables rate leadership deal open under sales, see role our be good interactions priorities QX rigor grid growth I’m the a services effectively into platform our Stephanie platform In Total X on wins in better deals, extensible was a our platform has partner of and business started growing and and on entire software evolved function, and an optimize applications. Covert. XX% our as that prioritization Stephanie separated profitability end-to-end endpoint resource confident focused and very X by in various enterprise. based structure presentation. aligns Jim organization deepen into been their continue we platform business pipeline I our I’m where allowing of on embraced Last resulting at enterprise up of early top to and more business clear that that and level vision we of pages alignment, business provide ago and discipline. direct our and software of to a XX%. we a this start XXXX decision allocation faster Stephanie’s ARR several leadership, and in ARR the to decisioning

also retention we’re XXX% rate that signing. the and increase XXX% we the to continue was NRR and of was Total new deals impressive. was net Our platform NRR value

As you our year. XX% same X bookings over last up on ACV were period can page the see,

We depth are excited interest about of the our platform in offering.

value had see page pricing X. strong year Scores and a in versus it U.S. the as signed use platform we is BXB day-to-day enables both were of the growth of quarter to automation good up deal on The This quarter We with using align based In continuing the deal to cloud the institution financial they innovate customer a you Scores, segment BXC. and to and XX% with quarter FICO prior our biggest provide. a the with the decisioning major multiyear analytics. our very much in can our sale-to-date, Scores platform. and we’re

On the the revenues BXB were prior quarter up versus year. side in the XX%

fiscal origination January where slowed the increases our loan about U.S. down last down for market effect We take origination areas were revenues card Auto quarter year. The originations offset personal XXXX revenues were and revenues more revenues primarily by volumes see mortgage we XX%. But up price rapidly. yet and growing were not a in year about the and in over that’s talked up are XX%, than XX% in continue were numbers. U.S. to other

our growth myFICO.com and revenues be the our prior up own both also Our a platform We year through to continue saw through BXC strong, versus XX% partner channels. quarter. strong

million Last quarter be continue value. would in our shareholder than repurchased shares in to more I’m we January. quarter, shares on and pleased focused we we said say aggressively I first always, X.X to to our shares. buyback more As continue

Our comments this add X% of morning, and buybacks new million detail. more by authorization. call I’ll for in the final turn $XXX over some the outstanding a few we announced versus let QX reduced repurchase But the to last shares Mike financial of Board me year minutes. first,

good William, afternoon, Thanks and everyone.

the year off we the X% or X% driving quarter prior said, to start was our over Total As throughout increase our product $XXX year. million $XXX year. the up Will BXC our revenues In last for collections XX% were growth line prior year. to last the Scores Scores of recovery segment fiscal revenues adjusting an year for the XX% strong business. divestiture of our up million, a from are were after period and first revenues over same

XX% originations last same that expected originations XX%. continue loan the revenues XX% were up down year. significantly. XX% As up offset the revenues partner Scores myFICO.com revenues more were from quarter origination were and up But other BXC last decline grew to revenues auto BXC and period personal year, and by from card both than same growth in was revenues mortgage areas. Credit

million of X%. $XXX up last for segment quarter software year. Software collections were divestiture the revenues and first Adjusting our the about X% business, same down the revenues in versus recovery period were

we licensed was at upfront On-prem margin efforts about million on-prem licensed our recognition on higher referred revenue quarters, or we to for last discussed recognition $X just quarter is it due $XX continue as several revenues recognized services our this change our QX upfront see policy software reduced licensed software. as subscriptions. are to XXQ reduced compared we’ve a made we in the And we seeing in revenue our software to As revenue million in time sales for professional focus point year. to to

Our last professional $XX services down $XX period same the were year. in revenues from million million,

were of derived This our from quarter XX% Americas region. revenues total company

remaining XX%, was generated EMEA Asia-Pacific. from Our region X% the and

Turning new XX% was in $XXX quarter. quarter a metrics the we quarter, first fiscal the prior of the software million, over to that increase XXXX our ARR introduced last software year

quarter and $XX of growth year. Our platform of XX% total prior versus a rate XX% first ARR representing was the ARR our million

Our than $XXX X% was quarter in non-platform was prior the first ARR year. which million higher the

overall. retention the XXX% net based rate in dollar quarter was Our

to retention usage As reflected XXX% mature we in customers’ of net software said, which and rate is the stable non-platform be relatively tends our this non-platform quarter.

net On platform dollar a land the strong other expand very on customers follow in expansion first DBNRR, hand, for quarter. and sales the to continued from show retention our platform rate was XXX% The and usage. based increased net

value this an strong annual of were million versus sales quarter XX%. contract prior million year, in of bookings the $XX.X with Software increase $XX.X

As ACV sales software annual the reminder, bookings of include excluding services. professional only value a

in our million expenses operating this accounting our gain year of from for and year-over-year JV the million expenses product XXXX. various $XXX China. decrease divestiture last the is decrease recovery cost as well for our ESS total collections as Turning our business, quarter, now first in to the due in on savings were before a The implemented from $XXX to sale quarter quarter, the

GAAP X% benefit last a mentioned tax effective on down in sale to and We from XXX our of expansion tax income the was shown year. of operating operating net rate previously on the quarter quarter million, lower non-GAAP the $XX as margin same year Reg as schedule higher excess a this last prior the for non-GAAP G delivered Our XX% was period XXXX result gain due quarter. over basis margin points year.

Our was up year. $X.XX, EPS GAAP prior the from X%

effective non-GAAP income including tax was year. benefits of the last of XX% $X The our quarter quarter, employee Our upon was exercise the was XX% net versus non-GAAP stock recognized same from quarter or XX%, year, expense from $X.XX, tax settlement awards. for excess for up the and $XXX up the EPS last rate tax million million reduced

year Free of the resulting million recurring quarter any the XXXX tax other $XXX million That $XXX be last recurring discrete free quarter approximately cash up At for tax We was million. $XXX to marketable expect XX% and is tax we cash about is from our excess XX%. to the for to trailing and XX%. effective cash expected was items. rate had end XX-months net the in before FY rate The flow estimated be flow benefit rate investments. tax XX% or

the issued the share X.XX%. debt we XXX interest of rate line draw and million fund billion we the senior weighted to as notes to in on to million use XXXX. credit Our at the an add-on of $X.XX total quarter issued notes end proceeds repurchases. the In our with was reduce We of December, of a notes XXX revolving in average

month price Turning Board to capital, per back average the which additional in quarter share. first we an current shares January $XXX nearly the in authorization. at of We XXX,XXX repurchased exhausted bought of return of shares X,XXX,XXX our

that, With repurchase a to announced turn his over mentioned, use cash. today on for we continue $XXX it share attractive back As repurchases XX. new Will Will an view thoughts million I’ll to authorization as FY of and

Thanks, Mike.

said As with I the extremely XXXX. in results my we our I’m QX remarks, take pleased opening into momentum and

diversification continues different types deliver growth Scores through of verticals strong means specific Our business dependent and on to we’re our not lending. credit

drive On to our straight delivered the in software platform strategy ARR focused strong of laser of continue remain results. and platform growth We’ve we excess XX%. on side, quarters nine

capabilities remain an We growth. We’re execution. the confident best-in-class explosive that’s that emerging in we marketplace focused have on poised for

We’re committed making. the and visibility we’re delivering to our to value shareholders progress to

to We Steve will Q&A. for back it now turn

Thanks, prepared take have. may to the Will. you now please our Operator, we’re ready questions open And concludes This lines. remarks. any

open. Barclays. [Operator Manav is Patnaik do from question with your We Instructions] you. have line Please a go ahead, Thank

of know Good that quarter the of usually given evening, you’re like you. maintained you is do. But, just through guys. could maybe strong to your some if just the I the just curious for us Thank assumptions walk you’d maybe guidance, Well, what rest year you at? looking the which

mean, guidance our our not this We’re year that over is guidance. at to we guidance, improve a Manav. position we’re better. and do our in hope things changing But I the obviously time,

Maybe you terms get on, volume can and those some numbers if of the gave the you first origination time. that us of in assumption for

just about thinking that. how how curious should for those we think trends? you’re thank of So But how you

is quarter usually or origination hardest I quarter. just specifically our generally first In think

internal plan quarter. our exceeded we for quarter This first

go gives of lot a the a So forecasts. out going news It on year the us. volume about to that’s turn to way But on us is out. I’m limb ready for good optimism not

of It’s Jan And if areas? did, your not could you mentioned just and price for usually then some on increases those you in any start color if just us but give Xst. lastly then curious out you put numbers, me, which

we pricing. earlier, have It’s the We discussed we of not a mixed based tier pricing strategic As one in did some particular board. kind spot. across

you as areas event. it’s once know, touched Other harder a bit touched. little weren’t areas Some a were kind and of year a

plays to we we it There’s So going did and any it not as on. it revision out. now watch

Please Kyle with question is go Needham. from Our Peterson next ahead.

open. is line Your

Good guys. Thanks questions. the evening for taking

looked a touch to based, it platform kind you great? happened impressive guys on just really want couple that the was color for be quarter. Just of or broad fallen growth deals large of that kind this the would ARR that any Was on just into that it acceleration, more place

of in accident. proven and weren’t but kind I an capability enterprise out kind the large couple big platform into right that been were the marketplace. fact for place, they a It’s was got It just planned that deals of think the right They it underlines we’ve of capability, the fell customers.

We’re seeing uptake. the

cases the focuses customer a with they it’s use all land expand As platform for incremental can strategy and really installed the you in platform the know, that the where place. gets get then and on us

in And happened the we landing quarter to continue is we year kind this what’s as so, love customers we forward. and the anticipate of occur large which which go will platform over

a that’s this the million? on wondered services where side expected or a the of sequentially are could relative should the like to down of kind of XX.X kind rate and kind Great, near we now off the professional kind little leveling quarter of you trends any helpful, run we in kind services to bit bit, little I with it’s the of non-platform offs and at business run take keep that just more of are know, software of to line. touch and mind then a XQ leg are things term point if there maybe

Hi it’s Mike.

feels I a it business rate, think of more put or run we recovery that A a which a rate is but big of less of with typical PS collection decline divestiture it a we’re a There it and are out to are issues at XX% of you part sort XX%, if bookings. revenue push was the way. combination of the catch want $XX.X just as last rest have about consistent we that million in was up will of revenue PS, quarter bit was contracted in XXQ, services. XX%, PS the The the going lower of year, year the had that we of what issue which forward. quarter any selling business, professional that disclosed of at about of we that first with little business schedule XX new don’t this million the we’re milestone already half

Please Our your next open. question is from Surinder Thind ahead, with go Jefferies. line is

the then keep Just clients way do kind then that of use products they is strategy. understand existing they functionality they a about how new Good tend cases first, from in color reverse of terms kind over do paid. afternoon. to question you out actually or provide the pour the into expand and is So My the works and which buy they’ll land build of maybe platform, platform? on more Can trying that maybe when functionality client? existing existing bit functionality first to build are and little

It’s on a depends the bit both and customer. of

get with customer can months a a introduction of some the XX it’s So not phase. bunch figure and dozen start about for there’s a will the they specific the And they to for phase a planning put as the for it’s typical to platform within do and solutions. within go but not to platform whole so more those then, the narrow uncommon the dozen X next platform fairly that the is different as with things months, out our immediately solutions. XX a at typically idea a through customer uses half legacy the or Typically, use, the think customer not in

embedding the cost incremental for much and utility at it’s seeing incremental providing big platform, make of so customers strategy because what And business the proposition getting really done the comes tools, of data so, is and the we’re plumbing that low And then, idea is for investment. on. the great the value a very right these so they initial having them, from

So that’s typical.

time Sometimes the lot that piece, I it’s in incremental say but quickly. functionality functionality. the comes would the the to initial replace of very that a that’s existing land

And of of then, $X has well million revenues, or a million has past to the this to some the that least the further, any BXC terms helpful. obviously, Was the business, licensing years. in the also trying typically on of $X generally little bit side solid of turning to at down break true That’s there this that growth BXB as color in it couple business? quarter quarter

the those typically fourth No, are quarter. in licenses

the that’s the we’ve that to in in last but any what given years. bank couple You can seen take of year,

the for onetime a had event like QX so, years And not has few last that.

a quarter over pretty it’s or clean So year-over-year comparison.

just it maybe on question a actually accelerate the seem were but revenues just volumes then, And or quarters quarter-over-quarter. auto to stronger growth, actually showed color on, volumes, down

was a it at up how overall that’s point So increase just think or that? looking pushing we should auto about harder people little confounding this or volume vehicles for

are you to down, when say are you external? referring volumes Surinder, some

to I am volumes. sales referring

obviously, So the actually XX% those terms activity sales volumes XX% new down I sold But and physical meaningfully, were your auto market look were both the units pretty quarter, market, up pretty and think used are of then of revenues actual they vehicles last this meaningfully. in when in at you quarter.

So kind of reconcile the difference?

we’re used card we track, we think as as data there’s data pretty is sales So sales. out concerned. good Actual there squishy the pretty volumes for about card new far

down. in volumes. call know But more So or push of up it really or less, whether don’t terms let’s they were a

require somebody auto, terms sell in little Scores to and card require doesn’t our look Remember we’re just Scores revenue up volumes credit. a for bit. of it Our to the

increase we bit little of sold. we But you it if A volume more was actions not that taken the about volume. we’ve revenue cards as increase out have the tiers number but through the possible than volume that contribution of of Scores. how the think I said, feathered total it’s that could users that was and pricing So actual the

Got price follow made increases. And remarks clarification it, you And that’s prepared then think a during helpful. question the there it. on then special comment that up about about the a I one was

think majority effect think is just this that like then is on roughly meaning that into another of quarter primarily effect kind will hit XX% it in they’re the and quarter next January, the maybe you X? take went January vast you something use I or language XX kind of that,

vast mean, but we of the control some timing things the majority majority, can’t because year, later in but yes, would upfront. I the the these is in phase say, I

you. Thank me. That’s it for

XX% is less and probably than, more a more too little than majority, half a XX%. but than strong,

Thank you.

Our is is go line Sachs. Tong with George next from Please open. question Goldman your ahead,

I Good thanks. increase. special wanted Scores pricing afternoon. the deeper Hi, into to dive

As Did for this tier these pricing how been pricing does step that with Especially how Step up? did it compare pricing consistent? you the you Is in of you light it has so to special your you year, keep did receptivity And far increases? or based step consistent it trends it inflationary down? it then up? customer prior increase did increases?

I would expectation. action inflation prior and take say of light didn’t inflationary consistent We with extra years. in

they would answer that. it. those the makes been, always consistent is, customer charge it’s for knowing we increases, value So, reaction provide, it that sense but to And as be the understand what we that actually price

wish those they our didn’t wish why is conversations customers past Of raise Do it. had with they in that similar didn’t. to do which the understand they we they prices? very course, so, And we’ve we

wish understand that course, they they us. Of but

how prior you with much Where have And to number blended a would it, consistent basis, that that helpful. years? on if that’s is? place Got up step quantify you that’s

what been never now. exact we’ve you $XX your can guidance plug. in the for I I the guys on don’t, million We we’ve provided It’s on think But of amount. you order models never, tell years

How head more with to leadership? optimal Stephanie the the then changing in the respect that about of group? bit with And outcome you can plan business, what the restructuring you software Great. that of to is and terms of execute appointment to a discuss little of the what’s

has you we’ve on in time for And this has question. spent so That’s a effective as phenomenal we’ve well. great services we’re her of years. been that sales job leader. a had, execution and and Stephanie job product that done a tucked extremely marketing just as she and great we with and an lot Everything professional focused a imagine, can us She’s underneath months. then recent she now she’s technology Yes. give with that. did on many with And

software entire business. And so she has the

I think to said, I streamlined it’s to lead that it more making. decision as going will,

at roll It be more business, little an look have could business of it around really opposed the used orientation of that You until organized. a strictly a as didn’t me. SBU, more as to to P&L little being a functionally we up

Now it her. rolls up to

here really she’s benefits, think those there’s tremendous So we but have I leader. what is just

we’re entire so the excited about And having business. software her

next is with Jeff Baird. Meuler go from Our Please ahead. question

Your line open. is

feel Yes, like see help U thanks. On large platform developed lab large you to institution? I then are financials a understand while how like it’s there us a out institutions be, software to lead the we you hearing and quarter, financial markets pipeline was this starting can guess, based on large, call a I would were about based a .S. pipeline? in lot in changing? for And in more

one North in much say institutions America. just read do LATAM, around pipeline I that too a wouldn’t Look all quarter. not strong pipeline, very I into software just financial any major platform globe, what with would we have hear not you per particular Yes. But the

North in the was now, sales right into getting where its platform our This it’s quarter our strong is obviously. put into But place. that’s customers putting enterprise that’s force what’s for And America, happening. direct energy and

quarter, it strong we this very LATAM and North to with all pipeline opportunities quarters full happy mean, It’s a But was forward. doesn’t the shifting was around go it I I and of the signal over shift. that as expect the We’re before it. America world. just is see

contracts those a when on the you’re typical what’s platform length And capabilities? of winning the client

but and we platform fully many the the know, three many, years, you be years. as but years, typical would in three years and will anticipate you platform XX put beyond, around more for contract the that in be Typically

the for know, don’t with low How last much new you then but the come obviously, what’s above it’s driving the Just a company’s, would leverage you. fairly authorizations that? go And up question. I repurchase target? leverage little Yes. has still me, Thank steady state

our we’ve as Can stock we’re we ever pace buying? as with the not. love been. continue look, buy in own to Probably been at Well we’ve

comfortable twos. with it today, could leverage quite go mid We’re our where is of higher. kind We

spend is cash intent our flow. of free Our to all

excess that. free have spending spend at But We our been in of our intent is least always flow. to cash

certainly So into I don’t powder, rate think but dry buying us future. at you same on indefinite could there is more the count the

Markets. [Operator We with RBC Sabadra go a ahead. Instructions] question from do Please have Ashish Capital

open. line Your is

my taking Thanks for question.

follow buyback those? quarter it assume guidance that second the for Just question The just I prior guidance was you’ve us didn’t with on to wanted the is the guidance. guidance, on focused fair and we along include increases? wondering increase which you’ll to pricing on Is how for think year-to-date. on Manav’s EPS significant increasing done about guidance buyback up special should

I think we’re guidance. adjust aggressive providing if you thing want not to you that stock that. That’s can our recently, a reflect do. your But buying to numbers to different not crazy do

? on And updated any color. timeline, you on wondering color any will thoughts Thanks. Any helpful be if helpful. color just That’s the just front that given, FHFA had and

Yes.

law by regulators, the and by FHFA. following been out agencies we’ve the process. We laid process by that exactly participate So the by and the in as

it are anything and awaiting to don’t share it when such news, else we is comes they’re as really, have now. right the so, And we

product to see what We have do. continue confident and just think so be have we they to very predictive and highly on, we good that but and wait I

this time. there are questions And further at no

joining we look soon. and concludes Thank to again This speaking forward for you. Thank you you today with everyone call. today’s

concludes and call. your line. thank disconnect your participation We please That the for you