- Revenue: $448 million, up 12% year-over-year.
- GAAP Net Income: $126 million, down 2% year-over-year.
- GAAP Earnings Per Share: $5.5, down 1% year-over-year.
- Non-GAAP Net Income: $156 million, up 9% year-over-year.
- Non-GAAP Earnings Per Share: $6.25, up 10% year-over-year.
- Free Cash Flow: $206 million for the quarter, $551 million over the last four quarters.
- Share Repurchase: 196,000 shares at an average price of $1,293 per share.
- Scores Segment Revenue: $241 million, up 20% year-over-year.
- Software Segment Revenue: $206 million, up 5% year-over-year.
- Total Software ARR: $710 million, up 10% year-over-year.
- Platform ARR: $215 million, up 31% year-over-year.
- Non-Platform ARR: $495 million, up 3% year-over-year.
- ACV Bookings: $27.5 million for the quarter.
- Operating Expenses: $258 million, up 16% year-over-year.
- Non-GAAP Operating Margin: 52%, up from 51% year-over-year.
- Effective Tax Rate: 24.5% for the quarter.
- Cash and Marketable Investments: $199 million at quarter end.
- Total Debt: $2.13 billion with a weighted average interest rate of 5.3%.
- Full-Year Revenue Guidance: Raised to $1.70 billion.
- Full-Year GAAP Net Income Guidance: $500 million.
- Full-Year GAAP Earnings Per Share Guidance: $19.90.
- Full-Year Non-GAAP Net Income Guidance: $582 million.
- Full-Year Non-GAAP Earnings Per Share Guidance: $23.16.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fair Isaac Corp (FICO, Financial) reported Q3 revenues of $448 million, up 12% over the last year.
- The company delivered record free cash flow of $206 million in Q3 and $551 million over the last four quarters.
- FICO's scores segment saw a 20% increase in revenues, driven by a 27% rise in B2B revenues.
- The company announced a new Board authorization for $1 billion of share repurchase.
- FICO's platform ARR grew by 31%, indicating strong adoption of their SaaS offerings.
Negative Points
- GAAP net income for Q3 was $126 million, down 2% from the prior year.
- GAAP earnings per share were $5.5, down 1% from the prior year.
- B2C revenues in the scores segment were down 2% versus the prior year.
- Auto originations revenues were down 3%, and credit card personal loan and other originations revenues were down 7% versus the prior year.
- Software operating margins contracted by 430 basis points year over year in the quarter.
Q & A Highlights
Q: Can you comment on the selling environment for the software business and any updates from FICO World?
A: The selling environment has remained stable over the past year. FICO World generated a healthy pipeline, and customers are increasingly making strategic purchases of FICO software. This trend of strategic buying has not changed.
Q: How did mortgage revenues trend in the quarter, and are there any impacts from lenders' options to use one or two bureaus?
A: Mortgage volumes are down compared to last year but flat versus the last quarter. This trend is consistent with expectations, and there are no significant impacts from lenders' options to use one or two bureaus.
Q: The guidance raise implies a quarter-over-quarter revenue decline. Can you explain this?
A: The guidance is conservative, reflecting the seasonal decline in mortgage volumes typically seen in the fourth quarter. The overall environment remains uncertain, which also influences the guidance.
Q: The non-platform business NRR was 101%, the slowest growth in two years. Is there any cannibalization from platform to non-platform?
A: There is no significant cannibalization. The non-platform business is managed to remain relatively flat, and the growth is primarily driven by the platform side. The previous year's higher numbers were influenced by CPI increases and FX advantages.
Q: Auto origination revenues were down 3%. How did volumes trend versus last quarter?
A: Volumes were relatively flat, but there was a mix shift towards lower-priced tiers, which affected the revenue per score.
Q: Can you discuss the growth rate for platform ARR and its sustainability?
A: The growth rate for platform ARR is expected to be sustainable at around the current levels. The growth is driven by new deals and increased customer usage.
Q: How should we think about the implementation cycles for software bookings and their translation to revenue?
A: The sales cycle can be as long as 400 days, with revenue flow-through typically occurring in the subsequent year. The implementation timeline depends on the customer's readiness and sophistication.
Q: What are the impacts of potential rate cuts on your business?
A: Rate cuts are expected to increase volumes, particularly in mortgage refinancing. The timing of rate cuts is uncertain, but we anticipate volume growth as rates decrease.
Q: Can you discuss the trends in the Scores business, particularly in card and personal loan revenue?
A: The subprime market has seen the biggest pullback, with banks being conservative in new originations due to economic uncertainty. This trend is consistent with expectations.
Q: Software operating margins contracted in the quarter. What were the reasons behind this?
A: The contraction was primarily due to a one-time reimbursement in the previous year. Costs from events like FICO World also impacted margins, but we expect margin expansion in the next quarter as these costs do not repeat.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
