FICO Announces Earnings of $5.05 per Share for Third Quarter Fiscal 2024

Rhea-AI Summary

FICO reported strong Q3 fiscal 2024 results, with revenues of $447.8 million, up from $398.7 million in the prior year. GAAP EPS was $5.05, slightly down from $5.08, while Non-GAAP EPS increased to $6.25 from $5.66. Scores revenues grew 20% to $241.4 million, driven by a 27% increase in B2B revenue. Software revenues rose 5% to $206.4 million, with Software Annual Recurring Revenue up 10% year-over-year. The company raised its full-year guidance, projecting revenues of $1.7 billion and Non-GAAP EPS of $23.16. FICO's CEO highlighted strong adoption of FICO 10 T and FICO Platform, contributing to significant growth across the business.

Positive

• Revenue increased by 12.3% year-over-year to $447.8 million
• Non-GAAP EPS grew by 10.4% to $6.25
• Scores revenues increased by 20% to $241.4 million
• B2B revenue in the Scores segment grew by 27%
• Software Annual Recurring Revenue up 10% year-over-year
• Software Dollar-Based Net Retention Rate at 108%, with platform software at 124%
• Free cash flow increased by 68.9% to $205.7 million
• Company raised full-year guidance for revenues and earnings

Negative

• GAAP EPS slightly decreased from $5.08 to $5.05 year-over-year
• B2C revenue in the Scores segment decreased by 2% due to lower myFICO.com volumes
• Professional services revenue in the Software segment decreased

Insights

Financial Analyst

FICO's Q3 FY2024 results demonstrate robust performance, with revenue climbing 12.3% year-over-year to $447.8 million. The company's core Scores segment showed impressive growth, up 20% to $241.4 million, driven by a 27% increase in B2B revenue. This growth, primarily attributed to higher unit prices, offset the decline in mortgage origination volumes, highlighting FICO's pricing power and the resilience of its scoring business.

The Software segment's 5% growth to $206.4 million is noteworthy, particularly the 31% platform ARR growth and a strong Dollar-Based Net Retention Rate of 124% for platform software. This indicates successful adoption of FICO Platform and suggests potential for sustained growth in recurring revenue streams.

Profitability remains strong with Non-GAAP EPS of $6.25, up 10.4% year-over-year. The substantial increase in free cash flow to $205.7 million from $121.8 million in the prior year period is particularly impressive, indicating improved operational efficiency and strong cash generation capabilities.

The raised full-year guidance reflects management's confidence in the company's trajectory. With the updated Non-GAAP EPS guidance of $23.16, FICO is projecting continued strong performance for the remainder of the fiscal year.

Investors should note the company's ability to grow despite challenging macroeconomic conditions, particularly in the mortgage sector. The strong adoption of FICO 10 T and FICO Platform suggests the company is successfully innovating and maintaining its competitive edge in the analytics and decision management software market.

Market Research Analyst

FICO's Q3 results underscore the company's strong market position and the growing demand for advanced analytics and decision management solutions. The 20% growth in the Scores segment, particularly the 27% increase in B2B revenue, indicates that financial institutions are increasingly relying on FICO's scoring models for risk assessment, despite the challenging environment in mortgage originations.

The adoption of FICO 10 T, the latest version of the FICO score, is a significant development. This new model's ability to better predict consumer credit risk is likely driving its uptake among lenders, potentially leading to more accurate lending decisions and improved portfolio management for FICO's clients.

In the software segment, the 31% growth in platform ARR and the impressive 124% Dollar-Based Net Retention Rate for platform software highlight the success of FICO Platform. This cloud-native decision management platform is clearly resonating with clients, suggesting a shift towards more integrated, AI-driven decision-making solutions in various industries.

The overall market for predictive analytics and decision management software appears robust, with FICO well-positioned to capitalize on this trend. The company's ability to maintain growth in its non-platform software business, albeit at a slower rate, demonstrates the ongoing relevance of its legacy products alongside newer offerings.

Looking ahead, the raised guidance suggests that FICO anticipates continued strong demand for its products and services. This confidence, coupled with the company's strong cash flow generation, indicates that FICO is well-equipped to invest in further innovation and market expansion, potentially widening its competitive moat in the analytics and decision management space.

Revenue of $448 million vs. $399 million in prior year

BOZEMAN, Mont.--(BUSINESS WIRE)-- FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its third fiscal quarter ended June 30, 2024.

Third Quarter Fiscal 2024 GAAP Results

Net income for the quarter totaled $126.3 million, or $5.05 per share, versus $128.8 million, or $5.08 per share, in the prior year period. The third quarter in Fiscal 2023 included a large one-time favorable expense adjustment.

Net cash provided by operating activities for the quarter was $213.3 million versus $122.6 million in the prior year period.

Third Quarter Fiscal 2024 Non-GAAP Results

Non-GAAP Net Income for the quarter was $156.4 million versus $143.4 million in the prior year period. Non-GAAP EPS for the quarter was $6.25 versus $5.66 in the prior year period. Free cash flow was $205.7 million for the current quarter versus $121.8 million in the prior year period. The Non-GAAP financial measures are described in the financial table captioned “Non-GAAP Results” and are reconciled to the corresponding GAAP results in the financial tables at the end of this release.

Third Quarter Fiscal 2024 GAAP Revenue

The company reported revenues of $447.8 million for the quarter as compared to $398.7 million reported in the prior year period.

“We delivered significant growth throughout the business, with strong adoption of FICO 10 T and FICO Platform,” said Will Lansing, chief executive officer. “We are pleased to announce that we are raising our full year guidance.”

Revenues for the third quarter of fiscal 2024 for the company’s two operating segments were as follows:

• Scores revenues, which include the company’s business-to-business (B2B) scoring solutions, and business-to-consumer (B2C) solutions, were $241.4 million in the third quarter, compared to $201.8 million in the prior year period, an increase of 20%. B2B revenue increased 27%, driven largely by higher unit prices, which were partially offset by a decrease in mortgage origination volumes. B2C revenue decreased 2% from the prior year period due to lower volumes on myFICO.com business.
• Software revenues, which include the company’s analytics and digital decisioning technology, were $206.4 million in the third quarter, compared to $196.9 million in the prior year period, an increase of 5%, mainly due to increased recurring revenue, partially offset by a decrease in professional services. Software Annual Recurring Revenue was up 10% year-over-year, consisting of 31% platform ARR growth and 3% non-platform growth. Software Dollar-Based Net Retention Rate was 108% at June 30, 2024, with platform software at 124% and non-platform software at 101%.

Outlook

The company is updating its previously provided guidance for fiscal 2024:

	Previous 2024 Guidance	Updated 2024 Guidance
Revenues	$1.690 billion	$1.700 billion
GAAP Net Income	$495 million	$500 million
GAAP EPS	$19.70	$19.90
Non-GAAP Net Income	$573 million	$582 million
Non-GAAP EPS	$22.80	$23.16

The Non-GAAP financial measures are described in the financial table captioned “Reconciliation of Non-GAAP Guidance.”

Company to Host Conference Call

The company will host a webcast on July 31, 2024 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to report its third quarter fiscal 2024 results and provide various strategic and operational updates. The call can be accessed at FICO's web site at www.fico.com/investors. A replay of the webcast will be available at our Past Events page through July 31, 2025.

About FICO

FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 215 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail, and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and has been made available in over 40 other countries, improving risk management, credit access and transparency.

Learn more at http://www.fico.com

Join the conversation at https://twitter.com/fico & http://www.fico.com/en/blogs/

For FICO news and media resources, visit www.fico.com/news.

FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.

Statement Concerning Forward-Looking Information

Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company’s Software segment’s business strategy, the Company’s ability to continue to develop new and enhanced products and services, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, disruptions and uncertainties with respect to global economic conditions as well as in industries and markets of the Company and its customers, the Company’s ability to keep up with rapidly changing technologies, its ability to recruit and retain qualified personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to protect such data, the failure to realize the anticipated benefits of any acquisitions, or divestitures, and material adverse developments in global economic conditions or the occurrence of certain other world events such as geopolitical tensions, military conflicts, the level and volatility of interest rates, the level of inflation, the continuing effects of the COVID-19 pandemic, an actual recession or fears of a recession, trade policies and tariffs, and political and governmental instability. Additional information on these risks and uncertainties and other factors that could affect FICO's future results are described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2023 and its subsequent filings with the SEC. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. FICO disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise.

FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30, 2024				September 30, 2023
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	156,043			$	136,778
Accounts receivable, net		437,637				387,947
Prepaid expenses and other current assets		37,455				31,723
Total current assets		631,135				556,448
Marketable securities and investments		44,034				34,237
Property and equipment, net		34,128				10,966
Operating lease right-of-use assets		26,087				25,703
Goodwill and intangible assets, net		776,806				774,244
Other assets		196,641				173,683
Total assets	$	1,708,831			$	1,575,281
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and other accrued liabilities	$	80,226			$	78,487
Accrued compensation and employee benefits		92,731				102,471
Deferred revenue		149,259				136,730
Current maturities on debt		15,000				50,000
Total current liabilities		337,216				367,688
Long-term debt		2,104,943				1,811,658
Operating lease liabilities		18,420				23,903
Other liabilities		77,558				60,022
Total liabilities		2,538,137				2,263,271
Stockholders’ deficit		(829,306	)			(687,990	)
Total liabilities and stockholders’ deficit	$	1,708,831			$	1,575,281

FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Quarter Ended June 30,								Nine Months Ended June 30,
	2024				2023				2024				2023
	(In thousands, except per share data)
Revenues:
On-premises and SaaS software	$	183,785			$	172,059			$	529,633			$	471,203
Professional services		22,614				24,851				63,637				74,348
Scores		241,450				201,778				670,447				578,273
Total revenues		447,849				398,688				1,263,717				1,123,824
Operating expenses:
Cost of revenues		88,225				71,846				258,632				228,221
Research and development		44,217				41,455				127,732				118,354
Selling, general and administrative		124,881				108,081				340,077				301,234
Amortization of intangible assets		275				275				825				825
Gain on product line asset sale		—				—				—				(1,941	)
Total operating expenses		257,598				221,657				727,266				646,693
Operating income		190,251				177,031				536,451				477,131
Other expense, net		(22,933	)			(19,244	)			(65,809	)			(63,972	)
Income before income taxes		167,318				157,787				470,642				413,159
Provision for income taxes		41,062				29,029				93,522				85,208
Net income	$	126,256			$	128,758			$	377,120			$	327,951
Earnings per share:
Basic	$	5.12			$	5.16			$	15.24			$	13.10
Diluted	$	5.05			$	5.08			$	15.01			$	12.91
Shares used in computing earnings per share:
Basic		24,646				24,959				24,743				25,040
Diluted		25,015				25,337				25,129				25,399

FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended June 30,
	2024				2023
	(In thousands)
Cash flows from operating activities:
Net income	$	377,120			$	327,951
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,012				11,642
Share-based compensation		109,457				89,750
Changes in operating assets and liabilities		(74,700	)			(93,763	)
Gain on product line asset sale		—				(1,941	)
Other, net		(15,403	)			(28,773	)
Net cash provided by operating activities		406,486				304,866
Cash flows from investing activities:
Purchases of property and equipment		(7,130	)			(3,169	)
Capitalized internal-use software costs		(11,298	)			—
Net activity from marketable securities		(2,006	)			(3,679	)
Cash transferred, net of proceeds, from product line asset sale		—				(6,126	)
Net cash used in investing activities		(20,434	)			(12,974	)
Cash flows from financing activities:
Proceeds from revolving line of credit and term loans		795,000				339,000
Payments on revolving line of credit and term loans		(538,250	)			(265,250	)
Proceeds from issuance of treasury stock under employee stock plans		15,680				15,615
Taxes paid related to net share settlement of equity awards		(137,223	)			(75,443	)
Repurchases of common stock		(498,171	)			(285,158	)
Other, net		(2,017	)			—
Net cash used in financing activities		(364,981	)			(271,236	)
Effect of exchange rate changes on cash		(1,806	)			9,164
Increase in cash and cash equivalents		19,265				29,820
Cash and cash equivalents, beginning of period		136,778				133,202
Cash and cash equivalents, end of period	$	156,043			$	163,022

FAIR ISAAC CORPORATION NON-GAAP RESULTS (Unaudited)
	Quarter Ended June 30,								Nine Months Ended June 30,
	2024				2023				2024				2023
	(In thousands, except per share data)
GAAP net income	$	126,256			$	128,758			$	377,120			$	327,951
Amortization of intangible assets		275				275				825				825
Gain on product line asset sale		—				—				—				(1,941	)
Share-based compensation expense		42,435				32,995				109,457				89,750
Income tax adjustments		(10,939	)			(8,314	)			(27,949	)			(22,046	)
Excess tax benefit		(1,636	)			(818	)			(27,345	)			(11,734	)
Adjustment to tax reserves and valuation allowance		—				(9,500	)			—				(9,500	)
Non-GAAP net income	$	156,391			$	143,396			$	432,108			$	373,305
GAAP diluted earnings per share	$	5.05			$	5.08			$	15.01			$	12.91
Amortization of intangible assets		0.01				0.01				0.03				0.03
Gain on product line asset sale		—				—				—				(0.08	)
Share-based compensation expense		1.70				1.30				4.36				3.53
Income tax adjustments		(0.44	)			(0.33	)			(1.11	)			(0.87	)
Excess tax benefit		(0.07	)			(0.03	)			(1.09	)			(0.46	)
Adjustment to tax reserves and valuation allowance		—				(0.37	)			—				(0.37	)
Non-GAAP diluted earnings per share	$	6.25			$	5.66			$	17.20			$	14.70
Free cash flow
Net cash provided by operating activities	$	213,331			$	122,623			$	406,486			$	304,866
Capital expenditures		(7,645	)			(793	)			(18,428	)			(3,169	)
Free cash flow	$	205,686			$	121,830			$	388,058			$	301,697
Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude, to the extent applicable, such items as the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses. We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION RECONCILIATION OF NON-GAAP GUIDANCE (Unaudited)
		Previous Fiscal 2024 Guidance				Updated Fiscal 2024 Guidance
		(In millions, except per share data)
GAAP net income		$	495			$	500
Amortization of intangible assets			1				1
Share-based compensation expense			140				149
Income tax adjustments			(35	)			(39	)
Excess tax benefit			(28	)			(29	)
Non-GAAP net income		$	573			$	582
GAAP diluted earnings per share		$	19.70			$	19.90
Amortization of intangible assets			0.04				0.04
Share-based compensation expense			5.57				5.93
Income tax adjustments			(1.39	)			(1.55	)
Excess tax benefit			(1.11	)			(1.15	)
Non-GAAP diluted earnings per share		$	22.80			$	23.16
Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude, to the extent applicable, such items as the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses. We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731354164/en/

Investors/Analysts:

Dave Singleton

Fair Isaac Corporation

(800) 459-7125

investor@fico.com

Source: FICO

FAQ

What was FICO's revenue for Q3 fiscal 2024?

FICO reported revenues of $447.8 million for Q3 fiscal 2024, compared to $398.7 million in the prior year period.

How did FICO's Scores segment perform in Q3 2024?

FICO's Scores revenues grew 20% to $241.4 million in Q3 2024, driven by a 27% increase in B2B revenue, partially offset by a 2% decrease in B2C revenue.

What is FICO's updated guidance for fiscal 2024?

FICO raised its fiscal 2024 guidance, projecting revenues of $1.7 billion, GAAP EPS of $19.90, and Non-GAAP EPS of $23.16.

How did FICO's Software segment perform in Q3 2024?

FICO's Software revenues increased 5% to $206.4 million in Q3 2024, with Software Annual Recurring Revenue up 10% year-over-year and a Dollar-Based Net Retention Rate of 108%.