Group 1: Near-Monopoly Stocks - The concept of near-monopolies can provide significant returns for investors, especially during uncertain economic cycles [1][2] - Examples of near-monopoly stocks include Copart Inc., ASML Holding, and Fair Isaac Corporation, which hold substantial market shares in their respective sectors [3] Group 2: Copart Inc. (CPRT) - Copart operates in the auto market, purchasing damaged vehicles from insurance companies, repairing them, and selling them at auctions, generating $4.7 billion in net revenue [4][5] - Copart holds approximately 40% market share in its field, positioning it as a near-monopoly [5] - Currently trading at 71% of its 52-week high, there is an expectation for price recovery, supported by institutional investment [6][7] Group 3: ASML Holding (ASML) - ASML is a leading company in lithography technology, essential for chipmaking, with minimal competition due to well-patented technology [8][9] - The stock is trading at 73% of its 52-week high, indicating potential for systemic buying as the industry surges [9][10] - Institutional investors have increased their holdings in ASML, reflecting confidence in its market position [10] Group 4: Fair Isaac Corporation (FICO) - Fair Isaac is integral to the U.S. banking and lending system, managing credit scores that are crucial for issuing loans and credit [12][13] - The stock is currently trading at 57% of its 52-week high, with analysts projecting a price target of $2,163, indicating a potential upside of 56.4% [14][15] - The company commands a high valuation premium, suggesting strong market confidence in its ability to outperform peers [15][16]

FICO's Business Performance - FICO experienced 20% growth overall, with 37% growth in the B2B portion of its scores business [4] - The scores business has demonstrated double-digit revenue and profit growth for several years [5] - FICO's volumes are approximately 40% below their peak [26] FHFA and Regulatory Issues - The FHFA (Federal Housing Finance Agency) is allowing lenders to use different credit score models for mortgages sold to Fannie Mae and Freddie Mac [2] - The FHFA director, Bill Py, has referred to FICO as a monopoly [1] - FICO 10T is technically approved by the FHFA, but its implementation timeline is not the same as Vantage [19] - Concerns exist regarding the safety and soundness of the FHFA's approach [20] FICO 10T vs VantageScore - FICO 10T outperforms FICO Classic, with 18% fewer credit defaults [13] - FICO maintains over 90% market share in markets outside of government mandates [17] - In the non-conforming mortgage market, $313 billion in originations have been done with FICO 10T [18] - FICO scores cost $4.95 out of $6,000 in mortgage closing costs [21] FICO Classic and Market Stability - FICO Classic has been used for the last 20 years and is highly optimized [11] - The industry has models built on FICO Classic, and regulators use it for capital adequacy assessments [12] - FICO Classic has been stress-tested through the 2008 downturn [23][24]

Core Insights - Fair Isaac Corporation (FICO) reported third-quarter fiscal 2025 non-GAAP earnings of $8.57 per share, exceeding the Zacks Consensus Estimate by 10.87% and increasing 37.1% year over year [1][9] - Revenues reached $536.4 million, surpassing the consensus mark by 3.4% and growing 19.8% year over year, with contributions from the Americas (87%), EMEA (8%), and Asia Pacific (5%) [1][9] - Scores, which account for 60.5% of total revenues, rose 34.3% year over year to $324.3 million [1][9] Revenue Breakdown - Software revenues, including analytics and digital-decisioning technology, increased 2.8% year over year to $212.1 million [2] - Software Annual Recurring Revenues (ARR) grew 4% year over year, with platform ARR up 18% and non-platform ARR down 2% [3] - On-premises and SaaS Software, making up 35% of revenues, increased 2.2% year over year to $187.9 million [3] - Professional services revenues, accounting for 4.5% of total revenues, rose 7% year over year to $24.2 million [3] Scoring Solutions - Business-to-business (B2B) scoring solutions revenues surged 42% year over year, driven by higher unit prices and increased mortgage originations [4] - Business-to-consumer (B2C) scoring solutions revenues increased 6% year over year, supported by higher royalties from scores sold through credit reporting agencies [4] Origination Revenues - Mortgage-originations revenues increased 53% year over year [5] - Auto-originations revenues rose 23% year over year [5] - Credit card, personal loan, and other origination revenues grew 3% year over year [5] Strategic Initiatives - FICO launched FICO Score10 BNPL and FICO Score10T BNPL models, integrating Buy-Now-Pay-Later data into credit scoring, promoting financial inclusion globally [6] Operating Performance - Research and development expenses as a percentage of revenues decreased by 110 basis points year over year to 8.8% [7] - Selling, general and administrative expenses as a percentage of revenues fell by 200 basis points year over year to 25.9% [7] - Adjusted EBITDA increased 31.9% year over year to $312.3 million, with an adjusted EBITDA margin of 58.2% compared to 52.9% in the prior year [7] Financial Position - As of June 30, 2025, FICO had $189 million in cash and cash equivalents, with total debt at $2.8 billion [8] - Cash flow from operations was $286.2 million, up from $213.3 million in the prior year [8] - Free cash flow for the quarter was $276.2 million, compared to $205.7 million in the previous year [8] Guidance - FICO reiterated its fiscal 2025 guidance, projecting revenues of $1.98 billion and non-GAAP earnings of $29.15 per share [9][11] Share Repurchase - In the fiscal third quarter, FICO repurchased 284,000 shares [10]

Core Insights - Fair Isaac (FICO) reported quarterly earnings of $8.57 per share, exceeding the Zacks Consensus Estimate of $7.73 per share, and showing an increase from $6.25 per share a year ago, resulting in an earnings surprise of +10.87% [1] - The company posted revenues of $536.42 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.40%, and up from $447.85 million year-over-year [2] - Fair Isaac shares have declined approximately 24.4% year-to-date, contrasting with the S&P 500's gain of 8.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $7.97, with expected revenues of $528.91 million, and for the current fiscal year, the EPS estimate is $29.42 on revenues of $1.99 billion [7] - The estimate revisions trend for Fair Isaac was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Computers - IT Services industry, to which Fair Isaac belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Amdocs (DOX), another company in the same industry, is expected to report quarterly earnings of $1.71 per share, reflecting a year-over-year change of +5.6%, with revenues anticipated to be $1.13 billion, down 9.7% from the previous year [9][10]

Financial Data and Key Metrics Changes - The company reported Q3 revenues of $536 million, up 20% year-over-year [7] - GAAP net income for the quarter was $182 million, an increase of 44%, with GAAP earnings per share at $7.4, up 47% from the prior year [24] - Non-GAAP net income was $211 million, up 35%, with non-GAAP earnings per share at $8.57, up 37% from the prior year [24] - Free cash flow reached a record $276 million, a 34% increase from the prior year [25] Business Line Data and Key Metrics Changes - In the Scores segment, revenues were $324 million, up 34% year-over-year, driven by B2B scores growth [8][18] - B2B revenues increased by 42%, primarily due to higher unit prices and increased mortgage originations [19] - B2C revenues grew by 6%, mainly from indirect channel partners [19] - Software segment revenues were $212 million, up 3% from the prior year, with growth driven by platform SaaS [12][20] Market Data and Key Metrics Changes - The Americas region accounted for 87% of total company revenues, while EMEA generated 8% and Asia Pacific delivered 5% [20] - The company expects a sequential decline in fourth-quarter revenues due to lower point-in-time revenues [20] Company Strategy and Development Direction - The company is increasing its fiscal year 2025 guidance, indicating confidence in its strategy and execution [7][28] - Innovations such as FICO Score 10T and FICO Score 10T BNPL are aimed at enhancing credit scoring and expanding financial inclusion [10][31] - The company continues to focus on a land and expand strategy in its software business, with a strong pipeline of new functionalities [12][69] Management's Comments on Operating Environment and Future Outlook - The management noted that elevated interest rates and affordability challenges are impacting the mortgage market, keeping loan originations below historical norms [28] - The company remains engaged with industry participants regarding the FHFA's decisions and emphasizes the importance of FICO scores in the mortgage ecosystem [30][35] Other Important Information - The company repurchased 284,000 shares in Q3, marking the largest single-quarter buyback in its history [8][27] - Total debt at quarter-end was $2.78 billion, with a weighted average interest rate of 5.25% [26] Q&A Session Summary Question: Adoption of FICO Score 10T - The management indicated that the pipeline for FICO Score 10T is strong, with customers testing and using it, requiring modest retooling [39] Question: Insurance Core Product Renewal - The renewal of the insurance core product was described as a one-off license deal [40] Question: Migration to VantageScore - Management stated they are not aware of any lenders moving to VantageScore since the FHFA announcement, citing significant challenges in switching scores [45] Question: Pricing Strategy for Mortgage Scores - No decisions have been made regarding pricing strategy, but management acknowledged a value gap between what is charged and the value provided [48] Question: Engagement with Regulators - The company maintains close relationships with FHFA and GSEs, emphasizing the importance of safety and soundness in the mortgage market [53] Question: Software Business Feedback - The company continues to see interest in its software platform, with expectations for bookings to trend positively [59] Question: Opportunities in Securitization Market - Management is exploring ways to provide real-time FICO scores to the securitization market to enhance value [81] Question: Capital Allocation and Buybacks - The company plans to continue share buybacks as part of its optimal capital structure strategy [91]

Financial Data and Key Metrics Changes - The company reported Q3 revenues of $536 million, up 20% year-over-year [5] - GAAP net income for the quarter was $182 million, an increase of 44%, with GAAP earnings of $7.4 per share, up 47% from the prior year [6][23] - Non-GAAP net income was $211 million, up 35%, with non-GAAP earnings of $8.57 per share, up 37% from the prior year [6][23] - Free cash flow reached a record $276 million, a 34% increase from the prior year [24] Business Line Data and Key Metrics Changes - In the Scores segment, revenues were $324 million, up 34% year-over-year, driven by B2B scores growth [6][17] - B2B revenues increased by 42%, primarily due to higher unit prices and increased mortgage originations [17] - B2C revenues grew by 6%, mainly from indirect channel partners [18] - Software segment revenues were $212 million, up 3% from the prior year, with growth driven by platform SaaS [11][19] Market Data and Key Metrics Changes - The Americas region accounted for 87% of total company revenues, while EMEA generated 8% and Asia Pacific delivered 5% [19] - Mortgage origination revenues were up 53% year-over-year, accounting for 53% of B2B revenue and 44% of total scores revenue [18] - Auto originations revenues increased by 23%, while credit card and personal loan revenues were up 3% [18] Company Strategy and Development Direction - The company is increasing its fiscal year 2025 guidance, reflecting strong performance and confidence in its business model [5][28] - Innovations such as FICO Score 10T and FICO Score 10BNPL are aimed at enhancing credit visibility and expanding financial inclusion [8][9] - The company continues to focus on a land and expand strategy in its software segment, with a strong emphasis on customer usage growth [11][21] Management's Comments on Operating Environment and Future Outlook - Management noted that elevated interest rates and affordability challenges are impacting the mortgage market, keeping loan originations below historical norms [27] - The company remains committed to innovation and disciplined execution despite a fluid macro environment [28] - Management expressed confidence in the adoption of FICO Score 10T, highlighting its predictive capabilities and industry standard status [31][32] Other Important Information - The company repurchased 284,000 shares in Q3, marking the largest single quarter buyback in its history [6][26] - Total debt at quarter end was $2.78 billion, with a weighted average interest rate of 5.25% [25] Q&A Session Summary Question: Adoption of FICO Score 10T and customer pipeline - Management indicated a strong pipeline for FICO Score 10T, with customers currently testing and using it, requiring modest retooling [39] Question: Impact of FHFA announcement on lenders moving to VantageScore - Management stated they are not aware of any lenders moving to VantageScore since the announcement, citing significant challenges in transitioning [44] Question: Pricing strategy for mortgage scores - Management noted that no decisions have been made regarding pricing changes, emphasizing a careful approach to closing the value gap [46] Question: Engagement with regulators - Management confirmed ongoing communication with FHFA and GSEs, emphasizing the importance of safety and soundness in the mortgage market [51] Question: Opportunities for FICO scores in new markets - Management highlighted the potential for expanding FICO scores into the securitization market, providing real-time score updates [81] Question: Capital allocation and buyback strategy - Management expressed a commitment to maintaining an optimal capital structure, indicating a willingness to continue share buybacks at an accelerated pace [90][92]

Financial Performance - Total revenue reached $5364 million, a 20% increase compared to Q3 2024[3, 23] - Scores revenue increased by 34% year-over-year, reaching $3243 million[3, 23] - Software revenue increased by 3% year-over-year, reaching $2121 million[3, 23] - Adjusted EBITDA reached $3123 million, a 32% increase compared to Q3 2024[3] - Non-GAAP diluted EPS increased by 37% year-over-year, reaching $857[3] Revenue Breakdown - B2B revenue increased by 42% compared to Q3 2024[12] - B2C revenue increased by 6% compared to Q3 2024[12] - Mortgage Originations revenues increased by 53% compared to Q3 2024[12] Software Metrics - Software ARR increased by 4% year-over-year, reaching $7391 million[3] - Software ACV Bookings increased by 22% QoQ to $267 million[3, 18] - Platform ARR reached $2542 million, representing 34% of the total ARR[14]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) [Q3 Fiscal 2025 Performance Overview](index=1&type=section&id=Q3%20Fiscal%202025%20Performance%20Overview) FICO reported strong Q3 fiscal 2025 results, with total revenue increasing 20% to **$536.4 million**, and significant growth in GAAP and Non-GAAP net income and EPS driven by the Scores segment Q3 FY2025 GAAP Financial Highlights (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue ($ million) | $536.4 | $447.8 | +20% | | Net Income ($ million) | $181.8 | $126.3 | +44% | | Diluted EPS ($) | $7.40 | $5.05 | +46.5% | | Net Cash from Operating Activities ($ million) | $286.2 | $213.3 | +34.2% | Q3 FY2025 Non-GAAP Financial Highlights (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Non-GAAP Net Income ($ million) | $210.6 | $156.4 | +34.7% | | Non-GAAP EPS ($) | $8.57 | $6.25 | +37.1% | | Free Cash Flow ($ million) | $276.2 | $205.7 | +34.3% | [Segment Performance](index=1&type=section&id=Segment%20Performance) Revenue growth was primarily driven by the **Scores segment's 34% increase**, with the Software segment showing modest 3% growth supported by SaaS and platform ARR Q3 FY2025 Revenue by Segment (vs. Q3 FY2024) | Segment | Q3 FY2025 Revenue ($ million) | Q3 FY2024 Revenue ($ million) | Growth | | :--- | :--- | :--- | :--- | | Scores | $324.3 | $241.4 | +34% | | Software | $212.1 | $206.4 | +3% | - Scores segment B2B revenue increased **42%** due to higher unit prices, increased mortgage origination volume, and a US insurance score license renewal, while B2C revenue grew **6%** from indirect channel partners[4](index=4&type=chunk) - Software segment growth was supported by an **18%** increase in platform Annual Recurring Revenue (ARR) and a platform software Dollar-Based Net Retention Rate of **115%**[4](index=4&type=chunk) [Fiscal 2025 Outlook](index=2&type=section&id=Fiscal%202025%20Outlook) [Updated Full-Year Guidance](index=2&type=section&id=Updated%20Full-Year%20Guidance) FICO raised its full-year fiscal 2025 GAAP and Non-GAAP Net Income and EPS guidance, while revenue guidance remains unchanged at **$1.98 billion** Updated Fiscal 2025 Guidance | Metric | Previous Guidance | Updated Guidance | | :--- | :--- | :--- | | Revenues | $1.98 billion | $1.98 billion | | GAAP Net Income | $624 million | $630 million | | GAAP EPS | $25.05 | $25.60 | | Non-GAAP Net Income | $712 million | $718 million | | Non-GAAP EPS | $28.58 | $29.15 | [Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$1.86 billion**, while total liabilities rose to **$3.26 billion**, resulting in a **$1.40 billion** stockholders' deficit Key Balance Sheet Items (in thousands) | Account | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :--- | :--- | :--- | | Total current assets | $709,844 | $617,413 | | Total assets | $1,862,023 | $1,717,884 | | Total current liabilities | $770,608 | $380,285 | | Total liabilities | $3,259,469 | $2,680,563 | | Stockholders' deficit | $(1,397,446) | $(962,679) | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q3 2025 total revenues increased **20%** to **$536.4 million**, with operating income reaching **$262.5 million** and net income **$181.8 million**, or **$7.40** per diluted share Q3 Income Statement Highlights (in thousands, except per share data) | Metric | Quarter Ended June 30, 2025 (in thousands) | Quarter Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenues | $536,415 | $447,849 | | Operating income | $262,518 | $190,251 | | Net income | $181,789 | $126,256 | | Diluted EPS | $7.40 | $5.05 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the nine months ended June 30, 2025, was **$555.1 million**, with **$486.8 million** used in financing activities, primarily for stock repurchases Cash Flow Summary for Nine Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $555,138 | $406,486 | | Net cash used in investing activities | $(30,390) | $(20,434) | | Net cash used in financing activities | $(486,792) | $(364,981) | | Increase in cash and cash equivalents | $38,382 | $19,265 | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of GAAP to Non-GAAP Results](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Results) Q3 2025 GAAP net income of **$181.8 million** was adjusted to **$210.6 million** Non-GAAP net income, primarily by adding back **$41.9 million** in share-based compensation Q3 2025 GAAP to Non-GAAP Reconciliation (in thousands, except per share data) | Metric | GAAP (in thousands) | Adjustments (in thousands) | Non-GAAP (in thousands) | | :--- | :--- | :--- | :--- | | Net Income | $181,789 | $28,762 | $210,551 | | Diluted EPS | $7.40 | $1.17 | $8.57 | [Reconciliation of Non-GAAP Guidance](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Guidance) Updated fiscal 2025 guidance reconciles GAAP net income of **$630 million** to Non-GAAP net income of **$718 million**, primarily adjusting for **$170 million** in share-based compensation Updated FY2025 Guidance Reconciliation (in millions, except per share data) | Metric | GAAP Guidance (in millions) | Adjustments (in millions) | Non-GAAP Guidance (in millions) | | :--- | :--- | :--- | :--- | | Net Income | $630 | $88 | $718 | | Diluted EPS | $25.60 | $3.55 | $29.15 | [Explanation of Non-GAAP Measures](index=7&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Management uses non-GAAP measures like non-GAAP net income and free cash flow to provide supplemental performance information and enhance transparency into recurring business results - Management uses non-GAAP measures for financial and operational decision-making and to evaluate period-to-period comparisons[18](index=18&type=chunk)[22](index=22&type=chunk) - These measures exclude items that may not be indicative of recurring business results, such as share-based compensation, amortization of intangibles, and certain tax items[17](index=17&type=chunk)[21](index=21&type=chunk)

PART I – FINANCIAL INFORMATION [Unaudited Financial Statements](index=5&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Fair Isaac Corporation's unaudited condensed consolidated financial statements for Q3 2025 show significant revenue and net income growth, primarily from the Scores segment, alongside balance sheet changes from new debt and stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,862,023** | **$1,717,884** | | Cash and cash equivalents | $189,049 | $150,667 | | Goodwill | $785,448 | $782,752 | | **Total Liabilities** | **$3,259,469** | **$2,680,563** | | Current maturities on debt | $399,345 | $15,000 | | Long-term debt | $2,380,209 | $2,194,021 | | **Total Stockholders' Deficit** | **($1,397,446)** | **($962,679)** | Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | % Change | 9 Months 2025 | 9 Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$536,415** | **$447,849** | **20%** | **$1,475,118** | **$1,263,717** | **17%** | | Scores Revenue | $324,309 | $241,450 | 34% | $857,023 | $670,447 | 28% | | **Operating Income** | **$262,518** | **$190,251** | **38%** | **$687,694** | **$536,451** | **28%** | | **Net Income** | **$181,789** | **$126,256** | **44%** | **$496,932** | **$377,120** | **32%** | | **Diluted EPS** | **$7.40** | **$5.05** | **47%** | **$20.12** | **$15.01** | **34%** | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $555,138 | $406,486 | | Net cash used in investing activities | ($30,390) | ($20,434) | | Net cash used in financing activities | ($486,792) | ($364,981) | | Increase in cash and cash equivalents | $38,382 | $19,265 | - Revenues from the three major consumer reporting agencies (TransUnion, Equifax, Experian) accounted for **54%** of total revenues in Q3 2025, up from **47%** in Q3 2024[47](index=47&type=chunk) - In May 2025, the company issued **$1.5 billion** of 6.00% senior notes due 2033 and used the proceeds to repay outstanding term loans and its revolving line of credit[41](index=41&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q3 2025 financial performance, driven by Scores segment growth, capital allocation strategies including debt issuance and stock repurchases, and Software segment key performance indicators [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 2025 total revenues grew 20% to $536.4 million and operating income increased 38% to $262.5 million, primarily driven by a 34% revenue increase in the high-margin Scores segment Quarterly Revenue by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Scores | $324,309 | $241,450 | $82,859 | 34% | | Software | $212,106 | $206,399 | $5,707 | 3% | | **Total** | **$536,415** | **$447,849** | **$88,566** | **20%** | - The increase in Scores B2B revenue was driven by higher unit prices, increased volume of mortgage originations, and a multi-year license renewal for an insurance score product[86](index=86&type=chunk) Quarterly Operating Income by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Scores | $284,711 | $212,989 | $71,722 | 34% | | Software | $67,942 | $70,340 | ($2,398) | (3)% | | **Total Segment Operating Income** | **$304,448** | **$232,961** | **$71,487** | **31%** | - Cost of revenues as a percentage of total revenues decreased from **20%** to **16%** year-over-year for the quarter, primarily due to the increased sales mix of higher-margin Scores products[92](index=92&type=chunk) [Key Performance Metrics for Software Segment](index=23&type=section&id=Key%20Performance%20Metrics%20for%20Software%20Segment) Key Software segment metrics for Q3 2025 include Annual Recurring Revenue (ARR) growth of 4% to $739.1 million, Platform ARR growth of 18%, and a Dollar-Based Net Retention Rate (DBNRR) of 103% Annual Recurring Revenue (ARR) by Platform (in millions) | Date | Platform ARR | Non-platform ARR | Total ARR | Total YoY Change | | :--- | :--- | :--- | :--- | :--- | | June 30, 2024 | $215.1 | $494.5 | $709.6 | 10% | | June 30, 2025 | $254.2 | $484.9 | $739.1 | 4% | Dollar-Based Net Retention Rate (DBNRR) | Date | Platform DBNRR | Non-platform DBNRR | Total DBNRR | | :--- | :--- | :--- | :--- | | June 30, 2024 | 124% | 101% | 108% | | June 30, 2025 | 115% | 97% | 103% | - Annual Contract Value (ACV) Bookings for on-premises and SaaS software were **$26.7 million** for the quarter ended June 30, 2025, compared to **$27.5 million** in the prior-year quarter[77](index=77&type=chunk) [Capital Resources and Liquidity](index=31&type=section&id=Capital%20Resources%20and%20Liquidity) FICO's liquidity as of June 30, 2025, is strong with $189.0 million in cash, supported by increased operating cash flow and an expanded revolving credit facility, alongside significant debt issuance and stock repurchases - Cash flow from operating activities increased by **$148.7 million** to **$555.1 million** for the nine months ended June 30, 2025, compared to the prior year period, driven by higher net income[119](index=119&type=chunk)[120](index=120&type=chunk) - In May 2025, the company amended its credit agreement, increasing its unsecured revolving line of credit from **$600 million** to **$1.0 billion** and extending the maturity to 2030. No amount was outstanding as of June 30, 2025[125](index=125&type=chunk)[126](index=126&type=chunk) - The company repurchased **$511.3 million** of its common stock during the quarter ended June 30, 2025. A new **$1.0 billion** stock repurchase program was approved in June 2025[123](index=123&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) FICO manages market risks from interest rate changes on its fixed-rate debt and foreign currency fluctuations through short-term forward contracts, avoiding speculative derivative use - The company's debt is primarily fixed-rate senior notes, with a total face value of **$2.8 billion** as of June 30, 2025. The fair value of this debt is sensitive to market interest rate changes[133](index=133&type=chunk) - The company uses foreign currency forward contracts to manage exchange rate risk on balances denominated in British pounds, Euros, and Singapore dollars. All contracts have maturities of less than three months[28](index=28&type=chunk)[135](index=135&type=chunk) - As of June 30, 2025, there were no borrowings outstanding under the variable-rate unsecured revolving line of credit[134](index=134&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) FICO's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that FICO's disclosure controls and procedures were effective as of June 30, 2025[137](index=137&type=chunk) - No material changes to the company's internal control over financial reporting were identified during the quarter[138](index=138&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) FICO is defending against a consolidated class action lawsuit alleging antitrust claims related to FICO Score distribution, with a Sherman Act Section 2 claim proceeding to discovery - FICO is a defendant in a consolidated class action lawsuit alleging antitrust violations in connection with the distribution of FICO Scores[139](index=139&type=chunk) - A Sherman Act Section 2 claim against FICO is proceeding through the discovery stage, and the company intends to defend against it vigorously[139](index=139&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - There have been no material changes from the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024[140](index=140&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 286,351 shares at an average price of $1,785.97 per share during Q3 2025, following the approval of a new open-ended stock repurchase program in June 2025 Issuer Purchases of Equity Securities (Q3 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Max Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 18,609 | $1,805.58 | 17,865 | $361,938,170 | | May 2025 | 92,990 | $1,753.52 | 91,261 | $202,040,151 | | June 2025 | 174,752 | $1,801.14 | 174,693 | $880,091,733 | | **Total** | **286,351** | **$1,785.97** | **283,819** | **$880,091,733** | - In June 2025, the Board of Directors approved a new **$1.0 billion** stock repurchase program, which is open-ended[142](index=142&type=chunk) [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans or other trading arrangements during Q3 2025 - During Q3 2025, no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other trading arrangements[146](index=146&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Exhibits filed with the Form 10-Q include CEO and CFO certifications, XBRL data, and incorporated documents like the 2033 senior notes indenture and amended credit agreement - Exhibits filed include CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and Inline XBRL documents[147](index=147&type=chunk) - The filing incorporates by reference the Third Amended and Restated Credit Agreement and the Indenture for the 6.000% Senior Notes due 2033[147](index=147&type=chunk)

Core Insights - The recent share price corrections and valuation compression of Fair Isaac Corporation (NYSE: FICO) are driven more by sentiment shifts rather than financials or fundamentals [1] Financial Analysis - The focus on Fair Isaac Corporation's financials and fundamentals is not the primary driver of its recent stock performance [1] Market Trends - There has been a notable sentiment shift affecting the valuation of Fair Isaac Corporation, indicating broader market trends influencing investor behavior [1]