Core Insights - Fair Isaac reported strong Q3 fiscal 2025 results, with non-GAAP earnings of $8.57 per share, exceeding estimates by 10.87% and showing a year-over-year increase of 37.1% [2] - Revenues reached $536.4 million, surpassing consensus by 3.4% and reflecting a 19.8% year-over-year growth [2] - The company continues to enhance its product offerings, including the launch of FICO Score10 BNPL models, which integrate Buy-Now-Pay-Later data into credit scoring [7] Financial Performance - Software revenues increased by 2.8% year over year to $212.1 million, with software annual recurring revenues (ARR) growing by 4% [3][4] - The adjusted EBITDA rose by 31.9% year over year to $312.3 million, with an adjusted EBITDA margin of 58.2% compared to 52.9% in the previous year [8] - Cash flow from operations was $286.2 million, up from $213.3 million in the prior-year period, and free cash flow increased to $276.2 million from $205.7 million [9][10] Revenue Breakdown - Scores, which account for 60.5% of total revenues, increased by 34.3% year over year to $324.3 million [2] - B2B scoring solutions saw a 42% year-over-year revenue increase, while B2C revenues grew by 6% [5] - Mortgage-originations revenues surged by 53% year over year, and auto-originations revenues increased by 23% [6] Guidance and Market Position - For fiscal 2025, Fair Isaac anticipates revenues of $1.98 billion and non-GAAP earnings of $29.15 per share [11] - Despite recent strong performance, there has been a downward trend in estimates, with a consensus estimate shift of -7.19% [12] - The company holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [14]

Core Viewpoint - Fair Isaac Corporation (NYSE: FICO) has been a subject of significant debate recently, particularly following the Federal Housing Finance Agency's (FHFA) announcement to introduce more competition in the market [1]. Company Analysis - FICO is positioned as a durable company with economic resilience, pricing power, and capital efficiency, which are essential traits for long-term value creation [1]. - The company operates within sectors such as Technology, Industrials, and Financials, focusing on scalable business models and mission-critical offerings [1]. - FICO's capital allocation strategies, margin trajectories, and unit economics are critical for assessing the sustainability of its growth and returns [1]. Market Context - The FHFA's move to increase competition may impact FICO's market dynamics, potentially affecting its competitive positioning and growth prospects [1].

Group 1 - Fair Isaac Corporation's stock has declined by over 45% from its all-time high in late 2024, indicating a significant drop in market value [1] - Despite the negative news surrounding Fair Isaac Corporation, there is a renewed interest in purchasing its stock, suggesting potential for recovery or undervaluation [1] Group 2 - Triba Research aims to identify high-quality businesses that can deliver sustainable, double-digit returns over the long term, focusing on companies with strong competitive advantages [2] - The strategy of Triba Research includes targeting firms operating in growing markets, maintaining low debt levels, and being led by skilled management teams [2] - The emphasis of Triba Research remains on long-term value creation while staying informed about the latest market developments [2]

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]

Core Insights - Fair Isaac's stock has experienced a significant decline but has returned over 43,000% since the mid-1990s, indicating a long-term growth trajectory despite recent challenges [1][2] - The U.S. government's decision to allow Fannie Mae and Freddie Mac to use VantageScore has disrupted Fair Isaac's long-standing monopoly in the credit scoring market [2][7] - The stock's recent decline may present a buying opportunity for long-term investors, as the company remains fundamentally strong [3][13] Company Performance - Fair Isaac's FICO score is utilized by approximately 90% of top U.S. lenders and credit unions, and 95% of U.S. securitizations reference the FICO score for risk assessment [5][6] - The company's pricing strategy has come under scrutiny, with a recent increase in wholesale royalty prices from $3.50 to $4.95 per score, a rise of over 40% [7][8] - Despite the price increase, the cost of the FICO score is minimal compared to total mortgage closing costs, suggesting that lenders may not switch to alternative scoring systems for minor savings [8] Market Dynamics - The stock's valuation has adjusted from a peak price-to-earnings (P/E) ratio of nearly 120, indicating a correction in overextended valuations [10][12] - Long-term earnings growth estimates for Fair Isaac are optimistic, projecting a 27% annualized growth rate, resulting in a price/earnings-to-growth (PEG) ratio of about 2 [13] - The company has been actively buying back stock, having reduced its diluted share count by nearly 25% over the past decade, which supports earnings per share growth [15] Future Outlook - Fair Isaac's ability to maintain pricing power for its FICO scores will be crucial for future growth, although significant price increases like the recent 40% hike may not be expected [14] - The company is well-positioned to benefit from continued borrowing trends in the U.S. and abroad, leveraging its market leadership in credit scoring [14]

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 a revenue of $536.42 million for the quarter ended June 2025, marking a year-over-year increase of 19.8% and an EPS of $8.57 compared to $6.25 a year ago, exceeding the Zacks Consensus Estimate by 3.4% [1] - The company’s EPS surprise was 10.87% over the consensus estimate of $7.73 [1] Financial Performance Metrics - Annual Recurring Revenue (ARR) - Platform: $254.2 million, slightly below the average estimate of $259.2 million [4] - Total ARR: $739.1 million, compared to the average estimate of $751.23 million [4] - Non-Platform ARR: $484.9 million, below the estimated $492.03 million [4] - Revenues from on-premises and SaaS software: $187.92 million, a 2.3% increase year-over-year, slightly below the estimate of $188.16 million [4] - Revenues from professional services: $24.19 million, exceeding the average estimate of $21.54 million, representing a 7% year-over-year increase [4] - Revenues from scores: $324.31 million, surpassing the estimate of $309.39 million, with a year-over-year change of 34.3% [4] - Revenues from software: $212.11 million, slightly above the estimate of $209.7 million, reflecting a 2.8% year-over-year increase [4] - Business-to-business scores revenue: $268.48 million, exceeding the estimate of $254.14 million, with a year-over-year change of 42.2% [4] - Business-to-consumer scores revenue: $55.83 million, slightly above the estimate of $54.78 million, representing a 6% year-over-year increase [4] - Operating income for software: $67.94 million, below the estimate of $69.33 million [4] - Operating income for scores: $284.71 million, exceeding the estimate of $269.49 million [4] Stock Performance - Fair Isaac's shares have returned -18.3% over the past month, contrasting with the Zacks S&P 500 composite's +3.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

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]