Financial Data and Key Metrics Changes - The company reported revenues of $331 million, an increase of 8% over the same period last year [11][25] - GAAP net income was $69 million, up 18%, with GAAP earnings of $2.33 per share, up 20% [11][42] - Non-GAAP net income was $90 million, up 40%, and earnings per share of $3.06 was up 42% [11][42] - Free cash flow reached a record $152 million, up 178% from last year [12][43] - Operating expenses totaled $230 million, compared to $218 million in the prior quarter [39] Business Line Data and Key Metrics Changes - Application segment revenues were $130 million, down 8% due to a 29% decline in upfront license revenues and a 21% decline in professional services revenues [14][25] - Decision management segment revenues were $33 million, down 14% year-over-year, despite a 34% increase in SaaS subscription revenue [14][26] - Scores segment revenues were $169 million, up 31% from the same period last year, with B2B revenues up 25% and B2C revenues up 47% [32][18] Market Data and Key Metrics Changes - 79% of total revenues were derived from the Americas region, with EMEA generating 15% and Asia Pacific contributing 6% [34] - Recurring revenues from transactional and maintenance sources represented 85% of total revenues [34] Company Strategy and Development Direction - The company is focused on migrating more of its business toward a subscription-based model, including SaaS software subscriptions [13] - A strategic divestiture of the collections and recovery product line was announced to enhance focus on the decision management platform [19][46] - The company aims to become a leader in decisioning analytics and is reallocating resources to support this vision [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model, emphasizing long-term value over short-term targets [50] - The company is not providing formal guidance until the credit markets stabilize and the full-year impact of revenue recognition is understood [50] Other Important Information - The company expects to close the divestiture deal in the third fiscal quarter, with proceeds funding a $200 million accelerated share repurchase program [48] - The effective tax rate for the quarter was 25%, with expectations for the fiscal year to be approximately 26% to 27% [42] Q&A Session Summary Question: Any smaller products left that could be candidates for divestiture? - Management indicated that there are no significant divestitures planned in the immediate future [53] Question: Potential for M&A to be a bigger part of the story going forward? - Management stated that the potential for M&A remains the same as in the past, with a focus on investing in internal growth [54] Question: Insights on the sales pipeline by geography? - Management noted strong performance in South America and healthy pipelines across all major regions [55][56] Question: Expense trajectory outlook? - Management expects expenses to increase slightly in the next quarter but does not anticipate a material impact on profitability [59][61] Question: Strength in the scores business? - Management attributed strength primarily to volume rather than pricing, with continued strong performance in mortgage and B2C segments [62] Question: Implications of the divestiture on customer retention? - Management reassured that customers will continue to receive support and innovation, with resources redirected to focus on the platform [72][73]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Securities registered pursuant | --- | --- | --- | --- | |------------------------------|-------------------------------------------------------------|----------------------- ...

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) Fair Isaac Corporation (FICO) filed its Quarterly Report on Form 10-Q for the period ended December 31, 2020 - Fair Isaac Corporation (FICO) filed its Quarterly Report on Form 10-Q for the period ended December 31, 2020[1](index=1&type=chunk)[2](index=2&type=chunk) - The registrant is a large accelerated filer and has filed all required reports and interactive data files during the preceding 12 months[3](index=3&type=chunk) - As of January 15, 2021, there were **29,236,110 shares of common stock outstanding**, excluding treasury stock[6](index=6&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents FICO's financial statements and management's analysis of its financial condition and operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents FICO's unaudited condensed consolidated financial statements, reflecting its financial position and performance [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details FICO's financial position, including assets, liabilities, and stockholders' equity at specific dates | Metric (In thousands) | December 31, 2020 | September 30, 2020 | | :-------------------- | :------------------ | :------------------- | | **Assets** | | | | Total current assets | $508,441 | $534,078 | | Goodwill | $817,777 | $812,364 | | Total assets | $1,576,863 | $1,606,240 | | **Liabilities** | | | | Total current liabilities | $391,042 | $414,511 | | Long-term debt | $739,831 | $739,435 | | Total liabilities | $1,252,742 | $1,275,158 | | **Stockholders' Equity** | | | | Total stockholders' equity | $324,121 | $331,082 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section outlines FICO's financial performance, presenting revenues, expenses, and net income for the reported periods | Metric (In thousands, except per share data) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :------------------------------------------- | :------------------------- | :------------------------- | | Total revenues | $312,414 | $298,504 | | Total operating expenses | $217,693 | $246,622 | | Operating income | $94,721 | $51,882 | | Income before income taxes | $87,960 | $41,895 | | Net income | $86,492 | $54,921 | | Comprehensive income | $103,540 | $69,013 | | Basic EPS | $2.97 | $1.89 | | Diluted EPS | $2.90 | $1.82 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in FICO's equity accounts, including common stock, retained earnings, and treasury stock | Metric (In thousands) | Balance at Sep 30, 2020 | Balance at Dec 31, 2020 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock Par Value | $291 | $292 | | Additional Paid-in Capital | $1,218,583 | $1,145,893 | | Treasury Stock | $(2,997,856) | $(3,035,668) | | Retained Earnings | $2,193,059 | $2,279,551 | | Accumulated Other Comprehensive Loss | $(82,995) | $(65,947) | | Total Stockholders' Equity | $331,082 | $324,121 | - Net income for the quarter ended December 31, 2020, was **$86,492 thousand**, contributing to retained earnings[13](index=13&type=chunk) - The company repurchased common stock totaling **$50,011 thousand** during the quarter[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports on FICO's cash inflows and outflows from operating, investing, and financing activities | Metric (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :-------------------- | :------------------------- | :------------------------- | | Net cash provided by operating activities | $77,947 | $60,365 | | Net cash provided by (used in) investing activities | $3,862 | $(9,011) | | Net cash used in financing activities | $(99,808) | $(48,195) | | Effect of exchange rate changes on cash | $5,267 | $1,631 | | Increase (decrease) in cash and cash equivalents | $(12,732) | $4,790 | | Cash and cash equivalents, end of period | $144,662 | $111,216 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Nature of Business](index=9&type=section&id=1.%20Nature%20of%20Business) This note describes FICO's core business, products, services, and the basis of financial statement preparation - FICO provides analytic, software, and data management products and services to automate, improve, and connect decisions for businesses[18](index=18&type=chunk) - The company serves banks, credit reporting agencies, insurers, retailers, healthcare organizations, and public agencies[18](index=18&type=chunk) - Unaudited interim condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and applicable accounting guidance[19](index=19&type=chunk) [2. Fair Value Measurements](index=10&type=section&id=2.%20Fair%20Value%20Measurements) This note details the fair value hierarchy and valuation methods used for FICO's financial assets and liabilities - Fair value is categorized into a three-level hierarchy based on input observability[27](index=27&type=chunk) - Level 1 assets include money market funds and certain marketable securities, valued using unadjusted quoted prices in active markets[28](index=28&type=chunk) | Assets (In thousands) | December 31, 2020 (Level 1) | September 30, 2020 (Level 1) | | :-------------------- | :-------------------------- | :--------------------------- | | Cash equivalents | $10,694 | $35,275 | | Marketable securities | $28,455 | $25,513 | | Total | $39,149 | $60,788 | [3. Derivative Financial Instruments](index=11&type=section&id=3.%20Derivative%20Financial%20Instruments) This note explains FICO's use of foreign currency forward contracts to manage exchange rate risks - FICO uses foreign currency forward contracts to manage risks from fluctuations in foreign exchange rates, primarily for British pound, Euro, and Singapore dollar exposures[32](index=32&type=chunk) - These contracts are not designated as hedges and are marked to market through other income, net, to mitigate changes in remeasured receivable and cash balances[33](index=33&type=chunk) | Metric (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :-------------------- | :------------------------- | :------------------------- | | Gains on foreign currency forward contracts | $1,686 | $1,145 | [4. Goodwill and Intangible Assets](index=12&type=section&id=4.%20Goodwill%20and%20Intangible%20Assets) This note provides details on amortization expenses for FICO's goodwill and intangible assets | Amortization Expense (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :---------------------------------- | :------------------------- | :------------------------- | | Completed technology | $322 | $575 | | Customer contracts and relationships | $571 | $1,140 | | Trade names | — | $37 | | Non-compete agreements | $44 | $44 | | Total | $937 | $1,796 | [5. Composition of Certain Financial Statement Captions](index=13&type=section&id=5.%20Composition%20of%20Certain%20Financial%20Statement%20Captions) This note breaks down the components of FICO's property and equipment, and other assets | Metric (In thousands) | December 31, 2020 | September 30, 2020 | | :-------------------- | :---------------- | :----------------- | | **Property and equipment, net:** | | | | Property and equipment | $156,053 | $161,119 | | Less: accumulated depreciation and amortization | $(117,042) | $(114,700) | | Total | $39,011 | $46,419 | | **Other assets:** | | | | Long-term receivables | $50,566 | $54,074 | | Prepaid commissions | $40,159 | $38,579 | | Others | $11,727 | $12,632 | | Total | $102,452 | $105,285 | [6. Revolving Line of Credit](index=14&type=section&id=6.%20Revolving%20Line%20of%20Credit) This note outlines the terms and outstanding balance of FICO's unsecured revolving line of credit - FICO has a **$400 million** unsecured revolving line of credit expiring May 8, 2023, with an option to increase by **$100 million**[42](index=42&type=chunk) - As of December 31, 2020, **$131.0 million** was outstanding at a weighted-average interest rate of **1.284%**, and the company was in compliance with all financial covenants[42](index=42&type=chunk) [7. Senior Notes](index=14&type=section&id=7.%20Senior%20Notes) This note details FICO's outstanding senior notes, including face and fair values - The company has **$400 million** in 2018 Senior Notes (**5.25%** interest, maturing May 15, 2026) and **$350 million** in 2019 Senior Notes (**4.00%** interest, maturing June 15, 2028)[43](index=43&type=chunk)[44](index=44&type=chunk) | Senior Notes (In thousands) | Face Value (Dec 31, 2020) | Fair Value (Dec 31, 2020) | Face Value (Sep 30, 2020) | Fair Value (Sep 30, 2020) | | :-------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | The 2018 Senior Notes | $400,000 | $452,000 | $400,000 | $442,000 | | The 2019 Senior Notes | $350,000 | $364,000 | $350,000 | $358,750 | | Total | $750,000 | $816,000 | $750,000 | $800,750 | [8. Income Taxes](index=14&type=section&id=8.%20Income%20Taxes) This note explains FICO's effective income tax rates and unrecognized tax benefits | Metric | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :----- | :------------------------- | :------------------------- | | Effective income tax rate | 1.7% | (31.1)% | - The effective tax rates were impacted by excess tax benefits from stock awards, with a significantly larger increase in stock price for awards vested in December 2019 compared to December 2020[48](index=48&type=chunk) - Unrecognized tax benefits for uncertain tax positions were **$9.0 million** at December 31, 2020, up from **$8.0 million** at September 30, 2020[50](index=50&type=chunk) [9. Stock-Based Employee Benefit Plans](index=15&type=section&id=9.%20Stock-Based%20Employee%20Benefit%20Plans) This note describes FICO's equity award plans and provides details on stock options and restricted stock units - FICO maintains the 2012 Long-Term Incentive Plan for equity awards (stock options, restricted stock units, performance share units, market share units) and the 2019 Employee Stock Purchase Plan[51](index=51&type=chunk) | Stock Options (In thousands) | Outstanding at Sep 30, 2020 | Granted | Outstanding at Dec 31, 2020 | | :--------------------------- | :-------------------------- | :------ | :-------------------------- | | Shares | 246 | 12 | 258 | | Weighted-average Exercise Price | $166.80 | $506.91 | $182.79 | | Restricted Stock Units (In thousands) | Outstanding at Sep 30, 2020 | Granted | Released | Forfeited | Outstanding at Dec 31, 2020 | | :------------------------------------ | :-------------------------- | :------ | :------- | :-------- | :-------------------------- | | Shares | 721 | 159 | (273) | (19) | 588 | | Weighted-average Grant-date Fair Value | $229.10 | $506.38 | $187.57 | $241.04 | $323.15 | [10. Earnings per Share](index=16&type=section&id=10.%20Earnings%20per%20Share) This note presents FICO's net income and weighted-average shares used to calculate basic and diluted earnings per share | Metric (In thousands, except per share data) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :------------------------------------------- | :------------------------- | :------------------------- | | Net income | $86,492 | $54,921 | | Basic weighted-average shares | 29,127 | 29,025 | | Diluted weighted-average shares | 29,789 | 30,169 | | Basic EPS | $2.97 | $1.89 | | Diluted EPS | $2.90 | $1.82 | [11. Segment Information](index=16&type=section&id=11.%20Segment%20Information) This note provides financial data for FICO's reportable segments: Applications, Scores, and Decision Management Software - FICO operates in three reportable segments: Applications, Scores, and Decision Management Software[59](index=59&type=chunk)[63](index=63&type=chunk) | Segment Revenues (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :------------------------------ | :------------------------- | :------------------------- | | Applications | $135,361 | $152,178 | | Scores | $144,651 | $115,138 | | Decision Management Software | $32,402 | $31,188 | | Total segment revenues | $312,414 | $298,504 | | Segment Operating Income (Loss) (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :--------------------------------------------- | :------------------------- | :------------------------- | | Applications | $35,502 | $36,168 | | Scores | $123,025 | $97,426 | | Decision Management Software | $(14,818) | $(19,457) | | Unallocated Corporate Expenses | $(30,253) | $(34,210) | | Total segment operating income | $113,456 | $79,927 | [12. Contract Balances and Performance Obligations](index=19&type=section&id=12.%20Contract%20Balances%20and%20Performance%20Obligations) This note details FICO's contract balances, including receivables and deferred revenues, and remaining performance obligations | Receivables (In thousands) | December 31, 2020 | September 30, 2020 | | :------------------------- | :---------------- | :----------------- | | Billed | $187,071 | $211,776 | | Unbilled | $178,839 | $181,550 | | Net receivables | $361,192 | $388,254 | | Short-term receivables | $310,626 | $334,180 | | Deferred Revenues (In thousands) | Quarter Ended Dec 31, 2020 | | :------------------------------- | :------------------------- | | Deferred revenues at Sep 30, 2020 | $122,141 | | Revenue recognized from beginning balance | $(47,793) | | Increases due to billings | $48,441 | | Deferred revenues at Dec 31, 2020 | $122,789 | - Revenue allocated to remaining performance obligations was **$337.7 million** as of December 31, 2020, with approximately **50%** expected to be recognized over the next **20 months**[80](index=80&type=chunk) [13. Contingencies](index=20&type=section&id=13.%20Contingencies) This note addresses FICO's involvement in legal disputes and the accounting for potential losses - FICO is involved in disputes with customers, claims from former employees, and other legal actions in the ordinary course of business[81](index=81&type=chunk) - Litigation accruals are recorded for probable and estimable losses; for reasonable possibility of loss, no material aggregate exposure is determined[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of FICO's financial condition, operational results, and key performance drivers [FORWARD LOOKING STATEMENTS](index=21&type=section&id=FORWARD%20LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements and the inherent risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including the impact of COVID-19, which may cause actual results to differ materially[84](index=84&type=chunk) - Readers are cautioned to review risk factors described in this and other SEC filings[84](index=84&type=chunk) [OVERVIEW](index=21&type=section&id=OVERVIEW) This section provides a high-level summary of FICO's business, strategic initiatives, and key financial highlights for the period - FICO uses predictive analytics and decision management systems to automate and improve business decisions, serving thousands of companies in over 100 countries[86](index=86&type=chunk) | Metric | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | YoY Change | | :----- | :------------------------- | :------------------------- | :--------- | | Total Revenue | $312.4 million | $298.5 million | +5% | | Scores Revenue | $144.7 million | $115.1 million | +26% | | Applications and Decision Management Software Revenue | $167.8 million | $183.4 million | -9% | | Operating Income | $94.7 million | $51.9 million | +83% | | Net Income | $86.5 million | $54.9 million | +57% | - The company completed a transition to bundled software subscription contracts, shifting revenue recognition timing and expecting a negative impact on recognized term software license revenue in fiscal 2021, but no negative impact on cash flows[89](index=89&type=chunk) - FICO sold cyber risk score operations and certain Applications and Decision Management Software assets to an affiliated joint venture in China, exiting less strategic areas to invest in higher-value ones[91](index=91&type=chunk) - The company repurchased approximately **101,000 shares** for **$50.0 million**, with **$174.8 million** remaining under the stock repurchase program[92](index=92&type=chunk) [COVID-19 Update](index=22&type=section&id=COVID-19%20Update) This section discusses FICO's response to the COVID-19 pandemic and its uncertain impact on future financial results - FICO's focus remains on employee health and safety, customer service, and business continuity amidst the COVID-19 pandemic[93](index=93&type=chunk) - The full impact of COVID-19 on future results, financial condition, liquidity, and cash flows remains uncertain due to evolving factors[93](index=93&type=chunk) [Bookings](index=22&type=section&id=Bookings) This section presents booking metrics as an indicator of future revenue, including contract values and terms - Bookings, representing contracts signed that generate current and future revenue, are an important indicator of future revenues, though not a substitute for revenue analysis[94](index=94&type=chunk) | Metric | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :----- | :------------------------- | :------------------------- | | Bookings (in millions) | $68.1 | $112.1 | | Bookings Yield | 13% | 14% | | Number of Bookings over $1 Million | 11 | 25 | | Weighted-Average Term (Months) | 36 | 39 | - Transactional and maintenance bookings increased to **67%** of total bookings in Q4 2020 from **37%** in Q4 2019, while professional services and license bookings decreased[104](index=104&type=chunk) [RESULTS OF OPERATIONS](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes FICO's financial performance, focusing on revenue and expense trends across segments [Revenues](index=24&type=section&id=Revenues) This section details FICO's revenue performance by segment, highlighting key drivers and changes | Segment Revenues (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | Period-to-Period Change | Period-to-Period Percentage Change | | :------------------------------ | :------------------------- | :------------------------- | :---------------------- | :--------------------------------- | | Applications | $135,361 | $152,178 | $(16,817) | (11)% | | Scores | $144,651 | $115,138 | $29,513 | 26% | | Decision Management Software | $32,402 | $31,188 | $1,214 | 4% | | Total | $312,414 | $298,504 | $13,910 | 5% | - Applications revenue decreased primarily due to a **$12.8 million decrease** in fraud solutions, attributed to the shift in revenue recognition for term license subscription sales and fewer new/renewed deals[108](index=108&type=chunk) - Scores revenue increased by **$29.5 million**, driven by a **$16.8 million increase** in business-to-business scores (higher mortgage volumes, higher unit price in unsecured originations) and a **$12.7 million increase** in business-to-consumer services[108](index=108&type=chunk) - Decision Management Software revenue increased by **$1.2 million**, mainly from higher SaaS subscription revenue, partially offset by lower license revenue[111](index=111&type=chunk) [Operating Expenses and Other Income / Expenses](index=25&type=section&id=Operating%20Expenses%20and%20Other%20Income%20%2F%20Expenses) This section analyzes FICO's operating expenses and other income/expenses, explaining period-over-period changes | Operating Expenses (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | Period-to-Period Change | Period-to-Period Percentage Change | | :-------------------------------- | :------------------------- | :------------------------- | :---------------------- | :--------------------------------- | | Cost of revenues | $89,528 | $90,758 | $(1,230) | (1)% | | Research and development | $40,651 | $38,943 | $1,708 | 4% | | Selling, general and administrative | $93,911 | $112,021 | $(18,110) | (16)% | | Amortization of intangible assets | $937 | $1,796 | $(859) | (48)% | | Restructuring and impairment charges | — | $3,104 | $(3,104) | (100)% | | Gain on sale of product line assets | $(7,334) | — | $(7,334) | —% | | Total operating expenses | $217,693 | $246,622 | $(28,929) | (12)% | - Cost of revenues decreased due to reduced travel from COVID-19, partially offset by increased third-party data costs[115](index=115&type=chunk) - Selling, general and administrative expenses decreased significantly due to lower travel, marketing costs, non-capitalizable commissions, and labor/personnel costs from strategic cost initiatives[119](index=119&type=chunk) - A **$7.3 million gain** on sale of product line assets was recognized from the divestiture of cyber risk score operations and certain Applications and Decision Management Software assets[124](index=124&type=chunk) - Other income (expense), net increased by **$3.1 million**, primarily due to decreased foreign currency exchange losses and increased net unrealized gains on the supplemental retirement and savings plan[127](index=127&type=chunk) [Operating Income](index=27&type=section&id=Operating%20Income) This section examines FICO's operating income by segment and overall, detailing the factors influencing changes | Segment Operating Income (Loss) (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | Period-to-Period Change | Period-to-Period Percentage Change | | :--------------------------------------------- | :------------------------- | :------------------------- | :---------------------- | :--------------------------------- | | Applications | $35,502 | $36,168 | $(666) | (2)% | | Scores | $123,025 | $97,426 | $25,599 | 26% | | Decision Management Software | $(14,818) | $(19,457) | $4,639 | (24)% | | Corporate expenses | $(30,253) | $(34,210) | $3,957 | (12)% | | Total segment operating income | $113,456 | $79,927 | $33,529 | 42% | | Operating income (Total) | $94,721 | $51,882 | $42,839 | 83% | - The **83% increase** in total operating income was driven by a **$15.6 million decrease** in segment operating expenses, a **$13.9 million increase** in segment revenues, a **$7.3 million gain** on asset sales, and a **$4.0 million decrease** in corporate expenses[132](index=132&type=chunk) - Scores segment operating income increased by **$25.6 million** due to higher revenue, while Decision Management Software segment operating loss decreased by **$4.6 million** due to lower expenses and higher revenue[133](index=133&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=29&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) This section discusses FICO's financial resources, liquidity position, and management's outlook on funding requirements [Outlook](index=29&type=section&id=Outlook) This section provides FICO's perspective on its cash position and ability to meet future capital and working capital needs - As of December 31, 2020, FICO had **$144.7 million** in cash and cash equivalents, with **$97.7 million** held by foreign subsidiaries[139](index=139&type=chunk) - Management believes current cash, available credit, and anticipated operating cash flows will be sufficient to fund working capital and other capital requirements[139](index=139&type=chunk) - The company does not foresee a need to repatriate foreign cash and cash equivalents, which are deemed permanently reinvested[139](index=139&type=chunk) [Summary of Cash Flows](index=29&type=section&id=Summary%20of%20Cash%20Flows) This section summarizes FICO's cash flow activities from operations, investing, and financing | Cash Flows (In thousands) | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | Period-to-Period Change | | :------------------------ | :------------------------- | :------------------------- | :---------------------- | | Operating activities | $77,947 | $60,365 | $17,582 | | Investing activities | $3,862 | $(9,011) | $12,873 | | Financing activities | $(99,808) | $(48,195) | $(51,613) | | Effect of exchange rate changes on cash | $5,267 | $1,631 | $3,636 | | Increase (decrease) in cash and cash equivalents | $(12,732) | $4,790 | $(17,522) | - Net cash from operating activities increased by **$17.5 million**, primarily due to a **$31.6 million increase** in net income[142](index=142&type=chunk) - Net cash from investing activities saw a **$12.9 million change**, driven by **$8.3 million** in proceeds from asset sales and a **$3.5 million decrease** in property and equipment purchases[143](index=143&type=chunk) - Net cash used in financing activities increased by **$51.6 million**, mainly due to a **$350.0 million decrease** in senior note proceeds, partially offset by reduced revolving line of credit payments and common stock repurchases[144](index=144&type=chunk) [Repurchases of Common Stock](index=30&type=section&id=Repurchases%20of%20Common%20Stock) This section details FICO's common stock repurchase program and shares bought back during the quarter - In July 2020, the Board approved an open-ended stock repurchase program for up to **$250.0 million**[146](index=146&type=chunk) - During the quarter ended December 31, 2020, FICO repurchased approximately **101,000 shares** for **$50.0 million**[147](index=147&type=chunk) [Revolving Line of Credit](index=30&type=section&id=Revolving%20Line%20of%20Credit) This section describes FICO's revolving credit facility, its outstanding balance, and compliance with covenants - FICO has a **$400 million** unsecured revolving line of credit, expiring May 8, 2023, used for working capital, general corporate purposes, debt refinancing, acquisitions, and stock repurchases[148](index=148&type=chunk) - As of December 31, 2020, **$131.0 million** was outstanding at a weighted-average interest rate of **1.284%**, with compliance to all financial covenants[148](index=148&type=chunk) [Senior Notes](index=30&type=section&id=Senior%20Notes) This section outlines FICO's senior notes, their carrying value, and compliance with financial covenants - The company has 2018 Senior Notes (**$400 million**, **5.25%**, maturing May 15, 2026) and 2019 Senior Notes (**$350 million**, **4.00%**, maturing June 15, 2028)[149](index=149&type=chunk) - As of December 31, 2020, the carrying value of Senior Notes was **$750.0 million**, and FICO was in compliance with all financial covenants[149](index=149&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements impacting FICO's financial condition - FICO does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition or results of operations[150](index=150&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=30&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section describes FICO's key accounting policies and estimates that require significant management judgment [Revenue Recognition](index=31&type=section&id=Revenue%20Recognition) This section explains FICO's policies for recognizing revenue from various contract types and performance obligations - Revenue is primarily from term/perpetual software/scoring licenses, maintenance, SaaS subscriptions, consumer scoring/monitoring, and professional services[154](index=154&type=chunk) - For contracts with multiple performance obligations, transaction price is allocated based on relative standalone selling price (SSP)[154](index=154&type=chunk) - Significant judgment is required to determine if products/services are distinct, to determine SSPs, and to estimate progress for fixed-price professional services[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [Capitalized Commission Costs](index=32&type=section&id=Capitalized%20Commission%20Costs) This section details FICO's accounting policy for capitalizing and amortizing incremental commission costs - Incremental commission fees for obtaining customer contracts are capitalized and amortized on a straight-line basis over ten years[162](index=162&type=chunk) - Costs with an amortization period of one year or less are expensed as incurred[163](index=163&type=chunk) [Business Combinations](index=32&type=section&id=Business%20Combinations) This section outlines FICO's accounting for business combinations, including valuation of acquired assets and liabilities - Acquired assets and assumed liabilities are recognized at acquisition-date fair values, with goodwill as the excess of consideration transferred[164](index=164&type=chunk) - Significant estimates and assumptions are required for valuing intangible assets, contractual obligations, and pre-acquisition contingencies[165](index=165&type=chunk) - Changes in estimates for uncertain tax positions and tax-related valuation allowances after the measurement period affect income tax provision[168](index=168&type=chunk) [Goodwill, Acquisition Intangibles and Other Long-Lived Assets - Impairment Assessment](index=33&type=section&id=Goodwill%2C%20Acquisition%20Intangibles%20and%20Other%20Long-Lived%20Assets%20-%20Impairment%20Assessment) This section describes FICO's policies for assessing impairment of goodwill and other long-lived assets - Goodwill is assessed for impairment annually using a qualitative 'step zero' approach, or a two-step quantitative test if impairment is more likely than not[169](index=169&type=chunk) - For fiscal 2018, 2019, and 2020, a qualitative analysis concluded that goodwill was not impaired for any reporting units[170](index=170&type=chunk) - Finite-lived intangible assets and other long-lived assets are assessed for impairment when indicators exist, using undiscounted cash flows[171](index=171&type=chunk) [Share-Based Compensation](index=34&type=section&id=Share-Based%20Compensation) This section explains FICO's accounting for stock-based compensation and the valuation assumptions used - Stock-based compensation cost is measured at grant date fair value and recognized as expense over the vesting period[174](index=174&type=chunk) - Valuation models (Black-Scholes, Monte Carlo) require assumptions on stock price volatility, dividend yield, turnover rates, and exercise behaviors[174](index=174&type=chunk) [Income Taxes](index=34&type=section&id=Income%20Taxes) This section details FICO's policies for income tax estimation and recognition of uncertain tax positions - Income taxes are estimated based on various jurisdictions, involving significant judgment in determining the provision and assessing deferred tax asset realization[175](index=175&type=chunk) - Benefits for uncertain tax positions are recognized using a two-step approach: likelihood of sustainment and measurement of the largest likely realized amount[176](index=176&type=chunk) [Contingencies and Litigation](index=35&type=section&id=Contingencies%20and%20Litigation) This section describes FICO's approach to assessing and accounting for potential losses from legal proceedings - FICO assesses the likelihood and potential range of probable losses for various legal proceedings, lawsuits, and claims[179](index=179&type=chunk) - Accruals are made for probable and estimable losses; disclosures are considered for less probable or unestimable amounts[179](index=179&type=chunk) [New Accounting Pronouncements](index=35&type=section&id=New%20Accounting%20Pronouncements) This section discusses the adoption of new accounting standards and their impact on FICO's financial statements - FICO adopted ASU 2018-15 (Internal-Use Software) and Topic 326 (Credit Losses) in Q1 fiscal 2021, with no significant impact on condensed consolidated financial statements[180](index=180&type=chunk)[181](index=181&type=chunk) - No recently issued accounting pronouncements are expected to have a significant effect on financial statements[26](index=26&type=chunk)[184](index=184&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details FICO's exposure to market risks, including interest and foreign exchange rates, and risk management strategies [Market Risk Disclosures](index=35&type=section&id=Market%20Risk%20Disclosures) This section outlines FICO's exposure to market risks, particularly interest rate and foreign exchange rate fluctuations - FICO is exposed to market risk from changes in interest rates and foreign exchange rates, but does not use derivative financial instruments for speculative purposes[182](index=182&type=chunk) [Interest Rate](index=35&type=section&id=Interest%20Rate) This section details FICO's exposure to interest rate risk, affecting cash equivalents and variable-rate debt | Metric (Dollars in thousands) | December 31, 2020 Basis Cost | December 31, 2020 Carrying Amount | December 31, 2020 Average Yield | | :---------------------------- | :--------------------------- | :-------------------------------- | :------------------------------ | | Cash and cash equivalents | $144,662 | $144,662 | 0.05% | - The fair value of Senior Notes (2018 and 2019) may fluctuate due to market interest rates and economic conditions[187](index=187&type=chunk) - The revolving line of credit has variable interest rates, impacting interest incurred and cash flows but not the fair value of the instrument[188](index=188&type=chunk) [Foreign Currency Forward Contracts](index=36&type=section&id=Foreign%20Currency%20Forward%20Contracts) This section describes FICO's use of foreign currency forward contracts to mitigate exchange rate risk - FICO uses foreign currency forward contracts to manage foreign exchange rate risk on foreign-currency-denominated receivable and cash balances[189](index=189&type=chunk) - These contracts have maturity periods of less than three months and mitigate foreign exchange rate risk by offsetting changes in remeasured asset values[189](index=189&type=chunk) | Foreign Currency Forward Contracts (In thousands) | Contract Amount (Dec 31, 2020) | USD (Dec 31, 2020) | Fair Value (Dec 31, 2020) | | :------------------------------------------------ | :----------------------------- | :----------------- | :------------------------ | | Sell Euro (EUR) | EUR 18,900 | $23,068 | $0 | | Buy British pound (GBP) | GBP 12,034 | $16,400 | $0 | | Buy Singapore dollar (SGD) | SGD 6,725 | $5,100 | $0 | [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of FICO's disclosure controls and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of FICO's disclosure controls and procedures as evaluated by management - FICO's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2020[192](index=192&type=chunk) - These controls ensure timely and accurate recording, processing, summarizing, and reporting of information required under the Exchange Act[192](index=192&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in FICO's internal control over financial reporting during the quarter - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, FICO's internal control over financial reporting during the quarter[193](index=193&type=chunk) [PART II – OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section reports on legal proceedings, noting the closure of a civil antitrust investigation without enforcement action - The U.S. Department of Justice (DOJ) closed its civil investigation into potential exclusionary conduct by FICO on December 8, 2020, with no enforcement action taken[195](index=195&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially affect FICO's business, financial condition, and results of operations [Business, Market and Strategy Risks](index=38&type=section&id=Business%2C%20Market%20and%20Strategy%20Risks) This section details risks related to FICO's business model, market conditions, and strategic initiatives, including COVID-19 impacts - The COVID-19 pandemic has negatively affected FICO's operations and customer spending, with uncertain duration and impact on future revenues and financial performance[196](index=196&type=chunk)[199](index=199&type=chunk) - FICO's Decision Management (DM) strategy, focusing on cloud-native platforms and multiple connectable products, may not be successful if the market is unreceptive, leading to potential volatility in revenues[201](index=201&type=chunk)[202](index=202&type=chunk) - A substantial portion of revenues comes from a few products (scoring, fraud, customer management) and the banking industry (**85%** in Q4 2020), making FICO vulnerable to market acceptance changes and industry conditions[86](index=86&type=chunk)[203](index=203&type=chunk)[205](index=205&type=chunk) - Reliance on major credit reporting agencies (Experian, TransUnion, Equifax) and large customers for significant revenue creates bargaining power imbalances and risks from changes in relationships or economic downturns[210](index=210&type=chunk)[213](index=213&type=chunk) - Failure to develop successful new products, keep pace with rapidly changing technologies, or manage product and pricing strategies could harm FICO's business and market share[216](index=216&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Acquisition activities involve risks like disruption, integration difficulties, and failure to realize financial goals, while strategic divestitures may not provide anticipated business benefits[229](index=229&type=chunk)[233](index=233&type=chunk) [Operational Risks](index=45&type=section&id=Operational%20Risks) This section outlines risks associated with FICO's internal operations, including cybersecurity, IT systems, and personnel management - Compromised cybersecurity measures or unauthorized access to data could damage FICO's reputation, lead to significant liabilities, and cause customers to cease using products[239](index=239&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Business interruptions or failures of IT and communication systems could adversely affect service availability, reputation, and financial condition[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - Failure to recruit and retain qualified personnel, especially in technical and sales roles, could hinder FICO's ability to manage its business and achieve future success[247](index=247&type=chunk) - Inability to obtain essential model construction data from customers or other sources due to privacy, security, or regulatory concerns could impair product effectiveness and development[249](index=249&type=chunk) [Global Operational Risks](index=47&type=section&id=Global%20Operational%20Risks) This section addresses risks stemming from FICO's international operations and global economic conditions - Adverse global economic conditions, including the COVID-19 pandemic, can reduce demand for FICO's products and services, leading to softened demand, longer sales cycles, and increased price competition[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Brexit introduces uncertainties for FICO's U.K. business, potentially affecting labor, goods flow, customer relationships, and creating economic volatility[253](index=253&type=chunk) - International operations (**32% of revenues** in fiscal 2020) expose FICO to risks like political instability, foreign laws, data privacy regulations, currency fluctuations, and difficulties in managing global staff[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) [Legal, Regulatory and Compliance Risks](index=48&type=section&id=Legal%2C%20Regulatory%20and%20Compliance%20Risks) This section covers risks related to legal proceedings, regulatory compliance, and intellectual property - FICO is subject to various U.S. and international laws and regulations (e.g., Fair Credit Reporting Act, GDPR, CCPA) that could expose it to liability, increase expenses, or limit product demand[260](index=260&type=chunk)[261](index=261&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) - New or changing legislation, especially regarding consumer protection, privacy, and data security, could negatively impact FICO's business and increase compliance costs[265](index=265&type=chunk)[267](index=267&type=chunk) - Infringement claims related to intellectual property could lead to significant defense costs, damages, or require FICO to cease using or selling certain products[268](index=268&type=chunk)[269](index=269&type=chunk) [Financial Risks](index=50&type=section&id=Financial%20Risks) This section discusses financial risks such as revenue forecasting challenges, sales cycle variability, and acquisition-related charges - Long and variable sales cycles (**60 days to 18 months**) make accurate revenue forecasting difficult, potentially leading to stock price volatility[270](index=270&type=chunk)[271](index=271&type=chunk) - Revenue-generating transactions concentrated in quarter-end weeks can prevent accurate financial forecasting and cause stock price declines[272](index=272&type=chunk)[273](index=273&type=chunk) - Acquisitions can result in material charges to earnings (e.g., goodwill impairment, amortization, integration costs), adversely affecting operating results and cash flows[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [General Risk Factors](index=51&type=section&id=General%20Risk%20Factors) This section includes broader risks affecting FICO's stock price, corporate governance, and tax matters - FICO's stock price is volatile and subject to fluctuations due to variations in revenues, operating results, market analyst expectations, and economic conditions (e.g., COVID-19)[278](index=278&type=chunk) - Anti-takeover defenses, such as the board's ability to issue preferred stock, could make it difficult for another company to acquire control, potentially limiting demand or price for FICO's securities[281](index=281&type=chunk)[282](index=282&type=chunk) - Changes in tax laws or adverse outcomes from income tax return examinations could negatively affect FICO's operating results and financial condition[283](index=283&type=chunk)[284](index=284&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase activities during the quarter ended December 31, 2020 [Issuer Purchases of Equity Securities](index=52&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This section details FICO's common stock repurchases, including shares bought under publicly announced programs | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) | | :----- | :----------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------- | :------------------------------------------------------------------------ | | Oct 1 - Oct 31, 2020 | 2,606 | $414.27 | — | $224,777,076 | | Nov 1 - Nov 30, 2020 | 39,698 | $477.20 | 39,618 | $205,860,921 | | Dec 1 - Dec 31, 2020 | 227,868 | $507.55 | 61,532 | $174,777,136 | | Total | 270,172 | $502.19 | 101,150 | $174,777,136 | - The total shares purchased include **169,022 shares** delivered for tax withholding obligations from restricted stock unit vesting[285](index=285&type=chunk) - The company repurchased **101,150 shares** under its July 2020 stock repurchase program, which authorizes up to **$250.0 million**[285](index=285&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Fair Isaac Corporation for the reported period - This item is not applicable[286](index=286&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Fair Isaac Corporation for the reported period - This item is not applicable[287](index=287&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) This item is not applicable to Fair Isaac Corporation for the reported period - This item is not applicable[289](index=289&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents and certifications - Exhibits include the Composite Restated Certificate of Incorporation, By-laws, CEO/CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), and Inline XBRL documents[291](index=291&type=chunk) [Signatures](index=55&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q filing, confirming its submission by authorized officers - The report was signed by Michael I. McLaughlin, Executive Vice President and Chief Financial Officer, and Michael S. Leonard, Vice President and Chief Accounting Officer, on January 28, 2021[295](index=295&type=chunk)

[PART I](index=6&type=section&id=PART%20I) Part I details FICO's core business of predictive analytics and decision management, its market segments, competitive landscape, and operational structure [Item 1. Business](index=6&type=section&id=Item%201.%20Business) FICO delivers predictive analytics and decision management systems, including the FICO® Score, across global industries through its Applications, Scores, and Decision Management Software segments [General Business Overview](index=6&type=section&id=GENERAL) FICO specializes in predictive analytics and decision management systems, including the FICO® Score, to automate and improve business decisions globally since 1956 - Fair Isaac Corporation (FICO) specializes in predictive analytics and decision management systems, including the FICO® Score, to automate and improve business decisions[15](index=15&type=chunk) - Founded in 1956, FICO assists companies in over 120 countries with customer acquisition, fraud reduction, credit loss mitigation, and market expansion[16](index=16&type=chunk) - FICO also offers online services for consumers to access and understand their FICO® Scores for financial health management[16](index=16&type=chunk) [Products and Services](index=6&type=section&id=PRODUCTS%20AND%20SERVICES) FICO's solutions enhance customer engagement, reduce fraud, mitigate risks, and improve profitability through precise and agile decision-making - FICO's solutions primarily address customer engagement (acquisition, onboarding, servicing, protection) and non-customer decisions (transaction/claims processing), aiming for more precise, consistent, and agile decisions[19](index=19&type=chunk) - The company's offerings help clients reduce costs, mitigate risks and fraud, and increase revenues, profitability, and customer loyalty[19](index=19&type=chunk) [Our Segments](index=6&type=section&id=Our%20Segments) FICO operates through three segments: Applications for pre-configured solutions, Scores for credit risk assessment, and Decision Management Software for custom applications - FICO categorizes its products and services into three operating segments: Applications, Scores, and Decision Management Software[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Applications include pre-configured decision management solutions for specific business problems (e.g., marketing, fraud, collections), available as on-premises or SaaS[20](index=20&type=chunk) - Scores encompass business-to-business and business-to-consumer scoring solutions, including the FICO® Score, distributed through credit reporting agencies and direct services[21](index=21&type=chunk) - Decision Management Software provides analytic and decision management tools for clients to create custom applications, delivered as part of the FICO® Platform or on-premises/cloud[22](index=22&type=chunk) [Our Solutions](index=7&type=section&id=Our%20Solutions) FICO's solutions leverage analytics, data management, software, and consulting to enable faster, more precise, and cost-effective business decisions - FICO's solutions are built on four fundamental disciplines: Analytics (predictive and optimization), Data management and transaction profiling, Software (decision management systems, customer engagement), and Consulting services[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - All solutions aim to help businesses make faster, more precise, consistent, and agile decisions, while reducing costs and risks[26](index=26&type=chunk) [Applications](index=7&type=section&id=Applications) FICO develops industry-specific decision management applications for various sectors, including banking, insurance, and retail, covering fraud, customer management, and collections - FICO develops industry-tailored decision management applications for banking, insurance, telecommunications, healthcare, retail, and public sectors, expanding offerings on FICO® Analytic Cloud and AWS[27](index=27&type=chunk) Applications Segment Revenue Contribution (Fiscal 2018-2020) | Application Type | FY2020 (% of total revenues) | FY2019 (% of total revenues) | FY2018 (% of total revenues) | |:---------------------------|:-----------------------------|:-----------------------------|:-----------------------------| | Fraud Solutions | 15% | 18% | 17% | | Customer Communication Services | 8% | 9% | 10% | - Key application areas include Origination (e.g., FICO® Origination Manager, SBSS), Customer Management (e.g., FICO® TRIAD® Customer Manager, FICO® Strategy Director), Fraud Protection and Compliance (e.g., FICO® Falcon® Platform, Identity Proofing, AML solutions), Collections & Recovery (e.g., FICO® Debt Manager™), Customer Communication Services, and Marketing Applications[28](index=28&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) [Scores](index=10&type=section&id=Scores) FICO® Scores are widely used for credit risk assessment in the U.S., offering broad-based and industry-specific models, including those for financial inclusion - FICO® Scores are widely used in U.S. credit decisions by major banks, credit card organizations, mortgage lenders, and auto loan originators, providing a consistent and objective measure of credit risk[53](index=53&type=chunk) - The company offers various broad-based and industry-specific FICO® Scores, including those using alternative data (FICO® Score XD, UltraFICO™ Score) to expand the scorable population and promote financial inclusion[54](index=54&type=chunk) - FICO also provides FICO® Score-based products, education, and information directly to consumers through myFICO® service and licensed distribution partners[58](index=58&type=chunk)[60](index=60&type=chunk) [Decision Management Software](index=11&type=section&id=Decision%20Management%20Software) FICO provides a platform for businesses to build custom, analytically-powered decision management applications, including tools for modeling, analytics, and optimization - FICO provides an analytics and decision management platform, the FICO® Decision Management Platform, for businesses to build tailored, analytically-powered decision management applications[61](index=61&type=chunk) - The FICO® Decision Management Suite, delivered as licensed software or SaaS, includes tools for authoring, customizing, executing, and managing predictive analytic, decisioning, and optimization components[62](index=62&type=chunk) - Key components include FICO® Decision Modeler, FICO® Analytics Workbench™, FICO® Decision Central™, and FICO® Xpress Optimization, enabling real-time decision execution and rapid application development[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [Competition](index=12&type=section&id=COMPETITION) FICO operates in a highly competitive and evolving market, facing diverse competitors from in-house developers to cloud solution providers - The market for FICO's advanced solutions is intensely competitive and constantly changing, with competitors varying in size and scope[69](index=69&type=chunk) - Competition comes from in-house developers, scoring model builders, ERP/CRM providers, business intelligence firms, credit report/score providers, data vendors, AI system builders, and cloud-based solution providers[69](index=69&type=chunk) - FICO believes its mix of products, predictive analytics expertise, and integration with decision management software provides a competitive advantage, though some competitors may hold larger shares in specific markets[71](index=71&type=chunk) [Markets and Customers](index=13&type=section&id=MARKETS%20AND%20CUSTOMERS) FICO serves a broad customer base across banking, insurance, retail, and public sectors, with major credit reporting agencies being key partners - FICO serves clients across multiple industries, primarily banking, insurance, retail, healthcare, and public agencies[81](index=81&type=chunk) - Key customers include **96 of the 100 largest U.S. financial institutions**, **two-thirds of the top 100 global banks**, over **600 insurers**, more than **300 retailers**, and over **200 government/public agencies**[81](index=81&type=chunk) Revenue from Major Credit Reporting Agencies (Fiscal 2018-2020) | Partner | FY2020 (% of total revenues) | FY2019 (% of total revenues) | FY2018 (% of total revenues) | |:--------|:-----------------------------|:-----------------------------|:-----------------------------| | Experian, TransUnion, Equifax (collectively) | 32% | 29% | 25% | [Technology](index=14&type=section&id=TECHNOLOGY) FICO focuses on analytics software and decision management technologies, enhancing its platform and expanding SaaS offerings on cloud infrastructure - FICO specializes in analytics software and decision management technologies, maintaining active research to derive greater insight and predictive value from data[88](index=88&type=chunk) - In fiscal 2020, FICO enhanced its FICO® Decision Management Platform with new Platform Service functionality for cross-application enablement of centralized services[90](index=90&type=chunk) - The company is expanding the integration of its software solutions into SaaS offerings hosted on the FICO® Analytic Cloud and AWS, driven by core technical capabilities and open-source software partnerships[91](index=91&type=chunk) [Product Protection and Trademarks](index=16&type=section&id=PRODUCT%20PROTECTION%20AND%20TRADEMARKS) FICO protects its intellectual property through patents, copyrights, trademarks, and trade secrets, while acknowledging risks of infringement - FICO protects its proprietary rights through a combination of patent, copyright, trademark, trade secret laws, and confidentiality agreements[103](index=103&type=chunk)[104](index=104&type=chunk) - The company holds **184 U.S. and 16 foreign patents** with **102 applications pending**, and **34 registered trademarks** in the U.S. and select foreign countries[105](index=105&type=chunk)[108](index=108&type=chunk) - Despite protections, FICO acknowledges risks of competitors copying software or obtaining trade secrets, especially in countries with weaker intellectual property laws[106](index=106&type=chunk) [Personnel](index=16&type=section&id=PERSONNEL) As of September 30, 2020, FICO employed 4,003 individuals globally, with no collective bargaining agreements or work stoppages - As of September 30, 2020, FICO employed **4,003 persons worldwide**, with significant employee bases in India and the United Kingdom[110](index=110&type=chunk) - None of FICO's employees are covered by a collective bargaining agreement, except where mandated by foreign law, and no work stoppages occurred in fiscal 2020[110](index=110&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) FICO faces significant risks from the COVID-19 pandemic, strategic execution, product reliance, intense competition, operational disruptions, global instability, regulatory changes, and financial volatility - The COVID-19 pandemic has negatively affected FICO's operations and customer spending, leading to reduced lending activities and potential delays or cancellations of purchasing decisions[113](index=113&type=chunk)[116](index=116&type=chunk) - FICO's growth prospects depend on the success of its cloud-enabled, platform-based Decision Management strategy, with risks including market unreceptiveness to cloud offerings or multiple product purchases[117](index=117&type=chunk) - A substantial portion of FICO's revenues (**86% in FY2020**) is derived from the banking industry and a few key products (scoring, fraud, customer communication, customer management, decision management software), making the company vulnerable to industry downturns or market acceptance issues[118](index=118&type=chunk)[122](index=122&type=chunk) [Business, Market and Strategy Risks](index=17&type=section&id=Business,%20Market%20and%20Strategy%20Risks) FICO faces risks from the COVID-19 pandemic, its Decision Management strategy, reliance on key products and industries, and challenges in product development and acquisitions - The COVID-19 pandemic has disrupted FICO's operations, led to office closures, workforce reductions, and may adversely affect future revenues due to reduced customer spending and lending activities[115](index=115&type=chunk)[116](index=116&type=chunk) - FICO's Decision Management strategy, focused on cloud-native platforms and multiple product sales, faces risks if the market is unreceptive or if revenue recognition shifts cause volatility[117](index=117&type=chunk) - The company relies heavily on scoring solutions, fraud solutions, customer communication services, customer management solutions, and decision management software, with **86% of FY2020 revenues** from the banking industry[118](index=118&type=chunk)[122](index=122&type=chunk) - Failure to develop successful new products, keep pace with rapidly changing technologies, or maintain competitive pricing strategies could harm FICO's business and market share[131](index=131&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk) - Acquisitions and divestitures carry significant risks, including business disruption, integration difficulties, failure to realize strategic goals, and potential financial liabilities[145](index=145&type=chunk)[147](index=147&type=chunk) [Operational Risks](index=22&type=section&id=Operational%20Risks) FICO is exposed to operational risks including cybersecurity threats, IT system failures, challenges in talent acquisition and retention, and data availability issues - FICO is a frequent target of cybersecurity threats due to storing sensitive consumer and customer information, with breaches potentially leading to significant litigation, regulatory fines, and reputational damage[153](index=153&type=chunk)[156](index=156&type=chunk) - Business interruptions or failures of information technology and communication systems, including those of external service providers, could disrupt product availability and harm FICO's reputation and financial condition[158](index=158&type=chunk)[159](index=159&type=chunk) - The company's future success depends on its ability to recruit and retain qualified personnel, especially in technical, sales, and consulting roles, in a highly competitive labor market[161](index=161&type=chunk) - FICO's business relies on obtaining sufficient, current, and statistically relevant data from customers and partners; failure to maintain these relationships or increased data restrictions could impair product effectiveness[163](index=163&type=chunk) [Global Operational Risks](index=24&type=section&id=Global%20Operational%20Risks) FICO's international operations are subject to global economic downturns, political instability, foreign regulations, and currency fluctuations, including Brexit impacts - Material adverse developments in global economic conditions, such as the COVID-19 pandemic, can reduce demand for FICO's products and services, leading to decreased capital expenditures by customers and increased price competition[165](index=165&type=chunk)[166](index=166&type=chunk) - FICO's international operations (**32% of FY2020 revenues**) expose it to additional risks, including economic and political instability, foreign laws and regulations, data privacy concerns, longer payment cycles, and currency fluctuations[171](index=171&type=chunk) - Brexit poses risks to FICO's U.K. business, potentially affecting labor and goods flow, customer/supplier relationships, and causing market volatility[167](index=167&type=chunk) [Legal, Regulatory and Compliance Risks](index=25&type=section&id=Legal,%20Regulatory%20and%20Compliance%20Risks) FICO faces legal and regulatory risks from data privacy laws, fair lending regulations, and potential intellectual property infringement claims - FICO is subject to various U.S. and international laws and regulations, including those related to data use by creditors (Fair Credit Reporting Act), fair lending, data privacy (GDPR, CCPA), and anti-money laundering[175](index=175&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Changes in these laws or their interpretation could expose FICO to liability, increase expenses, limit market competitiveness, or render products obsolete[174](index=174&type=chunk)[181](index=181&type=chunk) - The company faces risks from intellectual property infringement claims, which could result in significant defense costs, damages, or the need to cease product use or license technology[182](index=182&type=chunk)[183](index=183&type=chunk) [Financial Risks](index=27&type=section&id=Financial%20Risks) FICO's financial performance is subject to long sales cycles, difficulties in revenue forecasting, and potential adverse impacts from acquisition-related charges - FICO's long and variable sales cycles (**60 days to 18 months**) make accurate revenue forecasting difficult, potentially leading to fluctuations in financial results and stock price volatility[184](index=184&type=chunk)[185](index=185&type=chunk) - A significant portion of customer agreements are finalized in the final weeks of a quarter, increasing the risk of discrepancies between forecasted and actual results[186](index=186&type=chunk) - Acquisition-related charges, such as goodwill impairment, amortization of intangibles, and integration costs, can adversely affect FICO's operating results and cash flows[189](index=189&type=chunk)[190](index=190&type=chunk) [General Risk Factors](index=28&type=section&id=General%20Risk%20Factors) FICO's stock price is volatile, influenced by operating results and market expectations, and the company faces risks from anti-takeover defenses and tax law changes - FICO's stock price is volatile and can fluctuate due to variations in revenues, operating results, market analyst expectations, product performance issues, and economic conditions[192](index=192&type=chunk) - Anti-takeover defenses, such as the ability to issue preferred stock, could limit demand for FICO's securities or the price investors are willing to pay[195](index=195&type=chunk) - Changes in tax laws or adverse outcomes from income tax return examinations could negatively impact FICO's results of operations[196](index=196&type=chunk)[197](index=197&type=chunk) [Item 1B. Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments applicable to the company [Item 2. Properties](index=29&type=section&id=Item%202.%20Properties) FICO operates from leased office and data center facilities globally, including its corporate headquarters in San Jose, California - FICO's properties are primarily leased office facilities for sales, data processing, research and development, consulting, and administrative personnel[199](index=199&type=chunk) - Principal locations include San Jose, CA (**55,000 sq ft**, corporate HQ), Bangalore, India (**173,000 sq ft**), San Rafael, CA (**124,000 sq ft**), San Diego, CA (**80,000 sq ft**), and Roseville, MN (**45,000 sq ft**)[199](index=199&type=chunk) - The company also leases approximately **235,000 square feet** of office and data center space in other domestic and international locations (UK, China, Singapore)[199](index=199&type=chunk) [Item 3. Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) FICO is cooperating with a U.S. Department of Justice civil investigation initiated in March 2020 regarding potential exclusionary conduct - On March 13, 2020, FICO received a letter from the Antitrust Division of the U.S. Department of Justice (DOJ) informing them of a civil investigation into potential exclusionary conduct[201](index=201&type=chunk) - FICO is cooperating with the DOJ in its investigation[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to FICO [PART II](index=31&type=section&id=PART%20II) Part II covers FICO's common equity market, stockholder matters, equity repurchases, selected financial data, and management's discussion and analysis [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) FICO's common stock trades on the NYSE, with 278 stockholders of record as of October 30, 2020, and the company actively repurchases its shares under a $250 million program - FICO's common stock trades on the New York Stock Exchange under the symbol: **FICO**[205](index=205&type=chunk) - As of October 30, 2020, there were **278 stockholders of record**[205](index=205&type=chunk) [Market Information](index=31&type=section&id=Market%20Information) FICO's common stock is traded on the NYSE under the symbol FICO, with 278 stockholders of record as of October 30, 2020 - FICO's common stock is traded on the New York Stock Exchange under the symbol FICO[205](index=205&type=chunk) - As of October 30, 2020, there were **278 stockholders of record**[205](index=205&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable, indicating no unregistered sales of equity securities or use of proceeds to report - This section is not applicable, indicating no unregistered sales of equity securities or use of proceeds to report[206](index=206&type=chunk) [Issuer Purchases of Equity Securities](index=31&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) FICO actively repurchased common stock in Q3 FY2020, with a new $250 million program approved in July 2020, and $224.8 million remaining Issuer Purchases of Equity Securities (Q3 FY2020) | Period (2020) | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Announced Plans or Programs | Amount that May Yet Be Purchased Under Plans or Programs | |:---------------------------|:-----------------------|:-----------------------------|:--------------------------------------------------------|:---------------------------------------------------------| | July 1 - July 31 | 2,298 | $436.71 | — | $250,000,000 | | August 1 - August 31 | 27,880 | $426.55 | 24,000 | $239,776,878 | | September 1 - September 30 | 35,990 | $421.32 | 35,600 | $224,777,076 | | Total | 66,168 | $424.05 | 59,600 | $224,777,076 | - The total number of shares purchased includes **6,568 shares** delivered in satisfaction of tax withholding obligations from restricted stock unit vesting[208](index=208&type=chunk) - A new open-ended stock repurchase program, authorizing up to **$250.0 million**, was approved in July 2020, with **$224.8 million** remaining as of September 30, 2020[208](index=208&type=chunk) [Performance Graph](index=31&type=section&id=Performance%20Graph) The performance graph illustrates the cumulative total stockholder return of FICO common stock against market indices from 2015 to 2020 - The performance graph illustrates the cumulative total stockholder return of a **$100 investment** in FICO common stock, the S&P 500, and the S&P Application Software Index from September 30, 2015, to September 30, 2020, with dividends reinvested[209](index=209&type=chunk)[213](index=213&type=chunk) - Past performance is not indicative of future performance[209](index=209&type=chunk) [Item 6. Selected Financial Data](index=32&type=section&id=Item%206.%20Selected%20Financial%20Data) FICO's selected financial data for fiscal years 2016-2020 demonstrates consistent growth in revenues, net income, and EPS, with working capital turning positive in 2020 Selected Financial Data (Fiscal Years 2016-2020) | Metric (In thousands, except per share data) | 2020 | 2019 | 2018 | 2017 | 2016 | |:---------------------------------------------|:------------|:------------|:------------|:------------|:------------| | Revenues | $1,294,562 | $1,160,083 | $1,000,146 | $934,983 | $881,356 | | Operating income | $295,969 | $253,548 | $175,359 | $182,159 | $169,592 | | Net income | $236,411 | $192,124 | $126,482 | $133,414 | $109,448 | | Basic earnings per share | $8.13 | $6.63 | $4.26 | $4.32 | $3.52 | | Diluted earnings per share | $7.90 | $6.34 | $4.06 | $4.14 | $3.39 | | Dividends declared per share | — | — | — | $0.04 | $0.08 | Selected Balance Sheet Data (Fiscal Years 2016-2020) | Metric (In thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | |:----------------------|:------------|:------------|:------------|:------------|:------------| | Working capital | $119,567 | $(35,122) | $(77,514) | $22,842 | $21,561 | | Total assets | $1,606,240 | $1,433,448 | $1,330,467 | $1,348,728 | $1,220,676 | | Senior notes | $750,000 | $485,000 | $513,000 | $244,000 | $316,000 | | Revolving line of credit | $95,000 | $345,000 | $257,000 | $361,000 | $255,000 | | Stockholders' equity | $331,082 | $289,767 | $287,437 | $466,183 | $446,828 | - Fiscal years 2020 and 2017 included pre-tax charges of **$45.0 million** and **$4.5 million**, respectively, in restructuring and impairment charges[217](index=217&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FICO's MD&A details its cloud-enabled strategy, driving fiscal 2020 revenue growth to $1.29 billion and net income to $236.4 million, alongside cost initiatives and revenue recognition shifts - FICO's strategy in fiscal 2020 focused on advancing its cloud-enabled, platform-based approach in Applications and Decision Management Software segments, leading to increased cloud bookings (**41% of total bookings in FY2020** vs. **39% in FY2019**)[221](index=221&type=chunk) - Total revenues for fiscal 2020 increased by **12% to $1.29 billion**, and net income increased by **23% to $236.4 million**, with diluted EPS rising **25% to $7.90**[227](index=227&type=chunk)[228](index=228&type=chunk) - The Scores segment was a primary growth driver, with revenue increasing **25% to $528.5 million** and operating income increasing **26% to $454.3 million** in fiscal 2020[227](index=227&type=chunk) - In fiscal 2020, FICO implemented a strategic cost initiative, incurring **$41.9 million** in charges for office space impairment and workforce reduction, expecting **$36 million** in annual expense savings from fiscal 2021[224](index=224&type=chunk) [Business Overview](index=34&type=section&id=BUSINESS%20OVERVIEW) FICO's fiscal 2020 strategy focused on cloud-enabled, platform-based solutions, driving increased cloud bookings and Scores segment expansion, despite COVID-19 impacts - FICO's strategy in fiscal 2020 focused on cloud-enabled, platform-based solutions, increasing cloud bookings to **41% of total bookings**[221](index=221&type=chunk) - The Scores segment saw multi-year expansion in the U.S. business-to-consumer market and launched the FICO® Resilience Index to complement FICO® Score models[222](index=222&type=chunk) - Total revenues for fiscal 2020 were **$1.29 billion (up 12% YoY)**, with Scores revenue up **25% to $528.5 million** and SaaS business revenue up **11% to $300.0 million**[227](index=227&type=chunk) - FICO repurchased approximately **0.7 million shares** for **$235.2 million** in fiscal 2020, with **$224.8 million** remaining under the current stock repurchase program[223](index=223&type=chunk) - A strategic cost initiative in fiscal 2020 resulted in a **$41.9 million charge** for office space impairment and workforce reduction, aiming for **$36 million in annual savings**[224](index=224&type=chunk) - The company is transitioning from separate license and maintenance components to a single software subscription contract, which will shift revenue recognition timing but not negatively impact cash flows[225](index=225&type=chunk) [Results of Operations](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) FICO's fiscal 2020 results show a 12% revenue increase to $1.29 billion and a 23% net income increase to $236.4 million, driven by Scores and Decision Management Software segments Total Revenues by Segment (Fiscal 2018-2020) | Segment | 2020 ($ thousands) | 2019 ($ thousands) | 2018 ($ thousands) | 2020 to 2019 Change ($ thousands) | 2019 to 2018 Change ($ thousands) | 2020 to 2019 Percentage Change | 2019 to 2018 Percentage Change | |:-----------------------------|:-------------------|:-------------------|:-------------------|:----------------------------------|:----------------------------------|:-------------------------------|:-------------------------------| | Applications | 602,046 | 605,034 | 564,375 | (2,988) | 40,659 | — % | 7% | | Scores | 528,547 | 421,177 | 335,870 | 107,370 | 85,307 | 25 % | 25% | | Decision Management Software | 163,969 | 133,872 | 99,901 | 30,097 | 33,971 | 22 % | 34% | | Total | 1,294,562 | 1,160,083 | 1,000,146 | 134,479 | 159,937 | 12 % | 16% | Segment Revenue Contribution (Fiscal 2018-2020) | Segment | 2020 | 2019 | 2018 | |:-----------------------------|:------|:------|:------|\ | Applications | 46% | 52% | 56% | | Scores | 41% | 36% | 34% | | Decision Management Software | 13% | 12% | 10% | | Total | 100% | 100% | 100% | Consolidated Operating Expenses and Other Income, Net (Fiscal 2018-2020) | Metric (In thousands) | 2020 | 2019 | 2018 | 2020 to 2019 Change | 2019 to 2018 Change | 2020 to 2019 % Change | 2019 to 2018 % Change | |:--------------------------------------|:------------|:------------|:------------|:--------------------|:--------------------|:----------------------|:----------------------| | Revenues | $1,294,562 | $1,160,083 | $1,000,146 | $134,479 | $159,937 | 12 % | 16 % | | Cost of revenues | 361,142 | 336,845 | 312,898 | 24,297 | 23,947 | 7 % | 8 % | | Research and development | 166,499 | 149,478 | 128,383 | 17,021 | 21,095 | 11 % | 16 % | | Selling, general and administrative | 420,930 | 414,086 | 376,912 | 6,844 | 37,174 | 2 % | 10 % | | Amortization of intangible assets | 4,993 | 6,126 | 6,594 | (1,133) | (468) | (18)% | (7)% | | Restructuring and impairment charges | 45,029 | — | — | 45,029 | — | — % | — % | | Total operating expenses | 998,593 | 906,535 | 824,787 | 92,058 | 81,748 | 10 % | 10 % | | Operating income | 295,969 | 253,548 | 175,359 | 42,421 | 78,189 | 17 % | 45 % | | Interest expense, net | (42,177) | (39,752) | (31,311) | (2,425) | (8,441) | 6 % | 27 % | | Other income, net | 3,208 | 2,276 | 12,884 | 932 | (10,608) | 41 % | (82)% | | Income before income taxes | 257,000 | 216,072 | 156,932 | 40,928 | 59,140 | 19 % | 38 % | | Provision for income taxes | 20,589 | 23,948 | 30,450 | (3,359) | (6,502) | (14)% | (21)% | | Net income | $236,411 | $192,124 | $126,482 | $44,287 | $65,642 | 23 % | 52 % | [Capital Resources and Liquidity](index=47&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) FICO maintains strong liquidity with $157.4 million in cash and available credit, funding operations and stock repurchases, while managing $750.0 million in Senior Notes - As of September 30, 2020, FICO had **$157.4 million** in cash and cash equivalents, including **$118.0 million** held by foreign subsidiaries, which are deemed permanently reinvested[297](index=297&type=chunk) - The company believes its cash, available borrowings from its **$400 million revolving line of credit**, and anticipated operating cash flows are sufficient to fund future capital requirements[297](index=297&type=chunk) Summary of Cash Flows (Fiscal 2018-2020) | Cash Flow Activity (In thousands) | 2020 | 2019 | 2018 | |:----------------------------------|:------------|:------------|:------------| | Operating activities | $364,916 | $260,350 | $223,052 | | Investing activities | $(24,583) | $(42,760) | $(14,119) | | Financing activities | $(289,424) | $(200,047) | $(218,627) | | Effect of exchange rate changes | 59 | (1,140) | (5,901) | | Increase (decrease) in cash | $50,968 | $16,403 | $(15,595) | - Net cash provided by operating activities increased by **$104.5 million** in fiscal 2020 to **$364.9 million**, driven by higher net income and non-cash items like impairment losses[301](index=301&type=chunk) - FICO repurchased **$235.2 million** of common stock in fiscal 2020 under its stock repurchase programs[305](index=305&type=chunk) - The company has a **$400 million unsecured revolving line of credit** maturing in May 2023, with **$95.0 million** outstanding at September 30, 2020[306](index=306&type=chunk) - FICO's Senior Notes totaled **$750.0 million** in carrying value as of September 30, 2020, including 2018 Senior Notes (**$400M, 5.25% due 2026**) and 2019 Senior Notes (**$350M, 4.00% due 2028**)[307](index=307&type=chunk)[308](index=308&type=chunk) [Critical Accounting Policies and Estimates](index=49&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) FICO's critical accounting policies involve significant judgments in revenue recognition, goodwill impairment, share-based compensation, income taxes, and lease accounting - FICO's critical accounting policies involve significant judgments and assumptions in revenue recognition, goodwill and other intangible assets, share-based compensation, income taxes, and contingencies[313](index=313&type=chunk)[314](index=314&type=chunk) - Revenue recognition requires evaluating distinct performance obligations, estimating variable consideration, and determining standalone selling prices (SSPs) for bundled products and services[315](index=315&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk) - Goodwill and intangible assets are assessed for impairment annually, using qualitative or quantitative methods, with no impairment recognized in fiscal 2018-2020[331](index=331&type=chunk)[332](index=332&type=chunk)[334](index=334&type=chunk) - The company adopted Topic 842 (Leases) in fiscal 2020, recognizing operating lease assets and liabilities on the balance sheet, with an immaterial impact on income and cash flows[342](index=342&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) FICO manages market risks from interest rate fluctuations on its investment portfolio and variable-rate debt, and foreign exchange rate volatility through forward contracts - FICO is exposed to market risk related to changes in interest rates and foreign exchange rates, but does not use derivative financial instruments for speculative purposes[347](index=347&type=chunk) Investments with Interest Rate Risk (September 30, 2020 & 2019) | Metric (Dollars in thousands) | Sep 30, 2020 Cost Basis | Sep 30, 2020 Carrying Amount | Sep 30, 2020 Average Yield | Sep 30, 2019 Cost Basis | Sep 30, 2019 Carrying Amount | Sep 30, 2019 Average Yield | |:------------------------------|:------------------------|:-----------------------------|:---------------------------|:------------------------|:-----------------------------|:---------------------------| | Cash and cash equivalents | $157,394 | $157,394 | 0.05% | $106,426 | $106,426 | 0.76% | Senior Notes Carrying Amounts and Fair Values (September 30, 2020 & 2019) | Senior Notes (In thousands) | Sep 30, 2020 Face Value | Sep 30, 2020 Fair Value | Sep 30, 2019 Face Value | Sep 30, 2019 Fair Value | |:----------------------------|:------------------------|:------------------------|:------------------------|:------------------------| | The 2010 Senior Notes | — | — | $85,000 | $86,121 | | The 2018 Senior Notes | 400,000 | 442,000 | 400,000 | 428,000 | | The 2019 Senior Notes | 350,000 | 358,750 | — | — | | Total | $750,000 | $800,750 | $485,000 | $514,121 | - FICO uses foreign currency forward contracts to manage risks from fluctuations in foreign exchange rates, primarily for British pound, Euro, and Singapore dollar exposures, with contracts typically maturing in less than three months[351](index=351&type=chunk)[352](index=352&type=chunk) [Market Risk Disclosures](index=54&type=section&id=Market%20Risk%20Disclosures) FICO's market risk disclosures detail exposure to interest rate changes on investments and debt, and foreign exchange rate volatility managed by forward contracts - FICO's investment portfolio, consisting of bank deposits and money market funds, is subject to interest rate risk, but significant impact on operating results or cash flows from sudden changes is not expected[349](index=349&type=chunk) - The company's **$400 million unsecured revolving line of credit** has variable interest rates, impacting interest incurred and cash flows[350](index=350&type=chunk) - FICO utilizes foreign currency forward contracts to protect foreign-currency-denominated receivable and cash balances from exchange rate volatility, primarily for British pound, Euro, and Singapore dollar[351](index=351&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents FICO's audited consolidated financial statements for fiscal years 2018-2020, with unqualified auditor opinions and detailed notes on accounting policies and critical audit matters - Deloitte & Touche LLP provided unqualified opinions on FICO's consolidated financial statements and the effectiveness of its internal control over financial reporting as of September 30, 2020[358](index=358&type=chunk) - A critical audit matter was identified regarding revenue recognition due to the complexity of contracts, judgment in identifying performance obligations, estimating variable consideration, and determining standalone selling prices (SSPs)[372](index=372&type=chunk) Consolidated Balance Sheets (September 30, 2020 & 2019) | Asset/Liability (In thousands) | 2020 | 2019 | |:-------------------------------|:------------|:------------| | **Assets:** | | | | Cash and cash equivalents | $157,394 | $106,426 | | Accounts receivable, net | 334,180 | 297,427 | | Total current assets | 534,078 | 455,706 | | Total assets | $1,606,240 | $1,433,448 | | **Liabilities:** | | | | Total current liabilities | 414,511 | 490,828 | | Long-term debt | 739,435 | 606,790 | | Total liabilities | 1,275,158 | 1,143,681 | | **Stockholders' Equity:** | | | | Total stockholders' equity | 331,082 | 289,767 | Consolidated Statements of Income and Comprehensive Income (Fiscal 2018-2020) | Revenue/Expense (In thousands, except per share data) | 2020 | 2019 | 2018 | |:------------------------------------------------------|:------------|:------------|:------------| | Total revenues | $1,294,562 | $1,160,083 | $1,000,146 | | Total operating expenses | 998,593 | 906,535 | 824,787 | | Operating income | 295,969 | 253,548 | 175,359 | | Net income | 236,411 | 192,124 | 126,482 | | Diluted earnings per share | $7.90 | $6.34 | $4.06 | Consolidated Statements of Cash Flows (Fiscal 2018-2020) | Cash Flow Activity (In thousands) | 2020 | 2019 | 2018 | |:----------------------------------|:------------|:------------|:------------| | Net cash provided by operating activities | $364,916 | $260,350 | $223,052 | | Net cash used in investing activities | $(24,583) | $(42,760) | $(14,119) | | Net cash used in financing activities | $(289,424) | $(200,047) | $(218,627) | | Cash and cash equivalents, end of year | $157,394 | $106,426 | $90,023 | [Report of Independent Registered Public Accounting Firm](index=57&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) Deloitte & Touche LLP issued unqualified opinions on FICO's consolidated financial statements and internal control over financial reporting for fiscal 2020 - Deloitte & Touche LLP issued unqualified opinions on FICO's consolidated financial statements for the period ended September 30, 2020, and on the effectiveness of its internal control over financial reporting[358](index=358&type=chunk) [Change in Accounting Principle](index=57&type=section&id=Change%20in%20Accounting%20Principle) FICO adopted the new lease standard (Topic 842) in fiscal 2020 using a modified retrospective approach, impacting balance sheet recognition of leases - FICO changed its method of accounting for leases in fiscal year 2020 due to the adoption of the new lease standard (Topic 842) using the modified retrospective approach, meaning prior periods were not restated[359](index=359&type=chunk) [Basis for Opinions](index=57&type=section&id=Basis%20for%20Opinions) The auditor's opinions are based on audits conducted under PCAOB standards, with management responsible for financial statements and internal controls - Management is responsible for financial statements and internal control, while the auditor's responsibility is to express an opinion based on audits conducted in accordance with PCAOB standards[360](index=360&type=chunk)[361](index=361&type=chunk) [Definition and Limitations of Internal Control over Financial Reporting](index=57&type=section&id=Definition%20and%20Limitations%20of%20Internal%20Control%20over%20Financial%20Reporting) Internal control over financial reporting aims for reasonable assurance regarding financial reliability, but inherently has limitations that may prevent misstatement detection - Internal control over financial reporting is a process designed to provide reasonable assurance regarding financial reporting reliability and asset safeguarding[363](index=363&type=chunk)[365](index=365&type=chunk) - Internal controls have inherent limitations and may not prevent or detect all misstatements, and their effectiveness can deteriorate over time[366](index=366&type=chunk) [Critical Audit Matter](index=58&type=section&id=Critical%20Audit%20Matter) Revenue recognition was identified as a critical audit matter due to complex contracts requiring significant judgment in performance obligations and pricing - Revenue recognition was identified as a critical audit matter due to the complexity of FICO's contracts, involving significant judgment in identifying performance obligations, estimating variable consideration, and determining standalone selling prices (SSPs)[372](index=372&type=chunk) [How the Critical Audit Matter Was Addressed in the Audit](index=58&type=section&id=How%20the%20Critical%20Audit%20Matter%20Was%20Addressed%20in%20the%20Audit) Audit procedures addressed revenue recognition by testing controls, sampling contracts, and assessing management's judgments on performance obligations and pricing - Audit procedures included testing controls over contract revenue, sampling contracts to evaluate management's conclusions on performance obligations and variable consideration, and assessing the accuracy of SSP determination[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk) [Consolidated Balance Sheets](index=60&type=section&id=FAIR%20ISAAC%20CORPORATION%20CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets present FICO's financial position as of September 30, 2020 and 2019, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheets (September 30, 2020 & 2019) | Asset/Liability (In thousands) | 2020 | 2019 | |:-------------------------------|:------------|:------------| | **Assets:** | | | | Cash and cash equivalents | $157,394 | $106,426 | | Accounts receivable, net | 334,180 | 297,427 | | Prepaid expenses and other current assets | 42,504 | 51,853 | | Total current assets | 534,078 | 455,706 | | Marketable securities | 25,513 | 20,222 | | Property and equipment, net | 46,419 | 53,027 | | Operating lease right-of-use assets | 57,656 | — | | Goodwill | 812,364 | 803,542 | | Intangible assets, net | 9,236 | 14,139 | | Deferred income taxes | 14,629 | 6,006 | | Other assets | 105,285 | 79,163 | | Total assets | $1,606,240 | $1,433,448 | | **Liabilities and Stockholders' Equity:** | | | | Accounts payable | $23,033 | $23,118 | | Accrued compensation and employee benefits | 117,952 | 106,240 | | Other accrued liabilities | 63,367 | 32,454 | | Deferred revenue | 115,159 | 111,016 | | Current maturities on debt | 95,000 | 218,000 | | Total current liabilities | 414,511 | 490,828 | | Long-term debt | 739,435 | 606,790 | | Operating lease liabilities | 73,207 | — | | Other liabilities | 48,005 | 46,063 | | Total liabilities | 1,275,158 | 1,143,681 | | Common stock | 291 | 289 | | Paid-in-capital | 1,218,583 | 1,225,365 | | Treasury stock, at cost | (2,997,856) | (2,802,450) | | Retained earnings | 2,193,059 | 1,956,648 | | Accumulated other comprehensive loss | (82,995) | (90,085) | | Total stockholders' equity | 331,082 | 289,767 | | Total liabilities and stockholders' equity | $1,606,240 | $1,433,448 | [Consolidated Statements of Income and Comprehensive Income](index=61&type=section&id=FAIR%20ISAAC%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME) The consolidated statements of income and comprehensive income detail FICO's revenues, expenses, and net income for fiscal years 2018-2020 Consolidated Statements of Income and Comprehensive Income (Fiscal 2018-2020) | Revenue/Expense (In thousands, except per share data) | 2020 | 2019 | 2018 | |:------------------------------------------------------|:------------|:------------|:------------| | **Revenues:** | | | | | Transactional and maintenance | $973,933 | $860,948 | $750,603 | | Professional services | 183,040 | 184,095 | 176,910 | | License | 137,589 | 115,040 | 72,633 | | Total revenues | $1,294,562 | $1,160,083 | $1,000,146 | | **Operating expenses:** | | | | | Cost of revenues | 361,142 | 336,845 | 312,898 | | Research and development | 166,499 | 149,478 | 128,383 | | Selling, general and administrative | 420,930 | 414,086 | 376,912 | | Amortization of intangible assets | 4,993 | 6,126 | 6,594 | | Restructuring and impairment charges | 45,029 | — | — | | Total operating expenses | 998,593 | 906,535 | 824,787 | | Operating income | 295,969 | 253,548 | 175,359 | | Interest expense, net | (42,177) | (39,752) | (31,311) | | Other income, net | 3,208 | 2,276 | 12,884 | | Income before income taxes | 257,000 | 216,072 | 156,932 | | Provision for income taxes | 20,589 | 23,948 | 30,450 | | Net income | $236,411 | $192,124 | $126,482 | | **Other comprehensive income (loss):** | | | | | Foreign currency translation adjustments | 7,090 | (13,664) | (9,926) | | Comprehensive income | $243,501 | $178,460 | $116,556 | | Basic earnings per share | $8.13 | $6.63 | $4.26 | | Diluted earnings per share | $7.90 | $6.34 | $4.06 | [Consolidated Statements of Stockholders' Equity](index=62&type=section&id=FAIR%20ISAAC%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) The consolidated statements of stockholders' equity track changes in equity components, including net income and stock repurchases, for fiscal years 2018-2020 Consolidated Statements of Stockholders' Equity (Fiscal 2018-2020) | (In thousands) | Sep 30, 2017 | Sep 30, 2018 | Sep 30, 2019 | Sep 30, 2020 | |:---------------------------------------------|:-------------|:-------------|:-------------|:-------------| | Total Stockholders' Equity, beginning balance | $466,183 | $287,437 | $289,767 | $289,767 | | Share-based compensation | 74,814 | 82,973 | 93,681 | 93,681 | | Issuance of treasury stock | (33,181) | (30,209) | (60,644) | (60,644) | | Repurchases of common stock | (336,935) | (228,894) | (235,223) | (235,223) | | Net income | 126,482 | 192,124 | 236,411 | 236,411 | | Foreign currency translation adjustments | (9,926) | (13,664) | 7,090 | 7,090 | | Total Stockholders' Equity, ending balance | $287,437 | $289,767 | $331,082 | $331,082 | [Consolidated Statements of Cash Flows](index=63&type=section&id=FAIR%20ISAAC%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The consolidated statements of cash flows present FICO's cash generation and usage from operating, investing, and financing activities for fiscal years 2018-2020 Consolidated Statements of Cash Flows (Fiscal 2018-2020) | Cash Flow Activity (In thousands) | 2020 | 2019 | 2018 | |:----------------------------------|:------------|:------------|:------------| | **Cash flows from operating activities:** | | | | | Net income | $236,411 | $192,124 | $126,482 | | Depreciation and amortization | 30,367 | 31,612 | 30,182 | | Share-based compensation | 93,681 | 82,973 | 74,814 | | Deferred income taxes | (8,639) | 7,701 | 10,584 | | Non-cash operating lease costs | 20,011 | — | — | | Impairment loss on operating lease assets | 28,016 | — | — | | Net cash provided by operating activities | $364,916 | $260,350 | $223,052 | | **Cash flows from investing activities:** | | | | | Purchases of property and equipment | (21,989) | (23,981) | (31,299) | | Cash paid for acquisitions, net of cash acquired | — | (15,855) | — | | Net cash used in investing activities | $(24,583) | $(42,760) | $(14,119) | | **Cash flows from financing activities:** | | | | | Proceeds from revolving line of credit | 263,000 | 229,000 | 427,000 | | Payments on revolving line of credit | (513,000) | (141,000) | (531,000) | | Proceeds from issuance of senior notes | 350,000 | — | 400,000 | | Payments on senior notes | (85,000) | (28,000) | (131,000) | | Repurchases of common stock | (235,223) | (228,894) | (342,596) | | Net cash used in financing activities | $(289,424) | $(200,047) | $(218,627) | | Cash and cash equivalents, end of year | $157,394 | $106,426 | $90,023 | [Notes to Consolidated Financial Statements](index=65&type=section&id=FAIR%20ISAAC%20CORPORATION%20NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes provide detailed disclosures on FICO's accounting policies, segment information, lease adoption, restructuring charges, and revenue recognition complexities - FICO's financial statements are prepared in conformity with U.S. GAAP, requiring significant management estimates and assumptions, particularly for revenue recognition, goodwill, share-based compensation, and income taxes[313](index=313&type=chunk)[399](index=399&type=chunk) - The company adopted Topic 842 (Leases) in fiscal 2020, recognizing operating lease assets and liabilities of **$89.8 million** and **$98.9 million**, respectively, with an immaterial impact on income and cash flows[450](index=450&type=chunk) - FICO's revenue is primarily from term-based/perpetual software and scoring licenses, SaaS subscriptions, and professional services, with revenue recognized when control of goods/services is transferred[315](index=315&type=chunk)[417](index=417&type=chunk) - Goodwill and intangible assets are assessed for impairment annually, with no impairment losses recognized in fiscal 2018-2020[413](index=413&type=chunk)[416](index=416&type=chunk) - FICO incurred **$45.0 million** in restructuring and impairment charges in fiscal 2020, related to office space consolidation and workforce reduction, eliminating **209 positions**[483](index=483&type=chunk) - The effective tax rates were **8.0%**, **11.1%**, and **19.4%** in fiscal 2020, 2019, and 2018, respectively, with the 2020 decrease due to excess tax benefits from stock-based compensation[276](index=276&type=chunk)[492](index=492&type=chunk) - FICO's Scores segment operating income increased by **$93.0 million** in fiscal 2020, driven by a **$107.4 million revenue increase**, while Applications segment operating income decreased by **$7.6 million**[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - Revenue from Experian, TransUnion, and Equifax collectively accounted for **32%**, **29%**, and **25%** of total revenues in fiscal 2020, 2019, and 2018, respectively[529](index=529&type=chunk) - As of September 30, 2020, FICO had **$298.0 million** in remaining performance obligations, with approximately **50%** expected to be recognized over the next 18 months[538](index=538&type=chunk) - In October 2020, FICO entered a five-year agreement with Rackspace US, Inc. for primary cloud infrastructure services, replacing direct AWS services, with a minimum purchase obligation of **$120 million** over the first three years[556](index=556&type=chunk) [PART III](index=99&type=section&id=PART%20III) Part III outlines FICO's directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees [Item 10. Directors, Executive Officers and Corporate Governance](index=99&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) This section details FICO's directors, executive officers, and corporate governance practices, including codes of ethics, with further information referenced from the 2021 Proxy Statement - Information regarding FICO's Directors is incorporated by reference from the 2021 Proxy Statement[566](index=566&type=chunk) - Key executive officers include William J. Lansing (CEO), Michael I. McLaughlin (EVP, CFO), Thomas A. Bowers (EVP, Corporate Strategy), Stephanie Covert (EVP, Sales & Marketing), Richard S. Deal (EVP, Chief Human Resources Officer), Michael S. Leonard (VP, Chief Accounting Officer), Claus Moldt (EVP, CTO), Mark R. Scadina (EVP, General Counsel), and James M. Wehmann (EVP, Scores)[568](index=568&type=chunk) - FICO has adopted a Code of Ethics for Senior Financial Management and a Code of Conduct and Business Ethics, available on its website, www.fico.com[571](index=571&type=chunk) [Item 11. Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation for fiscal 2020 is incorporated by reference from FICO's 2021 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 'Director Compensation for Fiscal 2020' and 'Executive Compensation' sections of FICO's 2021 Proxy Statement[573](index=573&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Details on security ownership of beneficial owners and management, along with related stockholder matters, are incorporated by reference from FICO's 2021 Proxy Statement - Information on security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from FICO's 2021 Proxy Statement[574](index=574&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships, related person transactions, and director independence is incorporated by reference from FICO's 2021 Proxy Statement - Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from FICO's 2021 Proxy Statement[575](index=575&type=chunk) [Item 14. Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from FICO's 2021 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the 'Ratification of Independent Registered Public Accounting Firm' section of FICO's 2021 Proxy Statement[576](index=576&type=chunk) [PART IV](index=103&type=section&id=PART%20IV) Part IV lists FICO's exhibits, financial statement schedules, and required signatures for the Form 10-K report [Item 15. Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists FICO's consolidated financial statements and schedules, including the auditor's report and detailed notes, along with a comprehensive list of exhibits - The consolidated financial statements include the Report of independent registered public accounting firm, Consolidated balance sheets, Consolidated statements of income and comprehensive income, Consolidated statements of stockholders' equity, Consolidated statements of cash flows, and Notes to consolidated financial statements[579](index=579&type=chunk) - All financial statement schedules are omitted as the required information is either not applicable or included in the consolidated financial statements and related notes[580](index=580&type=chunk) - A detailed list of exhibits, including organizational documents, debt agreements, incentive plans, and various letter agreements, is provided, with many incorporated by reference from previous SEC filings[582](index=582&type=chunk)[583](index=583&type=chunk)[585](index=585&type=chunk)[586](index=586&type=chunk)[587](index=587&type=chunk)[588](index=588&type=chunk)[589](index=589&type=chunk)[590](index=590&type=chunk)[591](index=591&type=chunk)[596](index=596&type=chunk) [Signatures](index=109&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-K report from FICO's principal officers and Board of Directors, dated November 10, 2020 - The report is signed by William J. Lansing (CEO and Principal Executive Officer), Michael I. McLaughlin (EVP and Chief Financial Officer, Principal Financial Officer), Michael S. Leonard (VP and Chief Accounting Officer, Principal Accounting Officer), and several Directors[609](index=609&type=chunk) - All signatures are dated November 10, 2020[609](index=609&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-11689 Fair Isaac Corporation (Exact name of registrant as specified in its charter) Delaware 94-1499887 (State o ...