Core Insights - The article provides an update on Fair Isaac Corporation (NYSE: FICO) following a previous recommendation to hold due to high valuation multiples [1] - The author emphasizes a fundamentals-based approach to value investing, focusing on long-term durability and affordability rather than just low multiples [1] Company Analysis - Fair Isaac Corporation is currently viewed as trading at a high valuation multiple, which has led to a hold recommendation [1] - The company is characterized by steady long-term growth, a lack of cyclicality, and a robust balance sheet, making it an attractive investment despite the high valuation [1] Investment Philosophy - The author disagrees with the notion that low multiple stocks are inherently cheap, advocating for a focus on companies with strong fundamentals [1] - There is an acknowledgment of the risks involved in investing in successful companies, particularly the potential to overpay [1] - The author believes that in certain situations, the growth potential of a company can outweigh immediate price concerns [1]

Core Insights - Fair Isaac Corporation (FICO) reported first-quarter fiscal 2025 earnings of $5.79 per share, missing the Zacks Consensus Estimate by 6.76% but showing a year-over-year increase of 20.4% [1] - Revenues reached $440 million, a 15.2% increase year-over-year, but fell short of the consensus mark by 3.25% [2] - FICO raised its fiscal 2025 guidance following strong first-quarter performance, with shares appreciating 43.7% over the past six months, outperforming the Zacks Computer & Technology sector's return of 23.6% [3] Revenue Breakdown - Software revenues, including analytics and digital decisioning technology, increased 8% year-over-year to $204.3 million [4] - Software Annual Recurring Revenues (ARR) grew 6% year-over-year, with platform ARR up 20% and non-platform ARR up 1% [4] - Scores revenues, which include B2B and B2C scoring solutions, increased 22.7% year-over-year to $235.7 million [5] Segment Performance - B2B revenues surged 30% year-over-year, driven by higher unit prices and increased mortgage originations [6] - Mortgage originations revenues skyrocketed 110% year-over-year, accounting for 44% of B2B revenues and 34% of total scores revenues [6] - Professional services revenues decreased 14.1% year-over-year to $18.3 million [5] Operating Metrics - Research & development expenses as a percentage of revenues decreased by 90 basis points year-over-year to 10.3% [8] - Selling, general and administrative expenses increased by 180 basis points year-over-year to 29.1% [8] - Operating margin expanded by 120 basis points year-over-year to 40.8% [8] Financial Position - As of December 31, 2024, FICO had $184 million in cash and cash equivalents and total debt of $2.4 billion, compared to $151 million in cash and $2.2 billion in debt as of September 30, 2024 [9] - Cash flow from operations was $194 million in the first quarter, down from $226.4 million in the previous quarter [10] - Free cash flow was $187 million, compared to $219.4 million reported in the prior quarter [10] Future Guidance - For fiscal 2025, FICO anticipates revenues of $1.98 billion and non-GAAP earnings projected at $28.58 per share [11]

Financial Performance - Total revenues reached $440 million, a 15% increase year-over-year but a 3% decrease quarter-over-quarter[3] - Scores revenues were $235.7 million, up 23% year-over-year but down 5% quarter-over-quarter[3] - Software revenues remained relatively flat quarter-over-quarter at $204.3 million, showing an 8% increase year-over-year[3] - Adjusted EBITDA was $223.1 million, an 18% increase year-over-year but an 8% decrease quarter-over-quarter[3] - Non-GAAP diluted EPS was $5.79, a 20% increase year-over-year but an 11% decrease quarter-over-quarter[3] Software Metrics - Software ARR increased to $729.3 million, a 6% increase year-over-year and a 1% increase quarter-over-quarter[3] - Software ACV Bookings were $21.2 million, a 16% increase year-over-year but a 4% decrease quarter-over-quarter[3] - Platform ARR reached $227.7 million, while Non-Platform ARR was $501.6 million[20] Segment Performance - Scores operating income was $203.8 million, with an 86% operating margin[33] - Software operating income was $60.7 million, with a 30% operating margin[33] Balance Sheet - Cash and investments increased to $230.2 million, a 17% increase both year-over-year and quarter-over-quarter[31]

Core Insights - Fair Isaac reported strong year-over-year growth in revenue and net income but fell short of analyst expectations for adjusted EPS and revenue [2][3] Financial Performance - Revenue for Q1 2025 was $440 million, a 15% increase from $382.1 million in Q1 2024, but below the expected $452 million [2][4] - Adjusted EPS was $5.79, missing the analysts' estimate of $6.09, but up 20% from $4.81 in the previous year [2][4] - GAAP net income reached $152.5 million, a 26% increase from $121.1 million in the same quarter last year [2][4] - Free cash flow improved significantly to $186.8 million, a 55% increase from $120.8 million year-over-year [4] Business Overview - Fair Isaac is recognized for its FICO Scores, a key measure of consumer credit risk in the U.S., and focuses on scoring solutions and software for credit risk management [5] - The company is expanding its service offerings through the FICO Platform, a cloud-based solution that centralizes analytics and decision-making capabilities [5] Strategic Focus - The company aims to transition current software offerings to the FICO Platform and leverage innovations in analytics and decision management [6] - Strategic partnerships are being formed to expand distribution channels and capture new customer segments while maintaining market leadership [6] Segment Performance - The Scores segment generated $235.7 million in revenue, reflecting a 23% growth from $192.1 million last year, driven by a 30% increase in business-to-business scores [7] - The Software segment reported $204.3 million in revenue, an 8% increase from $189.9 million, attributed to higher recurring revenues and license fees [8] - The FICO Platform contributed to a 20% increase in annual recurring revenue (ARR), indicating successful customer engagement [8] Technological Advancements - Fair Isaac is leveraging artificial intelligence (AI) and machine learning (ML) to enhance its competitive position and adapt to market changes [9] Financial Outlook - Management projects revenue of approximately $1.98 billion for fiscal 2025, with GAAP net income targeted at $624 million, indicating optimism for double-digit growth [11] - The strategic vision emphasizes sustained growth in software and scoring solutions amidst evolving economic conditions [12]

Core Insights - FICO plans to incorporate buy now, pay later (BNPL) data into its credit score analysis following a joint study with Affirm, indicating a shift in credit scoring methodologies [1][2] - The study revealed that over 85% of consumers who opened a new BNPL account experienced a consistent impact on their FICO scores, suggesting potential benefits for both consumers and lenders [3] Group 1: Study Findings - The study compared FICO scores of over 500,000 consumers with at least one new Affirm BNPL loan against a benchmark population without such loans, demonstrating the potential positive impact of BNPL data on credit scores [2][3] - The inclusion of BNPL data could lead to score increases for some consumers while enhancing model risk performance for lenders, highlighting the importance of BNPL data in the credit ecosystem [2][3] Group 2: Consumer Trends - Over 56% of consumers reported using BNPL options last year, with 76% of these users expressing high satisfaction levels, indicating a growing acceptance and reliance on BNPL services [4] - Consumers living paycheck-to-paycheck are four times more likely to utilize BNPL options compared to those who are not, showcasing the demographic's dependence on such financial solutions [4]

Core Insights - Fair Isaac (FICO) reported revenue of $439.97 million for the quarter ended December 2024, reflecting a year-over-year increase of 15.2% [1] - Earnings per share (EPS) for the quarter was $5.79, up from $4.81 in the same quarter last year [1] - The reported revenue was below the Zacks Consensus Estimate of $454.73 million by 3.25%, and the EPS fell short of the consensus estimate of $6.21 by 6.76% [1] Revenue Breakdown - On-premises and SaaS software revenue was $186.01 million, slightly below the average estimate of $186.12 million, representing a year-over-year increase of 10.3% [4] - Scores revenue reached $235.68 million, compared to the estimated $251.58 million, marking a 22.7% increase year-over-year [4] - Professional services revenue was $18.28 million, below the average estimate of $20.61 million, showing a decline of 14.1% year-over-year [4] - Software revenue was reported at $204.29 million, slightly below the estimate of $206.72 million, with a year-over-year increase of 7.6% [4] Stock Performance - Fair Isaac's shares have returned -7.1% over the past month, contrasting with a +1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Fair Isaac (FICO) came out with quarterly earnings of $5.79 per share, missing the Zacks Consensus Estimate of $6.21 per share. This compares to earnings of $4.81 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -6.76%. A quarter ago, it was expected that this financial services company would post earnings of $6.60 per share when it actually produced earnings of $6.54, delivering a surprise of -0.91%.Over the last four quarters ...

Financial Performance - Total revenues for the quarter ended December 31, 2024, were $440.0 million, a 15% increase from $383.5 million in the same quarter of 2023[84] - Revenues for the Scores segment were $235.7 million, reflecting a 23% increase from $191.5 million in the prior year[84] - Annual Recurring Revenue (ARR) for the Software segment as of December 31, 2024, was $729.3 million, a 6% increase from $688.0 million as of December 31, 2023[84] - Operating income for the quarter was $179.5 million, a 19% increase from $150.8 million in the same quarter of 2023[84] - Net income for the quarter was $152.5 million, representing a 26% increase from $121.1 million in the prior year[84] - Diluted EPS for the quarter was $6.14, a 28% increase from $4.80 in the same quarter of 2023[84] - Total revenues for the quarter ended December 31, 2024, were $439.97 million, a 15% increase from $382.06 million in the same quarter of 2023[97] - Operating income for the quarter was $179.53 million, reflecting a 19% increase from $151.36 million in the prior year[109] - Net income for the quarter was $152.53 million, a 26% increase compared to $121.07 million in the same quarter of 2023[97] Cash Flow and Debt - Cash flows from operating activities were $194.0 million, compared to $122.1 million in the same quarter of 2023[84] - Total debt balance increased to $2.4 billion as of December 31, 2024, up from $2.2 billion as of September 30, 2024[84] - Net cash provided by operating activities increased to $194.0 million for the quarter ended December 31, 2024, up from $122.1 million in the same quarter of 2023, representing a $71.9 million increase[119] - Net cash used in investing activities rose to $8.9 million for the quarter ended December 31, 2024, compared to $2.4 million in the prior year, primarily due to a $6.3 million increase in capitalized internal-use software costs[120] - Net cash used in financing activities increased to $144.2 million for the quarter ended December 31, 2024, from $99.9 million in the same quarter of 2023, largely due to a $90.9 million increase in common stock repurchases[121] - The company has a new stock repurchase program authorized for up to $1.0 billion, with $600.7 million remaining as of December 31, 2024, after spending $159.7 million during the quarter[122] - As of December 31, 2024, the company had $425.0 million in borrowings under the revolving line of credit at a weighted-average interest rate of 5.762%[125] - The carrying value of the Senior Notes was $1.3 billion as of December 31, 2024, with compliance to all financial covenants[126] Expenses - Research and development expenses increased by $2.5 million, with R&D expenses as a percentage of revenues decreasing to 10% from 11% year-over-year[101] - Selling, general and administrative expenses rose by $23.6 million, with these expenses as a percentage of revenues increasing to 29% from 27% year-over-year[103] Segment Performance - Dollar-Based Net Retention Rate for the Software segment was 105% as of December 31, 2024[84] - Scores segment revenues increased by $43.6 million, driven by a $42.0 million rise in business-to-business scores revenue and a $1.6 million increase in business-to-consumer revenue[94] - Software segment revenues rose by $14.3 million, primarily due to a $17.3 million increase in on-premises and SaaS software revenue, partially offset by a $3.0 million decrease in professional services revenue[95] - Segment operating income for Scores increased by $35.1 million, while Software segment operating income rose by $5.6 million, contributing to a total segment operating income increase of $37.0 million[111] Tax and Legal Matters - The effective income tax rate for the quarter was (1.6)%, compared to 7.3% in the same quarter of 2023, influenced by excess tax benefits related to share-based compensation[108] - FICO is involved in a consolidated putative class action lawsuit alleging antitrust claims related to the distribution of FICO Scores, with some claims allowed to proceed to discovery[139] Risk Management - The company is exposed to market risks related to interest rates and foreign exchange rates, managing these risks through various financial instruments[131] - The company has entered into foreign currency forward contracts to mitigate foreign exchange rate risks associated with foreign-currency-denominated receivables[134] - As of December 31, 2024, FICO has outstanding foreign currency forward contracts with a total contract amount of $8,600,000 for Euro (EUR), $8,460,000 for British pound (GBP), and $8,967,000 for Singapore dollar (SGD)[135] - The fair value of the foreign currency forward contracts as of December 31, 2024, is $8,958,000 for Euro (EUR), $10,600,000 for British pound (GBP), and $6,600,000 for Singapore dollar (SGD)[135] - On September 30, 2024, the total contract amount for foreign currency forward contracts was $13,000,000 for Euro (EUR), $12,237,000 for British pound (GBP), and $7,404,000 for Singapore dollar (SGD)[135] - The fair value of the foreign currency forward contracts as of September 30, 2024, was $14,531,000 for Euro (EUR), $16,400,000 for British pound (GBP), and $5,800,000 for Singapore dollar (SGD)[135] Internal Controls - FICO's disclosure controls and procedures were evaluated and deemed effective as of December 31, 2024, ensuring timely reporting of required information[136] - No changes in FICO's internal control over financial reporting were identified during the reporting period that materially affected its internal controls[137]

First Quarter Fiscal 2025 Non-GAAP Results Exhibit 99.1 FICO Announces Earnings of $6.14 per Share for First Quarter Fiscal 2025 Revenue of $440 million vs. $382 million in prior year BOZEMAN, Mont.--(BUSINESS WIRE)--February 4, 2025--FICO (NYSE:FICO), a global analytics software leader, today announced results for its first fiscal quarter ended December 31, 2024. First Quarter Fiscal 2025 GAAP Results Net income for the quarter totaled $152.5 million, or $6.14 per share, versus $121.1 million, or $4.80 per ...

Fair Isaac Corporation (FICO) is set to report its first-quarter fiscal 2025 results on Feb. 4.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $454.73 million, suggesting an increase of 19.02% from the year-ago quarter’s reported figure.The consensus mark for earnings is pegged at $6.21 per share, up 0.8% over the past 30 days, indicating 29.11% year-over-year growth.The company’s earnings missed the Zack ...