Fair Isaac (FICO) Up 8.5% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Fair Isaac (FICO) reported mixed financial results for Q3 fiscal 2024, with earnings per share missing estimates but revenues showing year-over-year growth. The company has seen an 8.5% increase in share price since the last earnings report, outperforming the S&P 500, raising questions about future performance leading up to the next earnings release [1][2]. Financial Performance - Q3 fiscal 2024 earnings were $6.25 per share, missing the Zacks Consensus Estimate by 1.88%, but up 10.4% year over year [2]. - Revenues reached$ 448 million, a 12.3% increase year over year, but slightly below the consensus mark by 0.15% [2]. - Revenue contributions came from the Americas (85%), EMEA (10%), and Asia Pacific (5%) [2]. Revenue Breakdown - Software revenues increased 5% year over year to $206.4 million, with Software Annual Recurring Revenues (ARR) growing 10% year over year [3]. - On-premises and SaaS software revenues, accounting for 41% of total revenues, rose 6.8% year over year to$ 183.8 million [4]. - Scores, which represent 53.9% of revenues, increased 19.7% year over year to $241.5 million [4]. Segment Performance - B2B revenues grew 27% year over year, primarily due to unit price increases, while B2C revenues fell 2% due to lower volumes on myFICO.com [5]. - Mortgage originations revenues surged 80%, making up 49% of B2B revenues and 39% of total scores revenues [5]. - Auto originations revenues decreased by 3% year over year, and credit card and personal loan revenues declined by 7% [5]. Operating Metrics - Research & development expenses as a percentage of revenues decreased by 50 basis points to 9.9% year over year [6]. - Selling, general and administrative expenses increased by 80 basis points to 27.9% year over year [6]. - Operating margin contracted by 190 basis points to 42.5% in the reported quarter [6]. Balance Sheet and Cash Flow - As of June 30, 2024, FICO had$ 156 million in cash and cash equivalents and total debt of $2.11 billion, compared to$ 135.7 million in cash and $2.04 billion in debt as of March 31, 2024 [7]. - Cash flow from operations was$ 213.3 million in Q3, up from $71.04 million in the previous quarter, while free cash flow decreased to$ 20.5 million from $61.6 million [7]. Share Repurchase and Guidance - In Q3, FICO repurchased 196,000 shares and announced a new Board authorization for$ 1 billion in share repurchases [8]. - For fiscal 2024, FICO anticipates revenues of $1.7 billion and non-GAAP earnings projected at$ 23.16 per share [9]. Market Position and Outlook - Fair Isaac holds a Zacks Rank 4 (Sell), indicating expectations of below-average returns in the coming months [12]. - The company is part of the Zacks Computers - IT Services industry, which has seen mixed performance among peers, such as Roper Technologies, which reported a 12.1% year-over-year revenue increase [13].