For the quarter ended September 2025, Fair Isaac (FICO) reported revenue of $515.75 million, up 13.7% over the same period last year. EPS came in at $7.74, compared to $6.54 in the year-ago quarter.The reported revenue represents a surprise of +0.78% over the Zacks Consensus Estimate of $511.78 million. With the consensus EPS estimate being $7.34, the EPS surprise was +5.45%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine ...

Financial Data and Key Metrics Changes - Upstart reported a total revenue of approximately $277 million for Q3 2025, representing a 71% year-on-year increase and an 8% sequential increase [23] - GAAP net income for Q3 was approximately $32 million, significantly ahead of expectations, reflecting strong performance on net interest income and reduced fixed costs [26] - The average loan size decreased by 12% from the prior quarter to approximately $6,670, influenced by borrowers requesting lower amounts and a shift towards smaller loan products [24] Business Line Data and Key Metrics Changes - Transaction volume across Upstart's platform reached approximately 428,000, up 128% year-on-year and 15% sequentially, with around 300,000 new borrowers [24] - New products, including small-dollar loans, auto, and home loans, accounted for nearly 12% of originations and 22% of new borrowers in Q3, with transaction volume for these products growing approximately 300% year-on-year [8][9] - The auto retail business saw transaction volume grow more than 70% sequentially, with significant improvements in software and expansion into four new states [9] Market Data and Key Metrics Changes - Consumer demand for Upstart's services continued to grow, with over two million applications submitted in Q3, a 30% increase from Q2, marking the highest level in over three years [6] - The Upstart Macro Index (UMI) showed a modest increase in July and August, which led to a temporary reduction in approval rates and an increase in interest rates [6][8] Company Strategy and Development Direction - Upstart aims to leverage AI technology to lead the trillion-dollar credit industry, focusing on rapid growth, profitability, and AI leadership [5] - The company is transitioning several new products from R&D to scale-up phases, with expectations for significant growth in 2026 [27] - Upstart is committed to maintaining credit performance while achieving transaction volume targets, emphasizing the importance of precise risk pricing [8][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of consumer credit, noting no material deterioration and signs of improvement [8] - The company anticipates a favorable economic backdrop for credit, with expectations of improved consumer financial health and lower investor return requirements due to potential rate cuts [30] - Upstart plans to moderate take rates to increase origination volumes and repeat transactions, aiming for a strong finish to 2025 and a promising 2026 [30][31] Other Important Information - Upstart's contribution margin for Q3 was 57%, slightly down from the previous quarter due to lower conversion rates impacting acquisition costs [25] - The company ended Q3 with approximately $1.2 billion in loans held directly on its balance sheet, up from just over $1 billion in Q2 [26] Q&A Session Summary Question: Application demand and guidance - Dan Dolev inquired about the strong application demand and how it aligns with the guidance provided, which was below expectations. Management noted that while applications grew significantly, the model's conservatism impacted transaction volume [34][35] Question: Impact of recent auto industry events - Kyle Peterson asked if recent negative credit events in the auto sector affected Upstart's expansion plans. Management confirmed no direct impact but acknowledged increased diligence in underwriting [39][40] Question: Quality of leads from marketing improvements - Peter Christiansen questioned the quality of leads following marketing enhancements. Management indicated that while application volume increased, the model's conservatism affected conversion rates [45][46] Question: Repayment speeds and credit implications - Mihir Bhatia asked about the increase in repayment speeds and its implications. Management suggested that faster repayments could indicate improving consumer health but may lead to reduced interest income in the short term [72][74] Question: Conversion rate drivers - Reggie Smith inquired about the factors affecting the conversion rate. Management clarified that the primary driver was the model's conservatism, which influenced approval rates and loan sizes [63][79]

Core Insights - Rent payments are generally not included in credit reports and do not affect credit scores unless they are overdue and sent to collections [3] - Recent developments in rent reporting services allow for the addition of rent payments to credit profiles, potentially improving credit scores [4] Rent Reporting Services - **Boom**: Charges $60 for reporting rent payments to all three credit bureaus for one year, with an additional $25 fee for reporting up to 24 past payments. Users reportedly gain an average of 28 points in two weeks [5][6] - **Experian Boost**: A free service that only reports rent payments to Experian, potentially leading to a 13-point increase in scores, but results are unpredictable and may not impact scores from other bureaus [7][10] - **Piñata**: Charges $60 for a one-year membership, covering up to 24 months of back rent payments. Users may see an average score increase of 60 points in a year [11] - **Rental Kharma**: Costs $8.95 per month plus a $75 fee for past payments, reporting only to TransUnion and Equifax. Average score increase is 40 points, but late payments may negatively impact scores [13][14] Pros and Cons of Rent Reporting Services - **Pros**: On-time rent payments can be credited, potential for improved credit scores, availability of free services [18] - **Cons**: No guarantee of score improvement, late payments can negatively affect scores, some creditors may not consider scores impacted by these services [18] Recommendations - Companies should evaluate the offerings of rent reporting services and ensure eligibility before proceeding, as improvements are not guaranteed and may take time [19][20]

Core Insights - The Buy Now, Pay Later (BNPL) services are becoming a popular payment option among Americans, with 86% expressing trust in BNPL compared to credit cards [2] - A significant concern among BNPL users is the potential impact on their credit scores, as credit agencies are starting to incorporate BNPL payment history into their scoring models [2][3] User Demographics and Trends - Approximately 30% of Americans have utilized BNPL services, with usage projected to rise from 49.2 million in 2021 to 86.5 million in 2024, and further to 91.5 million by 2025 [3] - The average BNPL loan amount is around $135, but many users face challenges in managing multiple loans, leading to late payments [4] Credit Scoring Implications - FICO has announced plans to include BNPL data in its credit scoring models, which may negatively affect users' credit scores due to late payments [3][5] - The incorporation of BNPL activity into credit scores emphasizes the importance of responsible usage among consumers [5]

Core Viewpoint - Fair Isaac Corp. announced it will license its credit scores directly to mortgage resellers, which has raised concerns about margin pressure for major credit bureaus like Experian, Equifax, and TransUnion [1][6][12] Company Impact - Fair Isaac's shares surged by 26% following the announcement, potentially erasing all losses for the year [3] - The direct licensing model is expected to eliminate the approximately 100% markup that credit bureaus currently charge for FICO scores, leading to increased competition and price transparency in the market [2][10] - Citigroup analysts indicated that this move would negatively impact the margins of Experian and Equifax, as they would lose the markup on FICO scores [6][13] Industry Dynamics - The Federal Housing Finance Agency (FHFA) has supported Fair Isaac's initiative, suggesting it could lead to more creative solutions for consumers [3][11] - The introduction of direct competition for FICO scores in the mortgage market may hinder Fair Isaac's ability to continue increasing prices [9] - Analysts predict that credit bureaus could see earnings decline by an average of 10% to 15% due to the new licensing model, as they will need to negotiate prices directly with lenders [12][13]

Core Viewpoint - The company is set to license its credit scores directly to mortgage resellers, bypassing traditional credit bureaus, which is expected to enhance competition and reduce costs in the market [1][3]. Group 1: Company Strategy - The move to license credit scores directly is seen as a response to the Federal Housing Finance Agency's (FHFA) push for increased competition and cost reduction in the industry [3][4]. - The company anticipates that the pricing of FICO scores will remain flat or decrease in the coming year, benefiting consumers [5][6]. Group 2: Market Impact - The initiative is expected to lead to lower costs for consumers, as any savings from the system are likely to trickle down to them [5][6]. - The company acknowledges that while it cannot disclose specific earnings forecasts due to being in a quiet period, the new strategy is considered beneficial for its overall business [6]. Group 3: Economic Conditions - Current credit conditions indicate that consumers are financially extended, with signs of potential weakness in subprime auto delinquencies [7][8]. - There is uncertainty regarding when economic pressures may manifest, but the company recognizes that it operates as a lagging indicator in the economic cycle [10].

Core Insights - Personal loans can be beneficial for improving credit scores, which can lead to lower interest rates on future loans and better terms for insurance and utilities [2][4][6] Group 1: Benefits of Personal Loans - Positive Payment History: Taking out a personal loan can demonstrate responsibility to future lenders, as payment history accounts for 35% of the total credit score [4][5] - Good Credit Mix: Personal loans contribute to a diverse credit mix, which makes up 10% of the credit score, showing the ability to manage different types of debt [6] - Improve Credit Utilization Ratio: Personal loans can help improve the credit utilization ratio, which is a key factor in determining creditworthiness [7]

Core Insights - The overall FICO score in the U.S. has slightly decreased by approximately 2 percentage points due to inflation and rising interest rates affecting consumer affordability and leading to financial strain among borrowers [1] - The percentage of the population with FICO scores between 600 and 749 is projected to decline from 38.1% in 2021 to 33.8% by 2025 [1] - The most significant decline in scores is observed among Generation Z adults, primarily due to student loan pressures [1] - The report indicates that the student loan delinquency rate has reached a historical high, with over 10% of 21 million customers having overdue student loans [1] - Despite the challenges, many consumers still maintain good credit status, with average credit scores remaining close to historical highs [1] - Average FICO scores are considered a lagging indicator of credit health, suggesting that future average scores may face various risks [1]

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

Core Insights - Cash-out refinancing allows homeowners to access their home equity by replacing their current mortgage with a larger one, providing funds for various needs such as home improvements, debt consolidation, or education expenses [2][11]. Summary by Sections Cash-out Refinance Mechanism - Cash-out refinancing involves replacing an existing mortgage with a larger loan to access home equity, applicable to various mortgage types including fixed-rate, adjustable-rate, conventional, FHA, and VA loans [2]. - Closing costs for cash-out refinancing typically range from 2% to 6% of the loan amount, which can be paid in cash or included in the loan balance, affecting the cash available to the homeowner [3]. Borrowing Limits - Most conventional and FHA loan programs allow borrowing up to 80% of the primary home's value, while conventional loans for second homes or investment properties may limit borrowing to 70% to 75% [4]. - For certain VA loans, homeowners can borrow up to 90% of their home value, including the VA funding fee [4]. Qualification Criteria - To qualify for a cash-out refinance, homeowners generally need a minimum FICO score of 620, a debt-to-income ratio of 45% or less, and sufficient equity in their home, typically requiring an appraisal [7][24]. - Homeowners usually need to have owned their property for at least six months to one year before applying for a cash-out refinance [7]. Advantages and Disadvantages - Cash-out refinancing can provide access to cash for various purposes, but it comes with financial implications such as potential foreclosure risk, higher interest rates, and increased loan payments [11][13]. - The cash obtained can be used for home improvements, debt consolidation, or other financial needs, but it is essential to weigh the long-term costs and benefits [12][13]. Alternatives to Cash-out Refinancing - Alternatives include home equity loans, which allow borrowing a specific amount with fixed payments, and home equity lines of credit (HELOCs), which provide access to credit as needed [16][17]. - Personal loans and credit cards can also be considered, though they typically come with higher interest rates compared to mortgage options [19][20]. FAQs on Cash-out Refinancing - Cash-out refinancing can be beneficial if it leads to a lower interest rate or better loan terms, but it requires at least 20% equity and a credit score of 620 or higher for most lenders [22][24]. - It may temporarily lower credit scores due to new debt and hard inquiries, but maintaining a good payment history is crucial for long-term credit health [23].