Financial Data and Key Metrics Changes - The company reported Q4 revenues of $516 million, up 14% year-over-year, and for the full fiscal year, revenues reached $1.991 billion, an increase of 16% compared to the prior year [6][22] - GAAP net income for the quarter was $155 million, up 14%, with GAAP earnings of $6.42 per share, an 18% increase from the prior year [28][29] - Non-GAAP net income for the quarter was $187 million, up 15%, with non-GAAP earnings per share of $7.74, an 18% increase year-over-year [29] - Free cash flow for the quarter was $211 million, with a total of $739 million over the last four quarters, representing a 22% year-over-year increase [30] Business Line Data and Key Metrics Changes - In the software segment, Q4 revenues were $204 million, flat year-over-year, while for the fiscal year, revenues were $822 million, up 3% from last year [7][22] - The scores segment saw Q4 revenues of $312 million, up 25% year-over-year, driven primarily by B2B scores, which increased by 29% [9][23] - Total scores revenues for the fiscal year were $1.169 billion, up 27%, with mortgage origination revenues up 52% year-over-year [23] Market Data and Key Metrics Changes - The Americas region accounted for 87% of total company revenues, while EMEA generated 8% and Asia-Pacific delivered 5% [22] - The company anticipates no significant improvement in the macro environment for its Scores business, with expectations of stable market share and volume in auto, card, and personal loan originations [24] Company Strategy and Development Direction - The company plans to advance its direct and indirect distribution strategy and invest to capture market opportunities emerging from innovations like the FICO Platform and FICO FFM [9][24] - The FICO Mortgage Direct License Program aims to drive competition and transparency in the mortgage market, with significant interest from resellers and lenders [12][13] - The company maintains a focus on efficiencies and prioritizes resources for strategic initiatives, including headcount for distribution and development of the FICO Platform [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving stronger growth in fiscal 2026, guiding for revenues of $2.35 billion, a 18% increase over fiscal 2025 [33] - The company is being conservative in its guidance due to uncertainties in the macro environment, particularly regarding mortgage volumes and interest rates [72] - Management highlighted the importance of maintaining a competitive edge through innovations and the value provided by FICO scores [45][56] Other Important Information - The company has a patent portfolio of over 230 issued patents and nearly 80 pending applications, reinforcing its position in responsible AI development [9] - The effective tax rate for the quarter was 23.4%, with a full-year net effective tax rate of 18.8% [29][30] Q&A Session Summary Question: Feedback from FHFA and FICO 10T approval timeline - Management confirmed constructive conversations with the FHFA and expressed confidence in the eventual release of FICO 10T [36] Question: Assumptions around direct licensing model in guidance - Management indicated a conservative approach in guidance due to uncertainties in the macro environment and potential timing issues with the performance model [39][40] Question: Long-term pricing strategy - Management stated that while they recognize a value gap, specific pricing strategies for 2027 and beyond are not yet determined [44][45] Question: Feedback from lenders on pricing models - Positive reception to the direct model was reported, with lenders appreciating the optionality provided by the two pricing models [49] Question: Adoption of FICO 10T in the non-conforming market - Management noted that lenders in the non-conforming market prioritize default risk and are satisfied with the performance of FICO 10T [53] Question: Mortgage volume assumptions in guidance - Management acknowledged conservatism in guidance due to uncertainties around interest rates and trigger leads [72] Question: Reseller adoption of the direct model - Management confirmed that resellers are on pace for adoption, with no significant operational hurdles anticipated [82] Question: Credit bureaus and performance model availability - Management indicated uncertainty regarding the split between the per-score and performance models among lenders [85]

FICO's Business Performance - FICO experienced 20% growth overall, with 37% growth in the B2B portion of its scores business [4] - The scores business has demonstrated double-digit revenue and profit growth for several years [5] - FICO's volumes are approximately 40% below their peak [26] FHFA and Regulatory Issues - The FHFA (Federal Housing Finance Agency) is allowing lenders to use different credit score models for mortgages sold to Fannie Mae and Freddie Mac [2] - The FHFA director, Bill Py, has referred to FICO as a monopoly [1] - FICO 10T is technically approved by the FHFA, but its implementation timeline is not the same as Vantage [19] - Concerns exist regarding the safety and soundness of the FHFA's approach [20] FICO 10T vs VantageScore - FICO 10T outperforms FICO Classic, with 18% fewer credit defaults [13] - FICO maintains over 90% market share in markets outside of government mandates [17] - In the non-conforming mortgage market, $313 billion in originations have been done with FICO 10T [18] - FICO scores cost $4.95 out of $6,000 in mortgage closing costs [21] FICO Classic and Market Stability - FICO Classic has been used for the last 20 years and is highly optimized [11] - The industry has models built on FICO Classic, and regulators use it for capital adequacy assessments [12] - FICO Classic has been stress-tested through the 2008 downturn [23][24]

Market Position and Competition - FICO consistently outperforms Vantage in the market, securing over 90% market share in non-government sectors [1] - FICO 10T has achieved significant adoption in the non-conforming mortgage market, with $313 billion in originations [1] - While FICO 10T is technically approved by the FHFA, its implementation timeline may differ from Vantage [1] Pricing and Cost - The cost of a FICO score is $4.95 for a mortgage score, which is a small fraction of the $6,000 in closing costs [3] - The company acknowledges price increases but emphasizes their relative insignificance compared to the value provided [3] Industry Preference - FICO is the clear industry standard in the non-conforming mortgage market [1] - The industry widely uses FICO scores [1]