FICO(US:FICO)2020-07-30 02:30Financial Data and Key Metrics Changes - The company reported revenues of $314 million, flat compared to the same period last year, which was the highest revenue quarter ever [9] - GAAP net income was $64 million, with GAAP earnings of $2.15 per share; non-GAAP net income was $77 million, with non-GAAP EPS of $2.58 [9] - Free cash flow reached $99 million, the highest single quarter in company history, compared to $61 million in the same period last year, marking a 63% increase [31] - Total debt was reduced by about $20 million from the end of the second quarter, with a total debt face value of $938 million [9][32] Business Line Data and Key Metrics Changes - Software revenue decreased by 8% due to a tough comparison with the previous year, while the application segment was down 15% primarily due to lower upfront license revenues [10][22] - Decision Management Software segment revenues increased by 22% to $41 million, driven by increases in SaaS subscription revenues [25] - Scores segment revenues were up 14% to $132 million, with B2C revenues increasing by 21% and B2B revenues up 12% [11][26] Market Data and Key Metrics Changes - 79% of total revenues were derived from the Americas region, with EMEA contributing 14% and Asia-Pacific 7% [26] - The company experienced strong growth in the mortgage markets, with volumes up due to low interest rates, while auto volumes improved over the quarter [12][13] Company Strategy and Development Direction - The company is focused on digital transformation and innovation, with the introduction of the FICO Resilience Index to help assess consumer financial resiliency [14][15] - Management is confident in the company's ability to navigate the current economic environment while maintaining a commitment to strategic initiatives [36] - The company is not providing formal financial guidance due to the uncertain economic environment but is offering visibility into trending metrics [16][34] Management's Comments on Operating Environment and Future Outlook - Management noted that while the economic environment remains uncertain, the business model is resilient, and they are actively managing operations to address near-term challenges [20][36] - There is a focus on maintaining productivity and innovation despite the pandemic, with a strong pipeline of deals moving into the fourth quarter [8][10] Other Important Information - The effective tax rate for the quarter was about 16%, with expectations for the fiscal year around 9% to 11% [30] - The company has announced a new board authorization for $250 million of share repurchase [34] Q&A Session Summary Question: Insights on B2B Scores business growth - Management acknowledged that volume was lighter than expected, impacting growth, but pricing actions helped mitigate some effects [40][42] Question: B2C growth and any one-time deal activity - Management confirmed that the growth in B2C was genuine, driven by increased consumer interest in credit scores [44] Question: Budget issues affecting Software and Scores - Management indicated that while there is a cautious approach from clients, they are still moving forward with digital transformation initiatives [45] Question: Trends in mortgage and auto volumes - Management noted that mortgage volumes were strong, while auto volumes improved over the quarter, but credit card and personal loan volumes were down [12][13] Question: Demand for UltraFICO and Experian Boost - Management reported strong performance for Experian Boost, while UltraFICO is lagging due to Boost's success [52] Question: Future investment in software - Management stated that investment in software will continue as long as there is market demand for new solutions [54] Question: SaaS product development timeline - Management confirmed that APIs will be available for external use in the upcoming year, allowing for broader application development [57] Question: Disconnect between industry volumes and Scores revenues - Management acknowledged the disconnect but attributed it to the company's different lead generation strategies compared to bureaus [88] Question: Revenue impact from credit scoring recommendations - Management stated they are agnostic to the specific score versions used by clients and do not expect revenue increases from upgrades [90]