Segment Information | Segment Information We are organized into the following three operating segments, each of which is a reportable segment, to align with internal management of our worldwide business operations based on product offerings. • Applications . This segment includes pre-configured decision management applications designed for a specific type of business problem or process — such as marketing, account origination, customer management, fraud, collections and insurance claims management — as well as associated professional services. These applications are available to our customers as on-premises software, and many are available as hosted, software-as-a-service (“SaaS”) applications through the FICO ® Analytic Cloud. • Scores. This segment includes our business-to-business scoring solutions, our myFICO ® solutions for consumers and associated professional services. Our scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our scoring solutions are distributed through major credit reporting agencies, as well as services through which we provide our scores to clients directly. • Decision Management Software. This segment is composed of analytic and decision management software tools that clients can use to create their own custom decision management applications, our new FICO ® Decision Management Suite, as well as associated professional services. These tools are available to our customers as on-premises software or through the FICO ® Analytic Cloud. Our Chief Executive Officer evaluates segment financial performance based on segment revenues and segment operating income. Segment operating expenses consist of direct and indirect costs principally related to personnel, facilities, consulting, travel and depreciation. Indirect costs are allocated to the segments generally based on relative segment revenues, fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate broad-based incentive expense, share-based compensation expense, restructuring expense, amortization expense, various corporate charges and certain other income and expense measures to our segments. These income and expense items are not allocated because they are not considered in evaluating the segment’s operating performance. Our Chief Executive Officer does not evaluate the financial performance of each segment based on its respective assets, nor capital expenditures where depreciation amounts are allocated to the segments from their internal cost centers as described above. The following tables summarize segment information for the quarters ended December 31, 2017 and 2016 : Quarter Ended December 31, 2017 Applications Scores Decision Management Software Unallocated Corporate Expenses Total (In thousands) Segment revenues: Transactional and maintenance $ 93,213 $ 69,574 $ 11,875 $ — $ 174,662 Professional services 34,853 278 7,495 — 42,626 License 13,343 63 4,627 — 18,033 Total segment revenues 141,409 69,915 23,997 — 235,321 Segment operating expense (102,619 ) (15,887 ) (31,853 ) (26,760 ) (177,119 ) Segment operating income (loss) $ 38,790 $ 54,028 $ (7,856 ) $ (26,760 ) 58,202 Unallocated share-based compensation expense (16,510 ) Unallocated amortization expense (1,788 ) Operating income 39,904 Unallocated interest expense, net (6,460 ) Unallocated other income, net 513 Income before income taxes $ 33,957 Depreciation expense $ 3,943 $ 155 $ 1,412 $ 284 $ 5,794 Quarter Ended December 31, 2016 Applications Scores Decision Management Software Unallocated Corporate Expenses Total (In thousands) Segment revenues: Transactional and maintenance $ 84,881 $ 58,252 $ 10,527 $ — $ 153,660 Professional services 34,341 521 8,681 — 43,543 License 15,543 609 6,245 — 22,397 Total segment revenues 134,765 59,382 25,453 — 219,600 Segment operating expense (99,797 ) (13,319 ) (29,085 ) (24,633 ) (166,834 ) Segment operating income (loss) $ 34,968 $ 46,063 $ (3,632 ) $ (24,633 ) 52,766 Unallocated share-based compensation expense (14,519 ) Unallocated amortization expense (3,320 ) Operating income 34,927 Unallocated interest expense, net (6,172 ) Unallocated other expense, net (100 ) Income before income taxes $ 28,655 Depreciation expense $ 3,868 $ 266 $ 1,126 $ 349 $ 5,609 |