FICO - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fair Isaac Corporation Quarterly Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, January 25, 2018. to conference like Weber. to I’d now, turn over the Steve And go Please ahead.

Steve Weber

discuss these will turn on XXXX. through the website available quarter Regulation afternoon the management for XX, materially. over that of Company’s Act call we Relations our compared sec.gov. Forward-Looking may of And Reform Relations the the the in the to SEC, today cause year. Please could thank the quarter you. Company’s the and concerning CFO, schedule to Will financial page in Certain GAAP our to the under Lansing. are call and Thank Regulation schedule Good financial from results and Lansing; measures or to run a this Risk you and website, Factors G will press in January to Litigation now, uncertainties is I’m available of to includes also replay today uncertainties these from I’m on this at presentation issued certain prior order for of statements at and results our of On portions regarding release Weber, The non-GAAP CEO, describes the actual results Will facilitate most and in comparable Pung. Investor particular in financial SEC’s fico.com of or I’ll filings. XXXX. earnings Steve webcast rate A SEC, website prior from contained joining G such This a be Vice release the comparison the this non-GAAP to the Information business. be Relations team. forward-looking President of the in measure. are statements refer Statements Today, FICO Copies also Securities Investor understanding characterized the Those as Investor of Mike differ each available joined call, with by issued measures. earnings earnings Company’s statements release call. the our Private first many FICO’s made reconciliation of filings involve that

Will Lansing

same everyone, our earnings Thanks, pleased I’m us happy thank at the first of first the We revenues $XXX our GAAP joining million, increase see quarter, good we In for share. we delivered million the net an $X.XX reported quarter results for with call. period per year. earnings momentum GAAP look of and you, Steve, to X% of I’m of we $XX last ahead. have over year income and as and

units and year. XX%, and reform we’ll share each today XX% of earnings share be associated to a announced of special in last an in fiscal million issuing impact tax of and the guidance restricted We XX period the to up EPS GAAP our are we recent FICO is share, net that rate our delivered XXXX today from per enactment will $XX income employees tax $X.XX positive the it positive but $XX tax non-GAAP net talk and In of per that. charge updating $X.XX the owner non-GAAP us respectively going will grant also reduced Mike to Our reflect have more $XX or for our stock about forward. a employee tax of making We success. nearly of reform. same of employee, every of the impacts believe light with include million long-term a reform, ongoing million EPS to certainly

we recurring sell base deals. continue build as to side revenue our the of software we On cloud-based our more business, through

Services, for good now their quarters can collections last up and X% growth they’re products a and needle XX%. revenues due Customer sales. Our and Communications move solutions. new We recovery over revenue the upfront In where recurring our getting and X% segment million about particularly products year originations relatively applications was had license are to our was compliance, These up size Company. innovative, were less decision the or down cloud-based $X.X to management software, with

emphasis revenue. deals in on DMS, Our is meaning cloud recurring more

growth. However, quarter those Scores from were the same our $XX XX%. revenues were same revenues million, In were the last drive over up Overall, last based our XX% business, the based continue cloud up to cloud period bookings XX% year. up and Revenues significant this were period year. XX% we up

had are XX% more partners. personal We’ve Open we new the focused year like ever the and focused partners worthiness. over around to up growth previous educating side, On our financial seek on and than summary information their additional revenues the to then and as information from existing been monitoring. BXC consumers reports our were partners and with consumers Today’s first their program with Access ingredients, simulators, on provide content credit score Scores

expand how assess ways value to We to provide to to consumers partners lenders offerings for view more are possible together our best constantly and to consumers work them. give looking

take about side, up this been we update very both increases quarters. and see the climate the year. and On credit in were over Initiatives Inclusion talking throughout to revenues side to on volume BXB strong XX% the over The the remains price. continue on BXB Financial as we minute several expect last previous I’d you to fiscal a current year growth our we’ve that drive like to

refined Scores, predictive a the we data company, order the to The accurately a lender’s and stake. FICO on mortgage data that over in know which decades data what’s you produce to an is score know get the assess is hinges to or role independent consumers’ lending system rely bureau. not at are quality In predictive, we produce standards bureau’s of risk. the analytics and risk. on ability ability FICO’s reliable loan that consumer’s to credit is credit are car harness credit credit As to FICO

by and soundness lending in important robustness of our scoring millions role an play extension standards system of stability ensuring accuracy decisions every and data the the of day. Our and credit

We to be regulatory people data Scores that give sources are cannot reliable scored compliant and bureau FICO new responsibly using alternative alone. credit who allow using to data us

approach ever the details. diverse that ensures financial expansion as now scoring Mike to call I’ll broader, and the scoring more for before. than but thoughts like a standards group our of credit would of integrity as share the inclusive to Our later turn over to more I summary further well some

Mike Pung

Thanks, in Will afternoon, prepared everyone. comments. I’ll points emphasize Good three my Today,

we million million X/X accounted First, of three the all nearly double-digit of a revenue, $XX increase year-over-year. XX% growth last and at revenue. or for quarter’s $XXX over in X% an year, $XXX million grew Recurring revenue of delivered segments

Second, charges we the income, tax associated million reform which of delivered net $XX GAAP included act. some with

year, of remainder $XX Our ongoing will rate savings million tax per share. $X.XX of resulting over estimated an decline in recurring or the the

and million Finally, by $XX this an the a from in over to segments. quarter volumes partially in where We strong with product a repurchase revenue used I’ll our a three for we Starting breaking down generated were year. million revenue. additional $XX same into revenues the million, the cash XX% in our free versus shares by one repurchases $XX decline quarter revenues we flow begin pushed revenue reported million of and January. quarter in $XXX applications, grew up XX% period very had last license offset up last Communications year, last Recurring Customer year. Services X%

recovery, collections strong in and We quarter also up in had XX% XX%. a and up originations,

to of applications upfront in last XX% X% last bookings offset Decision increase license the the the Software were with versus of year. following also an $XX of fewer bookings. million revenue. Our down $XX due record year segment, million flat prior In That were revenues partially sales. Bookings $XX was were recurring Management quarter’s down, million, by

year. will see recurring. to less And Scores upfront As deals, based $XX in million, segment, we up we revenues continue finally, revenue more likely SaaS from to XX% were our transition more but last

year the to BXB are versus continuing side, revenues from BXC XX% XX% we’re On year. the last last quarter trends. The positive were up same up see and

As year. continue Scores to expect throughout to growth Will the accelerate we noted,

totaled of XX%; Reg revenue. XX% annual Bookings quarter compared including term can and revenues over Total increase up, quarter quarter EMEA XX% revenues continued region, the region period and million XX%. representing was weighted of generated The primarily And current bookings XX% XX million. quarter. Asia deals schedule, quarter. is transactional this bookings deals the Americas; for remaining Looking from as average at $XX over were four increase. implementation derived salary total revenues this for million, we this from our by $XXX Consulting Recurring our was you million of operating We X% derived Operating for from year the And yield license a million revenue revenues total. of maintenance to to quarter related $XXX to on $XXX non-GAAP $X down in first million. fourth this trend revenues and our had trailing were expenses is X% were X G X of the our XX% were million quarters from quarter. quarter. Pacific. total a months this quarter’s the was $XX for in our XX% bookings and generated The the to prior this $X margin those see sources

associated to the $XX the margin income Tax a income Cuts the encompasses operating share million expense that GAAP expect several for $XX and was The overseas a year. and million income deferred and profits, Job with XX.X% charge taxes. earnings tax quarter be included full XX.X% between per and net We $X.XX elements, charge of to of tax accumulated on or Act. this including re-measurement and

was our effective a excess this items, XXXX million, share from reduction had $X.XX with also anticipate reduction of or rate our tax rate fiscal the $XX expense of tax will Including about a the We benefits XX% million. in these shareholders. tax all per result a associated in savings We to in quarter. income tax about $XX.X

XXXX. be of still evaluating the was $XX expect are over rate tax flow the in for tax impact long-term to prior quarter year. million cash our but in of the reform the versus the low the remainder to million mid-XXs Free $XX We

we balance cash the the at $XX to million of hand sheet, on of the end quarter. Turning had

Our is quarter average X.X with of times, weighted the debt level interest times. EBITDA of to this $XXX ratio is adjusted X%. million a of debt net total rate covenant three below The

investors, an price of excess repurchasing we price in quarter, repurchased an in about January shares around $XX million our to average the of $XXX. During XXX,XXX shares another cash XXX,XXX $XXX. at average We returned at

authorization $XXX repurchases We remaining board latest continue have on share view million attractive use to about an the cash. of and as

our in evaluate opportunities guidance to provided to to adjust finally, count. portfolio the reform our tax our and We share we of strengthen position. that competitive the our acquire technologies for and continue legislation previously the and or And reduction also advance strategy updating actively products are impact

full approximately $XXX We are unchanged million, the net tax Revenues million an charges, increase a share is income at to for GAAP non-GAAP adjusted $XXX the the turn making final GAAP is non-GAAP previously previously I’ll from With $XXX $X.XX over at per remain rate as $XXX now now $XXX some million, net guiding follows. comments. share. per fiscal ongoing and benefit to million, by to that now at year earnings-per-share $X.XX, revised now income $X.XX it million Will earnings guided is guided to

Will Lansing

Mike. Thanks,

reap in As strategic have we beginning and to initiatives. our I I benefits my believe of the are remarkable opening said remarks, just momentum

find lead really the to of new the that IP. unique make we valuable to franchise continues business credit of markets. And Scores the business heart most way. to opportunities It’s U.S. at continue a Our the

transition in several sets for to our now of customers. side, will gradual new steady to to years a recurring It’s Steve the exciting markets over the are truly product that profitable predictable serve is at to be and turn On At revenue we FICO. invested making we deliver over an the the but model opening revenue. us time entirely SaaS have I’ll innovation allowing software time, new Q&A. same last

Steve Weber

and please concludes Will. our Thanks, questions you Operator, the open remarks This have. line. ready now any we’re prepared may to take

Operator

question from a line Patnaik of with Manav have proceed. we Please And Instructions] Barclays. the [Operator

Sorry Mr. your line Patnaik is open.

with from line question of a have also Stephens Brett Incorporated, We please Huff proceed. the

Brett Huff

the afternoon, was would I partners kind continuing Definitely, that hear of questions. investors. sounds big about quick current little focuses your like bit I across board from you. of Thank the the to BXC It of Couple it to hear by a more guys. Good partners. driven we one and be penetrate growth. then programs know or want that’s or helpful? different Are like it, that of their on new -- old look of do like and Discover they’re they and pushing partners maybe detail any some some the new and are like kind they also new with one, Experian with those

Will Lansing

programs, from which other of mean, an that some our starting mid and driven live as starting educational along expanded very and I announced are deals January add revenue in should Affinity Brett. and had digits. quarter deal with the go flow Recently, with we’re year Yes, a also well deal. a deal relationship in growing for to new we And was single nice that. Discover from to myFICO those see booked last the we Experian our transactions I great business it several

it’s a So, small of of a things up. add to lot combination beginning

Brett Huff

for consumer But more Can you Scores at how on about FICO any you a I kind consumer application, maybe folks know those? for dimensionalized a you talk versus that BXB. much guys bit economics maybe talked about don’t much application a have of relative little of have for how all? the selling beneficial

Will Lansing

guess No. and we that We’ve the have works I I some we relationship they dynamic about talked decline, with we the Experian they way as there, certainly grow, decline. grow; degree. broader and to mean, as pricing the

So, percent we’re tied a very of success failure. much or on

For they’re and using market deals, size amount the upon of very independently the technology the IP upon systems implementing, other be technology they tend each amount addressing. to the the in the negotiated of that based scoring of they’re they’re and or they’re also based of

literally do to into for we individually so, have which reasons. can’t we of would each confidentiality And deal go course

Brett Huff

we’re generally potentially shift the then, credit like Okay. distribution I view activity that. the different place mentioned where growth and BXB that’s the saw of things on kind question, partners? between really you you one also share of nice economic Anything consumer in good cycle breach and acceleration, And just last that a from and think vis-à-vis XX% point Equifax

Will Lansing

of don’t in but see just it’s we No, we that. the any market any see share and strength don’t shift,

Brett Huff

kind at update communication, SaaSified? One the that one in Falcon those innings are you pure last wise on the if on of that all know I manager, SaaS are An this more way? quarter can. I have first which version? we last Where of origination we TRIAD sold SaaS of one getting think products what maybe the point. the I products believe and I collections two your

Will Lansing

called What with product the have It’s actually Strategy can we in made ask it is would I for it And question. offer to intend cloud. and available say featured also to the Falcon the fully as TRIAD, haven’t run. Director Great And which Yes. easier you as yet. in the the full question we is the in to doesn’t transition ones mentioned in respect which Falcon the although successor cloud actually TRIAD. -- long it’s be we not TRIAD

on be more all now? is virtually, major But of our the cloud work there offerings to So, on done are available franchise falcon.

Operator

Manav from proceed. Please question with a have We Patnaik Barclays.

Manav Patnaik

here, giving there? the capital just thoughts So, do allocation just buybacks pick-up the employees just more you to we are nice expect looks first maybe any M&A, question those with some was benefit, obviously But tax broadly, should RSUs. change it or

Will Lansing

No.

answer the think that no. is to I

to I of flow go been optimal consider think a on. buyback also of level it’s leverage. kind the free continues our direction of to along we function and what business cash is be our The

for And of see leverage efficient our so, and maintain that is drift you’ll think to sheet. we balance buybacks level the our downward upward

which times, is -- at as low a are we for mentioned, X.X So, us. bit we’re we little

to little And bit, I is potentially about business room the way increase usual. to a so think but as as us it there for the think buyback

Manav Patnaik

mainly there, the the card? the XX% there the obviously, mortgage is just market any if have wondering then, on within of One, market, I the then, BXB, Okay. are on are things, like credit two-part debate that trends guess, there? mortgage that thoughts And question. is I seeing whole side within what a was all the FICO you And you Score

Mike Pung

of we board, and marketing, take account the of across management. can This the FICO the I Mike. up service, all quarter trends is that originations this quantities across The were pull lifecycles part. BXB Scores

quarters. very cards credit credit As areas, amount But tremendous have this saw the of a relates to specific was number strength quarter. last cards of it for we driver big and in

marketing also of origination flat in slightly. of little a our bit year, We was loans and to up auto mortgage lot of saw strength loans up from and auto last

Manav Patnaik

the I And in market? just the scoring on debate just guess there thoughts out

Will Lansing

yes. Well,

standard we that responding there to really you is works an standpoint is to the are we some As it sense there. that standard up system and is we from to think makes there. use -- to date on soundness. out our they very know, FICO remain believe the And continue There well have and reconsider to the the today, pressure paper. was the on offerings. [indiscernible] much a safety GSEs that today is scores and with there FICO to that and for put And RFI wrapped we around policy And that

hope anticipate that So, that change. we would system -- won’t we

Manav Patnaik

just then mix recurring for of should there, like? the a see down. to the where the we some see? that up, piece looks are to that was on hoping things, is in obviously license more last you us maybe give like the transition, what And be could mean, continue side good I DMS me one color trend we but just I

Will Lansing

the to what of Well, is this growing on trend as downwards I depending to we of timing It starting our continue is the will seen what revenue be which but of frankly the when And of quarter DMS had us business. was quarter. claimed. bookings, in upfront a license business license and too we decline the across deal only booked in the we DMS had revenue the last quarters. quarter, this recurring think are in that saw continuation revenue upon a we fourth lumpy than recurring couple have revenue the record we is general The Obviously, revenue. light off more to in offset in Company, whole surprising by the in isn’t not was coming is very

just the cloud advancement the the products. continued it’s from business recurring to more coming So, of revenue model

Operator

proceed. a Blair. please question with We have Katelyn from William Young

Katelyn Young

quarters I quarter. really if was the are off last some wondering year. you you talking bookings spend coming the time understand in strong Obviously, some I could the about over

client you the and mix of perhaps are weaker So, I quarter compare you there? was terms please wondering quarter, noticeably or product is it just this trends with could ago and that contrast anything in bookings any if mix seeing was the a year if in

Will Lansing

Yes. trend. last about this I quarter explain year wouldn’t being a XX total, Last large quarters. years we versus call it can each little the in record quarter the of we prior a this was internally which million a high. below us. that quarter with to bookings, And bit been maybe I a $XX reported million over fell disappointment quarter very

the of of from cloud was would another the to that one we top say we we relate just being in Fortunately, mix when our a deals to that I any it some have we question done. that timing just It’s not that of pipeline including due in was get deal business quarter. the there. the that deals are and deals first simply quarter, quarter, timing new XX we there’s trend we in the TRIAD of in have signed deals some are concerned this sign cloud of and previous them our had underlying this too many

it done very end December. we the all that’s catch of the But, unfortunately some anticipate didn’t itself the we by that before end out there’s of we strong So, get year. will fiscal business up there,

is other there I that, any beyond think wouldn’t important of. to trends So, say

Katelyn Young

growth growth building contributor the still is the of or on -- doing, revenue guys from that material that kind yet the you side, relationships international year-over-year work And is out? to a are then BXB XD are

Will Lansing

yet, it in pretty mode. build Not is much

Operator

we Bill And have of Warmington a question line Wells Please also with from Fargo. the proceed.

Bill Warmington

pipeline So, Scores on business. first in question the BXC for you the

looked ramping. January. the The it American you’ve early two clients Affinity So, live Express education in client, like it like are under sounds went Experian got

if as that. potential also, on you of group players added deals pipeline then, mentioned three Discover. gen new have each on been their side, congratulations of So, there banks three new I in there lead and wanted those a well any buckets. the to and to was buckets, as those ask And of then, and Experian if

Will Lansing

opportunities new can quarter think no deals Bill, those a of size one. and I in there potential new is terms in added players any buckets, of of we that pipeline in of

to So, hopefully, have quarter the on two or about more speak we’ll in that. next

Bill Warmington

side. your then, very And the is for had The zero I that Okay. strong there percent year? BXB still the growth performance on guidance for is, assuming question

Will Lansing

we at the Well, because revenue end same we of updated what the inherently, our last it’s year, have guided as guidance. not

that regard, anticipated. had So, from a stronger yes, obviously first than quarter true. we is We that

a just it’s strength to first continue We XXX. business. of to to the and But, have lighter a see guidance to Scores to made say, that sense would we in lot of as based safe sign license ride the revenue it in is. let better say all aspects as I quarter hit And feel better our upon we

Bill Warmington

the on the have mentioned that the end to there quarter? far then, trending And had deals that bookings to sounded wanted Okay. in ask, like some March it How so that were -- closing are of may close were I you after December. closed side, just DMS

Will Lansing

yet, Remember, know it in timeframe. March Boston, out was I Bill. not let you I’ll into wish know. the we’re in January. kind we’re Well, March of you

the would in I deals of of the of say, third usually backend given So, any quarter. the most loaded month frankly to are comes our quarter,

you giving whole won’t much on so, do guidance January really lot. probably And more a

Bill Warmington

then, on reform. Okay. another question And the tax

guidance the of some and the basis? flow cash actual do What’s benefit rate in terms impact on you expect impact. an us EPS annualized given You’ve

Will Lansing

stated, what cash. is Well, we that’s dollar for expense going $XX million, down if cash dollar our which is

the claim at it of today. over or back at payments estimated see to out go see way should on course of through payments the flow the when this come timing cash So, -- we we should see cash But, statement, least $XX starting based out. that cash the least for time we million our go

Bill Warmington

question, question the think impact then, for the out you count -- share was I the you do giving that? that grants had you other housekeeping it. the on how the forward, Got about on are of only And going

Will Lansing

just spill be to a compared be million into year for year remainder but amount a of dollars they’ll next pretty this couple inconsequential our numbers. That’ll million overall fiscal of might Yes. and the several year, this that’ll it’s

Bill Warmington

Got it. one. One final

had You mentioned can drive better strength not volumes, you consumer again, in little there. bit talk the which going BXB is surprise tailwinds a you mentioned the a about credit what’s the price but better also Maybe pricing? given to on there

Will Lansing

We our adjust typically our prices for our score, scores annually. all of

year we are And modest so, every is evaluate where different. and adjustments kind we we of and year make no this

bit And impact. is every impact, a so, bit of yes, we little pricing but there have year, little pricing

Mike Pung

Yes. What of this in an last pricing as January seeing X just took quarter impact is year, that the basically effect FYI. you are

Operator

further And time. at there questions no are registered this

Steve Weber

next All you. all quarter. right, update we and for Thank you Thank will you. call. back you thank joining be This our today’s to call concludes

Operator

call ask that We that Ladies for please and your line. disconnect thank and today. you for concludes you participation gentlemen, you your

Fair Isaac (FICO) 25 Jan 182018 Q1 Earnings call transcript