FICO - Earnings call transcript Q2 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.

As a reminder, this conference call is being recorded Thursday, April 26, 2018. the to turn Weber. now will conference Steve over I Please go ahead.

Steven P. Weber

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

over I'll Now turn Lansing. Will to the call

William J. Lansing

per Thanks, quarter $XXX will ever, is of full our In very business we shortly. second visibility our high and into Steve. highest a level. Mike executing I'm delivered our explain and which on increase our bullish revenue same quarter, team delivered are remain a our the delivering year. today We to of earnings over $X.XX income of delivered Most revenue because $X.XX. revenues $XX and model we million million non-GAAP happy revenue of upfront of GAAP our from the we base. revenue year say and increased recurring last at reported guidance growth, business raising period share. We million net GAAP we're successfully we're $XX transitioning license EPS our XX% importantly, We income to an of while of non-GAAP growth net

quarter up year-over-year XX% even our the license which XX% increasing This to We growth over last XX%. revenue recurring through by able while were revenue declined revenue is drive year. at grew

total our revenues quarter were last over In year. revenues recurring year. this Applications, prior accounted of X% revenues with fact, the XX% compared In for XX% up

revenue transition. revenues. grow were more visibility Our make respectively we Management the us We predictable Software, giving up In progress revenue most and the continued XX% from impressive, XX% Decision Communication this total Originations sees by model of last able and particularly to our Applications Customer impact XX% as were Solutions year. in even to to segment Services future recurring

reported as Xpress Blaze were down upfront about Optimization This And quarter as as for licenses and instance, sold perpetual either down from year, SaaS own Historically, or Advisor to revenue is which our last cloud More FICO on XX% result caused the Analytic revenues in Cloud be were revenue. or more we're licenses. total and XX%. recurring AWS. term the selling these a

drives our great both continue up quarter our Total new continue of to opportunities. as as pipeline up versus we In DMS and XX% sales a in opportunities and business healthy prior look have to the a Scores for had year are We revenues we XX% revenue year-to-date. technology Applications were the segments.

the On price by of This were BXB revenues same to targeted was but up driven XX% last increases. much the over as was it partly volumes due side, year. period increased

pricing reviewing As with we've case revenues with identified adjustments in been commensurate quarters, was some XX% the year-to-date. up this this where instances in primarily, the We January have mortgage our and pricing saying and continually several we XX% implemented in practices not the for BXC were last increases, are pricing delivered. quarter value originations.

roll beginning new deals revenues to a and with space. opportunities We still large deals. from potential out this evolving existing to are implemented serve recently partners see of to many and programs We have continue constantly see pipeline

$XXX we shareholder share halfway value. At call time Mike to fiscal many the year. the actively but million summary always, that in for focused I'll driving through exploiting later, shares thoughts pursuing. I'd over we're investing details. now turn nearly we're in As to some remain our We've further repurchased same financial the on opportunities like

Michael J. Pung

afternoon, Thanks, Will, and three emphasize Today points good in I'll comments. everyone. my

or were an and last revenue year. from million, of from XX% bookings million Recurring million $XXX $XXX $XXX of delivered up XX% year-over-year. up was we revenue, XX% increase million, year last First, $XX

income had Second, million spent into on this we is breaking we free million up flow and shares. year-over-year. of delivered of repurchasing cash $XX revenue $XX And by I'll million $XX both down quarter we strong XX% our finally, $XXX GAAP where begin which Originations period We and year. the Communications same Applications with particularly which last Start increases up strong Customer quarter volumes. the million, Services product had our a transactional lines, had segments. in revenues versus X% net were in reported three

decreased DMS last and quarter. X% bookings due Decision the $XX sales. last of bookings XX% segment Software up prior million the license revenues previous the over down Applications revenue is $XX XX% In million, year to it from last from in were XX% down while year. the Our from XX% million, $XX year versus were was Recurring up Management up year were

were $XX Finally, Scores same million year. our last segment, in from XX% period the up revenues

we're the overall a some increases. versus last quarter due side, the mortgage as up XX% in year On as ago same well the price to BXC revenues targeted primarily same BXB The up volume from period increases XX% were year.

growth our to continue continued of to We see back expect half BXC in and both the from year. BXB

of of implementation total derived of year. and EMEA and and transactional revenues revenues the and Looking total was Pacific. revenues total Asia were X% this by quarter XX% revenue. derived XX% of at was this generated X% represented from last our the XX% revenue Recurring XX% were were region from in revenues Americas, quarter revenues region, maintenance sources million revenue, quarter, consulting the from XX% up $XX license for just total Cloud remaining

quarter In million, of from the six of Bookings $X fact last a The this weighted $X term we of this for up $XXX million. $XX bookings prior current yield from on the only XX% in revenues those period period over quarter excess XX% and up months XX same for our average deals XX%. XX year, had $XXX year-to-date deals and bookings this year. cloud we booked million, was million revenue were million, are generated we quarter,

$XXX relates we incentive our Operating million expenses quarter. increased stock variable last almost cloud all million compared which period million the in are last double to addition, associated quarter, year. totaled revenue In bookings to This this same announced employee expenses first $XX were this and from quarter the $XX our $XXX including the grant is million increase special primarily quarter. and with restricted costs employee year-to-date,

our maintain resources our back actively priorities. run current to cost the year strategic over the while in half of expect We invest rate we our highest

margin XX% Reg in see the non-GAAP our operating can G was second As schedule, you in our quarter.

margin the will XX.X%. was the about back the year year in was the We $X.XX of The the half cash tax XX expansion net our of some million. mid we was tax $XX net was year. to flow million remainder for and quarter rate in free prior versus per was XX% quarter the million flow to Free this and $XXX trailing the $XX be income in expect XXXX. million for our income million effective months margin this be non-GAAP between to full share. XXs or operating quarter GAAP and cash the $XX that expect XX.X% low And $XX over rate

the end to balance on cash a sheet, turning we the of $XXX Now, the million of at had balance sheet quarter. the

our of the well market below quarters. Our $XXX weighted is refinancing conditions to some our million total Depending and of this total interest times. we three a ratio our covenant the debt net adjusted rate of next two over level quarter times, debt of upon be X.XX debt is EBITDA X.X% may average with

$XXX.XX. year million quarters shares cash $XX an repurchasing over returned XXX,XXX first through And at in two average the almost we price repurchased we average an the During our $XXX. fiscal our investors, just quarter price at of of shares to XXX,XXX excess of

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

relevant and competitive products continue We opportunities that and to our our or technologies strategy also to position. evaluate actively acquire advance strengthen portfolio

full provided fiscal previously guiding now Finally, follows. raising the we're Will mentioned, year We're guidance. as as our

be his and net up guided income per previously basis. GAAP to We $X.XX previously million. expect over approximately be on now million earnings per which is non-GAAP previously at income turn I'll a million non-GAAP about at previously expected share, revenues Will it share for equates $X.XX, approximately $XXX GAAP from million. now to $XXX which billion, $XXX the to that, $X.XX to we is expected $X.XX be $XXX guided is net guided million, $XXX to comments. final now With

William J. Lansing

Thanks, Mike.

through World Last companies uniquely I'm our sit to and decisioning customers more to week I the latest to wide a decisioning of stand. that than and with of our we the difficult hosted most customers happy very discussions opportunity in many we our me we problems. our are solutions. we where for X,XXX solve positioned help with halfway are their range confirmed FICO We year showcase together had where Conference brought fiscal those

do and done is At sales deals revenue. of in recurring of backlog to financial Our FICO build we're our great Q&A. development teams be to now I'll our believe value to efficient an transactional for job enabling beyond. prove IP effective turn bring entire the they back and And things continues the the a to of have time team cost the our to call poised to it fiscal in delivered magnificent same signing tailoring manner. remainder We cloud successfully the Steve XXXX the ecosystem. Scores

Steven P. Weber

Thanks we're to remarks ready take the concludes questions. Operator, prepared lines. please and now open Will. our This your

Operator

Certainly.

Patnaik line Our Please with from question. Barclays. question your the first of with is Manav proceed

Manav Patnaik

Good guys evening. are doing? you How Hi.

William J. Lansing

Good.

Manav Patnaik

guidance question scores BXB first is raised performance? is the just to My due the entirely

William J. Lansing

BXC. and BXB It's all pretty both around Scores much our yeah, business,

Manav Patnaik

So, price those I my I knew that sort guess, is you implemented, happening. increases you, of mean was that guess

So hold guidance hesitation was there? it color there a take in that some just beginning that you maybe wasn't the in to more going or include it didn't

William J. Lansing

No, a I of think that versus it's uncertainty. certainty matter

it's about So done. views we things had evolve. the would done, our it's not likely But way until

be we guidance. you know, as so tend And to conservative on

Manav Patnaik

just price forth and in the it. Obviously, the increase of Got you to thoughts that the that timing just guess TAM what context do around your going around (XX:XX) debate put in mortgage specifically. maybe on that market And debate then so want news the to scores, on with I some the on? and

William J. Lansing

Yeah.

from is a going source think sole pricing statutory the we're event really our we end to But we that I is a did the to trying score user. that talk regulatory about in to it. mean, position leveraging And through value being it provided I didn't this think from being up we knows I have the fair to who that view just think want standpoint said the that push – up shake provider, price wind a standpoint. that question, we increases. how I a were that's reflect

Manav Patnaik

trying this, take driven XX% was And so Okay. we don't increases. market BXB growth, this basically? just And what make to one understand for on just and then your guess, price numbers side add what trying rest year last you – your the I is ex to don't guess score to I like just sure the that the I'm of on the

Michael J. Pung

that, to points Two Yeah. Manav.

came cases we're how amount price did certain that you digits. lifecycles get granular we in And BXB. targeted we about, But high-single talk we not that being that pricing terms increases to the I the from across saw much tell of lifecycles were But the volume do. going board, some across volume. of of did obviously the from of that came much in real So said, versus can a some come this from how very the in significant all

just run in be we second the provided, rate other rest to that the roll scores we schedules a and As any to similar over year we're that the quarter Again, was a volume we we begin it and or of bureaus in in the uncertainty it's these and upon of increases. this these of delivered the agreements, what party see what so is certainly period some increases to uncertain in the pricing those guidance decreases relates will out dependent to time because to on bureaus pass end become customers applicable. to their when referring exactly Will not see

we in of included one wasn't reasons that's So our November when back the why this gave guidance.

Manav Patnaik

over. it Okay. I'll Got Thanks it. guys. turn

Operator

line is Our the from with ahead. next of Please Stephens. Huff Brett question go

Brett Huff

taking for thanks my questions. Good afternoon, and

William J. Lansing

Brett. Sure,

Brett Huff

then you scores providers, generation that to follow a things new like BXC seems efforts it's that it use working issuers developments really Experian of on to new channels any you and big Any maybe the up in and of doing there? to like that seems distribute on for have, developments things be – card those those, that credit that of least BXB solutions some the like given we (XX:XX:XX) at Can the the customized part that us to I the lead seem one more on channel other wanted the guys you're detail opportunity well. relationships the thanks with

Michael J. Pung

of we've the as I Nothing quarters. almost In are deals are coming past myFICO this each a them we're ramp. as Not new today. starting that They're business. through of though terms to in consumer fully large that say number new all of signed our quarter in ramped clients are those announcing yet. channels would revenue quarter,

what business arise, X%, very rate, seeing deals continue we're but myFICO numbers to this than in what So they quarter. X%, I'd you're growing to better our out roll new is at call just so and work on nice we have announce the growing both are nothing out like a to side to our of is X%, continuing as BXC

Brett Huff

some think, And lower. that you'll bit to then granular, just the were little in us know Scores. a but into commentary, single-digits, Any fall Scores, were on pre-screen? mentioned lifecycles did of Where that? on you different dig to sometimes the give get high if I I don't pre-screen want some you data

Michael J. Pung

Yeah.

were It Our this pre-screen, our from acquisitions this digit very what was we reporting. scores actually we're was some very strong marketing quarter high-single the There quarter. highest. saw in the numbers

Brett Huff

of you last then a either question loan general decelerate, seeing are changed last And kind origination or time have environment, all verticals the that anything since guys for we talked? particular me change just accelerate

Michael J. Pung

quarter shift solid are the it last Things that We're areas has been. couple. from certainly really. not seeing pretty No, the in any significant not or same even last

Brett Huff

Thanks Okay. That's for guys. what needed. I time, your

William J. Lansing

Sure.

Operator

Adam of with Please the Our is Blair. from next ahead. line go question Klauber William

Adam Klauber

the growth, In came how some more from existing Thanks. new much clients what much volume other of products Applications, not for or was but related? from sense, came good from it's how clients. just on volumes, clearly words, Couple general

Michael J. Pung

Yeah.

in on recurring online. a lot in came, So from fourth or starting it year. that they're came our of of lot growth particular a quarter, we come the to third the And last signed quarter deals booked line

where starting say products. the logos that Though customers revenue. logos. growth than of existing that a signed marquee that mix more would new have in I of you're easily client from existing time. logos So last the see of we still of new It's lot couple customers came or at primarily from client point year adopting had half the we existing more some versus deals are a logos recurring – we client to of latter and the part to coming who new do new is

from So a mainly it's customer coming nice blend base. existing but our

Adam Klauber

Okay.

that been up I as we then cause next moved lumpiness? down sometimes that think should that have can lumpy or some And be been think they about any the Okay. there renewals know renewals on could we two, about quarter or have

Michael J. Pung

in kind scheduled nothing of four, into say. effect and some guidance would renewals quarter our new quarter of sizable in baked three have we we've I the No, but in coming that

Adam Klauber

Okay.

clearly and going just cloud on then stabilize? DMS, And some towards Could you away will sense Okay. you when you in from revenue think the have shift license. have

William J. Lansing

we happening We're Yeah, transition. now climb I think the to of seeing as that's speak. right revenues the starting in spite

Michael J. Pung

Yeah.

the the book maybe sign I think, after roughly end little the revenue we're deals I ended deals quarter revenue, not to with don't this some that them disappointment know, closing Adam, into was we up deals be but deals. we I or million, timing one and the recurring Coming bit the expected would say a $XX we quarter have signing kind them. would more, in maybe and of of very of that either still upfront pursuing book quarter had,

occur So will there less this revenue and bookings... in that in license is business, the lumpiness probably more in

William J. Lansing

Right.

Michael J. Pung

As a of pipeline... we there lot But go forward. is

Adam Klauber

Okay.

Michael J. Pung

acceptance happy in the this and DMS around demand really and ...there market we're with product.

Adam Klauber

Okay. a Thanks lot.

Operator

the is Wells Fargo. question from Warmington Bill next Our with line of

William A. Warmington

afternoon, Good everyone.

William J. Lansing

Hi. Bill.

William A. Warmington

know, When mean, last ways, guidance I was the I you I'm guys are talking some don't within -? speechless. in the year? like So, we time raised

Michael J. Pung

a around been it. done Bill. it. but It's while, We've been years, I've done little we've XX

William A. Warmington

think, was I like XXXX, right. It

Michael J. Pung

I things. a on better do got calendar than You these

William A. Warmington

Anyway.

there. I that So, something think probably says right

that at in look BXB XX% the I As I it's side, was definitely growth the modelling. above anything

just they want that through the I been for assuming flow in assuming the is, volumes that continue as of sure? that's I am So have it Does we to rest piece that to growth the forward, year? business is XX% the remain thought the remaining. way the same rolled of the make increase price

Michael J. Pung

Yeah.

million uncertainty rate to to again, a is run the assuming the overall volatility along bureaus fairly least of bit of this that rate card this in And gets good rate the applied delivered through run if the run and the little there we're remain on so rate things the I using stable. right be of piece same little a there numbers but quarter, a the which as three is side. be mentioned, how run includes think could $XX the is way, now the we bit all as rate I of at that quantity BXB each our

William A. Warmington

working going you deals lead How you've been are volumes channels? different had Experian, coming meaningful with revenue and are up a Discover, with model, to side, the some on you starting to see with or it things gen was those signed

William J. Lansing

I but think are it, meaningful in the hands volumes of future, the our still more control it's don't we really our in partners.

so And they they're in when really, ramping not shape, good they're the be will in process of ramp we but now.

William A. Warmington

it. Got

Michael J. Pung

It big it some quarter, a a Yeah. from what seen but needle incremental wasn't wasn't this past needle we've was definitely in the but it revenue mover mover.

William A. Warmington

in Okay. maybe strong pretty seem what's Customer in numbers bit little and then Originations Those talk And strength applications? driving within a also can you the the Communication about side.

William J. Lansing

answer Yeah. I would say both in that the is same situations. the

product have the in market. best We the

just high of So product it's code, an high – offering. is a kind really elegant our feature, Originations function a

surprising not the that has it's marketplace so And it. really embraced

their and their And to interactions customers. I what and that Communication can that so do optimize we so the class their that customers return improve we're our analytics the we Customer and – they refine and continue thing, we're same best very think selling maximize as can it. busy feedback – so with the Services, in

of it So what kind it's like a but because products. it's having throwaway, I we sounds it mean great great I mean, – it's really is. truly product have is

Michael J. Pung

over what roughly was taken of over I'd last to much that all. an two You seven but last We've product it add Originations maybe was quarters that, know, couple the call not Bill, growing at years, six, the years.

revenue starting see last see we the being that. winning recurring in customers, you're business, the industry. and That's Originations. year, we've stepping that to got a lot and revenue it's cases accounts These backwards people XX cloud that the growth lives And a period, more starting needy the or go deals for live deals in two starting coming been on as talked some in market. we've past fact what the of pretty go some to XX% over about that see of said, booked and to In the lot been you're is are Will signed two year the starting ones working in banking the now what to in you're Originations in on have because,

William A. Warmington

to remember technology Yeah. expense build have invest booking business had you to order support year the to the and also out been challenge infrastructure side, the the business. the last of a that had and to I business lot been implement in you

getting the point to to are where in is investment Now, starting the and you implementations incremental slow? infrastructure

William J. Lansing

be we're and could investing set managed but I the cloud, all professional so wish we're And making be. we as not cost services show say point, security, that investments the really The the slowing. to to up opportunity so strong getting on that we're strong that services, that support the I side future is as for that. can can we're business it think

Michael J. Pung

a Yeah, were would we're we year the talked about We recovery of pipeline lot a deals the believe on and Where lot more we last that that frontend and side. of thing, one add collections signing. Bill. seeing originations at I

a planet the north of in of implemented a good the that'll see very as product million one us deal In the on and by side recovery fact was aggregate that is the that booked, and on collections our what so seeing we've a be repeat this side which course of very hope quarter in to the pipeline done we're the just on solid with we that to line. deal, probably of and largest Originations $XX was largest well cloud

William A. Warmington

Okay.

product, compliance is typically banks together handled areas that you paid? also a fraud would where but is and seem have within it they Now closely, case that fit separately, very like working been like been would have the combination on two that and sounded guys

William J. Lansing

it the we're holistically coming looking it way we're and committing they're footprint case, asking is our KYC more together for the on fraud and app are that all so all fraud customers and at too. and Bill, much are and frauds, very that focused way broad AML a

Michael J. Pung

what in terms deals well fairly is released Yeah, Falcon/CCS And the some integrated. deals course together, product seeing but integrating the seeing of of of a we're hasn't we're are happening these already AML Bill, while been bookings underpin yet those we're lot Solution of that from a actually standalone some end seeing the calls quite AML ones Falcon before we the deals, year. the end will few we're ton TONBELLER, X that the be it of available Stuart large expect of hopefully and of a by bought we as more calendar.

William A. Warmington

Well, on Excellent. much. you thank strong quarter. All right. very Congratulations a really

William J. Lansing

Thanks. Thanks, Bill.

Michael J. Pung

Bill. Thanks,

Operator

further at this time. There are no questions

William J. Lansing

Thank thank like you. all concludes a That We day. joining for today's would call. to Have you good us.

Operator

and Ladies that does thank today. conclude and disconnect conference your call gentlemen, for participation for We lines. please that your you you the ask

Fair Isaac (FICO) 26 Apr 182018 Q2 Earnings call transcript