FICO - Earnings call transcript Q2 2019

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Operator

Greetings and 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. It's Tuesday, April 30th, 2019. to conference like Weber. to now would turn over the Steve I go Please ahead.

Steve Weber

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

Will Lansing

we the $XXX opportunities Thank Scores delivered you We X% income million in income Because bookings million non-GAAP another us call. second year. same our are bookings in of $XX book of business our our lot into net fifth quarter and quarter quarter, $X.XX. increase We of everyone cloud good $XX you, for GAAP earnings We We non-GAAP EPS $X.XX over more of GAAP amazing thank and year million than In increased quarter, full continue of traction delivered had Steve our see as and to per and second quarter. joining of another last million, consecutive the of deals. today, an our in continue period net a $XXX with for And for the delivered to earnings we new share. solid we of revenues business. reported visibility guidance. our growth, raising we software

fact, In year. up bookings of half XX% last our versus the year-to-date, first cloud are

software we up had X% year, Applications modest down this was was while revenue sales were XX%. a last and revenue X% our than up software Our upfront quarter. as services less management license decision

also was of decision in deals but from due the to we're revenues seeing quarters. and services the we've of previous increase management licenses, Some signed benefit transactional

strategic made, happy with we're industry. said, technology and our the the have we investments been recognized As has innovative we've by

meet investing offerings to increases in point for sophisticated financial another confidence banks category market our a requirements. data ever services and Chartis that fact, completeness of recent a helps It's leader In more report and in AI pointed FICO potential. technology named that in

As partial with you the rolling an as important a business, effect platform. intrigued management in then, great with the footprint that expand announced customers turnkey greatly who $XXX cloud platform our posted price I stable began FICO we I totaled experience initiative of the our with Equifax number revenues data we've We'll are a to view are and this effects applications year quarter. of another Since up keep decision the progress. partnership prior provide potential saw FICO believe Scores XX% for our million. month, versus and out. continue it we increases last and to were on quarter know, had connected decision In combining to our volumes management met we Equifax of with we the will the second Total take of as a you platform.

year, phasing On been summary increases Mike revenues many was to implemented were margins up investing over like well last few were improve side, the X% I'd this same of million This in share see to efficiently I'll due for accelerate up targeted price have they financial months. remain call this but and and BXC revenues and a as as the quarter further future. resources, repurchased We're XX% X% BXB pursuing deals some free for we some to year-to-date. focused price on We've we space. turn later, details. January, year. driving period value. the now $XXX the over in shares primarily still And still while new thoughts through our product in allocate and in flow, the We worked number last halfway opportunities some innovations. as shareholder cash and adjustments fiscal to diligently potential

Mike Pung

emphasize my points Good Will. three in I'll remarks. Today, everyone. afternoon Thanks,

X% That's year-over-year. of increase of revenue. First, or $XXX we million $XX an delivered million

by revenue Our business. last strength million, from recurring XX% up was which $XXX our in Scores is year the driven

Second, of up of up delivered and $XX net income, per we share, XX%. year-over-year, million $X.XX EPS X% GAAP

applications, begin $XXX million, by Scores breaking upfront Finally, last period services. where is due I'll same license to with the sales and down reflect down business. seeing we reported three in are were is raising our our are versus in revenue the revenues to we into and which reductions guidance segments, starting X% year momentum our

were down Our applications remainder expect which large In the which million of $XXX license year renewals. up implement is the decision up prior We over software X% which finally, Scores segment, segment, previous year. is and services to in bookings term increased last revenue year. $XX from from revenues Recurring And is do license management analytic year as from last were the deploy from several XX% installations million, to the $XX to DMS year. X% last in Bookings we million, of XX% due the the due revenue were XX% primarily year. models. up expand versus up million, revenues were $XX revenues is new

On up due quarter. were The to the BXC from the same X% the XX% revenues price were we BXB targeted that increases last primarily during in year. some up began quarter feather side, to

We BXB, up. expect as ramp continue continued particularly growth, from increases the pricing to

at by Looking region. revenues

XX% revenues in the quarter, total derived Americas. This were of

for million Consulting the million, is EMEA bookings this total our rate revenues current on X% license which year. And XX% is weighted derived from last were the product. revenue quarter, some the CCS revenue. X% on was cloud a Asia-Pacific. revenues which was lower represented Year-to-date implementation up prior XX% region revenues. X% of last XX%. for this generated total months of maintenance The X% are to up were Our remaining and due bookings period revenues growth transactional from $XX sources customer up quarter this from for those $XXX of $XX from X% quarter XX%. this year. quarter and of just revenues term quarter. and the were XX We churn million, The were generated from Cloud $XXX Recurring revenues Bookings million was average year. yield

deals we we quarter, and additional XX over $X an million, and $X This $X between million had booked million. seven deals

$XX quarter, quarter associated In relates our Operating down slightly The bookings to million million to the $XXX primarily compared this quarter. million increased addition, to with from this employee year due signed and deals. increase timing costs. last expenses first variable totaled $XXX were revenue of in incentive expenses cloud

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

G As operating second non-GAAP in is our Reg XX% quarter, see schedule, you the and year-to-date. margin our was XX% it in can

year. in rate a quarter, cash for flow cash quarter fiscal $XX and trailing tax $XXX XX% was million versus flow year, year. that operating free XX% The expect we We net income the per the of $XX for was to expect full million. prior $XX to $XX be our per XX.X% GAAP this will was was share, million about margins or $X.XX the million $X.XX for tax share. be net rate between XX.X% income The effective free the or with XX-month non-GAAP and million about

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

the million, weighted may of this is will on months. XX a refinancing of $XXX average over adjusted is X.X%. rate conditions, three. next net debt X.X with EBITDA be total interest our the be which covenant of level Depending to that times, And below our ratio quarter maturing debt total the is marketing Our we of fixed some debt

million $XXX. we quarters at of price we've on the remaining shares XXX,XXX XXX,XXX have continue quarter, an shares Board our of and an $XX Through use two about at year, million as cash returned still the the We cash. attractive share During average price to $XX excess of repurchasing first investors, repurchases of the of average $XXX. authorization repurchased to view an

strategy finally, actively we as We technologies opportunities our previously that relevant our raising position. our advance Will strengthen also competitive continue to guidance. and provided and portfolio to mentioned, And acquire evaluate are products or

it or and per for from to is $X.XX is XXXX share. to that, With for the GAAP to turn earnings $XXX be approximately $XXX per revenue Will share. net year to is net now $X.XX Non-GAAP expected as is approximately share expected be expect final million billion, guided approximately million previously now now income back follows; Our guidance up new GAAP over fiscal comments. I'll $X.XX be billion. we the $X.XXX per income full

Will Lansing

well-positioned and another very Mike. We're fiscal Thanks we're through future. halfway the for year

better, customers decisions most to able we increasingly and and and Our their analytics more help seeking are to difficult advanced are technology them. optimize ready

very robust. result, a is our As pipeline

have ever deals than our pipeline more and in bigger before. We

recurring turn revenue in a I'll have earnings our We executing great call and growth. drive on for Steve now Q&A. to profitable and back the cloud place, to we're strategy team effectively

Steve Weber

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

Operator

Thank first ahead. you. And from Please Manav Patnaik Barclays. question comes [Operator Instructions] of line go our with the

Manav Patnaik

evening you. Good guys. Thank

on guidance the Just raise.

this that year into does then And software of effect that that So was mean because increases that are most still of of Scores kind as on shared was side. growth the you BXB raise expect the going well? from price X% the the

Mike Pung

Partially, Manav.

fact, So, the That's the offset guidance we by the in yes, the bit growth our the now in some driven revenue the software Scores back pricing, which half to from have is year. increase in visibility business. of a

As but or the minus. second likely you professional on little quarter, fell remember, fall of here bit software last our we'll back of in the expect, short our We growth it full a putting made revenue somewhere year, we around growth services. plus quarter, for short, we X%-ish,

bringing number slightly the it's item. we're by and Scores So, that being back replaced

Manav Patnaik

Got on then any feels anything the growth was that going on or a little are the comps pioneering, BXC light, in it. Scores, X% And just there? there

Mike Pung

going pipeline, mainly It's Experian. growth that's coming through our No, partner on through nothing there. really

Manav Patnaik

SaaS on that color the And far? think Will, broad it. some just Got the cloud so how about transition, then lastly, progress transition, maybe you

Will Lansing

our still plenty have pleased of work We're ahead. progress we and with

We available all of cloud. where our the on franchises are are at the now point major

code this us out, cloud year is to X We simplifying our in product coming have work terms coming of strongly in and But the positioning the consolidating even which and the out of cloud. version that's still have Falcon do more Falcon, we base.

say I really is really good ahead, there's it. there. is we're The but that work The about And solid. is The infrastructure more would reach reliability there. so feeling geographic

operational ops control network it. have We and of great

about that. pretty we're happy So,

Manav Patnaik

it. guys. got Okay, Thanks

Operator

ahead. line question comes with from Fargo. Please Wells next Bill the Warmington Our go of

Bill Warmington

everyone. afternoon Good

year. on for help you would question maybe increase one the and the this initial you price increase an it auto, in mortgage with on and contrast So, special last -- price from that compare if

referenced guys of couple the increase in being terms feathering and You of terms in. a partial

going structure that for is auto more slowly different So where something price than about -- that's the little it increase the of there the industry through a did mortgage? is

Will Lansing

It's Bill. have lagging right, slightly some that's coming Yes, and we in. exactly different, price

that that. it's major quite it's so move as as And I simple auto. in a mean still

Mike Pung

in auto, resellers, feathers is bureaus. I one case committed the in of any said we would mortgage Bill there we've always auto, both thing, will and with and extend the so some with is little are their grandfather our add mortgage. dates the other And credit three the that bureaus exists we've, that why than with for that's and out, by committed dates implement it end also, a customers bit which it card that is the And timing different slower. in rate

And in I add said. so bit nuanced guess, those little to on Will discussions a are that, what

Bill Warmington

on Got total from bookings transaction that. bookings ask total went it detail, December the the it, XX% what And and to wanted bookings on bookings I that's like maintenance just going of in helpful. then XX% in quarter to behind about was of the about March quarter. the looked

Mike Pung

nothing. Really

transactional that And quarters, a those in some we right, percentage license-oriented. deals had we correct were of signed are first prior are numbers. heavier You in the as or quarter that

was one PS-oriented. very quarter heavy to This that be happened

of XX% probably roughly next in are burn months. off which quarter bookings nine PS, something think our XX% six the to this I here close will to or

to other we this So, there deals than quarter the signed of really is past nothing it several. the in mix the that than

Bill Warmington

March the below mean last deals ask the there to detail And Or quarter the the you couple were Okay. were to When -- just to of that on quarter, on of a reference that. more cloud in the do then the going want little for that some timing, potentially are quarter? in the million, book bookings you $XX was June that I quarters. book going timing

Mike Pung

are this to the I April back in so frankly, a could up We quarter of half to with number. a make who something anyway, go of March the these were as May. signed the all are the terms sensitive larger the the quarter. practically extra one but mean we'll that's that's timing end the customers cloud it simply want quarter, by Yes, next. certainly all over something end that revenue exactly $XXX trying or deals have of don't And hopefully, obviously sign in And it's mile the And been deals we of to of was ratable and right. year. we speaking, some get happy to and it much compared of to in by million,

Bill Warmington

in much guys past. you that you to terms current want you could transition the referenced know from upfront if model to model is And a of the about headwind cloud just it of talk to revenue Yes. currently I SaaS headwind being and fee if in help the the delivery license margins have as or us the of how to a quantify terms the in quarter guidance. or want

Mike Pung

Yes.

old XXX, rules, a was it under So, the headwind. Bill, accounting

I rather on-premise contract, a signed old new we old rules. is to in strange ratably that rule, rule than on-premise, guaranteed think component are the the be the renewal as recognized or those the when minimums little upfront deal whenever are a implement new license is quarter was if minimums which required to guaranteed under revenue there for last mentioned rule had first XXX, software, there to I a there under

Will Lansing

Under rule. the new

Mike Pung

I'm sorry, the new rule. under

Will Lansing

Upfront.

Mike Pung

upfront recognized there, some now. time have Falcon claim renewals that license the we claiming guaranteed didn't in two and past. they're to carry we minimums from do time that are that's And created we this actually in that quarter including year, in so And revenue

of more have we some license year recurring offsetting couple CCS. the into So, softness seeing some on that plan with the we're built in and our that's is churn revenue revenue this renewals what customers we that from finding we in these are than a of

Bill Warmington

was the for year-over-year And on of you. increase basis looked expense personnel like the in Okay. department. a question It final then most

on wanted that personnel? for most -- that. ask color going R&D that is of implementation a see just little a Or get could into little a Is color bookings? little I I for the get So, of we wanted to just to there. if

Mike Pung

Yes. I broad it two things. call

added R&D added is heads Also, increase, in a first combination the December. continued so is took annual base, heads the the goods primarily some of as being combination a So, we operations, in in our add hits cost we being of line headcount the did typically have are headcount which compensation existing we've And organization. item. for That's the we as do in of the in. added R&D that and and where to employee effect

first So, which the in January in through we increase March is quarter have full remainder the of X% a salary the for the employees. effect

guidance, as driving rest the And as between the up the annual biggest increase. comp raising incentive we, incentive result, incentive our category the the result that's for the increase only a to So, rest of commissions comp that and headcount the the organization. catch is a The of added of for is increase variable also item, comp, quarter. have frankly second accruals that and quarter, of to tied the and the part but it line not the first affects to increase,

So, those of over are going two are we that driving level year. the the to cost increase. rest why it's the believe the really out That's things

Bill Warmington

Well, very it. Got thank you much.

Operator

comes next Huff go with Our ahead. question Stephens of line Please Instructions] Inc. [Operator Brett from the

Unidentified Analyst

be Yes, you is that at is [Indiscernible] for Joel that at? you. ask deal, Thank of Huff. hi be more right that This And for these going you'd on on lever something looking you comment, looking up? what forward? the I guys. M&A want Are the Brett tuck-in would just would guys assets kind acquisitions going to to be

Will Lansing

we've probably worth I the this past, discussed is So, it in reiterating. think but

opportunities. are always We interesting for looking acquisition

we that technology more our we The and nicely. businesses pieces the do or is you as acquire corporate very lot And don't are in talent result a there little we as of a accretion. we the think time-to-time, small our challenge to much noted, from, -- own problem were them active there we their that that merge question do -- would that acquisitions is And wrestle tuck-in for have out franchises interesting extend as arm. like development or businesses We of with we would for we do business. like us

to And much do very business, is bar. our a so bar you to comes own want very, to time down their we by that is and our we bigger acquisition, as it as like every get high like have business

FICO looking circumstances, would come I've is so makes up and for do as the And sense business attractive that five, we it. and seven I haven't been never, years, across one the CEO lever to I say -- we've But last right would of a financial under never yes, for as our own. the been and

just the money back and we So, to give and buy FICO back our we take it with stock it owners.

Operator

Weber, have phone questions right. Mr. the no back lines. turn we you. it All And from further to I'll

Steve Weber

call. Thank All Thank you joining This concludes for us. right. you. today's all

Operator

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

Fair Isaac (FICO) 30 Apr 192019 Q2 Earnings call transcript