FICO - Earnings call transcript Q1 2020

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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 today, Thursday, January 30, 2020.

I would now like to turn the conference over to Steve Weber. ahead. go Please,

Steve Weber

Will rate afternoon, quarter Good of you joining our for Relations; McLaughlin. CFO, Thank we Today, call. and I'm first issued CEO, prior in of discuss release by today comparison results that earnings I'm President and the to results our order call, understanding this of Steve the compared FICO's our and financial press On Mike run you. joined management quarter to in the facilitate a to thank prior describes Lansing; year. Weber, Investor business. will Vice also

contained made from Investor to Litigation be characterized SEC, Reform differ these with uncertainties company's materially. statements Factors available could involve Forward-Looking as SEC, Securities Statements XXXX. in this of Copies that Private particular, the statements of from Information filings Those FICO concerning the from Certain presentation Act and in many is our in are results forward-looking the actual such Relations may or filings. uncertainties team. under cause Risk portions the in the the website

replay the A release and sec.gov. at website company's fico.com through of this the on This the regarding website of and January or be page non-GAAP earnings measure. measures financial certain G call a at available Regulation company's for earnings issued The the XXXX. Relations to schedule today, Regulation release G most available each Please refer of also webcast comparable GAAP schedule Investor XX, on will reconciliation include SEC's measures. will statements those the are to financial of non-GAAP

the call turn to over now, Will And Lansing. I'll

Will Lansing

up us I'd across we're our first thank a start, off say earnings first growth also and quarter our you, In for Thanks, of revenues delivering XX%; innovation. everyone, last an GAAP and to good GAAP We for earnings portfolio income, delivering over our joining we Steve, period call. up net quarter, of and same million XX%. year. increase $XX $XXX $X.XX, million, XX% the of delivered of reported

XX% basis, On growth year. the fiscal a And we non-GAAP $X.XX as up free XXXX. XX% flow per delivered well, up from share from last was earnings cash

On use companies to the most we're decisioning is innovation solve our to difficult among eager gaining market side software traction analytics-driven problems. the their bringing of business, to

At more representing FICO we World companies November, X,XXX XX hosted attendees, in countries. XXX than from

business. sat the During customers workflows We and specialists digital dynamic solution their to customers how analytics, advanced their and issues consultations. down demonstrate to potential conference, close and explain X,XXX decisioning our held business and understand FICO's transform can with

$XX business. to in display business last into FICO million continues The million, is bookings analytic-based The good emerging $XXX $XX DMS quarters. developing convinced million. sales FICO's the innovation in on at we're software our means robust another translate bookings booked World I'm largest last second in in at for we've quarter, decisioning about of history. after quarter's DMS the at same million That software We quarter the two time was had demand $XXX software.

prior year. In quarter. another quarter XX% the up the good Scores were our in had versus we Scores business,

side, XX% up the year. BXB On the revenues prior were over

the up XXXX. were first versus revenues BXC Our XX% quarter of

to continue Scores strength marketplace. We throughout see the

FICO to is extending our reflects previous and scores. introduced is FICO The development data FICO We with bureau Score Score two XX FICO the are and normal that the has a credit suite of on announced business, innovations Scores some versions Score today. versions. be X cadence, relies new also FICO Score XX release features in in designed Suite. consistent XX model Score previous Score It with backward-compatible FICO market that the in X. were Score

data, of captures financial aspects over unique of set broader time. including a incorporates XXT the profile trended consumer's which Score credit FICO bureau data,

power. Both previous XX on versions Score predictive is design were data similar, demonstrate and predictive blueprint over Score recent XXT FICO While FICO the FICO uses and the greater sets. all to Score enhance of it developed characteristics power new

compared loans loans By that its portfolio used Score reduction XX% XX% the is auto originated among in as the the newly FICO as using a among to adopting compared to FICO newly even by for Score FICO in originated X. Score higher X% default of of mortgage the The defaults XX bank cards, in much at version reduce lender newly industry. Suite, can originated number

safely type and and offers lenders of significantly rates, industry to credit revenue, risk better These default lending loans increasing and We significant performance predictive avoid developed losses. expand while believe more which we've feedback unexpected control this the innovation, more not competitive allow from with power improvements in can will while increase help making to credit consumers. community, the

We will that update other and to you months. announce this the continue score on in innovations we'll coming

first, I'll but out, how details. talk more see over about turn year to we financial I'll playing Mike call for further the the

Mike McLaughlin

FICO's everyone. were million, increase quarter software increase the was was revenue driven prior well an revenues This our revenue professional $XXX XX% $XXX the total dollars, million Thanks, down over Breaking year. revenues X% revenues. in same as higher from that the segments, year. of Will, last usage-based good applications our as for by afternoon, up into higher services and reported period

down were from bookings $XX year. quarter applications X% last Software for the million,

were pointed the $XX the usage-based segment, was Will revenues Management previous segment's up at which, second increase Software This QX, up quarter X% year, in bookings highest XX% In our as last to due million in were this over is from revenues million, the booking in primarily out, FICO. DMS platform. Decision history period year. services our same Decision QX $XX Management and

up all same up We ASC accounting BXC portion year. over of that in In first last BXC had segment of were the volumes total our to new our XX% Scores dollars an also revenues were region. signed quarter, from -- Americas quarter XX% Scores our segment the up same the several first was strong XX% recognized $XXX million, last year. throughout from worth Finally, period rules. was period The deal derived from revenues XXX due our licensing XX% last million revenues the up and XX% vertical revenues annual BXB were the year. were Scores And

region the Pacific. Our XX%, EMEA and from was Asia remaining generated X%

revenue of $XX and for an in total for included previous total. sources the Recurring at revenues. and in Looking software Consulting and total. from professional Revenues quarter, products transactional revenues revenues, total year increase of which million from our software XX% and software-as-a-service transactional XX% $XX by cloud-delivered the revenues represented million were our revenues services, million in XX% maintenance derived $XX of XX% the from derived type were quarter. revenues implementation license of the were

$XX for million, the bookings year. the period for revenue, down $XXX X% XX% yield. last previous year. bookings up million current million totaled the Bookings of from SaaS XX% These quarter generated were from quarter, $XX a

Our prior operating increased the quarter; November FICO expenses with million associated costs. totaled $XXX personnel and primarily from in to World expenses million quarter, up due this $XX in

We taken quarter. also headcount the reduction restructuring first to actions incurred about $X costs million during in related

margin, the quarter non-GAAP was for schedule, GAAP operating as from was net income G year. up our shown Reg XX% this million, in prior Our XX% $XX quarter. the

million the same for non-GAAP income from the last XX% up quarter year. Our was quarter, net $XX

us resulting expense quarter This XX%. tax non-GAAP our tax $X.XX associated reconciliation, with stock-based As see share left million an or negative income rate $XX will tax from of reduction from we compensation with per of a this activities. you effective benefits, to large had excess

Free $XX As we for to benefits, quarter, of compared for tax to cash we quarter year. last same effective excess to trailing be million said flow the XX% quarters inclusive the for $XXX million the expect flow the rate, fiscal four million. was our was cash around in year. $XX tax last free XX% period FICO's

million balance up $X due cash. This had in repurchases. to million end the At ops, million generated offset the Turning to quarter, by from last the is share we cash sheet. from of $XX partially in $XXX quarter

value face on at million today is of revolving Our $XX our total outstanding $XXX including million, credit. line debt

Our debt weighted of a interest average has rate X.XX%.

repay will coming we the on is the a callable notes to $XXX to which maturity The rate revolving of due X%. were in that of used drawing facility. of fixed portion We senior $XX the During in Proceeds million XXXX. on facility new credit of revolving those issued pay is credit anticipate mature notes the notes July. the quarter, notes, million for

the used we for the cash to bought We XXX,XXX capital. And At of authorization. Total an the back $XXX repurchase board mentioned, December remaining as at end quarter, on in quarter million average share. I return first shares buybacks, in the turning $XXX had about $XX per of of million. was price quarter,

And finally, XXXX. financial previously are we issued guidance year for full fiscal confirming our

turn I'll his it to on thoughts for XXXX. Will FY that, over With back

Will Lansing

Thanks, Mike.

move for into my remarks, I As we're opening as I beyond. in success and we XXXX well said positioned believe

get feedback to we Our of safety to sure to and continues to and lenders Scores the excel, provide work we regulators hard decisions. analytics lending business and protect from soundness make

bookings recurring a building On the backlog producing software higher side, and of transactional revenue. we're

look continue do innovative value. We efficiency customers with business. serve of to ways our We and building all shareholder to our eye improve an in toward for it

to the over turn back now I'll call Q&A. for Steve

Steve Weber

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

Operator

the first very comes question, much. for Fargo. please Bill from Warmington you [Operator One it line Thank Wells moment and with our Instructions] of

is open. line Your

Bill Warmington

evening, everyone. Good

Will Lansing

Bill. Hey,

Bill Warmington

the strong ask side about Scores So the of first the the wanted on to revenue license I question was business.

to of and some license ask don't want on Scores, detail You see lot a normally revenue in that? for just

Will Lansing

not too, read one into so much it there, was a into too was did and a that. disproportionate larger license, it. wouldn't It I pop would as was we and too Bill, deal got structured I way much the – but all read we

Bill Warmington

through you Scores talked price auto. the on years if over seen increases. have January? couple the you Okay. maybe put could Have special mortgage you talk then And We've in special in so, two guys in and a And bit it? a about price business, little increase guys past a about

Will Lansing

effect, it's we into an And just have. the yet. we gone read results really opportunity had Yes, haven't to so and

Bill Warmington

feeling Okay. Are about good so far? you it

Will Lansing

feel good always about I business. Well, our

Bill Warmington

Is it perhaps the portion card in the of business? credit

Will Lansing

yes. Some is credit affected, card

Bill Warmington

Okay.

software business. your part tools And applications on kind time to Switching to so, facing, DMS APIs of of Is make those frame? APIs Today, available internal build are what are developers the of platform. all those the your if Okay. the to using over externally? plan inward meaning that the

Will Lansing

eventually. lot that to probably, a an A that question. insight outward-facing, that. to That's XX-month can we is APIs realistically, much our XX plan turn before so time they're We of that in very do great Bill, frame question.

financial is, you solutions, know, advantage to multi-tenant, behind mostly standardized, it, configurable with that them which are our have highly we're onto solutions of strategy taking The scale. as we the services-oriented, platforms we're getting it real returns the

happen. of When the can APIs a turn we bunch good outward, things

that get can becomes resellers our to not VARs and enlist it's to done. so that who It we API beyond and job. the of partners help First, others do customization that us

verticals a Second, into be where sales we all but where BXC would I force that's for able there's we'll don't to And move have financial beyond companies. true say appetite. services, an

company that we consumer solutions of strategy. let achieve based platform. to our their Any decisioning Frankly, The which and optimizing point Difficulty] inflection much our that. custom them have tend get from into data-driven it's for vertical [Technical software wants But an to kinds BXC our APIs will very on when platform. benefit outward-facing it's interactions, business

Bill Warmington

And impact? that? then the that else Or that basis. ask I impacting on CCS million, on to wanted down the on a were something bookings, a those SaaS year-over-year $XX just is question Is

Mike McLaughlin

fact lumpy noteworthy that this Bill, relatively pattern. that bookings. where relative it's our slowest particularly terms bookings Mike. to terms It's the typical There's of business in shortfall of and is seasonally is quarter our reflection a bookings in are in of nothing

As first come the in year high-teens that of quarter. kind to bookings full of you it's know, in, typically XX%

And you of just deals you if aberration relatively large of lots sample statistical this. seasonal should about set have an think sort lowest doesn't quarter, combine long-term how smallest is chances the significance high. being So business, for a with the i.e., that lumpy the that's

continue We booking that demand how good growing external feel terms business in pipeline. to and about of is

So I quarter. think it's think it's a this just one-off a -- I

Bill Warmington

are could. then going XX to your on last those? The actually and when the adopt the if FICO I question GSEs for thoughts Yes. And me, FICO XXT,

Will Lansing

these in be consideration to Boy, We that's set. to a certainly hard courses expect little say. the

Bill Warmington

right. thank very All Well you much.

Operator

comes Our the next line Barclays. with from Manav of Patnaik question

Your line is...

Manav Patnaik

you, Thank good evening guys.

there pricing, that auto mortgage still I two did some are Scores years, Just you cycled and follow-up opportunities pieces through, those prior the something the on fully is in there January. is or said card did you you in and But know the to there? incremental

Will Lansing

I fully think your while of through, think them cycled in place should It's to words. use you as for been now. being a

Manav Patnaik

Are -- give Or some your that Okay. I side, is the color in was us some good guess, And more there the broadly hoping a then just diversified? number. seeing just, pretty was I -- you there? you're is BXC could on XX% pretty relationship? I experience that on trends was mean, it

Mike McLaughlin

There's sticks But again, single have. it's that Yes, as it's a both Manav. explanation. as up platform really relationships nothing we own -- third-party our broadly diversified, its being and head the

Manav Patnaik

it. how front, your the you And maybe the margin FICO World much then hoping and the was through year? Got like just, point, timing maybe maybe the the the should help progression impact could us of we about the all Mike, obviously, in software, on there just moving be it to pieces with think of over lumpiness How can course place. if

Mike McLaughlin

Yes.

the more relatively year quarter, where favorable. a to last at we're talked to going small took reduction. on won't margins expect until the this that restructuring In turning be with focus and Most we of So impact benefit we end quarter realized of won't from the about associated the begin that materialize. realized being charge to beyond. be do that of we financial benefit XXXX quarter a financial headcount But second --

first out, expense restructuring our X% take OpEx due And that expense itself. had you on quarter, things. probably was those and an we of growth the FICO basis In those of to course World also if

still that -- than lower lower rate so growing is but And at double-digit, income than a growth. revenue we're OpEx

growth focus not more the the be But of the progresses, you're much and first it as expect that seeing the that. quarter. we We on efficiencies year than between greater leverage, gain cost in revenue as growth some expense and difference operating yet more will

Manav Patnaik

Got it. guys. Thank you Okay.

Operator

comes Meuler with question the next Our Baird. Instructions] of from [Operator line Jeff

line Your is open.

Jeff Meuler

Yeah. as bit going maintaining the read full just has that company's of front, shouldn't terms Thank we in the second you the how just this correct? the the into you. time of year as it's warranted implementation a remind more for as Can is adjust me, pricing methodology past typical special guidance quarter implementation to anything passed, guidance pricing special on

Will Lansing

in We for have schedule we don't where going give a is best to guidance. that our time point be. any really guidance The adjusting estimate of we're at

we in that the And have so is place the to guidance. guidance believe be we what

Jeff Meuler

maintenance help you performance quarter? then And year-over-year the muted me pretty application, been just while. Okay. the the in a can growth, It on lowest and transaction it's was in

there there? timing activity, transaction just factors, reason would growth be market end slower about any why anything Just

Will Lansing

by to about I think think that, the best way it's it is design.

able not And provide even stage. to they're impure, in single we'd hosted, be. you in-between strategically the We on-premise, we you look business, there's a is platform multi-tenant, take in-between predominantly, were that historically configurable we're solutions – the business, tenant like that to from of if stage, back the important cloud, at which and are software making but step the if if transition even an be and our to the future is to platform end-state software license them competitively, they're transition state what which was standardized, and our

pattern we platform. of abandon moved moved of platform. have having where top Two yet solutions are our in cloud. we've here, to top not for those the to some so And we're willing yet the the of not customer's three our five in five franchises, our And a needs to migration

to really satisfy And We keep strategic. But we our that platform. come is though because to those to we migrated competitors to business so it's want the standardized lower want solutions the are what take multi-tenant it's returns margin We do think out. business, even customers. over fully scale we when

there software the is in do. care than business space we more this in in is available to our balance So, strike business that between we

meet think it, basically think is the our lower we short-term. And we in it. customer the rate overdoing growth we demand strategic call how that without that, – basically And really that's to about needs we meet appropriate so revenue a

Jeff Meuler

had you've U.K. macro some, Got in it. And the I guess, call then given bookings last, out concerns, competitor concerns. delays just Brexit just a the

the you? U.K. something for seeing or on, Thanks. similar going any you're if comment how Just is

Will Lansing

Not really.

our fine. business, is business EMEA Our U.K.

Jeff Meuler

you. Thank Okay.

Operator

comes of the the question next Jefferies. Thind with line And Surinder from

Your open. line is

Surinder Thind

like little you XXT like Score talk sense Suite. of in the about FICO Good that FICO XXT start about the providing or important? a the XX about was introduced the sounds XXT versus value, it Score comes as that superior XX compatibility? across a the to afternoon. Can face primary it? the obviously, bit but I'd it's XX question a at reason benefit way for be – score, be And was why clients we FICO how should then Is will FICO the backwards that thinking thinking about

Will Lansing

Yeah, I that's characterization think that's of – difference. good the a

have the lenders to – always help have make score is decisions. to we better So, and a predictive more goal

updating a years. have of kind of several We cadence every scores a regular our

FICO from is right so completely FICO X. XX update Score backward-compatible. the on-time is And for It

codes, the can with different, it same the So in sense it's factors some some of of the X. and used reason interchangeably be is although weighting FICO

XXT, we're FICO some of what makes it kinds that codes. reason With predictiveness provide does sets, so it certain but does trended And not it we've backwards-compatible, data, the using different additional better data is introduced things. for and

So think versus compatibility backward to that's way about the is it right not.

Surinder Thind

Scores. and further compatibility then, next-generation another Because, like terms Because think from let's in how would have will the involved, in to from -- assume obviously say paradigm a you become I set completely -- the -- say, generally, effort assume. I that to a new different more, client be and Understood, perspective, without from I'll XXT? want wouldn't of beyond, you'd of I FICO a going much XXT FICO maintain

so... And

Will Lansing

have different, scores. adoption there. different rates new FICO we have out X, is and lender Every FICO for what Obviously, is see We different still you X. lenders have

fine. much work very still in earlier just And have that use. are We scores still

to brand-new Fintechs startups they customers So greatest, XX be would lender latest the pace and the change and what use. decide gravitate it's and scores to at and to to that want the XXT. they up which Obviously,

Surinder Thind

That's there's And characterized natural be the quarter, helpful. as, topic volatility. an revenues, touching here. the you then, And some earlier tends software this particular, think base about to on them lightest I of in

also -- When least flat there for or keep at the bit Or think just the and Can the margins overall verify them goal margins? a perhaps about were versus think you year, we year-over-year? is the software just that I little around. want we about to essentially should that talk firm-wide to you how color about providing

Will Lansing

in We're it so take we growth, revenue better Maybe here. We safe. little in have -- do on margin one worse. on a way now, focus or big other. little is flat bit a depends the of that expenses the think out. we're to year we'll as and that, than how changes matching the That maybe we go shake kind I trying don't right factors

Surinder Thind

is for that at is Sorry. level I And level? firm-wide at or apologize the software -- that the

Mike McLaughlin

And That's software our level. the steering bit the very we're very, I score at of is, Obviously, kind to as in the start to say there in well there. goal software the margins over year, little turning as this different. But -- some show time. margins incremental the is a the business, improvement

flat safe. As And safe be Will is we'd said, than -- it's happy that. if better

Surinder Thind

one and final Understood, then question. follow-up

the towards I the more think I the be think Falcon new of year. suite launches to product is of the going the -- end one anticipated

its is out, we migrate think let over the Or that course. you how platform? As as the existing many run client product to that upgrade it users to to cycle strategy about the roll natural that? around Is should idea suite

new as that. helpful. Thank any of think were that color platform you around But you. would many for be And maybe possible? additional some And kind color as users target providing guys I

Will Lansing

the I it's of more would say Yeah. latter.

time. customers quite And life. and rate a our upgrades. in long to of stay shelf for has tends their pace our It that, software a long in think I decide and go

pushing to early If okay. greatest so be customers, that's want. or it if pushing time, to it for direction -- on products. We they And customers And we're to them want to new We want pace our do also do away, going not we're migrate certainly, of take great. in the quickly. latest they and their the they that right

Surinder Thind

me. for it that's you. And Thank helpful. that's Okay,

Operator

time. Mr. you. yourself. to Thank I'll turn there the Weber, back no at are further call And present questions,

Steve Weber

Thank you. Good call. This for you all concludes Thank joining. today's bye.

Operator

thank And participation. We your for disconnect your lines. that you ask please you

Fair Isaac (FICO) 30 Jan 202020 Q1 Earnings call transcript