FICO - Earnings call transcript Q3 2021

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Operator

Greetings! And welcome to the Fair Isaac Corporate Quarterly Earnings Conference 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 call is being recorded today, Tuesday, August 3, 2021. turn over to Steve like now the to call Weber. I’d ahead. go Please

Steve Weber

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

Will Lansing

thank everyone our you Thanks third joining and for call. Steve, quarter us for earnings

colleagues this I innovation Before our to for results, and year. discuss thank FICO dedication, past I'd during adaptability, like our their

moving home, serve to to to more to begin is of proven of person. where in remotely that our working we our past in make business, and team year customers As the both open most we a offices up, we're collaborate and optimize and can technology hybrid back our system from our but we've the continue

posted website On of last In third offer Relations the delivered we increase that section over period quarter an Investor highlights third quarter. our year. financial some slides revenues our of $XXX of same million of the X% we our

earnings the up of which a on year. XX% for income basis, Adjusting including divestiture $X.XX of sale completed products dollars up gain quarter. sale, million, share non-GAAP year-over-year. delivered million As was the about We of per XX% previously net $XXX and from share, products. $XX and per our GAAP collections during last revenue and that, we C&R the recovery excludes the debt the was On of net earnings income $X.XX grew GAAP disclosed, X% of

year. using we're cash as growth the strong well. We a $XX program. continue last shareholders, strong in through quarter well for quarter us, to our flow strong are free return to and dedicated It four cash value was cash Free for and the fiscal we very was our million flow for our very and $XXX positioned that flow repurchase finish deliver to a to million quarters,

continue of a revenue. disruption and in model, see our based We're not much subscription margin our delivering some strategy near revenue as we as lower selling As model our not and towards services business upfront recognizing migrating much we term numbers.

vehicles So, these long revenue and will Beginning positioning and indicator delivery to vision onto or and efforts platform. its complement full products of ARR trajectory. platform the different delivered for the transparency providing our business customers also the whether we about are metrics potential. term that the scale software linchpin specifically will The will growth be to are predictable off business. Metrics on software, is quarter give like bringing our Management additional better the a for provide new platform next us and talking will Decision company strategic our reporting We'll growth. platform profitable be additional our that enable our to realize

believe become that As analytics; our in singular decisioning is in I've pre-eminent stated, player we software business. we can the role our

innovation cornerstone in Score’s has to the the predictability year. maintaining been growth versus we side pleased that the our while I'm Score and report the FICO of Score’s On prior record posted to another XX% to the always up remain outstanding drive committed score, business. that we continue quarter,

last revenues returns than to unsecured and originations, lending came cards market revenue those flat BXB more levels. most revenues predicted more to growth It is market throughout in very banks credit We year to financial down This those strong originate The to were for appear be strong new pivot have be to with lending as a XXX% since activity, Auto last a mortgage saw boom demand and began peaked the acceleration position the products. new versus to as expected by in products appetite dramatic origination side the last up accounts quarter activity expect to strong as originations market. volumes XX%. believe in unsecured XX% to industry. than refi a have revenues the record the and shows the from expect and had a we typically were year-over-year. trend activity other We year. On card as and the numbers are up now that other from wins year. in origination year's more and financial strong. XX% in We more card normal Mortgage leading than marketplace screen with the institutions is up up to were continue Fee a card numbers. with quarter continue indicator originations

the On growth. drive we continue consumer side impressive to

others at up the consumer. myfico.com Our an up mortgage we serve quarter expected new ways to partners has XX% BXC versus revenues off. our still and cools increasingly among is the last while slowing, picked That Growth strong as year. were sophisticated growth as which same market find Experian

this we product closed will for and our review using line. Finally, the collections about how the quarter repurchases. of share we impacts proceeds the talk are divestiture and financial recovery Mike

incredible we we last decision an As believe over best-in-class turn further is minutes, the I’ll final platform first, further for for to quarter, few have the focuses said Mike financial but resources divestiture that a call comments some the distributing FICO. and our refining opportunity I'll on in details.

Mike McLaughlin

good Total X% you recovery $XXX and more was Thanks quarter afternoon, detail Today in products the of information of our FICO collections quarter divestiture an some million, third in we results and through and Will quarter. provide closed increase I'll for over the on revenue prior walk the everyone. year.

applications period decreased $XX million the down segment and decrease were divestiture, software X% last down from year-over-year professional license year. upfront X% by sequentially last same up million, segment, versus services Our the revenues Adjusting for and applications The year, QX primarily quarter C&R to driven $XXX our XX% last decision in up X% revenues down were were revenues X% same revenue year. last the management was reduced period revenues. primarily revenues. In due versus over

software in our the to near impact is our shifting As business term. Will model said, continuing business

Our to decline from on we continue license notable sales premise revenue license a move revenues as away subscription model. to will

we year start recognition our at subscription of also premise deal. for we have changed Second, assumptions revenue the license noted that our term on fiscal

be versus DMS be year, As all in about what recognized over have will this deal. license a our term revenue of was anticipate more software result, would year it lower at net full million now methodology. our $XX the periods. and applications impact and upfront and revenue under The segments, license we each license ratably less $X revenue which lower of impact in quarter this recognize about prior We future will been the million revenue

$XX we As in license and fiscal booked our last fourth quarter million year reminder, upfront methodology. a revenue the prior under

an will So year-over-year be especially that difficult comparison.

our free the term As change the license in engagements, total high with core of we past, lower like we deemphasizing low to an selling not from flows non-strategic timing also I'd out are of on cash each impact the is is or driven goal This revenue. revenue by remind and that value does which subscription software over bookings revenue. resulting pointed PS contract. sales professional this you strategic software recognized decline have more in services in margin,

This revenues down quarter year. were versus XX% last services

As $XX sale of EPS GAAP the $X.XX sale fund in divestiture tax we million share our quarter's quarter. in previously collections Proceeds We book results. gain and a the third repurchase recovery were used contributed after from closed program. line Will the product of to a said, recognized the to accelerated pre-tax third The quarter. announced of the

card as by the as unit some year, score our Turning XX% year, were revenues year. million same same continued last categories. to revenues period over BXB from our line increases up BXC and period originations, well was partner XX% total volumes significantly. different same the were price auto last BXC myfico.com XX% revenues in up the high from Scores driven and across credit scores grew both segment, $XXX up period

X% derived from up generated the was This of year the and were from from months. bookings XX from Services Much revenues totaled Pacific revenue. revenues de-emphasize quarter current year. EMEA represented QX professional $X software the and quarter including weighted XX% XX% and not services, Recurring XX% term remaining the year. previous was due derived XX% our period revenues. services region. had Consulting grow and for margin Americas transactional last down for XX% the Professional Asia the revenues to the region total million, totaled were generated of in total of implementation deals million and XX% revenues, from revenues of signed. XX% X% our bookings region, yield. to were total Those the shorter million low our of revenues term continued quarter, average were revenues, lengths sources from related an PS of of revenues XX% and $XX maintenance and down $XX previous of a of license XX% decline total bookings bookings SaaS

business, fiscal our fourth new in strong have quarter. our strongest in see deals We and for typically we software continued to a our pipeline period

our de-emphasis said, and compared As professional to on-prem we we of numbers have subscription length service a trend of sales of term to overall shorter typical lower contracts. expect result somewhat historical license as the and term bookings

and financial mentioned, Will plan the more segment. the quarter, the subscription will begin we transparency the to metrics software we of lead to additional in that better believe understanding As results particularly providing software company, of next

operating which quarter, $XX the expenses this included C&R compared gain $XXX to million dollars $XXX prior on in dollars the quarter. sale, Our the totaled million million

increased add gain, Excluding expenses related Compared were management million, to gradually our million. and We the up were as XXXX, expense. incentive compensation QX that increase to $X development customer in we to expect platform and increase headcount one-time drive up do expenses, travel. distribution continue one-time decision excluding to to gain primarily operating $X strategic QX due

pre-tax shown on the margin which million, non-GAAP last divestiture. points for a G of quarter, period was quarter the XXX was Our basis year. $XXX the as expansion Reg gain net $XX this same income included from XX% our margin schedule of from operating million GAAP

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

million approximately divestiture recurring same recovery % flow about and XXXX flat Free We be expect to of the tax XX was XX%, FY quarter the expect cash and collections including we the to impact year. effective to XX% with year of our the our tax for last $XX net period rate the be business. for the rate

last cash four $XXX the from quarter's, in we was free the of cash, quarter. million flow At the million end up quarter had trailing $XXX For million. $XX

total X.XX%. at over debt billion stands of with now average rate weighted $X just Our interest a

agreement back of in accelerated share. capital, we price average Turning $XXX to the repurchase quarter XXX,XXX the the divestiture. of bought of at This third into shares a C&R following an $XXX close includes million per we entered share return

we remaining to For thoughts. the attractive on cash. had of our repurchase repurchased ended I'll nine repurchases continue million With XX, it At view we and turn his months Will an of shares. for that, X.XX authorization back stock June to over the XXXX June $XXX million as about we use our share end closing

Will Lansing

Thanks Mike.

As to extremely I'm I business pandemic. uncertainty all ability the of the said our and remarks, our this by team's my manage in customers with pleased opening midst in our serve created

strong. We continue business model to FICO prove was that the

rely analytics other Our optimize Mission on to customers our software, manage interactions with and and risk Critical scores consumers.

invest art back for make customers analytics decisions. We solutions and use over the to I'll continue to provide call to now to better Steve for Q&A. state innovate turn looking

Steve Weber

Thanks Will. does your conclude ready open to now to This you'd Operator, are take remarks. questions. our lines, if prepared we like the

Operator

Certainly [Operator and much. thank Instructions]. very you

Our with first Thind question Jefferies. comes from Surinder

is open. Your line

Surinder Thind

about how at guess. I if a this bit unique there's you start score FICO maybe question FICO. issuer I’d by you. kind suites competitor the think car a the a with like to talk Thank XX using that's adoption the in little the marketplace you just revealed just of large that issuer the Can anything recently of to about switch from competitive of terms and prompted point about

Will Lansing

in the and to our scores for. situation for think. I out what getting predictive That as been; our strong. it without Scores kinds score being marketplace is our a are tests as has most very of We strong ever very the continue all there they believe answer used And are time in are Yeah, into business volumes of our around is details, been score the a is, desirable. for strong was long that special has and stand the short

switching We and issuers seen we away. have a decline, see major don't not

I the that's one-off think is a that guess way it. So best characterize to and I really

Surinder Thind

should concerned can I the think broadly the so to rewind do people basis. And guess to to a and That's business helpful. you any credit about process. that that we're the that further of credit personal of a kind there the seeing on thesis be their we I about with when business. and has through that year, of scores [ph] now lot seeing terms of is BXC, it especially of then I kind monitoring growth in there’s that in thinking how the rush know But color additional we're resided for last there's pandemic were is a terms – the It of just, resiliency are in a that of you there a the on and Scores think was provide framework you basis, that talk growth Can we were growth? if that about business factors think I very When maybe was the the sequential it are about that additional impressive. now driving still strength

Will Lansing

with what that but and last worry here, it super we Yes, is at I expect trends for can't see some worry don't by they offsetting a the levels, that we recognize shopping the and predict monitoring mortgage, we true is about there's any all so we go of – credit to and they analysts pricing. what same go think trend that. we able market that for that it score to about it, when to get and one to this way that's reason over our mortgage consumers continue And mortgage sense don't high of was often to are get year disagree

the cycle. next time, a is the trajectory going until of about ago in FICO know on that importance the factor of positive a XX% as aided been a that's are part be present of the awareness Offsetting of just and credit at on try has consumers upward to and least years XX very today I've is the certainly well forward, level most a scores, and the XX% with last think I over long its you the it. the won't as was steady score for to score which So And that you consumer five awareness U.S. past, monitor FICO aware how in shared years. continue important

So get finally way out doing encourage their And credit services continue. in that. who positive positive then and provide sophisticated score we well and and message as our a customers, they they the provide consumer partners report see what credit they increasingly the are we are and will to monitoring, a that that monitoring very

feel good we business. So, pretty the about

Surinder Thind

at then contributor one is sounds which credit of talk pre-pandemic And growth It card leg helpful. we important might like I to volumes, one. of credit auto how where feel were terms segment to card the the quick volumes, other maybe mortgage part and like point? you the That's an there's into of story. third kind are in the like Can good volumes about close maybe within a that visibility of BXB this be auto levels story. we

Will Lansing

Mike, any that on detail I don't we know if can you share. that have

Mike McLaughlin

Yes, card business because we but predicting but with room nature though is still rebounded can we which it of They we're we need of it’s the plateauing. backwards, all volumes bureaus smartly can you in appear relationships be to grow. our as is not looking can what the of results, in still we the as to but see that see about credit and to be do, that growing and course, our of careful have definitely understand, doesn't can feels there's

Surinder Thind

get thank in you. helpful, you. the back queue. Thank That’s I'll

Operator

question next with from comes Peterson Our Needham. Kyle

Your line is open.

Unidentified Analyst

Did [Inaudible] Scores changes provide around a for I impact guys Hey! that have the little round noticeable Kyle pricing any last wondering if for you Good quarter? Thanks. environment pricing business. afternoon. the color actually business this more This the of is today. was could Score on

Will Lansing

dramatic dramatic that. not not changes, from impacts say not would I dramatic Yes, differences,

Unidentified Analyst

the the there? about it, that expense then moving helpful. And follow-up, should margin that's think and how quick after divestiture of trajectory forward we Got business a recent just

Will Lansing

de-emphasizing we lower there's amount tremendous about and tremendous the I same a space pouring services some we're expect mean into the of us from benefit in about, talk so the there, talked professional the you've comes margin wouldn't as it. that but at changes. there's benefit time, heard I that platform opportunity R&D

so one our investment levels And focus at hand, control I are time expense the and cost there's but on the same on high. think

I wouldn't sort There's effect, much COVID for that expense, improvement. coming there'll a one more of also be out modest also So offset look and there's tremendous I is think those travel this thing. another but more of and margin

Unidentified Analyst

Yes, got it. thanks guys. Alright,

Operator

with comes question Sachs. from Goldman next Your George Tong

open. is line Your

George Tong

afternoon. Good Thanks. Hi!

XX% from perspective, a back Going grew volume grew and relatively much level Can business, and how mortgages the a strong. and by you parts autos you flat volumes growth? revenue to were Scores auto mentioned and the how in discuss high quarter at much contributed to pricing part

Will Lansing

we’ve I something think with we to Well, don't to ourselves. That’s want that. Mike, help you me kept break that?

Mike McLaughlin

were in which script about the in you volumes But no was sure. well numbers for the volume Yeah, revisit this impact about discussed. price, share said the like. we’ve there price. that lion's it not as segments was It's There can some sure Will was his the if on one-on-ones on previous the with in you answer, quarter of story we but

George Tong

like Got I'd to on seeing drive customer on-platform dive products? initiatives adoption your client then evidence your adoption solutions increasing you of your into on platform what little about and Can bit more to you And a you're Okay, it. that talk have strategy. platform of further

Will Lansing

with the increasingly particular we on One and three ways. want line putting the top Yes, major judgments solutions. four management, get our major we they about selling so accurate solutions to solution or or customers, major customers where top is standardize do triad on institutions goes but other and on we're absolutely! our the franchises still the not couple two the of want franchises, we which to platform will, we're of in do a and – software think what a solution all But increases So increasingly are they they solution. to seeing and happen what [inaudible] of is, to and of is or platform, existing you customer after how platform, about financial those if to are customer that our franchise our that saying,

and do top intent have XX of our to analytics to We where platform. everything platform unified apply of data solutions XX as leverage decisions the way, doing do in with across that's customers all and or so leverage strategy to that have future places that. a our and or we make on that's different and this want very We future an respect our to our it the all – much XX it of we that’s resides

We have – it's a lumpy business.

customers use the big beyond XX of cases XX an number over this and XX a that. with five intent for start expand platform landed purpose to or months then we've very with or last the So for

to So all left strategy have is meeting work we're pretty working the marketplace. isn't has happy in That the do. said, as as that the to of platform solutions and modular it the it seems The platform of on that. need reported we completely solution to we're legs our are were, and working. a the be lot wish Not platform we

large investments we plenty a there's medium still reception have institutions have financial definitely going But customer and it. So of adopted in. from who standpoint,

George Tong

Very Thank it. helpful. Got you.

Operator

comes next with Sabadra RBC Markets. question from Capital Our Ashish

is open. line Your

Ashish Sabadra

was quarter Thanks the the my about question. if to impact quantify in quarterly impact taking how just a C&R should or going forward? wondering we divestiture think the fourth possible it's from for I

Will Lansing

that? take to want you Mike,

Mike McLaughlin

announced we'll deal, mentioned take the to. roughly that expense in We our in I to be happy quarter that press ballpark revenue the it's one. release the businesses when as to a can and was you able our heavy nearest Yes, in are. And just I'm like that's other percentage. It's we business same near last numbers. revenues software term perhaps X% that rounding of those the it or QX the are know flex

a not business give will park owning but it you respect, expect. ball seasonality to [inaudible] of associated ’XX a what in with impact would QX some versus that in of So have the year-over-year what

Ashish Sabadra

as be API, there around talk progress just maybe helpful? the then question studios. well Thanks. as strategy, color And on about follow-up you earlier could API like Okay. software, wondering will I the the if Any on the to external the the was

Will Lansing

pace, I hearing and those to both – interference. we proceed of would have that Yes, am this say I

progress making and more external facing of to that ready both are but of year. that Studio, much come, APIs this the We will there’s be on on FICO

Ashish Sabadra

That's Thanks. very helpful.

Operator

question next Caroline Research. comes with Autonomous The from Conway

is line open. Your

Caroline Conway

for Would that I the recent the particularly about business decision following ask say stage, this you divestiture. talk applications is at you as question. taking of you right to business the about sized, my can the the expectations relates forward to Thank it at strategic wanted for point the role unit this going and management business?

Will Lansing

Yes, plans We I it right not divestiture time. guess I least any that would any significant for say forward, is at sized. going don't at have this

would it I call So right sized.

I way yes. decision solutions the platforms increasingly top to so out. bear know But you think available will sized, the be about the break things think of you and on is those with that you [inaudible] how it management right application

Caroline Conway

decision level? you. provide thank timing the And on you at as profitability, are next we quarter point to ARR management on guidance my question your growth detail Okay, profitable of other additional especially is as that a well And the turning other talking metrics, expecting some rates? will about to and see

Will Lansing

think Will revenue and margin level. we'll the on TBD started down getting I have to with the

Caroline Conway

Okay, thank you.

Operator

from Instructions] Next question Mueler with Jeff Baird. [Operator comes

Your line is open.

Jeff Mueler

de-emphasis can sounds and quarter you is relatively was further a Anything it bookings, a professional that. say you. the like in of part on the thank services row large it bookings, Yeah, of third of weak

sold is or is shorter subscription of software is deal terms other timing jointly how terms the or preferring of based electing things? that? weaker that You I also is of length, customers How Just and mentioned customers large the of bookings you activity? much how much is shorter it because that term shorter and guess

Will Lansing

the me can I length honest, in XX% Mike so is of length, It's – it’s term term on shorter significant. The reduction significant. keep think it's order

whose that said, terms had choice the preferences is we of always customer the if wants. the have we we – that, idea in In what go matter, the do a extent to that's us do our that a we if things way for better We are for think sooner to shorter revisit more term because to length. we opportunities there think go. shorter, were That

sales we on longer So, is We no force changed terms well. longer compensate used that. we part commissions do to and of we this the way why and our bookings compensate to and as

to fine is customer absolutely shorter goal term us. our Our with wants, provide is that but the

Mike McLaughlin

can to add a color that. Jeff, of bit And I little

decrease, So was other length, XX XX apply specific. PS XX% about just XX% to million you that's because $XX a intensity. the was And year of months the term $XX term the And time; ago average term length rough if this factor is the it million right bookings be that's a to math, there, and of length.

were million this were than last Our lower they PS bookings quarter $XX quarter.

are in $XX You see down we million bookings. total

So you two those equal factors alone else would, explain being that. know all

Jeff Mueler

do on bought customer or buy where could Helpful. like are that how you're when a giving today is solutions everything with XX if the landing or going? they example a And then of to platform intent many customers eventual XX the solutions, how many skews there? Like

Will Lansing

platform is potentially thousands XXX way opportunity of do and we it's skews it the it. know, combinations hundreds call form right think the Well, about skews. things. are, we even modular about provides don't to to I in its not the when think skews probably of Because But

a I pricing are based and what goals so of modular I a we everything lets to from to and like that moving think, And solution think a want want, pre-packaged. achieve match is customers usage pricing not will so that more they the standpoint they be mix it's components that the and

Jeff Mueler

ultimate market enterprise maintain And ongoing dialogue then one BXB the you end on an customers. with just for do me, last how scores, Okay.

technically, the K because it's bureau I customer's So, your customer relationships. and disclosure think Q based on your is concentration revenue

dialogue FICO end-market scores. on maintain you do I and how monitor So their guess to that staying commitment

Will Lansing

the to our by or for direction all we people close understood But in any of are it in direct major and relationships, have stayed is activity we another bureaus. significant with well channel so we a certainly Obviously, through one sales our we the also and dialogue institutions, partners, them.

Jeff Mueler

Got it. Thank you.

Operator

are Thank closing questions with continue presentation you. back present no Please further turn the time. presentation there remarks. you. your I’ll And or at to

Will Lansing

today's concludes We speaking This with Thank you. for look joining. for Thanks joining. Thank call. again you soon. you forward to everyone

Operator

very the that your today. conclude for thank We conference much participation. you And does call for

now disconnect. You may

Fair Isaac (FICO) 4 Aug 212021 Q3 Earnings call transcript