FICO - Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the Fair Isaac Corporation Quarterly Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, August 3, 2022. I would now like to turn the call over to Steve Weber. Please go ahead, sir.

Steve Weber

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

Will Lansing

our results and a business fiscal of value what We the call. third joining the seeing demonstrates with Relations and during presentation quarter delivered we everyone, discuss Steve, you, some those quarter we again deliver. the some referencing which our of website. for and of today. the go our slides noncertain results in section our our posted for thank of third proposition our earnings results Thanks, strong on over serve. Investor I’ll We slides us the markets model we’re I’ll marketplace, be resiliency very in

and when on $XX We an of X% GAAP As Page million revenues last for last income million, GAAP and share $XXX per of of earnings per our recovery from presentation, income a over of share, year. adjusted and up of products. $X.XX last gain for delivered million, up and sale. year’s net reported collections year of On was XX% XX% sale when X% last the increase up or period $XXX earnings basis, adjusted net year’s X you on the same was XX%, we see XX%, respectively, can $X.XX non-GAAP of

to were Page business the on up Scores despite quarter Scores as Our the year, the market. continues presentation. the prior perform mortgage of X% in in well can versus you headwinds see X

originations rates our revenues down origination On of last up XX% X%. as rise. continues declined as total and revenues the about revenues. headwind originations company X% Mortgage of side, interest revenues Mortgage be for now account BXB year. have were Scores were revenues Mortgage the to our versus XX%

origination last Auto revenues Excluding XX% were up mortgage, personal card about revenues and up revenues versus year. credit total were up and XX%. originations XX%, loan BXB were

double-digit in our increases had also We year-over-year prescreen scores.

in are side, the BXC online. up new where seeing X% slowdown were direct our fewer customers On channel, myFICO.com the year. came growth The primarily previous we from in coming revenues

$XXX components, we the for after revenue, freemium growth. drive and continues segment, channel, In divestiture. paid partner Our to our XX% adjusting million from includes X% Software delivered and year which double-digit last up of

for know, talked our quarters, you the we opportunities. growth we’ve about see As several demand and over substantial platform how

ARR Platform ARR remarkable X, Page total on was X%, XX%. again a grew shown at up As and the

was existing very NRR on XXX%. XXX%. usage. rate Page our retention net their X, was the for is to as customers strong quarter, Our Platform expand NRR also Total shown continued

a We good with sales. new quarter also had very

year. Our XX% ACV bookings, was X, as Page up on last shown over

finally was a where explain clients in ‘XX from May that platform. the client commitment FICO’s clients to during surge customers, May platform services and let XX a here as XX details. from consulting with connect for the me The World face-to-face the success. through finance our held for event well this FICO financial FICO engagements, most learned. our turn event the the few registrations identify first, hundreds by FICO enable sessions excitement our our opportunity of past X-day recent XXX Clients and our nearly all our World seen essential over FICO and platform, FICO events, as But Conference. breakout hosted about achieve accelerate best FICO potential some opportunity FICO goals Hollywood, shared strategic to excited breakout and The individual leading Orlando FICO presenting firms, reinforce and providers we’ve lessons FICO partners, of banks, to to to in industry their clients. World great also had extremely We sharing moment help at colleagues success experts demonstrate World, in was auto and included We’re can minutes. I’ll call Florida. to with hosted final rated in our vision we already Mike and strategy FICO and companies, stories comments telcos. them all It have to strategic with back next how XX financial the continued growth sessions, was for insurance to clients, to be an a World customers in XX directly designed was the customers an opportunity

Mike McLaughlin

$XXX increased product after last the X% that of revenue Thanks, adjusting Will, Scores can from up another prior BXB and revenues line increase and quarter the of In on last our our and prior period last segment, over confident for results X% the was delivered the an afternoon, quarter. Recovery the divestiture we year. deliver year. $XXX were quarter Total remain revenue we X% over good Collections issued million, strong the for of June. We guidance everyone. was million, same up X% or Scores third year

year. in decline from see mortgage a to were origination continue last we revenues, same mentioned, down XX% quarter which Will As the

portfolio were we our And the year BXC loan in X% strong. quarter and originations be in parts third continue card personal same good strength Scores prescreen and last to to X% Credit strong from from FICO’s driven scores, other by see the revenues revenues period for divestiture XX%. year revenues the of continued $XXX auto continue our Collections up originations were last of is growth million, period business. which card up credit nice in and up were However, for after growth or segment same Recovery originations originations. a sign up adjusting XX%, versus our the partner channel. and Software XX% were revenues the revenues

recognized point compared time in period in million to $XX a -- or in was $XX Software upfront million was at last same million $XX license the revenue the quarter year.

result software GAAP sales accounting renewals. a upfront to require multiyear license are a revenues and point-in-time these reminder, of recognize rules portion of the subscription us value a on-premise of that total As contract from impacted that vary subscription revenue the our Point-in-time mix is these by accounting primarily ARR versus on-premise metric revenues will rules. driven SaaS important to not of quarter-to-quarter by point-in-time note sales. It’s

continue it services same up this we divestiture. to quarter, lower million period down last Those due from were but from revenues much last $XX the revenues. expected, As of slightly year, Software last XX% quarter, to professional year’s see

from were Americas total of region. company our derived revenues XX% quarter, This

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

quarter. million, of the XXXX was year third a X% of the fiscal end Our Software the over increase prior at $XXX ARR quarter

to Our ARR total well. a Platform million, third rate versus Platform business continues XX% quarter representing year. with perform of of $XXX extremely prior XX% was ARR, our growth the

prior from in was $XXX quarter, million non-Platform the X% the Our year. up ARR

As a reminder, metrics our all divestitures reported ARR periods. from revenues prior and related exclude in

quarter in Platform in to was rate overall. we’re continue dollar-based quarter. XXX% rate our business Our exceptional seeing the net dollar-based expand Again, was in as the for retention net The XXX% usage. Platform customers retention their third performance

customers usage continues non-Platform of a Our XXX% retention mature stable, this to be and net rate software relatively with quarter.

$XX with quarter, million this versus of contract $XX.X strong year, annual prior million of again were sales XX%. increase value the an in bookings Software

sales, Our the value only Software recurring professional ACV services. bookings excluding include of annual

expenses now slightly quarter. for second our the million our up expenses $XXX quarter. Total Turning operating from this quarter, to were

our quarter. modestly continue increase to to We expect in expenses fourth

non-GAAP non-GAAP income period last operating shown was net collections and over Reg our was the XX% points as quarter. margin, basis the when Our schedule, expansion was X,XXX a We our GAAP which $X.XX, from year. line. had last and same sale margin G was down delivered on for product on million, $XX we year EPS of quarter gain recovery our GAAP $XX this million pretax of

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

$XXX about be FY same resulting expect net benefit XX%. recurring cash is items. period We estimated tax the XX% quarter for million, other year. was to up tax rate effective any approximately from XXXX flow rate be last The discrete tax XX% our to and Free the excess before

we period, XX-month $XXX million million. cash free At was the the For cash flow end quarter, $XXX had trailing and the investments. in of

Our at total with interest was X.XX%. $X.XX quarter debt a weighted end of average rate billion,

of of the of we current share. remaining that, June, it Turning Board ‘XX. authorization the million of price thoughts his $XXX end I’ll cash. had repurchases back an capital. to the FY share turn per shares return in $XXX quarter an view With We over back on at attractive for as Will rest to use average the bought third to on of XXX,XXX At about and continue

Will Lansing

Thanks, Mike.

results pleased my how our with of to in shareholders. can and customer to while meet I’m As strong we our needs the I working said ability opening our deliver remarks, interest best in continue

software We and analytics continue customers. deliver to mission-critical to

need technology more the seeking to in important. services industry to assess the never As impacts has ways decision-making. the and through inform Lenders economic precision to navigate have to opportunity continues and risk analytics volatility, advanced expertise the best-in-class are deliver we And real-time been of solutions. more financial for

Our with scores And the those we’re types to customers. of many more consumer time-tested means of that to not lending throughout lending lenders highly provide risk continues help the manage specific analytics lending the Scores markets leveraged throughout use different business market.

market the On continue appetite a Platform latest our and side, and technology. ARR Software demonstrating growth, decisioning drive strong appreciation for we remarkable NRR to

guidance, we We know, fourth not confident ‘XX our I’ll you reiterating last full beat next well or quarter. numbers I’m to when meet our release turn in to the pleased provide Steve guidance forward our as quarter. results that look that quarter. discussing guidance our Q&A. to to only practice and we back fiscal policy for the expectations have we to Finally, are positioned it’s annual to presented it’s our raise are the we say remain call so raised year we

Steve Weber

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

Operator

with Instructions] from question first Barclays. Patnaik come will [Operator Manav The

Manav Patnaik

It walk on meet But us through kind of the you’re to said where I touch of comments pieces. in to the I last Well, that just wanted there work, moving guidance. maybe in you pricing well? the was as prepared work. worse either myFICO-dot hoping sounds better, And you beat and anything else maybe you or could perhaps made could some just some mortgage could point or like got throw on

Will Lansing

the is pretty mean those this in Well, the I next for really -- pricing mortgage and discussion And and I pricing mean is is really those got are baked mean, we’ve else puts takes. strong. year. a I headwind, year. everything for

Operator

Our from next line with the Needham. will Kyle of come Peterson question

Kyle Peterson

of any really at I recessionary clients it’s the wanted guys sales deals on question longer or in up looking a kind for seen you have some whether ARR Platform. potentially Software. with quarter side Have fears down-gauging strong, just here? this especially are Results cycles perking on to change,

Will Lansing

the No, not. is a industry gotten cycles short, on not they’re say that seems have say the they always no. have they’re not to but any spending and to would services in lot. track financial same, really be moved IT been. whole have They’re Sales hasn’t the what which longer. We I

And no would so say change. I

Kyle Peterson

expense really then, I just the guess, up That’s Understood. on And following helpful. rate. run

that good really tight leverage personnel you it the Or guys your guys investments next some having you and call labor want biggest are guys there expenses to are quarter. given any now? Is showed right modestly quarter the wage making, out costs, up What this that conference. said despite just drivers Then margin higher You just higher are here? you market? expenses other of

Will Lansing

a It’s things. of couple

a travel we say I pre-COVID or always hiring. starting We’re started less out going It’s been, to of is -- again. years that in where past. a think more kick little that in it’s just back a to And has but us the little bit Attrition are backfill I would longer more is it’s to than tight market there. taking expense

Operator

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

Surinder Thind

Any number. third you’ve on call, the the really A It’s here. addition quarter strong question about of what of a or commentary bookings to color the in consecutive ACV kind said there, expectation the where I quarter. there in seasonality that you be the sense tends are guys also expectations is, ahead next were, relative of And well that to to that. is think

we So expect about pull should there the been think as seasonality how forward? normal Has any Or we should that? well? just

Mike McLaughlin

expect a So ACV that QX finger it high this metric happened is before. it ACV tracking internally good doesn’t that, to And with is. the have quarters pull-forward or is sales, know, see we that’s any a And material usually new or on be a isn’t as new acceleration in you quarter ourselves as of There I and metric bookings of can of terms you reported of for because bookings, We’ve ACV this those. for goals metrics. hit it in longer track externally. put good terms to bookings or set course. other dynamics that revenue do we’re than distortions my been on we amount pretty year

Surinder Thind

then of had And professional services, enough. in they been terms the for while. Fair a declining

I think, -- bottoming. uptick the a that of balance a was I I was kind not realize what then about there? drives you large Where of of meaningful run color quarter. but should mean last that rate uptick quarter, there a number, And this I bigger them kind there? Any it’s anticipating. out? kind than talked it’s Or was

Mike McLaughlin

Yes.

bottom. my think you we reached out, correctly I may that have last it prediction, as was the point quarter

that once X services backlog any X the energies is to think services of our recurring of we have new while go-to-market saw in early, we, of from quarters When of case. focus revenues to quarter’s that, or we point made quarter, so professional I bookings our professional we in shifted that annual way focus have a through away way the decision. work we we that’s data strategic our lower-margin bookings demonstrated It more continue through. significant for services their professional takes software, because given work decline that X to those on

in can’t we pretty That go So new up bookings you ago, quarters normal. but our the rapidly -- change. when we decline it longer hit and for X to the bookings we this, the bookings the new And to policy are see X you -- saw down professional stabilized so made X the outside, quarters a took as no services few declining. it say, from PS revenues catch about

So in good of million this a kind quarter probably is $XX a pretty expectation the near term.

Surinder Thind

business. or question the color part on a then And a Helpful. the BXC of

You there? Are more, partner, seeing you terms myFICO.com. provide in perhaps, talked growth your bit myFICO.com? about growth continued the it double-digit at seeing net slowdown additions is of you color simply potentially in can a Any color new number? Any a there turnover at at

Will Lansing

No, do in it’s see fact really to out new additions. mortgage the spike mean shopping. it that we net I that when has people are with business the

that smaller to off, And subscribe numbers. in consumers so as fall volumes mortgage

Operator

from [Operator George of with Tong Instructions] The line the next Goldman question Sachs. comes

George Tong

performance card autos personal those and performance volume describe and and across in you how to loans. provided trends mortgage, Can price contributed categories? You revenue

Mike McLaughlin

Price played a part.

we numbers look that I if were they last or week externally or expected say, the think in set consistent Last to we the what looked that revised for that that revised those -- and decline and mortgage be guidance been you Power at similar quarter, X for bureaus bakes than been we performance our with volume categories, or results of as if then be pretty at the the card realizations And X.X is change. last of autos you it. units it year in volumes you the the like reported as then that others credit would would worse would we a really have I think NBA guidance in but J.D. nicely terms things weeks. those said the available doing quarter, has expected, in are we would our what when little expected.

closely of volumes. in So we pretty best we’re the can tell as market terms tracking

George Tong

tick your Got medium have continues to -- over it. next Can of on-Platform would like out percentage Software ARR goals the you respect And versus near off-Platform over what internal to moving mix term? you ARR for Platform to then with that’s see to where the of higher. on you the the business, lay

Will Lansing

after mix. much We aggressively don’t have a new go forced Platform as We can business and get. expansion Platform as we business

think, to and who invest So same we perspective, on shrinking that the bother the those it and many probably is, we’re on side. deals, functionality so thrilled. with mix for that priority And a modestly, solutions customers that’s happy way pretty with long is the our with very have wouldn’t little there. kind as us to are we for legacy dramatic a much. were strategic in very legacy as I continue And we and we’re growing that even on the side us. At from neutral us flat features time, it of rely the and involved if But bit, our renew growth growth Platform

Operator

comes question with of the Baird. next Jeff Meuler Our from line

Jeff Meuler

what’s I acceleration growth On lag when typical in it when some And bureau the is seeing BXB looks like from it’s last card relative FICO like quarter. as you’re gets Scores, by inquiry, recognized the to the reason asked the revenue? to

little bit industry Your last delta wider within was was credit versus than inquiries it this mortgage a quarter quarter.

a understand to for trying what there’s timing extent or just difference accounting other that’s some I’m that. that’s if to So factor

Mike McLaughlin

subject one The from the say. that it the guess, revision, to the really by difference closing to we there need month isn’t get I last and of books, Jeff, time finalize for bureaus, with Yes, is data caveat. we timing would a the tentative the I quarter,

of will what based be. make have on judgment some estimates experience and as we to and that past to lots accruals so And

the of you get that with a bit there will that there. you asterisk. So the in and I in real-time data with, material an there, not June data little It’s say, true-up when and see be a the occasionally, for to it’s it’s final but as we explanation not cited just dynamic

Jeff Meuler

it Okay. I understand And it’s just myFICO, that so growing is correctly, then on still correct? year-over-year,

Mike McLaughlin

you for less quarters, mentioned, growing the a But at couple less basis. about a lot it’s quarters probably Will year-over-year And to It’s couple more cautious seeing people basis, us that still are quarter-to-quarter less which at shopping be a if next last we’re of the of means as flat myFICO. because on mortgages. or on new, net look leads

Jeff Meuler

seeing the direct Yes, Understood. whole industry is softer much a channel.

and year. if think year-over-year outperforming to you’re And and channel. significantly then hear FICO the How bit a few haven’t significant that World. years. like you’re imagine next itself, event was up I again building for industry’s in flat it pipeline registrations the sequentially, party you doing it would you’re a a Great that I build? coming-out of Platform. the pipeline is pretty And May just direct little for a you for on had pretty

to would a think So years. of couple needle-mover that it’s pretty last the relative I actually big

you just talk If coming out build pipe of World. could FICO about

Will Lansing

right. exactly that’s Yes,

And our World out were showcasing several sit But with of occurs really, days sessions what do phenomenal. So is FICO them. really wares. down FICO in relationship these and our is where individually can comes the we that we World pipeline heavy true, of for clients the building consultation

Operator

RBC the Capital Markets. Sabadra And of our Ashish comes with next line question from

John Mazzoni

you for Ashish. growth slowing Can Software the total This filling quarter? about just in the in John talk is ARR

Mike McLaughlin

amount, I we you for that, it introduced at relatively you variability. quarter-to-quarter metric and would And November, that variation when see in revealed that normal we commonplace. to a that can is by that X-plus attribute look quarters small of slowed it’s Well, the if kind quarter-to-quarter

anything So fundamental, it’s not of a wouldn’t say. I reflection

Operator

the for back does session continue I’ll closing today. your conclude turn And Mr. with all the to Q&A Please you. presentation or remarks. that call Weber,

Steve Weber

We Thank to Thank joining. you, today’s thank with you soon. and concludes to look you. This you speaking everyone for forward again call.

Operator

participation. you call very all conclude for We much And today. for your will thank that the

disconnect. You may now

Fair Isaac (FICO) 4 Aug 222022 Q3 Earnings call transcript