Earnings call transcript Q1 2023

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Operator

Greetings, and thank you for standing by. Welcome to the Fair Isaac Corporation Quarterly Earnings Call.

During the presentation, all participants will be in a listen-only mode. [Operator Instructions] This conference is being recorded Thursday, January 26, 2023.

And now I'd like to turn the conference over to Steve Weber. ahead. go Please

Steve Weber

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

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

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

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

William Lansing

in section slides and we to both pleased through of steady presentation economic the call. quarter us joining our and we've will we earnings be for results posted In I'm some us everyone, these our first the team that of our Even and value our revenues Steve, Thanks, you, deliver website, growth quarter. delivered and times, today. the in execution assets the Relations Investor resilience uncertain our allow thank first earnings fiscal referencing with in our to of for shareholders. our

financial X reported year. X% highlights We quarter. from of shows million first QX, Page $XXX from up the prior in our revenues

earnings Our GAAP the X% GAAP basis, up Overall, from $X.XX, income prior of On a prior million from year, the we XX% very of fiscal million, the off a XX% our prior was up $XX to share were over QX and and year $X.XX EPS net up year quarter. up income start are net $XXX XX%. was in XXXX. of non-GAAP good per

over the price unit see prior also and BXB year, revenues up versus America. license same Scores, X increases, in were Latin were originations, XX% and of volumes increased you last personal quarter X% the loan as period card can year, a renewal driven the presentation. up In on in in by Page revenues the by

the In loan and personal originations and revenues auto XX%. originations U.S., revenues up card were XX% were up

in The January. we primarily see mortgage where increases last to market, were volumes U.S. the XXXX down for continue We price take quarter about about year-over-year. XX% talked origination reduced fiscal revenues effect

fiscal to the of we second expect So in see our much impact quarter.

difficult it's magnitude and estimate to always, As the of the impact. timing

strong, number continue due revenues higher numbers interest to quarter to the in and of down and of consumer that platform the economic year software continue see BXC because prior to X% especially difficult myFICO optimize focus our consumers to platform we the and exceptional. Our enterprise. as enables our Overall software were comps climate decisioning mortgages. business numbers on In business, look continue rates preparing across businesses versus their we lower be the for interactions our

overall Page platform ARR and growth of on can X, you we growth XX%. XX% see ARR delivered As of

continue on Overall, customers for see continuing DBNRR was strong the to ACV can shown again, our is software. our XXX%, demand rate to for our find demonstrate as see our net from cases, ARR, adjusted rates net to XXX%, and the are numbers and our divestiture. use retention platform retention net and new Our our Siron you land-and-expand retention strategy, continue Page we X. success And of

meeting, with can this Page discuss you best of from look Earlier strong the attend were our to colleagues X, ACV the over the strategic opportunity where our current week, decisioning. customers sales As bookings to met see around view as same practices, mission-critical trends to continue world our see deliver year, and I a offerings. customers to to up our especially period how had last annual I FICO on pipeline XX% we opportunities and

share difficult I been a increasingly time where market. has firsthand came that at most excitement. how it to help incredible use unique there's their for new the were the I those platform how us. businesses. think capabilities I taking decisions throughout so solve appreciation FICO opportunities customers customers their I renewed a away that about technological and team the heard ever of the were been finding to with FICO ways team and And don't at to our looking FICO have ahead excited we the

as the we Finally, strategic preeminent November, are and reached years. an allowed products partner, to had last we transaction agreement non-strategic IMTF. has our to committed business in to our over announced exit few I've services In closed becoming said, December. platform The in Siron that to compliance focus player We decisioning some transition we often the us analytics.

better penetration believe dedicate of our of capabilities platform. FICO expanding solution, proud the market and FICO we the our an the are we at are While team innovation to and resources Siron to we focus work and if into industry-leading put it positioned the we make

in a minutes, call for few the Thanks. I'll let first, to final detail. some comments turn financial more have me but Steve back

Steve Weber

revenues year. year BXB up over the year. said, last another both period segments. the prior of Will prior and were $XXX and we increase quarter in revenues In our the revenues As over X% were for first Scores of the Scores internal were delivered an segment, ahead from Total Software million, our solid XX% slightly our quarter same Scores up plan. million, $XXX X%

case the for been originations year. mortgage from down revenues were the previous has quarters, As several

quarter, revenues XX% year up same by growth This down other Credit and over last were and offset personal and XX% quarter from originations QX. last in was card from originations again, XX%. were areas. those XX% auto up that But revenues loan year, revenues were the

Scores fiscal of license, year. and modestly throughout levels down be which from a renewed last impact were down we on quarter. revenues revenues We from had the the to X% BXC same also current year, period a BXC multi-year expect the the rest positive

were in quarter X% versus the the revenues $XXX million, first year. up period same segment last Software

$XXX revenues or total Software recognized software of over million time XX% were revenues.

were $XX this revenues upfront revenues. at X% quarter point in any License of represented or million software time, and recognized

professional revenues were million, Our representing services of $XX revenues. XX% software total

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

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

the Our software over fiscal increase ARR quarter. the an year of quarter XXXX in first was prior million, $XXX XX%

$XXX Our XX% quarter ARR of up represented platform was year. last XX% XX% and year compared our last million, ARR with total first

quarter, $XXX X% adjusted the Our for first in when million non-platform divestitures. ARR was up

retention net versus last overall the XXX% rate dollar-based XXX% Our quarter was year. in

very and retention The strong show in increased customers fourth was XXX% expansion quarter. platform net follow-on per net usage. platform the continue Our from to land-and-expand sales

relatively XXX%. with non-platform retention stable this quarter Our customer at matured has and software usage

quarter million at software this $XX.X were the annual ACV of again bookings increase million versus bookings with an services. as prior sales strong contract $XX.X annual excluding XX%. a professional Software include sales, only of value And the in reminder, year, value

year Total operating quarter. the for QX. expenses $XXX our $XXX and versus quarter this expenses the to prior now in Turning $XXX in million million were million

efficiency, modest we to While headcount in increases. salary our do focus continue to and we up total on trend expect from increases XXXX FY expense expenses

last operating our the shown year. non-GAAP a versus was XX% the Reg expansion as XXX non-GAAP same basis margin, on Our schedule, margin quarter, representing point G for period

up GAAP prior this from the $XX net quarter income million, was quarter. year XX%

Our non-GAAP quarter tax was reduced same rate million the last stock benefits The net of effective quarter, tax exercise X% and million awards. recognized included $XXX expense tax the settlement for XX% of the year. was excess for from quarter from employee upon up the income or $XX

XX%. recurring is XX% The rate for tax items. other rate We net the tax estimated to $XX flow or quarter benefits full-year tax rate was Free to discrete tax resulting recurring to excess effective expected fiscal expect any is XXXX cash be That million. XX%. our before be approximately about

trailing months, the For was million. XX free $XXX cash flow

the end At investments. had of quarter, and the cash million in marketable we $XXX

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

flow periods. debt any free is debt rate the balances reduce use floating to Our future prepayable to time, flexibility giving cash outstanding floating rate us in at

an at bought Turning back to in $XXX shares average share. of the quarter We per capital. XXX,XXX price return first of

continue million to authorization, We the as attractive current on of Board we view repurchases share remaining cash. an have $XXX and use

it Will to turn for I'll the thoughts that, back with his of XXXX. rest FY And on

William Lansing

Thanks, the for fiscal making I'm pleased balance with our of and our progress positioning strategic QX pleased Steve. we're with on I'm the pleased results. I'm really with XXXX. initiatives,

growth business turbulent a in Scores Our deliver continues even to market.

in diversification one of not means dependent are type that As specific past, different on we I our lending. the said across verticals credit

and XX-plus side, delaying the software quarters This continued strong the platform nature evident platform of FICO mission-critical in net platform purchases rate to that not ARR strategic implementations. our our results. of customers and percent The straight the current growth of continued are On strategy decisioning of strong means retention is drive customers. XX

we emerging We that's sustained marketplace poised in are for an the capabilities confident have best-in-class growth.

on have strong I'm the deliver a place the to and strategy confident ahead. team correct remarkable opportunities we in

committed for shareholders. execution, and As always, we to on are value we focused delivering remain outstanding our

our when an partner. a the Siron also with transition Solution we for As Compliance our our the to reiterated of transition, reminder, CFO announced adjustment guidance we

of So $XXX EPS we million, million, and income income GAAP net of $XX, revenues $X.XXX of of non-GAAP net guiding $XX.XX. non-GAAP billion, EPS of are $XXX GAAP

back the turn questions. call be we'll and taking I'll to Steve,

Steve Weber

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

Operator

Sachs. Tong ahead. [Operator Instructions] And a Please question with George we the from go Goldman line of have

line Your open. is

George Tong

Scores afternoon. fiscal seeing X% and that you of does fiscal Or challenge had pricing composed guidance presented XXXX, increases assumption When you still are Good entirely your those anything growth quarter Thanks. your of origination could end? quarter, into XXXX flat volumes. you Hi. last trends? assumed on hold One revenue that

William Lansing

holds. future We I on we're think now, assumption think right the right track. uncertain, holds. still The the assumption but remains

George Tong

overall, software if derivative fiscal prepared in the the to strong. And Can remarks you, in you're Switching demand for in you software? and any second enterprise overall side. spend? customer XQ seeing remains year-over-year on that growth environment XQ, ARR from Great. fiscal slowdown elaborate mentioned spending just your accelerated

William Lansing

platform that pulling I so software customers subject to less bit I little pulling in is as a budgets think So their because spend. it's mentioned, and our their the mission-critical, in

pressure out is needs under solutions I kinds budget we is no the of perfect a of there there's there. mean that can't with it's So But these the such some question the that provide fit budget strategic something customers pressure. that everyone are platform wait. of just for

when that's easy it's thing platform, really, so a not the adopt to put and their it's the of And business customers transformation kind a of off.

we're that word is investment. The I would return amazing other customers we from testimonials year thing with is getting demonstrating around. And on incredibly And returns, within have rapid say returns.

spend finding are as in platform any pays out business. itself And the within stuff customers we a on have that result, not a Our for seen year. this slowdown our

George Tong

you. Thank helpful. Very

Operator

from is ahead. Please Our Jefferies. with next question go Surinder Thind

is line open. Your

Surinder Thind

additional the I start of in bit Scores of what you. BXB like on magnitude other think the deals color any When question about Thank a business. with than I that? a higher I'd on kind were, anticipating. volumes kind the was you licensing Can or came to the of revenues provide

in compare year So the last any this color year licensing deals revenue on terms impact? how to of

William Lansing

of bigger license they're and We deals, every there, I here. what that course. in, deal lumpiness renewal They can't renewal from would kind these of and the is deals got to what little they we say happen deals. time bit quarter get get par a year. referenced We time, we we've for the happen that's that predict really sometimes so

Surinder Thind

business. And Got terms of in BXC it. the then

color on modestly amount that of declines just can mentioned basis? think the a drag that that be about throughout lower Is us year you expecting might how you there perhaps maybe this point? think expectation basis. go-forward at the go-forward help you're a quarter-over-quarter I revenues of any some on provide a to Or basis the on on sequential

Steve Weber

mean, the I has Surinder, that we by is myFICO then myFICO relatively right. modest a Yes. now. there Steve. you as side that challenged is partner right environment, economic this know, a It's side business of piece and side. been see is, The the

getting I business projecting back than mortgages, that right we're looks and our probably a it if be expecting that it will spring it again. up now, today, pay that [indiscernible]. and is fact breaking them the mortgages to be and But pick In people little less increase increase in to down not but bit we're

Surinder Thind

on it. just Got Steve. And that, a clarification

the partner it's from side? mostly and holding – point? Or drag is this So is side steady – at the the myFICO

Steve Weber

Yes, a mostly business the side myFICO lot have they set the right? is premium market. models to, different myFICO partners can what it's on each more of the tied to it market lot – more because we cycle [indiscernible] MyFICO side, side is. It's don't a There's a off

Surinder Thind

has allocation. year And just the and on it. then obviously quarter. over really previous Got past The especially capital the stock performed over one well quick question

towards allocating of repurchases? to think at rate maybe about be sense this flow So your the should to Or does some start floating we this of debt cash make still paying share point? kind fully free of all down

William Lansing

We're stock, the And our right better at still the just good capital balance. said, X.X% And when keep look shareholders stock I stock, stock, think look FICO is at an on now. you believe FICO – to you I to love rates. plan a a with we're when at in repurchase. on expense we'll that's interest that's weighted and a – I return to eye through continue That

So for stock now, still buyback. on

Surinder Thind

with questions. Understood. my That’s all

Operator

with from ahead your is Our Company. next open. question is Needham Please line & Kyle go Peterson

Kyle Peterson

guys. Great. Thanks,

Steve, just use guess, mentioned is stock in capital, your, buyback are environment? of just the I you guys attractive. kind of would guys FICO of like that rank I if you like, So you helpful? and order, this get how to your really feeling about But capital sense be appetite. allocation like And really wanted could

Steve Weber

Yes.

that’s question. a Okay, good Kyle,

can frankly, that when around much one is world. as things the the cash we're rates from if higher, to are that slight bringing back on to just of we much there's working a possible. as hard, Even the makes sense more So really it we're as expense do as

as what back. bringing buy and stock between cash can U.S. we're much at can. to the then that the kind And trade-offs look So of rates into as we we the we put

that Will can as the So we're concentrating said, change. but as on change buybacks, markets

we back So did in, ratcheted last all I our this where still not as when we we the like it we're think can that we up the model conceivably. We're had us went out. many look said we to opportunity. at that, going you'll year But comfortable And as do we buying shares debt on and flow we spending we see buybacks. free cash year

Kyle Peterson

mean, that is money and guess that. I a went flow? about – you with year, been, the want different? it that into return that cash guys less you think year, last yes, same like use it's all if next sense. the I it there we find we're And messaging? But now? mean your to we're like, is I but on makes for Or has thinking different shareholders' we I any I just there is Or more better But ours, and cash we of or Yes. at guess anything least that. as should from hog-wild you can't more of the helm, and guys flow at messaging is historically not expect

William Lansing

return to every than free more And Steve said we periodically, year. we then do it cash think well. mean, try I I Look, flow that.

it's environment. was minds, value, last relative price the years, lower interest also considerably depressed, done was to than for quite stock depressed its two that. and a like rate our So really, it the in more we've And because

I have a little it's environment. more still is we it's but price think bit it here. bargain, The stock than expensive interest a was. rate higher Now

to about back cash annual we're stock of so our terms free And repurchase thinking flow. in our free flow, cash

not as I right would at piling I have over the So we circumstances. debt now up buy were and two changed. future, be say under the that these last will in least to really quite years, we in things shares the aggressive mean the

Steve Weber

And debt our is again, of fixed. two-thirds

rate rates even we So all, the with so no risk increasing. have at there

happy rate, then variable were always just probably it's is calculus pair go the if we're about talking But we'd and back the buybacks. have And where just with monitor to but rates continue right significantly, we it to now, the we're it. to we So up do.

Kyle Peterson

sense. of quarter. guys. ton Nice Makes Thanks Yes.

Operator

Thank you.

is question Manav ahead next Barclays. from Our Patnaik Please with go your open. is line

Manav Patnaik

you. Thank

On down for are assumption number? help some for to get and flat hoping Auto doing you flat Scores, us volumes what us to you categories? the Card and revenue those that volume And Auto side, I in gave Card was just showed the you overall increases. guess But are parse – what I volumes you could assuming in two healthy

Steve Weber

Yes.

flat. months right still flat. decelerating, months, still now, So It's it's relatively and up but up. Auto down is is it's relatively but Card been It's probably some some up.

the of side Auto of from of pricing. most increase So was. on side XXX%, came most it the the Not volumes. on but the year-over-year on Card increase came revenues from Most

So benefit now, as price forward we'll have new we increases. go the the quarter, next of

So different variables of in it lot a there. – there's

to pricing we're tiers of lot different and hard say expecting there's what a really volumes in of it's So terms because different tiers. there's involved, overall

it dig the in anything all really changing But really the not market guidance you we three to months that. we're have that's So when covers way the seeing ago. we of looked see at issued to under

it probably Mortgage weak. a was knew weaker but little was be then, to it than we is bit going

more none would tracking housing down ago. and much we pretty couple that things right there. acceleration are really rates progress picks we bit a see little in to If comes now, surprises some thought of then of what down and market the how the three months we'll that We'll pricing next see we're So us. get up, But quarters.

Manav Patnaik

Software on And platform a business the Will, then, the side, five just Got it. handle. always had Helpful.

it's Next plus terms growth, is, around prepared Is something This law but nitpicking. to growth. said that, in Just just probably of I type us the bit know XX% of it's in numbers? there your remarks, you talk Is timing-wise? XX%, little large just time, a even it please?

Steve Weber

a little It's both. of bit

So we now been than number, to XX% right? we're be we've knew little a able So keep XX%, we XX%. were never less to going now the

probably the XXs at XXs year, low think of in the Looking to high we'll that we percent. rest be

it it's comfortable So pretty in we're there mean, few really of range, don't see I think for give but things. operating some timing quarters, these a is points. the decline. we or around we last some this few But take declined

Manav Patnaik

it. Got

you, Thank Okay. guys.

Operator

Our next RBC question Markets. ahead. go is from Capital with Sabadra Ashish Please

line Your is open.

Ashish Sabadra

Thanks for taking my question.

a Just on question pricing. the special

Our initial that tends $XX you be feedback this ruled on is as to special have pricing these $XX that million increases? million well to Is in out usually. based the range expectation the understanding time as

William Lansing

special confirmed a pricing, number. never I still is today. today. We I It's for doing – can't but that it be you some so and won't There confirm number

Steve Weber

There's in to the lot marketplace. It's volatility, easier do hindsight. of in a right,

So six in better can probably can the going if be a you are number. tell give rates months, you to us interest what we

Ashish Sabadra

Maybe portfolio the divestiture portfolio? fair. other assume a Is rationalization. the are on follow-up question growth just potentially rationalization And That's on help portfolio Okay. software Siron it within opportunities profile? the for that fair also there could to

William Lansing

I and would say yes no.

growth substantially higher platform rate divested. our is Siron than the business that yes, we So

older opportunities to looking our we FICO. really. Even to solutions with efficient I still possibly solutions application as And as assets popular portfolio? are that rate the happy mean We're set are And today. our other higher be always quite so of of pretty But the can and we growth there our Not and streamlined does customers. never. never set in we're be. have with for divesting a say it contribute

functionality needs. features and make that We sure have market the them continue in to they that invest the and

know, And and a XX-year years, as nine-year arrangement. have kind times. renewed these they of the renewals a get cycle typically kind multiple could you of be on three of It or

this our to vast are at no time. There probably we'll portfolio. think majority of the on obvious for I so And candidates be divestiture hanging

Ashish Sabadra

very That's the BXC sneak one I color. And on helpful in side. can maybe question if last

wondering of do a can order the if from a it there's causing weakness. some anything headwinds to tied you are improve marketing that But on or As is the the moderate that mortgage BXC weak the you I in mortgage or perspective from side? market product mentioned, perspective was to

William Lansing

our business the can they the that performance team you do side But as share keep you of doing everything in macro talented have kind and can much the marketing I as a environment on right Well, just acquisition you're customer management now. to is that that growing possible. seeing the side results

business completely economically smart where it That science-based customer we on to to so. business a up is ceased spend of data-driven where acquisition to kind be do

whatever – business And there's levels That optimized is so optimized. have in the we marketplace. at that always is

your make just really the it's so think And short would answer that don't more I is I optimized. right doing better. question know things to we're the amount.

from might the standpoint. up, able rate to economic an be get it wouldn't but You growth better be

Ashish Sabadra

color. very That's helpful Thank you.

Operator

We have a question with Please Deutsche from go Faiza ahead. Bank. Alwy

Your line is open.

Faiza Alwy

thank you. Hi, Yes.

on I plan. quarter? that ahead first, expectations about in than saying just better particular your were what revenues a to wanted of in you comment areas could talk the were you you So thought pick Maybe that made

Steve Weber

ahead Yes. the a on of I bit mean, the in it it Scores plan. software mean little modest, pretty and side. was much dead I is but came software number plan, on was

So happen. that it's to that, see encouraging

Faiza Alwy

on non-platform we think should then And revenues. software curious Great. the Okay. how about I'm side, the

the had those of – business? revenues is revenue. about you like the about little expect previously, $XXX sort down year-over-year think are. – right forward? it that declines from in that way that some so basis. think going do – just more they Like a Or sort is being of They million, recurring here to about flat. a that I'm talking roughly were I And on talked bit you

William Lansing

about someday I flat but being, to way the declines, have is think will I it. time for right think we think the

it's contributes of number. in. obviously, products, and end act We really a we we shrinkage. And that are balancing. manage some And that choose that a to Now can life to it's balancing

doubt, right we day lot where now we still a result at shrinking right somewhat. that flat. of shrink just would close the end that without come, will of business really products a did the place that debt them good can a away. about continue down, in think we having we're day balance life But when us ways no technical where I that business. that will The in is That's

Faiza Alwy

on then And it. Got expenses. just

going you personnel in mentioned to can? we want expenses the Is that think bit how about on? talk driven should something that's pull curious, are And maybe that to up magnitude Or put of you something secondly, come on can in I'm go little year, that, that have go I a increase, as the planned that's flexibility expenses. you And don't by that already motion? you mostly is the through like revenues back if line. much something –

Steve Weber

not put I But salary – – not that we lot take mean, place have money. in it's a December. of we increases It's

So of we'll revenues, we but that. too. full expect three be have quarters have There'll to some to probably more headcount, additions

hires headcount the in. the revenues delay can come don't we mean, if I So

it's have function over not but So we step a do in control some to it degree, expenses.

Faiza Alwy

Got it. much. Thank you so

Operator

is Our with Jeff question next Baird. Meuler ahead. go Please from

Your open. line is

Unidentified Analyst

a was side the of for It trending... and some BXB How hoping marketing is scores, to Jeff. [indiscernible] on get is the of and particularly, things. color on just nonorigination prescreen I that little

Steve Weber

down slightly from is Prescreen Yes. quarter. last

but they're still strong that is we what of pre-stream pretty were fall. in Some see the numbers, not they But seasonal.

quarter, it marketing see as and not but strong after was it's It's in strong, a year. happens we'll what that's but we'll monitor of as that, the we So the still first see. fall. lower the Typically,

Unidentified Analyst

Okay. And then...

Steve Weber

account the review the In those terms actually were management account of scores, scores, stronger.

factors for it in So the lot than there's stronger it's – of that, looked prior was on a quarters. different a little but bit

Unidentified Analyst

a software benefited quarter? growth? the usage And of is then Appreciate in that. the that is there strong side on Or just component it things,

Steve Weber

mean, all There's Most I the off the some usage. especially, based usage. it's of it's a combination. platform,

increased board. of or it So same that cases on are use additional usage the functionality brought be either can

Unidentified Analyst

there is is guess, said, like, that's I benefit to, like a specifically... increased usage the transactional But revenue a I there or

Steve Weber

Yes.

Unidentified Analyst

it. Appreciate Okay.

Operator

your It for concludes session ask please And for also that We concludes today. your call. our the that disconnect participation you Q&A you thank and line.

Fair Isaac (FICO) 26 Jan 232023 Q1 Earnings call transcript