Earnings call transcript Q2 2023

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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, Thursday, April 27, 2023.

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

Steven Weber

Good afternoon and thank you for joining FICO's second quarter earnings call. CFO, joined Interim CEO, by Weber, Lansing. Will Steve and today I'm our I'm

a that the management press compared issued facilitate the we Today, release order in of prior results comparison to On our prior discuss quarter to understanding describes year. this rate also call, of will the in to run the results financial business.

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

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

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

William Lansing

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

pleased that continue of results revenue business. the of rest some talk throughout that Relations and On Today, strong offer expectations the of posted report with this financial section results highlights we am second I growth for the quarter's our and slides deliver about year. record our our our we website, I'll to quarter. Investor to

of basis, income million, earnings GAAP $X.XX. We of the As you million reported presentation, GAAP million and earnings delivered last same net per period year. Page of share. $XXX see per X net on over the was increase a $XXX of of an $X non-GAAP $XXX revenues of share we can income X% On with

side we business, well. record the quarter you million up the continue of X% On prior to Page Scores the the in can revenue, delivered $XXX with year, X. versus Scores perform on quarter see as a of

up originations On XX% Mortgage revenues the other revenues up versus revenues primarily card, BXB and loan year. were originations revenues. Credit side, Auto driven increased were were by originations up originations up revenues last XX%. personal XX%. were XX%

comps, same last difficult while X% quarter, year. Our versus versus down BXC face continue up slightly revenues were and the to period last

enable the provides scale. our and decisions clients in time solutions. through maximize to analytics experiences And better These business, in optimizing hyper-personalized demonstrated interactions business enterprise. In industry delivering these and We're and the delivering of decisions the by across at customer holistic platform AI predicting, Software management. results make our we're build by strong for trust better hungry the loyalty customer focused on to smarter customer power experience real FICO analyzing helping the customer decisions

platform As in growth on platform of see of XX% you of growth This excess XX%. we ARR X, XX%. our of ARR straight and ARR can Page quarter XXth overall delivered represents growth

Software. the use and Platform strong our was our many net driven net find demand to grew And strategy. increase was continue to platform land shown rates new see as due for Legacy of by in success Page XXX%. NRR retention rate continue our volumes cases we Again, on XXX% as customers to of and retention retention from can net XXX% volumes Overall, see our rate expand customers. expanded use you was our cases, X.

period Page see As last over same up were the ACV bookings on XX% our X, can year. you

we to as We our digital look decisioning continue they strategic to mission-critical at transformation. customers help see as their pipeline opportunities a of pursue strong

month. event a every to customer hyper-personalized talk across attendees little every FICO touch customer and FICO experience our able how deliver like I'd point about World bit a Finally, will interaction. World within design, and discover be to next build to

schedule will leading Attendees best presenters capabilities FICO reveal and with America, Latin meetings as as FICO platform conference FICO's Asia products, and will challenges. discuss flagship data have providers solution Europe innovations, North decisions. from General score for solutions new The company's leading World well services access and to practices the software to Pacific. solve alternative business on FICO to experts leaders thought innovative designs at include session financial AI-powered America, the

how We'll also other partnership more the will using about next about to are solutions design providers give innovative quarter business details platform new event leading announce FICO talk and solve challenges. financial We to solutions. a new the services more and FICO

Steve a I'll in guidance comments, call have to some a let final minutes. of for me details. financial including the further few our over talk first, -- turn revision But

Steven Weber

Thank you.

million, very of and second delivered increase our divestitures. for adjusted the said, million when segments. As or over the another were X% Software for -- year quarter we X% $XX revenue around $XXX an good Total both Will Scores in quarter prior

and up Scores our segment, other year driven originations. auto increases revenue originations year. XX% loan increased credit revenues. over Scores last X% In from drove BXB and card, were same revenues revenues the up by the million, $XXX personal mortgage, period in We were prior

from This same quarter, revenues quarter year. mortgage were originations last up the XX%

last originations credit were and loan Our revenues and were And card XX%. originations XX% personal up over up revenues year. other

BXC down Scores X% difficult last the same revenues year, explained, Will from were as comps. to period due

fiscal the our experienced quarter was up 'XX outsized versus fiscal and an was of that of third about quarter and refinancing this the 'XX. first X% boom quarter reminder, in peak a that during growth As area

we Software segment revenues a a same reminder, upfront -- significant year, quarter. license quarter in X% and the period we up were $XXX have million, last the where second last year revenue from as had

$XX and in represented revenues License at upfront million total point recognized revenues. revenues Software million or revenues. or or were quarter Software of recognized Software a over $XXX this -- XX% where time of XX% time

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

region. our Americas In total were XX% quarter, from the revenues second derived of company

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

in Our second XXXX quarter. year quarter fiscal prior $XXX increase XX% Software the over of a the was million, ARR

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

also ARR [ nonplatform $XXX grew and quarter, million first was the Our nicely up in X%. ]

been for As all a numbers of ARR our have adjusted reminder, divestitures.

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

from second Our quarter. platform for rate strong follow-on in from The usage. continue net cases was very XXX% show the retention sales customers use new expansion and increased net to of platform

quarter customers this volumes and Our PPI usage due was to increased NRR increased The increases. software nonplatform nonplatform XXX%.

$XX.X another annual sales an million [ We of good $XX.X quarter XX% in ]. with of the increase value bookings year, prior had of million Software versus contract

a professional As excluding services. ACV Software reminder, bookings sales, only include annual value the of

for quarter. Turning the on to expenses

this increases, expenses in due Our in million quarter $XXX $XXX took which Much December prior million total the versus $XXX increase and the to were year was and operating [indiscernible] QX. effect salary million of in increases.

from $XX this were We approximately incurred also that expense had of items number of small quarter. a million nonrecurring

to slightly rate some quarter, but in FICO have expense third year increase the World do run in from levels. of the the We a current we the expect our will back half event from onetime

X% for quarter had Our FY of our from on this year prior again, prior first EPS the million, non-GAAP $X was upfront large of up where, shown XX% 'XX. from as deal. $XXX operating quarter net license quarter the down schedule, quarter, we the as our income was same margin, GAAP Reg G X% GAAP was a year.

the Our non-GAAP $XXX -- was for and quarter $X.XX, X% EPS prior year up net versus X% year. million $XXX quarter, income non-GAAP first down million from was the last the

XX%. effective quarter The for tax rate was the

rate approximately to rate XXXX XX%. before benefit [indiscernible] about We to XX% to rate items. is estimated be XX%. excess to The or be resulting expect other our any expecting tax XX% tax effective full net discrete tax year recurring recurring tax

Free for quarter, the cash Free end million $XXX the million the $XX was flow and was [ $XXX million. marketable cash XX of had cash in the we At investments. for months. flow trailing quarter ]

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

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

capital. $XXX per at of of back average XXX,XXX At remaining end return use on share. authorization, attractive to an We to share bought in Turning shares repurchases the price view an at quarter, the Board of the of and quarter $XXX continue the million second we cash. current had we

his with guidance. back 'XX it full that, to thoughts our on rest I'll And Will year revised fiscal turn of and for the

William Lansing

Steve. you, Thank

have I to As strong our in team as opening we and I move said continue we forward. deliver my confidence in remarks, results,

macro volatile a in even growth strong deliver to continues business Scores Our environment.

said specific diversification credit rate which less means on of types environment. As rising verticals different we're a I've the past, very our is in lending, dependent important in through

On we revolutionize digital valuable market the to latency. low businesses technology with at We're to and their to scale growing. technology is to delivering that strong side, Software and and their use do AI for interactions looking demand latest FICO transformation customers it optimize prove continue to analytic the consumer and platform and, through importantly,

focused and shareholders we're into value execution visibility and to on As progress. committed our to remain always, our delivering

markets great of back our and we in year. revenue raising guidance deal but sight to much our our we're accordingly. our are today, the have a of line we enter still year uncertainty half as raise guidance fiscal Finally, can the that we full serve, There's we of confident of

revenue GAAP to million. is raising income are earnings net income We're to $XX.XX. guidance increasing expected is also now non-GAAP We expected to and to million. our full per GAAP expected share $X.XX be be Non-GAAP is net billion. income EPS guidance. net $XX.XX. Non-GAAP now now $XXX $XXX our is be GAAP year

turn with back let's the to Q&A. that, Steve for And call

Steven Weber

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

Operator

the And Instructions] of with Faiza question Bank. line from comes Deutsche Alwy first your [Operator

Faiza Alwy

revenue there maybe business where versus there updated your view to where you're us feeling you've about through of the you areas are positive Are the changed? of Wanted what's walk changed about around? of $X.XX billion. guidance sort more talk areas Can

William Lansing

Well, think what the in us, it's more we so changed have much that as confidence not expected. -- half with have things I we of year a that behind benefit

And so as we're able in guidance. know, -- we're our typically you conservative

things that stating dramatic any any changes. direction surprises with are just that there, comfortable there's headed. really we're so the not and really And not There's we're officially

Faiza Alwy

you something about Okay. quarter. that onetime expenses more Understood. I on follow-up a Steve, of million this were in nature just mentioned Maybe expenses. $XX know

of walk Just back your year the on us of half the again through expectations are what for expenses. sort

Steven Weber

Yes.

probably take don't the happened third of kind typically more year. little this So things quarter. a may of place we included had lot it bit do A that -- has incentives, of We of a a the number throughout to which that for quarter. lot we

So got year, few things in we our that sales events. throughout now. had had but We We that the more of this typically we quarter. true-up success did kind the a other happen

year, the of rest in I mean, the FICO we quarter. So third World have our coming

if there's there aren't half back -- our the in or onetime any we an events in there. But of that's quarter similar probably the So associated expect drift anything, the second be fourth the to expenses with down potentially will expense because that. even that, year quarter

lot revenue too. on we A that of stems the did,

on as onetime So lot because a step looks aggregation X -- as an a it's of but we like it much surface there's probably happening looks quarter. -- it's as in it don't function like it but of not here, the

Operator

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

Manav Patnaik

Will, broad macro you're just guidance. raising especially a comment, since your

be insight of you're seeing risks worried just bank lot and you peers to from I a failures from so about the the see to incremental the how assess unique don't wanted you if pressure but too forth, what had any seem Just your here. and

William Lansing

insight wish to I that with had I unique share you.

and know, upward the to quarter, a What to stabilized, to a is bureaus. not do we this -- tend bit. be see revenues They you to sequentially our from leading and tend little moving indicator. we've As we're lag quarter lag last seem so we

We right unique insight not sign. -- fallout we, I now. have positive the any that say haven't future. kind We're But a any any felt certainly fallout. into that's of FICO, have I sensing wouldn't So that

Manav Patnaik

Got it.

from Okay. color us That's I personal originations what the volume the this sense quarter. on mortgage you volumes. good some the and But I loan could helpful. have think a just just bureaus hoping we perspective revenues, was And on auto, from on then give card debt all a

Steven Weber

a modestly. the at up up least both Yes. it They lot, were current a year-over-year both was they Auto but and up. results. little, details the don't We up [indiscernible], need not at but was were all

Operator

with Peterson Needham. line Your from question of next the comes Kyle

Kyle Peterson

Just could really into touch tighten acceleration the quarter. the of kind compared guys ongoing I this the quarter the particularly to terms just looks at least there's you if where want budgets growth could drove what a just see dive year-on-year wanted rate in on in platform strong software think The speculation. an business. in in market. of to and lot ARR, the with IT volatility last especially that of side environment the all I to acceleration, The of side, bank

William Lansing

Yes. good for certainly, It's the us. software little spending There's -- but a And Kyle. is IT backdrop question, a for not and softer.

offerings, So but the our are that good offering, particularly our so software our critical. platform news is offerings

our are. bit. same seen -- our cycle of that little kind strategic cancellation future And so sales kind some not software We're big that products the of March, for a fact, squeeze a of in getting part and we've customers the shortening they're other

expansion of the We one out see with expect. are competition competitors out into might than existing less There's And have comes not from running who of really of Most a ours. platform. par there continued offerings actually sales on that there homegrown. we're competition

offering a customer the of competitive to of buy. that what situation needs more tends much is less strategic be fully more so kind and platform powerful a Our featured and and much it

And we're so seeing. that's really what

And spite environment. spending in have no, of software we slowed the down so not

Kyle Peterson

of to I helpful. talent of roles. any of hard Has per last a the then historically, having I the wanted of see to given market and se? of on some part it, just And months, some easier, particularly in X constrained selling Got se, it's to labor changes, guys just it. you particularly That's in a business, the of a contributing in been the things. kind seats key expenses. software supply maybe gotten tech maybe a a time call if little kind X that follow-up white-collar got know easier have bit higher side side per the

William Lansing

whatsoever times had never attracting talent have FICO, year, to when not we that tight, employment year, not when tight. are not than And talent this there say say pressure. no I'd ago, years salary any retaining very some more are Yes, even year cost talent trouble a issues last with is not have that but had for that's today, we I'd and attracting ago matter. or

able on great and it, people industries critical I super challenging think They're that they to and we stuff, track engineers talent way. roles. offer and our our mediating like working that we've been

on with the exception what -- wouldn't salary that. comp disproportionate mentioned wouldn't anything expense like Steve I a from say of that stock I or and pressure standpoint, bonus standpoint, conferencing there's

Operator

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

Surinder Thind

off? there stabilized to are terms in It color rolling maybe the point terms like have BXC that sequentially the flat color dynamic? the of Any Does declines that number were of Any like in look of like on the and then the it last of quarters. new things additions versus side at Scores the people couple this there? question a start the business. seen you've versus revenues with looked of I'd in quarter-over-quarter

William Lansing

It I feels stabilized. they've things think stabilized. like have

some myFICO, had for program. we've I And success are our think partners, free a For stabilizing. volumes with

that's the think general picture I of there. So kind

Surinder Thind

how How there? of enough. some international in quarter. the Fair obviously, from in is been the you to just the just last was slowing And color XXX% much of dollar-based quarter had is to we material much a seeing. reverses business provide there this that the And terms additional then sensitivity trend figure NRR, there? Can that That XXX% acceleration like FX? of then that

Steven Weber

[indiscernible]. Yes. it Very little of

number got is remember, small this to You've customers. fairly of a

their that. and dramatic impact can customer when use a really do cases have a out they pretty So expanding coming

going forward number. I volatility you're mean and have But much pretty ARR we're in that our I number both mean So seeing to crossed with customers.

more As find use additional drive it, cases start to they use they they and volume.

we're that. really by So encouraged

Surinder Thind

use through been of was or a at XXXX. one last mid-teens cases, about That the was pace. was then of platform new follow-on It And true when year. to most growing this new been in That -- true consistently about you've think year. the I adding true that that's terms the clients

seem So like it really doesn't any from impact macro. there's

lot there's the importance You've not quantified a kind there platform. it sensitivity of of as maybe the given of

you're But how that Like point? quoting them? the And with ago. or that you're say conversations discuss from about this having terms new Or at seeing that does we conversations we're think clients how -- current of you the the in like seeing can now, that the pipeline you're year? in meaning conversions that a is should last year what look pipeline? I Or year, last when how

William Lansing

strong it the say been. ever as has is as would I pipeline

we're last like not from pipeline off it's working So old year.

the bit as bright the as every think I present. future that is

So I that I'd there. -- lay out would just

The conversations are strategic.

at has level that our Officer, the the case. continues to Officer. the be and So higher Officer, CIO, C-suite, to been the customers. we're a We're Chief in Transformation Digital operating Risk Digital Chief talking the conversation elevated, The

and kind been I and the of consumer the industry of imperative that And certainly, leverage data all be that. have industry. possibly has, nobody know the well offering they the one, And wants. down And right else see something we this which that things and about that's have the for think and that to much optimize interaction the very every this an of interaction lenders make they distinguish are, want to path, can. are to view most smartest we forward-thinking sales we already have banks biggest every for here approach our the able couple industry certain customer the to and They

the is other thing is The rapid. very payback

long years and cycle a then couple, payback another would kind and some of get can within approach was be another the for ago. of be typical a and the the software in it long past is would license five years, sold would the rapid. payback that extremely would the years. three it be could renewed less software three unlike we three be -- the a take say of a then It I be then sales year. years a install kind So than It might and that it'd were Today, year.

it's And get so what easy -- very to started. and

monster to to get don't started. to a You commit have project

it one with to our And use it they three when or start a And as with and how portfolio they with result, easy then one or they can and in love and try cases, give for very expand. it, try. it's goes You two fall expand do they from it, there. a it, then see customers

rapid so very between we the And customers think who very talk references strategic nature, customers those would-be I us. the from things that think ROI, I get are all the the and powering strong are to our our

Operator

Your next George with from of Tong line the comes question Goldman Sachs.

George Tong

how XQ special much your of pricing now guidance? the have visibility the of you into increases. updated is your in complete, fiscal reflected special your Can you it of flow-through Scores increases? discuss And pricing traction With

William Lansing

guidance you're -- say mean the year yes, pricing it. asking numbers there when I provided, top there special there's you're would special we'll quantify asking, that on but I if the we've any pricing is we that's is end enough don't really we the of out If of what counted. is, what the are that at there the know uncertainty

is it the today. -- to quantify guidance would pricing version is special I that we've So provided today, wouldn't some want the I but short above there

Steven Weber

if to want the point guide, with the out way conservative the Yes. put you don't point we're you on final anything. and we follow George, realize And we

we We'll context years. past when can. we've done can, provide we in this the what much with So consistent pretty is but [indiscernible] more we

George Tong

receptivity what's special then And what's your of terms just the guidance, pricing in increases? of traction from aside the and

William Lansing

the there go we suppose but through. through. new were of they and and haven't certainly start because learn flow pricing, now, face wind -- prices, they Well, to We they through, if were attrition then we And publishing anything seen if to the go up like would about that. it we I

George Tong

getting you volumes Can origination modestly. secondly, stable? are auto perspective? I with and mentioned then things a they trending? you're volumes up How are seeing And mean Are helpful. trend card better? you Very from what they describe Perfect.

Steven Weber

I down. a year. Yes. mean auto probably of end very it's year Card little origination hot at has calendar is last -- the next trending down bit. probably It's trending But that last years. us. [indiscernible] stable pretty around lot. It's But you're from get bounced a of from the And pricing, data industry sources throughout couple you going again. probably been to

Operator

of Ashish line with from comes Sabadra Capital question next RBC Markets. Your

Ashish Sabadra

when maybe million year? half $XX the about back clarification you in that increasing in expense a quick talked the the Is doesn't the excluding of that? include that growth back Or the quarter? the the second in of onetime Steve, year. half Is

Steven Weber

be or kind again, million we'll run some with On products what flat high and get associated But expenses lot our it beyond implied to the of of that's over in probably a you year. kind see pretty that how take maybe be, a much of on our No. would basis, probably There's back rate but the in the model, $XX back end [indiscernible] revenue what's that. you guidance. guidance if of your can the of half

was But up personnel X%.

all that increase some true-ups in personnel the we think the some not had of other parts were headcount and the and so expansion, both U.S. obviously is of world. I incentives payroll

there's kind to bit we a $XX number. that million have onetime of number things of different a of that So and gets -- of kind little

noise of lot ramping up want I think the to number. people don't that are a there's our So in expenses dramatically. that

Ashish Sabadra

a the occur color. if you XX. March the on the helpful by any Maybe just I currently FHFA implementation on of that was question could first just press on buyer that It thoughts out release wondering credit very mentioned implementation. came estimates XXXX. quarter That's quick had it

William Lansing

time or has somewhat will time that's imagine Your could guess it like been happens happen on one always at and But ours. It as is later. -- the aggressive that seemed whether but a us, announced. as timetable could to it tell that time frame good

Operator

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

Jeff Meuler

understanding want World, question methodology. great. Look to looks FICO it correctly. I'm Software seeing on to have at another sure the So guess, I next you just do I forward make I guidance month.

But similar prior sound There you years. that was didn't and you less, I QX. quite the a of EPS to prior it years, some increase think all bit the obviously what magnitude were is a the that like was question, you least did at at Will, like line environment another than than expecting. what took different said, this year approach the you during

if, back you're of the this card holding worse Or year with pricing uncertainty just you if of benefit or mentioned what the this in prior like, in a more understanding anything not 'XX you've a is years of similar full that? given there's calendar little to pretty conservatism? or bit getting offsets view I'm So like volumes, special pricing impact incorporated

Steven Weber

Yes, conservatism I of because couple more back the I guidance right? you much so we've than think probably in it's pull a years go mean had completely. past uncertainty, early of

I there's lot uncertainty mean a of there. So

well, where now a a peers dealing are fair lot but have funding pretty we're amount We obviously volatile a of guidance. environment our in as their

So prudent possible. we're trying to as be as

Jeff Meuler

quarter-to-quarter. get that lumpy then flow? I Got cash on you could can it comment be And free it. just

it's I think a where couple we lower. quarters bit a have row a in now

what's going when there? on just So sense like expect that you'd normalize? of Or to any

Steven Weber

back think the half probably normalize in year. I it'll of the

what our see happens receivable. think both you is I in accounts it

So the while hard a receivables, jumps and I through Score to it cash. hit think our flow that takes up, revenue to as

lot that in is the of So a late quarter. fairly

next lot in flow quarter. you'll probably see more through There's that. any So changing of a I nothing think

mean look [indiscernible]. time, you if see I period at So overall of you'll

Operator

turn back presenters your closing questions. I'll the you. further Thank no to And remarks. call there are for

Steven Weber

you. forward and to look again for you This Thank speaking right. joining with today, the All soon. we ends all call. you Thank

Operator

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

may disconnect You now your lines.

Fair Isaac (FICO) 27 Apr 232023 Q2 Earnings call transcript