Release Date: February 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fair Isaac Corp (FICO, Financial) reported a strong quarter with revenues of $440 million, up 15% year-over-year.
- GAAP net income increased by 26% to $153 million, with GAAP earnings per share up 28% to $6.14.
- The company delivered free cash flow of $187 million in the first quarter, a 55% increase from the same quarter last year.
- FICO's Scores segment saw a 23% increase in revenues, driven by a 110% rise in mortgage origination revenues.
- The Software segment reported an 8% increase in revenue, with growth in SaaS Software and license revenue.
Negative Points
- The Software segment was negatively impacted by foreign exchange rates, affecting total ARR by 2% and platform ARR by 3%.
- Auto origination revenues only grew by 5%, while credit card, personal loan, and other originations revenues declined by 3%.
- The FHFA's delay in implementing new credit score requirements creates uncertainty in the timeline for FICO 10 T adoption.
- Platform ARR growth slowed to 20%, below the expected 30%, due to lower bookings in previous quarters.
- The effective tax rate for the quarter was negative 1.6%, influenced by $40 million in reduced tax expense from stock awards, which does not impact non-GAAP net income.
Q & A Highlights
Q: How do you view the FHFA's decision to delay the implementation of bi-merge and the two-score system, and what impact might GSE privatization have on the FICO Score?
A: The FHFA's decision to delay is not surprising, as the industry is not ready for this move. Historically, the GSEs have used the FICO Score, and we don't foresee significant changes even if they privatize. The FICO Score remains the best way for investors to understand risk, and we expect it to continue being used widely.
Q: Can you explain the discrepancy between the expected ARR growth rate for the Software business and the actual results?
A: The ARR growth rate was impacted by foreign exchange and weaker bookings in previous quarters. However, we remain confident in the long-term growth trajectory of around 30% for the Platform business. We expect ARR to accelerate in the coming quarters as bookings improve.
Q: How did fiscal Q1 results compare to expectations, and is the guidance more conservative now?
A: The results were in line with our expectations, and we maintain our conservative guidance. Our internal view on interest rates was more cautious than the market's, and our guidance reflects that. We are confident in our guidance and see no need for changes.
Q: What factors give you confidence in accelerating platform ARR back to 30%?
A: The confidence comes from the flow-through of bookings, which we can predict with a high level of certainty. While usage can vary, the deals we've signed provide a clear timeline for when they will go live and contribute to ARR growth.
Q: Can you discuss the impact of foreign exchange on ARR and the Software segment?
A: Foreign exchange had a negative impact of 2% on total ARR and 3% on platform ARR. This was primarily due to currency fluctuations, particularly in Brazil, which affected our results this quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
