Fiscal 2018 without
Excess Tax Benefit

Estimated Impact of
Excess Tax Benefit *

Fiscal 2018
Guidance

Revenue

$990 million

$990 million

GAAP Net Income

$119 million

$20 million

$139 million

GAAP EPS

$3.71

$0.62

$4.33

Non GAAP Net Income

$171 million

$171 million

Non GAAP EPS

$5.32

$5.32

*The impact of Excess Tax Benefit (ASU 2016-09) on fiscal 2017 results increased GAAP Net Income by $25 million and GAAP EPS by $0.77 per share.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

September 30,

2017

2016

ASSETS:

Current assets:

     Cash and cash equivalents

$                105,618

$                 75,926

     Accounts receivable, net

168,586

167,786

     Prepaid expenses and other current assets

36,727

23,926

          Total current assets

310,931

267,638

Marketable securities and investments

25,515

21,936

Property and equipment, net

40,703

45,122

Goodwill and intangible assets, net

825,599

832,034

Other assets

52,872

53,946

$             1,255,620

$            1,220,676

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

     Accounts payable and other accrued liabilities

$                  51,614

$                 50,732

     Accrued compensation and employee benefits

77,610

71,216

     Deferred revenue

55,431

47,129

     Current maturities on debt

142,000

77,000

          Total current liabilities

326,655

246,077

Long-term debt

462,801

493,624

Other liabilities

39,627

34,147

          Total liabilities

829,083

773,848

Stockholders' equity

426,537

446,828

$             1,255,620

$            1,220,676

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2017

2016

2017

2016

Revenues:

     Transactional and maintenance

$                171,056

$           154,218

$         652,660

$           605,919

     Professional services

50,871

51,940

179,569

169,738

     License

31,278

29,666

99,940

105,699

        Total revenues

253,205

235,824

932,169

881,356

Operating expenses:

     Cost of revenues

75,202

74,298

287,123

265,173

     Research & development

30,226

27,773

110,870

103,669

     Selling, general and administrative

84,262

85,429

339,796

328,940

     Amortization of intangible assets

2,712

3,409

12,709

13,982

     Restructuring and acquisition-related

-

-

4,471

-

        Total operating expenses

192,402

190,909

754,969

711,764

Operating income

60,803

44,915

177,200

169,592

Other expense, net

(6,601)

(6,556)

(25,876)

(25,023)

Income before income taxes

54,202

38,359

151,324

144,569

Provision for income taxes

14,158

6,255

23,068

35,121

Net income

$                  40,044

$             32,104

$         128,256

$           109,448

Basic earnings per share:

$                      1.31

$                 1.04

$               4.16

$                 3.52

Diluted earnings per share:

$                      1.25

$                 1.00

$               3.98

$                 3.39

Shares used in computing earnings per share:

     Basic

30,534

30,916

30,862

31,129

     Diluted

31,963

32,221

32,245

32,308

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 Year Ended 

 September 30, 

2017

2016

Cash flows from operating activities:

Net income

$            128,256

$               109,448

Adjustments to reconcile net income to net cash provided by operating activities:

      Depreciation and amortization

36,214

31,633

      Share-based compensation

61,222

55,509

      Changes in operating assets and liabilities

4,347

13,484

      Other, net

(4,395)

194

         Net cash provided by operating activities (1)

225,644

210,268

Cash flows from investing activities:

Purchases of property and equipment

(19,828)

(21,969)

Cash paid for acquisitions, net of cash acquired

-

(5,683)

Other, net

(777)

37

         Net cash used in investing activities

(20,605)

(27,615)

Cash flows from financing activities:

Proceeds from revolving line of credit

190,000

122,000

Payments on revolving line of credit

(84,000)

(99,000)

Payment on Senior Notes

(72,000)

(60,000)

Proceeds from issuances of common stock

14,474

17,828

Taxes paid related to net share settlement of equity awards

(40,232)

(29,955)

Repurchases of common stock

(187,629)

(138,399)

Other, net

(1,238)

(2,489)

         Net cash used in financing activities (1)

(180,625)

(190,015)

Effect of exchange rate changes on cash

5,278

(2,832)

Increase (decrease) in cash and cash equivalents

29,692

(10,194)

Cash and cash equivalents, beginning of year

75,926

86,120

Cash and cash equivalents, end of year

$            105,618

$                 75,926

(1)

During the quarter ended December 31, 2016, we adopted Accounting Standards Update No. 2016-09 which addresses, among other items, updates to the presentation of excess tax benefits related to stock based compensation. Excess tax benefits are no longer classified as a reduction of operating cash flows. We have adopted changes to our condensed consolidated statements of cash flows on a retrospective basis. The impact to net cash provided by operating activities and net cash used in financing activities for the year ended September 30, 2016 was $25.0 million.  

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2017

2016

2017

2016

Applications revenues:

     Transactional and maintenance

$   90,524

$   83,813

$ 348,861

$ 328,472

     Professional services

38,886

43,370

141,857

138,775

     License

20,873

21,836

62,449

65,395

          Total Applications revenues

$ 150,283

$ 149,019

$ 553,167

$ 532,642

Scores revenues:

     Transactional and maintenance

$   69,524

$   59,392

$ 259,780

$ 233,655

     Professional services

847

1,503

2,849

4,185

     License

1,654

1,916

3,725

3,219

          Total Scores revenues

$   72,025

$   62,811

$ 266,354

$ 241,059

Decision Management Software revenues:

     Transactional and maintenance

$   11,008

$   11,013

$   44,019

$   43,792

     Professional services

11,138

7,067

34,863

26,778

     License

8,751

5,914

33,766

37,085

          Total Decision Management Software revenues

$   30,897

$   23,994

$ 112,648

$ 107,655

Total revenues:

     Transactional and maintenance

$ 171,056

$ 154,218

$ 652,660

$ 605,919

     Professional services

50,871

51,940

179,569

169,738

     License

31,278

29,666

99,940

105,699

          Total revenues

$ 253,205

$ 235,824

$ 932,169

$ 881,356

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2017

2016

2017

2016

GAAP net income

$ 40,044

$ 32,104

$ 128,256

$ 109,448

  Amortization of intangible assets

2,712

3,409

12,709

13,982

  Restructuring and acquisition-related

-

-

4,471

-

  Stock-based compensation expense

17,676

13,804

61,222

55,508

  Income tax adjustments

(6,515)

(4,676)

(24,316)

(20,235)

  Excess tax benefit

(1,198)

-

(24,746)

-

  Adjustment to foreign tax credit and tax reserves 

-

(3,287)

-

(3,287)

    Non-GAAP net income

$ 52,719

$ 41,355

$ 157,596

$ 155,417

GAAP diluted earnings per share

$     1.25

$     1.00

$       3.98

$       3.39

  Amortization of intangible assets

0.08

0.11

0.39

0.43

  Restructuring and acquisition-related

-

-

0.14

-

  Stock-based compensation expense

0.55

0.43

1.90

1.72

  Income tax adjustments

(0.20)

(0.15)

(0.75)

(0.63)

  Excess tax benefit

(0.04)

-

(0.77)

-

  Adjustment to foreign tax credit and tax reserves 

-

(0.10)

-

(0.10)

    Non-GAAP diluted earnings per share

$     1.65

$     1.28

$       4.89

$       4.81

Free cash flow

  Net cash provided by operating activities

$ 54,221

$ 32,542

$ 225,644

$ 210,266

  Capital expenditures

(5,036)

(9,428)

(19,828)

(21,969)

  Dividends paid

-

(619)

(1,238)

(2,488)

    Free cash flow

$ 49,185

$ 22,495

$ 204,578

$ 185,809

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION

RECONCILIATION OF NON-GAAP GUIDANCE

(In millions, except per share data)

(Unaudited)

Fiscal 2018 Guidance
before Excess Tax
Benefit

Estimated Excess
Tax Benefit

Fiscal 2018 Guidance

GAAP net income

$                              119

$                        20

$            139

  Amortization of intangible assets

7

-

7

  Stock-based compensation expense

67

-

67

  Income tax adjustments

(22)

-

(22)

  Excess tax benefit

-

(20)

(20)

    Non-GAAP net income

$                              171

$                        -

$            171

GAAP diluted earnings per share

$                             3.71

$                     0.62

$           4.33

  Amortization of intangible assets

0.22

-

0.22

  Stock-based compensation expense

2.09

-

2.09

  Income tax adjustments

(0.69)

-

(0.69)

  Excess tax benefit

-

(0.62)

(0.62)

    Non-GAAP diluted earnings per share

$                             5.32

$                        -

$           5.32

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.