Fiscal 2018 Guidance*

Revenues

$1.02 billion

GAAP Net Income

$140 million

GAAP EPS

$4.47

Non GAAP Net Income

$200 million

Non GAAP EPS

$6.38

*Guidance includes the estimated Excess Tax Benefit (ASU 2016-09) of $20.0 million, or $0.64 per share.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

June 30,

September 30,

2018

2017

ASSETS:

Current assets:

     Cash and cash equivalents

$                119,929

$               105,618

     Accounts receivable, net

182,419

168,586

     Prepaid expenses and other current assets

32,944

36,727

          Total current assets

335,292

310,931

Marketable securities and investments

28,641

25,515

Property and equipment, net

51,517

40,703

Goodwill and intangible assets, net

818,120

825,599

Other assets

53,500

52,872

$             1,287,070

$            1,255,620

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

     Accounts payable and other accrued liabilities

$                  59,408

$                 51,614

     Accrued compensation and employee benefits

75,218

77,610

     Deferred revenue

60,587

55,431

     Current maturities on debt

202,000

142,000

          Total current liabilities

397,213

326,655

Long-term debt

556,713

462,801

Other liabilities

38,500

39,627

          Total liabilities

992,426

829,083

Stockholders' equity

294,644

426,537

$             1,287,070

$            1,255,620

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Nine Months Ended

June 30,

June 30,

2018

2017

2018

2017

Revenues:

     Transactional and maintenance

$           195,491

$           166,695

$           565,348

$           481,604

     Professional services

43,209

43,871

131,913

128,698

     License

20,805

20,420

55,423

68,662

        Total revenues

259,505

230,986

752,684

678,964

Operating expenses:

     Cost of revenues

78,390

69,793

231,268

211,921

     Research & development

32,483

27,839

93,976

80,644

     Selling, general and administrative

98,685

84,089

286,038

255,534

     Amortization of intangible assets

1,571

3,365

5,043

9,997

     Restructuring and acquisition-related

-

4,471

-

4,471

        Total operating expenses

211,129

189,557

616,325

562,567

Operating income

48,376

41,429

136,359

116,397

Other expense, net

(6,635)

(6,098)

(19,859)

(19,275)

Income before income taxes

41,741

35,331

116,500

97,122

Provision for income taxes

9,380

10,104

24,565

8,910

Net income

$             32,361

$             25,227

$             91,935

$             88,212

Basic earnings per share:

$                 1.09

$                 0.82

$                 3.07

$                 2.85

Diluted earnings per share:

$                 1.04

$                 0.78

$                 2.93

$                 2.73

Shares used in computing earnings per share:

     Basic

29,708

30,914

29,924

30,973

     Diluted

31,161

32,224

31,341

32,340

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 Nine Months Ended 

 June 30, 

2018

2017

Cash flows from operating activities:

 Net income 

$              91,935

$           88,212

 Adjustments to reconcile net income to net cash provided by  

   operating activities: 

       Depreciation and amortization 

22,329

27,427

       Share-based compensation 

54,631

43,546

       Changes in operating assets and liabilities 

(12,489)

10,826

       Other, net 

6,683

1,412

          Net cash provided by operating activities 

163,089

171,423

 Cash flows from investing activities: 

 Purchases of property and equipment 

(24,220)

(14,792)

 Net activity from marketable securities 

(2,504)

-

 Other, net 

-

(777)

          Net cash used in investing activities 

(26,724)

(15,569)

 Cash flows from financing activities: 

 Proceeds from revolving line of credit 

371,000

98,000

 Payments on revolving line of credit 

(480,000)

(57,000)

 Payment on Senior Notes 

(131,000)

-

 Proceeds from issuance of senior notes 

400,000

-

 Proceeds from issuances of common stock 

2,492

13,112

 Taxes paid related to net share settlement of equity awards 

(42,872)

(39,324)

 Repurchases of common stock 

(229,540)

(116,341)

 Other, net 

(7,869)

(1,238)

          Net cash used in financing activities 

(117,789)

(102,791)

 Effect of exchange rate changes on cash 

(4,265)

1,678

 Increase in cash and cash equivalents 

14,311

54,741

 Cash and cash equivalents, beginning of period 

105,618

75,926

 Cash and cash equivalents, end of period 

$            119,929

$         130,667

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)

Quarter Ended 

Nine Months Ended

June 30,

June 30,

2018

2017

2018

2017

Applications revenues:

     Transactional and maintenance

$   93,598

$   87,443

$ 284,441

$ 258,337

     Professional services

34,173

35,990

107,542

102,971

     License

13,847

10,349

37,743

41,576

          Total Applications revenues

$ 141,618

$ 133,782

$ 429,726

$ 402,884

Scores revenues:

     Transactional and maintenance

$   90,716

$   68,376

$ 245,934

$ 190,256

     Professional services

505

487

1,465

2,002

     License

884

651

2,531

2,071

          Total Scores revenues

$   92,105

$   69,514

$ 249,930

$ 194,329

Decision Management Software revenues:

     Transactional and maintenance

$   11,177

$   10,876

$   34,973

$   33,011

     Professional services

8,531

7,394

22,906

23,725

     License

6,074

9,420

15,149

25,015

          Total Decision Management Software revenues

$   25,782

$   27,690

$   73,028

$   81,751

Total revenues:

     Transactional and maintenance

$ 195,491

$ 166,695

$ 565,348

$ 481,604

     Professional services

43,209

43,871

131,913

128,698

     License

20,805

20,420

55,423

68,662

          Total revenues

$ 259,505

$ 230,986

$ 752,684

$ 678,964

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Nine Months Ended

June 30,

June 30,

2018

2017

2018

2017

GAAP net income

$ 32,361

$ 25,227

$   91,935

$   88,212

Amortization of intangible assets

1,571

3,365

5,043

9,997

Restructuring and acquisition-related

-

4,471

-

4,471

Stock-based compensation expense

18,882

14,315

54,630

43,546

Income tax adjustments

(5,484)

(7,272)

(15,357)

(17,801)

Excess tax benefit

(1,635)

(2,685)

(14,697)

(23,548)

Tax Cuts and Jobs Act

1,420

-

14,840

-

Non-GAAP net income

$ 47,115

$ 37,421

$ 136,394

$ 104,877

GAAP diluted earnings per share

$     1.04

$     0.78

$       2.93

$       2.73

Amortization of intangible assets

0.05

0.10

0.16

0.31

Restructuring and acquisition-related

-

0.14

-

0.14

Stock-based compensation expense

0.61

0.44

1.74

1.35

Income tax adjustments

(0.18)

(0.23)

(0.49)

(0.55)

Excess tax benefit

(0.05)

(0.08)

(0.47)

(0.73)

Tax Cuts and Jobs Act

0.05

-

0.47

-

Non-GAAP diluted earnings per share

$     1.51

$     1.16

$       4.35

$       3.24

Free cash flow

Net cash provided by operating activities

$ 85,079

$ 72,026

$ 163,089

$ 171,423

Capital expenditures

(13,109)

(5,189)

(24,220)

(14,792)

Dividends paid

-

-

-

(1,238)

Free cash flow

$ 71,970

$ 66,837

$ 138,869

$ 155,393

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 measuresis 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

GAAP net income

$                              140

Amortization of intangible assets

7

Stock-based compensation expense

76

Income tax adjustments

(21)

Excess tax benefit

(20)

Tax Cuts and Jobs Act

17

Non-GAAP net income

$                              200

GAAP diluted earnings per share

$                             4.47

Amortization of intangible assets

0.22

Stock-based compensation expense

2.44

Income tax adjustments

(0.66)

Excess tax benefit

(0.64)

Tax Cuts and Jobs Act

0.54

Non-GAAP diluted earnings per share

$                             6.38

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.