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FICO Announces Earnings for Third Quarter Fiscal 2017
Revenue of $231 million vs. $239 million in prior year

SAN JOSE, Calif., July 31, 2017 /PRNewswire/ -- FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its third fiscal quarter ended June 30, 2017.

FICO Corporate logo.  (PRNewsFoto/FICO)

Third Quarter Fiscal 2017 GAAP Results
Net income for the quarter totaled $25.2 million, or $0.78 per share, versus $35.0 million, or $1.08 per share, reported in the prior year period. The current quarter earnings include a reduction to income tax expense of $2.7 million, or $0.08 per share, associated with the adoption of FASB Accounting Standards Update No. 2016-09 ("ASU 2016-09"). The current quarter also includes a pre-tax restructuring charge of $4.5 million, or $0.09 per share after tax.

Net cash provided by operating activities for the quarter was $72.0 million versus $85.4 million in the prior year period.

Third Quarter Fiscal 2017 Non-GAAP Results
Non-GAAP Net Income for the quarter was $37.4 million vs. $46.8 million in the prior year period. Non-GAAP EPS for the quarter was $1.16 vs. $1.45 in the prior year period. Free cash flow for the quarter was $66.8 million vs. $80.0 million in the prior year period. Free cash flow for both periods reflects the impact of ASU 2016-09. These non-GAAP financial measures are described in the financial table captioned "Non-GAAP Results" and are reconciled to the corresponding GAAP measures in the financial tables at the end of this release.

Third Quarter Fiscal 2017 GAAP Revenue
The company reported revenues of $231.0 million for the quarter as compared to $238.8 million reported in the prior year period. 

"We had a very strong quarter in our Scores business, where our efforts to expand our revenue sources continue to pay off," said Will Lansing, chief executive officer. "We also had a strong bookings quarter, posting more than $90 million for the third consecutive quarter, and continuing to build a backlog of recurring revenue."

Revenues for the third quarter of fiscal 2017 across each of the company's three operating segments were as follows:

  • Applications revenues, which include the company's preconfigured decision management applications and associated professional services, were $133.8 million in the third quarter, compared with $141.6 million in the prior year quarter, a decrease of 5%. This was primarily due to decreased license sales in Fraud Management Solutions.
  • Scores revenues, which include the company's business-to-business (B2B) scoring solutions and associated professional services, and business-to-consumer (B2C) service, were $69.5 million in the third quarter, compared to $61.1 million in the prior year quarter, an increase of 14%. B2B revenue increased 13% and B2C revenue increased 16% from the prior year quarter.
  • Decision Management Software revenues, which include FICO® Blaze Advisor®, FICO® Xpress Optimization and related professional services, were $27.7 million in the third quarter compared to $36.1 million in the prior year quarter, a decrease of 23%, due primarily to decreased license revenues of Blaze Advisor.

Outlook 
The company is updating its previously provided guidance for fiscal 2017 as a result of the impact of ASU 2016-09 on the current quarter to approximately:


Previous
Fiscal 2017
Guidance

Quarter 3,
2017 Impact of
ASU 2016-09

New Fiscal
2017

Guidance

Revenue

$925 million

-

$925 million

GAAP Net Income

$130 million

$3 million

 $133 million

GAAP Earnings Per Share

$4.03

$0.08

$4.11

Non-GAAP Net Income

$158 million

-

$158 million

Non-GAAP Earnings Per Share

$4.92

-

$4.92

The non-GAAP financial measures are described in the financial table captioned "Reconciliation of Non-GAAP Guidance."

Company to Host Conference Call
The company will host a webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to report its third quarter fiscal 2017 results and provide various strategic and operational updates. The call can be accessed at FICO's Web site at www.FICO.com/investors. A replay of the webcast will be available through July 31, 2018.

The webcast will also be distributed through the Thomson StreetEvents Network to both institutional and individual investors. The webcast can be accessed via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 170 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

Learn more at http://www.fico.com

Join the conversation at https://twitter.com/fico & http://www.fico.com/en/blogs/

FICO and Blaze Advisor are registered trademarks of Fair Isaac Corporation in the U.S. and other countries.

Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering initiative, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions or in the markets we serve, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2016 and Form 10-Q for the quarter ended June 30, 2017. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)














June 30,


September 30,


2017


2016

ASSETS:




Current assets:




     Cash and cash equivalents

$                130,667


$                 75,926

     Accounts receivable, net

140,265


167,786

     Prepaid expenses and other current assets

51,033


23,926

          Total current assets

321,965


267,638





Marketable securities and investments

24,746


21,936

Property and equipment, net

42,143


45,122

Goodwill and intangible assets, net

823,373


832,034

Other assets

46,127


53,946


$             1,258,354


$            1,220,676





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




     Accounts payable and other accrued liabilities

$                  47,381


$                 50,732

     Accrued compensation and employee benefits

62,616


71,216

     Deferred revenue

65,028


47,129

     Current maturities on debt

224,000


77,000

          Total current liabilities

399,025


246,077





Long-term debt

387,767


493,624

Other liabilities

38,807


34,147

          Total liabilities

825,599


773,848





Stockholders' equity

432,755


446,828


$             1,258,354


$            1,220,676

 

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)


















Quarter Ended 


Nine Months Ended


June 30,


June 30,


2017


2016


2017


2016









Revenues:








     Transactional and maintenance

$             166,695


$           153,886


$        481,604


$           451,701

     Professional services

43,871


44,304


128,698


117,798

     License

20,420


40,588


68,662


76,033

        Total revenues

230,986


238,778


678,964


645,532









Operating expenses:








     Cost of revenues

69,793


66,384


211,921


190,875

     Research & development

27,839


26,417


80,644


75,896

     Selling, general and administrative

84,089


87,172


255,534


243,511

     Amortization of intangible assets

3,365


3,486


9,997


10,573

     Restructuring and acquisition-related

4,471


-


4,471


-

        Total operating expenses

189,557


183,459


562,567


520,855

Operating income

41,429


55,319


116,397


124,677

Other expense, net

(6,098)


(5,029)


(19,275)


(18,467)

Income before income taxes

35,331


50,290


97,122


106,210

Provision for income taxes

10,104


15,303


8,910


28,866

Net income

$               25,227


$             34,987


$          88,212


$             77,344

























Basic earnings per share:

$                   0.82


$                 1.12


$              2.85


$                 2.48

Diluted earnings per share:

$                   0.78


$                 1.08


$              2.73


$                 2.39









Shares used in computing earnings per share:








     Basic

30,914


31,149


30,973


31,201

     Diluted

32,224


32,313


32,340


32,337

 

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










 Nine Months Ended 


 June 30, 


2017


2016

Cash flows from operating activities:




Net income

$              88,212


$                 77,344

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




      Depreciation and amortization

27,427


23,127

      Share-based compensation

43,546


41,704

      Changes in operating assets and liabilities

10,826


18,996

      Other, net

1,412


16,554

         Net cash provided by operating activities (1)

171,423


177,725





Cash flows from investing activities:




Purchases of property and equipment

(14,792)


(12,541)

Cash paid for acquisitions, net of cash acquired

-


(5,683)

Other, net

(777)


37

         Net cash used in investing activities

(15,569)


(18,187)





Cash flows from financing activities:




Proceeds from revolving line of credit

98,000


49,000

Payments on revolving line of credit

(57,000)


(56,000)

Proceeds from issuances of common stock

13,112


8,356

Taxes paid related to net share settlement of equity awards

(39,324)


(28,544)

Repurchases of common stock

(116,341)


(96,121)

Other, net

(1,238)


(1,869)

         Net cash used in financing activities (1)

(102,791)


(125,178)





Effect of exchange rate changes on cash

1,678


(2,325)





Increase in cash and cash equivalents

54,741


32,035

Cash and cash equivalents, beginning of period

75,926


86,120

Cash and cash equivalents, end of period

$            130,667


$               118,155







(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 nine months ended June 30, 2016 was $16.1 million.  




 

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)























Quarter Ended 



Nine Months Ended



June 30,



June 30,



2017


2016



2017


2016











Applications revenues:










     Transactional and maintenance


$   87,443


$   82,925



$ 258,337


$ 244,659

     Professional services


35,990


36,560



102,971


95,405

     License


10,349


22,080



41,576


43,559

          Total Applications revenues


$ 133,782


$ 141,565



$ 402,884


$ 383,623











Scores revenues:










     Transactional and maintenance


$   68,376


$   59,781



$ 190,256


$ 174,263

     Professional services


487


822



2,002


2,682

     License


651


527



2,071


1,303

          Total Scores revenues


$   69,514


$   61,130



$ 194,329


$ 178,248











Decision Management Software revenues:










     Transactional and maintenance


$   10,876


$   11,180



$   33,011


$   32,779

     Professional services


7,394


6,922



23,725


19,711

     License


9,420


17,981



25,015


31,171

          Total Decision Management Software revenues

$   27,690


$   36,083



$   81,751


$   83,661











Total revenues:










     Transactional and maintenance


$ 166,695


$ 153,886



$ 481,604


$ 451,701

     Professional services


43,871


44,304



128,698


117,798

     License


20,420


40,588



68,662


76,033

          Total revenues


$ 230,986


$ 238,778



$ 678,964


$ 645,532

 

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)


















Quarter Ended 


Nine Months Ended


June 30,


June 30,


2017


2016


2017


2016









GAAP net income

$ 25,227


$ 34,987


$   88,212


$   77,344

  Amortization of intangible assets

3,365


3,486


9,997


10,573

  Restructuring and acquisition-related

4,471


-


4,471


-

  Stock-based compensation expense

14,315


13,404


43,546


41,704

  Income tax adjustments

(7,272)


(5,051)


(17,801)


(15,559)

  Excess tax benefit

(2,685)


-


(23,548)


-

    Non-GAAP net income

$ 37,421


$ 46,826


$ 104,877


$ 114,062

















GAAP diluted earnings per share

$     0.78


$     1.08


$       2.73


$       2.39

  Amortization of intangible assets

0.10


0.11


0.31


0.33

  Restructuring and acquisition-related

0.14


-


0.14


-

  Stock-based compensation expense

0.44


0.41


1.35


1.29

  Income tax adjustments

(0.23)


(0.16)


(0.55)


(0.48)

  Excess tax benefit

(0.08)


-


(0.73)


-

    Non-GAAP diluted earnings per share

$     1.16


$     1.45


$       3.24


$       3.53









Free cash flow








  Net cash provided by operating activities

$ 72,027


$ 85,390


$ 171,423


$ 177,724

  Capital expenditures

(5,189)


(4,734)


(14,792)


(12,541)

  Dividends paid

-


(624)


(1,238)


(1,869)

    Free cash flow

$ 66,838


$ 80,032


$ 155,393


$ 163,314









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)








Previous Fiscal 2017
Guidance


Quarter 3, 2017
Impact of ASU 2016-
09


New Fiscal 2017
Guidance







GAAP net income

$                             130


$                               3


$                     133

  Amortization of intangible assets

14


-


14

  Stock-based compensation expense

56


-


56

  Income tax adjustments

(21)


-


(21)

  Excess tax benefit

(21)


(3)


(24)

    Non-GAAP net income

$                             158


$                             -


$                     158













GAAP diluted earnings per share

$                            4.03


$                          0.08


$                    4.11

  Amortization of intangible assets

0.43


-


0.43

  Stock-based compensation expense

1.75


-


1.75

  Income tax adjustments

(0.65)


-


(0.65)

  Excess tax benefit

(0.64)


(0.08)


(0.72)

    Non-GAAP diluted earnings per share

$                            4.92


$                          0.08


$                    4.92













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.

 

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SOURCE FICO

Investors/Analysts: Steve Weber, (800) 213-5542, investor@fico.com, or Media: Greg Jawski, Porter Novelli, (212) 601-8248, greg.jawski@porternovelli.com