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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 2005
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FAIR ISAAC CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-16439 94-1499887
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
901 Marquette Avenue, Suite 3200
Minneapolis, Minnesota 55402-3232
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-758-5200
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition.
Item 9.01 Financial Statements and Exhibits.
Signature
Exhibit Index
Exhibit 99.1
Item 2.02 Results of Operations and Financial Condition.
On January 26, 2005, Fair Isaac Corporation (the "Company") reported its
financial results for the quarter ended December 31, 2004. See the Company's
press release January 26, 2005, which is furnished as Exhibit 99.1 hereto and
incorporated by reference in this Item 2.02.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
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99.1 Press Release dated January 26, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAIR ISAAC CORPORATION
By: /s/ CHARLES M. OSBORNE
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Charles M. Osborne
Vice President and Chief Financial Officer
Date: January 26, 2005
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
-----------------------------------------------------------------------------
99.1 Press Release dated January 26, 2005 Filed Electronically
EXHIBIT 99.1
Fair Isaac Announces First Quarter Fiscal 2005 Results
MINNEAPOLIS--(BUSINESS WIRE)--Jan. 26, 2005--
Year over year revenue growth of 15% for first quarter;
net income exceeds company guidance by 8%
Fair Isaac Corporation (NYSE:FIC), a leader in customer analytics and
decision technology, today announced financial results for its first fiscal
quarter ended December 31, 2004.
GAAP Results
The company reported first quarter revenues of $195.5 million in fiscal
2005 versus $169.3 million reported in the first quarter of fiscal 2004. Net
income for the first quarter of fiscal 2005 totaled $27.9 million, or $0.36 per
diluted share, compared with net income of $28.8 million, or $0.36 per diluted
share, reported in the same quarter last year. During the first quarter, the
company adopted EITF Issue No. 04-8, The Effect of Contingently Convertible
Instruments on Diluted Earnings Per Share, related to its Senior Convertible
Notes. The adoption of this standard only impacts the computation of diluted
earnings per share, and reduced the first quarter diluted earnings per share by
$0.03 in fiscal 2005 and $0.03 in fiscal 2004.
Pro Forma Results
The company reported pro forma net income for the first quarter of fiscal
2005 of $33.5 million, compared to pro forma net income of $31.3 million
reported in the same quarter last year. Pro forma diluted earnings per share for
the first quarter of fiscal 2005 was $0.43, compared to pro forma diluted
earnings per share of $0.39 reported in the same quarter last year.
The GAAP results for the first quarter include: i) the revenue impact of
the purchase accounting adjustments related to the write-down of deferred
revenue to fair market value in connection with the acquisition of London Bridge
Software Holdings plc, and ii) the amortization of intangible assets acquired in
acquisitions. The pro forma results for the first quarter of fiscal 2005 exclude
the impact of these items. A reconciliation of GAAP to pro forma, or non-GAAP,
financial results is included in this news release.
"We are pleased with our first quarter revenues and bookings, and are off
to a great start in achieving our 2005 objectives," said Thomas Grudnowski, Fair
Isaac's Chief Executive Officer. "In addition, we continue to deliver strong
cash flow performance."
Non-GAAP Financial Measures
The company uses pro forma non-GAAP financial measures because they provide
meaningful information regarding the company's operational performance and
facilitate management's internal comparisons to the company's historical
operating results and comparisons to the operating results of other companies.
The company believes that these non-GAAP financial measures are useful to
investors because they allow for greater transparency of the company's operating
performance. Wherever non-GAAP financial measures have been included in this
news release, the company has reconciled them in the tables below to their GAAP
counterparts. These non-GAAP financial measures are not prepared in accordance
with U.S. generally accepted accounting principles and may be different from
non-GAAP financial measures used by other companies. Non-GAAP financial measures
should not be considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP.
The following table reconciles the non-GAAP financial measures to GAAP:
Quarter Ended Quarter Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Net Diluted Net Diluted
Income EPS Income EPS
-------- -------- -------- --------
(In thousands, except per share data)
Non-GAAP (pro forma).............$33,480 $0.43 $31,293 $0.39
Impact of deferred revenue
write-down................... 1,396 0.02 -- --
Amortization of acquired
intangible assets............ 4,223 0.05 2,532 0.03
-------- -------- -------- --------
GAAP.............................$27,861 $0.36 $28,761 $0.36
======== ======== ======== ========
Revenues and Bookings Highlights
Revenues increased across each of the company's four operating segments.
Strategy Machine Solutions revenues increased to $117.8 million in 2005 from
$103.3 million in 2004, or by 14%, primarily due to revenues generated by our
collections and recovery solutions and mortgage banking solutions associated
with the acquisition of London Bridge and increased revenues from our fraud
solutions products, partially offset by a decline in revenues associated with
insurance and healthcare solutions. Scoring Solutions revenues increased to
$39.4 million in 2005 from $35.3 million in 2004, or by 12%, primarily due to an
increase in revenues derived from risk scoring services at the credit reporting
agencies. Professional Services revenues increased to $29.5 million in 2005 from
$22.5 million in 2004, or by 31%, due to our acquisition of London Bridge and
Braun Consulting, Inc. Analytic Software Tools revenues increased to $8.8
million in 2005 from $8.3 million in 2004, or by 7%, due to revenues generated
by sales from the Enterprise Decision Management suite of products.
The company achieved new bookings of $115.4 million in the first quarter of
2005, as compared to its previous guidance of $120.0 million. The company
defines a "new booking" as estimated future contractual revenues, including
agreements with perpetual, multi-year and annual terms. Management regards the
volume of new bookings achieved, among other factors, as an important indicator
of future revenues, but they are not comparable to, nor should they be
substituted for, an analysis of the company's revenues.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents, and marketable security investments were $344.3
million at December 31, 2004 as compared to $364.3 million at September 30,
2004. Significant changes in cash and cash equivalents include cash provided by
operations of $79.9 million for the first quarter of 2005. Cash used during the
first quarter of 2005 includes $3.1 million related to purchases of property and
equipment, $33.8 million (net of cash acquired) related to the November 10, 2004
acquisition of Braun Consulting, Inc., and $109.9 million to repurchase company
stock under its share repurchase plan. Cash was generated from the November 12,
2004 sale of the company's subsidiary, London Bridge Phoenix Software, Inc., for
$23.0 million and $17.9 million received from the exercise of stock options and
stock issued.
"We believe our first quarter performance is another strong indicator of
the appreciation and demand for our analytic solutions and tools," said
Grudnowski. "We expect demand will accelerate as more businesses seek answers to
critical decision management challenges."
Company to Host Conference Call
The company will host a conference call today at 5:00 p.m. Eastern Time
(4:00 p.m. Central Time/2:00 p.m. Pacific Time) to discuss its first quarter
results. The call can be accessed live on the Investor Relations section of the
company's Web site at www.fairisaac.com, and a replay will be available
approximately 2 hours after the completion of the call through February 25,
2005.
About Fair Isaac
Fair Isaac Corporation (NYSE:FIC) is the preeminent provider of creative
analytics that unlock value for people, businesses and industries. The company's
predictive modeling, decision analysis, intelligence management, decision
management systems and consulting services power billions of mission-critical
customer decisions a year. Founded in 1956, Fair Isaac helps thousands of
companies in over 60 countries acquire customers more efficiently, increase
customer value, reduce fraud and credit losses, lower operating expenses and
enter new markets more profitably. Most leading banks and credit card issuers
rely on Fair Isaac solutions, as do insurers, retailers, telecommunications
providers, healthcare organizations and government agencies. Through the
www.myFICO.com Web site, consumers use the company's FICO(R) scores, the
standard measure of credit risk, to manage their financial health. For more
information, visit www.fairisaac.com.
Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements
contained in this news release that relate to Fair Isaac 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 company's ability to recruit and retain key
technical and managerial personnel, 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, competition, regulatory changes applicable to the use of consumer
credit and other data, the possibility that the anticipated benefits of
acquisitions, including expected synergies, will not be realized and other risks
described from time to time in Fair Isaac's SEC reports, including its Annual
Report on Form 10-K for the year ended September 30, 2004. If any of these risks
or uncertainties materializes, Fair Isaac's results could differ materially from
Fair Isaac's expectations in these statements. Fair Isaac disclaims any intent
or obligation to update these forward-looking statements.
Fair Isaac and FICO are trademarks or registered trademarks of Fair Isaac
Corporation, in the United States and/or in other countries. Other product and
company names herein may be trademarks of their respective owners.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters Ended December 31, 2004 and 2003
(In thousands, except per share data)
(Unaudited)
Quarter Ended
December 31,
---------------------
2004 2003
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Revenues $195,546 $169,341
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Operating expenses:
Cost of revenues 69,770 59,535
Research and development 20,998 16,401
Selling, general and administrative 53,568 41,760
Amortization of intangible assets 6,784 4,067
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Total operating expenses 151,120 121,763
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Operating income 44,426 47,578
Other income (expense), net 330 (1,375)
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Income before income taxes 44,756 46,203
Provision for income taxes 16,895 17,442
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Net income $27,861 $28,761
========= =========
Earnings per share:
Basic $0.41 $0.41
========= =========
Diluted $0.36 (a) $0.36 (a)
========= =========
Shares used in computing earnings per share:
Basic 68,570 69,824
========= =========
Diluted 80,056 (a) 82,838 (a)
========= =========
(a) The computation of diluted earnings per share for the quarters
ended December 31, 2004 and 2003, includes 9.1 million shares of
common stock issuable upon conversion of our senior convertible
notes, along with a corresponding adjustment to net income to add
back related interest expense, net of tax, of approximately $1.3
million.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2004 and September 30, 2004
(In thousands)
(Unaudited)
December 31, September 30,
2004 2004
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ASSETS:
Current assets:
Cash and cash equivalents $157,150 $159,870
Marketable securities 149,844 139,435
Receivables, net 141,976 140,845
Prepaid expenses and other current assets 38,011 25,951
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Total current assets 486,981 466,101
Marketable securities and investments 37,270 65,007
Property and equipment, net 53,158 53,288
Goodwill and intangible assets, net 818,464 825,142
Other noncurrent assets 34,928 35,241
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$1,430,801 $1,444,779
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $60,906 $45,596
Accrued compensation and employee benefits 31,738 33,670
Deferred revenue 59,223 41,050
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Total current liabilities 151,867 120,316
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 11,306 7,992
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Total liabilities 563,173 528,308
Stockholders' equity 867,628 916,471
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$1,430,801 $1,444,779
============ =============
FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters Ended December 31, 2004 and 2003
(In thousands)
(Unaudited)
Quarter Ended
December 31,
-------------------
2004 2003
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Strategy machine solutions $117,812 $103,261
Scoring solutions 39,424 35,307
Professional services 29,470 22,492
Analytic software tools 8,840 8,281
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Total revenues $195,546 $169,341
========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended December 31, 2004 and 2003
(In thousands)
(Unaudited)
Quarter Ended
December 31,
-------------------
2004 2003
--------- ---------
Cash flows from operating activities:
Net income $27,861 $28,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,472 11,307
Changes in operating assets and liabilities, net
of acquisitions 33,705 23,985
Other, net 4,872 3,674
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Net cash provided by operating activities 79,910 67,727
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Cash flows from investing activities:
Purchases of property and equipment (3,089) (4,320)
Cash paid for acquisitions, net of cash acquired (33,800) (5,000)
Net activity from marketable securities 23,997 (122,786)
Other, net 23,250 1,700
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Net cash provided by (used in) investing
activities 10,358 (130,406)
--------- ---------
Cash flows from financing activities:
Proceeds from issuances of common stock 17,868 11,682
Dividends paid (1,371) (935)
Repurchases of common stock (109,892) -
--------- ---------
Net cash provided by (used in) financing
activities (93,395) 10,747
--------- ---------
Effect of exchange rate changes on cash 407 -
--------- ---------
Decrease in cash and cash equivalents (2,720) (51,932)
Cash and cash equivalents, beginning of period 159,870 249,458
--------- ---------
Cash and cash equivalents, end of period $157,150 $197,526
========= =========
FAIR ISAAC CORPORATION
BASELINE REVENUE ANALYSIS
(In thousands)
- ----------------------------------------------------------------------
BKG'04 Q1A Q2A Q3A Q4A FY04A
- ----------------------------------------------------------------------
Total Baseline
Prior to '04 $153,440 $148,234 $146,159 $151,800 $599,633
- ----------------------------------------------------------------------
Q1-2004A $135,108 15,901 10,304 8,300 8,021 42,526
Q2-2004A 116,997 14,708 8,397 9,933 33,038
Q3-2004A 78,580 10,341 7,537 17,878
Q4-2004A 110,585 13,131 13,131
- ----------------------------------------------------------------------
Total FY04A 441,270 15,901 25,012 27,038 38,622 106,573
- ----------------------------------------------------------------------
Baseline Prior
to '05 441,270 169,341 173,246 173,197 190,422 706,206
- ----------------------------------------------------------------------
Q1-2005A
Q2-2005E
Q3-2005E
Q4-2005E
- ----------------------------------------------------------------------
Total FY05E
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand Total $441,270 $169,341 $173,246 $173,197 $190,422 $706,206
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- ----------------------------------------------------------------------
BKG'05 Q1A Q2E Q3E Q4E FY05E
- ----------------------------------------------------------------------
Total Baseline
Prior to '04 $143,751 $141,800 $141,400 $139,600 $566,551
- ----------------------------------------------------------------------
Q1-2004A 8,714 7,100 6,300 5,900 28,014
Q2-2004A 6,447 6,500 5,900 5,700 24,547
Q3-2004A 6,720 5,300 3,700 4,400 20,120
Q4-2004A 10,046 9,800 10,300 7,800 37,946
- ----------------------------------------------------------------------
Total FY04A 31,927 28,700 26,200 23,800 110,627
- ----------------------------------------------------------------------
Baseline Prior
to '05 175,678 170,500 167,600 163,400 677,178
- ----------------------------------------------------------------------
Q1-2005A $115,363 19,868 13,500 11,300 10,200 54,868
Q2-2005E 125,000 19,000
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Q3-2005E
Q4-2005E
- ----------------------------------------------------------------------
Total FY05E 500,000 19,868 32,500
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand Total $500,000 $195,546 $203,000
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E = Estimate
A = Actual
CONTACT: Fair Isaac Corporation, Minneapolis
Investors & Analysts:
John Emerick or JD Bergquist Wood, 800-213-5542
investor@fairisaac.com