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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) April 27, 2005
----------------
FAIR ISAAC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-16439 94-1499887
- ----------------------------- ------- -------------------
(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 April 27, 2005, Fair Isaac Corporation (the "Company") reported its
financial results for the quarter and six months ended March 31, 2005. See the
Company's press release dated April 27, 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 April 27, 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
--------------------------------
Charles M. Osborne
Vice President and Chief Financial Officer
Date: April 27, 2005
EXHIBIT INDEX
Exhibit
Number Description METHOD OF FILING
- -------------------------------------------------------------------------------
99.1 Press Release dated April 27, 2005 Filed Electronically
Exhibit 99.1
Fair Isaac Announces Second Quarter Fiscal 2005 Results;
Year over Year Revenue Growth of 13%;
Record Earnings and Bookings for Second Quarter
MINNEAPOLIS--(BUSINESS WIRE)--April 27, 2005--Fair Isaac Corporation
(NYSE:FIC), a leader in customer analytics and decision technology, today
announced financial results for its second fiscal quarter ended March 31, 2005.
Second Quarter Fiscal 2005 Results
The company reported second quarter revenues of $196.0 million in fiscal
2005 versus $173.2 million reported in the prior year period. Net income for the
second quarter of fiscal 2005 totaled $34.3 million, or $0.45 per diluted share,
compared with net income of $30.8 million, or $0.39 per diluted share, reported
in the same quarter last year. Net income for the second quarter of 2005
included an adjustment that reduced income tax expense by $6.0 million, or $0.08
per diluted share. This adjustment resulted from revisions made to estimates of
prior years' tax liabilities.
The impact of the adoption of EITF Issue No. 04-8, The Effect of
Contingently Convertible Instruments on Diluted Earnings Per Share (EITF Issue
No. 04-8), including the costs associated with the exchange offer, reduced the
second quarter diluted earnings per share by $0.05 in fiscal 2005 and $0.03 in
fiscal 2004.
Fiscal 2005 Year-to-date Results
The company reported revenues of $391.6 million year-to-date versus $342.6
million reported in the same period last year. Year-to-date net income totaled
$62.2 million, or $0.82 per diluted share, compared with net income of $59.6
million, or $0.75 per diluted share, reported in the same period last year.
Year-to-date net income was also affected by the second quarter adjustment that
reduced income tax expense as described above.
The impact of the adoption of EITF Issue No. 04-8 reduced the year-to-date
diluted earnings per share by $0.08 in fiscal 2005 and $0.06 in fiscal 2004.
"We are pleased with our record earnings and bookings for the quarter,"
said Thomas Grudnowski, Fair Isaac's chief executive officer. "The strong
bookings and sales pipeline demonstrates the success of our increased sales
efforts in the core, high-margin market segments."
Senior Convertible Notes
During the first quarter, the company adopted EITF Issue No. 04-8 related
to its $400 million of Senior Convertible Notes ("old notes"). In the second
quarter, the company commenced an offer to exchange its old notes for new Senior
Convertible Notes ("new notes") that, upon conversion, would pay the holder cash
for the principal amount and cash or common stock for any conversion value in
excess of the principal amount. On March 31, 2005, the company successfully
completed its exchange offer for approximately 99.9% of the principal amount of
the old notes. The new notes are currently not dilutive to the company's diluted
earnings per share calculation.
Second Quarter Fiscal 2005 Revenues and Bookings Highlights
Revenues increased across each of the company's four operating segments.
Strategy Machine Solutions revenues increased to $111.3 million in the second
quarter of 2005 from $103.6 million in the prior year quarter, or by 7%,
primarily due to revenues generated by collections and recovery solutions, and
mortgage banking solutions associated with the acquisition of London Bridge and
increased revenues from fraud solutions products. These gains were partially
offset by a decline in revenues associated with marketing services, and
insurance and healthcare solutions. Scoring Solutions revenues increased to
$39.3 million in the second quarter from $33.7 million in the prior year
quarter, or by 17%, primarily due to an increase in revenues derived from risk
scoring services at the credit reporting agencies. Professional Services
revenues increased to $33.6 million in the second quarter from $24.6 million in
the prior year quarter, or by 36%, due to the acquisition of London Bridge and
Braun Consulting, Inc. Analytic Software Tools revenues increased to $11.8
million in the second quarter from $11.3 million in the prior year quarter, or
by 4%, due to revenues generated by sales from the Enterprise Decision
Management suite of products, primarily due to the acquisition of London Bridge.
The company achieved new bookings of $136.6 million in the second quarter
of 2005, as compared to its previous guidance of $125.0 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 $368.3
million at March 31, 2005 as compared to $364.3 million at September 30, 2004.
Significant changes in cash and cash equivalents from September 30, 2004 include
cash provided by operations of $119.6 million. Cash used year-to-date includes
$10.0 million related to purchases of property and equipment, $33.8 million (net
of cash acquired) related to the November 2004 acquisition of Braun Consulting,
Inc., and $127.0 million to repurchase company stock under its share repurchase
plan. In addition to operating cash flows, cash was also generated from the
November 2004 sale of the company's subsidiary, London Bridge Phoenix Software,
Inc., for $22.7 million and $27.4 million received from the exercise of stock
options and stock issued.
Outlook
The company expects revenue for the third quarter of fiscal 2005 of
approximately $205.0 million and earnings per diluted share of about $0.44. The
company also expects fiscal 2005 total revenue of approximately $811.0 million
and earnings per diluted share of about $1.80. This guidance reflects the
continuation of top-line growth in its core market segments and further
expansion of its operating margin.
"We are encouraged by our continuing growth in key market segments," said
Grudnowski. "Our above plan growth in sales and operating earnings from these
segments drives our expectations for full-year, record sales and earnings. The
growing demand for our analytic solutions in these core segments demonstrates
the critical value we deliver to our customers and their business success."
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 second quarter
results and outlook for the remainder of fiscal 2005. 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 two hours after
the completion of the call through May 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 and Quarterly Report
on Form 10-Q for the period ended December 31, 2004. If any of these risks or
uncertainties materialize, Fair Isaac's results could differ materially from its
expectations. 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 and Six Months Ended March 31, 2005 and 2004
(In thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues $196,021 $173,246 $391,567 $342,587
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Operating expenses:
Cost of revenues 69,648 63,283 139,418 122,818
Research and
development 18,123 14,333 39,121 30,734
Selling, general and
administrative 55,085 40,508 108,653 82,268
Amortization of
intangible assets 6,536 4,064 13,320 8,131
--------- --------- --------- ---------
Total operating
expenses 149,392 122,188 300,512 243,951
--------- --------- --------- ---------
Operating income 46,629 51,058 91,055 98,636
Other expense, net (490) (1,117) (160) (2,492)
--------- --------- --------- ---------
Income before income taxes 46,139 49,941 90,895 96,144
Provision for income taxes 11,812 19,098 28,707 36,540
--------- --------- --------- ---------
Net income $34,327 $30,843 $62,188 $59,604
========= ========= ========= =========
Earnings per share:
Basic $0.51 $0.44 $0.92 $0.85
========= ========= ========= =========
Diluted (b) $0.45 $0.39 (a) $0.82 $0.75 (a)
========= ========= ========= =========
Shares used in computing
earnings per share:
Basic 66,979 70,308 67,769 70,065
========= ========= ========= =========
Diluted (b) 78,385 83,117 (a) 79,231 82,976 (a)
========= ========= ========= =========
(a) The computation of diluted earnings per share for the quarters
ended March 31, 2005 and 2004, includes 9.0 million and 9.1
million, respectively, 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 $1.2 million and
$1.3 million, respectively. The computation of diluted earnings
per share for the six months ended March 31, 2005 and 2004,
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 $2.5 million.
(b) The dilutive effect of the Company's old notes has been calculated
on the if-converted method through March 30, 2005. Effective March
31, 2005, the dilutive effect of the Company's new notes has been
calculated using the treasury stock method.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2005 and September 30, 2004
(In thousands)
(Unaudited)
March 31, September 30,
2005 2004
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ASSETS:
Current assets:
Cash and cash equivalents $167,359 $134,070
Marketable securities 161,608 165,235
Receivables, net 166,434 140,845
Prepaid expenses and other current assets 39,522 25,951
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Total current assets 534,923 466,101
Marketable securities and investments 39,293 65,007
Property and equipment, net 54,089 53,288
Goodwill and intangible assets, net 807,243 825,142
Other noncurrent assets 31,025 35,241
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$1,466,573 $1,444,779
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $60,583 $45,596
Accrued compensation and employee benefits 36,420 33,670
Deferred revenue 64,451 41,050
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Total current liabilities 161,454 120,316
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 8,994 7,992
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Total liabilities 570,448 528,308
Stockholders' equity 896,125 916,471
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$1,466,573 $1,444,779
============ =============
FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters and Six Months Ended March 31, 2005 and 2004
(In thousands)
(Unaudited)
Quarter Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Strategy machine solutions $111,252 $103,587 $229,064 $206,848
Scoring solutions 39,347 33,707 78,771 69,014
Professional services 33,580 24,616 63,050 47,108
Analytic software tools 11,842 11,336 20,682 19,617
--------- --------- --------- ---------
Total revenues $196,021 $173,246 $391,567 $342,587
========= ========= ========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2005 and 2004
(In thousands)
(Unaudited)
Six Months Ended
March 31,
-------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $62,188 $59,604
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,539 22,620
Changes in operating assets and liabilities, net
of acquisitions 19,701 24,327
Other, net 11,129 9,727
--------- ---------
Net cash provided by operating activities 119,557 116,278
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (10,012) (10,744)
Cash paid for acquisitions, net of cash acquired (33,800) (5,000)
Net activity from marketable securities 35,143 7,940
Other, net 24,156 1,950
--------- ---------
Net cash provided by (used in) investing
activities 15,487 (5,854)
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Cash flows from financing activities:
Proceeds from issuances of common stock 27,353 32,235
Repurchases of common stock (127,048) (40,653)
Other, net (2,716) (2,118)
--------- ---------
Net cash used in financing activities (102,411) (10,536)
--------- ---------
Effect of exchange rate changes on cash 656 -
--------- ---------
Increase in cash and cash equivalents 33,289 99,888
Cash and cash equivalents, beginning of period 134,070 130,383
--------- ---------
Cash and cash equivalents, end of period $167,359 $230,271
========= =========
Fair Isaac Corporation
Baseline Revenue Analysis
(In thousands)
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BKG'04 Q1A Q2A Q3A Q4A FY04
- ----------------------------------------------------------------------
Total Baseline
Prior to '04 $153,440 $148,234 $146,159 $151,800 $599,633
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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
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Total FY04 441,270 15,901 25,012 27,038 38,622 106,573
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Baseline Prior
to '05 441,270 169,341 173,246 173,197 190,422 706,206
- ----------------------------------------------------------------------
Q1-2005E
Q2-2005E
Q3-2005E
Q4-2005E
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Total FY05
- ----------------------------------------------------------------------
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Grand Total $441,270 $169,341 $173,246 $173,197 $190,422 $706,206
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E = Estimate
A = Actual
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BKG'05 Q1A Q2A Q3E Q4E FY05E
- ----------------------------------------------------------------------
Total Baseline
Prior to '04 $144,463 $139,115 $135,000 $133,500 $552,078
- ----------------------------------------------------------------------
Q1-2004A 8,714 6,506 5,500 5,000 25,720
Q2-2004A 6,350 5,276 5,000 4,000 20,626
Q3-2004A 6,688 5,279 4,000 3,500 19,467
Q4-2004A 9,946 8,269 7,500 7,000 32,715
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Total FY04 31,698 25,330 22,000 19,500 98,528
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Baseline Prior
to '05 176,161 164,445 157,000 153,000 650,606
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Q1-2005E $115,363 19,385 12,916 12,000 11,500 55,801
Q2-2005E 136,559 18,660 16,000 10,000 44,660
Q3-2005E 123,000 20,000 16,500 36,500
Q4-2005E 125,078 23,000 23,000
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Total FY05 500,000 19,385 31,576 48,000 61,000 159,961
- ----------------------------------------------------------------------
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Grand Total $500,000 $195,546 $196,021 $205,000 $214,000 $810,567
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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