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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) July 27, 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
i
1
Item 2.02 Results of Operations and Financial Condition.
On July 27, 2005, Fair Isaac Corporation (the "Company") reported its
financial results for the quarter and nine months ended June 30, 2005. See the
Company's press release dated July 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 July 27, 2005
1
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: July 27, 2005
2
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
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99.1 Press Release dated July 27, 2005 Filed Electronically
Exhibit 99.1
Fair Isaac Announces Third Quarter Fiscal 2005 Results;
Year over Year Revenue Growth of 18%;
Record Revenue, Earnings Per Share and Bookings for the Third Quarter
MINNEAPOLIS--(BUSINESS WIRE)--July 27, 2005--Fair Isaac
Corporation (NYSE:FIC), the leading provider of analytics and decision
technology, today announced financial results for its third fiscal
quarter ended June 30, 2005.
Third Quarter Fiscal 2005 Results
The company reported third quarter revenues of $203.8 million in
fiscal 2005 versus $173.2 million reported in the prior year period.
Net income for the third quarter of fiscal 2005 totaled $36.6 million,
or $0.53 per diluted share, compared with net income of $28.8 million,
or $0.37 per diluted share, reported in the same quarter last year.
Net income for the third quarter of fiscal 2005 included an adjustment
that reduced income tax expense by $4.4 million, or $0.06 per diluted
share. The adjustment represents revisions made to estimates of prior
years' tax liabilities which resulted from a recently completed tax
study. In addition, the company reduced its estimated effective income
tax rate to 37% for the fiscal year.
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) had no effect on the third quarter of fiscal
2005 diluted earnings per share and reduced third quarter of fiscal
2004 diluted earnings per share by $0.02.
Fiscal 2005 Year-to-date Results
The company reported revenues of $595.4 million year-to-date
versus $515.8 million reported in the same period last year.
Year-to-date net income totaled $98.8 million, or $1.34 per diluted
share, compared with net income of $88.4 million, or $1.11 per diluted
share, reported in the same period last year. Year-to-date net income
in fiscal 2005 was also affected by the year-to-date adjustments that
reduced income tax expense by $10.3 million, or $0.14 per diluted
share.
The impact of the adoption of EITF Issue No. 04-8 reduced
year-to-date diluted earnings per share by $0.08 in fiscal 2005 and
$0.09 in fiscal 2004.
"We are pleased with our results this quarter as we continued our
trend of record-setting performance - including revenue, bookings,
sales proposals and earnings per share," said Thomas Grudnowski, Fair
Isaac's chief executive officer. "We are particularly pleased with the
results from our core Consumer, Enterprise Decision Management, Fraud
and Scoring market units."
Third Quarter Fiscal 2005 Revenues and Bookings Highlights
Revenues increased across each of the company's four operating
segments. Strategy Machine Solutions revenues increased to $115.1
million in the third quarter of 2005 from $105.7 million in the prior
year quarter, or by 9%, primarily due to revenues generated by
collections and recovery solutions, and mortgage banking solutions
associated with the acquisition of London Bridge; as well as increased
revenues from both the fraud solutions and consumer scoring products.
These gains were partially offset by a decline in revenues associated
with marketing services and insurance solutions. Scoring Solutions
revenues increased to $40.7 million in the third quarter from $36.3
million in the prior year quarter, or by 12%, primarily due to an
increase in revenues derived from the PreScore(R) Service and from
risk scoring services at the credit reporting agencies. Professional
Services revenues increased to $33.2 million in the third quarter from
$23.2 million in the prior year quarter, or by 43%, primarily due to
the acquisitions of London Bridge and Braun Consulting, Inc. Analytic
Software Tools revenues increased to $14.8 million in the third
quarter from $8.0 million in the prior year quarter, or by 85%, due to
revenues generated from sales of the Enterprise Decision Management
suite of products.
The company achieved record bookings of $143.3 million in the
third quarter of 2005, as compared to its previous guidance of $123.0
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 $310.3 million at June 30, 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 $150.2
million; $49.4 million received from the exercise of stock options and
stock issued and $22.7 million sourced from the November 2004 sale of
the company's subsidiary, London Bridge Phoenix Software, Inc. Cash
used year-to-date includes $14.0 million related to purchases of
property and equipment, $32.6 million (net of cash acquired) related
to the November 2004 acquisition of Braun Consulting, Inc., and $231.8
million to repurchase company stock under the current and previously
authorized share repurchase plans.
Outlook
The company expects revenue for fourth quarter fiscal 2005 of
approximately $207.0 million and earnings per diluted share of about
$0.49. The company also expects fiscal 2005 total revenue of
approximately $802.0 million and earnings per diluted share of about
$1.83. This guidance reflects the continuation of top-line growth in
its core market units and further expansion of its operating margin.
"We are encouraged by the continued strength we see in our key
market units," said Grudnowski. "We are excited about the growing
awareness of the FICO(R) score, the increasing market acceptance of
Fair Isaac's unique value proposition and the continued improvement in
the company's overall operating efficiencies. The stronger than
expected bookings for the quarter provide additional confidence in our
ability to achieve our revenue targets."
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
third quarter results and outlook for the fourth quarter. 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
August 24, 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 March 31, 2005. 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 Nine Months Ended June 30, 2005 and 2004
(In thousands, except per share data)
(Unaudited)
Quarter Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
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Revenues $203,807 $173,197 $595,374 $515,784
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Operating expenses:
Cost of revenues 68,339 61,361 207,757 184,179
Research and
development 21,176 19,096 60,297 49,830
Selling, general and
administrative 59,126 45,384 167,779 127,652
Amortization of
intangible assets 6,320 4,597 19,640 12,728
Restructuring and
merger related - 751 - 751
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Total operating
expenses 154,961 131,189 455,473 375,140
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Operating income 48,846 42,008 139,901 140,644
Other income, net 161 4,385 1 1,893
--------- --------- --------- ---------
Income before income taxes 49,007 46,393 139,902 142,537
Provision for income taxes 12,395 17,624 41,102 54,164
--------- --------- --------- ---------
Net income $36,612 $28,769 $98,800 $88,373
========= ========= ========= =========
Earnings per share:
Basic $0.55 $0.41 $1.47 $1.26
========= ========= ========= =========
Diluted (b) $0.53 $0.37 (a) $1.34 $1.11 (a)
========= ========= ========= =========
Shares used in computing
earnings per share:
Basic 66,215 70,008 67,247 70,046
========= ========= ========= =========
Diluted (b) 68,531 82,151 (a) 75,661 82,701 (a)
========= ========= ========= =========
(a) The computation of diluted earnings per share for the quarter
ended June 30, 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 $1.3 million. The
computation of diluted earnings per share for the nine months
ended June 30, 2005 and 2004, includes 6.0 million and 9.1 million
shares of common stock, respectively, 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 and $3.8 million,
respectively.
(b) On March 31, 2005, the Company successfully completed an exchange
offer for approximately 99.9% of the principal amount of its
senior convertible notes (Old Notes) for new senior convertible
notes (New Notes). The dilutive effect of the Company's Old Notes
has been calculated using the if-converted method through March
30, 2005. The dilutive effect of the New Notes has been calculated
using the treasury stock method since the effective date of the
exchange.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2005 and September 30, 2004
(In thousands)
(Unaudited)
June 30, September 30,
2005 2004
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ASSETS:
Current assets:
Cash and cash equivalents $93,126 $134,070
Marketable securities 161,285 165,235
Receivables, net 164,236 140,845
Prepaid expenses and other current
assets 24,167 25,951
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Total current assets 442,814 466,101
Marketable securities and investments 55,936 65,007
Property and equipment, net 51,808 53,288
Goodwill and intangible assets, net 809,103 825,142
Other noncurrent assets 24,859 35,241
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$1,384,520 $1,444,779
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $43,250 $45,596
Accrued compensation and employee
benefits 33,730 33,670
Deferred revenue 56,805 41,050
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Total current liabilities 133,785 120,316
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 8,469 7,992
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Total liabilities 542,254 528,308
Stockholders' equity 842,266 916,471
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$1,384,520 $1,444,779
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FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters and Nine Months Ended June 30, 2005 and 2004
(In thousands)
(Unaudited)
Quarter Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Strategy machine solutions $115,092 $105,699 $344,156 $312,547
Scoring solutions 40,741 36,308 119,512 105,322
Professional services 33,203 23,197 96,253 70,305
Analytic software tools 14,771 7,993 35,453 27,610
--------- --------- --------- ---------
Total revenues $203,807 $173,197 $595,374 $515,784
========= ========= ========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2005 and 2004
(In thousands)
(Unaudited)
Nine Months Ended
June 30,
-------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $98,800 $88,373
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 39,261 34,216
Changes in operating assets and liabilities, net
of acquisitions (12,304) 33,225
Other, net 24,395 6,669
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Net cash provided by operating activities 150,152 162,483
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Cash flows from investing activities:
Purchases of property and equipment (14,009) (14,749)
Cash paid for acquisitions, net of cash acquired (32,567) (274,545)
Net activity from marketable securities 19,800 224,799
Other, net 22,572 1,734
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Net cash used in investing activities (4,204) (62,761)
--------- ---------
Cash flows from financing activities:
Proceeds from issuances of common stock 49,353 44,527
Repurchases of common stock (231,834) (68,734)
Other, net (4,041) (3,520)
--------- ---------
Net cash used in financing activities (186,522) (27,727)
--------- ---------
Effect of exchange rate changes on cash (370) 531
--------- ---------
Increase (decrease) in cash and cash equivalents (40,944) 72,526
Cash and cash equivalents, beginning of period 134,070 130,383
--------- ---------
Cash and cash equivalents, end of period $93,126 $202,909
========= =========
Fair Isaac Corporation
Baseline Revenue Analysis
(In thousands) A = Actual, E = Estimate
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BKG'04 Q1A Q2A Q3A Q4A FY04
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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
- ----------------------------------------------------------------------
Baseline Prior
to '05 441,270 169,341 173,246 173,197 190,422 706,206
- ----------------------------------------------------------------------
Q1-2005E
Q2-2005E
Q3-2005E
Q4-2005E
- ----------------------------------------------------------------------
Total FY05
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand Total $441,270 $169,341 $173,246 $173,197 $190,422 $706,206
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BKG'05 Q1A Q2A Q3A Q4E FY05E
- ----------------------------------------------------------------------
Baseline Prior
to '04 $144,463 $139,115 $137,231 $133,500 $554,309
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Q1-2004A 8,714 6,506 6,243 5,500 26,963
Q2-2004A 6,350 5,276 4,817 4,500 20,943
Q3-2004A 6,688 5,279 3,341 3,000 18,308
Q4-2004A 9,946 8,269 7,280 6,500 31,995
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Total FY04 31,698 25,330 21,681 19,500 98,209
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Baseline Prior
to '05 176,161 164,445 158,912 153,000 652,518
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Q1-2005E $115,363 19,385 12,916 9,120 6,000 47,421
Q2-2005E 136,559 18,660 12,402 9,000 40,062
Q3-2005E 143,318 23,373 16,000 39,373
Q4-2005E 130,000 23,000 23,000
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Total FY05 525,240 19,385 31,576 44,895 54,000 149,856
- ----------------------------------------------------------------------
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Grand Total $525,240 $195,546 $196,021 $203,807 $207,000 $802,374
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CONTACT: Fair Isaac Corporation, Minneapolis
Investors & Analysts:
John D. Emerick, Jr., 800-213-5542
or
JD Bergquist Wood, 800-213-5542
investor@fairisaac.com