UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                      to                     

Fair Isaac Corporation

Delaware (State or other jurisdiction of incorporation or organization)		94-1499887 (I.R.S. Employer Identification No.)
901 Marquette Avenue, Suite 3200		55402-3232
Minneapolis, Minnesota		(Zip Code)
(Address of principal executive offices)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

     The number of shares of common stock outstanding on April 30, 2009 was 48,852,923 (excluding 40,003,860 shares held by the Company as treasury stock).

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			30
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			30
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 3. Defaults Upon Senior Securities			40
Item 4. Submission of Matters to a Vote of Security Holders			40
Item 5. Other Information			41
Item 6. Exhibits			41
Signatures			42
EX-31.1
EX-31.2
EX-32.1
EX-32.2

		March 31,				September 30,
		2009				2008
Assets
Current assets:
Cash and cash equivalents		$	201,286			$	129,678
Marketable securities available for sale, current portion			59,232				57,049
Accounts receivable, net			105,038				141,571
Prepaid expenses and other current assets			20,394				23,404
Total current assets			385,950				351,702
Marketable securities available for sale, less current portion			70,539				72,101
Other investments			11,074				12,374
Property and equipment, net			40,986				46,360
Goodwill			661,968				686,082
Intangible assets, net			43,926				52,468
Deferred income taxes			47,536				45,786
Other assets			10,060				8,380
		$	1,272,039			$	1,275,253
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	13,718			$	11,172
Accrued compensation and employee benefits			24,394				29,551
Other accrued liabilities			37,300				43,665
Deferred revenue			39,364				38,243
Total current liabilities			114,776				122,631
Revolving line of credit			295,000				295,000
Senior notes			275,000				275,000
Other liabilities			22,680				20,681
Total liabilities			707,456				713,312
Commitments and contingencies
Stockholders’ equity:
Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and outstanding)			—				—
Common stock ($0.01 par value; 200,000 shares authorized; 88,857 shares issued and 48,844 and 48,473 shares outstanding at March 31, 2009 and September 30, 2008, respectively)			488				485
Paid-in-capital			1,108,486				1,110,165
Treasury stock, at cost (40,013 and 40,384 shares at March 31, 2009 and September 30, 2008, respectively)			(1,361,837	)			(1,374,455	)
Retained earnings			853,018				825,109
Accumulated other comprehensive income (loss)			(35,572	)			637
Total stockholders’ equity			564,583				561,941
		$	1,272,039			$	1,275,253

See accompanying notes to condensed consolidated financial statements.

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

		Quarter Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Revenues		$	159,335			$	193,234			$	322,795			$	383,340
Operating expenses:
Cost of revenues (1)			53,476				72,946				112,495				139,918
Research and development			18,924				20,662				37,045				40,131
Selling, general and administrative (1)			52,460				61,365				107,229				128,124
Amortization of intangible assets (1)			3,156				3,621				6,403				6,684
Restructuring			870				6,124				8,948				5,679
Total operating expenses			128,886				164,718				272,120				320,536
Operating income			30,449				28,516				50,675				62,804
Interest income			1,245				1,685				2,900				4,235
Interest expense			(6,527	)			(3,837	)			(13,685	)			(8,258	)
Other income (expense), net			(298	)			874				1,148				617
Income from continuing operations before income taxes			24,869				27,238				41,038				59,398
Provision for income taxes			6,761				9,464				10,820				20,788
Income from continuing operations			18,108				17,774				30,218				38,610
Loss from discontinued operations			(363	)			(4,287	)			(363	)			(4,937	)
Net income		$	17,745			$	13,487			$	29,855			$	33,673
Basic earnings (loss) per share:
Continuing operations		$	0.37			$	0.36			$	0.62			$	0.78
Discontinued operations			(0.01	)			(0.08	)			(0.01	)			(0.10	)
Total		$	0.36			$	0.28			$	0.61			$	0.68
Diluted earnings (loss) per share:
Continuing operations		$	0.37			$	0.36			$	0.62			$	0.77
Discontinued operations			(0.01	)			(0.08	)			(0.01	)			(0.10	)
Total		$	0.36			$	0.28			$	0.61			$	0.67
Shares used in computing earnings (loss) per share:
Basic			48,813				48,760				48,643				49,404
Diluted			48,828				48,961				48,673				50,084

See accompanying notes to condensed consolidated financial statements.

																						Accumulated
		Common Stock																				Other				Total
						Par				Paid-In-				Treasury				Retained				Comprehensive				Stockholders’				Comprehensive
		Shares				Value				Capital				Stock				Earnings				Income (Loss)				Equity				Loss
Balance at September 30, 2008			48,473			$	485			$	1,110,165			$	(1,374,455	)		$	825,109			$	637			$	561,941
Share-based compensation			—				—				10,648				—				—				—				10,648
Exercise of stock options			82				1				(1,887	)			2,779				—				—				893
Tax effect from share-based payment arrangements			—				—				(2,680	)			—				—				—				(2,680	)
Issuance of ESPP shares from treasury			194				1				(3,829	)			6,604				—				—				2,776
Forfeitures of restricted stock			(2	)			—				64				(64	)			—				—				—
Issuance of stock to employees from treasury			97				1				(3,995	)			3,299				—				—				(695	)
Dividends paid			—				—				—				—				(1,946	)			—				(1,946	)
Net income			—				—				—				—				29,855				—				29,855			$	29,855
Unrealized gains on investments			—				—				—				—				—				446				446				446
Cumulative translation adjustments			—				—				—				—				—				(36,655	)			(36,655	)			(36,655	)
Balance at March 31, 2009			48,844			$	488			$	1,108,486			$	(1,361,837	)		$	853,018			$	(35.572	)		$	564,583			$	(6,354	)

See accompanying notes to condensed consolidated financial statements.

		Six Months Ended
		March 31,
		2009				2008
Cash flows from operating activities:
Net income		$	29,855			$	33,673
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			19,397				19,863
Share-based compensation			10,648				14,926
Deferred income taxes			915				1,020
Tax effect from share-based payment arrangements			(2,680	)			327
Excess tax benefits from share-based payment arrangements			(121	)			(1,216	)
Gain on repurchase of senior convertible notes			—				(356	)
Net amortization of premium on marketable securities			406				177
Provision for doubtful accounts			499				1,753
Loss on sale of discontinued operations			—				6,921
Net loss (gain) on sales of property and equipment			117				(37	)
Changes in operating assets and liabilities, net of acquisition and disposition effects:
Accounts receivable			28,419				8,133
Prepaid expenses and other assets			325				3,427
Accounts payable			3,018				571
Accrued compensation and employee benefits			(4,257	)			(10,134	)
Other liabilities			(7,913	)			(4,393	)
Deferred revenue			7,688				(4,386	)
Net cash provided by operating activities			86,316				70,269
Cash flows from investing activities:
Purchases of property and equipment			(8,503	)			(13,432	)
Cash proceeds from sales of property and equipment			—				1,543
Cash paid for acquisition, net of cash acquired			—				(31,941	)
Purchases of marketable securities			(66,512	)			(112,204	)
Proceeds from sales of marketable securities			—				2,008
Proceeds from maturities of marketable securities			64,590				121,000
Distribution from cost-method investees			1,300				—
Net cash used in investing activities			(9,125	)			(33,026	)
Cash flows from financing activities:
Proceeds from revolving line of credit			—				43,000
Repurchases of senior convertible notes			—				(23,348	)
Proceeds from issuances of common stock under employee stock option and purchase plans			2,974				14,938
Dividends paid			(1,946	)			(1,955	)
Repurchases of common stock			—				(106,840	)
Excess tax benefits from share-based payment arrangements			121				1,216
Net cash provided by (used in) financing activities			1,149				(72,989	)
Effect of exchange rate changes on cash			(6,732	)			425
Increase (decrease) in cash and cash equivalents			71,608				(35,321	)
Cash and cash equivalents, beginning of period			129,678				95,284
Cash and cash equivalents, end of period		$	201,286			$	59,963
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net		$	15,236			$	9,015
Cash paid for interest		$	14,063			$	9,037

See accompanying notes to condensed consolidated financial statements.

1. Nature of Business

Fair Isaac Corporation

     Incorporated under the laws of the State of Delaware, Fair Isaac Corporation is a provider of analytic, software and data management products and services that enable businesses to automate, improve and connect decisions. Fair Isaac Corporation (doing business under the name “FICO”) provides a range of analytical solutions, credit scoring and credit account management products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers, telecommunications providers, healthcare organizations and government agencies.

     In these consolidated financial statements, Fair Isaac Corporation is referred to as “we,” “us,” “our,” “FICO”, “Fair Isaac,” and “the Company.”

Principles of Consolidation and Basis of Presentation

     We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the standards of accounting measurement set forth in Accounting Principles Board (“APB”) Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board (“FASB”). Consequently, we have not necessarily included in this Form 10-Q all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements in this Form 10-Q reflect all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our financial position and results of operations. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with our audited consolidated financial statements and notes thereto presented in our Annual Report on Form 10-K for the year ended September 30, 2008. The interim financial information contained in this report is not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year.

     The condensed consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: the recoverability of accounts receivable, goodwill and other intangible assets, software development costs and deferred tax assets; estimated losses associated with contingencies and litigation; the ability to estimate hours in connection with fixed-fee service contracts, the ability to estimate transactional-based revenues for which actual transaction volumes have not yet been received, the determination of whether fees are fixed or determinable and collection is probable or reasonably assured; and the development of assumptions for use in the Black-Scholes model that estimates the fair value of our share-based awards and assessing forfeiture rates of share-based awards.

     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement No. 133 (“SFAS 161”). SFAS 161 expands the disclosure requirements about an entity’s derivative instruments and hedging activities. We adopted SFAS 161 as of January 1, 2009 on a prospective basis. Since SFAS 161 requires only additional disclosures of our derivative and hedging activities, the adoption of SFAS 161 did not affect our consolidated financial statements.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position (“FSP”) No. 157-2, Effective Date of FASB Statement No. 157, which defers the effective date of SFAS No. 157 for one year for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). In October 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”, which clarifies the application of SFAS 157 in a market that is not active. As described in Note 8, we have adopted Statement 157 and the related FASB staff positions. Consistent with the provisions of FSP 157-2, we elected to defer the adoption of SFAS 157 for non-financial assets and liabilities measured at fair value

on a non-recurring basis until October 1, 2009. We are currently evaluating the impact of the full adoption of SFAS 157 on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company’s choice to use fair value on its earnings. It also requires companies to display the fair value of those assets and liabilities for which a company has chosen to use fair value on the face of the balance sheet. The new standard does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS No. 107, Disclosures about Fair Value of Financial Instruments. On October 1, 2008 we adopted SFAS 159 but did not elect the fair value option for any additional financial assets or liabilities that we held at that date.

2. Amortization of Intangible Assets

     Amortization expense associated with our intangible assets, which has been reflected as a separate operating expense caption within the accompanying condensed consolidated statements of income, consisted of the following:

		Quarter Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In thousands)
Cost of revenues		$	1,663			$	1,919			$	3,386			$	3,421
Selling, general and administrative			1,493				1,702				3,017				3,263
		$	3,156			$	3,621			$	6,403			$	6,684

     Cost of revenues reflects our amortization of completed technology, and selling, general and administrative expenses reflects our amortization of other intangible assets. Intangible assets were $43.9 million and $52.5 million, net of accumulated amortization of $104.5 million and $101.7 million, as of March 31, 2009 and September 30, 2008, respectively.

3. Restructuring and Acquisition-Related Expenses

     The following table summarizes our restructuring and acquisition-related accruals associated with acquisitions and certain facility closures. The current portion and non-current portion is recorded in other accrued current liabilities and other long-term liabilities, respectively, within the accompanying condensed consolidated balance sheets. These balances are expected to be paid by fiscal 2018.

		Accrual at																Accrual at
		September 30,				Expense				Cash				Expense				March 31,
		2008				Additions				Payments				Reversal				2009
		(In thousands)
Facilities charges		$	9,688			$	3,877			$	(2,311	)		$	(413	)		$	10,841
Employee separation			930				5,860				(6,072	)			(376	)			342
			10,618			$	9,737			$	(8,383	)		$	(789	)			11,183
Less: current portion			(4,224	)															(4,215	)
Non-current		$	6,394															$	6,968

     During the quarter ended December 31, 2008, in connection with our reengineering program, we incurred net charges totaling $8.1 million. The charges included $5.9 million for severance costs associated with the reduction of 255 positions throughout the Company. Cash payments for substantially all the severance costs were paid during the quarter ended March 31, 2009. We also recognized charges of $2.6 million associated with vacating excess leased space located in Georgia and California. The charge represents future cash lease payments, net of estimated sublease income, which will be paid out over the next nine years. In addition, we reversed $0.4 million of accrued expenses as a result of a favorable lease termination agreement that we entered into for office

space that was vacated in the prior year. During the quarter ended March 31, 2009, we recognized a $1.2 million charge due to unfavorable sublease arrangements we entered into for office space previously vacated. The charge was offset by a $0.4 million reduction in other restructuring liabilities.

     In connection with the sale of our Insurance Bill Review business in April 2008, we recorded a charge of $0.4 million, net of tax, during the quarter ended March 31, 2009, resulting from the resolution of a final working capital adjustment in favor of the purchaser.

		March 31,				September 30,
		2009				2008
		(In thousands)
Property and equipment		$	200,449			$	203,236
Less accumulated depreciation and amortization			(159,463	)			(156,876	)
		$	40,986			$	46,360

6. Earnings Per Share

     The following reconciles the numerators and denominators of basic and diluted earnings per share (“EPS”):

		Quarter Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In thousands, except per share data)
Numerator for basic earnings per share — income from continuing operations		$	18,108			$	17,774			$	30,218			$	38,610
Interest expense on senior convertible notes, net of tax			—				1				—				2
Numerator for diluted earnings per share from continuing operations		$	18,108			$	17,775			$	30,218			$	38,612
Denominator — shares:
Basic weighted-average shares			48,813				48,760				48,643				49,404
Effect of dilutive securities			15				201				30				680
Diluted weighted-average shares			48,828				48,961				48,673				50,084
Earnings per share from continuing operations:
Basic		$	0.37			$	0.36			$	0.62			$	0.78
Diluted		$	0.37			$	0.36			$	0.62			$	0.77

     The computation of diluted EPS for the quarters ended March 31, 2009 and 2008, excludes options to purchase approximately 8,264,000 and 10,280,000 shares of common stock, respectively, and for the six months ended March 31, 2009 and 2008, excludes options to purchase approximately 8,106,000 and 7,235,000 shares of common stock, respectively, because the options’ exercise prices exceeded the average market price of our common stock in these periods and their inclusion would be antidilutive.

7. Segment Information

     We are organized into the following four reportable segments, to align with the internal management of our worldwide business operations based on product and service offerings:

	•		Strategy Machine™ Solutions. These are pre-configured Decision Management applications designed for a specific type of business problem or process, such as marketing, account origination, customer management, fraud and insurance claims management. This segment also includes our myFICO solutions for consumers.
	•		Scoring Solutions. Our scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our scoring solutions are distributed through major credit reporting agencies, as well as services through which we provide our scores to clients directly.

	•		Professional Services. Through our professional services, we tailor our Decision Management products to our clients’ environments, and we design more effective decisioning environments for our clients. This segment includes revenues from custom engagements, business solution and technical consulting services, systems integration services, and data management services.
	•		Analytic Software Tools. This segment is composed of software tools that clients can use to create their own custom Decision Management applications.

     Our Chief Executive Officer evaluates segment financial performance based on segment revenues and operating income. Segment operating expenses consist of direct and indirect costs principally related to personnel, facilities, consulting, travel, depreciation and amortization. Indirect costs are allocated to the segments generally based on relative segment revenues, fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate share-based compensation expense, restructuring expense and certain other income and expense measures to our segments. These income and expense items are not allocated because they are not considered in evaluating the segment’s operating performance. Our Chief Executive Officer does not evaluate the financial performance of each segment based on its respective assets or capital expenditures; rather, depreciation and amortization amounts are allocated to the segments from their internal cost centers as described above.

     The following tables summarize segment information for the quarters and six months ended March 31, 2009 and 2008:

		Quarter Ended March 31, 2009
		Strategy												Analytic
		Machine				Scoring				Professional				Software
		Solutions				Solutions				Services				Tools				Total
		(In thousands)
Revenues		$	86,632			$	31,118			$	30,885			$	10,700			$	159,335
Operating expenses			(68,128	)			(13,998	)			(30,654	)			(10,059	)			(122,839	)
Segment operating income		$	18,504			$	17,120			$	231			$	641				36,496
Unallocated share-based compensation expense																			(5,177	)
Unallocated restructuring																			(870	)
Operating income																			30,449
Unallocated interest income																			1,245
Unallocated interest expense																			(6,527	)
Unallocated other expense, net																			(298	)
Income from continuing operations before income taxes																		$	24,869
Depreciation and amortization		$	6,793			$	1,154			$	1,254			$	613			$	9,814

		Quarter Ended March 31, 2008
		Strategy												Analytic
		Machine				Scoring				Professional				Software
		Solutions				Solutions				Services				Tools				Total
		(In thousands)
Revenues		$	101,357			$	39,276			$	39,497			$	13,104			$	193,234
Operating expenses			(85,382	)			(16,702	)			(38,103	)			(11,657	)			(151,844	)
Segment operating income		$	15,975			$	22,574			$	1,394			$	1,447				41,390
Unallocated share-based compensation expense																			(6,750	)
Unallocated restructuring																			(6,124	)
Operating income																			28,516
Unallocated interest income																			1,685
Unallocated interest expense																			(3,837	)
Unallocated other income, net																			874
Income from continuing operations before income taxes																		$	27,238
Depreciation and amortization		$	5,367			$	1,193			$	890			$	580			$	8,030

		Six Months Ended March 31, 2009
		Strategy												Analytic
		Machine				Scoring				Professional				Software
		Solutions				Solutions				Services				Tools				Total
		(In thousands)
Revenues		$	174,207			$	65,228			$	58,709			$	24,651			$	322,795
Operating expenses			(139,581	)			(28,353	)			(63,661	)			(20,929	)			(252,524	)
Segment operating income (loss)		$	34,626			$	36,875			$	(4,952	)		$	3,722				70,271
Unallocated share-based compensation expense																			(10,648	)
Unallocated restructuring																			(8,948	)
Operating income																			50,675
Unallocated interest income																			2,900
Unallocated interest expense																			(13,685	)
Unallocated other income, net																			1,148
Income from continuing operations before income taxes																		$	41,038
Depreciation and amortization		$	13,200			$	2,438			$	2,438			$	1,321			$	19,397

		Six Months Ended March 31, 2008
		Strategy												Analytic
		Machine				Scoring				Professional				Software
		Solutions				Solutions				Services				Tools				Total
		(In thousands)
Revenues		$	198,784			$	82,003			$	75,513			$	27,040			$	383,340
Operating expenses			(169,851	)			(33,881	)			(72,876	)			(23,548	)			(300,156	)
Segment operating income		$	28,933			$	48,122			$	2,637			$	3,492				83,184
Unallocated share-based compensation expense																			(14,701	)
Unallocated restructuring																			(5,679	)
Operating income																			62,804
Unallocated interest income																			4,235
Unallocated interest expense																			(8,258	)
Unallocated other income, net																			617
Income from continuing operations before income taxes																		$	59,398
Depreciation and amortization		$	11,164			$	2,755			$	1,585			$	1,273			$	16,777

8. Fair Value Measurements

     As discussed in Note 1, “Adoption of Recent Accounting Pronouncements,” on October 1, 2008, we adopted SFAS 157 for financial assets and financial liabilities and for non-financial assets and non-financial liabilities that we recognize or disclose at fair value on a recurring basis (at least annually). As of the date of adoption, these included cash equivalents and available-for-sale marketable securities. Consistent with the provisions of FSP 157-2, we elected to defer the provisions of SFAS 157 that relate to non-financial assets and non-financial liabilities that we do not recognize or disclose at fair value on a recurring basis.

     SFAS 157 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

     Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. Our Level 1 securities are predominantly comprised of money market funds.

     Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. Our Level 2 securities are predominantly comprised of U.S. government obligations that are generally held to maturity.

     Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. We do not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy.

     The following table represents financial assets that we measured at fair value on a recurring basis at March 31, 2009. We have classified these assets in accordance with the fair value hierarchy set forth in SFAS 157:

						Significant
		Active Markets				Other				Fair Value
		For Identical				Observable				As of
		Instruments				Inputs				March 31,
		(Level 1)				(Level 2)				2009
Assets:
Cash equivalents (1)		$	134,372			$	—			$	134,372
Corporate debt (2)			—				1,027				1,027
U.S. government obligations (2)			—				125,686				125,686
Marketable equity securities (3)			3,058				—				3,058
Total		$	137,430			$	126,713			$	264,143

     The valuation techniques used to measure the fair values of our financial assets incorporate market inputs, which include reported trades, broker/dealer quotes, benchmark yields, issuer spreads, benchmark securities and other inputs derived from or corroborated by observable market data.

          Effective Tax Rate

     Our effective tax rate was 27.2% and 34.7% during the quarters ended March 31, 2009 and 2008, respectively, and 26.4% and 35.0% during the six months ended March 31, 2009 and 2008, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the respective full fiscal year.

     The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The tax rate was reduced from the second quarter of 2008 due to changes in the foreign domestic earnings mix as well as recognition of the 2008 extension of the Federal Research Credit and higher impact of permanent tax benefits on lower earnings.

     The total unrecognized tax benefit for uncertain tax positions under FASB Interpretation No. 48 at March 31, 2009 is estimated to be approximately $29.2 million. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our consolidated statements of income. We recognize interest earned as interest income in our consolidated statements of income. As of March 31, 2009, we have accrued interest of $3.7 million related to the unrecognized tax benefits.

     We have a $600.0 million unsecured revolving credit facility with a syndicate of banks that expires in 2011. Proceeds from the credit facility can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. Interest on amounts borrowed under the credit facility is based on (i) a base rate, which is the greater of (a) the prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin. The margin on LIBOR borrowings ranges from 0.30% to 0.55% and is determined based on our consolidated leverage ratio. In addition, we must pay utilization fees if borrowings and commitments under the credit facility exceed 50% of the total credit facility commitment, as well as facility fees. The credit facility contains certain restrictive covenants, including maintenance of consolidated leverage and fixed charge coverage ratios. The credit facility also contains covenants typical of unsecured facilities. As of March 31, 2009, we were in compliance with all covenants under this credit facility and we had $295.0 million of borrowings outstanding at an interest rate of 1.6%.

     In May 2008, we issued $275.0 million of Senior Notes in a private placement to a group of institutional investors. The Senior Notes were issued in four series with maturities ranging from 5 to 10 years. The Senior Notes’ weighted average interest rate is 6.8%. The Senior Notes are subject to certain restrictive covenants that are substantially similar to those in the credit agreement for the revolving credit facility including maintenance of consolidated leverage and fixed charge coverage ratios. The purchase agreement for the Senior Notes also includes covenants typical of unsecured facilities.

     On January 1, 2009, we adopted SFAS 161 which requires expanded disclosures on derivative investments and hedging activities. We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign currency denominated accounts receivable and bank balances from the effects of volatility in foreign exchange that might occur prior to their conversion to their functional currency. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign currency exchange. We routinely enter into contracts to offset exposures denominated primarily in the British Pound, EURO and Japanese Yen.

     Foreign currency denominated accounts receivable and bank balances are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other income (expense), net. The forward contracts are not designated as hedges and are marked to market through Other income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of the remeasured accounts receivable and bank balances attributable to changes in foreign currency exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.

     The following table summarizes the fair value of our derivative instruments and their location in the consolidated balance sheets:

March 31, 2009

(in thousands)

Assets

Liabilities

Derivatives not designated as hedging instruments

Balance Sheet Location

Amount

Balance Sheet Location

Amount

Foreign currency forward contracts

Other current assets

$

—

Other current liabilities

$

—

     The following table summarizes our outstanding forward foreign currency contracts, by currency at March 31, 2009:

		Contract Amount
		Foreign												Fair Value
		Currency								US$				US$
		(In thousands)
Sell foreign currency:
EURO (EUR)		EUR					9,130			$	12,170			$		—
Japanese Yen (YEN)		YEN					93,800				951					—
Canadian Dollar (CAD)		CAD					600				477					—
Buy foreign currency:
British Pound (GBP)		GBP					4,459			$	6,390			$		—

     The forward foreign currency contracts were all entered into on March 31, 2009; therefore, the fair value was $0 on that date.

     The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows:

March 31, 2009
(in thousands)		Loss on Derivative Recognized in Income
Derivatives not designated as hedging instruments		Location		Amount
Foreign currency forward contracts		Other income (expense), net		$	(366	)

     We are in disputes with certain customers regarding amounts owed in connection with the sale of certain of our products and services. We also have had claims asserted by former employees relating to compensation and other employment matters. We are also involved in various other claims and legal actions arising in the ordinary course of business. We believe that none of these aforementioned claims or actions will result in a material adverse impact to our consolidated results of operations, liquidity or financial condition. However, the amount or range of any potential liabilities associated with these claims and actions, if any, cannot be determined with certainty. Set forth below are additional details concerning certain ongoing litigation.

     Braun (which we acquired in November 2004) was a defendant in a lawsuit filed on November 26, 2001, in the United States District Court for the Southern District of New York (Case No. 01 CV 10629) that alleges violations of federal securities laws in connection with Braun’s initial public offering in August 1999. This lawsuit is among approximately 300 coordinated putative class actions against certain issuers, their officers and directors, and underwriters with respect to such issuers’ initial public offerings. As successor-in-interest to Braun, we entered into a Stipulation and Agreement of Settlement along with most of the other defendant

issuers in this coordinated litigation, where such issuers and their officers and directors would be dismissed with prejudice, subject to the satisfaction of certain conditions, including approval of the Court. Under the terms of this Agreement, we would not pay any amount of the settlement. However, since December 2006, certain procedural matters concerning the class status have been decided in the district and appellate courts of the Second Circuit, ultimately determining that no class status exists for the plaintiffs. Since there is no class status, there could be no agreement, thus the District Court entered an order formally denying the motion for final approval of the settlement agreement.

     The issuers and their insurers have recently reached a preliminary settlement agreement, which they believe to be consistent with the earlier court rulings and which has been presented to all parties for approval. The Company has given consent to the terms of the proposed settlement. Under the terms of this Agreement, we would not pay any amount of the settlement. We expect that the parties to the consolidated action will begin preparing formal settlement documents shortly. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter.

     In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) states that business combinations will result in all assets and liabilities of an acquired business being recorded at their fair values. Certain forms of contingent consideration and acquired contingencies will be recorded at fair value at the acquisition date. SFAS 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. This statement is effective for financial statement issued for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 141(R) will have on our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 clarifies that a noncontrolling or minority interest in a subsidiary is considered an ownership interest and, accordingly, requires all entities to report such interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 160 will have on our consolidated financial statements.

     In May 2008, the FASB issued FASB Staff Position (“FSP”) APB 14-1, Accounting for Convertible Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The FSP requires that proceeds from the issuance of convertible debt instruments be allocated between debt (at a discount) and an equity component. The debt discount will be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. This FSP is effective for fiscal years beginning after December 15, 2008, and will be applied retrospectively to prior periods. This FSP changes the accounting treatment for our Senior Convertible Notes, which were issued in August 2003. Even though we retired our Senior Convertible Notes during fiscal 2008, this new accounting treatment still requires us to retrospectively record a significant amount of non-cash interest expense in the periods when these notes were outstanding. We are in the process of determining what effect the adoption of this FSP will have on our consolidated financial statements.

     In April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets.” This new staff position is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), “Business Combinations.” FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of FSP SFAS 142-3 will have on our consolidated financial statements.

     In April 2009, the FASB issued FASB Staff Position (“FSP”) No. 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments. The staff position requires fair value disclosures of financial instruments on a quarterly basis, as well as new disclosures regarding the methodology and significant assumptions underlying the fair value measures and any changes to the methodology and assumptions during the reporting period. FSP No. 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009. We are in the process of determining what effect the adoption of FSP 107-1 and APB 28-1 will have on

our consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

     Statements contained in this Report that are not statements of historical fact should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). In addition, certain statements in our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other statements concerning future financial performance; (ii) statements of our plans and objectives by our management or Board of Directors, including those relating to products or services; (iii) statements of assumptions underlying such statements; (iv) statements regarding business relationships with vendors, customers or collaborators; and (v) statements regarding products, their characteristics, performance, sales potential or effect in the hands of customers. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “should,” “potential,” “goals,” “strategy,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in Item 1A of Part II, Risk Factors, below. The performance of our business and our securities may be adversely affected by these factors and by other factors common to other businesses and investments, or to the general economy. Forward-looking statements are qualified by some or all of these risk factors. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. Such forward-looking statements speak only as of the date on which statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances. Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our reports on Forms 10-Q and 8-K to be filed by the Company in fiscal 2009.

OVERVIEW

     We are a leader in Decision Management (“DM”) solutions that enable businesses to automate, improve and connect decisions to enhance business performance. Our predictive analytics and decision management systems power hundreds of billions of customer decisions each year. We help companies 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 our solutions, as do many insurers, retailers, telecommunications providers, healthcare organizations, pharmaceutical companies and government agencies. We also serve consumers through online services that enable people to purchase and understand their FICO^® scores, the standard measure in the United States of credit risk, empowering them to manage their financial health.

     Most of our revenues are derived from the sale of products and services within the consumer credit, financial services and insurance industries, and during the quarter ended March 31, 2009, 71% of our revenues were derived from within these industries. A significant portion of our remaining revenues is derived from the healthcare and retail industries, as well as the government sector. Our clients utilize our products and services to facilitate a variety of business processes, including customer marketing and acquisition, account origination, credit and underwriting risk management, fraud loss prevention and control, and client account and policyholder management. A significant portion of our revenues is derived from transactional or unit-based software license fees, annual license fees under long-term software license arrangements, transactional fees derived under scoring, network service or internal hosted software arrangements, and annual software maintenance fees. The recurrence of these revenues is, to a significant degree, dependent upon our clients’ continued usage of our products and services in their business activities. The more significant activities underlying the use of our products in these areas include: credit and debit card usage or active account levels; lending acquisition, origination and customer management activity; and customer acquisition, cross selling and retention programs. Approximately 76% and 70% of our revenues during the quarters ended March 31, 2009 and 2008, respectively, and 77% and 72% of our revenues for the six months ended March 31, 2009 and 2008, respectively, were derived from arrangements with transactional or unit-based pricing. We also derive revenues from other sources which generally do not recur and include, but are not limited to, perpetual or time-based licenses with upfront payment terms, non-recurring professional service arrangements and gain-share arrangements where revenue is derived based on percentages of client revenue growth or cost reductions attributable to our products.

     One measure used by management as an indicator of our business performance is the volume of bookings achieved. We define a

booking as estimated future contractual revenues, including agreements with perpetual, multi-year and annual terms. Bookings values may include: (i) estimates of variable fee components such as hours to be incurred under new professional services arrangements and customer account or transaction activity for agreements with transactional-based fee arrangements, (ii) additional or expanded business from renewals of contracts, and (iii) to a lesser extent, previous customers that have attrited and been re-sold only as a result of a significant sales effort. During the quarter ended March 31, 2009, we achieved bookings of $46.8 million, with no deals with a booking value of $3.0 million or more. In comparison, bookings in the prior year quarter ended March 31, 2008 were $99.2 million, including three deals with bookings values of $3.0 million or more.

     Management regards the volume of 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 our revenues, and they are subject to a number of risks and uncertainties, including those described in Item 1A of Part II, “Risk Factors”, concerning timing and contingencies affecting product delivery and performance. Although many of our contracts have fixed noncancelable terms, some of our contracts are terminable by the client on short notice or without notice. Accordingly, we do not believe it is appropriate to characterize all of our bookings as backlog that will generate future revenue.

     Our revenues derived from clients outside the United States have generally grown, and may in the future grow more rapidly than our revenues from domestic clients. International revenues totaled $51.2 million and $66.7 million during the quarters ended March 31, 2009 and 2008, respectively, representing 32% and 35% of total consolidated revenues in each of these periods. International revenues totaled $112.4 million and $127.7 million during the six months ended March 31, 2009 and 2008, respectively, representing 35% and 33% of total consolidated revenues in each of these periods. In addition to clients acquired via our acquisitions, we believe that our international growth is a product of successful relationships with third parties that assist in international sales efforts and our own increased sales focus internationally, and we expect that the percentage of our revenues derived from international clients will increase in the future, subject to the impact of foreign currency fluctuations.

Reengineering Plan

     In April 2008, we announced the details of a reengineering plan designed to grow revenues through strategic resource allocation and improve profitability through cost reduction. Key components of the plan include rationalizing the business portfolio, simplifying management hierarchy, eliminating low-priority positions, consolidating facilities and managing fixed and variable costs. Also in connection with the plan, we sold our Insurance Bill Review business unit and we fully exited our Cortronics neural research product line, Fast Panel diagnostics product line and advertising services group.

     In January 2009, we announced additional actions under the reengineering plan. The additional actions were either completed or committed to by management prior to December 31, 2008 and were primarily aimed at reducing costs through headcount reductions and facility consolidations. With respect to the headcount reductions, we identified and eliminated 255 positions throughout the Company. We expect annual cost savings as a result of these additional actions of approximately $30 million. During the quarter ended March 31, 2009, we recognized a $1.2 million charge due to unfavorable sublease arrangements we entered into for office space previously vacated. We plan to achieve further cost savings by eliminating additional positions during fiscal 2009 through attrition of non-revenue producing positions and restricting discretionary expenditures.

Current Business Environment

     In 2008, the financial markets experienced significant volatility and general economic conditions deteriorated. These conditions have had a substantial impact on our customers, especially financial institutions. This has included an increased number of consolidations among our customers, a significant decline in new account acquisition activities and extension of credit by financial institutions and a general slowing of software purchases and related implementation services by our customers. These unfavorable conditions have affected our business in the quarter ended March 31, 2009 and are expected to continue to affect us during the remainder of fiscal 2009. In particular, our Scoring Solutions, Strategy Machine Solutions and Professional Services segments have experienced significant revenue declines.

     As a result of this difficult business environment, we continue to aggressively manage our expenses in an effort to maintain solid earnings and cash flows. We also plan to continue to invest in our Decision Management solutions, as well as our core business operations.

     In January 2008, we acquired Dash Optimization Ltd., a leading provider of decision modeling and optimization software, for an

aggregate purchase price of $34.1 million in cash. Results of operations from this acquisition are included in our results prospectively from the date of acquisition.

     In April 2008, we completed the sale of our Insurance Bill Review business unit for $15.7 million in cash to Mitchell International, Inc. We recorded a $7.2 million pre-tax loss, but a $3.3 million after-tax gain on the sale, as the amount of goodwill disposed of for income tax purposes exceeded the amount determined for financial reporting purposes. Revenues from the business were $10.1 million and $19.4 million for the quarter and six month period ended March 31, 2008, respectively. The Insurance Bill Review business unit is classified as discontinued operations in our consolidated condensed financial statements and in the following management discussion and analysis.

     Our reportable segments are: Strategy Machine Solutions, Scoring Solutions, Professional Services and Analytic Software Tools. Although we sell solutions and services into a large number of end user product and industry markets, our reportable business segments reflect the primary method in which management organizes and evaluates internal financial information to make operating decisions and assess performance. Comparative segment revenues, operating income, and related financial information for the quarters ended March 31, 2009 and 2008 are set forth in Note 7 to the accompanying condensed consolidated financial statements.

     The following tables set forth certain summary information on a segment basis related to our revenues for the fiscal periods indicated.

		Quarter Ended																				Period-to-Period
		March 31,								Percentage of Revenues								Period-to-Period				Percentage
Segment		2009				2008				2009				2008				Change				Change
		(In thousands)																(In thousands)
Strategy Machine Solutions		$	86,632			$	101,357				54	%			53	%		$	(14,725	)			(15	)%
Scoring Solutions			31,118				39,276				20	%			20	%			(8,158	)			(21	)%
Professional Services			30,885				39,497				19	%			20	%			(8,612	)			(22	)%
Analytic Software Tools			10,700				13,104				7	%			7	%			(2,404	)			(18	)%
		$	159,335			$	193,234				100	%			100	%			(33,899	)			(18	)%

		Six Months Ended																				Period-to-Period
		March 31,								Percentage of Revenues								Period-to-Period				Percentage
Segment		2009				2008				2009				2008				Change				Change
		(In thousands)																(In thousands)
Strategy Machine Solutions		$	174,207			$	198,784				54	%			52	%		$	(24,577	)			(12	)%
Scoring Solutions			65,228				82,003				20	%			21	%			(16,775	)			(20	)%
Professional Services			58,709				75,513				18	%			20	%			(16,804	)			(22	)%
Analytic Software Tools			24,651				27,040				8	%			7	%			(2,389	)			(9	)%
		$	322,795			$	383,340				100	%			100	%			(60,545	)			(16	)%

     Quarter Ended March 31, 2009 Compared to Quarter Ended March 31, 2008 Revenues

     Strategy Machine Solutions segment revenues decreased $14.7 million due to a $5.4 million decrease in revenues from our customer management solutions, a $4.7 million decrease in revenues from our collections and recovery solutions, a $1.5 million decrease in revenues from our consumer solutions, a $1.4 million decrease in revenues from our fraud solutions, a $1.2 million decrease in revenues from our marketing solutions, and a $0.5 million decrease in revenues from our other strategy machine solutions.

     Overall segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In addition, revenues declined $2.5 million due to unfavorable currency translation related to

the weakening of the British Pound versus the U.S. dollar. At the product group level, the decrease in customer management solutions revenues was attributable to a decline in license sales, as the prior year quarter included several large license sales. In addition, there was a decline in customer management solutions transactional revenues. The decrease in collections and recovery solutions revenues resulted from a decline in license sales as the prior year quarter included several large license sales. The decrease in consumer solutions was primarily attributed to revenues lost from Experian terminating its relationship with myFICO.com^® during the quarter. The decrease in fraud solutions revenues was attributable primarily to decreases in volumes associated with transactional-based agreements. The decline was partially the result of a decrease in revenues associated with our solutions for telecommunication service providers, which we have determined are not strategic and are no longer actively marketing. The decrease in marketing solutions revenues was attributable primarily to a decline in sales volumes resulting from the loss last year of several large customer accounts.

     Scoring Solutions segment revenues decreased $8.2 million due to a $6.8 million reduction in revenues derived from the credit reporting agencies, which resulted from a decline in volumes. Volumes declined as financial institutions have significantly reduced new account acquisition activities and extension of credit. Revenues were also impacted by a reduction in revenues from our services sold directly to users, which resulted from increased pricing pressures and a decline in volumes due to a decrease in prescreening initiatives by our customers. We expect that competitive pricing pressures as well as reduced volumes due to weakness in the U.S. financial credit market will continue to adversely affect segment revenues in fiscal 2009.

     During the quarters ended March 31, 2009 and 2008, revenues generated from our agreements with Equifax, TransUnion and Experian collectively accounted for approximately 18% of our total revenues, including revenues from these customers that are recorded in our other segments.

     Professional Services segment revenues decreased $8.6 million as difficult global economic conditions have caused customers to slow down contracted services, and as a result of the weakening of the British Pound versus the U.S. dollar, which accounts for $2.4 million of the decrease. The decline in revenues also reflects the overall decline in license sales, which results in a corresponding decline in implementation services. In addition, the decline in revenues is the result of our decision to stop pursuing certain lower margin consulting service engagements. During the quarter ended March 31, 2009, we established fair value for certain analytic model consulting services that had previously been recorded as deferred revenue. Because all of the revenue recognition criteria have been met for these services, we recognized revenue of $2.5 million in the quarter that was previously deferred.

     Analytic Software Tools segment revenues decreased $2.4 million due to a decline in sales of our Blaze Advisor and Model Builder products, which was partially offset by $1.1 million increase from products acquired in our January 2008 acquisition of Dash Optimization Ltd.

     Six Months Ended March 31, 2009 Compared to Six Months Ended March 31, 2008 Revenues

     Strategy Machine Solutions segment revenues decreased $24.6 million due to a $7.5 million decrease in revenues from our collections and recovery solutions, a $7.1 million decrease in revenues from our customer management solutions, a $5.4 million decrease in revenues from our fraud solutions, a $2.8 million decrease in revenues from our marketing solutions, and a $1.8 million decrease in revenues from our other strategy machine solutions.

     Overall segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In addition, revenues declined $4.2 million due to unfavorable currency translation related to the weakening of the British Pound versus the U.S. dollar. At the product group level, the decrease in collections and recovery solutions revenues resulted from a decline in license sales. The decrease in customer management solutions revenues was attributable to a decline in license sales, as the prior year period included several large license sales. In addition, there was a decline in customer management solutions’ transactional revenues. The decrease in fraud solutions revenues was attributable primarily to decreases in volumes associated with transactional-based agreements. The decline was partially the result of a decrease in revenues associated with our solutions for telecommunication service providers, which we have determined are not strategic and are no longer actively marketing. Revenues were also adversely impacted by the restructuring of a large customer contract. The decrease in marketing solutions revenues was attributable primarily to a decline in sales volumes resulting from the loss last year of several large customer accounts.

     Scoring Solutions segment revenues decreased $16.8 million due to a $13.6 million reduction in revenues derived from the credit reporting agencies, which resulted from a decline in volumes. Volumes declined as financial institutions have significantly reduced new account acquisition activities and extension of credit. Revenues were also impacted by a reduction in revenues from our services sold directly to users, which resulted from increased pricing pressures and a decline in volumes due to a decrease in prescreening initiatives by our customers. We expect that competitive pricing pressures as well as reduced volumes due to weakness in the U.S.

financial credit market will continue to adversely affect segment revenues in fiscal 2009.

     During the six months ended March 31, 2009 and 2008, revenues generated from our agreements with Equifax, TransUnion and Experian, collectively accounted for approximately 18% and 19%, respectively, of our total revenues, including revenues from these customers that are recorded in our other segments.

     Professional Services segment revenues decreased $16.8 million as difficult global economic conditions have caused customers to slow down contracted services, and as a result of the weakening of the British Pound versus the U.S. dollar, which accounts for $3.7 million of the decrease. The decline in revenues also reflects the overall decline in license sales, which results in a corresponding decline in implementation services. In addition, the decline in revenues is the result of our decision to stop pursuing certain lower margin consulting service engagements. During the six month period ended March 31, 2009, we established fair value for certain analytic model consulting services that had previously been recorded as deferred revenue. Because all of the revenue recognition criteria have been met for these services, we recognized revenue of $2.5 million in the six-month period that was previously deferred.

     Analytic Software Tools segment revenues decreased $2.4 million due to a decline in sales of our Blaze Advisor product which was partially offset by $3.3 million increase from products acquired in our January 2008 acquisition of Dash Optimization Ltd.

     The following table sets forth certain summary information related to our statements of income for the fiscal periods indicated.

		Quarter Ended																				Period-to-Period
		March 31,								Percentage of Revenues								Period-to-Period				Percentage
		2009				2008				2009				2008				Change				Change
		(In thousands)																(In thousands)
Revenues		$	159,335			$	193,234				100	%			100	%		$	(33,899	)			(18	)%
Operating expenses:
Cost of revenues			53,476				72,946				34	%			38	%			(19,470	)			(27	)%
Research and development			18,924				20,662				12	%			10	%			(1,738	)			(8	)%
Selling, general and administrative			52,460				61,365				33	%			32	%			(8,905	)			(15	)%
Amortization of intangible assets			3,156				3,621				2	%			2	%			(465	)			(13	)%
Restructuring			870				6,124				—				3	%			(5,254	)			(86	)%
Total operating expenses			128,886				164,718				81	%			85	%			(35,832	)			(22	)%
Operating income			30,449				28,516				19	%			15	%			1,933				7	%
Interest income			1,245				1,685				1	%			1	%			(440	)			(26	)%
Interest expense			(6,527	)			(3,837	)			(4	)%			(2	)%			(2,690	)			70	%
Other income (expense), net			(298	)			874				—				—				(1,172	)			(134	)%
Income before income taxes			24,869				27,238				16	%			14	%			(2,369	)			(9	)%
Provision for income taxes			6,761				9,464				5	%			5	%			(2,703	)			(29	)%
Income from continuing operations			18,108				17,774				11	%			9	%			334				2	%
Loss from discontinued operations			(363	)			(4,287	)			—				(2	)%			3,924				(92	)%
Net income		$	17,745			$	13,487				11	%			7	%			4,258				32	%
Number of employees at quarter end			2,184				2,925												(741	)			(25	)%