UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

  

Date of Report (Date of earliest event reported) January 30, 2019

  

FAIR ISAAC CORPORATION

(Exact name of registrant as specified in its charter)

  

Delaware 1-11689 94-1499887

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

181 Metro Drive, Suite 700

San Jose, California

 

 

95110-1346

(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code   408-535-1500

 

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):

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Exchange Act (17 CFR 240.12b-2).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 

 

 

 

TABLE OF CONTENTS

 

Item 2.02. Results of Operations and Financial Condition.  
Item 9.01. Financial Statements and Exhibits.  
Exhibit 99.1  
Signature  

 

 

 

 

 

Item 2.02.Results of Operations and Financial Condition.

 

On January 30, 2019, Fair Isaac Corporation (the “Company”) reported its financial results for the quarter ended December 31, 2018. See the Company’s press release dated January 30, 2019, which is furnished as Exhibit 99.1 hereto and incorporated by reference in this Item 2.02.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)       Exhibits.

 

Exhibit Description
   
99.1 Press Release dated January 30, 2019

 

 

 

 

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/ MICHAEL J. PUNG  
    Michael J. Pung  
    Executive Vice President and Chief Financial  
    Officer  

 

Date: January 30, 2019

 

 

 

FICO Announces Earnings of $1.32 per Share for First Quarter Fiscal 2019



Revenue of $262 million vs. $232 million in prior year

SAN JOSE, Calif., Jan. 30, 2019 /PRNewswire/ -- FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its first fiscal quarter ended December 31, 2018.

First Quarter Fiscal 2019 GAAP Results
Net income for the quarter totaled $40.0 million, or $1.32 per share, versus $32.9 million, or $1.04 per share, reported in the prior year period.

Net cash provided by operating activities for the quarter was $48.9 million versus $28.8 million in the prior year period.

FICO adopted the new revenue accounting standard, Topic 606, as of October 1, 2018. Prior period information, including all comparative references, has been adjusted to reflect the adoption of the new standard. Additionally, the financial outlook provided below is based on projected revenue under Topic 606.

First Quarter Fiscal 2019 Non-GAAP Results
Non-GAAP Net Income for the quarter was $43.9 million versus $38.8 million in the prior year period. Non-GAAP EPS for the quarter was $1.45 versus $1.23 in the prior year period. Free cash flow for the quarter was $42.4 million versus $24.7 million in the prior year period. The Non-GAAP financial measures are described in the financial table captioned "Non-GAAP Results" and are reconciled to the corresponding GAAP results in the financial tables at the end of this release.

First Quarter Fiscal 2019 GAAP Revenue
The company reported revenues of $262.3 million for the quarter as compared to $232.4 million reported in the prior year period.

"We had a great start to our fiscal 2019," said Will Lansing, chief executive officer. "We are continuing our earnings growth momentum, and are executing our cloud-first strategy."

Revenues for the first quarter of fiscal 2019 across each of the company's three operating segments were as follows:

  • Applications revenues, which include the company's preconfigured decision management applications and associated professional services, were $147.7 million in the first quarter, compared to $140.2 million in the prior year quarter, an increase of 5%, due primarily to increased license and transactional revenues in Falcon Fraud Manager.
  • Scores revenues, which include the company's business-to-business (B2B) scoring solutions and associated professional services, and business-to-consumer (B2C) service, were $85.7 million in the first quarter, compared to $68.4 million in the prior year quarter, an increase of 25%. B2B revenue increased 36% and B2C revenue increased 9% from the prior year quarter.
  • Decision Management Software revenues, which include Blaze Advisor®, Xpress Optimization and related professional services, were $28.9 million in the first quarter compared to $23.8 million in the prior year quarter, an increase of 22%, due primarily to increased license and services revenues related to Decision Management Platform.

Outlook
The company is reiterating its previously provided guidance for fiscal 2019:


Fiscal 2019 Guidance

Revenues

$1.125 billion

GAAP Net Income

$168 million

GAAP EPS

$5.53

Non GAAP Net Income

$209 million

Non GAAP EPS

$6.88

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

CFO Retirement and Transition
Mike Pung has announced that he intends to retire from the company December 31, 2019. Pung will remain CFO until a successor is named and will facilitate a smooth transition. FICO will conduct a comprehensive search for its next CFO with the assistance from a national search firm.

"Mike has been a tremendous business partner and contributor to the success of the company," said Lansing. "While we will miss his steady and thoughtful leadership, we are fortunate to have a strong and experienced finance team in place while we conduct our search."

"It's been an honor serving our shareholders over the past 14 years," said Pung. "I am confident in our strategy and in the leadership team as they continue to pursue the opportunities ahead. FICO has amazing employees, incredible assets, and a bright future."

Company to Host Conference Call
The company will host a webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to report its first quarter fiscal 2019 results and provide various strategic and operational updates. The call can be accessed at FICO's web site at www.fico.com/investors. A replay of the webcast will be available at our Past Events page through January 30, 2020.

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 165 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

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

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

FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.

Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering initiative, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to protect such data, the failure to realize the anticipated benefits of any acquisitions, material adverse developments in global economic conditions or in the markets we serve, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2018 and subsequent quarterly reports on Form 10-Q. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)






December 31,


September 30,


2018


2018




* As Adjusted

ASSETS:




Current assets:




     Cash and cash equivalents

$                  79,896


$                 90,023

     Accounts receivable, net

247,566


266,742

     Prepaid expenses and other current assets

48,380


39,624

          Total current assets

375,842


396,389





Marketable securities and investments

18,889


19,756

Property and equipment, net

46,864


48,837

Goodwill and intangible assets, net

811,703


815,426

Other assets

52,328


50,059


$             1,305,626


$            1,330,467





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




     Accounts payable and other accrued liabilities

$                  46,466


$                 51,276

     Accrued compensation and employee benefits

55,354


84,292

     Deferred revenue

103,527


103,335

     Current maturities on debt

228,000


235,000

          Total current liabilities

433,347


473,903





Long-term debt

604,157


528,944

Other liabilities

40,227


40,183

          Total liabilities

1,077,731


1,043,030





Stockholders' equity

227,895


287,437


$             1,305,626


$            1,330,467


* Prior-period information has been adjusted for the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on October 1, 2018.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)






Quarter Ended 


December 31,


2018


2017




* As Adjusted

Revenues:




     Transactional and maintenance

$           194,193


$           170,403

     Professional services

40,808


43,128

     License

27,255


18,830

        Total revenues

262,256


232,361





Operating expenses:




     Cost of revenues

76,066


74,432

     Research & development

35,426


28,974

     Selling, general and administrative

100,258


90,342

     Amortization of intangible assets

1,502


1,788

        Total operating expenses

213,252


195,536

Operating income

49,004


36,825

Other expense, net

(11,848)


(5,947)

Income before income taxes

37,156


30,878

Provision for income taxes

(2,851)


(2,001)

Net income

$             40,007


$             32,879













Basic earnings per share:

$                 1.38


$                 1.09

Diluted earnings per share:

$                 1.32


$                 1.04





Shares used in computing earnings per share:




     Basic

28,961


30,078

     Diluted

30,336


31,561


* Prior-period information has been adjusted for the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on October 1, 2018.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)






 Quarter Ended 


 December 31, 


2018


2017




* As Adjusted

Cash flows from operating activities:




Net income 

$              40,007


$                 32,879

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




       Depreciation and amortization 

7,967


7,731

       Share-based compensation 

21,854


16,510

       Changes in operating assets and liabilities 

(24,129)


(26,320)

       Other, net 

3,158


(2,023)

          Net cash provided by operating activities 

48,857


28,777





 Cash flows from investing activities: 




 Purchases of property and equipment 

(6,474)


(4,044)

 Net activity from marketable securities 

(2,201)


(1,935)

          Net cash used in investing activities 

(8,675)


(5,979)





 Cash flows from financing activities: 




 Proceeds from revolving line of credit 

103,000


79,000

 Payments on revolving line of credit 

(35,000)


(20,000)

 Proceeds from issuances of common stock 

7,550


693

 Taxes paid related to net share settlement of equity awards 

(42,987)


(38,867)

 Repurchases of common stock 

(82,700)


(55,263)

 Other, net 

-


(240)

          Net cash used in financing activities 

(50,137)


(34,677)





 Effect of exchange rate changes on cash 

(172)


474





 Increase (decrease) in cash and cash equivalents 

(10,127)


(11,405)

 Cash and cash equivalents, beginning of year 

90,023


105,618

 Cash and cash equivalents, end of year 

$              79,896


$                 94,213


* Prior-period information has been adjusted for the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on October 1, 2018.

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)






Quarter Ended 


December 31,


2018


2017




* As Adjusted

Applications revenues:




     Transactional and maintenance

$   97,165


$           91,126

     Professional services

31,462


35,374

     License

19,032


13,674

          Total Applications revenues

$ 147,659


$         140,174





Scores revenues:




     Transactional and maintenance

$   84,821


$           67,996

     Professional services

701


297

     License

161


138

          Total Scores revenues

$   85,683


$           68,431





Decision Management Software revenues:




     Transactional and maintenance

$   12,207


$           11,281

     Professional services

8,645


7,457

     License

8,062


5,018

          Total Decision Management Software revenues

$   28,914


$           23,756





Total revenues:




     Transactional and maintenance

$ 194,193


$         170,403

     Professional services

40,808


43,128

     License

27,255


18,830

          Total revenues

$ 262,256


$         232,361


* Prior-period information has been adjusted for the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on October 1, 2018.

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)






Quarter Ended 


December 31,


2018


2017




* As Adjusted





GAAP net income

$ 40,007


$           32,879

Amortization of intangible assets

1,502


1,788

Stock-based compensation expense

21,854


16,510

Income tax adjustments

(6,219)


(4,703)

Excess tax benefit

(13,233)


(11,511)

Tax Cuts and Jobs Act

-


3,836

Non-GAAP net income

$ 43,911


$           38,799









GAAP diluted earnings per share

$     1.32


$               1.04

Amortization of intangible assets

0.05


0.06

Stock-based compensation expense

0.72


0.52

Income tax adjustments

(0.20)


(0.15)

Excess tax benefit

(0.44)


(0.36)

Tax Cuts and Jobs Act

-


0.12

Non-GAAP diluted earnings per share

$     1.45


$               1.23





Free cash flow




Net cash provided by operating activities

$ 48,857


$           28,777

Capital expenditures

(6,474)


(4,044)

Free cash flow

$ 42,383


$           24,733


Note: The numbers may not sum to total due to rounding.


* Prior-period information has been adjusted for the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on October 1, 2018.

About Non-GAAP Financial Measures


To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 


Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION

RECONCILIATION OF NON-GAAP GUIDANCE

(In millions, except per share data)

(Unaudited)




Fiscal 2019 Guidance



GAAP net income

$                              168

Amortization of intangible assets

6

Stock-based compensation expense

85

Income tax adjustments

(25)

Excess tax benefit

(25)

Non-GAAP net income

$                              209





GAAP diluted earnings per share

$                             5.53

Amortization of intangible assets

0.20

Stock-based compensation expense

2.79

Income tax adjustments

(0.81)

Excess tax benefit

(0.82)

Non-GAAP diluted earnings per share

$                             6.88


Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures


To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 


Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.



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