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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2020



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

For the transition period from to

Commission File Number 1-11689

Fair Isaac Corporation

(Exact name of registrant as specified in its charter)



Delaware		94-1499887
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

181 Metro Drive, Suite 700		95110-1346
San Jose,	California
(Address of principal executive offices)		(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	FICO	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



☐	Yes	☒	No

The number of shares of common stock outstanding on July 17, 2020 was 28,999,394 (excluding 59,857,389 shares held by us as treasury stock).

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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	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	54
Item 6.	Exhibits	55
Signatures		56

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	June 30, 2020			September 30, 2019
	(In thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents	$	125,673		$	106,426
Accounts receivable, net	303,558			297,427
Prepaid expenses and other current assets	53,780			51,853
Total current assets	483,011			455,706
Marketable securities	23,549			20,222
Other investments	1,587			1,643
Property and equipment, net	60,336			53,027
Operating lease right-of-use assets	84,106			—
Goodwill	804,528			803,542
Intangible assets, net	10,119			14,139
Deferred income taxes	7,110			6,006
Other assets	89,774			79,163
Total assets	$	1,564,120		$	1,433,448
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,816		$	23,118
Accrued compensation and employee benefits	95,674			106,240
Other accrued liabilities	50,864			32,454
Deferred revenue	105,833			111,016
Current maturities on debt	188,000			218,000
Total current liabilities	460,187			490,828
Long-term debt	739,039			606,790
Operating lease liabilities	74,000			—
Other liabilities	43,608			46,063
Total liabilities	1,316,834			1,143,681
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 28,999 and 28,944 shares outstanding at June 30, 2020 and September 30, 2019, respectively)	290			289
Additional paid-in-capital	1,187,717			1,225,365
Treasury stock, at cost (59,858 and 59,913 shares at June 30, 2020 and September 30, 2019, respectively)	(2,980,437		)	(2,802,450		)
Retained earnings	2,133,933			1,956,648
Accumulated other comprehensive loss	(94,217		)	(90,085		)
Total stockholders’ equity	247,286			289,767
Total liabilities and stockholders’ equity	$	1,564,120		$	1,433,448

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)



	Quarter Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
	(In thousands, except per share data)
Revenues:
Transactional and maintenance	$	246,829		$	226,040		$	707,905		$	632,012
Professional services	43,633			44,594			135,563			135,957
License	23,269			43,615			76,738			86,770
Total revenues	313,731			314,249			920,206			854,739
Operating expenses:
Cost of revenues	88,569			87,215			267,466			248,849
Research and development	41,411			36,972			119,793			110,082
Selling, general and administrative	99,832			102,906			315,318			308,094
Amortization of intangible assets	1,048			1,448			4,046			4,453
Restructuring and acquisition-related	—			—			3,104			—
Total operating expenses	230,860			228,541			709,727			671,478
Operating income	82,871			85,708			210,479			183,261
Interest expense, net	(11,223		)	(10,111		)	(32,245		)	(29,795		)
Other income, net	4,560			2,457			2,333			1,718
Income before income taxes	76,208			78,054			180,567			155,184
Income tax provision	12,132			13,902			3,282			17,644
Net income	64,076			64,152			177,285			137,540
Other comprehensive gain (loss):
Foreign currency translation adjustments	832			(4,189		)	(4,132		)	(4,529		)
Comprehensive income	$	64,908		$	59,963		$	173,153		$	133,011
Earnings per share:
Basic	$	2.21		$	2.21		$	6.10		$	4.74
Diluted	$	2.15		$	2.12		$	5.92		$	4.54
Shares used in computing earnings per share:
Basic	29,005			28,967			29,075			29,000
Diluted	29,744			30,292			29,966			30,295

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



	Common Stock					Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
(In thousands)	Shares		Par Value			Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at March 31, 2020	29,082		$	291		$	1,169,217		$	(2,930,165	)	$	2,069,857	$	(95,049	)	$	214,151
Share-based compensation	—		—			22,264			—			—		—			22,264
Issuance of treasury stock under employee stock plans	74		1			(3,764		)	3,716			—		—			(47		)
Repurchases of common stock	(157	)	(2		)	—			(53,988		)	—		—			(53,990		)
Net income	—		—			—			—			64,076		—			64,076
Foreign currency translation adjustments	—		—			—			—			—		832			832
Balance at June 30, 2020	28,999		$	290		$	1,187,717		$	(2,980,437	)	$	2,133,933	$	(94,217	)	$	247,286

	Common Stock					Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
(In thousands)	Shares		Par Value			Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at March 31, 2019	29,056		$	291		$	1,190,341		$	(2,704,305	)	$	1,837,912	$	(76,761	)	$	247,478
Share-based compensation	—		—			19,595			—			—		—			19,595
Issuance of treasury stock under employee stock plans	80		1			(3,197		)	3,680			—		—			484
Repurchases of common stock	(205	)	(3		)	—			(59,200		)	—		—			(59,203		)
Net income	—		—			—			—			64,152		—			64,152
Foreign currency translation adjustments	—		—			—			—			—		(4,189		)	(4,189		)
Balance at June 30, 2019	28,931		$	289		$	1,206,739		$	(2,759,825	)	$	1,902,064	$	(80,950	)	$	268,317

	Common Stock					Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
(In thousands)	Shares		Par Value			Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at September 30, 2019	28,944		$	289		$	1,225,365		$	(2,802,450	)	$	1,956,648	$	(90,085	)	$	289,767
Share-based compensation	—		—			68,197			—			—		—			68,197
Issuance of treasury stock under employee stock plans	670		7			(105,845		)	32,007			—		—			(73,831		)
Repurchases of common stock	(615	)	(6		)	—			(209,994		)	—		—			(210,000		)
Net income	—		—			—			—			177,285		—			177,285
Foreign currency translation adjustments	—		—			—			—			—		(4,132		)	(4,132		)
Balance at June 30, 2020	28,999		$	290		$	1,187,717		$	(2,980,437	)	$	2,133,933	$	(94,217	)	$	247,286

	Common Stock					Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
(In thousands)	Shares		Par Value			Additional Paid-in-Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at September 30, 2018 (As Adjusted)	29,015		$	290		$	1,211,051		$	(2,612,007	)	$	1,764,524	$	(76,421	)	$	287,437
Share-based compensation	—		—			61,931			—			—		—			61,931
Issuance of treasury stock under employee stock plans	696		7			(66,243		)	31,100			—		—			(35,136		)
Repurchases of common stock	(780	)	(8		)	—			(178,918		)	—		—			(178,926		)
Net income	—		—			—			—			137,540		—			137,540
Foreign currency translation adjustments	—		—			—			—			—		(4,529		)	(4,529		)
Balance at June 30, 2019	28,931		$	289		$	1,206,739		$	(2,759,825	)	$	1,902,064	$	(80,950	)	$	268,317

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended June 30,
	2020			2019
	(In thousands)
Cash flows from operating activities:
Net income	$	177,285		$	137,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,549			23,734
Share-based compensation	68,197			61,931
Deferred income taxes	(1,230		)	247
Net (gain) loss on marketable securities	(998		)	635
Non-cash operating lease costs	14,962			—
Provision for doubtful accounts, net	2,777			509
Net loss on sales of property and equipment	61			22
Changes in operating assets and liabilities:
Accounts receivable	(18,961		)	(53,288		)
Prepaid expenses and other assets	(9,734		)	(5,369		)
Accounts payable	(1,815		)	631
Accrued compensation and employee benefits	(10,147		)	4,217
Other liabilities	(12,330		)	(6,164		)
Deferred revenue	(2,886		)	291
Net cash provided by operating activities	228,730			164,936
Cash flows from investing activities:
Purchases of property and equipment	(21,073		)	(18,170		)
Proceeds from sales of marketable securities	3,462			3,228
Purchases of marketable securities	(5,790		)	(5,858		)
Distribution from other investments	55			—
Net cash used in investing activities	(23,346		)	(20,800		)
Cash flows from financing activities:
Proceeds from revolving line of credit	193,000			167,000
Payments on revolving line of credit	(435,000		)	(109,000		)
Proceeds from issuance of senior notes	350,000			—
Payments on debt issuance costs	(6,840		)	—
Payments on finance leases	(811		)	—
Proceeds from issuance of treasury stock under employee stock plans	26,235			16,073
Taxes paid related to net share settlement of equity awards	(100,067		)	(51,208		)
Repurchases of common stock	(210,000		)	(178,926		)
Net cash used in financing activities	(183,483		)	(156,061		)
Effect of exchange rate changes on cash	(2,654		)	710
Increase (decrease) in cash and cash equivalents	19,247			(11,215		)
Cash and cash equivalents, beginning of period	106,426			90,023
Cash and cash equivalents, end of period	$	125,673		$	78,808
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds	$	5,723		$	12,058
Cash paid for interest	$	34,844		$	33,401
Supplemental disclosures of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable	$	50		$	690
Finance lease obligations incurred	$	6,489		$	6,416

See accompanying notes.

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FAIR ISAAC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business

Fair Isaac Corporation

Incorporated under the laws of the State of Delaware, Fair Isaac Corporation (“FICO”) is a provider of analytic, software and data management products and services that enable businesses to automate, improve and connect decisions. 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, pharmaceutical companies, healthcare organizations, public agencies and organizations in other industries.

In this Quarterly Report on Form 10-Q, Fair Isaac Corporation is referred to as “FICO,” “we,” “us,” “our,” or “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 applicable accounting guidance. Consequently, we have not necessarily included all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements 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 fiscal year ended September 30, 2019. 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.

As discussed in New Accounting Pronouncements below and Note 13, effective October 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the condensed consolidated balance sheet as of June 30, 2020 is not comparable with that as of September 30, 2019. See our Annual Report on Form 10-K filed with the SEC on November 8, 2019 for lease policies that were in effect in prior periods before adoption of Topic 842.

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

Use of Estimates

We make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures made in the accompanying notes. For example, we use estimates in determining the collectability of accounts receivable; the appropriate levels of various accruals; labor hours in connection with fixed-fee service contracts; the amount of our tax provision; and the realizability of deferred tax assets. We also use estimates in determining the remaining economic lives and carrying values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Actual results may differ from our estimates.

As the impact of the COVID-19 pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the condensed consolidated financial statements as new events occur and additional information becomes known. To the extent our actual results differ materially from those estimates and assumptions, our future financial statements could be affected. For more information, see Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.

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New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Topic 842, which requires the recognition of operating lease assets and lease liabilities on the balance sheet. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted Topic 842 using the “Comparatives Under 840 Option” approach to transition. In accordance with the standard, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Topic 842 provided a package of practical expedients that allow an entity to not reassess (1) whether any expired or existing contracts contain a lease, (2) the lease classification of any expired or existing lease, and (3) initial direct costs for any existing leases. We elected to apply the package of practical expedients, and did not elect the hindsight practical expedient in determining the lease term for existing leases as of October 1, 2019.

Adoption of Topic 842 did not result in the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The most significant impact of adoption was the recognition of operating lease assets and operating lease liabilities of $89.8 million and $98.9 million, respectively, while our accounting for existing capital leases (now referred to as finance leases) remained substantially unchanged. We expect the impact of adoption to be immaterial to our consolidated statements of income and comprehensive income and consolidated statements of cash flows on an ongoing basis. As part of our adoption, we also modified our control procedures and processes, none of which materially affected our internal control over financial reporting. See Note 13 for additional information regarding our accounting policy for leases and additional disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other (Topic 350): Internal-Use Software” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which means that it will be effective for our fiscal year beginning October 1, 2020. Early adoption is permitted. We do not believe that adoption of ASU 2018-15 will have a significant impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. Topic 326 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which means it will be effective for our fiscal year beginning October 1, 2020. Early adoption is permitted. We do not believe that adoption of Topic 326 will have a significant impact on our consolidated financial statements.

We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.

2. Fair Value Measurements

Fair value is defined 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. The accounting guidance 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 assets are comprised of money market funds and certain marketable securities. We do not have any liabilities that are valued using inputs identified under a Level 1 hierarchy as of June 30, 2020 and September 30, 2019.

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•

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. We do not have any assets that are valued using inputs identified under a Level 2 hierarchy as of June 30, 2020 and September 30, 2019. We measure the fair value of the Senior Notes (as defined in Note 7) based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities.

•

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 as of June 30, 2020 and September 30, 2019.

The following tables represent financial assets that we measured at fair value on a recurring basis at June 30, 2020 and September 30, 2019:



June 30, 2020	Active Markets for Identical Instruments (Level 1)		Fair Value as of June 30, 2020
	(In thousands)
Assets:
Cash equivalents (1)	$	24,334	$	24,334
Marketable securities (2)	23,549		23,549
Total	$	47,883	$	47,883

September 30, 2019	Active Markets for Identical Instruments (Level 1)		Fair Value as of September 30, 2019
	(In thousands)
Assets:
Cash equivalents (1)	$	28,901	$	28,901
Marketable securities (2)	20,222		20,222
Total	$	49,123	$	49,123


(1)	Included in cash and cash equivalents on our condensed consolidated balance sheets at June 30, 2020 and September 30, 2019. Not included in these tables are cash deposits of $101.3 million and $77.5 million at June 30, 2020 and September 30, 2019, respectively.


(2)	Represents securities held under a supplemental retirement and savings plan for senior management employees, which are distributed upon termination or retirement of the employees. Included in marketable securities on our condensed consolidated balance sheets at June 30, 2020 and September 30, 2019.

For the fair value of our derivative instruments and senior notes, see Note 3 and Note 7, respectively.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the quarters and nine-month periods ended June 30, 2020 and 2019.

3. Derivative Financial Instruments

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 receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their respective functional currencies. 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 exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro, and Singapore dollar.

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

The following tables summarize our outstanding foreign currency forward contracts, by currency, at June 30, 2020 and September 30, 2019:



	June 30, 2020
	Contract Amount				Fair Value
	Foreign Currency		USD		USD
	(In thousands)
Sell foreign currency:
Euro (EUR)	EUR	10,400	$	11,629	$	—
Buy foreign currency:
British pound (GBP)	GBP	19,434	$	23,900	$	—
Singapore dollar (SGD)	SGD	9,895	$	7,100	$	—



	September 30, 2019
	Contract Amount				Fair Value
	Foreign Currency		USD		USD
	(In thousands)
Sell foreign currency:
Euro (EUR)	EUR	10,800	$	11,723	$	—
Buy foreign currency:
British pound (GBP)	GBP	5,200	$	6,400	$	—
Singapore dollar (SGD)	SGD	5,798	$	4,200	$	—

The foreign currency forward contracts were entered into on June 30, 2020 and September 30, 2019, respectively; therefore, their fair value was $0 on each of these dates.

Losses on derivative financial instruments are recorded in our condensed consolidated statements of income and comprehensive income as a component of other income, net, and consisted of the following:



	Quarter Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Losses on foreign currency forward contracts	$	380	$	928	$	1,429	$	612

4. Goodwill and Intangible Assets

Amortization expense associated with our intangible assets is reflected as a separate operating expense caption — amortization of intangible assets — and is excluded from cost of revenues and selling, general and administrative expenses within the accompanying condensed consolidated statements of income and comprehensive income. Amortization expense consisted of the following:

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	Quarter Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Completed technology	$	406	$	452	$	1,444	$	1,440
Customer contracts and relationships	561		996		2,359		3,013
Trade names	37		—		112		—
Non-compete agreements	44		—		131		—
Total	$	1,048	$	1,448	$	4,046	$	4,453

Estimated future intangible asset amortization expense associated with intangible assets existing at June 30, 2020 was as follows:



Year Ending September 30,	(In thousands)
2020 (excluding the nine months ended June 30, 2020)	$	938
2021	3,617
2022	3,330
2023	1,317
2024	917
	$	10,119

The following table summarizes changes to goodwill during the nine months ended June 30, 2020, both in total and as allocated to our segments:



	Applications		Scores		Decision Management Software		Total
	(In thousands)
Balance at September 30, 2019	$	588,614	$	146,648	$	68,280	$	803,542
Foreign currency translation adjustment	986		—		—		986
Balance at June 30, 2020	$	589,600	$	146,648	$	68,280	$	804,528

5. Composition of Certain Financial Statement Captions

The following table summarizes property and equipment, and the related accumulated depreciation and amortization, at June 30, 2020 and September 30, 2019:



	June 30, 2020			September 30, 2019
	(In thousands)
Property and equipment	$	190,932		$	172,075
Less: accumulated depreciation and amortization	(130,596		)	(119,048		)
	$	60,336		$	53,027

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6. Revolving Line of Credit

We have a $400 million unsecured revolving line of credit with a syndicate of banks that expires on May 8, 2023 with an option to increase it by another $100 million. 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, (b) the Federal Funds rate plus 0.500% and (c) the one-month LIBOR rate plus 1.000%, plus, in each case, an applicable margin, or (ii) an adjusted LIBOR rate plus an applicable margin. The applicable margin for base rate borrowings ranges from 0% to 0.875% and for LIBOR borrowings ranges from 1.000% to 1.875%, and is determined based on our consolidated leverage ratio. In addition, we must pay credit facility fees. The credit facility contains certain restrictive covenants including maintaining a maximum consolidated leverage ratio of 3.25 on an average trailing four-quarter basis, subject to a step up to 3.75 following certain permitted acquisitions; and a minimum fixed charge ratio of 2.50 through the maturity of our 2010 Senior Notes (as defined in Note 7) in July 2020, upon which maintaining a minimum interest coverage ratio of 3.00. The credit agreement also contains other covenants typical of unsecured facilities. As of June 30, 2020, we had $103.0 million in borrowings outstanding at a weighted average interest rate of 1.313% and were in compliance with all financial covenants under this credit facility.

7. Senior Notes

On July 14, 2010, we issued $245 million of senior notes in a private placement to a group of institutional investors (the “2010 Senior Notes”). The 2010 Senior Notes were issued in four series with maturities ranging from 6 to 10 years. The outstanding 2010 Senior Notes’ weighted average interest rate is 5.6% and the weighted average maturity is 10.0 years. The 2010 Senior Notes required interest payments semi-annually and contained certain restrictive covenants, including the maintenance of a maximum consolidated net debt to consolidated EBITDA ratio of 3.00 and a minimum fixed charge coverage ratio of 2.50. We were in compliance with all financial covenants under the 2010 Senior Notes as of June 30, 2020. In July 2020, we repaid $85 million in principal due at maturity of the remaining outstanding 2010 Senior Notes, and no 2010 Senior Notes remained outstanding following such repayment.

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”). The 2018 Senior Notes require interest payments semi-annually at a rate of 5.25% per annum and will mature on May 15, 2026.

On December 6, 2019, we issued $350 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes,” along with the 2010 Senior Notes and 2018 Senior Notes, the “Senior Notes”). We have used the net proceeds to repay a large portion of the outstanding balance on our revolving credit facility. The 2019 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028.

The purchase agreements for the 2010 Senior Notes, as well as the indentures for the 2018 Senior Notes and the 2019 Senior Notes, contain certain covenants typical of unsecured obligations.

The following table presents the face values and fair values for the Senior Notes at June 30, 2020 and September 30, 2019:



	June 30, 2020				September 30, 2019
	Face Value (*)		Fair Value		Face Value (*)		Fair Value
	(In thousands)
The 2010 Senior Notes	85,000		85,085		85,000		86,121
The 2018 Senior Notes	400,000		438,000		400,000		428,000
The 2019 Senior Notes	350,000		350,000		—		—
Total	$	835,000	$	873,085	$	485,000	$	514,121

(*) The carrying value of the Senior Notes was reduced by the net debt issuance costs of $11.0 million and $5.2 million at June 30, 2020 and September 30, 2019, respectively.

We measure the fair value of the Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities.

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8. Restructuring Expenses

There were no restructuring expenses incurred during the quarter ended June 30, 2020. During the nine-month period ended June 30, 2020, we incurred $3.1 million in employee separation costs due to the elimination of 69 positions throughout the Company. We expect that cash payment for all the employee separation costs will be paid by the end of our fiscal 2020.

There were no restructuring expenses incurred during the quarter and nine-month period ended June 30, 2019.

The following table summarizes our restructuring accruals related to facility closures and employee separation. The balances at June 30, 2020 and September 30, 2019 were classified as current liabilities and recorded in other accrued liabilities within the accompanying condensed consolidated balance sheets.



	Accrual at		Expense Additions		Cash Payments			Adjustment (*)			Accrual at
	September 30, 2019		Expense Additions		Cash Payments			Adjustment (*)			June 30, 2020
	(In thousands)
Facilities charges	$	1,378	$	—	$	—		$	(1,378	)	$	—
Employee separation	—		3,104		(3,007		)	—			97
	$	1,378	$	3,104	$	(3,007	)	$	(1,378	)	$	97

(*) Upon adoption of Topic 842, accrued lease exit obligations of $1.4 million, which were associated with vacating excess leased space in fiscal 2017, were reclassified to operating lease liabilities.

9. Income Taxes

Effective Tax Rate

The effective income tax rate was 15.9% and 17.8% during the quarters ended June 30, 2020 and 2019, respectively, and 1.8% and 11.4% during the nine months ended June 30, 2020 and 2019, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

The effective tax rates for the nine months ended June 30, 2020 and 2019 were both impacted by the recording of excess tax benefits relating to stock awards. Stock exercises during the nine months ended June 30, 2020 resulted in an additional increase in excess tax benefits.

The total unrecognized tax benefit for uncertain tax positions is estimated to be $6.8 million and $5.8 million at June 30, 2020 and September 30, 2019, respectively. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our condensed consolidated statements of income and comprehensive income. We have accrued interest of $0.4 million and $0.3 million related to unrecognized tax benefits as of June 30, 2020 and September 30, 2019, respectively.

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10. Earnings per Share

The following table presents reconciliations for the numerators and denominators of basic and diluted earnings per share (“EPS”) for the quarters and nine-month periods ended June 30, 2020 and 2019:



	Quarter Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019
	(In thousands, except per share data)
Numerator for diluted and basic earnings per share:
Net income	$	64,076	$	64,152	$	177,285	$	137,540
Denominator - share: