FAIR ISAAC CORP Q1 FY2025 earnings call

• Strong Q1 results: Revenues $440M, up 15% y/y; GAAP net income $153M, up 26%; non-GAAP net income $144M, up 19%. Free cash flow $187M in Q1. • Scores segment: B2B revenues up 30% y/y, mortgage origination revenues up 110%; drove study with Affirm on Buy Now Pay later loan data; strong adoption of FICO Score 10 T for non GSE mortgages; clients with over 261B in annualized mortgage originations signed up for FICO Score 10 T. • Software segment: Revenue up 8% y/y, driven by SaaS and license growth; ARR up 6%, platform ARR up 20%; NRR 105%; ACV bookings $21.2M vs $18.3M prior year. • Initiatives: Fiscal 2025 marks 2nd year of FICO Educational Analytics Challenge Program; expanded Global Financial Inclusion Initiative; in talks to launch FICO Score Mortgage Simulator.

Scores segment: Q1 revenues were $236 million, up 23% vs prior year. B2B up 30%, driven by mortgage originations (up 110%), auto up 5%, card/personal loan/other down 3%. Mortgage origination revenue accounted for 44% of B2B revenue and 34% of total scores revenue. Software segment: Q1 revenue was $204 million, up 8% vs last year, driven by SaaS software and license revenue, partially offset by foreign exchange. Total ARR up 6%, platform ARR up 20%, non-platform ARR up 1%. Total NRR 105%, platform NRR 112%, non-platform 100%.

• Reiterated fiscal 2025 guidance. • FX had negative impact of 2% on total ARR and 3% on platform ARR. • Expect ARR to accelerate in the back half; bookings expected to be strong with some volatility; expenses to increase modestly, with FICO World adding ~$5-6M in Q3. • Confident in guidance provided last quarter, with conservative guidance built around conservative interest rate view.

Q: Manav Patnaik from Barclays asked about FHFA changes and GSE privatization impact on FICO score.

A: Will Lansing said FHFA's decision to push out implementation is not surprising, and FICO score's efficacy means not much change expected with GSE changes.

Q: Jason Haas from Wells Fargo asked about 1Q results vs expectations.

A: Will Lansing said no surprise, guidance remains conservative as internal interest rate view was more conservative, and results align with expectations.

Q: Faiza Alwy from Deutsche Bank asked about confidence in accelerating platform ARR.

A: Will Lansing and Steve Weber said confidence comes from strong bookings with known timing of when they go live and contribute to ARR; usage can vary but new business will drive growth.

Q: Surinder Thind from Jefferies asked about platform ARR and FICO 10 T.

A: Will Lansing said FICO 10 T is better but not drastically different from classic FICO score, and both are likely to be used in securitization with no real issues.

Q: Owen Lau from Oppenheimer asked about bookings pipeline and expense color.

A: Steve Weber said strong pipeline with volatility, and expenses will increase modestly with nonrecurring items like FICO World adding ~$5-6M in Q3.

Q: Kyle Peterson from Needham asked about capital allocation and expense guidance.

A: Will Lansing said FICO stock is a good value, and expenses will increase modestly with no material step function increases; FICO World adds nonrecurring expense in Q3.

Q: George Tong from Goldman Sachs asked about card/personal loan revenue decline and software usage.

A: Steve Weber said decline in line with industry trends; software usage varies by customer, with seasonality and possible usage reduction for cost-saving or holiday reasons.

Q: Jeffrey Meuler from Robert W. Baird asked about ACV bookings to ARR timing and FX impact.

A: Steve Weber said typical 6-12 month lag between bookings and ARR; FX had negative impact of 3% on platform ARR year-over-year.

Q: Ashish Sabadra from RBC asked about B2B revenue softness and B2C growth.

A: Steve Weber said B2B softness due to mix of revenue streams; B2C growth seen with investing in marketing and programs, expecting more growth.

Q: Alexander Hess from JPMorgan asked about new revenue streams and FX impact on revenue.

A: Steve Weber said confident in clearing guidance with various factors; FX impact on software revenue was ~$4M.

Q: Simon Clinch from Redburn Atlantic asked about GSEs going private and mortgage market volume.

A: Will Lansing said hard to imagine GSEs moving away from FICO score; Steve Weber said don't detail mortgage volume growth but can look at industry reports.

Q: Scott Wurtzel from Wolfe Research asked about demand environment and Scores margins.

A: Will Lansing said no major slowdown in demand for strategic platform products; Steve Weber said Scores margin step down due to B2C investment and marketing spend.