FAIR ISAAC CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strong Quarter: Reported Q2 revenues of $499 million, up 15% y/y; GAAP net income $163 million, up 25% y/y; GAAP earnings per share $6.59, up 28% y/y; non-GAAP net income $193 million, up 25% y/y; non-GAAP earnings per share $7.81, up 27% y/y. Free cash flow was $65 million in Q2, with $677 million over the last four quarters.
• Global Initiatives: Announced a Kenya-specific FICO score in partnership with TransUnion to empower lenders for underserved consumers. Encouraged consumers to check free FICO scores at myfico.com/free, with nearly 70% increase in users over the last year.
• Innovation: FICO Score mortgage simulator available for lenders via Exactus; strong adoption of FICO Score 10 T for non-GSE loans; upcoming FICO World conference in Hollywood, Florida, to showcase customer success stories and innovations.

Segment Performance

• Scores Segment: Q2 revenues were $297 million, up 25% vs prior year. B2B revenues up 31% (driven by mortgage origination revenues, which were up 48% vs prior year; mortgage origination revenue accounted for 54% of B2B revenue and 44% of total Scores revenue). B2C revenues up 6% vs prior year due to increased revenue from indirect channel partners. Auto origination revenues were up 16%, while credit card, personal loan, and other originations revenues were flat.
• Software Segment: Q2 revenues were $202 million, up 2% vs prior year. On-premises and SaaS software revenue grew 4% year-over-year, while professional services declined 9%. Total software ARR was $715 million, a 3% increase over the prior year. Platform ARR was $235 million (33% of total Q2 '25 ARR, up from 29% of total Q2 '24 ARR), growing 17% vs prior year, while non-platform ARR declined 3% to $480 million. CCS usage faced headwinds due to macro volatility affecting customer outreach programs.

Guidance

• Reiterating fiscal '25 guidance despite macroeconomic uncertainty. Management is comfortable with current guidance as there is significant uncertainty, and they are conservative, waiting to raise guidance when more confident. No change in guidance due to the fluid macro environment.

Risks

• Macro Volatility: CCS usage faced headwinds as customers delayed or downsized outreach programs due to macro volatility. Uncertainty in regulatory environment impact on business operations. Unpredictability in customer usage levels affecting revenue from usage-based models.

Question and Answer

• Q: Manav Patnaik on results vs expectations and software platform A: Will Lansing said they are in a more uncertain environment but remain conservative, comfortable with current guidance. On software platform, non-platform growth affected by macroeconomic factors, but platform growth expected to remain strong.
• Q: George Tong on credit origination volumes and guidance A: Will Lansing said they are a lagging indicator, Steve Weber noted they are comfortable with current guidance due to uncertainty, sticking with provided numbers.
• Q: Stephen Pollock on software sales cycles and non-financial partners A: Will Lansing said deal cycles not really slowed, indirect channel emphasized for non-financial services customers.
• Q: Jason Haas on auto price increases A: Will Lansing and Steve Weber said price increases are feathering in, with price becoming a bigger component of revenue increase over time, but not specific on percentage of price vs volume.
• Q: Faiza Alwy on regulatory environment A: Will Lansing said they are in constant communication with regulators, and the regulatory environment is generally good for FICO.
• Q: Kyle Peterson on buybacks and capital allocation A: Will Lansing said their philosophy on buybacks hasn't changed, they are consistent in buying back shares, not market timers.