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FICO Announces Earnings of $0.86 per Share for First Quarter Fiscal 2018

Revenues of $235 million vs. $220 million in prior year

SAN JOSE, Calif., Jan. 25, 2018 /PRNewswire/ -- FICO (FICO), a leading predictive analytics and decision management software company, today announced results for its first fiscal quarter ended December 31, 2017.

FICO Corporate logo. (PRNewsFoto/FICO)

First Quarter Fiscal 2018 GAAP Results
Net income for the quarter totaled $27.3 million, or $0.86 per share, versus $37.9 million, or $1.16 per share, reported in the prior year period.

The current quarter earnings include a charge of $11.8 million, or $0.37 per share, related to the enactment of the Tax Cuts and Jobs Act in December 2017. The charge encompasses several elements, including a tax on the deemed repatriation of previously untaxed accumulated earnings and profits of its foreign subsidiaries, and the remeasurement of its deferred tax assets arising from a lower U.S. corporate tax rate. In addition, the company recorded a reduction to income tax expense of $11.5 million, or $0.36 per share, related to excess tax benefits associated with stock compensation.

Net cash provided by operating activities for the quarter was $28.8 million versus $33.0 million in the prior year period.

First Quarter Fiscal 2018 Non-GAAP Results
Non-GAAP Net Income for the quarter was $41.1 million vs. $33.5 million in the prior year period. Non-GAAP EPS for the quarter was $1.30 vs. $1.03 in the prior year period. Free cash flow for the quarter was $24.7 million vs. $28.0 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 2018 GAAP Revenues
The company reported revenues of $235.3 million for the quarter as compared to $219.6 million reported in the prior year period. 

"We're off to a good start in 2018, as we continue to expand our recurring revenue base," said Will Lansing, chief executive officer. "Our Scores segment is performing particularly well, as we drive growth in both B2B and B2C."

Revenues for the first quarter of fiscal 2018 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 $141.4 million in the first quarter compared to $134.8 million in the prior year quarter, an increase of 5%, due primarily to increased transactional revenue in Customer Communications Services.
  • Scores revenues, which include the company's business-to-business (B2B) scoring solutions and associated professional services as well as business-to-consumer (B2C) service, were $69.9 million in the first quarter compared to $59.4 million in the prior year quarter, an increase of 18%. B2B revenue increased 13% and B2C revenue increased 27% from the prior year quarter.
  • Decision Management Software revenues, which include Blaze Advisor®, Xpress Optimization and related professional services, were $24.0 million in the first quarter compared to $25.4 million in the prior year quarter, a decrease of 6%, due primarily to decreased license sales of Blaze Advisor®.

Outlook 
The company is updating guidance for fiscal 2018 to reflect the impacts of tax reform legislation:


Previous Fiscal 2018
Guidance without
Excess Tax Benefit

Tax Reform
Rate Impact *

Tax Items **

Updated Fiscal
2018 Guidance

Revenue

$990 million

--

--

$990 million

GAAP Net Income

$119 million

$14 million

$3 million

$136 million

GAAP EPS

$3.71

$0.44

$0.10

$4.34***

Non GAAP Net Income

$171 million

$20 million

--

$191 million

Non GAAP EPS

$5.32

$0.63

--

$6.09***

*   The company expects a reduction in tax expense of $14.0 million as a result of a tax rate change from tax reform legislation.

** Includes excess tax benefits associated with stock compensation of $20.0 million, or $0.64 per share, and a full-year tax charge of $17.0 million, or $0.54 per share, associated with tax reform legislation.

*** The EPS numbers do not cross foot due to updated guidance assuming FY diluted share count of 31.3 million shares.

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

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 2018 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 through January 25, 2019.

The webcast will also be distributed through the Thomson StreetEvents Network to both institutional and individual investors. The webcast can be accessed via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

About FICO
FICO (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, 2017. 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,


2017


2017

ASSETS:




Current assets:




     Cash and cash equivalents

$                  94,213


$               105,618

     Accounts receivable, net

164,660


168,586

     Prepaid expenses and other current assets

40,263


36,727

          Total current assets

299,136


310,931





Marketable securities and investments

27,550


25,515

Property and equipment, net

38,808


40,703

Goodwill and intangible assets, net

825,846


825,599

Other assets

49,505


52,872


$             1,240,845


$            1,255,620





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




     Accounts payable and other accrued liabilities

$                  44,506


$                 51,614

     Accrued compensation and employee benefits

49,031


77,610

     Deferred revenue

58,743


55,431

     Current maturities on debt

201,000


142,000

          Total current liabilities

353,280


326,655





Long-term debt

462,834


462,801

Other liabilities

39,089


39,627

          Total liabilities

855,203


829,083





Stockholders' equity

385,642


426,537


$             1,240,845


$            1,255,620

 

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)










Quarter Ended 


December 31,


2017


2016





Revenues:




     Transactional and maintenance

$           174,662


$           153,660

     Professional services

42,626


43,543

     License

18,033


22,397

        Total revenues

235,321


219,600





Operating expenses:




     Cost of revenues

74,359


69,997

     Research & development

28,974


26,142

     Selling, general and administrative

90,296


85,214

     Amortization of intangible assets

1,788


3,320

        Total operating expenses

195,417


184,673

Operating income

39,904


34,927

Other expense, net

(5,947)


(6,272)

Income before income taxes

33,957


28,655

Provision for income taxes

6,658


(9,246)

Net income

$             27,299


$             37,901













Basic earnings per share:

$                 0.91


$                 1.22

Diluted earnings per share:

$                 0.86


$                 1.16





Shares used in computing earnings per share:




     Basic

30,078


30,989

     Diluted

31,561


32,536

 

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










 Quarter Ended 


 December 31, 


2017


2016

Cash flows from operating activities:




 Net income 

$              27,299


$                 37,901

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




       Depreciation and amortization 

7,731


9,058

       Share-based compensation 

16,510


14,519

       Changes in operating assets and liabilities 

(29,399)


(28,963)

       Other, net 

6,636


463

          Net cash provided by operating activities 

28,777


32,978





 Cash flows from investing activities: 




 Purchases of property and equipment 

(4,044)


(4,319)

 Net activity from marketable securities 

(1,935)


-

          Net cash used in investing activities 

(5,979)


(4,319)





 Cash flows from financing activities: 




 Proceeds from revolving line of credit 

79,000


60,000

 Payments on revolving line of credit 

(20,000)


(10,000)

 Proceeds from issuances of common stock 

693


3,663

 Taxes paid related to net share settlement of equity awards 

(38,867)


(35,598)

 Repurchases of common stock 

(55,263)


(30,442)

 Other, net 

(240)


(618)

          Net cash used in financing activities 

(34,677)


(12,995)





 Effect of exchange rate changes on cash 

474


(3,489)





 Increase (decrease) in cash and cash equivalents 

(11,405)


12,175

 Cash and cash equivalents, beginning of period 

105,618


75,926

 Cash and cash equivalents, end of period 

$              94,213


$                 88,101

 

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)

















Quarter Ended 





December 31,





2017


2016










Applications revenues:







     Transactional and maintenance


$   93,213


$   84,881



     Professional services


34,853


34,341



     License


13,343


15,543



          Total Applications revenues


$ 141,409


$ 134,765










Scores revenues:







     Transactional and maintenance


$   69,574


$   58,252



     Professional services


278


521



     License


63


609



          Total Scores revenues


$   69,915


$   59,382










Decision Management Software revenues:







     Transactional and maintenance


$   11,875


$   10,527



     Professional services


7,495


8,681



     License


4,627


6,245



          Total Decision Management Software revenues


$   23,997


$   25,453










Total revenues:







     Transactional and maintenance


$ 174,662


$ 153,660



     Professional services


42,626


43,543



     License


18,033


22,397



          Total revenues


$ 235,321


$ 219,600



 

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)










Quarter Ended 


December 31,


2017


2016





GAAP net income

$ 27,299


$ 37,901

Amortization of intangible assets

1,788


3,320

Stock-based compensation expense

16,510


14,519

Income tax adjustments

(4,696)


(4,987)

Excess tax benefit

(11,511)


(17,261)

Tax Cuts and Jobs Act

11,755


-

Non-GAAP net income

$ 41,145


$ 33,492









GAAP diluted earnings per share

$     0.86


$     1.16

Amortization of intangible assets

0.06


0.10

Stock-based compensation expense

0.52


0.45

Income tax adjustments

(0.15)


(0.15)

Excess tax benefit

(0.36)


(0.53)

Tax Cuts and Jobs Act

0.37


-

Non-GAAP diluted earnings per share

$     1.30


$     1.03





Free cash flow




Net cash provided by operating activities

$ 28,777


$ 32,978

Capital expenditures

(4,044)


(4,319)

Dividends paid

-


(618)

Free cash flow

$ 24,733


$ 28,041


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.

 

FAIR ISAAC CORPORATION

RECONCILIATION OF NON-GAAP GUIDANCE

(In millions, except per share data)

(Unaudited)










Previous Fiscal 2018
Guidance without
Excess Tax Benefit


Tax Reform Rate
Impact 


Tax Items


Fiscal 2018 Guidance









GAAP net income

$                             119


$                       14


$            3


$            136

Amortization of intangible assets

7


-


-


7

Stock-based compensation expense

67


-


-


67

Income tax adjustments

(22)


6


-


(16)

Excess tax benefit

-


-


(20)


(20)

Tax Cuts and Jobs Act

-


-


17


17

Non-GAAP net income

$                             171


$                       20


$           -


$            191

















GAAP diluted earnings per share

$                            3.71


$                    0.44


$       0.10


$           4.34

Amortization of intangible assets

0.22


-


-


0.22

Stock-based compensation expense

2.09


-


-


2.14

Income tax adjustments

(0.69)


0.19


-


(0.52)

Excess tax benefit

-


-


(0.64)


(0.64)

Tax Cuts and Jobs Act

-


-


0.54


0.54

Non-GAAP diluted earnings per share

$                            5.32


$                    0.63


$           -


$           6.09


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.

 

Cision

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