Fair Isaac Corporation

Greetings and welcome to the Fair Isaac Corporation Quarterly Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. Should you require operator assistance at any time, please press star 0. As a reminder, this conference is being recorded today, Thursday, January 30, 2020. I would now like to turn the conference over to Steve Weber. Please go ahead. Thank you.

Good afternoon, and thank you for joining FICO's first quarter earnings call. I'm Steve Weber, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Mike McLaughlin. Today, we issued a press release that describes financial results compared to the prior year. On this call, management will also discuss results in comparison to the prior quarter in order to facilitate understanding of the run rate of our business. Certain statements made in this presentation may be characterized as forward-looking, under the Private Securities Litigation Reform Act of 1995. Those statements involve many uncertainties that could cause actual results to differ materially. Information concerning these uncertainties is contained in the company's filings with the SEC, in particular, in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICA website, or from our investor relations team. This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release and Regulation G Schedule issued today for a reconciliation of each of those non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G Schedule are available on the investor relations page of the company's website at FICO.com or on the SEC's website at SEC.gov. A replay of this webcast will be available through January 30th, 2021. And now, I'll turn the call over to Will Lansing.

Thanks, Steve, and thank you, everyone, for joining us for our first quarter earnings call. I'd say we're off to a good start, delivering growth across our portfolio and also delivering innovation. In our first quarter, we reported revenues of $299 million, an increase of 14% over the same period last year. We delivered $55 million of GAAP net income, up 37%, and GAAP earnings of $1.82, up 38%. On a non-GAAP basis, the $1.80 earnings per share was up 24% from last year. And we delivered free cash flow growth as well, up 27% from fiscal 19. On the software side of our business, the innovation we're bringing to market is gaining traction among companies eager to use analytics-driven decisioning to solve their most difficult problems. At FICO World in November, we hosted more than 1,400 attendees, representing 600 companies from 62 countries. During the conference, our solution specialists held close to 1,100 consultations. We sat down with customers and potential customers to understand their business issues and explain and demonstrate how FICO's advanced analytics, digital decisioning, and dynamic workflows can transform their business. The innovation on display at FICO World continues to translate into robust sales in our software business. We had another good bookings quarter at 112 million. The 49 million of DMS bookings was the second largest quarter, after the last quarter 61 million, in FICO's history. That means we've booked about 110 million in DMS business in the last two quarters. I'm convinced we're developing software at the same time demand is emerging for analytic-based decisioning software. In our scores business, we had another good quarter. Scores were up 34% in the quarter versus the prior year. On the B2B side, revenues were up 46% over the prior year. Our B2C revenues were up 11% versus the first quarter of 2019. We continue to see strength throughout the scores marketplace. We also announced some innovations in our scores business, the release of the FICO Score 10 suite. The suite has two new scores. FICO Score 10 relies on credit bureau data and is consistent with previous FICO score versions that are in the market today. It reflects a normal model development cadence, extending features that were introduced in FICO Score 8 and FICO Score 9. FICO Score 10 is designed to be backward compatible with previous score versions. FICO Score 10T incorporates a broader set of credit bureau data, including trended data, which captures unique aspects of the consumer's financial profile over time. While the blueprint design is similar, it uses new characteristics to enhance predictive power. Both FICO score 10 and FICO score 10T demonstrate greater predictive power over all previous versions of the FICO score and were developed on recent data sets. By adopting the FICO score 10 suite, a lender can reduce the number of defaults in its portfolio by as much as 10% among newly originated bank cards, 9% among newly originated auto loans compared to using FICO score 9. The reduction in defaults is even higher for newly originated mortgage loans at 17% compared to the version of the FICO score used in that industry. These improvements in predictive power can help lenders safely avoid unexpected credit risk and better control default rates while making more competitive credit offers to more consumers. We believe this type of innovation, which we've developed with significant feedback from the lending community, will significantly increase performance. and allow the industry to expand loans and revenue while not increasing losses. We will continue to update you on this and other score innovations that we'll announce in the coming months. I'll talk more about how we see the year playing out, but first I'll turn the call over to Mike for further financial details.