Fair Isaac Corporation

greetings thank you for standing by welcome to the fair isaac corporation quarterly earnings call during a presentation all participants will be in a listen-only mode and afterwards we'll conduct a question and answer session at that time if you have a question please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator please press star zero this conference has been recorded thursday january 27 2022 and now i'd like to turn the conference over to steve weber please go ahead

Thank you. Good afternoon, everyone, and thanks 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, including the impact of COVID-19 on macroeconomic conditions and the company's business, operations, and personnel 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 these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G schedule are available on the investor relations website at FICO.com or on the SEC's website at SEC.gov. A replay of this webcast will be available through January 27th, 2023. 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. In the investor relations section of our website, we've posted some slides that we will be referencing during our presentation today. We delivered a strong start to our fiscal year with double-digit growth in software ARR and scores revenue, and we continued to deliver strong earnings and free cash flow. Page 2 shows financial highlights from our first quarter. We reported revenues of $322 million in Q1 and $85 million of gap net income in the quarter. On a non-gap basis, Q1 net income was $102 million, up 25%, and earnings per share of $3.70, of 35% from the prior year quarter. We continue to deliver strong free cash flow growth as well. Q1 free cash flow was 124 million, up 66% from the previous year. For the trailing 12 months, free cash flow was 465 million. We're off to a good start in our fiscal 2022, and we continue to be very focused on our strategy. In our software business, we continue to focus on the decisioning platform that enables businesses to optimize consumer interactions across their enterprise. When I started at FICO, we had a software business consisting of separate tools and endpoint applications. We evolved that business into a vision of an open and extensible platform uniting advanced analytics, decision modeling, and AI. Historically, our software business has been separated by function, allowing us to deepen our expertise in various disciplines optimize role-based resourcing, and drive process consistency. This month, we made an important change that better aligns our software organizational structure by integrating our entire software business under Stephanie Covert. Stephanie has led our sales, marketing, and services organization, where her strong leadership has effectively embraced strategic change, resulting in early wins and a growing pipeline of enterprise platform deals, prioritization of software IP, increased deal-level profitability, and clear segmentation of direct and partner channels. I'm confident that by placing all elements of our software business under Stephanie's leadership, as we did years ago with the Scores business under Jim Wayman, we'll see better alignment, faster, more effective decision-making, improved resource allocation against top priorities, and stronger end-to-end operational rigor and discipline. Last quarter, we made several important improvements to our external reporting to provide more visibility into the progress we're making. Today, I'm happy to report that we continue to drive impressive growth in our software ARR, as you can see on pages 7 and 8 of the presentation. Total ARR was up 10% in Q1, and the platform ARR grew at a rate of 67%. Our net retention rate was also impressive. Total NRR was 109%, and platform NRR was 143%. And we continue to increase the value of the new deals that we're signing. As you can see on page 9, our ACV bookings were up 37% over the same period last year. We are excited about the depth of interest in our platform offering. This quarter, we signed a deal with a major U.S. financial institution to use the platform. The multi-year deal is our biggest platform sale to date, and it enables the automation of much of the day-to-day customer decisioning using cloud-based FICO analytics. In scores, we're continuing to innovate and to align our pricing with the value they provide. We had a very good quarter in our score segment with strong growth in both B2B and B2C. Scores were up 17% in the quarter versus the prior year, as you can see on page six. On the B2B side, revenues were up 13% in the quarter versus the prior year. We continue to see a slowdown in mortgage origination volumes for the U.S. market, where revenues were down about 17% year over year. But that's more than offset by other areas in the U.S. where revenues are growing rapidly. Auto origination revenues were up 27%. Card and personal loan origination revenues were up 39%. The fiscal 2022 price increases we talked about last quarter take effect primarily in January and are not yet in our numbers. Our B2C revenues continue to be strong, up 27% versus the prior year quarter. We saw strong growth through both our own MyFICO.com platforms, and also through our partner channels. As always, we continue to be focused on shareholder value. Last quarter, I said we would continue to aggressively buy back our shares. I'm pleased to say we repurchased more than 1.2 million shares in our first quarter and more shares in January. Our buybacks reduced the outstanding shares by 9% versus Q1 of last year. And this morning, we announced a new $500 million board repurchase authorization. I'll have some final comments in a few minutes, but first let me turn the call over to Mike for more financial detail.