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, Wednesday, August 3, 2022. I'd now like to turn the call over to Steve Weber. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thank you for joining FICO's third quarter earnings call. 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 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 August 3, 2023. Now I'll turn the call over to Will Lansing.

Thanks, Steve, and thank you, everyone, for joining us for our third quarter earnings call. We posted some slides with our results on the Investor Relations section of our website. I'll be referencing some of those slides during our presentation today, I'll go over the results of our third fiscal quarter and discuss what we're seeing in the markets we serve. We again delivered very strong results in an uncertain marketplace, which demonstrates the resiliency of our business model and the value proposition we deliver. As you can see on page two of the presentation, we reported revenues of $349 million, an increase of 3% over the same period last year, or 7% when adjusted for last year's sale of our collections and recovery products. We delivered $93 million of GAAP net income and GAAP earnings of $3.61 per share, up 21% and 36% respectively when adjusted for last year's gain on sale. On a non-GAAP basis, net income was $116 million, up 17%, and earnings per share of $4.47 was up 32% from last year. Our scores business continues to perform well despite headwinds in the mortgage market. Scores were up 4% in the quarter versus the prior year, as you can see on page six of the presentation. On the B2B side, revenues were up 3%. Mortgage continues to be the headwind as originations have declined as interest rates rise. Mortgage originations revenues were down 25% versus last year. Mortgage origination revenues now account for about 12% of our scores revenues and 6% of our total company revenues. Excluding mortgage, total B2B revenues were up about 12% versus last year. Auto origination revenues were up 12%, and credit card and personal loan originations revenues were up 37%. We also had double-digit year-over-year increases in our prescreen scores. On the B2C side, revenues were up 7% from the previous year. The slowdown in growth came primarily in our direct MyFICO.com channel, where we are seeing fewer new customers coming online. Our partner channel, which includes paid and freemium components, continues to drive double-digit growth. In our software segment, we delivered $170 million of revenue, up 2% from last year and 11% after adjusting for the divestiture. As you know, over several quarters, we've talked about the demand for our platform and how we see substantial growth opportunities. As shown on page 7, total ARR was up 9%, and the platform ARR again grew at a remarkable 60%. Our net retention rate is also very strong, as our existing customers continue to expand their usage. Total NRR for the quarter, shown on page 8, was 108%. Platform NRR was 135%. We also had a very good quarter with new sales. Our ACV bookings, as shown on page 9, was up 64% over last year. We're extremely excited about the continued growth potential for our FICO platform, and that excitement was shared by our customers at our recent FICO World Conference. The three-day event hosted in May was an opportunity to finally connect face-to-face with our clients, partners, industry experts, and colleagues to reinforce FICO's vision and commitment to client success. We hosted 750 FICO clients from leading banks, financial services firms, auto finance companies, insurance providers, and telcos. The event in Orlando included 90 breakout sessions as well as hundreds of individual strategic consulting engagements, all designed to help our customers identify how FICO can enable them to accelerate and achieve their goals with the FICO platform. It was also a great opportunity to hear from FICO customers, with nearly 70 clients presenting during breakout sessions, sharing the success stories and lessons learned. FICO World 22 was an essential moment where we had the opportunity to explain and demonstrate our platform strategy directly to our most strategic clients. Clients rated this FICO World the best FICO World of all past events, and we've already seen a surge in registrations for the next FICO World to be held May 13 through 16 in Hollywood, Florida. I'll have some final comments in a few minutes, but first let me turn the call back over to Mike for financial details.