Fair Isaac Corporation

Greetings and thank you for standing by. Welcome to the Fair Isaac Corporation quarterly earnings call. During presentation, all participants will be in a listen-only mode. 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 is being recorded Wednesday, November 9th, 2022. And now I'd like to turn the conference over to Steve Weber, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining FICO's fourth 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 Security and Litigation Reform Act of 1995. The statements involve many uncertainties, including the impact of COVID-19 on macroeconomic conditions in a 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 S&C, 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 the Regulation G schedule issued today for reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and the 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 November 9, 2023. And now I'll turn the call over to Will Lansing.

Thanks, Steve. And thank you, everyone, for joining us for our fourth quarter earnings call. In the Investor Relations section of our website, we've posted some slides that we'll be referencing during our presentation today. I'm pleased to report that we had a very good quarter, which completed an outstanding year with record revenues, record earnings, and record cash flows. We easily exceeded our guidance in all areas, even after a mid-year raise. Pages 2 and 3 show some financial highlights from our fourth quarter. We reported revenues of $349 million in fourth quarter and $1.38 billion of revenue for the fiscal year. We delivered $91 million of gap net income in the quarter and gap earnings of $3.55 per share. For the full fiscal year, we delivered $374 million of GAAP net income and $14.18 of earnings per share. On a non-GAAP basis, Q4 net income was $112 million and earnings per share were $4.40. Full year non-GAAP net income was $454 million, up 19% over last year. And non-GAAP EPS of $17.22 was up 32% over the previous year. We continue to deliver strong pre-cash flow growth as well. Q4 pre-cash flow was 144 million, bringing the fiscal year total to 503 million, up 21% from the previous year. Our strong cash flow allowed us to be especially aggressive in returning capital to shareholders through our share buybacks. In fiscal 2022, we repurchased nearly 2.7 million shares at an average price of $409 per share. In our software segment, we delivered $175 million of revenue, up 5% from last year. We continue to drive growth in this segment, particularly on our platform. As shown on page 7, total ARR was up 9%, and the platform ARR grew 52%. We continue to deliver strong NRR as well, demonstrating our land and expand strategy as customers increase their total usage. Total NRR for the quarter, shown on page 8, was 107%. Platform NRR was 128%, and we continue to see strong demand for our technology from new customers. Our ACB bookings, as shown on page 9, were up 14% over last year. We continue to focus on our state-of-the-art FICO platform. It truly is next-gen decisioning technology. It allows customers to use advanced analytics to optimize interactions with their consumers. In our score segment, we're seeing a continuation of the trend for the last several quarters. Mortgage originations have continued to decline, and in Q4 accounted for just 11% of our scores revenue and 5% of total company revenues. Auto originations revenues remain relatively stable, with originations flat with last quarter and up 20% versus last year, primarily due to pricing. Card and personal loan originations continue to perform well, with originations revenues up 37% over last year. Total scores revenues were up 3% in the quarter versus the prior year and up 8% for the full year, as you can see on page six. On the B2B side, revenues were up 6% in both the quarter and for the full year. This is a strong result considering the rapid and dramatic rise of interest rates and their impact on the mortgage market. On the B2C side, Revenues were down 3% in the quarter due to a slowdown in new customer subscriptions on our MyFICO platform, and up 11% for the full year. I will discuss next year's guidance in greater detail later, where we expect the scores business to grow about 7%. We also expect the special pricing initiatives for 2023 to have an additional impact beyond our guided numbers, consistent with those of the last several years, although it's difficult to estimate the timing and magnitude of the impact. Finally, as you're aware, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac have completed their validation and approval of new credit score models. I'm pleased the process has concluded and that the FICO score has again been approved for use in conforming mortgages by the enterprises. This decision means that FICO score 10-T will be required to be used when available, as classic FICO is today, for each conforming mortgage delivered to the enterprises. The latest release of our flagship FICO score, FICO score 10T, delivers increased predictive power while preserving the trusted and proven FICO score minimum scoring criteria. These improvements in predictive power can help mortgage lenders safely avoid unexpected credit risk and better control of default rates. The decision from the FHFA is the culmination of a multiyear process set up by both congressional and administrative regulation. We look forward to additional guidance from the FHFA and the enterprises on the timeline and implementation process. I'm also pleased to report that in our fourth quarter, we signed a multiyear extension with a large bureau partner in the consumer score space. I'll have some final comments and provide our fiscal 23 guidance in a few minutes. But first, let me turn the call over to Mike for further financial details.