Fair Isaac Corporation

Greetings and thank you for standing by. Welcome to the Fair Isaac Corporation Quarterly Earnings Call. During the 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 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. This conference is being recorded Thursday, January 26, 2023. And now I'd like to turn the conference over to Steve Weber. Please go ahead.

Good afternoon and thank you for joining FICO's first quarter earnings call. I'm Steve Weber, Interim CFO, and I'm joined today by our CEO, Will Lansing. 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 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 sheet 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 sheet 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. Replay of this webcast will be available through January 26, 2024. 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'll be referencing through our presentation today. I'm pleased with the results we delivered in our first fiscal quarter. Even in these uncertain economic times, The resilience of our assets and the execution of our team allow us to deliver steady growth in both revenues and earnings and value to our shareholders. Page two shows financial highlights from our first quarter. We reported revenues of $345 million in Q1, up 7% from the prior year. Our GAAP net income of $98 million was up 15% over the prior year. And GAAP EPS of $3.84, up 24%. On a non-GAAP basis, Q1 net income was $108 million, up 6% from the prior year, and earnings per share of $4.26 were up 15% from the prior year quarter. Overall, we are off to a very good start in our fiscal 2023. In scores, revenues were up 5% over the same period last year, as you can see on page 6 of the presentation. B2B revenues were up 11% in the quarter versus the prior year, driven by unit price increases, increased volumes in card and personal loan originations, and also by a license renewal in Latin America. In the U.S., auto originations revenues were up 24%, and card and personal loan originations revenues were up 19%. We continued to see reduced mortgage origination volumes for the U.S. market, where revenues were down about 40% year over year. The fiscal 2023 price increases we talked about last quarter take effect primarily in January, so we expect to see much of the impact in our second fiscal quarter. As always, it's difficult to estimate the timing and magnitude of the impact. Our B2C revenues were down 6% versus the prior year quarter, as we continue to see difficult comps in our MyFICO business due to the economic climate and especially because of the higher interest rates and lower number of consumers preparing for mortgages. In our software business, we continue our focus on the decisioning platform that enables businesses to optimize consumer interactions across their enterprise. Overall software numbers look strong, and platform numbers continue to be exceptional. As you can see on page 7, we delivered overall ARR growth of 11% and platform ARR growth of 46%. Our ARR, our DBNRR, and our ACB numbers are adjusted for the CYRON divestiture. And again, our customers continue to find new use cases, as you can see from our net retention rates shown on page 8. Overall, net retention rate was 110%, and platform net retention is 130%, continuing to demonstrate the success of our land and expand strategy. And we continue to see strong demand for our software. As you can see on page 9, our ACV bookings were up 31% over the same period last year, and we continue to see a strong pipeline of opportunities as customers look to FICO to deliver strategic, mission-critical decisioning. Earlier this week, I had the opportunity to attend our annual sales meeting where I met with colleagues from around the world to discuss best practices, current trends, and especially how our customers view our offerings. I heard firsthand how customers were looking to FICO to help solve their most difficult decisions and how those customers were increasingly finding new ways to use the FICO platform throughout their businesses. I don't think there's ever been a time at FICO where the team has been so excited about the opportunities ahead of us, and I share that excitement. I came away with a renewed appreciation for our unique technological capabilities and the incredible team that we have taking it to the market. Finally, as I've often said, we're committed to becoming the preeminent platform player in decisioning analytics. The strategic focus has allowed us to exit some non-strategic products and services over the last few years. In November, we announced we had reached an agreement to transition our CIRON compliance business to our partner, IMTF. We closed that transaction in December. While we're proud of the work and the innovation that the FICO team put into CIRON to make it an industry-leading solution, we believe we are better positioned if we dedicate our focus and our resources to expanding the capabilities and market penetration of FICO platform. I'll have some final comments in a few minutes, but first let me turn the call back to Steve for more financial detail. Thanks.