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 Wednesday, August 2, 2023. I'd now like to turn the conference over to Steve Weber. Please go ahead.

Good afternoon, and thank you for joining FICO's third quarter earnings call. I'm Steve Weber, FICO 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 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 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 2, 2024. And with that, I'll turn the call over to Will Lansing.

Thanks, Steve, and thank you everyone for joining us for our third quarter earnings call. On the investor relations section of our website, we posted slides that offer financial highlights of our third quarter. I am pleased to report we delivered another exceptional quarter with record revenue and profitability and strength throughout our business. Today I'll talk about this quarter's results and our increased guidance for the whole fiscal year. As you can see on page two of the presentation, we reported record revenues of $399 million, an increase of 14% over the same period last year. We delivered $129 million of GAAP net income and GAAP earnings of $5.08 per share, growing 38% and 41% respectively over the prior year. On a non-GAAP basis, net income was $143 million, with earnings per share of $5.66, representing year-over-year growth of 24% and 27%. We continue to deliver strong results throughout the business. Scores revenue was a record $202 million, up 13% in the quarter versus the prior year. As you can see on page 6 of the presentation, B2B revenues were up 24%, driven primarily by increased originations revenues. Mortgage originations revenues were up 135% versus last year. Auto origination revenues were up 5%. Credit card, personal loan, and other origination revenues were up 2%. On B2C, revenues were flat with last quarter and down 11% versus the same period last year. That was due to difficult comps. In our software business, we continue to drive growth with FICO Platform, which provides the power of analytics and AI to enable smarter business decisions at scale. You can see on page 7, We delivered overall ARR growth of 20%, a significant milestone for us, and platform ARR growth of 53%. This represents our 15th straight quarter of platform ARR growth in excess of 40%. We continue to drive strong net retention rates as our customers continue to increase volumes and find new use cases. Overall NRR increased to 117%, as shown on page 8. Legacy off platform NRR was 109% as volumes grew in many of our customers. Platform NRR was 142% due to expanded use cases driven by 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, we had another quarter of double-digit growth with ACV bookings up 13% over the same period last year. We continue to see a strong pipeline of opportunities and are seeing strong demand for FICO platform. We had firsthand confirmation of the critical nature of FICO platform at our recent FICO World Conference. This is a three-day event, and it attracted customers from more than 60 countries where they shared best practices, learned about the latest in AI and advanced analytic innovations, and learned new approaches for digital transformation. We talked about how FICO Platform can design, build, and deliver AI-powered, hyper-personalized customer journeys across every touchpoint and with every interaction. Personally, I enjoyed the opportunity to meet our customers and hear from them how we're working together to optimize their most difficult decisions. One customer said, I knew that FICO Platform had potential to help transform our business from a decision-making perspective, but I'm now blown away by the scope of the platform and communications capabilities. Another customer told us, FICO doesn't sell software. You sell intelligence. That's way more valuable. And yet another customer simply said, we either do this now or we fail forever. I'm proud of our technological excellence and the team that supports our customers to transform their business. Finally, I'd like to say a few words about our partnership with Chelsea Football Club, where we're working together to empower students, adults, and communities across the U.S. with financial literacy tools and knowledge to make informed credit decisions that last a lifetime. We are hosting fundamentals workshops in partnership with the U.S. Soccer Foundation to empower the younger generation with the essential credit knowledge to jumpstart their credit journeys. Financial literacy correlates with better outcomes in education, but we know that the playing field is not always equal. One in five U.S. teenagers lack basic financial literacy skills. Around 74% of teens aren't confident in their financial knowledge. We're working on tackling this financial education gap to get more young people in the game. In each of the five cities that Chelsea is playing this summer, we're working with local partners to bring teenagers from traditionally underserved communities to these fundamentals workshops that are held on or near game day. The students will have an opportunity to attend the Chelsea football game taking place in their city. For the wider community in these cities, FICO is also hosting Score a Better Future credit education events, which are free to the public and will provide local residents with knowledge and tools to gain better insight into their financial health and understanding of their FICO scores. We know that FICO scores have allowed much more equitable access to credit, and we're committed to helping educate consumers about processes to foster broader inclusion. I'll have some final comments, including an increase in our guidance, in a few minutes, but first let me turn the call back to Steve for further details.