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 zero. As a reminder, this conference is being recorded Wednesday, November 8th, 2023. I'd now like to turn the conference over to Dave Singleton, Vice President, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining FICO's fourth quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Steve Weber. 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 with the prior quarter to facilitate an understanding of the run rate of our business. Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portion of such filings. Copies are available from the SEC, from the FICO 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. Earnings released in Regulation Schedule G 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 8th, 2024. Now I'll turn the call over to our CEO, Will Lansing.

Thanks, Dave. 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 am pleased to report we had a strong quarter which completed another outstanding year with record annual revenues and record earnings meeting the guidance that we raised last quarter. Page 2 shows financial highlights from our fourth quarter. We reported fourth quarter revenues of $390 million, up 12% over the prior year, and $1.514 billion of revenue for the fiscal year, up 10% versus the prior year. We delivered $101 million of GAAP net income in the quarter and GAAP earnings of $4.01. For the full fiscal year, we delivered $429 million in GAAP net income, which equates to $16.93 of earnings per share. On a non-GAAP basis, Q4 net income was $127 million, with earnings of $5.01 per share. Full-year non-GAAP net income was $500 million, up 10% over last year, with $19.71 of non-GAAP earnings per share, which is up 14% versus the prior year. We continue to deliver strong free cash flow with a record $163 million in our fourth quarter. For the full year, we delivered $465 million of free cash flow. We continue to return capital to our shareholders through buybacks. In fiscal 2023, we repurchased 615,000 shares at an average price of $659 per share. In our score segment, as you can see from page six, Our fourth quarter revenues were $196 million, up 12% versus the prior year. For the full year, our revenues were $774 million, up 10% versus last year. On the B2B side, the current quarter revenues were up 21% versus the prior year and up 18% for the full year. This is a strong result considering the impact of rising interest rates on loan origination volumes. On the B2C side, the current quarter revenues were down 6% versus the prior year and down 8% for the full year due to difficult comps. Fourth quarter mortgage origination revenues were up 147% versus the prior year and accounted for 24% of our SCORES revenues and 12% of our total company revenues. Auto origination revenues were up 2% while credit card and personal loan origination revenues were down 2% versus the prior year. We continue to innovate in scores. We're happy to see traction with our latest score, FICO Score 10T. This quarter, we announced that Movement Mortgage, a top 10 retail mortgage lender, has become an early adopter of FICO Score 10T. They're using it to analyze their non-conforming loans in conjunction with the classic FICO scores. As a first-in-market user of FICO Score 10T, Movement Mortgage will work with FICO to share early use insights for non-conforming products to help the mortgage industry understand the benefits. of the most predictive credit score in the space. Movement Mortgage's use of FICO Score 10-T will provide opportunities to evaluate risk more efficiently in credit decisioning. The improvements in the predictive power of FICO Score 10-T can help lenders avoid unexpected credit risk and better control default rates while making more competitive credit offers to more consumers. And this all occurs without sacrificing the trusted FICO Score minimum scoring criteria and user experience. A more predictive score will help project cash flows with more precision, potentially increasing the value of securitized assets on the secondary market. In our software segment, we delivered $194 million in Q4 revenue, up 11% from last year. We delivered $740 million in fiscal year revenue, up 10% from last year. We continue to drive strong growth in ARR and NRR through our land and expand strategy, with expand driven by increased customer usage. As shown on page 7, total ARR was up 22%, with platform ARR growing 53% and non-platform ARR growing 14%. Total NRR for the quarter, shown on page 8, was 120%, with platform NRR at 145% and non-platform NRR at 111%. We continue to see strong demand from new customers. Our total ACV bookings for the year were $94 million, up 10% year over year. There continues to be strong demand for our FICO platform. We've built a strong pipeline of prospects interested in using this advanced decisioning technology to optimize interactions with their consumer customers. And we continue to be recognized for our technology. Chart has ranked FICO number one for innovation and risk management technology for the seventh consecutive year. And we're in the top five as a risk and compliance technology provider for the second year in a row. Forrester identified FICO as a leader in AI decisioning platforms. and Juniper Resources awarded FICO Platform the Future Digital Award for Banking Innovation of the Year. I'll highlight the fiscal year 2024 guidance in just a few minutes, but first let me turn the call back over to Steve for further financial details.