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. If at any time during the conference you need to reach an operator, please press star 0. And as a reminder, this conference is being recorded Thursday, January 25, 2024. It is now my pleasure to turn the conference over to David Singleton. Please go ahead.

Good afternoon, and thank you for joining FICO's first 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, and on this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the 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 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. And a replay of this webcast will be available through January 25th, 2025. Now I will turn the call over to our CEO, Will Lansing.

Thanks, Dave. And thank you, everyone, for joining us for our first quarter earnings call. In the investor relations section of our website, we posted some financial highlight slides that we'll be referencing during our talk today. I am so pleased to report that we had a great start to our fiscal year with double-digit growth in revenue, net income, and EPS versus last year. It was a solid quarter, and we're well positioned for our fiscal 2024. As shown on page two of the first quarter financial highlights, we reported first quarter revenues of $382 million, up 11% over last year. We delivered $121 million of GAAP net income in the quarter, up 24%, and GAAP earnings of $4.80 per share, up 25% from the prior year. On a non-GAAP basis, quarter one net income was $121 million, with earnings of $4.81 per share, up 12% and 13% respectively. We delivered free cash flow of 121 million in our first quarter, up 32% versus prior year. We continue to return capital to our shareholders through buybacks. In quarter one, we repurchased 78,000 shares at an average price of $915 per share. This month, we exhausted the remainder of the 2022 repurchase authorization and we announced a new $500 million authorization this week. In our score segment, as you can see from page six, our first quarter revenues were 192 million, up 8% versus the prior year. On the B2B side, the current quarter revenues were up 12% versus the prior year. This is a strong result, considering the impact of higher interest rates on loan origination volumes, and also the Latin America license renewal that we had in Q1 of 2023. On the B2C side, the current quarter revenues were down 3% versus the prior year. First quarter mortgage originations revenues were up 188% versus the prior year. Auto originations were down 3%. Credit card, personal loan, and other originations revenues were down 5% versus the prior year. We continue to see traction with our latest score, FICO score 10T. So you'll recall last quarter we announced that Movement Mortgage was an early adopter of FICO 10T. This quarter, we announced that Cross Country Mortgage, which is the nation's number three retail mortgage lender, will use FICO 10-T to analyze its non-conforming loans. They are the first lender originating loans to be issued in a mortgage-backed security based exclusively on the FICO Score 10-T. These clients, in addition to others, have signed up to demonstrate to investors and to rating agencies and to other stakeholders a real-world example of the improved predictive performance offered by FICO Score 10-T. In our software segment, we delivered $190 million in quarter one revenue, up 14% 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 you can see on page seven, total ARR was up 18%, with platform ARR growth growing 43%, and non-platform ARR growing 11%. Total NRR for the quarter, shown on page 8, was 114%, with platform NRR at 136% and non-platform NRR at 108%. We do continue to see strong demand from our new customers. Our total ACV bookings for the quarter were 18 million, a good result after a particularly strong fourth quarter. We continue to have a robust pipeline of opportunities, particularly with FIFO platform offerings. We've expanded our FICO platform reach both by geography and by customer type. In December, we launched FICO platform with an event in India, and we've already had several early adopters looking to expand to multiple use cases. In the UK, StepChange Debt Charity, a market leader, will use the FICO platform to provide individual outcomes to consumers seeking to become debt-free. Our biggest opportunity near term continues to be in North America, where banks are focused on digital transformation and understand the value of FICO platform. where data-driven analytics allow hyper-personalized decisioning in consumer interactions on a real-time basis. We continue to innovate and bring new capabilities to the FICO platform and work with new customers to demonstrate value and with existing customers to expand use cases. Our innovation will be highlighted at this year's FICO World event, which will take place in San Diego in April. I'll have more on that later, but for now, let me turn the call over to Steve for further financial details.