Fair Isaac Corporation

Thank you for standing by, and welcome to FICO's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Dave Singleton. Please go ahead.

Good afternoon, and thank you for attending 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 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 regulatory schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most appropriate comparable GAAP measure. This includes an FY25 guidance reconciliation of GAAP to non-GAAP earnings, which are adjusted for items such as stock-based compensation and excess tax benefit. This reconciliation is part of the earnings release included in Exhibit 99.1 to our 8K, which we filed with the SEC under item 2.02, titled Results of Operations and Financials. 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 November 6, 2025. I will now turn the call over to our CEO, Will Lansing.

Thanks, Dave. 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 financial highlight slides. We'll be referencing those during our presentation. Today, I'll talk about this quarter's results and our guidance for fiscal 25. We had another fantastic year. We exceeded fiscal 24 guidance on all metrics and delivered strong growth and free cash flow. As shown on page two of the fourth quarter financial highlights, we reported fourth quarter revenues of $454 million, up 16% over last year. For the full fiscal year, we delivered $1.718 billion in revenue, up 13% versus the prior year. We reported $136 million in GAAP net income in the quarter, up 34%, and GAAP earnings of $5.44 per share, up 36% from the prior year. For the full fiscal year, we delivered $513 million in GAAP net income, equating to $20.45 of earnings per share, up 19% and 21% respectively. We reported $163 million in non-GAAP net income in the quarter, up 29%, and non-GAAP earnings of $654 per share, up 30% from the prior year. For the full fiscal year, we delivered $595 million in non-GAAP net income, which equates to 2,374 of earnings per share of 19% and 20% respectively. As shown on page 10, we delivered record-free cash flow of $219 million in our fourth quarter and $607 million over the last four quarters, an increase of 31% year over year. We continue to return capital to our shareholders through buybacks. In the fourth quarter, we repurchased 188,000 shares at an average price of $1,721 per share. For the fiscal year, we've repurchased 606,000 shares at an average price of $1,366 per share. In our scores segment on page six of the presentation, our fourth quarter revenues were $249 million of 27% versus the prior year. For the full year, our revenues were $920 million up 19% versus last year. On the B2B side, fourth quarter revenues were up 38% versus the prior year and up 27% for the full year, primarily driven by mortgage originations. On the B2C side, fourth quarter revenues were down 1% versus the prior year and down 2% for the full fiscal year, driven by decreased sales on the myFICO.com website. Fourth quarter mortgage originations revenues were up 95% versus the prior year, Mortgage origination revenue accounted for 47% of B2B revenue and 37% of total scores revenue. Auto originations revenues were down 2%, while credit card, personal loan, and other originations revenues were down 5% versus the prior year. Today, we've announced that for calendar 2025, FICO's wholesale royalty will be $4.95 per score for mortgage originations. At this new per score royalty, the amount collected by FICO will remain a small percentage, on average about 15%, of the tri-merge bundle cost, which typically runs $80 to well over $100. With total average closing costs of $6,000, FICO's share is only about two-tenths of 1%. As such, it will continue to be the lowest of all individual mortgage closing costs. The FICO score plays a central role in facilitating about $2 trillion in mortgage originations every year as a critical tool for borrowers, lenders, insurers, investors, and other important stakeholders. The royalty collected by FICO is entirely fair and reasonable, and the FICO score continues to deliver incredible value as the most trusted and cost-effective tool used to evaluate consumer credit risk in residential mortgage finance. More information on our new royalty pricing can be found on our website at www.fico.com slash blogs. And I would encourage you all to get more detail out on the blog. We continue to drive strong adoption for FICO Score 10T for the non-GSE mortgages. This quarter, we signed new lenders, including United Wholesale Mortgages, the largest global mortgage lender. We now have clients with over $244 billion in annualized mortgage originations and about $1.33 trillion in eligible mortgage portfolio servicing that have signed up for FICO Score 10-T. Firms are already using 10-T to make credit decisions for securitization and for delivery to investors. FICO 10-T for conforming mortgages sold to the GSEs will be rolled out based on the timeline of the FHA's implementation of enterprise credit score requirements. Now, we continue to innovate in our scores business. Last week, we announced the upcoming launch of FICO Score Mortgage Simulator, which enables mortgage professionals to run credit event scenarios by applying simulated changes in an applicant's credit report data to simulate potential changes to the applicant's FICO Score. This benefits both mortgage lenders and consumers by potentially providing more loan options and more favorable interest rates. In our software segment, we delivered $205 million in fourth quarter revenue, up 5% from last year, driven mainly by growth in SaaS software, partially offset by a decline in professional services. We delivered $798 million in fiscal year revenue, up 8% from last year. We continue to drive growth in ARR and NRR through our land and expand strategy, with expand driven by increased customer usage. As shown on page 7, the total ARR was up 8%, with platform ARR growing 31% and non-platform ARR flat year-over-year. Total NRR for the quarter, shown on page 8, was 106%, with platform NRR at 123% and non-platform at 99%. ACV bookings for the quarter were $22 million. Our total ACV bookings for the year were $85 million, down 10% year-over-year. While we faced some macroeconomic headwinds in the first half of the year, the second half bookings were consistent year over year. I am excited about the future of our software business. This quarter, IDC recognized FICO as a leader in the worldwide decision intelligence platform market. This is a testament to our commitment to innovation that enables real-time, transparent decision-making at scale. We help organizations design, engineer, and orchestrate decisions by automating steps in the decision-making process. FICO was recognized for its capabilities and strategy, meeting both today's customers' needs and the needs of our customers in the future. We announced two FICO platform partnerships this quarter. We have partnered with Tata Consulting Services, generally known as TCS, a global services integrator, and with ISON Experiences, the largest business process outsourcing solutions company in Africa. Both partnerships will leverage FICO platform to create industry-specific solutions for real-time decision-making. These partnerships will help us continue to drive strong growth for our platform business. Before I address fiscal 25 guidance, I'll pass it over to Steve to provide some other financial details.