FICO Announces Earnings of $1.03 per Share for Second Quarter Fiscal 2018

Previous Fiscal
2018 Guidance*

Updated Fiscal 2018
Guidance*

Revenues

$990 million

$1.02 billion

GAAP Net Income

$136 million

$140 million

GAAP EPS

$4.34

$4.47

Non GAAP Net Income

$191 million

$200 million

Non GAAP EPS

$6.09

$6.38

* Previous and Updated Fiscal 2018 Guidance includes excess tax benefits associated with stock compensation of $20.0 million, or $0.64 per share, and a full-year tax charge of $17.0 million, or $0.54 per share, associated with tax reform legislation.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

March 31,

September 30,

2018

2017

ASSETS:

Current assets:

     Cash and cash equivalents

$                107,868

$               105,618

     Accounts receivable, net

188,538

168,586

     Prepaid expenses and other current assets

36,813

36,727

          Total current assets

333,219

310,931

Marketable securities and investments

27,912

25,515

Property and equipment, net

45,111

40,703

Goodwill and intangible assets, net

831,258

825,599

Other assets

53,395

52,872

$             1,290,895

$            1,255,620

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

     Accounts payable and other accrued liabilities

$                  55,234

$                 51,614

     Accrued compensation and employee benefits

57,294

77,610

     Deferred revenue

65,018

55,431

     Current maturities on debt

191,000

142,000

          Total current liabilities

368,546

326,655

Long-term debt

512,868

462,801

Other liabilities

38,778

39,627

          Total liabilities

920,192

829,083

Stockholders' equity

370,703

426,537

$             1,290,895

$            1,255,620

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Six Months Ended

March 31,

March 31,

2018

2017

2018

2017

Revenues:

     Transactional and maintenance

$           195,195

$           161,249

$           369,857

$           314,909

     Professional services

46,078

41,284

88,704

84,827

     License

16,585

25,845

34,618

48,242

        Total revenues

257,858

228,378

493,179

447,978

Operating expenses:

     Cost of revenues

78,519

72,131

152,878

142,128

     Research & development

32,519

26,663

61,493

52,805

     Selling, general and administrative

97,057

86,231

187,353

171,445

     Amortization of intangible assets

1,684

3,312

3,472

6,632

        Total operating expenses

209,779

188,337

405,196

373,010

Operating income

48,079

40,041

87,983

74,968

Other expense, net

(7,277)

(6,905)

(13,224)

(13,177)

Income before income taxes

40,802

33,136

74,759

61,791

Provision for income taxes

8,527

8,052

15,185

(1,194)

Net income

$             32,275

$             25,084

$             59,574

$             62,985

Basic earnings per share:

$                 1.08

$                 0.81

$                 1.98

$                 2.03

Diluted earnings per share:

$                 1.03

$                 0.78

$                 1.90

$                 1.94

Shares used in computing earnings per share:

     Basic

29,985

31,017

30,032

31,003

     Diluted

31,300

32,260

31,431

32,398

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 Six Months Ended 

 March 31, 

2018

2017

Cash flows from operating activities:

 Net income 

$                 59,574

$                 62,985

 Adjustments to reconcile net income to net cash provided by operating activities: 

       Depreciation and amortization 

15,095

18,236

       Share-based compensation 

35,749

29,231

       Changes in operating assets and liabilities 

(38,760)

(11,990)

       Other, net 

6,352

935

          Net cash provided by operating activities 

78,010

99,397

 Cash flows from investing activities: 

 Purchases of property and equipment 

(11,111)

(9,604)

 Net activity from marketable securities 

(2,145)

-

          Net cash used in investing activities 

(13,256)

(9,604)

 Cash flows from financing activities: 

 Proceeds from revolving line of credit 

147,000

79,000

 Payments on revolving line of credit 

(48,000)

(24,000)

 Proceeds from issuances of common stock 

1,706

9,114

 Taxes paid related to net share settlement of equity awards 

(40,448)

(36,914)

 Repurchases of common stock 

(124,715)

(74,647)

 Other, net 

(240)

(1,238)

          Net cash used in financing activities 

(64,697)

(48,685)

 Effect of exchange rate changes on cash 

2,193

(1,186)

 Increase in cash and cash equivalents 

2,250

39,922

 Cash and cash equivalents, beginning of period 

105,618

75,926

 Cash and cash equivalents, end of period 

$               107,868

$               115,848

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)

Quarter Ended 

Six Months Ended

March 31,

March 31,

2018

2017

2018

2017

Applications revenues:

     Transactional and maintenance

$         97,630

$         86,013

$        190,843

$        170,894

     Professional services

38,516

32,640

73,369

66,981

     License

10,553

15,684

23,896

31,227

          Total applications revenues

$       146,699

$       134,337

$        288,108

$        269,102

Scores revenues:

     Transactional and maintenance

$         85,644

$         63,628

$        155,218

$        121,880

     Professional services

682

994

960

1,515

     License

1,584

811

1,647

1,420

          Total scores revenues

$         87,910

$         65,433

$        157,825

$        124,815

Decision Management Software revenues:

     Transactional and maintenance

$         11,921

$         11,608

$          23,796

$          22,135

     Professional services

6,880

7,650

14,375

16,331

     License

4,448

9,350

9,075

15,595

          Total decision management software revenues

$         23,249

$         28,608

$          47,246

$          54,061

Total revenues:

     Transactional and maintenance

$       195,195

$       161,249

$        369,857

$        314,909

     Professional services

46,078

41,284

88,704

84,827

     License

16,585

25,845

34,618

48,242

          Total revenues

$       257,858

$       228,378

$        493,179

$        447,978

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Six Months Ended

March 31,

March 31,

2018

2017

2018

2017

GAAP net income

$ 32,275

$ 25,084

$ 59,574

$ 62,985

Amortization of intangible assets

1,684

3,312

3,472

6,632

Stock-based compensation expense

19,238

14,712

35,748

29,231

Income tax adjustments

(5,177)

(5,542)

(9,873)

(10,529)

Excess tax benefit

(1,551)

(3,602)

(13,062)

(20,863)

Tax Cuts and Jobs Act

1,665

-

13,420

-

Non-GAAP net income

$ 48,134

$ 33,964

$ 89,279

$ 67,456

GAAP diluted earnings per share

$     1.03

$     0.78

$     1.90

$     1.94

Amortization of intangible assets

0.05

0.10

0.11

0.20

Stock-based compensation expense

0.61

0.46

1.14

0.90

Income tax adjustments

(0.17)

(0.17)

(0.31)

(0.32)

Excess tax benefit

(0.05)

(0.11)

(0.42)

(0.64)

Tax Cuts and Jobs Act

0.05

-

0.43

-

Non-GAAP diluted earnings per share

$     1.54

$     1.05

$     2.84

$     2.08

Free cash flow

Net cash provided by operating activities

$ 49,233

$ 66,419

$ 78,010

$ 99,397

Capital expenditures

(7,067)

(5,284)

(11,111)

(9,603)

Dividends paid

-

(620)

-

(1,238)

Free cash flow

$ 42,166

$ 60,515

$ 66,899

$ 88,556

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION

RECONCILIATION OF NON-GAAP GUIDANCE

(In millions, except per share data)

(Unaudited)

Previous Fiscal 2018 Guidance

Updated Fiscal 2018 Guidance

GAAP net income

$                                                136

$                                              140

Amortization of intangible assets

7

7

Stock-based compensation expense

67

76

Income tax adjustments

(16)

(21)

Excess tax benefit

(20)

(20)

Tax Cuts and Jobs Act

17

17

Non-GAAP net income

$                                                191

$                                              200

GAAP diluted earnings per share

$                                               4.34

$                                             4.47

Amortization of intangible assets

0.22

0.22

Stock-based compensation expense

2.14

2.44

Income tax adjustments

(0.52)

(0.66)

Excess tax benefit

(0.64)

(0.64)

Tax Cuts and Jobs Act

0.54

0.54

Non-GAAP diluted earnings per share

$                                               6.09

$                                             6.38

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.