Fair Isaac Corporation (FICO)

FICO 
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Fair Isaac (FICO)

Q1 2013 Earnings Call

January 30, 2013 5:00 pm ET

Executives

Steven P. Weber - Vice President of Investor Relations and Treasurer

William J. Lansing - Chief Executive Officer, President and Director

Michael J. Pung - Chief Financial Officer, Chief Investor Relations and Executive Vice President

Analysts

Manav Patnaik - Barclays Capital, Research Division

Ben Hearnsberger - Stephens Inc., Research Division

Presentation

Operator

Good afternoon, and good evening. My name is Sheryl Lee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fair Isaac Corporation First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Mr. Steve Weber, you may begin your conference, sir.

Steven P. Weber

Thank you. Good afternoon, and thank you for joining FICO's first quarter earnings call. I'm Steve Weber, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing; and our CFO, Mike Pung. Today, we issued a press release that describes financial results compared to the prior year. Today, 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 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 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 www.fico.com, and on the SEC's website at www.sec.gov. A replay of this webcast will be available through March 1, 2013.

Now, I'll turn the call over to Will Lansing.

William J. Lansing

Thanks, Steve. Today, we announced the results of our first quarter of fiscal 2013. I'll briefly discuss those results and then discuss the progress we're making with the acquisitions we made in 2012 and how those acquisitions are helping us reach our strategic goals.

First, I'm happy to report that we had another good quarter. Our revenue of $190 million was an increase of 12% over the same period last year and 2% over the previous quarter. We delivered $23 million of net income and earnings of $0.65 for the quarter, which includes $0.06 per share of onetime charges taken in the quarter.

As we did last quarter, our revenues grew across our entire portfolio. Our Applications business was up 13% versus the same quarter last year. Scores was up 2% versus the same quarter last year, and Tools was up 24% versus the previous year. These results included about 1 month of contributions from our acquisition of CR Software at the end of November. Mike will provide more detail, but first I'd like to talk about what CR Software brings us and how, along with Entiera and Adeptra, it is helping us realize our strategic vision and accelerate our growth.

When I moved from the board to the CEO position 1 year ago, I said this was a highly attractive business with bright prospects. We have a strong brand and are viewed broadly as a pioneer and leader in using analytics to help businesses make better decisions. We also have a terrific set of products that are highly valued by our customers and deeply embedded into their business processes. However, the maturity of our products and the deep market penetration has also met with modest organic growth. So I also said that we'd be looking at complementing our organic growth with some carefully considered M&A activity. And we have a talented team of people who are attuned to the opportunities presented by the rise of Big Data and are excited about helping our customers understand and leverage its potential.

So over the past year, we've made internal investments and acquisitions to expand our addressable market. Specifically, we're pursuing 3 strategic initiatives: first, we are diversifying into industries where we can bring our core analytic competencies to bear in the same ways we've done for decades in financial services. We're paying particular attention to industries that are in the early stages of using analytics to generate value. And our extensive IP portfolio puts us several steps ahead of our competitors. Our acquisitions of Entiera, Adeptra and CR Software have helped us with this diversification strategy. They bring customer bases in retail, telecom, government, health care and other industries, while at the same time providing product extension cross-sell opportunities for our current customer base.

Our second area of focus is to provide innovative software-as-a-service offerings of our solution. Getting this right will provide us with a significant growth opportunity, again, by expanding our addressable market. Many of our current solutions appeal to large institutions with the infrastructure and resources to implement them. By offering SaaS-based products, we will be able to efficiently serve smaller organizations and those in emerging markets with lower cost, less complex implementations. Both Adeptra and Entiera have boosted our SaaS capabilities, and CR Software features a technology platform that offers many of these benefits as well.

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