Fair Isaac Corporation (FICO)

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Fair Isaac (FICO)

Q4 2013 Earnings Call

October 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

Matthew Galinko - Sidoti & Company, LLC

Brett Horn - Morningstar Inc., Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen. My name is Ryan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fair Isaac Corporation Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn our call over to Steve Weber. You may begin.

Steven P. Weber

Thank you, Ryan. Good afternoon, and thank you for joining FICO's Fourth 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. On this call, management will also discuss results in comparison to the prior quarter in order to facilitate understanding of the runway 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 fico.com or on the SEC's website at sec.gov. A replay of this webcast will be available through November 29, 2013.

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

William J. Lansing

Thanks, Steve. Today, we announced the results for our fourth quarter of fiscal 2013. I'll briefly recap those results and summarize our entire fiscal year 2013, then I'll discuss our outlook for 2014.

In our fourth quarter, we reported revenue of $190 million, an increase of 2% over the same period last year. On a GAAP basis, we delivered $29 million of net income and earnings of $0.79 per share for the quarter, up 38% and 32%, respectively, from the same period last year. We delivered $35 million of non-GAAP net income and non-GAAP EPS of $0.98 per share, increases of 17% from the same period last year.

Recurring revenues throughout our business were strong again this quarter, up 4% over the same quarter last year. Services revenue were 8% higher than last year. We were disappointed this quarter with license sales, which were 12% lower than the same period last year. Our customers continue to face uncertainties that have lengthened purchasing decisions for large license transactions. We had several very large deals this quarter that, had we closed them before September 30, would've yielded a different result for the quarter. While these deals are still in play, we've learned that in today's environment, it's difficult to forecast the timing of large deal approvals at North American banks.

Mike will provide more detail on the numbers, but first, I'd like to summarize what we accomplished in fiscal 2013, particularly since our Q4 results do not tell the whole story.

A year ago, I said we viewed fiscal 2013 as a year in which we would continue to invest in long-term growth initiatives. First, we would diversify beyond our strong foundation in financial services, where analytics have generated great value; second, we would expand our SaaS offerings with cloud-enabled FICO applications, analytics and solutions; and third, we would help our clients leverage Big Data to make better decisions and change the way they do business.

We've made great strides toward these goals in the past year. We've successfully integrated the IP and talent we gained when we acquired Adeptra. We closed the year with several large wins as a direct result of our new mobile customer engagement capability. We acquired and integrated CR Software, giving our Debt Manager product the functionality it needed to regain its position as the most advanced offering in a growing market, and at the same time, giving us firm footing in several new industries.

Both of these acquisitions boosted our revenue, accounting for much of our growth this year and also our bookings. And they helped us diversify beyond financial services, particularly in government and insurance bookings this year. We will see the benefits of these investments in the months and years ahead.

But we've also worked hard internally on innovation. We stepped up our development efforts in the area of enterprise fraud prevention, which is a growing problem for our customers, and we expect will be a significant growth driver for the business. We focus significant resources on the specific market problems of application fraud, online fraud and merchant monitoring fraud.

In addition, we continue to deliver solid performance from our Scores franchise. Our B2C business grew 16% from the prior year as we introduced new consumer product offerings. And perhaps most significantly, this year, we began the rollout of the FICO Analytic Cloud, a game-changing offering enabling businesses of any size to access the industry's most powerful Big Data analytics and Decision Management technology.

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