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FICO Announces Earnings of $1.25 per Share for Fourth Quarter Fiscal 2017

SAN JOSE, Calif., Nov. 1, 2017 /PRNewswire/ -- FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its fourth fiscal quarter ended September 30, 2017.

Fourth Quarter Fiscal 2017 GAAP Results
Net income for the quarter totaled $40.0 million, or $1.25 per share, versus $32.1 million, or $1.00 per share, reported in the prior year period. The current quarter earnings include a reduction to income tax expense of $1.2 million, or $0.04 per share, associated with the adoption of FASB Accounting Standards Update No. 2016-09 ("ASU 2016-09").

Net cash provided by operating activities for the quarter was $54.2 million versus $32.5 million in the prior year period.

Fourth Quarter Fiscal 2017 Non-GAAP Results
Non-GAAP Net Income for the quarter was $52.7 million vs. $41.4 million in the prior year period. Non-GAAP EPS for the quarter was $1.65 vs. $1.28 in the prior year period. Free cash flow for the quarter was $49.2 million vs. $22.5 million in the prior year period. The Non-GAAP financial measures are described in the financial table captioned "Non-GAAP Results" and are reconciled to the corresponding GAAP results in the financial tables at the end of this release.

Fourth Quarter Fiscal 2017 GAAP Revenues
The company reported revenues of $253.2 million for the quarter as compared to $235.8 million reported in the prior year period.

"We had an outstanding finish to our fiscal 2017," said Will Lansing, chief executive officer. "We had record revenues, record bookings, and have strong momentum entering 2018."

Revenues for the fourth quarter of fiscal 2017 across each of the company's three operating segments were as follows:

  • Applications revenues, which include the company's preconfigured decision management applications and associated professional services, were $150.3 million in the fourth quarter, up 1% from the prior year.
  • Scores revenues, which include the company's business-to-business (B2B) scoring solutions and associated professional services, and business-to-consumer (B2C) service, were $72.0 million in the fourth quarter, compared to $62.8 million in the prior year quarter, an increase of 15%. B2B revenue increased 13% and B2C revenue increased 17% from the prior year quarter.
  • Decision Management Software revenues, which include Blaze Advisor®, Xpress Optimization and related professional services, were $30.9 million in the fourth quarter compared to $24.0 million in the prior year quarter, an increase of 29%, due primarily to increased license sales and services of Xpress Optimization.

Outlook
The company is providing guidance for fiscal 2018 of approximately:


Fiscal 2018 without
Excess Tax Benefit

Estimated Impact of
Excess Tax Benefit *

Fiscal 2018
Guidance

Revenue

$990 million


$990 million

GAAP Net Income

$119 million

$20 million

$139 million

GAAP EPS

$3.71

$0.62

$4.33

Non GAAP Net Income

$171 million


$171 million

Non GAAP EPS

$5.32


$5.32


*The impact of Excess Tax Benefit (ASU 2016-09) on fiscal 2017 results increased GAAP Net Income by $25 million and GAAP EPS by $0.77 per share.

The Non-GAAP financial measures are described in the financial table captioned "Reconciliation of Non-GAAP Guidance."

Company to Host Conference Call
The company will host a webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to report its fourth quarter fiscal 2017 results and provide various strategic and operational updates. The call can be accessed at FICO's Web site at www.FICO.com/investors. A replay of the webcast will be available through November 1, 2018.

The webcast will also be distributed through the Thomson StreetEvents Network to both institutional and individual investors. The webcast can be accessed via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 165 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

Learn more at http://www.fico.com

Join the conversation at https://twitter.com/fico & http://www.fico.com/en/blogs/

FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.

Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering initiative, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to protect such data, the failure to realize the anticipated benefits of any acquisitions, material adverse developments in global economic conditions or in the markets we serve, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2016 and Form 10-Q for the quarter ended June 30, 2017. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)














September 30,


September 30,


2017


2016

ASSETS:




Current assets:




Cash and cash equivalents

$ 105,618


$ 75,926

Accounts receivable, net

168,586


167,786

Prepaid expenses and other current assets

36,727


23,926

Total current assets

310,931


267,638





Marketable securities and investments

25,515


21,936

Property and equipment, net

40,703


45,122

Goodwill and intangible assets, net

825,599


832,034

Other assets

52,872


53,946


$ 1,255,620


$ 1,220,676





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




Accounts payable and other accrued liabilities

$ 51,614


$ 50,732

Accrued compensation and employee benefits

77,610


71,216

Deferred revenue

55,431


47,129

Current maturities on debt

142,000


77,000

Total current liabilities

326,655


246,077





Long-term debt

462,801


493,624

Other liabilities

39,627


34,147

Total liabilities

829,083


773,848





Stockholders' equity

426,537


446,828


$ 1,255,620


$ 1,220,676

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


















Quarter Ended


Year Ended


September 30,


September 30,


2017


2016


2017


2016









Revenues:








Transactional and maintenance

$ 171,056


$ 154,218


$ 652,660


$ 605,919

Professional services

50,871


51,940


179,569


169,738

License

31,278


29,666


99,940


105,699

Total revenues

253,205


235,824


932,169


881,356









Operating expenses:








Cost of revenues

75,202


74,298


287,123


265,173

Research & development

30,226


27,773


110,870


103,669

Selling, general and administrative

84,262


85,429


339,796


328,940

Amortization of intangible assets

2,712


3,409


12,709


13,982

Restructuring and acquisition-related

-


-


4,471


-

Total operating expenses

192,402


190,909


754,969


711,764

Operating income

60,803


44,915


177,200


169,592

Other expense, net

(6,601)


(6,556)


(25,876)


(25,023)

Income before income taxes

54,202


38,359


151,324


144,569

Provision for income taxes

14,158


6,255


23,068


35,121

Net income

$ 40,044


$ 32,104


$ 128,256


$ 109,448

























Basic earnings per share:

$ 1.31


$ 1.04


$ 4.16


$ 3.52

Diluted earnings per share:

$ 1.25


$ 1.00


$ 3.98


$ 3.39









Shares used in computing earnings per share:








Basic

30,534


30,916


30,862


31,129

Diluted

31,963


32,221


32,245


32,308

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










Year Ended


September 30,


2017


2016

Cash flows from operating activities:




Net income

$ 128,256


$ 109,448

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




Depreciation and amortization

36,214


31,633

Share-based compensation

61,222


55,509

Changes in operating assets and liabilities

4,347


13,484

Other, net

(4,395)


194

Net cash provided by operating activities (1)

225,644


210,268





Cash flows from investing activities:




Purchases of property and equipment

(19,828)


(21,969)

Cash paid for acquisitions, net of cash acquired

-


(5,683)

Other, net

(777)


37

Net cash used in investing activities

(20,605)


(27,615)





Cash flows from financing activities:




Proceeds from revolving line of credit

190,000


122,000

Payments on revolving line of credit

(84,000)


(99,000)

Payment on Senior Notes

(72,000)


(60,000)

Proceeds from issuances of common stock

14,474


17,828

Taxes paid related to net share settlement of equity awards

(40,232)


(29,955)

Repurchases of common stock

(187,629)


(138,399)

Other, net

(1,238)


(2,489)

Net cash used in financing activities (1)

(180,625)


(190,015)





Effect of exchange rate changes on cash

5,278


(2,832)





Increase (decrease) in cash and cash equivalents

29,692


(10,194)

Cash and cash equivalents, beginning of year

75,926


86,120

Cash and cash equivalents, end of year

$ 105,618


$ 75,926







(1)

During the quarter ended December 31, 2016, we adopted Accounting Standards Update No. 2016-09 which addresses, among other items, updates to the presentation of excess tax benefits related to stock based compensation. Excess tax benefits are no longer classified as a reduction of operating cash flows. We have adopted changes to our condensed consolidated statements of cash flows on a retrospective basis. The impact to net cash provided by operating activities and net cash used in financing activities for the year ended September 30, 2016 was $25.0 million.

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)























Quarter Ended



Year Ended



September 30,



September 30,



2017


2016



2017


2016











Applications revenues:










Transactional and maintenance


$ 90,524


$ 83,813



$ 348,861


$ 328,472

Professional services


38,886


43,370



141,857


138,775

License


20,873


21,836



62,449


65,395

Total Applications revenues


$ 150,283


$ 149,019



$ 553,167


$ 532,642











Scores revenues:










Transactional and maintenance


$ 69,524


$ 59,392



$ 259,780


$ 233,655

Professional services


847


1,503



2,849


4,185

License


1,654


1,916



3,725


3,219

Total Scores revenues


$ 72,025


$ 62,811



$ 266,354


$ 241,059











Decision Management Software revenues:










Transactional and maintenance


$ 11,008


$ 11,013



$ 44,019


$ 43,792

Professional services


11,138


7,067



34,863


26,778

License


8,751


5,914



33,766


37,085

Total Decision Management Software revenues


$ 30,897


$ 23,994



$ 112,648


$ 107,655











Total revenues:










Transactional and maintenance


$ 171,056


$ 154,218



$ 652,660


$ 605,919

Professional services


50,871


51,940



179,569


169,738

License


31,278


29,666



99,940


105,699

Total revenues


$ 253,205


$ 235,824



$ 932,169


$ 881,356

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)


















Quarter Ended


Year Ended


September 30,


September 30,


2017


2016


2017


2016









GAAP net income

$ 40,044


$ 32,104


$ 128,256


$ 109,448

Amortization of intangible assets

2,712


3,409


12,709


13,982

Restructuring and acquisition-related

-


-


4,471


-

Stock-based compensation expense

17,676


13,804


61,222


55,508

Income tax adjustments

(6,515)


(4,676)


(24,316)


(20,235)

Excess tax benefit

(1,198)


-


(24,746)


-

Adjustment to foreign tax credit and tax reserves

-


(3,287)


-


(3,287)

Non-GAAP net income

$ 52,719


$ 41,355


$ 157,596


$ 155,417

















GAAP diluted earnings per share

$ 1.25


$ 1.00


$ 3.98


$ 3.39

Amortization of intangible assets

0.08


0.11


0.39


0.43

Restructuring and acquisition-related

-


-


0.14


-

Stock-based compensation expense

0.55


0.43


1.90


1.72

Income tax adjustments

(0.20)


(0.15)


(0.75)


(0.63)

Excess tax benefit

(0.04)


-


(0.77)


-

Adjustment to foreign tax credit and tax reserves

-


(0.10)


-


(0.10)

Non-GAAP diluted earnings per share

$ 1.65


$ 1.28


$ 4.89


$ 4.81









Free cash flow








Net cash provided by operating activities

$ 54,221


$ 32,542


$ 225,644


$ 210,266

Capital expenditures

(5,036)


(9,428)


(19,828)


(21,969)

Dividends paid

-


(619)


(1,238)


(2,488)

Free cash flow

$ 49,185


$ 22,495


$ 204,578


$ 185,809









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, 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)








Fiscal 2018 Guidance
before Excess Tax
Benefit


Estimated Excess
Tax Benefit


Fiscal 2018 Guidance







GAAP net income

$ 119


$ 20


$ 139

Amortization of intangible assets

7


-


7

Stock-based compensation expense

67


-


67

Income tax adjustments

(22)


-


(22)

Excess tax benefit

-


(20)


(20)

Non-GAAP net income

$ 171


$ -


$ 171













GAAP diluted earnings per share

$ 3.71


$ 0.62


$ 4.33

Amortization of intangible assets

0.22


-


0.22

Stock-based compensation expense

2.09


-


2.09

Income tax adjustments

(0.69)


-


(0.69)

Excess tax benefit

-


(0.62)


(0.62)

Non-GAAP diluted earnings per share

$ 5.32


$ -


$ 5.32














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.

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SOURCE FICO

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