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01/10 16:59
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary shows strong financial performance with positive adoption of FICO 10 T, new partnerships, and an optimistic fiscal year guidance. The Q&A reveals positive sentiment towards FICO's strategies and market position, despite some unclear responses. The reiterated guidance and free cash flow expectations, along with a strong market share, suggest a positive outlook. The absence of negative trends or significant risks further supports a positive sentiment. Overall, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
Q3 2025 Revenue $536 million, up 20% year-over-year. The increase was driven by growth in both the Scores and Software segments.
GAAP Net Income $182 million, up 44% year-over-year. The growth was attributed to higher revenues and operational efficiencies.
GAAP Earnings Per Share (EPS) $7.40, up 47% year-over-year. This reflects the increase in net income and share repurchases.
Non-GAAP Net Income $211 million, up 35% year-over-year. The increase was due to higher revenues and cost management.
Non-GAAP Earnings Per Share (EPS) $8.57, up 37% year-over-year. This reflects the increase in non-GAAP net income and share repurchases.
Free Cash Flow $276 million, up 34% year-over-year. The increase was driven by higher revenues and operational efficiencies.
Scores Segment Revenue $324 million, up 34% year-over-year. Growth was driven by higher unit prices, increased mortgage origination volumes, and a multiyear U.S. license renewal on the Insurance Scores product.
Software Segment Revenue $212 million, up 3% year-over-year. The growth was mainly due to platform SaaS and professional services.
Mortgage Origination Revenue Up 53% year-over-year. This accounted for 53% of B2B revenue and 44% of total Scores revenue, driven by increased mortgage origination volumes.
Auto Origination Revenue Up 23% year-over-year. Growth was attributed to increased auto loan originations.
Credit Card, Personal Loan, and Other Origination Revenue Up 3% year-over-year. Growth was attributed to increased originations in these categories.
Software Annual Recurring Revenue (ARR) $739 million, up 4% year-over-year. Growth was driven by the FICO Platform.
Platform ARR $254 million, up 18% year-over-year. Growth was driven by new use cases and increased usage of existing use cases.
Non-Platform ARR $485 million, down 2% year-over-year. Decline was due to headwinds in the CCS business.
Non-GAAP Operating Margin 57%, up 470 basis points year-over-year. The increase was due to higher revenues and cost management.
FICO Score 10 T: The most predictive broad-based credit scoring model in the U.S. industry today. It has been adopted by institutions representing over $313 billion in annualized mortgage originations and approximately $1.52 trillion in eligible mortgage portfolios under servicing.
FICO Score 10 BNPL and FICO Score 10 T BNPL: First credit scores to incorporate Buy Now, Pay Later data, providing lenders with greater visibility into consumers' repayment behavior and expanding financial inclusion.
FICO Score Mortgage Simulator: Gaining traction in the U.S. industry with multiple resellers, mortgage technology platform providers, hundreds of active lenders, and thousands of orders placed.
Next-generation FICO Platform: To be released in the second half of 2025, featuring enterprise fraud solutions and FICO Marketplace, enabling smarter outcomes, faster deployment, and better ROI.
FICO-focused AI models: Upcoming FICO-focused foundation, language, and sequence models for financial services, delivering greater accuracy, explainability, and control in high-stakes domains.
Strategic collaboration with AWS: FICO and AWS will amplify their work to bring AI-driven automated decision workflows to more organizations worldwide.
Revenue growth: Q3 revenues of $536 million, up 20% year-over-year. Scores segment revenues grew 34%, driven by B2B Scores and mortgage originations.
Free cash flow: Record-breaking free cash flow of $276 million in Q3, a 34% increase from the prior year.
Share buybacks: Repurchased 284,000 shares in Q3, totaling over $0.5 billion, the largest single quarter buyback in FICO history.
FICO World event: Showcased advancements in decisioning and enterprise AI, including the next-generation FICO Platform and AI models.
FHFA engagement: FICO is actively engaging with market participants and stakeholders regarding the FHFA's interim decision and advocating for the adoption of FICO Score 10 T.
Elevated Interest Rates and Affordability Challenges: The ongoing elevated interest rates and affordability challenges are negatively impacting the mortgage market, keeping loan originations below historical norms. This could affect revenue from mortgage-related products and services.
Seasonal Decline in Scores Originations Volumes: A sequential decline in Scores originations volumes is expected due to seasonality, which could impact revenue in the fourth quarter.
Pressure on CCS Business: The CCS business continues to face headwinds, putting pressure on year-over-year ARR growth. This could hinder the overall growth of the software segment.
Increased Operating Expenses: Operating expenses increased by 8% this quarter, driven by events like FICO World, incremental headcount, and other factors. This could impact profit margins if not managed effectively.
Regulatory and Competitive Risks in Credit Scoring: The FHFA's interim decision and the potential for lender choice in credit scoring could undermine the safety and soundness of the mortgage industry. This may lead to increased costs for consumers and higher capital requirements for risk holders.
Dependence on U.S. Market: 87% of total revenues are derived from the Americas region, making the company highly dependent on the U.S. market. Any economic downturn or regulatory changes in this region could significantly impact performance.
Debt Refinancing and Interest Expense: The company has a total debt of $2.78 billion with a weighted average interest rate of 5.25%. Increased interest expenses are expected in the fourth quarter, which could affect net income.
Fiscal Year 2025 Guidance: Revenue guidance remains at $1.98 billion. GAAP net income guidance is $630 million with GAAP earnings per share of $25.60. Non-GAAP net income guidance is $718 million with non-GAAP earnings per share of $29.15.
Fourth Quarter 2025 Revenue Expectations: Fourth quarter revenues are expected to be $505 million, down sequentially due to lower point-in-time revenues, including Insurance Scores licenses and Software licenses. Scores originations volumes are also expected to be slightly lower due to seasonality and a sequential decline in professional services revenues.
Platform ARR Growth: Platform ARR grew 18% year-over-year to $254 million, representing 34% of total Q3 '25 ARR, up from 30% in Q3 '24. Non-platform ARR declined 2% to $485 million.
Platform NRR and Expansion Strategy: Platform NRR was 115%, driven by new use cases and increased usage of existing use cases. The company continues to focus on its land and expand strategy to drive growth.
FICO Platform Innovations: Next-generation FICO Platform, enterprise fraud solutions powered by FICO Platform, and FICO Marketplace are expected to be generally available in the second half of calendar 2025. These innovations aim to bring new use cases, improve performance, and enhance customer ROI.
AI and Decisioning Advancements: FICO-focused foundation model, language model, and sequence model built for financial services will be released for general availability within the calendar year. These models aim to deliver greater accuracy, explainability, and control in high-stakes domains.
Share Buyback Program: We continue to return capital to our shareholders through buybacks by repurchasing 284,000 shares in Q3. We repurchased over $0.5 billion of shares this quarter, the largest single quarter buyback in FICO history.
Share Repurchase Details: We bought back 284,000 shares in the third quarter at an average price of $1,802 per share, and we continue to view share repurchases as an attractive use of cash.
The earnings call presents a mixed outlook. Positive elements include a 23% increase in non-GAAP net income, strong ACV bookings, and constructive discussions with FHFA. However, conservative guidance due to macro uncertainties, sequential revenue decline, and lack of clarity on FICO 10T release and pricing strategies temper optimism. The Q&A reveals cautious sentiment, with management avoiding direct answers on key issues. No market cap data prevents precise impact assessment, but overall, the sentiment is neutral with limited short-term catalysts.
The earnings call summary shows strong financial performance with positive adoption of FICO 10 T, new partnerships, and an optimistic fiscal year guidance. The Q&A reveals positive sentiment towards FICO's strategies and market position, despite some unclear responses. The reiterated guidance and free cash flow expectations, along with a strong market share, suggest a positive outlook. The absence of negative trends or significant risks further supports a positive sentiment. Overall, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
The earnings call reveals strong financial performance with a 15% revenue increase and optimistic guidance, yet concerns about economic volatility, customer conservatism, and substantial debt persist. The Q&A highlights management's cautious stance on growth and lack of real-time data, which tempers enthusiasm. Although shareholder returns and revenue growth are positive, the mixed signals and economic uncertainties suggest a neutral stock price reaction over the next two weeks.
The earnings call highlights strong financial performance with significant year-over-year growth in revenue, net income, and earnings per share. The positive sentiment is reinforced by a share repurchase plan, indicating confidence in the stock's value. Despite macroeconomic uncertainties and competitive pressures, the company shows resilience with conservative guidance and strategic investments in platform growth. However, concerns about debt and supply chain challenges moderate the outlook slightly. Overall, the positive financial metrics and strategic initiatives outweigh the negative factors, suggesting a positive stock price movement in the coming weeks.
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