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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Q4 Revenues $516 million, up 14% over last year. Reasons for change: Strong performance across segments.
Full Fiscal Year Revenues $1.991 billion, up 16% versus the prior year. Reasons for change: Growth in both Software and Scores segments.
Software Segment Q4 Revenues $204 million, flat year-over-year. Reasons for change: 17% platform revenue growth offset by a 7% decline in non-platform revenue due to end-of-life legacy products and timing of recurring revenue.
Software Segment Full Year Revenues $822 million, up 3% from last year. Reasons for change: Strong momentum driven by customer adoption of FICO platform.
Scores Segment Q4 Revenues $312 million, up 25% versus the prior year. Reasons for change: Growth driven by B2B scores and encouraging growth in B2C scores.
Scores Segment Full Year Revenues $1.169 billion, up 27% versus last year. Reasons for change: Material growth driven by B2B scores.
Non-GAAP Operating Margin (Q4) 54%, up from 52% in the same quarter last year. Reasons for change: Improved operational efficiencies.
Non-GAAP Operating Margin (Full Year) 55%, an improvement of 340 basis points year-over-year. Reasons for change: Focus on efficiencies and strategic resource allocation.
Free Cash Flow (Q4) $211 million. Reasons for change: Strong operational performance.
Free Cash Flow (Last 4 Quarters) $739 million, an increase of 22% year-over-year. Reasons for change: Improved cash generation from operations.
GAAP Net Income (Q4) $155 million, up 14%. Reasons for change: Revenue growth and operational efficiencies.
GAAP Net Income (Full Year) $652 million, up 27%. Reasons for change: Strong revenue growth and cost management.
Non-GAAP Net Income (Q4) $187 million, up 15%. Reasons for change: Adjustments for restructuring and operational improvements.
Non-GAAP Net Income (Full Year) $734 million, up 23%. Reasons for change: Revenue growth and operational efficiencies.
FICO Platform: Announced upcoming general availability of next-generation FICO platform, enterprise fraud solution natively on FICO platform, and the groundbreaking FICO marketplace.
FICO FFM: Launched FICO focused foundation model for financial services, including FICO FLM and FICO FSM, which are domain-specific gen AI models delivering accurate and auditable outcomes. Achieves 35% lift in transaction analytic models for fraud detection with up to 1,000x fewer resources compared to conventional gen AI models.
FICO Score 10T: Highlighted as the most predictive and inclusive credit scoring model in the market, offering significant improvements in predictive accuracy and fairness. Adopted by nearly 40 lenders, accounting for $316 billion in annual originations.
Mortgage Market: Introduced FICO mortgage direct license program, allowing tri-merge resellers to calculate and distribute FICO scores directly, reducing reliance on credit bureaus. Offers two pricing models, with potential cost savings for lenders.
B2B Scores: Achieved 29% growth in B2B scores revenue, driven by higher mortgage origination scores unit price and adoption of FICO Score 10T.
Revenue Growth: Reported Q4 revenues of $516 million, up 14% year-over-year. Full fiscal year revenue reached $1.991 billion, up 16%.
Free Cash Flow: Delivered record annual free cash flow of $739 million, a 22% increase year-over-year.
Share Repurchases: Repurchased 833,000 shares in fiscal 2025, totaling $1.41 billion, the highest in company history.
Patent Portfolio: Reinforced position in responsible AI development with over 230 issued patents and nearly 80 pending applications, many AI-specific.
Distribution Strategy: Plans to advance direct and indirect distribution strategies in fiscal 2026 to capture market opportunities from new innovations.
Software Segment Performance: The software segment experienced flat year-over-year performance in Q4, with a 7% decline in non-platform revenue due to the end of life of legacy products and timing of recurring revenue. This could indicate challenges in maintaining growth in this segment.
Platform ARR Growth: Platform ARR grew by 16%, but total software ARR only increased by 4%, indicating slower growth in non-platform areas. This imbalance could pose a risk to overall software revenue growth.
Professional Services Revenue: Professional services revenue declined by 5% year-over-year, which may reflect challenges in maintaining demand for these services.
Economic Environment Impact on Scores: The Scores segment's growth is heavily reliant on mortgage originations, which are affected by high interest rates. Persistently high rates could limit growth in this segment.
Dependence on Mortgage Market: Mortgage origination revenues accounted for 45% of total Scores revenue. Heavy reliance on this market exposes the company to risks from fluctuations in mortgage activity.
Competition in Credit Scoring: FICO faces competition from VantageScore, which claims to score more consumers. While FICO emphasizes its predictive accuracy, the competitive landscape could impact market share.
Debt Levels: The company has $3.06 billion in total debt, with a weighted average interest rate of 5.27%. High debt levels could limit financial flexibility, especially in a rising interest rate environment.
Restructuring Costs: The company incurred $10.9 million in restructuring costs, which may indicate challenges in aligning resources with strategic priorities.
Geographic Revenue Concentration: 87% of revenues are derived from the Americas, indicating a heavy reliance on this region. Limited geographic diversification could pose risks if market conditions in the Americas deteriorate.
Revenue Guidance for FY '26: The company is guiding for revenue of $2.35 billion, an increase of 18% over fiscal '25.
GAAP Net Income and EPS Guidance for FY '26: GAAP net income is projected at $795 million, an increase of 22%, with GAAP EPS of $33.47, an increase of 26%.
Non-GAAP Net Income and EPS Guidance for FY '26: Non-GAAP net income is expected to be $907 million, an increase of 24%, with non-GAAP EPS of $38.17, an increase of 28%.
Software SaaS Growth: FY '26 revenue guidance assumes growth in software SaaS driven mainly by the FICO platform, offset by fewer non-platform license renewal opportunities and similar levels of annual professional services revenue.
Scores Business Outlook: Guidance does not anticipate significant improvement in the macro environment, no expected loss of market share, and no significant volume changes in auto, card, and personal loan originations.
FICO Platform and ARR Growth: Total software ARR is expected to increase in fiscal 2026, reflecting the benefit of recent FICO platform bookings going live.
Operating Expense Growth: FY '26 guidance assumes a similar year-over-year operating expense growth compared to the prior year, with investments focused on headcount for distribution, development of the FICO platform, and marketing.
Tax Rate Assumptions: FY '26 guidance assumes a net effective tax rate of 24% with an operating tax rate of 25%.
Share Repurchase Program: This quarter, we repurchased 358,000 shares at an average price of $1,499 per share. For the fiscal year, we repurchased 833,000 shares at an average price of $1,693 per share. Share repurchases totaled $536 million in the fourth quarter and $1.41 billion for fiscal 2025, the highest quarterly and annual repurchase levels in the company's history. Going forward, our philosophy has not changed, 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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