Fair Isaac Corporation (FICO) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal strong financial metrics with optimistic guidance, including a 22% increase in net income and a 28% increase in non-GAAP EPS. The FICO platform shows sustainable growth, and no significant market share loss is anticipated. While management avoided specifics on some queries, the overall sentiment is positive, driven by strong SaaS growth and promising platform adoption. Despite the lack of a new partnership or dividend increase, the robust guidance and ARR growth suggest a positive stock price movement.
Key Financial Performance
Q1 Revenues $512 million, up 16% over last year. The increase is attributed to strong performance across segments.
GAAP Net Income $158 million, up 4% year-over-year. The growth is due to improved operational efficiency.
GAAP Earnings Per Share $6.61, up 8% from the prior year, reflecting higher net income and share repurchases.
Non-GAAP Net Income $176 million, up 22% year-over-year, driven by operational improvements and cost management.
Non-GAAP Earnings Per Share $7.33, up 27% from the prior year, reflecting strong financial performance and share repurchases.
Free Cash Flow (Q1) $165 million. Over the last 4 quarters, free cash flow was $718 million, an increase of 7% year-over-year, driven by operational efficiency.
Scores Segment Revenues $305 million, up 29% versus the prior year. Growth was driven by higher B2B Scores and continued growth in B2C Scores.
Software Segment Revenues $207 million, up 2% over last year. Results included 37% platform revenue growth and a 13% decline in non-platform revenue.
Mortgage Originations Revenues Up 60% versus the prior year, accounting for 51% of B2B revenue and 42% of total Scores revenue. Growth was driven by higher unit prices and increased volume.
Auto Originations Revenues Up 21% year-over-year, reflecting increased demand in the auto sector.
Credit Card, Personal Loan, and Other Originations Revenues Up 10% year-over-year, driven by broader consumer credit activity.
Software ACV Bookings $38 million for the quarter, a record high, driven by a large international multi-use case platform deal. Trailing 12-month ACV bookings reached $119 million, up 36% year-over-year.
Total Software ARR $766 million, up 5% year-over-year. Platform ARR grew 33%, while non-platform ARR declined 8%.
Non-GAAP Operating Margin 54% for the quarter, up from 50% in the same quarter last year, reflecting a 432 basis point expansion due to cost management and revenue growth.
Share Repurchases 95,000 shares repurchased in Q1 at an average price of $1,707 per share, totaling $163 million, reflecting a commitment to returning capital to shareholders.
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Operating Highlights
FICO Score 10T: FICO Score 10T offers significant improvements in predictive accuracy, fairness, and model stability. It is expected to be available for Direct Licensing in both conforming and nonconforming markets in the first half of 2026. The number of lenders in the FICO Score 10T Adopter Program has nearly doubled, covering $377 billion in annual originations and $1.6 trillion in eligible servicing volume.
UltraFICO Score: A strategic partnership with Plaid was announced to deliver the next generation of UltraFICO Score. This score combines FICO Score reliability with real-time cash flow data from Plaid, offering superior consumer risk assessment. It will launch in the first half of 2026.
FICO Score Mortgage Simulator: The simulator enables mortgage professionals to simulate potential changes to an applicant's FICO Score using credit event scenarios. It supports simulations on all three credit bureaus and is being adopted by multiple resellers.
FICO Mortgage Direct Licensing Program: The program added four new strategic reseller participants and signed a DLP agreement with MeridianLink. It supports classic FICO and will include FICO Score 10T in the first half of 2026.
Geographic Revenue Distribution: 88% of revenues were derived from the Americas, 8% from EMEA, and 4% from Asia Pacific.
Scores Segment Revenue: Revenue was $305 million, up 29% year-over-year, driven by B2B Scores and mortgage originations.
Software Segment Revenue: Revenue was $207 million, up 2% year-over-year, with platform revenues growing 37% and non-platform revenues declining 13%.
ARR Growth: Total software ARR was $766 million, up 5% year-over-year. Platform ARR grew 33%, while non-platform ARR declined 8%.
Recognition in Gartner Magic Quadrant: FICO was recognized as a leader in the January 2026 Gartner Magic Quadrant for Decision Intelligence Platforms, reflecting its ability to execute and deliver real-time decisions at scale.
FICO World 2026: The event will showcase FICO's innovations and strategies, focusing on real-time decision-making and financial inclusion.
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Risk or Challenges
Regulatory Risks: The transcript mentions that certain statements are forward-looking and involve risks and uncertainties, particularly those outlined in the company's SEC filings. This implies potential regulatory or compliance risks that could impact operations or financial performance.
Revenue Dependency on Mortgage Originations: A significant portion of revenue growth is tied to mortgage originations, which accounted for 42% of total Scores revenue. This dependency could pose a risk if there is a downturn in the mortgage market or changes in interest rates.
Decline in Non-Platform Revenue: The Software segment experienced a 13% decline in non-platform revenue, which could indicate challenges in maintaining legacy product lines or transitioning customers to newer platforms.
Debt Levels and Interest Rates: The company has $3.2 billion in total debt with a weighted average interest rate of 5.22%. Rising interest rates or changes in credit markets could increase borrowing costs or impact financial flexibility.
Geographic Revenue Concentration: 88% of revenues are derived from the Americas region, indicating a heavy reliance on a single geographic market. This concentration could pose risks if there are economic or market disruptions in this region.
Operational Expense Growth: Operating expenses grew 4% quarter-over-quarter, driven by personnel expenses. This could impact margins if revenue growth does not keep pace with expense increases.
Transition Risks in Software Business: The company is transitioning from non-platform to platform solutions, with non-platform ARR declining by 8%. This transition could pose risks if customers do not adopt the new platform at the expected rate.
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Guidance & Outlook
Fiscal Year 2026 Guidance: The company reiterated its fiscal 2026 guidance and expects to revisit it during the Q2 earnings call.
FICO Score 10T Availability: FICO Score 10T is expected to be available for Direct Licensing in both conforming and nonconforming markets in the first half of calendar 2026.
UltraFICO Score Launch: The enhanced UltraFICO Score, combining FICO Score with real-time cash flow data from Plaid, is set to launch for distribution in the first half of calendar 2026.
Software ARR Growth: The company expects ARR growth to continue accelerating in FY 2026, driven by strong bookings in recent quarters.
Operating Expenses: Operating expenses are expected to trend upward modestly throughout the fiscal year.
Tax Rate: The company expects a full-year net effective tax rate of 24% and an operating tax rate of 25%.
Next-Generation FICO Platform: The next-generation FICO platform and Enterprise Fraud Solution on FICO platform will soon be generally available.
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Shareholder Return Plan
Share Buyback Program: FICO repurchased 95,000 shares in Q1 at an average price of $1,707 per share, amounting to a total cost of $163 million. The company continues to view share repurchases as an attractive use of cash.
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Key Q&A
Q:What is the significance of the LoanPASS press release and the timing for 10T approval?
A:Steven Weber stated that there is a lot of adoption on the nonconforming side, but the agencies are still testing on the conforming side. No timeline has been published yet, so the availability of 10T remains uncertain.
Q:How is the performance model adoption progressing, and will it be available through the credit bureau channel?
A:William Lansing mentioned that the performance model is planned for the Direct License Program and is progressing well with significant interest. It is not currently available through the credit bureau channel.
Q:Why was there no raise in guidance despite a good quarter?
A:Steven Weber explained that while they are confident in beating guidance, they chose not to raise it due to macroeconomic uncertainties, including the Federal Reserve's actions. They expect to have a clearer picture by the next quarter.
Q:What is the timeline for the release of the LLPA grids, and what challenges exist?
A:William Lansing stated that no one knows the timeline for the LLPA grids. Significant challenges include gaming, adverse selection issues, and securitization market objections, which need to be resolved before release.
Q:What are the concerns from lenders regarding FICO Direct and the performance model?
A:William Lansing addressed concerns about resellers improperly calculating scores and regulators' views on passing performance fees to consumers. He assured that the scores calculated by resellers are identical to those by bureaus and that testing is ongoing to ensure confidence. Regulators are also reviewing the performance model.
Q:What is the timeline for the Direct License Program resellers to go live, and when will the performance model be communicated to the industry?
A:William Lansing could not provide a timeline but assured that the program will go live without issues. The performance model is optional and will be communicated better to the industry in due course.
Q:Is the revenue model agnostic to whether customers adopt the performance or per-score model?
A:Steven Weber and William Lansing stated that the revenue model is relatively agnostic, though not entirely.
Q:What is the strategy for targeting 500 named accounts globally in the software business?
A:William Lansing explained that they are focusing on financial services but are also expanding into other verticals like telco. The partner program and next-gen platform are designed to broaden their reach.
Q:How many named accounts are there in financial services?
A:Dave Singleton stated that they do not disclose the number of named accounts in financial services.
Q:What is the plan for migrating customers from non-platform to platform in the software business?
A:Steven Weber mentioned that they aim to migrate everyone to the platform over time for efficiency. Migration will increase as the platform's features and functionality surpass legacy solutions.
Q:How should investors interpret the LLPA grids under Vantage and FICO?
A:William Lansing explained that FICO and Vantage scores differ significantly, making direct substitution challenging. He highlighted issues like gaming, adverse selection, and securitization market objections as barriers to implementation.
Q:What is the timeline for FICO 10T availability for conforming and nonconforming markets?
A:William Lansing clarified that while they are confident FICO 10T will eventually be released, no specific timeline is available. The timeline for availability in the Direct Licensing Program differs from market-wide availability.
Q:Do we need an LLPA grid for 10T, and will it be released simultaneously with Vantage grids?
A:William Lansing suggested that an LLPA grid for 10T might be needed and that the industry prefers simultaneous release with Vantage grids. However, the FHFA's decision remains uncertain.
Q:What drove the recent acceleration in mortgage revenue growth?
A:William Lansing attributed the growth to a combination of factors, including price, value, and increased refinancing activity.
Q:Is 30%+ ARR growth in the platform business sustainable?
A:William Lansing and Steven Weber indicated that while growth rates may vary, the current levels are sustainable due to strong demand for the platform.
Q:Have there been any disruptions in the credit card business due to potential APR caps?
A:Steven Weber stated that no changes in activity have been observed, and pre-qualification and originations remain strong.
Q:What is the status of discussions about moving from tri-merge to bi-merge in credit reporting?
A:William Lansing noted that while there is talk about moving to bi-merge, challenges like gaming, adverse selection, and bureau monopolies make it difficult to implement.
Q:Where is the software business in its investment cycle, and when will investments normalize?
A:William Lansing stated that they continue to invest in the software business, with profitability improvements expected from increased volume rather than reduced R&D spending.
Q:What are the volume trends in the Scores business, and how much is driven by FICO innovation?
A:Steven Weber mentioned that volumes are stable or slightly increasing across all underwriting lines, driven more by macroeconomic factors than FICO innovation.
Q:What platform features are driving recent momentum in the software business?
A:William Lansing stated that customers are adopting the platform for traditional risk management solutions like originations and customer management, with additional use cases emerging post-adoption.
Q:Will FICO 10T be more predictive on prepayments than rival scores?
A:William Lansing suggested that FICO 10T would likely be more predictive on prepayments, as credit default rates and prepayments are related.
Q:What is driving land and expand momentum in the software business?
A:Steven Weber explained that once customers adopt the platform, they find additional use cases, making expansion easier. Both land and expand are growing at similar rates.
Q:Are lenders changing behavior due to cost pressures?
A:William Lansing stated that no changes in lender behavior have been observed.
Q:Are the next-gen platform and enterprise fraud solution driving bookings growth?
A:William Lansing clarified that the current bookings growth predates the general availability of these solutions.
Q:What is the potential impact of a 10% credit card APR cap on FICO?
A:William Lansing suggested that such a cap could lead to increased reliance on FICO Scores for understanding subprime credits or a shift to other lending forms like BNPL, which would also benefit FICO.
Q:Are large multi-use case platform deals becoming more frequent?
A:William Lansing confirmed that deal sizes and frequencies are increasing, with more significant deals expected in the future.
Q:What is the status of the reseller market for the Direct License Program?
A:William Lansing stated that the program is on track, with no significant operational hurdles, and resellers representing 70-80% of the market are signed.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to several questions, including the timeline for 10T approval, LLPA grid release, and Direct License Program resellers going live. Responses often lacked specificity, citing uncertainties or ongoing processes. For example, no clear timeline was given for 10T availability or LLPA grid release, and the timing for resellers going live was described as uncertain but progressing. Additionally, management did not disclose the number of named accounts in financial services or specific pricing details for auto and credit card markets, citing competitive reasons.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Credit
Decision Intelligence
Direct Licensing
FICO Mortgage
FICO platform
FY
Gartner
Licensing Program
LiquidCredit
MeridianLink
Mortgage Direct
Page presentation
Score FICO
Score Mortgage
Singleton
UltraFICO Score
Xactus
agreement
availability FICO
calendar
change applicant
commitment
connection
integration
investor presentation
lender FICO
market Plaid
migration
money
participant FICO
point revenue
professional
reseller participant
restructuring
revenue Page
simulation
software segment
testing reseller
FICO Transcript
Fair Isaac Corporation (FICO) Q1 2026 Earnings Call Transcript
Positive1-28
The earnings call summary and Q&A reveal strong financial metrics with optimistic guidance, including a 22% increase in net income and a 28% increase in non-GAAP EPS. The FICO platform shows sustainable growth, and no significant market share loss is anticipated. While management avoided specifics on some queries, the overall sentiment is positive, driven by strong SaaS growth and promising platform adoption. Despite the lack of a new partnership or dividend increase, the robust guidance and ARR growth suggest a positive stock price movement.
Fair Isaac Corporation (FICO) Q4 2025 Earnings Call Transcript
Unknown11-5
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.
Fair Isaac Corporation (FICO) Q3 2025 Earnings Call Transcript
Positive7-31
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.
Earnings call transcript: Fair Isaac Q2 2025 beats EPS forecast, stock dips
Unknown4-29
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.
FICO Report
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