FICO Announces Earnings of $4.00 per Share for Second Quarter Fiscal 2023
FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its second fiscal quarter ended March 31, 2023.
Second Quarter Fiscal 2023 GAAP Results
Net income for the quarter totaled $101.6 million, or $4.00 per share, versus $104.4 million, or $3.95 per share, in the prior year period.
Net cash provided by operating activities for the quarter was $89.8 million versus $122.6 million in the prior year period.
Second Quarter Fiscal 2023 Non-GAAP Results
Non-GAAP Net Income for the quarter was $121.4 million versus $123.7 million in the prior year period. Non-GAAP EPS for the quarter was $4.78 versus $4.68 in the prior year period. Free cash flow was $88.3 million for the current quarter versus $120.2 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.
Second Quarter Fiscal 2023 GAAP Revenue
The company reported revenues of $380.3 million for the quarter as compared to $357.2 million reported in the prior year period.
“Halfway through our fiscal year we continue to deliver strong results,” said Will Lansing, chief executive officer. “We had our biggest quarter ever, with record Scores revenues and strong Software ARR growth.”
Revenues for the second quarter of fiscal 2023 for the company’s two operating segments were as follows:
Scores revenues, which include the company’s business-to-business (B2B) scoring solutions, and business-to-consumer (B2C) scoring solutions, were $198.5 million in the second quarter, compared to $183.7 million in the prior year period, an increase of 8%. B2B revenue increased 16%, driven largely by unit price increases partially offset by declines in mortgage originations volumes. B2C revenue decreased 8% from the prior year period. Software revenues, which include the company’s analytics and digital decisioning technology, as well as associated professional services, were $181.8 million in the second quarter, compared to $173.5 million in the prior year period, an increase of 5%, due to increased recurring revenue, partially offset by decreases in point-in-time revenues. Software Annual Recurring Revenue was up 17% year-over-year, consisting of 60% platform ARR growth and 7% non-platform growth. Software Dollar-Based Net Retention Rate was 114% in the second quarter, with platform software at 146% and non-platform software at 105%.Outlook
The company is updating its previously provided guidance for fiscal 2023:
Previous 2023 Guidance
Updated 2023 Guidance
Revenues
$1.463 billion
$1.48 billion
GAAP Net Income
$401 million
$406 million
GAAP EPS
$16.00
$16.15
Non-GAAP Net Income
$487 million
$489 million
Non-GAAP EPS
$19.42
$19.45
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 second quarter fiscal 2023 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 at our Past Events page through April 27, 2024.
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 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 120 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/
For FICO news and media resources, visit www.fico.com/news.
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 impact of COVID-19 on macroeconomic conditions and FICO’s business, operations and personnel, the success of the Company’s business 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, the effects of, and any changes in, laws and regulations applicable to the Company’s business or its customers, the failure to protect data privacy and security, the failure to realize the anticipated benefits of any acquisitions, or divestitures, and material adverse developments in global economic conditions or in the markets we serve. Additional information on these risks and uncertainties and other factors that could affect FICO's future results are described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2022 and its subsequent filings with the SEC. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. FICO disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise.
2023
2022
ASSETS: Current assets: Cash and cash equivalents$
137,771
$
133,202
Accounts receivable, net
338,239
322,410
Prepaid expenses and other current assets
45,316
29,103
Total current assets
521,326
484,715
Marketable securities and investments
30,812
25,650
Property and equipment, net
13,664
17,580
Operating lease right-of-use-assets
29,638
36,688
Goodwill and intangible assets, net
775,797
763,084
Other assets
131,194
114,317
$
1,502,431
$
1,442,034
LIABILITIES AND STOCKHOLDERS' DEFICIT: Current liabilities: Accounts payable and other accrued liabilities
$
82,067
$
83,521
Accrued compensation and employee benefits
65,863
97,893
Deferred revenue
118,348
120,045
Current maturities on debt
107,000
30,000
Total current liabilities
373,278
331,459
Long-term debt
1,817,663
1,823,669
Operating lease liabilities
28,825
39,192
Other liabilities
53,458
49,661
Total liabilities
2,273,224
2,243,981
Stockholders' deficit
(770,793
)
(801,947
)
$
1,502,431
$
1,442,034
2023
2022
2023
2022
Revenues: On-premises and SaaS software$
154,584
$
149,088
$
299,144
$
275,426
Professional services
27,175
24,365
49,497
50,901
Scores
198,507
183,742
376,495
353,229
Total revenues
380,266
357,195
725,136
679,556
Operating expenses: Cost of revenues
79,806
71,794
156,375
140,997
Research development
40,266
36,387
76,899
75,367
Selling, general and administrative
100,158
96,414
193,153
194,462
Amortization of intangible assets
275
543
550
1,087
Gain on product line asset sale
-
-
(1,941
)
-
Total operating expenses
220,505
205,138
425,036
411,913
Operating income
159,761
152,057
300,100
267,643
Other expense, net
(22,292
)
(19,572
)
(44,728
)
(30,338
)
Income before Income taxes
137,469
132,485
255,372
237,305
Provision for income taxes
35,919
28,102
56,179
47,963
Net income
$
101,550
$
104,383
$
199,193
$
189,342
Basic earnings per share:
$
4.04
$
3.99
$
7.94
$
7.10
Diluted earnings per share:
$
4.00
$
3.95
$
7.83
$
7.02
Shares used in computing earnings per share: Basic
25,116
26,145
25,080
26,662
Diluted
25,419
26,421
25,431
26,978
2023
2022
Cash flows from operating activities: Net income$
199,193
$
189,342
Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization
8,294
10,656
Share-based compensation
56,755
57,814
Changes in operating assets and liabilities
(68,391
)
(25,523
)
Gain on product line asset sale
(1,941
)
-
Other, net
(11,666
)
15,195
Net cash provided by operating activities
182,244
247,484
Cash flows from investing activities: Purchases of property and equipment
(2,377
)
(3,293
)
Net activity from marketable securities
(3,384
)
(2,628
)
Proceeds from product line asset sales, net of cash transferred
(6,126
)
2,257
Net cash used in investing activities
(11,887
)
(3,664
)
Cash flows from financing activities: Proceeds from revolving line of credit and term loan
228,000
800,000
Payments on revolving line of credit and term loan
(158,500
)
(806,750
)
Proceeds from issuance of senior notes
-
550,000
Proceeds from issuance of treasury stock under employee stock plans
15,217
11,117
Taxes paid related to net share settlement of equity awards
(73,672
)
(47,849
)
Repurchases of common stock
(184,290
)
(760,861
)
Other, net
-
(8,819
)
Net cash used in financing activities
(173,245
)
(263,162
)
Effect of exchange rate changes on cash
7,457
(1,793
)
Increase (decrease) in cash and cash equivalents
4,569
(21,135
)
Cash and cash equivalents, beginning of period
133,202
195,354
Cash and cash equivalents, end of period
$
137,771
$
174,219
2023
2022
2023
2022
GAAP net income$
101,550
$
104,383
$
199,193
$
189,342
Amortization of intangible assets
275
543
550
1,087
Gain on product line asset sale
-
-
(1,941
)
-
Share-based compensation expense
27,053
27,936
56,755
57,814
Income tax adjustments
(6,818
)
(6,677
)
(13,732
)
(14,170
)
Excess tax benefit
(612
)
(2,495
)
(10,916
)
(8,452
)
Non-GAAP net income$
121,448
$
123,690
$
229,909
$
225,621
GAAP diluted earnings per share
$
4.00
$
3.95
$
7.83
$
7.02
Amortization of intangible assets
0.01
0.02
0.02
0.04
Gain on product line asset sale
-
-
(0.08
)
-
Share-based compensation expense
1.06
1.06
2.23
2.14
Income tax adjustments
(0.27
)
(0.25
)
(0.54
)
(0.53
)
Excess tax benefit
(0.02
)
(0.09
)
(0.43
)
(0.31
)
Non-GAAP diluted earnings per share$
4.78
$
4.68
$
9.04
$
8.36
Free cash flow Net cash provided by operating activities
$
89,803
$
122,603
$
182,244
$
247,484
Capital expenditures
(1,526
)
(2,398
)
(2,377
)
(3,293
)
Free cash flow$
88,277
$
120,205
$
179,867
$
244,191
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, to the extent applicable, such items as 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. 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.
Guidance Updated Fiscal 2023 Guidance GAAP net income
$
401
$
406
Amortization of intangible assets
1
1
Share-based compensation expense
120
124
Income tax adjustments
(30
)
(31
)
Excess tax benefit
(5
)
(11
)
Non-GAAP net income$
487
$
489
GAAP diluted earnings per share
$
16.00
$
16.15
Amortization of intangible assets
0.04
0.04
Share-based compensation expense
4.78
4.93
Income tax adjustments
(1.21
)
(1.23
)
Excess tax benefit
(0.20
)
(0.44
)
Non-GAAP diluted earnings per share$
19.42
$
19.45
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, to the extent applicable, such items as 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. 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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