Fair Isaac Corporation

Fair Isaac Corporation, known as FICO, sells credit scores and software used to assess risk and automate decisions. Its Scores business serves lenders and consumers, while its Software business provides analytics and decision-management tools. It trades on the New York Stock Exchange under FICO and has a September 30 fiscal year-end.

Latest quarterly results

Business-to-business Scores revenue increased 39%, mainly from higher unit prices, partly offset by lower origination volumes. Business-to-consumer Scores revenue grew 3% on higher indirect royalties. Software revenue grew 19%; annual recurring revenue increased 14%, with platform growth of 72% and a non-platform decline of 18%. Dollar-based net retention was 112% overall, 156% for platform and 82% for non-platform products.

Reported fourth-quarter profit includes a $65 million accrual for a proposed antitrust class-action settlement, a $47.927 million gain on the sale of a minority equity investment and $27.293 million of restructuring costs. Adjusted net income removes those items, $43.547 million of stock compensation and specified tax adjustments.

Diluted weighted-average shares declined to 21.559 million from 24.160 million, helping per-share growth exceed net-income growth.

Annual performance and expectations

Fiscal 2026 revenue was $2.535 billion, compared with $1.991 billion. Operating income was $1.266 billion versus $924.9 million; net income was $835 million versus $651.9 million. Diluted EPS rose to $36.32 from $26.54. Adjusted net income was $988.3 million versus $734 million, with adjusted EPS of $42.99 versus $29.88.

The original July 29 update targeted annual revenue of $2.53 billion, reported net income of $850 million and reported EPS of $36.86. Adjusted targets were $979 million of net income and $42.43 a share. Actual sales and adjusted earnings finished above those targets, while reported earnings finished below them.

In the November results, FICO did not provide fiscal 2027 guidance. It said mortgage-origination pricing and customer programs for calendar 2027 were still being finalized, while interest rates and housing affordability pressured volumes. Calendar-year customer programs and the fiscal year ending September 2027 cover different periods.

Cash flow, buybacks and debt

Fiscal 2026 operating cash flow was $1.072 billion, up from $778.8 million. Equipment spending of $2.14 million and capitalized internal-use software spending of $35.55 million reduced that to $1.034 billion of free cash flow, compared with $739.4 million. Fourth-quarter free cash flow was $284.3 million after $9.845 million of combined capital spending.

Annual cash used for common-share repurchases was $3.046 billion, compared with $1.415 billion. Another $112.6 million paid employee equity-award tax withholding. Credit-arrangement borrowings of $3.095 billion less $1.485 billion of repayments, plus $1 billion of bond proceeds less $400 million of bond repayments, produced $2.21 billion of net debt financing.

Cash and equivalents were $217.6 million at September 30, up from $134.1 million. Debt's carrying amount was $5.259 billion, including $337.5 million classified as current, versus $3.056 billion a year earlier.

The June report records a $1.5 billion term loan borrowed June 5 to fund an accelerated share repurchase. It has quarterly principal payments and matures in May 2028. FICO also issued $1 billion of 6.25% notes in March, due September 2034, and repaid $400 million of older notes that month. Its $1 billion revolving facility matures in May 2030.

The accelerated repurchase payment was made June 5, with an initial delivery of shares and final settlement then expected in the fourth quarter. It is included in the year's buyback cash total.

Workforce changes and developments to follow

On October 1, management committed to a restructuring plan eliminating approximately 15% of company positions. The October 6 announcement anticipated about $27 million of severance and related charges in the fiscal fourth quarter, substantially all resulting in future cash payments, with the plan substantially completed by the end of fiscal Q3 2027. The current $27.293 million expense reflects that earlier plan.

The key developments are the new mortgage pricing programs, publication of fiscal 2027 guidance, software-platform growth alongside the decline in older products, cash costs of restructuring and the balance between buybacks and debt reduction.