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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 2, 2005
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FAIR ISAAC CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-16439 94-1499887
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
901 Marquette Avenue, Suite 3200
Minneapolis, Minnesota 55402-3232
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-758-5200
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition.
Item 9.01 Financial Statements and Exhibits.
Signature
Exhibit Index
Exhibit 99.1
Item 2.02 Results of Operations and Financial Condition.
On November 2, 2005, Fair Isaac Corporation (the "Company") reported
its financial results for the quarter and fiscal year ended September 30, 2005.
See the Company's press release dated November 2, 2005, which is furnished as
Exhibit 99.1 hereto and incorporated by reference in this Item 2.02.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
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99.1 Press Release dated November 2, 2005
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAIR ISAAC CORPORATION
By /s/ CHARLES M. OSBORNE
--------------------------------
Charles M. Osborne
Vice President and Chief Financial Officer
Date: November 2, 2005
2
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
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99.1 Press Release dated November 2, 2005 Filed Electronically
Exhibit 99.1
Fair Isaac Announces Fourth Quarter and Fiscal 2005 Results
MINNEAPOLIS--(BUSINESS WIRE)--Nov. 2, 2005--
Annual revenue growth of 13%; Strong improvement
in fourth quarter earnings drives 42% growth in annual
earnings per share
Fair Isaac Corporation (NYSE:FIC), the leading provider of
analytics and decision technology, today announced financial results
for its fourth quarter and fiscal year ended September 30, 2005.
Fourth Quarter Fiscal 2005 Results
The company reported fourth quarter revenues of $203.3 million in
fiscal 2005 versus $190.4 million reported in the prior year period.
Net income for the fourth quarter of fiscal 2005 totaled $35.7
million, or $0.53 per diluted share, compared with net income of $14.4
million, or $0.19 per diluted share, reported in the same quarter last
year.
Fourth quarter fiscal 2004 results included an after-tax loss of
$6.1 million, or $0.08 per diluted share, recorded in connection with
the redemption of the company's convertible subordinated notes.
Fiscal 2005 Results
The company reported revenues of $798.7 million in fiscal 2005
versus $706.2 million last year. Net income totaled $134.5 million, or
$1.86 per diluted share, compared with net income of $102.8 million,
or $1.31 per diluted share, reported last year. Net income in fiscal
2005 was affected by adjustments made in prior quarters that reduced
income tax expense by $10.6 million, or $0.14 per diluted share.
The impact of the adoption of EITF Issue No. 04-8, The Effect of
Contingently Convertible Instruments on Diluted Earnings Per Share
reduced diluted earnings per share by $0.09 in fiscal 2005 and $0.10
in fiscal 2004.
"We are very pleased with our fiscal 2005 results, especially our
growth in revenue, our continued operating margin improvement and our
earnings per share growth." said Thomas Grudnowski, Fair Isaac's chief
executive officer. "Looking ahead, we continue to be encouraged by the
market's ever-increasing awareness and appreciation of the unique
kinds of value we deliver through our innovative decision management
products and consulting services."
Fourth Quarter Fiscal 2005 Revenues Highlights
Revenues for fourth quarter fiscal 2005 across each of the
company's four operating segments were as follows:
-- Strategy Machine Solutions revenues were $109.6 million in the
fourth quarter of 2005, compared to $115.1 million in the
prior year quarter, or a decrease of 4.8%, primarily due to a
decline in revenues associated with marketing services and
insurance solutions. These declines were partially offset by
solid growth in consumer scoring products, collections and
recovery solutions, mortgage banking solutions and fraud
solutions.
-- Scoring Solutions revenues increased to $47.8 million in the
fourth quarter from $37.5 million in the prior year quarter,
or by 27.5%, primarily due to an increase in revenues derived
from risk scoring services at the credit reporting agencies,
and PreScore(R) Service.
-- Professional Services revenues increased to $33.4 million in
the fourth quarter from $26.4 million in the prior year
quarter, or by 26.5%, primarily due to organic growth driven
by the company's customer management, collections and
recovery, and fraud solutions, as well as from the acquisition
of Braun Consulting, Inc.
-- Analytic Software Tools revenues increased to $12.6 million in
the fourth quarter from $11.4 million in the prior year
quarter, or by 10.5%, due to revenues generated from the sales
of Blaze Advisor and Model Builder products.
Fiscal 2005 Revenues Highlights
Revenues for fiscal 2005 across each of the company's four
operating segments were as follows:
-- Strategy Machine Solutions revenues were $453.7 million in
fiscal 2005, compared to $427.6 million in fiscal 2004, or an
increase of 6.1%, primarily due to an increase in revenues
associated with collections and recovery, fraud, mortgage
banking and consumer solutions. These increases were partially
offset by a decline in marketing services and insurance
solutions.
-- Scoring Solutions revenues increased to $167.3 million in
fiscal 2005 from $142.8 million in fiscal 2004, or by 17.2%,
due to an increase in revenues derived from risk scoring
services at the credit reporting agencies, as well as from
PreScore(R) Service.
-- Professional Services revenues increased to $129.6 million in
fiscal 2005 from $96.7 million in fiscal 2004, or by 34.0%,
driven by growth in services supporting our Collections and
Recovery, Blaze, Customer Management, and Mortgage Banking
solutions, as well as from the acquisition of Braun
Consulting, Inc.
-- Analytic Software Tools revenues increased to $48.0 million in
fiscal 2005 from $39.0 million in fiscal 2004, or by 23.1%,
mainly due to revenues generated from the sales of Blaze
Advisor product, as well as growth from Model Builder product.
Bookings Highlights
The company achieved record bookings of $505.0 million for fiscal
2005 versus $441.3 million in fiscal 2004, an increase of 14.4%,
exceeding original expectations. The company defines a "new booking"
as estimated future contractual revenues, including agreements with
perpetual, multi-year and annual terms. Management regards the volume
of new bookings achieved, among other factors, as an important
indicator of future revenues, but they are not comparable to, nor
should they be substituted for, an analysis of the company's revenues.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents, and marketable security investments
were $288.1 million at September 30, 2005, as compared to $364.3
million at September 30, 2004. Significant changes in cash and cash
equivalents from September 30, 2004 include cash provided by
operations of $214.1 million; $71.9 million received from the exercise
of stock options and stock issued; and $22.7 million from a
divestiture. Cash used in fiscal 2005 includes $16.4 million related
to purchases of property and equipment, $41.3 million (net of cash
acquired) related to acquisitions, and $328.5 million to repurchase
company stock under the current and previously authorized share
repurchase plans. The remaining balance of the existing share
repurchase authorization is $171.4 million.
Outlook
First quarter fiscal 2006
The company expects revenue for first quarter fiscal 2006 of
approximately $207.0 million, of which Product (Scoring, Strategy
Machines and Analytic Software Tools) revenue will account for
approximately $174.0 million and Services revenue will account for
approximately $33.0 million. The company also expects earnings per
diluted share for the quarter to be approximately $0.50.
Fiscal 2006
The company expects revenue for fiscal year 2006 to be in the
range of $860.0 million to $900.0 million, of which Product (Scoring,
Strategy Machines and Analytic Software Tools) revenue will account
for approximately $715.0 million to $745.0 million and Services
revenue will account for approximately $145.0 million to $155.0
million. The company also expects earnings per diluted share for
fiscal 2006 to be approximately $2.15.
Guidance for first quarter fiscal 2006 and the full fiscal year
reflect the continuation of top-line growth in our core market units
and operating margins reported in fourth quarter fiscal 2005. The
earnings per share guidance excludes the impact of expensing stock
options, which is required by a new accounting standard that the
company must adopt in fiscal 2006.
"In fiscal 2006, we will mark our 50th year of bringing
standard-setting decision management innovations to the marketplace,"
said Grudnowski. "We believe the year holds great promise for growth
in our core products, and we look forward to further expanding the
impact of our solutions and technology across industries around the
world."
Company to Host Conference Call
The company will host a conference call today at 5:00 p.m. Eastern
Time (4:00 p.m. Central Time/2:00 p.m. Pacific Time) to discuss its
fourth quarter and fiscal 2005 results, and outlook for fiscal 2006.
The call can be accessed live on the Investor Relations section of the
company's Web site at www.fairisaac.com, and a replay will be
available approximately two hours after the completion of the call
through November 30, 2005.
About Fair Isaac
Fair Isaac Corporation (NYSE:FIC) is the preeminent provider of
creative analytics that unlock value for people, businesses and
industries. The company's predictive modeling, decision analysis,
intelligence management, decision management systems and consulting
services power billions of mission-critical customer decisions a year.
Founded in 1956, Fair Isaac helps thousands of companies in over 60
countries acquire customers more efficiently, increase customer value,
reduce fraud and credit losses, lower operating expenses and enter new
markets more profitably. Most leading banks and credit card issuers
rely on Fair Isaac solutions, as do insurers, retailers,
telecommunications providers, healthcare organizations and government
agencies. Through the www.myFICO.com Web site, consumers use the
company's FICO(R) scores, the standard measure of credit risk, to
manage their financial health. For more information, visit
www.fairisaac.com.
Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements
contained in this news release that relate to Fair Isaac 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 company's ability to recruit and retain key technical
and managerial personnel, 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, competition, regulatory changes
applicable to the use of consumer credit and other data, the
possibility that the anticipated benefits of acquisitions, including
expected synergies, will not be realized and other risks described
from time to time in Fair Isaac's SEC reports, including its Annual
Report on Form 10-K for the year ended September 30, 2004 and
Quarterly Report on Form 10-Q for the period ended June 30, 2005. If
any of these risks or uncertainties materialize, Fair Isaac's results
could differ materially from its expectations. Fair Isaac disclaims
any intent or obligation to update these forward-looking statements.
Fair Isaac and FICO are trademarks or registered trademarks of
Fair Isaac Corporation, in the United States and/or in other
countries. Other product and company names herein may be trademarks of
their respective owners.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Years Ended September 30, 2005 and 2004
(In thousands, except per share data)
(Unaudited)
Quarter Ended Year Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues $203,297 $190,422 $798,671 $706,206
--------- --------- --------- ---------
Operating expenses:
Cost of revenues 67,308 68,408 275,065 252,587
Research and
development 20,998 21,258 81,295 71,088
Selling, general and
administrative 55,621 54,722 223,400 182,374
Amortization of
intangible assets 6,260 6,336 25,900 19,064
Restructuring and
merger related - 476 - 1,227
--------- --------- --------- ---------
Total operating
expenses 150,187 151,200 605,660 526,340
--------- --------- --------- ---------
Operating income 53,110 39,222 193,011 179,866
Loss on redemption of
convertible subordinated
notes - (11,137) - (11,137)
Other income (expense),
net 1,076 (1,807) 1,077 86
--------- --------- --------- ---------
Income before income taxes 54,186 26,278 194,088 168,815
Provision for income taxes 18,438 11,863 59,540 66,027
--------- --------- --------- ---------
Net income $35,748 $14,415 $134,548 $102,788
========= ========= ========= =========
Earnings per share:
Basic $0.55 $0.21 $2.02 $1.47
========= ========= ========= =========
Diluted (b) $0.53 $0.19 (a) $1.86 $1.31 (a)
========= ========= ========= =========
Shares used in computing
earnings per share:
Basic 64,471 69,596 66,556 69,933
========= ========= ========= =========
Diluted (b) 67,216 80,429 (a) 73,584 82,132 (a)
========= ========= ========= =========
(a) The computation of diluted earnings per share for the quarter
ended September 30, 2004, includes 9.1 million shares of common
stock issuable upon conversion of our senior convertible notes,
along with a corresponding adjustment to net income to add back
related interest expense, net of tax, of approximately $1.1
million. The computation of diluted earnings per share for twelve
months ended September 30, 2005 and 2004, includes 4.5 million and
9.1 million shares of common stock, respectively, issuable upon
conversion of our senior convertible notes, along with a
corresponding adjustment to net income to add back related
interest expense, net of tax, of approximately $2.5 million and
$4.9 million, respectively.
(b) On March 31, 2005, the Company successfully completed an exchange
offer for approximately 99.9% of the principal amount of its
senior convertible notes (Old Notes) for new senior convertible
notes (New Notes). The dilutive effect of the Company's Old Notes
has been calculated using the if-converted method through March
30, 2005. The dilutive effect of the New Notes has been calculated
using the treasury stock method since the effective date of the
exchange.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2005 and 2004
(In thousands)
(Unaudited)
September 30, September 30,
2005 2004
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ASSETS:
Current assets:
Cash and cash equivalents $82,880 $134,070
Marketable securities 146,088 165,235
Receivables, net 156,375 140,845
Prepaid expenses and other current assets 27,337 25,951
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Total current assets 412,680 466,101
Marketable securities and investments 59,087 65,007
Property and equipment, net 48,436 53,288
Goodwill and intangible assets, net 803,306 825,142
Other noncurrent assets 27,552 35,241
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$1,351,061 $1,444,779
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $50,947 $45,596
Accrued compensation and employee
benefits 31,373 33,670
Deferred revenue 55,837 41,050
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Total current liabilities 138,157 120,316
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 7,810 7,992
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Total liabilities 545,967 528,308
Stockholders' equity 805,094 916,471
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$1,351,061 $1,444,779
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FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters and Years Ended September 30, 2005 and 2004
(In thousands)
(Unaudited)
Quarter Ended Year Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Strategy machine solutions $109,578 $115,100 $453,734 $427,647
Scoring solutions 47,758 37,512 167,270 142,834
Professional services 33,383 26,410 129,636 96,715
Analytic software tools 12,578 11,400 48,031 39,010
--------- --------- --------- ---------
Total revenues $203,297 $190,422 $798,671 $706,206
========= ========= ========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2005 and 2004
(In thousands)
(Unaudited)
Year Ended
September 30,
-------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $134,548 $102,788
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,517 46,881
Loss on redemption of convertible subordinated
notes - 11,137
Changes in operating assets and liabilities, net
of acquisitions (5,082) 14,450
Other, net 33,099 23,893
--------- ---------
Net cash provided by operating activities 214,082 199,149
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (16,414) (23,204)
Cash paid for acquisitions, net of cash acquired (41,312) (284,731)
Net activity from marketable securities 32,003 313,119
Other, net 22,822 2,234
--------- ---------
Net cash provided by (used in) investing
activities (2,901) 7,418
--------- ---------
Cash flows from financing activities:
Payments for redemption of convertible subordinated
notes - (153,938)
Proceeds from issuances of common stock 71,867 53,526
Repurchases of common stock (328,537) (101,125)
Other, net (5,316) (4,911)
--------- ---------
Net cash used in financing activities (261,986) (206,448)
--------- ---------
Effect of exchange rate changes on cash (385) 568
--------- ---------
Increase (decrease) in cash and cash equivalents (51,190) 687
Cash and cash equivalents, beginning of period 134,070 133,383
--------- ---------
Cash and cash equivalents, end of period $82,880 $134,070
========= =========
Fair Isaac Corporation
Baseline Revenue Analysis
(in thousands)
E = Estimate, A = Actual
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BKG'05 Q1A Q2A Q3A Q4A FY05
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Total Baseline
Prior to '05 $176,161 $164,445 $158,912 $150,950 $650,468
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Q1-2005A $115,363 19,385 12,916 9,120 7,622 49,043
Q2-2005A 136,560 18,660 12,402 8,312 39,374
Q3-2005A 143,318 23,373 16,259 39,632
Q4-2005A 109,728 20,154 20,154
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Total FY05 504,969 19,385 31,576 44,895 52,347 148,203
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Total Baseline
Prior to '06 504,969 195,546 196,021 203,807 203,297 798,671
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Q1-2006E
Q2-2006E
Q3-2006E
Q4-2006E
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Total FY06
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Grand Total $504,969 $195,546 $196,021 $203,807 $203,297 $798,671
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BKG'06 Q1E Q2E Q3E Q4E FY06E
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Total Baseline
Prior to '05 $148,000 $144,000 $141,000 $139,000 $572,000
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Q1-2005A 5,000 3,500 3,250 3,000 14,750
Q2-2005A 7,500 6,000 5,500 5,000 24,000
Q3-2005A 9,000 7,000 6,500 4,500 27,000
Q4-2005A 12,500 9,000 7,500 5,500 34,500
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Total FY05 34,000 25,500 22,750 18,000 100,250
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Total Baseline
Prior to '06 182,000 169,500 163,750 157,000 672,250
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Q1-2006E $140,000 25,000
Q2-2006E
Q3-2006E
Q4-2006E
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Total FY06 25,000
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Grand Total $605,000 $207,000
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CONTACT: Fair Isaac Corporation, Minneapolis
Investors & Analysts:
John D. Emerick, Jr., 800-213-5542
or
JD Bergquist Wood, 800-213-5542
investor@fairisaac.com