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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) January 25, 2006
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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
i
Item 2.02 Results of Operations and Financial Condition.
On January 25, 2006, Fair Isaac Corporation (the "Company") reported
its financial results for the quarter ended December 31, 2005. See the Company's
press release dated January 25, 2006, which is furnished as Exhibit 99.1 hereto
and incorporated by reference in this Item 2.02.
The press release attached as Exhibit 99.1 hereto includes the non-GAAP
financial measure "EPS before Share-Based Compensation" which excludes the
expense related to all stock-based compensation. The Company excludes these
amounts in order to facilitate the comparison of current results with those of
prior periods and with previous guidance provided by the Company, which did not
include such expenses, and because these amounts are non-cash expenses. Wherever
this non-GAAP financial measure has been included in the press release, the
Company has reconciled it to GAAP EPS. This non-GAAP financial measure is not
prepared in accordance with accounting principles generally accepted in the
United States of America and may be different from non-GAAP financial measures
used by other companies. Non-GAAP financial measures should not be considered as
a substitute for, or superior to, measures of financial performance prepared in
accordance with GAAP.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
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99.1 Press Release dated January 25, 2006
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: January 25, 2006
2
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
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99.1 Press Release dated January 25, 2006 Filed Electronically
Exhibit 99.1
Fair Isaac Announces First Quarter Fiscal 2006 Results
MINNEAPOLIS--(BUSINESS WIRE)--Jan. 25, 2006--
The company begins expensing stock options in the first quarter as
required by SFAS 123(R); GAAP EPS of $0.43; EPS of $0.52 before
share-based compensation expense
Fair Isaac Corporation (NYSE:FIC), the leading provider of analytics and
decision technology, today announced financial results for its first quarter
ended December 31, 2005.
The company was required during the first quarter to adopt Statement of
Financial Accounting Standards No. 123(R), Share-Based Payment (SFAS 123 (R)).
As a result, effective October 1, 2005, the company began recording compensation
expense for stock options and purchases under its Employee Stock Purchase Plan
on that date in the consolidated statement of income. Results for prior periods
have not been restated. Financial guidance previously provided by the company of
$0.50 per diluted share for the first quarter 2006 and $2.15 per diluted share
for fiscal 2006, excluded share-based compensation expense related to SFAS
123(R).
First Quarter Fiscal 2006 Results
The company reported first quarter revenues of $202.8 million in fiscal
2006 versus $195.5 million reported in the prior year period. Net income for the
first quarter of fiscal 2006 totaled $28.5 million or $0.43 per diluted share in
accordance with generally accepted accounting principles (GAAP). First quarter
fiscal 2006 results included compensation expense of approximately $6.1 million
after-tax, or $0.09 per diluted share, due to the adoption of SFAS 123(R).
Excluding the effect of this expense, net income for the first quarter of fiscal
2006 was $34.6 million, or $0.52 per diluted share, on a non-GAAP basis. Net
income for the first quarter of fiscal 2005 totaled $27.9 million, or $0.36 per
diluted share. First quarter fiscal 2005 results were reduced by $0.03 per
diluted share from the adoption last year of EITF 04-8, The Effect of
Contingently Convertible Instruments on Diluted Earnings Per Share. SFAS 123(R)
was not effective for the first quarter of fiscal 2005.
"We are pleased with our continued management of expenses and our strong
performance in earnings per share growth," said Thomas Grudnowski, Fair Isaac's
chief executive officer.
First Quarter Fiscal 2006 Revenues Highlights
Revenues for first quarter fiscal 2006 across each of the company's four
operating segments were as follows:
-- Strategy Machine Solutions revenues were $112.0 million in the first
quarter of 2006, compared to $117.8 million in the prior year quarter,
or a decrease of 5.0%, 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, and collections and recovery solutions.
-- Scoring Solutions revenues increased to $46.2 million in the first
quarter from $39.4 million in the prior year quarter, or by 17.1%,
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 $32.8 million in the first
quarter from $29.5 million in the prior year quarter, or by 11.4%,
primarily due to revenues from industry strategic consulting services
and implementation services for our Blaze Advisor products.
-- Analytic Software Tools revenues increased to $11.8 million in the
first quarter from $8.8 million in the prior year quarter, or by
33.7%, due to revenues generated from the sales of Blaze Advisor and
Model Builder products.
Bookings Highlights
The company achieved bookings of $127.8 million for first quarter fiscal
2006 versus $115.4 million in the same period last year, an increase of 10.8%.
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 $372.2
million at December 31, 2005, as compared to $288.1 million at September 30,
2005. Significant changes in cash and cash equivalents from September 30, 2005
include cash provided by operations of $60.7 million for the first quarter
fiscal 2006 and $36.2 million received from the exercise of stock options and
stock issued under an employee stock purchase plan. Cash used during the first
quarter of fiscal 2006 includes $2.5 million related to purchases of property
and equipment and $12.8 million to repurchase company stock under the current
authorized share repurchase plan. The remaining balance of the existing share
repurchase authorization is $158.7 million.
Outlook
Second quarter fiscal 2006
The company expects revenue for second quarter fiscal 2006 of approximately
$210.0 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 $36.0 million. The company also
expects GAAP earnings per diluted share for the quarter to be approximately
$0.42, which includes an after-tax compensation expense of approximately $6.6
million, or $0.10 per diluted share, related to SFAS 123(R). Excluding the
effect of SFAS 123(R), non-GAAP earnings per diluted share for the quarter would
be $0.52.
Fiscal 2006
The company expects revenue for fiscal year 2006 to remain in line with
prior guidance of approximately $860.0 million to $900.0 million. The company
also expects GAAP earnings per diluted share for fiscal 2006 to be approximately
$1.77, which includes an after-tax compensation expense of approximately $26.0
million, or $0.38 per diluted share, related to SFAS 123(R). Excluding the
effect of SFAS 123(R), non-GAAP earnings per diluted share for fiscal 2006 is
expected to be approximately $2.15.
Guidance reflects top-line growth in our core market units and operating
margins consistent with prior quarters.
"We continue to respond to the growing demand for our industry-standard
solutions in areas like fraud management, scoring, and customer account
management," said Grudnowski. "We have seen terrific response from existing and
prospective customers in these areas. Furthermore, we continue to experience
growing market appreciation for our Enterprise Decision Management
capabilities."
Non-GAAP Financial Measures
This news release includes the non-GAAP financial measure "EPS before
Share-Based Compensation" which excludes the expense related to all stock-based
compensation. The company excludes these amounts in order to facilitate the
comparison of current results with those of prior periods and with previous
guidance provided by the company, which did not include such expenses, and
because these amounts are non-cash expenses. Wherever this non-GAAP financial
measure has been included in this news release, the company has reconciled it to
GAAP EPS. This non-GAAP financial measure is not prepared in accordance with
accounting principles generally accepted in the United States of America and may
be different from non-GAAP financial measures used by other companies. Non-GAAP
financial measures should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP.
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 first quarter
fiscal 2006 results, and outlook for the remainder of 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 February 22, 2006.
About Fair Isaac Corporation
Fair Isaac Corporation (NYSE:FIC) makes decisions smarter. The company's
solutions and technologies for Enterprise Decision Management give businesses
the power to automate more processes, and apply more intelligence to every
customer interaction. Through increasing the precision, consistency and agility
of their decisions, Fair Isaac clients worldwide increase sales, build customer
value, cut fraud losses, manage credit risk, reduce operational costs, meet
changing compliance demands and enter new markets more profitably. Founded in
1956, Fair Isaac powers hundreds of billions of decisions each year in financial
services, insurance, telecommunications, retail, consumer branded goods,
healthcare and the public sector. Fair Isaac also helps millions of individuals
manage their credit health through the www.myfico.com website. Visit Fair Isaac
online at 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, 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 Ended December 31, 2005 and 2004
(In thousands, except per share data)
(Unaudited)
Quarter Ended
December 31,
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2005 2004
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Revenues $202,790 $195,546
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Operating expenses:
Cost of revenues 67,045 69,770
Research and development 22,730 20,998
Selling, general and administrative 63,383 53,568
Amortization of intangible assets 6,263 6,784
Restructuring and merger related (674) -
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Total operating expenses 158,747 151,120
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Operating income 44,043 44,426
Other income (expense), net 845 330
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Income before income taxes 44,888 44,756
Provision for income taxes 16,431 16,895
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Net income $28,457 $27,861
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Earnings per share:
Basic $0.44 $0.41
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Diluted $0.43 $0.36 (a)
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Shares used in computing earnings per share:
Basic 64,211 68,570
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Diluted 66,219 80,056 (a)
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Share-based compensation expense included in
the above operating expense captions are as
follows (b):
Cost of revenues $2,826 $111
Research and development 1,835 29
Selling, general and administrative 4,853 293
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Total share-based compensation expense $9,514 $433
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(a) The computation of diluted earnings per share for the quarter
ended December 31, 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 $1.3
million. On March 31, 2005, the company successfully completed an
exchange offer for approximately 99.9% of the principal amount of
its senior convertible notes for new senior convertible notes. The
dilutive effect of the new senior convertible notes has been
calculated using the treasury stock method since the effective
date of the exchange.
(b) Effective October 1, 2005, the company adopted SFAS 123(R),
"Share- Based Payment", which required the company to record
compensation expense for all share-based awards. Results from
prior periods have not been restated.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2005 and September 30, 2005
(In thousands)
(Unaudited)
December 31, September 30,
2005 2005
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ASSETS:
Current assets:
Cash and cash equivalents $189,296 $82,880
Marketable securities 130,567 146,088
Receivables, net 156,403 156,375
Prepaid expenses and other current
assets 25,772 27,337
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Total current assets 502,038 412,680
Marketable securities and investments 52,360 59,087
Property and equipment, net 45,020 48,436
Goodwill and intangible assets, net 794,076 803,306
Other noncurrent assets 29,540 27,552
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$1,423,034 $1,351,061
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $57,956 $50,947
Accrued compensation and employee
benefits 33,897 31,373
Deferred revenue 56,087 55,837
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Total current liabilities 147,940 138,157
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 5,577 7,810
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Total liabilities 553,517 545,967
Stockholders' equity 869,517 805,094
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$1,423,034 $1,351,061
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FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters Ended December 31, 2005 and 2004
(In thousands)
(Unaudited)
Quarter Ended
December 31,
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2005 2004
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Strategy machine solutions $111,986 $117,812
Scoring solutions 46,156 39,424
Professional services 32,831 29,470
Analytic software tools 11,817 8,840
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Total revenues $202,790 $195,546
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FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended December 31, 2005 and 2004
(In thousands)
(Unaudited)
Quarter Ended
December 31,
-------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $28,457 $27,861
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,059 13,472
Share-based compensation expense 9,514 433
Changes in operating assets and liabilities, net
of acquisitions 10,366 33,705
Other, net 348 4,439
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Net cash provided by operating activities 60,744 79,910
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (2,545) (3,089)
Cash paid for acquisitions, net of cash acquired - (33,800)
Net activity from marketable securities 22,587 12,297
Other, net 249 23,250
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Net cash provided by (used in) investing
activities 20,291 (1,342)
--------- ---------
Cash flows from financing activities:
Proceeds from issuances of common stock 36,154 17,868
Repurchases of common stock (12,766) (109,892)
Other, net 2,352 (1,371)
--------- ---------
Net cash used in financing activities 25,740 (93,395)
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Effect of exchange rate changes on cash (359) 407
--------- ---------
Increase (decrease) in cash and cash equivalents 106,416 (14,420)
Cash and cash equivalents, beginning of period 82,880 134,070
--------- ---------
Cash and cash equivalents, end of period $189,296 $119,650
========= =========
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 Q1A Q2E Q3E Q4E FY06E
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Total Baseline
Prior to '05 $149,484 $145,000 $141,000 $139,000 $574,484
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Q1-2005A 6,205 3,000 2,750 2,500 14,455
Q2-2005A 6,194 6,000 5,000 4,500 21,694
Q3-2005A 7,404 7,000 6,500 5,500 26,404
Q4-2005A 11,482 9,000 7,500 5,500 33,482
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Total FY05 31,285 25,000 21,750 18,000 96,035
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Total Baseline
Prior to '06 180,769 170,000 162,750 157,000 670,519
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Q1-2006E $127,778 22,021 14,000 9,000 7,000 52,021
Q2-2006E 26,000
Q3-2006E
Q4-2006E
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Total FY06 22,021 40,000
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Grand Total $605,000 $202,790 $210,000
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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