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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) April 26, 2006
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FAIR ISAAC CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Delaware 0-16439 94-1499887
-------- ------- ----------
(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
----------------
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 April 26, 2006, Fair Isaac Corporation (the "Company") reported its
financial results for the quarter and six months ended March 31, 2006. See the
Company's press release dated April 26, 2006, 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 April 26, 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: April 26, 2006
2
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- --------------------------------------------------------------------------------
99.1 Press Release dated April 26, 2006 Filed Electronically
Exhibit 99.1
Fair Isaac Announces Second Quarter Fiscal 2006 Results
MINNEAPOLIS--(BUSINESS WIRE)--April 26, 2006--
Record Revenue of $208.2 Million;
EPS of $0.40 after $0.12 from SFAS 123(R) Expense
and Costs Related to an Abandoned Acquisition
Fair Isaac Corporation (NYSE:FIC), the leading provider of
analytics and decision technology, today announced financial results
for its second quarter ended March 31, 2006.
The company adopted Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment (SFAS 123 (R)) for fiscal 2006. As a
result, effective October 1, 2005, the company began recording
compensation expense for stock options and purchases under its
Employee Stock Purchase Plan in the consolidated statement of income.
Results for prior periods have not been restated.
"We are pleased with the year-over-year growth in earnings,
excluding special items," said Thomas Grudnowski, Fair Isaac's chief
executive officer. "We had continued strong revenue performance from
our Enterprise Decision Management (EDM) services, and consumer,
scoring, and fraud products."
Second Quarter Fiscal 2006 Results
The company reported second quarter revenues of $208.2 million in
fiscal 2006 versus $196.0 million reported in the prior year period.
Net income for the second quarter of fiscal 2006 totaled $27.0
million, or $0.40 per diluted share versus $34.3 million, or $0.45 per
diluted share reported in the prior year period.
Second quarter fiscal 2006 results included share-based
compensation expense of approximately $6.5 million after-tax, or $0.10
per diluted share, due to the adoption of SFAS 123(R), and costs
associated with an abandoned acquisition of approximately $1.4 million
after-tax, or $0.02 per diluted share.
Second quarter fiscal 2005 results included a decrease in diluted
earnings per share of $0.05 related to the adoption of EITF Issue No.
04-8, and an increase to net income due to a reduction to income tax
expense of $6.0 million, or $0.08 per diluted share, related to
revisions made to estimates of prior years' tax liabilities.
Fiscal 2006 Year-to-date Results
The company reported year-to-date revenues of $410.9 million
versus $391.6 million in the prior year period. Net income for
year-to-date fiscal 2006 totaled $55.4 million, or $0.83 per diluted
share versus $62.2 million, or $0.82 per diluted share reported in the
prior year period.
Year-to-date fiscal 2006 results included share-based compensation
expense of approximately $12.6 million after-tax, or $0.19 per diluted
share, due to the adoption of SFAS 123(R).
Year-to-date fiscal 2005 results included a decrease in diluted
earnings per share of $0.08 related to the adoption of EITF Issue No.
04-8, and the reduction to income tax expense of $0.08 per diluted
share for the reason described above.
Second Quarter Fiscal 2006 Revenues Highlights
Revenues for second quarter fiscal 2006 across each of the
company's four operating segments were as follows:
-- Strategy Machine Solutions revenues increased to $118.9
million in the second quarter from $111.3 million in the prior
year quarter, or by 6.8%, primarily due to an increase in
revenues derived from consumer scoring products and fraud
solutions, partially offset by decreases associated with
marketing services and insurance solutions.
-- Scoring Solutions revenues increased to $41.8 million in the
second quarter from $39.3 million in the prior year quarter,
or an increase of 6.2%, 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 $38.7 million in
the second quarter from $33.6 million in the prior year
quarter, or by 15.2%, primarily due to revenues from industry
strategic consulting services and implementation services for
EDM products.
-- Analytic Software Tools revenues were $8.8 million in the
second quarter compared to $11.8 million in the prior year
quarter, or a decrease of 25.3%, due to a decline in revenues
generated from sales of the Blaze Advisor(TM) product.
Fiscal 2006 Year-to-date Revenues Highlights
Year-to-date revenues for fiscal 2006 across each of the company's
four operating segments were as follows:
-- Strategy Machine Solutions revenues increased to $230.8
million from $229.1 million in the prior year period, or by
0.8%, primarily due to solid growth in consumer scoring
products, fraud products, and collection & recovery products,
offset by declines in marketing services and insurance
solutions.
-- Scoring Solutions revenues increased to $87.9 million from
$78.8 million in the prior year period, or by 11.6%, 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 $71.5 million from
$63.0 million in the prior year period, or by 13.4%, primarily
due to revenues from industry strategic consulting services
and implementation services for EDM products.
-- Analytic Software Tools revenues were $20.7 million compared
to $20.7 million in the prior year period, or virtually
unchanged.
Bookings Highlights
The company achieved bookings of $106.0 million for second quarter
fiscal 2006 versus $136.6 million in the same period last year.
However, the bookings yield (current quarter revenue divided by new
bookings) increased to 20.0% for second quarter fiscal 2006 from 13.7%
in the same period last year. 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 $425.7 million at March 31, 2006, 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 $109.7 million for fiscal 2006 and $45.6 million
received from the exercise of stock options and stock issued under an
employee stock purchase plan. Cash used during fiscal 2006 includes
$8.1 million related to purchases of property and equipment and $12.8
million to repurchase company stock under the currently authorized
share repurchase plan. The remaining balance of the existing share
repurchase authorization is $158.7 million.
Outlook
Third quarter fiscal 2006
The company expects revenues for third quarter fiscal 2006 of
approximately $210.0 million, of which Product (Scoring, Strategy
Machines and Analytic Software Tools) revenues will account for
approximately $170.0 million and Services revenues will account for
approximately $40.0 million. The company also expects earnings per
diluted share for the quarter to be approximately $0.44, which
includes an expected after-tax compensation expense of approximately
$6.6 million, or $0.10 per diluted share, related to SFAS 123(R).
Fiscal 2006
The company expects revenues for fiscal year 2006 of approximately
$836.0 million to $846.0 million. The company also expects earnings
per diluted share for fiscal 2006 to be approximately $1.75, which
includes an expected after-tax compensation expense of approximately
$26.0 million, or $0.38 per diluted share, related to SFAS 123(R) and
costs associated with an abandoned acquisition of approximately $1.4
million after-tax, or $0.02 per diluted share.
"As we anticipated, we continue to see strong global performance
and continued market leadership in our core product areas including
FICO(R) scores, our Falcon(TM) Fraud detection franchise and TRIAD(TM)
account management systems," said Grudnowski. "This ongoing demand for
our industry-standard solutions in a competitive environment is a
testament to the marketplace's continued recognition and
appreciation."
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
second 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 May 24, 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 and
quarterly report on Form 10-Q for the period ended December 31, 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, FICO, Falcon, Blaze Advisor, TRIAD and PreScore 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 Six Months Ended March 31, 2006 and 2005
(In thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
March 31, March 31,
---------------------- --------------------
2006 2005 2006 2005
----------- ---------- ---------- ---------
Revenues $208,157 $196,021 $410,947 $391,567
----------- ---------- ---------- ---------
Operating expenses:
Cost of revenues 73,144 69,648 140,189 139,418
Research and
development 21,694 18,123 44,424 39,121
Selling, general
and
administrative 64,157 55,085 127,540 108,653
Amortization of
intangible
assets 6,260 6,536 12,523 13,320
Restructuring and
acquisition
related 2,184 - 1,510 -
----------- ---------- ---------- ---------
Total
operating
expenses 167,439 149,392 326,186 300,512
----------- ---------- ---------- ---------
Operating income 40,718 46,629 84,761 91,055
Other income
(expense), net 1,495 (490) 2,340 (160)
----------- ---------- ---------- ---------
Income before income
taxes 42,213 46,139 87,101 90,895
Provision for income
taxes 15,240 11,812 31,671 28,707
----------- ---------- ---------- ---------
Net income $26,973 $34,327 $55,430 $62,188
=========== ========== ========== =========
Earnings per share:
Basic $0.41 $0.51 $0.86 $0.92
=========== ========== ========== =========
Diluted $0.40 $0.45 (a) $0.83 $0.82 (a)
=========== ========== ========== =========
Shares used in
computing earnings
per share:
Basic 65,052 66,979 64,626 67,769
=========== ========== ========== =========
Diluted 66,834 78,385 (a) 66,521 79,231 (a)
=========== ========== ========== =========
Share-based
compensation expense
included in the
above operating
expense captions are
as follows (b):
Cost of revenues $2,717 $- $5,543 $111
Research and
development 1,565 22 3,400 51
Selling, general
and
administrative 5,844 176 10,697 469
----------- ---------- ---------- ---------
Total share-based
compensation expense $10,126 $198 $19,640 $631
=========== ========== ========== =========
(a) The computation of diluted earnings per share for the quarter and
six months ended March 31, 2005, include 9.0 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 $1.2 and $2.5 million, respectively. 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
March 31, 2006 and September 30, 2005
(In thousands)
(Unaudited)
March 31, September 30,
2006 2005
------------ -------------
ASSETS:
Current assets:
Cash and cash equivalents $223,463 $82,880
Marketable securities 164,997 146,088
Receivables, net 160,621 156,375
Prepaid expenses and other current
assets 23,814 27,337
------------ -------------
Total current assets 572,895 412,680
Marketable securities and investments 37,195 59,087
Property and equipment, net 44,725 48,436
Goodwill and intangible assets, net 788,689 803,306
Other noncurrent assets 31,607 27,552
------------ -------------
$1,475,111 $1,351,061
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $62,826 $50,947
Accrued compensation and employee
benefits 31,795 31,373
Deferred revenue 57,038 55,837
------------ -------------
Total current liabilities 151,659 138,157
Senior convertible notes 400,000 400,000
Other noncurrent liabilities 5,406 7,810
------------ -------------
Total liabilities 557,065 545,967
Stockholders' equity 918,046 805,094
------------ -------------
$1,475,111 $1,351,061
============ =============
FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters and Six Months Ended March 31, 2006 and 2005
(In thousands)
(Unaudited)
Quarter Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Strategy machine solutions $118,852 $111,252 $230,838 $229,064
Scoring solutions 41,768 39,347 87,924 78,771
Professional services 38,691 33,580 71,522 63,050
Analytic software tools 8,846 11,842 20,663 20,682
--------- --------- --------- ---------
Total revenues $208,157 $196,021 $410,947 $391,567
========= ========= ========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2006 and 2005
(In thousands)
(Unaudited)
Six Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $55,430 $62,188
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 24,237 26,539
Changes in operating assets and liabilities,
net of acquisitions 9,370 19,701
Other, net 20,648 11,129
--------- ---------
Net cash provided by operating activities 109,685 119,557
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (8,125) (10,012)
Cash paid for acquisitions, net of cash acquired - (33,800)
Net activity from marketable securities 3,339 35,143
Other, net 500 24,156
--------- ---------
Net cash provided by (used in) investing
activities (4,286) 15,487
--------- ---------
Cash flows from financing activities:
Proceeds from issuances of common stock 45,577 27,353
Repurchases of common stock (12,766) (127,048)
Other, net 2,708 (2,716)
--------- ---------
Net cash provided by (used in) financing
activities 35,519 (102,411)
--------- ---------
Effect of exchange rate changes on cash (335) 656
--------- ---------
Increase in cash and cash equivalents 140,583 33,289
Cash and cash equivalents, beginning of period 82,880 134,070
--------- ---------
Cash and cash equivalents, end of period $223,463 $167,359
========= =========
Fair Isaac Corporation
Baseline Revenue Analysis
(In thousands)
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BKG'05 Q1A Q2A Q3A Q4A FY05
- ----------------------------------------------------------------------
Total Baseline
Prior to '05 $176,161 $164,445 $158,912 $150,950 $650,468
- ----------------------------------------------------------------------
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
- ----------------------------------------------------------------------
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
======================================================================
E = Estimate
A = Actual
- ----------------------------------------------------------------------
BKG'06 Q1A Q2A Q3E Q4E FY06E
- ----------------------------------------------------------------------
Total Baseline
Prior to '05 $149,484 $143,730 $142,000 $139,000 $574,214
- ----------------------------------------------------------------------
Q1-2005A 6,205 4,261 3,750 2,500 16,716
Q2-2005A 6,194 5,975 5,000 4,500 21,669
Q3-2005A 7,404 7,198 6,000 5,500 26,102
Q4-2005A 11,482 10,521 7,500 5,500 35,003
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Total FY05 31,285 27,955 22,250 18,000 99,490
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Total Baseline
Prior to '06 180,769 171,685 164,250 157,000 673,704
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Q1-2006E $127,778 22,021 15,296 10,000 7,000 54,317
Q2-2006E 106,024 21,176 11,000 7,000 39,176
Q3-2006E 155,000 24,750
Q4-2006E
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Total FY06 22,021 36,472 45,750
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand Total $560,000 $202,790 $208,157 $210,000
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E = Estimate
A = Actual
CONTACT: Fair Isaac Corporation, Minneapolis
Investors & Analysts:
John D. Emerick, Jr., 800-213-5542
or
JD Bergquist Wood, 800-213-5542
investor@fairisaac.com