UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) July 31, 2017
FAIR ISAAC CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-11689 | 94-1499887 |
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
181 Metro Drive, Suite 700 San Jose, California |
95110-1346 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code 408-535-1500
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Exchange Act (17 CFR 240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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 July 31, 2017, Fair Isaac Corporation (the “Company”) reported its financial results for the quarter ended June 30, 2017. See the Company’s press release dated July 31, 2017, which is furnished as Exhibit 99.1 hereto and incorporated by reference in this Item 2.02.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit | Description |
| 99.1 | Press Release dated July 31, 2017 |
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/ MICHAEL J. PUNG | |
| Michael J. Pung | ||
| Executive Vice President and Chief Financial | ||
| Officer | ||
Date: July 31, 2017
EXHIBIT INDEX
| Exhibit No. | Description | Manner of Filing |
| 99.1 | Press Release dated July 31, 2017 | Furnished Electronically |
FICO Announces Earnings for Third Quarter Fiscal 2017
Revenue of $231 million vs. $239 million in prior year
SAN JOSE, Calif., July 31, 2017 /PRNewswire/ -- FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today announced results for its third fiscal quarter ended June 30, 2017.
Third Quarter Fiscal 2017 GAAP Results
Net income for the quarter totaled $25.2 million, or $0.78 per share, versus $35.0 million, or $1.08 per share, reported in the prior year period. The current quarter earnings include a reduction to income tax expense of $2.7 million, or $0.08 per share, associated with the adoption of FASB Accounting Standards Update No. 2016-09 ("ASU 2016-09"). The current quarter also includes a pre-tax restructuring charge of $4.5 million, or $0.09 per share after tax.
Net cash provided by operating activities for the quarter was $72.0 million versus $85.4 million in the prior year period.
Third Quarter Fiscal 2017 Non-GAAP Results
Non-GAAP Net Income for the quarter was $37.4 million vs. $46.8 million in the prior year period. Non-GAAP EPS for the quarter was $1.16 vs. $1.45 in the prior year period. Free cash flow for the quarter was $66.8 million vs. $80.0 million in the prior year period. Free cash flow for both periods reflects the impact of ASU 2016-09. These non-GAAP financial measures are described in the financial table captioned "Non-GAAP Results" and are reconciled to the corresponding GAAP measures in the financial tables at the end of this release.
Third Quarter Fiscal 2017 GAAP Revenue
The company reported revenues of $231.0 million for the quarter as compared to $238.8 million reported in the prior year period.
"We had a very strong quarter in our Scores business, where our efforts to expand our revenue sources continue to pay off," said Will Lansing, chief executive officer. "We also had a strong bookings quarter, posting more than $90 million for the third consecutive quarter, and continuing to build a backlog of recurring revenue."
Revenues for the third quarter of fiscal 2017 across each of the company's three operating segments were as follows:
- Applications revenues, which include the company's preconfigured decision management applications and associated professional services, were $133.8 million in the third quarter, compared with $141.6 million in the prior year quarter, a decrease of 5%. This was primarily due to decreased license sales in Fraud Management Solutions.
- Scores revenues, which include the company's business-to-business (B2B) scoring solutions and associated professional services, and business-to-consumer (B2C) service, were $69.5 million in the third quarter, compared to $61.1 million in the prior year quarter, an increase of 14%. B2B revenue increased 13% and B2C revenue increased 16% from the prior year quarter.
- Decision Management Software revenues, which include FICO® Blaze Advisor®, FICO® Xpress Optimization and related professional services, were $27.7 million in the third quarter compared to $36.1 million in the prior year quarter, a decrease of 23%, due primarily to decreased license revenues of Blaze Advisor.
Outlook
The company is updating its previously provided guidance for fiscal 2017 as a result of the impact of ASU 2016-09 on the current quarter to approximately:
|
| Previous
| Quarter 3,
| New Fiscal
|
Revenue | $925 million | - | $925 million |
GAAP Net Income | $130 million | $3 million | $133 million |
GAAP Earnings Per Share | $4.03 | $0.08 | $4.11 |
Non-GAAP Net Income | $158 million | - | $158 million |
Non-GAAP Earnings Per Share | $4.92 | - | $4.92 |
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 third quarter fiscal 2017 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 through July 31, 2018.
The webcast will also be distributed through the Thomson StreetEvents Network to both institutional and individual investors. The webcast can be accessed via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 170 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 100 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/
FICO and Blaze Advisor are registered trademarks of Fair Isaac Corporation in the U.S. 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 success of the Company's Decision Management 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, regulatory changes applicable to the use of consumer credit and other data, the failure to
realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions or in the markets we serve, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2016 and Form 10-Q for the quarter ended June 30, 2017. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.
FAIR ISAAC CORPORATION | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(In thousands) | |||
(Unaudited) | |||
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| June 30, |
| September 30, |
|
| 2017 |
| 2016 |
ASSETS: |
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Current assets: |
|
|
|
Cash and cash equivalents | $ 130,667 |
| $ 75,926 |
Accounts receivable, net | 140,265 |
| 167,786 |
Prepaid expenses and other current assets | 51,033 |
| 23,926 |
Total current assets | 321,965 |
| 267,638 |
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|
Marketable securities and investments | 24,746 |
| 21,936 |
Property and equipment, net | 42,143 |
| 45,122 |
Goodwill and intangible assets, net | 823,373 |
| 832,034 |
Other assets | 46,127 |
| 53,946 |
|
| $ 1,258,354 |
| $ 1,220,676 |
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LIABILITIES AND STOCKHOLDERS' EQUITY: |
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Current liabilities: |
|
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Accounts payable and other accrued liabilities | $ 47,381 |
| $ 50,732 |
Accrued compensation and employee benefits | 62,616 |
| 71,216 |
Deferred revenue | 65,028 |
| 47,129 |
Current maturities on debt | 224,000 |
| 77,000 |
Total current liabilities | 399,025 |
| 246,077 |
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Long-term debt | 387,767 |
| 493,624 |
Other liabilities | 38,807 |
| 34,147 |
Total liabilities | 825,599 |
| 773,848 |
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Stockholders' equity | 432,755 |
| 446,828 |
|
| $ 1,258,354 |
| $ 1,220,676 |
FAIR ISAAC CORPORATION | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||
(In thousands, except per share data) | |||||||
(Unaudited) | |||||||
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| Quarter Ended |
| Nine Months Ended | ||||
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| June 30, |
| June 30, | ||||
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
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Revenues: |
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Transactional and maintenance | $ 166,695 |
| $ 153,886 |
| $ 481,604 |
| $ 451,701 |
Professional services | 43,871 |
| 44,304 |
| 128,698 |
| 117,798 |
License | 20,420 |
| 40,588 |
| 68,662 |
| 76,033 |
Total revenues | 230,986 |
| 238,778 |
| 678,964 |
| 645,532 |
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Operating expenses: |
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Cost of revenues | 69,793 |
| 66,384 |
| 211,921 |
| 190,875 |
Research & development | 27,839 |
| 26,417 |
| 80,644 |
| 75,896 |
Selling, general and administrative | 84,089 |
| 87,172 |
| 255,534 |
| 243,511 |
Amortization of intangible assets | 3,365 |
| 3,486 |
| 9,997 |
| 10,573 |
Restructuring and acquisition-related | 4,471 |
| - |
| 4,471 |
| - |
Total operating expenses | 189,557 |
| 183,459 |
| 562,567 |
| 520,855 |
Operating income | 41,429 |
| 55,319 |
| 116,397 |
| 124,677 |
Other expense, net | (6,098) |
| (5,029) |
| (19,275) |
| (18,467) |
Income before income taxes | 35,331 |
| 50,290 |
| 97,122 |
| 106,210 |
Provision for income taxes | 10,104 |
| 15,303 |
| 8,910 |
| 28,866 |
Net income | $ 25,227 |
| $ 34,987 |
| $ 88,212 |
| $ 77,344 |
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Basic earnings per share: | $ 0.82 |
| $ 1.12 |
| $ 2.85 |
| $ 2.48 |
Diluted earnings per share: | $ 0.78 |
| $ 1.08 |
| $ 2.73 |
| $ 2.39 |
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Shares used in computing earnings per share: |
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Basic | 30,914 |
| 31,149 |
| 30,973 |
| 31,201 |
Diluted | 32,224 |
| 32,313 |
| 32,340 |
| 32,337 |
FAIR ISAAC CORPORATION | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(In thousands) | |||
(Unaudited) | |||
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| Nine Months Ended | ||
|
| June 30, | ||
|
| 2017 |
| 2016 |
Cash flows from operating activities: |
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Net income | $ 88,212 |
| $ 77,344 |
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization | 27,427 |
| 23,127 |
Share-based compensation | 43,546 |
| 41,704 |
Changes in operating assets and liabilities | 10,826 |
| 18,996 |
Other, net | 1,412 |
| 16,554 |
Net cash provided by operating activities (1) | 171,423 |
| 177,725 |
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Cash flows from investing activities: |
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|
Purchases of property and equipment | (14,792) |
| (12,541) |
Cash paid for acquisitions, net of cash acquired | - |
| (5,683) |
Other, net | (777) |
| 37 |
Net cash used in investing activities | (15,569) |
| (18,187) |
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Cash flows from financing activities: |
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Proceeds from revolving line of credit | 98,000 |
| 49,000 |
Payments on revolving line of credit | (57,000) |
| (56,000) |
Proceeds from issuances of common stock | 13,112 |
| 8,356 |
Taxes paid related to net share settlement of equity awards | (39,324) |
| (28,544) |
Repurchases of common stock | (116,341) |
| (96,121) |
Other, net | (1,238) |
| (1,869) |
Net cash used in financing activities (1) | (102,791) |
| (125,178) |
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Effect of exchange rate changes on cash | 1,678 |
| (2,325) |
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Increase in cash and cash equivalents | 54,741 |
| 32,035 |
Cash and cash equivalents, beginning of period | 75,926 |
| 86,120 |
Cash and cash equivalents, end of period | $ 130,667 |
| $ 118,155 |
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(1) | During the quarter ended December 31, 2016, we adopted Accounting Standards Update No. 2016-09 which addresses, among other items, updates to the presentation of excess tax benefits related to stock based compensation. Excess tax benefits are no longer classified as a reduction of operating cash flows. We have adopted changes to our condensed consolidated statements of cash flows on a retrospective basis. The impact to net cash provided by operating activities and net cash used in financing activities for the nine months ended June 30, 2016 was $16.1 million. | |||
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FAIR ISAAC CORPORATION | |||||||||
REVENUE BY SEGMENT | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
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| Quarter Ended |
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| Nine Months Ended | ||||
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| June 30, |
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| June 30, | ||||
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| 2017 |
| 2016 |
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| 2017 |
| 2016 |
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Applications revenues: |
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Transactional and maintenance |
| $ 87,443 |
| $ 82,925 |
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| $ 258,337 |
| $ 244,659 |
Professional services |
| 35,990 |
| 36,560 |
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| 102,971 |
| 95,405 |
License |
| 10,349 |
| 22,080 |
|
| 41,576 |
| 43,559 |
Total Applications revenues |
| $ 133,782 |
| $ 141,565 |
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| $ 402,884 |
| $ 383,623 |
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Scores revenues: |
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Transactional and maintenance |
| $ 68,376 |
| $ 59,781 |
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| $ 190,256 |
| $ 174,263 |
Professional services |
| 487 |
| 822 |
|
| 2,002 |
| 2,682 |
License |
| 651 |
| 527 |
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| 2,071 |
| 1,303 |
Total Scores revenues |
| $ 69,514 |
| $ 61,130 |
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| $ 194,329 |
| $ 178,248 |
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Decision Management Software revenues: |
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Transactional and maintenance |
| $ 10,876 |
| $ 11,180 |
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| $ 33,011 |
| $ 32,779 |
Professional services |
| 7,394 |
| 6,922 |
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| 23,725 |
| 19,711 |
License |
| 9,420 |
| 17,981 |
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| 25,015 |
| 31,171 |
Total Decision Management Software revenues | $ 27,690 |
| $ 36,083 |
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| $ 81,751 |
| $ 83,661 | |
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Total revenues: |
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Transactional and maintenance |
| $ 166,695 |
| $ 153,886 |
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| $ 481,604 |
| $ 451,701 |
Professional services |
| 43,871 |
| 44,304 |
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| 128,698 |
| 117,798 |
License |
| 20,420 |
| 40,588 |
|
| 68,662 |
| 76,033 |
Total revenues |
| $ 230,986 |
| $ 238,778 |
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| $ 678,964 |
| $ 645,532 |
FAIR ISAAC CORPORATION | |||||||
NON-GAAP RESULTS | |||||||
(In thousands, except per share data) | |||||||
(Unaudited) | |||||||
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| Quarter Ended |
| Nine Months Ended | ||||
|
| June 30, |
| June 30, | ||||
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
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GAAP net income | $ 25,227 |
| $ 34,987 |
| $ 88,212 |
| $ 77,344 |
Amortization of intangible assets | 3,365 |
| 3,486 |
| 9,997 |
| 10,573 |
Restructuring and acquisition-related | 4,471 |
| - |
| 4,471 |
| - |
Stock-based compensation expense | 14,315 |
| 13,404 |
| 43,546 |
| 41,704 |
Income tax adjustments | (7,272) |
| (5,051) |
| (17,801) |
| (15,559) |
Excess tax benefit | (2,685) |
| - |
| (23,548) |
| - |
Non-GAAP net income | $ 37,421 |
| $ 46,826 |
| $ 104,877 |
| $ 114,062 |
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GAAP diluted earnings per share | $ 0.78 |
| $ 1.08 |
| $ 2.73 |
| $ 2.39 |
Amortization of intangible assets | 0.10 |
| 0.11 |
| 0.31 |
| 0.33 |
Restructuring and acquisition-related | 0.14 |
| - |
| 0.14 |
| - |
Stock-based compensation expense | 0.44 |
| 0.41 |
| 1.35 |
| 1.29 |
Income tax adjustments | (0.23) |
| (0.16) |
| (0.55) |
| (0.48) |
Excess tax benefit | (0.08) |
| - |
| (0.73) |
| - |
Non-GAAP diluted earnings per share | $ 1.16 |
| $ 1.45 |
| $ 3.24 |
| $ 3.53 |
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Free cash flow |
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Net cash provided by operating activities | $ 72,027 |
| $ 85,390 |
| $ 171,423 |
| $ 177,724 |
Capital expenditures | (5,189) |
| (4,734) |
| (14,792) |
| (12,541) |
Dividends paid | - |
| (624) |
| (1,238) |
| (1,869) |
Free cash flow | $ 66,838 |
| $ 80,032 |
| $ 155,393 |
| $ 163,314 |
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Note: The numbers may not sum to total due to rounding. |
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About Non-GAAP Financial Measures |
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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 the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid. 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. | ||||||||
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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. | ||||||||
FAIR ISAAC CORPORATION | |||||
RECONCILIATION OF NON-GAAP GUIDANCE | |||||
(In millions, except per share data) | |||||
(Unaudited) | |||||
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| Previous Fiscal 2017
|
| Quarter 3, 2017
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| New Fiscal 2017
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GAAP net income | $ 130 |
| $ 3 |
| $ 133 |
Amortization of intangible assets | 14 |
| - |
| 14 |
Stock-based compensation expense | 56 |
| - |
| 56 |
Income tax adjustments | (21) |
| - |
| (21) |
Excess tax benefit | (21) |
| (3) |
| (24) |
Non-GAAP net income | $ 158 |
| $ - |
| $ 158 |
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GAAP diluted earnings per share | $ 4.03 |
| $ 0.08 |
| $ 4.11 |
Amortization of intangible assets | 0.43 |
| - |
| 0.43 |
Stock-based compensation expense | 1.75 |
| - |
| 1.75 |
Income tax adjustments | (0.65) |
| - |
| (0.65) |
Excess tax benefit | (0.64) |
| (0.08) |
| (0.72) |
Non-GAAP diluted earnings per share | $ 4.92 |
| $ 0.08 |
| $ 4.92 |
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Note: The numbers may not sum to total due to rounding. |
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About Non-GAAP Financial Measures |
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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 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 and dividends paid. 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. | |||||
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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. | |||||
CONTACT: Investors/Analysts: Steve Weber, (800) 213-5542, investor@fico.com, or Media: Greg Jawski, Porter Novelli, (212) 601-8248, greg.jawski@porternovelli.com