Fair Isaac (FICO)

Q3 2012 Earnings Call

July 25, 2012 5:00 pm ET

Executives

Steven P. Weber - Vice President of Investor Relations and Treasurer

William J. Lansing - Chief Executive Officer, President, Director and Member of Audit Committee

Michael J. Pung - Chief Financial Officer, Chief Investor Relations and Executive Vice President

Analysts

Manav Patnaik - Barclays Capital, Research Division

Carter Malloy - Stephens Inc., Research Division

Ty M. Lilja - Feltl and Company, Inc., Research Division

Presentation

Operator

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Previous Statements by FICO
» Fair Isaac's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Fair Isaac's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Fair Isaac Corp. - Analyst/Investor Day

Good afternoon, my name is Kyle, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the FICO Third Quarter Earnings Conference Call. [Operator Instructions] Mr. Weber, you may begin your conference.

Steven P. Weber

Thank you, Kyle. Good afternoon and thank you for joining FICO's Third Quarter Earnings Call. I'm Steve Weber, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing; and our CFO, Mike Pung. You'll find on the Investor Relations portion of the FICO website a copy of today's news release, our Regulation G disclosure schedule and our financial highlights. While our press release describes financial results compared to the prior year, today management will also discuss results in comparison to the prior quarter in order to facilitate understanding of the run rate of our business.

Certain statements made in this presentation may be characterize as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many uncertainties that could cause actual results to differ materially. Information concerning these uncertainties is contained in the company's filings with the SEC, in particular, in the Risk Factors and Forward-Looking Statements portions of such filings. Copies are available from the SEC, from the FICO website or from our Investor Relations team.

In order to provide additional information to investors, we will use certain non-GAAP financial measures on this call. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, entitled Regulation G Disclosure, is available on the Investor page of our website under the Presentations tab. A replay of this webcast will be available through August 25, 2012.

And with that, I'll turn the call over to Will Lansing.

William J. Lansing

Thanks, Steve. Today, we announced the results of our third quarter fiscal 2012. I'll briefly summarize those results and then discuss some of the exciting things we've been working on and what they mean for the growth of the business.

I'm pleased to report we had a solid third quarter. Our revenue of $160 million was an increase of 7% over the same period last year. We delivered $21 million of net income and earnings of $0.59 per share versus $0.58 last year. I'm also pleased to report that we are increasing our full year guidance, which we'll detail later.

As we've stated in prior discussions, we're continually weighing share repurchase against the possibility of acquisitions in order to achieve the greatest long-term return on capital. This quarter, we managed to do both. Mike will provide details on the share repurchases in a few minutes, but I'd like to talk about our acquisition this quarter of Entiera, which gives FICO a SaaS-based next-generation marketing automation platform. This is especially important in today's environment where marketing executives spend nearly as much on technology as CIOs as they struggle to keep up with rapidly evolving digital, social, mobile and interactive technologies and exploding volumes of structured and unstructured data.

Since completing the acquisition in May, we've already made significant progress on integrating the Entiera platform with FICO's existing marketing decision management technologies. In fact, the acquisition has accelerated FICO's Marketing solutions product roadmap significantly. Soon, FICO will usher in a new era of analytically driven, big data multichannel campaign management, providing a combination unmatched in the industry today.

In concert with the product integration, we've already begun migrating a number of large existing FICO customers to the new platform. This will enable these clients to benefit from a more functionally rich, efficient and high-performance campaign management solution. This acquisition will also serve as the vehicle for FICO to expand the reach of our marketing solutions into new industry verticals. The software-as-a-service delivery model we've acquired will also provide the means to deliver FICO's proven high-end marketing analytics products to mid-market clients in a highly competitive manner.

As I said last quarter, we set the bar high as we evaluate potential acquisitions. I think Entiera provides a good illustration of what we look for. First, it's important that whatever we're acquiring must be able to integrate quickly and efficiently with our existing product base, enhancing the functionality of our core products.

Second, we look for opportunities to leverage our global sales force and extensive customer base. If we can find companies with products that provide our customers with additional capabilities that are closely adjacent to those of our current companies, we believe such an acquisition will help us take additional market share. Third, we look for products that are growing in terms of revenue and market share and have room for further growth. Finally, we keep a keen eye on valuation. And again, this is where we constantly weigh the value of acquisitions against investing in our own business, either through share buybacks or through internal development and operations.

As I said last quarter, I'm convinced we're in a great position to capitalize on opportunities inherent in big data. You might not know it from the hype, but the real value in big data is not going to come from relaxing constraints on data storage and processing. The real value in big data lies in the ability to extract value from incremental data sets of increasingly marginal utility and ultimately make smarter business decisions. Nobody knows how to do that better than FICO, and we're moving quickly to seize the opportunity.

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