Fair Isaac Discusses F1Q2011 Results - Earnings Call Transcript

Fair Isaac Corporation ( FIC)

F1Q2011 (Qtr End 12/31/2010) Earnings Call

January 26, 2010 5:00 pm ET

Executives

Steve Weber - Head IR

Mark Greene - CEO

Mike Pung - CFO

Analysts

Michael Nemeroff - Wedbush Securities

Manav Patnaik - Barclays Capital

Thomas Ernst - Deutsche Bank

Carter Malloy - Stephens Inc.

Nat Otis - KBW

Presentation

Operator

At this time, I would like to welcome everyone to the first quarter 2011 earnings conference call. (Operator Instructions) I would now like to introduce and turn the call over to, Mr. Steve Weber. You may begin your conference.

Steve Weber

Good afternoon, and thank you for joining FICO's first quarter earnings call. I am Steve Weber, Head of Investor Relations; and I'm joined today by CEO, Mark Greene; and CFO, Mike Pung.

You will find on the Investor Relations portion of the FICO website, a copy of today's press 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 discuss results in comparison to the prior quarter, in order to facilitate understanding of the run rate of our business.

Certain statements made in the presentation may be characterized 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 statement 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's page of our website under the presentations tab. A replay of this webcast will be available through February 26, 2011.

Now, I will turn the call over to Mark Greene.

Mark Greene

Thanks, Steve and good afternoon. We'll proceed today as usual in three parts. First, I'll summarize the quarterly results and assess our business in light of current market conditions. Mike Pung will then provide further financial details. And finally, I'll discuss our business outlook for the balance of fiscal 2011 before we take your questions.

For the first quarter of fiscal 2011, revenue was $156 million, up $1 million over the prior quarter and up $4 million or 3% year-over-year. GAAP earnings per share in the quarter were $0.40, up 5% from last quarter and up 8% year-over-year. Bookings were $84 million, compared to $106 million last quarter and $60 million in the first quarter of 2010.

On our last call I stated that we are positioned to realize growth across our business and I'm pleased with the progress we are making towards this objective.

Let me break out our quarterly performance for the three segments of our decision management portfolio. First, the Application segment consists of business software used by clients to make smarter decisions over customer life cycles. Revenue from these applications was $98 million, up 2% sequentially and up 5% versus the same period last year. This represents the third consecutive quarter that we've seen growth in this segment. We saw improved performance across most of our applications with impressive results from our fraud, originations, customer management and marketing solutions.

We had another solid quarter in fraud management, which consists of Insurance Fraud Manager and Falcon Fraud Manager for banking. In fact, fraud management bookings once again exceeded $30 million for the quarter, and we delivered the largest revenue quarter since the third quarter of 2008. Our originations business also continued to grow with revenue up 6% over last quarter and 17% over the last year.

We now routinely bundle our originations product in many of the larger multi-product solutions that we sell. And in the quarter we released our latest offering, Origination Manager 4.0, which is the third in a series of connected decision applications designed to work together on a single platform, to help clients break down internal silos, driving towards profitability and growth.

As lenders emerge from the financial crisis and starting to shift their focus from loss prevention to responsible profitable growth and FICO originations manager helps them insure that loan applicants are appropriately reviewed both for risk and fraud, then matched to the optimal terms to ensure the highest long-term profitability.

In our customer management business, we followed up on a strong prior quarter, with an even stronger Q1 with more than $18 million of bookings in the quarter; the largest number in 11 quarters, including several sizable TRIAD transactional deals that will provide future recurring revenue. And we also continue to deliver solid growth in our marketing solutions led by our retail action manager products, with revenue up 3% over the previous quarter or 8% over the prior year.

Finally, within the application segment, we've grown our services revenue by 5% over the prior quarter and 15% over the prior year. As we complete the implementation work associated with prior quarter bookings, we anticipate growth in our ongoing recurring transactional revenue streams.

Turning now to our second segment, which is Scores. Scores consists of predictive analytics that are used to assess risk. Overall scores revenue was $41 million in the quarter, down 2% from the prior quarter. We tracked two sub-segments here. B2B or business-to-business, which are scores sold to financial institutions and B2C or business-to-consumer, which are scores sold to consumers at myfico.com on a direct basis, as well as scores sold through bureau partners to consumers on an indirect basis.

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