Fair Isaac's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Fair Isaac (FICO)

Q2 2012 Earnings Call

April 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, Senior Vice President and Vice President of Finance and Investor Relations

Analysts

Manav Patnaik - Barclays Capital, Research Division

Nandan Amladi - Deutsche Bank AG, Research Division

Carter Malloy - Stephens Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

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

Presentation

Operator

Ladies and gentlemen, this is the operator. I would like to welcome everyone to the FICO's Second Quarter Earnings Call. Thank you. Mr. Steve Weber, you may begin.

Steven P. Weber

Thank you. Good afternoon, and thank you for joining FICO's second 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 characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements may involve many uncertainties that 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 those 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 May 25, 2012.

Now I'll turn the call over to Will Lansing.

William J. Lansing

Thanks, Steve. Today we announced the results of our second quarter fiscal 2012. I'd like to start by briefly summarizing those results and then offer my observations from my first 90 days at FICO.

I'm pleased to report we had a solid second quarter. Our revenue of $160 million was an increase of 4% over the same period last year. We delivered $20 million of net income versus $8 million last year and earnings of $0.55 per share versus $0.19 last year. We also continued to produce strong free cash flows, $36 million this quarter versus $22 million in the same quarter last year. Mike will get into the numbers in more detail in a few minutes. But first, I'd like to share my thoughts on where we currently stand and where we are going.

Over the past 3 months, I've had the opportunity to travel our offices around the world. We have an exceptionally smart, dedicated team of people who foresee exciting opportunities ahead for our business. I've also met with customers and I've got a deeper understanding of the value they get from FICO solutions and how they want to partner with us to tackle their toughest challenges. And I've come away very impressed with the strength of the company, its people, its products and its prospects for even greater success.

We have the strongest set of products in IT, with high barriers to entry. Products like the FICO Score, Falcon Fraud Manager and TRIAD are deeply embedded into the financial services industry and are recurring high-margin businesses. FICO

Retail Action Manager studies oceans of transaction data to determine not only what customers are most likely to buy but when, insight that our customers find extremely valuable. So we're looking closely at ways to offer this kind of value to an even broader number of retailers.

The product rationalization and restructuring that the company has undertaken in recent years has resulted in a business model that provides strong margins and operating leverage that propels earnings with even modest revenue growth. In a global market place, talent is the ultimate competitive advantage. And as I mentioned earlier, FICO has an exceptionally talented, dedicated workforce. We have over 200 analytic scientists on staff, with analytics centers of excellence in the U.S., U.K. and India. Our analysts work with dozens of proprietary and innovative modeling technologies, from genetic algorithms and neural network to Bayesian algorithms and experimental design.

In contrast to many players, new handle that are entering the analytics space, we specialize in real-world analytics solutions that solve specific real-world business problems. That's why in our discussions with clients, FICO always leads with the business problem, not with the technology.

What makes us very different from others is that we have great technology with a proven track record. We've developed proprietary technology for analyzing large data sets to develop predictive models. The results from analytic products transform entire industries. Our analytics that predict individual behavior protect 2/3 of the world's credit cards, and drive more than $10 billion lending decisions a year in the U.S. alone.

New entrants into the predictive analytics marketplace are jumping on the big data bandwagon, announcing that is now possible to express human behavior mathematically. FICO has been pioneering and perfecting this science since 1956. With the explosion of data available today, I'm convinced we are in a great position to the make the most of the opportunities inherent in Big Data.

Read the rest of this transcript for free on seekingalpha.com

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