Q1 2022 Fair Isaac Corp Earnings Call

January 27, 2022

Greetings. Thank you for standing by welcome to the Fair Isaac Corporation quarterly earnings call. During the presentation, all participants will be in a listen only mode and afterwards, we will conduct a question and answer session at that time. If you have a question. Please first the one followed by the four on your telephone.

Anytime during the conference you need to reach an operator. Please press Star Zero. This conference is being recorded Thursday January 27, 2022, and now I'd like to turn the conference over to Steve Weber. Please go ahead.

Thank you good afternoon, good afternoon, everyone and thanks for joining <unk> first 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 Mclaughlin.

We issued a press release that describes financial results compared to the prior year on this call 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 $19 95.

Those statements involve many uncertainties, including the impact of COVID-19 on macro economic conditions, and the company's business operations and personnel 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.

This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release and regulation G schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure.

The earnings release and regulation G schedule are available on the investors relations website.

FICO dot com or on the SEC's website at SEC Gov.

A replay of this webcast will be available through January 27, 2023, and now I will turn the call over to will Lansing.

Thanks, Steve and thank you everyone for joining us for our first quarter earnings call.

In the Investor Relations section of our website, we've posted some slides that we will be referencing during our presentation today.

We delivered a strong start to our fiscal year with double digit growth in software.

And scores revenue and we continued to deliver strong earnings and free cash flow.

Page two shows financial highlights from our first quarter.

We reported revenues of $322 million in Q1, and $85 million of GAAP net income in the quarter on a non-GAAP basis Q1, net income was $102 million up 25% and earnings per share of $3 70.

Up 35% from the prior year quarter.

We continued to deliver strong free cash flow growth as well Q1 free cash flow was $124 million up 66% from the previous year for the trailing 12 months free cash flow was $465 million.

We're off to a good start in our fiscal 2022, and we continue to be very focused on our strategy.

In our software business, we continue to focus on the Decisioning platform that enables businesses to optimize consumer interactions across their enterprise.

When I started at FICO, we had a software business consisting of separate tools and endpoint applications, we evolved that business into our vision of an open and extensible platform uniting advanced analytics decision modeling and AI his.

Historically, our software business has been separated by function, allowing us to deepen our expertise in various disciplines optimize role based resourcing and drive process consistency. This month, we made an important change that better aligns our software organizational structure by integrating our entire software business under Stephanie Kober.

Stephanie has led our sales marketing and services organization, where her strong leadership is effectively embraced strategic change, resulting in early wins and a growing pipeline of enterprise platform deals prioritization of software IP increased deal level profitability and clear segmentation of direct and partner channels I am confident that by placing all elements.

Our software business under Stephanie's leadership, as we did years ago with the scores business under Jim women will see better alignment faster and more effective decision, making improved resource allocation against top priorities and stronger end to end operational rigor and discipline.

Last quarter, we made several important improvements to our external reporting to provide more visibility into the progress we're making today I'm happy to report that we continued to drive impressive growth in our software <unk> as.

As you can see on pages seven and eight of the presentation total <unk> was up 10% in Q1 and the platform of our grid rate of 67%. Our net retention rate was also impressive total in IRR was 109% and platform NR was 143%.

And we continue to increase the value of the new deals that we're signing.

As you can see on page nine our ACD bookings were up 37% over the same period last year.

We are excited about the depth of interest in our platform offering this quarter, we signed a deal with a major U S financial institution to use the platform the.

The multiyear deal is our biggest platform sale to date and it has enabled us the automation of much of the day to day customer Decisioning using cloud based FICO analytics.

In scores, we're continuing to innovate and to align our pricing with the value. They provide we had a very good quarter in our scores segment with strong growth in both <unk> and <unk>.

Scores were up 17% in the quarter versus the prior year as you can see on page six.

The <unk> side revenues were up 13% in the quarter versus the prior year.

We continue to see a slow down in mortgage origination volumes for the U S market, where revenues were down about 17% year over year, but thats more than offset by other areas in the U S where revenues are growing rapidly auto origination revenues were up 27% card and personal loan originations revenues were up 39% to <unk>.

2022 price increases we talked about last quarter take effect, primarily in January and are not yet in our numbers are.

Our BDC revenues continue to be strong up 27% versus the prior year quarter, we saw strong growth through both our own myfico dot com platform.

Also through our partner channels.

As always we continue to be focused on shareholder value last quarter. I said, we would continue to aggressively buyback our shares I am pleased to say, we repurchased more than one 2 million shares in our first quarter and more shares in January our buybacks reduced outstanding shares by 9% versus Q1 of last year and this morning, we announced a new 500.

Board repurchase authorization I'll have some final comments in a few minutes, but first let me turn the call over to Mike for more financial detail.

Thanks, Paul and good afternoon, everyone as well said, we are off to a strong start to our fiscal year driving growth throughout our business total revenues for the first quarter was $322 million, an increase of 3% over the prior year or 9% after adjusting for the divestiture of our collections and recovery product line last June and.

Our scores segment revenues were $169 million up 17% from the same period last year <unk> revenues were up 13% over the prior year as expected mortgage origination revenues continued to decline down 17% from the same quarter last year, but that was more than offset by growth in other areas.

Credit card and personal loan originations revenues were up 39% and auto originations revenues were up 27%.

<unk> revenues were up 27% from the same period last year, both Wi Fi co dot com and partner <unk> revenues grew significantly.

Software segment revenues in the first quarter were $153 million down 9% versus the same period last year adjusting for the divestiture of our collections and recovery business software revenues were up about 1%.

And we are seeing reduced professional services revenues as we focus our sales efforts on higher margin software.

On premise software license revenue recognized upfront or at a point in time as it is referred to in our 10-Q was just $7 million this quarter compared to about $13 million in our Q1 last year. Our professional services revenues were $27 million down from $41 million in the same period last year.

This quarter, 82% of total company revenues were derived from our Americas region, our EMEA region generated 12% and the remaining 6% was from Asia Pacific.

Turning to the new software metrics that we introduced last quarter our software in the first fiscal quarter of 2022 was $547 million, a 10% increase over the prior year quarter, our platform <unk> was $92 million, representing 17% of our total first quarter IRR and a grow.

Rate of 67% versus the prior year.

Our non platform <unk> was $455 million in the first quarter, which was 3% higher than the prior year.

Our dollar based net retention rate in the quarter was 109% overall as we've said our non platform customers to software usage tends to be mature and relatively stable, which is reflected in the non platform net retention rate of 102%. This quarter on the other hand, our platform customers continued to show very strong.

<unk> net expansion from land and expand follow on sales and increased usage, the DB and our dollar based net retention rate for platform was 143% in the first quarter.

Software sales were strong this quarter with annual contract value bookings of $16 6 million versus $12 1 million in the prior year, an increase of 37% as a reminder, ACD bookings include only the annual value of software sales excluding professional services.

Turning now to our expenses for the quarter total operating expenses were $207 million. This quarter, a decrease from $225 million in the first quarter last year before accounting for the gain on sale from our <unk> product and our JV in China the.

The year over year decrease is due to the divestiture of our collections recovery business as well as various cost savings implemented in 2021.

Our non-GAAP operating margin as shown on our Reg G schedule was 45% for the quarter, we delivered non-GAAP operating margin expansion of 900 basis points over the same period last year.

GAAP net income this quarter was $85 million down 2% from the prior year quarter due to a higher effective tax rate in 2022, as a result of lower excess tax benefit.

The previously mentioned gain on sale last year.

Our GAAP EPS was $3 13 up 5% from the prior year or.

Our non-GAAP net income was $102 million for the quarter up 25% from the same quarter last year and our non-GAAP EPS was $3 70 up.

Up 35% versus last year.

The effective tax rate for the quarter was 19%, including $6 million of reduced tax expense from excess tax benefits recognized upon the settlement or exercise of employee stock Awards, we expect our FY 2022 recurring tax rate to be approximately 25% to 26% that expected recurring tax rate is before any.

The excess tax benefit or other discrete items, the resulting net effective tax rate is estimated to be about 24%.

Free cash flow for the quarter was $124 million up 66% from last year and for the trailing 12 months free cash flow was $465 million.

At the end of the quarter, we had $197 million in cash and marketable investments.

Our total debt at quarter end was 165 billion with a weighted average interest rate of 374% in December we issued $550 million in senior notes as an add on to the $350 million of notes. We issued in 2019, we used the proceeds of the notes to reduce the draw on our revolving line of credit and to <unk>.

And share repurchases.

Turning to return of capital, we bought back $1 million 244000 shares in the first quarter at an average price of $397 per share we repurchased nearly 400000 additional shares in the month of January which exhausted our current board authorization as.

As will mentioned, we announced today, a new $500 million repurchase authorization and continue to view share repurchases as an attractive use of cash with that I'll turn it back over to will for his thoughts on FY 'twenty two.

Thanks, Mike.

I said in my opening remarks, I'm extremely pleased with our Q1 results and the momentum we take into 2022 or.

Our scores business continues to deliver strong growth and our diversification through different credit verticals means we're not dependent on specific types of lending.

On the software side, we remain laser focused on our platform strategy and continued to drive strong results. We've delivered nine straight quarters of platform IRR growth in excess of 40%. We're confident that we have the best in class capabilities and in emerging marketplace, that's poised for explosive growth.

We remain focused on execution, we're committed to delivering value to our shareholders and visibility to the progress we're making.

I will now turn it back to Steve for Q&A.

Thanks will this concludes our prepared remarks, and we're now ready to take any questions you may have.

Operator, please open the lines. Thank you if you'd like to rest of your question. Please question to one followed by the four on your telephone Youll hear three Tom prompt technology request. If your question has been answered and you would like to withdraw your Registrational. Please press. The one followed by the three and if you are using a speaker phone. Please lift your handset before entering your request once again thats one floor to register for a question.

Do have a question from Manav Patnaik with Barclays. Please go ahead your line's open.

Thank you good evening guys.

Maybe just.

You maintained your guidance, which is usually what you like to do but given the strong quarter.

Just curious if you could just walk us through maybe some of the assumptions for the rest of the year that you are looking at.

We're not changing our guidance, but I mean, we obviously hope that things improve over the year and we're in a position to do better but at this time our guidance is our guidance.

Okay, maybe if you could just.

In terms of the volume assumption and you gave us some of those origination numbers for the first time. So thank you for that but just curious how we should think about how you're thinking of how those trends.

In origination specifically or just generally.

I think.

First quarter is usually our hardest quarter this quarter, we exceeded our internal plan for first quarter. So that's good news for us would make gives us.

A lot of.

Optimism about the way the year is going to turn out, but I'm not ready to go out on a limb on volume forecasts.

Okay and then just lastly for me you mentioned price increases usually start Jan first.

It's not in your numbers, but just curious if you could give us any color on if you did.

But some of those out and in which areas.

As we discussed earlier, we have strategic pricing kind of mixed across the board. It's not in one particular spot we did some tier based pricing.

Some areas one touch other areas, where touched a little bit harder.

As you know, it's kind of a once a year event. So we did it and now we watch as it plays out theres not any revision to it going on.

Alright, thank you.

Our next question is from Kyle Peterson with Needham. Please go ahead. Your line is open.

Hey, good evening.

Thanks for taking the questions.

Wanted to touch on on the platform <unk> growth.

That law.

Really impressive this quarter was that a couple of large deals.

Just kind of happened kind of falling into place for you guys or was it more broad based just any color on the acceleration would be great.

It was a couple of large deals that fell into place, but they werent in accident they were planned and.

And I think it just underlines the fact that we've got the right kind of.

Capability, the right kind of platform capability for big enterprise customers.

It's being proven out in the marketplace.

We're seeing the uptake.

As you know.

It's a land and expand strategy, where they had the platform gets installed and then customer really focuses on all the incremental use cases that they can get with the platform in place and so we love landing the platform and large customers, which is kind of what's happened this quarter and which we anticipate will continue to occur over the year.

As we go forward.

Great that's helpful and then.

Wondered if you could just touch a little bit on the professional services line I know.

It was kind of expected to take a leg down sequentially.

On a quarter and are we kind of at the point now where things are leveling off a little bit and maybe the services kind of trends with kind of the non platform side of the software business or are there any more.

In the near term kind of run offs that we should keep in mind relative to the <unk>.

Run rate of 26 5 million.

Kyle It's Mike I think we are more or less at a run rate. If you want to put it that way a big part of the decline was the divestiture of our collection recovery business as we disclosed in the 10-Q about $16 $3 million of revenue that we had in the first quarter last year that we don't have this year about half of that was professional services.

The rest of it is a combination of.

Lower bookings there was a little bit of pushout of already contracted PFS, which will catch up just schedule issue in milestone issues that are typical with any business, but the sort of 2017 26 million a quarter of 2017 18, 19% of revenue.

It feels consistent with what were the rate at which we're selling new business going forward.

Alright, that's helpful. Thanks, guys.

Our next question is from Surinder <unk> from Jefferies. Please go ahead. Your line is open.

Good afternoon.

My first question is about the land and expand strategy can you provide a little bit more color in terms of how that work actually works out to clients. So when they buy the platform do they tend to port over existing functionality first and kind of use cases or do they kind of reverse that which is they'll keep existing.

Functionality.

From existing products and then maybe build new functionality on the platform just trying to understand the way clients are.

Bit of both it's a bit of both and it depends on the customer. So it's not atypical for a customer to put the platform in with some fairly specific idea about about the use.

But it's typically not as narrow as our legacy solutions typically.

The customer will think through half a dozen or a dozen uses for the platform at the get go and phase the introduction of those those different solutions and.

And then it's not uncommon for the customer to figure out within 12 months within six to 12 months that there is a whole bunch more things they can do with the platform and so they immediately start planning.

Next phase and so what we're seeing is that the idea of embedding the platform providing the tools.

It really is the right strategy for getting incremental business from these customers.

And for them, it's a great value proposition because they make the big initial investment and then incremental utility comes at very low cost havent done so much of the data plumbing and so on so.

Is that typical.

Sometimes it's to replace existing functionality I would say that's a lot of the time and the initial the land piece, but.

But the incremental functionality becomes very quickly.

That's helpful and then turning to the.

B to C business.

Obviously solid growth there in terms of the revenues.

Trying to break that down a little bit further any color on typically this quarter generally has some $6 million to $7 million of licensing or at least it has the past couple of years is that was that also true this quarter as well in the beta.

<unk> side of the business.

No typically those license or in the fourth quarter.

You can take to the bank in any given year, but that's what we've seen in the last couple of years and so Q1.

For the last few years has not had a one time event like that so, it's a pretty clean quarter or year over year comparison.

Got it okay.

<unk>.

And then just maybe a question on just color on.

The quarter as volumes auto revenues actually seemed to accelerate or showed stronger growth, but volumes were actually down quarter over quarter. So it was a little confounding.

Or just people looking harder for auto vehicles at this point, that's pushing up overall inquiry volume or how should we think about that.

So sir Andrew when you say volumes are down or are you referring to some external.

I'm, referring to sales volumes. So obviously your revenues were up in auto.

Pretty meaningfully I think they were up 19% last quarter and 27% this quarter, but when you get actual sales activity in terms of physical units of vehicles sold both the used market and the new market.

Those volumes are actually down pretty meaningfully.

Yes.

Inside the difference.

Price. So the data we track we think there's pretty good data out there about new car sales actual volumes for used car sales is pretty squishy as far as we're concerned so.

We really don't know, whether they were up or down, but more or less let's call. It a push in terms of volumes our volumes in terms of scores in auto were up a little bit remember our scores revenue doesn't require the car to sell it just requires somebody to look for credit right. So it's possible that we could have more volume increase than the actual number of coal cars soap.

But if you think about the total revenue increase.

That was not volume.

Little bit of volume contribution as I said, but.

It was the pricing actions that we've taken and how we feather down through the tiers of the users of that score.

Got it that's helpful and then one clarification on a comment that.

You made during the prepared remarks about the special price increases and then I think there was a follow up question about it.

Do you use the language that they are primarily take effect in January meaning that.

Is that something like do you think kind of roughly 75% will hit this quarter than maybe another 25 next quarter or is it just the vast vast majority kind of went into effect on January one I mean, the vast majority, but we can't control the timing because some some of these things faze in later in the year, but I would say the majority is upfront.

Okay. Thanks.

Thank you that's it for me.

75% is probably a little too strong but.

More than a majority more than half in less than 75%.

Yes.

Thank you. Our next question is from George Tong with Goldman Sachs. Please go ahead. Your line is open.

Hi, Thanks, Good afternoon, I wanted to dive deeper into the score of special pricing increase as you as you do your tier based pricing.

For this year, how does that increase compare with the prior special price increases.

Did you step it up step it down, especially in light of inflationary trends that you'll keep it consistent when did you step it up.

How has customer receptivity been so far.

To these pricing increases.

I would say consistent with prior years.

We didn't take extra action in light of inflation in inflationary expectations. So consistent would be the answer to that.

And customer reaction is as it's always been knowing those price increases, but they actually understand the value that we provide.

It makes sense, what we charge for it.

So.

Very similar conversations to those we've had in the past with our customers, which is they understand why we do it do they wished that we didn't raise prices of course they were stated.

Of course, they wish that but they understand us.

Got it that's helpful and if you had to.

Quantify on a blended basis, how much that step up.

Where would you place that number that's consistent with prior years.

Well, we don't we've never I can tell you what you guys plug, but we've never provided guidance on the exact amount.

On the order of $50 million I think in your models for years now.

Great.

And then with respect to the software business.

Can you discuss a little bit more what's changing.

With the appointment of Stephanie to the head of the group, how you plan to execute that.

Optimal outcome is of that restructuring in terms of leadership.

Yes, that's a great question and as you can imagine we're so focused on execution that.

We've spent a lot of time on this in recent months.

Stephanie has been with us for many years. She has an extremely effective leader everything that she's had she has just done a phenomenal job with with sales and marketing and then we gave professional services and she did a great job with that and now we've tucked product and technology underneath.

Underneath her as well and so she has the entire software business.

I think that it will as I said, it's going to lead to more streamlined decision making.

You could look at it as we have a little more of an SBU a little more of a business orientation around that business as opposed to being strictly functionally organized.

It used to be the P&L doesn't really roll up until May now it rolls up to her.

So there is there is those benefits.

But I think what we really have here is she is just tremendous leader and so we're excited about her having the entire software business.

Great. Thanks, very much very helpful.

Our next question is from Jeff Mueller with Baird. Please go ahead. Your line is open.

Yes. Thanks.

Platform software pipeline can you just.

Help us out there stay on how it's changing I guess.

So we did would be are you starting to see a lot more large.

Financials in developed markets in the pipeline I feel like for a while we're hearing about like large Latam based financial institutions this quarter.

Was the call out on the large U S based institution.

Yes look I wouldn't read too much into what you're hearing any one particular quarter, but I would say that we do have a very strong pipeline software pipeline and per platform with major financial institutions all around the globe not just Latam not just North America. This quarter was strong for north.

America obviously.

But that's where our direct sales force is putting its energy right now is into our enterprise customers and then getting the platform put in place.

And so.

That's what's happening we're happy with it.

But will.

It doesn't signal a shift is just this quarter it was north America and the <unk>.

Orders before Latam was very strong.

And I expect to see that shifting around as we go forward I mean, the pipeline is full of opportunities all over the world.

And what's the typical length of those contracts when you are winning clients.

On the platform capabilities.

Typically around three years.

As you know you put in the platform and we fully anticipate that the platform will be in for many many more years 10 years and beyond.

But typical contract would be three years.

Yeah, Okay, and then last for me.

What's the company's I don't know if steady state leverage target.

Would you go above that just.

Obviously, leverages come up a little but it's still fairly low.

The new <unk>.

Repurchase authorizations driving the question. Thank you.

Well look we're as in love with our own stock as we've ever been.

Can we continue to buy at the pace, we've been buying probably not.

We're quite comfortable with our leverage where it is today.

Kind of mid twos, we could go higher.

Our intent is to spend all of our free cash flow, we have been spending in excess of that but our intent is always to spend at least our free cash flow. So there is there is certainly more dry powder, but I don't think you could count on us buying at the same rate into the indefinite future.

Yes. Thank you.

If you'd like to rest or for a question. Please press one four on your telephone do have a question from Ashish <unk> with RBC capital markets. Please go ahead. Your line is open.

Thanks for taking my question just wanted to follow up on <unk> question on the guidance, but just focused on the EPS guidance.

The guidance doesn't include buyback than you've done significant buyback just.

To date I was wondering.

How should we think about increasing the guidance for those.

Is it fair for us to assume that you increased guidance on the second quarter, along with special pricing increases.

I think that if you wanted to adjust your numbers to reflect our aggressive stock buying recently you can do that that's not a crazy thing to do we're not providing different guidance.

Okay, that's helpful color and.

Just given.

Just wondering if you had any color on the FHFA timeline and any updated thoughts on that front any color will be helpful. Thanks.

Yes, so we've been following that process, we participated in the process.

Exactly as laid out by law by the regulators by the agencies and by the FHFA and so where we.

Awaiting.

<unk>.

The news ways such as it is when it comes and they are really we don't have anything else to share right. Now we continue to be confident that we have very good products and highly predictive and so on but I think we'll just have to wait and see what they do.

Thanks for the color.

And there are no further questions at this time.

Thank you everyone for joining today and we look forward to speaking with you again soon this concludes todays call.

That concludes the call. We thank you for your participation and ask you. Please disconnect your lines.

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Greetings. Thank you for standing by welcome to the Fair Isaac Corporation quarterly earnings call. During the presentation, all participants will be in a listen only mode and afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.

At any time during the conference you need to reach an operator. Please press Star Zero. This conference is being recorded Thursday January 27, 2022, and now I'd like to turn the conference over to Steve Weber. Please go ahead.

Thank you good afternoon, good afternoon, everyone and thanks for joining <unk> first 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 Mclaughlin.

Today, we issued a press release that describes financial results compared to the prior year on this call 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 $19 95.

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.

These are available from the SEC from the FICO website or from our Investor Relations team.

The earnings release and regulation G schedule are available on the investors relations website.

FICO dot com or on the SEC's website at SEC Gov.

A replay of this webcast will be available through January 27, 2023, and now I will turn the call over to will Lansing.

Thanks, Steve and thank you everyone for joining us for our first quarter earnings call.

In the Investor Relations section of our website, we've posted some slides that we will be referencing during our presentation today.

We delivered a strong start to our fiscal year with double digit growth in software.

In scores revenue and we continued to deliver strong earnings and free cash flow.

Page two shows financial highlights from our first quarter.

We reported revenues of $322 million in Q1, and $85 million of GAAP net income in the quarter.

On a non-GAAP basis Q1, net income was $102 million up 25% and earnings per share of $3 70.

Up 35% from the prior year quarter.

We continue to deliver strong free cash flow growth as well Q1 free cash flow was $124 million up 66% from the previous year for the trailing 12 months free cash flow was $465 million.

We're off to a good start in our fiscal 2022, and we continue to be very focused on our strategy.

In our software business, we continue to focus on the Decisioning platform that enables businesses to optimize consumer interactions across their enterprise.

Historically, our software business has been separated by function, allowing us to deepen our expertise in various disciplines optimized role based resourcing and drive process consistency. This month, we made an important change that better aligns our software organizational structure by integrating our entire software business under Stephanie cohort.

Confident that by placing all elements of our software business under Stephanie's leadership as we did years ago with the scores business under Jim Wayman, we'll see better alignment.

Oster and more effective decision making.

<unk> resource allocation against top priorities and stronger end to end operational rigor and discipline.

As you can see on pages seven and eight of the presentation totally IRR was up 10% in Q1 and the platform of our grid rate of 67%.

Our net retention rate was also impressive.

Total <unk> was 109% and platform NR was 143%.

And we continue to increase the value of the new deals that we're signing.

As you can see on page nine our ACD bookings were up 37% over the same period last year.

We are excited about the depth of interest in our platform offering this quarter, we signed a deal with a major U S financial institution to use the platform the.

The multiyear deal is our biggest platform sale to date and it enables the automation of much of the day to day customer Decisioning using cloud based FICO analytics.

In scores, we're continuing to innovate and to align our pricing with the value. They provide we had a very good quarter in our scores segment with strong growth in both <unk> and <unk>.

So of course were up 17% in the quarter versus the prior year as you can see on page six.

On the <unk> side revenues were up 13% in the quarter versus the prior year.

We continue to see a slow down in mortgage origination volumes for the U S market, where revenues were down about 17% year over year.

But thats more than offset by other areas in the U S where revenues are growing rapidly auto origination revenues were up 27% card and personal loan originations revenues were up 39% to fiscal 2022 price increases we talked about last quarter take effect, primarily in January and are not yet in our numbers are.

Our BDC revenues continued to be strong up 27% versus the prior year quarter, we saw strong growth through both our own myfico dot com platform.

Also through our partner channels.

As always we continue to be focused on shareholder value.

Last quarter I said, we would continue to aggressively buyback our shares I am pleased to say, we've repurchased more than one 2 million shares in our first quarter and more shares in January our buybacks reduced outstanding shares by 9% versus Q1 of last year and this morning, we announced a new $500 million board repurchase authorization I'll have some final comments in a few.

Minutes, but first let me turn the call over to Mike for more financial detail.

In our scores segment revenues were $169 million up 17% from the same period last year <unk> revenues were up 13% over the prior year as expected mortgage origination revenues continued to decline down 17% from the same quarter last year, but that was more than offset by growth in other areas.

Credit card and personal loan originations revenues were up 39% and auto originations revenues were up 27%.

<unk> revenues were up 27% from the same period last year, both my FICO Dot com and partner <unk> revenues grew significantly.

As we've discussed for several quarters, we continue to see reduced upfront license revenue recognition due to the change we made to our revenue recognition policy for on Prem software license subscriptions and we are seeing reduced professional services revenues as we focus our sales efforts on higher margin software.

This quarter, 82% of total company revenues were derived from our Americas region, our EMEA region generated 12% and the remaining 6% was from Asia Pacific.

Turning to the new software metrics that we introduced last quarter our software in the first fiscal quarter of 2022 was $547 million, a 10% increase over the prior year quarter. Our platform <unk> was $92 million, representing 17% of our total first quarter IRR and a growth.

Speaker 1: over the prior year quarter. Our platform ARR was 92 million, representing 17% of our total first quarter ARR and a growth rate of 67% versus the prior year. Our non-platform ARR was 455 million in the first quarter, which was 3% higher than the prior year.

Of 67% versus the prior year, our non platform <unk> was $455 million in the first quarter, which was 3% higher than the prior year.

Speaker 1: Our dollar-based net retention rate in the quarter was 109% overall. As we've said, our non-platform customer's software usage tends to be mature and relatively stable, which is reflected in the non-platform net retention rate of 102% this quarter.

Speaker 1: On the other hand, our platform customers continued to show very strong net expansion from land and expand follow-on sales and increased usage. The DB-NRR or dollar-based net retention rate for platform was 143% in the first quarter.

Net expansion from land and expand follow on sales and increased usage, the DB and our dollar based net retention rate for platform was 143% in the first quarter.

Speaker 1: Software sales were strong this quarter with annual contract value bookings of 16.6M versus 12.1M in the prior year and increase of 37%. As a reminder, ACB bookings include only the annual value of software sales, excluding professional services.

Speaker 1: Turning now to our expenses for the quarter, total operating expenses were $207 million this quarter, a decrease from $225 million in the first quarter last year, before accounting for the gain on sale from our ESS product and our JB in China.

Speaker 1: The year-over-year decrease is due to the divestiture of our collections recovery business, as well as various cost savings implemented in 2021.

The year over year decrease is due to the divestiture of our collections recovery business as well as various cost savings implemented in 2021.

Speaker 1: Our non-GAAP operating margin as shown on our RegG schedule was 45% for the quarter. We delivered non-GAAP operating margin expansion of 900 basis points over the same period last year.

Our non-GAAP operating margin as shown on our Reg G schedule was 45% for the quarter, we delivered non-GAAP operating margin expansion of 900 basis points over the same period last year.

Speaker 1: Gap net income this quarter was 85 million down 2% from the prior year quarter. Due to a higher effective tax rate in 2022 as a result of lower excess tax benefit and the previously mentioned gain on sale last year.

GAAP net income this quarter was $85 million down 2% from the prior year quarter due to a higher effective tax rate in 2022, as a result of lower excess tax benefit and the previously mentioned gain on sale last year.

Speaker 1: Our gap EPS was $3.13, up 5% from the prior year.

Our GAAP EPS was $3 13 up 5% from the prior year or.

Speaker 1: Our non-GAAP net income was 102 million for the quarter, up 25% from the same quarter last year. And our non-GAAP EPS was $3.70, up 35% versus last year.

Our non-GAAP net income was $102 million for the quarter up 25% from the same quarter last year, and our non-GAAP EPS was $3 70 up 35% versus last year.

Speaker 1: The effective tax rate for the quarter was 19%, including 6M of reduced tax expense from excess tax benefits recognized upon the settlement or exercise of employee stock awards. We expect our FY 2022 recurring tax rate to be approximately 25 to 26%. That expected recurring tax rate is before any excess tax benefit or other discrete items. The resulting net effective tax rate is estimated to be about 24%.

That expected recurring tax rate is before any excess tax benefit or other discrete items, the resulting net effective tax rate is estimated to be about 24%.

Speaker 1: Pre-cash flow for the quarter was $124 million, up 66% from last year. And for the trailing 12 months, pre-cash flow was $465 million.

Free cash flow for the quarter was $124 million up 66% from last year and for the trailing 12 months free cash flow was $465 million.

Speaker 1: At the end of the quarter, we had $197 million in cash and marketable investments.

At the end of the quarter, we had $197 million in cash and marketable investments.

Speaker 1: Our total debt at quarter end was $1.65 billion with a weighted average interest rate of 3.74%. In December , we issued $550 million in senior notes as an add-on to the $350 million of notes we issued in 2019. We used the proceeds of the notes to reduce the draw on our revolving line of credit and to fund share with folks.

And share repurchases.

Speaker 1: Turning to return of capital, we bought back 1,244,000 shares in the first quarter at an average price of $397 per share. We repurchased nearly 400,000 additional shares in the month of January , which exhausted our current board authorization. As Will mentioned, we announced today a new $500 million repurchase authorization and continue to view share repurchases as an attractive use of cash.

Speaker 1: With that, I'll turn it back over to Will for a spot on FY22. Thanks, Mike.

Speaker 1: As I said in my opening remarks, I'm extremely pleased with our Q1 results and the momentum we take into 2022. Our scores business continues to deliver strong growth and our diversification through different credit verticals means we're not dependent on specific types of lending.

Thanks, Mike.

I said in my opening remarks, I'm extremely pleased with our Q1 results and the momentum we take into 2022.

Our scores business continues to deliver strong growth and our diversification through different credit verticals means we're not dependent on specific types of lending.

Speaker 1: On the software side, we remain laser focused on our platform strategy and continue to drive strong results. We've delivered nine straight quarters of platform ARR growth in excess of 40%. We're confident that we have the best-in-class capabilities in an emerging marketplace that's placed for explosive growth.

Speaker 1: We remain focused on execution. We're committed to delivering value to our shareholders and visibility to the progress we're making.

We remain focused on execution, we're committed to delivering value to our shareholders and visibility to the progress we're making.

Speaker 2: We'll now turn it back to Steve for Q&A. Thanks, Will. This concludes our prepared remarks and we're now ready to take any questions you may have.

I will now turn it back to Steve for Q&A.

Thanks will this concludes our prepared remarks, and we're now ready to take any questions you may have.

Speaker 3: Operator, please open the lines. Thank you. If you'd like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. And if you are using a speakerphone, please lift your handset before entering your request. Once again, that's 1-4 to register for a question. We do have a question from Manav Patnaik with Barclays. Please go ahead. Your line is open.

Operator, please open the lines. Thank you if you'd like to rest of your question and please question of one followed by the four on your telephone you will hear were three Tom prompt technology request. If your question has been answered and you would like to withdraw your Registrational. Please press. The one followed by the three and if you are using a speaker phone. Please lift your handset before entering your request once again thats one floor to register for a question.

Do have a question from Manav Patnaik with Barclays. Please go ahead. Your line is open.

Speaker 4: Thank you. Good evening guys. Well, maybe just, you know, I know you maintained your guidance, which is usually what you like to do, but, you know, given the strong quarter, you know, just curious if you could just walk us through, you know, maybe some of the assumptions for the rest of the year that you're looking at.

Thank you good evening guys.

Maybe just I know.

You maintained your guidance.

Usually what you like to do but given the strong quarter.

Just curious if you could just walk us through maybe some of the assumptions for the rest of the year that you are looking at.

Speaker 2: We're not changing our guidance enough. I mean, we obviously hope that things improve over the year and we're in a position to do better, but at this time, our guidance is our guidance.

We're not changing our guidance, but we obviously hope that things improve over the year and we are in a position to do better but at this time our guidance is our guidance.

Speaker 4: OK, maybe if you could, in terms of the volume assumption in there, you gave us some of those origination numbers for the first time. So thank you for that. But just curious how we should think about how you're thinking about things.

Okay, maybe if you could.

In terms of the volume assumption and you gave us some of those origination numbers for the first time. So thank you for that but just curious how we should think about how youre thinking of how those trends.

Speaker 5: In origination specifically or just generally, you know, I think first quarter is usually our hardest quarter this quarter. We exceeded our internal plan for first quarter. So that's good news for us would make gives us a lot of optimism about the way the year is going to turn out. But, you know, I'm not ready to go out on a limb on volume forecast.

In origination specifically or just generally.

I think.

First quarter is usually our hardest quarter this quarter, we exceeded our internal plan for first quarter. So that's good news for us would make gives us.

A lot of.

Optimism about the way the year is going to turn out, but I'm not ready to go out on a limb on volume forecasts.

Speaker 4: Okay, and then just lastly for me, you know, you mentioned price increases usually start Jan 1st. It's not in your numbers, but just, you know, curious if you could give us any color on if you did put some of those out and in which areas.

Okay and then just lastly for me you mentioned price increases usually start Jan first.

It's not in your numbers, but just curious if you could give us any color on if you did.

But some of those out and in which areas.

Speaker 5: You know, as we discussed earlier, we have strategic pricing kind of mixed across the board. It's not in one particular spot. We did some tier-based pricing. Some areas weren't touched. Other areas were touched a little bit harder. And, you know, as you know, it's kind of a once-a-year event. So we did it, and now we watch as it plays out. There's not any revision to it going on.

As we discussed earlier, we have strategic pricing kind of mixed across the board. It's not in one particular spot we did some tier based pricing.

Some areas wanted to touch other areas, where touched a little bit harder.

As you know, it's kind of a once a year event. So we did it and now we watch as it plays out theres not any revision to it going on.

Alright, thank you.

Speaker 3: And our next question is from Kyle Peterson with Needham. Please go ahead, your line's open.

Our next question is from Kyle Peterson with Needham. Please go ahead. Your line is open.

Speaker 6: Hey, good evening guys, thanks for taking the questions. I just wanted to touch on the platform ARR growth, you know, that looked really impressive this quarter. Was that, you know, a couple large deals that just kind of happened, that kind of fall into place for you guys? Or was it more broad-based, just any color on the acceleration would be great.

Hey, Deane.

Thanks for taking the questions.

Wanted to touch on on the platform <unk> growth.

That law.

Really impressive this quarter was that a couple of large deals.

Just kind of happened that kind of falling into place for you guys or was it more broad based just any color on the acceleration it would be great.

Speaker 5: It was a couple of large deals that fell into place, but they weren't an accident. They were planned. And, um, and I think it just underlines the fact that we've got the right kind of, um, capability, the right kind of platform capability for big enterprise customers, um, it's, it's being proven out in the marketplace.

It was a couple of large deals that fell into place, but they werent in accident they were planned and.

And I think it just underlines the fact that we've got the right kind of.

Capability, the right kind of platform capability for big enterprise customers.

It's being proven out in the marketplace.

Speaker 5: We're seeing the uptake, as you know, for us, it's a land and expand strategy where the platform gets installed and then the customer really focuses on all the incremental use cases that they can get with the platform in place. And so we love landing the platform in large customers, which is kind of what's happened this quarter, and which we anticipate will continue to occur over the year as we go forward.

We're seeing the uptake.

As you know.

As we go forward.

Speaker 6: Great, that's helpful. And then I wondered if you could just touch a little bit on the professional services line. I know it's kind of expected to take a leg down sequentially this quarter. And are we kind of at the point now where things are leveling off a little bit and maybe the services kind of trends with?

Great that's helpful and then.

Wondered if you could just touch a little bit on the professional services line I know.

It was kind of expected to take a leg down sequentially.

Quarter end are we kind of at the point now where things are leveling off a little bit and maybe the services kind of trends with kind of a non platform side of the software business or are there any more.

Speaker 6: kind of the non-platform side of the software business, or are there any more near-term kind of runoffs that we should keep in mind relative to the 1Q run rate of like $26.5 million.

In the near term kind of run offs that we should keep in mind relative to the <unk>.

Run rate of $26 5 million.

Speaker 1: Silence Mike, I think we are more or less at a run rate if you want to put it that way.

Kyle It's Mike I think we are more or less at a run rate.

Speaker 1: A big part of the decline was the divestiture of a collection recovery business. As we disclosed in the 10Q, about $16.3 million of revenue that we had in the first quarter last year that we don't have this year, about half of that was professional services.

You want to put it that way a big part of the decline was the divestiture of our collection recovery business as we disclosed in the 10-Q about $16 $3 million of revenue that we had in the first quarter last year that we don't have this year about half of that was professional services.

Speaker 1: The rest of it is a combination of, you know, lower bookings. There was a little bit of push out of already contracted PS, which will catch up, just schedule issue and milestone issues that are typical with any PS business. But the sort of 26, 17, 26 million a quarter, 17, 18, 19% of revenue, it feels consistent with what we're, the rate at which we're selling new PS business going forward.

The rest of it is a combination of.

Lower bookings there was a little bit of pushout of already contracted PFS, which will catch up just schedule issue in milestone issues that are typical with any PS business, but the sort of $26 17 $26 million a quarter of 2017 18, 19% of revenue.

It feels consistent with what were the rate at which we're selling new business going forward.

Alright, that's helpful. Thanks, guys.

Speaker 3: Our next question is from Surrender Attendant from Jeffries. Please go ahead, your line's open.

Our next question is from Surinder <unk> from Jefferies. Please go ahead your line's open.

Speaker 7: Good afternoon. My first question is about the land and expand strategy. Can you provide a little bit more color in terms of how that actually works out at a client? So when they buy the platform, do they tend to port over existing functionality first and then kind of build the use cases, or do they kind of reverse that, which is they'll keep existing functionality for...

Good afternoon.

My first question is about the land and expand strategy can you provide a little bit more color in terms of how that work actually works out to clients. So when they buy the platform do they tend to port over existing functionality first and kind of build use cases or do they kind of reverse that which is they'll keep existing.

Functionality.

From existing products and then maybe build new functionality on the platform just trying to understand the way clients are.

Speaker 5: trying to understand the way clients are... You know, it's a bit of both. It's a bit of both and it depends on the customer. So, you know, it's not atypical for a customer to put the platform in with some fairly specific idea about about the use.

Bit of both it's a bit of both and it depends on the customer.

So it's not atypical for a customer to put the platform in with some fairly specific idea about about the use.

Speaker 5: But it's typically not as narrow as our legacy solutions. Typically, you know, the customer will think through a half a dozen or a dozen uses for the platform, you know, at the get-go and phase the introduction of those different solutions.

But it's typically not as narrow as our legacy solutions typically.

The customer will think through half a dozen or a dozen uses for the platform.

The get go.

And phase the introduction of those those different solutions and then it's not uncommon for the customer to figure out within 12 months within six months to 12 months that there is a whole bunch more things they can do with the platform and so they immediately start planning the next phase and so what we're seeing is.

Speaker 5: And then it's not uncommon for the customer to figure out within 12 months, within 6 to 12 months, that there's a whole bunch more things they can do with the platform. And so they immediately start planning the next phase. And so what we're seeing is that the idea of, you know, embedding the platform, providing the tools.

The idea of embedding the platform providing the tools.

Speaker 5: really is the right strategy for getting incremental business from these customers. For them, it's a great value proposition because they make the big initial investment, and then incremental utility comes at very low cost, having done so much of the data plumbing and so on. That's typical. Sometimes it's to replace existing functionality. I would say that's a lot of the time that in the initial, the land piece. But the incremental functionality comes.

He is the right strategy for forgetting incremental business from these customers.

For them, it's a great value proposition because they make the big initial investment and then incremental utility comes at very low cost havent done so much of the data plumbing and so on so.

Is it best tip.

Typical.

Sometimes it's to replace existing functionality I would say that's a lot of the time and the initial the land piece.

But the incremental functionality comes very quickly.

Speaker 1: That's helpful. And then turning to the...

That's helpful and then turning to the.

Speaker 7: B2C business, obviously solid growth there in terms of the revenues. Trying to break that down a little bit further. Any color on them, typically this quarter generally has...

B to C business.

Obviously solid growth there in terms of the revenues.

Speaker 7: $67 million of licensing or at least it has the past couple of years is that was that also true this quarter as well in the beta

B side of the business.

Speaker 1: No, typically those licenses are in the fourth quarter.

No typically those license or in the fourth quarter.

Speaker 2: can't take that to the bank in any given year, but that's what we've seen in the last couple of years. And so Q1 for the last few years has not had a one-time event like that. So it's a pretty clean quarter over, or year over year comparison.

You can take to the bank in any given year, but that's what we've seen in the last couple of years and so Q1.

For the last few years has not had a one time event like that so it's a pretty clean quarter over year over year comparison.

Got it okay.

Speaker 7: And then just maybe a question on just color on.

And then just maybe a question on just color on.

Speaker 7: quarter's volumes, auto revenues actually seemed to accelerate or it showed stronger growth, but volumes were actually down quarter over quarter, so it was a little confounding. Are just people looking harder for auto vehicles at this point that's pushing up overall inquiry volume, or how should we think about that?

The quarter's volumes auto revenues actually seemed to accelerate or showed stronger growth, but volumes were actually down quarter over quarter. So it was a little confounding.

Or just people looking harder for auto vehicles at this point, that's pushing up overall inquiry volume or how should we think about that.

Speaker 7: So, Surinder, when you say volumes are down, are you referring to some external third-party source? I'm referring to sales volumes. So, obviously, your revenues were up in auto, you know, pretty meaningfully. I think they were up 19% last quarter and then 27% this quarter.

So sir Andrew when you say volumes are down or are you referring to some external.

I'm, referring to sales volumes. So obviously your revenues work yes.

Auto.

Pretty meaningfully I think they were up 19% last quarter and 27% this quarter, but when you net actual sales activity in terms of physical units of vehicles sold both the used market and the new market.

Speaker 7: But when you look at actual sales activity in terms of physical units of vehicles sold, both the used market and the new market, those volumes are actually down pretty meaningfully.

Those volumes are actually down pretty meaningfully.

Yes, So let me kind of reconcile the difference.

Speaker 7: of its price. So the data we track, we think there's pretty good data out there about new car sales. Actual volumes for used car sales is pretty squishy as far as we're concerned.

So the data we track we think there's pretty good data out there about new car sales actual volumes for used car sales is pretty squishy as far as we're concerned so.

Speaker 7: We really don't know whether they were up or down, but more or less, let's call it a push in terms of volumes.

Really don't know, whether they were up or down, but more or less let's call. It a push in terms of volumes our volumes in terms of scores in auto were up a little bit remember our scores revenue doesn't require the car to sell it just requires somebody to look for credit right. So it's possible that we could have more volume increase than the actual number of calls.

Speaker 7: Our volumes in terms of scores in auto were up a little bit. Remember, our scores revenue doesn't require the car to sell. It just requires somebody to look for credit, right? So it's possible that we could have more volume increase than the actual number of cars sold. But if you think about the total revenue increase, that was not volume. Little bit of volume contribution, as I said, but it was the pricing actions that we've taken and how we feathered that through the tiers of the users of that score.

Car sold but if you think about the total revenue increase.

That was not volume.

Little bit of volume contribution as I said, but.

It was the pricing actions that we've taken and how we feather down through the tiers of the users of that score.

Speaker 7: Got it, that's helpful. And then one clarification on a comment that you made during the prepared remarks about the special price increases, and then I think there was a follow-up question about it. I think you used the language that they primarily take effect in January , meaning that.

Got it that's helpful and then one clarification on a comment that.

You made during the prepared remarks about the special price increases and then I think there was a follow up question about it.

Do you use the language that they are primarily take effect in January meaning that.

Speaker 5: Is that something like you think kind of roughly 75% will hit this quarter, then maybe another 25 next quarter? Or is it just the vast, vast majority kind of went into effect on January 1st? I mean, the vast majority, but we can't control the timing because some of these things phase in later in the year. But I would say, yeah, the majority is up front. OK.

Okay.

Thank you that's it for me.

Speaker 5: 75% is probably a little too strong, but more, you know, more than a majority, more than half and less than 75%.

75% is probably a little too strong but.

More than a majority more than half in less than 75%.

Speaker 3: Our next question is from George Tong with Goldman Sachs. Please go ahead, your line is open.

Thank you. Our next question is from George Tong with Goldman Sachs. Please go ahead. Your line is open.

Speaker 3: Hi, thanks, good afternoon. Wanted to dive deeper into the score special pricing increase as you did your tier-based price.

Hi, Thanks, Good afternoon, I wanted to dive deeper into the score of special pricing increase.

As you do your tier based pricing for.

Speaker 6: for this year, how does that increase compare with the prior special pricing increases? Was there, is it consistent? Did you step it up, step it down, especially in light of inflationary trends? Did you keep it consistent or did you step it up? And then how has customer receptivity been so far to these pricing increases? I would say.

For this year.

Does that increase compare with the prior special pricing increases.

Did you step it up step it down, especially in light of inflationary trends that you keep it consistent where did you step it up and then how has customer receptivity been so far.

To these pricing increases.

I would say consistent with prior years.

Speaker 5: We didn't take extra action in light of inflation and inflationary expectations, so consistent would be the answer to that.

We didn't take extra action in light of inflation in inflationary expectations. So consistent would be the answer to that.

Speaker 5: And customer reaction is as it's always been no one loves price increases, but they actually understand that the value that we provide

And customer reaction is as it's always been knowing those price increases, but they actually understand the value that we provide.

Speaker 5: you know, it makes sense what we charge for it. And so, you know, very similar conversations to those we've had in the past with our customers, which is they understand why we do it, you know, do they wish that we didn't raise prices? Of course, they wish they didn't, you know, of course, they wish that, but they understand us.

It makes sense, what we charge for it.

So.

Very similar conversations to those we've had in the past with our customers, which is they understand why we do it.

Do they wished that we didn't raise prices of course, they wish they didn't.

Of course, they wish that but they understand us.

Speaker 8: Got it. That's helpful. And if you have to quantify on a blended basis, how much that step up is, where would you place that number that's consistent with prior years?

Got it that's helpful and if you had to.

To quantify on a blended basis, how much that step up.

Where would you place that number.

With prior years.

Speaker 5: We don't, you know, we've never, I can tell you what you guys plug, but we've never provided guidance on the exact amount, you know, it's been on the order of $50 million, I think, in your models for years now.

Well, we don't.

Never I can tell you what you guys plug, but we've never provided guidance on the exact amount.

It's been on the order of $50 million I think in your models for years now.

Speaker 8: Great. And then with respect to the software business, can you discuss a little bit more what's changing with the appointment of Stephanie to the head of the group, how you plan to execute that, and what the optimal outcome is of that restructuring in terms of leadership?

Great and then with respect to the software business.

Can you discuss a little bit more.

What's changing.

With the appointment of Stephanie to the head of the group, how you plan to execute that and what.

Optimal outcome is of that restructuring in terms of leadership.

Speaker 5: Yeah, that's a great question. And as you can imagine, we're so focused on execution that it, you know, it's, we've spent a lot of time on this in recent months. Stephanie's been with us for many years, she's an extremely effective leader, everything that she's had, she has just done a phenomenal job with, you know, with sales and marketing, and then we gave professional services, and she did a great job with that. And now we've talked product and technology underneath, underneath her as well. And so she has the entire software business.

Yes, that's a great question and as you can imagine we're so focused on execution.

We've spent a lot of time on this in recent months.

Speaker 5: I think that it will, as I said, it's going to lead to more streamlined decision-making. You know, you could look at it as we have a little more of an FPU, a little more of a business orientation around that business as opposed to being strictly functionally organized.

I think that it will as I said, it's going to lead to more streamlined decision making.

You could look at it is we have a little more of an SBU a little more about business orientation around that business as opposed to being strictly functionally organized.

Speaker 5: It used to be that P&L didn't really roll up until me, now it rolls up to her, so that there's those benefits. But I think what we really have here is she's a tremendous leader, and so we're excited about her having the entire software business.

It used to be the P&L didn't really roll up until me now it rolls up to her.

There is there is those benefits but.

But I think what we really have here is she is a tremendous leader and so we're excited about her having the entire software business.

Great. Thanks, very much very helpful.

Speaker 3: Our next question is from Jeff Mueller with Baird. Please go ahead, your line is open.

Our next question is from Jeff Mueller with Baird. Please go ahead. Your line is open.

Yes. Thanks.

Speaker 9: On platform software pipeline, can you just help us understand how it's changing and I guess the lead in would be are you starting to see a lot more large

Platform software pipeline can you just help us out there.

Sam how it's changing and I guess.

So we did would be are you starting to see a lot more large.

Speaker 9: financials in developed markets in the pipeline, I feel like for a while we were hearing about like large LATAM-based financial institutions, and then this quarter there was a call-out on a large U.S.-based institution.

Financials in developed markets in the pipeline I feel like for a while we're hearing about like large Latam based financial institutions this quarter.

The call out on the large U S based institution.

Speaker 5: Uh, yeah, I look, I wouldn't read too much into what you hear in any one particular quarter, but I would say that we do have a very strong pipeline software pipeline for platform with major financial institutions all around the globe. Uh, not just Latin, not just North America. Uh, this quarter was strong for North America, obviously. Um, but that that's where our direct sales force is putting its energy right now is into our enterprise customers and into getting the platform put in place.

Yes look I wouldn't read too much into what you're hearing any one particular quarter, but I would say that we do have a very strong pipeline and software pipeline per platform with major financial institutions all around the globe not just Latam not just North America. This quarter was strong for north.

America obviously.

But that's where our direct sales force is putting its energy right now is into our enterprise customers and into getting the platform put in place.

Speaker 5: And so it's, I mean, that's what's happening. We're happy with it, but it doesn't signal a shift. It's just, you know, this quarter it was North America and, you know, the quarters before last time was very strong. And, you know, I expect to see that shifting around as we go forward. I mean, the pipeline is full of opportunities all over the world.

And so I mean, that's.

That's what's happening we're happy with it.

But will.

It doesn't signal a shift is just this quarter. It was north America in the quarters before Latam was very strong and I expect to see that shifting around as we go forward I mean, the pipeline is full of opportunities all over the world.

Speaker 9: And what's the typical length of those contracts when you're winning a client on the platform capabilities?

And what's the typical length of those contracts when you are winning clients.

The platform capabilities.

Speaker 5: Typically around three years, but as you know, you put in the platform and we fully anticipate that the platform will be in for many, many more years, 10 years and beyond, but a typical contract would be three years.

Typically around three years, but as you know you put in the platform and we fully anticipate that the platform will be in for many many more years 10 years and beyond.

But typical contract would be three years.

Speaker 9: And then last for me, what's the company's steady state leverage target? How much would you go above that? Obviously, leverage has come up a little, but it's still fairly low with the new repurchase authorizations driving the question.

Okay, and then last for me.

What is the.

Companies I don't know if steady state leverage target.

How much would you go above that just.

Obviously, leverages come up a little but it's still fairly low.

The new <unk>.

Repurchase authorizations driving the question. Thank you.

Speaker 5: Well, look, we're as in love with our own stock as we've ever been. Can we continue to buy at the pace we've been buying? Probably not. We're quite comfortable with our leverage where it is today. You know, kind of mid twos. We we could go higher. You know, our intent is to spend all of our free cash flow. We have been spending in excess of that. But our intent is always to spend at least our free cash flow. So there's there's certainly more dry powder. But I don't think you could count on us buying at the same rate into the indefinite future.

Well look we're as in love with our own stock as we've ever been.

Can we continue to buy at the pace, we've been buying probably not.

We're quite comfortable with our leverage where it is today.

Kind of mid twos, we could go higher.

Yes. Thank you.

Speaker 3: If you'd like to register for a question, please press 1-4 on your telephone.

If you'd like to rest or for a question. Please press one four on your telephone do have a question from Ashish Sabedra with RBC capital markets. Please go ahead. Your line is open.

Speaker 4: Thanks for taking my question. I just wanted to follow up on Manav's question on the guidance, which is focused on the EPS guidance. The prior guidance didn't include buyback, and you've done significant buyback just year to date. I was wondering, how should we think about increasing the guidance for those? Is it fair for us to assume that you'll increase guidance on the second quarter along with special pricing increases?

Thanks for taking my question just wanted to follow up on <unk> question on the guidance, but just focused on the EPS guidance.

Guidance Didnt include buyback than you've done significant buyback just.

To date I was wondering.

How should we think about increasing the guidance for those.

Is it safe to assume that you increased guidance on the second quarter, along with special pricing increases.

Speaker 5: I think that if you want to adjust your numbers to reflect our aggressive stock buying recently, you can do that. That's not a crazy thing to do, but we're not providing different guidance.

I think that if you wanted to adjust your numbers to reflect our aggressive stock buying recently you can do that that's not a crazy thing to do but we're not providing different guidance.

Speaker 4: That's a helpful color. And just given, just wondering if you had any color on the FHFA timeline and any updated thoughts on that front. Any color will be helpful.

Okay, that's helpful color and.

Just given.

Just wondering if you had any color on the FHFA timeline and any updated thoughts on that front any color will be helpful. Thanks.

Speaker 5: Yeah, so we've been following that process. We've participated in the process, you know, exactly as laid out by law and by the regulators and by the agencies and by the FHFA. And so we're, you know, we are awaiting the, you know, the news such as it is when it comes. And they're really, we don't have anything else to share right now. You know, we continue to be confident that we have very good product and highly predictive and so on. But I think we'll just have to wait and see what they do. Thanks for the call.

Yes, so we've been following that process, we participated in the process.

Exactly as laid out by law by the regulators by the agencies and by the FHFA and so where we are awaiting.

<unk>.

Thanks for the color.

And there are no further questions at this time.

Speaker 2: Thank you. Thank you everyone for joining today and we look forward to speaking with you again soon. This concludes today's call.

Thank you. Thank you everyone for joining today and we look forward to speaking with you again soon this concludes todays call.

Speaker 3: That concludes the call. We thank you for your participation and I say please disconnect your line.

That concludes the call. Thank you for your participation and ask you. Please disconnect your lines.

Q1 2022 Fair Isaac Corp Earnings Call

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