Q3 2024 Fair Isaac Corp Earnings Call

July 31, 2024

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Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2024 FICO Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day, ladies and gentlemen, and thank you for standing by welcome to the third quarter 2024 cycle earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need a press star one on your <unk>.

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2024 FICO Earnings Conference Call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Speaker Change: Telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Singleton. Please go ahead.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dave Singleton. Please go ahead.

Dave Singleton: Good afternoon, and thank you for attending FICO's third-quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Steve Weber. Today, we issued a press release that describes financial results compared to the prior year, and on this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the business. Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially.

Dave Singleton: Good afternoon, and thank you for attending FICO's third quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Steve Weber. Today, we issued a press release that describes financial results compared to the prior year, and on this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the

Basically Hudson: Good afternoon, and thank you for attending <unk> third quarter earnings call I'm, basically Hudson, Vice President of Investor Relations and I'm joined today by our CEO will Lansing and our CFO Steve Weber.

Dave Singleton: Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICA 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 measures. The earnings release and Regulation G Schedules are available on the Investor Relations page of the company's website at FICO.com or on the SEC's website at SEC.gov.

Speaker Change: Today, we issued a press release that describes financial results compared to the prior year and on this call management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of that business.

Dave Singleton: Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICA website, or from our investor relations team.

Speaker Change: Certain statements made in this presentation are forward looking under the private Securities Litigation Reform Act of 1095, those statements involve many risks and uncertainties that could cause actual results to differ materially.

Speaker Change: Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward looking statements portions of such filings.

Speaker Change: Copies are available from the SEC from the FICO website or from our Investor Relations team.

Dave Singleton: 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 reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measures. The earnings release and Regulation G schedules are available on the Investor Relations page of the company's website at FICO.com or on the SEC's website at SEC.gov.

Speaker Change: 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.

Speaker Change: The earnings release and regulation G schedules are available on the Investor Relations page of the company's web site at FICO Dot com or on the Sec's website at SEC Gov.

Dave Singleton: And a replay of this webcast will be available through July 31, 2025. Now, I will turn the call over to our CEO, Will Lansing. Thanks, Dave, and thank you, everyone, for joining us for our third quarter earnings call. In the investor relations section of our website, we've posted some financial highlight slides that we'll be referencing during our presentation.

Speaker Change: And a replay of this webcast will be available through July 31, 2025.

Dave Singleton: And a replay of this webcast will be available through July 31, 2025. Now, I will turn the call over to our CEO, Will Lansing. Thanks, Dave.

Speaker Change: Now I will turn the call over to our CEO will Lansing.

William J. Lansing: Today, I'll talk about this quarter's results and our increased guidance for the full fiscal year. We continue to deliver strong quarterly results, including impressive growth in our ACV bookings and free cash flow. As shown on page 2 of the third quarter financial highlights, we reported Q3 revenues of $448 million, up 12% over the last year. We delivered $126 million of gap net income in the quarter, down 2%, and gap earnings of $5.05 per share, down 1% from the prior year.

William J. Lansing: And thank you, everyone, for joining us for our third quarter earnings call. In the investor relations section of our website, we've posted some financial highlight slides that we'll be referencing during our presentation. Today, I'll talk about this quarter's results and our increased guidance for the full fiscal year. We continue to deliver strong quarterly results, including impressive growth in our ACV bookings and free cash flow. As shown on page 2 of the third quarter financial highlights, we reported Q3 revenues of $448 million, up 12% over the last year. We delivered $126 million of gap net income in the quarter, down 2% and gap earnings of $5.05 per share, down 1% from the prior year.

William J. Lansing: Dave and thank you everyone for joining us for our third quarter earnings call.

Speaker Change: In the Investor Relations section of our website, we've posted some financial highlight slides that we will be referencing during our presentation. Today I will talk about this quarter's results and our increased guidance for the full fiscal year.

William J. Lansing: On a non-GAAP basis, Q3 net income was $156 million, with earnings of $6.25 per share, up 9% and 10%, respectively. We had a difficult comp in year-over-year net income as Q3 of 2023 included an $8.5 million one-time reimbursement of third-party data implementation costs, as well as a $9.5 million reduction to income tax expense associated with the valuation of our R&D credit. We delivered record-free cash flow of $206 million in our third quarter and $551 million over the last four quarters. We continue to return capital to our shareholders through buybacks. In Q3, we repurchased 196,000 shares at an average price of $1,293 per share.

Speaker Change: We continue to deliver strong quarterly results, including impressive growth in our ACD bookings and free cash flow.

Speaker Change: As shown on page two of the third quarter financial highlights, we reported Q3 revenues of $448 million up 12% over the last year.

Speaker Change: We delivered a $126 million of GAAP net income in the quarter down, 2% and GAAP earnings of $5 <unk> per share down 1% from the prior year.

Speaker Change: On a non-GAAP basis Q3, net income was $156 million.

With earnings of $6 25 per share up 9% and 10%, respectively. We had a difficult comp in year over year net income as Q3 of 2023 included an $8 5 million onetime reimbursement of third party data implementation costs as well as a $9 $5 million reduction to income tax.

Speaker Change: Expense associated with the valuation of our R&D credits.

Speaker Change: We delivered record free cash flow of $206 million in our third quarter and $551 million over the last four quarters. We continue to return capital to our shareholders through buybacks in Q3, we repurchased 196000 shares at an average price of $1293 per share and we announced a new board.

William J. Lansing: We announced a new board authorization for $1 billion of share repurchase. In our score segment on page six of the presentation, our third quarter revenues were $241 million, up 20% versus the prior year. Breaking that down, in B2B, current quarter revenues were up 27% versus the prior year. In B2C, current quarter revenues were down 2% versus the prior year.

Speaker Change: <unk> for $1 billion of share repurchase.

Speaker Change: In our scores segment on page six of the presentation of our third quarter revenues were 241 million up 20% versus the prior year.

Speaker Change: Okay.

Speaker Change: Breaking that down in <unk> current quarter revenues were up 27% versus the prior year.

Speaker Change: <unk> see the current quarter revenues were down 2% versus the prior year.

William J. Lansing: Third quarter mortgage originations revenues were up 80% versus the prior year. Mortgage origination revenue accounted for 49% of B2B revenue and 39% of total scores revenue. Auto originations revenues were down 3%, while credit card, personal loan, and other originations revenues were down 7% versus the prior year.

Speaker Change: Third quarter mortgage originations revenues were up 80% versus the prior year.

Speaker Change: Mortgage origination revenue accounted for 49% of <unk> revenue and 39% of total scores revenue.

Speaker Change: Auto originations revenues were down 3%, while credit card personal loan and other originations revenues were down 7% versus the prior year.

William J. Lansing: We continue to drive strong adoption for FICO Score 10-T for non-GSE mortgages. Based on 2023 firm reported data, clients with over $126 billion in annualized mortgage originations and about $380 billion in eligible mortgage portfolio servicing have signed up for the FICO Score 10-T. Firms are using the FICO Score 10-T to make credit decisions, deliver to investors, and for securitization. FICO 10-T for conforming mortgages will be rolled out based on the timeline of the FHFA's implementation of the enterprise credit score requirement.

William J. Lansing: We continue to drive strong adoption for FICO score 10-T for non-GSE mortgages. Based on 2023 firm reported data, clients with over $126 billion in annualized mortgage originations and about $380 billion in eligible mortgage portfolio servicing have signed up for the FICO score 10-T. Firms are using FICO score 10-T to make credit decisions, deliver to investors, and for securitization. FICO 10-T for conforming mortgages will be rolled out based on the timeline of the FHFA's implementation of the enterprise credit score requirement.

Speaker Change: We continue to drive strong adoption for FICO score 10 T per non GSE mortgages based on 2023 firm reported data clients with over 126 billion in annualized mortgage originations and about 380 billion as an eligible mortgage portfolio of servicing has signed up for the FICO score 10 T <unk>.

Speaker Change: Firms are using FICO 10, T to make credit decisions deliver to investors and for securitization.

Speaker Change: FICO 10 T for conforming mortgages will be rolled out based on the timeline of the Fhfa's implementation of enterprise credit score requirements.

Speaker Change: And our software segment, we delivered $206 million in Q3 revenue up 5% from last year, driven mainly by growth in SaaS software, partially offset by a decline in professional services.

William J. Lansing: In our software segment, we delivered $206 million in Q3 revenue, up 5% from last year, driven mainly by growth in SaaS software, partially offset by a decline in professional services. We continue to drive strong growth in ARR and NRR through our land and expand strategy, with expansion driven by increased customer usage. As shown on page seven, total ARR was up 10%, with platform ARR growing 31% and non-platform ARR growing 3%. Total NRR for the quarter shown on page eight was 108%, with platform NRR at 124% and non-platform NRR at 101%. Our total ACV bookings for the quarter were an impressive $27.5 million.

William J. Lansing: In our software segment, we delivered 206 million in Q3 revenue, up 5% from last year, driven mainly by growth in SaaS software, partially offset by a decline in professional services. We continue to drive strong growth in ARR and NRR through our land and expand strategy, with expansion driven by increased customer usage. As shown on page seven, total ARR was up 10%, with platform ARR growing 31% and non-platform ARR growing 3%. Total NRR for the quarter shown on page eight was 108%, with platform NRR at 124% and non-platform NRR at 101%. Our total ACV bookings for the quarter were an impressive $27.5 million.

Speaker Change: We continue to drive strong growth in <unk> and NR through our land and expand strategy with expand driven by increased customer usage as shown on page seven total <unk> was up 10% with platform AAR growing 31% and non platform IRR growing 3%.

Speaker Change: Total <unk> for the quarter shown on page eight was 108% with platform, an IRR at 124% and non platform NR at 101%.

Speaker Change: Our total ACB bookings for the quarter were an impressive 27 5 million.

William J. Lansing: We continue to drive more FICO platform SAS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World Event has been a catalyst for driving pipeline growth, especially for the FICO platform. I'm very proud of the strength of our software business, both the industry-leading technology and our remarkable team. This quarter, we secured another award for our FICO platform, the Business Intelligence Platform of the Year from Data Breakthrough. In July, Nikhil Bell was promoted to EVP for software, leading all technology and go-to-market functions.

William J. Lansing: We continue to drive more FICO platform SAS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World Event has been a catalyst for driving pipeline growth, especially for the FICO platform. I'm very proud of the strength of our software business, both the industry-leading technology and our remarkable team. This quarter, we secured another award for our FICO platform, the Business Intelligence Platform of the Year from Data Breakthrough. In July, Nikhil Bell was promoted to EVP for Software, leading all technology and go-to-market functions.

Speaker Change: We continue to drive more FICO platform, SaaS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World event has been a catalyst for driving pipeline growth, especially for the FICO platform.

Speaker Change: I'm very proud of the strength of our software business, both the industry, leading technology as well as our remarkable team.

Speaker Change: This quarter, we secured another award for our FICO platform the business intelligence platform in the year from data breakthrough.

Speaker Change: In July <unk> Bell was promoted to EVP for software, leading all technology and go to market functions. The killer has been instrumental in strengthening our brand value reputation with customers and regulators strategic competitive positioning for FICO scores and FICO platform and market leading business growth.

William J. Lansing: Nikhil has been instrumental in strengthening our brand value, reputation with customers and regulators, strategic competitive positioning for FICO scores and the FICO platform, and market-leading business growth. We continue to excel in our sports business as well. Our team is focused on innovation to provide new ways to add value for our customers. The FICO score is a tool that market participants rely on to make many crucial decisions, including pre-qualification, underwriting, pricing, insuring, securitizing, rating, selling, assessing capital requirements, assessing prepayment risk, and determining collection strategies. The FICO score has long been freely chosen because it's trusted as the most predictive and reliable independent credit score, enabling lenders to fairly expand credit access to more consumers.

Speaker Change: We continue to excel in our scores business as well our team is focused on innovation to provide new ways to add value for our customers.

Speaker Change: The FICO score is a tool that market participants rely on to make many crucial decisions, including pre qual underwriting pricing.

Speaker Change: During securitizing rating selling assessing capital requirements assessing prepayment risk and determining collection strategies.

Speaker Change: The FICO score has long been freely chosen because its trusted is the most predictive and reliable independent credit score, enabling lenders to fairly extend credit access to more consumers.

William J. Lansing: The FICO score was widely adopted because it democratized and expanded access to credit while simultaneously underpinning the safety and soundness of the market. It's worth pointing out that over half of the mortgage market is nonconforming and also overwhelmingly uses FICO scores. The FICO score is provided and will continue to provide tremendous value to the credit ecosystem. As part of our ongoing commitment to industry-leading credit decisions, we've made significant commitments to financial knowledge and financial inclusion. We've once again partnered with Chelsea Football Club, both men's and women's teams, and the U.S. Soccer Foundation for the Fields of Financial Empowerment Summer Tour.

William J. Lansing: The FICO score was widely adopted because it democratized and expanded access to credit while simultaneously underpinning the safety and soundness of the market. It's worth pointing out that over half of the mortgage market is non-conforming and also overwhelmingly uses FICO scores. The FICO score is provided and will continue to provide tremendous value to the credit ecosystem. As part of our ongoing commitment to industry-leading credit decisioning, we've made significant commitments to financial knowledge and financial inclusion. We've once again partnered with Chelsea Football Club, both men's and women's teams, and the U.S. Soccer Foundation for the Fields of Financial Empowerment Summer Tour.

Speaker Change: FICO score was widely adopted because it democratized and expanded access to credit while simultaneously underpinning the safety and soundness of the market.

Speaker Change: It's worth pointing out that over half of mortgage market is nonconforming and also overwhelmingly users FICO scores.

Speaker Change: The FICO score has provided and will continue to provide tremendous value to the credit ecosystem.

Speaker Change: As part of our ongoing commitment to industry, leading credit Decisioning, we've made significant commitments to financial knowledge and financial inclusion.

Speaker Change: Once again partnered with Chelsea Football club, both men's and women's teams and U S Soccer Foundation for the fields of financial empowerment Summer tour.

William J. Lansing: The goal is to build excitement for and access to financial education and resources to help more people, including the next generation of fans, make more informed credit decisions. As part of the campaign, FICO hosts free Score a Better Future Fundamentals, financial education workshops for students from traditionally underserved communities. Students improve their financial literacy and have the opportunity to attend a Chelsea football game.

William J. Lansing: The goal is to build excitement for and access to financial education and resources to help more people, including the next generation of fans, make more informed credit decisions. As part of the campaign, FICO hosts free Score a Better Future Fundamentals financial education workshops for students from traditionally underserved communities; students improve their financial literacy and have the opportunity to attend a Chelsea football game. I'll talk about our outlook and balance of the year, including our increased guidance, after Steve provides further financial details. Thanks, Will, and good afternoon, everyone.

Speaker Change: The goal is to build excitement for an access to financial education and resources to help more people, including the next generation of fans make more informed credit decisions.

Speaker Change: As part of the campaign FICO host free score a better future fundamentals financial education workshops for students from traditionally underserved communities.

Speaker Change: <unk> improved financial literacy and have the opportunity to attend to Chelsea football game.

Steven P. Weber: I'll talk about our outlook for the balance of the year, including our increased guidance, after Steve provides further financial details. Thanks, Will, and good afternoon, everyone. As Will mentioned, we had another good quarter with total revenues of $448 million, an increase of 12% over the prior year. Score segment revenues for the quarter were $241 million, up 20% from Q3 of 2023. B2B revenues were up 27%, driven primarily by mortgage origination revenue. However, our B2C revenues were down 2% versus the prior year due to volume declines in our MyFICO.com business.

Speaker Change: I'll talk about our outlook for the balance of the year, including our increased guidance. After Steve provides further financial details.

Steven P. Weber: As Will mentioned, we had another good quarter with total revenues of $448 million, an increase of 12% over the prior year. Score segment revenues for the quarter were $241 million, up 20% from Q3 of 2023. B2B revenues were up 27%, driven primarily by mortgage origination revenue. Our B2C revenues were down 2% versus the prior year due to volume declines in our MyFICO.com business.

Steven P. Weber: Software segment revenues in the third quarter were $206,000,000, up 5% versus Q3 2023. On-prem and fast software revenue grew 7% year over year, while professional services declined 9%. This quarter, 85% of total company revenues were derived from our Americas region, which is a combination of our North America and Latin American regions.

Steve: Thanks will and good afternoon, everyone.

Steve: As will mentioned, we had another good quarter with total revenues of $448 million, an increase of 12% over the prior year.

Steve: Score segment revenues for the quarter were $241 million up 20% from Q3 of 2023.

Steve: <unk> revenues were up 27% driven primarily by mortgage origination revenues are.

Steve: <unk> revenues were down 2% versus the prior year due to volume declines in our Myfico Dot com business.

Steve: Software segment revenues in the third quarter were $206 million up 5% versus Q3 2023.

Steve: On Prem and SaaS software revenue grew 7% year over year, while professional services declined 9%.

Steve: This quarter, 85% of total company revenues were derived from our Americas region, which is the combination of our North America and Latin American regions.

Steven P. Weber: Our EMEA region generated 10% of revenues, and the Asia Pacific region generated 5%. Our total software ARR was $710 million, a 10% increase over the prior year. Platform ARR was $215 million, representing 30% of our total Q3 2024 ARR, up from 25% of total in Q3 of 2023. Platform ARR grew 31% versus the prior year. Well, non-platform ARR grew 3% to $495 million this quarter. Our platform land and expand strategy continues to be successful. Our dollar-based net retention rate in the quarter was 108 percent.

Steven P. Weber: Our EMEA region generated 10% of revenues, and the Asia-Pacific region generated 5%. Our total software ARR was $710 million, a 10% increase over the prior year. Platform ARR was $215 million, representing 30% of our total Q3 2024 ARR, up from 25% of total in Q3 of 2023. Platform ARR grew 31% versus the prior year. Well, non-platform ARR grew 3% to $495 million this quarter. Our platform land and expand strategy continues to be successful; our dollar-based net retention rate in the quarter was 108%, platform NRR was 124%, while our non-platform NRR was 101%.

Steve: Our EMEA region EMEA region generated 10% of revenues in the Asia Pacific region generated 5%.

Steve: Our total software <unk> was $710 million, a 10% increase over the prior year.

Steve: Platform IRR was $215 million, representing 30% of our total Q3 'twenty four.

Steve: Up from 25% of total in Q3 of 2023.

Steve: Platform IRR grew 31% versus the prior year.

Steve: Non platform <unk> grew 3% to $495 million this quarter.

Steve: Our platform land and expand strategy continues to be successful our dollar based net retention rate in the quarter was 108%.

Steven P. Weber: Platform NRR was 124 percent, while our non-platform NRR was 101 percent. Platform NRR was driven by a combination of new use cases and increased usage. Our software ACV bookings for the quarter were $27.5 million. As a reminder, ACV bookings include only the annual value of software sales and exclude professional services.

Steve: Platform NR was 124%, while our non platform NR was 101%.

Steven P. Weber: Platform NRR was driven by a combination of new use cases and increased usage. Our software ACD bookings for the quarter were $27.5 million. As a reminder, ACD bookings include only the annual value of software sales and exclude professional service.

Steve: Platform MLR was driven by a combination of new use cases and increased usage.

Steve: Our software ACB bookings for the quarter were $227 5 million as a reminder, ACD bookings include only the annual value of software sales and exclude professional services.

Steven P. Weber: Our expenses for the quarter and total operating expenses were $258 million this quarter versus $222 million in the prior year, and the increase is 16% year over year and 8% versus the prior quarter. Our third quarter included our FICA World Event and a true-up for our Annual Incentive Rewards, and we expect Q4 expenses to be down modestly from our Q3 run rate. As Will noted, the prior year included an $8.5 million one-time reimbursement of third-party data implementation costs and a reduction to income tax expense of $9.5 million associated with the valuation of our R&D tax credit.

Steven P. Weber: Our expenses for the quarter, total operating expenses, were $258 million this quarter versus $222 million in the prior year, an increase of 16% year-over-year and 8% versus the prior quarter. Our third quarter included our FICA World Event and a true-up for our Annual Incentive Rewards, and we expect Q4 expenses to be down modestly from our Q3 run rate. As Will noted, the prior year included an $8.5 million one-time reimbursement of third-party data implementation costs and a reduction to income tax expense of $9.5 million associated with the valuation of our R&D tax credit.

Steve: Our expenses for the quarter.

Steve: Total operating expenses were $258 million this quarter versus $222 million in the prior year, an increase of 16% year over year and 8% versus the prior quarter.

Steve: Our third quarter included our FICO World event, and a true up for our annual incentive rewards and we expect Q4 expenses to be down modestly from our Q3 run rate.

Speaker Change: As will noted the prior year included an $8 $5 million, one time reimbursement of third party data implementation costs and a reduction to income tax expense of $9 5 million associated with the evaluation of our R&D tax credits.

Steven P. Weber: Our non-GAF operating margin is shown on our Reg G schedule with 52% for the quarter compared with 51% in the same quarter last year. Gap net income this quarter was $126 million, down 2% from the prior year's quarter. Our non-GAAP net income was $156 million for the quarter, up 9% from the prior year's quarter. The effective tax rate for the quarter was 24.5%. We believe that our fiscal year 2024 net effective tax rate is expected to be around 22%, while our recurring tax rate isn't for any excess tax benefit and other discrete items.

Steven P. Weber: Our non-GAAP operating margin is shown on our Reg G schedule with 52% for the quarter compared with 51% in the same quarter last year. Gap net income this quarter was $126 million, down 2% from the prior year's quarter. Our non-GAAP net income was $156 million for the quarter, up 9% from the prior year's quarter. The effective tax rate for the quarter was 24.5%. We believe that our fiscal year 2024 net effective tax rate is expected to be around 22%, while our recurring tax rate isn't for any excess tax benefit and other discrete items.

Steve: Our non-GAAP operating margin as shown in our Reg G schedule was 52% for the quarter compared with 51% in the same quarter last year.

Steve: GAAP net income this quarter was $126 million down.

Steve: Down 2% from the prior year's quarter.

Steve: Our non-GAAP net income was $156 million for the quarter up 9% from the prior year's quarter.

Steve: The effective tax rate for the quarter was 24, 5%, we believe that our fiscal year 2024, net effective tax rate is expected to be around 22%, while our recurring tax rate is expected to be around 26%.

Steve: Recurring tax rate is before any excess tax benefits and other discrete items.

Steven P. Weber: Free cash flow for the quarter was $206 million, a 69% increase from the previous year. The trailing 12-month free cash flow was $551 million, compared to $467 million in the prior quarter. At the end of the quarter, we had $199 million in cash and marketable investments. Our total debt at quarter end was $2.13 billion, with a weighted average interest rate of 5.3%. Currently, 61% of our total debt is fixed rate. Our floating rate debt is prepayable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods. During the quarter, we secured a $450 million term loan and used those proceeds to reduce our revolving line of credit and to provide additional debt capacity.

Steve: Free cash flow for the quarter was $206 million or 69% increase from the previous year. The trailing 12 months free cash flow was $551 million compared to $467 million in the prior quarter.

Steve: At the end of the quarter, we had $199 million in cash and marketable investments.

Steve: Our total debt at quarter end was $2, one 3 billion with a weighted average interest rate of five 3%.

Steve: Currently 61% of our total debt is fixed rate our floating rate debt is pre payable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods.

Steve: During the quarter, we secured a $450 million term loan and used those proceeds to reduce our revolving line of credit and to provide additional debt capacity.

Steven P. Weber: Turning to return to capital, we bought back 196,000 shares in the third quarter at an average price of $1,293 per share. That exhausted the existing board authorization, which was approved in January, and we have just announced a new board authorization for $1 billion. We continue to view share repurchases as an attractive use of cash.

Steve: Turning to return of capital we bought back 196000 shares in the third quarter at an average price of $1293 per share that exhausted the existing board authorization, which was approved in January and we have just announced a new box board authorization for 1 billion.

Steve: We continue to view share repurchases as an attractive use of cash.

William J. Lansing: And with that, I'll turn it back to Will for his thoughts on the rest of the year and the increase in our four-year guide. Thanks, Steve. We are executing on our strategy. Our customers are delighted with our innovative products. Our execution is generating strong financial results, including impressive ACV bookings, record free cash flow, and an increase in FICO platform and FICO 10T adoption. The business is strong. I'm pleased to report that today we're again raising our full-year guidance as we enter the fourth quarter of our fiscal year. We're raising our full-year revenue guidance to $1.70 billion. Gap net income is now expected to be $500 million, with earnings per share of $19.90.

William J. Lansing: And with that, I'll turn it back to Will for his thoughts on the rest of the year and the increase in our four-year guide. Thanks, Steve. We are executing on our strategy. Our customers are delighted with our innovative products. Our execution is generating strong financial results, including impressive ACV bookings, record free cash flow, and an increase in FICO platform and FICO 10T adoption. The business is strong. I'm pleased to report that today we're again raising our full year guidance as we enter the fourth quarter of our fiscal year. We're raising our full year revenue guidance to $1.70 billion. Gap net income is now expected to be $500 million, with earnings per share of $19.90.

William J. Lansing: And with that I'll turn it back to will for his thoughts on the rest of the year and the increase in our full year guidance.

William J. Lansing: We are executing on our strategy and our customers are delighted with our innovative products. Our execution is generating strong financial results, including impressive ACB bookings record free cash flow and an increase in FICO platform and.

Speaker Change: And FICO 10 T adoption. The business is strong I am pleased to report that today, we are again, raising our full year guidance as we enter the fourth quarter of our fiscal year.

Steve: We're raising our full year revenue guidance to $1 7 billion.

Steve: GAAP net income is now expected to be 500 million with GAAP earnings per share of $19 90.

Steve: non-GAAP net income is now expected to be 582 million with non-GAAP earnings per share of $23 16.

Dave Singleton: Non-GAAP net income is now expected to be $582 million, with non-GAAP earnings per share of $23.16. With that, I'll turn it back to Dave and we'll open up the Q&A session. Thanks, Will. This concludes our prepared remarks, and we're now ready to take questions. Operator, please open the line.

Steve: With that I'll turn it back to Dave and we will open up the Q&A session.

Dave: Well. This concludes our prepared remarks, and we're now ready to take questions. Operator, Please open the lines.

Operator: Thank you. As a reminder, to ask a question at this time, please press star then 11 on your telephone. If you wish to remove your question, please press star 11 again.

Operator: Thank you. As a reminder, to ask a question at this time, please press star then one on your telephone. If you wish to remove your question, please press star one one again.

Speaker Change: As a reminder to ask a question at this time. Please press Star then one one on your telephone if you wish to remove your question. Please press star one again, one moment, while we compile our Q&A roster.

Operator: One moment while we compile our Q&A roster. And our first question is going to come from the line of Faiza Alwy with Deutsche Bank. Your line is open. Please go ahead.

Operator: One moment while we compile our Q&A, and our first question is going to come from the line of Faiza Alwy with Deutsche Bank. Your line is open, please go ahead. Yes, hi, thank you so much.

Speaker Change: And our first question is going to come from the line of sight.

Speaker Change: <unk> with Deutsche Bank. Your line is open. Please go ahead.

Faiza Alwy: Yes, hi, thank you so much. So I wanted to start with the software business and just ask you if you could comment on the selling environment, if there's any change from a macro perspective, anything new or different you're hearing from your customers. And then, you know, I know at FICO World, we talked about, you know, improvement of the platform and talked about decomposition of the platform. So just give us a sense of if there's any update there and any additional color.

Faiza Alwy: So I wanted to start with the software business and just ask you if you could comment on the selling environment, if there's any change from a macro perspective, anything new or different you're hearing from your customers. And then, you know, at FICO World, we talked about, you know, improvement of the platform and talked about decomposition of the platform. So just give us a sense of if there's any update there and any additional color.

<unk>: Yes, hi, thank you so much so I wanted to start with the software business and just ask you. If you could comment on the selling environment alright, there's any change from a macro perspective anything new or different you are hearing from from your customers.

Speaker Change: And then I know it.

Speaker Change: Michael Wood, we had talked about.

Michael Wood: Improvement of surplus.

Speaker Change: <unk> been talking about the composition of the platform. So just give us a sense of if there's any update there.

Speaker Change: The additional color.

William J. Lansing: But FICO World is always and was this year the biggest pipeline-generating event that we have. And so we came out of FICO World with a very, very healthy pipeline. I would say that the selling environment, you know, has not changed that much over the last year or so. And I would also emphasize that more and more customers are buying FICO software as a strategic move. And so it's a very considered purchase. And it's, you know, it's not just like going out and finding a point solution to a small problem, to a specific problem.

William J. Lansing: FICO World is always, and was this year, the biggest pipeline-generating event that we have. And so we came out of FICO World with a very, very healthy pipeline. I would say that the selling environment has not changed that much over the last year or so, and I would also emphasize that more and more customers are buying FICO software as a strategic move. And so it's a very considered purchase. And it's, you know, it's not just like going out and finding a point solution to a small problem, to a specific problem.

Speaker Change: FICO World is always and was this year the biggest pipeline generating event that we have and so we came out of FICO world with a very very healthy pipeline I would say that the selling environment has not changed that much over the last year or so.

Speaker Change: And I would also emphasize that.

Speaker Change: Increasingly customers are buying FICO software is a strategic move and so it's a very considered purchase and it's.

Speaker Change: It's not just like going out and finding endpoint solution to a small problem to a specific problem. It's a bigger it's a bigger thing than that and that hasnt changed that's kind of the new way of operating.

Faiza Alwy: It's a bigger thing, it's a bigger thing than that. And that hasn't changed. That's kind of the new way of operating. Got it. Thank you. And then just a question on the mortgage or revenues. You obviously had very strong growth in the quarter. I'm curious how, you know, volume trended in the quarter. I know you don't give a breakdown, but was it in line with your expectations?

William J. Lansing: It's a bigger thing than that, and that hasn't changed. That's kind of the new way of operating. Got it. Thank you. And then just a question on mortgage revenues. You obviously had very strong growth in the quarter. I'm curious how volume trended in the quarter. I know you don't give a breakdown, but was it in line with your expectations?

Speaker Change: Got it. Thank you and then just a question on mortgage revenue.

Speaker Change: Had very strong growth in the quarter.

Speaker Change: Hi.

Speaker Change: Volume trended in the quarter I know you don't give a breakdown Budd.

William J. Lansing: Are there any dynamics you're seeing around soft falls where, I believe, lenders have the option to go to one or two bureaus? Are you seeing an impact on volumes from that and just the general environment? Our mortgage volumes are a lagging indicator relative to other mortgage data that you have. Our mortgage volumes are down versus a year ago. They're pretty much flat versus the last quarter.

Speaker Change: Was it in line with your expectations are there any dynamics you are seeing around soft foods, where I believe lenders have the option to go to one or two <unk> that are you seeing an impact from that and just the general environment.

William J. Lansing: Are there any, you know, dynamics you're seeing around, you know, soft falls where I believe lenders have the option to go to, you know, one or two bureaus like that? Are you seeing an impact on volumes from that and just the general environment around mortgages? You know, our mortgage volumes are a lagging indicator relative to other mortgage data that you have. For example, our mortgage volumes are down versus a year ago. They're pretty much flat versus the last quarter. And none of that is particularly surprising.

Speaker Change: Yeah.

Speaker Change: Our mortgage volumes.

Speaker Change: Are a lagging indicator relative to other mortgage data that you have.

Speaker Change: Our mortgage volumes are down versus a year ago, they are pretty much flat versus a quarter last quarter.

Speaker Change: And none of that is particularly surprising.

Surinder Singh Thind: None of that is particularly surprising. All right, thank you so much. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Surinder Thind with Jeffrey. Your line is open. Please go ahead.

Speaker Change: Alright, thank you so much.

Speaker Change: Thank you and one moment as we move on to our next question.

Faiza Alwy: All right, thank you so much. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Surinder Thind with Jeffrey. Your line is open. Please go ahead.

Surrender Send: And our next question is going to come from the line of surrender send with Jefferies. Your line is open. Please go ahead.

Steven P. Weber: Thank you. First question on just the guidance raised. It implies revenues are going to be down roughly $10 million a quarter. Any color there? I know you normally do the walk. Can you do the walk for us?

Surinder Singh Thind: Thank you. First question on just the guidance rate. It implies revenues are going to be down roughly $10 million a quarter. Any color there, I know you normally... (inaudible) can you do the walk for us?

Surrender Send: Thank you.

Surrender Send: First question on just the guidance raise.

Surrender Send: It implies revenues are going to be down roughly $10 million quarter over quarter, just any color. There I know you normally.

Speaker Change: Our conservative in the guide, but just can you do the walk for us from <unk> to fiscal <unk>. So we are pretty conservative with the way. We guide so we want to make sure that a lot of us on the scores. We don't have much control over right. So we don't really know what's going to happen. There I would say that generally the fourth quarter is a little lighter seasonally for.

Steven P. Weber: Yeah, so we are pretty conservative with the way we guide. So we want to make sure that, you know, a lot of us on this course, we don't have much control over it, right? So we don't really know what's going to happen there.

Unnamed: Steven Weber, Manav Patnaik, Faiza Alwy, Steven Weber, William Lansing, Kyle Peterson, John Mazzone, Dave Singleton, John Mazzone, Kyle Peterson, Simon Clinch, Ashish Sabadra, Keen Tong, Dave Singleton, John Mazzone, Kyle Peterson, Simon Clinch, Ashish Sabadra, Keen Tong, Dave [inaudible] Thank The NRR was 101. That's the slowest pace of growth in about two years. Any color there that you can help with, or is there some movement of revenues from non-platform to platform at this point? You know, I wouldn't say that it's cannibalization if that's what your question is getting at.

Steven P. Weber: I would say that, generally, the fourth quarter is a little lighter seasonally for mortgages. Mortgage volumes aren't typically as high then as they are in the spring. So there might be some, you know, a little bit of volume decline there, but a lot of it just depends on the environment, which we don't have a lot of visibility into. Thank you. And then in terms of just, when I think about the non-platform business here, the NRR was 101.

Speaker Change: Mortgage volumes aren't as high typically then as they are in the spring. So there might be some a little bit of volume declined 11% in the environment, which we don't have a lot of visibility to.

Speaker Change: Thank you and then in terms of just.

Speaker Change: When I think about.

Speaker Change: The non platform business here.

Speaker Change: The <unk> was 101% that's the slowest pace of growth in about two years. So.

Steven P. Weber: That's the slowest pace of growth in about two years. So, any color there that you can help with?

Steven P. Weber: Is there some movement of revenues from non-platform to platform at this point? You know, I wouldn't say that it's cannibalization if that's what your question is getting at. You know, we're pretty pleased with our classic offerings with 101% NRR. We've been trying to manage that business in this, you know, relatively flat way, and we're pleased that it's turning out that way. But, you know, as you can see, the growth is on the expansion side on the platform.

Speaker Change: Any color there.

Speaker Change: That you can help with or is there some movement of revenues from non platform to platform at this points, how should we think about that.

Speaker Change: I wouldn't say that it's cannibalization if thats what your question is getting at.

William J. Lansing: You know, we're pretty pleased with our classic offerings with a 101% NRR. We've been trying to manage that business in this, you know, relatively flat way, and we're pleased that it's turning out that way. But, you know, as you can see, the growth is on the expanding side on the platform. You know, we let the market tell us what it wants, but we're not displeased with the way it's shaking out. Yeah, and I would say, I mean, we had higher numbers last year.

Speaker Change: Sure.

Speaker Change: We're pretty pleased with our classic offerings with a 101% NRI.

Speaker Change: <unk> been trying to manage that business in this.

Speaker Change: Relatively flat way, we're pleased that it's turning out that way.

Speaker Change: But as you can see the growth is on the expand side on the platform.

Steven P. Weber: You know, we let the market tell us what it wants, but we're not displeased with the way it's shaking out. Yeah, and I would say we had higher numbers last year. And at the time, we said there were some things driving that some of it was, you know, some of the CPI increase that we had. And we had some advantages last year from some FX as well, when we knew that was not going to happen this year. So it's kind of what we thought was going to happen; it would settle more to around 100%. Okay, thank you, I'll get back to you.

Speaker Change: We let the market tell us what it wants but we're not displeased with the way it's shaking out.

Unnamed: And at the time, we said there were some things driving that some of it was, you know, some of the CPI increase that we had. And we had some advantages last year from some FX as well, when we knew that was not going to happen this year. So it's kind of what we thought was going to happen; it would settle more to around 100%. Okay, thank you, I'll get back to you.

Speaker Change: Yes, I would say I mean, we had higher numbers last year and at the time. We said there was some things driving that some of it was.

Speaker Change: Some of the CPI increase that we had and we had some we have some advantages last year from some FX as well and we knew that was not going to maintain this year. So it is kind of what we thought was going to happen it would settle more who around 100%.

Speaker Change: Okay. Thank you I'll get back into queue for additional questions.

Speaker Change: Thank you and one moment as we move on to our next question.

Scott Wurtzel: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Scott Wurtzel with Wolf Research. Your line is open. Please go ahead.

Speaker Change: And our next question is going to come from the line of Scott.

Speaker Change: <unk> with Wolfe Research. Your line is open. Please go ahead.

William J. Lansing: Hey, good afternoon, guys. And thank you for taking my questions. I wanted to start on the auto origination side, revenues down 3% versus modestly up last quarter. Just wondering, similar to how you did a mortgage, maybe comment on the volumes there and how they trended versus, Yeah, volumes were relatively flat. But it really is a makeshift.

Scott: Hey, good afternoon, guys and thank you for taking my questions.

Scott: I wanted to start on the auto origination side revenues down 3% versus modestly up last quarter. Just wondering similar to how you did in mortgage maybe comment on the volumes, there and how how they trended versus last quarter.

Speaker Change: Yes volumes were relatively flat, but the really is a mix shift. So we had we had more of a mix shift to more market share in the in the.

William J. Lansing: So we had, we had more of a makeshift to gain more market share in the tiers that are a little bit less pricey for us, unit costs a little bit lower. So that's really the difference between the volume and the revenue. So the price per score went down slightly because of the makeshift.

Scott Wurtzel: So we had, we had more of a makeshift to, you know, more market share in the in the tiers that are a little bit less price for us, you know, cost a little bit lower. So that's really the difference between the volume and the, you know, the revenue. So the price per score went down slightly because of a makeshift. Got it.

Speaker Change #110: Peers that are a little bit less price for us unit cost a little bit lower so thats really the difference between the volume and the.

Scott: The revenue so the price per score went down slightly because of our mix shifts.

William J. Lansing: That's helpful. Then on the software side on the platform ARR, I mean, I think it's pretty good to see the sort of rate of deceleration moderate from 2Q to 3Q. It's sort of this low 30s level.

Speaker Change: Got it Thats helpful.

Speaker Change: And then on the on the software side on the platform IRR I mean, I think it's pretty good to see the sort of rate of deceleration moderate from <unk>, it's sort of this low thirties level I mean, do you kind of see this as a sort of sustainable.

Speaker Change: Growth rates for platform over the near to medium term here.

William J. Lansing: I mean, do you kind of see this as a sustainable growth rate for platform ARR over the near to medium term here? Probably, yeah, I mean, we don't, you know, we think we're pretty confident in that or at around that rate, which can change as we go out farther, but you know, we think that's a sustainable rate. And we've got, you know, it helps when you have a good quarter like this in terms of signing new deals, too, because that'll, you know, that'll help boost AR in the future. But we don't have really good visibility, either, because a lot of it depends on how quickly our customers can get online and how much usage they have.

Speaker Change: Probably yes, I mean, we don't we think we're pretty confident in that are at around that rate.

Speaker Change: It can change as we go out further, but we think that's a sustainable rate.

Speaker Change: It helps when you have a good quarter like this in terms of signing new deals too because that will.

Speaker Change: That will help boost our future. So we don't have really good visibility took us a lot of it depends on how quickly our customers can get online and how much usage, they have but theres a lot of growth there.

Speaker Change: So we're pretty confident that we can maintain these levels.

Speaker Change: Great. Thanks, guys.

Speaker Change: <unk>.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Kyle Peterson with Needham. Your line is open. Please go ahead.

William J. Lansing: But you know, there's a lot of growth there, so we're pretty confident that we can maintain these levels. Great.

Kyle David Peterson: Great. Thanks, Good afternoon guys.

Kyle David Peterson: I just wanted to start out on software.

Kyle David Peterson: The bookings.

Kyle David Peterson: Pretty nice on ACB basis correct.

Speaker Change: Prior quarter, so how should we think about some of that.

Kyle David Peterson: Thanks, guys. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Kyle Peterson with Needham.

Speaker Change: Implementation cycles, and kind of when some of those bookings will start to translate to revenue here.

William J. Lansing: Your line is open, please go ahead. Great. Thanks. Good afternoon, guys. I just wanted to start out on software, particularly the bookings, which looked pretty nice on the ACB basis compared to a lot of the prior quarters. So how should we think about, you know, some of the implementation cycles and kind of when some of those bookings will start to translate to revenue? It's, you know, as you know, it's a long sales cycle. It's as long as 400 days.

Speaker Change: It is.

Speaker Change: As you know, it's a long sales cycle as long as 400 days and it takes not that long to get live once it's all said and done.

William J. Lansing: And it takes not that long to get live once it's all said and done. But, you know, I think that the flow through is the subsequent year. I mean, that's the easiest way to think about it.

Speaker Change: <unk>.

Speaker Change: I think I think that the flow through is the subsequent year I mean, thats the easiest way to think about it and it does depend on the customer how sophisticated are already they are but yes. I mean, if you sign deals now in the next six to nine months you start seeing flow through on that.

William J. Lansing: And it does depend on the customer, how sophisticated they are, how ready they are. But yeah, I mean, then, you know, if you sign deals now for the next six to nine months, you start seeing a flow through on that.

Speaker Change: Got it that's very helpful and then.

William J. Lansing: That's very helpful. And then, you know, just to follow up, you know, particularly on, you know, if we do get rate cuts, whether it's later this year or next year, maybe if you could walk us through some of the different sensitivities. I know your business now looks quite a bit different, you know, maybe compared to past cycles. So, you know, especially on those first, you know, one to two rate cuts, you know, what are some of the, you know, impacts that, you know, we should be mindful of, you know, if those do come to fruition?

Speaker Change: Just a follow up.

Speaker Change: On the particularly on if we do get rate cuts, whether it's later this year or next year maybe.

Speaker Change: Maybe if you can walk us through some of the different sensitivities I know your business now looks quite a bit different.

Speaker Change: Maybe compared to past cycles, so, especially on those first one to two rate cuts what are some of the impacts that we should be mindful of if those do come to fruition.

Speaker Change: Sure.

William J. Lansing: You know, we're already seeing a little bit of an uptick in refi, and it's not exactly, you know, a gigantic leap of faith that as rates come down, we'll see volumes go up; we fully anticipate that. You know, your guess is as good as ours as to the timing of the rate cuts. We would hope to see some rate cuts, you know, towards the end of this year and next year, and volumes will go up with that. All right, that's helpful. Thanks, guys.

Speaker Change: We're already seeing a little bit of an uptick in refi.

Speaker Change: And it's not exactly.

Speaker Change: A gigantic leap of faith that as rates come down we'll see volumes go up we fully anticipate that.

Speaker Change: Your guess is as good as ours as to the timing of the rate cuts.

Speaker Change: We would hope to see some rate cuts towards the end of this year and next year and volumes go up with that.

Speaker Change: Alright Thats helpful. Thanks, guys.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of George Tong with Goldman Sachs. Your line is open. Please go ahead hi.

William J. Lansing: Hi, thanks. Good afternoon. Within the Scores business, card and personal loan revenue fell 7% in the quarter, which is a little bit better than the 9% decline in the prior quarter. Can you talk about some of the trends you're seeing among subprime or lower-tier consumers that may be impacting card and personal loan performance? And also talk about overall bank lending conditions. Yeah, I mean, the supply markets obviously pulled back the hardest, which is not surprising, right? You're late in the credit cycle; you have a lot more, you know, uncertainty. And that's kind of where you see that happens first. Bank by bank, it kind of varies depending on what they're looking at.

Keen Fai Tong: Thanks, Good afternoon.

Keen Fai Tong: Within the scores business card and personal loan revenue fell 7% in the quarter, which is a little bit better than the 9% decline in the prior quarter can you talk about some of the trends you are seeing among.

Speaker Change: Subprime or lower to your consumers that may be impacting card and personal loan performance and also talk about overall bank lending conditions.

Speaker Change: Yes, I mean, the subprime markets always pull obviously, you've seen the biggest pullback which is not surprising right you're late in the credit cycle you have a lot more.

Speaker Change: Uncertainty and Thats kind of where you see the happened first bank by bank it kind of varies depending on what they are looking at and what kind of.

William J. Lansing: And we're kind of wondering what kind of campaigns they might, may or may not be running. But, you know, we see banks being relatively conservative with new originations. And I think they're kind of waiting to see what happens and see what the economic environment looks like. So it's really not surprising.

Speaker Change: What kind of campaigns, they might may or may not be running but.

Speaker Change: We see banks being relatively conservative with new originations.

Speaker Change: And I think they're kind of waiting to see what happens and see what the economic environment looks like so it's really not surprising.

Speaker Change: We saw probably a little over year ago strong growth there.

William J. Lansing: You know, we saw strong growth there probably a little over a year ago when mortgages started to slow down and rates started to go up. But now I think there's just more uncertainty in the market. And they're just kind of being more cautious in their origination.

Morgan: When Morgan started.

Morgan: The slowdown in rates start to go up we saw strong growth there, but now I think there's just more uncertainty in the market and Theyre, just kind of being more cautious in their originations.

William J. Lansing: That's helpful. And then, switching to the software side, software operating margins contracted about 430 bps year-over-year in the quarter. Can you talk about some of the reasons behind that?

Speaker Change: Got it.

Speaker Change: Helpful and then switching to the software side.

Speaker Change: All four operating margins contracted about 430 bps year over year quarter can you talk about some of the reasons behind what it's almost completely almost completely around that that that reimbursement we had last year.

Steven P. Weber: That's almost completely around that reimbursement we had last year. So that was a big number we had, and that was all on the software side. So that's the driver of that.

Speaker Change: Alright.

Speaker Change: Big number we had and that was all on the software side. So that's that's the driver of that and so as that laps. When would you expect the flip to margin expansion in the software business that we will get some margin expansion next quarter, because I mean again, we had some costs by FICO World. This quarter was not going to repeat next next quarter. So we'll have some our cost will decline.

Steven P. Weber: And so as that lapses, when would you expect to flip to margin expansion in the software business? Well, we'll get some margin expansion next quarter because, I mean, again, we had some costs like FICO World this quarter. It's not going to repeat next quarter. So we'll have some, our costs will decline next quarter, and that'll end up with some margin expansion. We, you know, these costs are big enough that in any one given quarter, something like FICO World is going to have an impact on that quarter's margin. Got it.

Speaker Change: Next quarter and that all of that will end up with some margin expansion.

Speaker Change: These costs are big enough, where any one given quarter something like FICO world is going to have an impact on that quarter's margin.

Speaker Change: Got it very helpful. Thank you.

Ashish Sabadra: Very helpful. Thank you. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Ashish Sabadra with RBC. Your line is open, please go ahead.

Speaker Change: Thank you and one moment as we move on to our next question.

Steven P. Weber: Thanks for taking my question. Just on the software revenue growth, particularly on prem and SaaS, and within that, when I look at software recognized over the contract term, the growth there moderated, what should we think about, Ashish? We can't hear you. Sorry. Let me know if I'm better.

Speaker Change: And our next question comes from the line of Ashish Szabo draw with RBC. Your line is open. Please go ahead.

Speaker Change: Thanks for taking the question.

Speaker Change: Just on the software revenue growth, particularly the on Prem and Seth and within that when I look at software recognized over the contract on the Gorilla, Denmark related how should we think about the growth profile.

Speaker Change: We can hear you we can hear you.

Ashish Sabadra: Yeah, So I wanted to focus on on-premises and SaaS software revenue growth. And within that, even the software recognized over the contract term, that moderated a bit, still pretty strong at 80%, but did moderate from the mid-teens. How should we think about those puts and takes on revenue growth? Yeah, I mean, a lot of that's the fact that we had, you know, the omega growth, the non-platform growth that we saw last year, so that right there drives most of the, you know, and obviously, the platform is not growing 50% either.

Speaker Change: Sorry.

Speaker Change: Let me look better and better.

Speaker Change #118: I wanted to focus on the on Prem and SaaS software revenue growth and within that even the software recognized over contract film that moderated a bit.

Speaker Change: Pretty strong.

Speaker Change #103: 80%, but did moderate from mid teens, how should we think about those puts and takes on the revenue growth going forward.

Speaker Change: Yes, I mean, a lot of that is the fact that we had.

Speaker Change: <unk>.

Speaker Change: The non platform gross out what we saw last year, so that right. There drives most of the and then obviously the platforms going 50% either but so we think these kind of growth rates going forward as I said earlier, that's probably more likely but we're going to see to continue.

Ashish Sabadra: But so, you know, we think these kind of growth rates going forward, as I said earlier, that's probably more likely what we're going to see to continue. You know, and as the numbers get bigger, it's harder to drive 50% growth or even 40% growth. So we're pretty happy with the 30% growth on the platform side, and on non-platforms, we think we can get, you know, better than 100%. We're happy with that as well. That's very helpful.

Speaker Change: And as the numbers get bigger it's harder to drive.

Speaker Change: 50% growth or even 40% growth. So we're pretty happy with the 30% growth in the platform side and on the non platform. We think we can get better than 100%, we're happy with that as well.

Speaker Change: That's very helpful. Thank.

Speaker Change: Thank you.

Steven P. Weber: Thanks. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Simon Clinch with Redburn Atlantic. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change #107: And our next question comes from the line of Simon Quench with Redburn Atlantic. Your line is open. Please go ahead.

Speaker Change: Hi.

Simon Alistair Vaughan Clinch: Hi, thanks for taking my question. I wanted to cycle back to the 30% plus growth in the platform software AR is on. And just as one of you could just go in a little bit more detail as to why you think that that is a sustainable level of growth and just perhaps flesh that out a little bit more for us, please. Well, I mean, we've got I mean, again, we had a really good quarter, you know, with new bookings, and we've got a lot of installed base that's rapidly expanding. I mean, there you are when we when we install them, you know, most of our customers, you know, look for new ways to use them.

Simon Quench: Thanks for taking my question I wanted to cycle back to you.

Simon Alistair Vaughan Clinch: The 30% plus growth in the platform software out on and just I was wondering if you could just going a little bit more detail as to why you think but that is a sustainable level of growth and just perhaps flesh that out a little bit more for us.

Speaker Change: Well I mean, we've got I mean again, we had a really good quarter.

Speaker Change: With new bookings and we've got a lot of installed base.

Speaker Change: <unk> rapidly expanding when.

Speaker Change: When we when we install most of our customers.

William J. Lansing: And we see that in the net retention rate. And that number continues to be, to do well, and we continue to add more business to it. So we can't guarantee it.

Speaker Change: Look for new ways to use it and we see that in the net retention rate and that is that.

Speaker Change: That number continues to be well do well and we continue to add more business to itself and we can't guarantee it but we've got a lot of reasons. Both data driven anecdotally to think that we're going to continue to see that kind of growth.

William J. Lansing: But we've got a lot of reasons, both data-driven and anecdotally, to think that we're going to continue to see that kind of growth. Okay, thanks. Could you, I mean, just frame the approach to pricing within the software business?

Speaker Change #104: Okay, Thanks, and just to follow up on that.

Speaker Change: Could you just frame the approach to pricing within the software business you mentioned last.

Speaker Change #111: Last year I think was the non platform side, you had sort of.

William J. Lansing: You mentioned last year on the, I think it was the non-platform side, you had sort of higher inflationary pricing, but I was wondering if you could talk a bit about the strategy around pricing for value and how you think about that going forward. Our strategy around software pricing is, you know, we're very focused right now on making our software accessible and encouraging adoption. And so, you know, while there's probably room for value pricing in our software business, that's not where our direction is.

Speaker Change #106: Higher inflationary pricing, but just wondering if you could talk to me about the strategy around.

Speaker Change: The pricing part of that value and how to think about that going forwards.

Speaker Change #102: Our strategy around software pricing is we're very focused right now on making our software accessible.

Speaker Change #102: And an encouraging adoption and so.

Speaker Change #102: There's probably room for value pricing in our software business, that's not where our direction is our direction is to put the software in the hands of our customers and then watch revenue grow as their usage increases and their usage increases within the initial applications that they've put the platform views for and then.

William J. Lansing: Our direction is to put the software in the hands of our customers and then watch revenue grow as their usage increases. And their usage increases, you know, within the initial applications that they put the platform to use for. And also, as they discover new uses, you know, the expand part of our land expand strategy is very much wrapped around the customer taking control of what they can do with the platform and coming up with new use cases.

Speaker Change #102: Also as they discover new uses.

Speaker Change #102: The expand part of our land and expand strategy is very much wrapped around the customer taking control of what they can do with the platform and coming up with new use cases, and we tend to design in a way that we don't have to renegotiate contracts and go back and do a lot of contractual work for them too.

William J. Lansing: And we tend to design it in a way that we don't have to renegotiate contracts and go back and do a lot of contractual work for them to make more revenue with us. We tend to design it in a way that they can, you know, select how much usage they want, and our revenue goes up automatically as their usage goes up. Thanks so much. I appreciate it.

Speaker Change #102: To do more revenue with us.

Speaker Change: We tend to design it in a way that they can.

Speaker Change: Select how much usage they want and.

Speaker Change: Our revenue goes up automatically as their usage goes up.

Speaker Change #115: Thanks, so much I appreciate it.

Speaker Change #100: Thank you and one moment as we move onto our next question.

Jeffrey P. Meuler: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Jeff Mueller with Baird. Your line is open. Please go ahead.

Speaker Change #100: And our next question is going to come from the line of Jeff Mueller with Baird. Your line is open. Please go ahead.

Jeffrey P. Meuler: Yes. Thanks, instead of me getting to ask a question about cash flow this quarter just to get to say congrats on the highest cash flow.

William J. Lansing: Yeah, thanks. Instead of me getting to ask a question about cash flow this quarter, I just get to say congrats on tonight's cash flow. Can you give us some perspective on the geographical kind of trends within software? And I guess I just it looks like America's revenue was down a little year over year. So any particular call outs, and then Amaya was up a lot.

Jeffrey P. Meuler: Can you give us some perspective on the.

Speaker Change #112: Geographic kind of trends within software.

Speaker Change #116: I'm just it looks like Americas revenue was down.

Speaker Change #109: Down a little year over year, so any particular call outs and then EMEA was up a lot.

Speaker Change #108: So just any mega wins in EMEA or any reason to think that you are at an inflection point, there and it's really taking off.

William J. Lansing: So just any mega wins in Amaya or any reason to think that you're at an inflection point there, and it's really taking off. You know, Jeff, I don't think that we have tremendous changes regionally. I, you know, I wouldn't try to read too much into the data on a quarterly basis. You know, we have strength in platform across all the regions. I think Asia Pacific was a little behind the other regions in terms of platform adoption, and there were some structural reasons for that. For example, AWS was not available in India before, and now it is.

Speaker Change #100: Jeff I don't think that we have tremendous changes regionally.

Jeffrey P. Meuler: I wouldn't try to read too much into into the data on a quarterly basis.

Speaker Change #117: We have strength with platform across all the regions I think Asia Pacific was a little behind the other regions in terms of platform adoption and there are some structural reasons for that for example, AWS was was not available in India before and now it is but.

William J. Lansing: But we're, you know, we're seeing adoption across all the regions. Yeah, I would think some of what you might see with the volatility is when we have that point in time license revenue, and that could skew things in one given quarter. But we've had a lot of adoption in the last year in North America, and we're starting to see a lot more interest too in EMEA as well. Okay, and then when you're calling out the FICO 10-T adoption and then the non-conforming mortgage market, is that almost exclusively about upgrades from prior versions of the FICO score given how high your penetration is? Or are you finding, I guess, like incremental volume as part of that adoption? It's a bit of both, but probably more of the upgrade.

Speaker Change #100: We're seeing adoption across other regions yes.

Speaker Change #100: Some of what you see you might see with the volatility is when we have that point in time license revenue and that could skew things in one given quarter, but we've had a lot of adoption in the last year in North America, and we're starting to see a lot more interest too in EMEA as well.

Speaker Change #100: And then when you are calling out the FICO 10 T adoption and then.

Speaker Change #119: The nonperforming mortgage market is that almost exclusively about upgrades from prior versions of the FICO score given how high your.

Speaker Change #125: Your penetration is or are you finding I guess like incremental volume as part of that adoption.

Speaker Change #121: It's a bit of both but probably more of the upgrade.

William J. Lansing: Yeah, I mean, for the most part, everybody was using the traditional FICO scores, and now they're just moving to the 10-T, you know, ahead of the adoption by the FHFA. Right. Okay.

Speaker Change #133: Yes, I mean for the most part everybody was using the traditional FICO scores and now Theyre just moving to the turn key.

Speaker Change #133: Ahead of the adoption by the FHFA.

Speaker Change #105: Alright, okay. Thank you.

Manav Shiv Patnaik: Thank you. Thank you. And again, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. One moment as we move on to our next question. And our next question is going to come from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead.

Speaker Change #113: Thank you.

Speaker Change #130: Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.

Speaker Change #122: <unk> as we move on to our next question.

Speaker Change #128: And our next question is going to come from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead.

William J. Lansing: Thank you. Good evening. I just wanted to, you know, ask, well, you tried to reference some of these in your prepared remarks, but, in the face of, you know, some public criticism around the price of your scores, like, you know, how's your approach or thought process around, you know, the value of your score, maybe the timing around which you get to that value? Has that changed at all?

Manav Shiv Patnaik: Thank you good evening I just wanted to ask.

Manav Shiv Patnaik: <unk> reference some of these in your prepared remarks, but in the face of some public criticism around the price of oil.

Speaker Change #127: As you approach your pop process around the value of his or maybe the timing around which you get to that value has that changed at all.

William J. Lansing: Well, you know, you've heard us say in the past, and I certainly continue to believe that what we charge for the FICO score is so much less than the value that we provide, that I would say there's not a lot of change in our thought process. Our thought process is that over time, we're going to close some of that gap. And, and, you know, I think anyone who actually studies the numbers and gets into the details of it sees that FICO scores are, you know, a tiny, tiny piece of the overall process, whether you're talking about a mortgage or any other kind of credit evaluation process.

Speaker Change #137: You've heard us say in the past and I certainly continue to believe that what we charged to the FICO score is so much less than the value that we provide.

Manav Shiv Patnaik: I would say, there's not a lot of change in our thought process or thought process is that over time, we're going to close some of that gap.

Speaker Change #105: And.

Speaker Change #105: I think.

Speaker Change #105: I think anyone who actually studied the numbers and gets into the details of it sees the FICO scores are tiny tiny piece of the overall process, whether you are talking mortgage or any other kind of credit evaluation process and so so I would say no no real change anticipated.

William J. Lansing: And so, I would say, no, no real change anticipated. Okay, and then, and then somewhat similarly on the software side, you know, I think you talked about that value proposition being unique and niche, etc. But, you know, we've heard a lot of other software companies during learning season talk about, you know, the weak environment and the slowdown. It doesn't sound like you're seeing any of that. But anything you'd like to call out? Was there maybe some, you know? Could it be a lag that you see some of these headwinds?

Speaker Change #134: Okay, and then somewhat similarly on the software side.

William J. Lansing: Or perhaps you're not seeing that at all? We're really not seeing that. That's not what I mean. We've certainly heard that, and I guess the industry is experiencing that, but we haven't felt it. Okay, fair enough, thank you guys. Thank you.

Speaker Change #135: I think you talked about that value proposition being unique and niche et cetera, but we've heard obviously a lot of other software companies, saying that anything you can talk.

Speaker Change #120: Talk about.

Speaker Change #131: The weak environment in the slowdown it doesn't sound like you're seeing any of that but.

Speaker Change #123: And you'd like to call out or is there may be some could it be at a lag when you see some of these headwinds or perhaps youre not seeing that at all.

Speaker Change #132: We're really not seeing that.

Speaker Change #136: I mean, we've certainly heard that and I guess the industry is experiencing that but we haven't felt that.

Speaker Change #126: Okay fair enough. Thank you guys.

Operator: This will conclude today's question and answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day. Goodbye. ??? ??? ??? ??? ??? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? and many more.

Speaker Change #129: Thank you. This will conclude today's question and answer session, ladies and gentlemen. This will also conclude today's conference call. Thank you for participating and you may now disconnect everyone have a great day.

Speaker Change #120: Goodbye.

Operator: Thanks for watching! Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2024 FICO Earnings Conference Call. At this time, all participants are in a listen-only mode.

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Speaker Change #139: Good day, ladies and gentlemen, and thank you for standing by welcome to the third quarter 2024 cycle earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.

Speaker Change #105: You will need to press star one on your telephone.

Speaker Change #105: Youre an automated message advising you. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Singleton. Please go ahead.

Dave Singleton: Good afternoon, and thank you for attending FICO's third quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Steve Weber. Today, we issued a press release that describes financial results compared to the prior year. And on this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the

Speaker Change #105: Good afternoon, and thank you for attending our third quarter earnings call I Am David Singleton, Vice President of Investor Relations and I'm joined today by our CEO will Lansing and our CFO Steve Weber.

Dave Singleton: Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portion of such filings. Copies are available from the SEC, from the FICA website, or from our investor relations team.

Speaker Change #142: Today, we issued a press release that describes financial results compared to the prior year and on this call management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of that business.

Speaker Change #140: Certain statements made in this presentation are forward looking under the private Securities Litigation Reform Act of 1095, those statements involve many risks and uncertainties that could cause actual results to differ materially.

Speaker Change #140: Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward looking statements portions of such filings.

Speaker Change #140: Copies are available from the SEC from the FICO website or from our Investor Relations team.

Dave Singleton: 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 reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measures. The earnings release and Regulation G Schedules are available on the Investor Relations page of the company's website at FICO.com or on the SEC's website at SEC.gov.

Speaker Change #140: 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.

Speaker Change #105: The earnings release and regulation G schedules are available on the Investor Relations page of the company's web site at FICO Dot com or on the Sec's website at SEC Gov and a replay of this webcast will be available through July 31 2025.

Dave Singleton: And a replay of this webcast will be available through July 31, 2025. Now, I will turn the call over to our CEO, Will Lansing. Thanks, Dave.

Speaker Change #105: Now I will turn the call over to our CEO will Lansing, Thanks, Dave and thank you everyone for joining us for our third quarter earnings call in.

William J. Lansing: And thank you, everyone, for joining us for our third quarter earnings call. In the investor relations section of our website, we've posted some financial highlight slides that we'll be referencing during our presentation. Today, I'll talk about this quarter's results and our increased guidance for the full fiscal year. We continue to deliver strong quarterly results, including impressive growth in our ACV bookings and free cash flow. As shown on page 2 of the third quarter financial highlights, we reported Q3 revenues of $448 million, up 12% over the last year. We delivered $126 million of gap net income in the quarter, down 2%, and gap earnings of $5.05 per share, down 1% from the prior year.

William J. Lansing: In the Investor Relations section of our website, we've posted some financial highlight slides that we will be referencing during our presentation. Today I'll talk about this quarter's results and our increased guidance for the full fiscal year.

Speaker Change #105: We continue to deliver strong quarterly results, including impressive growth in our ACD bookings and free cash flow.

Speaker Change #105: As shown on page two of the third quarter financial highlights, we reported Q3 revenues of $448 million up 12% over the last year.

Speaker Change #105: We delivered $126 million of GAAP net income in the quarter down, 2% and GAAP earnings of $5 <unk> per share down 1% from the prior year.

Speaker Change #105: On a non-GAAP basis Q3, net income was $156 million.

Speaker Change #105: With earnings of $6 25 per share up 9% and 10%, respectively. We had a difficult comp in year over year net income as Q3 of 2023 included an $8 5 million onetime reimbursement of third party data implementation costs as well as a $9 $5 million reduction to income tax.

Speaker Change #105: Expense associated with the valuation of our R&D credits.

Speaker Change #105: We delivered record free cash flow of $206 million in our third quarter and $551 million over the last four quarters. We continue to return capital to our shareholders through buybacks in Q3, we repurchased 196000 shares at an average price of $1293 per share and we announced a new board.

Speaker Change #105: <unk> for $1 billion of share repurchase.

William J. Lansing: And we announced a new board authorization for $1 billion of share repurchase. In our score segment on page six of the presentation, our third quarter revenues were $241 million, up 20% versus the prior year. Breaking that down, in B2B, current quarter revenues were up 27% versus the prior year. In B2C, current quarter revenues were down 2% versus the prior year.

Speaker Change #105: In our scores segment on page six of the presentation of our third quarter revenues were $241 million up 20% versus the prior year.

Speaker Change #105: Okay.

Speaker Change #105: Breaking that down in <unk> current quarter revenues were up 27% versus the prior year.

Speaker Change #143: <unk> see the current quarter revenues were down 2% versus the prior year.

Speaker Change #105: Third quarter mortgage originations revenues were up 80% versus the prior year.

Speaker Change #105: Mortgage origination revenue accounted for 49% of <unk> revenue and 39% of total scores revenue.

Speaker Change #105: Auto originations revenues were down 3%, while credit card personal loan and other originations revenues were down 7% versus the prior year.

Speaker Change #105: We continue to drive strong adoption for FICO score 10 T for non GSE mortgages based on 2023 firm reported data clients with over 126 billion in annualized mortgage originations and about 380 billion as an eligible mortgage portfolio of servicing has signed up for the FICO score 10 T <unk>.

Speaker Change #105: Firms are using FICO 10, T to make credit decisions delivered to investors and for securitization.

Speaker Change #105: FICO 10 T for conforming mortgages will be rolled out based on the timeline of the Fhfa's implementation of enterprise credit score requirements.

William J. Lansing: In our software segment, we delivered $206 million in Q3 revenue, up 5% from last year, driven mainly by growth in SaaS software, partially offset by a decline in professional services. We continue to drive strong growth in ARR and NRR through our land and expand strategy, with expansion driven by increased customer usage. As shown on page 7, total ARR was up 10%, with platform ARR growing 31% and non-platform ARR growing 3%. Total NRR for the quarter shown on page eight was 108%, with platform NRR at 124% and non-platform NRR at 101%. Our total ACV bookings for the quarter were an impressive $27.5 million.

Speaker Change #146: And our software segment, we delivered $206 million in Q3 revenue up 5% from last year, driven mainly by growth in SaaS software, partially offset by decline in professional services.

Speaker Change #248: Continue to drive strong growth in IRR and NR through our land and expand strategy with expand driven by increased customer usage as shown on page seven total <unk> was up 10% with platform AAR growing 31% and non platform IRR growing 3%.

Speaker Change #105: Total <unk> for the quarter shown on page eight was 108% with platform NR at 124% and non platform NR at 101%.

Speaker Change #105: Our total ACB bookings for the quarter were an impressive 27 5 million.

William J. Lansing: We continue to drive more FICO platform SAS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World Event has been a catalyst for driving pipeline growth, especially for the FICO platform. I'm very proud of the strength of our software business, both the industry-leading technology and our remarkable team. This quarter, we secured another award for our FICO platform, the Business Intelligence Platform of the Year from Data Breakthrough. In July, Nikhil Bell was promoted to EVP for Software, leading all technology and go-to-market functions.

Speaker Change #105: We continue to drive more FICO platform, SaaS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World event has been a catalyst for driving pipeline growth, especially for the FICO platform.

Speaker Change #105: I'm very proud of the strength of our software business, both the industry, leading technology as well as our remarkable team.

Speaker Change #105: This quarter, we secured another award for our FICO platform the business intelligence platform in the year from data breakthrough.

Speaker Change #145: In July <unk> Bell was promoted to EVP for software leaning all technology and go to market functions. The killer has been instrumental in strengthening our brand value reputation with customers and regulators strategic competitive positioning for FICO scores and FICO platform and market leading business growth.

William J. Lansing: Nikhil has been instrumental in strengthening our brand value, reputation with customers and regulators, strategic competitive positioning for FICO scores and the FICO platform, and market-leading business growth. We continue to excel in our sports business as well. Our team is focused on innovation to provide new ways to add value for our customers. The FICO score is a tool that market participants rely on to make many crucial decisions, including pre-qualification, underwriting, pricing, insuring, securitizing, rating, selling, assessing capital requirements, assessing prepayment risk, and determining collection strategies. The FISA score has long been freely chosen because it's trusted as the most predictive and reliable independent credit score, enabling lenders to fairly expand credit access to more consumers.

Speaker Change #105: We continue to excel in our scores business as well our team is focused on innovation to provide new ways to add value for our customers.

Speaker Change #141: The FICO score is a tool that market participants rely on to make many crucial decisions, including pre qual underwriting pricing, ensuring securitizing rating selling assessing capital requirements assessing prepayment risk and determining collection strategies.

Speaker Change #141: The FICO score has long been freely chosen because its trusted is the most predictive and reliable independent credit score, enabling lenders to fairly extend credit access to more consumers.

William J. Lansing: The FICO score was widely adopted because it democratized and expanded access to credit while simultaneously underpinning the safety and soundness of the market. It's worth pointing out that over half of the mortgage market is non-conforming and also overwhelmingly uses FICO scores. The FICO score is provided and will continue to provide tremendous value to the credit ecosystem. As part of our ongoing commitment to industry-leading credit decisions, we've made significant commitments to financial knowledge and financial inclusion.

Speaker Change #141: <unk> score was widely adopted because it democratized and expanded access to credit while simultaneously underpinning the safety and soundness of the market.

Speaker Change #148: It's worth pointing out that over half of mortgage market not as non conforming and also overwhelmingly users FICO scores.

Speaker Change #148: The FICO score has provided and will continue to provide tremendous value to the credit ecosystem.

Speaker Change #197: As part of our ongoing commitment to industry, leading credit decision, we've made significant commitments to financial knowledge and financial inclusion we have once again partnered with Chelsea Football club, both men's and women's teams and U S Soccer Foundation for the fields of financial empowerment Summer tour.

William J. Lansing: We've once again partnered with Chelsea Football Club, both men's and women's teams, and the U.S. Soccer Foundation for the Fields of Financial Empowerment Summer Tour. The goal is to build excitement for and access to financial education and resources to help more people, including the next generation of fans, make more informed credit decisions. As part of the campaign, FICO hosts free Score a Better Future Fundamentals financial education workshops for students from traditionally underserved communities. Students improve their financial literacy and have the opportunity to attend a Chelsea football game.

Speaker Change #148: Goal is to build excitement for an access to financial education and resources to help more people, including the next generation of fans.

Speaker Change #141: <unk> informed credit decisions.

Speaker Change #141: As part of the campaign FICO host free score a better future fundamentals financial education workshops for students from traditionally underserved communities students improved financial literacy and have the opportunity to attend to Chelsea football game.

William J. Lansing: I'll talk about our outlook and balance of the year, including our increased guidance, after Steve provides further financial details. Thanks, Will, and good afternoon, everyone. As Will mentioned, we had another good quarter with total revenues of $448 million, an increase of 12% over the prior year. Score segment revenues for the quarter were $241 million, up 20% from Q3 of 2023. B2B revenues were up 27%, driven primarily by mortgage origination revenues. However, our B2C revenues were down 2% versus the prior year due to volume declines in our MyFICO.com business.

Speaker Change #195: Talk about our outlook for the balance of the year, including our increased guidance. After Steve provides further financial details.

Steven P. Weber: Software segment revenues in the third quarter were $206,000,000, up 5% for Q3 2023. On-prem and SaaS software revenue grew 7% year-over-year, while professional services declined 9%. This quarter, 85% of total company revenues were derived from our Americas region, which is a combination of our North America and Latin American regions.

Steven P. Weber: Thanks will and good afternoon, everyone.

Steven P. Weber: As will mentioned, we had another good quarter with total revenues of $448 million, an increase of 12% over the prior year.

Steven P. Weber: Score segment revenues for the quarter were $241 million up 20% from Q3 of 2023.

Steven P. Weber: <unk> revenues were up 27% driven primarily by mortgage origination revenues.

Steven P. Weber: Our <unk> revenues were down 2% versus the prior year due to volume declines in our Myfico dotcom business.

Steven P. Weber: Software segment revenues in the third quarter were $206 million up 5% versus Q3 2023.

Steven P. Weber: <unk> and SaaS software revenue grew 7% year over year, while professional services declined 9%.

Steven P. Weber: This quarter, 85% of total company revenues were derived from our Americas region, which is the combination of our North America and Latin American regions.

Speaker Change #105: Our EMEA region EMEA region generated 10% of revenues in the Asia Pacific region generated 5%.

Speaker Change #105: Our total software <unk> was $710 million, a 10% increase over the prior year.

Speaker Change #105: Platform <unk> was $215 million, representing 30% of our total Q3 'twenty four.

Speaker Change #105: Up from 25% of total in Q3 of 2023.

Speaker Change #105: Platform IRR grew 31% versus the prior year.

Speaker Change #105: While non platform <unk> grew 3% to $495 million this quarter.

Speaker Change #105: Our platform land and expand strategy continues to be successful our dollar based net retention rate in the quarter was 108% platform NR was 124%, while our non platform NR was 101%.

Speaker Change #105: Platform MLR was driven by a combination of new use cases and increased usage.

Speaker Change #105: Our software ACB bookings for the quarter were $227 $5 million as a reminder, ACD bookings include only the annual value of software sales and exclude professional services.

Steven P. Weber: Our expenses for the quarter, total operating expenses, were $258 million this quarter versus $222 million in the prior year, an increase of 16% year-over-year and 8% versus the prior quarter. Our third quarter included our FICA World Event and a true-up for our Annual Incentive Rewards, and we expect Q4 expenses to be down modestly from our Q3 run rate. As Will noted, the prior year includes an $8.5 million one-time reimbursement of third-party data implementation costs and a reduction to income tax expense of $9.5 million associated with the valuation of our R&D tax credit.

Speaker Change #105: Our expenses for the quarter.

Speaker Change #105: Total operating expenses were $258 million this quarter versus $222 million in the prior year, an increase of 16% year over year and 8% versus the prior quarter.

Speaker Change #105: Our third quarter included our FICO World event, and a true up for our annual incentive rewards and we expect Q4 expenses to be down modestly from our Q3 run rate.

Speaker Change #194: As will noted the prior year included an $8 $5 million, one time reimbursement of third party data implementation costs and a reduction to income tax expense of $9 5 million associated with the valuation of our R&D tax credits.

Steven P. Weber: Our non-GAAP operating margin is shown in our Reg G schedule at 52% for the quarter compared with 51% in the same quarter last year. Gap net income this quarter was $126 million, down 2% from the prior year's quarter. Our non-GAAP net income was $156 million for the quarter, up 9% from the prior year's quarter. The effective tax rate for the quarter was 24.5%.

Speaker Change #105: Our non-GAAP operating margin as shown in our Reg G schedule was 52% for the quarter compared with 51% in the same quarter last year.

Speaker Change #105: GAAP net income this quarter was $126 million down.

Speaker Change #105: Down 2% from the prior year's quarter.

Speaker Change #105: Our non-GAAP net income was $156 million for the quarter up 9% from the prior year's quarter.

Speaker Change #105: The effective tax rate for the quarter was 24, 5%, we believe that our fiscal year 2024, net effective tax rate is expected to be around 22%, while our recurring tax rate is expected to be around 26%.

Steven P. Weber: We believe that our fiscal year 2024 net effective tax rate is expected to be around 22%, while our recurring tax rate is expected to be around 26%. Recurring tax rate is before any excess tax benefit and other discrete items. Free cash flow for the quarter was $206 million, a 69% increase from the previous year.

Speaker Change #105: Our recurring tax rate is before any excess tax benefits and other discrete items.

Speaker Change #105: Free cash flow for the quarter was $206 million or 69% increase from the previous year. The trailing 12 months free cash flow was $551 million compared to $467 million in the prior quarter.

Steven P. Weber: The trailing 12-month free cash flow was $551 million, compared to $467 million in the prior quarter. At the end of the quarter, we had $199 million in cash and marketable investments. Our total debt at quarter end was $2.13 billion, with a weighted average interest rate of 5.3%. Currently, 61% of our total debt is fixed rate. Our floating rate debt is prepayable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods. During the quarter, we secured a $450 million term loan and used those proceeds to reduce our revolving line of credit and to provide additional debt capacity.

Speaker Change #105: At the end of the quarter, we had $199 million in cash and marketable investments.

Speaker Change #105: Our total debt at quarter end was $2, one 3 billion with a weighted average interest rate of five 3%.

Speaker Change #105: Currently 61% of our total debt is fixed rate our floating rate debt is pre payable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods.

Speaker Change #105: During the quarter, we secured a $450 million term loan and used those proceeds to reduce our revolving line of credit and to provide additional debt capacity.

Speaker Change #105: Turning to return of capital we bought back 196000 shares in the third quarter at an average price of $1293 per share that exhausted the existing board authorization, which was approved in January and we have just announced a new bar board authorization for $1 billion.

Speaker Change #105: We continue to view share repurchases as an attractive use of cash.

William J. Lansing: And with that, I'll turn it back to Will for his thoughts on the rest of the year and the increase in our four-year guide. Thanks, Steve. We are executing on our strategy. Our customers are delighted with our innovative products. Our execution is generating strong financial results, including impressive ACD bookings, record free cash flow, and an increase in FICO platform and FICO 10T adoption. The business is strong. I'm pleased to report that today we're again raising our full year guidance as we enter the fourth quarter of our fiscal year. We're raising our full year revenue guidance to $1.70 billion. Gap net income is now expected to be $500 million, with earnings per share of $19.90.

William J. Lansing: And with that I'll turn it back to will for his thoughts on the rest of the year and the increase in our full year guidance.

Speaker Change #105: Year guidance as we enter the fourth quarter of our fiscal year.

Speaker Change #105: We're raising our full year revenue guidance to $1 7 billion.

Speaker Change #105: GAAP net income is now expected to be 500 million with GAAP earnings per share of $19 90.

Speaker Change #105: non-GAAP net income is now expected to be 582 million with non-GAAP earnings per share of <unk> $23 16.

Speaker Change #105: With that I'll turn it back to Dave and we will open up the Q&A session.

Dave: Well. This concludes our prepared remarks, and we're now ready to take questions. Operator, Please open the lines. Thank.

Operator: Thank you. As a reminder, to ask a question at this time, please press star then one on your telephone. If you wish to remove your question, please press star one one again.

Speaker Change #200: Thank you as a reminder to ask a question at this time. Please press Star then one one on your telephone if you wish to remove your question. Please press star one again, one moment, while we compile our Q&A roster.

Faiza Alwy: One moment while we compile our Q&A roster. And our first question is going to come from the line of Faiza Alwy with Deutsche Bank. Your line is open. Please go ahead.

Speaker Change #149: And our first question is going to come from the line of sight.

Speaker Change #212: With Deutsche Bank. Your line is open. Please go ahead.

William J. Lansing: Yes, hi, thank you so much. So I wanted to start with the software business and just ask you if you could comment on the selling environment, if there's any change from a macro perspective, anything new or different you're hearing from your customers. And then, you know, I know at FICO World, we talked about, you know, improvement of the platform and talked about decomposition of the platform. So just give us a sense of if there's any update there and any additional color. FICO World is always, and was this year, the biggest pipeline-generating event that we have.

Speaker Change #221: Yes, hi, thank you so much so I wanted to start with the software business and just ask you. If you could comment on the selling environment. If there's any change from a macro perspective anything new or different you are hearing from premier customers.

Speaker Change #150: And then I know with.

Speaker Change #150: Michael word we had talked about.

Speaker Change #202: Improvement of the platform and talking about the composition of the platform. So just give us a sense of if there is any update there.

Speaker Change #214: Additional color.

Speaker Change #198: FICO World is is always and was this year the biggest pipeline generating event that we have and so we came out of FICO world with a very very healthy pipeline I would say that the selling environment has not changed that much over the last year or so.

William J. Lansing: And so we came out of FICO World with a very, very healthy pipeline. But I would say that the selling environment, you know, has not changed that much over the last year or so. And I would also emphasize that more and more customers are buying FICO software as a strategic move. And so it's a very considered purchase. And it's, you know, it's not just like going out and finding a point solution to a small problem, to a specific problem. It's a bigger, it's a bigger thing than that. And that hasn't changed.

Speaker Change #150: And I would also emphasize that increasingly.

Speaker Change #150: Increasingly customers are buying FICO software as the strategic move and so it's a very considered purchase and it's.

Speaker Change #150: Okay.

Speaker Change #150: It's not just like going out and finding a point solution to a small problem to a specific problem. It's a bigger it's a bigger thing than that and that hasn't changed that's kind of the new way of operating.

William J. Lansing: That's kind of the new way of operating. Got it. Thank you. And then just a question on mortgage revenues. You obviously had very strong growth in the quarter. I'm curious how, you know, volume trended in the quarter. I know you don't give a breakdown, but was it in line with your expectations?

Speaker Change #152: Got it. Thank you and then just a question on mortgage revenue you, obviously had very strong growth in the quarter I'm curious how.

Speaker Change #147: <unk> hundred in the quarter I know you don't give a breakdown but was it in line with your expectations are there any dynamics you're seeing around.

Speaker Change #227: Optical buyer I believe lenders have the option to go to.

Speaker Change #147: 100, <unk> it looks like that that are you seeing an impact on volume from that and just the general environment.

Speaker Change #147: Right.

Speaker Change #154: Our mortgage volumes.

Speaker Change #158: Are a lagging indicator relative to other mortgage data that you have.

Speaker Change #189: Our mortgage volumes are down versus a year ago, they're pretty much flat versus a quarter last quarter.

Speaker Change #147: And.

Speaker Change #190: And none of that is particularly surprising.

Surinder Singh Thind: And that, you know, none of that is particularly surprising. All right, thank you so much. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Surinder Thind with Jeffrey. Your line is open. Please go ahead.

Speaker Change #151: Alright, thank you so much.

Speaker Change #192: Thank you and one moment as we move on to our next question.

surrender sand: And our next question is going to come from the line of surrender sand with Jefferies. Your line is open. Please go ahead.

surrender sand: Thank you first question on just the guidance raise it.

surrender sand: It implies revenues are going to be down roughly $10 million quarter over quarter, just any color. There I know you normally.

Speaker Change #233: Our conservative in the guide, but just can you do the walk for us from <unk> to fiscal <unk>. So we are pretty conservative with the way. We guide so we want to make sure that a lot of us on the scores. We don't have much control over right. So we don't really know what's going to happen. There I would say that generally the fourth quarter is a little lighter seasonally for.

Steven P. Weber: Thank you. Thank you. Can you do the walk for us?

surrender sand: Mortgage volumes aren't as high typically then as they are in the spring. So there might be some a little bit of volume decline number leverage type of an environment, which we don't have a lot of visibility to it.

Steven P. Weber: [inaudible] Thank you. And then, in terms of just when I think about the non-platform business here, the NRR was 101.

Speaker Change #222: Thank you and then in terms of just.

Speaker Change #160: When I think about.

Speaker Change #203: The non platform business here.

Speaker Change #220: The <unk> was 101% that's the slow pace of growth in about two years, so any color there that.

Steven P. Weber: That's the slowest pace of growth in about two years. Any color there that you can help with, or is there some movement of revenues from non-platform to platform at this point? You know, I wouldn't say that it's cannibalization if that's what your question is getting at.

Speaker Change #223: That you can help with or is there some movement of revenues from non platform to platform at this points, how should we think about that.

Speaker Change #224: I wouldn't say that it's cannibalization if thats what your question is getting at.

Steven P. Weber: You know, we're pretty pleased with our classic offerings with 101% NRR. We've been trying to manage that business in this, you know, relatively flat way, and we're pleased that it's turning out that way. But, you know, as you can see, the growth is on the expanding side on the platform. We let the market tell us what it wants, but we're not displeased with the way it's shaking out. Yeah, and I would say, we had higher numbers last year.

Speaker Change #220: We're we're pretty pleased with our classic offerings with a 101% NRI.

Speaker Change #160: <unk> been trying to manage that business in this.

Speaker Change #160: Relatively flat way, we're pleased that it's turning out that way.

Speaker Change #160: But as you can see the growth is on the expand side on the platform.

Speaker Change #160: We don't we let the market tell us what it wants but we're not displeased with the way it's shaping out.

Steven P. Weber: And at the time, we said there were some things driving that some of it was, you know, some of the CPI increase that we had. And we had some advantages last year from some FX as well, when we knew that was not going to happen this year.

Speaker Change #160: Yes, I would say I mean, we had higher numbers last year and at the time. We said there was some things driving that some of it was.

Speaker Change #160: Some of the CPI increase that we had and we had some we have some advantages last year from some FX as well and we knew that was not going to maintain this year. So it is kind of what we thought was going to happen it would settle more who around 100%.

Steven P. Weber: So it's kind of what we thought was going to happen; it would settle more to around 100%. Okay, thank you. I'll get back to you.

Speaker Change #230: Okay. Thank you I'll get back into queue for additional questions.

Speaker Change #193: Thank you and one moment as we move on to our next question.

Speaker Change #193: And our next question is going to come from the line of Scott.

Scott: With Wolfe Research. Your line is open. Please go ahead.

Scott: Hey, good afternoon, guys and thank you for taking my questions.

Scott: Wanted to start on the auto origination side revenues down 3% versus modestly up last quarter. Just wondering similar to how you did in mortgage may be comment on the volumes, there and how how they trended versus last quarter.

Speaker Change #210: Yes volumes were relatively flat, but the really is a mix shift. So we had we had more of a mix shift to more market share in the.

William J. Lansing: So we had, we had more of a makeshift to gain more market share in the tiers that are a little bit less pricey for us, cost a little bit less. So that's really the difference between the volume and the revenue. So the price per score went down slightly because of the makeshift.

Speaker Change #239: Peers that are a little bit less price for us unit cost a little bit lower so thats really the difference between the volume and the.

Speaker Change #210: The revenue so the price per score went down slightly because of our mix shifts.

William J. Lansing: Got it. That's helpful. Then on the software side of the platform ARR, I mean, I think it's pretty good to see the sort of rate of deceleration moderate from 2Q to 3Q. It's sort of this low 30s level.

Speaker Change #196: Got it that's helpful.

Speaker Change #157: And then on the on the software side on the platform.

Speaker Change #191: It's pretty good to see the sort of rate of deceleration moderate from Q3, Q, it's sort of this low thirty's level I mean, do you kind of see this as a sort of sustainable.

Speaker Change #234: Growth rate for platform IRR over the near to medium term here.

William J. Lansing: I mean, do you kind of see this as a sustainable growth rate for platform ARR over the near to medium term? Probably, yeah. I mean, we don't, you know, we think we're pretty confident in that or at around that rate, which can change as we go out farther. But, you know, we think that's a sustainable rate. And we've got, you know, it helps when you have a good quarter like this in terms of signing new deals too, because that'll, you know, that'll help boost AR in the future. But we don't have really good visibility, either, because a lot of it depends on how quickly our customers can get online and how much usage they have.

Speaker Change #153: Probably yes, I mean, we don't we think we're pretty confident in that are at around that rate.

Speaker Change #153: It can change as we go out further, but we think that's a sustainable rate.

Speaker Change #159: Got it helps when you have a good quarter like this in terms of signing new deals too because that will.

Speaker Change #159: That will help boost our future. So we don't have really good visibility took us a lot of it depends on how quickly our customers can get online.

Speaker Change #159: How much usage, they have but theres a lot of growth there.

William J. Lansing: But, you know, there's a lot of growth there, so we're pretty confident that we can maintain these levels. Great.

Speaker Change #159: So we're pretty confident that we can maintain these levels.

Kyle David Peterson: Thanks, guys. Thank you and one moment as we move on to our next question. And our next question is going to come from the line of Kyle Peterson with Needham.

Speaker Change #226: Great. Thanks, guys.

Speaker Change #159: <unk>.

Speaker Change #228: Thank you and one moment as we move on to our next question.

Speaker Change #229: And our next question is going to come from the line of Kyle Peterson with Needham. Your line is open. Please go ahead.

William J. Lansing: Your line is open, please go ahead. Great, thanks. Good afternoon, guys. I just wanted to start out on software, particularly the bookings, which looked pretty nice on an ACV basis compared to a lot of the prior quarters. So, how should we think about, you know, some of the implementation cycles and kind of when, you know, some of those bookings will start to translate to revenue? It's, you know, as you know, it's a long sales cycle. It's been as long as 400 days.

Kyle David Peterson: Okay, great. Thanks definitely guys.

Kyle David Peterson: I just wanted to start out on <unk>.

Kyle David Peterson: Software bookings.

Speaker Change #237: Pretty nice on an ACB basis correct.

Speaker Change #231: Prior quarter, so how should we think about some of the.

Speaker Change #166: Implementation cycles, and kind of when the bookings will start to translate to revenue here.

Speaker Change #241: It is.

Speaker Change #235: As you know, it's a long sales cycle as long as 400 days and it tastes not that long to get live once it's all said and done.

Speaker Change #153: Sure.

Speaker Change #161: I think I think that the flow through is the subsequent year I mean, thats the easiest way to think about it yes.

William J. Lansing: And it does depend on the customer, how sophisticated they are, how ready they are. But yeah, I mean, then, you know, if you sign deals now in the next six to nine months, you should start seeing a flow through on that. Okay.

Speaker Change #170: And it does depend on the customer how sophisticated are already they are but yes.

Speaker Change #153: If we sign deals now in the next six to nine months you start seeing it flow through on that.

Speaker Change #242: Got it that's very helpful and then.

Speaker Change #156: Just a follow up.

Speaker Change #244: Particularly on if we do get rate cuts, whether it's later this year next year maybe.

Speaker Change #246: Maybe if you can walk us through some of the different sensitivities I know your business now looks quite a bit different.

Speaker Change #167: Maybe compared to past cycles, so, especially on those first one to two rate cuts what are some of the impacts that we should be mindful of if those do come to fruition.

William J. Lansing: You know, we're already seeing a little bit of an uptick in refi, and it's not exactly, you know, a gigantic leap of faith that as rates come down, we'll see volumes go up; we fully anticipate that. You know, your guess is as good as ours as to the timing of the rate cut. We would hope to see some rate cuts, you know, towards the end of this year and next year, and volumes will go up with that. All right, that's helpful. Thanks, guys.

Speaker Change #153: Sure.

Speaker Change #250: We're already seeing a little bit of an uptick in refi.

Speaker Change #251: And it's not exactly.

Speaker Change #153: Okay.

Speaker Change #254: A gigantic leap of faith that as rates come down we will see volumes go up we fully anticipate that.

Speaker Change #256: Your guess is as good as ours as to the timing of the rate cuts.

Speaker Change #256: We would hope to see some rate cuts towards the end of this year and next year and volumes go up with that.

Speaker Change #257: Alright Thats helpful. Thanks, guys.

Keen Fai Tong: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of George Tong with Goldman Sachs. Your line is open. Please go ahead. Hi, thanks. Good afternoon. Within the scores business, card and personal loan revenue fell 7% in the quarter, which is a little bit better than the 9% decline in the prior quarter.

Speaker Change #259: Thank you and one moment as we move on to our next question.

Speaker Change #162: And our next question is going to come from the line of George Tong with Goldman Sachs. Your line is open. Please go ahead.

William J. Lansing: Can you talk about some of the trends you're seeing among subprime or lower-tier consumers that may be impacting card and personal loan performance? And also talk about overall bank lending conditions? Yeah, I mean, the supply markets obviously seem to have the biggest pullback, which is not surprising, right? You're late in the credit cycle; you have a lot more, you know, uncertainty. And that's kind of where you see that happens first. Bank by bank, it kind of varies depending on what they're looking at and what kind of, you know, what kind of campaigns they might, may or may not be running.

Keen Fai Tong: Hi, Thanks, good afternoon.

Speaker Change #155: Within the scores business card and personal loan revenue fell 7% in the quarter, which is a little bit better than the 9% decline in the prior quarter can you talk about some of the trends you are seeing among.

Speaker Change #165: Subprime or lower to your consumers that may be impacting card and personal loan performance and also talk about overall bank lending conditions.

Paul: Yes, I mean, the subprime market is obvious Paul obviously, you've seen the biggest pullback which is not surprising right here late in the credit cycle you have a lot more.

Speaker Change #164: Uncertainty and that's kind of where you see the happened first bank by bank it kind of varies depending on what they are looking at and we're kind of.

Speaker Change #208: What kind of campaigns, they might may or may not be running but.

William J. Lansing: But, you know, we see banks being relatively conservative with new originations. And I think they're kind of waiting to see what happens and see what the economic environment looks like. So it's really not surprising.

Speaker Change #164: We see banks being relatively conservative with new originations.

Speaker Change #164: And I think they're kind of waiting to see what happens and see what the economic environment looks like so it's really not surprising we saw probably little over a year ago strong growth there.

William J. Lansing: You know, we saw strong growth there probably a little over a year ago. When mortgages started to slow down and rates started to go up, we saw strong growth there. But now I think there's just more uncertainty in the market, and they're just kind of being more cautious in their origination. Got it. That's helpful. And then, switching to the software side, software operating margins contracted about 430 BIPs year-over-year in the quarter.

Speaker Change #164: When when mortgage started.

Speaker Change #164: The slowdown in rates started to go up we saw strong growth there, but now I think there's just more uncertainty in the market and they are just kind of being more cautious in their originations.

Speaker Change #168: Got it that's all.

Speaker Change #169: And then switching to the software side.

Speaker Change #171: For operating margins contracted about 430 bps year over year quarter can you talk about some of the reasons behind what yes, it's almost completely almost completely around that that that reimbursement we had last year.

Steven P. Weber: Can you talk about some of the reasons behind what... That's almost completely around that reimbursement we had last year. So that was a big number we had, and that was all on the software side. So that's the driver of that.

Speaker Change #171: Got it.

Speaker Change #172: A big number, but we had and that was all on the software side. So that's that's the driver of that and so as that laps. When would you expect to flip to margin expansion in the software business that we will get some margin expansion next quarter, because I mean again, we had some costs by FICO World. This quarter was not going to repeat next next quarter. So we will have some our cost will decline.

Steven P. Weber: And so as that lapses, when would you expect to flip to margin expansion in the software business? Well, we'll get some margin expansion next quarter because, I mean, again, we had some costs like FICO World this quarter. It's not going to repeat next quarter, so we'll have some... Our costs will decline next quarter, and that'll end up with some margin expansion. We, you know, these costs are big enough that in any one given quarter, something like FICO World is going to have an impact on that quarter's margin. Got it.

Speaker Change #172: Next quarter and that'll that'll end up with some margin expansion.

Speaker Change #172: These costs are big enough, where any one given quarter something like FICO world is going to have an impact on that quarter's margin.

Speaker Change #173: Got it very helpful. Thank you.

Speaker Change #174: Thank you and one moment as we move on to our next question.

Speaker Change #175: And our next question comes from the line of SG Szabo draw with RBC. Your line is open. Please go ahead.

Operator: Thanks for taking my question. Just on the software revenue growth, particularly on prem and SaaS, and within that, when I look at software recognized over the contract term, the growth there moderated. What should we think about, Ashish? We can't hear you.

Speaker Change #176: Thanks for taking the question.

Speaker Change #177: Just on the software revenue growth, particularly the on Prem and SaaS and within that when I look at software recognized over the contract on the Gorilla, Denmark related how should we think about the growth profile.

Speaker Change #178: We can hear you we can hear you.

Ashish Sabadra: Sorry, let me know better. Yeah, so I wanted to focus on on-premises and SaaS software revenue growth. And within that, even the software recognized over the contract term, that moderated a bit, still pretty strong at 80%, but did moderate from the mid-teens. How should we think about those puts and takes on revenue growth going forward? Yeah, I mean, a lot of that is the fact that we had, you know, the omega growth, you know, the non-platform growth, not what we saw last year.

Speaker Change #177: Sorry.

Speaker Change #179: Let me now look better and better.

Speaker Change #181: Wanted to focus on the on Prem and SaaS software revenue growth and within that even the software recognized over contract film that moderated a bit.

Speaker Change #179: <unk> strong.

Speaker Change #180: 80%, but did moderate from machines, how should we think about those puts and takes on the revenue growth going forward.

Ashish Sabadra: So that right there drives most of the, you know, and obviously, the platform size going 50% either. But so you know, we think these kind of growth rates going forward, as I said earlier, that's probably more likely what we're going to see to continue. You know, and as the numbers get bigger, it's harder to drive 50% growth or even 40% growth. So we're pretty happy with the 30% growth on the platform side, and on the non-platform side, if we think we can get better than 100%, we're happy with that as well. That's very helpful.

Speaker Change #183: Yes, I mean, a lot of that is the fact that we had.

Speaker Change #180: <unk>.

Speaker Change #182: Non platform broth out what we saw last year, so that right. There drives most of the and then obviously the platform growing 50% either but so we think these kind of growth rates going forward as I said earlier, that's probably more likely that we're going to see to continue.

Speaker Change #182: And as the numbers get bigger it's harder to drive.

Speaker Change #182: 50% growth rate of 40% growth. So we're pretty happy with the 30% growth in the platform side and on the non platform. We think we can get better than 100%, we're happy with that as well.

Speaker Change #184: That's very helpful. Thank you.

Speaker Change #185: Thank you and one moment as we move on to our next question.

Speaker Change #186: And our next question comes from the line of Simon <unk> with Redburn Atlantic. Your line is open. Please go ahead.

Simon Alistair Vaughan Clinch: Hi, thanks for taking my question. I wanted to cycle back to the 30% plus growth in the platform software AR is on. And just as one of you could just go in a little bit more detail as to why you think that that is a sustainable level of growth and just perhaps flesh that out a little bit more for us, please. Well, I mean, we've got I mean, again, we had a really good quarter, you know, with new bookings, and we've got a lot of installed base that's rapidly expanding. I mean, when we install them, you know, most of our customers look for new ways to use them.

Speaker Change #185: Hi.

Simon Alistair Vaughan Clinch: Thanks for taking my question I wanted to cycle back to.

Simon Alistair Vaughan Clinch: The 30% plus growth in the platform software out on and just I was wondering if you could just getting a little bit more detail as to why you think but that is a sustainable level of growth and just perhaps flesh that out a little bit more for us.

Speaker Change #187: Well I mean, we've got I mean again, we had a really good quarter with new bookings and we've got a lot of installed base.

Speaker Change #188: That's brought in a rapidly expanding.

Speaker Change #188: When we install most of our customers.

William J. Lansing: And we see that in the net retention rate. And that number continues to be, to do well, and we continue to add more business to it. So we can't guarantee it.

Speaker Change #188: Look for new ways to use it and we see that and then that retention rate.

Speaker Change #188: That number continues to be well do well and we continue to add more business to itself and we can't guarantee it but we've got a lot of reasons. Both data driven anecdotally to think that we're going to continue to see that kind of growth.

William J. Lansing: But we've got a lot of reasons, both data-driven and anecdotally, to think that we're going to continue to see that kind of growth. Okay, thanks. And just to follow up on that, could you, I mean, just frame the approach to pricing within the software business?

Speaker Change #201: Okay, Thanks, and just to follow up on that.

Could you just frame the approach to pricing within the software business you mentioned last.

Speaker Change #204: Last year I think it was a non platform side, you had sort of.

William J. Lansing: You mentioned last year on the, I think it was the non-platform side, you had sort of higher inflationary pricing, but I was wondering if you could talk a bit about the strategy around pricing for value and how to think about that going forward. Our strategy around software pricing is, you know, we're very focused right now on making our software accessible and encouraging adoption. And so, you know, while there's probably room for value pricing in our software business, that's not where our direction is.

Speaker Change #205: Higher inflationary pricing, but I was just wondering if you could talk a bit about the strategy around.

Speaker Change #206: The pricing pricing value and how to think about that ground pools.

Speaker Change #207: Our strategy around software pricing is we're very focused right now on making our software accessible.

Speaker Change #207: An encouraging adoption and so while there is probably room for value pricing in our software business, that's not where our direction is our direction is to put the software in the hands of our customers and then watch revenue grow as their usage increases and their usage increases within the.

William J. Lansing: Our direction is to put the software in the hands of our customers and then watch revenue grow as their usage increases. And their usage increases, you know, within the initial applications that they put the platform views on for. And also, as they discover new uses, you know, the expand part of our land expand strategy is very much wrapped around the customer taking control of what they can do with the platform and coming up with new use cases.

Speaker Change #207: The initial applications that they've put the platform views for and then also as they discover new uses.

Speaker Change #207: The expand part of our land and expand strategy is very much wrapped around the customer taking control of what they can do with the platform and coming up with new use cases, and we tend to design in a way that we don't have to renegotiate contracts and go back and do a lot of work for them too.

Speaker Change #207: To do more revenue with us.

Speaker Change #207: We tend to design it in a way that they can.

Speaker Change #207: Select how much usage they want and.

Speaker Change #207: Our revenue goes up automatically as their usage goes up.

Speaker Change #209: Thanks, so much I appreciate it.

Jeffrey P. Meuler: I appreciate it. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Jeff Mueller with Baird. Your line is open.

Speaker Change #211: Thank you and one moment as we move onto our next question.

Speaker Change #211: And our next question is going to come from the line of Jeff Mueller with Baird. Your line is open. Please go ahead.

William J. Lansing: Please go ahead. Yeah, thanks. Instead of me getting to ask a question about cash flow this quarter, I just get to say congrats on tonight's cash flow. Can you give us some perspective on the geographical kind of trends within software? And I guess I'm just, it looks like America's revenue was down a little year over year. So any particular call outs, and then MEA was up a lot.

Jeffrey P. Meuler: Yes. Thanks, instead of me getting to ask a question about cash flow this quarter just to get to say congrats on the highest cash flow.

Jeffrey P. Meuler: Can you give us some perspective on the.

Speaker Change #213: Geographic kind of trends within software.

Speaker Change #215: I'm just it looks like Americas revenue was down.

Speaker Change #216: Down a little year over year, so any particular call outs and then EMEA.

William J. Lansing: So just any mega wins in an MEA or any reason to think that you're at an inflection point there and it's really taking off. I, you know, I, Jeff, I don't think that we have tremendous changes regionally. I, you know, I wouldn't try to read too much into, you know, the data on a quarterly basis.

Speaker Change #217: <unk> was up a lot.

So just any mega wins in EMEA or any reason to think that you are at an inflection point, there and it's really taking off.

Speaker Change #218: Jeff I don't think that we have tremendous changes regionally.

Speaker Change #219: I wouldn't try to read too much into into the data on a quarterly basis.

William J. Lansing: You know, we have strength in platform across all the regions. I think Asia Pacific was a little behind the other regions in terms of platform adoption, and there were some structural reasons for that. For example, AWS was not available in India before, and now it is.

Jeffrey P. Meuler: We have strength of a platform across all the regions.

Jeffrey P. Meuler: Asia Pacific was a little behind the other regions in terms of platform adoption and there are some structural reasons for that for example, AWS was was not available in India before and now it is but.

William J. Lansing: But we're, you know, we're seeing adoption across all the regions. Yeah, I would think some of what you might see with the volatility is when we have that point in time license revenue, and that could skew things in one given quarter. But we've had a lot of adoption in the last year in North America, and we're starting to see a lot more interest too in EMEA as well. And then when you're calling out the FICO 10-T adoption and then the non-conforming mortgage market, is that almost exclusively about upgrades from prior versions of the FICO score, given how high your penetration is? Or are you finding, I guess, like incremental volume as part of that adoption? It's a bit of both, but probably more of the upgrade.

Jeffrey P. Meuler: We're seeing adoption across other regions yes.

Speaker Change #225: We think some of what you see might be with the volatility is when we have that point in time license revenue and that can skew things in one given quarter, but we've had a lot of adoption in the last year in North America, and we're starting to see a lot more interest too in EMEA as well.

Speaker Change #225: Okay.

And then when you are calling out the FICO 10 T adoption and then.

Speaker Change #232: The nonperforming mortgage market is that almost exclusively about upgrades from prior versions of the FICO score given how high your.

Speaker Change #236: Your penetration is or are you finding I guess like incremental volume as part of that adoption.

Speaker Change #237: It's a bit of both but probably more of the upgrade.

William J. Lansing: Yeah, I mean, for the most part, everybody was using the traditional FICA scores, and now they're just moving to the 10-T, you know, ahead of the adoption by the FHFA. Okay. Thank you. Thank you. And again, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. One moment as we move on to our next question, and our next question is going to come from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead.

Speaker Change #240: Yes, I mean for the most part everybody was using the traditional FICO scores and now they are just moving to the 10 key ahead.

Speaker Change #240: Ahead of the adoption by the FHFA.

Speaker Change #243: Alright, okay. Thank you.

Speaker Change #243: Thank you.

Speaker Change #245: Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.

Speaker Change #247: <unk> as we move on to our next question.

Speaker Change #249: And our next question is going to come from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead.

Manav Shiv Patnaik: Thank you. Good evening. I just wanted to, you know, ask, well, you tried to reference some of these in your prepared remarks, but, you know, in the face of, you know, some public criticism around the price of your school, like, you know, how's your approach or thought process around, you know, the value of your school, maybe the timing around which you get to that value? Has that changed at all?

Manav Shiv Patnaik: Thank you good evening I just wanted to ask I think you are correct.

Speaker Change #252: And some of these in your prepared remarks, but in the face of some public criticism around the price of this or how.

Speaker Change #253: How is your approach or pop process.

Speaker Change #255: The value of this or maybe the timing around which you get to that value has that changed at all.

William J. Lansing: Well, you know, you've heard us say in the past, and I certainly continue to believe that what we charge for the FICO score is so much less than the value that we provide, that I would say there's not a lot of change in our thought process. Our thought process is that over time, we're going to close some of that gap. And, you know, I think anyone who actually studies the numbers and gets into the details of it sees that FICO scores are, you know, a tiny, tiny piece of the overall process, whether you're talking mortgage or any other kind of credit evaluation process. And so, I would say, no, no real change anticipated. Okay, and then, and then somewhat similarly on the software side, you know, I think you talked about that value proposition being unique and niche, etc.

Speaker Change #258: You've heard us say in the past and I certainly continue to believe that what we charge for the FICO score is so much less than the value that we provide that I would say, there's not a lot of change in our thought process or thought process.

Speaker Change #258: Is that over time, we're going to close some of that gap and.

Speaker Change #258: I think.

Speaker Change #258: I think anyone who actually studied the numbers and gets into the details of it sees their FICO scores are.

Speaker Change #258: Tiny tiny piece of the overall process, whether you are talking mortgage or any other kind of credit evaluation process and so so I would say no no real change anticipated.

William J. Lansing: But, you know, we've heard a lot of other software companies during learning season talk about, you know, the weak environment and the slowdown. It doesn't sound like you're seeing any of that. But anything you'd like to call out? Was there maybe some, you know? Could it be the lag that you see some of these headwinds? Or perhaps you're not seeing that at all? We're really not seeing that. That's not to say we haven't heard that, and I guess the industry is experiencing that, but we haven't felt that.

Speaker Change #260: Okay, and then similarly on the software side.

Speaker Change #261: I think you talked about that value proposition being unique and niche et cetera, but we've.

Speaker Change #262: Obviously, a lot of other software companies doing that anything you can talk about.

Speaker Change #263: The weak environment and the slowdown it doesn't sound like you're seeing any of that but any anything you'd like to call out or is there may be some.

Speaker Change #264: Could it be it lagged ADC some of these headwinds or perhaps youre not seeing that at all.

Speaker Change #265: We're really not seeing that that's not that's.

Speaker Change #266: Certainly heard that and I guess the industry is experiencing that but we haven't felt that.

Speaker Change #265: Okay.

William J. Lansing: Okay, fair enough. Thank you, guys. Thank you. This will conclude today's question and answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.

Speaker Change #267: Okay fair enough. Thank you guys.

Speaker Change #268: Thank you. This will conclude today's question and answer session, ladies and gentlemen. This will also conclude today's conference call. Thank you for participating and you may now disconnect everyone have a great day.

Q3 2024 Fair Isaac Corp Earnings Call

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