FAIR ISAAC CORP [FICO] Filings

10-Q 1 fico-20240630.htm Q3-24 10-Q fico-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-11689

Fair Isaac Corporation

(Exact name of registrant as specified in its charter)


Delaware		94-1499887
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

5 West Mendenhall, Suite 105		59715
Bozeman,	Montana
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 406-982-7276

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	FICO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes			☐			No			☒

The number of shares of common stock outstanding on July 17, 2024 was 24,518,533 (excluding 64,338,250 shares held by us as treasury stock).

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TABLE OF CONTENTS


	PART I – FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	32

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35

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PART I – FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2024		September 30, 2023
	(In thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents	$	156,043	$	136,778
Accounts receivable, net	437,637		387,947
Prepaid expenses and other current assets	37,455		31,723
Total current assets	631,135		556,448
Marketable securities	42,779		33,014
Other investments	1,255		1,223
Property and equipment, net	34,128		10,966
Operating lease right-of-use assets	26,087		25,703
Goodwill	776,714		773,327
Intangible assets, net	92		917
Deferred income taxes	78,227		59,136
Other assets	118,414		114,547
Total assets	$	1,708,831	$	1,575,281
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	22,489	$	19,009
Accrued compensation and employee benefits	92,731		102,471
Other accrued liabilities	57,737		59,478
Deferred revenue	149,259		136,730
Current maturities on debt	15,000		50,000
Total current liabilities	337,216		367,688
Long-term debt	2,104,943		1,811,658
Operating lease liabilities	18,420		23,903
Other liabilities	77,558		60,022
Total liabilities	2,538,137		2,263,271
Commitments and contingencies
Stockholders’ deficit:
Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and outstanding)	—		—
Common stock ($0.01 par value; 200,000 shares authorized, 88,857 shares issued and 24,564 and 24,770 shares outstanding at June 30, 2024 and September 30, 2023, respectively)	246		248
Additional paid-in-capital	1,320,717		1,350,713
Treasury stock, at cost (64,293 and 64,087 shares at June 30, 2024 and September 30, 2023, respectively)	(5,813,751)		(5,324,865)
Retained earnings	3,765,179		3,388,059
Accumulated other comprehensive loss	(101,697)		(102,145)
Total stockholders’ deficit	(829,306)		(687,990)
Total liabilities and stockholders’ deficit	$	1,708,831	$	1,575,281

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)


	Quarter Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share data)
Revenues:
On-premises and SaaS software	$	183,785	$	172,059	$	529,633	$	471,203
Professional services	22,614		24,851		63,637		74,348
Scores	241,450		201,778		670,447		578,273
Total revenues	447,849		398,688		1,263,717		1,123,824
Operating expenses:
Cost of revenues	88,225		71,846		258,632		228,221
Research and development	44,217		41,455		127,732		118,354
Selling, general and administrative	124,881		108,081		340,077		301,234
Amortization of intangible assets	275		275		825		825

Gain on product line asset sale	—		—		—		(1,941)
Total operating expenses	257,598		221,657		727,266		646,693
Operating income	190,251		177,031		536,451		477,131
Interest expense, net	(26,868)		(24,545)		(77,123)		(71,242)
Other income, net	3,935		5,301		11,314		7,270
Income before income taxes	167,318		157,787		470,642		413,159
Provision for income taxes	41,062		29,029		93,522		85,208
Net income	126,256		128,758		377,120		327,951
Other comprehensive income (loss):
Foreign currency translation adjustments	(4,098)		5,072		448		30,005
Comprehensive income	$	122,158	$	133,830	$	377,568	$	357,956
Earnings per share:
Basic	$	5.12	$	5.16	$	15.24	$	13.10
Diluted	$	5.05	$	5.08	$	15.01	$	12.91
Shares used in computing earnings per share:
Basic	24,646		24,959		24,743		25,040
Diluted	25,015		25,337		25,129		25,399

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)


	Common Stock			Additional Paid-in-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
(In thousands)	Shares	Par Value
Balance at March 31, 2024	24,753	$	248	$	1,281,577	$	(5,558,809)	$	3,638,923	$	(97,599)	$	(735,660)
Share-based compensation	—	—		42,435		—		—		—		42,435
Issuance of treasury stock under employee stock plans	7	—		(3,295)		601		—		—		(2,694)
Repurchases of common stock	(196)	(2)		—		(255,543)		—		—		(255,545)
Net income	—	—		—		—		126,256		—		126,256
Foreign currency translation adjustments	—	—		—		—		—		(4,098)		(4,098)
Balance at June 30, 2024	24,564	$	246	$	1,320,717	$	(5,813,751)	$	3,765,179	$	(101,697)	$	(829,306)

	Common Stock			Additional Paid-in-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
(In thousands)	Shares	Par Value
Balance at March 31, 2023	25,016	$	250	$	1,281,270	$	(5,110,421)	$	3,157,877	$	(99,769)	$	(770,793)
Share-based compensation	—	—		32,995		—		—		—		32,995
Issuance of treasury stock under employee stock plans	6	—		(1,875)		502		—		—		(1,373)
Repurchases of common stock	(130)	(1)		—		(98,634)		—		—		(98,635)
Net income	—	—		—		—		128,758		—		128,758
Foreign currency translation adjustments	—	—		—		—		—		5,072		5,072
Balance at June 30, 2023	24,892	$	249	$	1,312,390	$	(5,208,553)	$	3,286,635	$	(94,697)	$	(703,976)

	Common Stock			Additional Paid-in-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
(In thousands)	Shares	Par Value
Balance at September 30, 2023	24,770	$	248	$	1,350,713	$	(5,324,865)	$	3,388,059	$	(102,145)	$	(687,990)
Share-based compensation	—	—		109,457		—		—		—		109,457
Issuance of treasury stock under employee stock plans	212	2		(139,453)		17,908		—		—		(121,543)
Repurchases of common stock	(418)	(4)		—		(506,794)		—		—		(506,798)
Net income	—	—		—		—		377,120		—		377,120
Foreign currency translation adjustments	—	—		—		—		—		448		448
Balance at June 30, 2024	24,564	$	246	$	1,320,717	$	(5,813,751)	$	3,765,179	$	(101,697)	$	(829,306)

	Common Stock			Additional Paid-in-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
(In thousands)	Shares	Par Value
Balance at September 30, 2022	25,154	$	252	$	1,299,588	$	(4,935,769)	$	2,958,684	$	(124,702)	$	(801,947)
Share-based compensation	—	—		89,750		—		—		—		89,750
Issuance of treasury stock under employee stock plans	218	2		(76,948)		17,117		—		—		(59,829)
Repurchases of common stock	(480)	(5)		—		(289,901)		—		—		(289,906)
Net income	—	—		—		—		327,951		—		327,951
Foreign currency translation adjustments	—	—		—		—		—		30,005		30,005
Balance at June 30, 2023	24,892	$	249	$	1,312,390	$	(5,208,553)	$	3,286,635	$	(94,697)	$	(703,976)

See accompanying notes.

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FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended June 30,
	2024		2023
	(In thousands)
Cash flows from operating activities:
Net income	$	377,120	$	327,951
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,012		11,642
Share-based compensation	109,457		89,750
Deferred income taxes	(19,013)		(37,795)
Net gain on marketable securities	(7,760)		(3,854)
Non-cash operating lease costs	9,686		11,215
Provision for doubtful accounts	1,256		1,106
Gain on product line asset sale	—		(1,941)
Net loss on sales and abandonment of property and equipment	428		555
Changes in operating assets and liabilities:
Accounts receivable	(47,683)		(65,005)
Prepaid expenses and other assets	(14,254)		(1,487)
Accounts payable	3,432		(62)
Accrued compensation and employee benefits	(9,699)		(14,931)
Other liabilities	(18,542)		(20,242)
Deferred revenue	12,046		7,964
Net cash provided by operating activities	406,486		304,866
Cash flows from investing activities:
Purchases of property and equipment	(7,130)		(3,169)
Capitalized internal-use software costs	(11,298)		—
Proceeds from sales of marketable securities	15,855		4,969
Purchases of marketable securities	(17,861)		(8,648)
Cash transferred, net of proceeds, from product line asset sale	—		(6,126)


Net cash used in investing activities	(20,434)		(12,974)
Cash flows from financing activities:
Proceeds from revolving line of credit and term loans	795,000		339,000
Payments on revolving line of credit and term loans	(538,250)		(265,250)


Payments on debt issuance costs	(706)		—
Payments on finance leases	(1,311)		—
Proceeds from issuance of treasury stock under employee stock plans	15,680		15,615
Taxes paid related to net share settlement of equity awards	(137,223)		(75,443)
Repurchases of common stock	(498,171)		(285,158)
Net cash used in financing activities	(364,981)		(271,236)
Effect of exchange rate changes on cash	(1,806)		9,164
Increase in cash and cash equivalents	19,265		29,820
Cash and cash equivalents, beginning of period	136,778		133,202
Cash and cash equivalents, end of period	$	156,043	$	163,022
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds of $836 and $567 during the nine-month periods ended June 30, 2024 and 2023, respectively	$	97,281	$	107,081
Cash paid for interest	$	91,708	$	86,122
Supplemental disclosures of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable	$	132	$	53
Unsettled repurchases of common stock	$	10,448	$	4,748
Finance lease obligations incurred	$	11,740	$	—

See accompanying notes.

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FAIR ISAAC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business

Fair Isaac Corporation

Fair Isaac Corporation (NYSE: FICO) (together with its consolidated subsidiaries, the “Company,” which may also be referred to in this report as “we,” “us,” “our,” or “FICO”) is a leading applied analytics company. We were founded in 1956 on the premise that data, used intelligently, can improve business decisions. Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in more than 100 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale. Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive lenders, consumer reporting agencies, public agencies, and organizations in other industries. We also serve consumers through online services that enable people to access and understand their FICO® Scores — the standard measure in the U.S. of consumer credit risk — empowering them to increase financial literacy and manage their financial health.

Principles of Consolidation and Basis of Presentation

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the applicable accounting guidance. Consequently, we have not necessarily included all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our financial position and results of operations. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with our audited consolidated financial statements and notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The interim financial information contained in this report is not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year.

The condensed consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

We make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the disclosures made in the accompanying notes. For example, we use estimates in determining the appropriate levels of various accruals; variable considerations included in the transaction price and standalone selling price of each performance obligation for our customer contracts; labor hours in connection with fixed-fee service contracts; the amount of our tax provision; and the realizability of deferred tax assets. We also use estimates in determining the remaining economic lives and carrying values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Actual results may differ from our estimates.

New Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606, Revenue from Contacts with Customers, in order to align the recognition of a contract liability with the definition of a performance obligation. We adopted ASU 2021-08 in the first quarter of fiscal 2024 and the adoption did not have a significant impact on our condensed consolidated financial statements.

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Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that it will be effective for our annual periods beginning October 1, 2024, and our interim periods beginning October 1, 2025. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income tax paid. The standard is effective for fiscal years beginning after December 15, 2024, which means that it will be effective for our fiscal years beginning October 1, 2025. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements.

We do not expect that any other recently issued accounting pronouncements will have a significant effect on our consolidated financial statements.

2. Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

•Level 1 — uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. Our Level 1 assets were comprised of money market funds and certain marketable securities and our Level 1 liabilities included senior notes as of June 30, 2024 and September 30, 2023.

•Level 2 — uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. We did not have any assets or liabilities that are valued using inputs identified under a Level 2 hierarchy as of June 30, 2024 and September 30, 2023.

•Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. We did not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy as of June 30, 2024 and September 30, 2023.

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The following tables represent financial assets that we measured at fair value on a recurring basis at June 30, 2024 and September 30, 2023:


June 30, 2024	Active Markets for Identical Instruments (Level 1)		Fair Value as of June 30, 2024
	(In thousands)
Assets:
Cash equivalents (1)	$	34,569	$	34,569
Marketable securities (2)	42,779		42,779
Total	$	77,348	$	77,348

September 30, 2023	Active Markets for Identical Instruments (Level 1)		Fair Value as of September 30, 2023
	(In thousands)
Assets:
Cash equivalents (1)	$	23,621	$	23,621
Marketable securities (2)	33,014		33,014
Total	$	56,635	$	56,635

(1)Included in cash and cash equivalents on our condensed consolidated balance sheets at June 30, 2024 and September 30, 2023. Not included in these tables are cash deposits of $121.5 million and $113.2 million at June 30, 2024 and September 30, 2023, respectively.

(2)Represents securities held under a supplemental retirement and savings plan for certain officers and senior management employees, which are distributed upon termination or retirement of the employees. Included in marketable securities on our condensed consolidated balance sheets at June 30, 2024 and September 30, 2023.

See Note 6 for the fair value of our senior notes.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the quarters and nine-month periods ended June 30, 2024 and 2023.

3. Derivative Financial Instruments

We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign-currency-denominated receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their functional currencies. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro, and Singapore dollar.

Foreign currency-denominated receivable and cash balances are remeasured at foreign exchange rates in effect on the balance sheet date with the effects of changes in foreign exchange rates reported in other income, net. The forward contracts are not designated as hedges and are marked to market through other income, net. Fair value changes in the forward contracts help mitigate the changes in the value of the remeasured receivable and cash balances attributable to changes in foreign exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.

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The following tables summarize our outstanding foreign currency forward contracts, by currency, at June 30, 2024 and September 30, 2023:


	June 30, 2024
	Contract Amount				Fair Value
	Foreign Currency		USD		USD
	(In thousands)
Sell foreign currency:

Euro (EUR)	EUR	7,900	$	8,447	$	—
Buy foreign currency:
British pound (GBP)	GBP	8,764	$	11,100	$	—
Singapore dollar (SGD)	SGD	5,688	$	4,200	$	—


	September 30, 2023
	Contract Amount				Fair Value
	Foreign Currency		USD		USD
	(In thousands)
Sell foreign currency:

Euro (EUR)	EUR	12,900	$	13,621	$	—
Buy foreign currency:
British pound (GBP)	GBP	10,700	$	13,100	$	—
Singapore dollar (SGD)	SGD	8,569	$	6,300	$	—

The foreign currency forward contracts were entered into on June 30, 2024 and September 30, 2023; therefore, their fair value was $0 on each of these dates.

Gains on derivative financial instruments were recorded in our condensed consolidated statements of income and comprehensive income as a component of other income, net, and consisted of the following:


	Quarter Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
	(In thousands)
Gains on foreign currency forward contracts	$	25	$	494	$	386	$	2,107

4. Goodwill

The following table summarizes changes to goodwill during the nine months ended June 30, 2024, both in total and as allocated to our segments. As of June 30, 2024, there was no accumulated goodwill impairment loss.


	Scores		Software		Total
	(In thousands)
Balance at September 30, 2023	$	146,648	$	626,679	$	773,327


Foreign currency translation adjustment	—		3,387		3,387

Balance at June 30, 2024	$	146,648	$	630,066	$	776,714

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5. Composition of Certain Financial Statement Captions

The following table presents the composition of property and equipment, net and other accrued liabilities at June 30, 2024 and September 30, 2023:


	June 30, 2024		September 30, 2023
	(In thousands)
Property and equipment, net:
Property and equipment	$	102,302	$	98,967
Internal-use software	11,298		—
Less: accumulated depreciation and amortization	(79,472)		(88,001)
Total	$	34,128	$	10,966

Other accrued liabilities:
Interest payable	$	7,343	$	20,770
Current operating leases	13,055		16,336
Other	37,339		22,372
Total	$	57,737	$	59,478

6. Debt

The following table represents our debt at carrying value at June 30, 2024 and September 30, 2023:


	June 30, 2024		September 30, 2023
	(In thousands)
Current maturities on debt:
Revolving line of credit	$	—	$	35,000
The $300 Million Term Loan	15,000		15,000
Current maturities on debt	15,000		50,000
Long-term debt:
Revolving line of credit	118,000		265,000
The $300 Million Term Loan	247,500		258,750
The $450 Million Term Loan	450,000		—
The 2018 Senior Notes	400,000		400,000
The 2019 Senior Notes and the 2021 Senior Notes	900,000		900,000
Less: debt issuance costs	(10,557)		(12,092)
Long-term debt	2,104,943		1,811,658
Total debt	$	2,119,943	$	1,861,658

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Revolving Line of Credit and Term Loans

We have a $600 million unsecured revolving line of credit and a $300 million unsecured term loan (the “$300 Million Term Loan”) with a syndicate of banks that mature on August 19, 2026. Borrowings under the revolving line of credit and the $300 Million Term Loan can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. The $300 Million Term Loan requires principal payments in consecutive quarterly installments of $3.75 million on the last business day of each quarter. Interest rates on amounts borrowed under the revolving line of credit and the $300 Million Term Loan are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5%, and (c) one-month adjusted term Secured Overnight Financing Rate (“SOFR”) rate plus 1%, plus, in each case, an applicable margin, or (ii) an adjusted term SOFR rate plus an applicable margin (or, if such rate is no longer available, a successor benchmark rate determined in accordance with the terms of the credit agreement). Adjusted term SOFR is defined as term SOFR for the relevant interest period plus a SOFR adjustment of 0.10% per annum. The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio. The applicable margin for base rate borrowings ranges from 0% to 0.75% per annum and for SOFR borrowings ranges from 1% to 1.75% per annum. In addition, we must pay certain credit facility fees. The revolving line of credit and the $300 Million Term Loan contain certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0. The credit agreement also contains other covenants typical of unsecured credit facilities.

On June 13, 2024, we amended our credit agreement to provide for the issuance of a new $450 million unsecured term loan (the “$450 Million Term Loan”) with a syndicate of banks, increasing the total capacity of the credit agreement to $1.35 billion. The $450 Million Term Loan is subject to the same interest rate provisions and covenants as the revolving line of credit and the $300 Million Term Loan, and matures on August 19, 2026. We have no obligation to make scheduled principal payments on the $450 Million Term Loan prior to the maturity date, but may prepay the $450 Million Term Loan, without premium or penalty, in whole or in part.

As of June 30, 2024, we had $118.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 6.688%, $262.5 million in outstanding balance of the $300 Million Term Loan at an interest rate of 6.688%, and $450.0 million in outstanding balance of the $450 Million Term Loan at an interest rate of 6.697%. We were in compliance with all financial covenants under the credit agreement as of June 30, 2024.

Senior Notes

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”). The 2018 Senior Notes require interest payments semi-annually at a rate of 5.25% per annum and will mature on May 15, 2026.

On December 6, 2019, we issued $350 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes”). The 2019 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028.

On December 17, 2021, we issued $550 million of additional senior notes of the same class as the 2019 Senior Notes in a private offering to qualified institutional investors (the “2021 Senior Notes,” and collectively with the 2018 Senior Notes and the 2019 Senior Notes, the “Senior Notes”). The 2021 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028, the same date as the 2019 Senior Notes.

The indentures for the Senior Notes contain certain covenants typical of unsecured obligations and we were in compliance as of June 30, 2024.

The following table presents the face values and fair values for the Senior Notes at June 30, 2024 and September 30, 2023:


	June 30, 2024				September 30, 2023
	Face Value		Fair Value		Face Value		Fair Value
	(In thousands)
The 2018 Senior Notes	$	400,000	$	394,000	$	400,000	$	386,000
The 2019 Senior Notes and the 2021 Senior Notes	900,000		835,875		900,000		803,250
Total	$	1,300,000	$	1,229,875	$	1,300,000	$	1,189,250

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7. Revenue from Contracts with Customers

Disaggregation of Revenue

The following tables provide information about disaggregated revenue by primary geographical market:


	Quarter Ended June 30, 2024
	Scores		Software		Total		Percentage
	(Dollars in thousands)
Americas	$	239,319	$	142,003	$	381,322	85	%
Europe, Middle East and Africa	1,769		44,592		46,361		10	%
Asia Pacific	362		19,804		20,166		5	%
Total	$	241,450	$	206,399	$	447,849	100	%


	Quarter Ended June 30, 2023
	Scores		Software		Total		Percentage
	(Dollars in thousands)
Americas	$	199,948	$	145,451	$	345,399	87	%
Europe, Middle East and Africa	1,486		31,267		32,753		8	%
Asia Pacific	344		20,192		20,536		5	%
Total	$	201,778	$	196,910	$	398,688	100	%


	Nine Months Ended June 30, 2024
	Scores		Software		Total		Percentage
	(Dollars in thousands)
Americas	$	657,990	$	405,859	$	1,063,849	84	%
Europe, Middle East and Africa	4,355		120,631		124,986		10	%
Asia Pacific	8,102		66,780		74,882		6	%
Total	$	670,447	$	593,270	$	1,263,717	100	%

	Nine Months Ended June 30, 2023
	Scores		Software		Total		Percentage
	(Dollars in thousands)
Americas	$	570,284	$	384,545	$	954,829	85	%
Europe, Middle East and Africa	3,988		102,458		106,446		9	%
Asia Pacific	4,001		58,548		62,549		6	%
Total	$	578,273	$	545,551	$	1,123,824	100	%

The following table provides information about disaggregated revenue for on-premises and SaaS software within our Software segment by deployment method:


	Quarter Ended June 30,				Percentage of revenues				Nine Months Ended June 30,				Percentage of revenues
	2024		2023		2024		2023		2024		2023		2024		2023
	(Dollars in thousands)
On-premises software	$	83,775	$	80,770	46	%	47	%	$	235,944	$	219,165	45	%	47	%
SaaS software	100,010		91,289		54	%	53	%	293,689		252,038		55	%	53	%
Total	$	183,785	$	172,059	100	%	100	%	$	529,633	$	471,203	100	%	100	%

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The following table provides information about disaggregated revenue for on-premises and SaaS software within our Software segment by product features:


	Quarter Ended June 30,				Percentage of revenues				Nine Months Ended June 30,				Percentage of revenues
	2024		2023		2024		2023		2024		2023		2024		2023
	(Dollars in thousands)
Platform software	$	51,780	$	40,317	28	%	23	%	$	144,278	$	109,827	27	%	23	%
Non-platform software	132,005		131,742		72	%	77	%	385,355		361,376		73	%	77	%
Total	$	183,785	$	172,059	100	%	100	%	$	529,633	$	471,203	100	%	100	%

The following table provides information about disaggregated revenue for on-premises and SaaS software within our Software segment by timing of revenue recognition:


	Quarter Ended June 30,				Percentage of revenues				Nine Months Ended June 30,				Percentage of revenues
	2024		2023		2024		2023		2024		2023		2024		2023
	(Dollars in thousands)
Software recognized at a point in time (1)	$	24,638	$	25,077	13	%	15	%	$	58,597	$	56,073	11	%	12	%
Software recognized over contract term (2)	159,147		146,982		87	%	85	%	471,036		415,130		89	%	88	%
Total	$	183,785	$	172,059	100	%	100	%	$	529,633	$	471,203	100	%	100	%

(1)Includes license portion of our on-premises subscription software and perpetual license, both of which are recognized when the software is made available to the customer, or at the start of the subscription.

(2)Includes maintenance portion and usage-based fees of our on-premises subscription software, maintenance revenue on perpetual licenses, as well as SaaS revenue.

The following table provides information about disaggregated revenue for our Scores segment by distribution method:


	Quarter Ended June 30,				Percentage of revenues				Nine Months Ended June 30,				Percentage of revenues
	2024		2023		2024		2023		2024		2023		2024		2023
	(Dollars in thousands)
Business-to-business Scores	$	188,754	$	148,128	78	%	73	%	$	514,704	$	417,907	77	%	72	%
Business-to-consumer Scores	52,696		53,650		22	%	27	%	155,743		160,366		23	%	28	%
Total	$	241,450	$	201,778	100	%	100	%	$	670,447	$	578,273	100	%	100	%

We derive a substantial portion of revenues from our contracts with the three major consumer reporting agencies, TransUnion, Equifax and Experian. Revenues collectively generated by agreements with these customers accounted for 47% and 42% of our total revenues in the quarters ended June 30, 2024 and 2023, respectively, with all three consumer reporting agencies each contributing more than 10% of our total revenues in each of the quarters ended June 30, 2024 and 2023. Revenues collectively generated by agreements with these customers accounted for 44% and 40% of our total revenues in the nine months ended June 30, 2024 and 2023, respectively, with all three consumer reporting agencies each contributing more than 10% of our total revenues in each of the nine months ended June 30, 2024 and 2023. At each of June 30, 2024 and September 30, 2023, one individual customer accounted for 10% or more of total consolidated receivables.

Contract Balances

We record a receivable when we satisfy a performance obligation prior to invoicing if only the passage of time is required before payment is due or if we have an unconditional right to consideration before we satisfy a performance obligation. We record a contract asset when we satisfy a performance obligation prior to invoicing but our right to consideration is conditional. We record deferred revenue when the payment is made or due before we satisfy a performance obligation.

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Receivables at June 30, 2024 and September 30, 2023 consisted of the following:


	June 30, 2024		September 30, 2023
	(In thousands)
Billed	$	275,400	$	234,745
Unbilled	209,909		203,896
	485,309		438,641
Less: allowance for doubtful accounts	(6,187)		(4,978)
Net receivables	479,122		433,663
Less: long-term receivables (*)	(41,485)		(45,716)
Short-term receivables (*)	$	437,637	$	387,947

(*) Short-term receivables and long-term receivables were recorded in accounts receivable, net and other assets, respectively, within the accompanying condensed consolidated balance sheets.

Deferred revenue primarily relates to our maintenance and SaaS contracts billed annually in advance and generally recognized ratably over the term of the service period. Significant changes in the deferred revenues balances are as follows:


	Nine Months Ended June 30, 2024
	(In thousands)
Deferred revenues, beginning balance (*)	$	143,235
Revenue recognized that was included in the deferred revenues balance at the beginning of the period	(122,567)
Increases due to billings, excluding amounts recognized as revenue during the period	135,115
Deferred revenues, ending balance (*)	$	155,783

(*) Deferred revenues at June 30, 2024 included current portion of $149.3 million and long-term portion of $6.5 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets. Deferred revenues at September 30, 2023 included current portion of $136.7 million and long-term portion of $6.5 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to provide customers with financing or to receive financing from our customers. Examples include multi-year on-premises licenses that are invoiced annually with revenue recognized upfront and invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period.

Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include:

•Usage-based revenue that will be recognized in future periods from on-premises software subscriptions;

•Consumption-based variable fees from SaaS software that will be recognized in the distinct service period during which it is earned; and

•Revenue from variable considerations that will be recognized in accordance with the “right-to-invoice” practical expedient, such as fees from our professional services billed based on a time and materials basis.

Revenue allocated to remaining performance obligations was $482.9 million as of June 30, 2024, approximately 50% of which we expect to recognize over the next 15 months and the remainder thereafter. Revenue allocated to remaining performance obligations was $470.5 million as of September 30, 2023.

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8. Income Taxes

Effective Tax Rate

The effective income tax rate was 24.5% and 18.4% during the quarters ended June 30, 2024 and 2023, respectively, and 19.9% and 20.6% during the nine months ended June 30, 2024 and 2023, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

A provision enacted as part of the 2022 Inflation Reduction Act imposes a 15% corporate minimum tax. The provision is effective for tax years beginning after December 31, 2022, which means that it was effective for our fiscal year beginning October 1, 2023. We do not expect any impact to our fiscal 2024 effective tax rate from the corporate minimum tax provision.

The total unrecognized tax benefit for uncertain tax positions was estimated to be $17.1 million and $13.8 million at June 30, 2024 and September 30, 2023, respectively. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our condensed consolidated statements of income and comprehensive income. We accrued interest of $1.7 million and $0.9 million related to unrecognized tax benefits as of June 30, 2024 and September 30, 2023, respectively.

9. Earnings per Share

The following table presents reconciliations for the numerators and denominators of basic and diluted earnings per share (“EPS”) for the quarters and nine-month periods ended June 30, 2024 and 2023:


	Quarter Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share data)
Numerator for diluted and basic earnings per share:
Net income	$	126,256	$	128,758	$	377,120	$	327,951
Denominator — share:
Basic weighted-average shares	24,646		24,959		24,743		25,040
Effect of dilutive securities	369		378		386		359
Diluted weighted-average shares	25,015		25,337		25,129		25,399
Earnings per share:
Basic	$	5.12	$	5.16	$	15.24	$	13.10
Diluted	$	5.05	$	5.08	$	15.01	$	12.91

Anti-dilutive share-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

10. Segment Information

We are organized into two reportable segments: Scores and Software. Although we sell solutions and services to a large number of end user product and industry markets, our reportable business segments reflect the primary method in which management organizes and evaluates internal financial information to make operating decisions and assess performance.

•Scores. This segment includes our business-to-business (“B2B”) scoring solutions and services which give our clients access to predictive credit and other scores that can be easily integrated into their transaction streams and decision-making processes. This segment also includes our business-to-consumer (“B2C”) scoring solutions, including our myFICO.com subscription offerings.

•Software. This segment includes pre-configured analytic and decision management solutions designed for a specific type of business need or process — such as account origination, customer management, customer engagement, fraud detection, and marketing — as well as associated professional services. This segment also includes FICO® Platform, a modular software offering designed to support advanced analytic and decision use cases, as well as stand-alone analytic and decisioning software that can be configured by our customers to address a wide variety of business use cases. These offerings are available to our customers as SaaS or as on-premises software.

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Our chief operating decision maker (“CODM”), who is our Chief Executive Officer, evaluates segment financial performance based on segment revenues and segment operating income. Segment operating expenses consist of direct and indirect costs principally related to personnel, facilities, IT infrastructure, consulting, travel and depreciation. Indirect costs are allocated to the segments generally based on relative segment revenues, fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate broad-based incentive expense, share-based compensation expense, restructuring and acquisition-related expense, amortization expense, various corporate charges and certain other income and expense measures to our segments. These income and expense items are not allocated because they are not considered in evaluating the segment’s operating performance. Our CODM does not evaluate the financial performance of each segment based on its respective assets or capital expenditures; rather, depreciation amounts are allocated to the segments from their internal cost centers as described above.

The following tables summarize segment information for the quarters and nine-month periods ended June 30, 2024 and 2023:


	Quarter Ended June 30, 2024
	Scores		Software		Unallocated Corporate Expenses		Total
	(In thousands)
Segment revenues:
On-premises and SaaS software	$	—	$	183,785	$	—	$	183,785
Professional services	—		22,614		—		22,614
Scores	241,450		—		—		241,450
Total segment revenues	241,450		206,399		—		447,849
Segment operating expense	(28,461)		(136,059)		(50,368)		(214,888)
Segment operating income	$	212,989	$	70,340	$	(50,368)	232,961
Unallocated share-based compensation expense							(42,435)
Unallocated amortization expense							(275)


Operating income							190,251
Unallocated interest expense, net							(26,868)
Unallocated other income, net							3,935
Income before income taxes							$	167,318
Depreciation and amortization	$	129	$	2,553	$	18	$	2,700


	Quarter Ended June 30, 2023
	Scores		Software		Unallocated Corporate Expenses		Total
	(In thousands)
Segment revenues:
On-premises and SaaS software	$	—	$	172,059	$	—	$	172,059
Professional services	—		24,851		—		24,851
Scores	201,778		—		—		201,778
Total segment revenues	201,778		196,910		—		398,688
Segment operating expense	(24,779)		(121,261)		(42,347)		(188,387)
Segment operating income	$	176,999	$	75,649	$	(42,347)	210,301
Unallocated share-based compensation expense							(32,995)
Unallocated amortization expense							(275)


Operating income							177,031
Unallocated interest expense, net							(24,545)
Unallocated other income, net							5,301
Income before income taxes							$	157,787
Depreciation and amortization	$	107	$	2,093	$	16	$	2,216

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	Nine Months Ended June 30, 2024
	Scores		Software		Unallocated Corporate Expenses		Total
	(In thousands)
Segment revenues:
On-premises and SaaS software	$	—	$	529,633	$	—	$	529,633
Professional services	—		63,637		—		63,637
Scores	670,447		—		—		670,447
Total segment revenues	670,447		593,270		—		1,263,717
Segment operating expense	(76,596)		(403,646)		(136,742)		(616,984)
Segment operating income	$	593,851	$	189,624	$	(136,742)	646,733
Unallocated share-based compensation expense							(109,457)
Unallocated amortization expense							(