EX-99.1 2 a5132895ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Fair Isaac Announces Second Quarter Fiscal 2006 Results MINNEAPOLIS--(BUSINESS WIRE)--April 26, 2006-- Record Revenue of $208.2 Million; EPS of $0.40 after $0.12 from SFAS 123(R) Expense and Costs Related to an Abandoned Acquisition Fair Isaac Corporation (NYSE:FIC), the leading provider of analytics and decision technology, today announced financial results for its second quarter ended March 31, 2006. The company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (SFAS 123 (R)) for fiscal 2006. As a result, effective October 1, 2005, the company began recording compensation expense for stock options and purchases under its Employee Stock Purchase Plan in the consolidated statement of income. Results for prior periods have not been restated. "We are pleased with the year-over-year growth in earnings, excluding special items," said Thomas Grudnowski, Fair Isaac's chief executive officer. "We had continued strong revenue performance from our Enterprise Decision Management (EDM) services, and consumer, scoring, and fraud products." Second Quarter Fiscal 2006 Results The company reported second quarter revenues of $208.2 million in fiscal 2006 versus $196.0 million reported in the prior year period. Net income for the second quarter of fiscal 2006 totaled $27.0 million, or $0.40 per diluted share versus $34.3 million, or $0.45 per diluted share reported in the prior year period. Second quarter fiscal 2006 results included share-based compensation expense of approximately $6.5 million after-tax, or $0.10 per diluted share, due to the adoption of SFAS 123(R), and costs associated with an abandoned acquisition of approximately $1.4 million after-tax, or $0.02 per diluted share. Second quarter fiscal 2005 results included a decrease in diluted earnings per share of $0.05 related to the adoption of EITF Issue No. 04-8, and an increase to net income due to a reduction to income tax expense of $6.0 million, or $0.08 per diluted share, related to revisions made to estimates of prior years' tax liabilities. Fiscal 2006 Year-to-date Results The company reported year-to-date revenues of $410.9 million versus $391.6 million in the prior year period. Net income for year-to-date fiscal 2006 totaled $55.4 million, or $0.83 per diluted share versus $62.2 million, or $0.82 per diluted share reported in the prior year period. Year-to-date fiscal 2006 results included share-based compensation expense of approximately $12.6 million after-tax, or $0.19 per diluted share, due to the adoption of SFAS 123(R). Year-to-date fiscal 2005 results included a decrease in diluted earnings per share of $0.08 related to the adoption of EITF Issue No. 04-8, and the reduction to income tax expense of $0.08 per diluted share for the reason described above. Second Quarter Fiscal 2006 Revenues Highlights Revenues for second quarter fiscal 2006 across each of the company's four operating segments were as follows: -- Strategy Machine Solutions revenues increased to $118.9 million in the second quarter from $111.3 million in the prior year quarter, or by 6.8%, primarily due to an increase in revenues derived from consumer scoring products and fraud solutions, partially offset by decreases associated with marketing services and insurance solutions. -- Scoring Solutions revenues increased to $41.8 million in the second quarter from $39.3 million in the prior year quarter, or an increase of 6.2%, primarily due to an increase in revenues derived from risk scoring services at the credit reporting agencies, and PreScore(R) Service. -- Professional Services revenues increased to $38.7 million in the second quarter from $33.6 million in the prior year quarter, or by 15.2%, primarily due to revenues from industry strategic consulting services and implementation services for EDM products. -- Analytic Software Tools revenues were $8.8 million in the second quarter compared to $11.8 million in the prior year quarter, or a decrease of 25.3%, due to a decline in revenues generated from sales of the Blaze Advisor(TM) product. Fiscal 2006 Year-to-date Revenues Highlights Year-to-date revenues for fiscal 2006 across each of the company's four operating segments were as follows: -- Strategy Machine Solutions revenues increased to $230.8 million from $229.1 million in the prior year period, or by 0.8%, primarily due to solid growth in consumer scoring products, fraud products, and collection & recovery products, offset by declines in marketing services and insurance solutions. -- Scoring Solutions revenues increased to $87.9 million from $78.8 million in the prior year period, or by 11.6%, primarily due to an increase in revenues derived from risk scoring services at the credit reporting agencies, and PreScore(R) Service. -- Professional Services revenues increased to $71.5 million from $63.0 million in the prior year period, or by 13.4%, primarily due to revenues from industry strategic consulting services and implementation services for EDM products. -- Analytic Software Tools revenues were $20.7 million compared to $20.7 million in the prior year period, or virtually unchanged. Bookings Highlights The company achieved bookings of $106.0 million for second quarter fiscal 2006 versus $136.6 million in the same period last year. However, the bookings yield (current quarter revenue divided by new bookings) increased to 20.0% for second quarter fiscal 2006 from 13.7% in the same period last year. The company defines a "new booking" as estimated future contractual revenues, including agreements with perpetual, multi-year and annual terms. Management regards the volume of new bookings achieved, among other factors, as an important indicator of future revenues, but they are not comparable to, nor should they be substituted for, an analysis of the company's revenues. Balance Sheet and Cash Flow Highlights Cash and cash equivalents, and marketable security investments were $425.7 million at March 31, 2006, as compared to $288.1 million at September 30, 2005. Significant changes in cash and cash equivalents from September 30, 2005 include cash provided by operations of $109.7 million for fiscal 2006 and $45.6 million received from the exercise of stock options and stock issued under an employee stock purchase plan. Cash used during fiscal 2006 includes $8.1 million related to purchases of property and equipment and $12.8 million to repurchase company stock under the currently authorized share repurchase plan. The remaining balance of the existing share repurchase authorization is $158.7 million. Outlook Third quarter fiscal 2006 The company expects revenues for third quarter fiscal 2006 of approximately $210.0 million, of which Product (Scoring, Strategy Machines and Analytic Software Tools) revenues will account for approximately $170.0 million and Services revenues will account for approximately $40.0 million. The company also expects earnings per diluted share for the quarter to be approximately $0.44, which includes an expected after-tax compensation expense of approximately $6.6 million, or $0.10 per diluted share, related to SFAS 123(R). Fiscal 2006 The company expects revenues for fiscal year 2006 of approximately $836.0 million to $846.0 million. The company also expects earnings per diluted share for fiscal 2006 to be approximately $1.75, which includes an expected after-tax compensation expense of approximately $26.0 million, or $0.38 per diluted share, related to SFAS 123(R) and costs associated with an abandoned acquisition of approximately $1.4 million after-tax, or $0.02 per diluted share. "As we anticipated, we continue to see strong global performance and continued market leadership in our core product areas including FICO(R) scores, our Falcon(TM) Fraud detection franchise and TRIAD(TM) account management systems," said Grudnowski. "This ongoing demand for our industry-standard solutions in a competitive environment is a testament to the marketplace's continued recognition and appreciation." Company to Host Conference Call The company will host a conference call today at 5:00 p.m. Eastern Time (4:00 p.m. Central Time/2:00 p.m. Pacific Time) to discuss its second quarter fiscal 2006 results, and outlook for the remainder of fiscal 2006. The call can be accessed live on the Investor Relations section of the company's Web site at www.fairisaac.com, and a replay will be available approximately two hours after the completion of the call through May 24, 2006. About Fair Isaac Corporation Fair Isaac Corporation (NYSE:FIC) makes decisions smarter. The company's solutions and technologies for Enterprise Decision Management give businesses the power to automate more processes, and apply more intelligence to every customer interaction. Through increasing the precision, consistency and agility of their decisions, Fair Isaac clients worldwide increase sales, build customer value, cut fraud losses, manage credit risk, reduce operational costs, meet changing compliance demands and enter new markets more profitably. Founded in 1956, Fair Isaac powers hundreds of billions of decisions each year in financial services, insurance, telecommunications, retail, consumer branded goods, healthcare and the public sector. Fair Isaac also helps millions of individuals manage their credit health through the www.myfico.com website. Visit Fair Isaac online at www.fairisaac.com. Statement Concerning Forward-Looking Information Except for historical information contained herein, the statements contained in this news release that relate to Fair Isaac or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the company's ability to recruit and retain key technical and managerial personnel, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, competition, regulatory changes applicable to the use of consumer credit and other data, the possibility that the anticipated benefits of acquisitions, including expected synergies, will not be realized and other risks described from time to time in Fair Isaac's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2005 and quarterly report on Form 10-Q for the period ended December 31, 2005. If any of these risks or uncertainties materialize, Fair Isaac's results could differ materially from its expectations. Fair Isaac disclaims any intent or obligation to update these forward-looking statements. Fair Isaac, FICO, Falcon, Blaze Advisor, TRIAD and PreScore are trademarks or registered trademarks of Fair Isaac Corporation in the United States and/or in other countries. Other product and company names herein may be trademarks of their respective owners. FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Quarters and Six Months Ended March 31, 2006 and 2005 (In thousands, except per share data) (Unaudited) Quarter Ended Six Months Ended March 31, March 31, ---------------------- -------------------- 2006 2005 2006 2005 ----------- ---------- ---------- --------- Revenues $208,157 $196,021 $410,947 $391,567 ----------- ---------- ---------- --------- Operating expenses: Cost of revenues 73,144 69,648 140,189 139,418 Research and development 21,694 18,123 44,424 39,121 Selling, general and administrative 64,157 55,085 127,540 108,653 Amortization of intangible assets 6,260 6,536 12,523 13,320 Restructuring and acquisition related 2,184 - 1,510 - ----------- ---------- ---------- --------- Total operating expenses 167,439 149,392 326,186 300,512 ----------- ---------- ---------- --------- Operating income 40,718 46,629 84,761 91,055 Other income (expense), net 1,495 (490) 2,340 (160) ----------- ---------- ---------- --------- Income before income taxes 42,213 46,139 87,101 90,895 Provision for income taxes 15,240 11,812 31,671 28,707 ----------- ---------- ---------- --------- Net income $26,973 $34,327 $55,430 $62,188 =========== ========== ========== ========= Earnings per share: Basic $0.41 $0.51 $0.86 $0.92 =========== ========== ========== ========= Diluted $0.40 $0.45 (a) $0.83 $0.82 (a) =========== ========== ========== ========= Shares used in computing earnings per share: Basic 65,052 66,979 64,626 67,769 =========== ========== ========== ========= Diluted 66,834 78,385 (a) 66,521 79,231 (a) =========== ========== ========== ========= Share-based compensation expense included in the above operating expense captions are as follows (b): Cost of revenues $2,717 $- $5,543 $111 Research and development 1,565 22 3,400 51 Selling, general and administrative 5,844 176 10,697 469 ----------- ---------- ---------- --------- Total share-based compensation expense $10,126 $198 $19,640 $631 =========== ========== ========== ========= (a) The computation of diluted earnings per share for the quarter and six months ended March 31, 2005, include 9.0 and 9.1 million shares of common stock, respectively, issuable upon conversion of our senior convertible notes, along with a corresponding adjustment to net income to add back related interest expense, net of tax, of approximately $1.2 and $2.5 million, respectively. On March 31, 2005, the company successfully completed an exchange offer for approximately 99.9% of the principal amount of its senior convertible notes for new senior convertible notes. The dilutive effect of the new senior convertible notes has been calculated using the treasury stock method since the effective date of the exchange. (b) Effective October 1, 2005, the company adopted SFAS 123(R), "Share- Based Payment", which required the company to record compensation expense for all share-based awards. Results from prior periods have not been restated. FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2006 and September 30, 2005 (In thousands) (Unaudited) March 31, September 30, 2006 2005 ------------ ------------- ASSETS: Current assets: Cash and cash equivalents $223,463 $82,880 Marketable securities 164,997 146,088 Receivables, net 160,621 156,375 Prepaid expenses and other current assets 23,814 27,337 ------------ ------------- Total current assets 572,895 412,680 Marketable securities and investments 37,195 59,087 Property and equipment, net 44,725 48,436 Goodwill and intangible assets, net 788,689 803,306 Other noncurrent assets 31,607 27,552 ------------ ------------- $1,475,111 $1,351,061 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other accrued liabilities $62,826 $50,947 Accrued compensation and employee benefits 31,795 31,373 Deferred revenue 57,038 55,837 ------------ ------------- Total current liabilities 151,659 138,157 Senior convertible notes 400,000 400,000 Other noncurrent liabilities 5,406 7,810 ------------ ------------- Total liabilities 557,065 545,967 Stockholders' equity 918,046 805,094 ------------ ------------- $1,475,111 $1,351,061 ============ ============= FAIR ISAAC CORPORATION REVENUES BY SEGMENT For the Quarters and Six Months Ended March 31, 2006 and 2005 (In thousands) (Unaudited) Quarter Ended Six Months Ended March 31, March 31, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Strategy machine solutions $118,852 $111,252 $230,838 $229,064 Scoring solutions 41,768 39,347 87,924 78,771 Professional services 38,691 33,580 71,522 63,050 Analytic software tools 8,846 11,842 20,663 20,682 --------- --------- --------- --------- Total revenues $208,157 $196,021 $410,947 $391,567 ========= ========= ========= ========= FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended March 31, 2006 and 2005 (In thousands) (Unaudited) Six Months Ended March 31, ------------------- 2006 2005 --------- --------- Cash flows from operating activities: Net income $55,430 $62,188 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,237 26,539 Changes in operating assets and liabilities, net of acquisitions 9,370 19,701 Other, net 20,648 11,129 --------- --------- Net cash provided by operating activities 109,685 119,557 --------- --------- Cash flows from investing activities: Purchases of property and equipment (8,125) (10,012) Cash paid for acquisitions, net of cash acquired - (33,800) Net activity from marketable securities 3,339 35,143 Other, net 500 24,156 --------- --------- Net cash provided by (used in) investing activities (4,286) 15,487 --------- --------- Cash flows from financing activities: Proceeds from issuances of common stock 45,577 27,353 Repurchases of common stock (12,766) (127,048) Other, net 2,708 (2,716) --------- --------- Net cash provided by (used in) financing activities 35,519 (102,411) --------- --------- Effect of exchange rate changes on cash (335) 656 --------- --------- Increase in cash and cash equivalents 140,583 33,289 Cash and cash equivalents, beginning of period 82,880 134,070 --------- --------- Cash and cash equivalents, end of period $223,463 $167,359 ========= ========= Fair Isaac Corporation Baseline Revenue Analysis (In thousands) ---------------------------------------------------------------------- BKG'05 Q1A Q2A Q3A Q4A FY05 ---------------------------------------------------------------------- Total Baseline Prior to '05 $176,161 $164,445 $158,912 $150,950 $650,468 ---------------------------------------------------------------------- Q1-2005A $115,363 19,385 12,916 9,120 7,622 49,043 Q2-2005A 136,560 18,660 12,402 8,312 39,374 Q3-2005A 143,318 23,373 16,259 39,632 Q4-2005A 109,728 20,154 20,154 ---------------------------------------------------------------------- Total FY05 504,969 19,385 31,576 44,895 52,347 148,203 ---------------------------------------------------------------------- Total Baseline Prior to '06 504,969 195,546 196,021 203,807 203,297 798,671 ---------------------------------------------------------------------- Q1-2006E Q2-2006E Q3-2006E Q4-2006E ---------------------------------------------------------------------- Total FY06 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $504,969 $195,546 $196,021 $203,807 $203,297 $798,671 ====================================================================== E = Estimate A = Actual ---------------------------------------------------------------------- BKG'06 Q1A Q2A Q3E Q4E FY06E ---------------------------------------------------------------------- Total Baseline Prior to '05 $149,484 $143,730 $142,000 $139,000 $574,214 ---------------------------------------------------------------------- Q1-2005A 6,205 4,261 3,750 2,500 16,716 Q2-2005A 6,194 5,975 5,000 4,500 21,669 Q3-2005A 7,404 7,198 6,000 5,500 26,102 Q4-2005A 11,482 10,521 7,500 5,500 35,003 ---------------------------------------------------------------------- Total FY05 31,285 27,955 22,250 18,000 99,490 ---------------------------------------------------------------------- Total Baseline Prior to '06 180,769 171,685 164,250 157,000 673,704 ---------------------------------------------------------------------- Q1-2006E $127,778 22,021 15,296 10,000 7,000 54,317 Q2-2006E 106,024 21,176 11,000 7,000 39,176 Q3-2006E 155,000 24,750 Q4-2006E ---------------------------------------------------------------------- Total FY06 22,021 36,472 45,750 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $560,000 $202,790 $208,157 $210,000 ====================================================================== E = Estimate A = Actual CONTACT: Fair Isaac Corporation, Minneapolis Investors & Analysts: John D. Emerick, Jr., 800-213-5542 or JD Bergquist Wood, 800-213-5542 investor@fairisaac.com