EX-99.1 2 a5064360ex991.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Fair Isaac Announces First Quarter Fiscal 2006 Results MINNEAPOLIS--(BUSINESS WIRE)--Jan. 25, 2006-- The company begins expensing stock options in the first quarter as required by SFAS 123(R); GAAP EPS of $0.43; EPS of $0.52 before share-based compensation expense Fair Isaac Corporation (NYSE:FIC), the leading provider of analytics and decision technology, today announced financial results for its first quarter ended December 31, 2005. The company was required during the first quarter to adopt Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (SFAS 123 (R)). As a result, effective October 1, 2005, the company began recording compensation expense for stock options and purchases under its Employee Stock Purchase Plan on that date in the consolidated statement of income. Results for prior periods have not been restated. Financial guidance previously provided by the company of $0.50 per diluted share for the first quarter 2006 and $2.15 per diluted share for fiscal 2006, excluded share-based compensation expense related to SFAS 123(R). First Quarter Fiscal 2006 Results The company reported first quarter revenues of $202.8 million in fiscal 2006 versus $195.5 million reported in the prior year period. Net income for the first quarter of fiscal 2006 totaled $28.5 million or $0.43 per diluted share in accordance with generally accepted accounting principles (GAAP). First quarter fiscal 2006 results included compensation expense of approximately $6.1 million after-tax, or $0.09 per diluted share, due to the adoption of SFAS 123(R). Excluding the effect of this expense, net income for the first quarter of fiscal 2006 was $34.6 million, or $0.52 per diluted share, on a non-GAAP basis. Net income for the first quarter of fiscal 2005 totaled $27.9 million, or $0.36 per diluted share. First quarter fiscal 2005 results were reduced by $0.03 per diluted share from the adoption last year of EITF 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share. SFAS 123(R) was not effective for the first quarter of fiscal 2005. "We are pleased with our continued management of expenses and our strong performance in earnings per share growth," said Thomas Grudnowski, Fair Isaac's chief executive officer. First Quarter Fiscal 2006 Revenues Highlights Revenues for first quarter fiscal 2006 across each of the company's four operating segments were as follows: -- Strategy Machine Solutions revenues were $112.0 million in the first quarter of 2006, compared to $117.8 million in the prior year quarter, or a decrease of 5.0%, primarily due to a decline in revenues associated with marketing services and insurance solutions. These declines were partially offset by solid growth in consumer scoring products, and collections and recovery solutions. -- Scoring Solutions revenues increased to $46.2 million in the first quarter from $39.4 million in the prior year quarter, or by 17.1%, 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 $32.8 million in the first quarter from $29.5 million in the prior year quarter, or by 11.4%, primarily due to revenues from industry strategic consulting services and implementation services for our Blaze Advisor products. -- Analytic Software Tools revenues increased to $11.8 million in the first quarter from $8.8 million in the prior year quarter, or by 33.7%, due to revenues generated from the sales of Blaze Advisor and Model Builder products. Bookings Highlights The company achieved bookings of $127.8 million for first quarter fiscal 2006 versus $115.4 million in the same period last year, an increase of 10.8%. 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 $372.2 million at December 31, 2005, 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 $60.7 million for the first quarter fiscal 2006 and $36.2 million received from the exercise of stock options and stock issued under an employee stock purchase plan. Cash used during the first quarter of fiscal 2006 includes $2.5 million related to purchases of property and equipment and $12.8 million to repurchase company stock under the current authorized share repurchase plan. The remaining balance of the existing share repurchase authorization is $158.7 million. Outlook Second quarter fiscal 2006 The company expects revenue for second quarter fiscal 2006 of approximately $210.0 million, of which Product (Scoring, Strategy Machines and Analytic Software Tools) revenue will account for approximately $174.0 million and Services revenue will account for approximately $36.0 million. The company also expects GAAP earnings per diluted share for the quarter to be approximately $0.42, which includes an after-tax compensation expense of approximately $6.6 million, or $0.10 per diluted share, related to SFAS 123(R). Excluding the effect of SFAS 123(R), non-GAAP earnings per diluted share for the quarter would be $0.52. Fiscal 2006 The company expects revenue for fiscal year 2006 to remain in line with prior guidance of approximately $860.0 million to $900.0 million. The company also expects GAAP earnings per diluted share for fiscal 2006 to be approximately $1.77, which includes an after-tax compensation expense of approximately $26.0 million, or $0.38 per diluted share, related to SFAS 123(R). Excluding the effect of SFAS 123(R), non-GAAP earnings per diluted share for fiscal 2006 is expected to be approximately $2.15. Guidance reflects top-line growth in our core market units and operating margins consistent with prior quarters. "We continue to respond to the growing demand for our industry-standard solutions in areas like fraud management, scoring, and customer account management," said Grudnowski. "We have seen terrific response from existing and prospective customers in these areas. Furthermore, we continue to experience growing market appreciation for our Enterprise Decision Management capabilities." Non-GAAP Financial Measures This news release includes the non-GAAP financial measure "EPS before Share-Based Compensation" which excludes the expense related to all stock-based compensation. The company excludes these amounts in order to facilitate the comparison of current results with those of prior periods and with previous guidance provided by the company, which did not include such expenses, and because these amounts are non-cash expenses. Wherever this non-GAAP financial measure has been included in this news release, the company has reconciled it to GAAP EPS. This non-GAAP financial measure is not prepared in accordance with accounting principles generally accepted in the United States of America and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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 first 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 February 22, 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. 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 and FICO 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 Ended December 31, 2005 and 2004 (In thousands, except per share data) (Unaudited) Quarter Ended December 31, --------------------- 2005 2004 --------- --------- Revenues $202,790 $195,546 --------- --------- Operating expenses: Cost of revenues 67,045 69,770 Research and development 22,730 20,998 Selling, general and administrative 63,383 53,568 Amortization of intangible assets 6,263 6,784 Restructuring and merger related (674) - --------- --------- Total operating expenses 158,747 151,120 --------- --------- Operating income 44,043 44,426 Other income (expense), net 845 330 --------- --------- Income before income taxes 44,888 44,756 Provision for income taxes 16,431 16,895 --------- --------- Net income $28,457 $27,861 ========= ========= Earnings per share: Basic $0.44 $0.41 ========= ========= Diluted $0.43 $0.36 (a) ========= ========= Shares used in computing earnings per share: Basic 64,211 68,570 ========= ========= Diluted 66,219 80,056 (a) ========= ========= Share-based compensation expense included in the above operating expense captions are as follows (b): Cost of revenues $2,826 $111 Research and development 1,835 29 Selling, general and administrative 4,853 293 --------- --------- Total share-based compensation expense $9,514 $433 ========= ========= (a) The computation of diluted earnings per share for the quarter ended December 31, 2004, includes 9.1 million shares of common stock 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 $1.3 million. 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 December 31, 2005 and September 30, 2005 (In thousands) (Unaudited) December 31, September 30, 2005 2005 ------------- ------------- ASSETS: Current assets: Cash and cash equivalents $189,296 $82,880 Marketable securities 130,567 146,088 Receivables, net 156,403 156,375 Prepaid expenses and other current assets 25,772 27,337 ------------- ------------- Total current assets 502,038 412,680 Marketable securities and investments 52,360 59,087 Property and equipment, net 45,020 48,436 Goodwill and intangible assets, net 794,076 803,306 Other noncurrent assets 29,540 27,552 ------------- ------------- $1,423,034 $1,351,061 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other accrued liabilities $57,956 $50,947 Accrued compensation and employee benefits 33,897 31,373 Deferred revenue 56,087 55,837 ------------- ------------- Total current liabilities 147,940 138,157 Senior convertible notes 400,000 400,000 Other noncurrent liabilities 5,577 7,810 ------------- ------------- Total liabilities 553,517 545,967 Stockholders' equity 869,517 805,094 ------------- ------------- $1,423,034 $1,351,061 ============= ============= FAIR ISAAC CORPORATION REVENUES BY SEGMENT For the Quarters Ended December 31, 2005 and 2004 (In thousands) (Unaudited) Quarter Ended December 31, ------------------- 2005 2004 --------- --------- Strategy machine solutions $111,986 $117,812 Scoring solutions 46,156 39,424 Professional services 32,831 29,470 Analytic software tools 11,817 8,840 --------- --------- Total revenues $202,790 $195,546 ========= ========= FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Quarters Ended December 31, 2005 and 2004 (In thousands) (Unaudited) Quarter Ended December 31, ------------------- 2005 2004 --------- --------- Cash flows from operating activities: Net income $28,457 $27,861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,059 13,472 Share-based compensation expense 9,514 433 Changes in operating assets and liabilities, net of acquisitions 10,366 33,705 Other, net 348 4,439 --------- --------- Net cash provided by operating activities 60,744 79,910 --------- --------- Cash flows from investing activities: Purchases of property and equipment (2,545) (3,089) Cash paid for acquisitions, net of cash acquired - (33,800) Net activity from marketable securities 22,587 12,297 Other, net 249 23,250 --------- --------- Net cash provided by (used in) investing activities 20,291 (1,342) --------- --------- Cash flows from financing activities: Proceeds from issuances of common stock 36,154 17,868 Repurchases of common stock (12,766) (109,892) Other, net 2,352 (1,371) --------- --------- Net cash used in financing activities 25,740 (93,395) --------- --------- Effect of exchange rate changes on cash (359) 407 --------- --------- Increase (decrease) in cash and cash equivalents 106,416 (14,420) Cash and cash equivalents, beginning of period 82,880 134,070 --------- --------- Cash and cash equivalents, end of period $189,296 $119,650 ========= ========= Fair Isaac Corporation Baseline Revenue Analysis (in thousands) E = Estimate, A = Actual ---------------------------------------------------------------------- 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 ====================================================================== ---------------------------------------------------------------------- BKG'06 Q1A Q2E Q3E Q4E FY06E ---------------------------------------------------------------------- Total Baseline Prior to '05 $149,484 $145,000 $141,000 $139,000 $574,484 ---------------------------------------------------------------------- Q1-2005A 6,205 3,000 2,750 2,500 14,455 Q2-2005A 6,194 6,000 5,000 4,500 21,694 Q3-2005A 7,404 7,000 6,500 5,500 26,404 Q4-2005A 11,482 9,000 7,500 5,500 33,482 ---------------------------------------------------------------------- Total FY05 31,285 25,000 21,750 18,000 96,035 ---------------------------------------------------------------------- Total Baseline Prior to '06 180,769 170,000 162,750 157,000 670,519 ---------------------------------------------------------------------- Q1-2006E $127,778 22,021 14,000 9,000 7,000 52,021 Q2-2006E 26,000 Q3-2006E Q4-2006E ---------------------------------------------------------------------- Total FY06 22,021 40,000 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $605,000 $202,790 $210,000 ====================================================================== CONTACT: Fair Isaac Corporation, Minneapolis Investors & Analysts: John D. Emerick, Jr., 800-213-5542 or JD Bergquist Wood, 800-213-5542 investor@fairisaac.com