Fair Isaac Q2 2025 Earnings Report

Fair Isaac EPS Results

• Actual EPS: $7.81
• Consensus EPS: $7.33
• Beat/Miss: Beat by +$0.48
• One Year Ago EPS: $6.14

Fair Isaac Revenue Results

• Actual Revenue: $498.74 million
• Expected Revenue: $500.45 million
• Beat/Miss: Missed by -$1.71 million
• YoY Revenue Growth: +15.00%

Fair Isaac Announcement Details

• Quarter: Q2 2025
• Date: 4/29/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 5:00PM ET

Fair Isaac (NYSE:FICO) develops analytic, software, and digital decisioning technologies and services that enable businesses to automate, enhance, and connect decisions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company operates in two segments, Scores and Software. The Software segment provides pre-configured analytic and decision management solution designed for various business needs or processes, such as account origination, customer management, customer engagement, fraud detection, financial crimes compliance, and marketing, as well as associated professional services. This segment also offers 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 customers to address a wide range of business use cases. The Scores segment provides business-to-business scoring solutions and services for consumers that give clients access to predictive credit and other scores that can be integrated into their transaction streams and decision-making processes, as well as business-to-consumer scoring solutions comprising myFICO.com subscription offerings. It offers FICO Customer Analytics, FICO Responsible AI, FICO Advisors, FICO Business Outcome Simulator, FICO Forecaster, FICO TRIAD Customer Manager, FICO Blaze Advisor, FICO Xpress Optimization, FICO Falcon Fraud Manager, FICO Analytics Workbench, FICO Data Orchestrator, FICO DMP Streaming, FICO Decision Optimizer, and FICO Strategy Director, as well as software implementation and configuration services. The company markets its products and services primarily through its direct sales organization and indirect channels, as well as online. The company was formerly known as Fair Isaac & Company, Inc. and changed its name to Fair Isaac Corporation in July 1992. Fair Isaac Corporation was founded in 1956 and is headquartered in Bozeman, Montana.

Fair Isaac Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Second Quarter twenty twenty five FICO Earnings Conference Call. At this time, participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker today, Dave Singleton. Please go ahead.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

Good afternoon, and thank you for attending FICO's second 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. 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.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

Those statements involve any 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 risks and forward looking statements portion of such filings. Copies are available from the SEC, from the FICO website or from our Investor Relations team. This call will also include statements regarding certain non GAAP financial measures. Please refer to the company's earnings release and Regulation G schedule issued today for a reconciliation of each of these non GAAP financial measures to the most comparable GAAP measure.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

The earnings release and Regulation G schedule are available on the Investor Relations page on the company's website at fico.com or on the SEC's website at sec.gov. A replay of this webcast will also be available through 04/29/2026. I will now turn the call over to our CEO, Will Ansett.

[William Lansing, CEO at Fair Isaac Corporation]

Thanks, Dave.

[William Lansing, CEO at Fair Isaac Corporation]

Thank you everyone for joining us for our second quarter earnings call. In the Investor Relations section of our website, we posted some financial highlights slides. We'll be referring to them during this earnings announcement. We had another strong quarter and we are reiterating our fiscal twenty twenty five guidance. As shown on page two of the second quarter financial highlights, we reported quarter two revenues of $499,000,000 up 15% over last year.

[William Lansing, CEO at Fair Isaac Corporation]

We reported $163,000,000 in GAAP net income in the quarter, up 25%. We reported GAAP earnings of $6.59 per share, up 28% from the prior year. We reported $193,000,000 in non GAAP net income in the quarter, up 25% and non GAAP earnings of $7.81 per share, up 27% from the prior year. As you can see on Page 10, we delivered free cash flow of $65,000,000 in our second quarter. Over the last four quarters, we delivered $677,000,000 of free cash flow, which would be an increase of 45% over the trailing twelve month period ending 03/31/2024.

[William Lansing, CEO at Fair Isaac Corporation]

We continue to return capital to our shareholders through buybacks by repurchasing 112,000 shares in quarter two. In our Scores segment, as you can see on page six of the presentation, our second quarter revenues were $297,000,000 up 25% versus the prior year. On the B2B side, quarter two revenues were up 31% versus the prior year, primarily driven by mortgage originations revenues. On the B2C side, quarter two revenues were up 6% versus the prior year, primarily driven by revenue from indirect channel partners. Second quarter mortgage origination revenues were up 48% versus the prior year.

[William Lansing, CEO at Fair Isaac Corporation]

Mortgage origination revenue accounted for 54% of B2B revenue and 44% of total Scores revenue. Auto origination revenues were up 16%, while credit card, personal loan and other originations revenues were flat versus the prior year. FICO continues to build financial inclusion globally. In the quarter, we announced a Kenya specific FICO Score. Through our partnership with TransUnion, the FICO Score is part of a credit risk solution, which empowers lenders to serve previously underserved consumers and small, micro and medium sized enterprises.

[William Lansing, CEO at Fair Isaac Corporation]

We also continue to raise awareness of financial literacy. One way we do it is by encouraging consumers to manage their financial health by checking their free FICO score at myfico.com/free. Over the last year, FICO has seen nearly 70% increase in users accessing their free FICO scores via MyFICO. I hope you'll tell all of your friends to get their free FICO score at MyFICO. Most importantly, we continue to focus on innovation.

[William Lansing, CEO at Fair Isaac Corporation]

FICO Score mortgage simulator is now available for lender use through Exactus, the largest credit reseller in the mortgage industry. Mortgage professionals can leverage valuable insight from the simulator to help drive smarter decisions that can present more loan options and favorable interest rates for customers. We continue to drive strong adoption of FICO Score 10T for non GSE loans, and we're seeing strong results from our early adopter program. Lenders who use the classic FICO Score today can receive FICO Score 10T for free through this program, so they can evaluate the advantages before fully moving to utilizing FICO's newest and most predictive score. Lenders in the program have been able to validate the power FICO Score 10T in real world mortgage underwriting, loan production, execution and servicing.

[William Lansing, CEO at Fair Isaac Corporation]

Refer to the February 24 post in our FICO newsroom to see a list of recent additions to our growing list of FICO 10T adopters. As of today, we have clients with over $284,000,000,000 in annualized mortgage originations and about $1,430,000,000,000 in eligible mortgage portfolio servicing that have signed up for FICO Score 10T. In our software segment, we delivered $2.00 $2,000,000 in quarter two revenue, up 2% from the prior year. The revenue increase was driven mainly by growth in license revenue recognized at a point in time, partially offset by a decline in professional services. We continue to drive growth in ARR and NRR through our land and expand strategy with expand driven by increased customer usage.

[William Lansing, CEO at Fair Isaac Corporation]

As shown on page seven, the total ARR was up 3% with platform ARR growing 17 and non platform ARR declining 3%. Total NRR for the quarter, shown on page eight, was 102%, with platform NRR at 110% and non platform at 96%. ACV bookings for the quarter were 21,800,000 compared to $16,800,000 in the prior year. In our software business, we continue to expand our partner channels. FICO recently partnered with Fujitsu, a top digital servicing company in Japan.

[William Lansing, CEO at Fair Isaac Corporation]

Together, we will accelerate digital transformation support for Japanese financial institutions, delivering a future of smarter, more connected banking and payments. This quarter, we announced a partnership with to bring AI powered precision to the life insurance industry. Dakado is a Swiss based technology company that develops solutions for digital health engagement and health risk quantification. By integrating FICO platform with Docadude's health risk quantification risk engine, we create a solution that enables insurers to target their life insurance products specific profiles. This allows Docadude to design highly personalized insurance products for their customers using advanced decision science.

[William Lansing, CEO at Fair Isaac Corporation]

Later in the call, I'll talk about our upcoming FICO World Conference, but first let me pass it to Steve to provide further financial details.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Thanks and good afternoon everyone. As Will mentioned, had another good quarter with total revenue of $499,000,000 an increase of 15% over the prior year. SCORE segment revenues for the quarter were $297,000,000 up 25% from the prior year. B2B revenues were up 31% driven primarily by mortgage originations revenues. Our B2C revenues were up 6% versus the prior year due to increased revenue from our indirect channel partners.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Software segment revenues for the quarter were two zero two million dollars up 2% from the prior year. On premises and SaaS software revenue grew 4% year over year, while professional services declined 9%. We do expect Q3 professional services revenue to increase from the Q2 level. This quarter 86% of total company revenues were derived from our Americas region, which is a combination of our North American and Latin America regions. Our EMEA region generated 9% of revenues and the Asia Pacific region delivered 5%.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Our total software ARR was $715,000,000 a 3% increase over the prior year. Platform ARR was $235,000,000 representing 33% of our total Q2 twenty twenty five ARR, up from 29% of total Q2 twenty twenty four ARR. Platform ARR grew 17% versus the prior year, while non platform declined 3% to four eighty million dollars this quarter. We did see some CCS usage headwinds, both platform and non platform, as some customers chose to either delay or downsize some of their customer outreach programs due to macro volatility. Our platform land and expand strategy continues to be successful.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Our dollar based net retention rate in the quarter was 102%. Platform NRR was 110%, while our non platform NRR was 96%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases. Our software ACV bookings for the quarter were $21,800,000 compared to $16,800,000 in the prior year. We have a healthy pipeline for the back half of this fiscal year.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Turning now to core expenses for the quarter as shown on page five of the financial highlight presentation, total operating expenses were $253,000,000 this quarter versus $260,000,000 in the prior quarter, a decrease of 3%. We expect expenses to be moderately higher in the back half of the year due mainly to our FICO World event and other marketing activities. Our non GAAP operating margin is shown in our Reg G schedule was 58% for the quarter compared with 53% in the same quarter last year. And this means we delivered non GAAP operating margin expansion of four fifty basis points year over year. GAAP net income this quarter was $163,000,000 up 25% from the prior year's quarter.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Our non GAAP net income was $193,000,000 for the quarter, up 25% from the prior year's quarter. GAAP earnings per share this quarter were $6.59 up 28% from the prior year and our non GAAP earnings per share were $7.81 up 27% from the prior year. The effective tax rate for the quarter was 23.7 and the operating tax rate was 24.9%. For the full year, we believe our net effective tax rate will be around 22% and our recurring tax rate will be around 26%. Free cash flow for the quarter was $65,000,000 a 6% increase from the prior year.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Free cash flow was $677,000,000 over the last four quarters, an increase of 45% over the trailing twelve month period ended 03/31/2024. Our accounts receivable balance was up this quarter due to the timing of some large payments that were not received until early April. We anticipate our free cash flow will accelerate in the second half of this fiscal year. At the end of the quarter, we had $192,000,000 in cash and marketable investments. Our total debt at quarter end was $2,530,000,000 with a weighted average interest rate of 5%.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Currently 51% 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. Turning to return of capital, we bought back 112,000 shares in the second quarter at an average price of $18.49 dollars per share. We continue to view share repurchases as an attractive use of cash. And with that, I'll turn it

[William Lansing, CEO at Fair Isaac Corporation]

back to Will for closing comments. Thanks, Steve. The macroeconomic environment remains fluid, but our strategy and execution remain consistent. We are well positioned for this fiscal year and remain confident in the fiscal year guidance that we've provided. Our continued innovations drive significant value to our customers.

[William Lansing, CEO at Fair Isaac Corporation]

This quarter, we announced several examples. IA Financial Group leverages FICO platform for expanding insurance underwriting. Nationwide's adoption has led to increased speed and credit decisioning and rollout of new strategies. Lloyd's Bank has increased credit card approvals and new to bank consumer loan approvals. Next week, we're hosting FICO World in Hollywood, Florida, where many of our customers will highlight their own success stories from adopting FICO offerings.

[William Lansing, CEO at Fair Isaac Corporation]

Four day event brings together customers and prospective customers from around the globe to discuss the benefits of making real time decisions at scale through the power of platform. Customers will explain the benefits of optimizing interactions with consumers using FICO platform. Those customers are realizing improved profits, increased customer acquisition and retention, reduced costs, growth in new product offerings and improved employee efficiency. The event will showcase FICO platform demonstrations and have exciting announcements related to bringing innovation to the market. Some of the content from FICO World will be available in the coming weeks on our YouTube channel.

[William Lansing, CEO at Fair Isaac Corporation]

I'd encourage all of you to view the demonstrations and presentations to better understand our customers' excitement around this innovative technology. With that, I'll turn it back to Dave to open up the questions.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

Thanks, Will. This concludes our prepared remarks and we're now ready to take questions. Operator, please open the lines.

[William Lansing, CEO at Fair Isaac Corporation]

Thank you.

[Operator]

Our first question comes from Manav Patnaik with Barclays. Your line is open.

[Manav Patnaik, Managing Director, Equity Research Analyst at Barclays Investment Bank]

Thank you.

[Manav Patnaik, Managing Director, Equity Research Analyst at Barclays Investment Bank]

Will, typically, you know, this is your kind of beat and raise type porter. So I just wanted some perspective on how you thought results came in versus your expectations. And, you know, it sounds like everyone else is just holding the guide given the potential uncertainty. Is that is that what you're thinking along those lines as well?

[William Lansing, CEO at Fair Isaac Corporation]

Yeah. I think that's exactly it. I think we're in an environment with a little more uncertainty than expected. And as usual, we remain conservative. So there's ample time to raise guidance when we're more confident about it, and we're we're comfortable with where we are.

[Manav Patnaik, Managing Director, Equity Research Analyst at Barclays Investment Bank]

And then I somewhat of a follow-up, guess, the software side. I mean, you guys confident in the reacceleration of software. So I was just hoping you'd give us some context on, you know, platform, and then even non platform was down this quarter. So just curious what's happening there.

[William Lansing, CEO at Fair Isaac Corporation]

Yeah. I I think I put that in the same category of macroeconomic factor. What we see on the non platform side is a little lower, I should say, not lower usage, but lower growth in usage of CCS. And I think that reflects our customers' conservatism around the macro environment. And I remain confident that our growth rate on the platform side will be strong, continue to be strong, will strengthen from where it is today.

[William Lansing, CEO at Fair Isaac Corporation]

As you know, we don't work quarter to quarter, deals slip, we're okay with that. Our customers and our salespeople know that we don't go to extraordinary lengths to try to close deals by quarter end. And so I think there's all those factors at play. But I think the business is still quite healthy, and we feel good about it.

[Manav Patnaik, Managing Director, Equity Research Analyst at Barclays Investment Bank]

Okay, thank you.

[Operator]

One moment for our next question. Our next question comes from George Tong with Goldman Sachs. Your line is open.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Hi, thanks. Good afternoon. Wanted to see if you can talk a little bit about whether you've seen any changes in credit origination volumes through April, given all the macro uncertainty out there. And if current trends persist, if you can point to where in your guidance range you would expect to land.

[William Lansing, CEO at Fair Isaac Corporation]

We haven't seen a lot of change there, but remember we're lagging in dictator.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

And in terms of the guidance, I mean, we're comfortable with where we are in the guidance. I mean, one of the reasons we probably didn't change our guidance this quarter is that there's a lot of uncertainty, right? This should go a lot of different directions. We're confident in our guidance number, but it's difficult to know with as much volatility as there is even what we would change it to if we were to change it. So we're sticking with what we have.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Okay, got it. That's helpful. And then following up on the platform software business, ARR growth decelerated. You mentioned that was due to macro factors. Can you talk about how much visibility you have into reacceleration in platform growth?

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

And will it take macro conditions improving to drive the growth to reaccelerate? Or do you have internal idiosyncratic drivers that can get that growth higher?

[William Lansing, CEO at Fair Isaac Corporation]

We have some level of visibility because we obviously book the deals ahead of when the revenue is recognized. So so I would say we do have some visibility, and that's part of my optimism about the business. But I think it is tempered by the macro environment. And so sometimes that means deals take longer to close. We haven't experienced this yet, but you never know deals might not happen because of the macro environment.

[William Lansing, CEO at Fair Isaac Corporation]

So you know, so we have the conservatism that goes with that. But in terms of visibility, our visibility says, you know, our business is healthy and, and should reaccelerate.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Got it. Thank you.

[Operator]

One moment for our next question. Our next question comes from Jeff Meuler with Baird. Your line is open.

[Steven Pawlak, Equity Research Analyst at Baird]

Yeah, thank you. Stephen Pollock on for Jeff. Just on that point, are you seeing any changes in the customer approach towards the platform sales cycles, things like are you seeing longer cycles, longer decision times? Any changes in sort of the contract terms, anything around that?

[William Lansing, CEO at Fair Isaac Corporation]

Not so far. So I would say that, you know, we've talked about this in the past that the platform is increasingly a strategic purchase by our customers. And it's part of a bigger strategic plan to be more consumer focused and and to optimize all kinds of interaction with the consumer. So I wouldn't say we're immune from macro conditions, but I do think that we're, we're such a critical part of the strategy for our customers that it's not really going to the back burner, it's not getting canceled just because conditions are not perfect. That said, that's today and who knows how that affects us in the future.

[William Lansing, CEO at Fair Isaac Corporation]

But today, we're not seeing it. Deal cycles have not really slowed. No.

[Steven Pawlak, Equity Research Analyst at Baird]

Okay. And then on some of the insurance partners that are customers that you've announced, if you could just talk about the go to market for some of the non financial services customers, is that direct? Is that through partners? Kind of maybe what's driving maybe some of traction in some of the non financial services segments?

[William Lansing, CEO at Fair Isaac Corporation]

It's It's both. But we you know, as you know, we have been putting increasing emphasis on our indirect channel. And so we you know, there is more activity there, and we are getting more deals outside of our direct sales force.

[Steven Pawlak, Equity Research Analyst at Baird]

Alright. Thank you.

[Operator]

One moment for our next question. The next question comes from Simon Klintch with Redburn Atlantic. Your line is open.

[Simon Clinch, Partner at Redburn Atlantic]

Hi. Hi. Thanks for taking my question. I was wondering if we could just go back to your comments that nothing's really changed in terms of client behavior or volumes through April. But I was wondering if we could perhaps break it down.

[Simon Clinch, Partner at Redburn Atlantic]

Was that an overall comment around sort of the aggregate level volumes? Or is there any sort of detail at the sort of vertical level which you can share with us?

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

You're talking about the Scores business?

[Simon Clinch, Partner at Redburn Atlantic]

Yes, sorry, on Scores.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

So, I mean, honestly, we don't have real time data, frankly. I mean, you'd be better off getting information from the bureaus on that. They can track it on a day to day basis. As Will said, we get our reporting in arrears. So we have some anecdotal information, but we don't have the type of real data to stay with us.

[Simon Clinch, Partner at Redburn Atlantic]

Okay, understood. Thanks. And then just secondary, going back to the software business. And I mean, the bookings strength was notable this quarter. That's sort of maintained despite everything that's going on.

[Simon Clinch, Partner at Redburn Atlantic]

I just wondered if you could give us a little context around pipeline builds and that sort of touching on the demand side as opposed to just the deal flipping. Thanks.

[William Lansing, CEO at Fair Isaac Corporation]

The demand side is strong, the pipeline is strong. The current bookings as you can see are strong. So it's all in a good direction.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yeah, I mean, again, where we saw the headwinds were on CCS and it's just about how a lot of our existing customers are reaching out to their consumers. If their accounts growth slows down, then you're see slowdown in CCS volumes. So a lot of this is it has nothing to do with the products necessarily, it's just about how they interact with their consumers.

[Simon Clinch, Partner at Redburn Atlantic]

Understood. Thank you.

[Operator]

One moment for our next question. Our next question comes from Jason Hoss with Wells Fargo. Your line is open.

[Jason Haas, Director & Senior Equity research Analyst at Wells Fargo]

Hey, good afternoon. Thanks for taking my question. I'm curious if you could give us any sense for what sort of price increase you took in auto, just so we can get a sense for maybe in the quarter how much was volume versus price driven since there was an acceleration there? Thanks.

[William Lansing, CEO at Fair Isaac Corporation]

We don't comment on price increases until we make

[William Lansing, CEO at Fair Isaac Corporation]

them.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Well, said about

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

the ones that are already made, the ones that we have this quarter. So there's definitely an impact from the pricing that we've done so far.

[Jason Haas, Director & Senior Equity research Analyst at Wells Fargo]

Oh, I see.

[William Lansing, CEO at Fair Isaac Corporation]

Yeah, of course. Yeah, mean, as the price increase feathers in, as it becomes recognized over the course of the year, becomes a bigger component, change in price becomes a bigger component of our revenue increase. And so, yeah, that

[William Lansing, CEO at Fair Isaac Corporation]

is happening as we speak.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

But we don't specifically call out the percentage of price increase versus volume increase.

[Jason Haas, Director & Senior Equity research Analyst at Wells Fargo]

Got it. Okay. That's fair. And then as a follow-up, it looks like the growth in personnel expense has maybe moderated a little bit. I wasn't sure if that was just timing or you're finding some efficiencies there.

[Jason Haas, Director & Senior Equity research Analyst at Wells Fargo]

Thanks.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yeah, that doesn't even have anything to do

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

with headcount. In essence, there was some of it's around fringe, some of it's around some of our truing up our Supplemental Retirement Plan. So it has nothing to do with headcount per se. It has more to do with some of the fringe costs around that. So we got a benefit this quarter that we probably won't have next quarter of a few million dollars.

[Jason Haas, Director & Senior Equity research Analyst at Wells Fargo]

It. Thank you.

[Operator]

One moment for our next question. Our next question comes from Faiza Alwy with Deutsche Bank. Your line is open.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Yes. Hi. Thank you. I wanted to ask about the Scores business. It looks like there was pretty substantial increase in the non origination B2B scores revenue, and I'm curious if there was something specific that you can point to there.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

There's just a lot of nothing really anything in particular. There's a lot of things that were kind of some of it's in some license sales and some in the international markets. Some of it's

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

a little bit more of

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

a free screen. There's just a lot

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

of things, nothing specific to call up, but there's a lot of things that kind of added to the non originations this quarter.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Okay, understood. Then Will, I wanted to

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

add some those.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Was just

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

going say we do have a lot of in quarter to quarter, we do have some fluctuation in that number, so there will always be some quarters that are a little bit higher than others.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

Well, I wanted to ask you about just the regulatory environment. There's obviously been a lot of shifts post election, and you've had some of these new regulators settle into their new roles. So curious how you're thinking about the evolving situation, if you've had any conversations, and anything you can share in terms of your perspective there?

[William Lansing, CEO at Fair Isaac Corporation]

Well, we're always in conversations with the appropriate regulators and agencies and nothing has really changed. We continue to be in touch with them and talk about our industry and how we ought to go forward with it. I would say that the regulatory environment is a good one for FICO. We're pleased with where we are. It's all basically good news for us.

[Faiza Alwy, Managing Director, US Company Research at Deutsche Bank]

All right, thank you.

[Operator]

One moment for our next question. Our next question comes from Surinder Thind with Jefferies. Your line is open.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

You. Will, maybe could you possibly comment on just kind of the DBNRR number? Obviously, it's slowed down a little bit, But is there a way to disaggregate the client behavior there in the sense that clients have stopped or slowed down kind of the implementation of use cases in the current environment, or is it more a case of they're just running existing use cases maybe less frequently?

[William Lansing, CEO at Fair Isaac Corporation]

Yeah, I would say usage itself. We're not losing customers, and they're not postponing what they do, but things that are usage based, we're seeing less usage, and I really think that's that's an ebb and a flow thing. It has to do with the environment.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

Got it. That's helpful.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

And, Serena, in most cases, it's not like they're really declining. In a lot of cases, it's just not growing as fast as they were in the past.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

Yes, I stand corrected there. It's just the growth rate has slowed down, it was this idea of whether clients are just slower to maybe adopt new use cases as we move from one division to the next to the next as well, right? Versus just

[William Lansing, CEO at Fair Isaac Corporation]

I don't know it's so much that.

[William Lansing, CEO at Fair Isaac Corporation]

I think it's more the usage itself. I I really think it's a it's an environmental factor.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

Got it. And and then maybe a question for you, Steve. Just on the expenses, the SG and A numbers, how do we think about the run rate excluding the expenses that are associated with FICO World Conference?

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yeah, so we will have higher expense in the back half of year. Do obviously at FICO World we have some marketing expenses primarily on the score side that we've got in the back half of the year that'll add some more expense to it. We're adding headcount as well, but it's not all that dramatic as we've said obviously for several quarters. We are adding headcount where we can bring in good people, but it doesn't it's not all that material. So from that point of view, you're not going see a lot of increase in expenses.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

Got it. So excluding FICO World, not a material increase in expenses in the back half.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

I'm sorry, say that again.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

So excluding FICO World, not a material increase in expenses, because that's a big one timeline item, right?

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yes. I mean, other expenses. There will have some marketing expenses too. So I mean, if you look at what's implied in the guide, there is additional expenses that will be in the back half of the year. But obviously, FICA was a big part of that.

[Surinder Thind, Senior VP & Equity Analyst at Jefferies]

Got it. Okay. Thank you.

[Operator]

One moment for our next question. Our next question comes from Ashish Sabadhar with RBC. Your line is open.

[Ashish Sabadra, Information & Business Services Analyst at RBC Capital Markets]

For taking my question. I just wanted to ask a question on software as well. How do we think about the timing of converting some of that ACV? We've seen pretty strong ACV in the first half of twenty five. The timing of that converting over to ARR.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

It's probably nine months, six to nine months before the conversion takes place. It depends on the individual customer. Some customers, if they're little more sophisticated or easier to implement, it could be a little bit quicker than that. But usually, it's in that six to nine month range.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

And then Ashish, it does take three months to kind of ramp that up. So you can I kind of think of it more like nine to twelve when it's fully ramped? But Steve's right, six to nine when it kind of kicks off.

[Ashish Sabadra, Information & Business Services Analyst at RBC Capital Markets]

That's very helpful color. And maybe just a quick clarification on the auto origination revenues. There was a comment there during the Q and A about pricing getting feathered in. So if our understanding is right, there was only partial benefit of pricing in the quarter and we should continue to see that incremental benefit as we go forward. Is that a right assumption?

[Ashish Sabadra, Information & Business Services Analyst at RBC Capital Markets]

Thanks.

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yeah, I mean, well, auto is the same as everything else. So we repriced it effective January 1. Sometimes it doesn't all roll in right away on January 1. So sometimes it takes a little bit of time for the full benefit of that to hit. But the auto pricing is the same way as the mortgage and auto mortgage and credit card as well.

[Ashish Sabadra, Information & Business Services Analyst at RBC Capital Markets]

That's very helpful color. Thank you.

[Operator]

One moment for our next question. Our next question comes from Kyle Peterson with Needham. Your line is open.

[Kyle Peterson, Senior Analyst at Needham & Company]

Great. Good afternoon. Thanks for taking the questions. I want to start on the buyback and capital allocation. Historically, you guys have been fairly steady and formulaic as to how much you guys have returned to shareholders.

[Kyle Peterson, Senior Analyst at Needham & Company]

Obviously, we seem to be in a more volatile equity market environment. How are you guys kind of thinking about balancing returning cash to shareholders versus potentially being like opportunistic and maybe stepping up a little bit more if we do get some short term blips, any color there on how you guys are thinking about that would be really helpful.

[William Lansing, CEO at Fair Isaac Corporation]

Our philosophy there has not really changed. We've said in the past and continues to be true that we're not market timers. We have a big view of the future value of our company, the value today and the future value. And so we're really committed to the stock buyback. And we don't spend a ton of time thinking about, is this a great time to back up the truck versus should we stay out of the market because it feels pricey.

[William Lansing, CEO at Fair Isaac Corporation]

We pretty much buy consistently and we're pretty happy with that. That said, there have been times in our history, as you know, where we felt like the market was punishing us with a bad understanding of our prospects. And so we there, although we've historically tried to match our free cash flow to our stock purchases, there have been times when we have exceeded that by quite a bit. And for a one to two year period, we did just a few years ago. And that's not out of the question.

[William Lansing, CEO at Fair Isaac Corporation]

I think you'll see us continuing to buy regularly into the future. And as opportunities present themselves, we do sometimes heavy up.

[Kyle Peterson, Senior Analyst at Needham & Company]

Okay. That's really helpful. Then maybe a follow-up on software. I know several other guys have asked about this, but any color on kind of what you guys are seeing maybe a little more under the hood is some of the sales cycle changes and such. Have there been any changes in like whether it's like by geographies or or bank size or or anything like that over the last, you know, call it, months or something?

[Kyle Peterson, Senior Analyst at Needham & Company]

Or is a lot of the decision making pretty consistent with what you guys have historically seen and kind of shared on recent calls before this?

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

No, I don't think we've seen any real any discernible trends that way. And actually, if you look at the bookings have been pretty good. So where we've seen some slowdown is in some of the usage. But we haven't really seen any changes in behavior with depending on region or geography or type of size of bank.

[Kyle Peterson, Senior Analyst at Needham & Company]

Okay.

[Kyle Peterson, Senior Analyst at Needham & Company]

That's very helpful. Thanks guys. Nice quarter.

[Operator]

One moment for our next question. Our next question comes from Joshua Dennerling with BofA Securities. Your line is open.

[Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America]

Yeah. Hey, guys. Just wanted to touch base on the platform. I know you are continually rolling out new solutions on that side. Could you remind us what you're rolling out solution wise this year on the platform?

[Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America]

And then just maybe provide some context on how when you've added solutions in the past, it's just impacted growth?

[William Lansing, CEO at Fair Isaac Corporation]

Yes, we well, so

[William Lansing, CEO at Fair Isaac Corporation]

I would say that the largest number of solutions and use cases are related to the credit risk life cycle and things that we've historically done with our legacy applications. So originations, line management, that sort of thing. I would say that our fraud solutions on the platform are still in process. So some of the fraud solutions are available on the platform. Some new ones are available on the platform that you couldn't get before, and some of the old ones are not available yet.

[William Lansing, CEO at Fair Isaac Corporation]

So I would say that's more of a work in progress in terms of where we are. I would expect that virtually all of our product solutions will be available on the platform next year.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

Okay, and Josh, there'll announcements about innovation on FICO platform at FICO World.

[Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America]

Oh, okay. Appreciate that, Dave. Is there do you guys

[William Lansing, CEO at Fair Isaac Corporation]

I would encourage anyone who's interested to, if you're not attending FICO World, check out the FICO World YouTube videos, because we'll go into a lot of detail on what's being released.

[Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America]

Guys typically end up getting, like, a like, with people who are coming to FICO World, do you see, like, a a sales growth bump from that? Does that convert to a lot of sales?

[William Lansing, CEO at Fair Isaac Corporation]

Oh, yeah, absolutely. I would say that it's our number one sales pipeline building effort. What happens is we put a ton of energy into making available all of our top technical personnel, so that customers, prospective customers can really get a deep understanding of what we can do for them. We couple that with meeting other customers who have implemented our solutions, and there's a lot of transfer of knowledge. And frankly, don't do a lot of selling.

[William Lansing, CEO at Fair Isaac Corporation]

It's really being done by our customers explaining to other customers and potential customers what they're doing and where they're having success and where they're not. So it used to be just a show and tell. And now I would say that most of the customers who come get a very personalized, customized several days focused specifically on the needs of their bank, the needs of their financial institution, and how we best can serve them. And typically with references and introductions to other customers who've already done what they'd like to do. So wind up being a huge channel pipeline building activity.

[Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America]

Thanks for that.

[Operator]

One moment for our next question. Our next question comes from Scott Wortzel with Wolfe Research. Just

[Scott Wurtzel, SVP - Equity Research at Wolfe Research, LLC]

one for me. The color on some of the channel partners that you're working with in the software business was helpful. Just wondering how you feel overall about the partner network in the software business and how that's running right now. Thanks.

[William Lansing, CEO at Fair Isaac Corporation]

We continue to believe it's a big opportunity for us. We don't have as much indirect sales as we would like, and we continue to invest in the indirect channel with a view to increasing it. We've talked about this in the past. We have a really dynamite direct sales force. That said, it's quite small.

[William Lansing, CEO at Fair Isaac Corporation]

If you compare our IP with our distribution strength and direct sales, it's fairly obvious that those are mismatched. And although we're taking a lot of initiative around that, we're adding salespeople, we're growing our direct sales, we recognize that the real opportunity is to expand the indirect sales. And so we have, we've been investing in it, we have a lot of people working on it right now. And for different kinds of things, we have geographic reach that's occurring. We have diversification into non financial services verticals.

[William Lansing, CEO at Fair Isaac Corporation]

We have work going with SIs. And interestingly, the work with the SIs is not just the transfer of our professional services work to them, but they're actually taking our IP and building proprietary solutions for themselves that they use with their customers. And so I think it's really nice. It's a partnership where we get the professional services extra capacity, if you want to call it that, coupled with them as a channel, a true channel for moving our IP to market.

[Scott Wurtzel, SVP - Equity Research at Wolfe Research, LLC]

Great, thanks for the color.

[Operator]

One moment for our next question. Our next question comes from Kevin McVeigh with UBS. Your line is open.

[Kevin McVeigh, Managing Director at UBS Group]

Great. Thanks so much. Would you expect some of the slower

[Kevin McVeigh, Managing Director at UBS Group]

kind

[Kevin McVeigh, Managing Director at UBS Group]

of usage in CCS to kind of capture that in the back half of this year? Or is that something that you think potentially gets pushed out to '26?

[William Lansing, CEO at Fair Isaac Corporation]

Wow, your guess is as good as ours. It's just so hard to say. Our business is built around doing some amount of kind of base level revenue for getting something underway and then built on usage. And we can't really control the usage except to the extent that we teach our customers how to get more value out by expanding the usage. But kind of the economic activity level of the usage is something we can't really control, and I don't really have visibility there.

[William Lansing, CEO at Fair Isaac Corporation]

I don't know which way it goes.

[Kevin McVeigh, Managing Director at UBS Group]

That's helpful. And then with the partner channel on the implementation work, is that help explaining some of the recent trends in the professional services? Because it seems like the bookings have really scaled or is it just the size of the bookings, just trying to reconcile the professional services trends against obviously what's been pretty good bookings overall?

[Steve Weber, Executive VP & CFO at Fair Isaac Corporation]

Yes, I would say this quarter some of it was actually timing. We had some milestones that had to be met in order to reclaim the revenue and it kicked over from March into April. So there's a little bit of a timing there. You will probably see the I think we even referenced in the prepared remarks that we expect the PS actually the revenue to come up a little bit in the back half and even in our third quarter.

[Kevin McVeigh, Managing Director at UBS Group]

Helpful. Thank you very much.

[Operator]

One moment for our next question. Our next question comes from Matthew O'Neil with Feet Partners. Your line is open.

[Matthew O'Neill, Managing Director at Financial Technology Partners]

Yes. Hi gentlemen. Thanks for taking my question. Many good questions asked and answered here. So I thought I would open ask a more open ended one just around strategic priorities, but recognize that FICO World is next week.

[Matthew O'Neill, Managing Director at Financial Technology Partners]

So, whatever you may be willing to preview as far as kind of the focus for the remainder of the year and beyond would be really interesting. Thank you.

[William Lansing, CEO at Fair Isaac Corporation]

Well, I think what you'll see at FICO World is a whole bunch of new capabilities. You'll see a little bit more on the way we're using AI. On the score side, you'll see some of the innovation that we have coming. We're just gearing up on FICO eleven, so you'll get a little taste of that. So those are the kinds of things that we expect to be announcing next week.

[Matthew O'Neill, Managing Director at Financial Technology Partners]

Got it. Appreciate it. Thank you.

[Operator]

And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. You may now disconnect and have a wonderful day.

[Dave Singleton, Vice President - IR at Fair Isaac Corporation]

Thank you. Thank you.

Participants

Executives

• Dave Singleton, Vice President - IR
• William Lansing, CEO
• Steve Weber, Executive VP & CFO

Analysts

• Manav Patnaik, Managing Director, Equity Research Analyst at Barclays Investment Bank
• George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs
• Steven Pawlak, Equity Research Analyst at Baird
• Simon Clinch, Partner at Redburn Atlantic
• Jason Haas, Director & Senior Equity research Analyst at Wells Fargo
• Faiza Alwy, Managing Director, US Company Research at Deutsche Bank
• Surinder Thind, Senior VP & Equity Analyst at Jefferies
• Ashish Sabadra, Information & Business Services Analyst at RBC Capital Markets
• Kyle Peterson, Senior Analyst at Needham & Company
• Joshua Dennerlein, Head of Business & Information Services equity research at Bank of America
• Scott Wurtzel, SVP - Equity Research at Wolfe Research, LLC
• Kevin McVeigh, Managing Director at UBS Group
• Matthew O'Neill, Managing Director at Financial Technology Partners