Fair Isaac NYSE: FICO executives defended the company’s mortgage scoring position, capital allocation strategy and software growth outlook during a conference appearance featuring President and CEO William J. Lansing and EVP and CFO Steven Weber.
Lansing said the company’s stock has been pressured over the past 15 months, which he attributed largely to concerns about political scrutiny in Washington tied to the mortgage business. He said Fair Isaac remains committed to repurchasing shares, describing the company as “kind of a slow-moving LBO.”
He noted that Fair Isaac had 74 million shares outstanding when he joined the board, 30 million when he became CEO in 2012 and about 23 million today. Lansing said the company uses cash flow to repurchase stock and manages leverage in a range of roughly two to three times.
“The business has just gotten stronger and stronger and stronger,” Lansing said, adding that management is “a little surprised” by where the stock is trading.
Executives Outline Long-Term Financial Framework
Weber said Fair Isaac has not issued long-term numerical targets, but described the company’s internal planning framework based on historical performance. He said management typically aims for revenue growth “at least into the teens,” which could support net income growth above 20% with margin expansion. EPS growth, aided by buybacks, can at times exceed 30%, he said.
“Just rough justice, that’s how we’ve been looking at it,” Weber said.
Mortgage Scoring Scrutiny Remains Central Issue
Much of the discussion focused on mortgage credit scores and the potential impact of VantageScore entering the conforming mortgage market. Lansing said Fair Isaac has competed with VantageScore for more than 20 years outside mortgage and argued that VantageScore has not gained meaningful paid share in those markets.
He said FICO Score 10T is 8% more predictive than VantageScore 4 and qualifies 5% more borrowers, citing Fair Isaac’s analysis and an independent study by Milliman. Lansing encouraged investors to read the technical white papers from both FICO and Milliman.
Lansing also argued that price is less likely to be a reason for lenders to switch because Fair Isaac has introduced a $0.99 option for mortgage scores through its Direct License Program, matching the VantageScore price referenced in the discussion. He said the remaining potential incentive to use both scores would be to “game” the system by presenting the better of two scores to Fannie Mae or Freddie Mac.
However, Lansing said that strategy would not reduce FICO volume because lenders would still need to pull a FICO score in order to compare it with another score. He said the addressable market for such gaming is “under 10%,” citing rules including a loan-to-value threshold below 80% and an approach that subtracts 20 points from a VantageScore before placing it into a FICO-based loan-level price adjustment grid.
Direct License Program Expected Soon
Lansing said Fair Isaac’s Direct License Program is expected to be ready “next month,” pending certification from the government-sponsored enterprises. He said the GSEs and the FHFA director are supportive, though the timing depends on certification.
Asked about possible adoption of the new performance model, Lansing said there is “a lot of demand” and that it could “easily” reach half of the market within a year. He said the performance model will be available through tri-merge resellers via the Direct License Program, and that those resellers account for the “lion’s share” of mortgage score purchases.
Lansing said the FHFA director is aware of the pricing structure and “supports it.” He also said there is limited information available about a pilot involving 21 lenders testing VantageScore because participants are under nondisclosure agreements.
On FICO Score 10T adoption, Lansing said the score is being adopted fairly quickly in the non-conforming mortgage market. He acknowledged significant inertia in the conforming market, where systems remain built around Classic FICO. Still, he said FICO Score 10T is architecturally more similar to earlier FICO models than VantageScore 4, though it is not fully backward-compatible because it uses trended data.
Pricing Strategy Extends Beyond Mortgage
Lansing said Fair Isaac has raised mortgage score prices over the past decade after roughly 30 years without price increases, but argued the product remains inexpensive relative to overall mortgage closing costs. He said the company is trying to monetize intellectual property that had been “undermanaged and undermonetized” for decades while minimizing market disruption.
He said 2027 pricing has not yet been determined. Fair Isaac typically reviews pricing in August or September and communicates changes to partners for implementation on Jan. 1, he said.
In auto, Lansing said the company has made modest price increases and continues to evaluate where the value of the score exceeds what Fair Isaac charges. In credit cards, he said increases are generally closer to inflation because the market has higher volume and more elasticity.
Lansing also said relationships with credit bureaus have improved after tensions related to the Direct License Program. He said the company surprised bureau CEOs shortly before announcing the alternate distribution channel, but added that the bureaus have since adjusted. “At the end of the day, we have symbiotic relationship with them,” he said.
Software Platform and AI Seen as Growth Drivers
Lansing said Fair Isaac’s newer software business is centered on a decisioning platform that helps companies use data and analytics in real time to optimize customer interactions. He described it as a “next generation CRM” that can feed decisions into workflows at the point of customer interaction.
He said the company typically competes against homegrown systems rather than other software vendors and argued Fair Isaac’s platform can be substantially less expensive than internal builds. Lansing said the newer platform grew 49% last quarter and represents about one-third of the software business, while the rest of the software portfolio is “pretty much flat.”
He also said the platform has a dollar-based net retention rate of 136%, reflecting expansion among existing customers.
On artificial intelligence, Lansing said Fair Isaac benefits from productivity improvements in software development and sees opportunities to add AI agents around its decisioning products. He gave fraud detection as an example, saying AI agents could handle tasks now performed by fraud analysts after software flags an exception.
Lansing said Fair Isaac has no near-term plan to sell or spin off the software business, adding that management believes it is “undervalued and under-recognized.”
About Fair Isaac NYSE: FICO
Fair Isaac Corporation, commonly known as FICO, is a data analytics and software company best known for its FICO Score, a widely used credit-scoring system that helps lenders assess consumer credit risk. Founded in 1956 by Bill Fair and Earl Isaac, the company has evolved from its origins in statistical credit scoring to a broader focus on predictive analytics, decision management and artificial intelligence-driven solutions for financial services and other industries. FICO is headquartered in San Jose, California, and operates globally, serving clients across North America, Latin America, Europe, the Middle East, Africa and the Asia-Pacific region.
FICO's product portfolio centers on analytics and decisioning technologies.
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