Segment Information

12 Months Ended

Sep. 30, 2019

We are organized into the following three operating segments, each of which is a reportable segment, to align with internal management of our worldwide business operations based on product offerings.

•

Applications. This segment includes pre-configured decision management applications designed for a specific type of business problem or process — such as marketing, account origination, customer management, fraud, collections and insurance claims management — as well as associated professional services. These applications are available to our customers as on-premises software, and many are available as hosted, SaaS applications through the FICO^® Analytic Cloud or third-party public clouds, such as those provided by AWS.

•

Scores. This segment includes our business-to-business scoring solutions, our myFICO^® solutions for consumers and associated professional services. Our scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our scoring solutions are distributed through major credit reporting agencies, as well as services through which we provide our scores to clients directly.

•

Decision Management Software. This segment is composed of analytic and decision management software tools that clients can use to create their own custom decision management applications, our FICO^® Decision Management Suite, as well as associated professional services. These tools are available to our customers as on-premises software or through the FICO^® Analytic Cloud or third-party public clouds, such as those provided by AWS.

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

The following tables summarize segment information for fiscal 2019, 2018 and 2017:



	Year Ended September 30, 2019
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	395,398		$	415,288		$	50,262		$	—		$	860,948
Professional services	137,258			2,157			44,680			—			184,095
License	72,378			3,732			38,930			—			115,040
Total segment revenues	605,034			421,177			133,872			—			1,160,083
Segment operating expense	(443,872		)	(59,821		)	(168,988		)	(144,755		)	(817,436		)
Segment operating income (loss)	$	161,162		$	361,356		$	(35,116	)	$	(144,755	)	$	342,647
Unallocated share-based compensation expense													(82,973		)
Unallocated amortization expense													(6,126		)
Operating income													253,548
Unallocated interest expense, net													(39,752		)
Unallocated other income, net													2,276
Income before income taxes													$	216,072
Depreciation expense	$	18,766		$	498		$	4,036		$	904		$	24,204



	Year Ended September 30, 2018 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	372,283		$	331,662		$	46,658		$	—		$	750,603
Professional services	142,736			1,900			32,274			—			176,910
License	49,356			2,308			20,969			—			72,633
Total segment revenues	564,375			335,870			99,901			—			1,000,146
Segment operating expense	(420,411		)	(63,452		)	(134,261		)	(125,255		)	(743,379		)
Segment operating income (loss)	$	143,964		$	272,418		$	(34,360	)	$	(125,255	)	256,767
Unallocated share-based compensation expense													(74,814		)
Unallocated amortization expense													(6,594		)
Operating income													175,359
Unallocated interest expense, net													(31,311		)
Unallocated other income, net													12,884
Income before income taxes													$	156,932
Depreciation expense	$	15,651		$	555		$	5,471		$	956		$	22,633



	Year Ended September 30, 2017 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	335,560		$	254,424		$	43,943		$	—		$	633,927
Professional services	140,990			2,869			34,045			—			177,904
License	84,084			2,244			36,824			—			123,152
Total segment revenues	560,634			259,537			114,812			—			934,983
Segment operating expense	(392,307		)	(54,369		)	(122,839		)	(104,907		)	(674,422		)
Segment operating income (loss)	$	168,327		$	205,168		$	(8,027	)	$	(104,907	)	260,561
Unallocated share-based compensation expense													(61,222		)
Unallocated amortization expense													(12,709		)
Unallocated restructuring and acquisition-related expenses													(4,471		)
Operating income													182,159
Unallocated interest expense, net													(25,790		)
Unallocated other expense, net													(86		)
Income before income taxes													$	156,283
Depreciation expense	$	15,857		$	991		$	4,783		$	1,349		$	22,980

Information about disaggregated revenue by product deployment methods was as follows:



	Year Ended September 30, 2019
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	360,105	$	244,929	$	—	$	605,034	52	%
Scores	—		—		421,177		421,177		36	%
Decision Management Software	108,447		25,425		—		133,872		12	%
Total	$	468,552	$	270,354	$	421,177	$	1,160,083	100	%



	Year Ended September 30, 2018 (As Adjusted)
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	337,162	$	227,213	$	—	$	564,375	56	%
Scores	—		—		335,870		335,870		34	%
Decision Management Software	86,172		13,729		—		99,901		10	%
Total	$	423,334	$	240,942	$	335,870	$	1,000,146	100	%



	Year Ended September 30, 2017 (As Adjusted)
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	367,944	$	192,690	$	—	$	560,634	60	%
Scores	—		—		259,537		259,537		28	%
Decision Management Software	104,995		9,817		—		114,812		12	%
Total	$	472,939	$	202,507	$	259,537	$	934,983	100	%

We derive a significant portion of revenues internationally, and 34%, 35%, and 37% of total consolidated revenues were derived from clients outside the U.S. during fiscal 2019, 2018 and 2017, respectively. Information about disaggregated revenue by primary geographical markets was as follows:



	Year Ended September 30, 2019
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	338,990	$	42,656	$	155,539	$	67,849	$	605,034
Scores	404,778		4,591		6,359		5,449		421,177
Decision Management Software	63,397		18,040		33,288		19,147		133,872
Total	$	807,165	$	65,287	$	195,186	$	92,445	$	1,160,083



	Year Ended September 30, 2018 (As Adjusted)
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	318,836	$	39,136	$	141,358	$	65,045	$	564,375
Scores	328,990		1,366		3,989		1,525		335,870
Decision Management Software	53,184		5,035		24,245		17,437		99,901
Total	$	701,010	$	45,537	$	169,592	$	84,007	$	1,000,146



	Year Ended September 30, 2017 (As Adjusted)
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	327,226	$	34,678	$	139,765	$	58,965	$	560,634
Scores	250,260		1,573		3,831		3,873		259,537
Decision Management Software	62,758		7,112		30,222		14,720		114,812
Total	$	640,244	$	43,363	$	173,818	$	77,558	$	934,983

Within our Applications segment our fraud solutions accounted for 18%, 17% and 19% of total revenues in each of fiscal 2019, 2018 and 2017, respectively, our customer communication services accounted for 9%, 10% and 10% of total revenues in each of these periods, respectively; and our customer management solutions accounted for 6%, 8% and 8% of total revenues in each of these periods, respectively.

Revenue generated from a single customer or a group of customers which represented 10% or greater of total revenue are summarized below for fiscal 2019, 2018 and 2017:



	Year Ended September 30,
	2019				2018				2017
					As Adjusted				As Adjusted
	(Dollars in thousands)
Experian	$	148,037	13	%	$	109,097	11	%	$	80,096	9	%
TransUnion and Equifax	183,523		16	%	142,179		14	%	99,735		11	%
Other customers	828,523		71	%	748,870		75	%	755,152		80	%
Total	$	1,160,083	100	%	$	1,000,146	100	%	$	934,983	100	%

At September 30, 2019 and 2018, no individual customer accounted for 10% or more of total consolidated receivables.

Our property and equipment, net, on a geographical basis are summarized below at September 30, 2019 and 2018:



	September 30,
	2019				2018
	(Dollars in thousands)
United States	$	38,058	72	%	$	39,593	81	%
United Kingdom	7,801		15	%	4,296		9	%
Other countries	7,168		13	%	4,948		10	%
Total	$	53,027	100	%	$	48,837	100	%