EX-99.1 2 a4939840ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Fair Isaac Announces Third Quarter Fiscal 2005 Results; Year over Year Revenue Growth of 18%; Record Revenue, Earnings Per Share and Bookings for the Third Quarter MINNEAPOLIS--(BUSINESS WIRE)--July 27, 2005--Fair Isaac Corporation (NYSE:FIC), the leading provider of analytics and decision technology, today announced financial results for its third fiscal quarter ended June 30, 2005. Third Quarter Fiscal 2005 Results The company reported third quarter revenues of $203.8 million in fiscal 2005 versus $173.2 million reported in the prior year period. Net income for the third quarter of fiscal 2005 totaled $36.6 million, or $0.53 per diluted share, compared with net income of $28.8 million, or $0.37 per diluted share, reported in the same quarter last year. Net income for the third quarter of fiscal 2005 included an adjustment that reduced income tax expense by $4.4 million, or $0.06 per diluted share. The adjustment represents revisions made to estimates of prior years' tax liabilities which resulted from a recently completed tax study. In addition, the company reduced its estimated effective income tax rate to 37% for the fiscal year. The impact of the adoption of EITF Issue No. 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share (EITF Issue No. 04-8) had no effect on the third quarter of fiscal 2005 diluted earnings per share and reduced third quarter of fiscal 2004 diluted earnings per share by $0.02. Fiscal 2005 Year-to-date Results The company reported revenues of $595.4 million year-to-date versus $515.8 million reported in the same period last year. Year-to-date net income totaled $98.8 million, or $1.34 per diluted share, compared with net income of $88.4 million, or $1.11 per diluted share, reported in the same period last year. Year-to-date net income in fiscal 2005 was also affected by the year-to-date adjustments that reduced income tax expense by $10.3 million, or $0.14 per diluted share. The impact of the adoption of EITF Issue No. 04-8 reduced year-to-date diluted earnings per share by $0.08 in fiscal 2005 and $0.09 in fiscal 2004. "We are pleased with our results this quarter as we continued our trend of record-setting performance - including revenue, bookings, sales proposals and earnings per share," said Thomas Grudnowski, Fair Isaac's chief executive officer. "We are particularly pleased with the results from our core Consumer, Enterprise Decision Management, Fraud and Scoring market units." Third Quarter Fiscal 2005 Revenues and Bookings Highlights Revenues increased across each of the company's four operating segments. Strategy Machine Solutions revenues increased to $115.1 million in the third quarter of 2005 from $105.7 million in the prior year quarter, or by 9%, primarily due to revenues generated by collections and recovery solutions, and mortgage banking solutions associated with the acquisition of London Bridge; as well as increased revenues from both the fraud solutions and consumer scoring products. These gains were partially offset by a decline in revenues associated with marketing services and insurance solutions. Scoring Solutions revenues increased to $40.7 million in the third quarter from $36.3 million in the prior year quarter, or by 12%, primarily due to an increase in revenues derived from the PreScore(R) Service and from risk scoring services at the credit reporting agencies. Professional Services revenues increased to $33.2 million in the third quarter from $23.2 million in the prior year quarter, or by 43%, primarily due to the acquisitions of London Bridge and Braun Consulting, Inc. Analytic Software Tools revenues increased to $14.8 million in the third quarter from $8.0 million in the prior year quarter, or by 85%, due to revenues generated from sales of the Enterprise Decision Management suite of products. The company achieved record bookings of $143.3 million in the third quarter of 2005, as compared to its previous guidance of $123.0 million. 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 $310.3 million at June 30, 2005 as compared to $364.3 million at September 30, 2004. Significant changes in cash and cash equivalents from September 30, 2004 include cash provided by operations of $150.2 million; $49.4 million received from the exercise of stock options and stock issued and $22.7 million sourced from the November 2004 sale of the company's subsidiary, London Bridge Phoenix Software, Inc. Cash used year-to-date includes $14.0 million related to purchases of property and equipment, $32.6 million (net of cash acquired) related to the November 2004 acquisition of Braun Consulting, Inc., and $231.8 million to repurchase company stock under the current and previously authorized share repurchase plans. Outlook The company expects revenue for fourth quarter fiscal 2005 of approximately $207.0 million and earnings per diluted share of about $0.49. The company also expects fiscal 2005 total revenue of approximately $802.0 million and earnings per diluted share of about $1.83. This guidance reflects the continuation of top-line growth in its core market units and further expansion of its operating margin. "We are encouraged by the continued strength we see in our key market units," said Grudnowski. "We are excited about the growing awareness of the FICO(R) score, the increasing market acceptance of Fair Isaac's unique value proposition and the continued improvement in the company's overall operating efficiencies. The stronger than expected bookings for the quarter provide additional confidence in our ability to achieve our revenue targets." 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 third quarter results and outlook for the fourth quarter. 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 August 24, 2005. About Fair Isaac Fair Isaac Corporation (NYSE:FIC) is the preeminent provider of creative analytics that unlock value for people, businesses and industries. The company's predictive modeling, decision analysis, intelligence management, decision management systems and consulting services power billions of mission-critical customer decisions a year. Founded in 1956, Fair Isaac helps thousands of companies in over 60 countries acquire customers more efficiently, increase customer value, reduce fraud and credit losses, lower operating expenses and enter new markets more profitably. Most leading banks and credit card issuers rely on Fair Isaac solutions, as do insurers, retailers, telecommunications providers, healthcare organizations and government agencies. Through the www.myFICO.com Web site, consumers use the company's FICO(R) scores, the standard measure of credit risk, to manage their financial health. For more information, visit 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, 2004 and Quarterly Report on Form 10-Q for the period ended March 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 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 and Nine Months Ended June 30, 2005 and 2004 (In thousands, except per share data) (Unaudited) Quarter Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Revenues $203,807 $173,197 $595,374 $515,784 --------- --------- --------- --------- Operating expenses: Cost of revenues 68,339 61,361 207,757 184,179 Research and development 21,176 19,096 60,297 49,830 Selling, general and administrative 59,126 45,384 167,779 127,652 Amortization of intangible assets 6,320 4,597 19,640 12,728 Restructuring and merger related - 751 - 751 --------- --------- --------- --------- Total operating expenses 154,961 131,189 455,473 375,140 --------- --------- --------- --------- Operating income 48,846 42,008 139,901 140,644 Other income, net 161 4,385 1 1,893 --------- --------- --------- --------- Income before income taxes 49,007 46,393 139,902 142,537 Provision for income taxes 12,395 17,624 41,102 54,164 --------- --------- --------- --------- Net income $36,612 $28,769 $98,800 $88,373 ========= ========= ========= ========= Earnings per share: Basic $0.55 $0.41 $1.47 $1.26 ========= ========= ========= ========= Diluted (b) $0.53 $0.37 (a) $1.34 $1.11 (a) ========= ========= ========= ========= Shares used in computing earnings per share: Basic 66,215 70,008 67,247 70,046 ========= ========= ========= ========= Diluted (b) 68,531 82,151 (a) 75,661 82,701 (a) ========= ========= ========= ========= (a) The computation of diluted earnings per share for the quarter ended June 30, 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. The computation of diluted earnings per share for the nine months ended June 30, 2005 and 2004, includes 6.0 million 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 $2.5 million and $3.8 million, respectively. (b) On March 31, 2005, the Company successfully completed an exchange offer for approximately 99.9% of the principal amount of its senior convertible notes (Old Notes) for new senior convertible notes (New Notes). The dilutive effect of the Company's Old Notes has been calculated using the if-converted method through March 30, 2005. The dilutive effect of the New Notes has been calculated using the treasury stock method since the effective date of the exchange. FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2005 and September 30, 2004 (In thousands) (Unaudited) June 30, September 30, 2005 2004 ------------- ------------- ASSETS: Current assets: Cash and cash equivalents $93,126 $134,070 Marketable securities 161,285 165,235 Receivables, net 164,236 140,845 Prepaid expenses and other current assets 24,167 25,951 ------------- ------------- Total current assets 442,814 466,101 Marketable securities and investments 55,936 65,007 Property and equipment, net 51,808 53,288 Goodwill and intangible assets, net 809,103 825,142 Other noncurrent assets 24,859 35,241 ------------- ------------- $1,384,520 $1,444,779 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other accrued liabilities $43,250 $45,596 Accrued compensation and employee benefits 33,730 33,670 Deferred revenue 56,805 41,050 ------------- ------------- Total current liabilities 133,785 120,316 Senior convertible notes 400,000 400,000 Other noncurrent liabilities 8,469 7,992 ------------- ------------- Total liabilities 542,254 528,308 Stockholders' equity 842,266 916,471 ------------- ------------- $1,384,520 $1,444,779 ============= ============= FAIR ISAAC CORPORATION REVENUES BY SEGMENT For the Quarters and Nine Months Ended June 30, 2005 and 2004 (In thousands) (Unaudited) Quarter Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Strategy machine solutions $115,092 $105,699 $344,156 $312,547 Scoring solutions 40,741 36,308 119,512 105,322 Professional services 33,203 23,197 96,253 70,305 Analytic software tools 14,771 7,993 35,453 27,610 --------- --------- --------- --------- Total revenues $203,807 $173,197 $595,374 $515,784 ========= ========= ========= ========= FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended June 30, 2005 and 2004 (In thousands) (Unaudited) Nine Months Ended June 30, ------------------- 2005 2004 --------- --------- Cash flows from operating activities: Net income $98,800 $88,373 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,261 34,216 Changes in operating assets and liabilities, net of acquisitions (12,304) 33,225 Other, net 24,395 6,669 --------- --------- Net cash provided by operating activities 150,152 162,483 --------- --------- Cash flows from investing activities: Purchases of property and equipment (14,009) (14,749) Cash paid for acquisitions, net of cash acquired (32,567) (274,545) Net activity from marketable securities 19,800 224,799 Other, net 22,572 1,734 --------- --------- Net cash used in investing activities (4,204) (62,761) --------- --------- Cash flows from financing activities: Proceeds from issuances of common stock 49,353 44,527 Repurchases of common stock (231,834) (68,734) Other, net (4,041) (3,520) --------- --------- Net cash used in financing activities (186,522) (27,727) --------- --------- Effect of exchange rate changes on cash (370) 531 --------- --------- Increase (decrease) in cash and cash equivalents (40,944) 72,526 Cash and cash equivalents, beginning of period 134,070 130,383 --------- --------- Cash and cash equivalents, end of period $93,126 $202,909 ========= ========= Fair Isaac Corporation Baseline Revenue Analysis (In thousands) A = Actual, E = Estimate ---------------------------------------------------------------------- BKG'04 Q1A Q2A Q3A Q4A FY04 ---------------------------------------------------------------------- Baseline Prior to '04 $153,440 $148,234 $146,159 $151,800 $599,633 ---------------------------------------------------------------------- Q1-2004A $135,108 15,901 10,304 8,300 8,021 42,526 Q2-2004A 116,997 14,708 8,397 9,933 33,038 Q3-2004A 78,580 10,341 7,537 17,878 Q4-2004A 110,585 13,131 13,131 ---------------------------------------------------------------------- Total FY04 441,270 15,901 25,012 27,038 38,622 106,573 ---------------------------------------------------------------------- Baseline Prior to '05 441,270 169,341 173,246 173,197 190,422 706,206 ---------------------------------------------------------------------- Q1-2005E Q2-2005E Q3-2005E Q4-2005E ---------------------------------------------------------------------- Total FY05 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $441,270 $169,341 $173,246 $173,197 $190,422 $706,206 ====================================================================== ---------------------------------------------------------------------- BKG'05 Q1A Q2A Q3A Q4E FY05E ---------------------------------------------------------------------- Baseline Prior to '04 $144,463 $139,115 $137,231 $133,500 $554,309 ---------------------------------------------------------------------- Q1-2004A 8,714 6,506 6,243 5,500 26,963 Q2-2004A 6,350 5,276 4,817 4,500 20,943 Q3-2004A 6,688 5,279 3,341 3,000 18,308 Q4-2004A 9,946 8,269 7,280 6,500 31,995 ---------------------------------------------------------------------- Total FY04 31,698 25,330 21,681 19,500 98,209 ---------------------------------------------------------------------- Baseline Prior to '05 176,161 164,445 158,912 153,000 652,518 ---------------------------------------------------------------------- Q1-2005E $115,363 19,385 12,916 9,120 6,000 47,421 Q2-2005E 136,559 18,660 12,402 9,000 40,062 Q3-2005E 143,318 23,373 16,000 39,373 Q4-2005E 130,000 23,000 23,000 ---------------------------------------------------------------------- Total FY05 525,240 19,385 31,576 44,895 54,000 149,856 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $525,240 $195,546 $196,021 $203,807 $207,000 $802,374 ====================================================================== CONTACT: Fair Isaac Corporation, Minneapolis Investors & Analysts: John D. Emerick, Jr., 800-213-5542 or JD Bergquist Wood, 800-213-5542 investor@fairisaac.com