EX-99.1 2 a5264101ex991.txt EXHIBIT 99.1 Exhibit 99.1 Fair Isaac Announces Fourth Quarter and Fiscal 2006 Results, New Stock Repurchase Authorization, and Departure of Chief Executive Officer MINNEAPOLIS--(BUSINESS WIRE)--Nov. 1, 2006--Fair Isaac Corporation (NYSE:FIC), the leading provider of analytics and decision technology, today announced the financial results for its fourth quarter and fiscal year ended September 30, 2006. In addition, the board of directors authorized a new $500 million share repurchase program. The board of directors of Fair Isaac Corporation also announced today that Thomas G. Grudnowski has stepped down as chief executive officer and board member, effective immediately. Charles M. Osborne, Fair Isaac's chief financial officer, has been named chief executive officer on an interim basis. "Tom Grudnowski came to Fair Isaac to revitalize and reinvigorate the company. He brought a strategic vision and put in place a plan that has given this company the capabilities to compete and win. We thank Tom for his significant leadership over the past seven years as we look forward to continued execution of the company's strategy," said A. George Battle, chairman, on behalf of the board. The board will begin a search for a new chief executive officer immediately. The interim chief executive officer, Mr. Osborne, has been the chief financial officer of the company since May 2004 and has over 32 years of business leadership experience. He will also retain his chief financial officer responsibilities. The company has made no additional structural changes or executive leadership changes at this time. Fourth Quarter Fiscal 2006 Results The company reported fourth quarter revenues of $207.3 million in fiscal 2006 versus $203.3 million reported in the prior year period. Net income for the fourth quarter of fiscal 2006 totaled $22.1 million, or $0.35 per diluted share, versus $35.7 million, or $0.53 per diluted share, reported in the prior year period. Fourth quarter fiscal 2006 results included share-based compensation expense of $7.4 million after-tax, or $0.12 per diluted share, due to the adoption of SFAS 123(R), and costs associated with the previously announced lease exit of $8.3 million after-tax, or $0.13 per diluted share. Fiscal 2006 Results The company reported revenues of $825.4 million versus $798.7 million in the prior year period. Net income for fiscal 2006 totaled $103.5 million, or $1.59 per diluted share, versus $134.5 million, or $1.86 per diluted share, reported in the prior year. Fiscal 2006 results included share-based compensation expense of $26.6 million after-tax, or $0.41 per diluted share, due to the adoption of SFAS 123(R), and restructuring and acquisition-related costs of $12.7 million after-tax, or $0.19 per diluted share. Fiscal 2005 results included a decrease in diluted earnings per share of $0.09 related to the adoption of EITF Issue No. 04-8, and an increase in diluted earnings per share of $0.14 related to revisions made to tax liabilities. Fourth Quarter Fiscal 2006 Revenues Highlights Revenues for fourth quarter fiscal 2006 across each of the company's four operating segments were as follows: -- Strategy Machine(R) Solutions revenues increased to $111.6 million in the fourth quarter compared to $109.6 million in the prior year quarter, or by 1.8%, primarily due to an increase in revenues from fraud, originations, and collections and recovery solutions, offset by a decline associated with insurance solutions and consumer scoring products. -- Scoring Solutions revenues were $45.5 million in the fourth quarter compared to $47.8 million in the prior year quarter, or a decrease of 4.8%, primarily due to a decrease in revenues derived from risk scoring services at the credit reporting agencies. -- Professional Services revenues increased to $37.0 million in the fourth quarter from $33.4 million in the prior year quarter, or by 10.9%, primarily due to an increase in revenues from strategic consulting services and implementation services for EDM products. -- Analytic Software Tools revenues increased to $13.2 million in the fourth quarter compared to $12.6 million in the prior year quarter, or by 5.1%, due to an increase in revenues generated from sales of the Blaze Advisor(TM) product. Fiscal 2006 Revenues Highlights Revenues for fiscal 2006 across each of the company's four operating segments were as follows: -- Strategy Machine(R) Solutions revenues increased to $457.2 million from $453.7 million in the prior year period, or by 0.8%, primarily due to growth in fraud solutions, consumer scoring products and collections and recovery solutions, offset by a decline associated with marketing services and insurance solutions. -- Scoring Solutions revenues increased to $177.2 million from $167.3 million in the prior year period, or by 5.9%, primarily due to an increase in revenues from risk scoring services at the credit reporting agencies, and PreScore(R) Service. -- Professional Services revenues increased to $145.3 million from $129.6 million in the prior year period, or by 12.1%, primarily due to an increase in revenues from strategic consulting services and implementation services for EDM products, offset by a decline in consulting services related to precision marketing. -- Analytic Software Tools revenues were $45.7 million compared to $48.0 million in the prior year period, or a decrease of 4.8%, due to a decline in revenues generated from sales of the Blaze Advisor(TM) product. Bookings Highlights The bookings for the fourth quarter were $112.6 million versus $109.7 million in the same period last year. 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 as one 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 $267.8 million at September 30, 2006, 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 $199.0 million for fiscal 2006 and $64.2 million received from the exercise of stock options and stock issued under an employee stock purchase plan. Cash used during fiscal 2006 includes $31.4 million related to purchases of property and equipment and $256.5 million to repurchase company stock. Outlook The company expects revenues for first quarter fiscal 2007 of approximately $210.0 million and earnings per diluted share, to be approximately $0.48. The company expects revenues for fiscal 2007 of approximately $870.0 million and earnings per diluted share, to be approximately $2.10. The earnings per diluted share, guidance include compensation expense related to SFAS 123(R). New Stock Repurchase Program Fair Isaac also announced today that its Board of Directors has approved a common stock repurchase program to acquire up to $500 million of the company's outstanding common stock. This new program replaces the Company's previous repurchase program announced on August 29, 2006, which had authorized the company to acquire up to $250 million of outstanding stock. Under the previous program, Fair Isaac purchased approximately 2.4 million shares of its common stock, at an aggregate cost of approximately $85.3 million. The stock repurchase program, which is open-ended, allows the company to repurchase its shares from time to time in the open market and in negotiated transactions. 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 fourth quarter and fiscal 2006 results, and outlook for fiscal 2007. 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 November 29, 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 and quarterly report on Form 10-Q for the period ended June 30, 2006. 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, FICO, myFICO, Falcon, Blaze Advisor, TRIAD, Strategy Machine and PreScore are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries. FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Quarters and Years Ended September 30, 2006 and 2005 (In thousands, except per share data) (Unaudited) Quarter Ended Year Ended September 30, September 30, --------------------- --------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Revenues $207,289 $203,297 $825,365 $798,671 ---------- ---------- ---------- ---------- Operating expenses: Cost of revenues 70,291 67,308 281,977 275,065 Research and development 19,173 20,998 84,967 81,295 Selling, general and administrative 66,967 55,621 260,845 223,400 Amortization of intangible assets 6,366 6,260 25,191 25,900 Restructuring and acquisition-related 12,862 - 19,662 - ---------- ---------- ---------- ---------- Total operating expenses 175,659 150,187 672,642 605,660 ---------- ---------- ---------- ---------- Operating income 31,630 53,110 152,723 193,011 Other income, net 1,416 1,076 6,469 1,077 ---------- ---------- ---------- ---------- Income before income taxes 33,046 54,186 159,192 194,088 Provision for income taxes 10,993 18,438 55,706 59,540 ---------- ---------- ---------- ---------- Net income $22,053 $35,748 $103,486 $134,548 ========== ========== ========== ========== Earnings per share: Basic $0.36 $0.55 $1.63 $2.02 ========== ========== ========== ========== Diluted $0.35 $0.53 $1.59 $1.86 (a) ========== ========== ========== ========== Shares used in computing earnings per share: Basic 61,423 64,471 63,579 66,556 ========== ========== ========== ========== Diluted 62,506 67,216 65,125 73,584 (a) ========== ========== ========== ========== Share-based compensation expense included in the above operating expense captions are as follows (b): Cost of revenues $2,705 $513 $10,970 $703 Research and development 1,374 79 6,435 166 Selling, general and administrative 7,982 1,243 24,680 2,058 ---------- ---------- ---------- ---------- Total share-based compensation expense $12,061 $1,835 $42,085 $2,927 ========== ========== ========== ========== (a) The computation of diluted earnings per share for the year ended September 30, 2005 includes 4.5 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 $2.5 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 September 30, 2006 and 2005 (In thousands) (Unaudited) September 30, September 30, 2006 2005 ------------- ------------- ASSETS: Current assets: Cash and cash equivalents $75,154 $82,880 Marketable securities 152,141 146,088 Receivables, net 165,806 156,375 Prepaid expenses and other current assets 20,209 27,337 ------------- ------------- Total current assets 413,310 412,680 Marketable securities and investments 40,479 59,087 Property and equipment, net 56,611 48,436 Goodwill and intangible assets, net 786,062 803,306 Other noncurrent assets 24,743 27,552 ------------- ------------- $1,321,205 $1,351,061 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other accrued liabilities $53,809 $50,947 Senior convertible notes 400,000 - Accrued compensation and employee benefits 34,936 31,373 Deferred revenue 48,284 55,837 ------------- ------------- Total current liabilities 537,029 138,157 Senior convertible notes - 400,000 Other noncurrent liabilities 14,148 7,810 ------------- ------------- Total liabilities 551,177 545,967 Stockholders' equity 770,028 805,094 ------------- ------------- $1,321,205 $1,351,061 ============= ============= FAIR ISAAC CORPORATION REVENUES BY SEGMENT For the Quarters and Years Ended September 30, 2006 and 2005 (In thousands) (Unaudited) Quarter Ended Year Ended September 30, September 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Strategy machine solutions $111,553 $109,578 $457,211 $453,734 Scoring solutions 45,483 47,758 177,152 167,270 Professional services 37,035 33,383 145,271 129,636 Analytic software tools 13,218 12,578 45,731 48,031 --------- --------- --------- --------- Total revenues $207,289 $203,297 $825,365 $798,671 ========= ========= ========= ========= FAIR ISAAC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended September 30, 2006 and 2005 (In thousands) (Unaudited) Year Ended September 30, --------------------- 2006 2005 ---------- ---------- Cash flows from operating activities: Net income $103,486 $134,548 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,805 51,517 Changes in operating assets and liabilities, net of acquisitions (2,096) (5,082) Other, net 48,847 33,099 ---------- ---------- Net cash provided by operating activities 199,042 214,082 ---------- ---------- Cash flows from investing activities: Purchases of property and equipment (31,409) (16,414) Cash paid for acquisitions, net of cash acquired - (41,312) Net activity from marketable securities 13,882 32,003 Other, net 500 22,822 ---------- ---------- Net cash used in investing activities (17,027) (2,901) ---------- ---------- Cash flows from financing activities: Proceeds from issuances of common stock 64,200 71,867 Repurchases of common stock (256,487) (328,537) Other, net 1,994 (5,316) ---------- ---------- Net cash used in financing activities (190,293) (261,986) ---------- ---------- Effect of exchange rate changes on cash 552 (385) ---------- ---------- Decrease in cash and cash equivalents (7,726) (51,190) Cash and cash equivalents, beginning of period 82,880 134,070 ---------- ---------- Cash and cash equivalents, end of period $75,154 $82,880 ========== ========== Fair Isaac Corporation Baseline Revenue Analysis (In thousands) ---------------------------------------------------------------------- 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 ---------------------------------------------------------------------- Q1-2006A Q2-2006A Q3-2006A Q4-2006A ---------------------------------------------------------------------- Total FY06 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $504,969 $195,546 $196,021 $203,807 $203,297 $798,671 ====================================================================== ---------------------------------------------------------------------- BKG'06 Q1A Q2A Q3A Q4A FY06 ---------------------------------------------------------------------- Total Baseline Prior to '05 $149,484 $143,730 $141,099 $140,237 $574,550 ---------------------------------------------------------------------- Q1-2005A 6,205 4,261 3,765 2,560 16,791 Q2-2005A 6,194 5,975 5,238 4,525 21,932 Q3-2005A 7,404 7,198 5,478 4,524 24,604 Q4-2005A 11,482 10,521 8,339 6,428 36,770 ---------------------------------------------------------------------- Total FY05 31,285 27,955 22,820 18,037 100,097 ---------------------------------------------------------------------- Total Baseline Prior to '06 180,769 171,685 163,919 158,274 674,647 ---------------------------------------------------------------------- Q1-2006A $127,778 22,021 15,296 8,988 6,548 52,853 Q2-2006A 106,024 21,176 12,674 8,716 42,566 Q3-2006A 94,480 21,547 13,009 34,556 Q4-2006A 112,572 20,743 20,743 ---------------------------------------------------------------------- Total FY06 440,854 22,021 36,472 43,209 49,016 150,718 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Grand Total $440,854 $202,790 $208,157 $207,128 $207,290 $825,365 ====================================================================== A = Actual CONTACT: Fair Isaac Corporation, Minneapolis Investors & Analysts: John D. Emerick, Jr., 612-758-5560 johnemerick@fairisaac.com