The paragraph is an introduction to FICO's Fourth Quarter 2024 Earnings Conference Call. Dave Singleton, Vice President of Investor Relations, along with CEO Will Lansing and CFO Steve Weber, are present for the call. The company has issued a press release detailing financial results compared to the previous year, and will also discuss results compared to the prior quarter for a better understanding of business trends. The presentation will include forward-looking statements with associated risks and uncertainties, as described in SEC filings. The call will also cover non-GAAP financial measures, with reconciliations provided in the company's earnings release and other SEC filings. Additionally, it includes FY '25 guidance reconciliation of GAAP to non-GAAP earnings.

The paragraph details the financial performance and achievements of the company for the fourth quarter and full fiscal year. It reports a 16% increase in fourth quarter revenue to $454 million and a 13% increase in annual revenue to $1.718 billion. The company saw significant growth in both GAAP and non-GAAP net income and earnings per share compared to the previous year. Record free cash flow was reported at $219 million for the fourth quarter and $607 million for the year, marking a 31% year-over-year increase. Additionally, the company continued to return capital to shareholders through share buybacks, repurchasing 606,000 shares for the fiscal year.

In the fourth quarter, the company's revenues increased significantly, with a 27% rise from the previous year, totaling $249 million, and $920 million for the full year, up 19%. The B2B segment saw a substantial increase in revenues, primarily due to mortgage originations, which rose by 95% compared to the previous year and represented 47% of B2B and 37% of total Scores revenue. B2C revenues, however, declined slightly. For 2025, FICO announced a wholesale royalty fee for mortgage originations at $4.95 per score, which remains a small portion of overall mortgage closing costs. The FICO Score is emphasized as a crucial and cost-effective tool in the mortgage industry. More details about the new pricing are available on FICO's blog.

In the reported quarter, FICO experienced strong adoption of the FICO Score 10 T for non-GSE mortgages, securing major new clients like United Wholesale Mortgages. The company now supports over $244 billion in annualized mortgage originations and has an eligible mortgage servicing portfolio of about $1.33 trillion. FICO Score 10 T is being used for credit decisions and securitization, with future rollout for conforming GSE mortgages pending FAA timelines. FICO is also launching a mortgage simulator to help mortgage professionals and consumers. In its Software segment, FICO achieved $205 million in fourth quarter revenue, up 5% from last year, and $798 million in annual revenue, an 8% increase. Growth was driven by SaaS software, despite a decline in professional services. The company's ARR grew by 8%, with platform ARR up 31%, though non-platform ARR remained flat. NRR was 106%, with platforms at 123% and non-platforms at 99%. ACV bookings were $22 million for the quarter and $85 million for the year, a 10% decrease but stable in the second half despite macroeconomic challenges.

The article discusses FICO's recent successes and future prospects in the software business. IDC has recognized FICO as a leader in the global Decision Intelligence platform market, highlighting its commitment to innovation in real-time decision-making. FICO has formed partnerships with Tata Consulting Services and iSON Xperiences to develop industry-specific solutions, aiming for significant growth in their platform business. Financially, FICO had a strong quarter with a total revenue of $454 million, a 16% increase from the previous year, and a full-year revenue of $1.718 billion, up 13%. The Scores segment saw a significant rise in B2B revenues by 38%, largely driven by mortgage originations, while B2C revenues slightly declined. Software segment revenues increased by 5%.

The company experienced an 8% year-over-year increase in on-premises and SaaS software revenue, despite a 9% decline in professional services. Total annual software revenue reached $798 million. The Americas contributed 85% of total revenue, EMEA 10%, and Asia Pacific 5%. Software ARR grew 8% to $721 million, with platform ARR increasing by 31% to $227 million. The company’s focus on expanding its platform is reflected in a platform net retention rate of 123%, compared to 99% for non-platform products. Total quarterly software ACV bookings were $22 million, with $85 million for the year. Operating expenses rose 15% year-over-year to $257 million this quarter, with full-year expenses increasing by 13% to $984 million. The company plans to moderate expense growth in FY '25 while prioritizing resource allocation to strategic initiatives.

The article details the financial performance and strategic focus of the company for the quarter and the full fiscal year. Key highlights include an increased investment in the FICO platform and marketing resources, with a non-GAAP operating margin of 52% for the quarter. GAAP net income rose 34% to $136 million, while non-GAAP net income grew 29% to $163 million for the quarter. For the full year, GAAP and non-GAAP net income increased by 19% each, to $513 million and $595 million, respectively. Earnings per share (EPS) also rose significantly, with GAAP EPS up 36% to $5.44 for the quarter, and non-GAAP EPS up 30% to $6.54. The full year's GAAP EPS was $20.45, up 21%, while non-GAAP EPS was $23.74, up 20%. The effective tax rate for the quarter was 20.8%, and 20.1% for the full year, with an expected increase in the net effective tax rate to 22% by fiscal year 2025. Free cash flow jumped 35% to $219 million for the quarter and 31% for the full year to $607 million. The company ended the quarter with $196 million in cash and marketable investments and $2.21 billion in total debt, 59% of which is at a fixed rate.

The paragraph discusses the financial and strategic achievements of the company, highlighting its flexibility with floating rate debt, share repurchases, and future fiscal guidance. It mentions a successful fiscal year 2024 with significant customer engagement and industry recognition. The company introduced new innovations, including APIs for the FICO Platform and a FICO Marketplace, while also demonstrating commitment to financial literacy through various initiatives. The focus is on maintaining a strong position for fiscal year 2025.

In the paragraph, the company announces its financial guidance, projecting double-digit growth in revenue and earnings for fiscal 2025. They forecast revenues of approximately $1.98 billion, a 15% increase from the previous year, with GAAP net income projected at around $624 million, representing a 22% increase. Additionally, GAAP EPS is expected to be about $25.05, a 23% increase, with non-GAAP net income anticipated to be approximately $712 million, marking a 20% rise, and non-GAAP EPS of around $28.58, also a 20% uplift. The company acknowledges uncertainty in volume and macro trends but expresses confidence due to its recurring revenues and diversified product portfolio. The Q&A session follows the prepared remarks, with Manav Patnaik from Barclays asking about the potential for closing the pricing gap of their score product, and Will Lansing indicating there's still room for opportunity.

The speaker discusses their company's position and future initiatives regarding their software platform, noting that despite being well-established, they are still in the early stages of penetrating the market, having reached less than half of the top 300 global financial institutions. There is significant growth potential with large lenders and other verticals. The company plans to continue investing in the platform to add features demand by customers, enhance indirect sales and distribution, and build an ecosystem using open APIs for a broader range of partners. They are also focused on reengineering the platforms to improve scalability and margins.

In the paragraph, company executives discuss their strategy for profitability and the difficulties in segment-specific financial guidance. They express confidence in improving margins over time due to scaling efforts, despite ongoing high R&D spending. When asked about specifics in software revenue, especially distinguishing between platform and non-platform products, the executives explain that they only provide guidance at the corporate level because it's challenging to make those distinctions at early stages. Additionally, they indicate that partnerships aimed at industry solutions are underway, though they don't disclose specific industries or solutions. Questions about intellectual property sharing in these partnerships are acknowledged but not elaborated on.

The paragraph discusses the partnership between TCS and FICO, highlighting how the collaboration benefits both sides by leveraging their respective strengths. FICO provides decisioning intellectual property (IP), while TCS contributes with its extensive reach, distribution, and professional services across various verticals that FICO does not engage in. TCS is developing expertise in FICO's solutions to aid customers with implementation, favoring professional services. Additionally, TCS is creating proprietary solutions based on FICO's IP for specific industries, like logistics. The conversation then shifts to a question from George Tong about FICO's plan to raise mortgage prices by less than 50% in 2025, indicating a consideration for future non-mortgage score pricing.

The paragraph discusses FICO's strategy regarding price increases, stating that they review their portfolio annually and apply price increases selectively, not uniformly across all segments. The conversation then shifts to how the Trump presidency might affect FICO's operations. Will Lansing, a representative from FICO, expresses confidence in the company's enduring role within the credit lending market, regardless of the administration in power. The dialogue then transitions to questions from Faiza Alwy of Deutsche Bank about macroeconomic uncertainties, specifically regarding expectations for mortgage volumes in 2025 amid higher interest rates and declining application pools.

Will Lansing discusses the difficulty in predicting future mortgage volumes due to macroeconomic uncertainty, noting that their guidance includes a conservative approach. He also addresses the potential for generating revenue from the FICO Score's value to secondary market participants. While many who use the FICO Score do not pay for it, the current business model charges for the initial use and allows free subsequent uses as permitted by contract. Lansing acknowledges that FICO considers various pricing strategies, but any changes must be carefully evaluated to avoid unforeseen consequences.

The speaker emphasizes the responsibility they have to the economy, community, customers, and market participants, and their careful approach to making decisions that could affect markets. They might consider changes in the future if appropriate. Owen Lau from Oppenheimer asks about guidance on rate cuts expected in 2025 and their impact on loan volume. Will Lansing refrains from speculating on rate cuts, suggesting that everyone has different opinions and emphasizes applying known pricing to personal estimates. Owen Lau also asks about client feedback regarding end-market challenges, budget cuts, and vendor consolidation. Will Lansing acknowledges these challenges, noting similar past experiences, especially in their applications business.

The paragraph discusses how FICO's platform has become a strategic investment for their customers, often decided at the C-suite level. Despite budget pressures, there is a strong imperative for clients to transition to digital consumer relationships, and FICO's platform offers unmatched features and functionality. Attempts to build in-house solutions can't compete with FICO's platform, which has seen nearly $1 billion of investment. As a result, there's significant adoption of FICO's platform due to its cost-effectiveness, superior functionality, and faster implementation. The company is not experiencing slowdown due to budget pressures, and any lessening of such pressures could potentially enhance their performance further.

The paragraph consists of a Q&A session between analysts and company representatives regarding financial results and price strategies. There is a clarification discussion about the presence of one-time revenues in the fourth-quarter financial numbers, where Steve Weber confirms that there were minor one-time revenues included, though they are not considered significant in the overall picture. Kyle Peterson asks further about the implementation of the mortgage score price rollout, to which Weber explains there is typically a lag in pricing adjustments because different customer deals have staggered timelines. Jason Haas then inquires about the specific analysis conducted to set the mortgage score price at $4.95 and seeks similar insights for pricing in other verticals, like auto and card, although details aren't provided for those.

In the paragraph, Will Lansing discusses the various factors considered in determining pricing, emphasizing that there's no specific formula, but considerations include market volumes, fairness of the price, and the value provided to customers. Each year, they decide on price adjustments differently after discussions with partners. Regarding a slight decline in the non-platform business, Lansing attributes it to volume fluctuations and ensures it remains strong due to its significant market share. He mentions a three-year renewal cycle for legacy products and that they are not rushing to shift these customers to a new platform, as they are focused on expanding new business on the platform.

The paragraph discusses the company's ongoing investment in legacy products to ensure they remain relevant for the present and future. The focus is not on rapid growth or harvest mode but on modest investments to keep them current. Customer usage influences its performance, with slight fluctuations around 100% being volume-driven. Jason Haas considers this information useful. David Paige, speaking for Ashish Sabadra from RBC Capital Markets, inquires about competitive dynamics in auto and card segments, as well as capital allocation priorities for 2025. Will Lansing responds, noting that these businesses remain largely unchanged competitively, with no significant threats or innovations from competitors. For capital allocation, the strategy is focused on returning capital to shareholders, maintaining an efficient balance sheet and leverage between two and three times, and viewing their stock as a valuable investment despite its high PE ratio.

In the paragraph, a company representative discusses ongoing stock buybacks and their plans to continue doing so, expressing confidence in this strategy. During a Q&A session, Simon Clinch asks about the potential impact of the FHFA's proposed changes and their implementation. Will Lansing responds, noting uncertainty about the proposal's future, as the industry has been slow to adapt due to unresolved issues and the potential for changes with a new administration. He suggests that delays are likely but doesn't rule out a shift in direction. Simon Clinch follows up with a question about expanding the company's software distribution beyond large financial clients, but the response is not included in the paragraph.

The paragraph discusses a company's strategy for expanding into diverse markets by collaborating with partners, such as big systems integrators like TCS, who have the necessary customers, distribution, skills, and expertise to apply to the company's intellectual property (IP). Additionally, the company is working on developing a more self-service model via open APIs and a marketplace for ISVs, resellers, and VARs, which will require time to mature. The discussion then shifts to a Q&A session where Scott Wurtzel from Wolfe Research questions the seasonal trends in ACV bookings. Steve Weber clarifies that there is no strict seasonal trend, though the fourth quarter often sees higher numbers, with this year's third and fourth-quarter numbers being consistent with the previous year.

The paragraph is a transcript of a discussion involving Scott Wurtzel, Steve Weber, and Andrew Stein. They discuss financial matters such as deal timing, expense growth, and investment guidance for fiscal year 2025. Steve Weber mentions that expense growth in 2025 will be lower compared to 2024 due to various one-time events. He also notes potential margin expansion if they exceed guidance. Andrew Stein asks about volume trends related to mortgage rates, and Steve Weber suggests referring to data from the NBA for more up-to-date information on that subject.

The paragraph covers a financial discussion where Kevin McVay from UBS asks about the impact of 2025 pricing on the company's guidance and whether any 2024 factors are included in that guidance. Will Lansing explains that new pricing takes effect on January 1, but since their fiscal year runs from October 1 to September 30, there is a one-quarter discrepancy affecting the pricing. Additionally, multiyear deals with channel partners maintain previous pricing, impacting how the new pricing is phased in. The Q&A session concludes afterward.

This summary was generated with AI and may contain some inaccuracies.