The paragraph is an introduction to FICO's First Quarter 2025 Earnings Conference Call. The operator welcomes participants and introduces Dave Singleton, the Vice President of Investor Relations. Singleton outlines the agenda, mentioning the presence of CEO Will Lansing and CFO Steve Weber, and discusses the press release about financial results compared to the prior year and prior quarter. He warns of forward-looking statements per the Private Securities Litigation Reform Act of 1995, highlighting the risks and uncertainties involved. He also notes the inclusion of non-GAAP financial measures, directing participants to resources for more information. The call is being recorded, and a replay will be available until February 4, 2026. Singleton then hands over to CEO Will Lansing.

The company announced strong financial results for the first quarter, with revenues of $440 million, reflecting a 15% increase from the previous year. GAAP net income rose by 26% to $153 million, and earnings per share increased by 28% to $6.14. Non-GAAP net income increased by 19%, with earnings per share up 20% to $5.79. Free cash flow was $187 million for the quarter and $673 million over the last year, up 36% from the prior year. The company repurchased shares to return capital to shareholders. In the Scores segment, revenues rose 23%, driven by a 30% increase in B2B revenues, largely from mortgage originations, which soared 110%. Auto origination revenues increased by 5%, while credit card and personal loan originations fell by 3%. The company also issued a press release on a study conducted with Affirm.

The study highlighted that incorporating Buy Now Pay Later loan data could enhance FICO scores and improve risk models for lenders. Efforts are underway to responsibly introduce this data into credit scoring, with further details forthcoming. FICO has achieved notable milestones, such as launching FICO Score 10 T for non-GSE mortgages on the MCT Marketplace and Cardinal Financial trading the first government-issued mortgage-backed security using these scores. Over $261 billion in new mortgage originations and $1.43 trillion in mortgage servicing now use FICO Score 10 T, with future rollouts dependent on FHFA's timeline. FICO reported an 8% increase in Q1 revenue, driven by SaaS and licenses, despite foreign exchange challenges, and continues expanding through its Land and Expand strategy.

The paragraph discusses FICO's financial performance and achievements for the quarter. Total annual recurring revenue (ARR) increased by 6%, with platform ARR up 20% but non-platform ARR at only 1%. Net revenue retention (NRR) was 105%, with platform NRR at 112%. Foreign exchange negatively affected ARR. The company had ACV bookings of $21.2 million, up from $18.3 million the previous year. FICO received awards for its Anti-Fraud Solution and innovative use of blockchain technology. The company’s software segment will be showcased at the FICO World Event. Steve Weber will now provide more financial details, noting that total revenue was $440 million, a 15% increase from the previous year.

For the quarter, the company reported scores segment revenues of $236 million, a 23% increase from the previous year, with B2B revenues rising 30% due to higher mortgage origination revenues. B2C revenues grew by 3% due to increased revenue from indirect channel partners. Software segment revenues were $204 million, up 8% despite adverse foreign exchange impacts. The Americas region contributed 87% of total revenues, while EMEA and Asia Pacific regions accounted for 8% and 5%, respectively. Total software ARR was $729 million, a 6% year-over-year increase. Platform ARR was $228 million, or 31% of total ARR, showing a 20% growth, while non-platform ARR increased by 1% to $501 million. The platform NRR was 112%, and non-platform NRR was 100%. Software ACV bookings for the quarter were $21.2 million. Total operating expenses increased by 1.5% to $260 million from the prior quarter.

The paragraph discusses the company's financial performance and metrics for the quarter. Expenses are expected to increase modestly, and non-GAAP operating margin has improved to 50% from 48% last year, with a margin expansion of 209 basis points. GAAP net income reached $153 million, a 26% increase, and non-GAAP net income was $144 million, up 19%. GAAP earnings per share increased by 28% to $6.14, while non-GAAP earnings per share rose by 20% to $5.79. The quarter's effective tax rate was negative 1.6% due to $40 million in excess tax benefits from employee stock awards. The expected full-year net effective tax rate is 22%. Free cash flow increased 55% to $187 million for the quarter, totaling $673 million over four quarters. The company ended the quarter with $230 million in cash and marketable investments and a total debt of $2.42 billion, half of which is at a fixed rate. They repurchased 79,000 shares at an average price of $2,015 per share.

The paragraph discusses recent activities and future plans of the company. They purchased 47,000 shares in January, viewing it as a beneficial use of cash. Despite a fluid macroeconomic environment, their strategy and execution remain strong, with confidence in their fiscal year guidance. Their software solutions help customers optimize interactions using real-time data-driven solutions. The FICO Educational Analytics Challenge Program, in its second year, engages students in developing AI models for fraud detection. The company is focused on financial inclusion through their Lenders Leading Inclusion Program, offering alternative data scores to expand credit access. They are also planning to launch a FICO Score Mortgage Simulator for mortgage professionals. The paragraph concludes with an invitation for questions from the audience.

In the paragraph, Manav Patnaik asks Will Lansing about the impact of potential GSE privatization on the FICO score, amidst changes at the FHFA and delays in implementing a bi-merge and two-score system. Will Lansing responds that the delay is unsurprising as the industry isn't ready for the move. He notes that FICO scores have historically been used by GSEs before and during conservatorship and sees no significant change in their importance if GSEs privatize. He emphasizes the FICO score's effectiveness in assessing risk for investors, regardless of government involvement. Additionally, in markets without government intervention, FICO maintains a strong market share. Lastly, Manav Patnaik inquires about a revision in the expected annual recurring revenue (ARR) growth in their software business, from 30% to 20%.

The paragraph is from a discussion about the company's financial performance and growth expectations. Will Lansing and Steve Weber address concerns about the latest quarter's performance, noting it was impacted by weaker bookings from earlier quarters and foreign exchange issues, particularly in Brazil. Despite the lower performance for this quarter, they remain confident in the company's long-term growth trajectory, which they estimate at around 30%. They expect annual recurring revenue (ARR) to accelerate in the coming quarters. They maintain their conservative guidance, which was based on a cautious internal view on interest rates, aligning with their expectations for fiscal 1Q. They assure that there is no change to their guidance despite the quarter's results.

The paragraph discusses a financial update, highlighting that the current performance aligns with expectations despite seasonality in the Scores business. The speaker, Will Lansing, explains that while the impact of the rate environment on future quarters is uncertain, the situation has progressed as planned. He also mentions that the new pricing for mortgage and auto scores for 2025 has been introduced without issues or elasticity concerns. In response to another question from Faiza Alwy about software and accelerating platform ARR (Annual Recurring Revenue) back to 30%, Lansing expresses confidence in reaching that target, attributing it to a direct flow-through from bookings, although customer usage may vary and isn't controlled by them.

The paragraph is a discussion about the future growth of ARR (Annual Recurring Revenue) based on recent bookings. Steve Weber expresses confidence in understanding when booked deals will go live and contribute to ARR, despite some uncertainty in predicting usage. Faiza Alwy inquires about expectations for volume across different verticals, particularly in the mortgage sector, given fluctuating interest rates. Will Lansing acknowledges the uncertainty surrounding future interest rates but mentions that their guidance assumes rates won't decrease significantly in 2025. The guidance is prepared for either scenario, with the potential for benefit if rates decrease later in the year. The conversation then turns to the next question from another analyst, Surinder Thind.

The paragraph discusses a slowdown in the platform's Annual Recurring Revenue (ARR), attributed mainly to decreased usage by specific clients rather than customer churn. Usage can vary quarterly, with some clients reducing their usage at the year's end to save money, reflecting a seasonal pattern. The expectation is for usage levels to return to normal and for new business to become active, resulting in a potential revenue rebound. The conversation also touches on the adoption of FICO 10 T versus classic FICO, with implications for securitization and market differentiation due to a delay in the Federal Housing Finance Agency (FHFA) timeline for implementation.

The paragraph features a conversation involving Will Lansing, Surinder Thind, and Steve Weber about the use and effectiveness of FICO scores in the mortgage market, focusing on the FICO Classic score and the newer FICO 10 T score. Lansing mentions that the FICO Classic score has been effective for 25 years, providing investors with a good sense of risk, and notes that while FICO 10 T is an improvement, both scores are expected to continue being used without issues. The conversation then shifts to Owen Lau's question about ACV bookings, with Steve Weber explaining that although they're experiencing strong bookings and interest in their products, the number can be volatile from quarter to quarter due to the small number of large bookings they handle. He adds that while it's difficult to predict exact numbers, the overall outlook for bookings in the year is positive.

The paragraph is part of a conversation discussing financial matters related to FICO. It begins with a mention of volatility in financial performance and a positive outlook for the year's annual recurring revenue (ARR). Owen Lau inquires about expected expense increases, noting FICO World as a factor for the third quarter, to which Steve Weber responds that while there will be some nonrecurring expenses like FICO World adding $5-6 million in the third quarter, no significant increase is anticipated. The conversation then shifts to capital allocation, specifically share buybacks. Kyle Peterson asks about FICO's approach to buybacks during stock price fluctuations. Will Lansing explains that FICO believes their stock represents great value, citing previous buybacks at various prices, and states that they aim to regularly purchase stock using available cash flow, not engaging in market timing but maintaining a steady strategy.

The paragraph discusses the company's approach to stock purchases and guidance on the mortgage environment. The company is willing to increase stock purchases when prices drop and has authorization to do so. They believe in the stock's value and have the appetite to buy more. In terms of guidance, the company had conservative assumptions about interest rates compared to the market's expectations, anticipating fewer rate cuts in 2025. The management prefers a conservative approach to ensure they meet their targets, similar to their strategy last year, when expected rate cuts did not occur.

The paragraph is a transcript from a financial earnings call. It features a discussion between Kyle Peterson, George Tong from Goldman Sachs, and Steve Weber about the company's financial performance. George Tong asks about the 3% decline in card and personal loan revenues year-over-year for the quarter. Steve Weber explains that the decline is reflective of industry trends, including a pullback in consumer lending and a cautious approach from banks. He notes that the decline is typical for a lighter quarter. When asked about the software business, Weber mentions that lower platform usage was observed, which varies customer by customer and could have various causes.

The paragraph is a discussion between various individuals concerning the timing and impact of annual contract value (ACV) bookings on annual recurring revenue (ARR). Steve Weber explains that there is generally a 6 to 12-month delay before ACV bookings are fully implemented and reflected in ARR. Due to lighter bookings early in the previous year, less new revenue is currently coming online, but recent stronger bookings suggest potential ARR growth in the latter half of the current year. Jeffrey Meuler seeks clarification on the timeframe for an ARR foreign exchange headwind affecting the platform, whether it was a year-over-year or sequential issue.

In this paragraph, Ashish Sabadra from RBC asks about the factors contributing to the moderated growth in B2B revenue, despite improvements in mortgage, auto, and card origination revenues. Although these areas showed significant year-over-year growth, the overall B2B revenue growth slowed from 38% in the fourth quarter to 30% in the first quarter. Steve Weber explains that while origination pieces are growing quickly, there are significant parts of the business that do not grow as rapidly, which impacts the total B2B growth.

In the article, Steve Weber discusses the varying growth rates of different business sectors. While some areas, like prescreen and account management, are not growing rapidly, international deals can sometimes cause spikes. However, these are hard to predict and not consistent. The most reliable growth metrics come from originations. On the B2C front, particularly with myFICO, there was strong growth during the refinancing boom, followed by challenging comparisons. Now, they've moved past these challenges and are seeing new growth potential, supported by recent investments and marketing strategies. They are optimistic about continued growth in myFICO this year.

The paragraph involves a discussion during a Q&A session, where Alexander Hess from JPMorgan is inquiring about a company's guidance, which implies a 15% year-on-year revenue growth. Steve Weber responds by expressing confidence in meeting the guidance, attributing this to expected improvements in volume after challenging quarters the previous year. Hess also asks about the impact of foreign exchange (FX) on revenue, particularly in the software segment, to which Weber notes a $4 million impact but doesn't provide detailed numbers. The conversation then transitions to Simon Clinch from Redburn Atlantic, who wants to revisit a topic concerning the GSEs.

The paragraph discusses the potential privatization of Government-Sponsored Enterprises (GSEs) and whether they would develop their own credit scoring models, possibly moving away from reliance on FICO Scores. Will Lansing and Steve Weber express skepticism about the GSEs abandoning FICO Scores due to their effectiveness in supporting the mortgage market analytics. They suggest that FICO Scores and internal models would likely complement each other. Simon Clinch asks about volume growth in the mortgage market, but Steve Weber does not provide specific details, suggesting looking at industry reports for that information. The paragraph concludes with a new question from Scott Wurtzel about the software business and its forward pipeline.

In the article's paragraph, Will Lansing discusses the demand environment after 2025 budget resets, stating that there hasn't been a significant change in the demand for their strategic platform offerings, which are less affected by customers' fiscal constraints compared to point solutions in the past. Scott Wurtzel asks about a decrease in Scores margins and increased expenses. Steve Weber explains there's more investment and spending on the business-to-consumer (B2C) side to enhance marketing, which has a different cost structure. The operator then introduces Matthew O'Neill from FT Partners for the next question.

The paragraph discusses the incorporation of Buy Now, Pay Later (BNPL) data into FICO's credit scoring models. Will Lansing points out that while the treatment of BNPL data by credit bureaus is inconsistent, understanding consumer repayment behavior through this data is valuable. FICO is collaborating with a firm to integrate BNPL data with traditional credit file elements to enhance predictive accuracy. Although this initiative is still in its early stages, it holds potential benefits for their customers by improving decision-making. Additionally, it is mentioned that more maturity is needed regarding data handling across bureaus. There’s also a brief mention of an FX impact on revenue, quantified at $3 million or about 1% of total revenue.

The paragraph informs readers to follow FICO's website and LinkedIn for updates on the FICO World event. It includes closing remarks from an unidentified company representative and the operator, who thanks participants and concludes the conference call. Participants are then instructed to disconnect.

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