Fair Isaac Q2 Earnings Top Estimates, Revenues Rise Y/Y, Shares Fall

Fair Isaac FICO reported second-quarter fiscal 2025 earnings of $7.81 per share, which surpassed the Zacks Consensus Estimate by 5.68% and jumped 27.2% year over year.

Revenues of $498.7 million beat the consensus mark by 0.51% and increased 15% year over year. The Americas, EMEA and the Asia Pacific contributed 86%, 9% and 5% to total revenues, respectively.

However, following the results, FICO shares declined 2.37% in the after-hours trading on April 29, as increased debt and reduced free cash flow raised concerns among investors.

FICO has a mixed earnings surprise history. The company’s earnings beat the Zacks Consensus Estimate in one of the trailing four quarters and missed in the remaining three, the average negative surprise being 0.92%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Fair Isaac Corporation Price, Consensus and EPS Surprise

 

Fair Isaac Corporation price-consensus-eps-surprise-chart | Fair Isaac Corporation Quote

FICO’s Top-Line Details

Software revenues, which include Fair Isaac’s analytics and digital decisioning technology, as well as associated professional services, increased 2.4% year over year to $201.7 million, largely attributable to higher license revenue recognized at a specific point in time.

Software Annual Recurring Revenues (ARR) increased 3% year over year, consisting of 17% platform ARR growth and a 3% decline in non-platform. Software Dollar-Based Net Retention Rate was 102% in the fiscal second quarter, with platform software at 110% and non-platform software at 96%.

On-premises and SaaS Software (36.9% of revenues) increased 3.8% year over year to $183.8 million. Professional services (3.6% of revenues) were $17.9 million, down 9.5% year over year. 

Scores (59.6% of revenues) increased 25.4% year over year to $297 million. Scores include FICO’s business-to-business (B2B) scoring solutions and business-to-consumer (B2C) scoring solutions.

B2B revenues increased 31% year over year, driven primarily by higher unit prices. B2C revenues increased 6% year over year due to increased revenues from indirect channel partners.

Mortgage originations revenues increased 48% year over year. It accounted for 54% of B2B revenues and 44% of total scores revenues. Auto originations revenues increased 16% year over year. Credit card and personal loan revenues inched up 1% year over year.

FICO continues to advance financial inclusion on a global scale. In the second quarter of fiscal 2025, a Kenya-specific FICO Score was launched in collaboration with TransUnion. The company is also driving strong adoption of FICO Score 10 T for non-GSE loans and is seeing promising outcomes from our early adopter program.

Fair Isaac’s Operating Details

Research and development expenses, as a percentage of revenues, contracted 40 basis points (bps) on a year-over-year basis to 9%.

Selling, general and administrative expenses, as a percentage of revenues, decreased 140 bps year over year to 24.1%.

Adjusted EBITDA increased 21.6% year over year to $287.8 million in the reported quarter. The adjusted EBITDA margin in the second quarter of fiscal 2025 was 57.7% compared with 54.6% in the fiscal second quarter of 2024.

The non-GAAP operating margin was 57.6% in the reported quarter, expanding 450 bps year over year.

FICO’s Balance Sheet & Cash Flow

As of March 31, 2025, Fair Isaac had $146.6 million in cash and cash equivalents, and total debt was $2.5 billion. In comparison, as of Dec. 31, 2024, FICO had $184.3 million in cash and cash equivalents and total debt of $2.4 billion.

Cash flow from operations was $74.9 million in the fiscal second quarter compared with $194 million in the previous quarter. The free cash flow was $65.5 million compared with $186.8 million in the prior quarter.

In the fiscal second quarter, FICO repurchased 112 thousand shares.

Fair Isaac Reiterates FY25 Guidance

For fiscal 2025, FICO anticipates revenues of $1.98 billion.

Non-GAAP earnings are projected to be $28.58 per share.

FICO’s Zacks Rank & Stocks to Consider

Currently, Fair Isaac has a Zacks Rank #3 (Hold). 

Paycom Software PAYC, QuinStreet QNST and Synchronoss Technologies SNCR are some better-ranked stocks that investors can consider in the broader sector. PAYC sports Zacks Rank #1 (Strong Buy), and QNST and SNCR carry Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software shares have rallied 11.6% year to date. PAYC is set to report first-quarter 2025 results on May 7.

QuinStreet shares have declined 22.9% year to date. QNST is set to report third-quarter fiscal 2025 results on May 7.

Synchronoss Technologies shares have gained 8.8% year to date. SNCR is set to report first-quarter 2025 results on May 6.

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