Fair Isaac Announces Fourth Quarter and Fiscal 2006 Results, New Stock Repurchase Authorization, and Departure of Chief Executive Officer
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® 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™ product.
Fiscal 2006 Revenues Highlights
Revenues for fiscal 2006 across each of the company's four operating segments were as follows:
- Strategy Machine® 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® 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™ 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.
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.
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