Fair Isaac FICO reported fourth-quarter and full-year results that show its susceptibility to the economic downturn. As the demand for credit has waned, the need for credit checks--and ultimately FICO scores--has hurt top-line results. However, there are several positive signs that the fortunes of Fair Isaac could be reversing. Compared with the year-ago quarter, bookings (deposits made for future services) increased 21% to $86 million. The company defines new bookings as estimated future contractual revenue, including any agreements with multiyear terms. Further, management said it is seeing strong growth in the firm's fraud solutions and marketing products. We believe the near term will be tough as the demand for credit remains weak. However, we think Fair Isaac's ability to effectively manage expenses and invest for future growth will position the company nicely for a rebound. We are leaving our fair value estimate unchanged. Compared with the year-ago quarter, revenue declined 12% to $152 million. The primarily reason for the decline in top-line growth was declines in the firm's consumer and customer management solutions, partially offset by increases in fraud and marketing solutions. The company continues to closely monitor expenses to offset lower revenue. As a result, the operating margin increased 500 basis points to 22%. Fair Isaac continues to generate nice cash flow, with free cash flow of $24 million in the quarter and $134 million for the year. This equates to free cash flow margins of 16% and 21%, respectively.
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Analyst Notes
07-22-09 | 4:14PM Fair Isaac Continues to Cut Costs in 3Q
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