Fair Isaac FICO reported first-quarter fiscal 2025 earnings of $5.79 per share, which missed the Zacks Consensus Estimate by 6.76% but rose 20.4% year over year.

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Revenues of $440 million increased 15.2% on a year-over-year basis but lagged the consensus mark by 3.25%. The Americas, EMEA and Asia Pacific contributed 87%, 8% and 5% to total revenues, respectively.

FICO raised its fiscal 2025 guidance following the robust fiscal first-quarter performance, which bodes well for investors. FICO shares have appreciated 43.7% over the trailing six-month period, outperforming the Zacks Computer & Technology sector’s return of 23.6%.

FICO’s Top-Line Details

Software revenues, which include Fair Isaac’s analytics and digital decisioning technology, as well as associated professional services, increased 8% year over year to $204.3 million. 

Software Annual Recurring Revenues (ARR) increased 6% year over year, consisting of 20% platform ARR growth and 1% growth in non-platform. Software Dollar-Based Net Retention Rate was 105% in the fiscal first quarter, with platform software at 112% and non-platform software at 100%.

On-premises and SaaS Software (42.3% of revenues) increased 10.3% year over year to $186 million. Professional services (4.2% of revenues) were $18.3 million, down 14.1% year over year. 

Scores (53.6% of revenues) increased 22.7% year over year to $235.7 million. Scores include FICO’s business-to-business (B2B) scoring solutions and business-to-consumer (B2C) scoring solutions.

B2B revenues increased 30% year over year, driven primarily by higher unit prices and an increase in the volume of mortgage originations. B2C revenues increased 3% year over year due to increased revenues from indirect channel partners.

Mortgage originations revenues surged 110% year over year. It accounted for 44% of B2B revenues and 34% of total scores revenues. Auto originations revenues increased 5% year over year. Credit card and personal loan revenues declined 3% year over year.

In the first quarter of fiscal 2025, FICO experienced continued customer adoption, particularly for FICO Score 10 T in mortgage origination. The company also signed new customers and increased adoption from existing ones, enhancing its leadership in the mortgage industry.

FICO’s Operating Details

Research & development expenses, as a percentage of revenues, contracted 90 basis points (bps) on a year-over-year basis to 10.3%.

Selling, general and administrative expenses, as a percentage of revenues, increased 180 bps year over year to 29.1%.

Operating margin was 40.8% in the reported quarter, expanding 120 bps year over year.

FICO’s Balance Sheet & Cash Flow

As of Dec. 31, 2024, FICO had $184 million in cash and cash equivalents, and total debt was $2.4 billion. In comparison, as of Sept. 30, 2024, FICO had $151 million in cash and cash equivalents and total debt of $2.2 billion.

Cash flow from operations was $194 million in the fiscal first quarter compared with $226.4 million in the previous quarter. Free cash flow was $187 million compared with $219.4 million reported in the prior quarter.

In the fiscal first quarter, FICO repurchased 79K shares.

FICO Initiated Fiscal 2025 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, FICO has a Zacks Rank #3 (Hold). 

Akamai Technologies AKAM, Bel Fuse BELFB and Arista Network ANET are some better-ranked stocks that investors can consider in the broader sector. While ANET sports Zacks Rank #1 (Strong Buy), AKAM and BELFB carry Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Akami Technologies shares have plunged 19.7% in the trailing six-month period. AKAM is set to report its fourth-quarter 2024 results on Feb. 20.

Bel Fuse shares have gained 20.6% in the trailing six-month period. BELFB is set to report its fourth-quarter 2024 results on Feb. 18.

Arista Network shares have gained 69.7% in the trailing six-month period. ANET is set to report its fourth-quarter 2024 results on Feb. 18.

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