Fair Isaac Corporation (FICO) Bundle
Understanding Fair Isaac Corporation (FICO) Revenue Streams
Understanding Fair Isaac Corporation’s Revenue Streams
In fiscal 2024, the total revenue for the company was $919.7 million, reflecting a year-over-year increase of 18.8% from $773.8 million in fiscal 2023.
Revenue Breakdown by Source
The revenue streams can be categorized into several key areas:
- Business-to-business Scores: $711.8 million (77% of total revenue)
- Business-to-consumer Scores: $207.8 million (23% of total revenue)
Year-over-Year Revenue Growth Rate
Examining the historical trends:
| Year | Total Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|
| 2024 | $919.7 | +18.8% |
| 2023 | $773.8 | +9.5% |
| 2022 | $706.6 | - |
Contribution of Different Business Segments to Overall Revenue
In fiscal 2024, the two main segments contributed significantly to the overall revenue:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Business-to-business Scores | $711.8 | 77% |
| Business-to-consumer Scores | $207.8 | 23% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- The business-to-business segment saw an increase of 26.8% from $560.9 million in 2023.
- The business-to-consumer segment experienced a slight decrease of 2.5% from $212.8 million in 2023.
Overall, the company continues to derive a substantial portion of its revenues from contracts with major consumer reporting agencies, which collectively accounted for 45% of total revenues in 2024, up from 41% in 2023 . This trend highlights the strong reliance on key partnerships for revenue stability and growth.
A Deep Dive into Fair Isaac Corporation (FICO) Profitability
A Deep Dive into Profitability Metrics
Gross Profit Margin: For the fiscal year ending September 30, 2024, the gross profit margin was 80%, compared to 79% in 2023 and 78% in 2022. The gross profit for 2024 was $1,216.1 million, reflecting an increase from $1,100.2 million in 2023.
Operating Profit Margin: The operating profit margin for 2024 stood at 43%, up from 42% in 2023 and 39% in 2022. Operating income for 2024 was $733.6 million, compared to $642.8 million in 2023.
Net Profit Margin: The net profit margin for 2024 was 30%, compared to 28% in 2023 and 27% in 2022. The net income recorded for 2024 was $512.8 million, an increase from $429.4 million in 2023.
Trends in Profitability Over Time
The profitability metrics over the past three years show a consistent upward trend. The gross profit margin has improved by 2% over the three-year period, while the operating profit margin has increased by 4%. The net profit margin has also shown growth, rising by 3% from 2022 to 2024.
Comparison of Profitability Ratios with Industry Averages
| Metric | 2024 FICO | Industry Average |
|---|---|---|
| Gross Profit Margin | 80% | 75% |
| Operating Profit Margin | 43% | 35% |
| Net Profit Margin | 30% | 25% |
Analysis of Operational Efficiency
The operational efficiency of the company can be assessed through its cost management and gross margin trends. The cost of revenues for 2024 was $305.4 million, which is 20% of total revenues. This reflects a decrease from 21% in 2023 and 22% in 2022, indicating improved cost management.
Research and development expenses constituted 10% of total revenues in 2024, consistent with the prior years. Selling, general and administrative expenses were 27% of total revenues, a slight decrease from 28% in 2022, showcasing a focus on operational efficiency.
The comprehensive income for 2024 was $523.3 million, up from $451.9 million in 2023, indicating a solid performance in profitability metrics amidst operational efficiency improvements.
Debt vs. Equity: How Fair Isaac Corporation (FICO) Finances Its Growth
Debt vs. Equity: How Fair Isaac Corporation Finances Its Growth
As of September 30, 2024, the company's total debt stood at $2.2 billion, an increase from $1.9 billion in 2023. This total includes both current and long-term debt components.
Overview of the Company's Debt Levels
The company's current maturities on debt include:
| Debt Type | September 30, 2024 (In thousands) | September 30, 2023 (In thousands) |
|---|---|---|
| Revolving line of credit | $0 | $35,000 |
| The $300 Million Term Loan | $15,000 | $15,000 |
| Total Current Maturities | $15,000 | $50,000 |
For long-term debt, the breakdown is as follows:
| Debt Type | September 30, 2024 (In thousands) | September 30, 2023 (In thousands) |
|---|---|---|
| Revolving line of credit | $210,000 | $265,000 |
| The $300 Million Term Loan | $243,750 | $258,750 |
| The $450 Million Term Loan | $450,000 | $0 |
| The 2018 Senior Notes | $400,000 | $400,000 |
| The 2019 Senior Notes and the 2021 Senior Notes | $900,000 | $900,000 |
| Total Long-term Debt | $2,194,021 | $1,811,658 |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Given the total debt of $2.2 billion and assuming total equity of approximately $1.7 billion, the debt-to-equity ratio is approximately 1.29. This ratio is above the industry standard, which typically ranges from 0.5 to 1.0.
Recent Debt Issuances and Credit Ratings
In fiscal 2024, the company issued a new $450 million term loan, contributing to the total debt increase. The company maintains a credit rating of Baa3 from Moody's, indicating a moderate credit risk.
Balancing Debt Financing and Equity Funding
The company has strategically balanced its growth financing through a combination of debt and equity. In fiscal 2024, the company repurchased 0.6 million shares at a total repurchase price of $833.3 million, showcasing a commitment to returning value to shareholders while managing debt levels. The current cash and cash equivalents stood at $150.7 million as of September 30, 2024.
Assessing Fair Isaac Corporation (FICO) Liquidity
Assessing Fair Isaac Corporation's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Fair Isaac Corporation was 1.55, indicating a solid liquidity position. The quick ratio, which excludes inventory from current assets, stood at 1.45. These ratios suggest that the company has enough short-term assets to cover its short-term liabilities.
Analysis of Working Capital Trends
For the fiscal year ending September 30, 2024, the working capital was reported at $150.7 million. This reflects an increase from $136.8 million in the previous year, showcasing a positive trend in the company’s liquidity position.
Cash Flow Statements Overview
The consolidated statements of cash flows for the years ended September 30 are summarized below:
| Cash Flow Activity | 2024 (In thousands) | 2023 (In thousands) | 2022 (In thousands) |
|---|---|---|---|
| Net cash provided by operating activities | $632,964 | $468,915 | $509,450 |
| Net cash used in investing activities | ($27,993) | ($15,954) | ($5,671) |
| Net cash used in financing activities | ($592,923) | ($455,001) | ($547,165) |
| Increase (decrease) in cash and cash equivalents | $13,889 | $3,576 | ($62,152) |
The primary method for funding operations and growth has been through cash flows generated from operating activities. The net cash provided by operating activities increased by $164.1 million in 2024 compared to 2023, primarily due to an increase in net income and favorable timing of receipts and payments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company held $150.7 million in cash and cash equivalents, with no significant debt obligations maturing within the next twelve months. This strong cash position, combined with the availability of a $600 million revolving line of credit, provides a buffer against potential liquidity concerns. Furthermore, the company has anticipated cash flows from operating activities, which are expected to be sufficient to meet its working and capital requirements for at least the next 12 months.
Is Fair Isaac Corporation (FICO) Overvalued or Undervalued?
Valuation Analysis
As of the fiscal year ending September 30, 2024, the company's key valuation ratios are as follows:
- Price-to-Earnings (P/E) Ratio: 94.7
- Price-to-Book (P/B) Ratio: 17.7
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 33.3
Over the last 12 months, the stock price has shown significant movement:
| Period | Stock Price ($) | Percentage Change (%) |
|---|---|---|
| September 2023 | 1,943.52 | - |
| September 2024 | 1,943.52 | 0.0 |
The company has not declared or paid any cash dividends since May 2017, maintaining a dividend yield of 0%. The payout ratio is also non-applicable.
Analyst consensus on stock valuation indicates a mixed perspective:
- Buy: 5 analysts
- Hold: 10 analysts
- Sell: 2 analysts
Recent earnings metrics for fiscal year 2024 are:
| Metric | Value |
|---|---|
| Net Income ($ million) | 512.8 |
| Earnings Per Share (EPS) ($) | 20.45 |
| Operating Income ($ million) | 733.6 |
| Total Revenue ($ million) | 1,700.0 |
The company reported a total debt balance of $2.2 billion as of September 30, 2024, compared to $1.9 billion for the previous year. Cash and cash equivalents stood at $150.7 million.
Key Risks Facing Fair Isaac Corporation (FICO)
Key Risks Facing Fair Isaac Corporation
Understanding the risks that impact a company's financial health is crucial for investors. Fair Isaac Corporation faces several internal and external risks that could affect its operations and profitability.
Overview of Internal and External Risks
The company operates in a highly competitive landscape, especially within the financial services sector, where 92% of its revenues are derived from sales to the banking industry. This reliance on a single industry can expose the company to significant risks, particularly during periods of economic uncertainty, which have previously resulted in volatility and disruptions in global credit markets.
- Regulatory Changes: The company must navigate complex regulatory environments that can change rapidly, impacting operational costs and compliance requirements.
- Market Conditions: Economic downturns can lead to reduced demand for financial services, thereby impacting revenue streams.
- Competition: The presence of numerous competitors in the analytics and decision management space can erode market share and pressure profit margins.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Economic Disruption: The potential for economic downturns presents risks of bankruptcies or credit deterioration among financial institutions, which are key customers. Such disruptions could lead to a decline in revenue from these institutions.
- Customer Relationships: The loss of significant relationships with major clients or distributors can adversely affect revenue. The company derives a substantial portion of revenue from contracts with major consumer reporting agencies.
- Cybersecurity Threats: Cybersecurity risks are a growing concern, with management actively managing these threats through oversight from the Audit Committee.
Mitigation Strategies or Plans
To address these risks, the company employs several strategies:
- Diversification: The company is expanding its sales into international markets to reduce dependence on U.S. banking clients.
- Regulatory Compliance: Continuous monitoring of regulatory changes and adapting operational strategies to maintain compliance is a priority.
- Cybersecurity Measures: The company enhances its cybersecurity protocols and regularly reviews them with management.
Risk Factors Table
| Risk Factor | Description | Impact Level | Mitigation Strategy |
|---|---|---|---|
| Economic Disruption | Potential bankruptcies of financial institutions | High | Diversification of customer base |
| Regulatory Changes | Changes in compliance requirements | Medium | Continuous monitoring and adaptation |
| Customer Relationships | Loss of major customers or distributors | High | Strengthening existing relationships |
| Cybersecurity Threats | Increased risk of data breaches | Medium | Enhanced cybersecurity measures and regular reviews |
In fiscal 2024, the company reported net income of $512.8 million, reflecting a 19% increase from the previous year. However, the ongoing risks necessitate vigilant management and proactive strategies to safeguard financial health.
Future Growth Prospects for Fair Isaac Corporation (FICO)
Growth Opportunities
Future growth prospects for the company are promising, driven by several key factors:
Analysis of Key Growth Drivers
- Product Innovations: The company has focused on enhancing its platform-first, cloud-delivered products, which has resulted in an increase in annual recurring revenue (ARR) to $721.2 million as of September 30, 2024, marking an 8% increase from the previous year.
- Market Expansions: The company has expanded its geographical reach, particularly in North America, where the demand for digital transformation solutions among financial institutions is significant.
- Acquisitions: The strategic acquisitions have bolstered the company's capabilities, although specific recent acquisitions were not disclosed in the latest reports.
Future Revenue Growth Projections and Earnings Estimates
For fiscal 2024, the company reported total revenues of $1.7 billion, representing a 13% increase from fiscal 2023. Segment revenues for the Scores division reached $919.7 million, a 19% increase year-over-year. The Software segment generated $797.9 million, up 8% from the previous year.
| Financial Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Total Revenues | $1.7 billion | $1.5 billion | $1.4 billion |
| Scores Segment Revenue | $919.7 million | $773.8 million | $706.6 million |
| Software Segment Revenue | $797.9 million | $739.7 million | $670.6 million |
| Net Income | $512.8 million | $429.4 million | $373.5 million |
| Earnings Per Share (EPS) | $20.45 | $16.88 | $14.94 |
Strategic Initiatives or Partnerships
The company has been actively pursuing partnerships that enhance its technological capabilities and broaden its customer base. The focus on operationalizing analytics through the FICO Platform is a strategic initiative aimed at increasing customer engagement and sales.
Competitive Advantages
- Market Leadership: The company commands a significant share of the market with its FICO® Score, which is widely used by financial institutions.
- Strong Customer Relationships: Approximately 92% of revenues are derived from the banking sector, highlighting the company’s entrenched position within this industry.
- High Margin Products: The cost of revenues as a percentage of total revenues decreased to 20% in fiscal 2024 from 21% in fiscal 2023, due to increased sales of higher-margin Scores products.
Overall, the combination of innovative products, strategic market expansions, and a robust revenue model positions the company well for continued growth in the foreseeable future.
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Updated on 16 Nov 2024
Resources:
- Fair Isaac Corporation (FICO) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Fair Isaac Corporation (FICO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fair Isaac Corporation (FICO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.