Fair Isaac Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Revenue Results: Q4 2025 revenues were $516 million, up 14% over last year. Full fiscal year 2025 revenue was $1.991 billion, up 16% versus the prior year.
• Software Segment Details: Q4 software revenues were $204 million. Platform revenue grew 17% year-over-year, while non-platform revenue declined 7% due to end of life legacy products and timing of recurring revenue. Fiscal year 2025 software revenue was $822 million, up 3% from the prior year.
• R&D and Innovations: Announced general availability of next-generation FICO platform, enterprise fraud solution on FICO platform, FICO marketplace, and FICO focused foundation model for financial services (FICO FFM). FICO FFM offers improved accuracy and cost efficiencies compared to conventional gen AI models.
• Scores Segment Initiatives: FICO mortgage direct license program with Xactus to drive competition in mortgage credit scoring. Overwhelming interest in the program, with FICO providing scoring software to top resellers and platform providers. FICO Score 10T is the most predictive credit scoring model, with 18% more defaulters identified in critical deciles for mortgage originations compared to Vantage 4.

Segment Performance

• Software Segment: Q4 2025 revenues were $204 million. While flat year-over-year at the segment level, it included 17% platform revenue growth driven by FICO platform and 7% decline in non-platform revenue. Fiscal year 2025 software revenue was $822 million, up 3% from the prior year.
• Scores Segment: Q4 2025 revenues were $312 million, up 25% versus the prior year. Fiscal year 2025 scores revenue was $1.169 billion, up 27% versus the prior year. Q4 2025 mortgage origination revenues were up 52% versus the prior year, with mortgage origination revenues accounting for 55% of B2B revenue and 45% of total scores revenue.

Guidance

• Fiscal 2026 Guidance: Revenue is guided to $2.35 billion, a 18% increase over fiscal 2025. GAAP net income is expected to be $795 million (22% increase), GAAP EPS $33.47 (26% increase). Non-GAAP net income is projected to be $907 million (24% increase), non-GAAP EPS $38.17 (28% increase). Guidance is conservative due to macro environment uncertainties and timing complexities in pricing model adoption.
• Software ARR: Total software ARR was $747 million, a 4% increase over the prior year. Platform ARR was $263 million (35% of total Q4 2025 ARR), growing 16% year-over-year, while non-platform ARR was $484 million, consistent with recent quarters.

Risks

• Macro Environment Uncertainties: Uncertainties in the macro environment affect the timing of adoption of pricing models, particularly the performance-based model in the mortgage direct license program.
• Timing Complexities: The performance-based pricing model has potential time lags due to the mortgage process timeline, which could spill into subsequent fiscal years.
• Volume Uncertainties: Uncertainties in mortgage and other originations volumes, especially affected by interest rate fluctuations, impact guidance conservatism.

Question and Answer

• Q: Broader question on FHFA and FICO 10T approval A: Constructive conversation with FHFA on direct distribution to increase competition. Working with GSEs to release FICO 10T, though no exact date provided but confident in eventual release.
• Q: Clarification on direct licensing model assumptions A: Guidance is conservative due to macro uncertainties and timing complexities; performance-based pricing model has potential time lags affecting revenue recognition.
• Q: Pricing in fiscal 2027 and beyond A: Value gap exists between charge and value provided by scores; will address the gap but details are to be determined (TBD).
• Q: Feedback on pricing models from lenders A: Positive reception to the direct licensing program, with optionality provided through 2 pricing models (historical per score and performance).
• Q: Nonconforming market adoption of FICO 10T A: Positive reception, but slow adoption process due to need for testing and evaluation.
• Q: Value prop in conforming vs nonconforming A: Credit risk remains important in conforming market despite GSE guarantees; originators still care about credit, prepayment, and default risks.
• Q: Software ACV bookings conversion to ARR A: Q1 2026 is expected to see acceleration in ARR as recent FICO platform bookings go live.
• Q: Resellers' fees under direct licensing A: Resellers set their own pricing, which is TBD; FICO does not influence resellers' pricing decisions.
• Q: Mortgage volume impact on guidance A: Guidance is conservative due to interest rate uncertainties; big volume increases from rate declines are not built into guidance.
• Q: Resellers' pace for 1/1 adoption A: On pace, with minimal operational hurdles; things are tracking nicely.
• Q: Split between pricing models A: Not finalized; modeling sensitivity around lender behavior informs decisions but split is not yet determined.
• Q: Usage of FICO scores in downstream market A: Scores are used in multiple downstream areas (mortgage originators, GSEs, rating agencies, investors, etc.), with historical unmonetized volume.