Business Context and Reporting Period
Fair Isaac Corporation (FICO) is a global analytics software leader providing decision management solutions and the widely used FICO Score. This Form 10-Q covers the quarterly and nine-month periods ended June 30, 2026. The company operates through two segments: Scores (B2B and B2C credit scoring) and Software (analytics and decision management solutions).
Key Financial Metrics
| Metric | Quarter Ended June 30, 2026 | Nine Months Ended June 30, 2026 |
|---|---|---|
| Total Revenues | $674.2 million | $1.88 billion |
| Operating Income | $362.6 million | $999.1 million |
| Net Income | $237.2 million | $660.0 million |
| Diluted EPS | $10.45 | $28.12 |
| Operating Cash Flow (9mo) | $777.9 million | |
| Total Debt | $5.58 billion (as of June 30, 2026) | |
| Cash and Equivalents | $248.4 million (as of June 30, 2026) |
Segment Performance (Quarter): Scores revenue was $458.9 million (91% operating margin); Software revenue was $215.3 million (26% operating margin).
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 26% quarter-over-quarter (QoQ) and 27% year-to-date (YTD). The Scores segment drove this growth with a 41% QoQ increase, attributed to higher mortgage origination scores unit prices and volume. Software revenue grew only 2% QoQ.
- Profitability: Operating income rose 38% QoQ and 45% YTD. Net income increased 30% QoQ and 33% YTD.
- Debt Structure: Total debt increased significantly from $3.06 billion (Sept 30, 2025) to $5.58 billion (June 30, 2026). This was driven by the issuance of $1.0 billion in 2026 Senior Notes and a new $1.5 billion term loan.
- Share Repurchases: The company repurchased $2.3 billion of stock in the quarter and $3.1 billion YTD, including a $1.5 billion Accelerated Share Repurchase (ASR) agreement entered in June 2026.
- Interest Expense: Net interest expense increased 82% QoQ due to higher average outstanding debt balances.
Outlook, Risks, and Unusual Items
- Capital Allocation: Management continues to prioritize share repurchases. As of June 30, 2026, $800 million remained under the June 2026 repurchase program (excluding the unsettled portion of the ASR).
- Software Metrics: Annual Recurring Revenue (ARR) for the Software segment reached $815.8 million (up 10% YoY). Dollar-Based Net Retention Rate (DBNRR) was 109%.
- Legal Proceedings: FICO is a defendant in consolidated putative class action lawsuits alleging antitrust claims regarding FICO Score distribution. A court dismissed most claims but allowed a Sherman Act Section 2 claim to proceed to discovery.
- Tax Legislation: The "One Big Beautiful Bill Act" (OBBBA) of 2025 allowed for immediate expensing of domestic R&E expenditures, impacting the effective tax rate for the period.
- Liquidity: The company maintains a $1.0 billion revolving credit facility and believes cash flows and borrowings are sufficient for the next 12 months.
Investor Verification Checklist
- Debt Servicing: Verify the impact of the new $1.5 billion term loan and $1.0 billion senior notes on future interest coverage ratios and cash flow.
- ASR Settlement: Monitor the final settlement of the $1.5 billion ASR agreement expected in Q4 FY2026 to determine the final share count reduction.
- Customer Concentration: Note that three major consumer reporting agencies (Experian, TransUnion, Equifax) accounted for 63% of total revenue in the quarter.
- Software Margin Pressure: Investigate the decline in Software segment operating margin (from 32% to 26% QoQ) driven by data center costs and a shift away from high-margin point-in-time license revenue.
- Legal Exposure: Track the progress of the antitrust litigation regarding the Sherman Act Section 2 claim.