Fair Isaac (FICO): Investment Flash Update | Q1-25 Earnings
FY-25 ON-TRACK; PRICE-LED SCORES SURGE FUNDS PLATFORM BUILD—WE MAINTAIN HIGH-CONVICTION OVERWEIGHT.
Link to Historical FICO Investment Flash Updates - Link
Link to Qualitative Analytic Bank - Link (Message me for access)
WHAT’S NEW — CHANGE LOG
• Solid beat: Q1-25 revenue $440 m (+15 % y/y), GAAP EPS $6.14 (+28 %), FCF $187 m (+55 %)—all above our run-rate.
• FY-25 guide reiterated; management telegraphs ARR acceleration H2-25 as recent bookings (> $40 m last two qtrs) come online.
KEY DELTAS BOX
∆ Platform ARR +20 % y/y (FX-neutral +23 %); share of software ARR holds at 31 %.
∆ Total NRR 105 %, down 100 bp q/q on holiday CCS usage; Platform NRR 112 %.
∆ Scores revenue +23 % y/y; mortgage origination rev +110 % on ASP lift (+42 %) & modest unit rebound.
∆ Software segment margin +200 bp y/y to 50 % on mix and disciplined opex.
∆ FCF TTM $673 m (+36 %); leverage 1.9× EBITDA after $126 m buy-back since Oct.
∆ FX drag: –3 % on Platform ARR (chiefly BRL slide), –$3 m on Q1 revenue.
QUICK MODEL REVISIONS
TAPE CHECK
COMPETITIVE EDGE ASSESSMENT
Mortgage royalty reset proves FICO’s in-elastic pricing power—still <0.2 % of closing costs vs. >3 % broker fees. 10T penetration now spans $261 bn annual originations and $1.4 tn servicing UPB, cementing structural switching costs. Platform ARR growth slowed on holiday CCS usage and FX but bookings momentum (Q1 ACV $21 m, +16 % y/y) plus TCS/iSON channel build underpin management’s mid-30 % ARR ambition. Affirm BNPL study showcases score’s extensibility into alternative data—a moat widener as fintech credit migrates onto reports. FX drag masks underlying software margin leverage (opex +1.5 % y/y). No credible displacement in auto/card; FHFA pause removes near-term regulatory overhang.
CATALYST MAP
Mar-25: Launch of FICO Score Mortgage Simulator—early reseller uptake check.
May 6-9, 25 — FICO World (Hollywood, FL): partner marketplace demos; watch funnel-to-bookings conversion.
H2-25: Platform ARR acceleration (management target >28 %) as FY-24 bookings activate.
FHFA timeline update (TBD-25): Any movement toward Bi-merge / two-score regime; adverse action downside.
FY-25: BNPL-enhanced score (pilot with Affirm) commercialization decision.
BEAR COUNTERPOINTS & REBUTTAL
Bear 1 – Platform ARR decel signals saturation.
Rebuttal: FX stripped, growth +23 %; lag reflects earlier weak bookings & CCS seasonality—already reversing with Q1 ACV +16 %.
Bear 2 – Mortgage ASP hike risks volume pushback.
Rebuttal: Units +? (company cites 110 % revenue vs. ~42 % ASP); lenders accept cost <0.2 % of closing—elasticity minimal.
Bear 3 – FHFA stasis limits 10T upside.
Rebuttal: Non-GSE market already trading 10T loans; securitization adoption snowballs independent of agency mandate.
ACTIONABLE TAKEAWAY
Maintain stop-loss –20 % from $1 ,880 close (02-Feb-25) or if Platform ARR growth <25 % in any subsequent quarter.
All figures cross-checked against FQ1-25 transcript and company 8-K (04-Feb-25). Consensus estimates from FactSet (04-Feb-25). Stock last closed $1,880 (~1 % below 52-week high).
Disclaimer
This commentary is for informational purposes only and reflects the author’s views as of the publication date. It does not constitute investment advice or an offer to buy or sell any security. Information is believed reliable but accuracy is not guaranteed. Forward-looking statements involve risks and uncertainties. The author or affiliates may hold positions in securities mentioned. Conduct your own due diligence or consult a professional before investing.