Fair Isaac (FICO): Investment Flash Update | Raymond James Institutional Conf. Fireside (4 Mar 25)
PRICE-LED SCORES UPSIDE, PLATFORM RE-ACCEL PATH INTACT—WE ADD ON DIP.
Link to Historical FICO Investment Flash Updates - Link
Link to Qualitative Analytic Bank - Link (Message me for access)
WHAT’S NEW — CHANGE LOG
Management reiterated (i) platform-ARR re-accel for 2H-25 once H2-24 bookings go live; (ii) score-price headroom after seven-year repricing journey; (iii) no impact from FHFA leadership change—privatised GSEs would still mandate FICO.
KEY DELTAS BOX
∆ Platform ARR +20 % y/y last reported; FX drag –3 ppt (mainly BRL).
∆ Bookings momentum: Q4-24 +Q1-25 ACV >$40 m; converts to ARR inside three quarters.
∆ Software segment margin stable ~50 %; re-architecture spend to lift GM from FY-26.
∆ Scores mortgage ASP +42 % CY-25; still <0.2 % of closing costs.
∆ B2C inflects to positive y/y on low-cost digital marketing pilots.
∆ Capital returns: $126 m buy-back since Oct; leverage 1.9× EBITDA, target unchanged.
QUICK MODEL REVISIONS
TAPE CHECK
COMPETITIVE EDGE ASSESSMENT
FICO’s wallet share in mortgage proves sticky after 30-year zero-price inflation; CFO notes continued acceptance of 2025 ASP hike with “a lot of use still economical”. Affirm BNPL study extends score IP into alternative data, enhancing moat versus bureau rivals. Platform backlog plus partner channels (processors, GSIs) open mid-tier banks & non-FS verticals—off-balance-sheet distribution that competitors lack. Gen-AI hype neutral: Falcon fraud has deployed neural nets since 1990s, while explainable-AI patents shield regulated use-cases. FHFA change viewed benign; even privatised GSEs would “still demand FICO”, limiting regulatory tail risk.
CATALYST MAP
FICO World – 6-9 May 25: showcase partner-marketplace; watch for incremental bookings.
BNPL-enhanced score beta (H2-25) with Affirm—monetisation update.
Platform ARR print (Aug-25): target >28 % y/y.
GSE privatisation roadmap (Congress hearings H2-25).
FY-26 architecture migration milestones—gross-margin unlock disclosures.
BEAR COUNTERPOINTS & REBUTTAL
Bear: Platform decel to 20 % signals saturation.
Rebuttal: FX & CCS usage explain 3-5 ppt; bookings pipeline indicates rebound.
Bear: Fintech alt-scores/Gen-AI will erode Scores royalty.
Rebuttal: Fintechs “built around a FICO score first” per CFO; regulators/investors require backward-compatible FICO.
Bear: FHFA leadership could mandate dual-score, hurting volumes.
Rebuttal: New director focus on housing supply; credit-score agenda dormant; privatisation scenario favourable.
ACTIONABLE TAKEAWAY
Maintain stop-loss –20 % vs latest close $1,905 (4 Mar), or if Platform ARR growth slips below 25 % for two consecutive quarters.
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.