What changed in this filing

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Item 7. Management’s Discussion and Analysis

2020-11-12 compared with 2019-11-08 · 159 added, 159 removed, 417 unchanged (43% of the section changed)

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Strategies and Initiatives

During fiscal 2019 , our growth initiatives continued to generate significant free cash flow.

We utilized our cash to enhance stockholder value through investments in long-term growth initiatives;

acquisitions of relevant technologies and products that strengthen our portfolio and competitive position;

and our stock repurchase programs.

We continued to transform our business from on-premises to recurring revenue associated with our cloud-based solutions in our Applications and Decision Management Software segments.

Our continued product innovation provides growth opportunities with customers that can benefit from the affordability and simplicity of these solutions.

The majority of our software solutions are now available through both the FICO ® Analytic Cloud and AWS.

During fiscal 2019, our cloud bookings accounted for 39% of our total bookings, compared to 35% during fiscal 2018.

For our Scores segment, our industry leading business-to-business FICO ® Scores has achieved a multi-year expansion in the growing U.S.

consumer market.

We have launched numerous new FICO ® Score based products, and continue to grow our partnership with Experian, a leading global information services provider.

During fiscal 2020, we continued to advance our cloud-enabled, platform-based strategy in our Applications and Decision Management Software segments.

The application of this strategy has led to an increase in our cloud bookings over the past several years.

Our cloud bookings accounted for 41% of our total bookings in fiscal 2020, compared to 39% during fiscal 2019.

We have invested, and intend to continue to invest, in product development to build out and deliver features, functionalities and performance enhancements using a SaaS-based approach on our platform.

Our continued product innovation provides growth opportunities with customers that can benefit from the power, flexibility and modularity of these solutions.

For our Scores segment, our industry leading business-to-business FICO ® Scores have achieved a multi-year expansion in the growing U.S.

business-to-consumer market.

We have launched numerous new FICO ® Score-based products, and continue to grow our business-to-consumer partnership with Experian, a leading global information services provider.

This partnership provides consumers the FICO ® Score that lenders most commonly use in evaluating credit when determining applicant eligibility for new credit cards, car loans, mortgages or other lines of credit and can be accessed through Experian.com.

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We continue to pursue additional partners to distribute FICO ® Scores with their product offerings sold directly to consumers.

We continue to enhance stockholder value by returning cash to stockholders through our stock repurchase program.

During fiscal 2020, we announced the launch of the FICO ® Resilience Index, a new analytic tool designed to complement FICO ® Score models by identifying those consumers who are most resilient to economic stress relative to other consumers within the same FICO ® Score bands.

FICO ® Resilience Index would enable industry participants to more precisely assess credit risk and extend credit to more consumers throughout the economic cycle by managing the risk that emerges during periods of economic stress.

We also continue to enhance stockholder value by returning cash to stockholders through our stock repurchase program.

During fiscal 2020 , we repurchased approximately 0.7 million shares at a total repurchase price of $235.2 million .

As of September 30, 2020 , we had $224.8 million remaining under our current stock repurchase program.

As a strategic cost initiative in fiscal 2020, we committed to a course of action designed to reduce operating costs in lower value, less strategic areas of our business in order to facilitate incremental investment in higher value, more strategic areas while also reducing our facilities footprint in light of post-pandemic workforce patterns.

As a result of this initiative, in the fourth quarter of fiscal 2020, we recorded a net charge of $41.9 million consisting of impairment losses of $33.2 million on our operating lease assets, property and equipment related to closing or consolidating office spaces, as well as a restructuring charge of $8.7 million related to our workforce reduction.

We expect this course of action to result in an aggregate annual expense savings of approximately $36 million beginning in fiscal 2021.

In addition, during fiscal 2020, we changed our practice of selling term software licenses with separate license and maintenance components to a single software subscription contract with license and maintenance bundled.

This transition will be substantially completed by the end of the first quarter of our fiscal 2021.

This will shift the timing of our revenue recognition on these subscription sales, resulting in less revenue recognized upfront and more revenue recognized over the term of these subscriptions.

We expect a decline in revenue recognized from term software licenses in fiscal 2021 as we transition to the new term license subscription model.

This change will not negatively impact our cash flows.

Overview of Financial Results

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Scores revenue increased 25% to $528.5 million in fiscal 2020 from $421.2 million in fiscal 2019, and Scores operating income increased 26% to $454.3 million in fiscal 2020 from $361.4 million in fiscal 2019.

For our Applications and Decision Management Software segments, our cloud business continues to grow as we pursue our cloud-first strategy.

Cloud revenues increased 12% to $270.4 million during fiscal 2019, from $240.9 million during fiscal 2018.

For our Applications and Decision Management Software segments, our SaaS business continues to grow as we pursue our cloud-enabled, platform-based strategy.

Revenue derived from our cloud-enabled SaaS business, which includes both subscription revenue and associated professional services revenue, increased 11% to $300.0 million during fiscal 2020, from $270.4 million during fiscal 2019.

SaaS subscription revenue increased 11% to $236.0 million during fiscal 2020, from $213.1 million during fiscal 2019.

We derive a significant portion of revenues internationally, and 32% and 34% of total consolidated revenues were derived from clients outside the U.S.

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A significant portion of our revenues are derived from the sale of products and services within the banking (including consumer credit) industry, and 86% and 87% of our revenues were derived from within this industry during fiscal 2020 and 2019 , respectively.

In addition, we derive a significant share of revenues from transactional or unit-based software license fees, transactional fees derived under credit scoring, data processing, data management and SaaS subscription services arrangements, and annual software maintenance fees.

In addition, a significant share of our revenues come from transactional or unit-based software license fees, transactional fees under credit scoring, data processing, data management and SaaS subscription services arrangements, and annual software maintenance fees.

Arrangements with transactional or unit-based pricing accounted for 75% and 74% of our revenues during fiscal 2020 and 2019 , respectively.

Revenue fluctuations in our business are primarily driven by changes in the transactional volume and license fees.

Operating income for fiscal 2020 was $296.0 million , an increase of 17% from $253.5 million in fiscal 2019 .

Operating margin was 23% and 22% for fiscal 2020 and 2019, respectively.

As a result, net income increased 52% to $192.1 million in fiscal 2019 from $126.5 million in fiscal 2018 .

Net income increased 23% to $236.4 million in fiscal 2020 from $192.1 million in fiscal 2019 primarily due to an increase in operating income.

Diluted earnings per share for fiscal 2020 was $7.90 , an increase of 25% from $6.34 in fiscal 2019 .

COVID-19 Update

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, which has spread throughout the U.S.

and the world.

The COVID-19 pandemic has resulted in authorities implementing numerous measures to contain the virus, including quarantines, shelter-in-place orders, travel bans and restrictions, and business limitations and shutdowns.

Our focus remains on promoting employee health and safety, serving our customers and ensuring business continuity.

Since March 2020, our employees have been instructed to work from home in each country where we operate to support their health and well-being as well as for our customers, partners and communities.

We have also substantially reduced employee travel to only essential business needs.

We cannot predict when or how we will begin to lift the actions put in place, but as of the date of this filing, we do not believe our work-from-home protocol has had a material adverse impact on our internal controls, financial reporting systems or our operations.

Our operational flexibility and strong balance sheet allowed us to successfully manage through the initial impact of COVID-19 while protecting our cash flow and liquidity.

However, certain areas of our business have been adversely impacted as a result of the pandemic’s global economic impact.

For example, COVID-19 has been adversely affecting certain purchasing decisions by our customers in our Applications and Decision Management Software segments.

For our Scores segment, we have seen a decline in auto and unsecured originations volumes, but an increase in mortgage volume through the 2 nd half of fiscal 2020 due to strong refinancing activities boosted by low interest rates.

Additionally, we have granted and may continue to grant extended payment terms to a small number of customers as a result of COVID-19.

We have not and do not plan to modify our customer agreements in a manner that would materially impact our financial condition or results of operations.

Finally, contrary to our original expectations, a decrease in sales-related travel activity has not materially affected our ability to consummate sales.

As a cost management initiative due to COVID-19, we accelerated reviews of our leased office spaces across our real estate portfolio to reshape and optimize our occupancy cost structures over the next several years.

As a result, in the fourth quarter of fiscal 2020 we recorded impairment charges of $33.2 million on operating lease assets, property and equipment related to closing or consolidating office spaces to better align with anticipated needs.

While we intend to continue to manage our costs by limiting the addition of new employees and third-party contracted services, and substantially reducing employee travel and other discretionary spending, to the extent the business disruption continues for an extended period, additional cost management actions will be considered and may become necessary.

Further asset impairment charges, increases in allowance for doubtful accounts, or restructuring charges may be required, depending on the severity and duration of the pandemic.

We have not incurred significant financial disruptions thus far from the COVID-19 outbreak, but due to numerous uncertainties, including the severity and duration of the pandemic, actions that may be taken by governmental authorities, the impact on the business of our clients, and other factors, we are unable to accurately predict the impact COVID-19 will have on our results of operations, financial condition, liquidity and cash flows.

For more information, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Management regards the volume of bookings achieved as an important indicator of future revenues, but they are not comparable to nor a substitute for an analysis of our revenues.

Bookings represent contracts signed in the current reporting period that generate current and future revenue streams.

While we disclose estimated revenue expected to be recognized in the future related to unsatisfied performance obligations in Note 16 to the accompanying consolidated financial statements, we believe bookings amount is still a meaningful measure of our business as it includes estimated revenues omitted from Note 16, such as sales- or usage-based royalties derived from our software licenses, among others.

While we disclose estimated revenue expected to be recognized in the future related to unsatisfied performance obligations in Note 16 to the accompanying consolidated financial statements, we believe bookings amount is still a meaningful measure of our business as it includes estimated revenues omitted from Note 16, such as usage-based royalties derived from our software licenses, among others.

We estimate bookings as of the end of the period in which a contract is signed and initial booking estimates are not updated in future periods for changes between estimated and actual results.

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Since these estimates cannot be considered fixed or firm, we do not believe it is appropriate to characterize bookings as backlog.

The following paragraphs discuss the key assumptions used to calculate bookings and the susceptibility of these assumptions to variability for each revenue type.

The following paragraphs discuss the key assumptions used to calculate bookings and the susceptibility of these assumptions to variability for each revenue type, as defined in Revenue Recognition in the Critical Accounting Policies and Estimates.

Transactional and Maintenance Bookings

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License Bookings

Licenses are sold on a perpetual or term basis and bookings generally equal the fixed amount stated in the contract.

Licenses that are sold on a perpetual or term basis when bookings generally equal the fixed amount (including guaranteed minimums) stated in the contract.

Bookings Trend Analysis

over $1 Million

(In millions)

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NM - Measure is not meaningful as our estimate of bookings is as of the end of the period in which a contract is signed, and we do not update our initial booking estimates in future periods for changes between estimated and actual results.

Transactional and maintenance bookings were 48% and 46% of total bookings for the years ended September 30, 2019 and 2018 , respectively.

Transactional and maintenance bookings were 48% of total bookings for each of the years ended September 30, 2020 and 2019 .

Professional services bookings were 33% and 39% of total bookings for the years ended September 30, 2020 and 2019 , respectively.

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Professional services

Applications segment revenues decreased $3.0 million in fiscal 2020 from 2019 primarily attributable to a $17.9 million decrease in our fraud solutions and a $3.1 million decrease in our customer communications services, partially offset by a $10.8 million increase in our compliance solutions and a $7.7 million increase in our originations solutions.

The decrease in fraud solutions was primarily attributable to a decrease in license revenue, driven by a large multi-year license renewal recognized during fiscal 2019.

The decrease in customer communication services was primarily attributable to a decrease in transactional revenue.

The increase in compliance solutions was primarily attributable to an increase in professional services and license revenues.

The increase in originations solutions was primarily due to an increase in SaaS subscription revenue classified as transactional and maintenance revenue and an increase in license revenue.

Applications segment revenues increased $40.7 million in fiscal 2019 from 2018 primarily due to a $50.6 million increase in our fraud solutions and a $7.3 million increase in our customer communication services, partially offset by an $8.7 million decrease in our customer management solutions and a $7.6 million decrease in our originations solutions.

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The increase in customer communication services was primarily attributable to an increase in transactional revenue.

The decrease in customer management solutions was primarily attributable to a decrease in license and services revenues.

The decrease in originations solutions was primarily attributable to a decrease in services revenues.

Applications segment revenues increased $3.7 million in fiscal 2018 from 2017 primarily due to an $11.5 million increase in our customer communication services, a $6.6 million increase in our customer management solutions, a $6.3 million increase in our originations solutions, a $6.0 million increase in our compliance solutions, and a $3.2 million increase in our collections & recovery solutions, partially offset by a $29.9 million decrease in our fraud solutions.

The increase in customer communication services was primarily attributable to an increase in transactional revenue.

The increase in customer management solutions was primarily attributable to an increase in license and transactional revenues.

The increase in originations solutions was primarily attributable to an increase in transactional and services revenues from our SaaS products.

The increase in collections & recovery solutions was primarily attributable to an increase in license revenue.

The increase in compliance solutions was attributable to an increase in all revenue types.

The decrease in fraud solutions was primarily attributable to a decrease in license revenue.

The decrease in customer management solutions was primarily attributable to a decrease in license and professional services revenues.

The decrease in originations solutions was primarily attributable to a decrease in professional services revenues.

Year Ended September 30,

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Scores segment revenues increased $107.4 million in fiscal 2020 from 2019 due to an increase of $79.8 million in our business-to-business scores revenue and $27.6 million in our business-to-consumer services revenue.

The increase in business-to-business scores was primarily attributable to a higher unit price in mortgage and auto activities.

The increase in business-to-consumer services was primarily attributable to an increase in royalties derived from scores sold indirectly to consumers through credit reporting agencies.

The increase in business-to-business scores was primarily attributable to an increase in mortgage volumes, a higher unit price in auto and unsecured originations, a large royalty true-up as well as a large annual license deal recognized during fiscal 2020.

The increase was partially offset by a decrease in unsecured originations volume.

The increase in business-to-consumer services was attributable to an increase in both royalties derived from direct sales generated from the myFICO.com website and scores sold indirectly to consumers through credit reporting agencies.

Scores segment revenues increased $85.3 million in fiscal 2019 from 2018 due to an increase of $77.4 million in our business-to-business scores revenue and $7.9 million in our business-to-consumer services revenue.

The increase in business-to-business scores was primarily attributable to a $48.1 million increase in transactional scores in originations, primarily driven by a higher unit price in mortgage activities;

in addition, transactional scores in account management and prescreen increased $13.1 million driven by higher transactional volume.

The increase in business-to-business scores was primarily attributable to a higher unit price in mortgage and auto activities.

The increase in business-to-consumer services was primarily attributable to an increase in royalties derived from scores sold indirectly to consumers through credit reporting agencies.

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Professional services

Decision Management Software segment revenues increased $34.0 million primarily attributable to an increase in both of our license sales and SaaS subscription revenue, as well as an increase in services revenues related to our Decision Management Platform product.

Decision Management Software segment revenues decreased $14.9 million in fiscal 2018 from 2017 primarily attributable to a decrease in license revenue related to our FICO ® Blaze Advisor ® .

Operating Expenses and Other Income (Expense), Net

The following tables set forth certain summary information related to our consolidated statements of income and comprehensive income for the fiscal 2019, 2018 and 2017 :

Decision Management Software segment revenues increased $30.1 million in fiscal 2020 from 2019 primarily attributable to an increase in license revenue, as well as an increase in our SaaS subscription revenue classified as transactional and maintenance revenue.

Decision Management Software segment revenues increased $34.0 million in fiscal 2019 from 2018 primarily attributable to an increase in license revenue, an increase in professional services revenue, as well as an increase in our SaaS subscription revenue classified as transactional and maintenance revenue.

Operating Expenses and Other Income, Net

The following tables set forth certain summary information related to our consolidated statements of income and comprehensive income for fiscal 2020, 2019 and 2018 :

Year Ended September 30,

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Amortization of intangible assets

Restructuring and acquisition-related

Restructuring and impairment charges

Total operating expenses

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Interest expense, net

Other income (expense), net

Other income, net

Income before income taxes

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Amortization of intangible assets

Restructuring and acquisition-related

Restructuring and impairment charges

Total operating expenses

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Interest expense, net

Other income (expense), net

Other income, net

Income before income taxes

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Cost of Revenues

Cost of revenues consists primarily of employee salaries and benefits for personnel directly involved in developing, installing and supporting revenue products;

travel costs;

overhead costs;

outside services;

internal network hosting costs;

Cost of revenues consists primarily of employee salaries and benefits for personnel directly involved in delivering software products, operating SaaS infrastructure, and providing support, implementation and consulting services;

allocated overhead, facilities and data center costs;

software royalty fees;

and credit bureau data and processing services.

credit bureau data and processing services;

third-party hosting fees related to our SaaS services;

travel costs;

and outside services.

The fiscal 2020 over 2019 increase of $24.3 million in cost of revenues was primarily attributable to an $11.1 million increase in allocated facilities and infrastructure costs, a $10.3 million increase in personnel and labor costs and a $7.6 million increase in direct materials cost, partially offset by a $4.9 million decrease in travel costs.

The increase in facilities and infrastructure costs was primarily attributable to increased resource requirements due to expansion in our cloud infrastructure operations.

The increase in personnel and labor costs was primarily attributable to an increase in our average headcount.

The increase in direct materials cost was primarily attributable to an increase in license and Scores revenues that incur third-party royalties and data costs, as well as an increase in telecommunication cost.

The decrease in travel costs was primarily attributable to the COVID-19 pandemic.

Cost of revenues as a percentage of revenues was 28% during fiscal 2020, materially consistent with that incurred during fiscal 2019.

The fiscal 2019 over 2018 increase of $23.9 million in cost of revenues expenses was primarily attributable to a $13.9 million increase in personnel and labor costs and a $6.7 million increase in facilities and infrastructure costs.

The increase in personnel and labor costs was primarily attributable to an increase in headcount.

The increase in facilities and infrastructure costs was primarily attributable to increased resource requirement due to expansion in our cloud infrastructure operations.

The increase in facilities and infrastructure costs was primarily attributable to increased resource requirements due to expansion in our cloud infrastructure operations.

Cost of revenues as a percentage of revenues decreased to 29% during fiscal 2019 from 31% during fiscal 2018 primarily due to increased sales of our high-margin Scores and software products.

The fiscal 2018 over 2017 increase of $25.3 million in cost of revenues expenses was primarily attributable to a $13.4 million increase in facilities and infrastructure costs and a $9.4 million increase in personnel and labor costs.

The increase in facilities and infrastructure costs was primarily attributable to increased resource requirement due to expansion in our cloud infrastructure operations.

The increase in personnel and labor costs was primarily attributable to an increase in incentive cost and share-based compensation costs.

Cost of revenues as a percentage of revenues was 31% during fiscal 2018, consistent with that incurred during fiscal 2017.

Research and Development

Research and development expenses include the personnel and related overhead costs incurred in the development of new products and services, including the research of mathematical and statistical models and the development of new versions of our products.

Research and development expenses include personnel and related overhead costs incurred in the development of new products and services, including research of mathematical and statistical models and development of new versions of Applications and Decision Management Software products.

The fiscal 2020 over 2019 increase of $17.0 million in research and development expenses was primarily attributable to an increase in personnel and labor costs and an increase in allocated facilities and infrastructure costs, both driven by increased average headcount and our continued investments in new product development.

Research and development expenses as a percentage of revenues was 13% during fiscal 2020, consistent with that incurred during fiscal 2019.

The fiscal 2019 over 2018 increase of $21.1 million in research and development expenses was primarily attributable to a $15.6 million increase in personnel and labor costs as a result of increased headcount, and a $3.5 million increase in facilities and infrastructure cost.

Research and development expenses as a percentage of revenues was 13% during fiscal 2019, consistent with that incurred during fiscal 2018.

The fiscal 2018 over 2017 increase of $17.5 million in research and development expenses was primarily attributable to a $14.8 million increase in personnel and labor costs as a result of our continued investment in the areas of cloud computing and SaaS, as well as new products.

Research and development expenses as a percentage of revenues was 13% during fiscal 2018, materially consistent with those incurred during fiscal 2017.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee salaries and benefits;

Selling, general and administrative expenses consist principally of employee salaries, commissions and benefits;

travel costs;

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legal expenses;

business development expenses and the cost of operating computer systems.

business development expenses;

and the cost of operating computer systems.

The fiscal 2020 over 2019 increase of $6.8 million was primarily attributable to an increase in personnel and labor costs as a result of increased average headcount, higher share-based compensation and higher non-capitalizable commission cost.

The increase was partially offset by a decrease in marketing and travel costs as a result of a decrease in travel activity due to COVID-19.

Selling, general and administrative expenses as a percentage of revenues decreased to 33% during fiscal 2020 from 35% during fiscal 2019 primarily due to increased sales of our high-margin Scores and software products.

The fiscal 2019 over 2018 increase of $37.2 million was primarily attributable to an increase in personnel and labor costs as a result of increased headcount, higher share-based compensation and higher non-capitalizable commission cost.

Selling, general and administrative expenses as a percentage of revenues decreased to 35% during fiscal 2019 from 37% during fiscal 2018 primarily due to increased sales of our high-margin Scores and software products.

The fiscal 2018 over 2017 increase of $39.7 million was primarily attributable to a $27.4 million increase in personnel and labor costs as a result of increased headcount, higher share-based compensation and incentive costs;

as well as a $10.1 million increase in marketing and travel costs, primarily driven by a company-wide marketing event during fiscal 2018.

Selling, general and administrative expenses as a percentage of revenues was 37% during fiscal 2018, materially consistent with those incurred during fiscal 2017.

Amortization of Intangible Assets

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Amortization expense was $5.0 million, $6.1 million and $6.6 million for fiscal 2020, 2019 and 2018, respectively.

The fiscal 2018 over fiscal 2017 decrease of $6.1 million was primarily attributable to certain intangible assets associated with our Adeptra and HNC acquisitions becoming fully amortized in fiscal 2017.

Restructuring and Acquisition-Related

There were no restructuring or acquisition-related expenses incurred during fiscal 2019 and 2018.

During fiscal 2017, we incurred net charges totaling $4.5 million consisting of $1.7 million in facilities charges associated with vacating excess leased space in San Rafael, California and $2.8 million in employee separation costs due to the elimination of 79 positions throughout the Company.

Cash payments for all the facilities charges will be paid by the end of fiscal 2020.

Cash payments for all the employee separation costs were paid before the end of the second quarter of fiscal 2018.

There were no acquisition-related expenses incurred during fiscal 2017.

Restructuring and Impairment Charges

During fiscal 2020, we incurred net charges totaling $45.0 million consisting of $28.0 million in impairment loss on operating lease assets, $5.2 million in impairment loss on abandonment of property and equipment and $11.8 million in restructuring charges.

The impairment losses were associated with closing certain non-core offices and reducing office space in other locations to better align with anticipated needs in light of post-pandemic workforce patterns.

The restructuring charges related to employee separation costs as a result of eliminating 209 positions throughout the Company.

Cash payments for all the employee separation costs will be paid by the end of our fiscal 2021.

There were no restructuring and impairment charges incurred during fiscal 2019 and 2018.

Interest Expense, Net

Interest expense includes primarily interest on the senior notes issued in May 2008, July 2010 and May 2018, as well as interest and credit facility fees on the revolving line of credit.

Interest expense includes primarily interest on the senior notes issued in December 2019, May 2018, and July 2010, as well as interest and credit facility fees on the revolving line of credit.

On our consolidated statements of income and comprehensive income, interest expense is netted with interest income, which is derived primarily from the investment of funds in excess of our immediate operating requirements.

The fiscal 2019 over 2018 increase in net interest expense of $8.4 million was primarily attributable to a higher average outstanding debt balance during fiscal 2019, as well as a higher average interest rate on our 2018 Senior Notes compared to that on our revolving line of credit.

The fiscal 2020 over 2019 increase in net interest expense of $2.4 million was primarily attributable to a higher average outstanding debt balance during fiscal 2020.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized investment gains/losses and unrealized gains/losses on certain investments classified as trading securities, exchange rate gains/losses resulting from re-measurement of foreign-currency-denominated receivable and cash balances held by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency forward contracts, and other non-operating items.

The fiscal 2019 over 2018 decrease in other income (expense), net of $10.6 million was primarily attributable to a non-operating gain related to the divestiture of an investment during fiscal 2018.

The fiscal 2018 over 2017 change in other income (expense), net of $13.0 million was primarily attributable to a non-operating gain related to the divestiture of an investment, as well as an increase in foreign currency exchange gain during fiscal 2018.

Other Income, Net

Other income, net consists primarily of realized investment gains/losses and unrealized gains/losses on certain investments classified as trading securities, exchange rate gains/losses resulting from re-measurement of foreign-currency-denominated receivable and cash balances held by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency forward contracts, and other non-operating items.

The fiscal 2020 over 2019 increase in other income, net of $0.9 million was primarily attributable to an increase in net unrealized gains on our supplemental retirement and savings plan, partially offset by an increase in foreign currency exchange losses.

The fiscal 2019 over 2018 decrease in other income, net of $10.6 million was primarily attributable to a non-operating gain related to the divestiture of an investment during fiscal 2018.

Provision for Income Taxes

Our effective tax rates were 8.0% , 11.1% and 19.4% in fiscal 2020, 2019 and 2018 , respectively.

The decrease in our income tax provision in fiscal 2019 compared to fiscal 2018 is due to the decrease in the overall federal tax rate from the blended 24.5% in fiscal 2018 to 21% in fiscal 2019 and the recording of several one-time items in fiscal 2018 related to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

The increase in our income tax provision in fiscal 2018 compared to fiscal 2017 was primarily due to recording the impact related to the enactment of the Tax Act in fiscal 2018.

This includes re-measurement to our deferred for the tax rate changes, the one-time deemed repatriation transition tax, and the loss of deductibility of performance-based compensation for certain employees.

As of September 30, 2019, we have approximately $95.6 million of unremitted earnings of non-U.S.

The decrease in our income tax provision in fiscal 2020 compared to fiscal 2019 was due to the excess tax benefits related to stock-based compensation.

The decrease in our income tax provision in fiscal 2019 compared to fiscal 2018 was due to the decrease in the overall federal tax rate from the blended 24.5% in fiscal 2018 to 21% in fiscal 2019 and the recording of several one-time items in fiscal 2018 related to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

As of September 30, 2020, we had approximately $111.7 million of unremitted earnings of non-U.S.

subsidiaries.

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from the foreign entities.

In the event these earnings are later remitted to the U.S., any estimated withholding tax on remittance of those earnings is expected to be immaterial to the income tax provision.

In the event these earnings are later remitted to the U.S., any estimated withholding tax on remittance of those earnings is expected to be immaterial to our income tax provision.

Operating Income

The following tables set forth certain summary information on a segment basis related to our operating income for the fiscal 2019, 2018 and 2017 :

The following tables set forth certain summary information on a segment basis related to our operating income for fiscal 2020, 2019 and 2018 :

Year Ended September 30,

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Unallocated amortization expense

Unallocated restructuring and acquisition-related

Unallocated restructuring and impairment charges

Operating income

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Segment operating loss

The fiscal 2020 over 2019 increase in operating income of $42.4 million was attributable to a $134.5 million increase in segment revenues and a $1.1 million decrease in amortization expense, partially offset by a $45.0 million increase in restructuring and impairment charges, a $37.5 million increase in segment operating expenses, and a $10.7 million increase in share-based compensation expense.

At the segment level, the $97.0 million increase in segment operating income was the result of a $93.0 million increase in our Scores segment operating income and an $11.6 million decrease in our Decision Management Software segment operating loss, partially offset by a $7.6 million decrease in our Applications segment operating income.

The $7.6 million decrease in Applications segment operating income was attributable to a $4.6 million increase in segment operating expenses and a $3.0 million decrease in segment revenue.

Segment operating income as a percentage of segment revenue for Applications was 26%, materially consistent with fiscal 2019.

The $93.0 million increase in Scores segment operating income was attributable to a $107.4 million increase in segment revenue, partially offset by a $14.4 million increase in segment operating expenses.

Segment operating income as a percentage of segment revenue for Scores was 86%, consistent with fiscal 2019.

The $11.6 million decrease in Decision Management Software segment operating loss was attributable to a $30.1 million increase in segment revenue, partially offset by an $18.5 million increase in segment operating expenses.

Segment operating margin for Decision Management Software improved to negative 14% from negative 26%, mainly due to an increase in sales of our higher-margin software products, partially offset by our continued investment in cloud infrastructure operations and new products.

The fiscal 2019 over 2018 increase in operating income of $78.2 million was attributable to a $160.0 million increase in segment revenues and a $0.5 million decrease in amortization expense, partially offset by a $54.6 million increase in segment operating expenses, a $19.5 million increase in unallocated corporate expenses and an $8.2 million increase in share-based compensation expense.

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The $0.7 million increase in Decision Management Software segment operating loss was attributable to a $34.7 million increase in segment operating expenses, partially offset by a $34.0 million increase in segment revenue.

Segment operating margin for Decision Management Software improved to a negative 26% from a negative 34% mainly due to an increase in sales of our higher-margin software products, partially offset by our continued investment in cloud infrastructure operations and new products.

The fiscal 2018 over 2017 decrease in operating income of $6.8 million was attributable to a $48.6 million increase in segment operating expenses, a $20.3 million increase in unallocated corporate expenses and a $13.6 million increase in share-based compensation expense, partially offset by a $65.1 million increase in segment revenues, a $6.1 million decrease in amortization expense and a $4.5 million decrease in restructuring and acquisition-related expenses.

At the segment level, the $3.8 million decrease in segment operating income was the result of a $26.3 million increase in our Decision Management Software segment operating loss, a $24.4 million decrease in our Applications segment operating income, and a $20.3 million increase in unallocated corporate expenses primarily driven by an increase in unallocated incentive cost and a one-time settlement during fiscal 2017, partially offset by a $67.2 million increase in our Scores segment operating income.

The $24.4 million decrease in Applications segment operating income was attributable to a $28.1 million increase in segment operating expenses, partially offset by a $3.7 million increase in segment revenue.

Segment operating income as a percentage of segment revenue for Applications decreased to 26% from 30% mainly due to a decrease in sales of our higher-margin software products.

The $67.2 million increase in Scores segment operating income was attributable to a $76.3 million increase in segment revenue, partially offset by a $9.1 million increase in segment operating expenses.

Segment operating income as a percentage of segment revenue for Scores increased to 81% from 79% mainly due to an increase in sales of our higher-margin score products.

The $26.3 million increase in Decision Management Software segment operating loss was attributable to a $14.9 million decrease in segment revenue and an $11.4 million increase in segment operating expenses.

Segment operating margin for Decision Management Software decreased to a negative 34% from a negative 7% mainly due to a decrease in sales of our higher-margin software products, as well as our continued investment in cloud infrastructure operations and new products.

Segment operating margin for Decision Management Software improved to negative 26% from negative 34% mainly due to an increase in sales of our higher-margin software products, partially offset by our continued investment in cloud infrastructure operations and new products.

CAPITAL RESOURCES AND LIQUIDITY

As of September 30, 2019 , we had $106.4 million in cash and cash equivalents, which included $81.1 million held off-shore by our foreign subsidiaries.

We believe these balances, as well as available borrowings from our $400 million revolving line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements as well as the $85.0 million principal payment due in July 2020 on our senior notes issued in July 2010.

Under our current financing arrangements, we have no other significant debt obligations maturing over the next twelve months.

Additionally, though we do not anticipate the need to repatriate any undistributed earnings from our foreign subsidiaries for the foreseeable future, we may take advantage of opportunities where we are able to repatriate these earnings to the U.S.

without material incremental tax provision.

As of September 30, 2020 , we had $157.4 million in cash and cash equivalents, which included $118.0 million held by our foreign subsidiaries.

Our cash position could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part I, Item 1A titled “Risk Factors” of this Annual Report on Form 10-K.

However, based on our current business plan and revenue prospects, we believe our cash and cash equivalents balances, as well as available borrowings from our $400 million revolving line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements.

Under our current financing arrangements, we have no significant debt obligations maturing over the next twelve months.

Our undistributed earnings outside the U.S.

are deemed to be permanently reinvested in foreign jurisdictions.

We currently do not foresee a need to repatriate cash and cash equivalents held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S., we may be required to accrue for state income or foreign withholding taxes on the distributed foreign earnings, which we expect to be immaterial.

In the normal course of business, we evaluate the merits of acquiring technology or businesses, or establishing strategic relationships with or investing in these businesses.

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Net cash provided by operating activities totaled $364.9 million in fiscal 2020 compared to $260.4 million in fiscal 2019.

The $37.3 million increase was attributable to a $65.6 increase in net income as well as an $18.7 million increase in non-cash items, partially offset by a $47.0 million decrease that resulted from timing of receipts and payments in our ordinary course of business.

The $104.5 million increase was attributable to a $44.3 million increase in net income, a $46.1 million increase in non-cash items, including a $28.0 million increase in impairment loss on operating lease assets as well as a $20.0 million increase in operating lease costs, and a $14.2 million increase that resulted from timing of receipts and payments in our ordinary course of business.

Net cash provided by operating activities totaled $260.4 million in fiscal 2019 compared to $223.1 million in fiscal 2018.

The $2.5 million decrease was attributable to a $7.8 million decrease that resulted from timing of receipts and payments in our ordinary course of business and a $6.9 million decrease in net income, partially offset by a $12.2 million increase in non-cash items.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $24.6 million in fiscal 2020 compared to $42.8 million in fiscal 2019.

The $28.7 million increase was primarily attributable to a $20.0 million decrease in proceeds from the sale of cost method investment and a $15.9 million increase in net cash used for acquisition, partially offset by a $7.3 million decrease in net cash used for purchases of property and equipment.

The $18.2 million decrease was primarily attributable to a $15.9 million decrease in net cash used for acquisitions and a $2.0 million decrease in net cash used for purchases of property and equipment.

Net cash used in investing activities totaled $42.8 million in fiscal 2019 compared to $14.1 million in fiscal 2018.

The $6.5 million decrease was primarily attributable to a $20.0 million increase in proceeds from the sale of cost method investment, partially offset by an $11.5 million increase in net cash used for purchases of property and equipment as well as a $2.8 million increase in purchases, net of proceeds from sale, of marketable securities.

The $28.7 million increase was primarily attributable to a $20.0 million decrease in proceeds from the sale of cost method investment and a $15.9 million increase in net cash used for acquisitions, partially offset by a $7.3 million decrease in net cash used for purchases of property and equipment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $289.4 million in fiscal 2020 compared to $200.0 million in fiscal 2019.

The $18.6 million decrease was primarily due to a $192.0 million decrease in payments, net of proceeds, on our revolving line of credit, a $113.7 million decrease in net cash used for repurchases of common stock and an $11.8 million increase in proceeds from issuance of treasury stock under employee stock plans, partially offset by a $297.0 million decrease in proceeds, net of payments, from our senior notes.

The $89.4 million increase was primarily due to a $338.0 million increase in payments, net of proceeds, on our revolving line of credit and a $49.9 million increase in taxes paid related to net share settlement of equity awards, partially offset by a $293.0 million increase in proceeds, net of payments, from our senior notes.

Net cash used in financing activities totaled $200.0 million in fiscal 2019 compared to $218.6 million in fiscal 2018.

The $38.0 million increase was primarily due to a $210.0 million increase in payments, net of proceeds, on our revolving line of credit, a $155.0 million increase in net cash used for repurchases of common stock and a $7.8 million increase in debt issuance cost, partially offset by a $341.0 million increase in proceeds, net of payments, from our senior notes.

Repurchases of Common Stock

In July 2019, our Board of Directors approved a stock repurchase program following the completion of the previously authorized program.

This program was open-ended and authorizes repurchases of shares of our common stock up to an aggregate cost of $250.0 million in the open market or in negotiated transactions.

This program was open-ended and authorized repurchases of shares of our common stock up to an aggregate cost of $250.0 million in the open market or in negotiated transactions.

In July 2020, our Board of Directors approved a new stock repurchase program following the completion of the July 2019 program.

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During fiscal 2020, 2019 and 2018 , we expended $235.2 million , $228.9 million and $336.9 million , respectively, under these and previously authorized stock repurchase programs.

We paid dividends of $0.02 per share on a quarterly basis during the first two quarters of our fiscal 2017.

In May 2017, our Board of Directors discontinued cash dividend payments in favor of using our excess cash flow for share repurchases.

Revolving Line of Credit

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The credit facility contains certain restrictive covenants including maintaining a maximum consolidated leverage ratio of 3.25, subject to a step up to 3.75 following certain permitted acquisitions;

and a minimum fixed charge ratio of 2.50 through the maturity of our 2010 Senior Notes in July 2020 (as defined below), upon which maintaining a minimum interest coverage ratio of 3.00.

and a minimum fixed charge ratio of 2.50 through the maturity of our 2010 Senior Notes (as defined below) in July 2020, following which maintaining a minimum interest coverage ratio of 3.00 is required.

The credit agreement also contains other covenants typical of unsecured facilities.

As of September 30, 2019 , we had $345.0 million in borrowings outstanding at a weighted average interest rate of 3.423% and were in compliance with all financial covenants under this credit facility.

On July 14, 2010, we issued $245 million of senior notes in a private placement to a group of institutional investors (the “2010 Senior Notes”).

The 2010 Senior Notes were issued in four series with maturities ranging from 6 to 10 years.

The outstanding 2010 Senior Notes’ weighted average interest rate is 5.59% and the weighted average maturity is 10 years.

The 2010 Senior Notes require interest payments semi-annually and contain certain restrictive covenants, including the maintenance of a maximum consolidated net debt to consolidated EBITDA ratio of 3.00 and a minimum fixed charge coverage ratio of 2.50.

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”, and with the 2010 Senior Notes, the “Senior Notes”).

As of September 30, 2020 , we had $95.0 million in borrowings outstanding at a weighted-average interest rate of 1.285% and we were in compliance with all financial covenants under this credit facility.

On July 14, 2010, we issued $245 million of senior notes in a private placement to a group of institutional investors, the outstanding aggregate principal amount of which was paid in full at maturity on July 14, 2020 (the “2010 Senior Notes”).

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”).

The 2018 Senior Notes require interest payments semi-annually at a rate of 5.25% per annum and will mature on May 15, 2026.

The purchase agreement for the 2010 Senior Notes and the indenture for the 2018 Senior Notes contain certain covenants typical of unsecured obligations.

As of September 30, 2019 , the carrying value of the Senior Notes was $485.0 million and we were in compliance with all financial covenants under the purchase agreement and the indenture, respectively.

On December 6, 2019, we issued $350 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes,” along with the 2010 Senior Notes and 2018 Senior Notes, the “Senior Notes”).

The 2019 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028.

The indentures for the 2018 Senior Notes and the 2019 Senior Notes contain certain covenants typical of unsecured obligations.

As of September 30, 2020 , the carrying value of the Senior Notes was $750.0 million and we were in compliance with all financial covenants under these obligations, and do not believe we are at material risk of not meeting these covenants due to COVID-19.

Contractual Obligations

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Interest due on debt obligations (2)

Capital lease obligations

Finance lease obligations

Operating lease obligations

Purchase obligations (3)

Unrecognized tax benefits (3)

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Represents interest payments on the Senior Notes.

Represents amounts associated with agreements that are enforceable, legally binding and specify terms, including:

fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the payments.

Represents unrecognized tax benefits related to uncertain tax positions.

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Our software offerings often include a perpetual or term-based license and post-contract support or maintenance, both of which generally represent distinct performance obligations and are accounted for separately.

The transaction price is either in the form of a fixed consideration with separate stated prices for license and maintenance, or a sales or usage-based royalty—sometimes subject to a guaranteed minimum—for the license and maintenance bundle.

When the amount is in the form of a fixed consideration, including the guaranteed minimum in sales or usage-based royalty, license revenue from distinct on-premises license is recognized at the point in time when the software or scoring solution is made available to the customer or distributor.

The transaction price is either in the form of a fixed consideration with separately stated prices for license and maintenance, a single subscription with license and maintenance bundled, or a usage-based royalty—sometimes subject to a guaranteed minimum—for the license and maintenance bundle.

When the amount is in the form of a fixed consideration, including the guaranteed minimum in usage-based royalty, license revenue from distinct on-premises licenses is recognized at the point in time when the software or scoring solution is made available to the customer or distributor.

Any royalties not subject to the guaranteed minimum or earned in excess of the minimum amount are recognized as transactional revenue when the subsequent sales or usage occurs.

Revenue allocated to maintenance is generally recognized ratably over the contract period as customers simultaneously consume and receive benefits.

In addition to sales or usage-based royalty on our software and scoring products, transactional revenue is also derived from SaaS contracts in which we provide customers with access to and standard support for our software application either in the FICO ® Analytic Cloud or AWS, our primary cloud infrastructure provider, on a subscription basis.

In addition to usage-based royalty on our software and scoring products, transactional revenue is also derived from SaaS contracts in which we provide customers with access to and standard support for our software application either in the FICO ® Analytic Cloud or AWS, our primary cloud infrastructure provider, on a subscription basis.

The transaction price typically includes a fixed consideration in the form of a guaranteed minimum that allows up to a certain level of usage and a variable consideration in the form of usage or transaction-based fees in excess of the minimum threshold;

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Goodwill represents the excess of cost over the fair value of identifiable assets acquired and liabilities assumed in business combinations.

We assess goodwill for impairment for each of our reporting units on an annual basis during the fourth quarter using a July 1 measurement date unless circumstances require a more frequent measurement.

We assess goodwill for impairment for each of our reporting units on an annual basis during our fourth fiscal quarter using a July 1 measurement date unless circumstances require a more frequent measurement.

We have determined that our reporting units are the same as our reportable segments.

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For example, if the economic environment impacts our forecasts beyond what we have anticipated, it could cause the fair value of a reporting unit to fall below its respective carrying value.

For fiscal 2017, we elected to proceed directly to the step one quantitative analysis for all of our reporting units, as three years had elapsed since the date of our previous quantitative valuation.

For fiscal 2017, we elected to proceed directly to the step one quantitative analysis for all of our reporting units.

There was a substantial excess of fair value over carrying value for each of our reporting units and we determined goodwill was not impaired for any of our reporting units for fiscal 2017.

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An increase in the valuation allowance would have an adverse impact, which could be material, on our income tax provision and net income in the period in which we record the increase.

On December 22, 2017, the Tax Act was enacted by the U.S.

The Tax Act makes broad and complex changes to the U.S.

tax code that affect our fiscal year ended September 30, 2019, including but not limited to:

(1) creating the base erosion anti-abuse tax measure that taxes certain payments between a U.S.

corporation and its foreign subsidiaries;

(2) creating a new provision designed to tax global intangible low-tax income of foreign subsidiaries;

and (3) a foreign derived intangible income.

We have estimated the impact of these changes in our income tax provision for 2019.

We recognize and measure benefits for uncertain tax positions using a two-step approach.

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Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09.

The standard’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers.

The guidance permits two methods of adoption:

retrospectively to each prior reporting period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective method”).

We adopted ASU 2014-09 in the first quarter of our fiscal 2019 using the full retrospective method which required us to adjust each prior reporting period presented.

This adoption primarily affected timing of revenue recognition of license revenue on term licenses and transactional revenue on guaranteed minimum fees related to our on-premises software products.

Under the new standard, we recognize revenue when control of the license is transferred to the customer, rather than at the date payments become due and payable when there are extended payment terms, or ratably over the term of the contract as required under the previous standard.

In addition, revenue attributable to a software license renewal is recognized at the beginning of the applicable renewal period rather than at the signing of the renewal agreement as required under the previous standard.

Additionally, under the new standard, when we enter into noncancellable contracts that provide unconditional rights to payment from our customers for services we have not yet completed or services we will provide in the near future, we present receivables—our unconditional rights to payments—and deferred revenues on a gross basis, rather than on a net basis.

Finally, under the new standard we capitalize and amortize contract acquisition costs such as commissions paid for SaaS cloud services contracts in excess of one year.

Following the adoption of ASU 2014-09, the revenue recognition for our other sales arrangements remained materially consistent with our historical practice.

Upon adoption of ASU 2014-09, we applied the standard’s practical expedients that permit the omission of prior-period information about our performance obligations.

See Note 1 to the accompanying consolidated financial statements for further discussion on the impact of the standard adoption on our previously reported results.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-02, “ Leases (Topic 842) ” and subsequent amendments to the initial guidance:

ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”).

Topic 842 requires the recognition of operating lease assets and lease liabilities on the balance sheet.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted Topic 842 using the “Comparatives Under 840 Option” approach to transition.

In accordance with the standard, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Topic 842 provided a package of practical expedients that allow an entity to not reassess (1) whether any expired or existing contracts contain a lease, (2) the lease classification of any expired or existing lease, and (3) initial direct costs for any existing leases.

We elected to apply the package of practical expedients, and did not elect the hindsight practical expedient in determining the lease term for existing leases as of October 1, 2019.

Recent Accounting Pronouncements Not Yet Adopted

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The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which means that it will be effective for our fiscal year beginning October 1, 2020.

Early adoption is permitted.

We are currently evaluating the impact of our pending adoption of ASU 2018-15 on our consolidated financial statements.

We do not believe that adoption of ASU 2018-15 will have a significant impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No.

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Topic 326 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which means it will be effective for our fiscal year beginning October 1, 2020.

Early adoption is permitted.

We are currently evaluating the impact of our pending adoption of Topic 326 on our consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, “ Leases (Topic 842) ” and subsequent amendments to the initial guidance:

ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”).

Topic 842 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets.

Topic 842 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018, which means it will be effective for our fiscal year beginning October 1, 2019.

Early adoption is permitted.

We are currently evaluating the impact of our pending adoption of Topic 842 on our consolidated financial statements.

We expect that most of our operating leases will be recognized as right-of-use assets and corresponding lease liabilities on our consolidated balance sheets, which will increase our total assets and total liabilities upon adoption.

Subject to the completion of our assessment, we expect the adoption of the standard will result in recognition of right-of-use assets of approximately $90 million and lease liability of approximately $99 million in our consolidated balance sheets.

We do not believe that adoption of Topic 326 will have a significant impact on our consolidated financial statements.

We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis