What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-04-27 · 71 added, 70 removed, 519 unchanged (21% of the section changed)

36 unchanged sentences

Common stock ($ 0.01 par value;

200,000 shares authorized, 88,857 shares issued and 25,982 and 27,568 shares outstanding at March 31, 2022 and September 30, 2021, respectively)

200,000 shares authorized, 88,857 shares issued and 25,252 and 27,568 shares outstanding at June 30, 2022 and September 30, 2021, respectively)

Additional paid-in-capital 1,269,289 1,237,348

Treasury stock, at cost ( 62,875 and 61,289 shares at March 31, 2022 and September 30, 2021, respectively)

Treasury stock, at cost ( 63,605 and 61,289 shares at June 30, 2022 and September 30, 2021, respectively)

( 4,881,304 ) ( 3,857,855 )

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Quarter Ended March 31, Six Months Ended March 31,

Quarter Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

34 unchanged sentences

(In thousands) Shares Par Value

Balance at December 31, 2021 26,509 $ 265 $ 1,208,365 $ ( 4,339,039 ) $ 2,670,102 $ ( 77,992 ) $ ( 538,299 )

Balance at March 31, 2022 25,982 $ 260 $ 1,242,280 $ ( 4,599,242 ) $ 2,774,485 $ ( 81,199 ) $ ( 663,416 )

Share-based compensation — — 28,549 — — — 28,549

3 unchanged sentences

Foreign currency translation adjustments — — — — — ( 22,496 ) ( 22,496 )

Balance at March 31, 2022 25,982 $ 260 $ 1,242,280 $ ( 4,599,242 ) $ 2,774,485 $ ( 81,199 ) $ ( 663,416 )

Balance at June 30, 2022 25,252 $ 253 $ 1,269,289 $ ( 4,881,304 ) $ 2,867,985 $ ( 103,695 ) $ ( 847,472 )

Common Stock Additional

3 unchanged sentences

(In thousands) Shares Par Value

Balance at December 31, 2020 29,236 $ 292 $ 1,145,893 $ ( 3,035,668 ) $ 2,279,551 $ ( 65,947 ) $ 324,121

Balance at March 31, 2021 28,829 $ 288 $ 1,181,692 $ ( 3,239,109 ) $ 2,348,225 $ ( 67,793 ) $ 223,303

Share-based compensation — — 30,004 — — — 30,004

3 unchanged sentences

Foreign currency translation adjustments — — — — — 4,243 4,243

Balance at March 31, 2021 28,829 $ 288 $ 1,181,692 $ ( 3,239,109 ) $ 2,348,225 $ ( 67,793 ) $ 223,303

Balance at June 30, 2021 28,386 $ 284 $ 1,171,164 $ ( 3,482,483 ) $ 2,499,423 $ ( 63,550 ) $ 124,838

Common Stock Additional

9 unchanged sentences

Foreign currency translation adjustments — — — — — ( 27,841 ) ( 27,841 )

Balance at March 31, 2022 25,982 $ 260 $ 1,242,280 $ ( 4,599,242 ) $ 2,774,485 $ ( 81,199 ) $ ( 663,416 )

Balance at June 30, 2022 25,252 $ 253 $ 1,269,289 $ ( 4,881,304 ) $ 2,867,985 $ ( 103,695 ) $ ( 847,472 )

Common Stock Additional

9 unchanged sentences

Foreign currency translation adjustments — — — — — 19,445 19,445

Balance at March 31, 2021 28,829 $ 288 $ 1,181,692 $ ( 3,239,109 ) $ 2,348,225 $ ( 67,793 ) $ 223,303

Balance at June 30, 2021 28,386 $ 284 $ 1,171,164 $ ( 3,482,483 ) $ 2,499,423 $ ( 63,550 ) $ 124,838

See accompanying notes.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31,

Nine Months Ended June 30,

(In thousands)

40 unchanged sentences

Supplemental disclosures of cash flow information:

Cash paid for income taxes, net of refunds of $ 1,003 and $ 288 during the six-month periods ended March 31, 2022 and 2021, respectively

Cash paid for income taxes, net of refunds of $ 1,021 and $ 289 during the nine-month periods ended June 30, 2022 and 2021, respectively

$ 45,984 $ 34,465

2 unchanged sentences

Purchase of property and equipment included in accounts payable $ 11 $ 564

Unsettled repurchases of common stock $ 4,735 $ 4,866

See accompanying notes.

20 unchanged sentences

As a result, we modified the presentation of our segment financial information with retrospective application to all prior periods presented.

Refer to Note 18 - Segment Information to the consolidated financial statements included in Part II.

Item 8 of our 2021 Annual Report on Form 10-K for further information.

Refer to Note 18 - Segment Information to the consolidated financial statements included in Part II, Item 8 of our 2021 Annual Report on Form 10-K for further information.

In addition, effective beginning in the fourth quarter of fiscal 2021, we changed the classification of revenue from transactional and maintenance, professional services, and license to on-premises and SaaS software, professional services and scores, which is reflected in our condensed consolidated statements of income and comprehensive income, as well as our disclosures on disaggregation of revenue, to better align with our business strategy.

19 unchanged sentences

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ” (“ASU 2021-08”).

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606 in order to align the recognition of a contract liability with the definition of a performance obligation.

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606, Revenue from Contacts with Customers , in order to align the recognition of a contract liability with the definition of a performance obligation.

The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which means that it will be effective for our fiscal year beginning October 1, 2023.

6 unchanged sentences

• Level 1 - uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Our Level 1 assets were comprised of money market funds and certain marketable securities and our Level 1 liabilities included senior notes as of March 31, 2022 and September 30, 2021.

Our Level 1 assets were comprised of money market funds and certain marketable securities and our Level 1 liabilities included senior notes as of June 30, 2022 and September 30, 2021.

• Level 2 - uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data.

2 unchanged sentences

and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

We did not have any assets or liabilities that are valued using inputs identified under a Level 2 hierarchy as of March 31, 2022 and September 30, 2021.

We did not have any assets or liabilities that are valued using inputs identified under a Level 2 hierarchy as of June 30, 2022 and September 30, 2021.

• Level 3 - uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment.

Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation.

We did not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy as of March 31, 2022 and September 30, 2021.

The following tables represent financial assets that we measured at fair value on a recurring basis at March 31, 2022 and September 30, 2021:

March 31, 2022 Active Markets for

We did not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy as of June 30, 2022 and September 30, 2021.

The following tables represent financial assets that we measured at fair value on a recurring basis at June 30, 2022 and September 30, 2021:

June 30, 2022 Active Markets for

Identical Instruments

(Level 1) Fair Value as of

March 31, 2022

June 30, 2022

(In thousands)

12 unchanged sentences

Total $ 32,078 $ 32,078

(1) Included in cash and cash equivalents on our condensed consolidated balance sheets at March 31, 2022 and September 30, 2021.

Not included in these tables are cash deposits of $ 124.0 million and $ 195.2 million at March 31, 2022 and September 30, 2021, respectively.

(1) Included in cash and cash equivalents on our condensed consolidated balance sheets at June 30, 2022 and September 30, 2021.

Not included in these tables are cash deposits of $ 124.3 million and $ 195.2 million at June 30, 2022 and September 30, 2021, respectively.

(2) Represents securities held under a supplemental retirement and savings plan for certain officers and senior management employees, which are distributed upon termination or retirement of the employees.

Included in marketable securities on our condensed consolidated balance sheets at March 31, 2022 and September 30, 2021.

Included in marketable securities on our condensed consolidated balance sheets at June 30, 2022 and September 30, 2021.

See Note 7 for the fair value of our senior notes.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the quarters and six-month periods ended March 31, 2022 and 2021.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the quarters and nine-month periods ended June 30, 2022 and 2021.

Derivative Financial Instruments

7 unchanged sentences

The forward contracts are short-term in nature and typically have average maturities at inception of less than three months .

The following tables summarize our outstanding foreign currency forward contracts, by currency, at March 31, 2022 and September 30, 2021:

March 31, 2022

The following tables summarize our outstanding foreign currency forward contracts, by currency, at June 30, 2022 and September 30, 2021:

June 30, 2022

Contract Amount Fair Value

15 unchanged sentences

Singapore dollar (SGD) SGD 6,650 $ 4,900 $ —

The foreign currency forward contracts were entered into on March 31, 2022 and September 30, 2021, respectively;

The foreign currency forward contracts were entered into on June 30, 2022 and September 30, 2021, respectively;

therefore, their fair value was $ 0 on each of these dates.

Gains (losses) on derivative financial instruments were recorded in our condensed consolidated statements of income and comprehensive income as a component of other income (expense), net, and consisted of the following:

Quarter Ended March 31, Six Months Ended March 31,

Quarter Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Amortization expense consisted of the following:

Quarter Ended March 31, Six Months Ended March 31,

Quarter Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Total $ 532 $ 810 $ 1,619 $ 2,692

Estimated future intangible asset amortization expense associated with intangible assets existing at March 31, 2022 was as follows:

Estimated future intangible asset amortization expense associated with intangible assets existing at June 30, 2022 was as follows:

Year Ending September 30, (In thousands)

2022 (excluding the six months ended March 31, 2022) $ 990

2022 (excluding the nine months ended June 30, 2022) $ 442

Total $ 2,459

The following table summarizes changes to goodwill during the six months ended March 31, 2022, both in total and as allocated to our segments.

The following table summarizes changes to goodwill during the nine months ended June 30, 2022, both in total and as allocated to our segments.

We have not recognized any goodwill impairment losses to date.

3 unchanged sentences

Foreign currency translation adjustment — ( 15,512 ) ( 15,512 )

Balance at March 31, 2022 $ 146,648 $ 637,096 $ 783,744

Balance at June 30, 2022 $ 146,648 $ 626,025 $ 772,673

Composition of Certain Financial Statement Captions

The following table presents the composition of property and equipment, net at March 31, 2022 and September 30, 2021:

The following table presents the composition of property and equipment, net at June 30, 2022 and September 30, 2021:

2022 September 30,

16 unchanged sentences

The term loan requires principal payments in consecutive quarterly installments of $ 3.75 million on the last business day of each quarter.

As of March 31, 2022, we had $ 215.0 million in borrowings outstanding under the revolving credit facility at a weighted-average interest rate of 1.932 %, and $ 296.3 million in outstanding balance of the term loan at an interest rate of 1.955 %, of which $ 381.3 million was classified as a long-term liability and recorded in long-term debt within the accompanying condensed consolidated balance sheets.

We were in compliance with all financial covenants under this credit facility as of March 31, 2022.

As of June 30, 2022, we had $ 380.0 million in borrowings outstanding under the revolving credit facility at a weighted-average interest rate of 2.974 %, and $ 292.5 million in outstanding balance of the term loan at an interest rate of 2.684 %, of which $ 542.5 million was classified as a long-term liability and recorded in long-term debt within the accompanying condensed consolidated balance sheets.

We were in compliance with all financial covenants under this credit facility as of June 30, 2022.

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

5 unchanged sentences

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

The following table presents the face values and fair values for the Senior Notes at March 31, 2022 and September 30, 2021:

March 31, 2022 September 30, 2021

The following table presents the face values and fair values for the Senior Notes at June 30, 2022 and September 30, 2021:

June 30, 2022 September 30, 2021

Face Value (*) Fair Value Face Value (*) Fair Value

3 unchanged sentences

Total $ 1,300,000 $ 1,189,000 $ 750,000 $ 810,000

(*) The carrying value of the Senior Notes was the face value reduced by the net debt issuance costs of $ 15.7 million and $ 9.0 million at March 31, 2022 and September 30, 2021, respectively.

(*) The carrying value of the Senior Notes was the face value reduced by the net debt issuance costs of $ 15.0 million and $ 9.0 million at June 30, 2022 and September 30, 2021, respectively.

Revenue from Contracts with Customers

1 unchanged sentence

The following tables provide information about disaggregated revenue by primary geographical market:

Quarter Ended March 31, 2022

Quarter Ended June 30, 2022

Scores Software Total Percentage

4 unchanged sentences

Total $ 179,355 $ 169,611 $ 348,966 100 %

Quarter Ended March 31, 2021

Quarter Ended June 30, 2021

Scores Software Total Percentage

4 unchanged sentences

Total $ 172,202 $ 165,982 $ 338,184 100 %

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Scores Software Total Percentage

4 unchanged sentences

Total $ 532,584 $ 495,938 $ 1,028,522 100 %

Six Months Ended March 31, 2021

Nine Months Ended June 30, 2021

Scores Software Total Percentage

5 unchanged sentences

The following table provides information about disaggregated revenue for our Software segment by deployment method:

Quarter Ended March 31, Percentage of revenues Six Months Ended March 31, Percentage of revenues

Quarter Ended June 30, Percentage of revenues Nine Months Ended June 30, Percentage of revenues

2022 2021 2022 2021 2022 2021 2022 2021

4 unchanged sentences

The following table provides information about disaggregated revenue for our Software segment by product features:

Quarter Ended March 31, Percentage of revenues Six Months Ended March 31, Percentage of revenues

Quarter Ended June 30, Percentage of revenues Nine Months Ended June 30, Percentage of revenues

2022 2021 2022 2021 2022 2021 2022 2021

3 unchanged sentences

Total on-premises and SaaS software $ 142,537 $ 130,230 100 % 100 % $ 417,963 $ 382,236 100 % 100 %

(*) The FICO platform software is a set of interoperable services which use software assets owned and/or governed by FICO for building solutions and which conform to FICO architectural standards based on key elements of Cloud Native Computing design principles.

These standards encompass shared security context and pre-integration using FICO standard application programming interfaces for all services.

(*) The FICO platform software is a set of interoperable capabilities which use software assets owned and/or governed by FICO for building solutions and services which conform to FICO architectural standards based on key elements of Cloud Native Computing design principles.

These standards encompass shared security context and access using FICO standard application programming interfaces.

The following table provides information about disaggregated revenue for our Software segment by timing of revenue recognition:

Quarter Ended March 31, Percentage of revenues Six Months Ended March 31, Percentage of revenues

Quarter Ended June 30, Percentage of revenues Nine Months Ended June 30, Percentage of revenues

2022 2021 2022 2021 2022 2021 2022 2021

8 unchanged sentences

The following table provides information about disaggregated revenue for our Scores segment by distribution method:

Quarter Ended March 31, Percentage of revenues Six Months Ended March 31, Percentage of revenues

Quarter Ended June 30, Percentage of revenues Nine Months Ended June 30, Percentage of revenues

2022 2021 2022 2021 2022 2021 2022 2021

4 unchanged sentences

We derive a substantial portion of revenues from our contracts with the three major consumer reporting agencies, TransUnion, Equifax and Experian.

Revenues collectively generated by agreements with these customers accounted for 39 % of our total revenues in each of the quarters ended March 31, 2022 and 2021, with all three consumer reporting agencies each contributing more than 10% of our total revenues in each of the quarters ended March 31, 2022 and 2021.

Revenues collectively generated by agreements with these customers accounted for 38 % and 37 % of our total revenues in the six months ended March 31, 2022 and 2021, respectively, with two and three consumer reporting agencies each contributing more than 10% of our total revenues in the six months ended March 31, 2022 and 2021, respectively.

Revenues collectively generated by agreements with these customers accounted for 41 % and 38 % of our total revenues in the quarters ended June 30, 2022 and 2021, respectively, with all three consumer reporting agencies each contributing more than 10% of our total revenues in each of the quarters ended June 30, 2022 and 2021.

Revenues collectively generated by agreements with these customers accounted for 39 % and 37 % of our total revenues in the nine months ended June 30, 2022 and 2021, respectively, with two and three consumer reporting agencies each contributing more than 10% of our total revenues in the nine months ended June 30, 2022 and 2021, respectively.

Contract Balances

2 unchanged sentences

We record deferred revenue when the payment is made or due before we satisfy a performance obligation.

Receivables at March 31, 2022 and September 30, 2021 consisted of the following:

March 31, 2022 September 30, 2021

Receivables at June 30, 2022 and September 30, 2021 consisted of the following:

June 30, 2022 September 30, 2021

(In thousands)

9 unchanged sentences

Significant changes in the deferred revenues balances are as follows:

Six Months Ended March 31,

Nine Months Ended June 30,

Deferred revenues, beginning balance (*) $ 110,763 $ 122,141

3 unchanged sentences

Deferred revenues, ending balance (*) $ 104,902 $ 105,577

(*) Deferred revenues at March 31, 2022 included current portion of $ 102.5 million and long-term portion of $ 4.4 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets.

(*) Deferred revenues at June 30, 2022 included current portion of $ 98.5 million and long-term portion of $ 6.4 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets.

Deferred revenues at September 30, 2021 included current portion of $ 105.4 million and long-term portion of $ 5.4 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets.

9 unchanged sentences

• Revenue from variable considerations that will be recognized in accordance with the “right-to-invoice” practical expedient, such as fees from our professional services billed based on a time and materials basis.

Revenue allocated to remaining performance obligations was $ 291.7 million as of March 31, 2022, approximately 52 % of which we expect to recognize over the next 16 months and the remainder thereafter.

Revenue allocated to remaining performance obligations was $ 283.7 million as of June 30, 2022, approximately 50 % of which we expect to recognize over the next 15 months and the remainder thereafter.

Revenue allocated to remaining performance obligations was $ 289.0 million as of September 30, 2021.

Effective Tax Rate

The effective income tax rate was 21.2 % and 25.2 % during the quarters ended March 31, 2022 and 2021, respectively, and 20.2 % and 13.7 % during the six months ended March 31, 2022 and 2021, respectively.

The effective income tax rate was 22.7 % and 19.5 % during the quarters ended June 30, 2022 and 2021, respectively, and 21.0 % and 16.7 % during the nine months ended June 30, 2022 and 2021, respectively.

The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year.

The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

The effective tax rates for the six months ended March 31, 2022 and 2021 were both favorably impacted by the recording of excess tax benefits relating to stock awards.

The effective tax rates for the nine months ended June 30, 2022 and 2021 were both favorably impacted by the recording of excess tax benefits relating to stock awards.

The impact is dependent upon grants of share-based compensation and the future stock price in relation to the fair value of awards on the grant date.

The decrease in stock price for awards that vested in December 2021 has resulted in a decreased net excess tax benefit for the six months ended March 31, 2022, as compared to the six months ended March 31, 2021.

The total unrecognized tax benefit for uncertain tax positions was estimated to be $ 13.2 million and $ 10.9 million at March 31, 2022 and September 30, 2021, respectively.

The decrease in stock price for awards that vested in December 2021 has resulted in a decreased net excess tax benefit for the nine months ended June 30, 2022, as compared to the nine months ended June 30, 2021.

The total unrecognized tax benefit for uncertain tax positions was estimated to be $ 14.0 million and $ 10.9 million at June 30, 2022 and September 30, 2021, respectively.

We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our condensed consolidated statements of income and comprehensive income.

We accrued interest of $ 0.6 million and $ 0.4 million related to unrecognized tax benefits as of March 31, 2022 and September 30, 2021, respectively.

We accrued interest of $ 0.7 million and $ 0.4 million related to unrecognized tax benefits as of June 30, 2022 and September 30, 2021, respectively.

Earnings per Share

The following table presents reconciliations for the numerators and denominators of basic and diluted earnings per share (“EPS”) for the quarters and six-month periods ended March 31, 2022 and 2021:

Quarter Ended March 31, Six Months Ended March 31,

The following table presents reconciliations for the numerators and denominators of basic and diluted earnings per share (“EPS”) for the quarters and nine-month periods ended June 30, 2022 and 2021:

Quarter Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

9 unchanged sentences

Diluted $ 3.61 $ 5.18 $ 10.63 $ 10.38

Anti-dilutive share-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

We exclude the options to purchase shares of common stock in the computation of the diluted EPS where the exercise price of the options exceeds the average market price of our common stock as their inclusion would be antidilutive.

There were approximately 43,000 and 12,000 options excluded for the quarters ended June 30, 2022 and 2021, respectively.

There were approximately 32,000 and 12,000 options excluded for nine months ended June 30, 2022 and 2021, respectively.

Segment Information

16 unchanged sentences

rather, depreciation amounts are allocated to the segments from their internal cost centers as described above.

The following tables summarize segment information for the quarters and six-month periods ended March 31, 2022 and 2021:

Quarter Ended March 31, 2022

The following tables summarize segment information for the quarters and nine-month periods ended June 30, 2022 and 2021:

Quarter Ended June 30, 2022

Scores Software Unallocated

15 unchanged sentences

Depreciation expense $ 182 $ 3,565 $ 26 $ 3,773

Quarter Ended March 31, 2021

Quarter Ended June 30, 2021

Scores Software Unallocated

10 unchanged sentences

Unallocated amortization expense ( 810 )

Unallocated gains on product line asset sales and business divestiture 92,805

Operating income 194,384

3 unchanged sentences

Depreciation expense $ 159 $ 4,854 $ 38 $ 5,051

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Scores Software Unallocated

15 unchanged sentences

Depreciation expense $ 563 $ 11,249 $ 83 $ 11,895

Six Months Ended March 31, 2021

Nine Months Ended June 30, 2021

Scores Software Unallocated

23 unchanged sentences

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-Q

Item 1. Financial Statements