What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-11-08 compared with 2022-11-09 · 184 added, 247 removed, 1018 unchanged (30% of the section changed)

37 unchanged sentences

For contracts with customers that contain various combinations of products and services, the Company evaluates whether the products or services are distinct — distinct products or services will be accounted for as separate performance obligations, while non-distinct products or services are combined with others to form a single performance obligation.

For on-premises software, which includes a term-based license and post-contract support or maintenance, the transaction price is either a fixed fee, or a usage-based fee — sometimes subject to a guaranteed minimum.

Any usage-based fees not subject to a guaranteed minimum or earned in excess of the minimum amount are recognized when the subsequent usage occurs.

For SaaS products, the Company estimates the total variable consideration at contract inception — subject to any constraints that may apply — and updates the estimates as new information becomes available and recognizes the amount ratably over the SaaS service period, unless the Company determines it is appropriate to allocate the variable amount to each distinct service period and recognize revenue as each distinct service period is performed.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.

The Company determines the SSP using data from historical standalone sales, or, in instances where such information is not available (such as when the Company does not sell the product or service separately), the Company considers factors such as the stated contract prices, overall pricing practices and objectives, go-to-market strategy, size and type of the transactions, and effects of the geographic area on pricing, among others.

Given the complexity of certain of the Company’s contracts, together with the judgment involved in identifying performance obligations, estimating variable consideration, and determining SSP, auditing the related revenue required both extensive audit effort due to the volume and complexity of the contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures .

The Company’s professional services include software implementation, consulting, model development and training.

The transaction price can be a fixed amount or a variable amount based upon the time and materials expended.

Revenue on fixed-price services is recognized using an input method based on labor hours expended, which the Company believe provides a faithful depiction of the transfer of services.

The Company’s scoring services include both business-to-business and business-to-consumer offerings.

The Company’s business-to-business scoring services typically include a license that grants consumer reporting agencies the right to use the scoring solutions in exchange for a usage-based royalty.

Revenue is generally recognized when the usage occurs.

Business-to-consumer offerings provide consumers with access to their FICO® Scores and credit reports, as well as other value-add services.

These are provided as either a one-time or ongoing subscription service renewed monthly or annually, all with a fixed consideration.

Given the complexity of certain of the Company’s contracts, together with the judgment involved in identifying performance obligations and estimating variable consideration, auditing the related revenue required both extensive audit effort due to the volume and complexity of the contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures .

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue recognition over the Company’s identification of performance obligations, estimation of variable consideration, and determination of SSP included the following, among others:

• We tested the effectiveness of controls over contract revenue, including management’s controls over the identification of performance obligations, estimation of variable consideration, and determination of the SSP.

Our audit procedures related to revenue recognition over the Company’s identification of performance obligations and estimation of variable consideration, included the following, among others:

• We tested the effectiveness of controls over contract revenue, including management’s controls over the identification of performance obligations and estimation of variable consideration.

• We selected a sample of contracts and performed the following procedures:

◦ Obtained and read the contract, including master agreements, renewal agreements, and other source documents that were part of the contract.

◦ Obtained other contracts with the same customer that were entered into at or near the same time and evaluated management’s conclusion of whether two or more contracts for multiple products and services promised to a customer should be combined and accounted for as a single contract for revenue recognition.

◦ Confirmed the terms of the contract directly with the customer, including whether there are side agreements and terms not formally included in the contract that may impact the identification of performance obligations and revenue recognition and performed alternative procedures in the event of nonreplies.

◦ Evaluated internal certification letters provided by the Company’s sales personnel to identify the existence of side agreements that may impact the identification of performance obligations and revenue recognition.

◦ Confirmed the terms of the contract directly with the customer, including whether there are terms not formally included in the contract that may impact the identification of performance obligations and revenue recognition and performed alternative procedures in the event of nonreplies.

◦ Tested management’s identification of the performance obligations within the customer contract, including whether material rights that gave rise to a performance obligation were identified.

◦ Tested management’s estimation of variable consideration in the transaction price by evaluating the reasonableness of the inputs used in management’s estimates.

◦ Tested the accuracy and completeness of the data and factors used in management’s determination of the SSP for each performance obligation.

◦ Evaluated the consistency of the methodologies used to develop the SSP for each performance obligation.

/s/ Deloitte & Touche LLP

61 unchanged sentences

Amortization of intangible assets 1,100 2,061 3,255

Restructuring and impairment charges — 7,957 45,029

Restructuring charges — — 7,957

Gains on product line asset sales and business divestiture ( 1,941 ) — ( 100,139 )

60 unchanged sentences

Non-cash operating lease costs 14,708 15,922 16,102

Impairment loss on operating lease assets — — 28,016

Provision of doubtful accounts 1,475 2,800 652

13 unchanged sentences

Purchases of marketable securities ( 10,623 ) ( 9,963 ) ( 9,039 )

Proceeds from product line asset sales and business divestiture 2,258 147,431 —

Distribution from (purchase of) equity investment — ( 210 ) 55

Proceeds from product line asset sales and business divestiture, net of cash transferred ( 6,126 ) 2,258 147,431

Purchase of equity investment — — ( 210 )

Net cash provided by (used in) investing activities ( 15,954 ) ( 5,671 ) 137,850

3 unchanged sentences

Proceeds from issuance of senior notes — 550,000 —

Payments on senior notes — — ( 85,000 )

Payments on debt issuance costs — ( 8,819 ) ( 1,488 )

13 unchanged sentences

Supplemental disclosures of non-cash investing and financing activities:

Finance lease obligation incurred $ — $ — $ 1,387

Unsettled repurchases of common stock $ 1,821 $ — $ 8,043

9 unchanged sentences

We were founded in 1956 on the premise that data, used intelligently, can improve business decisions.

Today, FICO’s software and the widely used FICO ® Score operationalize analytics, enabling thousands of businesses in nearly 120 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale.

Today, FICO’s software and the widely used FICO ® Score operationalize analytics, enabling thousands of businesses in more than 100 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale.

Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive lenders, consumer reporting agencies, public agencies, and organizations in other industries.

33 unchanged sentences

Investments with remaining maturities over one year are classified as long-term investments.

We have certain other investments for which there is no readily determinable fair value.

These investments are recorded at cost, less impairment (if any) plus or minus adjustments for observable price changes.

The carrying value of these investments was $ 1.1 million and $ 1.3 million at September 30, 2022 and 2021, respectively, and they were reported in other assets on our consolidated balance sheets.

At September 30, 2022, we reviewed the carrying value of these investments and concluded that they were not impaired and as of that date, we were unable to exercise significant influence over the investees.

Concentration of Risk

8 unchanged sentences

Major renewals and improvements are capitalized, while repair and maintenance costs are expensed as incurred.

Assets acquired under capital leases are included in property and equipment with corresponding depreciation included in accumulated depreciation.

Depreciation and amortization charges are calculated using the straight-line method over the following estimated useful lives:

4 unchanged sentences

useful life or lease term

Equipment under finance lease Shorter of estimated

useful life or lease term

The cost and accumulated depreciation for property and equipment sold, retired or otherwise disposed of are removed from the applicable accounts and resulting gains or losses are recorded in our consolidated statements of income and comprehensive income.

Depreciation and amortization on property and equipment totaled $ 10.1 million, $ 15.2 million and $ 20.3 million during fiscal 2023, 2022 and 2021, respectively.

FAIR ISAAC CORPORATION

1 unchanged sentence

Years Ended September 30, 2023, 2022 and 2021

Depreciation and amortization on property and equipment totaled $ 15.2 million, $ 20.3 million and $ 23.5 million during fiscal 2022, 2021 and 2020, respectively.

Internal-Use Software

2 unchanged sentences

Costs of significant upgrades and enhancements that result in additional functionality are also capitalized whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred.

Capitalized costs are amortized using the straight-line method over two to three years .

Capitalized costs are amortized using the straight-line method over three years .

Software development costs required to be capitalized for internal-use software have not been material to date.

15 unchanged sentences

Alternatively, we may bypass the qualitative assessment described above for any reporting unit in any period and proceed directly to performing step one of the goodwill impairment test.

For fiscal 2020, we performed a step zero qualitative analysis for our annual assessment of goodwill impairment.

After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than not that the fair value of any of our reporting units was less their carrying amounts.

Consequently, we did not perform a step one quantitative analysis and determined goodwill was not impaired for any of our reporting units for fiscal 2020.

For fiscal 2021, we consolidated our operating segment structure from three to two by merging our Applications and Decision Management Software segments into the new Software segment.

1 unchanged sentence

There was a substantial excess of fair value over carrying value for the reporting units and we determined goodwill was not impaired for any of our reporting units before or after the change for fiscal 2021.

For fiscal 2022, we performed a step zero qualitative analysis for our annual assessment of goodwill impairment.

After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than not that the fair value of either of our reporting units was less their carrying amounts.

Consequently, we did not perform a step one quantitative analysis and determined goodwill was not impaired for either of our reporting units for fiscal 2022.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

For fiscal 2022 and 2023, we performed a step zero qualitative analysis for our annual assessment of goodwill impairment.

Consequently, we did not perform a step one quantitative analysis and determined goodwill was not impaired for either of our reporting units for fiscal 2022 and 2023.

We amortize our finite-lived intangible assets which result from our acquisitions over the following estimated useful lives:

2 unchanged sentences

Customer contracts and relationships 5 years to 10 years

Trade names 1 year

Non-compete agreements 2 years

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Our intangible assets that have finite useful lives and other long-lived assets are assessed for potential impairment when there is evidence that events and circumstances related to our financial performance and economic environment indicate the carrying amount of the assets may not be recoverable.

5 unchanged sentences

See Note 11 for further discussion on revenues.

Business Combinations

Accounting for our acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition-date fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income and comprehensive income.

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies and contingent consideration, where applicable.

If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, we will recognize an asset or a liability for such pre-acquisition contingency if:

(i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Subsequent to the measurement period, changes in our estimates of such contingencies will affect earnings and could have a material effect on our consolidated results of operations and financial position.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to:

(i) future expected cash flows from software license sales, support agreements, consulting contracts, other customer contracts and acquired developed technologies and patents;

(ii) expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed;

and (iii) the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date.

We reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to our preliminary estimates being recorded to goodwill provided that we are within the measurement period.

Subsequent to the measurement period or our final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our consolidated statements of income and comprehensive income and could have a material impact on our consolidated results of operations and financial position.

We estimate our income taxes based on the various jurisdictions where we conduct business, which involves significant judgment in determining our income tax provision.

14 unchanged sentences

Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.

A description of our accounting policies associated with tax-related contingencies and valuation allowances assumed as part of a business combination is provided under “Business Combinations” above.

Earnings per Share

4 unchanged sentences

Comprehensive income is the change in our equity (net assets) during each period from transactions and other events and circumstances from non-owner sources.

It includes net income, foreign currency translation adjustments and unrealized gains and losses on our investments in marketable securities, net of tax.

It includes net income and foreign currency translation adjustments.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Foreign Currency and Derivative Financial Instruments

4 unchanged sentences

Foreign currency translation adjustments are accumulated as a separate component of consolidated stockholders’ deficit.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

We utilize derivative instruments to manage market risks associated with fluctuations in certain foreign currency exchange rates as they relate to specific balances of accounts receivable and cash denominated in foreign currencies.

3 unchanged sentences

At the end of the reporting period, foreign-currency-denominated assets and liabilities are remeasured into the functional currencies of the reporting entities at current market rates.

The change in value from this remeasurement is reported as a foreign exchange gain or loss for that period in other income, net in the accompanying consolidated statements of income and comprehensive income.

The change in value from this remeasurement is reported as a foreign exchange gain or loss for that period in other income (expense), net in the accompanying consolidated statements of income and comprehensive income.

We recorded transactional foreign exchange gains (losses) of $( 2.6 ) million, $ 1.9 million and $ 0.0 million during fiscal 2023, 2022 and 2021, respectively.

12 unchanged sentences

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.

Early adoption is permitted.

We do not believe that adoption of ASU 2021-08 will have a significant impact on our consolidated financial statements.

The adoption of ASU 2021-08 will not 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.

Business Divestitures

Product Line Asset Sales and Business Divestiture

During fiscal 2023, we sold certain assets related to our Siron compliance business within our Software segment, and recorded a gain of $ 1.9 million.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

During fiscal 2021, we sold our Collections and Recovery (“C&R”) business to Jonas Collections and Recovery Inc.

3 unchanged sentences

The C&R business and the assets sold were part of our Software segment.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Cash, Cash Equivalents and Marketable Securities

26 unchanged sentences

The following tables represent financial assets that we measured at fair value on a recurring basis at September 30, 2023 and 2022:

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

September 30, 2023 Active Markets for

7 unchanged sentences

Total $ 56,635 $ 56,635

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

September 30, 2022 Active Markets for

3 unchanged sentences

Cash equivalents (1)

$ 19,314 $ 19,314

Marketable securities (2)

16 unchanged sentences

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

The following tables summarize our outstanding foreign currency forward contracts, by currency, at September 30, 2023 and 2022:

8 unchanged sentences

Singapore dollar (SGD) SGD 8,569 $ 6,300 —

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

September 30, 2022

9 unchanged sentences

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

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

These amounts are shown below for the years ended September 30, 2022, 2021 and 2020:

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

Year Ended September 30,

15 unchanged sentences

$ 72,706 $ ( 71,789 ) $ 917 5 $ 70,760 $ ( 68,743 ) $ 2,017 5

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Amortization expense associated with our intangible assets is reflected as a separate operating expense caption — amortization of intangible assets — and is excluded from cost of revenues and selling, general and administrative expenses within the accompanying consolidated statements of income and comprehensive income.

5 unchanged sentences

Customer contracts and relationships 600 1,561 2,082

Trade names — — 125

Non-compete agreements — — 146

Total $ 1,100 $ 2,061 $ 3,255

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Year Ending September 30, (In thousands)

Total $ 2,017

At September 30, 2023, estimated future intangible asset amortization expense was $ 0.9 million, which will be recognized in fiscal 2024.

The following table summarizes changes to goodwill during fiscal 2023 and 2022, both in total and as allocated to our segments.

4 unchanged sentences

Foreign currency translation adjustment — ( 27,118 ) ( 27,118 )

C&R business divestiture — ( 25,596 ) ( 25,596 )

Balance at September 30, 2022 146,648 614,419 761,067

16 unchanged sentences

Total $ 59,478 $ 66,248

Revolving Line of Credit and Term Loan

We have a $ 600 million unsecured revolving line of credit with a syndicate of banks that expires on August 19, 2026 .

Borrowings under the credit facility can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock.

Interest on amounts borrowed under the credit facility is based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.500 %, and (c) the one-month LIBOR rate plus 1.000 %, plus, in each case, an applicable margin, or (ii) an adjusted LIBOR rate plus an applicable margin.

The applicable margin for base rate borrowings ranges from 0 % to 0.750 % and for LIBOR borrowings ranges from 1.000 % to 1.750 %, and is determined based on our consolidated leverage ratio.

In addition, we must pay credit facility fees.

The credit facility contains certain restrictive covenants, including a maximum consolidated leverage ratio of 3.50 , subject to a step up to 4.00 following certain permitted acquisitions;

and a minimum interest coverage ratio of 3.00 .

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

FAIR ISAAC CORPORATION

1 unchanged sentence

Years Ended September 30, 2023, 2022 and 2021

On October 20, 2021, we amended our credit agreement to provide for the issuance of a $ 300 million term loan.

The term loan is subject to the same pricing and covenants as the revolving line of credit and matures at the expiration of the facility on August 19, 2026 .

Revolving Line of Credit and Term Loan

We have a $ 600 million unsecured revolving line of credit and a $ 300 million unsecured term loan with a syndicate of banks that mature on August 19, 2026 .

Borrowings under the revolving line of credit and term loan can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock.

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

As of September 30, 2022, we had $ 280.0 million in borrowings outstanding under the revolving credit facility at a weighted-average interest rate of 4.479 % and $ 288.8 million in outstanding balance of the term loan at an interest rate of 4.283 %, of which $ 538.8 million was classified as a long-term liability and recorded in long-term debt within the accompanying consolidated balance sheets.

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

In November 2022, we amended our credit agreement to replace the LIBOR reference rate with the Secured Overnight Financing Rate (“SOFR”) reference rate.

Interest rates on amounts borrowed under the revolving line of credit and term loan are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5 %, and (c) one-month adjusted term SOFR rate plus 1 %, plus, in each case, an applicable margin, or (ii) an adjusted term SOFR rate plus an applicable margin.

The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio.

The applicable margin for base rate borrowings ranges from 0 % to 0.75 % per annum and for SOFR borrowings ranges from 1 % to 1.75 % per annum.

In addition, we must pay certain credit facility fees.

The revolving line of credit and term loan contain certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0.

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

As of September 30, 2023, we had $ 300.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 6.678 %, of which $ 35.0 million was classified as a current liability and $ 265.0 million was classified as a long-term liability.

In addition, as of September 30, 2023, we had $ 273.8 million in outstanding balance under the term loan at an interest rate of 6.752 %, of which $ 15.0 million was classified as a current liability and $ 258.8 million was classified as a long-term liability.

The current and long-term revolving line of credit and term loan liabilities were recorded in current maturities on debt and long-term debt, respectively, within the accompanying consolidated balance sheets.

We were in compliance with all financial covenants under this credit agreement as of September 30, 2023.

Future principal payments for the term loan are as follows:

8 unchanged sentences

The 2021 Senior Notes require interest payments semi-annually at a rate of 4.00 % per annum and will mature on June 15, 2028 , the same date as the 2019 Senior Notes.

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

The indentures for the Senior Notes contain certain covenants typical of unsecured obligations and we were in compliance as of September 30, 2023.

The following table presents the face values and fair values for the Senior Notes at September 30, 2023 and 2022:

6 unchanged sentences

(*) The carrying value of the Senior Notes was the face value reduced by the net debt issuance costs of $ 11.5 million and $ 14.3 million at September 30, 2023 and 2022, respectively.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Future principal payments for the Senior Notes are as follows:

Year Ending September 30, (In thousands)

Thereafter 900,000

Total $ 1,300,000

13 unchanged sentences

Revenue is recognized when control of the promised goods or services is transferred to our customers.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Our on-premises software is primarily sold on a subscription basis, which includes a term-based license and post-contract support or maintenance, both of which generally represent distinct performance obligations and are accounted for separately.

10 unchanged sentences

We estimate the total variable consideration at contract inception — subject to any constraints that may apply — and update the estimates as new information becomes available and recognize the amount ratably over the SaaS service period, unless we determine it is appropriate to allocate the variable amount to each distinct service period and recognize revenue as each distinct service period is performed.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Our professional services include software implementation, consulting, model development and training.

13 unchanged sentences

During fiscal 2021, we sold all assets related to our cyber risk score operations, sold certain assets related to our Software segment to an affiliated joint venture in China, and divested our C&R business.

During fiscal 2023, we sold certain assets related to our Siron compliance business.

The comparability of the data below is impacted as a result of these divestitures.

7 unchanged sentences

Total $ 773,828 $ 739,729 $ 1,513,557 100 %

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Year Ended September 30, 2022

13 unchanged sentences

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Year Ended September 30, Percentage of revenues

12 unchanged sentences

Total on-premises and SaaS software $ 640,182 $ 564,751 $ 517,888 100 % 100 % 100 %

(*) 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.

(*) 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.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

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

6 unchanged sentences

567,339 489,104 458,864 89 % 87 % 89 %

Total on-premises and SaaS software $ 564,751 $ 517,888 $ 584,576 100 % 100 % 100 %

Total on-premises and SaaS

$ 640,182 $ 564,751 $ 517,888 100 % 100 % 100 %

(1) Includes license portion of our on-premises subscription software and perpetual license, both of which are recognized when the software is made available to the customer, or at the start of the subscription.

7 unchanged sentences

Total $ 773,828 $ 706,643 $ 654,147 100 % 100 % 100 %

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

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 %, 38 % and 33 % of our total revenues in fiscal 2022, 2021 and 2020, respectively, with two consumer reporting agencies each contributing more than 10% of our total revenues in fiscal 2022 and 2021, and one contributing more than 10% of our total revenues in fiscal 2020.

Revenues collectively generated by agreements with these customers accounted for 41 %, 39 % and 38 % of our total revenues in fiscal 2023, 2022 and 2021, respectively, with all three consumer reporting agencies each contributing more than 10% of our total revenues in fiscal 2023, and two each contributing more than 10% of our total revenues in fiscal 2022 and 2021.

At September 30, 2023, one individual customer accounted for 10% or more of total consolidated receivables.

At September 30, 2022, no individual customer accounted for 10% or more of total consolidated receivables.

At September 30, 2021, only one individual customer accounted for 10% or more of total consolidated receivables.

Contract Balances

2 unchanged sentences

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Receivables at September 30, 2023 and 2022 consisted of the following:

24 unchanged sentences

Revenue recognized that was included in the deferred revenues balance at the beginning of the period ( 113,341 ) ( 95,286 )

Decrease due to divestiture of the C&R business — ( 16,671 )

Increases due to billings, excluding amounts recognized as revenue during the period 130,016 111,083

1 unchanged sentence

$ 143,235 $ 126,560

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

(*) Deferred revenues at September 30, 2023 included current portion of $ 136.7 million and long-term portion of $ 6.5 million that were recorded in deferred revenue and other liabilities, respectively, within the consolidated balance sheets.

4 unchanged sentences

Examples include multi-year on-premises licenses that are invoiced annually with revenue recognized upfront and invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Performance Obligations

18 unchanged sentences

Adjustments to estimates are made in the period in which the facts requiring such revisions become known and, accordingly, recognized revenues are subject to revisions as the contract progresses to completion.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Capitalized Commission Costs

7 unchanged sentences

These costs are recorded within selling, general, and administrative expenses.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Employee Benefit Plans

7 unchanged sentences

We maintain various employee incentive plans for the benefit of eligible employees, including officers.

The awards generally are based on the achievement of certain financial and performance objectives subject to the discretion of management.

The awards generally are based upon the achievement of certain financial and performance objectives subject to the discretion of management.

For executive officers, such discretion is exercised by the Leadership Development and Compensation Committee of Company’s Board of Directors.

Total expenses under our employee incentive plans were $ 57.8 million, $ 55.7 million and $ 58.1 million during fiscal 2023, 2022 and 2021, respectively.

Restructuring and Impairment Charges

There were no restructuring and impairment charges incurred during fiscal 2022.

Restructuring Charges

There were no restructuring charges incurred during fiscal 2023 or 2022.

During fiscal 2021, we incurred restructuring charges of $ 8.0 million in employee separation costs due to the elimination of 160 positions throughout the Company.

Cash payments for all the employee separation costs were fully paid before the end of our fiscal 2022.

There were no impairment charges incurred during fiscal 2021.

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 disposals 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 those employee separation costs were fully paid before the end of our fiscal 2021.

The following tables summarize our restructuring accruals for employee separation.

At September 30, 2021, the balance was classified as current liabilities and recorded in other accrued liabilities within the accompanying consolidated balance sheets.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Year Ended September 30,

(In thousands)

Restructuring accrual, beginning balance $ 7,856 $ 8,191

Expense additions — 7,956

Cash payments ( 7,856 ) ( 8,291 )

Restructuring accrual, ending balance $ — $ 7,856

Cash payments for all the employee separation costs were fully paid before the end of fiscal 2022.

The provision for income taxes was as follows during fiscal 2023, 2022 and 2021:

24 unchanged sentences

Operating lease liabilities 9,396 13,065

Research and development costs 34,730 —

Other assets 17,327 14,744

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Deferred commission ( 14,017 ) ( 12,419 )

Property and equipment ( 327 ) ( 487 )

Operating lease right-of-use assets ( 6,228 ) ( 8,798 )

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federal NOL is subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended.

We have available an excess California state research credit of approximately $ 16.0 million.

The California state research credit does not have an expiration date;

however, based on enacted law and expected future cash taxes, we have recorded a valuation allowance of $ 16.0 million.

There is approximately $ 0.6 million of foreign tax credit carryforwards.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

We had available an excess California state research credit of approximately $ 9.2 million as of September 30, 2023.

There was approximately $ 2.2 million of foreign tax credit carryforwards as of September 30, 2023.

The excess foreign tax credit can be carried forward for 10 years;

however, based on enacted law and expected future usage, we have recorded a valuation allowance of $ 2.2 million as of September 30, 2023.

A reconciliation of the provision for income taxes, with the amount computed by applying the U.S.

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Recorded income tax provision $ 124,249 $ 97,768 $ 81,058

The increase in our income tax provision in fiscal 2022 compared to fiscal 2021 was due to a decrease in excess tax benefits related to share-based compensation.

The increase in our income tax provision in fiscal 2021 compared to fiscal 2020 was due to an increase in pretax book income, of which a large amount was due to the gain on divestiture of C&R business, as well as a decrease in excess tax benefits related to share-based compensation.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

As of September 30, 2023, we had approximately $ 27.2 million of unremitted earnings of non-U.S.

21 unchanged sentences

Gross unrecognized tax benefits at end of year $ 13,849 $ 12,980 $ 10,897

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

We had $ 13.8 million of total unrecognized tax benefits as of September 30, 2023, including $ 12.7 million of tax benefits that, if recognized, would impact the effective tax rate.

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At September 30, 2023, there were 4,726,001 shares available for issuance as new awards under the 2021 Plan.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Description of Employee Stock Purchase Plan

We maintain the 2019 Employee Stock Purchase Plan (the “2019 Purchase Plan”) under which we are authorized to issue up to 1,000,000 shares of our common stock to eligible employees.

Employees may have up to 15 % of their eligible pay withheld through payroll deductions to purchase FICO common stock during semi-annual offering periods.

Eligible employees may elect to have up to 15 % of their eligible pay withheld through payroll deductions to purchase FICO common stock during semi-annual offering periods.

The purchase price of the stock is 85 % of the closing sales price of FICO common stock on the last trading day of each offering period.

9 unchanged sentences

In fiscal 2023 we received $ 8.1 million in cash from stock option exercises, with the tax benefit realized for the tax deductions from these exercises of $ 4.0 million.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Share-Based Activity

Stock Options

We estimate the fair value of stock options granted using the Black-Scholes option valuation model and we amortize the fair value on a straight-line basis over the vesting period.

We used the following assumptions to estimate the fair value of our stock options during fiscal 2022, 2021 and 2020:

Year Ended September 30,

2022 2021 2020

Stock Options:

Weighted-average expected term (years) 4.43 4.47 4.46

Expected volatility (range) 32.9 - 34.1 % 33.6 - 34.4 % 30.0 - 35.9 %

Weighted-average volatility 33.2 % 33.9 % 30.6 %

Risk-free interest rate (range) 1.18 - 2.85 % 0.29 - 0.73 % 0.36 - 1.68 %

Weighted-average expected dividend yield — % — % — %

Expected Term.

The expected term represents the period that our stock options are expected to be outstanding.

We estimate the expected term based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards, vesting schedules and expectations of future employee behavior.

Expected Volatility.

We estimate the volatility of our common stock at the date of grant based on a combination of the implied volatility of publicly traded options on our common stock and our historical volatility rate.

Risk-Free Interest Rate.

The risk-free interest rate assumption is based on observed interest rates appropriate for the term of our employee options.

We have not declared or paid any cash dividends on our common stock since May 2017, and we do not presently plan to pay cash dividends on our common stock in the foreseeable future.

Consequently, we used an expected dividend yield of zero in the years presented.

We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.

The following table summarizes option activity during fiscal 2022:

Shares Weighted-

Price Weighted-

Term Aggregate

Intrinsic Value

(In thousands) (In years) (In thousands)

Outstanding at September 30, 2021 226 $ 205.90

Granted 23 451.70

Exercised ( 36 ) 87.84

Forfeited ( 4 ) 523.43

Outstanding at September 30, 2022 209 $ 247.56 3.28 $ 36,373

Exercisable at September 30, 2022 159 $ 214.74 2.82 $ 32,118

Vested or expected to vest at September 30, 2022 207 $ 246.35 3.27 $ 36,344

The weighted-average fair value of options granted was $ 134.91 , $ 139.11 and $ 99.30 during fiscal 2022, 2021 and 2020, respectively.

The aggregate intrinsic value of options outstanding at September 30, 2022 was calculated as the difference between the exercise price of the underlying options and the market price of our common stock for the 180,000 outstanding options that had exercise prices lower than the $ 412.01 market price of our common stock at September 30, 2022.

The total intrinsic value of options exercised was $ 14.5 million, $ 15.8 million and $ 132.6 million during fiscal 2022, 2021 and 2020, respectively, determined as of the date of exercise.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Restricted Stock Units

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We reassess the probability at each reporting period and recognize the cumulative effect of the change in estimate in the period of change.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

The following table summarizes the PSUs activity during fiscal 2023:

8 unchanged sentences

The total intrinsic value of the PSUs that vested was $ 40.3 million, $ 25.9 million and $ 34.7 million during fiscal 2023, 2022 and 2021, respectively, determined as of the date of vesting.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Market Share Units

25 unchanged sentences

Outstanding at September 30, 2023 87 $ 844.24

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

The weighted-average fair value of the MSUs granted was $ 822.96 , $ 493.66 and $ 471.16 during fiscal 2023, 2022 and 2021, respectively.

The total intrinsic value of the MSUs that vested was $ 42.2 million, $ 7.8 million and $ 34.5 million during fiscal 2023, 2022 and 2021, respectively, determined as of the date of vesting.

Employee Stock Purchase Plan

The compensation expense on the employee stock purchase plan arises from the 15 % discount offered to participants.

During fiscal 2022, a total of 32,528 shares of our common stock with a weighted-average purchase price of $ 393.95 per share were issued under the 2019 Purchase Plan.

During fiscal 2021, a total of 42,402 shares of our common stock with a weighted-average purchase price of $ 389.61 per share were issued under the 2019 Purchase Plan.

Stock Options

We estimate the fair value of stock options granted using the Black-Scholes option valuation model and we amortize the fair value on a straight-line basis over the vesting period.

We used the following assumptions to estimate the fair value of our stock options during fiscal 2023, 2022 and 2021:

Year Ended September 30,

2023 2022 2021

Stock Options:

Weighted-average expected term (years) 5.23 4.43 4.47

Expected volatility (range) 33.4 - 35.5 % 32.9 - 34.1 % 33.6 - 34.4 %

Weighted-average volatility 33.5 % 33.2 % 33.9 %

Risk-free interest rate (range) 3.40 - 4.49 % 1.18 - 2.85 % 0.29 - 0.73 %

Weighted-average expected dividend yield — % — % — %

Expected Term.

The expected term represents the period that our stock options are expected to be outstanding.

Expected Volatility.

We estimate the volatility of our common stock at the date of grant based on a combination of the implied volatility of publicly traded options on our common stock and our historical volatility rate.

Risk-Free Interest Rate.

The risk-free interest rate assumption is based on observed interest rates appropriate for the term of our employee options.

We have not declared or paid any cash dividends on our common stock since May 2017, and we do not presently plan to pay cash dividends on our common stock in the foreseeable future.

Consequently, we used an expected dividend yield of zero in the years presented.

We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.

The following table summarizes option activity during fiscal 2023:

Shares Weighted-

Price Weighted-

Term Aggregate

Intrinsic Value

(In thousands) (In years) (In thousands)

Outstanding at September 30, 2022 209 $ 247.56

Granted 58 779.98

Exercised ( 38 ) 214.00

Forfeited ( 2 ) 390.14

Outstanding at September 30, 2023 227 $ 387.95 3.55 $ 109,242

Exercisable at September 30, 2023 153 $ 236.84 2.30 $ 96,648

Vested or expected to vest at September 30, 2023 221 $ 377.24 3.46 $ 108,544

FAIR ISAAC CORPORATION

1 unchanged sentence

Years Ended September 30, 2023, 2022 and 2021

The weighted-average fair value of options granted was $ 289.54 , $ 134.91 and $ 139.11 during fiscal 2023, 2022 and 2021, respectively.

The aggregate intrinsic value of options outstanding at September 30, 2023 was calculated as the difference between the exercise price of the underlying options and the market price of our common stock for the 227,000 outstanding options that had exercise prices lower than the $ 868.53 market price of our common stock at September 30, 2023.

The total intrinsic value of options exercised was $ 16.7 million, $ 14.5 million and $ 15.8 million during fiscal 2023, 2022 and 2021, respectively, determined as of the date of exercise.

Employee Stock Purchase Plan

The compensation expense on the 2019 Purchase Plan arises from the 15 % discount offered to participants.

A total of 21,876 , 32,528 , and 42,402 shares of our common stock were issued under the 2019 Purchase Plan during fiscal 2023, 2022 and 2021, respectively.

The weighted-average purchase price was $ 646.37 , $ 393.95 , and $ 389.61 per share for fiscal 2023, 2022 and 2021 , respectively.

Earnings per Share

12 unchanged sentences

Diluted $ 16.93 $ 14.18 $ 13.40

The computation of diluted EPS excludes options to purchase approximately 32,000 , 12,000 , and 10,000 shares of common stock for fiscal 2022, 2021 and 2020, respectively, because the exercise prices of the options exceeded the average market price of our common stock in these fiscal years and their inclusion would be antidilutive.

The computation of diluted EPS excluded options to purchase approximately 14,000 , 32,000 , and 12,000 shares of common stock for fiscal 2023, 2022 and 2021, respectively, because the exercise prices of the options exceeded the average market price of our common stock in these fiscal years and their inclusion would be antidilutive.

Segment Information

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This segment also includes our business-to-consumer (“B2C”) scoring solutions, including our myFICO.com subscription offerings.

This segment includes pre-configured analytic and decision management solutions designed for a specific type of business need or process — such as account origination, customer management, customer engagement, fraud detection, financial crimes compliance, and marketing — as well as associated professional services.

This segment includes pre-configured analytic and decision management solutions designed for a specific type of business need or process — such as account origination, customer management, customer engagement, fraud detection, and marketing — as well as associated professional services.

This segment also includes FICO ® Platform, a modular software offering designed to support advanced analytic and decision use cases, as well as stand-alone analytic and decisioning software that can be configured by our customers to address a wide variety of business use cases.

These offerings are available to our customers as SaaS or as on-premises software.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Our chief operating decision maker (“CODM”), who is our Chief Executive Officer, evaluates segment financial performance based on segment revenues and segment operating income.

5 unchanged sentences

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

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

We have recast certain prior period amounts within this note to conform to the way we internally managed and monitored segment performance during the current fiscal year, reflecting immaterial movements of business activities between segments and changes in cost allocations.

The following tables summarize segment information for fiscal 2023, 2022 and 2021:

12 unchanged sentences

Unallocated amortization expense ( 1,100 )

Unallocated gain on product line asset sale 1,941

Operating income 642,830

Unallocated interest expense, net ( 95,546 )

Unallocated other expense, net ( 2,138 )

Unallocated other income, net 6,340

Income before income taxes $ 553,624

Depreciation expense $ 485 $ 9,550 $ 71 $ 10,106

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

Year Ended September 30, 2022

11 unchanged sentences

Unallocated amortization expense ( 2,061 )

Unallocated restructuring and impairment charges ( 7,957 )

Unallocated gains on product line asset sales and business divestiture 100,139

Operating income 542,414

Unallocated interest expense, net ( 68,967 )

Unallocated other income, net 7,745

Unallocated other expense, net ( 2,138 )

Income before income taxes $ 471,309

Depreciation expense $ 723 $ 14,412 $ 107 $ 15,242

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

Year Ended September 30, 2021

11 unchanged sentences

Unallocated amortization expense ( 3,255 )

Unallocated restructuring and impairment charges ( 45,029 )

Unallocated restructuring charges ( 7,957 )

Unallocated gains on product line asset sales and business divestiture 100,139

Operating income 505,489

3 unchanged sentences

Depreciation expense $ 667 $ 19,505 $ 147 $ 20,319

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2023, 2022 and 2021

We lease office space and data centers under operating lease arrangements, which constitute the majority of our lease obligations.

We also enter into finance lease agreements from time to time for certain computer equipment.

For any lease with a lease term in excess of 12 months, the related lease assets and liabilities are recognized on our consolidated balance sheets as either operating or finance leases at the commencement of an agreement where it is determined that a lease exists.

For any lease with a lease term in excess of 12 months, the related lease assets and liabilities are recognized on our consolidated balance sheets as operating leases at the commencement of an agreement where it is determined that a lease exists.

We have lease agreements that contain both lease and non-lease components, and we have elected to combine these components together and account for them as a single lease component for all classes of assets.

12 unchanged sentences

We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

FAIR ISAAC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2022, 2021 and 2020

The following table presents the lease balances within the accompanying consolidated balance sheets as of September 30, 2023 and 2022:

5 unchanged sentences

Total lease liabilities $ 40,239 $ 58,561

The components of our operating and finance lease expenses were as follows:

The components of our operating lease expenses were as follows:

Year Ended September 30,

2 unchanged sentences

Operating lease cost $ 16,594 $ 18,426 $ 19,551

Finance lease cost:

Depreciation of lease assets — 175 2,078

Interest on lease liabilities — 11 186

Short-term lease cost 461 201 85

Variable lease cost 2,363 2,091 1,190

Sublease income ( 429 ) — —

Total lease cost $ 18,989 $ 20,718 $ 20,826

The following table presents weighted-average remaining lease term and weighted-average discount rates related to our operating leases:

September 30,

Weighted-average remaining lease term (in months) 47 53

Weighted-average discount rate 4.01 % 3.64 %

FAIR ISAAC CORPORATION

1 unchanged sentence

Years Ended September 30, 2023, 2022 and 2021

Supplemental cash flow information related to our operating and finance leases was as follows:

September 30,

Weighted-average remaining lease term (in months) 35 47

Weighted-average discount rate 4.58 % 4.01 %

Supplemental cash flow information related to our operating leases was as follows:

Year Ended September 30,

2 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities $ 19,780 $ 22,021 $ 23,260

Operating cash outflow for operating leases $ 22,021 $ 23,260 $ 18,801

Operating cash outflow for finance leases — 11 186

Financing cash outflow for finance leases — 176 1,716

Lease assets obtained in exchange for new lease liabilities 4,150 7,505 5,413

Operating leases 7,505 5,413 11,457

Finance leases — — 1,387

Future lease payments under our non-cancellable operating leases as of September 30, 2023 were as follows:

9 unchanged sentences

Total reported lease liability $ 40,239

The amounts above do not include contractual sublease income totaling $ 1.1 million, $ 0.5 million, $ 0.4 million, and $ 0.2 million during fiscal 2024, 2025, 2026, and 2027, respectively.

In the ordinary course of business, we enter into contractual purchase obligations and other agreements that are legally binding and specify certain minimum payment terms.

5 unchanged sentences

We record litigation accruals for legal matters which are both probable and estimable.

For legal proceedings for which there is a reasonable possibility of loss (meaning those losses for which the likelihood is more than remote but less than probable), we have determined we do not have material exposure on an aggregate basis.

In the ordinary course of business, we are not subject to potential obligations under guarantees , except for standard indemnification and warranty provisions that are contained within many of our customer license and service agreements and certain supplier agreements, including underwriter agreements, as well as standard indemnification agreements that we have executed with certain of our officers and directors, and give rise only to the disclosure in the consolidated financial statements.

In addition, we continue to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it

FAIR ISAAC CORPORATION

1 unchanged sentence

Years Ended September 30, 2023, 2022 and 2021

is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.

In addition, we continue to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.

Indemnification and warranty provisions contained within our customer license and service agreements and certain supplier agreements are generally consistent with those prevalent in our industry.

6 unchanged sentences

The maximum potential amount of future payments that we could be required to make under the indemnification provisions in our customer license and service agreements, and officer and director agreements is unlimited.

Subsequent Event

In October 2022, our Board of Directors approved a new stock repurchase program replacing the previous stock repurchase program.

The new program is open-ended and authorizes repurchases of shares of our common stock up to an aggregate cost of $ 500.0 million in the open market or in negotiated transactions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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 8. Financial Statements and Supplementary Data