FICO — Fair Isaac Corporation

FICO Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenues: $674 million, up 26% year-over-year.
• GAAP Net Income: $237 million, up 30%, with GAAP EPS of $10.45, up 41%.
• Non-GAAP Net Income: $277 million, up 31%, with non-GAAP EPS of $12.18, up 42%.
• Free Cash Flow: $370 million for Q3; $961 million over the last four quarters, a 28% increase.
• Share Repurchases: $1.96 billion spent on buybacks, exceeding historical records.
• Scores Segment Revenue: $459 million, up 41%, driven by B2B Scores growth.
• Software Segment Revenue: $215 million, up 2%, with platform revenue growing 66% but non-platform revenue declining 25%.

2. Strategic Updates and Business Highlights

• FICO Score 10T: Released data sets for GSEs, showing a predictive advantage over Vantage 4, with significant adoption interest from lenders.
• UltraFICO Score: General availability announced, targeting subprime and near-prime consumers, showing positive initial results.
• Direct Licensing Program (DLP): Under review by GSEs, with strong lender interest and agreements covering 60% of mortgage volume.
• AI Adoption: Accelerating among clients, with FICO Platform positioned as a leading AI decisioning tool.
• Partnership with Accenture: Expanded collaboration to enhance market reach and customer solutions.

3. Forward Guidance and Outlook

• Fiscal 2026 Guidance: Revenue raised to $2.53 billion (20% increase), GAAP net income of $850 million (30% increase), and non-GAAP net income of $979 million (33% increase).
• Operating Expenses: Expected to increase slightly in Q4 due to marketing and restructuring charges.

4. Bad News, Challenges, or Points of Concern

• Mortgage Market Pressures: Elevated interest rates and affordability challenges continue to impact loan originations, keeping them below historical norms.
• Software Segment Dynamics: Non-platform revenues declined significantly, raising concerns about the sustainability of legacy products.
• Competitive Pressures: VantageScore gaining traction in the mortgage market, leading to potential "gaming" behavior among lenders, where they may choose scores based on favorable outcomes.

5. Notable Q&A Insights

• DLP Program: Certification from GSEs is pending, with lenders eager for the performance model.
• VantageScore Impact: Lenders are pulling both FICO and VantageScores, indicating a gaming environment where both scores are used to maximize consumer benefits.
• Mortgage Origination Revenue: Growth has decelerated due to a slowdown in the mortgage market, with expectations for continued low single-digit growth.
• Platform Growth: Continued migration from non-platform to platform products is expected, contributing to divergence in revenue growth between the two segments.
• Future Pricing Strategies: Discussions around potential pricing adjustments for FICO scores, particularly in light of competitive pressures from VantageScore.

This summary encapsulates the key points from FICO's Q3 2026 earnings call, highlighting financial performance, strategic initiatives, and challenges faced by the company.