A month has gone by since the last earnings report for Fair Isaac (FICO). Shares have added about 1.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Fair Isaac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fair Isaac Q1 Earnings Miss Estimates, Revenues Increase

Fair Isaac reported first-quarter fiscal 2025 earnings of $5.79 per share, which missed the Zacks Consensus Estimate by 6.76% but rose 20.4% year over year.

Revenues of $440 million increased 15.2% on a year-over-year basis but lagged the consensus mark by 3.25%. The Americas, EMEA and Asia Pacific contributed 87%, 8% and 5% to total revenues, respectively.

FICO’s Top-Line Details

Software revenues, which include Fair Isaac’s analytics and digital decisioning technology, as well as associated professional services, increased 8% year over year to $204.3 million. 

Software Annual Recurring Revenues (ARR) increased 6% year over year, consisting of 20% platform ARR growth and 1% growth in non-platform. Software Dollar-Based Net Retention Rate was 105% in the fiscal first quarter, with platform software at 112% and non-platform software at 100%.

On-premises and SaaS Software (42.3% of revenues) increased 10.3% year over year to $186 million. Professional services (4.2% of revenues) were $18.3 million, down 14.1% year over year. 

Scores (53.6% of revenues) increased 22.7% year over year to $235.7 million. Scores include FICO’s business-to-business (B2B) scoring solutions and business-to-consumer (B2C) scoring solutions.

B2B revenues increased 30% year over year, driven primarily by higher unit prices and an increase in the volume of mortgage originations. B2C revenues increased 3% year over year due to increased revenues from indirect channel partners.

Mortgage originations revenues surged 110% year over year. It accounted for 44% of B2B revenues and 34% of total scores revenues. Auto originations revenues increased 5% year over year. Credit card and personal loan revenues declined 3% year over year.

In the first quarter of fiscal 2025, FICO experienced continued customer adoption, particularly for FICO Score 10 T in mortgage origination. The company also signed new customers and increased adoption from existing ones, enhancing its leadership in the mortgage industry.

FICO’s Operating Details

Research & development expenses, as a percentage of revenues, contracted 90 basis points (bps) on a year-over-year basis to 10.3%.

Selling, general and administrative expenses, as a percentage of revenues, increased 180 bps year over year to 29.1%.

Operating margin was 40.8% in the reported quarter, expanding 120 bps year over year.

FICO’s Balance Sheet & Cash Flow

As of Dec. 31, 2024, FICO had $184 million in cash and cash equivalents, and total debt was $2.4 billion. In comparison, as of Sept. 30, 2024, FICO had $151 million in cash and cash equivalents and total debt of $2.2 billion.

Cash flow from operations was $194 million in the fiscal first quarter compared with $226.4 million in the previous quarter. Free cash flow was $187 million compared with $219.4 million reported in the prior quarter.

In the fiscal first quarter, FICO repurchased 79K shares.

FICO Initiated Fiscal 2025 Guidance

For fiscal 2025, FICO anticipates revenues of $1.98 billion.

Non-GAAP earnings are projected to be $28.58 per share.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Fair Isaac has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Fair Isaac has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Fair Isaac Corporation (FICO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research