Fair Isaac's 3Q Profits Decline

The credit-rating service and credit-analysis software supplier said revenue was up about 6% but net income was down almost 4%.
Fair Isaac Corp., the credit-rating service and credit-analysis software supplier, reported $28.8 million net income or 39 cents a share in its third quarter ended June 30, a decline from $30 million or 40 cents per share a year ago.

"After 19 consecutive quarters of hitting our projected earnings, we missed one," CEO Tom Grudnowski said Wednesday during a conference call. Until a July 13 revision, the company had projected third-quarter earnings at 40 to 43 cents per share.

Revenue for the quarter increased 6% to $173.2 million, up from $163.0 million a year ago.

Grudnowski said the third quarter was market by an unusually high number of large software deals, 13, that did not close as expected in the quarter. "We haven't lost any that we know of," he noted. It did close 16 deals worth more than $1 million each, with five of them worth more than $3 million, he said.

The company said its fourth quarter would see greater revenue flow stemming from its acquisition of London Bridge Software Holdings plc, a London-based supplier of analytical software for collections and bad debt recovery. Fair Isaac said on April 26 that it would acquire the company for $299 million.

The company's board of directors said it has approved a $200 million stock repurchase program over the next year, amounting to 7.5 million shares at current prices. Fair Isaac has 73.1 million diluted shares outstanding. The stock closed on Wednesday at $26.85.

Grudnowski said even with the buyback, Fair Isaac would remain in a position to do additional "medium-sized acquisitions." It purchased HNC Software of San Diego, a supplier of neural network-based, pattern analyzing systems, 18 months ago. Fair Isaac has added pattern-matching capabilities to its Payment Optimizer system used by health-care insurers to look for fraudulent claim submissions. "Fraud remains a big growth driver" of Fair Isaac software sales to credit-card and insurance companies, Grudnowski said.

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