Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Wednesday, January 28, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — William J. Lansing
  • Chief Financial Officer — Steven P. Weber
  • Vice President, Investor Relations — Dave Singleton

Need a quote from a Motley Fool analyst? Email [email protected]

TAKEAWAYS

  • Total Revenue -- $512 million, increasing 16% year over year, reflecting robust double-digit topline growth.
  • GAAP Net Income -- $158 million, up 4%, with GAAP earnings per share at $6.61, up 8% from the prior year.
  • Non-GAAP Net Income -- $176 million, up 22%, and non-GAAP earnings per share of $7.33, up 27% over prior year.
  • Free Cash Flow -- $165 million for the quarter; trailing four quarters’ free cash flow total $718 million, a year-over-year growth of 7%.
  • Share Repurchases -- 95,000 shares bought back at average price of $1,707 per share in Q1, totaling $163 million.
  • Scores Segment Revenue -- $305 million, representing 29% year-over-year growth, led primarily by business-to-business (B2B) scores.
  • Mortgage Originations Revenue -- Up 60%, accounting for 51% of B2B revenue and 42% of total scores revenue.
  • B2B Scores Revenue -- Grew 36%, driven by higher mortgage origination volumes and pricing; B2C scores increased 5%, mainly through indirect partners.
  • Auto Originations Revenue -- Rose 21%, with credit card, personal loan, and other origination revenues up 10% versus prior year.
  • Software Segment Revenue -- $207 million, a 2% increase over prior year; platform revenue up 37%, while non-platform revenue declined 13%.
  • SaaS Revenue (Software Segment) -- Up 12%, counterbalanced by a 12% decline in on-premises software revenue, primarily related to lower point-in-time revenues.
  • Software ACV Bookings -- Record $38 million for the quarter, bolstered by a large international multi-use case platform deal; trailing twelve-month ACV bookings rose 36% to $119 million.
  • Total Software ARR -- $766 million, up 5%, with platform ARR at $303 million (40% of total), a 33% year-over-year increase; non-platform ARR declined 8% to $463 million.
  • Platform Customer Adoption -- Over 150 customers using FICO platform; more than half of those customers leverage the platform for multiple use cases.
  • Net Retention Rate (NRR) -- Dollar-based NRR at 103% for the quarter; platform NRR 122% and non-platform NRR 91%.
  • Operating Expenses -- $278 million in Q1, in line with prior quarter when excluding a $10.9 million restructuring charge; 4% sequential growth driven by personnel costs.
  • Non-GAAP Operating Margin -- 54%, expanding by 432 basis points over the prior year.
  • Effective Tax Rate -- 17.5% for the quarter; operating tax rate 25.7% due to $15.7 million excess tax benefit on employee stock awards.
  • Capital Structure -- $218 million in cash and marketable investments; $3.2 billion total debt with 5.22% weighted average interest rate and 87% in senior notes.
  • Regional Revenue Mix -- 88% Americas, 8% EMEA, and 4% Asia Pacific.
  • FICO Mortgage Direct Licensing Program -- Five reseller partners now under contract, collectively representing an estimated 70%-80% of the reseller market.
  • FICO Score 10 T Adoption -- Nearly doubled adopter lenders in the last year, representing over $377 billion in annual originations and more than $1.6 trillion in eligible servicing volume.
  • UltraFICO and Plaid Partnership -- Strategic partnership announced to deliver the next generation UltraFICO Score, leveraging Plaid’s real-time cash flow data, launching in 2026.
  • FICO Score Mortgage Simulator -- Now adopted by five resellers, enabling simulation of FICO score changes for mortgage professionals.
  • Gartner Magic Quadrant Recognition -- FICO named leader for decision intelligence platforms, with highest placement for “ability to execute.”
  • Guidance -- Fiscal year 2026 guidance reiterated despite management stating confidence in surpassing targets.

SUMMARY

Fair Isaac (FICO 1.25%) reported substantial year-over-year revenue and profit growth, with leading performance from both the Scores and Software segments. Management highlighted accelerated adoption of flagship products, including FICO Score 10 T and the FICO Platform, and positioned recent large enterprise software deals and reseller partnerships as drivers for sustained ARR expansion. While FICO reiterated its annual outlook despite market uncertainty, both CEO and CFO noted confidence in outperforming current guidance and referenced volume-driven upside potential dependent on evolving macro conditions.

  • The FICO Mortgage Direct Licensing Program's contracted resellers now cover the majority of the reseller channel by origination volume.
  • Expanded platform use cases and customer migration are leading to platform ARR comprising 40% of total software ARR, signaling a continued business mix shift.
  • Executive commentary clarified that the launch and timing of FICO Score 10 T and new LLPA grids remain subject to regulatory and agency testing, with no firm schedule established.
  • The partnership with Plaid is expected to provide real-time data augmentation to credit scores and expand distribution capabilities in 2026.
  • Management described increasing strategic focus on extending software vertical reach beyond financial services through horizontal platform capabilities and partner channels.
  • No material operational or integration barriers were cited for the reseller program rollout, with implementation progressing as expected and a staggered but timely go-live anticipated.
  • Platform ACV bookings reached a record level, and management indicated that average deal size and frequency are rising alongside growing pipeline momentum for FY 2026.
  • Management emphasized platform NRR of 122% as evidence of effective “land and expand” customer strategy, driven both by migration and broadened use case adoption.
  • Residually, management noted that fiscal year 2026 revenue guidance factors in lower expected point-in-time license renewals and is more influenced by volume than by pricing, which is considered well understood.

INDUSTRY GLOSSARY

  • ACV (Annual Contract Value): The annualized value of all active recurring customer contracts booked in a specified period, excluding one-time fees.
  • ARR (Annual Recurring Revenue): The annualized value of recurring subscription revenues recognized from active contracts at a point in time.
  • B2B/B2C Scores: Revenues generated from business-to-business clients (lenders, resellers) versus direct-to-consumer offerings (such as myFICO.com subscriptions).
  • CCS Business: FICO’s Customer Communications Services business within the Software segment.
  • Direct License Program: Distribution model enabling resellers to license FICO scores directly from FICO, rather than via third-party credit bureaus, improving transparency and reducing costs/breakage fees.
  • FICO Platform: FICO’s modular, cloud-based software environment enabling enterprise customers to build, deploy, and manage advanced decision analytics across multiple business processes.
  • FICO Score 10 T: Latest generation FICO credit score, incorporating trended data for improved prediction of consumer credit risk.
  • LLPA (Loan Level Price Adjustment): Upfront risk-based pricing adjustments charged by mortgage agencies, dependent on borrower credit characteristics.
  • NRR (Net Retention Rate): A metric capturing net revenue expansion or contraction from existing customers, including upsells, downgrades, and churn.
  • Platform/Non-Platform Revenue or ARR: Platform refers to next-generation, cloud-based software; non-platform refers to legacy or on-premise applications still in use by customers.
  • Point-in-Time Revenue: License revenue recognized at contract signing or software delivery, not on a recurring basis.
  • SaaS (Software as a Service): Cloud-based, subscription delivery model for software solutions.
  • Tri-merge/Bi-merge: Mortgage industry terms referencing the use of three (tri-merge) or two (bi-merge) credit bureau reports for underwriting decisions.

Full Conference Call Transcript

Dave Singleton: Good afternoon, and thank you for attending FICO's first quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations. I'm joined today by our CEO, William J. Lansing, and our CFO, Steven P. Weber. Today, we issued a press release that describes financial results compared to the prior year. On this call, management will also discuss results in comparison to the prior quarter, to facilitate an understanding of the run rate of the business. Certain statements made in this presentation are forward-looking, under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially.

Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICO website, or from our Investor Relations team. This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release and Regulation G schedule issued today for reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G schedule are available on the Investor Relations page of the company's website at fico.com or on the SEC's website at sec.gov.

A replay of this webcast will be available through January 28, 2027. We have refreshed our quarterly investor presentation with additional content, which is available in the Investor Relations section of our website. We will refer to this presentation during today's earnings announcement. I will now turn the call over to our CEO, William J. Lansing.

William J. Lansing: Thanks, Dave, and thank you, everyone, for joining us for our first quarter earnings call. We had another strong quarter and are reiterating our fiscal 2026 guidance. We reported Q1 revenues of $512 million, up 16% over last year, as you can see on Page five of our investor presentation. For the quarter, we reported $158 million in GAAP net income, up 4%, and GAAP earnings of $6.61 per share, up 8% from the prior year. We reported $176 million in non-GAAP net income, up 22%, and non-GAAP earnings of $7.33 per share, up 27% from the prior year. We delivered free cash flow of $165 million in our first quarter.

Over the last four quarters, we delivered $718 million in free cash flow, an increase of 7% year over year. We continue to return capital to our shareholders through buybacks by repurchasing 95,000 shares in Q1 at an average price of $1,707 per share. At the segment level, on Page six, you can see our first quarter SCORED segment revenues were $305 million, up 29% versus the prior year. While B2B scores were the key driver of growth, we also saw continued growth in B2C scores. In our software segment, we delivered $207 million in Q1 revenues, up 2% over last year. Results included 37% platform revenue growth and a 13% decline in non-platform revenue.

Steve will provide additional revenue details later in the call. We had another strong execution quarter in our scores business, which we highlight on page eight. The FICO mortgage direct licensing program allows resellers the ability to streamline score access, enhance price transparency, and provide cost savings to lenders to reduce breakage fees. This quarter, we announced the addition of four new strategic resellers to the FICO Mortgage Direct Licensing program: Zaktis, Kotality, Ascend Companies, and CIC Credit. Additionally, we signed a DLP agreement to add another participant, MeridianLink, a key platform provider to the mortgage industry. We'll be releasing a press release on that soon. With strong demand from lenders, FICO is actively working alongside participants to support testing.

One large reseller is close to completing production integration testing. Another large reseller has completed that testing and is now testing system integration downstream. While we expect to go live soon with multiple partners, we also continue to work on finalizing agreements with additional reseller participants. The direct license program currently supports classic FICO. The conforming market is anticipating the general availability of FICO Score 10 T. We expect FICO Score 10 T to be available for direct licensing in both conforming and nonconforming in 2026. A high-level overview of the direct license program and FICO Score 10 T can be found on pages nine and ten of our presentation.

FICO Score 10 T is a meaningful step forward in credit risk assessment. FICO Score 10 T offers significant improvements in predictive accuracy, combined with a focus on fairness and model stability, offering tremendous benefits for lenders, investors, and borrowers compared to other alternatives on the market. In the last year, we have nearly doubled the number of lenders in our FICO Score 10 T adopter program. These lenders account for more than $377 billion in annual originations and more than $1.6 trillion in eligible servicing volume, most making multiyear commitments to use FICO Score for mortgage decisions in both the conforming and nonconforming markets.

This quarter, we also announced a strategic partnership with Plaid to deliver the next generation of UltraFICO Score. The score combines the proven reliability of the FICO Score with real-time cash flow data from Plaid to provide lenders with a single enhanced credit score that delivers superior consumer risk assessment without operational complexity. The enhanced UltraFICO Score solution is credit bureau agnostic and will leverage cash flow data, historical and current information about the money flowing into and out of a consumer's transaction accounts, that's checking, savings, money market, accessed through Plaid's Open Finance network of consumer-permissioned data.

Plaid powers nearly 1 million secure financial connections each day and has helped more than half of Americans with a bank account securely move more of their financial life online. We see growing demand for the score, which will launch for distribution with Plaid in 2026. Within the quarter, we continued to expand adoption of FICO Score Mortgage Simulator by partnering with Sharper Lending Solutions, Credit Interlink, and Ascend Partners. Including Zaktis and MeridianLink announced in fiscal 2025, five resellers have adopted the simulator, and we're expecting another large reseller to sign shortly. The FICO Score Mortgage Simulator is the only simulation tool available to mortgage professionals that use the FICO Score algorithm.

It enables mortgage professionals to run credit event scenarios by applying mock changes in an applicant's credit report data to simulate potential changes to the applicant's FICO Score. The FICO Score Mortgage Simulator supports simulations on all three credit bureaus and models potential changes to several FICO Score versions used in mortgage lending. More mortgage professionals can leverage valuable insight from the simulator to help drive smarter decisions that can present more loan options and favorable interest rates for customers. In our software business, we're thrilled to be recognized by Gartner as a leader in the January 2026 Gartner Magic Quadrant for decision intelligence platforms. We are positioned the highest for our ability to execute.

We believe this recognition is a landmark moment for FICO. Further, we feel it reflects our commitments to empowering customers and delivering lasting impact worldwide. As a market leader in decision intelligence, FICO enables businesses to make real-time decisions at scale. The core of our strategy is to empower customers with always-on real-time customer insights that deliver connected decisions and continuous learning throughout the entire customer life cycle. Our innovations will be on display at FICO World 2026, which is going to happen May 22 in Orlando, Florida. FICO World brings together customers and partners from around the world, allowing participants to collaborate on how FICO platform makes real-time decisions at scale and optimize interactions with consumers.

At FICO, we're obsessed with powering consumer connections and delivering always-on personalized experiences to drive outsized business outcomes. At FICO World 2026, you can network with the world's leading experts to learn how you can power your organization, apply best practices, and advance platform decisioning, and drive financial inclusion. I'm going to now hand it over to Steve to provide further financial details.

Steven P. Weber: Thanks, and good afternoon, everyone. As Will mentioned, our SCORE segment revenues for the quarter were $305 million, up 29% from the prior year. As shown on page 13 of our presentation, B2B revenues were up 36%, primarily attributable to higher mortgage origination scores, unit price, and an increase in volume in mortgage originations. Our B2C revenues were up 5% from the prior year, driven mainly by our indirect channel partners. First-quarter mortgage originations revenues were up 60% versus the prior year. Mortgage originations revenues accounted for 51% of B2B revenue and 42% of total scores revenue. Auto originations revenues were up 21%, while credit card, personal loan, and other originations revenues were up 10% from the prior year.

For your reference, page 14 of our presentation provides five-quarter trending on all of our scores metrics. Turning to our software segment, our software ACV bookings for the quarter were a record $38 million, as shown on Page 15 of the presentation. This quarter included an above-average size international multi-use case platform deal. On a trailing twelve-month basis, ACV bookings reached $119 million this quarter, an increase of 36% from the same period last year. Our strong bookings in recent quarters give us increased confidence that our ARR growth will continue to accelerate in FY '26. Our total software ARR, shown on page 16, was $766 million, a 5% increase over the prior year.

Platform ARR was $303 million, representing 40% of our total Q1 2026 ARR. Platform ARR grew 33% versus the prior year, while non-platform declined 8% to $463 million this quarter. Platform ARR was driven by both new customer wins, as well as expanded use cases and volumes from existing customers. We also migrated our non-platform liquid credit solution to the platform. Excluding that liquid credit migration, our platform ARR growth was in the high 20% range. The non-platform year-over-year ARR decline was driven primarily by migrations, the end of life of a legacy authentication suite solution, and some usage declines. In our CCS business, ARR growth was relatively flat. Our dollar-based net retention rate in the quarter was 103%.

Platform NRR was 122%, while our non-NRR was 91%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases. We now have over 150 customers on FICO platform, more than half leveraging FICO platform for multiple use cases. First-quarter software segment revenues detailed on page 17 were $207 million, up 2% from the prior year. Within the segment, our SaaS revenues grew 12%, driven by FICO platform. Our on-premises revenues declined 12%, primarily driven by lower point-in-time revenues. Year over year, our platform revenues grew 37%, and our non-platform revenues declined 13%.

As a reminder, our FY 2026 revenue guidance reflects an expectation of lower point-in-time revenues throughout FY 2026 due to fewer non-platform license renewal opportunities compared to the prior year. From a regional lens, 88% of total company revenues this quarter were derived from our Americas region, which is a combination of our North America and Latin America regions. Our EMEA region generated 8% of revenues, and the Asia Pacific region delivered 4%. Operating expenses for the quarter, as shown on page 18, were $278 million this quarter versus $279 million in the prior quarter, which included $10.9 million in restructuring charges. Excluding restructuring, expenses grew 4% quarter over quarter, driven primarily by personnel expenses.

We expect operating expense dollars to continue to trend upward modestly throughout the fiscal year. Our non-GAAP operating margin, as shown on Page 19, was 54% for the quarter compared with 50% in the same quarter last year, which means we delivered year-over-year non-GAAP operating margin expansion of 432 basis points. The effective tax rate for the quarter was 17.5%. The operating tax rate was 25.7%. The primary difference between the operating tax rate and net effective tax rate for the quarter is $15.7 million in excess tax benefit recognized upon the settlement or exercise of employee stock awards. We continue to expect a full-year net effective tax rate of 24% and an operating tax rate of 25%.

At the end of the quarter, we had $218 million in cash and marketable investments. Our total debt at quarter-end was $3.2 billion with a weighted average interest rate of 5.22%. As of December 31, 2025, 87% of our debt was held in senior notes, with no term loans. We had a $415 million balance on our revolving line of credit, which is repayable at any time. As Will highlighted, we continue to return capital to our shareholders through buybacks, as shown on Page 20. In Q1, we repurchased 95,000 shares at a total cost of $163 million, and we continue to view share repurchases as an attractive use of cash.

With that, I'll turn it back to Will for his closing comments.

William J. Lansing: Thanks, Steve. We had a great start to the year and are well-positioned to exceed our fiscal year guidance. As in prior years, we will revisit our guidance on our Q2 earnings call. In our software business, we're seeing growth in bookings and ARR, reflecting the value of our innovation in the market. Since FICO World 2025, we achieved general availability of FICO Marketplace and FICO Focus Foundation model. Our next-generation FICO platform and enterprise fraud solution on FICO platform will soon be generally available. I'm excited to see our innovation realized in the market and delighting our customers. In our scores business, our innovations are driving increased engagement from market participants.

There's continued participant adoption of our FICO mortgage direct licensing program. Outside of conforming mortgages, there's continued adoption for FICO Score 10 T. We see adoption of FICO Score Mortgage Simulator throughout the mortgage industry. The FICO Score continues to be the trusted industry standard used by 90% of top US lenders as the standard measure of consumer credit risk in the US.

Dave Singleton: With that, let me turn this over to Dave to open up the Q&A session.

Dave Singleton: Thanks, Will. This concludes our prepared remarks. And we're now ready to take questions. Operator, please open the lines.

Operator: Thank you. And at this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Manav Patnaik from Barclays. Your line is open.

Manav Patnaik: Thank you. I just wanted to touch on the, you know, the 10 T. Again, that slide you had was really helpful. But right before earnings, you had the special release with Loan Pass and the data sharing and the back testing and stuff that can be done. I was just hoping you could help us appreciate the significance of that and any sense of, you know, timing around when 10 T, you know, officially gets approved and used, etcetera?

William J. Lansing: Yes. Thanks, Manav. I think we're continuing to see a lot of adoption on the nonconforming side and the conforming side with the agencies. They're still doing a lot of testing. We don't really have a timeline. They haven't published any kind of a timeline yet. So at this point, we really don't know when it will be generally available.

Manav Patnaik: Okay. Got it. And then maybe just on the performance model adoption, I was just wondering if you could give us any early signs of base in discussions, how you think that's going? Is that going to be available to the credit bureau channel as well?

William J. Lansing: The performance model right now is planned for the direct license program. And it's going well. We have a lot of interest. And we're busy working towards bringing the direct channel live.

Manav Patnaik: Okay. Enough. Maybe just sorry. If I can squeeze one more in, Steve, just you know, it was a good quarter. You maintained the guide. I know that's practice, but maybe you could just help us appreciate why there was no raise to the guide this time.

Steven P. Weber: Yeah. Thanks, Manav. It's a good question. We're pretty confident we're going to be able to beat our guidance. We talked about it being pretty conservative last quarter. At this point, we're only three months in. There's just a lot of questions out in the macro environment. I mean, with the Fed today, there's just I frankly, we don't know what numbers we would move to. So I think by next quarter, we'll have a much better idea of what the world looks like. And what overall volumes are going to look like. So I think that was our thinking behind that.

Manav Patnaik: Okay. Fair enough. Thank you, guys.

Operator: Thank you. One moment for our next question. And our next question will come from the line of Jason Haas from Wells Fargo. Your line is open.

Jason Haas: Hey. Good afternoon, and thanks for taking my question. I'm curious if you had any sense of what the timeline looks like for the release of the LLPA grids and if you had any insight as to what those might look like.

William J. Lansing: Well, the short answer to that is no. I don't think anyone knows what the timeline for the LLPA grids looks like. You know? And as we've discussed in the past, there's tremendous challenges with figuring out how to make those work because of the gaming and adverse selection issues. And so no one knows what the timeline really looks like. Certainly, we don't. But I think that we have some significant problems that need to be overcome before they can be released.

Jason Haas: Got it. That's very helpful. And then as a follow-up, we've heard, I guess, two concerns from lenders regarding FICO Direct and the performance model. One is that for FICO Direct, there's a concern the resellers could improperly calculate the scores and aren't taking, I guess, legal responsibility for it. So I think there's been some hesitancy from lenders. I was curious if you could address that.

William J. Lansing: Then on the performance model, I believe some lenders are concerned about how the regulators might view passing on that back performance fee to the end consumer. So curious if you could comment on those two hang-ups that may be out there.

William J. Lansing: Yeah. I think that they're that's misplaced misguided concern. The score calculated by the resellers in the direct license program will be the same scores that are calculated by the bureaus today. It's the same algorithm and the same technology to do it. The same data is being used. And so I think that any kind of concern about miscalculation or differences in scores is misplaced. That said, I can tell you that we are in the midst of making sure that all the testing gives everyone every confidence that's not an issue. And then in terms of the regulators, they also are looking at it to get comfortable with it, and that's proceeding apace.

Jason Haas: Got it. That's very helpful. Thank you.

Operator: One moment for our next question. Our next question will come from the line of Ashish Sabadra from RBC. Your line is open.

Ashish Sabadra: Thanks for taking my question. It's good to see that momentum in the direct license program with five resellers signed. You talked about them being in advanced stages of implementation. Was just wondering if you had some timelines around when they would go live. And then at least when we have done checks with brokers, they are not aware of the performance model as yet. When do we start to see that get communicated to the mortgage brokers and the industry in general? Much more yeah, much better communicated. Thanks.

William J. Lansing: On timeline, I wish I could help you. I wish that we knew what the timeline was, but you know, this is the mortgage market, and we don't do anything without having everything extremely buttoned up. And so we are working through all the integration testing and all the downstream impacts, and you can be assured that when it does go live, it'll go live without a hiccup. But we're well on our way. I just can't give you a timeline.

Ashish Sabadra: No. That's completely understandable. Okay. There's two I will choose. Oh, well and so the performance model first of all, the performance model is optional. Okay? No one's being forced to take the performance model. So anyone who doesn't like it doesn't have to use it. They can just pay for the score per unit as they always have. So you know, we introduced the performance model as an option to provide more flexibility for some originators for some lenders who prefer that approach. And so, you know, people who don't like it is a little hard to understand what the problem is. They don't have to use it. They can just go with a per unit price.

Ashish Sabadra: That's helpful color. Maybe if I can just clarify that your revenue model is agnostic irrespective of whether customers adopt performance or post-code model. Is that right?

William J. Lansing: It's relatively agnostic. Yeah. Nothing's ever truly agnostic. But it's set up to basically be relatively agnostic.

Ashish Sabadra: That's helpful. Thanks. Thank you.

Operator: Thank you. One moment for our next question. Next question comes from the line of Surinder Thind from Jefferies. Your line is open.

Surinder Thind: Thank you. Gonna switch over to the software business. Know, some interesting, you know, improvements there to think about. You maybe talk about the target of the 500 named accounts globally. You broke that into 350 in financial services and 150 outside. How does this kind of compare to, you know, your prior strategy under the Gen one platform, and how aggressively do you think you can get reach those customers? And how much of this is a push to specifically go outside and expand beyond the financial institutions at this point? Are we kind of entering this phase two approach with the Gen two platform?

William J. Lansing: I think we're in the beginning of that phase two. We look. We are very heavy in financial services, have been historically, and will continue to be. Let's be realistic about this. That said, the platform is very much designed to be horizontal and is highly appealing to other verticals. And so we're getting a lot of traction in telco and in other verticals. Further, we're really committed to our partner program and taking our IP to market through systems integrators and other providers. And I think that's gonna be the way we wind up expanding to other verticals. Our marketplace is designed to be able to do that. Our next-gen platform is designed to be able to do that.

And so we're still very interested in broadening our reach. But our direct selling efforts are still primarily focused on financial services.

Surinder Thind: Got it. And just quickly, how many named accounts do you have right now in financial services?

William J. Lansing: No. We don't disclose it.

Surinder Thind: We don't. Okay. Sorry. But, I mean, it's an arbitrary number. We can name any we And if you're not moving an arbitrary number, you know, what number would you like it to be? Was just an attempt to kind of better understand the new customers you haven't approached yet. It was just ballpark. But that's Oh, I understood. Understood. Look. I think there's I think the general answer to that is there's several hundred to go. Got it. Okay. That's helpful. And then as a follow-up here, if we back out kind of the international, multiyear deal here, still solid growth in the ARR. But there is also a divergence.

You guys did list the reasons why between ARR growth and non-platform. But is the idea that we're beginning to also see customers that ultimately want to move from non-platform to platform. And so we should begin to see a sustained discrepancy in the ARR numbers.

William J. Lansing: Yeah. I mean, gradually, over time, we're looking to migrate everyone. Right? It's a lot more efficient to be on the platform, and we've set up for a long time. So there'll be a lot of efficiencies to be gained from that. We haven't done a lot of that in the past, but we're getting to a point now where we can. So you're gonna see more and more of that, but you're also seeing just a lot more sales. I mean, you know, even the big deal we had this quarter had very little ARR impact this quarter, but it'll have a much bigger impact next quarter.

So if you look at the rolling trend of ACV bookings, it's growing dramatically. And we think there's still a lot more that to come this year, and that's gonna drive more ARR growth. So we've got a lot of land activity happening, and we've got a lot more expand. So if you look at the platform, the net retention rate goes up. They find new use cases. They expand into other areas. So there's just a lot of different areas we can grow in that business. You know, this is a classic software business problem. We as a provider would love to have everybody on a single code base. Be really nice and easy to run it that way.

And yet we have more legacy code that's still highly profitable. We have customers who are really committed to using it and want to continue to use it. And so we wind up in this position where we have to make proactive decisions about what legacy solutions we're gonna continue to support and which ones we're gonna force migration on. And the biggest factor in thinking that through is can we provide a full features and functionality of the legacy solution on the new platform before we force a change through an end-of-life initiative. And so far, we've been pretty successful with that. I mean, our classic business, our historical legacy business, runs just fine and is profitable.

And as the new platform, the next-gen platform has the features and functionality that, frankly, is superior to what you find in the legacy solutions. We're gonna see voluntary migration. We'll see some forced migration, and then we'll see some end-of-life.

Surinder Thind: Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeffrey Meuler from Baird. Your line is open.

Jeffrey Meuler: Yeah. Thanks. Good afternoon. So everyone's obviously waiting for the LO the market and investors. I just any education process or caveats you'll you'd volunteer to kind of, like, help investors interpret how to compare the LLPAs under Vantage to FICO. I'm thinking things like, you know, for the same consumer, what's the delta between FICO and Vantage on average or anything like that? And then just I know it's a finger-in-the-air assumption to say that the grids may be at parity. But just remind us, if the grids do appear to be at parity, what do you view as the key barriers to potential switching?

William J. Lansing: I think it's unlikely that grids will be at parity. But let's hold that one and just talk a little bit about your first part of your question, which is differences in the score. Our research suggests that the FICO score and the Vantage score are more than 20 points different 30% of the time. In both directions. It's not consistently one direction off. Means that it's very, very hard to just substitute one score for another, a Vantage score for a FICO score. You really have to have a completely independent separate system to run a score that just has different odds to score ratio for every three-digit number.

So I think and I think that's one of the big challenges with developing the LLPA grids. How are you gonna reconcile all that? And then, you know, you kinda go beyond that to assuming you had separate LLPA grids and you somehow figured out how to do that, you still have all the gaming problems that go with that. You know, and the adverse selection problems that go with that. Those have to be resolved. And then you finally, you have whatever objections the securitization market might have to, you know, whatever penalties they might impose on Vantage scored paper versus FICO scored paper. So there's I think there's significant problems to be overcome.

Jeffrey Meuler: Got it. And then just to reconcile something, I thought that you said in your prepared remarks that 10 T was gonna be available for both the conforming and nonconforming market in 2026? And then in answering one of the earlier questions, I think Steve said you're not sure when 10 T is gonna be available.

William J. Lansing: So one's a guess, and one it is true that we're not sure. So it you know, the FICO 10 T data is with the GSEs is with the FHFA. And, you know, we can't give you a timeline. But you know, we're confident it'll eventually be released.

Steven P. Weber: Well, and Jeff, those are two different comments just to clarify. The nonconforming conforming is around having FICO 10 T available on the direct licensing program. And the comment Steve talked about was having FICO 10 T available for the data for the market.

Jeffrey Meuler: Okay. Thank you. Does that make sense what I said?

William J. Lansing: Yep.

Jeffrey Meuler: Okay.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Faiza Alwy from Deutsche Bank. Your line is open.

Faiza Alwy: Yes. Hi. Thank you so much. So sorry to be a dead horse here, but I guess just to clarify, do we need, like, an LLPA grid for 10 T, or do you think the conforming market could accept the 10 T, you know, without that grid being out?

William J. Lansing: Yeah. That's a great question whether there'd be an adjustment fee to the grid. 10 T is obviously much, much closer to FICO classic than Vantage is. But my guess is, you know, when 10 T is made available, that there'll be an adjustment to the grid for that.

Faiza Alwy: Okay. And just a quick follow-up. Like, do you think that timing I understand all of the issues that you've talked about, but are you expecting that the 10 T and Vantage grids would come out at the same time? And like, the acceptability is good or the implementation is going to be around the same time, or do you think it could happen in stages?

William J. Lansing: Certainly, the industry would like them to come out at the same time. There's a lot of efficiency in that, and you probably saw the letter sent to the director at the FHFA this past week from 35 economists and think tanks and industry groups who all believe that it's critical that if and when any change is made away from FICO classic that it'd be done simultaneously to both FICO 10 T and Vantage. So the industry has a preference for that. What the FHFA will ultimately do, no one knows. So, you know, we'll have to see.

You know, to the earlier point about FICO 10 T and LLPA grids for FICO 10 T, I would point out that FICO 10 T is architecturally very similar to FICO classic. It's built on the same kinds of attributes weighted in a similar way. That's very different from Vantage. Vantage has a different architecture and weights the factors differently. And so in terms of compatibility and closeness, FICO 10 T is much, much closer to FICO classic.

Steven P. Weber: And don't confuse that with predictability where FICO 10 T is significantly more predictive than FICO classic.

Faiza Alwy: Understood. That's very helpful. And then I wanted to ask about, you know, your mortgage revenue growth. We saw a nice acceleration this quarter relative to what we've been seeing. And I'm just curious, are you just benefiting from maybe higher refi activity? I know you don't disclose volumes, but just directionally, like, was volume growth that was higher? Or

William J. Lansing: It's all of the above. It's price. It's Yeah. It is it's all of the above. So there's some price there. There's some value there. Some refi volume there. So all those are factors.

Faiza Alwy: Got it. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Kyle Peterson from Needham. Your line is open.

Kyle Peterson: Great. Good afternoon. Thanks for taking the questions, guys. Know, wanted to start out on, you know, the platform business. Obviously, nice quarter there. I know some of that was the migration. Guessing some of that was the large deal. But just wanted to see, are we at a point where, you know, 30% plus ARR growth on, you know, the platform side should be sustainable again? Or, I guess, like, how should we think about that in light of the really nice bounce back this quarter?

William J. Lansing: Well, so, Kyle, you know, we don't we don't make promises, but, you know, we had 40% growth in platform for sixteen quarters, then we were down a few a couple quarters in the just under 20% range. Now here we are at 30%. It, you know, it does move around. You know, the total ARR is definitely gonna go up. You know? And so but and so you know, that's a short answer to your question is ARR will go up. I think current levels are sustainable. I you know, that's not a crazy thing to think. We've got a lot of appetite for our new platform.

And the total ARR is gonna be different by the platform because more and more, we're seeing acceleration of platform growth. And, frankly, the ARR is a bigger portion of the overall number now. So as that grows faster, it helps the overall number as well. So we see continued sustained significant growth in ARR for the rest of the year, which is kind of what we've been talking about for a few quarters, and now you're starting to see

Kyle Peterson: Okay. That is helpful and good to hear. And then switching over into the card business, the origination revenue on the credit cards seems to be climbing in the right direction here the last few quarters, which is it is good to see. Just I know it's still early, but have you guys seen any disruption or changes in activity? I know there's been some chatter around a potential 10% cap on card APR. So I guess anything you guys are seeing there, or is it still, you know, too early to tell in terms of when you guys are delivered the usage reports?

William J. Lansing: We haven't seen anything. Haven't seen any changes in that data. There's been a lot of, you know, prequal activity in the card space and, you know, decent originations. We haven't seen any changes.

Kyle Peterson: Okay. Okay. That's great to hear. You, guys, and nice quarter.

William J. Lansing: Thanks.

Operator: Thank you. One moment for our next question. Next question will come from the line of George Tong from Goldman Sachs. Your line is open.

Sammy: Hi. This is Sammy on for George. In your discussions with the FHFA and GSEs, do you get the sense that a move from tri-merge to bi-merge is gaining traction? We saw the NBA came out with a single score proposition and also the regulators focus at least shifted to the bureaus. So just wanted to get your views on

William J. Lansing: Yeah. There's certainly a lot of talk about it these days. You know, the bureau position I don't generally give the bureau position, but I think it's fair to say that the bureaus believe that tri-merge makes a lot more sense because the bureau files are not identical to one another. If you chose two out of three files, some consumers on the margin are gonna be underserved. And I think that's a fair point. That's just a fair point. Set against that, you know, tri-merge does give the bureaus a monopoly, and that's not a great thing. So that, you know, that would be an offset. I think the real challenge here's the real challenge with moving to bi-merge.

It's the same problem that we have with lender choice. When you get to choose between two credit scores, or when you get to choose your favorite two out of three credit bureaus, you're gonna have gaming. You're gonna have adverse selection. You're gonna have all of these demonstrate all these problems occur. And you know there's a cost to be paid for that. That cost ultimately gets paid by Fannie and Freddie and potentially the US taxpayer. And so the you know, that is the biggest the biggest problem that has to be overcome. And, frankly, I don't know what kind of a solution there is to that. It's structural.

Sammy: Okay. And on software, can you talk about where you are in the investment cycle? How far along are you in the platform build-out? And when should we expect the investments to normalize?

William J. Lansing: You know, we continue to invest in our software business. We're really on it. It's growing really nicely. We do anticipate margin expansion because our new platform is built for scaling profitably. And so it you know, the improvements to profitability of our software business will come more from additional volume and additional customers on the new platform versus reduced R&D spending, which, of course, is a lever, and someday it will go down.

Sammy: Alright. Great. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Alexander Hess from JPMorgan. Your line is open.

Alexander Hess: Just maybe to start with the Scores business and volumes there. Saw a call out in the new slide deck, which is by the way, excellent. That the you guys saw positive volumes in all three of your underwriting lines. Can you maybe speak to some volume trends in the industry overall? Are they improving? And then when you sort of turn the lens inward, how much of the improvement that you've seen and the degree that there is any is really industry-wide versus FICO innovation-led.

William J. Lansing: Yeah. That's a good question. I mean, I think it's hard to call anything a trend at this point. There's just a lot of uncertainty in the marketplace, again, which is one of the reasons why we've chosen not to update our guidance today. You know, I don't think anybody really knows what's gonna happen in mortgage. Just, you know, I think if rates continue to trend downward, we'll probably see more volumes there. You know, at card, we already talked about just some potential noise in that market. We'll see how real that is. But we've seen decent volumes throughout. I mean, not like crazy growth, but, you know, not declines either.

So at least some, you know, some margin or some volume increases across the board. So that's encouraging, and we'll see if that continues. In terms of how much of that is driven by our innovation, maybe a little bit. In some cases, there are some different things that we're that provide some additional volumes. But most of this is the macro environment and what's happening in the, you know, auto lending industry or the mortgage or the card industry.

Alexander Hess: Pivoting to software, you know, you did see a nice pickup in ACV bookings. Obviously, platform NRR growth is strong. Can you maybe provide a comment on what platform features, functions, use cases are really driving that recent momentum?

William J. Lansing: Yeah. And, you know, I'm not sure there's any particular use cases, to be frank. So just a little bit of history here. We you know, for many, many years, for tens, for decades, FICO is an application software company focused on solutions to half a dozen critical bank problems having to do with the life cycle. Right? Risk-oriented solutions. When we move to the platform, we opened up a pretty vast set of solutions potential solutions for banks that adopt the platform. It's no longer just, you know, decisioning around originations and customer management and fraud. So that, you know, just a much, much wider set. That said, customers are coming to the platform for the basics.

They come for originations. They come for customer management. We're seeing those use cases as primary use cases. But what's interesting is, particularly on the expand side, you know, if you think about land and expand, they put in the platform, and then they come up with all kinds of innovations on things they should be decisioning around that they have never done before. And so there's a lot of that. But I think it's fair to say that they come to the platform for the same kinds of risk management solutions they bought in the past.

Alexander Hess: Maybe I can squeeze a third in. Just on the predictive power of FICO 10 T, obviously, you guys have the white paper out that showed a pretty, pretty compelling predictive lift in those key cohorts. Can you make but that was on sort of the basis of the defaults? Delinquencies. Can you maybe pivot that conversation to prepayments? And do you have a view on will 10 T be more predictive on prepayments than rival scores?

William J. Lansing: You know, I think so. And I think it's important to note that credit default rates and prepayments are related. They're, you know, they're sides of the same coin in some way. So you know, for example, I've heard people say, well, you know, credit improving credit default rates doesn't really matter in the conforming market because Fannie and Freddie stand behind it. And so who cares about the credit default rates? Well, you know, when you have a credit default, it is functionally the same as a prepayment risk for those who hold the paper. So I think 10 T is gonna help on both those sides.

Operator: One moment for our next question. Our next question comes from the line of Ryan Griffin from BMO Capital Markets. Your line is open.

Ryan Griffin: Hey. Thanks so much. Just had a software question. I think you said 75 of your largest customers are using multiple use cases now. I was just wondering how that has trended over the past year or so and what's driving the land and expand momentum. Thank you.

William J. Lansing: I'm not sure I followed the question. It's the land expand. So essentially, yeah, I mean, what's driving it is that a lot of people bought in just to see how it would work, right? They needed to be that it would work. And once they get it installed, the next use case is a lot easier than the first use case. So they find more ways to use it, and, you know, they're pleased with the way it's working. So the expand pieces I shouldn't say easy, but it's a lot easier than the land because once it's in and it's working, they look for more ways to use it.

The expand is running in roughly the same rate as land. They're kinda neck and neck on growth rate. The expand piece really has two kinds there's two styles. Right? One is expansion of the use cases that they started with, and the second is bringing on new use cases. And our revenue goes up in both situations.

Ryan Griffin: Great. Thank you. And then just one more question on the volume side. I think we've all read some headlines about lenders struggling with their cost base this year. We're just wondering if you're seeing any of this from your perspective and any changes in lender behavior that you can call out relating to your business. Thank you.

William J. Lansing: You know, we really haven't. I mean, you know how critical FICO scores are in the system. And we really have not seen any changes.

Operator: Thank you. One moment for our next question. Our next question comes will come from the line of Scott Wurtzel from Wolfe Research. Your line is open.

Scott Wurtzel: Hey. Good evening, guys. Just wanted to ask one question on the software business. I mean, the trends on the side have been pretty positive, but you also had mentioned that the next-gen platform, I think the enterprise fraud solution are, you know, I guess not yet generally available, but are they helping to drive some of the bookings growth right now, you know, pending the general availability at all? Thanks.

William J. Lansing: Not yet. Not yet. All the growth you're seeing is, you know, predates the enterprise solution.

Scott Wurtzel: Thanks, guys.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Owen Lau from Clear Street. Your line is open.

Owen Lau: Good afternoon. Thank you for taking my question. I do want to go back to President Trump's 10% credit card interest rate cap policy question. If it is implemented, how would it potentially impact FICO? Do you think consumers will go to other forms of loans which will still need to use FICO score for underwriting? Also, could you please kind of, like, help us size the credit card exposure? Thank you.

William J. Lansing: In terms of will consumers look for alternate credit if the card providers provide fewer cards to, you know, deeply subprime. You know, your guess is as good as mine, but I would assume so. And I'm not sure how you The second question was the size of our credit card originations revenue, but we don't provide that. We don't break that out. Now you know, who knows whether this actually ever happens? But if it does, I think it puts that much more pressure on lenders to understand those subprime credits really, really well.

And my guess is that they would be doing extra work involving FICO scores and credit data to, you know, to understand what happens on the margin. And if it went to some other type of personal lending or something else that would not apply, then, you know, obviously, FICO scores in that area. You know, does it involve a shift to BNPL or some I mean, obviously, we'd be beneficiaries in all those scenarios.

Owen Lau: Got it. That's helpful. And then going back to software, noticed that I mean, you mentioned that there was an above-average size in multi-use case platform deal in the first quarter. Is it really a one-off deal that we shouldn't expect this to recur or FICO platform begins to gain recognition and traction and more similar deals could come more frequently in the future.

William J. Lansing: It is the latter. There's no question that the deal size is going up. The frequency of it, and the amounts. So yeah. And I would just add to that. We think the FY 2026 ACV bookings are gonna be significantly higher than FY '25. So we've got a lot of deals we've already signed. We got a lot of deals in the pipeline. There's a lot of momentum here. And we're seeing it, you know, even more and bigger deals.

Owen Lau: Alright. Thanks a lot.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Craig Huber from Huber Research Partners. Your line is open.

Craig Huber: Great. Thank you. My first question, you made a comment earlier on that you're well-positioned to well exceed guidance for fiscal 2026. Can you just talk about that a little bit further? What in your mind were you overly conservative on specifically if you're willing to talk about that and maybe also touch on how things are going in the reseller market mortgage market ready for the this new two pricing plans, reseller in particular. Is that meaningfully ahead or behind or on schedule with what you originally thinking when you first rolled this out?

William J. Lansing: I think so to take those in reverse order, the direct license program with the resellers is on track, roughly as expected. And frankly, whether it comes a little sooner or a little later, does not have a big revenue impact on us. It's really pretty close. You know, as we said earlier, we're not completely agnostic, but you know, it's pretty close. It's not enough to drive a change in guidance, for example. And then as to what might have us change our guidance, it presumably would be volume. I mean, the price is extremely well understood. And, you know, it's we publish it, and it's that's that price is here for the year.

And so it's really much more around volume and what happens with interest rates and that no one knows. And so we'll that's why we want another quarter to see how it plays out.

Steven P. Weber: Yeah. I think there's just like I said, there's a lot of uncertainty in the marketplace, and I think three months from now, we're gonna have a much better idea. If we were to take a guess now, we would probably you'd probably still think we were being too conservative. So at this point, three months, we're gonna know a lot more. We'll have one more quarter under our belts, and we'll have a much better idea of how to We really don't wanna get into the situation where we're continually updating our guidance every quarter. We have annual guidance.

We try to stick to that until it's pretty clear we can move to some more meaningful estimation of what it looks like, and that's what we're doing.

Craig Huber: And then my last question, if I could. You just talk about pricing for calendar '26 for auto? And then, credit card and personal loans? I mean, is auto gonna be up north of 10% again this year, for example?

William J. Lansing: Oh, we don't disclose the specifics of it. There's a it's a lot more complicated in auto and card because there's different price points depending on, you know, different tiers. Or different types of markets. So it's a lot more complicated than that. We don't get into the detail of that, basically, for competitive reasons.

Operator: Okay. Thank you. Thank you. One moment for our next question. And our next question will come from the line of Kevin McVeigh from UBS. Your line is open.

Kevin McVeigh: Great. Thank you. Hey. I think you'd mentioned in the slide deck that there's some incremental headcount investment in FICO and then increased marketing. Maybe help us understand, was that related to the reseller adoption or what drove those investments?

William J. Lansing: You know, we are investing in go-to-market across the board, both on the software side and on the score side. And after, I would say, many years of conservatism and growing headcount and direct sales and partner sales. We've, you know, we've been fairly aggressive this year in expanding that headcount. So I would say that's it's both on both sides, software as well as scores.

Kevin McVeigh: Great. And then just in terms of goalposts for the resellers actually going live, do you have any sense, you know, would you expect the big five to go live simultaneously or once sequential? Any sense or just timing on that?

William J. Lansing: You know, my guess is that it will not be a big bang with all of them going live at the same time. It'll probably be staggered but close in time. I mean, we you know, all of the resellers we've signed with are well underway. And I think for their own benefit, they'll want to be able to offer the direct license program as quickly as possible. So I would expect a convergence on timeline there. But I couldn't say that it's all gonna happen simultaneously.

Kevin McVeigh: Okay. Thank you.

Operator: Thank you. One moment for our next question. And our next question will come from the line of Rayna Kumar from Oppenheimer. Your line is open.

Rayna Kumar: Good evening. Thanks for taking my question, and congrats on the five resellers. I just want some more color on that. How much of the total resellers market would you say the five represents? Would you like, you know, establish some size on these wins?

William J. Lansing: How much of the market do those resellers represent?

Rayna Kumar: Yes.

William J. Lansing: You know, somewhere in the 70, 80% range.

Rayna Kumar: Got it. Okay. And just as a follow-up, on your last earnings call, you mentioned some operational hurdles in having resellers move to the direct model. Can you just talk about how you're addressing some of those hurdles?

William J. Lansing: We really don't have any operational hurdles. It's moving very smoothly. We're working our way through the details. And, you know, we're highly confident that the program will be live in the relatively near future.

Rayna Kumar: Got it. Thank you.

Operator: Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Dave for any closing remarks.

Dave Singleton: No. That's everything. We're good. Great quarter. Thank you.

William J. Lansing: Thanks, all.

Operator: Thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.