Credit scoring and data company Fair Isaac Corporation (FICO 0.47%) reported record revenue in the second quarter. Revenue grew 13% year over year to $258 million, and net income jumped to $32 million, or $1.03 per diluted share, in the second quarter.

Here's everything shareholders need to know about the company's impressive second-quarter results.

Fair Isaac's Q2 earnings: By the numbers


Q2 2018

Q2 2017

Year-Over-Year Change

Total revenue

$257.9 million

$228.4 million


Operating income

$48.1 million

$40.0 million


Net income

$32.3 million

$25.1 million


Diluted EPS




Source: Fair Isaac Corporation. EPS = Earnings Per Share.

What happened this quarter

Fair Isaac makes its money by providing scores and services throughout the credit life cycle. It collects fees when financiers want to view a person's FICO score for marketing purposes, when banks pull prospective customers' scores to make a credit decision, and thereafter when lenders want to refresh the data they have on their existing customers.

Fair Isaac Corporation logo.

Image source: Fair Isaac Corporation. 

Here are the key developments that led to a record quarter for Fair Isaac Corporation:

  • The company successfully passed on certain price increases. It specifically identified mortgage origination as one area where higher prices boosted revenue. Prices were increased in January, so much of the benefit flowed through in its quarterly results.
  • Business-to-business revenue grew fastest thanks to price increases. Business-to-business revenue increased 47% year over year. Business-to-consumer revenue increased 13% year over year.
  • Its MyFICO business line for consumer score products is growing at a high rate. Management said on the conference call that the MyFICO business is "growing better than 5%, 6%, 7%" year over year. While Fair Isaac makes money when consumers pay for MyFICO, it also makes money from lenders who want to give their clients free access to their FICO scores. Both business lines are growing at a similar high-single-digit rate, per conference call commentary. 
  • A shift toward a recurring revenue model is working. Recurring revenue grew 21% year over year, and made up 76% of total revenue this quarter versus 71% of total revenue in the year-ago period. Fair Isaac is turning into a royalty on the consumer credit business.
  • Fair Isaac repurchased approximately $125 million of stock in the first two quarters of fiscal year 2018. The company has ample room to leverage its balance sheet to fund share repurchases in excess of free cash flow generation.

What management had to say

On the conference call, management said that increased marketing spend by financial companies is helping drive volume in business-to-business products. "There was some very strong marketing from what we saw this quarter and in the numbers we're reporting," said Fair Isaac's Chief Executive Officer William J. Lansing.

Lansing noted that the company's acquisition score was the fastest growing contributor in the credit life cycle, saying that it "was a very high single digit" grower this quarter in terms of volume.

Financial companies "pre-screen" customers for certain parameters like their credit score range to figure out if a household is a good candidate for a bulk mail advertisement about a credit card or mortgage, for example.

At the margin, a change in bank marketing spend can have an outsize impact on Fair Isaac's revenue and profit growth as the financial industry spends more money to pre-screen households for targeted advertising. This quarter, increased marketing was a helpful tailwind for Fair Isaac, beyond the gains it saw from price increases in mortgage-related products.

Looking ahead

Fair Isaac raised guidance for the remainder of the year. On the conference call, the company said increased guidance was due to the strong performance across its credit scores business, including business-to-business products and business-to-consumer products.


Previous guidance for 2018

Updated guidance for 2018


$990 million

$1.02 billion

GAAP net income

$136 million

$140 million

Non-GAAP net income

$191 million

$200 million







Source: Fair Isaac Corporation. GAAP = Generally accepted accounting principles. 

On the conference call, an analyst pointed out just how rare it is for Fair Isaac Corporation to raise guidance during the year, suggesting that the last time the company raised guidance during the year was in 2013. With that in mind, Fair Isaac's improved outlook for 2018 is a good sign.