Fair Isaac (FICO) 10-K risk factor changes: FY2019 vs FY2018

[removed: Risks] [added: Risks] Related to Our [removed: Business][added: Business]

[removed: We] [added: We] continue to expand the pursuit of our Decision Management strategy, and we may not be successful, which could cause our growth prospects and results of operations to [removed: suffer.][added: suffer.]

[removed: We] [added: We] derive a substantial portion of our revenues from a small number of products and services, and if the market does not continue to accept these products and services, our revenues will [removed: decline.][added: decline.]

[removed: If] [added: If] we are unable to access new markets or develop new distribution channels, our business and growth prospects could [removed: suffer.][added: suffer.]

[removed: If] [added: If] we are unable to develop successful new products or if we experience defects, failures and delays associated with the introduction of new products, our business could suffer serious [removed: harm.][added: harm.]

[removed: We] [added: We] rely on relatively few customers, as well as our contracts with the three major credit reporting agencies, for a significant portion of our revenues and profits.

If these customers are negatively impacted by weak global economic conditions, global economic volatility or the terms of these relationships otherwise change, our revenues and operating results could [removed: decline.][added: decline.]

[removed: We] [added: We] rely on relationships with third parties for marketing, distribution and certain [removed: services.][added: services. If we experience difficulties in these relationships, our future revenues may be adversely affected.]

[removed: Our] [added: Our] acquisition and divestiture activities may disrupt our ongoing business and may involve increased expenses, and we may not realize the financial and strategic goals contemplated at the time of a [removed: transaction.][added: transaction.]

[removed: Charges] [added: Charges] to earnings resulting from acquisitions may adversely affect our operating [removed: results.][added: results.]

[removed: Our] [added: Our] reengineering initiative may cause our growth prospects and profitability to [removed: suffer.][added: suffer.]

[removed: The] [added: The] occurrence of certain negative events may cause fluctuations in our stock [removed: price.][added: price.]

[removed: Our] [added: Our] products have long and variable sales cycles.

If we do not accurately predict these cycles, we may not forecast our financial results accurately, and our stock price could be adversely [removed: affected.][added: affected.]

For example, the sales cycle for [removed: licensing] our products typically ranges from 60 days to 18 months.

[removed: We] [added: We] typically have revenue-generating transactions concentrated in the final weeks of a quarter, which may prevent accurate forecasting of our financial results and cause our stock price to [removed: decline.][added: decline.]

[removed: The] [added: The] failure to recruit and retain additional qualified personnel could hinder our ability to successfully manage our [removed: business.][added: business.]

The complexity of our products requires highly trained [removed: customer service and technical support] personnel [added: for research and development and] to assist customers with product [removed: installation] [added: installation, deployment, maintenance] and [removed: deployment.][added: support.]

[removed: The] [added: The] failure to obtain certain forms of model construction data from our customers or others could harm our [removed: business.][added: business.]

[removed: We] [added: We] will continue to rely upon proprietary technology rights, and if we are unable to protect them, our business could be [removed: harmed.][added: harmed.]

[removed: If] [added: If] we are subject to infringement claims, it could harm our [removed: business.][added: business.]

Moreover, in recent years, individuals and groups that are non-practicing entities, commonly referred to as “patent [removed: trolls”,] [added: trolls,”] have purchased patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements.

[removed: If] [added: If] our [removed: security] [added: cybersecurity] measures are compromised or unauthorized access to customer or consumer data is otherwise obtained, our products and services may be perceived as not being secure, customers may curtail or cease their use of our products and services, our reputation may be damaged and we could incur significant [removed: liabilities.][added: liabilities.]

[removed: Security] [added: Cybersecurity] breaches could expose us to a risk of loss, the unauthorized disclosure of consumer or customer information, litigation, indemnity obligations and other liability.

If our [removed: security] [added: cybersecurity] measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and as a result, someone obtains unauthorized access to our systems or to consumer or customer information, our reputation may be damaged, our business may suffer and we could incur significant liability.

[removed: Security] [added: Cybersecurity] compromises experienced by our competitors, by our distributors, by our customers or by us may lead to public disclosures, which may lead to widespread negative publicity.

Any [removed: security] [added: cybersecurity] compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to curtail or cease their use of our products and services, cause regulatory or industry changes that impact our products and services, or subject us to third-party lawsuits, regulatory fines or other action or liability, all of which could materially and adversely affect our business and operating results.

[removed: Protection] [added: Protection] from system interruptions is important to our business.

If we experience system interruptions, it could harm our [removed: business.][added: business.]

[removed: Risks] [added: Risks] Related to Our [removed: Industry][added: Industry]

[removed: Our] [added: Our] ability to increase our revenues will depend to some extent upon introducing new products and services.

If the marketplace does not accept these new products and services, our revenues may [removed: decline.][added: decline.]

[removed: If] [added: If] we fail to keep up with rapidly changing technologies, our products could become less competitive or [removed: obsolete.][added: obsolete.]

If our competitors introduce new products and pricing strategies, it could decrease our product sales and market share, or could pressure us to reduce our product prices in a manner that reduces our [removed: margins.][added: margins.]

[removed: We] [added: In addition, we] may not be able to compete successfully against our competitors, and this inability could impair our capacity to sell our products.

[removed: Laws] [added: Laws] and regulations in the U.S. and abroad that apply to us or to our customers may expose us to liability, cause us to incur significant expense, affect our ability to compete in certain markets, limit the profitability of or demand for our products, or render our products obsolete.

New legislation or regulations, or changes to existing laws and regulations, may also negatively impact our business and increase our costs of doing [removed: business.][added: business.]

| • | Fair lending laws (e.g., the [removed: U.S. Truth In Lending Act and Regulation Z, the] Equal Credit Opportunity Act and Regulation B, and the Fair Housing Act); |

| • | Privacy and security laws and regulations that limit the use and disclosure of personally identifiable information, require security procedures, or otherwise apply to the collection, processing, storage, use and [removed: transmission] [added: transfer] of protected data (e.g., the U.S. Financial Services Modernization Act of 1999, also known as the Gramm Leach Bliley Act; the General Data Protection Regulation (the “GDPR”) [removed: adopted by the EU Parliament, the EU Council] and [removed: the EU Commission, and] country-specific data protection laws enacted to supplement the GDPR; the U.S. Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the Cybersecurity Act of 2015; the U.S. Department of Commerce’s National Institute of Standards and Technology’s Cybersecurity Framework; [added: the Clarifying Lawful Overseas Use of Data Act;] and identity theft, file freezing, security breach notification and similar state privacy laws); |

| • | [removed: Regulations applicable to, or standards] [added: Laws] and [removed: criteria adopted by,] [added: regulations applicable to] secondary market participants (e.g., Fannie Mae and Freddie Mac) that could have an impact on our scoring products, including [removed: any regulations, standards or criteria established as the result] [added: 12 CFR Part 1254 (Validation and Approval] of [added: Credit Score Models) issued by the Federal Housing Finance Agency in accordance with] Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law [removed: 115-174);] [added: 115-174), and any regulations, standards or criteria established pursuant to such laws or regulations;] |

Our product and pricing strategies may not be successful.

Demand for our products and services may be sensitive to product and pricing changes we implement, and our product and pricing strategies may not be accepted by the market.

If our customers fail to accept our product and pricing strategies, our revenues, results of operations and business may suffer.

Brazil, India, South Africa, Japan, China, Israel, Canada, and several other countries have introduced and, in some cases, enacted, similar privacy laws.

If we experience difficulties in these relationships, our future revenues may be adversely affected.

Our MD&A should be read in conjunction with Item 8, [removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data,] [added: Data*,] of this Annual Report on Form 10-K.

Actual results may differ from those referred to herein due to a number of factors, including but not limited to risks described in Item 1A, [removed: Risk Factors,] [added: *Risk Factors*,] in this Annual Report on Form 10-K.

[removed: BUSINESS OVERVIEW][added: BUSINESS OVERVIEW]

[removed: Strategies] [added: Strategies] and [removed: Initiatives][added: Initiatives]

During fiscal [removed: 2018,] [added: 2019,] our growth initiatives continued to generate significant free cash flow.

We utilized our cash to enhance stockholder value through investments in long-term growth [removed: initiatives] [added: initiatives; acquisitions of relevant technologies] and [added: products that strengthen] our [added: portfolio and competitive position; and our] stock repurchase programs.

The majority of our software solutions are [added: now] available through [added: both] the FICO® Analytic [removed: Cloud,] [added: Cloud] and [removed: starting fiscal 2017 we added AWS as our primary cloud infrastructure provider.][added: AWS.]

The FICO® Score Open Access [removed: program launched in 2014,] [added: program,] which allows our participating clients to provide their customers with a free FICO® Score along with content to help them understand the FICO® Score their lender uses, has more than [removed: 310] [added: 290] million consumer accounts with access to their free FICO® Scores.

During fiscal [removed: 2018,] [added: 2019,] we repurchased approximately [removed: 1.9] [added: 0.9] million shares at a total repurchase price of [removed: $336.9] [added: $228.9] million.

As of September 30, [removed: 2018,] [added: 2019,] we had [removed: $199.3] [added: $220.3] million remaining under our current stock repurchase program.

[removed: Overview] [added: Overview] of Financial [removed: Results][added: Results]

Total revenues for fiscal [removed: 2018] [added: 2019] were [removed: $1.03] [added: $1.16] billion, an increase of [removed: 11%] [added: 16%] from [removed: $932.2 million] [added: $1.00 billion] in fiscal [removed: 2017.][added: 2018.]

For our Applications and Decision Management Software segments, our cloud business continues to grow [removed: both in the absolute dollar value and] as [removed: a percentage of revenues as] we pursue our cloud-first strategy.

We derive a significant portion of revenues internationally, and 34% and [removed: 36%] [added: 35%] of total consolidated revenues were derived from clients outside the U.S. during fiscal [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

A significant portion of our revenues are derived from the sale of products and services within the banking (including consumer credit) industry, and [removed: 86%] [added: 87%] and [removed: 74%] [added: 85%] of our revenues were derived from within this industry during fiscal [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Arrangements with transactional or unit-based pricing accounted for 74% and [removed: 70%] [added: 75%] of our revenues during fiscal [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Operating income for fiscal [removed: 2018] [added: 2019] was [removed: $206.4] [added: $253.5] million, an increase of [removed: 16%] [added: 45%] from [removed: $177.2] [added: $175.4] million in fiscal [removed: 2017.][added: 2018.]

Operating margin was [removed: 20%] [added: 22%] and [removed: 19%] [added: 18%] for fiscal [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Diluted earnings per share for fiscal [removed: 2018] [added: 2019] was [removed: $4.57,] [added: $6.34,] an increase of [removed: 15%] [added: 56%] from [removed: $3.98] [added: $4.06] in fiscal [removed: 2017.][added: 2018.]

[removed: Bookings][added: Bookings]

[removed: Transactional] [added: Transactional] and Maintenance [removed: Bookings][added: Bookings]

[removed: Professional] [added: Professional] Services [removed: Bookings][added: Bookings]

[removed: License Bookings][added: License Bookings]

[removed: Bookings] [added: Bookings] Trend [removed: Analysis][added: Analysis]

| | [removed: Bookings] [added: Bookings] | | | | [removed: Bookings Yield (1)] [added: Bookings Yield (1)] | | | [removed: Number of Bookings over $1 Million] [added: Number of Bookings over $1 Million] | | | [removed: Weighted- Average Term (2)] [added: Weighted- Average Term (2)] | |

| | [removed: (In millions)] [added: (In millions)] | | | | | | | | | | [removed: (months)] [added: (months)] | |

| Quarter ended September 30, [removed: 2017] [added: 2019] | $ | [removed: 145.9] [added: 160.4] | | | [removed: 16] [added: 15] | % | | [removed: 32] [added: 34] | | | [removed: 29] [added: 34] | |

| [removed: Year ended September 30, 2017] | [removed: $ | 429.0] [added: Year Ended September 30,] | | | [removed: 36] | [removed: %] | | [removed: 88] | | | [removed: NM(a)] | |

Transactional and maintenance bookings were [removed: 46%] [added: 48%] and [removed: 41%] [added: 46%] of total bookings for the years ended September 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Professional services bookings were [removed: 43%] [added: 39%] and 43% of total bookings for the years ended September 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

License bookings were [removed: 11%] [added: 13%] and [removed: 16%] [added: 11%] of total bookings for the years ended September 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

Segment revenues, operating income, and related financial information, including [removed: geographic information,] [added: disaggregation of revenue,] for the years ended September 30, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] are set forth in Note [removed: 16] [added: 15] to the accompanying consolidated financial statements.

[removed: Revenues][added: Revenues]

The following tables set forth certain summary information on a segment basis related to our revenues for fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016:][added: 2017:]

| | [removed: Revenues Year] [added: Revenues Year] Ended September [removed: 30,] [added: 30,] | | | | | | | | | | | | [removed: Period-to-Period Change] [added: Period-to-Period Change] | | | | | | | | [removed: Period-to-Period Percentage Change] [added: Period-to-Period Percentage Change] | | | | |

| [removed: Segment] [added: Segment] | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2018] [added: 2019] to [removed: 2017] [added: 2018] | | | | [removed: 2017] [added: 2018] to [removed: 2016] [added: 2017] | | | | [removed: 2018] [added: 2019] to [removed: 2017] [added: 2018] | | | [removed: 2017] [added: 2018] to [removed: 2016] [added: 2017] | |

| | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | | | | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | | | | |

| | [removed: Percentage] [added: Percentage] of [removed: Revenues Year] [added: Revenues Year] Ended September [removed: 30,] [added: 30,] | | | | | | | |

| [removed: Segment] [added: Segment] | [removed: 2018] [added: 2019] | | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | |

During fiscal 2019, our cloud bookings accounted for 39% of our total bookings, compared to 35% during fiscal 2018.

Scores revenue increased 25% to $421.2 million in fiscal 2019 from $335.9 million in fiscal 2018, and Scores operating income increased 33% to $361.4 million in fiscal 2019 from $272.4 million in fiscal 2018.

Cloud revenues increased 12% to $270.4 million during fiscal 2019, from $240.9 million during fiscal 2018.

As a result, net income increased 52% to $192.1 million in fiscal 2019 from $126.5 million in fiscal 2018.

While we disclose estimated revenue expected to be recognized in the future related to unsatisfied performance obligations in Note 16 to the accompanying consolidated financial statements, we believe bookings amount is still a meaningful measure of our business as it includes estimated revenues omitted from Note 16, such as sales- or usage-based royalties derived from our software licenses, among others.

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | As Adjusted | | | | | | | As Adjusted | |

| Applications | $ | 605,034 | | | $ | 564,375 | | | $ | 560,634 | | | $ | 40,659 | | | $ | 3,741 | | | 7 | % | | 1 | % |

| Scores | 421,177 | | | | 335,870 | | | | 259,537 | | | | 85,307 | | | | 76,333 | | | | 25 | % | | 29 | % |

| Decision Management Software | 133,872 | | | | 99,901 | | | | 114,812 | | | | 33,971 | | | | (14,911 | | ) | | 34 | % | | (13 | )% |

| Total | $ | 1,160,083 | | | $ | 1,000,146 | | | $ | 934,983 | | | 159,937 | | | | 65,163 | | | | 16 | % | | 7 | % |

| | | | | As Adjusted | | | As Adjusted | |

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | As Adjusted | | | | | | | As Adjusted | |

| Transactional and maintenance | $ | 395,398 | | | $ | 372,283 | | | $ | 335,560 | | | $ | 23,115 | | | $ | 36,723 | | | 6 | % | | 11 | % |

| Professional services | 137,258 | | | | 142,736 | | | | 140,990 | | | | (5,478 | | ) | | 1,746 | | | | (4 | )% | | 1 | % |

| License | 72,378 | | | | 49,356 | | | | 84,084 | | | | 23,022 | | | | (34,728 | | ) | | 47 | % | | (41 | )% |

| Total | $ | 605,034 | | | $ | 564,375 | | | $ | 560,634 | | | 40,659 | | | | 3,741 | | | | 7 | % | | 1 | % |

The decrease in customer management solutions was primarily attributable to a decrease in license and services revenues.

The decrease in originations solutions was primarily attributable to a decrease in services revenues.

The increase in customer communication services was primarily attributable to an increase in transactional revenue.

The increase in collections & recovery solutions was primarily attributable to an increase in license revenue.

The decrease in fraud solutions was primarily attributable to a decrease in license revenue.

| | Year Ended September 30, | | | | | | | | | | | | Period-to-Period Change | | | | | | | | Period-to-Period Percentage Change | | | | |

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | As Adjusted | | | | | | | As Adjusted | |

| Transactional and maintenance | $ | 415,288 | | | $ | 331,662 | | | $ | 254,424 | | | $ | 83,626 | | | $ | 77,238 | | | 25 | % | | 30 | % |

| Professional services | 2,157 | | | | 1,900 | | | | 2,869 | | | | 257 | | | | (969 | | ) | | 14 | % | | (34 | )% |

| License | 3,732 | | | | 2,308 | | | | 2,244 | | | | 1,424 | | | | 64 | | | | 62 | % | | 3 | % |

| Total | $ | 421,177 | | | $ | 335,870 | | | $ | 259,537 | | | 85,307 | | | | 76,333 | | | | 25 | % | | 29 | % |

The increase in business-to-business scores was primarily attributable to a higher unit price in mortgage and auto activities.

| | Year Ended September 30, | | | | | | | | | | | | Period-to-Period Change | | | | | | | | Period-to-Period Percentage Change | | | | |

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | As Adjusted | | | | | | | As Adjusted | |

| Transactional and maintenance | $ | 50,262 | | | $ | 46,658 | | | $ | 43,943 | | | $ | 3,604 | | | $ | 2,715 | | | 8 | % | | 6 | % |

| Professional services | 44,680 | | | | 32,274 | | | | 34,045 | | | | 12,406 | | | | (1,771 | | ) | | 38 | % | | (5 | )% |

| License | 38,930 | | | | 20,969 | | | | 36,824 | | | | 17,961 | | | | (15,855 | | ) | | 86 | % | | (43 | )% |

| Total | $ | 133,872 | | | $ | 99,901 | | | $ | 114,812 | | | 33,971 | | | | (14,911 | | ) | | 34 | % | | (13 | )% |

| | Year Ended September 30, | | | | | | | | | | | | Period-to-Period Change | | | | | | | | Period-to-Period Percentage Change | | | | |

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | As Adjusted | | | | | | | As Adjusted | |

| Revenues | $ | 1,160,083 | | | $ | 1,000,146 | | | $ | 934,983 | | | $ | 159,937 | | | $ | 65,163 | | | 16 | % | | 7 | % |

| Cost of revenues | 336,845 | | | | 312,898 | | | | 287,607 | | | | 23,947 | | | | 25,291 | | | | 8 | % | | 9 | % |

| Selling, general and administrative | 414,086 | | | | 376,912 | | | | 337,167 | | | | 37,174 | | | | 39,745 | | | | 10 | % | | 12 | % |

| Total operating expenses | 906,535 | | | | 824,787 | | | | 752,824 | | | | 81,748 | | | | 71,963 | | | | 10 | % | | 10 | % |

We have migrated several core applications, including the Decision Management Suite, to AWS and will migrate additional applications over the next couple of years.

Our cloud bookings accounted for 35% and 24% of our total bookings during fiscal 2018 and 2017, respectively, directly demonstrating the willingness among our customers to engage our cloud-based solutions.

During fiscal 2017, we announced the FICO Financial Inclusion Initiative, a global effort to increase access to affordable credit for consumers and businesses with limited or no credit history, through the use of alternative data.

In addition, we are pursuing opportunities to make FICO® Scores available to third-parties for affinity, white-labeled programs to further penetrate and expand the markets where our scores are available.

Scores revenue increased 29% to $342.6 million in fiscal 2018 from $266.4 million in fiscal 2017, and Scores operating income increased 32% to $279.2 million in fiscal 2018 from $211.9 million in fiscal 2017.

During fiscal 2018, cloud revenues accounted for $241.5 million, or 35% of non-Scores revenues, compared to $202.7 million, or 30% during fiscal 2017.

Net income increased 11% to $142.4 million in fiscal 2018 from $128.3 million in fiscal 2017 primarily due to an increase in operating income, partially offset by the income tax expense related to enactment of the Tax Cuts and Jobs Act.

| Applications | $ | 585,571 | | | $ | 553,167 | | | $ | 532,642 | | | $ | 32,404 | | | $ | 20,525 | | | 6 | % | | 4 | % |

| Scores | 342,648 | | | | 266,354 | | | | 241,059 | | | | 76,294 | | | | 25,295 | | | | 29 | % | | 10 | % |

| Decision Management Software | 104,256 | | | | 112,648 | | | | 107,655 | | | | (8,392 | | ) | | 4,993 | | | | (7 | )% | | 5 | % |

| Total | $ | 1,032,475 | | | $ | 932,169 | | | $ | 881,356 | | | 100,306 | | | | 50,813 | | | | 11 | % | | 6 | % |

| Transactional and maintenance | $ | 381,109 | | | $ | 348,861 | | | $ | 328,472 | | | $ | 32,248 | | | $ | 20,389 | | | 9 | % | | 6 | % |

| Professional services | 142,908 | | | | 141,857 | | | | 138,775 | | | | 1,051 | | | | 3,082 | | | | 1 | % | | 2 | % |

| License | 61,554 | | | | 62,449 | | | | 65,395 | | | | (895 | | ) | | (2,946 | | ) | | (1 | )% | | (5 | )% |

| Total | $ | 585,571 | | | $ | 553,167 | | | $ | 532,642 | | | 32,404 | | | | 20,525 | | | | 6 | % | | 4 | % |

| Transactional and maintenance | $ | 337,530 | | | $ | 259,780 | | | $ | 233,655 | | | $ | 77,750 | | | $ | 26,125 | | | 30 | % | | 11 | % |

| Professional services | 1,751 | | | | 2,849 | | | | 4,185 | | | | (1,098 | | ) | | (1,336 | | ) | | (39 | )% | | (32 | )% |

| License | 3,367 | | | | 3,725 | | | | 3,219 | | | | (358 | | ) | | 506 | | | | (10 | )% | | 16 | % |

| Total | $ | 342,648 | | | $ | 266,354 | | | $ | 241,059 | | | 76,294 | | | | 25,295 | | | | 29 | % | | 10 | % |

The increase in business-to-business scores was primarily attributable to an increase in our transactional scores driven by new originations, prescreen and account management.

| Transactional and maintenance | $ | 47,420 | | | $ | 44,019 | | | $ | 43,792 | | | $ | 3,401 | | | $ | 227 | | | 8 | % | | 1 | % |

| Professional services | 32,145 | | | | 34,863 | | | | 26,778 | | | | (2,718 | | ) | | 8,085 | | | | (8 | )% | | 30 | % |

| License | 24,691 | | | | 33,766 | | | | 37,085 | | | | (9,075 | | ) | | (3,319 | | ) | | (27 | )% | | (9 | )% |

| Total | $ | 104,256 | | | $ | 112,648 | | | $ | 107,655 | | | (8,392 | | ) | | 4,993 | | | | (7 | )% | | 5 | % |

| Revenues | $ | 1,032,475 | | | $ | 932,169 | | | $ | 881,356 | | | $ | 100,306 | | | $ | 50,813 | | | 11 | % | | 6 | % |

| Cost of revenues | 310,699 | | | | 287,123 | | | | 265,173 | | | | 23,576 | | | | 21,950 | | | | 8 | % | | 8 | % |

| Selling, general and administrative | 380,362 | | | | 339,796 | | | | 328,940 | | | | 40,566 | | | | 10,856 | | | | 12 | % | | 3 | % |

| Total operating expenses | 826,038 | | | | 754,969 | | | | 711,764 | | | | 71,069 | | | | 43,205 | | | | 9 | % | | 6 | % |

| Operating income | 206,437 | | | | 177,200 | | | | 169,592 | | | | 29,237 | | | | 7,608 | | | | 16 | % | | 4 | % |

| Income before income taxes | 188,010 | | | | 151,324 | | | | 144,569 | | | | 36,686 | | | | 6,755 | | | | 24 | % | | 5 | % |

| Net income | $ | 142,415 | | | $ | 128,256 | | | $ | 109,448 | | | 14,159 | | | | 18,808 | | | | 11 | % | | 17 | % |

Cost of revenues as a percentage of revenues increased to 31% during fiscal 2017 from 30% during fiscal 2016.

The increase in personnel and labor costs was primarily attributable to an increase in professional services delivery cost driven by higher services revenue and an increase in salaries and benefit costs as a result of our increased headcount.

The fiscal 2017 over 2016 increase of $7.2 million in research and development expenses was primarily attributable to a $5.0 million increase in personnel and labor costs and a $2.6 million increase in facilities and infrastructure costs, mainly driven by our continued investment in the areas of cloud computing and SaaS, as well as new products primarily in the Decision Management Software segment.

Research and development expenses as a percentage of revenues were 12% during fiscal 2017, consistent with those incurred during fiscal 2016.

In fiscal 2019, we expect that research and development expenditures as a percentage of revenues will be consistent with or slightly higher than those incurred during fiscal 2018.

The fiscal 2017 over 2016 increase of $10.9 million was primarily attributable to a $21.0 million increase in labor and personnel costs, partially offset by a $4.0 million decrease in marketing expenses and a $6.6 million decrease in outside services.

The decrease in marketing expenses was primarily attributable to a company-wide marketing event during our fiscal 2016.

The decrease in outside services was primarily attributable to a one-time settlement during fiscal 2017.

Selling, general and administrative expenses as a percentage of revenues was 36% during fiscal 2017, materially consistent with those incurred during fiscal 2016.

[removed: Market] [added: Market] Risk [removed: Disclosures][added: Disclosures]

[removed: Interest Rate][added: Interest Rate]

The following table presents the principal amounts and related weighted-average yields for our investments with interest rate risk at September 30, [removed: 2018] [added: 2019] and [removed: 2017:][added: 2018:]

| | [removed: September 30, 2018 | | | | | | | | | | | September] [added: September] 30, [removed: 2017] [added: 2018] | | | | | | | | | |

| | [removed: Cost Basis] [added: Cost Basis] | | | | [removed: Carrying Amount] [added: Carrying Amount] | | | | [removed: Average Yield] [added: Average Yield] | | | [removed: Cost Basis] [added: Cost Basis] | | | | [removed: Carrying Amount] [added: Carrying Amount] | | | | [removed: Average Yield] [added: Average Yield] | |

| | [removed: (Dollars] [added: (Dollars] in [removed: thousands)] [added: thousands)] | | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents | $ | [removed: 90,023] [added: 106,426] | | | $ | [removed: 90,023] [added: 106,426] | | | [removed: 0.66] [added: 0.76] | % | | $ | [removed: 105,618] [added: 90,023] | | | $ | [removed: 105,618] [added: 90,023] | | | [removed: 0.56] [added: 0.66] | % |

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”, and with the [removed: 2008 Senior Notes and the] 2010 Senior Notes, the “Senior Notes”).The fair value of the Senior Notes may increase or decrease due to various factors, including fluctuations in market interest rates and fluctuations in general economic conditions.

The following table presents the carrying amounts and fair values for the Senior Notes at September 30, [removed: 2018] [added: 2019] and [removed: 2017:][added: 2018:]

| | [removed: September] [added: September] 30, [removed: 2018] [added: 2019] | | | | | | | | [removed: September] [added: | | | September] 30, [removed: 2017] [added: 2018] | | | | | | | [added: | | |]

| | [removed: Carrying Amounts] [added: Carrying Amounts] | | | | [removed: Fair Value] [added: Fair Value] | | | | [removed: Carrying Amounts] [added: Carrying Amounts] | | | | [removed: Fair Value] [added: Fair Value] | | |

| | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | | | | | | |

| The 2010 Senior Notes | [removed: 113,000] [added: 85,000] | | | | [removed: 114,413] [added: 86,121] | | | | 113,000 | | | | [removed: 119,106] [added: 114,413] | | |

| The 2018 Senior Notes | 400,000 | | | | $ | [removed: 404,000] [added: 428,000] | | | [removed: —] [added: 400,000] | | | | [removed: —] [added: 404,000] | | |

| Total | $ | [removed: 513,000] [added: 485,000] | | | $ | [removed: 518,413] [added: 514,121] | | | $ | [removed: 244,000] [added: 513,000] | | | $ | [removed: 253,356] [added: 518,413] | |

We had [removed: $257.0] [added: $345.0] million in borrowings outstanding at a weighted average interest of [removed: 3.555%] [added: 3.423%] under the credit facility as of September 30, [removed: 2018.][added: 2019.]

[removed: Foreign] [added: Foreign] Currency Forward [removed: Contracts][added: Contracts]

The following tables summarize our outstanding foreign currency forward contracts, by currency, at September 30, [removed: 2018] [added: 2019] and [removed: 2017:][added: 2018:]

| | [removed: September] [added: September] 30, [removed: 2018] [added: 2019] | | | | | | | | [added: September 30, 2018] | | [added: | | | | |]

| | [removed: Contract Amount] [added: Contract Amount] | | | | | | | | [removed: Fair Value] [added: Fair Value] | |

| | [removed: Foreign Currency] [added: Foreign Currency] | | | | [removed: US$] [added: US$] | | | | [removed: US$] [added: US$] | |

| | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | |

| British pound (GBP) | GBP | [removed: 9,341] [added: 5,200] | | | $ | [removed: 12,500] [added: 6,400] | | | — | |

The foreign currency forward contracts were entered into on September 30 of each fiscal year; therefore, the fair value was $0 on September 30, [removed: 2018] [added: 2019] and [removed: 2017.][added: 2018.]

| | September 30, 2019 | | | | | | | | | |

| Euro (EUR) | EUR | 10,800 | | | $ | 11,723 | | | — | |

| Singapore dollar (SGD) | SGD | 5,798 | | | $ | 4,200 | | | — | |

| | Contract Amount | | | | | | | | Fair Value | |

| | Foreign Currency | | | | US$ | | | | US$ | |

| | (In thousands) | | | | | | | | | |

On May 7, 2008, we issued $275 million of senior notes to a group of institutional investors in a private placement (the “2008 Senior Notes”), the outstanding aggregate principal amount of which was paid in full at maturity on May 7, 2018.

| The 2008 Senior Notes | $ | — | | | $ | — | | | $ | 131,000 | | | $ | 134,250 | |

| | September 30, 2017 | | | | | | | | | |

| Euro (EUR) | EUR | 5,050 | | | $ | 5,968 | | | — | |

[removed: GENERAL][added: GENERAL]

[removed: PRODUCTS] [added: PRODUCTS] AND [removed: SERVICES][added: SERVICES]

[removed: Our Segments][added: Our Segments]

| • | [removed: Applications.] [added: *Applications.*] This segment includes pre-configured decision management applications designed for a specific type of business problem or process — such as marketing, account origination, customer management, fraud, collections and insurance claims management — as well as associated professional services. These applications are available to our customers as on-premises software, and many are available as hosted, software-as-a-service (“SaaS”) applications through the FICO® Analytic Cloud [removed: and/or] [added: or third-party public clouds, such as those provided by] Amazon Web [removed: Services, Inc. (“AWS”), our primary cloud infrastructure provider.] [added: Services (“AWS”).] |

| • | [removed: Scores.] [added: *Scores*.] This segment includes our business-to-business scoring solutions and services, our business-to-consumer scoring solutions and services including myFICO® solutions for consumers, and associated professional services. Our scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our scoring solutions are distributed through major credit reporting agencies worldwide, as well as services through which we provide our scores to clients directly. |

| • | [removed: Decision] [added: *Decision] Management [removed: Software.] [added: Software.*] This segment is composed of analytic and decision management software tools that clients can use to create their own custom decision management applications, our [removed: new] FICO® Decision Management Suite, as well as associated professional services. These tools are available to our customers as on-premises [removed: software or] [added: software,] through the FICO® Analytic Cloud [removed: and/or] [added: or third-party public clouds, such as those provided by] AWS. |

[removed: Our Solutions][added: Our Solutions]

| • | Software such as decision management systems that [added: author and] implement business rules, models and decision strategies, often in a real-time environment, as well as software for managing customer engagement. |

[removed: Applications][added: Applications]

During fiscal [removed: 2018,] [added: 2019,] we continued to expand our product offerings for the FICO® Analytic Cloud and AWS, resulting in increased sales opportunities by accommodating small to mid-size businesses that benefit from the affordability and simplicity of cloud-based solutions.

Within our Applications segment, our fraud solutions accounted for [added: 18%,] 17%, [removed: 19%] and [removed: 20%] [added: 19%] of total revenues in each of fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively; our customer communication services accounted for [added: 9%,] 10%, [removed: 10%] and [removed: 9%] [added: 10%] of total revenues for each of these periods, respectively; and our customer management solutions accounted for [added: 6%,] 8%, [removed: 8%] and [removed: 9%] [added: 8%] of total revenues in each of these periods, respectively.

[removed: Marketing Applications][added: *Marketing Applications*]

[removed: FICO offers a suite] [added: FICO® Marketing Solutions Suite is made up] of [removed: marketing] products, capabilities and services designed to integrate the technology and analytic services needed to perform context-sensitive customer acquisition, cross-selling and retention programs and deliver mathematically optimized offers.

[removed: Our marketing solutions enable] [added: The Marketing Solutions Suite enables] companies that offer multiple products and use multiple channels (companies such as large financial institutions, consumer branded goods companies, pharmaceutical companies, retail merchants and hospitality companies) to execute more efficient and profitable customer interactions.

[removed: Originations Applications][added: *Originations Applications*]

[removed: Customer] [added: *Customer] Management [removed: Applications][added: Applications*]

FICO® TRIAD® Customer Manager, a leading credit management system, is available both [removed: on premises] [added: on-premises] and in the FICO® Analytic Cloud.

[added: | • |] FICO® Strategy Director, which helps organizations proactively manage consumer accounts to increase revenue, decrease risk and improve customer [removed: retention, is offered both on premises and in AWS.][added: retention; |]

[removed: Fraud] [added: *Fraud] and Security Management [removed: Applications][added: Applications*]

Our solutions are designed to detect and prevent a wide variety of fraud and risk types across multiple industries, including credit and debit payment card fraud; e-payment fraud; deposit account fraud; [added: identity theft;] healthcare fraud; Medicaid and Medicare fraud; and property and casualty insurance claims fraud, including workers’ compensation fraud.

In addition to our [removed: Falcon] [added: Falcon®] products, we offer a wide range of solutions focused on preventing and detecting a variety of financial crimes.

The service analyzes daily transactions from participating [removed: networks,] [added: networks] and uses this data to identify common points of compromise and suspect cards most likely to incur fraud.

FICO’s cybersecurity products utilize predictive analytics to deliver enterprise-level risk [removed: assessments as well as prioritization of tactical cyber threat response.][added: assessments.]

The FICO® [removed: Enterprise Security] [added: Cyber Risk] Score provides an empirically derived score that conveys the security posture of an organization and the likelihood of a material data breach in the next twelve months.

The score is used to manage the cyber risk of an enterprise as well as [removed: risks] [added: to assess third-party risk that may be] introduced by [removed: trusted business partners.][added: third-party partners and suppliers.]

[removed: Collections] [added: *Collections] & Recovery [removed: Applications][added: Applications*]

FICO® Debt [removed: Manager™ solution,] [added: Manager™,] FICO® Debt Manager™ Pro, FICO® Debt Manager™ Pro Plus, FICO® PlacementsPlus® service and Placement OptimizerSM solution [added: (collectively, the “FICO Debt Management Solutions”)] automate the full cycle of collections and recovery, including early collections, late collections, asset disposal, agency placement and optimization, recovery, litigation, bankruptcy, asset management and residual balance recovery.

[removed: Customer] [added: *Customer] Communication [removed: Services][added: Services*]

[removed: Analytic Services][added: *Analytic Services*]

[removed: Scores][added: Scores]

The [removed: FICO®] [added: FICO®] Score XD expands the scorable population using alternative credit data.

[removed: FICO®] [added: FICO®] Score XD looks at public records and property data, and a consumer’s history with mobile, landline phone and cable payments, to generate scores on the same 300-850 scale as standard [removed: FICO®] [added: FICO®] Scores.

[removed: FICO®] [added: FICO®] Score XD is available to lenders from LexisNexis Risk Solutions and Equifax.

Outside the U.S., we offer FICO® Scores, including scores using alternative data, for consumers, and in some cases for small and medium enterprises, through credit reporting [removed: agencies in 24 countries worldwide.][added: agencies.]

We [added: also] have installed [removed: nine] client-specific versions of the FICO® Score in [removed: five] [added: over 10] countries.

Like [removed: FICO®] [added: FICO®] Scores in the U.S., these scores help lenders in multiple countries leverage the [removed: FICO®] [added: FICO®] Score’s predictive analysis to assess the risk of marketing prospects and credit applicants.

[removed: FICO®] [added: FICO®] Scores are in use or being implemented in [removed: 20] [added: 30] different countries across five continents outside the U.S.

They are distributed directly by us through our myFICO® service and through licensed distribution partners, including Experian and certain lenders, for use in customer and [removed: noncustomer] [added: non-customer] programs.

Customers can use products to simulate how taking specific actions [removed: would] [added: could] affect their FICO® [removed: Score.][added: Score 8.]

[removed: Decision] [added: Decision] Management [removed: Software][added: Software]

In September 2019, FICO introduced FICO® Falcon® X, a unified platform for the detection and investigation of both fraud and financial crimes.

We also announced the FICO® Financial Crimes Studio, which allows banks’ data science teams to develop machine learning models using open source libraries, as well as FICO machine learning libraries, and then deploy the models on FICO® Falcon® X for operational use.

FICO® Card Compromise Manager is used in conjunction with the FICO® Falcon® Platform to identify point-of-sale and e-commerce card compromises with analytically derived recommenced actions—such as card block and reissue, or watch-listing—to optimize loss prevention.

FICO® Identity Resolution Engine helps organizations detect and investigate organized criminal behavior using graph analytics to identify entities and their connections across federated data sources.

In August 2019, FICO acquired EZMCOM, Inc. (“EZMCOM”) to provide both identity proofing (“ID proofing”) and user authentication solutions.

ID proofing is the digital process of on-boarding new customers without requiring face-to-face verification.

The technology provides an extra layer of security that is easy to use, with minimal customer inconvenience, thereby preventing fraud as well as ensuring regulatory compliance standards such as e-KYC are met.

User authentication is the real-time corroboration of an identity previously established to enable his or her access to an electronic or digital asset.

As an authentication hub, FICO’s technology includes multifactor, biometric, and behavioral (user and device-based) capabilities.

We also continue to innovate with respect to scores that consider consumer permissioned data from accounts such as checking, savings, or money market accounts.

Incorporating consumer contributed data is a unique approach to helping empower consumers to establish or improve their creditworthiness by using data that reflects sound financial activity but that is not part of a traditional credit report.

This can help consumers qualify for the credit they seek under more competitive terms.

This approach is particularly helpful for consumers who may have very sparse or inactive credit files and are seeking a path toward greater financial inclusion in mainstream banking.

| • | FICO® Decision Modeler, the core decision rules modeling tool, which improves scale, performance, and versatility; |

| • | FICO® Decision Central™ (formerly known as Model Central), an analytic and decision model management tool, which expands its versatility and usability across a much broader range of implementations and use cases and makes it fully cloud-capable; and |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

Applications

Scores

*Customer Engagement*.

*Cybersecurity.* We have advanced services for cyber risk assessment, which enable users to understand the likelihood their organization or a third-party organization that is their partner, supplier, or potential supplier will suffer a material data breach within a forward-looking 12-month period.

These services are used by organizations to track and monitor their own cyber risk for self-assessment and to assess and monitor partner and supplier enterprises for third-party risk assessment.

They are also used by insurance underwriters to assess cyber risk for cyber breach insurance policies.

FICO’s methodology for segmentation and deployment of predictive analytics enables institutions to deliver faster, fully automated and compliant decisions for a broad range of banking challenges based on each customer’s risk and relationship value.

Separately, FICO® Falcon® Cybersecurity Analytics utilizes advanced streaming self-learning models to help organizations detect and remediate cyber-attacks by reducing the dwell time between when an attack occurs and when it is recognized.

These products can be used independently or together as part of a comprehensive cyber risk management program.

Predictive Modeling.

Decision Analysis and Optimization.

Transaction Profiling.

Customer Data Integration.

Customer Engagement.

Social Network Analysis.

Cybersecurity.

We continue to seek projects in the cybersecurity and security information and event management space that leverage FICO’s streaming analytics, transaction profiling and unsupervised modeling technologies.

These technologies include those successfully leveraged by our fraud management systems, including the FICO® Falcon® Platform, and new methods we believe to be unique approaches for detecting certain types of cyber security threats.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended September] [added: ended September] 30, [removed: 2018][added: 2019]

| [removed: o] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 \[NO FEE REQUIRED\]] [added: 1934] |

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] File [removed: Number 1-11689][added: Number 1-11689]

[removed: Fair] [added: Fair] Isaac [removed: Corporation][added: Corporation]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware] [added: Delaware] | | [removed: 94-1499887] [added: 94-1499887] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization)] [added: organization)] | | [removed: (I.R.S. Employer Identification No.)] [added: (I.R.S. Employer Identification No.)] |

| [removed: 181] [added: 181] Metro Drive, Suite [removed: 700] [added: 700] | | | [added: |]

| [removed: San Jose, California] [added: San Jose,] | [added: California] | [removed: 95110-1346] | [added: 95110-1346 |]

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | | [removed: (Zip Code)] | [added: (Zip Code) |]

[removed: Registrant’s] [added: Registrant’s] telephone number, including area [removed: code:][added: code:]

[removed: 408-535-1500][added: 408\-535-1500]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: (Title] [added: Title] of [removed: Class)] [added: each Class] | [added: Trading Symbol(s)] | [removed: (Name] [added: Name] of each exchange on which [removed: registered)] [added: registered] |

| Common Stock, $0.01 par value per share | [added: FICO] | New York Stock [removed: Exchange, Inc.] [added: Exchange] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: None][added: None]

Yes [removed: ý] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T [added: (§232.405 of this chapter)] during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

See [added: the] definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange [removed: Act.][added: Act:]

| Large Accelerated Filer | | [removed: ý] [added: ☒] | Accelerated Filer | | [removed: o] [added: ☐] |

| Non-Accelerated Filer | | [removed: o] [added: ☐] | [added: Smaller Reporting Company] | | [removed: o] [added: ☐] |

| | | | Emerging Growth Company | | [removed: o] [added: ☐] |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the [removed: Exchange] Act.

As of March 31, [removed: 2018,] [added: 2019,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was [removed: $3,548,843,145] [added: $5,769,737,106] based on the last transaction price as reported on the New York Stock Exchange on such date.

The number of shares of common stock outstanding on October [removed: 26, 2018] [added: 25, 2019] was [removed: 28,955,028] [added: 28,961,612] (excluding [removed: 59,901,755] [added: 59,895,171] shares held by the Company as treasury stock).

Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

[removed: | [PART I](#sC8E47CD223545980B43190F579C3E6E0) | | |][added: PART I]

| Item 1. | [removed: [Business](#s7555ADD30B935FDDB404347B2552589E)] [added: [Business](#s43015EA11CEB5976BBDA9B13E8A2D2E8)] | [removed: [3](#s7555ADD30B935FDDB404347B2552589E)] [added: [3](#s43015EA11CEB5976BBDA9B13E8A2D2E8)] |

| Item 1A. | [Risk [removed: Factors](#sE785B47E15695B028FF7D637113CD23F)] [added: Factors](#s78C3B3F6C1845AE2AF33D6B27F26399D)] | [removed: [13](#sE785B47E15695B028FF7D637113CD23F)] [added: [14](#s78C3B3F6C1845AE2AF33D6B27F26399D)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s602246C0830E5D6E912A1715F6825A50)] [added: Comments](#sAF9F3215B4BF580180D634C2E9EBF543)] | [removed: [23](#s602246C0830E5D6E912A1715F6825A50)] [added: [24](#sAF9F3215B4BF580180D634C2E9EBF543)] |

| | | | |

| --- | --- | --- | --- |

| | | | |

Yes ☒ No ☐

Yes ☒ No ☐

| | | | |

| --- | --- | --- | --- |

| | | | |

| ☐ | Yes | ☒ | No |

| [PART II](#s1C4BC7883C5D5305974BA89453AD6FC8) | | |

| [PART IV](#sDB9958FC47595CBD8964A4718F174F8F) | | |

| [Signatures](#s6F552ABB62EB5C38890E51D9A8D4812A) | | [95](#s6F552ABB62EB5C38890E51D9A8D4812A) |

10-K 1 fico10-k2018.htm FICO 10-K 2018

| | | |

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

(Check one):

| [PART II](#s2E11175A642C5A238353693B3A505345) | | |

| [PART IV](#sFD96A137EB1555E592A1E3A8ABC26C92) | | |

| [Signatures](#sA7DD97EB15F85ACF85891FD0C9E6420F) | | [93](#sA7DD97EB15F85ACF85891FD0C9E6420F) |

| • | approximately 124,000 square feet of office space in San Rafael, California in one building under a lease expiring in fiscal [removed: 2020;] [added: 2025;] this is used for all of our segments; |

| • | approximately [removed: 84,000] [added: 173,000] square feet of office space in Bangalore, India in one building under a lease expiring in fiscal [removed: 2019;] [added: 2022;] this is used for Applications and Decision Management Software segments; |

| • | approximately 80,000 square feet of office space in San Diego, California in one building under a lease expiring in fiscal [removed: 2020;] [added: 2027;] this is used for Applications and Decision Management Software segments; and |

| • | approximately [removed: 77,000] [added: 45,000] square feet of office space in Roseville, Minnesota in one building under a lease expiring in fiscal [removed: 2023; 16,000 square feet of this space is subleased to a third party;] [added: 2028;] this is used for all of our segments. |

In addition, we lease an aggregate of approximately [removed: 249,000] [added: 254,000] square feet of office and data center space in a number of smaller domestic locations and internationally in the United Kingdom, China, Singapore, and several other locations.

See Note [removed: 18] [added: 17] to the accompanying consolidated financial statements for information regarding our obligations under leases.

[removed: PART II][added: PART II]

[removed: Market Information][added: Market Information]

According to records of our transfer agent, at October [removed: 26, 2018,] [added: 25, 2019,] we had [removed: 331] [added: 303] stockholders of record of our common stock.

[removed: Unregistered] [added: Unregistered] Sales of Equity Securities and Use of [removed: Proceeds][added: Proceeds]

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

| [removed: Period] [added: Period] | [removed: Total Number of Shares Purchased (1)] [added: Total Number of Shares Purchased (1)] | | | [removed: Average Price Paid per Share] [added: Average Price Paid per Share] | | | | [removed: Total Number of Shares Purchased as] [added: Total Number of Shares Purchased as] Part [removed: of Publicly Announced Plans or Programs (2)] [added: of Publicly Announced Plans or Programs (2)] | | | [removed: Maximum Dollar Value] [added: Maximum Dollar Value] of [removed: Shares that] [added: Shares that] May Yet [removed: Be Purchased Under the] [added: Be Purchased Under the] Plans [removed: or Programs (2)] [added: or Programs (2)] | | |

| (1) | Includes [removed: 6,452] [added: 5,225] shares delivered in satisfaction of the tax withholding obligations resulting from the vesting of restricted stock units held by employees during the quarter ended September 30, [removed: 2018.] [added: 2019.] |

| (2) | In [removed: October 2017,] [added: July 2018,] our Board of Directors approved a stock repurchase program following the completion of our previous program. This program was open-ended and authorized repurchases of shares of our common stock up to an aggregate cost of $250.0 million in the open market or in negotiated transactions. In July [removed: 2018,] [added: 2019,] our Board of Directors approved a new stock repurchase program following the completion of the [removed: October 2017] [added: July 2018] program. The new program is open-ended and authorizes repurchases of shares of our common stock up to an aggregate cost of $250.0 million in the open market or in negotiated transactions. |

[removed: Performance Graph][added: Performance Graph]

The following graph shows the total stockholder return of an investment of $100 in cash on September 30, [removed: 2013,] [added: 2014,] in (a) the Company’s common stock, (b) the Standard & Poor’s 500 Stock Index and (c) the Standard & Poor’s 500 Application Software Index, in each case with reinvestment of dividends.

[removed: ][added: ]

| July 1, 2019 through July 31, 2019 | 63,866 | | | $ | 335.90 | | | 60,554 | | | $ | 250,000,000 | |

| August 1, 2019 through August 31, 2019 | 76,445 | | | $ | 348.16 | | | 75,000 | | | $ | 223,871,960 | |

| September 1, 2019 through September 30, 2019 | 10,468 | | | $ | 352.38 | | | 10,000 | | | $ | 220,332,604 | |

| Total | 150,779 | | | $ | 343.26 | | | 145,554 | | | $ | 220,332,604 | |

| July 1, 2018 through July 31, 2018 | 276,830 | | | $ | 201.18 | | | 271,955 | | | $ | 250,000,000 | |

| August 1, 2018 through August 31, 2018 | 201,445 | | | $ | 218.88 | | | 200,000 | | | $ | 206,224,769 | |

| September 1, 2018 through September 30, 2018 | 30,132 | | | $ | 232.39 | | | 30,000 | | | $ | 199,252,394 | |

| Total | 508,407 | | | $ | 210.04 | | | 501,955 | | | $ | 199,252,394 | |

We acquired [removed: InfoCentricity, Inc. in April 2014,] TONBELLER Aktiengesellschaft in January 2015, [removed: and] QuadMetrics, Inc. in May [removed: 2016.][added: 2016, and EZMCOM in August 2019.]

| | [removed: Year] [added: Year] Ended September [removed: 30,] [added: 30,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017 (1)] [added: 2018] | | | | [removed: 2016] [added: 2017 (1)] | | | | [removed: 2015 (1)] [added: 2016] | | | | [removed: 2014 (1)] [added: 2015 (1)] | | |

| | [removed: (In] [added: (In] thousands, except per share [removed: data)] [added: data)] | | | | | | | | | | | | | | | | | | |

| Basic earnings per share | [removed: 4.79] [added: 6.63] | | | | [removed: 4.16] [added: 4.26] | | | | [removed: 3.52] [added: 4.32] | | | | [removed: 2.75] [added: 3.52] | | | | [removed: 2.80] [added: 2.75] | | |

| Diluted earnings per share | [removed: 4.57] [added: 6.34] | | | | [removed: 3.98] [added: 4.06] | | | | [removed: 3.39] [added: 4.14] | | | | [removed: 2.65] [added: 3.39] | | | | [removed: 2.72] [added: 2.65] | | |

| Dividends declared per share | — | | | | [removed: 0.04] [added: —] | | | | [removed: 0.08] [added: 0.04] | | | | 0.08 | | | | 0.08 | | |

| | [removed: September 30,] [added: September 30,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | | | | | | | | | | |

| Working capital | $ | [removed: (83,703] [added: (35,122] | ) | | $ | [removed: (15,724] [added: (77,514] | ) | | $ | [removed: 21,561] [added: 22,842] | | | $ | [removed: 42,727] [added: 21,561] | | | $ | [removed: (52,877] [added: 42,727] | [removed: )] |

| Senior notes | [removed: 513,000] [added: 485,000] | | | | [removed: 244,000] [added: 513,000] | | | | [removed: 316,000] [added: 244,000] | | | | [removed: 376,000] [added: 316,000] | | | | [removed: 447,000] [added: 376,000] | | |

| Revolving line of credit | [removed: 257,000] [added: 345,000] | | | | [removed: 361,000] [added: 257,000] | | | | [removed: 255,000] [added: 361,000] | | | | [removed: 232,000] [added: 255,000] | | | | [removed: 99,000] [added: 232,000] | | |

(1) Results of operations for fiscal years [removed: 2017, 2015] [added: 2017] and [removed: 2014] [added: 2015] included pre-tax charges of $4.5 [removed: million, $18.2] million and [removed: $4.3] [added: $18.2] million, respectively, in restructuring and acquisition-related expenses.

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | | | |

| Revenues | $ | 1,160,083 | | | $ | 1,000,146 | | | $ | 934,983 | | | $ | 881,356 | | | $ | 838,781 | |

| Operating income | 253,548 | | | | 175,359 | | | | 182,159 | | | | 169,592 | | | | 137,505 | | |

| Net income | 192,124 | | | | 126,482 | | | | 133,414 | | | | 109,448 | | | | 86,502 | | |

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | | | |

| Total assets | 1,433,448 | | | | 1,330,467 | | | | 1,348,728 | | | | 1,220,676 | | | | 1,230,163 | | |

| Stockholders’ equity | 289,767 | | | | 287,437 | | | | 466,183 | | | | 446,828 | | | | 436,998 | | |

| Revenues | $ | 1,032,475 | | | $ | 932,169 | | | $ | 881,356 | | | $ | 838,781 | | | $ | 788,985 | |

| Operating income | 206,437 | | | | 177,200 | | | | 169,592 | | | | 137,505 | | | | 161,868 | | |

| Net income | 142,415 | | | | 128,256 | | | | 109,448 | | | | 86,502 | | | | 94,879 | | |

| Total assets | 1,255,079 | | | | 1,255,620 | | | | 1,220,676 | | | | 1,230,163 | | | | 1,192,298 | | |

| Stockholders’ equity | 263,737 | | | | 426,537 | | | | 446,828 | | | | 436,998 | | | | 454,614 | | |

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Fair Isaac Corporation][added: FAIR ISAAC CORPORATION]

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance sheets of Fair Isaac Corporation and subsidiaries (the "Company") as of September 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, [removed: 2018,] [added: 2019,] and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company's internal control over financial reporting as of September 30, [removed: 2018,] [added: 2019,] based on [removed: the] criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the [removed: consolidated] financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended September 30, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, [removed: 2018,] [added: 2019,] based on [removed: the] criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by COSO.

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

A company's internal control over financial reporting is a process designed [removed: by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Also, projections of any evaluation of [removed: the] effectiveness [removed: of the internal control over financial reporting] to future periods are subject to the risk that [removed: the] controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

| | [removed: September 30,] [added: September 30,] | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| | [removed: (In] [added: (In] thousands, except par [removed: value data)] [added: value data)] | | | | | | |

| [removed: Assets] [added: Assets] | | | | | | | |

| Cash and cash [removed: equivalents | $] [added: equivalents, beginning of year] | 90,023 | | | [removed: $] | 105,618 | | [added: | | 75,926 | | |]

| Accounts receivable, net | [added: $ |] 208,865 | | | [added: $] | [removed: 168,586] [added: 57,877] | | | [added: $ | 266,742 | |]

| Prepaid expenses and other current assets | [removed: 39,624] [added: 51,853] | | | | [removed: 36,727] [added: 39,624] | | |

| Marketable securities | [removed: 18,059] [added: 20,222] | | | | [removed: 13,791] [added: 18,059] | | |

| Other investments | [removed: 1,697] [added: 1,643] | | | | [removed: 11,724] [added: 1,697] | | |

| Property and equipment, net | [removed: 48,837] [added: 53,027] | | | | [removed: 40,703] [added: 48,837] | | |

| Goodwill | [removed: 800,890] [added: 803,542] | | | | [removed: 804,414] [added: 800,890] | | |

| Intangible assets, net | [removed: 14,536] [added: 14,139] | | | | [removed: 21,185] [added: 14,536] | | |

| Deferred income taxes | 20,117 | | | | [removed: 47,204] [added: (6,312] | | [added: )] | [added: | 13,805 | | |]

| Other assets | 12,431 | | | | [removed: 5,668] [added: 23,823] | | | [added: | 36,254 | | |]

| [removed: Liabilities] [added: Liabilities] and Stockholders’ [removed: Equity] [added: Equity] | | | | | | | |

| Accounts payable | $ | [removed: 20,251] [added: 23,118] | | | $ | [removed: 19,510] [added: 20,251] | |

| Accrued compensation and employee benefits | [removed: 84,292] [added: 106,240] | | | | [removed: 77,610] [added: 84,292] | | |

| Other accrued liabilities | 30,457 | | | | [removed: 32,104] [added: 568] | | | [added: | 31,025 | | |]

| Deferred revenue | 52,215 | | | | [removed: 55,431] [added: 51,120] | | | [added: | 103,335 | | |]

| Current maturities on debt | [removed: 235,000] [added: 218,000] | | | | [removed: 142,000] [added: 235,000] | | |

| Long-term debt | [removed: 528,944] [added: 606,790] | | | | [removed: 462,801] [added: 528,944] | | |

| Other liabilities | [removed: 40,183] [added: 46,063] | | | | [removed: 39,627] [added: 40,183] | | |

| Common stock ($0.01 par value; 200,000 shares authorized, 88,857 shares issued and [removed: 29,015] [added: 28,944] and [removed: 30,243] [added: 29,015] shares outstanding at September 30, [removed: 2018] [added: 2019] and September 30, [removed: 2017,] [added: 2018,] respectively) | [removed: 290] [added: 289] | | | | [removed: 302] [added: 290] | | |

| Paid-in-capital | [removed: 1,211,051] [added: 1,225,365] | | | | [removed: 1,195,431] [added: 1,211,051] | | |

| Treasury stock, at cost [removed: (59,842] [added: (59,913] and [removed: 58,614] [added: 59,842] shares at September 30, [removed: 2018] [added: 2019] and September 30, [removed: 2017,] [added: 2018,] respectively) | [removed: (2,612,007] [added: (2,802,450] | | ) | | [removed: (2,301,097] [added: (2,612,007] | | ) |

| Accumulated other comprehensive loss | [removed: (76,407] [added: (90,085] | | ) | | [removed: (66,494] [added: (76,421] | | ) |

| [removed: Total stockholders’] [added: Stockholders’] equity | 263,737 | | | | [removed: 426,537] [added: 23,700] | | | [added: | 287,437 | | |]

| Total liabilities and stockholders’ equity | $ | [removed: 1,255,079] [added: 1,433,448] | | | $ | [removed: 1,255,620] [added: 1,330,467] | |

| | [removed: Year] [added: Year] Ended September [removed: 30,] [added: 30,] | | | | | | | | | | |

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers in fiscal year 2019 due to the adoption of the new revenue standard.

Because of its inherent limitations; internal control over financial reporting may not prevent or detect misstatements.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Revenues - Refer to Notes 1, 15 and 16 to the financial statements*

*Critical Audit Matter Description*

The Company recognizes revenue when control of the promised goods or services in a contract is transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services.

The Company’s revenue is primarily derived from term-based or perpetual licensing of software and scoring products and solutions, and associated maintenance; software-as-a-service (SaaS) subscription services; scoring and credit monitoring services for consumers; and professional services.

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer.

For contracts with customers that contain various combinations of products and services, the Company evaluates whether the products or services are distinct.

Distinct products or services will be accounted for as separate performance obligations, while non-distinct products or services are combined with others to form a single performance obligation.

For transactional revenue, the transaction price for contracts with customers typically includes a fixed consideration in the form of a guaranteed minimum that allows up to a certain level of usage and a variable consideration in the form of usage or transaction-based fees in excess of the minimum threshold; or usage or transaction-based variable amount not subject to a minimum threshold.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative standalone selling price (“SSP”) basis.

The Company determines the SSP using data from historical standalone sales, or, in instances where such information is not available, the Company considers factors such as the stated contract prices, their overall pricing practices and objectives, go-to-market strategy, size and type of the transactions, and effects of the geographic area on pricing, among others.

Given the complexity of certain of the Company’s contracts, together with the judgment involved in identifying performance obligations, estimating variable consideration, and determining SSP, auditing the related revenue required both extensive audit effort due to the volume and complexity of the contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to revenue recognition and the Company’s identification of performance obligations, estimation of variable consideration, and determination of SSP included the following, among others:

| • | We tested the effectiveness of controls over contract revenue, including management’s controls over the identification of performance obligations, estimation of variable consideration, and determination of the SSP. |

| • | We selected a sample of contracts and performed the following procedures: |

| – | Obtained and read the contract, including master agreements, renewal agreements, and other source documents that were part of the contract. |

| – | Obtained other contracts with the same customer that were entered into at or near the same time and evaluated management’s conclusion of whether two or more contracts for multiple products and services promised to a customer should be combined and accounted for as a single contract for revenue recognition. |

| – | Confirmed the terms of the contract directly with the customer, including whether there are side agreements and terms not formally included in the contract that may impact the identification of performance obligations and revenue recognition. |

| – | Evaluated internal certification letters provided by the Company’s sales personnel to identify the existence of side agreements that may impact the identification of performance obligations and revenue recognition. |

| – | Tested management’s identification of the performance obligations within the customer contract, including whether material rights that gave rise to a performance obligation were identified. |

| – | Tested management’s estimation of variable consideration in the transaction price by evaluating the reasonableness of the inputs used in management’s estimates. |

| – | Tested the accuracy and completeness of the data and factors used in management’s determination of the SSP for each performance obligation. |

| – | Evaluated the consistency of the methodologies used to develop the SSP for each performance obligation. |

| November 8, 2019 |

CONSOLIDATED BALANCE SHEETS

| | 2019 | | | | 2018 | | |

| | | | | | As Adjusted | | |

| Cash and cash equivalents | $ | 106,426 | | | $ | 90,023 | |

| Total current assets | 455,706 | | | | 396,389 | | |

| Deferred income taxes | 6,006 | | | | 13,805 | | |

| Other assets | 79,163 | | | | 36,254 | | |

| Total assets | $ | 1,433,448 | | | $ | 1,330,467 | |

| Other accrued liabilities | 32,454 | | | | 31,025 | | |

| Deferred revenue | 111,016 | | | | 103,335 | | |

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.

| November 9, 2018 |

| Total current assets | 338,512 | | | | 310,931 | | |

| Total assets | $ | 1,255,079 | | | $ | 1,255,620 | |

| Total current liabilities | 422,215 | | | | 326,655 | | |

| Total liabilities | 991,342 | | | | 829,083 | | |

| Retained earnings | 1,740,810 | | | | 1,598,395 | | |

| Transactional and maintenance | $ | 766,059 | | | $ | 652,660 | | | $ | 605,919 | |

| Professional services | 176,804 | | | | 179,569 | | | | 169,738 | | |

| License | 89,612 | | | | 99,940 | | | | 105,699 | | |

| Total revenues | 1,032,475 | | | | 932,169 | | | | 881,356 | | |

| Total operating expenses | 826,038 | | | | 754,969 | | | | 711,764 | | |

| Operating income | 206,437 | | | | 177,200 | | | | 169,592 | | |

| Income before income taxes | 188,010 | | | | 151,324 | | | | 144,569 | | |

| (1) | Cost of revenues and selling, general and administrative expenses exclude the amortization of intangible assets. See Note 7. |

| Balance at September 30, 2015 | 31,290 | | | $ | 313 | | | $ | 1,156,626 | | | $ | (2,033,644 | ) | | $ | 1,364,418 | | | $ | (50,715 | ) | | $ | 436,998 | |

| Tax effect from share-based payment arrangements | — | | | — | | | | 24,184 | | | | — | | | | — | | | | — | | | | 24,184 | | |

| Repurchases of common stock | (1,335 | ) | | (14 | | ) | | — | | | | (138,385 | | ) | | — | | | | — | | | | (138,399 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 109,448 | | | | — | | | | 109,448 | | |

| Net income | — | | | — | | | | — | | | | — | | | | 128,256 | | | | — | | | | 128,256 | | |

| Net income | — | | | — | | | | — | | | | — | | | | 142,415 | | | | — | | | | 142,415 | | |

| Tax effect from share-based payment arrangements | — | | | | — | | | | 24,184 | | |

| Accounts receivable | (42,403 | | ) | | (1,265 | | ) | | (18,225 | | ) |

| Other liabilities | 6,416 | | | | (683 | | ) | | (4,282 | | ) |

| Deferred revenue | (3,197 | | ) | | 8,973 | | | | 5,500 | | |

| Dividends paid | — | | | | (1,238 | | ) | | (2,489 | | ) |

| Cash and cash equivalents, end of year | $ | 90,023 | | | $ | 105,618 | | | $ | 75,926 | |

1.

Our investments in equity securities of companies over which we do not have significant influence are accounted for under the cost method.

The investment is originally recorded at cost and adjusted for additional contributions or distributions.

Management periodically reviews cost-method investments for instances where fair value is less than the carrying amount and the decline in value is determined to be other than temporary.

If the decline in value is judged to be other than temporary, the carrying amount of the security is written down to fair value and the resulting loss is charged to operations.

We currently do not have investments in which we own 20% to 50% and exercise significant influence over operating and financial policies, therefore we do not account for any investment under the equity method.

Software Licenses

Software license fee revenue is recognized when persuasive evidence of an arrangement exists, software is made available to our customers, the fee is fixed or determinable and collection is probable.

The determination of whether fees are fixed or determinable and collection is probable involves the use of judgment.

If at the outset of an arrangement we determine that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes fixed or determinable, assuming all other revenue recognition criteria have been met.

If at the outset of an arrangement we determine that collectability is not probable, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment.

If there is uncertainty as to the customer’s acceptance of our deliverables, revenue is not recognized until the earlier of receipt of customer acceptance, expiration of the acceptance period, or when we can demonstrate we meet the acceptance criteria.

We evaluate contract terms and customer information to ensure that these criteria are met prior to our recognition of license fee revenue.

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

An evaluation was carried out under the supervision and with the participation of FICO’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of FICO’s disclosure controls and procedures (as defined in [removed: Rule] [added: Rules] 13a-15(e) [added: or 15d-15(e)] under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this annual report.

[removed: Changes] [added: Changes] in Internal Control over Financial [removed: Reporting][added: Reporting]

[removed: No] [added: There was no other] change in FICO’s internal control over financial reporting was identified in connection with the evaluation required by [removed: Rule 13a-15(d)] [added: Rules13a-15 or 15d-15] of the Exchange Act that occurred during the year ended September 30, [removed: 2018,] [added: 2019,] that has materially affected, or is reasonably likely to materially affect, FICO’s internal control over financial reporting.

[removed: Management’s] [added: Management’s] Report on Internal Control over Financial [removed: Reporting][added: Reporting]

Under the supervision and with the participation of management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, [removed: 2018] [added: 2019] based on the guidelines established in [removed: Internal] [added: *Internal] Control – Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation management has concluded that our internal control over financial reporting was effective as of September 30, [removed: 2018.][added: 2019.]

Deloitte & Touche LLP, an independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of September 30, [removed: 2018,] [added: 2019,] as stated in their attestation report included in Part II, Item 8 of this Annual Report on Form 10-K.

Beginning on October 1, 2018, we implemented ASU 2014-09 and, as a result, we also implemented changes to our controls related to revenue.

These included the development of new policies, enhanced contract review processes, and other ongoing monitoring activities.

These controls were designed to provide assurance at a reasonable level of the fair presentation of our consolidated financial statements and related disclosures.

[removed: PART III][added: PART III]

The required information regarding our Directors is incorporated by reference from the information under the caption “Our Director Nominees” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

| [removed: Name] [added: Name] | [removed: Positions Held] [added: Positions Held] | [removed: Age] [added: Age] |

| William J. Lansing | January 2012-present, Chief Executive Officer and member of the Board of Directors of the Company. February 2009-November 2010, Chief Executive Offer and President, Infospace, Inc. 2004-2007, Chief Executive Officer and President, ValueVision Media, Inc. 2001-2003, General Partner, General Atlantic LLC. 2000-2001, Chief Executive Officer, NBC Internet, Inc. 1998-2000, President/Chief Executive Officer, Fingerhut Companies, Inc. 1996-1998, Vice President, Corporate Business Development, General Electric Company. 1996, Executive Vice President, Chief Operating Office, Prodigy, Inc. 1986-1995, various positions, McKinsey & Company, Inc. | [removed: 60] [added: 61] |

| Richard S. Deal | November 2015-present, Executive Vice President, Chief Human Resources Officer of the Company. August 2007-November 2015, Senior Vice President, Chief Human Resources Officer of the Company. January 2001-August 2007, Vice President, Human Resources of the Company. 1998-2001, Vice President, Human Resources, Arcadia Financial, Ltd. 1993-1998, managed broad range of human resources corporate and line consulting functions with U.S. Bancorp. | [removed: 51] [added: 52] |

| Wayne Huyard | November 2014-present, Executive Vice President of Sales, Services, and Marketing of the Company. January 2014-November 2014, Consultant to the Chief Executive Officer of the Company. September 2012-November 2014, Chief Executive Officer and President, TEXbase, Inc. March 2012-May 2012, General Manager of RightNow Technologies, Oracle Corporation. July 2010-February 2012, President and Chief Operating Officer, RightNow Technologies, Inc. May 2006-May 2010, Operations and Advisory Group Executive Leadership Team Member, Cerberus Capital Management L.P. | [removed: 59] [added: 60] |

| Michael S. Leonard | November 2011-present, Vice President, Chief Accounting Officer of the Company. November 2007-November 2011, Senior Director, Finance of the Company. July 2000-November 2007, Director, Finance of the Company. 1998-2000, Controller of Natural Alternatives International, Inc. 1994-1998, various audit staff positions at KPMG LLP. | [removed: 54] [added: 55] |

| Mark R. Scadina | February 2009-present, Executive Vice President and General Counsel and Corporate Secretary of the Company. June 2007-February 2009, Senior Vice President and General Counsel and Corporate Secretary of the Company. 2003-2007, various senior positions including Executive Vice President, General Counsel and Corporate Secretary, Liberate Technologies, Inc. 1999-2003, various leadership positions including Vice President and General Counsel, Intertrust Technologies Corporation. 1994-1999, Associate, Pennie and Edmonds LLP. | [removed: 49] [added: 50] |

| James M. Wehmann | April 2012-present, Executive Vice President, Scores of the Company. November 2003-March 2012, Vice President/Senior Vice President, Global Marketing, Digital River, Inc. March 2002-June 2003, Vice President, Marketing, Brylane, Inc. September 2000-March 2002, Senior Vice President, Marketing, New Customer Acquisition, Bank One. 1993-2000, various roles, including Senior Vice President, Marketing, Fingerhut Companies, Inc. | [removed: 53] [added: 54] |

The required information regarding compliance with Section 16(a) of the Securities Exchange Act is incorporated by reference from the information [removed: under the caption “Section 16(a) Beneficial Ownership Reporting Compliance”] in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

The required information regarding the Company’s audit committee is incorporated by reference from the information under the caption “Board Committees” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

| Michael I. McLaughlin | August 2019-present, Executive Vice President, Chief Financial Officer of the Company. May 2007-August 2019, Managing Director, Head of Technology Corporate Finance of Morgan Stanley. January 2004-May 2007, Managing Director, Head of Enterprise Systems and Supply Chain Coverage of BofA Securities. January 2001-January 2004, Executive Director, Head of Enterprise Hardware and Supply Chain of UBS Investment Bank. 1997-2001, founder and co-Chief Executive Officer of Stampede Ventures, LLC. 1993-1997, Vice President of Montgomery Securities. 1990-1993, Associate of The First Boston Corporation. 1986-1988, Analyst of The First Boston Corporation. | 55 |

| Claus Moldt | August 2019-present, Executive Vice President, Chief Technology Officer of the Company. March 2016-August 2019, Chief Information Officer of the Company. June 2013-March 2016, Chief Executive Officer of mPath. October 2006-June 2013, Global Chief Information Officer and Senior Vice President of Technical Operations of Salesforce.com. November 2002-September 2006, Senior Director Operations Infrastructure and Project Delivery of eBay. May 2001-May 2002, Manager Database and System Administration, LoudCloud/Opsware. | 56 |

| Michael J. Pung | November 2010-present, Executive Vice President and Chief Financial Officer of the Company. August 2004-November 2010, Vice President, Finance of the Company. 2000-2004, Vice President and Controller, Hubbard Media Group, LLC. 1999-2000, Controller, Capella Education, Inc. 1998-1999, Controller, U.S. Satellite Broadcasting, Inc. 1992-1998, various financial management positions with Deluxe Corporation. 1985-1992, various audit positions, including audit manager, at Deloitte & Touche LLP. | 55 |

| Stuart C. Wells | April 2012-present, Executive Vice President, Chief Technology Officer of the Company. June 2010- April 2012, Head of Global Professional Services and Support of the Company (Consultant). February 2009-June 2010, CEO, and Chairman of the Board, ScaleMP. January 2007-January 2009, Senior Vice President and President, Avaya, Inc. April 2005-December 2006, Executive Vice President, Utility Computing, Sun Microsystems. | 62 |

The information required by this Item is incorporated by reference from the information under the captions “Director Compensation for Fiscal [removed: 2018”] [added: 2019”] and “Executive Compensation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

The information required by this Item is incorporated by reference from the information under the caption “Security Ownership [removed: Of] [added: of] Certain Beneficial Owners and Management” and “Executive Compensation Plan Information” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

The information required by this Item is incorporated by reference from the information under the caption “Certain Relationships and Related Persons Transactions” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

The information required by this Item is incorporated by reference from the information under the caption “Ratification of Independent Registered Public Accounting Firm” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on [removed: February 28, 2019.][added: March 4, 2020.]

[removed: PART IV][added: PART IV]

Consolidated Financial [removed: Statements:][added: Statements:]

| | [removed: Reference Page Form 10-K] [added: Reference Page Form 10-K] |

| [Report of independent registered public accounting [removed: firm](#s1FE26FCDE55558089FA953E8513A9AEB)] [added: firm](#sF90A21287FE25A39BEF357CC2A7EC728)] | [removed: [50](#s1FE26FCDE55558089FA953E8513A9AEB)] [added: [50](#sF90A21287FE25A39BEF357CC2A7EC728)] |

| [Consolidated balance sheets as of September 30, [removed: 2018] [added: 2019] and [removed: 2017](#s69000A76D4755E64BDFCC23D7A7E5F7B)] [added: 2018](#s6290042BD3AD5804A6BC02F173B9BCF7)] | [removed: [52](#s69000A76D4755E64BDFCC23D7A7E5F7B)] [added: [53](#s6290042BD3AD5804A6BC02F173B9BCF7)] |

| [Consolidated statements of income and comprehensive income for the years ended September 30, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s7CAE2352E9675472B9C7F44B25C202C7)] [added: 2017](#sD69A67C7B74A52D0AB1716D57684643F)] | [removed: [53](#s7CAE2352E9675472B9C7F44B25C202C7)] [added: [54](#sD69A67C7B74A52D0AB1716D57684643F)] |

| [Consolidated statements of stockholders’ equity for the years ended September 30, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s42C275CD5F2F58778CF92A0FB67EF7ED)] [added: 2017](#s3284A9FE376751D78F44DD127612FE29)] | [removed: [54](#s42C275CD5F2F58778CF92A0FB67EF7ED)] [added: [55](#s3284A9FE376751D78F44DD127612FE29)] |

| [Consolidated statements of cash flows for the years ended September 30, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s99F45894E8B952A29C1F6F54261EE10B)] [added: 2017](#sF50F583962F45A3BB256F77CA7D9FBCA)] | [removed: [55](#s99F45894E8B952A29C1F6F54261EE10B)] [added: [56](#sF50F583962F45A3BB256F77CA7D9FBCA)] |

| [Notes to consolidated financial [removed: statements](#s8126BC3ED7A8595B95FC2608DDFEE0EE)] [added: statements](#s402A2545E5AB5195BD0D65C9EE54007E)] | [removed: [56](#s8126BC3ED7A8595B95FC2608DDFEE0EE)] [added: [57](#s402A2545E5AB5195BD0D65C9EE54007E)] |

Financial Statement [removed: Schedules][added: Schedules]

[removed: Exhibits:][added: Exhibits:]

| [removed: Exhibit Number] [added: Exhibit Number] | [removed: Description] [added: Description] |

| [removed: 10.30*] [added: 10.30] | [Form of Executive Non-Statutory Stock Option Agreement under the 2012 Long-Term Incentive Plan (U.S.), as amended November 6, [removed: 2018.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-103010xk2018stockoption.htm)] [added: 2018. (Incorporated by reference to Exhibit 10.30 to the Company’s Form 10-K for the period ended September 30, 2018 (file no. 001-11689).) (1)](http://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-103010xk2018stockoption.htm)] |

| [removed: 10.32*] [added: 10.32] | [Form of Executive Restricted Stock Unit Award Agreement under the 2012 Long-Term Incentive Plan (U.S.), as amended November 8, [removed: 2018.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-103210xk2018rsuagmt.htm)] [added: 2018.(Incorporated by reference to Exhibit 10.32 to the Company’s Form 10-K for the period ended September 30, 2018 (file no. 001-11689).) (1)](http://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-103210xk2018rsuagmt.htm)] |

| [removed: 10.44*] [added: 10.44] | [Form of Performance Share Unit Agreement [removed: (fiscal 2019)] under the 2012 Long-Term Incentive [removed: Plan.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-104410xk2018psuagmt.htm)] [added: Plan.(Incorporated by reference to Exhibit 10.44 to the Company’s Form 10-K for the period ended September 30, 2018 (file no. 001-11689).) (1)](http://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-104410xk2018psuagmt.htm)] |

| [removed: 10.48*] [added: 10.48] | [Form of Market Share Unit Agreement [removed: (fiscal 2019 grants)] under the 2012 Long-Term Incentive [removed: Plan.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-104810xk2018msuagmt.htm)] [added: Plan.(Incorporated by reference to Exhibit 10.48 to the Company’s Form 10-K for the period ended September 30, 2018 (file no. 001-11689).) (1)](http://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-104810xk2018msuagmt.htm)] |

| 21.1* | [List of Company’s [removed: subsidiaries.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-211subsidiariesnarrativ.htm)] [added: subsidiaries.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-211subsidiariesnarr.htm)] |

| 23.1* | [Consent of Deloitte & Touche LLP, independent registered public accounting [removed: firm.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-231deloitteconsent10xk2.htm)] [added: firm.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-231deloitteconsent1.htm)] |

| 31.1* | [Rule 13a-14(a)/15d-14(a) Certifications of [removed: CEO.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-31110xk2018.htm)] [added: CEO.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-31110xk2019.htm)] |

| 31.2* | [Rule 13a-14(a)/15d-14(a) Certifications of [removed: CFO.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-31210xk2018.htm)] [added: CFO.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-31210xk2019.htm)] |

| 32.1* | [Section 1350 Certification of [removed: CEO.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-32110xk2018.htm)] [added: CEO.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-32110xk2019.htm)] |

| 32.2* | [Section 1350 Certification of [removed: CFO.](https://www.sec.gov/Archives/edgar/data/814547/000081454718000010/ex-32210xk2018.htm)] [added: CFO.](https://www.sec.gov/Archives/edgar/data/814547/000081454719000016/ex-32210xk2019.htm)] |

[removed: SIGNATURES][added: SIGNATURES]

| | | [removed: Executive] [added: *Executive] Vice [removed: President and] [added: President* *and] Chief Financial [removed: Officer] [added: Officer*] |

DATE: November [removed: 9, 2018][added: 8, 2019]

| /s/ WILLIAM J. LANSING | Chief Executive Officer (Principal Executive Officer) and Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ MICHAEL [removed: J. PUNG] [added: I. MCLAUGHLIN] | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ MICHAEL S. LEONARD | Vice President and Chief Accounting Officer (Principal Accounting Officer) | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ A. GEORGE BATTLE | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ BRADEN R. KELLY | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ JAMES D. KIRSNER | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ EVA MANOLIS | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ MARC F. MCMORRIS | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ JOANNA REES | Director | November [removed: 9, 2018] [added: 8, 2019] |

| /s/ DAVID A. REY | Director | November [removed: 9, 2018] [added: 8, 2019] |

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