Fair Isaac (FICO) 10-K risk factor changes: FY2021 vs FY2019

Due in part to anticipated post-pandemic workforce patterns, [added: in late fiscal 2020 and early fiscal 2021,] we [removed: have] permanently closed certain non-core offices, reduced certain other office space and reduced our global workforce.

For example, many cities, counties, states, and countries may [added: impose or] continue to impose [added: requirements and restrictions related to COVID-19 that affect us, including] a wide range of restrictions on our employees’, partners’ and customers’ physical movement to limit the spread of COVID-19.

We [removed: have] postponed, canceled or shifted certain of our customer, employee or industry events to virtual-only experiences and may [removed: continue] [added: decide] to do so in the future.

[removed: We have seen evidence that] COVID-19 has adversely affected certain segments and originations volume, which may impact future revenue.

We are unable to accurately predict the complete impact that COVID-19 will have on our future results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the severity and transmission rate of the [removed: virus,] [added: virus and its variants,] the duration [added: and any resurgence] of the outbreak, the extent and effectiveness of containment actions, the effectiveness [added: and acceptance] of any medical treatment and prevention options, and the impact of these and other factors on us, our employees, customers, partners and vendors, and on worldwide and U.S. economic conditions.

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

Our [removed: DM] [added: business] strategy is designed to enable us to increase our business by selling multiple connectable and extensible [removed: DM] products to clients, as well as to enable the development of custom client solutions and to allow our clients to more easily expand their usage and the use cases they enable over time.

The market may be unreceptive to our general [removed: DM] business approach, including being unreceptive to our cloud-based offerings, unreceptive to purchasing multiple products from us, or unreceptive to our customized solutions.

As we continue to pursue our [removed: DM] [added: business] strategy, we may experience volatility in our revenues and operating results caused by various factors, including differences in revenue recognition treatment between our cloud-based offerings and [removed: on-premise] [added: on-premises] software licenses, the timing of investments and other expenditures necessary to develop and operate our cloud-based offerings, and the adoption of new sales and delivery methods.

If our [removed: DM] [added: business] strategy is not successful, we may not be able to grow our business, growth may occur more slowly than we anticipate, or our revenues and profits may decline.

[removed: | • |] [added: -] changes in the business analytics industry; [removed: |]

[removed: | • |] [added: -] changes in technology; [removed: |]

[removed: | • |] [added: -] our inability to obtain or use key data for our products; [removed: |]

[removed: | • |] [added: -] saturation or contraction of market demand; [removed: |]

[removed: | • |] [added: -] loss of key customers; [removed: |]

[removed: | • |] [added: -] industry consolidation; [removed: |]

[removed: | • |] [added: -] failure to successfully adopt cloud-based technologies; [removed: |]

[removed: | • |] [added: -] our inability to obtain regulatory approvals for our products and services, including credit score models; [removed: |]

[removed: | • |] [added: -] the increasing availability of free or relatively inexpensive consumer credit, credit score and other information from public or commercial sources; [removed: |]

[removed: | • |] [added: -] failure to execute our selling approach; and [removed: |]

[removed: | • |] [added: -] inability to successfully sell our products in new vertical markets. [removed: |]

During fiscal [removed: 2020, 86%] [added: 2021, 89%] of our revenues were derived from sales of products and services to the banking industry.

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

Most of our customers are relatively large enterprises, such as banks, [removed: payment] [added: credit] card [removed: processors, insurance companies, healthcare firms,] [added: issuers, insurers, retailers,] telecommunications providers, [removed: retailers and] [added: automotive companies,] public [removed: agencies.][added: agencies, and organizations in other industries.]

We also derive a substantial portion of our revenues and operating income from our contracts with the three major [removed: credit] [added: consumer] reporting [removed: agencies,] [added: agencies in the U.S.,] Experian, TransUnion and Equifax, and other parties that distribute our products to certain markets.

The loss of or a significant change in a relationship with one of [removed: these credit] [added: the three consumer] reporting agencies with respect to their distribution of our products or with respect to our myFICO® offerings, the loss of or a significant change in a relationship with a major customer, the loss of or a significant change in a relationship with a significant third-party distributor (including payment card processors), or the [added: loss of or] delay of significant revenues from these sources, could have a material adverse effect on our revenues and results of operations.

We expect that part of the growth that we seek to achieve through our [removed: DM] [added: business] strategy will be derived from the sale of [removed: DM] products and service solutions in industries and markets we do not currently serve.

We also expect to grow our business by delivering our [removed: DM] solutions through additional distribution channels.

If we fail to penetrate these industries and markets to the degree we anticipate utilizing our [removed: DM] [added: business] strategy, or if we fail to develop additional distribution channels, we may not be able to grow our business, growth may occur more slowly than we anticipate, or our revenues and profits may decline.

Our growth and the success of our [removed: DM] [added: business] strategy depend upon our ability to develop and sell new products or suites of products, including the development and sale of our cloud-based product offerings.

We believe much of the future growth of our business and the success of our [removed: DM] [added: business] strategy will rest on our ability to continue to expand into newer markets for our products and services.

[removed: | • |] [added: -] innovate by internally developing new and competitive technologies; [removed: |]

[removed: | • |] [added: -] use leading third-party technologies effectively; [removed: |]

[removed: | • |] [added: -] continue to develop our technical expertise; [removed: |]

[removed: | • |] [added: -] anticipate and effectively respond to changing customer needs; [removed: |]

[removed: | • |] [added: -] initiate new product introductions in a way that minimizes the impact of customers delaying purchases of existing products in anticipation of new product releases; and [removed: |]

[removed: | • |] [added: -] influence and respond to emerging industry standards and other technological changes. [removed: |]

The market for [removed: business analytics] [added: our solutions] is [removed: rapidly evolving] [added: intensely competitive] and [removed: highly competitive,] [added: is constantly changing,] and we expect competition [removed: in this market] to persist and intensify.

[removed: | • |] [added: -] in-house analytic and systems developers; [removed: |]

[removed: | • |] [added: -] scoring model builders; [removed: |]

As a result of the COVID-19 pandemic, we temporarily closed the majority of our offices (including our corporate headquarters in the United States), but are in the process of re-opening them while extending our company-wide voluntary work from home policy until early January 2022 and allowing the majority of our workforce the flexibility to work remotely on an ongoing basis.

In addition, we continue to impose certain travel restrictions where applicable.

Both of these actions have disrupted how we operate our business.

We have increasingly focused our business strategy on investing significant development resources to enable substantially all of our software to run on FICO® Platform, our modular software offering designed to support advanced analytics and decisioning use cases.

If use of the FICO® Score by Fannie Mae and Freddie Mac were to cease or decline, it could have a material adverse effect on our revenues, results of operations and stock price.

A significant portion of our revenues in our Scores segment is attributable to the U.S. mortgage market, which includes, for conforming mortgages in that market, a requirement of The Federal National Mortgage Association (“Fannie Mae”) and The Federal Home Loan Mortgage Corporation (“Freddie Mac”) that U.S. lenders provide FICO® Scores for each mortgage delivered to them.

However, their continued use of the FICO Score is currently subject to validation and approval by those enterprises and the Federal Housing Finance Agency.

If Fannie Mae and Freddie Mac approve other credit score models for use by them, or do not approve the FICO Score for continued use by them, it could have a material adverse effect on our revenues, results of operations and stock price.

- software companies supplying predictive analytic modeling, rules, or analytic development tools;

This could include customers of ours that develop their own scoring models or other products, and as a result no longer purchase or reduce their purchases from us.

We also expect to experience competition from other technologies.

We rely on relationships with third parties for marketing, distribution and certain services.

In September 2021, we further reduced our operating costs primarily through a reduction of headcount.

In addition, we have implemented a Remote Work Policy which allows a portion of our workforce to partially or fully work from home.

These and other reengineering efforts may not be successful over the long term should we fail to reduce expenses at the anticipated level, should we fail to increase revenues to anticipated levels or at all, or should productivity decline or employees’ ability to collaborate fall as a result of the Remote Work Policy.

- we could incur material charges in connection with the impairment of goodwill or other assets that we acquire;

- a company that we acquire may have experienced a security incident that it has yet to discover, investigate and remediate which we might not be identify in a timely manner and which could spread more broadly to other parts of our company during the integration effort;

- we may incur material charges as a result of acquisition costs, costs incurred in combining and/or operating the acquired business, or liabilities assumed in the acquisition that are greater than anticipated;

As a software and technology vendor, we may incorporate or distribute software or other materials from third parties.

Attacks or other threats to our supply chain for such software and materials may render us unable to provide assurances of the origin of such software and materials, and could put us at risk of distributing software or other materials that may cause harm to ourselves, our customers or other third parties.

Further, any continuing legal or economic disruptions resulting from Brexit may negatively impact our clients with operations in the U.K., which may cause them to reduce their spending budget on our products and services.

- Laws and regulations relating to the privacy, security and transmission of individually identifiable health information, including the Health Insurance Portability and Accountability Act of 1996, as amended by the American Recovery and Reinvestment Act of 2009 (“HIPAA”) and the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations;

- Special requirements that may apply when we provide services directly or indirectly to U.S. federal, state and local government agencies (e.g., the Privacy Act of 1974, the Internal Revenue Service’s Publication 4812 and the Federal Acquisition Regulation);

- The Cybersecurity Act of 2015; the U.S. Department of Commerce’s National Institute of Standards and Technology’s Cybersecurity Framework; the Clarifying Lawful Overseas Use of Data Act; and identity theft, file freezing, and similar state privacy laws;

A decision in July 2020 by the Court of Justice of the European Union (*i.e.*, Schrems II), called into question certain data transfer mechanisms between the E.U. and the U.S. In June 2021, the European Commission issued new standard contractual clauses (“SCCs”) governing cross-border data transfers and data exchanges among controllers and processors, which reflect more recent data protection laws, such as the GDPR, and account for the analysis in the Schrems II decision.

Additionally, effective starting January 1, 2023, the California Privacy Rights Act (the “CPRA”) will revise and significantly expand the scope of the CCPA.

The CPRA also creates a new California data protection agency authorized to implement and enforce the CCPA and the CPRA, which could result in increased privacy and information security enforcement.

Other U.S. states have considered and/or enacted similar privacy laws, including Virginia and Colorado, which passed new consumer privacy laws in 2021.

Our financial results and key metrics fluctuate within each quarter and from quarter to quarter, making our future revenue, annual recurring revenue (“ARR”), and financial results difficult to predict, which may cause us to miss analyst expectations and may cause the price of our common stock to decline.

Our quarterly financial results and key metrics have fluctuated in the past and will continue to do so in the future, and therefore period-to-period comparisons should not be relied upon as an indication of future performance.

These fluctuations could cause our stock price to change significantly or experience declines.

We also may provide investors with quarterly and annual financial forward-looking guidance that could prove to be inaccurate as a result of these fluctuations and other factors.

In addition to the other risks described in these risk factors, some of the factors that could cause our financial results and key metrics to fluctuate include:

Our operating expenses are based in part on our expectations for future revenue and many are fixed and cannot be quickly adjusted as revenue changes.

Accordingly, any revenue shortfall below expectations has had, and in the future could have, an immediate and significant adverse effect on our operating results and profitability.

Greater than anticipated expenses or a failure to maintain rigorous cost controls would also negatively affect profitability.

Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, or may decline, regardless of our operating performance.

As a result of the COVID-19 pandemic, we have temporarily closed the majority of our offices (including our corporate headquarters in the United States) and implemented travel restrictions, both of which have disrupted how we operate our business.

We continue to expand the pursuit of our business objective to become a leader in helping businesses automate and improve decisions across their enterprises, an approach that we commonly refer to as Decision Management, or “DM.” We have increasingly focused our DM strategy on bringing our Decision Management assets together in a flexible, extensible, and cloud-native platform approach (the FICO Decision Management Platform).

| | |

| --- | --- |

| • | process modeling tools providers; |

| • | data vendors; |

Brexit has caused, and may continue to create, volatility in global stock markets and regional and global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budget on our products and services.

For example, the sales cycle for our products typically ranges from 60 days to 18 months, which may be further extended as a result of COVID-19.

Charges to earnings resulting from acquisitions may adversely affect our operating results.

Under business combination accounting standards, we recognize the identifiable assets acquired and the liabilities assumed in acquired companies generally at their acquisition-date fair values and separately from goodwill.

Goodwill is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the net of the amounts of the identifiable assets acquired and the liabilities assumed as of the acquisition date.

Our estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain.

After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and may adversely affect our cash flows:

| • | impairment of goodwill or intangible assets, or a reduction in the useful lives of intangible assets acquired; |

| • | amortization of intangible assets acquired; |

| • | identification of, or changes to, assumed contingent liabilities, both income tax and non-income tax related, after our final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes first; |

| • | costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention, redeployment or relocation expenses; |

| • | charges to our operating results to maintain certain duplicative pre-merger activities for an extended period of time or to maintain these activities for a period of time that is longer than we had anticipated, charges to eliminate certain duplicative pre-merger activities, and charges to restructure our operations or to reduce our cost structure; and |

| • | charges to our operating results resulting from expenses incurred to effect the acquisition. |

Substantially all of these costs will be accounted for as expenses that will decrease our net income and earnings per share for the periods in which those costs are incurred.

Charges to our operating results in any given period could differ substantially from other periods based on the timing and size of our future acquisitions and the extent of integration activities.

A more detailed discussion of our accounting for business combinations and other items is presented in the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7).

The occurrence of certain negative events may cause fluctuations in our stock price.

We believe that you should not rely on period-to-period comparisons of financial results as an indication of future performance.

Because many of our operating expenses are fixed and will not be affected by short-term fluctuations in revenues, short-term fluctuations in revenues may significantly impact operating results.

Additional factors that may cause our stock price to fluctuate include the following:

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) includes the following: a business overview that provides a high-level summary of our strategies and initiatives, [removed: financial results] [added: highlights from fiscal year 2021] and [removed: bookings trends that affect] [added: key performance metrics for] our [removed: business;] [added: Software segment;] a more detailed analysis of our results of operations; our [removed: liquidity and] capital [removed: resources,] [added: resources and liquidity,] which discusses key aspects of our statements of cash flows, changes in our balance sheets and our financial commitments; and a summary of our critical accounting policies and estimates we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

During fiscal [removed: 2020,] [added: 2021,] we continued to advance our [removed: cloud-enabled, platform-based] [added: platform-first, cloud delivered] strategy in our [removed: Applications and Decision Management] Software [removed: segments.][added: segment.]

[removed: During fiscal 2020, we announced the launch of] [added: We also created] the FICO® Resilience Index, a [removed: new analytic tool designed to] complement [removed: FICO® Score models by identifying those] [added: to FICO Scores that identifies] consumers who are [removed: most] [added: more] resilient to economic stress relative to other consumers within the same [removed: FICO®] [added: FICO] Score bands.

We also continue to enhance stockholder value by returning cash to stockholders through our stock repurchase [removed: program.][added: programs.]

During fiscal [removed: 2020,] [added: 2021,] we repurchased [removed: approximately 0.7] [added: 1.9] million shares at a total repurchase price of [removed: $235.2] [added: $882.2] million.

As of September 30, [removed: 2020,] [added: 2021,] we had [removed: $224.8] [added: $173.2] million remaining under our current stock repurchase program.

[removed: In addition, during] [added: During] fiscal 2020, we changed our [added: business] practice of selling term software licenses with separate license and maintenance components to a single software subscription contract with license and maintenance bundled.

This transition [removed: will be] [added: was] substantially completed by the end of the first quarter of our fiscal 2021.

[removed: This will shift the] [added: The] timing of our revenue recognition on these subscription [removed: sales,] [added: sales changed,] resulting in less revenue recognized upfront and more revenue recognized over the term of these subscriptions.

[removed: This] [added: In addition, this] change [removed: will] [added: does] not negatively impact our cash flows.

[removed: We] [added: While we] have not [removed: incurred significant financial] [added: experienced material] disruptions [removed: thus far] [added: to our operations] from the COVID-19 [removed: outbreak, but due to numerous uncertainties, including the severity and duration of the] pandemic, [removed: actions that may be taken by governmental authorities, the impact on the business of our clients, and other factors,] we are unable to [removed: accurately] predict the [added: full] impact [added: that the] COVID-19 [added: pandemic] will have on our [removed: results of operations,] [added: operations and future] financial [removed: condition, liquidity] [added: performance, including demand for our offerings, impact to our customers] and [removed: cash flows.][added: partners, actions that may be taken by governmental authorities, and other factors identified in “Risk Factors” in Part I, Item 1A of this Report.]

Management regards [removed: the volume of bookings achieved] [added: ACV Bookings] as an important indicator of future revenues, but they are not comparable [removed: to] [added: to,] nor [added: are they] a substitute [removed: for] [added: for,] an analysis [removed: of] [added: of,] our revenues.

[added: We define ACV] Bookings [removed: represent] [added: as the average annualized value of software] contracts signed in the current reporting period that generate current and future [removed: revenue streams.][added: on-premises and SaaS software revenue.]

[removed: 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,] [added: However,] we believe [removed: bookings amount] [added: ACV Bookings] is [removed: still] a [added: more] meaningful measure of our business as it includes estimated revenues [removed: omitted] [added: and future billings excluded] from Note [removed: 16,] [added: 12,] such as usage-based [removed: royalties] [added: fees and guaranteed minimums] derived from our [added: on-premises] software licenses, among others.

Differences between [removed: estimated bookings] [added: estimates] and actual results occur due to variability in the [removed: volume of transactions or number of active accounts estimated.][added: estimated usage.]

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

| [removed: Quarter ended] [added: | | | Quarter Ended] September [removed: 30, 2020] [added: 30,] | [removed: $] | [removed: 234.6] | | | [removed: 15] | [removed: %] | | [removed: 31] | | | [removed: 55] | [added: Year Ended September 30,] | [added: | | | | | | | |]

| [removed: Quarter ended September 30, 2019] | [removed: $] | [removed: 160.4] | [added: Quarter Ended] | | [removed: 15] | [removed: %] | | [removed: 34] | | | [removed: 34] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Year ended] [added: | | | Year Ended] September [removed: 30, 2020] [added: 30,] | [removed: $] | [removed: 537.0] | | | [removed: 29] | [removed: %] | | [removed: 87] | | | [removed: NM(a)] | | [added: | |]

| [added: | | | Percentage of Revenues] Year [removed: ended] [added: Ended] September [removed: 30, 2019] [added: 30,] | [removed: $] | [removed: 481.7] | | | [removed: 31] | [removed: %] | | [removed: 95] | | | [removed: NM(a)] | | [added: | |]

We are organized into the following [removed: three] [added: two] reportable segments: [removed: Applications, Scores] [added: Software] and [removed: Decision Management Software.][added: Scores.]

Segment revenues, operating income, and related financial information, including disaggregation of revenue, for the years ended September 30, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] are set forth in Note [removed: 15] [added: 12 and Note 18] to the accompanying consolidated financial statements.

The following tables set forth certain summary information on a segment basis related to our revenues for fiscal [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018:][added: 2019:]

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

| Segment | [added: | | 2021 | | | | | |] 2020 | | | | [added: | |] 2019 | | | | [removed: 2018] | | [added: 2021 to 2020] | | [added: | | | |] 2020 to 2019 | | | | [removed: 2019] [added: | | 2021] to [removed: 2018] [added: 2020] | | | | [added: | |] 2020 to 2019 | | | [removed: 2019 to 2018 | |]

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

| Scores | [added: | | $ | 654,147 | | | | | $ |] 528,547 | | | | [added: | $ |] 421,177 | | | | [removed: 335,870] | [added: $] | [added: 125,600] | | [removed: 107,370] | | | [added: $] | [removed: 85,307] [added: 107,370] | | | | [removed: 25] | [added: 24 | |] % | | [added: | |] 25 | [added: |] % |

| Total | [added: | |] $ | [added: 1,316,536 | | | | | $ |] 1,294,562 | | | [added: | |] $ | 1,160,083 | | | [removed: $] | [removed: 1,000,146] | [added: 21,974] | | [removed: 134,479] | | | | [removed: 159,937] [added: 134,479] | | | | [removed: 12] | [added: | 2 | |] % | | [removed: 16] | [added: | 12 | |] % |

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

| Segment | [added: | | 2021 | | | | | |] 2020 | | | [removed: 2019] | | | [removed: 2018] [added: 2019] | | [added: |]

| Scores | [removed: 41] | [added: | 50 | |] % | | [removed: 36] | [added: | 41 | |] % | | [removed: 34] | [added: | 36 | |] % |

| Total | [added: | |] 100 | [added: |] % | | [added: | |] 100 | [added: |] % | | [added: | |] 100 | [added: |] % |

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

| | [added: | | 2021 | | | | | |] 2020 | | | | [added: | |] 2019 | | | | [removed: 2018] | | [added: 2021 to 2020] | | [added: | | | |] 2020 to 2019 | | | | [removed: 2019] [added: | | 2021] to [removed: 2018] [added: 2020] | | | | [added: | |] 2020 to 2019 | | | [removed: 2019 to 2018 | |]

Scores segment revenues increased $107.4 million in fiscal 2020 from 2019 due to an increase of $79.8 million in our business-to-business scores revenue and $27.6 million in our business-to-consumer [removed: services] revenue.

The increase in business-to-business scores was primarily attributable to an increase in mortgage volumes, a higher unit price [removed: in auto and unsecured originations,] [added: across several business-to-business offerings,] a large royalty true-up as well as a large annual license deal recognized during fiscal 2020.

The increase in business-to-consumer [removed: services] [added: revenue] was attributable to an increase in both royalties derived from [removed: direct sales generated from the myFICO.com website and] scores sold indirectly to consumers through [removed: credit] [added: consumer] reporting [removed: agencies.][added: agencies and direct sales generated from the myFICO.com website.]

Scores segment revenues increased [removed: $85.3] [added: $125.6] million in fiscal [removed: 2019] [added: 2021] from [removed: 2018] [added: 2020] due to an increase of [removed: $77.4] [added: $64.6] million in our business-to-business scores revenue and [removed: $7.9] [added: $61.0] million in our business-to-consumer [removed: services] revenue.

The increase in business-to-business scores [added: revenue] was primarily attributable to a higher unit price [removed: in mortgage and auto activities.][added: across several business-to-business offerings, as well as higher volumes.]

The increase in business-to-consumer [removed: services] [added: revenue] was [removed: primarily] attributable to an increase in [added: both] royalties derived from scores sold indirectly to consumers through [removed: credit] [added: consumer] reporting [removed: agencies.][added: agencies and direct sales generated from the myFICO.com website.]

In fiscal 2021, our B2B scoring solutions, including the flagship FICO® Score, continued to be the standard measure of consumer credit risk in the U.S. In January 2020 we introduced our most predictive scores, FICO® Score 10 and 10T.

We continued to develop scores that use alternative data to enhance conventional credit bureau data and generate scores for otherwise un-scorable consumers.

This led us to exit less strategic areas of our business in order to facilitate incremental investment in higher value, more strategic areas.

As part of this process, we divested the non-platform-based Collections and Recovery (“C&R”) business, sold all assets related to our cyber risk score operations, and sold certain assets related to our Software operations to an affiliated joint venture in China.

This change led to a negative impact of our revenue recognized from term software licenses in our fiscal 2021 but does not affect total revenue recognized over the life of a contract.

In June 2021, following the divestiture of our C&R business, we entered into an accelerated share repurchase agreement (“ASR Agreement”) to repurchase $200.0 million of our common stock.

In August 2021, we entered into a stock repurchase agreement with an institutional shareholder pursuant to which we repurchased $225.0 million of our common stock.

We also repurchased shares in other open market transactions under our stock repurchase programs.

Due to the COVID-19 pandemic, we continue to conduct business with substantial modifications to employee travel and work locations and also the virtualization of sales and marketing events.

We expect these modifications to remain in place throughout calendar year 2021, along with substantially modified interactions with customers and suppliers, among other adjustments.

As certain offices reopened due to the lifting of local government restrictions and a small number of employees started returning to work locations on a limited basis during fiscal 2021, we have maintained a “Voluntary Work-From-Home Policy” providing our people with valued flexibility.

Highlights from Fiscal Year 2021

- Total GAAP revenue was $1.32 billion during fiscal year 2021, a 2% increase from fiscal year 2020.

- Total revenue for our Scores segment was $654.1 million during fiscal year 2021, a 24% increase from fiscal year 2020.

- Annual Recurring Revenue for our Software segment as of September 30, 2021 was $524.0 million, a 6% increase from September 30, 2020, excluding divestitures.

- Dollar-Based Net Retention Rate for our Software segment during the fourth quarter of fiscal 2021 was 106%, excluding divestitures.

- Cash and cash equivalents was $195.4 million as of September 30, 2021, compared with $157.4 million as of September 30, 2020.

- Operating income, which included $100.1 million gains on product line asset sales and business divestiture, was $505.5 million during fiscal year 2021, a 71% increase from fiscal 2020.

- Net income was $392.1 million during fiscal year 2021, a 66% increase from fiscal 2020.

- Cash flow from operations was $423.8 during fiscal year 2021, compared with $364.9 million generated during the prior year.

- Total debt balance was $1.268 billion as of September 30, 2021, compared with $845 million as of September 30, 2020.

- $882.2 million was spent on share repurchases, compared with $235.2 million spent during the prior year.

Key performance metrics for Software segment

Annual Contract Value Bookings (“ACV Bookings”)

We only include contracts with an initial term of at least 24 months and we exclude perpetual licenses and other revenues that are non-recurring in nature.

For renewals of existing software subscription contracts, we count only incremental annual revenue expected over the current contract as ACV Bookings.

ACV Bookings is calculated by dividing the total expected contract value by the contract term in years.

The expected contract value equals the fixed amount — including guaranteed minimums — stated in the contract, plus estimates of future usage-based fees.

We disclose estimated revenue expected to be recognized in the future related to remaining performance obligations in Note 12 to the accompanying consolidated financial statements.

The following table summarizes our ACV Bookings during the periods indicated:

| | | | | | | | | | | | | | | | | | | | | | | | |

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

| | | | 2021 | | | | | | 2020 | | | | | | 2021 | | | | | | 2020 | | |

| Total on-premises and SaaS software * | | | $ | 25.8 | | | | | $ | 28.9 | | | | | $ | 62.8 | | | | | $ | 58.3 | |

(*) During fiscal 2021, we sold all assets related to our cyber risk score operations, sold certain assets related to our Software segment to an affiliated joint venture in China, and divested our C&R business.

The amounts above exclude these divested product lines and businesses for all periods presented.

Annual Recurring Revenue (“ARR”)

Accounting Standards Codification 606 requires us to recognize a significant portion of revenue from our on-premises software subscriptions at the point in time when the software is first made available to the customer, or at the beginning of the subscription term, despite the fact that our contracts typically call for billing these amounts ratably over the life of the subscription.

The remaining portion of our on-premises software subscription revenue including maintenance and usage-based fees are recognized over the life of the contract.

This point-in-time recognition of a portion of our on-premises software subscription revenue creates significant variability in the revenue recognized period to period based on the timing of the subscription start date and the subscription term.

The application of this strategy has led to an increase in our cloud bookings over the past several years.

Our cloud bookings accounted for 41% of our total bookings in fiscal 2020, compared to 39% during fiscal 2019.

We have invested, and intend to continue to invest, in product development to build out and deliver features, functionalities and performance enhancements using a SaaS-based approach on our platform.

Our continued product innovation provides growth opportunities with customers that can benefit from the power, flexibility and modularity of these solutions.

For our Scores segment, our industry leading business-to-business FICO® Scores have achieved a multi-year expansion in the growing U.S. business-to-consumer market.

We have launched numerous new FICO® Score-based products, and continue to grow our business-to-consumer partnership with Experian, a leading global information services provider.

This partnership provides consumers the FICO® Score that lenders most commonly use in evaluating credit when determining applicant eligibility for new credit cards, car loans, mortgages or other lines of credit and can be accessed through Experian.com.

The FICO® Score Open Access 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 240 million consumer accounts with access to their free FICO® Scores.

We continue to pursue additional partners to distribute FICO® Scores with their product offerings sold directly to consumers.

FICO® Resilience Index would enable industry participants to more precisely assess credit risk and extend credit to more consumers throughout the economic cycle by managing the risk that emerges during periods of economic stress.

As a strategic cost initiative in fiscal 2020, we committed to a course of action designed to reduce operating costs in lower value, less strategic areas of our business in order to facilitate incremental investment in higher value, more strategic areas while also reducing our facilities footprint in light of post-pandemic workforce patterns.

As a result of this initiative, in the fourth quarter of fiscal 2020, we recorded a net charge of $41.9 million consisting of impairment losses of $33.2 million on our operating lease assets, property and equipment related to closing or consolidating office spaces, as well as a restructuring charge of $8.7 million related to our workforce reduction.

We expect this course of action to result in an aggregate annual expense savings of approximately $36 million beginning in fiscal 2021.

We expect a decline in revenue recognized from term software licenses in fiscal 2021 as we transition to the new term license subscription model.

Overview of Financial Results

Total revenues for fiscal 2020 were $1.29 billion, an increase of 12% from $1.16 billion in fiscal 2019.

We continue to drive growth in our Scores segment.

Scores revenue increased 25% to $528.5 million in fiscal 2020 from $421.2 million in fiscal 2019, and Scores operating income increased 26% to $454.3 million in fiscal 2020 from $361.4 million in fiscal 2019.

For our Applications and Decision Management Software segments, our SaaS business continues to grow as we pursue our cloud-enabled, platform-based strategy.

Revenue derived from our cloud-enabled SaaS business, which includes both subscription revenue and associated professional services revenue, increased 11% to $300.0 million during fiscal 2020, from $270.4 million during fiscal 2019.

SaaS subscription revenue increased 11% to $236.0 million during fiscal 2020, from $213.1 million during fiscal 2019.

We derive a significant portion of revenues internationally, and 32% and 34% of total consolidated revenues were derived from clients outside the U.S. during fiscal 2020 and 2019, respectively.

A significant portion of our revenues are derived from the sale of products and services within the banking (including consumer credit) industry, and 86% and 87% of our revenues were derived from within this industry during fiscal 2020 and 2019, respectively.

In addition, a significant share of our revenues come from transactional or unit-based software license fees, transactional fees under credit scoring, data processing, data management and SaaS subscription services arrangements, and annual software maintenance fees.

Arrangements with transactional or unit-based pricing accounted for 75% and 74% of our revenues during fiscal 2020 and 2019, respectively.

Operating income for fiscal 2020 was $296.0 million, an increase of 17% from $253.5 million in fiscal 2019.

Operating margin was 23% and 22% for fiscal 2020 and 2019, respectively.

Net income increased 23% to $236.4 million in fiscal 2020 from $192.1 million in fiscal 2019 primarily due to an increase in operating income.

Diluted earnings per share for fiscal 2020 was $7.90, an increase of 25% from $6.34 in fiscal 2019.

COVID-19 Update

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, which has spread throughout the U.S. and the world.

The COVID-19 pandemic has resulted in authorities implementing numerous measures to contain the virus, including quarantines, shelter-in-place orders, travel bans and restrictions, and business limitations and shutdowns.

Our focus remains on promoting employee health and safety, serving our customers and ensuring business continuity.

Since March 2020, our employees have been instructed to work from home in each country where we operate to support their health and well-being as well as for our customers, partners and communities.

We have also substantially reduced employee travel to only essential business needs.

We cannot predict when or how we will begin to lift the actions put in place, but as of the date of this filing, we do not believe our work-from-home protocol has had a material adverse impact on our internal controls, financial reporting systems or our operations.

Our operational flexibility and strong balance sheet allowed us to successfully manage through the initial impact of COVID-19 while protecting our cash flow and liquidity.

However, certain areas of our business have been adversely impacted as a result of the pandemic’s global economic impact.

For example, COVID-19 has been adversely affecting certain purchasing decisions by our customers in our Applications and Decision Management Software segments.

For our Scores segment, we have seen a decline in auto and unsecured originations volumes, but an increase in mortgage volume through the 2nd half of fiscal 2020 due to strong refinancing activities boosted by low interest rates.

The following table presents the principal amounts and related weighted-average yields for our investments with interest rate risk at September 30, [removed: 2020] [added: 2021] and [removed: 2019:][added: 2020:]

| | [added: | |] September 30, 2020 | | | | | | | | | | | [removed: September 30, 2019] | | | | [removed: | | | | | |]

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

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

| Cash and cash equivalents | [added: | |] $ | [removed: 157,394] [added: 195,354] | | | [added: | |] $ | [removed: 157,394] [added: 195,354] | | | [removed: 0.05] | [added: | 0.04 | |] % | | [added: | |] $ | [removed: 106,426] [added: 157,394] | | | [added: | |] $ | [removed: 106,426] [added: 157,394] | | | [removed: 0.76] | [added: | 0.05 | |] % |

On December 6, 2019, we issued $350 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes,” [removed: along] [added: and] with the [removed: 2010 Senior Notes and] 2018 Senior Notes, the “Senior Notes”).

The following table presents the carrying amounts and fair values for the Senior Notes at September 30, [removed: 2020] [added: 2021] and [removed: 2019:][added: 2020:]

| | [added: | |] September 30, [removed: 2020] [added: 2021] | | | | | | | | [added: | | | | | | | | | |] September 30, [removed: 2019] [added: 2020] | | | | | | | [added: | | | | | | | |]

| | [added: | |] Face Value (*) | | | | [added: | |] Fair Value | | | | [added: | |] Face Value (*) | | | | [added: | |] Fair Value | | |

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

| The [removed: 2010] [added: 2018] Senior Notes | [removed: $] | [removed: —] | [added: 400,000] | | [removed: $] | [removed: —] | | | [removed: $] [added: 453,000] | [removed: 85,000] | | | [removed: $] | [removed: 86,121] | [added: 400,000] | [added: | | | | | 442,000 | | |]

| The 2019 Senior Notes | [added: | |] 350,000 | | | | [removed: 358,750] | | [added: 357,000] | | [removed: —] | | | | [removed: —] [added: 350,000] | | | [added: | | | 358,750 | | |]

| Total | [added: | |] $ | 750,000 | | | [added: | |] $ | [removed: 800,750] [added: 810,000] | | | [added: | |] $ | [removed: 485,000] [added: 750,000] | | | [added: | |] $ | [removed: 514,121] [added: 800,750] | |

(*) The carrying value of the Senior Notes was [added: the face value] reduced by the net debt issuance costs of [removed: $10.6] [added: $9.0] million and [removed: $5.2] [added: $10.6] million at September 30, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

We have interest rate risk with respect to our [removed: $400] [added: $600] million unsecured revolving line of credit.

The applicable margin for base rate borrowings ranges from 0% to [removed: 0.875%] [added: 0.750%] and for LIBOR borrowings ranges from 1.000% to [removed: 1.875%] [added: 1.750%] and is determined based on our consolidated leverage ratio.

We had [removed: $95.0] [added: $518.0] million in borrowings outstanding at a weighted-average interest of [removed: 1.285%] [added: 1.212%] under the credit facility as of September 30, [removed: 2020.][added: 2021.]

The following tables summarize our outstanding foreign currency forward contracts, by currency, at September 30, [removed: 2020] [added: 2021] and [removed: 2019:][added: 2020:]

| | [added: | |] September 30, [removed: 2020] [added: 2021] | | | | | | | | | | [added: | | September 30, 2020 | | | | | | | | |]

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

| | [removed: Foreign Currency] | | | | [added: | Foreign Currency | | | | | |] USD | | | | [added: | |] USD | | [added: |]

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

| Sell foreign currency: | | | | | | | | | | | [added: | | | | | | | | | |]

| Euro (EUR) | [added: | |] EUR | 15,000 | | | [added: | |] $ | 17,656 | | | [added: | |] — | | [added: |]

| Buy foreign currency: | | | | | | | | | | | [added: | | | | | | | | | |]

| British pound (GBP) | [added: | |] GBP | 16,555 | | | [added: | |] $ | 21,300 | | | [added: | |] — | | [added: |]

| Singapore dollar (SGD) | [added: | |] SGD | 7,815 | | | [added: | |] $ | 5,700 | | | [added: | |] — | | [added: |]

| British pound (GBP) | [added: | | | | |] GBP | [removed: 5,200] [added: 11,467] | | | [added: | |] $ | [removed: 6,400] [added: 15,400] | | | [added: | |] — | | [added: |]

| Singapore dollar (SGD) | [added: | | | | |] SGD | [removed: 5,798] [added: 6,650] | | | [added: | |] $ | [removed: 4,200] [added: 4,900] | | | [added: | |] — | | [added: |]

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: 2020] [added: 2021] and [removed: 2019.][added: 2020.]

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| | | | | | | | | | | | | | | | | | | | | | | | |

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

| | | | | | | | | | | | | | | | | | | | | |

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

| | | | | | | September 30, 2021 | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | |

| Euro (EUR) | | | | | | EUR | 17,100 | | | | | $ | 19,829 | | | | | — | | |

| | | | | | | | | | | | | | | | | | |

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

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

| | | | Foreign Currency | | | | | | USD | | | | | | USD | | |

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

| Sell foreign currency: | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| Buy foreign currency: | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | |

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

On July 14, 2010, we issued $245 million of senior notes in a private placement to a group of institutional investors, the outstanding aggregate principal amount of which was paid in full at maturity on July 14, 2020 (the “2010 Senior Notes”).

| | | | | | | | | | | | | | | | |

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

| The 2018 Senior Notes | 400,000 | | | | 442,000 | | | | 400,000 | | | | 428,000 | | |

| | | | | | | | | | | |

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

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

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

Fair Isaac Corporation (NYSE: FICO) (together with its consolidated subsidiaries, the “Company,” which may also be referred to in this report as “we,” “us,” “our,” and “FICO”) [removed: provides products, solutions and services that enable businesses to automate, improve and connect decisions to enhance business performance.][added: is a leading applied analytics company.]

[removed: Today, we help thousands] [added: With more than 60 years] of [removed: companies in over 120 countries use] [added: analytics and software experience, we have found that bringing human and digital intelligence together allows] our [removed: decision management technology] [added: customers] to target and acquire customers more efficiently, increase customer value, reduce fraud and credit losses, lower operating expenses, and enter new markets more profitably.

Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive companies, [removed: pharmaceutical companies, healthcare organizations,] public [removed: agencies] [added: agencies,] and organizations in other industries.

We also serve consumers through online services that enable people to access and understand their [removed: FICO®] [added: FICO] Scores, the standard measure in the U.S. of consumer credit risk, empowering them to [added: increase financial literacy and] manage their financial health.

We make our Annual Reports on [removed: Form] [added: Forms] 10-K, Quarterly Reports on [removed: Form 10-Q] [added: Forms 10-Q,] and Current Reports on [removed: Form] [added: Forms] 8-K, as well as amendments to those reports, available free of charge through our website as soon as reasonably practicable after we electronically file them with the [removed: SEC.][added: U.S. Securities and Exchange Commission (“SEC”).]

Most of our solutions address customer engagement, including [removed: customer acquisition, customer] [added: acquisition and pricing,] onboarding, [removed: customer] servicing and management, and [removed: customer] [added: fraud] protection.

We also help businesses improve non-customer [added: facing] decisions such as [removed: transaction] [added: supply chain optimization, scheduling management] and [removed: claims processing.][added: policy adherence.]

[removed: | • | *Applications.* This] [added: Our Software] segment includes pre-configured [added: analytic and] decision management [removed: applications] [added: solutions] designed for a specific type of business [removed: problem] [added: need] or process — such as [removed: marketing,] account origination, customer management, [removed: fraud,] [added: customer engagement, fraud detection,] financial crimes compliance, [removed: collections] and [removed: insurance claims management] [added: marketing] — as well as associated professional services. [removed: 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 or Amazon Web Services (“AWS”). |]

[removed: | • | *Scores*. This] [added: Our Scores] segment includes our business-to-business [removed: scoring solutions and services, our business-to-consumer] [added: (“B2B”)] scoring solutions and services [removed: including myFICO® solutions for consumers, and associated professional services. Our scoring solutions] [added: which] give our clients access to [removed: analytics] [added: predictive credit and other scores] that can be easily integrated into their transaction streams and decision-making processes. [removed: Our scoring solutions are distributed through major credit reporting agencies worldwide, as well as services through which we provide our scores to clients directly. |]

Our [removed: applications primarily] [added: scores and software products and services] serve clients in [removed: the] [added: multiple industries, including] banking, insurance, [removed: telecommunications, healthcare, retail] [added: retail, healthcare] and public [removed: sectors.][added: agencies.]

[removed: We provide solutions that enable] [added: It enables] banks, credit unions, finance companies, [removed: alternative peer-to-peer and] online lenders, auto lenders, and other companies to automate and improve the processing of requests for [removed: credit or service.][added: credit.]

[removed: These solutions increase] [added: Our Originations Solution increases] the [removed: speed] [added: speed, consistency] and efficiency with which requests are handled, [removed: reduce] [added: reducing] losses, and [removed: increase] [added: increasing] approval rates through [added: the application of sophisticated policies and] analytics that assess applicant risk and reduce the need for manual review by [removed: loan officers.][added: underwriters.]

[removed: Our customer portfolio management products] [added: - *FICO*® *Strategy Director] and [removed: services] [added: FICO*® *TRIAD*® *Customer Manager*] enable businesses to automate and improve risk-based decisions for their existing [added: credit] customers.

These [removed: solutions] [added: products] help businesses apply advanced analytics in [added: credit] account and customer decisions to increase portfolio [removed: revenue, decrease] [added: revenue and reduce] risk exposure and losses, [removed: and reduce customer attrition,] while improving [removed: operational efficiencies.][added: customer retention.]

[removed: The current versions enable] [added: They also allow] users to manage risk and communications at both the account and customer level from a single [removed: platform.][added: place.]

[removed: *Fraud Protection] [added: - fraud] and [removed: Compliance Applications*][added: compliance solution providers;]

Our [removed: fraud and financial crimes] solutions analyze [removed: activity in real time] [added: activities such as credit card transactions] and [added: account openings to] generate [added: real time] recommendations for immediate action.

[removed: FICO® Customer] [added: - *FICO*® *Customer] Communication [removed: Services] [added: Service*] is an intelligent omnichannel digital communication manager for [removed: executing] [added: resolving] customer [removed: lifecycle decisions.][added: interactions.]

It enables businesses to automate individualized [added: customer] dialogues with the [added: same] consistency and regulatory compliance [removed: of] [added: as] their human agents.

With Customer Communication [removed: Services,] [added: Service,] businesses can be available 24/7 for one-way or two-way communication through any channel [added: their] consumers choose.

[removed: Customers] [added: Businesses] can rapidly launch mobile alerts, messaging, virtual agents, self-service [removed: options] [added: options,] and other auto-resolution capabilities.

It helps make the full customer [removed: journey—account origination and onboarding, customer management account notifications and engagement campaigns, fraud management and debt collection—more digital] [added: journey more efficient] and raises the level of data-driven [added: digital] intelligence behind lifecycle communications.

[added: - *FICO*® *Analytic Services.*] We [removed: perform] [added: build] custom [removed: analytics (descriptive, predictive and prescriptive) as well as] [added: analytics,] decision [removed: modeling] [added: models] and related [removed: analytic] [added: analytics,] and [added: perform] machine learning projects for clients in multiple industries.

Most of [removed: this work falls under] [added: our engagements utilize] predictive analytics, decision modeling and [removed: optimization, which] [added: optimization to] provide greater insight into customer [removed: preferences,] [added: preferences and help] predict future customer [removed: behavior and operationalize these analytics.][added: behavior.]

[removed: Scores][added: *Scores*]

Our [added: B2B scoring solutions include the] FICO® [removed: Scores are used in] [added: Score, which is] the [removed: majority] [added: standard measure] of [added: consumer credit risk in the] U.S. [added: It is used in most U.S.] credit decisions, by nearly all [removed: of the] major banks, credit card [removed: organizations,] [added: issuers,] mortgage [removed: lenders] [added: lenders,] and auto loan originators.

[added: The] FICO® Score is a three-digit [removed: score] [added: number] ranging from 300-850.

[removed: While] [added: In addition to] the [removed: core] FICO® [removed: Score is the foundation of our scoring portfolio,] [added: Score,] we offer [removed: a number of] [added: several] other broad-based scores, including [removed: several] specific FICO® Industry Scores.

[removed: FICO®] [added: - FICO®] Score XD [removed: looks at] [added: uses] public records and property data, and a consumer’s history with [removed: mobile,] [added: mobile phone,] 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 [removed: from] [added: through our distribution partners,] LexisNexis Risk Solutions and Equifax.

Incorporating [removed: consumer contributed] [added: consumer-permissioned] data [removed: is a unique approach to helping] [added: helps] empower consumers to establish or improve their creditworthiness by using data that reflects sound financial [removed: activity] [added: activity,] but that is not part of a [removed: traditional] [added: conventional] credit report.

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

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

[removed: During fiscal 2020, we announced the launch of the] [added: The] FICO® Resilience [removed: Index,] [added: Index is] a [removed: new analytic tool] [added: recently introduced offering] designed to complement FICO® Score models by identifying those consumers who are [removed: most] [added: more] resilient to economic stress relative to other consumers within the same [removed: FICO®] [added: FICO] Score bands.

[removed: Consumers can use the] [added: Through] myFICO.com [removed: website to] [added: and other direct-to-consumer channels, consumers can] purchase their [removed: FICO®] [added: FICO] Scores, including credit reports associated with the scores, explanations of the factors affecting their scores, and customized [added: educational] information on how to manage their scores.

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

Consumers can also subscribe to [removed: monitoring services,] [added: credit monitoring,] which deliver alerts via email and text when changes to a user’s [removed: FICO®] [added: FICO] Scores or other credit report content are detected.

In addition, consumers can purchase identity theft monitoring products that alert [removed: consumers of] [added: them to] potential risks of identity [removed: fraud with comprehensive detection and identity restoration services.][added: fraud.]

[removed: | • | FICO® Decision Modeler, the] [added: - *FICO*® *Decision Modeler and FICO*® *Blaze Advisor*® are our] core decision rules modeling [removed: tool,] [added: tools,] which [removed: enables] [added: enable] users to flexibly author and manage decision rules and [removed: strategies; |][added: strategies.]

[removed: | • | FICO® Decision Management Platform Streaming,] [added: - *FICO*® *DMP Streaming* is] a real-time and batch data ingestion solution that uniquely delivers in-stream analytics for real-time data insights and complex event processing. [removed: |]

Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in nearly 120 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale.

Our business consists of two operating segments: Scores and Software.

This segment also includes our business-to-consumer (“B2C”) scoring solutions, including our myFICO.com subscription offerings.

This segment also includes FICO® Platform, a modular software offering designed to support advanced analytic and decision use cases, as well as stand-alone analytic and decisioning software that can be configured by our customers to address a wide variety of business use cases.

Our offerings are available to our customers as software-as-a-service (“SaaS”) or as on-premises software.

Our B2B scoring solutions are primarily distributed through major consumer reporting agencies worldwide.

Our B2C scores are sold directly to consumers through our myFICO.com website and other direct-to-consumer channels.

Our proprietary analytic algorithms are applied to credit data collected and maintained by the three U.S. national consumer reporting agencies — Experian, TransUnion and Equifax — to produce standard scores that are used across the credit lifecycle, including in origination, account management and consumer marketing.

Users of our scores generally pay the consumer reporting agencies a fee for each individual score generated by our algorithms, and the consumer reporting agencies pay an associated fee to us.

Except for product development using de-personalized data, FICO does not collect or store the consumer credit data used in the calculation of our scores, and in most cases, we do not sell our scores directly to lenders or other end-users.

Since the introduction of the FICO® Score in the U.S. in 1989, we have regularly updated the score to take advantage of newly available data and enhanced analytics.

Our most recent and most predictive scores, FICO® Score 10 and 10T, were introduced in January 2020.

To increase its predictive power, FICO Score 10T builds on FICO Score 10 but also incorporates trended credit data.

Trended data considers a longer historical view, giving lenders even more insight into how individuals are managing their credit.

When we introduced FICO® Score 9 in 2015, it also made use of newly available data such as reported rental payment history, while also de-emphasizing medical debt and disregarding paid collections.

Most of our scores distributed today are FICO® Score 8 and FICO® Score 9.

While our newer scores generally provide greater predictive accuracy than the scores they replace, we ensure that new versions of the standard FICO® Score are compatible with prior versions of the FICO Score.

For example, in July 2021 we introduced Bankcard and Auto Industry versions of FICO® Score 10.

The FICO Resilience Index is designed to enable lenders to continue to lend and better manage risk by providing a more precise assessment of loan default risk during periods of economic stress.

FICO has invested significant resources in the development of scores that can help expand credit access and lower borrowing costs for consumers that have limited credit history or who have sparse or inactive credit files.

These scores use alternative data sources to enhance conventional credit bureau data and generate scores for otherwise un-scorable consumers and in many cases improve the credit scores of scorable consumers.

- The UltraFICOTM Score uses consumer-permissioned data such as checking, savings, or money market account data, to generate scores on the same 300-850 scale as standard FICO® Scores.

Both scores maintain the same score to risk relationship as standard FICO® Scores, enhancing their compatibility with existing credit underwriting systems and models.

These scores are typically sold to end-users through consumer reporting agencies in those countries, as they are in the U.S. We have also developed client-specific versions of the FICO Score in over ten countries that we sell directly to end-user customers.

We also provide FICO® Scores to consumers in the U.S. through our B2C scoring solutions.

These Scores are distributed directly by us through our myFICO.com subscription offering and indirectly through our licensed distribution partners, including Experian and certain lenders through the FICO® Score Open Access Program.

Software

Our software harnesses the power of analytics and digital decisioning technology to help businesses automate, improve, and connect decisions across their enterprise.

FICO provides software solutions to business customers in more than 120 countries around the world.

Our software can be deployed in the cloud as SaaS utilizing FICO’s infrastructure or third-party cloud services, or on-premises using our customers’ IT infrastructure.

We typically sell our software as multi-year subscriptions, with payments based on usage metrics such as the number of accounts, transactions or decisioning use cases deployed, often subject to contracted minimum payments.

A significant and growing number of our software solutions run natively on FICO® Platform, a modular software offering designed to support advanced analytics and decisioning use cases.

While not all our software runs on FICO Platform today, we are investing significant development resources to enable substantially all of our software to run on FICO Platform in the future.

We specialize in solutions that empower businesses to operationalize analytics to uncover new opportunities, make timely decisions that matter, and execute them at scale.

Our principal areas of research and development expertise are focused on the following four analytic domains.

- *Predictive Modeling*

These include proprietary applications of both linear and nonlinear optimization algorithms, advanced neural systems, machine learning and AI.

- *Decision Analysis and Optimization*

This is often referred to as prescriptive analytics.

- *Transaction Profiling*

Our predictive analytics, which includes the industry-standard FICO® Score, and our decision management systems leverage the use of big data and mathematical algorithms to predict consumer behavior and power hundreds of billions of customer decisions each year.

We use analytics to help businesses automate, improve and connect decisions across their enterprise, an approach we commonly refer to as decision management.

Our solutions enable users to make decisions that are more precise, consistent and agile, and that systematically advance business goals.

This helps our clients reduce the cost of doing business and losses from risks and fraud, while helping increase revenues, profitability, and customer loyalty.

Our Segments

We categorize our products and services into the following three operating segments:

| | |

| --- | --- |

| • | *Decision Management 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 FICO® Decision Management Suite, as well as associated professional services. Decision management software is currently delivered as part of the FICO® Platform and is increasingly being adopted to connect decisioning solutions or previously disconnected use cases. These tools are available to our customers as on-premises software, through the FICO® Analytic Cloud or AWS. |

Our Solutions

Our solutions involve four fundamental disciplines:

| • | Analytics, which include predictive analytics that identify risks and opportunities associated with individual customers, prospects and transactions, in order to detect patterns such as risk, fraud or profitability, as well as optimization analytics that are used to mathematically improve the design of decision logic or “strategies.” |

| • | Data management and transaction profiling that bring extensive consumer information to every decision. |

| • | Software such as decision management systems that author and implement business rules, models and decision strategies, often in a real-time environment, as well as software for managing customer engagement. This software is increasingly deployed as a platform solution that enables previously disparate use cases to be connected in a manner that provides a centralized or 360-degree view of a customer’s journey through traditionally siloed client offerings. |

| • | Consulting services that help clients make the most of investments in FICO applications, tools and scores in the shortest possible time. |

All of our solutions are designed to help businesses make decisions that are faster, more precise, more consistent and more agile, while reducing costs and risks incurred in making decisions.

In addition, we offer our clients a portfolio of applications, tools and services in the cloud, which allow them to create, customize, deploy and manage powerful analytic services.

Applications

We develop industry-tailored decision management applications, which apply analytics, data management and decision management software to specific business challenges and processes.

During fiscal 2020, we continued to expand our product offerings for the FICO® Analytic Cloud and AWS, resulting in increased sales opportunities by accommodating customers that can benefit from the power, flexibility and modularity of these solutions.

Within our Applications segment our fraud solutions accounted for 15%, 18% and 17% of total revenues in each of fiscal 2020, 2019 and 2018, respectively, and our customer communication services accounted for 8%, 9% and 10% of total revenues in each of these periods, respectively.

*Origination Applications*

FICO® Origination Manager, an application-to-decision processing solution, is available both on-premises and in the FICO® Analytic Cloud, and we plan to make it available in the AWS cloud in fiscal 2021 with the launch of FICO® Origination Manager 5.0.

Other solutions include the web-based FICO® LiquidCredit® service, which is primarily focused on credit decisions and offered largely to mid-tier banking institutions.

FICO® Small Business Scoring Service℠ (SBSS) is recognized as the industry leader in assessing the risk of U.S. small business credit applicants.

SBSS is delivered via our LiquidCredit service infrastructure and it brings the speed of consumer lending to small business lending decisions.

With SBSS, clients can typically make decisions in hours rather than days to improve customer satisfaction and help attract more small businesses.

Delivered as a cloud service, FICO® Origination Manager Essentials offers mid-market organizations the ability to inexpensively set up and process small business applications quickly, without a long or difficult implementation process.

Origination Manager Essentials will be phased out in August 2021.

To support origination, we also offer custom and consortium-based credit risk and application fraud models.

*Customer Management Applications*

We provide customer portfolio management solutions for banking, telecommunications and retail.

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

FICO® Strategy Director is the newest, more flexible customer management application available on the FICO Analytic Cloud and AWS.

These solutions enable businesses to rapidly adapt to changing business and internal conditions by designing and testing new strategies in a “champion/challenger” environment.

We market and sell FICO® TRIAD® Customer Manager and FICO® Strategy Director software licenses, maintenance, consulting services, and strategy design and evaluation.

Additionally, we provide TRIAD and Strategy Director services and similar credit account management services through third-party credit card processors worldwide, including two of the largest processors in the U.S.

Our fraud protection and compliance products improve our clients’ profitability by providing protections across the customer lifecycle from account origination to digital customer interactions—such as online or mobile logins—to non-monetary transactions—such as address changes or pin changes—to payment transactions.

These defenses are critical to stopping synthetic identity fraud, first-party fraud, and third-party fraud, as well as identifying money laundering activity to help our clients stay compliant and secure while safeguarding the customer experience.

Our fraud solutions are designed to detect and prevent a wide variety of risk types.

Not applicable.

On March 13, 2020, we received a letter from the Antitrust Division of the U.S. Department of Justice (“DOJ”) informing us that the DOJ had opened a civil investigation into potential exclusionary conduct by the Company.

We are cooperating with the DOJ in its investigation.

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

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

For the fiscal year [removed: ended September] [added: ended September] 30, [removed: 2020][added: 2021]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

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

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

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

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

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

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

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

| Large Accelerated Filer | | [added: | | | |] ☒ | [added: | |] Accelerated Filer | | [added: | | | |] ☐ | [added: | |]

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

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

| ☐ | [added: | |] Yes | [added: | |] ☒ | [added: | |] No | [added: | |]

As of March 31, [removed: 2020,] [added: 2021,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was [removed: $7,095,692,430] [added: $11,138,645,215] 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: 30, 2020] [added: 29, 2021] was [removed: 29,098,177] [added: 27,358,353] (excluding [removed: 59,758,606] [added: 61,498,430] shares held by the Company as treasury stock).

Portions of the Registrant’s definitive proxy statement relating to its [removed: 2021] [added: 2022] Annual Meeting of Stockholders [removed: (“2021] [added: (“2022] Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

The [removed: 2021] [added: 2022] Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

| Item 1. | [removed: [Business](#sA0AE620BF90555A4B696251348CBE4D7)] | [removed: [3](#sA0AE620BF90555A4B696251348CBE4D7)] | [added: [Business](#i418c637ca00a491b8b456ab257e63118_16) | | | [3](#i418c637ca00a491b8b456ab257e63118_16) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#s9B0074BB50C6514EBAFAD2368306886B)] [added: Factors](#i418c637ca00a491b8b456ab257e63118_19)] | [removed: [14](#s9B0074BB50C6514EBAFAD2368306886B)] | [added: | [14](#i418c637ca00a491b8b456ab257e63118_19) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s7487B11E394F5ECC9A57A71F3ABCFD51)] [added: Comments](#i418c637ca00a491b8b456ab257e63118_22)] | [removed: [26](#s7487B11E394F5ECC9A57A71F3ABCFD51)] | [added: | [28](#i418c637ca00a491b8b456ab257e63118_22) | | |]

| Item 2. | [removed: [Properties](#s492D292DAD425FD0BAC36927BD7AE0A7)] | [removed: [26](#s492D292DAD425FD0BAC36927BD7AE0A7)] | [added: [Properties](#i418c637ca00a491b8b456ab257e63118_25) | | | [28](#i418c637ca00a491b8b456ab257e63118_25) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s29A07539E31356A3A71421CA7A3C0795)] [added: Proceedings](#i418c637ca00a491b8b456ab257e63118_28)] | [removed: [27](#s29A07539E31356A3A71421CA7A3C0795)] | [added: | [29](#i418c637ca00a491b8b456ab257e63118_28) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#s11E0F2A435F95345866F10058D8793A4)] [added: Disclosures](#i418c637ca00a491b8b456ab257e63118_31)] | [removed: [27](#s11E0F2A435F95345866F10058D8793A4)] | [added: | [29](#i418c637ca00a491b8b456ab257e63118_31) | | |]

| Item 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sB15DCCDE474E5838AD6B26E6F819365B)] [added: Securities](#i418c637ca00a491b8b456ab257e63118_37)] | [removed: [28](#sB15DCCDE474E5838AD6B26E6F819365B)] | [added: | [30](#i418c637ca00a491b8b456ab257e63118_37) | | |]

| Item 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sA16CB90BA6CB577AB5BD62A2C5FD0F10)] [added: Operations](#i418c637ca00a491b8b456ab257e63118_43)] | [removed: [31](#sA16CB90BA6CB577AB5BD62A2C5FD0F10)] | [added: | [32](#i418c637ca00a491b8b456ab257e63118_43) | | |]

| Item 7A. | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s3D60BE26749357BF8DCDFFF2800C919D)] [added: Risk](#i418c637ca00a491b8b456ab257e63118_67)] | [removed: [49](#s3D60BE26749357BF8DCDFFF2800C919D)] | [added: | [50](#i418c637ca00a491b8b456ab257e63118_67) | | |]

| Item 8. | [added: | |] [Financial Statements and Supplementary [removed: Data](#s63CCAC5A446D5B1E9BEFD2AA1DE147F4)] [added: Data](#i418c637ca00a491b8b456ab257e63118_70)] | [removed: [52](#s63CCAC5A446D5B1E9BEFD2AA1DE147F4)] | [added: | [53](#i418c637ca00a491b8b456ab257e63118_70) | | |]

| Item 9. | [added: | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s4EA986E0CF92567FA1E588E82C71EA2B)] [added: Disclosure](#i418c637ca00a491b8b456ab257e63118_184)] | [removed: [90](#s4EA986E0CF92567FA1E588E82C71EA2B)] | [added: | [90](#i418c637ca00a491b8b456ab257e63118_184) | | |]

| Item 9A. | [added: | |] [Controls and [removed: Procedures](#sAC42F918DE235D9C918665BE6BAA4344)] [added: Procedures](#i418c637ca00a491b8b456ab257e63118_187)] | [removed: [90](#sAC42F918DE235D9C918665BE6BAA4344)] | [added: | [90](#i418c637ca00a491b8b456ab257e63118_187) | | |]

| Item 9B. | [added: | |] [Other [removed: Information](#sE100009490605BF5B81DD7451FD2F72F)] [added: Information](#i418c637ca00a491b8b456ab257e63118_190)] | [removed: [90](#sE100009490605BF5B81DD7451FD2F72F)] | [added: | [91](#i418c637ca00a491b8b456ab257e63118_190) | | |]

| [removed: [PART III](#sC66968926161522E855DC428F5FCF049)] [added: [PART III](#i418c637ca00a491b8b456ab257e63118_193)] | | | [added: | | | | | |]

| Item 10. | [added: | |] [Directors, Executive Officers and Corporate [removed: Governance](#s134B478EB316587EAF138512050D9794)] [added: Governance](#i418c637ca00a491b8b456ab257e63118_196)] | [removed: [91](#s134B478EB316587EAF138512050D9794)] | [added: | [92](#i418c637ca00a491b8b456ab257e63118_196) | | |]

| Item 11. | [added: | |] [Executive [removed: Compensation](#sDD95F05848C354E9BBEE15687F4A47EC)] [added: Compensation](#i418c637ca00a491b8b456ab257e63118_199)] | [removed: [93](#sDD95F05848C354E9BBEE15687F4A47EC)] | [added: | [94](#i418c637ca00a491b8b456ab257e63118_199) | | |]

| Item 12. | [added: | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sE185119D808852B9A604EABDA9C2F305)] [added: Matters](#i418c637ca00a491b8b456ab257e63118_202)] | [removed: [93](#sE185119D808852B9A604EABDA9C2F305)] | [added: | [94](#i418c637ca00a491b8b456ab257e63118_202) | | |]

| Item 13. | [added: | |] [Certain Relationships and Related Transactions, and Director [removed: Independence](#s1E5E8BEAF15A58808A995118309FDDB9)] [added: Independence](#i418c637ca00a491b8b456ab257e63118_205)] | [removed: [93](#s1E5E8BEAF15A58808A995118309FDDB9)] | [added: | [94](#i418c637ca00a491b8b456ab257e63118_205) | | |]

| Item 14. | [added: | |] [Principal Accountant Fees and [removed: Services](#s61203B5156855EB7BCF8560CD238239F)] [added: Services](#i418c637ca00a491b8b456ab257e63118_208)] | [removed: [93](#s61203B5156855EB7BCF8560CD238239F)] | [added: | [94](#i418c637ca00a491b8b456ab257e63118_208) | | |]

| Item 15. | [added: | |] [Exhibits, Financial Statement [removed: Schedules](#s1A589B21106E5068BC1D9D30084D7E3A)] [added: Schedules](#i418c637ca00a491b8b456ab257e63118_214)] | [removed: [94](#s1A589B21106E5068BC1D9D30084D7E3A)] | [added: | [95](#i418c637ca00a491b8b456ab257e63118_214) | | |]

[removed: FORWARD LOOKING] [added: FORWARD-LOOKING] STATEMENTS

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| 5 West Mendenhall, Suite 105 | | | | | | | | | | | |

| Bozeman, | | | Montana | | | | | | 59715 | | |

406-982-7276

| | | | | | | | | |

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| [PART I](#i418c637ca00a491b8b456ab257e63118_13) | | | | | | | | |

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| [PART II](#i418c637ca00a491b8b456ab257e63118_34) | | | | | | | | |

| Item 6. | | | [\[Reserved\]](#i418c637ca00a491b8b456ab257e63118_40) | | | [31](#i418c637ca00a491b8b456ab257e63118_40) | | |

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| [PART IV](#i418c637ca00a491b8b456ab257e63118_211) | | | | | | | | |

| [Signatures](#i418c637ca00a491b8b456ab257e63118_226) | | | | | | [100](#i418c637ca00a491b8b456ab257e63118_226) | | |

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| 181 Metro Drive, Suite 700 | | | |

| San Jose, | California | | 95110-1346 |

408\-535-1500

| [PART I](#s0B055F985BD85424A10119CB187C390F) | | |

| [PART II](#sBC8A62C55DE85AE7B7D428125F47A36D) | | |

| Item 6. | [Selected Financial Data](#s073826E8633F5322B01782D604D13ABF) | [29](#s073826E8633F5322B01782D604D13ABF) |

| [PART IV](#s7F53C618BD5D572A966836E4951E461B) | | |

| [Signatures](#s91BD41CBF3575202BDD9EA62D620F0A8) | | [99](#s91BD41CBF3575202BDD9EA62D620F0A8) |

The Company’s headquarters are located in Bozeman, Montana.

As of September 30, 2021, the Company leased office facilities in geographically dispersed locations primarily for corporate functions, sales, research and development, data centers and other purposes.

The Company believes its existing facilities, which are used by both reportable segments, are in good operating condition and are suitable to meet operating needs.

Our properties consist primarily of leased office facilities for sales, data processing, research and development, consulting and administrative personnel.

Our principal locations include:

| | |

| --- | --- |

| • | approximately 55,000 square feet of office space in San Jose, California in one building under a lease expiring in fiscal 2024; this is used for our corporate headquarters and all of our segments; |

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

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

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

| • | approximately 45,000 square feet of office space in Roseville, Minnesota in one building under a lease expiring in fiscal 2028; this is used for all of our segments. |

In addition, we lease an aggregate of approximately 235,000 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.

We believe that suitable additional space will be available to accommodate future needs.

See Note 17 to the accompanying consolidated financial statements for information regarding our obligations under leases.

According to records of our transfer agent, at October [removed: 30, 2020,] [added: 29, 2021,] we had [removed: 278] [added: 301] stockholders of record of our common stock.

| Period | [added: | |] Total [removed: Number of Shares Purchased] [added: Number of Shares Purchased] (1) | | | [removed: Average Price Paid per] [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] [added: of Publicly Announced Plans or Programs] (2) | | | [added: | | |] Maximum [removed: Dollar Value] [added: 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] [added: or Programs] (2) | | |

[removed: | (1) | Includes 6,568] [added: (1)Includes 5,858] 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: 2020. |][added: 2021.]

[removed: | (2) | In July 2019, 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 [removed: $250.0 million in the open market or in negotiated transactions. In July 2020, our Board of Directors approved a new stock repurchase program following the completion of the July 2019 program. The new program is open-ended and authorizes repurchases of shares of our common stock up to an aggregate cost of $250.0] [added: $500.0] million in the open market or in negotiated transactions. [removed: |]

The following graph shows the total stockholder return of an investment of $100 in cash on September 30, [removed: 2015,] [added: 2016,] 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, 2021 through July 31, 2021 | | | 1,373 | | | | | | $ | 528.56 | | | | | — | | | | | | $ | 221,344,762 | |

| August 1, 2021 through August 31, 2021 | | | 689,649 | | | | | | $ | 448.14 | | | | | 685,420 | | | | | | $ | 243,139,026 | |

| September 1, 2021 through September 30, 2021 | | | 160,256 | | | | | | $ | 437.29 | | | | | 160,000 | | | | | | $ | 173,176,417 | |

| Total | | | 851,278 | | | | | | $ | 446.23 | | | | | 845,420 | | | | | | $ | 173,176,417 | |

(2)In March 2021, our Board of Directors approved a stock repurchase program following the completion of our previous program.

As part of the broader share repurchase program, we entered into the accelerated share repurchase agreement (“ASR Agreement”) with a financial institution in June 2021 to repurchase $200.0 million of our common stock.

Pursuant to the ASR Agreement, we paid $200.0 million to the financial institution and received an initial delivery of 319,400 shares of common stock, which approximated 80% of the total number of expected shares to be repurchased under the ASR Agreement.

In August 2021, we settled the ASR Agreement and received 70,127 additional shares.

In total, 389,527 shares were repurchased under the ASR Agreement.

In August 2021, our Board of Directors approved a new stock repurchase program following the termination of the March 2021 program.

This new program is open-ended and authorizes repurchases of shares of our common stock up to an aggregate cost of $500.0 million in the open market or in negotiated transactions.

In August 2021, we entered into a stock repurchase agreement with an institutional shareholder, pursuant to which we repurchased 515,293 shares of our common stock for $225.0 million.

| | | | | | | | | | | | | | |

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

| July 1, 2020 through July 31, 2020 | 2,298 | | | $ | 436.71 | | | — | | | $ | 250,000,000 | |

| August 1, 2020 through August 31, 2020 | 27,880 | | | $ | 426.55 | | | 24,000 | | | $ | 239,776,878 | |

| September 1, 2020 through September 30, 2020 | 35,990 | | | $ | 421.32 | | | 35,600 | | | $ | 224,777,076 | |

| Total | 66,168 | | | $ | 424.05 | | | 59,600 | | | $ | 224,777,076 | |

| | |

| --- | --- |

We acquired TONBELLER Aktiengesellschaft in January 2015, QuadMetrics, Inc. in May 2016, and eZmCom, Inc. in August 2019.

Results of operations from the acquisitions are included prospectively from their respective acquisition dates and did not materially impact comparability of the data presented below.

| | | | | | | | | | | | | | | | | | | | |

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

| | Year Ended September 30, | | | | | | | | | | | | | | | | | | |

| | 2020 (1) | | | | 2019 | | | | 2018 | | | | 2017 (1) | | | | 2016 | | |

| | (In thousands, except per share data) | | | | | | | | | | | | | | | | | | |

| Revenues | $ | 1,294,562 | | | $ | 1,160,083 | | | $ | 1,000,146 | | | $ | 934,983 | | | $ | 881,356 | |

| Operating income | 295,969 | | | | 253,548 | | | | 175,359 | | | | 182,159 | | | | 169,592 | | |

| Net income | 236,411 | | | | 192,124 | | | | 126,482 | | | | 133,414 | | | | 109,448 | | |

| Basic earnings per share | 8.13 | | | | 6.63 | | | | 4.26 | | | | 4.32 | | | | 3.52 | | |

| Diluted earnings per share | 7.90 | | | | 6.34 | | | | 4.06 | | | | 4.14 | | | | 3.39 | | |

| Dividends declared per share | — | | | | — | | | | — | | | | 0.04 | | | | 0.08 | | |

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

| | 2020 | | | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | |

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

| Working capital | $ | 119,567 | | | $ | (35,122 | ) | | $ | (77,514 | ) | | $ | 22,842 | | | $ | 21,561 | |

| Total assets | 1,606,240 | | | | 1,433,448 | | | | 1,330,467 | | | | 1,348,728 | | | | 1,220,676 | | |

| Senior notes | 750,000 | | | | 485,000 | | | | 513,000 | | | | 244,000 | | | | 316,000 | | |

| Revolving line of credit | 95,000 | | | | 345,000 | | | | 257,000 | | | | 361,000 | | | | 255,000 | | |

| Stockholders’ equity | 331,082 | | | | 289,767 | | | | 287,437 | | | | 466,183 | | | | 446,828 | | |

(1) Results of operations for fiscal years 2020 and 2017 included pre-tax charges of $45.0 million and $4.5 million, respectively, in restructuring and impairment charges.

We have audited the accompanying consolidated balance sheets of Fair Isaac Corporation and subsidiaries (the "Company") as of September 30, [removed: 2020 and 2019,] [added: 2021] and [added: 2020,] the related consolidated statements of [removed: Income] [added: income] and comprehensive income, stockholders' [removed: equity,] [added: equity (deficit),] and cash flows, for each of the three years in the period ended September 30, [removed: 2020,] [added: 2021,] 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: 2020,] [added: 2021,] based on criteria established in [removed: *Internal] [added: Internal] Control [removed: -] [added: —] Integrated Framework [removed: (2013)*] [added: (2013)] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of operations and cash flows for each of the three years in the period ended September 30, [removed: 2020,] [added: 2021,] in conformity with accounting principles generally accepted in the United States of [removed: America .][added: America.]

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, [removed: 2020,] [added: 2021,] based on criteria established in [removed: *Internal] [added: Internal] Control [removed: -] [added: —] Integrated Framework [removed: (2013)*] [added: (2013)] issued by COSO.

[added: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain] to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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) [removed: relates] [added: relate] 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 [removed: matters] [added: matter] does not alter in any way our opinion on the financial statements, taken as a whole, and [removed: 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.]

[removed: Critical] [added: *Critical] Audit Matter [removed: Description][added: Description*]

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

The [removed: Company's] [added: Company’s] contracts with customers often [removed: includes] [added: 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 [removed: weather] [added: whether] the [removed: product] [added: products] or [removed: service] [added: services] are distinct.

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

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

[removed: | • |] [added: -] 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. [removed: |]

[removed: | • |] [added: -] We selected a sample of contracts and performed the following procedures: [removed: |]

[removed: \-Obtained] [added: ◦Obtained] and read the contract, including master agreements, renewal agreements, and other source documents that were part of the contract.

[removed: \-Obtained] [added: ◦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.

[removed: \-Confirmed] [added: ◦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 and performed alternative procedures in the event of nonreplies.

[removed: \-Evaluated] [added: ◦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.

[removed: \-Tested] [added: ◦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.

[removed: \-Tested] [added: ◦Tested] management’s estimation of variable consideration in the transaction price by evaluating the reasonableness of the inputs used in management’s estimates.

[removed: \-Tested] [added: ◦Tested] the accuracy and completeness of the data and factors used in management’s determination of the SSP for each performance obligation.

[removed: \-Evaluated] [added: ◦Evaluated] the consistency of the methodologies used to develop the SSP for each performance obligation.

| [removed: /s/] [added: */s/] Deloitte & Touche [removed: LLP] [added: LLP*] | [added: | |]

| San Diego, CA | [added: | |]

| We have served as the Company’s auditor since 2004. | [added: | |]

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

| | [added: | | 2021 | | | | | |] 2020 | | | | [added: | |] 2019 | | |

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

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

| Current assets: | | | | | | | | [added: | | | |]

| Cash and cash [removed: equivalents] [added: equivalents, beginning of year] | [removed: $] | [added: |] 157,394 | | | [removed: $] | [added: | |] 106,426 | | [added: | | | | 90,023 | | |]

| Accounts receivable, net | [removed: 334,180] | | [added: 312,107] | | [removed: 297,427] | | | [added: | 334,180 | | |]

| Prepaid expenses and other current assets | [removed: 42,504] | | [added: 43,513] | | [removed: 51,853] | | | [added: | 42,504 | | |]

| Total current assets | [removed: 534,078] | | [added: 550,974] | | [removed: 455,706] | | | [added: | 534,078 | | |]

| Marketable securities [added: (2)] | [added: | |] 25,513 | | | | [removed: 20,222] | | [added: 25,513] | [added: | |]

| Other investments | [removed: 1,060] | | [added: 1,312] | | [removed: 1,643] | | | [added: | 1,060 | | |]

| Property and equipment, net | [removed: 46,419] | | [added: 27,913] | | [removed: 53,027] | | | [added: | 46,419 | | |]

| Operating lease right-of-use assets | [removed: 57,656] | | [added: 47,275] | | [removed: —] | | | [added: | 57,656 | | |]

| Goodwill | [removed: 812,364] | | [added: 788,185] | | [removed: 803,542] | | | [added: | 812,364 | | |]

Bozeman, Montana

we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Contracts with Customers – Refer to Note 1 and Note 12 to the financial statements

| | | |

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

| | | | 2021 | | | | | | 2020 | | |

| | | | | | | | | | | | | | | | | | |

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

| On-premises and SaaS software | | | $ | 517,888 | | | | | $ | 584,576 | | | | | $ | 556,968 | |

| Professional services | | | 144,501 | | | | | | 181,439 | | | | | | 181,938 | | |

| Scores | | | 654,147 | | | | | | 528,547 | | | | | | 421,177 | | |

| Gains on product line asset sales and business divestiture | | | (100,139) | | | | | | — | | | | | | — | | |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| Share-based compensation | | | — | | | | | | — | | | | | | 111,700 | | | | | | — | | | | | | — | | | | | | — | | | | | | 111,700 | | |

| Repurchases of common stock | | | (1,877) | | | | | | (19) | | | | | | (3,982) | | | | | | (878,221) | | | | | | — | | | | | | — | | | | | | (882,222) | | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 392,084 | | | | | | — | | | | | | 392,084 | | |

| Balance at September 30, 2021 | | | 27,568 | | | | | | $ | 276 | | | | | $ | 1,237,348 | | | | | $ | (3,857,855) | | | | | $ | 2,585,143 | | | | | $ | (75,854) | | | | | $ | (110,942) | |

| | | | | | | | | | | | | | | | | | |

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

| Gains on product line asset sales and business divestiture | | | (100,139) | | | | | | — | | | | | | — | | |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| Proceeds from product line asset sales and business divestiture | | | 147,431 | | | | | | — | | | | | | — | | |

| | | | | | | | | | | | | | | | | | |

| Unsettled repurchases of common stock | | | $ | 8,043 | | | | | $ | — | | | | | $ | — | |

Fair Isaac Corporation (“FICO”), a Delaware corporation, was founded in 1956 on the premise that data, used intelligently, can improve business decisions.

Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in nearly 120 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale.

Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive companies, public agencies, and organizations in other industries.

We also serve consumers through online services that enable people to access and understand their FICO Scores, the standard measure in the U.S. of consumer credit risk, empowering them to increase financial literacy and manage their financial health.

During the fourth quarter of our fiscal 2021, we reevaluated our operating segments to better align with how our chief operating decision maker (“CODM”), who is our Chief Executive Officer, evaluates performance and allocates resources.

The key factors evaluated included our evolving platform strategies, our go-to market considerations, and sales of our product lines and businesses during fiscal 2021, and in particular the divestiture of our Collections and Recovery (“C&R”) business in June 2021, among others.

As a result, we consolidated our operating segment structure from three to two by merging Applications and Decision Management Software segments into the new Software segment.

As a result, we modified the presentation of our segment financial information with retrospective application to all prior periods presented.

In addition, effective beginning in the fourth quarter of fiscal 2021, we changed the classification of revenue from transactional and maintenance, professional services, and license to on-premises and SaaS software, professional services and scores on our consolidated statements of income and comprehensive income, as well as our disclosures on disaggregation of revenue, to better align with our business strategy.

Previously reported amounts in the consolidated statements of income and comprehensive income and notes to the consolidated financial statements have been adjusted to conform to the current presentation.

Years Ended September 30, 2021, 2020 and 2019

Years Ended September 30, 2021, 2020 and 2019

During the fourth quarter of fiscal 2021, we reevaluated our operating segments to better align with how our CODM evaluates performance and allocates resources, which resulted in a change from three operating segments, Applications, Decision Management Software and Scores, to two operating segments, Software and Scores.

San Jose, California

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in fiscal year 2020 due to adoption of the new lease standard (Topic 842).

The Company adopted the new lease standard using the modified retrospective approach.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain

*Revenues -Refer to Note 1 to the financial statement*

| | |

| --- | --- |

| |

| --- |

| November 10, 2020 |

| | | | | | | | |

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

| Transactional and maintenance | $ | 973,933 | | | $ | 860,948 | | | $ | 750,603 | |

| Professional services | 183,040 | | | | 184,095 | | | | 176,910 | | |

| License | 137,589 | | | | 115,040 | | | | 72,633 | | |

| Balance at September 30, 2017 | 30,243 | | | $ | 302 | | | $ | 1,195,431 | | | $ | (2,301,097 | ) | | $ | 1,638,042 | | | $ | (66,495 | ) | | $ | 466,183 | |

| Repurchases of common stock | (1,861 | ) | | (19 | | ) | | — | | | | (336,916 | | ) | | — | | | | — | | | | (336,935 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 126,482 | | | | — | | | | 126,482 | | |

| Gain on sale of equity investments | — | | | | — | | | | (10,000 | | ) |

| Proceeds from sale of equity investments | — | | | | — | | | | 20,000 | | |

Incorporated under the laws of the State of Delaware, Fair Isaac Corporation (“FICO”) is a provider of analytic, software and data management products and services that enable businesses to automate, improve and connect decisions.

FICO provides a range of analytical solutions, credit scoring and credit account management products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers, healthcare organizations and public agencies.

Effective October 1, 2019, we adopted ASU No. 2016-02, “*Leases (Topic 842)*” and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”) using the modified retrospective approach, under which financial results reported in prior periods were not restated.

As a result, the consolidated balance sheet as of September 30, 2020 is not comparable with that as of September 30, 2019.

See our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 filed with the SEC on November 8, 2019 for lease policies that were in effect in prior periods before adoption of Topic 842.

| | | | |

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

We have determined that our reporting units are the same as our reportable segments.

For fiscal 2017, we elected to proceed directly to the step one quantitative analysis for all of our reporting units.

License revenue is derived from contracts in which we grant our direct customers or distributors the right to deploy or resell our software and scoring products and solutions on-premises.

The transaction price is either in the form of a fixed consideration with separately stated prices for license and maintenance, a single subscription with license and maintenance bundled, or a usage-based royalty — sometimes subject to a guaranteed minimum — for the license and maintenance bundle.

In addition to usage-based royalty on our software and scoring products, transactional revenue is also derived from SaaS contracts in which we provide customers with access to and standard support for our software application either in the FICO® Analytic Cloud or Amazon Web Services (“AWS”), our primary cloud infrastructure provider, on a subscription basis.

We also derive transactional revenue from credit scoring and monitoring services that provide consumers access to their credit reports and enable them to monitor their credit.

In addition, we sell premium cloud support on a subscription basis for a fixed amount, and revenue is recognized ratably over the contract term.

See Note 15 for our discussion on disaggregation of revenues, and Note 16 for contract balances and performance obligations.

In February 2016, the FASB issued Topic 842, which requires the recognition of operating lease assets and lease liabilities on the balance sheet.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted Topic 842 using the “Comparatives Under 840 Option” approach to transition.

Based on that evaluation, the CEO and CFO have concluded that FICO’s disclosure controls and procedures [removed: are] [added: were] effective [added: as of September 30, 2021] to ensure that information required to be disclosed by FICO in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

No change in FICO’s internal control over financial reporting was identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the [removed: year] [added: quarter] ended September 30, [removed: 2020,] [added: 2021,] that has materially affected, or is reasonably likely to materially affect, FICO’s internal control over financial 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: 2020] [added: 2021] based on the guidelines established in *Internal Control – Integrated Framework (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: 2020.][added: 2021.]

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: 2020,] [added: 2021,] as stated in their attestation report included in Part II, Item 8 of this Annual Report on Form 10-K.

The required information regarding our Directors is incorporated by reference from the information under the caption “Our Director Nominees” in our [removed: 2021] [added: 2022] Proxy Statement to be filed with the SEC within 120 days after September 30, [removed: 2020.][added: 2021.]

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

| William J. Lansing | [added: | |] 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: 62] | [added: | 63 | | |]

| Michael I. McLaughlin | [added: | |] 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. | [removed: 56] | [added: | 57 | | |]

| Thomas A. Bowers | [added: | |] August 2020-present, Executive Vice President, Corporate Strategy of the Company. September 2019-August 2020, Vice President, Business Consulting of the Company. April 2018-September 2019, Founder and Managing Partner, M Cubed Development, LLC. August 2012-March 2018, Executive Vice President, American Savings Bank. 1987-2012, Senior partner and various positions, McKinsey & Company, Inc. | [removed: 65] | [added: | 66 | | |]

| Stephanie Covert | [added: | |] October 2020-present, Executive Vice President, Sales & Marketing of the Company. June 2016-October 2020, Vice President, Global Sales Operations of the Company. December 2015-May 2016, Vice President, Solution Success of the Company. June 2015-December 2015, Senior Director, Solution Success, Americas & EMEA of the Company. May 2014-June 2015, Senior Director, Solution Success, Americas of the Company. March 2013-May 2014, Senior Director, Sales Operations, Apttus. March 2012-March 2013, Sales Operations Director, Oracle Corporation. June 2007-March 2012, various positions, RightNow Technologies, Inc. | [removed: 41] | [added: | 42 | | |]

| Richard S. Deal | [added: | |] 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: 53] | [added: | 54 | | |]

| Michael S. Leonard | [added: | |] 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: 56] | [added: | 57 | | |]

| Claus Moldt | [added: | |] 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. | [removed: 57] | [added: | 58 | | |]

| Mark R. Scadina | [added: | |] 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: 51] | [added: | 52 | | |]

| James M. Wehmann | [added: | |] 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: 55] | [added: | 56 | | |]

The required information regarding compliance with Section 16(a) of the Securities Exchange Act is incorporated by reference from the information in our [removed: 2021] [added: 2022] Proxy Statement to be filed with the SEC within 120 days after September 30, [removed: 2020.][added: 2021.]