Item 1. Unaudited Financial Statements

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			March 31, 2024						September 30, 2023
			(In thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents			$	135,667					$	136,778
Accounts receivable, net			469,025						387,947
Prepaid expenses and other current assets			36,780						31,723
Total current assets			641,472						556,448
Marketable securities			41,407						33,014
Other investments			1,252						1,223
Property and equipment, net			27,224						10,966
Operating lease right-of-use assets			28,283						25,703
Goodwill			776,376						773,327
Intangible assets, net			367						917
Deferred income taxes			72,249						59,136
Other assets			114,487						114,547
Total assets			$	1,703,117					$	1,575,281
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable			$	18,835					$	19,009
Accrued compensation and employee benefits			68,805						102,471
Other accrued liabilities			68,936						59,478
Deferred revenue			143,544						136,730
Current maturities on debt			15,000						50,000
Total current liabilities			315,120						367,688
Long-term debt			2,028,652						1,811,658
Operating lease liabilities			20,558						23,903
Other liabilities			74,447						60,022
Total liabilities			2,438,777						2,263,271
Commitments and contingencies
Stockholders’ deficit:
Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and outstanding)			—						—
Common stock ($0.01 par value; 200,000 shares authorized, 88,857 shares issued and 24,753 and 24,770 shares outstanding at March 31, 2024 and September 30, 2023, respectively)			248						248
Additional paid-in-capital			1,281,577						1,350,713
Treasury stock, at cost (64,104 and 64,087 shares at March 31, 2024 and September 30, 2023, respectively)			(5,558,809)						(5,324,865)
Retained earnings			3,638,923						3,388,059
Accumulated other comprehensive loss			(97,599)						(102,145)
Total stockholders’ deficit			(735,660)						(687,990)
Total liabilities and stockholders’ deficit			$	1,703,117					$	1,575,281

See accompanying notes.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

			Quarter Ended March 31,												Six Months Ended March 31,
			2024						2023						2024						2023
			(In thousands, except per share data)
Revenues:
On-premises and SaaS software			$	177,180					$	154,584					$	345,848					$	299,144
Professional services			19,744						27,175						41,023						49,497
Scores			236,885						198,507						428,997						376,495
Total revenues			433,809						380,266						815,868						725,136
Operating expenses:
Cost of revenues			86,946						79,806						170,407						156,375
Research and development			40,880						40,266						83,515						76,899
Selling, general and administrative			110,867						100,158						215,196						193,153
Amortization of intangible assets			275						275						550						550
Gain on product line asset sale			—						—						—						(1,941)
Total operating expenses			238,968						220,505						469,668						425,036
Operating income			194,841						159,761						346,200						300,100
Interest expense, net			(26,093)						(23,897)						(50,255)						(46,697)
Other income, net			3,986						1,605						7,379						1,969
Income before income taxes			172,734						137,469						303,324						255,372
Provision for income taxes			42,935						35,919						52,460						56,179
Net income			129,799						101,550						250,864						199,193
Other comprehensive income (loss):
Foreign currency translation adjustments			(4,157)						6,552						4,546						24,933
Comprehensive income			$	125,642					$	108,102					$	255,410					$	224,126
Earnings per share:
Basic			$	5.23					$	4.04					$	10.12					$	7.94
Diluted			$	5.16					$	4.00					$	9.96					$	7.83
Shares used in computing earnings per share:
Basic			24,819						25,116						24,791						25,080
Diluted			25,154						25,419						25,186						25,431

See accompanying notes.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

			Common Stock												Additional Paid-in-Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Deficit
(In thousands)			Shares						Par Value
Balance at December 31, 2023			24,879						$	249					$	1,239,131					$	(5,380,827)					$	3,509,124					$	(93,442)					$	(725,765)
Share-based compensation			—						—						35,448						—						—						—						35,448
Issuance of treasury stock under employee stock plans			18						—						6,998						1,566						—						—						8,564
Repurchases of common stock			(144)						(1)						—						(179,548)						—						—						(179,549)
Net income			—						—						—						—						129,799						—						129,799
Foreign currency translation adjustments			—						—						—						—						—						(4,157)						(4,157)
Balance at March 31, 2024			24,753						$	248					$	1,281,577					$	(5,558,809)					$	3,638,923					$	(97,599)					$	(735,660)
			Common Stock												Additional Paid-in-Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Deficit
(In thousands)			Shares						Par Value
Balance at December 31, 2022			25,155						$	252					$	1,244,271					$	(4,996,624)					$	3,056,327					$	(106,321)					$	(802,095)
Share-based compensation			—						—						27,053						—						—						—						27,053
Issuance of treasury stock under employee stock plans			32						—						9,946						2,468						—						—						12,414
Repurchases of common stock			(171)						(2)						—						(116,265)						—						—						(116,267)
Net income			—						—						—						—						101,550						—						101,550
Foreign currency translation adjustments			—						—						—						—						—						6,552						6,552
Balance at March 31, 2023			25,016						$	250					$	1,281,270					$	(5,110,421)					$	3,157,877					$	(99,769)					$	(770,793)
			Common Stock												Additional Paid-in-Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Deficit
(In thousands)			Shares						Par Value
Balance at September 30, 2023			24,770						$	248					$	1,350,713					$	(5,324,865)					$	3,388,059					$	(102,145)					$	(687,990)
Share-based compensation			—						—						67,022						—						—						—						67,022
Issuance of treasury stock under employee stock plans			205						2						(136,158)						17,307						—						—						(118,849)
Repurchases of common stock			(222)						(2)						—						(251,251)						—						—						(251,253)
Net income			—						—						—						—						250,864						—						250,864
Foreign currency translation adjustments			—						—						—						—						—						4,546						4,546
Balance at March 31, 2024			24,753						$	248					$	1,281,577					$	(5,558,809)					$	3,638,923					$	(97,599)					$	(735,660)
			Common Stock												Additional Paid-in-Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Deficit
(In thousands)			Shares						Par Value
Balance at September 30, 2022			25,154						$	252					$	1,299,588					$	(4,935,769)					$	2,958,684					$	(124,702)					$	(801,947)
Share-based compensation			—						—						56,755						—						—						—						56,755
Issuance of treasury stock under employee stock plans			212						2						(75,073)						16,615						—						—						(58,456)
Repurchases of common stock			(350)						(4)						—						(191,267)						—						—						(191,271)
Net income			—						—						—						—						199,193						—						199,193
Foreign currency translation adjustments			—						—						—						—						—						24,933						24,933
Balance at March 31, 2023			25,016						$	250					$	1,281,270					$	(5,110,421)					$	3,157,877					$	(99,769)					$	(770,793)

See accompanying notes.

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

			Six Months Ended March 31,
			2024						2023
			(In thousands)
Cash flows from operating activities:
Net income			$	250,864					$	199,193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			6,178						8,294
Share-based compensation			67,022						56,755
Deferred income taxes			(13,041)						(18,360)
Net gain on marketable securities			(6,727)						(1,681)
Non-cash operating lease costs			6,772						7,613
Provision for doubtful accounts			838						738
Gain on product line asset sale			—						(1,941)
Net loss on sales and abandonment of property and equipment			408						24
Changes in operating assets and liabilities:
Accounts receivable			(72,661)						(13,789)
Prepaid expenses and other assets			(12,490)						(17,078)
Accounts payable			(579)						(2,810)
Accrued compensation and employee benefits			(34,170)						(32,318)
Other liabilities			(5,049)						(2,425)
Deferred revenue			5,790						29
Net cash provided by operating activities			193,155						182,244
Cash flows from investing activities:
Purchases of property and equipment			(5,403)						(2,377)
Capitalized internal-use software costs			(5,380)						—
Proceeds from sales of marketable securities			15,571						4,631
Purchases of marketable securities			(16,828)						(8,015)
Cash transferred, net of proceeds, from product line asset sale			—						(6,126)
Net cash used in investing activities			(12,040)						(11,887)
Cash flows from financing activities:
Proceeds from revolving line of credit and term loan			255,000						228,000
Payments on revolving line of credit and term loan			(74,500)						(158,500)
Payments on finance leases			(1,400)						—
Proceeds from issuance of treasury stock under employee stock plans			14,937						15,217
Taxes paid related to net share settlement of equity awards			(133,786)						(73,672)
Repurchases of common stock			(243,473)						(184,290)
Net cash used in financing activities			(183,222)						(173,245)
Effect of exchange rate changes on cash			996						7,457
Increase (decrease) in cash and cash equivalents			(1,111)						4,569
Cash and cash equivalents, beginning of period			136,778						133,202
Cash and cash equivalents, end of period			$	135,667					$	137,771
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds of $320 and $548 during the six-month periods ended March 31, 2024 and 2023, respectively			$	53,757					$	72,800
Cash paid for interest			$	50,331					$	46,801
Supplemental disclosures of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable			$	439					$	9
Unsettled repurchases of common stock			$	7,780					$	6,981
Finance lease obligations incurred			$	9,400					$	—

See accompanying notes.

FAIR ISAAC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business

Fair Isaac Corporation

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,” or “FICO”) is a leading applied analytics company. We were 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 more than 100 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 lenders, consumer reporting agencies, 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.

Principles of Consolidation and Basis of Presentation

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the applicable accounting guidance. Consequently, we have not necessarily included all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our financial position and results of operations. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with our audited consolidated financial statements and notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The interim financial information contained in this report is not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year.

The condensed consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

We make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the disclosures made in the accompanying notes. For example, we use estimates in determining the appropriate levels of various accruals; variable considerations included in the transaction price and standalone selling price of each performance obligation for our customer contracts; labor hours in connection with fixed-fee service contracts; the amount of our tax provision; and the realizability of deferred tax assets. We also use estimates in determining the remaining economic lives and carrying values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Actual results may differ from our estimates.

New Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606, Revenue from Contacts with Customers, in order to align the recognition of a contract liability with the definition of a performance obligation. We adopted ASU 2021-08 in the first quarter of fiscal 2024 and the adoption did not have a significant impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that it will be effective for our annual periods beginning October 1, 2024, and our interim periods beginning October 1, 2025. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income tax paid. The standard is effective for fiscal years beginning after December 15, 2024, which means that it will be effective for our fiscal years beginning October 1, 2025. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our disclosures within our consolidated financial statements.

In March 2024, the Securities and Exchange Commission (“SEC”) issued Final Rule Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” This rule will require registrants to provide certain climate disclosures in their annual reports, including certain climate-related financial metrics in their audited financial statements. The rule is effective for large accelerated filers beginning with annual reports for the fiscal year beginning in 2025, which means that it will be effective for our fiscal years beginning October 1, 2025. We are currently evaluating the impact that the final rule will have on our disclosures within our consolidated financial statements.

We do not expect that any other recently issued accounting pronouncements will have a significant effect on our consolidated financial statements.

2. Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

• Level 1 — uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. Our Level 1 assets were comprised of money market funds and certain marketable securities and our Level 1 liabilities included senior notes as of March 31, 2024 and September 30, 2023.

• Level 2 — uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. We did not have any assets or liabilities that are valued using inputs identified under a Level 2 hierarchy as of March 31, 2024 and September 30, 2023.

• Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. We did not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy as of March 31, 2024 and September 30, 2023.

The following tables represent financial assets that we measured at fair value on a recurring basis at March 31, 2024 and September 30, 2023:

March 31, 2024			Active Markets for Identical Instruments (Level 1)						Fair Value as of March 31, 2024
			(In thousands)
Assets:
Cash equivalents (1)			$	19,165					$	19,165
Marketable securities (2)			41,407						41,407
Total			$	60,572					$	60,572
September 30, 2023			Active Markets for Identical Instruments (Level 1)						Fair Value as of September 30, 2023
			(In thousands)
Assets:
Cash equivalents (1)			$	23,621					$	23,621
Marketable securities (2)			33,014						33,014
Total			$	56,635					$	56,635

(1)Included in cash and cash equivalents on our condensed consolidated balance sheets at March 31, 2024 and September 30, 2023. Not included in these tables are cash deposits of $116.5 million and $113.2 million at March 31, 2024 and September 30, 2023, respectively.

(2)Represents securities held under a supplemental retirement and savings plan for certain officers and senior management employees, which are distributed upon termination or retirement of the employees. Included in marketable securities on our condensed consolidated balance sheets at March 31, 2024 and September 30, 2023.

See Note 6 for the fair value of our senior notes.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the quarters and six-month periods ended March 31, 2024 and 2023.

3. Derivative Financial Instruments

We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign-currency-denominated receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their functional currencies. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro, and Singapore dollar.

Foreign currency-denominated receivable and cash balances are remeasured at foreign exchange rates in effect on the balance sheet date with the effects of changes in foreign exchange rates reported in other income, net. The forward contracts are not designated as hedges and are marked to market through other income, net. Fair value changes in the forward contracts help mitigate the changes in the value of the remeasured receivable and cash balances attributable to changes in foreign exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.

The following tables summarize our outstanding foreign currency forward contracts, by currency, at March 31, 2024 and September 30, 2023:

			March 31, 2024
			Contract Amount															Fair Value
			Foreign Currency									USD						USD
			(In thousands)
Sell foreign currency:
Euro (EUR)			EUR			9,000						$	9,718					$	—
Buy foreign currency:
British pound (GBP)			GBP			9,670						$	12,200					$	—
Singapore dollar (SGD)			SGD			10,487						$	7,800					$	—

			September 30, 2023
			Contract Amount															Fair Value
			Foreign Currency									USD						USD
			(In thousands)
Sell foreign currency:
Euro (EUR)			EUR			12,900						$	13,621					$	—
Buy foreign currency:
British pound (GBP)			GBP			10,700						$	13,100					$	—
Singapore dollar (SGD)			SGD			8,569						$	6,300					$	—

The foreign currency forward contracts were entered into on March 31, 2024 and September 30, 2023; therefore, their fair value was $0 on each of these dates.

Gains (losses) on derivative financial instruments were recorded in our condensed consolidated statements of income and comprehensive income as a component of other income, net, and consisted of the following:

			Quarter Ended March 31,												Six Months Ended March 31,
			2024						2023						2024						2023
			(In thousands)
Gains (losses) on foreign currency forward contracts			$	(180)					$	309					$	361					$	1,613

4. Goodwill

The following table summarizes changes to goodwill during the six months ended March 31, 2024, both in total and as allocated to our segments. As of March 31, 2024, there was no accumulated goodwill impairment loss.

			Scores						Software						Total
			(In thousands)
Balance at September 30, 2023			$	146,648					$	626,679					$	773,327
Foreign currency translation adjustment			—						3,049						3,049
Balance at March 31, 2024			$	146,648					$	629,728					$	776,376

5. Composition of Certain Financial Statement Captions

The following table presents the composition of property and equipment, net and other accrued liabilities at March 31, 2024 and September 30, 2023:

			March 31, 2024						September 30, 2023
			(In thousands)
Property and equipment, net:
Property and equipment			$	99,269					$	98,967
Internal-use software			5,380						—
Less: accumulated depreciation and amortization			(77,425)						(88,001)
Total			$	27,224					$	10,966
Other accrued liabilities:
Interest payable			$	21,384					$	20,770
Current operating leases			14,586						16,336
Other			32,966						22,372
Total			$	68,936					$	59,478

6. Debt

The following table represents our debt at carrying value at March 31, 2024 and September 30, 2023:

			March 31, 2024						September 30, 2023
			(In thousands)
Current maturities on debt:
Revolving line of credit			$	—					$	35,000
Term loan			15,000						15,000
Current maturities on debt			15,000						50,000
Long-term debt:
Revolving line of credit			488,000						265,000
Term loan			251,250						258,750
The 2018 Senior Notes			400,000						400,000
The 2019 Senior Notes and the 2021 Senior Notes			900,000						900,000
Less: debt issuance costs			(10,598)						(12,092)
Long-term debt			2,028,652						1,811,658
Total debt			$	2,043,652					$	1,861,658

Revolving Line of Credit and Term Loan

We have a $600 million unsecured revolving line of credit and a $300 million unsecured term loan with a syndicate of banks that mature on August 19, 2026. Borrowings under the revolving line of credit and term loan can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. The term loan requires principal payments in consecutive quarterly installments of $3.75 million on the last business day of each quarter. Interest rates on amounts borrowed under the revolving line of credit and term loan are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5%, and (c) one-month adjusted term Secured Overnight Financing Rate (“SOFR”) rate plus 1%, plus, in each case, an applicable margin, or (ii) an adjusted term SOFR rate plus an applicable margin. The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio. The applicable margin for base rate borrowings ranges from 0% to 0.75% per annum and for SOFR borrowings ranges from 1% to 1.75% per annum. In addition, we must pay certain credit facility fees. The revolving line of credit and term loan contain certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0. The credit agreement also contains other covenants typical of unsecured credit facilities.

As of March 31, 2024, we had $488.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 6.673%, and $266.3 million in outstanding balance of the term loan at an interest rate of 6.674%. We were in compliance with all financial covenants under this credit agreement as of March 31, 2024.

Senior Notes

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”). The 2018 Senior Notes require interest payments semi-annually at a rate of 5.25% per annum and will mature on May 15, 2026.

On December 6, 2019, we issued $350 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes”). The 2019 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028.

On December 17, 2021, we issued $550 million of additional senior notes of the same class as the 2019 Senior Notes in a private offering to qualified institutional investors (the “2021 Senior Notes,” and collectively with the 2018 Senior Notes and the 2019 Senior Notes, the “Senior Notes”). The 2021 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028, the same date as the 2019 Senior Notes.

The indentures for the Senior Notes contain certain covenants typical of unsecured obligations and we were in compliance as of March 31, 2024.

The following table presents the face values and fair values for the Senior Notes at March 31, 2024 and September 30, 2023:

			March 31, 2024												September 30, 2023
			Face Value						Fair Value						Face Value						Fair Value
			(In thousands)
The 2018 Senior Notes			$	400,000					$	395,000					$	400,000					$	386,000
The 2019 Senior Notes and the 2021 Senior Notes			900,000						837,000						900,000						803,250
Total			$	1,300,000					$	1,232,000					$	1,300,000					$	1,189,250

7. Revenue from Contracts with Customers

Disaggregation of Revenue

The following tables provide information about disaggregated revenue by primary geographical market:

			Quarter Ended March 31, 2024
			Scores						Software						Total						Percentage
			(Dollars in thousands)
Americas			$	233,723					$	130,294					$	364,017					84		%
Europe, Middle East and Africa			1,278						40,979						42,257						10		%
Asia Pacific			1,884						25,651						27,535						6		%
Total			$	236,885					$	196,924					$	433,809					100		%

			Quarter Ended March 31, 2023
			Scores						Software						Total						Percentage
			(Dollars in thousands)
Americas			$	197,039					$	121,264					$	318,303					84		%
Europe, Middle East and Africa			1,154						40,199						41,353						11		%
Asia Pacific			314						20,296						20,610						5		%
Total			$	198,507					$	181,759					$	380,266					100		%

			Six Months Ended March 31, 2024
			Scores						Software						Total						Percentage
			(Dollars in thousands)
Americas			$	418,671					$	263,856					$	682,527					84		%
Europe, Middle East and Africa			2,586						76,039						78,625						9		%
Asia Pacific			7,740						46,976						54,716						7		%
Total			$	428,997					$	386,871					$	815,868					100		%
			Six Months Ended March 31, 2023
			Scores						Software						Total						Percentage
			(Dollars in thousands)
Americas			$	370,336					$	239,094					$	609,430					84		%
Europe, Middle East and Africa			2,502						71,191						73,693						10		%
Asia Pacific			3,657						38,356						42,013						6		%
Total			$	376,495					$	348,641					$	725,136					100		%

The following table provides information about disaggregated revenue for our Software segment by deployment method:

			Quarter Ended March 31,												Percentage of revenues												Six Months Ended March 31,												Percentage of revenues
			2024						2023						2024						2023						2024						2023						2024						2023
			(Dollars in thousands)
On-premises software			$	79,697					$	73,473					45		%				48		%				$	152,169					$	138,395					44		%				46		%
SaaS software			97,483						81,111						55		%				52		%				193,679						160,749						56		%				54		%
Total on-premises and SaaS software			$	177,180					$	154,584					100		%				100		%				$	345,848					$	299,144					100		%				100		%

The following table provides information about disaggregated revenue for our Software segment by product features:

			Quarter Ended March 31,												Percentage of revenues												Six Months Ended March 31,												Percentage of revenues
			2024						2023						2024						2023						2024						2023						2024						2023
			(Dollars in thousands)
Platform software			$	47,325					$	38,682					27		%				25		%				$	92,498					$	69,510					27		%				23		%
Non-platform software			129,855						115,902						73		%				75		%				253,350						229,634						73		%				77		%
Total on-premises and SaaS software			$	177,180					$	154,584					100		%				100		%				$	345,848					$	299,144					100		%				100		%

The following table provides information about disaggregated revenue for our Software segment by timing of revenue recognition:

			Quarter Ended March 31,												Percentage of revenues												Six Months Ended March 31,												Percentage of revenues
			2024						2023						2024						2023						2024						2023						2024						2023
			(Dollars in thousands)
Software recognized at a point in time (1)			$	20,177					$	19,193					11		%				12		%				$	33,959					$	30,996					10		%				10		%
Software recognized over contract term (2)			157,003						135,391						89		%				88		%				311,889						268,148						90		%				90		%
Total on-premises and SaaS software			$	177,180					$	154,584					100		%				100		%				$	345,848					$	299,144					100		%				100		%

(1)Includes license portion of our on-premises subscription software and perpetual license, both of which are recognized when the software is made available to the customer, or at the start of the subscription.

(2)Includes maintenance portion and usage-based fees of our on-premises subscription software, maintenance revenue on perpetual licenses, as well as SaaS revenue.

The following table provides information about disaggregated revenue for our Scores segment by distribution method:

			Quarter Ended March 31,												Percentage of revenues												Six Months Ended March 31,												Percentage of revenues
			2024						2023						2024						2023						2024						2023						2024						2023
			(Dollars in thousands)
Business-to-business Scores			$	185,508					$	144,874					78		%				73		%				$	325,950					$	269,779					76		%				72		%
Business-to-consumer Scores			51,377						53,633						22		%				27		%				103,047						106,716						24		%				28		%
Total			$	236,885					$	198,507					100		%				100		%				$	428,997					$	376,495					100		%				100		%

We derive a substantial portion of revenues from our contracts with the three major consumer reporting agencies, TransUnion, Equifax and Experian. Revenues collectively generated by agreements with these customers accounted for 47% and 43% of our total revenues in the quarters ended March 31, 2024 and 2023, respectively, with all three consumer reporting agencies each contributing more than 10% of our total revenues in each of the quarters ended March 31, 2024 and 2023. Revenues collectively generated by agreements with these customers accounted for 43% and 40% of our total revenues in the six months ended March 31, 2024 and 2023, respectively, with three and two consumer reporting agencies each contributing more than 10% of our total revenues in the six months ended March 31, 2024 and 2023, respectively. At March 31, 2024 and September 30, 2023, two and one individual customers each accounted for 10% or more of total consolidated receivables, respectively.

Contract Balances

We record a receivable when we satisfy a performance obligation prior to invoicing if only the passage of time is required before payment is due or if we have an unconditional right to consideration before we satisfy a performance obligation. We record a contract asset when we satisfy a performance obligation prior to invoicing but our right to consideration is conditional. We record deferred revenue when the payment is made or due before we satisfy a performance obligation.

Receivables at March 31, 2024 and September 30, 2023 consisted of the following:

			March 31, 2024						September 30, 2023
			(In thousands)
Billed			$	300,179					$	234,745
Unbilled			213,023						203,896
			513,202						438,641
Less: allowance for doubtful accounts			(5,806)						(4,978)
Net receivables			507,396						433,663
Less: long-term receivables (*)			(38,371)						(45,716)
Short-term receivables (*)			$	469,025					$	387,947

(*) Short-term receivables and long-term receivables were recorded in accounts receivable, net and other assets, respectively, within the accompanying condensed consolidated balance sheets.

Deferred revenue primarily relates to our maintenance and SaaS contracts billed annually in advance and generally recognized ratably over the term of the service period. Significant changes in the deferred revenues balances are as follows:

						Six Months Ended March 31, 2024
						(In thousands)
Deferred revenues, beginning balance (*)						$	143,235
Revenue recognized that was included in the deferred revenues balance at the beginning of the period						(102,063)
Increases due to billings, excluding amounts recognized as revenue during the period						108,904
Deferred revenues, ending balance (*)						$	150,076

(*) Deferred revenues at March 31, 2024 included current portion of $143.6 million and long-term portion of $6.5 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets. Deferred revenues at September 30, 2023 included current portion of $136.7 million and long-term portion of $6.5 million that were recorded in deferred revenue and other liabilities, respectively, within the condensed consolidated balance sheets.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to provide customers with financing or to receive financing from our customers. Examples include multi-year on-premises licenses that are invoiced annually with revenue recognized upfront and invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period.

Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include:

• Usage-based revenue that will be recognized in future periods from on-premises software subscriptions;

• Consumption-based variable fees from SaaS software that will be recognized in the distinct service period during which it is earned; and

• Revenue from variable considerations that will be recognized in accordance with the “right-to-invoice” practical expedient, such as fees from our professional services billed based on a time and materials basis.

Revenue allocated to remaining performance obligations was $481.7 million as of March 31, 2024, approximately 50% of which we expect to recognize over the next 16 months and the remainder thereafter. Revenue allocated to remaining performance obligations was $470.5 million as of September 30, 2023.

8. Income Taxes

Effective Tax Rate

The effective income tax rate was 24.9% and 26.1% during the quarters ended March 31, 2024 and 2023, respectively, and 17.3% and 22.0% during the six months ended March 31, 2024 and 2023, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

A provision enacted as part of the 2022 Inflation Reduction Act imposes a 15% corporate minimum tax. The provision is effective for tax years beginning after December 31, 2022, which means that it was effective for our fiscal year beginning October 1, 2023. We do not expect any impact to our fiscal 2024 effective tax rate from the corporate minimum tax provision.

The total unrecognized tax benefit for uncertain tax positions was estimated to be $15.7 million and $13.8 million at March 31, 2024 and September 30, 2023, respectively. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our condensed consolidated statements of income and comprehensive income. We accrued interest of $1.5 million and $0.9 million related to unrecognized tax benefits as of March 31, 2024 and September 30, 2023, respectively.

9. Earnings per Share

The following table presents reconciliations for the numerators and denominators of basic and diluted earnings per share (“EPS”) for the quarters and six-month periods ended March 31, 2024 and 2023:

			Quarter Ended March 31,												Six Months Ended March 31,
			2024						2023						2024						2023
			(In thousands, except per share data)
Numerator for diluted and basic earnings per share:
Net income			$	129,799					$	101,550					$	250,864					$	199,193
Denominator — share:
Basic weighted-average shares			24,819						25,116						24,791						25,080
Effect of dilutive securities			335						303						395						351
Diluted weighted-average shares			25,154						25,419						25,186						25,431
Earnings per share:
Basic			$	5.23					$	4.04					$	10.12					$	7.94
Diluted			$	5.16					$	4.00					$	9.96					$	7.83

Anti-dilutive share-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

10. Segment Information

We are organized into two reportable segments: Scores and Software. Although we sell solutions and services to a large number of end user product and industry markets, our reportable business segments reflect the primary method in which management organizes and evaluates internal financial information to make operating decisions and assess performance.

• Scores. This segment includes our business-to-business (“B2B”) scoring solutions and services which give our clients access to predictive credit and other scores that can be easily integrated into their transaction streams and decision-making processes. This segment also includes our business-to-consumer (“B2C”) scoring solutions, including our myFICO.com subscription offerings.

• Software. This segment includes pre-configured analytic and decision management solutions designed for a specific type of business need or process — such as account origination, customer management, customer engagement, fraud detection, and marketing — as well as associated professional services. 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. These offerings are available to our customers as SaaS or as on-premises software.

Our chief operating decision maker (“CODM”), who is our Chief Executive Officer, evaluates segment financial performance based on segment revenues and segment operating income. Segment operating expenses consist of direct and indirect costs principally related to personnel, facilities, IT infrastructure, consulting, travel and depreciation. Indirect costs are allocated to the segments generally based on relative segment revenues, fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate broad-based incentive expense, share-based compensation expense, restructuring and acquisition-related expense, amortization expense, various corporate charges and certain other income and expense measures to our segments. These income and expense items are not allocated because they are not considered in evaluating the segment’s operating performance. Our CODM does not evaluate the financial performance of each segment based on its respective assets or capital expenditures; rather, depreciation amounts are allocated to the segments from their internal cost centers as described above.

The following tables summarize segment information for the quarters and six-month periods ended March 31, 2024 and 2023:

			Quarter Ended March 31, 2024
			Scores						Software						Unallocated Corporate Expenses						Total
			(In thousands)
Segment revenues:
On-premises and SaaS software			$	—					$	177,180					$	—					$	177,180
Professional services			—						19,744						—						19,744
Scores			236,885						—						—						236,885
Total segment revenues			236,885						196,924						—						433,809
Segment operating expense			(24,677)						(132,762)						(45,806)						(203,245)
Segment operating income			$	212,208					$	64,162					$	(45,806)					230,564
Unallocated share-based compensation expense																					(35,448)
Unallocated amortization expense																					(275)
Operating income																					194,841
Unallocated interest expense, net																					(26,093)
Unallocated other income, net																					3,986
Income before income taxes																					$	172,734
Depreciation expense			$	107					$	2,099					$	16					$	2,222

			Quarter Ended March 31, 2023
			Scores						Software						Unallocated Corporate Expenses						Total
			(In thousands)
Segment revenues:
On-premises and SaaS software			$	—					$	154,584					$	—					$	154,584
Professional services			—						27,175						—						27,175
Scores			198,507						—						—						198,507
Total segment revenues			198,507						181,759						—						380,266
Segment operating expense			(23,102)						(126,892)						(43,183)						(193,177)
Segment operating income			$	175,405					$	54,867					$	(43,183)					187,089
Unallocated share-based compensation expense																					(27,053)
Unallocated amortization expense																					(275)
Operating income																					159,761
Unallocated interest expense, net																					(23,897)
Unallocated other income, net																					1,605
Income before income taxes																					$	137,469
Depreciation expense			$	138					$	2,723					$	20					$	2,881

			Six Months Ended March 31, 2024
			Scores						Software						Unallocated Corporate Expenses						Total
			(In thousands)
Segment revenues:
On-premises and SaaS software			$	—					$	345,848					$	—					$	345,848
Professional services			—						41,023						—						41,023
Scores			428,997						—						—						428,997
Total segment revenues			428,997						386,871						—						815,868
Segment operating expense			(48,135)						(267,587)						(86,374)						(402,096)
Segment operating income			$	380,862					$	119,284					$	(86,374)					413,772
Unallocated share-based compensation expense																					(67,022)
Unallocated amortization expense																					(550)
Operating income																					346,200
Unallocated interest expense, net																					(50,255)
Unallocated other income, net																					7,379
Income before income taxes																					$	303,324
Depreciation expense			$	188					$	3,697					$	28					$	3,913

			Six Months Ended March 31, 2023
			Scores						Software						Unallocated Corporate Expenses						Total
			(In thousands)
Segment revenues:
On-premises and SaaS software			$	—					$	299,144					$	—					$	299,144
Professional services			—						49,497						—						49,497
Scores			376,495						—						—						376,495
Total segment revenues			376,495						348,641						—						725,136
Segment operating expense			(44,398)						(248,009)						(77,265)						(369,672)
Segment operating income			$	332,097					$	100,632					$	(77,265)					355,464
Unallocated share-based compensation expense																					(56,755)
Unallocated amortization expense																					(550)
Unallocated gain on product line asset sale																					1,941
Operating income																					300,100
Unallocated interest expense, net																					(46,697)
Unallocated other income, net																					1,969
Income before income taxes																					$	255,372
Depreciation expense			$	289					$	5,697					$	42					$	6,028

11. Contingencies

We are in disputes with certain customers regarding amounts owed in connection with the sale of certain of our products and services. We also have had claims asserted by former employees relating to compensation and other employment matters. We are also involved in various other claims and legal actions arising in the ordinary course of business. We record litigation accruals for legal matters which are both probable and estimable. For legal proceedings for which there is a reasonable possibility of loss (meaning those losses for which the likelihood is more than remote but less than probable), we have determined we do not have a material exposure, either individually or in the aggregate.