Fair Isaac Corporation Debt surged on 26.3% and Net Debt / EBITDA jumped on 0.5x from 2.3x to 2.8x
11/01/2018 • About Fair Isaac Corporation (
$FICO) • By InTwits
Fair Isaac Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Fair Isaac Corporation motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 6.6% while average EBITDA Margin was 22.7% for the sames years. In FY2018 SBC/Revenue was even higher: 7.1%
- Fair Isaac Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's in pair with industry average of 13.3%
- CAPEX is quite volatile: $39m in 2018, $27m in 2017, $16m in 2016, $17m in 2015, $18m in 2014
- In the last 5 years the company invested considerably less than D&A: $111m vs. $165m
- The company has highly profitable business model: ROIC is 20.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.8x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Fair Isaac Corporation's Revenue jumped on 10.8%. Revenue growth showed small slowdown in FY18Q4 - it was 10.5% YoY. EBITDA Margin showed almost no change in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2015 at 20.4% and was growing since that time.
Gross Margin increased slightly on 0.71 pp from 69.2% to 69.9% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.54 pp from 6.6% to 7.1% in FY2018.
Net Income margin showed almost no change in FY2018. During the last 5 years Net Income margin bottomed in FY2015 at 10.3% and was growing since that time. The efficient tax rate was 24.3% in FY2018 while the average for the last five years was 22.7%.
Investments (CAPEX, working capital and M&A)
Fair Isaac Corporation's CAPEX/Revenue was 3.0% in FY2018. Fair Isaac Corporation's CAPEX/Revenue showed almost no change from FY2015 to FY2018. It's average level of CAPEX/Revenue for the last three years was 2.6%.
Accounts receivable as a % of Revenue increased on 2.1 pp from 18.1% to 20.2% in FY2018. Accounts payable as a % of Revenue showed almost no change in FY2018.
Return on investment
The company operates at high and attractive ROE (41.3%) while ROIC is a bit lower (20.0%). ROIC increased on 2.7 pp from 17.3% to 20.0% in FY2018. ROE jumped on 11.9 pp from 29.4% to 41.3% in FY2018. During FY2014-FY2018 ROIC bottomed in FY2015 at 13.4% and was growing since that time. ROE grew at 5.4 pp per annum in FY2014-FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.8x and Debt / EBITDA is 3.2x. Net Debt / EBITDA jumped on 0.5x from 2.3x to 2.8x in FY2018. Debt jumped on 26.3% while cash dropped on 14.8%.
Fair Isaac Corporation has good short term financial stability: Interest coverage ratio (ICR) is 6.6x. Fair Isaac Corporation has short term refinancing risk: cash is only 38.3% of short term debt.
Average interest expence paid by the company was 4.1% in FY2018.
Valuation and dividends
Fair Isaac Corporation's trades at EV/EBITDA 27.1x and P/E 40.4x.
Management team
William J Lansing "Will" is a the company's CEO. William J Lansing "Will" is a founder and has spent 7 years with the company. CEO total compensation was
$12,247,481 in FY2018 which included
$750,000 salary. Fair Isaac Corporation's CFO is Michael J Pung "Mike". Michael J Pung "Mike" has 8 years tenure at the company.
3.0% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 3,668 employees. The number of employees jumped on 11.2%. Average revenue per employee in FY2018 was
$281,482 and it showed almost no change in 2018.
Financial and operational results
FY ended 09/30/2018
Fair Isaac Corporation ($FICO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 789 | 839 | 881 | 932 | 1,032 | 10.8% |
| Gross Profit | 540 | 568 | 616 | 645 | 722 | 11.9% |
| SG&A | 278 | 300 | 329 | 340 | 380 | 11.9% |
| EBITDA | 195 | 171 | 201 | 213 | 237 | 10.9% |
| EBIT | 162 | 138 | 170 | 177 | 206 | 16.5% |
| Interest expence | | | 27 | 26 | 31 | 21.4% |
| Tax | 38 | 23 | 35 | 23 | 46 | 97.7% |
| Net Income | 95 | 87 | 109 | 128 | 142 | 11.0% |
| Stock Based Compensation | 36 | 44 | 80 | 61 | 73 | 19.8% |
Balance Sheet
|
|---|
| Cash | 105 | 86 | 76 | 106 | 90 | -14.8% |
| Accounts Receivable | 155 | 159 | 168 | 169 | 209 | 23.9% |
| Accounts Payable | 22 | 20 | 23 | 20 | 20 | 3.8% |
| Short Term Debt | 170 | 92 | 77 | 142 | 235 | 65.5% |
| Long Term Debt | 376 | 516 | 494 | 463 | 529 | 14.3% |
Cash flow
|
|---|
| Capex | 13 | 25 | 22 | 20 | 31 | 57.9% |
| Dividends | 3 | 3 | 2 | 1 | | |
| Acquisitions | 7 | 57 | 6 | | | |
Ratios
|
|---|
| Revenue growth | 6.1% | 6.3% | 5.1% | 5.8% | 10.8% | |
| EBITDA growth | -0.2% | -11.9% | 17.4% | 6.1% | 10.9% | |
|
|---|
| Gross Margin | 68.4% | 67.7% | 69.9% | 69.2% | 69.9% | 0.7% |
| EBITDA Margin | 24.7% | 20.4% | 22.8% | 22.9% | 22.9% | 0.0% |
| EBIT Margin | 20.5% | 16.4% | 19.2% | 19.0% | 20.0% | 1.0% |
| SG&A, % of revenue | 35.3% | 35.8% | 37.3% | 36.5% | 36.8% | 0.4% |
| SBC, % of revenue | 4.5% | 5.3% | 9.0% | 6.6% | 7.1% | 0.5% |
| Net Income Margin | 12.0% | 10.3% | 12.4% | 13.8% | 13.8% | 0.0% |
| CAPEX, % of revenue | 1.6% | 3.0% | 2.5% | 2.1% | 3.0% | 0.9% |
|
|---|
| ROIC | 16.1% | 13.4% | 16.4% | 17.3% | 20.0% | 2.7% |
| ROE | 19.3% | 19.4% | 24.8% | 29.4% | 41.3% | 11.9% |
| Net Debt/EBITDA | 2.3x | 3.0x | 2.5x | 2.3x | 2.8x | 0.5x |
| Interest coverage ratio (ICR) | | | 6.4x | 6.9x | 6.6x | -0.3x |
| Interest expence / Average debt | | | 4.5% | 4.4% | 4.1% | -0.3% |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 0.0% |
| Employees | 1,775 | 2,803 | 3,088 | 3,299 | 3,668 | 11.2% |
| Revenue/Employee, th. $ | 444 | 299 | 285 | 283 | 281 | -0.4% |
Fair Isaac Corporation ($FICO) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 232 | 256 | 260 | 280 | | 5.8% | 12.2% | 12.3% | 10.5% |
| EBITDA | 45 | 54 | 56 | 78 | | 1.3% | 9.3% | 9.9% | 12.0% |
| Net Income | 33 | 31 | 32 | 50 | | -13.3% | 24.3% | 28.3% | 26.1% |
Balance Sheet
|
|---|
| Cash | 94 | 108 | 120 | 90 | | 6.9% | -6.9% | -8.2% | -14.8% |
| Short Term Debt | 201 | 191 | 202 | 235 | | 97.1% | 78.5% | -9.8% | 65.5% |
| Long Term Debt | 463 | 513 | 557 | 529 | | -10.8% | -1.1% | 43.6% | 14.3% |
Ratios
|
|---|
| Gross Margin | 68.0% | 69.0% | 69.8% | 71.6% | | -0.2% | 0.6% | 0.0% | 1.3% |
| EBITDA Margin | 19.2% | 21.0% | 21.4% | 27.9% | | -0.9% | -0.6% | -0.5% | 0.4% |
| Net Income Margin | 14.1% | 12.2% | 12.5% | 18.0% | | -3.1% | 1.2% | 1.5% | 2.2% |
Peers in Application Software
Below we provide Fair Isaac Corporation benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Fair Isaac Corporation ($FICO) | | 6.3% | 5.1% | 5.8% | 10.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| Fair Isaac Corporation ($FICO) | 68.4% | 67.7% | 69.9% | 69.2% | 69.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Fair Isaac Corporation ($FICO) | 24.7% | 20.4% | 22.8% | 22.9% | 22.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Fair Isaac Corporation ($FICO) | 1.6% | 3.0% | 2.5% | 2.1% | 3.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Fair Isaac Corporation ($FICO) | 16.1% | 13.4% | 16.4% | 17.3% | 20.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| Fair Isaac Corporation ($FICO) | 2.3x | 3.0x | 2.5x | 2.3x | 2.8x |
