Q1 2025 Earnings Call Transcript

Good day and thank you for standing by, and welcome to First Quarter 2025 FICO Earnings Conference Call. [Operator Instructions] please be advised that today’s conference is being recorded. I would now like to hand the conference over to our first speaker today, Dave Singleton. Please go ahead.

Thank you. Good afternoon, and thank you for attending FICO's first quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing; and our CFO, Steve Weber. Today, we issued a press release that describes financial results compared to the prior year.

On this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the business. Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portion of such filings. Copies are available from the SEC, from the FICO website or from our Investor Relations team.

This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release and Reg G schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most appropriate comparable GAAP measure. The earnings release and Regulation G schedule are available on the investor relations page of the company’s website at fico.com or on the SECs website at sec.gov. A replay of this webcast will be available through February 4, 2026. I will now turn the call over to our CEO, Will Lansing.

Thanks Dave and thank you everyone for joining us for our first quarter earnings call. In the Investor Relations section of our website, we've posted some financial highlight slides that we will be referring to during this earnings announcement. We had another strong quarter and are reiterating our fiscal 2025 guidance. As shown on page 2 of the first quarter financial highlights, we reported quarter one revenues of $440 million, up 15% over last year.

We reported $153 million in GAAP net income in the quarter up 26% and GAAP earnings of $6.14 per share, up 28% from the prior year. We reported $144 million in non-GAAP net income in the quarter, up 19% and non-GAAP earnings of $5.79 per share, up 20% from the prior year. As shown on Page 10, we delivered free cash flow of $187 million in our first quarter and $673 million over the last four quarters, an increase of 36% over the prior period. We continue to return capital to our shareholders through buybacks.

We repurchased 79,000 shares in quarter one and an additional 47,000 shares in January. In our Scores segment on page six of the presentation, our first quarter revenues were $236 million, up 23% versus the prior year. On the B2B side, quarter one revenues were up 30% versus the prior year, primarily driven by mortgage originations revenues from both pricing and volume increases. On the B2C side, quarter one revenues were up 3% versus the prior year, primarily driven by revenue from indirect channel partners.

First quarter mortgage originations revenues were up 110% versus the prior year. Mortgage origination revenue accounted for 44% of B2B revenue and 34% of total scores revenue. Auto origination revenues were up 5% while credit card, personal loan and other originations revenues were down 3% versus the prior year. This week we issued a press release on the study we conducted with our partner, Affirm.

That study concluded that the inclusion of Buy Now Pay later loan data can drive a FICO score increase for some consumers while improving model risk performance for lenders when applying FICO's innovative treatment to that data. The study also helped inform responsible furnishing of Buy Now Pay later loans to the credit bureaus. We're currently working with stakeholders to identify the best way to introduce our proprietary treatment of this data to the credit scoring marketplace. We'll be sharing more details soon.

We continue to drive strong adoption of FICO Score 10 T for non GSE mortgages. This quarter, loans utilizing FICO Score 10 T began trading on MCT Marketplace, the largest mortgage asset exchange for the US Secondary market. In addition, Cardinal Financial formed and traded the first government issued mortgage backed security featuring loans powered by FICO Score 10 T. I'm proud of these strong achievements and look forward to continued progress in the quarters ahead.

We now have clients with over 261 billion in annualized mortgage originations and approximately 1.43 trillion in eligible mortgage portfolio servicing that have signed up for FICO Score 10 T, with some firms already adopting FICO 10 T to make credit decisions for securitization and for delivery to investors. FICO 10 T for conforming mortgages sold to the GSEs will be rolled out based on the timeline of the FHFA's implementation of enterprise Credit Score requirements. In January, the FHFA announced it no longer has a specific timeline for the implementation. In our software segment we delivered $204 million in quarter one revenue, up 8% from last year.

Revenue increase was driven mainly by growth in SaaS software and license revenue, partially offset by the foreign exchange rate impact. We continue to drive growth in ARR and NRR through our Land and Expand strategy with expand driven by increased customer usage. As shown on page 7, the total ARR was up 6% with platform ARR growing 20% and non-platform ARR of 1%. Total NRR for the quarter shown on page 8 was 105% with platform NRR at 112% and non-platform at 100%.

Foreign exchange had negative impact of 2% on total ARR and 3% on platform ARR. ACV bookings for the quarter were 21.2 million compared to 18.3 million in the prior year. We continue to drive our software business forward. Our investments are helping progress development of new FICO platform capabilities, partner channel adoption, FICO marketplace realization and building scalability to improve our cost structure.

We continue to be recognized for our innovation. This quarter, FICO was awarded Best Anti-Fraud Solution at the Credit and Collections Technology Awards. The award was given to the FICO Customer Communication Service Scam Signal Solution which uniquely uses telephony signals to detect potential scams. Our innovative work using blockchain technology for responsible AI model governance yielded the Tech of the Future Blockchain and Tokenization Award at the Banking Tech Awards and won a Software Category Transformative Product Award at the Big Innovation Awards.

Our software business will be on display this year at FICO World Event which will take place in Hollywood, Florida in May. At this four day event, we'll bring together industry professionals from around the world to connect, share best practices and learn how FICO enables organizations to power customer connections at scale. We'll highlight successful clients and demonstrate the power of FICO platform, enabling companies to operationalize, analytics, become more composable and make better decisions at scale. I'll now pass it over to Steve to provide further financial details.

Thanks Will, and good afternoon everyone. As Will mentioned, we had another good quarter with total revenue of $440 million, an increase of 15% over the prior year. Scores segment revenues for the quarter were $236 million, up 23% from the prior year. B2B revenues were up 30% driven primarily by mortgage originations revenues, as Will said, from both pricing and volume increases.

Our B2C revenues were up 3% versus the prior year due to increased revenue from our indirect Channel Partners. Software segment revenues for the quarter were $204 million, up 8% from the prior year, hindered by foreign exchange rate impact. On-premises and SaaS Software revenue grew 10% year-over-year while professional services declined 14%. This quarter, 87% of total company revenues were derived from our Americas region which is a combination of our North America and Latin America regions.

Our EMEA region generated 8% of revenues and the Asia Pacific region delivered 5%. Our total software ARR was $729 million, a 6% increase over the prior year. Platform ARR was $228 million representing 31% of our total Q1, 25 ARR and was up 28% and up from 28% of total Q1, 24 ARR. Platform ARR grew 20% versus the prior year while non-platform grew 1% to $501 million this quarter.

As a reminder, foreign exchange had a negative impact of 2% on total ARR and 3% on platform ARR. We continue to focus on FICO platform growth while retaining our non-platform customers. Over time we do expect migration of those non platform customers to platform products. Our platform land and expand strategy continues to be successful.

Our dollar based net retention rate in the quarter was 105%. Platform NRR was 112% while our non-platform NRR was 100%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases. Our software ACV bookings for the quarter were $21.2 million compared to $18.3 million in the prior year.

Turning now to expenses for the quarter as shown on Page 5 of the financial highlight presentation, total operating expenses were $260 million this quarter versus $257 million in the prior quarter, an increase of 1.5%. We anticipate our expenses increasing modestly throughout the year, which will again include cost for FICO World in our third quarter. Our non-GAAP operating margin as shown in our Reg. G schedule was 50% for the quarter compared with 48% in the same quarter last year.

We delivered non-GAAP margin expansion of 209 basis points year-over-year. GAAP net income this quarter was $153 million, or 26% from the prior year. Our non-GAAP net income was $144 million for the quarter, up 19% from the prior year's quarter. GAAP earnings per share this quarter were $6.14 up 28% from the prior year and our non-GAAP earnings per share were $5.79, up 20% from the prior year.

The effective tax rate for the quarter was negative 1.6%. The operating tax rate was 24.3%. The effective tax rate for the quarter includes $40 million of reduced tax expense from excess tax benefits recognized upon the settlement or exercise of employee stock awards. As a reminder, excess tax benefit does not impact our non-GAAP net income.

For the full year we expect our net effective tax rate will be around 22% and our recurring tax rate will be around 26%. Free cash flow for the quarter was $187 million, 55% increase from the same quarter last year. Free cash flow was $673 million over the last four quarters, which was an increase of 36% over the prior period. At the end of the quarter we had $230 million in cash and marketable investments.

Our total debt at quarter end was $2.42 billion with a weighted average interest rate of 5%. Currently, 53% of our total debt is fixed rate. Our floating rate debt is prepayable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods. Turning to return of capital, we bought back 79,000 shares in the first quarter at an average price of $2,015 per share.

We purchased an additional 47,000 shares in January at an average price of $1,905 per share and we do continue to view share repurchases as an attractive use of cash. With that, I'll turn it back to Will for his closing comments.

Thanks Steve. The macroeconomic environment remains fluid, but our strategy and execution remain consistent. We're well positioned for this fiscal year and remain confident in the guidance we provided last quarter. Our software and scores businesses continue to be best-in-class.

Our software customers are delighted by our ability to help them optimize interactions with their end customers through data driven composable solutions that are executed in real time. Fiscal 25 marks the second year of the FICO Educational Analytics Challenge Program which was created to encourage students in data science, engineering and technology. To date, we've partnered with seven colleges and universities. This year, students in this program are getting hands on experience learning to develop analytics AI models to detect fraud.

In our Scores business we expanded our Global Financial Inclusion Initiative through our Lenders Leading Inclusion Program. FICO provides cutting edge alternative data scores and financial inclusion strategies to lenders so they can responsibly expand access to credit for underserved communities. On the innovation side, we're in talks with resellers and close to launching our FICO Score Mortgage Simulator which enables mortgage professionals to run credit event scenarios by applying simulated changes in an applicant's credit report data to simulate potential changes to the applicant's FICO Sport.

With that, I'll turn the call back to Dave and we'll open up the Q&A.

Thanks, Will. This concludes our prepared remarks. We are now ready to take questions. Operator, please open the line.

Thank you. [Operator Instructions] Our first question comes in line of Manav Patnaik from Barclays. Your line is open.

Thank you. Will, I just had a big picture question and you talked about the FHFA pushing out the directors on bi-merge and the scoring. They've got a new director in there. There's talk of, the GSE privatizing. Just how do you look at these changes? Do you think GSE privatization has any impact to the status of the FICO score? Any kind of broad color around that would be helpful.

Sure. Well, so the decision by the FHFA to push out to an indeterminate date, the implementation of bi-merge and a two score system is not really surprising. I think everyone in the industry believes that the industry is not ready to make this move. And so there's really not a lot of surprise there.

With respect to the GSEs, I think it's important to recognize that before the GSEs ever entered conservatorship, they had selected the FICO score and were using the FICO score in evaluating the paper that they then securitized and passed to investors. And so, and then obviously that's continued through the present time. In a world which who knows whether the GSEs will come out of conservatorship or not, but in a world in which potentially they would, we don't really see a lot of change. I mean, if you go back to the fundamentals, the FICO score is the, is really the best way for investors to understand the risk in the paper that they're buying.

And we don't see that changing, whether the government is more or less involved with the GSEs. And I guess I would further point out that in every other market, where the government is not involved, we have a very strong market share because of the efficacy of the score. So a long way of saying not a lot of change.

Okay. Fair enough. And then, Will, if I can just ask you on the software business. I think you were expecting ARR to be in the 30%, and now we're talking 20%. Was there something in the quarter timing-wise, bookings or can you just talk about if 20% now is the new growth rate we should be thinking about?

Yes. That's -- I'm glad you pointed it out. It's -- I don't -- I wouldn't read too much into any particular quarter. This quarter, we got dinged a little bit with foreign exchange.

But really, the biggest driver is the fact that it flows through from bookings and we had some weaker bookings quarters in the past. We haven't revised our view about the kind of long-term growth trajectory for the platform business, which is in the 30s, 30% or so. And so I wouldn't read too much into this quarter's number.

Yes. And Manav, we actually do expect ARR to accelerate in the back half even in the coming quarters. So we knew this was going to be a lighter quarter because, again, like Will said, the weaker bookings we had the first couple of quarters last year, and then we got hit by the FX, particularly in Brazil, that had a pretty significant impact this quarter.

Okay, thanks a lot guys.

One moment for our next question. Our next question will come from the line of Jason Haas from Wells Fargo. Your line is open.

Hey good afternoon and thanks for taking my questions. I'm curious if you could talk about how fiscal 1Q came in versus your expectations? And the genesis of the question is, I'm curious, I know you're holding the guidance, but I'm curious if there's any less conservative now than it was prior to the results of this quarter coming in?

Well, I would say that we're not really surprised. As you know, we provide conservative guidance, and I think that our internal view on interest rates was more conservative than the general market view, and we built our guidance around that. So for us, no change to our guidance, and really no surprise in terms of what we're seeing right now.

Yes. And I would just add to that. I mean, this pretty much came in according to our plan. We -- there's a lot of seasonality to the Scores business.

So if you look at it on a year-over-year basis versus the fourth quarter versus our first quarter, it makes a lot of sense. What's further out, in terms of Q3 and Q4, it's harder to know what's going to happen with the current rate environment, but we didn't expect a lot of things to happen this quickly. So this pretty much came in line with what we expected.

Got it. That's helpful. I know we're pretty early to the start of the calendar year, but I was curious if you could talk to -- any sense to be you're seeing as you've put in the new -- or started to put in new prices for mortgage scores and also auto scores?

Well, I mean it is very early, but we have socialized the pricing for 2025 and everything’s gone just as expected and no real issues.

We don't see really any elasticity...

Helpful, yes. Thank you.

One moment for our next question. Our next question will come from the line of Faiza Alwy from Deutsche Bank. Your line is open.

Yes, hi thank you. I wanted to follow up on the software question and just your confidence in accelerating platform ARR back to 30%, can you give us a bit more color on what's driving that confidence? Do you expect sort of increased usage? Is there a new business that you're expecting? And just a bit more color on where you're getting more traction.

Yes. And so your question suggests the answer. The usage, we obviously don't control. That part of the equation moves around and it kind of depends on what the customers do.

And so this particular quarter, we had lower usage. In terms of predictability, and do we have confidence in the rate accelerating back into the 30% range, we do have that confidence. And that's because of a direct flow-through from bookings. So we know what the bookings look like that we'll be driving ARR growth in the future.

And so we have a high level of confidence.

Yes. I mean there's a timing piece between when something is booked and when it goes live. So we have advanced -- we can see when things will go live and at what point then that will turn at ARR. So we've -- for the last few quarters, we've had some pretty strong bookings, and we have a good idea of when those will go live and when the ARR will roll off.

So that piece, as Will said, the usage is harder to understand, but it's -- or the forecast, but the deals that we signed, we have a pretty good idea of when they're going to go live, what kind of ARR they will deliver.

Understood. And then just as a follow-up on the Scores business. I think you mentioned higher volume in mortgage. I'm curious if you can give us a bit more color on what you're expecting in terms of volume across the verticals for this year? Sort of what's embedded in the guide, just given the fact that we have seen sort of rates go back up between November.

I could ask you the same question about the future. We all have our crystal balls. We really -- we don't know what direction interest rates will go. We don't know when they'll come down.

We don't know when the volumes will come up as a result of them coming down. I can tell you that our guidance was built around a view that rates would not come down much in 2025. And so far, things are playing out roughly the way we expected. If rates come down in the back half of the year, that will be a tremendous benefit for us. And if they don't, we're prepared for that and our guidance reflects that.

Understood. Thank you.

Thank you. One moment for our next question. Our next question will come from the line of Surinder Thind from Jefferies. Your line is open.

Thank you. Following up on the platform ARR question, it looks like it was mostly related to just a slowdown in the NRR at particular clients. So is the messaging here it was predominantly just usage and that things just kind of slowed down? Or how should we think about that? Like what percentage of revenue is characterized...

A lot of it is usage. So I mean you're absolutely right. A lot of it's usage. But some of it is lower bookings that are now flowing through.

Yes. But the NRR piece is usage. We didn't have churn. We didn't have customers leaving.

We had some customers that for some of our products, the usage can vary quite a bit quarter-to-quarter. And they -- in some cases, they might have turned some things down at the end of the calendar year to save some money, which happens from time to time. So that's the seasonality around different pieces of some of what their usage is. So that's really what drove that.

And we expect a lot of that returns to form and then we also expect a lot of the new business that we've already sold will come live.

Got it. So there's -- what it sounds like is if usage returns to normal then there's kind of a double bounce back effect here, right? Because you'll get working...

Exactly. Exactly. Yes.

And then fair enough. And then in terms of just the FICO 10 T and the non-GSE usage adoption. Can you talk a little bit more about that? And then maybe contrast that with the kind of the delay at the FHFA in terms of the time line being suspended for implementation.

Does a bifurcation in the market between classic FICO and 10 T have any implications that we should be aware from securitization or other considerations here as we think about this longer term? Because obviously, it sounds like on one path, there's a certain number of entities that are going down the top of 10 T, but then with conforming, we may not be going down that path.

Well, I mean it's a very interesting question. I think what you have to start with is that the FICO Classic score that's been in use for 25 years in the mortgage market is a highly predictive score. It works really, really well. And it has historically provided the investor community with a pretty good sense of what they're buying and the risk associated with it.

FICO 10 T is a little bit better. Some would say quite a bit better, some would say a little bit better. We're -- I'm not sure it makes that much difference whether it's a little better or a lot better. Its better enough that we have customers who prefer it.

I'm not sure that the answers you get from 10 T are very different from the classic FICO score. And so I don't imagine tremendous [indiscernible] investor community about which score is being used to securitize those portfolios. I imagine they will both be used with no real issues.

Okay, thank you. That’s helpful.

One moment for our next question. Our next question will come from the line of Owen Lau from Oppenheimer. Your line is open.

Thank you for taking my question. So go back to the ACV bookings, it was strong in the first quarter. Could you please talk about the pipeline and outlook of bookings over the next quarter or so? Do you expect this to also accelerate to also drive high ARR going forward?

Yes. I mean, honestly, we have a strong pipeline. But again, we will have volatility in that bookings number. Some quarters will be really good, some quarters won't be as good because we don't have thousands of bookings.

We have a fairly small number, and some of them are pretty large, and they can move from quarter-to-quarter. So there's still a lot of interest in these products. We still have a strong pipeline, but it's hard to put hard numbers out there about what we expect in the next couple of quarters. We think we'll have a good year for bookings.

But every year, every quarter, there's some volatility in that. But again, we put up two quarters that we're really happy with, the last two quarters, and that's going to have an impact as we move through the year in terms of ARR.

Got it. And then on the expense side, could you please add more color on that? I think you mentioned expense will go up from here. And in the third quarter, there will be FICO World. Any more color you can add in terms of, let's say, how much increase from the first quarter runway from here? Thanks.

Yes. It's not all that significant. And if you put together a model with the guidance we gave you there's no change to that. But there are some things that are nonrecurring.

The FICO World adds probably $5 million, $6 million in our third quarter that we won't see yet in our second quarter. So there are things like that to come along from time to time. But we won't have any material step function type expense increases throughout the year.

Thanks a lot.

One moment for our next question. Our next question will come from the line of Kyle Peterson from Needham. Your line is open.

Thanks guys for taking the questions. I wanted to start off on capital allocation. It does seem like you guys did kind of amp up the full -- or the buyback in January when the stock start to pull back some. I guess, should we think about you guys having the appetite to continue to do that if the stock continues to be off highs despite the results you guys have put up.

Yes. Well, look, you know our view on this. We think FICO stock is a great value at $1,800 or $1,900 or $2,000, $2,100 as we did in the last quarter. And in the fullness of time, we're sure what we've indicated we try -- we're not really market timers.

We try to be in the market kind of all the time with regular purchases to use up our cash flow and maintain our leverage at kind of a comfortable level. That said, when the stock dips, we do sometimes size up our purchases, and we have a lot open on the authorization so that we have the ability to do that should we choose to ramp up. So kind of a long way of saying, we believe in the stock. We think it's a pretty good value where it is.

And yes, we have appetite for more.

Okay. That's really helpful. And maybe just a follow-up on the guide. I think kind of looking at from when you guys last reported to now, I guess, obviously, you guys are reiterating the guide.

It does look like the mortgage environment seems a little worse, I guess. Could you walk us through, did you guys just have maybe a more conservative assumption than the market had in November when you guys guided? Or are there any other offsets or moving pieces we should be mindful of that helped offset incremental mortgage softness.

I think it's really a combination of two things. One is I think we did have a more conservative view, a less optimistic view of the future of rates several months ago when we put together the guidance than the market. Certainly, at the time we put our guidance out there, people anticipated a lot more rate cuts in 2025 than we're likely to get. So that is part of it.

And then I would say on top of that, you have a management team that always wants to hit its numbers. And so we're conservative. We'll do our best estimate, and then we'll haircut it to make sure we come in. And so it's both listings.

We had a more conservative view and then we add the conservatism on top of that.

Tanya, I think this is -- Kyle, this is pretty consistent, right? I mean we did the same last year. And if you look back, I mean, we guided numbers and people expected in 2024, multiple rate cuts that never happened. So we plan for a situation where we were not going to count on something that hasn't happened yet.

So we did the same thing here. So frankly, we're probably so far, I mean, our first quarter mortgage probably did better than what we had in our guidance because we were so conservative. So if you plan that way and you guide that way, it gives you a little bit of upside even when things are not as rosy as what the world thinks they might turn out to be.

Okay, that’s helpful color. Thank you.

Thank you. One moment for our next question. Our next question will come from the line of George Tong from Goldman Sachs. Your line is open.

Hi, thanks. Good afternoon. With your card and personal loan revenues, they were down 3% year-over-year in the quarter. Can you talk about some of the trends that drove this decline?

Yes. I mean it's kind of what you see in the industry, right? There's kind of a little bit of a pullback in consumer lending. We also have the underneath our numbers, you might see some mix shifts.

So some of the users that are paying a little higher unit cost might be harder hit than some of the bigger operators that are paying a lower unit cost. But yes, 3% is kind of in line with what you're seeing in the industry. I think that typically is a lighter quarter anyway. And I think there's been a conservativeness among the banks in terms of lending.

We've seen that in multiple verticals.

Got it. That's helpful color. And then going back to the software business, you mentioned seeing lower platform usage in the quarter. Can you talk more about some of the key catalysts that can drive higher usage levels?

I mean it depends customer by customer. I mean what we saw in some cases in this quarter was that -- and the CCS is on platform, there was just less usage. And that could be a number of different things. I mean in some cases, like I said, sometimes the -- they might reduce usage over the holidays if they don't think there's as much receptiveness of some of those messages or in some cases, they might be pulling back a little bit to save a little bit of money on some things.

There's a lot of -- it depends on the customer. But typically, there is some seasonality to that business.

And George, remember, the CCS product has a collection use case and a fraud use case. That very differently as you go out the year and different customers have -- some of them have collections, some of the fraud, some not both. So those all play factors in depth how the users might go back up.

Got it. Helpful. Thank you.

One moment for our next question. Our next question will come from the line of Jeff Meuler from Robert W. Baird. Your line is open.

Yes, thank you. Good afternoon. Can you just help us kind of understand the typical time line for mapping ACV bookings into ARR.? I get it that there's this usage component. But like are the Q1, Q2 of 2024 ACV bookings kind of flowing into ARR now? Or just like what's the typical timing?

Yes. I mean it varies. But typically, it's at least 6 months and it's probably more like 9 to 12 months before they're implemented and up and running. So the fact that we had in the last year, early last year, we had lighter bookings that means that you're going to have less new stuff coming online right now?

And then that's a result of the bookings we had last year. So the bookings that have -- that we've done in the last couple of quarters, that bodes well for the latter half of this year in terms of more ARR growth. The 6 to 9 month lag between the 2.

Got it. And the ARR FX headwind, I think you said it was three points to platform. Was that year-over-year or sequential? And I know you've been asked us a million different ways, but can you help -- well, if we can get that, but can you also just help us with any sort of like quantification of how much of the platform revenue is driven by usage or what it did sequentially the ARR sequential trend for platform is just a pretty striking change.

Yes. Well, that's on a constant currency basis. So if we had not had changes to the FX, we would have had an extra 3% of ARR this quarter versus last year.

Okay, thank you.

One moment for our next question. Our next question comes from the line of Ashish Sabadra from RBC. Your line is open.

Thank for taking my question. I had two clarifying questions. First one on the B2B. When we look at the mortgage, auto and card origination revenue, those improved year-on-year compared to fourth quarter, but the overall B2B revenue moderated. So I was just wondering if you can comment on what caused that softness? Is it prescreening or some other revenue stream there within B2B scores?

Are you talking about Q3 -- or Q4 to Q1, you're sequentially.

Yes or if you look at the year-on-year growth. Yes, sorry.

I'm not sure what the -- can you just maybe restate the question. I'm not sure what you -- year-on-year was it's all up.

Yes. So if I look at mortgage originations, those improved from 95% growth to 110%, auto improved, card improved. But if I look at B2B revenue growth, it was up pretty robust on year-on-year, but it moderated -- the growth moderated from 38% year-on-year in fourth quarter to 30% in the first quarter.

The 30%, I'm not sure what numbers you're talking about it. There's a significant piece of the business that's not originations, right? So I mean -- and those pieces don't grow anywhere near as fast as some of the origination pieces do. The total B2B was up 30% year-over-year.

But a lot of the pieces grew very rapidly, but a lot of things like the prescreen business, the account management business and some of the international pieces are not growing that rapidly. So those pieces can fluctuate if we have a onetime license event with a foreign customer, that might drive a few extra percent of growth in that one quarter, but we didn't have anything in particular like that this year for this quarter.

Okay. That's helpful. Yes, just from a modeling perspective, we were trying to better understand if there are any other puts and takes to be cognizant of as we look for the rest of the year?

No. I mean there's always some little -- not always, but a lot of quarters, we have onetime license deals that could be a few million dollars, and some of those could add a couple percent here or there. But those are hard to predict when they're going to happen. So really, the most predictable or most modelable numbers to look at are probably around originations, and those have a bigger impact.

That's very helpful color. And maybe just a quick one on B2C. It's good to see that inflection in growth there. I was wondering if you could talk about some of the trends that you're seeing on myFICO and how should we think about the growth going forward? Thanks.

Yes. I mean we're seeing -- obviously, we had some really, really strong growth right during the -- all the refi boom that was happening, and then we had a lot of difficult comps. And now we're seeing that we've kind of cleared those. And there's a lot of -- we've done some investing, and we talked about this on the call last quarter.

We're doing some investing on the B2C side. We're doing some different marketing programs. And we think there's a lot of room for growth there. It takes some time to do that.

But we're excited about our myFICO business, certainly, and we're investing in that, and we hope to see more growth throughout this year.

That’s very helpful color. Thanks.

One moment for our next question. Our next question will come from line of Alexander Hess from JPMorgan. Your line is open.

Hi, everybody. This is Alex with JPMorgan. So your guide implies about 15% year-on-year revenue growth, which is about where at a consolidated level you ended in 1Q. So not -- so stable from that perspective, you guys flagged that it's conservative and that you guys are confident in the guide.

So maybe just thinking outside of mortgage price, are there any new revenue streams that you would call out? I know it's another question on the guide, but everybody is trying to sort of square where this confidence comes from?

Yes, I mean, I think outside of pricing, there's a lot of -- I mean, even in terms of some of the volume assumptions we have, I mean, there are -- there were some really rough quarters last year in terms of volumes that should -- if not do much better. We think there'll probably be more of a return to normal. So there's a lot of areas we have without going into detail, where we're pretty confident that we were not going to have any trouble clearing our guidance for the rest of the year.

Got it. Understood. And then just on the FX side, could you dimension what the impact was to revenue specifically on the software and consolidated side?

Yes. It was all on the software side essentially. And it was in a few particular currencies, but I think it was around $4 million.

I'll look for it.

Yes, you have to get back to me. I don't have the exact number.

Understood. Thank you all.

One moment for our next question. Our next question comes from the line of Simon Clinch from Redburn Atlantic. Your line is open.

Hi everyone. Thanks for taking my question. I wanted to just cycle back to the GSEs. There's been some discussion about the potential for the GSEs when they -- should they go private to start employing sort of some cash flow modeling internally to their own sort of credit scoring capabilities.

And I was wondering, one, is that how would that work, first of all? And would FICO still play a part in that kind of scenario, if it would happen.

I don't know how that would work. It's hard for me to imagine these entities going away from the FICO Score. I mean I think we have a mortgage system in the United States, which is the MV of the world. And the risks are well understood by the investors.

The securitization market works a dream. And so it's just very hard for me to imagine them moving away from the FICO Score, which is so effective for supporting the analytics in that market.

And frankly, they wouldn't be mutual exclusive, right? They would be complementary.

Yes. And it has been the case. It's always been the place that Fannie and Freddie have their own models. It's not just a score, right.

Right.

Understood. Okay. That's useful. And just a quick follow-up question, just on the mortgage market. I mean, could you give us an indication of the magnitude of volume growth that you did see in the quarter?

No. We don't detail out the all that. But you can look at reporting that comes from mortgage bankers and other groups to kind of see what those numbers look like.

Okay. Thanks so much.

One moment for our next question. Our next question will come from the line of Scott Wurtzel from Wolfe Research. Your line is open.

Hey good afternoon guys. Thank you for taking my questions. I just wanted to go back to the software business. I mean it sounds like you're pretty positive on the forward pipeline.

But we if you can kind of dimensionalize sort of how the broader demand environment looks, now that we've kind of turned the calendar to 2025 budgets are reset and just kind of characterize maybe the demand environment and how budgets are looking relative to last year? Thanks.

We don't see a tremendous amount of change in appetite for our products from a demand side. I think that we're years ago, our point solution applications were under more budget pressure and were the kinds of things that sometimes got deferred. I think that the strategic nature of the platform kind of transcends that. And so not that we're not affected by the fiscal environment of our customers.

But it is a high-level decision. It is strategic for our customers. And so we have not experienced a lot of slowdown there.

Got it. That's helpful. And then just a quick clarification. Just on the Scores margins, we saw kind of a step down there quarter-over-quarter year-over-year with a notable uptick year-over-year in expenses. Just wondering if you can kind of gave a little bit of context around that. Was there anything to do with mix? Anything around that would be helpful.

No. There's a little bit more spend on the B2C side. So the B2C side has a different cost structure, and we're doing a little bit of investment there and doing some things to -- in terms of marketing.

Makes sense.

Thank you. One moment for our next question. Our next question comes from the line of Matthew O'Neill from FT Partners. Your line is open.

Hi, good afternoon. Thanks so much for taking my question. A lot of good questions asked and answered, particularly around the guide and outlook for the remainder of the year. So I think maybe we could spend a moment or two digging in further on the press release out today on the study done with a firm and maybe give us a little bit more of a view on the longer-term integration of Buy Now Pay Later into the FICO modeling and how that may sort of develop and so forth.

Thank you.

Well, buy now, pay later, as you know, is popular and growing. The bureaus don't have consistent treatment in terms of how they use it. Is there a caloric value in understanding the consumer repayment behavior on Buy Now, Pay Later? Absolutely.

So we've been working with a firm with their data in ours to see how we can extract a little more prediction out of incorporating Buy Now Pay Later data along with other elements of the credit files into the FICO score. And so in the future, we will be doing that. We're pretty excited about it. Any time you can bring alternative data or data that hasn't historically resided in the credit file to the decision, you're going to get a better decision.

And so it's -- for us, this is an opportunity for our customers, it's a great thing. It's early days still. I don't think that we have maturity around how the data will be handled across the bureaus. And so we're working on that.

Got it. Thank you so much. And I guess as a quick follow-up, have any other players in the space volunteered for the invitation in the press release?

We've been working with the firm for quite a while.

Got it. Thanks again.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call over to David for closing remarks.

Yes. Thank you, Victor. I'll just comment on Alex asked a question about FX impact on revenues. So the number was $3 million for total revenue.

It's about 1% of total revenue or about 1.5% of software revenue. But overall, thanks, everyone, for attending the earnings call today. Please stay tuned to fico.com and LinkedIn to keep up to date on the latest news as we kick into our FICO World event. Thank you very much.

Good bye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.