Fair Isaac Corporation Analyst Day - library.corporate...

© 2007 Fair Isaac Corporation.

Fair Isaac CorporationAnalyst Day15 May 2007San Francisco

May 15, 2007


Forward Looking Statements

Some of the statements to be made by us during this meeting, including statements concerning our expectations about future operations and financial results, are forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including those risks and uncertainties described from time to time in Fair Isaac’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2006, and its Quarterly Report on Form 10-Q for the period ended March 31, 2007.


Corporate Overview

Mark GreeneChief Executive Officer

4© 2007 Fair Isaac Corporation.

Agenda

1. Vision

2. Business Model

3. Enterprise Decision Management

4. Markets

5. Geography

6. Products

7. Services

8. Execution

9. Innovation


1

1 VISION

2 3 4 5 6 7 8 9


Core Values

Focus on Clients

Develop Our People

Innovate & Collaborate

Execute with Integrity

Deliver High Performance

We will earn a “trusted advisor”reputation by being client-centric in everything we do.

We will foster learning and growth by offering an engaging, career-focused environment.

We will pursue focused innovation and leverage our collective talents through collaboration and teamwork.

We will be honest with ourselves and with our clients, and demonstrate integrity in everything we say and do.

We will deliver on our promises through effective planning, execution and change management.

I will earn my client’s trust by aligning my goals and interests with their needs.

I will take responsibility for my career development by pursuing learning opportunities.

I will embrace innovation and change by partnering with my colleagues and valuing the contributions of others.

I will always tell the truth, even when doing so may conflict with my personal interests.

I will commit myself to achieving and exceeding my personal and team goals.

Fair Isaac’s Commitment Personal CommitmentCore Value


Durable Client Relationships


Brand Promise

Fair Isaac combinestrusted advice,

world-class analytics, andinnovative applications

to help clients makesmarter decisions

in a dynamic market.


Value Capture

Fair Isaac seeks to be the leader inEnterprise Decision Management,

enhancing business decision-makingby applying predictive analytics

throughout the customer lifecycle.


Market Focus

Enterprise Decision Managementis an approach that

automates, improves & connects decisions to enhance business performance.


Growth Strategy (1 of 2)Base franchise

ClientsImprove client relationships and service levels

ChannelsStabilize scoring/bureau relationshipsCultivate System Integrator indirect channels (IBM, Accenture)

ProductsBoost product quality & supportIntegrate products into Enterprise Decision Management suites


Growth Strategy (2 of 2)Focused growth

Financial Services & InsuranceGeographic expansion• China • Eastern EuropeProduct cross-sell• Leverage EDM suites

Emerging industriesHealthcareRetailTelco

Convert to a “General Business” Horizontal Model


Value Stack – Financial Services

Analytics andDecision Management

Customer Life-cycle Applications

Business Intelligence

Core Banking System

Infrastructure

Vendors

Oracle/i-flex, CSC/Hogan, Fiserv

IBM, Microsoft, Oracle, BEA, webMethods

Fair Isaac

Ente

rpris

e D

ecis

ion

Man

agem

ent


Analytics andDecision Management

Customer Life-cycle Applications

Business Intelligence

Core System

Infrastructure

Vendors

Custom Developed, IDX

IBM, Microsoft, Oracle, BEA, webMethods

Fair Isaac

Cognos, MicroStrategy, Business Objects

Oracle/Siebel

Value Stack – Non-Financial Services


Thriving in a Consolidating Industry

Potential

TransactionsR

ecent Transactions

Hyperion (S)First Data (PE)

Metavante (PE)

SAS ($$$$)

SPSS ($$)

Small Tuck-Ins

Chordiant ($$$)

Business Objects ($$$)

Cognos ($$$)

MicoStrategy ($$$)

Pega ($$)

eFunds (PE?)($$$)

TSYS ($$$$)

FiServ ($$$$)

TSAI ($$)

AnalyticsRules, BPM &Bus. IntelligencePayments

PE = Private Equity

S = Strategic


1

2 BUSINESS MODEL

2 3 4 5 6 7 8 9


Business Model: Market Sizing

Source: 2006 Gartner, IDC and Fair Isaac Analysis

Business Process Automation ($2B)

BPM Tools

Middleware

EDM ($22 to 25B)

Business Analytics ($16.6B)

Analytic Apps ($6.1B):

Financial Performance ($2.6B)

Supply Chain ($1.1B)

Workforce ($0.1B)

CRM ($1.1B)

Service Ops ($1.2B)

Advanced Analytic Tools ($1.2B)

Integration Consulting ($6.9B)

Client-led Custom App Dev ($1.7B)

Data Integration (e.g. CDI) ($3.8B)

Custom Models ($1.7B)

Strategy Consulting ($1.5B)

Scores & Decision ASP Solutions ($1.8B)

Business Rules Management ($0.2B)

FIC Core Markets ($12.5B)

FIC $825M = 7% share

Query, Reporting Analysis ($4.5B)

Analytic Spatial Info Mgmt ($0.6B)

Data Warehouse Platform ($5.2B)


Business ModelFollow a software company business model, targeting high recurring revenues (75%) by embedding our software & analytics into transaction streams

Continually remix the portfolio to shed low-margin / low-growth products and segments, and expand into higher margin / higher-growth areas

Target Growth Model as of FY 20097-10% Organic Revenue Growth1% Acquired Revenue Growth1% Productivity Gains1% Net Share Count Reduction10-13% EPS Gains

Target Revenue Mix as of FY 200960% - 70% Direct Sales10% - 15% Strategic Partners (SI & Consultants)10% - 15% Indirect – Credit Bureaus5% - 10% Indirect – Processors & Networks2% - 5% Indirect - Other


Partner Categorization IBM HP Teradata MS Oracle SAP McKinsey Accenture TCS InfosysSoftware Applications X Tools X X x X X X x xHardware X X XConsultants Strategy/Business X X X Integration X x X X X Outsourcing X X X

Sales/Distribution X x x x X X X X XDelivery X X X XProduct/Technology X X X X X

Business Model: Indirect Sales & Partnerships

IBM – Active Relationship

Global reach and delivery capabilities

GTM with our Franchise Products

GTM with Compliance/Basel Offering

FS industry focus

HP – Active Relationship

Reestablished connection

Possible HPOpenview, Blaze, Analytics offering

Delivery org is very product specific and doesn’t compete with any Sis

MS – Active Relationship

GTM Tools partner

BizTalk Blaze BPM offer

Cross Industry play

Product Development & TSI Partner

Oracle –Active Relationship

Largely an in-active relationship but Fraud Product team is pursuing an agreement to resell Oracles DB SW

Interested in partnering with us on Analytics

SAP – Active Relationship

Reseller for our Analytics

Accenture –Active Relationship

Global delivery capabilities

Cross industry

No product competition

TCS & Infosys –Active Relationship

Currently members of Blaze referral program


1

3 Enterprise Decision Management

2 3 4 5 6 7 8 9


Enterprise Decision Management

Automate, Improve & ConnectAutomate for speed and consistencyImprove targeting, relevance and resultsConnect decisions across functions, channels, customer touchpoints

Enhance Business PerformanceIncrease customer profitability Grow and strengthen customer relationshipsReduce fraud and credit riskLower costs of making decisions

An approach that automates, improves & connects decisions to enhance business performance


Towards Smarter Decisions

Reduce expenses needed to make decisions(Staff time, exception & investigation handling, …) COST

Execute decisions and modify processes quicklySPEED

Adapt dynamically to changing conditionsAGILITY

Ensure coherence across channels, business units and geographiesCONSISTENCY

Make more profitable and targeted decisionsPRECISION

Reduce expenses needed to make decisions(Staff time, exception & investigation handling, etc) COST

Execute decisions faster – even in real timeSPEED

Adapt dynamically to changing conditionsAGILITY

Ensure coherence across channels, business units and geographiesCONSISTENCY

Make more profitable and targeted decisionsPRECISION


Smarter Decisions ► Business Gains

Decrease in fraud losses

Increase in collector

productivity

Decrease in bad debt

Customers booked at same

risk level

Profit per account

Collections & Recovery

Customer ManagementOriginations FraudMarketing

30%30% 15%15% 30%30% 50%50%

Sample Fair Isaac Client Results

1515--25%25%

Enterprise Decision Managementamplifies these benefits

by coordinating across decision areas


EDMPredict Future BehaviorRecommended ActionsClosed-loop learning

EDM Positioning

Transaction SystemsERP Systems CRM SystemsBusiness Process Automation

Business IntelligenceManagement ReportingData Analysis:

Drill-up / Drill-down

Alerts

EDM makes existing Business Intelligence (BI) and Transaction Systems more effective.

Business Intelligence is backward looking (i.e. rear-view mirror) and report-orientedEDM looks forward to predict behavior and recommend actions to be executed.

‘Intelligent Process Automation’

Operational Decisions

‘Management Reporting’

Insights & Guidelines

‘Execution’Focus:

Output: Outcomes


EDM ContinuumB

usin

ess

Impa

ct

Degree of EDM Adoption

Rules Management Software

Predictive Analytics

Decision Models

Adaptive Control

Consistency,Speed, Agility

Enterprise Coordination

Poi

nt /

Func

tiona

l Li

ftE

xten

sive

/ C

ontin

ual L

ift

ReusableComponents

Shared Decision Capabilities

Precision and Adaptation

Connect

Decisions Across Channels,

Systems and Customer Lifecycle

Automate

High-Volume

Operational Decisions

Improve

the Quality and Results

from Decisions


Connect

EDM BenefitsB

usin

ess

Impa

ct

Degree of EDM AdoptionConsistency,Speed, Agility

Enterprise Coordination

Poi

nt /

Func

tiona

l Li

ftE

xten

sive

/ C

ontin

ual L

ift

Automate

Improve

Underwriting policies can be changed more quickly to reflect market conditions

More refined segments and understanding of propensity to buy improves take up and reduces noise.

Collections insights detect emerging market conditions & drive account management & originations strategies to reduce loss exposure

Precision and Adaptation


EDM Suite (Today)

Actions Actions Actions Actions


Fraud

Customer ManagementOriginationMarketing


EDM Suite (Goal)


Fraud


Actions Actions Actions Actions


Enabling Portfolio-level Decisions


Fraud


Credit Card

Auto Loan

Mortgage

DDA

Savings

Integrated Portfolio Strategies


Data Warehouse

EDM Architecture

Customer Behavior and Strategy Performance

AnalyticDevelopment

RulesManagement

BusinessIntelligence

T R A N S A C T I O NE X E C U T I O N

D E V E L O P M E N T &M A N A G E M E N T D E C I S I O N

S E R V I C E OPERATIONALSYSTEMS

E-Business

Process Data, Rules and Analytics to

Determine Best Decision

DecisionRequest

Decision

EDM Repository

Fraud

DECISIONAPPLICATIONS

ERP

CRM

Core Banking

Billing

SupplyChain

Marketing

OriginationCustomer

ManagementCollection &

Recovery


1

4 MARKETS

2 3 4 5 6 7 8 9


Changed go-to-market approach in mid-2006 from product- to customer-focused

Created 22 Integrated Client Networks (ICN)

Current Industry Coverage

Global LeadersGlobal

Leaders

EMEAEMEA

Small & Mid-Market NA

Small & Mid-Market NA

InsuranceInsurance

PharmaPharma TelecomTelecom

EDM Tech& AnalyticsEDM Tech

& Analytics

JapanJapan

Credit BureausCredit

Bureaus

Manufacturing & Other

Manufacturing & Other

Retail / CBGRetail / CBG

NetworksNetworks

Asia PacificAsia Pacific

ProcessorsProcessors

HealthcareHealthcare

GovernmentGovernment

High TechHigh Tech

Large North America

Large North America

Latin America Latin America

ConsumersConsumers

Bill ReviewBill Review

TM&ETM&E

Financial Services (8)

Cross-Market (1)

In-direct Channels (3)

Emerging Industries (10)


Industry RationalizationMaintain / Grow Industry Vertical Focus

Financial ServicesInsuranceHealthcareRetailTelco

Convert to “General Business” Horizontal ModelTravel Media & EntertainmentHigh-TechManufacturingGovernment

Implement streamlined ICN focus in 4Q 07


1

5 GEOGRAPHY

2 3 4 5 6 7 8 9


Global PrioritiesAggressive expansion

China (~50 FTE in 6mo)

Gradual expansionEastern EuropeRussia

Productivity focusLatin America (new MD pending)Japan (new MD pending)

Sales expansion vs. sourcingIndia


1

6 PRODUCTS

2 3 4 5 6 7 8 9


Portfolio

Marketing

Precision Marketing

Originations

Capstone®

Customer Management

TRIAD™


DebtManager™

EDM TECHNOLOGIES

Business Rules Management


Data Access and Delivery

EDM LIFECYCLE APPLICATIONS

Blaze Advisor™

ModelBuilder

ScoreNet®

Fraud

Falcon™


Portfolio RationalizationFocus on core strengths:

ScoringFraudCustomer ManagementOriginationsCollections & RecoveryDecision Platform SoftwareAnalytics

Evaluate other product lines for strategic relevance and profitability

Rationalize/simplify and rename product portfolio


1

7 SERVICES

2 3 4 5 6 7 8 9


Realizing the Promise of EDM

Industry expertise650 professionals in financial services, insurance, healthcare, retail, travel

Technical expertiseBroad math, statistics, operations research, and process re-engineering talentClose linkage to 350 analytic scientists

Delivery experience9,000 engagements in past 3 years

Consultative approachEngagement methodology tied to client’s strategy and business objectivesProfessional engagement model with proven work steps & artifacts

Open partnership modelFair Isaac PS provides consulting / implementation services for our productsJoint engagement model with other consultants & Systems Integrators

Fair Isaac Professional Servicesstands ready to help clients realize the promise of EDM


Professional Services Consultative Approach

PROFESSIONAL SERVICESReadiness AssessmentsBusiness Case Founded RoadmapsOutcome-Based Project Approach

Marketing

Precision Marketing

Originations

Capstone®

Customer Management

TRIAD™


DebtManager™

EDM TECHNOLOGIES





Blaze Advisor™

ModelBuilder

ScoreNet®

Fraud

Falcon™

Marketing

Precision Marketing

Marketing

Precision Marketing

Originations

Capstone®

Originations

Capstone®

Customer Management

TRIAD™

Customer Management

TRIAD™


DebtManager™


DebtManager™

EDM TECHNOLOGIES





Blaze Advisor™

ModelBuilder

ScoreNet®

Fraud

Falcon™

Fraud

Falcon™


Professional Services focus areasDelivery excellence

Project ManagementResource planning and availabilityQuality assurance programs

Value RealizationRoadmaps as a deliverableBusiness case collaborationPost implementation reviews

EDM Breadth and DepthEDM specific offeringsQuantity and quality of resources

Market shareAdvanced services – significantly grow analytic/decision strategy, modelingTraditional services – grow product implementation services, introduce partneringIntegration services – rely on partners

EDM Enablement SupportProductize EDM migration road mapping, readiness and related services

PartnershipsDevelop blended services engagement model with IBM, Accenture and others


1

8 EXECUTION

2 3 4 5 6 7 8 9


Execution AgendaProduct Management

Unified portfolio managementRemix portfolio to higher-value solutionsSimpler portfolio with new naming architectureProvide EDM product roadmap & timeline

Development Rationalize development tools & methodologiesProvide EDM architecture incl. info managementMove to SOA / web-services interoperability

MarketingImprove value propositionBoost brand imageDrive thought leadership

SalesTighten Integrated Client Network structureBoost # and skills of Client Partners and Client Relationship ManagersFocus on client satisfaction / resolving critical situations

DeliveryBuild skills and staffingImprove service qualityMigrate clients from products to EDM suites

ResearchManage Innovation pipeline to improve yieldEngage clients around new IPFIC Research Exchange program


More Responsive Organization

Increased Focus on Core Strengths

More Client Support Managers

Specialized TeamsCore CompetenciesSolution Architects

Multi-National Structure

Stronger Product Support

Streamlined Escalations


1

9 INNOVATION

2 3 4 5 6 7 8 9


InnovationWe are a market-directed technology company

Our innovation approach focuses on ideas that are:Relevant to the industries and market segment we serveDemonstrably feasibleHigh impact (create significant value to clients)Replicable in large markets (present significant opportunity for FIC)

Innovation Management is performed…Under executive sponsorship of FIC’s Strategy TeamWithin the Product Management function to ensure relevance to market needsUsing a 4-Horizon lifecycle methodologyAt a portfolio level, to allow resources to move from low- to high-priority projects


Innovation SummaryHighlights

FICO® Score: Injecting “Next Gen FICO Score” innovations into updated “Classic FICO Score” boosts predictive power.

FalconTM: Several analytic innovations promise significant additional predictive power in detecting fraud.

FastPanelTM: Signed development and distribution contract with provider of 60+% of centralized lab tests for U.S. companion animal vets.

Pipeline AssessmentPipeline funnel has 168 ideas, incl. 57 ideas in Horizon 4


Innovation: New Avenues

INNOVATION

FastPanel ID

INNOVATION

Revenue Assurance

INNOVATION

Best Next Action

INNOVATION$900 Million Tax “Bonus”


Financial Overview

Chuck OsborneChief Financial Officer


$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

FY 2001A FY 2002A FY 2003A FY 2004A FY 2005A FY 2006A FY 2007E

Total Revenue Recurring Revenue

$629.3 $706.2$329.1 $392.4

(In m

illio

ns)

Historical Revenue Growth

– 2001 recurring revenue was the majority of total revenue, however, FIC did not report recurring revenue

– 2002 recurring estimated based on mid-year acquisition of HNC

$798.7 $825.4

$795 – $805

YTD $409.2


Revenue – Vertical Markets

Financial Services

65%

Telecom5%

Insurance9%

Retail9%

Other12%

Financial Services

65%

Telecom5%

Insurance9%

Retail6%

Other15%

YTD2007

Fiscal 2006

– While Financial Services remains our most prominent vertical market, Retail continues to gain share


Revenue – Geographic

YTDFiscal 2007

US71%

International29%

Fiscal 2006

US72%

International28%

– International markets continue to represent significant growth opportunities for Fair Isaac


Bookings, Yield and Revenue–While bookings have fluctuated over last six quarters, current quarter yield has been fairly constant,

as has FIC’s total revenue– Large bookings’ quarters do not directly imply a large revenue quarter – Any given quarters bookings will vary simply due to the type of deals signed within each respective

quarter

$58.9

$72.1

$112.6

$94.5

$106.0

$127.8

$15.2$19.9$20.7$21.5$22.0 $21.2

25.7%27.8%

18.4%22.8%

20.0%17.2%

$0

$20

$40

$60

$80

$100

$120

$140

Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-070%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Bookings Current Quarter Revenue Bookings Yield


$97.2

$125.5

$221.6 $228.0$244.5

$263.3

$240

$162.5

$192.4

$171.2

$152.4

$77.1

$45.2

$125.5

$0

$50

$100

$150

$200

$250

$300

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007E

FIC Produces Significant Cash Flow(In

mill

ions

)

$45.2

$77.1

EBITDA Free Cash FlowNote: Free cash flow defined as cash flow from operations less capital expenditures and dividends.

YTD

$126.6 $74.5


Cash Flow and EBITDA by Quarter

–Despite lower revenue and earnings, Fair Isaac still generates significant cash flow and EBITDA

($ in Thousands)

Adjusted EBITDA Q1-06 Q2-06 Q3-06A Q4-06A Q1-07A Q2-07A Q3-07E Q4-07E

Operating Income (EBIT) (as reported) 44,043$ 40,719$ 36,332$ 31,630$ 44,901$ 36,220$ 33,059$ 36,871$

Plus:Restructuring, Acquisition and Divestiture related items (674) 2,183 5,290 12,862 - (1,541) - - Depreciation & Amortization 12,059 12,178 12,292 12,276 13,549 13,318 13,415 11,729 123R Stock Based Compensation 9,514 10,126 10,384 12,061 9,572 10,508 9,091 9,307

Adjusted EBITDA 64,942$ 65,205$ 64,298$ 68,828$ 68,022$ 58,505$ 55,565$ 57,907$ Rolling 4 Quarter Adj EBITDA 251,572$ 257,082$ 259,812$ 263,274$ 266,354$ 259,654$ 250,921$ 240,000$

Free Cash FlowQ1-06 Q2-06 Q3-06A Q4-06A Q1-07A Q2-07A Q3-07E Q4-07E

Cash Flow from Operations 60,745 48,939 44,226 45,131 59,647 28,756 43,202 20,396 (1)

Less:Capital Expenditures (2,545) (5,580) (16,196) (7,088) (5,125) (6,526) (5,150) (5,200) Dividends (1,294) (1,302) (1,280) (1,224) (1,136) (1,148) (1,115) (1,100)

Subtotal (3,839)$ (6,881)$ (17,476)$ (8,312)$ (6,261)$ (7,675)$ (6,265)$ (6,301)$ Free Cash Flow 56,905$ 42,058$ 26,750$ 36,819$ 53,387$ 21,081$ 36,938$ 14,095$

Rolling 4 Quarter Free Cash Flow 173,807$ 184,487$ 185,964$ 162,532$ 159,014$ 138,037$ 148,224$ 125,500$

1. Includes $24M cash tax payment associated with potential CoCo put as discussed in post Q2-07 earnings call.


Pro Forma Operating Margin Analysis

27.5%29.0%27.4%Pro Forma Operating Margin

$112.4$239.7$218.9Pro Forma Operating Income

31.387.025.9Sub-Total Adjustments

42.1

19.7

25.2

152.7

825.4

2006A

20.10.0Stock Based Compensation (FASB 123R)

(1.5)–Restructuring and Merger Related

12.725.9Amortization of Intangible Assets

Adjustments:

81.1193.0Operating Income

$409.2$798.7Revenue

2007 YTD2005A$ in millions

– Margins remain strong, despite decreased revenue


Balance Sheet : A Position of StrengthCurrently, ~$300 million in cash

YE 2006 days sales outstanding of 74 days (focus to reduce to 65 days)

$470 million of debt outstanding

$300 million multi-year revolving credit facility (excluding $200 million “upsize feature)

YE 2006, Shareholders’Equity of $770 million

Balance Sheet 2004 2005 2006Mar2007

Assets Current Assets

Cash and cash equiv. 134,070$ 82,881$ 75,154$ 122,447$ Investments 165,235 146,088 152,141 150,449

Net. Accounts receivable 140,845 156,375 165,806 178,703 Prepaid exp. & other CA 15,029 20,249 17,998 22,376 Deferred income taxes 10,922 7,088 2,211 -

Total Current Assets 466,101$ 412,681$ 413,310$ 473,975$

Long-term investments 63,446 56,926 38,318 28,665 Other Investments 1,561 2,161 2,161 2,374

Property and equipmentPP&E gross 152,944 152,743 181,346 185,867 Accum. Depreciation (99,656) (104,307) (124,735) (131,978)

Net PP&E 53,288 48,436 56,611 53,889 Goodwill, net 689,345 688,683 695,162 693,596 Intangibles, Net 135,797 114,623 90,900 72,745 Deferred income taxes 21,028 19,902 20,010 18,111 Other assets 14,213 7,650 4,733 3,937

Total Assets 1,444,779$ 1,351,062$ 1,321,205$ 1,347,292$

Liabilities and Equity Current Liabilities Accounts payable 13,055$ 11,579$ 12,162$ 15,138$ Accr'd Comp. & Emp Benefits 33,670 31,373 34,936 39,608 Other accrued liabilities 32,541 39,368 41,647 39,583 Deferred revenue 41,050 55,837 48,284 44,602

Revolver - - - 70,000 Senior Convertible Notes - - 400,000 400,000

Total Current Liabilities 120,316$ 138,157$ 537,029$ 608,931$

Term Loan - - - Senior Convertible Notes 400,000 400,000 - - Other liabilities 7,992 7,810 14,148 13,356

Total Liabilities 528,308$ 545,967$ 551,177$ 622,287$

Stockholders' Equity 916,471 805,094 770,028 725,005

Total Liabilities and Stockholders' Equity 1,444,779 1,351,062 1,321,205 1,347,292


Capital ManagementAs of the end of 2Q 07, the Company has over $300 million remaining in our November 2006 $500 million Share Repurchase authorization

FY 04 activity impacted by different financial leadership and acquisition activity

FY 06 activity was impacted by acquisition activity in the first and second quarter

Expect to continue to purchase at the same average pace as FY 05 and FY 06 throughout FY 07

Small dividend paid every quarter

$101

$328

$256

$0

$50

$100

$150

$200

$250

$300

$350

Dol

lars

Spe

nt (M

illio

ns)

FY 04 FY 05 FY 06

Share Repurchase Program

Dollars

3.0

9.2

7.0

0

2

4

6

8

10

Shar

es in

Mill

ions

FY 04 FY 05 FY 06

Shares Repurchased

Shares


Priorities for Driving Stakeholder Value

Balance Growth & Returns

to Deliver Stakeholder Value

Consistent Revenue Growth

Core Revenue: 7-10%

Product Improvements

International Markets

Analytics & Decision Mgmt.

New Products and Services

Acquisition strategy

Must be EPS Accretive

Growth Agenda

7-10% Revenue Growth with 10-12% EPS Growth

Focus on Capital Efficiency

Risk Adjusted Rate of Return

Free Cash Flow to Equity

Revenue Growth:

High-Value Areas

Technology Architecture

Acquisition Activity

Share Repurchases

Capital Allocation

Improve Free Cash Flow

Strong Capital Structure

$300mm Revolver

$200mm Upsize feature

Over $250mm in Cash

Share Repurchase Program

New $500mm Program

Bought 7mm shares in F’06

Financial Policies

ROIC


Key Initiatives Designed to Build Client Trust

Re-Focus Strategy around Products

Strengthen Sales Organization

Improve Product Management & Development

Re-vamp Services efforts around our Products

EDM: Deliver Product Roadmaps & Architecture

Revenue

Grow

th


Key Message

Strong Board Support

Experienced Management Team

Excellent Market Position and Brand Awareness

Strong Revenue

Significant Free Cash Flow

Strong Balance Sheet

Higher Customer Satisfaction

Revenue Growth


Frequently Asked Questions

When will organic growth return to the industry level mentioned earlier?

How should we think about the impact of VantageScore?

How should we think about Scoring revenue? Recurring Revenue?

What should we expect from margins going forward?

How should we think about your capital allocation discipline?

How should we think about the Company’s Tax Rate in the future?

How should we think about the refinance of the convertible?

Would the Company consider any and all strategic alternatives ?

How should we think about sale of additional business units, like Mortgage?


Appendix


Free Cash Flow$ in millions Actual Actual Actual Actual Actual Actual Actual Estimate

2001 2002 2003 2004 2005 2006 2007 YTD 2007

GAAP Cash Flow from Operations (as reported ) 70.5 103.1 174.6 199.1 214.1 199.0 88.4 152.0

Adjustments:Less: Capital Expenditures 24.0 23.4 18.3 23.2 16.4 31.4 11.6 22.0 Less: Dividends 1.3 2.6 3.9 4.7 5.3 5.1 2.3 4.5 Sub-Total of Adjustments 25.3 26.0 22.2 27.9 21.7 36.5 13.9 26.5

Free Cash Flow 45.2 77.1 152.4 171.2 192.4 162.5 74.5 125.5

Reconciliation of Non-GAAP Financial Data

EBITDA$ in millions Actual Actual Actual Actual Actual Actual Actual Estimate

2001 2002 2003 2004 2005 2006 YTD 2007 2007

GAAP Operating Income (as reported ) 72.1 47.1 174.2 179.9 193.0 152.7 81.1 151.0

Adjustments:Depreciation & Amortization (as reported ) 25.1 31.0 44.9 46.9 51.5 48.8 26.9 52.0 Restructuring, Acquisition and Divestiture related items - 47.4 2.5 1.2 - 19.7 (1.5) (1.5) Stock Based Compensation (FASB 123R) (as reported ) - - - - - 42.1 20.1 38.5 Sub-Total of Adjustments 25.1 78.4 47.4 48.1 51.5 110.6 45.5 89.0

EBITDA 97.2 125.5 221.6 228.0 244.5 263.3 126.6 240.0


Reconciliation of Non-GAAP Financial Data

($ in Thousands)

Adjusted EBITDA Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06A Q4-06A Q1-07A Q2-07A Q3-07E

Operating Income (EBIT) (as reported) 46,629$ 48,846$ 53,110$ 44,043$ 40,719$ 36,332$ 31,630$ 44,901$ 36,220$ 33,059$

Plus:Restructuring, Acquisition and Divestiture related items (674) 2,183 5,290 12,862 (1,541) Depreciation & Amortization 13,067 12,722 12,256 12,059 12,178 12,292 12,276 13,549 13,318 13,415 123R Stock Based Compensation 9,514 10,126 10,384 12,061 9,572 10,508 9,091

Adjusted EBITDA 59,696$ 61,568$ 65,366$ 64,942$ 65,205$ 64,298$ 68,828$ 68,022$ 58,505$ 55,565$ Rolling 4 Quarter Adj EBITDA 251,572$ 257,082$ 259,812$ 263,274$ 266,354$ 259,654$ 250,921$

Free Cash FlowQ2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06A Q4-06A Q1-07A Q2-07A Q3-07E

Cash Flow from Operations 39,647 30,595 63,930 60,745 48,939 44,226 45,131 59,647 28,756 43,202

Less:Capital Expenditures (6,923) (3,997) (2,405) (2,545) (5,580) (16,196) (7,088) (5,125) (6,526) (5,150) Dividends (1,345) (1,325) (1,275) (1,294) (1,302) (1,280) (1,224) (1,136) (1,148) (1,115)

Subtotal (8,268)$ (5,322)$ (3,680)$ (3,839)$ (6,881)$ (17,476)$ (8,312)$ (6,261)$ (7,675)$ (6,265)$ Free Cash Flow 31,379$ 25,273$ 60,250$ 56,905$ 42,058$ 26,750$ 36,819$ 53,387$ 21,081$ 36,938$

Rolling 4 Quarter Free Cash Flow 173,807$ 184,487$ 185,964$ 162,532$ 159,014$ 138,037$ 148,224$

1. Includes $24M cash tax payment associated with potential CoCo put as discussed in post Q2-07 earnings call.

Fair Isaac Corporation Analyst Day - library.corporate...

Documents

Transcript of Fair Isaac Corporation Analyst Day - library.corporate...