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Slower demand for credit scores as well as financial companies freezing their spending pressured fourth-quarter earnings of Fair Isaac Corp. Still, the Minneapolis-based credit scoring and analytics company remained profitable, reporting net income of $23.8 million, or 49 cents per share.
Analysts had expected earnings of 36 cents per share, which Fair Isaac beat thanks to a $4.9 million tax benefit and a $1.5 million after-tax restructuring cost that added a combined 13 cents per share.
CEO Mark Greene, who was hired to increase revenue at the stagnating company, said the restructuring plan announced in March and a focus on growing business overseas had positioned the company for revenue growth during fiscal 2009, which started Oct. 1. But he said the global financial crisis had clouded the outlook.
"We will more than likely see some erosion of revenue for the next several quarters followed by a return to growth as the financial services industry recovers," Greene said during a Wednesday conference call with investors and analysts.
To cope, Fair Isaac continues to monitor spending. Greene said he has frozen new hiring as well as salary increases, is curbing unnecessary travel and will continue to cut non-revenue-producing jobs.
Revenue dropped 19 percent at the credit-scoring division for the quarter that ended Sept. 30, as banks pulled fewer credit scores on new customers. However, Greene said the growing practice of banks pulling monthly credit scores to monitor their customers' financial health could increase demand for scores in the future. Revenue was off for Fair Isaac's software and decision management tools unit as financial institutions curbed spending to conserve cash.
The tough economy helped one business segment -- collections grew 11 percent during Fair Isaac's 2008 fiscal year. Its research team also has been developing several products fine-tuned to the troubles in the mortgage, home equity and credit markets, Greene said.
Fair Isaac declined to predict its fiscal 2009 outlook, blaming market volatility and an inability to gauge customers' future spending. It plans to deliver guidance in January. However, Greene did say that bank consolidation likely will reduce revenue from financial services, leaving its retail, insurance, and health care areas to pick up the slack.
Fair Isaac shares closed down 81 cents, or 5.4 percent, at $14.20 before earnings were announced late Wednesday afternoon. Shares bounced back 36 cents, or 2.5 percent, to $14.56 in after-hours trading.
4th quarter FY2008, 9/30
2008 2007 % chg. Revenue $178.2 $198.7 -10.3 Cont. ops. 23.8 32.5 -26.8 Disc. ops. -- -4.3 -- Income 23.8 28.2 -15.7 Earn/share 0.49 0.52 -5.812 months
Revenue $744.8 $784.2 -5.0 Cont. ops. 81.2 111.9 -27.4 Disc. ops. 2.8 -7.2 -- Income 84.0 104.7 -19.8 Earn/share 1.70 1.82 -6.6Figures in millions except earnings per share.
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