Detailed Narrative
FICO Score 10T and Direct Licensing Program Progress
FICO continues to advance its FICO Score 10T and Direct Licensing Program (DLP) initiatives. The company announced the addition of four new strategic reseller participants (Xactus, Cotality, Ascend Companies, CIC Credit) to the DLP, with MeridianLink also signing an agreement. While the conforming market awaits general availability, FICO Score 10T is expected to be available for Direct Licensing in both conforming and nonconforming markets in the first half of calendar 2026. Management noted significant interest and ongoing integration testing, with one large reseller nearing completion of production integration.
Software Platform Momentum and Gartner Recognition
The Software segment demonstrated strong platform momentum, with platform revenue growing 37% year-over-year and platform ARR increasing 33% year-over-year. The company was recognized as a leader in the January 2026 Gartner Magic Quadrant for Decision Intelligence Platforms, positioned highest for its ability to execute. This recognition underscores FICO's strategy to empower customers with real-time, connected decisions and continuous learning across the customer lifecycle. The next-generation FICO platform and Enterprise Fraud Solution are also nearing general availability.
Strategic Partnerships and Product Innovation
FICO announced a strategic partnership with Plaid to deliver the next generation of UltraFICO Score, combining FICO's reliability with Plaid's real-time cash flow data for enhanced credit risk assessment. This solution, leveraging consumer-permissioned data, is expected to launch for distribution in the first half of calendar 2026. Additionally, the FICO Score Mortgage Simulator expanded adoption with three new resellers, enabling mortgage professionals to simulate credit event scenarios and optimize loan options.
Scores Segment Performance Drivers
The Scores segment delivered robust performance, with revenues up 29% year-over-year to $305 million. This growth was primarily driven by a 36% increase in B2B revenues, attributed to higher mortgage origination Scores unit price and increased volume. Mortgage originations revenues alone surged 60% year-over-year, accounting for 42% of total Scores revenue. Auto originations and credit card/personal loan originations also saw growth of 21% and 10% year-over-year, respectively.
Software Segment Dynamics and Migration Strategy
Software segment revenues grew 2% year-over-year to $207 million. While platform revenues showed strong growth, non-platform revenues declined 13% year-over-year, and on-premises revenues decreased 12%. The company is actively migrating non-platform solutions to the platform for greater efficiency, with one LiquidCredit solution already migrated. Management expects this migration to continue, leading to sustained discrepancies in platform vs. non-platform ARR growth as the platform becomes a larger portion of the total.
Capital Allocation and Share Repurchases
FICO continued its capital return strategy, repurchasing 95,000 shares for a total cost of $163 million at an average price of $1,707 per share during the quarter. The company views share repurchases as an attractive use of cash, having delivered $718 million in free cash flow over the last four quarters, an increase of 7% year-over-year. The balance sheet remains strong with $218 million in cash and marketable investments and total debt of $3.2 billion, 87% of which is in senior notes.