- Record Revenue Growth - Q3 revenues reached $536 million, up 20% year-over-year.
- Strong Profitability - GAAP net income rose 44% to $182 million, with GAAP EPS up 47% to $7.40.
- Shareholder Returns - The company repurchased a record $0.5 billion in shares, the largest single-quarter buyback in FICO's history.
- Scores Segment Growth - Scores revenue grew 34% to $324 million, driven by B2B Scores and FICO Score10 T adoption.
- Raised Guidance - Full-year revenue guidance increased to $1.98 billion, with non-GAAP EPS expected at $29.15.
Segment Performance
In the Scores segment, Q3 revenues were $324 million, up 34% versus the prior year, driven by growth in B2B Scores, with B2C Scores also showing encouraging growth. FICO Score10 T, the most predictive broad-based credit scoring model in the U.S., has secured adoption from institutions representing over $313 billion in annualized mortgage originations and approximately $1.52 trillion in eligible mortgage portfolios under servicing. The Software segment delivered $212 million in Q3 revenue, up 3% from the prior year, driven mainly by growth in platform SaaS.
Guidance and Innovation Pipeline
The company raised its full-year guidance, with revenue expected to be $1.98 billion, and non-GAAP earnings per share of $29.15. FICO also announced the launch of FICO Score10 BNPL and FICO Score10 T BNPL, the first credit scores to incorporate Buy Now, Pay Later data. The company has a strong innovation pipeline, with the next-generation FICO Platform, enterprise fraud solutions, and FICO Marketplace to be released in the second half of 2025.
Valuation and Capital Allocation
With a P/E Ratio of 53.01 and an EV/EBITDA of 40.02, FICO's valuation multiples are high, indicating that the stock price has already factored in significant growth expectations. The company's capital allocation strategy includes stepping up the pace of buyback, given the dislocated stock price and strong cash flow. The company anticipates continuing to buy back shares at an accelerated pace. According to management, "We're a buyer at current stock levels, having repurchased shares aggressively in the last quarter and 13 years."
Competitive Landscape and Regulatory Environment
FICO does not see significant traction or share loss from VantageScore competition, with lenders taking years to switch to new scoring models, and FICO's model considered the industry standard. The company is engaged with regulators and industry participants to discuss the implications of the FHFA's announcement. Despite a strong quarterly beat, the guidance for the full year remains unchanged due to one-time expenses and charges expected in the fourth quarter.