Good afternoon. My name is Tanya, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fair Isaac Corporation Quarterly Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Steve Weber, you may begin your conference.

Thank you, Tanya. Good afternoon and thank you for joining FICO's Second Quarter Earnings Call. I'm Steve Weber, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing; and our CFO, Mike Pung. 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 to the prior quarter in order to facilitate an understanding of the run rate of our business. Certain statements made in this presentation may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many uncertainties that could cause actual results to differ materially. Information concerning these uncertainties is contained in the company's filings with the SEC, in particular, in the Risk Factors and Forward-looking Statements portions of such filings. Copies are available from the SEC, from the FICO Web site 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 Regulation G schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G schedule are available on the Investor Relations page of the company's Web site at fico.com or on the SEC's Web site at sec.gov. A replay of this webcast will be available through April 24, 2015. Now I'll turn the call over to Will Lansing.

Thanks Steve. Today we announced the results for our second quarter of fiscal 2014. I will briefly recap those results, talk about the progress we are making with the FICO analytics cloud and discuss some important recent announcements we have made. In our second quarter, we reported revenues of $185 million, an increase of 3% over the same period last year. On a GAAP basis, we delivered $21 million of net income and earnings of $0.59 per share for the quarter versus $18 million and $0.51 per share from the same period last year. We delivered $29 million of non-GAAP net income and non-GAAP EPS of $0.81 per share increases of 13% and 17% respectively from the same period last year. We had a very good bookings quarter delivering $109 million of new deals, the highest single quarter's since 2011. Mike will provide more detail on the numbers. But first, I will discuss some of the things we have been working on. We continue to make progress with the FICO analytics cloud. We signed several deals this quarter that will begin contributing recurring revenues in the next few quarters. These deals involve customers that required SaaS delivery, opportunities that we previously could not have competed for. Though, we are in early stage of rollout, we have already signed about $10 million of future SaaS revenue. In March, we announced the acquisition of InfoCentricity, a private software-as-a-service based predictive analytics company. With this acquisition, we are able to put the most sophisticated cloud-based analytics modeling tools into the hands of the entire spectrum of users, from first time modelers and seasoned business analysts up through advanced data scientists and the most demanding analytics professionals. FICO now has the industries broadest offering for predictive analytics modeling available in the cloud and on…

Thank you, Will, and good afternoon, everyone. Today I will emphasize three points in my prepared comments. First our revenue this quarter was $185 million, a 3% increase from last year. Our scores business grew 9%, our tools business grew 22% and our applications business was down about 1% from the prior year. Second, we delivered $21 million of GAAP net income and $29 million of non-GAAP net income. Our free cash flow was $44 million for the quarter. Finally, we repurchased about $40 million of stock this quarter which exhausted our previous $150 million authorization and announced today Board approval for a new $150 million authorization. I will break the revenues down into three reporting segments. Starting with applications, revenues were $116 million down 1% versus the same period last year and up 3% versus last quarter. We delivered growth in collections and recovery up 22% from the same period last year, in mobility up 20% and in originations up 12%. These gains were offset by fraud banking revenues, which were down from the same period last year due to lower license sales. While total applications revenue were down slightly versus last year, we did have much higher bookings in that segment. The $79 million dollars of bookings this quarter is up 18% over last year and is the largest quarter for applications bookings we have done in the last 10 quarters. In the tool segment, revenues were $22 million up 22% versus the prior year. The growth this quarter is driven by models and optimization tools. We also had a good bookings quarter and tools up from the prior quarter and up 123% from the same quarter last year. And finally, our score segment continues to perform well. Revenues were $48 million up 9% from the same period…

Thanks Mike. This concludes our prepared remarks and we're ready now to take any questions. Tanya, please open the lines.

(Operator Instructions) Our first question comes from the line of Manav Patnaik from Barclays. Your line is open.

Hey, good evening gentlemen. I have a quick question in terms of looking at the M&A strategy and how that's evolved, Will, you have obviously, worked at this now for two years you have made a lot of good sort of tuck-in technology type deals. I was just wondering what the appetite is to do something a little more significant a game changing and just sort of make a bigger impact in terms of diversifying the company and how you think of it with respect to that.

Yes. Good question. I would say that our M&A strategy has not changed dramatically. I think you will see us continue to do technology tuck-ins as appropriate where we find pockets of talent in technology and IP that are really synergistic of what we are doing especially around decision management platform and pipeline over the cloud. But, I wouldn't confine it just to those areas. And at the same time, we are always on the look out for bigger, more game changing acquisitions. That said, we remain as conservative as we have always been in terms of evaluating those kinds of acquisitions. And that's not to say we wouldn't do one but it have to meet a pretty high hurdle. We have to be very confident that it's going to advance our business in a pretty material way. And certainly for us to take any dilution, we have to have very high expectations for the return that we will get. As always we evaluate everything against the alternative of buying back own shares and because we are so confident in the brightness of our future that's a high hurdle too. So we absolutely look at bigger deals all the time. I mean its very much within our scope and it remains to be seem whether we are going to build one or not, but we are always looking.

Okay. Fair enough. And just on the scores business maybe can we get a quick update on sort of what the mix there in terms of looking at the different end markets like credit cards, autos and so forth. And are there any early signs that you guys maybe picking up with the economy improving that could be sort of an early read on – if that can start gaining some real good momentum there?

Sure Manav. So this is Mike. We had a very – once again a pretty solid quarter across our scores business on both the consumer and on the B2B side. As it relates to the mix of our business, any comparison to last year, we saw our marketing or acquisitions scores grow pretty dramatically. The volume grew from last year roughly 20% volume. Much of that volume was coming from the card side of the business. The bank card as opposed to last year, our business was more driven from originations in new mortgages. So the increase on the acquisition side on cards were about to offset by the decline in the mortgage refinancing and on the origination side – we saw – we look at our business. So one great solid quarter. And time will tell us if those acquisition scores ultimately originate and open up new accounts.

Okay. Fair enough. All right. That's all I have. Thank you.

Your next question comes from the line of Bill Warmington from Wells Fargo. Your line is open.

Good afternoon, everyone.

Hey, Bill.

I have a couple of questions for you. The first if you could talk a little bit about what's behind the strength in application in terms of what's changed, why now you are seeing this sudden surge on the application side?

Yes. So over the past three, four quarters now we have had a very long cycle for getting deals completed mainly in the U.S. banks and then the U.S. markets. Some of the deals that have been held up in the sales cycle since last year are starting to sign. And we are starting to see of that in the form of bookings and some of that as part of the revenue that we reported this quarter. But, that cycle is kind of continuing to push. So we have seen a little bit of that backlog come through. We're also seeing some very nice strong services deals for companies that are upgrading to our current version of a product. And so generally, when a company upgrades to a current version, they get that version through the maintenance they have been paying and they hire us to come in and help install, and implement. And so we have a fairly healthy backlog of implementation service that's embedded in part of these deals.

Okay. And then I wanted to ask about how quickly you plan to implement this buy back?

How quickly that we plan to implement it?

Implement the buyback, just something where you just going to basically match it to cash flow quarter-by-quarter, or is it something you will take on from additional leverage to accelerate?

We generally are sitting with the pretty decent position of cash on the balance sheet and we also obviously have access to take on a little leverage on the line of credit. We took a little bit last quarter. The buyback program itself, we are just – we are quite regular buyers of the program and so the rate and pace that we have been buying the past is all depending upon alternative cash needs. So I wouldn't say there is a time we are going to turn it on and turn it off. It's just an ongoing program for us and we just assess it with the cash flow in the near term and other alternative uses for.

Okay. And then I had a question for about FICO 9, and why switch to FICO 9 now, what drives the adoption?

Well, we are constantly looking at improving on the technology that we have out in the marketplace. And just as FICO 8 replaced the scores that preceded that, we have the next generation of scores coming. This has been in the works actually for several years and so why now, I mean why not now. It is a regular thing for us to move generationally from one score to the next and we do it with tremendous caution because FICO 8 obviously has very wide spread adoption that we want to do in a way that's not disruptive to the marketplace. But there is – the beauty of the way we are going at it is – that it is both backwards compatible for people who have FICO 8 in place. And there are opportunities for more kinds of customization for our bank customers who want to do other things that they weren't able to do before.

Okay. And then a final question for you on the score side of the business in terms of the demand that you are seeing for scores for pre-screening for banks and credit card use. How are you finding the banks appetite at this point, as it started, are you starting to see a lift there, it sounded with a pick up in volume that you referenced, answer that would be yes, but I wanted to just ask that.

The answer to that is yes.

Okay. Well, thank you very much.

Thanks Bill. Thanks.

(Operator Instructions) Your next one comes from Brett Huff from Stephens, Inc. Your line is open.

Good afternoon. Thanks for taking my questions.

Hi, Brett.

One follow-up on the applications question that was asked earlier, did you – I didn't – I'm not sure if I heard it in the prepared comments that if you broke down which of the applications are providing some of that growth, which of the deals or what variety of deals are coming through. And I guess, my question is both which product and what's the delivery mechanism, is it typically license or some other deals I know you have been developing some SaaS versions of those products. Can you give us – just characterize that for us?

Let me walk you through that from my portion of the script here. This is Mike. So the growth on the application side came through first collections and recovery which is our Debt Manager 9 product. And all the versions of Debt Manager that are out in the marketplace, those are typically licensed revenues, so the term license is signed and we claim it up front. We were up 22% from the prior year. The second area of strength on the application side was in mobility, which is what we gained when we acquired Adeptra, little over a year-and-a-half ago. Mobility is a ratable model. And its all subscription based. So first shows up in the booking and then once live it shows up in an ongoing revenue stream that we call transactional. That was up 20% over the prior year. And finally, origination, our Originations Manager product, which was up 12% over the prior year. The originations product is also generally more of a licensed based term, licensed based product. Though the SaaS revenues that Will was describing which are going to yield future revenue to us are going to come in a ratable model. Did that help?

That's helpful. Yes. That's great. Thank you.

Okay.

And then just kind of a follow up question to the SaaS question, I know you developed various SaaS versions of some of the products you have developed – some of them developed, some of them. Can you give us just a status update of where are we are on that, what any more in or how do you want to characterize it to us that's a big part of the story for FICO right now. I want to just get an update on that.

I don't know exactly what anything you call it, the products are there. They have been made available as services and we are just starting to sell them now. The market is increasingly interested in it maybe faster than we even expect it. And we have done our first few SaaS deals where we literally took the functionality that we had in the non-premise application like Originations Manager 4 and have it in the marketplace now and deals done in – on a SaaS basis with Origination Manager 4.5. That would be an example. But, we have that across the board.

It's helpful. And then, last question for me is, the scores business any commentary on pricing or competition or any update on that front?

We have to earn our wins everyday in that business. We don't take anything for granted. The appetite of our customer base for Open Access seems to be very large. And although that's not a lot of revenue that comes from Open Access, it really does help us with cementing the franchise. And we hope that the strong position in Open Access leads to additional revenue in programs like our education program – the credit education program.

Okay. That's what I needed. Appreciate your time. Thank you.

Your next question comes from the line of Matthew Galinko from Sidoti.

Hey, thanks for taking my question.

Hi, Matt.

So, is there any revenue from the customer credit education program built into your fiscal 2014 guidance?

No. There is not.

Okay. Thanks. And then, any color you can provide around just the length in the bookings term?

The length, is what you said?

Yes. The length in bookings term?

Oh, sorry. I didn't hear you. Yes. Normally our bookings term is usually 23 or 24 months quarter-after-quarter, little bit longer 28 months this quarter. I won't necessarily read into any about it other than we have a couple of our large deals we did 9 deals over $3 million. A couple of them have 36 and 48 month terms to it. One in particular has a four term but that was a larger deal. And so that skews a little bit of the pie.

Got it. Thanks.

(Operator Instructions) There are no further questions at this time. I turn the call back over to the presenters.

Thank you, Tanya. This concludes our call for the quarter. Thank you all for joining.