Fair Isaac Corp Q1 FY2026 Earnings Call

Good day and thank you for joining us. Welcome to the First Quarter 2026 FICO Earnings Conference Call. Please note that today's conference is being recorded. I will now turn it over to your first speaker, Dave Singleton. Please proceed.

Good afternoon and thank you for attending FICO's first quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations. I'm joined today by our CEO, Will Lansing; and our CFO, Steve Weber. 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 to facilitate an understanding of the run rate of the business. Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICO website 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 website at fico.com or on the SEC's website at sec.gov. A replay of this webcast will be available through January 28, 2027. We have refreshed our quarterly investor presentation with additional content, which is available in the Investor Relations section of our website. We will refer to this presentation during today's earnings announcement. I will now turn the call over to our CEO, Will Lansing.

Thanks, Dave, and thank you, everyone, for joining us for our first quarter earnings call. We had another strong quarter and are reiterating our fiscal 2026 guidance. We reported Q1 revenues of $512 million, up 16% over last year, as you can see on Page 5 of our investor presentation. For the quarter, we reported $158 million in GAAP net income in the quarter, up 4% and GAAP earnings of $6.61 per share, up 8% from the prior year. We reported $176 million in non-GAAP net income, up 22% and non-GAAP earnings of $7.33 per share, up 27% from the prior year. We delivered free cash flow of $165 million in our first quarter. Over the last 4 quarters, we delivered $718 million in free cash flow, an increase of 7% year-over-year. We continue to return capital to our shareholders through buybacks by repurchasing 95,000 shares in Q1 at an average price of $1,707 per share. At the segment level, on Page 6, you can see our first quarter Scores segment revenues were $305 million. That's up 29% versus the prior year. While B2B Scores were the key driver of growth, we also saw continued growth in B2C Scores. In our Software segment, we delivered $207 million in Q1 revenues. That's up 2% over last year. Results included 37% platform revenue growth and a 13% decline in non-platform revenue. Steve will provide additional revenue details later in the call. We had another strong execution quarter in our Scores business, which we highlight on Page 8. The FICO Mortgage Direct Licensing Program allows resellers the ability to streamline Score access, enhance price transparency and provide cost savings to lenders through reduced breakage fees. This quarter, we announced the addition of 4 new strategic reseller participants to the FICO Mortgage Direct Licensing Program, Xactus, Cotality, Ascend Companies and CIC Credit. Additionally, we signed a DLP agreement to add another participant, MeridianLink, a key platform provider to the mortgage industry. We'll be releasing a press release on that soon. With strong demand from lenders, FICO is actively working alongside participants to support testing. One large reseller is close to completing production integration testing. Another large reseller has completed that testing and is now testing system integration downstream. While we expect to go live soon with multiple partners, we also continue to work on finalizing agreements with additional reseller participants. The direct license program currently supports classic FICO. While the conforming market is anticipating the general availability of FICO Score 10T, we expect FICO Score 10T to be available for Direct Licensing in both conforming and nonconforming in the first half of calendar 2026. A high-level overview of the Direct License Program and FICO Score 10T can be found on Page 9 and 10 of our presentation. FICO Score 10T is a meaningful step forward in credit risk assessment. FICO Score 10T offers significant improvements in predictive accuracy, combined with a focus on fairness and model stability, offering tremendous benefits for lenders, investors, and borrowers compared to other alternatives on the market. In the last year, we have nearly doubled the number of lenders in our FICO Score 10T Adopter Program. These lenders account for more than $377 billion in annual originations and more than $1.6 trillion in eligible servicing volume, most making multiyear commitments to use the FICO Score for mortgage decisions in both the conforming and nonconforming markets. This quarter, we also announced a strategic partnership with Plaid to deliver the next generation of UltraFICO Score. This score combines the proven reliability of the FICO Score with real-time cash flow data from Plaid to provide lenders with a single enhanced credit score that delivers superior consumer risk assessment without operational complexity. The enhanced UltraFICO Score solution is credit bureau agnostic and will leverage cash flow data, historical and current information about the money flowing into and out of a consumer's transaction accounts, that's checking, savings, money market, accessed through Plaid's open finance network of consumer permission data. Plaid powers nearly 1 million secure financial connections each day and has helped more than half of Americans with a bank account securely move more of their financial life online. We see growing demand for this score, which will launch for distribution with Plaid in the first half of calendar 2026. Within the quarter, we continued to expand adoption of FICO Score Mortgage Simulator by partnering with SharperLending Solutions, Credit Interlink and Ascend Partners. Including Xactus and MeridianLink announced in fiscal 2025, 5 resellers have adopted the Simulator, and we're expecting another large reseller to sign shortly. The FICO Score mortgage simulator is the only simulation tool available to mortgage professionals that use the FICO Score algorithm. It enables mortgage professionals to run credit event scenarios by applying mock changes in an applicant's credit report data to simulate potential changes to the applicant's FICO Score. The FICO Score Mortgage Simulator supports simulations on all 3 credit bureaus and models potential changes to several FICO Score versions used in mortgage lending. Mortgage professionals can leverage valuable insight from the simulator to help drive smarter decisions that can present more loan options and favorable interest rates for customers. In our software business, we're thrilled to be recognized by Gartner as a leader in the January 2026 Gartner Magic Quadrant for Decision Intelligence Platforms. We are positioned the highest for our ability to execute. We believe this recognition is a landmark moment for FICO. Further, we feel it reflects our commitments to empowering customers and delivering lasting impact worldwide. As a market leader in Decision Intelligence, FICO enables businesses to make real-time decisions at scale. The core of our strategy is to empower customers with always-on, real-time customer insights that deliver connected decisions and continuous learning throughout the entire customer life cycle. Our innovations will be on display at FICO World 2026, which is going to happen May 19 through 22 in Orlando, Florida. FICO World brings together customers and partners from around the world, allowing participants to collaborate on how FICO platform makes real-time decisions at scale to optimize interactions with consumers. At FICO, we're obsessed with powering consumer connections and delivering always-on personalized experiences to drive outsized business outcomes. At FICO World '26, you can network with the world's leading experts to learn how you can power your organization, apply best practices in advanced platform decisioning and drive financial inclusion. I'm going to now hand it over to Steve to provide further financial details.

Thanks, and good afternoon, everyone. As Will mentioned, our Scores segment revenues for the quarter were $305 million, up 29% from the prior year. As shown on Page 13 of our presentation, B2B revenues were up 36%, primarily attributable to higher mortgage origination Scores unit price and an increase of volume in mortgage originations. Our B2C revenues were up 5% versus the prior year, driven mainly by our indirect channel partners. First quarter mortgage originations revenues were up 60% versus the prior year. Mortgage originations revenues accounted for 51% of B2B revenue and 42% of total Scores revenue. Auto originations revenues were up 21%, while credit card, personal loan and other originations revenues were up 10% versus the prior year. For your reference, Page 14 of our presentation provides 5-quarter trending on all of our Scores metrics. Turning to our software segment. Our software ACV bookings for the quarter were a record of $38 million, as shown on Page 15 of the presentation. This quarter included an above-average sized international multi-use case platform deal. On a trailing 12-month basis, ACV bookings reached $119 million this quarter, an increase of 36% from the same period last year. Our strong bookings in recent quarters gives us increased confidence that our ARR growth will continue to accelerate in FY '26. Our total software ARR, as shown on Page 16, was $766 million, a 5% increase over the prior year. Platform ARR was $303 million, representing 40% of our total Q1 '26 ARR. Platform ARR grew 33% versus the prior year, while non-platform declined 8% to $463 million this quarter. Platform ARR was driven by both new customer wins as well as expanded use cases and volumes from existing customers. We also migrated our non-platform LiquidCredit solution to the platform. Excluding that LiquidCredit migration, our platform ARR growth was in the high 20% range. The non-platform year-over-year ARR decline was driven primarily by migrations, the end of life of a legacy authentication suite solution and some usage declines. In our CCS business, ARR growth was relatively flat. Our dollar-based net retention rate in the quarter was 103%, platform NRR was 122%, while our non-platform NRR was 91%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases. We now have over 150 customers on FICO platform with more than half leveraging FICO platform for multiple use cases. First quarter software segment revenues detailed on Page 17 were $207 million, up 2% from the prior year. Within the segment, our SaaS revenues grew 12%, driven by FICO Platform. Our on-premises revenues declined 12%, primarily driven by lower point-in-time revenues. Year-over-year, our platform revenues grew 37% and our non-platform revenues declined 13%. As a reminder, our FY '26 revenue guidance reflects an expectation of lower point-in-time revenues throughout FY '26 due to fewer non-platform license renewal opportunities compared to the prior year. From a regional lens, 88% of total company revenues this quarter were derived from our Americas region, which is a combination of our North America and Latin America regions. Our EMEA region generated 8% of revenues and the Asia Pacific region delivered 4%. Operating expenses for the quarter, as shown on Page 18, were $278 million this quarter versus $279 million in the prior quarter, which included $10.9 million in restructuring charges. Excluding restructuring, expenses grew 4% quarter-over-quarter, driven primarily by personnel expenses. We expect operating expense dollars to continue to trend upward modestly throughout the fiscal year. Our non-GAAP operating margin, as shown on Page 19, was 54% for the quarter compared with 50% in the same quarter last year, which means we delivered year-over-year non-GAAP operating margin expansion of 432 basis points. The effective tax rate for the quarter was 17.5%. The operating tax rate was 25.7%. The primary difference between operating tax rate and net effective tax rate for the quarter is $15.7 million in excess tax benefit recognized upon the settlement or exercise of employee stock awards. We continue to expect a full year net effective tax rate of 24% and an operating tax rate of 25%. At the end of the quarter, we had $218 million in cash and marketable investments. Our total debt at quarter end was $3.2 billion with a weighted average interest rate of 5.22%. As of December 31, 2025, 87% of our debt was held in senior notes with no term loans. We had $415 million balance on our revolving line of credit, which is repayable at any time. As Will highlighted, we continue to return capital to our shareholders through buybacks, as shown on Page 20. In Q1, we repurchased 95,000 shares for a total cost of $163 million, and we continue to view share repurchases as an attractive use of cash. And with that, I'll turn it back to Will for his closing comments.

Thanks, Steve. We had a great start to the year and are well positioned to exceed our fiscal year guidance. As in prior years, we will revisit our guidance on our Q2 earnings call. In our software business, we're seeing growth in bookings and ARR, reflecting the value of our innovation in the market. Since FICO World 2025, we achieved general availability of FICO Marketplace and FICO Focused Foundation Model. Our next-generation FICO platform and Enterprise Fraud Solution on FICO platform will soon be generally available. I'm excited to see our innovation realized in the market and delighting our customers. In our Scores business, our innovations are driving increased engagement from market participants. There's continued participant adoption of our FICO Mortgage Direct Licensing Program. Outside of conforming mortgages, there's continued adoption for FICO Score 10T. We see adoption of FICO Score Mortgage Simulator throughout the mortgage industry. The FICO Score continues to be the trusted industry standard used by 90% of top U.S. lenders as the standard measure of consumer credit risk in the U.S. With that, let me turn this over to Dave to open up the Q&A session.

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

Our first question will come from Manav Patnaik from Barclays.

I just wanted to touch on the 10T. Again, that slide you had was really helpful. But right before earnings, you had this press release with LoanPASS and the data sharing and the back testing and stuff that can be done. I was just hoping you could help us appreciate the significance of that and any sense of timing around when 10T officially gets approved and used, et cetera?

Yes. Thanks, Manav. I think we're continuing to see a lot of adoption on the nonconforming side and on the conforming side with the agencies, they're still doing a lot of testing. We don't really have a timeline. They haven't published any kind of a timeline yet. So at this point, we really don't know when it will be generally available.

Okay. Got it. And then maybe just on the performance model adoption. I was just wondering if you could give us any early signs or based on your discussions, how you think that's going? Is that going to be available through the credit bureau channel as well?

The performance model right now is planned for the Direct License Program, and it's going well. We have a lot of interest, and we're busy working towards bringing the direct channel live.

Okay. Fair enough. If I could ask one more question, Steve. It was a good quarter, and you maintained the guidance. I understand that’s common practice, but could you explain why there was no increase to the guidance this time?

Yes. Thanks, Manav. It's a good question. We're quite confident that we will be able to exceed our guidance. I know we mentioned that it was quite conservative last quarter. Currently, we're only three months in, and there are many uncertainties in the macro environment. With the Fed's position today, we don't really have clarity on what adjustments we might make. I believe by next quarter, we will have a much clearer understanding of the overall landscape and what total volumes will look like. That was the rationale behind our approach.

Our next question will come from the line of Jason Haas from Wells Fargo.

I'm curious if you had any sense of what the timeline looks like for the release of the LLPA grids and if you had any insight as to what those might look like?

Well, the short answer to that is no. I don't think anyone knows what the timeline for the LLPA grids looks like. And as we've discussed in the past, there are tremendous challenges with figuring out how to make those work because of the gaming and adverse selection issues. And so no one knows what the timeline really looks like. Certainly, we don't. But I think that we have some significant problems that have to be overcome before they can be released.

Got it. That's very helpful. As a follow-up, we've heard two concerns from lenders regarding FICO Direct and the performance model. One concern related to FICO Direct is that the resellers might incorrectly calculate the Scores and may not take legal responsibility for them. This has created some hesitancy among lenders. I would like to know if you could address this issue. Additionally, regarding the performance model, it seems some lenders are worried about how regulators might perceive passing on the performance fee to the end consumer. I would appreciate your comments on these two concerns that may exist.

Yes. I believe that concern is misguided. The Scores produced by the resellers in the Direct License Program will match the Scores currently produced by the bureaus. The algorithm and technology are the same, and the data used is identical. Therefore, any concerns about miscalculation or discrepancies in Scores are unfounded. I can assure you that we are actively ensuring that our testing instills confidence that this isn't an issue. Additionally, regulators are also reviewing it to gain comfort, and that process is moving forward efficiently.

Our next question will come from the line of Ashish Sabadra from RBC.

It's encouraging to see the progress in the Direct License Program with five resellers signed. You mentioned they are in advanced stages of implementation, and I was wondering if you have any timelines for when they will go live. Additionally, when checking in with brokers, they seem unaware of the performance model. When can we expect that information to be communicated to the mortgage brokers and the broader industry in a clearer way?

I wish I could help you with the timeline, but I can't provide specifics. This is the mortgage market, and we ensure everything is thoroughly prepared before we proceed. We are currently working through all the integration testing and assessing the downstream impacts. You can be assured that when we do go live, it will be seamless. We're making good progress, but I cannot give you a timeline.

No, that's completely understandable.

The performance model is optional, meaning no one is required to use it. Those who prefer not to can simply continue to pay per score per unit as they have in the past. We introduced the performance model to offer additional flexibility for some originators and lenders who find it beneficial. For those who do not like it, it's unclear what the issue is since they have the option to stick with the per unit price.

That's helpful color. Maybe if I can just clarify that your revenue model is agnostic irrespective of whether the customers adopt performance or per score model. Is that right?

It relatively agnostic.

Well, nothing is ever truly agnostic, but it's set up to basically be relatively agnostic.

Next question will come from the line of Surinder Thind from Jefferies.

I'm going to switch over to the software business. Some interesting improvements there to think about. Can you maybe talk about the target of the 500 named accounts globally? You broke that into 350 in financial services and 150 outside. So how does this kind of compare to your prior strategy under the Gen 1 platform? And how aggressively do you think you can reach those customers? And how much of this is a push to specifically go outside and expand beyond the financial institutions at this point? Are we kind of entering this Phase 2 approach with the Gen 2 platform?

I believe we are just starting Phase 2. Historically, we have had a strong presence in financial services and will continue to focus on this area. However, our platform is designed to be versatile and is attractive to other sectors as well. We are seeing significant interest in telecommunications and other industries. Additionally, we are dedicated to our partner program and will be leveraging our intellectual property through systems integrators and other providers. This approach will help us expand into different sectors. Our marketplace and next-generation platform are both set up to facilitate this growth. While we aim to broaden our reach, our direct sales efforts will still primarily target financial services.

Got it. And just quickly, how many named accounts do you have right now in financial services?

No, we don't disclose it.

We don't disclose it. It's an arbitrary number. We can name any number you want. What number would you like it to be?

Sure. It was just an attempt to kind of better understand the new customers you haven't approached yet. It was just ballpark, but that's...

Understood. I think the general answer to that is there are several hundred to go.

Got it. Okay. That's helpful. And then as a follow-up here, if we back out kind of the international multiyear deal here, still solid growth in the ARR, but there's also a divergence. You guys did list the reasons why between platform ARR growth and non-platform. But is the idea that we're beginning to also see customers that ultimately want to move from non-platform to platform. And so we should begin to see a sustained discrepancy in the ARR numbers?

Yes, we are looking to gradually transition everyone to the platform because it's more efficient, and we have acknowledged this for a while. This migration will lead to significant efficiencies. Although we haven't done much of this in the past, we are now at a stage where it's becoming feasible. You can expect to see this increase over time. Additionally, our sales are increasing notably; for instance, although a major deal we secured this quarter had minimal impact on ARR, it will contribute much more significantly next quarter. The rolling trend of ACV bookings has shown remarkable growth, and we foresee even more potential for growth this year, which will drive ARR growth further. We have a lot of land and expansion activities taking place. When examining the platform, the net retention rate is improving as customers identify new use cases and expand into different areas. There are numerous opportunities for growth within that business.

This is a common issue in software businesses. As a provider, we would prefer to have everyone on a unified code base, which would simplify operations. However, we still have a significant amount of legacy code that is quite profitable, and many customers are dedicated to it and wish to keep using it. This puts us in a situation where we have to make informed decisions about which legacy solutions to continue supporting and which ones we'll require migration for. The primary consideration in this process is whether we can offer all the features and functionality of the legacy solution on the new platform before we initiate any end-of-life transition. So far, we have had good success in this area. Our traditional business remains strong and profitable, and as the new platform develops superior features and functionality compared to the legacy options, we anticipate some voluntary migration, necessary migration, and eventually some end-of-life solutions.

Our next question will come from the line of Jeff Meuler from Baird.

Everyone is obviously looking forward to the LLPAs, including the market and investors. Can you share any insights or considerations that might help investors understand how to compare the LLPAs under Vantage to FICO? For instance, what is the average difference between FICO and Vantage for the same consumer? Additionally, while it's a rough assumption to suggest the grids may be comparable, could you remind us what the main obstacles would be if the grids do indeed appear to be at parity?

I think it's unlikely that grids will be equivalent, but let's address the first part of your question regarding the differences in the scores. Our research indicates that the FICO Score and the VantageScore differ by more than 20 points 30% of the time in both directions. This inconsistency means it's challenging to simply replace one score with the other, as you need a completely independent system to run a score that has a different odds-to-score ratio for each 3-digit number. This poses a significant challenge for developing the LLPA grids. Reconciling these differences is complex, and even if separate LLPA grids were established, there would still be issues related to gaming and adverse selection that must be addressed. Additionally, there are potential objections from the securitization market regarding any penalties they might impose on Vantage scored paper compared to FICO scored paper. Overall, there are considerable obstacles to overcome.

Got it. And then just to reconcile something, I thought that you said in your prepared remarks that 10T was going to be available for both the conforming and nonconforming market in the first half of calendar '26. And then in answering one of the earlier questions, I think Steve said you're not sure when 10T is going to be available.

No. So one is a guess and one, it is true that we're not sure. So the FICO 10T data is with the GSEs, is with the FHFA, and we can't give you a timeline, but we're confident it will eventually be released.

Well...

Jeff, those are 2 different comments just to clarify. The nonconforming and conforming is around having FICO 10T available on the Direct Licensing Program. And the comment Steve talked about was having FICO 10T available for the data for the market. Does that make sense, what I said?

Yes.

Our next question comes from the line of Faiza Alwy from Deutsche Bank.

So sorry to beat a dead horse here, but I guess just to clarify, do we need like an LLPA grid for 10T? Or do you think the conforming market could accept the 10T without that grid being out?

That's a great question, whether there'd be adjustment to the grid. 10T is obviously much, much closer to FICO Classic than Vantage is. But my guess is when 10T is made available that there'll be adjustment to the grid for that.

Okay. Just a quick follow-up. Do you expect the 10T and Vantage grids to be released at the same time, and is the acceptability good or will the implementation occur around the same time? Or do you think it might happen in stages?

Certainly, the industry would like them to come out at the same time. There's a lot of efficiency in that. And you probably saw the letter sent to the director at the FHFA this past week from 35 economists and think tanks and industry groups who all believe that it's critical that if and when any change is made away from FICO Classic that it would be done simultaneously to both FICO 10T and Vantage. So the industry has a preference for that. What the FHFA will ultimately do, no one knows. So we'll have to see. To the earlier point about FICO 10T and LLPA grids for FICO 10T, I would point out that FICO 10T is architecturally very similar to FICO Classic. It's built on the same kinds of attributes weighted in a similar way. That's very different from Vantage. Vantage has a different architecture and weights the factors differently. And so in terms of compatibility and closeness, FICO 10T is much, much closer to FICO Classic.

And don't confuse that with predictability where FICO 10T is significantly more predictive than FICO Classic.

Our next question will come from the line of Kyle Peterson from Needham.

I wanted to start out on the platform business. Obviously, a nice quarter there. I know some of that was the migration. I'm guessing some of that was the large deal. But just wanted to see, are we at a point where 30% plus ARR growth on the platform side should be sustainable again? Or I guess like how should we think about that in light of the really nice bounce back this quarter?

We don't make promises, but we've seen 40% growth in our platform for 16 quarters, followed by a couple of quarters just below 20%. Now we are at 30%. It varies, but total ARR is definitely going to increase. So the short answer to your question is that ARR will rise, and I believe current levels are sustainable. It's reasonable to think this way, especially given the strong interest in our new platform.

And the total ARR is going to be driven by the platform because more and more, we're seeing acceleration in platform growth. And frankly, the platform ARR is a bigger portion of the overall number now. So as that grows faster, it helps the overall number as well. So we see continued sustained significant growth in ARR for the rest of the year, which is kind of what we've been talking about for a few quarters, and now you're starting to see it.

That is helpful and good to hear. Switching over to the card business, the origination revenue from credit cards seems to be increasing positively in the last few quarters, which is encouraging. I know it's still early, but have you noticed any disruptions or changes in activity? There has been some discussion about a potential 10% cap on card APR. Are you seeing anything related to that, or is it still too soon to draw conclusions from the usage reports?

We haven't seen anything. We haven't seen any changes in activity. There's been a lot of pre-qual activity in the card space and decent originations. We haven't seen any changes.

Our next question will come from the line of George Tong from Goldman Sachs.

This is Sami on for George. In your discussions with the FHFA and GSEs, do you get the sense that a move from tri-merge and bi-merge is gaining traction? We saw the MBA come out with a single score proposition and also the regulators' focus has recently shifted to the bureaus. So I just wanted to get your views on it.

There's definitely a lot of discussion around this topic lately. I usually don't comment on the bureau position, but I think it's reasonable to say that the bureaus view tri-merge as a more viable option since the bureau files aren't identical. If only two out of three files are selected, some consumers may not receive adequate services, which is a valid concern. However, it's important to recognize that tri-merge can create a monopoly for the bureaus, which is not ideal. This presents a significant challenge when considering a shift to bi-merge. It mirrors the issue we face with lender choice. When given the option to select between two credit scores or pick their favorite two bureaus out of three, there will be opportunities for manipulation and adverse selection. These issues arise, and they come with a cost. Ultimately, Fannie and Freddie, and potentially the U.S. taxpayer, bear that cost. This is the main issue that needs to be addressed, and frankly, I'm unsure what effective solutions exist for it. It's a structural problem.

Okay. And on software, can you talk about where you are in the investment cycle? How far along are you in the platform build-out? And when should we expect the investments to normalize?

We continue to invest in our software business. We're really bullish on it. It's growing really nicely. We do anticipate margin expansion because our new platform is built for scaling profitably. And so the improvements to profitability of our software business will come more from additional volume and additional customers on the new platform versus reduced R&D spending, which, of course, is a lever and someday it will go down.

Our next question will come from the line of Alexander Hess from JPMorgan.

Just maybe to start with the Scores business and volumes there. I saw a call out in the new slide deck, which is, by the way, excellent that you guys saw positive volumes in all 3 of your underwriting lines. Can you maybe speak to sort of volume trends in the industry overall? Are they improving? And then when you sort of turn the lens inward, how much of the improvement that you've seen to the degree that there is any, is really industry-wide versus FICO innovation led?

Yes, that's a good question. I mean I think it's hard to call a trend at this point. There's just a lot of uncertainty in the marketplace, again, which is one of the reasons why we've chosen not to update our guidance today. I don't think anybody really knows what's going to happen in mortgage. I think if rates continue to trend downward, we'll probably see more volumes there. Card, we already talked about there's some potential noise in that market. We'll see how real that is. But we've seen decent volumes, decent volumes throughout. I mean, not like crazy growth, but not declines either. So at least some margin, or some volume increases across the board. So that's encouraging, and we'll see if that continues. In terms of how much of that is driven by our innovation, maybe a little bit. In some cases, there are some different things that we're providing that provide some additional volumes. But most of this is the macro environment and what's happening in the auto lending industry or the mortgage or the card industry.

Pivoting to software, you did see a nice pickup in ACV bookings. Obviously, platform NRR growth is strong. Can you maybe provide a comment on what platform features, functions, use cases are really driving that recent momentum, that would potentially...

Yes, I'm not sure there are any specific use cases to mention. Historically, FICO has been an application software company that focused on solving several critical banking issues related to the life cycle and risk management. When we transitioned to the platform, we opened up a broad range of potential solutions for banks adopting it. It's no longer limited to decision-making around origination, customer management, and fraud. Customers mainly come to the platform for the basics like origination and customer management. However, what's interesting is that particularly in the expansion phase, after they implement the platform, they discover numerous innovative ways to make decisions on things they haven't considered before. It’s accurate to say that they are primarily seeking the same type of risk management solutions they have purchased in the past.

Maybe I can add another point. Regarding the predictive capabilities of FICO 10T, you have released a white paper that demonstrated a significant predictive improvement in key cohorts, specifically related to defaults and delinquencies. Could you shift that discussion towards prepayments? Do you believe that 10T will be more effective at predicting prepayments compared to competing scores?

I believe so. It's important to recognize that credit default rates and prepayments are interconnected. They can be viewed as different aspects of the same issue. For instance, some argue that improving credit default rates are not significant in the conforming market since Fannie and Freddie support it, making credit default rates seem irrelevant. However, experiencing a credit default essentially equates to a prepayment risk for those holding the loans. Therefore, I anticipate that 10T will benefit both areas.

Our next question will come from the line of Ryan Griffin from BMO Capital Markets.

Just had a software question. I think you said 75 of your largest customers are using multiple use cases now. I was just wondering how that has trended over the past year or so and what's driving the land and expand momentum?

I'm not sure I follow the question.

It's about expanding upon initial usage. Many customers initially bought in to see how our solution would work. After installation, finding additional use cases becomes much easier than the first one. They discover more ways to utilize it and are satisfied with its performance. Once it's up and running, they actively seek more applications for the product.

The expansion is progressing at a rate similar to that of new customer acquisition, with both showing comparable growth. The expansion aspect has two components: one involves extending the initial use cases, while the other focuses on introducing new use cases. Our revenue increases in both scenarios.

Our next question will come from the line of Scott Wurtzel from Wolfe Research.

Just wanted to ask one question on the software business. I mean the trends on the bookings side have been pretty positive. But you also had mentioned that the next-gen platform and I think the enterprise fraud solution are, I guess, not yet generally available, but are they helping to drive some of the bookings growth right now, pending the general availability at all?

Not yet, not yet. All the growth you're seeing is predates the enterprise solution.

Our next question will come from the line of Owen Lau from Clear Street.

I do want to go back to President Trump's 10% credit card interest rate cap policy question. If it is implemented, how would it potentially impact FICO? Do you think consumers will go to other forms of loans, which will still need to use FICO score for underwriting? And also, could you please kind of help us size the credit card exposure?

In terms of will consumers look for alternate credit if the card providers provide fewer cards to deeply subprime. Your guess is good as mine, but I would assume so. And I'm not sure...

The second question was the size of our credit card originations revenue, but we don't provide that.

We don't break that out, no. Who knows whether this actually ever happens. But if it does, I think it puts that much more pressure on lenders to understand those subprime credits really, really well. And my guess is that they would be doing extra work involving FICO Scores and credit data to understand what happens on the margin.

And if it went to some other type of personal lending or something else that would not apply, then obviously use FICO Scores in that area.

Does it involve a shift to BNPL? I mean, clearly, we would benefit in all those scenarios.

Got it. That's helpful. And then going back to software, I noticed that, I mean, you mentioned that there was an above-average size multi-use case platform deal in the first quarter. Is it really a one-off deal that we shouldn't expect this to recur, or FICO platform begins to gain recognition and traction, and more similar deals could come more frequently in the future?

It is the latter. There's no question that the deal size is going up, the frequency of it and the amounts.

Yes. And I would just add to that, we think the FY '26 ACV bookings are going to be significantly higher than FY '25. So we've got a lot of deals that we've already signed. We got a lot of deals in the pipeline. There's a lot of momentum here, and we're seeing it even more in bigger deals.

Our next question will come from the line of Craig Huber from Huber Research Partners.

My first question, you made a comment earlier on that you're well positioned to well exceed guidance for fiscal 2026. Can you just talk about that a little bit further? What in your mind were you overly conservative on specifically if you're willing to talk about that? And maybe also touch on how things are going in the reseller market, mortgage market ready for these new 2 pricing plans, reseller in particular. Is that meaningfully ahead or behind or on schedule of what you originally were thinking when you first rolled this out?

So to take those in reverse order, the Direct License Program with the resellers is progressing as we expected. Whether it arrives a bit sooner or a bit later won't significantly impact our revenue. It's all quite close. As mentioned earlier, we're not entirely indifferent, but it's nearly the same. It's not enough to cause a change in our guidance, for instance. Regarding what might prompt a change in our guidance, it likely would be related to volume. The pricing is clearly understood; we publish it and it remains the same for the year. Therefore, it's primarily about volume and the effects of interest rates, which are uncertain. That's why we want to wait another quarter to see how it unfolds.

Yes, I believe there is a significant amount of uncertainty in the marketplace right now. In three months, we will have a clearer understanding of the situation. If we were to make an estimation at this point, it might still seem overly cautious. In three months, we'll have completed another quarter and will have a much better grasp of how things are progressing. We want to avoid the scenario of continuously updating our guidance each quarter. We have annual guidance that we try to adhere to until we can confidently make a more substantial estimation, and that's our approach at this time.

And then my last question, if I could. Can you just talk about pricing for calendar '26 for auto and then credit card and personal loans? I mean, is auto going to be up north of 10% again this year, for example?

We don't disclose the specifics of it. It's a lot more complicated in auto and card because there's different price points depending on different tiers or different types of markets. So it's a lot more complicated than that, and we don't get into the detail of that basically for competitive reasons.

Your next question will come from the line of Kevin McVeigh from UBS.

I think you mentioned in the slide deck that there was some incremental headcount investment in FICO and then increased marketing. Maybe help us understand, was that related to the reseller adoption? Or what drove those investments?

We are investing in go-to-market initiatives across the board, both in software and in Scores. After many years of being conservative, we have increased our headcount in direct sales and partner sales significantly this year. Therefore, I would say that this expansion is happening on both sides, in software as well as Scores.

Great. In terms of the timeline for the resellers going live, do you expect the big five to launch at the same time or one after the other? What is your sense of the timing for that?

My guess is that it will not be a big bang with all of them going live at the same time. It will probably be staggered, but close in time. I mean all of the resellers we've signed with are well underway. And I think for their own benefit, they'll want to be able to offer the Direct License Program as quickly as possible. So I would expect a convergence on timeline there, but I couldn't say that it's all going to happen simultaneously.

And our next question will come from the line of Rayna Kumar from Oppenheimer.

Congrats on the 5 resellers. I just want some more color on that. How much of the total resellers market would you say the 5 represent just to like establish some size on these wins?

Somewhere in the 70%, 80% range.

Got it. Okay. And just as a follow-up, on your last earnings call, you discussed some operational hurdles in having resellers move to the direct model. Can you just talk about how you're addressing some of those hurdles?

We really don't have any operational hurdles. It's moving very smoothly. We're working our way through the details, and we're highly confident that the program will be live in the relatively near future.

I'm not showing any further questions in the queue. I'd like to turn the call back over to Dave for any closing remarks.

No, that's everything. We're good. Great quarter. Thank you.

Thanks all.

Thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.