Earnings Call Transcript - FICO Q4 2025

Operator, Operator

Good day, and thank you for being here. Welcome to the Fourth Quarter 2025 FICO Earnings Conference Call. Please note that today’s conference is being recorded. I would now like to turn the call over to your speaker today, Dave Singleton. Please proceed.

Dave Singleton, Vice President of Investor Relations

Good afternoon, and thank you for attending FICO's fourth quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and 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 with 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. This includes an FY '26 guidance reconciliation of GAAP to non-GAAP earnings, which are adjusted for items such as stock-based compensation and excess tax benefit. This reconciliation as part of the earnings release included in Exhibit 99.1 to our 8-K, which we filed with the SEC under Item 2.02 called results of operations and financials. 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 November 5, 2026. I will now turn the call over to our CEO, Will Lansing.

William Lansing, CEO

Thanks, Dave, and thank you, everyone, for joining us for our fourth quarter earnings call. In the Investor Relations section of our website, we've posted some financial highlight slides that we'll be referring to during this earnings announcement. Today, I'll talk about this quarter's results and our guidance for fiscal '26. We had another fantastic year. We exceeded fiscal '25 guidance on all metrics and delivered record annual free cash flow. As shown on Page 2 of the fourth quarter financial highlights, we reported Q4 revenues of $516 million, up 14% over last year. For the full fiscal year, we delivered $1.991 billion, up 16% versus the prior year. In our Software segment, we delivered $204 million in Q4 revenues. While performance at the segment level was flat year-over-year, results included 17% platform revenue growth driven by FICO platform and 7% decline in non-platform revenue due to the end of life of legacy products and timing of recurring revenue within the quarter. For the fiscal year, we delivered $822 million in revenue, up 3% from last year. We have strong momentum in our software business, driven by customer adoption of FICO platform. At FICO World, we announced upcoming general availability of next-generation FICO platform, enterprise fraud solution natively on FICO platform and the groundbreaking FICO marketplace. Our R&D investments are directly tied to driving real value for our customers. These innovations bring connected end-to-end customer experience, including new use cases to the market; they enable smarter explainable outcomes, improved performance and improve speed of deployment and yield better customer ROI. This quarter, we announced the general availability of FICO focused foundation model for financial services, what we call FICO FFM. FICO FFM consists of FICO focused language model, which is FICO FLM and FICO focused sequence model, which is FICO FSM. It's a domain, data and problem-specific generative AI model for financial services that delivers accurate and auditable outcomes. FICO FFM enables enterprises to use small language models built for their specific business problems, significantly helping to mitigate hallucinations and provide transparency, auditability and adaptability. FICO FFM achieves improved accuracy and cost efficiencies compared to conventional generative AI models. For example, FICO FFM results in more than 35% lift in world-class transaction analytic models in areas such as fraud detection while requiring up to 1,000 times fewer resources compared to conventional generative AI models. In fiscal '26, we plan to advance our direct and indirect distribution strategy and invest to capture market opportunities emerging from these innovations. Steve will discuss that further later on. As a reminder, analytic innovation and intellectual property at FICO are protected by our patent portfolio of over 230 issued patents and nearly 80 pending applications. Many of these issued and pending patents are AI-specific and reinforce FICO's position at the forefront of responsible AI development. Turning to scores. In our Scores segment, our fourth quarter revenues were $312 million, up 25% versus the prior year. While B2B scores were the key driver of growth, we also saw continued encouraging growth in B2C scores. For the full year, our revenues were $1.169 billion, up 27% versus last year, and that was materially driven by B2B scores. The FICO score used by 90% of top U.S. lenders continues to be the standard measure of consumer credit risk in the U.S. Long-term model stability is a critical consideration for lenders determining which credit scoring model to use for originations. FICO scores are used by lenders across consumer credit sectors because they're time tested, trusted, reliable, and they are the independent standard around the world. In fact, FICO remains the only independent analytics provider and the only score with known predictable performance through a complete economic cycle, including the stressful period of the Great Recession. FICO scores continue to be widely used and critically relied on throughout the consumer credit ecosystem. That includes cards, personal loans, auto lending and mortgages. The FICO score was established as an industry standard and was freely chosen by mortgage market participants long before the GSE selected classic FICO as the credit score for guaranteeing conforming mortgages. With no government guarantee outside of conforming mortgages, market participants seek out the most predictive score, which is often one of our recent innovations, such as FICO 8, FICO Auto 10 and FICO 10T. In fact, bureaus have provided free Vantage scores for years outside of mortgage, yet FICO has continued to successfully compete and win business in those areas. Our scores remain the standard for use in mortgage underwriting and pricing in investor credit risk and prepayment models and capital requirements and by credit rating agencies for mortgage-backed securities ratings. Classic FICO is critical to driving investor pricing of mortgage-backed and other securities and ultimately, the cost consumers pay in the mortgage industry. We recently announced our FICO mortgage direct license program with a view to driving competition, transparency and cost savings in mortgage while aligning with calls from policymakers and industry leaders to modernize credit infrastructure and promote affordability, liquidity and access in the $12 trillion U.S. mortgage market. In the short time since our announcement, we've seen overwhelming interest in the FICO mortgage direct license program. As we announced today, we entered into a multiyear direct license and distribution agreement with Xactus, the largest credit verification and tri-merge provider of FICO scores. In addition, we're actively engaged with resellers representing about 90% of mortgage volume, including the largest tri-merge resellers, as well as technology platform providers, who serve the smaller tri-merge sellers to enable our mortgage direct program as quickly and efficiently as possible. We've already provided our FICO score scoring software for the mortgage direct license program software to the top 4 resellers along with several key platform providers. With our FICO mortgage direct license program, tri-merge resellers have the option to calculate and distribute FICO scores directly to their customers, eliminating reliance on the 3 nationwide credit bureaus. The calculation of the FICO score and the packaging to create a tri-merge bundle does not add incremental complexity or risk for tri-merge resellers. The tri-merge resellers have the infrastructure and processes to package data today as this is their core business. The FICO score algorithm that will now be used by the resellers under our direct program is the same model as what is currently installed at the bureaus today. The underlying data used by resellers and bureaus in the FICO score models is the very same data. The data format for the FICO direct license program is the same data format processed by tri-merge resellers today that lenders use today and that's required in the conforming mortgage market by Freddie and Fannie today. In fact, it's the same format we use in our partnership with the tri-merge resellers for the FICO score mortgage simulator, which is in the market today. Our FICO mortgage direct license program provides optionality to the market. We offer 2 alternative pricing models. A historical per score pricing model and a new performance pricing model. The performance pricing model was built on successful mortgage funding and answers the call of industry participants to provide optionality in our pricing models. We anticipate resellers evaluating lenders' throughput rates to determine which FICO score pricing models provides lenders with the most savings. From a pricing perspective, the FICO score for mortgage originations was $4.95 per score in 2025. The bureaus marked this price up on average to $10 per score. In 2026, under the FICO direct license program, lenders have a choice of either the performance model at $4.95 per score plus a funding fee at closing or the per score model at $10 per score. The performance model yields a 50% reduction in average per score fees to what resellers paid for FICO scores in 2025. And the per score model is on average the same price as the resellers paid for FICO scores in 2025. Lenders obviously have a lot to consider when evaluating which credit scores to adopt, and that decision considers factors well beyond the upfront cost of the credit scores. Classic FICO is still the only score used for conforming mortgages guaranteed by the GSE. It is the only score that has performance data through the Great Recession in 2008, 2009. It's the only score that's leveraged throughout our secondary mortgage markets. Regardless of GSE guarantees, predictiveness of the score matters. Recent independent studies by Milliman, Urban Institute, AEI Housing Center and others have found classic FICO, a score developed 20 years ago to perform similarly or on par with or at times to outperform the recently developed Vantage Score 4. Our latest score, FICO 10T is the most predictive and inclusive credit scoring model in the market. We continue to see growing momentum and adoption of FICO Score 10T. There's a large industry efficiency benefit in testing FICO 10T and Vantage score simultaneously, and we expect FICO Score 10T to be made available for implementation at the GSEs. FICO 10T builds upon FICO's decades as a trusted pillar of the mortgage ecosystem using advanced modeling techniques and comprehensive consumer financial data, including rental payments, a source data that we've at FICO have used in our credit score model since 2015. In addition to rental data, utility data and telco data by leveraging trended credit data, FICO Score 10T analyzes borrower behavior over time, which allows lenders using the score to gain deeper insights into prospective borrowers, helping them to make more precise lending decisions. Our latest score is a meaningful step forward in credit risk assessment. FICO 10T offers significant improvements in predictive accuracy combined with a focus on fairness and model stability, offering tremendous benefits for lenders, investors and borrowers alike. Earlier this year, our team at FICO published a comprehensive white paper demonstrating our FICO Score 10T offer significant improvement in predictive accuracy over our other models, including both Vantage 4 and classic FICO. The link to that white paper and other studies mentioned in today's earnings call can be found in our Investor Relations presentation. Specifically, FICO Score 10T identified 18% more defaulters in the critical score decile commonly used for mortgage originations, while Vantage score identified only marginally more than classic FICO. FICO Score 10T also enables a 5% increase in mortgage originations without taking on additional credit risk. Vantage 4 claims to score far more consumers but does so using models that are statistically unsound for predicting risk. For example, scoring using one month of payment history. We, by contrast, don't lower our standards. In 2024, the GSE average credit profile included an average FICO score of 758. Vantage 4 claims they can score more consumers, but with less than 10% of GSE guaranteed loans below FICO Score 680. This does not result in a material increase in loan qualifications that are guaranteed by the GSEs. In fact, it can actually hinder those who have thin credit profiles from processes that are already in place that are designed to approve no file or thin-file applicants. Make no mistake, we have access to the same data as our competition. What matters is how the data is used to innovate scoring models to yield the best risk prediction. FICO's decades of experience enable us to innovate better, as shown in the outstanding performance of FICO 10T versus Vantage 4, which can only keep pace; in some cases, can't even do that with the score that we created 2 decades ago. FICO Score 10T's better performance will drive benefit for not only mortgage insurers and investors but other market participants as well. It will deliver improved mortgage pricing and lower monthly cost for borrowers. It's going to benefit millions of Americans. To further emphasize this point, the benefits of FICO Score 10T are not hypothetical. In the nonconforming mortgage industry, FICO Score 10T has already been adopted by nearly 40 lenders accounting for more than $316 billion in annual originations and more than $1.5 trillion in eligible servicing volume, with most making multiyear commitments to use the FICO Score for mortgage decisions in both the conforming and nonconforming markets. We're proud of our innovations and ability to adapt to needs of our customers. We're excited about the perception and adoption of our latest offers. I'm going to pass it now over to Steve for further financial details.

Steven Weber, CFO

Thanks, Will, and good afternoon, everyone. We had a strong quarter, generating total revenues of $516 million, reflecting a 14% increase compared to the previous year. As mentioned last quarter, we saw a dip in sequential revenue mainly due to reduced point-in-time revenue from scores and software licenses, along with the effects of seasonality and lower professional services revenue. Our software segment revenues remained unchanged at $204 million year-over-year. Within that segment, both on-premise and SaaS software revenues held steady, while professional services experienced a 5% decline. For the fiscal year, we achieved total revenues of $822 million, up 3% from the prior year. In this quarter, 87% of our overall revenues originated from the Americas region, combining North America and Latin America. The EMEA region contributed 8% to our revenues, while Asia Pacific accounted for 5%. Our score segment revenues increased to $312 million, a 25% rise from the prior year. As indicated in our presentation, B2B revenues grew by 29%, mainly due to an increase in mortgage origination scores pricing. Excluding our previous quarter's multiyear U.S. license renewal for the insurance score product, B2B revenue showed slight improvement sequentially. Our B2C revenues also rose by 8% compared to the prior year, driven by myFICO.com and our indirect channel partners. The total scores revenue amounted to $1.169 billion, up 27%, despite lower historical mortgage origination volumes due to persistently high interest rates. In the fourth quarter, mortgage origination revenues grew 52% year-over-year, representing 55% of B2B revenue and 45% of total scores revenue. Revenues from auto originations increased by 24%, while credit card, personal loan, and other originations revenues rose by 7% compared to the previous year. Looking ahead to fiscal year 2026, our revenue guidance anticipates software SaaS growth primarily driven by the FICO platform, though we expect diminished point-in-time revenue due to fewer non-platform license renewals and stable annual professional services revenue. We do not foresee any substantial improvements in the macro environment affecting our scores business, nor do we expect any significant changes in market share or origination volumes in auto, card, or personal loans. It’s important to note that last quarter included a notable nonrecurring multiyear U.S. license renewal for the insurance score product that will not recur in FY '26. According to our presentation, our total software ARR reached $747 million, up 4% year-over-year. Platform ARR was $263 million, making up 35% of our total Q4 '25 ARR, with platform ARR growing 16% compared to the previous year, while non-platform ARR fell 2% to $484 million this quarter. The decrease in platform ARR was influenced by reduced usage from certain CCS customers, while non-platform ARR remained steady over recent quarters. We project that total software ARR will rise in fiscal 2026, benefiting from recent FICO platform bookings going live. Our strategy of platform lend and expand continues to yield favorable results. Our dollar-based net retention rate for the quarter was 102%, with platform NRR at 112% and non-platform NRR at 97%. Platform NRR growth was fueled by new use cases and increased usage of existing ones. Our software ACV bookings for the quarter were $32.7 million, up from $22.1 million in the previous year, marking our strongest quarterly ACV performance in six years. Over the full year, ACV bookings reached $102 million, representing our most robust annual performance in that timeframe. Total operating expenses for this quarter totaled $279 million, compared to $274 million in the prior quarter, reflecting a 2% increase. In our previous quarter’s remarks, we highlighted the key factors contributing to sequential expense growth, which materialized as anticipated, including $10.9 million for restructuring, increased interest expenses, and higher marketing costs. These were partially offset by a decrease in stock-based compensation due to some forfeitures. The restructuring mentioned was a result of reallocating resources to better align with our strategic objectives. For the entire year, expenses amounted to $1.066 billion, up from $984 million in the previous year, marking an 8% increase. Our guidance for FY '26 assumes a similar year-on-year increase in operating expenses as seen previously. We remain dedicated to improving efficiencies and prioritizing resources for our most strategic initiatives, focusing on expanding headcount for distribution, development of the FICO platform, and enhancing our Scores business along with marketing efforts. Our non-GAAP operating margin for the quarter was 54%, compared to 52% the same quarter last year, reflecting a year-over-year expansion of 210 basis points. For the full fiscal year, the non-GAAP operating margin improved to 55%, marking a 340 basis point year-over-year increase. We reported GAAP net income of $155 million for the quarter, up 14%, with GAAP earnings of $6.42 per share, an 18% rise from the previous year. Excluding restructuring, GAAP net income would have been $166 million with earnings of $6.76 per share. For the entire fiscal year, we recorded a total of $652 million in GAAP net income, which translates to $26.54 in earnings per share, representing increases of 27% and 30%, respectively. For the quarter, we reported non-GAAP net income of $187 million, which is a 15% rise, alongside non-GAAP earnings per share of $7.74, reflecting an 18% year-over-year increase. It's worth noting that restructuring is added back in the non-GAAP net income, as depicted in the Reg G schedule. For the full fiscal year, we achieved $734 million in non-GAAP net income, equating to $29.88 in earnings per share, up 23% and 26%, respectively. The effective tax rate for the quarter was 23.4%, with the operating tax rate at 25%. For the full year, our net effective tax rate was 18.8%, while the operating rate remained at 25%. The primary difference between the operating and net effective tax rates was due to a $44 million excess tax benefit. Our guidance for FY '26 anticipates a net effective tax rate of 24% and an operating tax rate of 25%. Our free cash flow for the fourth quarter was $211 million. Over the last four quarters, we generated $739 million in free cash flow, a 22% increase year-over-year. At the end of the quarter, we had $189 million in cash and marketable investments, while total debt was $3.06 billion with a weighted average interest rate of 5.27%. As of September 30, 2025, 91% of our debt was in senior notes, with no term loans outstanding. We had a $275 million balance on our revolving line of credit, which can be repaid at any time. We continue to return capital to our shareholders through share repurchases. This quarter, we bought back 358,000 shares at an average price of $1,499 each. For the fiscal year, we repurchased 833,000 shares at an average price of $1,693 each. The total for share repurchases amounted to $536 million in the fourth quarter and $1.41 billion for fiscal 2025, setting records for both quarterly and annual repurchase levels in the company's history. Our approach has not changed, and we still see share repurchases as a valuable use of cash. Now, I will turn it back to Will for his closing comments.

William Lansing, CEO

Thanks, Steve. We continue to execute well in our strategy and we're well positioned for a strong fiscal '25. As we announce our guidance, I'll remind everyone that consistent with prior years, we expect some of the pricing initiatives in '26 to have an additional impact beyond our guided numbers. And because of uncertainty in volumes, it's difficult to estimate the timing and magnitude of that impact. I'm pleased to report that today, we're guiding even stronger growth than we achieved in fiscal '25. As you can see on Page 13, we are guiding the following: revenue of $2.35 billion, an increase of 18% over fiscal '25. GAAP net income of $795 million, an increase of 22%, GAAP EPS of $33.47, an increase of 26%; non-GAAP net income of $907 million, an increase of 24%; and non-GAAP earnings per share of $38.17, an increase of 28%. With that, I'll turn the call back to Dave, and we'll open up the Q&A session.

Dave Singleton, Vice President of Investor Relations

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

Operator, Operator

Our first question comes from Manav Patnaik with Barclays.

Manav Patnaik, Analyst

I guess my one question is just a broader question around your recent discussions with the FHFA. Obviously, there's a lot going on and direct will be treated favorably about your recent actions. But then also, like, what's next? A lot of the talk on FICO 10T, do you think that gets approved soon? Just anything there you could provide that would be helpful.

William Lansing, CEO

Sure. Well, we've obviously been engaged in constructive conversation with the FHFA. The director has had a big push for increasing competition and our direct distribution program is a big step in that direction. It basically creates competition in the distribution of credit scores. So that was positively received. With respect to 10T, it is with the GSEs, and we're working with them to get it out. And I can't give you an exact date, but we're confident that eventually it will be released.

Operator, Operator

Our next question comes from Simon Clinch with Rothschild & Co Redburn.

Simon Clinch, Analyst

Just to clarify, that's Rothschild & Co Redburn. I was wondering, maybe, Steve, if you could talk about some of the assumptions around the actual direct licensing model that you built into the guidance for the year? And how we should think about the cadence of that through the year? Because I know quite a lot is really sensitive to the mix of whether it's the historic model or the performance model.

Steven Weber, CFO

That's a really good question. As you know, we've generally been quite conservative in our guidance, but this year we're being even more cautious due to uncertainties in the macro environment and the timing of certain factors. For example, with the performance model, there could be a time lag because it’s performance-based. If the mortgage process begins in December and continues into January, we won't receive payment for the performance aspect immediately. Similarly, if the process starts in August or September, it might not close until October, which could push the performance fee into 2027. There’s a lot of complexity involved, so we're being very careful in our projections. Additionally, we can't predict yet who will choose which model, so we have more conservatism built into our guidance than usual. In a couple of quarters, we should be able to provide more details on how this all plays out, helping us all better understand the timeline.

Operator, Operator

Our next question comes from Jason Haas with Wells Fargo.

Jason Haas, Analyst

I know we've just recently gotten the price information for fiscal 2026, but we're already starting to think about what pricing could look like in fiscal 2027 and beyond. So I was curious if you could talk about how you're thinking about price increases over the long run. And if there's any change to the pricing runway now that you're going through this direct model?

William Lansing, CEO

Yes. I guess that everybody would love to know what the pricing is going to look like in '27, '28 and beyond. And as is our custom, we're not going to share any of that with you because we don't know ourselves. We read the market and we read the environment. And here's what you can take as kind of our baseline. We believe that there continues to be a very large value gap between what we charge and the value that the Score provides to those who use it. And so we've been on a mission over a number of years, and it will continue into the future to close that value gap. As we've said in the past, our goal is to do it in a predictable methodical way and not create any kind of big dislocations, but to make it very manageable for all industry participants. But do we believe that the value gap continues to exist? It does. Are we going to address that in coming years? We will. And exactly the nature and form of that and the amount of that is all TBD because we don't know ourselves.

Operator, Operator

Our next question comes from Faiza Alwy with Deutsche Bank.

Faiza Alwy, Analyst

I wanted to ask about what type of feedback you've gotten from lenders on the 2 pricing models that you have? And if there's any hesitation around going via the resellers and essentially going direct? Because I believe the performance model is only available if they go direct? And if there are any complexities or additional costs that lenders might have to incur if they're going direct and not to the bureaus?

William Lansing, CEO

So far, we're receiving very positive feedback on the direct model. Our objective is to make our intellectual property and FICO scores accessible through both the bureaus and the direct channel via the tri-merge resellers. There's a lot of enthusiasm for the direct method, and we don't anticipate many operational challenges. We'll handle the specifics to ensure it's available. Regarding lender reactions, the idea was to provide them with options and flexibility so they can choose how they use the scores to best suit their businesses. We've developed two models with considerable thought to ensure that FICO is protected from adverse selection and that those who use the scores will select the model that works best for them. We are confident that regardless of how the balance between the per score model and the performance model turns out, it will be satisfactory and beneficial for our customers.

Operator, Operator

Our next question comes from Surinder Thind with Jefferies.

Surinder Thind, Analyst

Will, given that we've seen 10T adoption in the nonconforming market, can you maybe walk us through those conversations, the specifics of the evaluation and maybe how long it took those lenders to make that decision? I think that would be helpful in just kind of color to try and understand the timing around some of these upgrades and the complexity?

William Lansing, CEO

Well, so in the nonconforming market, more than anywhere else, they truly care about default risk and prepayment risk and the predictiveness of the score really matters. And I think that's what motivates and drives those who already have chosen FICO 10T to do that. We make the score available. We give them both classic and FICO 10T. We give them the data with which to do the analysis. And so far, there's a lot of happiness over the introduction of our latest and greatest score. So I mean that's the dynamic. But in that market, like in all scoring markets, things move slowly. It takes a while to test and to adopt. And so there's still a lot of room for penetration in the nonconforming market, but we're very happy with our progress to date.

Operator, Operator

Our next question comes from Jeff Meuler with Baird.

Jeffrey Meuler, Analyst

Let me invert the answer you just gave to that question. So in the conforming market, where it's more about residual credit risk and there's less default risk to the security holder. Just help us understand kind of the value prop or compare and contrast the value prop of staying on FICO in the conforming versus the nonconforming market?

William Lansing, CEO

I think some people believe that because the GSEs provide a guarantee, credit risk becomes less significant, leading to a focus on simplified criteria like the price per score. I challenge that notion. The fact is, mortgage originators who sell loans to Fannie and Freddie still care about credit risk, prepayment risk, and default risk. As many of you know, if issues arise with a mortgage, the GSEs can return the loans to the originators. They review the documentation, which often reveals problems, resulting in loans being sent back. Therefore, even if originators do not retain the loan itself or the associated risk, they remain concerned about credit risk. Consequently, I believe that both in the conforming and nonconforming markets, there will be a demand for the most predictive score and a solid understanding of prepayment and default risks.

Operator, Operator

Our next question comes from Ashish Sabadra with RBC Capital Markets.

Ashish Sabadra, Analyst

I'll just ask a question on the software front. ARR moderated there, but you obviously had a very strong ACV bookings quarter, but as well as the year. How should we think about this ACV starting to convert into ARR as we head into '26?

Steven Weber, CFO

Yes. We'll actually see as soon as Q1 acceleration of ARR. So that's something that we see coming in because as these deals go live, it helps us right away with ARR.

Operator, Operator

Our next question comes from George Tong with Goldman Sachs.

Keen Fai Tong, Analyst

Now that mortgage resellers will be undertaking more responsibilities calculating the score under the direct licensing program. What are your thoughts on whether they may raise their fees to match with the credit bureaus charge? What are some of the conversations with these resellers suggested?

William Lansing, CEO

Well, that's up to the resellers, what they're going to charge. And I think that's all TBD. I don't think that their pricing is completely understood from the bureaus on the data side. And so I think they're still putting together their pricing. We obviously don't really influence that. They're running a business, and they do what they do. So I mean, that's entirely in their hands.

Operator, Operator

Our next question comes from Scott Wurtzel with Wolfe Research.

Scott Wurtzel, Analyst

I'm just wondering if you can talk about in the FY '26 guide, what you're contemplating in terms of pricing on other areas and scores such as auto and how you're thinking about the monetization opportunity there?

William Lansing, CEO

Yes. It's somewhat more conservative than mortgage pricing. We examine various segments where the scores are applied. Typically, we implement a cost of living adjustment to our prices overall. Additionally, we target specific areas where we identify a significant value gap and potential for higher prices. We've made such adjustments this year in sectors beyond mortgage, as we usually do. I wouldn't single out any specific segment for substantial changes; overall, it resembles previous years with slight increases above inflation and cost of living, while there are certain areas where we do a bit more.

Operator, Operator

Our next question comes from Alexander Hess with JPMorgan.

John Mazzoni, Analyst

Maybe just a follow-up on the strength in the ACV bookings. Could you just maybe give us some color in terms of what drove that kind of outsized quarterly performance? And is there any kind of budget flush or any other items we're seeing? I just want to make sure there wasn't a pull forward or any other things like that.

Steven Weber, CFO

Yes, there was nothing. I think you've observed an acceleration in that number over the last several quarters. We're seeing momentum in that area. We have a new sales leader, which has generated some excitement, along with growing momentum in the products we offer on the platform. It takes time for these efforts to gain traction, and we're beginning to see the results of that. We hope to see this trend continue as we move into next year.

Operator, Operator

Our next question comes from Ryan Griffin with BMO Capital Markets.

Ryan Griffin, Analyst

Just hoping to focus a little bit on the mortgage volume side of the equation. Just curious what is built into your guidance and what swing factors, whether it's trigger loans or rates could impact the view?

Steven Weber, CFO

Yes. I think this is where the conservatism comes, right? We don't really have a full understanding. Trigger leads, we have a pretty big assumption in there for reduction because of trigger leads. So we're being really conservative. I mean we're looking at this and thinking until we know more, it's a lot easier to raise your guidance than it is to lower it. So I think we're always conservative, but this year, probably more than other years where we're extra conservative.

Operator, Operator

Our next question comes from Owen Lau with Clear Street.

Owen Lau, Analyst

So for the multiyear agreement with your reseller, I think, Xactus. Could you please add more color on the pricing arrangement for this agreement longer term? Is the pricing lock in, in this agreement or there's flexibility for FICO to raise pricing because of the value you provided?

William Lansing, CEO

That's a good question. Our pricing is for 2026. And we have a multi-agreement to work together but the pricing that's been published is for 2026. And as you know, we adjust our prices every year, and that will continue.

Operator, Operator

Our next question comes from Alexander Hess with JPMorgan. Looks like they had a bit of phone issues. Your line now disconnected. I'll move on to the next person in the queue, one moment. Our next question comes from John Mazzoni with Seaport Research Partners.

John Mazzoni, Analyst

Maybe just a follow-up on the strength in the ACV bookings. Could you just maybe give us some color in terms of what drove that kind of outsized quarterly performance? And is there any kind of budget flush or any other items we're seeing? I just want to make sure there wasn't a pull forward or any other things like that.

Steven Weber, CFO

Yes, there was nothing. I think you've noticed an acceleration in that number over the past several quarters. We're experiencing momentum there. We have a new sales leader who has sparked some excitement, and our products are gaining traction on the platform. It simply takes time for that to develop, and we are beginning to see the results. We hope to see this trend continue into the next year as well.

Operator, Operator

I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.