Fair Isaac Corp.

The stable outlook reflects our view that over the next 12 months FICO will maintain its competitive position within the Scores and Application segments, driving high-single-digit percentage revenue growth and stable EBITDA margins. We expect the company to generate strong FOCF, which it will likely use for share repurchases, leading to leverage sustaining above 2x. We could raise the ratings if better-than-expected operating performance or debt reduction keep leverage below 2x. This would be contingent on a change in FICO's financial policy so that these metrics would be maintained long-term. Though less likely, we could also raise our ratings if the company increases its scale in the Applications and DMS segments and materially expands its software as a service (SaaS)

...Revenue growth will remain solid due to improved contract pricing within the Scores segment and strong software booking trends. Over the next 12-18 months, we expect the rate of total revenue growth will taper off but remain solid in the high-single-digit percentage area as favorable contract repricing within mortgage and auto Scores products is fully realized. Fair Isaac Corp.'s (FICO) software booking trends within the Applications and Decision Management Software (DMS) segments have remained stable with new bookings sustained over $100 million in the last seven quarters. Notably, the frequency of bookings over $1 million increased about 19% in fiscal 2019, reflecting increased customer penetration with larger enterprises. Investments to maintain FICO's first-to-market position will limit EBITDA margin expansion. Over the next 12-18 months, despite healthy revenue growth, we expect only modest margin improvement because of continued investments in product development across all businesses,...

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