Research Update: Fair Isaac Corp. Outlook Revised To Stable From Negative On Better Than Expected Operating Performance; Ratings Affirmed

The residential mortgage market boom has driven strong volumes in San Jose, Calif.-based Fair Isaac Corp.'s (FICO's) highest margin Scores business, thereby increasing adjusted EBITDA margins to 34% and driving adjusted leverage to 1.8x at the close of the company's fiscal year ended Sept. 30, 2020. Though we expect demand for mortgages to taper off gradually in 2021, we believe adjusted margins will expand by around 300 basis points (bps) by the end of the upcoming fiscal year as COVID-19-related restructuring charges roll off and other aspects of consumer credit, including autos and credit cards recover in line with the broader economy, resulting in adjusted leverage that is sustained at the 2x area or better. As a result, we are

...- The residential mortgage market boom has driven strong volumes in San Jose, Calif.-based Fair Isaac Corp.'s (FICO's) highest margin Scores business, thereby increasing adjusted EBITDA margins to 34% and driving adjusted leverage to 1.8x at the close of the company's fiscal year ended Sept. 30, 2020. - Though we expect demand for mortgages to taper off gradually in 2021, we believe adjusted margins will expand by around 300 basis points (bps) by the end of the upcoming fiscal year as COVID-19-related restructuring charges roll off and other aspects of consumer credit, including autos and credit cards recover in line with the broader economy, resulting in adjusted leverage that is sustained at the 2x area or better. - As a result, we are revising our outlook to stable from negative and affirming all our ratings, including the '##+' issuer credit and issue-level ratings. - The stable outlook reflects our expectation that margin expansion and modest revenue growth will support adjusted leverage...

Research Update