Fair Isaac Corporation Stock

Good day, and welcome to the Q3 2026 FICO Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Dave Singleton. Please go ahead.

Good afternoon, and thank you for attending FICO's third 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 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 July 29, 2027. Our quarterly investor presentation 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 third quarter earnings call. With another strong quarter, we are increasing our fiscal 2026 guidance. We reported Q3 revenues of $674 million, up 26% over last year, as shown on Page 5 of our investor presentation.

For the quarter, we reported $237 million in GAAP net income, up 30% and GAAP earnings of $10.45 per share, up 41% from the prior year. We reported $277 million in non-GAAP net income, up 31% and non-GAAP earnings of $12.18 per share, up 42% from the prior year. We delivered free cash flow of $370 million in our third quarter. Over the last 4 quarters, we delivered $961 million in free cash flow, an increase of 28% over the prior 4-quarter period.

In Q3, we returned significant capital to shareholders through share repurchases, with report spending exceeding 3x the historical record quarter. Including our accelerated share repurchase plan, we bought back $1.96 billion or 1.75 million shares at an average price of $1,149 per share. At the segment level shown on Page 6, Score segment revenues in our third quarter were $459 million, up 41% versus the prior year. While B2B scores were the key driver of growth, we also experienced continued growth in B2C scores.

In our Software segment, we delivered $215 million in Q3 revenues, up 2% year-over-year. Results included 66% platform revenue growth and a 25% decline in non-platform revenue. Steve will provide additional revenue segment level details later. Beyond the financial results, we continue to make meaningful progress against the strategic priorities that position FICO for long-term growth. With more than 70 years of innovation, FICO has been the trusted backbone of High stakes decision-making.

Turning data into intelligence and intelligence into better business outcomes. That leadership continued this quarter with the GSE release of the FICO Score 10T data sets and Ultra FICO general availability. Fannie Mae and Freddie Mac recently released expanded historical level data sets for FICO Score 10T, enabling mortgage ecosystem participants to independently evaluate credit score performance using real-world GSE mortgage data.

Independent analysis by Millman, leading global actuarial and risk management firm, [indiscernible] findings, concluding that FICO Score 10T outperforms Vantage for on all 3 key statistical measures of predictiveness and across every origination year studied, both individually and in aggregate. Millman found that FICO Score 10T delivers more than a 10% predictive advantage for first-time homebuyers. And more than an 8% predictive advantage over Vantage 4 for the most recent origination years an especially important cohort because it exhibits some of the highest default rates in the data set.

FICO's predictive advantage is not driven by access to different data. FICO Score 10T and Vantage 4 are built on the same underlying data sets. The comparison of the models can be found in our investor presentation on Page 10. The difference lies in FICO's decades of experience developing predictive credit risk models and how FICO transforms that data into a more accurate assessment of default risk. That predictive advantage has meaningful implications across the mortgage ecosystems. For lenders and originators, a more predictive score enables better risk assessment, more confident lending decisions, improved portfolio performance and the ability to responsibly expand access for borrowers.

For investors and capital markets participants, stronger default prediction supports more accurate risk measurement pricing confidence and ultimately, a more resilient housing finance system. For consumers, it enables more precise risk-based pricing, broader access to credit and better borrowing outcomes. The FICO Score 10T adopter program provides lenders with historical data and makes FICO Score 10T available at no additional cost alongside classic FICO, enabling production testing and validation within existing workflows.

Ecosystem participants actively opt in and FICO works directly with them to evaluate and prepare for production deployment. The program has grown to 70 lenders, spanning both conforming and nonconforming mortgage markets. The program now represents about 55% of the volume generated by the top 50 mortgage originators.

$587 billion in eligible annual originations based on 2025 on the data and more than $1.87 trillion in eligible annual servicing. Complementing the adopter program, FICO has expanded the technology infrastructure supporting FICO Score 10T adoption. To further streamline implementation and deployment, FICO Score 10 is now integrated into Optimal Blue's market-leading mortgage platform and loan passes automated product pricing and eligibility platform.

These integrations enable lenders to leverage the industry's most predictive credit score throughout the mortgage life cycle, including loan eligibility, pricing, hedging, trading and portfolio valuation. This allows lenders to adopt FICO Score 10T using the platforms and workflows they already rely on today. Now turning to Ultra FICO. We recently announced the general availability of the next-generation Ultra FICO score. Developed in partnership with Pat. The new score combines the FICO Score with consumer permission cash flow data from Pat's network of more than 12,000 financial institutions, giving lenders a more complete view of credit risk on the same score scale they already use today.

Our initial target market for this score is subprime and near prime consumers across card, personal loan and auto lending. Our analysis shows that 79% of nonprime applicants with a history of positive account balances, saw higher scores under Ultra FICO, reflecting the SCOR's ability to recognize positive financial behavior that isn't captured by traditional credit file data for this population. We also find a 7% relative increase in approvals with no incremental risk and a 15% relative performance lift for prime applicants with limited credit histories showing that predictiveness improves beyond what traditional credit scoring alone can capture.

Since journal availability began just this past May, we're still in the early days of adoption. A pipeline of lender interest exists today as we continue to build that pipeline and we expect to onboard clients for testing. Another strategic priority is the FICO mortgage direct licensing program, which is still under review by the GSEs. This remains the key milestone for the program to go live and for lenders to realize cost savings through performance model pricing.

Lender interest in the program remains strong, and we continue to expand reseller participation -- we signed direct license agreements with partners and resellers representing about 60% of mortgage volume, and we're in active negotiations with the remaining material resellers that would bring us closer to 90% of mortgage volume once finalized.

This past quarter, we hosted FICO World 2026 where customers and partners echoed a consistent theme. AI adoption is accelerating at an unprecedented pace reshaping how businesses operate and how consumers interact with financial institutions. The structural forces are driving the shift, the need to operationalize AI to enterprise scale. Rising regulatory demands for governance and explainability and evolving customer expectations for personalized real-time decisions as AI agents emerge.

For our customers, the real challenge is not investing in AI or experimenting with AI. It's turning their AI investment into business outcomes and measuring business value while keeping every decision governed, explainable and auditable. Customers are answering the challenge by integrating FICO platform, the world's leading AI decisioning platform for the financial services industry into their enterprise architecture and building their business solutions on FICO platform.

The FICO platform is differentiated by a number of things. First, FICO leverages 70 years of domain expertise in financial services. Second, FICO platform benefits from proprietary data sets, such as our fraud consortium data, spanning thousands of financial institutions. Third, FICO platform clients that leverage multiple use cases benefit from a compounding feedback loop that can create a more complete picture of the customer, utilizing the always on and always available AI-powered customer profile engine.

Fourth, our FICO platform architecture enables responsible AI through decisions that are auditable, transparent and explainable, allowing clients to more easily adhere to governance and regulatory requirements. Fifth, FICO platform decisioning capabilities are deeply embedded into enterprise workflows, delivering complex decisions in real time at scale in milliseconds and with a high degree of reliability. Our investments are focused on development and distribution of market-leading and differentiated intellectual property. These include the development of FICO platform and technologies such as focused sequence models and focused language models.

This requires limited CapEx as we leverage cloud providers for scalability. We continue to deliver healthy year-over-year growth in bookings, ARR, DBNRR and enterprise platform clients, demonstrating real-world value for our customers and tangible results from our investments. Our near-term focus has been on driving top line growth while our long-term focus is on driving margin expansion. We've advanced 2 initiatives that will support these objectives.

First, in July, we expanded our collaboration with Accenture by pairing the FICO platform with Accenture's experience in risk AI and industry operations, this partnership will help enterprises turn investments into real business results, faster decisions, stronger risk controls and all comes that hold up under regulatory scrutiny. Our immediate focus is go-to-market and enablement with a phased-in geographic rollout.

Second, later this calendar year, we anticipate the general availability of our next-generation FICO platform, which includes our enterprise fraud solution. With incremental IP and expanded distribution, we anticipate greater penetration of FICO platform within our current 500 named target accounts and an expansion of our operating market beyond those accounts.

I'll now pass this to Steve to provide further financial details.

Thanks, Will, and good afternoon, everyone. As Will mentioned, our Scores segment revenues for the quarter were $459 million, up 41% from the prior year. As shown on Page 17 of our presentation, B2B revenues were up 49%, primarily attributable to a higher mortgage origination score unit price. In the prior year quarter, FICO recognized approximately $16 million on a multiyear U.S. license renewal on our insurance score product.

Normalizing for that, GEALscores revenues were up 49% and B2B revenues grew 59%, respectively. Our B2C revenues were up 5% versus the prior year. In our mortgage origination Scores business, Third quarter volumes grew low single digit versus the prior year. Our mortgage originations revenues were up 97% from the prior year. Mortgage origination revenues accounted for 71% of B2B revenues and 62% of total scores revenues.

Auto originations revenues were up 15%, while credit card, personal loan and other originations revenues were up 9% from the prior year. For your reference, Page 18 of our presentation provides quarterly trending for Scores segment metrics. Turning to our Software segment. Our software ACV bookings for the quarter were $29 million, as shown on Page 19 of the presentation.

On a trailing 12-month basis, ACV bookings reached $128 million this quarter, an increase of 39% from the same period last year. We continue to see strong growth in our sales pipeline. Our total software ARR, as shown on Page 20 was $816 million, a 10% increase over the prior year. Platform ARR grew 62% versus the prior year to $413 million and represented 51% of our total Q3 '26 ARR, while non-platform declined 17% to $403 million for the quarter.

For the first time, platform ARR dollars exceed nonplatform ARR dollars marking an important milestone that reflects the successful execution of our long-term strategy and the returns we are realizing from our strategic investments. Excluding migrations, platform ARR growth was in the mid-30% range, reflecting strong execution and new customer wins as well as expanded use cases and volumes from existing customers.

In our non-platform business, ARR declined year-over-year, driven mostly by migrations and to a lesser extent, end-of-life products. Our dollar-based net retention rate in the quarter was 109% and platform NRR was 148%, while our non-platform NRR was 82%. Platform NRR was driven by a combination of new use cases, increased usage of existing use cases and migrations. Third quarter Software segment revenues detailed on Page 21 were $215 million, up 2% versus the prior year. Within the segment, our SaaS revenues grew 21%, driven by continued strength in FICO platform.

Our on-premises revenues declined 16%, driven by lower point in time revenue as we had fewer nonplatform license renewal opportunities compared to the prior year quarter. Our professional services revenues declined 24% with the prior year quarter includes revenue from the completion of a large field milestone. Normalizing for point-in-time revenue and professional services revenue, the Software segment revenues grew 10% versus the prior year.

Platform revenues exceeded nonprofits for the first time in FICO history. Year-over-year platform revenues grew 66%, driven by success in our land-and-expand strategy. Excluding migrations, platform revenues grew in the high 30% range. Nonplatform revenues declined 25% and driven by migrations and lower point in time revenue. As a reminder, platform and non-platform revenues exclude professional services revenues. From a regional perspective, 91% of total company revenues this quarter were derived from our Americas region, which is the combination of our North America and Latin America regions.

Our EMEA region generated 6% of revenues, and the Asia Pacific region delivered 3%. Operating expenses for the quarter, as shown on Page 22, were $312 million this quarter compared to $289 million in the prior year, an increase of 8% quarter-over-quarter driven by marketing for FICO World and some personnel expenses. Our updated guidance includes fourth quarter operating expenses that are modestly higher than in our third quarter due to incremental front-end loaded marketing expenses to support the launch of our new partnership with Accenture as well as some anticipated onetime restructuring charges.

Our non-GAAP operating margin, as shown on Page 23, was 62% for the quarter compared with 57% in the same quarter last year. Delivered year-over-year non-GAAP operating margin expansion of 479 basis points. The effective tax rate for the quarter was 24.6%. We expect the full year operating tax rate of 25% to 26% and an effective tax rate of around 24%. At the end of the quarter, we had $305 million in cash and marketable investments.

Our total debt at quarter end was $5.58 billion with a weighted average interest rate of 5.64%. This includes the June issuance of a $1.5 billion term loan to fund the accelerated share repurchase. As a result, we expect fourth quarter interest expense to be higher than in the third quarter. As of June 30, 2026, 60% of our debt was held in senior notes, while 40% of our debt was held in term loans or a balance on our revolving line of credit, both of which are repayable at any time.

As Will highlighted, we had a record quarter for returning capital to our shareholders through buybacks. As shown on Page 25, in Q3, we repurchased 1.705 shares -- million shares for a total cost of $1.96 billion. In the near term, we will be using cash to pay down debt Beyond that, 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. Elevated interest rates and ongoing affordability challenges continue to weigh on the mortgage market, keeping loan originations below historical norms. While the macro environment remains fluid, our strategy, innovation and execution remain disciplined and consistent. I'm quite pleased to report that today, we're raising our full year guidance as we enter the fourth quarter.

As shown on Page 26 of our presentation, revenue guidance is now $2.53 billion, an increase of 20% versus prior year. GAAP net income guidance is now $850 million, with GAAP earnings per share of $36.86, an increase of 30% and 39%, respectively. Non-GAAP net income guidance is now $979 million, with non-GAAP earnings per share of $42.43. Those are increases of 33% and 42%, respectively, -- with that, I'll turn the call back to Dave, and we'll open up for Q&A.

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

[Operator Instructions] Our first question comes from the line of Manav Patnaik out with Barclays.

I just had a question on the DLP program that you said is under review by the I believe 1 of them had already signed off. So just trying to appreciate why -- or what the next steps for the other ones are? And then with respect to that, you talked about the signed agreements with 60% -- resellers representing 60% of the U.S. mortgage volumes. Is that -- are they also interested specifically in the performance fee model? Just looking for that incremental color?

Yes. So with respect to the DLP, not a lot of new news. We're literally waiting on certification from 1 of the GSEs so that we can go live. The operational stuff is all set up, ready to go -- and as we've pointed out, we have agreements already covering 60% of the reseller volume. We are also very close to signing 2 additional resellers -- so that's -- we're literally waiting for there, okay.

The -- in terms of interest from the resellers and the performance model, yes, there is significant interest in the performance model. And we and they are anxious to get it out into the marketplace. We think it'll be very beneficial.

Okay. And then just on the release of the 10T data, just curious, I don't know if you guys have had any feedback worth sharing from your -- from the industry or your clients in terms of that versus the other alternatives out there?

Well, they now have an opportunity to test the 10T data as provided by the GSEs. And although we'd like to see 10T approved sooner rather than later, there is kind of a time -- an elapsed time between releasing the data and doing the analysis and then approving 10T. There's a lot of interest -- and as you know from my earlier remarks today, third parties like Milliman and others have done the analysis and 10 is more predictive than Vantage, pure and simple. And so there's a lot of market demand for it. .

And our next question comes from the line of Jason Haas with Wells Fargo.

As you know, there's now some data out there that shows VantageScore gaining some share in the MBS market. I'm curious from the lenders that are in that pilot program -- are you seeing them drop FICO pools at any point in the mortgage process? Or are they certainly pulling the same number of FICO scores and just also adding an advantage score? And then maybe what is time to submit that loan to the GSE they're submitting with Vantage score .

Jason, that's a very good question. So just a bit of -- to take a step back, you know that we're not crazy about lenders Choice as a policy. We think it's bad policy because it encourages gaming. And that's the primary reason that 1 might consider buying a Vantage score is to try to deliver to consumer a better rate when some of the time the enicor produced is higher than the FICO score. .

So we knew that gaming was going to happen, and that's what we're seeing is that it is happening. And to your specific question, are we seeing volume loss? No, we are not, which suggests that they're pulling both scores. And you have to pull to scores if you're going to try to do the gaming. You need both scores to figure out which 1 is going to deliver a bigger benefit to the consumer.

So there's not a lot of surprise in what we're seeing. You got a 2-core system, which has its own kind of structural problems. You have the gaming that you would expect, you have the most sophisticated biggest players experimenting with it. But I guess the thing to remember is you need to pull both the FICO score and Avana score, you're going to do the gaming. A van score by itself doesn't really get you there.

And I guess, just to round it out, we're not seeing volume loss. So I don't think it's instead of -- the Van score is additive to the market makes the market bigger.

Got it. That's very helpful. That all makes sense. Can you also just comment on the mortgage origination revenue growth decelerated on a year-over-year basis. It was also down quarter-over-quarter. I'm sure part of it was just mortgage volumes being a bit softer in 3Q that was the case. But any other comments on what's driving that? And I don't know if you could give us any sort of framework for how to think about 4Q just to level set expectations here. .

Yes, that's a great question. So if you look on a year-over-year basis, we were up -- we said low single-digit volumes, which I think is pretty much in line. If you take all the beers together and average them, that's probably what you get are taken as a total universe. So I think we're seeing similar volumes to what the bureaus are seeing. There definitely was a slowdown as the Bureau has talked about as well as rates take up the volume to do slow down.

So that's what happened there on the on a year-over-year basis, and that's also what caused the quarter quarter-over-quarter. So again, it's really just about the slowdown in the mortgage market as rates crept up.

And our next question comes from the line of Jeff Mueller with Baird.

Yes. A follow-up on my last question. Maybe this is just asking rehashing old news, but the 127% growth that you had last quarter, it was always hard to get there based -- based upon market volume and based upon a $10 versus 4.90% price. So -- was there anything else that was inflating that number? Or is there anything like -- I know it's an annual calendar year rate card, but anything on 1 timing of the pricing actually took effect last year versus this year or anything like that? .

Yes. I think there's some of the timing piece. And I think there's some of how maybe our quarter cut off versus what the bureau quarter cutoffs are. And when you have markets that are moving very rapidly when rates are moving, you can have every week at have different kind of volumes. I think you might see some of that. We don't have access to what the bureaus the data, the underlying data that they report. So I can't tell you -- all I can tell you is the scores that were pulled by us on a year-over-year basis. .

And what we charge for them. So that's really it. I think the shorter, you parse apart the segments. If you get down to week by week, it's probably even less or month-to-month, there's less correlation. And especially when the market certain like the. But over time, it all works out, but there are some quarters here and there where you see anomalies like last quarter was.

And our next question comes from the line of Simon Clinch with Rob child in Redburn.

I was wondering, well, if you could talk -- you mentioned that, of course, you're not seeing any volume loss. I'm just wondering, given you are pretty much all of the market, how easy is it for you to actually monitor any sort of evidence of volume goals in that regard.

It's not bad, easy. It's not -- I mean, honestly, it's not that easy. But relative to our forecast and expectations, we're not seeing it. .

And I think you can see that in our numbers for the full quarter that we just did. I mean, the volumes we saw are pretty much in line with what the funds that the bureaus reported on a year-over-year basis. So we're pretty confident in that. But we try and get late on a lot of different factors. We see mortgage public mortgage data. So we try to trying it as much as we can. I mean we don't have exact numbers, but we're pretty confident that -- what we're seeing is representative of what's happening. .

Okay. Great. And just following up on the other segments, the auto carbon personal loans. Could you just give us a bit of color as to how things are progressing there in terms of your sort of pricing initiatives, testing elasticity of the market, et cetera? .

Yes. Well, it's obviously early in the year for us to be suggesting where the pricing will go for next year. But as you know, we are constantly exploring where and how to get revenue growth. And each year, we get a little bit better at getting more precise, more surgical identifying the pockets where it creates the least amount of pain, has the least amount of market reaction. And so we're obviously working our way through those things this year as we always do. No final decisions have been made about the -- about any of the sectors, frankly, about mortgage or auto or card or personal. I mean we're -- it's early days.

So yes, lots of analysis going on. our pricing team, our strategy team are working on all these things, but really nothing to share with you right now.

Our next question comes from the line of Surinder Thind with Jefferies.

Just switching gears over to platform. Can you maybe talk about just the next-generation product of the next-generation platform. And just the kind of conversations you're having in terms of the uptake Obviously, it seems like there's some clients that are moving from nonplatform to platform as well. And just any color on the dynamics? Is that something that we should just expect to accelerate as more features, functionality and go forward? Or how should we think about that? .

Yes, that's exactly what you should expect is for it to continue to accelerate. We've got tremendous interest and tremendous uptake. And you can see in our numbers, tremendous platform growth. We do continue to release into the market new features and functionality that just increase the use cases -- and with that, the utility of the platform because it's all -- as I said earlier, it's reinforcing the more use cases you have on the platform, the more value you get out of it, the lower cost it is to bring on additional functionality. .

And so our whole land and expand strategy is built around that. It's like get started and then work with our customers to get the full benefit out of it. We absolutely see more growth. .

I guess just following on from that is, would you -- now that platform is larger than non-platform and you're also seeing some volatility from the licensing component. Would you start considering like end-of-life certain products at this point? Or how do we think about that to understand and running the strategy here.

Yes, absolutely. So we've talked in the past about our end of life and our migration strategy and in quarters past, what we've said is that we're not forcing migration. We're not cannibalizing legacy to achieve growth in the new platform. And that remains true. However, there's a tremendous benefit to FICO in simplifying our product set, our catalog. And we have some products that are old in the tooth that really should be end of life.

And so we're finally getting around to doing it. We have the capacity to move our customers on those older products to newer, better products that are going to wind up well, to the platform and to the functionality they get with the platform, and they'll be able to get more functionality at a lower cost. So Long answer to your question, but yes, we are -- we have an active end-of-life strategy that we're working through.

Thank you. Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

I just wanted to follow up on that earlier question around the Vantage core market share in conforming loans. If we look at some of the bigger players there, particularly UWM and Rocket the market share for Vantage score seems to be closer to 20%. I understand it's both full initially, but like are they still using both pools when they close the loan?

And also like the pace of adoption, like how does that compare to what your expectations were and how do we -- like any thoughts around what FICO can do to regain the market share?

Yes. So I think, first of all, we have a week of numbers that have a 2 handle on them, okay? So that's -- so it will take some time for us to really digest and see what the steady state is. That said, we don't anticipate a lot more than the 20s or we don't anticipate more than the 20s for banded share because, as I said earlier, it's really tied to the gaming. .

And when you do the math on what percent of the time a consumer is advantaged by using a higher Vantage score than a FICO score, that number, which in our minds, represents a theoretical maximum is in the 20s. So I think we'll just have to wait and see how things play out. I think it is a reality that Vantage is selling scores and -- or sending them along with FICO scores, I should say.

And gaming is a reality, and we're going to have gaming. I mean the rules of the road, the environment that we're operating in is a gaming environment. The FHFA has put it in place. The GSEs have accepted it. And so that's the world we have. And so I think we can -- we should all do our own math, but I can tell you, our math says, that the number is in the 20s.

That's very helpful color. And from a pricing strategy perspective, is there things that FICO can implement to help influence that going forward? Or does that change your pricing strategy for '27 or going forward?

Well, of course, there are many, many things that FICO can do, and we're not in a position to share them on this call. But we -- of course, we have a lot of work going on in the strategy for everything we do for how we monetize our IP or how we set our prices for what features functionality we put in the products, all of that is on the table. And so we have lots of degrees of freedom in how to respond. .

Thank you. And our next question comes from the line of Feza Ali with Deutsche Bank.

First, I just wanted to ask about the revenue guidance raise because -- it seems like it was pretty significant relative to what it should be this quarter. And so I'm wondering if there's anything out of the ordinary, maybe you're expecting some licensing revenues in the fourth quarter? Or maybe what previously assumed the direct program would come through when that might cause a lag in revenue. So just a bit more color on what led to the revenue guidance raise?

Yes. I think it's more of the latter. I mean, we had planned that if the DLP was to go live with the performance fees that we would push some revenues out -- more revenues out. So as the year goes along, it doesn't happen yet. So there's that piece. And I think, frankly, actually, the mortgage market has been better than what we had originally guided to.

And our volumes are better than what we had originally guided to. There were a lot of concerns about rates. The rates haven't -- they haven't gone down, but they haven't gotten worse. So the mortgage markets held up fairly decently. And for a period of time, it actually popped a little bit, but now it's back to kind of low single-digit growth. But but that's where it's coming from.

Okay. Understood. And then just a follow-up on the Vantage pilot. I guess with 10 sort of in the picture now, -- how are you thinking things will evolve? Are you -- is there -- are you anticipating a separate pilot for attendee? Would lenders pull kind of all 3 scores -- for gaming purposes, just curious on how you expect things to evolve from here?

Yes. That's a great point, is it really is because -- if we have a 3 score market, then there is an incentive to pull all 3 squares and see which 1 produces the best outcome for the consumer. How will actually shake out? It's hard to say, but it's hard to imagine retiring classic not anytime soon. And so most likely, 10T will come into the mix, and you'll have classic and Vantage and 10T. And you're absolutely right. I mean that's kind of a shopping -- a score shopping environment. .

Sorry, just to follow up on that. Would you charge extra would 10 be an additional price? Or would it -- would you offer it for free alongside cycle class? .

As you know, today, we have a tremendous amount of volume in our TNT pilot program, right? 55%, I said earlier. So TNT is increasingly being used. Tensiis the most predictive score. If you care about credit risk, 100 is the answer. If you care about gaming, might be the answer to some of the time. Plastic might be the answer some of the time and Vanish might be the answer some of the time. And that's a gaming world.

In terms of how we price it and how we bundle it today, as you know, we bundle 10T with Classic. And if you pay for classic, you get 10T free. And I would imagine we would continue to do something like that because we want to encourage adoption. That said, we have not made final pricing decisions. Everything is on the table. One could easily imagine a revenue jump at FICO, if we were to charge separately for the -- but that's not the current plan. The current plan is more of a continuing with the bundle as we have it today.

Our next question comes from the line of Alexander Hess with JPMorgan.

I hope you're well. I want to maybe ask about we'll start with the Tennessee question, of course. There have been a bunch of analyses out there -- I'm sorry, a classic FICO versus Vantage and whether or not there is a meaningful coupon differential at -- obviously, when you look at on Vantage score at a certain given number, say, it $800, of course, is a differential versus a FICO at 800 for a mortgage loan given the presumably shadow LLPA grid that exists for them.

But then when you correct for those sorts of factors, it seems that a lot of the spread goes away at least by some of our team's analysis, how do you think about the mortgage level and then the pool level spreads for firms that are using the competitors score.

Yes, that's a great question. And frankly, I'd refer you back to your own MBS traders to really get the insights there. But as a matter of theory, there's a lot less history with Vantage. Vantage has never been through a down cycle. And so there's more uncertainty around it. And so investors, if they're rational, should analyze paper that's not as well understood. So that's the theory behind the 30 basis point estimate that we've kind of talked about in the past. How it will really take out? It's hard to say. I mean it really kind of depends on the rationality of the market.

Now today, Vantage is such a small part of the market. It's not clear that any of it is really providing real signal. As you know, what has been securitized with Vantage is largely mixed and much bigger FICO pools. So I would just encourage you to talk to your traders and see what they say. But they are rational. And so as they dig into this, I think we ought to see the differential appear.

And then maybe thinking about the monetization across the Scores business, holistically, will. Obviously, there's a price point for the FICO and mortgage applications. But there are entire pools of the market where I think you guys would say you're pretty undermonetized and even underpenetrated rental comes to my mind, but maybe something else comes to your mind overseas perhaps. How are you thinking about maybe . At some point, the mortgage market does reach an equilibrium on CIC pricing. I don't know when it is. But how are you thinking about the next leg or future legs of monetization for scores holistically and what might that look like? .

Yes. I very much appreciate that question because too often, people think about our Scores as being single threaded through mortgage. And yes, obviously, we have a lot of mortgage concentration. But we do have a lot of opportunity in other verticals, and we have a lot of opportunity with new scores that rely on different data sets that can score new populations and provide new avenues for us to make money.

We're working on all those things. I mean I mentioned Ultra FICO and our partnership with Platt, Ultra FICO is a next-generation score. It's consumer permission for that captures everything that you get today in a FICO score, the credit file data and everything, all the caloric value that you get out of the credit file but it augments it with cash flow data. And when you do that, you get much better insights.

And so that's very much the next generation story. It's not widely adopted. We're just getting going now, and you know that the adoption curve for new scores, it can take 4 years for a new store to really get established. And so we are very much driving ahead with Ultra FICO 2. There's an UltraFICO II that's being readied, that has some additional functionality. And so that's 1 example. But we're -- there's also FICO 11 in the lab.

So we're constantly innovating, constantly trying to figure out how we're going to get a little more signal there's -- there really are limits to how much more signal you can derive from the credit file. I mean that it's been pretty well picked over. And so we tend to focus on other data sets to get more predictive power.

Thank you. Our next question comes from the line of Kyle Peterson .

Great. I wanted to start off on the DLP program. I know we've gaming has come up several times on this call already. But I guess just how have those conversations with potential lenders gone? I guess do you think there might be any slowdown in adoption from that by people that are gaming, given that at least right now, if they buy from the bureaus, they can get the Vantage for free and save the buck. So I guess, just any thought on if gaming would impact the adoption curve on DLP would be good.

Yes, good question. We don't think so. We think that the benefits of the performance model with DLP are pretty significant from a cost standpoint. What it really does is encourages more customer acquisition, more speculative effort to identify potential borrowers. It broadens the market, more access. So it does all those kinds of things, which are very desirable to the big lenders. So we see continued interest in it. And I don't think the gaming is going to put any kind of a damper in it.

Okay. That's helpful. And then I guess just a quick follow-up on capital return. Obviously, good to see the ASR big signal. And I think you guys have said a couple of times now that kind of prioritizing leverage reduction in the near term, I guess, should we interpret that as that you'll likely be more or less totally out of the market for the next couple of quarters? Or any color there on how much you guys want to prioritize and for how long you guys will be prioritizing debt versus incremental buybacks?

Yes. I mean we drive -- we have a lot of free cash flow. So we delever pretty quickly. So we'll see. We'll update you next quarter on what it looks like then, and we'll determine where we're at. I mean it's probably not likely we're going to buy any shares -- additional shares on what's already in the ASR this quarter. Right then when we give our next quarter results, we'll talk about where we are there because we do delever pretty quickly.

So this is an acceleration certainly of our buyback. But we've also seen our EBITDA and our cash generation grow pretty dramatically. So we're delevering even quicker than we normally did.

Thank you. Our next question comes from the line of George Tong with Goldman Sachs.

Thanks. Good afternoon. You're on the cusp of having your 10T score go live pending DLP approval, can you share feedback you've received from lenders on TNT's pricing including the funding fee component?

Well, we have explored the performance model and the funding fee component with lenders. And -- as you can imagine, there's some like it and some don't like it so much. And so we know that there's appetite for it. I think that is 1 of the driving forces behind DLP adoption will be the opportunity to get the funding fee model and performance model. .

So -- but is it for everyone? No, it's not -- I mean, not everyone will love it, particularly if you hardly pull -- if you don't pull many scores per closed loan, it's less attractive. I mean I kind of goes without saying.

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

Just on the software business, I was wondering if you could talk about the retention rate dynamics. Is that the best way to think about that, just land and expand? And then on the ACV bookings, are you still expecting those to accelerate in 2 half versus first half?

So in reverse order bookings, yes, we see continued acceleration. But the first part of your question is, yes, and expand is very much our strategy. You see it in the DR -- we are doing a little more migration now than we were, say, 3 or 4 quarters ago, some of our CCS business is migrating. So there's a bit more migration. And that's why you saw the legacy retention rate go down.

But on balance, we're pretty happy with the way it's all playing out. I mean 146% DBNRR on the on the platform business and that being now the bigger half of our business, that's pretty good. We have very, very low churn.

And for the follow-up, just on the recent trigger loan legislation. We heard that shift things up between the pre-call market and the hard inquiry market, but just wondering to what extent that impacted the mortgage volume side of your business?

We haven't seen a lot. There's a little -- I mean, we noticed a bit, but I wouldn't say anything dramatic.

Thank you. And our next question comes from the line of Owen Lau with Clear Street.

Going back to software, you mentioned booking was strong. Platform ARR growth accelerated, but non-platform was weak. Should we expect these kind of like divergence continue, I mean, because delta was pretty high. I'm just thinking about how to think about this going forward?

Yes. I mean the short answer is yes. I mean we had held off on migrating legacy to platform for many, many quarters, partly because we didn't have the capacity to handle it on the new platform. We are still busy bringing on new customers. But again, kind of going back to 1 of your earlier questions about end of life, there really are some legacy offerings that ought to be wound down over the next several years. and we're actively doing it.

And we're going to give our customers a better alternative on the platform. So yes, I would say you will continue to see the divergence that you're seeing right now. It's -- we don't think it's a bad thing. As long as on balance, we're going up, I think we're pretty happy. We will have continued migrations. We have a plan for migrations.

We have a team that makes sure that they go smoothly. Yes. But all that said, I don't want you to get the impression that the growth in platform is being driven by us cannibalizing the legacy because the truth is our pipeline is growing. It's expanding, it's growing. We -- the land and expand strategy works, we have a lot of new. But unlike a year ago, 2 years ago, some amount of the platform growth is coming from migration.

Got it. That's helpful. And then quickly on the Veeco pilot program, I'm wondering if TNT is actually dependent on the Vantage core pilot or there's a path to run both in parallel. I mean if 10s further delayed, how would that impact the implementation of other FICO score you just mentioned like Ultra FICO or FICO Al?

Well, so obviously, the FHFA and the GSEs are going to have to decide when they approve 10. I mean, it's approved, but when they accept it, right? That's on them, and that's their schedule. That said, we know that 10 is absolutely the best score in the world for measuring credit default risk. And you're seeing it in the nonconforming market. You're seeing tremendous adoption of TNT in the nonconforming market.

And so to the extent people care about credit default, 10ks the answer. -- when the GSEs and the agency side decide that they want to mix that in is up to them. I think that they are actively working on it. I think they want it out there. But it's going to take a certain amount of time for them to get comfortable. They just released the data, so it's going to take them a little while.

Thank you. And our next question comes from the line of Scott Wurtzel with Wolfe Research.

Just 1 for me on the direct license program in terms of the remaining resellers that are still out there to be signed up. Just wondering if you can give us kind of an update on where the process stands with those 2 and maybe what's unique about them that's maybe taking a little bit longer.?

We have 2 big ones that are signed. We have 2 big ones that are almost signed, very, very close and then we have the tail. So that's where we stand. We're pretty close. .

Thank you. Our next question comes from the line of Sean Kennedy with Mizuho.

On software, I was wondering how impactful partnerships like Accenture are for platform growth. Does it significantly help FICO platform's customer reach? And is there any particular type of customer that you're targeting in terms of geography or size?

Sean, thank you for that question. We have talked for many years about FICO's challenge in distribution. We're IP-rich and distribution for, and we've always had so much more IP than we can sell with our direct sales force. And that's as true today as -- it's not quite as true today as opposed and your past but still through.

And so for several years now, we've been very focused on how do we partner with SIs who can take our IP to market with us for us, different approaches. And we are super pleased to now be in this significant strategic partnership with 1 of the top SIs in the world, where they're going to be going to market with us with our IP and their capabilities.

They have relationships that we don't have. We have relationships and can send work their way. So just really a truly strategic partnership for both of us. We're super excited I think it's the beginning of seeing the indirect side of our business growth. I think you're going to see increasingly will wind up getting -- monetizing our IP through partners and not just through our direct sales force.

Got it. That's great to hear. And then the platform retains really inflected possibly this year. Is it partially due to AI and CICS capabilities there? Or are there certain platform products that are going significantly faster than other ones? .

Just to repeat the first sentence you said, it just got muffled on our side .

Sorry, I was saying is that with the net retention rate of platform like in this trajectory, is it partially due to AI and FICO's capabilities there? Are there -- or are there certain platform products that are growing significantly faster than others? .

So I would say yes and no. So it's not yet because of AI, although we have a lot of AI coming in the platform. I'd say that the platform growth we have right now reflects the current state the current state of the platform and the functionality and capabilities that we can bring to our customers with what we have today.

I mean, they get immediate payback. They're up and running very fast and they get immediate payback from it. The AI enhancements to the platform, if you want to call that, are coming. They're folks. And will that result in an uptick in platform growth? I don't know. It's certainly going to continue the growth. There's a lot of appetite for it. We've got all kinds of great AI-driven capabilities for our customers who are on the platform.

Thank you. Our next question comes from the line of Curtis Nagle with Bank of America.

All right. Terrific. Well, maybe just a question for you. Just following up on all the commentary in terms of gaming -- potential gaming in the system. I guess anything you're seeing anecdotal, whether it be discounts placed on advantage of securitized loans and maybe that's a little hard to see because commingling. But just anything else that you think is suggesting that that's occurring in the market?

I'm not sure I know how to interpret that question. We know that they're gaming. We expected gaming, we're seeing gaming. We think there's a limit to how big gaming can get. And so I don't know what -- the anecdotal is what you see with ROCCAT and WM. I mean that would be your anecdotal evidence of how much is happening and who's doing it. But I mean it is a reality that there will be gaming. I mean the structure that's been put in place invites lenders and originators to score shop. And so they will.

Thank you. And our next question comes from the line of Craig Huber with Huber Research Partners.

Great. First, I want to ask, -- on the performance model, given that we're almost into August here, just talk a little bit further about just the usage of it out there, the feedback that you're getting. Where are we at on that right now, please?

Yes. So just to be clear, the performance model is to be distributed through the direct license program with the resellers. That program is not yet live. And we thought it would be live months ago, but it's not yet live because it's waiting on a certification from 1 of the GSEs. So I can't speak to usage of the performance model because it's not available yet. It's theoretical until it gets certified. .

That said, are we hours away, days away, weeks away? I mean this isn't that hard thing to do. The market wants the model. It gets us -- we're happy because it gets a lower price point out to the market and makes us more competitive. -- the lenders who want it, really want it. The resellers want it. So I think we're in a waiting game here to get certified.

And there's really no commentary you can give like on a nonconforming part of the market for the usage of it is -- is that also tied to the conforming piece. So there's not really much uptick there either. This is all a waiting pattern ?

We have not offered it. Just to be clear, we have not offered it there. it's offered in -- it is to be offered through the direct license program, and that is not live yet. .

Okay. And my other question on the software side. I just wanted to understand this a little bit better. Obviously, your software revenue in aggregate was up 2%. On-premise and SaaS software up, call it, 5% year-over-year. Your costs looked like were up about 12% year-over-year, similar cost growth to the March quarter. Just what's going on there with the cost growth significantly outpacing the revenue growth?

Well, so there's a couple of pieces there. So on the revenue side, we have a lot less point-in-time revenue, significantly less point in time revenue. So that's essentially revenue that it's lumpiness, but there's still a little bit of that lumpiness in the model. We have less of it than we had in the past, and we'll have less going forward.

So there's that piece. And then this quarter, we had a pretty significant uptick from FICO World, which is a bigger event than what we had last year. And then we had some other kind of AWS that is increased to as the SaaS piece has gone up. And we've done some investing on that side. So I mean, there's -- we've done some investing and you're going to see the margin growth probably next year, you'll start to see some growth off of that.

But there is some lumpiness on the software point in time side that will give you some lumpiness in the margin.

Thank you. Our next question comes from the line of Rayna Kumar with Oppenheimer.

So even with the DLP, the credit bureaus are likely to remain large customers of FICO. So I'm just wondering if you can comment on how your relationship with them has evolved over this process and where you stand now?

That's a great question. We get along great with the bureaus. They are our partners. We get a lot of revenue from them. They are our channel partners for our Scores IP. We sell into lots of other verticals with them -- and it's been a strong, healthy relationship. And then particularly with Experian, we have a big consumer business together.

So I would say healthy and strong relationship. But at the same time, we're now competing in mortgage scores, and that's not a secret. We're obviously doing it. They've been pushing Vantage for 20 years, and now they're finally getting a little bit of traction in mortgage because of the lender Choice program. And so is that a thing that stands between us and being the best of friends, yes. But I would say the relationships are strong, healthy and we will compete in this space.

Thank you. Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.

All right. Good afternoon, everybody. Thank you for being here. We're happy to continue our session here with FICO. We have CEO, Will Lansing; and CFO, Steve Weber. So thank you both for being here.

Well, maybe -- I guess let's take a step back. I think there are some newer investors in the space now. Obviously, your stock has been under some pressure for a while. So maybe kind of from your perspective, what is the FICO pitch today from your perspective? Because you guys keep obviously buying back shares every opportunity you get.

Yes. Well, I guess just on that point, we're kind of a slow-moving LBO. We have been buying back our stock for a very long time. We started at 74 million shares. And when I joined the Board, we were at 36 million shares. When I became CEO in 2012, we were at 30 million shares. Today, we're at 23 million shares. So what we do is we take our cash flow and we buy back stock and lever up and our cash flow grows, and then we buy back some more stock and lever up a little bit more and trying to keep the leverage up in kind of a 2 to 3x range. So that's the capital side of the equation.

And then the business has just gotten stronger and stronger and stronger for -- well, certainly for the last 14 years. And we see a pretty bright future. We're a little surprised at where the stock price is, frankly. We're kind of trading at multiples that surprise us. And maybe it's just worth going back in time and giving you a little bit of the FICO story. So you kind of have a level set on where we are.

But I guess before I do that, I'd remind you, take a look at the charts. We had well over a decade of kind of rocketing to top decile performance on TSR. And then in the last 15 months, we've been pretty beat up, mostly because of fear about some political things going on in Washington and our mortgage business. So I'm sure we'll spend more time on that.

But again, by way of context, just maybe a few minutes on FICO history and how we got here. Well, actually, just a show of hands, how many of you guys know the story, the FICO story. You guys know nothing about us. That's fine. So it's a good place to start. The company was founded in 1956 by a mathematician and an engineer. And the idea was let's apply analytics to data and make better decisions. And so for 30 or 40 years, that was the business. It was a consulting business, a body business of doing that. We built scorecards, proprietary scorecards for banks because banks had big money decisions, it was worth taking the time to invest in a better decision. That went on.

In the 1970s, we got this idea that maybe we should try to build a software business, too, because if we have software, if we embody the analytics and software, we'll be able to get returns to scale, make money while we sleep, we won't just be a body business. So we started a software business.

We took the half dozen questions that banks asked us most frequently, and we built applications around them. So originations, should we or should we not make this loan? Customer management, line management, should we increase this person's credit card line? Should we decrease it? If we increase it, should we decrease something else, some other risk somewhere else, fraud, fraud detection, collections and recovery. So these were the big areas where we had applications. And we built a really substantial software business through the '80s, '90s, 2000 and on around these franchises.

I took over in 2012, and we made some changes. On the software side, we went to a cloud model from an on-premise model, and then we also put a lot of energy into building out the technology stack so that we're not just an applications business anymore. We are a decisioning platform. We're a true platform. And it took a lot of years to achieve that success, but that's kind of where we are now. We'll spend more time on it if we have time at the end.

On the score side, in 1987, we decided instead of building proprietary scorecards for each bank, what we would do is build a generic scorecard that could be used by any bank. They just show up. They don't have to give us any special parameters. We did that in partnership with Equifax, and it was wildly successful. We kind of made this thing that made it super easy for lenders to evaluate credit, low-cost evaluation of credit. And this is also in response to the fair lending laws that want you to demonstrate that there's no discrimination in the way you do your underwriting and scores are completely clean and science-based.

Then we had this idea that we should build the same kind of a score with the other bureaus. So in the U.S., there are 3 bureaus, Equifax, Experian and TransUnion are the big 3. And so we went and built scores with Experian and with TransUnion as well as with Equifax. And what we did was we aligned the odds to score ratio across all 3 bureaus the same.

So what that did was effectively say a FICO score is the FICO score regardless of where you get your data, regardless of which bureau you use. You can imagine how popular that was with the lenders. I mean it commoditized the data at some level, and it gave them a lot of leverage versus the data providers because they could easily switch from one bureau to another. So pretty popular. That went on.

And we had the lenders liking it. Regulators got into it. They thought that it was pretty useful for them because they could measure the risk of the banks that they're regulating, what's the average FICO score of the portfolio, how it will behave in a downturn. And then the securitization market evolved, and they needed a metric for pricing the risk and the most obvious one was FICO. And so pretty much all your asset-backed securities, your mortgage-backed securities all come with an average weighted FICO score so that people actually know what the paper is worth.

And so now you've got lenders, you've got regulators, you got the securities, the investors in the securities market. And then finally, we've got consumers on board. We give them their score for free. And so there's a lot of demand pull for FICO scores. So that's the -- that's how scores got to be the industry standard that they are and kind of positioned us where we are.

Another wrinkle starting in -- about a decade ago, we started raising prices for scores. Why did we do that? Well, for 30 years, we didn't raise prices for scores because our pricing was hardwired into our contracts with the bureaus. We distribute our scores through the bureaus, and so the prices were all fixed, and we never changed them. And you should just talk to my predecessors about why.

And I decided we should have the flexibility to change our pricing and 30 years is too long to go without a price increase. And so we started changing our prices about a decade ago. And so every year, we're in the business of trying to capture some of the value that's been left behind. I mean that's really -- the story of FICO is we have a mountain of IP that has been undermanaged and undermonetized for decades.

And we're in the process of figuring out how do you monetize that with the least amount of disruption to the markets with the -- in a steady and continuous way, march up the value -- march up the monetization of the value. And so that's what we've been doing.

In mortgage, in particular, we've raised prices. If you read the bad press, they focus on the percentage increases that we've raised prices, and it's true. We've raised prices from $0.05 years ago to $10 today. But remember, that's $10 out of $6,000 of closing costs. So it's still kind of a trivial number in the scheme of things.

But what's happened is it turned into a headline. Our mortgage price increases turned into a headline for the populists in Washington and in particular, for the Director of the FHFA, who's very pro-competition, very focused on how do I make housing more affordable in the U.S. One of the things he's looking at is closing costs. And so among other things, he's questioned our pricing. And I think that we've actually responded by coming out with some new pricing models, some innovation that I think he likes where we have an option to buy mortgage scores from FICO for $0.99.

So that's a big step in the direction that I think he was looking for. But I would say the noise in our stock is almost entirely tied to that. There might be a little bit of spillover from the AI software scare, but I think that's pretty minor. We never got much credit for software before. So I don't know how much we should get bashed for it now. We are very happy with the software business, grew 49% last quarter on our new platform. So strong business. So that's the background.

All right. Helpful. We'll get into some of the noise, but maybe, Steve, you can help here. But like with that history, with the current context around pricing and mortgage and so forth, is there a long-term algorithm -- financial algorithm that the audience should keep in mind, whether revenue, EPS?

Yes. I mean we don't have any issued numbers. But if you look at our past, you can kind of see that we've been pretty consistent. So we do target internally. We want to maintain the same pace that we've done in the past. So we try to get in at least into the teens of revenue growth, which could drive us into the 20-plus percent with margin expansion in -- of net income. And then a lot of times, that can be above 30% with EPS with the buyback. So just rough justice, that's how we've been looking at it. And that's -- as we make plans for the coming year, that's what we try to target going forward.

Got it. Okay. Well, let's jump into the mortgage market and the political noise you're referring to. So we just had MSCI before you. We had S&P in the morning. Those indices, there's a lot of competition, but once you're the benchmark you're the benchmark. The way you described it, FICO is the benchmark. Obviously, Director Pulte has implemented a lender's choice allowed or in the process of allowing VantageScore to come in. From your perspective, how do you see the potential shifts in the market if and when they are approved?

Well, we'll see if Vantage gets any share at all. I mean we've been competing with Vantage for over 20 years in every other market outside mortgage, and they have no share. They push a lot of scores and the way they do that is by sending them along for free. So if a lender asked for -- asks a bureau for a credit file and a FICO score, they'll often get the VantageScore sent along for free. And that's where the big numbers come from. But I'm not exactly sure that should be considered market share because nobody asked for it and nobody paid for it.

In mortgage, remains to be seen whether having an option for VantageScore gets you anywhere. I would say that the value proposition is still pretty thin. So why would someone buy a VantageScore? If they're buying it because they're interested in credit default risk and predictiveness and certainly, the entire nonconforming market cares about credit default risk.

And I would say that the conforming market also cares about credit default risk, because it comes back to haunt them, if the loans go bad, it does -- a lot of those loans are put back by the GSEs to the originators. So they also care about credit default risk. If that's what you care about, FICO 10T is 8% more predictive than Vantage 4 and FICO 10T qualifies 5% more borrowers than Vantage 4. So predictiveness is not going to get you there from a value proposition standpoint. So then you say, well, what about on price? Maybe somebody cares about price. And even though we're talking about a very small price in the scheme of things, is there someone who cares?

And on that, I'd say our new pricing model at $0.99 meets VantageScore pricing at $0.99. So I don't think there's a reason to move for price. So that leaves you with one and only one reason to buy VantageScore, and that's if you're trying to game the GSEs. And that's real. That's not hypothetical. I mean any time you have a 2 score system, one score is always better than the other. So when you -- typically, you would give a better price to the better score.

So if Fannie and Freddie are constantly being presented with the better of 2 scores, they're being gamed. And frankly, what will occur in the long run, if anybody does this gaming. What occurs in the long run is that the nonconforming market, the lenders in the nonconforming market will skim off the best credits out of the conforming market and leave the GSEs with the inferior credits, which will cost Fannie and Freddie quite a lot. That is the likely outcome of gaming.

But I would caution you just by saying that the addressable market for gaming is fairly limited. It's under 10%. So if you look at the rules that came out last week, which are you need less than 80% loan-to-value, meaning you have to put down 20% or you can't get the mortgage. So for Vantage, you need 80 -- less than 80% loan-to-value and you need -- there's not actually a separate Vantage LLPA grid. That's the pricing grid. There's not a separate one for Vantage. What they did was they said, take a Vantage score, subtract 20 points and jam it into a FICO LLPA grid, which is suspect science. But anyway, that's what they've done. And if you work through all the math on it, and I'll spare you guys the math today, it takes you to about a 9% addressable market.

And I guess just to be clear, that in the gaming, in order to gain, don't you just have to pull both scores all the time. So...

Well, yes, great point. So there's no volume loss. So if you have to pull both scores in order to compare them to do the gaming, our volume doesn't go down. You're still pulling a FICO score. But the overall market for scores volume went up a little bit. So yes, we could have -- technically, we could have share loss, but no volume loss. That's theoretically possible.

Got it. And then the $0.99, yes, you've matched kind of the upfront pull fee. But in the performance model, you do have the $65 closing fee per report. So how do you think the lenders originators market will address that when they're trying to compare whether they want to save money or not?

Well, that's money that's paid by the consumer. Now ultimately, of course, consumers pay for everything. We know that. So it's really about kind of what bucket you put it in. But the industry has always tried to push cost to the closing statement and out of their own P&Ls. And that's why we have RESPA laws. The RESPA laws are designed to keep that from happening really to ensure that the only cost that go into a closing are appropriate costs that have something to do with the closing.

And to that extent, what we've done is matched them perfectly because there's nothing that's closer to what the closing is all about than you've got your mortgage successful funding fee. So I think that we're actually helping the lenders with this. In terms of their true cost to themselves, it's identical, whether they're paying $0.99 to Vantage or $0.99 to FICO.

Got it. And in order to get that $0.99 to FICO, they have to go through the direct -- the DLP model.

That's correct.

Through you guys.

That's right.

It seems like it's been a case of going to be ready in the next month for a few months now. So what's the latest on when the DLP will be out there?

It's going to be ready in the next month. I mean, -- it shouldn't take that much longer. We're waiting on certification from the GSEs. They're supportive, the director is supportive. It's a matter of time.

Okay. And all that you described on the lenders want 10T, $0.99 takes care of the cost. Once DLP is live, how fast and how much adoption should we be looking out for?

Well, no one really knows, but I think that there's a lot of demand for the performance model, which will only be available through the tri-merge resellers through the DLP model. And our economic analysis says roughly half the market would prefer the performance model over the per score model. And the tri-merge resellers have the, by far, the lion's share of the market. Almost all the scores are purchased ultimately through the tri-merge resellers. So it could easily be half. It could get to half certainly within a year.

Got it. And I think it's probably worth spending a little bit time on the 10T independent study that was put out recently because I think VantageScore obviously claims should be better than the FICO Classic, which might make sense because it was developed so many years later. But can you just talk about -- this was a second iteration of the independent study, I believe. So what changed? And what are some of the stats again and why 10T is much better?

So I would encourage people to go to the FICO website and read our white paper on it, and you can go to Milliman, which is the independent third party that did the analysis and read there. It's quite technical. But they've done a scientifically rigorous assessment of 10T versus Vantage 4. And we are better on predictiveness. They actually go through the gaming issues with the 2 score system and identify the costs around that. So I mean it's worth a read, but it's quite technical. There's probably other things you'll read before you read that. Just take my word for it. FICO [indiscernible].

Okay. The FHFA had a press conference recently and actually 2 questions. The first one is, I think the Director Pulte had mentioned that he had a conversation with you around this $0.99 pricing model. And then he had also mentioned a few times, it sounds too good to be true, so I'm going to make sure there's nothing in there. But I guess I just want to confirm, he knows of the performance model and the closing, the $65, that's not going to be new to him?

Absolutely. No, no, no. He's a smart guy, and he's completely aware of the structure, and I think he supports them.

Okay. The other main thing for their conference is obviously the pilot. I guess they've selected 21 lenders to try and test out VantageScore. It's a little bit of a black box, gray box, whatever, for a lot of us. Anything your mortgage team and Julie may have shed any insights you can share with us?

There's not a lot to know there. I mean all those lenders, whoever they are, are under NDA, I can't talk about it and can't disclose. And so very little is known. We know some of the rules around accepting the VantageScore, the 20 points and the 80% loan-to-value. So -- but other than that, I can't tell you much. I don't know. I think it's a manual process. Not sure.

Okay. Maybe the other thing you might be able to tell us about is the 10T data has not yet been released. They said in the coming months, "summer." What is the holdback for when that gets released? Once that gets released, do you have to go -- do these 21 lenders have to go back and test that as well?

Don't know the answer to that. I know that the GSEs are working on it and intend to release. I mean, I think they mentioned the press conference early summer. So we're kind of waiting for them to do that. They have their own processes and procedures, and they're working their way through them, and we fully anticipate that it will be released, but we don't have a time line.

Got it. In terms of 10T, though, when it does come out, I think historically, you've talked about how even today, the mortgage market is using FICO version 4 and 5. So how quickly do you think 10T can be adopted or even the S4 like...

10T is being adopted fairly quickly in the nonconforming market. So it can be adopted. I do think there's a ton of inertia. I think if you ask the industry, do you want to change, they would say no. They would like to just stay with FICO Classic forever. But we are seeing adoption in the nonconforming market. And then once all of Classic Vantage 4 and FICO 10T are accepted in the conforming market, it's a little hard to say. I mean you could see a shift. I mean there's -- if you were going to shift, you should shift from Classic to 10T because you'd get more predictiveness out of it. But again, all the systems models, everything is designed around classic. So we'll see how long that takes.

Got it.

There's also an advantage we can run -- I mean you run 10T in parallel with Classic FICO, right? That's what's happening in the nonconforming market. So from that point of view, it's easier to run them both at the same time, compare the results and do some forecasting on that.

Got it. And in the past, you've talked about it's a heavy uplift to switch from scores, but -- or go from the classic to something totally different like a VantageScore. What is the lift like to go from Classic to 10T?

It's a little easier. So the reason -- FICO scores are designed to be backward compatible with prior generation FICO scores, and they always have been right up to FICO 10. FICO 10 is backward compatible with FICO 9. FICO 10T uses trended data. So it's not perfectly backward compatible. It's a little bit different. But I would say that 10T is architecturally very similar to prior FICO scores. It leverages the same kind of weighting, same attributes. And so the -- if you were going to make some assumptions about how 10T behaves relative to Classic, 10T will be a lot closer than Vantage 4 would be.

Got it. The $0.99 plus $65 for FICO 10T, I think, implies a modest price increase versus the $4.95 plus $33 you have for Classic. Some people think that's your 2027 pricing that you've introduced today. Is that the case? Or how should we think about?

No, no, I would say that 2027 pricing is not here yet. We haven't really decided what we're going to do there. Our process is in September -- August, September every year, we kind of review things, decide where it would be appropriate to make bigger pricing adjustments, and then we publish them to our partners so that they can be implemented on Jan 1. So none of that has occurred. Any pricing that you see in the market today is 2026 pricing.

Got it. And with all this noise, with all this change, how should we think about what your price value gap in mortgage is, let's say, it's roughly $10 a score today versus what you think it should be? Because I know you talked about this for years. Before this all began, I think people thought sure it's going to get there, but now I think they're a lot more skeptical. So is your approach changed? Are you going to balance the annual increases differently? Or...

What's a FICO mortgage score worth, right? That's the question. Nobody knows the answer to that. I mean, really no one knows the answer to it. All you can do is look at analog. So if you look at S&P and Moody's, they charge approximately 8 basis points to rate a mortgage-backed security [ each 2 ], so that's 16 basis points, okay? And that's typical. And those securities that they rate AAA rated, guaranteed by the government, they're all AAA rated. So I'm not sure how useful that is.

But they also supply the average weighted FICO score of those securities. And that's what the pricing is built on. The pricing is built on the FICO score, not actually the S&P rating. And I only share that by way of background because we don't charge anything for using our score in that context. We charge 0. They charge 16 basis points and we charge 0 and yet the value is all coming from the FICO score.

Another way to think about it is 16 basis points on an average $400,000 mortgage is a little over $600. We charge $10 for a score. So you guys will have to make up your own minds about what the value gap is, but I would submit that it's quite large and remains so.

Got it. Fair enough. Okay. Maybe one last opportunity on mortgage. Again, we've talked about a lot of noise. What do you think is the most underappreciated or misunderstood aspect of this debate that keeps pressuring your stock?

Look, I think that the FICO mortgage score is deeply, deeply embedded in the system, not just because it's used by the originators to get the mortgage, but everybody downstream uses it. The Fannie and Freddie use that score in their LLPA pricing grids. The mortgage insurers use it in their models for providing mortgage insurance. The credit risk transfer guys, CRT, they use it in their models. The mortgage-backed securities investors themselves use it when they're pricing the MBS. The prudential regulators use it.

So there are lots and lots of parties who are pretty deeply focused on FICO as the cornerstone of the system. So I think changing is very hard. It's just really hard. I mean you can create an option and say, sure, you have an option to use a VantageScore. Guess what? There's an option to use VantageScore in every other market that we have in auto and credit card, in account management and prequal prescreen, you name it. You want a VanatageScore, Vantage will be happy to provide you with one and yet nobody uses them. So how different is it going to be in the mortgage market? We'll have to see.

Got it. That's a good segue into the other parts of the market. So in auto for the last several years, I think you've done modest price increases. In card, it's been inflation type stuff. So maybe just talk on auto firstly, what -- like how do we think about the historical price increases? What's the opportunity going forward?

Yes. I mean we've been, I think, like you said, modestly increasing prices in auto. A lot of it's really understanding the market, understanding the dynamics. There's a lot of different players in that space. There's a lot of value derived from the score. A lot of times, it's the score that determines whether a car is bought or sold. So there's a lot of value there to the dealers, to the people that actually do the financing. So again, we just need to understand the market. And every year, we learn a little bit more and we look at the market and look for opportunities to raise prices there where we think that the value is much higher than what we charge.

Got it. And both in auto and maybe mortgage as well, right, does the forecasted volumes impact how much pricing is going to take?

Yes. I think a little bit. I mean, because in the sense that we don't rely on increases in volume to provide our guidance. So every year, what we do is we sit down, we look at all the data sources come up with kind of a consensus view of the volumes for mortgage or for auto or for whatever. And then we heavily haircut that because we don't believe that most of those are wrong. And because we're conservative. And if you followed us for any time, you know we have a reputation for sandbagging.

So that's kind of where we get to. We don't count on a lot of volume increase to make our numbers. And then what happens is if we really do get a good volume year, which someday we will have in mortgage for sure, we closed 5.8 million mortgages this past year, and the average over the last 5 years is over 8 million closed mortgages. So I mean, there's a lot of room to grow. Volumes will come back someday, but we don't count on that. Our guidance is not built on an expectation about volume increase.

We get questions a lot of times like if mortgage goes up next year, which that means you do less on the pricing side, well, we'll never know, right? So we can't count on that. So we tend to assume that the markets will remain relatively flat.

Got it. And then maybe to round it up, like the card strategy, is that just inflation because it's a high-volume market?

Yes, it's a high-volume market. It's probably -- there's probably more discretion. There's probably more elasticity because you really don't need to score in the same way, and there's not really the transaction that takes place that we have in the other markets. So it's more inflation. There are some pockets there where we will charge a little bit more than inflation, but it's closer to a CPI type price increase.

Got it. Even when and if the DLP program is introduced, the credit bureaus are still going to be your largest customer, whatever the disclosures you have in the 10-K. What are the relationships like with the bureaus now with -- after all this has happened?

Well, I think they improved a lot. I mean, look, it's not a secret that there was some friction. I mean we've gotten along very, very well for -- certainly for the last 14 years. And FICO surprised them with the direct license program. I mean I called the CEOs of the bureaus several hours before we announced it to the world and said, guess what, we're launching an alternate distribution channel, probably the most rattling thing in our industry in a decade.

And needless to say, they didn't appreciate the lack of a heads up, the fact that we just dropped it on them. And of course, it had big revenue implications for them, big profit implications for them. So we caught them off guard. We didn't treat them with the respect that they deserve given our relationship. I mean so I understand why they reacted the way they did.

As you know, they've all recovered, right? They figured out how to go get that revenue by increasing the data, the price of the data. So the hole that was anticipated has been kind of closed up. So I think that's resolved. And at the end of the day, we have symbiotic relationship with them. We need them as a channel. They need FICO scores or else their data is not worth very much. And so it's that combination that keeps us working closely together. And I'd say our relationships are pretty...

Got it. So no potential spillover effects into card and auto? Any plans there potentially?

No, we don't have any plans.

Okay. And how about on the direct-to-consumer side, Experian obviously is a big partner there. Is that a completely separate entity relationship?

They're a great partner there. No, it's not completely separate. It's part and parcel of the whole relationship. They are phenomenal consumer marketers. I would say that they have a very proud of myFICO in our own little consumer business. We give them every opportunity to take the business. We don't compete with them on search words. We -- I mean, we test things. And when they work, we tell them about it. And they've done just a phenomenal job building that consumer business. It's really impressive, and that will continue. We feel really good about it, so today.

Got it. Okay. We have about 9 minutes left. Let's turn to software. Maybe a little bit of a -- not background, but a mix, like what is software? It is a little bit kind of many different things all over the place. So how would you simplify software amongst your top few products or mixes that will help us more?

I think the easiest way to think about our software business is our new software business because the old one is the applications we talked about. The new software business is a decisioning platform and it's kind of next-generation CRM. So the idea is take data from a lot of different places and apply some analytics and with that, make a decision, which you can then feed into a workflow, and that workflow happens in real time. It gets in real time that decision to a point of interaction with the consumer.

So if you're a B2C company, whether you're a bank or a credit union or a retailer, anybody with a B2C relationship wants to optimize that interaction with the consumer to achieve some goal. And it's not always the same thing. It could be they're after revenue, you're close to the end of quarter, and so they're all about conversion, okay? Someone showed up on my website, I just need them to convert and buy something and put a few more dollars in the revenue line.

Or maybe revenue is fine, but profit is what matters. So let's emphasize for this customer, things that are more profitable for us or maybe those are fine and we want to focus on lifetime value. How do we get this customer from this category to a more valuable category, even though the conversion rates will be lower. The objective function can change. It can change at any time. And it should change. It should really change depending on what the management of the business wants it to do.

But what should be consistent is never interact with a customer without taking into account everything you know about the customer. So if you've had 25 transactions with a customer over the prior 24 months, how about we use that knowledge in what we do with that customer. So what we expect is when you show up, we know your brand proclivity, we know your price elasticity. We know what makes you tick. We know how to get you to respond to whatever it is we want you to do. That's what FICO software does. And it does it better than anybody else's. There's nothing that comes close.

A lot of B2C companies have tried to build this themselves. Usually, we don't compete with other software companies. We compete with homegrown because there really are no solutions quite like ours on the market. And then we are so much lower cost than them building it themselves. They'll go to do something that's halfway as good, they'll spend $100 million or they can buy ours for $15 million. And so that's kind of the dynamic. So it's very popular. We're growing really fast.

So maybe just to follow up there. Like you said, a lot of -- the way you described it is a lot of software companies, a lot of analytic companies try to say the same thing. What is the secret sauce? Like are there some key IP assets, brands within that, that help you keep growing at this rate?

Well, if you think about part of the reason that you don't see a lot of analytic software companies is it's really, really hard to put analytics into software. That's because what do analytics do? You ask a question, you're looking for an answer to a question, and then you have to figure out which data is the right data to answer that question. And then you have to figure out what's the right analytics technology to put on that data to get to the answer you want and do that all in real time. That's a very complex equation. I mean it's just really hard to do. And we've mastered it over 40 years. and no one else has.

Got it. And maybe to that point, AI, the new LLMs are they making life easier for you? Are they introducing more competitive threats? What's -- how do you evaluate that?

For us, it's good on all counts. So we get the same productivity benefits that any software company would get from no longer having to write code, right? So that's a labor saving. But more importantly, we think that all of the adjacency -- the core of our platform is decisioning. We think that all of the adjacencies lend themselves really well to AI-driven agentic behavior. So.

I don't know, let me give you an example. We try to detect fraud. And so we'll go in and look at millions and millions and millions of transactions and try to identify patterns and profiles and figure out what looks odd. And when we find those things, we either -- if it looks okay, within 17 milliseconds, we say, looks good. And then the rest of the time, it's an exception. It gets kicked out to a fraud analyst.

Well, the fraud analyst takes that exception and studies it and looks into your accounts and checks your -- checking account balance and other kinds of things and makes a determination, not in 17 milliseconds, but maybe in a half hour. In our view, an AI agent could do what that analyst does in another 30 seconds. So instead of 17 milliseconds, we get the exception, kicks it out and now we have an AI agent that does what the fraud analyst used to do. So I think that the banks are going to get tremendous savings out of applying agents to the outcome -- output of our software.

Got it. And maybe the last question in the last 2 minutes here. It sounds like a really neat decision platform. You've been accelerating growth recently, doing very well. What is the vision for software? How do you -- it's still relatively small in the scheme of software. So how do you scale it to the heights that you probably want to take this?

I think if we keep growing the new platform at over 40% a quarter, it will scale to new heights very quickly. It has been growing really fast. I mean it's now -- the new platform is 1/3 of our total software business and growing much faster than the rest. The rest of it is pretty much flat.

And so we've got the growth. And we'll see. I mean, I think -- and also our model is a land and expand model. So anything we land, we typically get a lot more revenue out beyond that. Our dollar-based net retention revenue on the platform is 136%. So you can see that the customers who buy it buy more. I mean that's kind of what that means.

We'll see. We don't have -- every time once a while, I get asked questions about you're going to sell it or spin it off. And of course, that's a question the Board asks once a year. But we have no intention of doing that anytime soon. Right now, software is not in favor. This wouldn't be a great time for us to spin it off anyway, but we really think it's undervalued and underrecognized.

Okay. Cool. All right. We'll leave it right there. Thank you. Appreciate your time.

Thank you.

Thank you.

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 FICO Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Dave Singleton. Please go ahead, sir.

Good afternoon, and thank you for attending FICO's second quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing; 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 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 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. And a replay of this webcast will be available through April 28, 2026. We have refreshed our quarterly investor presentation with additional content, which is available on 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 second quarter earnings call. We had a very strong quarter and a great start to the first half of our fiscal year. Based on our results and outlook, we are increasing our fiscal 2026 guidance. We reported Q2 revenues of $692 million, up 39% over last year, as shown on Page 5 of our investor presentation.

For the quarter, we reported $264 million in GAAP net income. in the quarter, up 63% and GAAP earnings of $11.14 per share, up 69% from the prior year. We reported $297 million in non-GAAP net income, up 54% and non-GAAP earnings of $12.50 per share, up 60% from the prior year. We delivered free cash flow of $214 million in our second quarter. Over the last 4 quarters, we delivered $867 million in free cash flow, an increase of 28% over the prior 4 quarter period.

In Q2, we continued returning capital to shareholders through share repurchases, buying back $605 million or 484,000 shares at an average price of $1,251 per share.

At the segment level, shown on Page 6, our second quarter score segment revenues were $475 million, up 60% versus the prior year. While B2B scores were the key driver of growth, we also experienced the sixth straight quarter of growth in B2C scores. In our Software segment, we delivered $217 million in Q2 revenues, up 7% over last year. Results included 54% platform revenue growth and a 12% decline in not platform revenue.

Steve will provide additional revenue details later in this call. Last week, we issued a statement on our website in response to the FHFA and FHA update on credit for modernization. We applaud the FHFA and FHA initiative to get FICO Score 10T into the market in the coming months. FICO Score 10T is the most predictive credit score for all borrowers, including first-time home borrowers. FICO Score 10T incorporates rental and utility payment history, enabling more consumers to qualify for mortgages.

To support the goal of increased homeownership and bring the benefits of increased competition to the marketplace, we updated our FICO Score 10T performance model pricing in the FICO mortgage direct licensing program from $4.95 per score plus $33 funding fee to $0.99 per score plus $65 funding fee. We anticipate the release of FICO Score 10T data and the time line provided by the FHFA and GSEs. In the last quarter, we added 11 more lenders to our FICO Score 10T early adopter program.

As a reminder, through this program, FICO Score 10T is made available for free with the purchase of classic FICO. The 55 lenders in the program account for more than $495 billion in annual serviceable originations when evaluated using 2025 HMDA data and more than $1.6 trillion ineligible servicing. We're moving closer to the go-live dates of our next-generation cash flow Ultra FICO score with our strategic partner plat. and the FIFO mortgage direct licensing reseller partners. We continue to actively work alongside participants to support testing on both initiatives.

As AI adoption accelerates, we recognize the need of stakeholders to weigh the associated opportunities and risks. At FICO, we view AI as a tremendous opportunity that we've committed significant resources to for several years. In the Scores business, AI is limited by strict regulatory requirements on credit underwriting outcome explainability and model governance. In addition, our scoring models are supported by proprietary data access, mainly with the credit bureaus and deep ecosystem integration. Across both businesses, FICO has been issued 137 AI-based patents, which include patents and blockchain technology that are helpful for traceable and explainable decision-making. the type of market-leading innovation that will be in high demand as businesses seek ways to safely deploy AI analytics in highly regulated industries.

In our software business, as shown on Page 13, FICO platform is architected from the ground up to be agentic by design. That foundation delivers decision grade analytics, deep domain expertise, and an enterprise platform that clients depend on for precision, consistency, explainability and trust. These principles are nonnegotiable for our primary target market, the highly regulated financial services industry.

FICO platform is the world's leading AI decisioning platform for financial services recognized as such as a leader by Gartner, Forrester and IDC. Its agentic architecture power is a real-time, always-on customer profile engine that delivers hyperpersonalized consumer experiences where every interaction can inform and improve the next. There are over 150 clients globally using the FICO platform across multiple connected use cases to power their customer experience, business critical operations, risk management and fraud monitoring and prevention.

FICO platform brings together multiple functions within an enterprise in a common operating environment and enables them to operationalize AI at scale to drive real business outcomes. Financially, a substantial majority of our nearly $315 million platform segment annual recurring revenue is driven from FICO platform. Financially, a substantial majority of our Platform segment annual recurring revenue, approaching $350 million and growing rapidly is driven by the FICO platform, reflecting years of proven commercialization.

FICO transformed 70 years of proven deep domain knowledge into validated expandable AI that powers the most consequential business decisions with that expertise embedded directly into the agents, models and guardrails that operate on the platform. FICO platform accelerates client innovation by providing clients with the ability to build, test, optimize and monitor decisioning across the enterprise. With FICO AI-guided operations, clients create a self-reinforcing cycle of value generation, reinvesting outcomes back into the platform by enabling additional use cases, driving further value for their businesses.

FICO platforms marketplace and FICO assistant unlock broader capabilities that compound with scale. Every new mode, agent and integration from the ecosystem strengthens the customer profile engine and accelerate consumption of proprietary capabilities across the platform. At FICO, AI is already driving meaningful results today while creating significant opportunities that we are well positioned to capture.

I'll now pass it back to Steve to provide further financial details.

Thanks, and good afternoon, everyone. As Will mentioned, our Scores segment revenues for the quarter were $475 million, up 60% from the prior year. As shown on Page 16 of our presentation, B2B revenues were up 72%, primarily attributable to higher mortgage origination scores unit price and a recent volume of mortgage rising. Our B2C revenues were up 5% versus the prior year, driven mainly by our indirect channel partners.

Second quarter mortgage originations revenues were up 127% versus the prior year. Mortgage originations revenues accounted for 72% of B2B revenue and 63% of total stores revenue. Auto originations revenues were up 13%, while credit card, personal loan and other originations revenues were up 6% versus the prior year.

For your reference, Page 17 of our presentation provides 5-quarter trending of our scores metrics. As in the past, our updated guidance assumes conservative score volumes. And to reiterate, we do not anticipate share loss to competition in any vertical.

Turning to our Software segment. Our software ACV bookings for the quarter were $28 million, as shown on Page 18 of our presentation. On a trailing 12-month basis, ACV bookings reached $126 million this quarter, an increase of 36% from the same period last year. With our strong pipeline, we expect bookings in the second half of the year to exceed the first half of the year. Our total software ARR, as shown on Page 19, was $789 million, a 10% increase over the prior year. Platform ARR was $349 million, representing 44% of our total Q2 '26 ARR.

Platform ARR grew 49% versus the prior year, while non-platform declined 8% to $440 million this quarter. Platform ARR growth was driven by both new customer wins as well as expanded use cases and volumes from existing customers. Platform ARR growth includes the onetime Q1 liquid credit solution migration and Q2 CCS migrations from non-platform to the platform. Excluding those migrations, our platform ARR growth was in the mid-30% range.

The non-platform year-over-year ARR decline was driven by migrations, end-of-life products and some usage declines. In our CCS business, which contains both platform and non-platform, ARR growth was relatively flat. Our dollar-based net retention rate in the quarter was 109%. Platform NRR was 136%, while our non-platform NRR was 90%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases.

Second quarter software segment revenue is detailed on Page 20 were $217 million, up 7% from the prior year. Within this segment, our SaaS revenues grew by 19%, driven by FICO platform. Our on-premises revenue declined 4%, year-over-year, our platform revenues grew 54%, driven mainly by the success of our land and expand strategy. nonplatform revenues declined 12%, driven mainly by migrations.

As a reminder, our FY '26 revenue guidance reflects an expectation of lower point in time revenue throughout FY '26 due to fewer nonplatform license renewal opportunities compared to the prior year. From a regional point of view, 90% of total company revenues this quarter were derived from our Americas region, which is a combination of both our North America and Latin American region. Our EMEA region generated 7% of revenues and the Asia Pacific region delivered 3%.

Operating expenses for the quarter, as shown on Page 21, were $289 million this quarter versus $278 million in the prior quarter, an increase of 4% quarter-over-quarter driven by personnel expenses. We expect operating expense dollars to trend modestly upward from the Q2 run rate into the back half of the fiscal year, driven mainly by personnel expenses and marketing for both FICO World and our Scores business.

Our non-GAAP operating margin, as shown on Page 22, was 65% for the quarter compared with 58% in the same quarter last year. We delivered year-over-year non-GAAP operating margin expansion of 712 basis points. The effective tax rate for the quarter was 25.7% and we expect a full year operating tax rate of 25% to 26% and an effective tax rate of around 24%. At the end of the quarter, we had $272 million in cash and marketable investments.

Our total debt at quarter end was $3.64 billion with a weighted average interest rate of 5.5%. This includes the March issuance of $1 billion in senior notes due 2034 which used some proceeds to fund the redemption of $400 million in senior notes that were due in May. As of March 31, 2026, 93% of our debt was held in senior notes. We had $265 million balance on our revolving line of credit, which is repayable at any time. We anticipate interest rate expense dollars to trend modestly upward from the Q2 run rate into the back half of the fiscal year.

As Will highlighted, we continue to return capital to our shareholders through buybacks as shown on Page 23. In Q2, we repurchased 484,000 shares for a total cost of $605 million, representing the single largest quarterly repurchase in dollars in FICO history. We continue to view share repurchases as an attractive use of cash. With our recent $1.5 billion Board authorization, strong free cash flow and unutilized revolver, since April 1, we have bought an additional $170 million or 164,000 shares at an average price of $1,040 per share.

And with that, I'll turn it back to Will for closing comments.

Thanks, Steve. As we approach the start of FICO World 2026, which is going to happen on May 19 through the 22nd in Orlando. We look forward to showcasing our continued innovations. The event brings together customers and partners from around the world to explore how real-time scalable decision-making is transforming consumer engagement. We remain focused on enabling deeper customer relationships through always on personalization that drives strong business outcomes.

The conference also provides a form to connect with industry experts, share best practices and advanced initiatives that drive financial inclusion. We had a great first half of our fiscal year, and I'm pleased to report that today, we are raising our full year guidance as we enter the third quarter.

As shown on Page 24 of our presentation, revenue guidance is now $2.45 billion, an increase of 23% versus prior year. GAAP net income guidance is now $825 million with GAAP earnings per share of $35.60, an increase of 27% and 34%, respectively. Non-GAAP net income guidance is now $946 million with non-GAAP earnings per share of $40.45, an increase of 29% and 35%, respectively.

With that, I'm going to turn it back to Dave, and we'll open up for Q&A.

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

[Operator Instructions] Our first question is going to come from the line of Jason Hass with Wells Fargo.

I'm curious to start, Will, if you could talk about the philosophy behind adjusting your pricing model going to the $0.99 upfront. I appreciate some commentary.

Yes. Absolutely. So that's a step and direction we've been talking about now for several years. I mean, we have historically charged upfront for score. That's the historical way we've always charged for our IP, but what that does is it doesn't spread the cost across the rest of the value chain. And so a lot of the beneficiaries of the IP are not really paying for it. And so we have that cost concentrated upfront. The whole idea we had moving to the performance model is to give us more flexibility so that we could distribute the monetization of that IP over more players across the chain.

And so that's really what we've done. In this most recent move to $0.99, plus a $65 funding fee, the idea was to encourage adoption of FICO 10T because we think that the most powerful thing that we can do is really get FICO 10T established. And obviously, it's already established in the nonperforming market. But we'd really like to encourage wide use of 10T and so this kind of pricing is designed to encourage that.

Great. That certainly makes sense. And then now that Vantage score is available to be used on the conforming mortgage market, do you expect what percentage of lenders do you think would shift fully away from FICO to just using Vantage score? Or do you see most lenders if they are going to use Vantage scores, if you see them also pulling FICO during the mortgage process and then submitting the score ultimately that's most favorable to that into the GSEs?

I suppose we'll see how it turns out. But if you think about the decision process for those who purchase scores, if they're after the most predictive score 10T is the answer to that. If they're after price, then I think we have parity 10T at $0.99 is at parity with Vantage at $0.99. And so on both predictability and price, we think we're highly competitive and frankly, don't see good reasons to switch. Now depending on how the FHFA decides to handle the gaming problem, there may be opportunities for Vantage based on the gaming. And so we'll just have to see how that unfolds.

Although our analysis suggests that in a gaming scenario, if there's true consumer shopping for the best rate and the system is going to be gained in that way, that originators and lenders would wind up pulling both scores.

Our next question will come from the line of Manav Patni with Barclays.

Will, for the 10T adoption, obviously, that $0.99 is only available through the direct loan model that you have, TLT model. Can you give us an update on when that's going live, what the feedback right now is with lenders and kind of adoption that you expect there?

Yes, absolutely. So there's a few pieces to getting the direct license program live and they're mostly in place. We're working on the last kind of final details now. So we have 3 of the top 5 major resellers signed up, we are in deep discussion with the other 2 and fully anticipate that all 5 of the big resellers will be able to provide the direct license program. We also see a great deal of interest from the lender community for this performance-based pricing model.

So there's a pent-up demand, and we anticipate quite a lot of usage of this model once we get direct up and running. We do still need FHFA final sign-off on having the resellers calculate the score. But we don't anticipate any issues there because the math is identical and the score, we've tested and the score calculated by the resellers is the same score that calculated by the bureau. So it's on the same data, and it's the same methodology. So -- although I can't give you a date, I can tell you that we're closing in on it.

Okay. And then just in terms of the historical 10T data coming out sometime in the summer, maybe just some help on how that process works? Like will there be another pilot like they're doing now with Vantage Coal once 10T is out and we're only looking for something realistically in 2027 for both to be ready to go fully live, I guess?

Well, the FICO 10T data, as you know, is with the FHFA and the GSEs, and it's up to them to decide when to release it. There's certainly a lot of market sentiment for being able to evaluate 10T and AdVantage at the same time. And certainly, by the time the GSEs accept truly accept AdVantage I think the market would like to be available as well. So there's some market pressure to get this done, but I don't have the time line.

Our next question will come from the line of Simon Clinch with Rothschild and Redburn.

Will, I was wondering if you could just cycle back to the question of investment. I think it was Jason asked about the pricing of 10T and your comments that it's at parity at just. I was wondering if you could talk about the philosophy or like how you think lenders will treat the successfully in that kind of mutation and how we should think about that dynamic in that sort of comparison?

Well, I think the beauty of the way we've structured this is that mortgage originators and lenders have a choice. They can continue to buy the score, the way they always have on a per-square basis, or if they prefer they can move to the $0.99 plus funding fee. And the idea there is that it encourages very widespread use of the score in the prospecting phase, in the customer acquisition phase and figuring out who's qualified for a mortgage. And frankly, with the goal of trying to encourage more housing and more mortgages, making the upfront score cost very low is likely to support that.

And so it really is up to the lenders, which model they prefer, and we leave it to them. we are -- I've said before, we're largely indifferent as between the 2 models because it's about revenue neutral for us either way. But I think that each model meets the needs of different customers for the score in different ways.

Understood. And just as a follow-up to the reseller readiness right now. I mean I understand we're getting close to go live will come to place. The bit I would love to get a bit more color on is just, I guess, what has relative to initial sort of expectations, it feels like it's taking longer than expected. And I was wondering if you could talk about sort of what has been behind some of the prolonged process here?

I think that some of the expectations were a little on the optimistic side. We certainly didn't think it was going to happen in a couple of months. We thought that it would take a while to put this together. It's a pretty complicated program, not a complicated program, but it's -- there's enough moving parts that require validation and testing that we knew it was going to take some time. This much time, I would say, we actually believe that it would be up and running by now. I would say that we're close and as I said earlier, it's really up to the FHFA to sign off on the calculation of scored by the resellers and then we're pretty much there.

Our next question comes from the line of Surinder Thind with Jefferies..

Well, just following up on the timing of 10T. Just to understand, is there a sequence of dependencies before the FHFA kind of makes it available in the sense of like releasing the historical data. Obviously, you got to have the systems and everything ready. But are there other things that we should be aware of? Or is it just kind of once the systems are ready, they can release it, whether or not the historical data is available?

No. I would say that there are not a bunch of additional things that no 1 knows about. I think we have to get the 10T data out so that people can test it. and then the GSEs have to accept 10T, and that's it. That's all that's required.

Got it. And then in terms of just switching away. Can you maybe talk a little bit about the outlook for expenses here. I noticed you talked a little bit about incremental scores, marketing expense what should we expect there? And then other than kind of the step-up that's related to the annual FICO World Conference.

Yes. I mean it's not all that material. I mean, there will be some expense. I mean, it's that -- I think you can kind of back into it when you look at our guidance numbers, but it's not all immaterial. But we've got some additional personnel expense. We got expenses around Piper world, there's some other types of marketing we're doing. When you see more growth on the software side, that comes at a 100% margin either, right? There's cost of good solar. So you're going to see some expenses there. But none of it is all material.

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

So first, I wanted to ask about the very strong growth that you saw in mortgage revenue this quarter, up 127%. I think we know about your pricing but it implies pretty strong volume growth. So I'm just curious if you can talk a little bit more some of the factors there.

Yes. I mean we had decent volume growth. I think it was a pretty good quarter. There was a period of time that where interest rates dropped a little bit. We saw a little bit of an uptick here and I think it's consistent with what you hear from the bureaus as well. So it was a decent volume quarter, probably better than we expected when we gave our guidance. But again, we guide very conservatively because it's really difficult to know what those numbers might be.

Okay. Understood. And then just on the software side of the business, again, pretty strong bookings, really strong ARR growth on the platform side. So again, give us some context in terms of what you're seeing there? Are you seeing higher of notice that you alluded to growth or maybe focusing outside of the services. And I'm curious if you're sort of thinking your approach there at all?

I would not say that moving to other verticals is driving the growth. It's really primarily in financial services. And it's across a wide range of use cases, and we continue to have success and the model that we've been experiencing just continues to be strong, which is a financial institution will adopt the platform and make it the kind of the heart and soul of the way they interact with their consumer customers and then discover just how powerful it is and then get more utility out of it, the more use cases they put on it. And so it's the land and expand strategy, which we have for that business is working really nicely. And the customers have tremendous satisfaction, and that's driving the growth.

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

From an earlier question, it sounds like the answer may be TBD, depending upon what FHFA decides to do. And I don't know, do we have to wait for the selling guidelines. But the question is, what's your understanding? Because I think the language is the enterprises cannot accept scores from multiple models. But have they said anything about if an underwriter can pull scores for multiple models earlier in the process? Or is that waiting for the selling guidelines to know the answer?

I think that's waiting on the selling guidelines. I mean I can't speak for the GSEs on that.

Okay. And then do you have any sense of what went into the approval process of the '21 initially approved lenders for Vantage 4.0, were they asked to apply by FHFA? Is there any sort of like commitment, how intensive of a process it is? Just trying to figure out if that's a meaningful signal or not.

We don't really have a lot of detail around that program. Obviously, we weren't invited to be part of it. And so we just don't have the details. it's -- it remains to be seen what happens there. Our understanding is a fairly manual process.

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

I know you just announced the FICO 10T pricing, but I just wanted to understand what's your pricing strategy over the midterm? Is there still a gap between price and value and as you think about it, how do you think about closing that gap? Would you also consider alternative pricing algorithms, including a percentage of the loan amount for the success fees. So any color there?

As you know, we've talked about a lot of different approaches to pricing for our IP. And those are under constant evaluation and study. And the balancing act is, we don't want to shock the market. We don't want to make precipitous changes. In fact, we don't love change. We -- if the market works really well the way it is today, and so we don't like change. That said, there is a case to be made for low pricing upfront. There's a case to be made for shifting around the monetization of the IP across more than just the first purchaser. And so we're always evaluating those kinds of things. Our philosophy has not changed. What you see is the first couple of steps in the direction of what we've been talking about for several years now.

That's very helpful color. And then maybe just on the Mantecorp grids, FHFA mentioned that they are taking into account proper credit risk accounting in order to make sure, and that's why those matrices are different compared to FICO. I was wondering based on your experience, what are the key credit risks that they would consider when they are designing these matrices? And why should FICO or FICO 10T get a preference?

Well, so again, I can't really speak for the way the GSEs are thinking about it. But what we believe is that in these LLPA grids, if you're going to account for risk, there's going to be price differential, there's going to be gaming that goes on. What kind of risks might be accounted for? I don't know how they account for them exactly, but certainly, you could have very different credit default risk for Vantage versus FICO. You could have very different prepayment risk for Vantage versus FICO.

As you know, Vantage only goes -- the Vantage data only goes back to 2013 has never been tested through a full cycle. And so there's a lack of understanding, not for want of trying, but there's -- the data is not there to understand how Vintage will operate through a full cycle. And so I'm not really sure -- what does that mean? It means that downstream investors are going to demand some kind of a premium for the lack of understanding around the prepayment risk and in default risk. How that gets translated into the LLPA grid, the GPEs, hard to say. And then because the pricing will be different for FICO and Vantage, and we guess that sometimes Vans will have better pricing for a consumer and sometimes FIO have better pricing for consumer. It's going to create some real headaches for the GSEs.

So we'll see. We'll just have to see how they solve that problem.

Next question will come from the line of George Tong with Goldman Sachs.

With the direct licensing program, it sounds like you're awaiting FHFA approval. Are there other implementation hurdles they have to overcome among the top 3 resellers that have signed up so far? And can you talk about why the remaining 2 out of the top 5 are taking a bit longer to sign up?

I would say that there are not other factors, nothing meaningful. So we're really just waiting on approval from the FHFA. And then in terms of the 2 that haven't signed, I can't get into the details, but we're very close.

Okay. Got it. And then with respect to your outlook, can you elaborate on what assumptions are baked into your full year guide with respect to Vantage score adoption, the timing of the direct licensing model going live and performance fee adoption?

Yes. We anticipate no loss of volume to Vantage in this fiscal year. That's in our -- that's assumed in our guide. We are -- we are -- as I said earlier, we're in roughly the same place financially, whether they go with the first core model or the performance model. So it's revenue neutral. There's a little bit of a timing difference because with the performance model, the funding fee would trail the initial fees. So I mean there's some minor differences. But I would say on balance, it's pretty close to a wash between the 2. So it doesn't really matter when the adoption occurs. I suppose you could argue that if the adoption of the direct license program is delayed that's beneficial to FICO in the very short term from a timing standpoint, but we don't think about it that way.

Yes. And we do have some lag built into the guidance based on the assumption that performance model will go live, and we'll have some revenue that's pushed from late this fiscal year and early next fiscal year because again, because the timing cost described.

Next question is going to come from the line of Alexander Hess with JPMorgan.

Could you start with the 127% year-on-year growth in mortgage. I understand that your rack rate is widely known, layer on top of that volume assumption is still a bit below. So maybe were there any prior year pricing adjustments have feathered into the present fiscal year. Just anything that might have given that an extra booster is this sort of the rate you guys think you can continue at these volume models?

Yes. I mean not really. I mean there might be some difference in the unit cost. I mean there's some without getting to a lot of detail that some people are on a little bit lighter rate last year, and we're up to the full wrap rate this quarter. But it's primarily just the new rate and then the additional volumes we saw.

Got it. And then maybe shifting to usage of the FICO score overall. I know there were some remarks about stepping up expenses for the Scores business, introducing the new version of Ultra FICO. If you could just talk about your investments in innovation in the Scores business and how that sort of benefits the franchise you guys have there? That would be super helpful.

In the scheme of things, the investments and incremental expense is not large, okay? I mean just to be really clear. That said, we are constantly investing in innovation, developing new scores. UltraFICO is -- although we've talked about it for several years, it is very much on our minds, and we have a plan which we're going to talk about at FICO World next month. But I can't go into the details now. But UltraFICO is likely to be a pretty significant factor in the sports business in the future.

Next question is going to come from the line of Kyle Peterson with Needham.

I want to just start off on software. The platform growth remains really impressive. Bookings are really good. I know the non-platform was kind of ran off maybe a little faster than we expected in the second quarter in a row. But I guess should we expect this trend to continue where the platform growth is accelerating, the nonplatform is running off? Or do you think it will kind of return to flattish nonplatform and historical platform growth? Just I guess, the moving pieces there would be helpful.

It's a good question, Kyle. And we've talked about this in the past. There's -- we have the platform growth, which comes from selling the platform often to customers, generally, the customers we already have, but not necessarily for the same things that they've been doing with us on the legacy side. And so there's new growth in platform, which look like new deals with customers that we know and occasionally with customers we've never met before.

And then there's a migration from our legacy applications to the platform. And I would tell you there that we are not forcing that migration. We're not even really encouraging that migration because we have our hands full with the growth in the new platform. And so we really leave it to the customer, the customer's choice. If the customer comes to us and wants to renew for 3 more years, legacy application that is working extremely well for them. We are all for it, and it's highly profitable business for us and it's good. If they're ready to make the move, we're happy to help them make the move, and so we work on that, too.

I think there is a balance there. I think there at some level, there's a bit of migration that happens from the legacy business to the platform business. And so that would explain higher growth on the 1 side means a little bit lower growth -- a loss of business on the legacy side. But I wouldn't say it's a huge factor. I just think that the 2 are kind of in balance at this level now. We're not pushing it with our thumb on the scale 1 way or the other. That may change in the future. But for now, we're very happy with the growth on the platform side.

Got it. That's helpful. And then as a follow-up, I wanted to switch over to auto origination Scores revenue. I guess, it did decelerate a little bit this quarter. Obviously, I think the comps are getting tougher, but I want to see at least directionally, if you guys could give a little bit more color on what drove the year-on-year detail between tougher comps, pricing changes in calendar year '26 or any changes in origination volumes or trends that you guys are seeing?

It's really the tough comps. The volumes are not growing as rapidly as they were. The pricing is relatively consistent. The '26 price increases is consistent with '25. I think what you see is that the comps are difficult, and there's probably a little bit of a mix shift there in terms of the pricing tiers that some of the lower -- the lower unit cost pricing tiers have gained the volume from those that are higher unit costs. So some of that happening in the auto industry in general.

Our next question comes from the line of Craig Huber with Huber Research Partners.

We've talked about this in the past, but can you just update us on your understanding, what the data show you in terms of -- the market share out there is for Vantage score in credit cards, autos, personal loans, and also nonconforming mortgage loans. What's their market share right now and we'll go from there.

I guess it all depends on how you measure it because if you ask them, they would tell you they have significant market share and all those things. near as we can tell, nobody is paying for Vantage scores and the bureau send along the Vantage score for free when someone buys a FICO score. So when you see the big Vantage score volumes that Vantage talks about, you should know that they're largely unpaid for. So are they -- is anyone using them? I don't know. Is anyone paying for them? Our sense is not much -- and so it's pretty hard to triangulate on what their market share is. I mean I think it's trivial is what I would say.

And I think you see that in our numbers, right? I mean if there were -- we were losing market share, you'd see it in our numbers, and you don't see any that. We have to report our results or audited. They don't have that same obligation, so there's a lot of sun in what we produce, and we back it up with actual numbers that are verified.

So just to be clear, if you had a ballpark, you think it might be 5%, 10% market share, maybe not even not ballpark.

I would call it 2%.

Okay. So then on the nonconforming part of mortgages, you're saying probably the same thing, right, roughly that...

To be really clear, in the nonconforming market, the lenders use FICO Classic and they use FICO 10T, and they don't use Manta.

So what -- all the worry out there about AI, put that aside for a second. All the worry out there that Vantage score is going to take significant share just because of the changes from the government standpoint -- the rest of the market here is -- you guys have been Vantage scores to go up against FICO for 20 years, right, in 2006. You tell me it's roughly 2% market share give or technique -- what's going to change though but what's going to change here on the conforming mortgage side of things here that they're going to get significant market share. I mean, that's the theory out there for a lot of people. What's the case there that you guys possibly see?

Look, I am not going to make the case for how Vantage takes market share because I think we're competitive on price, we are far more competitive on predictiveness. We have a better score than Vantage. There's not a good reason for them to take any share at all.

Okay. Let me just -- my final question is why did you lower the upfront fee down to $0.99 from $5 then?

Two reasons. One is to be competitive with Vantage and to have a low entry point and encourage widespread use of the score and second, to encourage adoption of FICO 10T. a pretty classic approach to launching a new product is to price it so that people use it.

But again, you're not worried at all that Vantage is going to take any meaningful share from you on the conforming mortgage side, right? That's what you're saying?

That is correct.

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

I'm just wondering if you have any feedback to share from the securitization market in terms of reference in light of...

Everyone has done their own market checks, and we have to -- and I would say that the securitization market is not ready to accept Vantage. It's -- there's some hurdles to be overcome. And so we'll see how that all unfolds. I don't have a lot of insight there. I mean the market is still all FICO. I think something like 20 mortgages have been securitized with Vantage for paper, which is obviously less than 1%, less than [indiscernible] of the most recent securitization. So it's not real yet. We'll have to see how the market reacts.

And I know we're getting some data released over the summer from the was wondering what you're expecting that relate the tail and how you think it might validate the predictive.

Well, I think that -- I can't give you a date for when the FHFA will lease the FICO 10T data to the marketplace. But we're certainly not standing in the way. We provided the data and we're ready to go. In terms of validating the predictiveness, we have white papers posted on our website that actually analyze FICO 10T versus Vantage and provide insights on print default risk and prepayment risk and the differences. We qualify 5% more borrowers. I mean there's a lot to see there. That's already been done. But then if you don't believe FICO because it's self-serving, I'd encourage you to look to third-party analyses as they come out because I'm sure they will. And you're going to see a lot of analytic work around this topic in the coming weeks and months.

Our next question comes from the line of Owen Lau with Clear Street.

So the AI disruption narrative hasn't gone away. Could you please talk about why it's very hard for whatever vantage or a third-party AI platform to come in and create a more predictive credit score which will be adopted by lenders and consumers if they can offer a lower price.

Okay. So there are 2 different things there. One is AI versus the current credit scoring system. And the second is within that more predictive. So first, I would say, with respect to AI displacing the FICO score, we have a really well-defined body of law fair lending laws, which are designed to protect consumers to ensure that there's not discrimination, ensure that consumers are treated fairly. And that requires compliance with all kinds of things that our scores take into account. I mean just 1 small example would be red lining, which is not allowed in the United States. Is it a predictive factor? Yes, it's predictive back here, but it's not allowed.

And so you can't use red lining as a factor in a credit score. Well, AI doesn't -- AI would find 100 other ways to get to the same result. And so the regulators are not going to be comfortable with AI making underwriting decisions when they're not explainable when it's a black box when they can't demonstrate that discrimination is not occurring. So that's kind of the core problem with using AI and underwriting. I mean, AI is great in a lot of things, but using it in underwriting, the biggest play is that it's going to get around the rules and escalations of the fair lending laws.

Now, you're probably aware that FICO scores carry with them 32 recent coast. So when consumers turn down for credit, they get a letter and -- or the line is not increased on the request or whatever they get a letter, the letter says, here's why. And that reaches into the FICO score and the recent codes and those recent codes are shared with the consumer. And so there's a level of comfort with the regulators and with the consumer that they understand what's going on. I would also point out that the experiment with AI in some of the black box underwriting that was undertaken several years ago by upstart ended with the CFPB shutting it down.

So I think there's some real challenges, not that it will be this way forever. And we are prepared for the day when AI is appropriate in underwriting. We have patents in the area of explainability and ethical AI. And so I think we're in an advantaged position, but I would not hold my breath. I think that's going to take a long time. And then on predictiveness of the score, I would tell you that our latest and greatest score is more predictive than Vantage and frankly, more predictive than any other score out there. The only asterisk I would put on that is there are lenders who build proprietary scores on top FICO and they leverage their first-party data. And so they have incremental data and they get incremental signal out of that. And so there are some proprietary scores that are really excellent that are most typically developed on top of FICO.

Got it. And then maybe quickly on LLPA, -- have you heard of any of these 21 lenders received the updated LLPA grid from FHFA for the pilot? And do you have any expectation that when the new grid will be made public?

No idea. I have heard nothing, I encourage you guys to keep asking the questions, what's going on there? I think it's a manual process.

Our next question comes from the line of Scott Wurtzel with Wolfe Research.

Just on the guidance, I understand you're still being -- it seems like being conservative on your assumptions regarding volume. Just wondering if there had been any sort of change to your volume assumptions after the last quarter end?

Not really. I mean, again, we tend to be pretty conservative because, obviously, there's a lot happening in the world. And if we get that number wrong, difficult to make that up someplace else, but not really. I think we had a better second quarter volume-wise than we had anticipated when we gave guidance. But we don't necessarily think that's going to continue. So we tend to take the same conservative approach for the rest of the year.

Got it. And then just on the buyback, I mean the number $600 million in the quarter was great to see along with the incremental buyback this quarter. Just wondering, I mean, how aggressive do you think or would you guys be with the stock at these current levels and given the capacity that you have?

What I can say is what we've said in the past. We're always interested in share repurchase, and we're in the market kind of all the time. And we tend not to be market timers, although we have mean in much more heavily on an opportunistic basis. I would certainly consider our stock at these levels to be an opportunistic time.

Our next question comes from the line of Kevin McVay with UBS.

I wonder if you had any thoughts on, given the current shift in the regulatory environment, do you feel like that's pretty much contained at this point? Or is there anything else you're kind of focused on as we think about whether it's FHFA or other parts, do you kind of continue to manage to from a regulatory perspective.

The mortgage market is $13 trillion market, and everyone takes it pretty seriously and no 1 wants to do things that are reckless there. And so everything that happens in that market, you see coming a mile away. And I think that's kind of where we are. I think we know everything there is to know about the way this is unfolding for now. And so no, I don't really see being blindsided by regulatory or other kinds of things in the market. I think we understand how the market is evolving. We understand what the choices are for evaluating credit in the 1 market.

Things will change if the GSEs get out? I mean anybody's guess when and if that happens and will things change. We actually don't think they'll change oat. We think that in in a world where the GSEs are private or if they were to lose the guarantee, the emphasis on credit default risk would go up, the interest in credit default risk goes up, and that's advantage FICO because we have the best score for evaluating that. But again, these are more theoretical and down the road kind of things. I don't think there's any surprises ahead.

Our next question comes from the line of Curtis Nagle with Bank of America.

Most of my questions been taken, but just maybe Well, I guess any fat or detail you could provide in terms of the uptake of 10T within the nonconforming market at this point mortgages?

Yes. I don't have an updated number for you, but it's -- we have underwritten brilliance. Yes. Most of them are running in parallel with plastics because they want to be able to use the latest score and so they run them in parallel with each other. I think the number is $1.2 trillion.

And our last question is going to come from the line of Sean Kennedy with Mizuho.

So with Vantage score, I was wondering if you could discuss a bit more about potential adverse selection, how lenders could pull both scores in the beginning of a process that could pick 1 or the other for the remaining initial result and the implications there for the mortgage market?

Yes, it's a good question. I think -- and of course, we don't know how this is going to unfold. I mean it's really in the interest of the GSEs and the FHFA to prevent gaming to not have a gaming situation. That said, in the 2 score system, it's almost inevitable. It's kind of structural that 1 score or the other is going to be more beneficial to the consumer at all times. And so in a world where the systems are in place to use both scores and barring other unforeseen things, there will be some people who pull both scores. And so it may unfold that way. I think to the extent that, that happens, that's not -- I mean, it is technically share loss for FICO, but it's not volume loss. What you're really doing is expanding the market by the second full. And so it's conceivable advantage could get some share that way if they don't solve the gaming problem.

But I don't -- again, I don't see volume loss for FICO.

Great. And then I was also wondering just with the auto in card loan growth. If you saw any volume weakness later in the corner -- and if you're asking any consumer weakness there?

Yes. I mean auto tends to be pretty stable unless there's like a really disruption in the economy. A lot of the volume on the card side is really the banks that are marketing. And if they want to market more, they'll find consumers that will take it off. So and that can vary quarter-to-quarter. But so far, we haven't really seen any significant weakness on the volumes. They've actually been pretty good. There's been a little bit of a falloff in the subprime but it's been picked up throughout the rest the prime and super prime. So we haven't really seen it.

This does conclude today's question-and-answer session. Ladies and gentlemen, this also does conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to the First Quarter 2026 FICO Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand it over to your first speaker today, Dave Singleton. Please go ahead.

Good afternoon, and thank you for attending FICO's first 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 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, enhanced price transparency and provide cost savings to lenders to reduce 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 and integration testing. Another large reseller has completed that testing and is now testing system integration downstream. While we expect to go live soon with the full 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 10 T, we expect FICO Score 10 T to be available for direct licensing in both conforming and nonconforming in the first half of calendar '26. A high-level overview of the direct license program and FICO Score 10 T can be found on Page 9 and 10 of our presentation.

FICO Score 10 T is a meaningful step forward in credit risk assessment. FICO Score 10 T 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 10 T 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 use the FICO Score for mortgage decisions on both the conforming and nonconforming markets.

This quarter, we also announced a strategic partnership with to deliver the next generation of Ultra FICO score. This score combines the proven reliability of the FICO score with real-time cash flow data from to provide lenders with a single enhanced credit score that delivers superior consumer risk assessment without operational complexity. The enhanced Ultra FICO 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 access through cloud's open finance network of consumer permission data. Plat 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 the score, which we'll launch for distribution with Plat in the first half of calendar 2026.

Within the quarter, we continued to expand adoption of FICO Score mortgage simulator by partnering with sharper lending solutions, credit Interlink and Ascend Partners, including Xactus and MeridianLink announced in fiscal 2025, five 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 applicants FICO score. The FICO Score simulator supports simulations on all three 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 power and consumer connections and delivering always-on personalized experiences to drive outsized business outcomes. At FICO World '26, you can network the world's leading experts to learn how you can power your organization, apply best practices and advanced platform decisioning and drive financial inclusion.

We're 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 liquid credit solution to the platform. Excluding that liquid credit 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 nonplatform 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 for 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 10 T. We see adoption of FICO Score mortgage simulator throughout the mortgage industry. The FICO score continues to be the trusted industry standard 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.

[Operator Instructions] Our first question will come from the line of Manav Patnaik from Barclays. .

I just wanted to touch on the 10 T. Again, that slide you had was really helpful. But right before earnings, you had this press release with Loan Pass and the data sharing and the back testing the 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 10 T 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 time line. They haven't published any kind of a time line 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 of basic discussions, how you think that's going? Is that going to be available to 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. Maybe sorry, if I can squeeze one more in, Steve. Just -- it was a good quarter. You maintained the guide. I know that's practiced, but maybe you could just help us appreciate why there was no raise to the guide this time?

Yes. Thanks, Manav. It's a good question. We're pretty confident we're going to be able to beat our guidance. And I know we talked about it was pretty conservative last quarter. At this point, we're only 3 months in. There's just a lot of questions out in the macro environment. I mean, with the Fed today. It's just -- frankly, we probably know what numbers we would move to. So I think by next quarter, we'll have a much better idea of what the world looks like and what overall volumes are going to look like. So I think that was our thinking behind that.

And 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 time line looks like for the release of the LLPA grid, do 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 time line for the LLPA grid looks like. And as we've discussed in the past, there's 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 time line 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. And then as a follow-up, we've heard, I guess, two concerns around from lenders regarding FICO directing the performance model. One is that for FICO direct, there's a concern the resellers I guess, could improperly calculate the scores and aren't taking, I guess, legal responsibility for it. So I think there's been some hesitancy from lenders. So I was curious if you could address that. And then on the performance model, I believe some lenders are concerned about how the regulators might view passing on that performance fee to the end consumer. So curious if you could comment on those 2 hang-ups that may be out there.

Yes. I think that there -- that's misplaced, misguided concern. The score is calculated by the resellers in the direct license program will be the same scores that are calculated by the bureaus today. It's the same algorithm and the same technology to do it. Same data is being used. And so I think that the -- any kind of concern about miscalculation or differences and scores is misplaced. That said, I can tell you that we are in the midst of making sure that all the testing gives everyone every confidence that, that's not an issue. And then in terms of the regulators, they also are looking at it to get comfortable with that and that's proceeding our pace.

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

It's good to see that momentum in the direct license program that 5 resellers signed. You talked about them being in advanced stages of implementation. I was just wondering if you had some time lines around when they would go live. And then at least when we've done checks with brokers, they are not aware of the performance models yet. So when do we start to see that gets communicated to the mortgage producers than the industry in general, much more -- much better complicated.

On time line, I wish I could help you. I wish that we knew what the time line was, but this is the mortgage market, and we don't do anything without having everything extremely buttoned up. And so we are working through all the integration testing and all the downstream impacts. And you can be assured that when it does go live, it will go live without a hiccup. But we're well on our way. I can't give you a time line.

Well, so the performance model -- first of all, the performance model is optional, okay? No one is being forced to take the performance model. So anyone who doesn't like it, doesn't have to use it. They can just pay per score per unit as they always have. So we introduced the performance model as an option to provide more flexibility for some originators, for some lenders who prefer that approach. And so people who don't like it, it's a little hard to understand what the problem is. They don't have to use it. They can just go with a per unit price.

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

It's relatively agnostic, yes. Nothing's 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 get 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 I approach with the Gen 2 platform?

I think we're in the beginning of that Phase 2. Look, we are very heavy in financial services, have been historically, will continue to be, let's be realistic about this. That said, the platform is very much designed to be horizontal and is highly appealing to other verticals. And so we're getting a lot of traction in telco and in other verticals. Further, we're really committed to our partner program and going -- taking our IP to market through systems integrators and other providers. And I think that's going to be the way we wind up expanding to other verticals. Our marketplace is designed to be able to do that. Our next-gen platform is designed to be able to do that. And so we're still very interested in broadening our reach, but our direct selling efforts are still primarily focused on 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.

Okay. Sorry. But I mean it's an arbitrary number. We can name anyway and what not would you like it to be.

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

Understood. Understood. Look, I think there's -- I think the general answer to that is there's 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 of 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. I mean, gradually, over time, we're looking to migrate everyone, right? It's a lot more efficient to be on the platform, and we've set it for a long time. So there will be a lot of efficiencies to be gained from that. We haven't done a lot of that in the past, but we're getting to the point now where we can, so you're going to see more and more of that. But you're also seeing just a lot more sales. I mean even the big deal we had this quarter had very little ARR impact this quarter, but will have a much bigger impact next quarter. So if you look at the rolling trend of ACV bookings, it's grown dramatically. And we think there's still a lot more of that to come this year, and that's going to drive more ARR growth. So we've got a lot of land activity happening, and we've got a lot more expand. So the -- if you look at the platform, the net retention rate goes up, they find new use cases, they expand into other areas. So there's just a lot of different areas we can grow in that business.

There's a classic software business problem. We, as a provider, would love to have everybody on a single code base. It would be really nice and easy to run it that way. And yet, we have more legacy code that's still highly profitable. We have customers who are really committed to using it and want to continue to use it. And so we wind up in this position where we have to make proactive decisions about what legacy solutions we're going to continue to support and which ones we're going to force migration on. And the biggest factor in thinking that through is, can we provide full features and functionality of the legacy solution on the new platform before we force a change through an end-of-life initiative. And so far, we've been pretty successful with that. I mean our classic business, our historical legacy business runs just fine and is profitable. And as the new platform, the NextGen platform has the features and functionality that frankly, is superior to what you find in the legacy solutions. We're going to see voluntary migration. We'll see some force migration, and then we'll see some end of life.

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

So everyone is obviously waiting the LLPAs, the market and investors. I just -- any education process or caveats you volunteer to kind of like help investors interpret how to compare the LLPAs under Vantage to FICO? I'm thinking things like for the same consumer, what's the delta between FICO and Vantage on average or anything like that? And then just -- I know it's a finger in the air assumption to say that the grids may be at parity. But just remind us if the grids do appear to be at parity, what do you view as the key barriers to potential switching?

I think it's unlikely that rise at parity. But let's hold that one. And just talk a little bit about your first -- the first part of your question, which is differences in the score. Our research suggests that the FICO Score and the Vantage score are more than 20 points different -- 30% of the time in both directions. It's not consistently in one direction, which means that it's very, very hard to just substitute one score for another, a Vantage score for a FICO score. You really have to have a completely independent, separate system to run a score that just has different on to score ratio for every 3-digit number. And so I think -- and I think that's one of the big challenges with developing the LLP acreage. How are you going to reconcile all that.

And then you kind of go beyond that to assuming you had separate LLPA grids and you somehow figured out how to do that, you still have all the gaming problems that go with that and the adverse selection problems that go with that. Those have to be resolved. And then you finally, you have whatever objections the securitization market might have to whatever penalties they might impose on Vantage scored paper versus FICO Score paper. So I think there's significant problems to be overcome.

Got it. And then just to reconcile something. I thought that you said in your prepared remarks that NT 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 10 T is going to be available?

So one to guess and one, it is true that we're not sure. So the FICO 10 T data with the GSEs is with FHFA. And we can't give you a time line, but we're confident it will eventually be released.

Those are two different comments just to clarify, the non-confirming and confirming is around having FICO 10 T available on the direct licensing program. And the comment Steve talked about was having FICO 10 T available for the data for the market. Does that make sense, what I said?

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

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

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

Okay. And just a quick follow. Do you think the timing -- I understand all of the issues that you've talked about, but are you expecting that the 10 T and Vantage grids would come out at the same time? And like the acceptability is good on the implementation is going to be around the same time? Or do you think it could 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 changes made away from FICO Classic that would be done simultaneously to both FICO 10 T 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 10 T and LLPA grid for FICO 10 T, I would point out that FICO 10 T 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 waits the factors differently. And so in terms of compatibility and closeness, FICO 10 T is much, much closer to FICO Classic.

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

Understood. That's very helpful. And then I wanted to ask about your mortgage revenue growth. We saw a nice acceleration this quarter relative to what we've been seeing. And I'm just curious, is that -- are you just benefiting from maybe higher refi activity? I know you don't disclose volumes, but just directionally, it was volume was it volume growth that was higher or

It's all of the above. It's price -- it's all of the above. So there's some price there, there's some value there. There's some refi volume there. So all of those are factors.

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

Great. I wanted to start out on the platform business. Obviously, a nice quarter there. I know some of that was the migration. I guess in some of that was the large deal. But I 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?

Well, so Kyle, we don't make promises, but we had 40% growth in platform for 16 quarters, then we were down a couple of quarters in the just under 20% range. Now here we are at 30%. It does move around. The total ARR is definitely going to go up. And so -- but -- so that's a short answer to your question is. The ARR will go up. I think current levels are sustainable. That's not a crazy thing to think. We've got a lot of appetite for our new platform.

And the total ARR is going to be driven by the platform because more and more, we're intruding 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.

Okay. Okay. That is helpful and good to hear. And then switching over to the card business. The origination revenue in the credit cards seem be climbing in the right direction here in the last few quarters, which is good to see. Just -- I know it's still early, but have you guys seen any disruption or changes in activity? I know there's been some chatter around a potential 10% cap on card APR. So I guess -- anything you guys are seeing there? Or is it still too early to tell in terms of when you guys are delivered 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.

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 trimmers to Bimerge is gaining traction? We saw the MBA came out over 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.

Yes. There's certainly a lot of talk about it these days. The bureau position, I don't generally give the bureau position, but I think it's fair to say that the bureaus believe that Prime Merge makes a lot more sense because the bureau files are not identical to one another. And if you chose 2 out of 3 files, some consumers on the margin are going to be underserved. And I think that's a fair point. That's just a fair point. Set against that, Tri-Merge does give the bureau's a monopoly, and that's not a great thing. So that would be an offset. I think the real challenge is the real challenge with moving to IMerge. It's the same problem that we have with lender choice.

When you get to choose between 2 credit scores or when you get to choose your favorite 2 out of 3 credit bureaus, you're going to have gaming, you're going to have adverse selection. You're going to have all of these -- all these problems occur. And there's a cost to be paid for that. That cost ultimately gets paid by Fannie and Freddie and potentially the U.S. taxpayer. And so that is the biggest problem that has to be overcome. And frankly, I don't know what kind of a solution there is to that. It's structural.

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 comes from the line of Alexander Hess from JPMorgan.

Just maybe to start with the Scores business and volumes there. I saw a call out on the new slide deck, which is by the way, excellent, that you guys saw positive volumes in all three 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 in the degree that there is any is really industry-wide versus FICO innovation land?

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. Just I think if rates continue to trend down, we'll probably see more volumes there. In Card, we already talked about this 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 not decline 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.

Tuning 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...

Yes. And I'm not sure that it's any particular use cases to be frank. So just a little bit of history here. For many, many years, for 10 for decades, FICO is an application software company focused on solutions to half a dozen critical bank problems having to do with the life cycle, right, risk-oriented solutions. When we move to the platform, we opened up a pretty vast set of solutions -- potential solutions for banks that adopt the platform. It's no longer just decisioning around originations and customer management and fraud. So just a much, much wider set. That said, customers are coming to the platform for the basics. They come for originations. They come for customer management. We're seeing those use cases as primary use cases. But what's interesting is, particularly on the expand side, if you think about land and expand, they put in the platform and then they come up with all kinds of innovations on things they should be decisioning around that they have never done before. So there's a lot of that. But I think it's fair to say that they come to the platform for the same kinds of risk management solutions they bought in the past.

Maybe I can squeeze a third in. Just on the predictive power of FICO 10 T, obviously, you guys have a white paper out that showed a pretty compelling predictive lift in those key cohorts. Can you -- but that was on sort of the basis of defaults, delinquencies. Can you maybe pivot that conversation to prepayments? And do you have a view on will 10 T being more predictive on prepayments than rival scores?

I think so. And I think it's important to note that credit default rates and prepayments are related. They're sides of the same coin in some ways. So for example, I've heard people say, well, credit -- improving credit default rates doesn't really matter in the conforming market because Fannie and Freddie stand behind it. And so who cares about the credit default rates. Well, when you have a credit default, it is functionally the same as a prepayment risk for those who hold the paper. So I think 10 T is going to help on both those sides.

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 the land expand. So essentially, yes, I mean, what's driving it is that a lot of people bought in just to see how it would work, right? They need be shown that it would work. And once they get it installed. The next use case is a lot easier than the first use case. So they find more ways to use it, and they're pleased with the way it's working. So it's the expand pieces I shouldn't say easy, but it's a lot easier than the land because once it's and it's working, they look for more ways to use it.

The expand is running at roughly the same rate as land. They're kind of neck and neck on growth rate. The expand piece really has two kind -- there's two styles, right? One is expansion of the use cases that they started with and the second is bringing on new use cases. And our revenue goes up in both situations.

Great. And then just one more question on the volume side. I think we've all read some headlines about lenders struggling with their cost base this year. I was just wondering if you're seeing any of this from your perspective and any changes in the lender behavior that you can call out relating to your business?

We really haven't. I mean, you know how critical FICO scores are in the system, and we really have not seen any changes.

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

I just wanted to ask one question on the software business. I mean the trends on the book have been pretty positive, but you also had mentioned that the NextGen 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.

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 form of loans, which will still need to use FICO score for underwriting? And also, could you please kind of like help us size the credit card exposure.

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

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

We don't break that out. Now 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 it, then obviously, use FICO scores in that area.

Does it involve a shift to BNPL? I mean, obviously, we'd be beneficiaries 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 amount...

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

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

Great. 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 this new to pricing plans that we saw in particular, is that meaningfully ahead or behind or on schedule with 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 on track, roughly as expected. And frankly, whether it comes a little sooner or a little later, does not have a big revenue impact on us. It's really pretty close. As we said earlier, we're not completely agnostic, but it's pretty close. It's not enough to drive a change in guidance, for example. And then as to what might have us change our guidance, it presumably would be volume. I mean the price is extremely well understood. And it's we publish it and it's -- that price is here for the year. And so it's really much more around volume and what happens with interest rates and that no one knows. And so we'll -- that's why we want another quarter to see how it plays out.

Yes. I think there's just -- like I said, there's a lot of uncertainty in the marketplace. And I think 3 months from now, we're going to have a much better idea. If we were to take a guess now, we were probably -- you'd probably still think we were being too conservative. So at this point, in 3 months, we're going to know a lot more. We'll have one more quarter under our belts, and we'll have a much better idea of what it does. We really don't want to get into the situation where we're continually updating our guidance every quarter. We have annual guidance. We try to stick to that until it's pretty clear we can move to some more meaningful estimation of what it looks like, and that's what we're doing here.

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?

Well, we don't disclose the specifics of it. There's -- 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.

Our 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 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 across the board, both in -- on the software side and on the score side. And after, I would say, many years of conservatism in growing headcount and direct sales and partner sales. We've been fairly aggressive this year in expanding that headcount. So I would say that's -- it's on both sides, software as well as scores.

Great. And then just in terms of goalposts for the resellers actually going live, do you have any sense -- would you expect the big 5 to go live simultaneously or one sequential. Any sense of just timing on 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 drug license program as quickly as possible. So I would expect convergence on time line there, but I couldn't say that it's all going to happen simultaneously.

And our next question will come from Rayna Kumar from Oppenheimer.

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

How much of the market do those resellers represent?

Yes.

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 and 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.

Thank you. 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.

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 FICO Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dave Singleton, please go ahead.

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.

If exclude and 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 an 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.

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 highlights 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 2's6. 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 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 gen 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 gen AI models. For example, FICO FFM results in more than 35% left in world-class transaction analytic models in areas such as fraud detection, while requiring up to 1,000x fewer resources compared to conventional gen 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 Tapio'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 1 of our recent innovations, like FICO 8, FICO Auto 10 and FICO 10T. In fact, bureaus have provided free [ Van ] 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-back to another 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 Zactus, 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-merger sellers to enable our mortgage direct program as quickly and efficiently as possible. We've already provided our FICO -- 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 trimer sellers 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 very 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 market is priced 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 yielded 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 a par with or at times to outperform they recently developed managed Score 4. Our latest score, FICO 10T is the most predictive and inclusive credit scoring model on the market.

We continue to see growing momentum and adoption of FICO score at 10T. There's a large industry efficiency benefit in testing FICO 10T and Vantage for 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, the set data that we've used -- 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 [indiscernible] 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 is far more consumers but do so using models that are statistically unsound for predicting risk. For example, scoring using 1 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 improve 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 is 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.

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 reception and adoption of our latest offers. I'm going to pass it now over to Steve for further financial details.

Thanks, Will, and good afternoon, everyone. We had another good quarter with total quarterly revenues of $516 million, an increase of [ 14% ] over the prior year. As we discussed last quarter, sequential revenue was down due primarily to lower point in time revenues from scores and software licenses as well as seasonality and lower professional services revenues.

Software segment revenues for the quarter were $204 million, flat versus the prior year. From Page 5 of our presentation within that segment, you could see on-premise and SaaS software revenues were flat year-over-year, while professional services declined 5%. We delivered $822 million in fiscal year revenue, which was up 3% from the year -- on the prior year.

This quarter, 87% of total company revenues were derived from our Americas region, which is the combination of our North America and Latin America regions. Our EMEA region generated 8% of revenues in the Asia Pacific region delivered 5%. Score segment revenues for the quarter were $312 million, up 25% from the prior year. As shown on Page 6 of the presentation, B2B revenues were up 29% primarily attributable to a higher mortgage origination scores unit price.

Sequentially, B2B revenue slightly improved when excluding our prior quarter multiyear U.S. license renewal on our insurance score product last quarter. Our B2C revenues were up 8% versus the prior year, driven both by our MyFico.com business and our indirect channel partners.

Total Scores revenues were $1.169 billion, up 27% despite lower than historical mortgage originations volumes driven by persistently high interest rates. Fourth quarter mortgage originations revenues were up 52% versus the prior year. Mortgage origination revenues accounted for 55% of B2B revenue and 45% of total scores revenue. Auto originations revenues were up 24%, while credit card, personal loan and other originations revenues were up 7% versus the prior year.

Turning to guidance for '26. Our FY '26 revenue guidance assumes software SaaS growth driven mainly by FICO platform. and offset by less point in time revenue due to fewer nonplatform license renewal opportunities and a similar level of annual professional services revenue. For our Scores business, our guidance doesn't anticipate any significant improvement in the macro environment.

We also don't expect any loss of market share or any significant volume changes in auto card and personal loan originations. As a reminder, our last quarter contained 1 material nonrecurring multiyear U.S. license renewal on our insurance score product that we won't see in FY '26.

As shown on Page 7 of our investor presentation, our total software ARR was $747 million, a 4% increase over the prior year. Platform ARR was $263 million, representing 35% of our total Q4, '25 ARR. Platform ARR grew 16% versus the prior year, while non-platform declined 2% to $484 million this quarter.

Our platform ARR experienced lower performance due to usage reductions from select CCS customers non-platform ARR was consistent with the last few quarters. We expect total software ARR to increase in fiscal 2026, reflecting the benefit of recent FICO platform bookings going live. Our platform lend and expand strategy continues to be successful.

On Page 8, our dollar-based net retention rate in the quarter was 102%. Platform NRR was 112%, while our non-platform NRR was 97%. Platform NRR was driven by a combination of new use cases and increased usage of existing use cases. Our software ACV bookings for the quarter were $32.7 million compared to $22.1 million in the prior year, representing our best quarterly ACV performance in the 6 years, since we began disclosing this metric.

On a full year basis, ACV bookings reached $102 million, our strongest annual performance over that time frame. Expenses for the quarter as shown on Page 5 of the financial highlights presentation. Total expense -- operating expenses were $279 million this quarter versus $274 million in the prior quarter, a 2% increase.

In our prior quarter's prepared remarks, we outlined key factors we expect to contribute to a sequential increase in total expenses. Those factors largely materialized as expected and included $10.9 million for restructuring increased interest expense and increased marketing expenses.

Partially offsetting these factors, stock-based compensation declined in Q4 due to forfeitures, the restructuring I noted was the result of reallocating resources to align with our strategy. For the full year, our expenses were $1.066 billion versus $984 million in the prior year, an increase of 8%. Our FY '26 guidance assumes a similar year-over-year operating expense growth compared to the prior year.

We maintain our focus on efficiencies and are committed to prioritizing resources to our most strategic initiatives. -- investments focused on head count for distribution and continued development of our FICO platform as well as increased head count for our scores business and marketing across both sides of the business. Our non-GAAP operating margin is shown in our Reg schedule, was 54% for the quarter compared with 52% in the same quarter last year.

We delivered year-over-year non-GAAP operating margin expansion of 210 basis points. Our full year non-GAAP operating margin was 55%, an improvement of 340 basis points year-over-year. We reported $155 million in GAAP net income in the quarter, up 14% and GAAP earnings of $6.42 per share, up 18% from the prior year.

Excluding restructuring, GAAP net income would have been $166 million with earnings of $6.76. As reported for the full fiscal year, we delivered $652 million in GAAP net income, equating to $26.54 of earnings per share, up 27% and 30%, respectively. For the quarter, we reported $187 million in non-GAAP net income, up 15% and non-GAAP earnings per share of $7.74 per share, up 18% from the prior year.

And note, restructuring has added back to the non-GAAP net income, as shown on the Reg G schedule. For the full fiscal year, we delivered $734 million in non-GAAP net income equating to $29.88 of earnings per share, up 23% and 26%, respectively. The effective tax rate for the quarter was 23.4% and the operating tax rate was 25%.

Our full year net effective tax rate was 18.8%, while the operating rate was 25%. As a reminder, the key difference between operating tax rate and net effective tax rate was the $44 million excess tax benefit. Our FY '26 guidance assumes a net effective tax rate of 24% with an operating tax rate of 25%.

As shown on Page 10, we delivered free cash flow of $211 million in our fourth quarter -- over the last 4 quarters, we delivered $739 million in free cash flow, which represents an increase of 22% year-over-year. At the end of the quarter, we had $189 million in cash and marketable investments. Our total debt at quarter end was $3.06 billion with a weighted average interest rate of 5.27%.

As of September 30, 2025, 91% of our debt was held in senior notes with no term loans. We had $275 million balance on our revolving line of credit, which is repayable at any time. We continue to return capital to our shareholders through buybacks.

This quarter, we repurchased 358,000 shares at an average price of $1,499 per share. For the fiscal year, we repurchased 833,000 shares at an average price of $1,693 per share. Share repurchases totaled $536 million in the fourth quarter and $1.41 billion for fiscal 2025, the highest quarterly and annual repurchase levels in the company's history.

Going forward, our philosophy has not changed, and we continue to view share repurchases as an attractive use of cash. With that, I'll turn it back to Will for his closing comments.

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% and 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.

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

Our first question comes from Manav Patnaik with Barclays.

I guess my 1 question is just a broader question around your recent discussions with the FHFA. Obviously, there's a lot going on and direct to 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.

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

Just to clarify, that's Rothschild & Co Redburn. I was wondering, maybe, Steve, if you could talk about the -- 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.

Yes, that's a really good question. And honestly, I think you follow us for several years. I mean, you realize that we're pretty conservative with the way we guide generally, but we're probably more conservative this year because there's a lot of uncertainties in the macro environment and the timing around some of this.

So with the performance model, for instance, there could be a time lag just because of the way it works if it's performance-based. After the mortgage process starts in December and it's built into January, we won't necessarily get paid on the performance piece of that yet. So -- and even at the end of the year, if the process starts in the August, September time frame and may not closed until out so that performance might spill into '27. So there's a lot of complexity to all that.

So frankly, we're being very conservative with the way we look at this. And we just don't know for sure yet, who's going to take which model. So there's probably more conservatism built in than what we would generally have. And then within a couple of quarters, we'll be able to give you a lot more information on that and how that really shapes up and then we can all do a better job of understanding the time line of this.

[Operator Instructions] Our next question comes from Jason Haas with Wells Fargo.

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?

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 customer, 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 they'll 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.

Our next question comes from Faiza Alwy with Deutsche Bank.

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 by 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?

So far, we're getting really positive reduction to the direct model. Now our goal is to make our IP, our FICO scores available through both the bureaus as we've done historically and through the direct channel through the tri-merge resellers. A lot of enthusiasm for the direct approach -- there are not a lot of operational complexities. We'll work through the details. And so it's going to be available.

In terms of the reaction from lenders, the whole idea was to provide a choice to provide optionality to let those who consume the scores optimize for their own businesses the way that they consume the scores. And so we've done that with the 2 models. You can imagine that we spent a lot of time thinking about how to construct them so that we wouldn't be -- we FICO wouldn't be terribly hurt through adverse selection because you can expect for those, who consume these cores are going to choose the model that's best for them.

And so that all went into the calculus. And we're very comfortable that, however, the mix shakes out between the per score model and the performance model will be fine and customers will be happier.

Our next question comes from Surinder Thind with Jefferies.

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?

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.

Our next question comes from Jeff Meuler with Baird.

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 nonconforming market?

Well, I think it's -- there are some people, who believe that because the GSEs have a guarantee that suddenly credit risk doesn't matter and that we default to a much lower importance criteria like the price per score. And I would just challenge that. I would tell you it's not true. The reality is that mortgage originators, who passed the loans to Fannie and Freddie still care about credit risk. They still care about prepayment risk. They still care about default risk.

And as many of you know, when things go wrong with the mortgage, the GSEs are able to put these loans back to the originator. They basically take a look at the documentation, and there's often problems of the documentation and the loans get put back. So the originators, even if they don't hold the loan and hold the risk associated with the loan, they still care about the credit risk.

And so, I think that in both the conforming market and the nonconforming market, you're going to see appetite for the most predictive score and the best understanding of prepayment and default rests.

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

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?

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.

Our next question comes from George Tong with Goldman Sachs.

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 met with the credit bureaus charge? What are some of the conversations with these resellers suggested?

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. That they're running a business, and they do what they do. So I mean, that's entirely in their hands.

Our next question comes from Scott Wurtzel with Wolf Research.

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?

Yes. We -- it's a little more modest than mortgage. I mean what we do -- we've talked about this in the past. What we do is we look across all the different segments in which the scores are used. And we will typically put in place kind of a cost of living, inflation-oriented adjustment on price across the board.

And then we go after selective areas, where we think that there's the big value gap and there's an opportunity for a little bit more price. And so we've done that this year in areas outside of mortgage, as we always do. I wouldn't point to any particular segment for dramatic change.

I don't think you'll see that. So it's more like years past where it's a little bit more than inflation and cost of living, but there are selective spots where we do a bit more than that.

Our next question comes from Alexander Hess with JPMorgan. Looks like they had a bit of phone issues or line disconnected. I'll move on to the next person in the queue 1 moment. Our next question comes from John Mazzoni with Seaport Seaport Research Partners.

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.

Yes, there was nothing. I mean, I think you've seen in the last several quarters kind of an acceleration in that number. It has -- we're just seeing momentum there, right? We've got a new sales leader that came in there. So there is some excitement around that, plus we just have there's momentum gaining with the products that we produce in the platform. So it just takes time for that to gain traction, and we're seeing the results of that. And we hope to see that continue going into the next year as well.

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

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 you?

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.

Our next question comes from [ Ola ] with Clear Street.

So for the multiyear agreement with your resell ethic sector, 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 go to raise pricing because of the value you provided?

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.

Our next question comes from Alexander Hess with JPMorgan.

Sorry about the rest hanging up instead of unmute. So on the guidance, you indicated to me this quarter is wrong, that your guidance that you don't expect any loss of market share or any significant volume changes in auto, card and personal loan originations. That was sort of from the prepared remarks.

Mortgage wasn't touched on that. I know you just said you're being conservative with the assumptions. But like what could surprise to the upside in mortgage? Is it better volume, better market share retention?

Well, I mean I think it's -- the market share we're not very worried about to be frank. The volumes will vary mostly with interest rates. And your guess on that is as good as ours. And as we have for many years, we're very conservative on forecasting increases in volume based on expectations about where our rates go.

And that -- we've been rewarded for that conservatism in years past because rates have had for the last several years not come down to the extent that people expected. And we've done more of the same this year. So although there's a good chance rates will come down, big volume increases associated with rate declines are not built into our guidance.

Yes. And just -- I mean, just to further expand on that, if you followed us, you realize that all we look at guidance is we build a model that we believe is what's likely to happen. And then we will take that and herecut that expectation. So we want to be able to exceed, right? We don't want to be sweating out to the fourth quarter, hoping that things are going to work well.

So that haircut gives us the ability to -- without things getting dramatically better to still be able to raise our guidance or beat our guidance. So we've done that again this year. And like I said before, it's probably a little bit more of a haircut that went into that because there's so much uncertainty. So that's just kind of a background again, on how we actually prepare our guidance.

Our next question comes from Kevin McVeigh with UBS.

If you could give us a sense, are the resellers on pace for the 1/1 adoption? And if you're helping them with the implementation? And any thoughts as to what they've experienced it sounds like they were pretty far along anyway, but just any thoughts around that?

We're on pace. I mean I can't give you an exact date, but things are tracking very nicely. And as I said, there's not a lot of operational hurdles to be overcome.

Our next question comes from Craig Huber with Huber Research Partners.

Just is your position right now that you think the credit bureaus are not going to have the option for the performance model that you guys are offering that the resellers will, you're just not sure what percentage yet of the resellers will offer both models and not sure what percentage of the lenders will go with the performance model?

Yes. I can't give you a definitive answer to that. We're in that discussion. And we frankly don't know what the split is going to be between the score, the per score and the performance model. We just don't know. We've obviously done a lot of modeling and sensitivity around it. And it's easy to come up with a hypothesis about how it will split based on the average number of scores pulled per closed loan for different kinds of lenders and different kinds of mortgage originators. And so that's kind of what's gone into our calculus on what winds up in which model. So I mean, those are the things that inform the decision, but it's not finalized.

Our next question comes from Rayna Kumar with Oppenheimer.

This is [ Guru ] on for Rayna. I was wondering if you could maybe just help us understand the usage of FICO scores in the downstream market. how material is it to total mortgage core volume? And what are the overall dynamics like there? This will be helpful in determining how we should be thinking about the potential uptake in the new [indiscernible] 533 performance pricing model. and the value of that 33%, right, which was previously the issue fee?

Yes. So obviously, there's a lot of score volume that happens downstream that we had historically not monetized. -- it ranges -- where does the score get used without focusing on who pays for it. The score gets used by the mortgage originators. It gets used by lenders. It gets used by the GSEs in terms of their screening of whether they're prepared to accept the loan or not.

It gets used by the rating agencies, S&P and Moody's, when they rate the bonds, the mortgage-backed securities that go out to the marketplace. It gets used by the [ Morgan base ] securities investors when they price those bonds. -- it gets used by the mortgage insurers. And it also gets used by some of the prudential regulators in their capital adequacy models.

So it's used in many, many, many places downstream. And historically, we haven't charged for that. And your point is well taken, which is a per closed loan pricing was designed to capture some of that IP value.

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.