Fair Isaac Corp (FICO) 2004 Q3 法說會逐字稿

Good afternoon.

My name is Debbie and I will be your conference facilitator.

At this time, I would like to welcome everyone to the Fair Isaac earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there be a question and answer period.

If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad.

If you would like to withdraw your question, press star then the number 2 on your telephone keypad.

Thank you.

Ms. Megan Forrester, Director of Investor Relations for Fair Isaac.

Ms. Forrester, you may begin your conference.

Thanks Debbie.

Good afternoon, and welcome to everyone.

Joining me today are Tom Grudnowski, our CEO; and [Chuck Osborne], our CFO.

This call is being webcast live, and it will be archived on our website at the conclusion of today's meeting.

I do need to remind you that during the call today we will be making statements that are forward-looking within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially, including those described from time to time in Fair Isaac's SEC report.

We refer you to our 10K and Form 10Q.

With that, I will turn the call over to Tom.

Thanks Megan.

Today I will provide you with normal operating results for Q3.

I'll provide some additional information about guidance for Q4.

And then I'll shed some light, as your anxious to find out, on fiscal year 2005 as well.

Usually, we do the next year projections at the end of our fourth quarter call, but based on questions we've had since our July 12th preannouncement, we thought it appropriate to discuss them now, on at least a preliminary basis.

And then I'll turn it over to Chuck, who will review the numbers in more detail.

I will discuss some new information that was attached today to our announcement that will provide some information about our revenue forecast.

So before I start on the fourth - on the third quarter information, I'd like to point out a couple recent balance sheet decisions that were announced.

First, the Board has approved a buyback of stock, up to $200 million worth over the next year and at current prices that is approximately 7.5 million shares.

And this is consistent for those of you who follow us, with our buyback strategies in previous years.

They've also approved redemption of our $150 million convertible bond.

Given our large cash balances and operating cash flow, this still provides remaining cash for medium size acquisitions which we intend to continue as opportunities present themselves.

So, now to the quarter.

As we preannounced, our earnings on July 12th, we had informed you that our guidance would be below both our revenue and earnings projections for Q3 the rest of the year.

As our press release shows, our actual results are in line with that preannouncement.

Revenue came in at 173.2 million versus our original guidance of 185 to 189.

This guidance included revenue for London Bridge for the month of June of around 7.5 million.

A diluted earnings-per-share for Q3 came in around 39 cents versus our guidance of 40 to 43 cents.

Our bookings in the quarter came in at around 80 million.

We had 16 deals over 1million and 5 deals over 3 million.

And usually, as you know, we have more big deals around 30 of those, and therein lies this quarter's problem.

The short story is after 19 consecutive quarters of hitting earnings, we finally missed one.

And it was because of this more than usual number of big deals of falling into future quarters rather than getting closed in the third quarter as we anticipated.

There are about 13 large size software deals that we missed.

Interestingly, we haven't lost any of them yet.

They simply were deferred.

And we didn't get them signed in the third quarter as expected.

Those deals were distributed across 4 areas.

Our general tools group, our origination group Capstone, our account management group, Triad, and London Bridge debt manager.

So it wasn't just in one area.

Missing by a couple million of one-time software revenue in one area does fit within the normal variations we expect for a quarter.

But that does happen as you know.

But the fact that this happened in 4 different markets simultaneously, and several other software companies missed numbers this quarter, this led us to worry that maybe the buying cycle for Enterprise Software was stretching out a bit again.

In previous recent quarters it appeared, in fact, the opposite was happening.

So given that, we had previously contemplated good growth in the fourth quarter in software, and given the miss in this area in the third quarter, we decided to reduce expectations for our fourth quarter as well.

The cummulative effect of this change in assumptions for fourth quarter revenue was about $14 million.

So we have effectively now projected a flat fourth quarter revenue for legacy Fair Isaac, if you will, of 170 to 175.

Then when you add in London Bridge that would round to about 189 to 195 million.

Now, if the third quarter delays turn out to be a one-time effect, well then these numbers would be very conservative.

And Chuck will cover in a second here the ins and outs of purchase accounting and other balance sheet adjustments that will affect our EPS guidance in the fourth quarter and for the end of the year.

So, we'll let him do that here in a second.

Now, the good news is our major transaction [inaudible] recurring revenue in the fourth - third quarter performed within the normal range of expectations.

In fact scoring had a very strong quarter, in fact, it was our best third quarter ever.

In fraud, marketing, insurance, consumer, and account management all performed as generally expected.

Although their combined performance wasn't strong enough to offset the weaker software sales as have sometimes happened in the past.

So, at the end of the day, the impact on this fiscal year has been - or internal growth rate has been less than planned, because number one, our one-time software sales haven't moved as fast as thought here at the end of the year.

And two, our recurring baseline revenue, although growing nicely because of large bookings, is taking longer to get to revenue as a result of bigger deals taking longer to install, we've talked about this before.

Thus, the organic growth trajectory has been less than we had planned at the beginning of the year.

The good news and bad news of large recurring transaction revenue base--it'spredictable and stable, but it takes time to increase the growth rate significantly.

So what does all that mean for '05 and how much growth do we see?

As you know, since we merged with HNC a couple years ago, we're now managing a larger portfolio of vertical applications.

Before that, we really only had credit applications in our portfolio.

But now with HNC, London Bridge and other organic innovation, we now have 11 verticals, or markets, if you will, that have critical mass and that we sell into.

By using this experience the last couple of years we now believe we can estimate the future a little bit better, and faster than we have in the past.

And again, Chuck will provide some perspective on this estimating approach in a moment.

We attached something we call a baseline revenue analysis schedule for '04 and '05 to support our estimates.

This is the infamous Waterfall information, so, Chuck will discuss that here in a few minutes.

Now, when we apply all the Waterfall [inaudible] sheet we have in our preliminary meetings we have around '05, we get the following preliminary guidance.

We revenue in the 800 to 830 million range.

Which is actually consistent with - what most of you have us at now.

And earnings on that revenue will be consistent with the net income after tax percentages for the last several years.

Again around 13 to 14%, in line with most of your unguided expectations for '05.

Compared to an estimated '04 revenue of approximately $705 million, that would be projected to be a 13 to 18% growth rate for '05 of which about 5% is budgeted for organic growth without London Bridge.

Now, again as we said, when love acquired growth as well, if we can turn it - turns profits into a consistent high in margin-type of profit which is consistent with our business model in the past.

So, this budget does assume an objective is accomplished over next year, and I'll talk about London Bridge integration here in a second.

We also believe our experience in accomplishing with HNC in the past will help.

Now in 05, we will have between 640 and 650 million of baseline revenue if you're looking at your waterfall chart.

And that is revenue which is transaction based, interrecurring, and represents expected amount of revenue-based on all the previous contracts that we've already got signed, and will accrue revenue in, you know, '05.

So that would mean we would have to add around 160 to 180 of new revenue next year, and that number would include about 30 to 40 million of London Bridge and about 130 to140 of Legacy Fair Isaac.

That 130 to140 would compare to about 110 million of Legacy Fair Isaac new revenue that will accrue actually in '04.

So that gives you some perspective of our preliminary ideas for the budget for next year at the end of this next quarter we'll zero in on those numbers in a little bit more detail as we actually complete our year end budgeting process.

Nevertheless, let me emphasize now, for the remainder of my comments, where we see opportunities for growth.

We're obviously being asked a lot about what are our growth drivers?

You know, what's going to continue the momentum that we had in the past?

And I'll speak about those growth drivers in three segments.

Those in our core business where we see sector growth, those in our core business where we see channel growth, and then finally geographic growth.

By sector, but I'm going to sort of go through some of the areas where we see growth larger than those that we've anticipated in the numbers - they're possible.

Number one, fraud.

Growth here is being driven by a growing transaction or traction, I should say, in telephone fraud and the continued rollout of fraud predictor.

This quarter we have several very strategic wins.

And I guess before I jump into that, first, we did finish the Visa EU implementation, which we've talked about before, so we're gladly recognizing revenue away on that one.

We had a huge win at BT--British Telecom, where we now are implementing a network assurance fraud model, where we have to process 1 billion call records a day.

They couldn't find anybody else to do that besides us.

Weve won a large debit card processing opportunity in Brazil through Cobra, and we've also won a large project with Level III, where we're implementing Fraud Manager [inaudible] over Internet, which of course is going to be a growing technology here in the future.

So fraud continues to be a big growth driver and will be one in the future.

On the origination side, the origination sector, again LiquidCredit and small business are our biggest growers there, and our LiquidCredit for teleco area is growing as well.

Nice geographic distribution here, we won a large project in the Bank of China.

So we've - we're starting to make some progress in our - international expansion in China.

In insurance, we'll review, although we've had some discussions about that in the past, we've recently completed SmartAdvisor, which is the newest upgrade of software, as you may recall.

We sell technology and insurance two ways, one a service where we process the software, and one where we sell the software and we let the end client use it.

Our software has always been the highest functioning software in the industry, but it was a little behind in technology.

We've now fixed that, so we see growth in end-user software, which is recurring software by the way, growing as fast as our ASP offerings have.

We had another very big bookings quarter here in insurance, so the revenue was heading toward the transactions in this particular segment.

And we see growth there next year.

Account management.

Although I mentioned, we didn't hit as many Triad sales that we had, we had three very big ones again this quarter.

Cafe, Verizon, Bank of Ireland, very competitive, as usual, we won.

And we now have also released this quarter, Triad 8, which is our new unified platform for account and customer level decisioning, which is the trend here in the United States that all the big banks are heading toward.

So, we continue to see this as a big growth area.

Analytic software, our Blaze Rules Technology continues to be a big roar.

And if you follow any of the outside press, rules management is a very large and growing market today, as large organizations tried to move their existing legacy systems to newer rules based technology.

On the consumer side, we had another very good quarter there.

Similar in size to last quarter, as you know, which was a very good quarter for us.

And we see this continuing to grow as a result of the Fact Act, which is going to - which starts in December, and is actually going to provide lots of new free advertising for the value of credit information.

And we're also coming out with some new products in this particular area as well.

Collections is going to be a grower because of the synergy between our UniScore products and the collections platform.

We added another 23 UniScore customers, the most ever, and we hope that the - integration of London Bridge as it progresses will accelerate that trend.

In scoring, we've been investing heavily, and I'll come to a couple of those here in a second, I think I'll highlight those, but scoring, which of course is a mainstay of Fair Isaac, has several new things that are coming out.

So, all of that's sort of a sector - news.

By channel, of course, our strategy is to build new third party relationships--our IBM relationship falls in this category.

It's growing, and is getting us many many opportunities.

Our pipeline is growing very quickly here in fraud, account management, originations, and scoring.

And a lot of this action is outside the United States, which is very good for us.

We are also working on several other very powerful relationships, that hopefully - we hope to complete soon.

By geography, we are now forming an international management organization around the management that - or is now part of Fair Isaac as a result of the London Bridge acquisition.

And so we're planning on moving more and more resources closer to the local clients, and that it is well under way now.

So we've completed much new innovation and development in '04, and we believe this - that the items I just mentioned will provide the traction we need in '05 to continue our - organic growth.

In fact, '04 has been the largest year of investment for new products, ever.

And let me summarize a couple more of those that aren't necessarily by segment.

As a mentioned, we completed Triad 8, and SmartAdvisor, in scoring we've announced three very new things.

We now have a new world cycles score, where we can score international portfolios around the world.

And this now works in the U.S., Canada, South Africa, Mexico, Sweden, Poland, Singapore, and Malaysia.

And this is for real now, and we're getting great global traction with this new big idea.

We also announced a new marketing score, called the Qualify Score, used for ITA type applications.

And this is a new score.

It doesn't use credit information, but does use outside and other interesting information to figure out how to market more directly to potentially credit card customers.

And we have five very large customers testing this new technology right now, very exciting.

And then yesterday we announced, probably one of our more interesting innovations, we announced a new FICO score for the underserved credit market, and so as of today we now have FICO scores for 25 million people who didn't have FICO scores 2 days ago.

And there's been lots published about in the last couple days, and I'll just leave it at that.

We also are rolling out our generic EDM software which we just completed this past quarter.

This has been an investment of over 300 man years in the last few years.

We have talked about this before, and we continue to believe there's a huge market for this generic decisioning software, and now we have the investment and putting it behind us, and we're off to the market.

We're also rolling out soon a new Falcon ID product, which adds identity theft capability to our large installed base of Falcon users.

As you know, today, our expertise in fraud is around transaction fraud, this is our identity fraud product.

Which is really a huge emerging and new market for us.

Interestingly, we used our existing large base of international and multi-industry clients to actually create the specifications for this new product.

And finally in the consumer area, we are - will be timing some new products around the introduction of the Fact Act at fiscal year to help new customers learn about how to monitor their FICO score.

So as you can see, we're well positioned with grand momentum, organizational scope, and world-class products to meet our growth objectives.

If it wasn't for a few million and one time software sales missed this - if it wasn't for what was missed this quarter, which has taken center stage here for the last few weeks, I try to say that we have never been better positioned.

Now, of course, execution is the key as usual.

In '05 we must successfully complete the integration of London Bridge.

We have started that already by dividing it into five markets that it serves, and integrate it into the existing Fair Isaac organization.

Those include mortgage origination, collections, tools, poor banking, and bridge link network applications.

Each area is now melded with its corresponding Fair Isaac market segment, and our plan includes about 20 million of synergy around these new assets in '05.

And that is any combination of revenue growth and/or productivity improvements in that amount would get us the margins we were planning for originally in this acquisition.

So, in summary, we are anxious to perform well against all these growth opportunities in the near future and hopefully prove we can manage our growing portfolio and - analytic application as well and I guess our objective for the fiscal year '05 is proof that we can be big.

With that, I will turn it over to Chuck who will now go through some numbers.

Okay, thanks Tom, and good afternoon.

Before I turn it back over to the operator for questions I'll review our third quarter results.

Provide a little more detail on the fourth quarter guidance.

Also I'll introduce some new terminology that I believe will be useful in helping to understand our revenue projections and guidance.

First off, let me talk about our normal reporting metrics.

Revenue, we reported revenues for the quarter of 100 - of approximately $173.2 million, flat from the prior quarter, and up 6% year over year.

Net income - net income came in at around 28.8 million, and earnings per share of 39 cents on 73 million fully diluted shares.

Versus our guidance of 40 to 43 cents.

Breaking this down a bit, earnings per share from operations before London Bridge acquisition-related costs, and minority investment gains produced 37 cents.

London Bridge was 4 cents diluted, which includes about 1 cent of merger related expense.

The final adjustments earnings per share was a favorable 6 cent gain on the sale of a minority investment.

This was an investment in Open Solutions Inc., which we accounted for under the cost method.

Therefore, we did not pick up any of the - of OSIs results of operations Fair Isaac's Financials.

We picked this investment up to the HNC acquisition.

Now looking at revenue contribution by segments, crediting machines contributed 105.7 million, or 61% of total revenue, versus 103.6 million, or 60% of revenue in the prior quarter.

Scoring was 36.3 million, or 21% of total revenue for the quarter, versus 33.7 million, or 19% total revenue in the prior quarter.

Professional services contributed 23.2 million or 13% of total revenue, versus 24.6 million or 14% of total revenue in the prior quarter.

Finally, analytics software tools contributed 8 million or 5% of total revenue for the quarter versus 11.3 million, or 7% of revenues in the prior quarter.

Looking at these by vertical, 69 % of our revenue came from the financial industry, 10% from the insurance industry, 7% from Telecom, 6% from retail, and roughly 8% for everything else.

Our transactional revenues came in at about 83%, which is up from 80% in our prior quarter.

Revenue outside the U.S. represented 20% of total revenued, down from 22% last quarter.

Total expenditures and costs were 131 million versus 122 million the prior quarter, and break down as follows, based upon a percent of total revenues.

Cost of revenues were about 35% versus 37% last quarter.

Research and development costs was 11% versus 8% last quarter.

Selling, general, and administrative costs came in at 26% versus 23% last quarter.

Amortization and merger related expenses totaled 5.3 million this quarter, up from 4.1 million last quarter.

Other income net was 4.4 million, due to a $6.7 million gain on investments, most due to our one time sale of OSI stock, and $3.1 million in interest expense, offset by a foreign exchange loss of 1.1 million, and 4.4 million in interest expense related to the two convertible notes we have outstanding.

Our annual tax rate remains at 38%.

This is up slightly year-over-year due to the loss of R&D tax credits under the current law.

We are hopeful that legislation will renew the credits, but for now our rate has increased accordingly.

Turning to the balance sheet, cash and long-term investments were roughly 525 million which is down from 246 million from the prior quarter.

The decrease is due to outflows, 265 million for the acquisition of London Bridge Software Holdings, and that's net of 29 million in cash that we acquired from London Bridge.

28 million used to repurchase about 830,000 shares, 4 million in purchases of property and equipment, 2 million in dividends.

And of course, that's offset by inflows of about 41 million from operations, and 12 million from option exercises and issuance of stock.

Accounts receivable net were about 136 million--up about 2 million from last quarter's 134 million.

On days sales outstanding we're up 1 day for this quarter to 71 days. [Inaudible] and equipment came in at 52.7 million, up slightly from 49.3 million last quarter.

We acquired about 6 million of fixed assets to the London Bridge acquisition.

Capitalized roughly $1 million of software development less depreciation of roughly 6.6 million, and 1.2 million of net fixed asset disposal.

Goodwill and intangibles net came in at 831.4 million, which is up about 283.9 from the prior quarter.

This is made up of 243.5 million good will, and 40.4 million of intangibles due to the acquisition of London Bridge.

Total current liabilities were 149.8 million, which is up about 33.7 million from last quarter, which is primarily due to the acquisition again of London Bridge.

Shareholders' equity came in 922 million which is up 7.4 million from the prior quarter, principally, of course, due to earnings, and then repurchase of stock and exercised stock options.

And finally, total headcount at the end of the quarter is 3094, compared to 2333 at the end of last quarter, again, the increase here is due primarily to the acquisition of London Bridge.

Now - as Tom introduced at the beginning, turning to some new terminology.

Tom already talked about our traditional new bookings.

Most of you know, we had historically talked about our bookings as an indication of the strength of our quarter, and our ability to meet future revenue goals.

While you all know that bookings flow under revenue, the remaining additional revenue streams that never really start as new bookings.

Examples of this include MyFICO Consumer and Bureau Scoring.

Unfortunately, just talking about bookings seems to be leading to some confusion among the investment committee.

Therefore, starting this quarter, we thought it would be more useful to modify our usual discussion on bookings to provide more insight into our business by adding some new terminology and data.

So here we go.

We break our revenue forecast down into two categories.

Baseline revenue, and new revenue.

Our new revenue is revenue we expect to get from new bookings closed in the current period.

The base line revenue consists of revenue that we expect to record from deals that are already under contract from prior period bookings, or from predictable transactional revenue that we never really classified as bookings.

That is, baseline revenue is the expected revenue from signed deals or transactional revenues that continue to come in, assuming we continue to serve the customer and generate normal renewals.

Most of our scoring revenue and processor revenue has never come in through a booking.

The long term signed deals for much of the signed revenue, but we don't track it through a booking.

Most of this transaction revenue has proven to be relatively consistent, and therefore it's predictable, and included in our forecast as part of the baseline projections.

Today we forecast all our revenue at a deal by deal level, and we also track our revenue by which quarter we book the deal.

We're then able to waterfall our bookings and data to gain a better understanding of where our revenue comes from, and better able to forecast revenue in the future.

Of course the farther you look out into the future, the more volatile our baseline becomes because of the transaction nature of some of the revenue.

Therefore, we only talk about baseline as of next year, instead of talking about baseline going out several years.

Now, to be clear, we begin each year with a new baseline that includes the ongoing transactional revenues that were never booked, and all the book revenue from the prior year.

During our budget season we establish the baseline revenue forecast for the next year.

In our release today, we have included a new chart that shows the buildup of our baseline for the current fiscal year, as well as how the new bookings in the year flow into new revenue throughout this year and next.

But let me tell you that this is attached of course, to the Bizwire version of our release, it's also on our website as a PDF file.

You may wish to look at the website version which is a landscape version.

The Bizwire version actually is presented in portrait orientation and wraps, so you'd have to cut the page off in the middle just after the first grand total estimate and move the lower half up to align with the same lines on the top half of the page.

The chart starts with the line called baseline prior to '04.

This is our baseline revenue derived from all revenue streams under contract prior to the new bookings we achieved in the current year.

Next, we lift out the new baseline coming from the London Bridge acquisition.

The chart, for example, shows the total baseline to prior to '04 of 596 million.

Going down the page, we show each quarter's bookings and fiscal year '04 and the waterfall of the revenue flowing from those bookings through each quarter in '04 as well as '05.

Now, it's important to understand that all the numbers on this chart, from Q4, '04 and beyond are all estimates.

There will be some variability in these numbers, as many of them are based on assumptions around implementation schedules and volumes.

Of course, bookings do continue beyond the two years shown in this chart, but as I said a moment ago, we are only going to show the forecast through the next year.

This concept of new revenue and baseline is not new to Fair Isaac.

We previously touched on it the beginning of last fiscal year.

We think that by discussing our guidance at the beginning of a year, in terms of expected baseline and expected new revenue, we will provide more clarity into our guidance.

And so now, turning to Q4 guidance.

For Q4, for example, we are guiding our revenue to be 189 to 195 million.

We believe have a baseline forecast heading into Q4 of about 174 to 176 million.

Therefore, in Q4 we really need to close around 15 to $20 million in new revenue during the quarter.

This 15 to $20 million in revenue comes mostly from new license revenue, but also from professional services, engagements, and quick ramping transactional revenues signed in the quarter.

This also includes about $4 million in new license revenue coming from London Bridge.

Looking at the charts, you can see this in the column called Q4E, which shows the low end of that guidance.

Now for fiscal year '05, as Tom mentioned, our guidance range for revenue in fiscal year '05 is 800 million to 830 million.

This is made up of a baseline of around 640 to 650 million and new revenue of about 160 to 180 million.

Since we are in budget season as we speak, we will continue to refine our forecast for next year, and we'll provide our usual Q1 guidance again when we report our results for Q4 in fiscal year '04 in late October.

Again, as in the past, we'll continue to track our bookings, which turn into the new revenue in both the current period and future baseline, and then discuss the strength of the quarter by talking about new bookings, but we'll also discuss our projected baselines over the guidance period as well as the new revenue we expect to get over this same period.

Although we're not yet prepared to give you earnings guidance for fiscal year '05, we believe we'll be just as profitable fiscal year '05 revenue as we are in fiscal year '04.

That's all we're going - on say this for now, when we discuss our Q4 results we'll provide guidance for Q1 and full-year '05 as well as the baseline and new revenue targets for both of those periods.

And since this is sort of a transition quarter, introducing new terminology for baseline, for this quarter I'll also provide the normal guidance by our current reporting segments.

Again, total revenue.

Again, revenues are forecasted to be 189 to 195 million, that breaks as in strategy machine, 118 to 120 million.

Scoring, 36 to 37 million, tools, 6 to 8 million, and professional services about 29 to 30 million.

Gross margins are estimated to be in the 60 to 64% range.

Total expenditures and costs are forecasted to be roughly 147 to 151 million broken down as follows.

Cost of goods around 36 to 40%, R&D coming in around 11 to 12%.

Selling, general,and administrative in the neighborhood of 28 to 29%.

And total amortization around 5.7 million for the quarter, which includes 1.6 million of London Bridge amortization.

Capital Expending's forecast remain in line with our prior expenditures of 5 to 6 million per quarter, and depreciation around 6 to 7 million per quarter.

Other expense net was principally interest income from our investment portfolio upset by interest expense from our two outstanding convertible notes.

Now Tom mentioned, the Company has given notice to redeem its 5.25% convertible subordinated notes due September 1, 2008.

The redemption date will be September 8, 2004, at a redemption price of 102 5/8% of the principal amount of the note, plus interest accrued on the notes, to the redemption date.

In connection with this transaction, the Company will report a charge in its fiscal 2004 fourth quarter of approximately 11.2 million to reflect a redemption premium, and purchase accounting, fair market valued discount on the redeemed note.

This is slightly offset by a reduction in interest expense of around 700,000 during the month of September.

The net result for the quarter is therefore about 10.5 million, or 9 cents per share.

Now, as a reminder, the $11.2 million charge is approximately 4 million in cash, and 7.2 million non-cash.

And of course, the noncash stems from the discount at which these notes were recorded at the time of HNC purchase transaction.

Beginning in the next year, the redemption of the notes will reduce the Company's expense by approximately $2.4 million per quarter, pretax.

Our tax rate for 2004 is forecast to be approximately 38%.

So, given the 9 cent charge for the convertible note, we expect earnings per share to come in around 18 to 20 cents per share in Q4.

Adjusting for the 9 cents this is slightly better than the 25 to 27 cents we disclosed on our prelease on July 12th.

I realize there are a lot of ins and outs in earnings per share resulting from London Bridge, our convertible note, and merger related expenses.

To recap, our earnings per share guidance at 18 to 20 cents.

We are expecting to deliver between 35 to 37 cents from operations without London Bridge.

London Bridge and merger related costs add an 8 cent dilution to the quarter, and the convertible note adds another 9 cent one time hit.

Add those together and you get 18 to 20 cents.

This would suggest that we have net income in the range of 13 to 15 million on 71 million fully diluted shares.

On the subject of share counts for 2004 guidance, Tom cited our Board's recent approval of stock repurchase program to acquire up to $200 million of the Company's outstanding common stock.

As of June 30th, 2004, the Company had approximately 70.3 million shares of common stock outstanding.

The program which will expire in one year will allow the Company to repurchase its shares from time to time in the open market, and in negotiated transactions.

Finally, returning to revenue guidance, and total revenue as Tom mentioned, our full-year revenue targets are from 704 to 710 million which is roughly 12% over the prior year.

We believe earnings will be in the range of $1.38 to $1.40 using approximately 72 million shares[inaudible].

For that will turn the meeting back over to the operator so that we can field some questions.

At this time, I'd like to remind everyone if you would like to ask a question, please press star, then the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Brad Eichler.

Good afternoon.

A couple of questions.

First of all, going into this waterfall analysis, which thank you very much for doing this, but I just want to make sure I'm reading this thing correctly If you're giving guidance for next year of 800 to 830 million, the difference between that and the baseline prior to '05 of 643, the 160 to 180 is new business that you have to bring on board?

That's correct.

OK.

This year, you did bookings, it looks like, if you assume 100 million for the fourth quarter, 430 million, and you got out of that 109 million, or 108-705 in revenue this year.

That's right.

So, is what you're saying, that next year, based on the bookings you do next year, you're going to have to generate 160 to 180, which will be a comparable number to the 108-705?

You've got the impact of London Bridge in there as well, Brad,so I think - you see that probably over on the side as well.

Okay, so, I guess maybe a question would be how much in bookings to you have to do, to generate that incremental amount of revenue?

Just roughly.

We're going to give you that, you know, next quarter, so you can - so - we'll give you the waterfall of '05 next quarter.

But you're right.

So - effectively, you know, round numbers' 110 - that compares to, like the 130 to 150 next year.

Okay?

Okay, so your bookings have got to go up by some measure to hit that number?

So, we've got to have some revenue growth, and we've got - obviously therefore, have to have some booking growth.

Okay.

Now, on this as well, one of the questions that a lot of folks have had is, people have felt like there has been some change in the duration of contracts that you've signed which has caused some apples and oranges comparisons with the bookings.

And I guess one of my questions would be, the old guidance that - the old rule of thumb maybe that Ken always alluded to was, of your bookings, about 40% of those bookings you would recognize in the first 12 months after signing the contract.

And of that amount, about 40% you'd recognize in the first quarter.

And what looks like, just doing some quick calculations on these numbers you provided today, it really looks like it's maybe more 30% that you recognize over the first 12 months and, you know, maybe 35 to 40% in first quarter.

Those seem more like appropriate measures to use?

Certainly you're moving in the right direction.

I don't want to be dogmatic about the actual percentage, because that percentage will be influenced by the nature booking as well.

You know, if it's - if it's a large transaction that requires some period of implementation, we'll maybe get the Professional Services revenue, you know, there may even be some testing involved, and our recognition will be delayed accordingly, and so on.

The larger transactions in those percentages may even be a little lower in the initial period, but you're - certainly your calculations are in the right direction, and the purpose of this chart is to help you see how that happens.

You know, as we move into '05 and we announced to you what the new revenue book in any one period is, you would, you know, presumably fill that in on that side, and then waterfall that out how you expect it to go, and we'll help you do that.

Okay, and then one more thing, one more question on the guidance.

There's been some concern on your MarketSmart database side about you all losing some pretty sizable contracts.

Can you, A, comment on that and, B, let us know how you factored that into this guidance?

Yes.

Because of the consolidation of a couple large banks, sometime in '05 there'll be some contracts - mostly likely will not be renewed.

And we've taken that into effect in these numbers.

But that - now the full-year effect, it won't be a full-year effect, because it happens later on in the fiscal year, so - we've already built that - contracts that we don't anticipate being renewed, those or any others we wouldn't have put into the baseline in '05.

Is that a number around 30 million, Tom, or can you comment on how big that is?

It probably wouldn't be quite that big for the effect in '05, but a full year's value, you know, it could be.

The trouble is - is that what we're doing is, we're transitioning off potentially some database work, but we're not transitioning off the analytic work and so, the true answer is, we're trying to work it out right now, we really don't know.

But it'll be - you know, a significant change some time in '05.

But- around the numbers I'm talking about, but we - but it's not resolved yet.

Thank you.

Our next question comes from [Ed McGuire].

Yes, good afternoon.

You know, given the challenges in closing perpetual licenses, you know, which are subject to kind of typical enterprise software slippage, any thought to changing the nature of some of the licensing to, you know, term licenses or just peers subscriptions?

Great question .

You know, why would I put up with this?

As you know, we try to move as many of these licenses to recurring as we can.

And, you know, that's our strategy--we do it everyday.

There still remains some examples where it's one-time perpetual licenses, our objective is not to try to grow that.

Our objective is to try to convert that by adding analytics to the software into recurring numbers.

So, that is definitely our strategy.

And we're trying to execute - you know, a specific example of that would be in the London Bridge acquisition, collections functionality and origination functionality is actually delivered two ways in our products.

One, through a network-based product called Bridgelink where - the functionality is actually in the network, and you pay a recurring charge, or through a piece of software that sits on your computer for which you pay a perpetual license.

So our strategy would be over time, for example, in this instance, to try to add more functionality to the recurring dimension, you know, of the platform and try to evolve into, more of a recurring stream than a, you know, a perpetual stream.

That also is the case in our tools area.

In our, you know, Blaze technology, has been a - if the competitors in Blaze sell on a perpetual license, and so we do too, because we're in a market where that's the rule.

Now with EDM technology area, where we're evolving that market, our plan is not to do that.

And that's a market more synonymous with what Sass and some others do, where the revenue is recurring, not, you know, but not based on a perpetual license.

So long winded question, my favorite day on earth will be the time when there's no, you know, perpetual license revenue left at Fair Isaac, and it's all - it's all transactions.

Unfortunately, there's transition to get it there, and there's where the complexity comes in.

Moving on to a different area .

The past, you've given out break down of the different subsegments between strategy machines, rough sequential growth.

I mean, can you provide that?

In general, we got these - 10 or 11 different areas, you know, the simple answer is the areas of account management, and London Bridge, and origination, and tools, were simply affected by a little bit less Capstone sales, a little less Triad sales, a little less debt manager sales, I think it's that simple.

And everything, you know, performed pretty close, literally within hundreds of thousands of dollars, quite frankly, of we thought it was going to do.

So, you know, so marketing and fraud and insurance and, you know, consumers and all of those other areas, you know, there was nothing new, there was nothing, you know, exciting.

Now, you know, the point I tried to make, is now none of those hit it out of the park.

It wasn't like, you know, consumer was approximately $9 million again this quarter which was, you know, a wonderful quarter, now it didn't grow to 12 million and make up for, you know, the software sales we missed.

So the other verticals performed as we had planned, nobody hit it out of the park to make up for the, you know, the losses in the software area.

And the losses in the software area by each of those - groups was small.

You know, there's $1 million or $2 million in each, but across 3 or 4 areas that adds up to 8, $9 million and all the sudden, you know, you've got a, you know, you've got a miss.

So, it wasn't one area.

And it wasn't - you know, we tried to break this down and think about what's the issue?

You know, these - this was software and origination, it was in account management.

It was across the entire life cycle - I don't think was our sales technique, because they're, you know, they're the same across these - I think was simply, you know, we didn't close as many deals as we thought.

And we didn't lose them, as I said, we're still working them, and we're still trying to close them this quarter.

Okay I - just for modeling purposes, you're not - you had previously given our dollar figures for 6 subsegments.

But that's not really the appropriate way to be thinking of the business?

Well, I think - what we will do - I don't think it's going to help today [inaudible] imprudent details, quite frankly.

Get what I just said, but what we will do, is typically when we give off our '05 segments next quarter we'll give you that by segment.

So we'll, we lay out the 800 to 830 we'll break that down like we, you know, like we have before into verticals, so we can start tracking them for the year to see where the - you know, where the big growth's coming.

Okay, and one final question, disregarding London Bridge, what are your plans around employee retention there?

There's over 700 employees, are you planning to do any consolidation of head count?

Well, that's not the plan.

But we're going to get $20 million worth of synergies.

Okay. have just one final question now - I may have missed this, but there was couple million of revenue from - related to this Susie Orman relationship, were you able to recognize that this quarter?

No .

We're still - we're still - Susie gets recognized radically.

Now, you know, so that's just the way they do it.

And, you know - the kid's still selling.

You know, the software revenue recognition rules for that type of product really requires to take the revenue out approximately every 12 months.

So we, as we add to that base of revenue we will increasingly recognize the amount, but not all at once or all in one sale.

Fair enough.

Thanks very much.

Yeah, the Susie - QVC stuff is still working very well.

Next question comes from Bruce Simpson.

Good afternoon guys.

Hello.

I wonder if at this point it makes sense for us to revisit your expectations for the long term organic growth for this Company.

I think 8 to 11 with the operating assumption that you headed into '04, and Tom I think you mentioned 5% in the near term here?

And I'm not sure if that was fiscal '05 or the September period.

No, fiscal '05 was the intent of my comment.

Okay.

So, as you look out over the next, let's say three years, and you're aware of the various growth initiatives that you have and the success that you've had and growing those or not.

What do you think is the right assumption or range for organic growth for this Company?

Should we say that 8 to 11 was too aggressive on a long-term basis?

You know, I think right now, based on where we are in the planning process, and you know, given our, you know, wonderful performance this third quarter, you know, I think I'd just like to leave it at that until we start to, you know, show a little bit more progress.

Obviously, you know, I believe, given all the investments we have this quarter, and given - or this fiscal year - all the new products that we just came out with, you know, I think we're really positioned well.

Having said that, you know, I continue to emphasize we're trying to become a big company, we're trying to become, you know, someone who can manage this portfolio, and I think at the end of the day, you know, the question here isn't innovation, it's not about are we in enough markets, it's not about do we have world class products, you know, it's just - you know, can we get an organization that just a couple of years ago had a couple, few products and segments, and now all of a sudden, we're trying to, you know, fire off on 11 different markets simultaneously, I think that is the challenge, and until I can, you know, get us all working so efficiently that, you know, we can deliver on that, it's probably better to be a little bit more conservative.

You know, I'm a glass half full, and then some, type of person.

But I think right now we should just sort of - you know, obviously, I believe the potential's higher than that, you know, I continue to believe that, and we've just got to demonstrate that we can build an organization that can - execute that.

And as you know, [inaudible] transaction revenue is hard is, you know, it takes momentum of bookings to build that up.

And, I think I want to focus more on, you know, getting that momentum going across a large number of segments, and if we can get that momentum going, you know, that number will start to accelerate, so.

Okay.

My second question has to do with trying to pin you down a little bit more on the nature of the miss this quarter.

Tom, you're comment earlier was something about, you just didn't close as many deals as we thought we did.

Can you give some opinion as to whether that is due to competitive forces, or overall pushout within the financial services vertical, or do you think that some of these deals were lost in a - to competitors, and if so, to whom?

Yeah, no.

The answer is, you know, it's more frustrating than that, we just didn't close them.

In Triad, we were undefeated again this quarter, but there was a few, you know, that we didn't get, that we thought we were going to get.

But origination, there was some Capstone deals that we, you know, we literally thought this - you know, going into the last day, so we just - they just didn't get done.

And, so, we haven't lost them.

Everyone of them, there's 13 that I'm talking about that added up to the bigger number, you know, we're, you know, we're trying to close this quarter.

So, it wasn't because, now, maybe competitive pressure could be, you know, as we're trying to get something - now these are contract level things, we won, we're trying to sign contracts, we're negotiating, you know, legal terms.

That's the level of these, this isn't, you know, a sales guy's excited about a meeting he just had.

So, I - you know, I don't know, I - usually we get them done, we didn't get them done this quarter.

Are you attributing that to kind of the broader forces that we hear out of [inaudible] and all these other business software makers, or to company specific execution failure?

Yeah, great question, I would say that's where I'm headed, you know, that's where my head is.

I mean, I - think it's just, you know, some combination of events whereby companies aren't deciding as fast, and taking longer.

Purchase agents love their jobs now, and they do a good job of - and so, I think that's one function, and I think we just didn't get some deals done that we thought.

I wouldn't call it execution failure, I would just call it not getting them done.

And I think, now, you know, - there is pressure in general, you know, across technology for taking down, you know, doing big write offs at the last second, or taking discounts at the last second to get deals, you know, we tend not to try to do too much of that.

And, you know, there was, there seemed to be a little bit more pressure in that area this quarter which we didn't succumb to, so.

Okay, thanks.

The last thing that I had pertains to London Bridge.

When you say you're looking for $20 million in synergies, and yet you're not anticipating cutting head count, does that 20 million include either revenue or cost reductions, and can you give us a little bit more detail on how you think you're going to get there.

The answer's yes.

We're going - it'll probably take a little bit of both, and now that we have migrated the operating plans to the various group leaders, and for Isaac, those plans are evolving, you know, as we speak, so we're well in the details of that as we focus our growth for, you know, our energies for '05.

So - so, we're the integration is happening as we speak, we're not planning it anymore, we're, you know, we're executing to it, and probably - you know - we're only the first month into this, really this past quarter.

So, we'll have more color on, you know, on specifics as we - absorb our first quarter of activity with the new management team from London Bridge.

Okay, thanks.

Our next question comes from [Tony Libel].

Good evening.

A couple of quick questions, and one longer one.

First, I was wondering if you could recap the 4th quarter, what exactly your other interest expense expectations are, after the - the redemption of the convert?

It will just be the interest expense - we'll have interest expense until September at the same rate - until about September 8 at the same rate that we show right now on the two instruments, and then going into the last part of September, we'll save about $700,000 of interest on the 5 1/4, or - 5 1/4 convert.

Is there a net hard dollar number that you could point to?

Just one second, we'll calculate that for you Tony.

Why don't you give us your other question?

Sure.

The other one was like - I know you guys have kind of been asked this several - a couple different ways, but you have an organic growth rate on a combined basis for the strategy machine segment this quarter?

Not on - my fingertips here, sorry.

Okay, I'll move on to the last one, which is a little bit longer, and it kind of ties to the first question you had.

If I heard correctly, you had said that you had about - you were expecting about 800 to 830 million in total revenues with about 640 to 650 coming from the baseline, and with London Bridge being 30 to 40 million of the incremental new on top of 160 to 180, I kind of get a number of - new revenue contribution needing to be about 130 to 140, looking about - what you did this quarter, that would imply that you'd probably need to see about a 40% increase in new bookings, and you're calling for about 5% organic growth.

Is the difference between those two essentially the assumption that there's going to be additional acquisition?

I - sorry, half the team's here trying to calculate your last number.

I feel - we've lost.

You know, the easier way, is the - does the '05 guidance that you're providing include acquisitions that you might do in the future?

No, no, it does not.

Going to the answer on your interest is 4 million, 300 thousand - is a hard number for expense in the quarter.

That is the - the net?

The net number I was looking for, for other income?

Yes.

Okay.

All right, great, thank you very much.

You know, the retirement of the converts take some of our cash away, so you've got - [inaudible] the loss of interest income, too.

Okay, thanks.

Our next question comes from [Andrew Jeffrey].

Hi, good afternoon.

A couple questions.

First of all, Chuck, could you comment on how the current waterfall that you've provided us here compares to what it might have looked like prior to the preannouncement of the third quarter?

Both as it pertains to - well, I guess primarily as it pertains revenue recognition considerations, but also to any other changes you might have made in terms of helping us understand just you know, just the level of confidence we should have in the projections you give us here.

Well, let me tell you that I - you know, I think you're referring to the fact that here I arrived, and now you see this.

I will tell you that this existed in form before the Company just - didn't organize it to release it as you here.

But, I - I've really done nothing, we've done nothing to change the way these numbers are developed or brought forward, and I have a, you know, a high confidence in that baseline figure, and how these waterfall out.

These are based upon actual deals that are done, the baseline is tested in a number of different ways by revenue accountants that are looking at estimates of usage and renewal rates out into the future.

You're point about prior to - perhaps, you know, going back, the history for this really dates forward from the HNC acquisition.

And during the year following the merger, the Company did a number of things to improve it's revenue accounting systems, and to bring together the two books of business that were brought together in the transaction into one revenue stream going forward.

And that's - there are hundreds of contracts that make up these numbers, and any one sale or any one line item, and it takes a great deal of work to audit those deals going forward, and to track performance against them.

So, I'm confident that we've got a lot of eyes on them, and that the departure from the numbers that you see here are issues that, generally speak to either a single renewal, or to volumes being different, or falling into different periods that we anticipated when we first scheduled out the waterfall.

So, the - I expect the changes - you know, within a high level of confidence to be - maybe some volatility between sales--either into one quarter before, or one quarter after.

And then as I said in the earlier question, or I should say - [inaudible] very large transactions where, you know, the scheduling out of the revenue after, perhaps, a deferral period, or implementation period, or benchmarking conform, may have a significant impact, but always perspective in - with regard to the current year's bookings.

If I - - -.

It's a long answer, but - - -.

That said, have you taken a different look at revenue recognition policies, timing, or assumptions as you lay out this new waterfall versus that which you saw when you first walked in the door?

No, and, you know, I would be barred from doing that anyway, this Company's been audited by KPMG, from it's inception, from the audit, and I can assure you they apply the revenue recognition rules rigorously.

Okay.

And then a question for you, Tom.

Could you comment on Ken Saunder's departure from Fair Isaac, and if you anticipate running the European business?

Yeah, actually, you know, the original strategy for Ken was to get him involved in helping some of these emerging markets, and at the same time transition to Chuck, and actually he did a good enough job on that recently that he decided, you know, that he likes being a CFO again, and so, I think it'll be announced soon, if it wasn't, I think - soon.

He's moving from the operating world that we were trying to get him into, a new CFO position somewhere.

So, he wants to go back to the CFO days.

Now, having said that, we moved out of - we've moved the, you know, his job on the bridge was to help, you know, move it and integrate it into the, you know, into the matrix of Fair Isaac, if you will, that's already been done, so.

So, his operating role there had been moved already to the individuals who run these units.

So - we'll miss Ken, you know, and I think he's done a great job over the last couple of years, but we weren't able to move him into an operating role that I - he felt was challenging enough, so he's moving on.

Okay, thanks.

Our next question comes from [David Scharr].

Hi, good afternoon.

Ken, I'm curious, you know, as I look at the breadth of the license shortfall, or delays, you know, you mentioned they spanned 4 or 5 different areas, tools, origination, Capstone, Triad, debt manager, you know, and it kind of raises the question, because it is so broad, if you reflect on the organic growth of prior periods, was it the license aspect of Fair Isaac that was providing much of the upside in the organic growth?

Or, put another way, just how much organic growth have we really seen over the last 18 months in the recurring revenue transaction based business, the 85% revenue?

Well, I don't know if I know that - I don't know that one off the top of my head, so, we'd have to - we'd have to get back on that one, I'm sorry, I just don't know that off the top of my head.

I see.

They've - they've both been growing, and I don't know the percentages by the last couple of quarters, sorry.

Okay, and on these license - - .

I mean, the best way, a way to sort of understand this is real simple.

Is you look at the - I'm into this baseline revenue analysis chart that we sent out.

If you look in the Q3 new revenue box, there's 10 million, 341.

And now if you look at the last quarter, it was 14.7, the previous quarter was 15, so we didn't get as much new revenue.

Right there, that's the sell.

That's the thing that says, you know, we were off.

Now, that could have been revenue because of consulting, it could have been new revenue for lots of reasons, but anyway.

So.

Yeah, and I guess my point is, it seems to be because of licenses, and we've always been thinking of Fair Isaac as a pretty predictable recurring revenue, 85% transaction based model.

And I'm wondering with such a, you know, such a breadth of areas, that licenses were delayed, and the magnitude of the earnings miss, if in fact it's that 15%, the tail is really wagging the dog here.

What - were these 13 licenses that were delayed all to new customers, or were they - sales of other products to existing ones?

Actually, it's - some mix.

It's probably - I won't get it exactly right, but - I got them right here.

It's a mix, it's a mix of existing and, you know, new.

You know, and - I think, you know, the reason I don't know this right off the top of my head here is, you know, again back to the examples like insurance.

We're getting phenomenal bookings in insurance, but it takes us months to get them installed, to get them recognized.

So that revenue's coming, we're going to get it, you know, I think our major, you know, if - to think we can criticize us those 4 and do better 4 in the future is - you know - we overestimated how quickly booking would be turned to revenue.

We didn't have a lot of experience with these big bookings, as you know, these are new for us.

And so we just, you know, overestimated how quickly they'd move into transactions, and you know, they're not - we're still getting big contracts, they're just not moving into revenues fast, but hopefully with this - deal - with this chart, we can reflect that more, you know, specifically.

Now, all the new products I just talked about are all transaction oriented.

You know, the new scores, you know, the new software, the new blah - - -.

That's all transaction stuff that, you know, that we're trying to grow.

So, we're not taking our eye off the transaction ball at all, so. [Inaudible - speakers overlapping.] With this schedule now, we can do a better job of trying to track your points here.

Okay, and one last question, on sort of the pulse of your customers, this is maybe pretty difficult to answer, but, you know, interestingly we've seen in some other areas of financial outsourcing, you know, a move by a lot banks and card issuers to suddenly reverse trend, and instead of focusing on outsourcing certain processing and analytics, bring it in house.

You know, we've seen it with Bank One and the card issuing space, we've seen it with a number of - banks and the electronic bill pay.

Whenever you see, you know, a number of licenses, you know, closings delayed, you know, any - sense or feedback from sales that perhaps some clients are re-evaluating the value proposition, that there's any trend of developing more analytics in house?

Well, since - two different - let me break that down.

You know, we've been competing forever with the analytic departments, you know, of our biggest customers.

So that's - nothing new there.

That's not the issue here.

You know, we've - that's not the numbers that we're off on here.

The - so actually, the trends of big banks to continue as they consolidate to do it more and more themselves is not a factor in this particular, in this quarter at all.

So, that isn't happening to us.

About the only place we do - you know, in '05 as I said earlier, about the only place we do outsourcing of, you know, large amounts, you know, not - is sort of in this marketing space, and there's no question that banks are moving their - you know, more and more of their marketing functions in house, but that placed, you know, that doesn't hurt us.

I mean, that - we'd rather work with the in house staffs on, you know, on their analytic problems, so that's not - that's not happening to us.

That's not a problem for us.

I think it's just - yeah, I just think it was we didn't as many deals closed, and if we would've got 10 more of those closed we wouldn't be sitting here right now, we didn't.

You know, I've been through all of them with the team, we thought they were going to close they didn't so, I'm getting a little conservative.

I see.

Thank you, Tom.

Your next question comes from Scott Kessler.

Hi, thanks very much.

A few questions.

Tom, you referenced a couple of times that a number of deals didn't close.

Another - a number of enterprise software companies have actually indicated that although perhaps deals didn't close in the June quarter, they actually did close in the September quarter.

Can you possibly make comparable comments?

I have some other questions, but I'll let you start with that one.

I don't know.

Okay.

I think, you know, - the hard part - why don't I know that?

Because we - since this number isn't that big of a number every quarter, you know, I don't think we have enough data, you know, for me to be projecting industry trends.

Okay.

The second question I have is a few enterprise software companies have been talking about the potential for Sarbanes-Oxley implementation potentially having an impact - a negative impact on new spending and deployments.

Is that something you've heard from your customers?

No, never.

As we don't sell any software that - first of all, we don't sell any software that helps Sarbanes-Oxley from a compliance perspective, so that wouldn't be the case, and I - I've never heard of a situation yet where someone felt Sarbanes-Oxley gets blamed for other things, but not for that.

Right.

I guess my though, is that a lot of companies, whether it's rational or not, are choosing not to buy and deploy software as they're checking their systems related to Sarbanes-Oxley compliance, that's all I'm saying.

Yeah, I understand.

Again - I haven't heard that.

There's one excuse I haven't heard yet.

Okay, well maybe you could use it.

The last comment is actually a follow up, to some extent, and that is this.

I think what a lot of folks might be reading into, is the fact that you have Ken Saunders essentially transitioned from the CFO role to, I guess, a COO international role.

A new CFO comes in, you have a preannouncement, and now we see that in fact, Ken did not remain with the company, and another member of your executive team, or another manager within your company left with Ken.

So, I guess, I just wanted to give you the opportunity to kind of talk a little bit about, you know, how people shouldn't maybe be reading into that series of events, and the way that I think some people could.

Yeah.

Please, don't read anything into it.

They're from two different parts of the organization, and left for two very different reasons, and I should just probably leave it at that.

They're not - they're unrelated.

Okay, fair enough, thanks a lot.

Ladies and gentlemen, we have reached the end of the allotted time for this question and answer session.

Are there any closing remarks?

No, thank you very much, and we'll see you in a quarter.

Thank you.

Thanks for your time, bye-bye.

This concludes today's Fair Isaac earning's conference call.

You may now disconnect.