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Fair, Isaac Reports Strong First Quarter Results; 73% Year-Over-Year Revenue Growth with HNC Revenues

Fair, Isaac Reports Strong First Quarter Results; 73% Year-Over-Year Revenue Growth with HNC Revenues

Business Editors

SAN RAFAEL, Calif.–(BUSINESS WIRE)–Jan. 22, 2003

Fair, Isaac and Company, Incorporated (NYSE:FIC), the leader in customer analytics and decision technology, today announced financial results for the first fiscal quarter ended December 31, 2002.

The company achieved first quarter revenue of $146.7 million versus $85.1 million reported in the first quarter of fiscal 2002, and in line with the company’s previous guidance. Net income for the first quarter of fiscal 2003 totaled $19.8 million, or $0.38 per share on 52.2 million diluted shares outstanding, compared with $13.5 million, or $0.38 per share on 35.9 million diluted shares outstanding reported in the same quarter last year.

Results for the first quarter in fiscal 2003 include $2.0 million in merger-related charges resulting from the HNC Software acquisition, which resulted in a negative two-cent impact to diluted earnings per share(1).

“Our December quarter was our first full quarter as a combined company and clearly illustrates our success in merging two analytic powerhouses,” said Tom Grudnowski, CEO of Fair, Isaac. “Despite a continued lackluster business environment, I’m particularly pleased that we were able to meet our financial goals while simultaneously melding our people and products. Our results speak for themselves and demonstrate our continued ability to build and maintain relationships with both new and existing customers and strategic partners.”

The company will host a conference call today at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its first quarter results and provide guidance for fiscal 2003. The call can be accessed live on the Investor Relations’ section of the company’s Web site at www.fairisaac.com, and will be archived on the site immediately following the call.

About Fair, Isaac

Fair, Isaac and Company, Incorporated (NYSE:FIC) is the preeminent provider of creative analytics that unlock value for people, businesses and industries. The company’s predictive modeling, decision analysis, intelligence management, decision management systems and consulting services power more than 25 billion mission-critical customer decisions a year. Founded in 1956, Fair, Isaac helps thousands of companies in over 60 countries acquire customers more efficiently, increase customer value, reduce fraud and credit losses, lower operating expenses and enter new markets more profitably. Most leading banks and credit card issuers rely on Fair, Isaac solutions, as do insurers, retailers, telecommunications providers, healthcare organizations and government agencies. Through the www.myfico.com Web site, consumers use the company’s FICO(R) scores, the standard measure of credit risk, to manage their financial health. As of August 5, 2002, the business of HNC Software Inc., a leading provider of high-end analytic and decision management software, is part of Fair, Isaac. For more information, visit www.fairisaac.com.

Forward-Looking Statements

Except for historical information contained herein, the statements contained in this press release that relate to Fair, Isaac, including statements regarding our ability to build and maintain customer and other business relationships, are forward-looking statements 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 actual results to differ materially, including the company’s ability to recruit and retain key technical and managerial personnel, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, competition, regulatory changes applicable to the use of consumer credit and other data, the possibility that the anticipated benefits of its recent merger with HNC, including expected synergies, cannot be fully realized, the possibility that costs or difficulties related to the integration of our business and HNC’s business will be greater than expected, and other risks described from time to time in Fair, Isaac’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2002. If any of these risks or uncertainties materializes, Fair, Isaac’s results could differ materially from Fair, Isaac’s expectations in these statements. Fair, Isaac disclaims any intent or obligation to update these forward-looking statements.

Fair, Isaac, HNC and FICO are trademarks or registered trademarks of Fair, Isaac and Company, Incorporated, in the United States and/or in other countries. Other product and company names herein may be trademarks of their respective owners.

Note (1): Calculated as $2.0 million in merger-related charges less $0.8 million income tax benefit (by application of the company’s 38.5 percent effective tax rate for the quarter), or $1.2 million, divided by 52.2 million diluted shares outstanding for the quarter.

FAIR, ISAAC AND COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Quarters Ended December 31, 2002 and 2001

(in thousands, except per share data)

Quarter Ended

December 31,

———————–

2002 2001

———– ———–

(Unaudited) (Unaudited)

Revenues $146,732 $85,061

———– ———–

Operating expenses:

Cost of revenues 60,654 38,585

Research and development 17,247 7,477

Sales, general and administrative 32,183 17,942

Amortization of intangibles 3,262 525

Merger-related expenses 2,010 –

———– ———–

Total operating expenses 115,356 64,529

———– ———–

Income from operations 31,376 20,532

Other income, net 802 1,859

———– ———–

Income before income taxes 32,178 22,391

Provision for income taxes 12,389 8,844

———– ———–

Net income $19,789 $13,547

=========== ===========

Earnings per share:

Basic $0.39 $0.40

=========== ===========

Diluted $0.38 $0.38

=========== ===========

Shares used in computing earnings per share:

Basic 50,162 34,190

=========== ===========

Diluted 52,173 35,946

=========== ===========

FAIR, ISAAC AND COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2002 and September 30, 2002

(in thousands)

December September

31, 30,

2002 2002

———– ———–

(unaudited)

ASSETS:

Current assets:

Cash and investments $270,441 $281,211

Receivables, net 110,196 121,456

Other current assets 26,217 25,507

———– ———–

Total current assets 406,854 428,174

Investments 148,989 150,202

Property and equipment, net 57,859 63,898

Goodwill and intangibles, net 519,177 520,114

Other noncurrent assets 52,560 50,125

———– ———–

$1,185,439 $1,212,513

=========== ===========

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:

Accounts payable and other accrued

liabilities $54,691 $44,135

Accrued compensation and employee

benefits 24,973 28,153

Deferred revenue 20,943 17,921

———– ———–

Total current liabilities 100,607 90,209

Convertible subordinated notes 140,274 139,922

Other noncurrent liabilities 7,956 8,910

———– ———–

Total liabilities 248,837 239,041

Stockholders’ equity 936,602 973,472

———– ———–

$1,185,439 $1,212,513

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