Fair Isaac Corporation Annual Report 2011

FY2011 Annual Report · Fair Isaac Corporation

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FAIR ISAAC CORPORATION

2011 ANNUAL REPORT

To our stockholders, clients and employees:

Fiscal 2011 was the fourth consecutive year characterized by extremely challenging macroeconomic
conditions, yet through it, we delivered revenue growth as well as healthy earnings thanks to our strong
operating leverage.

In some markets, the principal challenge for FICO and our clients was the painfully slow pace of
economic recovery, coupled with increasing regulatory pressures. In others, it was the opposite: the rapid
pace of economic growth and development in parts of Asia, Latin America and Eastern Europe presented
different, yet no less demanding challenges. And in still other parts of the globe, business conditions were
marked by unpredictable and volatile economic swings, fueling uncertainty and a reluctance to invest.

Yet through FY2011, we maintained focus on our long-term strategy. We delivered innovative, highly

relevant products into the marketplace. We made significant improvements in sales execution, gaining
better visibility into the sales pipeline, increasing the number of large deals we were able to win, and
achieving our targets for the year. And we made similarly dramatic improvements in services execution,
increasing profitability and revenues while boosting the quality and value of our services offerings.

At the mid-year point, we stepped up our cost reengineering efforts — efforts that bore fruit by year’s

end, when we met our revenue and margin guidance for FY2011. I’m pleased to report today that our
company remains in excellent financial health, with a reliable business model, substantial operating
leverage and a promising outlook for the year ahead.

• In our Applications business, we released important updates to our solutions for originations (FICO®
Origination Manager), collections (FICO® Debt Manager™ Live and FICO® PlacementsPlus) and
insurance fraud (FICO® Insurance Fraud Manager 3.2). We also introduced the FICO® Bankcard Growth
Solution, an integrated solution that helps lenders improve decisions based on deeper analytic insight and
accelerated learning across all stages of bankcard acquisitions and originations.

• In our Scores business, we continued to drive market adoption of the FICO® 8 Score, along with industry-

standard FICO scores for the mortgage and auto industries. We introduced the FICO® Medication
Adherence Score, designed to address the costly business and societal problem of medication adherence.
We also announced the ability to predict strategic mortgage defaults, creating demand for potentially
lucrative consulting engagements with a range of large mortgage lenders and servicers. And we forged
new partnerships with two well-known industry leaders: CoreLogic, with whom we are developing an
enhanced FICO mortgage scoring solution for the U.S. mortgage industry, and Equifax, with whom we are
working to deliver risk management solutions for banking, insurance and retail in the United Kingdom.

• In our Tools business, we made strong competitive strides, winning some large deals, building an

impressive sales pipeline, and delivering updated versions of the FICO® Xpress Optimization Suite and
FICO® Model Builder products into the marketplace.

• Finally, we delivered substantial free cash flow, allowing us to repurchase 3.6 million shares of stock,

for a 9.7 percent reduction in shares outstanding from last year.

For fiscal year 2011, revenue from continuing operations totaled $620 million, an increase of 2.3 percent

from last year’s $606 million. Our income from continuing operations was $71.6 million, an 11 percent increase
over the fiscal 2009 result of $64.5 million. Fully diluted earnings per share from continuing operations was
$1.79, a 26 percent increase from last year’s $1.42.

As we move into the new fiscal year we continue to pursue larger, more complex solution sales. Because of

their size and complexity, these deals are difficult to time, yet we believe they bring exceptional value to our
clients and shareholders, and ensure FICO’s long-term growth and financial sustainability.

In closing, I’d like to share with you some of what I experienced at FICO World, our global customer
conference, in New York at the beginning of FY2012. More than 700 attendees — mostly banking and insurance
executives — came seeking game-changing strategies and solutions for profitable growth. These executives face
severe stress in their businesses — from economic, regulatory and political stress in Europe and the United
States, to the very real stress of hyper-growth and competition in places like China, Brazil and Russia.

Yet amid those conditions, these clients made time to come talk to FICO. Why? For the same reason I
believe we’re able to report strong financial results for FY2011: the value of FICO solutions is increasingly
apparent in the marketplace. Based upon that and the structural improvements we made to our business over the
past year, we’re well-positioned to deliver strong value to our shareholders in FY2012 and beyond.

Finally, in closing, I’d like to express appreciation for the many years of service from board members Peggy
Taylor and Pete Hart, who have chosen not to stand for reelection at the 2012 annual meeting. We thank them for
their contributions of time and talent, and wish them much continued success.

Mark Greene
Chief Executive Officer
Fair Isaac Corporation

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

Form 10-K

EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2011

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from

to
Commission File Number 1-11689

Fair Isaac Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

901 Marquette Avenue, Suite 3200
Minneapolis, Minnesota
(Address of principal executive offices)

94-1499887
(I.R.S. Employer
Identification No.)

55402-3232
(Zip Code)

Registrant’s telephone number, including area code:
612-758-5200
Securities registered pursuant to Section 12(b) of the Act:

(Title of Class)

(Name of each exchange on which registered)

Common Stock, $0.01 par value per share
Preferred Stock Purchase Rights

New York Stock Exchange, Inc.
New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. È Yes ‘ No
Indicate by check mark if the registrant is not required to file report pursuant to Section 13 or Section 15(d) of the Act. ‘ Yes È No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be

contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. È

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting

company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ‘ Yes È No
As of March 31, 2011, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $540,420,207
based on the last transaction price as reported on the New York Stock Exchange on such date. This calculation does not reflect a determination that
certain persons are affiliates of the registrant for any other purposes.

The number of shares of common stock outstanding on October 31, 2011 was 35,701,425 (excluding 53,155,358 shares held by the Company

as treasury stock).

Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the definitive proxy statement for the Annual Meeting of

Stockholders to be held on February 7, 2012.

[THIS PAGE INTENTIONALLY LEFT BLANK]

TABLE OF CONTENTS

PART I

Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
(Removed and Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . .
Item 9.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

3
15
26
26
27
27

28
30
31
51
54
91
91
91
91

92
93

93
94
94

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95
99

PART IV

FORWARD LOOKING STATEMENTS

Statements contained in this report that are not statements of historical fact should be considered forward-

looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). In
addition, certain statements in our future filings with the Securities and Exchange Commission (“SEC”), in press
releases, and in oral and written statements made by us or with our approval that are not statements of historical
fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking
statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share,
the payment or nonpayment of dividends, capital structure and other statements concerning future financial
performance; (ii) statements of our plans and objectives by our management or Board of Directors, including
those relating to products or services; (iii) statements of assumptions underlying such statements; (iv) statements
regarding business relationships with vendors, customers or collaborators; and (v) statements regarding
products, their characteristics, performance, sales potential or effect in the hands of customers. Words such as
“believes,” “anticipates,” “expects,” “intends,” “targeted,” “should,” “potential,” “goals,” “strategy,” and
similar expressions are intended to identify forward-looking statements, but are not the exclusive means of
identifying such statements. Forward-looking statements involve risks and uncertainties that may cause actual
results to differ materially from those in such statements. Factors that could cause actual results to differ from
those discussed in the forward-looking statements include, but are not limited to, those described in Item 1A of
Part I, Risk Factors, below. The performance of our business and our securities may be adversely affected by
these factors and by other factors common to other businesses and investments, or to the general economy.
Forward-looking statements are qualified by some or all of these risk factors. Therefore, you should consider
these risk factors with caution and form your own critical and independent conclusions about the likely effect of
these risk factors on our future performance. Such forward-looking statements speak only as of the date on which
statements are made, and we undertake no obligation to update any forward-looking statement to reflect events
or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events
or circumstances. Readers should carefully review the disclosures and the risk factors described in this and other
documents we file from time to time with the SEC, including our reports on Forms 10-Q and 8-K to be filed by
the Company in fiscal 2012.

Item 1. Business

PART I

GENERAL

Fair Isaac Corporation (NYSE: FICO) (together with its consolidated subsidiaries, the “Company”, which

may also be referred to in this report as “we,” “us,” “our,” and “FICO”) provides products and services that
enable businesses to automate, improve and connect decisions to enhance business performance. Our predictive
analytics, which includes the industry-standard FICO® Score, and our Decision Management systems power
hundreds of billions of customer decisions each year.

We were founded in 1956 on the premise that data, used intelligently, can improve business decisions.
Today, we help thousands of companies in over 90 countries use our Decision Management technology to target
and 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 our
solutions, as do insurers, retailers and healthcare organizations. We also serve consumers through online services
that enable people to purchase and understand their FICO® Scores, the standard measure in the United States of
credit risk, empowering them to manage their financial health.

More information about us can be found on our principal website, www.fico.com. We make our Annual
Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, as well as
amendments to those reports, available free of charge through our website as soon as reasonably practicable after
we electronically file them with the SEC. Information on our website is not part of this report.

PRODUCTS AND SERVICES

We help businesses automate, improve and connect decisions across the enterprise, an approach we

commonly refer to as Decision Management. Most of our solutions address customer decisions, including
customer targeting and acquisition, account origination, customer management, fraud management, collections
and recovery. We also help businesses improve noncustomer decisions such as transaction and claims processing.
Our solutions enable users to make decisions that are more precise, consistent and agile, and that systematically
advance business goals. This helps our clients to reduce the cost of doing business, increase revenues and
profitability, reduce losses from risks and fraud, and increase customer loyalty.

Our Segments

We categorize our products and services into the following three operating segments:

• Applications. This segment includes pre-configured Decision Management applications designed for a

specific type of business problem or process—such as marketing, account origination, customer
management, fraud and insurance claims management—as well as associated professional services.

•

Scores. This segment includes our business-to-business scoring solutions and services, our myFICO®
solutions for consumers, and associated professional services. Our scoring solutions give our clients
access to analytics that can be easily integrated into their transaction streams and decision-making
processes. Our scoring solutions are distributed through major credit reporting agencies, as well as
services through which we provide our scores to clients directly.

Tools. The Tools segment is composed of software tools that clients can use to create their own custom
Decision Management applications, as well as associated professional services.

Comparative segment revenues, operating income and related financial information for fiscal 2011, 2010

and 2009 are set forth in Note 18 to the accompanying consolidated financial statements.

Key Products and Services by Operating Segment

Operating Segment

Key Products and Services

Applications . . . . . . . . . . . . . . . . . . . . . . . .

Marketing . . . . . . . . . . . . . . . . . . . . . . FICO® Precision Marketing Manager

FICO® Retail Action Manager

Originations . . . . . . . . . . . . . . . . . . . . FICO® Origination Manager
FICO® LiquidCredit® service
FICO® Capstone® Decision Manager
FICO® Capstone® Decision Accelerator

Customer Management . . . . . . . . . . . . FICO® TRIAD® Customer Manager

FICO® Transaction Scores

Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . FICO® Falcon® Fraud Manager

FICO® Insurance Fraud Manager
FICO® Fraud Predictor with Merchant Profiles
FICO® Falcon® ID solution
FICO® Card Alert Service

Collections & Recovery . . . . . . . . . . . FICO® Debt Manager™ solution

FICO® Recovery Management System™ solution (“RMS™)
FICO® Network Services
FICO® PlacementsPlus® service

Analytics . . . . . . . . . . . . . . . . . . . . . . . FICO® Predictive Analytics

FICO® Custom Decision Optimization
FICO® Economic Impact Service
FICO® Basel II Analytic Services

Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business-to-business . . . . . . . . . . . . . . FICO® Scores

FICO® Expansion® Scores
FICO® Revenue Scores
FICO® Bankruptcy Scores
FICO® Insurance Scores
Property PredictR™, a FICO® Insurance Score
FICO® PreScore® Service
FICO® Credit Capacity Index™
FICO® Medication Adherence Score
FICO® Strategic Default Score
FICO® Economic Impact Index

Business-to-consumer . . . . . . . . . . . . . myFICO® service

Score Watch® subscription

Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FICO® Blaze Advisor® business rules management system

FICO® Model Builder
FICO® Decision Optimizer
FICO® Xpress Optimization Suite

Our Solutions

Our solutions involve four fundamental disciplines:

•

Predictive analytics that identify the risks and opportunities associated with individual clients,
prospects and transactions, in order to detect patterns such as risk and fraud, and that improve the
design of decision logic or “strategies”;

• Data management and profiling that bring extensive consumer information to every decision;

•

Software such as rules management systems that implement business rules, models and decision
strategies, often in a real-time environment; and

• Consulting services that help clients make the most of investments in FICO applications, tools and

scores in the shortest possible time.

All of our solutions are designed to help businesses make decisions that are faster, more precise, more

consistent and more agile, while reducing costs and risks incurred in making decisions.

Applications

We develop industry-tailored Decision Management applications, categorized as Applications, which apply

analytics, data management and Decision Management software to specific business challenges and processes.
These include credit offer prescreening, insurance claims management and others. Our Applications primarily serve
clients in the banking, insurance, healthcare, and retail sectors. Within our Applications segment our fraud solutions
accounted for 23%, 20% and 20% of total revenues in each of fiscal 2011, 2010 and 2009, respectively, our
customer management solutions accounted for 13%, 14% and 15% of total revenues, in each of these periods,
respectively, and our marketing solutions accounted for 10%, 11% and 9% for each of these periods, respectively.

Marketing Applications

The chief offerings for marketing are our FICO® Retail Action Manager and FICO® Precision Marketing
Manager. These solutions offer a suite of products, capabilities and services designed to integrate the technology
and analytic services needed to perform context-sensitive customer acquisition, cross-selling and retention
programs and deliver mathematically optimized offers. Our marketing solutions enable companies that offer
multiple products and use multiple channels (companies such as large financial institutions, consumer branded
goods companies, pharmaceutical companies, retail merchants and hospitality companies) to execute more
efficient and profitable customer interactions. Services offered in our Marketing Solutions include customer data
integration services; services that enable real-time marketing through direct consumer interaction channels;
campaign management and optimization services; interactive tools that automate the design, execution and
collection of customer response data across multiple channels; and customer data collection, management and
profiling services.

Originations Applications

We provide solutions that enable banks, credit unions, finance companies, installment lenders and other
companies to automate and improve the processing of requests for credit or service. These solutions increase the
speed and efficiency with which requests are handled, reduce losses and increase approval rates through analytics
that assess applicant risk, and reduce the need for manual review by loan officers.

In fiscal 2011, we launched FICO® Origination Manager, our next generation application-to-decisioning
processing solution built on a service-oriented architecture (SOA), modularized approach. Our other solutions
include the web-based FICO® LiquidCredit® service, which is primarily focused on credit decisions and is
offered largely to mid-tier banking institutions. In addition, we offer FICO® Capstone® Decision Manager and
FICO® Capstone® Decision Accelerator, a rules-based application based on our FICO® Blaze Advisor® business
rules management system. We also offer custom and consortium-based credit risk and application fraud models.

Customer Management Applications

Our customer management products and services enable businesses to automate and improve decisions on
their existing customers. These solutions help businesses decide which customers to cross-sell, what additional
products and services to offer, whether customer risk levels have increased or decreased, when and how much to
change a customer’s credit line, what pricing adjustments to make in response to account performance or
promotional goals, and how to treat delinquent and high-risk accounts.

We provide customer management solutions for:

Banking. In banking, our leading account and customer management product is the FICO® TRIAD®
Customer Manager. The solution is an adaptive control system, so named because it enables businesses
to rapidly adapt to changing business and internal conditions by designing and testing new strategies in
a “champion/challenger” environment. The TRIAD system is the world’s leading credit account
management system, and our adaptive control systems are used by more than 250 issuers. The current
version of the TRIAD system enables users to manage risk and communications at both the account
and customer level from a single platform. We also offer transaction-based models called FICO®
Transaction Scores, which help card issuers identify high-risk behavior more quickly and thus manage
their credit card accounts more profitably. We market and sell TRIAD end-user software licenses,
maintenance, consulting services, and strategy design and evaluation. Additionally, we provide TRIAD
services and similar credit account management services through third-party credit card processors
worldwide, including the two largest processors in the U.S., First Data Resources, Inc. and Total
System Services, Inc.

Fraud Applications

Our fraud management products improve our clients’ profitability by predicting the likelihood that a given
transaction or customer account is experiencing fraud. Our fraud products analyze transactions in real time and
generate recommendations for immediate action, which is critical to stopping third-party fraud, as well as first-
party fraud and deliberate misuse of account privileges.

Our solutions are designed to detect and prevent a wide variety of fraud and risk types across multiple
industries, including credit and debit payment card fraud; deposit account fraud; technical fraud and bad debt;
healthcare fraud; Medicaid and Medicare fraud; and property and casualty insurance fraud, including workers’
compensation fraud. FICO fraud solutions protect financial institutions, insurance companies and government
agencies from losses and damaged customer relationships caused by fraud and related criminal behavior.

Our leading fraud detection solution is FICO® Falcon® Fraud Manager, recognized as the leader in global
payment card fraud detection. Falcon Fraud Manager’s neural network predictive models and patented profiling
technology, both further described below in the “Technology” section, examine transaction, cardholder and
merchant data to detect a wide range of credit and debit card fraud quickly and accurately. Falcon Fraud Manager
analyzes payment card transactions in real time, assesses the risk of fraud, and takes the user-defined steps to
prevent fraud while expediting legitimate transactions.

FICO® Fraud Predictor with Merchant Profiles is used in conjunction with Falcon Fraud Manager to
improve fraud detection rates with merchant profiles. Merchant profiles are built using fraud and transactional
data that include characteristics that reveal, for example, merchants that have a history of higher fraud volumes,
and which purchase types and ticket sizes have most often been fraudulent at a particular merchant.

FICO® Insurance Fraud Manager, which uses predictive modeling to detect claims fraud, abuse and errors

before payment identifies suspicious providers as soon as aberrant behavior patterns emerge. FICO offers
versions tailored to Healthcare and Workers Compensation.

In addition to the Falcon products, we offer FICO® Card Alert Service. Card Alert Service is a solution for

fighting debit and ATM fraud in the U.S. The Card Alert Service identifies and reports counterfeit payment cards
to issuers before the majority of them incur fraud losses. The service analyzes daily transactions across multiple
financial institutions, and uses this data to pinpoint multi-card fraud and identify common points of compromise.

Collections & Recovery Applications

Our leading solutions in this area are the FICO® Debt ManagerTM solution and the FICO® Recovery

Management SystemTM (“RMS”) solution. The Debt Manager solution automates the full cycle of collections and
recovery, including early collections, late collections, asset disposal, agency placement, recovery, litigation,
bankruptcy, asset management and residual balance recovery. The RMS solution is focused on the later phases of
distressed debt management, including bankruptcy and agency management. Companies using the Debt Manager
solution and the RMS solution in the U.S. can access partner services such as collection agencies and attorneys
via FICO® Network Services, which provides web-based access to and from thousands of third-party collections
and recovery service providers, as well as access to multiple data sources and FICO solutions hosted in Active
Service Pages (ASP) mode. We also provide the FICO® PlacementsPlus® service, an account placement
optimization and management system.

Analytics

We perform custom predictive, descriptive and decision modeling and related analytic projects for clients in
multiple industries and to address multiple business processes across the customer life cycle. This work leverages
our analytic methodologies and expertise to solve risk management and marketing challenges for a single
business, using that business’s data and industry best practices to develop a highly customized solution. Most of
this work falls under predictive analytics, decision analysis and optimization, which provide greater insight into
customer preferences and future customer behavior. Within decision analysis and optimization, we apply data
and proprietary algorithms to the design of customer treatment strategies.

We offer FICO® Economic Impact Service, which uses time series modeling of the macro economy to allow
lenders to forecast future credit risk performance based on their views of the economy. The resulting insights can
be used to adjust current credit policy as well as provide input into the calculation of regulatory capital
requirements.

Scores

We develop the world’s leading credit scores based on third-party data. Our FICO® Scores are used in most
U.S. credit decisions, by most of the major banks and credit card organizations as well as by mortgage and auto
loan originators. These scores provide a consistent and objective measure of an individual’s credit risk. Credit
grantors use the FICO® Scores to prescreen solicitation candidates, to evaluate applicants for new credit and to
review existing accounts. The FICO® Scores are calculated based on proprietary scoring models. The scores
produced by these models are available through each of the three major credit reporting agencies in the United
States: TransUnion, Experian and Equifax. Users generally pay the credit reporting agencies scoring fees based
on usage, and the credit reporting agencies share these fees with us.

The most recent version of the FICO® Score for U.S. lenders is the FICO® 8 Score. This substantially
upgraded version, available at the three major credit reporting agencies, includes enhancements that increase its
predictive power, as well as enhancements that consider authorized user accounts (accounts where another
consumer is added as a user of the primary cardholder’s account) while limiting the possibility that such accounts
are used to artificially inflate scores.

Our scoring portfolio also includes the FICO Expansion® Score, which provides scores on U.S. consumers

who do not have traditional FICO® Scores, generally because they have too few credit accounts being reported to

the credit reporting agencies. The score analyzes multiple sources of non-traditional credit data such as
subscription memberships, deposit account activity and utility payment histories. The resulting scores have the
same 300—850 score range as the traditional FICO® Score.

Our other solutions include:

• The FICO® Credit Capacity Index™, the first market-ready predictive analytic to assess a consumer’s
ability to pay new debt and is available for use with four credit reporting agencies’ data in markets
worldwide. Also, outside of North America, we have installed client-specific versions of the FICO®
Credit Capacity Index™ in two countries.

• The FICO® Economic Impact Index, the first market-ready economic consumer risk measure available

for portfolio stress testing as well as individual credit decisions.

The FICO® Score Trends Service is a comprehensive reporting package that allows lenders to drill down

into industry FICO® Score trends, indexed by a range of criteria such as industry, geography and time period, in
order to regularly analyze their own portfolios, and improve their risk management and forecasting.

Through the combination of these scoring solutions, FICO offers a comprehensive market-ready solution for

giving lenders a 360 degree view of the customer, encompassing the risk view (FICO® Score), market view
(FICO® Score Trends Service), opportunity view (FICO® Credit Capacity Index™) and economic view (FICO®
Economic Impact Index).

Outside of the United States and Canada, we offer, or are close to launching, the FICO® Score, for
consumer and/or small and medium enterprises lending, through credit reporting agencies in 11 markets
worldwide. We have installed client-specific versions of the FICO® Score in 10 countries. Like FICO® Scores in
North America, these scores help lenders in multiple countries leverage the FICO® Score’s predictive analysis to
assess the risk of prospects, applicants and borrowers. FICO® Scores are in use or being implemented in 18
different countries across four continents.

In addition to the scoring solutions noted above, we also offer marketing and bankruptcy scores known as
FICO® Revenue Scores and FICO® Bankruptcy Scores through the U.S. credit reporting agencies; an application
fraud, revenue and bankruptcy score available in Canada; and commercial credit scores delivered by both U.S.
and U.K. credit reporting agencies, and soon to be released in Singapore.

In fiscal 2011, we launched the FICO® Medication Adherence Score. This uses predictive analytics to
forecast an individual’s likelihood of taking his or her prescription medication as directed. The FICO Medication
Adherence Score is a HIPAA-compliant solution that helps improve drug adherence, boosting therapy
effectiveness and reducing health care costs. We also launched the FICO® Strategic Default Score which uses
predictive analytics to forecast an individual’s likelihood of defaulting.

We have also developed scoring systems for insurance underwriters and marketers. Such systems use the

same underlying statistical technology as our FICO® risk scores, but are designed to predict applicant or
policyholder insurance loss risk for automobile or homeowners’ coverage. Our insurance scores are available in
the U.S. from TransUnion, Experian, Equifax and ChoicePoint, Inc., and in Canada from Equifax. We also offer
an insurance score called the Property PredictRTM score, which analyzes property inspection database data from
an insurance services provider, Millennium Information Services, Inc., to calculate the loss risk of a property.

We provide credit bureau scoring services and related consulting directly to users in banking through the

FICO® PreScore® service for prescreening solicitation candidates.

Through our myFICO® service, we provide solutions based on our analytics to consumers, sold directly by

us or through distribution partners. Consumers can use the myFICO.com website to purchase their FICO®

Scores, the credit reports underlying the scores, explanations of the factors affecting their scores, and customized
advice on how to manage their scores. Customers can use the myFICO service to simulate how taking specific
actions would affect their FICO Score. Consumers can also purchase Equifax’s Score Watch® subscriptions,
which deliver alerts via email and short message service or text messages when the user’s scores or balances
change. The myFICO products and subscription offerings are available online at www.myfico.com in partnership
with two major U.S. credit reporting agencies: Equifax and TransUnion. The myFICO products and subscription
offerings are also available to consumers through lenders, financial portals and numerous other partners.

Tools

We provide end-user software products that businesses use to build their own tailored Decision

Management applications. In contrast to our packaged Applications developed for specific industry applications,
our Tools support the addition of Decision Management capabilities to virtually any application or operational
system. These tools are sold as licensed software, and can be used by themselves or together to advance a client’s
Decision Management initiatives. We use these tools as common software components for our own Decision
Management applications, described above in the Applications section. They are also key components of our
Decision Management architecture, described in the Technology section. We also partner with third-party
providers within given industry markets and with major software companies to embed our tools within existing
applications.

The principal products offered are software tools for:

• Rules Management. The FICO® Blaze Advisor® business rules management system is used to design,
develop, execute and maintain rules-based business applications. The Blaze Advisor system enables
business users to propose and preview the impact of changes to decisioning logic, to review and
approve proposed changes, and commit those changes to production decisioning, all without
demanding IT cycles. The Blaze Advisor system is sold as an end-user tool and is also the rules engine
within several of our Decision Management applications. The Blaze Advisor system, available in six
languages, is a multi-platform solution that: embeds rules management within existing applications;
supports Web Services and SOA, Java 2 Enterprise Edition (J2EE) platforms, Microsoft .NET and
COBOL for z/OS mainframes; and is the first rules engine to support Java, .NET and COBOL
deployment of the same rules. It also incorporates the exclusive Rete III rules execution technology,
which improves the efficiency and speed with which the Blaze Advisor system is able to process and
execute complex, high-volume business rules.

• Predictive Modeling. FICO® Model Builder enables the user to develop and deploy sophisticated

predictive models for use in automated decisions as well as complete scoring routines, such as variable
generation, segment logic, scoring, calibration and reason codes. This software is based on the
methodology and tools FICO uses to build both client-level and industry-level predictive models and
scorecards, which we have developed over more than 40 years, and includes additional algorithms for
rapidly discovering variable relationships, predictive interactions and optimal segmentation. The
predictive models produced can be embedded in custom production applications or one of our Decision
Management applications and can also be executed in the FICO Blaze Advisor system.

• Optimization. FICO® Xpress Optimization Suite provides operations research professionals with

world-class solvers and high-productivity tools to quickly design and deliver custom, mathematically
optimal solutions for a wide range of industry problems. Xpress includes a powerful modeling and
programming language, with robust scalability, to quickly model and solve even the largest
optimization problems. Xpress tools are licensed to end users, consultants and independent software
vendors in several industries, and are a core component within FICO® Decision Optimizer. Decision
Optimizer is a software tool that enables complex, large-scale optimizations involving dozens of
networked action-effect models, and enables exploration and simulation of many optimized scenarios
along an efficient frontier of options. The data-driven strategies produced by these tools can be
executed by the FICO® Blaze Advisor® system or one of our Decision Management applications.

COMPETITION

The market for our advanced solutions is intensely competitive and is constantly changing. Our competitors
vary in size and in the scope of the products and services they offer. We encounter competition from a number of
sources, including:

•

in-house analytic and systems developers;

scoring model builders;

enterprise resource planning (“ERP”) and customer relationship management (“CRM”) packaged
solutions providers;

business intelligence solutions providers;

business process management and business rules management providers;

providers of credit reports and credit scores;

providers of automated application processing services;

data vendors;

neural network developers and artificial intelligence system builders;

third-party professional services and consulting organizations;

providers of account/workflow management software; and

software companies supplying modeling, rules, or analytic development tools.

We believe that none of our competitors offers the same mix of products as we do, has the same expertise in

predictive analytics and their integration with Decision Management software, and can offer the enhanced
lifecycle management capabilities we offer in areas like banking. However, certain competitors may have larger
shares of particular geographic or product markets.

Applications

The competition for our Applications varies by both application and industry.

In the marketing services market, we compete with Acxiom, Epsilon, Equifax, Experian, Harte-Hanks,
InfoUSA, KnowledgeBase, Merkle and TargetBase, among others. We also compete with traditional advertising
agencies and companies’ own internal information technology and analytics departments.

In the origination market, we compete with Experian, Equifax, and CGI, among others.

In the customer management market, we compete with Experian, among others.

In the fraud solutions market, we mainly compete with Actimize, a division of NICE Systems, ID Analytics,
Experian, Detica, a division of BAE, SAS and ACI Worldwide, a division of Transaction Systems Architects, in
the banking market; IBM and ViPS in the healthcare segment; and SAS, Infoglide Software Corporation,
NetMap Analytics and Magnify in the property and casualty and workers’ compensation insurance market.

In the collections and recovery solutions market, we mainly compete with CGI, Experian, and various
boutique firms for software and ASP servicing and in-house scoring and computer science departments, along
with the three major U.S. credit reporting agencies and Experian-Scorex for scoring and optimization projects.

In the insurance and healthcare solutions market, we mainly compete with Emdeon, Ingenix, ViPS,

MedStat, Detica, a division of BAE, SAS, Verisk Analytics and IBM.

Scores

In this segment, we compete with both outside suppliers and in-house analytics and computer systems
departments for scoring business. Major competitors among outside suppliers of scoring models include the three
major credit reporting agencies in the U.S. and Canada, which are also our partners in offering our scoring
solutions; Experian and Experian-Scorex (U.S. partner), TransUnion and TransUnion International, Equifax,
VantageScore (a joint venture entity established by the major U.S. credit reporting agencies), CRIF and other
credit reporting agencies outside the United States; and other data providers like LexisNexis and ChoicePoint,
some of which also represent FICO partners.

For our direct-to-consumer services that deliver credit scores, credit reports and consumer credit education

services, we compete with our credit reporting agency partners and their affiliated companies, as well as with
Trilegiant, InterSections and others.

Tools

Our primary competitors in this segment include IBM, SAS, Pegasystems and Angoss.

Competitive Factors

We believe the principal competitive factors affecting our markets include: technical performance; access to

unique proprietary databases; availability in ASP format; product attributes like adaptability, scalability,
interoperability, functionality and ease-of-use; product price; customer service and support; the effectiveness of
sales and marketing efforts; existing market penetration; and our reputation. Although we believe our products
and services compete favorably with respect to these factors, we may not be able to maintain our competitive
position against current and future competitors.

MARKETS AND CUSTOMERS

Our products and services serve clients in multiple industries, including primarily banking, insurance, retail
and healthcare. End users of our products include 91 of the 100 largest financial institutions in the United States,
and more than half of the largest 100 banks in the world. Our clients also include more than 400 insurers,
including the top ten U.S. property and casualty insurers; more than 200 retailers and general merchandisers,
including about one-third of the top 100 U.S. retailers; more than 100 government or public agencies; and more
than 150 healthcare and pharmaceuticals companies, including nine of the world’s top ten pharmaceuticals
companies. All of the top ten companies on the 2011 Fortune 500 list use FICO’s solutions.

In addition, our consumer services are marketed to an estimated 200 million U.S. consumers whose credit

relationships are reported to the three major credit reporting agencies.

In the United States, we market our products and services primarily through our own direct sales

organization that is organized around vertical markets. Sales groups are based in our headquarters and in field
offices strategically located both in and outside the United States. We also market our products through indirect
channels, including alliance partners and other resellers.

During fiscal 2011, 2010 and 2009, revenues generated from our agreements with Equifax, TransUnion and

Experian collectively accounted for 18%, 20%, and 19% of our total revenues, respectively.

Outside the United States, we market our products and services primarily through our subsidiary sales
organizations. Our subsidiaries license and support our products in their local countries as well as within other
foreign countries where we do not operate through a direct sales subsidiary. We also market our products through
resellers and independent distributors in international territories not covered by our subsidiaries’ direct sales
organizations.

Our largest market segments outside the United States are the United Kingdom and Canada. In addition, we

have delivered products to users in over 90 countries.

Revenues from international customers, including end users and resellers, amounted to 37%, 35% and 32%
of our total revenues in fiscal 2011, 2010 and 2009, respectively. See Note 18 to the accompanying consolidated
financial statements for a summary of our operating segments and geographic information.

TECHNOLOGY

We specialize in analytics, software and data management technologies that analyze data and drive business
processes and decision strategies. We maintain active research in a number of fields for the purposes of deriving
greater insight and predictive value from data, making various forms of data more usable and valuable to the
model-building process, and automating and applying analytics to the various processes involved in making
high-volume decisions in real time.

Because of our pioneering work in credit scoring and fraud detection, we are widely recognized as the
leader in predictive analytics. In all our work, we believe that our tools and processes are among the very best
commercially available, and that we are uniquely able to integrate advanced analytic, software and data
technologies into mission-critical business solutions that offer superior returns on investment.

Recent product releases support our integrated technical architecture for Decision Management, which

ensures interoperability across FICO systems. Our intention is to bring greater flexibility, higher analytic
performance and better decisions across the lifecycle. Building on FICO’s broad and deep experience in
developing Decision Management applications, the architecture is service-oriented, designed for easy standards-
based integration with our clients’ core systems and will support and deliver ever more powerful analytics that
operate both within specific stages of the customer lifecycle and across them. This Decision Management
architecture contains capabilities from existing FICO products, from new and existing components and from
third-party providers. We have developed the architecture’s components and are continuing to migrate our
software products onto the architecture. This migration takes the form of successive product releases that also
provide immediate client value through added functionality.

The technologies listed below are all supported by the Decision Management architecture, which will create

tighter integration between our Decision Management Applications, as well as our Tools.

Principal Areas of Expertise

Predictive Modeling. Predictive modeling identifies and mathematically represents underlying relationships

in historical data in order to explain the data and make predictions or classifications about future events. Our
models summarize large quantities of data to amplify its value. Predictive models typically analyze current and
historical data on individuals to produce easily understood metrics such as scores. These scores rank-order
individuals by likely future performance, e.g., their likelihood of making credit payments on time, or of
responding to a particular offer for services. We also include in this category models that detect the likelihood of
a transaction being fraudulent. Our predictive models are frequently operationalized in mission-critical
transactional systems and drive decisions and actions in near real time. A number of analytic methodologies
underlie our products in this area. These include proprietary applications of both linear and nonlinear
mathematical programming algorithms, in which one objective is optimized within a set of constraints, and
advanced “neural” systems, which learn complex patterns from large data sets to predict the probability that a
new individual will exhibit certain behaviors of business interest. We also apply various related statistical
techniques for analysis and pattern detection within large datasets.

Decision Analysis and Optimization. Decision analysis refers to the broad quantitative field that deals with

modeling, analyzing and optimizing decisions made by individuals, groups and organizations. Whereas

predictive models analyze multiple aspects of individual behavior to forecast future behavior, decision analysis
analyzes multiple aspects of a given decision to identify the most effective action to take to reach a desired result.
We have developed an integrated approach to decision analysis that incorporates the development of a decision
model that mathematically maps the entire decision structure; proprietary optimization technology that identifies
the most effective strategies, given both the performance objective and constraints; the development of designed
testing required for active, continuous learning; and the robust extrapolation of an optimized strategy to a wider
set of scenarios than historically encountered. Our optimization capabilities also include a proprietary
mathematical modeling and programming language, an easy-to-use development environment, and a
state-of-the-art set of optimization algorithms. These capabilities allow us to solve a large variety of optimization
problems across all industries.

Transaction Profiling. Transaction profiling is a patent-protected technique used to extract meaningful
information and reduce the complexity of transaction data used in modeling. Many of our products operate using
transactional data, such as credit card purchase transactions, or other types of data that change over time. In its raw
form, this data is very difficult to use in predictive models for several reasons. First, an isolated transaction contains
very little information about the behavior of the individual who generated the transaction. In addition, transaction
patterns change rapidly over time. Finally, this type of data can often be highly complex. To overcome these issues,
we have developed a set of proprietary techniques that transform raw transactional data into a mathematical
representation that reveals latent information, and which make the data more usable by predictive models. This
profiling technology accumulates data across multiple transactions of many types to create and update profiles of
transaction patterns. These profiles enable our neural network models to efficiently and effectively make accurate
assessments of, for example, fraud risk and credit risk within real-time transaction streams.

Customer Data Integration. Decisions made on customers or prospects can benefit from data stored in

multiple sources, both inside and outside the enterprise. We have focused on developing data integration
processes that are able to assemble and integrate those disparate data sources into a unified view of the customer
or household, through the application of persistent keying technology.

Decision Management Software. In order to make a decision strategy operational, the various steps and rules

need to be programmed or exported into the business’s software infrastructure, where it can communicate with
front-end, customer-facing systems and back-end systems such as billing systems. We have developed software
systems, sometimes known as decision engines and business rules management systems, which perform the
necessary functions to execute a decision strategy. Our software includes very efficient programs for these
functions, facilitating, for example, business user definition of extremely complex decision strategies using
graphic user interfaces; simultaneous testing of hundreds of decision strategies in “champion/challenger”
(test/control) mode; high-volume processing and analysis of transactions in real time; integration of multiple data
sources; and execution of predictive models for improved behavior forecasts and finer segmentation. Decision
Management software is an integral part of our Decision Management Applications, described earlier.

Research and Development Activities

Our research and development expenses were $62.1 million, $73.6 million and $73.6 million in fiscal 2011,

2010 and 2009, respectively. We believe that our future success depends on our ability to continually maintain
and improve our core technologies, enhance our existing products, and develop new products and technologies
that meet an expanding range of markets and customer requirements. In the development of new products and
enhancements to existing products, we use our own development tools extensively.

We have traditionally relied primarily on the internal development of our products. Based on timing and

cost considerations; however, we have acquired, and in the future may consider acquiring, technology or
products from third parties.

PRODUCT PROTECTION AND TRADEMARKS

We rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality

agreements and procedures to protect our proprietary rights.

We retain the title to and protect the suite of models and software used to develop scoring models as a trade

secret. We also restrict access to our source code and limit access to and distribution of our software,
documentation and other proprietary information. We have generally relied upon the laws protecting trade secrets
and upon contractual nondisclosure safeguards and restrictions on transferability to protect our software and
proprietary interests in our product and service methodology and know-how. Our confidentiality procedures
include invention assignment and proprietary information agreements with our employees and independent
contractors, and nondisclosure agreements with our distributors, strategic partners and customers. We also claim
copyright protection for certain proprietary software and documentation.

We have patents on many of our technologies and have patent applications pending on other technologies.
The patents we hold may not be upheld as valid and may not prevent the development of competitive products. In
addition, patents may never be issued on our pending patent applications or on any future applications that we
may submit. We currently hold 102 U.S. and 14 foreign patents with 104 applications pending.

Despite our precautions, it may be possible for competitors or users to copy or reproduce aspects of our
software or to obtain information that we regard as trade secrets. In addition, the laws of some foreign countries
do not protect proprietary rights to the same extent as do the laws of the United States. Patents and other
protections for our intellectual property are important, but we believe our success and growth will depend
principally on such factors as the knowledge, ability, experience and creative skills of our personnel, new
products, frequent product enhancements and name recognition.

We have developed technologies for research projects conducted under agreements with various United

States government agencies or their subcontractors. Although we have acquired commercial rights to these
technologies, the United States government typically retains ownership of intellectual property rights and
licenses in the technologies that we develop under these contracts. In some cases, the United States government
can terminate our rights to these technologies if we fail to commercialize them on a timely basis. In addition,
under United States government contracts, the government may make the results of our research public, which
could limit our competitive advantage with respect to future products based on funded research.

We have used, registered and/or applied to register certain trademarks and service marks for our technologies,

products and services. We currently have 31 trademarks registered in the U.S. and select foreign countries.

PERSONNEL

As of September 30, 2011, we employed 2,023 persons worldwide. Of these, 286 full-time employees were
located in our Minneapolis and Arden Hills, Minnesota offices, 246 full-time employees were located in our San
Rafael, California office, 287 full-time employees were located in our San Diego, California office, 355 full-time
employees were located in our India-based office and 215 full-time employees were located in our United
Kingdom-based offices. None of our employees is covered by a collective bargaining agreement, and no work
stoppages have been experienced.

Information regarding our officers is included in Item 10 of this report.

Item 1A. Risk Factors

Risks Related to Our Business

We have expanded the pursuit of our Decision Management strategy, and we may not be successful, which
could cause our growth prospects and results of operations to suffer.

We have expanded the pursuit of our business objective to become a leader in helping businesses automate
and improve decisions across their enterprises, an approach that we commonly refer to as Decision Management,
or “DM.” Our DM strategy is designed to enable us to increase our business by selling multiple products to
clients, as well as to enable the development of custom client solutions that may lead to opportunities to develop
new proprietary scores or other new proprietary products. The market may be unreceptive to this general DM
business approach, including being unreceptive to purchasing multiple products from us or unreceptive to our
customized solutions. If our DM strategy is not successful, we may not be able to grow our business, growth may
occur more slowly than we anticipate or our revenues and profits may decline.

We derive a substantial portion of our revenues from a small number of products and services, and if the
market does not continue to accept these products and services, our revenues will decline.

We expect that revenues derived from our scoring solutions, fraud solutions, customer management
solutions and tools will continue to account for a substantial portion of our total revenues for the foreseeable
future. Our revenues will decline if the market does not continue to accept these products and services. Factors
that might affect the market acceptance of these products and services include the following:

•

changes in the business analytics industry;

changes in technology;

our inability to obtain or use key data for our products;

saturation or contraction of market demand;

loss of key customers;

industry consolidation;

failure to execute our selling approach; and

inability to successfully sell our products in new vertical markets.

If we are unable to access new markets or develop new distribution channels, our business and growth
prospects could suffer.

We expect that part of the growth that we seek to achieve through our DM strategy will be derived from the
sale of DM products and service solutions in industries and markets we do not currently serve. We also expect to
grow our business by delivering our DM solutions through additional distribution channels. If we fail to penetrate
these industries and markets to the degree we anticipate utilizing our DM strategy, or if we fail to develop
additional distribution channels, we may not be able to grow our business, growth may occur more slowly than
we anticipate or our revenues and profits may decline.

If we are unable to develop successful new products or if we experience defects, failures and delays
associated with the introduction of new products, our business could suffer serious harm.

Our growth and the success of our DM strategy depend upon our ability to develop and sell new products or

suites of products. If we are unable to develop new products, or if we are not successful in introducing new
products, we may not be able to grow our business, or growth may occur more slowly than we anticipate. In
addition, significant undetected errors or delays in new products or new versions of products may affect market
acceptance of our products and could harm our business, financial condition or results of operations. In the past,

we have experienced delays while developing and introducing new products and product enhancements,
primarily due to difficulties developing models, acquiring data and adapting to particular operating
environments. We have also experienced errors or “bugs” in our software products, despite testing prior to
release of the products. Software errors in our products could affect the ability of our products to work with other
hardware or software products, could delay the development or release of new products or new versions of
products and could adversely affect market acceptance of our products. Errors or defects in our products that are
significant, or are perceived to be significant, could result in rejection of our products, damage to our reputation,
loss of revenues, diversion of development resources, an increase in product liability claims, and increases in
service and support costs and warranty claims.

We rely on relatively few customers, as well as our contracts with the three major credit reporting agencies,
for a significant portion of our revenues and profits. Certain of our large customers were negatively
impacted by the recent financial crisis. If these customers continue to be negatively impacted, or if the terms
of these relationships otherwise change, our revenues and operating results could decline.

Most of our customers are relatively large enterprises, such as banks, credit card processors, insurance

companies, healthcare firms and retailers. As a result, many of our customers and potential customers are
significantly larger than we are and may have sufficient bargaining power to demand reduced prices and
favorable nonstandard terms.

In addition, since mid-2007, global financial markets have suffered substantial stress, volatility, illiquidity

and disruption. The potential for increased and continuing economic disruption presents considerable risks to our
business, including potential bankruptcies or credit deterioration of financial institutions with which we have
substantial relationships. Such disruption would result in a continued decline in the volume of transactions that
we execute for our customers.

We also derive a substantial portion of our revenues and operating income from our contracts with the three
major credit reporting agencies, TransUnion, Equifax and Experian, and other parties that distribute our products
to certain markets. The loss of or a significant change in a relationship with one of these credit reporting agencies
with respect to their distribution of our products or with respect to our myFICO® offerings, the loss of or a
significant change in a relationship with a major customer, the loss of or a significant change in a relationship
with a significant third-party distributor or the delay of significant revenues from these sources, could have a
material adverse effect on our revenues and results of operations.

We rely on relationships with third parties for marketing, distribution and certain services. If we experience
difficulties in these relationships, our future revenues may be adversely affected.

Most of our products rely on distributors, and we intend to continue to market and distribute our products
through existing and future distributor relationships. Our Scores segment relies on, among others, TransUnion,
Equifax and Experian. Failure of our existing and future distributors to generate significant revenues, demands
by such distributors to change the terms on which they offer our products or our failure to establish additional
distribution or sales and marketing alliances could have a material adverse effect on our business, operating
results and financial condition. In addition, certain of our distributors presently compete with us and may
compete with us in the future either by developing competitive products themselves or by distributing
competitive offerings. For example, TransUnion, Equifax and Experian have developed a credit scoring product
to compete directly with our products and are collectively attempting to sell the product. Competition from
distributors or other sales and marketing partners could significantly harm sales of our products and services.

If we do not engage in acquisition activity, we may be unable to increase our revenues at comparable
market growth rates.

Our past revenue growth has been augmented by numerous acquisitions, and we anticipate that acquisitions
may be an important part of our future revenue growth. We may be unable to increase our revenues if we do not
make acquisitions of similar size and at a comparable rate as in the past.

If we engage in acquisitions, significant investments in new businesses, or divestitures of existing
businesses, we will incur a variety of risks, any of which may adversely affect our business.

We have made in the past, and may make in the future, acquisitions of, or significant investments in,

businesses that offer complementary products, services and technologies. Any acquisitions or investments will be
accompanied by the risks commonly encountered in acquisitions of businesses, which may include:

•

failure to achieve the financial and strategic goals for the acquired and combined business;

overpayment for the acquired companies or assets;

difficulty assimilating the operations and personnel of the acquired businesses;

product liability and other exposure associated with acquired businesses or the sale of their products;

disruption of our ongoing business;

dilution of our existing stockholders and earnings per share;

unanticipated liabilities, legal risks and costs;

retention of key personnel;

distraction of management from our ongoing business; and

impairment of relationships with employees and customers as a result of integration of new
management personnel.

We have also divested ourselves of businesses in the past and may do so again in the future. Any divestitures

will be accompanied by the risks commonly encountered in the sale of businesses, which may include:

•

disruption of our ongoing business;

reductions of our revenues or earnings per share;

unanticipated liabilities, legal risks and costs;

the potential loss of key personnel;

distraction of management from our ongoing business; and

impairment of relationships with employees and customers as a result of migrating a business to new
owners.

These risks could harm our business, financial condition or results of operations, particularly if they occur in
the context of a significant acquisition. Acquisitions of businesses having a significant presence outside the U.S.
will increase our exposure to the risks of conducting operations in international markets.

Our reengineering initiative may cause our growth prospects and profitability to suffer.

As part of our management approach, we implemented an ongoing reengineering initiative designed to grow

revenues through strategic resource allocation and improve profitability through cost reductions. Our
reengineering initiative may not be successful over the long term as a result of our failure to reduce expenses at
the anticipated level, or a lower, or no, positive impact on revenues from strategic resource allocation. If our
reengineering initiative is not successful over the long term, our revenues, results of operations and business may
suffer.

The occurrence of certain negative events may cause fluctuations in our stock price.

The market price of our common stock may be volatile and could be subject to wide fluctuations due to a
number of factors, including variations in our revenues and operating results. We believe that you should not rely
on period-to-period comparisons of financial results as an indication of future performance. Because many of our

operating expenses are fixed and will not be affected by short-term fluctuations in revenues, short-term
fluctuations in revenues may significantly impact operating results. Additional factors that may cause our stock
price to fluctuate include the following:

•

variability in demand from our existing customers;

failure to meet the expectations of market analysts;

changes in recommendations by market analysts;

the lengthy and variable sales cycle of many products, combined with the relatively large size of orders
for our products, increases the likelihood of short-term fluctuation in revenues;

consumer dissatisfaction with, or problems caused by, the performance of our products;

the timing of new product announcements and introductions in comparison with our competitors;

the level of our operating expenses;

changes in competitive and other conditions in the consumer credit, banking and insurance industries;

fluctuations in domestic and international economic conditions;

our ability to complete large installations on schedule and within budget;

acquisition-related expenses and charges; and

timing of orders for and deliveries of software systems.

In addition, the financial markets have experienced significant price and volume fluctuations that have
particularly affected the stock prices of many technology companies and financial services companies, and these
fluctuations sometimes have been unrelated to the operating performance of these companies. Broad market
fluctuations, as well as industry-specific and general economic conditions may adversely affect the market price
of our common stock.

Due to recent uncertainty in economic conditions and weakness in financial credit markets, the fair value of

our businesses has declined. If difficult market and economic conditions continue over a sustained period, we
may experience a further decline in the fair value of one or more of our businesses. Such further declines in fair
value may require us to record an impairment charge related to goodwill, which could adversely affect our results
of operations, stock price and business.

Our products have long and variable sales cycles. If we do not accurately predict these cycles, we may not
forecast our financial results accurately, and our stock price could be adversely affected.

We experience difficulty in forecasting our revenues accurately because the length of our sales cycles makes

it difficult for us to predict the quarter in which sales will occur. In addition, our selling approach is complex as
we look to sell multiple products and services across our customers’ organizations. This makes forecasting of
revenues in any given period more difficult. As a result of our sales approach and lengthening sales cycles,
revenues and operating results may vary significantly from period to period. For example, the sales cycle for
licensing our products typically ranges from 60 days to 18 months. Customers are often cautious in making
decisions to acquire our products because purchasing our products typically involves a significant commitment of
capital and may involve shifts by the customer to a new software and/or hardware platform or changes in the
customer’s operational procedures. This may cause customers, particularly those experiencing financial stress, to
make purchasing decisions more cautiously. Delays in completing sales can arise while customers complete their
internal procedures to approve large capital expenditures and test and accept our applications. Consequently, we
face difficulty predicting the quarter in which sales to expected customers will occur and experience fluctuations
in our revenues and operating results. If we are unable to accurately forecast our revenues, our stock price could
be adversely affected.

We typically have revenue-generating transactions concentrated in the final weeks of a quarter, which may
prevent accurate forecasting of our financial results and cause our stock price to decline.

Large portions of our software license agreements are consummated in the weeks immediately preceding

quarter end. Before these agreements are consummated, we create and rely on forecasted revenues for planning,
modeling and earnings guidance. Forecasts, however, are only estimates and actual results may vary for a
particular quarter or longer periods of time. Consequently, significant discrepancies between actual and
forecasted results could limit our ability to plan, budget or provide accurate guidance, which could adversely
affect our stock price. Any publicly-stated revenue or earnings projections are subject to this risk.

The failure to recruit and retain additional qualified personnel could hinder our ability to successfully
manage our business.

Our DM strategy and our future success will depend in large part on our ability to attract and retain
experienced sales, consulting, research and development, marketing, technical support and management
personnel. The complexity of our products requires highly trained customer service and technical support
personnel to assist customers with product installation and deployment. The labor market for these individuals is
very competitive due to the limited number of people available with the necessary technical skills and
understanding and may become more competitive with general market and economic improvement. We cannot
be certain that our compensation strategies will be perceived as competitive by current or prospective employees.
This could impair our ability to recruit and retain personnel. We have experienced difficulty in recruiting
qualified personnel, especially technical, sales and consulting personnel, and we may need additional staff to
support new customers and/or increased customer needs. We may also recruit skilled technical professionals
from other countries to work in the United States. Limitations imposed by immigration laws in the United States
and abroad and the availability of visas in the countries where we do business could hinder our ability to attract
necessary qualified personnel and harm our business and future operating results. There is a risk that even if we
invest significant resources in attempting to attract, train and retain qualified personnel, we will not succeed in
our efforts, and our business could be harmed. The failure of the value of our stock to appreciate may adversely
affect our ability to use equity and equity based incentive plans to attract and retain personnel, and may require
us to use alternative and more expensive forms of compensation for this purpose.

The failure to obtain certain forms of model construction data from our customers or others could harm
our business.

We must develop or obtain a reliable source of sufficient amounts of current and statistically relevant data to

analyze transactions and update our products. In most cases, these data must be periodically updated and
refreshed to enable our products to continue to work effectively in a changing environment. We do not own or
control much of the data that we require, most of which is collected privately and maintained in proprietary
databases. Customers and key business alliances provide us with the data we require to analyze transactions,
report results and build new models. Our DM strategy depends in part upon our ability to access new forms of
data to develop custom and proprietary analytic tools. If we fail to maintain sufficient data sourcing relationships
with our customers and business alliances, or if they decline to provide such data due to legal privacy concerns,
competition concerns, prohibitions or a lack of permission from their customers, we could lose access to required
data and our products, and the development of new products might become less effective. Third parties have
asserted copyright interests in these data, and these assertions, if successful, could prevent us from using these
data. Any interruption of our supply of data could seriously harm our business, financial condition or results of
operations.

We will continue to rely upon proprietary technology rights, and if we are unable to protect them, our
business could be harmed.

Our success depends, in part, upon our proprietary technology and other intellectual property rights. To date,

we have relied primarily on a combination of copyright, patent, trade secret, and trademark laws, and
nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology.

This protection of our proprietary technology is limited, and our proprietary technology could be used by others
without our consent. In addition, patents may not be issued with respect to our pending or future patent
applications, and our patents may not be upheld as valid or may not prevent the development of competitive
products. Any disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact
our competitive position, and ultimately, our business. There can be no assurance that our protection of our
intellectual property rights in the United States or abroad will be adequate or that others, including our
competitors, will not use our proprietary technology without our consent. Furthermore, litigation may be
necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of
resources and could harm our business, financial condition or results of operations.

Some of our technologies were developed under research projects conducted under agreements with various
U.S. government agencies or subcontractors. Although we have commercial rights to these technologies, the U.S.
government typically retains ownership of intellectual property rights and licenses in the technologies developed by
us under these contracts, and in some cases can terminate our rights in these technologies if we fail to commercialize
them on a timely basis. Under these contracts with the U.S. government, the results of research may be made public
by the government, limiting our competitive advantage with respect to future products based on our research.

If we are subject to infringement claims, it could harm our business.

We expect that products in the industry segments in which we compete, including software products, will
increasingly be subject to claims of patent and other intellectual property infringement as the number of products
and competitors in our industry segments grow. We may need to defend claims that our products infringe
intellectual property rights, and as a result we may:

•

incur significant defense costs or substantial damages;

be required to cease the use or sale of infringing products;

expend significant resources to develop or license a substitute non-infringing technology;

discontinue the use of some technology; or

be required to obtain a license under the intellectual property rights of the third party claiming
infringement, which license may not be available or might require substantial royalties or license fees
that would reduce our margins.

Breaches of security, or the perception that e-commerce is not secure, could harm our business.

Our business requires the appropriate and secure utilization of consumer and other sensitive information.

Internet-based electronic commerce requires the secure transmission of confidential information over public
networks, and several of our products are accessed through the Internet, including our consumer services
accessible through the www.myfico.com website. Security breaches in connection with the delivery of our
products and services, including products and services utilizing the Internet, or well-publicized security breaches,
and the trend toward broad consumer and general public notification of such incidents, could significantly harm
our business, financial condition or results of operations. We cannot be certain that advances in criminal
capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities in our systems, data thefts,
physical system or network break-ins or inappropriate access, or other developments will not compromise or
breach the technology protecting the networks that access our net-sourced products, consumer services and
proprietary database information.

Protection from system interruptions is important to our business. If we experience a sustained interruption
of our telecommunication systems, it could harm our business.

Systems or network interruptions could delay and disrupt our ability to develop, deliver or maintain our
products and services, causing harm to our business and reputation and resulting in loss of customers or revenue.
These interruptions can include fires, floods, earthquakes, power losses, equipment failures and other events
beyond our control.

Risks Related to Our Industry

Our ability to increase our revenues will depend to some extent upon introducing new products and
services. If the marketplace does not accept these new products and services, our revenues may decline.

We have a significant share of the available market in portions of our Scores segment and for certain
services in our Applications segment, specifically, the markets for account management services at credit card
processors and credit card fraud detection software. To increase our revenues, we must enhance and improve
existing products and continue to introduce new products and new versions of existing products that keep pace
with technological developments, satisfy increasingly sophisticated customer requirements and achieve market
acceptance. We believe much of the future growth of our business and the success of our DM strategy will rest
on our ability to continue to expand into newer markets for our products and services. Such areas are relatively
new to our product development and sales and marketing personnel. Products that we plan to market in the future
are in various stages of development. We cannot assure you that the marketplace will accept these products. If
our current or potential customers are not willing to switch to or adopt our new products and services, either as a
result of the quality of these products and services or due to other factors, such as economic conditions, our
revenues will decrease.

If we fail to keep up with rapidly changing technologies, our products could become less competitive or
obsolete.

In our markets, technology changes rapidly, and there are continuous improvements in computer hardware,

network operating systems, programming tools, programming languages, operating systems, database technology
and the use of the Internet. If we fail to enhance our current products and develop new products in response to
changes in technology or industry standards, or if we fail to bring product enhancements or new product
developments to market quickly enough, our products could rapidly become less competitive or obsolete. Our
future success will depend, in part, upon our ability to:

•

innovate by internally developing new and competitive technologies;

use leading third-party technologies effectively;

continue to develop our technical expertise;

anticipate and effectively respond to changing customer needs;

initiate new product introductions in a way that minimizes the impact of customers delaying purchases
of existing products in anticipation of new product releases; and

influence and respond to emerging industry standards and other technological changes.

If our competitors introduce new products and pricing strategies, it could decrease our product sales and
market share, or could pressure us to reduce our product prices in a manner that reduces our margins.

We may not be able to compete successfully against our competitors, and this inability could impair our
capacity to sell our products. The market for business analytics is new, rapidly evolving and highly competitive,
and we expect competition in this market to persist and intensify. Our regional and global competitors vary in
size and in the scope of the products and services they offer, and include:

•

in-house analytic and systems developers;

scoring model builders;

enterprise resource planning (ERP) and customer relationship management (CRM) packaged solutions
providers;

business intelligence solutions providers;

credit report and credit score providers;

•

business process management solution providers;

process modeling tools providers;

automated application processing services providers;

data vendors;

neural network developers and artificial intelligence system builders;

third-party professional services and consulting organizations;

account/workflow management software providers; and

software tools companies supplying modeling, rules, or analytic development tools.

We expect to experience additional competition from other established and emerging companies, as well as
from other technologies. For example, certain of our fraud solutions products compete against other methods of
preventing credit card fraud, such as credit cards that contain the cardholder’s photograph, smart cards,
cardholder verification and authentication solutions and other card authorization techniques. Many of our
anticipated competitors have greater financial, technical, marketing, professional services and other resources
than we do, and industry consolidation is creating even larger competitors in many of our markets. As a result,
our competitors may be able to respond more quickly to new or emerging technologies and changes in customer
requirements. They may also be able to devote greater resources than we can to develop, promote and sell their
products. Many of these companies have extensive customer relationships, including relationships with many of
our current and potential customers. Furthermore, new competitors or alliances among competitors may emerge
and rapidly gain significant market share. For example, TransUnion, Equifax and Experian have formed an
alliance that has developed a credit scoring product competitive with our products. If we are unable to respond as
quickly or effectively to changes in customer requirements as our competition, our ability to expand our business
and sell our products will be negatively affected.

Our competitors may be able to sell products competitive to ours at lower prices individually or as part of

integrated suites of several related products. This ability may cause our customers to purchase products that
directly compete with our products from our competitors. Price reductions by our competitors could negatively
impact our margins, and could also harm our ability to obtain new long-term contracts and renewals of existing
long-term contracts on favorable terms.

Legislation that is enacted by the U.S. Congress, the states, Canadian provinces, and other countries, and
government regulations that apply to us or to our customers may expose us to liability, affect our ability to
compete in certain markets, limit the profitability of or demand for our products, or render our products
obsolete. If these laws and regulations require us to change our current products and services, it could
adversely affect our business and results of operations.

Legislation and governmental regulation affect how our business is conducted and, in some cases, subject us

to the possibility of future lawsuits arising from our products and services. Globally, legislation and
governmental regulation also influence our current and prospective customers’ activities, as well as their
expectations and needs in relation to our products and services. Both our core businesses and our newer
initiatives are affected globally by federal, regional, provincial, state and other jurisdictional regulations,
including those in the following significant regulatory areas:

• Use of data by creditors and consumer reporting agencies. Examples in the U.S. include the Fair Credit
Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Transactions Act (“FACTA”);

• Laws and regulations that limit the use of credit scoring models such as state “mortgage trigger” laws,
state “inquiries” laws, state insurance restrictions on the use of credit based insurance scores, and the
Consumer Credit Directive in the European Union;

•

Fair lending laws, such as the Truth In Lending Act (“TILA”) and Regulation Z, as amended by the
Credit Card Accountability Responsibility and Disclosure Act of 2009 (“Credit CARD Act of 2009”),
and the Equal Credit Opportunity Act (“ECOA”) and Regulation B;

Privacy and security laws and regulations that limit the use and disclosure of personally identifiable
information or require security procedures, including but not limited to the provisions of the Financial
Services Modernization Act of 1999, also known as the Gramm Leach Bliley Act (“GLBA”); the
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health
Information Technology for Economic and Clinical Health Act (“HITECH”); the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001 (“USA Patriot Act”); identity theft, file freezing, security breach notification and similar
state privacy laws;

• Extension of credit to consumers through the Electronic Fund Transfers Act and Regulation E, as well

as nongovernmental VISA and MasterCard electronic payment standards;

• Regulations applicable to secondary market participants such as Fannie Mae and Freddie Mac that

could have an impact on our products;

•

Insurance laws and regulations applicable to our insurance clients and their use of our insurance
products and services;

• The application or extension of consumer protection laws, including, laws governing the use of the

Internet and telemarketing, advertising, endorsements and testimonials and credit repair;

• Laws and regulations applicable to operations in other countries, for example, the European Union’s

Privacy Directive and the Foreign Corrupt Practices Act;

•

Sarbanes-Oxley Act (“SOX”) requirements to maintain and verify internal process controls, including
controls for material event awareness and notification;

• The implementation of the Emergency Economic Stabilization Act of 2008 by federal regulators to

manage the financial crisis in the United States;

•

Financial regulatory reform stemming from the Dodd-Frank Wall Street Reform and Consumer
Protection Act and the many regulations mandated by that Act; and

• Laws and regulations regarding export controls as they apply to FICO products delivered in non-US

countries.

In making credit evaluations of consumers, or in performing fraud screening or user authentication, our
customers are subject to requirements of multiple jurisdictions, which may impose onerous and contradictory
requirements. Privacy legislation such as GLBA or the European Union’s Privacy Directive may also affect the
nature and extent of the products or services that we can provide to customers, as well as our ability to collect,
monitor and disseminate information subject to privacy protection. In addition to existing regulation, changes in
legislative, judicial, regulatory or consumer environments could harm our business, financial condition or results
of operations. These regulations and amendments to them could affect the demand for or profitability of some of
our products, including scoring and consumer products. New regulations pertaining to financial institutions could
cause them to pursue new strategies, reducing the demand for our products.

In response to market disruptions over the past several years, legislators and financial regulators

implemented a number of mechanisms designed to add stability to the financial markets, including the provision
of direct and indirect assistance to distressed financial institutions, assistance by the banking authorities in
arranging acquisitions of weakened banks and broker-dealers, and implementation of programs by the Federal
Reserve to provide liquidity to the commercial paper markets. The overall effects of these and other legislative
and regulatory efforts on the financial markets are uncertain, and they may not have the intended stabilization
effects. Should these or other legislative or regulatory initiatives fail to stabilize and add liquidity to the financial
markets over the long term, our business, financial condition, results of operations and prospects could be

materially and adversely affected. Whether or not legislative or regulatory initiatives or other efforts designed to
address recent economic conditions successfully stabilize and add liquidity to the financial markets over the long
term, we may need to modify our strategies, businesses or operations, and we may incur additional costs in order
to compete in a changed business environment.

Our revenues depend, to a great extent, upon conditions in the banking (including consumer credit) and
insurance industries. If our clients’ industries continue to experience a downturn, it will likely harm our
business, financial condition or results of operations.

During fiscal 2011, 78% of our revenues were derived from sales of products and services to the banking

and insurance industries. Since mid-2007, global credit and other financial markets have suffered substantial
stress, volatility, illiquidity and disruption. These forces reached unprecedented levels in the fall of 2008,
resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and
international financial institutions. The potential for increased and continuing disruptions present considerable
risks to our businesses and operations. These risks include potential bankruptcies or credit deterioration of
financial institutions, many of which are our customers. Such increased or continuing disruption would result in a
continued decline in the revenue we receive from financial and other institutions.

While the rate of account growth in the U.S. bankcard industry has been slowing and many of our large

institutional customers have consolidated in recent years, we have generated most of our revenue growth from
our bankcard-related scoring and account management businesses by selling and cross-selling our products and
services to large banks and other credit issuers. As the banking industry continues to experience contraction in
the number of participating institutions, we may have fewer opportunities for revenue growth due to reduced or
changing demand for our products and services that support customer acquisition programs of our customers. In
addition, industry contraction could affect the base of recurring revenues derived from contracts in which we are
paid on a per-transaction basis as formerly separate customers combine their operations under one contract.
There can be no assurance that we will be able to prevent future revenue contraction or effectively promote
future revenue growth in our businesses.

While we are attempting to expand our sales of consumer credit, banking and insurance products and
services into international markets, the risks are greater as these markets are also experiencing substantial
disruption and we are less well-known in them.

Risk Related to External Conditions

Material adverse developments in global economic conditions, or the occurrence of certain other world
events, could affect demand for our products and services and harm our business.

Purchases of technology products and services and decisioning solutions are subject to adverse economic
conditions. When an economy is struggling, companies in many industries delay or reduce technology purchases,
and we experience softened demand for our decisioning solutions and other products and services. Since
mid-2007, global credit and other financial markets have suffered substantial stress, volatility, illiquidity and
disruption. The widespread economic downturn negatively affected the businesses and purchasing decisions of
companies in the industries we serve. The potential for increased and continuing disruptions present considerable
risks to our businesses and operations. If global economic conditions experience stress and negative volatility, or
if there is an escalation in regional or global conflicts or terrorism, we will likely experience reductions in the
number of available customers and in capital expenditures by our remaining customers, longer sales cycles,
deferral or delay of purchase commitments for our products and increased price competition, which may
adversely affect our business, results of operations and liquidity.

Whether or not legislative or regulatory initiatives or other efforts successfully stabilize and add liquidity to

the financial markets, we may need to modify our strategies, businesses or operations, and we may incur
additional costs in order to compete in a changed business environment. Given the volatile nature of the global

economic environment and the uncertainties underlying efforts to stabilize it, we may not timely anticipate or
manage existing, new or additional risks, as well as contingencies or developments, which may include
regulatory developments and trends in new products and services. Our failure to do so could materially and
adversely affect our business, financial condition, results of operations and prospects.

In operations outside the United States, we are subject to unique risks that may harm our business,
financial condition or results of operations.

A growing portion of our revenues is derived from international sales. During fiscal 2011, 37% of our
revenues were derived from business outside the United States. As part of our growth strategy, we plan to
continue to pursue opportunities outside the United States, including opportunities in countries with economic
systems that are in early stages of development and that may not mature sufficiently to result in growth for our
business. Accordingly, our future operating results could be negatively affected by a variety of factors arising out
of international commerce, some of which are beyond our control. These factors include:

•

general economic and political conditions in countries where we sell our products and services;

difficulty in staffing and efficiently managing our operations in multiple geographic locations and in
various countries;

effects of a variety of foreign laws and regulations, including restrictions on access to personal
information;

import and export licensing requirements;

longer payment cycles;

reduced protection for intellectual property rights;

currency fluctuations;

changes in tariffs and other trade barriers; and

difficulties and delays in translating products and related documentation into foreign languages.

There can be no assurance that we will be able to successfully address each of these challenges in the near

term. Additionally, some of our business will be conducted in currencies other than the U.S. dollar. Foreign
currency transaction gains and losses are not currently material to our cash flows, financial position or results of
operations. However, an increase in our foreign revenues could subject us to increased foreign currency
transaction risks in the future.

In addition to the risk of depending on international sales, we have risks incurred in having research and
development personnel located in various international locations. We currently have a substantial portion of our
product development staff in international locations, some of which have political and developmental risks. If
such risks materialize, our business could be damaged.

Our anti-takeover defenses could make it difficult for another company to acquire control of FICO, thereby
limiting the demand for our securities by certain types of purchasers or the price investors are willing to pay
for our stock.

Certain provisions of our Restated Certificate of Incorporation, as amended, could make a merger, tender

offer or proxy contest involving us difficult, even if such events would be beneficial to the interests of our
stockholders. These provisions include giving our board the ability to issue preferred stock and determine the
rights and designations of the preferred stock at any time without stockholder approval. The rights of the holders
of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have the effect of making it more

difficult for a third party to acquire, or discouraging a third party from acquiring, a majority of our outstanding
voting stock. These factors and certain provisions of the Delaware General Corporation Law may have the effect
of deterring hostile takeovers or otherwise delaying or preventing changes in control or changes in our
management, including transactions in which our stockholders might otherwise receive a premium over the fair
market value of our common stock.

If we experience changes in tax laws or adverse outcomes resulting from examination of our income tax
returns, it could adversely affect our results of operations.

We are subject to federal and state income taxes in the United States and in certain foreign jurisdictions.

Significant judgment is required in determining our worldwide provision for income taxes. Our future effective
tax rates could be adversely affected by changes in tax laws, by our ability to generate taxable income in foreign
jurisdictions in order to utilize foreign tax losses, and by the valuation of our deferred tax assets. In addition, we
are subject to the examination of our income tax returns by the Internal Revenue Service and other tax
authorities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to
determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from
such examinations will not have an adverse effect on our operating results and financial condition.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2.

Properties

Our properties consist primarily of leased office facilities for sales, data processing, research and

development, consulting and administrative personnel. Our principal office is located in Minneapolis, Minnesota.

Our leased properties include:

•

approximately 246,000 square feet of office, data center, and data processing space in Arden Hills and
Minneapolis, Minnesota, in seven buildings under leases expiring in 2012 or later; 68,000 square feet
of this space is subleased to third parties;

approximately 124,000 square feet of office space in San Rafael, California in one building under a
lease expiring in 2020;

approximately 80,000 square feet of office space in San Diego, California in one building under a lease
expiring in 2019; and

an aggregate of approximately 306,000 square feet of office and data center space in: Annandale, VA;
Austin, TX; Bangalore, India; Bangkok, Thailand; Beijing, China; Birmingham, United Kingdom;
Chicago, IL; Hong Kong, China; Gauteng, Malaysia; London, United Kingdom; Madrid, Spain;
Melbourne, Australia; Moscow, Russia; Mumbai, India; Munich, Germany; New Castle, DE; New
York, NY; Norcross, GA; San Jose, CA; Sao Paulo, Brazil; Seoul, Korea; Shanghai, China; Singapore,
Singapore; Sydney, Australia; Taipei City, Taiwan; Tokyo, Japan; Toronto, Canada; and Westminster,
CO; 49,000 square feet of this space is subleased to third parties.

See Note 19 to the accompanying consolidated financial statements for information regarding our
obligations under leases. We believe that suitable additional space will be available to accommodate future
needs.

Item 3.

Legal Proceedings

On October 11, 2006, we filed a lawsuit in the U.S. District Court for the District of Minnesota captioned
Fair Isaac Corporation and myFICO Consumer Services Inc. v. Equifax Inc., Equifax Information Services LLC,
Experian Information Solutions, Inc., TransUnion LLC, VantageScore Solutions LLC, and Does I through X.
The lawsuit related in part to the development, marketing, and distribution of VantageScore, a credit score
product developed by VantageScore Solutions LLC, which is jointly owned by the three national credit reporting
companies. We alleged in the lawsuit violations of antitrust laws, unfair competitive practices and false
advertising, trademark infringement, and breach of contract. We sought injunctive relief and compensatory
damages. On June 6, 2008, we entered into a settlement agreement with Equifax Inc. and Equifax Information
Services LLC, and on June 13, 2008, Equifax Inc. and Equifax Information Services LLC were formally
dismissed from this lawsuit. On February 9, 2009, the Court granted our motions to strike counterclaims the
remaining defendants had attempted to bring against us in the case, allowing them to assert only a counterclaim
for trademark cancellation. On July 24, 2009, the Court issued a summary judgment order, which limited the
claims to be tried. The Court dismissed our antitrust, contract, and certain false advertising claims. The Court
allowed our trademark infringement, unfair competition, and passing off claims to proceed to trial. After a three-
week trial on these claims, the jury ruled in the defendants’ favor on November 20, 2009. We filed post-trial
motions to address issues in the trial, and the defendants filed post-trial motions seeking payment of certain
attorneys’ fees and costs. On May 10, 2010, the Court issued a ruling denying our post-trial motions and
substantially denying defendants’ motions for attorneys’ fees and costs (other than an award to TransUnion LLC
for certain fees associated with our contract claims). On May 17, 2010, we entered into a settlement agreement
with TransUnion LLC pursuant to which, among many other terms, TransUnion LLC released all claims to the
fee award and was dismissed from the lawsuit. On August 20, 2010, we filed an appeal with the U.S. Court of
Appeals for the Eighth Circuit appealing the results from the district court, including the dismissal of our antitrust
claims and certain rulings fundamental to our trademark and false advertising claims. On November 4, 2010, the
remaining defendants, Experian Information Solutions, Inc. and VantageScore Solutions LLC, filed an appeal
regarding the denial of their motions for attorneys’ fees. A hearing before the Eighth Circuit was held on May 12,
2011. On August 17, 2011, the Eighth Circuit issued an opinion affirming the findings of the District Court on all
issues.

Item 4.

(Removed and Reserved)

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Market Information

Our common stock trades on the New York Stock Exchange under the symbol: FICO. According to records

of our transfer agent, at September 30, 2011, we had 593 shareholders of record of our common stock.

The following table shows the high and low sales prices for our stock, as listed on the New York Stock

Exchange for each quarter in the last two fiscal years:

Fiscal 2010
October 1 – December 31, 2009
January 1 – March 31, 2010
April 1 – June 30, 2010
July 1 – September 30, 2010

Fiscal 2011
October 1 – December 31, 2010
January 1 – March 31, 2011
April 1 – June 30, 2011
July 1 – September 30, 2011

High

Low

$23.08
$27.00
$26.27
$25.27

$26.00
$31.81
$31.78
$31.04

$17.63
$19.54
$20.16
$21.24

$22.95
$22.16
$27.79
$20.89

Dividends

We paid quarterly dividends of two cents per share, or eight cents per year, during each quarter of fiscal
2011, 2010 and 2009. Our dividend rate is set by the Board of Directors on a quarterly basis taking into account a
variety of factors, including among others, our operating results and cash flows, general economic and industry
conditions, our obligations, changes in applicable tax laws and other factors deemed relevant by the Board.
Although we expect to continue to pay dividends at the current rate, our dividend rate is subject to change from
time to time based on the Board’s business judgment with respect to these and other relevant factors.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

Period

July 1, 2011 through July 31, 2011
August 1, 2011 through August 31, 2011
September 1, 2011 through September 30, 2011

Total
Number of
Shares
Purchased (1)

Average
Price Paid
per Share

198,703
1,079,846
500,896

1,779,445

$29.82
$25.67
$22.54

$25.25

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (2)

166,100
1,069,000
500,000

Maximum
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs (2)

$117,115,404
$ 89,674,408
$ 78,404,238

1,735,100

$ 78,404,238

(1)

Includes 44,345 shares delivered in satisfaction of the tax withholding obligations resulting from the vesting
of restricted stock units held by employees during the quarter ended September 30, 2011.

(2)

In June 2010, our Board of Directors approved a common stock repurchase program that allowed us to
purchase shares of our common stock up to an aggregate cost of $250.0 million in the open market or
through negotiated transactions. The June 2010 program was terminated in October 2011. On November 2,
2011, we announced that our Board of Directors approved an open-ended stock repurchase program to
acquire shares of our common stock up to an aggregate cost of $150.0 million in the open market or through
negotiated transactions.

Performance Graph

The follow graph shows the total stockholder return of an investment of $100 in cash on September 30,

2006, in (a) the Company’s Common Stock (b) the Standard & Poor’s 500 Stock Index and (c) the Standard &
Poor’s 500 Application Software Index, in each case with reinvestment of dividends. We do not believe there are
any publicly traded companies that compete with us across the full spectrum of our product and service offerings.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among FICO, the S&P 500 Index
and the S&P Application Software Index

$140

$120

$100

$80

$60

$40

$20

9/06

9/07

9/08

9/09

9/10

9/11

FICO

S&P 500

S&P Application Software

*$100 invested on 9/30/06 in stock or index, including reinvestment of dividends.
Fiscal year ending September 30.

The Company is listed on the New York Stock Exchange (“NYSE”). As an NYSE-listed company, our

Chief Executive Officer must certify annually that he is not aware of any violation by the Company of NYSE
corporate governance listing standards as of the date of that certification. The most recent Chief Executive
Officer’s certification was filed with the NYSE on February 24, 2011.

Item 6.

Selected Financial Data

We acquired Dash Optimization (“Dash”) in January 2008. Results of operations from the acquisition are
included prospectively from the date of the acquisition. As a result of this acquisition, the comparability of the
data below is impacted.

In April 2008, we completed the sale of our Insurance Bill Review business unit. We accounted for this
business unit as a discontinued operation and, accordingly, we have reclassified the selected financial data for all
periods presented.

Revenues
Operating income
Income from continuing operations
Income (loss) from discontinued operations
Net income

Basic earnings (loss) per share:
Continuing operations
Discontinued operations

Total

Diluted earnings (loss) per share:
Continuing operations
Discontinued operations

Total

Dividends declared per share

Working capital (deficit)
Total assets
Senior convertible notes
Senior Notes
Revolving line of credit
Stockholders’ equity

Fiscal Years Ended September 30,

2011 (1)

2010 (1)

2009 (1)(2)

2008 (1)

2007 (1)(2)

$619,683
127,337
71,562
—
71,562

(In thousands, except per share data)
$744,842
$630,735
$605,643
122,283
116,747
113,349
81,186
65,465
64,457
2,766
(363)
—
83,952
65,102
64,457

$784,188
160,327
111,851
(7,201)
104,650

1.82
—

1.82

1.79
—

1.79

0.08

1.44
—

1.44

1.42
—

1.42

0.08

1.35
(0.01)

1.34

1.34
(0.01)

1.33

0.08

1.66
0.06

1.72

1.64
0.06

1.70

0.08

2.00
(0.13)

1.87

1.94
(0.12)

1.82

0.08

Fiscal Years Ended September 30,

2011

2010

2009

2008

2007

$ 217,983
1,129,468
—
512,000
—
465,494

$ 225,028
1,123,716

—
520,000
—
474,914

(In thousands)
$ 327,970
1,303,888

—
275,000
295,000
600,269

$ 229,071
1,275,253

—
275,000
295,000
561,941

$ (103,173)
1,275,771
390,963
—

170,000
566,314

(1) Results of operations for fiscal years 2011, 2010, 2009, 2008 and 2007 include pre-tax charges of $12.4

million, $1.6 million, $8.7 million, $10.2 million and $2.5 million, respectively, in restructuring expenses.
(2) Results of operations for fiscal years 2009 and 2007 include a $3.0 million pre-tax loss and a $1.5 million

pre-tax gain on the sale of product line assets, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We are a leader in Decision Management (“DM”) solutions that enable businesses to automate, improve and
connect decisions to enhance business performance. Our predictive analytics, which include the industry standard
FICO® score, and our Decision Management systems power billions of customer decisions each year. We help
companies 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
our solutions, as do many insurers, retailers, healthcare organizations, pharmaceutical companies and government
agencies. We also serve consumers through online services that enable people to purchase and understand their
FICO® scores, the standard measure in the United States of credit risk, empowering them to manage their
financial health.

A significant portion of our revenues are derived from the sale of products and services within the banking
(including consumer credit) and insurance industries, and during the years ended September 30, 2011, 2010 and
2009, 78%, 76% and 75%, respectively, of our revenues were derived from within these industries. A significant
portion of our remaining revenues are derived from the healthcare and retail industries. Our clients utilize our
products and services to facilitate a variety of business processes, including customer marketing and acquisition,
account origination, credit and underwriting risk management, fraud loss prevention and control, and client
account and policyholder management. A significant portion of our revenues are derived from transactional or
unit-based software license fees, annual license fees under long-term software license arrangements, transactional
fees derived under scoring, network service or internal hosted software arrangements, and annual software
maintenance fees. The recurrence of these revenues is, to a significant degree, dependent upon our clients’
continued usage of our products and services in their business activities. The more significant activities
underlying the use of our products in these areas include: credit and debit card usage or active account levels;
lending acquisition, origination and customer management activity; and customer acquisition, cross selling and
retention programs. Approximately 73%, 75% and 76% of our revenues during fiscal 2011, 2010 and 2009,
respectively, were derived from arrangements with transactional or unit-based pricing. We also derive revenues
from other sources which generally do not recur and include, but are not limited to, perpetual or time-based
licenses with upfront payment terms and non-recurring consulting service arrangements.

Our revenues derived from clients outside the United States have generally grown, and may in the future
grow more rapidly than our revenues from domestic clients. International revenues totaled $230.0 million, $209.6
million and $199.8 million in fiscal 2011, 2010 and 2009, respectively, representing 37%, 35% and 32% of total
consolidated revenues in each of these years. We expect that the percentage of our revenues derived from
international clients will increase in the future, subject to the impact of foreign currency fluctuations.

General economic conditions stabilized in fiscal 2011 from which we realized overall growth in our
revenues of 2% to $619.7 million. However, high levels of unemployment and financial market uncertainty
continue to impact our customers in the United States and the pace of global recovery. Consumer and small
business lending activity, which is one of the drivers of demand for our services, has stabilized in most markets
around the world but in most cases is not yet showing strong growth. We expect growth in consumer lending to
continue to lag the general economic recovery. In an effort to respond to these market conditions, we have
continued to focus on activities related to our ongoing reengineering initiative. As part of this initiative, we
continue to manage our expenses to maintain solid earnings and cash flows and grow revenues through strategic
resource allocation. Key components of the initiative include ongoing rationalization of our business portfolio,
simplifying management hierarchy, eliminating low-priority positions, investing in high-priority positions,
consolidating facilities and managing fixed and variable costs.

In fiscal 2009, we completed additional actions under our reengineering initiative that was initiated in fiscal
2008. These actions were aimed at reducing costs through headcount reductions and facility consolidations. With
respect to the headcount reductions, we identified and eliminated 255 positions throughout the Company. Also in

connection with the initiative, we sold our LiquidCredit® Service for Telecom (“LCT”) and RoamEx® product
line assets, and we fully exited our Cortronics neural research product line, Fast Panel diagnostics product line
and advertising services group. During fiscal 2011, we incurred net charges totaling $12.4 million. The charges
included $8.2 million for severance costs associated with the reduction of 177 positions throughout the company.
We also recognized charges of $4.2 million associated with vacating excess leased space in Minnesota, Georgia
and Illinois. Costs for vacating excess leased space represent future cash lease payments, net of estimated
sublease income, which will be paid out over the next seven years. For 2012, the operating environment will
continue to present challenges for the marketing and growth of our products and services. However, we do expect
to derive growth through modest improvements in the credit economy and from the momentum we achieved as a
result of our performance in the latter part of 2011.

Bookings

Management uses bookings as an indicator of our business performance. Bookings represent contracts
signed in the current reporting period that will generate current and future revenue streams. We consider contract
terms, knowledge of the marketplace and experience with our customers, among other factors, when determining
the estimated value of contract bookings.

Bookings calculations have varying degrees of certainty depending on the revenue type and individual
contract terms. Our revenue types are transactional and maintenance, professional services and license. Our
estimate of bookings is as of the end of the period in which a contract is signed, and we do not update our initial
booking estimates in future periods for changes between estimated and actual results. Actual revenue and the
timing thereof could differ materially from our initial estimates. The following paragraphs discuss the key
assumptions used to calculate bookings and the susceptibility of these assumptions to variability.

Transactional and Maintenance Bookings

We calculate transactional bookings as the total estimated volume of transactions or number of accounts
under contract, multiplied by a contractual rate. Transactional contracts generally span multiple years and require
us to make estimates about future transaction volumes or number of active accounts. We develop estimates from
discussions with our customers and examinations of historical data from similar products and customer
arrangements. Differences between estimated bookings and actual results occur due to variability in the volume
of transactions or number of active accounts estimated. This variability is primarily caused by the following:

• The health of the economy and economic trends in our customer’s industries;

•

Individual performance of our customers relative to their competitors; and

• Regulatory and other factors that affect the business environment in which our customers operate.

We calculate maintenance bookings directly from the terms stated in the contract.

Professional Services Bookings

We calculate professional services bookings as the estimated number of hours to complete a project

multiplied by the rate per hour. We estimate the number of hours based on our understanding of the project
scope, conversations with customer personnel and our experience in estimating professional services projects.
Estimated bookings may differ from actual results primarily due to differences in the actual number of hours
incurred. These differences typically result from customer decisions to alter the mix of FICO and internal
resources used to complete a project.

License Bookings

Licenses are sold on a perpetual or term basis and bookings generally equal the fixed amount stated in the

contract.

Bookings Trend Analysis

Quarter ended September 30, 2011
Quarter ended September 30, 2010
Year ended September 30, 2011
Year ended September 30, 2010

Number of
Bookings
over $1
Million

Bookings
Yield(1)

13%
20%
34%
36%

14
18
45
53

Weighted-
Average
Term(2)

(months)
27
27
N/M
N/M

Bookings

(in millions)
$112.0
$105.6
$303.6
$283.3

(1) Bookings yield represents the percentage of revenue recognized from bookings for the periods indicated.
(2) N/M-Measure is not meaningful as our estimate of bookings is as of the end of the period in which a

contract is signed, and we do not update our initial booking estimates in future periods for changes between
estimated and actual results.

Transactional and maintenance bookings were 43% and 52% of total bookings for the quarters ended
September 30, 2011 and 2010, respectively. Professional services bookings were 34% and 32% of total bookings
for the quarters ended September 30, 2011 and 2010, respectively. License bookings were 23% and 16% of total
bookings for the quarters ended September 30, 2011 and 2010, respectively.

Transactional and maintenance bookings were 44% and 50% of total bookings for the years ended

September 30, 2011 and 2010, respectively. Professional services bookings were 36% and 34% of total bookings
for the years ended September 30, 2011 and 2010, respectively. License bookings were 20% and 16% of total
bookings for the years ended September 30, 2011 and 2010, respectively.

The weighted-average term of bookings achieved measures the average term over which the bookings are
expected to be recognized as revenue. As the weighted-average term increases, the average amount of revenues
expected to be realized in a quarter decreases, however, the revenues are expected to be recognized over a longer
period of time. As the weighted-average term decreases, the average amount of revenues expected to be realized
in a quarter increases, however, the revenues are expected to be recognized over a shorter period of time.

Management regards the volume of bookings achieved, among other factors, as an important indicator of
future revenues, but they are not comparable to, nor should they be substituted for, an analysis of our revenues,
and they are subject to a number of risks and uncertainties concerning timing and contingencies affecting product
delivery and performance.

Although many of our contracts contain noncancelable terms, most of our bookings are transactional or
service related and are dependent upon estimates such as volume of transactions, number of active accounts, or
number of hours incurred. Since these estimates cannot be considered fixed or firm, we do not believe it is
appropriate to characterize bookings as backlog.

Divestiture Activity

In June 2009, we signed definitive agreements to sell the assets associated with our Liquid Credit® for
Telecom (LCT) and RoamEx® product lines for $6.2 million in cash. We recognized a combined $3.0 million
pre-tax loss, and a $3.9 million after-tax loss on the sales, as the goodwill associated with the sale of these
product lines was not deductible for income tax purposes. LCT and RoamEx solutions were included in our
Applications segment. Revenues attributable to the LCT and RoamEx product lines were $15.7 million during
fiscal 2009. The earnings contribution from the LCT and RoamEx product lines were not significant to our fiscal
2009 results of operations.

Segment Information

We are organized into the following three reportable segments: Applications, Scores and Tools. Although

we sell solutions and services into a large number of end user product and industry markets, our reportable
business segments reflect the primary method in which management organizes and evaluates internal financial
information to make operating decisions and assess performance. Comparative segment revenues, operating
income, and related financial information for the years ended September 30, 2011, 2010 and 2009 are set forth in
Note 18 to the accompanying consolidated financial statements.

Continuing Operations

Revenues

RESULTS OF OPERATIONS

The following tables set forth certain summary information on a segment basis related to our revenues for

the fiscal years indicated.

Segment

2011

2010

2009

Revenues
Fiscal Year

Period-to-Period
Change

Period-to-Period
Percentage Change

2011
to
2010

2010
to
2009

2011
to
2010

2010
to
2009

Applications
Scores
Tools

Total Revenues

$383,028
168,567
68,088

(In thousands)
$367,258
172,339
66,046

(In thousands)

$383,130
179,575
68,030

$15,770
(3,772)
2,042

$(15,872)
(7,236)
(1,984)

$619,683

$605,643

$630,735

14,040

(25,092)

4%
(2)%
3%

(4)%
(4)%
(3)%

(4)%

Percentage of Revenues
Fiscal Year

2011

2010

2009

62%
27%
11%

61%
28%
11%

100%

Segment

Applications
Scores
Tools

Total Revenues

Applications

2011

2010

2009

Fiscal Year

Transactional and maintenance
Professional services
License

258,736
100,921
23,371

(In thousands)
$257,275
86,097
23,886

$274,123
92,000
17,007

$ 1,461
14,824
(515)

$(16,848)
(5,903)
6,879

Total

$383,028

$367,258

$383,130

15,770

(15,872)

Period-to-Period
Change

2011 to
2010

2010 to
2009

(In thousands)

Period-to-Period
Percentage Change

2011 to
2010

2010 to
2009

1%
17%
(2)%

(6)%
(6)%
40%

(4)%

Applications segment revenues increased $15.8 million in fiscal 2011 from fiscal 2010 due to an $18.2
million increase in our fraud solutions and a $6.0 million increase in our originations solutions. These increases
were partially offset by a $4.8 million decrease in our customer management solutions, and a $3.6 million
decrease from our other Applications solutions.

The increase in fraud solutions was attributable to higher volumes associated with transactional-based
agreements, increased software sales of FICO® Falcon® Fraud Manager and FICO® Insurance Fraud Manager,
and increased services related to these software sales. The increase in originations solutions was attributable to
an increase in professional services, and sales of a new product, FICO® Originations Manager, partially offset by
a decrease in volumes associated with transactional-based agreements on existing products. The decrease in
customer management solutions was attributable to a decline in license revenue and a decline in professional
services.

Applications segment revenues decreased $15.9 million in fiscal 2010 from fiscal 2009 due to a $14.5

million decrease in revenues from our originations solutions, a $10.6 million decrease in our customer
management solutions and a $2.6 million decrease from our other Applications solutions. These decreases were
partially offset by an $11.8 million increase in revenues from our marketing solutions.

The decrease in originations solutions was attributable to a decrease in volumes associated with
transactional-based agreements, a decline in professional services and the June 2009 divestiture of our LCT
product line, which accounted for $9.1 million of revenue during the year ended September 30, 2009. The
decrease in customer management solutions was attributable to a decrease in volumes associated with
transactional-based agreements and a decline in implementation services. The increase in our marketing solutions
revenues was attributable to sales of a new product, FICO® Retail Action Manager. In addition, although
revenues from our fraud solutions revenues remained consistent from fiscal 2009 to fiscal 2010, revenues were
positively impacted by higher volumes, new sales of FICO® Falcon® Fraud Manager and sales of a new product,
FICO® Insurance Fraud Manager. Fraud solutions revenues were negatively impacted by the June 2009
divestiture of our RoamEx product line, which accounted for $6.6 million of revenue during fiscal 2009.

Scores

Fiscal Year

Period-to-Period Change

Period-to-Period
Percentage Change

2011 to
2010

2010 to
2009

2011 to
2010

2010 to
2009

(In thousands)

Scores

2011

2010

2009

Transactional and maintenance
Professional services
License

$164,918
2,102
1,547

(In thousands)
$170,141
2,042
156

$178,048
1,527
—

$(5,223)
60
1,391

$(7,907)
515
156

(3)%
3%

(4)%
34%
892% — %

Total

$168,567

$172,339

$179,575

(3,772)

(7,236)

(2)%

(4)%

Scores segment revenues decreased $3.8 million in fiscal 2011 from 2010 due to a $2.1 million decrease in

our myFICO® business-to-consumer services revenues and a $1.7 million decrease in our business-to-business
scores revenues. The decline in business-to-consumer services was primarily attributable to a decrease in
royalties derived from scores sold indirectly to consumers through credit reporting agencies. This decline was
partially offset by stronger direct sales generated from the myFICO.com website. Business-to-business scores
revenues decrease was mainly attributable to a decrease in credit bureau risk scores revenues.

Scores segment revenues decreased $7.2 million in fiscal 2010 from 2009 due to a $5.4 million decrease in

our myFICO® business-to-consumer services revenues and a $1.8 million decrease in our business-to-business
scores revenues. The decline in our business-to-consumer services was primarily attributable to Experian
terminating its relationship with myFICO.com in February 2009. Business-to-business scores revenue was
impacted by a $3.4 million reduction in scores used for marketing purposes, mainly due to a decline in volumes
of prescreening initiatives by our customers.

During fiscal 2011, 2010 and 2009, revenues generated from our agreements with Equifax, TransUnion and

Experian, collectively accounted for approximately 18%, 20% and 19%, respectively, of our total revenues,
including revenues from these customers that are recorded in our other segments.

Tools

Transactional and maintenance
Professional services
License

Fiscal Year

Period-to-Period Change

2011

2010

2009

$29,776
12,918
25,394

(In thousands)
$28,071
14,739
23,236

$26,531
18,886
22,613

2011 to
2010

2010 to
2009

(In thousands)

$ 1,705
(1,821)
2,158

$ 1,540
(4,147)
623

Total

$68,088

$66,046

$68,030

2,042

(1,984)

Period-to-Period
Percentage Change

2011 to
2010

2010 to
2009

6%
(12)%
9%

6%
(22)%
3%

(3)%

Tools segment revenues increased $2.0 million in fiscal 2011 from fiscal 2010 primarily due to an increase

in license and maintenance revenues related to our FICO® Blaze Advisor® product. The increase was partially
offset by a decrease in license sales related to our FICO® Model Builder and FICO® Decision Optimizer
products, and a decrease in professional services related to our FICO® Blaze Advisor® as a result of the
completion of several large installations in the prior year.

Tools segment revenues decreased $2.0 million in fiscal 2010 from fiscal 2009 primarily due to a decrease

of license and professional services sales related to our FICO® Blaze Advisor® product, which was negatively
impacted by the current business environment. Professional services revenue declined due to the completion of
several large installations in prior periods and fewer implementation services due to a reduction in FICO® Blaze
Advisor® license sales. These decreases were partially offset by an increase in revenues from our FICO® Model
Builder and FICO® Decision Optimizer products.

Operating Expenses and Other Income (Expense)

The following tables set forth certain summary information related to our consolidated statements of income

for the fiscal years indicated.

Period-to-Period
Change

Period-to-Period
Percentage Change

Fiscal Year

2011

2010

2009

2011 to
2010

2010 to
2009

2011 to
2010

2010 to
2009

(In thousands, except employees)

(In thousands, except
employees)

$619,683 $605,643 $630,735 $ 14,040 $(25,092)

(4)%

186,470
62,129

180,932
73,581

206,448
73,626

5,538
(11,452)

(25,516)
(45)

(12)%
(16)% — %

223,615

225,263

209,319

(1,648)

15,944

(1)%

7,741
12,391

10,901
1,617

12,891
8,711

(3,160)
10,774

(1,990)
(7,094)

(29)%
666%

(15)%
(81)%

—

2,993

—

(2,993) — % (100)%

Revenues

Operating expenses:

Cost of revenues
Research and development
Selling, general and
administrative

Amortization of intangible

assets

Restructuring
Loss on sale of product line

assets

Total operating expenses

492,346

492,294

513,988

(21,694) — %

Operating income
Interest income
Interest expense
Other income, net

Income from continuing operations

before income taxes
Provision for income taxes

Income from continuing operations
Income (loss) from discontinued

operations

Net income

Number of employees at fiscal

year-end

127,337
2,192
(32,364)
290

113,349
1,688
(24,124)
1,391

116,747
4,717
(25,481)
1,587

13,988
504
(8,240)
(1,101)

97,455
25,893

71,562

92,304
27,847

64,457

97,570
32,105

65,465

5,151
(1,954)

7,105

(3,398)
(3,029)
1,357
(196)

(5,266)
(4,258)

(1,008)

12%
30%
34%
(79)%

6%
(7)%

11%

(4)%

(3)%
(64)%
(5)%
(12)%

(5)%
(13)%

(2)%

—

(363)

—

363 — % (100)%

$ 71,562 $ 64,457 $ 65,102

7,105

(645)

11%

(1)%

2,023

2,157

2,086

(134)

Revenues

Operating expenses:

Cost of revenues
Research and development
Selling, general and administrative
Amortization of intangible assets
Restructuring
Loss on sale of product line assets

Total operating expenses

Operating income
Interest income
Interest expense
Other income, net

Income from continuing operations before income taxes
Provision for income taxes

Income from continuing operations
Income (loss) from discontinued operations

Net income

Percentage of Revenues
Fiscal Year

2011

100%

2010

100%

2009

100%

30%
10%
36%
1%
2%
— %

79%

21%
— %
(5)%
— %

16%
4%

12%
— %

12%

30%
12%
37%
2%
— %
— %

81%

19%
— %
(4)%
— %

15%
4%

11%
— %

11%

33%
12%
33%
2%
1%
— %

81%

19%
1%
(5)%
— %

15%
5%

10%
— %

10%

Cost of Revenues

Cost of revenues consists primarily of employee salaries and benefits for personnel directly involved in

developing, installing and supporting revenue products; travel costs; overhead costs; costs of computer service
bureaus; internal network hosting costs; amounts payable to credit reporting agencies for scores; software costs;
and expenses related to our consumer score services through myFICO.com.

Cost of revenues as a percentage of revenues was 30% in fiscal 2011, consistent with fiscal 2010. The fiscal

year 2011 over 2010 increase of $5.5 million in cost of revenues resulted from a $13.3 million increase in
personnel and labor costs, partially offset by a $4.2 million decrease in third party software and data cost, a $3.0
million decrease in facilities and infrastructure costs, and a $0.6 million decrease in other expenses. The increase
in personnel and other labor-related costs was attributable to an increase in salary and related benefit costs as a
result of increased consulting services activities, and an increase in incentive cost. The decrease in third party
software and data costs was attributable to decreased sales that require data acquisition. The decrease in facilities
and infrastructure costs was attributable primarily to a decline in allocated costs resulting from overhead
reductions and exiting certain facilities.

Cost of revenues as a percentage of revenues was 30% in fiscal 2010, as compared to 33% in fiscal 2009.
The decrease of $25.5 million in cost of revenues resulted from a $12.2 million decrease in personnel and other
labor-related costs, an $11.8 million decrease in facilities and infrastructure costs and a $1.5 million decrease in
other costs. The decrease in personnel and other labor-related costs was attributable primarily to a decline in
salary and related benefit costs resulting from staff reductions and from the decline in consulting services
activities. The decrease in facilities and infrastructure costs was attributable primarily to a decline in allocated
costs resulting from overhead reductions and exiting certain facilities.

In fiscal 2012, we expect that cost of revenues as a percentage of revenues will be consistent with those

incurred during fiscal 2011.

Research and Development

Research and development expenses include the personnel and related overhead costs incurred in the
development of new products and services, including the research of mathematical and statistical models and the
development of new versions of our products.

Research and development as a percentage of revenues was 10% in fiscal 2011, as compared to 12% in
fiscal 2010. The decrease of $11.5 million in research and development expenditures was attributable primarily
to a $8.7 million decrease in personnel and related costs, a $2.1 million decrease in facilities and infrastructure
costs, and a $0.7 million decrease in other expenses. The decrease in personnel and related costs was due to
decreased salary and related benefit costs, partially offset by a higher incentive cost for fiscal 2011. The decrease
in facilities and infrastructure costs was attributable primarily to a decline in allocated costs resulting from
overhead reductions and exiting certain facilities.

Research and development as a percentage of revenues was 12% in fiscal 2010, consistent with fiscal 2009.

Research and development expenditures for fiscal 2010 were consistent with expenditures for fiscal 2009.

In fiscal 2012, we expect that research and development expenditures as a percentage of revenues will be
consistent with those incurred during fiscal 2011 as we continue to invest in our Decision Management solutions.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee salaries and benefits, travel,
overhead, advertising and other promotional expenses, corporate facilities expenses, legal expenses, business
development expenses and the cost of operating computer systems.

Selling, general and administrative expenses as a percentage of revenues was 36% in fiscal 2011, as

compared to 37% in fiscal 2010. The fiscal 2011 over 2010 decrease of $1.6 million in selling, general and
administrative expenses was attributable to a $5.5 million decrease in marketing expenses and a $2.4 million
decrease in facilities and infrastructure costs, partially offset by a $4.8 million increase in personnel and related
costs and a $1.5 million increase in other costs. The decrease in marketing expenses was due to a reduction in
marketing programs in areas that were not producing the anticipated sales results. The decrease in facilities and
infrastructure costs was attributable primarily to a decline in allocated costs resulting from overhead reductions
and exiting certain facilities. The increase in personnel and related cost was due to increased salary, commission
and incentive expenses.

Selling, general and administrative expenses as a percentage of revenues was 37% in fiscal 2010, as
compared to 33% in fiscal 2009. The fiscal 2010 over 2009 increase of $15.9 million in selling, general and
administrative expenses was attributable to an $18.6 million increase in personnel and related costs, a $2.8
million increase in travel expenses and a $1.6 million increase in marketing expenses, partially offset by a $3.9
million decrease in professional fees and a $3.2 million decrease in other costs, which includes bad debt expense,
taxes and licenses and other miscellaneous expenses. The increase in personnel and related costs was primarily
due to increased commissions and salaries and benefits for the year ended September 30, 2010. The increase in
travel expenses was due to increased travel to support sales efforts. The increase in marketing expense was
attributable to an increase in marketing campaigns and related activities. The decline in professional fees was
primarily due to decreased legal fees.

In fiscal 2012, we expect that selling, general and administrative expenses as a percentage of revenues will

be slightly lower than those incurred during fiscal 2011.

Amortization of Intangible Assets

Amortization of intangible assets consists of amortization expense related to intangible assets recorded in
connection with acquisitions accounted for by the purchase method of accounting. Our definite-lived intangible
assets, consisting primarily of completed technology and customer contracts and relationships, are being
amortized using the straight-line method or based on forecasted cash flows associated with the assets over
periods ranging from five to fifteen years.

The fiscal 2011 over 2010 decline of $3.2 million in amortization expense was attributable mainly to certain

intangible assets associated with our London Bridge acquisition becoming fully amortized during fiscal 2010.

The fiscal 2010 over 2009 decline of $2.0 million in amortization expense was attributable mainly to certain

intangible assets associated with our London Bridge acquisition becoming fully amortized.

In fiscal 2012, we expect amortization expense will be slightly lower than the amortization expense incurred

in 2011 due to certain intangible assets related to our Dash acquisition becoming fully amortized during fiscal
2012.

Restructuring

The following table sets forth certain summary information on restructuring expenses:

Severance costs
Lease exit costs and other adjustments

Total restructuring expense

Fiscal Year

2011

2010

2009

$ 8,165
4,226

(In thousands)
$ 742
875

$5,485
3,226

$12,391

$1,617

$8,711

In fiscal 2011 we eliminated 177 positions across the company and incurred charges of $8.2 million for
severance costs. Cash payments for substantially all the severance costs have been paid by the end of fiscal 2011.
We also recognized charges of $4.2 million associated with vacating excess leased space. Costs for vacating
excess leased space represent future cash lease payments, net of estimated sublease income, which will be paid
out over the next seven years.

In fiscal 2010 we incurred restructuring expenses of $1.6 million. The expenses include a $0.9 million

charge related to lease exit activities and $0.7 million for severance costs, which was paid in fiscal 2011.

In fiscal 2009, we incurred restructuring charges of $8.7 million. The charges include $5.5 million, net
charge for severance costs associated with the reduction of 255 positions throughout the Company and a reversal
of accrued expenses as a result of favorable adjustments. All severance costs were paid in fiscal 2009. We also
recognized a $3.2 million, net charge associated with lease exit activities and a reversal of accrued expenses as a
result of favorable adjustments.

Loss on Sale of Product Line Assets

In June 2009, we signed definitive agreements to sell the assets associated with our LCT and RoamEx
product lines for $6.2 million in cash. We recognized a $3.0 million pre-tax loss, and a $3.9 million after-tax loss
on the sales, as the goodwill associated with the sale of these product lines was not deductible for income tax
purposes.

Interest Income

Interest income is derived primarily from the investment of funds in excess of our immediate operating

requirements.

The fiscal 2011 over 2010 increase of $0.5 million in interest income was attributable to interest received on
tax refunds in fiscal 2011 partially offset by lower average investment balances and a decline in interest rates and
investment income yields due to market conditions.

The fiscal 2010 over 2009 decrease of $3.0 million in interest income was due mainly to a decline in interest
rates and investment yields due to market conditions and a decrease in average investment balances outstanding.

Interest Expense

In fiscal 2011, interest expense included interest on the Senior Notes issued in May 2008 and July 2010. In

fiscal 2010, interest expense included interest on the Senior Notes issued in May 2008 and July 2010 and
borrowings under our revolving credit facility. In fiscal 2009, interest expense included interest on the Senior
Notes issued in May 2008 and borrowings under our revolving credit facility.

The fiscal 2011 over 2010 increase of $8.2 million in interest expense was attributable to the higher average

interest rate on our July 2010 Senior Notes as compared to our revolving credit facility.

The decrease in interest expense of $1.4 million in fiscal 2010 compared to fiscal 2009 was the result of

lower average interest rates on our revolving line of credit in fiscal 2010 partially offset by interest expense
recorded on our $245 million Senior Notes issued in July 2010.

In fiscal 2012, we expect that interest expense will be consistent with what we incurred during fiscal 2011.

Other Income, Net

Other income, net consists primarily of realized investment gains/losses, exchange rate gains/losses
resulting from re-measurement of foreign-denominated receivable and cash balances held by our foreign
reporting entities into their respective functional currency at period-end market rates, net of the impact of
offsetting forward exchange contracts, and other non-operating items.

Other income, net was $0.3 million in fiscal 2011, compared to $1.4 million in 2010. The decrease was

primarily attributable to a non-recurring sale of a patent in fiscal 2010.

Other income, net was $1.4 million in fiscal 2010, compared to $1.6 million in 2009. The decrease was
primarily attributable to an increase in exchange rate losses, partially offset by a non-recurring sale of a patent in
fiscal 2010.

Provision for Income Taxes

Our effective tax rates were 26.6%, 30.2% and 32.9% in fiscal 2011, 2010 and 2009, respectively.

The decrease in our effective tax rate in fiscal 2011 compared with fiscal 2010 was largely due to a one-time

$1.1 million discrete entry recorded in the recognition of the 2010 extension of the US Federal Research and
Development Credit and a manufacturing deduction rate increase. In addition, there was a one-time Foreign Tax
Credit benefit related to an intercompany dividend.

The decrease in our effective tax rate in fiscal 2010 compared with fiscal 2009 was due to benefits
recognized from the completion of a research and development credit study and an adjustment in tax reserves.
This decrease was partially offset by the effect from the expiration of the U.S federal research and development
tax credit. We were unable to recognize this tax credit during fiscal 2010 as legislation providing for
reinstatement of this credit had not yet been enacted. The decrease in our effective tax rate in fiscal 2010 was
also due to a higher tax rate in fiscal 2009 from the sale of our RoamEx and LCT product lines. These product
line sales included a write-off of goodwill that was not deductible for income tax purposes.

Operating Income

The following table sets forth certain summary information on a segment basis related to our operating

income for the fiscal years indicated.

Segment

2011

2010

2009

Fiscal Year

Period-to-Period
Change

2011 to
2010

2010 to
2009

(In thousands)

Period-to-Period
Percentage Change

2011 to
2010

2010 to
2009

$106,561
113,398
13,690
(70,680)

(In thousands)
$ 93,275
110,651
8,412
(69,166)

$112,589
122,202
7,354
(80,868)

$ 13,286
2,747
5,278
(1,514)

$(19,314)
(11,551)
1,058
11,702

14%
2%
63%
2%

(17)%
(9)%
14%
(14)%

162,969

143,172

161,277

19,797

(18,105)

14%

(11)%

(15,500)
(7,741)
(12,391)

(17,305)
(10,901)
(1,617)

(19,935)
(12,891)
(8,711)

1,805
3,160
(10,774)

2,630
1,990
7,094

(10)%
(29)%
666%

(13)%
(15)%
(81)%

—

(2,993)

—

2,993 — %

(100)%

$127,337

$113,349

$116,747

13,988

(3,398)

12%

(3)%

Applications
Scores
Tools
Unallocated corporate expenses

Total segment operating

income
Unallocated share-based

compensation

Unallocated amortization expense
Unallocated restructuring
Unallocated loss on sale of

product line assets

Operating income

The increase in operating income between fiscal 2011 and 2010 of $14.0 million was attributable to an
increase in segment revenues, a decrease in segment operating expenses and reductions in amortization and
share-based compensation expenses, partially offset by an increase in restructuring cost and unallocated
corporate expenses. At the segment level, our segment operating income increased across all segments—$13.3
million increase in our Applications segment, $2.7 million increase in our Scores segment and $5.3 million
increase in our Tools segment.

The increase in our Applications segment operating income was attributable to an increase in revenue,

partially offset by an increase in operating expenses.

The increase in our Scores segment operating income was attributable to a decrease in operating expenses
due to decreased marketing activities, partially offset by a decline in revenues in both business-to-business scores
and business-consumer services.

In our Tools segment, the increase in segment operating income was primarily attributed to a decrease in
operating expenses and an increase in FICO Blaze Advisor revenues, partially offset by a decline in FICO Model
Builder and FICO Decision Optimizer revenues.

The decline in amortization expense was attributable mainly to certain intangible assets associated with our

London Bridge acquisition that became fully amortized during fiscal 2010.

The decrease in operating income between fiscal 2010 and 2009 of $3.4 million was attributable to a

decrease in segment revenues, partially offset by a reduction in segment and corporate operating expenses, which
was driven by our reengineering initiative, a decrease in restructuring expenses, a decrease in loss on sale of
product line assets, a decrease in share-based compensation expense and a decrease in amortization expenses.
Under the reengineering initiative, we reduced operating costs through staff reductions, facility consolidations
and restriction of discretionary expenditures. At the segment level, our segment operating income was negatively
impacted by a $19.3 million decrease in our Applications segment, and an $11.6 million decrease in our Scores
segment partially offset by a $1.1 million increase in our Tools segment.

The decrease in our Applications segment operating income was attributable to a decrease in revenue and an

increase in operating expenses as we continued to invest in our Decision Management solutions.

The decrease in our Scores segment operating income was attributable primarily to a decline in revenues

from scores used for marketing purposes, revenues derived from business-to-consumer services and an increase
in operating expenses due to increased marketing activities.

In our Tools segment, the increase in segment operating income was primarily attributed to an increase in
FICO Model Builder and FICO Decision Optimizer revenues and lower operating expenses, which was driven by
our reengineering initiative, partially offset by a decrease in Blaze Advisor revenues.

The decrease in corporate expenses was due to staff reductions and facility consolidations, driven by our

reengineering initiative, and a decrease in legal fees.

Discontinued Operations

On April 30, 2008, we completed the sale of our Insurance Bill Review business unit for $16.0 million in

cash. We recorded a $6.9 million pre-tax loss, but a $3.4 million after-tax gain on the sale as the amount of
goodwill disposed of for income tax purposes exceeded the amount determined for financial reporting purposes.
During fiscal 2009, we recorded an additional $0.4 million working capital adjustment in favor of the purchaser.

Capital Resources and Liquidity

Cash Flows from Operating Activities

Our primary method for funding operations and growth has been through cash flows generated from
operating activities. Net cash provided by operating activities totaled $136.2 million in fiscal 2011 compared to
$105.8 million in fiscal 2010. The 30.4 million increase was mainly attributable to the increased cash provided
by accounts receivable, prepaid expenses and other assets, and other liabilities. The increase was partially offset
by increased cash used for accrued compensation and employee benefits.

Net cash provided by operating activities totaled $105.8 million in fiscal 2010 compared to $151.6 million

in fiscal 2009. Operating cash flows were negatively impacted by an $11.6 million increase in accounts
receivable (compared to a $31.3 million decrease in fiscal 2009), which resulted from the timing of cash receipts,
a $3.3 million decrease in other liabilities and a $1.1 million decrease in deferred revenue. Operating cash flows
were positively impacted by a $5.4 million increase in accrued compensation and employee benefits, which
resulted from the timing of cash payments.

Cash Flows from Investing Activities

Net cash used by investing activities totaled $51.7 million in fiscal 2011 compared to net cash provided of
$110.6 million in fiscal 2010. The change was driven by $37.8 million in cash used for purchases of marketable
securities, net of sales and proceeds from maturities during fiscal 2011 compared to $125.9 million in proceeds
from maturities and sales of marketable securities, net of purchases, during fiscal 2010.

Net cash provided by investing activities totaled $110.6 million in fiscal 2010 compared to net cash used of

$81.9 million in fiscal 2009. The change was driven by $125.9 million in proceeds from maturities and sales of
marketable securities, net of purchases, during the year ended September 30, 2010 compared to $73.3 million of
cash used for purchases of marketable securities, net of sales and proceeds from maturities, during the year ended
September 30, 2009.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $94.0 million in fiscal 2011, compared to $248.5 million in
fiscal 2010. The decrease in cash used in financing activities was primarily due to the $104.7 million decrease of
cash paid to repurchase common stock, and the repayment of $295 million of debt outstanding on our revolving
line of credit in fiscal 2010, partially offset by cash provided from the issuance of $245 million of Senior Notes
on July 14, 2010.

Net cash used in financing activities totaled $248.5 million in 2010, compared to $18.8 million in fiscal
2009. The increase in cash used in financing activities was primarily due to the $196.1 million of cash paid to
repurchase common stock during the year ended September 30, 2010 and the repayment of $295 million of debt
outstanding on our revolving line of credit, partially offset by cash provided from the issuance of $245 million of
Senior Notes on July 14, 2010.

Repurchases of Common Stock

From time to time, we repurchase our common stock in the open market. During fiscal 2011, 2010 and

2009, we expended $96.3 million, $198.0 million and $18.5 million, respectively, in connection with our
repurchase of common stock. In June 2010, our Board of Directors approved a common stock repurchase
program that allows us to purchase shares of our common stock up to an aggregate cost of $250.0 million. As of
September 30, 2011, we had $78.4 million remaining under this authorization. For a description of recent Board
Authorization, see Note 23 to the financial statements in Item 8 of this report.

Dividends

We paid quarterly dividends of two cents per share, or eight cents per year, during each of fiscal 2011, 2010
and 2009. Our dividend rate is set by the Board of Directors on a quarterly basis taking into account a variety of
factors, including among others, our operating results and cash flows, general economic and industry conditions,
our obligations, changes in applicable tax laws and other factors deemed relevant by the Board. Although we
expect to continue to pay dividends at the current rate, our dividend rate is subject to change from time to time
based on the Board’s business judgment with respect to these and other relevant factors.

Revolving Line of Credit

We have a $200 million unsecured revolving line of credit with a syndicate of banks that expires on
September 28, 2016. Proceeds from the credit facility can be used for working capital and general corporate
purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of the
Company’s common stock. Interest on amounts borrowed under the credit facility is based on (i) a base rate,
which is the greater of (a) the prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an
applicable margin. The margin on LIBOR borrowings ranges from 1.000% to 1.625% and is determined based on
our consolidated leverage ratio. In addition, we must pay utilization fees if borrowings and commitments under
the credit facility exceed 50% of the total credit facility commitment, as well as facility fees. The credit facility
contains certain restrictive covenants including maintaining a maximum consolidated leverage ratio of 3.0 and a
minimum fixed charge ratio of 2.5, and also contains other covenants typical of unsecured facilities. As of
September 30, 2011, we had no borrowings outstanding under the credit facility and were in compliance with all
financial covenants.

Senior Notes

In May 2008, we issued $275 million of Senior Notes in a private placement to a group of institutional
investors. These Senior Notes were issued in four series with maturities ranging from 5 to 10 years. These Senior
Notes’ weighted average interest rate is 6.8% and the weighted average maturity is 7.9 years.

In addition, on July 14, 2010, we issued $245 million of Senior Notes in a private placement to a group of

institutional investors. These Senior Notes have a weighted average interest rate of 5.20% and a weighted
average maturity of 8 years. Proceeds from these Senior Notes were used to repay the entire balance outstanding
on our revolving line of credit. These Senior Notes were issued in four series as follows:

Series

E
F
G
H

Amount

$60 million
$72 million
$28 million
$85 million

Interest Rate

4.72%
5.04%
5.42%
5.59%

Maturity Date

July 14, 2016
July 14, 2017
July 14, 2019
July 14, 2020

All of the Senior Notes are subject to certain restrictive covenants that are substantially similar to those in the
credit agreement for the revolving credit facility, including maintenance of consolidated leverage and fixed
charge coverage ratios. The purchase agreements for the Senior Notes also include covenants typical of
unsecured facilities.

Capital Resources and Liquidity Outlook

As of September 30, 2011, we had $241.6 million in cash, cash equivalents and marketable security
investments. We believe that these balances, as well as available borrowings from our $200 million revolving
line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and
other capital requirements and any scheduled repayments of existing debt over the course of the next twelve
months. Under our current financing arrangements we have no significant debt obligations maturing until May
2013. In the normal course of business, we evaluate the merits of acquiring technology or businesses, or
establishing strategic relationships with or investing in these businesses. We may elect to use available cash and
cash equivalents and marketable security investments to fund such activities in the future. In the event additional
needs for cash arise, or if we refinance our existing debt, we may raise additional funds from a combination of
sources, including the potential issuance of debt or equity securities. Additional financing might not be available
on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms,
our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

Contractual Obligations

The following is a summary of our contractual obligations at September 30, 2011:

2012

2013

2014

2015

2016

Thereafter

Total

Senior Notes (1)
Interest due on debt obligations (2)
Operating lease obligations
Purchase obligations (3)
Unrecognized tax benefits (4)

$ 8,000 $ 49,000 $ 8,000 $ 71,000 $60,000 $316,000 $512,000
183,906
26,873
119,289
15,425
12,100
—
9,539
—

30,503
19,615
4,400
—

45,999
30,242
—
—

31,013
22,669
5,100
—

27,382
18,237
2,600
—

22,136
13,101
—
—

Total commitments

$66,782 $103,518 $56,219 $113,298 $95,237 $392,241 $836,834

(1) Represents the unpaid principal amount of our $275 million Senior Notes issued in May 2008 and the $245

million Senior Notes issued in July 2010.
Interest due on debt obligations represents interest payments on our Senior Notes.

(2)
(3) Represents amounts associated with agreements that are enforceable, legally binding and specify terms,

including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and
the approximate timing of the payments.

(4) Unrecognized tax benefits related to uncertain tax positions. As we are not able to reasonably estimate the
timing of the payments or the amount by which the liability will increase or decrease over time, the related
balances have not been reflected in the section of the table showing payment by fiscal year.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or
future material effect on our financial condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting
principles. These accounting principles require management to make certain judgments and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
We periodically evaluate our estimates including those relating to revenue recognition, the allowance for
doubtful accounts, goodwill and other intangible assets resulting from business acquisitions, share-based
compensation, income taxes and contingencies and litigation. We base our estimates on historical experience and
various other assumptions that we believe to be reasonable based on the specific circumstances, the results of
which form the basis for making judgments about the carrying value of certain assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.

We believe the following critical accounting policies involve the most significant judgments and estimates

used in the preparation of our consolidated financial statements:

Revenue Recognition

Software Licenses

Software license fee revenue is recognized when persuasive evidence of an arrangement exists, software is

made available to our customers, the fee is fixed or determinable and collection is probable. The determination of
whether fees are fixed or determinable and collection is probable involves the use of assumptions. If at the outset
of an arrangement we determine that the arrangement fee is not fixed or determinable, revenue is deferred until
the arrangement fee becomes fixed or determinable, assuming all other revenue recognition criteria have been
met. If at the outset of an arrangement we determine that collectability is not probable, revenue is deferred until
the earlier of when collectability becomes probable or the receipt of payment. If there is uncertainty as to the
customer’s acceptance of our deliverables, revenue is not recognized until the earlier of receipt of customer
acceptance, expiration of the acceptance period, or when we can demonstrate we meet the acceptance criteria.
We evaluate contract terms and customer information to ensure that these criteria are met prior to our recognition
of license fee revenue.

We use the residual method to recognize revenue when an arrangement includes one or more elements to be

delivered at a future date and vendor-specific objective evidence (“VSOE”) of the fair value of all undelivered
elements exists. VSOE of fair value is based on the normal pricing practices for those products and services when
sold separately by us and customer renewal rates for post-contract customer support services. Under the residual
method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is
recognized as revenue. If evidence of the fair value of one or more undelivered elements does not exist, the
revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established.
Changes to the elements in a software arrangement, the ability to identify VSOE for those elements, the fair
value of the respective elements, and change to a product’s estimated life cycle could materially impact the
amount of earned and unearned revenue.

When software licenses are sold together with implementation or consulting services, license fees are
recognized upon delivery provided that the above criteria are met, payment of the license fees is not dependent
upon the performance of the services, and the services do not provide significant customization or modification
of the software products and are not essential to the functionality of the software that was delivered. For
arrangements with services that are essential to the functionality of the software, the license and related service
revenues are recognized using contract accounting as described below.

Revenues from post-contract customer support services, such as software maintenance, are recognized on a

straight-line basis over the term of the support period. The majority of our software maintenance agreements
provide technical support as well as unspecified software product upgrades and releases when and if made
available by us during the term of the support period.

Transactional-based Revenues

Transactional-based revenue is recognized when persuasive evidence of an arrangement exists, fees are

fixed or determinable, and collection is reasonably assured. Revenues from our credit scoring, data processing,
data management and internet delivery services are recognized as these services are performed. Revenues from
transactional or unit-based license fees under software license arrangements, network service and internally-
hosted software agreements are recognized based on minimum contractual amounts or on system usage that
exceeds minimum contractual amounts. Certain of our transactional-based revenues are based on transaction or
active account volumes as reported by our clients. In instances where volumes are reported to us in arrears, we
estimate volumes based on preliminary customer transaction information or average actual reported volumes for
an immediate trailing period. Differences between our estimates and actual final volumes reported are recorded
in the period in which actual volumes are reported. We have not experienced significant variances between our
estimates and actual reported volumes in the past and anticipate that we will be able to continue to make
reasonable estimates in the future. If for some reason we were unable to reasonably estimate transaction volumes
in the future, revenue may be deferred until actual customer data is received, and this could have a material
impact on our consolidated results of operations.

Consulting Services

We provide consulting, training, model development and software integration services under both hourly-
based time and materials and fixed-priced contracts. Revenues from these services are generally recognized as
the services are performed. For fixed-price service contracts, we apply the percentage-of-completion method of
contract accounting to determine progress towards completion, which requires the use of estimates. In such
instances, management is required to estimate the input measures, generally based on hours incurred to date
compared to total estimated hours of the project, with consideration also given to output measures, such as
contract milestones, when applicable. Adjustments to estimates are made in the period in which the facts
requiring such revisions become known and, accordingly, recognized revenues and profits are subject to
revisions as the contract progresses to completion. Estimated losses, if any, are recorded in the period in which
current estimates of total contract revenue and contract costs indicate a loss. If substantive uncertainty related to
customer acceptance of services exists, we apply the completed contract method of accounting and defer the
associated revenue until the contract is completed. If we are unable to accurately estimate the input measures
used for percentage-of-completion accounting, revenue would be deferred until the contract is complete, and this
could have a material impact on our consolidated results of operations.

Hosting Services

We are an application service provider (“ASP”), where we provide hosting services that allow customers
access to software that resides on our servers. The ASP model typically includes an up-front fee and a monthly
commitment from the customer that commences upon completion of the implementation through the remainder
of the contractual term. The up-front fee is the initial setup fee, or the implementation fee. The monthly
commitment includes, but is not limited to, a fixed monthly fee or a transactional fee based on system usage that
exceeds monthly minimums. Revenue is recognized from ASP when there is persuasive evidence of an
arrangement, the service has been provided to the customer, the amount of fees is fixed or determinable and the
collection of the Company’s fees is probable. We do not view the activities of signing the contract or providing
initial setup services as discrete earnings events. Revenue is typically deferred until the date the customer
commences use of our services at which point the up-front fees are recognized ratably over the contractual term
of the customer arrangement. ASP transactional fees are recorded monthly as earned.

Multiple-Deliverable Arrangements including Non-Software

Each deliverable within a multiple-deliverable revenue arrangement that includes non-software is accounted
for as a separate unit of accounting if the following criteria are met: (i) the delivered item or items have value to
the customer on a standalone basis and (ii) for an arrangement that includes a general right of return relative to
the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially
in our control. We consider a deliverable to have standalone value if we sell this item separately or if the item is
sold by another vendor or could be resold by the customer. Further, our revenue arrangements generally do not
include a general right of return relative to delivered products. Revenue for multiple element arrangements is
allocated to the software and non-software deliverables based on a relative selling price. We use VSOE in our
allocation of arrangement consideration when it is available. We define VSOE as a median price of recent
standalone transactions that are priced within a narrow range, as defined by us. If a product or service is seldom
sold separately, it is unlikely that we can determine VSOE. In circumstances when VSOE does not exist, we then
assess whether we can obtain third-party evidence (“TPE”) of the selling price. It may be difficult for us to obtain
sufficient information on competitor pricing to substantiate TPE and therefore we may not always be able to use
TPE. When we are unable to establish selling price using VSOE or TPE, we use estimated selling price (“ESP”)
in its allocation of arrangement consideration. The objective of ESP is to determine the price at which we would
transact if the product or service were sold by us on a standalone basis. Our determination of ESP involves
weighting several factors based on the specific facts and circumstances of each arrangement. The factors include,
but are not limited to, geographies, market conditions, gross margin objectives, pricing practices and controls and
customer segment pricing strategies and the product lifecycle. We analyze selling prices used in our allocation of
arrangement consideration on an annual basis, or more frequently if necessary. Selling prices will be analyzed
more frequently if a significant change in our business necessitates a more timely analysis or if we experience
significant variances in our selling prices.

Gross vs. Net Revenue Reporting

We apply accounting guidance to determine whether we report revenue for certain transactions based upon

the gross amount billed to the customer, or the net amount retained by us. In accordance with the guidance we
record revenue on a gross basis for sales in which we have acted as the principal and on a net basis for those sales
in which we have in substance acted as an agent or broker in the transaction.

Allowance for Doubtful Accounts

We make estimates regarding the collectability of our accounts receivable. When we evaluate the adequacy

of our allowance for doubtful accounts, we analyze specific accounts receivable balances, historical bad debts,
customer creditworthiness, current economic trends and changes in our customer payment cycles. Material
differences may result in the amount and timing of expense for any period if we were to make different
judgments or utilize different estimates. If the financial condition of our customers deteriorates resulting in an
impairment of their ability to make payments, additional allowances might be required.

Valuation of Goodwill and Other Intangible Assets—Impairment Assessment

Our business acquisitions typically result in the recognition of goodwill and other intangible assets, which

affect the amount of current and future period charges and amortization expense. Goodwill represents the excess
of the purchase price over the fair value of net assets acquired, including identified intangible assets, in
connection with our business combinations. We amortize our definite-lived intangible assets based on forecasted
cash flows associated with the assets over the estimated useful lives. Goodwill is not amortized, but is assessed at
least annually for impairment.

The determination of the value of these components of a business combination, as well as associated asset

useful lives, requires management to make various estimates and assumptions. Critical estimates in valuing
certain of the intangible assets include but are not limited to: future expected cash flows from product sales and

services, maintenance agreements, consulting contracts, customer contracts, and acquired developed technologies
and patents or trademarks; the acquired company’s brand awareness and market position, as well as assumptions
about the period of time the acquired products and services will continue to be used in our product portfolio; and
discount rates. Management’s estimates of fair value and useful lives are based upon assumptions believed to be
reasonable. Estimates using different assumptions, or unanticipated events and circumstances could produce
significantly different results.

We assess potential impairments to our intangible assets when there is evidence that events and

circumstances related to our financial performance and economic environment indicate the carrying amount of
the assets may not be recoverable. When impairment indicators are identified with respect to our previously
recorded intangible assets with finite useful lives, we test for impairment using undiscounted cash flows. If such
tests indicate impairment, then we measure and record the impairment as the difference between the carrying
value of the asset and the fair value of the asset. Significant management judgment is required in forecasting
future operating results used in the preparation of the projected discounted cash flows. Should different
conditions prevail, material write downs of net intangible assets and other long-lived assets could occur. We
periodically review the estimated remaining useful lives of our acquired intangible assets. A reduction in our
estimate of remaining useful lives, if any, could result in increased amortization expense in future periods.

We test goodwill for impairment at the reporting unit levels, which we have determined are the same as our
reportable segments, at least annually during the fourth quarter of each fiscal year. The timing and frequency of
our goodwill impairment test is based on an ongoing assessment of events and circumstances that would be an
indicator of potential impairment of a reporting unit, with the fair value below its carrying value. The first step of
the goodwill impairment test is a comparison of the fair value of a reporting unit to its carrying value. We
estimate the fair values of our reporting units using a weighted combination of discounted cash flow valuation
model (known as the income approach) and a comparison of our reporting units to guideline publicly-traded
companies (known as the market approach). These methods require estimates of our future revenues, profits,
capital expenditures, working capital, costs of capital and other relevant factors, as well as selecting appropriate
guideline publicly-traded companies for each reporting unit. We evaluate historical trends, current budgets,
operating plans, industry data, and other relevant factors when estimating these amounts. The determination of an
impairment loss, using assumptions that are different from those used in our estimates but in each case
reasonable, could produce significantly different results and materially affect the determination of fair value and/
or goodwill impairment for each reporting unit. For example, if the economic environment impacts our forecasts
beyond what we have anticipated, it could cause the fair value of a reporting unit to fall below its respective
carrying value.

The key assumptions that require significant management judgment for the income approach include
revenue growth rates and weighted average cost of capital. In our analysis, revenue growth rates were primarily
based on third party studies of industry growth rates for each of our reporting units. Within each reporting unit,
management refined these estimates based on their knowledge of the product, the needs of our customers and
expected market opportunity. The weighted average cost of capital was determined based on publicly available
data such as the long-term yield on U.S. treasury bonds, the expected rate of return on high quality bonds and the
returns and betas of various equity instruments. As it relates to the market approach, there is less management
judgment in determining the fair value of our reporting units other than selecting which guideline publicly-traded
companies are included in our peer group.

In the fourth quarter of fiscal 2011 we performed our annual goodwill impairment test. In step one of that

test we compared the estimated fair value of each reporting unit to its carrying value. The estimated fair value of
each of our reporting units exceeded its respective carrying value in fiscal 2011, indicating the underlying
goodwill of each reporting unit was not impaired as of our most recent testing date. Accordingly, we were not
required to complete the second step of the goodwill impairment test and recorded no goodwill impairment
charges for the twelve months ended September 30, 2011.

During our fiscal 2011 goodwill impairment analysis, we concluded the estimated fair values of all of our

reporting units substantially exceeded their carrying values. As discussed above, estimates of fair value for all of
our reporting units can be affected by a variety of external and internal factors. We believe that the assumptions
and estimates utilized were appropriate based on the information available to management. The timing and
recognition of impairment losses by us in the future, if any, may be highly dependent upon our estimates and
assumptions.

Share-Based Compensation

We account for share-based compensation using the fair value recognition provisions as required in the
accounting literature. We estimate the fair value of options granted using the Black-Scholes option valuation
model. We estimate the volatility of our common stock at the date of grant based on a combination of the implied
volatility of publicly traded options on our common stock and our historical volatility rate. Our decision to use
implied volatility was based upon the availability of actively traded options on our common stock and our
assessment that implied volatility is more representative of future stock price trends than historical volatility. We
estimate the expected term of options granted based on historical exercise patterns. The dividend yield
assumption is based on historical dividend payouts. The risk-free interest rate assumption is based on observed
interest rates appropriate for the term of our employee options. We use historical data to estimate pre-vesting
option forfeitures and record share-based compensation expense only for those awards that are expected to vest.
For options granted, we amortize the fair value on a straight-line basis. All options are amortized over the
requisite service periods of the awards, which are generally the vesting periods. If factors change we may decide
to use different assumptions under the Black-Scholes option valuation model in the future, which could
materially affect our share-based compensation expense, net income and earnings per share.

Income Taxes

We use the asset and liability approach to account for income taxes. This methodology recognizes deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax base of assets and liabilities and operating loss and tax credit carryforwards. We then record
a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. We
consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, which requires the use of estimates. If we determine during any period that we could
realize a larger net deferred tax asset than the recorded amount, we would adjust the deferred tax asset to increase
income for the period or reduce goodwill if such deferred tax asset relates to an acquisition. Conversely, if we
determine that we would be unable to realize a portion of our recorded deferred tax asset, we would adjust the
deferred tax asset to record a charge to income. To the extent an adjustment in our deferred tax assets relates to a
business combination the adjustment is recorded either in income from continuing operations in the period of the
combination or directly in contributed capital, depending on the circumstances. Although we believe that our
estimates are reasonable, there is no assurance that our valuation allowance will not need to be increased to cover
additional deferred tax assets that may not be realizable, and such an increase could have a material adverse
impact on our income tax provision and results of operations in the period in which such determination is made.
In addition, the calculation of tax liabilities also involves significant judgment in estimating the impact of
uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent
with management’s expectations could also have a material impact on our income tax provision and consolidated
results of operations in the period in which such determination is made.

Contingencies and Litigation

We are subject to various proceedings, lawsuits and claims relating to products and services, technology,
labor, shareholder and other matters. We are required to assess the likelihood of any adverse outcomes and the
potential range of probable losses in these matters. If the potential loss is considered probable and the amount can
be reasonably estimated, we accrue a liability for the estimated loss. If the potential loss is considered less than

probable or the amount cannot be reasonably estimated, disclosure of the matter is considered. The amount of
loss accrual or disclosure, if any, is determined after analysis of each matter, and is subject to adjustment if
warranted by new developments or revised strategies. Due to uncertainties related to these matters, accruals or
disclosures are based on the best information available at the time. Significant judgment is required in both the
assessment of likelihood and in the determination of a range of potential losses. Revisions in the estimates of the
potential liabilities could have a material impact on our consolidated financial position or consolidated results of
operations.

New Accounting Pronouncements Not Yet Adopted

On May 12, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update

(ASU) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04). This update amends
Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurement and Disclosure.” ASU 2011-04
clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair
value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 is effective
for annual and interim reporting periods beginning on or after December 15, 2011, which means that it will be
effective for our fiscal quarter beginning January 1, 2012. The new guidance is to be adopted prospectively and
early adoption is not permitted. We do not believe that adoption of ASU 2011-04 will have a significant impact
on our financial position, results of operations or cash flows.

On June 16, 2011 the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation
of Comprehensive Income” (ASU 2011-05). This update amends ASC Topic 220, “Comprehensive Income” to
provide that total comprehensive income will be reported in one continuous statement or two separate but
consecutive statements of financial performance. Presentation of total comprehensive income in the statement of
stockholders’ equity or the footnotes will no longer be allowed. The calculation of net income and basic and
diluted net income per share will not be affected. ASU 2011-005 is effective for fiscal years, and interim periods
within those years, beginning on or after December 15, 2011, which means that it will be effective for our fiscal
year beginning October 1, 2012. Retrospective adoption is required and early adoption is permitted. We do not
believe that adoption of ASU 2011-05 will have a significant impact on our financial position, results of
operations or cash flows.

On September 15, 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (Topic
350): Testing Goodwill for Impairment” (ASU 2011-08). This update amends the guidance in ASC 350-20 on
testing goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the
option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e. step 1 of
the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the
reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be
required. ASU 2011-08 does not change how goodwill is calculated or assigned to reporting units, nor does it
revise the requirement to test goodwill annually for impairment. In addition, ASU 2011-08 does not amend the
requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it
does revise the examples of events and circumstances that an entity should consider. ASU 2011-08 is effective
for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011,
which means that it will be effective for our fiscal year beginning October 1, 2013. Early adoption is permitted.
We do not believe that adoption of ASU 2011-08 will have a significant impact on our financial position, results
of operations or cash flows.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Disclosures

We are exposed to market risk related to changes in interest rates, equity market prices, and foreign
currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

We maintain an investment portfolio consisting mainly of income securities with an average maturity of two

years or less. These available-for-sale securities are subject to interest rate risk and will fall in value if market
interest rates increase. We have the ability to hold our fixed income investments until maturity, and therefore we
would not expect our operating results or cash flows to be affected to any significant degree by the effect of a
sudden change in market interest rates on our securities portfolio. The following table presents the principal
amounts and related weighted-average yields for our investments with interest rate risk at September 30, 2011
and 2010:

Cash and cash equivalents
Short-term investments

September 30, 2011

September 30, 2010

Cost Basis

Carrying
Amount

Average
Yield

Cost Basis

Carrying
Amount

Average
Yield

$135,752
105,819

$135,752
105,826

(Dollars in thousands)
0.14% $146,199
68,554
0.16%

$146,199
68,615

$241,571

$241,578

0.15% $214,753

$214,814

0.10%
0.94%

0.37%

In May 2008, we issued $275 million of Senior Notes to a group of institutional investors in a private
placement. In July 2010 we issued an additional $245 million of Senior Notes to a group of institutional investors
in a private placement. The fair value of our Senior Notes may increase or decrease due to various factors,
including fluctuations in market interest rates and fluctuations in general economic conditions. See
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources
and Liquidity, above, for additional information on the Senior Notes. The following table presents the principal
amounts, carrying amounts, and fair values for our Senior Notes at September 30, 2011 and 2010:

May 2008 $275 million Senior Notes
July 2010 $245 million Senior Notes

September 30, 2011

September 30, 2010

Principal

$267,000
$245,000

Carrying
Amounts

(In thousands)
$267,000
$245,000

Fair Value

Principal

$305,874 $275,000
$266,620 $245,000

Carrying
Amounts

(In thousands)
$275,000
$245,000

Fair Value

$315,019
$258,727

We have interest rate risk with respect to our five-year $200 million unsecured revolving line of credit.

Interest on amounts borrowed under the line of credit is based on (i) a base rate, which is the greater of (a) the
prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin. The margin on
LIBOR borrowings ranges from 1.000% to 1.625% and is determined based on our consolidated leverage ratio. A
change in interest rates on this variable rate debt impacts the interest incurred and cash flows, but does not impact
the fair value of the instrument. We had no borrowings outstanding under the credit facility as of September 30,
2011.

Forward Foreign Currency Contracts

We maintain a program to manage our foreign currency exchange rate risk on existing foreign currency

receivable and cash balances by entering into forward contracts to sell or buy foreign currency. At period end,
foreign-denominated receivables and cash balances held by our U.S. reporting entities are remeasured into the
U.S. dollar functional currency at current market rates. The change in value from this remeasurement is then
reported as a foreign exchange gain or loss for that period in our accompanying consolidated statements of
income and the resulting gain or loss on the forward contract mitigates the exchange rate risk of the associated
assets. All of our forward foreign currency contracts have maturity periods of less than three months. Such
derivative financial instruments are subject to market risk.

The following table summarizes our outstanding forward foreign currency contracts, by currency at

September 30, 2011 and 2010:

Sell foreign currency:

Canadian dollar (CAD)
Euro (EUR)

Buy foreign currency:

British pound (GBP)

Sell foreign currency:

Canadian dollar (CAD)
Euro (EUR)

Buy foreign currency:

British pound (GBP)

September 30, 2011

Contract Amount

Fair
Value

Foreign
Currency

US$

(In thousands)

CAD 8,000
EUR 4,830

$7,663
$6,524

$—
—

GBP 3,911

$6,100

—

September 30, 2010

Contract Amount

Fair
Value

Foreign
Currency

US$

(In thousands)

CAD 1,300
EUR 5,460

$1,258
$7,446

$—
—

GBP 3,672

$5,800

—

The forward foreign currency contracts were all entered into on September 30, 2011; therefore, the fair

value was $0 on that date.

Item 8.

Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Fair Isaac Corporation
Minneapolis, Minnesota

We have audited the accompanying consolidated balance sheets of Fair Isaac Corporation and subsidiaries (the
“Company”) as of September 30, 2011 and 2010, and the related consolidated statements of income,
stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended
September 30, 2011. We also have audited the Company’s internal control over financial reporting as of
September 30, 2011, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is
responsible for these financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on these financial statements and an opinion on the Company’s internal control over financial reporting based on
our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the consolidated financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of September 30, 2011 and 2010, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 2011, in conformity with accounting

principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of September 30, 2011, based on the
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP

Minneapolis, MN

November 18, 2011

FAIR ISAAC CORPORATION
CONSOLIDATED BALANCE SHEETS

Current assets:

Assets

Cash and cash equivalents
Marketable securities available for sale, current portion
Accounts receivable, net
Prepaid expenses and other current assets

Total current assets

Marketable securities available for sale, less current portion
Other investments
Property and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Other assets

September 30,
2011

September 30,
2010

(In thousands, except par value data)

135,752
105,826
104,974
17,929

364,481

4,170
10,934
33,017
664,688
19,498
25,032
7,648

146,199
68,615
113,187
19,174

347,175

4,367
11,074
30,975
665,953
27,244
27,774
9,154

Total assets

$ 1,129,468

$ 1,123,716

Current liabilities:

Liabilities and Stockholders’ Equity

Accounts payable
Accrued compensation and employee benefits
Other accrued liabilities
Deferred revenue
Deferred income taxes
Current maturities on long-term debt

Total current liabilities

Senior notes
Other liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity:

11,139
36,470
47,031
41,768
2,090
8,000

146,498

504,000
13,476

663,974

8,765
33,697
28,732
42,953
—
8,000

122,147

512,000
14,655

648,802

Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and

outstanding)

—

Common stock ($0.01 par value; 200,000 shares authorized, 88,857 shares
issued and 37,084 and 39,882 shares outstanding at September 30, 2011
and 2010, respectively)

Paid-in-capital
Treasury stock, at cost (51,773 and 48,975 shares at September 30, 2011

and 2010, respectively)

Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

371
1,098,388

399
1,103,244

(1,627,180)
1,015,624
(21,709)

(1,556,253)
947,202
(19,678)

465,494

474,914

$ 1,129,468

$ 1,123,716

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

Revenues:

Transactional and maintenance
Professional services
License

Total revenues

Operating expenses:

Cost of revenues (1)
Research and development
Selling, general and administrative (1)
Amortization of intangible assets (1)
Restructuring
Loss on sale of product line assets

Total operating expenses

Operating income
Interest income
Interest expense
Other income, net

Income from continuing operations before income taxes
Provision for income taxes

Income from continuing operations
Loss from discontinued operations

Net income

Basic earnings (loss) per share:
Continuing operations
Discontinued operations

Total

Diluted earnings (loss) per share:
Continuing operations
Discontinued operations

Total

Shares used in computing earnings (loss) per share:

Basic

Diluted

Years Ended September 30,

2011

2010

2009

(in thousands, except per share data)

$453,430
115,941
50,312

$455,487
102,878
47,278

$478,702
112,413
39,620

619,683

605,643

630,735

186,470
62,129
223,615
7,741
12,391
—

180,932
73,581
225,263
10,901
1,617
—

206,448
73,626
209,319
12,891
8,711
2,993

492,346

492,294

513,988

127,337
2,192
(32,364)
290

113,349
1,688
(24,124)
1,391

97,455
25,893

71,562
—

92,304
27,847

64,457
—

116,747
4,717
(25,481)
1,587

97,570
32,105

65,465
(363)

$ 71,562

$ 64,457

$ 65,102

1.82
—

1.82

1.79
—

1.79

1.44
—

1.44

1.42
—

1.42

1.35
(0.01)

1.34

1.34
(0.01)

1.33

39,359

44,903

48,658

39,988

45,308

48,776

(1) Cost of revenues and selling, general and administrative expenses exclude the amortization of intangible

assets. See Note 8 to consolidated financial statements.

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Years Ended September 30, 2011, 2010 and 2009

Common
Stock

Par
Value

Paid-in-
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders’
Equity

Comprehensive
Income

(In thousands, except per share data)

$(1,374,455) $ 825,109

Balance at September 30, 2008
Share-based compensation
Exercise of stock options
Tax benefit from share based payment

arrangements

Forfeitures of restricted stock
Repurchases of common stock
Issuance of ESPP shares from treasury
Issuance of restricted stock to employees

from treasury

Dividends paid ($0.08 per share)
Net income
Unrealized gains on investments, net of tax

of $232

Cumulative translation adjustments
Balance at September 30, 2009

Share-based compensation
Exercise of stock options
Tax benefit from share based payment

arrangements

Repurchases of common stock
Issuance of ESPP shares from
treasury
Issuance of restricted stock to employees

from treasury

Dividends paid ($0.08 per share)
Net income
Unrealized losses on investments, net of tax

benefit of $250

Cumulative translation adjustments
Balance at September 30, 2010

Share-based compensation
Exercise of stock options
Tax benefit from share based payment

arrangements

Repurchases of common stock
Issuance of ESPP shares from treasury
Issuance of restricted stock to employees

from treasury

Dividends paid ($0.08 per share)
Net income
Unrealized losses on investments, net of tax

benefit of $23

Cumulative translation adjustments
Balance at September 30, 2011

48,473 $485 $1,110,165
19,935
(3,197)

— —
148

— —
(2) —

(832)
195

(8)
2

174
2
— —
— —

— —
— —

(9,545)
64
—
(3,848)

(7,282)
—
—

—
—

—
5,027

—
(64)
(18,492)
6,646

5,938
—
—

—
—

—
—
—
—

—
(3,887)
65,102

—
—

48,156

482 1,106,292

(1,375,400)

886,324

— —
288

— —

(8,790)

(88)

17,305
(5,539)

(4,717)
—

—
9,528

—

(197,894)

2 —

(18)

2
226
— —
— —

— —
— —

(10,079)
—
—

—
—

7,458
—
—

—
—

—

—
(3,579)
64,457

—
—

39,882

399 1,103,244

(1,556,253)

947,202

—
554

— —

(3,598)

(36)

1 —

245
2
— —
— —

— —
— —

15,500
(6,784)

(2,599)
—

(7)

(10,966)
—
—

—
—

—
17,581

—
(96,289)
34

7,747
—
—

—
—

—
—
—

—
(3,140)
71,562

—
—

37,084 $371 $1,098,388

$(1,627,180) $1,015,624

637
—
—

—
—
—
—

—
—
—

359
(18,425)
(17,429)

—
—

—

—
—
—

(387)
(1,862)
(19,678)

—
—

—
—
—

$ 561,941
19,935
1,831

(9,545)
—
(18,500)
2,800

(1,342)
(3,887)
65,102

359
(18,425)
600,269

17,305
3,992

(4,717)
(197,982)

—

(2,619)
(3,579)
64,457

(387)
(1,862)
474,914

15,500
10,803

(2,599)
(96,325)
27

(3,217)
(3,140)
71,562

(33)
(1,998)
$(21,709)

(33)
(1,998)
$ 465,494

$ 65,102

359
(18,425)
$ 47,036

64,457

(387)
(1,862)
$ 62,208

71,562

(33)
(1,998)
$131,739

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
Share-based compensation
Deferred income taxes
Tax effect from share-based payment arrangements
Excess tax benefits from share-based payment arrangements
Net amortization of premium on marketable securities
Provision for (Benefit from) doubtful accounts
Loss on sale of product line assets
Net loss on sales of property and equipment

Changes in operating assets and liabilities, net of disposition effects:

Accounts receivable
Prepaid expenses and other assets
Accounts payable
Accrued compensation and employee benefits
Other liabilities
Deferred revenue

Net cash provided by operating activities

Cash flows from investing activities:
Purchases of property and equipment
Cash proceeds from sales of property and equipment
Cash proceeds from sales of product line assets
Purchases of marketable securities
Proceeds from sale of marketable securities
Proceeds from maturities of marketable securities
Distribution from cost method investees

Years Ended September 30,

2011

2010

2009

(In thousands)

$ 71,562

$ 64,457

$ 65,102

24,197
15,500
1,252
(2,599)
(1,664)
554
(583)
—
169

8,571
2,060
(1,749)
3,154
18,727
(2,995)

30,918
17,305
6,761
(4,717)
(1,158)
2,174
(118)
—
694

(11,561)
315
(317)
5,413
(3,290)
(1,096)

38,419
19,935
(5,031)
(9,545)
(280)
1,057
499
2,993
115

31,316
36
(2,519)
(976)
3,214
7,298

136,156

105,780

151,633

(14,020)
—
—

(144,224)
13,644
92,759
140

(17,453)
50
2,182
(71,749)
10,014
187,593
—

(13,958)
—
4,000
(197,274)
7,400
116,585
1,300

Net cash provided by (used in) investing activities

(51,701)

110,637

(81,947)

Cash flows from financing activities:
Payments on revolving line of credit
Proceeds from issuance of senior notes
Payments on senior notes
Debt issuance costs
Proceeds from issuances of common stock under employee stock option and purchase

plans

Dividends paid
Repurchases of common stock
Excess tax benefits from share-based payment arrangements

Net cash used in financing activities

Effect of exchange rate changes on cash

Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

—
—
(8,000)
(736)

7,613
(3,140)
(91,422)
1,664

(295,000)
245,000
—
(1,343)

1,410
(3,579)
(196,119)
1,158

—
—
—
—

3,289
(3,887)
(18,500)
280

(94,021)

(248,473)

(18,818)

(881)

(2,389)

(10,447)
146,199

(31,958)
178,157

48,479
129,678

$ 135,752

$ 146,199

$ 178,157

Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds of $207, $457 and $2,742 during the years

ended September 30, 2011, 2010 and 2009, respectively

Cash paid for interest

$ 11,460
$ 31,974

$ 26,885
$ 21,048

$ 28,364
$ 26,189

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

1. Nature of Business and Summary of Significant Accounting Policies

Fair Isaac Corporation

Incorporated under the laws of the State of Delaware, Fair Isaac Corporation (“FICO”) is a provider of
analytic, software and data management products and services that enable businesses to automate, improve and
connect decisions. FICO provides a range of analytical solutions, credit scoring and credit account management
products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers and
healthcare organizations.

In these consolidated financial statements, FICO is referred to as “we,” “us,” “our,” or “FICO”.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany

accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates. These
estimates and assumptions include, but are not limited to, assessing the following: the recoverability of accounts
receivable, goodwill, intangible assets, software development costs, deferred tax assets, the benefits related to
uncertain tax positions, the determination of the fair value of share-based compensation, the ability to estimate
hours in connection with fixed-fee service contracts, the ability to estimate transactional-based revenues for
which actual transaction volumes have not yet been received, and the determination of whether fees are fixed or
determinable and collection is probable or reasonably assured.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and investments with a maturity of 90 days or less at

time of purchase.

Fair Value of Financial Instruments

The fair value of certain of our financial instruments, including cash and cash equivalents, receivables, other

current assets, accounts payable, accrued compensation and employee benefits, other accrued liabilities and
amounts outstanding under our revolving line of credit, approximate their carrying amounts because of the short-
term maturity of these instruments. The fair values of our cash and cash equivalents and marketable security
investments are disclosed in Note 4. The fair value of our Senior Notes is disclosed in Note 11.

Investments

Management determines the appropriate classification of our investments in marketable debt and equity
securities at the time of purchase, and re-evaluates this designation at each balance sheet date. While it is our
intent to hold debt securities to maturity, our investments in U.S. government obligations and marketable equity
and debt securities that have readily determinable fair values are classified as available-for-sale, as the sale of
such securities may be required prior to maturity to implement management strategies. Therefore, such securities

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

are carried at fair value with unrealized gains or losses related to these securities included in accumulated other
comprehensive income (loss). The fair value of marketable securities is based upon inputs including quoted
prices for identical or similar assets. Realized gains and losses are included in other income, net on the
consolidated statements of income. The cost of investments sold is based on the specific identification method.
Losses resulting from other than temporary declines in fair value are charged to operations. Investments with
remaining maturities over one year are classified as long-term investments.

Our investments in equity securities of companies over which we do not have significant influence are

accounted for under the cost method. Investments in which we own 20% to 50% and exercise significant
influence over operating and financial policies are accounted for using the equity method. Under the equity
method, the investment is originally recorded at cost and adjusted to recognize our share of net earnings or losses
of the investee, limited to the extent of our investment in, advances to, and financial guarantees for the investee.
Under the cost method, the investment is originally recorded at cost and adjusted for additional contributions or
distributions. Management periodically reviews equity-method and cost-method investments for instances where
fair value is less than the carrying amount and the decline in value is determined to be other than temporary. If
the decline in value is judged to be other than temporary, the carrying amount of the security is written down to
fair value and the resulting loss is charged to operations.

Concentration of Risk

Financial instruments that potentially expose us to concentrations of risk consist primarily of cash and cash
equivalents, marketable securities and accounts receivable, which are generally not collateralized. Our policy is
to place our cash, cash equivalents, and marketable securities with high quality financial institutions, commercial
corporations and government agencies in order to limit the amount of credit exposure. We have established
guidelines relative to diversification and maturities for maintaining safety and liquidity. We generally do not
require collateral from our customers, but our credit extension and collection policies include analyzing the
financial condition of potential customers, establishing credit limits, monitoring payments, and aggressively
pursuing delinquent accounts. We maintain allowances for potential credit losses.

A significant portion of our revenues are derived from the sales of products and services to the consumer

credit, banking and insurance industries.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Major
renewals and improvements are capitalized, while repair and maintenance costs are expensed as incurred.
Depreciation and amortization charges are calculated using the straight-line method over the following estimated
useful lives:

Data processing equipment and software
Office furniture and equipment

Leasehold improvements

Estimated Useful Life

2 to 3 years
3 to 7 years
Shorter of estimated
useful life or lease term

The cost and accumulated depreciation for property and equipment sold, retired or otherwise disposed of are
removed from the applicable accounts and resulting gains or losses are recorded in our consolidated statement of
operations. Depreciation and amortization on property and equipment totaled $16.5 million, $20.0 million and
$25.5 million during fiscal 2011, 2010 and 2009, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Internal-use Software

Costs incurred to develop internal-use software during the application development stage are capitalized and
reported at cost, subject to an impairment test as described below. Application development stage costs generally
include costs associated with internal-use software configuration, coding, installation and testing. Costs of
significant upgrades and enhancements that result in additional functionality are also capitalized whereas costs
incurred for maintenance and minor upgrades and enhancements are expensed as incurred. Capitalized costs are
amortized using the straight-line method over two to three years.

We assess potential impairment of capitalized internal-use software whenever events or changes in

circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset group to the future undiscounted
net cash flows that are expected to be generated by the asset group. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. We capitalized $0.3 million, $0, and $0.3 million of internal-use software during fiscal 2011,
2010, and 2009, respectively. During fiscal 2011, 2010 and 2009 we impaired $0, $0.6 million and $0,
respectively, of previously capitalized internal-use software. We did not amortize any internal-use software in
fiscal 2011 or 2010 while we amortized $0.3 million in fiscal 2009.

Capitalized Software and Research and Development Costs

All costs incurred prior to the resolution of unproven functionality and features, including new technologies,

are expensed as research and development costs. Software development costs incurred between completion of a
working prototype and general availability of the related products have not been significant and have been
expensed as incurred. Technological feasibility for our products occurs approximately concurrently with the
general release of our products, accordingly, we have not capitalized any development or production costs. Costs
we incur to maintain and support our existing products after the general release of the product are expensed in the
period they are incurred and included in research and development costs in our statements of operations.
Research and development costs totaled $62.1 million, $73.6 million and $73.6 million in fiscal 2011, 2010 and
2009, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in connection

with our business combinations accounted for by the purchase method of accounting (see Note 8). We test
goodwill for impairment at the reporting unit level at least annually during the fourth quarter of each fiscal year
and more frequently if impairment indicators are identified. We have determined that our reporting units are the
same as our reportable segments. The first step of the goodwill impairment test is a comparison of the fair value
of a reporting unit to its carrying value. We estimate the fair values of our reporting units using discounted cash
flow valuation models and by comparing our reporting units to guideline publicly-traded companies. These
methods require estimates of our future revenues, profits, capital expenditures, working capital, and other
relevant factors, as well as selecting appropriate guideline publicly-traded companies for each reporting unit. We
estimate these amounts by evaluating historical trends, current budgets, operating plans, industry data, and other
relevant factors.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Definite-lived intangible assets are tested for impairment if impairment indicators arise. We amortize our
definite-lived intangible assets, which result from our acquisitions accounted for under the purchase method of
accounting, using the straight-line method or based on the forecasted cash flows associated with the assets over
the following estimated useful lives:

Completed technology
Customer contracts and relationships
Trade names

Estimated Useful Life

4 to 6 years
5 to 15 years
5 years

Revenue Recognition

Software Licenses

Software license fee revenue is recognized when persuasive evidence of an arrangement exists, software is

made available to our customers, the fee is fixed or determinable and collection is probable. The determination of
whether fees are fixed or determinable and collection is probable involves the use of judgment. If at the outset of
an arrangement we determine that the arrangement fee is not fixed or determinable, revenue is deferred until the
arrangement fee becomes fixed or determinable, assuming all other revenue recognition criteria have been met. If
at the outset of an arrangement we determine that collectability is not probable, revenue is deferred until the
earlier of when collectability becomes probable or the receipt of payment. If there is uncertainty as to the
customer’s acceptance of our deliverables, revenue is not recognized until the earlier of receipt of customer
acceptance, expiration of the acceptance period, or when we can demonstrate we meet the acceptance criteria.
We evaluate contract terms and customer information to ensure that these criteria are met prior to our recognition
of license fee revenue.

We use the residual method to recognize revenue when a software arrangement includes one or more
elements to be delivered at a future date and vendor-specific objective evidence (“VSOE”) of the fair value of all
undelivered elements exists. VSOE of fair value is based on the normal pricing practices for those products and
services when sold separately by us and customer renewal rates for post-contract customer support services.
Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the
arrangement fee is recognized as revenue. If evidence of the fair value of one or more undelivered elements does
not exist, the revenue is deferred and recognized when delivery of those elements occurs or when fair value can
be established. Changes to the elements in a software arrangement, the ability to identify VSOE for those
elements, the fair value of the respective elements, and change to a product’s estimated life cycle could
materially impact the amount of earned and unearned revenue.

Revenues from post-contract customer support services, such as software maintenance, are recognized on a

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Transactional-based Revenues

Transactional-based revenue is recognized when persuasive evidence of an arrangement exists, fees are

Consulting Services

Hosting Services

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Multiple-Deliverable Arrangements including Non-Software

Gross vs. Net Revenue Reporting

We apply accounting guidance to determine whether we report revenue for certain transactions based upon

Allowance for Doubtful Accounts

We make estimates regarding the collectability of our accounts receivable. When we evaluate the adequacy

Income Taxes

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

the valuation allowance, which requires the use of estimates. If we determine during any period that we could
realize a larger net deferred tax asset than the recorded amount, we would adjust the deferred tax asset to increase
income for the period or reduce goodwill if such deferred tax asset relates to an acquisition. Conversely, if we
determine that we would be unable to realize a portion of our recorded deferred tax asset, we would adjust the
deferred tax asset to record a charge to income. To the extent an adjustment in our deferred tax assets relates to a
business combination the adjustment is recorded either in income from continuing operations in the period of the
combination or directly in contributed capital, depending on the circumstances. Although we believe that our
estimates are reasonable, there is no assurance that our valuation allowance will not need to be increased to cover
additional deferred tax assets that may not be realizable, and such an increase could have a material adverse
impact on our income tax provision and results of operations in the period in which such determination is made.
In addition, the calculation of tax liabilities also involves significant judgment in estimating the impact of
uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent
with management’s expectations could also have a material impact on our income tax provision and consolidated
results of operations in the period in which such determination is made.

Earnings per Share

Basic earnings per share are computed on the basis of the weighted-average number of common shares
outstanding during the period under measurement. Diluted earnings per share are based on the weighted-average
number of common shares outstanding and potential common shares. Potential common shares result from the
assumed exercise of outstanding stock options or other potentially dilutive equity instruments, when they are
dilutive under the treasury stock method or the if-converted method.

Comprehensive Income

Comprehensive income is the change in our equity (net assets) during each period from transactions and
other events and circumstances from non-owner sources. It includes net income, foreign currency translation
adjustments and unrealized gains and losses on our investments in marketable securities, net of tax.

Foreign Currency

We have determined that the functional currency of each foreign operation is the local currency. Assets and
liabilities denominated in their local foreign currencies are translated into U.S. dollars at the exchange rate on the
balance sheet date. Revenues and expenses are translated at average rates of exchange prevailing during the
period. Translation adjustments are accumulated as a separate component of consolidated stockholders’ equity.

At the end of the reporting period, foreign currency denominated receivables and liabilities are remeasured

into the functional currency of the reporting entities at current market rates. The change in value from this
remeasurement is reported as a foreign exchange gain or loss for that period in other income, net in the
accompanying consolidated statements of income. We recorded ($1.0) million, ($1.2) million and $2.5 million of
transactional foreign currency exchange gains (losses) during fiscal 2011, 2010 and 2009, respectively.

Derivative Financial Instruments

From time to time, we utilize forward contract instruments to manage market risks associated with

fluctuations in certain foreign currency exchange rates as they relate to specific balances of accounts receivable
and cash denominated in foreign currencies. It is our policy to use derivative financial instruments to protect
against market risks arising in the normal course of business. Our policies prohibit the use of derivative

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

instruments for the sole purpose of trading for profit on price fluctuations or to enter into contracts that
intentionally increase our underlying exposure. All of our forward foreign currency contracts have maturity
periods of less than three months. Gains or losses from forward foreign currency contracts are included in other
income, net.

Share-Based Compensation

Impairment of Long-Lived Assets

We assess potential impairment to long-lived assets and certain identifiable intangible assets with finite
lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of
an asset to the future undiscounted net cash flows that are expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. We determined that our long-lived assets were not
impaired at September 30, 2011, 2010 and 2009. Assets to be disposed are reported at the lower of the carrying
amount or fair value less costs to sell.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred and are included in selling, general and
administrative expenses in the accompanying consolidated statements of income. Advertising and promotion
costs totaled $1.0 million, $3.0 million and $6.8 million in fiscal 2011, 2010 and 2009, respectively.

New Accounting Pronouncements Not Yet Adopted

On May 12, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

for annual and interim reporting periods beginning on or after December 15, 2011, which means that it will be
effective for our fiscal quarter beginning January 1, 2012. The new guidance is to be adopted prospectively and
early adoption is not permitted. We do not believe that adoption of ASU 2011-04 will have a significant impact
on our financial position, results of operations or cash flows.

2. Discontinued Operations

In April 2008, we completed the sale of our Insurance Bill Review business unit for $16.0 million in cash.

During fiscal 2009, we recorded an additional charge of $0.4 million, net of tax, as a result of an unfavorable
final working capital adjustment.

3. Sales of Product Line Assets

In June 2009, we sold the assets associated with our LCT and RoamEx product lines. These solutions were

included in our Applications segment. The LCT sale, which was for $3.5 million, included a $0.5 million
receivable for post-closing working capital adjustments. All post-closing working capital amounts were received
in fiscal 2010. The primary assets sold included accounts receivable and goodwill. Included in the results of
operations for fiscal 2009 were a $1.5 million pre-tax loss and a $2.1 million after-tax loss on the sale as the
goodwill associated with the LCT solution product line was not deductible for income tax purposes. Revenues
attributable to the LCT solutions product line were $9.1 million during fiscal 2009. The RoamEx sale, which was
for $2.7 million, included a $1.4 million escrow balance and a $0.3 million receivable for post-closing working
capital adjustments. All amounts included in escrow and applicable post-closing working capital adjustments

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

were received in fiscal 2010. The primary assets sold included accounts receivable and goodwill. We recognized
a $1.5 million pre-tax loss, and a $1.8 million after-tax loss on the sale as the goodwill associated with the
RoamEx product line was not deductible for income tax purposes. Revenues attributable to the RoamEx product
line were $6.6 million in fiscal 2009.

4. Cash, Cash Equivalents and Marketable Securities Available for Sale

The following is a summary of cash, cash equivalents and marketable securities available for sale at

September 30, 2011 and 2010:

2011

2010

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Amortized
Cost

(In thousands)

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Cash and Cash Equivalents:
Cash
Money market funds
Non U.S. money market funds
U.S. commercial paper

$ 68,248

$—
20,333 —
42,171 —
5,000 —

$ — $ 68,248 $ 63,654
20,333
42,171
5,000

$—
82,545 —
—
—

—
—
—

—
—

$ — $ 63,654
82,545
—
—

—
—
—

$135,752

$—

$ — $135,752 $146,199

$—

$ — $146,199

Short-term Marketable

Securities:

U.S. government obligations
U.S. corporate debt
U.S. commercial paper
Non U.S. corporate debt

Long-term Marketable

Securities:

$ 90,291

$ 14

1,531 —
13,997 —
—

—

(1) $ 90,304 $ 48,325
2,972
1,529
(2)
—
13,993
(4)
— 17,257

—

$ 42
9

—
13

$ — $ 48,367
2,981
—
17,267

—
—

(3)

$105,819

$ 14

(7) $105,826 $ 68,554

$ 64

(3) $ 68,615

Marketable equity securities

4,649

$—

$(479) $

4,170 $

4,847

$—

$(480) $

4,367

Short-term marketable securities mature at various dates over the course of the next twelve months. The
long-term marketable equity securities represent securities held under a supplemental retirement and savings plan
for certain officers and senior management employees, which are distributed upon termination or retirement of
the employees.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

The following table shows the gross unrealized losses and fair value of our investments with unrealized
losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length
of time that individual securities have been in a continuous unrealized loss position, at September 30, 2011 and
2010:

2011

Less than 12 months

12 months or greater

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

$18,993
2,008
1,528

$22,529

$(4)
(1)
(2)

$(7)

$—
—
—

$—

$18,993
2,008
1,528

$22,529

$(4)
(1)
(2)

$(7)

$—
—
—

$—

2010

Less than 12 months

12 months or greater

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

$2,255

$(3)

$—

$2,255

$(3)

Description of Securities:
U.S. commercial paper
U.S. government obligations
Non U.S. corporate debt

Description of Securities:
Non U.S. corporate debt

5. Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. The accounting guidance establishes a three-
level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of
assets and liabilities.

• Level 1—uses unadjusted quoted prices that are available in active markets for identical assets or

liabilities. Our Level 1 securities are comprised of money market funds.

• Level 2—uses inputs other than quoted prices included in Level 1 that are either directly or indirectly
observable through correlation with market data. These include quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are
not active; and inputs to valuation models or other pricing methodologies that do not require significant
judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated
by readily observable market data. Our Level 2 securities are comprised of U.S. government and
corporate debt obligations that are generally held to maturity.

• Level 3—uses one or more significant inputs that are unobservable and supported by little or no market
activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities
include those whose fair value measurements are determined using pricing models, discounted cash
flow methodologies or similar valuation techniques, and significant management judgment or
estimation. We do not have any assets or liabilities that are valued using inputs identified under a Level
3 hierarchy.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

The following table represents financial assets that we measured at fair value on a recurring basis at
September 30, 2011 and 2010, respectively:

September 30, 2011

Assets:
Cash equivalents (1)
U.S. corporate debt (2)
U.S. commercial paper (2)
Non U.S. corporate debt (2)
U.S. government obligations (2)
U.S. municipal obligations (2)
Marketable securities (3)

Total

September 30, 2010

Assets:
Cash equivalents (1)
U.S. corporate debt (2)
U.S. commercial paper (2)
Non U.S. corporate debt (2)
U.S. government obligations (2)
U.S. municipal obligations (2)
Marketable securities (3)

Total

Active Markets for
Identical Instruments
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Fair Value as of
September 30, 2011

(In thousands)

$ —
1,529
13,993
—
44,092
46,212
—

$105,826

$67,504
—
—
—
—
—
4,170

$71,674

$ 67,504
1,529
13,993
—
44,092
46,212
4,170

$177,500

Active Markets for
Identical Instruments
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Fair Value as of
September 30, 2010

(In thousands)

$82,545
—
—
—
—
—
4,367

$86,912

$ —
2,981
—
17,267
39,452
8,915
—

$68,615

$ 82,545
2,981
—
17,267
39,452
8,915
4,367

$155,527

(1)

Included in cash and cash equivalents on our balance sheet at September 30, 2011 and September 30, 2010.
Not included in this table are cash deposits of $68.2 million and $63.7 million at September 30, 2011 and
September 30, 2010, respectively.
Included in current marketable securities on our balance sheet at September 30, 2011 and 2010.

(2)
(3) Represents securities held under a supplemental retirement and savings plan for certain officers and senior

management employees, which are distributed upon termination or retirement of the employees. Included in
long-term marketable securities on our balance sheet at September 30, 2011 and 2010.

Where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair
value. This pricing applies to our Level 1 investments. To the extent quoted prices in active markets for assets or
liabilities are not available, the valuation techniques used to measure the fair values of our financial assets
incorporate market inputs, which include reported trades, broker/dealer quotes, benchmark yields, issuer spreads,
benchmark securities and other inputs derived from or corroborated by observable market data. This
methodology applies to our Level 2 investments. The Company has not changed its valuation techniques in
measuring the fair value of any financial assets and liabilities during the period.

For the fair value of our derivative instruments, see Note 6 to the financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

6. Derivative Financial Instruments

We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary
objective of our derivative instruments is to protect the value of foreign currency denominated accounts receivable and
cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their
functional currency. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign
currencies in the future at fixed exchange rates and economically offset changes in foreign currency exchange rates.
We routinely enter into contracts to offset exposures denominated in the British pound, Euro and Canadian dollar.

Foreign currency denominated accounts receivable and cash balances are re-measured at foreign currency

rates in effect on the balance sheet date with the effects of changes in foreign currency rates reported in other
income, net. The forward contracts are not designated as hedges and are marked to market through other income,
net. Fair value changes in the forward contracts help mitigate the changes in the value of the re-measured
accounts receivable and cash balances attributable to changes in foreign currency exchange rates. The forward
contracts are short-term in nature and typically have average maturities at inception of less than three months.

The following table summarizes the fair value of our derivative instruments and their location in the

consolidated balance sheet as of September 30, 2011 and 2010:

September 30, 2011
(In thousands)

Assets

Liabilities

Derivatives not designated as hedging instruments

Balance Sheet Location Amount

Balance Sheet Location

Amount

Foreign currency forward contracts

Other current assets

$— Other current liabilities

$—

September 30, 2010
(In thousands)

Assets

Liabilities

Derivatives not designated as hedging instruments

Balance Sheet Location Amount

Balance Sheet Location

Amount

Foreign currency forward contracts

Other current assets

$— Other current liabilities

$—

The following table summarizes our outstanding forward foreign currency contracts, by currency at

September 30, 2011 and 2010:

Sell foreign currency:

Canadian dollar (CAD)
Euro (EUR)
Buy foreign currency:

British pound (GBP)

Sell foreign currency:

Canadian dollar (CAD)
Euro (EUR)
Buy foreign currency:

British pound (GBP)

September 30, 2011

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 8,000
EUR 4,830

$7,663
$6,524

$—
—

GBP 3,911

$6,100

—

September 30, 2010

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 1,300
EUR 5,460

$1,258
$7,446

$—
—

GBP 3,672

$5,800

—

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

The forward foreign currency contracts were all entered into on September 30, 2011 and 2010; therefore,

their fair value was $0.

Gains (losses) on derivative financial instruments are recorded in our consolidated statements of income as a

component of other income, net. These amounts are shown for the years ended September 30, 2011, 2010 and
2009:

Foreign currency forward contracts

7. Receivables

Receivables at September 30, 2011 and 2010 consisted of the following:

Billed
Unbilled

Less: allowance for doubtful accounts

Receivables, net

Year Ended September 30,
2009
2011

2010

(in thousands)

$—

$319

$(2,064)

2011

2010

(In thousands)

$ 80,858
27,830

$ 92,305
26,863

108,688
(3,714)

119,168
(5,981)

$104,974

$113,187

Unbilled receivables represent revenue recorded in excess of amounts billable pursuant to contract
provisions and generally become billable at contractually specified dates or upon the attainment of milestones.
Unbilled amounts are expected to be realized within one year. During fiscal 2011, 2010 and 2009, we increased
(decreased) our allowance for the provision for doubtful accounts by ($0.6) million, ($0.1) million and $0.5
million, respectively, and wrote off receivables (net of recoveries) of $1.7 million, $0.9 million and $1.4 million,
respectively.

8. Goodwill and Intangible Assets

Goodwill and intangible assets are tested for impairment at least annually or more frequently if impairment
indicators arise. Our intangible assets have definite lives and are being amortized using the straight-line method
or based on the forecasted cash flows associated with the assets over their estimated useful lives.

We have determined that our reporting units are the same as our reportable segments (see Note 18). We

performed our annual goodwill impairment test, and determined that goodwill was not impaired as of
September 30, 2011 and 2010.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Intangible assets that are subject to amortization consisted of the following at September 30, 2011 and 2010:

Completed technology
Customer contracts and

relationships

Trade names

Foreign currency translation

adjustments

Intangible assets, net

2011

2010

(In thousands, except average life)

Gross
Carrying
Amount
$ 66,037 $ (65,618) $

Accumulated
Amortization

Net

419

Average
Life
4

Gross
Carrying
Accumulated
Amount
Amortization
$ 66,037 $ (63,344) $ 2,693

Net

Average
Life
4

60,756
9,291

(41,792) 18,964
181
(9,110)
$136,084 $(116,520) 19,564

12
5
11

60,756
9,291

(36,463) 24,293
319
(8,972)
$136,084 $(108,779) 27,305

12
5
11

(66)
$19,498

(61)
$27,244

Amortization expense associated with our intangible assets, which has been reflected as a separate operating

expense caption within the accompanying consolidated statements of income, consisted of the following during
fiscal 2011, 2010 and 2009:

Cost of revenues
Selling, general and administrative expenses

2011

2010

2009

$2,274
5,467

(In thousands)
$ 5,415
5,486

$ 6,827
6,064

$7,741

$10,901

$12,891

In the table above, cost of revenues reflects our amortization of completed technology, and selling, general

and administrative expenses reflect our amortization of other intangible assets.

Estimated future intangible asset amortization expense associated with intangible assets existing at

September 30, 2011, was as follows (in thousands):

Fiscal year
2012
2013
2014
2015
2016
Thereafter

$ 6,127
4,126
2,407
2,407
2,407
2,024
$19,498

The following table summarizes changes to goodwill during fiscal 2011 and 2010, both in total and as

allocated to our operating segments.

Balance at September 30, 2010
Foreign currency translation adjustment

$452,248
(1,043)

$146,648
—

$67,057
(222)

$665,953
(1,265)

Balance at September 30, 2011

$451,205

$146,648

$66,835

$664,688

Applications

Scores

Tools

Total

(In thousands)

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

9. Composition of Certain Financial Statement Captions

Property and equipment:

Data processing equipment and software
Office furniture and equipment
Leasehold improvements
Less: accumulated depreciation and amortization

Other accrued liabilities:
Interest payable
Income taxes payable
Other

10. Revolving Line of Credit

2011

2010

(In thousands)

$ 155,326
9,232
19,268
(150,809)

$ 175,590
19,685
22,850
(187,150)

$ 33,017

$ 30,975

9,950
15,588
21,493

$ 10,152
3,797
14,783

$ 47,031

$ 28,732

11. Senior Notes

On May 7, 2008, we issued $275 million of Senior Notes in a private placement to a group of institutional

investors. The Senior Notes were issued in four series as follows:

Series

A
B
C
D

Amount

$41 million
$40 million
$63 million
$131 million

Interest
Rate

6.37%
6.37%
6.71%
7.18%

Maturity Date

May 7, 2013
May 7, 2015
May 7, 2015
May 7, 2018

We are required to pay the entire unpaid principal balances of each note series on its maturity date except

for Series B notes, which requires annual principal payments of $8.0 million starting on May 7, 2011 and ending
on May 7, 2015.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

On July 14, 2010, we issued $245 million of Senior Notes in a private placement to a group of institutional

investors. The Senior Notes were issued in four series as follows:

Series

E
F
G
H

Amount

$60 million
$72 million
$28 million
$85 million

Interest Rate

4.72%
5.04%
5.42%
5.59%

Maturity Date

July 14, 2016
July 14, 2017
July 14, 2019
July 14, 2020

The Senior Notes require interest payments semi-annually and also include certain restrictive covenants. As

of September 2011, we were in compliance with all financial covenants which include the maintenance of
consolidated net debt to consolidated EBITDA and a fixed charge coverage ratio The issuance of the Senior
Notes also required us to make certain covenants typical of unsecured facilities. The fair value of the $275
million Senior Notes was $305.9 million and $315.0 million at September 30, 2011 and 2010, respectively. The
fair value of the $245 million Senior Notes was $266.6 million and $258.7 million at September 30, 2011 and
2010, respectively. We determined fair value based on quoted market prices and interest rate spreads of similar
securities.

Future principal payments for the Senior Notes are as follows (in thousands):

Fiscal Year

2012
2013
2014
2015
2016
Thereafter

12. Employee Benefit Plans

Defined Contribution Plans

8,000
49,000
8,000
71,000
60,000
316,000

$512,000

We sponsor the Fair Isaac Corporation 401(k) plan for eligible employees. Under this plan, eligible
employees may contribute up to 25% of compensation, not to exceed statutory limits. We also provide a
company matching contribution. Investment in FICO common stock is not an option under this plan. Our
contributions into all 401(k) plans, including former acquired company sponsored plans that have since merged
into the Fair Isaac Corporation 401(k) plan or have been frozen, totaled $5.1 million, $5.4 million and $5.7
million during fiscal 2011, 2010 and 2009, respectively.

Employee Incentive Plans

We maintain various employee incentive plans for the benefit of eligible employees, including officers. The

awards generally are based on the achievement of certain financial and performance objectives subject to the
discretion of management. Total expenses under our employee incentive plans were $10.1 million, $5.4 million
and $5.5 million during fiscal 2011, 2010 and 2009, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

13. Restructuring Expenses

During fiscal 2011, we incurred charges totaling $12.4 million as a result of $8.2 million in severance
charges due to the elimination of 177 positions throughout the company, and $4.2 million in facilities charges
associated with vacating excess leased space primarily in Minnesota and Georgia. Cash payments for
substantially all the severance costs have been paid by the end of fiscal 2011.

During fiscal 2010, we incurred charges totaling $1.6 million as a result of $0.9 million in facilities charges

from adjusting two lease exit accruals due to a reduction in estimated sublease income and $0.7 million in
severance charges due to the elimination of 35 positions in the U.S., U.K. and India. Cash payments for the
severance costs were paid during fiscal 2011.

During fiscal 2009, we incurred net charges totaling $8.7 million consisting mainly of $5.9 million for

severance costs associated with the reduction of 255 positions throughout the company and $2.6 million
associated with vacating excess leased space. We also recognized a $1.2 million charge due to unfavorable
sublease arrangements we entered into for lease space previously vacated. In addition, we reversed $0.6 million
of accrued expenses as a result of a favorable lease termination agreement that we entered into for office space
that was previously vacated and $0.4 million of previously recognized severance costs due to favorable
adjustments. Cash payments for the severance costs were paid during fiscal 2009.

The following table summarizes our restructuring accruals associated with the above actions. The current
portion and non-current portion was recorded in other accrued current liabilities and other liabilities, respectively,
within the accompanying consolidated balance sheets.

Facilities charges
Employee separation

Less: current portion

Non-current

Facilities charges
Employee separation

Less: current portion

Non-current

Accrual at
September 30,
2008

Expense
Additions

Cash
Payments

Expense
Reversals

(In thousands)

Accrual at
September 30,
2009

$ 9,688
930

$3,876
5,860

$ (9,143) $ (650)
(375)

(6,415)

$ 3,771
—

10,618

$9,736

$(15,558) $(1,025)

3,771

(4,224)

$ 6,394

Accrual at
September 30,
2009

(1,361)

$ 2,410

Expense
Additions

Cash
Payments

Expense
Reversals

Accrual at
September 30,
2010

$ 2,836
742

3,578

(1,474)

$ 2,104

$ 3,771
—

$ 875
742

(In thousands)
$(1,810)
—

3,771

$1,617

$(1,810)

$—
—

$—

(1,361)

$ 2,410

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Accrual at
September 30,
2010

$ 2,836
742

Expense
Additions

Cash
Payments

Expense
Reversals

$ 4,226
8,165

(In thousands)
$(1,700)

$—
(7,873) —

3,578

$12,391

$(9,573)

$—

(1,474)

$ 2,104

Accrual at
September 30,
2011

$ 5,362
1,034

6,396

(3,062)

$ 3,334

Facilities charges
Employee separation

Less: current portion

Non-current

14. Income Taxes

The provision for income taxes was as follows during fiscal 2011, 2010, and 2009:

Current:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

2009

(In thousands)

$22,019
2,873
(251)

$10,190
4,406
6,490

$16,704
4,979
15,453

24,641

21,086

37,136

59
(112)
1,305

1,252

7,761
(644)
(356)

6,761

(2,317)
(2,018)
(696)

(5,031)

Total provision . . . . . . . . . . . . . . . . . . . . . . . . .

$25,893

$27,847

$32,105

The foreign provision was based on foreign pretax earnings of $20.6 million, $25.3 million and $30.8

million in fiscal 2011, 2010, and 2009, respectively. Current foreign tax expense related to foreign tax
withholdings was $5.4 million, $2.3 million and $5.0 million in fiscal year 2011, 2010 and 2009, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Deferred tax assets and liabilities at September 30, 2011 and 2010 were as follows:

Deferred tax assets:

Net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research credit carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
Capitalized R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

(In thousands)

$ 9,373
1,388
21
1,235
1,586
24,489
1,042
2,526
4,239
—
5,988

$ 10,004
1,028
134
1,260
2,176
23,531
2,345
1,611
5,890
323
11,356

51,887
(3,422)

48,465

59,658
(3,540)

56,118

(20,541)
(3,942)
(1,040)

(19,732)
(4,534)
(2,865)

(25,523)

(27,131)

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22,942

$ 28,987

Based upon the level of historical taxable income and projections for future taxable income over the periods

that the deferred tax assets will reverse, management believes it is more likely than not that we will realize the
benefits of the deferred tax asset, net of the existing valuation allowance at September 30, 2011.

For fiscal 2011, the decrease in the valuation allowance was due to the expiration of a portion of the U.S.
capital loss carryforward. The remaining valuation allowance is associated with operations where the company
has a net operating loss carryforward where realization remains uncertain.

During fiscal 2011, the change in net operating loss (NOL) was due to utilization of federal NOL. The
increase in the research credit carryforward was due to less than expected utilization on the fiscal 2010 tax return.
We acquired the following U.S. Federal and state NOL in connection with our acquisition of Braun in fiscal
2005. As of September 30, 2011, we had available U.S. federal, state and foreign NOL carryforwards of
approximately $14.6 million, $3.2 million, and $13.6 million, respectively. We also have available excess
California state research credit of approximately $1.4 million. The U.S. federal NOL carryforward will expire at
various dates beginning in fiscal 2024, if not utilized. The state NOL carryforward will begin to expire in fiscal
2021 through fiscal 2024, if not utilized. Utilization of the U.S. federal and state NOL are subject to an annual
limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 (the “Code”), as
amended, and similar state provisions.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

The reconciliation between the U.S. federal statutory income tax rate of 35% and our effective tax rate is

shown below for fiscal 2011, 2010 and 2009:

Income tax provision at U.S. federal statutory rate . . . . . . . . . . . . . .
State income taxes, net of U.S. federal benefit
. . . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic production deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

2009

$34,117
2,770
(6,045)
(2,559)
(2,494)
—
104

(In thousands)
$32,306
2,452
(4,721)
(353)
(1,204)
—
(633)

$34,150
1,383
(3,469)
(1,950)
(1,421)
(148)
3,560

Recorded income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,893

$27,847

$32,105

The decrease in our income tax provision in fiscal 2011 compared with fiscal 2010 was largely due to a one-time
discrete entry recorded in the recognition of the 2010 extension of the US Federal Research and Development
Credit and a manufacturing deduction rate increase. In addition, there was a one-time Foreign Tax Credit benefit
related to an intercompany dividend.

Unrecognized Tax Benefit for Uncertain Tax Positions

We conduct business globally and, as a result, file income tax returns in the U.S. federal jurisdiction and
various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing
authorities. With few exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax
examinations for fiscal years prior to 2008. We are currently under audit by the IRS for tax returns filed for fiscal
2008 and 2009 and by California Franchise Tax Board for fiscal 2006 through 2009. We do not anticipate any
adjustments related to those audits that will result in a material change to our financial position.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Gross unrecognized tax benefits upon adoption on October 1 . . . . .
Gross increases for tax positions in prior periods . . . . . . . . . . . . . . .
Gross decreases for tax positions in prior periods . . . . . . . . . . . . . .
Gross increases based on tax positions related to the current

year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for settlements and payments . . . . . . . . . . . . . . . . . . . . .
Decreases due to statute expiration . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

2009

$12,286
547
—

(in thousands)
$18,587
—
(7,025)

$ 26,265
3,566
(2,141)

1,000
(4,294)
—

724
—
—

1,802
(10,905)
—

Gross unrecognized tax benefits at September 30 . . . . . . . . . . . . . .

$ 9,539

$12,286

$ 18,587

We had $9.5 million of total unrecognized tax benefits as of September 30, 2011. Included in the $9.5
million of total gross unrecognized tax benefits as of September 30, 2011 was $7.9 million of tax benefits that, if
recognized, would impact the effective tax rate. The Company expects that approximately $7.1 million of
unrecognized tax benefits will settle over the next 12 months.

We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for

income taxes in our consolidated statements of income. We recognize interest earned related to income tax
matters as interest income in our consolidated statements of income. As of September 30, 2011, we have accrued
interest of $0.8 million related to the unrecognized tax benefits.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Pretax earnings of a non-U.S. subsidiary or affiliate are generally subject to U.S. taxation when repatriated.

We reinvest international earnings in our international operations and currently do not have a plan to repatriate
those earnings. Accordingly, no provision has been made for the taxes related to any future repatriation of these
earnings.

15. Stock-Based Employee Benefit Plans

Description of Stock Option and Share Plans

We maintain the 1992 Long-term Incentive Plan (the “1992 Plan”) under which we may grant stock options,
stock appreciation rights, restricted stock, restricted stock units and common stock to officers, key employees and
non-employee directors. As of September 30, 2011, 5,637,085 shares remained available for grants under this
plan. The 1992 Plan will terminate in February 2012. In November 2003, our Board of Directors approved the
adoption of the 2003 Employment Inducement Award Plan (the “2003 Plan”). The 2003 Plan reserves 2,250,000
shares of common stock solely for the granting of inducement stock options and other awards, as defined, that
meet the “employment inducement award” exception to the New York Stock Exchange’s listing standards
requiring shareholder approval of equity-based inducement incentive plans. Except for the employment
inducement award criteria, awards under the 2003 Plan will be generally consistent with those made under our
1992 Plan. As of September 30, 2011, 1,841,723 shares remained available for grants under this plan. The 2003
Plan shall remain in effect until terminated by the Board of Directors. Stock option awards typically had a
maximum term of seven years and vested ratably over four years. Stock option awards granted prior to
October 1, 2005, typically had a maximum term of ten years and vested ratably over four years.

Description of Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan (“Purchase Plan”), we are authorized to issue up to 5,062,500
shares of common stock to eligible employees. Employees may have up to 10% of their base salary withheld
through payroll deductions to purchase FICO common stock during semi-annual offering periods. The purchase
price of the stock is 85% of the fair market value on the exercise date (the last day of each offering period).
Offering period means approximately six-month periods commencing (a) on the first trading day on or after
January 1 and terminating on the last trading day in the following June, and (b) on the first trading day on or after
July 1 and terminating on the last trading day in the following December. The Purchase Plan was suspended
effective January 1, 2009 and employees cannot contribute to the Purchase Plan until the suspension is repealed.

A total of approximately 192,000 shares of our common stock with a weighted average purchase price of

$14.33 per share were issued under the Purchase Plan during fiscal 2009. At September 30, 2011, 2,707,966
shares remained available for issuance.

Share-Based Compensation Expense

We recorded $15.5 million, $17.3 million and $19.9 million of share-based compensation expense for stock

options, restricted stock units, non-vested shares and purchases under the Purchase Plan in fiscal years 2011,
2010 and 2009, respectively. The total tax benefit related to this share-based compensation expense was $5.8
million, $6.6 million and $7.5 million in fiscal 2011, 2010 and 2009, respectively. As of September 30, 2011,
there was $26.1 million of total unrecognized compensation cost related to non-vested share-based compensation
arrangements granted under all equity compensation plans. Total unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average
period of 2.5 years.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Determining Fair Value

We estimate the fair value of stock options granted using the Black-Scholes option valuation model and we

amortize the fair value on a straight-line basis over the vesting period. We used the following assumptions to
estimate the fair value of our stock options during fiscal 2011, 2010 and 2009:

2011

2010

2009

Stock Options:

Average expected term (years)
Expected volatility (range)
Weighted average volatility
Risk-free interest rate (range)
Average expected dividend yield
Expected dividend yield (range)

4.27

4.31

40%

4.22
39-41% 35-42% 45-48%
47%
0.6-2.1% 0.2-3.1% 1.1-2.3%
0.4%
0.4%

0.3%
0.4%
0.3% 0.4-0.5%

41%

The fair value of restricted stock units and non-vested shares granted is the fair value of our common stock
on the date of grant adjusted for the expected dividend yield. We amortize the fair value on a straight-line basis
over the vesting period.

Expected Volatility. We estimate the volatility of our common stock at the date of grant based on a

combination of the implied volatility of publicly traded options on our common stock and our historical volatility
rate. Our decision to use implied volatility was based upon the availability of actively traded options on our
common stock and our assessment that implied volatility is more representative of future stock price trends than
historical volatility.

Expected Term. The expected term represents the period that our stock options are expected to be

outstanding. We estimate the expected term based on historical experience of similar awards, giving
consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future
employee behavior.

Dividends. The dividend yield assumption is based on historical dividend payouts.

Risk-Free Interest Rate. The risk-free interest rate assumption is based on observed interest rates appropriate

for the term of our employee options.

Forfeitures. We use historical data to estimate pre-vesting option forfeitures and record share-based

compensation expense only for those awards that are expected to vest.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Stock-Based Activity

The following table summarizes option activity during fiscal 2011:

Outstanding at October 1, 2010
Granted
Exercised
Forfeited
Expired

Outstanding at September 30, 2011

Options exercisable at September 30, 2011

Non-vested options expected to vest at September 30, 2011

Weighted-
average
Exercise
Price

Weighted-
average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

(In years)

(In thousands)

$30.25
24.24
19.49
20.94
37.30

$29.94

$33.32

$21.67

3.71

2.86

5.81

$4,661

$2,118

$1,699

(In thousands)
6,573
1,078
(554)
(475)
(810)

5,812

4,035

1,195

The weighted average fair value of options granted during fiscal 2011, 2010 and 2009 were $8.02, $7.58 and
$5.40, respectively. The aggregate intrinsic value of options outstanding at September 30, 2011 was calculated as
the difference between the exercise price of the underlying options and the market price of our common stock for
the 1.0 million shares that had exercise prices that were lower than the $21.83 market price of our common stock
at September 30, 2011. The total intrinsic value of options exercised during fiscal 2011, 2010 and 2009 was $4.4
million, $2.7 million and $0.8 million, respectively, determined as of the date of exercise.

The following table summarizes restricted stock unit activity during fiscal 2011:

Outstanding at October 1, 2010
Granted
Released
Forfeited

Outstanding at September 30, 2011

(In thousands)
1,211
590
(366)
(330)

1,105

Weighted-
average
Price

$22.78
24.67
24.49
23.04

23.14

The weighted average fair value of restricted stock units and non-vested shares granted during fiscal 2011,

2010 and 2009 were $24.38, $22.05 and $17.80, respectively. The total intrinsic value of restricted stock units
and non-vested shares that vested during fiscal 2011, 2010 and 2009 was $9.7 million, $7.7 million and $4.1
million, respectively, determined as of the date of exercise.

We received $7.6 million in cash from stock option exercises and the issuance of stock under the Purchase

Plan in fiscal 2011. The actual tax benefit that we realized for the tax deductions from option exercises totaled
$1.7 million for that period.

Due primarily to our ongoing program of repurchasing shares on the open market; we had approximately

$51.8 million treasury shares at September 30, 2011. We satisfy stock option exercises, Purchase Plan issuances
and vesting of restricted stock units from this pool of treasury shares.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

16. Earnings Per Share

The following reconciles the numerators and denominators of basic and diluted earnings per share (“EPS”)

from continuing operations during fiscal 2011, 2010 and 2009:

2011

2010

2009

Numerator for basic earnings per share: income from continuing operations

(In thousands, except per share
data)
$64,457

$65,465

$71,562

Numerator for diluted earnings per share from continuing operations

$71,562

$64,457

$65,465

Denominator—share:

Basic weighted-average shares
Effect of dilutive securities

Diluted weighted-average shares

Earnings per share from continuing operations:

Basic

Diluted

39,359
629

44,903
405

48,658
118

39,988

45,308

48,776

1.82

1.79

1.44

1.42

1.35

1.34

The computation of diluted EPS for fiscal 2011, 2010 and 2009 excludes options to purchase approximately

3,598,000, 4,939,000 and 7,189,000 shares of common stock, respectively, because the options’ exercise prices
exceeded the average market price of our common stock in these fiscal years and their inclusion would be
antidilutive.

17. Related Party Transactions

We have a $10 million investment in convertible preferred stock in a private company. The company is
developing a range of products focused on revenue cycle activities for hospitals and healthcare providers. Related
party revenues for the year ended September 30, 2011 included $0.1 million in transactional revenue and $0.3
million in professional services revenue. Related party revenues for the year ended September 30, 2010 included
$0.1 million in transactional revenue and $0.3 million in professional services revenue. Related party revenues
for the year ended September 30, 2009 included $0.3 million in maintenance revenue and $0.3 million in
professional services revenue. The accounts receivable balance from this company was not significant as of
September 30, 2011 and 2010.

18. Segment Information

We are organized into the following three reportable segments to align with internal management of our

worldwide business operations based on product offerings.

• Applications. Our Applications products are pre-configured Decision Management applications and
associated professional services, designed for a specific type of business problem or process, such as
marketing, account origination, customer management, fraud and insurance claims management.

•

Scores. This segment includes our business-to-business scoring solutions, our myFICO® solutions for
consumers and associated professional services. Our scoring solutions give our clients access to
analytics that can be easily integrated into their transaction streams and decision-making processes.
Our scoring solutions are distributed through major credit reporting agencies, as well as services
through which we provide our scores to clients directly.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

•

Tools. The Tools segment is composed of software tools and associated professional services that
clients can use to create their own custom Decision Management applications.

Our Chief Executive Officer evaluates segment financial performance based on segment revenues and segment
operating income. Segment operating expenses consist of direct and indirect costs principally related to
personnel, facilities, consulting, travel and depreciation. Indirect costs are allocated to the segments generally
based on relative segment revenues, fixed rates established by management based upon estimated expense
contribution levels and other assumptions that management considers reasonable. We do not allocate share-based
compensation expense, restructuring expense, amortization expense, various corporate charges and certain other
income and expense measures to our segments. These income and expense items are not allocated because they
are not considered in evaluating the segment’s operating performance. Our Chief Executive Officer does not
evaluate the financial performance of each segment based on its respective assets or capital expenditures; rather,
depreciation amounts are allocated to the segments from their internal cost centers as described above.

The following tables summarize segment information for fiscal 2011, 2010 and 2009:

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

2011

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 258,736
100,921
23,371

$164,918
2,102
1,547

$ 29,776
12,918
25,394

$ — $ 453,430
115,941
50,312

—
—

383,028
(276,467)

168,567
(55,169)

68,088
(54,398)

—
(70,680)

619,683
(456,714)

Segment operating income

$ 106,561

$113,398

$ 13,690

$(70,680)

162,969

Unallocated share-based compensation expense
Unallocated amortization expense
Unallocated restructuring expense

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other expense, net

Income before income taxes

(15,500)
(7,741)
(12,391)

127,337
2,192
(32,364)
290

$ 97,455

Depreciation expense

$ 12,784

1,007

$ 1,667

998

$ 16,456

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

2010

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 257,275
86,097
23,886

$170,141
2,042
156

$ 28,071
14,739
23,236

$ 455,487
102,878
47,278

367,258
(273,983)

172,339
(61,688)

66,046
(57,634)

—
(69,166)

605,643
(462,471)

Segment operating income

$ 93,275

$110,651

$ 8,412

$(69,166)

143,172

Unallocated share-based compensation expense
Unallocated amortization expense
Unallocated restructuring expense

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other expense, net

Income before income taxes

(17,305)
(10,901)
(1,617)

113,349
1,688
(24,124)
1,391

$ 92,304

Depreciation expense

$ 14,998

1,339

$ 2,147

$ 1,533

$ 20,017

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

2009

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 274,123
92,000
17,007

$178,048
1,527
—

$ 26,531
18,886
22,613

$ — $ 478,702
112,413
39,620

—
—

383,130
(270,541)

179,575
(57,373)

68,030
(60,676)

—
(80,868)

630,735
(469,458)

Segment operating income

$ 112,589

$122,202

$ 7,354

$(80,868)

161,277

Unallocated share-based compensation expense
Unallocated amortization expense
Unallocated restructuring expense
Unallocated loss on sale of product line assets

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other income, net

Income before income taxes

Depreciation expense

(19,935)
(12,891)
(8,711)
(2,993)

116,747
4,717
(25,481)
1,587

$ 97,570

$ 19,569

1,827

$ 2,248

$ 1,884

$ 25,528

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Our revenues and percentage of revenues by reportable market segments were as follows for fiscal 2011,
2010 and 2009, the majority of which were derived from the sale of products and services within the banking and
insurance industries:

Applications
Scores
Tools

2011

2010

2009

(Dollars in thousands)

$383,028
168,567
68,088

62% $367,258
27% 172,339
66,046
11%

61% $383,130
28% 179,575
68,030
11%

61%
28%
11%

$619,683

100% $605,643

100% $630,735

100%

Within our Applications segment our fraud solutions accounted for 23%, 20% and 20% of total revenues in

each of fiscal 2011, 2010 and 2009, respectively, our customer management solutions accounted for 13%, 14%
and 15% of total revenues, in each of these periods, respectively, and our marketing solutions accounted for 10%,
11% and 9% for each of these periods, respectively.

Our revenues and percentage of revenues on a geographical basis are summarized below for fiscal 2011,
2010 and 2009. No individual country outside of the United States accounted for 10% or more of revenue in any
of these years.

United States
Other International

2011

2010

2009

(Dollars in thousands)

$389,676
230,007

63% $396,036
37% 209,607

65% $430,958
35% 199,777

68%
32%

$619,683

100% $605,643

100% $630,735

100%

During fiscal 2011, 2010 and 2009, no individual customer accounted for 10% or more of our total

revenues; however, we derive a substantial portion of our revenues from our contracts with the three major credit
reporting agencies, TransUnion, Equifax and Experian. Revenues collectively generated by agreements with
these customers accounted for 18%, 20% and 19% of our total revenues in fiscal 2011, 2010 and 2009,
respectively. At September 30, 2011 and 2010, no individual customer accounted for 10% or more of total
consolidated receivables.

Our property and equipment, net, on a geographical basis are summarized below at September 30, 2011 and
2010. At September 30, 2011 and 2010, no individual country outside of the United States accounted for 10% or
more of total consolidated net property and equipment.

2011

2010

United States
International

$29,899
3,118

(Dollars in thousands)
91% $27,452
3,523

89%
11%

$33,017

100% $30,975

100%

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

19. Commitments

Minimum future commitments under non-cancelable operating leases and other obligations were as follows

at September 30, 2011:

Fiscal Year

2012
2013
2014
2015
2016
Thereafter

Future
Minimum
Lease
Commitments

Other
Commitments

(In thousands)

$ 22,669
19,615
18,237
15,425
13,101
30,242

$119,289

$ 5,100
4,400
2,600
—
—
—

$12,100

Lease Commitments

The above amounts have been reduced by contractual sublease commitments totaling $1.1 million, $1.1
million, $0.7 million in fiscal 2012 through 2014, respectively. We occupy the majority of our facilities under
non-cancelable operating leases with lease terms in excess of one year. Such facility leases generally provide for
annual increases based upon the Consumer Price Index or fixed increments. Rent expense under operating leases,
including month-to-month leases, totaled $21.1 million, $22.6 million and $24.4 million during fiscal 2011, 2010
and 2009, respectively.

Other Commitments

In the ordinary course of business, we enter into contractual purchase obligations and other agreements that

are legally binding and specify certain minimum payment terms.

We are also a party to a management agreement with 23 of our executives providing for certain payments

and other benefits in the event of a qualified change in control of FICO, coupled with a termination of the officer
during the following year.

20. Contingencies

We are in disputes with certain customers regarding amounts owed in connection with the sale of certain of
our products and services. We also have had claims asserted by former employees relating to compensation and
other employment matters. We are also involved in various other claims and legal actions arising in the ordinary
course of business. We believe that none of these aforementioned claims or actions will result in a material
adverse impact to our consolidated results of operations, liquidity or financial condition. However, the amount or
range of any potential liabilities associated with these claims and actions, if any, cannot be determined with
certainty. Set forth below are additional details concerning certain ongoing litigation.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

Braun Consulting, Inc.

Braun (which we acquired in November 2004) was a defendant in a lawsuit filed on November 26, 2001, in

the United States District Court for the Southern District of New York (Case No. 01 CV 10629) that alleges
violations of federal securities laws in connection with Braun’s initial public offering in August 1999. This
lawsuit is among approximately 300 coordinated putative class actions against certain issuers, their officers and
directors, and underwriters with respect to such issuers’ initial public offerings.

On April 2, 2009, a stipulation and agreement of settlement between the plaintiffs, issuer defendants and
underwriter defendants was submitted to the United States District Court for the Southern District of New York
for preliminary approval. This settlement requires no financial contribution from us. The Court granted the
plaintiffs’ motion for preliminary approval and preliminarily certified the settlement classes on June 10, 2009.
The settlement “fairness” hearing was held on September 10, 2009. The Court granted the plaintiffs’ motion for
final approval of the settlement and certified the settlement classes on October 5, 2009. The Court determined
that the settlement is fair to the class members, approved the settlement and dismissed, with prejudice, the case
against the Company and its individual defendants. Appeals of the opinion granting final approval were filed, and
the appeals filed by one objector have been remanded to the district court to determine standing to appeal. Due to
the inherent uncertainties of litigation and because the settlement remains subject to appeal, the ultimate outcome
of the matter is uncertain.

21. Guarantees

In the ordinary course of business, we are not subject to potential obligations under guarantees, except for
standard indemnification and warranty provisions that are contained within many of our customer license and
service agreements and certain supplier agreements, including underwriter agreements, as well as standard
indemnification agreements that we have executed with certain of our officers and directors, and give rise only to
the disclosure in the consolidated financial statements. In addition, we continue to monitor the conditions that are
subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and
would recognize any such losses under the guarantees and indemnifications when those losses are estimable.

Indemnification and warranty provisions contained within our customer license and service agreements and

certain supplier agreements are generally consistent with those prevalent in our industry. The duration of our
product warranties generally does not exceed 90 days following delivery of our products. We have not incurred
significant obligations under customer indemnification or warranty provisions historically and do not expect to
incur significant obligations in the future. Accordingly, we do not maintain accruals for potential customer
indemnification or warranty-related obligations. The indemnification agreements that we have executed with
certain of our officers and directors would require us to indemnify such officers and directors in certain instances.
We have not incurred obligations under these indemnification agreements historically and do not expect to incur
significant obligations in the future. Accordingly, we do not maintain accruals for potential officer or director
indemnification obligations. The maximum potential amount of future payments that we could be required to
make under the indemnification provisions in our customer license and service agreements, and officer and
director agreements is unlimited.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2011, 2010 and 2009

22. Supplementary Financial Data (Unaudited)

The following table presents selected unaudited consolidated financial results for each of the eight quarters
in the two-year period ended September 30, 2011. In the opinion of management, this unaudited information has
been prepared on the same basis as the audited information and includes all adjustments (consisting of only
normal recurring adjustments, except as noted below) necessary for a fair statement of the consolidated financial
information for the period presented.

Revenues
Cost of revenues (2)
Gross profit

Net income (3)

Earnings per share (1):

Basic

Diluted

Shares used in computing earnings per share:

Basic
Diluted

Revenues
Cost of revenues (2)
Gross profit

Net income (3)

Earnings per share (1):

Basic

Diluted

Shares used in computing earnings per share:

Basic
Diluted

December 31, 2010 March 31, 2011

June 30, 2011

September 30, 2011

$155,931
45,803
110,128

16,009

0.40

39,923
40,439

(In thousands, except per share data)

$152,824
48,506
104,318

$150,679
43,398
107,281

7,745

23,189

0.19

0.59

0.58

$160,249
48,763
111,486

24,619

0.65

0.64

40,010
40,618

39,451
40,241

38,088
38,687

December 31, 2009 March 31, 2010

June 30, 2010

September 30, 2010

$151,496
42,519
108,977

17,686

0.37

47,606
47,915

(In thousands, except per share data)

$143,720
44,641
99,079

$155,329
45,316
110,013

12,992

17,938

0.28

0.40

$155,098
48,456
106,642

15,841

0.39

0.38

46,447
46,870

44,446
44,885

41,141
41,590

(1) Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the

quarterly per share amounts may not equal the totals for the respective years.

(2) Cost of revenues excludes amortization expense for the quarters ended December 31, 2009, March 31,
2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011 and
September 30, 2011 of $1.7 million, $1.7 million, $1.3 million, $0.7 million, $0.6 million, $0.6 million, $0.6
million, and $0.5 million respectively.

(3) Net income includes restructuring expenses (income) for the quarters ended and September 30,

2010, December 31, 2010 and March 31, 2011 of $1.6 million, $0.9 million and $11.5 million, respectively.

23. Subsequent Events

In November 2011, our Board of Directors approved a common stock repurchase program that allows us to

purchase shares of our common stock up to an aggregate cost of $150.0 million, which replaced a similar
program approved in June 2010.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

An evaluation was carried out under the supervision and with the participation of FICO’s management,
including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the
design and operation of FICO’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this
annual report. Based on that evaluation, the CEO and CFO have concluded that FICO’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by FICO in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms. In addition, the disclosure controls and procedures ensure that information
required to be disclosed is accumulated and communicated to management, including the chief executive officer
and chief financial officer, allowing timely decisions regarding required disclosure.

No change in FICO’s internal control over financial reporting was identified in connection with the

evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended September 30,
2011, that has materially affected, or is reasonably likely to materially affect, FICO’s internal control over
financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the
participation of management, including our CEO and CFO, we conducted an evaluation of the effectiveness of
our internal controls over financial reporting based on the framework in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this
evaluation management has concluded that our internal control over financial reporting was effective as of
September 30, 2011.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated

financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of our
internal control over financial reporting as of September 30, 2011, as stated in their attestation report included in
Part II, Item 8 of this Annual Report on Form 10-K.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The required information regarding our Directors is incorporated by reference from the information under

the caption “Director Nominees” in our definitive proxy statement for the Annual Meeting of Stockholders to be
held on February 7, 2012.

Our current executive officers are as follows:

Name
Mark N. Greene . . . . . . . . . . February 2007-present, Chief Executive Officer and member of the Board

Positions Held

Age
57

of Directors of the Company. 2006-2007, Vice President, Financial
Services—Sales and Distribution at IBM Corporation (“IBM”),
2001-2006, General Manager, Global Banking Industry—Sales and
Distribution at IBM. 2000-2001, Vice President Financial Services
Strategy and Solutions—Sales and Distribution at IBM. 1998-2000, Vice
President, SecureWay—Software Group at IBM. 1995-1998, Vice
President, Electronic Commerce—Software Group at IBM. 1993-1994,
Vice President and Practice Area Leader at Technology Solutions
Company. 1989-1992, Senior Vice President, Trading Products and
Consulting at Berkley Investment Technologies. 1987-1989, Director,
Fixed Income Products at Citicorp. 1985-1986, Assistant Director,
Research at the Federal Reserve Board. 1984-1985, Chief—Automation
and Research Computing at the Federal Reserve Board. 1982-1984,
Economist—Special Studies at the Federal Reserve Board.

Michael J. Pung . . . . . . . . . . . November 2010-present, Senior Vice President and Chief Financial Officer
of the Company. August 2004-November 2010, Vice President, Finance of
the Company. 2000-2004, Vice President and Controller, Hubbard Media
Group, LLC. 1999-2000, Controller, Capella Education, Inc. 1998-1999,
Controller, U.S. Satellite Broadcasting, Inc. 1992-1998, various financial
management positions with Deluxe Corporation. 1985-1992, various audit
positions, including audit manager, at Deloitte & Touche LLP.

Deborah Kerr

. . . . . . . . . . . . February 2009-present, Executive Vice Present, Chief Product and
Technology Officer of the Company. 2007-2009, Chief Technology
Officer, at Hewlett-Packard Enterprise Services (HP Services and EDS).
2005-2007, Vice President, Business Technology Optimization Products at
Hewlett-Packard Software. 1998-2005, various positions and most recently
Senior Vice President, Product Delivery at Peregrine Systems, Inc. (which
filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in September of 2002). 1988-1998, various leadership
positions at NASA/Jet Propulsion Laboratory (JPL), including Mission
Operations Manager, Space Very Long Baseline Interferometry.

Charles L. Ill . . . . . . . . . . . . . February 2010-Present, Executive Vice President, Sales, Services and

Marketing of the Company. 2006-2008, Senior Vice President, Global Sales
at Avaya, Inc. (“Avaya”), 2005-2006, Vice President, Software at Avaya.
2005, Vice President, Worldwide Sales Operations and Channels at
Avaya. 2003-2004, Vice President, Worldwide Software Sales at BEA
Systems, Inc. 2002-2003, Vice President, Worldwide Software Sales at IBM
Corporation (“IBM”). 2000-2002, Vice President, Software Sales and
Marketing, Americas at IBM. 1999-2000, Vice President, Worldwide
Software Marketing at IBM. 1998-1999, Vice President, EMEA Software
Sales and Marketing at IBM. 1997-1998, General Manager, APAC Software
Marketing and Channels at IBM. 1996-1997, Director, Asia Pacific Software
Operations at IBM. 1994-1996, PC Software Product Mgmt Director at IBM.
1993-1994, PC Company M&S PS Brand Manager at IBM. 1991-1992,
Manager of the Opportunity Project Office at IBM. 1989-1991, Executive
Assistant M&S Director, PC and Software Marketing at IBM. 1987-1989,
Customer Executive Instructor, Adv. Business Institute at IBM. 1984-1987,
Business Unit Executive at IBM. 1983-1984, Executive Assistant to Director
of Finance and Insurance at IBM.

Mark R. Scadina . . . . . . . . . . February 2009-present, Executive Vice President and General Counsel and

Corporate Secretary of the Company. June 2007-February 2009, Senior
Vice President and General Counsel and Corporate Secretary of the
Company. 2003-2007, various senior positions including Executive Vice
President, General Counsel and Corporate Secretary, Liberate
Technologies, Inc. 1999-2003, various leadership positions including Vice
President and General Counsel, Intertrust Technologies Corporation.
1994-1999, Associate, Pennie and Edmonds LLP.

Richard S. Deal . . . . . . . . . . . August 2007-present, Senior Vice President, Chief Human Resources

Officer of the Company. January 2001-July 2007, Vice President, Human
Resources of the Company. 1998-2001, Vice President, Human Resources,
Arcadia Financial, Ltd. 1993-1998, managed broad range of human
resources corporate and line consulting functions with U.S. Bancorp.

Andrew N. Jennings . . . . . . . February 2011-present, Senior Vice President, Chief Analytics Officer of
the Company. October 2007-February 2011, Senior Vice President, Chief
Research Officer of the Company. May 2007-September 2007, Vice
President, Analytic Research and Development of the Company. May
2006-May 2007, Vice President, EDM Applications of the Company. 2001-
2006, Vice President Global Account Management Solutions of the
Company. 2000-2001, Senior Vice President International Sales of the
Company. 1999-2000, Senior Vice President, International Operations of
the Company. 1996-1999, Vice President European Operations of the
Company. 1994-1996, Director, United Kingdom Operations of the
Company.

The required information regarding compliance with Section 16(a) of the Securities Exchange Act is

incorporated by reference from the information under the caption “Section 16(a) Beneficial Ownership Reporting
Compliance” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on February 7,
2012.

FICO has adopted a Code of Ethics for Senior Financial Management that applies to the Company’s Chief

Executive Officer, Chief Financial Officer, Controller and other employees performing similar functions who
have been identified by the Chief Executive Officer. We have posted the Code of Ethics on our web site located
at www.fico.com. FICO intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an
amendment to, or a waiver from, this Code of Ethics by posting such information on its web site. FICO also has a
Code of Conduct and Business Ethics applicable to all directors, officers and employees, which is also available
at the web site cited above.

The required information regarding the Company’s audit committee is incorporated by reference from the
information under the caption “Board Meetings, Committees and Attendance” in our definitive proxy statement
for the Annual Meeting of Shareholders to be held on February 7, 2012.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference from the information under the captions
“Director Compensation for 2011,” “Executive Compensation,” and “Compensation Committee Interlocks and
Insider Participation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on
February 7, 2012.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this Item is incorporated by reference from the information under the caption

“Security Ownership Of Certain Beneficial Owners and Management” and “Executive Compensation” in our
definitive proxy statement for the Annual Meeting of Stockholders to be held on February 7, 2012.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference from the information under the caption
“Certain Relationships and Related Transactions” in our definitive proxy statement for the Annual Meeting of
Stockholders to be held on February 7, 2012.

Item 14. Principal Accountant Fees and Services

The information required by this Item is incorporated by reference from the information under the caption

“Audit and Non-Audit Fees” in our definitive proxy statement for the Annual Meeting of Stockholders to be held
on February 7, 2012.

Item 15. Exhibits and Financial Statement Schedules

1. Consolidated Financial Statements:

PART IV

Reference Page
Form 10-K

Reports of independent registered public accounting firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheets as of September 30, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of income for the years ended September 30, 2011, 2010 and 2009 . . . . .
Consolidated statements of stockholders’ equity and comprehensive income for the years ended

September 30, 2011, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of cash flows for the years ended September 30, 2011, 2010 and 2009 . .
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54
56
57

58
59
60

2. Financial Statement Schedules

All financial statement schedules are omitted as the required information is not applicable or as the

information required is included in the consolidated financial statements and related notes.

3. Exhibits:

Exhibit
Number

Description

3.1

3.2

4.1

4.2

4.3

10.1

10.2

Bylaws of Fair Isaac Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s
Form 10-Q filed on February 8, 2010.)

Composite Restated Certificate of Incorporation of Fair Isaac Corporation. (Incorporated by
reference to Exhibit 3.2 to the Company’s Form 10-Q filed on February 8, 2010.)

Rights Agreement dated as of August 8, 2001, between Fair, Isaac and Company, Incorporated and
Mellon Investor Services LLC, which includes as Exhibit B the form of Rights Certificate and as
Exhibit C the Summary of Rights. (Incorporated by reference to Exhibit 4.1 of the Company’s
Registration Statement on Form 8-A relating to the Series A Participating Preferred Stock Purchase
Rights filed August 10, 2001.)

Amendment Number 1, dated May 21, 2009, to the Rights Agreement between Fair, Isaac and
Company, Incorporated and Mellon Investor Services LLC. (Incorporated by reference to Exhibit 4.1
to the Company’s Form 8-K filed on May 26, 2009.)

Form of Rights Certificate. (Included in Exhibit 4.1.)

Amended and Restated Credit Agreement among Fair Isaac, Wells Fargo Bank, N.A., U.S. Bank
N.A., Bank of America, N.A., JPMorgan Chase Bank, N.A. and Deutsche Bank AG, NY Branch,
dated July 23, 2007 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with
the SEC on July 25, 2007).

Form of Note Purchase Agreement, dated May 7, 2008, between Fair Isaac Corporation and the
Purchasers listed on Schedule A thereto, which includes as Exhibits 1-4 the form of Senior Note for
each of Series A, B, C and D (excluding certain schedules and exhibits thereto, which Fair Isaac
Corporation agrees to furnish to the Securities and Exchange Commission upon request).
(Incorporated by reference to Exhibit 10.1 to Fair Isaac’s Form 10-Q for the fiscal quarter ended
June 30, 2008.)

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

Form of Note Purchase Agreement, dated July 14, 2010, between Fair Isaac Corporation and the
Purchasers listed on Schedule A thereto, which includes as Exhibits 1-4 the form of Senior Note for
each of Series E, F, G and H (excluding certain schedules and exhibits thereto, which Fair Isaac
Corporation agrees to furnish to the Securities and Exchange Commission upon request).
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 19, 2010.)

Voting Agreement dated May 21, 2009 by and between Fair Isaac Corporation and Southeastern Asset
Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on
May 26, 2009.)

Amended and Restated Agreement dated December 4, 2008, between the Company and the Sandell
Group. (Incorporated by reference to Exhibit 10.1 to Fair Isaac’s Form 8-K filed on December 9,
2008.)

Amendment Number 1, dated July 29, 2009, to the Amended and Restated Agreement between the
Company and the Sandell Group. (Incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K filed on July 30, 2009.)

Fair Isaac Corporation 1992 Long-Term Incentive Plan, as amended effective May 4, 2010.
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 6, 2010.) (1)

Form of Non-Qualified Stock Option Agreement under 1992 Long-term Incentive Plan, as amended
effective July 18, 2007. (Incorporated by reference to Exhibit 10.42 to Fair Isaac’s Form 10-Q for the
fiscal quarter ended December 31, 2007.) (1)

Form of Nonstatutory Stock Option Agreement for Initial Grants to Non-Employee Directors under
1992 Long-term Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-
Q for the fiscal quarter ended December 31, 2008.) (1)

Form of Restricted Stock Unit Agreement under 1992 Long-term Incentive Plan, as amended effective
July 18, 2007. (Incorporated by reference to Exhibit 10.49 to Fair Isaac’s Form 10-Q for the fiscal
quarter ended December 31, 2007.) (1)

Form of Restricted Stock Agreement under 1992 Long-Term Incentive Plan. (Incorporated by
reference to Exhibit 10.43 to the Company’s Annual Report of Form 10-K for the period ended
September 30, 2006.) (1)

HNC’s 1995 Directors Stock Option Plan, as amended through April 30, 2000. (Incorporated by
reference to Exhibit 4.05 to HNC’s Form S-8 Registration Statement, File No. 333-40344, filed
June 28, 2000.) (1)

HNC’s Form of 1995 Directors Stock Option Plan Option Agreement and Stock Option Exercise
Agreement. (Incorporated by reference to Exhibit 10.01 to HNC’s Form 10-Q for the quarter ended
June 30, 1999.) (1)

Fair, Isaac Supplemental Retirement and Savings Plan, as amended and restated effective January 1,
2009. (Incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the fiscal year
ended September 30, 2008.) (1)

Stock Option Agreement with A. George Battle entered into as of February 5, 2002. (Incorporated by
reference to Exhibit 10.58 to the Company’s report on Form 10-K for the fiscal year ended September
30, 2002.) (1)

10.16* Management Incentive Plan, Fiscal 2012. (1)

10.17

Form of Indemnity Agreement entered into by the Company with the Company’s directors and
executive officers. (Incorporated by reference to Exhibit 10.49 to the Company’s report on Form 10-K
for the fiscal year ended September 30, 2002.) (1)

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

Form of Management Agreement entered into with each of the Company’s executive officers (except
Dr. Mark N. Greene, Mark R. Scadina and Laurent F. Pacalin). (Incorporated by reference to
Exhibit 10.18 of the Company’s Form 10-K for the fiscal year ended September 30, 2008.) (1)

Management Agreement entered into with Dr. Mark N. Greene. (Incorporated by reference to
Exhibit 10.51 to the Company’s Form 10-K for the fiscal year ended September 30, 2008.) (1)

Management Agreement entered into with Mark R. Scadina. (Incorporated by reference to
Exhibit 10.55 to the Company’s Form 10-K for the fiscal year ended September 30, 2008.) (1)

Management Agreement entered into with Laurent F. Pacalin. (Incorporated by reference to
Exhibit 10.56 to the Company’s Form 10-K for the fiscal year ended September 30, 2008.) (1)

Employment Agreement dated February 13, 2007, by and between Fair Isaac and Dr. Mark Greene
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with
the SEC on February 14, 2007). (1)

Letter Agreement entered into on June 30, 2008 by and between Fair Isaac Corporation and
Dr. Mark N. Greene. (Incorporated by reference to Exhibit 10.59 to the Company’s Form 10-K for the
fiscal year ended September 30, 2008.) (1)

Offer Letter entered into on May 29, 2007 with Mark R. Scadina. (Incorporated by reference to
Exhibit 10.61 to the Company’s Form 10-K for the fiscal year ended September 30, 2008.) (1)

Letter Agreement dated January 12, 2009 by and between the Company and Deborah Kerr. (1)
(Incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K for the fiscal year ended
September 30, 2010.)

Letter Agreement dated January 15, 2010 by and between the Company and Charles Ill. (Incorporated
by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 20, 2010.) (1)

Letter Agreement dated July 28, 2010 by and between the Company and Jordan Graham. (1)
(Incorporated by reference to Exhibit 10.27 to the Company’s Form 10-K for the fiscal year ended
September 30, 2010.)

Letter Agreement entered into on March 11, 2009 by and between Fair Isaac Corporation and Thomas
Bradley. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 16,
2009.) (1)

Letter providing terms of offer of employment by the Company to Michael H. Campbell dated
April 15, 2005. (Incorporated by reference to Exhibit 10.01 to Fair Isaac’s Form 8-K filed on April 21,
2005.) (1)

Letter Agreement entered into on October 18, 2007 by and between Fair Isaac Corporation and
Michael H. Campbell (Incorporated by reference to Exhibit 10 to the Company’s Form 8-K filed with
the SEC on October 22, 2007). (1)

Letter Agreement entered into on June 30, 2008 by and between Fair Isaac Corporation and
Michael H. Campbell. (Incorporated by reference to Exhibit 10.58 to the Company’s Form 10-K for
the fiscal year ended September 30, 2008.) (1)

Transition Agreement dated November 16, 2009 by and between Fair Isaac Corporation and
Michael H. Campbell. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on
November 17, 2009.) (1)

10.33

2003 Employment Inducement Award Plan as amended effective May 15, 2005. (Incorporated by
reference to Exhibit 10.2 to Fair Isaac’s Form 10-Q for the fiscal quarter ended June 30, 2005.) (1)

10.34

10.35

12.1*

21.1*

23.1*

31.1*

31.2*

32.1*

32.2*

Transition Agreement dated November 14, 2010 by and between the Company and Thomas A.
Bradley. (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K
filed with the SEC on November 19, 2010.) (1)

Credit Agreement dated September 27, 2011 among the Company, Wells Fargo Securities, LLC,
U.S. Bank National Association, and Wells Fargo Bank, National Association. (Incorporated by
reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the SEC on
September 30, 2011.)

Computations of ratios of earnings to fixed charges.

List of Company’s subsidiaries.

Consent of Deloitte & Touche LLP, independent registered public accounting firm.

Rule 13a-14(a)/15d-14(a) Certifications of CEO.

Rule 13a-14(a)/15d-14(a) Certifications of CFO.

Section 1350 Certification of CEO.

Section 1350 Certification of CFO.

101.INS** XBRL Instance Document.

101.SCH** XBRL Taxonomy Extension Schema Document.

101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF** XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB** XBRL Taxonomy Extension Label Linkbase Document.

101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Management contract or compensatory plan or arrangement.
*
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not

Filed herewith.

filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of
1934, as amended, and otherwise are not subject to liability under those sections

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the

Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

FAIR ISAAC CORPORATION

/S/ MICHAEL J. PUNG

Michael J. Pung
Senior Vice President
and Chief Financial Officer

DATE: November 18, 2011

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below

constitutes and appoints Michael J. Pung his attorney-in-fact, with full power of substitution, for him in any and
all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/S/ DR. MARK N. GREENE

Dr. Mark N. Greene

/S/ MICHAEL J. PUNG

Michael J. Pung

/S/ A. GEORGE BATTLE
A. George Battle

/S/ NICHOLAS F. GRAZIANO
Nicholas F. Graziano

/S/ ALEX W. HART
Alex W. Hart

/S/ JAMES D. KIRSNER

James D. Kirsner

/S/ WILLIAM J. LANSING

William J. Lansing

Chief Executive Officer
(Principal Executive Officer
and Director)

Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

/S/ RAHUL N. MERCHANT

Rahul N. Merchant

/S/ DAVID A. REY

David A. Rey

/S/ MARGARET L. TAYLOR

Margaret L. Taylor

/S/ DUANE E. WHITE

Duane E. White

Director

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

Director

November 18, 2011

100