Fair Isaac Corporation Annual Report 2013

FY2013 Annual Report · Fair Isaac Corporation

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FAIR ISAAC CORPORATION

2013 ANNUAL REPORT

FY2013 CEO Letter

Shareholders:

Fiscal 2013 was a transition year for FICO. Revenue grew 10% to $743 million, versus $676 million in
2012. Net income was $90 million, versus $92 million in fiscal 2012, and EPS was $2.48 versus $2.55
in the previous year. We had temporary margin compression resulting from acquisitions.

I am pleased to report that we made significant, measureable progress across all areas of our business
relative to our long-term growth initiatives.

A year ago, we identified three areas of investment. First, we wanted to diversify beyond our strong
foundation in banking, where analytics have already generated great value for our clients. Second, we
aimed to expand our SaaS offerings, with cloud-enabled FICO applications, analytics, and solutions.
And third, we sought to help our clients leverage Big Data to make better decisions and change the
way they do business.

We made great strides in all three areas over the past year. We successfully integrated the IP and talent
we gained when we acquired Adeptra. We closed the year with several large wins as a direct result of
our new mobile customer engagement capabilities. We acquired and integrated CR Software, giving
our FICO® Debt Manager™ solution the functionality it needed to regain its position as the most
advanced offering in a growing market, and at the same time, giving us firm footing in industries that
are new to us. Both of these acquisitions boosted our revenue, accounting for much of our growth this
year, and also our bookings. And they helped us diversify beyond banking: our 2013 bookings in the
government market were up 200% over the previous year, and insurance bookings were up more than
40%. We will continue to see the return on these investments in the months and years ahead.

We also worked hard on internal innovation. We stepped up our development efforts in the area of
enterprise fraud prevention, a growing problem for our customers that we expect will be a significant
growth driver for our business. We focused significant resources on the specific market problems of
application fraud, online fraud, and merchant monitoring fraud. And we introduced new Consumer
Scores products, helping fuel 16% growth in our B2C business over the prior year, and contributing to
an overall solid performance of our Scores franchise.

Finally, in fiscal 2013 we introduced the FICO® Analytic Cloud, a game-changing offering enabling
businesses of any size to access the industry’s most powerful Big Data analytics and decision
management technology. The FICO Analytic Cloud delivers a range of benefits, one of which is
cutting analytic application development time from months to weeks. It is an exciting offering that we
expect will open up new opportunities for us with mid-market companies that could not otherwise
afford FICO’s best-in-class solutions.

We also created value for our shareholders this year through ongoing stock buyback. We remain
confident about the future, and believe that investing in ourselves represents a good use of our healthy
cash flow. At the same time we continue to look for opportunities to accelerate our growth through
carefully considered acquisitions, always guided by our overriding goal of creating shareholder value.

FICO has great technology with a proven track record. In many ways the market for that technology is
just getting warmed up. FICO analytic products transform entire industries, and in the era of Big Data,
there are many industries left to transform.

William Lansing
CEO

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

Form 10-K

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

ACT OF 1934
For the fiscal year ended September 30, 2013

‘ 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)
181 Metro Drive, Suite 700
San Jose, California
(Address of principal executive offices)

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

95110-1346
(Zip Code)

Registrant’s telephone number, including area code:
408-535-1500
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

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. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ‘ No È

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 ‘ No È

As of March 31, 2013, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
$1,031,516,584 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, 2013 was 34,567,208 (excluding 54,289,575 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 11, 2014.

TABLE OF CONTENTS

PART I

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.

Item 9B.

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

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

PART III

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

3
15
27
27
28
28

29
31
32
53
56
93
93
93
93

94
96

96
96
96

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

97
101

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, research and development, and the sufficiency of capital resources;
(iii) statements of assumptions underlying such statements, including those related to economic conditions;
(iv) statements regarding business relationships with vendors, customers or collaborators, including the
proportion of revenues generated from international as opposed to domestic customers; 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 2014.

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, healthcare organizations and public 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 consumer 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 use analytics to 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 engagement,
including customer acquisition, customer servicing and management, and customer protection. 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, collections 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. This segment is composed of software tools that clients can use to create their own custom
decision management applications, our new FICO® Decision Management Platform, the FICO®
Analytic Cloud, as well as associated professional services.

Comparative segment revenues, operating income and related financial information for fiscal 2013, 2012

and 2011 are set forth in Note 17 to the accompanying consolidated financial statements.

Our Solutions

Our solutions involve four fundamental disciplines:

•

Predictive analytics that identify the risks and opportunities associated with individual customers,
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, as well as software for managing customer engagement;
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. With the announcement
of the FICO® Analytic Cloud for creating, customizing and deploying powerful analytic services and the new
FICO® Decision Management Platform in May 2013, we will now offer clients an increasing portfolio of
applications and services in the cloud.

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, retail and public sectors. Within our applications segment our
fraud solutions accounted for 22%, 25% and 23% of total revenues in each of fiscal 2013, 2012 and 2011,
respectively; our customer management solutions accounted for 11%, 13% and 13% of total revenues, in each of
these periods, respectively; and our collections & recovery solutions accounted for 9%, 8% and 8% for each of
these periods, respectively.

Marketing Applications

The chief offerings for marketing are our FICO® Analytic Offer Manager and FICO® Customer Dialogue

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.

Our newest origination application is FICO® Origination Manager, an application-to-decision processing

solution built on a service-oriented architecture (SOA), modularized approach that launched in fiscal year 2011.
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® Origination
Decision Manager, 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 risk-based

decisions on their existing customers. These solutions help businesses apply advanced analytics in account and
customer decisions to increase portfolio revenue, decrease risk exposure and losses, while improving operational
efficiencies.

We provide customer management solutions for banking, where 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 banks. 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 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.

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.

Fraud Management 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; e-payment fraud; deposit account fraud; technical fraud
and bad debt; healthcare fraud; Medicaid and Medicare fraud; and property and casualty insurance claims 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, account,
customer, device and merchant data to detect a wide range of payment card fraud quickly and accurately. Falcon
Fraud Manager analyzes payment 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 on
payment card monitoring for credit and debit to improve fraud detection rates through the inclusion of merchant
profiles. Merchant profiles are built using fraud and transactional data that include characteristics revealing
which merchants have a history of higher fraud volumes, and which purchase types and ticket sizes have most
often been fraudulent at a particular merchant, among others.

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

fighting ATM debit fraud. The Card Alert Service identifies counterfeit payment cards and reports them to
issuers. The service analyzes daily transactions from participating networks, and uses this data to identify
common points of compromise and suspect cards most likely to incur fraud.

FICO® Insurance Fraud Manager uses advanced unsupervised predictive modeling techniques to detect

health care claims fraud, abuse and errors as soon as aberrant behavior patterns emerge. Insurance Fraud
Manager is used by both public and private health care payers to detect and prevent fraud in both pre- and
post-pay fraud investigation environments.

FICO® Claims Fraud Solution provides auto and other property and casualty insurers with a powerful
integrated set of sophisticated components that are configured to detect and prioritize claims fraud incidents so
that most clients experience payback on the solution in a matter of months, not years.

FICO® Merchant Monitoring Solution enables merchant acquirers to identify the full spectrum of merchant
risk including fraud, card association non-compliance, bankruptcy, and merchant attrition risk to mitigate losses
while increasing portfolio volumes.

Collections & Recovery Applications

In November 2012, FICO acquired CR Software, LLC (“CR Software”), a leading provider of enterprise-

class collections and recovery solutions for credit issuers, government organizations, collection agencies,
retailers and health care providers and enterprises. CR Software Titanium ORE™ (Open Receivables
Environment) is the foundation of FICO® Debt Manager™ 9, introduced in April 2013. FICO® Debt ManagerTM
solution and FICO® PlacementsPlus® service automate 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. PlacementsPlus® facilitates control over the distribution and management of
accounts to agencies, attorneys, debt buyers and internal recovery departments. Companies using our Debt
Manager™ and PlacementsPlus® solutions 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.

Mobility Applications

FICO® Adeptra® Mobile Services Platform provides cloud-based customer engagement and risk

intervention solutions. Delivered as software as a service (“SaaS”), it enables leading financial services
institutions and other businesses to take advantage of the explosion in mobile communication to manage risk,
fight fraud and dramatically improve the customer experience, all in real time. By using FICO® Adeptra® Mobile
Services Platform combined with FICO’s decision management applications, businesses can move from defining,
changing and testing decisions to executing and resolving customer interactions while improving customer
outcomes.

New offerings for FICO include: FICO® Adeptra® Fraud Resolution Manager, which enables clients to
engage with customers rapidly and effectively to identify true cases of fraud; FICO® Adeptra® Risk Intervention
Manager, which enables clients to interact with customers using preferred channels, treatments and schedules to

manage past due payments; and FICO® Adeptra® Origination Interaction Manager, which facilitates effective,
scalable and targeted two-way multi-channel engagement across a range of applications such as account
activation, marketing and customer service.

Analytics

We perform custom predictive, descriptive and decision modeling and related analytic projects for clients in
multiple industries 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.

Entity Resolution

In April 2013, FICO acquired Infoglide Software, Inc. (“Infoglide”), which provides identity resolution and
social network analysis software. The technology involved enables users to understand the relationships between
their organization, customers, events, and third-party actors. Businesses can perform real-time searches across
their enterprise data to find, match, and link similar entities and uncover hidden relationship between people,
places and things. This technology complements FICO’s capabilities in the area of fraud and marketing analytics.

Scores

Our FICO® Scores are used in the majority of U.S. credit decisions, by nearly all of the major banks, credit

card organizations, mortgage lenders and auto loan originators. These credit scores, developed based on third-
party data, provide a consistent and objective measure of an individual’s credit risk. Credit grantors use our
FICO® Scores in a variety of ways: to prescreen candidates for marketing programs; evaluate applicants for new
credit; and manage existing customer accounts. The FICO® Scores are calculated by running data from the three
national credit reporting agencies, TransUnion, Experian and Equifax through one of several proprietary scoring
models developed by FICO. The resulting three digit FICO® Score, ranging from 300-850, is available in the
United States and Canada. Lenders generally pay the credit reporting agencies scoring fees based on usage, and
the credit reporting agencies share these fees with us. FICO® 8 Score, the most recent version of the FICO®
Score, is currently available in the U.S. and Canada. The next version of the FICO® Score will be released in
Fiscal 2014.

While the core FICO® Score is the foundation of our scoring portfolio, we offer many other products and

services. The FICO® Expansion Score provides scores on U.S. consumers who have too few credit accounts
being reported to the credit reporting agencies to generate a traditional FICO® Score. The score analyzes multiple
sources of non-traditional credit data, such as subscription memberships, deposit account activity and utility
payment histories. The FICO® Credit Capacity Index™ was the first market-ready predictive analytic to assess a
consumer’s ability to pay new debt. It is available in the U.S. and the U.K. The FICO® Economic Impact Index
was the first market-ready, economically adjusted measure of consumer risk available for portfolio stress testing
as well as individual credit decisions.

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

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

Internationally, we offer the FICO® Score for consumer and/or small and medium enterprises lending
through credit reporting agencies in 11 countries worldwide. We have installed client-specific versions of the
FICO® Score in eight 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 marketing prospects and credit
applicants. FICO® Scores are in use or being implemented in 18 different countries across four continents outside
the United States.

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 credit reporting agencies in the U.S. and Singapore.

We also have scoring systems for insurance underwriters and marketers. They use the same underlying
statistical technology as our FICO® Scores, but are designed to predict applicant or policyholder insurance loss
ratio for automobile or homeowners’ coverage. Our insurance scores are available in the U.S. and Canada. We
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 and the FICO® Score Delivery Service for
account review.

Through our myFICO® service, we provide FICO® Score based products, education and information on
FICO Scores to consumers. They are sold directly by us or through distribution partners. The myFICO website is
the only source for a consumer to purchase their FICO® Scores from all three U.S. credit reporting agencies.
Consumers can use the myFICO.com website to purchase their FICO® Scores including credit reports associated
with the scores, explanations of the factors affecting their scores, and customized information on how to manage
their scores. Customers can use the myFICO website to simulate how taking specific actions would affect their
FICO® Score. Consumers can also purchase Score Watch® subscriptions, which deliver alerts via email and text
when the user’s FICO Scores or other credit report content change. The myFICO products and subscription
offerings are available online at www.myfico.com. The myFICO products and subscription offerings are also
available to consumers through numerous other partners.

Tools

We provide software products that businesses use to build their own tailored decision management

applications on premise or within the FICO® Analytic Cloud. 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.

In May 2013, FICO announced the launch of the FICO® Analytic Cloud and FICO® Decision Management
Platform. The FICO® Analytic Cloud gives application developers, business users and FICO partners around the
world direct access to FICO’s best-in-class analytics and decision management tools and technology to help spur
Big Data innovation. The FICO® Decision Management Platform helps close the gap between Big Data,
decisions and execution by enabling organizations to create powerful decision services that analyze customer
behavior, target decisions to individuals and determine the best possible action in real time. The FICO Decision

Management Platform includes FICO’s award-winning and market-leading software for creating decision
management applications. FICO will be rolling out components of the FICO Analytic Cloud, including FICO
Decision Management Platform, starting fiscal 2014.

The principal products offered as software tools or within the FICO Decision Management Platform

include:

•

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 Central™ Solution is a comprehensive offering to help banks and
other organizations, including insurance, retail and health care companies, maximize the power of their
predictive models and meet stricter regulations for model management. It complements FICO® Model
Builder, which 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;

software companies supplying modeling, rules, or analytic development tools; collections and recovery
solutions providers; entity resolution and social network analysis solutions providers; and

providers of cloud-based customer engagement and risk intervention solutions.

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 management market for banking, we compete primarily with Actimize, a division of NICE
Systems, Experian, Detica, a division of BAE, SAS and ACI Worldwide. In the fraud solutions market for health
care insurance, we compete with Emdeon, Ingenix, ViPS, MedStat, Detica, a division of BAE, SAS, Verisk
Analytics and IBM. Verisk Analytics and SAS also compete in the property and casualty insurance claims fraud
market.

In the collections and recovery market, we compete with both outside suppliers and in-house scoring and
computer systems departments for software and ASP servicing. Major competitors include CGI, Experian, and
various boutique firms, along with the three major U.S. credit reporting agencies and Experian-Scorex for
scoring and optimization projects.

Scores

In this segment, we compete with both outside suppliers and in-house analytics and computer systems
departments for scoring business. Primary competitors among outside suppliers of scoring models are 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, and
VantageScore (a joint venture entity established by the major U.S. credit reporting agencies). Additional
competitors include 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,

healthcare, and public agencies. End users of our products include 95 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
600 insurers, including the top ten U.S. property and casualty insurers; more than 400 retailers and general
merchandisers, including more than 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. Nine of the top ten companies on the 2013 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.

Our scores are marketed and sold through credit reporting agencies. During fiscal 2013, 2012 and 2011,
revenues generated from our agreements with Equifax, TransUnion and Experian collectively accounted for 16%,
18% and 18% 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 40%, 39% and 37%
of our total revenues in fiscal 2013, 2012 and 2011, respectively. See Note 17 to the accompanying consolidated
financial statements for a summary of our operating segments and geographic information.

TECHNOLOGY

We specialize in analytics software and decision management technologies that analyze data and drive
decision strategies and customer engagement. 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 a 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.

In 2013, FICO announced a strategy to make more of our products available as services hosted on the
FICO® Analytic Cloud. In addition, we announced the creation of the FICO® Decision Management Platform,
which enables clients to use FICO tools along with rapid application development tools from third parties to
quickly develop their own decision management applications and services. These initiatives are driven by
enhancing our core technical capabilities listed below, and extending them through partnerships with other
technology providers. Both of these initiatives build on our work in recent years to create an integrated, service-
oriented architecture for decision management.

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, and have enhanced our abilities to derive insights and
predictive variables from various forms of so-called Big Data, including unstructured data, such as text.

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. Through our acquisition of Entiera, Inc.
(Entiera) in May 2012, we now have the capability to store unstructured customer data — commonly referred to
as Big Data — and enable business clients to use this data to develop more targeted customer communications.

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 they 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.

Customer Engagement. Through our acquisition of Adeptra Ltd. (“Adeptra”) in September 2012, we now

have advanced technology for customer engagement, which enables the execution of decisions and customer
contact through SMS, email, automated voice, mobile applications and other channels. This technology enables
FICO to extend decision management beyond the rendering of the decision to the final resolution with a
customer, using the most effective method of communication for a given event and customer. Integrating this
technology with our decision management systems has proven to decrease costs, improve staff efficiency,
increase customer satisfaction and improve the return from marketing, fraud and collections activities.

Social Network Analysis. Through our acquisition of Infoglide in April 2013, we now have advanced

technology for identity resolution and social network analysis, which enables users to understand the relationships
between their organization, customers, events, and third-party actors. Businesses can perform real-time searches
across their enterprise data to find, match, and link similar entities and uncover hidden relationship between people,
places and things. This technology complements FICO’s capabilities in the area of fraud and marketing analytics.

Research and Development Activities

Our research and development expenses were $67.0 million, $59.5 million and $62.1 million in fiscal 2013,

2012 and 2011, 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 139 U.S. and 7 foreign patents with 89 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 36 trademarks registered in the U.S. and select foreign
countries.

PERSONNEL

As of September 30, 2013, we employed 2,482 persons worldwide. Of these, 103 full-time employees were

located in our San Jose, California office, 307 full-time employees were located in our San Diego, California
office, 266 full-time employees were located in our Roseville, Minnesota office, 215 full-time employees were
located in our San Rafael, California office, 125 full-time employees were located in our Fairfax, Virginia office,
448 full-time employees were located in our India-based offices and 241 full-time employees were located in our
United Kingdom-based offices. None of our employees are covered by a collective bargaining agreement, and no
work stoppages have been experienced.

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

Item 1A. Risk Factors

Risks Related to Our Business

We continue to expand 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 continue to expand 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. The businesses of our largest customers depend, in
large part, on favorable macroeconomic conditions. If these customers are negatively impacted by the
continued global economic volatility or 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, retailers and public agencies. 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, the global financial markets have continued to suffer 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.

Our acquisition and divestiture activities may disrupt our ongoing business and may involve increased
expenses, and we may not realize the financial and strategic goals contemplated at the time of a transaction.

We have acquired and expect to continue to acquire companies, businesses, products, services and

technologies. Acquisitions involve significant risks and uncertainties, including:

•

our ongoing business may be disrupted and our management’s attention may be diverted by
acquisition, transition or integration activities;

•

an acquisition may not further our business strategy as we expected, we may not integrate an acquired
company or technology as successfully as we expected or we may overpay for our investments, or
otherwise not realize the expected return, which could adversely affect our business or operating
results;

we may be unable to retain the key employees, customers and other business partners of the acquired
operation;

we may have difficulties entering new markets where we have no or limited direct prior experience or
where competitors may have stronger market positions;

our operating results or financial condition may be adversely impacted by claims or liabilities we
assume from an acquired company, business, product or technology, including claims from government
agencies, terminated employees, current or former customers, former stockholders or other third
parties; pre-existing contractual relationships of an acquired company we would not have otherwise
entered into; unfavorable revenue recognition or other accounting treatment as a result of an acquired
company’s practices; and intellectual property claims or disputes;

we may fail to identify or assess the magnitude of certain liabilities or other circumstances prior to
acquiring a company, business, product or technology, which could result in unexpected litigation or
regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, a loss of
anticipated tax benefits or other adverse effects on our business, operating results or financial
condition;

we may not realize the anticipated increase in our revenues from an acquisition for a number of
reasons, including if a larger than predicted number of customers decline to renew their contracts, if we
are unable to sell the acquired products to our customer base or if contract models of an acquired
company do not allow us to recognize revenues on a timely basis;

we may have difficulty incorporating acquired technologies or products with our existing product lines
and maintaining uniform standards, architecture, controls, procedures and policies;

our use of cash to pay for acquisitions may limit other potential uses of our cash, including stock
repurchases, dividend payments and retirement of outstanding indebtedness;

to the extent we issue a significant amount of equity securities in connection with future acquisitions,
existing stockholders may be diluted and earnings per share may decrease; and

we may experience additional or unexpected changes in how we are required to account for our
acquisitions pursuant to U.S. generally accepted accounting principles, including arrangements we
assume from an acquisition.

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

involve significant risks and uncertainties, including:

•

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.

Because acquisitions and divestitures are inherently risky, our transactions may not be successful and may

have a material adverse effect on our business, results of operations, financial condition or cash flows.
Acquisitions of businesses having a significant presence outside the U.S. will increase our exposure to the risks
of conducting operations in international markets.

Charges to earnings resulting from acquisitions may adversely affect our operating results.

Under business combination accounting standards, we recognize the identifiable assets acquired and the

liabilities assumed in acquired companies generally at their acquisition date fair values and separately from
goodwill. Goodwill is measured as the excess amount of consideration transferred, which is also generally
measured at fair value, and the net of the amounts of the identifiable assets acquired and the liabilities assumed as
of the acquisition date. Our estimates of fair value are based upon assumptions believed to be reasonable but
which are inherently uncertain. After we complete an acquisition, the following factors could result in material
charges and adversely affect our operating results and may adversely affect our cash flows:

•

impairment of goodwill or intangible assets, or a reduction in the useful lives of intangible assets
acquired;

amortization of intangible assets acquired;

identification of, or changes to, assumed contingent liabilities, both income tax and non-income tax
related, after our final determination of the amounts for these contingencies or the conclusion of the
measurement period (generally up to one year from the acquisition date), whichever comes first;

costs incurred to combine the operations of companies we acquire, such as transitional employee
expenses and employee retention, redeployment or relocation expenses;

charges to our operating results to maintain certain duplicative pre-merger activities for an extended
period of time or to maintain these activities for a period of time that is longer than we had anticipated,
charges to eliminate certain duplicative pre-merger activities, and charges to restructure our operations
or to reduce our cost structure; and

•

charges to our operating results resulting from expenses incurred to effect the acquisition.

Substantially all of these costs will be accounted for as expenses that will decrease our net income and
earnings per share for the periods in which those costs are incurred. Charges to our operating results in any given
period could differ substantially from other periods based on the timing and size of our future acquisitions and
the extent of integration activities. A more detailed discussion of our accounting for business combinations and
other items is presented in the “Critical Accounting Policies and Estimates” section of Management’s Discussion
and Analysis of Financial Condition and Results of Operations (Item 7).

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 negatively affect our business and
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.

Moreover, in recent years, individuals and groups that are non-practicing entities, commonly referred to as
“patent trolls”, have purchased patents and other intellectual property assets for the purpose of making claims of
infringement in order to extract settlements. From time to time, we may receive threatening letters or notices or
may be the subject of claims that our solutions and underlying technology infringe or violate the intellectual
property rights of others. Responding to such claims, regardless of their merit, can be time consuming, costly to
defend in litigation, divert management’s attention and resources, damage our reputation and brand, and cause us
to incur significant expenses.

If our security measures are compromised or unauthorized access to customer or consumer data is
otherwise obtained, our products and services may be perceived as not being secure, customers may curtail
or cease their use of our products and services, our reputation may be damaged and we could incur
significant liabilities.

Our business requires the storage, transmission and utilization of sensitive consumer and customer

information. Many of our products are provided by us through the Internet. Security breaches could expose us to
a risk of loss, the unauthorized disclosure of consumer or customer information, litigation, indemnity obligations
and other liability. If our security measures are breached as a result of third-party action, employee error,
malfeasance or otherwise, and as a result, someone obtains unauthorized access to our system or to consumer or
customer information, our reputation may be damaged, our business may suffer and we could incur significant
liability. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently
and generally are not recognized until launched against a target, we may be unable to anticipate these techniques
or to implement adequate preventative measures. Malicious third parties may also conduct attacks designed to
temporarily deny customers access to our services. Security compromises experienced by our competitors, by our
customers or by us may lead to public disclosures, which may lead to widespread negative publicity. Any
security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer
confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers,
cause existing customers to curtail or cease their use of our products and services or subject us to third-party
lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business
and operating results.

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, cause us to incur
significant expense, 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 government supervision and 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, including regulations issued by, and the
supervisory authority of, the Bureau of Consumer Financial Protection (“CFPB”); and

Laws and regulations regarding export controls as they apply to FICO products delivered in non-U.S.
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 uncertainty, it will likely harm our
business, financial condition or results of operations.

During fiscal 2013, 76% of our revenues were derived from sales of products and services to the banking
and insurance industries. The continued global economic uncertainty has produced substantial stress, volatility,
illiquidity and disruption of global credit and other financial markets, 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 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. The continued
global economic uncertainty has produced substantial stress, volatility, illiquidity and disruption of global credit
and other financial markets. This uncertainty can negatively affect 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 2013, 40% 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 San Jose, California.

Our leased properties include:

•

approximately 45,000 square feet of office space in San Jose, California in one building under a lease
expiring in fiscal 2017;

approximately 173,000 square feet of office, data center, and data processing space in Minneapolis and
Roseville, Minnesota, in four buildings under leases expiring in fiscal 2014 or later; 35,000 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 fiscal 2020;

approximately 80,000 square feet of office space in San Diego, California in one building under a lease
expiring in fiscal 2020; and

an aggregate of approximately 293,000 square feet of office and data center space in: Annandale, VA;
Austin, TX; Bangalore, India; Bangkok, Thailand; Beijing, China; Birmingham, United Kingdom;

Chicago, IL; Clifton Park, NY; Denver, CO; Fairfax, VA; Hong Kong, China; Istanbul, Turkey;
Johannesburg, South Africa; Kaula Lumpur, Malaysia; London, United Kingdom; Madrid, Spain;
Moscow, Russia; Mumbai, India; Munich, Germany; New Castle, DE; New York, NY; Norcross, GA;
Norwalk, CT; Pune, India; Reading, United Kingdom; Sao Paulo, Brazil; Seoul, Korea; Shanghai,
China; Singapore, Singapore; Sydney, Australia; Taipei City, Taiwan; Tokyo, Japan; Toronto, Canada;
and Vilnius, Lithuania; 49,000 square feet of this space is subleased to third parties.

See Note 18 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

Not Applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

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, 2013, we had 476 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 2012
October 1 — December 31, 2011
January 1 — March 31, 2012
April 1 — June 30, 2012
July 1 — September 30, 2012

Fiscal 2013
October 1 — December 31, 2012
January 1 — March 31, 2013
April 1 — June 30, 2013
July 1 — September 30, 2013

High

Low

$38.49
$44.35
$45.00
$46.11

$47.86
$46.32
$50.93
$55.80

$20.05
$34.60
$38.02
$38.99

$40.47
$42.62
$41.33
$45.80

Dividends

We paid quarterly dividends of two cents per share, or eight cents per year, during each of fiscal 2013, 2012
and 2011. 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.

Sales of Unregistered Equity Securities and Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

Period

July 1, 2013 through July 31, 2013
August 1, 2013 through August 31, 2013
September 1, 2013 through September 30, 2013

Total

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

—
326,798
382,343

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

$102,189,447
$ 85,257,645
$ 65,106,879

709,141

$ 65,106,879

Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share

17,183
339,426
389,580

746,189

$50.31
$51.83
$52.66

$52.23

(1)

Includes 37,048 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, 2013.

(2) On August 16, 2012, 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 following graph shows the total stockholder return of an investment of $100 in cash on September 30,
2008, 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

$300

$250

$200

$150

$100

$50

9/08

9/09

9/10

9/11

9/12

9/13

FICO

S&P 500

S&P Application Software

*$100 invested on 9/30/08 in stock or index, including reinvestment of dividends.
Fiscal year ending September 30.

Item 6. Selected Financial Data

We acquired Entiera in May 2012, Adeptra in September 2012, CR Software in November 2012, and
Infoglide in April 2013. Results of operations from the acquisitions are included prospectively from their
respective acquisition dates and did not materially impact comparability of the data presented below.

Revenues
Operating income
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

Dividends declared per share

Working capital
Total assets
Senior Notes
Revolving line of credit
Stockholders’ equity

Year Ended September 30,

2013

2012

2011

2010

2009 (1)

$743,444
161,593
90,095
—
90,095

(In thousands, except per share data)
$605,643
$619,683
$676,423
113,349
127,337
168,358
64,457
71,562
92,004
—
—
—
64,457
71,562
92,004

$630,735
116,747
65,465
(363)
65,102

2.55
—

2.55

2.48
—

2.48

0.08

2.64
—

2.64

2.55
—

2.55

0.08

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

September 30,

2013

2012

2011

2010

2009

83,308
1,161,547
455,000
15,000
530,677

49,720
1,158,611
504,000
—
474,406

(In thousands)
$ 217,983
1,129,468
512,000
—
465,494

$ 225,028
1,123,716
520,000
—
474,914

$ 327,970
1,303,888
275,000
295,000
600,269

(1) Results of operations for fiscal year 2009 includes a $3.0 million pre-tax loss on the sale of product line

assets.

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

OVERVIEW

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

includes the following: a business overview that provides a high level summary of our operating results and
bookings trends that affect our business; a more detailed analysis of our results of operations; our liquidity and
capital resources, which discusses key aspects of our statements of cash flows, changes in our balance sheets and
our financial commitments; and a summary of our critical accounting policies and estimates we believe are
important to understanding the assumptions and judgments incorporated in our reported financial results. Our
MD&A should be read in conjunction with Item 8, Financial Statements and Supplementary Data, of this Annual
Report on Form 10-K. The following discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results may differ from those referred to herein due to a number of factors, including but not
limited to risks described in the Item 1A, Risk Factors, in this Annual Report on Form 10-K.

Business Overview

Total revenues for fiscal 2013 were $743.4 million, an increase of 10% from $676.4 million in fiscal 2012,
primarily attributable to our recent acquisitions. Revenue in each of our segments increased, with Applications,
Scores and Tools increasing by 12%, 3% and 14% in fiscal 2013 compared to fiscal 2012, respectively. 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 $294.0 million for fiscal 2013, an
increase of 10% from $266.2 million in fiscal 2012, representing 40% and 39% of total consolidated revenues in
each of these years. A significant portion of our revenues are derived from the sale of products and services
within the banking (including consumer credit) industry, and 73% and 77% of our revenues were derived from
within this industry during fiscal 2013 and 2012, respectively. In addition, we derive a significant share of
revenue from transactional or unit-based software license fees, transactional fees derived under scoring, network
service or internal hosted software arrangements, annual software maintenance fees and annual license fees under
long-term software license arrangements. Arrangements with transactional or unit-based pricing accounted for
approximately 69% of our revenues during fiscal 2013 and 2012.

Operating income for fiscal 2013 was $161.6 million, a decrease of 4% from $168.4 million in fiscal 2012.

This decrease in operating income, despite our revenue growth, was attributable primarily to integration of
lower-margin product and service offerings associated with our recent acquisitions. Net income for fiscal 2013
was $90.1 million, a decrease of 2% from $92.0 million in fiscal 2012. Diluted earnings per share was $2.48, a
decrease of 3% from $2.55 in fiscal 2012.

We continue to invest in our franchise technologies, including in the areas of cloud computing and SaaS.

The expansion of cloud-based solutions will enable us to deliver solutions more efficiently to our customers and
expand our market opportunities further into markets outside the banking industry sector. In addition to our
ongoing product development efforts, we completed multiple strategic acquisitions in our Applications segment
during fiscal 2013 and 2012 for aggregate purchase consideration of $165.5 million. Our acquisitions included:
Adeptra, a provider of cloud-based customer engagement and risk intervention solutions; Entiera, a provider of
customer dialogue management solutions; CR Software, a provider of enterprise-class collections and recovery
solutions; and Infoglide, a provider of entity resolution and social network analysis solutions.

We also continue to enhance shareholder value by returning cash to shareholders through our stock
repurchase program. In August 2012, our Board of Directors approved a new $150 million stock repurchase
program. The stock repurchase program is open-ended, allowing the company to repurchase shares from time to
time in the open market and in negotiated transactions. During fiscal 2013, we repurchased approximately
1.7 million shares for a total value of $84.9 million.

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 customers’ 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, 2013

Quarter ended September 30, 2012

Year ended September 30, 2013

Year ended September 30, 2012

Number of
Bookings
over $1
Million

Bookings
Yield (1)

29%

32%

42%

43%

Weighted-
Average
Term (2)

(months)
22

N/M

Bookings

(in millions)
$ 91.3

$ 98.6

$328.2

$293.8

(1) Bookings yield represents the percentage of revenue recognized from bookings for the periods indicated.

(2) NM — 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 40% of total bookings for the quarters ended September 30,

2013 and 2012. Professional services bookings were 41% and 34% of total bookings for the quarters ended
September 30, 2013 and 2012, respectively. License bookings were 19% and 26% of total bookings for the
quarters ended September 30, 2013 and 2012, respectively.

Transactional and maintenance bookings were 37% and 35% of total bookings for the years ended

September 30, 2013 and 2012, respectively. Professional services bookings were 41% and 43% of total bookings
for the years ended September 30, 2013 and 2012, respectively. License bookings were 22% of total bookings for
the years ended September 30, 2013 and 2012.

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 non-cancelable 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.

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, 2013, 2012 and 2011 are set forth in
Note 17 to the accompanying consolidated financial statements.

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

Applications
Scores
Tools

Total Revenues

Revenues
Year Ended September 30,

2013

2012

2011

Period-to-Period Change

2013 to
2012

2012 to
2011

(In thousands)

$476,084
180,813
86,547

(In thousands)
$424,604
175,623
76,196

$383,028
168,567
68,088

$51,480
5,190
10,351

$41,576
7,056
8,108

$743,444

$676,423

$619,683

67,021

56,740

Period-to-Period
Percentage Change

2013 to
2012

2012 to
2011

12%
3%
14%

10%

11%
4%
12%

Segment

Applications
Scores
Tools

Total Revenues

Applications

Percentage of Revenues
Year Ended September 30,

2013

2012

2011

64% 63% 62%
24% 26% 27%
12% 11% 11%

100% 100% 100%

Year Ended September 30,

Period-to-Period Change

2013

2012

2011

2013 to
2012

2012 to
2011

(In thousands)

Transactional and maintenance
Professional services
License

$306,738
110,081
59,265

(In thousands)
$263,726
104,637
56,241

$258,736
100,921
23,371

$43,012
5,444
3,024

$ 4,990
3,716
32,870

Total

$476,084

$424,604

$383,028

51,480

41,576

Period-to-Period
Percentage Change

2013 to
2012

2012 to
2011

16%
5%
5%

12%

2%
4%
141%

11%

Applications segment revenues increased $51.5 million in fiscal 2013 from fiscal 2012 primarily due to a

$51.1 million increase in our mobility solutions and a $11.1 million increase in our collections & recovery
solutions, partially offset by a $6.5 million decrease in our customer management solutions and a $3.5 million
decrease in our marketing solutions.

The increase in mobility solutions was attributable to our Adeptra acquisition in September 2012. The

increase in collections & recovery solutions was primarily attributable to our CR Software acquisition in
November 2012, partially offset by a decrease in revenues generated from our FICO® Debt ManagerTM product.
The decrease in customer management solutions was primarily attributable to a decrease in software revenue
driven by a large license transaction in fiscal 2012. The decrease in marketing solutions was primarily
attributable to the early termination of a large customer in December 2012.

Applications segment revenues increased $41.6 million in fiscal 2012 from fiscal 2011 primarily due to a
$25.3 million increase in our fraud solutions, an $8.0 million increase in our customer management solutions, a
$4.2 million increase in our mobility solutions and a $4.0 million increase in our collections & recovery
solutions.

The increase in fraud solutions revenue was primarily due to software revenue attributable to two large
multi-year license transactions during fiscal 2012. In addition, the fraud solutions revenue was also impacted by
increased professional services revenue from software implementations and consulting services and a decrease in
transactional-based revenues. The increase in customer management solutions revenue was due to an increase in
software revenue primarily driven by a large license transaction, increased services revenue as well as increased
transactional and maintenance revenue. The increase in mobility solutions was due to our acquisition of Adeptra
in September 2012. The increase in collections & recovery solutions was mainly due to an increase in license
sales.

Scores

Year Ended September 30,

Period-to-Period Change

2013

2012

2011

2013 to
2012

2012 to
2011

(In thousands)

Transactional and maintenance
Professional services
License

$175,281
4,012
1,520

(In thousands)
$172,218
2,382
1,023

$164,918
2,102
1,547

$3,063
1,630
497

$7,300
280
(524)

Total

$180,813

$175,623

$168,567

5,190

7,056

Period-to-Period
Percentage Change

2013 to
2012

2012 to
2011

2%
68%
49%

4%
13%
(34)%

Scores segment revenues increased $5.2 million in fiscal 2013 from 2012 due to a $5.8 million increase in

our myFICO® business-to-consumer services revenues partially offset by a $0.6 million decrease in our
business-to-business scores revenues. The increase in our myFICO business-to-consumer services was
attributable to a $6.8 million increase in direct sales generated from the myFICO.com website, partly driven by
the availability of FICO® scores generated using the consumer data of one credit reporting agency following an
agreement with the credit reporting agency in May 2013. The increase was partially offset by a $1.0 million
decrease in royalties derived from scores sold indirectly to consumers through credit reporting agencies.

Scores segment revenues increased $7.1 million in fiscal 2012 from 2011 due to a $9.2 million increase in

our business-to-business scores revenues partially offset by a $2.1 million decrease in our myFICO®
business-to-consumer services revenues. The increase in our business-to-business scores was primarily
attributable to an increase in Credit Bureau Risk Scores driven by a couple of special projects conducted by a
major customer utilizing historical Credit Bureau Risk Scores, and an increase in transactional volumes. The
decline in our myFICO business-to-consumer services was primarily attributable to a decrease in royalties
derived from scores sold indirectly to consumers through credit reporting agencies.

During fiscal 2013, 2012 and 2011, revenues generated from our agreements with Equifax, TransUnion and

Experian, collectively accounted for approximately 16%, 18% and 18%, respectively, of our total revenues,
including revenues from these customers that are recorded in our other segments.

Tools

Year Ended September 30,

Period-to-Period Change

Transactional and maintenance
Professional services
License

2013

2012

2011

$32,285
21,101
33,161

(In thousands)
$30,231
17,952
28,013

$29,776
12,918
25,394

Total

$86,547

$76,196

$68,088

10,351

Period-to-Period
Percentage Change

2013 to
2012

2012 to
2011

2013 to
2012

2012 to
2011

(In thousands)

$ 2,054
3,149
5,148

$ 455
5,034
2,619

8,108

7%
18%
18%

14%

2%
39%
10%

12%

Tools segment revenues increased $10.4 million primarily due to a $4.8 million increase in our rules

management tools and a $4.0 million increase in our predictive modeling tools. The increase in rules
management tools was primarily attributable to increased services revenue related to our FICO® Blaze Advisor®
and third-party products. The increase in predictive modeling tools was primarily attributable to increased license
sales in our FICO® Model Central™ product.

Tools segment revenues increased $8.1 million in fiscal 2012 from fiscal 2011 primarily due to an increase

in our services revenue and license revenue. The increase in our services revenue was primarily attributable to

increased professional services related to our FICO® Blaze Advisor® product. The increase in our license
revenue was primarily attributable to an increase in our FICO® Xpress Optimization Suite and FICO® Blaze
Advisor® product sales.

Operating Expenses and Other Income (Expense), Net

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

and comprehensive income for the fiscal years indicated.

Period-to-Period Change

Period-to-Period
Percentage Change

Year Ended September 30,

2013

2012

2011

2013 to
2012

2012 to
2011

2013 to
2012

2012 to
2011

(In thousands, except employees)

(In thousands, except
employees)

$743,444 $676,423 $619,683 $67,021

$56,740

10%

9 %

Revenues

Operating expenses:

Cost of revenues
Research and development
Selling, general and administrative
Amortization of intangibleassets
Restructuring and acquisition-related

229,468
66,967
268,395
13,535
3,486

197,947
59,527
238,522
6,944
5,125

186,470
62,129
223,615
7,741
12,391

31,521
7,440
29,873
6,591
(1,639)

11,477
(2,602)
14,907
(797)
(7,266)

16%
6 %
12% (4)%
13%
7 %
95% (10)%
(32)% (59)%

Total operating expenses

Operating income
Interest income
Interest expense
Other income (expense), net

Income before income taxes
Provision for income taxes

581,851

508,065

492,346

73,786

15,719

15%

3 %

161,593
54
(30,281)
618

168,358
317
(31,734)
(698)

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

131,984
41,889

136,243
44,239

97,455
25,893

(6,765)
(263)
1,453
1,316

(4,259)
(2,350)

41,021
(1,875)
630
(988)

38,788
18,346

(4)% 32%
(83)% (86)%
(5)% (2)%
(189)% (341)%

(3)% 40%
(5)% 71%

Net income

$ 90,095 $ 92,004 $ 71,562

(1,909)

20,442

(2)% 29%

Number of employees at fiscal year-end

2,482

2,315

2,023

167

292

Revenues

Operating expenses:

Cost of revenues
Research and development
Selling, general and administrative
Amortization of intangible assets
Restructuring and acquisition-related

Total operating expenses

Operating income
Interest income
Interest expense
Other income (expense), net

Income before income taxes
Provision for income taxes

Net income

Percentage of Revenues
Year Ended September 30,

2013

2012

2011

100% 100% 100%

31%
9%
36%
2%
— %

78%

29%
9%
35%
1%
1%

75%

30%
10%
36%
1%
2%

79%

22%

25%
21%
— % — % — %
(5)%
(5)%
— % — % — %

(4)%

18%
6%

12%

20%
6%

14%

16%
4%

12%

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 increased to 31% during fiscal 2013 from 29% during fiscal
2012. The $31.5 million increase was primarily due to a $14.9 million increase in third-party software and data
costs, an $11.2 million increase in personnel and labor costs, a $2.3 million increase in travel cost and a $1.8
million increase in outside services cost. The increase in third-party software and data costs was mainly related to
integration of lower-margin products from our Adeptra and CR Software acquisitions in September and
November 2012, respectively, as well as an increase in sales of our other products that require data acquisition.
The increase in personnel and labor costs was primarily attributable to the increased headcount as a result of our
recent acquisitions. The increase in travel cost was primarily attributable to an increase in services revenue
requiring travel to client locations. The increase in outside services cost was due to an increase in use of external
contractors as a result of increased services revenue.

The fiscal year 2012 over 2011 increase of $11.5 million in cost of revenues resulted from a $5.9 million
increase in personnel and labor costs, a $2.7 million increase in allocated facilities and infrastructure costs, a $1.5
million increase in travel cost, and a $1.4 million increase in other costs. The increase in personnel and other
labor-related costs was attributable to an increase in salary, related benefit and incentive cost. The increase in
allocated facilities and infrastructure costs was attributable to the Company’s utilization of additional resources
towards direct revenue generating activities. The increase in travel cost was primarily attributable to an increase
in services revenue requiring travel to client locations. Cost of revenues as a percentage of revenues was 29% for
the year ended September 30, 2012 compared to 30% for the year ended September 30, 2011 as a result of
increased sales of higher-margin software and Scores products.

In fiscal 2014, we expect that cost of revenues as a percentage of revenues will be consistent with those

incurred during fiscal 2013.

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.

The fiscal year 2013 over 2012 increase of $7.4 million in research and development expenses was

primarily attributable to an $8.5 million increase in personnel and labor costs, attributable to the increased
headcount as a result of our recent acquisitions. Research and development expenses as a percentage of revenues
was 9% during the year ended September 30, 2013, consistent with those incurred during the year ended
September 30, 2012.

Research and development as a percentage of revenues was 9% during the year ended September 30, 2012,
compared to 10% during the year ended September 30, 2011. The $2.6 million decrease was mainly attributable
to a $2.1 million decrease in personnel and labor costs, resulting from decreased salary and related benefit
expenses partially offset by an increase in incentive expense for the year ended September 30, 2012.

In fiscal 2014, we expect that research and development expenditures as a percentage of revenues will be
consistent with or slightly higher than those incurred during fiscal 2013 as we continue to invest in the areas of
cloud computing and SaaS.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee salaries and benefits; travel
costs; overhead costs; 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% for the year ended
September 30, 2013 as compared to 35% for the year ended September 30, 2012. The $29.9 million increase was
primarily attributable to a $15.7 million increase in labor and personnel costs, a $4.4 million increase in
equipment and software depreciation cost, a $3.3 million increase in travel cost and a $2.9 million increase in
allocated facilities and infrastructure costs. The increase in labor and personnel costs was primarily due to the
increased headcount as a result of our recent acquisitions. The increase in equipment and software depreciation
cost was due to timing of fixed assets placed in service. The increase in travel cost was primarily due to increased
non-revenue producing travel activities as a result of our recent acquisitions. The increase in allocated facilities
and infrastructure costs was primarily due to increased resource requirement as a result of our recent acquisitions.

The fiscal 2012 over 2011 increase of $14.9 million in selling, general and administrative expenses was

attributable to a $15.4 million increase in labor and personnel costs, a $2.4 million increase in marketing
expenses and a $1.5 million increase in travel cost, partially offset by a $2.1 million decrease in allocated
facilities and infrastructure costs, a $1.1 million decrease in equipment depreciation cost, a $0.8 million decrease
in outside services cost, and a $0.4 million decrease in other costs. The increase in labor and personnel costs was
due to an increase in stock compensation cost, salary and related benefit costs, commission cost, incentive cost
and severance and retention costs. The increase in marketing expenses was due to a company marketing event
held in fiscal 2012. The increase in travel cost was primarily due to the reinstatement of non-revenue producing
travel during fiscal 2012. The decrease in allocated facilities and infrastructure costs was attributable primarily to
the Company’s utilization of additional resources towards direct revenue generating activities. The decrease in
equipment depreciation cost was mainly due to timing of fixed assets placed in service. The decrease in outside
services was due to a non-recurring strategic consulting service incurred in fiscal 2011. Selling, general and
administrative expenses as a percentage of revenues was 35% during fiscal 2012 compared to 36% during fiscal
2011 as a result of revenue growing at a higher rate than cost due to improved operations efficiency.

In fiscal 2014, we expect that selling, general and administrative expenses as a percentage of revenues will

be consistent with those incurred during fiscal 2013.

Amortization of Intangible Assets

Amortization of intangible assets consists of amortization expense related to intangible assets recorded in
connection with our acquisitions. Our finite-lived intangible assets consist primarily of completed technology and
customer contracts and relationships, which are being amortized using the straight-line method over periods
ranging from five to fifteen years.

The fiscal 2013 over fiscal 2012 increase in amortization expense of $6.6 million was attributable to the

addition of intangible assets associated with our recent acquisitions of Entiera, Adeptra, CR Software and
Infoglide, partially offset by certain intangible assets associated with our Dash and London Bridge acquisitions
becoming fully amortized in January 2012 and May 2013, respectively.

The fiscal 2012 over fiscal 2011 decrease in amortization expense of $0.8 million was attributable to certain
intangible assets associated with our Dash acquisition becoming fully amortized in January 2012, partially offset
by the addition of intangible assets associated with our Entiera acquisition in May 2012 and Adeptra acquisition
in September 2012.

In fiscal 2014, we expect amortization expense will be lower than the amortization expense incurred in 2013

due to certain intangible assets associated with our London Bridge acquisition becoming fully amortized in

May 2013, partially offset by a full year amortization of the intangible assets acquired through our CR Software
and Infoglide acquisitions.

Restructuring and acquisition-related

In fiscal 2013, we incurred $1.0 million in acquisition-related cost mainly associated with our CR Software
and Infoglide acquisitions. We also incurred net charges totaling $2.5 million consisting of severance costs and
costs for vacating excess leased space. Cash payments for all the severance costs were paid during fiscal 2013.
Cash payments for substantially all the facilities charges will be paid by the end of fiscal 2014.

In fiscal 2012, we incurred $1.1 million in acquisition-related cost in association with the Adeptra and
Entiera acquisitions. We also eliminated 85 positions mainly within the product and technology organization of
the Company and incurred $4.0 million for severance costs. Cash payments for all the severance costs have been
paid by the end of fiscal 2013.

In fiscal 2011 we eliminated 177 positions across the company and incurred charges of $8.2 million for

severance costs. Cash payments for all the severance costs were paid by the end of fiscal 2011. We also
recognized charges of $4.2 million associated with vacating excess leased space. Cash payments for substantially
all the facilities charges have been paid by the end of fiscal 2013.

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

Severance costs
Lease exit costs and other adjustments

Total restructuring expense

Interest Income

Year Ended September 30,

2013

2012

2011

$ 842
1,624

(In thousands)
$3,978
—

$ 8,165
4,226

$2,466

$3,978

$12,391

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

requirements.

The fiscal 2013 over 2012 decrease in interest income of $0.3 million was attributable to lower average

investment balances during fiscal 2013.

The fiscal 2012 over 2011 decrease in interest income of $1.9 million was primarily attributable to interest

received on tax refunds during fiscal 2011.

Interest Expense

Interest expense included primarily interest on the Senior Notes issued in May 2008 and July 2010, as well

as credit facility fees for the revolving line of credit.

The fiscal 2013 over 2012 decrease in interest expense of $1.5 million was attributable to the $49.0 million
and $8.0 million principal payment in May 2013 and 2012, respectively, on the Senior Notes issued in May 2008
resulting in lower average debt balance for fiscal 2013.

The fiscal 2012 over 2011 decrease in interest expense of $0.6 million was attributable to an $8.0 million

principal payment in both May 2011 and May 2012 on the Senior Notes issued in May 2008 resulting in a lower

average debt balance for fiscal 2012, as well as a decline in credit facility fees as a result of the Company
lowering the revolving line of credit in fiscal 2011.

In fiscal 2014, we expect that interest expense will be consistent with or slightly lower than what we

incurred during fiscal 2013.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized investment gains/losses, exchange rate gains/

losses resulting from remeasurement of foreign-denominated receivable and cash balances held by our various
reporting entities into their respective functional currencies at period-end market rates, net of the impact of
offsetting forward exchange contracts, and other non-operating items.

Other income (expense), net was $0.6 million in fiscal 2013, compared to ($0.7) million in 2012. The
increase was primarily attributable to a decrease in foreign currency exchange losses, as well as a one-time
vendor termination fee during fiscal 2012.

Other income (expense), net was ($0.7) million in fiscal 2012, compared to $0.3 million in 2011. The
decrease was primarily attributable to a one-time vendor termination fee as well as increased foreign currency
losses during fiscal 2012.

Provision for Income Taxes

Our effective tax rates were 31.7%, 32.5% and 26.6% in fiscal 2013, 2012 and 2011, respectively.

The decrease in our effective tax rate in fiscal 2013 compared to fiscal 2012 was primarily due to the
reenactment of the U.S. Federal Research and Development Credit in 2013, as well as the expiration of the U.S.
Federal Research and Development credit and a one-time tax impact of a legal entity restructuring charge in
2012.

The increase in our effective tax rate in fiscal 2012 compared to fiscal 2011 was due to two factors. The
fiscal year 2011 effective rate was largely decreased due to a $1.1 million benefit recorded in recognition of the
2010 extension of the U.S. Federal Research and Development Credit and a manufacturing deduction rate
increase, and the fiscal year 2012 effective tax rate was increased by a one-time $1.6 million tax charge
associated with the Company’s intellectual property rights.

As of September 30, 2013 the Company has reported $48.6 million of unremitted earnings of the

international subsidiaries in our consolidated income. U.S. income taxes have not been provided on undistributed
earnings of international subsidiaries. It is our intention to reinvest these earnings permanently or to repatriate the
earnings only when it is tax efficient to do so. The amount of the unrecognized deferred tax liability depends on
judgment required to analyze the withholding tax due, the applicable tax law and related tax treaties, and factual
circumstances in effect at the time of any such distribution, therefore, we believe it is not practicable at this time
to reliably determine the amount of the unrecognized deferred tax liability related to the Company’s
undistributed earnings. If circumstances change and it becomes apparent that some or all of the undistributed
earnings of a subsidiary will be remitted in the next twelve months and income taxes have not been recognized
by the parent entity, the parent entity shall accrue as an expense of the current period income taxes attributable to
that remittance.

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

2013

2012

2011

Year Ended September 30,

Period-to-Period
Change

Period-to-Period
Percentage Change

2013 to
2012

2012 to
2011

2013 to
2012

2012 to
2011

Applications
Scores
Tools
Unallocated corporate expenses

$129,862
129,032
16,536
(70,966)

(In thousands)
$132,826
122,936
17,599
(71,705)

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

(In thousands)
$(2,964) $26,265
9,538
3,909
(1,025)

6,096
(1,063)
739

(2)% 25%
5%
8%
(6)% 29%
1%
(1)%

Total segment operating income

204,464

201,656

162,969

2,808

38,687

24%

Unallocated share-based

compensation

Unallocated amortization expense
Unallocated restructuring and

acquisition-related

Operating income

Applications

Segment revenues
Segment operating expense

Segment operating income

Scores

Segment revenues
Segment operating expense

Segment operating income

Tools

Segment revenues
Segment operating expense

Segment operating income

(25,850)
(13,535)

(21,229)
(6,944)

(15,500)
(7,741)

(4,621)
(6,591)

(5,729)
797

22%
37%
95% (10)%

(3,486)

(5,125)

(12,391)

1,639

7,266

(32)% (59)%

$161,593

$168,358

$127,337

(6,765)

41,021

(4)% 32%

Year Ended September 30,

Percentage of Revenues

2013

2012

2011

2013

2012

2011

(In thousands)

$ 476,084
(346,222)

$ 424,604
(291,778)

$ 383,028 100% 100% 100%
(73)% (69)% (72)%

(276,467)

$ 129,862

$ 132,826

$ 106,561

27% 31% 28%

Year Ended September 30,

Percentage of Revenues

2013

2012

2011

2013

2012

2011

(In thousands)

$180,813
(51,781)

$175,623
(52,687)

$168,567
(55,169)

100% 100% 100%
(29)% (30)% (33)%

$129,032

$122,936

$113,398

71% 70% 67%

Year Ended September 30,

Percentage of Revenues

2013

2012

2011

2013

2012

2011

(In thousands)

$ 86,547
(70,011)

$ 76,196
(58,597)

$ 68,088
(54,398)

100% 100% 100%
(81)% (77)% (80)%

$ 16,536

$ 17,599

$ 13,690

19% 23% 20%

The decrease in operating income between fiscal 2013 and 2012 of $6.8 million was primarily attributable to

a $65.0 million increase in segment operating expenses, a $6.6 million increase in amortization expenses, and a
$4.6 million increase in share-based compensation expense, partially offset by a $67.1 million increase in
segment revenues and a $1.6 million decrease in restructuring and acquisition-related expenses.

At the segment level, the $2.8 million increase in segment operating income was driven by a $6.1 million
increase in our Scores segment and a $0.7 million decrease in unallocated corporate operating expenses, partially
offset by a $2.9 million decrease in our Applications segment and a $1.1 million decrease in our Tools segment.

The decrease in Applications segment operating income was attributable to a $54.4 million increase in
segment operating expenses, partially offset by a $51.5 million increase in segment revenues. The increases in
both segment operating expenses and segment revenues were primarily related to our Adeptra and CR Software
acquisitions. Segment operating income as a percentage of segment revenue for Applications decreased from
31% to 27% mainly due to increased sales of lower-margin products from our Adeptra and CR Software
acquisitions.

The increase in Scores segment operating income was attributable to a $5.2 million increase in segment
revenue, primarily due to increased revenue generated from our myFICO® business-to-consumer services, and a
$0.9 million decrease in segment operating expenses. Segment operating income as a percentage of segment
revenue for Scores was 71% for fiscal 2013, materially consistent with fiscal 2012.

The decrease in Tools segment operating income was attributable primarily to an $11.5 million increase in

segment operating expenses, partially offset by a $10.4 million increase in segment revenue. The increase in
segment revenue was primarily due to an increase of services and software revenues related to our FICO® Blaze
Advisor® and FICO® Model Central™ products. Segment operating income as a percentage of segment revenue
for Tools decreased from 23% to 19% mainly due to an increase in our lower margin services revenues and third-
party software product sales.

The increase in operating income between fiscal 2012 and 2011 of $41.0 million was primarily attributable

to a $56.7 million increase in segment revenues and a $7.3 million decrease in restructuring and acquisition-
related expenses, partially offset by a $17.0 million increase in segment operating expenses and a $5.7 million
increase in share-based compensation expense.

At the segment level, the $38.7 million increase in segment operating income was driven by a $26.3 million

increase in our Applications segment, a $9.5 million increase in our Scores segment and a $3.9 million increase
in our Tools segment, partially offset by a $1.0 million increase in unallocated corporate operating expenses.

The increase in Applications segment operating income was attributable to a $41.6 million increase in
segment revenue primarily due to several large multi-year license transactions, partially offset by a $15.3 million
increase in segment operating expenses. Segment operating income as a percentage of segment revenue for
Applications increased from 28% to 31% mainly due to increased sales of higher margin software products.

The increase in Scores segment operating income was attributable to a $7.1 million increase in segment

revenue, primarily attributable to an increase in Credit Bureau Risk Scores driven by a couple of large projects
conducted by a major customer utilizing historical Credit Bureau Risk Scores, and a $2.4 million decrease in
segment operating expenses, driven by a decrease in digital marketing and third-party data costs.

The increase in Tools segment operating income was attributable primarily to an $8.1 million increase in

segment revenue partially offset by a $4.2 million increase in segment operating expenses. The increase in
segment revenue was primarily due to an increase of services and software revenues related to our Blaze Advisor
and Xpress Optimization products. Segment operating income as a percentage of segment revenue for Tools
increased from 20% to 23% mainly due to increased sales of higher margin software products.

Capital Resources and Liquidity

Outlook

As of September 30, 2013, we had $83.2 million in cash and cash equivalents which included $64.0 million

held off-shore by our foreign subsidiaries. We believe 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. Additionally, we do not anticipate the need to repatriate any undistributed earnings
from our foreign subsidiaries for the foreseeable future.

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, 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.

Summary of Cash Flows

Cash provided by/(used in):
Operating activities
Investing activities
Financing activities

Effect of exchange rate changes on cash

Year Ended September 30,

2013

2012

2011

(In thousands)

$136,120
(34,971)
(86,634)
(2,946)

$ 129,746
(65,670)
(128,453)
234

$136,156
(51,701)
(94,021)
(881)

Increase (decrease) in cash and cash equivalents

$ 11,569

$ (64,143)

$ (10,447)

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 $136.1 million in fiscal 2013 compared to
$129.7 million in fiscal 2012. The $6.4 million increase, despite $1.9 million decrease in net income, was mainly
attributable to an increase in non-cash charges to depreciation and amortization, deferred income taxes and share
based compensation, partially offset by a decrease caused by the timing of receipts and payments in our ordinary
course of business.

Net cash provided by operating activities totaled $129.7 million in fiscal 2012 compared to $136.2 million

in fiscal 2011. The $6.5 million decrease was mainly attributable to a $23.8 million decrease caused by the
timing of receipts and payments in our ordinary course of business, including a $35.1 million decrease from
timing of cash receipts on accounts receivable, partially offset by higher net income for the year ended
September 30, 2012.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $35.0 million in fiscal 2013 compared to $65.7 million in fiscal
2012. The $30.7 million decrease in cash used in investing activities was primarily attributable to a $90.8 million
decrease in net cash used for acquisitions, partially offset by a $61.6 million decrease in proceeds from sales and
maturities of marketable securities, net of purchases.

Net cash used in investing activities totaled $65.7 million in fiscal 2012 compared to $51.7 million in fiscal
2011. The increase in cash used in investing activities was primarily attributable to $123.6 million net cash used
for the acquisition of Adeptra and Entiera and a $11.5 million increase in purchases of property and equipment
during fiscal 2012, partially offset by $83.6 million of proceeds from sales and maturities of marketable
securities, net of purchases, for fiscal 2012 compared to $37.8 million of cash used in purchases of marketable
securities, net of sales and maturities, during fiscal 2011.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $86.6 million in fiscal 2013 compared to $128.5 million in

fiscal 2012. The $41.9 million decrease was primarily due to a $108.3 million decrease in common stock
repurchased, partially offset by a $40.5 million decrease in cash generated from stock option exercises. In
addition, there was a $26.0 million increase in payment on Senior Notes and revolving line of credit, net of
proceeds from revolving line of credit.

Net cash used in financing activities totaled $128.5 million in fiscal 2012 compared to $94.0 million in
fiscal 2011. The $34.5 million increase was primarily due to $191.1 million of common stock repurchased in
fiscal 2012 versus $91.4 million of common stock repurchased in fiscal 2011, partially offset by a $63.2 million
increase in cash generated from stock option exercises attributable to a higher average stock price for fiscal 2012.

Repurchases of Common Stock

From time to time, we repurchase our common stock in the open market. During fiscal 2013, 2012 and

2011, we expended $84.9 million, $184.3 million and $96.3 million, respectively, in connection with our
repurchase of common stock. In August 2012, 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. As of September 30, 2013, we had $65.1 million remaining under this
authorization.

Dividends

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, 2013, we had $15.0 million in borrowings outstanding at an interest rate of 1.3125% and were in
compliance with all financial covenants under this credit facility.

Senior Notes

In May 2008, we issued $275 million of Senior Notes in a private placement to a group of institutional
investors (the “2008 Senior Notes”). The 2008 Senior Notes were issued in four series with maturities ranging
from 5 to 10 years. The Series A note matured on May 7, 2013 and the entire $41 million principal balance was
repaid. The remaining 2008 Senior Notes’ weighted average interest rate is 7.0% and the weighted average
maturity is 8.8 years. In addition, in July 2010, we issued $245 million of Senior Notes in a private placement to
a group of institutional investors (the “2010 Senior Notes” and, with the 2008 Senior Notes, the “Senior Notes”).
The 2010 Senior Notes were issued in four series with maturities ranging from 6 to 10 years. The 2010 Senior
Notes’ weighted average interest rate is 5.2% and the weighted average maturity is 8.0 years. 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. As of
September 30, 2013 we were in compliance with all financial covenants under these purchase agreements.

Contractual Obligations

The following is a summary of our contractual obligations at September 30, 2013:

Year Ended September 30,

2014

2015

2016

2017

2018

Thereafter

Total

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

(In thousands)
$ 8,000 $ 71,000 $60,000 $ 72,000 $131,000 $113,000 $455,000
122,390
19,303
105,198
12,628
9,009
—

26,873
19,173
—

22,136
16,267
—

11,021
21,350
—

15,675
11,104
—

27,382
24,676
—

Total commitments

$60,058 $117,046 $98,403 $103,931 $157,779 $145,371 $691,597

(1) Represents the unpaid principal amount of the Senior Notes.
(2) Represents interest payments on the Senior Notes.
(3) Represents 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, 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 a software arrangement includes one or more
elements to be delivered at a future date provided the following criteria are met: (i) vendor-specific objective
evidence (“VSOE”) of the fair value does not exist for one or more of the delivered items but exists for all
undelivered elements, (ii) all other applicable revenue recognition criteria are met and (iii) the fair value of all of
the undelivered elements is less than the arrangement fee. 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

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 use a proportionate performance model with
hours as the input method of attribution to determine progress towards completion, with consideration also given
to output measures, such as contract milestones, when applicable. In such instances, management is required to
estimate the total estimated hours of the project. 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 defer the associated revenue until the contract is completed. We have
not experienced significant variances between our estimates and actual hours in the past and anticipate that we
will be able to continue to make reasonable estimates in the future. If for some reason we are unable to accurately
estimate the input measures, revenue would be deferred until the contract is complete, and this could have a
material impact on our consolidated results of operations.

Services that are sold in connection with software license arrangements generally qualify for separate

accounting from the license element because they do not involve significant production, modification or
customization of our products and are not otherwise considered to be essential to the functionality of our
software. In arrangements where the professional services do not qualify for separate accounting from the license
element, the combined software license and professional services revenue are recognized based on contract
accounting using either the percentage-of-completion or completed-contract method.

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 customer life. 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 transactions 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 expected life of
the customer relationship. ASP transactional fees are recorded monthly as earned.

Multiple-Deliverable Arrangements including Non-Software

When we enter into a multiple-deliverable arrangement that includes non-software, each deliverable 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 our 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, customer segment pricing strategies and the product lifecycle.

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.

Business Combinations

Accounting for our acquisitions requires us to recognize, separately from goodwill, the assets acquired and
the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the
excess of consideration transferred and the net of the acquisition date fair values of the assets acquired and the
liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and
liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a
result, during the measurement period, which may be up to one year from the acquisition date, we record
adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the
conclusion of the measurement period or final determination of the values of assets acquired or liabilities
assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of
income and comprehensive income.

Accounting for business combinations requires our management to make significant estimates and
assumptions, especially at the acquisition date including our estimates for intangible assets, contractual
obligations assumed, pre-acquisition contingencies and contingent consideration, where applicable. If we cannot
reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the
measurement period, we will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is
probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the
asset or liability can be reasonably estimated. Although we believe the assumptions and estimates we have made
in the past have been reasonable and appropriate, they are based in part on historical experience and information
obtained from the management of the acquired companies and are inherently uncertain. Subsequent to the
measurement period, changes in our estimates of such contingencies will affect earnings and could have a
material effect on our results of operations and financial position.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are

not limited to: (i) future expected cash flows from software license sales, support agreements, consulting
contracts, other customer contracts and acquired developed technologies and patents; (ii) expected costs to
develop the in-process research and development into commercially viable products and estimated cash flows
from the projects when completed, and; (iii) the acquired company’s brand and competitive position, as well as
assumptions about the period of time the acquired brand will continue to be used in the combined company’s
product portfolio. Unanticipated events and circumstances may occur that may affect the accuracy or validity of
such assumptions, estimates or actual results.

estimates being recorded to goodwill provided that we are within the measurement period. Subsequent to the
measurement period or our final determination of the tax allowance’s or contingency’s estimated value,
whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect
our provision for income taxes in our consolidated statements of income and comprehensive income and could
have a material impact on our results of operations and financial position.

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 finite-lived intangible 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 cash flows. Should different conditions prevail,
material write downs of net intangible 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 annual 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. 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 2013 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 substantially exceeded its respective carrying value in fiscal 2013, 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, 2013.

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. 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 estimate our income taxes based on the various jurisdictions where we conduct business, which involves

significant judgment in determining our income tax provision. We estimate our current tax liability using
currently enacted tax rates and laws and assess temporary differences that result from differing treatments of
certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities
recorded on our balance sheet using the currently enacted tax rates and laws that will apply to taxable income for
the years in which those tax assets are expected to be realized or settled. We then assess the likelihood our
deferred tax assets will be realized and to the extent we believe realization is not likely, we establish a valuation
allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we
record a corresponding income tax expense in our consolidated statements of income and comprehensive income.
In assessing the need for the valuation allowance, we consider future taxable income in the jurisdictions we
operate; an analysis of our deferred tax assets and the periods over which they will be realizable; and ongoing
prudent and feasible tax planning strategies. An increase in the valuation allowance would have an adverse
impact, which could be material, on our income tax provision and net income in the period in which we record
the increase.

We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to
evaluate the tax position taken or expected to be taken in a tax return by determining if the technical merits of the
tax position indicate it is more likely than not that the tax position will be sustained upon audit, including
resolution of any related appeals or litigation processes. For tax positions more likely than not of being sustained
upon audit, the second step is to measure the tax benefit as the largest amount more than 50% likely of being
realized upon settlement. Significant judgment is required to evaluate uncertain tax positions and they are
evaluated on a quarterly basis. Our evaluations are based upon a number of factors, including changes in facts or
circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective
settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in
material increases or decreases in our income tax expense in the period in which we make the change, which
could have a material impact on our effective tax rate and operating results.

A description of our accounting policies associated with tax-related contingencies and valuation allowances

assumed as part of a business combination is provided under “Business Combinations” above.

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 Recently Issued or Adopted

In December 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-11, “Balance
Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” (ASU 2011-11). ASU 2011-11 provides
for additional disclosures of both gross information and net information about both instruments and transactions
eligible for offset in the statement of financial position and instruments and transactions subject to an agreement
similar to a master netting arrangement. In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet
(Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” (ASU 2013-01). ASU
2013-01 clarifies that ordinary trade receivables and payables are not in the scope of ASU 2011-11. Specifically,
ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities
borrowing and securities lending transactions that are either offset in accordance with specific criteria contained
in the FASB Accounting Standards Codification™ or subject to a master netting arrangement or similar
agreement. Both ASU 2013-01 and ASU 2011-11 are effective for fiscal years, and interim periods within those
years, beginning on or after January 1, 2013, which means that they will be effective for our fiscal year beginning
October 1, 2013. Retrospective adoption is required. We do not believe that adoption of ASU 2013-01 or ASU
2011-11 will have a significant impact on our consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of

comprehensive income line item. ASU 2013-02 is effective for fiscal years, and interim periods within those
years, beginning on or after December 15, 2012, 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 2013-02 will
have a significant impact on our consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a
Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” (ASU 2013-11).
ASU 2013-11 provides guidance for presentation of an unrecognized tax benefit, or a portion of an unrecognized
tax benefit. ASU 2013-11 provides that a benefit should be presented in the financial statements as a reduction to
a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except
as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not
available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income
taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does
not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the
unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined
with deferred tax assets. ASU 2013-11 is effective for fiscal years and interim periods within those years,
beginning on or after December 15, 2013, which means it will be effective for our fiscal year beginning
October 1, 2014. We do not believe that adoption of ASU 2013-11 will have a significant impact on our
consolidated financial statements.

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 and Equity Market Price

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, 2013
and 2012:

Cash and cash equivalents
Short-term investments

September 30, 2013

September 30, 2012

Cost Basis

Carrying
Amount

Average
Yield

Cost Basis

Carrying
Amount

Average
Yield

$83,178
—

(Dollars in thousands)
0.00% $71,609
0.00% 22,008

$71,609
22,008

0.00%
0.16%

$83,178

0.00% $93,617

$93,617

0.04%

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, 2013 and 2012:

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

September 30, 2013

September 30, 2012

Principal

$210,000
$245,000

Carrying
Amounts

(In thousands)
$210,000
$245,000

Fair Value

Principal

$221,393 $259,000
$241,035 $245,000

Carrying
Amounts

(In thousands)
$259,000
$245,000

Fair Value

$275,201
$243,866

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 $15.0 million in borrowings outstanding at an interest of 1.3125% under
the credit facility as of September 30, 2013.

Forward Foreign Currency Contracts

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 currencies. 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 remeasured at foreign currency
rates in effect on the balance sheet date with the effects of changes in foreign currency rates reported in other
income (expense), net. The forward contracts are not designated as hedges and are marked to market through
other income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of
the remeasured 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 our outstanding forward foreign currency contracts, by currency at

September 30, 2013 and 2012:

September 30, 2013

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 4,700
EUR 5,400

$ 4,542
$ 7,307

$—
—

GBP 6,513

$10,500

—

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, 2012

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 2,750
EUR 4,060

$2,794
$5,255

$—
—

GBP 6,131

$9,950

—

The forward foreign currency contracts were entered into on September 30 of each fiscal year; therefore, the

fair value was $0 on September 30, 2013 and 2012.

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
San Jose, California

We have audited the accompanying consolidated balance sheets of Fair Isaac Corporation and subsidiaries (the
“Company”) as of September 30, 2013 and 2012, and the related consolidated statements of income and
comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended
September 30, 2013. We also have audited the Company’s internal control over financial reporting as of September 30,
2013 based on the criteria established in Internal Control — Integrated Framework (1992) 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 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 financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the 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, 2013 and 2012, and the results of their operations and
their cash flows for each of the three years in the period ended September 30, 2013, 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, 2013,
based on the criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP
Minneapolis, MN
November 12, 2013

FAIR ISAAC CORPORATION
CONSOLIDATED BALANCE SHEETS

Assets

Current 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

Total assets

Current liabilities:

Liabilities and Stockholders’ Equity

Accounts payable
Accrued compensation and employee benefits
Other accrued liabilities
Deferred revenue
Current maturities on debt

Total current liabilities

Senior notes
Other liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity:

September 30,

2013

2012

(In thousands, except par value
data)

83,178
—

143,733
22,277

249,188

7,107
11,033
45,155
773,931
57,361
11,132
6,640

71,609
22,008
142,595
23,113

259,325

5,417
11,083
41,080
757,504
52,299
22,856
9,047

$ 1,161,547

$ 1,158,611

19,216
39,281
35,202
49,181
23,000

165,880

447,000
17,990

630,870

18,958
50,043
43,645
47,959
49,000

209,605

455,000
19,600

684,205

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 34,786 and 34,839 shares outstanding at September 30, 2013 and
2012, respectively)

Paid-in-capital
Treasury stock, at cost (54,071 and 54,018 shares at September 30, 2013 and

2012, respectively)

Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

348
1,110,198

348
1,103,611

(1,751,057)
1,192,096
(20,908)

(1,718,570)
1,104,825
(15,808)

530,677

474,406

$ 1,161,547

$ 1,158,611

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE 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 and acquisition-related

Total operating expenses

Operating income
Interest income
Interest expense
Other income (expense), net

Income before income taxes
Provision for income taxes

Net income

Other comprehensive income (loss):

Unrealized losses on investments, net of tax benefit of $3 and $23, for

the years ended September 30, 2012 and 2011, respectively

Foreign currency translation adjustments

Comprehensive income

Basic earnings per share

Shares used in computing basic earnings per share

Diluted earnings per share

Shares used in computing diluted earnings per share

Year Ended September 30,

2013

2012

2011

(In thousands, except per share data)

$514,304
135,194
93,946

$466,175
124,971
85,277

$453,430
115,941
50,312

743,444

676,423

619,683

229,468
66,967
268,395
13,535
3,486

197,947
59,527
238,522
6,944
5,125

186,470
62,129
223,615
7,741
12,391

581,851

508,065

492,346

161,593
54
(30,281)
618

131,984
41,889

168,358
317
(31,734)
(698)

136,243
44,239

90,095

92,004

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

97,455
25,893

71,562

—
(5,100)

(4)
5,905

(33)
(1,998)

$ 84,995

$ 97,905

$ 69,531

2.55

2.64

1.82

35,332

34,909

39,359

2.48

2.55

1.79

36,292

36,063

39,988

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

assets. See Note 7 to consolidated financial statements.

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended September 30, 2013, 2012 and 2011
(In thousands, except per share data)

Common
Stock

Par
Value

Paid-in-
Capital

Treasury
Stock

Retained
Earnings

Balance at September 30, 2010 39,882 $399 $1,103,244 $(1,556,253) $ 947,202
Share-based compensation
Issuance of treasury stock under

15,500

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid ($0.08 per share)
Net income
Unrealized losses on

investments, net of tax benefit
of $23

Foreign currency translation

adjustments

800

(17,757)

25,362

—

— —

(3,598)

(36)

— —
— —

(2,599)
—
—
—

—
(96,289)
—
—

—
—
(3,140)
71,562

— —

—

Balance at September 30, 2011 37,084 371
Share-based compensation
— —
Issuance of treasury stock under

1,098,388
21,229

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

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid ($0.08 per share)
Net income
Unrealized losses on

investments, net of tax benefit
of $3

Foreign currency translation

adjustments

2,942

(22,085)

92,849

— —

(5,187)

(52)

— —
— —

— —

6,079
—
—
—

—

(184,239)

—
—

—

Balance at September 30, 2012 34,839 348
Share-based compensation
— —
Issuance of treasury stock under

1,103,611
25,850

(1,718,570) 1,104,825

—

1,642

(22,150)

52,389

—

—
—
(2,803)
92,004

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid ($0.08 per share)
Net income
Foreign currency translation

— —

(1,695)

(17)

— —
— —

2,887
—
—
—

—
(84,876)
—
—

—
—
(2,824)
90,095

Accumulated
Other
Comprehensive
Income
(Loss)

$(19,678)

—

—
—
—
—

Total
Stockholders’
Equity

$ 474,914
15,500

7,613

(2,599)
(96,325)
(3,140)
71,562

(33)

(1,998)

(21,709)
—

—

—
—
—
—

(1,998)

465,494
21,229

70,793

6,079
(184,291)
(2,803)
92,004

(4)

5,905

(15,808)
—

—

—
—
—
—

5,905

474,406
25,850

30,256

2,887
(84,893)
(2,824)
90,095

adjustments

— —

—

(5,100)

Balance at September 30, 2013 34,786 $348 $1,110,198 $(1,751,057) $1,192,096

$(20,908)

$ 530,677

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 of (benefit from) doubtful accounts
Net loss on sales of property and equipment

Changes in operating assets and liabilities:

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
Purchases of marketable securities
Proceeds from sale of marketable securities
Proceeds from maturities of marketable securities
Cash paid for acquisitions, net of cash acquired
Distribution from (purchase of) cost method investees

Net cash used in investing activities

Cash flows from financing activities:
Proceeds from revolving line of credit
Payments on revolving line of credit and other short-term loans
Payments on senior notes
Debt issuance costs
Proceeds from issuance of treasury stock under employee stock 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

Year Ended September 30,

2013

2012

2011

(In thousands)

$ 90,095

$ 92,004

$ 71,562

33,214
25,850
3,671
2,887
(6,362)
8
327
351

1,286
(822)
(590)
(11,729)
1,823
(3,889)
136,120

(24,147)
—
—
22,000
(32,874)
50
(34,971)

21,549
21,229
(7,121)
6,079
(8,079)
221
(122)
63

(26,490)
802
6,810
11,314
1,455
10,032
129,746

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)
136,156

(25,483)
(48,067)
—
131,659
(123,631)
(148)
(65,670)

(14,020)
(144,224)
13,644
92,759
—
140
(51,701)

30,000
(18,676)
(49,000)
—
30,256
(2,824)
(82,752)
6,362
(86,634)
(2,946)
11,569
71,609
$ 83,178

—
(5,466)
(8,000)
—
70,793
(2,803)
(191,056)
8,079
(128,453)
234
(64,143)
135,752
$ 71,609

—
—
(8,000)
(736)
7,613
(3,140)
(91,422)
1,664
(94,021)
(881)
(10,447)
146,199
$ 135,752

Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds of $2,471, $584 and $207 during

the years ended September 30, 2013, 2012 and 2011, respectively

Cash paid for interest
Supplemental disclosures of non-cash investing and financing activities:
Unsettled repurchases of common stock
Purchase of property and equipment included in accounts payable

$ 24,141
$ 31,011

$ 36,852
$ 31,421

$ 11,460
$ 31,974

$
$

2,141
681

$
$

— $
$
641

6,765
4,790

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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.
Significant items subject to such estimates and assumptions include, but are not limited to: revenue recognition;
recoverability of accounts receivable; valuation of goodwill and intangible assets, including impairment
assessment; valuation of share-based compensation; and realizability of deferred tax assets.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and investments with an original 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 derivative instruments is disclosed in Note 5. The fair
value of our Senior Notes is disclosed in Note 10.

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
are carried at fair value with unrealized gains or losses related to these securities included in accumulated other

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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 (expense), net on the
consolidated statements of income and comprehensive 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. The investment is originally recorded at cost and adjusted for additional
contributions or distributions. Management periodically reviews 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. We currently do not have investments in which we own
20% to 50% and exercise significant influence over operating and financial policies, therefore we do not account
for any investment under the equity method.

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 and banking 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

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 statements of
income and comprehensive income. Depreciation and amortization on property and equipment totaled
$19.7 million, $14.6 million and $16.5 million during fiscal 2013, 2012 and 2011, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Internal-use Software

Costs incurred to develop internal-use software during the application development stage are capitalized and

reported at cost. 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. Software development costs required to be capitalized for internal-use software have not been
material to date.

Capitalized Software and Research and Development Costs

Software development costs relating to products to be sold in the normal course of business are expensed as
incurred as research and development costs until technological feasibility is established. 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 consolidated statements of income and comprehensive income.

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. 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. We performed our annual goodwill
impairment tests as of July 1, 2013 and 2012, and determined our goodwill was not impaired.

Finite-lived intangible assets are tested for impairment if impairment indicators arise. We amortize our

finite-lived intangible assets which result from our acquisitions over the following estimated useful lives:

Completed technology
Customer contracts and relationships
Trade names

Estimated Useful Life

4 to 10 years
5 to 15 years
1 to 5 years

Revenue Recognition

Software Licenses

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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.

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

Transactional-based Revenues

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

Consulting Services

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

hours as the input method of attribution to determine progress towards completion, with consideration also given
to output measures, such as contract milestones, when applicable. In such instances, management is required to
estimate the total estimated hours of the project. 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 defer the associated revenue until the contract is completed. We have
not experienced significant variances between our estimates and actual hours in the past and anticipate that we
will be able to continue to make reasonable estimates in the future. If for some reason we are unable to accurately
estimate the input measures, revenue would be deferred until the contract is complete, and this could have a
material impact on our consolidated results of operations.

Services that are sold in connection with software license arrangements generally qualify for separate

Hosting Services

Multiple-Deliverable Arrangements including Non-Software

When we enter into a multiple-deliverable arrangement that includes non-software, each deliverable is

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

able to use TPE. When we are unable to establish selling price using VSOE or TPE, we use estimated selling
price (“ESP”) in our 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, customer segment pricing strategies and the product lifecycle.

Gross vs. Net Revenue Reporting

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

Business Combinations

Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a
business combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based
upon facts and circumstances that existed as of the acquisition date with any adjustments to our preliminary
estimates being recorded to goodwill provided that we are within the measurement period. Subsequent to the
measurement period or our final determination of the tax allowance’s or contingency’s estimated value,
whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect
our provision for income taxes in our consolidated statements of income and comprehensive income and could
have a material impact on our results of operations and financial position.

Income Taxes

We estimate our income taxes based on the various jurisdictions where we conduct business, which involves
significant judgment in determining our income tax provision. We estimate our current tax liability using currently
enacted tax rates and laws and assess temporary differences that result from differing treatments of certain items for
tax and accounting purposes. These differences result in deferred tax assets and liabilities recorded on our balance
sheet using the currently enacted tax rates and laws that will apply to taxable income for the years in which those tax
assets are expected to be realized or settled. We then assess the likelihood our deferred tax assets will be realized
and to the extent we believe realization is not likely, we establish a valuation allowance. When we establish a
valuation allowance or increase this allowance in an accounting period, we record a corresponding income tax
expense in our consolidated statements of income and comprehensive income. In assessing the need for the
valuation allowance, we consider future taxable income in the jurisdictions we operate; an analysis of our deferred
tax assets and the periods over which they will be realizable; and ongoing prudent and feasible tax planning
strategies. An increase in the valuation allowance would have an adverse impact, which could be material, on our
income tax provision and net income in the period in which we record the increase.

A description of our accounting policies associated with tax-related contingencies and valuation allowances

assumed as part of a business combination is provided under “Business Combinations” above.

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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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 and Derivative Financial Instruments

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. Foreign currency translation adjustments are accumulated as a separate component of consolidated
stockholders’ equity.

We utilize derivative 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. We principally utilize foreign currency forward contracts to protect against market risks arising in the
normal course of business. Our policies prohibit the use of derivative 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.

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

the functional currencies 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 (expense), net in the
accompanying consolidated statements of income and comprehensive income. We recorded transactional foreign
currency exchange losses of $0.8 million, $1.5 million and $1.0 million during fiscal 2013, 2012 and 2011,
respectively.

Share-Based Compensation

Impairment of Long-Lived Assets

We assess potential impairment of 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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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 as 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, 2013 and 2012.

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 and comprehensive income.
Advertising and promotion costs totaled $2.5 million, $1.8 million and $1.0 million in fiscal 2013, 2012 and
2011, respectively.

New Accounting Pronouncements Recently Issued or Adopted

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of

Amounts Reclassified Out of Accumulated Other Comprehensive Income.” (ASU 2013-02). ASU 2013-02
requires reporting entities to provide information about the amounts reclassified from accumulated other
comprehensive income by component. In addition, reporting entities will be required to present, either on the
face of the statement of income and comprehensive income or in the footnotes to the financial statements,
significant amounts reclassified from accumulated other comprehensive income by statements of income and
comprehensive income line item. ASU 2013-02 is effective for fiscal years, and interim periods within those
years, beginning on or after December 15, 2012, 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 2013-02 will
have a significant impact on our consolidated financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does
not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the
unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined
with deferred tax assets. ASU 2013-11 is effective for fiscal years and interim periods within those years,
beginning on or after December 15, 2013, which means it will be effective for our fiscal year beginning
October 1, 2014. We do not believe that adoption of ASU 2013-11 will have a significant impact on our
consolidated financial statements.

2. Business Combinations

CR Software

On November 21, 2012, we acquired 100% of the ownership interest of CR Software, LLC (“CR
Software”), a provider of enterprise-class collections and recovery solutions for credit issuers, government
organizations, collection agencies, retailers, healthcare and other leading enterprises. The primary objective of
the acquisition was to help us accelerate the delivery of robust collections and recovery capabilities to clients
across multiple industries and organization sizes.

The following table summarizes the consideration paid for CR Software and the allocation of purchase price

to assets acquired and liabilities assumed, recognized based on a valuation at the acquisition date:

Consideration
Cash

Acquisition-related costs (included in the company’s consolidated statement of income and

comprehensive income for the year ended September 30, 2013 as a component of restructuring
and acquisition-related expense)

Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Property and equipment, net
Intangible assets:

Completed technology
Customer relationships
Trade names

Other assets
Accounts payable
Accrued compensation and employee benefits
Other accrued liabilities
Deferred revenue
Notes payable to affiliate

Total identifiable net assets

Goodwill

Total

(In thousands)

$29,649

306

$ 1,211
2,943
119
238

10,800
5,500
200
28
(400)
(506)
(1,057)
(178)
(2,925)

15,973

13,676

$29,649

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

The acquired identifiable intangible assets have a weighted average useful life of approximately 8.8 years
and are being amortized using the straight-line method over their estimated useful lives as follows: completed
technology, five to ten years, customer relationships, ten years, and trade names, one year. The goodwill of
$13.7 million arising from the acquisition consists largely of the revenue synergies created by market expansion
and increasingly rapid innovation for our collections & recovery solutions. The goodwill was allocated to our
Applications segment and is not deductible for tax purposes. CR Software has been included in our operating
results since the acquisition date.

Infoglide

On April 1, 2013, we acquired 100% of the common stock of Infoglide Software, Inc. (“Infoglide”) for

$4.4 million in cash. Infoglide is a provider of entity resolution and social network analysis solutions used
primarily to improve fraud detection, security and compliance. Infoglide’s solutions expedite fraud investigations
and will further differentiate FICO’s fraud solutions in banking, insurance, retail and healthcare, as well as
enabling FICO analytics to be applied to fraud, security and compliance challenges across multiple industries,
including telecommunications and cyber-security. Infoglide has been included in our operating results since the
acquisition date.

The pro forma impact of these acquisitions was not deemed material to our results of operations for the

periods presented.

3. 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, 2013 and 2012:

September 30, 2013

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Amortized
Cost

(In thousands)

September 30, 2012

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

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

$82,493
439
246

$ —
—
—

$— $82,493 $70,965
—
—

$—
397 —
247 —

439
246

$— $70,965
397
—
247
—

Total

$83,178

$ —

$— $83,178 $71,609

$—

$— $71,609

Short-term Marketable

Securities:

U.S. government obligations
U.S. corporate debt

$ — $ —
—

—

$— $ — $20,001
2,007
—
—

Total

$ — $ —

$— $ — $22,008

$—
1

$ (1)
—

$20,000
2,008

$ (1)

$22,008

Long-term Marketable

Securities:

Marketable equity securities

$ 6,006

$1,101

$— $ 7,107 $ 5,016

$401

$— $ 5,417

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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 senior management employees, which are distributed upon termination or retirement of the employees.

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, 2012:

September 30, 2012

Less than 12 months

12 months or greater

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

$15,000

$(1)

$—

$15,000

$(1)

Description of Securities:
U.S. government obligations

Total

4. 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 assets are comprised of money market funds and certain equity securities.

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 assets 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, 2013, 2012 and 2011

The following table represents financial assets that we measured at fair value on a recurring basis at

September 30, 2013 and 2012:

September 30, 2013

Assets:
Cash equivalents (1)
Marketable securities (3)

Total

September 30, 2012

Assets:
Cash equivalents (1)
U.S. corporate debt (2)
U.S. government 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, 2013

$ 685
7,107

$7,792

(In thousands)

$—
—

$—

$ 685
7,107

$7,792

Active Markets for
Identical Instruments
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Fair Value as of
September 30, 2012

$ 644
—
—
5,417

$6,061

(In thousands)

$ —
2,008
20,000
—

$22,008

644
2,008
20,000
5,417

$28,069

(1)

Included in cash and cash equivalents on our balance sheet at September 30, 2013 and 2012. Not included in
this table are cash deposits of $82.5 million and $71.0 million at September 30, 2013 and 2012, respectively.
Included in current marketable securities on our balance sheet at September 30, 2012.

(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, 2013 and 2012.

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 and Senior Notes, see Note 5 and Note 10 to the

consolidated financial statements, respectively.

5. Derivative Financial Instruments

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

foreign currency exchange rates. We routinely enter into contracts to offset exposures denominated in the British
pound, Euro and Canadian dollar.

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

September 30, 2013 and 2012:

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, 2013

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 4,700
EUR 5,400

$ 4,542
$ 7,307

GBP 6,513

$10,500

$—
—

—

September 30, 2012

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD 2,750
EUR 4,060

$2,794
$5,255

GBP 6,131

$9,950

$—
—

—

The forward foreign currency contracts were entered into on September 30 of each fiscal year; therefore,

their fair value was $0 at September 30, 2013 and 2012.

Gains on derivative financial instruments are recorded in our consolidated statements of income and
comprehensive income as a component of other income (expense), net. These amounts are shown below for the
years ended September 30, 2013, 2012 and 2011:

Foreign currency forward contracts

Year Ended September 30,

2013

2012

2011

(in thousands)
$453

$—

$25

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

6. Receivables

Receivables at September 30, 2013 and 2012 consisted of the following:

September 30,

2013

2012

Billed
Unbilled (1)

Less: allowance for doubtful accounts

Receivables, net

(In thousands)

$115,640
31,250

$113,514
32,487

146,890
(3,157)

146,001
(3,406)

$143,733

$142,595

(1) Represents 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.

Activity in the allowance for doubtful accounts was as follows:

Balance, beginning of year

Add: expense
Less: write-offs (net of recoveries)

Balance, end of year

Year Ended September 30,

2013

2012

(In thousands)

$3,406
327
(576)

$3,157

$3,714
(122)
(186)

$3,406

7. Goodwill and Intangible Assets

Intangible assets that are subject to amortization consisted of the following at September 30, 2013 and 2012:

Completed technology
Customer contracts and

relationships

Trade names

Foreign currency translation

adjustments

Intangible assets, net

September 30, 2013

September 30, 2012

Gross
Carrying
Amount

Accumulated
Amortization

Net

Average
Life

Gross
Carrying
Amount

Accumulated
Amortization

Net

Average
Life

(In thousands, except average life)

$ 84,604 $(53,347) $31,257

$ 92,437 $ (66,950) $25,487

56,321
230

(30,422)
(182)

25,899
48

$141,155 $(83,951)

57,204

13
1

73,046
9,801

(47,224) 25,822
511
(9,290)

$175,284 $(123,464) 51,820

12
3

479

$52,299

157

$57,361

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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

expense caption within the accompanying consolidated statements of income and comprehensive income,
consisted of the following during fiscal 2013, 2012 and 2011:

Cost of revenues
Selling, general and administrative expenses

Total

Year Ended September 30,

2013

2012

2011

$ 6,630
6,905

(In thousands)
$1,332
5,612

$2,274
5,467

$13,535

$6,944

$7,741

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, 2013, was as follows (in thousands):

Year Ended September 30,

2014
2015
2016
2017
2018
Thereafter

Total

$11,557
11,409
11,180
10,044
2,866
10,305

$57,361

The following table summarizes changes to goodwill during fiscal 2013 and 2012, both in total and as

allocated to our operating segments. We have not recognized any goodwill impairment losses to date.

Balance at September 30, 2011
Addition from acquisition
Foreign currency translation adjustment

Balance at September 30, 2012
Addition from acquisition
Foreign currency translation adjustment

Applications

Scores

Tools

Total

(In thousands)

$451,205
87,280
4,458

542,943
17,457
(862)

$146,648
—
—

146,648
—
—

$66,835
—
1,078

67,913
—
(168)

$664,688
87,280
5,536

757,504
17,457
(1,030)

Balance at September 30, 2013

$559,538

$146,648

$67,745

$773,931

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

8. Composition of Certain Financial Statement Captions

The following table presents the composition of property and equipment and other accrued liabilities at

September 30, 2013 and 2012:

Property and equipment:

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

Total

Other accrued liabilities:
Interest payable
Income taxes payable
Other

Total

September 30,

2013

2012

(In thousands)

$ 139,035
11,670
24,117
(129,667)

$ 161,215
6,963
21,341
(148,439)

$ 45,155

$ 41,080

8,519
6,821
19,862

9,747
11,754
22,144

$ 35,202

$ 43,645

9. Revolving Line of Credit

10. Senior Notes

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

investors (the “2008 Senior Notes”). The 2008 Senior Notes were issued in four series as follows:

Series

A
B
C
D

Amount

Interest Rate

Maturity Date

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

6.37%
6.37%
6.71%
7.18%

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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

investors (the “2010 Senior Notes” and, with the 2008 Senior Notes, the “Senior Notes”). The 2010 Senior Notes
were issued in four series as follows:

Series

Amount

Interest Rate

Maturity Date

E
F
G
H

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

4.72%
5.04%
5.42%
5.59%

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

We are required to pay the entire unpaid principal balances of each note series on its maturity date except
for Series B notes, which required annual principal payments of $8.0 million starting on May 7, 2011 and ending
on May 7, 2015. The Series A note matured on May 7, 2013 and the entire $41 million principal balance was
repaid. The Senior Notes require interest payments semi-annually and also include certain restrictive covenants.
As of September 30, 2013, we were in compliance with all financial covenants which include the maintenance of
consolidated net debt to consolidated EBITDA ratio and a fixed charge coverage ratio. The issuance of the Senior
Notes also required us to make certain covenants typical of unsecured facilities.

The following table presents the principal amounts, carrying amounts, and fair values for our Senior Notes

at September 30, 2013 and 2012:

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

September 30, 2013

September 30, 2012

Principal

$210,000
$245,000

Carrying
Amounts

(In thousands)
$210,000
$245,000

Fair Value

Principal

$221,393 $259,000
$241,035 $245,000

Carrying
Amounts

(In thousands)
$259,000
$245,000

Fair Value

$275,201
$243,866

We measure the fair value of our Senior Notes based on Level 2 inputs, which include quoted market prices

and interest rate spreads of similar securities.

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

Year Ended September 30,

2014
2015
2016
2017
2018
Thereafter

Total

8,000
71,000
60,000
72,000
131,000
113,000

$455,000

11. Employee Benefit Plans

Defined Contribution Plans

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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 $6.3 million, $5.5 million and
$5.1 million during fiscal 2013, 2012 and 2011, 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 $10.5 million, $17.4 million
and $10.1 million during fiscal 2013, 2012 and 2011, respectively.

12. Restructuring Expenses

During fiscal 2013, we incurred net charges totaling $2.5 million consisting of $1.6 million in facilities
charges associated with vacating excess leased space in Minnesota, $1.1 million in severance charges due to the
elimination of 52 positions primarily in the U.S., and a reversal of $0.2 million of previously recognized
severance costs due to favorable adjustments. Cash payments for all the severance costs were paid during fiscal
2013. Cash payments for substantially all the facilities charges will be paid by the end of fiscal 2014.

During fiscal 2012, we incurred $4.0 million in severance charges due to the elimination of 85 positions
mainly within the product and technology organization of the Company. Cash payments for all the severance
costs have been paid by the end of fiscal 2013.

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 all the
severance costs were paid during fiscal 2011. Cash payments for substantially all the facilities charges have been
paid by the end of fiscal 2013.

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

Accrual at
September 30,
2011

$ 5,362
1,034

6,396

(3,062)

$ 3,334

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Accrual at
September 30,
2011

$ 5,362
1,034

Expense
Additions

Cash
Payments

Expense
Reversals

(In thousands)

$ — $(2,029)

$—
(2,541) —

3,978

6,396

$3,978

$(4,570)

$—

(3,062)

$ 3,334

Accrual at
September 30,
2012

$ 3,333
2,471

Expense
Additions

Cash
Payments

Expense
Reversals

$1,624
1,095

(In thousands)
$(3,225)
(3,313)

$ —

(253)

5,804

$2,719

$(6,538)

$(253)

(4,944)

860

Accrual at
September 30,
2012

$ 3,333
2,471

5,804

(4,944)

860

Accrual at
September 30,
2013

$ 1,732
—

1,732

(1,732)

$ —

Facilities charges
Employee separation

Less: current portion

Non-current

Facilities charges
Employee separation

Less: current portion

Non-current

13. Income Taxes

The provision for income taxes was as follows during fiscal 2013, 2012, and 2011:

Current:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended September 30,

2013

2012

2011

(In thousands)

$31,469
2,755
3,994

$42,502
4,899
3,959

$22,019
2,873
(251)

38,218

51,360

24,641

(468)
2,069
2,070

3,671

(6,843)
(925)
647

(7,121)

59
(112)
1,305

1,252

Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$41,889

$44,239

$25,893

The foreign provision was based on foreign pretax earnings of $24.3 million, $26.9 million and

$20.6 million in fiscal 2013, 2012, and 2011, respectively. Current foreign tax expense related to foreign tax
withholdings was $4.8 million, $6.3 million and $5.4 million in fiscal 2013, 2012, and 2011, respectively.
Foreign withholding tax and related foreign tax credits are included in federal current tax expense above.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Deferred tax assets and liabilities at September 30, 2013 and 2012 were as follows:

September 30,

2013

2012

(In thousands)

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
. . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,529
4,074
165
1,101
1,662
16,443
2,139
1,127
2,155
7,093

$ 22,120
2,310
91
1,141
1,297
20,109
3,577
1,774
3,629
14,183

Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:

57,488
(8,712)

48,776

70,231
(5,425)

64,806

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(29,912)
(3,526)
(1,515)

(31,364)
(3,405)
(1,019)

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . .

(34,953)

(35,788)

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13,823

$ 29,018

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 assets, net of the existing valuation allowance at September 30, 2013.

For fiscal 2013, the increase in the valuation allowance was due to a change in the California tax law in

which FICO adopted the single sales factor election that will result in lower income apportioned to California.
The lower income apportioned to California in the future will result in FICO not being able to utilize the existing
Research & Development Tax credits it had recorded as deferred tax assets. The remaining valuation allowance
is associated with operations where the Company has a Net Operating Loss (“NOL”) carryforward where
realization remains uncertain.

As of September 30, 2013, we had available U.S. federal, state and foreign NOL carryforwards of
approximately $31.5 million, $6.2 million, and $10.2 million, respectively. The NOLs were acquired in
connection with our acquisitions of Braun in fiscal 2005, Adeptra and Entiera in fiscal 2012, and Infoglide in
fiscal 2013. The change in NOL during fiscal 2013 was due to utilization of federal NOL and acquisition of
Infoglide. 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 at various dates beginning in fiscal 2021, if not
utilized. The UK NOL carryforward does not have an expiration date. 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. We also have available excess California
state research credit of approximately $3.4 million. The California state research credit does not have an

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

expiration date; however, due to the adoption of the single sales factor election, FICO has recorded a valuation
allowance of $3.4 million.

The reconciliation between the U.S. federal statutory income tax rate of 35% and our effective tax rate is

shown below for fiscal 2013, 2012 and 2011:

Income tax provision at U.S. federal statutory rate . . . . . .
State income taxes, net of U.S. federal benefit
. . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic production deduction . . . . . . . . . . . . . . . . . . . . .
Tax audit settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CA Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2013

2012

2011

$46,194
2,689
(2,855)
(32)
(2,412)
(2,168)
—
2,310
(1,837)

(In thousands)
$47,685
3,663
(3,616)
2,692
(375)
(3,054)
(1,203)
—
(1,553)

$34,117
2,770
(9,867)
3,822
(2,559)
(2,494)
1,524
—
(1,420)

Recorded income tax provision . . . . . . . . . . . . . . . . . . . . .

$41,889

$44,239

$25,893

The 2013 effective tax rate was positively impacted by the reenactment of the U.S. Federal Research and
Development Credit. The 2012 effective tax rate was negatively impacted by the expiration of the U.S. Federal
Research and Development credit and a one-time tax impact of a legal entity restructuring charge.

In 2013 and 2012, the foreign taxes consist of tax rate differentials, local country permanent items, and prior

years’ true ups.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S.

subsidiaries in those operations. As of September 30, 2013, the Company has not made a provision for U.S. or
additional foreign withholding taxes on approximately $48.6 million of the excess of the amount for financial
reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration.
Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain
other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in
these foreign subsidiaries.

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 a 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
years 2008 through 2012 and by California Franchise Tax Board for fiscal 2006 through 2011. We do not
anticipate any adjustments related to those audits that will result in a material change to our consolidated
financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Gross unrecognized tax benefits at beginning of year . . . . . . . . . . . . .
Gross increases for tax positions in prior years . . . . . . . . . . . . . . . . . .
Gross decreases for tax positions in prior years . . . . . . . . . . . . . . . . . .
Gross increases based on tax positions related to the current year . . . .
Decreases for settlements and payments . . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

2013

2012

2011

$7,501
508
—
1,000
—

(In thousands)
$ 9,539
64
(2,035)
681
(748)

$12,286
547
—
1,000
(4,294)

Gross unrecognized tax benefits at end of year . . . . . . . . . . . . . . . . . .

$9,009

$ 7,501

$ 9,539

We had $9.0 million of total unrecognized tax benefits as of September 30, 2013. Included in the

$9.0 million of total gross unrecognized tax benefits as of September 30, 2013 was $7.2 million of tax benefits
that, if recognized, would impact the effective tax rate. Although the timing and outcome of audit settlements are
uncertain, it is reasonably possible that a $7.0 million reduction of the uncertain tax benefits will occur in 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 and comprehensive income. We recognize interest earned
related to income tax matters as interest income in our consolidated statements of income and comprehensive
income. As of September 30, 2013, we have accrued interest of $0.9 million related to the unrecognized tax
benefits.

14. Stock-Based Employee Benefit Plans

Description of Stock Option and Share Plans

We maintained the 1992 Long-term Incentive Plan (the “1992 Plan”) under which we could grant stock

options, stock appreciation rights, restricted stock, restricted stock units and common stock to officers, key
employees and non-employee directors. The 1992 Plan expired by its terms on February 4, 2012.

In November 2003, our Board of Directors approved the adoption of the 2003 Employment Inducement
Award Plan (the “2003 Plan”). The 2003 Plan reserved 2,250,000 shares of common stock solely for the granting
of inducement stock options and other awards, as defined, that met 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
were generally consistent with those made under our 1992 Plan. The Compensation Committee terminated the
2003 Plan, effective February 7, 2012.

On February 7, 2012 our shareholders approved the adoption of the 2012 Long-Term Incentive Plan (the
“2012 Plan”). The 2012 Plan authorizes the issuance of 6,000,000 shares of our common stock. Unused shares
under the 1992 Plan and the 2003 Plan will not be available for grants under the 2012 Plan. Under the terms of
the 2012 Plan, the pool of shares available for issuance may be used for all types of equity awards available
under the 2012 Plan, which include stock options, stock appreciation rights, restricted stock awards, stock unit
awards and other stock-based awards. All employees, consultants and advisors of FICO or any subsidiary, as well
as all non-employee directors will be eligible to receive awards under the 2012 Plan. As of September 30, 2013,
1,731,492 shares remained available for grants under this plan. The 2012 Plan will terminate on the tenth

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

anniversary of its adoption by our Board of Directors. Stock option awards granted typically have a maximum
term of seven years and vest ratably over four years. Stock option awards granted prior to October 1, 2005 under
the 1992 Plan 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.

At September 30, 2013, 2,707,966 shares remained available for issuance.

Share-Based Compensation Expense

We recorded share-based compensation expense of $25.9 million, $21.2 million and $15.5 million in fiscal
years 2013, 2012 and 2011, respectively. The total tax benefit related to this share-based compensation expense
was $9.2 million, $7.8 million and $5.8 million in fiscal 2013, 2012 and 2011, respectively. As of September 30,
2013, there was $54.5 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 2.67 years.

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 2013, 2012 and 2011:

Year Ended September 30,

2013

2012

2011

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)

4.10

4.27

37%

4.31
35-37% 38-41% 39-41%
40%
0.5-1.1% 0.5-1.5% 0.6-2.1%
0.3%
0.3%

0.2%
0.3%
0.2% 0.2-0.3%

40%

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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

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.

The fair value of restricted stock units 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.

Stock-Based Activity

The following table summarizes option activity during fiscal 2013:

Outstanding at October 1, 2012
Granted
Exercised
Forfeited
Expired

Outstanding at September 30, 2013

Options exercisable at September 30, 2013

Vested and expected to vest at September 30, 2013

Weighted-
average
Exercise
Price

Weighted-
average
Remaining
Contractual
Term

Aggregate
Intrinsic Value

(In years)

(In thousands)

$33.01
42.86
31.79
26.03
44.73

$35.48

$32.57

$35.03

4.86

3.57

4.78

$53,203

$21,388

$49,312

(In thousands)
4,034
757
(1,360)
(334)
(410)

2,687

942

2,435

The weighted average fair value of options granted were $12.53, $12.32 and $8.02 during fiscal 2013, 2012

and 2011, respectively. The aggregate intrinsic value of options outstanding at September 30, 2013 was
calculated as the difference between the exercise price of the underlying options and the market price of our
common stock for all 2.7 million outstanding shares, which had exercise prices lower than the $55.28 market
price of our common stock at September 30, 2013. The total intrinsic value of options exercised was
$19.8 million, $31.2 million and $4.4 million during fiscal 2013, 2012 and 2011, respectively, determined as of
the date of exercise.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

The following table summarizes restricted stock unit activity during fiscal 2013:

Outstanding at October 1, 2012
Granted
Released
Forfeited

Outstanding at September 30, 2013

(In thousands)
1,732
782
(603)
(195)

1,716

Weighted-
average
Price

$33.31
42.59
30.08
34.57

38.54

The weighted average fair value of restricted stock units granted were $42.27, $37.8 and $24.38 during

fiscal 2013, 2012 and 2011, respectively. The total intrinsic value of restricted stock units that vested was
$26.7 million, $15.5 million and $9.7 million during fiscal 2013, 2012 and 2011, respectively, determined as of
the date of vesting.

In fiscal 2013 we received $30.3 million in cash from stock option exercises, with the tax benefit realized

for the tax deductions from these exercises of $6.8 million.

Due primarily to our ongoing program of repurchasing shares on the open market, we had approximately
54.1 million treasury shares at September 30, 2013. We satisfy stock option exercises, Purchase Plan issuances
and vesting of restricted stock units from this pool of treasury shares.

15. Earnings Per Share

The following table reconciles the numerators and denominators of basic and diluted earnings per share

(“EPS”) during fiscal 2013, 2012 and 2011:

Numerator for basic and diluted earnings per share — net income

Denominator — share:

Basic weighted-average shares
Effect of dilutive securities

Diluted weighted-average shares

Earnings per share:

Basic

Diluted

Year Ended September 30,

2013

2012

2011

(In thousands, except per share data)
$71,562
$92,004
$90,095

35,332
960

36,292

34,909
1,154

36,063

39,359
629

39,988

2.55

2.48

2.64

2.55

1.82

1.79

The computation of diluted EPS excludes options to purchase approximately 111,000, 1,420,000, and
3,598,000 shares of common stock for fiscal 2013, 2012 and 2011, 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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

16. Related Party Transactions

We have a $10 million investment in convertible preferred stock of a private company. The company is
developing a range of products focused on revenue cycle activities for hospitals and healthcare providers. Related
party revenue was immaterial for the years ended September 30, 2013, 2012 and 2011. The accounts receivable
balance from this company was not significant as of September 30, 2013 and 2012.

17. 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.

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 and acquisition-related 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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

The following tables summarize segment information for fiscal 2013, 2012 and 2011:

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

Year Ended September 30, 2013

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 306,738
110,081
59,265

$175,281
4,012
1,520

$ 32,285
21,101
33,161

$ — $ 514,304
135,194
93,946

—
—

476,084
(346,222)

180,813
(51,781)

86,547
(70,011)

—
(70,966)

743,444
(538,980)

Segment operating income

$ 129,862

$129,032

$ 16,536

$(70,966)

204,464

Unallocated share-based compensation expense
Unallocated amortization expense
Unallocated restructuring and acquisition-related

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other expense, net

Income before income taxes

Depreciation expense

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

(25,850)
(13,535)
(3,486)

161,593
54
(30,281)
618

$ 131,984

$ 14,171

867

$ 1,998

$ 2,643

$ 19,679

Year Ended September 30, 2012

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 263,726
104,637
56,241

$172,218
2,382
1,023

$ 30,231
17,952
28,013

$ — $ 466,175
124,971
85,277

—
—

424,604
(291,778)

175,623
(52,687)

76,196
(58,597)

—
(71,705)

676,423
(474,767)

Segment operating income

$ 132,826

$122,936

$ 17,599

$(71,705)

201,656

Unallocated share-based compensation expense
Unallocated amortization expense
Unallocated restructuring and acquisition-related

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other expense, net

Income before income taxes

Depreciation expense

(21,229)
(6,944)
(5,125)

168,358
317
(31,734)
(698)

$ 136,243

$ 11,321

724

$ 1,258

$ 1,302

$ 14,605

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

Year Ended September 30, 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 and acquisition-related

Operating income
Unallocated interest income
Unallocated interest expense
Unallocated other income, net

Income before income taxes

Depreciation expense

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

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

$ 97,455

$ 12,784

1,007

$ 1,667

998

$ 16,456

Our revenues and percentage of revenues by reportable market segments were as follows for fiscal 2013,
2012 and 2011, the majority of which were derived from the sale of products and services within the banking
(including consumer credit) industry:

Applications
Scores
Tools

Total

Year Ended September 30,

2013

2012

2011

(Dollars in thousands)

$476,084
180,813
86,547

64% $424,604
24% 175,623
76,196
12%

63% $383,028
26% 168,567
68,088
11%

62%
27%
11%

$743,444

100% $676,423

100% $619,683

100%

Within our Applications segment our fraud solutions accounted for 22%, 25% and 23% of total revenues in
each of fiscal 2013, 2012 and 2011, respectively; our customer management solutions accounted for 11%, 13%
and 13% of total revenues, in each of these periods, respectively; and our collections & recovery solutions
accounted for 9%, 8% and 8% for each of these periods, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Our revenues and percentage of revenues on a geographical basis are summarized below for fiscal 2013,

2012 and 2011.

United States
United Kingdom
Other countries

Total

Year Ended September 30,

2013

2012

2011

(Dollars in thousands)

$449,437
79,238
214,769

60% $410,178
11%
66,964
29% 199,281

61% $389,676
10%
58,941
29% 171,066

63%
9%
28%

$743,444

100% $676,423

100% $619,683

100%

During fiscal 2013, 2012 and 2011, no individual customer accounted for 10% or more of our total
revenues; however, we derive a substantial portion of 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 16%, 18% and 18% of our total revenues in fiscal 2013, 2012 and 2011,
respectively. At September 30, 2013 and 2012, 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, 2013 and
2012. At September 30, 2013 and 2012, no individual country outside of the United States accounted for 10% or
more of total consolidated net property and equipment.

United States
International

Total

18. Commitments

September 30,

2013

2012

$39,737
5,418

(Dollars in thousands)
88% $35,571
5,509
12%

87%
13%

$45,155

100% $41,080

100%

Minimum future commitments under non-cancelable operating leases and other obligations were as follows

at September 30, 2013:

Year Ended September 30,

2014
2015
2016
2017
2018
Thereafter

Total

Future
Minimum
Lease
Commitments

(In thousands)
$ 24,676
19,173
16,267
12,628
11,104
21,350

$105,198

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2013, 2012 and 2011

Lease Commitments

The above amounts have contractual sublease commitments totaling $1.1 million in fiscal 2014. 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 $22.1 million, $21.3 million and
$21.1 million during fiscal 2013, 2012 and 2011, 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 25 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.

19. 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 record litigation accruals for legal matters which are both probable and estimable. For
legal proceedings for which there is a reasonable possibility of loss (meaning those losses for which the
likelihood is more than remote but less than probable), we have determined we do not have material exposure on
an aggregate basis.

20. 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, 2013, 2012 and 2011

21. 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, 2013. 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

Earnings per share (1):

Basic

Diluted

Shares used in computing earnings per share:

Basic
Diluted

Revenues
Cost of revenues (2)

Gross profit

Net income

Earnings per share (1):

Basic

Diluted

Quarter Ended

September 30,
2013

June 30,
2013

March 31,
2013

December 31,
2012

(In thousands, except per share data)

$190,327
56,809

$183,772
57,655

$179,325
58,856

$190,020
56,148

133,518

126,117

120,469

133,872

$ 28,557

$ 19,622

$ 18,495

$ 23,421

0.81

0.79

0.55

0.54

0.52

0.51

0.67

0.65

35,132
36,151

35,499
36,385

35,664
36,492

35,043
36,151

Quarter Ended

September 30,
2012

June 30,
2012

March 31,
2012

December 31,
2011

(In thousands, except per share data)

$186,075
55,327

$160,478
47,832

$159,521
48,814

$170,349
45,974

130,748

112,646

110,707

124,375

$ 21,246

$ 20,749

$ 20,012

$ 29,997

0.62

0.60

0.61

0.59

0.57

0.55

0.83

0.81

Shares used in computing earnings per share:

Basic
Diluted

34,262
35,513

34,004
35,293

35,331
36,552

36,034
36,887

(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 of $1.7 million, $1.7 million, $1.7 million, $1.5 million,
$0.5 million, $0.1 million, $0.1 million and $0.6 million for the quarters ended September 30, 2013,
June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012
and December 31, 2011, respectively.

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 CEO and CFO,
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,
2013, 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 control 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, 2013.

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, 2013, 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 11, 2014.

Our current executive officers are as follows:

Name

William J. Lansing . . . . . . . . . . . .

Age

Positions Held

January 2012-present, Chief Executive Officer and member of the
Board of Directors of the Company. February 2009-November 2010,
Chief Executive Offer and President, Infospace, Inc. 2004-2007,
Chief Executive Officer and President, ValueVision Media, Inc.
2001-2003, General Partner, General Atlantic LLC. 2000-2001, Chief
Executive Officer, NBC Internet, Inc. 1998-2000, President/Chief
Executive Officer, Fingerhut Companies, Inc. 1996-1998, Vice
President, Corporate Business Development, General Electric
Company. 1996, Executive Vice President, Chief Operating Office,
Prodigy, Inc. 1986-1995, various positions, McKinsey & Company,
Inc.

Michael J. Pung . . . . . . . . . . . . . . . November 2010-present, Executive 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.

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.

Michael J. Gordon . . . . . . . . . . . . . October 2012-present, Executive Vice President of Sales, Services

and Marketing of the Company. April 2009-October 2012, Vice
President and Managing Director, Europe, Middle East, and Africa of
the Company. February 2010-October 2012, Vice President, Global
Lead for Banking of the Company. January 2008-April 2009, Vice
President for Emerging/ Growth Industries & Tools of the Company.
November 2005-January 2008, Vice President, Insurance Industry
Lead of the Company. August 2005-November 2005, Vice President,
Client Partner of the Company.

Name

Positions Held

Andrew N. Jennings . . . . . . . . . . . February 2011-present, Senior Vice President, Chief Analytics

Age

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.

Michael S. Leonard . . . . . . . . . . . . November 2011-present, Vice President, Chief Accounting Officer of

the Company. November 2007-November 2011, Senior Director,
Finance of the Company. July 2000-November 2007, Director,
Finance of the Company. 1998-2000, Controller of Natural
Alternatives International, Inc. 1994-1998, various audit staff
positions at KPMG LLP.

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.

James M. Wehmann . . . . . . . . . . . April 2012-present, Executive Vice President, Scores of the

Company. November 2003-March 2012, Vice President/Senior Vice
President, Global Marketing, Digital River, Inc. March 2002-June
2003, Vice President, Marketing, Brylane, Inc. September 2000-
March 2002, Senior Vice President, Marketing, New Customer
Acquisition, Bank One. 1993-2000, various roles, including Senior
Vice President, Marketing, Fingerhut Companies, Inc.

Stuart C. Wells . . . . . . . . . . . . . . . April 2012-present, Executive Vice President, Chief Technology

Officer of the Company. June 2012 to April 2012, Head of Global
Professional Services and Support of the Company (Consultant).
February 2009-June 2010, CEO, and Chairman of the Board,
ScaleMP. January 2007-January 2009, Senior Vice President and
President, Avaya, Inc. April 2005-December 2006, Executive Vice
President, Utility Computing, Sun Microsystems.

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 11, 2014.

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 11, 2014.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference from the information under the captions
“Director Compensation for 2013,” “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 11, 2014.

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 Plan
Information” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on
February 11, 2014.

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 11, 2014.

Item 14. Principal Accountant Fees and Services

The information required by this Item is incorporated by reference from the information under the caption

“Ratification of Independent Registered Public Accounting Firm” in our definitive proxy statement for the
Annual Meeting of Stockholders to be held on February 11, 2014.

Item 15. Exhibits and Financial Statement Schedules

1. Consolidated Financial Statements:

PART IV

Reference Page
Form 10-K

Report of independent registered public accounting firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheets as of September 30, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of income and comprehensive income for the years ended September 30,
2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of stockholders’ equity for the years ended September 30, 2013, 2012

and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of cash flows for the years ended September 30, 2013, 2012 and 2011 . .
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56
57

59
60
61

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

2.1

3.1

3.2

10.1

10.2

10.3

Description

Equity Purchase Agreement, dated as of August 16, 2012, among Fair Isaac Software Holdings
Limited, Adeptra Limited, the Executing Shareholders of Adeptra Limited, Shareholder
Representative Services, LLC as Representative to the Executing Shareholders and Fair Isaac
Corporation as Guarantor. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K
filed on August 17, 2012.)

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.)

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.)

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.)

Exhibit
Number

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.17

10.18

10.22

10.23

Description

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)

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)

Form of Management Agreement entered into with each of the Company’s executive officers.
(Incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed on February 10, 2012.) (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)

Exhibit
Number

10.24

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38

10.39

10.40

10.41

Description

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)

Transition Agreement dated January 24, 2012 by and between the Company and Dr. Mark N.
Greene. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 26,
2012.) (1)

Amended and Restated Transition Agreement dated September 11, 2012 by and between the
Company and Dr. Mark N. Greene. (Incorporated by reference to Exhibit 10.28 to the Company’s
Form 10-K for the fiscal year ended September 30, 2012.) (1)

Letter Agreement dated January 24, 2012 by and between the Company and William J. Lansing.
(Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 26, 2012.) (1)

Letter Agreement dated February 6, 2012 by and between the Company and Michael Pung.
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 10, 2012.) (1)

Letter Agreement dated February 6, 2012 by and between the Company and Mark Scadina.
(Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on February 10, 2012.) (1)

Letter Agreement dated March 7, 2012 by and between the Company and James M. Wehmann.
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended
December 31, 2012.) (1)

Letter Agreement dated April 24, 2012 by and between the Company and Stuart C. Wells.
(Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended
December 31, 2012.) (1)

Transition Agreement dated April 25, 2012 by and between the Company and Deborah Kerr.
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 25, 2012.) (1)

Transition Agreement dated April 25, 2012 by and between the Company and Charles L. Ill.
(Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on April 25, 2012.) (1)

Fair Isaac Corporation 2012 Long-Term Incentive Plan (incorporated by reference to Appendix A of
the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders, filed with
the SEC on January 4, 2012.) (1)

Form of Employee Non-Statutory Stock Option Agreement (U.S.) under the 2012 Long-Term
Incentive Plan. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the
quarter ended March 31, 2012.) (1)

Form of Employee Restricted Stock Unit Award Agreement (U.S.) under the 2012 Long-Term
Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the
quarter ended March 31, 2012.) (1)

Form of Employee Non-Statutory Stock Option Agreement (International) under the 2012 Long-
Term Incentive Plan. (Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the
quarter ended March 31, 2012.) (1)

Form of Employee Restricted Stock Unit Award Agreement (International) under the 2012 Long-
Term Incentive Plan. (Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the
quarter ended March 31, 2012.) (1)

Form of Director Non-Statutory Stock Option Agreement under the 2012 Long-Term Incentive Plan.
(Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended
March 31, 2012.) (1)

Exhibit
Number

10.42

10.43

10.44

10.45

12.1*

21.1*

23.1*

31.1*

31.2*

32.1*

32.2*

Description

Form of Director Restricted Stock Unit Award Agreement under the 2012 Long-Term Incentive
Plan. (Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q for the quarter
ended March 31, 2012.) (1)

Form of Performance Share Unit Award Agreement (fiscal 2012 grants) under the 2012 Long-Term
Incentive Plan. (Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q for the
quarter ended March 31, 2012.) (1)

Form of Performance Share Unit Award Agreement (fiscal 2013 grants) under the 2012 Long-Term
Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the
quarter ended December 31, 2012.) (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.
*

Filed herewith.

100

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
Executive Vice President
and Chief Financial Officer

DATE: November 12, 2013

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/ WILLIAM J. LANSING
William J. Lansing

/s/ MICHAEL J. PUNG
Michael J. Pung

/s/ MICHAEL S. LEONARD
Michael S. Leonard

/s/ A. GEORGE BATTLE
A. George Battle

/s/ BRADEN R. KELLY
Braden R. Kelly

/s/ JAMES D. KIRSNER
James D. Kirsner

/s/ RAHUL N. MERCHANT
Rahul N. Merchant

/s/ DAVID A. REY
David A. Rey

/s/ DUANE E. WHITE
Duane E. White

Chief Executive Officer
(Principal Executive Officer)
and Director

Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

Vice President and
Chief Accounting Officer
(Principal Accounting Officer)

November 12, 2013

Director

November 12, 2013

Director

November 12, 2013

Director

November 12, 2013

Director

November 12, 2013

Director

November 12, 2013

Director

November 12, 2013

101

Exhibit
Number

3.1

3.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

EXHIBIT INDEX

To Fair Isaac Corporation
Report On Form 10-K For The Fiscal Year Ended September 30, 2013

Description

Equity Purchase Agreement, dated as of August 16, 2012, among Fair
Isaac Software Holdings Limited, Adeptra Limited, the Executing
Shareholders of Adeptra Limited, Shareholder Representative Services,
LLC as Representative to the Executing Shareholders and Fair Isaac
Corporation as Guarantor.

By-laws of the Company.

Composite Restated Certificate of Incorporation of Fair Isaac
Corporation.

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

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).

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

Voting Agreement dated May 21, 2009 by and between Fair Isaac
Corporation and Southeastern Asset Management, Inc.

Incorporated by Reference

Amended and Restated Agreement dated December 4, 2008, between
the Company and the Sandell Group.

Incorporated by Reference

Amendment Number 1, dated July 29, 2009, to the Amended and
Restated Agreement between the Company and the Sandell Group.

Incorporated by Reference

Fair Isaac Corporation 1992 Long-Term Incentive Plan, as amended
effective May 4, 2010.

Incorporated by Reference

Form of Non-Qualified Stock Option Agreement under 1992 Long-term
Incentive Plan, as amended effective July 18, 2007.

Incorporated by Reference

Form of Nonstatutory Stock Option Agreement for Initial Grants to
Non-Employee Directors under 1992 Long-term Incentive Plan.

Incorporated by Reference

Form of Restricted Stock Unit Agreement under 1992 Long-term
Incentive Plan, as amended effective July 18, 2007.

Incorporated by Reference

Form of Restricted Stock Agreement under 1992 Long-Term Incentive
Plan.

Incorporated by Reference

102

Exhibit
Number

10.12

10.13

10.14

10.17

10.18

10.22

10.23

10.24

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38

10.39

Description

HNC’s 1995 Directors Stock Option Plan, as amended through April
30, 2000.

Incorporated by Reference

HNC’s Form of 1995 Directors Stock Option Plan Option Agreement
and Stock Option Exercise Agreement.

Incorporated by Reference

Fair, Isaac Supplemental Retirement and Savings Plan, as amended and
restated effective January 1, 2009.

Incorporated by Reference

Form of Indemnity Agreement entered into by the Company with the
Company’s directors and executive officers.

Incorporated by Reference

Form of Management Agreement entered into with each of the
Company’s executive officers.

Incorporated by Reference

Employment Agreement dated February 13, 2007, by and between Fair
Isaac and Dr. Mark Greene.

Incorporated by Reference

Letter Agreement entered into on June 30, 2008 by and between Fair
Isaac Corporation and Dr. Mark N. Greene.

Incorporated by Reference

Offer Letter entered into on May 29, 2007 with Mark R. Scadina.

Incorporated by Reference

Transition Agreement dated January 24, 2012 by and between the
Company and Dr. Mark N. Greene.

Incorporated by Reference

Amended and Restated Transition Agreement dated September 11, 2012
by and between the Company and Dr. Mark N. Greene.

Incorporated by Reference

Letter Agreement dated January 24, 2012 by and between the Company
and William J. Lansing.

Incorporated by Reference

Letter Agreement dated February 6, 2012 by and between the Company
and Michael Pung.

Incorporated by Reference

Letter Agreement dated February 6, 2012 by and between the Company
and Mark Scadina.

Incorporated by Reference

Letter Agreement dated March 7, 2012 by and between the Company
and James M. Wehmann.

Incorporated by Reference

Letter Agreement dated April 24, 2012 by and between the Company
and Stuart C. Wells.

Incorporated by Reference

Transition Agreement dated April 25, 2012 by and between the
Company and Deborah Kerr.

Transition Agreement dated April 25, 2012 by and between the
Company and Charles L. Ill.

Incorporated by Reference

Fair Isaac Corporation 2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Employee Non-Statutory Stock Option Agreement (U.S.) under
the 2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Employee Restricted Stock Unit Award Agreement (U.S.)
under the 2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Employee Non-Statutory Stock Option Agreement
(International) under the 2012 Long-Term Incentive Plan.

Incorporated by Reference

103

Exhibit
Number

10.40

10.41

10.42

10.43

10.44

10.45

12.1

21.1

23.1

31.1

31.2

32.1

32.2

Description

Form of Employee Restricted Stock Unit Award Agreement
(International) under the 2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Director Non-Statutory Stock Option Agreement under the
2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Director Restricted Stock Unit Award Agreement under the
2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Performance Share Unit Award Agreement (fiscal 2012
grants) under the 2012 Long-Term Incentive Plan.

Incorporated by Reference

Form of Performance Share Unit Award Agreement (fiscal 2013
grants) under the 2012 Long-Term Incentive Plan.

Incorporated by Reference

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

Filed Electronically

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) Certification of CEO.

Rule 13a-14(a)/15d-14(a) Certification of CFO.

Section 1350 Certifications of CEO.

Section 1350 Certifications 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.

104