Fair Isaac Corporation Annual Report 2015

FY2015 Annual Report · Fair Isaac Corporation

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FAIR ISAAC CORPORATION

2015 ANNUAL REPORT

FY2015 CEO Letter

Shareholders:

Fiscal 2015 was a strong year for FICO. Revenues grew six percent to $839 million versus $789
million in 2014. We grew across all three of our business segments amid the difficult interest rate and
regulatory environment in which our financial services customers are operating, and despite slowing
purchase decisions and lengthening sales cycles.

Our Applications business overall was up four percent for the year. Sales of our cloud-based tools and
applications were up 13 percent in fiscal 2015, much of which was driven by growth in our sales of
cloud applications. We anticipate continued demand for our core franchises — Falcon®, TRIAD®, and
other mission-critical applications — in this era of cloud-enabled Big Data analytics. We have spent
the last two years investing in these products to ensure that they continue to uphold their industry-
standard status well into the future. We are now shifting resources toward the expansion of our sales
team, which is fanning out across the globe to offer these excellent products to more customers in more
industries.

Meanwhile, we have a great deal of demand reflected in the Decision Management Suite pipeline.
Revenues for our Tools business were up seven percent in fiscal 2015, and recurring revenues were up
19 percent. Given the rate and pace at which we have been winning these deals, the next several years
hold great promise.

And finally, prospects for our Scores business continue to brighten. This business overall was up 11
percent over the previous year, and the Consumer Scores segment was up 45 percent. Bolstered by the
success of the FICO® Score Open Access program, which furnishes FICO® Scores and presents the
FICO brand name on more than 100 million U.S. consumer account statements every month, we
anticipate continued growth in this part of our business.

As in years past, we created value for our shareholders this year through ongoing stock repurchases.
We remain confident about the future — it is a great time to be in the predictive analytics business —
and we believe that investing in ourselves represents an excellent 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.

Today, strong financial performance is a necessary but insufficient condition for success. Increasingly,
people want to do business with — and work for — companies that not only perform well, but that also
make the world a better place. I am happy to report that FICO shines in that regard as well. As one
example of this, FICO was recognized in fiscal 2015 by President Obama and senior U.S. government
officials for our efforts to increase consumer awareness and understanding about their credit health.
The FICO® Score Open Access program is the right thing for FICO, for our customers, and for

consumers. Enabling banks to distribute the actual scores they rely on for risk management
decisions — which in more than 90 percent of cases means genuine FICO® Scores — helps consumers
understand how lenders really view them, so they can make the best decisions for themselves and their
families.

In the year ahead, we will be bringing to market the new FICO® Score XD, a breakthrough for
consumer empowerment. An estimated 50 million Americans today do not have traditional credit
scores because they have no credit file or the data in their file is old or incomplete. Our clients have
asked us for a safe and reliable way to assess credit risk for these individuals and that is what we’re
delivering. Specifically, using alternative data — data found outside traditional credit bureau files —
we can score more than 50 percent of these previously “invisible” people who apply for credit. And
based on the results of our pilot study with 12 of the largest lenders, we have found that over a third of
these newly scored consumers have scores above 620, which is a common threshold for lenders.
Moreover, within six months of obtaining a credit product, these consumers begin receiving traditional
FICO® Scores, and are on their way to gaining access to mainstream financial services that they need
for financial health and stability.

Expanding access to credit is a long-term challenge, but it is essential for both macroeconomic growth
and individual economic opportunity. This is true within the United States and across the globe, where
an estimated two billion people are struggling to support themselves and their families without access
to mainstream financial services. As the company that commercialized credit scoring, we embrace the
challenge of continuing to expand consumer access to credit while making lending safer and more
profitable.

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, 2015

‘ 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, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
$2,098,972,006 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 30, 2015 was 31,076,089 (excluding 57,780,694 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 24, 2016.

[THIS PAGE INTENTIONALLY LEFT BLANK]

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
28
28
28
28

29
31
32
53
55
92
92
92

93
94

95
95
95

Item 15.
Signatures

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96
100

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 2016.

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 leverage the
use of Big Data and mathematical algorithms to predict consumer behavior and 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 100 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, telecommunications providers, pharmaceutical companies, healthcare
organizations, public agencies and organizations in other industries. We also serve consumers through online
services that enable people to purchase and understand their FICO® Scores, the standard measure in the U.S. 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. References to our website addresses in this report are provided as a
convenience and do not constitute an incorporation by reference. 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 their enterprise, an

approach we commonly refer to as decision management. Most of our solutions address customer engagement,
including customer acquisition, customer onboarding, 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. These applications are available to our customers as on-premises software, and many are
available as hosted, software-as-a-service (“SaaS”) applications through the FICO® Analytic Cloud.

•

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 worldwide, as
well as services through which we provide our scores to clients directly.

•

Tools. This segment is composed of analytic and decision management software tools that clients can
use to create their own custom decision management applications, our new FICO® Decision
Management Suite, as well as associated professional services. These tools are available to our
customers as on-premises software or through the FICO® Analytic Cloud.

Comparative segment revenues, operating income and related financial information for fiscal 2015, 2014

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

Our Solutions

Our solutions involve four fundamental disciplines:

• Analytics, which include predictive analytics that identify risks and opportunities associated with

individual customers, prospects and transactions, in order to detect patterns such as risk and fraud, as
well as optimization analytics that are used to improve the design of decision logic or “strategies.”

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

•

Software such as decision management systems that implement business rules, models and decision
strategies, often in a real-time environment, as well as software for managing customer engagement.

• 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 new FICO®
Analytic Cloud, FICO® Decision Management Platform and FICO® Decision Management Suite, we now offer
clients an increasing portfolio of applications, tools and services in the cloud, which they can use to create,
customize, deploy and manage powerful analytic services.

Applications

We develop industry-tailored decision management 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. During fiscal 2015, we continued to expand our product offerings
for the FICO® Analytic Cloud, resulting in increased sales opportunities by accommodating small to midsize
businesses that benefit from the affordability and simplicity of cloud-based solutions. Within our applications
segment our fraud solutions accounted for 23%, 23% and 22% of total revenues in each of fiscal 2015, 2014 and
2013, respectively; our customer management solutions accounted for 9%, 10% and 11% of total revenues, in
each of these periods, respectively; and our collections & recovery solutions accounted for 9% of total revenues
for each of these periods.

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, alternative peer-to-peer and
online lenders, auto 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.

The latest version of our origination application, FICO® Origination Manager, is an application-to-decision

processing solution, available both on premises and in the FICO® Analytic Cloud. 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. We also offer custom and consortium-based credit risk and application fraud
models.

Customer Management Applications

Our customer strategy management products and services enable businesses to automate and improve risk-

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

We provide customer strategy management solutions for banking, telecommunications and retail. Our
primary account and customer strategy management product is FICO® TRIAD® Customer Manager, a leading
credit management system, available both on premises and in the FICO® Analytic Cloud. The solution is an
adaptive control system, which enables businesses to rapidly adapt to changing business and internal conditions
by designing and testing new strategies in a “champion/challenger” environment. The current version enables
users to manage risk and communications at both the account and customer level from a single platform.

We market and sell FICO® TRIAD® Customer Manager software licenses, maintenance, consulting

services, and strategy design and evaluation. Additionally, we provide TRIAD services and similar credit account
management services through third-party credit card processors worldwide, including the two largest processors
in the U.S., First Data Resources, Inc. and Total System Services, Inc.

Fraud Management Applications

Our fraud management products improve our clients’ profitability by predicting the likelihood 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; 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 a leader in global
payment card fraud detection. Falcon® Fraud Manager examines transaction, cardholder, account, customer,
device and merchant data to detect a wide range of payment card fraud quickly and accurately. It analyzes
payment transactions in real time, assesses the risk of fraud in a fraud score, and provides the ability for user-
defined variables and rules strategies to be used in conjunction with the fraud score 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 unusual 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.

In fiscal 2015, FICO acquired TONBELLER Aktiengesellschaft (“TONBELLER”), a provider of financial
crime prevention and compliance solutions for financial institutions, banks, insurance companies and industrial
corporations. By combining these solutions with its legacy fraud analytics, such as those used in FICO® Falcon®
Fraud Manager, FICO now offers a comprehensive modular set of solutions to fight money-laundering, fraud,
terrorist financing, and to fulfill custom requirements for governance, risk and compliance.

Collections & Recovery Applications

FICO® Debt Manager™ 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 service facilitates control over the
distribution and management of accounts to agencies, attorneys, debt buyers and internal recovery departments.
FICO Debt Management Solutions also include assessments, models and scores, predictive analytics, advanced
customer engagement, optimization and speech analytics capabilities. FICO® Debt Manager™ is now available
in the cloud.

Customer Communication Services

FICO® Customer Communication Services provides customer engagement, fraud resolution, and collections

solutions in the cloud. It enables leading financial services institutions, utilities, telecommunications firms,
insurers, and other businesses to engage in automated two-way communications. It allows businesses to reach
customers in real time using short message service (“SMS”), mobile applications, automated voice, email and
other channels; resolve matters such as verification of suspicious credit or debit card transactions; request missed
payments; and resolve customer service issues. FICO® Customer Communication Services, combined with
FICO’s decision management applications, allow businesses to execute and resolve customer interactions while
improving customer outcomes.

Analytic Services

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

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. FICO® Score is a three-digit score ranging from 300-850. They
are calculated by running data from the three U.S. national credit reporting agencies, TransUnion, Experian and
Equifax, through one of several proprietary scoring models developed by FICO. Lenders generally pay the credit
reporting agencies scoring fees based on usage, and the credit reporting agencies pay an associated fee to us.
FICO® Score 9, the most recent version of the FICO® Score, was released in early fiscal 2015.

While the core FICO® Score is the foundation of our scoring portfolio, we offer a number of other broad

based scores, including several specific FICO® Industry Scores. We also develop various custom scores for our
financial services clients. During 2015 we announced a pilot program for a new FICO® Score we refer to as
FICO® Score XD to expand the scorable population using alternative data. The pilot will run into fiscal 2016 in
partnership with Equifax and LexisNexis. The FICO® Score Open Access program allows participating clients to
provide their customers with a FICO® Score along with materials to help them understand what affects their
score at no fee to the consumer. In addition, we offer the FICO® Custom Credit Education program where
lenders can license enhanced credit education tools to include in their consumer financial education programs.

Outside the U.S., we offer the FICO® Score for consumers, as well as for small and medium enterprises
lending through credit reporting agencies in 12 countries worldwide. We have installed client-specific versions of
the FICO® Score in nine countries. Like FICO® Scores in the U.S., 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 20 different countries across five continents outside
the U.S.

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
license 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.

We also provide FICO® Score based products, education and information on FICO® Scores to consumers.
They are sold directly by us through our myFICO® service and through licensed distribution partners. In fiscal
2015, we made available the 19 most widely used versions of the FICO® Score from the three major credit
bureaus through our myFICO® service, representing approximately 95% of all FICO® Scores sold and used by
lenders. 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 products to simulate how taking specific actions would affect their

FICO® Score. Consumers can also subscribe to monitoring services, which deliver alerts via email and text when
changes to a user’s FICO Scores or other credit report content are detected. In addition, consumers can purchase
identity theft monitoring products that alert consumers of potential risks of identity fraud with comprehensive
detection, defense, and identity restoration services.

The myFICO® products and subscription offerings are available online at www.myfico.com and are also

available to consumers through numerous other partners.

Tools

We provide analytic and decision management platforms and tools that businesses use to build their own

tailored, analytically powered decision management applications on-premises or within the FICO® Analytic
Cloud. In contrast to our packaged applications developed for specific industry solutions, our tools add scalable
and flexible decision management capabilities to virtually any application or operational system. These tools are
sold as licensed software, and can be used standalone, or in conjunction with third-party solutions to advance a
client’s decision management initiatives. We use these tools as common software components for our own
decision management solutions, described above in the Applications section. They are also key components of
our decision management architecture. We also partner with third-party providers within given industry markets
and with major software companies to embed our tools within existing applications.

During fiscal 2015, FICO enhanced the FICO® Decision Management Suite, a collection of tools for
building, extending, deploying and scaling applications and solutions. The Decision Management Suite includes
the FICO® Decision Management Platform with tools for building and customizing decision components and
services; developing, orchestrating and publishing analytics-powered applications, and visualizing, analyzing and
reporting data trends. Decision Management Suite tools are available in the FICO® Analytic Cloud and on-
premises; businesses can choose either or both deployments depending on their specific needs, IT environments
and other factors. In fiscal 2015, we added two new products to the suite:

•

FICO® Big Data Analyzer, a purpose-built analytics environment that enables a broad range of users to
collaboratively explore data and discover new insights from any type and size of data on Hadoop; and

FICO® Data Management Integration Platform, a streaming analytics and real-time distributed
processing platform.

The FICO® Decision Management Suite combines Big Data, predictive analytics and decision execution

together in an easy-to-use development environment. It enables organizations to rapidly create innovative
analytic applications; dramatically increase developer and business user productivity with support for a broad
range of analytic and decision tools; and execute decisions in real time. It also empowers business analysts and
other domain experts to modify systems in real time without IT involvement, providing organizations with the
agility they need to rapidly respond to customer, regulatory and business changes.

The principal products offered are software tools for:

• Rules Management. The FICO® Blaze Advisor® decision 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 service-oriented architecture (“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 decision rules. FICO’s solution for rules
management in the cloud is called FICO® Decision Modeler.

• Predictive Modeling. FICO® Model Central™ 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. 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. FICO’s solution set for predictive modeling in the
cloud is called FICO® Analytic Modeler.

• 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.
FICO’s solution for executing optimization services in the cloud is called FICO® Optimization
Modeler.

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 management solutions.

We believe our competitors are unable to provide the mix of products, expertise in predictive analytics and

their integration with decision management software, and enhanced customer management capabilities we are
able to deliver. However, certain competitors may have larger shares of particular geographic or product markets
than we do.

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

In the customer strategy 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 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,
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 U.S., 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 other direct to consumer credit and identity services.

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 SaaS 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 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 all of the 100 largest financial institutions in
the U.S., and two-thirds of the largest 100 banks in the world. Our clients also include more than 700 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 150 government or public agencies; and
more than 150 healthcare and pharmaceuticals companies, including eight of the world’s top ten pharmaceuticals
companies. All of the top ten companies on the 2015 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 U.S. credit reporting agencies.

In the U.S., 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 U.S. 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 2015, 2014 and 2013,
revenues generated from our agreements with Equifax, TransUnion and Experian collectively accounted for 16%,
15% and 16% of our total revenues, respectively.

Outside the U.S., 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 U.S. are the United Kingdom and Canada. In addition, we have

delivered products to users in more than 100 countries.

Revenues from international customers, including end users and resellers, amounted to 40%, 42% and 40%
of our total revenues in fiscal 2015, 2014 and 2013, 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.

We are widely recognized as a leader in predictive analytics due to our pioneering work in credit scoring
and fraud detection. 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 fiscal 2015, we continued to make significant progress with our FICO® Analytic Cloud and FICO®

Decision Management Platform initiatives. We have made many of our software solutions, which were
previously available only as on-premises software installations, into SaaS solutions hosted on our cloud. The
FICO® Decision Management Suite enables clients to use FICO tools, along with rapid application development
tools and visualization tools, to quickly develop their own decision management applications and services. We
continue to add functionality to the platform as well as host additional FICO applications in the cloud. These
ongoing initiatives are driven by enhancing our core technical capabilities listed below, and extending them
through partnerships with other technology providers as well as through employing open source software.

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.

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 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. This data can include structured or
unstructured data. During 2015 we made available a new solution that can integrate multiple data sources in real
time and make them available for analysis and decisions.

Decision Management Software. In order to make a decision strategy operational, 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
graphical 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. We 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. We 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.

Cyber Security. We continue to seek projects in the cyber security and security information and event
management (“SIEM”) space that leverage FICO’s streaming analytics, transaction profiling, and unsupervised
modeling technologies. These technologies include those successfully leveraged by our fraud management
systems, including FICO® Falcon® Fraud Manager and new methods that we believe to be unique approaches for
detecting certain types of cyber security threats.

Research and Development Activities

Our research and development expenses were $98.8 million, $83.4 million and $67.0 million in fiscal 2015,

2014 and 2013, 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 153 U.S. and 14 foreign patents with 93 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 U.S. 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 U.S.

government agencies or their subcontractors. Although we have acquired commercial rights to these
technologies, the U.S. government typically retains ownership of intellectual property rights and licenses in the
technologies that we develop under these contracts. In some cases, the U.S. government can terminate our rights
to these technologies if we fail to commercialize them on a timely basis. In addition, under U.S. 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 38 trademarks registered in the U.S. and select foreign
countries.

PERSONNEL

As of September 30, 2015, we employed 2,803 persons worldwide. Of these, 142 full-time employees were

located in our San Jose, California office, 314 full-time employees were located in our San Diego, California
office, 206 full-time employees were located in our San Rafael, California office, 189 full-time employees were
located in our Roseville, Minnesota office, 146 full-time employees were located in our Fairfax, Virginia office,
532 full-time employees were located in our India-based offices and 272 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, and 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 including the development and sale of our cloud-based product offerings. 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 or certain client or other systems. 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. Many of our customers are significantly larger than
we are and may have greater bargaining power. The businesses of our largest customers depend, in large
part, on favorable macroeconomic conditions. If these customers are negatively impacted by weak global
economic conditions, 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 U.S. and other key international economies have experienced in the past a downturn in
which economic activity was impacted by falling demand for a variety of goods and services, restricted credit,
poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets,
bankruptcies and overall uncertainty with respect to the economy. The European Union continues to face great
economic uncertainty which could impact the overall world economy or various other regional economies. The
potential for 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 could
result in a 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 (including credit card processors) 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 at various times 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 U.S and from the U.S, and other countries to work abroad. Limitations
imposed by immigration laws in the U.S. 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.

Our business requires that we 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 or partners, 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 and other intellectual property

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 U.S. 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”), customer relationship management (“CRM”), and customer
communication and mobility solution 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; biometric measures on devices including fingerprint and

face matching; and other card authorization techniques and user verification 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 U.S.;

•

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 and investigative 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 experience uncertainty, it will likely harm our business,
financial condition or results of operations.

During fiscal 2015, 73% of our revenues were derived from sales of products and services to the banking

and insurance industries. Global economic uncertainty experienced in the U.S. and other key international
economies in the past 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 disruptions presents 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 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 slow 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. Global
economic uncertainty has produced substantial stress, volatility, illiquidity and disruption of global credit and
other financial markets in the past. Any economic uncertainty can negatively affect the businesses and
purchasing decisions of companies in the industries we serve. The potential for disruptions presents 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 recent or new 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 U.S., 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 2015, 40% of our
revenues were derived from business outside the U.S. As part of our growth strategy, we plan to continue to
pursue opportunities outside the U.S., 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 U.S. 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 locations include:

•

approximately 55,000 square feet of office space in San Jose, California in one building under a lease
expiring in fiscal 2017; this is used for our corporate headquarters and all of our segments;

approximately 124,000 square feet of office space in San Rafael, California in one building under a
lease expiring in fiscal 2020; this is used for all of our segments;

approximately 101,000 square feet of office, data center, and data processing space in Roseville,
Brooklyn Park and Minneapolis, Minnesota, in three buildings under leases expiring in fiscal 2016 or
later; this is used for all of our segments;

approximately 80,000 square feet of office space in San Diego, California in one building under a lease
expiring in fiscal 2020; this is used for Applications and Tools segments.

In addition, we lease an aggregate of approximately 275,000 square feet of office and data center space in a

number of smaller domestic locations and internationally in India, the United Kingdom, China, Singapore, and
several other locations. We believe that suitable additional space will be available to accommodate future needs.
See Note 18 to the accompanying consolidated financial statements for information regarding our obligations
under leases.

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 October 30, 2015, we had 404 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 2014
October 1 — December 31, 2013
January 1 — March 31, 2014
April 1 — June 30, 2014
July 1 — September 30, 2014

Fiscal 2015
October 1 — December 31, 2014
January 1 — March 31, 2015
April 1 — June 30, 2015
July 1 — September 30, 2015

High

Low

$63.48
$62.49
$63.87
$65.62

$74.39
$89.42
$96.53
$97.56

$52.90
$50.26
$50.49
$54.38

$53.09
$69.44
$85.40
$77.57

Dividends

We paid dividends of two cents per share on a quarterly basis during each of fiscal 2015, 2014 and 2013.
Our dividend rate is set by the Board of Directors on a quarterly basis taking into account a variety of factors,
including among others, our operating results and cash flows, general economic and industry conditions, our
obligations, changes in applicable tax laws and other factors deemed relevant by the Board. Although we expect
to continue to pay dividends at the current rate, our dividend rate is subject to change from time to time based on
the Board’s business judgment with respect to these and other relevant factors.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

Period

July 1, 2015 through July 31, 2015
August 1, 2015 through August 31, 2015
September 1, 2015 through September 30, 2015

Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share

6,332
2,363
6,835

$91.73
$90.54
$82.53

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

$119,280,609
$119,280,609
$119,280,609

Total

15,530

$87.50

$119,280,609

(1) Represents 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, 2015.

(2) On August 18, 2014, our Board of Directors approved an open-ended stock repurchase program to acquire
shares of our common stock up to an aggregate cost of $250.0 million in the open market or in negotiated
transactions.

Performance Graph

The following graph shows the total stockholder return of an investment of $100 in cash on September 30,
2010, 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

$400

$350

$300

$250

$200

$150

$100

$50

9/10

9/11

9/12

9/13

9/14

9/15

FICO

S&P 500

S&P Application Software

*$100 invested on 9/30/10 in stock or index, including reinvestment of dividends.
Fiscal year ending September 30.

Item 6. Selected Financial Data

We acquired Entiera, Inc. (“Entiera”) in May 2012, Adeptra Ltd. (“Adeptra”) in September 2012, CR
Software, LLC. (“CR Software”) in November 2012, Infoglide Software, Inc. (“Infoglide”) in April 2013,
InfoCentricity, Inc. (“InfoCentricity”) in April 2014, and TONBELLER in January 2015. 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
Net income
Basic earnings per share
Diluted earnings per share
Dividends declared per share

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

Year Ended September 30,

2015 (1)

2014 (1)

2013 (1)

2012 (1)

2011 (1)

$838,781
137,505
86,502
2.75
2.65
0.08

(In thousands, except per share data)
$676,423
$743,444
$788,985
168,358
161,593
161,868
92,004
90,095
94,879
2.64
2.55
2.80
2.55
2.48
2.72
0.08
0.08
0.08

$619,683
127,337
71,562
1.82
1.79
0.08

September 30,

2015

2014

2013

2012

2011

42,727
1,230,163
376,000
232,000
436,998

$ (52,877) $
1,192,298
447,000
99,000
454,614

(In thousands)
83,308
1,161,547
455,000
15,000
530,677

49,720
1,158,611
504,000
—
474,406

$ 217,983
1,129,468
512,000
—
465,494

(1) Results of operations for fiscal years 2015, 2014, 2013, 2013 and 2011 include pre-tax charges of $18.2
million, $4.3 million, $3.5 million, $5.1 million and $12.4 million, respectively in restructuring and
acquisition-related expenses.

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

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 strategies and initiatives,
financial 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 Item 1A, Risk Factors, in this Annual
Report on Form 10-K.

BUSINESS OVERVIEW

Strategies and Initiatives

During fiscal 2015, we continued to generate significant free cash flow used to enhance shareholder value

through investments in long-term growth initiatives; acquisitions of relevant technologies and products that
strengthen our portfolio and competitive position; and our share repurchase program.

We continued to invest in our growth initiatives that expand our addressable markets. Our full suite of
applications available through the FICO® Analytic Cloud provide product offerings in our Applications and
Tools segments to provide growth opportunities with customers that can benefit from the affordability and
simplicity of cloud-based solutions. For our Scores segment, the FICO® Score Open Access program continued
its expansion during the current year. We have more than 100 million consumers with access to their free score
through the FICO® Score Open Access program, which allows our participating clients to provide their
customers with a free FICO® Score along with materials to help them understand what affects their score. In
addition, during fiscal 2015, we launched a partnership program with Experian, a leading global information
services provider, making the FICO® Score available to consumers, who can now go to Experian.com to access
the credit score lenders use most when determining applicant eligibility for new credit cards, car loans,
mortgages or other lines of credit.

We continued to make acquisitions that deliver solutions to the financial services industry and adjacent

vertical industries. Our acquisition of TONBELLER addresses the rapidly growing demand for integrated,
enterprise-class financial crime and compliance solutions. We leveraged the financial crime and compliance
technology to integrate with our existing fraud detection and analytics to provide broader, more responsive fraud
solutions for our customers.

With our strong portfolio of products now in place, we are shifting some of our resources to distribution of

our expanded market. This fiscal year, we incurred severance charges to reallocate expenses from building out
products to our distribution and go-to-market for both the Applications and Tools segments, which includes
significant sales training and increasing sales resources to reach new market segments.

We also returned significant cash to shareholders through our stock repurchase program. During fiscal 2015,
we repurchased approximately 1.7 million shares for a total cost of $130.7 million. As of September 30, 2015, we
had $119.3 million remaining under our current stock repurchase program.

Overview of Financial Results

Total revenues for fiscal 2015 were $838.8 million, an increase of 6% from $789.0 million in fiscal 2014.

Revenue in each of our segments increased, with Applications, Scores and Tools increasing by 4%, 11% and 7%

in fiscal 2015 compared to fiscal 2014, respectively. We derive a significant portion of revenue internationally,
and 40% and 42% of total consolidated revenues were derived from clients outside the U.S. during fiscal 2015
and 2014, respectively. A significant portion of our revenues are derived from the sale of products and services
within the banking (including consumer credit) industry, and 69% and 74% of our revenues were derived from
within this industry during fiscal 2015 and 2014, 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
67% of our revenues during fiscal 2015 and 2014. Revenue fluctuations in our business are primarily driven by
changes in the transactional volume and license fees.

Operating income for fiscal 2015 was $137.5 million, a decrease of 15% from $161.9 million in fiscal 2014.
Operating margin decreased to 16% from 21%. The margin decrease was primarily attributable to an increase in
our restructuring cost related to the write-down of facilities, our continued investment in the areas of cloud
computing and SaaS, and an increase in our professional services delivery cost, partially offset by a higher
percentage of revenues derived from our higher-margin products including revenues generated from our Experian
agreement. Net income decreased 9% to $86.5 million in fiscal 2015 from $94.9 million in fiscal 2014 primarily
due to the decrease in operating margin, partially offset by lower income tax expense, largely driven by a
favorable tax adjustment in fiscal 2015. Diluted earnings per share for fiscal 2015 was $2.65, a decrease of 3%
from $2.72 in fiscal 2014.

Bookings

Management regards the volume of bookings achieved as an important indicator of future revenues, but they
are not comparable to nor a substitute for an analysis of our revenues. Bookings represent contracts signed in the
current reporting period that generate current and future revenue streams. We estimate bookings as of the end of
the period in which a contract is signed and initial booking estimates are not updated in future periods for
changes between estimated and actual results. Our calculations have varying degrees of certainty depending on
the revenue type and individual contract terms. They are subject to a number of risks and uncertainties
concerning timing and contingencies affecting product delivery and performance, and estimates consider contract
terms, knowledge of the marketplace and experience with our customers, among other factors. Actual revenue
and the timing thereof could differ materially from our initial estimates.

Although many of our contracts contain non-cancelable terms, most of our bookings are transactional or

service related that 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. The following paragraphs discuss the key assumptions used to
calculate bookings and the susceptibility of these assumptions to variability for each revenue type.

Transactional and Maintenance Bookings

We calculate transactional bookings as the total estimated volume of transactions or number of accounts

under contract, multiplied by the contractual rate. Transactional contracts generally span multiple years and
require estimates of 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 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.

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, 2015

Quarter ended September 30, 2014

Year ended September 30, 2015

Year ended September 30, 2014

Number of
Bookings
over $1
Million

Bookings
Yield (1)

21%

26%

45%

38%

Weighted-
Average
Term (2)

(months)
18

NM(a)

Bookings

(In millions)
$105.3

$ 85.8

$314.7

$362.3

(1) Bookings yield represents the percentage of revenue recognized from bookings for the periods indicated.
(2) Weighted-average term of bookings measures the average term over which bookings are expected to be

recognized as revenue.

(a) 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 31% and 29% of total bookings for the years ended

September 30, 2015 and 2014, respectively. Professional services bookings were 47% of total bookings for the
years ended September 30, 2015 and 2014. License bookings were 22% and 24% of total bookings for the years
ended September 30, 2015 and 2014, respectively.

RESULTS OF OPERATIONS

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, 2015, 2014 and 2013 are set forth in
Note 17 to the accompanying consolidated financial statements.

Revenues

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

fiscal 2015, 2014 and 2013:

Revenues
Year Ended September 30,

2015

2014

2013

(In thousands)

Period-to-Period Change

2015 to
2014

2014 to
2013

(In thousands)

$526,274 $504,256
186,469
207,007
98,260
105,500

$476,084
180,813
86,547

$22,018
20,538
7,240

$28,172
5,656
11,713

$838,781 $788,985

$743,444

49,796

45,541

Period-to-Period
Percentage Change

2015 to
2014

2014 to
2013

4%
11%
7%

6%
3%
14%

Percentage of Revenues
Year Ended September 30,

2015

2014

2013

63%
25%
12%

64%
24%
12%

100% 100% 100%

Segment

Applications
Scores
Tools

Total Revenues

Segment

Applications
Scores
Tools

Total Revenues

Applications

Transactional and maintenance
Professional services
License

Year Ended September 30,

Period-to-Period Change

2015

2014

2013

(In thousands)
$320,596 $313,316 $306,738
110,081
121,100
124,562
59,265
69,840
81,116

2015 to
2014

2014 to
2013

(In thousands)

$ 7,280
3,462
11,276

$ 6,578
11,019
10,575

Total

$526,274 $504,256 $476,084

22,018

28,172

Period-to-Period
Percentage Change

2015 to
2014

2014 to
2013

2%
3%
16%

2%
10%
18%

Applications segment revenues increased $22.0 million in fiscal 2015 from fiscal 2014 primarily due to an

$11.1 million increase in our compliance solutions, a $10.0 million increase in our fraud solutions, and a $4.1
million increase in our customer communication services, partially offset by a $3.3 million decrease in our
marketing solutions.

The increase in compliance solutions was attributable to our acquisition of TONBELLER in January 2015.
The increase in fraud solutions was primarily attributable to a large multi-year license transaction during fiscal
2015, as well as an increase in transactional revenues driven by increased volumes. The increase in customer
communication services was primarily attributable to an increase in transactional revenues as a result of our
growth in the mobile communication market. The decrease in marketing solutions was primarily attributable to
terminations of several customers in fiscal 2015.

Applications segment revenues increased $28.2 million in fiscal 2014 from fiscal 2013 due to a $17.3
million increase in our fraud solutions, a $9.6 million increase in our customer communication solutions, a $5.0
million increase in our originations solutions, and a $4.8 million increase in our collections & recovery solutions.
The increase was partially offset by a $5.3 million decrease in our marketing solutions and a $3.2 million
decrease in our customer management solutions.

The increase in fraud solutions was primarily attributable to two large multi-year license transactions during

fiscal 2014. The increase in customer communication solutions was primarily attributable to an increase in
transactional revenues as a result of our growth in the mobile communication market. The increase in
originations solutions was primarily attributable to an increase in license and services revenues. The increase in
collections & recovery solutions was primarily attributable to an increase in services revenues. The decrease in
marketing solutions was primarily attributable to the early termination of a large customer in fiscal 2013,
partially offset by a large deal entered into in fiscal 2014 to develop customized software solutions for a new
customer. The decrease in customer management solutions was primarily attributable to a decrease in license
revenue.

Period-to-Period
Percentage Change

2015 to
2014

2014 to
2013

Scores

Year Ended September 30,

Period-to-Period Change

2015

2014

2013

2015 to
2014

2014 to
2013

(In thousands)

Transactional and maintenance
Professional services
License

$200,426
2,901
3,680

(In thousands)
$178,023
2,784
5,662

$175,281
4,012
1,520

$22,403
117
(1,982)

$ 2,742
(1,228)
4,142

13%
4%

2%
(31)%
(35)% 273%

Total

$207,007

$186,469

$180,813

20,538

5,656

11%

Scores segment revenues increased $20.5 million in fiscal 2015 from 2014 due to a $20.6 million increase
in our business-to-consumer services revenues, partially offset by a decrease of $0.1 million in our business-to-
business Scores revenue. The increase in business-to-consumer services was primarily attributable to revenue
generated from the agreement with Experian that launched in December 2014 and made FICO® Score available
to consumers on Experian.com. The decrease in our business-to-business Scores was primarily attributable to
decreased software revenue related to our Global FICO® Score, and a royalty true-up during fiscal 2014, partially
offset by an increase in our transactional scores driven by new originations and prescreen.

Scores segment revenues increased $5.7 million in fiscal 2014 from 2013 due to a $3.5 million increase in

our business-to-consumer services revenues and a $2.2 million increase in our business-to-business scores
revenues. The increase in our business-to-consumer services was attributable to a $4.2 million increase in direct
sales generated from the myFICO.com website, partially offset by a $0.7 million decrease in royalties derived
from scores sold indirectly to consumers through credit reporting agencies. The increase in our business-to-
business scores revenues was primarily attributable to increased software revenue related to our Global FICO®
Score.

During fiscal 2015, 2014 and 2013, revenues generated from our agreements with Equifax, TransUnion and

Experian, collectively accounted for approximately 16%, 15% and 16%, respectively, of our total revenues,
including revenues from these customers recorded in our other segments.

Tools

Transactional and maintenance
Professional services
License

Year Ended September 30,

Period-to-Period Change

2015

2014

2013

$ 43,210
24,310
37,980

(In thousands)
$36,224
25,950
36,086

$32,285
21,101
33,161

2015 to
2014

2014 to
2013

(In thousands)

$ 6,986
(1,640)
1,894

$ 3,939
4,849
2,925

Total

$105,500

$98,260

$86,547

7,240

11,713

Period-to-Period
Percentage Change

2015 to
2014

2014 to
2013

19%
(6)%
5%

12%
23%
9%

14%

Tools segment revenues increased $7.2 million in fiscal 2015 from 2014 primarily due to an increase in our
FICO® Decision Management Platform license sales as well as related services and transactional revenues, a one-
time settlement with a customer related to under-reported royalties from a multi-year period, as well as increased
transactional revenues from our InfoCentricity acquisition in April 2014. The increase was partially offset by a
decrease in optimization tools primarily attributable to decreased license sales on our FICO® Decision Optimizer
and FICO® Xpress Optimization products.

Tools segment revenues increased $11.7 million in fiscal 2014 from 2013 primarily due to an $8.5 million

increase in our optimization tools and a $2.2 million increase in our predictive modeling tools. The increase in
optimization tools was primarily attributable to increased license sales on our FICO® Decision Optimizer and
FICO® Xpress Optimization products. The increase in predictive modeling tools was primarily attributable to
increased services revenue related to our FICO® Model Central™ product.

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 2015, 2014 and 2013:

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 expense, net
Other income (expense), net

Income before income taxes
Provision for income taxes

Year Ended September 30,

Period-to-Period Change

Period-to-Period
Percentage Change

2015

2014

2013

2015 to
2014

2014 to
2013

2015 to
2014

2014 to
2013

(In thousands, except employees)
$838,781 $788,985 $743,444 $ 49,796 $45,541

(In thousands, except
employees)

98,824

270,535 249,281 229,468
83,435
66,967
300,002 278,203 268,395
13,535
11,917
3,486
4,281

13,673
18,242

21,254
15,389
21,799
1,756
13,961

19,813
16,468
9,808
(1,618)
795

9%
9%
25%
18%
8%
4%
15% (12)%
23%
326%

701,276 627,117 581,851

74,159

45,266

12%

137,505 161,868 161,593
(30,227)
(28,550)
(29,150)
618
(187)
883

109,238 133,131 131,984
41,889
38,252

22,736

(24,363)
(600)
1,070

(23,893)
(15,516)

275
1,677
(805)

1,147
(3,637)

(15)% — %
(6)%
(572)% (130)%

(18)%
1%
(41)% (9)%

Net income

$ 86,502 $ 94,879 $ 90,095

(8,377)

4,784

Number of employees at fiscal year-end

2,803

2,646

2,482

157

164

(9)%

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 expense, net
Income before income taxes
Provision for income taxes

Net income

Percentage of Revenues
Year Ended September 30,

2015

2014

2013

100% 100% 100%

32%
12%
36%
2%
2%

84%

31%
31%
11%
9%
35%
36%
2%
1%
1% — %

79%

78%

22%
21%
16%
(3)% (4)% (4)%
18%
17%
13%
6%
5%
3%

10%

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 32% during fiscal year 2015 from 31% during
fiscal 2014. The $21.3 million increase was primarily attributable to an $8.8 million increase in outside services,
a $7.9 million increase in direct materials, and a $6.4 million increase in personnel and labor costs. The increase
in outside services was primarily attributable to an increase in our billable consulting projects utilizing temporary
resources. The increase in direct materials was primarily attributable to an increase in third-party royalties cost
associated with increased software license sales, as well as an increase in third-party data cost associated with the
increase in our business-to-consumer subscription based revenue. The increase in personnel and labor costs was
primarily attributable to an increase in professional services delivery cost, including a nonrecurring charge
related to a large implementation project; an increase in salaries and benefits cost as a result of our increased
headcount; and an increase in stock based compensation cost driven by the increase in our stock price, partially
offset by a decrease in incentive cost.

The fiscal year 2014 over 2013 increase of $19.8 million was primarily due to an $11.2 million increase in

personnel and labor costs, a $5.3 million increase in outside services cost, and a $2.7 million increase in allocated
facilities cost, partially offset by a $3.2 million decrease in direct materials. The increase in personnel and labor
costs was primarily attributable to an increase in incentive cost, as well as an increase in salaries and benefits cost
as a result of our increased headcount. The increase in outside services cost was primarily attributable to an
increase in our billable consulting projects utilizing temporary resources. The increase in allocated facilities cost
was primarily attributable to leased office space assumed from our acquisitions of CR Software and Infoglide in
fiscal 2013, and InfoCentricity in fiscal 2014. The decrease in direct materials was primarily attributable to a
decrease in software license sales that incur royalties cost. Cost of revenues as a percentage of revenues was
31%, consistent with those incurred during fiscal 2013.

In fiscal 2016, we expect cost of revenues as a percentage of revenues will be consistent with or slightly

lower than those incurred during fiscal 2015.

Research and Development

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

Research and development expenses as a percentage of revenues increased to 12% during fiscal 2015 from
11% during fiscal 2014. The $15.4 million increase was attributable to a $15.3 million increase in personnel and
labor costs, primarily driven by our continued investment in the areas of cloud computing and SaaS, as well as
our investment in several new products primarily in the Tools segment.

Research and development expenses as a percentage of revenues increased to 11% during fiscal 2014 from
9% during fiscal 2013. The $16.5 million increase was attributable to an $11.5 million increase in personnel and
labor costs, a $3.0 million increase in outside services cost, and a $2.0 million increase in allocated facilities cost,
all driven by our continued investment in the areas of cloud computing and SaaS.

In fiscal 2016, we expect that research and development expenditures as a percentage of revenues will be

consistent with or slightly lower than those incurred during fiscal 2015.

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 increased to 36% during fiscal
2015 from 35% during fiscal 2014. The $21.8 million increase was primarily attributable to a $16.4 million
increase in labor and personnel costs, a $2.0 million increase in allocated facilities and infrastructure costs, and a
$1.7 million increase in marketing expenses. The increase in labor and personnel costs was primarily attributable
to an increase in salaries and benefits as a result of our increased headcount, an increase in commissions cost as a
result of increased revenues, as well as an increase in stock-based compensation cost driven by the increase in
our stock price. The increase in allocated facilities and infrastructure costs was primarily due to increased
resource requirement as a result of our recent acquisitions. The increase in marketing expenses was primarily
attributable to a company-wide marketing event during fiscal 2015.

The fiscal year 2014 over 2013 increase of $9.8 million in selling, general and administrative expenses was

primarily attributable to a $7.9 million increase in labor and personnel costs and a $2.3 million increase in
marketing cost. The increase in labor and personnel costs was primarily due to an increase in stock-based
compensation cost driven by the increase in our stock price, as well as an increase in incentive cost. The increase
in marketing cost was primarily attributable to several new marketing programs implemented in fiscal 2014.
Selling, general and administrative expenses as a percentage of revenues decreased to 35% for the year ended
September 30, 2014 from 36% for the year ended September 30, 2013 primarily attributable to FICO shifting
resources to research and development efforts in the areas of cloud computing and SaaS.

In fiscal 2016, we expect that selling, general and administrative expenses as a percentage of revenues will

be consistent with or slightly higher than those incurred during fiscal 2015.

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 2015 over 2014 increase in amortization expense of $1.7 million was primarily attributable to the

addition of intangible assets associated with our TONBELLER acquisition in January 2015.

The fiscal 2014 over 2013 decrease in amortization expense of $1.6 million was primarily attributable to

certain intangible assets associated with our Dash and London Bridge acquisitions becoming fully amortized in
fiscal 2013, partially offset by the addition of intangible assets associated with our Infoglide acquisition in fiscal
2013 and InfoCentricity acquisition in fiscal 2014.

In fiscal 2016, we expect amortization expense will be slightly higher than the amortization expense

incurred in 2015.

Restructuring and Acquisition-related

During fiscal 2015, we incurred net charges totaling $17.5 million consisting of $13.6 million in facilities
charges associated with vacating excess leased space in Roseville, Minnesota and San Rafael, California, and
$3.9 million in severance charges due to the elimination of 97 positions throughout the company. Cash payments
for all the facilities charges will be paid by the end of our fiscal 2020. Cash payments for all the severance costs
will be paid by the end of our fiscal 2016. We also incurred $0.7 million in acquisition-related cost primarily
associated with our TONBELLER acquisition.

In fiscal 2014, we incurred net charges totaling $4.1 million consisting of $0.2 million in facilities charges

and $3.9 million in severance charges due to the elimination of 88 positions throughout the Company. Cash
payments for all the restructuring charges were paid by the end of the second quarter of our fiscal 2015. We also
incurred $0.2 million in acquisition-related cost primarily associated with our InfoCentricity acquisition.

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 all the facilities charges have been paid by the end of fiscal 2014.

The following table sets forth certain summary information on restructuring expenses for the fiscal 2015,

2014 and 2013:

Severance costs
Lease exit costs and other adjustments

Total restructuring expense

Interest Expense, Net

Year Ended September 30,

2015

2014

2013

$ 3,908
13,571

(In thousands)
$3,963
167

$ 842
1,624

$17,479

$4,130

$2,466

Interest expense includes primarily interest on the senior notes issued in May 2008 and July 2010, as well as

interest and credit facility fees on the revolving line of credit. On our consolidated statements of income and
comprehensive income, interest expense is netted with interest income, which is derived primarily from the
investment of funds in excess of our immediate operating requirements.

The fiscal 2015 over 2014 increase in net interest expense of $0.6 million was primarily attributable to a
higher average balance on our revolving line of credit, partially offset by the $71.0 million principal payment in
May 2015 on the Senior Notes issued in May 2008 resulting in lower average debt balance for fiscal 2015.

The fiscal 2014 over 2013 decrease in net interest expense of $1.7 million was primarily attributable to the
$8.0 million and $49.0 million principal payment in May 2014 and 2013, respectively, on the senior notes issued
in May 2008 resulting in lower average debt balance for fiscal 2014.

In fiscal 2016, we expect that net interest expense will be lower than what we incurred during fiscal 2015
due to the $71.0 million principal payment made in May 2015 on our senior notes issued in May 2008, and the
$60.0 million principal payment due in July 2016 on our senior notes issued in July 2010.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized investment gains/losses, exchange rate gains/
losses resulting from re-measurement of foreign-currency-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 foreign currency forward contracts, and other non-operating items.

The fiscal 2015 over 2014 change in other income (expense), net of $1.1 million was primarily attributable

to a decrease in foreign currency exchange loss during fiscal 2015.

The fiscal 2014 over 2013 change in other income (expense), net of 0.8 million was primarily attributable to

a nonrecurring charge related to our fixed assets balance as well as an increase in foreign currency exchange
losses during fiscal 2014.

Provision for Income Taxes

Our effective tax rates were 20.8%, 28.7% and 31.7% in fiscal 2015, 2014 and 2013, respectively.

The decrease in our effective tax rate in fiscal 2015 compared to fiscal 2014 was due primarily to the

favorable settlement of the fiscal 2006 — 2009 state audits and the favorable settlement of the 2010 foreign
transfer pricing assessment, as well as the December 2014 reenactment of the calendar 2014 U.S. Federal
Research and Development Credit, which resulted in a catch up adjustment for the R&D credit during fiscal
2015.

The decrease in our effective tax rate in fiscal 2014 compared to fiscal 2013 was due primarily to the

favorable settlement of the fiscal 2010 — 2012 Federal IRS audits and secondarily to a higher percentage of
revenue in lower taxing jurisdictions.

As of September 30, 2015 we have reported $52.8 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 our 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 tables set forth certain summary information on a segment basis related to our operating

income for the fiscal 2015, 2014 and 2013:

Segment

2015

2014

2013

Year Ended September 30,

Period-to-Period
Change

Period-to-Period
Percentage Change

2015 to
2014

2014 to
2013

2015 to
2014

2014 to
2013

(In thousands)

Applications
Scores
Tools
Unallocated corporate expenses

$159,608 $ 169,494 $141,131 $ (9,886) $ 28,363
12,015
151,214
(15,266)
(6,350)
(15,148)
(89,744)

142,282
4,203
(101,551)

130,267
19,469
(86,403)

8,932
(10,553)
11,807

(6)% 20%
9%
6%
(251)% (78)%
(12)% 18%

Total segment operating income

214,728

214,428

204,464

300

9,964 — %

Unallocated share-based

compensation

Unallocated amortization expense
Unallocated restructuring and

acquisition-related

Operating income

Applications

Segment revenues
Segment operating expenses

Segment operating income

Scores

Segment revenues
Segment operating expenses

Segment operating income

Tools

Segment revenues
Segment operating expenses

(45,308)
(13,673)

(36,362)
(11,917)

(25,850)
(13,535)

(8,946)
(1,756)

(10,512)
1,618

25% 41%
15% (12)%

(18,242)

(4,281)

(3,486)

(13,961)

(795)

326% 23%

$137,505 $ 161,868 $161,593

(24,363)

275

(15)% — %

Year Ended September 30,

Percentage of Revenues

2015

2014

2013

2015

2014

2013

$ 526,274
(366,666)

(In thousands)
$ 504,256
(334,762)

$ 476,084 100% 100% 100%
(70)% (66)% (70)%

(334,953)

$ 159,608

$ 169,494

$ 141,131

30% 34% 30%

Year Ended September 30,

Percentage of Revenues

2015

2014

2013

2015

2014

2013

$207,007
(55,793)

(In thousands)
$186,469
(44,187)

$180,813
(50,546)

100% 100% 100%
(27)% (24)% (28)%

$151,214

$142,282

$130,267

73% 76% 72%

Year Ended September 30,

Percentage of Revenues

2015

2014

2013

2015

2014

2013

$ 105,500
(111,850)

(In thousands)
$ 98,260
(94,057)

$ 86,547
(67,078)

100% 100% 100%
(106)% (96)% (78)%

Segment operating income (loss)

(6,350) $ 4,203

$ 19,469

(6)% 4% 22%

The decrease in operating income between fiscal 2015 and 2014 of $24.4 million was attributable to a $61.3
million increase in segment operating expenses, a $14.0 million increase in restructuring and acquisition-related
expenses, an $8.9 million increase in share-based compensation expense and a $1.8 million increase in
amortization expense, partially offset by a $49.8 million increase in segment revenues and an $11.8 million
decrease in unallocated corporate expenses.

At the segment level, the $0.3 million increase in segment operating income was driven by an $11.8 million
decrease in unallocated corporate expenses and an $8.9 million increase in our Scores segment, partially offset by
a $10.5 million decrease in our Tools segment and a $9.9 million decrease in our Applications segment.

The $9.9 million decrease in Applications segment operating income was attributable to a $31.9 million

increase in segment operating expenses, partially offset by a $22.0 million increase in segment revenues.
Segment operating income as a percentage of segment revenues for Applications decreased to 30% from 34%
primarily due to an increase in professional services delivery cost, as well as an increase in salaries and benefits
cost as a result of our increased headcount, partially offset by an increase in sales of our higher-margin software
products .

The $8.9 million increase in Scores segment operating income was attributable to a $20.5 million increase in

segment revenues, partially offset by an $11.6 million increase in segment operating expenses. Segment
operating income as a percentage of segment revenues for Scores decreased to 73% from 76% mainly due to a
decrease in sales of our higher-margin software products, an increase in salaries and benefits cost as a result of
our increased headcount, and a nonrecurring charge in third-party data cost. In addition, the margin was
positively impacted by an increase in our higher-margin revenues generated from the Experian agreement.

The $10.5 million decrease in Tools segment operating income (loss) was attributable to a $17.8 million
increase in segment operating expenses, partially offset by a $7.3 million increase in segment revenues. Segment
operating income as a percentage of segment revenues for Tools was a negative 6% for fiscal 2015 compared to a
positive 4% for fiscal 2014 mainly due to an increase in the research and development efforts related to our
cloud-based FICO® Decision Management Platform and several new products in the Tools segment, as well as an
increase in professional services delivery cost, partially offset by an increase in sales of higher-margin software
products.

The $11.8 million decrease in unallocated corporate expenses was primarily attributable to a decrease in

incentive cost, as well as a decrease in certain corporate charges including bad debt.

The increase in operating income between fiscal 2014 and 2013 of $0.3 million was attributable to a $45.5
million increase in segment revenues and a $1.6 million decrease in amortization expense, partially offset by a
$20.4 million increase in segment operating expenses, a $15.1 million increase in unallocated corporate
expenses, a $10.5 million increase in share-based compensation expense and a $0.8 million increase in
restructuring and acquisition-related expenses.

At the segment level, the $10.0 million increase in segment operating income was driven by a $28.4 million

increase in our Applications segment and a $12.0 million increase in our Scores segment, partially offset by a
$15.1 million increase in unallocated corporate expenses and a $15.3 million decrease in our Tools segment.

The $28.4 million increase in Applications segment operating income was attributable to a $28.2 million

increase in segment revenues and a $0.2 million decrease in segment operating expenses. The increase in
segment revenues was primarily attributable to two large multi-year license transactions in fraud solutions and
increased transactional and services revenues in customer communication solutions. Segment operating income
as a percentage of segment revenues for Applications increased to 34% from 30% primarily due to FICO shifting
resources to cloud computing mainly in the Tools segment, a reduction in sales workforce as part of our
restructuring during the first quarter of our fiscal 2014, as well as increased sales of higher-margin software
products.

The $12.0 million increase in Scores segment operating income was attributable to a $6.4 million decrease
in segment operating expenses and a $5.6 million increase in segment revenues. Segment operating income as a
percentage of segment revenues for Scores increased to 76% from 72% mainly due to an increase in sales of our
higher-margin software products, as well as decreased third-party data cost as a result of favorable terms in a
renewed agreement with one credit reporting agency in May 2013.

The $15.3 million decrease in Tools segment operating income was attributable to a $27.0 million increase

in segment operating expenses, partially offset by an $11.7 million increase in segment revenues. Segment
operating income as a percentage of segment revenues for Tools decreased to 4% from 22% mainly due to an
increase in the research and development efforts related to our cloud-based FICO® Decision Management
Platform as well as our FICO® Model Central™ Solution.

The $15.1 million increase in unallocated corporate expenses was primarily attributable to an increase in

incentive cost.

Outlook

CAPITAL RESOURCES AND LIQUIDITY

As of September 30, 2015, we had $86.1 million in cash and cash equivalents which included $64.5 million

held off-shore by our foreign subsidiaries. We believe these balances, as well as available borrowings from our
$400 million revolving line of credit and anticipated cash flows from operating activities, will be sufficient to
fund our working and other capital requirements as well as the $60.0 million principal payment due in July 2016
on our senior notes issued in July 2010. Under our current financing arrangements we have no other significant
debt obligations maturing over 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 and
cash equivalents 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,

2015

2014

2013

(In thousands)

$132,977
(81,916)
(58,635)
(11,381)

$ 175,034
(19,843)
(130,391)
(2,903)

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

Increase (decrease) in cash and cash equivalents

$ (18,955)

$ 21,897

$ 11,569

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 $133.0 million in fiscal 2015 compared to

$175.0 million in fiscal 2014. The $42.0 million decrease was mainly attributable to a $27.6 million decrease
caused by timing of receipts and payments in our ordinary course of business, a $15.2 million increase in
payment associated with our accrued incentive from prior year and an $11.4 million increase in our income tax
payments.

Net cash provided by operating activities totaled $175.0 million in fiscal 2014 compared to $136.1 million

in fiscal 2013. The $38.9 million increase was mainly attributable to a $40.4 million increase caused by the
timing of receipts and payments in our ordinary course of business, including a $29.2 million increase caused by
timing of payment on accrued compensation and employee benefits.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $81.9 million in fiscal 2015 compared to $19.8 million in fiscal
2014. The $62.1 million increase was attributable to a $49.7 million increase in net cash used for acquisitions and
a $12.4 million increase in net cash used for purchases of property and equipment.

Net cash used in investing activities totaled $19.8 million in fiscal 2014 compared to $35.0 million in fiscal

2013. The $15.2 million decrease was attributable to a $25.6 million decrease in net cash used for acquisitions
and an $11.6 million decrease in net cash used for purchases of property and equipment, partially offset by a
$22.0 million decrease in proceeds from maturities of marketable securities.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $58.6 million in fiscal 2015 compared to $130.4 million in

fiscal 2014. The $71.8 million decrease was primarily due to an $86.3 million decrease in common stock
repurchased and a $49.0 million increase in proceeds, net of payments from our revolving line of credit, partially
offset by a $63.0 million increase in payment on our senior notes.

Net cash used in financing activities totaled $130.4 million in fiscal 2014 compared to $86.6 million in

fiscal 2013. The $43.8 million increase was primarily due to a $134.3 million increase in common stock
repurchased and a $23.7 million decrease in cash generated from stock option exercises, partially offset by a
$72.7 million increase in proceeds, net of payments from our revolving line of credit and a $41.0 million
decrease in payment on our senior notes.

Repurchases of Common Stock

From time to time, we repurchase our common stock in the open market. During fiscal 2015, 2014 and
2013, we expended $130.7 million , $214.9 million and $84.9 million, respectively, in connection with our
repurchase of common stock. In April 2014, 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. Following the completion of the April 2014 program, our Board of Directors
approved a new stock repurchase program in August 2014. This program is open-ended and authorizes
repurchases of shares of our common stock up to an aggregate cost of $250.0 million in the open market or in
negotiated transactions. As of September 30, 2015, we had $119.3 million remaining under this authorization.

Dividends

We paid quarterly dividends of two cents per share during each of fiscal 2015, 2014 and 2013. Our dividend
rate is set by the Board of Directors on a quarterly basis taking into account a variety of factors, including among
others, our operating results and cash flows, general economic and industry conditions, our obligations, changes
in applicable tax laws and other factors deemed relevant by the Board. Although we expect to continue to pay
dividends at the current rate, our dividend rate is subject to change from time to time based on the Board’s
business judgment with respect to these and other relevant factors.

Revolving Line of Credit

We have a $400 million unsecured revolving line of credit with a syndicate of banks that expires on
December 30, 2019. 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 our
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, (b) the Federal Funds rate plus 0.500% and (c) the one-month LIBOR rate plus
1.000%, plus, in each case, an applicable margin, or (ii) an adjusted LIBOR rate plus an applicable margin. The
applicable margin for base rate borrowings ranges from 0% to 0.875% and for LIBOR borrowings ranges from
1.000% to 1.875%, and is determined based on our consolidated leverage ratio. In addition, we must pay credit
facility fees. The credit facility contains certain restrictive covenants including maintaining a minimum fixed
charge ratio of 2.5 and a maximum consolidated leverage ratio of 3.0, subject to a step up to 3.5 following certain
permitted acquisitions. The credit agreement also contains other covenants typical of unsecured facilities. As of
September 30, 2015, we had $232.0 million in borrowings outstanding at a weighted average interest rate of
1.601% 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 five to ten years. The weighted average interest rate is 7.2% and the weighted average maturity is 10.0 years
for the remaining 2008 Senior Notes. 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 six to ten
years. The weighted average interest rate is 5.2% and the weighted average maturity is 8.0 years for the 2010
Senior Notes. 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, 2015 we were in compliance with all financial covenants under these
purchase agreements.

Contractual Obligations

The following table presents a summary of our contractual obligations at September 30, 2015:

Year Ended September 30,

2016

2017

2018

2019

2020

Thereafter

Total

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

(In thousands)
$ 60,000 $ 72,000 $131,000 $28,000 $85,000 $ — $376,000
68,135
103,499
4,634

15,675
17,370
—

19,303
19,415
—

22,136
22,603
—

6,269
15,565
—

—
19,908
—

4,752
8,638
—

Total commitments

$104,739 $110,718 $164,045 $49,834 $98,390 $19,908 $552,268

(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 probable. 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 our 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; for example, we conclude
professional services offered along with our SaaS subscription services typically have standalone value using this
criteria. 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. Historically, there have been no significant changes in our estimated selling price used in
allocation of arrangement consideration. We do not believe there is a reasonable likelihood there will be a
material change in the future estimates.

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. Historically, there have been no significant changes in our
estimates or assumptions. To the extent a significant acquisition is made during a fiscal year, as appropriate we
will expand the discussion to include specific assumptions and inputs used to determine the fair value of our
acquired intangible assets.

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. Historically, there have been no
significant changes in our valuation allowances or uncertain tax positions as it relates to business combinations.
We do not believe there is a reasonable likelihood there will be a material change in the future estimates.

Goodwill, Acquisition Intangibles and Other Long-Lived Assets—Impairment Assessment

Goodwill represents the excess of cost over the fair value of identifiable assets acquired and liabilities assumed

in business combinations. We assess goodwill for impairment for each of our reporting units on an annual basis
during the fourth quarter using a July 1 measurement date unless circumstances require a more frequent
measurement. We have determined that our reporting units are the same as our reportable segments. When
evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than
not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. If, based on
the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit
is less than its carrying value, we would bypass the two-step impairment test. Events and circumstances we consider
in performing the “step zero” qualitative assessment include macro-economic conditions, market and industry
conditions, internal cost factors, share price fluctuations, and the operational stability and the overall financial
performance of the reporting units. If we conclude that it is more likely than not that a reporting unit’s fair value is
less than its carrying amount, we would perform the first step (“step one”) of the two-step impairment test and
calculate the estimated fair value of the reporting unit by 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. 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.

For fiscal 2015, we began our assessment with the step zero qualitative analysis because the fair value
substantially exceeded the carrying value for each of our reporting units in our fiscal 2014 step one analysis.
After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than
not that the fair value of each of our reporting units was less than their carrying amounts. Consequently, we did
not perform a step one quantitative analysis in fiscal 2015. For fiscal 2014 and 2013, we elected to proceed
directly to the step one quantitative analysis rather than perform the step zero qualitative assessment and
determined goodwill was not impaired for any of our reporting units.

Our intangible assets that have finite useful lives and other long-lived assets are assessed for potential
impairment 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, 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 our
intangible assets or other long-lived assets could occur. We review the estimated remaining useful lives of our
acquired intangible assets at each reporting period. A reduction in our estimate of remaining useful lives, if any,
could result in increased annual amortization expense in future periods. We did not recognize any impairment
charges on intangible assets that have finite useful lives or other long-lived assets in fiscal 2015, 2014 or 2013.

As discussed above, while we believe that the assumptions and estimates utilized were appropriate based on
the information available to management, different assumptions, judgments and estimates could materially affect
our impairment assessments for our goodwill, acquired intangibles with finite lives and other long-lived assets.
Historically, there have been no significant changes in our estimates or assumptions that would have had a
material impact for our goodwill or intangible assets impairment assessment. We believe our projected operating
results and cash flows would need to be significantly less favorable to have a material impact on our impairment
assessment. However, based upon our historical experience with operations, we do not believe there is a
reasonable likelihood of a significant change in our projections.

Share-Based Compensation

We measure stock-based compensation cost at the grant date based on the fair value of the award and
recognize it as expense, net of estimated forfeitures, over the vesting or service period, as applicable, of the stock
award (generally three to four years). We use the Black-Scholes valuation model to determine the fair value of
our stock options and a Monte Carlo valuation model to determine the fair value of our market share units. Our
valuation models and generally accepted valuation techniques require us to make assumptions and to apply
judgment to determine the fair value of our awards. These assumptions and judgments include estimating the
volatility of our stock price, expected dividend yield, employee turnover rates and employee stock option
exercise behaviors. Historically, there have been no material changes in our estimates or assumptions. We do not
believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions. See
Note 14 to the accompanying consolidated financial statements for further discussion of our share-based
employee benefit plans.

Income Taxes

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

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 have historically had minimal changes in our valuation allowances related to deferred tax assets,
as described in Note 13 to the accompanying consolidated financial statements.

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. Historically, settlements related to
our unrecognized tax benefits have been minimal as described in Note 13 to the accompanying consolidated
financial statements.

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. Historically, there have been no material changes in our estimates or assumptions. We do not believe
there is a reasonable likelihood there will be a material change in the future estimates.

New Accounting Pronouncements Recently Issued or Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue
from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the
amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.
ASU 2014-09 will replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting
Principles when it becomes effective and permits the use of either the retrospective or cumulative effect
transition method. The guidance also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts. In July 2015, the FASB issued guidance
to defer the effective date for one year. For public entities, the standard will be effective for annual reporting
periods beginning after December 15, 2017 (including interim reporting periods within those periods), which

means it will be effective for our fiscal year beginning October 1, 2018. Early adoption is permitted to the
original effective date of December 15, 2016 (including interim reporting periods within those periods). We have
not yet selected a transition method and we are currently evaluating the impact that the updated standard will
have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance” (“ASU

2015-03”), which changes the presentation of debt issuance costs in financial statements. Under ASU 2015-03,
an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than
as an asset. Amortization of the costs is reported as interest expense. ASU 2015-03 is effective for fiscal years
and interim periods within those fiscal years, beginning after December 15, 2015, which means it will be
effective for our fiscal year beginning October 1, 2016. Early adoption is permitted. We do not believe that
adoption of ASU 2015-03 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 and foreign exchange rates. We do not use

derivative financial instruments for speculative or trading purposes.

Interest Rate

We maintain an investment portfolio consisting of bank deposits and money market funds. The funds
provide daily liquidity and may be subject to interest rate risk and fall in value if market interest rates increase.
We do not expect our operating results or cash flows to be affected to any significant degree by a sudden change
in market interest rates. The following table presents the principal amounts and related weighted-average yields
for our investments with interest rate risk at September 30, 2015 and 2014:

Cash and cash equivalents

September 30, 2015

September 30, 2014

Cost
Basis

Carrying
Amount

Average
Yield

Cost Basis

Carrying
Amount

Average
Yield

$86,120

(Dollars in thousands)
0.95% $105,075

$105,075

0.03%

In May 2008, we issued $275 million of senior notes to a group of institutional investors in a private
placement (the “2008 Senior Notes”). In July 2010 we issued an additional $245 million of senior notes to a
group of institutional investors in a private placement (the “2010 Senior Notes” and, with the 2008 Senior Notes,
the “Senior Notes”). The fair value of the 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 the Senior Notes at September 30, 2015 and 2014:

The 2008 Senior Notes
The 2010 Senior Notes

September 30, 2015

September 30, 2014

Principal

$131,000
$245,000

Carrying
Amounts
(In thousands)
$131,000
$245,000

Fair Value

Principal

$144,009 $202,000
$257,563 $245,000

Carrying
Amounts
(In thousands)
$202,000
$245,000

Fair Value

$214,170
$248,557

We have interest rate risk with respect to our five-year $400 million unsecured revolving line of credit.
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 0.500% and (c) the one-month LIBOR rate plus 1.000%, plus, in

each case, an applicable margin, or (ii) an adjusted LIBOR rate plus an applicable margin. The applicable margin
for base rate borrowings ranges from 0% to 0.875% and for LIBOR borrowings ranges from 1.000% to 1.875%
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 $232.0
million in borrowings outstanding at a weighted average interest of 1.601% under the credit facility as of
September 30, 2015.

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

Foreign-currency-denominated receivable and cash balances are remeasured at foreign exchange rates in
effect on the balance sheet date with the effects of changes in foreign exchange 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 receivable and cash balances attributable to changes in foreign exchange rates. The forward contracts
are short-term in nature and typically have average maturities at inception of less than three months.

The following tables summarize our outstanding foreign currency forward contracts, by currency at

September 30, 2015 and 2014:

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, 2015

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD
EUR

2,750
5,600

$ 2,045
$ 6,296

$—
—

GBP

6,943

$10,550

—

September 30, 2014

Contract Amount

Fair Value

Foreign
Currency

US$

(In thousands)

CAD
EUR

3,300
3,800

$ 2,960
$ 4,790

$—
—

GBP

6,795

$11,000

—

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

fair value was $0 on September 30, 2015 and 2014.

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, 2015 and 2014, and the related consolidated statements of income, comprehensive
income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2015.
We also have audited the Company’s internal control over financial reporting as of September 30, 2015, based on
the criteria established in Internal Control — Integrated Framework (2013) 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 and subsidiaries as of September 2015 and 2014, and the results of their
operations and their cash flows for each of the three years in the period ended September 30, 2015, 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, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP
San Diego, CA
November 10, 2015

FAIR ISAAC CORPORATION
CONSOLIDATED BALANCE SHEETS

Assets

Current assets:

Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets

Total current assets

Marketable securities available for sale
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

Long-term debt
Other liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity:

September 30,

2015

2014

(In thousands, except par value
data)

86,120
158,773
41,709

286,602

9,567
10,958
38,208
814,750
47,321
15,196
7,561

105,075
155,295
28,157

288,527

8,751
11,033
36,677
779,928
47,914
13,061
6,407

$ 1,230,163

$ 1,192,298

19,852
54,368
30,958
46,697
92,000

243,875

516,000
33,290

793,165

22,000
56,650
36,235
56,519
170,000

341,404

376,000
20,280

737,684

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 31,290 and 32,047 shares outstanding at September 30, 2015 and
September 30, 2014, respectively)

Paid-in-capital
Treasury stock, at cost (57,567 and 56,810 shares at September 30, 2015 and

September 30, 2014, respectively)

Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

313
1,152,789

320
1,129,317

(2,033,644)
1,368,255
(50,715)

(1,936,095)
1,284,261
(23,189)

436,998

454,614

$ 1,230,163

$ 1,192,298

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Year Ended September 30,

2015

2014
(In thousands, except per share data)

2013

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 expense, net
Other income (expense), net

Income before income taxes
Provision for income taxes

Net income

Other comprehensive loss:

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

$564,232
151,773
122,776

$527,563
149,834
111,588

$514,304
135,194
93,946

838,781

788,985

743,444

270,535
98,824
300,002
13,673
18,242

249,281
83,435
278,203
11,917
4,281

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

701,276

627,117

581,851

137,505
(29,150)
883

109,238
22,736

161,868
(28,550)
(187)

133,131
38,252

161,593
(30,227)
618

131,984
41,889

86,502

94,879

90,095

(27,526)

(2,281)

(5,100)

$ 58,976

$ 92,598

$ 84,995

2.75

2.80

2.55

31,402

33,870

35,332

2.65

2.72

2.48

32,609

34,864

36,292

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

assets. See Note 7 to the consolidated financial statements.

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended September 30, 2015, 2014 and 2013
(In thousands, except per share data)

Common
Stock

Par
Value

Paid-in-
Capital

Treasury
Stock

Retained
Earnings

Balance at September 30, 2012 34,839 $348 $1,103,611 $(1,718,570) $1,104,825
Share-based compensation
— —
Issuance of treasury stock under

25,850

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid
Net income
Foreign currency translation

1,642

(22,150)

52,389

—

— —

(1,695)

(17)

— —
— —

2,887
—
—
—

—
(84,876)
—
—

—
—
(2,824)
90,095

adjustments

— —

—

Balance at September 30, 2013 34,786
Share-based compensation
Issuance of treasury stock under

348 1,110,198
36,362

— —

(1,751,057) 1,192,096
—

—

911

(23,278)

29,823

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid
Net income
Foreign currency translation

— —

(3,650)

(37)

— —
— —

6,035
—
—
—

adjustments

— —

—

Balance at September 30, 2014 32,047
Share-based compensation
Issuance of treasury stock under

320 1,129,317
45,308

— —

—

(214,861)

—
—

—

—
—
(2,714)
94,879

—

(1,936,095) 1,284,261
—

—

employee stock plans
Tax effect from share-based
payment arrangements

Repurchases of common stock
Dividends paid
Net income
Foreign currency translation

954

(34,366)

33,153

—

— —

(1,711)

(17)

— —
— —

12,530
—
—
—

—
—
(2,508)
86,502

—

(130,702)

—
—

—

Accumulated
Other
Comprehensive
Loss

$(15,808)

—

—
—
—
—

(5,100)

(20,908)
—

—

—
—
—
—

(2,281)

(23,189)
—

—

—
—
—
—

Total
Stockholders’
Equity

$ 474,406
25,850

30,256

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

(5,100)

530,677
36,362

6,554

6,035
(214,898)
(2,714)
94,879

(2,281)

454,614
45,308

(1,203)

12,530
(130,719)
(2,508)
86,502

adjustments

— —

—

(27,526)

Balance at September 30, 2015 31,290 $313 $1,152,789 $(2,033,644) $1,368,255

$(50,715)

$ 436,998

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 doubtful accounts
Net (gain) 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
Proceeds from maturities of marketable securities
Cash paid for acquisitions, net of cash acquired
Distribution from 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
Proceeds from issuance of treasury stock under employee stock plans
Taxes paid related to net share settlement of equity awards
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,

2015

2014
(In thousands)

2013

$ 86,502

$ 94,879

$ 90,095

33,889
45,308
(5,934)
12,530
(13,795)
—
—
2,210

(4,602)
(15,462)
(3,672)
(1,506)
4,113
(6,604)
132,977

(24,999)
—
(56,992)
75
(81,916)

32,632
36,362
(16,026)
6,035
(6,808)
—
1,485
(10)

(13,649)
(1,754)
3,174
17,450
15,566
5,698
175,034

(12,590)
—
(7,253)
—
(19,843)

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)

249,000
(116,000)
(71,000)
18,258
(19,461)
(2,508)
(130,719)
13,795
(58,635)
(11,381)
(18,955)
105,075
$ 86,120

145,000
(61,000)
(8,000)
18,851
(12,297)
(2,714)
(217,039)
6,808
(130,391)
(2,903)
21,897
83,178
$ 105,075

30,000
(18,676)
(49,000)
40,107
(9,851)
(2,824)
(82,752)
6,362
(86,634)
(2,946)
11,569
71,609
$ 83,178

Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds of $1,592, $3,424 and $2,471

during the years ended September 30, 2015, 2014 and 2013, 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

$ 33,752
$ 30,470

$ 22,367
$ 28,209

$ 24,141
$ 31,011

$
$

— $
$
436

— $
$
363

2,141
681

See accompanying notes to consolidated financial statements.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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,
healthcare organizations and public agencies.

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

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

We make estimates and assumptions that affect the amounts reported in the financial statements and the
disclosures made in the accompanying notes. For example, we use estimates in determining the collectibility of
accounts receivable; the appropriate levels of various accruals; labor hours in connection with fixed-fee service
contracts; the amount of our tax provision and the realizability of deferred tax assets. We also use estimates in
determining the remaining economic lives and carrying values of acquired intangible assets, property and
equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting
units and share-based compensation. Actual results may differ from our estimates.

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, 2015, 2014 and 2013

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 $20.2
million, $20.7 million and $19.7 million during fiscal 2015, 2014 and 2013, respectively.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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, Acquisition Intangibles and Other Long-Lived Assets

Goodwill represents the excess of cost over the fair value of identifiable assets acquired and liabilities
assumed in business combinations. We assess goodwill for impairment for each of our reporting units on an
annual basis during the fourth quarter using a July 1 measurement date unless circumstances require a more
frequent measurement. We have determined that our reporting units are the same as our reportable segments.
When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more
likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero”
approach. If, based on the review of the qualitative factors, we determine it is not more likely than not that the
fair value of a reporting unit is less than its carrying value, we would bypass the two-step impairment test. Events
and circumstances we consider in performing the “step zero” qualitative assessment include macro-economic
conditions, market and industry conditions, internal cost factors, share price fluctuations, and the operational
stability and the overall financial performance of the reporting units. If we conclude that it is more likely than not
that a reporting unit’s fair value is less than its carrying amount, we would perform the first step (“step one”) of
the two-step impairment test and calculate the estimated fair value of the reporting unit by 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.

For fiscal 2015, we began our assessment with the step zero qualitative analysis because the fair value
substantially exceeded the carrying value for each of our reporting units in our fiscal 2014 step one analysis.
After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than
not that the fair value of each of our reporting units was less their carrying amounts. Consequently, we did not
perform a step one quantitative analysis in fiscal 2015. For fiscal 2014 and 2013, we elected to proceed directly
to the step one quantitative analysis rather than perform the step zero qualitative assessment and determined
goodwill was not impaired for any of our reporting units.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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 3 years

Revenue Recognition

Software Licenses

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

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

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

Transactional-Based Revenues

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

fixed or determinable, and collection is probable. 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 material 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 material 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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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 our 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

Gross vs. Net Revenue Reporting

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

Business Combinations

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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

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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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.

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.

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 foreign currency forward 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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

We recorded transactional foreign exchange losses of $0.0 million (less than $100,000), $1.0 million and

$0.8 million during fiscal 2015, 2014 and 2013, respectively.

Share-Based Compensation

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 $3.7 million, $3.8 million and $2.5 million in fiscal 2015, 2014 and
2013, respectively.

New Accounting Pronouncements Recently Issued or Adopted

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance” (“ASU

2. Business Combinations

On January 12, 2015, we acquired 100% of the equity of TONBELLER Aktiengesellschaft

(“TONBELLER”). TONBELLER is an innovative provider of financial crime and compliance (“FCC”) solutions
that support the demanding regulatory compliance requirements of more than a thousand banks and commercial
organizations. This acquisition allows us to capitalize on the escalating demand for new, risk-based, integrated
FCC solutions.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price are as

follows:

Consideration
Cash

Acquisition-related costs (included in the Company’s consolidated statement of income for the

year ended September 30, 2015 as a component of restructuring and acquisition-related
expenses)

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

Completed technology
Customer relationships
Trade names

Other assets
Accounts payable
Accrued compensation and employee benefits
Other accrued liabilities
Deferred income taxes

Total identifiable net assets

Goodwill

Total

(In thousands)

$59,632

763

$ 2,640
5,331
209

2,700
11,600
600
112
(1,118)
(1,514)
(2,728)
(4,349)

13,483

46,149

$59,632

The acquired identifiable intangible assets have a weighted average useful life of approximately 4.9 years
and are being amortized using the straight-line method over their estimated useful lives as follows: completed
technology, five years; customer relationships, five years; and trade names, three years. The goodwill of $46.1
million arising from the acquisition consists largely of the revenue synergies related to market expansion and
more rapid innovation for our solutions. The goodwill was allocated to our Applications segment and is not
deductible for tax purposes. The final purchase price allocation is subject to the completion of the final valuation
of the accounts receivables acquired, which is expected to be completed as soon as is practicable but no later than
January 12, 2016, and will not have a material impact on the preliminary purchase price allocation disclosed
above. TONBELLER has been included in our operating results since the acquisition date. The pro forma impact
of this acquisition was not deemed material to our results of operations.

In fiscal 2014, we acquired 100% of the common stock of InfoCentricity, Inc. for $8.2 million in cash.

In fiscal 2013, we acquired 100% of the ownership interest of CR Software, LLC for $29.6 million in cash.
We recorded $16.5 million of intangible assets, which are being amortized using the straight-line method over a
weighted average useful life of approximately 8.8 years. The goodwill of $13.7 million was allocated to our
Applications segment and was not deductible for tax purposes. We also acquired 100% of the common stock of
Infoglide Software, Inc. (“Infoglide”) for $4.4 million in cash.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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, 2015 and 2014:

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

Total

Long-term Marketable Securities:
Marketable equity securities

September 30, 2015

September 30, 2014

Amortized
Cost

Gross
Unrealized
Gains

Fair Value

Amortized
Cost

(In thousands)

Gross
Unrealized
Gains

Fair Value

$85,681
439
—

$86,120

$—
—
—

$—

$85,681
439
—

$ 94,749
439
9,887

$ — $ 94,749
439
9,887

—
—

$86,120

$105,075

$ — $105,075

$ 8,691

$876

$ 9,567

7,220

$1,531

8,751

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.

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. We do not have any assets that are valued using inputs identified
under a Level 2 hierarchy as of September 30, 2015 and 2014.

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 as of September 30, 2015 and 2014.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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

September 30, 2015 and 2014:

September 30, 2015

Assets:
Cash equivalents (1)
Marketable securities (2)

Total

September 30, 2014

Assets:
Cash equivalents (1)
Marketable securities (2)

Total

Active Markets for
Identical Instruments
(Level 1)

Fair Value as of
September 30, 2015

(In thousands)

439
9,567

$10,006

439
9,567

$10,006

Active Markets for
Identical Instruments
(Level 1)

Fair Value as of
September 30, 2014

(In thousands)

$10,326
8,751

$19,077

$10,326
8,751

$19,077

(1)

Included in cash and cash equivalents on our balance sheet at September 30, 2015 and 2014. Not included in
this table are cash deposits of $85.7 million and $94.7 million at September 30, 2015 and 2014, respectively.

(2) 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, 2015 and 2014.

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 would apply to our Level 2 investments. We have not changed our 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, respectively.

5. Derivative Financial Instruments

We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of the
remeasured receivable and cash balances attributable to changes in foreign exchange rates. The forward contracts
are short-term in nature and typically have average maturities at inception of less than three months.

The following tables summarize our outstanding foreign currency forward contracts, by currency at

September 30, 2015 and 2014:

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, 2015

Contract Amount

ForeignCurrency

US$

(In thousands)

Fair Value

US$

CAD
EUR

2,750
5,600

$ 2,045
$ 6,296

GBP

6,943

$10,550

September 30, 2014

Contract Amount

ForeignCurrency

US$

(In thousands)

$—
—

—

Fair Value

US$

CAD
EUR

3,300
3,800

$ 2,960
$ 4,790

GBP

6,795

$11,000

$—
—

—

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

their fair value was $0 at September 30, 2015 and 2014.

Gains (losses) 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, 2015, 2014 and 2013:

Gain (loss) on foreign currency forward contracts

Year Ended September 30,

2015

2014

$(62)

(In thousands)
$256

2013

$25

6. Receivables

Receivables at September 30, 2015 and 2014 consisted of the following:

Billed
Unbilled (1)

Less: allowance for doubtful accounts

Receivables, net

September 30,

2015

2014

(In thousands)

$114,464
46,435

$123,083
35,139

160,899
(2,126)

158,222
(2,927)

$158,773

$155,295

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

(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,

2015

2014

(In thousands)

$2,927
—
(801)

$2,126

$ 3,157
1,485
(1,715)

$ 2,927

7. Goodwill and Intangible Assets

Intangible assets that are subject to amortization consisted of the following at September 30, 2015 and 2014:

September 30, 2015

September 30, 2014

Gross
Carrying
Amount

Accumulated
Amortization

Net

Average
Life

Gross
Carrying
Amount

Accumulated
Amortization

Net

Average
Life

(In thousands, except average life)

Completed

technology

Customer contracts
and relationships

Trade names

$ 87,820

$ (67,769) $20,051

65,762
576

(38,930)
(138)

26,832
438

$154,158

$(106,837) $47,321

12
3

$ 87,050

$(61,189)

$25,861

55,130
—

(33,077)
—

22,053
—

$142,180

$(94,266)

$47,914

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 2015, 2014 and 2013:

Cost of revenues
Selling, general and administrative expenses

Total

Year Ended September 30,

2015

2014

2013

$ 7,594
6,079

(In thousands)
$ 7,371
4,546

$ 6,630
6,905

$13,673

$11,917

$13,535

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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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

September 30, 2015, was as follows (in thousands):

Year Ended September 30,

2016
2017
2018
2019
2020
Thereafter

Total

$14,209
13,095
6,018
5,503
3,394
5,102

$47,321

The following table summarizes changes to goodwill during fiscal 2015 and 2014, both in total and as

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

Balance at September 30, 2013
Addition from acquisitions
Adjustment related to prior acquisitions
Foreign currency translation adjustment

Balance at September 30, 2014

Addition from acquisitions
Foreign currency translation adjustment

Balance at September 30, 2015

Applications

Scores

Tools

Total

(In thousands)

$559,538
—
298
459

$146,648
—
—
—

$67,745
5,129
—
111

$773,931
5,129
298
570

560,295

146,648

72,985

779,928

46,149
(9,679)

—
—

—
(1,648)

46,149
(11,327)

$596,765

$146,648

$71,337

$814,750

8. Composition of Certain Financial Statement Captions

The following table presents the composition of property and equipment at September 30, 2015 and 2014:

Property and equipment:

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

Total

September 30,

2015

2014

(In thousands)

$ 71,841
14,750
23,269
(71,652)

$ 124,699
14,346
25,503
(127,871)

$ 38,208

$ 36,677

9. Revolving Line of Credit

In December 2014 we refinanced our $200 million unsecured revolving line of credit, increasing our
borrowing capacity to $400 million with a syndicate of banks that expires on December 30, 2019. 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 our common stock. Interest on amounts

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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 0.500% and (c) the one-month LIBOR rate plus 1.000%, plus, in each case, an applicable
margin, or (ii) an adjusted LIBOR rate plus an applicable margin. The applicable margin for base rate borrowings
ranges from 0% to 0.875% and for LIBOR borrowings ranges from 1.000% to 1.875% and is determined based
on our consolidated leverage ratio. In addition, we must pay credit facility fees. The credit facility contains
certain restrictive covenants including maintaining a minimum fixed charge ratio of 2.5 and a maximum
consolidated leverage ratio of 3.0, subject to a step up to 3.5 following certain permitted acquisitions. The credit
agreement also contains other covenants typical of unsecured facilities. As of September 30, 2015, we had
$232.0 million in borrowings outstanding at a weighted average interest rate of 1.601%, of which $200.0 million
was classified as a long-term liability and recorded in long-term debt within the accompanying consolidated
balance sheets. We were in compliance with all financial covenants under this credit facility as of September 30,
2015.

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

Amount

Interest Rate

Maturity Date

A
B
C
D

(In millions)
$ 41.0
$ 40.0
$ 63.0
$131.0

6.37%
6.37%
6.71%
7.18%

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

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

E
F
G
H

Amount

(In millions)
$60.0
$72.0
$28.0
$85.0

Interest
Rate

Maturity Date

4.72% July 14, 2016
5.04% July 14, 2017
5.42% July 14, 2019
5.59% July 14, 2020

We were and 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 Senior Notes require interest payments semi-annually and also include certain
restrictive covenants. As of September 30, 2015, 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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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

September 30, 2015 and 2014:

The 2008 Senior Notes
The 2010 Senior Notes

September 30, 2015

September 30, 2014

Principal

$131,000
$245,000

Carrying
Amounts

(In thousands)
$131,000
$245,000

Fair Value

Principal

$144,009 $202,000
$257,563 $245,000

Carrying
Amounts

(In thousands)
$202,000
$245,000

Fair Value

$214,170
$248,557

We measure the fair value of the 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,

2016
2017
2018
2019
2020

Total

11. Employee Benefit Plans

Defined Contribution Plans

$ 60,000
72,000
131,000
28,000
85,000

$376,000

We sponsor the Fair Isaac Corporation 401(k) plan for eligible employees in the U.S. Under this plan,
eligible employees may contribute up to 25% of compensation, not to exceed statutory limits. We also provide a
company matching contribution. Investment in FICO common stock is not an option under this plan. Our
contributions into all 401(k) plans, including former acquired company sponsored plans that have since merged
into the Fair Isaac Corporation 401(k) plan or have been frozen, totaled $7.1 million, $6.3 million and $6.3
million during fiscal 2015, 2014 and 2013, 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 $20.3 million, $25.0 million
and $10.5 million during fiscal 2015, 2014 and 2013, respectively.

12. Restructuring Expenses

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

During fiscal 2014, we incurred net charges totaling $4.1 million consisting of $0.2 million in facilities
charges and $3.9 million in severance charges due to the elimination of 88 positions primarily in the U.S. Cash
payments for all the restructuring charges were paid by the end of the second quarter of our fiscal 2015.

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 all the facilities charges were paid by the end of our fiscal 2014.

The following tables summarize 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.

Accrual at
September 30,
2013

Expense
Additions

Cash
Payments

Non-cash
Settlements

Accrual at
September 30,
2014

Facilities charges
Employee separation

Less: current portion

Non-current

Facilities charges
Employee separation

Less: current portion

Non-current

$ 92
170

262

(262)

$ —

Accrual at
September 30,
2015

$12,995
2,405

15,400

(5,570)

$ 9,830

$ 1,732
—

$ 167
3,963

(In thousands)
$(1,807)
(3,793)

1,732

$4,130

$(5,600)

$—
—

$—

Expense
Additions

Cash
Payments

Non-cash
Settlements

(In thousands)

$13,571
3,908

(92)
(1,673)

$(576)
—

$17,479

$(1,765)

$(576)

(1,732)

$ —

Accrual at
September 30,
2014

$ 92
170

262

(262)

$ —

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

13. Income Taxes

The provision for income taxes was as follows during fiscal 2015, 2014 and 2013:

Current:

Federal
State
Foreign

Deferred:

Federal
State
Foreign

Total provision

Year ended September 30,

2015

2014

2013

(In thousands)

$23,646
(5,381)
10,405

$ 42,570
4,221
7,487

$31,469
2,755
3,994

28,670

54,278

38,218

(5,004)
1,422
(2,352)

(15,401)
(1,093)
468

(5,934)

(16,026)

(468)
2,069
2,070

3,671

$22,736

$ 38,252

$41,889

The foreign provision was based on foreign pre-tax earnings of $45.2 million, $43.3 million and $24.3

million in fiscal 2015, 2014 and 2013, respectively. Current foreign tax expense related to foreign tax
withholdings was $5.3 million, $7.7 million and $4.8 million in fiscal 2015, 2014 and 2013, 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, 2015, 2014 and 2013

Deferred tax assets and liabilities at September 30, 2015 and 2014 were as follows:

Deferred tax assets:

Net operating loss carryforward
Research credit carryforward
Accrued bonus
Investments
Accrued compensation
Share-based compensation
Deferred revenue
Accrued lease costs
Property and equipment
Other

Less valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Intangible assets
Prepaid expense
Other

Total deferred tax liabilities

Deferred tax assets, net

September 30,

2015

2014

(In thousands)

$ 17,650
5,759
5,400
1,042
1,834
23,741
979
5,009
3,249
5,613

$ 18,618
5,018
8,484
1,059
1,381
20,238
629
1,007
2,837
4,731

70,276
(13,882)

64,002
(12,078)

56,394

51,924

(30,286)
(3,877)
(993)

(27,391)
(3,966)
(993)

(35,156)

(32,350)

$ 21,238

$ 19,574

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, 2015.

As of September 30, 2015, we had available U.S. federal, state and foreign NOL carryforwards of
approximately $23.9 million, $0.3 million, and $34.2 million, respectively. The U.S. 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 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 and Luxembourg NOL carryforwards do not have an expiration date. The $34.2 million of
foreign NOL includes $22.0 million related to China. Due to a limited ability to utilize the China NOLs a full
valuation allowance has been recorded on the China NOLs, resulting in no tax benefit. 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, as amended, and similar state provisions. We also have available excess
California state research credit of approximately $5.7 million. The California state research credit does not have
an expiration date; however, based on enacted law and expected future cash taxes, we have recorded a valuation
allowance of $5.7 million.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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

shown below for fiscal 2015, 2014 and 2013:

Income tax provision at U.S. federal statutory rate
State income taxes, net of U.S. federal benefit
Foreign tax rate differential
Intercompany interest
Research credits
Domestic production deduction
Federal and state audit settlements
Foreign
Valuation allowance
Intercompany dividend
Other

Year Ended September 30,

2015

2014

2013

$38,233
1,719
(5,279)
(1,260)
(2,104)
(1,607)
(5,806)
(3,109)
1,805
(1,296)
1,440

(In thousands)
$46,595
2,832
(4,592)
(1,246)
(302)
(3,141)
(5,886)
(1,654)
3,888
150
1,608

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

Recorded income tax provision

$22,736

$38,252

$41,889

The decrease in our effective tax rate in fiscal 2015 compared to fiscal 2014 was due primarily to the
favorable settlement of the fiscal 2006 — 2009 state audits, the favorable settlement of the 2010 foreign transfer
pricing assessment, as well as the December 2014 reenactment of the calendar 2014 U.S. Federal Research and
Development Credit, which resulted in a catch up adjustment for the R&D credit during fiscal 2015.

The decrease in our effective tax rate in fiscal 2014 compared to fiscal 2013 was due primarily to the
favorable settlement of the fiscal 2010 — 2012 Federal IRS audits and secondly, due to a higher percentage of
revenue in lower taxing jurisdictions. The 2013 effective tax rate was positively impacted by the reenactment of
the U.S. Federal Research and Development Credit.

In fiscal 2015 and 2014, the foreign taxes consist of tax rate differentials, local country permanent items,

and prior years’ true ups.

In general, it is our practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those
operations. As of September 30, 2015, we have not made a provision for U.S. or additional foreign withholding
taxes on approximately $52.8 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 2012. We are currently under audit by the California Franchise Tax Board
for fiscal 2012 and 2013. 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, 2015, 2014 and 2013

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

Gross unrecognized tax benefits at end of year

Year Ended September 30,

2015

2014

2013

$ 4,554
1,725
(3)
582
(2,224)

(In thousands)
$ 9,009
2,468
(967)
923
(6,879)

$7,501
508
—
1,000
—

$ 4,634

$ 4,554

$9,009

We had $4.6 million of total unrecognized tax benefits as of September 30, 2015, including $4.0 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 unlikely there will be a reduction of the uncertain tax benefits 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, 2015, we have accrued interest of $0.2 million related to the unrecognized tax
benefits.

14. Stock-Based Employee Benefit Plans

Description of Stock Option and Share Plans

We maintain the 2012 Long-Term Incentive Plan (the “2012 Plan”) under which we are authorized to issue
equity awards, including 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 are eligible to receive awards under the 2012 Plan. We also have two other long-term
incentive plans under which awards are currently outstanding: the 1992 Long-term Incentive Plan, which was
adopted in February 1992 and expired in February 2012, and the 2003 Employment Inducement Award Plan,
which was adopted in November 2003 and terminated in February 2012. Stock option awards granted after
September 30, 2005 have a maximum term of seven years, and stock option awards granted prior to October 1,
2005 had a maximum term of ten years. Stock option awards and restricted stock unit awards not subject to
market conditions vest ratably over three or four years. Restricted stock unit awards subject to market conditions
vest annually over a period of three years based on achievement of specified criteria. At September 30, 2015,
there were 2,428,612 shares available for issuance under the 2012 Plan.

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

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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, 2015, there were 2,707,966 shares available for issuance.

We satisfy stock option exercises, vesting of restricted stock units and Purchase Plan issuances from

treasury shares.

Share-Based Compensation Expense and related income tax benefits

We recorded share-based compensation expense of $45.3 million, $36.4 million and $25.9 million in fiscal
years 2015, 2014 and 2013, respectively. The total tax benefit related to this share-based compensation expense
was $16.1 million, $13.0 million and $9.2 million in fiscal 2015, 2014 and 2013, respectively. As of
September 30, 2015, there was $67.8 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 2.30 years.

In fiscal 2015 we received $18.3 million in cash from stock option exercises, with the tax benefit realized

for the tax deductions from these exercises of $8.9 million.

Stock-Based Activity

Stock Options

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 2015, 2014 and 2013:

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)

Year Ended September 30,

2015

2014

2013

4.18

4.04

4.10

34.6%

34.5 - 35.3% 34.6 - 35.6% 35.3 - 36.9%
36.6%
1.33 - 1.48% 0.76 - 1.16% 0.51 - 1.07%
0.20%
0.11 - 0.14% 0.16 - 0.17% 0.18 - 0.20%

0.16%

0.14%

35.1%

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.

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.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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 following table summarizes option activity during fiscal 2015:

Outstanding at October 1, 2014
Granted
Exercised
Forfeited

Outstanding at September 30, 2015

Options exercisable at September 30, 2015

Vested and expected to vest at September 30, 2015

Weighted-
average
Exercise
Price

Weighted-
average
Remaining
Contractual
Term

Aggregate
Intrinsic Value

(In years)

(In thousands)

$36.24
73.37
33.46
41.47

$46.94

$35.51

$46.06

4.31

3.44

4.26

$76,075

$49,230

$73,769

(In thousands)
2,089
552
(545)
(72)

2,024

1,005

1,918

The weighted average fair value of options granted were $21.66, $15.50 and $12.53 during fiscal 2015,
2014 and 2013, respectively. The aggregate intrinsic value of options outstanding at September 30, 2015 was
calculated as the difference between the exercise price of the underlying options and the market price of our
common stock for the 2.0 million outstanding shares, which had exercise prices lower than the $84.50 market
price of our common stock at September 30, 2015. The total intrinsic value of options exercised was $24.3
million, $13.8 million and $19.8 million during fiscal 2015, 2014 and 2013, respectively, determined as of the
date of exercise.

Restricted Stock Units

The fair value of restricted stock units (“RSUs”) granted is the closing market price 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.

The following table summarizes the RSUs activity during fiscal 2015:

Outstanding at October 1, 2014
Granted
Released
Forfeited

Outstanding at September 30, 2015

(In thousands)
1,440
544
(513)
(152)

1,319

Weighted-average
Grant-date Fair Value

$46.68
73.93
43.55
52.09

$58.51

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

The weighted average fair value of the RSUs granted were $73.93, $56.23 and $42.41 during fiscal 2015,
2014 and 2013, respectively. The total intrinsic value of the RSUs that vested was $38.5 million, $27.6 million
and $24.1 million during fiscal 2015, 2014 and 2013, respectively, determined as of the date of vesting.

Performance Share Units

Performance share units (“PSUs”) are granted to our senior officers and earned based on pre-established
performance goals approved by the Leadership Development and Compensation Committee of our Board of
Directors for any given performance period. The range of payout is zero to 200% of the number of granted PSUs,
based on the outcome of the performance conditions. The fair value of the PSUs is the closing market price 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, based on the performance condition that is probable of achievement
that would result in the vesting of the most shares. The Company reassesses the probability at each reporting
period and recognizes the cumulative effect of the change in estimate in the period of change. As of
September 30, 2015, the Company believed the performance condition of the PSUs granted during fiscal year
2015 had been achieved at 92.17% of target value, however, the final determination has not yet been made by the
Leadership Development and Compensation Committee.

The following table summarizes the PSUs activity during fiscal 2015:

Outstanding at October 1, 2014
Granted
Released
Forfeited

Outstanding at September 30, 2015

(In thousands)
381
82
(135)
(47)

281

Weighted-average
Grant-date Fair Value

$47.19
71.86
45.58
56.14

$53.70

The weighted average fair value of the PSUs granted were $71.86, $56.63 and $41.56 during fiscal 2015,

2014 and 2013, respectively. The total intrinsic value of the PSUs that vested was $9.7 million, $4.9 million and
$2.6 million during fiscal 2015, 2014 and 2013, respectively, determined as of the date of vesting.

Market Share Units

Starting our fiscal 2014, market share units (“MSUs”) are granted to our senior officers and earned based on

our total shareholder return relative to the Russell 3000 Index over performance periods of one, two and three
years. We estimate the fair value of MSUs granted using the Monte Carlo valuation model and attribute the cost
separately for each vesting tranche of the award. In addition, we do not reverse the compensation cost solely
because the market condition is not satisfied, and the award is therefore not exercisable or retained by the
employee, provided the requisite service is rendered. We used the following assumptions to estimate the fair
value of our MSUs during fiscal 2015 and 2014:

Expected volatility in FICO’s stock price
Expected volatility in Russell 3000 Index
Correlation between FICO and the Russell 3000 Index
Risk-free interest rate
Average expected dividend yield

Year Ended
September 30,

2015

2014

26.6% 33.9%
12.2% 17.3%
55.9% 68.0%
1.10% 0.68%
0.14% 0.16%

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

The expected volatility was determined based on daily historical movements in our stock price and the
Russell 3000 index for the three years preceding the grant date. The correlation between FICO and the Russell
3000 Index was determined based on historical daily stock price movements for the three years preceding the
grant date. The dividend yield was determined using the historical dividend payout and a trailing twelve month
closing stock price on the grant date. The risk-free rate was determined based on U.S. Treasury zero-coupon
yields over the three-year performance period.

The following table summarizes the MSUs activity during fiscal 2015:

Outstanding at October 1, 2014
Granted
Released
Forfeited

Outstanding at September 30, 2015

Weighted-
average
Grant-
date Fair
Value

$ 68.47
101.85
68.47
78.27

$ 88.65

(In thousands)
88
83
(24)
(18)

129

The weighted average fair value of the MSUs granted were $101.85 and $68.47 during fiscal 2015 and

2014, respectively. The total intrinsic value of the MSUs that vested was $1.7 million during fiscal 2015,
determined as of the date of vesting.

15. Earnings per Share

The following table presents reconciliations for the numerators and denominators of basic and diluted

earnings per share (“EPS”) during fiscal 2015, 2014 and 2013:

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,

2015

2014

2013

(In thousands, except per share data)
$90,095
$94,879
$86,502

31,402
1,207

32,609

33,870
994

34,864

35,332
960

36,292

2.75

2.65

2.80

2.72

2.55

2.48

The computation of diluted EPS excludes options to purchase approximately 138,000, 11,000, and 111,000

shares of common stock for fiscal 2015, 2014 and 2013, 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, 2015, 2014 and 2013

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, 2015, 2014 and 2013. The accounts receivable
balance from this company was not significant as of September 30, 2015 and 2014.

17. Segment Information

We are organized into the following three operating segments, each of which is a reportable segment, 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.

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 broad-based
incentive expense, 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, 2015, 2014 and 2013

The following tables summarize segment information for fiscal 2015, 2014 and 2013:

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

Year Ended September 30, 2015

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 320,596
124,562
81,116

$200,426
2,901
3,680

$ 43,210
24,310
37,980

$ — $ 564,232
151,773
122,776

—
—

526,274
(366,666)

207,007
(55,793)

105,500
(111,850)

—
(89,744)

838,781
(624,053)

Segment operating income (loss)

$ 159,608

$151,214

(6,350) $(89,744) $ 214,728

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

expenses

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

Income before income taxes

(45,308)
(13,673)

(18,242)

137,505
(29,150)
883

$ 109,238

Depreciation expense

$ 13,861

921

3,087

$ 2,347

$ 20,216

Segment revenues:

Transactional and maintenance
Professional services
License

Total segment revenues

Segment operating expense

Year Ended September 30, 2014

Applications

Scores

Tools

(In thousands)

Unallocated
Corporate
Expenses

Total

$ 313,316
121,100
69,840

$178,023
2,784
5,662

$ 36,224
25,950
36,086

— $ 527,563
149,834
—
111,588
—

504,256
(334,762)

186,469
(44,187)

98,260
(94,057)

—

(101,551)

788,985
(574,557)

Segment operating income

$ 169,494

$142,282

$ 4,203

$(101,551)

214,428

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

expenses

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

Income before income taxes

(36,362)
(11,917)

(4,281)

161,868
(28,550)
(187)

$ 133,131

Depreciation expense

$ 14,451

851

$ 2,752

2,661

$ 20,715

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

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
(334,953)

180,813
(50,546)

86,547
(67,078)

—
(86,403)

743,444
(538,980)

Segment operating income

$ 141,131

$130,267

$ 19,469

$(86,403)

204,464

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

expenses

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

Income before income taxes

(25,850)
(13,535)

(3,486)

161,593
(30,227)
618

$ 131,984

Depreciation expense

$ 14,171

867

$ 1,998

$ 2,643

$ 19,679

Our revenues and percentage of revenues by reportable market segments were as follows for fiscal 2015,
2014 and 2013, 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,

2015

2014

2013

(Dollars in thousands)

$526,274
207,007
105,500

63% $504,256
25% 186,469
98,260
12%

64% $476,084
24% 180,813
86,547
12%

64%
24%
12%

$838,781

100% $788,985

100% $743,444

100%

Within our Applications segment our fraud solutions accounted for 23%, 23% and 22% of total revenues in

each of fiscal 2015, 2014 and 2013, respectively; our customer management solutions accounted for 9%, 10%
and 11% of total revenues, in each of these periods, respectively; and our collections & recovery solutions
accounted for 9% for each of these periods.

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

Our revenues and percentage of revenues on a geographical basis are summarized below for fiscal 2015,

2014 and 2013:

United States
United Kingdom
Other countries

Total

Year Ended September 30,

2015

2014

2013

(Dollars in thousands)

$505,109
93,855
239,817

60% $457,270
11%
98,784
29% 232,931

58% $449,437
12%
79,238
30% 214,769

60%
11%
29%

$838,781

100% $788,985

100% $743,444

100%

During fiscal 2015, 2014 and 2013, 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%, 15% and 16% of our total revenues in fiscal 2015, 2014 and 2013,
respectively. At September 30, 2015 and 2014, 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, 2015 and

2014. At September 30, 2015 and 2014, no individual country outside the U.S. accounted for 10% or more of
total consolidated net property and equipment.

United States
International

Total

18. Commitments

September 30,

2015

2014

$29,949
8,259

(Dollars in thousands)
78% $29,276
7,401
22%

80%
20%

$38,208

100% $36,677

100%

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

at September 30, 2015:

Year Ended September 30,

2016
2017
2018
2019
2020
Thereafter

Total

Future
Minimum
Lease
Commitments

(In thousands)
$ 22,603
19,415
17,370
15,565
8,638
19,908

$103,499

FAIR ISAAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2015, 2014 and 2013

Lease Commitments

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 $20.7 million,
$19.4 million and $22.1 million during fiscal 2015, 2014 and 2013, respectively.

Other Commitments

In the ordinary course of business, we enter into contractual purchase obligations and other agreements that

are legally binding and specify certain minimum payment terms.

We are also a party to a management agreement with 23 of our executives providing for certain payments

and other benefits in the event of a qualified change in control of FICO, coupled with a termination of the officer
during the following year.

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, 2015, 2014 and 2013

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, 2015. 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 (1)

Gross profit

Net income

Earnings per share (2):

Basic

Diluted

Shares used in computing earnings per share:

Basic
Diluted

Revenues
Cost of revenues (1)

Gross profit

Net income

Earnings per share (2):

Basic

Diluted

Quarter Ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(In thousands, except per share data)

$232,756
67,042

$209,366
66,202

$207,109
70,991

$189,550
66,300

165,714

143,164

136,118

123,250

$ 33,319

$ 19,906

$ 18,870

$ 14,407

1.07

1.03

0.64

0.62

0.60

0.58

0.45

0.43

31,214
32,494

31,118
32,363

31,335
32,448

31,936
33,128

Quarter Ended

September 30,
2014

June 30,
2014

March 31,
2014

December 31,
2013

(In thousands, except per share data)

$221,570
71,026

$197,610
62,752

$185,462
58,183

$184,343
57,319

150,544

134,858

127,279

127,024

$ 36,603

$ 20,548

$ 20,751

$ 16,977

1.14

1.10

0.60

0.58

0.60

0.59

0.49

0.47

Shares used in computing earnings per share:

Basic
Diluted

32,123
33,217

34,210
35,162

34,500
35,311

34,699
35,820

(1) Cost of revenues excludes amortization expense of $1.9 million, $1.9 million, $1.9 million, $1.8 million,

$1.9 million, $1.9 million, $1.8 million and $1.8 million for the quarters ended September 30,
2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014, March 31,
2014 and December 31, 2013, respectively.

(2) 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.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure 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.

Changes in Internal Control over Financial Reporting

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 year ended September 30,
2015, 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 defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. 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 as of September 30, 2015 based on the guidelines established in
2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation management has concluded that our internal control over
financial reporting was effective as of September 30, 2015.

Deloitte & Touche LLP, an 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, 2015, 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 24, 2016.

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.

Wayne Huyard . . . . . . . . . . . . . . . November 2014-present, Executive Vice President of Sales, Services,

and Marketing of the Company. January 2014-November 2014,
Consultant to the Chief Executive Officer of the Company. September
2012-November 2014, Chief Executive Officer and President,
TEXbase, Inc. March 2012-May 2012, General Manager of RightNow
Technologies, Oracle Corporation. July 2010-February 2012,
President and Chief Operating Officer, RightNow Technologies, Inc.
May 2006-May 2010, Operations and Advisory Group Executive
Leadership Team Member, Cerberus Capital Management L.P.

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.

Name

Positions Held

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.

Age

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 2010- 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 24, 2016.

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 website 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 website. 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 24, 2016.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference from the information under the captions
“Director Compensation for 2015,” “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 24, 2016.

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 24, 2016.

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 24, 2016.

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 24, 2016.

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, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of income and comprehensive income for the years ended September 30,
2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of stockholders’ equity for the years ended September 30, 2015, 2014

and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of cash flows for the years ended September 30, 2015, 2014 and 2013 . .
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55
56

58
59
60

2. Financial Statement Schedules

All financial statement schedules are omitted as the required information is not applicable or as the

information required is included in the consolidated financial statements and related notes.

3. Exhibits:

Exhibit
Number

3.1

3.2

10.1

10.2

10.3

10.4

Description

Bylaws of Fair Isaac Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s
Form 10-Q for the quarter ended December 31, 2009 (file no. 001-11689))

Composite Restated Certificate of Incorporation of Fair Isaac Corporation. (Incorporated by
reference to Exhibit 3.2 to the Company’s Form 10-Q for the quarter ended December 31, 2009
(file no. 001-11689))

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 the Company’s Form 10-Q for the quarter ended
June 30, 2008 (file no. 001-11689))

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 (file
no. 001-11689))

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 for the quarter ended
June 30, 2010 (file no. 001-11689)) (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 the Company’s
Form 10-Q for the quarter ended December 31, 2007 (file no. 001-11689)) (1)

Exhibit
Number

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

Description

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 quarter ended December 31, 2008 (file no. 001-11689)) (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 the Company’s Form 10-Q
for the quarter ended December 31, 2007 (file no. 001-11689)) (1)

Form of Restricted Stock Agreement under 1992 Long-Term Incentive Plan. (Incorporated by
reference to Exhibit 10.43 to the Company’s Form 10-K for the period ended September 30, 2006
(file no. 001-11689)) (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 (file no. 001-11689)) (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 Form 10-K for
the fiscal year ended September 30, 2002 (file no. 001-11689)) (1)

Form of Management Agreement entered into with each of the Company’s executive officers.
(Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on February 10,
2012.) (1)

Form of Amendment to Management Agreement entered into with certain of the Company’s
executive officers. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the
quarter ended December 31, 2014) (1)

Offer Letter entered into on May 29, 2007 with Mark R. Scadina. (Incorporated by reference to
Exhibit 10.61 to the Company’s Form 10-K for the fiscal year ended September 30, 2008 (file no.
001-11689)) (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)

Letter Agreement dated November 5, 2014 by and between the Company and Wayne Huyard.
(Incorporated by reference to the Company’s Form 10-Q for the quarter ended December 31,
2014.) (1)

Exhibit
Number

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29*

10.30

10.31*

10.32

Description

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)

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)

Form of Performance Share Unit Award Agreement (fiscal 2014 grants) under the 2012 Long-
Term Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for
the quarter ended December 31, 2013.) (1)

Form of Performance Share Unit Award Agreement (fiscal 2015 grants) under the 2012 Long-
Term Incentive Plan. (1)

Form of Market Share Unit Agreement (fiscal 2014 grants) 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 December 31, 2013.) (1)

Form of Market Share Unit Agreement (fiscal 2015 grants) under the 2012 Long-Term Incentive
Plan. (1)

Amended and Restated Credit Agreement dated December 31, 2014 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 Form 8-K filed on
December 31, 2014.)

Exhibit
Number

10.33

12.1*

21.1*

23.1*

31.1*

31.2*

32.1*

32.2*

Description

First Amendment to Amended and Restated Credit Agreement among the Company, Wells Fargo
Bank, National Association as administrative agent and the lenders thereto dated as of April 16,
2015. (Incorporated by reference to the Exhibit 10.1 to the Company’s Form 8-K filed on April 17,
2015)

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.

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 10, 2015

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/ GREG R. GIANFORTE
Greg R. Gianforte

/s/ BRADEN R. KELLY
Braden R. Kelly

/s/ JAMES D. KIRSNER
James D. Kirsner

/s/ MARC F. MCMORRIS
Marc F. McMorris

/s/ JOANNA REES
Joanna Rees

/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 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

Director

November 10, 2015

100