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. 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, 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.


•	Decision Management Software. 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.

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 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, nor capital expenditures where depreciation amounts are allocated to the segments from their internal cost centers as described above.

The following tables summarize segment information for the quarters and nine-month periods ended June 30, 2018 and 2017:



	Quarter Ended June 30, 2018
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	93,598		$	90,716		$	11,177		$	—		$	195,491
Professional services	34,173			505			8,531			—			43,209
License	13,847			884			6,074			—			20,805
Total segment revenues	141,618			92,105			25,782			—			259,505
Segment operating expense	(107,228		)	(16,374		)	(35,151		)	(31,922		)	(190,675		)
Segment operating income (loss)	$	34,390		$	75,731		$	(9,369	)	$	(31,922	)	68,830
Unallocated share-based compensation expense													(18,883		)
Unallocated amortization expense													(1,571		)
Operating income													48,376
Unallocated interest expense, net													(8,223		)
Unallocated other income, net													1,588
Income before income taxes													$	41,741
Depreciation expense	$	3,682		$	130		$	1,321		$	215		$	5,348



	Quarter Ended June 30, 2017
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	87,443		$	68,376		$	10,876		$	—		$	166,695
Professional services	35,990			487			7,394			—			43,871
License	10,349			651			9,420			—			20,420
Total segment revenues	133,782			69,514			27,690			—			230,986
Segment operating expense	(95,357		)	(14,013		)	(31,312		)	(26,724		)	(167,406		)
Segment operating income (loss)	$	38,425		$	55,501		$	(3,622	)	$	(26,724	)	63,580
Unallocated share-based compensation expense													(14,315		)
Unallocated amortization expense													(3,365		)
Unallocated restructuring and acquisition-related													(4,471		)
Operating income													41,429
Unallocated interest expense, net													(6,653		)
Unallocated other income, net													555
Income before income taxes													$	35,331
Depreciation expense	$	3,931		$	239		$	1,196		$	331		$	5,697




	Nine Months Ended June 30, 2018
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	284,441		$	245,934		$	34,973		$	—		$	565,348
Professional services	107,542			1,465			22,906			—			131,913
License	37,743			2,531			15,149			—			55,423
Total segment revenues	429,726			249,930			73,028			—			752,684
Segment operating expense	(316,886		)	(48,673		)	(98,917		)	(92,175		)	(556,651		)
Segment operating income (loss)	$	112,840		$	201,257		$	(25,889	)	$	(92,175	)	196,033
Unallocated share-based compensation expense													(54,631		)
Unallocated amortization expense													(5,043		)
Operating income													136,359
Unallocated interest expense, net													(21,799		)
Unallocated other income, net													1,940
Income before income taxes													$	116,500
Depreciation expense	$	11,459		$	432		$	4,024		$	737		$	16,652




	Nine Months Ended June 30, 2017
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	258,337		$	190,256		$	33,011		$	—		$	481,604
Professional services	102,971			2,002			23,725			—			128,698
License	41,576			2,071			25,015			—			68,662
Total segment revenues	402,884			194,329			81,751			—			678,964
Segment operating expense	(294,608		)	(41,816		)	(91,549		)	(76,580		)	(504,553		)
Segment operating income (loss)	$	108,276		$	152,513		$	(9,798	)	$	(76,580	)	174,411
Unallocated share-based compensation expense													(43,546		)
Unallocated amortization expense													(9,997		)
Unallocated restructuring and acquisition-related													(4,471		)
Operating income													116,397
Unallocated interest expense, net													(19,403		)
Unallocated other income, net													128
Income before income taxes													$	97,122
Depreciation expense	$	11,758		$	741		$	3,524		$	1,021		$	17,044