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 applications through the FICO^® Analytic Cloud and/or Amazon Web Services, Inc. (“AWS”), our primary cloud infrastructure provider.

•

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 and/or AWS.

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.

The following tables summarize segment information for fiscal 2018, 2017 and 2016:



	Year Ended September 30, 2018
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	381,109		$	337,530		$	47,420		$	—		$	766,059
Professional services	142,908			1,751			32,145			—			176,804
License	61,554			3,367			24,691			—			89,612
Total segment revenues	585,571			342,648			104,256			—			1,032,475
Segment operating expense	(420,995		)	(63,477		)	(134,903		)	(125,255		)	(744,630		)
Segment operating income (loss)	$	164,576		$	279,171		$	(30,647	)	$	(125,255	)	$	287,845
Unallocated share-based compensation expense													(74,814		)
Unallocated amortization expense													(6,594		)
Operating income													206,437
Unallocated interest expense, net													(31,311		)
Unallocated other income, net													12,884
Income before income taxes													$	188,010
Depreciation expense	$	15,651		$	555		$	5,471		$	956		$	22,633



	Year Ended September 30, 2017
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	348,861		$	259,780		$	44,019		$	—		$	652,660
Professional services	141,857			2,849			34,863			—			179,569
License	62,449			3,725			33,766			—			99,940
Total segment revenues	553,167			266,354			112,648			—			932,169
Segment operating expense	(393,667		)	(54,436		)	(123,466		)	(104,998		)	(676,567		)
Segment operating income (loss)	$	159,500		$	211,918		$	(10,818	)	$	(104,998	)	255,602
Unallocated share-based compensation expense													(61,222		)
Unallocated amortization expense													(12,709		)
Unallocated restructuring and acquisition-related expenses													(4,471		)
Operating income													177,200
Unallocated interest expense, net													(25,790		)
Unallocated other expense, net													(86		)
Income before income taxes													$	151,324
Depreciation expense	$	15,857		$	991		$	4,783		$	1,349		$	22,980



	Year Ended September 30, 2016
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	328,472		$	233,655		$	43,792		$	—		$	605,919
Professional services	138,775			4,185			26,778			—			169,738
License	65,395			3,219			37,085			—			105,699
Total segment revenues	532,642			241,059			107,655			—			881,356
Segment operating expense	(364,371		)	(55,975		)	(111,315		)	(110,612		)	(642,273		)
Segment operating income (loss)	$	168,271		$	185,084		$	(3,660	)	$	(110,612	)	239,083
Unallocated share-based compensation expense													(55,509		)
Unallocated amortization expense													(13,982		)
Operating income													169,592
Unallocated interest expense, net													(26,633		)
Unallocated other income, net													1,610
Income before income taxes													$	144,569
Depreciation expense	$	11,852		$	814		$	3,657		$	1,328		$	17,651

Our revenues and percentage of revenues by reportable market segments were as follows for fiscal 2018, 2017 and 2016, the majority of which were derived from the sale of products and services within the banking (including consumer credit) industry:



	Year Ended September 30,
	2018				2017				2016
	(Dollars in thousands)
Applications	$	585,571	57	%	$	553,167	59	%	$	532,642	61	%
Scores	342,648		33	%	266,354		29	%	241,059		27	%
Decision Management Software	104,256		10	%	112,648		12	%	107,655		12	%
Total	$	1,032,475	100	%	$	932,169	100	%	$	881,356	100	%

Within our Applications segment our fraud solutions accounted for 17%, 19% and 20% of total revenues in each of fiscal 2018, 2017 and 2016, respectively, our customer communication services accounted for 10%, 10% and 9% of total revenues in each of these periods, respectively; and our customer management solutions accounted for 8%, 8% and 9% of total revenues in each of these periods, respectively.

Our revenues and percentage of revenues on a geographical basis are summarized below for fiscal 2018, 2017 and 2016:



	Year Ended September 30,
	2018				2017				2016
	(Dollars in thousands)
United States	$	679,425	66	%	$	598,765	64	%	$	567,443	64	%
United Kingdom	77,053		7	%	71,989		8	%	86,485		10	%
Other countries	275,997		27	%	261,415		28	%	227,428		26	%
Total	$	1,032,475	100	%	$	932,169	100	%	$	881,356	100	%

Revenue generated from a single customer or a group of customers which represented 10% or greater of total revenue are summarized below for fiscal 2018, 2017 and 2016:



	Year Ended September 30,
	2018				2017				2016
	(Dollars in thousands)
Experian	$	109,638	11	%	$	80,347	9	%	$	65,753	8	%
TransUnion and Equifax	143,922		14	%	104,475		11	%	97,427		11	%
Other customers	778,915		75	%	747,347		80	%	718,176		81	%
Total	$	1,032,475	100	%	$	932,169	100	%	$	881,356	100	%

At September 30, 2018 and 2017, 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, 2018 and 2017:



	September 30,
	2018				2017
	(Dollars in thousands)
United States	$	39,593	81	%	$	30,773	76	%
United Kingdom	4,296		9	%	4,893		12	%
Other countries	4,948		10	%	5,037		12	%
Total	$	48,837	100	%	$	40,703	100	%