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.

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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 detection, 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.

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Scores. This segment includes our business-to-business credit scoring solutions, our myFICO^® solutions for consumers (enabling consumer-level access to and understanding of their credit scores) and associated professional services. Our credit scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our credit 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 ended December 31, 2018 and 2017:



	Quarter Ended December 31, 2018
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	97,165		$	84,821		$	12,207		$	—		$	194,193
Professional services	31,462			701			8,645			—			40,808
License	19,032			161			8,062			—			27,255
Total segment revenues	147,659			85,683			28,914			—			262,256
Segment operating expense	(107,598		)	(13,482		)	(39,562		)	(29,254		)	(189,896		)
Segment operating income (loss)	$	40,061		$	72,201		$	(10,648	)	$	(29,254	)	72,360
Unallocated share-based compensation expense													(21,854		)
Unallocated amortization expense													(1,502		)
Operating income													49,004
Unallocated interest expense, net													(9,676		)
Unallocated other expense, net													(2,172		)
Income before income taxes													$	37,156
Depreciation expense	$	4,797		$	125		$	989		$	233		$	6,144



	Quarter Ended December 31, 2017 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	91,126		$	67,996		$	11,281		$	—		$	170,403
Professional services	35,374			297			7,457			—			43,128
License	13,674			138			5,018			—			18,830
Total segment revenues	140,174			68,431			23,756			—			232,361
Segment operating expense	(102,726		)	(15,888		)	(31,863		)	(26,761		)	(177,238		)
Segment operating income (loss)	$	37,448		$	52,543		$	(8,107	)	$	(26,761	)	55,123
Unallocated share-based compensation expense													(16,510		)
Unallocated amortization expense													(1,788		)
Operating income													36,825
Unallocated interest expense, net													(6,460		)
Unallocated other income, net													513
Income before income taxes													$	30,878
Depreciation expense	$	3,943		$	155		$	1,412		$	284		$	5,794