Segment Information

6 Months Ended

Mar. 31, 2019

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 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, SaaS applications through the FICO^® Analytic Cloud.

•

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 and six-month periods ended March 31, 2019 and 2018:



	Quarter Ended March 31, 2019
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	97,074		$	102,363		$	12,342		$	—		$	211,779
Professional services	35,981			901			13,673			—			50,555
License	8,760			1,139			6,001			—			15,900
Total segment revenues	141,815			104,403			32,016			—			278,234
Segment operating expense	(111,643		)	(16,167		)	(40,384		)	(39,506		)	(207,700		)
Segment operating income (loss)	$	30,172		$	88,236		$	(8,368	)	$	(39,506	)	70,534
Unallocated share-based compensation expense													(20,482		)
Unallocated amortization expense													(1,503		)
Operating income													48,549
Unallocated interest expense, net													(10,008		)
Unallocated other income, net													1,433
Income before income taxes													$	39,974
Depreciation expense	$	4,662		$	132		$	972		$	229		$	5,995



	Quarter Ended March 31, 2018 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	95,515		$	85,451		$	11,825		$	—		$	192,791
Professional services	39,131			757			6,843			—			46,731
License	11,850			895			3,993			—			16,738
Total segment revenues	146,496			87,103			22,661			—			256,260
Segment operating expense	(107,292		)	(16,413		)	(31,700		)	(33,493		)	(188,898		)
Segment operating income (loss)	$	39,204		$	70,690		$	(9,039	)	$	(33,493	)	67,362
Unallocated share-based compensation expense													(19,239		)
Unallocated amortization expense													(1,684		)
Operating income													46,439
Unallocated interest expense, net													(7,116		)
Unallocated other expense, net													(161		)
Income before income taxes													$	39,162
Depreciation expense	$	3,834		$	147		$	1,291		$	238		$	5,510



	Six Months Ended March 31, 2019
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	194,239		$	187,184		$	24,549		$	—		$	405,972
Professional services	67,443			1,602			22,318			—			91,363
License	27,792			1,300			14,063			—			43,155
Total segment revenues	289,474			190,086			60,930			—			540,490
Segment operating expense	(219,241		)	(29,649		)	(79,946		)	(68,760		)	(397,596		)
Segment operating income (loss)	$	70,233		$	160,437		$	(19,016	)	$	(68,760	)	142,894
Unallocated share-based compensation expense													(42,336		)
Unallocated amortization expense													(3,005		)
Operating income													97,553
Unallocated interest expense, net													(19,684		)
Unallocated other expense, net													(739		)
Income before income taxes													$	77,130
Depreciation expense	$	9,459		$	257		$	1,961		$	462		$	12,139



	Six Months Ended March 31, 2018 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	186,641		$	153,447		$	23,106		$	—		$	363,194
Professional services	74,505			1,054			14,300			—			89,859
License	25,524			1,033			9,011			—			35,568
Total segment revenues	286,670			155,534			46,417			—			488,621
Segment operating expense	(210,018		)	(32,301		)	(63,563		)	(60,254		)	(366,136		)
Segment operating income (loss)	$	76,652		$	123,233		$	(17,146	)	$	(60,254	)	122,485
Unallocated share-based compensation expense													(35,749		)
Unallocated amortization expense													(3,472		)
Operating income													83,264
Unallocated interest expense, net													(13,576		)
Unallocated other income, net													352
Income before income taxes													$	70,040
Depreciation expense	$	7,777		$	302		$	2,703		$	522		$	11,304