Segment Information

9 Months Ended

Jun. 30, 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 nine-month periods ended June 30, 2019 and 2018:



	Quarter Ended June 30, 2019
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	100,385		$	112,949		$	12,706		$	—		$	226,040
Professional services	33,989			392			10,213			—			44,594
License	31,263			1,805			10,547			—			43,615
Total segment revenues	165,637			115,146			33,466			—			314,249
Segment operating expense	(113,400		)	(15,850		)	(42,229		)	(36,019		)	(207,498		)
Segment operating income (loss)	$	52,237		$	99,296		$	(8,763	)	$	(36,019	)	106,751
Unallocated share-based compensation expense													(19,595		)
Unallocated amortization expense													(1,448		)
Operating income													85,708
Unallocated interest expense, net													(10,111		)
Unallocated other income, net													2,457
Income before income taxes													$	78,054
Depreciation expense	$	4,800		$	130		$	1,027		$	222		$	6,179



	Quarter Ended June 30, 2018 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	91,102		$	89,876		$	11,165		$	—		$	192,143
Professional services	33,783			559			8,494			—			42,836
License	13,773			394			5,847			—			20,014
Total segment revenues	138,658			90,829			25,506			—			254,993
Segment operating expense	(106,741		)	(16,369		)	(34,971		)	(31,922		)	(190,003		)
Segment operating income (loss)	$	31,917		$	74,460		$	(9,465	)	$	(31,922	)	64,990
Unallocated share-based compensation expense													(18,882		)
Unallocated amortization expense													(1,571		)
Operating income													44,537
Unallocated interest expense, net													(8,223		)
Unallocated other income, net													1,588
Income before income taxes													$	37,902
Depreciation expense	$	3,682		$	130		$	1,321		$	215		$	5,348



	Nine Months Ended June 30, 2019
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	294,624		$	300,133		$	37,255		$	—		$	632,012
Professional services	101,432			1,994			32,531			—			135,957
License	59,055			3,105			24,610			—			86,770
Total segment revenues	455,111			305,232			94,396			—			854,739
Segment operating expense	(332,641		)	(45,499		)	(122,175		)	(104,779		)	(605,094		)
Segment operating income (loss)	$	122,470		$	259,733		$	(27,779	)	$	(104,779	)	249,645
Unallocated share-based compensation expense													(61,931		)
Unallocated amortization expense													(4,453		)
Operating income													183,261
Unallocated interest expense, net													(29,795		)
Unallocated other income, net													1,718
Income before income taxes													$	155,184
Depreciation expense	$	14,259		$	387		$	2,988		$	684		$	18,318



	Nine Months Ended June 30, 2018 (As Adjusted)
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	277,743		$	243,323		$	34,271		$	—		$	555,337
Professional services	108,288			1,613			22,794			—			132,695
License	39,297			1,427			14,858			—			55,582
Total segment revenues	425,328			246,363			71,923			—			743,614
Segment operating expense	(316,759		)	(48,670		)	(98,534		)	(92,176		)	(556,139		)
Segment operating income (loss)	$	108,569		$	197,693		$	(26,611	)	$	(92,176	)	187,475
Unallocated share-based compensation expense													(54,631		)
Unallocated amortization expense													(5,043		)
Operating income													127,801
Unallocated interest expense, net													(21,799		)
Unallocated other income, net													1,940
Income before income taxes													$	107,942
Depreciation expense	$	11,459		$	432		$	4,024		$	737		$	16,652