Segment Information

6 Months Ended

Mar. 31, 2020

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 or third-party public clouds, such as those provided by Amazon Web Services (“AWS”).

•

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 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 or third-party public clouds, such as those provided by 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 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, 2020 and 2019:



	Quarter Ended March 31, 2020
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	97,789		$	127,610		$	15,303		$	—		$	240,702
Professional services	35,134			819			11,952			—			47,905
License	7,356			719			11,289			—			19,364
Total segment revenues	140,279			129,148			38,544			—			307,971
Segment operating expense	(111,456		)	(15,660		)	(47,354		)	(33,785		)	(208,255		)
Segment operating income (loss)	$	28,823		$	113,488		$	(8,810	)	$	(33,785	)	99,716
Unallocated share-based compensation expense													(22,788		)
Unallocated amortization expense													(1,202		)
Operating income													75,726
Unallocated interest expense, net													(11,254		)
Unallocated other expense, net													(2,008		)
Income before income taxes													$	62,464
Depreciation expense	$	4,553		$	141		$	1,158		$	108		$	5,960



	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 expense, net													1,433
Income before income taxes													$	39,974
Depreciation expense	$	4,662		$	132		$	972		$	229		$	5,995



	Six Months Ended March 31, 2020
	Applications			Scores			Decision Management Software			Unallocated Corporate Expenses			Total
	(In thousands)
Segment revenues:
Transactional and maintenance	$	196,626		$	235,056		$	29,394		$	—		$	461,076
Professional services	69,157			1,083			21,690			—			91,930
License	26,674			8,147			18,648			—			53,469
Total segment revenues	292,457			244,286			69,732			—			606,475
Segment operating expense	(227,466		)	(33,372		)	(97,999		)	(67,995		)	(426,832		)
Segment operating income (loss)	$	64,991		$	210,914		$	(28,267	)	$	(67,995	)	179,643
Unallocated share-based compensation expense													(45,933		)
Unallocated amortization expense													(2,998		)
Unallocated restructuring and acquisition-related													(3,104		)
Operating income													127,608
Unallocated interest expense, net													(21,022		)
Unallocated other income, net													(2,227		)
Income before income taxes													$	104,359
Depreciation expense	$	8,902		$	257		$	2,144		$	333		$	11,636



	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 income, net													(739		)
Income before income taxes													$	77,130
Depreciation expense	$	9,459		$	257		$	1,961		$	462		$	12,139

Information about disaggregated revenue by product deployment methods was as follows:



	Quarter Ended March 31, 2020
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	76,341	$	63,938	$	—	$	140,279	46	%
Scores	—		—		129,148		129,148		42	%
Decision Management Software	28,847		9,697		—		38,544		12	%
Total	$	105,188	$	73,635	$	129,148	$	307,971	100	%



	Quarter Ended March 31, 2019
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	81,311	$	60,504	$	—	$	141,815	51	%
Scores	—		—		104,403		104,403		38	%
Decision Management Software	25,725		6,291		—		32,016		11	%
Total	$	107,036	$	66,795	$	104,403	$	278,234	100	%



	Six Months Ended March 31, 2020
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	162,319	$	130,138	$	—	$	292,457	48	%
Scores	—		—		244,286		244,286		40	%
Decision Management Software	52,526		17,206		—		69,732		12	%
Total	$	214,845	$	147,344	$	244,286	$	606,475	100	%



	Six Months Ended March 31, 2019
Reportable Segments	On-Premises		SaaS		Scores		Total		Percentage
	(Dollars in thousands)
Applications	$	170,906	$	118,568	$	—	$	289,474	54	%
Scores	—		—		190,086		190,086		35	%
Decision Management Software	49,334		11,596		—		60,930		11	%
Total	$	220,240	$	130,164	$	190,086	$	540,490	100	%

Information about disaggregated revenue by primary geographical markets was as follows:



	Quarter Ended March 31, 2020
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	78,900	$	9,672	$	34,271	$	17,436	$	140,279
Scores	123,249		2,619		1,720		1,560		129,148
Decision Management Software	21,007		5,917		6,920		4,700		38,544
Total	$	223,156	$	18,208	$	42,911	$	23,696	$	307,971



	Quarter Ended March 31, 2019
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	87,226	$	6,670	$	33,238	$	14,681	$	141,815
Scores	100,491		1,368		1,472		1,072		104,403
Decision Management Software	16,600		3,327		7,173		4,916		32,016
Total	$	204,317	$	11,365	$	41,883	$	20,669	$	278,234



	Six Months Ended March 31, 2020
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	164,366	$	19,189	$	74,055	$	34,847	$	292,457
Scores	233,446		2,903		3,258		4,679		244,286
Decision Management Software	36,594		10,250		14,185		8,703		69,732
Total	$	434,406	$	32,342	$	91,498	$	48,229	$	606,475



	Six Months Ended March 31, 2019
Reportable Segments	North America		Latin America		Europe, Middle East and Africa		Asia Pacific		Total
	(In thousands)
Applications	$	168,175	$	24,923	$	65,800	$	30,576	$	289,474
Scores	182,564		1,882		3,006		2,634		190,086
Decision Management Software	30,424		8,552		13,297		8,657		60,930
Total	$	381,163	$	35,357	$	82,103	$	41,867	$	540,490