Segment Information

3 Months Ended

Dec. 31, 2013

Segment Information

12. Segment Information

We are organized into the following three reportable segments to align with internal management of our worldwide business operations based on product offerings.

• Applications. Our Applications products are pre-configured decision management applications and associated professional services, designed for a specific type of business problem or process, such as marketing, account origination, customer management, fraud and insurance claims management.

• 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.

• Tools. The Tools segment is composed of software tools and associated professional services that clients can use to create their own custom decision management applications.

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 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 or capital expenditures; rather, depreciation amounts are allocated to the segments from their internal cost centers as described above. We have recast certain prior period amounts within this note to conform to the way we internally managed and monitored segment performance during the current fiscal year, reflecting immaterial movements of business activities between segments and changes in cost allocations.

The following tables summarize segment information for the quarters ended December 31, 2013 and 2012:

	Quarter Ended December 31, 2013
										Unallocated
										Corporate
	Applications			Scores			Tools			Expenses			Total
							(In thousands)
Segment revenues:
Transactional and maintenance	$	77,779		$	43,318		$	8,558		$	—		$	129,655
Professional services		26,787			589			6,910			—			34,286
License		7,350			3,273			9,779			—			20,402
Total segment revenues		111,916			47,180			25,247			—			184,343
Segment operating expense		(81,962	)		(10,375	)		(21,071	)		(21,757	)		(135,165	)
Segment operating income	$	29,954		$	36,805		$	4,176		$	(21,757	)		49,178
Unallocated share-based compensation expense														(7,235	)
Unallocated amortization expense														(3,013	)
Unallocated restructuring and acquisition-related														(3,660	)
Operating income														35,270
Unallocated interest income														6
Unallocated interest expense														(7,132	)
Unallocated other expense, net														(961	)
Income before income taxes													$	27,183
Depreciation expense	$	3,637		$	212		$	614		$	691		$	5,154
	Quarter Ended December 31, 2012
										Unallocated
										Corporate
	Applications			Scores			Tools			Expenses			Total
							(In thousands)
Segment revenues:
Transactional and maintenance	$	79,625		$	42,437		$	7,836		$	—		$	129,898
Professional services		26,159			903			5,275			—			32,337
License		18,923			107			8,755			—			27,785
Total segment revenues		124,707			43,447			21,866			—			190,020
Segment operating expense		(83,762	)		(12,907	)		(16,330	)		(21,534	)		(134,533	)
Segment operating income	$	40,945		$	30,540		$	5,536		$	(21,534	)		55,487
Unallocated share-based compensation expense														(5,832	)
Unallocated amortization expense														(3,372	)
Unallocated restructuring and acquisition-related														(3,289	)
Operating income														42,994
Unallocated interest income														21
Unallocated interest expense														(7,880	)
Unallocated other expense, net														(92	)
Income before income taxes													$	35,043
Depreciation expense	$	3,285		$	216		$	471		$	629		$	4,601