Fair Isaac · 10-Q · Item 2 MD&A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Statements contained in this report that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). In addition, certain statements in our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact constitute forward-looking statements within the meaning of the PSLRA. Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, expenses, earnings or loss per share, the payment or nonpayment of dividends, share repurchases, capital structure and other statements concerning future financial performance; (ii) statements of our plans and objectives by our management or Board of Directors, including those relating to products or services, research and development, and the sufficiency of capital resources; (iii) statements of assumptions underlying such statements, including those related to economic conditions; (iv) statements regarding results of business combinations or strategic divestitures; (v) statements regarding business relationships with vendors, customers or collaborators, including the proportion of revenues generated from international as opposed to domestic customers; and (vi) statements regarding products and services, their characteristics, performance, sales potential or effect in use by customers.

Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “should,” “potential,” “goals,” “strategy,” “outlook,” “plan,” “estimated,” “will,” variations of these terms and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 and in subsequent filings with the SEC.

The performance of our business and our securities may be adversely affected by these factors and by other factors common to other businesses and investments, or to the general economy. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We disclaim any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

OVERVIEW

We were founded in 1956 on the premise that data, used intelligently, can improve business decisions. Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in more than 80 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale. Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive lenders, consumer reporting agencies, public agencies, and organizations in other industries. We also serve consumers through online services that enable people to access and understand their FICO® Scores — the standard measure of consumer credit risk in the United States (“U.S.”) — empowering them to increase financial literacy and manage their financial health.

Our business consists of two operating segments: Scores and Software.

Our Scores segment includes our business-to-business (“B2B”) scoring solutions and services which give our clients access to predictive credit and other scores that can be easily integrated into their transaction streams and decision-making processes. This segment also includes our business-to-consumer (“B2C”) scoring solutions, including our myFICO.com subscription offerings.

Our Software segment includes pre-configured analytic and decision management solutions designed for a specific type of business need or process — such as account origination, customer management, customer engagement, fraud detection, and marketing — as well as associated professional services. This segment also includes FICO® Platform, a modular software offering designed to support advanced analytic and decision use cases, as well as stand-alone analytic and decisioning software that can be configured by our customers to address a wide variety of business use cases. Our offerings are available to our customers as software-as-a-service (“SaaS”) or as on-premises software.

Highlights from the quarter and nine months ended June 30, 2026

•Total revenues were $674.2 million during the quarter ended June 30, 2026, a 26% increase from the quarter ended June 30, 2025, and $1.9 billion during the nine months ended June 30, 2026, a 27% increase from the nine months ended June 30, 2025.

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•T1Revenues for our Scores segment were $458.9 million during the quarter ended June 30, 2026, a 41% increase from the quarter ended June 30, 2025, and $1.2 billion during the nine months ended June 30, 2026, a 45% increase from the nine months ended June 30, 2025.

•T2Annual Recurring Revenue for our Software segment as of June 30, 2026 was $815.8 million, a 10% increase from June 30, 2025.

•Dollar-Based Net Retention Rate for our Software segment was 109% as of June 30, 2026.

•T3Operating income was $362.6 million during the quarter ended June 30, 2026, a 38% increase from the quarter ended June 30, 2025, and $999.1 million during the nine months ended June 30, 2026, a 45% increase from the nine months ended June 30, 2025.

•Net income was $237.2 million during the quarter ended June 30, 2026, a 30% increase from the quarter ended June 30, 2025, and $660.0 million during the nine months ended June 30, 2026, a 33% increase from the nine months ended June 30, 2025.

•Diluted EPS was $10.45 during the quarter ended June 30, 2026, a 41% increase from the quarter ended June 30, 2025, and $28.12 during the nine months ended June 30, 2026, a 40% increase from the nine months ended June 30, 2025.

•Cash flows from operating activities were $777.9 million during the nine months ended June 30, 2026, compared with $555.1 million during the nine months ended June 30, 2025.

•In June 2026, we amended our credit agreement to provide for a $1.5 billion term loan, the proceeds of which were used to fund an accelerated share repurchase agreement (“ASR Agreement”).

•T4Total debt balance was $5.6 billion as of June 30, 2026, compared with $3.1 billion as of September 30, 2025.

•T5Total share repurchases during the quarter ended June 30, 2026 were $2.3 billion, compared with $511.3 million during the quarter ended June 30, 2025, and during the nine months ended June 30, 2026 were $3.1 billion, compared with $878.1 million during the nine months ended June 30, 2025. The quarter and nine months ended June 30, 2026 included $1.5 billion paid under the ASR Agreement.

Key performance metrics for Software segment

Annual Contract Value Bookings (“ACV Bookings”)

Management regards ACV Bookings as an important indicator of future revenues, but it is not comparable to, nor is it a substitute for, an analysis of our revenues and other U.S. generally accepted accounting principles (“U.S. GAAP”) measures. We define ACV Bookings as the average annualized value of software contracts signed in the current reporting period that generate current and future on-premises and SaaS software revenue. We only include contracts with an initial term of at least 24 months and we exclude perpetual licenses and other software revenues that are non-recurring in nature. For renewals of existing software subscription contracts, we count only incremental annual revenue expected over the current contract as ACV Bookings.

ACV Bookings is calculated by dividing the total expected contract value by the contract term in years. The expected contract value equals the fixed amount — including guaranteed minimums, if any — stated in the contract, plus estimates of future usage-based fees. We develop estimates from discussions with our customers and examinations of historical data from similar products and customer arrangements. Differences between estimates and actual results occur due to variability in the estimated usage. This variability can be the result of the economic trends in our customers’ industries, individual performance of our customers relative to their competitors, and regulatory and other factors that affect the business environment in which our customers operate.

For the periods presented, ACV Bookings related to estimates of future usage-based fees was approximately 20% of the total ACV Bookings amount on an annualized basis. Differences between the initial estimates of future usage-based fees and actual results historically have not been material and we do not currently expect that they will be materially different in the future.

We disclose estimated revenue expected to be recognized in the future related to remaining performance obligations in Note 8 to the accompanying condensed consolidated financial statements. However, we believe ACV Bookings is a useful supplemental measure of our business as it includes estimated revenues and future billings excluded from Note 8, such as usage-based fees and guaranteed minimums derived from our on-premises software licenses, among others.

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The following table summarizes our ACV Bookings during the periods indicated:

Quarter Ended June 30,

Nine Months Ended June 30,

(In millions)

Total on-premises and SaaS software

$

$

$

$

Annual Recurring Revenue (“ARR”)

Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, requires us to recognize a significant portion of revenue from our on-premises software subscriptions at the point in time when the software is first made available to the customer, or at the beginning of the subscription term, despite the fact that our contracts typically call for billing these amounts ratably over the life of the subscription. The remaining portion of our on-premises software subscription revenue including maintenance and usage-based fees are recognized over the life of the contract. This point-in-time recognition of a portion of our on-premises software subscription revenue creates significant variability in the revenue recognized period to period based on the timing of the subscription start date and the subscription term.

Furthermore, this point-in-time revenue recognition can create a significant difference between the timing of our revenue recognition and the actual customer billing under the contract. We use ARR to measure the underlying performance of our subscription-based contracts and mitigate the impact of this variability. ARR is defined as the annualized revenue run-rate of on-premises and SaaS software agreements within a quarterly reporting period, and as such, is different from the timing and amount of revenue recognized. All components of our software licensing and subscription arrangements that are not expected to recur (primarily perpetual licenses) are excluded. We calculate ARR as the quarterly recurring revenue run-rate multiplied by four.

The following table summarizes our ARR for on-premises and SaaS software exiting each of the dates presented:

ARR

(In millions)

Platform

$

$

$

$

$

$

$

$

Non-platform

Total

$

$

$

$

$

$

$

$

Percentage

Platform

%

%

%

%

%

%

%

%

Non-platform

%

%

%

%

%

%

%

%

Total

%

%

%

%

%

%

%

%

YoY Change

Platform

%

%

%

%

%

%

%

%

Non-platform

—

%

1

%

(3)

%

(2)

%

(2)

%

(8)

%

(8)

%

%

Total

8

%

6

%

3

%

4

%

4

%

5

%

%

%

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Dollar-Based Net Retention Rate (“DBNRR”)

We consider DBNRR to be an important measure of our success in retaining and growing revenue from our existing customers. To calculate DBNRR for any period, we compare the ARR at the end of the prior comparable quarter (“base ARR”) to the ARR from that same cohort of customers at the end of the current quarter (“retained ARR”); we then divide the retained ARR by the base ARR to arrive at the DBNRR. Our calculation includes the positive impact among this cohort of customers of selling additional products, price increases and increases in usage-based fees, and the negative impact of customer attrition, price decreases, and decreases in usage-based fees during the period.

However, the calculation does not include the positive impact from sales to any new customers acquired during the period. Our DBNRR may increase or decrease from period to period as a result of various factors, including the timing of new sales and customer renewal rates.

The following table summarizes our DBNRR for on-premises and SaaS software exiting each of the dates presented:

DBNRR

Platform

%

%

%

%

%

%

%

%

Non-platform

%

%

%

%

%

%

%

%

Total

%

%

%

%

%

%

%

%

RESULTS OF OPERATIONS

We are organized into two reportable segments: Scores and Software. Although we sell solutions and services into a large number of end user product and industry markets, our reportable business segments reflect the primary method in which management organizes and evaluates internal financial information to make operating decisions and assess performance.

Segment revenues, operating income, and related financial information, including disaggregation of revenue, are set forth in Note 8 and Note 11 to the accompanying condensed consolidated financial statements.

Revenues

The following tables set forth certain summary information on a segment basis related to our revenues for the quarters and nine-month periods ended June 30, 2026 and 2025:

Quarter Ended June 30,

Percentage of Revenues

Period-to-Period Change

Period-to-Period

Percentage Change

Segment

(In thousands)

(In thousands)

Scores

$

$

%

%

$

%

Software

%

%

2

%

Total

$

$

%

%

%

Nine Months Ended June 30,

Percentage of Revenues

Period-to-Period Change

Period-to-Period

Percentage Change

Segment

(In thousands)

(In thousands)

Scores

$

$

%

%

$

%

Software

%

%

3

%

Total

$

$

%

%

%

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Scores

Scores segment revenues increased $134.6 million due to an increase of $131.6 million in our business-to-business scores revenue and an increase of $3.0 million in our business-to-consumer scores revenue. The increase in business-to-business scores revenue was primarily attributable to a higher mortgage origination scores unit price. The increase in business-to-consumer scores revenue was primarily attributable to an increase in royalties derived from scores sold indirectly to consumers through credit reporting agencies.

Software

The following table provides information about disaggregated revenue for our Software segment by revenue types:

Quarter Ended June 30,

Period-to-Period Change

Period-to-Period

Percentage Change

(In thousands)

(In thousands)

On-premises and SaaS software

$

$

$

5

%

Professional services

%

Total

$

$

2

%

Software segment revenues increased $3.2 million due to a $9.1 million increase in our on-premises and SaaS software revenue, partially offset by a $5.9 million decrease in our professional services revenue. The increase in our on-premises and SaaS software revenue was primarily attributable to an increase in revenue recognized over time largely driven by SaaS growth for our Platform products, partially offset by a decrease in license revenue recognized at a point in time. The decrease in professional services revenue was primarily attributable to our strategy to emphasize higher-margin software over professional services.

Scores

Scores segment revenues increased $381.4 million due to an increase of $372.9 million in our business-to-business scores revenue and an increase of $8.5 million in our business-to-consumer scores revenue. The increase in business-to-business scores revenue was primarily attributable to both a higher unit price and an increase in volume of mortgage origination scores. The increase in business-to-consumer scores revenue was primarily attributable to an increase in royalties derived from scores sold indirectly to consumers through credit reporting agencies.

Software

Nine Months Ended June 30,

Period-to-Period Change

Period-to-Period

Percentage Change

(In thousands)

(In thousands)

On-premises and SaaS software

$

$

$

5

%

Professional services

(9)

%

Total

$

$

3

%

Software segment revenues increased $21.3 million due to a $26.7 million increase in our on-premises and SaaS software revenue, partially offset by a $5.3 million decrease in professional services revenue. The increase in our on-premises and SaaS software revenue was primarily attributable to an increase in revenue recognized over time largely driven by SaaS growth for our Platform products, partially offset by a decrease in license revenue recognized at a point in time. The decrease in professional services revenue was primarily attributable to our strategy to emphasize higher-margin software over professional services.

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Operating Expenses and Other Expense, Net

The following tables set forth certain summary information related to our condensed consolidated statements of income and comprehensive income for the quarters and nine-month periods ended June 30, 2026 and 2025:

Quarter Ended June 30,

Percentage of Revenues

Period-to-Period Change

Period-to-

Period

Percentage Change

(In thousands, except

employees)

(In thousands,

except employees)

Revenues

$

$

%

%

$

%

Operating expenses:

Cost of revenues

%

%

(1)

%

Research and development

8

%

9

%

%

Selling, general and administrative

%

%

%

Total operating expenses

%

%

%

Operating income

%

%

%

Interest expense, net

(9)

%

(6)

%

%

Other income, net

2

%

1

%

%

Income before income taxes

%

%

%

Provision for income taxes

%

%

%

Net income

$

$

%

%

%

Number of employees at quarter end

1

%

Nine Months Ended June 30,

Percentage of Revenues

Period-to-Period Change

Period-to-

Period

Percentage Change

(In thousands)

(In thousands)

Revenues

$

$

%

%

$

%

Operating expenses:

Cost of revenues

%

%

1

%

Research and development

9

%

9

%

%

Selling, general and administrative

%

%

%

Total operating expenses

%

%

%

Operating income

%

%

%

Interest expense, net

(8)

%

(6)

%

%

Other income, net

1

%

—

%

%

Income before income taxes

%

%

%

Provision for income taxes

%

7

%

%

Net income

$

$

%

%

%

Cost of Revenues

Cost of revenues consists primarily of employee salaries, incentives, and benefits for personnel directly involved in delivering software products, operating SaaS infrastructure, and providing support, implementation and consulting services; overhead, facilities and data center costs; software royalty fees; consumer reporting agency data and processing services; third-party hosting fees related to our SaaS services; travel costs; and outside services.

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Cost of revenues remained consistent quarter-over-prior year quarter. Cost of revenues as a percentage of revenues decreased to 13% during the quarter ended June 30, 2026 from 16% during the quarter ended June 30, 2025, primarily due to increased sales of our higher-margin Scores products.

The year-to-date period-over-period increase in cost of revenues of $2.9 million was primarily attributable to a $6.9 million increase in infrastructure and facilities costs, partially offset by a $2.9 million decrease in personnel and labor costs and a $1.1 million decrease in direct materials and other costs. The increase in infrastructure and facilities costs was primarily attributable to an increase in third-party data center hosting costs. T6The decrease in personnel and labor costs was primarily attributable to decreased headcount. The decrease in direct materials and other costs was primarily attributable to decreased telecommunications costs that support FICO® Customer Communications Services revenue. Cost of revenues as a percentage of revenues decreased to 14% during the nine months ended June 30, 2026 from 18% during the nine months ended June 30, 2025, primarily due to increased sales of our higher-margin Scores products.

Research and Development

Research and development expenses include personnel and related overhead costs incurred in the development of new products and services, including research of mathematical and statistical models and development of new versions of Software products.

The quarter-over-prior year quarter increase in research and development expenses of $6.5 million was primarily attributable to a $5.4 million increase in infrastructure and facilities costs and a $2.2 million increase in personnel and labor costs, partially offset by a $1.1 million decrease in outside services and other costs. The increase in infrastructure and facilities costs was primarily attributable to increased third-party data center hosting costs. The increase in personnel and labor costs was primarily attributable to increased incentive costs, increased fringe benefit costs related to our deferred compensation plan, and increased share-based compensation costs. The decrease in outside services and other costs was primarily attributable to decreased third-party contractor costs. Research and development expenses as a percentage of revenues decreased to 8% during the quarter ended June 30, 2026 from 9% during the quarter ended June 30, 2025.

The year-to-date period-over-period increase in research and development expenses of $20.1 million was primarily attributable to a $15.5 million increase in infrastructure and facilities costs and a $9.4 million increase in personnel and labor costs, partially offset by a $4.8 million decrease in outside services and other costs. The increase in infrastructure and facilities costs was primarily attributable to increased third-party data center hosting costs. The increase in personnel and labor costs was primarily attributable to increased incentive costs, increased headcount, and increased share-based compensation costs. The decrease in outside services and other costs was primarily attributable to decreased third-party contractor costs. Research and development expenses as a percentage of revenues remained consistent at 9% during each of the nine months ended June 30, 2026 and 2025.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee salaries, incentives, commissions and benefits; travel costs; overhead costs; advertising and other promotional expenses; corporate facilities expenses; legal expenses; and business development expenses.

The quarter-over-prior year quarter increase in selling, general and administrative expenses of $31.7 million was primarily attributable to a $25.6 million increase in personnel and labor costs and a $6.1 million increase in marketing and other costs. The increase in personnel and labor costs was primarily attributable to increased share-based compensation costs, increased headcount, increased fringe benefit costs related to our deferred compensation plan, increased incentive costs, and increased commission costs. The increase in marketing and other costs was primarily attributable to increased advertising and other promotional costs. Selling, general and administrative expenses as a percentage of revenues decreased to 25% during the quarter ended June 30, 2026 from 26% during the quarter ended June 30, 2025.

The year-to-date period-over-period increase in selling, general and administrative expenses of $68.2 million was primarily attributable to a $50.4 million increase in personnel and labor costs, a $13.9 million increase in marketing and other costs, and a $3.9 million increase in outside services costs. The increase in personnel and labor costs was primarily attributable to increased headcount, increased share-based compensation costs, increased commission costs, increased incentive costs, and increased fringe benefit costs related to our deferred compensation plan. The increase in marketing and other costs was primarily attributable to increased advertising and other promotional costs. The increase in outside services costs was primarily attributable to increased third-party consulting costs. Selling, general and administrative expenses as a percentage of revenues decreased to 24% during the nine months ended June 30, 2026 from 26% during the nine months ended June 30, 2025.

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Interest Expense, Net

Interest expense includes interest on the senior notes issued in March 2026, May 2025, December 2021, December 2019 and May 2018, as well as interest and credit agreement fees on the revolving line of credit and term loans. On our condensed consolidated statements of income and comprehensive income, interest expense is netted with interest income, which is derived primarily from the investment of funds in excess of our immediate operating requirements.

The quarter-over-prior year quarter increase in interest expense, net of $27.0 million was primarily attributable to a higher average outstanding debt balance during the quarter ended June 30, 2026. The higher average debt balance was primarily attributable to the $1.5 billion of 2025 Senior Notes (as defined below), the $1.0 billion of 2026 Senior Notes (as defined below), the $1.5 billion term loan issued during June 2026, and a higher average outstanding balance on borrowings under our revolving line of credit.

The year-to-date period-over-period increase in interest expense, net of $52.7 million was primarily attributable to a higher average outstanding debt balance during the nine months ended June 30, 2026. The higher average debt balance was primarily attributable to the $1.5 billion of 2025 Senior Notes (as defined below) and the $1.0 billion of 2026 Senior Notes (as defined below).

Other Income, Net

Other income, net consists primarily of unrealized investment gains/losses and realized gains/losses on marketable securities classified as trading securities, exchange rate gains/losses resulting from remeasurement of foreign-currency-denominated receivables and cash balances held by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency forward contracts, and other non-operating items.

The quarter-over-prior year quarter increase in other income, net of $4.5 million was primarily attributable to an increase in net unrealized and realized gains on investments classified as trading securities in our deferred compensation plan.

The year-to-date period-over-period increase in other income, net of $3.7 million was primarily attributable to an increase in dividend income and realized gains on investments classified as trading securities in our deferred compensation plan.

Provision for Income Taxes

The effective income tax rate was 24.6% and 23.3% during the quarters ended June 30, 2026 and 2025, respectively, and 23.5% and 17.2% during the nine months ended June 30, 2026 and 2025, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

The effective tax rates for the quarters and nine months ended June 30, 2026 and 2025 were favorably impacted by the recording of excess tax benefits relating to stock awards. The impact is dependent upon grants of share-based compensation and the future stock price in relation to the fair value of awards on the grant date. The decrease in stock price for awards that vested in December 2025 resulted in a decreased net excess tax benefit for the nine months ended June 30, 2026.

Operating Income

The following tables set forth certain summary information on a segment basis related to our operating income for the quarters ended June 30, 2026 and 2025:

Quarter Ended June 30,

Period-to-Period Change

Period-to-Period

Percentage Change

Segment

(In thousands)

(In thousands)

Scores

$

$

$

%

Software

%

Total segment operating income

%

Unallocated corporate expenses

%

Unallocated share-based compensation

%

Operating income

$

$

%

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Scores

Software

Quarter Ended

Percentage of

Revenues

Quarter Ended

Percentage of

Revenues

(In thousands)

(In thousands)

Segment revenues

$

$

%

%

$

$

%

%

Segment operating expense

(9)

%

%

%

%

Segment operating income

$

$

%

%

$

$

%

%

The quarter-over-prior year quarter increase in operating income of $100.1 million was attributable to a $137.8 million increase in segment revenues, partially offset by an $18.5 million increase in segment operating expenses, a $10.4 million increase in share-based compensation expense, and an $8.8 million increase in corporate expenses.

At the segment level, the quarter-over-prior year quarter increase in segment operating income of $119.3 million was the result of a $132.2 million increase in our Scores segment operating income, partially offset by a $12.9 million decrease in our Software segment operating income.

The quarter-over-prior year quarter increase in Scores segment operating income of $132.2 million was due to a $134.6 million increase in segment revenue, partially offset by a $2.4 million increase in segment operating expenses. Scores segment operating income as a percentage of segment revenue increased to 91% from 88%, primarily due to higher business-to-business scores revenue driven by a higher mortgage origination scores unit price.

The quarter-over-prior year quarter decrease in Software segment operating income of $12.9 million was due to a $16.1 million increase in segment operating expenses, partially offset by a $3.2 million increase in segment revenue. Software segment operating income as a percentage of segment revenue decreased to 26% from 32%, primarily attributable to a decrease in sales of higher-margin software recognized at a point in time and an increase in third-party data center hosting costs.

The following tables set forth certain summary information on a segment basis related to our operating income for the nine-month periods ended June 30, 2026 and 2025:

Nine Months Ended June 30,

Period-to-Period Change

Period-to-Period

Percentage Change

Segment

(In thousands)

(In thousands)

Scores

$

$

$

%

Software

(8)

%

Total segment operating income

%

Unallocated corporate expenses

%

Unallocated share-based compensation

%

Operating income

$

$

%

Scores

Software

Nine Months Ended

Percentage of

Revenues

Nine Months Ended

Percentage of

Revenues

(In thousands)

(In thousands)

Segment revenues

$

$

%

%

$

$

%

%

Segment operating expense

%

%

%

%

Segment operating income

$

$

%

%

$

$

%

%

The year-to-date period-over-period increase of $311.4 million in operating income was attributable to a $402.7 million increase in segment revenues, partially offset by a $54.7 million increase in segment operating expenses, an $18.9 million increase in corporate expenses, and a $17.7 million increase in share-based compensation expense.

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At the segment level, the year-to-date period-over-period increase of $348.0 million in segment operating income was the result of a $363.8 million increase in our Scores segment operating income, partially offset by a $15.8 million decrease in our Software segment operating income.

The year-to-date period-over-period $363.8 million increase in Scores segment operating income was attributable to a $381.4 million increase in segment revenue, partially offset by a $17.6 million increase in segment operating expenses. Scores segment operating income as a percentage of segment revenue increased to 90% from 88%, primarily due to higher business-to-business scores revenue driven by both a higher unit price and an increase in volume of mortgage origination scores.

The year-to-date period-over-period $15.8 million decrease in Software segment operating income was due to a $37.1 million increase in segment operating expenses, partially offset by a $21.3 million increase in segment revenue. Software segment operating income as a percentage of segment revenue decreased to 28% from 31%, primarily attributable to an increase in third-party data center hosting costs and a decrease in sales of higher-margin software recognized at a point in time.

CAPITAL RESOURCES AND LIQUIDITY

Outlook

As of June 30, 2026, we had $248.4 million in cash and cash equivalents, which included $139.8 million held by our foreign subsidiaries. We believe our cash and cash equivalents balances, including those held by our foreign subsidiaries, as well as available borrowings from our $1.0 billion revolving line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future, including the $300.0 million principal payments due on our term loan over the next 12 months. Under our current financing arrangements, we have no other significant debt obligations maturing over the next 12 months. For jurisdictions outside the U.S. where cash may be repatriated in the future, the Company expects the net impact of any repatriations to be immaterial to the Company’s overall tax liability.

In the normal course of business, we evaluate the merits of acquiring technology or businesses, or establishing strategic relationships with or investing in these businesses. We may elect to use available cash and cash equivalents to fund such activities in the future. In the event additional needs for cash arise, or if we refinance our existing debt, we may raise additional funds from a combination of sources, including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

Summary of Cash Flows

Nine Months Ended June 30,

Period-to-Period Change

(In thousands)

Cash provided by (used in):

Operating activities

$

$

$

Investing activities

Financing activities

Effect of exchange rate changes on cash

Increase in cash and cash equivalents

$

$

Cash Flows from Operating Activities

Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities increased to $777.9 million during the nine months ended June 30, 2026 from $555.1 million during the nine months ended June 30, 2025. The $222.7 million increase was attributable to a $163.1 million increase in net income and a $60.9 million increase in non-cash items, partially offset by a $1.3 million decrease due to the timing of receipts and payments in our ordinary course of business.

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Cash Flows from Investing Activities

Net cash used in investing activities increased to $39.3 million for the nine months ended June 30, 2026 from $30.4 million for the nine months ended June 30, 2025. The $8.9 million increase was attributable to a $4.7 million increase in capitalized internal-use software costs and a $12.8 million increase in purchases of other investments, partially offset by a $5.2 million increase in proceeds from sales, net of purchases, of marketable securities and a $3.4 million decrease in purchases of property and equipment.

Cash Flows from Financing Activities

Net cash used in financing activities increased to $622.3 million for the nine months ended June 30, 2026 from $486.8 million for the nine months ended June 30, 2025. The $135.6 million increase was primarily attributable to a $2.2 billion increase in repurchases of common stock (including the $1.5 billion paid under the ASR Agreement in the nine months ended June 30, 2026), a $500.0 million decrease in proceeds from issuance of senior notes, and the $400.0 million repayment of 2018 Senior Notes (as defined below), partially offset by a $2.9 billion increase in proceeds, net of payments, from the revolving line of credit and term loans, and a $91.9 million decrease in taxes paid related to net share settlement of equity awards.

Repurchases of Common Stock

In June 2025, our Board of Directors approved a stock repurchase program (the “June 2025 program”), replacing our previously authorized July 2024 stock repurchase program, which was terminated prior to its expiration. The June 2025 program was open-ended and authorized repurchases of shares of our common stock from time to time up to an aggregate cost of $1.0 billion in the open market or in negotiated transactions. In February 2026, our Board of Directors approved a stock repurchase program (the “February 2026 program”), replacing the June 2025 program, which was terminated prior to its expiration. The February 2026 program was open-ended and authorized repurchases of shares of our common stock from time to time up to an aggregate cost of $1.5 billion in the open market or in negotiated transactions.

In June 2026, our Board of Directors approved a stock repurchase program (the “June 2026 program”), replacing the February 2026 program, which was terminated prior to its expiration. The June 2026 program is open-ended and authorizes repurchases of shares of our common stock from time to time up to an aggregate cost of $2.0 billion in the open market, in negotiated transactions or through accelerated share repurchase programs. The June 2026 program remains in effect until the total authorized amount is expended or until further action by our Board of Directors.

As of June 30, 2026, we had $800.0 million remaining under the June 2026 program, which includes the $300.0 million prepayment under the ASR Agreement as to which shares have not yet been repurchased and will be delivered to us upon settlement of the ASR Agreement. During the quarter and nine months ended June 30, 2026, we expended $2.3 billion and $3.1 billion, respectively, under the June 2025 program, the February 2026 program, and the June 2026 program, as applicable, including $1.5 billion under the ASR Agreement entered into as part of the June 2026 program. Under the ASR Agreement, we received an initial delivery of 1,055,103 shares of common stock, representing approximately 80 percent of the total shares expected to be repurchased under the ASR Agreement.

The final number of shares repurchased and the average price paid per share will be determined upon the settlement of the ASR Agreement, which is expected to occur during the fourth quarter of fiscal 2026.

During the quarter and nine months ended June 30, 2025, we expended $511.3 million and $878.1 million, respectively, under the June 2025 program and other previously authorized stock repurchase programs.

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Revolving Line of Credit and Term Loan

We have a credit agreement with a syndicate of banks that provides for a $1.0 billion unsecured revolving line of credit that matures on May 13, 2030. On June 5, 2026, we amended our credit agreement to provide for the issuance of a $1.5 billion unsecured term loan that was borrowed in full on June 5, 2026 and matures on May 15, 2028. The credit agreement also provides for an option for us to request additional incremental term loans and/or incremental increases to the revolving line of credit from time to time, in each case subject to the terms and conditions of the credit agreement. Borrowings under the credit agreement can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock.

Principal on the term loan is to be repaid in consecutive quarterly installments on the last business day of March, June, September, and December equal to (i) $75.0 million from September 30, 2026 through and including June 30, 2027 and (ii) $112.5 million thereafter. Interest rates on amounts borrowed under the revolving line of credit and term loan are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5%, and (c) the Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 1%, plus, in each case, an applicable margin, (ii) the Daily Simple SOFR plus an applicable margin (or, if such rate is no longer available, a successor benchmark rate determined in accordance with the terms of the credit agreement), or (iii) term SOFR (without a credit spread adjustment) plus an applicable margin (or, if such rate is no longer available, a successor benchmark rate determined in accordance with the terms of the credit agreement).

The applicable margin for base rate borrowings and for SOFR borrowings for the loans under the credit agreement is determined based on our consolidated leverage ratio. The applicable margin for loans under the revolving line of credit for base rate borrowings ranges from 0% to 1% per annum and for SOFR borrowings ranges from 1% to 2% per annum. The applicable margin for the term loan for base rate borrowings ranges from 0.5% to 1.25% per annum and for SOFR borrowings ranges from 1.5% to 2.25% per annum. In addition, we must pay certain credit agreement fees. The credit agreement contains certain restrictive covenants including a maximum consolidated leverage ratio of 4.5 to 1.0 through December 30, 2026, 4.0 to 1.0 during December 31, 2026 through December 30, 2027, and 3.5 to 1.0 during December 31, 2027 and thereafter, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and contains other covenants typical of an unsecured credit facility.

As of June 30, 2026, we had $710.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 5.643% and $1.5 billion in outstanding balance of the term loan at an interest rate of 5.863%, and we were in compliance with all financial covenants under the credit agreement.

Senior Notes

On May 8, 2018, we issued $400.0 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”). The 2018 Senior Notes required interest payments semi-annually at a rate of 5.25% per annum and were to mature on May 15, 2026. On March 26, 2026, prior to the maturity date, we repaid in full the 2018 Senior Notes, utilizing proceeds from the issuance of the 2026 Senior Notes (as defined below). On December 6, 2019, we issued $350.0 million of senior notes in a private offering to qualified institutional investors (the “2019 Senior Notes”). The 2019 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028.

On December 17, 2021, we issued $550.0 million of additional senior notes of the same class as the 2019 Senior Notes in a private offering to qualified institutional investors (the “2021 Senior Notes”). The 2021 Senior Notes require interest payments semi-annually at a rate of 4.00% per annum and will mature on June 15, 2028, the same date as the 2019 Senior Notes. On May 13, 2025, we issued $1.5 billion of senior notes in a private offering to qualified institutional investors (the “2025 Senior Notes”). The 2025 Senior Notes require interest payments semi-annually at a rate of 6.00% per annum and will mature on May 15, 2033. On March 20, 2026, we issued $1.0 billion of senior notes in a private offering to qualified institutional investors (the “2026 Senior Notes,” and collectively with the 2018 Senior Notes, the 2019 Senior Notes, the 2021 Senior Notes, and the 2025 Senior Notes, the “Senior Notes”).

The 2026 Senior Notes require interest payments semi-annually at a rate of 6.25% per annum and will mature on September 15, 2034. The indentures for the Senior Notes contain certain covenants typical of unsecured obligations. As of June 30, 2026, the carrying value of the Senior Notes was $3.4 billion and we were in compliance with all financial covenants under these obligations.

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CRITICAL ACCOUNTING ESTIMATES

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. These accounting principles require management to make certain judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We periodically evaluate our estimates including those relating to revenue recognition, goodwill resulting from business combinations and other long-lived assets — impairment assessment, share-based compensation, income taxes, and contingencies and litigation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable based on the specific circumstances, the results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates and such differences could be material to our financial condition and results of operations. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations.

You should carefully consider the critical accounting estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (“Annual Report on Form 10-K”). There have been no significant changes from the critical accounting estimates disclosed in our Annual Report on Form 10-K.

New Accounting Pronouncements

For information about recent accounting pronouncements not yet adopted and the impact on our consolidated financial statements, refer to Part I, Item 1, “Unaudited Financial Statements,” Note 1, “Nature of Business” in our accompanying Notes to Condensed Consolidated Financial Statements.