Fair Isaac Corporation (NYSE:FICO) Q4 2020 Results Earnings Conference Call

November 10, 2020 5:00 PM ET

Company Participants

Steve Weber - Vice President, Investor Relations

Will Lansing - Chief Executive Officer

Mike McLaughlin - Chief Financial Officer

Conference Call Participants

Manav Patnaik - Barclays Capital

Kyle Peterson - Needham

Jeff Meuler - Baird

Brett Huff - Stephens Incorporated

Jake Williams - Wells Fargo

Surinder Thind - Jefferies

Operator

Greetings. And welcome to the Fair Isaac Corporation Quarterly Earnings Call.
During the presentation, all participants will be in a listen-only mode.
Afterwards, we will conduct the question-and-answer session. [Operator
Instructions]

As a reminder, this conference is being recorded it�s Tuesday, November 10, 2020. I
would now like to turn the conference over to Steve Weber. Please, go ahead.

Steve Weber

Thank you, Eric. Good afternoon. And thank you for joining FICO�s Fourth Quarter
Earnings Call. I am Steve Weber, Vice President of Investor Relations and I am
joined today by our CEO, Will Lansing; and our CFO, Mike McLaughlin.

Today, we issued a press release that describes financial results compared to the
prior year. On this call, management will also discuss results in comparison to the
prior quarter in order to facilitate understanding of the run rate of our business.

Certain statements made in this presentation may be characterized as forward-

looking under the Private Securities Litigation Reform Act of 1995. Those
statements involve many uncertainties including the impact of COVID-19 on
macroeconomic conditions and the company�s business, operations and personnel that
could cause actual results to differ materially.

Information concerning these uncertainties is contained in the company�s filings

with the SEC, in particular, in the Risk Factors and Forward-Looking Statements
portions of such filings. Copies are available from the SEC, from the FICO website
or from our Investor Relations team.

This call will also include statements regarding certain non-GAAP financial
measures. Please refer to the company�s earnings release and Regulation G schedule
issued today for a reconciliation of each of those non-GAAP financial measures to
the most comparable GAAP measure.

The earnings release and Regulation G schedule are available on the Investor
Relations page of the company�s website at fico.com or on the SEC�s website at
sec.gov. A replay of this webcast will be available through November 10, 2021.

And with that, I will turn the call over to Will Lansing.

Will Lansing

Thanks, Steve, and thank you, everyone, for joining us for our fourth quarter
earnings call. I hope you and your families are healthy and staying safe as we with
the effects of the pandemic. At FICO we continue to make the health and safety of
our employees a priority and are primarily working from home with most of our
offices remaining closed.

I�d like to take this opportunity to thank our entire team for their perseverance
and their adaptability and their commitment to our customers. On the Investor
Relations section of our website we posted some slides that I will reference during
our presentation today.

2020 has been a remarkable year for all of us. At FICO we have been focused on
navigating an extremely volatile and unpredictable environment. I am happy to
report that our Q4 results again demonstrate not only the quality of our management
team, but also the resilience of our business model.

In our fourth quarter, we posted exceptional results that capped off a very
successful fiscal year. We reported record revenues of $374 million, an increase of
23% over the same period last year. For the full fiscal year, we recorded $1.9 --
$1.29 billion of revenue, up 12% from fiscal 2019. We delivered $59 million of GAAP
net income and GAAP earnings of $1.98 per share, even after taking a large charge
and restructuring and impairment losses.

On a non-GAAP basis, the $3.25 earnings per share was up 62% from last year. And we
are delivering strong free cash flow growth as well. Q4 free cash flow was $135
million, up 51% from last year. Total fiscal year �20 free cash flow was $343
million, up 45% from fiscal �19.

We had another solid year throughout our business and our Applications segment we
had a great quarter of 12% versus last year in large part due to some Falcon
license renewals. For the year, the segment was essentially flat for good result
considering we entered the year with difficult comps as a result of large license
sales in fiscal �19. Applications bookings in the quarter were $117 million, up 42%
over the same period last year, and $282 million for the full year, up 6% versus
fiscal �19.

In our Decision Management segment, we continue to prove that we are gaining

traction with our new technology. We again delivered our largest DMS revenue
quarter ever, up 36% from last year�s fourth quarter and the segment was up 22% for
the full year versus fiscal 2009 [ph].

Our bookings were even more impressive. We signed $99 million in new DMS deals this
quarter, up 62% from the same quarter last year. For the full year we signed $199
million of new DMS deals, up 27% versus last year.

Let me take a few moments to highlight the DMS success this quarter. First, we
signed the biggest single platform in Centralized Decision Solution in company
history with a large Latin American bank. The bank is looking to implement 19
different instances on our platform to derive the decision to support use cases
related to auto, credit line management for the different retail products, and
collections and others on the corporate platform. We are signing more deals and
bigger deals as we find operators eager to use our advanced analytic tools to
automate their most difficult decisions.

We continue to focus our strategy of investing for platform success, we have been
making coordinated changes across the business to grow revenue from our on-platform
solutions, favorite software-over-services, optimize pricing and manage operating
expenses.

In our fourth quarter, we made some changes, including reducing headcount and some
of our facilities footprint. Those were announced in September when we disclosed
the charge we would be taking. Subsequent to the end of our fiscal year, we also
made the decision to exit our FICO Cyber Risk Score business which we sold to
institutional shareholder services last month.

We don�t make these decisions lightly. We are committed to becoming the preeminent
platform player in decisioning analytics and we need to be focused on that mission.
That may mean exiting non-strategic products or not signing or renewing low margin
project work. We are constantly looking at our business to identify areas for
growth and improvement, and implement actions to deliver our strategic initiatives.

We will continue to keep you updated on the progress we are making in our Software
business and we will be providing more information in the coming quarters to
explain the transformation we are making there.

In our Scores business, we had another very successful year. Scores were up 32% in
the quarter versus the prior year and up 25% for the full year. On the B2B side
revenues were up 27% as we saw continued strong mortgage origination volumes. We
saw a small rebound in auto originations in the quarter, while cards and other
personal loan volumes continued to be down.

The quarter also included a one-time true-up of royalty revenues. For the full year
B2B revenues were up 26% compared to 2019. Our B2C revenues were up 45% versus the
same quarter last year and 23% for the full year compared to last year.

We continue to see incredible growth in myFICO.com, which was up 62% this quarter
versus last year and are also getting good growth through our partners. As we look
to our fiscal 2021, we see customers looking to accelerate their digital
transformation and looking to our technology to facilitate the process.

But we are also faced with a number of uncertainties. Obviously, we are all still
dealing with the ongoing pandemic and all of the resulting health and economic
impacts. We may see a new stimulus package from the federal government but with the
just completed elections it�s difficult to predict any timing or impacts. It�s also
difficult to predict what we will see in debt markets in the coming year.
Obviously, the mortgage markets have been growing at phenomenal levels, but we
can�t predict when or to what degree those markets will cool off.

In auto and personal loans, there�s still a great deal of volatility and we cannot
confidently predict how the next 12 months will play out. As in past years, we have
instituted some pricing increases in various areas within Scores. But it�s also
difficult to determine their potential impact because of volume uncertainty.

We are coming off a quarter with record revenues and record bookings. But again,
with an ongoing pandemic, it�s difficult to predict with certainty how quickly our
solutions from the new sales will be implemented. In addition, our subscription-
based go-to-market strategy will have an impact on the timing of revenue
recognition in fiscal �21, causing less revenue to be claimed up front and more to
be taken rapidly, which Mike will described in his remarks.

We are proud of our business performed in fiscal �20 and are excited as we embark
on a new year. But we are also realistic and understanding that we are in
unprecedented times with many uncertainties. Because of this, we remain committed
to providing as much transparency as possible, but are not providing guidance for
fiscal �21 at this time.

Have some final comments in a few minutes. But first let me turn the call over to
Mike for more financial details.

Mike McLaughlin

Thanks, Will, and good afternoon, everyone. As Will said, we had a great finish to
our fiscal year and we are able to post exceptional results in the midst of a
tumultuous business environment. Revenue for the quarter was $374 million, an
increase of 23% over the prior year. Our full year revenue of $1.29 billion was up
12% over last year.

Within our three reported business segments, our Application revenues were $168
billion, up 12% versus the same period last year. The quarterly increase in revenue
was driven by increased term license sales, including an unusually high number of
large multiyear license renewals. Full year revenues for Applications were $602
million roughly flat with last year. Applications bookings were up 42% over the
same quarter last year and up 6% for the full year.

In our Decision Management Software segment Q4 revenues were $53 million, up 36%
over the same period last year. Full year DMS revenues were $164 million, up 22%
from fiscal �19. The revenue increases for both the quarter and the year were due
to increase license sales, as well as increased SaaS subscription revenue. Q4 DMS
bookings were $99 million, up 62% from the previous year. For the full year DMS
bookings of $199 million were up 27% over last year.

Finally, our Score segment revenues were $153 million, up 32% from the same period
last year. The B2B part of the business was up 27% over the same period, driven by
high volumes in mortgage originations and a one-time true-up of past royalties. B2C
revenues were up 45% from the same period last year, both myFICO.com and partner
revenues grew significantly. For the full year, Scores revenues were $529 million,
up to 25% from last year.

This quarter�s 74% of total revenues were derived from our Americas region, our
EMEA region generated 18% and the remaining 8% was from Asia-Pacific. Recurring
revenues derived from transactional and maintenance sources for the quarter
represented 71% of total revenues, consulting and implementation services revenues
were 13% of total quarterly revenues and licensed revenues were 16% of the total.
SaaS software revenues not including related professional services revenues for the
full year of fiscal 2019 were $237 million, up 11% from fiscal 2019.

We had record total bookings in Q4 of $235 million, up 46% from the previous year.
These bookings generated $34 million of current period revenues, which is a 15%
yield. Full year bookings of $537 million represent an 11% increase from last year.
SaaS bookings were $221 million for the year, up 18% from 2019. As you may recall,
our total bookings lagged in Q2 and Q3 of this year due to disruptions from the
pandemic. But the strong finish put us in line with our annual expectations.

Our operating expenses totaled $289 million this quarter, including $42 million of
restructuring and impairment charges. Excluding those one-time charges expenses
were $247 million, compared to $231 million in the prior quarter, up $16 million
due to increased expenses associated with additional revenue and incentives
expenses.

Our non-GAAP operating margin as shown on our Reg G schedule was 41% for the
quarter and 34% for the full year. We delivered non-GAAP margin expansion of 400
basis points for the full fiscal year.

GAAP net income this quarter, which again included one-time charges was $59
million, up 8% from Q4 and fiscal 2019. Our non-GAAP net income was $97 million for
the quarter, up 59% from the same quarter last year. For the full year, GAAP net
income was $236, including $45 million of restructuring impairment charges, and $50
million of reduced tax expense from one-time excess tax benefits recognized upon
the settlement or exercise of employee stock awards. Non-GAAP net income was $292
million, up 28% from prior year.

Our effective tax rate for the full year was 8%, including the $50 million of
reduced tax expense from excess tax benefits. We expect our FY 2021 recurring tax
rate to be approximately 26% to 27%, compared with 28% at FY �20. That expected
recurring tax rate is before an estimated excess tax benefit of approximately $20
million in FY 2021. The resulting net effective tax rate is estimated to be about
20% in fiscal �21.

Free cash for the quarter was $135 million, compared to $90 million in the same
period last year, an increase of 51%. For the full year free cash flow was $343
million, up 45% from last year�s $236 million.

Turning to balance sheet. At the end of the quarter, we had $157 million in cash.
This is up $32 million from last quarter due to cash generated from operations,
partially offset by $25 million of share repurchases. Our total debt now stands at
$845 million with a weighted average interest rate of 4.3%.

Turning to return of capital, we bought back 60,000 shares in the fourth quarter at
an average price of $423 per share. In fiscal 2020 we repurchased a total of
675,000 shares at an average price of $348 per share for a total of $235 million.
At the end of September we had about $225 million remaining on the Board repurchase
authorization and we continue to do share repurchases as an attractive use of cash.

Finally, as well mentioned, we have recently shifted the sales of our on premise
software, away from the sale of separate license and maintenance components to
subscriptions that include both the rights to use the software and the ongoing
maintenance.

As a result at the beginning of FY21, we adjusted our revenue recognition

assumptions to be consistent with industry standards for software subscription
sales. This change will result in less upfront revenue recognized in the year we
sign subscription contracts, and more revenue from those contracts recognized
ratably during their term.

This will likely result in a material decline of our software license revenues in
fiscal �21. As a greater percentage of the total expected revenue to be received
from newly signed on-premise subscription sales and renewals of existing term
licenses or spread over the term of the deal. This will not have an impact on our
cash flows, or the total revenue recognized from software license sales over the
term of each subscription contract.

With that, I will turn it back over to Will for his thoughts on FY21.
Will Lansing

Thanks, Mike. As I said, in my opening remarks, I am proud of our team and what we
were able to accomplish in fiscal 20. I am excited about our prospects are 2021 and
beyond. Clearly, there is uncertainty. But we are confident that our future is
bright. We can�t pin down exact expectations, but we have proven our businesses
remarkably resilient. And we are well positioned for the future. We will continue
to innovate fine tune and improve our business model with an eye toward improving
margins and delivering on our potential. And we look forward to keep you all
informed as we progress.

Now, let�s turn to Q&A.

Steve Weber

Thanks, Will. This concludes our remarks. Eric, if you could please open the lines
for questions.

Question-and-Answer Session

Operator

Absolutely. Thank you. [Operator Instructions] And our first question comes from
the line of Manav Patnaik. Please go ahead.

Manav Patnaik

Thank you. Good evening, guys. Just on the software business clearly, a solid end
to the year to you. You characterize it as a backlog that kind of pause because of
the pandemic. But I was hoping you could give us just a little bit more color on
how the clients are viewing the next few quarters ahead I guess. Is the fact that
you ended strong just find that they are back to normal or is there some shift in
where they are finding these deals?

Will Lansing

Hi, Manav. I think that, I wouldn�t say things are back to normal. But I would also
say that with respect to the software that banks buy from us, things didn�t change
that much. Remember, we have a very long sales cycle, 270 days on average. And so a
lot of what we have booked in 2020 was pipeline built even earlier.

We are now in the process of building pipeline for 2021. We have some pipeline
built. We have more to build. And it�s a little hard to say how it will all turn
out. But I would say that our customers are they have the same needs for the
software that they had before the pandemic, if anything, there is increased
appetite, because the pandemic has gotten everyone focused on digital
transformation. And, and our software obviously plays really well for that. So I
anticipate continued interest, I don�t think we are just working off backlog.

Manav Patnaik

Okay. Got it. And then if I may just on the score side, plus can you just quantify
how much the two upgrades that he talked about? And then secondly, just going into
next calendar year, I guess, how should we think about the pricing initiatives that
you have been doing in the last few years, like, should we be expecting another
one?

Will Lansing
We can�t disclose the amount of the true that�s held confidential. But as you know,
these things happen every several years. We wind up doing a trip of this sort. With
respect to the pricing actions and scores, we took some actions, but as in years
past, we don�t really know exactly how it will feather in we don�t know exactly
what volumes will be.

And so it�s a little hard to predict. I would say not a lot more nor a lot less
than years past is probably a way to think about it. But it�s -- we have
uncertainty, we always -- we wind up getting the activity and or from the Bureau�s
and that�s just the way it is.

Manav Patnaik

Got it. And if I can just squeeze in one minute just selling this hybris core
business to ISS, I guess. I don�t know if you have ever sold a prune portfolio
before. So I was just curious it�s something is there a fresh milk is a lot more
that maybe we can see coming?

Will Lansing

Yes. Good question, Manav. We have undertaken a pretty massive strategic look at
our business over the last six, seven months. We hired in a former McKinsey
Director, Tab Bowers to help us. And we have been really focused on what is
strategic and what is not.

And so we are -- the things that look promising, but they really are not central to
our mission for building a decisioning platform, are definitely being moved to the
periphery and cyber risk course example, when those sold, we are proud of it. It
was good technology.

But our success in the decisioning platform business doesn�t turn on whether we are
successful in cyber risk score. So at some level was a distraction for us. Are
there other things like that we are in a state of constant evaluation, and we hope
to find some things that are less strategic and free up resources for more
strategic.

Manav Patnaik

Thank you, guys.

Operator

Thank you. Our next question comes from a line of Kyle Peterson with Needham.
Please go ahead.

Kyle Peterson

Hi. Good afternoon, guys. Thanks for taking the questions. Just wanted to touch a
little bit on the SG&A trajectory, you guys took some restructuring kind of
rationalized headcount in real estate, how should we think about kind of the
expense trends over the next coming year given that, it seems like some of these
efficiencies could be permanent, but not sure whether you guys are going to
reinvest part of that in some higher growth areas such as DMS.

Will Lansing

Yes. I will give you some quantitative thoughts. And then maybe we will can provide
qualitative. Big part of the reduction in expense run rate in the second half of
the year with T&E. You can see from the additional slides we provide, as a part of
this call that are going into the pandemic, T&E run rate was about $30 million to
$35 million a year. I think it was something like $100,000 in Q4.

So that�s not going to persist, but it�s probably going to be less than 30 to 35.
So even if we do have a vaccine and get back to normal. So that�s one moving piece.
We have also taken action to reduce our geographic footprint and to a minor extent
reduce headcount in non-strategic areas that real estate saving will accrue over
the years. And so that will be a one way benefit. That isn�t going to change.

But with respect to some of the headcount reductions, we actually did that so that
we could reinvest, if not all of that money into headcount augmentation in areas
related to the software platform, to pursue our strategic ambitions there.

So we expect overall expenses for the business, probably, again with the pandemic
so much is uncertain. But we expect flat to single digit growth and expenses as the
year goes on, maybe we will do better than that. If perversely, we can travel for
the whole full year. Hopefully, we can and we have some money to spend in that
category. But hopefully, that at least gives you some color.

Kyle Peterson

Yes. That�s helpful. Thanks for the color. And like it�s just more of a
housekeeping item, particularly on some of these longer term licensed sales that
you guys recognize this quarter. Was that more on the application side? Just trying
to think about how we should incorporate that into our model moving forward?

Will Lansing

Yes. If you look at the segment breakout in the 10-K, you can figure that out, you
have to do a little quarterly subtraction math, because we don�t show the quarter-
over-quarter comparison in a friendly way as we might. But the licensed growth was
really driven by renewals.

We had a healthy new business license sale quarter as well as we would expect in
the fourth quarter of particularly given some of the delayed purchases that flowed
over from Q2, Q3. But if you look at our $62.5 million of licensed bookings for the
quarter, which is up of that $21 million or so is renewal that renewals in excess
of renewals we had in the year ago quarter.

So -- and then just for better, worse, they are lumpy, we have to recognize a lot
of upfront. And so, it was both increase in new business sales, which was up sort
of mid to high teens from year-over-year, but most of the increase, but not always,
just by this lumpiness of renewals that happened to be a whopper renewal quarter.

Kyle Peterson

All right. Great. Thanks, guys. Nice quarter.

Operator

Thank you. Our next question comes from the line of Jeff Meuler with Baird. Please
go ahead.

Jeff Meuler

Yes. Thanks and good evening everyone. I wanted to ask on B2C scores, kind of a
really, really good quarter. On the myFICO side recognize you have a strong brand,
recognize the direct is the part of the market that�s been performing well lately,
but anything that you have changed for myFICO, either in terms of go to market or
product or just any other changes that are driving that exceptionally strong
result?

Will Lansing

I would say it�s more on the market side than on our side, but we are constantly
innovating over there. We are constantly pushing the -- trying to push the value
that the consumer gets in that offering. Our strategy around myFICO is to be kind
of best-in-class credit monitoring for consumers.

And at the same time, we mostly go to market through partners like Experian. And
so, myFICO is at some level of laboratory for us, a place to test out ideas, to
test out value proposition changes. And so, we are always doing that. That�s not
like a new thing this year, we constantly do that. I think that the biggest thing
responsible for the lift is consumer demand. And then the consumer is really
interested in tracking his or her credit score.

Jeff Meuler

Yep. Okay. And then Mike, just on these accounting changes, I just want to make
sure that -- I guess a couple of clarifying questions, but there�s no change to the
timing of expense recognition would be one question. And then my guess is -- are
you viewing booking as kind of the best way to track the performance of the
business throughout 2021? And I think that�s unaffected? Or is there some other
kind of metric or some way that you are going to be adjusting revenue to give us a
like for like impact or something to track the performance of the business as we
progress through 2021?

Mike McLaughlin

Thanks for those two questions. The first one definitely merits some additional
detail, I think for everyone listening in the call. So the change really is to get
in line with industry standard for how subscription software is recognized.

We had been recognized revenue for on-premise term license sale essentially in the
way that you would recognize a perpetual license sale where you had a one-time
license upfront and then 20% maintenance every year. We were treating the total
contract value of term license in sort of the same way.

That lead to about between 80% and 85% of the total contract value for a multi-year
deal being recognized in the year you sign it, when you sign it, and only 17% --
15% to 20% recognized ratably in years two and three.

With this change, again, which is what the vast majority of subscription software
companies already do, we are shifting that revenue recognition to better reflect
the fact that the value of the ongoing support and maintenance for the on-prem
software in a term license as opposed to a professional license situation is higher
than what we had been recognizing before. That nets out to about a 30% reduction in
the percent of TCV, contract value recognized in year one versus years two, three,
and in some cases years four and five.

So when you think about the revenue side, and I know you have asked about the
expense side as well, we had $120 8 million of license revenue in our software
business in fiscal 2020. Going forward, we would recognize about 30% less of that
in the first year and 30% will then be recognized as recurring revenue in the
remaining years of the contract.
So it�s all about revenue recognition for accounting purposes. It doesn�t change
when we build a customer, how much we build them, or what total revenue will
recognize over the term of a contract. So, hopefully, that�s clear. And you can do
your own math on how much of a headwind that will be for revenue, but it will be a
headwind for fiscal 2021 for sure. We want to make sure everybody notice that.

With respect to expenses, these are on-prem license sales. So there aren�t that
much -- there isn�t that much expense associated with it. Margins -- our on-prem
business are consistent with what others earn 90 plus percent. So that -- but it
will change revenue recognition a little bit to the extent that we recognize more
revenue ratably we match expense with the revenue recognition, but that�s not going
to be a material impact relative to the revenue impact.

And then you asked about booking, separate question. Yes, for now, that�s the best
indicator to measure our current period performance in generating new revenue. It�s
not a perfect metric, as you know it�s on a TCV basis, so term length matters, but
we are sticking with that metric for now.

As we move more to a subscription and SaaS business, annual recurring revenue and
its derivatives becomes more important to us. And we do expect to be able to expose
to you guys at some point during this fiscal year, just kind of metrics for FIFO,
but we are not ready to do that yet.

Jeff Meuler

Got it. Sorry for the three partner. I appreciate all the detail.

Mike McLaughlin

Thank you for the questions.

Operator

Our next question comes from the line of Brett Huff with Stephens Incorporated.
Please go ahead.

Brett Huff

Good afternoon, guys.

Will Lansing

Hi, Brett.

Brett Huff

Good. Just a quick follow up on pricing. Could you guys give us a sense -- I think
sometimes you have given us a sense of which part of scoring you sort of dug into
and we are tweaking the pricing on? Could you - any insight there that you could
share with us for this new round of price tweaks?

Will Lansing

Yes. To the extent we are willing to share that information, it�s less to do with
the type of scores and it�s more to do with the size of the customer. So we are
into a more kind of a tiered pricing philosophy. And so I would say that the price
increases were spread across the spread -- scores portfolio with a view to the size
of the customer buying the scores.

Brett Huff

And I am assuming that that the smaller customers may have been getting a pretty
good deal for a long time and maybe we are tweaking that based on just volumes.

Will Lansing

Yes. Yes. Absolutely. And I would say they are still getting a good deal, but not
as good a deal.

Brett Huff

In terms of bank buying behavior, you touched on this a couple of times. I know
your sales cycles are long. And so, when things exactly come out of the pipe and
get booked, I know it takes a while. But as you are having conversations with
folks, I know you mentioned digitization is really important. But as you think
about Falcon�s strategy director, debt collector, sort of those key apps, any sort
of detail on the conversations there that that stick out that might be useful to
know?

Will Lansing

What�s interesting is, historically, we have provided for lack of a better term
point solutions for our bank customers, originations and customer management and
fraud and collections and recovery as you know. What we are seeing -- what we saw
last year and what we are starting to see more of is more engagement with the IT
department, more engaged with the CIO, and a better understanding on the part of
our customers have just the benefits and value of the platform.

So while they may still be buying a solution like originations, now they appreciate
that it�s originations on top of the platform. And there is all kinds of potential
that goes with that where for small incremental investments they get large
incremental value out. I think that�s the biggest change we are seeing in the
conversation is customers increasingly understanding our strategy around platform
and looking to leverage it.

Brett Huff

Okay. And then any update on the sort of the master plan of moving everything over
to sort of the core underlying DMS platform on the app side. Can you just --
sometimes you sort of say we expect Falcon going to be completely done in a year or
whatever. Can you just give us the update on that to remind us where we are in
terms of finish line?

Will Lansing

Yes. So I guess the honest answer is our work is never done. Okay. So it�s not like
we will just say, okay. Now it�s on the platform, we can all go home. It�s a
process. And so we have moved some core fraud applications from Falcon onto the
platform. Our compliance is now available in Falcon X on the platform.

We are also looking at, I would say, more flexible and modular approaches to
providing fraud solutions on the platform. So there will be some of that. Some of
our applications aren�t going to make it to the platform.

So, for example, collections and recovery has a massive code base, 8 million lines
of code. And it just doesn�t make sense to rewrite it onto the platform. And so
that will remain a distinct code base.

So, when are we done? I guess another way to think of it is, when are we going to
feel that the platform is sufficiently mature that customers who want to have
multiple use cases on the platform have that work? I think we are almost there.

Now, we are pretty much there. This Latin American bank deal that we just
referenced, it started out with a conversation about a handful of use cases that
they would want to do on the platform and they we are up to 19. And I think there�s
more in the future. So it�s a different way of thinking about the value that we
provide.

Brett Huff

Great. Thank you so much. I appreciate it.

Operator

[Operator Instructions] Our next question comes from the line of Jake Williams with
Wells Fargo. Please go ahead.

Jake Williams

Good evening, everyone.

Will Lansing

Hi, Jake.

Jake Williams

Can you help us to understand how much of an impact mortgage items were in this
quarter in the B2B Square segment?

Will Lansing

Like last quarter, Experian -- Equifax and TransUnion reported before us last week
and end of the prior week, and you can see how they broke out mortgage volumes. We
don�t break out mortgage volumes, but we can say that what we saw was consistent
with what they told The Street they saw. I think one showed up 45% in terms of
volume and the other was closer to 60%, although it�s a little unclear whether that
was for the quarter itself or sort of run rate including the last -- including the
month of October, but our volumes were consistent with what you could see from
them.

Jake Williams

Got it. And then in terms in the average bookings term stretched out to 55 months
this quarter from 37 was that impacted by the decision to change the revenue
recognition on-prem or is this an independent evolution?

Will Lansing

No. It�s independent. It�s not related to that. What is related to is we had some
deals that are really long-term deals long, much longer than typical than has been
our usual. And I would say that that trend could continue. We will have to see how
things play out. But I think when banks adopt our platform and standardize on the
platform, it�s not surprising that they would want to lock us in for a long period
of time with an understanding of what it�s going to cost. So I think there�s going
to be pressure for longer-term deals on us.

Jake Williams

So can we assume that the clients are the ones who are coming to you asking for
this long-term deal to give them stability and in return there�s probably some
price escalator built-in each year.

Will Lansing

Yes. We try to be smart about it and yes it�s definitely client request.

Jake Williams

Got it. Thank you very much.

Operator

Thank you. Our next question comes from the line of Surinder Thind with Jefferies.
Please go ahead.

Surinder Thind

Good afternoon. Following up on earlier question about just the DMS platform, maybe
can you provide a little bit more color on the investments you are making in terms
of the -- you are redirecting some of the 36 billion in savings that you have
towards additional headcount for the build out of that platform. Is that simply we
are just trying to accelerate the build out of certain functionality? I was just
hoping for maybe a better understanding of where the roadmap is in terms of, I
think, ultimately we are trying to get to, I guess, in terms of the function that
we currently have versus where it will be fairly equivalent product to your on-prem
and in your old architecture cloud stuff?

Will Lansing

So part of the strategy of the platform is to is to have a lot of interoperability

around the data, right? So we have a data orchestration layer. We can take data
from lots of different places and bring it into the platform. And then we have a
wide range of analytics that can be applied to that data. And then we have various
solutions that sit on top of that platform, of that decision platform to meet
specific needs.

Our strategy with the platform has been to -- as we migrate our applications to the
platform, the way we think about it is we say, what are the components of this
solution that we ought to modularize, what are the micro services that are involved
here and let�s break them up and make them available to users of the platform, so
they can be mixed and matched in different ways.

And so that�s really kind of the heavy lifting that�s going on. We have also put a
lot of energy into a thing called FICO Studio, which is kind of a front end fourth
generation language kind of a programming environment where you can drag and drop a
lot of things to build workflows based on the decisioning analytics in the
platform. So there�s a lot of work that�s gone into that.

But the way we think about it is not let�s port an application to the platform.
It�s more break up the application into its component parts, understand how they
can be micro services that could be consumed in independently and then bring those
to the platform so they can be reassembled on the platform for all different kinds
of purposes.

Surinder Thind

Fair enough. And then in terms of just a bigger picture question, obviously with a
potential change in the administration, is there any other considerations that
enter into picture here where maybe could there be, let�s say, an acceleration in
the upgrade cycle for, let�s say, from FICO 8 to FICO 9 or even to FICO 10 or
something for that matter that might drive based on the differences in the policy
administrations.

Will Lansing

I am not sure that we will have a change in the rate and pace of adoption of new
scores under -- based on the administration. I do think that all lenders are really
focused right now on how do they get the most value out of scoring algorithms and
they are increasingly using things like FICO resiliency index to complement the
traditional FICO score to make these decisions.

I wouldn�t say that�s driven by the administration. I think that�s more driven by
the innovation coming out of our scores team. But there�s a tremendous appetite on
the side of the banks to get the full benefit out of it. And so, we are pretty
focused on that.

Surinder Thind

Thank you. And then just a quick one on -- or maybe on the B2C revenues obviously
really strong growth there. I am assuming the run rate is what is a sustainable run
rate at this point? Is there any color you can provide on how -- is this just --
there�s just this initial phase where we should expect this big ramp up that we
have seen with the kind of the dislocation in the markets? Or how should we think
about the growth rate forward should�

Will Lansing

I think that we definitely�

Surinder Thind

�I am a little bit or how long do customers stay on the platform?

Will Lansing

I think we have definitely enjoyed a spike because of the environment. There�s no

question that consumers are more focused than ever on their score and whether it�s
going up or down, I get letters in the mail all the time. And that�s definitely the
environment driving that. So I would say the 62% spike I referenced earlier that is
-- that�s driven by the environment.

In terms of the lifetime value, how long they stay on. We have not -- it�s too
early to tell, but we haven�t seen changes. So what we are seeing so far is kind of
the same attrition over time that we have historically had. So we will stay.

Surinder Thind

Okay.
Will Lansing

What we have noticed is that there�s an inexorable trend to consumers being ever
more focused on their credit score. I mean, this has been every year, year in, year
out has become bigger and more important to them. And so, I am not sure that it�s
like a spike up and then a ramp down. I mean, it may just be part of a trend.

Surinder Thind

That�s helpful. Thank you.

Operator

All right. Thank you. And Mr. Weber, we have no further questions from the phones
at this time. I will turn the call back to you.

Steve Weber

Thank you. This concludes our call today. Thank you all for joining, and we will
look forward to speaking with you again soon. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank
you for your participation and ask that you please disconnect your lines.