FICO 10-K & 10-Q changes, risk factors and insider trading

We have increasingly focused our Software segment’s business strategy on investing significant development resources to enable substantially all of our software to run on FICO® Platform, our modular software offering designed to enable advanced analytics and decisioning use cases. This business strategy is designed to enable us to increase our business by selling multiple connectable and extensible products to clients, as well as to enable the development of custom client solutions and to allow our clients to more easily expand their usage and the use cases they enable over time. The market may be unreceptive to our general business approach, including being unreceptive to our cloud-based offerings,offerings and unreceptive to purchasing multiple products from us, or unreceptive to our customized solutions.us. As we continue to pursue this business strategy, we may experience volatility in our Software segment’s revenues and operating results caused by various factors, including the differences in revenue recognition treatment and timing between our cloud-based offerings and on-premises software licenses, the timing of investments and other expenditures necessary to develop and operate our cloud-based offerings, and the adoption of new sales, delivery and distribution methods. If this business strategy is not successful, we may not be able to grow our Software segment’s business, growth may occur more slowly than we anticipate, or revenues and profits may decline.

•the increasing availability of free or relatively inexpensive consumer credit, credit score and other information from public or commercial sourcessources, including those that use AI technologies;

Our ability to increase our revenues will dependdepends to some extent upon introducing new products and services andservices, upon introducing enhancements and improvements to existing products and services and upon entering new markets for products and services. If we are unable to successfully develop, or if the marketplace does not accept theseaccept, new, enhanced or improved products and services, or if we experience defects, failures or delays associated with the introduction of new, enhanced or improved products or services, our revenuesbusiness maycould decline.suffer serious harm.

ToWe increasealso our revenues, we must enhance and improve existing products and services, and continue to introduce new products and servicesbelieve that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. We believe much of the future growth of our business and the success of our business strategy willmay restdepend on our ability to continue to expand into newer markets for our products and services. Such areas are relatively new to our product development and sales and marketing personnel. Products and services that we plan to market in the future are in various stages of development. We cannot assure you that the marketplace will acceptIf these productsnewer and services. If our current or potential customersmarkets are not willing to switch to or adopt our new products and services, either as a result of the quality of these products and services or due to other factors, such as economic conditions, our revenues willmay decrease.

In addition, the U.S. and other key international economies have periodically experiencedexperience downturns in which economic activity is impacted by falling demand for a variety of goods and services, increased volatility of interest rates, fluctuating rates of inflation, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, trade policies and tariffs, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. The potential for economic disruption presents considerable risks to our business, including potential bankruptcies or credit deterioration of financial institutions with which we have substantial relationships. Economic disruption could result in a decline in the sales of new products to our customers and the volume of transactions that we execute for existing customers. In addition, the volume of our Scores sales depends heavily on macroeconomic conditions, including, for example, the volume of transactions in the U.S. mortgage and credit card markets, which account for a significant portion of the revenues in our Scores segment.

During fiscal 2024,2025, 92% of our revenues were derived from sales of products and services to the banking industry. Periods of global economic uncertainty experienced in the past have produced substantial stress, volatility, illiquidity and disruption of global credit and other financial markets, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions. The potential for future stress and disruptions, including in connection with geopolitical tensions, military conflicts, trade policies and tariffs, the level of inflation and the volatility of interest rates, presents considerable risks to our businesses and operations. These risks include potential bankruptcies or credit deterioration of financial institutions, many of which are our customers. Such disruption would result in a decline in the revenue we receive from financial and other institutions. In addition, if consumer demand for financial services and products and the number of credit applications decrease, the demand for our products and services could also be materially reduced. These types of disruptions could lead to a decline in the volumes of products and services we provide our customers and could negatively impact our revenue and results of operations.

While we expand our sales into international markets, the risks are greater as some of these markets arehave alsoexperienced experiencingand may in the future experience substantial disruption and we are less well-known in them.

A significant portion of our revenues in our Scores segment is attributable to the U.S. mortgage market, which includes, for mortgages eligible for purchase by The Federal National Mortgage Association (“Fannie Mae”) and The Federal Home Loan Mortgage Corporation (“Freddie Mac”), a requirement by those enterprises that U.S. lenders provide FICO® Scores for each mortgage delivered to them. However, their continued use of the FICO Score is subject to ongoing validation and approval by those enterprises and the Federal Housing Finance Agency (“FHFA”). If other credit score models are approved for use with mortgages delivered to Fannie Mae and Freddie Mac, or the FICO Score is not approved for continued use with those mortgages, it could have a material adverse effect on our revenues, results of operations and stock price. Other changes implemented by FHFA, Fannie Mae or Freddie Mac could also affect the demand for FICO Scores and thus could have similar adverse effects on our business, including, for example, the change announced by the FHFA Director in July 2025 permitting mortgage originators to choose the credit score they submit with mortgages delivered to Fannie Mae and Freddie Mac or a potential future change permitting mortgage originators to underwrite loans using credit scores from onlyfewer two of thethan three national consumer reporting agenciesagencies. (The ability of our FICO Score to compete effectively in the U.S. mortgage market may be constrained by the pricing and other business practices of the consumer reporting agencies, which could have a “bi-mergematerial report”)adverse rathereffect thanon fromour allrevenues, threeresults (aof “tri-mergeoperations report”).and stock price.

•neural network developers and artificialproviders intelligenceof systemneural buildersnetworks, machine learning, and AI systems;

•providers of credit reports and credit scoresscores, including consumer reporting agencies;

Many of our products are sold by distributors or partners, and we intend to continue to market and distribute our products through these existing distributor and partner relationships, as well as invest resources to develop additional sales, distribution and marketing relationships. OurFor example, our Scores segment relies on, among others, Experian, TransUnion and Equifax. Failure of our existing and future distributors or partners to generate significant revenues or otherwise perform their expected services or functions, demands by such distributors or partners to change the terms on which they offer our products, or our failure to establish additional distribution or sales and marketing alliances, could have a material adverse effect on our business, operating results and financial condition. In addition, certain of our distributors and partners presently compete with us and may compete with us in the future, either by developing competitive products themselves or by distributing competitive offerings. For example, Experian, TransUnion and Equifax have developed a credit scoring product to compete directly with our products and are actively selling that product. Competition from distributors or other sales and marketing partners could significantly harm sales of our products and services.

Our success depends, in part, upon our proprietary technology and other intellectual property rights. To date, we have relied primarily on a combination of copyright, patent, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution, to protect our proprietary technology. This protection of our proprietary technology is limited, and our proprietary technology could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Any disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. The extent to which our intellectual property rights can be protected differs by jurisdiction, and is rapidly evolving with respect to AI technologies. There can be no assurance that our protection of our intellectual property rights in the U.S. or abroad will be adequate or that others, including our competitors, will not use our proprietary technology without our consent. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could harm our business, financial condition or results of operations.

In our markets, technology changes rapidly, and there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, database technologies, cloud-based technologies and the use of the Internet. For example, artificial intelligenceAI technologies, including generative artificial intelligence,AI, and their use are currently undergoing rapid change. If we fail to enhance our current products and develop new products in response to changes in technology or industry standards, or if we fail to bring product enhancements or new product developments to market quickly enough, our products could rapidly become less competitive or obsolete. Our future success will depend, in part, upon our ability to:

•influence and respond to emerging industry standards and other technological changes.changes, including relating to AI.

Because our business requires the storage, transmission and utilization of sensitive consumer and customer information, we will continue to routinely be the target of attempted cybersecurity and other security threats by technically sophisticated and well-resourced outside third parties, among others, attempting to access or steal the data we store. Many of our products are provided by us through the Internet. We may beare exposed to additional cybersecurity threats as we continue to migrate our software solutions and data from our legacy systems to cloud-based solutions. We operate in an environment of significant risk of cybersecurity incidents resulting from unintentional events or deliberate attacks by third parties or insiders, which may involve exploiting security vulnerabilities or sophisticated attack methods. These threats include social engineering attacks, phishing attacks and other cyber-attacks, including state-sponsored cyber-attacks, industrial espionage, insider threats, denial-of-service attacks, computer viruses, ransomware and other malware, payment fraud or other cyber incidents. As a software and technology vendor, we may incorporate or distribute software or other materials from third parties. Attacks or other threats to our supply chain for such software and materials may render us unable to provide assurances of the origin of such software and materials, and could put us at risk of distributing software or other materials that may cause harm to ourselves, our customers or other third parties. In addition, increased attention on and use of artificial intelligenceAI increases the risk of cyber-attacks and data breaches, which can occur more quickly and evolve more rapidly when artificial intelligenceAI is used. Further, use of artificial intelligenceAI by our employees, whether authorized or unauthorized, increases the risk that our intellectual property and other proprietary information will be unintentionally disclosed.

Cybersecurity breachesbreaches, including those that impact our third-party vendors and other security providers, could expose us to a risk of loss, the unauthorized disclosure of consumer or customer information, significant litigation, regulatory fines, penalties, loss of customers or reputational damage, indemnity obligations and other liability. There is no assurance that the programs, technologies and processes that we have put in place in an effort to maintain the security and protection of our non-public information and that of our customers will be fully implemented, complied with or effective. If our cybersecurity measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and as a result, someone obtains unauthorized access to our systems or to consumer or customer information, sensitive data may be accessed, stolen, disclosed or lost, our reputation may be damaged, our business may suffer and we could incur significant liability. Because the techniques used to obtain unauthorized access, disable or degrade service or to sabotage systems change frequently and generally are not recognized until launched against a target, or even for some time after, we may be unable to anticipate these techniques, implement adequate preventative measures or remediate any intrusion on a timely or effective basis. Because a successful breach of our computer systems, software, networks or other technology asset could occur and persist for an extended period of time before being detected, we may not be able to immediately address the consequences of a cybersecurity incident.

Malicious third parties may also conduct attacks designed to temporarily deny customers, distributors and vendors access to our systems and services.services, and may demand payment by us in order to restore access. Cybersecurity breaches experienced by our vendors, by our distributors, by our customers, by companies that we acquire, or by us may trigger governmental notice requirements and public disclosures, which may lead to widespread negative publicity, statutory damages, and lawsuits filed by individuals impacted by cybersecurity breaches under privacy and cybersecurity statutes that create rights of action. We may also be affected by cybersecurity breaches experienced by customers who use our products on-premises, and those breaches may occur due to factors not under our control, including a customer’s failure to timely install updates and fixes to our products, vulnerabilities in a customer’s own cybersecurity measures, and other factors. Any cybersecurity breach, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to curtail or cease their use of our products and services, cause regulatory or industry changes that impact our products and services, or subject us to third-party lawsuits, regulatory fines or other action or liability, all of which could materially and adversely affect our business and operating results.

Our ability to provide reliable products and services to our customers depends on the efficient and uninterrupted operation of our and our external service providers’ data centers, information technology and communication systems, and increasingly those of our external service providers.systems. Any disruption of or interference with our use of data centers, information technology or communication systems of our external service providers would adversely affect our operations and our business. As we continue to grow our Software segment’s business, our dependency on the continuing operation and availability of these systems increases. Our systems and data centers, and those of our external service providers, could be exposed to damage or interruption. These interruptions can include software or hardware malfunctions, communication failures, outages or other failures of third-party environments or service providers, or be due to defective updates, fires, floods, earthquakes, pandemics, war, terrorist acts or civil unrest, power losses, equipment failures, supply chain disruptions, computer viruses, denial-of-service or other cybersecurity attacks, employee or insider malfeasance, human error and other events beyond our control. Any steps that we or our external service providers have taken to prevent or reduce disruption may not be sufficient to prevent an interruption of services and disaster recovery planning may not account for all eventualities.

The failure to obtain certain forms of model construction data from our customers or others for our use in product development could harm our business.

Our business requires that we develop or obtain a reliable source of sufficient amounts of current and statistically relevant data to analyze transactions and update some of our products. In most cases, thesethis data must be periodically updated and refreshed to enable our products to continue to work effectively in a changing environment. We do not own or control much of the data that we require, most of which is collected privately and maintained in proprietary databases. Customers and key business partners provide us with the data we require to analyze transactions, report results and build new models. Our business strategy depends in part upon our ability to access new forms of data to develop custom and proprietary analytic tools. If we fail to maintain sufficient data sourcing relationships with our customers and business partners, or if they decline to provide such data due to privacy, security, competitive concerns, regulatory concerns, or prohibitions or a lack of permission from their customers or partners, we could lose access to required data and our products. If this were to happen, our development of new products might become less effective. We could also become subject to increased legislative, regulatory or judicial restrictions or mandates on the collection, disclosure, transfer or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. Third parties have asserted copyright and other intellectual property interests in thesethis data, and these assertions, if successful, could prevent us from using thesethis data. We may not be successful in maintaining our relationships with these external data source providers or in continuing to obtain data from them on acceptable terms or at all. Any interruption of our supply of data could seriously harm our business, financial condition or results of operations.

Our business strategy and our future success will depend in large part on our ability to attract and retain experienced sales, consulting, research and development, marketing, technical support and management personnel. The labor market for these individuals, particularly in the complex technical disciplines of enterprise platform sales, software engineering, data science, AI and cyber security,cybersecurity, is very competitive due to the limited number of people available with the necessary technical skills and understanding to build, sell and support our complex products and it may become more competitive with general market and economic improvement.growth. We cannot be certain that our compensation strategies will be perceived as competitive by current or prospective employees. This and other competitive factors could impair our ability to recruit and retain personnel. We have experienced past difficulty in recruiting and retaining qualified personnel, especially in these intensely competitive and technical skill areas, and we may experience future difficulty in recruiting and retaining such personnel, at a time when we may need additional staff to support expanded research and development efforts, new customers and/or increased customer needs. We may also recruit skilled technical professionals from other countries to work in the U.S., and from the U.S. and other countries to work abroad. Limitations imposed by current and changing immigration laws in the U.S. and abroad and the availability of visas in the countries where we do business could hinder our ability to attract and retain necessary qualified personnel and harm our business and future operating results. There is a risk that even if we invest significant resources in attempting to attract, train and retain qualified personnel, we will not succeed in our efforts, and our business could be harmed. The failure of the value of our stock to appreciate may adversely affect our ability to use equity and equity-based incentive plans to attract and retain personnel, and may require us to use alternative forms of compensation for this purpose.

Increased regulatory focus on U.S. residential mortgage closing costs may affect our ability to implement price changes for FICO® Scores used in mortgage originations and thus limit the revenues and profitability of the FICO Score. If new laws, regulations or other governmental action affecting the FICO Score or our other productsproducts, services and servicessolutions are implemented or carried out, it could adversely affect our business and results of operations.

There has been increased regulatory focus in the U.S. by federal regulators such as the CFPB and the FTC, as well as the current presidential administration and some states, related to the transparency and fairness of certain fees charged to consumers andin connection with the impacts on the costsclosing of consumer goods and services. For example, in May 2024, the CFPB launched a public inquiry to obtain information on fees charged by providers of mortgages and related settlement services in the U.S. residential mortgage market,loan, including fees for credit reports and credit scores. The CFPB indicated that it is looking into why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered. If new laws, regulations or other governmental action result from this inquiry, or otherwise, that limit the fees that can be charged for credit scores by us, consumer reporting agencies, or end users of our FICO® Scores, or that place other restrictions on the sale or distribution of credit scores, our ability in the future to increase pricing for FICO Scores used in mortgage originations may be impacted and thus the revenues and profitability of the FICO Score may be adversely affected and the growth of our Scores business may be constrained.

There has also been increased focus more broadly on laws and regulations in the U.S. related to our business and the business of consumer reporting agencies, including by U.S. state and federal regulators such as the CFPB,regulators, relating to policy concerns with regard to the operation of consumer reporting agencies, the sale and distribution of credit scores and credit reports, the use and accuracy of credit and alternative data, the use of credit scores and fair lending, and the use, transparency, and fairness of algorithms, artificial intelligence,AI, and machine learning in business processes. For example, the CFPB has indicated that it intends to issue rules under the FCRA that would extend the FCRA to certain business practices not currently subject to that statute. The costs and other burdens of compliance with such laws and regulations, and with new or revised laws and regulations that may be implemented addressing these topics, could negatively impact the use and adoption of our solutions, reduce overall demand for them, and harm our business, financial condition or results of operations.

Laws and governmental regulation affect how our business is conducted and, in some cases, subject us to the possibility of government supervision or enforcement and future lawsuits arising from our products and services. Laws and governmental regulations also influence our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services.services, and may require them to flow down certain contractual obligations, exercise greater oversight, and perform more rigorous audits of their key service providers such as us. Laws and regulations in the U.S. and abroad that may affect our business and/or our current and prospective customers’ activities include, but are not limited to, those in the following significant regulatory areas:

•TheData and cybersecurity laws and regulations, including: the Cybersecurity Act of 2015; the U.S. Department of Commerce’s National Institute of Standards and Technology’s Cybersecurity Framework; the Clarifying Lawful Overseas Use of Data Act; cyber incident notice requirements for banks and their service providers under rules and regulations issued by federal banking regulators; cybersecurity incident disclosure requirements for public companies under regulations issued by the SEC; and identity theft, file freezing, and similar state privacy laws;

•Laws and regulations relating to the environmental, social and governance, or sustainability,sustainability practices of companies, including enhanced climate-related disclosure requirements from regulators, such as CaliforniaCalifornia’s andclimate thedisclosure SEC,rules and the E.U.’s Corporate Sustainability Reporting Directive.

The California Consumer Privacy Act of 2018 (“CCPA”) gives California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights. Additionally, effective January 1, 2023, the California Privacy Rights Act (the “CPRA”) revised and significantly expanded the scope of the CCPA. The CPRA also created a new agency, the California Privacy Protection Agency, authorized to implement and enforce the CCPA and the CPRA. Numerous other U.S. states have consideredpassed similar privacy laws, withand many of thoseother states havingare passedconsidering such laws with respective effective dates ranging from 2023 through 2026.legislation.

The European Commission has finalized the EU AI Act, which establishes requirements for the provision and use of products that leverage artificial intelligenceAI systems, including in credit scoring. The EU AI Act entered into force on August 1, 2024, and its provisions take effect between six and 36 months after that date, with most of those provisions becoming effective in 2026. Other countries, as well as the executive branch of the U.S. government and a number of U.S. states, are considering or have implemented laws, regulations or standards applicable to the provision and use of artificial intelligenceAI technologies.

In addition to existing laws and regulations, changes in the U.S. or foreign legislative, judicial, regulatory or consumer environments could harm our business, financial condition or results of operations. The laws and regulations above, and changes to them or their interpretation by the courts, could affect the demand for or profitability of our products, including scoring and consumer products. New laws and regulations pertaining to our customers could cause them to pursue new strategies, reducing the demand for our products. We expect there will continue to be an increased focus on laws and regulations related to our business and/or the business of our clients, including with regard to the operation of consumer reporting agencies, the collection, use, accuracy, correction and sharing of personal information, credit scoring, the use of artificial intelligenceAI and machine learning, and algorithmic accountability and fair lending.

•unfavorable tax rules or changes in tariffs and other trade barriers;

In addition to the risk of depending on international sales, we have risks incurred in having research and development personnel located in various international locations. We currently have a substantial portion of our product development staff in international locations, some of which have political and developmental risks. For example, approximately one-third of our workforce is located in India, which could be negatively impacted by heightened tensions between India and Pakistan. If any of such risks materialize, our business could be damaged.

Economic uncertainty has and could continue to negatively affect the businesses and purchasing decisions of companies in the industries we serve. Such disruptions present considerable risks to our businesses and operations. As global economic conditions experience stress and negative volatility, including any stress or negative volatility related to the imposition of, and threatened imposition of, tariffs and retaliatory tariffs, economic sanctions and increased trade tensions or if there is an escalation in regional or global conflicts, or terrorism, we will likely experience reductions in the number of available customers and in capital expenditures by our remaining customers, longer sales cycles, deferral or delay of purchase commitments for our products and increased price competition, which may adversely affect our business, results of operations and liquidity.

During fiscal 2024,2025, the strategy for our Software segment was to continuecontinued to advance and drive growth through our platform-first, cloud deliveredplatform-first products. A significant portion of our short-term opportunity remains in North America, where financial institutions are focused on digital transformation and understand the value of FICO® Platform. We have also expanded our FICO® Platform reachreach, both by geography and customer typetype, inwith orderthe tolaunch enableof FICO® Marketplace, enabling organizations to operationalize analytics, and to power customer connectionsconnections, and decisionmake makingdecisions at scale. Marketplace offers easy access to data, artificial intelligence (“AI”) models, optimization tools, decision rulesets, and machine learning models, which deliver enterprise business outcomes from AI. We continue to innovate and bring new capabilities to FICO Platform, demonstrating its value with new customers and expanding use cases with existing customers.customers and partners. We announced newly granted patents around advancing responsible AI, machine learning, and applied intelligence technology. Additionally, we continue to expand our FICO® Educational Analytics Challenge program that was created to empower students and help educate the next generation of data scientists.

We also continued to enhance stockholder value by returning cash to stockholders through our stock repurchase program. During fiscal 2024,2025, we repurchased 0.60.8 million shares at a total repurchase price of $833.3$1.4 million.billion.

•Revenues for our Scores segment were $919.7$1.2 millionbillion during fiscal 2024,2025, a 19%27% increase from fiscal 2023.2024.

•Annual Recurring Revenue for our Software segment as of September 30, 20242025 was $721.2$747.3 million, ana 8%4% increase from September 30, 2023.2024.

•Total share repurchases during fiscal 20242025 were $833.3$1.4 million,billion, compared with $407.3$0.8 millionbillion during fiscal 2023.2024.

Scores segment revenues increased $145.8$248.9 million in fiscal 20242025 from 20232024 due to an increase of $150.8$236.7 million in our business-to-business scores revenue,revenue partiallyand offsetan by a decreaseincrease of $5.0$12.2 million in our business-to-consumer scores revenue. The increase in business-to-business scores revenue was primarily attributable to a higher unit price, partiallyan offset by a decreaseincrease in volume of mortgage originations.originations and a multi-year license renewal in the U.S. recognized on our insurance score product during fiscal 2025. The decreaseincrease in business-to-consumer scores revenue was primarily attributable to aan decreaseincrease in directroyalties sales generatedderived from thescores myFICO.comsold website.indirectly to consumers through consumer reporting agencies.

(1)Includes license portion of our on-premises subscription software and perpetual license,licenses, both of which are recognized when the software is made available to the customer, or at the start of the subscription.

Software segment revenues increased $58.1$24.4 million in fiscal 20242025 from 20232024 due to a $71.2$28.8 million increase in on-premises and SaaS software revenue, partially offset by a $13.0$4.4 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.products Theand decreasean increase in professional serviceslicense revenue wasrecognized primarilyat attributablea point in time due to oura strategylarge tolicense emphasize higher-margin software over professional services.renewal.

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; creditconsumer bureaureporting agency data and processing services; third-party hosting fees related to our SaaS services; travel costs; and outside services.

The fiscal 20242025 over 20232024 increase in cost of revenues of $37.2$5.5 million was primarily attributable to an $18.1$8.7 million increase in infrastructure and facilities costs, partially offset by a $12.4$2.1 million increasedecrease in outside services costs and a $1.4 million decrease in personnel and labor costs, a $4.3 million increase in direct materials costs, and a $2.4 million increase in outside services costs. The increase in infrastructure and facilities costs was primarily attributable to an increase in third-party data center hosting costs, a prior year one-time reimbursement from a third-party data center provider for implementation costs previously incurred, and an increase in softwaredepreciation royaltyon data center computer hardware. The decrease in outside services costs was primarily attributable to decreased third-party contractor costs. The increasedecrease in personnel and labor costs was primarily attributable to increaseddecreased market base-pay adjustments and increased share-based compensationincentive expense. The increase in direct materials costs was primarily attributable to increased telecommunications expenses to support FICO® Customer Communications Services revenue. The increase in outside services costs was primarily attributable to increased consulting costs. Cost of revenues as a percentage of revenues decreased to 18% during fiscal 2025 from 20% during fiscal 2024 from 21% during fiscal 2023,2024, primarily due to increased sales of our higher-margin Scores products.

The fiscal 20242025 over 20232024 increase in research and development expenses of $12.0$16.4 million was primarily attributable to ana $8.2$6.9 million increase in infrastructure and facilities costs, a $5.7 million increase in outside services costs, and a $3.8 million increase in personnel and labor costs,costs. as a result of increases in share-based compensation expense, headcount, and incentive expense, a $2.4 millionThe increase in infrastructure and facilities costs was primarily attributable to increased third-party data center hosting costs,costs and athird-party $1.8SaaS millionservices costs. The increase in consultingoutside services costs was primarily attributable to increased third-party contractor costs. The increase in personnel and labor costs was primarily attributable to increased headcount. Research and development expenses as a percentage of revenues decreased to 9% during fiscal 2025 from 10% during fiscal 2024 from 11% during fiscal 2023.2024.

The fiscal 20242025 over 20232024 increase in selling, general and administrative expenses of $62.3$50.2 million was primarily attributable to a $38.6$23.7 million increase in personnel and labor costs, a $6.0 million increase in outside services costs, a $5.5$22.4 million increase in advertising and other promotional costs, a $4.9 million increase in non-income tax costs,and a $3.7$3.3 million increase in travel costs, and a $2.6 million increase in infrastructure and facilities costs. The increase in personnel and labor costs was primarily attributable to increased share-based compensation expense, increased headcount, market base-pay adjustments, increasedcommission expense, and share-based compensation expense, partially offset by decreased fringe benefit costs related to our supplemental retirement and savings plan, and increased incentive expense. The increase in outside services costs was primarily attributable to increased legal and consulting expenses.plan. The increase in advertising and other promotional expensescosts was primarily attributable to increased costs for advertising campaigns and corporate events. The increase in non-income tax costs was primarily attributable to a tax law change related to transfer pricing effective in fiscal 2024 that impacted a non-U.S. subsidiary. The increase in travel costs was primarily attributable to promotional and corporate events. The increase in infrastructure and facilities costs was primarily attributable to the impact of a favorable adjustment in the prior year from the termination of an office lease. Selling, general and administrative expenses as a percentage of revenues increaseddecreased to 26% during fiscal 2025 from 27% during fiscal 2024 from 26% during fiscal 2023.2024.

Interest expense includes interest on the senior notes issued in 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 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 fiscal 2025 over 2024 from 2023 increase in net interest expense of $10.1$28.0 million was primarily attributable to the $1.5 billion of 2025 Senior Notes (as defined below), partially offset by a higherlower average outstanding balance and a lower average interest rate and higher average outstanding balance ofon borrowings under our credit agreement during fiscal 2024.2025.

Other Income (Expense),Income, Net

Other income (expense),income, net consists primarily of unrealized investment gains/losses and realized gains/losses on certainmarketable investmentssecurities classified as trading securities, exchange rate gains/losses resulting from remeasurement of foreign-currency-denominated receivable 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 fiscal 20242025 over 20232024 increasedecrease in other income, net of $7.7$2.6 million was primarily attributable to ana increasedecrease in net unrealized and realized gains on investments classified as trading securities in our supplemental retirement and savings planplan, partially offset by an increase in net exchange rate gains resulting from remeasurement of foreign-currency-denominated receivable and acash decreasebalances inheld by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency exchangeforward losses.contracts.

The fiscal 20242025 over 20232024 increase in operating income of $90.8$191.2 million was primarily attributable to a $204.0$273.3 million increase in segment revenues,revenues and a $5.4 million decrease in corporate expenses, partially offset by a $55.3$70.2 million increase in segment operating expenses, a $30.5$10.9 million increase in corporaterestructuring expenses,charges, and a $25.6$7.2 million increase in share-based compensation cost.

At the segment level, the $118.1$203.1 million increase in segment operating income was the result of a $132.3$212.9 million increase in our Scores segment operating incomeincome, andpartially offset by a $16.3$9.8 million increasedecrease in our Software segment operating income, partially offset by a $30.5 million increase in corporate expenses.income.

The $16.3$9.8 million increasedecrease in our Software segment operating income was attributable to a $58.1 million increase in segment revenue, partially offset by a $41.8$34.2 million increase in segment operating expenses.expenses, partially offset by a $24.4 million increase in segment revenue. Segment operating income as a percentage of segment revenue for Software decreased to 32%30% from 33%,32%, primarily attributable to athe priorincreases year one-time reimbursement from ain third-party data center provider for implementationhosting costs previously incurred, partially offset by a decreaseand in salespersonnel ofand ourlabor lower-margin professional services.costs.

As of September 30, 2024,2025, we had $150.7$134.1 million in cash and cash equivalents, which included $124.4$118.8 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 $600$1.0 millionbillion 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 $15.0$400.0 million principal paymentspayment on the $3002018 MillionSenior Term LoanNotes (as defined below) due over the next 12 months. Under our current financing arrangements, we have no other significant debt obligations maturing over the next twelve12 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.

Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities totaled $778.8 million in fiscal 2025 compared to $633.0 million in fiscal 2024 compared to $468.9 million in fiscal 2023.2024. The $164.1$145.8 million increase was attributable to ana $83.4$139.1 million increase in net income, a $43.0$4.8 million increase in non-cash items, and a $1.9 million increase that resulted from timing of receipts and payments in our ordinary course of business, and a $37.7 million increase in non-cash items.business.

Net cash used in investing activities totaled $43.7 million in fiscal 2025 compared to $28.0 million in fiscal 2024 compared to $16.0 million in fiscal 2023.2024. The $12.0$15.7 million increase was attributable to a $16.7$13.8 million increase in capitalized internal-use software costs and a $4.6 million increase in purchases of property and equipment, partially offset by a $6.1$1.9 million decrease in cash transferred, net of proceeds, from a product line asset sale and a $3.2 million increase in proceeds from sales, net of purchases, of marketable securities.

Net cash used in financing activities totaled $750.3 million in fiscal 2025 compared to $592.9 million in fiscal 2024 compared to $455.0 million in fiscal 2023.2024. The $137.9$157.4 million increase was primarily attributable to a $416.2$988.8 million increase in payments, net of proceeds, on our revolving line of credit and term loans, a $592.8 million increase in repurchases of common stock andstock, a $62.5$65.4 million increase in taxes paid related to net share settlement of equity awards, partially offset byand a $340.0$16.5 million increase in proceeds,debt netissuance costs, partially offset by the proceeds from the issuance of payments, on our revolving$1.5 linebillion of2025 creditSenior andNotes term(as loans.defined below).

In JanuaryJuly 2024, our Board of Directors approved a stock repurchase program (the “JanuaryJuly 2024 program”), replacing our previously authorized OctoberJanuary 20222024 stock repurchase program, which was terminated prior to its expiration. The JanuaryJuly 2024 program was open-ended and authorized repurchases of shares of our common stock from time to time up to an aggregate cost of $500.0$1.0 millionbillion in the open market or in negotiated transactions. In JulyJune 2024,2025, our Board of Directors approved a new stock repurchase program (the “JulyJune 20242025 program”), replacing the JanuaryJuly 2024 program, which was terminated prior to its expiration and under which $29.6 million was remaining for repurchase at the time of termination.expiration. The JulyJune 20242025 program is open-ended and authorizes 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. The JulyJune 20242025 program remains in effect until the total authorized amount is expended or until further action by our Board of Directors.Board. As of September 30, 2024,2025, we had $760.5$343.6 million remaining under the JulyJune 20242025 program. During fiscal 20242025 and 2023,2024, we expended $833.3$1.4 millionbillion and $407.3$0.8 million,billion, respectively, under the JulyJune 20242025 program and previously authorized stock repurchase programs, as applicable.

WeOn haveMay 13, 2025, we amended our credit agreement with a $600syndicate millionof banks, increasing our borrowing capacity under the unsecured revolving line of credit from $600 million to $1.0 billion and aextending its maturity to May 13, 2030. Also on May 13, 2025, we repaid in full and terminated the $300 million unsecured term loan (the “$300 Million Term Loan”) withand athe syndicate$450 million unsecured term loan (the “$450 Million Term Loan”) outstanding under our credit agreement, utilizing proceeds from the issuance of banksthe that2025 matureSenior onNotes August(as 19,defined 2026.below). Borrowings under the revolving line of credit and the $300 Million Term Loan 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. The $300 Million Term Loan requires principal payments in consecutive quarterly installments of $3.75 million on the last business day of each quarter. Interest rates on amounts borrowed under the revolving line of credit and the $300 Million 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) one-monththe adjustedDaily termSimple Secured Overnight Financing Rate (“SOFR”) plus 1%, plus, in each case, an applicable margin, or (ii) anthe adjustedDaily termSimple 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)., Adjustedor (iii) term SOFR (without a credit spread adjustment) plus an applicable margin (or, if such rate is definedno aslonger termavailable, SOFRa forsuccessor benchmark rate determined in accordance with the relevant interest period plus a SOFR adjustmentterms of 0.10%the percredit annum.agreement). The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio. The applicable margin for base rate borrowings ranges from 0% to 0.75% per annum and for SOFR borrowings ranges from 1% to 1.75% per annum. In addition, we must pay certain credit facility fees. The revolving line of credit andagreement the $300 Million Term Loan containcontains certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0. The credit agreement also contains other covenants typical of an unsecured credit facilities.facility.

As of September 30, 2024,2025, we had $210.0$275.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 6.396%, $258.8 million in outstanding balance of the $300 Million Term Loan at an interest rate of 6.344%,5.423% and $450.0 million in outstanding balance of the $450 Million Term Loan at an interest rate of 6.281%. Wewe were in compliance with all financial covenants under the credit agreement as of September 30, 2024.agreement.

On May 8, 2018, we issued $400 million of senior notes in a private offering to qualified institutional investors (the “2018 Senior Notes”). The 2018 Senior Notes require interest payments semi-annually at a rate of 5.25% per annum and will mature on May 15, 2026. On December 6, 2019, we issued $350 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 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,” and collectively with the 2018 Senior Notes and the 2019 Senior Notes, the “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,” and collectively with the 2018 Senior Notes, the 2019 Senior Notes and the 2021 Senior Notes, the “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. The indentures for the Senior Notes contain certain covenants typical of unsecured obligations. As of September 30, 2024,2025, the carrying value of the Senior Notes was $1.3$2.8 billion and we were in compliance with all financial covenants under these obligations.

(1)Represents the unpaid principal payments due under the Senior Notes,Notes and revolving line of credit, and term loans.credit.

Highlights from the quarter and sixnine months ended MarchJune 31,30, 2026

•Total revenues were $691.7$674.2 million during the quarter ended MarchJune 31,30, 2026, a 39%26% increase from the quarter ended MarchJune 31,30, 2025, and $1.2$1.9 billion during the sixnine months ended MarchJune 31,30, 2026, a 28%27% increase from the sixnine months ended MarchJune 31,30, 2025.

•Revenues for our Scores segment were $475.0$458.9 million during the quarter ended MarchJune 31,30, 2026, a 60%41% increase from the quarter ended MarchJune 31,30, 2025, and $779.5$1.2 millionbillion during the sixnine months ended MarchJune 31,30, 2026, a 46%45% increase from the sixnine months ended MarchJune 31,30, 2025.

•Annual Recurring Revenue for our Software segment as of MarchJune 31,30, 2026 was $788.8$815.8 million, a 10% increase from MarchJune 31,30, 2025.

•Dollar-Based Net Retention Rate for our Software segment was 109% as of MarchJune 31,30, 2026.

•Operating income was $402.5$362.6 million during the quarter ended MarchJune 31,30, 2026, a 64%38% increase from the quarter ended MarchJune 31,30, 2025, and $636.5$999.1 million during the sixnine months ended MarchJune 31,30, 2026, a 50%45% increase from the sixnine months ended MarchJune 31,30, 2025.

•Net income was $264.5$237.2 million during the quarter ended MarchJune 31,30, 2026, a 63%30% increase from the quarter ended MarchJune 31,30, 2025, and $422.8$660.0 million during the sixnine months ended MarchJune 31,30, 2026, a 34%33% increase from the sixnine months ended MarchJune 31,30, 2025.

•Diluted EPS was $11.14$10.45 during the quarter ended MarchJune 31,30, 2026, a 69%41% increase from the quarter ended MarchJune 31,30, 2025, and $17.73$28.12 during the sixnine months ended MarchJune 31,30, 2026, a 39%40% increase from the sixnine months ended MarchJune 31,30, 2025.

•Cash flows from operating activities were $397.4$777.9 million during the sixnine months ended MarchJune 31,30, 2026, compared with $268.9$555.1 million during the sixnine months ended MarchJune 31,30, 2025.

•CashTotal anddebt cashbalance equivalentswas were$5.6 $219.4 millionbillion as of MarchJune 31,30, 2026, compared with $134.1$3.1 millionbillion as of September 30, 2025.

•Total share repurchases during the quarter ended MarchJune 31,30, 2026 were $611.3$2.3 million,billion, compared with $207.0$511.3 million during the quarter ended MarchJune 31,30, 2025, and during the sixnine months ended MarchJune 31,30, 2026 were $773.9$3.1 million,billion, compared with $366.8$878.1 million during the sixnine months ended MarchJune 31,30, 2025. The quarter and nine months ended June 30, 2026 included $1.5 billion paid under the ASR Agreement.

The following tables set forth certain summary information on a segment basis related to our revenues for the quarters and six-monthnine-month periods ended MarchJune 31,30, 2026 and 2025:

Quarter Ended MarchJune 31,30, 2026 Compared to Quarter Ended MarchJune 31,30, 2025

Scores segment revenues increased $177.9$134.6 million due to an increase of $175.1$131.6 million in our business-to-business scores revenue and an increase of $2.8$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 and an increase in volume of mortgage originations.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 segment revenues increased $15.0$3.2 million due to a $15.4$9.1 million increase in our on-premises and SaaS software revenue, partially offset by a $0.4$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.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.

SixNine Months Ended MarchJune 31,30, 2026 Compared to SixNine Months Ended MarchJune 31,30, 2025

Scores segment revenues increased $246.8$381.4 million due to an increase of $241.4$372.9 million in our business-to-business scores revenue and an increase of $5.4$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 originations.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 segment revenues increased $18.1$21.3 million due to a $17.6$26.7 million increase in our on-premises and SaaS software revenuerevenue, andpartially offset by a $0.5$5.3 million increasedecrease 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.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.

The following tables set forth certain summary information related to our condensed consolidated statements of income and comprehensive income for the quarters and six-monthnine-month periods ended MarchJune 31,30, 2026 and 2025:

TheCost of revenues remained consistent quarter-over-prior year quarter increase in cost of revenues of $3.6 million was primarily attributable to a $3.0 million increase in infrastructure and facilities costs and a $0.6 million increase in personnel, labor and other costs. The increase in infrastructure and facilities costs was primarily attributable to an increase in third-party data center hosting costs.quarter. Cost of revenues as a percentage of revenues decreased to 13% during the quarter ended MarchJune 31,30, 2026 from 18%16% during the quarter ended MarchJune 31,30, 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 $3.5$2.9 million was primarily attributable to a $4.7$6.9 million increase in infrastructure and facilities costs, partially offset by a $1.2$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. The 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 15%14% during the sixnine months ended MarchJune 31,30, 2026 from 19%18% during the sixnine months ended MarchJune 31,30, 2025, primarily due to increased sales of our higher-margin Scores products.

The quarter-over-prior year quarter increase in research and development expenses of $8.9$6.5 million was primarily attributable to a $6.0$5.4 million increase in infrastructure and facilities costs and a $4.8$2.2 million increase in personnel and labor costs, partially offset by a $1.9$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 headcountincentive costs, increased fringe benefit costs related to our deferred compensation plan, and increased incentiveshare-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 MarchJune 31,30, 2026 from 9% during the quarter ended MarchJune 31,30, 2025.

The year-to-date period-over-period increase in research and development expenses of $13.6$20.1 million was primarily attributable to a $10.0$15.5 million increase in infrastructure and facilities costs and a $7.2$9.4 million increase in personnel and labor costs, partially offset by a $3.6$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, and increased incentive 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 decreasedremained toconsistent at 9% during each of the quarternine months ended MarchJune 31,30, 2026 from 10% during the quarter ended March 31,and 2025.

The quarter-over-prior year quarter increase in selling, general and administrative expenses of $23.7$31.7 million was primarily attributable to a $15.8$25.6 million increase in personnel and labor costs and a $7.9$6.1 million increase in marketing and other costs. The increase in personnel and labor costs was primarily attributable to increased headcount, 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 21%25% during the quarter ended MarchJune 31,30, 2026 from 24%26% during the quarter ended MarchJune 31,30, 2025.

The year-to-date period-over-period increase in selling, general and administrative expenses of $36.5$68.2 million was primarily attributable to a $24.8$50.4 million increase in personnel and labor costscosts, anda an $11.7$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 commissionfringe costs.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,costs. The increase in outside services costs was primarily attributable to increased third-party consulting costs, and increased third-party contractor costs. Selling, general and administrative expenses as a percentage of revenues decreased to 23%24% during the sixnine months ended MarchJune 31,30, 2026 from 26% during the sixnine months ended MarchJune 31,30, 2025.

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, for the prior year quarter and prior year-to-date period, 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 net interest expenseexpense, net of $13.2$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) and, the $1.0 billion of 2026 Senior Notes (as defined below), partiallythe offset$1.5 bybillion term loan issued during June 2026, and a lowerhigher average outstanding balance and a lower average interest rate on borrowings under our creditrevolving agreementline duringof the quarter ended March 31, 2026.credit.

The year-to-date period-over-period increase in interest expenseexpense, net of $25.7$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), partially offset by a lower average outstanding balance and a lower average interest rate on borrowings under our credit agreement during the six months ended March 31, 2026..

Other Expense,Income, Net

Other expense,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 expense,income, net of $0.6$4.5 million was primarily attributable to aan decreaseincrease in foreignnet exchangeunrealized rateand realized gains resultingon frominvestments remeasurementclassified ofas foreign-currency-denominatedtrading receivablessecurities and cash balances held byin our variousdeferred reportingcompensation entities into their respective functional currencies at period-end market rates.plan.

The year-to-date period-over-period increase in other expense,income, net of $0.8$3.7 million was primarily attributable to an increase in foreigndividend exchange rate losses resulting from remeasurement of foreign-currency-denominated receivablesincome and cashrealized balancesgains heldon byinvestments classified as trading securities in our variousdeferred reportingcompensation entities into their respective functional currencies at period-end market rates.plan.

The effective income tax rate was 25.7%24.6% and 23.7%23.3% during the quarters ended MarchJune 31,30, 2026 and 2025, respectively, and 22.8%23.5% and 13.2%17.2% during the sixnine months ended MarchJune 31,30, 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 sixnine months ended MarchJune 31,30, 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 sixnine months ended MarchJune 31,30, 2026.

The following tables set forth certain summary information on a segment basis related to our operating income for the quarters and six-month periods ended MarchJune 31,30, 2026 and 2025:

The quarter-over-prior year quarter increase in operating income of $156.8$100.1 million was primarily attributable to a $192.9$137.8 million increase in segment revenues, partially offset by aan $26.2$18.5 million increase in segment operating expenses, a $6.3 million increase in corporate expenses, and a $3.6$10.4 million increase in share-based compensation expense.expense, and an $8.8 million increase in corporate expenses.

The quarter-over-prior year quarter increase in Scores segment operating income of $167.5$132.2 million was due to a $177.9$134.6 million increase in segment revenue, partially offset by a $10.4$2.4 million increase in segment operating expenses. Scores segment operating income as a percentage of segment revenue increased to 91% from 89%,88%, primarily due to higher business-to-business scores revenue driven by a higher mortgage origination scores unit price and an increase in volume of mortgage originations.price.

The quarter-over-prior year quarter decrease in Software segment operating income of $0.7$12.9 million was due to a $15.7$16.1 million increase in segment operating expenses, partially offset by a $15.0$3.2 million increase in segment revenue. Software segment operating income as a percentage of segment revenue decreased to 29%26% from 31%,32%, 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.time and an increase in third-party data center hosting costs.

The year-to-date period-over-period increase of $211.3$311.4 million in operating income was primarily attributable to a $264.9$402.7 million increase in segment revenues, partially offset by a $36.2$54.7 million increase in segment operating expenses, aan $10.2$18.9 million increase in corporate expenses, and a $7.2$17.7 million increase in share-based compensation expense.

The year-to-date period-over-period $231.6$363.8 million increase in Scores segment operating income was attributable to a $246.8$381.4 million increase in segment revenue, partially offset by a $15.2$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 originations.origination scores.

The year-to-date period-over-period $2.9$15.8 million decrease in Software segment operating income was due to a $21.0$37.1 million increase in segment operating expenses, partially offset by ana $18.1$21.3 million increase in segment revenue. Software segment operating income as a percentage of segment revenue decreased to 29%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.

As of MarchJune 31,30, 2026, we had $219.4$248.4 million in cash and cash equivalents, which included $104.0$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.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.

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 $397.4$777.9 million during the sixnine months ended MarchJune 31,30, 2026 from $268.9$555.1 million during the sixnine months ended MarchJune 31,30, 2025. The $128.5$222.7 million increase was attributable to a $107.7$163.1 million increase in net income and a $35.9$60.9 million increase in non-cash items, partially offset by a $15.1$1.3 million decrease due to the timing of receipts and payments in our ordinary course of business.

Net cash used in investing activities increased to $21.1$39.3 million for the sixnine months ended MarchJune 31,30, 2026 from $19.9$30.4 million for the sixnine months ended MarchJune 31,30, 2025. The $1.3$8.9 million increase was primarily attributable to a $3.6$4.7 million increase in capitalized internal-use software costs,costs and a $12.8 million increase in purchases of other investments, partially offset by a $2.5$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.

Net cash used in financing activities increased to $289.2$622.3 million for the sixnine months ended MarchJune 31,30, 2026 from $247.7$486.8 million for the sixnine months ended MarchJune 31,30, 2025. The $41.5$135.6 million increase was primarily attributable to a $396.8$2.2 millionbillion increase in repurchases of common stock,stock (including the $1.5 billion paid under the ASR Agreement in the nine months ended June 30, 2026), a $327.5$500.0 million increasedecrease in payments,proceeds netfrom issuance of proceeds,senior on our revolving line of credit and term loans,notes, and the $400.0 million repayment of 2018 Senior Notes (as defined below), partially offset by thea proceeds$2.9 billion increase in proceeds, net of payments, from the issuancerevolving line of ourcredit $1.0and billionterm 2026 Senior Notes (as defined below)loans, and a $92.8$91.9 million decrease in taxes paid related to net share settlement of equity awards.

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 new stock repurchase program (the “February 2026 program”), replacing the June 2025 program, which was terminated prior to its expiration. The February 2026 program iswas open-ended and authorizesauthorized 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 FebruaryJune 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 March 31, 2026, we had $1.1 billion remaining under the February 2026 program. We expended $611.3 million and $773.9 million during the quarter and six months ended March 31, 2026, respectively, under the June 2025 program and the February 2026 program. We expended $207.0 million and $366.8 million during the quarter and six months ended March 31, 2025, respectively, under previously authorized stock repurchase programs.

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 with a syndicate of banks that matures on May 13, 2030. BorrowingsOn underJune 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 0.75%1% per annum and for SOFR borrowings ranges from 1% to 1.75%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 facilityagreement 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 1.0,1.0 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 MarchJune 31,30, 2026, we had $265.0$710.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 4.931%,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.

On May 8, 2018, we issued $400$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$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$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 MarchJune 31,30, 2026, the carrying value of the Senior Notes was $3.4 billion and we were in compliance with all financial covenants under these obligations.