FICO

Fair Isaac is a textbook high-quality business: FY2025 revenue of $1.99B grew 15.9% with operating income of $925M (46.5% margin) and net income of $652M (32.7% margin), and growth is accelerating — revenue has climbed from $1.32B (FY21) to $1.99B (FY25) while net income roughly doubled from $392M to $652M. The economics are franchise-grade: the MD&A confirms Scores revenue rose 27% to $1.2B as FICO Score 10/10 T won FHFA approval for conforming mortgages and the company launched BNPL-aware scores, reinforcing the FICO Score's standing as the U.S. standard for consumer credit risk. Capital intensity is trivial ($8.9M capex against $779M operating cash flow), and management is returning that cash aggressively, repurchasing 0.8M shares for $1.4B in FY2025 and shrinking the share count 2.6%.

The balance sheet looks alarming on the surface — stockholders' equity is -$1.75B and ROE prints -37.3% — but this is a financial-engineering artifact, not distress. Retained earnings are a healthy $4.55B; equity is negative purely because cumulative buybacks exceed paid-in capital. The real question is leverage: total debt reached $3.1B (up from $2.2B), the company issued $1.5B of senior notes, and current liabilities more than doubled to $849M against only $705M of current assets and $134M of cash. Debt-funded buybacks at a 41x multiple add risk if growth or refinancing conditions sour, though $779M of annual operating cash flow comfortably services the obligations.