This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Fair Isaac Corporation, commonly known as FICO. We cover the moat FICO has built with its Scores business, why software margins should improve, and the biggest lessons from its capital-light, high-margin model.
Our guest is Dev Kantesaria, managing partner at Valley Forge Capital Management. Show Notes
(00:00:00) – Introduction
(00:02:40) – (First question) – What attracted him to FICO as a business
(00:03:31) – An overview of their key products and the value they provide
(00:06:01) – How FICO collaborates and competes with credit bureaus
(00:11:23) – Their ability to sustain steady growth in a cyclical environment
(00:12:48) – How FICO’s software offerings complement their credit score business
(00:14:13) – Who their competitors are
(00:23:16) – The potential competitive risks of emerging A.I. technology
(00:25:57) – Why the push for VantageScore in the mortgage industry created more competition for credit bureaus
(00:27:58) – The differences between their B2C and scores businesses
(00:30:38) – A breakdown of the software side of the business and its significance
(00:34:26) – All about FICO’s Falcon Fraud Manager and Triad Customer Manager
(00:39:20) – FICO’s capital-light business model in detail
(00:41:59) – The aspects of the business that investors often overlook or underestimate
(00:45:18) – Lessons learned from studying FICO