Joining. I'm Ashish Sabadra. I cover business and information services companies at RBC Capital Markets. I'm excited to host Steve Weber, CFO of FICO. Steve, thanks for coming.
Thank you, Ashish. Thank you for inviting us. It's a great conference. We're happy to be here.
Thank you. We'll start off or kick off with a question that we're asking all the companies at the conference. It's on the macro, and so from your perspective, can you just comment on consumer lending? And if you can, talk about, like, all different kinds of consumer lending-
Right
... what's happening on cards, autos, personal loans, mortgages, but also from a software perspective, what you're seeing from a financial services and their IT budgets. Thanks.
Sure, yeah. There's a lot to unpack there, right? So there's a lot happening. It's interesting because this, this is... You know, I've been doing this for a long time. This is unlike anything I've ever seen in terms of, you know, you have, you know, higher rates, you have low unemployment, so the consumer's strong. There's all... You know, the banks are strong for the most part. We've saw some, obviously some fallout earlier in the year, but the bigger banks are very strong, and they're still lending. They're cautious about their lending. They're, you know... I think they're probably moving up market a little bit. But, you know, the, the rates went up so much so quickly, and I think they stayed, it was, you know, higher or longer than, than everybody thought.
So that had a big impact on the mortgage market. You know, we saw the refi market basically collapse and shut down almost entirely. And a lot of consumers, I think, are just kind of waiting to see what happens. So even if they, you know, are able to get, you know, new mortgages, a lot of them are choosing not to because of the rates. So that's interesting to see what happens and how, you know, how long that kind of takes to get back to some sort of normalcy. I mean, maybe we'll see some loosening of rates, and I think there's probably some pent-up demand, you know, for on the mortgage side, but we'll see. I think, I don't think it's anybody's guess what really happens with rates going forward. So that's kind of that market.
But we're still seeing, you know, decent volumes there, but it's, you know, hit historic lows. I mean, we're not seeing a further decline, but it's just kind of minimal activity that's happening there. Auto has been relatively stable. I think, again, you have a, you know, relatively full employment. People are living their lives, and, you know, the auto market's probably less rate sensitive than other markets, certainly than mortgage. If you need a car, you're probably gonna buy a car. You're not making a decision based on what interest rates look like. So that market's been pretty stable. We haven't seen a lot of volatility there. On the credit card side, credit card origination is, you know, there's still a fair amount. It's that can be relatively volatile in short periods of time.
It can even be seasonal, as you know, some of the large lenders do different campaigns. I think there's definitely been a move-up market there, just kind of been a squeezing in the subprime market, you know, trying to manage risk a little bit. But it's still a good entry point for a lot of customers into banks, and banks are in business to lend, so they're, you know, trying to move to areas that are still profitable for them but probably hold a little bit more risk. So, you know, from that, that's kind of how we see the credit markets. On the software side, we're just seeing really good demand for our products.
And a lot of what we offer is, you know, you hear banks talk a lot about digital transformation, and they have since, you know, for several years now. But I think our platform business really was propelled by the pandemic. You know, banks, they were seeing their customers in person less frequently, so people don't go to the branch offices as much anymore. So the banks are forced to interact digitally, be that through an app or through text messages or emails or, you know, sometimes voicemails. So they have ways to do that, but they have to have the decisioning behind that to determine what to put in those messages, and that's what we provide. So we're...
You know, we have, we have the ability with this platform to take in a lot of different datasets, apply analytics on top of that, and figure out the best ways to, to do things that used to be done in person.
That, that's very helpful color. And if you don't mind, I want to spend one more minute on the macro, particularly talk about marketing. And I was just wondering, from a credit marketing perspective, what trends have you seen in the last quarter, and any kind of changes there as we-
Well-
-last month?
Yeah. So I mean, we have visibility to one subset of marketing, right? So we have visibility to the Pre-scores that are pulled before a mailer is sent out. So if you go back, you know, 15... I mean, I used to work for a credit card issuer, and that was how we did marketing back then. I mean, most of what we did was send out mailers to people. And that's what marketing was back then. You'd do some events, but you didn't have the kind of internet marketing you can do. Now, I mean, a lot of it's done differently. It's done through internet markets. We don't have any visibility to that, so we see the scores that are pulled before mailers are sent out, and there can be quite a bit of volatility in that.
I mean, a year ago, it was pretty high. Today, it's down from where it was a year ago, and it's, you know, relatively flat, that we're seeing maybe, you know, down a little bit, but that can, you know, that can bounce around, again, based off of, you know, a large issue or doing a big campaign. So we're not seeing as much of that type of market as we've seen in the past, but it's not like it's fallen off a cliff either.
Yeah. No, that, that's very helpful color. Maybe just switching gears a bit and focusing on the special pricing, we saw some pretty significant tailwinds for the mortgage origination revenues for FICO, and over the last several years, you've had special pricing. How should we think about any preliminary color on how should we think about the special pricing for next year?
Yeah, I mean, first of all, we talk less about special pricing because, you know, we have one price for the different scores, and it's kind of confusing with how much is special versus CPI. And, you know, a lot of these prices hadn't been touched for decades.
Yeah.
So we're kind of trying to bring them up to what we think is, you know, kind of a market level.
Yeah.
So, you know, we do that every year. We don't talk a lot publicly about pricing because, you know, it's a sensitive subject, obviously.
Yeah.
You know, we kind of have those conversations with our customers, you know, one-to-one instead of in public.
Yes.
But, you know, we do think in a lot of cases, the value we provide is well beyond what we charge.
Mm-hmm.
And because we, you know, the charging, you know, the prices we put in place in the, in the eighties, in some cases, so a lot of... You know, the world's changed a lot since then. So, so, you know, we, we do look at every year the different markets and the different scores that we sell, and we try to think about, you know, if it's bundled in with other products, what, you know, how much of the bundle are, is- are we getting in, in value versus what are others getting, and what, do we think that's right? So we just, you know, try to do market checks and try to understand, again, what, you know, kind of value we're deriving versus what we charge for them.
... That, that's very helpful color. As you pointed out, the, like, FICO Score is such a small cost compared to the cost of originating a mortgage loan, and particularly when you think of the value at risk.
Right
compared to that, what you're charging is such a small amount. As we think about, is this kind of, not special, but again, as we try to think about pricing for value, is that an opportunity as we think about just in 2024, or is this, like, a multi-year opportunity?
Yeah, I mean, I think it's multi-year. I mean, I think there's a lot of areas where we're charging less than the value, I think. Yeah, and to some degree, those goalposts keep moving out.
Yeah.
You know, I mean, the world's moving on, and there's a lot of different things that are, you know, evolving, and there's, you know, everything's going up in price. So, you know, it's again, it's something we think about kind of over a multi-year term, but that we look at it really hard every year.
That's great. That's great color. And then one question that we get a lot from investors is around FHFA and their decision to move to, from Tri-Merge to Bi-Merge. That seems to have been pushed out. And so I was wondering, do you have any more clarity on -
On the timing?
Yeah.
I don't know. I think it's a difficult change to make.
Yes.
You know, and I think they announced this, you know, their intentions about a year ago.
Yeah.
I think there was a lot of pushback from different players in the industry.
Mm-hmm.
In terms of what does this mean, how is it actually gonna be implemented? It's a difficult thing to do.
Yes.
I mean, it's a very core piece of, you know, the financial component to, you know, North... in the U.S. with the, you know, the conforming mortgages. So it's not an easy thing to do. They have a lot of different players in it that have a lot of different opinions, and, you know, they wanna know what the benefit is from the cost associated with it and what potential risks they might be, you know, taking on. So I think it's just that it's something that has to be done at a pace to make sure everything's done right-
Yeah
... because there's obviously, it's a, you know, big dollars involved, you know, backed by the federal government. So we just need to make sure that, you know, it's done in a timely, but not rushed fashion, and that, you know, that all the things were thought through.
That's very helpful color. And would you say that maybe FICO is also agnostic to it because you-
Yeah, I mean, you know, I think moving from the tri-bureau to the two bureaus, it doesn't directly impact us.
Yes.
Obviously, you know, I mean, we want stability in the system.
Yeah.
We don't want potential risk put into the system. We don't want uncertainty put into the system, and, you know, how would this actually work? I mean, do you have to take two, or could you take three? Can you take three and then choose the best two? There's a lot of these things that need to be thought through-
Yeah
... in terms of how it's actually gonna work and how, you know, how the different players are gonna operate in the system.
That's very helpful color. And then, just moving on to the B2C front, we've seen pretty good stability there.
Mm.
How should we think about the B2C business going forward?
Yeah, I mean, so there's two pieces of that. We have partners, we have, you know, a number of partners. Experian's our biggest partner. They're very, very good consumer marketers-
Yes
... so they're good at pivoting to whatever, you know, kind of what the markets look like. We've had a lot of success with them and their Boost product, so you see a lot of commercials for that. You know, you've seen Travis Kelce lately on those commercials. So there's a lot of that. You know, they're really good at what they do, and that business has been really stable through, you know, different types of consumer behavior. The other side of that business is our myFICO.com business.
Mm.
When the pandemic came, we saw some rapid growth in that. As people were at home, they're thinking through their finances, they're all looking to refinance, and they're like, "Well, if I spend some time on, you know, myFICO and buy that for a while, I can kind of see how, you know, how banks are looking at me and maybe manage my way through this and get the best possible deal." So we saw a rapid uptick in the growth in myFICO. You know, that leveled off. It came down a little bit. You know, we're down from where the highs were, but we're still at a, you know, pretty high level above where we were pre-pandemic.
Mm-hmm.
So we don't really have, you know, the refi boom, that's kind of, you know, with the tailwind there. So we get a little bit of headwind there, but we've lapped our... You know, this last quarter was the last difficult comp we had, so that's been running pretty stable for this last year. So heading into next year, we'll see. We don't do a lot of marketing on the myFICO business. I mean, you guys here probably never seen a myFICO. Well, you've never seen a commercial on TV unless you saw the Super Bowl 15 years ago, and we were only around once. Otherwise, you probably rarely see, you know, digital marketing. Every now and then you'll see.
So there might be some things we can do there to, you know, to kind of capitalize on the brand a little bit.
Yeah.
But we're really not consumer marketers, so we're not gonna step into that in a big way.
Okay. No, that's helpful. And then, as you think about your pipeline and new win opportunities across the board, particularly I'm talking about the scores front-
Mm-hmm
... how do you see that going forward?
Yeah, I mean, the pipeline, we do a lot of innovation that we don't necessarily talk about a lot.
Yes
... because a lot of it's long term.
Yeah.
You know, we had a couple of years ago we came out with the FICO Resilience Index that it's a tag-along to the Account Management Score.
Yeah.
What it does is it shows how different consumers would fare during a downturn.
Mm-hmm.
So you might have two people that are 680s, but because of the makeup of their, what's involved in that 680, some are gonna be more resilient in a downturn because maybe they have a little less debt, and they're gonna be less impacted. So it's an additional thing we can tack on to what we already sell to the banks to give them a little more visibility. So we have things like that that we don't necessarily have near-term revenue benefits from-
Yeah
... but it kind of, you know, as part of the package, it gives us a little more ability to raise price for the overall package. We're still working on UltraFICO.
Yeah.
We have that in testing in a lot of areas. It's kind of like Boost, but it's a little different, has a little more information available. There's a lot of things we're doing, you know, potentially we don't talk about a lot, that kind of are still in labs, that look out a little bit farther in terms of, you know, we're always. We have, you know, a fairly large team that always is working on innovation.
That's great. Then on the call, it was also mentioned there was a bank or a lender that adopted FICO 10T for mortgages.
Right, yeah.
I was just wondering if you can talk about that adoption.
Yeah, and that's for non-conforming mortgages, so they can't use them in conforming mortgages yet.
Yeah.
But it's, you know, the 10T is a lot more predictive and, you know, it's got trending data in it. So there's a lot of additional lift from that, and they're seeing the benefit of that, so they're, they're committing to, to using that already today.
... That's great. Again, if there are any questions, please raise your hands. We will switch gear to the software side of the business.
Yes.
As you mentioned, very strong demand for your platform business. The platform ARR was up 53%, and this is on top of 50%+ growth last year as well, so very strong momentum in the business. Can you just talk about what's driving that momentum?
Yeah, again, it's back to the same... Where we have the right product or the right platform at the right time, I think, for banks. I mean, they're all looking to, you know, you hear they kind of become buzzwords, but digital transformation and the 360 view of the consumer, it's really important today, right? I mean, banks, you know, used to be they were all siloed, and if you... You'd go into the office, and if you wanted a car loan, you walk down that hall and talk to Jerry. And you know, if you talk to Lisa, if you want a credit card. It was all very siloed. And the different parts of the bank would not talk to each other. They... You know, you were a customer of the different pieces.
More and more, they're stepping back, and they're taking a holistic view of the consumer, and they realize that if we really wanna optimize our relationship with the consumer, we have to optimize every interaction we have, and more of those interactions are digital. We know so much about the consumer based on all the data we have. We'll know, in some cases, we'll know what they want before they know what they want, right? We see their DDA accounts. We realize that, you know, they got a raise this year. Well, by the way, they paid off their car loan two years ago, so maybe they're interested in a new car.
So rather than wait for them to come to us, we'll take all this information and the analytics we put on top of this, and we'll make them an offer specific to that.
Mm-hmm.
You know, historically, they've sent an email to everybody saying, "Hey, we have rates as low as whatever." And then people go in and be disappointed because my rate's 2% higher than that.
Yeah.
So now it's a specialized, more of a one-to-one message they can send to that consumer, telling them exactly, you know, what kind of offer they have. And again, consumers appreciate good offers-
Yeah
... not just like, you know, mass emails coming in. So they have to get better at that, and that's what they're doing. And our platform allows that. It's a way to ingest all the different types of data they have and then apply analytics on top of that and try different, you know, marketing tactics, you know, champion-challenger scenarios, and figure out the best way to proceed, and then, you know, right, figure out how to push out offers or whatever you're doing to do. And it can be used for a lot of different things. Offers are just one such kind of metric.
That's great. And AI machine learning comes up a lot in the conversations these days, and particularly GenAI.
Yeah.
Can you talk about how those trends are a tailwind for your platform?
Well, we've been a big user of AI machine learning going back to the 1990s. You know, I mean, Falcon Fraud Manager was probably one of the first products, software products to actually have, you know, AI embedded in it.
Great.
So a lot of what we use AI for historically has been fraud detection.
Mm-hmm.
It really works well because you're looking at, in some cases, billions of transactions and identifying trends and then building that, you know, models that learn from that. So you're in real time, you're constantly updating things. That's been one of the areas we've used it a lot. You know, more and more, what we've worked on recently is something we call explainable AI. We have a lot of patents around that because we're operating in very heavily regulated industries.
Yeah.
Right? Or our customers are-
Yes
... that have to justify to regulators what they're doing and changes they're making.
Yeah.
If you have a black box, you can't really explain that to anybody.
Yeah.
Right? So, you know, if you're making decisions based on, you know, an AI model that keeps changing, unless you have a paper trail behind that and you can understand all the things that have been done to that, it's difficult to satisfy regulators.
Yes.
You know, like with originating credit, for instance, is really difficult to do with AI.
Yeah
... because the regulators, it's highly regulated in terms of what you can and can't use.
Mm-hmm.
You have to be able to explain why you gave someone a loan or didn't give them a loan.
Yes
... and what the risk involved in that is. So anybody that talks about, you know, using AI to originate credit, it's really difficult to do because you're gonna follow regulators pretty quickly. Because you end up with things that, you know, that correlate to protected classes that you can't include, and then you end up not being able to explain to somebody why you turned them down, which obviously is not allowed.
That's, that's helpful color. And then, as you mentioned, like the platform really gives banks an opportunity to get a 360-degree view of the customers. I was just wondering, how have you seen the adoption? Because the DBNRR have been really strong at the existing customers-
Right
... so.
Okay. So really, the strategy is to drive down the installation cost as much as possible-
Yeah
... to get them, you know, get it installed, get the plumbing hooked up, so the data flows are all working, even for a small use case.
Sure.
Because once they use that, it's pretty easy to get them to ramp it up.
Yeah.
Because they, you know, the ROI is really high. You know, the payback on some of this is as soon as a year of installing it, and then you start to see some really, you know, significant economic benefits. And then you get evangelists within the bank that are, you know, telling others: "This is what we're using. This is the tool we're using. These are different ways you can use it," because the data's already there. So it's been an effective way for us. You know, get it installed, and then, you know, once people start using it, they find other ways on their own to use it. You know, we have customer success teams-
Yeah
... that will come in and help.
Yeah.
You know, say, "This is what others are doing." But in a lot of cases, there are, you know, every bank's different.
Yes.
They have a lot of things that we haven't even thought about, different ways to use it, and that's been really successful for us as well.
Yeah, no, it definitely seems like a great land and expand strategy. Even the non-platform business, which historically-
... There's a little bit of CPI in there, more than historically, 'cause CPI is a little bit higher.
Yeah.
I mean, there's also, like, a secular trend, again, with more digital interaction. You know, and so, you know, on the products like our CCS products, some of that's new and on the platform, but a lot of it is old and off platform. And there's just a lot more of the, you know, banks communicating digitally, so the usage drives up. We also have our Falcon Fraud Manager, and there's another big product. And, you know, that kind of just grows with the install base. So as there's more cards out there, there's just a natural uptick in that. But, I mean, overall, yeah, I mean, the, the trends towards digital interaction has really benefited our business.
That's great. Falcon obviously is the market leader in the space, so.
Right. Right.
Is there also an opportunity for you to migrate some of these non-platform software onto the platform-
Yeah
... and open up even more?
That's a great question. I mean, so, yes-
Well-
... but it takes time, and banks are slow to move.
Yeah.
Banks love the platform, but they also love using Falcon, 'cause it runs really well. It's stable, you know, and it runs billions of transactions 24/7. You know, you can't just take it down for the weekend to migrate, so it's difficult. But the longer-term strategy there is just to offer more functionality on the platform, and over time, we'll see that move. But, you know, things like Falcon, it's this workhorse that's been in place in some kinds, you know, for 30 years, and it works really, really well. And it's profitable for us, and it works well for the customer, so we're not, you know, we're not gonna shut them off and tell them to move.
No, that's great. And from a platform, we talked a lot about how this platform is being used by lenders or banks in general, but seems like there's a huge opportunity outside the core-
Yeah
... traditional FI. I think you already have customers in insurance and telco, but I was just wondering, how do you plan to expand into other, other-
Yeah
... end markets?
That's a really good question. So essentially, it's a platform that we could easily expand horizontally. Easily, maybe-
Yeah
... if nothing's easy, I guess, because we don't really have a lot of domain expertise outside of financial services.
That's it.
Most of the areas we're selling into directly-
Yes
... you know, with our own sales force, is things that are, you know, closely, closely aligned to financial. I mean, even telecom companies, if you go into a, you know, telecom provider, you go in there and you want a new phone and a plan, it looks a lot like a credit card transaction, right?
Yeah.
Because it's... you're getting a device that they're giving you. You're putting it on a plan that you're gonna have to pay for monthly. So the originations process, walking you through what should the pricing be, how does all this work, is a lot like, you know, a financial transaction. So from that point of view, we have, you know, we work with a large telecom provider, where we have, like, a point-of-sale that's on an iPad, essentially.
Yeah
... and walks the customer through it. And again, the strategy can be pushed out from somebody centrally, and it can be changed every day if they want to. And you know, the people working in the store don't need to know all the inner workings of this, 'cause it's all run off an iPad. So there are things like that we can do more broadly. If you're... Really, the idea of the platform is, you take all the data-
Yeah
... on the consumer, and you try to optimize every interaction you have with that consumer-
Yeah
... so that it's satisfactory for the consumer and for you. And, you know, you wanna know what the consumer wants, so you're not just, you know... there's not just a deluge of worthless offers. But you also want an offer that if they accept it, it's good for you.
Yeah.
So it's matching that up-
Yeah
... and understanding that on a one-to-one basis. Because historically, it's all been, you know, crude segmentation.
Yes.
You fall into five different categories. You were a soccer mom or young professional, whatever they were.
Yeah.
Now, it's much more a one-to-one. It's like, we know so much about you, we will optimize every interaction.
Of course.
So that's big in financial services, obviously, but there's a lot of other areas that are trying to do the same thing.
Yes.
You know, financial services was the easiest because they're used to making decisions that way. They have a lot of the systems in place, and we have a lot of relationships there.
Mm-hmm.
But as we move outside of there, it's harder. So the longer term plan we have is to work with, you know, systems integrators that already have these relationships and are looking for more IP to build practices around. So, you know, we're making some investments this year to kind of make it easier for those SIs to build practices around it.
Yeah.
We're, you know, we're developing software developer kits and different APIs to do that. I mean, most of our focus has been on, you know, internally on how we would help implement, but if we can... you know, we can only scale that so much.
Yeah.
If we can extend it to have others implement and build on top of it, that'd be a great thing for us to kind of build out a marketplace.
That sounds great because it essentially helps you tap into their, as you said, their relationship-
Right
...
Right
... their network. And so it makes it easier for you to scale faster.
Right, exactly. That's, that's exactly, that's what we're trying to do.
That's great. Do you already work with SIs, or is that-
A little bit.
Yeah.
But I mean, again, the way the platform's built today, we still have to have a lot of involvement.
Mm-hmm.
So we're trying to build more, you know, more functionality into it, so we don't have to be involved at all.
Yeah.
So ideally, we turn it over to the SI and say, "Here you go.
Yeah.
You can implement it. You build on top of this. You work with your clients, and we'll just run the infrastructure underneath." We're not at that point yet, but we're getting close to that.
That, that's helpful. And then, you've been de-emphasizing, or FICO has been de-emphasizing professional services. Is that also part of, like-?
It's part of that same strategy, right? So I mean, as we build, you know, build something that's easier to implement, we don't need to be as involved. Even if we fully implement it, it doesn't require as much implementation as it used to.
Sure.
And then, if we can get others involved, we don't have to have... You know, it's hard to ramp up the professional services piece, and it's low margin. So we don't. We kind of want to emphasize the IP piece and make it as easy as to implement as possible.
Yeah, yeah. And then you, you mentioned some investments there in order to build those SDKs and open APIs. How should we think about those investments? I think there was a reference to software investments-
Yeah
... for next year.
They're relatively modest-
Yeah
... honestly. I mean, from a you know, overall point of view, you might see a couple points of you know, of expansion and costs. I mean, excuse me, in some cases, we'd like to go out and hire-
Yeah
... 500 salespeople, but then you just can't.
Yeah.
... but, you know, we're always looking to, you know, to figure out how do we scale the business? And sometimes, you know, you have to put some cost into it on the front end of that, but again, they're relatively modest. So it's things like the SDKs and APIs to kind of make it so that we can scale the business. In some cases, it's retiring a little technical debt to make sure that the business will scale properly.
Yes.
But it's only because we think, you know, the growth trajectory is so high, we need to build on those efficiencies today so that we'll enjoy the results of that in 2025 and 2026.
No, that's great. And just given how big the opportunity is, it makes sense to... And the, the momentum that you're-
Right
... seeing in the business, it's helpful. And maybe just another way to ask question is, given how strong the top-line momentum is, even with the slight cost uplift, can we continue to see pretty robust mar- we saw very good robust margin expansion-
Yeah
... in the software business this year.
Oh-
Does your guidance for fiscal 2024 also-
Yeah, I mean, our guidance is probably pretty conservative in terms of margin expansion. We'll probably, you know, we'd like to think we can beat that.
Yes.
We don't really have near-term targets for margin. I mean, we were so focused on the top-line growth-
Yes
... and more of the medium to long-term margins. We don't wanna do anything today that, you know, we don't wanna—you know, if, if we fail to invest in a couple of these small investments today-
Yes
... we could pay a big price later on in margin expansion.
Yes.
Putting a little bit in it today when it's still small enough-
Yeah
... you can, you know, to build out all the multi-tenancy, to, to make sure that-
Yeah
... you can actually scale this, it's worth doing.
Absolutely.
'Cause it has minimal impact today on the margins, but it has a huge impact going forward.
That's, that's helpful. Maybe just switching gear, talking about capital allocation. You obviously generate a lot of good free cash flow, great allocators of capital, bought back a lot of stock when the stock had pulled back. So how should we think about free cash flow, use of free cash flow going forward?
Yeah, I mean, it's probably the same. You know, we have predictable free cash flow.
Yes.
It's, you know, the... We have a little bit higher accounts receivable now because some of the, you know, some of the mechanisms about how quickly our revenue came up. But yeah, we have good throughput on that. We have, you know... We've always had good free cash flow. It's very predictable, and we generate cash that we really don't have use for. We don't do much M&A. We have, you know, we do some tuck-ins, small tuck-ins occasionally, but it looks more like a software buy than a company buy.
Yes.
you know, we have the choice to either pay down debt. We have some variable debt that we could pay down. About 30% of our debt today is variable that we could pay down, or we could buy shares back. We're really bullish on the future of the company.
Yeah.
So we, you know, we have a longer time horizon.
Yes.
So we look out, you know, over the next several years, and we think that if we can take shares out today, that we won't regret it. So, you know, we do that fairly systematically.
Mm-hmm.
Then, when there's a pullback, a lot of times, if there's a broad market pullback or if it's something specific to us, then we'll go in heavily and take out a lot more shares. So we can be a little bit opportunistic, but we're more systematic because-
Mm
... you can wait a long time for the right opportunity.
Yeah.
So, you know, if we had been opportunistic, we wouldn't have bought many shares back in the last 10 years.
Yeah. Yeah. No, absolutely. And just to clarify, your guidance doesn't include any of the capital allocation decisions-
No
... or of the debt paydown-
Yeah
... or buyback?
Yeah.
That is included.
Because there's too many assumptions-
That's all upside.
... you have to make with the, you know. There's too many different things, so we try to simplify it as much as possible, and that's upside.
Sure, sure. Maybe if I can go back to the special pricing, 'cause that's been very, like, on the top of investor minds. One of the questions that we get is, like, particularly for mortgage last year, there were three different... Based on the news articles-
Right
... there were three different tiers. Does those tiers make sense, or is there, like, potential for everyone to have the same pricing?
Yeah, I mean, you know, every year we look at it and determine what makes sense going forward. So we, we put a pricing tier in mortgage last year for the first time. You know, that's not to say that we will always have a pricing tier in place. I think, you know, it might make sense to have, you know, collapse those or, you know... There's, there's a lot of different things we could look at in terms of that, and we'll probably be talking about that more in the future as, you know, it actually gets implemented.
Okay, that, that's helpful color. And, two questions that we're asking all the companies. First one is: What is the biggest decision you think the management team will have to make over the next three years?
I think it's all about resource allocation, right? I mean, we have to determine how much to... There's a lot of opportunities, but you have to focus.
Yes.
If you try to do too many things, put too many bets around the table, you know, you have to be focused on what the strategy really is, and I think we've been really good at that.
Yeah.
I mean, I think we've run the two sides of the business really well. But, you know, from the software side, we need to make sure that we maintain that focus and don't get distracted. Honestly, that's one of the reasons we don't do a lot of M&A. It's easy to see something that, you know, the kind of the shiny object that you chase after for a while, and that kind of distracts you from your focus, and I think we're really good at being focused. That's always, you know, the continued focus on that and, you know, the resource allocation around that, and then the execution.
Yeah. No, obviously, and then you've had such a strong track record, both on-platform and non-platform ARR. And maybe the last question in closing: What is one thing that you're most excited about, about the future of the company?
I think the software business is. It's an amazing opportunity, and I think if, you know, four or five years ago, people thought, "You're crazy. Banks are never gonna move to the cloud. They're gonna wanna keep all their data in-house." And we kind of, you know... Will Lansing, our CEO, was adamant that we had to have a cloud strategy, and I think we're now starting to see it pay off, and we're way ahead of really anybody else.
That's great. Again, thank you, Steve. Thanks a lot. Thank you, everyone, for joining.
Thank you.