Good afternoon, everybody. Thank you for being here. We're happy to continue our session here with FICO. We have CEO William J. Lansing and CFO Steven Weber. Thank you both for being here.
Thank you.
Well, maybe I guess let's take a step back. I think there are some newer investors in the space now. Obviously, your stock has been under some pressure for a while. Maybe, kind of a From your perspective, what is the FICO pitch today from your perspective? Because you guys keep obviously buying back shares every opportunity you get.
Yeah. Well, I guess just on that point, we're kind of a slow-moving LBO. We have been buying back our stock for a very long time. We started at 74 million shares, when I joined the board, we were at 36 million shares. When I became CEO in 2012, we were at 30 million shares. Today, we're at 23 million shares. What we do is we take our cashflow and we buy back stock and lever up, our cashflow grows, then we buy back some more stock and lever up a little bit more and trying to keep the leverage up in kind of a two to three times range. That's the capital side of the equation.
The business has just gotten stronger and stronger and stronger for, well, certainly for the last 14 years. We see a pretty bright future. We're a little surprised at where the stock price is, frankly. You know, we're kinda trading at multiples that surprise us. Maybe it's just worth going back in time and giving you a little bit of the FICO story.
Sure
So you kinda have a level set on where we are. I guess before I do that, I'd remind you, take a look at the charts. You know, we had well over a decade of kinda rocketing to top decile performance on TSR. In the last 15 months, we've been pretty beat up, mostly because of fear about some political things going on in Washington and our mortgage business. I'm sure we'll spend more time on that.
Yeah.
But again, you know, by way of context, just maybe a few minutes on FICO history and how we got here. Well, actually, just a show of hands, how many of you guys know the story, the FICO story? You guys, you guys know nothing about us. Okay. That's fine. It's a good place to start. The company was founded in 1956 by a mathematician and an engineer, the idea was let's apply analytics to data and make better decisions. For 30 or 40 years, that was the business. It was a consulting business, a body business of doing that. We built scorecards, proprietary scorecards for banks because banks had big money decisions. It was worth taking the time to invest in a better decision. That went on.
In the 1970s, we got this idea that maybe we should try to build a software business too because if we have software, if we embody the analytics and software, we'll be able to get returns to scale, make money while we sleep. We won't just be a body business. We started a software business. We took the half dozen questions that banks asked us most frequently, and we built applications around them. Originations, should we or should we not make this loan? Customer management, line management, should we increase this person's credit card line? Should we decrease it? If we increase it, should we decrease something else, some other risk somewhere else? Fraud, fraud detection, collections and recovery.
These were the big areas where we had applications, and we built a really substantial software business in the through the '80s, '90s, 2000, and on around these franchises. I took over in 2012, and we made some changes. On the software side, we went to a cloud model from an on-premise model. We also put a lot of energy into building out the technology stack so that we're not just an applications business anymore. We are a decisioning platform. We're a true platform. It took a lot of years to achieve that success, but that's kinda where we are now. We'll spend more time on it if we have time at the end.
On the score side, in 1987, we decided instead of building proprietary scorecards for each bank, what we would do is build a generic scorecard that could be used by any bank. They just show up. They don't have to give us any special parameters. We did that in partnership with Equifax, and it was wildly successful. You know, we kind of made this thing that made it super easy for lenders to evaluate credit, low cost evaluation of credit. This is also, you know, in response to the Fair Lending Laws that want you to demonstrate that there's no discrimination in the way you do your underwriting and scores are completely clean and science-based. We had this idea that we should build the same kind of a score with the other bureaus. In the U.S., there are three bureaus.
Equifax, Experian, and TransUnion are the big three. We went and built scores with Experian and with TransUnion as well as with Equifax. What we did was we aligned the odds to score ratio across all three bureaus the same. What that did was effectively say a FICO Score is a FICO Score regardless of where you get your data, regardless of which bureau you use. You can imagine how popular that was with the lenders. I mean, it commoditized the data at some level, and it gave them a lot of leverage versus the data providers because they could easily switch from one bureau to another. Pretty popular. That went on and, you know, we had the lenders liking it. Regulators got into it.
They thought that it was pretty useful for them because they could measure the risk of the banks that they're regulating. What's the average FICO Score of the portfolio? How will it behave in a downturn? Then the securitization market evolved, and they needed a metric for pricing the risk, and the most obvious one was FICO. Pretty much all your asset-backed securities, your mortgage-backed securities all come with an average weighted FICO Score so that people actually know what the paper's worth. Now you've got lenders, you've got regulators, you've got the investors and the securities market, finally we got consumers on board. We give them their score for free, there's a lot of demand pull for FICO Scores.
That's the, that's how scores got to be the industry standard that they are and kind of positioned us where we are. Another wrinkle, starting in about a decade ago, we started raising prices for scores. Why did we do that? Well, for 30 years we didn't raise prices for scores because our pricing was hardwired into our contracts with the bureaus. We distribute our scores through the bureaus, the prices were all fixed, and we never changed them. You should just talk to my predecessors about why. I decided we should have the flexibility to change our pricing, 30 years is too long to go without a price increase, we started changing our prices about a decade ago.
Every year we're in the business of trying to capture some of the value that's been left behind. I mean, that's really the story of FICO is we have a mountain of IP that has been undermanaged and undermonetized for decades, and we're in the process of figuring out how do you monetize that with the least amount of disruption to markets, with a, in a steady and continuous way march up the value, march up the monetization of the value. That's what we've been doing. In mortgage in particular, we've raised prices. If you read the, you know, the bad press, they focus on the % increases that we've raised prices, and it's true. We've raised prices from $0.05 years ago to $10 today.
Remember, that's $10 out of $6,000 of closing costs, so it's still kind of a trivial number in the scheme of things. What's happened is it turned into a headline. Our mortgage price increases turned into a headline for the populists in Washington, in particular for the Director of the FHFA, who's very pro-competition, very focused on how do I, you know, make housing more affordable in the U.S. One of the things he's looking at is closing costs. Among other things, you know, he's questioned our pricing. I think that we've actually responded by coming out with some new pricing models, some innovation that, I think he likes, where, you know, we have an option to buy mortgage scores from FICO for $0.99.
That's a big step in the direction that I think he was looking for. I would say the noise in our stock is almost entirely tied to that. There might be a little bit of spillover from the AI software scare, but I think that's pretty minor. We never got much credit for software before, so I don't know how much we should get bashed for it now. We are very happy with the software business. Grew 49% last quarter in the, you know, in our new platform, so strong business. Anyway, that's the background.
All right. Helpful. We'll get into some of the noise, but maybe Steve, you can help here. Like, with that history, with the current context around, you know, pricing and mortgage and so forth, is there a long-term algorithm, financial algorithm that the audience should keep in mind, whether revenue, EPS?
I mean, we don't, we don't have any, you know, issued numbers. If you look at our past, you can kind of see that we've been pretty consistent. We, we do target internally. We want to, you know, maintain the same pace that we've done in the past. You know, we try to get in, you know, at least into the teens of revenue growth, which could drive us into the 20+% with, you know, margin expansion in the net income, and then a lot of times that can be above 30% with EPS with the buyback. Just rough justice, that's how we've been looking at it. That's, you know, as we make plans for the coming year, that's what we try to target going forward.
Got it. Okay, well, let's jump into the mortgage market and the political noise you were referring to.
Okay.
You know, we just had MSCI before you. We had S&P in the morning. You know, those indices, there's a lot of competition, but once you're the benchmark, you're the benchmark. The way you described it, FICO is the benchmark. Obviously, Director Pulte has implemented a lender's choice, allowed or in the process of allowing VantageScore to come in. You know, from your perspective, how do you see the potential shifts in the market if and when they are approved?
Well, we'll see if Vantage gets any share at all. I mean, we've been competing with Vantage for over 20 years in every other market outside mortgage, and they have no share. They push a lot of scores, and the way they do that is by sending them along for free. If a lender asks the bureau for a credit file and a FICO Score, they'll often get the VantageScore sent along for free, and that's where the big numbers come from. I'm not exactly sure that should be considered market share because nobody asked for it and nobody paid for it. In mortgage, remains to be seen whether having an option for a VantageScore gets you anywhere. I would say that the value proposition is still pretty thin.
Why would someone buy a VantageScore? If, if they're buying it because they're interested in credit default risk and predictiveness, and certainly the entire non-conforming market cares about credit default risk, and I would say that the conforming market also cares about credit default risk because it comes back to haunt them. If, if the loans go bad, you know, a lot of those loans are put back by the GSEs to the originator. They also care about credit default risk. If that's what you care about, FICO 10T is 8% more predictive than Vantage 4, and FICO 10T qualifies 5% more borrowers than Vantage 4. Predictiveness is not gonna get you there from a value proposition standpoint.
You say, "Well, what about on price?" You know, maybe somebody cares about price, and even though we're talking about a very small price in the scheme of things, is there someone who cares? On that, I'd say our new pricing model at $0.99 meets VantageScore pricing at $0.99. I don't think there's a reason to move for price. That leaves you with one and only one reason to buy a VantageScore, and that's if you're trying to game the GSEs. That's real. That's not, you know, that's not hypothetical. I mean, if anytime you have a two-score system, one score's always better than the other. When you typically, you would give a better price to the better score. If Fannie and Freddie are constantly being presented with the better of two scores, they're being gamed.
Frankly, what'll occur in the long run, if anybody does this gaming, what occurs in the long run is that the non-conforming market, the lenders in the non-conforming market will skim off the best credits out of the conforming market and leave the Government-Sponsored Enterprises with the inferior credits, which will cost Fannie Mae and Freddie Mac quite a lot. That is the likely outcome of gaming. I would caution you, just by saying that the addressable market for gaming is fairly limited. It's under 10%. You know, if you look at the rules that came out last week, which are you need less than 80% loan to value, meaning you have to put down 20%, or you can't get the mortgage.
For Vantage, you need 80 less than 80% loan to value, and you need, there's not actually a separate Vantage LLPA grid. That's the pricing grid. There's not a separate one for Vantage. What they did was they said, "Take a VantageScore, subtract 20 points, and jam it into a FICO LLPA grid," which is suspect science, but anyway, that's what they've done. If you work through all the math on it, and I'll spare you guys the math today, it takes you to about a 9% addressable market.
I guess just to be clear, that even the gaming, in order to game, don't you just have to pull both scores all the time?
Well, yeah.
potential share loss?
Great point. There's no volume loss. If you have to pull both scores in order to compare them to do the gaming, our volume doesn't go down. You're still pulling a FICO score. The overall market of scores volume went up a little bit. Yeah, technically we could have share loss, but no volume loss. That's theoretically possible.
Got it. You know, the $0.99, yes, you've matched kind of the upfront pull fee, but in the, in the performance model, you do have the $65 closing fee per report. How do you think the lenders, originators market will address that when they're trying to compare whether they want to save money or not?
Well, you know, that's money that's paid by the consumer. Ultimately, of course, consumers pay for everything. We know that. It's really about kind of what bucket you put it in. You know, the industry has always tried to push cost to the closing statement and out of their own P&Ls. That's why we have RESPA laws. The RESPA laws are designed to keep that from happening, really, to ensure that the only costs that go into a closing are appropriate costs that have something to do with the closing. To that extent, what we've done is matched them perfectly. There's nothing that's closer to what the closing's all about than you got your mortgage, successful funding fee. You know, I think that we're actually helping the lenders with this.
In terms of their true cost to themselves, it's identical whether they're paying $0.99 to Vantage or $0.99 to FICO.
Got it. In order to get that $0.99 to FICO, they have to go through the direct, the DLP model.
That's correct.
through you guys.
That's right.
It seems like it's been a case of gonna be ready in the next month for a few months now.
What's the latest on when the DLP will be out there?
It's gonna be ready next month. Well, I mean, it shouldn't take that much longer. We're waiting on certification from the GSEs. They're supportive. The Director's supportive. It's a matter of time.
Okay. In all that you described on the lenders want 10T, you know, $0.99 takes care of the cost, once DLP is live, how fast and how much adoption should we be, you know, looking out for?
Well, no one really knows, but I think that there's a lot of demand for the performance model, which will only be available through the tri-merge resellers, through the DLP model. The tri-merge resellers have the, by far, the lion's share of the market. Almost all the scores are purchased ultimately through the tri-merge resellers. It could easily be half. It could get to half, certainly within a year.
Got it. I think it's probably worth spending a little bit of time on the 10T independent study that was put out recently because I think VantageScore obviously claims to be better than the Classic FICO, which might make sense because it was developed so many years later. Can you just talk about this was a second iteration of the independent study, I believe. what changed and what are some of the stats again, and why 10T is much better than the other?
I would encourage people to go to the FICO website and read our white paper on it, and you can go to Milliman, which is the independent third party that did the analysis, and read theirs. It's quite technical. They've done a scientifically rigorous assessment of 10T versus VantageScore 4, and we are better on predictiveness. They actually go through the gaming issues with the two-score system and identify the costs around that. I mean, it's worth a read, but it's quite technical. There's probably other things you'll read before you read that. Take my word for it, FICO 10T is better than VantageScore 4.
Okay. You know, the FHFA had a press conference recently, actually two questions. The first one is, I think the Director Pulte had mentioned that he had a conversation with you around this $0.99 pricing model. He had also mentioned a few times, you know, it sounds too good to be true, so I'm gonna make sure there's nothing in there. I guess I just wanna confirm, he knows of the performance model.
Absolutely
The closing, the 65, that's not gonna be new to him, correct?
No, no, no. He's smart guy, and he's completely aware of the structure, and I think he supports it.
Okay. The other main thing for that conference is obviously the pilot. I guess they've selected 21 lenders to try and test out VantageScore. It's a little bit of a black box, gray box, whatever, for a lot of us. Anything your mortgage team and Julie may have shed any insights you can share with us?
Yes. There's not a lot to know there. I mean, all those lenders, whoever they are under NDA, and can't talk about it, and can't disclose, and so very little is known. We know some of the rules around accepting a VantageScore, the 20 points and the 80%.
Okay
loan-to-value. But other than that, I can't tell you much.
Okay.
I, you know, I don't know. I think it's a manual process. Not sure.
Okay. Maybe the other thing you might be able to tell us about is the 10T data has not yet been released. They said in the coming months, quote, unquote, "summer." You know, what is the holdback for when that gets released? Once that gets released, do these 21 lenders have to go back and test that as well?
Don't know the answer to that. I know that the GSEs are working on it and intend to release. I mean, I think they mentioned the press conference early summer. We're kinda waiting for them to do that. You know, they have their own processes and procedures, they're working their way through them. You know, we fully anticipate that it will be released, but we don't have a timeline.
Got it. In terms of 10T though, when it does come out, I think, you know, historically you've talked about how even today the mortgage market's using FICO Score 4 and 5. How quickly do you think 10T can be adopted or even VS4, like?
10T's being adopted fairly quickly in the non-conforming market, it can be adopted. I do think there's a ton of inertia. I think if the, if you ask the industry, "Do you wanna change?" They would say no. They would like to just stay with Classic FICO forever. We are seeing, you know, we are seeing adoption in the non-conforming market. Once all of Classic FICO, VantageScore 4.0, and FICO Score 10T are accepted in the conforming market, it's a little hard to say. I mean, you could see a shift. I mean, there's if you were gonna shift, you should shift from Classic FICO to 10T because you'd get more predictiveness out of it. Again, you know, all the systems, models, everything's designed around Classic FICO, we'll see how long that takes.
Got it.
There's also an advantage. We could run, I mean, you'd run 10T in parallel with Classic FICO, right? That's what's happening in the non-conforming market. From that point of view, it's easier to, you know, to run them both at the same time, compare the results, and you can do some forecasting on that.
Got it. In the past, you know, you've talked about it's a heavy uplift to switch from scores, but, or go from a Classic to something totally different like a VantageScore. What is the lift like to go from Classic to 10T?
It's a little easier. The reason, FICO Scores are designed to be backward-compatible with prior generation FICO Scores, and they always have been right up to FICO 10. FICO 10 is backward-compatible with FICO 9. FICO 10T uses trended data, so it's not perfectly backward-compatible. It's a little bit different. I would say that 10T is architecturally very similar to prior FICO Scores. It leverages the same kind of weighting, same attributes. If you were gonna make some assumptions about how 10T behaves relative to Classic, 10T will be a lot closer than Vantage 4 would be.
Got it. The $0.99 plus $0.65 for FICO Score 10T, I think implies a modest price increase versus the $4.95 plus $0.33 you have for Classic FICO.
Yes.
Some people think that's your 2027 pricing that you've introduced today. Is that the case? How should we think about that?
Well, no. I would say that 2027 pricing is not here yet. We haven't really decided what we're gonna do there. You know, our process is in September, August, September every year, we kind of review things, decide where it would be appropriate to make bigger pricing adjustments, and then we publish them to our partners so that they can be implemented on January 1. None of that has occurred. Any pricing that you see in the market today is 2026 pricing.
Got it. With all this noise, with all this change, how should we think about, you know, what your price value gap in mortgages, like let's say it's roughly $10 a score today, versus what you think it should be? I know you know, you talked about this for years. Before this all began, I think people thought, "Sure, it's gonna get there," but now I think they're a lot more skeptical. You know, is your approach changed? Are you gonna balance the annual increases differently?
You know, what's a FICO mortgage score worth, right? That's the question. Nobody knows the answer to that. I mean, really, no one knows the answer to it. All you can do is look at analogs. If you look at S&P and Moody's, they charge approximately 8 basis points to rate a mortgage-backed security. They each do, that's 16 basis points, okay? That's typical. Those securities that they rate, triple A rated, guaranteed by the government, they're all triple A rated, I'm not sure how useful that is. They also supply the average weighted FICO score of those securities. That's what the pricing is built on. The pricing's built on the FICO score, not actually the S&P rating.
I only share that by way of, you know, background because we don't charge anything for using our Score in that context. We charge zero. They charge 16 basis points and we charge zero, and yet the value is all coming from the FICO Score. Another way to think about it is 16 basis points on an average $400,000 mortgage is a little over $600. We charge $10 for a Score. You guys will have to make up your own minds about what the value gap is, but I would submit that it's quite large.
Okay
remains so.
Got it. Fair enough. Okay, maybe one last opportunity on mortgage. We've talked about a lot of noise. What do you think is the most underappreciated or misunderstood aspect of this, of this debate that keeps pressuring your stock?
Look, I think that the FICO mortgage score is deeply embedded in the system. Not just because it's used by the originators to, you know, to get the mortgage, but everybody downstream uses it, that Fannie and Freddie use that score in their LLPA pricing grids. The mortgage insurers use it in their models for providing mortgage insurance. The credit risk transfer guys, CRT, they use it in their models. The mortgage-backed securities investors themselves use it when they're pricing the MBS. The prudential regulators use it. There are lots and lots of parties who are pretty deeply, you know, focused on FICO as the cornerstone of the system. I think changing it's very hard. It's just really hard. I mean, you can create an option, say, sure, you have an option to use a VantageScore. Guess what?
There's an option to use a VantageScore in every other market that we have, in auto, in credit card, in account management, in pre-qual, pre-screen, you name it. You want a VantageScore, Vantage would be happy to provide you with one, and yet nobody uses them. How different is it gonna be in the mortgage market? We'll have to see.
Got it. That's a good segue into the other parts of the market. In auto for the last several years, I think you've done modest price increases. In card, it's been inflation type stuff. Maybe just talk on auto firstly. You know, what like, how do we think about the historical price increases? What's the opportunity going forward?
Yeah, I mean, we've been, I think, you know, like you said, modestly increasing prices in auto. You know, a lot of it's really understanding the market, understanding the dynamics. There's a lot of different players in that space. There's a lot of value derived from the score. A lot of times it's the score that determines whether a car is bought or sold. There's a lot of value there to the, you know, to the dealers, to the people that actually do the financing. Again, we just need to understand the market, and every year we learn a little bit more, and we look at the market and look for opportunities to raise prices there, where we think that the value is much higher than what we charge.
Got it. Both in auto and maybe mortgage as well, right? Does the forecasted volumes impact how much pricing you're gonna take?
Yeah, I think a little bit. I mean, Because in the sense that we don't rely on increases in volume to provide our guidance. Every year what we do is we sit down, we look at all the data sources, come up with kind of a consensus view of the volumes for mortgage or for auto or for whatever, and then we heavily haircut that, you know, because we don't believe it. Most of those are wrong. And because we're conservative and, you know, if you've followed us for any time, you know we have a reputation for sandbagging. You know, that's kind of where we get to. We don't count on a lot of volume increase to make our numbers.
Got it.
What happens is, if we really do get a good volume year, which someday we will have in mortgage for sure, you know, we closed $5.8 million mortgages this past year and, you know, the average over the last five years is over $8 million closed mortgages. I mean, there's a lot of room to grow. Volumes will come back someday. We don't count on that. Our guidance is not built on an expectation about volume increase.
Got it.
We get questions a lot of times like if you know, "If mortgage goes up next year, would that mean you'd do less in the pricing side?" Well, we'll never know, right? We can't count on that. We tend to assume that the markets will remain relatively flat.
Got it. Maybe to round it up, like the card, strategy. Is that just inflation 'cause it's a high volume market?
Yeah, it's a high volume market. It's probably, you know, there's more discretion. There's probably more elasticity because you really don't need the score in the same way, and there's not really the transaction that takes place like we have in the other markets. It's more inflation. There are some pockets there where we'll charge a little bit more than inflation but, you know, it's closer to a CPI type price increase.
Got it. you know, even when and if the DLP program is introduced, the credit bureaus are still gonna be your largest customer, whatever the disclosures you have in your 10-K. What are the relationships like with the bureaus now with after all this has happened?
I think they've improved a lot. It's not a secret that there was some friction. We've gotten along very, very well for certainly for the last 14 years. FICO surprised them with the Direct License Program. I called the CEOs of the bureaus several hours before we announced it to the world and said, "Guess what? We're launching an alternate distribution channel," probably the most rattling thing in our industry in a decade. Needless to say, they didn't appreciate the lack of a heads-up, the fact that we just dropped it on them. Of course, it had big revenue implications for them, big profit implications for them. We caught them off guard. We didn't treat them with the respect that they deserve given our relationship.
I mean, I understand why they reacted the way they did. As you know, they've all recovered, right? They figured out how to go get that revenue by increasing the data, the price of the data. They're, you know, the hole that was anticipated has been kind of closed up, so I think that's resolved. At the end of the day, we have symbiotic relationship with them. We need them as a channel. They need FICO scores or else their data's not worth very much. It's that combination that keeps us working closely together, and I'd say our relationships are pretty strong.
Got it. No, potential spillover effects into card and auto? Any plans there for targeting?
No, we don't have any plans there.
Okay. How about on the direct-to-consumer side? You know, Experian obviously is a big, big partner there. Is that a completely separate entity relationship?
They're a great partner there. No, it's not completely separate. It's part and parcel of the whole relationship. They are phenomenal consumer marketers. I would say that they have Although I'm very proud of my FICO and our own little consumer business, we give them every opportunity to take the business. You know, we don't compete with them on search words. We, I mean, we test things, and when they work, we tell them about it. They've done just a phenomenal job building that consumer business. It's really impressive, and that'll continue. We feel really good about it, and so do they.
Got it. Okay, we have about nine minutes left. Let's turn to software. Maybe a little bit of not background, but a mix. Like, you know, what is software? It is a little bit kind of many different things all over the place, so how would you simplify software amongst your top few products or mixes that will help us appreciate it more?
I think the easiest way to think about our FICO Software business is our new FICO Software business, cause the old one is the applications we talked about. The new FICO Software business is a decisioning platform, it's kind of next generation CRM. The idea is take data from a lot of different places and apply some analytics, and with that, make a decision which you can then feed into a workflow, and that workflow happens in real time. It gets, in real time, that decision to a point of interaction with the consumer. If you're a B2C company, whether you're a bank or a credit union or a retailer, anybody with a B2C relationship wants to optimize that interaction with the consumer to achieve some goal. It's not always the same thing. It could be they're after revenue.
You're close to the end of quarter. They're all about conversion, okay? Someone showed up on my website, I just need them to convert and buy something and put a few more dollars in the revenue line. Maybe revenue's fine, but profit is what matters, so let's emphasize for this customer, you know, things that are more profitable for us. Maybe those are fine and we wanna focus on lifetime value. How do we get this customer from this category to a more valuable category even though the conversion rates will be lower? The objective function can change. It can change at any time, and it should change. It should really change and, you know, depending on what the management of the business wants it to do.
What should be consistent is never interact with a customer without taking into account everything you know about the customer. If you've had 25 transactions with a customer over the prior 24 months, how about we use that knowledge in what we do with that customer? What we expect is when you show up, we know your brand proclivity. We know your price elasticity. We know what makes you tick. We know how to get you to respond to whatever it is we want you to do. That's what FICO Software does, and it does it better than anybody else's. There's nothing that comes close. A lot of B2C companies have tried to build this themselves. You know, usually we don't compete with other software companies. We compete with homegrown because there really are no solutions quite like ours on the market.
We are so much lower cost than them building it themselves. You know, they'll go to do something that's halfway as good, they'll spend $100 million, or they can buy ours for $15 million. That, you know, that's kind of the dynamic. It's very popular. We're growing really fast.
Maybe just to follow up there, like you said, a lot of, the way you described it, a lot of software companies, a lot of analytics companies try to say the same thing. What is the secret sauce? Like, are there some key IP assets, brands within that that help you know, keep growing at this rate?
Well, if you think about part of the reason that you don't see a lot of analytics software companies is it's really, really hard to put analytics into software. That's because, you know, what do analytics do? You ask a question. You're looking for an answer to a question. Then you have to figure out which data is the right data to answer that question. Then you have to figure out what's the right analytics technology to put on that data to get to the answer you want, and do that all in real time. That's a very complex equation. I mean, it's just really hard to do, and we've mastered it over 40 years, and no one else has.
Got it. maybe to that point, AI, the new LLMs, they making life easier for you? Are they introducing more competitive threats?
Oh, it's-
How do you evaluate that?
For us, it's good on all, on all counts. We get the same productivity benefits that any software company would get from no longer having to write code, right? That's a labor saving. More importantly, The core of our platform is decisioning. We think that all of the adjacencies lend themselves really well to AI-driven agentic behavior. I don't know. Let me give you an example. We try to detect fraud, we'll go in and look at, you know, millions and millions and millions of transactions and try to identify patterns and profiles and figure out what looks odd.
When we find those things, we either if it looks okay, within 17 milliseconds we say, "Looks good." Then the rest of the time it's an exception, gets kicked out to a fraud analyst. The fraud analyst takes that exception and studies it and looks into your account and checks your checking account balance and other kinds of things and makes a determination, not in 17 milliseconds, but maybe in a half hour. In our view, an AI agent could do what that analyst does in another 30 seconds. Instead of in 17 milliseconds, we get the exception, kicks it out, and now we have an AI agent that does what the fraud analyst used to do. I think that the banks are gonna get tremendous savings out of applying agents to the outcome output of our software.
Got it. Maybe the last question in the last two minutes here. You know, sounds like a really neat decision platform. You've been accelerating growth recently, doing very well. What is the vision for software? How do you It's still relatively small in the scheme of software, so how do you scale it to the heights that you probably wanna take this?
I think if we keep growing the new platform at over 40% a quarter, it'll scale to new heights very quickly. It has been growing really fast. I mean, the new platform is 1/3 of our total software business and growing, you know, much faster than the rest. The rest of it's pretty much flat. It you know, we've got the growth, and we'll see. I mean, I think and also our model is a land and expand model, anything we land, we typically get a lot more revenue out in the, you know, beyond that. Our dollar-based net retention revenue on the new platform is 136%. You can see that the customers who buy it, buy more. That, I mean, that's kinda what that means. We'll see.
You know, we don't have, you know, every time, once in a while I get asked questions about are you gonna sell it or spin it off. Of course that's a question the Board asks once a year. We have no intention of doing that anytime soon. Right now, Software's not in favor. This wouldn't be a great time for us to spin it off anyway. We really think it's undervalued and under-recognized.
Okay. Cool. All right. We'll leave it right there. Thank you, William.
Thank you.
We appreciate the time.
Thank you. Thanks.
Thank you, guys.