Transcription
Today, we will dive into one of the companies that could be one of the best opportunities at the start of 2026, or else represent a huge trap with the end of a historical and almost undisputed monopoly until now. So, we will focus on Ferc for this deep dive. By the end of this video, you will understand absolutely everything you need to know about the business. I have gathered everything here. We will look at, of course, the business, the valuation, at what price to enter, if we should enter, the points to watch, what has changed in the business model, and especially what the business model is, because it is a company that can be, that seems simple at first glance, but can be quite complicated as soon as we try to really dig into their importance, how it is that this FICO score is so important. You will discover all of this in this video.
So, if we look a little bit in detail, we can see that FICO, over the last five years, despite a drop of more than 50% from its all-time high, still outperforms the S&P 500 if it had been bought 5 years ago, with 113% performance compared to 67%. The methodology I will use to analyze this company and for the presentation is the stock market triptych. So, it's the method I use to analyze all companies in my portfolio and which allows me to generate alpha compared to the market, outperforming by more than 25% per year. So, we will focus on the numbers, on the competitive advantage, as well as on the valuation. We will start with the numbers before getting into the business model. And we already have two things that are quite striking: scores in terms of growth and profitability are excellent. But what affects the company is debt. And we will understand in this video why debt is both problematic and a huge advantage for this company.
If you look at the evolution of ROIC compared to the cost of capital, we can see that we have an enormous ROIC, almost 50%, for a cost of capital around 10%. So, it's really very, very well balanced. The cost of capital is a bit high, but the company's profitability is so enormous that it is largely covered. What interests us, of course, is that this ROIC minus WACC is in the positive zone, and here we are at over 30% for the company. So, if we focus a little on the numbers, we see that we have a margin score of 78%. I have a triptych score of 79%, so essentially the same. And there is one thing that should be quite striking: the evolution of debt. If we look at how debt has evolved, well, we have net debt that has completely jumped in recent years. We can see here in 2025, net debt has almost, almost increased by 1 billion dollars. You will understand why this happened in the last quarters of 2025. They simply raised money to do more share buybacks.
If we go back to the cash flow statement here in the financing activities, we can see here the common stock repurchases, which have really accelerated, especially in the second half of 2025, and they are continuing. That's why they made these purchases. This causes debt to rise quite high because we have a net debt today compared to free cash flow that exceeds four. And if you've been following me for a while, you know I don't really like companies with such high debt. I prefer to be below three. So, why is it a bit different for FICO and can be tolerated? Simply because of the company's competitive advantage, the predictability of revenue, we can tolerate going a bit higher, and especially the use of this cash, because the debt contracted by FICO, so we remain at three times EBITDA, so it remains manageable. It's not like we're at 10 times EBITDA or anything. We have an interest coverage that is almost 7, so it remains tolerable. But this cash is used to buy back shares, it is used directly to return to shareholders' pockets, and especially at interest rates that are generally quite attractive, between 5 and 6%, which means that the cost of capital is generally around 10% for the company. Here, it brings it down to about 6%, and for ROICs of around 30%. So, it is largely profitable to do this and to give money to shareholders in this way. Knowing that it is to buy back shares, it will not last forever, and it is not to develop company projects, make questionable acquisitions, or anything like that. It is really to buy back shares. You will see with the valuation that share buybacks at these times are potentially quite interesting.
If we look at the evolution of the number of outstanding shares, we can see that it is decreasing by 3% per year over the last 10 years, and by 4% per year over the last 20 years. So, this is what is called a cannibal company that buys back its shares quite massively. Regarding revenue, you can see the evolution, which is quite incredible. It should be noted that there is a before and after 2016-2017 or 2018, where they underwent a restructuring in their business. They moved to SaaS Cloud. Before, it was integrated SaaS for banks. Now, they are moving to a SaaS model focused on the cloud. This has led to a nice acceleration from 2017-2018 onwards, with revenue growth of 9% per year. And here, if we look since 2021, it's 10% per year. So, revenue is re-accelerating, and since 2024, 15% revenue growth. So, we have a re-acceleration of revenue growth that is quite exceptional. We will obviously see the same for earnings per share, which will re-accelerate and accelerate even more.
If we take the last 10 years, let's put it annually, taking the last 10 years, it's 26% growth. If we take the last 5 years, 23% growth, and the last two years, 29% growth. So, we have a re-acceleration of figures, and that's quite good. We have gross margins that are increasing. So, we validate that. We also have operating margins that are increasing. So, we validate that. We are in a sector where there is not much competition. So, that's also very good, and it's also the problem the company is encountering, because if the stock price is falling so much, it's not because the company is ultra-dominant and nothing interesting is happening. Well, if the company is falling, anyway, it's simple. There is one thing to remember for a stock market opportunity. If the stock falls, there is always a reason behind it. Now, the investor's job is to know if this reason is justified or at least if the reason for the fall justifies the current price. If it doesn't justify the current price and it's exaggerated, then there is an opportunity. But sometimes it will not be exaggerated at all. It will be completely justified, and in that case, it will not be a good opportunity. It would be what is called a value trap. A concrete example of this was Orpea in France. Following the announcements, the stock fell sharply. It never recovered simply because it completely destroyed the business.
So, the big question we will ask today is: will all of this destroy FICO's business? For the business, it was founded in 1956. It is a leading company in applied analytics. FICO is primarily known for its credit scores, which are a widely used benchmark in the industry to determine an individual's creditworthiness. The company's credit scoring business, centered in the United States, represents the majority of its revenue and profits and includes business-to-business and business-to-consumer services. In addition to credit scores, FICO also markets software primarily for financial institutions in areas such as analytics, decision-making, customer workflows, and fraud prevention. Globally, it's 60% scoring, 41% software. Previously, scoring was much more important, and it is this software part that has arrived and allowed for super growth of the company and accelerated growth.
The model relies on transactional royalties, which are almost monopolistic, to finance the development of the FICO SaaS platform, which boasts a remarkable net retention rate of 122%. If we look globally at where FICO sells, it's 87% US America, EMEA 8%, Asia Pacific 5%. So, it's really not a company that is diversified internationally. Certainly, we have 13% elsewhere, but the US sector is the most important. So, that's good, it's important to note this to understand the difference between scoring and software. Scoring is the grade. That is, someone asks, what is my credit score? They have a score that varies between 0 and 850 approximately, with 850 being excellent and 0 being terrible. At 850, you will be granted a loan more or less easily depending on your situation and everything else. At zero, not much. Now, the thing is, the score itself doesn't mean everything and nothing at the same time. Okay? Software is the part of everything we can do with this score. For example, I will use a metaphor here. It's not exact, it's just to understand, to get an idea of the segments. A student with a 17 average, the 17 average is their score. Okay? Considering everything about them, here are the universities they can attend or the jobs they can do. That's what the software allows. So, in short, you have a 17 average. Now, taking into account your parents' jobs, your family's wealth, your geographical situation, your desires, where you want to go, in which country you want to live, what you want to do professionally, well, the software will take all this information to tell you, "Here is the university that will allow you to do that. Here are the universities you could attend and you should more or less be accepted." Okay? I'm simplifying it to death here, but it's to give an idea of what the software segment is for and what the score segment is for. Okay? And one thing to understand is that without the score segment, the software segment would make almost no sense. It is really the score segment that is the most important. For this, we need to understand the pyramid of what I call the US credit pyramid.
So, at the bottom of the pyramid, we have the borrower. This is the individual. They go to their banker, the lender, their banker to get a loan. Once they get the loan, the bank will ask the credit bureaus. So, there are Equifax, TransUnion, Experian, there are three of them. Okay? It's a triopoly there. They will ask for the person's financial information to know if they can grant them credit. Among this financial information that will be transmitted, there will be a credit score, which is the FICO score. And now, there is the Vantage score that has been created. But before, it was only the FICO score. And at the very top of all this, we have what are called the GSEs, which are Fannie Mae or Freddie Mac. Okay? It's almost a duopoly here. They will buy back the loans. That is, once the bank makes a loan, let's say the bank makes a loan for $15,000 with 5% interest paid over 10 years. Well, once they have signed the loan, they will go to Fannie Mae, Freddie Mac, the GSEs, they will sell them this loan. So, they have originated, they have a contract for $15,000 and 5% interest over 10 years. Well, they will go to the GSE, they will say, "Here, I have this loan," and the GSE will buy it back. Perhaps instead of buying it back for the full $15,000 plus interest, which would be a total of $20,000 over 10 years, the GSE will buy the loan for $17,000. And so, the bank gets the cash directly and can lend this money again. This avoids them having to wait 10 years. And then, Fannie Mae, Freddie Mac, etc., will create what are called MBS from these loans. Okay? Mortgage-Backed Securities. If you saw the movie The Big Short, a bit of what caused the US economy to collapse in 2008 because it was based on garbage. Here, they will do, okay, based on all this, we will look at the, we will make these Mortgage-Backed Securities and sell them to investors. This is the diagram I've put here. Okay?
So, to understand the diagram well, we have the borrower who says, "I want a loan," and goes to the bank. For the bank to give them the loan, they want a report on the borrower. So, they go to the credit bureaus. Okay? Which we've said are Equifax, TransUnion, Experian. These credit bureaus have the financial data. FICO processes this financial data to give you a score. So, FICO will give them a score. The credit bureaus return to the bank to decide if they can lend. Once the loan is made, the bank will sell the loans to the GSEs. Okay? The GSEs group the loans into MBS and sell them to investors. Investors can be sovereign funds, China, and what's also quite funny is that among these MBS investors, you will have banks. So, you have the bank that will lend money to ultimately buy back the debt it lent, or rather invest in the debt it lent in a mortgage-backed security. So, it's all a mess. Now, what does FICO do in all this? Well, FICO, because one could say, well, the credit bureaus, why would they ask for a FICO score? They could just give a score themselves, they have the financial data. You should know that FICO does not have the financial data. To make its score, FICO is forced to go through a credit bureau, to connect via the API of a credit bureau to get the data on clients to then make its FICO score so that the algorithm allows them to have the score. So, one could say, well, credit bureaus, why would they look at FICO score? They could just ask for the thing, do the score at the bank, and then send them the report. All of this is because FICO has enormous importance, it is the standard, it is the unit of measurement in terms of creditworthiness. The unit of measurement for distance is the meter or miles for Americans. The unit of measurement for liquids is liters. And here, the unit of measurement for credit in the United States is FICO. So, you can't replace it like that. And there is a second very important thing: the GSEs, so Fannie Mae, Freddie Mac, to buy back loans from banks, okay, they require that these loans be FICO-scored, which means that 98% of all credit scores that go to GSEs are FICO. They really require this. There is no other choice. It must be a FICO score. This is where FICO's monopoly comes from, this is why there is so much around FICO.
Now, what has happened is that we have regulations that now say GSEs are no longer required to have a FICO score. You can switch to the Vantage Score 4.0. So, this is what is shaking things up a bit. Now, FICO also depends on credit bureaus. Not before. FICO depended on credit bureaus for APIs, for financial data so that they could have the score, but also for distribution, because the bank goes to the credit bureau, the credit bureau gives them the report with the FICO score inside. So, without the credit bureau, FICO cannot sell. Now, FICO is bypassing them. They have launched a solution to directly bypass the credit bureau in distribution. Okay? I emphasize distribution because in score creation, they cannot. They need, credit bureaus are indispensable. There is no other choice from a regulatory point of view and so on. There is no other choice but to go through a credit bureau. However, to get the score, well, FICO, they are launching a solution to bypass credit bureaus and distribute the score directly to the bank. So, instead of the bank going to the credit bureau to get a score, the bank has direct access to the FICO score, which means there are more potential margins for FICO and that the credit bureau does not take its commission on FICO. Okay. This is the overall business model, how it works globally. I've tried to simplify it as much as possible. Now, you will understand, well, when we see this, we understand the different areas where problems will arise. We will have the problem with credit bureaus. Well, credit bureaus, they are tired of having to provide a FICO score every time. Especially since FICO, they increase their prices all the time, all the time, all the time. FICO's price increases are 150% over the last four years. Okay? In 4 years, they have increased prices by a total of 150%. So, you see, credit bureaus are a bit fed up.
Then, the other problem here is that the GSEs, well, they want security in loans. They know that the FICO score is safe, it provides security. So, why would they use a second score? Okay, now that they can have a second one, why would they use it? So, we have a huge conflict of interest here where credit bureaus are forced to ask for a FICO score to give the result to the bank. They would like to do without it so they can earn money, they can save. That's why they are now putting things in place like, well, take the Vantage score, it's free. So, the three credit bureaus, Equifax, TransUnion, Experian, have joined forces, or I think it's just Equifax, Experian, anyway, they have joined forces to create the Vantage Score. So, the Vantage Score, some offer it for free, others offer it with a fee, but generally, the Vantage Score is much cheaper than the FICO score. Once the bank has this, well, now the other point of problem here is that FICO, to get this score, they need data from the credit bureau. So, this creates a dependence on credit bureaus. So, you see that in fact, there is a monopoly, but there are conflicts of interest everywhere. It's a rather tough environment to operate in, and it's all based a bit on US regulations regarding credit. Okay, so this is a bit of everything that's happening now regarding the revenue model.
So, we have royalties every time a score is requested, they receive a royalty. Many banks, when they see a report on a borrower, since there are three credit bureaus, they ask all three credit bureaus. This means that for one borrower, FICO generates three scores. There is a new law that has passed which says that before it was mandatory to go through the three credit bureaus. Now, we are moving from tri-merge to bi-merge. So, now only two credit bureaus are necessary. This means a potential 33% reduction in volume for FICO. So, we will get into this. This will be everything that requires SWAT now. After that, we will analyze the management and also the different markets, the different competitive landscapes, even though there is not really any competition for FICO.
So, I'm trying to simplify things as much as possible. If there are things that are not clear, please put them in the comments, I will send you, I will reply to you and I will try to argue a bit better or develop a bit better. So, the first strengths of FICO are its near-monopoly and network effect. FICO holds a near-monopoly in B2B credit scoring with an estimated market share of 90%. This position is cemented by a B2B2C network effect: lenders and secondary market investors all demand the FICO score. The latter remains the indispensable standard for pricing mortgage loans and the requirements of deep funds. So, understand well, because the entire investment thesis and the entire stake around FICO are based on the fact that FICO is the standard, that FICO is the unit of measurement for creditworthiness in the United States. And so, in fact, when we start from this thesis, it means that regardless of whether a new score arrives, the price of this new score should not affect the company in the long term because it is a standard. Okay?
Next, we have pricing power. The company benefits from almost absolute price-setting power. The royalty of $4.95 per score represents only about 0.2% of the total closing costs of an average mortgage loan. This allows FICO to impose massive and successive price increases, over 40% in 2024, with a potential increase of 100% in 2026, without suffering traditional competitive pressure. It's important to understand this. One might think, yes, the price increase for FICO is significant, and it represents 0.2% of total costs, and the FICO score is almost the most important element in obtaining credit. So, this is an important point to consider. So, here we have the increase, which is about 150% cumulative annual growth rate over 4 years. So, it's quite enormous. Okay, exceptional margins. We saw that the score segment is the nuclear core of FICO's profitability, historically generating operating margins exceeding 80%. This segment benefits from practically zero marginal cost of production and distribution. We have the successful and high-performing SaaS transition. The software segment is successfully migrating to the FICO cloud-based platform, which showed revenue growth of 19% and ARR growth of 17-18% in 2025. The platform also maintains a strong net retention rate of 110%, above the industry median. We have architectural superiority of the software. Rated as an undisputed leader by Forrester in 2025, the FICO platform stands out for its agnostic ability to integrate data from any source. Its low-code tools facilitate decision-making for business analysts, and its explainable AI ensures regulatory compliance.
Now, of course, there are weaknesses. The first weakness, we've talked about it a bit, is the dependence on credit bureaus. They can do without them for distribution, but they are forced to obtain data, credit from somewhere. There is no choice but to go through credit bureaus for this. It's very difficult to counter from a regulatory and implementation perspective, because one might think, well, FICO could just create its own credit bureau, so to speak. Except that it's really not that easy. The sector, the field, is really blocked by the three companies I mentioned: Equifax, TransUnion, and Experian. Next, we have debt. Okay, even if it's negotiated at good rates, we need to be careful that it's not too high. Stagnation of the B2C segment. Unlike the booming growth of B2B, B2C, mainly myfico.com, shows relative stagnation after a 2% drop in 2024 and has only seen modest growth of 3-6% in 2025. The weight of the SaaS transition on overall margins. The software segment is going through the valley of death inherent in the transition to a SaaS model. Industry benchmarks show that sales, marketing, R&D, and overhead costs absorb a very significant portion of revenue during this phase, which temporarily weighs on the company's consolidated operating margins. The decline of off-platform ARR. The overall ARR growth of the software segment is hampered by the planned obsolescence of its legacy off-platform software. This off-platform ARR declined by 2-3% in 2025. This can be a problem because potentially banks may decide to migrate to another platform that is not FICO.
On the other hand, within the FICO universe, it increases the LTV per customer. So, what needs to be understood here is that there is platform and off-platform for SaaS. Platform SaaS is simply the model of Adobe post-subscription. Okay? So, basically, we go to the bank, we install the software, and everything runs on the bank's servers. They moved to the cloud, so it's FICO platform, and they wanted to transition customers. The thing is that the previous SaaS is more or less obsolete today. And so, the idea is to transition customers from the old SaaS to the new SaaS. However, to make the change, it's possible that some customers will be lost. Well, not too many customers are lost, but it's something that could happen, where customers say, "Well, we'll take this opportunity to go elsewhere than FICO, we'll take another service that we might prefer, perhaps from someone cheaper, etc." So, this is where there can be a loss. At present, there are no real losses. Okay? But this is one of the problems FICO faces, one of its weaknesses. Now, they have addressed them quite well. They also have a dependence on a cross-subsidy model. FICO's business model relies on strict cross-subsidy. The quasi-monopolistic rent from the Score segment is imperative to finance the capital and technological transition of the software segment. A reversal of the Score ARR would break this essential engine.
Now, for the opportunities for the company: disintermediation via the Mortgage Direct License Program, scoring directly to resellers, the tri-merge reseller, and lenders. FICO bypasses credit bureaus. This strategy allows the company to capture the markup historically retained by its intermediaries. And this is a good thing because it addresses the threat of moving to bi-merge. Okay, so the bi-merge contraction, before we were at 3, now we are moving to 2 per file. And so, the idea is that FICO bypasses all of this and goes directly to the borrower. Monetization of open banking. Ultra FICO, the launch of the Ultra FICO score in partnership with Plaid allows FICO to assess risk through real-time analysis of current account cash flows. This addresses the lucrative market of millions of consumers considered invisible to credit. Expansion of the total addressable market into non-banking verticals. The decision intelligence markets are expected to reach $55.6 billion by 2032 with a CAGR of 15%. The FICO platform is agnostic, it can massively expand into the telecommunications, insurance, and supply chain sectors. We also have upselling with FICO Score 10T. The growing adoption of the 10T version, which integrates trend data, allows for an increase in average revenue per user. This model already covers over $377 billion in mortgage originations. It should be noted that 10T is a bit of a response to Vantage Score 4.0, which was launched by Equifax and others. We have a cross-selling strategy that is also possible. FICO's sales team initially targets a specific department, fraud detection for example, with a module, then performs cross-selling to extend the FICO platform to other decision-making areas of the client bank, considerably increasing the customer lifetime value for FICO.
Now, the threats. The first one, where I have a big question, is whether they haven't exploited their monopoly a bit too aggressively. It seems that a good part of the threats around FICO are based on the fact that they are profiting too much from their monopolistic status. And so, credit bureaus, especially credit bureaus, are the ones who will attack the most and lobby the most against them. Well, credit bureaus want much less dependence on FICO scores and want to take their market share because they see how much FICO is profiting, and that, from a regulatory standpoint, it used to be mandatory, now it's not, but it technically still was because it's the industry standard, but that just depends on the fact that it's the standard. People are no longer obliged to use FICO.
Next, is it possible that all of this was caused simply by the fact that FICO was too arrogant and wanted too much with its business model and pushed clients and the market a bit too hard, perhaps? We have in-housing by mega banks. Large, very large global banks with colossal IT budgets could choose to develop their own artificial intelligence models internally. This internal cash flow underwriting would reduce their dependence on FICO's standardized external risk scores in the long term. We have the proliferation of phantom credit. Okay? The explosion of Buy Now Pay Later services has created a credit activity that is not systematically reported to credit bureaus. The absence of this data risks blurring the predictive accuracy of historical mathematical models on which FICO relies. We have supply chain retaliation. Okay. Competition has turned into open hostility in 2025-2026, with Equifax, TransUnion, Experian publicly denouncing FICO's monopolistic power. Data providers could retaliate by restricting access to payment histories or heavily subsidizing Vantage Score to sell it at a loss. This is, let's say, the biggest risk surrounding FICO.
And then we have the end of the regulatory monopoly. As I said earlier, the Federal Housing Finance Agency (FHFA) has officially validated the use of the competing Vantage Score 4.0 model for loans guaranteed by GSEs Fannie Mae and Freddie Mac. This decision erodes FICO's historical institutional monopoly. The initiation of a transition to bi-merge bureau reporting instead of tri-merge also threatens business volumes. Okay? So, here we have a summary: dismantling by FHFA, loss of barrier to entry. Before, it was only FICO, now it's FICO and Vantage Score 4.0. Antitrust investigations, threats to pricing power, risk of sanctions, active investigations, and whistleblower programs. Customer revolts, FICO is becoming an unsustainable cost center for banks. Well, unsustainable is a bit exaggerated here, but okay. And then the bi-merge contraction, which technically means 33% of the score volume sold would be affected because we are going from three tri-merge reports to two for each credit. We have dependence on the legacy segment. Okay? We have B2B score here, 51%, platform software 25%, platform 24% which is declining and being replaced by platform. We have systemic threats from AI. We have the open banking revolution. Regulation CFPB requires free sharing of financial data. The creation of real-time cash flow underwriting models makes the need for credit scores drastically less relevant and bypasses FICO's costs. We have the internal banking model. Banking giants are deploying their own artificial intelligence models trained on exabytes of proprietary data, often outperforming FICO. FICO risks being relegated to the role of a simple benchmark.
regulatory secondary and we have the FTEG offensives. Innovators like Upstart or Zest AI use thousands of non-traditional data points for risk assessment. These non-linear models promise better inclusion than the classic FCO algorithm frozen for years. OK. And so there, if we take the major risk matrix here, so the price war, when we enter, when we go there, we look at the price war. OK, we see that the Fa cost in trimerge, it costs them 48 dollars. The Fa cost by going bimerge, it costs 43 dollars. The vantage score 4.50 and some vend scores like Experian offer it at 0 dollars. OK. Figo, a formidable supplanter against the dumping strategy, experience 0 dollars to retain key accounts. Fico will be forced to grant discounts directly threatening its exceptional 80% gross margin and its share buyback capacity. The collapse of barriers also, we have the end of the GSE monopoly. which absolutely pillars the fichar officially validated v score 4.0, thereby establishing lender choice. We have moved from a state-protected winner-take-all market to an open competitive market. Lenders no longer have the excuse of regulatory constraints to accept the price gouging dictated by Faiko. Rupture of the network effect. Historically, the MBS securitization market only spoke the Fao language. This is no longer the case. OK? Not really. It's just that now they have a choice. It's still the case. OK. You don't change languages like that, it doesn't happen in the blink of an eye. So it's still the case but now there's competition which is very present. If we look a little at the market, then we will look at the management. If we can see here globally, well it's not very comparable in the sense that Faco doesn't have the same job as Credit Bureaus, but they have much higher margins than all credit bureaus. OK? And especially the TAM should grow by more or less 15% per year until 2032. So it's a growing market, which is a good thing. On the competitive landscape, we have Fa, the global standard leader, holding 90% of B2C lending decisions in the US. Massive advantage based on empirical validation. Stress tested during the 2008 crisis. OK. Faiko was among those who didn't crack during the 2008 crisis, who didn't do anything foolish. So that's a good, good history of trust, and it's not for nothing that they also easily obtained this monopoly. We have the vantage score which is the direct competitor, Equifax's Experian TransUnion company, a serious threat propelled by the recent authorization of the FHS. The Pegas system, that's not the entire thing. OK, these will be software competitors, battle for the decision market, business intelligence, strong technological competition on cloud deployments and in-house internal models as potential substitutes. Mega banks for example JP Morgan are investing in internal cash flow underwriting to free themselves from external scores. OK? So that's everything that's happening in the universe. So you can see that we are increasingly threatened, let's say, and that there is an attack from all fronts at the moment, at least. Now let's see how management is reacting to all of this and its history. Already, management's history globally on all the promises it has made, it has kept 75%. 12% are in the process of validation. 8% are partially realized, and one is missed. Knowing that the one that was missed is the one from Covid. OK? Because during Covid, what happened, initial guidance anticipated 1.200 billion, 1.2 billion in revenue for fiscal year 2020. March 2020, force majeure, prudential revision of guidance due to macroeconomic uncertainty. So they make a guidance. In March, they withdraw this guidance, well, because of the events you know. In September, here are the results they got. They made 1.295. So better than what they had guided in November 2019. So technically, it's counted here as a missed promise, but ultimately it was a fulfilled promise. It's missed because they withdrew the guidance. If they hadn't touched the guidance, well, it would have been a fulfilled promise. And so that really shows the antifragility of the business model in the face of shocks we can have. If we look at the company, we have William Lansing who is the CEO, who owns 1.5% of the company. He built the position more or less alone in the company in the sense that he is not the founder, and it's really by buying shares himself with the bonuses he was able to obtain, etc. If we look, if we rate all this, we have a 5-star financial track record, exceptional historical value creation, monopoly margins, 4-star strategic vision, successful SAS platform pivot, but overall pricing strategy quite risky with these increases. Management alignment 4 stars, strong ownership despite regular stock sales. Now, it's not huge stock sales, but the CEO sold some shares a few years ago, I don't remember exactly why. And then, governance and succession, we have the key person risk of William Laning who is getting old. I think he is 66 or 67 years old. So if he retires, we need to see how the succession will be put in place. So the management team, we have Will Lensing, the CEO, at the helm since 2012. Total personal holdings valued at a little over 500 million dollars. Vision focused on rent extraction and cloud transition, no empire building through M&A. FACO spent 1.4 billion dollars on share buybacks in 2005, massively concentrating EPS on a reduced float, cash generation OK, conversion above 110%, and an extremely high ROIC. In management consistency tests, we have the last quarter's results. Management promised to decouple FICO from distribution through bureaus via Jank licensing. The signing of five major resellers, including Xactus and Meridian League, validates this execution. They promised margin expansion, delivered 54% operating margin, confirming the model's scalability. The discourse has shifted from waiting for the mortgage recovery to actively managing prices and distribution. Regardless of volume, the tone regarding the adoption of Tenti by the FHSE and GSE remains patient but confident, acknowledging the regulatory opacity involved. During the Q3 2025 earnings call, in July, management stated, "We are also attentive to stock price corrections. This represents a great opportunity. Are we taking advantage of it? Of course." OK. As a result, they take on an additional 1 billion in debt to accelerate share buybacks. only two quarters later. And beyond that, if we look at the period when they made this statement and we look at the share buybacks made during this period, hop common stock chase, we put it quarterly, and well, it was in July 2025, which corresponds more or less here, and the following quarter was the biggest share buyback almost in the company's history, if I'm not mistaken, in the company's history. OK? The following quarter. So management says it, it does it, it goes straight for it. So that's something that is appreciated regarding the competitive advantage now and the points to watch. That's the most important thing. We'll look at the valuation just after. But now, OK, does the company have a competitive advantage? Is it threatened? Not threatened. What do I think of all this? Morning Star's rating is wide. It was updated not long ago, I think early March 2026. So it's still wide. Morning Star does not believe that Fa's moat is threatened. What needs to be understood here is that the Fa score is a unit of measurement. It doesn't change like that, especially when the Fa rate is made in relation to the cost generated to obtain credit. And that's something important to understand. Everyone is panicking about what's happening around, but when you're anchored, I don't know if you go to brick-and-mortar banks, things move very slowly. OK? In all these kinds of things, things move very slowly. So for the next 5 to 10 years, Faiko will still be the standard. In 10 years and more, maybe it won't be anymore. But today, Faiko works. Maybe they will be able to increase prices less than they have done so far, but until now, it will continue to always ask for the FC score because it is better than the vent score, because it is more accurate, because there is a much higher history, and because it is the industry standard. It is truly the Fao standard, it is the unit of measurement in terms of credit. So we have an indirect network effect. The more secondary debt buyers demand FCO, the more primary banks are constrained, establishing a universal exchange standard. Switching costs are prohibitive. Replacing a bank's decision engine requires years of IT integration and risk validation, costing millions of dollars. We have a semantic monopoly. The term Fa has become the undisputed generic name for credit assessment in the United States, similar to Google for search. Historical empirical validation, Fa remains the only model largely validated by a full-scale stress test during the 2008 subprime crisis. So all this means that Faci cannot be easily replaced. It means that we cannot switch to another score, and given the costs, it is very likely that the GSEs will continue to ask for the FC score and will also ask for the vantage score, they will take both, and that's it, and that's what will most likely happen. What will need to be monitored now for the next quarters and years. The platform's growth rate must remain above 30% compared to the decline of what is non-platform for the SAS. OK? Growth in mortgage origination revenue based on actual market volume. Verify the announcement of Goli's deployment for direct licensing partners in the coming quarters. Stability of TNT model adoption in non-compliant markets as a leading indicator for the overall market. And the warning threshold would be a drop in platform NRR below 110%, signaling a weakening of the expand strategy. OK? So that's what needs to be checked. Now we will focus on what we all want, which is at what price to buy Fao. At what price is Faco a business we want to have in our portfolio. at what price does it represent an opportunity. So to value this, we will do it based on free cash flow. We will look at the evolution of free cash flow, given that we have a cash conversion that is over 100%. We have a price to free cash flow at the moment of 32. We had 21 in 2022, 27 in 2021, and otherwise it's been a long time since the business model change. So since 2018, we have never been so low. We are here, let's start from 2018, so post 2017-28. The median is 35, we are at 32 today. So we are starting to be in historically lower zones compared to the history. I just realized that what I just said doesn't mean much, but well, it's been 40 minutes of video. Let's move on to free cash flow. The current free cash flow is 735 million dollars. So let's put it here. Let's put 735. Hop, I 735 million dollars. Management has announced a growth of more or less 25% per year for the next 5 to 10 years. OK, let's take safety margins, let's put it at 20%. We have a price to free cash flow, we can put it at 29. There, we will first look for what the market expects. So there, if we put it at 25, if we have 25 price to free cash flow and 20% free cash flow growth per share, OK, I insist per share, we would get 13% per year. With that, we get 13% per year. So that means we have a fair value of 1000 dollars. If now we increase here, let's put it at 30, considering their position, the competitive advantage they have. The growth rate, I think it can be 22%. OK. I think it can even be around 25%, but I prefer to be a bit more conservative. Let's be super conservative, let's leave it at 20. 20. A price to free cash of 30 means we have a fair value of 1200 dollars. That means we are 21. We are undervalued, we are at 1000 dollars today. That gives us 17% CAGR. 17% CAGR for the company, which is particularly interesting. So today, if we believe that Fa's competitive advantage will remain, if we believe that the company will not be destroyed in the coming years, then we are in a position where there is a strong competitive advantage, where the company is undervalued, and which could represent a good opportunity. Now, if we are not convinced by this, if we think the company will suffer, that the vent score will come and steal market share from Fa, and that Fa's monopoly will quietly disappear, then in that case, we are potentially overvalued because that would mean we would not have this 25% growth and we would have much less growth. So that would become a bit more dangerous. Is this the cheapest opportunity on the market right now? Not necessarily. There are probably companies that are less expensive and could be much cheaper. OK? We are still at a premium, it still trades at 32 times free cash flow, which is not insignificant. But considering the company's competitive advantage, the monopolistic position it has, and the fact that it is the standard, the price can potentially be justified and therefore the premium seems quite normal for the company. It's up to you now to form your own opinion on this. I will try to give you as much information as possible. I will try to be as neutral as possible because we are necessarily a bit biased by our prism, by our view of the markets, etc. I have tried to present all the information, the threats, the opportunities. So now, make your decision directly after this. If you want to go further, master this way I use to analyze, so the whole model, let's say the triptych method to analyze companies, I invite you to click on the link in the description. You can book a call directly with me. We will talk and we will see how we can implement this in your portfolio with direct support from me, and you will also be able to access my entire portfolio, copy my [clears throat] portfolio, see my analyses, and we will move forward together to build a profitable portfolio directly for you. You have the link in the description for that. If you liked the video, remember to give it a thumbs up, subscribe by activating the little bell so you don't miss any future videos, and I'll see you very soon for another deep dive. Ciao. Ciao.