FAIR ISAAC CORP

Previous wording

We were founded in 1956 on the premise that data, used intelligently, can improve business decisions. Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in more than 100 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale. Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive lenders, consumer reporting agencies, public agencies, and organizations in other industries. We also serve consumers through online services that enable people to access and understand their FICO® Scores — the standard measure in the U.S. of consumer credit risk — empowering them to increase financial literacy and manage their financial health.

Current wording

We were founded in 1956 on the premise that data, used intelligently, can improve business decisions. Today, FICO’s software and the widely used FICO® Score operationalize analytics, enabling thousands of businesses in more than 80 countries to uncover new opportunities, make timely decisions that matter, and execute them at scale. Most leading banks and credit card issuers rely on our solutions, as do insurers, retailers, telecommunications providers, automotive lenders, consumer reporting agencies, public agencies, and organizations in other industries. We also serve consumers through online services that enable people to access and understand their FICO® Scores — the standard measure in the United States (“U.S.”) of consumer credit risk — empowering them to increase financial literacy and manage their financial health.

Previous wording

Highlights from the quarter and nine months ended June 30, 2024

Current wording

Highlights from the quarter ended December 31, 2024

Previous wording

•Net income was $126.3 million during the quarter ended June 30, 2024, a 2% decrease from the quarter ended June 30, 2023, and $377.1 million during the nine months ended June 30, 2024, a 15% increase from the nine months ended June 30, 2023.

Current wording

•Total revenues were $440.0 million during the quarter ended December 31, 2024, a 15% increase from the quarter ended December 31, 2023.

Previous wording

•Revenues for our Scores segment were $241.5 million during the quarter ended June 30, 2024, a 20% increase from the quarter ended June 30, 2023, and $670.4 million during the nine months ended June 30, 2024, a 16% increase from the nine months ended June 30, 2023.

Current wording

•Revenues for our Scores segment were $235.7 million during the quarter ended December 31, 2024, a 23% increase from the quarter ended December 31, 2023.

Previous wording

•Annual Recurring Revenue for our Software segment as of June 30, 2024 was $709.6 million, a 10% increase from June 30, 2023.

Current wording

•Annual Recurring Revenue for our Software segment as of December 31, 2024 was $729.3 million, a 6% increase from December 31, 2023.

Previous wording

•Dollar-Based Net Retention Rate for our Software segment was 108% as of June 30, 2024.

Current wording

•Dollar-Based Net Retention Rate for our Software segment was 105% as of December 31, 2024.

Previous wording

•Cash and cash equivalents were $156.0 million as of June 30, 2024, compared with $136.8 million as of September 30, 2023.

Current wording

•Cash and cash equivalents were $184.3 million as of December 31, 2024, compared with $150.7 million as of September 30, 2024.

Previous wording

•Total debt balance was $2.1 billion as of June 30, 2024, compared with $1.9 billion as of September 30, 2023.

Current wording

•Total debt balance was $2.4 billion as of December 31, 2024, compared with $2.2 billion as of September 30, 2024.

Previous wording

•Total share repurchases during the quarter ended June 30, 2024 were $255.5 million, compared with $98.6 million during the quarter ended June 30, 2023, and during the nine months ended June 30, 2024 were $506.8 million, compared with $289.9 million during the nine months ended June 30, 2023.

Current wording

•Total share repurchases during the quarter ended December 31, 2024 were $159.7 million, compared with $71.7 million during the quarter ended December 31, 2023.

Previous wording

ACV Bookings is calculated by dividing the total expected contract value by the contract term in years. The expected contract value equals the fixed amount — including guaranteed minimums, if any — stated in the contract, plus estimates of future usage-based fees. We develop estimates from discussions with our customers and examinations of historical data from similar products and customer arrangements. Differences between estimates and actual results occur due to variability in the estimated usage. This variability can be the result of the economic trends in our customers’ industries, individual performance of our customers relative to their competitors, and regulatory and other factors that affect the business environment in which our customers operate. For each of the periods presented, ACV Bookings related to estimates of future usage-based fees was approximately 30% of the total ACV Bookings amount. Differences between the initial estimates of future usage-based fees and actual results historically have not been material and we do not currently expect that they will be materially different in the future.

Current wording

ACV Bookings is calculated by dividing the total expected contract value by the contract term in years. The expected contract value equals the fixed amount — including guaranteed minimums, if any — stated in the contract, plus estimates of future usage-based fees. We develop estimates from discussions with our customers and examinations of historical data from similar products and customer arrangements. Differences between estimates and actual results occur due to variability in the estimated usage. This variability can be the result of the economic trends in our customers’ industries, individual performance of our customers relative to their competitors, and regulatory and other factors that affect the business environment in which our customers operate. For the periods presented, ACV Bookings related to estimates of future usage-based fees was approximately 30% of the total ACV Bookings amount on an annualized basis. Differences between the initial estimates of future usage-based fees and actual results historically have not been material and we do not currently expect that they will be materially different in the future.

Previous wording

Accounting Standards Codification Topic 606, Revenue from Contacts with Customers, requires us to recognize a significant portion of revenue from our on-premises software subscriptions at the point in time when the software is first made available to the customer, or at the beginning of the subscription term, despite the fact that our contracts typically call for billing these amounts ratably over the life of the subscription. The remaining portion of our on-premises software subscription revenue including maintenance and usage-based fees are recognized over the life of the contract. This point-in-time recognition of a portion of our on-premises software subscription revenue creates significant variability in the revenue recognized period to period based on the timing of the subscription start date and the subscription term. Furthermore, this point-in-time revenue recognition can create a significant difference between the timing of our revenue recognition and the actual customer billing under the contract. We use ARR to measure the underlying performance of our subscription-based contracts and mitigate the impact of this variability. ARR is defined as the annualized revenue run-rate of on-premises and SaaS software agreements within a quarterly reporting period, and as such, is different from the timing and amount of revenue recognized. All components of our software licensing and subscription arrangements that are not expected to recur (primarily perpetual licenses) are excluded. We calculate ARR as the quarterly recurring revenue run-rate multiplied by four.

Current wording

Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, requires us to recognize a significant portion of revenue from our on-premises software subscriptions at the point in time when the software is first made available to the customer, or at the beginning of the subscription term, despite the fact that our contracts typically call for billing these amounts ratably over the life of the subscription. The remaining portion of our on-premises software subscription revenue including maintenance and usage-based fees are recognized over the life of the contract. This point-in-time recognition of a portion of our on-premises software subscription revenue creates significant variability in the revenue recognized period to period based on the timing of the subscription start date and the subscription term. Furthermore, this point-in-time revenue recognition can create a significant difference between the timing of our revenue recognition and the actual customer billing under the contract. We use ARR to measure the underlying performance of our subscription-based contracts and mitigate the impact of this variability. ARR is defined as the annualized revenue run-rate of on-premises and SaaS software agreements within a quarterly reporting period, and as such, is different from the timing and amount of revenue recognized. All components of our software licensing and subscription arrangements that are not expected to recur (primarily perpetual licenses) are excluded. We calculate ARR as the quarterly recurring revenue run-rate multiplied by four.

Previous wording

The following tables set forth certain summary information on a segment basis related to our revenues for the quarters and nine-month periods ended June 30, 2024 and 2023:

Current wording

The following tables set forth certain summary information on a segment basis related to our revenues for the quarters ended December 31, 2024 and 2023:

Previous wording

Scores segment revenues increased $39.7 million due to an increase of $40.6 million in our business-to-business scores revenue, partially offset by a decrease of $0.9 million in our business-to-consumer revenue. The increase in business-to-business scores revenue was primarily attributable to a higher unit price, partially offset by a decrease in volume of mortgage originations. The decrease in business-to-consumer revenue was primarily attributable to a decrease in direct sales generated from the myFICO.com website.

Current wording

Scores segment revenues increased $43.6 million due to an increase of $42.0 million in our business-to-business scores revenue and an increase of $1.6 million in our business-to-consumer revenue. The increase in business-to-business scores revenue was primarily attributable to a higher unit price and an increase in volume of mortgage originations.

Previous wording

Software segment revenues increased $9.5 million due to an $11.7 million increase in our on-premises and SaaS software revenue, partially offset by a $2.2 million decrease in professional services revenue. The increase in our on-premises and SaaS software revenue was primarily attributable to an increase in revenue recognized over time largely driven by SaaS growth. The decrease in professional services revenue was primarily attributable to our strategy to emphasize higher-margin software over professional services.

Current wording

Software segment revenues increased $14.3 million due to a $17.3 million increase in our on-premises and SaaS software revenue, partially offset by a $3.0 million decrease in professional services revenue. The increase in our on-premises and SaaS software revenue was primarily attributable to an increase in license revenue recognized at a point in time due to a large license renewal and an increase in revenue recognized over time largely driven by SaaS growth for our Platform products. The decrease in professional services revenue was primarily attributable to our strategy to emphasize higher-margin software over professional services.

Previous wording

The following tables set forth certain summary information related to our condensed consolidated statements of income and comprehensive income for the quarters and nine-month periods ended June 30, 2024 and 2023:

Current wording

The following tables set forth certain summary information related to our condensed consolidated statements of income and comprehensive income for the quarters ended December 31, 2024 and 2023:

Previous wording

The quarter-over-prior year quarter increase in cost of revenues of $16.4 million was primarily attributable to an $11.1 million increase in infrastructure and facilities costs, a $3.8 million increase in personnel and labor costs, and a $1.1 million increase in outside services costs. The increase in infrastructure and facilities costs was primarily attributable to a prior-year quarter one-time reimbursement from a third-party data center provider for implementation costs previously incurred. The increase in personnel and labor costs was primarily attributable to increased incentive expense and increased headcount. The increase in outside services costs was primarily attributable to increased consulting expenses. Cost of revenues as a percentage of revenues increased to 20% during the quarter ended June 30, 2024 from 18% during the quarter ended June 30, 2023, primarily due to the increase in infrastructure and facilities costs, partially offset by increased sales of our higher-margin Scores products.

Current wording

The quarter-over-prior year quarter increase in cost of revenues of $3.9 million was primarily attributable to a $2.9 million increase in infrastructure and facilities costs and a $0.9 million increase in personnel and labor costs. The increase in infrastructure and facilities costs was primarily attributable to an increase in third-party data center hosting costs and an increase in depreciation on data center computer hardware. The increase in personnel and labor costs was primarily attributable to increased incentive expense and increased share-based compensation expense. Cost of revenues as a percentage of revenues decreased to 20% during the quarter ended December 31, 2024 from 22% during the quarter ended December 31, 2023, primarily due to increased sales of our higher-margin Scores products and decreased sales of our lower-margin professional services.

Previous wording

The quarter-over-prior year quarter increase in research and development expenses of $2.8 million was primarily attributable to increased third-party data center hosting costs and an increase in personnel and labor costs as a result of increased incentive expense. Research and development expenses as a percentage of revenues decreased to 10% during the quarter ended June 30, 2024 from 11% during the quarter ended June 30, 2023.

Current wording

The quarter-over-prior year quarter increase in research and development expenses of $2.5 million was primarily attributable to a $1.7 million increase in infrastructure and facilities costs primarily attributable to increased third-party data center hosting costs and software royalty fees and a $1.6 million increase in third-party contractor costs, partially offset by a $1.3 million decrease in personnel and labor costs. Research and development expenses as a percentage of revenues decreased to 10% during the quarter ended December 31, 2024 from 11% during the quarter ended December 31, 2023.

Previous wording

The quarter-over-prior year quarter increase in selling, general and administrative expenses of $16.8 million was primarily attributable to a $12.3 million increase in personnel and labor costs, a $2.7 million increase in outside services costs, and a $1.6 million increase in advertising and other promotional expenses. The increase in personnel and labor costs was primarily attributable to increased share-based compensation expense, increased headcount, and increased incentive expense. The increase in outside services costs was primarily attributable to increased legal and consulting expenses. The increase in advertising and other promotional expenses was primarily attributable to increased costs for corporate events. Selling, general and administrative expenses as a percentage of revenues increased to 28% during the quarter ended June 30, 2024 from 27% during the quarter ended June 30, 2023.

Current wording

The quarter-over-prior year quarter increase in selling, general and administrative expenses of $23.6 million was primarily attributable to a $12.6 million increase in personnel and labor costs and a $10.2 million increase in advertising and other promotional expenses. The increase in personnel and labor costs was primarily attributable to increased share-based compensation expense, increased headcount, and market base-pay adjustments. The increase in advertising and other promotional expenses was primarily attributable to increased costs for corporate events and advertising campaigns. Selling, general and administrative expenses as a percentage of revenues increased to 29% during the quarter ended December 31, 2024 from 27% during the quarter ended December 31, 2023.

Previous wording

The quarter-over-prior year quarter increase in interest expense of $2.3 million was primarily attributable to a higher average interest rate and higher average outstanding balance of borrowings under our credit agreement during the quarter ended June 30, 2024.

Current wording

The quarter-over-prior year quarter increase in interest expense of $5.3 million was primarily attributable to a higher average outstanding balance on borrowings under our credit agreement during the quarter ended December 31, 2024, partially offset by a lower average interest rate on borrowings under our credit agreement during the quarter ended December 31, 2024.

Previous wording

Other income, net consists primarily of unrealized investment gains/losses and realized gains/losses on certain investments classified as trading securities, exchange rate gains/losses resulting from remeasurement of foreign-currency-denominated receivable and cash balances held by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency forward contracts, and other non-operating items.

Current wording

Other income, net consists primarily of unrealized investment gains/losses and realized gains/losses on marketable securities classified as trading securities, exchange rate gains/losses resulting from remeasurement of foreign-currency-denominated receivable and cash balances held by our various reporting entities into their respective functional currencies at period-end market rates, net of the impact of offsetting foreign currency forward contracts, and other non-operating items.

Previous wording

The quarter-over-prior year quarter decrease in other income, net of $1.4 million was primarily attributable to a decrease in net unrealized gains on investments classified as trading securities in our supplemental retirement and savings plan.

Current wording

The quarter-over-prior year quarter decrease in other income, net of $3.3 million was primarily attributable to a decrease in net unrealized gains on investments classified as trading securities in our supplemental retirement and savings plan.

Previous wording

The effective income tax rate was 24.5% and 18.4% during the quarters ended June 30, 2024 and 2023, respectively, and 19.9% and 20.6% during the nine months ended June 30, 2024 and 2023, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The effective tax rate for the quarter ended June 30, 2023 was favorably impacted by the release of the valuation allowance previously established for our California state research and development tax credits.

Current wording

The effective income tax rate was (1.6)% and 7.3% during the quarters ended December 31, 2024 and 2023, respectively. The income tax provision (benefit) during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The effective tax rate for the quarter ended December 31, 2024 was favorably impacted by the excess tax benefit relating to share-based compensation.

Previous wording

The following tables set forth certain summary information on a segment basis related to our operating income for the quarters and nine-month periods ended June 30, 2024 and 2023.

Current wording

The following tables set forth certain summary information on a segment basis related to our operating income for the quarters ended December 31, 2024 and 2023:

Previous wording

The quarter-over-prior year quarter increase in operating income of $13.2 million was attributable to a $49.2 million increase in segment revenues, partially offset by an $18.5 million increase in segment operating expenses, a $9.4 million increase in share-based compensation cost, and an $8.0 million increase in corporate expenses.

Current wording

The quarter-over-prior year quarter increase in operating income of $28.2 million was primarily attributable to a $57.9 million increase in segment revenues, partially offset by a $17.2 million increase in segment operating expenses, a $9.1 million increase in share-based compensation cost, and a $3.8 million increase in corporate expenses.

Previous wording

At the segment level, the quarter-over-prior year quarter increase in segment operating income of $22.7 million was the result of a $36.0 million increase in our Scores segment operating income, partially offset by an $8.0 million increase in corporate expenses and a $5.3 million decrease in our Software segment operating income.

Current wording

At the segment level, the quarter-over-prior year quarter increase in segment operating income of $37.0 million was the result of a $35.1 million increase in our Scores segment operating income and a $5.6 million increase in our Software segment operating income, partially offset by a $3.8 million increase in corporate expenses.

Previous wording

The year-to-date period-over-period $84.8 million increase in Scores segment operating income was attributable to a $92.2 million increase in segment revenue, partially offset by a $7.4 million increase in segment operating expenses. Segment operating income as a percentage of segment revenue for Scores increased to 89% from 88%.

Current wording

The quarter-over-prior year quarter increase in Scores segment operating income of $35.1 million was due to a $43.6 million increase in segment revenue, partially offset by an $8.4 million increase in segment operating expenses. Segment operating income as a percentage of segment revenue for Scores decreased to 86% from 88%, primarily attributable to an increase in marketing expenses.

Previous wording

The quarter-over-prior year quarter increase in Scores segment operating income of $36.0 million was due to a $39.7 million increase in segment revenue, partially offset by a $3.7 million increase in segment operating expenses. Segment operating income as a percentage of segment revenue for Scores was 88%, consistent with the quarter ended June 30, 2023.

Current wording

The quarter-over-prior year quarter increase in Software segment operating income of $5.6 million was due to a $14.3 million increase in segment revenue, partially offset by an $8.7 million increase in segment operating expenses. Segment operating income as a percentage of segment revenue for Software was 30%, materially consistent with the quarter ended December 31, 2023.

Previous wording

As of June 30, 2024, we had $156.0 million in cash and cash equivalents, which included $120.8 million held by our foreign subsidiaries. We believe our cash and cash equivalents balances, including those held by our foreign subsidiaries, as well as available borrowings from our $600 million revolving line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future, including the $15.0 million principal payments on the $300 Million Term Loan due over the next 12 months. Under our current financing arrangements, we have no other significant debt obligations maturing over the next 12 months. For jurisdictions outside the U.S. where cash may be repatriated in the future, the Company expects the net impact of any repatriations to be immaterial to the Company’s overall tax liability.

Current wording

As of December 31, 2024, we had $184.3 million in cash and cash equivalents, which included $123.9 million held by our foreign subsidiaries. We believe our cash and cash equivalents balances, including those held by our foreign subsidiaries, as well as available borrowings from our $600 million revolving line of credit and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future, including the $15.0 million principal payments on the $300 Million Term Loan (as defined below) due over the next 12 months. Under our current financing arrangements, we have no other significant debt obligations maturing over the next 12 months. For jurisdictions outside the U.S. where cash may be repatriated in the future, the Company expects the net impact of any repatriations to be immaterial to the Company’s overall tax liability.

Previous wording

Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities increased to $406.5 million during the nine months ended June 30, 2024 from $304.9 million during the nine months ended June 30, 2023. The $101.6 million increase was attributable to a $49.2 million increase in net income, a $33.4 million increase in non-cash items, and a $19.0 million increase due to the timing of receipts and payments in our ordinary course of business.

Current wording

Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities increased to $194.0 million during the quarter ended December 31, 2024 from $122.1 million during the quarter ended December 31, 2023. The $71.9 million increase was attributable to a $31.5 million increase in net income, a $29.1 million increase due to the timing of receipts and payments in our ordinary course of business, and an $11.3 million increase in non-cash items.

Previous wording

Net cash used in investing activities increased to $20.4 million for the nine months ended June 30, 2024 from $13.0 million for the nine months ended June 30, 2023. The $7.5 million increase was primarily attributable to an $11.3 million increase in capitalized internal-use software costs and a $4.0 million increase in purchases of property and equipment, partially offset by a $6.1 million decrease in cash transferred, net of proceeds, from a product line asset sale.

Current wording

Net cash used in investing activities increased to $8.9 million for the quarter ended December 31, 2024 from $2.4 million for the quarter ended December 31, 2023. The $6.5 million increase was primarily attributable to a $6.3 million increase in capitalized internal-use software costs.

Previous wording

Net cash used in financing activities increased to $365.0 million for the nine months ended June 30, 2024 from $271.2 million for the nine months ended June 30, 2023. The $93.7 million increase was primarily attributable to a $213.0 million increase in repurchases of common stock and a $61.8 million increase in taxes paid related to net share settlement of equity awards, partially offset by a $183.0 million increase in proceeds, net of payments, from our revolving line of credit and term loans.

Current wording

Net cash used in financing activities increased to $144.2 million for the quarter ended December 31, 2024 from $99.9 million for the quarter ended December 31, 2023. The $44.4 million increase was primarily attributable to a $90.9 million increase in repurchases of common stock and a $64.2 million increase in taxes paid related to net share settlement of equity awards, partially offset by a $112.0 million increase in proceeds, net of payments, from our revolving line of credit and term loans.

Previous wording

In January 2024, our Board of Directors approved a stock repurchase program (the “January 2024 program”), replacing our previously authorized October 2022 stock repurchase program, which was terminated prior to its expiration. The January 2024 program was open-ended and authorized repurchases of shares of our common stock from time to time up to an aggregate cost of $500.0 million in the open market or in negotiated transactions. As of June 30, 2024, we had $113.6 million remaining under the January 2024 program. We expended $255.5 million and $98.6 million during the quarters ended June 30, 2024 and 2023, respectively, and $506.8 million and $289.9 million during the nine months ended June 30, 2024 and 2023, respectively, under the January 2024 program and previously authorized stock repurchase programs, as applicable.

Current wording

In July 2024, our Board of Directors approved a new stock repurchase program (the “July 2024 program”), replacing our previously authorized January 2024 stock repurchase program, which was terminated prior to its expiration. The July 2024 program is open-ended and authorizes repurchases of shares of our common stock from time to time up to an aggregate cost of $1.0 billion in the open market or in negotiated transactions. The July 2024 program remains in effect until the total authorized amount is expended or until further action by our Board of Directors. As of December 31, 2024, we had $600.7 million remaining under the July 2024 program. We expended $159.7 million during the quarter ended December 31, 2024 under the July 2024 program and $71.7 million during the quarter ended December 31, 2023 under previously authorized stock repurchase programs.

Previous wording

We have a $600 million unsecured revolving line of credit and a $300 million unsecured term loan (the “$300 Million Term Loan”) with a syndicate of banks that mature on August 19, 2026. Borrowings under the revolving line of credit and the $300 Million Term Loan can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. The $300 Million Term Loan requires principal payments in consecutive quarterly installments of $3.75 million on the last business day of each quarter. Interest rates on amounts borrowed under the revolving line of credit and the $300 Million Term Loan are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5%, and (c) one-month adjusted term Secured Overnight Financing Rate (“SOFR”) rate plus 1%, plus, in each case, an applicable margin, or (ii) an adjusted term SOFR rate plus an applicable margin (or, if such rate is no longer available, a successor benchmark rate determined in accordance with the terms of the credit agreement). Adjusted term SOFR is defined as term SOFR for the relevant interest period plus a SOFR adjustment of 0.10% per annum. The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio. The applicable margin for base rate borrowings ranges from 0% to 0.75% per annum and for SOFR borrowings ranges from 1% to 1.75% per annum. In addition, we must pay certain credit facility fees. The revolving line of credit and the $300 Million Term Loan contain certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0. The credit agreement also contains other covenants typical of unsecured credit facilities.

Current wording

We have a $600 million unsecured revolving line of credit, a $300 million unsecured term loan (the “$300 Million Term Loan”), and a $450 million unsecured term loan (the “$450 Million Term Loan”) with a syndicate of banks that mature on August 19, 2026. Borrowings under the revolving line of credit and the term loans can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. The $300 Million Term Loan requires principal payments in consecutive quarterly installments of $3.75 million on the last business day of each quarter. We have no obligation to make scheduled principal payments on the $450 Million Term Loan prior to the maturity date, but may prepay the $450 Million Term Loan, without premium or penalty, in whole or in part. Interest rates on amounts borrowed under the revolving line of credit and the term loans are based on (i) an adjusted base rate, which is the greatest of (a) the prime rate, (b) the Federal Funds rate plus 0.5%, and (c) one-month adjusted term Secured Overnight Financing Rate (“SOFR”) plus 1%, plus, in each case, an applicable margin, or (ii) an adjusted term SOFR plus an applicable margin (or, if such rate is no longer available, a successor benchmark rate determined in accordance with the terms of the credit agreement). Adjusted term SOFR is defined as term SOFR for the relevant interest period plus a SOFR adjustment of 0.10% per annum. The applicable margin for base rate borrowings and for SOFR borrowings is determined based on our consolidated leverage ratio. The applicable margin for base rate borrowings ranges from 0% to 0.75% per annum and for SOFR borrowings ranges from 1% to 1.75% per annum. In addition, we must pay certain credit facility fees. The revolving line of credit and the term loans contain certain restrictive covenants including a maximum consolidated leverage ratio of 3.5 to 1.0, subject to a step up to 4.0 to 1.0 following certain permitted acquisitions and subject to certain conditions, and a minimum interest coverage ratio of 3.0 to 1.0. The credit agreement also contains other covenants typical of unsecured credit facilities.

Previous wording

As of June 30, 2024, we had $118.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 6.688%, $262.5 million in outstanding balance of the $300 Million Term Loan at an interest rate of 6.688%, and $450.0 million in outstanding balance of the $450 Million Term Loan at an interest rate of 6.697%. We were in compliance with all financial covenants under the credit agreement as of June 30, 2024.

Current wording

As of December 31, 2024, we had $425.0 million in borrowings outstanding under the revolving line of credit at a weighted-average interest rate of 5.762%, $255.0 million in outstanding balance of the $300 Million Term Loan at an interest rate of 5.794%, and $450.0 million in outstanding balance of the $450 Million Term Loan at an interest rate of 5.745%. We were in compliance with all financial covenants under the credit agreement as of December 31, 2024.

Previous wording

For information about recent accounting pronouncements recently adopted and not yet adopted and the impact on our consolidated financial statements, refer to Part I, Item 1, “Unaudited Financial Statements,” Note 1, “Nature of Business” in our accompanying Notes to Condensed Consolidated Financial Statements.

Current wording

For information about recent accounting pronouncements not yet adopted and the impact on our consolidated financial statements, refer to Part I, Item 1, “Unaudited Financial Statements,” Note 1, “Nature of Business” in our accompanying Notes to Condensed Consolidated Financial Statements.