<SEC-DOCUMENT>0001193125-24-067876.txt : 20240425
<SEC-HEADER>0001193125-24-067876.hdr.sgml : 20240425
<ACCEPTANCE-DATETIME>20240314160550
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ACCESSION NUMBER:		0001193125-24-067876
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20240314

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FAIR ISAAC CORP
		CENTRAL INDEX KEY:			0000814547
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-BUSINESS SERVICES, NEC [7389]
		ORGANIZATION NAME:           	07 Trade & Services
		IRS NUMBER:				941499887
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		5 WEST MENDENHALL
		STREET 2:		SUITES 105
		CITY:			BOZEMAN
		STATE:			MT
		ZIP:			59715
		BUSINESS PHONE:		(406) 982-7276

	MAIL ADDRESS:	
		STREET 1:		5 WEST MENDENHALL
		STREET 2:		SUITES 105
		CITY:			BOZEMAN
		STATE:			MT
		ZIP:			59715

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FAIR ISAAC & COMPANY INC
		DATE OF NAME CHANGE:	19920703
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<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fair Isaac Corporation</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">5 West Mendenhall</P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Suite 105</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Bozeman, MT 59715 USA</P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">T +1 (406) 982 7276</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">www.fico.com</P></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">March&nbsp;14, 2024 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Via
EDGAR Transmission </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">U.S. Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Office of Trade&nbsp;&amp;
Services </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street, N.E. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549 </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Attention: Nasreen Mohammed and Joel Parker </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><B>Fair Isaac Corporation </B></P></TD></TR></TABLE>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:18%; font-size:10pt; font-family:Times New Roman"><B>Form 10-K the Year Ended September&nbsp;30, 2023</B> </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:18%; font-size:10pt; font-family:Times New Roman"><B><U>File No.&nbsp;001-11689</U></B> </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Dear
Ms.&nbsp;Mohammed and Mr.&nbsp;Parker, </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This letter is submitted in response to the comment letter of the staff of the Division of
Corporation Finance (the &#147;Staff&#148;) of the Securities and Exchange Commission, dated March&nbsp;4, 2024, with respect to review of the above-referenced filings of Fair Isaac Corporation (&#147;we,&#148; &#147;us,&#148; &#147;our,&#148; or
the &#147;Company&#148;).&nbsp;For your convenience, we have reproduced the text of the Staff&#146;s comments below in bold type, and our response thereto follows each comment. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Form 10-K for the Year Ended September&nbsp;30, 2023 </U></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations </U></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Annual Contract Value Bookings (ACV Bookings), page 32 </U></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>1. Please revise your disclosure to provide context to the amount of the ACV bookings that is based on estimates of future usage-based fees and disclose
whether differences between estimates and actual results have been material. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Company Response </U></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">A significant portion of our annual contract value bookings (&#147;ACV Bookings&#148;) consist of fixed amounts stated in the software contracts we sign,
while approximately 30% of the value is attributable to estimates of future usage-based fees. We will expand our discussion in future filings starting with our Quarterly Report on Form 10-Q for the quarter ending March&nbsp;31, 2024. Set forth below
is an illustrative example of how we would intend to expand our disclosure using the first three paragraphs under &#147;Annual Contract Bookings (&#147;ACV Bookings&#148;)&#148; that appeared on page 32 of our Annual Report on Form 10-K for the year
ended September&nbsp;30, 2023 (additional text shown as underlined; deleted text shown as strikethrough). </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><B><I>Annual Contract Value Bookings (&#147;ACV Bookings&#148;) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Management regards ACV Bookings as an important indicator of future revenues, but they are not comparable to, nor are they a substitute for,
an analysis of our revenues and other U.S. generally accepted accounting principles (&#147;U.S. GAAP&#148;) measures. We define ACV Bookings as the average annualized value of software contracts signed in the current reporting period that generate
current and future on-premises and SaaS software revenue. We only include contracts with an initial term of at least 24 months and we exclude perpetual licenses and other software revenues that are non-recurring in nature. For renewals of existing
software subscription contracts, we count only incremental annual revenue expected over the current contract as ACV Bookings. </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>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 &#151; including guaranteed minimums, if any &#151; 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&#146; 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. <U>For each of the periods presented, ACV Bookings related to estimates of future usage-based fees were 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</U>. </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>We disclose estimated revenue expected to be recognized in the future related to remaining performance obligations in Note 11 to the
accompanying consolidated financial statements. However, we believe ACV Bookings is a <STRIKE>more meaningful</STRIKE> <U>useful supplemental</U> measure of our business as it includes estimated revenues and future billings excluded from Note 11,
such as usage-based fees and guaranteed minimums derived from our on-premises software licenses, among others. </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Critical Accounting Policies and
Estimates </U></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Revenue Recognition, page 42 </U></P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>2. Regarding your revenue recognition, please tell us why you have not disclosed how much each estimate
and/or assumption has changed over the periods and the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation. Refer to Item&#8201;303(b)(3) of Regulation S-K. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Company Response </U></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We acknowledge the Staff&#146;s comment
and understand that the critical accounting estimates disclosure in Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations should supplement, but not duplicate, the description of significant accounting policies
in the notes to the financial statements. The assumptions and estimates utilized in connection with our recognition of revenue have been accurate in all material respects in the past, have not changed materially in the past, and we do not currently
expect that they will materially change in the future. In future filings we will revise this disclosure to include analysis of such factors as: why the estimate is subject to uncertainty; to the extent material and reasonably available, how much the
estimate and/or assumption has changed over a relevant period; and, to the extent material and reasonably available, the sensitivity of the reported amounts to the methods, assumptions and estimates underlying the estimate&#146;s calculation. In the
disclosure of our critical accounting estimates, we will also include, to the extent material and reasonably available, quantitative information that would help investors understand the impact of estimation uncertainty on our operating results and
financial condition. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Below is an illustrative example of how we would intend to expand our discussion of our revenue recognition critical accounting
policy in future Annual Reports on Form 10-K (additional text shown as underlined; deleted text shown as strikethrough). We do not believe these additional disclosures are material updates from the critical accounting policy disclosures in our
Annual Report on Form 10-K for the fiscal year ended September&nbsp;30, 2023. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>While our significant accounting policies are more fully
described in Note 1 <U>and Note 11</U> to our consolidated financial statements included elsewhere in this report, we believe the following discussion addresses our most critical accounting estimates, which involve significant subjectivity and
judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results. Therefore, we consider an understanding of the variability and judgment required in making these estimates and
assumptions to be critical in fully understanding and evaluating our reported financial results. </I></P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Revenue Recognition </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><B><I><STRIKE>Contracts with Customers</STRIKE> </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Our revenue is primarily derived from on-premises software and SaaS subscriptions, professional services and scoring services. For
contracts with customers that contain various combinations of products and services, we evaluate whether the products or services are distinct &#151; distinct products or services will be accounted for as separate performance obligations, while
non-distinct products or services are combined with others to form a single performance obligation. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative standalone
selling price (&#147;SSP&#148;) basis. Revenue is recognized when control of the promised goods or services is transferred to our customers</STRIKE>. </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Our on-premises software is primarily sold on a subscription basis, which includes a term-based license and post-contract support
or maintenance, both of which generally represent distinct performance obligations and are accounted for separately. The transaction price is either a fixed fee, or a usage-based fee &#151; sometimes subject to a guaranteed minimum. When the amount
is fixed, including the guaranteed minimum in a usage-based fee, license revenue is recognized at the point in time when the software is made available to the customer. Maintenance revenue is recognized ratably over the contract period as customers
simultaneously consume and receive benefits. Any usage-based fees not subject to a guaranteed minimum or earned in excess of the minimum amount are recognized when the subsequent usage occurs. We occasionally sell software arrangements consisting of
on-premises perpetual licenses and maintenance. License revenue is recognized at a point in time when the software is made available to the customer and maintenance revenue is recognized ratably over the contract term.</STRIKE> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Our SaaS products provide customers with access to and standard support for our software on a subscription basis, delivered through
our own infrastructure or third-party cloud services. The SaaS transaction contracts typically include a guaranteed minimum fee per period that allows up to a certain level of usage and a consumption-based variable fee in excess of the minimum
threshold; or a consumption-based variable fee not subject to a minimum threshold. The nature of our SaaS arrangements is to provide continuous access to our hosted solutions in the cloud, i.e., a stand-ready obligation that comprises a series of
distinct service periods (e.g., a series of distinct daily, monthly or annual periods of service).</STRIKE> <U>For our SaaS subscriptions,</U> we estimate the total variable consideration at contract inception &#151; subject to any constraints that
may apply &#151; and update the estimates as new information becomes available and recognize the amount ratably over the SaaS service period, unless we determine it is appropriate to allocate the variable amount to each distinct service period and
recognize revenue as each distinct service period is performed. <U>Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract
will not occur. Variable consideration is estimated based on either the expected value or the most likely amount </U> </I></P>
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method depending on which method we expect to better predict the amount of consideration to which we will be entitled. Our estimates of variable consideration are based largely on an assessment
of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us at contract inception and require judgment. For the periods presented, we have not experienced significant changes to our
estimates and judgments related to variable consideration in our contracts. </U></I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Our professional services include software
implementation, consulting, model development and training. Professional services are sold either standalone, or together with other products or services and generally represent distinct performance obligations. The transaction price can be a fixed
amount or a variable amount based upon the time and materials expended. Revenue on fixed-price services is recognized using an input method based on labor hours expended, which we believe provides a faithful depiction of the transfer of services.
Revenue on services provided on a time and materials basis is recognized by applying the &#147;right-to-invoice&#148; practical expedient as the amount to which we have a right to invoice the customer corresponds directly with the value of our
performance to the customer.</STRIKE> </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>For our professional services, significant judgment may be required to determine the
timing of satisfaction of a performance obligation in certain professional services contracts with a fixed consideration, in which we measure progress using an input method based on labor hours expended. In order to estimate the total hours of the
project, we make assumptions about labor utilization, efficiency of processes, the customer&#146;s specification and IT environment, among others. For certain complex projects, due to the risks and uncertainties inherent with the estimation process
and factors relating to the assumptions, actual progress may differ due to the change in estimated total hours. Adjustments to estimates are made in the period in which the facts requiring such revisions become known and, accordingly, recognized
revenues are subject to revisions as the contract progresses to completion. For the periods presented, we have not experienced significant changes to our estimates and judgments related to the timing of satisfaction of our professional services</U>.
</I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Our scoring services include both business-to-business and business-to-consumer offerings. Our business-to-business
scoring services typically include a license that grants consumer reporting agencies the right to use our scoring solutions in exchange for a usage-based royalty. Revenue is generally recognized when the usage occurs. Business-to-consumer offerings
provide consumers with access to their FICO<SUP STYLE="font-size:75%; vertical-align:top">&reg;</SUP> Scores and credit reports, as well as other value-add services. These are provided as either a one-time or ongoing subscription service renewed
monthly or annually, all with a fixed consideration. The nature of the subscription service is a stand-ready obligation to generate credit reports, provide credit monitoring, and other services for our customers, which comprises a series of distinct
service periods (e.g., a series of distinct daily, monthly or annual periods of service). Revenue from one-time or monthly subscription services is recognized during the period when service is performed. Revenue from annual subscription services is
recognized ratably over the subscription period.</STRIKE> </I></P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><B><I><STRIKE>Significant Judgments</STRIKE> </I></B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products
and services are considered distinct and should be accounted for separately may require significant judgment. Specifically, when implementation service is included in the original software or SaaS offerings, judgment is required to determine if the
implementation service significantly modifies or customizes the software or SaaS service in such a way that the risks of providing it and the customization service are inseparable. In rare instances, contracts may include significant modification or
customization of the software of SaaS service and will result in the combination of software or SaaS service and implementation service as one performance obligation. <U>For the periods presented, we have not experienced significant changes to our
estimates and judgments related to the identification of performance obligations for our contracts.</U></I> </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>We determine the SSPs
using data from our historical standalone sales, or, in instances where such information is not available (such as when we do not sell the product or service separately), we consider factors such as the stated contract prices, our overall pricing
practices and objectives, go-to-market strategy, size and type of the transactions, and effects of the geographic area on pricing, among others. When the selling price of a product or service is highly variable, we may use the residual approach to
determine the SSP of that product or service. Significant judgment may be required to determine the SSP for each distinct performance obligation when it involves the consideration of many market conditions and entity-specific factors discussed
above. <U>For the periods presented, we have not experienced significant changes to our estimates and judgments related to the determination of our SSPs.</U> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><STRIKE>Significant judgment may be required to determine the timing of satisfaction of a performance obligation in certain professional
services contracts with a fixed consideration, in which we measure progress using an input method based on labor hours expended. In order to estimate the total hours of the project, we make assumptions about labor utilization, efficiency of
processes, the customer&#146;s specification and IT environment, among others. For certain complex projects, due to the risks and uncertainties inherent with the estimation process and factors relating to the assumptions, actual progress may differ
due to the change in estimated total hours. Adjustments to estimates are made in the period in which the facts requiring such revisions become known and, accordingly, recognized revenues are subject to revisions as the contract progresses to
completion.</STRIKE> </I></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Item&#8201;8. Financial Statements and Supplementary Data </U></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Capitalized Software and Research and Development Costs, page 57 </U></P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>3. Please tell us why costs incurred to maintain and support existing products are included in research
and development. Refer to ASC 730-10-55. </B></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Company Response </U></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company acknowledges the Staff&#146;s comment and confirms we do not include costs incurred to maintain and support existing products in research and
development costs. Costs incurred to maintain and support existing products are included in cost of revenues in our consolidated statements of income and comprehensive income. Set forth below is an illustrative example of how we would intend to
revise the disclosure regarding our capitalized software and research and development costs in future Annual Reports on Form 10-K (additional text shown as underlined and deleted text shown as strikethrough). </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:2%; font-size:10pt; font-family:Times New Roman"><B><I>Capitalized Software and Research and Development Costs </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Software development costs relating to products to be sold in the normal course of business are expensed as incurred as research and
development costs until technological feasibility is established. Technological feasibility for our products occurs approximately concurrently with the general release of our products; accordingly, we have not capitalized any development or
production costs. Costs we incur to maintain and support our <STRIKE>existing</STRIKE> products <STRIKE>after the general release of the product</STRIKE> are expensed in the period they are incurred and included in <U>cost of revenues</U>
<STRIKE>research and development costs</STRIKE> in our consolidated statements of income and comprehensive income. </I></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">* * * * </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We appreciate the opportunity to respond to your comments.&nbsp;If you have any questions with respect to this letter or if you require
additional information, please feel free to contact me directly at 612-758-5356.</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top">Sincerely,</TD></TR>
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<TD VALIGN="top">/s/ Steven Weber</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD></TR>
<TR STYLE="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Steven Weber</TD></TR>
<TR STYLE="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Chief Financial Officer</TD></TR>
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