02 October 2014

Strong growth in electronic payments drives Jack Henry financials

02 May 2012  |  1224 views  |  0 Source: Jack Henry

Jack Henry & Associates, Inc., a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announced third quarter fiscal 2012 results with a 7% increase in revenue, an increase of 8% in gross profit and a 11% increase in net income over the third quarter of fiscal 2011.

For the first nine months of fiscal 2012, revenue increased 6%, with an increase of 7% in gross profit, and an increase of 11% in net income compared to last year.

For the quarter ended March 31, 2012, the company generated total revenue of $256.3 million compared to $240.2 million in the same quarter a year ago. Gross profit increased to $103.4 million from $95.3 million in the third quarter of last fiscal year. Net income in the current quarter was $36.7 million, or $0.42 per diluted share, compared to $33.1 million, or $0.38 per diluted share in the same quarter a year ago.

For the nine months ended March 31, 2012, total revenue of $760.5 million was generated compared to $717.6 million in the first nine months of fiscal 2011. Gross profit increased to $315.2 million compared to $295.1 million during the same period last fiscal year. Net income for the first nine months of fiscal 2012 totaled $111.7 million, or $1.28 per diluted share, compared to $100.9 million, or $1.17 per diluted share for the same nine month period in fiscal 2011.

According to Jack Prim, CEO, "We continue to see an improved spending environment, favorably influenced by improving financial institution balance sheets and fee income that has been less negatively impacted than was expected a year ago. In addition to the solid financial performance in the quarter our biennial employee engagement survey showed solid gains across the board, which we believe bodes well for our Customers and our Shareholders."

Operating Results

"We continue to have a very strong fiscal 2012 with record revenue, record gross profit and net income for the third quarter compared to any fiscal year and record all time backlog," stated Tony Wormington, President. "Our Support and Services line of revenue continues to grow and contribute nicely, which represents 88% of our total revenue. Within this line we continue to see strong growth in all of our electronic payment offerings with 11% growth in revenue for both the quarter and year to date compared to the same periods last year. Overall our Support and Services revenue grew 8% for the quarter compared to a year ago and has grown 6% year to date."

License revenue for the third quarter increased to $15.0 million, or 6% of third quarter total revenue, from $13.0 million, or 5% of third quarter total revenue a year ago. Support and service revenue increased 8% to $226.5 million, or 88% of total revenue in third quarter of fiscal 2012 from $210.1 million, or 87% of total revenue for the same period a year ago. Within support and service revenue, electronic payment services (which include ATM/debit/credit card transaction processing, bill payment, remote deposit capture and ACH transaction processing services) had the largest growth of $8.6 million or 11% in the third quarter compared to the same quarter a year ago. Hardware sales in the third quarter of fiscal 2012 decreased 14% to $14.8 million (6% of total revenue), from $17.1 million (7% of total revenue) in the third quarter of last fiscal year.

For the first nine months of fiscal 2012, license revenue increased 8% to $40.8 million from $37.9 million and was 5% of total revenue in both years. There was growth in all components of support and service revenue in fiscal 2012 resulting in a 6% increase in support and service revenue, which expanded to $672.4 million in the nine months ended March 31, 2012 from $633.1 million for the same period a year ago. Support and service was 88% of total revenue in both periods. Hardware sales in the first nine months of fiscal 2012 increased 1% to $47.3 million, from $46.6 million. Hardware revenue was 6% of total revenue in both periods.

Cost of sales for the third quarter increased 6% to $152.9 million from $144.9 million for the third quarter in fiscal 2011. Gross profit increased 8% to $103.4 million for the third quarter this fiscal year from $95.3 million last year. Gross margin was 40% in both periods.

Cost of sales for the nine months ended March 31, 2012 increased 5%, to $445.3 million from $422.5 million for the same period ended March 31, 2011. Gross profit for the nine month period increased 7% to $315.2 million compared to $295.1 million last year. Gross margin was 41% for both year-to-date periods.

Gross margin on license revenue for the third quarter of fiscal 2012 was 84% compared to 91% in the third quarter of fiscal 2011. For the nine months ended March 31, 2012 gross margin on license was 89% compared to 88% in the same period a year ago. The change in license gross margin is a result of fluctuations in the sales mix of products delivered. Support and service gross margin was 38% in the third quarter of both fiscal 2012 and fiscal 2011. The support and service gross margin was 40% in the nine month period ending March 31, 2012, up slightly compared to 39% in March 31, 2011. Hardware gross margins increased for the third quarter at 26% compared to 25% for the same quarter last year. Hardware gross margins also increased to 28% for the nine month period this fiscal year, from 26% in the nine month period last fiscal year.

Operating expenses increased 5% in the third quarter of fiscal 2012 compared to the same quarter a year ago primarily due to increased selling and marketing expenses. Selling and marketing expenses increased 12% in the current year third quarter to $19.0 million, or 7% of total revenue, from $16.9 million, or 7% of prior year third quarter revenue. Research and development expenses decreased 2% to $15.5 million, or 6% of total revenue, from $15.7 million, or 7% of total revenue, for the third quarter in fiscal 2011. General and administrative costs increased 2% in the current year third quarter to $12.4 million, or 5% of total revenue, from $12.1 million, or 5% of total revenue, in the third quarter of fiscal 2011.

For the nine months ending March 31, 2012, operating expenses increased 2% to $140.1 million, compared to $136.9 million for the same period a year ago, primarily due to increased commission expenses in line with increased revenue. Selling and marketing expenses increased 11% in the nine months ended March 31, 2012 to $55.9 million from $50.3 million in the prior year, and was 7% of revenue for both fiscal years. Research and development expenses decreased 3% to $45.5 million for fiscal 2012 year to date, from $46.9 million last year. Research and development expenses decreased to 6% of total revenue from 7% of total revenue in the prior year. General and administrative costs decreased 2% to $38.7 million in the first nine months of fiscal year 2012, from $39.7 million for the same period a year ago, and also decreased to 5% of total revenue in fiscal 2012 from 6% in fiscal 2011.

Operating income increased 12% to $56.5 million, or 22% of third quarter revenue, compared to $50.5 million, or 21% of revenue in the third quarter of fiscal 2011. Provision for income taxes increased 17% in the current third quarter compared to the same quarter in fiscal 2011 and is 33.5% of income before income taxes this quarter compared to 32.3% of income before income taxes for the same period in fiscal 2011. The prior year percentage was lower due primarily to the Research and Experimentation Credit ("R&E Credit") which expired December 31, 2011. Third quarter net income totaled $36.7 million, or $0.42 per diluted share, compared to $33.1 million, or $0.38 per diluted share in the third quarter of fiscal 2011.

Operating income increased 11% to $175.1 million for the first nine months of fiscal 2012 compared to $158.3 million for the same period a year ago. Year to date operating income was 23% of total revenue, a slight increase from 22% last fiscal year. Provision for income taxes increased to 34.7% of income before income taxes year to date in fiscal 2012 compared to 33.3% year to date in fiscal 2011. Year-to-date net income totaled $111.7 million for fiscal 2012, or $1.28 per diluted share, compared to $100.9 million, or $1.17 per diluted share, for fiscal 2011.

For the third quarter of 2012, the bank systems and services segment revenue increased 6% to $194.7 million from $183.5 million in the same quarter last year. Gross margin was 40% in both the current and prior year fiscal quarters. The credit union systems and services segment revenue increased 9% to $61.6 million with a gross margin of 40% for the third quarter of 2012 from $56.7 million and a gross margin of 38% in the same period a year ago.

For the nine months ended March 31, 2012, the bank systems and services segment revenue increased 4% to $577.6 million from $554.4 million with a gross margin of 42% for both periods. The credit union systems and services segment revenue increased 12% to $182.9 million for the first nine months of fiscal 2012 from $163.3 million in the same period a year ago, with gross margin increasing to 41% in the current year, from 38% for the same nine month period last year.

According to Kevin Williams, CFO, "the reported results for the quarter were in line with our internal budget and forecasts, as total revenue continues to be within 1%. However, our margins continue to be slightly ahead of budget as our Managers and Associates continue to do an outstanding job of focusing on revenue growth while at the same time controlling our overall costs."

Balance Sheet, Cash Flow, and Backlog Review

At March 31, 2012, cash and cash equivalents increased to $89.8 million from $54.4 million at March 31, 2011. Trade receivables increased slightly to $118.4 million from $115.5 million a year ago. Current and long term debt decreased from $244.7 million a year ago to $141.1 million at March 31, 2012 primarily due to the repayment of the revolving loan and ongoing quarterly term loan payments. Deferred revenue increased slightly to $138.3 million at March 31, 2012, compared to $137.6 million a year ago. Stockholders' equity increased 15% to $978.8 million at March 31, 2012, compared to $849.5 million a year ago.

Backlog increased 18% at March 31, 2012 to $397.0 million ($82.4 million in-house and $314.6 million outsourcing) from $335.5 million ($76.9 million in-house and $258.6 million outsourcing) at March 31, 2011. Backlog increased 5% when compared to December 31, 2011, which was $378.8 million ($73.7 million in-house and $305.0 million outsourcing).

Cash provided by operations totaled $118.0 million in the current year compared to $115.2 million last year.

Cash used in investing activities for fiscal 2012 of $49.4 million included capital expenditure on facilities and equipment of $26.6 million and $25.9 million for the development of software. Cash used in investing activities for fiscal 2011 was $43.5 million and included capital expenditures of $24.2 million, and capitalized software development of $19.3 million.

During fiscal 2012, net cash used in financing activities for the current fiscal year is $42.0 million and includes repayments on our credit facilities of $24.3 million and the payment of dividends of $28.2 million. Cash used in financing activities was partially offset by net proceeds of $10.5 million from the exercise of stock options, the sale of common stock and excess tax benefits from stock option exercises. Net cash used in financing activities for the prior fiscal year was $142.8 million and includes repayments on our credit facilities of $136.9 million and dividends paid of $25.3 million, partially offset by net proceeds of $19.0 million from the exercise of stock options, the sale of common stock and excess tax benefits from stock option exercises.

Comments: (0)

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Related blogs

Create a blog about this story (membership required)

Related company news

 

Featured job

Commensurate with the status and importance of thi...
London based with substantial international travel

Find your next job