21 September 2014

Jack Henry reports 14% full year net income rise

13 August 2014  |  906 views  |  0 Source: Jack Henry & Associates, Inc.

Jack Henry & Associates, Inc. (JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announced fiscal 2014 results.

Total revenue increased 7% compared to the prior fiscal year to $1,210.1 million and gross profit increased 9% to $518.6 million.  Net income rose 14% compared to the prior fiscal year to $201.1 million.

For the quarter ended June 30, 2014, the company generated total revenue of $310.9 million compared to $298.1 million in the same quarter a year ago.  Gross profit increased to $132.6 million from $124.2 million in the fourth quarter of last fiscal year.  Net income in the current quarter was $50.6 million, or $0.60 per diluted share, compared to $47.7 million, or $0.55 per diluted share in the same quarter a year ago.

In fiscal 2014, total revenue of $1,210.1 million was generated compared to $1,129.4 million in fiscal 2013. Gross profit increased to $518.6 million compared to $477.0 million during last fiscal year. Net income for the current year was $201.1 million, or $2.36 per diluted share, compared to $176.6 million, or $2.04 per diluted share for the prior year.

According to Jack Prim, CEO, "We are very pleased to announce record revenue for both the fourth quarter and fiscal year as well as record earnings for the full fiscal year.  We delivered a balanced performance that benefitted our shareholders, customers and employees, and we feel good about the outlook for FY15."

Operating Results

License revenue for the fourth quarter increased to $13.1 million, or 4% of fourth quarter total revenue, from $12.1 million, or 4% of fourth quarter total revenue a year ago.  All components of support and service revenue grew in the quarter compared to the prior year and increased 5% to $283.6 million, or 91% of total revenue in the fourth quarter of fiscal 2014 from $269.9 million, or 91% of total revenue for the same period a year ago.  Hardware sales in the fourth quarter of fiscal 2014 decreased 12% to $14.2 million, from $16.2 million in the fourth quarter of last fiscal ye quarter of fiscal 2014 decreased 12% to $14.2 million, from $16.2 million in the fourth quarter of last fiscal year.  Hardware revenue was 5% of total revenue in both periods.

For the fiscal year 2014, license revenue decreased 3% to $53.0 million from $54.8 million a year ago. License revenue was 5% of total revenue last year, dropping to 4% in the current fiscal year.  There was growth in all components of support and service revenue in fiscal 2014 resulting in an 8% increase in support and service revenue, which expanded to $1,098.4 million from $1,015.2 million last year. Support and service as a percentage of total revenue increased to 91% of fiscal 2014 revenue from 90% last year. Hardware sales for the fiscal year decreased 1% to $58.7 million, or 5% of total revenue, from $59.4 million, or 5% of total revenue, in the same period last year.

According to Kevin Williams, CFO, "as we discussed a year ago there was a significant amount of one-time revenue impacts during the quarter and the entire prior fiscal year, which created very challenging comps.  Backing out the entire impact of the unexpected one-time revenue impacts primarily from early termination fees, our revenue actually grew 7% for the quarter and 8% for the entire fiscal year compared to the same periods last year."

Cost of sales for the fourth quarter increased 3% to $178.4 million from $173.9 million in the fourth quarter of fiscal 2013.  Gross profit increased 7% to $132.6 million for the fourth quarter this fiscal year from $124.2 million last year.  Gross margin was 43% in the fourth quarter compared to 42% in the same quarter last year.

Cost of sales for fiscal year 2014 increased 6%, to $691.4 million from $652.4 million for the year ended June 30, 2013. Gross profit increased 9% to $518.6 million compared to $477.0 million last year. Gross margin was 43% for fiscal 2014 compared to 42% last year.

Gross margin on license revenue for the fourth quarter of fiscal 2014 was 94% compared to 91% for fiscal 2013.  Gross margin on license was 92% for fiscal year 2014 compared to 91% for fiscal year 2013. Support and service gross margin was 41% in the fourth quarter of fiscal 2014, increasing from 40% in the fourth quarter of fiscal 2013. The support and service gross margin was 41% for both years ending June 30, 2014 and June 30, 2013. Hardware gross margins decreased for the fourth quarter to 23% from 26% for the same quarter last year.   Year-to-date hardware gross margins also decreased from 26% in the twelve months ended June 30, 2013 to 25% for the twelve months ended June 30, 2014.

Operating expenses increased 3% in the fourth quarter of fiscal 2014 compared to the same quarter a year ago primarily due to increased headcount and related salaries.  Selling and marketing expenses increased 7% in the current year fourth quarter to $22.0 million, or 7% of total revenue, from $20.6 million, or 7% of prior year fourth quarter revenue.  Research and development expenses increased 3% to $17.4 million, or 6% of total revenue, from $16.9 million, or 6% of total revenue, for the fourth quarter in fiscal 2013.  General and administrative costs decreased 4% in the current year fourth quarter to $13.3 million, or 4% of total revenue, from $13.9 million, or 5% of total revenue, in the fourth quarter of fiscal 2013.

For the fiscal year ended June 30, 2014, operating expenses decreased 2% to $206.6 million, compared to $211.4 million for the same period a year ago.  Selling and marketing expenses increased 6% in fiscal year 2014 to $86.6 million from $81.6 million in the prior year, and remained at 7% of total revenue for both fiscal years.  Research and development expenses increased 6% to $66.7 million, or 6% of total revenue, for fiscal 2014, from $63.2 million, or 6% of total revenue, last year. General and administrative costs decreased 20% to $53.3 million in fiscal 2014, from $66.6 million for the same period a year ago, and also decreased to 4% of total revenue in fiscal 2014 from 6% in fiscal 2013.  The decrease in general and administrative costs is primarily due to the prior year expenses related to the flooding at our Lyndhurst, New Jersey item processing center.

Operating income increased 9% to $79.8 million, or 26% of fourth quarter revenue, compared to $72.9 million, or 24% of revenue in the fourth quarter of fiscal 2013.  Provision for income taxes increased 28% in the current fourth quarter compared to the same quarter in fiscal 2013 and is 36.4% of income before income taxes this quarter compared to 32.2% of income before income taxes for the same period in fiscal 2013.  Fourth quarter net income totaled $50.6 million, or $0.60 per diluted share, compared to $47.7 million, or $0.55 per diluted share in the fourth quarter of fiscal 2013.

Operating income increased 17% to $312.0 million for fiscal 2014 compared to $265.5 million a year ago. Operating income was 26% of total revenue in fiscal 2014 compared to 24% in the prior fiscal year. Provision for income taxes as a percentage of income before income taxes increased to 35.4% in fiscal 2014 from 32.0% in fiscal 2013.  Net income totaled $201.1 million for fiscal 2014, or $2.36 per diluted share, compared to $176.6 million, for fiscal 2013, or $2.04 per diluted share.

For the fourth quarter of fiscal 2014, the bank systems and services segment revenue increased 5% to $235.8 million from $224.5 million in the same quarter last year.  Gross margin was 42% in the fourth quarter of 2014, compared with 41% in the same period last year.  The credit union systems and services segment revenue increased 2% to $75.1 million with a gross margin of 45% for the fourth quarter of 2014 from $73.6 million and a gross margin of 44% in the same period a year ago.

For the year ended June 30, 2014, the bank systems and services segment revenue increased 8% to $913.0 million from $848.1 million, with a gross margin of 42% for both the current and prior year. The credit union systems and services segment revenue increased 6% to $297.1 million for fiscal 2014 from $281.3 million last year, with gross margin increasing to 45% in the current year, from 44% last year.

Full figures available here.

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