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Jack Henry Q4 net income rises

03 February 2010  |  1333 views  |  0 Source: Jack Henry & Associates

Jack Henry & Associates (Nasdaq: JKHY), a leading provider of integrated technology solutions that performs data processing for financial institutions, today announced second quarter fiscal 2010 results with an 11% increase in revenue, an increase of 15% in gross profit, and a 7% increase in net income compared to the second quarter of fiscal 2009.

For the first six months of fiscal 2010 revenue increased 5%, with an increase of 9% in gross profit, and an increase of 11% in net income over the same six months in fiscal 2009.

For the quarter ended December 31, 2009, the company generated total revenue of $210.9 million compared to $190.2 million in the same quarter a year ago. Gross profit increased to $89.1 million compared to $77.4 million in the second quarter of last fiscal year. Net income totaled $30.0 million, or $.35 per diluted share, compared to $28.0 million, or $0.33 per diluted share in the same quarter a year ago.

For the first half of fiscal 2010, total revenue of $393.2 million was generated compared to $373.3 million for the first half of fiscal 2009. Gross profit increased to $163.5 million compared to $149.9 million during the same period last fiscal year. Net income for the first half of fiscal 2010 was $56.3 million, or $.66 per diluted share, compared to $50.5 million, or $0.59 per diluted share for the same six months in fiscal 2009.

According to Jack Prim, CEO, "We are generally pleased with the overall performance in the quarter. We continued to see positive impacts resulting from our cost control initiatives with a 14% improvement in operating income compared to the prior year, even with the inclusion of the one-time expenses related to the acquisitions. The integration of both acquisitions during the quarter continues to progress in line with original plans and the cost synergies and EPS contributions from these acquisitions are also tracking in line with the original guidance provided."

Operating Results

"Support and services revenue grew 19% for the quarter compared to last year, which a large part of this was related to the recently announced acquisitions. However, organically this line of revenue grew 5% compared to the prior year quarter and increased 4% sequentially. This is due to the continued demand for the components that makd demand for the components that make up our recurring revenue," stated Tony Wormington, President. "As these offerings continue to grow they also have the ability to expand our gross margins through additional leverage of the existing infrastructure. In addition to this our managers and all of our associates continue to focus on improving margins through the control of operating costs."

License revenue for the second quarter was $12.0 million, or 6% of total revenue, compared to $14.9 million, or 8% of total revenue, for the same period last year. Support and service revenue increased to $184.1 million, or 87% of total revenue in second quarter of fiscal 2010 from $155.1 million, or 82% of total revenue for the same period a year ago. Hardware sales in the second quarter of fiscal 2010 decreased to $14.7 million, or 7% of total revenue, from $20.3 million, or 11% of total revenue in the second quarter of last fiscal year.

For the first half of fiscal 2010, license revenue was $23.4 million, or 6% of total revenue, compared to $28.2 million, or 8% of the total revenue a year ago. Support and service revenue comprised 86% of total revenue, or $340.1 million for the first six months of the current fiscal year compared to $307.0 million, or 82% of total revenue for the first six months of the prior fiscal year. Hardware sales for the first half of fiscal 2010 were $29.7 million, or 8% of total revenue, compared to $38.1 million, or 10% of total revenue, for the same period last year.

Cost of sales for the second quarter increased to $121.8 million for the three months ended December 31, 2009 from $112.8 million for the three months ended December 31, 2008. Second quarter gross profit increased 15% to $89.1 million compared to $77.4 million a year ago. Gross margin increased to 42% from 41% a year ago.

Cost of sales for the six months ended December 31, 2009 increased 3%, to $229.7 million from $223.4 million for the period ended December 31, 2008. Gross profit for the first half of fiscal 2010 increased 9% to $163.5 million compared to $149.9 for the first half of fiscal 2009. Gross margin was 42% for the six-month period ended December 31, 2009 compared to 40% for the six-month period ended December 31, 2008.

Gross margin on license revenue for the second quarter was 91% compared to 86% a year ago. For the six months ended December 31, 2009, gross margin on license revenue was 91% compared to 89% for the same period a year ago. The increase in gross margin on license revenue is attributable to a decrease in third party software delivered in the current periods compared to those in the prior year.

Support and service gross margin increased to 40% for the second quarter of fiscal 2010 compared to 38% a year ago. Support and service gross margin also increased to 39% for the first six months of fiscal 2010 compared to 37% for the first six months in fiscal 2009. Hardware gross margins for the second quarter were 27% compared to 30% for the same quarter last year. Hardware gross margin decreased to 27% for the first six months of fiscal 2010 compared to 28% for the first six months in fiscal 2009.

Operating expenses increased 17% for the second quarter of fiscal 2010 compared to the same quarter a year ago primarily due to increases in our general and administrative and research and development costs, resulting largely from the acquisition of Goldleaf Financial Solutions, Inc. and PEMCO Technology Services, Inc. during the current quarter. Selling and marketing expenses increased 7% to $14.9 million in the current year second quarter compared to the prior year of $13.8 million and remained steady at 7% of total revenue. Research and development expenses increased 21% to $12.3 million, or 6% of revenue, from $10.2 million, or 5% of total revenue in the second quarter of fiscal 2009. General and administrative costs increased 24% to $14.5 million or 7% of revenue, in the second quarter of fiscal year 2010, from $11.7 million, or 6% of revenue for the same quarter a year ago.

Operating expenses increased 2% for fiscal 2010 year to date compared to the same period a year ago primarily due to increased general and administrative costs. Selling and marketing expenses decreased 3% in the same period to $27.0 million from $27.8 million, while remaining at 7% of total revenue for the second quarters in fiscal 2010 and 2009. Research and development expenses increased 3% to $22.5 million or 6% of revenue for the first half of fiscal 2010 from $21.7 million, or 6% of revenue for the same period a year ago. General and administrative costs increased 7% to $24.7 million compared to the prior year at $23.2 million and remained at 6% of total revenue for both periods.

Operating income increased 14% to $47.4 million, or 22% of second quarter revenue, compared to $41.6 million, or 22% of revenue in the second quarter of fiscal 2009. Provision for income taxes is 36.5% for the second quarter in fiscal 2010 compared to 32.1% last year. The increase is due to the renewal of the Research and Experimentation Credit in fiscal 2009, which was retroactive to January 1, 2008. This resulted in twelve months of tax benefit from the Credit being recognized all within the second quarter of fiscal 2009. Second quarter net income totaled $30.0 million, or $.35 per diluted share, compared to $28.0 million, or $0.33 per diluted share in the second quarter of fiscal 2009.

Operating income increased 16% to $89.3 million for the first six months of fiscal 2010 compared to $77.2 million for the same period a year ago. For the current year-to-date period, operating income was 23% of total revenues compared to 21% in the prior year's period. Provision for income taxes is 36.9% year to date fiscal 2010 compared to 34.4% year to date in fiscal 2009 due to the retroactive renewal during the current year of the Research and Experimentation Credit. Year to date net income increased 11% and totaled $56.3 million, or $.66 per diluted share, compared to $50.5 million, or $0.59 per diluted share in the prior year.

For the second quarter of 2010, the bank systems and services segment revenue increased 10% to $171.0 million from $156.0 million in the same quarter a year ago. The bank system and services segment gross margin was 43% for the current quarter compared to 40% a year ago. The credit union systems and services segment revenue increased 17% to $39.8 million with a gross margin of 38% for the second quarter of 2010 from revenue of $34.2 million and a gross margin of 43% in the same period a year ago. The credit union segment gross margin was lower primarily due to a decrease in license revenue which has higher margins than other revenue components.

For the six months ended December 31, 2009, the bank systems and services segment revenue increased 5% to $321.4 million from $305.9 million with a gross margin of 42% for the current period compared to 40% a year ago. The credit union systems and services segment revenue increased 7% to $71.7 million for the first half of fiscal 2010, with a gross margin of 38% from revenue of $67.4 million and gross margin of 42% in the same period a year ago.

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