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MONETT, Mo., Jul 23, 2003 /PRNewswire-FirstCall via COMTEX/ --
Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading provider of integrated technology solutions for financial institutions, today reported solid fourth quarter and fiscal year profitability and backlog in one of the most difficult markets the technology industry has seen in more than a decade. Continued success in the expansion into the credit union market for both in-house and outsourcing, competitive wins in both the banking and credit union segments, expansion of outsourcing services, and sales of complementary products were the major contributing factors to the company's solid performance in fiscal 2003.
For the fiscal year ended June 30, 2003, the Company generated total revenues of $404.6 million, compared to $396.7 million in fiscal 2002. Net income totaled $49.4 million, or $0.55 per diluted share, compared to $57.1 million, or $0.62 per diluted share, a year ago. Fourth quarter total revenues were $109.2 million, compared to $106.1 million, and net income was $14.1 million, or $0.16 per diluted share, compared to $15.9 million, or $0.17 per diluted share, in the like quarter a year ago.
Fiscal 2003 Highlights:
"The fourth quarter was definitely the strongest quarter of the year, showing incremental improvement in revenues, margins and profitability over the prior three quarters," said Michael E. Henry, Chairman and CEO. "Even with the challenges presented by one of the toughest years ever in the technology industry, fiscal 2003 was a solidly profitable one for us and a year in which we laid the groundwork for the future. During the year we made product changes to our core banking software which have allowed us to effectively move further upstream and downstream from what has been our historical banking market. We also made an acquisition in the credit union segment which allows us to market our products to all credit unions regardless of size. I am very proud of our team members for their efforts this year and the current positioning of our organization for future success."
"We continue to see encouraging signs in the market, although our outlook is for a slow, steady improvement over the next year rather than a steep ramp up of business," said Jack Prim, President. "During the year we opened two new item processing centers, one of them by acquisition, and announced we will open one more location this fall continuing the expansion of our geographic footprint in our growing outsourcing business. Our credit union segment continues to provide significant revenue opportunities and we see potential for strong margin expansion in this segment of our business as we continue to leverage our existing infrastructure, particularly in the areas of our ATM/Debit switch and outsourcing services. We are just now beginning to get traction in this segment with both of these offerings."
Operating Results
Fourth quarter revenues grew 3% to $109.2 million compared to $106.1 million in the fourth quarter a year ago. Fiscal 2003 revenues were up 2% to $404.6 million compared to $396.7 million in fiscal 2002. Gross customer reimbursements are now included and presented in the correlating line items of support and services or hardware revenues and costs, respectively.
Reflecting the strength in new outsourcing business, support and services continues to grow its contribution to revenues, growing to 64% of revenues in 2003 compared to 58% of 2002 revenues. Fourth quarter support and service revenue increased 14% to $69.8 million from $61.2 million in the fourth quarter of 2002.
Continuing softness in banking core system sales negatively impacted revenues from license fees and hardware sales in 2003. Fourth quarter license revenue dropped 34% to $12.0 million, accounting for 11% of total revenues, compared to $18.1 million, or 17% of revenues, in the prior year. For the full year, license fees dropped 27% to $48.3 million or 12% of total 2003 revenues, compared $66.6 million, or 17% of 2002 revenues.
Cost of sales increased 5% during the quarter and 7% during the fiscal year, primarily due to increased headcount included in cost of services. Fourth quarter gross margin was 39% this fiscal year compared to 41% in the prior year. Year-to-date gross margin was 38% compared to 41% in fiscal 2002. Support and service margins continue to strengthen to 33% up from 32% for the same quarter a year ago. Year-to-date support and service margin increased to 32% this year from 29% in the prior year. The increase is primarily due to increased volumes, number of customers and continued leveraging of resources in our outsourcing and ATM/Debit card processing services. Hardware gross margin for the fourth quarter was 33% compared to 25% for the same quarter last year. Year-to-date hardware margin decreased from 30% in the prior year to 28% in the current year. The decrease in hardware margin for the year is primarily attributable to the sales mix of products and reduced vendor incentives.
Operating expenses increased 9% during the quarter and 2% for the full year, with the majority of the increase generated from research and development expenses. Research and development expense went up by 39% for the quarter and 27% for the year primarily as a result of increased headcount for ongoing development of new products and enhancements to existing products in both segments of our business.
Operating income decreased 7% in the quarter to $22.1 million compared to $23.9 million in the fourth quarter a year ago. Fiscal 2003 operating income totaled $77.3 million, down 11% from $86.6 million in fiscal 2002. Fourth quarter pre-tax income totaled $22.2 million, down 8% from $24.1 million in the fourth quarter a year ago. Pre-tax income for fiscal 2003 totaled $77.8 million, down 12% from $88.5 million a year ago. Fourth quarter net income totaled $14.1 million, or $0.16 per share, compared to $15.9 million or $0.17 per share in the same quarter of fiscal 2002. Net income was $49.4 million, or $0.55 per share, in fiscal 2003 compared to $57.1 million, or $0.62 per share, in fiscal 2002.
Cash Flow and Balance Sheet Review
"As we have explained in the previous two quarters, we shifted our annual in-house support billing cycle for customers that came to us through acquisitions to our fiscal year end from a calendar year. Included in the June 30 annual support billings was an increase of $25.0 million because of this shift in billing cycles and is the primary reason for the increase in receivables and approximately $12.5 million of the increase in deferred revenue at June 30, 2003 compared to the prior year," said Kevin D. Williams, CFO. Trade receivables increased $19.5 million to $151.0 million and deferred revenue increased $23.2 million to $132.2 million at June 30, 2003 compared to the prior year.
Cash flow from operations increased to $98.9 million this year from $89.9 million in the prior year. Year-to-date, depreciation and amortization expenses were $24.0 million and $6.2 million, respectively, in fiscal 2003, compared to $20.9 million and $6.6 million, respectively, in fiscal 2002. Capital expenditures were $46.0 million this year compared to $49.5 last year.
Backlog, which is a measure of future business and revenue, continued to grow during the quarter and for the fiscal year in both in-house and outsourcing revenue. Year-end backlog grew 29% to $183.1 million ($69.5 million in-house and $113.7 million outsourcing) compared to $141.7 million ($52.8 million in-house and $88.9 million outsourcing) at June 30, 2002.
About Jack Henry & Associates
Jack Henry & Associates, Inc. provides integrated computer systems and processes ATM and debit card transactions for banks and credit unions. Jack Henry markets and supports its systems throughout the United States and has over 3,000 customers nationwide. For additional information on Jack Henry, visit the company's web site at www.jackhenry.com. The company will hold a conference call today at 7:45 Central Time, and investors are invited to listen at www.jackhenry.com .
Statements made in this news release that are not historical facts are forward-looking information. Actual results may differ materially from those projected in any forward-looking information. Specifically, there are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Additional information on these and other factors, which could affect the Company's financial results, are included in its Securities and Exchange Commission (SEC) filings on Form 10-K, and potential investors should review these statements. Finally, there may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ materially from any forward-looking information.
Condensed Consolidated Statements of Income
(in thousands, Except Per Share Data)
(unaudited)
Three Months Ended Year To Date
June 30 June 30
2003 2002 Change 2003 2002 Change
REVENUES
License $11,962 $18,131 -34% $48,284 $66,576 -27%
Support and service 69,764 61,212 14% 260,452 228,744 14%
Hardware sales 27,462 26,736 3% 95,891 101,337 -5%
Total revenues 109,188 106,079 3% 404,627 396,657 2%
COST OF SALES
Cost of license 1,295 1,051 23% 3,890 2,509 55%
Cost of services 46,413 41,785 11% 178,256 161,523 10%
Cost of hardware 18,526 20,175 -8% 69,145 71,405 -3%
Total cost of sales 66,234 63,011 5% 251,291 235,437 7%
GROSS PROFIT 42,954 43,068 0% 153,336 161,220 -5%
Gross profit % 39% 41% 38% 41%
OPERATING EXPENSES
Selling and marketing 8,201 8,070 2% 30,664 29,380 4%
Research and development 4,327 3,121 39% 15,892 12,526 27%
General and administrative 8,304 8,004 4% 29,509 32,668 -10%
Total operating
expenses 20,832 19,195 9% 76,065 74,574 2%
OPERATING INCOME 22,122 23,873 -7% 77,271 86,646 -11%
INTEREST INCOME (EXPENSE)
Interest income 118 263 -55% 630 2,018 -69%
Interest expense (26) (50) -48% (110) (191) -42%
Total 92 213 -57% 520 1,827 -72%
INCOME BEFORE TAXES 22,214 24,086 -8% 77,791 88,473 -12%
PROVISION FOR INCOME TAXES 8,108 8,229 -1% 28,394 31,408 -10%
NET INCOME $14,106 $15,857 -11% $49,397 $57,065 -13%
Diluted net income per
share $0.16 $0.17 $0.55 $0.62
Diluted weighted average
shares outstanding 89,750 92,012 89,270 92,367
Consolidated Balance Sheet Highlights
(in thousands) June 30, %
(unaudited) 2003 2002 Change
Cash, cash equivalents and investments $33,012 $18,762 76%
Trade receivables $150,951 $131,431 15%
Other current assets $37,888 $29,784 27%
TOTAL ASSETS $553,165 $486,142 14%
Accounts payable and accrued expenses $27,317 $20,628 32%
Deferred revenue $132,224 $108,975 21%
STOCKHOLDERS' EQUITY $365,223 $340,739 7%
Note: Transmitted on PR Newswire on July 23, 2003, at 4:00 a.m. CDT.
SOURCE Jack Henry & Associates, Inc.
Analysts, Kevin D. Williams, Chief Financial Officer of Jack Henry & Associates, Inc., +1-417-235-6652, or IR, Becky Pendleton Reid of The Cereghino Group, +1-206-762-0993
http://www.jackhenry.com
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