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MONETT, Mo., April 20, 2005 /PRNewswire-FirstCall via COMTEX/ -- Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading provider of integrated technology solutions that perform data processing for financial institutions, today reported fiscal 2005 third quarter results with a 12% growth in revenue, a 21% increase in gross profit, and a 19% increase in net income compared to the third quarter of fiscal 2004. For the first nine months of fiscal 2005, revenue increased 16%, gross profit increased 21%, and net income grew 20% over the same nine month period in fiscal 2004.
For the quarter ended March 31, 2005, the company generated total revenue of $134.4 million compared to $119.7 million in the same quarter a year ago. Gross profit increased to $57.3 million compared to $47.3 million in the third quarter of last fiscal year. Net income totaled $19.4 million, or $0.21 per diluted share, compared to $16.3 million, or $0.18 per diluted share in the same quarter a year ago.
For the first nine months of fiscal 2005, total revenue of $394.4 million was generated compared to $341.4 million for the same nine months of fiscal 2004. Gross profit grew $27.9 million to $162.6 million compared to $134.7 million during the same period last fiscal year. Net income for the first nine months of fiscal 2005 was $53.8 million, or $0.58 per diluted share, compared to $44.7 million, or $0.49 per diluted share, for the same nine-month period in fiscal 2004.
"Revenue and gross profits have continued to improve during both the quarter and the first nine months of our fiscal year. License and support and service revenues continue to grow at a very nice level with the only decreased revenue component being hardware. This shift in revenues has had a positive impact on our margins," said Jack F. Prim, CEO. "The acquisitions that we have completed during the fiscal year continue to show significant promise, but as we have mentioned in earlier communications, several of these will take additional time to increase their revenues to generate margins equal to our traditional expectations. Therefore, some of these recent acquisitions continue to put pressure on our margins in the short-term, but in the longer- term present opportunities for both revenue growth and margin expansion."
Operating Results
"We continue to have strong increases in our support and service revenue for the third fiscal quarter with an 18% increase for the quarter and a 16% increase for the nine months ended March 31, 2005, compared to the prior year periods. This growth continues to be driven by increases in every component of our recurring revenue. Our recurring revenue represented 60% of total revenue for the quarter and 59% of total revenue for the nine months of fiscal 2005, while last fiscal year, it was 57% for the third quarter and 58% year- to-date" said Tony L. Wormington, President. "We believe that the increase in our recurring revenue is directly attributable to the quality of our products we provide and the commitment of our employees to service our customers. As a result, our customers continue to contract for additional products and services with us."
License revenue increased 36% to $20.9 million, or 16% of third quarter total revenue, compared to $15.3 million, or 13% of the third quarter total revenue a year ago. Support and services revenue increased 18% to $92.5 million, or 69% of total revenue in third quarter of fiscal 2005, from $78.4 million, or 65% of total revenue for the same period a year ago. Hardware sales in the third quarter of fiscal 2005 decreased 20% to $20.9 million, or 15% of total revenue, from $26.0 million, or 22% of total revenue in the third quarter of last fiscal year.
For the nine months in fiscal 2005, license revenue improved by $21.9 million with an increase of 54% to $62.6 million, or 16% of total revenue, compared to $40.7 million, or 12% of the total revenue a year ago. Support and service revenue increased 16% and contributed 67% to total revenue, or $263.9 million for the nine months of fiscal 2005 compared to $227.6 million, also 67% of total revenue for the nine months of fiscal 2004. Hardware sales for the nine months of fiscal 2005 fell 7% to $67.9 million, or 17% of total revenue, compared to $73.1 million, or 21% of total revenue for the same nine month period in fiscal 2004.
Cost of sales for the third quarter increased 7% from $72.4 million for the three months ended March 31, 2004 to $77.1 million for the three months ended March 31, 2005. Third quarter gross profit expanded 21% to $57.3 million with a 43% gross margin compared to $47.3 million with a 40% gross margin for the same quarter a year ago.
Cost of sales for the nine months ended March 31, 2005 increased 12%, to $231.9 million from $206.7 million for the same period ended March 31, 2004. Gross profit for the nine months in fiscal 2005 increased 21% to $162.6 million with a 41% gross margin, compared to $134.7 million with a 39% gross margin for the same nine-month period in fiscal 2004.
Gross margin on license revenue for the third quarter of fiscal 2005 was 95% compared to 93% a year ago for the same period due to the product mix of license revenue. Support and service gross margin remained even at 34% for the third quarter of fiscal 2005 and fiscal 2004. Hardware gross margins increased to 30% in the current third quarter compared to 26% in the same quarter last year, primarily due to volume and sales mix of hardware and vendor rebates received in the current quarter.
Gross margin on license revenue for the nine months of fiscal 2005 was 93% compared to 94% a year ago for the same period due to increased license revenue delivered through reseller agreements in prior quarters of this year. Support and service gross margin decreased slightly to 32% from 33% primarily due to increased headcount for support and services. Hardware gross margins were slightly lower for the nine months of fiscal 2005 at 28% compared to 29% for the same nine months last year, primarily due to the volume and sales mix of hardware for complimentary products which carry a lower price and margin.
For the third quarter of 2005, the bank systems and services segment revenue increased 8% to $104.2 million, with a gross margin of 42% from $96.7 million in revenue with a gross margin of 41% in the third quarter in fiscal 2004. The credit union systems and services segment revenue increased 31% to $30.1 million with a gross margin of 44% for the third quarter of 2005 from $23.0 million and a gross margin of 35% in the same quarter a year ago. "The credit union systems and services segment gross margin increased predominantly due to both the amount of software delivered during the quarter and the significant improvement in the support and services margins," stated Kevin D. Williams, CFO. "The improvement in the support and service margins was a dramatic improvement sequentially over last quarter and returned the margins back in line year-to-date with those of last year."
For the nine months ended March 31, 2005, the bank systems and services segment revenue increased 12% to $315.4 million, with a gross margin of 42% from $282.5 million with a gross margin of 40% a year ago. The credit union systems and services segment revenue increased 34% to $79.1 million for the nine months of fiscal 2005, with a gross margin of 37% from $58.9 million and gross margin of 35% in the same period a year ago.
Operating expenses increased 20% to $26.3 million for the third quarter of fiscal 2005 compared to $21.8 million for the same quarter a year ago primarily due to employee-related expenses and depreciation expense. Selling and marketing expenses rose 34% in the third quarter to $11.6 million, or 9% of total revenue, from $8.6 million, or 7% of total revenue. Research and development expenses increased 22% to $7.7, million or 6% of total revenue in fiscal 2005, from $6.3 million, or 5% of total revenue in the third quarter of fiscal 2004. General and administrative costs increased 1% to $6.9 million, or 5% of revenue, in the third quarter of fiscal year 2005, from $6.8 million, or 6% of revenue for the same quarter a year ago.
Operating expenses increased 19% to $77.4 million for fiscal 2005 year-to- date compared to $65.0 million for the same nine-month period in fiscal 2004 mainly due to employee-related expenses and depreciation. Selling and marketing expenses rose 32% in the same period to $34.3 million, or 9% of total revenue, from $25.9 million, or 8% of total revenue. Research and development expenses increased 17% to $20.6 million from $17.6 million, while remaining at 5% of total revenue for nine-month periods in fiscal 2005 and 2004. General and administrative costs increased 5% to $22.5 million compared to $21.5 million for the same nine months in fiscal 2004, and remained at 6% of total revenue for both fiscal years.
Operating income grew 22% to $31.0 million, or 23% of third quarter revenue, compared to $25.5 million, or 21% of revenue in the third quarter of fiscal 2004. Provision for income taxes is 37.5% for the third quarter in fiscal 2005 compared to 36.5% last year due to changes in the effective state tax rates. Third quarter net income totaled $19.4 million, or $0.21 per diluted share, compared to $16.3 million, or $0.18 per diluted share in the third quarter of fiscal 2004.
Operating income for the nine months of fiscal 2005 also increased 22% to $85.2 million, or 22% of year-to-date revenue, compared to $69.7 million, or 20% of revenue year-to-date in fiscal 2004. Provision for income taxes is 37.5% year to date fiscal 2005 compared to 36.5% year-to-date in fiscal 2004 due to changes in the effective state tax rates. Year-to-date net income totaled $53.8 million, or $0.58 per diluted share, compared to $44.7 million, or $0.49 per diluted share in the prior year.
Cash Flow, Balance Sheet and Backlog Review
Cash, cash equivalents, and investments decreased to $16.9 million from $89.9 million compared to March 31, 2004 primarily due to amounts paid for acquisitions. Trade receivables increased $13.0 million to $80.0 million compared to a year ago.
Deferred revenue increased $8.0 million or 11% to $82.4 million at March 31, 2005 compared to a year ago. Stockholders' equity grew 19% to $502.9 million at March 31, 2005 from $422.7 million at March 31, 2004.
Cash flow from operations increased to $105.1 million for the first nine months in fiscal year 2005 from $103.7 million for the same period in fiscal 2004. The increase of $1.4 million from net cash from operating activities consists of an increase in net income of $9.1 million, an increase in depreciation and amortization expense of $3.6 million, plus changes in trade receivables of $10.4 million, prepaid expenses of ($3.7) million, accounts payable and accrued expenses of $1.1 million, income taxes of ($5.7) million and deferred revenues of ($13.4) million.
Net cash used in investing activities for the first nine months of fiscal year 2005 was $157.4 million which includes $119.6 million for acquisitions, capital expenditures of $33.4 million, and capitalized software development of $4.6 million. For the first nine months in fiscal 2004, net cash used in investing activities primarily consisted of $20.6 million for acquisitions, $33.1 million in capital expenditures and $2.7 million for capitalized software development.
For the first nine months in fiscal 2005, net cash from financing activities totaled $14.5 million and includes proceeds of $11.8 million from the exercise of stock options and sale of common stock, a short term note of $14.0 million, offset by dividends paid of $11.3 million. For the first nine months in fiscal 2004, net cash from financing activities was $7.9 million, mainly from proceeds from the exercise of stock options and sale of common stock of $17.7 million, offset by dividends paid of $9.8 million.
Backlog, which is a measure of future business and revenue, increased 5% from year-ago levels and increased 2% from the prior quarter to $198.2 million ($67.1 million in-house and $131.1 million outsourcing). Backlog at December 31, 2004, was $194.5 million ($68.4 million in-house and $126.1 million outsourcing) and at March 31, 2004, was $187.9 million ($66.4 million in-house and $121.5 million outsourcing).
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 7,400 customers nationwide. For additional information on Jack Henry, visit the company's web site at http://www.jackhenry.com . The company will hold a conference call on April 21st at 7:45 a.m. Central Time and investors are invited to listen at http://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 Nine Months Ended
March 31, % March 31, %
2005 2004 Change 2005 2004 Change
REVENUE
License $20,943 $15,343 36% $62,642 $40,703 54%
Support and
service 92,509 78,353 18% 263,883 227,594 16%
Hardware 20,930 26,012 -20% 67,913 73,081 -7%
Total 134,382 119,708 12% 394,438 341,378 16%
COST OF SALES
Cost of license 1,085 1,131 -4% 4,428 2,296 93%
Cost of support
and service 61,436 52,073 18% 178,412 152,818 17%
Cost of hardware 14,584 19,185 -24% 49,010 51,579 -5%
Total 77,105 72,389 7% 231,850 206,693 12%
GROSS PROFIT 57,277 47,319 21% 162,588 134,685 21%
Gross Profit Margin 43% 40% 41% 39%
OPERATING EXPENSES
Selling and
marketing 11,598 8,634 34% 34,250 25,937 32%
Research and
development 7,738 6,344 22% 20,621 17,575 17%
General and
administrative 6,915 6,842 1% 22,507 21,520 5%
Total 26,251 21,820 20% 77,378 65,032 19%
OPERATING INCOME 31,026 25,499 22% 85,210 69,653 22%
INTEREST INCOME
(EXPENSE)
Interest income 171 248 -31% 989 816 21%
Interest expense (110) (52) 112% (127) (81) 57%
Total 61 196 -69% 862 735 17%
INCOME BEFORE INCOME
TAXES 31,087 25,695 21% 86,072 70,388 22%
PROVISION FOR INCOME
TAXES 11,658 9,379 24% 32,277 25,692 26%
NET INCOME $19,429 $16,316 19% $53,795 $44,696 20%
Diluted net income
per share $0.21 $0.18 $0.58 $0.49
Diluted weighted avg
shares outstanding 93,421 92,077 92,954 91,715
Consolidated Balance
Sheet Highlights
(In Thousands-
unaudited) March 31, % Change
2005 2004
Cash, cash
equivalents and
investments $16,945 $89,904 -81%
Trade receivables $80,026 $66,980 19%
TOTAL ASSETS $660,100 $547,654 21%
Accounts payable and
accrued expenses $28,280 $20,944 35%
Deferred revenue $82,371 $74,379 11%
Note payable $14,000 $- >100%
STOCKHOLDERS' EQUITY $502,874 $422,691 19%
SOURCE Jack Henry & Associates, Inc.
Analysts, Kevin D. Williams, Chief Financial Officer, +1-417-235-6652, or IR, Jon Seegert, Director of Investor Relations, +1-417-235-6652, both of Jack Henry & Associates, Inc.
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