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MONETT, Mo., Jan 16, 2003 /PRNewswire-FirstCall via COMTEX/ -- Jack Henry & Associates, Inc. (Nasdaq: JKHY) today reported that revenues increased 4% to $102.6 million, and profits were $11.7 million, or $0.13 per share, in the second quarter of fiscal 2003 ended December 31, 2002 compared to the second quarter last year. Results for 2Q03 were slightly better than those for the first quarter of FY03 but weaker than those in the same period a year ago.
"Technology spending patterns continue to show the effects of the slow down in the capital goods market, and bankers have not yet boosted spending on technology upgrades," said Michael E. Henry, Chairman and CEO. "In this environment, outsourcing continues to be a popular solution due to the minimal upfront outlay of capital. Credit unions have also been more willing to invest in technology to improve their competitiveness in the financial market place. Financial institutions are seeking strong, integrated technology platforms that provide competitive advantages and improved efficiencies. It is too early to tell if the increase in sales activity and revenue is the beginning of a rebound or just an anomaly, however I am confident the markets will turn, but when they will turn is still unclear. Until that time, we continue to build our competitive strengths and remain profitable and debt-free."
"To build on our competitive position, we previously announced two strategic acquisitions since our last earnings release," said Jack Prim, President, "in addition we have continued to invest in developing new products and enhancing existing products for our broad customer base. We have made good progress this quarter on the JKHY/ARGO customer relationship management (CRM) and platform products. The deposit software of this offering is now in beta testing and additional modules should be in testing this quarter."
Operating Results
Second quarter revenues increased 4% to $102.6 million compared to $98.2 million in 2Q02. Total non-hardware revenues grew to $78.4 million up 10% from 2Q02. Support and services accounted for 49% of total revenues, with license and installation at 20%, hardware sales at 24% and customer reimbursements generating 7% of total revenue in the second quarter. License and installation revenues were $20.8 million, down 9% from 2Q02. Support and services increased to $50.3 million or up 20% from 2Q02. Hardware sales were $24.2 million a decline of 10% from 2Q02.
Year-to-date revenues were up 3% to $196.5 million from $190.8 million in the first six months of fiscal 2002. For the first six months of the year, non-hardware revenues grew 6% and accounted for 77% of total year-to-date revenues. Licensing and installation was 20% of total revenues at $39.1 million, down from $45.1 million, or 24% of total revenues, in the same period a year ago. Support and services increased 17% during the first half of the year, totaling $97.9 million, and accounting for 50% of revenues, compared to $83.5 million, or 44% of revenues, in the first half of fiscal 2002. Hardware sales were down 7% to $45.7 million, or 23% of revenues, compared to $49.0 million or 26% of revenues in the first half of fiscal 2002.
Profit margin declined across the board, primarily due to sales mix and increase in head count compared to last year's quarter. Second quarter gross margin was 36% compared to 40% 2Q02. Year-to-date, gross margin was down to 37% from 41% in the first half of 2002. Non-hardware margins in the second quarter were 39% down from 43% in 2Q02. During the first half, non-hardware margin declined to 40% from 44%. Second quarter hardware margin came in at 26%, which is down from 31% in 2Q02. For the first half of 2003, hardware margin dropped to 26% from 32% in the like period of fiscal 2002.
Operating expense in the second quarter dropped 3% to $18.6 million from $19.2 million in 2Q02, and was flat for the first six months of the year at $36.1 million compared to the first half of last year. Second quarter operating income totaled $18.2 million down 8% from $19.8 million in 2Q02. In the first half of fiscal 2003, operating profit dropped 14% to $35.9 million from $41.9 million.
Second quarter pre-tax income was $18.4 million, down 10% from $20.4 million in 2Q02. Year-to-date pre-tax income totaled $36.2 million down 16% from $43.2 million in the first half of 2002. Net income was $11.7 million, a 10% decline from the second quarter a year ago.
"Support fees for existing in-house core customers are usually 20% of the initial software license, and are typically billed in annual installments at June 30 for the next fiscal year; however, for our acquired customers bases, we are transitioning them from a December annual billing cycle to our June billing cycle, with a bi-annual billing process this year, which obviously had an impact on our accounts receivable and deferred revenue balances at December 31," said Kevin D. Williams, CFO. Consequently, deferred revenues dropped to $78.2 million a decline of 9% from $85.9 million a year ago.
Year-end backlog was up due primarily to new contracts for the JKHY/ARGO customer relationship management (CRM) product and continued success in sales of complementary products and our outsourcing services. Backlog grew 8% during the quarter to $158.0 million ($57.6 million in-house and $100.4 million outsourcing) compared to $146.5 million ($53.2 million in-house and $93.3 million outsourcing) at September 30, 2002, and $132.1 million ($52.3 million in-house and $79.8 million outsourcing) at December 31, 2002. "ARGO's CRM and platform products are currently being marketed to our existing SilverLake customer base," said Williams. "Because these products are just now being introduced into the beta sites, new contracts will not have a significant impact on revenue in the near term. In addition, when these revenues are recognized, they will carry somewhat lower gross profit than our other software products due to the alliance agreement with ARGO."
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, Three Months Ended Six Months Ended
Except Per Share Data) 31-Dec 31-Dec % 31-Dec 31-Dec %
(Unaudited) 2002 2001 Change 2002 2001 Change
REVENUES
Licensing and
installation $20,823 $22,874 -9% $39,116 $45,144 -13%
Support and service 50,323 41,888 20% 97,940 83,494 17%
Customer reimbursements 7,254 6,682 9% 13,752 13,117 5%
Non Hardware Revenue 78,400 71,444 10% 150,808 141,755 6%
Hardware sales 24,163 26,783 -10% 45,733 49,039 -7%
Total 102,563 98,227 4% 196,541 190,794 3%
COST OF SALES
Cost of services 40,580 34,163 19% 76,783 66,367 16%
Customer reimbursement
expenses 7,254 6,682 9% 13,752 13,117 5%
Cost of hardware 17,863 18,371 -3% 34,027 33,250 2%
Total 65,697 59,216 11% 124,562 112,734 10%
GROSS PROFIT 36,866 39,011 -5% 71,979 78,060 -8%
36% 40% -10% 37% 41% -10%
OPERATING EXPENSE
Selling and marketing 7,661 6,975 10% 14,860 13,544 10%
Research and development 3,962 3,543 12% 7,513 6,453 16%
General and
administrative 7,012 8,657 -19% 13,748 16,162 -15%
Total 18,635 19,175 -3% 36,121 36,159 0%
OPERATING INCOME 18,231 19,836 -8% 35,858 41,901 -14%
INTEREST INCOME (EXPENSE)
Interest income 191 571 -67% 378 1,390 -73%
Interest expense (32) (41) -22% (55) (88) -38%
Total 159 530 -70% 323 1,302 -75%
INCOME BEFORE INCOME TAXES 18,390 20,366 -10% 36,181 43,203 -16%
PROVISION FOR INCOME TAXES 6,713 7,332 -8% 13,206 15,553 -15%
NET INCOME $11,677 $13,034 -10% $22,975 $27,650 -17%
Diluted income per share $0.13 $0.14 -7% $0.26 $0.30 -13%
Diluted weighted
average shares 88,812 92,247 -4% 89,196 92,485 -4%
Consolidated Balance Sheet Highlights
31-Dec 31-Dec Annual
2002 2001 Change
Cash, cash equivalents and investments $31,208 $37,829 -18%
Trade receivables $74,090 $91,338 -19%
Other current assets $29,631 $30,146 -2%
TOTAL ASSETS $459,581 $442,511 4%
Accounts payable and accrued expenses $21,747 $20,045 8%
Deferred revenue $78,153 $85,867 -9%
STOCKHOLDERS' EQUITY $340,381 $328,957 3%
Analysts, Kevin D. Williams, Chief Financial Officer of Jack Henry & Associates, +1-417-235-6652, or Investor Relations, Becky Pendleton Reid of The Cereghino Group for Jack Henry & Associates, +1-206-762-0993
http://www.jackhenry.com
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