Jack Henry & Associates Ends Third Quarter Fiscal 2016 With 8% Increase In Revenue

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May 03, 2016

Jack Henry & Associates Ends Third Quarter Fiscal 2016 With 8% Increase In Revenue

MONETT, Mo., May 3, 2016 /PRNewswire/ -- Jack Henry & Associates, Inc. (NASDAQ: JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announced third quarter fiscal 2016 results. 

Revenue for the quarter increased 8% compared to the third quarter of fiscal 2015 to $333.2 million, gross profit increased 5% to $138.9 million, and net income increased 6% to $53.9 million, or $0.68 per diluted share. 

The nine months ended March 31, 2016 also contained increases in each of these categories.  Fiscal year-to-date revenue increased 7% to $987.7 million, gross profit increased 8% to $419.3 million, and net income increased 9% to $164.6 million, or $2.06 per diluted share, over the first nine months of fiscal 2015.

According to Jack Prim, CEO, "We are pleased to deliver another quarter with record revenue and earnings.  Sales performances across our brands remained strong in the quarter as we begin to book next year's business."

Operating Results

Revenue, cost of sales, and gross profit results for the quarter and fiscal year-to-date periods were as follows:

Revenue, Cost of Sales, and Gross Profit

(In Thousands)

Three Months Ended
March 31,


%

 Change


Nine Months Ended
March 31,


%

Change


2016


2015




2016


2015



Revenue










License

$

292


$

569


(49)%


$

2,530


$

1,563


62%

  Percentage of Total Revenue

&#60 1%


&#60 1%




&#60 1%


&#60 1%



Support and Service

319,649


296,896


8%


947,615


882,017


7%

  Percentage of Total Revenue

96%


96%




96%


96%



Hardware

13,245


12,244


8%


37,532


38,897


(4)%

  Percentage of Total Revenue

4%


4%




4%


4%



Total Revenue

333,186


309,709


8%


987,677


922,477


7%











Cost of Sales










Cost of License

193


285


(32)%


873


1,002


(13)%

Cost of Support and Service

184,527


168,457


10%


541,230


503,925


7%

Cost of Hardware

9,553


9,152


4%


26,279


28,111


(7)%

Total Cost of Sales

194,273


177,894


9%


568,382


533,038


7%











Gross Profit










License Gross Profit

99


284


(65)%


1,657


561


195%

  License Gross Profit Margin

34%


50%




65%


36%



Support and Service Gross Profit

135,122


128,439


5%


406,385


378,092


7%

  Support and Service Gross Profit Margin

42%


43%




43%


43%



Hardware Gross Profit

3,692


3,092


19%


11,253


10,786


4%

  Hardware Gross Profit Margin

28%


25%




30%


28%



Total Gross Profit

$

138,913


$

131,815


5%


$

419,295


$

389,439


8%

  Gross Profit Margin

42%


43%




42%


42%



 

  • For the third quarter of fiscal 2016, the bank systems and services segment revenue increased 3% to $246.2 million with a gross margin of 39% from $238.1 million with a gross margin of 41% in the same quarter last year. The decrease in gross margin is primarily due to the decrease in deconversion fees in the current quarter compared to the prior year. The credit union systems and services segment revenue increased 21% to $87.0 million with a gross margin of 48% for the third quarter of fiscal 2016 from $71.6 million and a gross margin of 46% in the same period a year ago.
  • Bank systems and services segment revenue for the nine month period increased 2% to $723.9 million from $709.0 million. Gross margins in each period were 40% and 41%, respectively. Credit union systems and services segment revenue increased 24% to $263.7 million with a gross margin of 49% from $213.4 million with a gross margin of 46% for the same nine months last year.

Operating Expenses and Operating Income

Operating income increased 3% to $79.8 million, or 24% of third quarter fiscal 2016 revenue, compared to $77.2 million, or 25% of revenue in the third quarter of fiscal 2015.

For the nine month period ending March 31, 2016, operating income increased 7% to $245.2 million, a 25% operating margin on total revenue, from $228.5 million, also 25% of revenue, in the same period of fiscal 2015.

(In Thousands)

Three Months Ended
March 31,


%

 Change


Nine Months Ended
March 31,


%

Change


2016


2015




2016


2015



Selling and Marketing

$

22,732


$

21,674


5%


$

66,714


$

65,512


2%

Percentage of Total Revenue

7%


7%




7%


7%















Research and Development

19,854


17,522


13%


57,269


51,995


10%

Percentage of Total Revenue

6%


6%




6%


6%















General and Administrative

16,497


15,417


7%


50,157


43,442


15%

Percentage of Total Revenue

5%


5%




5%


5%



Total Operating Expenses

59,083


54,613


8%


174,140


160,949


8%

Operating Income

$

79,830


$

77,202


3%


$

245,155


$

228,490


7%

Operating Margin

24%


25%




25%


25%



 

  • The general and administrative costs increase of 15% in the year-to-date period is partially due to the gain on the sale of assets for TeleWeb products reported in the prior year. Increased headcount and related personnel costs also contributed to the increase in general and administrative and research and development costs.

Net Income

Third quarter net income totaled $53.9 million, or $0.68 per diluted share, compared to $50.7 million, or $0.63 per diluted share in the third quarter of fiscal 2015, for an increase in net income of 6% and an increase in diluted earnings per share of 9%.

Net income for the nine months ending March 31, 2016 totaled $164.6 million, compared to $150.7 million for the same time frame last year, for an increase of 9%, and diluted earnings per share increased 12% to $2.06 from $1.84 for the prior year period.

(In Thousands, Except Per Share Data)

Three Months Ended
March 31,


%

Change


Nine Months Ended
March 31,


%

Change


2016


2015




2016


2015



Income Before Income Taxes

$

79,398


$

76,566


4%


$

244,430


$

227,335


8%

Provision for Income Taxes

25,515


25,854


(1)%


79,833


76,656


4%

Net Income

$

53,883


$

50,712


6%


$

164,597


$

150,679


9%

Diluted net income per share

$

0.68


$

0.63


9%


$

2.06


$

1.84


12%

















 

  • Provision for income taxes decreased 1% in the current third quarter compared to the same quarter in fiscal 2015 and is 32.1% of income before income taxes this quarter compared to 33.8% of income before income taxes for the same period in fiscal 2015.
  • Provision for income taxes increased 4% for the year-to-date period, although the effective rate decreased to 32.7% of income before income taxes from 33.7% for the nine months ending March 31, 2015.

Balance Sheet and Cash Flow Review

  • At March 31, 2016, cash and cash equivalents increased to $54.0 million from $52.8 million at March 31, 2015.
  • Trade receivables totaled $137.4 million at March 31, 2016, which was the same at March 31, 2015.
  • Current and long term debt increased from $77.4 million a year ago to $100.2 million at March 31, 2016.
  • Deferred revenue increased to $383.2 million at March 31, 2016, compared to $370.5 million a year ago.
  • Stockholders' equity decreased 1% to $948.9 million at March 31, 2016, compared to $956.6 million a year ago.

Cash provided by operations totaled $207.0 million in the current year-to-date period compared to $182.5 million for the same period last year.  The following table summarizes net cash (in thousands) from operating activities:

(In Thousands)

Nine Months Ended March 31,


2016


2015

Net income

$

164,597


$

150,679

Depreciation

38,106


41,023

Amortization

57,013


48,063

Other non-cash expenses

32,522


(2,241)

Change in receivables

108,172


86,626

Change in deferred revenue

(149,885)


(120,941)

Change in other assets and liabilities

(43,492)


(20,722)

Net cash provided by operating activities

$

207,033


$

182,487

Cash used in investing activities for the first nine months of fiscal 2016 totaled $133.6 million, compared to $94.3 million for the first nine months of fiscal 2015 and included the following:

(In Thousands)

Nine Months Ended March 31,


2016


2015

Payment for acquisitions, net of cash acquired

$

(8,275)


$

Capital expenditures

(43,300)


(35,867)

Proceeds from sale of assets

2,797


8,266

Internal use software

(10,157)


(10,266)

Computer software developed

(74,662)


(56,465)

Net cash from investing activities

$

(133,597)


$

(94,332)

 

  • The $43.3 million in capital expenditures was mainly for the purchase of computer equipment and aircraft.
  • $8.3 million, net of cash acquired, was used for the acquisition of Bayside Business Solutions.
  • The prior year's $8.3 million in proceeds from the sale of assets mainly related to the TeleWeb suite of Internet and mobile banking software products.

Financing activities used cash of $167.7 million for the first nine months of fiscal 2016 and $105.7 million in the first nine months of fiscal 2015. 

(In Thousands)

Nine Months Ended March 31,


2016


2015

Borrowings on credit facilities

$

100,000


$

70,000

Repayments on credit facilities

(52,484)


(6,033)

Debt acquisition costs


(901)

Purchase of treasury stock

(155,122)


(112,803)

Dividends paid

(62,037)


(56,183)

Net cash from issuance of stock and tax related to stock-based compensation

1,895


188

Net cash from financing activities

$

(167,748)


$

(105,732)

According to Kevin Williams, CFO, "We continue to invest pretty heavily in capitalized software, which is primarily in the areas of electronic payments, mobile offerings and other new products; along with other offerings that will drive additional future revenue. Dividends increased for the first nine months reflecting the twelve percent increase announced in the third quarter. We continue to have a strong cash balance with liquidity for potential acquisitions, stock buy-backs, dividends, and continued investment in the company."

Quarterly Conference Call

The company will hold a conference call on May 4, 2016; at 7:45 a.m. Central Time and investors are invited to listen at www.jackhenry.com.

About Jack Henry & Associates

Jack Henry & Associates, Inc. (NASDAQ: JKHY) is a leading provider of computer systems and electronic payment solutions primarily for financial services organizations. Its technology solutions serve more than 10,600 customers nationwide, and are marketed and supported through three primary brands. Jack Henry Banking™ supports banks ranging from community to mid-tier institutions with information processing solutions. Symitar™ is the leading provider of information processing solutions for credit unions of all sizes. ProfitStars provides highly specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities to mitigate and control risks, optimize revenue and growth opportunities, and contain costs.  Additional information is available 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 (Unaudited)

(In Thousands, Except Per Share Data)

Three Months Ended March 31,


%

Change


Nine Months Ended March 31,


%

Change


2016


2015




2016


2015



REVENUE












License

$

292


$

569


(49)%


$

2,530


$

1,563


62%

Support and service

319,649


296,896


8%


947,615


882,017


7%

Hardware

13,245


12,244


8%


37,532


38,897


(4)%

Total

333,186


309,709


8%


987,677


922,477


7%

COST OF SALES












Cost of license

193


285


(32)%


873


1,002


(13)%

Cost of support and service

184,527


168,457


10%


541,230


503,925


7%

Cost of hardware

9,553


9,152


4%


26,279


28,111


(7)%

Total

194,273


177,894


9%


568,382


533,038


7%

GROSS PROFIT

138,913


131,815


5%


419,295


389,439


8%

Gross Profit Margin

42%


43%




42%


42%



OPERATING EXPENSES












Selling and marketing

22,732


21,674


5%


66,714


65,512


2%

Research and development

19,854


17,522


13%


57,269


51,995


10%

General and administrative

16,497


15,417


7%


50,157


43,442


15%

Total

59,083


54,613


8%


174,140


160,949


8%

OPERATING INCOME

79,830


77,202


3%


245,155


228,490


7%

INTEREST INCOME (EXPENSE)












Interest income

54


33


64%


258


118


119%

Interest expense

(486)


(669)


(27)%


(983)


(1,273)


(23)%

Total

(432)


(636)


(32)%


(725)


(1,155)


(37)%

INCOME BEFORE INCOME TAXES

79,398


76,566


4%


244,430


227,335


8%

PROVISION FOR INCOME TAXES

25,515


25,854


(1)%


79,833


76,656


4%

NET INCOME

$

53,883


$

50,712


6%


$

164,597


$

150,679


9%

Diluted net income per share

$

0.68


$

0.63




$

2.06


$

1.84



Diluted weighted average shares outstanding

79,167


81,094




79,891


81,773















Consolidated Balance Sheet Highlights (Unaudited)

(In Thousands)







March 31,


%

 Change








2016


2015



Cash and cash equivalents







$

54,001


$

52,800


2%

Receivables







137,406


137,415


—%

Total assets







1,702,622


1,618,139


5%













Accounts payable and accrued expenses







$

76,781


$

71,502


7%

Current and long term debt







100,213


77,447


29%

Deferred revenue







383,171


370,470


3%

Stockholders' Equity







948,867


956,610


(1)%

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/jack-henry--associates-ends-third-quarter-fiscal-2016-with-8-increase-in-revenue-300261938.html

SOURCE Jack Henry & Associates

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