Delaware | 0-14112 | 43-1128385 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
JACK HENRY & ASSOCIATES, INC. | |||
(Registrant) | |||
Date: | February 7, 2017 | /s/ Kevin D. Williams | |
Kevin D. Williams | |||
Chief Financial Officer and Treasurer |
Jack Henry & Associates, Inc. | Analyst & IR Contact: | Kevin D. Williams |
663 Highway 60, P.O. Box 807 | Chief Financial Officer | |
Monett, MO 65708 | (417) 235-6652 |
Revenue, Cost of Sales, and Gross Profit (Unaudited) | |||||||||||||||||||
(In Thousands) | Three Months Ended December 31, | % Change | Six Months Ended December 31, | % Change | |||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Revenue | |||||||||||||||||||
License | $ | 849 | $ | 634 | 34 | % | $ | 1,543 | $ | 2,237 | (31 | )% | |||||||
Percentage of Total Revenue | <1% | <1% | <1% | <1% | |||||||||||||||
Support and Service | 337,515 | 320,219 | 5 | % | 670,561 | 627,966 | 7 | % | |||||||||||
Percentage of Total Revenue | 97 | % | 96 | % | 97 | % | 96 | % | |||||||||||
Hardware | 10,189 | 12,019 | (15 | )% | 21,477 | 24,287 | (12 | )% | |||||||||||
Percentage of Total Revenue | 3 | % | 4 | % | 3 | % | 4 | % | |||||||||||
Total Revenue | 348,553 | 332,872 | 5 | % | 693,581 | 654,490 | 6 | % | |||||||||||
Cost of Sales | |||||||||||||||||||
Cost of License | 59 | 498 | (88 | )% | 311 | 680 | (54 | )% | |||||||||||
Cost of Support and Service | 191,269 | 181,989 | 5 | % | 377,161 | 356,703 | 6 | % | |||||||||||
Cost of Hardware | 6,818 | 7,958 | (14 | )% | 15,436 | 16,726 | (8 | )% | |||||||||||
Total Cost of Sales | 198,146 | 190,445 | 4 | % | 392,908 | 374,109 | 5 | % | |||||||||||
Gross Profit | |||||||||||||||||||
License Gross Profit | 790 | 136 | 481 | % | 1,232 | 1,557 | (21 | )% | |||||||||||
License Gross Profit Margin | 93 | % | 21 | % | 80 | % | 70 | % | |||||||||||
Support and Service Gross Profit | 146,246 | 138,230 | 6 | % | 293,400 | 271,263 | 8 | % | |||||||||||
Support and Service Gross Profit Margin | 43 | % | 43 | % | 44 | % | 43 | % | |||||||||||
Hardware Gross Profit | 3,371 | 4,061 | (17 | )% | 6,041 | 7,561 | (20 | )% | |||||||||||
Hardware Gross Profit Margin | 33 | % | 34 | % | 28 | % | 31 | % | |||||||||||
Total Gross Profit | $ | 150,407 | $ | 142,427 | 6 | % | $ | 300,673 | $ | 280,381 | 7 | % | |||||||
Gross Profit Margin | 43 | % | 43 | % | 43 | % | 43 | % |
• | Second quarter fiscal 2016 included revenue of $8.3 million from Alogent, which was sold in the fourth quarter of fiscal 2016. Excluding Alogent from the prior year, revenues increased 7% and gross profit increased 9%. |
• | The six months ended December 31, 2015 included revenue of $14.7 million from Alogent. Excluding that headwind, revenue grew 8% and gross profit increased 10%. |
• | For the second quarter of fiscal 2017, the bank systems and services segment revenue increased 8% to $260.6 million with a gross margin of 41% from $241.0 million with a gross margin of 41% in the same quarter last year. Excluding Alogent from the second quarter of fiscal 2016, bank systems and services segment revenue increased 12% for the quarter. The credit union systems and services segment revenue decreased 4% to $88.0 million, primarily due to decreased deconversion fees compared to last year's second quarter, with a gross margin of 50% for the second quarter of fiscal 2017 from $91.8 million and a gross margin of 49% in the same period a year ago. |
• | For the six months ended December 31, 2016, bank systems and services segment revenue increased 9% to $518.4 million with a gross margin of 42% from $477.7 million with a gross margin of 41% for the same six months of fiscal 2016. Excluding Alogent revenue from the prior year period, bank systems and services revenue increased 12%. Credit union systems and services segment revenue decreased 1% to $175.2 million with a gross margin of 48% for the year-to-date period, compared to revenue of $176.7 million with a gross margin of 49% for the six months ended December 31, 2015. |
(Unaudited, In Thousands) | Three Months Ended December 31, | % Change | Six Months Ended December 31, | % Change | |||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Selling and Marketing | $ | 21,903 | $ | 22,231 | (1 | )% | $ | 44,030 | $ | 43,982 | — | % | |||||||
Percentage of Total Revenue | 6 | % | 7 | % | 6 | % | 7 | % | |||||||||||
Research and Development | 20,873 | 18,862 | 11 | % | 40,611 | 37,416 | 9 | % | |||||||||||
Percentage of Total Revenue | 6 | % | 6 | % | 6 | % | 6 | % | |||||||||||
General and Administrative | 19,025 | 16,547 | 15 | % | 36,008 | 33,659 | 7 | % | |||||||||||
Percentage of Total Revenue | 5 | % | 5 | % | 5 | % | 5 | % | |||||||||||
Total Operating Expenses | 61,801 | 57,640 | 7 | % | 120,649 | 115,057 | 5 | % | |||||||||||
Operating Income | $ | 88,606 | $ | 84,787 | 5 | % | $ | 180,024 | $ | 165,324 | 9 | % | |||||||
Operating Margin | 25 | % | 25 | % | 26 | % | 25 | % |
• | The increases in research and development costs and general and administrative costs are mostly due to increased salaries and personnel costs. |
(Unaudited, In Thousands, Except Per Share Data) | Three Months Ended December 31, | % Change | Six Months Ended December 31, | % Change | |||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Income Before Income Taxes | $ | 88,482 | $ | 84,602 | 5 | % | $ | 179,865 | $ | 165,032 | 9 | % | |||||||
Provision for Income Taxes | 29,668 | 25,254 | 17 | % | 58,807 | 54,318 | 8 | % | |||||||||||
Net Income | $ | 58,814 | $ | 59,348 | (1 | )% | $ | 121,058 | $ | 110,714 | 9 | % | |||||||
Diluted earnings per share | $ | 0.75 | $ | 0.74 | 1 | % | $ | 1.54 | $ | 1.38 | 12 | % |
• | Provision for income taxes increased in the second quarter, with an effective tax rate at 33.5% of income before income taxes, compared to 29.9% for the same quarter of the prior year. The second quarter rate for fiscal 2016 was lowered by the recognition of a tax benefit from the retroactive extension of the federal Research and Experimentation Credit ("R&E Credit"). |
• | For the year-to-date period, the effective tax rate decreased to 32.7% of income before income taxes from 32.9% for the six months ending December 31, 2015. |
• | The adoption of ASU 2016-09 (Improvements to Employee Share-Based Payment Accounting) resulted in an increase in diluted earnings per share of $0.03 for the six months ended December 31, 2016. |
• | At December 31, 2016, cash and cash equivalents increased to $64.2 million from $55.1 million at December 31, 2015. |
• | Trade receivables totaled $146.3 million at December 31, 2016 compared to $147.1 million at December 31, 2015. |
• | Current and long term debt totaled $50.0 million at December 31, 2016, a decrease from $100.3 million a year ago. |
• | Total deferred revenue decreased to $407.4 million at December 31, 2016, compared to $440.1 million a year ago. |
• | Stockholders' equity increased to $971.4 million at December 31, 2016, compared to $912.5 million a year ago. |
(Unaudited, In Thousands) | Six Months Ended December 31, | ||||||
2016 | 2015 | ||||||
Net income | $ | 121,058 | $ | 110,714 | |||
Depreciation | 24,892 | 25,973 | |||||
Amortization | 44,568 | 37,012 | |||||
Other non-cash expenses | 13,646 | 11,089 | |||||
Change in receivables | 107,667 | 98,487 | |||||
Change in deferred revenue | (113,612 | ) | (92,911 | ) | |||
Change in other assets and liabilities | (34,352 | ) | (43,084 | ) | |||
Net cash provided by operating activities | $ | 163,867 | $ | 147,280 |
(Unaudited, In Thousands) | Six Months Ended December 31, | ||||||
2016 | 2015 | ||||||
Payment for acquisitions, net of cash acquired | $ | — | $ | (8,275 | ) | ||
Capital expenditures | (17,405 | ) | (31,506 | ) | |||
Proceeds from the sale of assets | 830 | 2,747 | |||||
Internal use software | (11,455 | ) | (8,183 | ) | |||
Computer software developed | (41,673 | ) | (47,903 | ) | |||
Net cash from investing activities | $ | (69,703 | ) | $ | (93,120 | ) |
• | The $17.4 million in capital expenditures was mainly for the purchase of computer equipment. |
(Unaudited, In Thousands) | Six Months Ended December 31, | ||||||
2016 | 2015 | ||||||
Borrowings on credit facilities | $ | 50,000 | $ | 100,000 | |||
Repayments on credit facilities | (200 | ) | (52,374 | ) | |||
Purchase of treasury stock | (103,885 | ) | (155,122 | ) | |||
Dividends paid | (43,582 | ) | (39,972 | ) | |||
Net cash from issuance of stock and tax related to stock-based compensation | (2,619 | ) | 121 | ||||
Net cash from financing activities | $ | (100,286 | ) | $ | (147,347 | ) |
Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||
(In Thousands, Except Per Share Data) | Three Months Ended December 31, | % Change | Six Months Ended December 31, | % Change | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
REVENUE | |||||||||||||||||||||
License | $ | 849 | $ | 634 | 34 | % | $ | 1,543 | $ | 2,237 | (31 | )% | |||||||||
Support and service | 337,515 | 320,219 | 5 | % | 670,561 | 627,966 | 7 | % | |||||||||||||
Hardware | 10,189 | 12,019 | (15 | )% | 21,477 | 24,287 | (12 | )% | |||||||||||||
Total | 348,553 | 332,872 | 5 | % | 693,581 | 654,490 | 6 | % | |||||||||||||
COST OF SALES | |||||||||||||||||||||
Cost of license | 59 | 498 | (88 | )% | 311 | 680 | (54 | )% | |||||||||||||
Cost of support and service | 191,269 | 181,989 | 5 | % | 377,161 | 356,703 | 6 | % | |||||||||||||
Cost of hardware | 6,818 | 7,958 | (14 | )% | 15,436 | 16,726 | (8 | )% | |||||||||||||
Total | 198,146 | 190,445 | 4 | % | 392,908 | 374,109 | 5 | % | |||||||||||||
GROSS PROFIT | 150,407 | 142,427 | 6 | % | 300,673 | 280,381 | 7 | % | |||||||||||||
Gross Profit Margin | 43 | % | 43 | % | 43 | % | 43 | % | |||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||
Selling and marketing | 21,903 | 22,231 | (1 | )% | 44,030 | 43,982 | — | % | |||||||||||||
Research and development | 20,873 | 18,862 | 11 | % | 40,611 | 37,416 | 9 | % | |||||||||||||
General and administrative | 19,025 | 16,547 | 15 | % | 36,008 | 33,659 | 7 | % | |||||||||||||
Total | 61,801 | 57,640 | 7 | % | 120,649 | 115,057 | 5 | % | |||||||||||||
OPERATING INCOME | 88,606 | 84,787 | 5 | % | 180,024 | 165,324 | 9 | % | |||||||||||||
INTEREST INCOME (EXPENSE) | |||||||||||||||||||||
Interest income | 60 | 91 | (34 | )% | 167 | 204 | (18 | )% | |||||||||||||
Interest expense | (184 | ) | (276 | ) | (33 | )% | (326 | ) | (496 | ) | (34 | )% | |||||||||
Total | (124 | ) | (185 | ) | (33 | )% | (159 | ) | (292 | ) | (46 | )% | |||||||||
INCOME BEFORE INCOME TAXES | 88,482 | 84,602 | 5 | % | 179,865 | 165,032 | 9 | % | |||||||||||||
PROVISION FOR INCOME TAXES | 29,668 | 25,254 | 17 | % | 58,807 | 54,318 | 8 | % | |||||||||||||
NET INCOME | $ | 58,814 | $ | 59,348 | (1 | )% | $ | 121,058 | $ | 110,714 | 9 | % | |||||||||
Diluted net income per share | $ | 0.75 | $ | 0.74 | $ | 1.54 | $ | 1.38 | |||||||||||||
Diluted weighted average shares outstanding | 78,180 | 79,770 | 78,512 | 80,252 | |||||||||||||||||
Consolidated Balance Sheet Highlights (Unaudited) | |||||||||||||||||||||
(In Thousands) | December 31, | % Change | |||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||
Cash and cash equivalents | $ | 64,188 | $ | 55,126 | 16 | % | |||||||||||||||
Receivables | 146,256 | 147,091 | (1 | )% | |||||||||||||||||
Total assets | 1,718,095 | 1,708,865 | 1 | % | |||||||||||||||||
Accounts payable and accrued expenses | $ | 83,418 | $ | 80,122 | 4 | % | |||||||||||||||
Current and long term debt | 50,000 | 100,323 | (50 | )% | |||||||||||||||||
Deferred revenue | 407,441 | 440,145 | (7 | )% | |||||||||||||||||
Stockholders' equity | 971,412 | 912,474 | 6 | % |