Delaware | 0-14112 | 43-1128385 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
JACK HENRY & ASSOCIATES, INC. | |||
(Registrant) | |||
Date: | May 2, 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 March 31, | % Change | Nine Months Ended March 31, | % Change | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Revenue | |||||||||||||||||||
License | $ | 516 | $ | 292 | 77 | % | $ | 2,059 | $ | 2,530 | (19 | )% | |||||||
Percentage of Total Revenue | <1% | <1% | <1% | <1% | |||||||||||||||
Support and Service | 342,769 | 319,649 | 7 | % | 1,013,331 | 947,615 | 7 | % | |||||||||||
Percentage of Total Revenue | 97 | % | 96 | % | 97 | % | 96 | % | |||||||||||
Hardware | 10,482 | 13,245 | (21 | )% | 31,959 | 37,532 | (15 | )% | |||||||||||
Percentage of Total Revenue | 3 | % | 4 | % | 3 | % | 4 | % | |||||||||||
Total Revenue | 353,767 | 333,186 | 6 | % | 1,047,349 | 987,677 | 6 | % | |||||||||||
Cost of Sales | |||||||||||||||||||
Cost of License | 280 | 193 | 45 | % | 591 | 873 | (32 | )% | |||||||||||
Cost of Support and Service | 198,844 | 184,527 | 8 | % | 576,006 | 541,230 | 6 | % | |||||||||||
Cost of Hardware | 7,603 | 9,553 | (20 | )% | 23,039 | 26,279 | (12 | )% | |||||||||||
Total Cost of Sales | 206,727 | 194,273 | 6 | % | 599,636 | 568,382 | 5 | % | |||||||||||
Gross Profit | |||||||||||||||||||
License Gross Profit | 236 | 99 | 138 | % | 1,468 | 1,657 | (11 | )% | |||||||||||
License Gross Profit Margin | 46 | % | 34 | % | 71 | % | 65 | % | |||||||||||
Support and Service Gross Profit | 143,925 | 135,122 | 7 | % | 437,325 | 406,385 | 8 | % | |||||||||||
Support and Service Gross Profit Margin | 42 | % | 42 | % | 43 | % | 43 | % | |||||||||||
Hardware Gross Profit | 2,879 | 3,692 | (22 | )% | 8,920 | 11,253 | (21 | )% | |||||||||||
Hardware Gross Profit Margin | 27 | % | 28 | % | 28 | % | 30 | % | |||||||||||
Total Gross Profit | $ | 147,040 | $ | 138,913 | 6 | % | $ | 447,713 | $ | 419,295 | 7 | % | |||||||
Gross Profit Margin | 42 | % | 42 | % | 43 | % | 42 | % |
• | Third quarter fiscal 2016 included revenue of $7.7 million from Alogent, which was sold in the fourth quarter of fiscal 2016. However, this headwind was partially offset by increased deconversion fees in the third quarter of fiscal 2017. Excluding |
• | The nine months ended March 31, 2016 included revenue of $22.3 million from Alogent, part of which was again set off by an increase in deconversion fees in fiscal 2017. Excluding the Alogent headwind, and deconversion fees from both periods, revenue and gross profit each grew 8% over the nine months ended March 31, 2016. |
• | For the third quarter of fiscal 2017, the bank systems and services segment revenue increased 6% to $260.0 million with a gross margin of 39% from $246.2 million with a gross margin of 39% in the same quarter last year. Excluding Alogent from the third quarter of fiscal 2016, bank systems and services segment revenue increased 9% for the quarter. The credit union systems and services segment revenue increased 8% to $93.8 million with a gross margin of 48% for the third quarter of fiscal 2017 from $87.0 million and a gross margin of 48% in the same period a year ago. |
• | For the nine months ended March 31, 2017, bank systems and services segment revenue increased 8% to $778.4 million with a gross margin of 41% from $723.9 million with a gross margin of 40% for the same nine months of fiscal 2016. Excluding Alogent revenue from the prior year period, bank systems and services revenue increased 11%. Credit union systems and services segment revenue increased 2% to $269.0 million with a gross margin of 48% for the year-to-date period, compared to revenue of $263.7 million with a gross margin of 49% for the nine months ended March 31, 2016. |
(Unaudited, In Thousands) | Three Months Ended March 31, | % Change | Nine Months Ended March 31, | % Change | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Selling and Marketing | $ | 23,571 | $ | 22,732 | 4 | % | $ | 67,601 | $ | 66,714 | 1 | % | |||||||
Percentage of Total Revenue | 7 | % | 7 | % | 6 | % | 7 | % | |||||||||||
Research and Development | 20,801 | 19,854 | 5 | % | 61,413 | 57,269 | 7 | % | |||||||||||
Percentage of Total Revenue | 6 | % | 6 | % | 6 | % | 6 | % | |||||||||||
General and Administrative | 13,937 | 16,497 | (16 | )% | 49,944 | 50,157 | — | % | |||||||||||
Percentage of Total Revenue | 4 | % | 5 | % | 5 | % | 5 | % | |||||||||||
Total Operating Expenses | 58,309 | 59,083 | (1 | )% | 178,958 | 174,140 | 3 | % | |||||||||||
Operating Income | $ | 88,731 | $ | 79,830 | 11 | % | $ | 268,755 | $ | 245,155 | 10 | % | |||||||
Operating Margin | 25 | % | 24 | % | 26 | % | 25 | % |
• | Selling and marketing expenses for the third quarter of fiscal 2017 increased over the prior year quarter due mainly to increased commission expense, but was a consistent percentage of total revenue in both quarters. |
• | The increases in research and development costs are mostly due to increased salaries and personnel costs. |
• | General and administrative expenses decreased compared to the prior quarter due mainly to a gain recognized on the sale of a business, as well as decreased spending on travel, meetings, and litigation. These factors also drove the year-to-date decrease. |
• | Excluding Alogent revenue and costs from fiscal 2016, and deconversion fees from both years, operating income increased 3% for the quarter and increased 7% for the year-to-date period. |
(Unaudited, In Thousands, Except Per Share Data) | Three Months Ended March 31, | % Change | Nine Months Ended March 31, | % Change | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Income Before Income Taxes | $ | 88,495 | $ | 79,398 | 11 | % | $ | 268,360 | $ | 244,430 | 10 | % | |||||||
Provision for Income Taxes | 28,451 | 25,515 | 12 | % | 87,258 | 79,833 | 9 | % | |||||||||||
Net Income | $ | 60,044 | $ | 53,883 | 11 | % | $ | 181,102 | $ | 164,597 | 10 | % | |||||||
Diluted earnings per share | $ | 0.77 | $ | 0.68 | 13 | % | $ | 2.31 | $ | 2.06 | 12 | % |
• | Provision for income taxes increased in the third quarter, with an effective tax rate at 32.1% of income before income taxes, consistent with the 32.1% for the same quarter of the prior year. |
• | For the year-to-date period, the effective tax rate decreased to 32.5% of income before income taxes from 32.7% for the nine months ending March 31, 2016. |
• | 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 nine months ended March 31, 2017. |
• | Excluding Alogent revenue and costs from the third quarter of fiscal 2016 and deconversion fees from both quarters, net income increased 4% and diluted earnings per share increased 5%. Excluding these same items for the year-to-date periods, net income increased 7% and diluted earnings per share increased 9%. |
• | At March 31, 2017, cash and cash equivalents decreased to $42.9 million from $54.0 million at March 31, 2016. |
• | Trade receivables totaled $139.5 million at March 31, 2017 compared to $137.4 million at March 31, 2016. |
• | Current and long term debt totaled $50.0 million at March 31, 2017, a decrease from $100.2 million a year ago. |
• | Total deferred revenue decreased to $338.7 million at March 31, 2017, compared to $383.2 million a year ago. |
• | Stockholders' equity increased to $1,012.1 million at March 31, 2017, compared to $948.9 million a year ago. |
(Unaudited, In Thousands) | Nine Months Ended March 31, | ||||||
2017 | 2016 | ||||||
Net income | $ | 181,102 | $ | 164,597 | |||
Depreciation | 37,554 | 38,106 | |||||
Amortization | 66,882 | 57,013 | |||||
Other non-cash expenses | 23,634 | 32,860 | |||||
Change in receivables | 114,420 | 108,172 | |||||
Change in deferred revenue | (182,309 | ) | (149,885 | ) | |||
Change in other assets and liabilities | (42,416 | ) | (43,492 | ) | |||
Net cash provided by operating activities | $ | 198,867 | $ | 207,371 |
(Unaudited, In Thousands) | Nine Months Ended March 31, | ||||||
2017 | 2016 | ||||||
Payment for acquisitions, net of cash acquired | $ | — | $ | (8,275 | ) | ||
Capital expenditures | (28,150 | ) | (43,300 | ) | |||
Proceeds from the sale of businesses | 2,286 | — | |||||
Proceeds from the sale of assets | 949 | 2,797 | |||||
Internal use software | (14,780 | ) | (10,157 | ) | |||
Computer software developed | (63,804 | ) | (74,662 | ) | |||
Net cash from investing activities | $ | (103,499 | ) | $ | (133,597 | ) |
• | The $28.2 million in capital expenditures was mainly for the purchase of computer equipment. |
(Unaudited, In Thousands) | Nine Months Ended March 31, | ||||||
2017 | 2016 | ||||||
Borrowings on credit facilities | $ | 80,000 | $ | 100,000 | |||
Repayments on credit facilities | (30,200 | ) | (52,484 | ) | |||
Purchase of treasury stock | (103,885 | ) | (155,122 | ) | |||
Dividends paid | (67,641 | ) | (62,037 | ) | |||
Net cash from issuance of stock and tax related to stock-based compensation | (1,036 | ) | 1,557 | ||||
Net cash from financing activities | $ | (122,762 | ) | $ | (168,086 | ) |
Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||
(In Thousands, Except Per Share Data) | Three Months Ended March 31, | % Change | Nine Months Ended March 31, | % Change | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
REVENUE | |||||||||||||||||||||
License | $ | 516 | $ | 292 | 77 | % | $ | 2,059 | $ | 2,530 | (19 | )% | |||||||||
Support and service | 342,769 | 319,649 | 7 | % | 1,013,331 | 947,615 | 7 | % | |||||||||||||
Hardware | 10,482 | 13,245 | (21 | )% | 31,959 | 37,532 | (15 | )% | |||||||||||||
Total | 353,767 | 333,186 | 6 | % | 1,047,349 | 987,677 | 6 | % | |||||||||||||
COST OF SALES | |||||||||||||||||||||
Cost of license | 280 | 193 | 45 | % | 591 | 873 | (32 | )% | |||||||||||||
Cost of support and service | 198,844 | 184,527 | 8 | % | 576,006 | 541,230 | 6 | % | |||||||||||||
Cost of hardware | 7,603 | 9,553 | (20 | )% | 23,039 | 26,279 | (12 | )% | |||||||||||||
Total | 206,727 | 194,273 | 6 | % | 599,636 | 568,382 | 5 | % | |||||||||||||
GROSS PROFIT | 147,040 | 138,913 | 6 | % | 447,713 | 419,295 | 7 | % | |||||||||||||
Gross Profit Margin | 42 | % | 42 | % | 43 | % | 42 | % | |||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||
Selling and marketing | 23,571 | 22,732 | 4 | % | 67,601 | 66,714 | 1 | % | |||||||||||||
Research and development | 20,801 | 19,854 | 5 | % | 61,413 | 57,269 | 7 | % | |||||||||||||
General and administrative | 13,937 | 16,497 | (16 | )% | 49,944 | 50,157 | — | % | |||||||||||||
Total | 58,309 | 59,083 | (1 | )% | 178,958 | 174,140 | 3 | % | |||||||||||||
OPERATING INCOME | 88,731 | 79,830 | 11 | % | 268,755 | 245,155 | 10 | % | |||||||||||||
INTEREST INCOME (EXPENSE) | |||||||||||||||||||||
Interest income | 42 | 54 | (22 | )% | 209 | 258 | (19 | )% | |||||||||||||
Interest expense | (278 | ) | (486 | ) | (43 | )% | (604 | ) | (983 | ) | (39 | )% | |||||||||
Total | (236 | ) | (432 | ) | (45 | )% | (395 | ) | (725 | ) | (46 | )% | |||||||||
INCOME BEFORE INCOME TAXES | 88,495 | 79,398 | 11 | % | 268,360 | 244,430 | 10 | % | |||||||||||||
PROVISION FOR INCOME TAXES | 28,451 | 25,515 | 12 | % | 87,258 | 79,833 | 9 | % | |||||||||||||
NET INCOME | $ | 60,044 | $ | 53,883 | 11 | % | $ | 181,102 | $ | 164,597 | 10 | % | |||||||||
Diluted net income per share | $ | 0.77 | $ | 0.68 | $ | 2.31 | $ | 2.06 | |||||||||||||
Diluted weighted average shares outstanding | 77,932 | 79,167 | 78,319 | 79,891 | |||||||||||||||||
Consolidated Balance Sheet Highlights (Unaudited) | |||||||||||||||||||||
(In Thousands) | March 31, | % Change | |||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
Cash and cash equivalents | $ | 42,916 | $ | 54,001 | (21 | )% | |||||||||||||||
Receivables | 139,503 | 137,406 | 2 | % | |||||||||||||||||
Total assets | 1,686,983 | 1,702,622 | (1 | )% | |||||||||||||||||
Accounts payable and accrued expenses | $ | 75,062 | $ | 76,781 | (2 | )% | |||||||||||||||
Current and long term debt | 50,000 | 100,213 | (50 | )% | |||||||||||||||||
Deferred revenue | 338,744 | 383,171 | (12 | )% | |||||||||||||||||
Stockholders' equity | 1,012,112 | 948,867 | 7 | % |