Jack Henry Lays Out $17 Million for Goldleaf After Good 4Q

Published: August 24, 2009

by Alex Woodie

Despite the poor economic climate, i OS banking software developer Jack Henry and Associates managed to increase revenues and net income during its fiscal fourth quarter ended June 30, closing out a challenging year on an optimistic note. With its stock price at a 52-week high, the Monett, Missouri, company announced plans to acquire Goldleaf Financial Solutions, a publicly traded developer of payment processing and automated deposit capture solutions for banks, for about $61 million.

Fourth quarter revenues for Jack Henry increased 2 percent to $192 million. The bulk of that revenue came from support and services contracts, which brought in $155 million, a 5 percent increase from a year ago. License fee revenue from products such as SilverLake, its core i OS-based banking platform, dropped 4 percent to $17.6 million. Net income jumped 12 percent to about $28 million, an increase largely attributed to cuts in labor, travel, and marketing.

For fiscal year 2009, the company reported total revenues of $745.6 million, up less than a percent from the $743 million in brought in a year ago. License fee revenue--the key leading indicator in a software company's financials--plummeted more than 20 percent to $58 million. Support and services revenues more than made up for that drop with a 6 percent increase to more than $614 million. Net income for the year came in at $103 million, a 1 percent decrease from a year ago.

"In a year of unprecedented challenges we maintained a long-term focus on the operation of our business," says Jack Henry CEO, Jack Prim. "We enter fiscal 2010 with a strong balance sheet, a focused strategy, and a cautiously optimistic outlook for the new year."

That cautious optimism was reflected in Jack Henry's most recently announced acquisition, Goldleaf Financial Systems. Based near Atlanta, Georgia, Goldleaf develops and delivers a range of payment processing solutions, including remote deposit capture software, ACH processing services, document imaging, and Web hosting.

Jack Henry agreed to pay $.98 per share for all outstanding Goldleaf stock, or $17.1 million. That equates to a 40 percent price-premium premium over recent per-share prices for Goldleaf's stock, which is traded on NASDAQ. Jack Henry is also assuming about $42 million in Goldleaf's debt, bringing to total cost to $69.1 million.

At its core, Goldleaf's technology is focused on transitioning deposits and payments from paper to electronic-based transactions. This is especially important considering Check 21, the law that requires banks to transition from paper-based handling of deposits to electronic means. Goldleaf's software is considered one of the top certified Check 21 solutions, and it should provide a big boost to Jack Henry's Check 21 efforts.

Despite its small size (only 500 employees across six locations), Goldleaf has about 3,500 customers, ranging from the smaller "de novo" banks that are Jack Henry's bread and butter to some of the biggest financial institutions in the world. Some Jack Henry customers are also Goldleaf customers.

Goldleaf will operate as a subsidiary of Jack Henry. The acquisition is expected to close later this quarter or early in the fourth quarter. Goldleaf will be "slightly accretive in the first full year and improve beyond that," says Jack Henry CFO Kevin Williams. Goldleaf's directors have approved the deal, which is subject to a vote of shareholders and customary closing conditions.

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