Jack Henry Sees 10 Percent Revenue and Profit Growth in Fiscal Q1

Published: November 6, 2006

by Timothy Prickett Morgan

It is always a good thing to see independent software vendors that push the System i platform doing well. And in its most recent quarter Jack Henry & Associates, which specializes in selling software to financial institutions such as community banks and credit unions, said that sales were up 10 percent.

Jack Henry ended its first quarter of fiscal 2007 on September 30, and reported sales of $150.6 million, up 10 percent from the $137 million it booked in the prior year's first quarter. Software license sales were actually down in the quarter, however, falling 8 percent to $15.5 million. Hardware sales (including systems and related peripherals used by banks and other financial institutions) declined by 6 percent to $19.5 million. But support and services revenues, however, increased by 16 percent to $115.5 million, more than offsetting the declines in software and hardware sales.

The costs associated with hardware fell a lot faster than the hardware declines, which means that despite falling sales in this area, it was more profitable. Costs of sales for software fell by 35 percent, which means software profits were up, too. The costs for support and services increased by 14 percent against a 16 percent increase in sales, which means only a little more money hit the bottom line than last year. Other costs--particularly for back office operations related to an upgrade of its own accounting systems and research and development for its software products--rose in the quarter, which pushed down profits at Jack Henry. Still, net income rose in synch with overall revenues, increasing by 10 percent to $21.4 million.

Equally significantly, Jack Henry had $51.6 million in cash (down by $5 million from last year, though) and $155.9 million in deferred revenue in the quarter.