Jack Henry’s Revenues Increase Thanks to Support and Services

Jack Henry & Associates, one of the dominant providers of data processing hardware, software, and services for financial institutions, recently released its financial results for its second quarter of fiscal 2006 ended December 31, 2005. The company posted overall gains based on the performance of its support and service sectors, which prospered despite the banking industry’s continued preference for outsourcing. The gains more than offset small decreases in hardware revenues, an area that makes up the company’s lowest margin revenue component.

According to company president Tony Wormington, the best performance, in terms of recurring revenue, originates from outsourcing, in-house maintenance, and ATM/Debit card processing. Jack Henry saw revenue go up 8 percent, an increase of 20 percent in gross profit, and a 22 percent increase in net income compared to the second quarter of fiscal 2005. For the first six months of fiscal 2006 revenue increased 9 percent, with an increase of 16 percent in gross profit and an increase of 19 percent in net income over the same six months in fiscal 2005.

Compared to the same quarter one year ago, the company generated total revenue of $147.4 million versus $136 million. Gross profit increased to $65.5 million compared to $54.7 million in the second quarter of last fiscal year. Net income totaled $21.6 million, or $0.23 per diluted share, compared to $17.7 million, or $0.19 per diluted share, in the same quarter a year ago.

For the first half of fiscal 2006, total revenue of $284.4 million was generated compared to $260.1 million for the first half of fiscal 2005. Gross profit increased to $122 million compared to $105.3 million during the same period last fiscal year. Net income for the first half of fiscal 2006 was $41.1 million, or $0.44 per diluted share, compared to $34.4 million, or $0.37 per diluted share for the same six months in fiscal 2005.

License revenue generated 14 percent of the total second quarter revenue–a total of $20.8 million, which was down from the $22.2 million (16 percent of revenue) brought in a year ago. Support and service revenue increased to $106.5 million, or 72 percent of total revenue in second quarter of fiscal 2006. One year ago support and services contributed $87.7 million, or 65 percent of total revenue. Hardware sales in the second quarter of fiscal 2006 decreased from $26.1 million to $20.1 million when compared quarter to quarter with one year ago.

For the first half of fiscal 2006, license revenue decreased to $37.8 million, compared to $41.7 million. Support and service revenue contributed $205.9 million of the total revenue for the first six months of the current fiscal year compared to $171.4 million for the first six months of the prior fiscal year. Hardware sales for the first half of fiscal 2006 were $40.7 million compared to $47.0 million for the same period last year.