Jack Henry Acquisitions Push Record Q1 Revenue
November 15, 2010 Dan Burger
Major acquisitions during the past year are bringing expected gains to the first quarter fiscal 2001 financial report at Jack Henry and Associates. With integration nearly complete and the three acquired companies–iPay Technologies, Goldleaf Financial Solutions, and Pemco Technologies–reportedly running at or above expected performance, JHA enjoyed record revenue and net income for the quarter.
JHA is a producer of integrated software systems for the banking industry. It also processes ATM and debit card transactions for banks and credit unions. Its customer base includes businesses with core applications running on the IBM i platform as well as others.
In the first quarter ended in September, Jack Henry reported sales of $234.8 million, a 21 percent jump compared to a year ago. Net income totaled $31.8 million compared to $26.3 million, an increase of 20.9 percent year-on-year.
License revenue, however, decreased 17 percent to $9.5 million compared to $11.4 million a year ago. Hardware sales (including Power Systems machines running IBM i) in the first quarter of fiscal 2011 decreased 2 percent to $14.8 million from $15 million in the year ago period.
The effects of the economic downturn and the lingering lack of confidence continues to put pressure on discretionary spending items like hardware and software, said JHA chief executive officer Jack Prim, who went on to say bank executives remain pessimistic in their outlook for local and national economies. Prim added that hardware and software revenue was also affected by more than 120 existing JHA customers transitioning from in-house to outsourced processing in the last several years.
Support and service revenue, bolstered considerably by the iPay acquisition last year, jumped 35 percent in the first quarter of fiscal 2011. That was a bump from $159.9 million to $210.6 million. As a percentage of total revenue, support and service now claims 90 percent of the pie compared to 86 percent of revenue last year.
“Our support and services revenue continues to generate the required growth to offset the continued lack of discretionary spending on license fees and hardware sales,” stated JHA president Tony Wormington, in a statement accompanying the financials. “The biggest driver within this line is our EFT (electronic funds transfer) revenue which grew $34.6 million or 87 percent compared to the prior year, and represented 32 percent of total revenue for the quarter. Obviously all three of the acquisitions we did last year contributed to this growth, however, we experienced organic growth in EFT revenue of 11 percent in the quarter compared to last year.”
Prim also noted that organic revenue growth played an important role in the record revenue, operating and net income for the quarter, specifically pointing to increases in recurring revenue, which was at 81 percent for the quarter–another company record.
“This was accomplished in spite of the fact that the economic environment for our customers remains essentially unchanged,” Prim added. “We expect to see gradual improvement in financial institution spending as the economy continues to slowly improve.”