Services Power Jack Henry to Record Revenues in Fiscal 2011

August 22, 2011 Dan Burger

A strong showing on the services side of business has propelled Jack Henry and Associates to impressive gains in its Q4 of fiscal 2011 ended in July. This comes despite a weak economy and much turmoil in the banking industry as a result of bank failures and a stormy season of mergers and acquisitions in the credit union sector. JHA has long been a major contributor to the IBM i ecosystem.

JHA president Tony Wormington, in a prepared document, stated, “We ended fiscal 2011 with record levels of revenue, gross profit and net income. Our company continues to prosper in a very competitive market and a consolidating industry . . . We are entering our fiscal 2012 with a strong balance sheet with low levels of debt, recurring revenue that continues to grow, an extremely focused strategy on servicing financial institutions, and a cautiously optimistic outlook for the new fiscal year.”

In comparison to the previous fiscal year, Jack Henry revenues rose 16 percent to $966.9 million and net income rose 17 percent to $137.5 million.

Support and services are the growth engines. JHA derives 88 percent–$852.3 million–of its total revenues from this stream. Support and services brought in $720.5 million the previous year. Credit for that 18.3 percent increase goes to a combination of organic growth and the additional revenues from JHA acquisitions that occurred during the prior fiscal year. Electronics payments revenue led the way in the support and services area with a 32 percent gain over the previous year. This area alone now contributes 33 percent of the total revenue.

For the fiscal year 2011, software license revenue was below expectations. Although revenue here managed a 6 percent gain compared to 2010, that $53.1 million was just 6 percent of total revenue that the company generated–the same percentage of overall revenue as a year ago. License fees are a high-margin revenue item, and Prim noted this performance was disappointing.

Hardware sales slipped from $63.9 million in 2010 to $61.6 million in 2011.

Operating expenses increased 12 percent for the 2011 fiscal year to $183 million, primarily due to additional operating expenses of the companies acquired during the previous fiscal year.

Research and development expenses increased 25 percent to $63.4 million, which is 7 percent of total revenue.

Jack Henry CEO Jack Prim reminded everyone that his company exceeded expectations and enjoyed success during a worse than anticipated economy.

“Solid organic revenue growth and strong performances from our recent acquisitions allowed us to deliver revenue and operating income that exceeded the guidance we provided a year ago,” Prim said in a prepared statement. “In spite of recent economic news, we believe the spending environment for our customers is continuing to improve and we ended the fiscal year with strong sales performances as all four brands were over 100 percent of their assigned quotas for the year. We are cautiously optimistic that we will continue to see an improved economic environment over the next 12 months.”

Looking at the Q4 numbers, the company generated total revenue of $249.3 million compared to $227.8 million in the same quarter a year ago. Gross profit increased to $104.2 million compared to $95.1 million. Net income for the quarter, which ended June 30, was $36.6 million compared to $30 million in the same quarter a year ago.

License revenue for the fourth quarter was $15.1 million, a 6 percent increase in line with the full fiscal year growth. Support and service revenue increased 11 percent in Q4 and brought in $219.2 million.

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