Jack Henry’s Fiscal Winning Streak Continues
February 11, 2013 Dan Burger
Jack Henry & Associates, the banking software and payment processing services provider that is a well-known vendor in the IBM midrange, has tacked on healthy increases in revenue for its fiscal second quarter of 2013. The financial report, released last week, showed a revenue spurt of 9 percent compared to the first fiscal quarter of 2012. Net income was bumped up 5 percent in the same year-to-year comparison.
For the first six months of the company’s fiscal 2013, revenue increase maintains that 9 clip and net income increases are on an 11 percent gain. Closely shadowing Jack Henry’s established pattern of success is the speculation that the company will become fuel for the gigantic mergers and acquisitions machine that is strategic to the global economy.
“We continue to have a very good fiscal 2013 with both the quarter and first six months providing record revenue and gross profit compared to any respective periods in our history,” Jack Henry president Tony Wormington said in a statement. “Support and services revenue was once again the primary driver of our total revenue growth with 11 percent growth within that revenue line for the quarter compared to last year. We continue to see strong growth in every component within this line with the primary driver again being our electronic payments.”
Net income in the current quarter was $40.5 million compared to $38.5 million in the same quarter a year ago. Net income for the first half of fiscal 2013 totaled $83 million compared to $75 million for the same six months in fiscal 2012.
License revenue for the second quarter decreased to $13.2 million, a 5 percent slip from the $13.6 million registered in this quarter a year ago. However, support and service revenue increased 11 percent to $250.3 million. That represents 90 percent of total revenue in second quarter of fiscal 2013. The corresponding figures from 2012 were $225.6 million generated from support and service, which represented 88 percent of total revenue.
Within support and service revenue, electronic payment services (which include ATM/debit/credit card transaction processing, bill payment, remote deposit capture and ACH transaction processing services) had the largest growth. This piece of the pie represented $15.2 million or 18 percent in the second quarter.
The amount that hardware sales contribute to total revenue declined in the second quarter of fiscal 2013. The slippage was noted as 9 percent taking the figure from $16.7 million one year ago to $15.2 million in 2013. Hardware sales in the first six months of fiscal 2013 decreased 12 percent to $28.7 million from $32.5 million in the same period last year. Hardware gross margins decreased to 27 percent for the six-month period this fiscal year. They stood at 29 percent in the six month period last fiscal year.
For the first half of fiscal 2013, license revenue was $26.1 million, up 1 percent from $25.8 million a year ago. License revenue as a percentage of total revenue remained at 5 percent in year-to-year comparisons.
Lining up support and service revenue in the first half year of fiscal 2012 and 2013 shows an 11 percent increase in support and service revenue. The numbers are $494.9 million in 2013 and $445.9 million for the same period a year ago.
Also of note, the company’s operating expenses increased 35 percent in the second quarter of fiscal 2013 compared to the same quarter a year ago. Hurricane Sandy’s visit, which brought flooding to the Lyndhurst, New Jersey, processing center run by Jack Henry, was primarily responsible.
In his roundtable discussion at the OCEAN user group meeting in January, IBM i chief architect Steve Will singled out Jack Henry as one of the most prevalent banking solution vendors in the United States and proudly noted that many of its customers run on the Power Systems-IBM i platform.
Jack Henry & Associates is one of the largest applications and services vendors that works with both small and large financial services institutions. Its IBM i-based applications, known as the SilverLake System, as well as its Windows-based systems are both performing well.
The company claims approximately 20 percent share of the applications market in the mid-tier banking segment, with more than 1,500 customers using its Windows or IBM i banking suites. It also estimates 11,200 customers are using its software and processing services.