MONETT, Mo., Aug. 21, 2018 /PRNewswire/ -- Jack Henry & Associates, Inc. (NASDAQ: JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announced fourth quarter and full year fiscal 2018 results.
Revenue for the quarter ended June 30, 2018 increased to $417.2 million, a 9% improvement over the fourth quarter of fiscal 2017. Operating income increased 10% to $108.5 million. The Tax Cuts and Jobs Act enacted December 22, 2017 had a large impact on our provision for income taxes and contributed to the large increase in net income of 32% over the fourth quarter of fiscal 2017 to $85.3 million, or $1.10 per diluted share.
For the year ended June 30, 2018, revenue increased 7% to $1,536.6 million compared to fiscal 2017. Operating income also increased 7% to $392.4 million, and net income increased 53% to $376.7 million, or $4.85 per diluted share, with the increase again due mainly to the effects of the Tax Cuts and Jobs Act ("TCJA").
According to David Foss, President and CEO, "We are happy to report another strong quarter of revenue and operating income growth. Our sales teams had an extremely strong fourth quarter across all product lines and have positioned us well as we begin the new fiscal year. We signed 20 new core customers in the quarter with almost all of them choosing the outsourced model and we continue to see strong demand for Jack Henry's industry-leading core solutions. As always, I want to thank all of our associates for their outstanding efforts to produce these results."
Operating Results
Revenue, operating expenses, operating income, and net income for the quarter and the year ended June 30, 2018 were as follows:
Revenue (Unaudited) | |||||||||||||||||||
(In Thousands) |
Three Months Ended |
% |
Year Ended |
% | |||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
Revenue |
|||||||||||||||||||
Services & Support |
$ |
271,542 |
$ |
251,487 |
8 |
% |
$ |
978,421 |
$ |
917,548 |
7 |
% | |||||||
Percentage of Total Revenue |
65 |
% |
66 |
% |
64 |
% |
64 |
% |
|||||||||||
Processing |
145,687 |
132,282 |
10 |
% |
558,182 |
513,569 |
9 |
% | |||||||||||
Percentage of Total Revenue |
35 |
% |
34 |
% |
36 |
% |
36 |
% |
|||||||||||
Total Revenue |
417,229 |
383,769 |
9 |
% |
1,536,603 |
1,431,117 |
7 |
% |
Operating Expenses and Operating Income
(Unaudited, In Thousands) |
Three Months Ended June 30, |
% |
Year Ended |
% | |||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||||
Cost of Revenue |
$ |
235,682 |
$ |
219,398 |
7 |
% |
$ |
873,642 |
$ |
819,034 |
7 |
% | |||||||
Percentage of Total Revenue |
56 |
% |
57 |
% |
57 |
% |
57 |
% |
|||||||||||
Research and Development |
24,406 |
23,340 |
5 |
% |
90,340 |
84,753 |
7 |
% | |||||||||||
Percentage of Total Revenue |
6 |
% |
6 |
% |
6 |
% |
6 |
% |
|||||||||||
Selling, General, & Administrative |
48,615 |
43,103 |
13 |
% |
182,146 |
162,898 |
12 |
% | |||||||||||
Percentage of Total Revenue |
12 |
% |
11 |
% |
12 |
% |
11 |
% |
|||||||||||
Gain on disposal of a business |
? |
(1,020) |
(100) |
% |
(1,894) |
(3,270) |
(42) |
% | |||||||||||
Total Operating Expenses |
308,703 |
284,821 |
8 |
% |
1,144,234 |
1,063,415 |
8 |
% | |||||||||||
Operating Income |
$ |
108,526 |
$ |
98,948 |
10 |
% |
$ |
392,369 |
$ |
367,702 |
7 |
% | |||||||
Operating Margin |
26 |
% |
26 |
% |
26 |
% |
26 |
% |
Net Income
Net income for the fourth quarter and the year ended June 30, 2018 was significantly impacted by the effects of the Tax Cuts and Jobs Act.
(Unaudited, In Thousands, Except Per Share Data) |
Three Months Ended June 30, |
% |
Year Ended June 30, |
% | |||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||
Income Before Income Taxes |
$ |
107,931 |
$ |
98,594 |
9 |
% |
$ |
391,024 |
$ |
366,954 |
7 |
% | |||||
Provision for Income Taxes |
22,651 |
33,903 |
(33) |
% |
14,364 |
121,161 |
(88) |
% | |||||||||
Net Income |
$ |
85,280 |
$ |
64,691 |
32 |
% |
$ |
376,660 |
$ |
245,793 |
53 |
% | |||||
Diluted earnings per share |
$ |
1.10 |
$ |
0.83 |
33 |
% |
$ |
4.85 |
$ |
3.14 |
55 |
% |
According to Kevin Williams, CFO, "The TCJA was a significant impact on the quarter and the year. The effective tax rate as reported for the year was 3.7%, but if you back out the impact of the re-measurement of deferred taxes, the effective tax rate under the new rules was 27.9%, compared to 33.0% in the prior year. The table below adjusts out all the non-operational impacts on the financials by excluding deconversion fees, revenue and operating income from acquisitions, and revenue and gain from divestitures to allow our investors to focus on our true operating performance of revenue and operating income growth of 6% over the respective prior year quarter, and 7% revenue and operating income growth over the prior full fiscal year."
Effects of Deconversion Fees, Acquisitions, and Divestitures
The table below shows our revenue and operating income (in thousands) for the fourth quarter and fiscal year ended June 30, 2018 compared to the prior year periods, excluding the impacts of deconversion fees, divestitures, and fiscal 2018 acquisitions.
Three Months Ended |
% |
Year Ended |
% | ||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||
Reported Revenue (GAAP) |
$ |
417,229 |
$ |
383,769 |
9 |
% |
$ |
1,536,603 |
$ |
1,431,117 |
7 |
% | |||||
Adjustments: |
|||||||||||||||||
Deconversion fees |
11,249 |
6,093 |
45,537 |
39,516 |
|||||||||||||
Revenue from fiscal 2018 acquisitions |
8,087 |
? |
17,145 |
? |
|||||||||||||
Revenue from divestitures |
? |
1,844 |
? |
9,341 |
|||||||||||||
Proforma Revenue |
$ |
397,893 |
$ |
375,832 |
6 |
% |
$ |
1,473,921 |
$ |
1,382,260 |
7 |
% | |||||
Reported Operating Income (GAAP) |
$ |
108,526 |
$ |
98,948 |
10 |
% |
$ |
392,369 |
$ |
367,702 |
7 |
% | |||||
Adjustments: |
|||||||||||||||||
Deconversion fees |
11,050 |
6,093 |
44,244 |
39,509 |
|||||||||||||
Operating income from fiscal 2018 acquisitions |
512 |
? |
597 |
? |
|||||||||||||
Operating income from divestitures |
? |
213 |
? |
2,083 |
|||||||||||||
Gain on disposal of businesses |
? |
1,020 |
1,894 |
3,270 |
|||||||||||||
Proforma Operating Income |
$ |
96,964 |
$ |
91,622 |
6 |
% |
$ |
345,634 |
$ |
322,840 |
7 |
% |
Balance Sheet and Cash Flow Review
Cash provided by operations totaled $412.1 million in fiscal 2018 compared to $357.3 million last year. The following table summarizes net cash (in thousands) from operating activities:
(Unaudited, In Thousands) |
Year Ended June 30, | ||||
2018 |
2017 | ||||
Net income |
$ |
376,660 |
$ |
245,793 | |
Depreciation |
47,975 |
49,677 | |||
Amortization |
104,011 |
90,109 | |||
Change in deferred income taxes |
(51,644) |
30,940 | |||
Other non-cash expenses |
10,804 |
15,900 | |||
Change in receivables |
(9,219) |
(22,499) | |||
Change in deferred revenue |
(63,262) |
(8,800) | |||
Change in other assets and liabilities |
(3,183) |
(43,798) | |||
Net cash provided by operating activities |
$ |
412,142 |
$ |
357,322 |
Cash used in investing activities for fiscal 2018 totaled $291.8 million, compared to $141.6 million for the same period in fiscal 2017 and included the following:
(Unaudited, In Thousands) |
Year Ended June 30, | ||||
2018 |
2017 | ||||
Payment for acquisitions, net of cash acquired |
$ |
(137,562) |
$ |
? | |
Capital expenditures |
(40,135) |
(41,947) | |||
Proceeds from the sale of businesses |
350 |
5,632 | |||
Proceeds from the sale of assets |
306 |
968 | |||
Internal use software |
(13,138) |
(16,608) | |||
Computer software developed |
(96,647) |
(89,631) | |||
Purchase of investments |
$ |
(5,000) |
$ |
? | |
Net cash from investing activities |
$ |
(291,826) |
$ |
(141,586) |
Financing activities used cash of $203.6 million in fiscal 2018 and $171.3 million in fiscal 2017.
(Unaudited, In Thousands) |
Year Ended June 30, | ||||
2018 |
2017 | ||||
Borrowings on credit facilities |
$ |
125,000 |
$ |
80,000 | |
Repayments on credit facilities |
(175,000) |
(30,200) | |||
Purchase of treasury stock |
(48,986) |
(130,140) | |||
Dividends paid |
(105,021) |
(91,707) | |||
Net cash from issuance of stock and tax related to stock-based compensation |
366 |
766 | |||
Net cash from financing activities |
$ |
(203,641) |
$ |
(171,281) |
Quarterly Conference Call
The company will hold a conference call on August 22, 2018; at 7:45 a.m. Central Time and investors are invited to listen at www.jackhenry.com.
About Jack Henry & Associates
Jack Henry & Associates, Inc. (NASDAQ: JKHY) is a leading provider of technology solutions and payment processing services primarily for the financial services industry. Its solutions serve more than 9,000 customers nationwide, and are marketed and supported through three primary brands. Jack Henry Banking® supports banks ranging from community banks to multi-billion-dollar institutions with information processing solutions. Symitar® is a leading provider of information processing solutions for credit unions of all sizes. ProfitStars® provides highly specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. Additional information is available at www.jackhenry.com.
Statements made in this news release that are not historical facts are forward-looking information. Actual results may differ materially from those projected in any forward-looking information. Specifically, there are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Additional information on these and other factors, which could affect the Company's financial results, are included in its Securities and Exchange Commission (SEC) filings on Form 10-K, and potential investors should review these statements. Finally, there may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ materially from any forward-looking information.
Condensed Consolidated Statements of Income | |||||||||||||||||
(Unaudited) | |||||||||||||||||
(In Thousands, Except Per Share Data) |
Three Months Ended June |
% |
Year Ended June 30, |
% | |||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||
REVENUE |
$ |
417,229 |
$ |
383,769 |
9 |
% |
$ |
1,536,603 |
$ |
1,431,117 |
7 |
% | |||||
EXPENSES |
|||||||||||||||||
Cost of Revenue |
235,682 |
219,398 |
7 |
% |
873,642 |
819,034 |
7 |
% | |||||||||
Research & Development |
24,406 |
23,340 |
5 |
% |
90,340 |
84,753 |
7 |
% | |||||||||
Selling, General, & Administrative |
48,615 |
43,103 |
13 |
% |
182,146 |
162,898 |
12 |
% | |||||||||
Gain on disposal of businesses |
? |
(1,020) |
(100) |
% |
(1,894) |
(3,270) |
(42) |
% | |||||||||
Total Expenses |
308,703 |
284,821 |
8 |
% |
1,144,234 |
1,063,415 |
8 |
% | |||||||||
OPERATING INCOME |
108,526 |
98,948 |
10 |
% |
392,369 |
367,702 |
7 |
% | |||||||||
INTEREST INCOME (EXPENSE) |
|||||||||||||||||
Interest income |
152 |
38 |
300 |
% |
575 |
248 |
132 |
% | |||||||||
Interest expense |
(747) |
(392) |
91 |
% |
(1,920) |
(996) |
93 |
% | |||||||||
Total |
(595) |
(354) |
68 |
% |
(1,345) |
(748) |
80 |
% | |||||||||
INCOME BEFORE INCOME TAXES |
107,931 |
98,594 |
9 |
% |
391,024 |
366,954 |
7 |
% | |||||||||
PROVISION FOR INCOME TAXES |
22,651 |
33,903 |
(33) |
% |
14,364 |
121,161 |
(88) |
% | |||||||||
NET INCOME |
$ |
85,280 |
$ |
64,691 |
32 |
% |
$ |
376,660 |
$ |
245,793 |
53 |
% | |||||
Diluted net income per share |
$ |
1.10 |
$ |
0.83 |
$ |
4.85 |
$ |
3.14 |
|||||||||
Diluted weighted average shares outstanding |
77,585 |
78,064 |
77,585 |
78,255 |
|||||||||||||
Consolidated Balance Sheet Highlights (Unaudited) | |||||||||||||||||
(In Thousands) |
June 30, |
% | |||||||||||||||
2018 |
2017 |
||||||||||||||||
Cash and cash equivalents |
$ |
31,440 |
$ |
114,765 |
(73) |
% | |||||||||||
Receivables |
291,630 |
276,923 |
5 |
% | |||||||||||||
Total assets |
2,050,303 |
1,908,945 |
7 |
% | |||||||||||||
Accounts payable and accrued expenses |
$ |
132,358 |
$ |
88,415 |
50 |
% | |||||||||||
Current and long-term debt |
? |
50,000 |
(100) |
% | |||||||||||||
Deferred revenue |
448,632 |
511,384 |
(12) |
% | |||||||||||||
Stockholders' equity |
1,266,828 |
1,032,051 |
23 |
% |
SOURCE Jack Henry & Associates, Inc.
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