Jack Henry & Associates, Inc. Reports First Quarter Fiscal 2023 Results

•GAAP revenue increased 8% and GAAP operating income increased 5% for the three months ended September 30, 2022, compared to the prior fiscal year quarter.

•Non-GAAP adjusted revenue increased 8% and non-GAAP adjusted operating income increased 2% for the three months ended September 30, 2022, compared to the prior fiscal year quarter.1

▪GAAP EPS was $1.46 per diluted share for the three months ended September 30, 2022, compared to $1.38 for the prior fiscal year quarter.

▪Cash at September 30, 2022, was $32 million and $44.3 million at September 30, 2021.

▪Debt related to the revolving credit line was $245 million at September 30, 2022, and $65 million at September 30, 2021.

Full-year fiscal 2023 guidance:2

▪GAAP revenue $2,092 million to $2,099 million

▪GAAP operating margin 23.2% to 23.3%

▪GAAP EPS $4.90 to $4.94

▪Non-GAAP revenue $2,045 million to $2,052 million3

▪Non-GAAP operating margin 22.5% to 22.6%3

Monett, MO, November 8, 2022 - Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading financial technology provider, today announced results for the first quarter ended September 30, 2022.

According to David Foss, Board Chair and CEO, “We are very pleased to report another quarter of record revenue and an overall strong performance for the first quarter of our new fiscal year. Our sales teams continue to see strong demand for Jack Henry technology solutions, and we’re seeing significant interest in our new initiatives including our technology modernization strategy, Financial Crimes Defender platform, Banno Business solution, and Payrailz. Today, as a well-rounded financial technology company, we continue to invest in a modern technology infrastructure that is cloud-native, digitally centric, open and scalable in order to deliver the speed and agility that our clients require."

1 See tables below reconciling non-GAAP financial measures to GAAP.

2 The guidance assumes no additional acquisitions are made during the year.

3 See tables below reconciling fiscal year 2023 GAAP to non-GAAP guidance.

4 See tables below on page 10 reconciling Net Income to non-GAAP EBITDA.

Revenue, operating expenses, operating income, and net income for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, were as follows (all dollar amounts in this section are in thousands, except for per share amounts):

•Services and support revenue increased for first quarter fiscal 2023 primarily driven by growth in cloud processing revenue of 11%. Other drivers were increases in software usage, implementation fee, and user group revenues. Processing revenue increased for the first quarter fiscal 2023 primarily driven by growth in card processing revenue of 8%. Other drivers were increases in Jack Henry digital revenue and payment processing, including iPay.

•For first quarter fiscal 2023, core segment revenue increased 6%, payments segment revenue increased 8%, complementary segment revenue increased 8%, and corporate and other segment revenue increased 55%. Non-GAAP adjusted core segment revenue increased 6%, non-GAAP adjusted payments segment revenue increased 7%, non-GAAP adjusted complementary segment revenue increased 8%, and non-GAAP adjusted corporate and other segment revenue increased 55% (see revenue lines of segment break-out tables on page 4 below).

•Cost of revenue increased for first quarter fiscal 2023 primarily due to higher costs associated with our card processing third-party platform approximately in line with related increases in revenue, higher personnel costs, higher internal licenses and fees, and increased amortization of intangibles, partially offset by a decrease for labor cost deferrals.

•Research and development expense increased for first quarter fiscal 2023 primarily due to higher personnel costs (net of capitalized personnel costs).

•Selling, general, and administrative expense increased for the first quarter fiscal 2023 primarily due to higher travel expenses, increased personnel costs, higher consulting and other professional services, and an increase in meetings and trainings, partially offset by the increase in the gain on sale of assets.

5 Operating margin is calculated by dividing operating income by revenue.

•Effective tax rates for the first quarter of fiscal years 2023 and 2022 were 23.5% and 23.4%, respectively.

The table below shows our revenue and operating income (in thousands) for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, excluding the impacts of deconversion fees, acquisitions, and gain/loss.

The tables below show the segment break-out of revenue and cost of revenue for each period presented, as adjusted for the items above, and include a reconciliation to non-GAAP adjusted operating income presented above.

**Cost of revenue non-GAAP adjustments were $411 related to deconversion fees and $1,539 related to the acquisition.

The table below shows our GAAP to non-GAAP guidance for fiscal 2023.. Non-GAAP guidance excludes the impacts of deconversion fee and acquisition revenue and operating expenses.

            

•At September 30, 2022, cash and cash equivalents decreased to $32 million from $44.3 million at September 30, 2021.

•Trade receivables totaled $247.5 million at September 30, 2022, compared to $253.2 million at September 30, 2021.

•The Company had $245 million of borrowings at September 30, 2022, and $65 million at September 30, 2021.

•Total deferred revenue increased to $345.1 million at September 30, 2022, compared to $334.9 million a year ago.

•Stockholders' equity increased to $1,461.1 million at September 30, 2022, compared to $1,395.7 million a year ago.    

*See table below for Net Cash Provided by Operating Activities and on page 10 for Return on Average Shareholders’ Equity. Tables reconciling the non-GAAP measures Free Cash Flow and return on invested capital (ROIC) to GAAP measures are also on page 10. See Use of Non-GAAP Financial Information below for definition of Free Cash Flow and ROIC.

The following table summarizes net cash from operating activities:

The following table summarizes net cash from investing activities:

*During first quarter fiscal 2023, the Company completed its previously announced acquisition of Payrailz.

The following table summarizes net cash from financing activities:

*The Company's acquisition of Payrailz during first quarter fiscal 2023 was primarily funded by new borrowings on credit facilities.

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP include the standards, conventions, and rules accountants follow in recording and summarizing transactions in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, we have provided certain non-GAAP financial measures, including adjusted revenue, adjusted operating income, adjusted segment income, adjusted cost of revenue, adjusted operating expenses, non-GAAP earnings before interest, taxes, depreciation, and amortization (non-GAAP EBITDA), free cash flow, and return on invested capital (ROIC).

We believe non-GAAP financial measures help investors better understand the underlying fundamentals and true operations of our business. The non-GAAP financial measures presented, adjusted revenue, adjusted operating income, adjusted operating income margin, adjusted segment income, adjusted cost of revenue, and adjusted operating expenses, eliminate one-time deconversion fees, acquisitions, divestitures, and gain/loss, all of which management believes are not indicative of the Company's operating performance. Such adjustments give investors further insight into our performance. Non-GAAP EBITDA is defined as net income attributable to the Company before the effect of interest expense, taxes, depreciation, and amortization, adjusted for net income before the effect of interest expense, taxes, depreciation, and amortization attributable to eliminated one-time deconversion fees, acquisitions and divestitures, and gain/loss. Free cash flow is defined as net cash from operating activities, less capitalized expenditures, internal use software, and capitalized software, plus proceeds from the sale of assets. ROIC is defined as net income divided by average invested capital, which is the average of beginning and ending long-term debt and stockholders’ equity for a given period. Management believes that non-GAAP EBITDA is an important measure of the Company’s overall operating performance and excludes certain costs and other transactions that management deems one time or non-operational in nature; free cash flow is useful to measure the funds generated in a given period that are available for debt service requirements and strategic capital decisions; and ROIC is a measure of the Company’s allocation efficiency and effectiveness of its invested capital. For these reasons, management also uses these non-GAAP financial measures in its assessment and management of the Company's performance.

Non-GAAP financial measures used by the Company may not be comparable to similarly titled non-GAAP measures used by other companies. Non-GAAP financial measures have no standardized meaning prescribed by GAAP and therefore, are unlikely to be comparable with calculations of similar measures for other companies.

Any non-GAAP financial measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. Reconciliations of the non-GAAP financial measures to related GAAP measures are included.