Jack Henry & Associates, Inc. Reports Third Quarter Fiscal 2024 Results

Third quarter summary:

•     GAAP revenue increased 5.9% and GAAP operating income increased 3.4% for the fiscal three months ended March 31, 2024, compared to the prior fiscal year quarter.

•     Non-GAAP adjusted revenue increased 7.0% and non-GAAP adjusted operating income increased 8.6% for the fiscal three months ended March 31, 2024, compared to the prior fiscal year quarter.1

▪     GAAP EPS was $1.19 per diluted share for the fiscal three months ended March 31, 2024, compared to $1.12 in the prior fiscal year quarter.

Fiscal year-to-date summary:

•     GAAP revenue increased 7.3% and GAAP operating income increased 2.0% for the fiscal nine months ended March 31, 2024, compared to the prior fiscal year period.

•     Non-GAAP adjusted revenue increased 7.7% and non-GAAP adjusted operating income increased 12.0% for the fiscal nine months ended March 31, 2024, compared to the prior fiscal year period.1

▪     GAAP EPS was $3.85 per diluted share for the fiscal nine months ended March 31, 2024, compared to $3.68 in the prior fiscal year period.

▪     Cash and cash equivalents were $27 million at March 31, 2024, and 2023.

▪     Debt related to credit facilities was $250 million at March 31, 2024, and $375 million at March 31, 2023.

Full year fiscal 2024 guidance:2

Monett, MO, May 7, 2024 - Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading financial technology provider, today announced results for the fiscal third quarter ended March 31, 2024.

1 See tables below on page 4 reconciling non-GAAP financial measures to GAAP.

2 The full year guidance assumes no acquisitions are made during fiscal year 2024.

3 See tables below on page 8 reconciling fiscal year 2024 GAAP to non-GAAP guidance.

4 See table below on page 14 reconciling net income to non-GAAP EBITDA.

Revenue, operating expenses, operating income, and net income for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, were as follows (all dollar amounts in this section are in thousands, except per share amounts):

•Services and support revenue increased for the three months ended March 31, 2024, primarily driven by growth in data processing and hosting revenue of 10.6%. Processing revenue increased for the three months ended March 31, 2024, primarily driven by growth in Jack Henry digital revenue (including Banno) of 26.1%. Other drivers were increases in card, payment processing and other processing revenues.

•Services and support revenue increased for the nine months ended March 31, 2024, primarily driven by growth in public cloud revenue of 10.0%. Other drivers were increases in on-premise support and product delivery and services revenues. Processing revenue increased for the nine months ended March 31, 2024, primarily driven by growth in transaction and digital revenue of 19.1%. Other drivers were increases in card and remittance revenues.

•For the three months ended March 31, 2024, core segment revenue increased 7.4%, payments segment revenue increased 5.3%, complementary segment revenue increased 5.1%, and corporate and other segment revenue increased 5.8%. Non-GAAP adjusted core segment revenue increased 8.2%, non-GAAP adjusted payments segment revenue increased 5.7%, non-GAAP adjusted complementary segment revenue increased 7.7%, and non-GAAP adjusted corporate and other segment revenue increased 5.8% (see revenue lines of segment break-out tables on pages 5 and 6 below).

•For the nine months ended March 31, 2024, core segment revenue increased 7.6%, payments segment revenue increased 6.2%, complementary segment revenue increased 7.1%, and corporate and other segment revenue increased 17.1%. Non-GAAP adjusted core segment revenue increased 8.0%, non-GAAP adjusted payments segment revenue increased 6.1%, non-GAAP adjusted complementary segment revenue increased 8.3%, and non-GAAP adjusted corporate and other segment revenue increased 17.1% (see revenue lines of segment break-out tables on pages 6 and 7 below).

•Cost of revenue increased for the three and nine months ended March 31, 2024, primarily due to higher direct costs generally consistent with increases in the related revenue, increased personnel costs due to an increase in employee headcount in the trailing twelve months, and higher internal licenses and fees.

•Research and development expense increased for the three months ended March 31, 2024, primarily due to cloud consumption costs, net of capitalization. Research and development expense increased for the nine months ended March 31, 2024, primarily due to higher personnel costs (net of capitalized personnel costs) related to the Payrailz, LLC ("Payrailz") acquisition6 and Jack Henry Platform.

•Selling, general, and administrative expense increased for the three months ended March 31, 2024, primarily due to higher personnel costs from increased commissions and medical benefits expenses. Selling, general, and administrative expense increased for the nine months ended March 31, 2024, primarily due to higher personnel costs from the voluntary employee departure incentive payment (VEDIP) program7 and a decrease in the gain on sale of assets, net, period over period.

•Effective tax rates for the three months ended March 31, 2024, and 2023 were 23.7% and 23.2%, respectively. Effective tax rates for the nine months ended March 31, 2024, and 2023 were 23.6% and 23.3%, respectively.

5 Operating margin is calculated by dividing operating income by revenue. Operating margin plus operating expense components as a percentage of total revenue may not equal 100% due to rounding.

6 On August 31, 2022, the Company acquired all the equity interest in Payrailz.

7 The VEDIP program was a Company voluntary separation program offered to certain eligible employees beginning in July 2023.

The tables below show our revenue, operating income, and net income (in thousands) for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, excluding the impacts of deconversions, acquisitions, the VEDIP program expense,** and the gain on sale of assets, net.

On August 31, 2022, the Company acquired all the equity interest in Payrailz (the "acquisition"). Payrailz related revenue, operating expenses, operating income, and net income excluded in the tables below in the column for the nine months ended March 31, 2024, include Payrailz activity for the first two months of the fiscal year only.

*GAAP revenue is comprised of services and support and processing revenues (see page 2). Reducing services and support revenue by deconversion revenue for the three months ended March 31, 2024, and 2023, which was $843 for the current fiscal year quarter and $6,143 for the prior fiscal year quarter, results in non-GAAP adjusted services and support revenue growth of 6.4% quarter over quarter. There were no non-GAAP adjustments to processing revenue for the three months ended March 31, 2024, and 2023.

Reducing services and support revenue by deconversion revenue for the nine months ended March 31, 2024, and 2023, which was $9,861 for the current fiscal year-to-date period and $17,042 for the prior fiscal year-to-date period, and by $2 of revenue from acquisition in the current fiscal year-to-date period, results in non-GAAP adjusted services and support revenue growth of 7.2% period over period. Reducing processing revenue by revenue from acquisition for the nine months ended March 31, 2024, which was $1,943, results in non-GAAP adjusted processing revenue growth of 8.5% year-to-date period over year-to-date period.

**The VEDIP program expense for the nine months ended March 31, 2024, was related to a Company voluntary separation program offered to certain eligible employees beginning in July 2023.

***Non-GAAP adjusted operating margin is calculated by dividing non-GAAP adjusted operating income by non-GAAP adjusted revenue.

*The VEDIP program expense for the nine months ended March 31, 2024, was related to a Company voluntary separation program offered to certain eligible employees beginning in July 2023.

**The tax impact of adjustments is calculated using a tax rate of 24% for the three and nine month periods of fiscal 2024 and for the three and nine month periods of fiscal 2023. Our tax rate for non-GAAP adjustment items takes a broad look at our recurring tax adjustments and applies them to non-GAAP revenue that does not have its own specific tax impacts.

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.

			Three Months Ended March 31, 2024
(Unaudited, In Thousands)			Core						Payments						Complementary						Corporate and Other						Total
GAAP REVENUE			$	166,655					$	201,919					$	149,231					$	20,757					$	538,562
Non-GAAP adjustments*			(1,291)						(910)						1,366						(8)						(843)
NON-GAAP ADJUSTED REVENUE			165,364						201,009						150,597						20,749						537,719
GAAP COST OF REVENUE			72,153						109,848						65,414						80,809						328,224
Non-GAAP adjustments*			(225)						(95)						(348)						(3)						(671)
NON-GAAP ADJUSTED COST OF REVENUE			71,928						109,753						65,066						80,806						327,553
GAAP SEGMENT INCOME			$	94,502					$	92,071					$	83,817					$	(60,052)
Segment Income Margin**			56.7		%				45.6		%				56.2		%				(289.3)		%
NON-GAAP ADJUSTED SEGMENT INCOME			$	93,436					$	91,256					$	85,531					$	(60,057)
Non-GAAP Adjusted Segment Income Margin**			56.5		%				45.4		%				56.8		%				(289.4)		%
Research and Development																											35,993
Selling, General, and Administrative																											62,246
Non-GAAP adjustments unassigned to a segment***																											(178)
NON-GAAP TOTAL ADJUSTED OPERATING EXPENSES																											425,614
NON-GAAP ADJUSTED OPERATING INCOME																											$	112,105

*Revenue non-GAAP adjustments for all segments were deconversion revenue. Cost of revenue non-GAAP adjustments for all segments were deconversion costs.

**Segment income margin is calculated by dividing segment income by revenue. Non-GAAP adjusted segment income margin is calculated by dividing non-GAAP adjusted segment income by non-GAAP adjusted revenue.

***Non-GAAP adjustments unassigned to a segment were selling, general, and administrative deconversion costs.

			Three Months Ended March 31, 2023
(Unaudited, In Thousands)			Core						Payments						Complementary						Corporate and Other						Total
GAAP REVENUE			$	155,106					$	191,833					$	141,987					$	19,626					$	508,552
Non-GAAP adjustments*			(2,315)						(1,643)						(2,170)						(15)						(6,143)
NON-GAAP ADJUSTED REVENUE			152,791						190,190						139,817						19,611						502,409
GAAP COST OF REVENUE			69,994						106,216						61,037						70,098						307,345
Non-GAAP adjustments*			(238)						(62)						(166)						(4)						(470)
NON-GAAP ADJUSTED COST OF REVENUE			69,756						106,154						60,871						70,094						306,875
GAAP SEGMENT INCOME			$	85,112					$	85,617					$	80,950					$	(50,472)
Segment Income Margin			54.9		%				44.6		%				57.0		%				(257.2)		%
NON-GAAP ADJUSTED SEGMENT INCOME			$	83,035					$	84,036					$	78,946					$	(50,483)
Non-GAAP Adjusted Segment Income Margin			54.3		%				44.2		%				56.5		%				(257.4)		%
Research and Development																											34,625
Selling, General, and Administrative																											58,192
Non-GAAP adjustments unassigned to a segment**																											(543)
NON-GAAP TOTAL ADJUSTED OPERATING EXPENSES																											399,149
NON-GAAP ADJUSTED OPERATING INCOME																											$	103,260

*Revenue non-GAAP adjustments for all segments were deconversion revenues. Cost of revenue non-GAAP adjustments for all segments were deconversion costs.

**Non-GAAP adjustments unassigned to a segment were selling, general, and administrative deconversion costs.

*Revenue non-GAAP adjustments for the Core, Complementary, and Corporate and Other segments were deconversion revenue. Revenue non-GAAP adjustments for the Payments segment were deconversion revenue of $(3,470) and acquisition revenue of $(1,945). Cost of revenue non-GAAP adjustments for the Core and Complementary segments were deconversion costs. Cost of revenue non-GAAP adjustments for the Payments and Corporate and Other segments were deconversion costs of $(193) and $(4), respectively, and acquisition costs of $(3,314) and $(20), respectively.

**Non-GAAP adjustments unassigned to a segment were selling, general, and administrative VEDIP expenses, deconversion costs, and acquisition costs of $(16,443), $(747), and $(6), respectively, and research and development acquisition costs of $(842).

*Revenue non-GAAP adjustments for all segments were deconversion revenue. Cost of revenue non-GAAP adjustments for all segments were deconversion costs.

**Non-GAAP adjustments unassigned to a segment were the selling, general, and administrative gain on sale of assets, net, and deconversion costs of $7,384 and $(1,148), respectively.

The table below shows our GAAP to non-GAAP guidance for the fiscal year ending June 30, 2024. Non-GAAP guidance excludes the impacts of deconversion revenue and related operating expenses, acquisition revenue and costs related to the August 31, 2022, Payrailz acquisition,* costs related to the July 2023 VEDIP program, and assumes no acquisitions or dispositions are made during fiscal year 2024.

*Excluded acquisition revenue and costs are for the first two months of the fiscal year only (see "Impact of Non-GAAP Adjustments") on page 4.

**GAAP to Non-GAAP revenue, operating expenses, and operating income may not foot due to rounding.

***Deconversion revenue and related operating expenses are based on actual results for the nine months ended March 31, 2024 and estimates for the remainder of fiscal year 2024 based on the lowest actual recent historical results. See the Company’s Form 8-K filed with the Securities and Exchange Commission on April 29, 2024.

****This cost relates to the group of employees who participated in a Company VEDIP program offered in July 2023 to certain employees of a specified minimum age who had reached a specified minimum number of years of service with the Company.

            

•Cash and cash equivalents were $27 million at March 31, 2024, and 2023.

•Trade receivables were $263 million at March 31, 2024, compared to $238 million at March 31, 2023.

•The Company had $250 million of borrowings at March 31, 2024 compared to $375 million of borrowings at March 31, 2023.

•Deferred revenue decreased to $214 million at March 31, 2024, compared to $226 million a year ago.

•Stockholders' equity increased to $1,780 million at March 31, 2024, compared to $1,538 million a year ago.

    

*See table below for Net Cash Provided by Operating Activities and on page 14 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 14. See the Use of Non-GAAP Financial Information section below for the definitions 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 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 under the Company's 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 includes 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, adjusted operating margin, adjusted segment income margin, non-GAAP earnings before interest, taxes, depreciation, and amortization (non-GAAP EBITDA), free cash flow, return on invested capital (ROIC), and non-GAAP adjusted net income.

We believe non-GAAP financial measures help investors better understand the underlying fundamentals and true operations of our business. Adjusted revenue, adjusted operating income, adjusted operating margin, adjusted segment income, adjusted segment income margin, adjusted cost of revenue, adjusted operating expenses, and adjusted net income eliminate one-time deconversion revenue and associated costs, the effects of acquisitions and divestitures, the VEDIP program expense, and the gain on sale of assets, net, 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 deconversions, acquisitions and divestitures, the VEDIP program expense, and the gain on sale of assets, net. 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.