Jack Henry & Associates, Inc. Reports Fourth Quarter and Full Year Fiscal 2024 Results

Fourth quarter summary:

•     GAAP revenue increased 4.7% and GAAP operating income increased 1.2% for the fiscal three months ended June 30, 2024, compared to the prior fiscal year quarter.

•     Non-GAAP adjusted revenue increased 6.4% and non-GAAP adjusted operating income increased 5.3% for the fiscal three months ended June 30, 2024, compared to the prior fiscal year quarter.1

▪     GAAP EPS was $1.38 per diluted share for the fiscal three months ended June 30, 2024, compared to $1.34 per diluted share in the prior fiscal year quarter.

Fiscal year summary:

•     GAAP revenue increased 6.6% and GAAP operating income increased 1.8% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.

•     Non-GAAP adjusted revenue increased 7.4% and non-GAAP adjusted operating income increased 10.3% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.1

▪     GAAP EPS was $5.23 per diluted share for the fiscal year ended June 30, 2024, compared to $5.02 per diluted share in the prior fiscal year.

▪     Cash and cash equivalents were $38 million at June 30, 2024, and $12 million at June 30, 2023.

▪     Debt outstanding related to credit facilities was $150 million at June 30, 2024, and $275 million at June 30, 2023.

Full year fiscal 2025 guidance:2

Monett, MO, August 20, 2024 - Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading financial technology provider, today announced results for the fiscal fourth quarter and full fiscal year ended June 30, 2024.

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

2 The full fiscal year guidance assumes no acquisitions or dispositions are made during fiscal year 2025.

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 months and fiscal year ended June 30, 2024, compared to the three months and fiscal year ended June 30, 2023, were as follows:

•Services and support revenue increased for the three months ended June 30, 2024, primarily driven by growth in data processing and hosting revenue of 11.5%. The increase in services and support revenue was partially offset by the decrease in deconversion revenue quarter over quarter. Processing revenue increased for the three months ended June 30, 2024, primarily driven by growth in card revenue of 8.3% and transaction and digital revenue of 14.0%. Other drivers were increases in payment processing and remote capture and ACH revenues.

•Services and support revenue increased for the fiscal year ended June 30, 2024, primarily driven by growth in data processing and hosting revenue of 10.9%. Other drivers were increases in software usage, consulting, and hardware revenues. The increase in services and support revenue was partially offset by the decrease in deconversion revenue fiscal year over fiscal year. Processing revenue increased for the fiscal year ended June 30, 2024, primarily driven by growth in card revenue of 6.2% and transaction and digital revenue of 17.7%. Other drivers were increases in payment processing, remote capture and ACH, and other processing revenues.

•For the three months ended June 30, 2024, core segment revenue increased 3.0%, payments segment revenue increased 7.7%, complementary segment revenue increased 2.7%, and corporate and other segment revenue increased 5.8%. For the three months ended June 30, 2024, non-GAAP adjusted core segment revenue increased 4.4%, non-GAAP adjusted payments segment revenue increased 8.4%, non-GAAP adjusted complementary segment revenue increased 6.0%, and non-GAAP adjusted corporate and other segment revenue increased 6.3% (see revenue lines of segment break-out tables on pages 5 and 6 below).

•For the fiscal year ended June 30, 2024, core segment revenue increased 6.4%, payments segment revenue increased 6.6%, complementary segment revenue increased 5.9%, and corporate and other segment revenue increased 14.3%. For the fiscal year ended June 30, 2024, non-GAAP adjusted core segment revenue increased 7.1%, non-GAAP adjusted payments segment revenue increased 6.7%, non-GAAP adjusted complementary segment revenue increased 7.7%, and non-GAAP adjusted corporate and other segment revenue increased 14.4% (see revenue lines of segment break-out tables on pages 6 and 7 below).

•Cost of revenue increased for the three months ended June 30, 2024, primarily due to higher direct costs generally consistent with increases in the related revenue, higher personnel costs, and increased internal licenses and fees. Cost of revenue increased for the fiscal year ended June 30, 2024, primarily due to increased personnel costs, higher direct costs generally consistent with increases in the related revenue, and increased internal licenses and fees.

•Research and development expense increased for the three months ended June 30, 2024, primarily due to higher consulting and other professional services (net of capitalization) and increased cloud consumption costs (net of capitalization). Research and development expense increased for the fiscal year ended June 30, 2024, primarily due to higher cloud consumption (net of capitalization) and increased personnel costs (net of capitalization) related to the Jack Henry Platform and Payrailz, LLC ("Payrailz").6

•Selling, general, and administrative expense increased for the three months ended June 30, 2024, primarily due to higher personnel costs, including increased commissions, payroll taxes, and medical benefits expenses. Selling, general, and administrative expense increased for the fiscal year ended June 30, 2024, primarily due to higher personnel costs, including the voluntary employee departure incentive payment (VEDIP) program7 and commissions expenses.

•Effective tax rates for the three months ended June 30, 2024, and 2023, were 22.5% and 21.1%, respectively. Effective tax rates for the fiscal year ended June 30, 2024, and 2023, were 23.3% and 22.7%, 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 for the three months ended June 30, 2024, and fiscal year ended June 30, 2024, compared to the three months ended June 30, 2023, and fiscal year ended June 30, 2023, excluding the impacts of deconversions, the VEDIP program expense,* the (gain)/loss on sale of assets, net, and the acquisition.

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 year ended June 30, 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 June 30, 2024, and 2023 which was $6,693 for the current fiscal year quarter and $14,733 for the prior fiscal year quarter, results in non-GAAP adjusted services and support revenue growth of 4.3% quarter over quarter. There were no non-GAAP adjustments to processing revenue for the three months ended June 30, 2024, or 2023 .

Reducing services and support revenue by deconversion revenue for the year ended June 30, 2024, and 2023, which was $16,554 for the current fiscal year and $31,775 for the prior fiscal year, and by $2 of revenue from the acquisition in the current fiscal year, results in non-GAAP adjusted services and support revenue growth of 6.5% year over year. Reducing processing revenue by revenue from the acquisition for the year ended June 30, 2024, which was $1,943, results in non-GAAP adjusted processing revenue growth of 8.6% year over year.

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

**The tax impact of adjustments is calculated using a tax rate of 24% for the three months ended June 30, 2024, and 2023, and for the fiscal year ended June 30, 2024, and 2023. The 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 June 30, 2024
(Unaudited, In Thousands)			Core						Payments						Complementary						Corporate and Other						Total
GAAP REVENUE			$	172,040					$	212,593					$	155,149					$	20,130					$	559,912
Non-GAAP adjustments*			(2,407)						(2,367)						(1,777)						(142)						(6,693)
NON-GAAP ADJUSTED REVENUE			169,633						210,226						153,372						19,988						553,219
GAAP COST OF REVENUE			69,900						111,787						64,295						81,290						327,272
Non-GAAP adjustments*			(415)						(66)						(188)						—						(669)
NON-GAAP ADJUSTED COST OF REVENUE			69,485						111,721						64,107						81,290						326,603
GAAP SEGMENT INCOME			$	102,140					$	100,806					$	90,854					$	(61,160)
Segment Income Margin**			59.4		%				47.4		%				58.6		%				(303.8)		%
NON-GAAP ADJUSTED SEGMENT INCOME			$	100,148					$	98,505					$	89,265					$	(61,302)
Non-GAAP Adjusted Segment Income Margin**			59.0		%				46.9		%				58.2		%				(306.7)		%
Research and Development																											39,892
Selling, General, and Administrative																											67,122
Non-GAAP adjustments unassigned to a segment***																											(430)
NON-GAAP TOTAL ADJUSTED OPERATING EXPENSES																											433,187
NON-GAAP ADJUSTED OPERATING INCOME																											$	120,032

*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 June 30, 2023
(Unaudited, In Thousands)			Core						Payments						Complementary						Corporate and Other						Total
GAAP REVENUE			$	167,085					$	197,466					$	151,059					$	19,024					$	534,634
Non-GAAP adjustments*			(4,676)						(3,510)						(6,330)						(217)						(14,733)
NON-GAAP ADJUSTED REVENUE			162,409						193,956						144,729						18,807						519,901
GAAP COST OF REVENUE			69,554						106,699						59,673						72,942						308,868
Non-GAAP adjustments*			(256)						(82)						(269)						(3)						(610)
NON-GAAP ADJUSTED COST OF REVENUE			69,298						106,617						59,404						72,939						308,258
GAAP SEGMENT INCOME			$	97,531					$	90,767					$	91,386					$	(53,918)
Segment Income Margin			58.4		%				46.0		%				60.5		%				(283.4)		%
NON-GAAP ADJUSTED SEGMENT INCOME			$	93,111					$	87,339					$	85,325					$	(54,132)
Non-GAAP Adjusted Segment Income Margin			57.3		%				45.0		%				59.0		%				(287.8)		%
Research and Development																											38,498
Selling, General, and Administrative																											63,069
Non-GAAP adjustments unassigned to a segment**																											(3,885)
NON-GAAP TOTAL ADJUSTED OPERATING EXPENSES																											405,940
NON-GAAP ADJUSTED OPERATING INCOME																											$	113,961

*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 of $(1,068) and loss on sale of assets, net, of $(2,817).

*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 $(5,836) 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 $(259) 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), $(1,177), and $(192), respectively, and research and development acquisition costs of $(656).

*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 $4,567 and $(2,216), respectively.

The table below shows our GAAP to non-GAAP guidance for the fiscal year ending June 30, 2025. Fiscal year 2025 non-GAAP guidance excludes the impacts of deconversion revenue and related operating expenses and assumes no acquisitions or dispositions are made during the fiscal year.

For comparison and reconciliation, the table below also shows fiscal 2024 reported results, fiscal 2024 results adjusted for fiscal 2025 comparison, and fiscal 2024 acquisition activity. Fiscal 2024 non-GAAP guidance excluded the impacts of deconversion revenue and related operating expenses, acquisition revenue and costs related to the August 31, 2022, Payrailz acquisition, and costs related to the July 2023 VEDIP program.

*Deconversion revenue and related operating expenses are based on estimates for the year ended June 30, 2025, based on the lowest actual recent historical results. See the Company’s Form 8-K filed with the Securities and Exchange Commission on August 12, 2024.

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

****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.

*****The GAAP to Non-GAAP EPS reconciliation table is below on page 15.

            

•Cash and cash equivalents were $38 million at June 30, 2024, and $12 million at June 30, 2023.

•Trade receivables were $333 million at June 30, 2024, compared to $361 million at June 30, 2023.

•The Company had $150 million of borrowings at June 30, 2024 compared to $275 million of borrowings at June 30, 2023.

•Deferred revenue decreased to $389 million at June 30, 2024, compared to $400 million at June 30, 2023.

•Stockholders' equity increased to $1,842 million at June 30, 2024, compared to $1,609 million at June 30, 2023.

    

*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:

*For the year ended June 30, 2024, includes the change in prepaid expenses, prepaid cost of product and other of $(115,558) and change in accrued expenses of $37,292. For the year ended June 30, 2023, includes the change in prepaid expenses, prepaid cost of product and other of $(112,316).

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), non-GAAP adjusted net income, and non-GAAP earnings per share (EPS).

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, adjusted net income, and non-GAAP EPS 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.

*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.

***We are not aware of any other discreet adjustments at this time. Deconversion revenue and related operating expenses are based on estimates for the year ended June 30, 2025, based on the lowest actual recent historical results. See the Company’s Form 8-K filed with the Securities and Exchange Commission on August 12, 2024.