Jack Henry & Associates, Inc. Reports Second Quarter Fiscal 2025 Results

Second quarter summary:

•     GAAP revenue increased 5.2% and GAAP operating income increased 3.4% for the fiscal three months ended December 31, 2024, compared to the prior fiscal year quarter.

•     Non-GAAP adjusted revenue increased 6.1% and non-GAAP adjusted operating income increased 7.3% for the fiscal three months ended December 31, 2024, compared to the prior fiscal year quarter.1

▪     GAAP EPS was $1.34 per diluted share for the fiscal three months ended December 31, 2024, compared to $1.26 per diluted share in the prior fiscal year quarter.

Fiscal year-to-date summary:

•     GAAP revenue increased 5.2% and GAAP operating income increased 9.0% for the fiscal year-to-date period ended December 31, 2024, compared to the prior fiscal year-to-date period.

•     Non-GAAP adjusted revenue increased 5.7% and non-GAAP adjusted operating income increased 4.2% for the fiscal year-to-date period ended December 31, 2024, compared to the prior fiscal year-to-date period.1

▪     GAAP EPS was $2.97 per diluted share for the fiscal year-to-date period ended December 31, 2024, compared to $2.65 per diluted share in the prior fiscal year-to-date period.

▪     Cash and cash equivalents were $26 million at December 31, 2024, and $27 million at December 31, 2023.

▪     Debt outstanding related to credit facilities was $150 million at December 31, 2024, and $255 million at December 31, 2023.

Full year fiscal 2025 guidance (In millions):2

Monett, MO, February 4, 2025 - Jack Henry & Associates, Inc. (Nasdaq: JKHY), a leading financial technology provider, today announced results for fiscal second quarter ended December 31, 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.

3Operating margin is calculated by dividing operating income by revenue.

4 See tables below on page 9 reconciling fiscal year 2025 GAAP to non-GAAP guidance.

5See table below on page 14 reconciling net income to non-GAAP EBITDA.

Revenue, operating expenses, operating income, and net income for the three and six months ended December 31, 2024, compared to the three and six months ended December 31, 2023, were as follows:

•Services and support revenue increased for the three months ended December 31, 2024, primarily driven by growth in data processing and hosting revenue of 11.8%, partially offset by a decrease in deconversion revenue of $4,813. Processing revenue increased for the three months ended December 31, 2024, primarily driven by growth in card revenue of 6.5%, transaction and digital revenue of 10.0%, and payment processing revenue of 10.1%..

•Services and support revenue increased for the six months ended December 31, 2024, primarily driven by growth in data processing and hosting revenue of 12.2%, partially offset by a decrease in hardware and deconversion revenues of 31.1% and 58.2%, respectively. Processing revenue increased for the six months ended December 31, 2024, primarily driven by growth in card revenue of 5.8% and transaction and digital revenue of 10.4%. Another driver was an increase in payment processing revenues.

•For the three months ended December 31, 2024, core segment revenue increased 4.6%, payments segment revenue increased 5.4%, complementary segment revenue increased 5.6%, and corporate and other segment revenue increased 4.7%. For the three months ended December 31, 2024, core segment non-GAAP adjusted revenue increased 5.8%, payments segment non-GAAP adjusted revenue increased 6.2%, complementary segment non-GAAP adjusted revenue increased 6.5%, and corporate and other non-GAAP adjusted segment revenue increased 4.9% (see revenue lines of segment break-out tables on pages 5 and 6 below for a reconciliation of segment non-GAAP adjusted revenue to GAAP segment revenue).

•For the six months ended December 31, 2024, core segment revenue increased 4.8%, payments segment revenue increased 5.8%, complementary segment revenue increased 6.0%, and corporate and other segment revenue decreased 2.8%. For the six months ended December 31, 2024, core segment non-GAAP adjusted revenue increased 5.5%, payments segment non-GAAP adjusted revenue increased 6.0%, complementary segment non-GAAP adjusted revenue increased 6.8%, and corporate and other non-GAAP adjusted segment revenue decreased 2.8% (see revenue lines of segment break-out tables on pages 7 and 8 below for a reconciliation of segment non-GAAP adjusted revenue to GAAP segment revenue).

•Cost of revenue increased for the three months ended December 31, 2024, primarily due to higher direct costs generally consistent with increases in the related lines of revenue and higher personnel costs including benefits expenses from an increase in employee headcount in the trailing twelve months. Cost of revenue increased for the six months ended December 31, 2024, primarily due to higher direct costs generally consistent with increases in the related lines of revenue, higher personnel costs including benefits expenses from an increase in employee headcount in the trailing twelve months, higher internal licenses and fees from increased deployments and prices, and a rise in amortization from capital development projects placed into service in the trailing twelve months.

•Research and development expense increased for the three and six months ended December 31, 2024, primarily due to higher personnel costs (net of capitalization) including benefits expenses from an increase in employee headcount in the trailing twelve months.

•Selling, general, and administrative expense increased for the three months ended December 31, 2024, primarily due to higher personnel costs including benefits expenses from an increase in employee headcount in the trailing twelve months. Selling, general, and administrative expense decreased for the six months ended December 31, 2024, primarily due to the decrease in non-recurring personnel costs when compared to the prior fiscal year period.

•Effective tax rates for the three months ended December 31, 2024, and 2023, were 23.2% and 23.5%, respectively. Effective tax rates for the six months ended December 31, 2024, and 2023, were 23.6% and 23.6%, respectively.

6Operating 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.

The tables below show our revenue, operating income, and net income for the three and six months ended December 31, 2024, compared to the three and six months ended December 31, 2023, excluding the impacts of deconversions and the VEDIP program expense.*

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

**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 December 31, 2024, and 2023 which was $69 for the current fiscal year quarter and $4,882 for the prior fiscal year quarter, results in non-GAAP adjusted services and support revenue growth of 5.2% quarter over quarter. There were no non-GAAP adjustments to processing revenue for the three months ended December 31, 2024, or 2023.

Reducing services and support revenue by deconversion revenue for the six months ended December 31, 2024, and 2023, which was $3,766 for the current fiscal year period and $9,018 for the prior fiscal year period, results in non-GAAP adjusted services and support revenue growth of 4.8% period over period. There were no non-GAAP adjustments to processing revenue for the six months ended December 31, 2024, or 2023.

***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 and six months ended December 31, 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.

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

			Three Months Ended December 31, 2023
(Unaudited, in thousands)			Core						Payments						Complementary						Corporate and Other						Total
GAAP REVENUE			$	165,601					$	203,839					$	152,466					$	23,795					$	545,701
Non-GAAP adjustments*			(1,929)						(1,555)						(1,355)						(43)						(4,882)
NON-GAAP ADJUSTED REVENUE			163,672						202,284						151,111						23,752						540,819
GAAP COST OF REVENUE			69,370						111,623						62,825						77,161						320,979
Non-GAAP adjustments*			(321)						(51)						(249)						—						(621)
NON-GAAP ADJUSTED COST OF REVENUE			69,049						111,572						62,576						77,161						320,358
GAAP SEGMENT INCOME			$	96,231					$	92,216					$	89,641					$	(53,366)
Segment Income Margin**			58.1		%				45.2		%				58.8		%				(224.3)		%
NON-GAAP ADJUSTED SEGMENT INCOME			$	94,623					$	90,712					$	88,535					$	(53,409)
Non-GAAP Adjusted Segment Income Margin			57.8		%				44.8		%				58.6		%				(224.9)		%
Research and Development																											35,478
Selling, General, and Administrative																											70,277
Non-GAAP adjustments unassigned to a segment***																											(458)
NON-GAAP TOTAL ADJUSTED OPERATING EXPENSES																											425,655
NON-GAAP ADJUSTED OPERATING INCOME																											$	115,164

*Revenue non-GAAP adjustments for all segments were deconversion revenues. Cost of revenue non-GAAP adjustments for the Core, Payments, and Complementary segments were deconversion costs.

*Revenue non-GAAP adjustments for all segments were deconversion revenue. Cost of revenue non-GAAP adjustments for the Core, Payments, and Complementary segments were deconversion costs.

*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 VEDIP expenses of $16,443 and selling, general, and administrative deconversion costs of $569. The VEDIP program expense for the fiscal six months ended December 31, 2023, was related to a Company voluntary separation program offered to certain eligible employees beginning in July 2023.

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.

*Deconversion revenue and related operating expenses are based on actual results for the six months ended December 31, 2024, and estimates for the remainder of fiscal year 2025, based on the lowest actual recent historical results. See the Company’s Form 8-K filed with the Securities and Exchange Commission on January 27, 2025.

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

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

            

•Cash and cash equivalents were $26 million at December 31, 2024, and $27 million at December 31, 2023.

•Trade receivables were $283 million at December 31, 2024, compared to $271 million at December 31, 2023.

•The Company had $150 million of borrowings at December 31, 2024 compared to $255 million of borrowings at December 31, 2023.

•Deferred revenue remained consistent at $269 million at December 31, 2024, and 2023.

•Stockholders' equity increased to $1,976 million at December 31, 2024, compared to $1,724 million at December 31, 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 six months ended December 31, 2024, includes the change in prepaid cost of product and other of $(34,384), accrued expenses of $(19,450), and income taxes of $9,538. For the six months ended December 31, 2023, includes the change in prepaid cost of product and other of $(52,969), income taxes of $23,792, and the change in accrued expenses of $15,463.

The following table summarizes net cash from investing activities:

The following table summarizes net cash from financing activities:

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 and the effects of the VEDIP program expense related to a Company voluntary separation program offered to certain eligible employees beginning in July 2023, 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 and the VEDIP program expense. 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.

*We are not aware of any other discreet adjustments at this time. Deconversion revenue and related operating expenses are based on actual results for fiscal second quarter 2025 and estimates for the remainder of fiscal year 2025, based on the lowest actual recent historical results. See the Company’s Form 8-K filed with the Securities and Exchange Commission on January 27, 2025.