• First quarter summary:
• GAAP revenue increased 3% and operating income decreased 1% for the quarter compared to the prior-year quarter
• Non-GAAP adjusted revenue increased 5% and adjusted operating income increased 7% for the quarter compared to the prior-year quarter
• GAAP EPS was $119 per diluted share for the quarter compared to $116 in the prior-year quarter
• Cash at September 30 2020 was $1953 million an increase of 102% compared to September 30 2019
• Debt related to the revolving credit line and other lines of credit was zero for the quarters ended September 30 2020 and 2019
• Full-year fiscal 2021 guidance:
• GAAP revenue $1760 million to $1770 million (assumes deconversion fee decrease of $33 million)
• GAAP EPS $375 to $380
• Non-GAAP revenue growth 60% to 65%

Jack Henry & Associates Inc (NASDAQ: JKHY) a leading provider of technology solutions and payment processing services primarily for the financial services industry today announces results for the first quarter of fiscal 2021 and discusses its continued response to the novel coronavirus (COVID-19) pandemic

According to David Foss President 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 teams continue to perform admirably given the obvious challenges of conducting business in the midst of the ongoing pandemic  As I've said before the resiliency of our business model and the extraordinary commitment of our associates has enabled us to continue to deliver solid results for our clients and our shareholders

GAAP Results for the Quarter

Revenue for the quarter ended September 30 2020 increased to $4518 million which is 3% growth over the first quarter of fiscal 2020 and includes increased processing and services and support revenue partially offset by a decrease in product delivery and services revenue primarily caused by lower deconversion fees  The overall growth in revenue was more than offset by an increase in costs primarily related to our card processing platform and higher personnel costs partially offset by travel expense savings as a result of COVID-19 travel limitations (see COVID-19 Impact and Response section below) resulting in operating income of $1176 million a 1% decrease compared to the first quarter of fiscal 2020  Net income increased 2% to $912 million or $119 per diluted share compared to the first quarter of fiscal 2020 and was primarily driven by the above factors and a decrease in effective tax rate from the prior fiscal year quarter

Non-GAAP Results for the Quarter

For the quarter ended September 30 2020 non-GAAP revenue increased 5% to $4459 million due to the above factors excluding the effect of the change in deconversion fees Non-GAAP operating income increased 7% to $1124 million compared to the prior fiscal year quarter due to the above factors excluding the effect of the change in deconversion fees and related costs (see Non-GAAP Impact of Deconversion Fees on page 4)

Operating Results

Revenue operating expenses operating income and net income for the three months ended September 30 2020 as compared to the three months ended September 30 2019 were as follows:

• Total revenue increased 3% for the first quarter of fiscal 2021 compared to the same quarter last fiscal year The increased revenue in the services and support line for the first quarter of fiscal 2021 was primarily driven by the growth in data processing and hosting fees and software usage fees partially offset by a decrease in product delivery and services revenue particularly deconversion fee revenue noted below quarter over quarter The increase in processing revenue was mainly driven by increased card and Jack Henry digital revenue due to expanding volumes quarter over quarter Deconversion fees which are included within services and support decreased $90 million compared to the first quarter of fiscal 2020 Excluding deconversion fees from both periods non-GAAP revenue increased 5% for the first quarter of fiscal 2021 compared to the same quarter of fiscal 2020
• For the first quarter of fiscal 2021 core segment revenue increased 2% to $1590 million from $1559 million in the first quarter of fiscal 2020 Payments segment revenue increased 5% to $1567 million from $1497 million in the same quarter last fiscal year Revenue from the complementary segment increased 6% to $1245 million in the first quarter of fiscal 2021 from $1172 million in the same quarter of fiscal 2020 Revenue in the corporate and other segment decreased to $116 million from $152 million in the first quarter of fiscal 2020

Operating Expenses and Operating Income

• Cost of revenue increased 7% for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020 and increased 2% as a percentage of revenue The increase was primarily due to higher costs associated with our card processing platform and higher personnel costs related to organic growth within our product lines partially offset by travel expense savings as a result of COVID-19 travel limitations (see COVID-19 Impact and Response section below)
• Research and development expense increased 6% for the first quarter of fiscal 2021 compared to the same quarter the prior fiscal year The increase was primarily due to higher personnel costs partially due to a headcount increase of 5% at September 30 2020 compared to a year ago reflecting organic growth within our product lines Research and development expense for the quarter remained consistent as a percentage of total revenue compared to the prior fiscal year quarter
• Selling general and administrative expense decreased 9% for the first quarter of fiscal 2021 compared to the same quarter the prior fiscal year Personnel cost increases for the quarter were more than offset by travel expense savings as a result of COVID-19 travel limitations and lower expenses related to both our national sales meeting and Symitar Education Conference (SEC) being held virtually this year (see COVID-19 Impact and Response section below) Selling general and administrative expense for the quarter decreased as a percentage of total revenue compared to the prior fiscal year quarter
• For the first quarter of fiscal 2021 operating income decreased 1% to $1176 million which is 26% of revenue compared to $1182 million which was 27% of revenue for the first quarter of fiscal 2020

Net Income

• Provision for income taxes decreased in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020 with an effective tax rate of 224% of income before income taxes compared to 246% in the prior fiscal year quarter The decrease in the effective tax rate in the current quarter over the year-ago quarter was primarily due to the difference in impact of share-based compensation that vested during each of the periods

According to Kevin Williams CFO and Treasurer Private cloud card processing and digital offerings were the drivers of revenue growth for the quarter  Revenue headwinds in our product delivery and services are due to the significant decrease in deconversion fees during the quarter decreased license and hardware due to both delayed implementations and the continued shift of our existing customers moving to our private cloud and decreased pass thru revenue also due to delayed implementations and moving our Symitar Education Conference to virtual this year Our primary reported operating segments all had nice revenue growth for the quarter on both a GAAP and Non-GAAP basis  Operating margins were in line with expectations for all the operating segments with continued headwinds primarily on the payments segment as we continue on schedule of the migration to the new processing platform  Again I would like to thank all of our associates for taking care of themselves and their families so that they can continue to provide the high level care and support for our customers as we continue to make are way through these unusual times

Non-GAAP Impact of Deconversion Fees

The table below shows our revenue and operating income (in thousands) for the three months ended September 30 2020 compared to the three months ended September 30 2019 excluding the impacts of deconversion fees

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

Balance Sheet and Cash Flow Review

• At September 30 2020 cash and cash equivalents increased to $1953 million from $967 million at September 30 2019
• Trade receivables totaled $2230 million at September 30 2020 compared to $2344 million at September 30 2019
• The Company had no borrowings at September 30 2020 and September 30 2019
• Total deferred revenue decreased to $3225 million at September 30 2020 compared to $3256 million a year ago
• Stockholders' equity increased to $15438 million at September 30 2020 compared to $14767 million a year ago

Cash provided by operations totaled $1145 million for the three months ended September 30 2020 compared to $1231 million for the same period last fiscal year  The following table summarizes net cash from operating activities:

Cash used in investing activities for the three months ended September 30 2020 totaled $312 million compared to $754 million for the same period last fiscal year and included the following:

• On July 1 2019 the Company acquired all of the equity interest of Geezeo for $30376 net of cash acquired (final payment) Geezeo is a Boston-based provider of retail and business digital financial management solutions

Financing activities used cash of $1013 million in the three months ended September 30 2020 and $446 million in the same period last fiscal year and included the following: 

Use of Non-GAAP Financial Information

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 and adjusted operating expenses

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 eliminate one-time deconversion fees which management believes are not indicative of the Company's operating performance  Such adjustments give investors further insight into our performance  For these reasons management also uses these non-GAAP financial measures in its assessment and management of the Company's performance

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

COVID-19 Impact and Response

In March 2020 the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic and the President of the United States declared the outbreak as a national emergency As COVID-19 has rapidly spread federal state and local governments have responded by imposing varying degrees of restrictions including widespread stay-at-home orders social distancing requirements travel limitations quarantines and forced closures or limitations on operations of non-essential businesses Such restrictions have resulted in significant economic disruptions and uncertainty

The health safety and well-being of our employees and customers is of paramount importance to us In March 2020 we established an internal task force composed of executive officers and other members of management to frequently assess updates to the COVID-19 situation and recommend Company actions We offered remote working as a recommended option to employees whose job duties allow them to work off-site This recommended remote working option is currently extended until at least January 4 2021 and our internal task force will continue to evaluate recommending further extensions Based on guidance from the US Department of Homeland Security's Cybersecurity and Infrastructure Security Agency the Company was designated as essential critical infrastructure because of our support of the financial services industry As of October 26 2020 the majority of our employees were continuing to work remotely Our internal task force considers federal state and local guidance as well as employee-specific and facility-specific factors when recommending Company actions At such time that our internal task force recommends that our remote employees begin to return to our facilities we have prepared procedures to assist with a safe gradual and deliberate approach including a return-to-office training enhanced sanitation procedures and face mask requirements which are currently being utilized by our employees who are required to be on-site to perform their required job functions

We have suspended all non-essential business travel until at least January 4 2021 and our internal task force will continue to evaluate the need for further extensions We have put additional safety precautions into place for travel that is essential We have also updated the health benefits available to our employees by waiving out-of-pocket expenses related to testing and treatment of COVID-19 Despite the move to a principally remote workforce we honored our 2020 summer internship program through virtual methods

Customers

We are working closely with our customers who are scheduled for on-site visits to ensure their needs are met while taking necessary safety precautions when our employees are required to be at a customer site Delays of customer system installations due to COVID-19 have been limited and we have developed processes to handle remote installations when available We expect these processes to provide flexibility and value both during and after the COVID-19 pandemic However we have experienced delays related to continuing customer migrations to our new card processing platform We completed the migrations of our core customers and are on track for the revised schedule for non-core customers by March 31 2021 We continue to work with our customers to support them during this difficult time and to that end have waived certain late fees in connection with our products and services We have also enhanced our lending service offerings to support the Paycheck Protection Program that was introduced by the Coronavirus Aid Relief and Economic Security (CARES) Act which was signed into law on March 27 2020 Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been curtailed we have not yet experienced significant disruption to our operations We believe our technological capabilities are well positioned to allow our employees to work remotely for the foreseeable future without materially impacting our business

Financial impact

We have seen delays in certain product installations due to COVID-19 with the associated revenue pushed from the current period to future periods These headwinds may continue to impact our license hardware installation and pass-through revenues throughout fiscal 2021 Despite the changes and restrictions caused by COVID-19 the overall financial and operational impact on our business has been limited and our liquidity balance sheet and business trends remain strong We experienced positive operating cash flows during the first quarter of fiscal 2021 and we do not expect that to change in the near term However we are unable to accurately predict the future impact of COVID-19 due to a number of uncertainties including further government actions; the duration severity and recurrence of the outbreak; the speed of economic recovery; the potential impact to our customers vendors and employees; and how the potential impact might affect future customer services processing and installation-related revenue and processes and efficiencies within the Company directly or indirectly impacting financial results We will continue to monitor COVID-19 and its possible impact on the Company and to take steps necessary to protect the health and safety of our employees and customers

Quarterly Conference Call

The Company will hold a conference call on November 5 2020; at 7:45 am Central Time and investors are invited to listen at wwwjackhenrycom   

About Jack Henry & Associates Inc®

Jack Henry (NASDAQ: JKHY) is a leading provider of technology solutions primarily for the financial services industry We are an S&P 500 company that serves approximately 8700 clients nationwide through three divisions: Jack Henry Banking® supports banks ranging from community banks to multi-billion-dollar institutions; Symitar® provides industry-leading solutions to credit unions of all sizes; and ProfitStars® offers highly specialized solutions to financial institutions of every asset size as well as diverse corporate entities outside of the financial services industry With a heritage that has been dedicated to openness partnership and user centricity for more than 40 years we are well-positioned as a driving market force in future-ready digital solutions and payment processing services We empower our clients and consumers with the human-centered tech-forward and insights-driven solutions that will get them where they want to go Are you future ready? Additional information is available at wwwjackhenrycom

Statements made in this news release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934  Because forward-looking statements relate to the future they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements  Such risks and uncertainties include but are not limited to those discussed in the Company's Securities and Exchange Commission filings including the Company's most recent reports on Form 10-K and Form 10-Q particularly under the heading Risk Factors Any forward-looking statement made in this news release speaks only as of the date of the news release and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statement whether because of new information future events or otherwise