• Fiscal year summary:
• GAAP revenue increased 9% and operating income increased 10% for the year ended June 30 2020
• Non-GAAP adjusted revenue increased 7% and adjusted operating income increased 5% for the year ended June 30 2020
• GAAP EPS was $386 and $352 per diluted share for the years ended June 30 2020 and 2019 respectively
• Cash at June 30 2020 was $2133 million an increase of 128% compared to June 30 2019
• Debt related to the revolving credit line and other lines of credit was zero for the years ended June 30 2020 and 2019
• Fourth quarter summary:
• GAAP revenue increased 4% and operating income decreased 3% for the quarter compared to the prior-year quarter
• Non-GAAP adjusted revenue increased 4% and adjusted operating income decreased 2% for the quarter compared to the prior-year quarter
• GAAP EPS was $080 per diluted share for the quarter compared to $079 in the prior-year quarter
• Full-year fiscal 2021 GAAP guidance:
• GAAP revenue $1750 million to $1770 million (assumes deconversion fee decrease of $33 million)
• GAAP EPS $370 to $375
• Non-GAAP revenue growth 55% 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 fourth quarter of fiscal 2020 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 to finish off a very solid year of financial performance for our company Despite the challenges associated with conducting business in the midst of a global pandemic our sales teams persevered and set a monthly sales record in June and a quarterly sales record in our fiscal fourth quarter At the same time our operations teams continued to deliver new solutions and outstanding customer service for our clients Even in the current business environment the resiliency of our business model and the ongoing commitment of our associates have put us in a position to continue to successfully execute as we look forward to the new fiscal year

GAAP Results for the Quarter and Year

Revenue for the quarter ended June 30 2020 increased to $4105 million which is 4% growth over the fourth quarter of fiscal 2019  Operating income decreased 3% to $768 million and net income increased 1% to $613 million or $080 per diluted share compared to the fourth quarter of fiscal 2019 The decrease in operating income for the quarter was primarily due to a slower growth rate of processing revenue as a result of headwinds related to the impact of COVID-19 (see COVID-19 Impact and Response section below) The net income increase was primarily driven by the decrease in effective tax rate compared to the prior-year quarter

For the fiscal year ended June 30 2020 revenue increased to $16971 million which is 9% growth over the fiscal year ended June 30 2019 Operating income increased 10% over the prior fiscal year to $3806 million Net income totaled $2967 million or $386 per diluted share an increase of 9% compared to the fiscal year ended June 30 2019 The increase in operating income was driven by organic growth in both our services and support and processing lines of revenue and higher deconversion fees during the fiscal year over the prior fiscal year  The increase in net income is primarily attributable to the growth in both our lines of revenue and higher deconversion fees discussed above partially offset by the increase in effective tax rate compared to the prior fiscal year

Non-GAAP Results for the Quarter and Year

For the quarter ended June 30 2020 adjusted revenue increased 4% to $3998 million and adjusted operating income decreased 2% to $713 million compared to the prior-year quarter

For the fiscal year ended June 30 2020 adjusted revenue increased 7% to $16342 million and adjusted operating income increased 5% to $3357 million compared to the fiscal year ended June 30 2019 (see Non-GAAP Impact of Deconversion Fees Acquisition and Disposals on page 4)

Operating Results
Revenue operating expenses operating income and net income for the three months and fiscal year ended June 30 2020 as compared to the three months and fiscal year ended June 30 2019 were as follows:

• Total revenue increased 4% for the fourth quarter of fiscal 2020 compared to the same quarter last year The increased revenue in the services and support line for the fourth quarter of fiscal 2020 was primarily driven by the growth in data processing and hosting fees quarter over quarter The increase in processing revenue was mainly driven by increased transaction and digital revenue related to our new Paycheck Protection Program lending line related to the CARES Act (see COVID-19 Impact and Response section below) as well as increased transaction volumes within card processing and the associated fee revenue quarter over quarter Deconversion fees which are included within services and support increased $08 million compared to the fourth quarter of last year Excluding deconversion fees from both periods and revenue from the fiscal 2020 acquisition total adjusted revenue also increased 4% for the fourth quarter of fiscal 2020 compared to the same quarter of fiscal 2019

• Total revenue increased 9% for the fiscal year ended June 30 2020 compared to the same period last year For the fiscal year ended June 30 2020 deconversion fees increased $237 million compared to the prior fiscal year Excluding deconversion fees from both years and revenue from the fiscal 2020 acquisition total adjusted revenue increased 7% The adjusted increase in the services and support line was primarily driven by the growth in data processing and hosting fees as well as increased software usage revenue and higher implementation fees primarily related to our private cloud offerings when compared to the prior fiscal year All components of processing revenue increased for the year despite the impact of COVID-19 late in the third quarter and into the fourth quarter (see COVID-19 Impact and Response section below) with increased transaction volumes within card processing and the associated fee revenue being the largest driver

• For the fourth quarter of fiscal 2020 core segment revenue increased 4% to $1415 million from $1365 million in the fourth quarter of fiscal 2019 Payments segment revenue increased 3% to $1455 million from $1416 million in the same quarter last year Revenue from the complementary segment increased 9% to $1140 million in the fourth quarter of fiscal 2020 from $1046 million in the same quarter of fiscal 2019 Revenue in the corporate and other segment decreased to $95 million from $108 million in the fourth quarter of fiscal 2019

• For the fiscal year ended June 30 2020 revenue in the core segment increased 9% to $5822 million compared to $5360 million for the fiscal year ended June 30 2019 Payments segment revenue increased 9% to $5977 million from $5493 million for the prior fiscal year Complementary segment revenue increased 11% to $4633 million up from $4156 million in the prior fiscal year Revenue from the corporate and other segment increased 4% to $539 million for the fiscal year ended June 30 2020 from $517 million for the fiscal year ended June 30 2019

• Cost of revenue increased 6% for the fourth quarter of fiscal 2020 compared to the fourth quarter of fiscal 2019 and increased 1% as a percentage of revenue Excluding costs related to deconversions for both years and the fiscal 2020 acquisition the adjusted cost of revenue increase was also 6% The adjusted increase was primarily due to higher costs associated with our card processing platform higher salaries and personnel costs related to organic growth within our product lines and increased amortization expense primarily related to capitalized software The adjusted increase for the quarter was partially offset by travel expense savings as a result of COVID-19 travel restrictions (see COVID-19 Impact and Response section below)

• For the fiscal year ended June 30 2020 cost of revenue increased 9% compared to the equivalent period of the prior fiscal year but remained consistent as a percentage of revenue Excluding costs related to deconversions for both years and the fiscal 2020 acquisition adjusted cost of revenue also increased 9% The adjusted increase was primarily due to higher costs associated with our card processing platform increases in related revenue and higher salaries and personnel costs primarily due to a headcount increase of 5% at June 30 2020 compared to a year ago reflecting organic growth within our product lines and increased amortization expense primarily related to capitalized software

• Research and development expense increased 20% for the fourth quarter of fiscal 2020 and 14% for full fiscal year 2020 compared to the equivalent periods of the prior fiscal year Excluding costs related to the fiscal 2020 acquisition from the fourth quarter of fiscal 2020 of $560 and from the full fiscal year 2020 of $1980 adjusted research and development expense increased 18% for the quarter and 12% for the full fiscal year The adjusted increases were primarily due to increased salaries and personnel costs partially due to a headcount increase of 4% at June 30 2020 compared to a year ago reflecting organic growth within our product lines as well as an increase in licenses and fees A portion of the adjusted research and development expense is a result of our investment in digital platforms Research and development expense for the quarter increased 1% as a percentage of total revenue compared to the prior-year quarter Research and development expense for fiscal 2020 remained consistent with the prior fiscal year as a percentage of total revenue

• Selling general and administrative expense remained consistent for the fourth quarter of fiscal 2020 and increased 6% for full fiscal year 2020 compared to the equivalent prior fiscal year periods Excluding costs related to deconversions the fiscal 2020 acquisition and the loss on disposal of certain assets net from the fourth quarter of fiscal 2020 of $2231 and from the full fiscal year 2020 of $7825 adjusted selling general and administrative expense decreased 5% for the quarter and increased 2% for the full fiscal year 2020 compared to the equivalent prior fiscal year periods The adjusted increase for the full fiscal year was mainly due to increased personnel costs primarily due to a 5% increase in headcount over the prior fiscal year and salary increases during the trailing twelve-month period Selling general and administrative expense for the quarter and fiscal year remained consistent as a percentage of total revenue compared to the prior fiscal year

• For the fourth quarter of fiscal 2020 operating income decreased 3% to $768 million which is 19% of revenue compared to $794 million which was 20% of revenue for the fourth quarter of fiscal 2019 For the fiscal year operating income increased 10% to $3806 million which is 22% of revenue compared to operating income of $3473 million which was also 22% of revenue for the year ended June 30 2019

• Provision for income taxes decreased in the fourth quarter of fiscal 2020 compared to the fourth quarter of fiscal 2019 with an effective tax rate of 200% of income before income taxes compared to 230% in the prior-year quarter The decrease in the effective tax rate quarter over quarter was primarily due to the changes in the estimated state tax rate as a result of effective state planning strategies inclusive of the adjustment to deferred taxes and the true up of prior-year state tax expense to the actual state tax returns filed

• For the year ended June 30 2020 provision for income taxes increased with an effective tax rate at 221% of income before income taxes compared to 217% for the last year The increase to the Company's tax rate was primarily due to the difference in the tax benefits recognized from stock-based compensation between the two periods

According to Kevin Williams CFO and Treasurer Our private cloud offerings transactional processing and digital continue to drive revenue growth for both the quarter and fiscal year We continue to have headwinds on revenue from decreased license and hardware sales as almost every new core customer selects our cloud offering along with the continued shift of our existing customers migrating from on-premise to our private cloud  The three primary reported operating segments showed nice revenue growth for the quarter on both a GAAP and Non-GAAP basis considering some headwinds caused by COVID-19 especially in our payments segment Operating margins in our payments segment continue to be impacted by the additional costs related to the migration of our debit card customers to the new processing platform while margins in core and complementary segments were steady for both the quarter and fiscal year I would like to express my gratitude to all of our associates for taking extremely good care of themselves and our customers during these unusual times they have and continue to perform at incredibly high levels

Non-GAAP Impact of Deconversion Fees Acquisition and Disposals

The table below shows our revenue and operating income (in thousands) for the three months and fiscal year ended June 30 2020 compared to the three months and fiscal year ended June 30 2019 excluding the impacts of deconversion fees the fiscal 2020 acquisition and the loss on disposal of certain assets net

*For the quarter the loss includes the write-off of a portion of the Payments Hub development  This occurred as part of a technology directional change in an effort to accelerate bringing customers live on The Clearing House's Real-Time Payments Network (RTP)  For the year this includes the write-off of the Company's investments in Enterprise Risk Mitigation Solution and Payments Hub partially offset by the gain on the sale of the Company's Houston TX facility

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 June 30 2020 cash and cash equivalents increased to $2133 million from $936 million at June 30 2019
• Trade receivables totaled $3009 million at June 30 2020 compared to $3101 million at June 30 2019
• The Company had no borrowings at June 30 2020 and June 30 2019
• Total deferred revenue decreased to $3896 million at June 30 2020 compared to $3943 million a year ago
• Stockholders' equity increased to $15497 million at June 30 2020 compared to $14290 million a year ago

Cash provided by operations totaled $5105 million for the year ended June 30 2020 compared to $4311 million for the same period last year  The following table summarizes net cash (in thousands) from operating activities:

Cash used in investing activities for the year ended June 30 2020 totaled $1979 million compared to $1906 million for the same period last 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 Geezeo is a Boston-based provider of retail and business digital financial management solutions

Financing activities used cash of $1929 million in the year ended June 30 2020 and $1783 million in the same period last 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 contributions of the current fiscal year acquisition and the one-time disposals of certain assets all items 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 these 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 August 13 2020 the majority of our employees were working 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 are on track to meet the revised schedule to complete migrations of our core customers by September 30 2020 and non-core customers by March 31 2021 to the new platform 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 saw a decrease of card processing transaction volumes late in the third quarter of fiscal 2020 and into the early portion of the fourth quarter due to COVID-19 which slowed the rate of growth of our processing revenue for those periods versus a year ago  In addition installations have been delayed and the associated revenue pushed from the current period to future periods These headwinds may also impact our processing and installation revenues moving into fiscal 2021 Although transaction levels have since returned to more normal levels the recurrence of lower-than-normal card processing transaction rates is uncertain and will depend upon when requirements for business closures and other restrictions are normalized and how quickly economic recovery occurs 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 fourth quarter 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 and the potential impact to our customers vendors and employees as well as how the potential impact might affect future customer services processing 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 August 19 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