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 second quarter of fiscal 2022 and discusses its continued response to the novel coronavirus (COVID-19) pandemic (page 8 below).

Year to date summary:

• GAAP revenue increased 12% and operating income increased 23% for the six months ended December 31, 2021 compared to the prior-year period.
• Non-GAAP adjusted revenue increased 10% and non-GAAP adjusted operating income increased 15% for the six months ended December 31, 2021 compared to the prior-year period.¹
• GAAP EPS was $2.68 per diluted share for the six months ended December 31, 2021, compared to $2.13 per diluted share in the prior-year period.
• Cash at December 31, 2021 was $29.1 million and $147.8 million at December 31, 2020.
• Debt related to the revolving credit line was $240 million at December 31, 2021 and zero at December 31, 2020.²

Second quarter summary:

• GAAP revenue increased 17% and operating income increased 34% for the quarter compared to the prior-year quarter.
• Non-GAAP adjusted revenue increased 11% and non-GAAP adjusted operating income increased 13% for the quarter compared to the prior-year quarter.¹
• GAAP EPS was $1.30 per diluted share for the quarter, compared to $0.94 per diluted share in the prior-year quarter.

Full-year fiscal 2022 guidance:

• GAAP revenue $1,939 million to $1,942 million
• GAAP EPS $4.75 to $4.82
• Non-GAAP revenue $1,889 million to $1,892 million³

According to David Foss, Board Chair and CEO, "We are very pleased to report another quarter of record revenue and an overall strong performance for the second quarter of our fiscal year.  Not only did we experience record revenue in the quarter, but our sales teams booked more business this quarter than any quarter in the history of the company.  The sales organization continues to work a robust pipeline of financial institutions interested in our many best-of-breed capabilities and solutions. We are proud to be a well-rounded financial technology company that is committed to serving the needs of community and regional financial institutions in the United States.  As part of that commitment, this week we will be sharing our technology modernization strategy for helping our clients capture the opportunity created by the most recent industry disruption.  This strategy leverages the investments we have made and will continue to make in a modern infrastructure that is cloud-native, digitally centric, open, and scalable.  It establishes an ecosystem which, when applied to our digital, payments, lending, risk, and core platforms, helps community and regional financial institutions innovate faster, differentiate strategically, and compete successfully while serving the evolving needs of their accountholders."

Operating Results

Revenue, operating expenses, operating income, and net income for the three and six months ended December 31, 2021, as compared to the three and six months ended December 31, 2020, were as follows:

• Services and support revenue increased for the second quarter, primarily driven by growth in deconversion fee revenue of $24,748. Other increases were data processing and hosting fees, implementation, and conversion/merger revenues. Processing revenue increased for the second quarter, primarily driven by growth in card processing fee revenue of 14%. Other increases were in Jack Henry digital and remote capture and automated clearinghouse (ACH) revenues.
• Services and support revenue increased for the year-to-date period, primarily driven by growth in data processing and hosting fee revenue of 12%. Other increases were deconversion fee, implementation, and software usage fee revenues. Processing revenue increased for the year-to-date period, primarily driven by growth in card processing fee revenue of 12%. Other increases were in remote capture and ACH, and Jack Henry digital revenues.
• For the second quarter, core segment revenue increased 15%, payments segment revenue increased 18%, complementary segment revenue increased 17%, and corporate and other segment revenue increased 36%. Non-GAAP adjusted core segment revenue increased 7%, non-GAAP adjusted payments segment revenue increased 13%, non-GAAP adjusted complementary segment revenue increased 11%, and non-GAAP adjusted corporate and other segment revenue increased 36% (see revenue lines of segment break-out tables on page 4 below).
• For the year-to-date period, core segment revenue increased 11%, payments segment revenue increased 13%, complementary segment revenue increased 12%, and corporate and other segment revenue increased 18%. Non-GAAP adjusted core segment revenue increased 8%, non-GAAP adjusted payments segment revenue increased 11%, non-GAAP adjusted complementary segment revenue increased 10%, and non-GAAP adjusted corporate and other segment revenue increased 18% (see revenue lines of segment break-out tables on page 5 below).

• Cost of revenue increased for the second quarter and year-to-date period, primarily due to higher costs associated with our card processing platform, personnel costs, and operating licenses and fees.
• Research and development expense increased for the second quarter and year-to-date period, primarily due to higher personnel costs (net of capitalized personnel costs).
• Selling, general, and administrative expense increased for the second quarter and year-to-date period, primarily due to higher personnel costs and a smaller gain on sale of assets in the current fiscal periods.

• Effective tax rates for the second quarter of fiscal years 2022 and 2021 were 23.6% and 23.1%, respectively. Effective tax rates for the year-to-date period of fiscal years 2022 and 2021 were 23.5% and 22.7%, respectively.
• The Company repurchased 1.25 million shares of common stock during fiscal year-to-date 2022 and 675 thousand shares of common stock during fiscal year-to-date 2021. Common stock repurchases during the trailing twelve months contributed $0.05 to diluted earnings per share for the second quarter and $0.09 for year-to-date fiscal 2022.

According to Kevin Williams, CFO and Treasurer, "For the second quarter of the fiscal year, our private cloud, remittance, card processing and digital solutions continue to drive our revenue growth. As we guided in November our deconversion fees were up considerably in our second fiscal quarter. We saw a very solid 17% GAAP and 11% non-GAAP revenue growth compared to the prior year. There was also good operating margin expansion on both a GAAP and a non-GAAP basis for the quarter. We are also very pleased to report our Return on Average Shareholders' Equity and Return on Invested Capital (ROIC) of 24.6% and 22.6% for the trailing twelve months, respectively, which improved nicely from 19.7% for each of those measurements last year. I want to thank all of our management team and associates for all their dedication, focus and contributions to support and continue doing the right thing for our customers."

Non-GAAP Impact of Deconversion Fees, Acquisitions and Divestitures

The table below is our revenue and operating income (in thousands) for the three and six months ended December 31, 2021, compared to the three and six months ended December 31, 2020, excluding the impacts of deconversion fees, acquisitions and divestitures, and gain/loss.

The tables below are the segment breakdown 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.

The table below is our GAAP to non-GAAP guidance for fiscal 2022. Non-GAAP guidance excludes the impacts of deconversion fee and acquisition and divestiture revenue (see Use of Non-GAAP Financial Information below).

Balance Sheet and Cash Flow Review

• At December 31, 2021, cash and cash equivalents decreased to $29.1 million from $147.8 million at December 31, 2020.**
• Trade receivables totaled $236.1 million at December 31, 2021 compared to $212.9 million at December 31, 2020.
• The Company had $240 million of borrowings at December 31, 2021 and no borrowings at December 31, 2020.**
• Total deferred revenue increased to $275.8 million at December 31, 2021, compared to $262.9 million a year ago.
• Stockholders' equity decreased to $1,272.0 million at December 31, 2021, compared to $1,545.2 million a year ago.**

The following table summarizes net cash from operating activities (Unaudited, in thousands):

The following table summarizes net cash from investing activities (Unaudited, in thousands):

The following table summarizes net cash from financing activities (Unaudited, in thousands):

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 include 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, non-GAAP earnings before interest, taxes, depreciation, and amortization (non-GAAP EBITDA), free cash flow, and return on invested capital (ROIC).

We believe non-GAAP financial measures help investors better understand the underlying fundamentals and true operations of our business. The non-GAAP financial measures adjusted revenue, adjusted operating income, adjusted segment income, adjusted cost of revenue, and adjusted operating expenses presented eliminate one-time deconversion fees, acquisitions and divestitures, and gain/loss, 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 deconversion fees, acquisitions and divestitures, and gain/loss. 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 financial measures. Reconciliations of the non-GAAP financial measures to related GAAP financial measures are included.

COVID-19 Impact and Response

Since its outbreak in early calendar 2020, COVID-19 has rapidly spread and continues to represent a public health concern. 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 allowed them to work off-site, and we suspended all non-essential business travel. This company-wide recommendation initially extended until July 1, 2021, at which point we began transition to a return to our facilities and normalization of travel activities. However, we reimplemented our company-wide recommendation for remote work on August 3, 2021, based on new virus variants and increased infection rates. This remote work recommendation remains in effect as of February 4, 2022.   For those employees who are at our facilities, we have introduced enhanced sanitation procedures and require face masks for both vaccinated and unvaccinated employees. We have not required employees who return to our facilities to receive vaccinations, but we have provided information on vaccine providers, as well as hosted on-site COVID-19 vaccination clinics at several of our facilities for our employees and their families. As of February 4, 2022, the majority of our employees were continuing to work remotely either full time or in a hybrid capacity. Once the remote work recommendation is lifted, individual decisions on returning to the office will be manager-coordinated and based on conversations with specific teams and departments. A large number of our employees have requested to remain fully remote or participate in a hybrid approach where they would split their time between remote and in-person working. While our business travel has increased in recent months, we continue to encourage a cautious approach to business travel activities.

Customers

We work 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. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been limited, 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 without materially impacting our business.

Financial impact

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 fiscal 2021 and the first six months of fiscal 2022, 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, including the onset of variants of the virus; the effectiveness of vaccines against new variants; the development and effectiveness of treatments; the effect on the economy generally; 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.

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 8,000 clients nationwide through three divisions: Jack Henry Banking® provides innovative solutions to community and regional banks; 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 www.jackhenry.com.  

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.

Quarterly Conference Call

The Company will hold a conference call on February 9, 2022; at 7:45 a.m. Central Time and investors are invited to listen at www.jackhenry.com.

For More Information

To directly access the Company's press releases, go to ir.jackhenry.com/press-releases.