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 third quarter of fiscal 2021 and discusses its continued response to the novel coronavirus (COVID-19) pandemic

• Year-to-date summary:
• GAAP revenue increased 2% and operating income remained consistent for the nine months ended March 31 2021 compared to the prior-year period
• Non-GAAP adjusted revenue increased 5% and non-GAAP adjusted operating income increased 9% for the nine months ended March 31 2021 compared to the prior-year period
• GAAP EPS was $308 per diluted share for the nine months ended March 31 2021 compared to $306 in the prior-year period
• Cash at March 31 2021 was $701 million and $1095 million at March 31 2020
• Debt related to the revolving credit line was $200 million at March 31 2021 and $55 million at  March 31 2020
• Third quarter summary:
• GAAP revenue increased 1% and operating income decreased 1% for the quarter compared to the prior-year quarter
• Non-GAAP adjusted revenue increased 6% and non-GAAP adjusted operating income increased 19% for the quarter compared to the prior-year quarter
• GAAP EPS was $095 per diluted share for the quarter compared to $096 in the prior-year quarter
• Full-year fiscal 2021 guidance:
• GAAP revenue $1752 million to $1757 million
• GAAP EPS $398 to $402
• Non-GAAP revenue $1735 million to $1740 million¹       

According to David Foss President and CEO We are very pleased to report another quarter of revenue growth and an overall solid financial performance Our sales team had another outstanding quarter booking fifteen new core sales including five deals in the multi-billion dollar institution market Also of note in the quarter we successfully completed our much-anticipated card processing system conversion in accordance with our announced plan We continue to see very strong demand for Jack Henry technology solutions in the markets we serve and continue to operate with a very robust sales pipeline

Operating Results

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

• Processing revenue increased for the third quarter primarily driven by growth in card processing of 14% Other increases were in Jack Henry digital and remittance revenues Services and support revenue decreased primarily due to a deconversion fee revenue reduction of $18414 as fewer customers were lost to mergers with non-Jack Henry customers Another decrease was in hardware revenue and was partially offset by growth in data processing and hosting fees
• Processing revenue increased for the nine month period primarily driven by growth in card processing of 8% Other increases were in Jack Henry digital and remittance revenues Services and support revenue decreased primarily due to a deconversion fee revenue reduction of $32979 as fewer customers were lost to mergers with non-Jack Henry customers Other decreases were pass-through (due to COVID-19 travel limitations²) and hardware revenues partially offset by growth in data processing and hosting fees and software usage fees
• For the third quarter core segment revenue decreased 4% payments segment revenue increased 7% complementary segment revenue increased 1% and corporate and other segment revenue decreased 11%³
• For the nine month period core segment revenue decreased 1% payments segment revenue increased 5% complementary segment revenue increased 4% and corporate and other segment revenue decreased 22%³

Operating Expenses and Operating Income

• Cost of revenue increased for the third quarter primarily due to higher costs associated with our card processing platform and operating licenses and fees
• Cost of revenue increased for the nine month period primarily due to higher costs associated with our card processing platform operating licenses and fees and personnel costs partially offset by travel expense savings as a result of COVID-19 travel limitations² and lower costs related to hardware
• Research and development expense decreased for the third quarter primarily due to higher capitalized research and development costs partially offset by an increase in personnel costs
• Research and development expense remained consistent for the nine month period The consistency of this expense category for the period reflected our continuing commitment to the development of strategic products
• Selling general and administrative expense decreased for the third quarter primarily due to the change in gain/loss on disposal of assets net
• Selling general and administrative expense decreased for the nine months primarily due to travel expense and other savings as a result of COVID-19 travel limitations and the change in gain/loss on disposal of assets net partially offset by increased personnel costs COVID-19 related savings included our national sales meeting Jack Henry Annual Conference and Symitar Education Conference being held virtually²

Net Income

• Effective tax rates for the third quarter of fiscal years 2021 and 2020 were 215% and 197% respectively and for the nine month periods of fiscal years 2021 and 2020 were 223% and 227% respectively

According to Kevin Williams CFO and Treasurer Our private cloud card processing and digital solutions continue driving our revenue growth during the quarter compared to the prior year However we also continue to have revenue headwinds on our reported numbers primarily driven by decreased deconversion fees due to the significant reduction in M&A activity during the year; and hardware revenue attributable to the on-going migration of our existing on-premise customers moving to our private cloud Operating margins were in line with the previous year's quarter and on a non-GAAP basis we saw nice margin expansion in each of our three operating segments I also want to thank all of our associates for their continued focus and contributions to move our company and customers forward in these unusual times

¹ See tables below reconciling fiscal year 2021 GAAP to non-GAAP guidance
² See COVID-19 Impact and Response section below
³ See revenue lines of segment break-out tables on pages 4 and 5 below

Non-GAAP Impact of Deconversion Fees and Acquisitions Divestitures and Gain/Loss

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

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

The table below shows our GAAP to non-GAAP guidance for the twelve months ended June 30 2021 Non-GAAP guidance excludes the impacts of deconversion fees and acquisitions and divestitures

Balance Sheet and Cash Flow Review

• At March 31 2021 cash and cash equivalents decreased to $701 million from $1095 million at March 31 2020
• Trade receivables totaled $2077 million at March 31 2021 compared to $2121 million at March 31 2020
• The Company had $200 million of borrowings at March 31 2021 and $55 million at March 31 2020
• Total deferred revenue decreased to $2120 million at March 31 2021 compared to $2264 million a year ago
• Stockholders' equity decreased to $13154 million at March 31 2021 compared to $15139 million a year ago

The following table summarizes net cash from operating activities:

The following table summarizes net cash from investing activities:

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

The following table summarizes net cash from financing activities:

• For the nine months ended March 31 2021 the Company repurchased common stock and transferred to its treasury 2500 shares compared to the nine months ended March 31 2020 when the Company repurchased common stock and transferred to its treasury 485 shares

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 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 and acquisitions 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 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 rapidly spread federal state and local governments 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 Over the course of the pandemic these restrictions have been modified lifted and in some cases re-imposed in various locations The existence diversity and constantly changing nature of these 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 July 1 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 May 1 2021 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 July 1 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

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 We did experience delays related to continuing customer migrations to our new card processing platform However we successfully completed all the migrations according to a revised schedule 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 (PPP) that was introduced by the Coronavirus Aid Relief and Economic Security (CARES) Act 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 into fiscal 2022 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 nine months 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 and effectiveness of vaccine and treatment developments; 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 May 4 2021; 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 8400 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