Jack Henry Busts Through $1 Billion Barrier In Fiscal 2012

October 1, 2012 Timothy Prickett Morgan

Banking software and payment processing service Jack Henry and Associates has pumped up its sales to above $1 billion for the latest fiscal year just ended, the first time the company has hit that sales level and almost assuring that someone–Oracle, Infor, or even Microsoft–is going to try to try to buy the company.

But Jack Henry has done just fine on its own, thank you very much. In the fiscal 2012 year ended on June 30, the software and service provider that specializes in sales to small and regional banks, booked $1.03 billion in sales, up 6 percent compared to fiscal 2011. Software license sales for the fiscal year were only up 3 percent, to $54.8 million, and hardware sales mirrored that with 3 percent growth, to $63.1 million. (Jack Henry sells IBM i-based packages that run on Power Systems machines as well as Windows-based solutions that it sells IBM System x and Dell PowerEdge to run.) For the fiscal year, software support and services revenues were up a much higher 7 percent, and together brought in $909.2 million. Net income for the year was up 13 percent, to just under $155 million, which worked out to $1.78 per share.

For the final quarter of the year, Jack Henry saw new software license sales decline 8 percent, to just under $14 million, with hardware sales up 6 percent, to $15.9 million. Support and services revenues were $236.8 million, rising 8 percent. While new software sales took a hit, profits accelerated, with net income up 18 percent to $43.3 million, which worked out to 50 cents per share.

The growth that Jack Henry is enjoying seems to be coming from the credit union side of the business, not banks, but banks still drive the majority of its sales. In the fourth quarter, sales of software, hardware, and services to banks was up 4 percent, to $200.9 million, and for the full year, rose by 4 percent to $778.5 million. Credit unions accounted for $65.7 million in revenues in the final quarter of fiscal 2012, up 16 percent, and for the full year were $248.7 million, up 13 percent. Gross margins are a bit higher on the banking side compared to the credit union side, so that growth comes at a bit of a cost. But any time you are growing profits three times as fast as revenues are growing, there is just nothing to complain about.

The company ended the fiscal year with $157.3 million in cash, no debts, and $296 million in deferred revenues, a services backlog of $435.3 million, and 11,900 customers. This is a pretty solid financial position considering the jittery state of the global economy. And it goes a long way toward explaining why Jack Henry has a market capitalization of $3.26 billion as The Four Hundred goes to press.

In separate news, Michael Henry, who has been at the company that bears his father’s name since 1979 and has been chairman of the firm since 1994, has retired. Jack Prim, who has been on the board since Jack Henry died in 2007 and who is currently CEO, will take over as chairman of the board.