Press release·03/02/2025 22:18:29

Financial Performance Overview

Jack Henry & Associates, Inc. is a leading provider of technology solutions and payment processing services primarily to community and regional financial institutions. The company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate and Other.

For the second quarter of fiscal 2025, the company reported a 5.2% increase in total revenue to $573,848,000 compared to the same quarter in fiscal 2024. Removing the impact of deconversion revenue, total revenue increased 6.1% year-over-year. This growth was primarily driven by organic expansion across the company’s revenue lines, including data processing and hosting, card, payment processing, and digital banking.

Operating expenses increased 5.7% to $451,846,000 for the quarter. Excluding the impact of deconversion costs, operating expenses rose 5.8%. The increase was mainly due to higher personnel and direct costs. Operating income grew 3.4% to $122,002,000, or 7.3% excluding deconversion impacts.

The provision for income taxes increased 4.5% to $29,536,000, resulting in an effective tax rate of 23.2% for the quarter, down slightly from 23.5% a year earlier. Net income rose 6.4% to $97,845,000, or $1.34 per diluted share. Removing deconversion impacts, net income increased 10.4% year-over-year.

For the six months ended December 31, 2024, total revenue grew 5.2% to $1,175,568,000. Excluding deconversion revenue, the increase was 5.7%. Operating expenses rose 4.1% to $899,430,000, or 6.2% excluding deconversion costs and a voluntary employee departure program in the prior year period. Operating income increased 9.0% to $276,138,000, or 4.2% excluding deconversion and the prior year program impacts.

Net income for the six-month period climbed 12.1% to $217,036,000, or $2.97 per diluted share. Adjusting for deconversion and the prior year voluntary program, net income grew 7.2% year-over-year.

Segment Performance

The Core segment, which provides core information processing platforms, saw revenue increase 4.6% and cost of revenue rise 2.0% in the second quarter. Excluding deconversion impacts, Core revenue grew 5.8% as new and existing clients migrated to the company’s private cloud. Core cost of revenue increased 2.3% on higher direct costs.

In the Payments segment, revenue increased 5.4% and cost of revenue rose 2.8%. Excluding deconversion, Payments revenue grew 6.2% driven by higher card, payment processing, remote capture, and ACH revenues. Payments cost of revenue as a percentage of revenue decreased 2%.

The Complementary segment, which provides additional software and services, reported a 5.6% increase in revenue and a 0.9% rise in cost of revenue. Excluding deconversion, Complementary revenue grew 6.5% on strong hosting and digital banking revenues. Complementary cost of revenue increased 1.1%.

The Corporate and Other segment, which includes hardware and other unallocated items, saw revenue rise 4.7% and cost of revenue increase 8.8%. The revenue growth was primarily due to higher processing and subscription revenues.

Strengths and Weaknesses

A key strength of Jack Henry & Associates is its strong client service infrastructure and commitment to high customer satisfaction. The company consistently measures client satisfaction through various surveys and dedicated feedback channels. This focus on service quality helps drive high client retention rates.

Another strength is the company’s diversified revenue streams, with a balance between recurring “services and support” revenue (56% of total) and more variable “processing” revenue (44% of total). The services and support line has seen steady organic growth as clients migrate to the company’s private cloud offerings. The processing segment has also grown, benefiting from expansion in card, payment, and digital banking volumes.

Jack Henry’s broad product portfolio spanning core banking, payments, digital banking, and complementary solutions is another competitive advantage. This allows the company to cross-sell and meet the evolving technology needs of its financial institution clients.

A potential weakness is the company’s reliance on capital expenditures and software development to maintain its product offerings. While research and development expenses increased 15.8% in the quarter, the company must continue investing to stay ahead of industry changes and client demands.

Additionally, Jack Henry faces ongoing cost pressures, with operating expenses rising 5.7% in the quarter, outpacing the 5.2% revenue growth. The company will need to carefully manage personnel, direct, and other costs to protect margins going forward.

Outlook and Conclusion

As Jack Henry moves into the third quarter of fiscal 2025, the company believes its strong balance sheet, access to credit, product portfolio, and commitment to client service position it well to address current and future opportunities. Significant portions of the business continue to provide recurring revenue, and the sales pipeline remains encouraging.

Clients are facing ongoing regulatory and operational challenges, which Jack Henry’s products and services are well-suited to address. In these times, the company’s solutions that target institutional profitability, efficiency, and security are in high demand.

Overall, Jack Henry & Associates delivered solid financial results in the second quarter, with broad-based organic revenue growth across its business segments. The company’s focus on client service, diversified revenue streams, and comprehensive product offerings are key strengths. However, managing costs and continued investment in product development will be critical to maintaining the company’s competitive edge and profitability going forward.