A month has gone by since the last earnings report for Jack Henry (JKHY). Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Jack Henry due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Jack Henry's Q4 Earnings Beat Estimate
Jack Henry & Associates reported fourth-quarter fiscal 2023 earnings of $1.34 per share, which beat the Zacks Consensus Estimate by 12.6%. The bottom line increased 21.8% from the year-ago fiscal quarter’s reported figure.
Revenues improved 11% from the year-ago fiscal quarter’s reading to $534.6 million. The figure beat the Zacks Consensus Estimate of $511.3 million.
JKHY’s non-GAAP revenues were $517.4 million, up 8% from the year-ago fiscal quarter’s level.
Top-line growth was driven by growing services and support revenues. Strong growth in processing revenues also contributed well.
Additionally, strong momentum across the Core, Payments, Complementary and Corporate segments drove the results further.
Top Line in Detail
Services & Support: Jack Henry generated revenues of $311.9 million from the category (58% of revenues). The figure grew 12% from the year-ago fiscal quarter’s level, owing to a 10% rise in data processing and hosting fees. Also, accelerating one-time revenues, including consulting fees and work orders, implementation fee revenues, and hardware revenue were positives.
Moreover, rising deconversion fees was a plus.
Processing: The category yielded $222.7 million in revenues (42% of revenues) in the reported quarter, up 10% from the year-ago fiscal quarter’s actuals. This can be attributed to a 7% increase in Jack Henry's card-processing revenues and a 13% rise in payment-processing revenues. Positive contributions from Payrailz buyout also contributed well.
Segments in Detail
Core: Revenues totaled $168.7 million (31.6% of total revenues), which rose 11% from the year-ago fiscal quarter’s figure. The figure surpassed the Zacks Consensus Estimate of $160 million.
Payments: Revenues summed up to $197.5 million (36.9% of total revenues), increasing 9% from the year-ago fiscal quarter’s level. The figure beat the consensus mark of $186 million.
Complementary: Revenues came in at $151.1 million (28.3% of total revenues), up 11% from the year-earlier fiscal quarter’s number. The figure came ahead of the consensus mark of $149 million.
Corporate & Other: Revenues grossed $17.3 million (3.2% of the total revenues) and surged 18% from the prior-year fiscal quarter’s level. The figure came ahead of the consensus mark of $14.6 million.
In fourth-quarter fiscal 2023, total operating expenses were $410.4 million, reflecting an 8% increase from the prior-year fiscal quarter. This can primarily be attributed to rising direct costs and personnel costs, including benefits expenses.
As a percentage of revenues, the figure contracted 170 basis points (bps) from the year-ago fiscal quarter’s number to 76.8%.
The operating margin was 23%, up 200 bps from the year-ago fiscal quarter’s number.
As of Jun 30, 2023, cash and cash equivalents totaled $12.2 million compared with $26.6 million as of Mar 31, 2023.
Trade receivables were $361.2 million in the reported quarter, down from $238.4 million in the previous fiscal quarter.
The current and long-term debt stood at $275 million at the end of fourth-quarter fiscal 2023 compared with $375 million at the end of the third quarter of fiscal 2023.
For fiscal 2024, Jack Henry expects GAAP revenues between $2.208 billion and $2.229 billion.
It expects non-GAAP revenues to be $2.190-$2.210 billion.
Management raised the guidance for earnings from $4.85-$4.87 to $4.92-$4.99 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.28% due to these changes.
Currently, Jack Henry has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Jack Henry has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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