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Why Is Jack Henry (JKHY) Down 0.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Jack Henry (JKHY - Free Report) . Shares have lost about 0.2% in that time frame, outperforming 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 Q2 Earnings Miss Estimate

Jack Henry & Associates reported second-quarter fiscal 2023 earnings of $1.10 per share, which missed the Zacks Consensus Estimate by 0.9%. Further, the bottom line decreased by 15.4% from the year-ago fiscal quarter’s reported figure.

Revenues improved 2% from the year-ago fiscal quarter’s reading to $505.3 million. The figure lagged the Zacks Consensus Estimate of $519.7 million.

JKHY’s non-GAAP revenues were $496.4 million, up 6% from the year-ago fiscal quarter’s level.

Top line growth was driven by growing processing revenues. Additionally, strong momentum across the Payments and Complementary segments drove the results.

However, declining services and support revenues and weakness in Corporate segment remained concerns.

Top Line in Detail

Services & Support: Jack Henry generated revenues of $290.7 million from the category (58% of revenues). The figure fell 2% from the year-ago fiscal quarter’s level, owing to a 64% decline in deconversion fees.

Processing: The category yielded $214.6 million (42% of revenues) in the reported quarter, up 9% from the year-ago fiscal quarter’s actuals. This can be attributed to the 7% growth in Jack Henry's card-processing fee revenues. Also, growing payment processing and digital revenues contributed well.

Segments in Detail

Core: Revenues totaled $155.4 million (31% of the top line), up 0.3% from the year-ago fiscal quarter’s tally.

Payments: Revenues summed $191.5 million (38% of the total revenues), increasing 3% from the year-ago fiscal quarter’s level.

Complementary: Revenues came in at $142.3 million (28% of the total revenues), up 4% from the year-earlier fiscal quarter’s number.

Corporate & Other: Revenues grossed $16.1 million (3% of the total revenues), down 5% from the prior-year fiscal quarter’s level.

Operating Details

In second-quarter fiscal 2023, total operating expenses were $397.9 million, reflecting an 8% increase from the prior-year fiscal quarter. This can primarily be attributed to higher personnel and travel costs.

As a percentage of revenues, the figure expanded by 410 basis points (bps) from the year-ago fiscal quarter’s number to 78.7%.

The operating margin was 21% that contracted by 400 bps from the year-ago fiscal quarter’s number.

The reported quarter's operating margin was 21%, down 400 basis points from the previous fiscal quarter.

Balance Sheet

As of Dec 31, 2022, cash and cash equivalents totaled $26 million, which decreased from $32 million as of Sep 30, 2022.

Trade receivables were $246.4 million in the reported quarter, down from $247.5 million in the previous fiscal quarter.

The current and long-term debt stood at $275.02 million at the end of the second-quarter fiscal 2023 compared with $245.04 million at the end of the first quarter of fiscal 2023.

Guidance

For fiscal 2023, Jack Henry reduced its guidance for GAAP revenues from $2.092-$2.099 billion to $2.048-$2.055 billion.

It also trimmed its guidance for non-GAAP revenues from $2.045-$2.052 billion to $2.021-$2.028 billion.

Management lowered the guidance for earnings from $4.90-$4.94 to $4.79-$4.83 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Jack Henry has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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