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Jack Henry (JKHY) Q2 Earnings & Revenues Beat Estimates

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Jack Henry & Associates, Inc. JKHY reported second-quarter fiscal 2020 earnings of 94 cents per share, which surpassed the Zacks Consensus Estimate by 5.6%. Further, the figure surged 6.8% from the year-ago quarter.

Revenues improved 9% year over year to $419.12 million. The figure also outpaced the Zacks Consensus Estimate of $411.61 million.

Further, the company’s non-GAAP revenues came in $409.36 million, up 8% on a year-over-year basis.

The top line was driven by solid performance of Core, Payments and Complementary segments during the reported quarter. Additionally, accelerating processing, and services and support revenues contributed to the results.

Following the better than expected results, shares of the company surged 4.05% in the pre-market trading.

Further, Jack Henry has returned 16.5% in the past year, outperforming the industry’s rally of 16.5%.

We believe Jack Henry’s continued core customer wins and robust new payment platform will continue to drive its business growth. Further, benefits from strategic acquisitions and expanding product portfolio are likely to sustain investor optimism.

Top-Line in Detail

Services & Support: The company generated $255.2 million revenues in this category (61% of revenues). Notably, the figure increased 8% from the year-ago quarter, owing to increase in data processing and hosting fees. Further, accelerating consulting fee revenues was a positive. Moreover, hike in implementation fees of the company’s private cloud offerings and deconversion fees contributed to the results.

Processing: Revenues worth $163.9 million came from this category (39% of revenues) during the reported quarter, surging 10% year over year. This can be attributed to hike in remittance fees and growth in card processing transaction volumes.

Segments in Detail

Core: The company generated $138.4 million revenues from this segment (33% of total revenues), improved 7% year over year.

Payments: This segment yielded $152 million revenues (36.3% of total revenues), climbing 10% from the year-ago quarter.

Complementary: This segment generated $113.5 million revenues (27.1% of total revenues), increasing 10% year over year.

Corporate & Other: The company generated $15.2 million revenues from this segment (3.6% of total revenues), declining 0.4% from the prior-year quarter.

Operating Details

In second-quarter fiscal 2020, total operating expenses were $325.4 million, reflecting an improvement of 9.1% year over year. As a percentage of revenues, the figure expanded 40 bps year over year to 77.6%.

This can primarily be attributed to rising headcounts, which led to an increase in personnel costs and salaries. This led to a surge in R&D, and selling, general and administrative expenses.

Consequently, operating margin came in 22%, contracted 100 bps year over year.

Balance Sheet

As of Dec 31, 2019, cash and cash equivalents totaled $72.5 million, which improved from $96.7 million as of Sep 30, 2019.

Trade receivables were nearly $204.7 million, down from $234.4 million in the previous quarter.

Zacks Rank & Key Picks

Jack Henry currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Itron, Inc. ITRI, NetEase, Inc. (NTES - Free Report) and Five9, Inc. FIVN. While Itron sports a Zacks Rank #1 (Strong Buy), NetEase and Five9 carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Itron, NetEase and Five9 is currently pegged at 25%, 41.99% and 10%, respectively.

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