Business context and reporting period
Jack Henry & Associates, Inc. (Nasdaq: JKHY) provides banking and credit-union software, hosted data processing, digital products, and payment processing. It serves nearly 8,400 customers through Jack Henry Banking, Symitar, and ProfitStars. This is the 10-K for the fiscal year ended June 30, 2021, compared primarily with fiscal 2020—not a 2020 Q4 filing as indicated in the request metadata. Dollar amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $1,758.2 | $1,697.1 | +3.6% |
| Operating income | $398.7 | $380.6 | +4.8% |
| Net income | $311.5 | $296.7 | +5.0% |
| Diluted EPS | $4.12 | $3.86 | +6.7% |
| Operating cash flow | $462.1 | $510.5 | -9.5% |
- Gross margin was approximately 39.5%, versus 40.6%; operating margin improved to approximately 22.7% from 22.4%; net margin was approximately 17.7%, versus 17.5%.
- Processing revenue rose 10% to $710.0 million, driven by card, transaction and digital, and remittance activity. Services and support revenue was nearly flat at $1,048.2 million; excluding deconversion fees and specified acquisition/divestiture effects, it grew 3%.
- Cash and cash equivalents fell to $51.0 million from $213.3 million. Current assets were $543.7 million and current liabilities $520.9 million. Long-term debt was $100.1 million, primarily revolving-credit borrowings; total reported debt including current maturities was about $100.2 million. The $300 million revolving facility matures in February 2025, and the company reported compliance with its covenants.
- Capital returns included $133.8 million of dividends and $431.5 million of share repurchases. The annual dividend declared per share increased to $1.78 from $1.66.
Material changes versus the prior period
- Revenue growth was led by processing, while services and support stayed level overall. Adjusting for deconversion fees and identified acquisition/divestiture effects, total revenue grew 6%.
- Operating expenses rose 3%; cost of revenue increased 5%, while selling, general, and administrative expense decreased 6%, partly reflecting lower travel and event costs during COVID-19 restrictions.
- Operating cash flow declined despite higher net income, including lower deconversion-fee collections and increased cash use in other assets and liabilities. Financing cash outflow increased sharply, principally due to repurchases.
- Payments segment revenue grew 7% and segment income rose; its cost of revenue grew 11%, faster than revenue. Core revenue was essentially flat as reported, while Complementary revenue grew 4%.
Outlook, risks, and unusual items
- Management described the business as entering fiscal 2022 after strong performance, with an encouraging sales pipeline, substantial recurring revenue, and a strong balance sheet. The filing gives no specific revenue, earnings, or margin guidance.
- Management said COVID-19’s financial and operational impact had been limited and that operations continued without significant disruption, but noted uncertainty around the pandemic, variants, recovery, and effects on customers, vendors, installations, and transaction activity.
- Key risks include cybersecurity incidents, service or infrastructure outages, payment-processing failures, reliance on third-party providers, competition and customer contract renewals, regulatory and privacy requirements, industry consolidation, and attracting and retaining skilled employees.
- A long-term First Data/PSCU card-processing agreement carries a remaining purchase commitment of approximately $1.028 billion through January 2036, subject to renewal terms. Total contractual obligations were $1.179 billion, including lease obligations and off-balance-sheet purchase obligations.
- Remaining performance obligations were $4.636 billion; management expected about 28% to be recognized within 12 months. The auditor identified revenue recognition—particularly variable consideration and performance-obligation judgments—as a critical audit matter. Routine legal claims were not expected by management to materially affect the financial statements.
- CECL adoption reduced beginning retained earnings by $0.5 million. The company reported effective internal controls and received an unqualified audit opinion on its financial statements.
Important facts for investors to verify
- How much of future growth comes from recurring cloud and processing revenue, and whether processing growth sustains margins as related costs rise.
- The drivers of lower operating cash flow and the sustainability of elevated repurchases alongside dividends and capital investment.
- The financial and operational terms, utilization, and renewal provisions of the First Data/PSCU commitment through 2036.
- Customer retention, contract-renewal pricing, and the effects of bank and credit-union consolidation on the addressable customer base.
- Exposure to cybersecurity, third-party processing, and service-continuity risks, and any material subsequent developments after the filing date.