It has been about a month since the last earnings report for Jack Henry (JKHY). Shares have added about 7.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jack Henry due for a pullback? 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 Q1 Earnings Beat
Jack Henry & Associates reported first-quarter fiscal 2023 earnings of $1.46 per share, which surpassed the Zacks Consensus Estimate by 5.8%. Further, the bottom line increased 5.8% from the year-ago fiscal quarter’s reported figure.
Revenues improved 8% from the year-ago fiscal quarter’s reading to $529.2 million, which came ahead of the Zacks Consensus Estimate of $529.04 million.
JKHY’s non-GAAP revenues were $523.9 million, up 8% from the year-ago fiscal quarter’s level.
Top-line growth was driven by increased processing, and services and support revenues. Additionally, strength across the Core, Payments, Complementary and Corporate segments drove the results.
Top Line in Detail
Services & Support:
Jack Henry generated revenues of $320.15 million from the category (60% of revenues). The figure rose 8% from the year-ago fiscal quarter’s level owing to growth in cloud processing revenues. Also, improving user group revenues, rising implementation fee and increasing software usage contributed well.
Processing:
The category yielded $209.1 million (40% of revenues) in the reported quarter, up 10% from the year-ago fiscal quarter’s actuals. This can be attributed to 8% growth in Jack Henry’s digital revenues and the growing card-processing fee revenues.
Segments in Detail
Core:
Revenues totaled $175.1 million. (33% of the top line), up 6% from the year-ago fiscal quarter’s tally.
Payments:
Revenues summed $186.5 million (35% of the total revenues), increasing 8% from the year-ago fiscal quarter’s level.
Complementary:
Revenues came in at $148.3 million (28% of the total revenues), rising 8% from the year-earlier fiscal quarter’s number.
Corporate & Other:
Revenues grossed $19.2 million (3% of the total revenues), up 55% from the prior-year fiscal quarter’s level.
Operating Details
In first-quarter fiscal 2023, total operating expenses were $388.5 million, reflecting a 10% increase from the prior-year fiscal quarter’s finals. This can primarily be attributed to higher personnel and travel costs, and rising expenses related to JKHY’s card-processing platform.
As a percentage of revenues, the figure expanded 80 basis points (bps) from the year-earlier fiscal quarter’s number to 73.4%.
The operating margin was 27% in the reported quarter, flat with the year-earlier fiscal quarter’s number.
Balance Sheet
As of Sep 30, 2022, cash and cash equivalents totaled $32 million, which decreased from $48.8 million as of Jun 30, 2022.
Trade receivables were $247.5 million in the reported quarter, down from $348.1 million in the previous fiscal quarter.
The current and the long-term debt stood at $245.04 million at the end of the first-quarter fiscal 2023 compared with $115.1 million at the end of the fourth-quarter fiscal 2022.
Guidance
For fiscal 2023, Jack Henry raised its guidance for GAAP revenues from $2.080-$2.087 billion to $2.092-$2.099 billion.
JKHY anticipates non-GAAP revenues of $2.045-$2.052 billion.
Management lowered the guidance for earnings from $5.05-$5.09 per share to $4.90-$4.94.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.26% due to these changes.
VGM Scores
At this time, Jack Henry has a great Growth Score of A, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jack Henry has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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