Jack Henry & Associates, Inc. reports 53.2% Net Income growth in 2018 and almost no change in EBITDA Margin of 35.4%
08/21/2018 • About Jack Henry & Associates, Inc. (
$JKHY) • By InTwits
Jack Henry & Associates, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Jack Henry & Associates, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.4%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $89m in 2018, $46m in 2017, $38m in 2016, $18m in 2015, $19m in 2014
- In the last 5 years the company invested considerably less than D&A: $226m vs. $648m. In FY2018 this situation was still the same: CAPEX was 40 while D&A was 152
- The company has highly profitable business model: ROIC is 28.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 7.4%. Revenue growth showed acceleration in FY18Q4 - it increased 8.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. During the last 5 years EBITDA Margin topped in FY2016 at 36.3% and was declining since that time.
Gross Margin showed almost no change in FY2018. Gross Margin grew at 0.22 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in FY2018. During the last 5 years SG&A as a % of Revenue bottomed in FY2017 at 11.4%. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin increased on 7.3 pp from 17.2% to 24.5% in FY2018. The efficient tax rate was 3.7% in FY2018 while the average for the last five years was 26.3%.
Investments (CAPEX, working capital and M&A)
Jack Henry & Associates, Inc.'s CAPEX/Revenue was 2.6% in FY2018. Jack Henry & Associates, Inc.'s CAPEX/Revenue decreased slightly on 1.7 pp from 4.3% in FY2015 to 2.6% in FY2018. It's average CAPEX/Revenue for the last three years was 3.2%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2015 at 4.3% and was declining since that time.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Accounts payable as a % of Revenue increased on 3.1 pp from 0.84% to 4.0% in FY2018.
Jack Henry & Associates, Inc. has spent
$138m on M&A in FY2018 which accounts for 9.0% of revenue.
Return on investment
The company operates at high and attractive ROIC (28.8%) and ROE (32.8%). ROIC decreased slightly on 1.9 pp from 30.7% to 28.8% in FY2018. ROE increased on 8.5 pp from 24.2% to 32.8% in FY2018. During FY2014-FY2018 ROIC topped in FY2016 at 31.7% and was declining since that time. ROE stuck to a growing trend at 3.2 pp per annum in the last 5 years.
Leverage (Debt)
The company paid down all the debt in FY2018. Cash dropped on 72.6%.
Valuation and dividends
Jack Henry & Associates, Inc.'s trades at EV/EBITDA 22.2x and P/E 32.1x.
The company paid 27.9% of Net Income as dividends in FY2018. Dividends grew on average at 8.1% per annum in the last 5 years).
Management team
Jack Henry & Associates, Inc.'s CEO David B Foss "Dave" is a founder and has spent 3 years with the company. CEO total compensation was
$3,918,826 in FY2018 which included
$675,000 salary. The company's CFO is Kevin D Williams. Kevin D Williams has 18 years tenure at the company.
0.79% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 6,307 employees. The number of employees increased on 5.6%. Average revenue per employee in FY2018 was
$243,635 and it increased slightly on 1.7%.
Financial and operational results
FY ended 06/30/2018
Jack Henry & Associates, Inc. ($JKHY) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,173 | 1,256 | 1,355 | 1,431 | 1,537 | 7.4% |
| Gross Profit | 494 | 536 | 581 | 612 | 663 | 8.3% |
| SG&A | 139 | 146 | 158 | 163 | 182 | 11.8% |
| EBITDA | 396 | 437 | 491 | 507 | 544 | 7.3% |
| EBIT | 288 | 318 | 362 | 368 | 392 | 6.7% |
| Interest expence | 1 | 2 | 1 | 1 | 2 | 92.8% |
| Tax | 101 | 105 | 112 | 121 | 14 | -88.1% |
| Net Income | 187 | 211 | 249 | 246 | 377 | 53.2% |
| Stock Based Compensation | 7 | 6 | 11 | 11 | 12 | 5.7% |
Balance Sheet
|
|---|
| Cash | 70 | 148 | 70 | 115 | 31 | -72.6% |
| Accounts Receivable | 224 | 245 | 254 | 277 | 292 | 5.3% |
| Accounts Payable | 11 | 10 | 15 | 7 | 35 | 404.5% |
| Short Term Debt | 5 | 3 | 0 | 0 | 0 | |
| Long Term Debt | 4 | 50 | 0 | 50 | 0 | -100.0% |
Cash flow
|
|---|
| Capex | 33 | 54 | 56 | 42 | 40 | -4.3% |
| Dividends | 71 | 76 | 84 | 92 | 105 | 14.1% |
| Acquisitions | 28 | | 8 | | 138 | |
Ratios
|
|---|
| Revenue growth | 3.9% | 7.1% | 7.8% | 5.6% | 7.4% | |
| EBITDA growth | 8.2% | 10.3% | 12.5% | 3.3% | 7.3% | |
|
|---|
| Gross Margin | 42.1% | 42.7% | 42.9% | 42.8% | 43.1% | 0.4% |
| EBITDA Margin | 33.8% | 34.8% | 36.3% | 35.5% | 35.4% | -0.0% |
| EBIT Margin | 24.6% | 25.3% | 26.7% | 25.7% | 25.5% | -0.2% |
| SG&A, % of revenue | 11.8% | 11.7% | 11.6% | 11.4% | 11.9% | 0.5% |
| SBC, % of revenue | 0.6% | 0.5% | 0.8% | 0.8% | 0.8% | -0.0% |
| Net Income Margin | 15.9% | 16.8% | 18.4% | 17.2% | 24.5% | 7.3% |
| CAPEX, % of revenue | 2.8% | 4.3% | 4.2% | 2.9% | 2.6% | -0.3% |
|
|---|
| ROIC | 26.7% | 29.1% | 31.7% | 30.7% | 28.8% | -1.9% |
| ROE | 18.3% | 21.6% | 25.0% | 24.2% | 32.8% | 8.5% |
| Net Debt/EBITDA | -0.2x | -0.2x | -0.1x | -0.1x | -0.1x | 0.1x |
| Interest expence / Average debt | 12.1% | 5.2% | 5.4% | 2.0% | | |
People
|
|---|
| Insider ownership | 0.8% | 0.8% | 0.8% | 0.8% | 0.8% | 0.0% |
| Employees | 5,499 | 5,822 | 5,861 | 5,972 | 6,307 | 5.6% |
| Revenue/Employee, th. $ | 213 | 216 | 231 | 240 | 244 | 1.7% |
Jack Henry & Associates, Inc. ($JKHY) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 361 | 357 | 374 | 417 | | 4.7% | 2.5% | 5.7% | 8.7% |
| EBITDA | 133 | 122 | 130 | 148 | | 6.2% | -1.7% | 4.8% | 10.4% |
| Net Income | 67 | 161 | 69 | 85 | | 7.4% | 174.2% | 15.1% | 31.8% |
Balance Sheet
|
|---|
| Cash | 104 | 58 | 57 | 31 | | 23.1% | -10.1% | 33.8% | -72.6% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 100 | 105 | 0 | | | 100.0% | 110.0% | -100.0% |
Ratios
|
|---|
| Gross Margin | 43.6% | 42.0% | 41.6% | 43.5% | | 0.0% | -1.1% | 0.0% | 0.7% |
| EBITDA Margin | 36.9% | 34.1% | 34.7% | 35.5% | | 0.5% | -1.5% | -0.3% | 0.5% |
| Net Income Margin | 18.5% | 45.1% | 18.5% | 20.4% | | 0.5% | 28.3% | 1.5% | 3.6% |
Peers in Data Processing & Outsourced S
Below you can find Jack Henry & Associates, Inc. benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.6% | 11.8% | 7.5% |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | | 7.1% | 7.8% | 5.6% | 7.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.2% | 38.9% | 40.9% |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | 42.1% | 42.7% | 42.9% | 42.8% | 43.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.2% | 20.6% | 19.2% |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | 33.8% | 34.8% | 36.3% | 35.5% | 35.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | 2.8% | 4.3% | 4.2% | 2.9% | 2.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | 26.7% | 29.1% | 31.7% | 30.7% | 28.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| Jack Henry & Associates, Inc. ($JKHY) | -0.2x | -0.2x | -0.1x | -0.1x | -0.1x |
