Banks' budgets for technology spending are loosening, but the overall sales environment is a "mixed bag," Jack Henry & Associates Inc.'s top executive said Wednesday on an earnings conference call.
"I think a lot of people are certainly feeling better than they were a year ago," Jack Prim, the chief executive of the Monett, Mo., payments and core processing vendor, told analysts. "We're seeing more evaluation of different products right now. We believe some of these evaluations will obviously result in closed sales."
Jack Henry, which sells technology to small and midsize banks and credit unions, reported that revenue grew 19%, year over year, to $227.8 million in its fiscal fourth quarter. Net income also rose, to $30 million, or 35 cents per diluted share, in the quarter ended June 30, from $27.8 million, or 33 cents, a year earlier.
Prim said banks are evaluating the recently enacted financial regulatory reform legislation, including provisions that are expected to reduce debit card interchange revenue.
Jack Henry, which does automated teller machine and debit card processing, does not expect the changes to affect it, Prim said.
"We don't make any money in any of our payments businesses off of interchange, so anything that happens with interchange … does not impact us," he said. However, if debit card use were to decline, it could affect the business, he added.
The company is focused on cross-selling bill-payment capabilities it gained with its $300 million purchase of iPay Technologies Inc., one of three deals completed during the fiscal year. iPay has some products, including for small-business banking, that Jack Henry expects to promote to banks using its NetTeller bill-payment product, he said.
For the full fiscal year, Jack Henry's sales rose 12%, to $836.6 million. Net income for the year was $117.9 million, or $1.38 per diluted share, up from $103.1 million, or $1.22 per diluted share.
In a research note Wednesday, Greg Smith, an analyst at Duncan-Williams Inc., said he expects Jack Henry's revenue growth to "remain challenged" but that, "as the economy improves and banks' appetite for discretionary spending eventually improves," it will be a "direct beneficiary."
