Jack Henry & Associates Inc. reported strong gains in its earnings, in part because of efforts to sign up some large credit unions as customers.
"This quarter was strong in both the bank and credit union segments," Jack F. Prim, the Monnett, Mo., core processor's chief executive, said during a conference call Tuesday to discuss the results for its fiscal fourth quarter, which ended June 30.
He spotlighted the $1.3 billion-asset Technology Credit Union of San Jose, which became the 500th company to use Jack Henry's Symitar Episys core processing system.
This quarter it has signed a deal with the $1.2 billion-asset Western Federal Credit Union of Manhattan Beach, Calif., he said. "We continue to lead the industry with more credit unions over a billion dollars in assets."
Fiscal fourth-quarter revenue rose 11% from a year earlier, to $181.3 million, and net income rose 15%, to $29.1 million, or 32 cents a share. For the full fiscal year, revenue rose 13%, to $668.1 million, and net income rose 16%, to $104.7 million, or $1.14 a share.
Jack Henry has been building out its product offerings in recent years to boost its appeal to banks and credit unions.
It plans to roll out a mobile banking and bill payment product this fall, and Mr. Prim said last month's purchase of Gladiator Technology Services Inc., an Atlanta security technology vendor, addressed his clients' concerns about security.
Though Jack Henry reported strong sales in many categories, its license revenue dropped 5% for the quarter, to $24.3 million, and 9% for the year, to $76.4 million.
The quarterly results are being compared to those of a period that was "the highest in the history of the company and had several large mid-tier bank deals," said Kevin D. Williams, Jack Henry's treasurer and chief financial officer.
Robert Hunt, a senior analyst at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said the quarterly results were "very impressive" for Jack Henry.
Though licensing was down, that type of revenue is not steady, he said. "Licensing revenue is going to go through hills and valleys, because it takes so long to do a license and there's no pattern."
However, declining license revenue can sometimes be a good thing if customers are switching to outsourcing, Mr. Hunt said. He has noticed "a trend toward outsourcing from in-house processing, and outsourcing helps grow recurring revenue."
Jack Henry has positioned itself well to capture this type of business through its steady acquisitions, he said, so it is no coincidence that it is winning large credit unions.
"The credit unions … seem much more willing to undertake a core system replacement effort" than comparably sized banks, Mr. Hunt said.
"Credit unions are expanding their product lines significantly, going into small-business products, so they're changing the nature of their business."
Their older systems cannot support the products credit unions want to offer, so they are being forced to upgrade their core banking systems, he said.
Jack Henry also is doing well to win business from its customers as they expand, Mr. Hunt said.
"The value of a core banking relationship almost can't be measured in terms of cross-selling opportunity," he said. Jack Henry's acquisitions make it "a stronger company in terms of ancillary products outside the core banking world."
Payment products and services are particularly popular among its clientele, Mr. Hunt said. "They have a great core banking client base to sell these payment services into."
