Jack Henry & Associates, Inc. JKHY delivered fourth-quarter fiscal 2018 earnings of $1.10 per share, surpassing the Zacks Consensus Estimate by 15 cents. The figure surged 33% from the year-ago quarter and 18.3% on a sequential basis.
Revenues advanced 8.4% sequentially and 9% year over year to $417.2 million. The figure also outpaced the Zacks Consensus Estimate of $406 million.
Top-line growth was driven by solid organic growth of 7% and strong momentum across the company's core, payments and complementary segments during the reported quarter. Moreover, benefits from the acquisition of Ensenta and 84.6% hike in the deconversion fees contributed well to the quarterly results.
Further, on a pro forma basis, revenues came in $397.9 million which also improved 5.9% year over year and 10.1% from the previous quarter.
Coming to the price performance, shares of Jack Henry have returned 57.3% over a year, outperforming the industry
's rally of 34.3%.
2018 in Detail
Per the company, earnings for the fiscal 2018 were $4.85 per share increasing 55% from fiscal 2017.
Further, total revenues climbed 7.4% from the prior-year figure to $1.54 billion. This was driven by strong performance of both processing and services & support business lines which accounted for 36% and 64%of the total revenues, respectively, in the reported year.
Operating margin was 26% which remained flat when compared with year-ago figure.
Additionally, the company paid back $154 million to its shareholders in the form of dividends and share buybacks.
Segments in Detail
Core: The company generated $155.3 million revenues from this segment (37.2% of total revenues), increasing 12% year over year. This was mainly driven by positive impact of deconversion. Further, the company experienced booking of 20 core takeaways during the reported quarter.
Payments: This segment yielded $135.6 million revenues (32.5% of total revenues), improving 11% from the year-ago quarter. Robust product portfolio, positive contributions from the Ensenta buyout and improved deconversion fees drove this segment's results. Moreover, the company experienced increased payment bookings during the quarter.
Complementary: This segment generated $113.9 million revenues (27.3% of total revenues), increasing 7% year over year. This can be attributed to strong bookings for the company's complementary solutions.
Corporate & Other: The company generated $12.3 million revenues from this segment (2.9% of total revenues), declining 25% from the prior-year quarter.
Jack Henry & Associates, Inc. Price, Consensus and EPS Surprise
Jack Henry & Associates, Inc. Price, Consensus and EPS Surprise | Jack Henry & Associates, Inc. Quote
In the fourth-quarter fiscal 2018, total operating expenses were $308.7 million, reflecting an increase of 8.4% year over year. This was mainly due to rising headcounts which led to an increase in personnel costs and salaries. Further, surge in professional services expenses hiked operating expenses.
Per the company reported, operating margin was 26%, remaining flat year over year. Segment wise, core and payments witnessed a contraction of 100 basis points (bps) each in their operating margins which came in 55% and 52%, respectively.
Meanwhile, complementary segment was successful in maintaining its operating margin in line with the year-ago figure of 60%.
Balance Sheet & Cash Flow
As of Jun 30, 2018, cash and cash equivalents totaled $31.4 million which declined from $57.4 million as of Mar 31, 2018. Trade receivables were nearly $291.6 million, increasing from $168.9 million in the previous quarter.
Further, the company generated $412.1 million of cash from operations in fiscal 2018, increasing from $357.3 million in fiscal 2017.
Additionally, free cash flow came in $262.9 million in the reported year.
For fiscal 2019, the company anticipates total revenues to be up by high mid-single digit.
Further, the earnings per share are expected to grow between 10% and 11% from fiscal 2018. Moreover, the adjusted earnings are anticipated to lie within the range of $3.94-$4.04 per share.
However, management expects operating margin to contract by 60-80 bps compared with fiscal 2018 reported figure.
Zacks Rank & Stocks to Consider
Jack Henry & Associates carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Computer and Technology sector are Virtusa Corporation VRTU , Qualys, Inc. QLYS and Fortinet, Inc. FTNT , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Long-term earnings growth for Virtusa, Qualys and Fortinet is projected to be 20%, 8% and 16.8%, respectively.
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