Jack Henry(JKHY) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial information for the reporting period ITEM 1. FINANCIAL STATEMENTS This section presents unaudited condensed consolidated financial statements and detailed notes on accounting policies Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (In Thousands): | Item | December 31, 2020 | June 30, 2020 | | :-------------------------- | :------------------ | :-------------- | | Total Assets | $2,286,709 | $2,428,474 | | Total Liabilities | $741,530 | $878,786 | | Total Stockholders' Equity | $1,545,179 | $1,549,688 | | Cash and cash equivalents | $147,762 | $213,345 | | Receivables, net | $212,934 | $300,945 | | Deferred revenues (current) | $193,409 | $318,161 | Condensed Consolidated Statements of Income This section presents the company's financial performance, detailing revenues, expenses, and net income Condensed Consolidated Statements of Income Highlights (In Thousands, Except Per Share Data): | Item | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $422,361 | $419,119 | $874,161 | $857,124 | | Operating Income | $93,632 | $93,704 | $211,220 | $211,892 | | Net Income | $71,982 | $72,098 | $163,198 | $161,468 | | Basic earnings per share | $0.94 | $0.94 | $2.14 | $2.10 | | Diluted earnings per share | $0.94 | $0.94 | $2.13 | $2.10 | Condensed Consolidated Statements of Changes in Stockholders' Equity This section details changes in equity, including net income, dividends, and share repurchases Changes in Stockholders' Equity Highlights (In Thousands): | Item | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net income | $163,198 | $161,468 | | Dividends | $(65,516) | $(61,502) | | Purchase of treasury shares | $(109,899) | $(51,210) | | Total Stockholders' Equity (End of Period) | $1,545,179 | $1,486,746 | | Dividends declared per share | $0.86 | $0.80 | Condensed Consolidated Statements of Cash Flows This section outlines cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (In Thousands): | Cash Flow Activity | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net cash from operating activities | $193,984 | $215,013 | | Net cash from investing activities | $(82,544) | $(125,395) | | Net cash from financing activities | $(177,023) | $(110,733) | | Net change in cash and cash equivalents | $(65,583) | $(21,115) | | Cash and cash equivalents, end of period | $147,762 | $72,513 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes the company's business and outlines its significant accounting policies - Jack Henry & Associates, Inc. provides integrated computer systems and services, including software, hardware, conversion, implementation, and support, primarily to financial institutions[18] - The Company adopted FASB ASC Topic 326 (CECL) on July 1, 2020, for allowance for credit losses, resulting in an immaterial cumulative effect adjustment to retained earnings[21][35] Allowance for Credit Losses Activity (In Thousands): | Item | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | | :-------------------------------- | :------------------------------ | :---------------------------- | | Allowance for credit losses - beginning balance | $6,731 | $6,719 | | Current provision for expected credit losses | $370 | $910 | | Allowance for credit losses - ending balance | $6,830 | $6,830 | - The COVID-19 pandemic did not result in a significant increase in the Company's expected credit loss allowance as of December 31, 2020, but future developments could have a material impact on management's estimates[22][32] NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS This note details the adoption and impact of recent accounting standards on financial statements - The Company adopted ASU No. 2017-04 (Goodwill Impairment) on July 1, 2020, with no material impact on its financial statements[33] - ASU No. 2016-13 (CECL) was adopted effective July 1, 2020, resulting in a cumulative-effect decrease to beginning retained earnings of $493K[34][35] - ASU No. 2019-12 (Income Taxes) will be effective for the Company on July 1, 2021, and is not expected to have a material impact[36] NOTE 3. REVENUE AND DEFERRED COSTS This note provides a breakdown of revenue by type and details deferred revenue and related costs - The Company generates revenue from data processing, transaction processing, software licensing and related services, professional services, and hardware sales[37] Revenue Disaggregated by Type (In Thousands): | Revenue Type | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Outsourcing & Cloud | $124,498 | $115,897 | $245,456 | $224,480 | | Product Delivery & Services | $48,414 | $61,709 | $105,312 | $133,070 | | In-House Support | $77,961 | $77,598 | $181,102 | $176,462 | | Services & Support | $250,873 | $255,204 | $531,870 | $534,012 | | Processing | $171,488 | $163,915 | $342,291 | $323,112 | | Total Revenue | $422,361 | $419,119 | $874,161 | $857,124 | - As of December 31, 2020, estimated revenue expected to be recognized in the future related to unsatisfied performance obligations totaled $4,139,497K, with approximately 27% expected over the next 12 months[45] NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS This note describes fair value measurements of financial instruments - For cash equivalents, certificates of deposit, amounts receivable or payable, and short-term borrowings, fair values approximate carrying value due to their short-term nature[48] Fair Value of Financial Assets (In Thousands): | Item | December 31, 2020 (Level 2) | June 30, 2020 (Level 2) |