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Jack Henry & Associates, Inc. (NASDAQ:JKHY)

Q4 2014 Earnings Conference Call

August 13, 2014, 8:45 AM ET

Executives

Dave Foss - President

Jack Prim - CEO

Kevin Williams - CFO

Analysts

Kartik Mehta - Northcoast Research

Peter Heckmann - Avondale Partners

David Togut - Evercore Partners

James Rutherford - Stephens Incorporated

Dave Koning - Robert W. Baird

Operator

Good morning, ladies and gentlemen, and welcome to the Jack Henry & Associates Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Kevin Williams, Chief Financial Officer. Mr. Williams, you may begin.

Kevin Williams

Thank you, Bridget. Good morning, and thank you for joining us for the Jack Henry & Associates fourth quarter and fiscal 2014 year-end conference call. I’m Kevin Williams, CFO and on the call with me today is Jack Prim, our CEO.

The agenda for the call this morning will be; Jack will start out with an overview of the quarter along with some operational highlights and I’ll provide some additional comments regarding the press release that we’ve put out yesterday after market close, we’ll then open the lines up for Q&A.

I need to remind you that remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements or deal with expectations about the future. Like any statement about the future, these are subject to a number of factors, which could cause actual results or events to differ materially from those which we anticipate, due to a number of risks and uncertainties and the company undertakes no obligation to update or revise these statements.

For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our 10-K entitled Risk Factors and Forward-Looking Statements.

With that, I'll now turn the call over to Jack.

Jack Prim

Thanks, Kevin. Good morning, and welcome to the call. We are pleased to again announce record revenue and earnings for the fourth fiscal quarter and fiscal year 2014.

In addition to a strong financial performance, we increased our dividend and stepped up share repurchases during the year to return just under $250 million in cash to our shareholders, including over $130 million in the last quarter. This performance was fairly balanced with our employees and customers as we saw solid gains in satisfaction measures from these major constituents as well.

Our sales teams continued their strong performances, and for the fourth consecutive year, all of our brands, JHA Banking, Symitar and ProfitStars finished ahead of their sales targets for the year. Our banking teams saw a balanced performance of core and complementary product sales.

Symitar was once again the credit union industry leader in new core system sales, including five new signings during the year of institutions over $1 billion in assets, besting last year’s record of three.

ProfitStars again had strong cross sales to its non-core customer base of almost 10,000 institutions with over half of their product sales to non-JHA core customers. Our payments product had strong sales and transaction growth throughout the year and corresponding revenue grew 9% for the year.

Revenue growth of 4% in the quarter was lower than normal, primarily due to a tough comparable in the year-ago quarter, particularly in the area of early termination fees. This revenue component tends to be more episodic and less predictable than even license fees, and is not really a category of revenue that you want to see because ultimately it means a customer went away.

Adjusting out early termination fees in both periods, we show organic revenue growth of 7% in the quarter and 8% for the full year. We saw solid improvements in operating margins in the quarter and year-to-date even in the absence of these higher-margin early termination fees and with the infrastructure, regulatory and compliance investments we made during the year.

Dave Foss transitioned to his new role of President of Jack Henry as Tony Wormington retired after 34 years of service to the company. We are greatly appreciative of Tony’s contribution to the company in a variety of roles over his long career. At the same time, we’re excited to welcome Dave to his new role after his most recent success in driving our ProfitStars business to new levels.

As I turn it over to Kevin for a closer look at the financials, I would like to express our appreciation to over 11,000 customers for their continued business and our over 5,500 associates who continue to take care of those customers every day.

Kevin, I’ll turn it over to you.

Kevin Williams

Thanks Jack. Our total organic revenue growth increased 4% for the quarter which compared to the same year ago, obviously impacted by the tough comps, as Jack mentioned. As he mentioned, we don’t really like seeing those early termination fees. The Banno acquisition that we closed late in the third quarter contributed slightly to the quarter, but had no bearing on the 4% growth, that’s how insignificant it was.

The license revenue increased by 8% for the quarter compared to prior year, and license represented about 4% of our total revenue. Support and services revenue increased 5% this quarter over the same quarter a year ago and represented 91% of total revenue. Obviously, this is the line that had the most impact or actually all the impact of the one-time revenue impacts that we mentioned in the quarter and last year. Support and services revenue actually grew 8% for the quarter and 9% for the year without the impact of those one-times on an apples-to-apples comparison.

To break down the support and services a little bit more, our implementation revenue was $26 million for the quarter, up 9%, our electronic payments was $113.9 million, which is up 5%, which again tough comps at just under $2 million in deconversion fee difference this quarter from a year ago, our outlink data processing, which was $61 million for the quarter, increased 3%, but again this line had right at $5 million less deconversion fees this quarter than it did a year ago, and our in-house maintenance at $82.7 million, increased 6% for the quarter.

Our hardware revenue decreased 12% for the quarter compared to the prior year and continues to represent approximately 5% of our total revenue.

Our recurring revenue experienced growth of approximately 5% for the quarter and 7% for the year compared to the prior year and represents 79% of our total revenue.

Consolidated gross margins improved to 43% for the quarter from 42% last year. Again, this was with the one-times in there. We overgrew those and still expanded margins slightly. Our license margins increased to 94% from 91% last year. Support and services margins improved to 41% from 40% for the quarter compared to the prior year and our hardware margins decreased to 23% from 26% due to sales mix.

Our banking segment gross margins improved to 42% from 41% a year ago, and our credit union segment margins improved to 45% this quarter compared to 44% last year.

Total operating expenses increased 3% for the quarter compared to the prior year, which G&A actually was down a little bit due to the impact of gain on sale of an airplane during the quarter and also some decreased depreciation on the airplanes that we saw in the quarter compared to a year ago.

Our operating margin for the quarter increased to 26% and our operating income increased 9% for the quarter compared to last year. If you back out the impact of Banno on the quarter, our organic revenue income actually grew 11%, compared to last year.

The effective tax rate for the quarter was 36.4%, which is up significantly from last year’s effective rate of 32.2%, and our income before income taxes increased 13%, but our net income only increased 6% because of the significant increase in income taxes, primarily due to the impact of the R&E credit a year ago.

EPS of $0.60 was up 9% over last year, impacted by both stock buybacks and the Banno acquisition, which the Banno acquisition was a $0.01 EPS dilution effect on us this quarter.

Our EBITDA increased to $108.1 million for the quarter, compared to $98.7 million a year ago or approximate 10% increase. Within this, depreciation and amortization expense of $28.3 million for the quarter with $13.4 million depreciation and $14.9 million amortization, compared to $25.7 million last year.

Included in total amortization is the amortization of intangibles from acquisitions, which is up slightly to $5.5 million, compared to $5.3 million this quarter last year. The increase is obviously due to the Banno acquisition.

Our operating cash flow year-to-date increased to $341.7 million from $309.2 million a year ago. Free cash flow year-to-date, calculated as operating cash flow less capital expenditures, of $49.5 million, which this $49.5 million actually includes both CapEx of $33.2 million and the internal use developed software of $16.3 million which is where this has been going in previous years, but we broke it out on the cash statement this year. It has not been included in cap software in previous quarters.

Compared to $46.34 million last year, our cap software of $62.3 million this year compares to $51.3 million last year, again continues to be up due to the significant projects we have going on and just having to satisfy larger customers.

Our dividend of $31.3 million was up significantly from $48.2 million last year, representing a 48% increase, plus the proceeds of sale of assets within this calculation of $7.8 million this year compared to $0.5 million last year. So, free cash flow was basically at $166.4 million compared to $162.7 million, impacted significantly by the increase in dividends. This equates to free cash flow per share of $1.95 compared to $1.89 last year, and our cash balance is down significantly due to the purchase of 1.9 million treasury shares during the quarter and a little over 3 million shares during the year actually in the second half.

Our in-house backlog, which represents contracts in hand for software, hardware and implementation services yet to be delivered is at $118.7 million, which is up 12% last year. Outsourcing backlog, which is for the remaining life of our current data and item process contracts, was essentially flat with last year, and our total backlog was up 3%.

As we’ve talked about over the last year or so, and on some of these earnings calls, this is the last time we plan to disclose our outsourcing backlog. Due to the confusing nature of this number with all the renewals, the migrations of our customers to in-house outsourcing, the average length of the contract changing so dramatically, it makes it very meaningless for modeling. So we are not going to disclose our outsourcing backlog in the future. We will continue to disclose our in-house backlog. And again, there has never been anything in our backlog for our electronic payments business which is about 37% of our revenue and we do not intend to start reporting that backlog either.

As far as FY15 guidance, we kind of hinted at that on the last earnings call, we’ll kind of confirm that now. Our top line revenue we project for FY15 will continue to be in the mid-to-high single-digit growth range, similar to what we saw in FY14.

As we’ve been discussing for the last six months or so, we do not anticipate much in the way of margin expansion in FY15 for either gross or operating margins because of the significant investments and increase in personnel that we’ve done in the last year and continue to do to make sure that we are solid for our customers and put our disaster avoidance plan completely in play, but we do not expect any significant drop in margins either. We think we’ll maintain our margins for next fiscal year comparatively to FY14.

The effective tax rate should remain at about 35.5%. Obviously, this could be impacted if the R&E credit is put back in place or if there is other legislation passed, but we cannot anticipate those changes until they actually become law. So in your models, please go and use 35.5% as the effective tax rate.

As far as the current consistent EPS estimates out there recorded by FY15, it appears to be mostly in line, however, I would probably say that we are a little more back-end loaded, then it looks like the consensus estimates are out there on a quarterly basis. It appears like the first quarter is probably a little high, so I would probably need to pull that in a couple of pennies to get more in line with our current forecast and budgets.

However, during the year there should be some leverage to our EPS from our stock buyback that we bought back in FY14, and again we anticipate to continue to be in the market buying back our stock in FY15, maybe not at the same levels that we did in the fourth quarter, but we will continue to be in the market. We currently have 5.2 million shares remaining under authorization to buyback with no timing or pricing constraints.

This concludes our opening comments. With that, we are now ready to take questions. Bridget, will you please open the call line for questions.

Question-and-Answer Session

Operator

Thank you, Mr. Williams. (Operator Instructions) Our first question is from Kartik Mehta with Northcoast Research. Your line is open.

Kartik Mehta - Northcoast Research

Kevin, you talked about margin expansion FY15 being about -- margins being about similar in FY15 to FY14, and you talked about some of the investments you are going to make. Do you think these are one-time investments and that after that you would go back to the type of margin expansion you have had in the past or is there some change in the business that you need to continue to make investments going forward?

Kevin Williams

We made some significant investments, Kartik, that’s a good question, and obviously we have changed our business a little bit. I mean we are going to continue to make investments because with being in what we consider now disaster avoidance versus disaster recovery, everything is replicated. So when we buy a new server in production, we buy the exact same server in our backup sites or in the second production site theoretically, but we’ve made investments, we’ve beefed up our internal audit compliance team, which hopefully that’s kind of leveled off. So there is some continued investment that I think we have to make, but I think we’ll grow over that.

I think Jack and I have been pretty consistent for the last six to nine months, kind of predicting this is going to happen and we don’t think there is going to be any margin degradation, but we think it’s going to be pretty solid for the next year and it’s probably going to take us a year to grow over that and then probably FY16, we get back to some margin expansion. There will be some -- obviously, every quarter there is going to be some margin fluctuations, but I think we are going to be pretty solid for the next year.

Kartik Mehta - Northcoast Research

And then, Kevin, I think there has been a lot of talk about mobile banking and the usage of that. Can you talk a little bit about what’s happening from a pricing standpoint? So I guess what I am trying to get to is we hear a lot about subscriber growth being very high, but what does that translate in terms of revenue growth?

Jack Prim

Kartik, this is Jack. There are various pricing models out there and there certainly is some more price competition than what there was a couple of years ago in the area of mobile. In some cases, there are per user charges for certain mobile elements. There are certain cases there could be a monthly charge which entitles you to some number of users.

So tracking the growth and number of subscribers directly to a prediction of what that should do to revenue is difficult, if not, impossible to do. We are seeing very strong growth in adoption. We are seeing the revenue grow nicely. Again, I think that the pricing on that per user or whatever methodology is going to come under some pressure, I think, industry-wide, but still a lot of good growth capability left.

Operator

Thank you. And our next question is from Peter Heckmann with Avondale Partners. Your line is open.

Peter Heckmann - Avondale Partners

Can you talk a little bit about the dynamics on the credit union side? I know Symitar continues to have a strong record of winning in large credit unions. Has there been any change in dynamics in the under $1 billion market since Fiserv's acquisition of Open Solutions, as well as with some of the smaller players?

Jack Prim

Pete, I wouldn’t say that there has been a significant change. We had said from the beginning that we suspect that their initial efforts would be focused at solidifying some of the replacements of some of the orders for the previous systems they had had out, I think that was the case.

I think they are largely past reselling those customers and so we are seeing them probably a little more competitively, but I don’t think there has been a significant change. We had 44 new core system wins, all of those competitive replacements last fiscal year, and as I mentioned, five of them were over $1 billion in assets, 39 of them were not. So those represented wins pretty much across the board.

There were maybe a couple of wins in the very small credit unions under $50 million in assets, but the majority of those wins were going to be in that $75 million to $250 million, $500 million asset range and we continue to do very well there.

Operator

Thank you. And our next question is from David Togut with Evercore. Your line is open.

David Togut - Evercore Partners

The electronic payments revenue growth at 5% continues to decelerate. I believe it peaked at about 18% four or five quarters ago. Can you just walk us through the underlying drivers of that 5%, why growth has come down so substantially over the last four to five quarters?

Jack Prim

David, I think a large contributing factor to that was the early termination fees that Kevin mentioned earlier. We’re continuing to see very good transaction volume growth ahead of industry averages. There continue to be certainly some pricing pressures in some aspects of the payments business that would be part of the impact there. But I think a large part of the impact in this quarter was the early termination fees or the lack of early termination fees in this quarter compared to the year ago quarter.

Kevin Williams

Yes. And the other thing, David, the piece that you are talking about four or five quarters ago, we addressed that at that point. That’s when we did a very significant conversion of a large number of credit unions from Accurso and we anniversaried that, I believe, in the December quarter. So we can’t really look at that peak, the five quarters ago as being where we could go. I think we’re probably more in line in the very high low double-digit growth rate now as far as our electronic payments growth going forward.

David Togut - Evercore Partners

So what was the growth rate of electronic payments if you adjust for the year-ago term fees, at least in the June quarter?

Kevin Williams

If I adjust the term fees, it would be about just under 8% for the quarter and a little over 10% for the year.

David Togut - Evercore Partners

And then on cap software, you indicated, Kevin, that it was up 21% year-over-year for FY14 as a whole. What is your outlook for cap software for FY15?

Kevin Williams

Our cap software for FY15 is going to be about the same as FY14, Dave. As we’ve talked about, we’ve got some major projects going on. Mark Forbis and some others talked about that at the Analyst Day at May, some of the projects we’ve got going on. These are multi-year projects that are going to impact our core solutions and some of our payment solutions for years to come and they are coming in phases.

I would say one of the things that I look at, our Board looks at, is the percentage of our cap software that’s actually in production which has not changed dramatically over the last few years. So we are capitalizing a lot of our software because it’s going to give us long-term benefits, but it’s going into production phases on a quarterly and annual basis. So it’s just going to continue probably about the level of what this year is based on our initial pass of our budget.

David Togut - Evercore Partners

Understood. And can you quantify what the early termination fees were this quarter? How much?

Kevin Williams

Yes. They were, in total, just over $2 million compared to just under $9 million in the quarter a year ago.

David Togut - Evercore Partners

And just a quick final question from me, Kevin, what was the end-of-period share count?

Kevin Williams

It was about just under 84 million.

Operator

(Operator Instructions) Our next question is from Brett Huff with Stephens Incorporated. Your line is open.

James Rutherford - Stephens Incorporated

Good morning. This is James Rutherford in for Brett. Thanks for taking the questions. Just a couple questions from me. The first on growth, could you give some commentary on what are the factors that might lead to a mid-single digit growth versus high-single digit in your guidance range? And then more in the long term how you view yourselves growing and how you will continue to grow industry-leading organic growth versus peers and what will be the driver there? Is it kind of new products or is it sales execution, et cetera?

Jack Prim

James, several things in terms of what could influence mid versus high single digits. License fee that you might realize in the year can certainly make a difference with 80% recurring revenue. It pretty well takes something like license fees to be able to make an impact almost in the fiscal year, let alone in any particular quarter, and again those tend to be somewhat episodic in nature. Early termination fees are similarly unpredictable and not, as we talked about earlier, usually something that we -- certainly not something we seek or have a particular forecast for because we just don’t know what that’s going to be. I think those are some of the impacts.

I think the longer term, the ability to continue to grow at above average industry rates, first of all, we still project mid-to-high single-digit organic growth for the, I would say, the foreseeable future, which is a relatively near-term, but I think some of the things that give us comfort in that area is the continued growth in both our payments and our outsourcing business.

Keep in mind that we’re a little unique in that we started out as a company offering in-house processing only, and at a relatively new, 15 years or more, but relatively new in this industry in the outsourcing business. So the majority of our customers are still in-house and we are continuing to see that migration, that interest level in moving from in-house to outsourcing.

So we have a larger base of customers that can potentially make that transition over time and as we’ve talked about at analyst conference and in our investor conference, when we see a customer makes that transition, typically our revenue doubles, at a minimum doubles in the first year after they transition from in-house to outsource, and actually tends to increase even further from there in subsequent years. So I think there is probably more of an opportunity there for us than some of the other folks, and I think those are some of the major components that we would see that give us confidence in those forecasts.

James Rutherford - Stephens Incorporated

And do you guys break out how much of your revs are from in-house versus outsourced?

Kevin Williams

Not really. If you look at our P&L, we break down license fees, which is obviously all basically in-house. Obviously, there are some other things in there, but we do show outsourcing revenue - we breakdown outsourcing within our support and services line, which is all data and item processing. But to say an in-house customer versus outsourced customer, the lines get blurred really fast there, because they’ve got all of our payments businesses, they’ve got some implementation fees, even some of our outsourcing customer may actually have an in-house product, and so they may also have some hardware, so to try to split the difference between a true in-house revenue stream and an outsourced revenue stream is almost impossible.

James Rutherford - Stephens Incorporated

And then the last question from me is on capital deployment. Could you just kind of rank your priorities here and then where your minds are on M&A going forward in terms of the kinds or the sizes of deals you might be considering?

Kevin Williams

Obviously, we’d love to find the right M&A opportunities, but right now, the valuations that are expected out there seem to be a little high. We will continue to focus on returning capital to our shareholders through continued dividend increases and systematic buybacks of our stock. I mean jack, do you want to comment on what we’re looking at in M&A?

Jack Prim

James, I would say we are more interested in finding the products that make sense more so than focusing on acquisition of a particular size. Obviously, we like something that moves the needle and is going to be worth the effort, but anything from ideally probably in the $20 million to potentially $100 million or more in revenue would certainly be something that we would look at, which is not to say, we wouldn’t look at something with $2 million or $5 million if it was an acquisition of technology or something that we felt like really was going to offer good growth when incorporated into our product offerings.

But again I think Kevin’s point is that we do not tend to overpay for acquisitions. We think that some of the prices that properties are going for out there now are difficult to justify from a financial standpoint, frankly, in our case, from a strategic standpoint, as well. So, again, as Kevin mention, in terms of uses of capital, dividends and share repurchases based on what we see right now are likely to be more of a focus area for us than M&A per se.

Operator

Thank you. And our next question is from Dave Koning with Baird. Your line is open.

Dave Koning - Robert W. Baird

Hey, guys another nice year.

Jack Prim

Thanks, Dave,

Dave Koning - Robert W. Baird

And I guess, first of all, just on the outsourcing business, if we looked the last three years now, you went from 5% growth in fiscal ‘12 and then 12% in fiscal ‘13 and then 10% this year. But, if we exclude the big term fees from fiscal ‘13, it actually looks like you have had a nice accelerating pattern from ‘12 to ‘14. And I am just wondering, it seems like that momentum likely continues. There is a big group of banks and credit unions that can still outsource. Is that right? Is there any reason to not expect kind of that double-digit growth to continue in outsourcing?

Jack Prim

No. You’re right on the path, Dave. Obviously, we’ve seen this trend starting back in 2008 of our existing in-house customers moving to outsourcing. That’s been pretty steady the last three are four years at 40, 45 FIs been wanting to do that, but we’ve been seeing is some of the larger banks that are willing to do that and we’ve had several banks the last year over $1 billion. I think we’ll continue to see that trend.

And then, obviously the majority of our new customers on the bank side at least ago outsourcing. Last year I think all but one went outsourcing. On the credit union side, we continue to see a migration of smaller or a lower pace than we do on the bank side from in to out, but it still continues to be very strong, and about 60% of our new core customer wins on the outsourcing are on the credit union cycle outsourcing. So I think you’re going to continue to see that nice strong growth in that line of revenue going forward.

Dave Koning - Robert W. Baird

And then, similarly, I guess the implementation revenues, the last two years were the second and third strongest growth of the last 10 years. So I mean that has been really good as well and is that just correlated so that if outsourcing is really strong, it just means there's a lot of implementation work as well that keeps coming?

Jack Prim

Not really. That’s more driven, Dave, by some of the large in-house implementation we go on the ProfitStars side. We’ve had some large Alogent deals that have been going on that have driven some nice implementation revenue. And then, obviously you got to remember there is a significant amount of merged revenue where our customers are buying other banks, which that drives a lot of that implementation revenues. So those are probably the biggest drivers that has caused that increase in the last couple of years, and I don’t see those slowing.

Dave Koning - Robert W. Baird

I guess secondly the buyback you talked about, when you talked about EPS being around kind of in line with what the Street estimates are for fiscal ‘15, does that include some estimates of buyback or would any buybacks be incremental?

Jack Prim

That would really depend on the timing of the buybacks, Dave, because obviously you go by the average shares, so obviously we will be kind of precluded from buying any shares this quarter until after we announced -- until basically next week. So it kind of limits the time we can bid in this quarter, so kind of reduce the impact. So the guidance I’m giving doesn’t get a whole lot of impacts of buying additional share back this year, but if you’re going to build it into your models, you might want to impact of 1 million or so shares weighted average over the year.

Dave Koning - Robert W. Baird

And then I guess just lastly, you will probably tell me I am too deep in the weeds on this, but accounts receivable actually down year-over-year in Q4. Did you steal a little bit of free cash flow into fiscal ‘14, which was a really, really strong cash flow yield and kind of steal just a little bit from ‘15 or should we still think free cash flow above earnings in ‘15?

Kevin Williams

Obviously, we still got a lot of cash coming in in the September quarter. I will tell you that our collections on our annual maintenance was about 3% ahead this year where it was last year June 30. So I don’t know - you can say we stole some, but I think there was a little shift in timing by about 3% of that $2 million or $220 million that we billed June 1. We were about 3% ahead of collections on those at June 30.

Operator

Thank you. And looks like we do have a follow-up from Peter Heckmann with Avondale Partners. Your line is open.

Peter Heckmann - Avondale Partners

Hey, Kevin, could you talk about any major new releases of modules or functionality that you are currently working on, have been capitalizing that may go into production and how that might impact R&D as a percent of -- R&D, as well as overall margins for this year and next?

Jack Prim

Pete, this is Jack. The nature of some of these projects is that they are large projects delivered incrementally. So whether it’s some of the technology, infrastructure rework that we’re doing on both the banking and credit union platforms, those are going to be rolled out in phases on a multi-year kind of a schedule.

So, in terms of those components rolling into production and being something that’s going to be meaningful to what you get see on the financial statements, I don’t know that there really is anything that we could speak to there and I’m sorry I forgot the second half of your question, Pete.

Peter Heckmann - Avondale Partners

Just trying to think about how, as the amortization of previously capitalized software begins, whether we see any particular step-up at any point in time or if it would be just phased in over time?

Kevin Williams

We’ve been rolling these out for the last couple of years as we continued to see an increase in cap software. So I don’t think we’re going to see that. That was to my earlier comments about we’re probably not going to see much margin improvement over the next 12 months and that’s primarily because of those investments and the rollout of some of these [indiscernible].

But to that point, our EBITDA margins are at 35% for the fiscal year compared to 32% a year ago and actually 32% in the last three years. So that right there tells you that we’ve already seen some of that increase in G&A as it’s impacting our overall P&L, but it’s a positive impact to our EBITDA, which I know you guys love to follow EBITDA.

Peter Heckmann - Avondale Partners

Sure enough. But just to confirm, we are not looking at some major overhaul or rewrite something on the lines of a new open architecture or real-time processing type platform. This is really just more incremental development?

Jack Prim

Well, certain of those components, Pete, are definitely parts of some of the rework that we’re doing. Last December, I believe it was, we completed a complete redevelopment of the Cruise, our low-end credit union system and moved it to really pretty much a completely new architecture. And basically the kinds of things we’re talking about here are going to be different depending on which product that you’re looking at, but there definitely are some of those types of components changing the database structure, changing in some cases to some real-time functionality.

But again - so, for example, on a real-time functionality, last year on the banking and the SilverLake application, we released some initial real-time capabilities. We are enabling some additional real-time capabilities that will be rolled out this year. So yes, some of those things you mentioned are components of what we’re doing, but there is no big bang that all of a sudden on a certain day, there is a completely redeveloped application available for implementation, it’s, as I said, on incremental release process spanning multiple years.

Kevin Williams

Yeah, Pete, we sort of talked about these three years ago and they continue to grow and they are big projects, but there has been annual releases rolled out each year for the last three years and that’s the way it will continue. So there is one big bank that you are going to see a quarter and say, holy crap, depreciation just jumped up 40%, it’s not going to be that way.

Operator

Thank you. And I’m not showing any further questions. Please proceed with any closing remarks.

Jack Prim

Thank you, Bridget. Again, we want to thank you for joining us today to review our fourth quarter and year-end fiscal 2014 results. We are pleased with the results from our ongoing operations and the efforts of all of our associates to take care of our customers. Our executive managers and all of our associates will continue to focus on what is best for our customers and you, our shareholders.

With that, I want to thank you again and Bridget, would you please provide the replay number?

Operator

Yes, sir, I can. If you want to hear the replay which will be available in two hours is 855-869-2060. Now, ladies and gentlemen, this does conclude the program. Thank you all for listening. You may all disconnect. Everyone have a great day.

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Source: Jack Henry & Associates' (JKHY) CEO Jack Prim on Q4 2014 Results - Earnings Call Transcript

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