Grade: A — Clean, No Material Concerns
Framework: Technology/financial services analysis + Schilit earnings quality principles
Data: SEC EDGAR 10-K (Filed 2025-08-25) + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP — Clean opinion
One-line verdict: Jack Henry is a steady, high-quality fintech company serving community and regional banks and credit unions. Revenue grew 7.2% to $2.38 billion, net income surged 19.4% to $455.7 million ($6.24 diluted EPS), and operating margin expanded as the company benefited from cloud migration revenue and the absence of prior-year restructuring charges. Cash flow quality is excellent: CFFO/NI of 1.41x, low accruals ratio of -6.1%, and free cash flow of $404 million covering 90% of net income. The only flag is goodwill plus intangibles at 70% of equity — a legacy of past acquisitions — but goodwill has been stable at $804.8 million for years with no impairment risk. The balance sheet is clean with minimal debt. This is a boring, predictable business with high recurring revenue and strong earnings quality.
| Metric | Result |
|---|---|
| Red Flags (Engine) | **1** (D1 — goodwill/intangibles ratio) |
| Watch Items | **0** |
| Checks Completed | **16/18** |
| Beneish M-Score | **-2.73** (unlikely manipulator) |
| F-Score (Fraud Probability) | **1.71** (0.63% probability) |
| Altman Z-Score | **7.69** (safe zone) |
| Auditor | PricewaterhouseCoopers LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended June 30, 2025) |
| Report Date | 2026-04-05 |
Note on sector classification: Although Yahoo Finance classifies JKHY under Technology, the company exclusively serves banks and credit unions with core processing, digital banking, and payment solutions. It is a financial technology company, not a financial institution. Standard screening metrics (M-Score, Z-Score) are applicable.
Steady Growth, Expanding Margins
Per the Consolidated Statements of Income:
| Metric | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|
| Revenue | $2,077,702K | $2,215,543K | **$2,375,288K** | +7.2% |
| Cost of Revenue | $1,219,062K | $1,299,477K | $1,360,747K | +4.7% |
| Operating Income | $480,688K | $489,391K | **$568,715K** | +16.2% |
| Net Income | $366,646K | $381,816K | **$455,748K** | +19.4% |
| Diluted EPS | $5.02 | $5.23 | **$6.24** | +19.3% |
| Operating Margin | 23.1% | 22.1% | **23.9%** | Expanding |
Per the 10-K: "Net income grew 19.4% to $455,748, or $6.24 per diluted share, in fiscal 2025 from $381,816, or $5.23 per diluted share, in fiscal 2024. This increase was primarily due to organic growth in our lines of revenue and the decrease in one-time severance expenses related to VEDIP fiscal year over fiscal year."
Revenue growth was entirely organic. The company made no acquisitions in fiscal 2025 — goodwill remained flat at $804.8 million.
Revenue Mix: Recurring Revenue Dominates
Per the 10-K revenue discussion:
| Revenue Category | FY2025 | FY2024 | Growth |
|---|---|---|---|
| Services and Support | $1,361,737K | $1,275,954K | +6.7% |
| Processing | $1,013,551K | $939,589K | +7.9% |
| Total Revenue | $2,375,288K | $2,215,543K | +7.2% |
Services and support includes private and public cloud fees (predominantly 6-year contracts), implementation services, and on-premise support. Processing includes card transaction processing and digital payment fees. Both segments are highly recurring with long-term contracts.
Balance Sheet: Conservative and Clean
Per the Consolidated Balance Sheets:
| Item | FY2024 | FY2025 |
|---|---|---|
| Cash and Cash Equivalents | $38,284K | **$101,953K** |
| Total Current Assets | $632,018K | $681,464K |
| Goodwill | $804,797K | $804,797K |
| Total Assets | $2,924,481K | **$3,043,970K** |
| Current Maturities of Debt | $90,000K | $0 |
| Long-term Debt | $0 | $60,000K |
| Total Stockholders' Equity | $1,842,364K* | **$2,130,832K** |
Cash tripled from $38.3 million to $102.0 million. The $90 million in current debt maturities from FY2024 was paid off, and only $60 million in long-term debt remains. This is a nearly debt-free company.
Goodwill of $804.8 million has been unchanged — no acquisitions, no impairments. Total intangibles (including computer software) of approximately $685 million are largely internally developed software that generates recurring revenue.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 50 days, -6 days YoY |
| A2 | AR vs Revenue Growth | PASS | AR declined 4.7% vs revenue growth 7.2% |
| A3 | Revenue vs CFFO | PASS | Revenue +7.2%, CFFO +12.9% |
| B1 | Inventory vs COGS | PASS | No material inventory |
| B2 | CapEx vs Revenue | PASS | CapEx growth -0.5% vs revenue +7.2% |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 27.9% |
| B4 | Gross Margin | PASS | Gross margin 42.7%, +1.4pp |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.41x |
| C2 | Free Cash Flow | PASS | FCF $404M, FCF/NI = 0.90 |
| C3 | Accruals Ratio | PASS | -6.1%. Low accruals |
| C4 | Cash vs Debt | N/A | Insufficient data |
| D1 | Goodwill + Intangibles | **FAIL** | $1.5B = 70% of equity |
| D2 | Leverage | PASS | Leverage manageable |
| D3 | Soft Asset Growth | PASS | Other assets +6.2% vs revenue +7.2% |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill change +1% YoY |
| F1 | Beneish M-Score | PASS | M-Score = -2.73 (< -2.22) |
The D1 flag (goodwill + intangibles at 70% of equity) is a technical flag, not a material concern. Goodwill has been stable for years, there are no impairment indicators, and much of the "intangibles" are internally developed software assets that generate the company's revenue.
Key Risks from the 10-K
1. Customer Concentration in Community Banking
JKHY serves approximately 7,500 financial institutions, primarily community and regional banks and credit unions. Consolidation in the banking industry could reduce the addressable market.
2. Cloud Migration Execution
The company is transitioning customers from on-premise to private and public cloud deployments. This creates multi-year contracts but requires significant upfront investment in technology infrastructure.
3. Competition from Larger Players
JKHY competes with Fiserv, FIS, and other larger technology providers. The filing notes competitive pressures from both established players and fintech startups targeting the same community banking market.
Summary
Grade: A. Clean earnings quality. Steady organic growth, conservative balance sheet, excellent cash flow conversion.
Jack Henry is a textbook high-quality earnings company. Net income grew 19.4% on 7.2% revenue growth, demonstrating operating leverage. Cash flow conversion at 1.41x net income is excellent. The balance sheet is nearly debt-free with stable goodwill. M-Score at -2.73 and Z-Score at 7.69 both indicate no financial distress or manipulation risk.
The only technical flag — goodwill plus intangibles at 70% of equity — reflects past acquisitions that have been fully integrated and stable for years. There are no impairment indicators.
This is a boring, predictable business that serves community banks with essential technology infrastructure. That predictability is exactly what makes the earnings quality high.
**Disclaimer**: This report is based on Jack Henry & Associates' fiscal year 2025 10-K filed with the SEC on August 25, 2025. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade A means the company shows clean earnings quality with no material concerns.