NASDAQ:JKHY Jack Henry & Associates Q3 2023 Earnings Report $170.93 -1.61 (-0.93%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$170.96 +0.03 (+0.01%) As of 04/25/2025 07:04 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Jack Henry & Associates EPS ResultsActual EPS$1.12Consensus EPS $1.09Beat/MissBeat by +$0.03One Year Ago EPS$1.16Jack Henry & Associates Revenue ResultsActual Revenue$508.55 millionExpected Revenue$500.76 millionBeat/MissBeat by +$7.79 millionYoY Revenue Growth+6.30%Jack Henry & Associates Announcement DetailsQuarterQ3 2023Date5/2/2023TimeAfter Market ClosesConference Call DateWednesday, May 3, 2023Conference Call Time8:45AM ETUpcoming EarningsJack Henry & Associates' Q3 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled on Wednesday, May 7, 2025 at 8:45 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfilePowered by Jack Henry & Associates Q3 2023 Earnings Call TranscriptProvided by QuartrMay 3, 2023 ShareLink copied to clipboard.There are 15 speakers on the call. Operator00:00:00Welcome to the Jack Henry Third Quarter Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mr. Vance Sherrard, Vice President, Investor Relations. Operator00:00:39Please go ahead. Speaker 100:00:43Good morning and thank you for joining us for the Jack Henry fiscal 2023 3rd quarter earnings call. Joining me on the call today is David Foss, Board Chair and CEO Mimi Carsley, CFO and Treasurer and Greg Adelson, President and COO. After my opening remarks, I will turn the call over to Dave for his thoughts about the state of our business, financial and sales performance for the quarter, industry comments and other key initiatives. After Dave concludes his comments, Mimi will provide additional commentary regarding the financial results and fiscal year guidance included in the press release issued yesterday that is available from the Investor Relations section of the Jack Henry website. We will then open the lines for Q and A. Speaker 100:01:26As a reminder, this call includes certain forward looking statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results. Like any statement about the future, these are subject to multiple factors 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 ks entitled Risk Factors and Forward Looking Statements. On this call, we will discuss certain non GAAP financial measures, including non GAAP revenue and non GAAP operating income. The reconciliations for non GAAP financial measures are in yesterday's press release. Speaker 100:02:18I will now turn the call over to Dave. Speaker 200:02:21Thank you, Vance. Good morning, everyone. We're very pleased to report another strong quarter of revenue growth and an overall solid performance by our business. As always, I'd like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for our 3rd fiscal quarter. For Q3 of fiscal 2023, total revenue increased 6% for the quarter and increased 8% on a non GAAP basis. Speaker 200:02:45Consistent with our prior comments regarding the reduction in bank M and A this year, deconversion revenue was down approximately 5% as compared to the prior year quarter. Turning to the segments, we again had a good quarter in the core segment of our business. Revenue increased 4% for the quarter and increased by 8% on a non GAAP basis. Our Payments segment performed very well posting a 6% increase in revenue quarter and a 7% increase on a non GAAP basis. We also had a strong quarter in our complementary solutions businesses with a 6% increase in revenue this quarter and an 8% increase on a non GAAP basis. Speaker 200:03:23As I highlighted in the press release, our sales professionals posted an strong quarter led by the core sales team. On our last quarterly call, I mentioned that the sales team set an all time sales booking record in our fiscal Q2. Although we didn't break that record this quarter, we did set a record for the strongest Q3 in history. During the quarter, we inked 13 competitive core takeaways, so we continue at the approximately one deal per week run rate I've discussed in the past. In addition to our success signing new core clients, we signed 13 existing on prem core customers to move to our private cloud environment. Speaker 200:04:02In addition to the tremendous success we've experienced in our core business this quarter, we continue to attract new clients to our digital banking suite. During the Q3, we signed 39 new clients to our Banno retail platform with another 35 clients signed up for Banno Business. Regarding our Banno Digital Suite, as of March 31, we now have just over 9,300,000 users live on the Banno platform. We continue to enjoy the highest consumer rating in the App Store and we are regularly recognized as the fastest application in the industry. The feedback from our 30 Banno Business beta testing clients has been outstanding and we remain on track to deliver Banno business into general availability later this quarter. Speaker 200:04:48Let me take a moment to address the banking landscape related to the liquidity challenges experienced by a couple of large regional banks in March and earlier this week. Although I'm not aware of any Jack Henry core clients have tapped into the Federal Reserve's new bank term funding program, I think the announcement has had a positive effect on the overall concern in the market regarding bank liquidity, And I applaud the Fed on their swift and decisive action. Since those events grab the headlines, members of our team have spoken with hundreds of our clients And I personally have visited with a large number of CEOs at our client banks. I'm pleased to say that our banking clients have indicated they have been largely unaffected by these events with the exception of several who have reported an influx of new accounts as business clients look to diversify their deposit balances. Our clients typically have a diversified customer base, serve small and medium businesses and consumers in their local communities and have long standing and loyal customers. Speaker 200:05:48So I think it's logical that they wouldn't see an adverse impact as a result of a few extreme scenarios. Also remember that a large part of our business is focused on the credit union industry with approximately half of all credit unions with more than $1,000,000,000 in assets partnered with Jack Henry as their primary technology provider. Those clients also report being largely unaffected by the challenges in the banking sector. In late April, IntraFi conducted a survey which generated responses for more than 550 bank CEOs, presidents and CFOs, Primarily at banks with less than $10,000,000,000 in assets. Approximately 77% of the respondents saw no significant inflows or outflows of deposits, 14% said they saw deposits decline by 2% or more and 9% said they saw an increase of at least 2% in deposits. Speaker 200:06:43I think these results are consistent with what we've heard anecdotally from our clients. We have seen no hesitation on the part of our clients to move ahead with decision since the middle of March. And as I mentioned earlier, this was the largest third quarter in terms of sales bookings in the history of our company. What's more, our sales pipeline is now larger than at any other time, including a recognizable uptick Since our last quarterly call in February. I'm well aware of the challenges bankers face in today's economy and understand that things could change. Speaker 200:07:18But as we speak today, our clients are generally performing well and banks and credit unions are continuing to prioritize modernization of their technology stack to remain competitive and serve the evolving needs of their account holders. Hopefully, you've all seen the new corporate sustainability report that we published on March 31st. I think it's an excellent representation of the key initiatives and accomplishments we've been working on since we published our last report. In this new version, we provided a more detailed review of Jack Henry's demographic makeup, a summary of the results of our annual employee engagement survey, an overview of our data privacy and cybersecurity practices and an outline of our commitment to setting science based targets through the Science Based Targets Initiative or SBTI to address the reduction of greenhouse gas emissions. Additionally, the report highlights some of the public recognition we've received from organizations like Newsweek, Computer World and LinkedIn's top companies list. Speaker 200:08:15As we look toward the end of the fiscal year, our sales pipeline is much larger than it's ever been And we continue to be optimistic about the strength of our technology solutions, our ability to deliver outstanding service to our customers, our ability to expand our customer relationships and our long term prospects for success. I look forward to seeing and chatting with many of you at our Investor Day in Denver in a couple of weeks. With that, I'll turn it over to Mimi for some detail on the numbers. Speaker 300:08:42Thanks, Dave. Good morning, everyone. As Dave shared, Jack Henry had a successful Q3, I will call out the details driving those results and our outlook for the remainder of the year. For both the Q3 and 1st 9 months of our fiscal year, Total revenue is up 6% on a GAAP basis and solidly up 8% on a non GAAP basis. Now on to the 3rd quarter detail. Speaker 300:09:07On a GAAP basis, services and support revenue increased 3% in both the Q3 year to date. Consistent with trends over the past two quarters, services and support were negatively impacted as de conversion revenue decreased, $11,000,000 for the quarter $31,000,000 year to date. This remains in line with the limited broader market activity acquisition activity in our space. With only a couple of months left, we are projecting approximately $20,000,000 in deconversion revenue this fiscal year. However, forecasting deconversion activity is always challenging given the limited advance notice and general uncertainty of M and A. Speaker 300:09:50Our private and public cloud offerings show robust growth this quarter, growing 11% 10% year to date. Product delivery and services decreased 10% in the quarter, 11% year to date impacted by lower deconversion revenue and convert merge activity offset by higher license and hardware revenue. On a non GAAP basis, Services and support revenue grew 8% for the quarter and 7% year to date, which serves to highlight the consistent strength of our business model. Processing revenue increased 11% on a GAAP basis for the quarter and 10% year to date. On a non GAAP basis, The growth was 10% for the quarter and 9% year to date. Speaker 300:10:36The increases were driven by the higher card volumes and services plus robust digital demand. Now reviewing costs. Cost of revenue was up 9% for the 3rd quarter and 8% year to date. Quarterly drivers included increased card processing costs consistent with card revenue growth, higher personnel costs and amortization expense. These drivers are consistent across our year to date results. Speaker 300:11:04Research and development expense increased 13% during the quarter, mostly due to higher personnel costs and license fees furthering innovation. Year to date, these expenses increased 19% based on the same factors. SG and A rose 9% for the quarter, driven by increases in personnel related costs. Year to date, the increase was 8%, driven by personnel, travel, professional services costs, partly offset by the gain on sale of assets earlier this year. We remain focused on actions involving facility rationalization, headcount and travel controls, procurement wins and other expense management. Speaker 300:11:46Collectively, these efforts are helping offset inflationary pressures in driving positive operational results. Despite a decline in net income, primarily related to deconversion revenue and partially offset by a lower tax rate, we delivered fully diluted earnings per share of $1.12 for the quarter. Thanks to our hard working and dedicated associates, GAAP and non GAAP results for the Q3 9 months of the year are consistent with internal expectations and set us up for a strong conclusion to FY 2023. As a reminder, For transparency, the impact from the gain on sale of assets, the Payrails acquisition and deconversion revenue are shown as part of the non GAAP adjustments in the press release. Turning our attention to cash flow. Speaker 300:12:37Year to date, operating cash flow was $207,000,000 down from $301,000,000 in the same period last year due to lower deconversion revenue and the timing of taxes. The tax payments were significant a significant outflow at $64,000,000 in the quarter related to a change in the timing of the deductibility of development expenses. Free cash flow, which is operating cash flow less CapEx and CAP Software, plus proceeds from the sale of assets with $82,000,000 year to date. Excluding the previously discussed tax payments and keeping year to date deconversion revenue flat, free cash flow would have been approximately $163,000,000 While balancing repurchase activities with maintaining a conservative balance sheet, we repurchased 151,000 shares during the quarter. We also returned capital to shareholders through a dividend of $0.52 per share, representing a 6% increase. Speaker 300:13:39Our capital allocation priorities remain consistent. We're focused on maintaining ample liquidity, investing in our business to fuel growth, evaluating acquisitions, paying dividends and opportunistically repurchasing our stock. This consistent dedication to value creation resulted in a trailing 12 month return on invested capital of 20.1%. With that, let's review our outlook for the completion of our fiscal year. The press release included updated full year GAAP guidance. Speaker 300:14:14The GAAP guidance remains inclusive of the PayReals acquisition, gain on asset sales and deconversion revenue. We expect the year to date trends to continue for the remainder of the fiscal year, impacting GAAP results. Most significantly, assuming continued minimal consolidation in our customer base, deconversion revenue will remain muted. Considering year to date activity, we expect approximately $20,000,000 of annual deconversion revenue, representing a $5,000,000 increase from our previous guidance provided on the last call. To be transparent, on our August full year earnings call, we will outline our new approach to providing guidance for deconversion revenue. Speaker 300:15:01While the integration of Payrails continues to meet expectations, there has been 3rd party implementation delays impacting FY2023 revenue, amounting to a shortfall of $3,000,000 This revenue remains in our pipeline. We remain confident in the strategic value and financial performance trajectory. We expect full year GAAP revenue growth for fiscal 2023 to be between 5.5% to 5.9%. With respect to full year GAAP EPS, we expect $4.85 to $4.87 per share with improvement driven from positive impacts from a modestly higher expected deconversion revenue, lower tax rate, partly offset by slight increase in payroll dilution. Non GAAP guidance remains unchanged due to the continued impressive and consistent performance of our business model. Speaker 300:15:57So in closing, we delivered another quarter of strong operational and financial results and remain solidly optimistic about the conclusion of this fiscal year. We thank all of our investors for their continued confidence in Jack Henry. Debbie, will you please open the call for questions? Operator00:16:16We will now begin the question and answer session. The first question is from Rayna Kumar with UBS. Please go ahead. Speaker 400:16:51Good morning. David, in the past, you've spoken about having the ability to sell Dano To non Jack Henry core customers, how is that progressing? And in general, are you seeing the opportunity to sell your for processing services to larger financial institutions? Speaker 200:17:11Yes, good morning, Rana. So questions in there. First off, as far as Banda was concerned, so and I think I talked about this on the last earnings call. I know I've talked In some of the fireside chats that I've done with some of you, we had in fact a plan to start selling Banno outside the base here in the fall of this past year. And what we learned much to our surprise was that some of our competitors had identified that as an opportunity for them to hang on to their core customers. Speaker 200:17:37The fact Their core customer was going to be able to use Banno. They were essentially using that as a selling point for those customers to retain their legacy core system Because they would get the best of breed digital banking system without having to change out the course and that certainly was not part of our strategy. And so We kind of backed off on that. We were prepared in the fall to start selling outside the base. We backed away from that now. Speaker 200:18:01We're really reworking that strategy with a more targeted And so you'll hear more about that from us, I think later this year as far as how we're going to go to market with Banno outside the core base. As far as the now you'll have to remind me the second part of your question. I was selling up yes, sorry, selling upmarket. Good thing I have help here in the room. Selling up markets. Speaker 200:18:23So, yes, the first off, we're having great success with Silver Lake in the banking side. And of course, we're the dominant player on the credit union side already, a market. So approximately 50% of the credit union industry with assets over $1,000,000,000 are already Jack Henry core customers. So we're already the dominant player on the credit union side of the business. On the banking side, We've had great success here in the past few years moving up market with particularly with our Silver Lake core system. Speaker 200:18:51What's been interesting now With the tech modernization strategy, we are engaging with a number of customers now that are significantly larger than you would normally think of as a Jack core customer. We're very interested in what we're doing and are now seeing Jack Henry as the very probable technology partner that they want to partner up with going forward. So More to come on that. It's early days for us with some of these very large customers that we're talking to, but the prospects I think are pretty bright And much of that being driven by the tech modernization strategy that we've been talking about lately. Speaker 500:19:28Very helpful. And then if Speaker 400:19:29I can fit one in for Mimi. Mimi, could you just comment on the debit processing volume in the quarter? And secondly, if you can just give us your preliminary thoughts on how FY 'twenty four revenue and operating margin could pan out given that you're close to your fiscal year end? Thank you. Speaker 300:19:50Thanks, Rina. Yes, so we continue to see the trends that have happened for the 1st 9 months of the year, and are consistent with the broader market data that you're getting from other industry players in terms of Slightly slower as it relates to the consumer sentiment impacting those trends, and a little bit more going to the credit side than the debit And as you know, we have a much bigger profile on debit in our business. So, our guidance incorporates the continuation of that trend. And then to your second question, unfortunately, it's a little premature at this point to talk about FY 2024. Our teams are still heads down, collaborating on the budgeting process and we'll probably share that more on the August call than we will today. Speaker 200:20:38And can I add one comment on the Trent, so I think there was a bit of a misunderstanding after the last call? We attributed a part of our guide change to the fact that the debit volumes we saw Going forward, we're going to slow just a little bit. And certainly that's true, but that doesn't mean the debit business Is underperforming. The debit side of our business has been a real solid performer for us this year. We just had a little higher expectation for the remainder of the year then is reality and that's why we made the adjustment, but the debit business is performing extremely well at Jack Henry. Speaker 400:21:14Thank you. Operator00:21:18The next question comes from Dan Perlin with RBC Capital Markets. Please go ahead. Speaker 600:21:26Thanks. Good morning. Dave, I had a question going back to the demand environment. I feel like This huge disconnect in the market with the stocks and kind of what we hear from the banks versus what you're seeing. I'm just wondering if maybe we're getting it wrong a little bit. Speaker 600:21:40Like is The pressure that the banks are feeling right now driving more tech demand to you as opposed to maybe the converse, which is I think what most people are expecting? Speaker 200:21:50Yes, it's an insightful question, Dan. And I think what you're saying is generally correct. So if you're running a bank or credit union in the United States today, They've been performing pretty well and we all know the challenges that they're under and rate increases and cost of capital and that kind of stuff. But if you're running a Bank of Credit in the United States Today, you for almost all of them, they need to continue to focus on modernizing their technology stack for one of 2 reasons. 1, You're trying to attract new customers to your institution and customers aren't coming into the branch anymore, right? Speaker 200:22:21They're expecting to do things through some type of digital presentation layer. So for most banks and credit unions that requires them to continue on this modernization track and make sure that they have the tools to attract not just consumers, but business customers, small, medium business customers are the lifeblood of our customers and how they operate on the banking side. And so there's that driver, but then the other side of the equation is Efficiency. So for most bankers, they can quote their efficiency ratio immediately to you without looking at any piece of paper. They can quote it off the top of their head Because they are all focused on efficiency and trying to figure out where are those areas where we can drive efficiency through the operation. Speaker 200:22:59Well, generally, technology is that the kind of the crux of where they're going to find efficiency. And so there too, Jack Henry is in the mix having those conversations with our customers. And then you throw into that, on top of that fraud and cybersecurity and all those kinds of things, all of that is driven by technology. And so, yes, I think there is a bit of a disconnect in this sense that because there's some turmoil in the industry, Jack Henry sales are going to be negatively impacted. They're just not. Speaker 200:23:30The businesses continue to run and they need to continue to find technology solutions to help with all those things that I just highlighted. Speaker 600:23:39No, it sounds somewhat counterintuitive, but I mean, it clearly makes sense in the current context. The quick question And our follow-up on margins here. I know you don't want to go out to next year, but I would appreciate if you could maybe talk about some of Key drivers and levers that you're going to be able to have here, whether it be expense control specifically, kind of mix of the business, Just as we start to think about the margin expansion story again. Thank you. Speaker 300:24:05Sure, Dan. Great question. So as we talked about Previously, we continue to see margin expansion throughout the year. We knew it would be a modest amount this year. Earlier in the year, our original guidance was for flat for the year, we're hopeful that and we're on track for a small increase in margin expansion. Speaker 300:24:26I would say the things we're working on are consistent. We do a ton around efficiency, continuous improvement. We've done a lot on internal Automization and procurement has been a huge win for us as we think about streamlining partnerships and really prioritizing that spend. So we're being really thoughtful on controllable spend like travel, headcount, positions, really thinking about each position from a 0 based perspective. But there's nothing structurally that concerns me in terms of the ability to once again continue back now that we have the normalization of some of the headwinds we've seen past years and return out of COVID environment they will return back to a margin expansion story. Speaker 600:25:13That's great to hear. Thank you. Operator00:25:17The next question is from Nick Cimino with Credit Suisse. Please go ahead. Speaker 600:25:24Hey, congrats on the strong results. Thanks for taking my question. I was hoping to get some more color on the performance in the payments segment in the quarter just across The various business lines and if you received any one time benefits related to the banking turmoil like some of your competitors. And just as my follow-up, are you still expecting payrolls to be modestly accretive in FY 2024? Thank you. Speaker 200:25:50Let's do payrolls first. Greg is prepared to give you an overview of payrolls and then we'll talk about the rest of the payments business. Yes. Speaker 700:25:57And I think So I'll go ahead and start with payrolls, but a couple of things. So one, Mimi alluded to the fact that in her opening comments around, we do have some challenges with a couple of third parties. And I think some of it's headcount related and other constraints that they have to get some of the work done to allow some of our contracts that are already done and in the implementation queue to be brought into the production queue. So there's a few of those constraints and things that we're working through. But the good news is, is that since September when we made that acquisition, we've actually sold 48 new contracts and 17 add ons. Speaker 700:26:38Add ons are things like the P2P solution. We have a loan payment solution, things like that. So The sales engine is starting to move and a lot of the sales that were done previously before we acquired Payrails We're really predominantly done through that 3rd party channel. So of course, we have a much larger sales force and folks that are focused on selling more direct deals. So We're pretty very optimistic on what's happening in the sales side of this. Speaker 700:27:06We just need a couple of the integration partners to be able to get some of their work done that will help us accelerate the revenue in fiscal year 2024. And I can start on the payment side too. So I think and Mimi alluded to what was going on, on our card business, which continues To go very, very strongly as far as growth. But when you look at the rest of our payment businesses, there's a nice mix of growth, Maybe not to the same level that we had. Remote deposit capture in our EPS business was significant during the pandemic. Speaker 700:27:40Obviously, folks or not going into branches at all, though that continues for the most part. That business is not growing at the same pace it did, but still in a double digit growth in our portfolio. So things that we're doing in our PayCentre business around General payments and preparation for FedNow, which we can talk about at some point too. But in our The clearinghouse business and what we've done with Zelle, we continue to have about 60% of all the clearinghouse customers That are out there, there's only about 300 clearinghouse and we have over 180 that are live on Jack Henry today. That continues to grow nicely. Speaker 700:28:22And so that business continues to have a lot of upside. Speaker 300:28:26Yes. I would just add that there's consistency to To Greg's point, there's consistency across remit cards, payments, also led by things like the fraud and other risk management solutions that are add ons. So I would say that trend from a consistency of growth will continue and then added by the benefit of payroll. Operator00:28:50Okay. The next question comes from David Togut with Evercore ISI. Speaker 800:28:59Thank you. Good morning. You've called out your new sales pipeline At a record level, could you walk through what are the biggest drivers of that? Is that new tech modernization modules? Is it Banno Business, Silver Lake, what are the underlying components of that strength? Speaker 200:29:17Sure, Dave. And one thing I'll highlight as I go through this, When I talk about pipeline, I know there's been some confusion in the past. I'm not talking about individual deals, how many core customers are in the pipeline or anything like that. I'm talking about the dollar amount essentially. And this is a non GAAP number, but it's the dollar amount that we track as far as the value of each contract. Speaker 200:29:37So it's In theory, that all converts into revenue at some point after deals are signed and they're implemented. As far as the drivers, So core continues to be king for us when it comes to a driver. We have just a tremendous amount of core activity right now, both banking and credit union As far as customers that are talking to Jack Henry about trading out their existing technology, some of that is certainly driven by tech modernization, But I don't think it's as much driven by I want to sign tech for the tech modernization module right now today. It is more about Jack Henry has a strategy that makes sense to us as bank and credit union executives. Their strategy makes sense. Speaker 200:30:16We need to look at them now and get Jack Henry now because we want to be partnered with them as they continue to evolve. And so there's a lot of that that's driving interest in our existing core customers, Silver Lake primarily on the banking side and of course, Simitar on the credit union side. But then on top of that, Banno continues to be A driver and that's why I call it out on these calls almost every time. There's a tremendous amount of interest in Banno, Our new Financial Crimes Defender solution that we've talked about on this call, that's rolling out here very soon. We have a lot of Fraud solution in the industry in many years and so lots of interest not only inside our core base but outside the core base in that solution. Speaker 200:31:07Our treasury management solution is getting great reviews today, so continued interest in treasury management. Certainly cards, we've talked about the number We've been adding to the cards business, so continuing to drive interest there. Our online commercial lending solution, tremendous amount of interest in that. So it's just a broad variety of solutions. I think the common thread in all of that is Almost all of those non core solutions have been written and rolled out within the past 2, 3, 4 years. Speaker 200:31:38So it's a new technology that people are Speaker 300:31:41And then Speaker 200:31:41of course on the core side, you know all about our tech modernization initiative there. And so you put all those things together, much of what's driving this is the Recognition in the industry that Jack Henry has put a tremendous amount of investment into brand new technology and new solutions to help our customers solve problems, and so that's what's getting us a lot of attention. I'd like this is Greg. I'd like to Speaker 700:32:06add a relevant example. So we actually just got an inbound request from a large regional That hadn't talked to us since 2010 and they came to us and said, hey, we'd like to renew conversations based on what we've heard about you in the industry, the tech modernization story and things in general. And that's a relevant example because these are larger institutions that we typically wouldn't have seen in the past that again that are inbound to us because of the things that we're doing and the stuff that Dave just described. Speaker 800:32:39What's the asset size of that large regional bank, Greg? Speaker 700:32:43It's greater than 50,000,000,000 Speaker 200:32:47And we're engaged today Dave with a number in the mid-twenty billion space. Several banks in the mid-20s are talking to us today and I think a lot of it is because of they've seen with tech modernization and but they're not talking about moving right to that platform. They're talking about Silver Lake and then evolving to that platform. Speaker 800:33:07Understood. And just as a follow-up, what's your latest view on timing of rollout of FedNow, Jack Henry's role and how material could FedNow be to Jack Henry over the next 12 plus months? Speaker 700:33:24Yes, this is Greg. I'll take that question as well. So good insightful question. We are absolutely ready. We're already fully certified. Speaker 700:33:32And on July 19th, when the first transaction takes place, we will be part of that transaction process. We have 20 institutions that will be going live between the July 19 timeframe and sometime in late August based on just rollout with those institutions, we can go as fast as they want to go. We have 51 contracts that are already sold and a significant number of others that are in process just based on interest. I think to your point about significance of where this Is in our portfolio, time will tell. A lot of it's going to be based on use cases And there's a lot of rumors that the Fed in general will be mandating several use cases that will be important for institutions to be set up on the receive now at least aspect of the equation allowing them to receive payments if one comes to them. Speaker 700:34:29So we are having very detailed conversations with a lot of our institutions about the importance of at least being set up on the receive aspect, even if they're not ready to go to the send aspect. But again, we're very bullish on this. The clearinghouse, There had been some challenges just because some institutions that we work with were a little leery of working with The larger conglomerate that owns the clearinghouse versus the Fed being a part of this. So we think we're going to see a little more uptick in the FedNow solution that maybe that we saw so far in the clearinghouse one. Speaker 200:35:10Just to emphasize, Dave, the level of our involvement with the Fed on this project, I was just in Washington DC on Monday, so 2 days ago, meeting with some of the Fed presidents and the FedNow team and the President of our with the Fed and very, very it's top of mind for us to make sure that we're helping our customers take advantage of this opportunity. Speaker 800:35:41Understood. Thank you. Operator00:35:44The next question is from Vasu Govil with KBW. Please go ahead. Speaker 500:35:50Hi. Thank you for taking my question. I guess first one, I know you will share more on your Investor Day, but just thinking about revenue growth next year, so what are some of with the puts and takes that we should consider? Speaker 300:36:04Hi, Vasu. Well, I appreciate the question. We're still in the midst of planning. In fact, this afternoon, we'll be spending the whole afternoon with the sales team on their planning for next year. I would say overall, as Dave mentioned, a continuation of both the transition and implementation from a great pipeline from the last two years, plus the continued interest in some of these new products, BANO business wasn't in the year numbers for FY 23 will be in 2024, so that's a nice bump as well. Speaker 300:36:38But I would say it's going to be a continuation of a diverse portfolio growing very well. Speaker 500:36:47That's helpful. And then just to follow-up on the complementary segment. Clearly, Banno is The big driver there, maybe David you could talk about what are the some of the other products that rise to the top in terms of growth drivers. And then as we think about growth in that segment long term, is mid single digits toward the right base going forward or do you see that accelerating? Speaker 200:37:08I'm Sorry, I missed the last part of your question is what? Speaker 500:37:11Mid single digits. Speaker 200:37:11Oh, mid single digits. Okay. Speaker 500:37:13Yes. Speaker 200:37:13Sorry, yes. So as you know Vasu, the segment is a little bit of a challenging one to talk about because there are so many solutions in there, but I understand your point trying to figure out what are the key drivers. So there are several. I already highlighted the Financial Crimes Defender solution that we're just now rolling out. So we definitely expect that to be A key driver for us in the coming year, Banno is in that segment and so Banno will of course continue to be a driver as we're rolling out Banno Business. Speaker 200:37:40Treasury Management that I called out a little while ago, treasury is in that segment that will continue to be a driver for us. Most of the fraud solutions that are not specific to payments, so the payments fraud pieces show up in the payments segment, but the other Fraud type things, security solutions for example, those are all in that segment that is always top of mind for our customers. So that continues to be A driver for us as well. So it's just a lot of different things. And then as I mentioned earlier, our online commercial lending solution That has really picked up here in the past several months. Speaker 200:38:17We've had that solution in market for probably 4 years now, but in the past few months, it's really picked up as far as level of engagement with customers and prospects. And so a bunch of different pieces. And so to the second part of your question about mid single digits, I think that is a good assumption because with so many solutions in there, you have some that are growing quickly and some that are kind of just steady Performers and so I think that's a good assumption for that segment for the long term. Speaker 500:38:45Great. And just on that online commercial lending solution sort of any drivers by using that's gaining more traction now? Speaker 200:38:52Yes. Well, I think it's because it's an Interesting thing when you work with banks. In banks, most bank CEOs grew up in the bank as a commercial lender. That's their background for most of them. Commercial lenders, they're the moneymakers in the bank, right? Speaker 200:39:07You can talk all day long about all the consumers and what wonderful relationships you have with But what really makes money for a bank is the commercial lending business. And so that's small, medium business customers and then of course even larger customers. Commercial lenders tend to have a process that they follow. They're the moneymakers. They're the people who have a process that they They have tended traditionally to be averse to using more technology. Speaker 200:39:33And but now with So many people, particularly on the backside of the pandemic, so many people not wanting to go to the branch, they've gotten used to this idea of being able to do everything through some kind of a digital layer, commercial lenders are getting a lot more comfortable with the idea, and I don't say they like it, but they're accepting it. They're getting more comfortable with the idea that their customers, small, medium businesses expect to be able to apply for a loan and interact with the bank using a commercial presentation layer. That's exactly what our solution does. It's a complete commercial lending solution that is hosted online where the borrower can do everything they need to do through that presentation and then the lender can interact with them again through that technology. So I think it's a result of the backside of the pandemic, customer expectation has changed and lenders are kind of Oftentimes grudgingly accepting the fact that their customers want to do things differently and they're now thinking about how do we adopt different technology to make sure we take care of our customers. Speaker 500:40:37Great. Thank you very much. Operator00:40:39Certainly. The next question is from Peter Heckmann with D. A. Davidson. Please go Speaker 900:40:46ahead. Hey, good morning. Most of my questions have been answered, but I wanted to follow-up on FedNow. I guess, is it your impression that with FedNow The primary use case is going to be enterprise B2B and likely replacing same day ACH. And related to that, are you aware of any other use cases that might involve the consumer or other Certain niche processes that you think are going to be strong right out of the gates? Speaker 700:41:18Yes, Pete. Actually, I think that Could be one example. I think what we have seen even with some of the other solutions that are out there that we think will be the primary use case is with the gig workers. The gig workers taking the payments that they're getting and moving them using and remember the FedNow solution actually It's truly real time. The clearinghouse solution still has kind of a batch settlement on the back end. Speaker 700:41:44And so the ability though they have to their funds immediately, the process is different. But using the gig workers to move those funds into their FI accounts, We see that today with a lot of the stuff that we have with the clearinghouse and the Fed believes that to be a big one. The other one is having the FI customers, the financial institution customers actually moving money from external wallets into the depository accounts as well. So There's a whole host of use cases that are being built out of those two scenarios, as well as and Dave was just there, There's going to be some, I don't know if I would call them mandates, but there's going to be some strong Requests for things to be done through the FedNow account for stuff like various Tax payments Speaker 200:42:38and one of the things we talked about Monday was VA benefits. Yes. Speaker 700:42:41So there's going to insurance payments, things like that. Things that the treasury and the Fed can control, they're going to be pushing that. So that's why it's important for processors like Jack Henry, who can really kind of help get to that last mile of institutions to get that receive now turned on. So Regardless of where that payment is being initiated from, it has a place to land. Speaker 900:43:08Okay. That's helpful. And then just to clarify Again, with that now, it doesn't sound as if there's a lot of applications that are currently either cash based or card based That we've replaced with real time payments. It's primarily some form of ACH or interbank transfer. Is that how you see it? Speaker 700:43:29No. I do see some reasonableness to some of the Card products, there's various things that happen today in the B2B world, that where transactions that typically would have gone out paper, maybe would have gone out through a virtual card program or things like that where there's interchange and some of those programs could be disintermediated because of this type of solution. So I think there's going to be some heavy focus on B2B solutions as well because there's so much Paper in the process today and other types of card payments maybe at a merchant level, where depending on how the merchant is set up, could those transactions to them or from them end up going through that channel as well. So Yet to be determined, but I think the card part Speaker 200:44:23of this, Speaker 700:44:25specifically on merchant side and specifically in B2B payments Could have some chances for disintermediation. Speaker 900:44:32Okay, good. That's helpful. Thanks. Speaker 1000:44:35Sure. Operator00:44:36The next question is from Kartik Mehta with Northcoast Research. Please go ahead. Speaker 1100:44:44Hey, Dave, I know you and I have talked about this a little bit, but one of the things I think that gets misunderstood is how strong your pipeline is and how much visibility you have on revenue. And I'm wondering if you could just talk about you've talked about how the pipeline has grown. Just looking at the pipeline and what kind of visibility you have and what kind of confidence that gives you over the next 12 to 18 months? Speaker 200:45:08Yes. Thanks, Kartik. So it's an interesting thing in this the business that we're in with the recurring model recurring revenue model that we've built. So first off, when it comes to the contracts that we already have signed, we of course have a tremendous amount of visibility because we're almost 90% recurring revenue as far as The contracts that we have in house and the kind of watching the revenue build on those contracts. And then you know that once we sign a customer, oftentimes Depending on the product, it can take 1 month to 12 months depending on what they purchase from us for that revenue start layering in, so we see the bit and we have visibility into that. Speaker 200:45:46And then as far as the pipeline is concerned, So when you've been doing this as long as I have and I've been doing this a long time, we have a very predictable model. So I can I'm not going to quote numbers here, but I can tell you with a pretty high degree of accuracy if the pipeline is X then Y percentage of the pipeline is Very likely to close because we have years years years of history doing this. And so we know that that's going to translate into Z dollars of revenue over time and so we can kind of do that math and predict pretty accurately what the impact is going to be. Now the challenge again is some of those solutions you sign a contract today and we won't see you the first dime practically of revenue for 9 to 12 months. Some of them you sign a contract today and you have revenue flowing in 1 month. Speaker 200:46:33And No, there's some art to this, but there is a lot of science to it as well just based on all the experience that we have doing this for as long as we have and understanding The way these contracts works and the way customers make decisions. Speaker 1100:46:47Well, sometime you'll have to give it to X, Y and Z, Dave. Speaker 200:46:51Not That happens. Speaker 1100:46:54And then just thinking about, I don't want to call it a banking crisis, just the issues that are out there. And looking at Jack Henry when the last crisis happened and kind of how you looked at the business then and what And if there's any lessons you could take from that and what's happening today. I know they're very different, but just trying to get a feel for maybe What we could clean? Speaker 200:47:22Yes, it is a very different environment today from 2,007, 2008 for sure. And of course, if you go back in time and look at Jack Henry's performance during the period of the Great Recession, we performed really well, even though there were hundreds of banks that were being shut down at that time. And of course, many of them were our customers that were being shut down. So I think the major difference, if you look Specifically at Jack Henry between then and now is at that time we were still very dependent on license fees and maintenance revenue. So when customers kind of pull their arms in and said we're not spending on anything, our revenue had the potential to drop Significantly because we were so dependent on license fees and whenever you sell a license, you see the impact in the quarter as opposed to being spread like we do today. Speaker 200:48:11Today, of course, so back then we were maybe 50%, 60% hosted. Today we're recurring revenue. Today we're 90 percent recurring revenue. So very different from a Jack Henry perspective as far as the predictability of revenue because if a bank is challenged unless they shut down, They don't quit spending money with us. They don't decide all of a sudden we're just going to quit processing loans. Speaker 200:48:34You have to still process loans, which means you still have to pay Jack Henry for that service. And so today I would draw a significant contrast as far as our business and the resilience of our business as bankers are going through what they're going through right now. That does not say we're bulletproof. It doesn't say we're totally immune to any challenges out there. But I think we have a much more resilient model than we had during the Great Recession at that time. Speaker 200:48:58And again, if you go back and look at how we performed during that period, We performed pretty well. And so my expectation is that we should be able to weather this storm right now. And of course, much of this storm is the result. I mean, these are runs on the banks that are happening, right? So you get some headline somewhere that says this bank As liquidity challenge and by the way, liquidity and capitalization, those have been conflated over and over in these conversations, 2 totally different topics. Speaker 200:49:25And yet, the run on the banks are happening because wildfire the spreads like wildfire through social media that there's some challenge at a bank, everybody uses their digital banking solution to withdraw money from the bank and all of a sudden they're in trouble. And so I just view this as 2 totally different scenarios. But if I look specifically at our company, we are in a much better position to weather the storm than we were even in 2,008 and we performed really well in 2,008. Speaker 1100:49:54Perfect. Thanks, Dave. I really appreciate it. Speaker 200:49:56Certainly. Operator00:49:58The next question is from John Davis with Raymond James. Please go ahead. Speaker 600:50:05Hey, good morning. Mimi, just wanted Speaker 1200:50:06to follow-up on Dan's question around margins. So I think the guide implies about a 2 50 basis point year over year Improvement in the Q4. So anything to call out from a timing perspective or what kind of gives you confidence in that ramp in 4Q margins? Speaker 300:50:21Yes. Thanks, Judy. Great question. Yes, I think that $250,000,000 is a good estimation. I think we feel good about that. Speaker 300:50:29We always knew that it would be a grow as the year continued kind of situation, and we're seeing that transpire. So I feel good with that Speaker 200:50:38estimation. Okay. And then, Speaker 1200:50:40you called out tax payment timing, for the free cash flow in the quarter. So how should we think about Free cash flow conversion for the full year, obviously 4Q is always a huge free cash flow conversion quarter. So just curious, I think you guys did like mid-80s conversions last year. Just any sort of guide rails for us for the full year. Speaker 300:51:00Yes, great question. And J. D, I love that you're looking at it on an annual basis versus a quarterly just Because of the lumpiness that any one quarter can have in this quarter, in particular, between the deconversion and then, the larger tax payments and just kind of going into that, we were waiting for some legislative clarity around IRC 174 like a lot of tech companies that impacted The capitalization, the deductibility of that capitalized labor, unfortunately, with lack of legislative clarity, we had to make a payment. So you would have normally seen that kind of maybe spread over a couple of quarters. That's a timing thing. Speaker 300:51:38It doesn't impact our tax rate that will reverse over several years and kind of normalize. So, I think that obviously will not be a part of Q4. As you said, we have a large inflow, so you'll certainly see an uptick. I think the reality is because of deconversion revenue, we also have A couple of larger renewals of some third party expenses in Q3, I think will be light of our target of the 100% that free cash flow conversion target, but I think it will definitely be an uptick from Q3. Speaker 200:52:13Okay. And then last Speaker 1200:52:14one for me. Dave, you talked about some of the impacts From all the banking turmoil has been kind of increased in account growth. So maybe how should we think about your business? Like what percentage of revenue ballpark Is priced on kind of a per account basis versus transaction or anything else just to kind of help us understand what the account growth can mean from a revenue perspective? Speaker 200:52:36Well, I don't know that I know the answer to that question. Anybody want to give me a guess? It's more I mean the payment businesses, but he's talking about account Based, so it's the core business essentially. Yes, 25%. 25%. Speaker 200:52:50Okay, we'll go with 25%, JD. Speaker 600:52:52Okay. All right. Thanks guys. Sure. Operator00:52:56The next question is from Dave Koenig with Baird. Please go ahead. Speaker 600:53:01Yes. Hey, guys. Thanks. And Maybe Speaker 800:53:05I guess, first of all, just on Q4, kind Speaker 600:53:07of the implied guide is for somewhere around 6%, I think, kind of non GAAP revenue growth, Which the rest of the quarter of the year, I think we're kind of 6% to 8.5%, so it's a little slower. What's the reason for the slower in Q4? Speaker 300:53:23Yes. Hi, Dave. Good morning. I would say, if anything, I think there's a little bit of conservatism in that. I would Maybe be a slightly biased towards the higher side of that range. Speaker 300:53:35I think with a little bit of uncertainty still in the consumer sentiment, We just wanted to think about a little bit conservative, but the trends I feel are still quite strong for the year and in terms of getting us to our full year number or better. Speaker 600:53:51Okay. Okay. And then, And I guess on Payrails, I think year to date, you add back the loss from acquisitions to non GAAP margin, I believe. And I think it's trended like around $10,000,000 year to date loss, so probably a little more by the end of the year. Is that all going away in 24, and basically is that why you can get to accretion in 2024, like is that just the main what just kind of goes away? Speaker 300:54:22So it will not be part of non GAAP in 2024 for sure. So that will be one component. But I also think it's just a question of having let Some of those inflationary pressures like the great resignation, the wage inflation we saw, some of the 3rd party one time costs Like Java are now in our normalized base rate. Speaker 200:54:41But he was specifically talking about payrolls. Speaker 300:54:43He was talking about the impact on March. Okay. So I think we're still set for margin expansion in 'twenty four because of the base now running through the 'twenty three numbers where it wasn't in the 'twenty two numbers. So I think we're still in good shape, as well as some of the efficiency measures that we're continuing to focus on internally. Speaker 600:55:03Got you. Thank you and I appreciate it. Operator00:55:07The next question is from James Faucette with Morgan Stanley. Please go ahead. Speaker 1000:55:14Hey, good morning, everybody. Thanks a lot for taking the time. I think most of the questions around demand and sales cycle, etcetera, You guys have at least addressed a little bit. I wanted to ask quickly on capital allocation. I think Dan Perlin raised kind of the change in sentiment in the market and clearly that's impacted your stock. Speaker 1000:55:39At the same time, We continue to wonder about M and A. So just any comments how you're thinking about capital allocation and what looks attractive to you right now and how you prioritize? Speaker 200:55:51Yes. So nothing has changed there, James, as far as capital allocation is concerned. We're committed to our dividend policy and Mimi emphasized that in her comments. Besides that in her comments, we as we've said many times before, M and A is always at the top of our list. We do share buybacks when it makes sense for us and Mimi highlighted that of course in her comments as well. Speaker 200:56:13But M and A, No, we are a I've said many times, we're a solid acquirer. We know how to do integration well of companies once we acquire them. We're very disciplined and only pursuing acquisitions that we think are really going to be additive to our business in the long term. I think Payrails is a great example of that. You've seen that it's a little challenge in the short term, but when we look at what we're doing with that business in the long term, I think it's going I'm absolutely convinced it's going to be a real Home run for Jack Henry in the long term and that's the way we think about doing M and A. Speaker 200:56:45We're always looking for those things that we believe we can take Advantage of is a long term solution for our customers to help our customers perform better. Now, I was hoping and I've said this in many forums that by this time and even several months ago that there would be a lot more interesting M and A opportunity for Jack Henry, we have been looking at some companies. We continue to look at some companies to acquire, but There just hasn't been anything that has kind of jumped over that bar for us so far here even though the deal flow hasn't been particularly strong. We have been looking at some deals, but nothing's jumped over the bar here recently, but we're going to continue to look. Speaker 300:57:27The only thing I would add to that James, just to add one more thing, which is consistent with our priorities is paying down the debt through our normal cash flow from And so you would expect to see that over the next several months, years that we're going to continue to decline the debt balance. Speaker 1000:57:48Thanks for that Mimi. And then Dave, we've seen a lot of headlines around technology layoffs and headcount reductions, etcetera. How is that impacting your ability to go out and hire and add talent to the Jack Henry pool and maybe that even out of your customer? Anything you can talk about there? Speaker 200:58:08Yes. So we've it's been an interesting time since the great resignation. We went from the great Designation where everybody was resigning their jobs and going to find the pot of gold at the end of the rainbow to within about 3 months all of sudden, companies were doing these massive layoffs. And so, a lot of heads were spinning, I think, among employees of a lot of these companies. So for us here in the recent past, we have picked up some really good new hires and we've had some So what we refer to here as boomerangs, people who left because they wanted to chase the pot of gold and then they realized the pot of gold wasn't there and they And those are great additions to us because they already know our company, they know how we do things and they're oftentimes really talented folks. Speaker 200:58:55So we've had a number of boomerangs come back. We are attracting some great talent from some other companies in our space that have been challenged and so they understand the industry, they understand what we do, may not understand the Jack Henry products completely, But we found some really good talent, people that were a little shaken by what's happening at other companies in the industry who are looking for A steady provider and so they've joined Jack Henry. So, but we're not just hiring left and right. We're being very judicious about when we hire and where we hire. And so, we're trying to be very selective about who we choose to join the Jack Henry team, but I think the overall message would be We've had some great additions to our team in the last 2, 3, 4 months. Speaker 1000:59:43That's very great color there, Dave. Sure. Operator00:59:47The next question is from Dominic Gabriel with Oppenheimer. Please go ahead. Speaker 1300:59:53Hey, great. Good morning, everybody. Speaker 900:59:57David, I don't Speaker 600:59:58know the best way Speaker 1300:59:58to ask this, so I'm just going to go ahead and ask. I guess you're the sole survivor of The big four companies in core platform as far as CEOs go from pre pandemic. A lot of our clients actually do ask about what is the long term Succession plan, if there even should be one, you've had a major contribution to this enterprise. And so I do get questions about, If a succession plan ever came, would it be someone inside, outside? How do we think about that not thinking about timing, but What does the succession plan look like in the past for Jack Henry, in general for CEO? Speaker 1301:00:48And I'm not saying you should leave. Speaker 201:00:51That's the most polite way everybody has everybody's tried me as old. No. You're old Dave, so what's the plan? No, so Dom, it's a reasonable question. Obviously, I can't share specifics about either my timing or succession planning at Jack Henry. Speaker 201:01:09But I will tell you and then of course I'm also Board Chair, it's Jack Henry. And so this is a real focus for us is making sure that we have a solid succession plan in place. As a matter of fact, So next week is our quarterly Board meeting and in May the Board meeting in May is when I always review with the governance committee my personal succession plan, I also review with the entire Board the succession plans for the entire leadership team. So I'll have All the members of the leadership team with their successors or what the plan is. So if it's an internal candidate, I'll highlight that for the Board. Speaker 201:01:44If it's a plan to do a search, then we I'll highlight that as well. And so all of those options are on the table. What I normally do is I walk in to the governance committee meeting with some suggestions of internal candidates and also external candidates. I know a lot of people in the industry and I know people who might be a decent fit for a role like this. And so I try to give the Board a good kind of overview of who potential candidates might be and then ultimately of course it's the Board's decision to hire or fire the CEO. Speaker 201:02:17And so But we have a very rigorous exercise that we go through around the topic of succession, not just for me, but for all members of the leadership team at Jack Henry. Speaker 1301:02:27Excellent. Thanks so much on that one. And Mimi, you mentioned in the prepared remarks a few times about personnel related costs increasing year over year. And this was kind of talked about in the last question, but not exactly. Is there a way to kind of break up new hires versus wage inflation Versus tech talent demand in those growth rates or just to kind of parse out largest factor, least Important factor as we think about the go forward growth in expenses for personnel? Speaker 301:03:05Thanks so much. Yes. It's good question. I would say the headcount on account basis has been modest. We're about 3% increase in headcount from a number of positions year on year, which is a much lower percentage than obviously the fully baked cost of that. Speaker 301:03:24As Dave mentioned, we're being very judicious on where those heads go. We've been focusing on customer facing roles like Service roles as well as R and D roles. And then we look at every role on a 0 based budgeting perspective when we're thinking about that. I can't really give you a lot of breakout in terms of because we just don't provide that level of detail in terms of Vacancies versus new, and rollovers, but I would just say we're being really judicious about it. Operator01:04:00The final question is from Mark Feldman with William Blair. Please go ahead. Speaker 1401:04:07This is Mark on for Chris. Thanks for taking the question here. So just wanted to ask on Banno, do you guys have any information regarding the asset size of the institutions that are you're seeing, the primary uptake From Banno and any interest in it. Then I guess additionally adding on to that, what does Banno for Business do for your sales ability to close Banno signings that they didn't have before without the offering. Speaker 201:04:34Yes. So we have about 700 ish Clients that are live today on Banno, and they are all over the board as far as asset size. I would say that The primary adopters have been a little bit on the larger side. So let's say, averaging closer to $1,000,000,000 probably as opposed to something smaller than that. So that's been the primary adoption, but we continue to see great demand across asset sizes. Speaker 201:05:00So and as I highlighted earlier, most As far as Banno Business, so if you think about traditional Banno, it is designed for the retail consumer. So you or me, and all All the functionality is retail in nature. Banno Business provides that a similar functionality, but for business customers. So specifically things like cash management and the ability within the application for the, let's say, the CFO of the small business, medium business and the CEO to communicate about financial transactions within the application. So it's a really interesting and robust application designed specifically to help a business manage their business and communicate about financial transactions and decisions within the business, but in the financial application. Speaker 201:05:55So it's a revolutionary new solution and we have a lot of bankers that are very excited about the rollout of this platform. Speaker 1401:06:04Great. Thanks. And if I can ask you just one more on cards with credit cards. I know in the past, You originally didn't have the sales force that could go out and the infrastructure to go out and sell the product. Do you have any update on where that is today? Speaker 1401:06:18And once When we can start seeing some deals getting signed with credit cards? Thank you. Hey, Mark. Speaker 701:06:25This is Greg. I can take that one. So yes, we have a dedicated sales force. We also have dedicated install and operational folks that now all have the experience. So That is starting to ramp up. Speaker 701:06:37We also added, if you saw a press release we did a couple of months ago on an agent program that we've added, We now have a lot of interest in that agent program and that's typically for smaller institutions that they themselves don't have The folks are the infrastructure to really support that type of full service credit solution. So that's given us another angle to sell the credit side of our business. We already have, I think, 2 or 3 now in the pilot phase of that, and we have a pipeline of about 10 or more Just in the last 2 to 3 months. So that's starting to grow, but that all of those products will continue to accelerate over time. Speaker 901:07:21Great. Thank you. Operator01:07:23Sure. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Speaker 101:07:33Thank you, Debbie. We have additional upcoming investor engagement opportunities with management at multiple investor events. The first one is going to be our Annual which will be held in Denver on the afternoon of Monday, May 15th at 1 pm Mountain Time. The agenda includes presentations from wide selection of the Jack Henry management theme and reception that will include demos of some of our newest solutions. We look forward to hosting those attending in person and via the webcast. Speaker 101:08:01We are pleased with the quarterly results and thank all Jack Henry associates for their efforts in producing these results. Thank you for joining us And Debbie, would you please provide the replay number? Operator01:08:14Yes. The replay number for today's call is 8 773447529. And the access code is 1,000,000,000,000,000,000,000,000,000,000,000,000,000,000 The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallJack Henry & Associates Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Jack Henry & Associates Earnings HeadlinesJack Henry & Associates’ Q3 2025 Earnings: What to ExpectApril 25 at 3:12 AM | msn.comJACK HENRY & ASSOCIATES TO PROVIDE WEBCAST OF THIRD QUARTER 2025 EARNINGS CALLApril 23 at 8:00 AM | prnewswire.comDonald Trump is about to free crypto from its chains …Sure enough, Bitcoin took off on the exact day Juan said it would. It's up more than 40% since the election … surpassing $100,000 on Dec. 8 .… Now Juan believes it could hit $150,000 … or higher in 2025.April 26, 2025 | Weiss Ratings (Ad)Commit To Purchase Jack Henry & Associates At $145, Earn 4.7% Annualized Using OptionsApril 23 at 7:28 AM | nasdaq.comBrightStar Credit Union Fuels Future Growth and Expansion with Jack HenryApril 21, 2025 | prnewswire.comJack Henry Now Accepting Entries for the 2025 Cobalt AwardsApril 17, 2025 | prnewswire.comSee More Jack Henry & Associates Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Jack Henry & Associates? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Jack Henry & Associates and other key companies, straight to your email. Email Address About Jack Henry & AssociatesJack Henry & Associates (NASDAQ:JKHY) is a financial technology company, which engages in the provision of technology solutions and payment processing services. It operates through the following segments: Core, Payments, Complementary, and Corporate and Other. The Core segment provides core information processing platforms to banks and credit unions which consist of integrated applications required to process deposit, loan, and general ledger transactions, and maintain centralized customer and member information. The Payments segment includes secure payment processing tools and services including ATM, debit, and credit card processing services, online and mobile bill pay solutions, ACH origination and remote deposit capture processing, and risk management products and services. The Complementary segment focuses on additional software, hosted processing platforms, and services including call center support, network security management, consulting, and monitoring. The Corporate and Other segment offers hardware and other products. The company was founded by Jerry D. Hall and John W. Henry in 1976 and is headquartered in Monett, MO.View Jack Henry & Associates ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 15 speakers on the call. Operator00:00:00Welcome to the Jack Henry Third Quarter Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mr. Vance Sherrard, Vice President, Investor Relations. Operator00:00:39Please go ahead. Speaker 100:00:43Good morning and thank you for joining us for the Jack Henry fiscal 2023 3rd quarter earnings call. Joining me on the call today is David Foss, Board Chair and CEO Mimi Carsley, CFO and Treasurer and Greg Adelson, President and COO. After my opening remarks, I will turn the call over to Dave for his thoughts about the state of our business, financial and sales performance for the quarter, industry comments and other key initiatives. After Dave concludes his comments, Mimi will provide additional commentary regarding the financial results and fiscal year guidance included in the press release issued yesterday that is available from the Investor Relations section of the Jack Henry website. We will then open the lines for Q and A. Speaker 100:01:26As a reminder, this call includes certain forward looking statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results. Like any statement about the future, these are subject to multiple factors 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 ks entitled Risk Factors and Forward Looking Statements. On this call, we will discuss certain non GAAP financial measures, including non GAAP revenue and non GAAP operating income. The reconciliations for non GAAP financial measures are in yesterday's press release. Speaker 100:02:18I will now turn the call over to Dave. Speaker 200:02:21Thank you, Vance. Good morning, everyone. We're very pleased to report another strong quarter of revenue growth and an overall solid performance by our business. As always, I'd like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for our 3rd fiscal quarter. For Q3 of fiscal 2023, total revenue increased 6% for the quarter and increased 8% on a non GAAP basis. Speaker 200:02:45Consistent with our prior comments regarding the reduction in bank M and A this year, deconversion revenue was down approximately 5% as compared to the prior year quarter. Turning to the segments, we again had a good quarter in the core segment of our business. Revenue increased 4% for the quarter and increased by 8% on a non GAAP basis. Our Payments segment performed very well posting a 6% increase in revenue quarter and a 7% increase on a non GAAP basis. We also had a strong quarter in our complementary solutions businesses with a 6% increase in revenue this quarter and an 8% increase on a non GAAP basis. Speaker 200:03:23As I highlighted in the press release, our sales professionals posted an strong quarter led by the core sales team. On our last quarterly call, I mentioned that the sales team set an all time sales booking record in our fiscal Q2. Although we didn't break that record this quarter, we did set a record for the strongest Q3 in history. During the quarter, we inked 13 competitive core takeaways, so we continue at the approximately one deal per week run rate I've discussed in the past. In addition to our success signing new core clients, we signed 13 existing on prem core customers to move to our private cloud environment. Speaker 200:04:02In addition to the tremendous success we've experienced in our core business this quarter, we continue to attract new clients to our digital banking suite. During the Q3, we signed 39 new clients to our Banno retail platform with another 35 clients signed up for Banno Business. Regarding our Banno Digital Suite, as of March 31, we now have just over 9,300,000 users live on the Banno platform. We continue to enjoy the highest consumer rating in the App Store and we are regularly recognized as the fastest application in the industry. The feedback from our 30 Banno Business beta testing clients has been outstanding and we remain on track to deliver Banno business into general availability later this quarter. Speaker 200:04:48Let me take a moment to address the banking landscape related to the liquidity challenges experienced by a couple of large regional banks in March and earlier this week. Although I'm not aware of any Jack Henry core clients have tapped into the Federal Reserve's new bank term funding program, I think the announcement has had a positive effect on the overall concern in the market regarding bank liquidity, And I applaud the Fed on their swift and decisive action. Since those events grab the headlines, members of our team have spoken with hundreds of our clients And I personally have visited with a large number of CEOs at our client banks. I'm pleased to say that our banking clients have indicated they have been largely unaffected by these events with the exception of several who have reported an influx of new accounts as business clients look to diversify their deposit balances. Our clients typically have a diversified customer base, serve small and medium businesses and consumers in their local communities and have long standing and loyal customers. Speaker 200:05:48So I think it's logical that they wouldn't see an adverse impact as a result of a few extreme scenarios. Also remember that a large part of our business is focused on the credit union industry with approximately half of all credit unions with more than $1,000,000,000 in assets partnered with Jack Henry as their primary technology provider. Those clients also report being largely unaffected by the challenges in the banking sector. In late April, IntraFi conducted a survey which generated responses for more than 550 bank CEOs, presidents and CFOs, Primarily at banks with less than $10,000,000,000 in assets. Approximately 77% of the respondents saw no significant inflows or outflows of deposits, 14% said they saw deposits decline by 2% or more and 9% said they saw an increase of at least 2% in deposits. Speaker 200:06:43I think these results are consistent with what we've heard anecdotally from our clients. We have seen no hesitation on the part of our clients to move ahead with decision since the middle of March. And as I mentioned earlier, this was the largest third quarter in terms of sales bookings in the history of our company. What's more, our sales pipeline is now larger than at any other time, including a recognizable uptick Since our last quarterly call in February. I'm well aware of the challenges bankers face in today's economy and understand that things could change. Speaker 200:07:18But as we speak today, our clients are generally performing well and banks and credit unions are continuing to prioritize modernization of their technology stack to remain competitive and serve the evolving needs of their account holders. Hopefully, you've all seen the new corporate sustainability report that we published on March 31st. I think it's an excellent representation of the key initiatives and accomplishments we've been working on since we published our last report. In this new version, we provided a more detailed review of Jack Henry's demographic makeup, a summary of the results of our annual employee engagement survey, an overview of our data privacy and cybersecurity practices and an outline of our commitment to setting science based targets through the Science Based Targets Initiative or SBTI to address the reduction of greenhouse gas emissions. Additionally, the report highlights some of the public recognition we've received from organizations like Newsweek, Computer World and LinkedIn's top companies list. Speaker 200:08:15As we look toward the end of the fiscal year, our sales pipeline is much larger than it's ever been And we continue to be optimistic about the strength of our technology solutions, our ability to deliver outstanding service to our customers, our ability to expand our customer relationships and our long term prospects for success. I look forward to seeing and chatting with many of you at our Investor Day in Denver in a couple of weeks. With that, I'll turn it over to Mimi for some detail on the numbers. Speaker 300:08:42Thanks, Dave. Good morning, everyone. As Dave shared, Jack Henry had a successful Q3, I will call out the details driving those results and our outlook for the remainder of the year. For both the Q3 and 1st 9 months of our fiscal year, Total revenue is up 6% on a GAAP basis and solidly up 8% on a non GAAP basis. Now on to the 3rd quarter detail. Speaker 300:09:07On a GAAP basis, services and support revenue increased 3% in both the Q3 year to date. Consistent with trends over the past two quarters, services and support were negatively impacted as de conversion revenue decreased, $11,000,000 for the quarter $31,000,000 year to date. This remains in line with the limited broader market activity acquisition activity in our space. With only a couple of months left, we are projecting approximately $20,000,000 in deconversion revenue this fiscal year. However, forecasting deconversion activity is always challenging given the limited advance notice and general uncertainty of M and A. Speaker 300:09:50Our private and public cloud offerings show robust growth this quarter, growing 11% 10% year to date. Product delivery and services decreased 10% in the quarter, 11% year to date impacted by lower deconversion revenue and convert merge activity offset by higher license and hardware revenue. On a non GAAP basis, Services and support revenue grew 8% for the quarter and 7% year to date, which serves to highlight the consistent strength of our business model. Processing revenue increased 11% on a GAAP basis for the quarter and 10% year to date. On a non GAAP basis, The growth was 10% for the quarter and 9% year to date. Speaker 300:10:36The increases were driven by the higher card volumes and services plus robust digital demand. Now reviewing costs. Cost of revenue was up 9% for the 3rd quarter and 8% year to date. Quarterly drivers included increased card processing costs consistent with card revenue growth, higher personnel costs and amortization expense. These drivers are consistent across our year to date results. Speaker 300:11:04Research and development expense increased 13% during the quarter, mostly due to higher personnel costs and license fees furthering innovation. Year to date, these expenses increased 19% based on the same factors. SG and A rose 9% for the quarter, driven by increases in personnel related costs. Year to date, the increase was 8%, driven by personnel, travel, professional services costs, partly offset by the gain on sale of assets earlier this year. We remain focused on actions involving facility rationalization, headcount and travel controls, procurement wins and other expense management. Speaker 300:11:46Collectively, these efforts are helping offset inflationary pressures in driving positive operational results. Despite a decline in net income, primarily related to deconversion revenue and partially offset by a lower tax rate, we delivered fully diluted earnings per share of $1.12 for the quarter. Thanks to our hard working and dedicated associates, GAAP and non GAAP results for the Q3 9 months of the year are consistent with internal expectations and set us up for a strong conclusion to FY 2023. As a reminder, For transparency, the impact from the gain on sale of assets, the Payrails acquisition and deconversion revenue are shown as part of the non GAAP adjustments in the press release. Turning our attention to cash flow. Speaker 300:12:37Year to date, operating cash flow was $207,000,000 down from $301,000,000 in the same period last year due to lower deconversion revenue and the timing of taxes. The tax payments were significant a significant outflow at $64,000,000 in the quarter related to a change in the timing of the deductibility of development expenses. Free cash flow, which is operating cash flow less CapEx and CAP Software, plus proceeds from the sale of assets with $82,000,000 year to date. Excluding the previously discussed tax payments and keeping year to date deconversion revenue flat, free cash flow would have been approximately $163,000,000 While balancing repurchase activities with maintaining a conservative balance sheet, we repurchased 151,000 shares during the quarter. We also returned capital to shareholders through a dividend of $0.52 per share, representing a 6% increase. Speaker 300:13:39Our capital allocation priorities remain consistent. We're focused on maintaining ample liquidity, investing in our business to fuel growth, evaluating acquisitions, paying dividends and opportunistically repurchasing our stock. This consistent dedication to value creation resulted in a trailing 12 month return on invested capital of 20.1%. With that, let's review our outlook for the completion of our fiscal year. The press release included updated full year GAAP guidance. Speaker 300:14:14The GAAP guidance remains inclusive of the PayReals acquisition, gain on asset sales and deconversion revenue. We expect the year to date trends to continue for the remainder of the fiscal year, impacting GAAP results. Most significantly, assuming continued minimal consolidation in our customer base, deconversion revenue will remain muted. Considering year to date activity, we expect approximately $20,000,000 of annual deconversion revenue, representing a $5,000,000 increase from our previous guidance provided on the last call. To be transparent, on our August full year earnings call, we will outline our new approach to providing guidance for deconversion revenue. Speaker 300:15:01While the integration of Payrails continues to meet expectations, there has been 3rd party implementation delays impacting FY2023 revenue, amounting to a shortfall of $3,000,000 This revenue remains in our pipeline. We remain confident in the strategic value and financial performance trajectory. We expect full year GAAP revenue growth for fiscal 2023 to be between 5.5% to 5.9%. With respect to full year GAAP EPS, we expect $4.85 to $4.87 per share with improvement driven from positive impacts from a modestly higher expected deconversion revenue, lower tax rate, partly offset by slight increase in payroll dilution. Non GAAP guidance remains unchanged due to the continued impressive and consistent performance of our business model. Speaker 300:15:57So in closing, we delivered another quarter of strong operational and financial results and remain solidly optimistic about the conclusion of this fiscal year. We thank all of our investors for their continued confidence in Jack Henry. Debbie, will you please open the call for questions? Operator00:16:16We will now begin the question and answer session. The first question is from Rayna Kumar with UBS. Please go ahead. Speaker 400:16:51Good morning. David, in the past, you've spoken about having the ability to sell Dano To non Jack Henry core customers, how is that progressing? And in general, are you seeing the opportunity to sell your for processing services to larger financial institutions? Speaker 200:17:11Yes, good morning, Rana. So questions in there. First off, as far as Banda was concerned, so and I think I talked about this on the last earnings call. I know I've talked In some of the fireside chats that I've done with some of you, we had in fact a plan to start selling Banno outside the base here in the fall of this past year. And what we learned much to our surprise was that some of our competitors had identified that as an opportunity for them to hang on to their core customers. Speaker 200:17:37The fact Their core customer was going to be able to use Banno. They were essentially using that as a selling point for those customers to retain their legacy core system Because they would get the best of breed digital banking system without having to change out the course and that certainly was not part of our strategy. And so We kind of backed off on that. We were prepared in the fall to start selling outside the base. We backed away from that now. Speaker 200:18:01We're really reworking that strategy with a more targeted And so you'll hear more about that from us, I think later this year as far as how we're going to go to market with Banno outside the core base. As far as the now you'll have to remind me the second part of your question. I was selling up yes, sorry, selling upmarket. Good thing I have help here in the room. Selling up markets. Speaker 200:18:23So, yes, the first off, we're having great success with Silver Lake in the banking side. And of course, we're the dominant player on the credit union side already, a market. So approximately 50% of the credit union industry with assets over $1,000,000,000 are already Jack Henry core customers. So we're already the dominant player on the credit union side of the business. On the banking side, We've had great success here in the past few years moving up market with particularly with our Silver Lake core system. Speaker 200:18:51What's been interesting now With the tech modernization strategy, we are engaging with a number of customers now that are significantly larger than you would normally think of as a Jack core customer. We're very interested in what we're doing and are now seeing Jack Henry as the very probable technology partner that they want to partner up with going forward. So More to come on that. It's early days for us with some of these very large customers that we're talking to, but the prospects I think are pretty bright And much of that being driven by the tech modernization strategy that we've been talking about lately. Speaker 500:19:28Very helpful. And then if Speaker 400:19:29I can fit one in for Mimi. Mimi, could you just comment on the debit processing volume in the quarter? And secondly, if you can just give us your preliminary thoughts on how FY 'twenty four revenue and operating margin could pan out given that you're close to your fiscal year end? Thank you. Speaker 300:19:50Thanks, Rina. Yes, so we continue to see the trends that have happened for the 1st 9 months of the year, and are consistent with the broader market data that you're getting from other industry players in terms of Slightly slower as it relates to the consumer sentiment impacting those trends, and a little bit more going to the credit side than the debit And as you know, we have a much bigger profile on debit in our business. So, our guidance incorporates the continuation of that trend. And then to your second question, unfortunately, it's a little premature at this point to talk about FY 2024. Our teams are still heads down, collaborating on the budgeting process and we'll probably share that more on the August call than we will today. Speaker 200:20:38And can I add one comment on the Trent, so I think there was a bit of a misunderstanding after the last call? We attributed a part of our guide change to the fact that the debit volumes we saw Going forward, we're going to slow just a little bit. And certainly that's true, but that doesn't mean the debit business Is underperforming. The debit side of our business has been a real solid performer for us this year. We just had a little higher expectation for the remainder of the year then is reality and that's why we made the adjustment, but the debit business is performing extremely well at Jack Henry. Speaker 400:21:14Thank you. Operator00:21:18The next question comes from Dan Perlin with RBC Capital Markets. Please go ahead. Speaker 600:21:26Thanks. Good morning. Dave, I had a question going back to the demand environment. I feel like This huge disconnect in the market with the stocks and kind of what we hear from the banks versus what you're seeing. I'm just wondering if maybe we're getting it wrong a little bit. Speaker 600:21:40Like is The pressure that the banks are feeling right now driving more tech demand to you as opposed to maybe the converse, which is I think what most people are expecting? Speaker 200:21:50Yes, it's an insightful question, Dan. And I think what you're saying is generally correct. So if you're running a bank or credit union in the United States today, They've been performing pretty well and we all know the challenges that they're under and rate increases and cost of capital and that kind of stuff. But if you're running a Bank of Credit in the United States Today, you for almost all of them, they need to continue to focus on modernizing their technology stack for one of 2 reasons. 1, You're trying to attract new customers to your institution and customers aren't coming into the branch anymore, right? Speaker 200:22:21They're expecting to do things through some type of digital presentation layer. So for most banks and credit unions that requires them to continue on this modernization track and make sure that they have the tools to attract not just consumers, but business customers, small, medium business customers are the lifeblood of our customers and how they operate on the banking side. And so there's that driver, but then the other side of the equation is Efficiency. So for most bankers, they can quote their efficiency ratio immediately to you without looking at any piece of paper. They can quote it off the top of their head Because they are all focused on efficiency and trying to figure out where are those areas where we can drive efficiency through the operation. Speaker 200:22:59Well, generally, technology is that the kind of the crux of where they're going to find efficiency. And so there too, Jack Henry is in the mix having those conversations with our customers. And then you throw into that, on top of that fraud and cybersecurity and all those kinds of things, all of that is driven by technology. And so, yes, I think there is a bit of a disconnect in this sense that because there's some turmoil in the industry, Jack Henry sales are going to be negatively impacted. They're just not. Speaker 200:23:30The businesses continue to run and they need to continue to find technology solutions to help with all those things that I just highlighted. Speaker 600:23:39No, it sounds somewhat counterintuitive, but I mean, it clearly makes sense in the current context. The quick question And our follow-up on margins here. I know you don't want to go out to next year, but I would appreciate if you could maybe talk about some of Key drivers and levers that you're going to be able to have here, whether it be expense control specifically, kind of mix of the business, Just as we start to think about the margin expansion story again. Thank you. Speaker 300:24:05Sure, Dan. Great question. So as we talked about Previously, we continue to see margin expansion throughout the year. We knew it would be a modest amount this year. Earlier in the year, our original guidance was for flat for the year, we're hopeful that and we're on track for a small increase in margin expansion. Speaker 300:24:26I would say the things we're working on are consistent. We do a ton around efficiency, continuous improvement. We've done a lot on internal Automization and procurement has been a huge win for us as we think about streamlining partnerships and really prioritizing that spend. So we're being really thoughtful on controllable spend like travel, headcount, positions, really thinking about each position from a 0 based perspective. But there's nothing structurally that concerns me in terms of the ability to once again continue back now that we have the normalization of some of the headwinds we've seen past years and return out of COVID environment they will return back to a margin expansion story. Speaker 600:25:13That's great to hear. Thank you. Operator00:25:17The next question is from Nick Cimino with Credit Suisse. Please go ahead. Speaker 600:25:24Hey, congrats on the strong results. Thanks for taking my question. I was hoping to get some more color on the performance in the payments segment in the quarter just across The various business lines and if you received any one time benefits related to the banking turmoil like some of your competitors. And just as my follow-up, are you still expecting payrolls to be modestly accretive in FY 2024? Thank you. Speaker 200:25:50Let's do payrolls first. Greg is prepared to give you an overview of payrolls and then we'll talk about the rest of the payments business. Yes. Speaker 700:25:57And I think So I'll go ahead and start with payrolls, but a couple of things. So one, Mimi alluded to the fact that in her opening comments around, we do have some challenges with a couple of third parties. And I think some of it's headcount related and other constraints that they have to get some of the work done to allow some of our contracts that are already done and in the implementation queue to be brought into the production queue. So there's a few of those constraints and things that we're working through. But the good news is, is that since September when we made that acquisition, we've actually sold 48 new contracts and 17 add ons. Speaker 700:26:38Add ons are things like the P2P solution. We have a loan payment solution, things like that. So The sales engine is starting to move and a lot of the sales that were done previously before we acquired Payrails We're really predominantly done through that 3rd party channel. So of course, we have a much larger sales force and folks that are focused on selling more direct deals. So We're pretty very optimistic on what's happening in the sales side of this. Speaker 700:27:06We just need a couple of the integration partners to be able to get some of their work done that will help us accelerate the revenue in fiscal year 2024. And I can start on the payment side too. So I think and Mimi alluded to what was going on, on our card business, which continues To go very, very strongly as far as growth. But when you look at the rest of our payment businesses, there's a nice mix of growth, Maybe not to the same level that we had. Remote deposit capture in our EPS business was significant during the pandemic. Speaker 700:27:40Obviously, folks or not going into branches at all, though that continues for the most part. That business is not growing at the same pace it did, but still in a double digit growth in our portfolio. So things that we're doing in our PayCentre business around General payments and preparation for FedNow, which we can talk about at some point too. But in our The clearinghouse business and what we've done with Zelle, we continue to have about 60% of all the clearinghouse customers That are out there, there's only about 300 clearinghouse and we have over 180 that are live on Jack Henry today. That continues to grow nicely. Speaker 700:28:22And so that business continues to have a lot of upside. Speaker 300:28:26Yes. I would just add that there's consistency to To Greg's point, there's consistency across remit cards, payments, also led by things like the fraud and other risk management solutions that are add ons. So I would say that trend from a consistency of growth will continue and then added by the benefit of payroll. Operator00:28:50Okay. The next question comes from David Togut with Evercore ISI. Speaker 800:28:59Thank you. Good morning. You've called out your new sales pipeline At a record level, could you walk through what are the biggest drivers of that? Is that new tech modernization modules? Is it Banno Business, Silver Lake, what are the underlying components of that strength? Speaker 200:29:17Sure, Dave. And one thing I'll highlight as I go through this, When I talk about pipeline, I know there's been some confusion in the past. I'm not talking about individual deals, how many core customers are in the pipeline or anything like that. I'm talking about the dollar amount essentially. And this is a non GAAP number, but it's the dollar amount that we track as far as the value of each contract. Speaker 200:29:37So it's In theory, that all converts into revenue at some point after deals are signed and they're implemented. As far as the drivers, So core continues to be king for us when it comes to a driver. We have just a tremendous amount of core activity right now, both banking and credit union As far as customers that are talking to Jack Henry about trading out their existing technology, some of that is certainly driven by tech modernization, But I don't think it's as much driven by I want to sign tech for the tech modernization module right now today. It is more about Jack Henry has a strategy that makes sense to us as bank and credit union executives. Their strategy makes sense. Speaker 200:30:16We need to look at them now and get Jack Henry now because we want to be partnered with them as they continue to evolve. And so there's a lot of that that's driving interest in our existing core customers, Silver Lake primarily on the banking side and of course, Simitar on the credit union side. But then on top of that, Banno continues to be A driver and that's why I call it out on these calls almost every time. There's a tremendous amount of interest in Banno, Our new Financial Crimes Defender solution that we've talked about on this call, that's rolling out here very soon. We have a lot of Fraud solution in the industry in many years and so lots of interest not only inside our core base but outside the core base in that solution. Speaker 200:31:07Our treasury management solution is getting great reviews today, so continued interest in treasury management. Certainly cards, we've talked about the number We've been adding to the cards business, so continuing to drive interest there. Our online commercial lending solution, tremendous amount of interest in that. So it's just a broad variety of solutions. I think the common thread in all of that is Almost all of those non core solutions have been written and rolled out within the past 2, 3, 4 years. Speaker 200:31:38So it's a new technology that people are Speaker 300:31:41And then Speaker 200:31:41of course on the core side, you know all about our tech modernization initiative there. And so you put all those things together, much of what's driving this is the Recognition in the industry that Jack Henry has put a tremendous amount of investment into brand new technology and new solutions to help our customers solve problems, and so that's what's getting us a lot of attention. I'd like this is Greg. I'd like to Speaker 700:32:06add a relevant example. So we actually just got an inbound request from a large regional That hadn't talked to us since 2010 and they came to us and said, hey, we'd like to renew conversations based on what we've heard about you in the industry, the tech modernization story and things in general. And that's a relevant example because these are larger institutions that we typically wouldn't have seen in the past that again that are inbound to us because of the things that we're doing and the stuff that Dave just described. Speaker 800:32:39What's the asset size of that large regional bank, Greg? Speaker 700:32:43It's greater than 50,000,000,000 Speaker 200:32:47And we're engaged today Dave with a number in the mid-twenty billion space. Several banks in the mid-20s are talking to us today and I think a lot of it is because of they've seen with tech modernization and but they're not talking about moving right to that platform. They're talking about Silver Lake and then evolving to that platform. Speaker 800:33:07Understood. And just as a follow-up, what's your latest view on timing of rollout of FedNow, Jack Henry's role and how material could FedNow be to Jack Henry over the next 12 plus months? Speaker 700:33:24Yes, this is Greg. I'll take that question as well. So good insightful question. We are absolutely ready. We're already fully certified. Speaker 700:33:32And on July 19th, when the first transaction takes place, we will be part of that transaction process. We have 20 institutions that will be going live between the July 19 timeframe and sometime in late August based on just rollout with those institutions, we can go as fast as they want to go. We have 51 contracts that are already sold and a significant number of others that are in process just based on interest. I think to your point about significance of where this Is in our portfolio, time will tell. A lot of it's going to be based on use cases And there's a lot of rumors that the Fed in general will be mandating several use cases that will be important for institutions to be set up on the receive now at least aspect of the equation allowing them to receive payments if one comes to them. Speaker 700:34:29So we are having very detailed conversations with a lot of our institutions about the importance of at least being set up on the receive aspect, even if they're not ready to go to the send aspect. But again, we're very bullish on this. The clearinghouse, There had been some challenges just because some institutions that we work with were a little leery of working with The larger conglomerate that owns the clearinghouse versus the Fed being a part of this. So we think we're going to see a little more uptick in the FedNow solution that maybe that we saw so far in the clearinghouse one. Speaker 200:35:10Just to emphasize, Dave, the level of our involvement with the Fed on this project, I was just in Washington DC on Monday, so 2 days ago, meeting with some of the Fed presidents and the FedNow team and the President of our with the Fed and very, very it's top of mind for us to make sure that we're helping our customers take advantage of this opportunity. Speaker 800:35:41Understood. Thank you. Operator00:35:44The next question is from Vasu Govil with KBW. Please go ahead. Speaker 500:35:50Hi. Thank you for taking my question. I guess first one, I know you will share more on your Investor Day, but just thinking about revenue growth next year, so what are some of with the puts and takes that we should consider? Speaker 300:36:04Hi, Vasu. Well, I appreciate the question. We're still in the midst of planning. In fact, this afternoon, we'll be spending the whole afternoon with the sales team on their planning for next year. I would say overall, as Dave mentioned, a continuation of both the transition and implementation from a great pipeline from the last two years, plus the continued interest in some of these new products, BANO business wasn't in the year numbers for FY 23 will be in 2024, so that's a nice bump as well. Speaker 300:36:38But I would say it's going to be a continuation of a diverse portfolio growing very well. Speaker 500:36:47That's helpful. And then just to follow-up on the complementary segment. Clearly, Banno is The big driver there, maybe David you could talk about what are the some of the other products that rise to the top in terms of growth drivers. And then as we think about growth in that segment long term, is mid single digits toward the right base going forward or do you see that accelerating? Speaker 200:37:08I'm Sorry, I missed the last part of your question is what? Speaker 500:37:11Mid single digits. Speaker 200:37:11Oh, mid single digits. Okay. Speaker 500:37:13Yes. Speaker 200:37:13Sorry, yes. So as you know Vasu, the segment is a little bit of a challenging one to talk about because there are so many solutions in there, but I understand your point trying to figure out what are the key drivers. So there are several. I already highlighted the Financial Crimes Defender solution that we're just now rolling out. So we definitely expect that to be A key driver for us in the coming year, Banno is in that segment and so Banno will of course continue to be a driver as we're rolling out Banno Business. Speaker 200:37:40Treasury Management that I called out a little while ago, treasury is in that segment that will continue to be a driver for us. Most of the fraud solutions that are not specific to payments, so the payments fraud pieces show up in the payments segment, but the other Fraud type things, security solutions for example, those are all in that segment that is always top of mind for our customers. So that continues to be A driver for us as well. So it's just a lot of different things. And then as I mentioned earlier, our online commercial lending solution That has really picked up here in the past several months. Speaker 200:38:17We've had that solution in market for probably 4 years now, but in the past few months, it's really picked up as far as level of engagement with customers and prospects. And so a bunch of different pieces. And so to the second part of your question about mid single digits, I think that is a good assumption because with so many solutions in there, you have some that are growing quickly and some that are kind of just steady Performers and so I think that's a good assumption for that segment for the long term. Speaker 500:38:45Great. And just on that online commercial lending solution sort of any drivers by using that's gaining more traction now? Speaker 200:38:52Yes. Well, I think it's because it's an Interesting thing when you work with banks. In banks, most bank CEOs grew up in the bank as a commercial lender. That's their background for most of them. Commercial lenders, they're the moneymakers in the bank, right? Speaker 200:39:07You can talk all day long about all the consumers and what wonderful relationships you have with But what really makes money for a bank is the commercial lending business. And so that's small, medium business customers and then of course even larger customers. Commercial lenders tend to have a process that they follow. They're the moneymakers. They're the people who have a process that they They have tended traditionally to be averse to using more technology. Speaker 200:39:33And but now with So many people, particularly on the backside of the pandemic, so many people not wanting to go to the branch, they've gotten used to this idea of being able to do everything through some kind of a digital layer, commercial lenders are getting a lot more comfortable with the idea, and I don't say they like it, but they're accepting it. They're getting more comfortable with the idea that their customers, small, medium businesses expect to be able to apply for a loan and interact with the bank using a commercial presentation layer. That's exactly what our solution does. It's a complete commercial lending solution that is hosted online where the borrower can do everything they need to do through that presentation and then the lender can interact with them again through that technology. So I think it's a result of the backside of the pandemic, customer expectation has changed and lenders are kind of Oftentimes grudgingly accepting the fact that their customers want to do things differently and they're now thinking about how do we adopt different technology to make sure we take care of our customers. Speaker 500:40:37Great. Thank you very much. Operator00:40:39Certainly. The next question is from Peter Heckmann with D. A. Davidson. Please go Speaker 900:40:46ahead. Hey, good morning. Most of my questions have been answered, but I wanted to follow-up on FedNow. I guess, is it your impression that with FedNow The primary use case is going to be enterprise B2B and likely replacing same day ACH. And related to that, are you aware of any other use cases that might involve the consumer or other Certain niche processes that you think are going to be strong right out of the gates? Speaker 700:41:18Yes, Pete. Actually, I think that Could be one example. I think what we have seen even with some of the other solutions that are out there that we think will be the primary use case is with the gig workers. The gig workers taking the payments that they're getting and moving them using and remember the FedNow solution actually It's truly real time. The clearinghouse solution still has kind of a batch settlement on the back end. Speaker 700:41:44And so the ability though they have to their funds immediately, the process is different. But using the gig workers to move those funds into their FI accounts, We see that today with a lot of the stuff that we have with the clearinghouse and the Fed believes that to be a big one. The other one is having the FI customers, the financial institution customers actually moving money from external wallets into the depository accounts as well. So There's a whole host of use cases that are being built out of those two scenarios, as well as and Dave was just there, There's going to be some, I don't know if I would call them mandates, but there's going to be some strong Requests for things to be done through the FedNow account for stuff like various Tax payments Speaker 200:42:38and one of the things we talked about Monday was VA benefits. Yes. Speaker 700:42:41So there's going to insurance payments, things like that. Things that the treasury and the Fed can control, they're going to be pushing that. So that's why it's important for processors like Jack Henry, who can really kind of help get to that last mile of institutions to get that receive now turned on. So Regardless of where that payment is being initiated from, it has a place to land. Speaker 900:43:08Okay. That's helpful. And then just to clarify Again, with that now, it doesn't sound as if there's a lot of applications that are currently either cash based or card based That we've replaced with real time payments. It's primarily some form of ACH or interbank transfer. Is that how you see it? Speaker 700:43:29No. I do see some reasonableness to some of the Card products, there's various things that happen today in the B2B world, that where transactions that typically would have gone out paper, maybe would have gone out through a virtual card program or things like that where there's interchange and some of those programs could be disintermediated because of this type of solution. So I think there's going to be some heavy focus on B2B solutions as well because there's so much Paper in the process today and other types of card payments maybe at a merchant level, where depending on how the merchant is set up, could those transactions to them or from them end up going through that channel as well. So Yet to be determined, but I think the card part Speaker 200:44:23of this, Speaker 700:44:25specifically on merchant side and specifically in B2B payments Could have some chances for disintermediation. Speaker 900:44:32Okay, good. That's helpful. Thanks. Speaker 1000:44:35Sure. Operator00:44:36The next question is from Kartik Mehta with Northcoast Research. Please go ahead. Speaker 1100:44:44Hey, Dave, I know you and I have talked about this a little bit, but one of the things I think that gets misunderstood is how strong your pipeline is and how much visibility you have on revenue. And I'm wondering if you could just talk about you've talked about how the pipeline has grown. Just looking at the pipeline and what kind of visibility you have and what kind of confidence that gives you over the next 12 to 18 months? Speaker 200:45:08Yes. Thanks, Kartik. So it's an interesting thing in this the business that we're in with the recurring model recurring revenue model that we've built. So first off, when it comes to the contracts that we already have signed, we of course have a tremendous amount of visibility because we're almost 90% recurring revenue as far as The contracts that we have in house and the kind of watching the revenue build on those contracts. And then you know that once we sign a customer, oftentimes Depending on the product, it can take 1 month to 12 months depending on what they purchase from us for that revenue start layering in, so we see the bit and we have visibility into that. Speaker 200:45:46And then as far as the pipeline is concerned, So when you've been doing this as long as I have and I've been doing this a long time, we have a very predictable model. So I can I'm not going to quote numbers here, but I can tell you with a pretty high degree of accuracy if the pipeline is X then Y percentage of the pipeline is Very likely to close because we have years years years of history doing this. And so we know that that's going to translate into Z dollars of revenue over time and so we can kind of do that math and predict pretty accurately what the impact is going to be. Now the challenge again is some of those solutions you sign a contract today and we won't see you the first dime practically of revenue for 9 to 12 months. Some of them you sign a contract today and you have revenue flowing in 1 month. Speaker 200:46:33And No, there's some art to this, but there is a lot of science to it as well just based on all the experience that we have doing this for as long as we have and understanding The way these contracts works and the way customers make decisions. Speaker 1100:46:47Well, sometime you'll have to give it to X, Y and Z, Dave. Speaker 200:46:51Not That happens. Speaker 1100:46:54And then just thinking about, I don't want to call it a banking crisis, just the issues that are out there. And looking at Jack Henry when the last crisis happened and kind of how you looked at the business then and what And if there's any lessons you could take from that and what's happening today. I know they're very different, but just trying to get a feel for maybe What we could clean? Speaker 200:47:22Yes, it is a very different environment today from 2,007, 2008 for sure. And of course, if you go back in time and look at Jack Henry's performance during the period of the Great Recession, we performed really well, even though there were hundreds of banks that were being shut down at that time. And of course, many of them were our customers that were being shut down. So I think the major difference, if you look Specifically at Jack Henry between then and now is at that time we were still very dependent on license fees and maintenance revenue. So when customers kind of pull their arms in and said we're not spending on anything, our revenue had the potential to drop Significantly because we were so dependent on license fees and whenever you sell a license, you see the impact in the quarter as opposed to being spread like we do today. Speaker 200:48:11Today, of course, so back then we were maybe 50%, 60% hosted. Today we're recurring revenue. Today we're 90 percent recurring revenue. So very different from a Jack Henry perspective as far as the predictability of revenue because if a bank is challenged unless they shut down, They don't quit spending money with us. They don't decide all of a sudden we're just going to quit processing loans. Speaker 200:48:34You have to still process loans, which means you still have to pay Jack Henry for that service. And so today I would draw a significant contrast as far as our business and the resilience of our business as bankers are going through what they're going through right now. That does not say we're bulletproof. It doesn't say we're totally immune to any challenges out there. But I think we have a much more resilient model than we had during the Great Recession at that time. Speaker 200:48:58And again, if you go back and look at how we performed during that period, We performed pretty well. And so my expectation is that we should be able to weather this storm right now. And of course, much of this storm is the result. I mean, these are runs on the banks that are happening, right? So you get some headline somewhere that says this bank As liquidity challenge and by the way, liquidity and capitalization, those have been conflated over and over in these conversations, 2 totally different topics. Speaker 200:49:25And yet, the run on the banks are happening because wildfire the spreads like wildfire through social media that there's some challenge at a bank, everybody uses their digital banking solution to withdraw money from the bank and all of a sudden they're in trouble. And so I just view this as 2 totally different scenarios. But if I look specifically at our company, we are in a much better position to weather the storm than we were even in 2,008 and we performed really well in 2,008. Speaker 1100:49:54Perfect. Thanks, Dave. I really appreciate it. Speaker 200:49:56Certainly. Operator00:49:58The next question is from John Davis with Raymond James. Please go ahead. Speaker 600:50:05Hey, good morning. Mimi, just wanted Speaker 1200:50:06to follow-up on Dan's question around margins. So I think the guide implies about a 2 50 basis point year over year Improvement in the Q4. So anything to call out from a timing perspective or what kind of gives you confidence in that ramp in 4Q margins? Speaker 300:50:21Yes. Thanks, Judy. Great question. Yes, I think that $250,000,000 is a good estimation. I think we feel good about that. Speaker 300:50:29We always knew that it would be a grow as the year continued kind of situation, and we're seeing that transpire. So I feel good with that Speaker 200:50:38estimation. Okay. And then, Speaker 1200:50:40you called out tax payment timing, for the free cash flow in the quarter. So how should we think about Free cash flow conversion for the full year, obviously 4Q is always a huge free cash flow conversion quarter. So just curious, I think you guys did like mid-80s conversions last year. Just any sort of guide rails for us for the full year. Speaker 300:51:00Yes, great question. And J. D, I love that you're looking at it on an annual basis versus a quarterly just Because of the lumpiness that any one quarter can have in this quarter, in particular, between the deconversion and then, the larger tax payments and just kind of going into that, we were waiting for some legislative clarity around IRC 174 like a lot of tech companies that impacted The capitalization, the deductibility of that capitalized labor, unfortunately, with lack of legislative clarity, we had to make a payment. So you would have normally seen that kind of maybe spread over a couple of quarters. That's a timing thing. Speaker 300:51:38It doesn't impact our tax rate that will reverse over several years and kind of normalize. So, I think that obviously will not be a part of Q4. As you said, we have a large inflow, so you'll certainly see an uptick. I think the reality is because of deconversion revenue, we also have A couple of larger renewals of some third party expenses in Q3, I think will be light of our target of the 100% that free cash flow conversion target, but I think it will definitely be an uptick from Q3. Speaker 200:52:13Okay. And then last Speaker 1200:52:14one for me. Dave, you talked about some of the impacts From all the banking turmoil has been kind of increased in account growth. So maybe how should we think about your business? Like what percentage of revenue ballpark Is priced on kind of a per account basis versus transaction or anything else just to kind of help us understand what the account growth can mean from a revenue perspective? Speaker 200:52:36Well, I don't know that I know the answer to that question. Anybody want to give me a guess? It's more I mean the payment businesses, but he's talking about account Based, so it's the core business essentially. Yes, 25%. 25%. Speaker 200:52:50Okay, we'll go with 25%, JD. Speaker 600:52:52Okay. All right. Thanks guys. Sure. Operator00:52:56The next question is from Dave Koenig with Baird. Please go ahead. Speaker 600:53:01Yes. Hey, guys. Thanks. And Maybe Speaker 800:53:05I guess, first of all, just on Q4, kind Speaker 600:53:07of the implied guide is for somewhere around 6%, I think, kind of non GAAP revenue growth, Which the rest of the quarter of the year, I think we're kind of 6% to 8.5%, so it's a little slower. What's the reason for the slower in Q4? Speaker 300:53:23Yes. Hi, Dave. Good morning. I would say, if anything, I think there's a little bit of conservatism in that. I would Maybe be a slightly biased towards the higher side of that range. Speaker 300:53:35I think with a little bit of uncertainty still in the consumer sentiment, We just wanted to think about a little bit conservative, but the trends I feel are still quite strong for the year and in terms of getting us to our full year number or better. Speaker 600:53:51Okay. Okay. And then, And I guess on Payrails, I think year to date, you add back the loss from acquisitions to non GAAP margin, I believe. And I think it's trended like around $10,000,000 year to date loss, so probably a little more by the end of the year. Is that all going away in 24, and basically is that why you can get to accretion in 2024, like is that just the main what just kind of goes away? Speaker 300:54:22So it will not be part of non GAAP in 2024 for sure. So that will be one component. But I also think it's just a question of having let Some of those inflationary pressures like the great resignation, the wage inflation we saw, some of the 3rd party one time costs Like Java are now in our normalized base rate. Speaker 200:54:41But he was specifically talking about payrolls. Speaker 300:54:43He was talking about the impact on March. Okay. So I think we're still set for margin expansion in 'twenty four because of the base now running through the 'twenty three numbers where it wasn't in the 'twenty two numbers. So I think we're still in good shape, as well as some of the efficiency measures that we're continuing to focus on internally. Speaker 600:55:03Got you. Thank you and I appreciate it. Operator00:55:07The next question is from James Faucette with Morgan Stanley. Please go ahead. Speaker 1000:55:14Hey, good morning, everybody. Thanks a lot for taking the time. I think most of the questions around demand and sales cycle, etcetera, You guys have at least addressed a little bit. I wanted to ask quickly on capital allocation. I think Dan Perlin raised kind of the change in sentiment in the market and clearly that's impacted your stock. Speaker 1000:55:39At the same time, We continue to wonder about M and A. So just any comments how you're thinking about capital allocation and what looks attractive to you right now and how you prioritize? Speaker 200:55:51Yes. So nothing has changed there, James, as far as capital allocation is concerned. We're committed to our dividend policy and Mimi emphasized that in her comments. Besides that in her comments, we as we've said many times before, M and A is always at the top of our list. We do share buybacks when it makes sense for us and Mimi highlighted that of course in her comments as well. Speaker 200:56:13But M and A, No, we are a I've said many times, we're a solid acquirer. We know how to do integration well of companies once we acquire them. We're very disciplined and only pursuing acquisitions that we think are really going to be additive to our business in the long term. I think Payrails is a great example of that. You've seen that it's a little challenge in the short term, but when we look at what we're doing with that business in the long term, I think it's going I'm absolutely convinced it's going to be a real Home run for Jack Henry in the long term and that's the way we think about doing M and A. Speaker 200:56:45We're always looking for those things that we believe we can take Advantage of is a long term solution for our customers to help our customers perform better. Now, I was hoping and I've said this in many forums that by this time and even several months ago that there would be a lot more interesting M and A opportunity for Jack Henry, we have been looking at some companies. We continue to look at some companies to acquire, but There just hasn't been anything that has kind of jumped over that bar for us so far here even though the deal flow hasn't been particularly strong. We have been looking at some deals, but nothing's jumped over the bar here recently, but we're going to continue to look. Speaker 300:57:27The only thing I would add to that James, just to add one more thing, which is consistent with our priorities is paying down the debt through our normal cash flow from And so you would expect to see that over the next several months, years that we're going to continue to decline the debt balance. Speaker 1000:57:48Thanks for that Mimi. And then Dave, we've seen a lot of headlines around technology layoffs and headcount reductions, etcetera. How is that impacting your ability to go out and hire and add talent to the Jack Henry pool and maybe that even out of your customer? Anything you can talk about there? Speaker 200:58:08Yes. So we've it's been an interesting time since the great resignation. We went from the great Designation where everybody was resigning their jobs and going to find the pot of gold at the end of the rainbow to within about 3 months all of sudden, companies were doing these massive layoffs. And so, a lot of heads were spinning, I think, among employees of a lot of these companies. So for us here in the recent past, we have picked up some really good new hires and we've had some So what we refer to here as boomerangs, people who left because they wanted to chase the pot of gold and then they realized the pot of gold wasn't there and they And those are great additions to us because they already know our company, they know how we do things and they're oftentimes really talented folks. Speaker 200:58:55So we've had a number of boomerangs come back. We are attracting some great talent from some other companies in our space that have been challenged and so they understand the industry, they understand what we do, may not understand the Jack Henry products completely, But we found some really good talent, people that were a little shaken by what's happening at other companies in the industry who are looking for A steady provider and so they've joined Jack Henry. So, but we're not just hiring left and right. We're being very judicious about when we hire and where we hire. And so, we're trying to be very selective about who we choose to join the Jack Henry team, but I think the overall message would be We've had some great additions to our team in the last 2, 3, 4 months. Speaker 1000:59:43That's very great color there, Dave. Sure. Operator00:59:47The next question is from Dominic Gabriel with Oppenheimer. Please go ahead. Speaker 1300:59:53Hey, great. Good morning, everybody. Speaker 900:59:57David, I don't Speaker 600:59:58know the best way Speaker 1300:59:58to ask this, so I'm just going to go ahead and ask. I guess you're the sole survivor of The big four companies in core platform as far as CEOs go from pre pandemic. A lot of our clients actually do ask about what is the long term Succession plan, if there even should be one, you've had a major contribution to this enterprise. And so I do get questions about, If a succession plan ever came, would it be someone inside, outside? How do we think about that not thinking about timing, but What does the succession plan look like in the past for Jack Henry, in general for CEO? Speaker 1301:00:48And I'm not saying you should leave. Speaker 201:00:51That's the most polite way everybody has everybody's tried me as old. No. You're old Dave, so what's the plan? No, so Dom, it's a reasonable question. Obviously, I can't share specifics about either my timing or succession planning at Jack Henry. Speaker 201:01:09But I will tell you and then of course I'm also Board Chair, it's Jack Henry. And so this is a real focus for us is making sure that we have a solid succession plan in place. As a matter of fact, So next week is our quarterly Board meeting and in May the Board meeting in May is when I always review with the governance committee my personal succession plan, I also review with the entire Board the succession plans for the entire leadership team. So I'll have All the members of the leadership team with their successors or what the plan is. So if it's an internal candidate, I'll highlight that for the Board. Speaker 201:01:44If it's a plan to do a search, then we I'll highlight that as well. And so all of those options are on the table. What I normally do is I walk in to the governance committee meeting with some suggestions of internal candidates and also external candidates. I know a lot of people in the industry and I know people who might be a decent fit for a role like this. And so I try to give the Board a good kind of overview of who potential candidates might be and then ultimately of course it's the Board's decision to hire or fire the CEO. Speaker 201:02:17And so But we have a very rigorous exercise that we go through around the topic of succession, not just for me, but for all members of the leadership team at Jack Henry. Speaker 1301:02:27Excellent. Thanks so much on that one. And Mimi, you mentioned in the prepared remarks a few times about personnel related costs increasing year over year. And this was kind of talked about in the last question, but not exactly. Is there a way to kind of break up new hires versus wage inflation Versus tech talent demand in those growth rates or just to kind of parse out largest factor, least Important factor as we think about the go forward growth in expenses for personnel? Speaker 301:03:05Thanks so much. Yes. It's good question. I would say the headcount on account basis has been modest. We're about 3% increase in headcount from a number of positions year on year, which is a much lower percentage than obviously the fully baked cost of that. Speaker 301:03:24As Dave mentioned, we're being very judicious on where those heads go. We've been focusing on customer facing roles like Service roles as well as R and D roles. And then we look at every role on a 0 based budgeting perspective when we're thinking about that. I can't really give you a lot of breakout in terms of because we just don't provide that level of detail in terms of Vacancies versus new, and rollovers, but I would just say we're being really judicious about it. Operator01:04:00The final question is from Mark Feldman with William Blair. Please go ahead. Speaker 1401:04:07This is Mark on for Chris. Thanks for taking the question here. So just wanted to ask on Banno, do you guys have any information regarding the asset size of the institutions that are you're seeing, the primary uptake From Banno and any interest in it. Then I guess additionally adding on to that, what does Banno for Business do for your sales ability to close Banno signings that they didn't have before without the offering. Speaker 201:04:34Yes. So we have about 700 ish Clients that are live today on Banno, and they are all over the board as far as asset size. I would say that The primary adopters have been a little bit on the larger side. So let's say, averaging closer to $1,000,000,000 probably as opposed to something smaller than that. So that's been the primary adoption, but we continue to see great demand across asset sizes. Speaker 201:05:00So and as I highlighted earlier, most As far as Banno Business, so if you think about traditional Banno, it is designed for the retail consumer. So you or me, and all All the functionality is retail in nature. Banno Business provides that a similar functionality, but for business customers. So specifically things like cash management and the ability within the application for the, let's say, the CFO of the small business, medium business and the CEO to communicate about financial transactions within the application. So it's a really interesting and robust application designed specifically to help a business manage their business and communicate about financial transactions and decisions within the business, but in the financial application. Speaker 201:05:55So it's a revolutionary new solution and we have a lot of bankers that are very excited about the rollout of this platform. Speaker 1401:06:04Great. Thanks. And if I can ask you just one more on cards with credit cards. I know in the past, You originally didn't have the sales force that could go out and the infrastructure to go out and sell the product. Do you have any update on where that is today? Speaker 1401:06:18And once When we can start seeing some deals getting signed with credit cards? Thank you. Hey, Mark. Speaker 701:06:25This is Greg. I can take that one. So yes, we have a dedicated sales force. We also have dedicated install and operational folks that now all have the experience. So That is starting to ramp up. Speaker 701:06:37We also added, if you saw a press release we did a couple of months ago on an agent program that we've added, We now have a lot of interest in that agent program and that's typically for smaller institutions that they themselves don't have The folks are the infrastructure to really support that type of full service credit solution. So that's given us another angle to sell the credit side of our business. We already have, I think, 2 or 3 now in the pilot phase of that, and we have a pipeline of about 10 or more Just in the last 2 to 3 months. So that's starting to grow, but that all of those products will continue to accelerate over time. Speaker 901:07:21Great. Thank you. Operator01:07:23Sure. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Speaker 101:07:33Thank you, Debbie. We have additional upcoming investor engagement opportunities with management at multiple investor events. The first one is going to be our Annual which will be held in Denver on the afternoon of Monday, May 15th at 1 pm Mountain Time. The agenda includes presentations from wide selection of the Jack Henry management theme and reception that will include demos of some of our newest solutions. We look forward to hosting those attending in person and via the webcast. Speaker 101:08:01We are pleased with the quarterly results and thank all Jack Henry associates for their efforts in producing these results. Thank you for joining us And Debbie, would you please provide the replay number? Operator01:08:14Yes. The replay number for today's call is 8 773447529. And the access code is 1,000,000,000,000,000,000,000,000,000,000,000,000,000,000 The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by