Mimi Carsley
Chief Financial Officer and Treasurer at Jack Henry & Associates
Thank you, Greg, and good morning. Our continued focus on serving our community and regional financial institution clients, investing in our joint future and delivering shareholder value led to another quarter of solid revenue and earnings growth. I'll begin with the details driving our as-expected strong second quarter and year-to-date results, then conclude with our full-year guidance update.
Second quarter GAAP and non-GAAP revenue increased 8%, a continuation of the strong start to our year and keeping us on track for a tremendous fiscal 2024, as year-to-date growth was 8% on both a GAAP and non-GAAP basis. Deconversion revenue of $4.9 million, which we pre-released last week, was down approximately $1.5 million, reflecting minimal financial institution consolidation. Year-to-date, deconversion revenue is $9.0 million, $1.9 million less than the prior period. As a reminder, effective September 1 onward, Payrailz results are included in both GAAP and non-GAAP figures.
Now, let's look more closely at the details. GAAP services and support revenue increased a healthy 7%, while non-GAAP increased a more robust 8%. The first-half increased 7% for GAAP and 8% for non-GAAP basis. Services and support growth during the quarter was the result of increases in data processing and hosting and the timing of user group revenues. We continue to experience robust growth in our private and public cloud offerings, which again increased 10% in the quarter and for year-to-date. This reoccurring revenue contributor has long been a double-digit growth engine.
Shifting to processing revenue. We saw consistently positive performance with 9% growth on both a GAAP and non-GAAP basis for the quarter and first-half from this reoccurring revenue source. Similar to recent results, drivers included a combination of higher card and other payment processing, plus strong digital demand.
Next, moving to expenses. Beginning with cost of revenue, which increased 5% on both a GAAP and non-GAAP basis during the quarter, 7% for GAAP versus 6% non-GAAP year-to-date. Drivers for the quarter included higher direct cost consistent with increases in related revenue and internal licenses and fees. Growth in cost of revenue was limited to 5% due to active cost control and the timing of merit increases. Next, R&D expense decreased 3% on both a GAAP and non-GAAP basis for the quarter. The decrease was due to lower personnel expense, net of capitalization and inclusive of benefits. For the first half, R&D expense increased 4% on a GAAP basis and 3% for non-GAAP.
And lastly, on a GAAP basis, SG&A rose 24% for the quarter, 21% on a non-GAAP basis, primarily due to the shift in our customer conference from Q1 to Q2, plus higher personnel and related costs. Year-to-date, SG&A expense increased 31% on a GAAP basis and 9% non-GAAP. The primary difference is the $16.4 million in one-time costs related to the voluntary early departure incentive program, VEDIP, in Q1.
We remain focused on generating compounding margin expansion and the quarter delivered 111 basis points in non-GAAP margin at 21.3%. Non-GAAP margin benefited from operational performance and a one-time shift in our merit increases from Q2 to Q3, offset slightly by the timing of our customer conference. These strong quarterly results produced a fully diluted GAAP earnings per share of $1.26, up 14%.
Breaking down the results into the three operating segments, we're pleased by the consistent, solid performance achieved. Our Core segment revenue increased 8% on a non-GAAP basis, with non-GAAP operating margins increasing 166 basis points, benefiting from private cloud trends and strong cost controls. Year-to-date non-GAAP revenue growth was 8% and the associated margin increased 80 basis points.
Payments segment revenue increased 6% on a non-GAAP basis. This segment had impressive non-GAAP operating margin growth of 128 basis points. This was due to the strong growth in our EPS business, moderate card growth, coupled with our scalable operating model and disciplined cost control. Year-to-date, non-GAAP revenue growth matched the quarter at 6% with 94 basis points of margin expansion. It should be noted that card revenue growth has been negatively impacted by lower card production among other non-processing revenue items. Excluding these impacts, processing related revenue increased 8% for the quarter and 9% year-to-date.
Finally, Complementary segment non-GAAP revenue increased 9%, with flat margin. Year-to-date non-GAAP revenue also increased 9%, with 25 basis points of margin expansion. Growth year-to-date was driven primarily by digital, recently released solutions and overall product mix. Quarterly margins faced headwinds from direct support cost, amortization of new products and licenses and fees.
Now, let's turn to a review of cash flow and capital allocation. Year-to-date, operating cash flow is $239 million, a $48 million increase over the prior period, producing free cash flow of $129 million, slightly more than the $119 million last year. Excluding asset sale impacts of $1 million and $28 million from the current year-to-date and prior period, respectively, free cash flow is $37 million higher through the first-half of our current fiscal year. Additionally, the timing of tax payments this year represented a $15 million headwind to free cash flow.
Our consistent dedication to value creation resulted in a trailing 12-month return on invested capital of 20%. Additionally, I would highlight other notable return of capital metrics for the first-half of our fiscal year, including $20 million in share repurchases, offsetting annual dilution, $20 million in debt reduction and $76 million in dividends.
As we head into the second half of fiscal 2024, I will conclude with guidance highlights. As you are aware, yesterday's press release included updated fiscal 2024 full-year GAAP guidance, along with a reconciliation to non-GAAP guidance metrics. As a reminder, we filed an 8-K on August 3, that described how, starting in the current fiscal year, we are using a revised approach for deconversion revenue guidance. Based on current trends, we expect to see similar acquisition levels of our core customers for the second-half of the fiscal year. As such, we're reiterating our full-year deconversion revenue guidance of $16 million.
Based on positive year-to-date results from strong execution and near-term visibility, we are tightening our revenue growth outlook around the current midpoint. We now expect to generate full-year non-GAAP revenue growth of 7.4% to 8.0% compared to the 7.2% to 8.2% provided on the November call. This corresponds to an increased full-year GAAP revenue guidance of 6.6% to 7.2% for fiscal '24. In tandem with our revenue outlook, we now expect an increase in annual non-GAAP margin expansion of 35 basis points to 40 basis points compared to the 30 basis points to 35 basis points previously provided. The full-year tax rate is now approximately 23.5% with potential bias slightly higher.
Incorporating the noted positive updates, full-year guidance for GAAP EPS is revised upwards to $5.09 to $5.13 per share from previous guidance of $4.98 to $5.04 per share. As a reminder, the guidance for deconversion revenue compared to actual fiscal 2023 deconversion revenue, VEDIP severance related costs and non-reoccurring gain on asset sales resulted in an approximate $0.37 headwind for fiscal 2024 GAAP EPS.
Lastly, some additional modeling commentary. We are comfortable with the current level of Q3 consensus for revenue growth, operating margin and GAAP EPS. Our full-year guidance of 60% free cash flow conversion is reiterated. However, the legislation that passed the House last week would have a material beneficial impact on fiscal 2024 free cash flow and beyond. We are monitoring legislative progress and are hopeful for a swift and positive outcome. Based on the current bill language, if passed, our free cash flow conversion would rebound to historical norm levels either in fiscal '24 or fiscal year '25, depending on the timing of certain items.
In conclusion, Q2 reflects the strong performance we've seen consistently in the first-half and expect the remainder of our fiscal year. We are exceptionally positive about our ability to deliver innovative and in-demand solutions, the resilience of our clients and our focus on execution and shareholder value creation. We appreciate all the contributions of our hardworking and dedicated associates that drove these strong results. We thank all Jack Henry investors for their continued confidence.
Laura, will you please open the call for questions.
