Q1 2022 Jack Henry & Associates Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the Jack Henry and Associates' first quarter FY 'twenty to 'twenty two earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Good question during the session you will need to press star one.
And your telephone please be advised that today's conference is being recorded.
If you have quantified the distance lease fast start.
Zero.
As I hand, the conference over to your first speaker for today, Kevin Williams, CFO and Treasurer, you may begin Sir.
Thanks, Brian Good morning, Thank you for joining us for the Jack Meehan Associates first quarter fiscal 2022 earnings call I am Kevin Williams, CFO and Treasurer and on the call with me today is David Foss Board Chair, President and CEO of Jack Henry.
In just a minute I will turn the call over to Dave to provide some of his thoughts about the state of our business.
Financial performance for the quarter comments regarding the industry in general and some other key initiatives that we have in place then after David concludes his comments I'll provide some additional thoughts and comments regarding the press release, we put out yesterday after market closed and also provide some comments regarding our updated guidance for fiscal year 2022 provided in the release yes.
And then we will open the lines up for Q&A.
First I need to remind you that 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 future. These are subject to a number of factors that could cause actual results or events to differ materially from those which we anticipate due.
Due to a number of risks and uncertainties. The company undertakes no obligation to update or revise these statements for a summary of these risk factors and additional information. Please refer to yesterday's press release and the sections in our 10-K entitled risk factors and forward looking statements on.
On this call. We will also discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income the reconciliations for historical non-GAAP financial measures can be found in yesterday's press release with that I'll now turn the call over to Dave.
Thank you Kevin and good morning, everyone. We're pleased to report another strong quarter of revenue and operating income growth 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 first fiscal quarter, particularly in light of the challenges posed by the ongoing pandemic.
We continue to operate with well over 90% of our employees working full time remote and continue to evaluate options regarding an appropriate return to office target for all affected employees with.
With that let's shift our focus to look at our performance for the quarter, we completed in September.
For the first quarter of fiscal 2022 total revenue increased 8% for the quarter and increased 9% on a non-GAAP basis deconversion fees were down more than $2 million over the prior year quarter.
Turning to the segments, we had another solid quarter in the core segment of our business revenue increased by 8% for the quarter and increased by 9% on a non-GAAP basis.
Our payments segment again performed well and also posted an 8% increase in revenue this quarter and a 9% increase on a non-GAAP basis.
We also had another strong quarter in our complementary solutions businesses with a 9% increase in revenue this quarter and a 9% increase on a non-GAAP basis.
Traditionally our first quarter has been our lightest sales bookings quarter, because our fourth quarter tends to be extremely strong and the sales pipeline is depleted as a result as you may recall the June quarter was the strongest sales quarter in the history of the company. So we certainly expected this historical trend to hold true what we experienced however, it was.
Just the opposite the performance of the sales organization was again very strong with a number of notable wins.
In the quarter, we booked six competitive core takeaways and 10 deals to move existing in house customers to our private cloud environment.
Although our rate of six takeaways as light as compared to our normal run rate. It is clear to me that a number of deals fell into the month of October because we booked six more core takeaways in October alone.
As we've discussed on prior calls our convert merge backlog is a good indicator for us of what to expect with coming mergers and acquisitions within our base of customers. We can now see that M&A in the banking space will be very active this year because almost all of our conversion slots for acquired banks are full for the year.
We are working to evaluate whether or not we need to add more conversion teams to keep up with the activity.
You should expect to see a corresponding increase in deconversion revenue as some of our institutions are acquired by others in the space.
Kevin will provide more detail on this line when he shares his comments.
We continue to see good success with our new card processing solution, signing six new debit processing clients this quarter and one new credit clients.
We also continue to see great success, signing clients to our <unk> digital suite with 35, new contracts in Q1.
Speaking of our digital suite, we are continuing to implement new financial institution clients on the ban on platform at a similar pace to recent quarters at the end of Q1, we surpassed 6 million registered users on the platform and that number is growing at about 125000 users per month.
At the same time, our <unk> platform continues to hold one of the highest consumer ratings in the App store.
The banner digital suite as well down the path to becoming the industry, leading digital banking solution.
The continued success, we've seen with sales and adoption of our digital suite is consistent with the expectations coming out of the Bank Director Technology Survey published in August.
As they do every year bank director surveyed hundreds of their subscribers during June and July regarding a variety of technology prioritization and spending topics.
More than 50% of the responses. They received were from bank Ceos and or board members with almost 80% of the responded banks greater than $500 million in assets. This.
This year's survey showed an interesting shift as more than 70% of the responding banks had moved efficiency of operation to the top of their priority list and.
An improved customer experience and an improved digital experience followed closely behind.
To further the point regarding an improved digital experience. This year, 54% of the respondents indicated that their customers prefer to interact with their bank using a digital channel rather than in branch or over the phone.
The survey also indicated that the median increase in expected technology spending for the coming year was 10% as compared to the prior year.
All of this bodes well for the future of our digital suite as well as the other solutions offered by Jack Henry which helped facilitate an improved customer experience and an opportunity to enhance efficiency in the financial institution.
As many of you know we normally conduct our two largest client conferences in the fall each year. This year, we combined those conferences into one event and again hosted the sessions virtually.
We had hoped to be in person this year, but because of the size of the event, we decided that wasn't prudent.
As we saw last year attendance was much larger than our in person conferences, because nobody had to incur any travel expense and they were able to readily drop into virtual sessions. We were pleased to be able to successfully interact in a virtual setting with many of our existing clients and prospects.
Last week, we announced two pending retirements from our leadership team, our long time, CFO and Treasurer, Kevin Williams, and our CTO <unk> have both announced their intent to retire next summer.
As we shared in the press release, we already have a search in process to find Kevin's replacement and we'll be considering both internal and external candidates.
Kevin will be with us until we identify the right person and have them fully prepared to take the reins.
We will transition out of his role in January when Ben meets our current head of digital solutions will become our chief digital and Technology Officer.
Ed will stay for several months after that to help them with the transition.
Of course, we have many months before each of them actually retire so have lots of time to thank them for their many years of service to our associates customers and shareholders, but I would be remiss if I didn't acknowledge how much I've enjoyed working with each of them and how much I. Appreciate the approach each of them has taken to executing these much deserved retirement.
Next week, we will conduct our annual shareholder meeting we will be hosting this meeting in person and more on that but we will abide by strict COVID-19 protocols to ensure a safe event for all attendees.
We are excited to be able to meet with our shareholders in person again, but we are also very aware of the ongoing pandemic related concerns that arise when you assemble a group of people.
We will start an hour earlier than in past years, we will recover acquire all attendees to be mast and we won't be serving a lunch. Following the meeting with these changes I am confident we will have a productive and safe meeting.
In our ongoing attempt to communicate effectively regarding our ESG related efforts. We recently published our ESG statement, which provides a sustained and centralized overview of Jack Henry's ESG commitments and material environmental and social topics.
Yes.
Additionally at points readers towards other related policies like our human rights policy.
We've also published an environmental policy that highlights our commitment to sustainability and proper environmental management practices.
Both documents can be found on our new corporate responsibility website via Investor Relations. We created this website to house, our sustainability reports and provide a centralized location for Jack Henry's ESG information.
Speaking of sustainability reports, our next sustainability report covering calendar year 2021 will be published in March we have continued to make major advances across our environmental social and governance initiatives and the board has established a quarterly cadence to discuss ESG matters.
As we move forward I'm very optimistic regarding our levels of sales activity and customer responses to the solutions, we're delivering and the strategies. We are executing we will continue with our disciplined approach to running the company and we expect that approach to continue to provide stability and solid performance for our employees customers and shareholders with that.
I'll turn it over to Kevin for some detail on the numbers.
Thanks, Dave.
Services and support revenue increased 6% in the first quarter of FY 'twenty, two compared to the same quarter a year ago.
I've mentioned, our deconversion fees were actually down $2 million compared to last year or 37% for the quarter.
License revenue was down slightly compared to the prior year and our hardware revenue was down $4 million or 39% compared to Q1 a year ago.
Due to our customers continue to choose our private cloud delivery and therefore not purchasing hardware.
Services and support line of revenue primary revenue drivers, where our software subscription revenue and our data processing hosting fees in our private and public cloud offerings, which combined continued to show strong growth in the quarter compared to the previous year growing combined by 10% for the quarter.
However, the growth in this line was slowed significantly due to the product building services revenue, which includes the previously mentioned deconversion fees license and hardware along with implementation and convert merge revenue, which combined were down by a total of 9% compared to the prior year quarter.
Therefore, total sport services net grew 6% for the quarter, our processing revenue increased 12% in the first quarter FY 'twenty two compared to the same quarter last fiscal year. This increase was primarily driven by higher card volumes with new customers installed last year and increased debit card usage from existing customers.
Our Jackson, who digital revenue continued to show strong growth as demand for our <unk> digital platform continues to be very strong.
As Dave mentioned total revenues up eight 8% for the quarter compared to last year, our GAAP basis, and 9% on a non-GAAP basis.
Our cost of revenue was up 5% compared to last year's first quarter. The increase primarily due to higher costs associated with customer maintenance card and transaction processing, along with higher personnel costs compared to a year ago.
Research and development expense increased 3% for the quarter.
<unk> 22 compared to last year. This increase primarily due to personnel costs and our SG&A expense increased 13% in first quarter compared to the same quarter previous year and this increase was due primarily to increased personnel costs and travel related costs compared to last year as travel increased significantly in Q1 compared to last year.
Our reported consolidated operating margins increased from 26% last year to 27, 4% in the current year or 140 bps increase and on a non-GAAP basis operating margins expanded from 25, 2% last year to 26, 9%. This year for 170 bps expansion.
We had margin expansion in all three of our reporting operating segments on both a GAAP and non-GAAP basis.
The effective tax rate for the first quarter of fiscal 'twenty, two increased to 23, 4% compared to 22, 4% in the same quarter a year ago, which is in line with guidance, we provided on previous call.
Our net income grew 12% to $102 1 million for the first fiscal quarter compared to $91 2 million last year with earnings per share of $1 38 for the quarter compared to $1 19 last year for a 19% or 16% increase year over year.
For cash flow, our total amortization increased 2% for the quarter compared to last year due to capitalized software projects being placed into service.
In total amortization is the amortization of intangibles related to acquisitions, which decreased to $4 3 million this year compared to $4 4 million in last year's quarter.
Our depreciation was down 2% compared to the prior fiscal year and during the quarter, we paid dividends of $34 million.
Our operating cash flow was $106 5 million for the year, which is down from $114 5 million last year, which the decrease primarily due to the timing and change of various operating asset assets and liabilities considering in the calculation of operating cash flow.
Invested $46 5 million back into our company through Capex and capitalized software our free cash flow, which is operating cash flow less capex and cap software and adding back net proceeds from disposal of assets was $60 1 million for the quarter.
Our cash position.
<unk> was $44 3 million compared to $195 3 million a year ago, primarily due to the significant stock repurchases. We did last year we.
We had $65 million draw on our revolver in the quarter and we had no other long term debt our balance sheet other than leases.
Return on our average assets for trailing 12 months was 13, 7% our return on invested capital for the trailing 12 months was 21, 5% and return on equity for the trailing 12 months was 21, 9%, which are all very strong.
For FY 'twenty guidance, we provided both GAAP and non-GAAP updated revenue guidance in the press release yesterday for fiscal 'twenty. Two we also provided a reconciliation of GAAP to non-GAAP revenue in the release immediately following the segment information in the release yesterday.
However, just to be clear this guidance continues to assume that the country continues to open and the economy economy continues to improve.
And if things were to go differently, obviously this guidance will be revised.
For GAAP revenue growth for fiscal 'twenty, two based on the amounts in the release yesterday, our revenue guidance range of eight 6% to nine 1% approximately over previous year. We now anticipate deconversion revenue to be approximately $42 million to $43 million for the entire fiscal year with a significant percentage of that being.
In Q2, and Q3 for non-GAAP revenue growth, we continue to guide to a range of seven 5% to 8% growth for fiscal year <unk>.
Obviously these will be updated during the year.
We continue to anticipate GAAP and non-GAAP operating margins to improve in FY 'twenty two compared to last year as we should have very nice margin expansion, our payment segment and anticipated higher deconversion fees.
However, I continue to be somewhat cautious on guiding to too much of an operating margin expansion as we will continue to have headwinds on license and hardware revenue as we continue to move core customers from on premise to a private cloud and also travel costs will continue to increase significantly compared to the prior year.
Our effective tax rate for FY 'twenty, two continues to be projected slightly higher at approximately 23% compared to the prior year.
Obviously significant changes in corporate tax structure could change this guidance.
Our FY 'twenty to GAAP EPS guidance is range of $4 64 to $4 73.
Which is an increase from our prior guidance of $4 53 to $4 60.
This concludes our opening comments, we're now ready to take questions. Brian will you. Please open the call lines up for questions.
So the bill.
Absolutely.
Followed by the key.
Yeah.
Okay.
Yeah.
Question with K B W.
Hi, Thanks.
And I wanted to congratulate Kevin.
And we will be sad to see you go but we have a couple of more quarters to talk with you.
Yes.
I guess my first question is on the merger and then I think David you make.
So you would think there I know.
What are you kind of had said that you expected to be better this year, but it didn't seem like you were really including much in the guidance just wanted to get it.
That's what you're including in the guide versus what could be sort of upside based on what you've seen.
So I think.
As I said in my comments.
The convert merged lots and just to make sure everybody is clear when we referenced convert emerge.
It happens when one of our institutions is acquiring another institution.
They notify us well ahead of time well before the <unk>.
Conversion actually or the acquisition actually happens they notified us that they will need our help to convert the acquired institution onto the Jack Henry platform and so we hope those those slots.
Excuse me.
So in the past several weeks here that volume has increased significantly our customers contacting us to hold.
To hold conversion slots and essentially signed contracts to lock those in and so that's why what I said in my comments was every convergent flatten out on the banking side of our business is filled or convert merge activity through the remainder of the fiscal year.
And we are evaluating whether or not we need to add add more teams and the reason for that evaluation is we have to keep an eye on does a deal fall through since they notify US well ahead of time and ask us to hold our slot in may.
They will we will put a contract in front of them, but does that deal fell through we have a we've been doing this for a long time, we're very good at predicting what's going to actually happen and what's not but.
Everything that we have.
Today that is known that is booked is worked into the guidance that Kevin provided to you, but there is more potential opportunity out there we may stand up if demand.
Just find that we may stand up an additional conversion team or even two conversion teams we've done that in the past.
And so we'll just kind of have to follow that as it goes but what we know today.
As included in the guidance that Kevin has shared with you, but there is still potentially more opportunity there based on what happens with our with our customers. The key messaging. There was just for you all to know there.
That convert merge or M&A is back in the banking space.
And so that not only is a real positive for us given that we have customers acquiring other other customers and we generally are paid on account volume in transaction volumes. So that's good for us when they get merged in but then also for you to be aware that deconversion revenue will probably go up because we know that some of our customers will also be acquired away from us.
M&A continues to grow.
That's very helpful color. Thank you and just a follow up I had was on the payments segment. It has seen demand coming into the quarter that would probably be the high watermark and then kind of level off from there.
I think just the revenues in the quarter.
<unk> lighter than what we were modeling I, just I'm curious to see where they came in relative to your internal expectations.
I know debit volume sort of rolled off a bit is that sort of being back within our payments segment. But then if you could also comment on what's going on in the Bill pay business I know.
Softer trends across the peer group, but if you could just comment on if you have any insights on is that just more competition from digital wallet or something else, which is dying.
Yes.
So theres a lot on the payments line of course, three and you've kind of highlighted because theyre. So three primary components in the payments line for us. So the payments segment for US there is bill pay revenue.
Card revenue debit and credit and then there is what we refer to as EPS enterprise payments solutions.
The bill pay.
Bill pay line or the Bill pay business continues to be relatively flat I mean, there is some growth, but as we've talked about on the call before anybody who needs a bill pay solution has a bill pay solution volumes arent really fluctuate that much. So it's relatively flat in the bill pay business the card.
Business is continuing to grow we're seeing nice growth not only because we are adding customers, but because.
Now as the pandemic numbers have have dropped again here in the early fall transaction volumes, we've seen a definite correlation between transaction volumes, increasing as the as infections have reported infections have dropped and so that's a key part, but the enterprise payments.
Business is continuing to grow very nicely. It's the smallest piece of that segment, but the fastest growing piece of that segment and that is driven by remote deposit capture but also by a future originations and so we have we have a number of customers who have signed with that platform.
Recently, and some that we will announce next year I think as they come alive.
We'll be continuing to drive big volumes through that that platform. So it's the combination of those things.
That I think are driving the payments revenue and all of those are positioned well for continued growth in the in the coming year.
Thank you very much.
Thank you.
Thanks.
Kartik Mehta.
Northcoast.
Hey, good morning, Dave and Kevin.
I wanted to maybe get a little bit more on your sales pipeline question I think when you spoke last earnings call you thought that.
Slide 22 pipeline would be up 3% to 5% if I remember my numbers right and I'm wondering what your expectations are it sounds like things are going well, but we.
Would be interested in what your expectations are for the growth in the pipeline for this fiscal year, yes.
Yes, it's a good question.
I have no hesitation about reaffirming 3% to 5% cannot be greater than 5%.
It's little early probably for me to commit to that but I will again say with no hesitation, 3% to 5% and in fact on the high end of that easily sign up four 5% based on what we're seeing right now.
The core its been interesting watching core deals as we've come out of the <unk>.
The real trough of the pandemic and obviously the pandemic is over but where deals are really lumpy right now, but there is a tremendous amount of activity as far as side of the business and then.
And then if you look at the rest of the suite that Jack Henry.
The forecasts are looking or the pipelines are looking very very strong right now so.
Like I say very comfortable signing up for the high end of that guide and it could be even higher but I think we need a little more time under our belt here too.
To make sure that I'm I'm not overextending.
Okay.
Kevin.
You talked about margins and you want to be a little bit cautious because you're out at excellent quarter. This quarter. It seems like margins are probably better than you thought I'm wondering maybe your reluctance to think it'll be better than the 50 basis points you talked about last fiscal year or is it just too early in your opinion or are there other things up white.
Impact margins.
We should be aware of.
Yes, let me Kartik, there's so many moving parts. This year that are coming back that weren't there last year. So I mean deconversion fees, obviously going to be higher as Dave mentioned convert merge I mean M&A activity just drive so many different moving parts within our financials I mean, so obviously travel is going to be a lot higher.
Theres other costs there our salespeople are getting out and traveling more so just just the travel expense is going to be higher.
Possible, but our total margin should be higher yet obviously, the Q1 margins are probably the highest of the year because of all the software subscription revenue that we recognized in Q1 for the software that's been delivered in the previous years. So this this is a high watermark for margins for the year.
The other thing I'll say Cargill hardware was down.
40% this quarter, which that actually helps our margins by hardware revenue being down, which I mean, it sounds weird, but.
If hardware revenue would level out and go back up a little bit the rest of the year.
As I am sure IBM will come out with additional hardware upgrades could that impact our margins yet so.
I'm still very comfortable that we can hit the 50 bps and could it be higher than that yes, but.
I'm not I'm, just not ready to step out on that limb yet.
Thank you, Kevin and I really appreciate it thanks, Dave.
Yes.
Yeah.
Thank you.
We have deep heckman with D. A davidson.
This is John on for Pete just a quick question I know you touched on that in the prepared remarks, but what's the expectation for deconversion fees and how did that land in each quarter again.
So we increased deconversion fees, we think is going to be somewhere around $42 million to $43 million in again.
Looking at the Crystal ball.
We don't know for sure that that's what's going to be that's just kind of the indications that we're getting.
But we think probably 80% of that will probably be in Q2 and Q3 based on what we know right now so.
Deconversion fees in Q2, and Q3 could be $15 million or so plus in.
Each of those quarters.
Got it got it thank you and that non-GAAP payment segment growth was 9% what was the.
What.
Segments do you see that grew notably faster or slower than the segment average.
I assume you're referencing in my comments earlier, John about the three different pieces of the of the payments segment is that what youre asking about yeah.
So three pieces Bill Pate.
Our card business debit and credit and then what we refer to as EPS enterprise payment solutions, which is one part of the capture ECH.
The enterprise payment solutions business is growing the fastest but it's the smallest of those three components.
Components of the card business to the largest bill pay business second largest bill pay really relatively flat I mean, its growing a little bit, but like I said, most anybody who needs bill pay as bill pay and volumes don't change that much in that piece.
Piece of the segment, but the card business is growing nicely, both because of new customers that we're adding and because of just volumes picking up again and then the fastest is also the smallest which is enterprise payments.
Got it thanks, so much sure.
Thank you.
So we have David Koning with Baird.
Oh, Yeah, Hey, guys. Thank you.
And I guess first of all just as we look at the market, we hear a lot about the super apps and how.
How they're progressing is is there a much different debt a super app can do than what kind of band.
That's on on the <unk> system.
Can do and do you even do some work for a lot of the super apps to help to help them grow as well.
Well I am not exactly sure what you're including in the Super App bucket, Dave and the other is.
Lots of stuff going on out there we are working so the thing about the <unk> platform is built to work with to be.
And open API based platform. So modern technology stack open API based platform you saw hopefully you saw the press release, we did in October where we announced the <unk>.
Partnership and integration of <unk> and plat. So all of those relationships are designed to provide greater functionality on this digital platform to connect Fintech solutions to other Fintech solutions. Our goal with the platform is not only to offer the best experience for the consumer and small business through.
Single digital experience, but also to provide the best platform in the industry.
To create that interconnectivity of applications to other applications. The other thing that we're trying to do through all of that.
This is important.
When you compare kind of modern technology stack like we have with panel as compared to other things that are out. There is we are close to being able to eliminate screen scraping and if youre not comfortable if youre not familiar with that term of screen scraping. That's what happens with older applications, where we're a consumer let's say youre trying to consolidate all of your account on one.
One experience on one spot one digital experience, while the old approach, which most companies out there are using widely today is screen scraping, where the consumer provides their credentials their logon and password into some central location and that central location goes out.
Simulate being a consumer going on in pulling down balance information, while you can probably imagine the security.
Potential security and privacy issues that come along with that and so we've been working very diligently for several years to eliminate.
All of that in our in our platforms and these this integration that we've done with <unk> and the other moves that we've made with our digital platform have us right on the cusp of eliminating all of that well ahead of anybody else any of our traditional competitors when it comes to offering a truly state of the art digital experience.
<unk>.
Gotcha. Thanks.
It looks to us like growth in core and really the whole business youre doing about as good or actually better like your core segments about the best it's been in a few years in terms of growth like it just seems like momentum is as strong as ever there's no real like competitive changes in the environment or if anything it seems like the environment is strengthening maybe.
For you is that fair to say that it's fair to say so we are youre accurate we're signing in.
Besides that many time signing core takeaways gaining share on the core side of the business, but a lot of that is driven by all this other outstanding technology that we're delivering and the tight integration that we're doing not just with Jack Henry products other Jack Henry products, but Jack Henry products to the other things out there in the industry that people want to be able to use the fintech solutions out there.
We are providing that connectivity easily.
In the press release again, but referring back to the peninsula, you're acquiring Plaid release, if you look at the headlines at zero cost zero lift. So we're doing all of that for our customers zero cost as it will lift why would you do that it's the right thing to do but be in long run it's less expensive for us as a provider if our customers will adopt those types of things all of that thought all of that.
So all of that philosophy around delivering technology is being recognized in our industry and Jack Henry is getting credit for it and customers are moving to our platforms as a result.
And Dave one more thing just to remember the one of the big drivers in our core growth is the continued movement of existing on Prem customers to our private cloud because we get a nice lift in revenue and move those as Dave said in his opening comments, we signed 10 more in Q1 to make that move and we're seeing larger <unk> that are on.
They're collecting to make that move as well.
Great great well, thanks, guys good job.
Thanks, Ed.
Thank you.
Next week.
Suggesting mid.
Yes.
Hi, Good morning, David and Kevin Thanks for taking the question here I just wanted to follow up on that last comment about that.
Shift.
Our core customer from on trend to the private cloud.
Maybe you can help us understand the.
The revenue lift that you might get from that on that on a per customer per unit basis.
Yes. So on average if you look at the an on Prem customer day, everything that theyre paying us which would be in house maintenance could be disaster recovery it could be hardware maintenance.
There are several buckets and line items of revenue that could be paying us.
But on average when an on prem customer moves to our private cloud the revenue that we get out of that customer essentially doubles.
And there is there's very little cost increase because remember it is exact same software. It's the exact same support organization are we've got the infrastructure in place of their data centers, so they're very high margin.
From that additional revenue when we move those customers from on premise or a private cloud.
Okay. That's really helpful. And then maybe just a question on the on the payment segment I mean, it looks like on a non-GAAP basis. The growth in this segment slowed from about 17% last quarter to 9%. This quarter I mean, what drove that slowdown and I guess what are your expectations for that segment going forward.
I don't recall the.
It was the 17th.
That segment is growing very well, we're very happy with what's happening in the segment well members reporting 17% last quarter well, but you also got to remember that that last quarter was compared to the previous year. So that was what was significantly impacted by COVID-19 as the death of the debt.
The payments in April and the first part of May and <unk>. So it was a very easy comp and for Q4 of 'twenty, one compared to Q4 'twenty. So I think I think the 9% growth. We showed this quarter is probably more examples of what youre going to see for the entire fiscal year.
Okay and then just last one for me just on the share repurchases.
Thank you guys bought back any stock in the quarter I think in the prior quarter you had it at a larger buyback.
I guess thoughts on overall capital allocation at this point and what are your thoughts on repurchases at the current stock price.
Yes, so I mean, obviously, we're going to we're going to continue to buy back stock here and there I will tell you that this quarter one of the reasons that we were we didn't buy any stock back was we were actually trying to get some tax planning in place based on what the New administration was proposing it on the table because we were.
Going to use were potentially a significant amount of cash to pay upfront taxes for a number of reasons, but now now the change in the corporate tax structure actually they took a totally back out to where they are not even going to change the the 21%. So.
Wildcard right now, but I mean is the tax landscape kind of.
We figure out exactly where it's going to be obviously, we will use some of our capital buyback more stock during the year.
Okay. Thank you very much really appreciate it you betcha.
Thank you.
Again, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone.
We have Dominic Gabriel with Oppenheimer.
Hey, great. Thank you so much for taking the question I appreciate the commentary on <unk> and the partnerships with other Fintech I.
I guess what.
<unk> are typically adopted.
Across your peers.
Could you just.
Offer that functionality in house, maybe just discuss the puts and takes why partner partnerships are the way to go versus just expanding the capabilities or maybe I'm just not understanding the dynamics there and I just have a follow up thank you sure yes.
I'll try not to be.
I think you're misunderstanding of dynamics. So you said it yourself and I'll just repeat that.
When we use the term partnership that doesn't mean that we're reselling somebody elses stuff that we're exchanging revenue that there's something like that or that we're missing a piece in this day and age with all of the new feature function, that's happening with Fintech and with the demand that our customers that bankers have from their customers their consumers to use.
Different different things different pieces of technology that they've come across.
The future for banking in the future for a provider like US is to provide open connectivity so that the customer our customer the banker can choose to integrate whenever they want to integrate into our platform.
What we're moving toward.
Consumers are moving toward is theyre very sensitive to the fact that the data is their data like I'm. The consumer. It's my data. It's not your data is my data and so it happens to be housed at this bank.
But I want access to that data and so the bank is now more than ever very sensitive to that idea that they need to provide access to that data in a secure manner to a variety of different sources that the consumer chooses to want to use or that the bank may choose to want to use. So we are continuing to innovate on our <unk>.
Technology I mean, the reason that the <unk> platform is so well regarded and has the highest ratings in the App store is because we have the best functionality out there, but you can't do everything right every not every idea that every fintech comes up it's not it's just not possible to to write all of that code into one application and so providing that platform for open connect.
<unk> is the best of all worlds. It gives us this reputation being open and being innovative but it also provides the bank or the opportunity to connect whatever they want to connect into that platform and take advantage of the data for the benefit of their consumer whether the consumer is an individual or if it's a small business and so what.
What we're doing today is being recognized regularly as being really industry, leading and providing that open connectivity and that opportunity for the banker to choose as opposed to us going to them and say you must use our platform whether you like it or not and this is not new for US we have always been extremely open them back from when Jack and Jerry started the company.
45 years ago, we've always been open because we started as just a core provider and we had to let them use any third party I mean, if you think about our investor conferences that Dave referred to as open opening comments I mean, we typically have well over 100 and over 300 other vendors at our Tech fair.
To sharpen where so we've always been open. The fact that open API is just makes it that much easier for a third party to integrate into our core solutions.
Perfect. Thank you so much for all that clarification I really appreciate it.
Then as you think about the net M&A activity affecting your partners.
Do you think that could change the geography of your average asset size of your underlying banking credit Union mix and where do you typically win.
Which sized clients get taken away.
From the Jack Henry platform, and then and then perhaps Oh, sorry go ahead.
And just to pile on on this I guess.
For clients that do get taken away and that create these deconversion fees, what about the wind back rates perhaps.
The one that got taken out was using Jack Henry really liked it and then they kind of explain the benefits there and then you could win perhaps.
Entire relationship later does that happen maybe you can discuss all of those factors. Thanks, So much Dominic you've got a lot packed into that one question that are things that I love to talk about.
Youll give me about an hour and a half I'll try and I'll try and fill yes, so no seriously.
So first off.
When M&A happens.
To answer your question from the beginning and work forward does it happen that customers are acquired away and then they come back to Jack Henry Yes that happens and in fact, it's more often than you might think where somebody gets acquired the logical thing is for the acquiring institution to convert them to whatever they're running and then once they get integrated in the people who have been acquired.
Mired.
The people who have been acquired suddenly start to say, we had a better on the old platform than we have on the new platform. Let US tell you guys. What we used to be able to do with Jack Henry and it's oftentimes the combination of the technology and the relationships. This is a relationship business partnership is a key part of what we do and so oftentimes the acquired institution will <unk>.
Eight the acquirer on what it was like new business with Jack Henry So we do win those occasionally the other thing that when once in a while is what.
Let's say that an acquirer is targeting one of our institutions. We know that that is happening we can oftentimes sell the acquirer on converting to the Jack Henry platform as opposed to the acquirer using whatever it was they had before.
Before the.
Before the acquisition was announced or before the deal was announced and so those are what we refer to those as winter merger.
And those we've been successful at but kind of the heart of your question at the beginning of your question.
Was.
That is the power.
The beginning of your question sorry, we have a little phone issue going on here at the beginning of your question most of the M&A activity is happening at the low end of the range. So real small institutions being acquired by a larger institution.
And we don't tend to serve the real small institutions, so that tends to be tends to be good for us that usually we are the benefactor one of our institutions acquiring a smaller institution as opposed to ours being acquired away, but to the very beginning of your question. What that means is our asset base among our customers is growing because those.
Larger customers in our base are acquiring smaller customers and so over time, we will continue to grow as far as average asset size.
Alright. Thank you. Thank you so much I really don't.
Thank you.
Okay.
And as there are no further questions I will now turn the call back over to the speakers.
Okay.
Again, we're pleased with the overall results of our ongoing operations I want to thank all of our associates for the way they've handled these challenging times by taking care of themselves and our customers.
Turning to work hard to improve our company and to continue moving forward for the future.
All of US Jack Canter continue to focus on what is best for our customers and our shareholders again want to thank you for joining us today and with that Brian will you. Please provide the replay number.
Alright.
A replay will be available two hours after the call has concluded.
Thanks, Dan can replay you may dial 80085867 or 8585909. This concludes this concludes today's conference call you may now disconnect.
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