Q3 2024 Jack Henry & Associates Inc Earnings Call

That's right.

No.

[music].

Speaker Change: Good morning, and welcome to the Jack Henry third quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.

Unknown Executive: Let the fight be requested and enjoyed. Good morning and welcome to the Jack Henry 3rd Quarter. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by the yellow button. At the end of today's presentation, there will be an opportunity for questions. Please press star then 1 on your telephone keypad.

Speaker Change: You May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would like now to turn the conference over to Vance Girard Vice President of Investor Relations. Please go ahead.

Rayna Kumar: To withdraw your question, please press star and 1. This event is being recorded. Rayna Kumar, Vance Sherard, Thank you, Alan. Good morning, and thank you for joining us for the Jack Henry third quarter 2024 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 comments on our business in the industry.

Vance Sherard: Thank you Ellen and good morning, and thank you for joining us for the Jack Henry <unk> third quarter 2024 earnings call. Joining me on the call today is David Foss Board Chair and CEO, Mimi cars leased CFO, and Treasurer, and Greg Adelson President Zillow.

Vance Sherard: After my opening remarks, I will turn the call over to Dave for his comments on our business in the industry.

Rayna Kumar: After Dave concludes his comments, Greg will discuss our recent strategic benchmark survey, recent success metrics for multiple solutions, our strategic focus on AI, plus other key initiatives. Mimi will then provide commentary on the financial results and updated guidance included in the press release issued yesterday that is available from the Investor Relations section of the Jack Henry website. Before concluding our prepared remarks, we'll add some closing comments.

Vance Sherard: After David concludes his comments, Greg will discuss our recent strategic benchmark benchmark survey recent success metrics for multiple solutions, our strategic focus on AI plus other key initiatives.

Vance Sherard: Mimi will then provide commentary around the financial results and updated guidance included in the press release issued yesterday that is available from the Investor Relations section of the Jack Henry website.

Vance Sherard: Concluding our prepared remarks, Dave will add some closing comments.

Unknown Executive: We will then open the lines for Q&A. As 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 that could cause actual results or events to differ materially from those which we anticipate due to multiple risks and uncertainties. The company undertakes no obligation to update or revise these statements.

Vance Sherard: We will then open the lines for Q&A.

Vance Sherard: As a reminder, this call includes certain forward looking statements, including remarks or responses to questions concerning future expectations events objectives strategies trends or results.

Vance Sherard: Any statement about the future. These are subject to multiple factors that could cause actual results or events to differ materially from those which we anticipate due to multiple risks and uncertainties.

Vance Sherard: Company undertakes no obligation to update or revise these statements for.

Unknown Executive: 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 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. I will now turn the call over to Dave. Thank you, Vance. Good morning, everyone.

Vance Sherard: 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.

Vance Sherard: 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, I will now turn the call over to Dave.

David B. Foss: I'd like to begin today's call by remembering Jack Henry board member Laura Kelly, who passed away unexpectedly on March 15. Laura served on our board for over a decade and was a cherished colleague and friend to all who had the privilege of working with her. With over 30 years of experience in senior leadership roles, she brought invaluable insights, wisdom, and financial expertise to our organization. Beyond her remarkable professional achievements, Laura was known for her kindness, generosity, and unwavering dedication to making a positive impact. Our thoughts and deepest condolences go out to John and Jake and the rest of Laura's family during this incredibly difficult time.

Dave: Thank you Vince good morning, everyone I'd like to begin today's call by remembering Jack Henry Board member, Laura Kelly, who passed away unexpectedly on March 15th floor has served on our board for over a decade and was a cherished colleague and friend to all who had the privilege of working with her.

Dave: With over 30 years of experience in senior leadership roles. She brought invaluable insights wisdom and financial expertise to our organization.

Dave: Beyond her remarkable professional achievements Laura was known for her kindness generosity and unwavering dedication to making a positive impact.

Dave: Our thoughts and deepest condolences go out to John and Jake and the rest of Laurus family. During this incredibly difficult time.

David B. Foss: Let's now transition to our quarterly results. We're very pleased to report another strong quarter of revenue growth and overall business performance. As always, I'd like to thank our associates for all the hard work and commitment that went into producing those results for the quarter. For the third quarter of fiscal 2024, total revenue increased by 6% for the quarter and increased 7% on an on-gap basis. Operating income increased 3% for the quarter and increased 9% on an on-gap basis.

Dave: Let's now transition to our quarterly results. We're very pleased to report another strong quarter of revenue growth and overall business performance.

Dave: As always I'd like to thank our associates for all the hard work and commitment that went into producing those results for the quarter.

Dave: For the third quarter of fiscal 2024 total revenue increased by 6% for the quarter and increased 7% on a non-GAAP basis.

Dave: Operating income increased 3% for the quarter and increased 9% on a non-GAAP basis.

David B. Foss: Turning to the segments, we again had a strong quarter in the core segment of our business. Revenue was up by 7% for the quarter and increased 8% on a non-gap basis. Our payments segment performed very well, posting a 5% increase in revenue this quarter and a 6% increase on an on-gap basis. We also had a solid quarter in our complementary solutions businesses, with a 5% increase in revenue this quarter and an 8% increase on a non-gap basis.

Dave: Turning to the segments, we again had a strong quarter in the core segment of our business revenue was up by 7% for the quarter and increased 8% on a non-GAAP basis, our payment segment performed very well posting a 5% increase in revenue this quarter and a 6% increase on a non-GAAP basis. We also had a solid quarter in our complementary solutions.

Dave: With a 5% increase in revenue this quarter and an 8% increase on a non-GAAP basis.

David B. Foss: As I highlighted in the press release, this was our best third quarter ever for sales booking. During the quarter, we inked 11 competitive core takeaways, with one of them being a multi-billion dollar institution. For the year, we've now signed six multi-billion dollar institutions, topping last year's full year total of five.

Dave: As I highlighted in the press release this was our best third quarter ever for sales bookings during the quarter, we inked 11 competitive core takeaways with one of them being a multibillion dollar institution for.

Dave: For the year, we've now signed six multibillion dollar institutions topping last year's full year total of five. Additionally, we signed seven deals to move existing in house core clients to a private cloud environment.

David B. Foss: Additionally, we signed seven deals to move existing in-house core clients to our private cloud environment. We are seeing strong interest in our new Financial Crimes Defender solution, with 11 new contracts in Q3. Additionally, we signed 45 new contracts for our new Financial Crimes Defender fraud module for the Zelle, FedNow, and RTP payments networks that uses artificial intelligence and machine learning to detect fraud and money laundering in real time. We continue to see success with our card processing solution, signing 14 new card processing clients this quarter.

Dave: We are seeing strong interest in our new financial crimes defender solution with 11, new contracts in Q3. Additionally.

Dave: Additionally, we signed 45, new contracts for our new financial crimes defender broad module for the Zelle fed now and RTP payments networks that uses artificial intelligence and machine learning to detect fraud and money laundering in real time.

Dave: We continue to see success with our card processing solution, signing 14, new card processing clients this quarter.

David B. Foss: Our Bano digital banking platform remains very popular, with 69 new signings in Q3, including 37 contracts for Bano business. We now have over 11.6 million users live on Bano, and we're continuing to add approximately 200,000 users per month.

Dave: Our bandwidth digital banking platform remains very popular it was 69, new signings in Q3, including 37 contracts for <unk> business.

Dave: We now have over $11 6 million users live on banner and we're continuing to add approximately 200000 users per month.

David B. Foss: Even with our strong sales success in Q3, we continued to replenish our sales pipeline and keep it near an all-time high. As we look toward the end of our fiscal year, we remain very optimistic about the industry, the demand for our solutions, our ability to deliver outstanding service, and our long-term prospects for success. With that, I'll turn it over to Greg for more detail on our solutions and businesses. Thank you, Dave.

Dave: Even with our strong sales success in Q3, we continued to replenish our sales pipeline and keep it near an all time high.

Dave: As we look toward the end of our fiscal year, we remain very optimistic about the industry the demand for our solutions, our ability to deliver outstanding service and our long term prospects for success.

Dave: With that I'll turn it over to Greg for more detail on our solutions and businesses.

Gregory R. Adelson: As some of you may have seen, we recently released the 2024 results from our Annual Strategy Benchmark Survey. This survey offers insight into concerns, opportunities, and technology priorities from bank and credit union CEOs. The survey indicated that 80% of bank and credit union CEOs plan to increase technology spending over the next two years.

Gregory R. Adelson: Dave and some of you may have seen we recently released the 2024 results from our annual strategy Benchmark Survey. This survey offers insight into concerns opportunities in technology priorities from banking credit Union Ceos.

Gregory R. Adelson: Of those, the largest segment, 35%, plan to increase investments between 6% and 10%. We also inquired where they plan to invest over the next two years. The top four areas for planned investment were fraud detection, digital banking, data analytics, and automation. All areas where Jack Henry has been investing in and executing with innovative solutions through our technology modernization strategy. As previously announced, we recently launched our cloud-native, AI-powered Financial Crimes Defender Fraud Detection Platform.

Gregory R. Adelson: The survey indicated that 80% of banking credit Union Ceos plan to increased technology spending over the next two years of those the largest segment, 35% plan to increase investments between 6% and 10%.

Gregory R. Adelson: We also acquired where they plan to invest over the next two years the top four area for planned investment where fraud detection digital banking data analytics and automation all areas, where Jack Henry has been investing and executing with innovative solutions through our technology modernization strategy.

Gregory R. Adelson: As previously announced we recently launched our cloud native AI powered financial crimes defender fraud detection platform. We now have 16 clients live and another 175 clients in the implementation queue.

Gregory R. Adelson: We now have 16 clients live and another 175 clients in the implementation queue. In addition, we announced in March that Financial Crimes Defender was named the best fraud prevention platform by Fintech Breakthrough, an independent market intelligence organization.

Gregory R. Adelson: In addition, we announced in March that financial crimes defender was named the best fraud prevention platform by Fintech breakthrough and independent market intelligent organization.

Gregory R. Adelson: Dave mentioned earlier that we have more than 11.6 million registered users on our cloud-native Bano digital banking platform. We continue to see strong interest in our recently launched Bano Business Solution, which provides a modern banking experience for small and medium-sized businesses. As of March 31st, we had 124 clients live and about 70 additional clients in various stages of implementation. In terms of data analytics, we continue to make progress on our Data Broker and Executive Dashboard solutions. Both are part of the cloud-native, API-first Jack Henry platform.

Gregory R. Adelson: Dave mentioned earlier that we have more than $11 6 million registered users on our cloud Native Bain banner digital banking platform. We continue to see strong interest in our recently launched <unk> business solution that provides a modern banking experience for small and medium sized businesses as of March 31, we had 124.

Gregory R. Adelson: Our clients alive and about 70 additional clients in various stages of implementation.

Gregory R. Adelson: In terms of data analytics, we continue to make progress on our data broker and executive dashboard solutions. Both are part of the cloud Native API first Jack Henry platform <unk>.

Gregory R. Adelson: DataBroker, which is currently in beta, will eventually provide access to all of a client's Jack Henry data in a single repository with innovative AI intelligence capabilities. To complement the data broker solution, we are developing an executive dashboard with real-time event monitoring to help executives at our financial institutions make informed, dynamic decisions throughout the day based on metrics they customize. Related to automation technology, one new Jack Henry platform offering we haven't spoken much about yet is our cloud-native online deposit and loan account opening solution. This integrated solution will provide a seamless digital account opening experience for our clients that enables them to streamline processes, automate workflows, and better serve both retail and commercial loan clients.

Gregory R. Adelson: Data broker, which is currently in beta will eventually provide access to all of a client's Jack Henry data in a single repository with innovative AI intelligence capabilities.

Gregory R. Adelson: The compliment the data broker solution, we are developing an executive dashboard with real time event monitoring to help executives at our financial institutions make informed dynamic decisions throughout the day based on metrics they customize.

Gregory R. Adelson: Okay.

Gregory R. Adelson: Related to automation technology, one new Jack Henry platform offering we haven't spoken much about yet is our cloud native online deposit and loan account opening solution.

Gregory R. Adelson: This integrated solution will provide a seamless digital account opening experience for our clients that enables them to streamline processes automate workflows and better serve both retail and commercial loan clients. We we plan to begin the beta phase with clients and early calendar year 2025.

Gregory R. Adelson: We plan to begin the beta phase with clients in early calendar year 2025. The survey also found that 96% of our clients plan to add payment services over the next two years. We continue to offer a full range of payment solutions in our PayCenter application, as well as in other areas of our payment group. As of March 31st, we had 312 clients using Zelle, 275 clients using RTP, the Real-Time Payments Network, which represents 48% of the live RTP clients, and 190 clients using FedNow, representing 29% of the live FedNow clients.

Gregory R. Adelson: The survey also found that 96% of our clients plan to add payment services over the next two years.

Gregory R. Adelson: We continue to offer a full range of payment solutions in our pace center application as well as other areas of our payment groups as of March 31, We had 312 clients using zelle 275 clients using RTP real time payments network, which.

Gregory R. Adelson: Which represents 48% of the live RTP clients and 190 clients using fed now representing 29% of the live fed now clients.

Gregory R. Adelson: One final point on the survey findings. They were consistent with what we heard from our clients at our annual strategic initiative symposium in late April. While financial institutions are concerned about the increasing costs of deposits and the impact on interest margins, there's a general feeling of optimism and less concern about an economic slowdown this year versus what we heard a year ago. One topic we spend a lot of time discussing at the Strategic Initiatives Symposium is artificial intelligence. We presented in detail Jack Henry's framework for building the necessary guardrails, education, training, use of acceptable tools, etc.

Gregory R. Adelson: One final point on the survey findings they were consistent with what we heard from our clients at our annual strategic initiatives Symposium in late April while financial institutions are concerned about the increasing cost of deposits and impact to interest margins. There is a general feeling of optimism and less concerned about an economic slowdown.

Gregory R. Adelson: This year versus what we heard a year ago.

Gregory R. Adelson: One topic, we spent a lot of time discussing that the strategic initiatives Symposium is artificial intelligence, we presented in detail Jack Henry's framework for building the necessary Guardrails education training use of acceptable tools et cetera.

Gregory R. Adelson: We continue to actively identify opportunities to leverage AI, aiming to enhance client solutions and optimize internal processes and workstreams. Incorporating AI into select client solutions like Financial Crimes Defender, Data Broker, Executive Dashboard, and Bano Conversations is part of that strategy. We are approaching AI deployment thoughtfully, ensuring it benefits our clients and associates and aligns with our commitment to data privacy, protection, and security. Our strategy ensures we are responsibly bold and balanced. It has been about 18 months since our corporate rebranding initiative to retire the Scimitar, ProfitStars, and Jack Henry banking brands, as we now simply go to market as Jack Henry.

Gregory R. Adelson: We continue to actively identify opportunities to leverage AI aiming to enhance client solutions and optimize internal processes and work streams.

Gregory R. Adelson: Incorporating AI into select client solutions like financial crimes defender data broker executive dashboard and banner conversations is part of that strategy.

Gregory R. Adelson: We are approaching AI deployment, thoughtfully, ensuring that benefits, our clients and associates and aligns with our commitment to data privacy protection and security.

Gregory R. Adelson: Our strategy ensures we are responsibly bold and balanced.

Gregory R. Adelson: It has been about 18 months since our corporate rebranding initiative to retire the scimitar profit stars and Jack Henry banking brands as we now simply go to market as Jack Henry as.

Gregory R. Adelson: As we said at that time, uniting the brands reflects Jack Henry's role as a well-rounded financial technology provider and enables us to speak from a single consistent brand voice, one Jack Henry. We recently received results from an independent brand study that showed that Jack Henry's brand equity has increased by 9 points in just 18 months. We specifically saw significant improvement with large regional financial institutions and millennials. This is important as we continue to execute on our strategy to provide innovative technology solutions to larger financial institutions beyond what we already provide today through both our payment and complementary groups. And millennials are a critical audience because they are taking on larger leadership roles at these financial institutions and having more influence in technology buyer decisions.

Gregory R. Adelson: As we said at that time uniting the brands reflects Jack Henry's role as a well rounded financial technology provider and enables us to speak from a single consistent brand voice one Jack Henry.

Gregory R. Adelson: We recently received results from an independent brand study that showed that Jack Henry's brand equity has increased by nine points in just 18 months, we specifically saw significant improvement with large regional financial institutions and millennials.

Gregory R. Adelson: This is important as we continue to execute on our strategy to provide innovative technology solutions, the larger financial institutions beyond what we already provide today through both our payment and complementary groups Emma.

Gregory R. Adelson: Millennials are a critical audience because they are taking on larger leadership roles at these financial institutions, and having more influence and technology buyer decisions.

Gregory R. Adelson: Speaking of brand equity, hopefully, you all have seen the new Corporate Sustainability Report that we published on March 29th. We believe the 2024 report is an excellent representation of the key initiatives and accomplishments we've been working on over the past year. This year's report details how we are supporting local communities with a focus on financial wellness through both our investments in innovative technology and a variety of philanthropic efforts. We also continue to further our commitment to valuing people with disabilities with the launch of a new associate-led business innovation group focused on awareness of visible and invisible disabilities.

Gregory R. Adelson: Speaking of brand equity hopefully you all have seen the new corporate sustainability report that we published on March 29th We believe that 2024 report is an excellent representation of the key initiatives and accomplishments we have been working on over the past year.

Gregory R. Adelson: This year's report details how we are we're supporting local communities with a focus on financial wellness through both our investments in innovative technology and a variety of philanthropic efforts.

Gregory R. Adelson: We also continue to further our commitment to valuing people with disabilities with the launch of a new associate led business innovation group focused on awareness of visible and invisible disabilities.

Gregory R. Adelson: The report also highlights some of the public Best Places to Work recognition we receive from organizations like Newsweek, Computer World, and USA Today. As part of our planned organizational changes, we recently announced the promotion of Shanna McLaughlin, who is currently President of Jack Henry Credit Union Solutions, to Chief Operating Officer, effective July 1st.

Gregory R. Adelson: The report also highlights some of the public best places to work recognition, we received from organizations like Newsweek computer World and USA today.

Gregory R. Adelson: As part of our planned organizational changes, we recently announced the promotion of Shannon Mclaughlin, who is currently president of Jack Henry Credit Union solutions to Chief operating Officer effective July one.

Gregory R. Adelson: Shannon has been with Jack Henry for nine years, but she has close to 30 years' experience working with both banks and credit unions in senior technology and operational roles. She is a strategic, visionary leader who has significantly contributed to our company's overall success and will continue to do so as the next Chief Operating Officer. I want to close by recognizing Dave for the exceptional job he has done as CEO over the past eight years.

Gregory R. Adelson: Shannon has been with Jack Henry for nine years, but has close to 30 years, working with both banks and credit unions and senior technology and operational roles.

Gregory R. Adelson: Shannon as a strategic visionary leader, who has significantly contributed to our company's overall success and we'll continue to do so as the next chief operating officer.

Gregory R. Adelson: Okay.

Gregory R. Adelson: I want to close by recognizing de for the exceptional job. He has done as CEO over the past eight years under Dave's leadership, Jack Henry has experienced outstanding growth, both organically and through strategic acquisitions also want to thank Dave for his Mentorship and guidance. He has prepared me well as I step into the CEO role on July one and Im.

Gregory R. Adelson: Under Dave's leadership, Jack Henry has experienced outstanding growth both organically and through strategic acquisitions. I also want to thank Dave for his mentorship and guidance. He has prepared me well as I step into the CEO role on July 1st, and I'm honored to continue leading our company with an unwavering focus on our associates, clients, and shareholders. With that, I will turn it over to Mimi for more details on the numbers.

Gregory R. Adelson: <unk> hundred to continue leading our company with an unwavering focus on our associates clients and shareholders.

Dave: With that I will turn it over to me for more details on the numbers.

Mimi L. Carsley: Thank you, Greg, and good morning. Our continued focus on serving our community and regional financial institution clients and delivering shareholder value led to another quarter of solid revenue and earnings growth. I'll start with the details driving our third quarter and yield year-to-date results, then conclude with our full year guidance update. Q3 gap revenue increased 6% and non-gap revenue increased 7%, a continuation of consistently solid performance and keeping us on track for a strong fiscal 2024.

Me: Thank you, Greg and good morning all.

Me: Our continued focus on serving our community and regional financial institution clients.

Speaker Change: Laboring shareholder value led to another quarter of solid revenue and earnings growth.

Me: I'll start with the details driving our third quarter and year to date results, then conclude with our full year guidance update.

Me: Q3, GAAP revenue increased 6% and non-GAAP revenue increased 7% a continuation of consistently solid performance.

Me: Keeping us on track for a strong fiscal 2024.

Mimi L. Carsley: Year-to-date growth was 7% on a gap basis and stronger on non-gap at 8%. Deconversion revenue of approximately $800,000, which we pre-released last week, was down approximately $5.3 million, reflecting minimal financial institution consolidation of our clients. Year-to-date deconversion revenue was $9.9 million, $7.2 million less than the prior period.

Me: Year to date growth was 7% on a GAAP basis and stronger on non-GAAP at 8%.

Me: He conversion revenue of approximately 800000, which we pre released last week was down approximately $5 3 million, reflecting minimal financial institution consolidation of our clients.

Me: Year to date Deconversion revenue is $9 9 million.

Me: Seven 2 million less than the prior period.

Mimi L. Carsley: Now let's look more closely at the details. Gap services and support revenue increased 4%, while non-gap increased a more robust 6%. Year-to-date, the increase was 6% for gap and 7% on a non-gap basis. Service and support growth during the quarter was the result of increases in data processing and hosting revenue. We continue to experience robust growth in our private and public cloud offerings, which again increased 10% in the quarter and for the year to date.

Speaker Change: Now, let's look more closely at the details.

Speaker Change: <unk> services and support revenue increased 4%, while non-GAAP increase in more robust 6%.

Speaker Change: Year to date, the increase was 6% for GAAP and 7% on a non-GAAP basis.

Me: Service and support growth during the quarter was the result of increases in data processing and hosting revenue.

Me: We continue to experience robust growth in our private and public cloud offering, which again increased 10% in the quarter and for the year to date.

Mimi L. Carsley: This recurring revenue contributor is 32% of our total revenue and has long been a key to double-digit growth and... Moving to processing revenue, which is 43% of total revenue and another key component of our long-term growth model. We saw positive performance with 8% growth on both a gap and non-gap basis for the quarter, and year-to-date, we delivered 9% for both. Consistent with recent results, drivers include positive demand for our digital solutions, card processing, other payment processing, and other processing revenue.

Me: This reoccurring revenue contributor is 32% of our total revenue and has long been a key to double digit growth engine.

Me: Shifting to processing revenue, which is 43% of total revenue and another key component of our long term growth model is.

Me: These are positive performance with 8% growth on both a GAAP and non-GAAP basis for the quarter and year to date delivered 9% for Beth.

Me: Consistent with recent results drivers include positive demand for our digital solutions card processing or their payment processing and other processing revenues.

Mimi L. Carsley: In closing out revenue commentary, I would like to highlight total recurring revenue exceeded 91%. Next, moving to expenses. Beginning with cost of revenue, which increased 7% on both a gap and non-gap basis for the quarter and 7% for gap versus 6% for non-gap year to date. Drivers for the quarter included higher direct costs consistent with increases in related revenue, higher personnel costs, and increased internal license and fees.

Me: In closing out revenue commentary I would like to highlight total recurring revenue exceeded 91%.

Mimi L. Carsley: Next, R&D increased 4% on both a gap and non-gap basis for the quarter. The increase is primarily due to cloud consumption costs, net of capitalization. For the year today, R&D increased 4% on a GAAP basis and 3% for non-GAAP. And lastly, on a gap basis, SG&A rose 7% for the quarter and 8% on a non-gap basis, primarily due to higher personnel costs. Year-to-date SG&A expense increased 23% on a GAAP basis and 9% on a non-GAAP basis.

Me: Next moving to expenses.

Me: Beginning with cost of revenue, which increased 7% on both a GAAP and non-GAAP basis for the quarter and 7% for GAAP versus 6% for non-GAAP year to date.

Me: Drivers for the quarter included higher direct cost consistent with increases in related revenue.

Me: Higher personnel costs and increased internal license and fees.

Me: Next R&D increased 4% on both a GAAP and non-GAAP basis for the quarter. The increase was primarily due to cloud consumption costs net of capitalization.

Me: For the year to date, R&D increased 4% on a GAAP basis and 3% for non-GAAP.

Me: And lastly on a GAAP basis, SG&A rose, 7% for the quarter and 8% on a non-GAAP basis, primarily due to higher personnel costs.

Me: Year to date SG&A expense increased 23% on a GAAP basis, and 9% on non-GAAP basis, the primary GAAP differences or the $16 4 million in one time related costs.

Mimi L. Carsley: The primary gap differences are the $16.4 million in one-time costs related to the Voluntary Early Departure Incentive Program and VDIP and Q1 and prior period $7.4 million gain on asset sales. For non-GAAP, the difference is primarily due to the higher personnel costs and absence of gain on sale of assets.

Me: Related to the voluntary early departure incentive program.

Me: The dip in Q1 and prior period $7 4 million gain on asset sale.

Me: For non-GAAP. The difference is primarily due to the higher personnel costs and absence of gain on sale of assets.

Mimi L. Carsley: We remain focused on generating compounding margin expansion, and the quarter results delivered 30 basis points of increased non-gap margin, which was 20.8%. Non-Gap Margin benefited from focused process improvements and disciplined management of our workforce while retaining key talent. These strong quarterly results produced a fully diluted GAAP earnings per share of $1.19, up 7%.

Me: We remain focused on generating compounding margin expansion in the quarter results delivered 30 basis points and increased non-GAAP margin, which was 28%.

Me: non-GAAP margin benefited from focused process improvement and disciplined management of our workforce, while retaining key talent.

Me: These strong quarterly results produced a fully diluted GAAP earnings per share of $1 19 up 7%.

Mimi L. Carsley: Splitting results into the three operating segments, we're pleased to see across the board positive performance. Our core segment revenue increased 8% for the quarter on a non-GAAP basis, with non-GAAP operating margins increasing 216 basis points, continuing to benefit from private cloud trends and strong cost control. Year-to-date non-GAAP revenue growth was 8% and the associated margin increased 124 basis points. Payment segment revenue increased 6% on a non-GAAP basis. This segment had impressive non-GAAP operating margin growth of 121 basis points.

Me: Separating results into the three operating segments, we're pleased to see across the board positive performance.

Me: Our core segment revenue increased 8% for the quarter on a non-GAAP basis.

Me: With non-GAAP operating margins, increasing 216 basis points.

Me: We continue to benefit from private cloud trends and strong cost control.

Mimi L. Carsley: Year to date non-GAAP revenue growth was 8% and the associated margin increased 124 basis points.

Me: Payment segment revenue increased 6% on a non-GAAP basis. The segment had impressive non-GAAP operating margin growth of 121 basis points.

Mimi L. Carsley: This was due to continuing growth in our EPS business and moderate card growth consistent with U.S. consumer spending trends and a slightly tough comp combined with focused cost management. Year-to-date non-GAAP revenue growth matched the quarter at 6% with 103 basis points of margin expansion.

Me: This was due to continuing growth in our EPS business and moderate card growth consistent with U S consumer spending trends and a slightly tough comp combined with a focused cost management.

Me: Year to date non-GAAP revenue growth matched the quarter at 6% with 103 basis points of margin expansion.

Mimi L. Carsley: And finally, complementary segment non-GAAP revenue increased 8% with 33 basis points of margin expansion; year-to-date non-GAAP revenue also increased 8% with 28 basis points of margin. Growth year-to-date reflects digital solution demand and beneficial overall product mix. Segment quarterly margins were impacted by moderate headwinds from direct support costs and licensing fees.

Me: And finally complementary segment non-GAAP revenue increased 8% with 33 basis points of margin expansion.

Mimi L. Carsley: Year to date non-GAAP revenue also increased 8% with 28 basis points of margin expansion.

Mimi L. Carsley: Growth year to date reflects digital suite solution demand and beneficial overall product mix.

Mimi L. Carsley: Segment quarterly margins were impacted by moderate headwinds from direct support costs and license fees.

Mimi L. Carsley: Let's now turn to a review of cash flow and capital allocation. Year-to-date operating cash flow is $336,129,000, an increase over the prior period. Excluding proceeds from the sale of assets, BRIC cash flow was $172 million, significantly more than $54 million last year.

Speaker Change: Let's now turn to a review of cash flow and capital allocation.

Mimi L. Carsley: Year to date operating cash flow was $336 million $129 million increase over prior periods.

Mimi L. Carsley: Excluding proceeds from the sale of asset free cash flow was $172 million significantly more than the $54 million last year.

Mimi L. Carsley: Our base case entering the year included an elevated level of cash tax payments based on the Section 174 impact. However, based on legislative clarity and internal efforts, we were able to meaningfully lessen the impact. The net result was lower cash taxes, equating to an approximately $29 million overpayment last fiscal year, as well as an improved cash tax outlook this fiscal year.

Mimi L. Carsley: Our base case entering the year included an elevated level of tax cash tax payment based on the section 174 impact.

Mimi L. Carsley: Based on legislative clarity and internal efforts, we were able to meaningfully less than the impact. The net result was lower cash taxes equating to an approximately $29 million overpayment last fiscal year as well as improved cash tax outlook this fiscal year.

Mimi L. Carsley: Our consistent dedication to shareholder value creation resulted in a trailing 12-month return on invested capital of 19%. Additionally, I would highlight other notable return on capital metrics for the year-to-date period, including $20 million in share repurchase, offsetting annual dilution, $25 million in debt reduction, and $116 million in dividends. With three quarters of the year complete, we're nearing the conclusion of our fiscal year, and therefore, I'll conclude with guidance changes. As you are aware, yesterday's press release included updated fiscal 2024 full-year gap guidance along with the reconciliation to non-gap metrics.

Mimi L. Carsley: Our consistent dedication to shareholders.

Mimi L. Carsley: Value creation resulted in a trailing 12 month return on invested capital of 19%.

Mimi L. Carsley: Additionally, I would highlight other notable return on capital metrics for the year to date period, including $20 million in share repurchases offsetting annual dilution $25 million in debt reduction and $116 million in dividends.

Mimi L. Carsley: With three quarters of the year complete we're nearing the conclusion of our fiscal year, and therefore, I'll conclude with guidance changes.

Mimi L. Carsley: As you are aware Yesterdays press release included updated fiscal 2020 for full year GAAP guidance, along with a reconciliation to non-GAAP metrics.

Mimi L. Carsley: As a reminder, we filed an AK on August 3rd that described how, starting in the current fiscal year, we're using a revised approach for deconversion guidance. While we reported third quarter deconversion revenue of approximately $800,000, we are reiterating our full year deconversion guidance of $16 million.

Mimi L. Carsley: As a reminder, we filed an 8-K on August 3rd described how starting in the current fiscal year, we are using a revised approach for deconversion guidance.

Mimi L. Carsley: Well, we are while we reported third quarter Deconversion revenue of approximately 800000, we are reiterating our full year deconversion guidance at $16 million.

Mimi L. Carsley: We are reiterating both GAAP and non-GAAP revenue growth, but we expect non-GAAP growth to potentially have a bias towards the lower end of our 7.4 to 8.0 growth range. Due to the continued positive operational results and a focus on cost management, we now expect an increase in annual non-GAAP margin expansion of 45 to 50 basis points, compared to the 35 to 40 basis points previously provided. The full-year tax rate estimate remains at 23.5%.

Mimi L. Carsley: We are reiterating both GAAP and non-GAAP revenue growth and expect non-GAAP growth to potentially have a bias towards the lower end of our seven four to eight point growth range.

Mimi L. Carsley: Due to the continued positive operational result, and are focused on cost management. We now expect an increase in annual non-GAAP margin expansion of 45 to 50 basis points compared to the 35 to 40 basis points previously provided.

Mimi L. Carsley: The full year tax rate estimate remains at 23, 5%.

Mimi L. Carsley: Incorporating the noted positive updates, full year guidance for GAP EPS is revised upward to $5.15 to $5.19 per share from the previous guidance of $5.09 to $5.13 per share. As a reminder, the guidance for deconversion revenue compared to actual fiscal 2023 deconversion revenue, VDIP severance-related costs, and non-reoccurring gain on asset sales results in an approximate $0.37 headwind for EPS for Fiscal 2024. Due to the better-than-initially-anticipated cash tax payments, improved margins, and contributions from favorable net interests, our full-year guidance for free cash flow conversion has increased to 70-75% from the previous commentary of 60%.

Mimi L. Carsley: Incorporating the noted positive update full year guidance for GAAP EPS is revised upward to $5 15 to $5 19 per share from the previous guidance at $5 nine to $5 13 per share.

Mimi L. Carsley: As a reminder, the guidance or deconversion revenue compared to actual fiscal 2023 deconversion revenue.

Mimi L. Carsley: The severance related costs and non recurring gain on asset sales results in approximate 37 cent headwind for GAAP EPS.

Mimi L. Carsley: EPS for fiscal 2024.

Mimi L. Carsley: Due to the better than initially anticipated cash tax payments improved margins and contributions from favorable net interest our full year guidance for free cash flow conversion has increased to 70% to 75% from the previous commentary of 60%.

Mimi L. Carsley: In conclusion, Q3 results reflected continued momentum of the strong execution we've seen thus far this year, and we expect a solid finish for the remainder of the fiscal year. We remain 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 the contributions of our diligent and dedicated associates that drove these strong results and Jack Henry investors for their continued confidence.

Mimi L. Carsley: In conclusion Q3 results reflected continued momentum the strong execution, we've seen thus far this year and we expect a solid finish for the remainder of the fiscal year.

Mimi L. Carsley: We remain 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.

Mimi L. Carsley: We appreciate the contributions of our diligent and dedicated associates. The drove these strong results and Jack Henry investors for their continued confidence.

Mimi L. Carsley: Before I turn the call back over to Dave for his closing remarks... While I haven't had the pleasure of working with Dave for as long as others, I've cherished our time together. I want to thank Dave for giving me the opportunity to work for this amazing company, for being so incredibly generous with his wisdom and support, for so many small and meaningful pieces of guidance over the past two years. He is a role model of service, leadership, and doing the right thing.

Mimi L. Carsley: Before I turn the call back over to Dave for closing remarks.

Speaker Change: Haven't had the pleasure of working with David as long as others I cherished our time together I want to thank Dave for giving me the opportunity for this amazing company for being so incredibly generous with his wisdom and support.

Mimi L. Carsley: For so many small and meaningful pieces of guidance over the past two years is a role model of servant leadership and doing the right thing.

Mimi L. Carsley: We were fortunate to have him lead the Jack Henry board, and I look forward to this continued journey together. Well, thank you, Mimi. As you are all undoubtedly aware, this marks my final earnings call as CEO before my transition to Executive Board Chair on July 1. Reflecting on my career at Jack Henry, this has been an incredibly humbling journey for me both personally and professionally, and I'm beyond grateful to have had the opportunity to lead this great company for the past eight years.

Dave: We are fortunate to have him lead the Jack Henry Board and I look forward to this continued journey together.

Mimi L. Carsley: Ed.

Speaker Change: Thank you Mimi.

Mimi L. Carsley: As you are all undoubtedly aware this marks my final earnings call as CEO before May trend Executive Board Chair on July one.

Speaker Change: Reflecting on my career Jack Henry This has been an incredibly humbling journey for me, both personally and professionally and I'm beyond grateful to have had the opportunity to lead this great company for the past eight years as we move forward I have the utmost confidence in Greg and the rest of our exceptional team to sustain a reputation for great technology and service as well.

Mimi L. Carsley: As we move forward, I have the utmost confidence in Greg and the rest of our exceptional team to sustain our reputation for great technology and service, as well as our strong financial performance. I've cherished the opportunity to get to know all of you over the years and appreciate your insightful questions and thorough analysis. I thank our investors for their trust in Jack Henry and our clients for allowing us to serve their needs.

Mimi L. Carsley: As our strong financial performance.

Mimi L. Carsley: I'm curious the opportunity to get to know all of you over the years and I. Appreciate your insightful questions and thorough analysis I. Thank our investors for their trust and Jack Henry and our clients for allowing us to serve their needs and lastly, I want to express my heartfelt appreciation to our associates. It is their dedication and unwavering commitment to supporting our clients and each other.

Mimi L. Carsley: And lastly, I want to express my heartfelt appreciation to our associates. It is their dedication and unwavering commitment to supporting our clients and each other that drives our success and makes this company special. With that, we'll open up the floor for questions. Alan, if you would, please open the line. We will now begin the question and answer session. Please press star then 1 on your telephone keypad.

Mimi L. Carsley: That drives our success and makes this company special.

Mimi L. Carsley: With that we'll open up the floor for questions. Alan If you would please open the line.

Mimi L. Carsley: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

David B. Foss: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star. At this time, we will pause momentarily to assemble our roster. Well Dave, it's been good talking to you on all these calls. We'll miss speaking with you in the future, at least on the calls anyway. I wanted to get your perspective on maybe just the backlog. I know, Mimi, you said you're expecting maybe the lower end of the non-GAAP revenue for fiscal 24, and maybe backlog is the wrong word to use, but just your perspective on, you know, based on what the sales pipeline looks like and, you know, how good you feel about, as we move forward, the ability to predict revenue and maybe why the lower end of the guidance. So I'll give you my perspective, and then I'll ask Mimi to comment.

David B. Foss: Our first question comes from Kartik Mehta of Northcoast Research. Please go ahead.

David B. Foss: Dave It's been good talking to you all these calls we'll Miss speaking with you in the future at least on the calls anyways.

Mimi: Thank you Patrick.

David B. Foss: Okay.

David B. Foss: I wanted to get your perspective on maybe just the backlog I know Mimi you said you were expecting maybe at the lower end of the non-GAAP revenue for fiscal 'twenty four.

David B. Foss: And maybe backlog the wrong word to use but just your perspective on.

David B. Foss: Based on what the sales pipeline looks like.

David B. Foss: And how good you feel about as we move forward the ability to predict revenue and maybe why.

David B. Foss: The lower end of the guidance.

David B. Foss: So I'll give you my perspective, and then ill ask Mimi to comment so first off I mentioned in the in the release and in my comments that this was a.

David B. Foss: So first off, you know, I mentioned in the release and in my comments that this was the best sales quarter we've ever had, the best third quarter sales quarter we've ever had. And I also highlighted the fact that the sales pipeline has been replenished almost to that same record level that it was at last quarter. So as I see what's going on in the sales pipeline, but even more importantly, as I see what's happening here in the quarter that we're in right now, which of course we're not here to announce, I feel really bullish about the future opportunity as far as sales at Jack Henry and our ability to continue to deliver. So that's from a sales perspective. I'll ask Mimi to, oh, did you want to say something?

Speaker Change: Best sales quarter, we've ever best third quarter sales quarter, we've ever had and I also highlighted the fact that the sales.

Mimi: Our pipeline has been replenished almost of that same record level that it was out last quarter. So as.

Mimi: As I see what's going on in the sales pipeline, but even more importantly, as I see what's happening here in the quarter that we're in right now which of course, we're not here to announce I feel really bullish about the future opportunities for our sales of Jack Henry.

Mimi: And our ability to continue to deliver so that's a sales perspective or else. We need to go did you own the system. Let me just add to that so I think the other thing is is that we've had unbelievable sales success. This year, but as we've highlighted many times the deals that we're selling this year for the most part don't actually become revenue opportunities until future.

David B. Foss: Let me just add this. So I think the other thing is that, you know, we've had unbelievable sales success this year. But as we've highlighted many times, the deals that we're selling this year, for the most part, don't actually become revenue opportunities until future years and future quarters. So I think, you know, part of this is, you know, yes, there's some things that are in a implementation queue, and we're working through all those as we always do. But there isn't really anything that is signaling anything other than, you know, hopefully, future success based on what we've seen.

David B. Foss: Years in future quarters. So I think part of this is yes. There are some there are some things that are in a implementation queue and we're working through all of those as we always do.

David B. Foss: But there isn't really anything that is signaling anything other than hopefully future success based on what we've seen so I just want to make sure that you understand that all of the sales success, we're seeing right now will be in future quarters.

Mimi L. Carsley: So I just want to make sure that you understand that all of the sales success we're seeing right now will be in future quarters. Yeah, the only thing I would add, Kartik, is that we feel really good about all three operating segments' revenue. The total revenue is still very much in line with our long-term algorithm and what we thought about at the beginning of the year.

Speaker Change: Yeah. The only thing I would add Kartik is that now we feel really good about all three operating segments revenue.

Mimi L. Carsley: Total revenue is still very much in line with our long term algorithm and what we've thought about at the beginning of the year. There is a part of our business that does really.

Gregory R. Adelson: There is a part of our business that does relate to economic factors and USM, and that's the card business. So I think as we look ahead for the year, we feel really confident about our ability to hit that range. And then, Greg, you talked about AI and maybe the opportunities there. But I'm wondering, for Jack Henry, is there an opportunity for you to use AI internally?

Speaker Change: Two economic factors and use unmet and Thats the card business. So I think as we look out for the year, we feel really confident about our ability to hit that range.

Speaker Change: Perfect and then Greg just you talked about AI and maybe the opportunities in there, but I'm wondering for Jack Henry is there an opportunity where you use it internally and could that lower cost.

Gregory R. Adelson: And could that lower costs? And if so, you know, is there an upfront cost that you're dealing with in an effort to implement that? Yeah, it's a great question, Kartik.

Greg: And if so is there upfront cost that youre dealing with.

Greg: In an effort to implement that.

Gregory R. Adelson: So the short answer is we are spending a lot of time on internal operational efficiency opportunities throughout our entire organization. In fact, we recently had a corporate leadership team meeting where each of the individual business units and non-operating business units all presented their ideas for the utilization of AI, specifically generative AI. And so we're going through prioritization. We've done a really good job of spending time making sure that we're focused on building the efficiencies first, getting the learnings, and all the other stuff. We've just approved a couple of utilizations for the Microsoft co-pilot for internal use and the GitHub co-developer stuff for the developers. Or co-pilot, sorry.

Greg: Yes, it's a great question Kartik. So short answer is we are spending a lot of time on internal operational efficiency opportunities throughout our entire organization. In fact, we most recently had a corporate leadership team meeting where each of the individual business units and non operating business units.

Gregory R. Adelson: That's all presented their ideas for for utilization of AI, and specifically generative AI and so we're going through prioritization, we've done a really good job of of spending time, making sure that we're focused on building the efficiencies first getting the learnings and all the other stuff we have just approved.

Gregory R. Adelson: Couple of utilization for the Microsoft co pilot for internal use and the get get hub.

Gregory R. Adelson: Developer.

Gregory R. Adelson: Stuff for them for the developers.

Gregory R. Adelson: Their copilot, sorry, and we're actually in the process of going through all of those things and looking for ways that we can continue to build efficiency and effectiveness.

Gregory R. Adelson: And we're actually in the process of going through all those things and looking for ways that we can continue to build efficiency and effectiveness first, as we're actually doing some other things within some of our products, as I announced as well. The only thing I would add is, as Greg said, responsibly bold and balanced is our approach. And that covers both the usage as well as the investment.

Gregory R. Adelson: First as we're actually doing some other things within some of our products as I announced as well.

Unknown Executive: And so we're using the internal existing policies and processes to prioritize and develop business cases to think about the benefits, not this isn't just a curiosity, there have to be business cases. And so all of that will still fit within our plan, budget, R&D, and internal expense policy. Thank you very much. I appreciate it. Next question. Andrew Schmidt of, Hi Dave, Greg, Mimi.

Gregory R. Adelson: The only thing I would add on there is as Greg said responsibly bold and balances our approach and that covers both the usage as well as the investment and so we are using the internal existing policies and processes to prioritize did develop business cases to think about the benefits not this isn't.

Unknown Executive: Just a curiosity there has to be business Davis, and so all of that will still fit within our planned budget in R&D and internal expense policies.

Andrew Garth Schmidt: Perfect. Thank you very much appreciate it.

Unknown Executive: Yes.

Unknown Executive: The next question comes from Andrew Schmidt of Citi. Please go ahead.

Andrew Garth Schmidt: Thanks for taking my questions. And Dave, congrats again on the Thank you. Let us start on the margin front. Good performance here.

Andrew Garth Schmidt: Hey, Dave Gregg Mimi, Thanks for taking my questions and Dave Congrats again on the transition.

Andrew Garth Schmidt: Thank you.

Andrew Garth Schmidt: Wanted to start on the margin front it performance here.

Mimi L. Carsley: Mimi, maybe you should put a finer point on this. I know that there were some operational efficiencies that drove this, maybe some mixed factors as well, but maybe a finer point on that. And then, as we think about, the Go Forward Margin Trajectory. It seems like you're above. Transcribed by https://otter.ai. Welcome.

Mimi L. Carsley: Mimi maybe you could put a finer point on this I knew that there were some you mentioned some operational efficiencies that drove this maybe with some mix factors as well.

Mimi L. Carsley: Maybe a finer point on that and then as we think about the go forward margin trajectory. It seems like youre above this year kind of what you've outlined for the longer term. So how does this year's margin performance kind of inform the view on the longer term margin progression. Thanks a lot.

Mimi L. Carsley: So Andrew, I would say for this year, it came down to strong execution, operational focus, and a bit of product mix as well. But, you know, we're being very diligent around headcount and spending for the year. There's also some timing around products and how that amortization impacts us as well, which is also something that we're just going to be thoughtful about for next year. It's really early still in our budget planning, and our teams are getting together and thinking about the prioritization.

Mimi: Youre welcome so Andrew I would say for this year. It came down to strong execution operational focus it's a bit of product mix as well, but we're being very diligent around head count around spending for the year. There's also some timing around.

Mimi L. Carsley: Products, and how that amortization impacts us as well, which is also something that we're just going to be thoughtful about for next year.

Mimi L. Carsley: I would say at this point, still thinking about that long-term range we've given versus an elevated state, but we're always trying to deliver shareholder value. And so that's going to always be a focus for us. Perfect. Thank you for that, Mimi.

Andrew: It really early still in our budget planning our teams are getting together and thinking about the prioritization.

Mimi L. Carsley: I would say at this point still thinking about that long term range we've given.

Andrew: Versus an elevated state, but we're always trying to deliver shareholder value and so that's going to always be a focus for us.

Speaker Change: Perfect. Thank you for that and then.

David B. Foss: And then maybe just digging into the average contract size of recent cohorts. I know the tax rates have gone up over the past few years, but maybe you could put a finer point in terms of what you're seeing in terms of just a couple in our product adoption and just average contract size, maybe a year or two years ago. Thank you very much.

Speaker Change: Maybe just digging into the average contract size of recent cohorts I know.

David B. Foss: The catch rates have gone up over the past few years, but maybe to put.

David B. Foss: A finer point in terms of what Youre seeing in terms of.

David B. Foss: Couple of hundred product adoption, and just average contract sizes.

David B. Foss: Perhaps recent periods versus may.

David B. Foss: Maybe a year or two years ago. Thank you very much.

David B. Foss: Yeah, Andrew, Dave. So one of the challenges with this, whenever we have a conversation like this, is that there is no such thing as an average when it comes to our contracts. You're correct, the attach rates tend to be high with our core clients. But remember, we sell a lot of solutions that are outside the core base. And the variety of solutions that we sell, roughly 300 different solutions, they range from, you know, very small ticket prices to very large ticket prices. Most of the solutions, almost everything we sell today is hosted. So it's rare for us to sell a licensed version of a solution.

David B. Foss: Andrew It's Dave So one of the challenges in this so whenever we have a conversation like this is there is no such thing as average when it comes to our contracts Youre correct. The attach rates tend to be high with or.

David B. Foss: With our core clients, but remember we sell a lot of solutions that are outside the core outside the core base and the variety of solutions that we sell in a roughly 300 different solutions. They range from very small ticket price to very large ticket price most of the solutions almost everything we sell today is hosted so it's rare for us to sell.

David B. Foss: Well, then, in a hosted contract, are they going to be hosted for three years or 10 years or, you know, so trying to talk about averages is pretty challenging. The best indicator, because we have used the same measurement approach for sales quota attainment for many years now, the best measure is the fact that, you know, as I just mentioned, Q3 was the best quarter we've ever had. You know, that's the most significant indicator of sales success is the fact that we've used the same way of measuring contracts for many years.

David B. Foss: The license version of our solution will then in the hosted contract or are they going to be hosted for three years or 10 years or so the trying to talk about average is pretty challenging the best indicator because we have used the same measurement approach for sales quota attack.

David B. Foss: <unk> for many years now the best measure is the fact that as I. Just mentioned Q3 was the best Q3, we've ever had.

David B. Foss: That's the most significant indicator of sales success is the fact that we've used the same way of measuring contracts for many years and so it's a.

David B. Foss: It's a good relative performance indicator for our sales organization and sales overall are up so I know, it's frustrating to not be able to talk about averages, but it's just really not a practical thing to try and do in our in our world.

David B. Foss: And so it's a good relative performance indicator for a sales organization, and sales overall are up. So I know it's frustrating to not be able to talk about averages, but it's just really not a practical thing to try and do in our world. Now, it makes sense. Yeah, a lot of different shapes and sizes. El-Fatih.

Speaker Change: No no. It makes sense, yeah, a lot of different shapes and sizes out there I don't know.

David B. Foss: Exactly.

Unknown Attendee: Congratulations again, Dave, thank you very much. Thank you. Darrin Peller of Wolf, Thanks guys, thanks, and Dave, I want to send my congratulations. Thank you, Darrin. Hey, guys, maybe just start off on a free cast.

Speaker Change: Congrats again, thank you very much.

Speaker Change: Thank you.

Unknown Attendee: The next question comes from Darrin Peller of Wolfe Research. Please go ahead.

Speaker Change: Got it thanks, Dave I want to semi congrats as well.

Speaker Change: Thank you Darren for years.

Speaker Change: So always appreciate the help.

Unknown Attendee: Hey.

Speaker Change: Guys, maybe just start off on a free cash discussion if we could just revisit.

Darrin David Peller: If we could just revisit, you know, it obviously is, Periods of strength above 80% and below, https://www.youtube.com.au. Maybe just give us a sense a little more of what the driving factors are and the sustainability of it now. Maybe it just helps us understand, you know, if we're back to 80% going forward in the next election, Sharon. So it has been a bit of a roller coaster ride, you know, and in part that was due to the lack of clarity from a legislative front.

Speaker Change: It obviously has gone through it.

Darrin David Peller: It's periods of strength above, 80% and below 60% now you're saying back to 70 plus thank you.

Darrin David Peller: Just give us a sense a little more on what the driving factors are on the sustainability of it now and.

Darrin David Peller: I mean, maybe you can just help us understand if we're back to 80% going forward in the next couple of years.

Darrin David Peller: It has been a bit of a roller coaster ride.

Darrin David Peller: And in part that was due to the lack of clarity from a legislative front.

Darrin David Peller: You know, as we said on last quarter's call, we were hopeful the progress on Congress addressing the Section 174 R&D related impact on cash taxes would go through. We were optimistic, but not, you know, betting on that. But even in the absence of that, the clarity that the Treasury, the IRS, our outside consultants, and our incredible tax team here at Jack Henry have given us has really helped us to discover savings from a cash tax perspective that effectively impacted last year's benefit, so that would mean less cash tax paid this year.

Darrin David Peller: As we said on last quarter's call we were hopeful the progress on <unk>.

Darrin David Peller: Congress addressing the section 174, R&D related impact on cash taxes, which go through we were optimistic but not betting on that but even in the absence of that the clarity that the treasury the IRS.

Darrin David Peller: Our outside consultants are incredible tax team here at Jack Henry have had.

Darrin David Peller: Has really helped us from being able to discover savings from a cash tax perspective that impacted effectively.

Darrin David Peller: Last year, our benefits so that would mean less cash taxpayer this year.

Mimi L. Carsley: And so even if that legislation does not get fully addressed, I think we're in an improved position versus where we thought earlier in the year. We're still hopeful that it will be addressed, but that's the biggest driver, you know, that represents over $29 million in last year's impact alone, let alone some additional for this year. So that's the biggest impact, the free cash flow, and I think that's sustainable for the company to go forward. Okay, that's very helpful.

Darrin David Peller: And so even if that legislation does not get fully addressed I think we're in an improved position versus where we thought earlier in the year, we're still hopeful that it will be addressed but that's the biggest driver.

Mimi L. Carsley: That represents over $29 million.

Mimi L. Carsley: In last year's impact alone let alone some additional for this year. So that's the biggest impact the free cash flow and I think that's a sustainable for either go for.

Speaker Change: Okay. That's very helpful. Thanks, guys, Greg maybe just on your side, if we could just talk about what youre seeing in the market more specifically around demand for core conversions or obviously the cloud discussion that we've had for some time now I mean, just any inflections youre seeing for specific products or our offerings or maybe vice versa anything that week.

Gregory R. Adelson: Guys, Greg, maybe just on your side, if we could just talk about what you're seeing in the market more specifically around demand for core conversions or, obviously, the cloud discussion we've had for some time now. I mean, just any inflections you're seeing for specific products or, or off. Yeah, sure. So I think a couple of things are, you know, part of our survey, and even just obviously, with our regular conferences and conversations with our clients. Deposit growth continues to be a big driver.

Gregory R. Adelson: Or any more color would be great.

Gregory R. Adelson: Operational efficiency continues to be a big one, and that's why we really highlighted some of those key products that were already focused on and, you know, fraud being a big one, things that we were already focused on and driving out in the market set, and we're continuing to see some nice pickup in all of those. So those continue to be big ones.

Greg: Yeah sure. So I think a couple of things as part of our survey and even just obviously with our regular conferences in conversations with our clients deposit growth continues to be a big driver.

Gregory R. Adelson: Operational efficiency continues to be and that's why we really highlighted some of those key products that were already.

Gregory R. Adelson: Focused on fraud being a big one things that we're already focused on driving out in the market set and we're continuing to see some nice pick up in all of those so those continue to be big ones I think related to the tech modernization and what we're doing with our modules.

Gregory R. Adelson: I think related to the technological modernization and what we're doing with our modules, we're continuing to have a lot of success on the execution side of that. We'll continue to talk more about that in future calls. But, you know, right now, we're really excited about what we've done with Data Broker and Executive Dashboard. We think those are some products that really aren't out there in the space today, and we'll continue to create an opportunity for us to show the advancement of what we're doing in our cloud-native technology and utilization of generative AI as part of that.

Gregory R. Adelson: We're continuing to have a lot of success in and on the execution side of that and we'll continue to talk more about that in future calls.

Gregory R. Adelson: But right now we're really excited about what we've done with data broker and executive dashboard. We think those are some products that really are not out there in the space today and will continue to create an opportunity for us to show the advancement of what we're doing in our our cloud native technology and utilization of generative AI is <unk>.

Gregory R. Adelson: So all of those will kind of tie into what the demand has been around deposits broad opportunities operational efficiency as.

Gregory R. Adelson: As the three big things.

Speaker Change: Great. Thanks.

Speaker Change: Thanks, Kevin.

Gregory R. Adelson: Okay.

Gregory R. Adelson: Our next question comes from Vasu <unk> of K B W.

Gregory R. Adelson: So all of those will kind of tie into what the demand has been around deposits, fraud opportunities, operational efficiency, as the three big things, and Vasu Govil of KBW. Please go ahead. I guess, for a quick one. I know it's a little too early to talk about the 25 out, based on the new sales momentum that you've had. Like you were setting up for stable, if not, accelerate.

Vasundhara Govil: Go ahead.

Vasundhara Govil: Hi, Thanks for taking my questions I guess first quick one for me I know, it's a little too early to talk about the 25 outlook, but just based on the new sales momentum that <unk> had this year. It seems like you're setting up for stable if not accelerating revenue growth into next year.

Vasundhara Govil: Any reason to think that may not be the case? Transcribed by https://otter.ai. So Vasu, I wish I could tell you with more precision about next year's targets, but it's just a little too early. We're still in the budget process, but there's no reason to have any other expectation than the GROWS algorithm, you know, at a high level. You know, there are some things that present challenges each year from a grow-over perspective, even though we're having tremendous success with the sales pipeline, you know, there's lower convert merge that was impacted this year. You just never know from a grow-over perspective.

Vasundhara Govil: Any reason to think that may not be the case and then maybe if you could also specifically comment on the payments segment.

Vasundhara Govil: Ending slightly softer than we would've thought just how it performed relative to internal expectations and what you're expecting for that go forward trend line there.

Vasundhara Govil: Yeah, Vasu I wish I could tell you with more precision that next year's targets, but it's just a little too early we're still during the budget process, but there is no reason to have any other expectation then the growth algorithm at all.

Vasundhara Govil: High level.

Vasundhara Govil: There are some things that present challenges each year from a grow over perspective.

Vasundhara Govil: That even though we're having tremendous success with the sales pipeline.

Vasundhara Govil: Lower convert merge that impacted this year you just never know from a grow over perspective.

Vasundhara Govil: But I think the growth algorithm is a pretty good framework to think about for next year as it relates to this year and the payments question I would say that that really to categorize that we saw slower transaction growth.

Mimi L. Carsley: But I think the GROWS algorithm is a pretty good framework to think about for next year. As it relates to this year and the payments question, I would say that, really, you know, to categorize it, we saw slower transaction growth, you know, broadly slower growth in debit. And that was, you know, in line with all of the major card network providers and U.S. trends we've seen and a tough comp.

Mimi L. Carsley: Broadly slower growth in debit and that was in line with all of the major card network providers in U S trends we've seen.

Mimi L. Carsley: And a tough comp, but we're reiterating the full year guide and we feel comfortable in that 7% to 8% growth or algorithm is still a appropriate level.

Mimi L. Carsley: But we're reiterating the full-year guide, and we feel comfortable in that 7 to 8 percent, you know, the GROWS algorithm is still an appropriate level. Thank you for that. And then Dave, I want to add, I really enjoyed working with you the last time. One high-level question. Any big players that have the majority of the share in D&D?

Speaker Change: Thank you for that and then Dave I wanted to add I agree.

Dave: Really enjoyed working with you the last few years and you will certainly be missed.

Speaker Change: One high level question for you.

Dave: Three big players that have the majority of the share in the industry, but the number of Fintech that are going after the opportunity is larger today than it probably was a few years ago. So how do you see the competitive landscape evolving over the next three to five years.

David B. Foss: The number of FinTechs that are going after the opportunity is larger today than it probably was. Yeah, so first off, thank you, Vasu. It's been, it's been fun.

David B. Foss: So it's interesting, you know, this, people trying to come into the US market and provide competing services to players like us has been going on for quite a while now. And the challenge for many of them is that they approach it from a technology point of view, as opposed to from a banking point of view. And so they come in thinking, hey, I can deliver a greater user experience, you know, something that's cooler and more fun.

Dave: Yeah. So first off thank you so it's been it's been fun.

David B. Foss: So it's interesting.

David B. Foss: People trying to come into the U S market and provide competing services to players like us has been going on for quite a while now.

David B. Foss: The challenge for many of them is the appropriate approach it from a technology point of view as opposed from a banking point of view and so they come in thinking Hey, I can deliver a greater user experience something that's let's cooler and more fun, but they don't realize how really difficult that is to do the heavy lifting that's behind the scenes that you don't see it's the it's the work that's not sexy, but it's the work that has.

David B. Foss: But they don't realize how really difficult it is to do the heavy lifting that's behind the scenes that you don't see. It's the work that's not sexy, but it's the work that has to be done for a bank or credit union to be successful.

David B. Foss: To be done for a bank or credit union to be successful.

David B. Foss: So we've seen many come into the U S market trying to deliver a solution don't understand the regulatory environment don't really understand all the heavy lifting that happens underneath and then they kind of back away and maybe turn their solution into a digital banking solution or something like that and so I don't view whats going on today is really any different from that there are there.

David B. Foss: There are people out there and they are smart people, but I think the complexity of all the things you have to do to keep the bank or credit Union operating an imbalance in all of those important things is oftentimes.

David B. Foss: Times overlooked so we have our eyes wide open we don't we're not pretending that nobody has a threats but.

David B. Foss: We follow a lot of different companies, but today isn't really in my mind any different than it was five years ago, where a lot of people were talking a lot of people were trying to figure out how to really take a foothold in this industry and.

David B. Foss: And it's just really difficult to do all the things that we do so I don't see that changing anytime soon.

Speaker Change: Thank you for the color.

David B. Foss: The next question comes from Tyler Dupont of Bank of America.

David B. Foss: And so we've seen many come into the US market, trying to deliver a solution, but they don't understand the regulatory environment, don't really understand all the heavy lifting that happens underneath. And then they kind of back away and maybe turn their solution into a digital banking solution or something like that. And so I don't view what's going on today as really any different from that there are people out there, and they're smart people.

David B. Foss: But I think the complexity of all the things you have to do to keep a bank or credit union operating and in balance and all those important things is often, often overlooked. So we have our eyes wide open; we're not pretending that nobody is a threat.

Speaker Change: Please go ahead.

David B. Foss: Hi, Hi, Good morning. This is Tyler on for Jason Thanks for taking the question.

David B. Foss: But we follow a lot of different companies, but today, in my mind, it isn't really any different than it was five years ago, where a lot of people were talking; a lot of people were trying to figure out how to really take a foothold in this industry. And it's just really difficult to do all the things that we do. So I don't see that changing anytime soon. Thank you for the color.

Speaker Change: I wanted to start by asking about the progress in rolling out some of the complementary solutions.

David B. Foss: Such as that panel business financial crimes vendors outside the core.

Speaker Change: Could you maybe just level set where we are today with that rollout if I remember right the target with some sort of implementation by the end of about 24.

Speaker Change: And just sort of when you think this might be needle moving going forward any clarity there.

Tyler DuPont: The next is Tyler DuPont of Bank Hi. Hi. Good morning.

David B. Foss: Yes. This is Greg so I'll take that one so as far as execution. We're moving forward, we had talked about being able to sell it at the end of this calendar year, and we will be able to start doing that in Q4 execution and planned implementation will be in the fourth quarter of our fiscal year.

Tyler DuPont: <unk> 25.

Tyler DuPont: Second year or second quarter of the calendar year of 'twenty five that'll be the planned implementations.

Tyler DuPont: As we mentioned earlier, we were going to take this in a very strategic fashion.

Tyler DuPont: After just a handful of.

Tyler DuPont: Competitive of course, we're focused on working through one right now you have to get some level of cooperation to do some of what we're doing as well so some of that.

Tyler DuPont: It gets kind of in the documentation and working through some of those.

Tyler DuPont: Kind of idiosyncrasies that what you need but.

Tyler DuPont: But as far as our plan has us on track to have banner business, our Cps card product and financial crimes defender all three of those products that today to do that do not go outside of the Jack Henry core base to be available all at the same time and offer the the first the first.

Tyler DuPont: Specific core that we're targeting.

Tyler DuPont: And then we'll be working through the other thing so as far as answering your question of when it will have any significant impact it'll be a little while for that to happen and but the reality is we think the stickiness of what we're doing.

Tyler DuPont: With with those particular products will help us with some other things.

Tyler DuPont: And selling other solutions and other opportunities.

Gregory R. Adelson: This is Tyler on. I wanted to start by asking about the progress in rolling out some of the accomplishments. www.thevenusproject.com. Can you maybe just level set where we are today with that rollout? If I remember right, the target was some sort of implementation by the end of F-22, and just sort of when you think this might... I'm going forward. Yeah, this is Greg, so I'll take that one.

Tyler DuPont: I have just one clarification to your question Tyler just to make sure. We're on the same page here. So.

Gregory R. Adelson: So as far as execution is concerned, we're moving forward. We talked about being able to sell it at the end of this calendar year, and we'll be able to start doing that in Q4. Execution and planned implementation will be in the fourth quarter of our fiscal year 25, second year, or second quarter of the calendar year 25.

Gregory R. Adelson: What Greg has talked about as these brand new solutions that we're rolling into the <unk>.

Gregory R. Adelson: Outside the base, but we have thousands and thousands of deployments of other solutions to non Jack Henry core customers. So I just want to make sure. There's no confusion about we've been selling outside the core base for many years thousands of them. In fact, I think we have more customers more banks and credit unions running our bill pay solution, who are not Jack Henry core customers, then who are Jack Henry core customers and that's true for.

Gregory R. Adelson: A number of other solutions. So just want make sure we're clear on the fact that we know how to sell outside the base is just the strategy around these these brand new solutions that we've been really.

Speaker Change: Kind of.

Gregory R. Adelson: Talking about and thoughtful about.

Gregory R. Adelson: That'll be the planned implementations. As we mentioned earlier, we were going to take this in a very strategic fashion, going after just a handful of competitive cores. We're focused on working through one right now; you have to get some level of cooperation to do some of what we're doing as well. So some of that gets, you know, kind of into documentation and working through some of those, you know, kind of idiosyncrasies with what you need.

Gregory R. Adelson: Okay.

Speaker Change: Stuart I appreciate the clarity there and then just as a follow up I wanted to jump off of the previous competitive positioning question, but from a slightly different angle.

Gregory R. Adelson: Can you discuss any signs of success, you're seeing or any trends youre seeing.

Gregory R. Adelson: Moving a little bit more into the Midmarket financial institutions.

Gregory R. Adelson: Playing field, if you will sort of what trends you're seeing there. If there is any different go to market that you need to implement.

Gregory R. Adelson: I know you mentioned that there was a couple of multimillion dollar signings over over the past several quarters, but just any update there.

Gregory R. Adelson: But as far as our plan is concerned, we are on track to have Bano Business, our CPS card product, and Financial Crimes Defender, all three of those products that today do not go outside of the Jack Henry core base, to be available all at the same time, and all for the first specific core that we're targeting. And then we'll be working through the other things. So as far as answering your question of when it'll have any significant impact, it'll be a little while for that to happen.

Gregory R. Adelson: Yes sure. This is Gregg again, so I'll take that so as we've mentioned previously and there still are.

Gregory R. Adelson: All in the Q, we have 320 billion plus opportunities in our current pipeline and we continue to work those.

Gregory R. Adelson: And continue to make progress on those but I would say that even in the multibillion space, let's just call. It the 5% to $15 billion, we're continuing to see more and more opportunities in there and I would say the biggest drivers really are the technology modernization strategy that we've articulated and what folks are seeing.

David B. Foss: And but the reality is, we think the stickiness of what we're doing with those particular products will help us with some other things in selling other solutions and other opportunities. Can I offer just one clarification to your question, Tyler, just to make sure we're on the same page here? So, you know, what Greg has talked about are these brand new solutions that we're rolling out outside the base. But we have thousands and thousands of deployments of other solutions to non-Jack Henry core customers.

David B. Foss: <unk> for the future and more importantly, what we've already executed on as you can imagine most people want to see that it's not just a sales pitch is some level of execution and we continue to show advancements on what we've done where we're going.

David B. Foss: And things along that line. So that has really helped us continue to move and progress in the sales pipeline with many of these these larger opportunities. So I think what youre going to continue to see is what we're doing on the technology side, what we've always been known from the service side.

David B. Foss: So I just want to make sure there's no confusion about, we've been selling outside the core base for many years. Thousands, in fact, I think we have more customers, more banks and credit unions running our BillPay solution who are not Jack Henry core customers than who are Jack Henry core customers. And that's true for a number of other solutions.

David B. Foss: To create those those opportunities.

Speaker Change: Okay, great. Thanks, Great that's very helpful.

David B. Foss: The next question comes from Dave Koning of Baird.

Speaker Change: Please go ahead.

Speaker Change: Hey, guys, Congrats Dave great career.

David B. Foss: And I guess first of all I.

Gregory R. Adelson: So I just want to make sure we're clear on the fact that we know how to sell outside the base. It's just the strategy around these brand new solutions that we've been really kind of talking about and thoughtful about. Okay, understood. I appreciate the clarity there. And then, just as a follow-up, I wanted to jump off.

Speaker Change: I guess, just kind of to kind of clean up questions corporate revenue was lower than the normal lower than recently I think as the conference wasn't in the quarter, but then costs corporate costs were higher than usual, what's just the dynamic there and do those go back down in the coming quarters.

Gregory R. Adelson: Competitive Positioning Question, but from a slightly different angle. If you discuss any signs of success you're seeing or any trends you're seeing, such as moving a little bit more into the mid-market financial institutions. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com, I know you mentioned the... $1.8 billion. Transcription by CastingWords.

Speaker Change: Yeah, I think I wouldn't read anything into just like one quarter. We did have relative to last quarter, we talked about that the annual merit increase is hit.

Gregory R. Adelson: Q3, though from a cost perspective, that's where you saw personnel costs go up.

Gregory R. Adelson: The revenue it could just be hardware, whereas you mentioned last quarter was the conference, but I would not read too much into that.

Gregory R. Adelson: Okay. Okay, and then one other one I think you had a negative term fee in complementary and then I think you actually had a small EBIT loss on term fees. Both of those I don't know if we've ever seen those dynamics before either of those.

Gregory R. Adelson: Maybe just I know it was such a small term fee quarter anyway, but just describe kind of how that happens.

Gregory R. Adelson: That's one off.

Speaker Change: Yeah. This is certainly a one also.

Gregory R. Adelson: As you know for the conversions.

Gregory R. Adelson: But we do get a little bit of notice once they start the file transfer process that we were informed that a financial institution had planned to deconvert.

Gregory R. Adelson: And then later postpone the timing and delay and so there was a bit of a reversal on that transaction and this is something I've been doing this a long time I don't remember the last time I saw this but this was essentially a customer that.

Gregory R. Adelson: And was recruited away by a competitor and they had a failed conversion and so decided that they needed to back out of that and come back to Jack Henry So I don't I don't ever remember that happening and certainly haven't seen a failed conversion in our industry for many many years. So this was a real unique situations.

Speaker Change: No that's great to hear thanks, guys.

Gregory R. Adelson: Our next question comes from James Faucette of Morgan Stanley. Please go ahead.

Speaker Change: Great. Thank you very much and also when I extend my my thanks for all the hard work put them on behalf of Jack Henry over the years.

Gregory R. Adelson: Wanted to quickly.

Gregory R. Adelson: Maybe take advantage of.

Gregory R. Adelson: Greg and being here in <unk>.

Gregory R. Adelson: Dig in a little bit on your commentary about customer sentiment I'd love to get your thoughts on the regulatory scrutiny that banks are going through right now which seems to be picking up.

Gregory R. Adelson: Several of the banks have alluded to plans to adjust their capital liquidity and CRE concentrations over the next several quarters.

Gregory R. Adelson: Doesn't seem to be impacting your bookings and sales performance, but curious if the topic of greater regular regulatory scrutiny is coming up with customers and how you're thinking about what you can do to help those customers as they deal with that.

Gregory R. Adelson: So greater.

Gregory R. Adelson: Literary scrutiny is absolutely in the conversation very regularly these days and really.

Gregory R. Adelson: Since.

Gregory R. Adelson: I guess may of last year.

Gregory R. Adelson: The.

Gregory R. Adelson: Period, where there was all this consternation around what was happening in the regional banking space since that time, the regulatory environment has changed pretty dramatically for I think all of our customers on the banking side and so there's a lot of conversation about that it is interesting. However that that has not had any impact on bookings and one of the things that.

Gregory R. Adelson: I'd say regularly now is if you're running a bank or credit Union almost any challenge you have almost any problem you need to solve in this day and age in 2020 for the solution involves technology it.

Gregory R. Adelson: It doesn't involve usually people because they are trying to figure out how to automate or how to use technology to either mitigate risk or grow grow the franchise or something like that and so I think because of the world. We live in today, where technology is almost always part of the solution. That's why regardless of what's going on with the regulators.

Gregory R. Adelson: There is an opportunity for us to help them using some some type of technology solution, either looking to stay to grow the franchise or to mitigate risk or deal with fraud or whatever it is so I haven't seen any or heard and we just did.

Gregory R. Adelson: Client conference in <unk> City about three weeks ago, no discussion about backing off on spend.

Speaker Change: Spending on technology or anything like that in fact, the survey that Greg just say that there was the unexpected increase in tech spending for the coming year and so those would be my observations, but I'll defer to Greg. If you want to no. I think you were you were pretty complete I think the part that I would say is that the technology component really is the driver here is that more and more folks.

Gregory R. Adelson: Are recognizing for them to continue to be able to quote punch above their weight, especially in the community bank.

Gregory R. Adelson: Base is that they're looking for technology to stay to the level of railroad relevancy that they need to be and that's why we've been so adamant and our focused execution on getting these products out and giving us and our institutions and opportunity to do that.

Speaker Change: Got it. Thank you for that and then want to turn quickly Greg to implementation and you mentioned implementation queues.

Gregory R. Adelson: How are those trending broadly in and how are you thinking about the puts and takes between margin expansion and you're delivering versus the potential for additional resource allocations beat up those implementations just.

Gregory R. Adelson: Walk us through the thought process and what youre dealing with from a current demand perspective there.

Speaker Change: Yes, it's a great question and it is absolutely something that we look at truly every every month.

Gregory R. Adelson: With our teams through we go through a very detailed financial analysis and variance reviews with each of our business unit leaders and those discussions are always take place and so <unk> already referenced the kind of business cases, and so we actually take a business case approach, where we look at what we may need to add a relative to.

Gregory R. Adelson: Enhancing the implementation queue, what kind of value are we able to provide both from an immediate revenue standpoint.

Gregory R. Adelson: Helping kind of relief some pressure on the sales side things along that line. So we actually have done that multiple times this year, where we've added resources to accelerate queues.

Gregory R. Adelson: Or to do things differently. We're also constantly looking at process improvements that we can do both.

Gregory R. Adelson: From a systemic standpoint, or just general process improvements obviously the questions that were asked about AI earlier, we're looking at ways that that AI, who might be able to help us with some of those but but to answer. Your question. We are constantly evaluating both sides, but we also recognize as long as we can continue to move that queue forward.

Gregory R. Adelson: And it makes sense, then we're going to add people to make sure that that happens.

Gregory R. Adelson: Yeah.

Speaker Change: Great Thanks for that Greg.

Gregory R. Adelson: Sure.

Gregory R. Adelson: Our next question comes from Charles Navan of Stephens. Please go ahead.

Speaker Change: Great. Good morning, and thank you for taking my question just want to Echo everybody's gratitude and congratulations Dave it's been.

Speaker Change: Great working with you I just want to wish you all the best.

Speaker Change: Thank you Tom.

Speaker Change: So I wanted to follow up on the earlier question on some of the progress you've made in the middle market and just get a better understanding of how we should think about some of those larger relative banks from an <unk> standpoint, as well as you know.

Gregory R. Adelson: Their product consumption.

Gregory R. Adelson: Terms of like what products there.

Gregory R. Adelson: How it compares to some of your smaller banks smaller banks in your customer base, what they are buying what they are not buying.

Gregory R. Adelson: What's helping you win those deals as well.

Gregory R. Adelson: This is Greg again. So I'll take that. So as we've mentioned previously, and they're still all in the queue, we have three $20 billion plus opportunities in our current pipeline, and we continue to work those and continue to make progress on those. But I would say that even in the multi-billion dollar space, let's just call it the $5 to $15 billion, we're continuing to see more and more opportunities in there. And I would say the biggest drivers really are the technology modernization strategy that we have articulated and what folks are seeing for the future.

Gregory R. Adelson: Yes, So I'll go and take this this is Greg So I think as far as the deals that we've won so the six multibillion dollars that Dave referenced this year I'd say there hasn't been a significant.

Speaker Change: Alternative to any of the solutions that we typically sell what's helping is what I described earlier of not only the strategy for the future, but what we've executed on the present, which is around financial crimes around <unk>, specifically banner business, what we've done in our payments markets and things along that.

Gregory R. Adelson: So those continue to be huge drivers of opportunity.

Speaker Change: And then maybe even more specifically than what we see just specifically in our core offering because those complimentary products really helped drive the core decisions to be honest with you as.

Gregory R. Adelson: As we continue to go to the larger ones. So the 20 billion plus that I've talked about still a lot of the same interest.

Gregory R. Adelson: Question will be is.

Speaker Change: Where are they in some of their current relationships are more importantly, they buy tend to buy a little bit fewer products.

Gregory R. Adelson: They tend to not do.

Gregory R. Adelson: Everything with one particular vendor so.

Speaker Change: As we're working through the dynamics of specifically those three larger ones that I've referenced but we're also seeing some some larger ones, where a product or to a Jack Henry especially as we start to look outside the Jack Henry core base and be able to take some of these products were getting one off opportunities and two off.

Gregory R. Adelson: <unk> from larger institutions.

Gregory R. Adelson: That are more than the $50 billion that we have today. So I think youll continue to see that evolution.

Gregory R. Adelson: As we continue to drive things outside of the Jack Henry base.

Gregory R. Adelson: But as we've referenced before we have complementary and payment products today in institutions that are as large as 200 billion.

Gregory R. Adelson: So that's not foreign to us.

Speaker Change: Great. Thank you and as a follow up I just wanted to get your general thoughts on M&A and consolidation in the bank space, there's been a handful of deals announced in the past month and it.

Gregory R. Adelson: And more importantly, what we've already executed on is, you can imagine, most people want to see that it's not just a sales pitch, it's some level of execution, and we continue to show advancements on what we've done, where we're going, and things along that line. So that has really helped us continue to move and progress in the sales pipeline with many of these larger opportunities. So I think what you're going to continue to see is what we're doing on the technology side, and what we've always been known for on the service side, continue to create those opportunities. Thanks, Greg. That's very helpful. The next Dave Koning of Berry. Hey guys, congrats Dave, great career.

David John Koning: And I guess, first of all, I guess just kind of two kinds of clean up questions. Corporate revenue was lower than normal, lower than recently, I think, because the conference wasn't in the quarter. But then costs, corporate costs were higher than usual. What's just the dynamic there, and do those go back down in the... Yeah, I think I wouldn't read anything into just like one quarter. We did have relative to last quarter. We talked about that the annual merit increases hit in Q3.

David John Koning: So, you know, from a cost perspective, that's where you saw personnel costs go up. The revenue, it could just be hardware, or as you mentioned, last quarter was the conference, but I would not read too much into that. Okay, and then one other one, I think you had a negative term fee in complimentary, and then I think you actually had a small EBIT loss on term fees, both of those, I don't know if you've ever seen those dynamics before, either of those, and maybe just, I know it was such a small term fee quarter anyway, but just describe kind of how that happens, and if that's one, Yeah, this is certainly a one off.

Mimi L. Carsley: So in, as you know, for deconversions, we do get a little bit of notice once they start the file transfer process. So we were informed that a financial institution had planned to deconvert, and then later postponed the timing and delay. And so there was a bit of a reversal on that transaction. And this is something they've been doing for a long time.

David B. Foss: I don't remember the last time I saw this, but this was essentially a customer that was recruited away by a competitor, and they had a failed conversion and so decided that they needed to back out of that and come back to Jack Henry. So I don't, I certainly haven't seen that happen, and certainly haven't seen a failed conversion in our industry for many, many years. So this was a really unique situation.

Gregory R. Adelson: That's great to hear, thanks guys. Very much, and I also want to extend my thanks to Dave for all the hard work he's put in on behalf of Jack Henry over the years. I wanted to quickly take advantage of Greg and Dave being here and dig in a little bit on your commentary about customer sentiment. I'd love to get your thoughts on the regulatory scrutiny that banks are going through right now, which seems to be picking up. Several of the banks have alluded to plans to adjust their capital liquidity and CRE concentrations over the next several quarters.

Gregory R. Adelson: It seems like the regular regulatory scrutiny that you had alluded to could be a catalyst for consolidation but.

Gregory R. Adelson: As you think about the next year or two just wanted to get your general thoughts on M&A.

Gregory R. Adelson: In the bank and the credit Union space.

David B. Foss: That doesn't seem to be impacting your bookings and sales performance, but I'm curious if the topic of greater regulatory scrutiny is coming up with customers and how you're thinking about what you can do to help those customers as they deal with that. So, greater regulatory scrutiny is absolutely in the conversation very regularly these days, and really, since the... I guess May of last year, you know, the period where there was all this consternation around what was happening in the regional banking space. Since that time, the regulatory environment has changed pretty dramatically for, I think, all of our customers on the banking side. And so there's a lot of conversation about that. It is interesting, however, that this has not had any impact on bookings.

Speaker Change: Yes. Another good question. So we are continuing to see that as we've referenced.

David B. Foss: I think on our last earnings call that we have started to add some staff relative to that especially on the credit Union side, where we've seen even more of that of those opportunities, but we're seeing more on the banking side than we did just a few months ago.

David B. Foss: Part of the challenge, though is the timing of when those are expected to be.

David B. Foss: Completed so we've actually had a couple of our institutions that have acquired other institutions.

David B. Foss: Competitive institutions for that matter in but they're the ability for them to be able to complete those have been delayed by regulatory challenges. So in some cases five and six months. So will that continue to be a challenge that remains to be seen but I think what's happening right now, especially in the market.

David B. Foss: With.

David B. Foss: And especially we will see what happens with the election, but we're continuing to see some challenges with the timing of when those things can be completed not necessarily the interest in doing them now.

David B. Foss: And I would just add on that that creates.

David B. Foss: A little bit of a headwind for us this year, we talked about the lower deconversion revenue of people, leaving it also impacts us from the convert merge ending Q3, we saw approximately $3 $5 million last year over year and convert merge revenue.

Speaker Change: Got it but I heard on the call.

David B. Foss: Sure I'll just finalize with one last comment is that you are absolutely right that when we have our conversations with our institutions as well as what we just had in Kansas City. The interest level in continuing to to look at M&A opportunities is very very relevant in part of their overall strategies.

Speaker Change: Got it thank you.

David B. Foss: Our next question comes from John Davis of Raymond James. Please go ahead.

Speaker Change: Hey, good morning, guys and Dave I'll Echo my congrats you'll be missed.

Speaker Change: But maybe before you go or maybe Greg can hop in here, but just thoughts on capital allocation.

David B. Foss: Talking about free cash flow conversion going up.

David B. Foss: And one of the things that I say regularly now is, you know, if you're running a bank or credit union, almost any challenge you have, almost any problem you need to solve in this day and age, in 2024, the solution involves technology. You know, it doesn't usually involve people because they're trying to figure out how to automate or how to use technology to either mitigate risk or grow the franchise or something like that.

David B. Foss: Looks like you guys haven't bought back stock in a couple of quarters balance sheet is in good shape. So just broader thoughts on capital allocation, maybe more specifically.

David B. Foss: And so I think because of the world we live in today, where technology is almost always part of the solution, that's why, regardless of what's going on with the regulators, there is an opportunity for us to help them using some type of technology solution, either, like I say, to grow the franchise or to mitigate risk or deal with fraud or whatever it is. So I haven't seen any or heard anything, and we just did a client conference in Kansas City about three weeks ago. There was no discussion about backing off on spending on technology or anything like that.

David B. Foss: Max.

David B. Foss: In fact, the survey that Greg just cited, there was an expected increase in tech spending for the coming year. And so those would be my observations, but I'll defer to Greg if you want to... No, I think you were pretty complete.

Speaker Change: You've heard me talk about capital allocation, a thousand times JD, so I'll defer to Greg.

Gregory R. Adelson: I think the part that I would say is that the technology component really is the driver here, because more and more folks are recognizing that for them to continue to be able to, quote, punch above their weight, especially in the community bank space, they're looking for technology to stay at the level of relevancy that they need to be. And that's why we've been so adamant about our focused execution on getting these products out and giving us and our institutions an opportunity to do that. I got it.

Gregory R. Adelson: Thank you for that. And then I want to turn quickly, Greg, to implementation. You mentioned implementation cues. How are those trending broadly, and how are you thinking about the puts and takes between margin expansion you're delivering versus the potential for additional resource allocations to speed up those implementations? Walk us through the thought process and what you're dealing with from a current demand perspective. Yeah, it's a great question.

Gregory R. Adelson: Well I think we continue to look at opportunities to buyback and I know Mimi has done a great job of presenting use cases and timing. So we're continuing to look at that.

Gregory R. Adelson: And it is absolutely something that we look at, you know, truly every month. With our teams, we go through very detailed financial analysis and variance reviews with each of our business unit leaders. And those discussions always take place.

Gregory R. Adelson: And so Mimi already referenced the kind of business cases. And so we actually take a business case approach where we look at what we may need to add a relative to in enhancing the implementation queue, what kind of value we are able to provide, both from an immediate revenue standpoint, helping, you know, kind of relieve some pressure on the sales side, things along that line. So we actually have done that multiple times this year, where we've added resources to accelerate queues or to do things differently.

Gregory R. Adelson: We're also constantly looking at process improvements that we can do both from a systemic standpoint or, you know, just general process improvements. Obviously, the questions that were asked about AI earlier; we're looking at ways that AI might be able to help us with some of those.

Gregory R. Adelson: Obviously.

Gregory R. Adelson: We're focused on free cash flow and the opportunities of continue to improve that so the opportunities are closer to that than they were in the future in the past and J D. I would just add on we.

Gregory R. Adelson: I always look see first is there are investments within our own business to accelerate growth.

Gregory R. Adelson: We've been at that 14% R&D for quite some time, but we're always open to think about.

Gregory R. Adelson: Ways to accelerate our strategy and where we can continue to serve our clients through investments in technology. So that that's always a prioritization.

Gregory R. Adelson: And then the other is we're expecting to have to pay down the debt substantially. So one thing I would note just from a call out for folks for modeling purposes, you'll see in the next quarter reclassification of our debt. The term loan a goes current in May and a couple of weeks here.

Gregory R. Adelson: And as we plan to while being very mindful of the current ratio, we do anticipate paying that down and shifting some of that to the revolver.

Gregory R. Adelson: So it's not common that a lot of people, let their debt go current but we intend to pay it off.

Speaker Change: Okay, Great and then Greg It seems like panel business is off to a pretty good start just would love to get your thoughts longer term, where do you see the mix of like Danaher business versus retail I know, we're really early innings today, but just how you think about that over the next call. It three to five years.

Gregory R. Adelson: But to answer your question, we're constantly evaluating both sides. But we also recognize that as long as we can continue to move that queue forward, and it makes sense, then we're going to add people to make sure that that happens. Great. Thanks for that, Greg. Sure. Our next question... Charles Nabhan. Good morning.

Charles Joseph Nabhan: Just the mix between retail and business to beno.

Charles Joseph Nabhan: Yes, well, we continue to your point I mean, there is.

Speaker Change: That I think is important for you to understand is that how we do the.

Charles Joseph Nabhan: The revenue model for this is that we basically it's an add on to each of the $11 6 million registered users that Dave alluded to any of our institutions that have a commercial focus that want to add banner business, then that that add on prices added to all of their registered.

Speaker Change: <unk>, regardless of whether they are being utilized in a business application or not as you can imagine there's a lot of of small business owners that are hiding in a retail presence today and so this creates the opportunity to do both so for our benefit any institution that has.

Charles Joseph Nabhan: Interest in buying banjo business.

Charles Joseph Nabhan: It gets applied to all of their active registered users.

Charles Joseph Nabhan: Just ones that are kind of allocated to quote a business application. So that that's great for us and Thats kind of how we built the model.

Charles Joseph Nabhan: As far as again continued success, we think theres a huge opportunity on the credit Union side of our business as we continue to see more and more credit unions get focused on that side.

Gregory R. Adelson: And that's been a lot of the opportunities that we have right now and then I think more importantly, as we do take the product outside of the Jack Henry base.

Charles Joseph Nabhan: We think we're going to be able to go take the product further up market, maybe even to some institutions that are much larger than the ones that we support today as part of that.

Charles Joseph Nabhan: Okay, and then maybe just really appreciate the clarification, there, but maybe the better way to rephrase that.

Charles Joseph Nabhan: What kind of adoption of what percentage of of banks adopting of your current base adopting D&O business would you guys kind of considered success over the next let's call. It three to five years is it 30%, 40% to 80% just trying to some some guideposts on how to think about that longer term.

Charles Joseph Nabhan: Say roughly it's in the 60% to 70% just because a lot of our institution a commercially focused already.

Charles Joseph Nabhan: So I would say anything north of 60% would be fairly a decent target.

Charles Joseph Nabhan: So I won't be here anymore can I vote for 100%.

Speaker Change: I don't know, if we'll get 100% okay.

Charles Joseph Nabhan: Under give it your best shot of under promising, but I really do believe that the what we've seen today based on where we are today.

Charles Joseph Nabhan: Anywhere from 60% to 70% is probably a reasonable approach.

Charles Joseph Nabhan: Okay. Appreciate it thanks for the color.

Charles Joseph Nabhan: Our next question comes from Chris Kennedy of William Blair. Please go ahead.

Charles Joseph Nabhan: Good morning, Thank you for fitting me in and I'll Echo all the comments for Dave just one last one just a follow up to that last question.

Charles Joseph Nabhan: And thank you for taking my question. And I just want to echo everybody's gratitude and congratulations, Dave. It's been great working with you and just want to wish you all the best. Thank you, Todd. So, I wanted to follow up on Middle Market and just get a better understanding of it.

Gregory R. Adelson: How we should think about some of..., you know, their product. In terms of, www.youtube.com.uk http://TheBusinessProfessor.com, What's helping you win those deals as well? Yeah, so I'll go ahead and take this. This is Greg.

Speaker Change: Clearly your panel business is a big initiative, but can you just talk about some of the other opportunities and initiatives that you have to capture that commercial banking opportunity, especially within small businesses.

Greg: Yes, it's great great comment.

Greg: Comment in actually from we have several different what I would call point to point solutions that we have so we have a treasury management solution that we've talked about a lot.

Greg: So theres a great opportunity to continue to drive that there we have things that we're doing on the lending side and the account opening side for small businesses that we continue we have a small business application in bill pay.

Greg: We used a business bill pay application things that we do on the remote deposit capture side of our businesses as well. So we have a lot of point to point solutions that we utilize today, but one of the focuses that I have and I've talked about this in individual meetings as.

Greg: Is a focus on building a cohesive SMB strategy and we'll continue to talk more about what we're doing not only with our existing products, but what we what we plan to do.

Greg: As an overarching.

Greg: Strategy and solution set.

Speaker Change: Great. Thank you thanks for fitting me in.

Gregory R. Adelson: Sure.

Gregory R. Adelson: The next question comes from David <unk> of Evercore. Please go ahead.

Speaker Change: Thank you good morning, and congratulations Dave since this is your last call as CEO, perhaps you could give us a final update on kind of the status of your credit card processing initiative.

Gregory R. Adelson: So I think, as far as the deals that we've won, so the $6 billion that Dave referenced this year, I'd say there hasn't been a significant alternative to any of the solutions that we typically sell. What's helping is what I described earlier, not only the strategy for the future but what we've executed in the present, which is around financial crime, around Bano, and specifically Bano business, what we've done in our payments markets and things along that line.

Gregory R. Adelson: And then maybe to go along with that.

Gregory R. Adelson: You continue to call out the three big $20 billion asset banks in the pipe how important is it to the bigger banks that you have a robust credit card processing offering perhaps is that more important that it might be for the smaller <unk>, which tend to be more debit focused.

Gregory R. Adelson: So those continue to be huge drivers of opportunity, you know, and maybe even more specifically than what we see just specifically in a core offering because those complementary products really help drive the core decisions, to be honest with you. As we continue to go to the larger ones, so the $20 billion plus that I've talked about, still a lot of the same interest. The question will be, you know, where are they in some of their current relationships?

Speaker Change: Yes. So thank you Dave I don't think that its a big item of consideration regardless of the size of the bank. It's all about where they are with their strategy, where they are with their relationship with whoever their their processor is the decision regarding core is a totally independent decision from who am I going to do debit and credit with and what am I looking for as far as pump.

Gregory R. Adelson: <unk> and all of that and I think that that whole decision process has been completed and the industry in the past few years with some of our competitors have tried to.

Gregory R. Adelson: Sell a narrative that if you have the quarter youre going to get the card business that is that's not necessarily true you have to provide great service and great product on the card side in order to win that business. So they're really the worst of each other as far as the where are we at on the.

Gregory R. Adelson: On the credit side, so I Didnt mentioned in my script, but we did sign three additional credit customers in the quarter. So we're continuing to make progress there but.

Gregory R. Adelson: Recall, Dave when I first started talking about our move and getting into credit I said at the time. This will be a slow grower for us. It's not that everybody is looking for Jack Henry to offer credit, but there are some customers who want the same processor to provide dividend credit at this at the same time on the same platform and so it was unnecessary offering for us but we.

Gregory R. Adelson: Never had an expectation that was going to be a really fast grower to become a really significant part of our revenue stream and sure enough.

Gregory R. Adelson: That's the.

Gregory R. Adelson: That's the position that we're in today, but we have a very complete offering we have.

Gregory R. Adelson: Our partnership with another entity to offer.

Gregory R. Adelson: Hey.

Gregory R. Adelson: Agent program and so I think we're in great position today, but it has lived up to the expectation that I set with you all years ago, not a great big grower not a great big piece of our portfolio, but a nice offering for those customers that want books together.

Speaker Change: Understood. Thanks, so much and congrats again Dave.

Speaker Change: Thank you Dave.

Kenneth Christopher Suchoski: The next question comes from Ken such Husky of Autonomous Research. Please go ahead.

Gregory R. Adelson: More importantly, they buy, tend to buy a little bit fewer products, they tend to not do, you know, everything with one particular vendor. So as we're working through the dynamics of specifically those three larger ones that I've referenced, but we're also seeing some larger ones where a product or two of Jack Henry's especially as we start to look outside the Jack Henry core base and be able to take some of these products, we're getting, you know, one-off opportunities and two-off opportunities from larger institutions that are, you know, more than the $50 billion that we have today.

Speaker Change: Hey, good morning, Thanks for taking the questions.

Gregory R. Adelson: I think I heard you say that for the full year on non-GAAP revenue growth I think.

Gregory R. Adelson: It might come in towards the low end of that seven 4% to 8% growth range, which I think puts fiscal <unk> non-GAAP revenue growth may be slightly below 7%.

Gregory R. Adelson: So just wanted to make sure I'm thinking about that right and is there anything that would be driving maybe a slight deceleration and I guess is that the right jumping off point for fiscal year 'twenty five.

Gregory R. Adelson: So I think you'll continue to see that evolution as we continue to drive things outside of the Jack Henry base. But, as we've referenced before, we have complementary and payment products today in institutions that are as large as $200 billion. So, you know, that's not foreign to us. Great, thank you.

Speaker Change: Yeah, Ken I think that's just the way FY 'twenty four is going to play out.

Gregory R. Adelson: Still looking at that that growth revenue within our growth algorithm in the seven to eight longer term midyear will hit within that range.

Gregory R. Adelson: Still as I mentioned earlier, the payments business, we thought a little bit slower car nothing.

Gregory R. Adelson: That is out of line with what the card networks are seeing but we believe that the consumer is resilient and we continue to see that they are spending more per ticket, but less tickets overall enough being transactional.

Gregory R. Adelson: That is having a bit of an impact. So we're seeing really positive growth on card risk business other monthly services.

Gregory R. Adelson: So, it's just a little bit lower on that transactional growth.

Gregory R. Adelson: That's just the way the segments are playing out for this year for Q4, but I wouldn't say that that has anything from a launching off point for next year of concern.

Charles Joseph Nabhan: And as a follow-up, I just wanted to get your general thoughts. There have been a handful of deals announced in the past. And, you know, it seems like the regulatory scrutiny that you had alluded to could be a catalyst. Transcribed by https://otter.ai. I just wanted to get your general thoughts. The bank and the credit union.

Speaker Change: Okay. No. That's really helpful. And then it sounds like I mean, it sounds like Theres, a lot of momentum behind <unk> and crimes defender.

Charles Joseph Nabhan: We got a few questions just on the on the slowdown in complementary revenue growth.

Charles Joseph Nabhan: Just I guess.

Charles Joseph Nabhan: Is there anything to call out there in terms of that slowdown.

Charles Joseph Nabhan: Just because.

Charles Joseph Nabhan: I think it's becoming a bigger.

Charles Joseph Nabhan: Part of the business and the user growth is quite strong.

Charles Joseph Nabhan: No you are right to call. It I mean digital has been a great growth engine for us and we continue to see robust growth in demand for those solutions I would say a couple of entry as a portfolio of products. So there's nothing there from a.

Charles Joseph Nabhan: Slowing and I wouldn't say it slowed I mean, the numbers are really strong and they are in line with what we expect year in year out for the segment.

Speaker Change: Okay, great. Thanks, so much and Dave Congrats to you.

Speaker Change: Thank you very much Ken.

Charles Joseph Nabhan: This concludes our question and answer session I would like to turn the conference back over to Vince Gerard for any closing remarks.

Speaker Change: Thank you al.

Gregory R. Adelson: Yeah, another good question. So we are continuing to see that, as we referenced, I think, in our last earnings call that we have started to add some staff relative to that, especially on the credit union side, where we've seen even more of those opportunities. But we're seeing more on the banking side than we did, you know, just a few months ago. Part of the challenge, though, is the timing of when those are expected to be completed.

Charles Joseph Nabhan: Our Investor Day has historically been an annual event, but starting this year, we were moving our Investor day to September the.

Gregory R. Adelson: So we've actually had a couple of our institutions that have acquired other institutions, competitive institutions, for that matter, but the ability for them to be able to complete those acquisitions has been delayed by regulatory challenges. So in some cases, for five and six months.

Gregory R. Adelson: The meeting will take place on Thursday September 5th in Dallas, We hope you will be able to join US and are interested in attending in person. Please let me know.

Gregory R. Adelson: Executive.

Gregory R. Adelson: The executives will be travelling in the coming weeks and we look forward to attending various investor events and on behalf of the entire management team I would like to express our appreciation to all the Jack Henry Associates, whose efforts produced these outstanding results.

Speaker Change: Finally, I too would like to congratulate Dave on his upcoming retirement as CEO. Thank you for his constant willingness to do anything requested on behalf of investors and our 25 year friendship. We're working at this great company.

Gregory R. Adelson: So will that continue to be a challenge? You know, that remains to be seen. But I think what's happening right now, especially in the market, with, you know, especially we'll see what happens with the election. But we're continuing to see some challenges with the timing of when those things can be completed, not necessarily the interest in doing them. And I would just add that that creates a little bit of a headwind for us this year.

Speaker Change: Thank you for joining us today and Alan will you. Please provide replay number.

Gregory R. Adelson: We've talked about the lower deconversion revenue of people leaving that also impacts us from the convert merge. And in Q3, we saw, you know, approximately three and a half million dollars less year over year in convert merge revenue.

John Kimbrough Davis: Got it, but I will... Sure, I will just finalize with one last comment. You are absolutely right that when we have our conversations with our institutions, as well as what we just had in Kansas City, the interest level in continuing to look at M&A opportunities is very, very relevant and part of their overall strategy. Our next question comes from John Davis of Raymond James. Please go ahead.

Gregory R. Adelson: Hey, good morning, guys. And Dave, I'll echo my, But, you know, maybe before you go, or maybe not. But just thoughts on Capital Outlook. We're talking about free cash flow conversion going up. www.thebusinessprofessor.com You've heard me talk about capital allocation a thousand times, JD, so I'll defer to Greg for that one. Well, I think we continue to look at opportunities to buy back, and I know Mimi's done a great job of presenting use cases and timing, so we're continuing to look at that.

Gregory R. Adelson: Obviously, we're focused on free cash flow and the opportunities of continuing to improve that, so the opportunities are closer to that than they were in the past. Yeah, and JD, I would just add: we always look first, are there investments within our own business to accelerate growth? We've been at that 14% R&D for quite some time, but we're always open to thinking about ways to accelerate our strategy and where we can continue to serve our clients through investments and technology, so that's always a priority.

Gregory R. Adelson: And then the other thing is we're expecting to pay down the debt substantially, so one thing I would note, just from a call-out for folks, for modeling purposes, you'll see in the next quarter a reclassification of our debt. The term loan A goes current in May, in a couple weeks here, and as we plan to, while being very mindful of the current ratio, we do anticipate paying that down and shifting some of that to the revolver. It's not common that a lot of people let their debt go current, but we intend to pay it off. Okay, great.

John Kimbrough Davis: And then, Greg, it seems like Bano Business is also, https://www.youtube.com.au versus retail. I know we're really early in today, but you know how you think about that over the next, call it three to, https://www.patreon.com. Yeah, well, we continue with your point. I mean, the part that I think is important for you to understand is that how we do the revenue model for this is that it's basically an add-on to each of the 11.6 million registered users that Dave alluded to. Any of our institutions that have a commercial focus that want to add Baino business, then that add-on price is added to all of their registered users, regardless of whether they are being utilized in a business application or not. As you can imagine, there are a lot of small business owners that are hiding behind a retail presence today.

Speaker Change: The replay number for today's call is 87734475 to nine and the access code is 2714678. The conference is now concluded. Thank you for attending today's presentation.

Vance Sherard: And on behalf of the entire management team, I would like to express our appreciation to all the Jack Henry Associates whose efforts have produced these outstanding results. Finally, I, too, would like to congratulate Dave on his upcoming retirement as CEO. I thank him for his constant willingness to do anything requested on behalf of investors and our 25-year friendship while working at this great company. Thank you for joining us today, and Alan, will you please provide the replay number? The replay number for today's call is 1-800-777-3440, 7529, and the access code is 271-4678.

Gregory R. Adelson: And so this creates the opportunity to do both. And so, for our benefit, any institution that has an interest in buying Baino business, it gets applied to all of their active registered users, versus just ones that are kind of allocated to quote a business application. So that's great for us. And that's kind of how we built the model. As far as, again, continued success, we think there's a huge opportunity on the credit union side of our business, as we continue to see more and more credit unions get focused on this side.

Gregory R. Adelson: And that's a lot of the opportunities that we have right now. And then, more importantly, as we do take the product outside of the Jack Henry base, we think we're going to be able to take the product further up market, maybe even to some institutions that are much larger than the ones that we support today, as part of that. Okay, and then maybe. I really appreciate the clarification there.

Gregory R. Adelson: But maybe the better way to rephrase it is, so what kind of adoption or what percentage of banks your current base would consider adopting Bano business would you guys consider success over the next, Let's call it three to five years. Is it 30%? 40%? 80%? Just trying to find out on youtube.com.uk. I'd say roughly it's in the 60-70% just because a lot of our institutions are commercially focused already

Gregory R. Adelson: So I would say anything north of 60% would be a fairly decent target. But I won't be here anymore. Can I vote for 100%?

Gregory R. Adelson: I don't know if we'll get 100%. Okay, yeah, I'm taking your best shot at promising. But I really do believe that what we've seen today based on where we are today, you know, anywhere from 60 to 70% is probably a reasonable approach. Appreciate it.

John Kimbrough Davis: Thanks for the call. Thank you for fitting me in, and I'll echo all the comments for Dave. Just one last one, just to follow up on that last question.

Unknown Attendee: Clearly, Bannow Business is a big... Can you just talk about some of the other opportunities? that you have to capture that commercial banking opportunity, especially within small, Yes, it's a great, great comment. And actually, from, we have several different kinds of what I would call point to point solutions that we have.

Gregory R. Adelson: We have a treasury management solution that we've talked about a lot. So there's a great opportunity to continue to drive that there. We have things that we're doing on the lending side and the account opening side. For small businesses, we continue to have a small business application in BillPay, that we use a business BillPay application, and things that we do on the remote deposit capture side of our businesses as well. So we have a lot of point-to-point solutions that we utilize today.

Gregory R. Adelson: But one of the focuses that I have, and I've talked about this in individual meetings, is a focus on building a cohesive SMB strategy. And we'll continue to talk more about what we're doing not only with our existing products but what we plan to do as an overarching strategy and solution set. Thanks for putting me in, David Togut of Thank you, good morning, and congratulations, Dave. Unknown Speaker On your last call as CEO, perhaps you could give us a final update on the status of your credit card processing initiative. And then maybe, to go along with that.

David Mark Togut: Call out the three big $20 billion asset banks in the pipe. How important is it to the bigger banks that you have a robust credit card process? Offering.

David B. Foss: Perhaps that is more important than it might be for the smaller FIs, which tend to be more debt-ridden. Yeah, I don't. So thank you, Dave. I don't think that it's a big item of consideration, regardless of the size of the bank. It's all about where they are with their strategy, where they are with their relationship with whoever their processor is. You know, the decision regarding core is a totally independent decision from who I am going to do debit and credit with.

David B. Foss: And, and, you know, what am I looking for, as far as functionality and all that? And I think, you know, that whole decision process has been conflated in the industry in the past few years, as some of our competitors have tried to sell a narrative that if you have the core, you're going to get the card business. That's not necessarily true; you have to provide great service and great products on the card side in order to win that business. So they're really divorced from each other.

David B. Foss: As far as where we are at on the credit side, so I didn't mention it in my script, but we did sign three additional credit customers in the core. So we're continuing to make progress there. But, you know, Dave, when I first started talking about our move and getting into credit, I said at the time, "You know, this will be a slow grower for us." It's not that everybody's looking for Jack Henry to offer credit, but there are some customers who want the same processor to provide debit and credit at the same time on the same platform. And so it was a necessary offering for us.

David B. Foss: But we never had an expectation that it was going to be a really fast grower or become a really significant part of our revenue stream. And sure enough, that's the position that we're in today. But we have a very complete offering; we have a partnership with another entity to offer a, a, agent program. And so, you know, I think we're in a great position today, but it has lived up to the expectation that I set with you all years ago, not a great big grower, not a great big piece of our portfolio, but a nice offering for those customers that want both together. Thanks so much and congrats. Thank you, Dave. Hey, good morning.

Unknown Attendee: Thanks for taking the questions. Mimi, I think I heard you say that for the full year on non-GAAP revenue growth, you might come in towards the low end of that 7.4% to 8% growth range, which I think puts fiscal 4Q non-GAAP revenue growth maybe slightly below 7%, so I just wanted to make sure I'm thinking about that right. And is there anything that would be driving maybe a slight deceleration, and I guess is that the right jumping off point for fiscal year 25? Again, I think that's just the way FY 24 is going to play out.

Mimi L. Carsley: We're still looking at, you know, that growth revenue within our growth algorithm of the seven to eight longer term this year will hit within that range. You know, still, as I mentioned earlier, the payments business, we saw a little bit slower card growth, nothing, you know, that is out of line with what the card networks are seeing. But, you know, we believe that the consumer is resilient; we've continued to see that they're spending more per ticket, but you know, fewer tickets overall, enough being transactional, you know, that is having a bit of an impact.

Mimi L. Carsley: So we're seeing really positive growth in the card risk business and other monthly services. So it's just, you know, a little bit lower on that transactional growth. That's just the way the segments are playing out for this year in Q4. But I wouldn't say that that has anything to do with a launching point for next year of concern. Okay, no, that's really helpful. And then it sounds like, I mean, there's a lot of momentum behind Bano and Crimes Defender.

Unknown Attendee: We got a few questions just on the slowdown and complementary revenue growth. Just, I guess, you know, is there anything to call out there in terms of that slowdown? Because Bano, I think, is becoming a bigger part of the business, and the user growth is quite strong. No, you're right to call it that.

Unknown Attendee: I mean, digital has been a great growth engine for us, and we continue to see robust growth and demand for those solutions. I would say, you know, complimentary is a portfolio product. So there's nothing there from a slowing, and I wouldn't say it's slowed.

Speaker Change: You may now disconnect.

Unknown Attendee: I mean, the numbers are really strong, and they're in line with what we expect year in and year out for the segment. Okay, great. Thanks so much. And Dave, congratulations. Thank you very much, Ken. This concludes our question and answer session. I would like to turn the conference back over to Vance Sherard.

Vance Sherard: Thank you, Al. Our Investor Day has historically been an annual May event, but starting this year, we are moving our Investor Day to September. The meeting will take place on Thursday, September 5th in Dallas. We hope you will be able to join us, and if you are interested in attending in person, please let me know. Executives will be traveling in the coming weeks, and we look forward to attending various investor events.

Unknown Attendee: Okay.

Vance Sherard: [music].

Vance Sherard: Okay.

Vance Sherard: Sure.