Q3 2025 Jack Henry & Associates Inc Earnings Call

Gregory Adelson: In closing, we remain excited and confident that our unwavering approach to culture, service, innovation, strategy, and execution will continue to enable Jack Henry to drive industry-leading revenue growth and margin expansion through this evolving macro environment. We have a robust sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions. We will continue to evaluate acquisitions that will accelerate or complement our strategy, remain disciplined in our expense management, and continue to rationalize products that fall in our non-key revenue segment. In short, we remain well-positioned for the future.

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Speaker Change: I would now like to turn the conference over to Mr. Guan Charade, Vice President Thank you and what do you.

Speaker Change: Thank you Martin.

Speaker Change: And thank you for joining the Jack Henry <unk> third quarter fiscal 2025 earnings call.

Speaker Change: Joining me today are Greg Adelson, President and CEO.

And so, good riddance.

Speaker Change: Mimi Carsley CFO and treasurer.

Speaker Change: Following my opening remarks, Greg will share his insights and observations on our quarter and year to date financial results operational metrics and outlook.

Mimi Carsley: With that, I'll turn it over to Mimi for more detail on the finance. Thank you, Greg, and good morning, everyone. I want to open by thanking the dedicated Jack Henry team for their steadfast focus on execution and support of our clients. While the quarter results differed modestly from our fiscal year expectations, it was another quarter of solid revenue and earnings growth.

Speaker Change: Mimi will then discuss the financial results provided in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website.

Now, I think somebody had to do it. I was gonna do it, but I didn't want to say it.

Speaker Change: Afterward, we will open the lines for a Q&A session.

Speaker Change: Please note that this call includes forward looking statements, which involve risks and uncertainties that could cause actual results to differ materially from our expectations.

Mimi Carsley: I will discuss the details behind our third quarter and year-to-date results, then conclude with commentary on our updated Fiscal 25 Guidance. Q3 GAAP and non-GAAP revenue increased 9% and 7% respectively, with GAAP revenue outperformance driven by notable uptick in deconversion revenue. Despite strong performance in previously identified key areas, overall non-gap revenue growth was tempered by lower non-key revenue growth, especially from a slowdown in hardware sales and non-reoccurring revenue from customer projects. Excluding hardware impact, Q3 non-cap revenue growth would have been 8%. Quarterly deconversion revenue of approximately $9.6 million, which we released prior to full earnings, increased $8.8 million compared to the same period last year, reflecting an accelerating pace of consolidation in the industry.

Speaker Change: Good day and welcome to the Jack Henry & Associates Inc. 3rd quarter of fiscal year, 25 results conference call.

Speaker Change: The company is not obligated to update or revise these statements for.

Speaker Change: For a summary of risk factors and additional information that could cause actual results to differ materially from such forward looking statements refer to yesterday's press release and the risk factors and forward looking statements sections in our 10-K.

All participants will be in the lesson only mode. Should we assist you with a conference called please signal a conference specialist by pressing star, followed by the key zero. After today's presentation there will be an opportunity to ask questions.

Speaker Change: To ask a question, you press star and one on your touch tone phone. To withdraw your question, you may press star and two. Please know that this conference has been recorded.

Speaker Change: During this call we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income reconciliations for these measures are included in yesterday's press release.

Speaker Change: I would now like to turn the conference over to Mr. Vance Sherard, the Vice President, thank you and over to you [inaudible]

Greg Adelson: Now I will turn the call over to Greg.

Speaker Change: Thank you Vince good morning, and I appreciate each of you joining the call I'd like to begin by thanking our associates for their hard work and dedication to our success consistently going above and beyond and taking care of our clients. Our commitment to people first culture service excellence technology innovation and a clear strategy backed by.

Thank you, Myron.

Speaker Change: Good morning and thank you for joining the Jack Henry III quarter fiscal 2025 earnings call.

Joining me today are Greg Adelson, President and CEO , CEO ,

and Mimi Carsley, CFO and Treasure. [inaudible]

Speaker Change: Following my opening remarks, Greg will share his insights and observations on our quarter and year-to-date financial results, operational metrics and outlook.

Greg Adelson: <unk> execution continues to differentiate us in the market.

Mimi Carsley: In light of year-to-date results and fourth quarter pending agreements, we have raised our full year deconversion guidance to a range of $22 million to $28 million. Financial Institution M&A activity will have minimal non-GAAP impact in Fiscal 25 but potential for meaningful impact in Fiscal 26.

Speaker Change: I will share three main takeaways from the quarter and then will provide additional detail about our overall business.

Mimi: Mimi will then discuss the financial results provided in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website.

Speaker Change: First our financial performance, our third quarter fiscal year 2025 results reflect solid overall performance, our non-GAAP revenue increased 7% and our non-GAAP.

Afterward, we will open the lines for a Q&A session.

Mimi: Please note that this call includes forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from our expectations

Mimi Carsley: Now looking closer to the quarterly results. In the quarter, GAAP and non-GAAP services and support revenue increased 8% and 6% respectively. Data processing and hosting continue to dominate services and support revenue growth for the quarter and year to date. Hardware revenue is down $4 million in the quarter and $11 million year-to-date, creating headwinds for services and support revenue. As a reminder, hardware revenue is both non-recurring and low visibility, making it a part of non-key revenue. Our private and public cloud offerings increased 11% in the quarter, reflecting strong, persistent new installs and existing FI growth trends.

Speaker Change: Operating margin was 23% representing an impressive 207 basis points of margin expansion over last year.

Mimi: The company is not obligated to update or revise these statements.

Speaker Change: In terms of GAAP revenue, we are starting to see an increase in M&A activity and our Q3 Deconversion revenue was $9 6 million.

Mimi: For a summary of risk factors and additional information that could cause actual results to differ materially from such forward-looking statements, refer to yesterday's press release and the risk factors and forward-looking statements sections in our 10K.

Speaker Change: We expect a continuation of increased deconversion revenue in Q4, thus we are forecasting a full year deconversion revenue range of $22 million to $28 million.

Mimi: During this call, we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income Reconciliation for these measures are included in yesterday's press release

Speaker Change: Second our fiscal 'twenty five guidance as you saw on the press release and with three quarters now closed we adjusted our full year guidance for GAAP and non-GAAP revenue margin expansion and EPS.

Now I will turn the call over to Greg.

Greg: Thank you, Vance. Good morning and I appreciate each of you joining the call. I'd like to begin by thanking our associates for their hard work and dedication to our success, consistently going above and beyond and taking care of our clients.

<unk> revenue guidance revisions are primary or key revenue consistent most notably mostly of processing and cloud was 76% of total revenue for the quarter and grew at nine 8% versus a growth rate of eight 8% for Q3 fiscal year 'twenty four.

Mimi Carsley: This reoccurring revenue growth contributor is 33% of our total revenue and continues to be a double digit growth engine. Moving to processing revenue, which is 43% of quarterly revenue and a significant contributor to our long-term growth model, we saw strong performance with 9% growth on both a gap and non-gap basis for the quarter. Continuing long-term trends, quarterly drivers include increased card, digital, and payment processing revenue. Completing commentary on revenue, I would highlight quarterly total reoccurring revenue, excluding deconversion revenue, was 92%. We focus on key revenues, which comprise of our strategic reoccurring revenue. Non-key revenue includes lower growth and margin solutions that are typically non-reoccurring or not aligned to our future strategic direction, yet often support existing operations.

Greg: Our commitment to people first culture, service excellence, technology innovation, and a clear strategy backed by consistent execution continues to differentiate us in the market.

The adjusted non-GAAP revenue guidance is primarily due to macroeconomic concerns and the softening of non strategic revenue such as hardware purchases and consulting engagements.

Greg: I will share three main takeaways from the quarter and then we'll provide additional detail about our overall business.

First, our financial performance.

Greg: Our third quarter fiscal year 2025 results reflect solid overall performance. Our non-GAAP revenue increased 7% in our non-GAAP

Speaker Change: As most of you know hardware sold to our in house processing clients at a time, they desire to add or replace equipment.

Greg: Operating margin was 23%. Representing an impressive 207 basis points of margin expansion over last year.

Speaker Change: Similar to hardware purchases, we are seeing some customers delay the start of signed nonrecurring projects. Examples include one off work orders and the implementation of post core conversion products and are complementary and payments segments.

Greg: In terms of gap revenue, we are starting to see an increase in M&A activity and our Q3D conversion revenue was 9.6 million [inaudible]

Speaker Change: We are also seeing some softening in debit card transactions, which is similar to what the card associations experienced in their U S debit businesses.

Greg: We expect a continuation of increased e-conversion revenue in Q4, thus we are forecasting a full-year e-conversion revenue range of 22 to 28 million.

Speaker Change: Based on these factors and what we have seen through April we felt it was necessary to lower our revenue guidance.

Greg: Second, our fiscal 25 guidance. As you saw on the press release and with three quarters now closed, we adjusted our full year guidance for gap in non-GAAP revenue, margin expansion and EPS.

Mimi Carsley: Quarterly key revenue was 78% of total non-GAAP revenue and grew a robust 10%. The year-to-date key revenue was 75% of total non-GAAP revenues, with continued momentum producing healthy growth of 9%. Quarterly non-key revenue makes up the remaining non-GEP revenue, and during the quarter and year to date has contracted 2%, creating a headwind to total growth.

However, due to our key revenue growth at higher incremental margins as well as our disciplined approach to expense management project prioritization and capital expenditures, we have increased our GAAP and non-GAAP guidance on margin expansion and EPS growth Mimi will provide more details in her comments.

Greg: Despite revenue guidance revisions, our primary or key revenue consistent mostly a processing and cloud was 76% of total revenue for the quarter and grew at 9.8% versus a growth rate of 8.8% for Q3 fiscal year 24

Speaker Change: Third we are continuing to win larger competitive core deals.

Speaker Change: Over the past two years, the aggregate assets of competitive new core takeaways have more than doubled.

Mimi Carsley: While Jack Henry is not immune to the broader macroeconomic challenges, the high reoccurring revenue, long-term contracts, and critical functionality of our products ensure the resiliency of our business.

Greg: The adjusted non-GAAP revenue guidance is primarily due to macroeconomic concerns and the softening of non-strategic revenue such as hardware purchases and consulting engagements

Speaker Change: This is important to note since our core revenue models include asset based and per account pricing options, both benefiting from larger institution wins.

Mimi Carsley: We are well positioned regardless of economic Next, moving to expenses. Starting with cost of revenue, which increased 4% on a GAAP basis and 3% on a non-GAAP basis during the quarter. The quarterly increase was due to higher direct costs, internal licenses and fees, which partly offset by increase in labor cost deferral. For clarification and to assist with models, the amortization of acquisition-related intangibles was $6 million in the quarter. Next, RMD expense increased 9% on both a GAAP and non-GAAP basis for the quarter. Quarterly increase was primarily related to non-personnel costs, sorry, net personnel costs. Ending with SG&A expense, it increased 7% for the quarter on a gap basis and 5% on a non-gap basis.

Greg: As most of you know, hardware is sold to our in-house processing clients at a time they desire to add or replace equipment

Speaker Change: To date this fiscal year, we have secured 28, new core wins, including 11 in Q3 with financial institutions totaling $30 billion in assets.

Greg: Similar to hardware purchases, we are seeing some customers delay the start of signed non-recurring projects. Examples include one-off work orders and the implementation of post-court conversion products in our complimentary and payment segments.

Speaker Change: This compares to 35 core transactions totaling $21 billion in assets at this time last year and 31 core deals totaling $14 billion in assets two years ago.

Greg: We are also seeing some softening in debit car transactions which is similar to what the car associations experience in their US debit businesses.

Speaker Change: Our core and total pipeline remained very strong and we will see a significant increase in competitive core wins in Q4 over the previous three quarters, we can expect.

Greg: Based on these factors and what we have seen through April , we felt it was necessary to lower our revenue guidance.

Speaker Change: To win total similar to what we did in Q4 last year and again with larger asset financial institutions.

Greg: However, due to our key revenue growth at higher incremental margins, as well as our disciplined approach to expense management, project prioritization and capital expenditures, we have increased our gap and non-GAAP guidance on margin expansion and EPS growth.

Speaker Change: In addition to core wins, we are seeing a similar trend in migrations of existing customers from in house processing to our private cloud. This fiscal year to date, we have contracted to migrate 26 clients, including seven in Q3 that totaled 42 billion in assets that compares to 29 client.

Mimi Carsley: It's also related to an increase in net personnel. We remain focused on prioritization, cost efficiency, and effective utilization of our workforce that will result in annually compounding margin expenses. We are pleased to report that the quarter delivered 207 basis points increase in non-GAAP margin to 23%. We remain confident in our ability to deliver margin expansion and have increased the full year guide. These solid quarterly operating results produced a fully deleted gap earnings per share of $1.52, up 28%.

Mimi will provide more details in her comments.

Third, we are continuing to win larger competitive core deals.

Speaker Change: With $27 billion in assets at this time last year, representing a 55% increase in assets. We currently have 76% of our clients processing in the Jack Henry private cloud environment.

Greg: Over the past two years, the aggregate assets of competitive new core takeaways have more than doubled. This is important to note, since our core revenue models include asset-based and per-account pricing options, both benefiting from larger institution wins.

Speaker Change: Our success with new core wins in migration aligns well with our core platform survey results published by the American Bankers Association in February for the first time, the Eva named the core providers previously they used generic labels like company a D&C.

Greg: To date this fiscal year, we have secured 28 new core wins, including 11 and 2-3 with financial institutions totaling 30 billion in assets [inaudible]

Greg: This compares to 35 core transactions totaling 21 billion in assets at this time last year and 31 core deals totaling 14 billion in assets two years ago.

Speaker Change: Title of the report is all core platform providers are not the same and we wholeheartedly agree.

Mimi Carsley: Reviewing the three operating segments, we are pleased with core segment key revenue performance, monitoring payments for consumer sentiment impacts, and continue to benefit from strong complementary performance. Our segment increased 6% for the quarter on a non-gap basis due to the headwinds from license and credit union hardware that rose up into this segment. On a key basis, the segment revenue grew 11%, a 10 basis point increase over the prior period. Core segment performance primarily came from organic growth in data processing and hosting, partly offset by lower maintenance fee revenue and credit union-related hardware, the result of our core clients continuing to shift from on-premise to private cloud.

Speaker Change: Jack Henry scored near the top across multiple categories and when our respondents were asked what matters most in our core provider.

Greg: Our core and total pipeline remain very strong and we will see a significant increase in competitive core wins in Q4 over the previous three quarters. We can expect a win total similar to what we did in Q4 last year and again with larger asset financial institutions.

Speaker Change: Innovation and customer service top the list definitely two key differentiators for Jack Henry.

Speaker Change: Turning to specific product and strategy updates I will comment on the payments and complementary segments, followed by providing updates on technology modernization, our new SMB solutions and our annual benchmark survey results.

Greg: In addition to core wins, we are seeing a similar trend in migrations of existing customers from in-house processing to our private cloud [inaudible]

Speaker Change: In our payments segment, we continue to experience strong growth with our faster payment solutions over the past year, we've grown the number of <unk> using zelle by 10% the clearinghouses RTP network by 37% and fed now by 96%. We now have 354 clients on the zelle platform.

Greg: This fiscal year to date we have contracted to migrate 26 clients including 7 in Q3 that total 42 billion in assets.

Greg: That compares to 29 clients with 27 billion in assets at this time last year representing a 55% increase in assets. We currently have 76% of our clients processing in the Jack Henry Private Cloud environment.

Mimi Carsley: Non-GAAP Segment Income Margin for CORE increased 141 basis points from improved operating leverage. Payment segment non-GAAP quarterly revenue increased 7% and saw non-GAAP segment income margin growth of 59%. Performance was due to continued higher card revenue from volumes, increased payment processing revenue, including FedNow, RTP, Zelle, and elevated EPF. Margins in the payment segment also banks incentives from ongoing improvement to operating leverage. Finally, complimentary segment quarterly non-GAAP revenue increased 10% from strong product mix with digital and hosting revenue, driving growth momentum. Segment margins strongly expanded 164 basis points from the high incremental margin of reoccurring revenue and staff-like nature of our business.

Speaker Change: <unk>, representing 14% of <unk> using zelle 384 clients on RTP, representing 43% of EFI is using RTP and 370 clients on fed now representing 26% of <unk> using fed now.

Speaker Change: And our complementary segment 32 contracts were signed in the quarter for financial crimes defender or SCD faster payment fraud module, a real time solution designed to mitigate fraud, and zelle RTP and fed now transactions.

Greg: For the first time, the ABA named the core providers, previously they used generic labels like Company A, B and C. The title of the report is all core platform providers are not the same, and we wholeheartedly agree.

Speaker Change: As of the end of March we have installed 115 financial crimes defender customers and have another 83 in various stages of implementation. We also have 69 faster payment modules installed in 160 in various stages of implementation.

Greg: Jack Henry scored near the top across multiple categories and when respondents were asked what matters most in a core provider, innovation and customer service topped the list. Definitely two key differentiators for Jack Henry.

Speaker Change: Our <unk> digital platform continues to experience healthy growth with 29, New banner platform contracts in the quarter at the end of March we had more than 1000 banner platform clients, including 270 live with banner business.

Greg: Turning to specific product and strategy updates, I will comment on the payments and complimentary segments followed by providing updates on technology modernization, our new SMB solutions and our annual benchmark survey results.

Mimi Carsley: Now let's turn to a review of cash flow and capital allocation. Third quarter operating cash flow was $108 million, a $10 million increase over the prior year's period. Strong cash flow reflects higher profitability from operations and increased deconversion revenue, partly offset by higher taxes. Trailing 12-month free cash flow with a hearty $303 million, resulting in a 71% conversion in line with the full-year guidance. Our dedication to value creation resulted in a trailing 12-month return on invested capital of 20%. This is a nice improvement and we expect to see this increase returning to historic levels in the near future.

Greg: In our payment segment we continue to experience strong growth with our faster payment solutions.

Speaker Change: We finished the quarter with more than $13 7 million registered users on the <unk> platform at the end of Q3 last year, we had $11 6 million registered users an 18% increase over the past 12 months.

Greg: Over the past year we've grown the number of FIs using Zell by 10%, the Clearing House's RTP network by 37% and Fed now by 96%.

Speaker Change: Regarding our technology modernization, we continue to execute very well and ahead of schedule on our core strategy for the new public cloud Native Jack Henry platform.

Greg: We now have 354 clients on the Zell platform representing 14% of FIs using Zell

Greg: 384 clients on RTP representing 43% of FIs using RTP and 370 clients on FedNow representing 26% of FIs using FedNow

Speaker Change: We are now live in various stages with 15 components.

Speaker Change: Some of these are only used internally to eliminate duplication of development costs across the company, but most are utilized by our clients and are getting favorable reviews.

Greg: In our complimentary segment, 32 contracts were signed in the quarter for Financial Crimes Defender or FCD Faster Payment Fraud Module, a real-time solution designed to mitigate fraud in Zell, RTP and FedNow transactions

Speaker Change: As a result of the efforts of our development teams, we remain on track to deliver our public cloud native consumer and commercial deposit only core in the first half of calendar year, 2026, which will be about six months ahead of what we communicated in February of 2022.

Mimi Carsley: For the quarter, we repurchased $18 million of Jack Henry shares aligned with our constructive outlook for future Jack Henry.

Greg: As of the end of March, we have installed 115 financial crimes defender customers and have another 83 and various stages of implementation. We also have 69 faster payment modules installed in 160 and various stages of implementation.

Speaker Change: Another example of our technology monetization progress is our new enterprise deposit and loan account opening solution. This technology enables banks and credit unions to grow loans and deposits by streamlining processes, automating workflows, and better serving retail and business clients through a single digital deposit and loan account opening.

Mimi Carsley: As we move towards the close of Fiscal 25, I will conclude with comments on full year guidance and other operating metrics. Yesterday's press release included adjusted fiscal 2025 full-year gap guidance, along with a reconciliation to our adjusted non-gap guidance metric. While the press release also included a fiscal 25 non-GAAP ETF metric, this is not intended to be a new guidance metric. The purpose is to provide additional clarity on our numbers, and it should be noted that a 24% tax rate is used.

Greg: Our Bano Digital Platform continues to experience healthy growth, with 29 new Bano Platform contracts in the quarter. At the end of March we had more than 1,000 Bano Platform clients, including 270 live with Bano Business.

Speaker Change: Experience.

Speaker Change: We have initiated our closed beta process with two clients and we'll continue to add more early adopter clients over the coming months.

Greg: We finished the quarter with more than 13.7 million registered users on the Bano platform. At the end of Q3 last year we had 11.6 million registered users, an 18% increase over the past 12 months

Speaker Change: Another area of focus that the industry is excited about is our small and medium sized business strategy.

Speaker Change: A key aspect of our strategy is to only provide the service directly to financial institutions, allowing them to recapture high value deposits and service the needs of their account holders.

Mimi Carsley: Given the current dynamic macroeconomic environment, including early signs of softness of consumer-related payments, we are adopting a more cautious stance for the remainder of the fiscal year. Updated full year guidance metrics and outlooks include Full year deconversion revenue of $22 million to $28 million, up from $16 million. Non-GAAP revenue growth of 6% to 6.5%, lowered from 7% to 8%. Non-GAAP margin expansion of 60-70 basis points increased from 25-40. A tax rate of 23% decreased from 24%. Gap EPS of $6.00 to $6.09, up from $5.78 to $5.87, representing annual growth of 16% to 17%. Outlook for free full year free cash flow conversion is unchanged at $65 to $75.

Greg: Regarding our technology modernization, we continue to execute very well in the head of schedule on our core strategy for the new public cloud made of Jack Henry platform. We fear now live in various stages with 15 components

Speaker Change: Our initial offering called Jack Henry rapid transfers is in closed beta with three clients.

Greg: Some of these are only used internally to eliminate duplication of development costs across the company but most are utilized by our clients and are getting favorable reviews.

Speaker Change: We are currently extending availability to all <unk> customers and actively enrolling clients through our digital operations team.

Speaker Change: Jack Henry rapid transfers enables both smbs and consumers to instantly move funds between external accounts eligible cards and digital wallets.

Greg: As a result of the efforts of our development teams, we remain on track to deliver our public cloud native consumer and commercial deposit only core in the first half of calendar year 2026, which will be about six months ahead of what we communicated in February of 2022.

Speaker Change: We are collaborating with both visa and Mastercard to facilitate these transactions through their respective debit rails.

Speaker Change: The second offering is our unique merchant acquiring solution in partnership with move.

Greg: Another example of our technology monetization progress is our new enterprise deposit in loan account opening solution

Speaker Change: This solution delivers many distinguishing features for merchants, including instant Decisioning tap to pay for both iOS and Android devices. The option to receive settlement funds up to eight times per day and continuous account reconciliation to the accounting platform of their choice.

Greg: This technology enables banks and credit unions to grow loans and deposits by streamlining processes, automating workflows, and better serving retail and business clients through a single digital deposit and loan account opening experience.

Mimi Carsley: An outlook for full year return on invested capital is 21 to 22% based on expected lower debt at the end of the fiscal year.

Greg: We have initiated our closed beta process with two clients and we'll continue to add more early adopter clients over the coming months

Speaker Change: We are on track for a close beta in June with two banjo clients.

Speaker Change: We are also currently working on several additional phases to our SMB strategy as we expect to continue to deliver new functionality and solutions over the next 18 to 24 months to bolt Jack Henry and non Jack Henry core institutions.

Greg: Another area of focus that the industry is excited about is our small and medium-sized business strategy.

Mimi Carsley: The appropriate performance indicator for our business continues to be the full fiscal year financial results. In conclusion, we are seeing modest headwinds to non-key revenue items that impact our consolidated results and near-term outlook. Still, we remain confident as the key parts of our business continue to perform strongly and position us for continued growth. Our focus remains on delivering long-term profitable growth at scale through challenging revenue growth and margin expansion.

Greg: A key aspect of our strategy is to only provide the service directly to financial institutions, allowing them to recapture high-value deposits and service the needs of their account holders.

Speaker Change: We recently released our seventh annual 2025 strategy Benchmark survey, while we track many industry surveys. This one stands out because it reflects insights directly from the Ceos of our own bank and credit Union clients.

Greg: Our initial offering called Jack Henry Rapid Transfers is in close beta with three clients,

Greg: We are currently extending availability to all Bano customers and actively enrolling clients through our digital operations team.

Speaker Change: Survey indicated that 76% of our bank and credit Union clients planned to increased technology spending over the next two years.

Greg: Jack Henry Rapid Transfers enables both SMBs and consumers to instantly move funds between external accounts, eligible cards, and digital wallets.

Vance Sherard: In pursuing these goals, we appreciate the achievement of our approximately 7,200 dedicated associates and our investors for their ongoing Myron, please open the line for questions. Thank you.

Speaker Change: Of those the largest segment, 33% plans to increase investments between six and 10%.

Greg: We are collaborating with both Visa and Mastercard to facilitate these transactions through their respective debit rails.

Speaker Change: We also asked where they expect to invest over the next two years the top three areas identified where digital banking fraud prevention and enhancing efficiency through automation all areas, where Jack Henry has been investing and executing with innovative solutions such as the <unk> platform financial crimes defender.

Greg: The second offering is our unique merchant acquiring solution and partnership with Move.

Operator: We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2.

Greg: The solution delivers many distinguishing features for merchants, including instant decisioning, tap to pay for both iOS and Android devices, the option to receive settlement funds up to eight times per day, and continuous account reconciliation to the accounting platform of their choice.

Speaker Change: The digital deposit and loan account opening solution that I mentioned earlier.

Speaker Change: It's worth noting that the survey was conducted in January and February prior to April market volatility. However, we did spend a significant amount of time speaking with our clients about the current environment at our strategic insights event last week in Minneapolis much of what we learned in the survey still holds true for them today.

Operator: At this time, we will pause momentarily to assemble our roster.

Greg: We are on track for a close beta in June with two bano clients.

Greg: We are also currently working on several additional phases to our SMB strategy as we expect to continue to deliver new functionality and solutions over the next 18 to 24 months to both Jack Henry and non-Jack Henry core institutions.

Daniel Perlin: We have the first question from the line of Dan Perlin from RBC. Please go ahead. Thanks, good morning. So I wanted to get back to the question, obviously, around, like large capital purchases, you know, for hardware being down, I completely understand that. The question is, are you seeing similar restraints when it comes to your more modernized projects and cloud migration? So are you starting to hear elongated, you know, implementation cycles in that kind of area?

Speaker Change: Banks and credit unions are generally concerned about the impact of tariffs on their commercial clients, especially smbs. They.

Greg: We recently released our seventh annual 2025 Strategy Benchmark Survey. While we track many industry surveys, this one stands out because it reflects insights directly from the CEOs of our own bank and credit union clients.

Speaker Change: They remain optimistic overall and see expected regulatory relief as a positive as well.

Speaker Change: Our clients continue to suggest that M&A activity is picking up and we are also seeing an increase in our clients, making acquisitions, which presents additional revenue opportunities in the future.

Gregory Adelson: Or is it really just this non-recurring stuff that we're Hey, Dan. Yeah, so it's almost all in the kind of non-recurring stuff. We are seeing a little bit in some of the complimentary and payment products that I mentioned, so mostly in what we would call kind of day two or kind of post-conversion, where folks have a product set that they're either waiting for a contract to terminate with a competitor, or they have an existing Jack Henry product, which is the case in most of these, where they're just delaying kind of putting the new one on.

Greg: The survey indicated that 76% of our bank and credit union clients plan to increase technology spending over the next two years. Above those, the largest segment, 33%, plans to increase investments between 6 and 10%.

Speaker Change: In closing, we remain excited and confident that our unwavering approach to culture service innovation strategy and execution will continue to enable Jack Henry to drive industry, leading industry, leading revenue growth and margin expansion through this evolving macro environment.

Greg: We also ask where they expect to invest over the next two years. The top three areas identified were digital banking, fraud prevention, and enhancing the efficiency through automation.

Speaker Change: We have a robust sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions. We will continue to evaluate acquisitions that will accelerate or complement our strategy remain disciplined in our expense management and continue to rationalize products that fall in our non key revenue segments.

Speaker Change: All areas where Jack Henry has been investing and executing with innovative solutions such as the Bano Platform, Financial Crimes Defender, and the Digital Deposit and Loan Account Opening Solution that I mentioned earlier.

Gregory Adelson: So let's say Yellow Hammer to our Financial Crimes Defender product, which, by the way, also affects some consulting revenue because the consulting revenue goes hand-in-hand with the Financial Crimes Defender stuff. So there's some examples of that. We're not really seeing any real delays in, as you described, from somebody going from in-house to outsource. They usually fill those gaps and want to take advantage of them. But I also do want to remind you that we see delays regularly throughout the year, but because there's only one quarter left and where we are with kind of the environment, especially with pure hardware sales, where folks that are in-house that are wanting to buy hardware and looking to either delay that decision for one of two reasons.

Speaker Change: It's worth noting that the survey was conducted in January and February prior to April's market volatility However, we did spend a significant amount of time speaking with our clients about the current environment at our strategic insights event last week in Minneapolis . . . .

In short, we remain well positioned for the future.

Speaker Change: With that I'll turn it over to Mimi for more detail on the financials.

Thank you, Greg and good morning, everyone.

Speaker Change: To open by thanking the dedicated Jack Henry.

Speaker Change: Much of what we learned in the survey still holds true for them today. Banks and credit unions are generally concerned about the impact of tariffs on their commercial clients, especially SMBs.

Speaker Change: Steadfast focus on execution.

Speaker Change: Part of our clients.

Speaker Change: While the quarter results different modestly from our fiscal year expectation. It was another quarter of solid revenue and earnings growth.

Speaker Change: They remain optimistic overall and see expected regulatory relief as a positive as well.

Speaker Change: I will discuss the details behind our third quarter and year to date results.

Speaker Change: To conclude with commentary on our updated fiscal 'twenty five guidance.

Speaker Change: Our clients continue to suggest that M&A activity is picking up and we are also seeing an increase in our clients making acquisitions which presents additional revenue opportunities in the future.

Gregory Adelson: One, that they want to wait to kind of see timing-wise and see if they have an opportunity to wait as long as they can to make those purchases. But the other side is actually a really good reason, which is several of those folks are evaluating moving to our private cloud, and it's through that evaluation they've also made decisions to delay those purchases as well.

Speaker Change: Q3, GAAP and non-GAAP revenue increased 9% and 7% respectively, GAAP revenue outperformance driven by notable uptick in deconversion revenue.

Speaker Change: In closing, we remain excited and confident that our unwavering approach to culture service innovation, strategy and execution will continue to enable Jack Henry to drive industry leading revenue growth and margin expansion through this evolving macro environment

Speaker Change: Despite strong performance in previously identified key areas overall non-GAAP revenue growth was tempered by lower non key revenue growth, especially from a slowdown in hardware sale and non reoccurring revenue from customer project.

Operator: Yeah, that's great color.

Daniel Perlin: Um, just a quick follow up for Mimi, you know, Mimi, you talked about M&A impacts, you know, being really kind of de minimis to this year, but you took the opportunity to kind of throw out that there could be impacts to non gap revenue growth for 26.

Speaker Change: We have a robust sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions.

Speaker Change: Excluding the hardware impact Q3, non-GAAP revenue growth would have been 8%.

Speaker Change: We will continue to evaluate acquisitions that will accelerate or complement our strategy, remain disciplined in our expense management and continue to rationalize products that fall in our non-key revenue segment. In short, we remain well positioned for the future.

Speaker Change: Quarterly deconversion revenue of approximately $9 6 million, which we released prior to full earnings.

Mimi Carsley: So I'm just wondering if you want to put any kind of context or a finer point around that point. Thank you. Thank you, Dan, for the question. So, yes, as we talked about, we have line of sight through known when people sign the deconversion agreement. That's when we start from a revenue recognition perspective when folks are leaving. I would say we have seen an acceleration in that merger activity, roughly around 30 clients. The majority of these have been Jack Henry to Jack Henry mergers, and typically they're cloud customers. So, fantastic that we're retaining that revenue.

Speaker Change: <unk> $8 8 million compared to the same period last year, reflecting an accelerating pace of consolidation in the industry.

Speaker Change: With that, I'll turn it over to Mimi for more detail on the finances.

Speaker Change: In light of year to date results and fourth quarter pending agreement, we have raised our full year deconversion guidance to a range of 22 million $28 million.

Mimi: Thank you, Greg, and good morning, everyone. I want to open by thanking the dedicated Jack Henry team, so there's steadfast focus on execution and support of our clients.

Speaker Change: Financial institution M&A activity will have minimal non-GAAP impact in fiscal 'twenty five.

Mimi: While the quarter results differed modestly from our fiscal year expectations, it was another quarter of solid revenue and earnings growth [inaudible]

Speaker Change: Then show for a meaningful impact in fiscal 'twenty.

Mimi: I will discuss the details behind our third quarter and a year-to-date results, then conclude with commentary on our updated fiscal 25 guidance

Speaker Change: Now looking closer to the quarterly results.

Speaker Change: In the quarter, GAAP, and non-GAAP services, and support revenue increased 8% and 6% respectively.

Mimi Carsley: There can be a little bit of a modest pricing impact from a tiered pricing perspective. What usually comes later in the merger cycle, so when it's a Jack Henry client doing the acquisition, we get notified pretty early on in the cycle they want to secure their slot. What happens when it's a Jack Henry customer getting acquired away to another platform, we tend to hear about that a little later in the cycle, as well as the convert-merge services that we help them with during that consolidation, when it's our clients doing this acquisition, are usually a little later post-approval cycle.

Mimi: Q3 Gap & Non Gap Revenue increased 9% and 7% respectively, with Gap Revenue outperformance driven by notable upticks in Deconversion Revenue.

Speaker Change: Data processing and hosting continue to dominate in services and support revenue growth for the quarter and year to date.

Mimi: Despite strong performance and previously identified key areas, overall non-GAAP revenue growth was tempered by lower non-key revenue growth, especially from a slowdown in hardware sales and non-reoccurring revenue from customer project.

Speaker Change: Hardware revenue was down $4 million in the quarter and $11 million year to date, creating headwind for services and support revenue.

Speaker Change: As a reminder, hardware revenues, both nonrecurring and low visibility, making it a part of Nike revenue.

Mimi: Excluding hardware impact, Q3 non-GAAP revenue growth would have been 8 percent.

Speaker Change: Our private and public cloud offerings.

Speaker Change: <unk>, 11% in the quarter, reflecting strong persistent newest style.

Mimi: Quarterly Deconversion Revenue of a approximately 9.6 million, which we released prior to full earning, increased 8.8 million compared to the same period last year, reflecting an accelerating pace of consolidation in the industry.

Mimi Carsley: That's why we're not really expecting to see much of that impact in FY25, but you would see more of that probably longer in the approval cycle. We're only a couple of months into the administration. We haven't seen a radical shift in the timing, being shrunken from an approval cycle. So, as more deals happen and you get a little longer in that implementation and close of those deals is where we would expect to see the impact to our revenue from a positive perspective, as well as any services that we would perform for them. Just a final note on the point, on that convert-merge related Jack Henry to Jack Henry cloud, any of that, you won't see any lumpiness because that is spread out over the remaining life of the contract.

Speaker Change: <unk> growth trends.

Speaker Change: This reoccurring revenue growth contributor is 33% of our total revenue.

Speaker Change: He has to be a double digit growth engine.

Speaker Change: Moving to processing revenue, which is 43% quarterly revenue and a significant contributor to our long term growth model is a strong performance with 9% growth on both a GAAP and non-GAAP basis for the quarter.

Mimi: In light of year-to-date results and fourth quarter pending agreements, we have raised our full year de-conversion guidance to a range of 22 million to 28 million

Mimi: National Institution M&A Activity will have minimal non-GAAP impact in fiscal 25 but potential for meaningful impact in fiscal 26.

Speaker Change: Continuing long term trend quarterly drivers included increased card digital and payment processing revenues.

Now looking closer to the quarterly result.

Speaker Change: Leading complement commentary on revenue I would highlight quarterly total reoccurring revenue, excluding deconversion revenue with 92%.

Mimi: In the quarter gap and non gap services and support revenue increased 8% and 6% respectively.

Mimi: Data processing and hosting continue to dominate services in support revenue growth for the quarter and year-to-date [inaudible]

Speaker Change: We focus on key revenue, which comprised of our <unk>.

Speaker Change: Reoccurring revenue.

Operator: So, it's doubtful that you would see anything noticeable in any one quarter. Great color. Thank you so much. Of course. Thank you.

Speaker Change: Nike revenue includes lower growth and margin solutions that are typically nonrecurring or not aligned to our future strategic direction at Ogden support existing operations.

Mimi: Hardware revenue is down 4 million in a quarter, and 11 million year to date, creating headwinds for services and support revenue.

Mimi: As a reminder, hardware revenue is both non-repearing and low visibility making it a part of non-key revenue.

Speaker Change: Quarterly key revenue with 78% of total non-GAAP revenue and grew a robust 10%.

Rayna Kumar: We have the next question from the line of Rayna Kumar from EvoCorp. Please go ahead.

Gregory Adelson: Hi, Greg and Mimi, and yeah, it's actually Oppenheimer now. Just in terms of the project delay that you experienced in the third quarter, what are you hearing on a timeline? Like, are these projects that could come in later this year? Or is this maybe a next year? Yeah, hey, Rayna. So yeah, just, you're right on. So where we are at the end of the year, like I said, this happens throughout the year on a regular basis, just, you know, we're seeing a little bit more than normal, but also ones that are getting pushed into the following year.

Speaker Change: The year to date key revenue was 75% of total non-GAAP revenues with continued momentum producing healthy growth of 9%.

Speaker Change: Quarterly 90 revenue makes up the remaining non-GAAP revenue during the quarter and year to date has contracted 2%, creating a headwind to total growth.

Mimi: This reoccurring revenue growth contributor is 33% of our total revenue and continues to be a double digit growth engine

Mimi: Moving to processing revenue, which is 43% quarterly revenue, and a significant contributor to our long-term growth model is our strong performance with 9% growth on both a gap and non-GAAP faces for the quarter.

Speaker Change: But Jack Henry is not immune to the broader macroeconomic challenges.

Speaker Change: High reoccurring revenue long term contracts are critical functionality of our product and share the resiliency of our business model.

Gregory Adelson: So, as I said, these are delays in products that they've already contracted for. And so it's not like, you know, they're walking away from a contract or things that are things along that line. But they're just things that are getting pushed into, you know, out of the next quarter and into the next fiscal year.

Speaker Change: We are well positioned regardless of economic conditions.

Mimi: Continuing long-term trends, quarterly drivers include increased card, digital, and payment processing revenues.

Speaker Change: Nick.

Speaker Change: Moving to expenses.

Speaker Change: Starting with cost of revenue, which increased 4% on a GAAP basis, and 3% on a non-GAAP basis during the quarter.

Mimi: Leading Compliment, Commentary, and Revenue, I would highlight quarterly total reoccurring revenue excluding Deconversion Revenue with 92%.

Speaker Change: The increase was due to higher direct cost.

Operator: Understood, that's helpful.

Mimi Carsley: And then it was nice to see the strong margin expansion in the quarter. And I know, I know, Mimi, you've spoken about 20 to 40 basis points and margin expansion as a medium term target. Just given the strength we saw in the high margin revenue and cost management, is that target too low? So, cost management is something that is just bread and butter for Jack Henry. It's something we've always done from zero baselining of every headcount decision to a rigorous prioritization of our capital spend. I'll note that our R&D spend is 14.5% this year, down a little from last year.

Speaker Change: Licenses and fees, which partly offset by increase in labor cost of borrow.

Mimi: We focus on key revenues which comprise of our strategic reoccurring revenues.

Speaker Change: For clarification Intuit's District model.

Mimi: Non-key revenue includes lower growth and margin solutions that are typically non-reoccurring or not aligned to our future strategic direction yet often support existing operations

Speaker Change: Amortization of acquisition related intangibles with $6 million in the quarter.

Speaker Change: Next R&D expense increased 9% I bet, the GAAP and non-GAAP basis for the quarter.

Mimi: Quarterly Key Revenue, with 78% of total non-GAAP revenue, and grew a robust 10%

Speaker Change: The increase was primarily related to non personnel costs, sorry, net personnel costs.

Mimi: The year-to-day key revenue with 75% of total non-GAAP revenues would continue to momentum producing healthy growth of 9%.

Speaker Change: And then with SG&A expense it increased 7% for the quarter on a GAAP basis, and 5% on a non-GAAP basis. It's also related to an increase in net personnel costs.

Gregory Adelson: Now, last year was elevated a touch related to the payrolls, acquisition, and the integration needed between those 2 businesses. But we are always very mindful as a leadership team. Certainly, as we started to see a little bit of the softness related to that non-key revenue, we've even turned up the dial a little bit more from discretionary spending control. I feel very comfortable in the 25 to 40% representing the floor of what's achievable from the model from a year in, year out basis. That's always just a floor and we aim for more. Too early to see from a fiscal 26 perspective, given where we stand in the budget timing cycle.

Mimi: Orderly non-key revenue makes up the remaining non-get revenue and during the quarter end year to date has contracted 2% creating a headwind to total growth.

Speaker Change: We remain focused on prioritization cost efficiencies and effective utilization of our workforce that will result in annual compounding margin expansion.

Mimi: Well, Jack Henry is not immune to the broader macroeconomic challenges, the high reoccurring revenues, long-term contracts, and critical functionality of our products, ensure the resiliency of our business model.

Speaker Change: We are pleased to report that the quarter delivered 207 basis point increase in non-GAAP margin to 23%.

Speaker Change: We remain confident in our ability to deliver margin expansion and have increased the full year guide.

We are well positioned regardless of economic condition. [inaudible]

Next, moving to expenses.

Speaker Change: These solid quarterly operating results produced fully diluted GAAP earnings per share of $1 52 up 28%.

Mimi: starting with cost of revenue which increased 4% on a gap basis and 3% on a non-gap basis during the quarter. The quarterly increase was due to higher direct costs, internal licenses and fees, which partly offset by increase in labor cost deferral.

Speaker Change: Reviewing our three operating segments. We are pleased with core segment key revenue performance monitoring payments for consumer sentiment impacts and continue to benefit from strong complementary performance.

Gregory Adelson: Yeah, Rayna, one thing I want to add on that. So, you know, Mimi said it, but, you know, historically, we've always done a really good job of managing our headcount and the timing of that headcount. And so, you know, we've taken that to another level. We have new leaders and, you know, really, they've been grained and trained to make sure that that's part of the process. So, that'll continue. And, you know, obviously, some of the things that we have to spend additional money on, as far as infrastructure and other spends, you know, do vary each year.

Mimi: For clarification and to assist with models, the amortization of acquisition-related intangibles was $6 million in the quarter.

Speaker Change: For segment increased 6% for the quarter on a non-GAAP basis due to the headwinds from the license credit Union hardware it rolls up into this segment.

Mimi: Next, R&D Accents Increase 9% on both of Gap & Non-Bapt Gap Basis for the quarter.

Speaker Change: On a key basis segment revenue grew 11%, a 10 basis point increase over the prior period.

Mimi: The quarterly increase was primarily related to non-Personal Costs. Starting next, Personal Costs.

Operator: So, some of that is, you know, as we're still going through the budget process, as you know, you know, some of that is yet to be determined on where we will end up for next year. And this year, we're up 1% on headcount. Yeah.

Mimi: Ending with S-GNA expense, it increased 7% to the quarter on a gap basis and 5% on a non-GAAP basis. It's also related to an increase in net personnel cost.

Speaker Change: Core segment performance, primarily came from organic growth in data processing and hosting partly offset by lower maintenance fee revenue a credit union related hardware.

Mimi: We remain focused on prioritization, cost efficiencies, and effective utilization of our workforce that will result in annually compounding margin expansion.

Speaker Change: <unk> of our core clients continuing to shift from on private.

Operator: Thank you.

Operator: I appreciate all the color.

Speaker Change: Private clouds.

Speaker Change: non-GAAP segment income margin for core increased 141 basis point from improved operating leverage.

Operator: Thank you.

Vasu Govil: We have the next question from the line of Vasu Govil from KBW. Please go ahead. Hi, thank you for taking my question. I guess the first one maybe just for you to follow up on the change in the revenue guide for the fourth quarter, it sounds like it's mostly hardware and these contract delays.

Mimi: We are pleased to report that the quarter delivered 207 basis points increase in non-GAAP margin to 23 percent [inaudible]

Speaker Change: Segment payment segment, non-GAAP quarterly revenue increased 7%.

Speaker Change: Our non-GAAP segment income margin growth of 59 basis points.

Mimi: We remain confident in our ability to deliver margin expansion and have increased the foliar guide.

Speaker Change: Performance was due to continued higher card revenue from volumes.

Mimi Carsley: But I think you also mentioned conservatism in the guide, so if you could just break apart the big drivers for the change, and then also if there's a way to size the overall hardware revenue for us, so we sort of have a sense for how much that can drive volatility and growth. Sure, Vasu. So the guide for the remaining of the year is really just, you know, given the prudence and having conservative macro assumptions as it relates to what's going on in the economy, as well as the trends we've, you know, seen in the third quarter, particularly the outlook for hardware is down.

Mimi: These solid, quarterly operating results produced a fully-deleted gap earning per share of $1.52 up 28%.

Speaker Change: Increased payment processing revenue, including fed now RTP.

Speaker Change: <unk> and elevated ETF payments.

Mimi: Reviewing the three operating segments, we have pleased with core segment key revenue performance, monitor and payments for consumer sentiment, impacts, and continue to benefit from strong complementary performance.

Speaker Change: Margins in the payments segment also baked in today from ongoing improvement to operating leverage.

Speaker Change: Finally complementary segment quarterly non-GAAP revenue increased 10% from strong product mix with digital and hosting revenues driving growth momentum.

Mimi: Four segment increased six percent of the quarter on a non-GAAP basis to the headwinds from license, a credit union hardware that rolls up into the segment.

Speaker Change: Segment margin strongly expanded 164 basis points from the high incremental margin of reoccurring revenue and SaaS like nature of our business model.

Mimi: On a key basis, the segment revenue grew 11% a 10 basis point increase over the prior period.

Mimi Carsley: As Greg mentioned, we're seeing some customers delay, you know, big capital purchases, you know, possibly due to economic uncertainty. Also, you know, as they contemplate moving to the cloud, which is a good thing for Jack Henry. In fact, you know, FI is maybe not wanting to make those pretty expensive hardware decisions. They actually help push their decisions to the cloud. So I think in the long run, that could be a great thing for Jack Henry, as we're already at 76% of our clients in our private cloud environment. The headwind on hardware is about $11 million for the year.

Now, let's turn to a review of cash flow and capital allocation.

Mimi: Gore Segment, Performance, primarily came from organic growth and data processing and hosting, partly offset by lower maintenance fee revenue, a credit union-related hardware, the results of our core clients continuing to shift from on-privileged to private cloud.

Speaker Change: Third quarter operating cash flow was $108 million, a $10 million increase over the prior period Years' period.

Speaker Change: Cash flow reflects higher profitability from operations and increased deconversion revenue, partly offset by higher tax payments.

Mimi: non-GAAP segment, income margin for core increased 141 basis points from improved operating leverage.

Speaker Change: Trailing 12 month free cash flow with a hearty $303 million, resulting in a 71% conversion in line with our full year guidance range.

Mimi: Payment, payment, segment, non-GAAP , quarterly revenue increased 7%, and saw non-GAAP , segment, income, margin, growth of 59 basis points.

Mimi Carsley: I'll call out that 80% of that falls within the corporate segment, with the remainder of that being in the core segment. I think the other is what Gregory touched upon, which is we're just seeing customers take a bit more of a cautious stance, you know, delaying some of these non-reoccurring projects, mostly consulting work orders, some of the implementation of some of their post-core, as Greg mentioned, and I just want to reiterate it, these are contractual, you know, commitments they've already signed for, so it's just more of a timing than a fundamental shift or a change in decision-making pattern.

Speaker Change: Our dedication to value creation resulted in a 12 trailing 12 months return on invested capital of 20%.

Mimi: Performance was due to continued higher card revenue from volumes, increased payment processing revenue, including FedNow, RTP, Zell, and elevated EPS payment.

Speaker Change: This is a nice improvement and we expect to see this increase returning to historic levels in the near future.

Speaker Change: For the quarter, we repurchased $18 million of Jack Henry shares aligned with our constructive outlook for future Jack Henry grid.

Mimi: Margins and the payment segment also baked the cinnets from ongoing agreement to operating leverage.

Mimi: Finally, complimentary segment, quarterly non-GAAP revenue increased 10% from strong product with digital and hosting revenues, driving growth momentum.

Speaker Change: As we move towards the close of fiscal 'twenty five I will conclude with comments on full year guidance and other operating metrics.

Speaker Change: Yesterday's press release included adjusted fiscal 2025 full year GAAP guidance, along with a reconciliation to our adjusted non-GAAP guidance metrics.

Mimi: Degment Margin strongly expanded 164 basis points from the high incremental margin of reoccurring revenue and staff-like nature of our business model.

Mimi Carsley: So, historically, we've seen anywhere between after 18 months of implementation, but it can be as long as 36 months, and so that really comes down to their readiness versus our resources and capability to help them. We have not seen any meaningful changes to our implementation schedule, so I think it's more just out of an abundance of caution, you know, to be thoughtful. In terms of the payment impact, we just started to really see that more in April. As we sit here today, we all know that that is, you know, the transaction volume is based on consumer spending and how they feel.

Speaker Change: While the press release also included a fiscal 'twenty five non-GAAP EPS metric. This is not intended to be a new guidance metric. The purpose is to provide additional clarity on our numbers and it should be noted that a 24% tax rate as you.

Mimi: Now let's turn to a review of cash flow and capital allocation.

Mimi: Third quarter operating cash flow with 108 million, a 10 million increase over the prior period, years period

Mimi: Drawn Tashler reflects higher profitability from operations and increase de-conversion review partly offset by higher task payment

Speaker Change: Given the current dynamic macro economic environment, including early signs of softness of consumer related payments.

Speaker Change: We're adopting a more cautious stance for the remainder of the fiscal year.

Mimi: Trailing 12 month free cashflow with a hearty 303 million, resulting in a 71% conversion in line with the full year guidance range.

Speaker Change: Outdated full year guidance metrics and outlook.

Speaker Change: <unk>.

Speaker Change: So year deconversion revenue of 22 million to $28 million up from six 8 million.

Gregory Adelson: It also depends on what's top of their wallet, whether it's debit or credit. So, again, just prudent in the current environment to narrow that horizon aperture of our outlook. And it really more came down to what our original expectation was, was more of a really robust fourth quarter. So, it's not that we're calling for it to drop off precipitously from the current trend. It's more just relative to our original expectation of being pretty robust. Yeah, one last point, Vasu, is that, you know, when you think about historically in tough economic times, you know, folks tend to move to their credit versus their debit.

Mimi: Our dedication to value creation resulted in a 12-trailing 12-month return on invested capital of 20% This is a nice improvement and we expect to see this increase returning to historic levels in the near future [inaudible]

Speaker Change: non-GAAP revenue growth of 6% to six 5% lowered from 7% to 8%.

Speaker Change: non-GAAP margin expansion of 60 to 70 basis point increase from 25 to 40 attach.

Mimi: For the quarter we repurchased $18 million of Jack Henry shares aligned with our constructive outlook for future Jack Henry Group.

Speaker Change: The tax rate of 23% decrease from 24%.

Speaker Change: GAAP EPS of $6 to $6, 9% up from $5 78 to $5 87.

Mimi: As we move towards the close of fiscal 25, I will conclude with comments on full-year guidance and other operating metrics.

Speaker Change: Representing annual growth of 15% to 17%.

Mimi: Yesterday's press release included adjusted fiscal 2025 full-year gap guidance along with a reconciliation toward adjusted non-GAAP guidance metric.

Speaker Change: Outlook for free full year free cash flow conversion is unchanged at 65% to 75%.

Gregory Adelson: And so, based on what we saw in April, and ironically, we've actually seen pretty good volumes in May thus far, even though a short, you know, number of days so far. But the reality is, you know, based on historical around here, we've seen the use of credit accelerate over the use of debit during these times. So, we're just, as Mimi said, we're just being cautious with our approach and making sure that, you know, we provide that level of guidance.

Speaker Change: And outlook for full year return on invested capital is 21% to 22% based on expected lower debt at the end of the fiscal year.

Mimi: While the press release also included a fiscal 25 non-GAAP ETF metric, this is not intended to be a new guidance metric. The purpose is to provide additional clarity on their numbers, and it should be noted that a 24% tax rate is used.

Speaker Change: The appropriate performance indicator for our business continues to be the full fiscal year financial results.

Mimi: Given the current dynamic macroeconomic environment, including early-sized softness of consumer-related payments, we are adopting a more cautious stance for the remainder of the fiscal year.

Speaker Change: In conclusion, we are seeing modest headwinds to non key revenue items that impact our consolidated results and near term outlook.

Operator: Great, that's very helpful, Culler.

Speaker Change: We remain confident as the key parts of our business continue to perform strongly.

Gregory Adelson: And then, Greg, one high-level one for you.

Mimi: Updated Folier Guidance, Metric & Outlooks Inc. Folier Deconversion Revenue of 22 million to 28 million, up from 16 million Now I gap revenue growth of 6 to 6 and a half percent, lowered from 7 to 8 percent . . . .

Gregory Adelson: Is there any change in how you're thinking about your competitive positioning following the announcement from FIS to acquire the issuer business from Global Payments? Thank you. Yeah, it's a great question. Thank you. No, I mean, I think, look, here's what I would say. When you look at the fact that they added much better credit processing capabilities with that acquisition, that's good for them. We already had credit capabilities. I think one thing that we have that is still a differentiator is that we process on a single platform for both debit and credit. That's not the case for what they have today.

Speaker Change: Vision is for continued growth.

Speaker Change: Our focus remains on delivering long term profitable growth at scale.

Speaker Change: Compounding revenue growth and margin expansion.

Speaker Change: In pursuing these calls we appreciate the achievement of our approximately 7200 dedicated associates and our investors for their ongoing confidence.

Lauren: Lauren Please open the line for questions.

Mimi: Gap EPS of $6.00 to $6.09, up from $5.78 to $5.87, representing annual growth of 15% to 17%.

Lauren: Thank you.

Lauren: We will now begin the question and answer session.

Lauren: To ask a question with star and one on your Touchtone phone.

Gregory Adelson: And so it's too early to see from a competitive standpoint. We really, specifically that particular competitor, we didn't have a lot of challenges when it came to looking at their debit processing capabilities versus ours. So we'll have to wait and see. But they're still working in the same environments as they always have as far as the type of customers they're going after and the size of asset customers. So we'll continue to compete as we always have at that market.

Lauren: If youre using a speakerphone please pick up your handset before pressing the keys.

Mimi: Outlook for a full year free cash flow conversion is unchanged at 65 to 75 percent.

Lauren: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two.

Mimi: An outlook for Folier Return on Invested Capital is 21 to 22% based on expected lower debt at the end of the fiscal year.

Lauren: Yeah.

Lauren: At this time, we will pause momentarily to assemble our roster.

Speaker Change: We have the first question from the line of Dan Perlin from RBC. Please go ahead.

Mimi: The appropriate performance indicator for our business continues to be the full fiscal year financial result.

Dan Perlin: Thanks, Good morning, So I.

Mimi: In conclusion, we are seeing modest headwinds to non-key revenue items that impact our consolidated results and year-term outlook. Still, we remain competent as the key parts of our business continue to perform strongly in position as for continued growth.

Dan Perlin: Wanted to get back to the question obviously around.

Operator: As I mentioned in my opening remarks, we're very bullish on our Q4 related to core opportunities. And as you know, most of those come with a lot of add-on products. So I'll leave it at that. Thank you for the color. Thank you.

Dan Perlin: Like large capital purchases of hardware being down I completely understand that the question is are you seeing similar restrained when it comes to your more modernized projects in cloud migration. So you're starting to hear elongated implementation cycles in that kind of area or is it really just this nonrecurring stuff that we're seeing right now.

Mimi: Our focus remains on delivering long-term, profitable growth at scale through compounding revenue growth and margin expansion.

Jason Kupferberg: We have the next question in the line of Jason Kupferberg from Bank of America. Please go ahead. Good morning, guys. So it sounds like as we start thinking ahead to fiscal 26, there might be a couple of moving parts we need to consider on the revenue line. You've got the effect of the deconversion revenues that you highlighted as a potential headwind, but now we've got some delays and post-core add-ons being pushed into fiscal 26, which sounds like it could be a tailwind. So I'm just wondering how you think those two dynamics might net out and what the implications could be for revenue growth next year, just in the context of the medium-term outlook of 7% to 8%.

Dan Perlin: Hey, Dan Yes, so it's almost all in the non U.

Mimi: In pursuing these goals, we appreciate the achievement of our approximately 7200 dedicated associates and our investors for their ongoing confidence.

Dan Perlin: Kind of nonrecurring stuff, we are seeing a little bit in some of the complementary and payment products that I mentioned, so mostly in what we would call kind of day, two or kind of post conversion, where folks have a product set that they are either waiting for a.

Myron, please open the line for questions.

Thank you.

Dan Perlin: A contract to determinate with a competitor or they have an existing Jack Henry products, which is the case in most of these where they're just delaying kind of putting the new one on so let's say yellow hammered two our financial crimes defender product, which by the way also affect some consulting revenue because the consulting revenue goes hand.

Mimi: We will now begin the question answer session. To ask a question, you have a star and one on your touchtone phone.

Mimi: If you're using a speaker phone, please pick up your handset before pressing the keys. [inaudible]

Mimi: If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2.

Mimi Carsley: Is there any risk there? Thank you.

Mimi: At this time, you will pause momentarily to assemble a roster

Dan Perlin: In hand, with the financial crimes defender stuff. So there are some examples of that we're not really seeing any real delays in like as you described from from somebody going from in house to outsource they usually fill those gaps and want to take advantage of them.

Mimi Carsley: So, Jason, I'd love to share with you the full FY26 picture. We're just too early in the process. Budget and season is deeply underway here at Jack Henry, but it's not finalized yet for another several months. And so in this dynamic environment, we just can't commit on next year this far in advance. I will say to some of your comments in terms of the tailwinds and headwinds. Our sales pipeline continues to be robust. We're seeing no elongation of the sales cycle. Greg mentioned the numerous account wins, including large FIs that are still making plenty of decisions and commitments.

Mimi: We have the first question from the line of Dan Perlin from RBC. Please go ahead.

Dan Perlin: Thanks, good morning. So I wanted to get back to the question obviously around like large capital purchases, you know, for hardware being down. I completely understand that. The question is, are you seeing similar restraints when it comes to your more modernized projects and cloud migration? So are you starting to hear elongated implementation cycles in that kind of area or is it really just this non-recurring stuff that we're seeing right now? Yeah.

But I also do want to remind you that we see delays regularly throughout the year, but because there is only one quarter left.

Dan Perlin: And where we are with kind of the environment, especially with pure hardware sales were folks that are in house that are wanting to buy hardware and looking to either delay that decision for one of two reasons.

Dan Perlin: One that they want to wait to see timing wise and see if they have an opportunity.

Dan Perlin: Hey, Dan, yeah, so it's almost all in the non-recurring stuff.

Dan Perlin: To wait as long as they can to make those purchases, but the other side is actually a really good reason, which is several of those folks are evaluating moving to our private cloud and it's through that evaluation. They've also made decisions to delay those purchases as well.

Mimi Carsley: So seeing no change in trends from that perspective. In terms of any of the deals that are being pushed from an implementation perspective, as Greg mentioned, there's always some moving of the calendar within the year. I'm not sure that that will really create a tailwind. We always manage the implementation pretty tightly. So we'll see if there's enough demand for another implementation team. We'll certainly add that if there's there. But I wouldn't say that that's a layering effect to the normal flow. It's a continuously evolving calendar. In terms of just the guide, again, too early to say for sure, but I would say as a preview, the width of the revenue guide will likely expand on that.

Dan Perlin: We are seeing a little bit in some of the complimentary and payment products that I mentioned, so mostly in what we would call kind of day two or kind of post-conversion worth

Dan Perlin: Folks have a product set that they're either waiting for a contract to terminate with a competitor, or they have an existing Jack Henry product

Interesting yes.

Dan Perlin: Any color.

Speaker Change: Just a quick follow up for me you know many of you talked about M&A impacts.

Speaker Change: Let me kind of de Minimis to this year, but you took the opportunity to kind of throw out that there could be impacts in non-GAAP revenue growth for 26. So I'm. Just wondering if you want to put any kind of context or a finer point around that point. Thank you.

Dan Perlin: which is the case in most of these where they're just delaying kind of putting the new one on so let's say yellow hammer to our financial crimes defender product which by the way also affects some consulting revenue because the consulting revenue goes hand in hand with the financial crimes defender stuff so there's some examples of that we're not really seeing any real delays in like as you described from from somebody going from in house to outsource they usually fill those gaps and want to take advantage

Speaker Change: Thank you Dan for the question. So yes, as we talked about we have line of sight through known when people sign that D conversion agreements Ah. That's when we start from a revenue recognition perspective, when folks are leaving.

Mimi Carsley: And we'll talk more about that in August.

Thank you all.

Speaker Change: I'd say, we have seen an acceleration in that merger activity roughly around 30 clients. The majority of these have been Jack Henry to Jack Henry mergers.

Mimi Carsley: Okay, no, that's definitely helpful for now. So I wanted to come back to the the key revenue, the cloud plus processing, like you said, it's now 76% of total, and you did actually see acceleration in the growth, almost 10% versus nine each of the past two quarters. Are we going to, are we expecting to sustain, call it that 10% level in Q4? And is there any reason to believe that something in that kind of general neighborhood couldn't sustain into, into next year? I think you're on the right course in terms of the ballpark you're talking about.

Dan Perlin: and where we are with kind of the environment, especially with pure hardware sales, where folks that are in-house that are wanting to buy hardware and looking to either delay that decision for one of two reasons.

Speaker Change: And typically there are cloud customers so fantastic.

Speaker Change: Fantastic that we're retaining that revenue.

Speaker Change: There can be a little bit of a modest pricing impacts on the tiered pricing perspective, what usually comes later in the merger of cycles.

Dan Perlin: One that they want to wait to kind of see timing-wise and see if they have an opportunity to wait as long as they can to make those purchases. But the other side is actually a really good reason, which is several of those folks are evaluating moving to our private cloud. And through that evaluation, they've also made decisions to delay those purchases as well.

Speaker Change: When it's a Jack Henry client doing acquisition, we get notified pretty early on in the cycle. They wanted to secure their slot.

Speaker Change: What happens when a Jack Henry customer getting acquired away.

Mimi Carsley: I feel pretty comfortable. Those are the long-term strategic growth of the business. You have things like digital, you have things like the new product, the cloud, the continued cloud migration. So all of those have been long sustainable trends for the business, and we fully expect that to continue. What has hurt us is the headwinds from the non-key business that has compressed at about 2%. So that's been more of the challenge, but as we have more and more as a percentage of the portfolio in that key revenue, and we will continue to thrive. Thanks Mimi. Thank you.

Speaker Change: To another platform, we tend to hear about that a little later in the cycle.

Interesting.

Speaker Change: Yeah, that's great color. Just a quick follow-up from Mimi, Mimi talked about M&A impacts, you know, being really kind of diminished to this year, but you took the opportunity to kind of throw out that there could be impacts to the non-GAAP revenue growth for 26. So I'm just wondering if you want to put any kind of context or a finer point around that point. Thank you.

Speaker Change: As well as the convert merge services that we help them with during that consolidation when it's our clients doing this acquisition are usually a little later post approval cycle.

Speaker Change: That we don't that's why we're not really expecting to see much of that impact in FY 'twenty five.

Thank you, Dan, for the question. Bye.

Speaker Change: But you would see more of that probably longer in the improvement cycle. We're only a couple of months into the administration, we haven't seen a radical shift in the timing.

Deconversion agreement. [inaudible]

Speaker Change: That's when we start from a revenue recognition perspective when folks are leaving. I would say we have seen an acceleration in that merger activity roughly around 30 clients. The majority of these have been Jack Henry to Jack Henry mergers. And typically they're their cloud customers. So, um.

Speaker Change: Being shrunken from an approval cycles as more deals happen and you get a little longer in that implementation and close those deals is where we would expect to see the.

Darrin Peller: We have the next question in the line of Darrin Peller from Wolf Research. Please go ahead. Guys, thank you. You know, you mentioned obviously this step up in consolidation you're seeing in your end market. So again, I mean, I know it was just brought up a little bit in the prior question around what it could mean for the future, but at the end of the day, there's positives and negatives. Obviously, you have integration revenue if your customers are the acquirer or part of the merger.

Speaker Change: Back to our revenue from a positive perspective, as well as any services that we would perform for them.

Speaker Change: And just a final note on the point.

Speaker Change: They're fantastic that we're retaining that revenue. There can be a little bit of a modest pricing impact from a tiered pricing perspective. What usually comes later in the merger cycle, so when it's a Jack Henry client doing that position, we get notified pretty early on in the cycle. They want to secure their slot. What?

Speaker Change: On that convert merged.

Related.

Speaker Change: Henry to Jack Henry Cloud.

Speaker Change: Any of that you won't see any lumpiness because that is spread out over the remaining life of the contract.

Speaker Change: It's doubtful that you would see anything noticeable in any one quarter.

Speaker Change: what happens when it's a Jack Henry customer getting acquired away.

Speaker Change: That's great color. Thank you so much.

Speaker Change: to another platform. We tend to hear about that a little later in the cycle.

Of course.

Speaker Change: Thank you.

Speaker Change: as well as the Convert Merge services that we help them with during that consolidation when it's our clients doing this acquisition are usually a little later post approval cycle. So we don't that's why we're not really expecting to see much of that impact in FY 25.

Speaker Change: We have the next question from the line of reign, Oklahoma from Evercore. Please go ahead.

Hi, Greg.

Greg Adelson: Yes, actually Oppenheimer now.

Gregory Adelson: https://www.youtube.com.uk Yeah, hey, Darren, I'll take that. It's great. So, a couple things. So, as I mentioned, you know, it starts with the size of the institution. So, as you know, we've continued to grow. Last year, we sold 15 multibillion. We sold 8 so far this year. Much larger ones, as I referenced, from an asset size on, you know, the 30 billion on the 28 sold so far this year, meaning, you know, on average, we're selling over a billion in assets per deal sold. So, again, that historically hasn't been the case. And so, as we continue to be able to go up market and have larger size institutions, they tend to be the acquirers, as you can imagine.

Speaker Change: Just in terms of the project delays that you experienced in the third quarter. What are you hearing on a timeline like are these projects that could come in later this year or is this maybe an estimate of that.

Speaker Change: But you would see more of that probably longer in the improvement cycles. We're only a couple months into the administration. We haven't seen a radical shift in the timing. [inaudible]

Speaker Change: Yeah, Hey, Ryan So yeah, just youre right on where we are at the end of the year like I said. These this happens throughout the year on a regular basis, just we're seeing a little bit more than normal.

Um...

Speaker Change: being shrunk in from an approval cycle so as more deals happen and you get a little longer in that implementation and close of those deals is where we would expect to see

Speaker Change: But also ones that are getting pushed into the following year. So as I said these are delays in products that they are already contracted for.

Speaker Change: And so it's not like they're walking away from a contract or things that are things along that line, but there are just things that are getting pushed into.

Speaker Change: The impact to our revenue from a positive perspective, as well as any services that we would perform for them. So,

Gregory Adelson: You know, over the 40 years of, you know, kind of the market shrinking, most of that has happened at the 500 million and below asset size. So, the larger we have, the more opportunity. So, to answer the second part of your question, yeah. So, it happens to be, you know, kind of both. So, if it's a Jack Henry client, buying a Jack Henry client, you know, there's some things that we can work through related to the deconversion fees and or, you know, kind of convert and merge fees that end up being positive for us. You know, when you look at a competitor buying one of our clients, obviously, we tend to get the full conversion fee, deconversion fee, and push.

Speaker Change: Out of the next quarter and into the.

Speaker Change: and just a final note on the point, on that convert merge. . . .

Speaker Change: The next fiscal year.

Speaker Change: Understood. That's helpful. And then it was nice to see the strong margin expansion in the quarter and I know I know, maybe you've spoken about 20 to 40 basis points of margin expansion as a medium term target just given the strength we saw in the high margin revenue and cost management.

related

Speaker Change: Jack Henry to Jack Henry Cloud, any of that you won't see any lumpiness because that is spread out over the remaining life of the contract so it's doubtful that you would see anything noticeable in any one quarter.

Speaker Change: That target too low.

Great color. Thank you so much.

Speaker Change: So cost management is something that is just bread and butter for Jack Henry It's something we've always done from zero base lining of every head count decision to a rigorous prioritization of our capital spend I'll note that our R&D spend is 14, 5% this year down a little from last year.

Of course.

Thank you.

Speaker Change: We have the next session from the line of Rayna Kumar from Evercore, please go ahead.

Raina Kumar: Hi, Greg and Mimi, and yeah, it's actually Oppenheimer now. Just in terms of the project delay that you experienced in the third quarter, what are you hearing on a timeline? Like, are these projects that could come in later this year, or is this maybe a next year event?

Gregory Adelson: And it really depends on how much time is left on that contract at the time that that purchase happens. But, you know, what we typically see when it's Jack Henry to Jack Henry is not only do we retain the client, but they tend to buy additional products depending on what one of the – which, you know, institution had which products. And we actually saw that this year with a large merger of $4 billion plus institutions where one of them had our digital platform and one of them didn't. And we were able to get them to move to Bano for both.

Speaker Change: Now last year was elevated a touch related to the payroll as acquisition and integration needed between those two businesses, but we are always very mindful of that as a leadership team certainly as we've started to see a little bit of the softness related to that non key revenue, we've even turned up the dial a little bit.

Raina Kumar: Yeah, hey Raina, so yeah, just you're right on. So where we are at the end of the year, like I said, this happens throughout the year on a regular basis. Just, you know, we're seeing a little bit more than normal, but also ones that are getting pushed into the following year. So as I said, these are delays in products that they've already contracted for. And so it's not like, you know, they're walking away from a contract or things that are things along that line, but they're just things that are getting pushed into.

Speaker Change: More from discretionary spending controls.

Speaker Change: I feel very comfortable in the 25% to 40% representing the floor.

Mimi Carsley: So, it is a hit and miss depending on which institutions, what products they have, the timing of the – how much time is left on the term of the agreement and things along that. And I'll just add that, well, in general, over the multi-year period, it tends to be a positive for Jack Henry. As Greg mentioned, more of our clients are the acquired than the acquired. You know, it can produce some lumpiness, particularly as we moved up market. While deconversion revenue is a great thing for free cash flow and EPS, it does represent the loss of future revenue.

Speaker Change: [noise] achievable from the model from a year on year out basis, that's always just a floor and we aim for more too early to see from fiscal.

Raina Kumar: from the next quarter and into the next fiscal year.

Speaker Change: Fiscal 2006 perspective, given where we stand in the budget tightening cycle.

Speaker Change: Understood, that's helpful. And then it was nice to see the strong margin expansion in the quarter. And I know Mimi you've spoken about 20 to 40 basis points of margin expansion as a medium term target. Just given the strength we saw in the high margin revenue and cost management.

Irina: Yes Irina.

Irina: I want to add on that so does it mean.

Irina: And he said it but you know historically, we've always done a really good job of managing our head count and the timing of that head count and so we've taken that too.

Irina: To another level, we have new leaders and really they've been grained and trained.

Is that target too low?

So, cost management is something that is just-

Irina: To make sure that that's part of the process so that will continue.

Speaker Change: Bregg and Butter for Jack Henry, something we've always done from zero-based lighting of every headcount decision to a rigorous prioritization of our capital spend, all note that our R&D spend is 14.5% this year, down a little from last year. Now last year was elevated, it touched related to the payrolls, acquisition and the integration needed between those two businesses.

Operator: And so if for some reason in this environment, we were to lose, you know, any bulk of larger clients, we would call that out from a headwind grow over problem. Yeah, so I mean, where we are now, are you what you're seeing? Is it going to be seen more as a headwind or a tailwind?

Irina: And obviously some of the things that we have to spend additional money on and as far as infrastructure and other spends do vary each year. So some of that is as.

Irina: As we are still going through the budget process as you know.

Irina: Some of that is yet to be determined on where we will end up for next year and.

Irina: And this year were up 1% on head count yes.

Gregory Adelson: Unknown Speaker 1-2 years, but and then really the follow up for me is more around, you guys called out the things you're seeing around the project related non key revenue And then maybe some cyclical impacts on spend on debit, for example, but what's the demand environment like for the core business, the key areas, if you just rank ordered what you're seeing the most demand for right now, and how that's looking from the prior couple of sales, pretty good for the sales pipeline standpoint, but I'd love more color. Thanks. Yeah, thanks. So I think from a sales pipeline, as we, you know, we tried to articulate was very, very robust, continues to be very robust.

Speaker Change: But we are always very mindful as a leadership team. Certainly as we started to see a little bit of the softness related to that non-key revenue, we've even turned up the dial, a little bit more from discretionary spending controls.

Irina: Thank you I appreciate all the color.

Irina: Thank you.

Speaker Change: We have the next question from the line of Russell Gordon from K VW. Please go ahead.

Speaker Change: Hi, Thank you for taking my question I guess the first one you need just for you to follow up on the change in the revenue guide for the fourth quarter. It sounds like it's mostly hardware and these contract delays, but I think you also mentioned conservatism in the guide if you could just break apart.

Speaker Change: I feel very comfortable in the 20 to 40% representing the floor of, you know, what...

Speaker Change: Cheavable from the model, from a year-and-year out basis. That's always just a floor and we aim for more. Too early to see from fiscal 26 perspectives given where we stand in the budget timing cycle.

Speaker Change: The big drivers for the change and then also if there's a way to size. The overall hardware revenue for US are we sort of have a sense for how much that can drive when the dividend growth.

Gregory Adelson: So not just for core itself, but for the products that we have created, that level of innovation related to financial crimes into pay center components to what I just described as enterprise account origination, a lot of those key revenue products that continue to grow at a nice pace at that 9.8 that we referenced. You know, are hugely, you know, continue to be in demand. I think when you look at at where the challenge was related to what we were trying to describe in the non-key revenue, again, it's really that one off stuff, the things that we don't control for timing and things that are typically done on a more as a as needed basis than a must have basis.

Speaker Change: Yeah, Raina, one thing I want to add on that, so, you know, Amin said it, but, you know, historically we've always done a really good job of managing our head count and the timing of that head count, and so, you know, we've taken that to another level. We have new leaders and, you know, really they've been grained and trained to make sure that that's part of the process. So that'll continue and, you know, obviously some of the things that we have to spend additional money on as far as infrastructure and other

Speaker Change: Share of US is the guide for the remaining of the year is really just you know given.

Speaker Change: Given the prudence and.

Speaker Change: Having conservative macro assumptions as it relates to.

Speaker Change: What's going on in the economy as well as the trends we've seen in the third quarter, particularly the outlook for hardware is down.

Speaker Change: As Greg mentioned, we're seeing some customers delay big capital purchases, you know, possibly due to economic uncertainty also you know as they contemplate moving to the cloud which is a good thing for Jack Henry.

David Foss, Gregory Adelson, Vance Sherard

Operator: And that's really where a lot of that delay happened. So I would point to the strategic benchmark survey that Greg mentioned in his opening remark that's up on the Jack Henry investor website and available that talks about the three top priorities for both banks and credit union CEOs continuing to be around gathering deposits, accounts, efficiency. But the longer term trends that we've talked about over several quarters now around digital, around fraud and around payments tend to be thematically the largest demand that we're seeing. All right, thanks. Thank you.

Speaker Change: In fact, you know everybody maybe not wanting to make this a pretty expensive hardware decision may actually help push their decisions.

Thank you, appreciate all the color. [inaudible]

Thank you.

The cloud so I think in the long run that could be a great thing for Jack Henry as we're already at 76% of our clients and in our private cloud environment.

Speaker Change: We have the next question from the line of Vasu Govil from KBW, please cover it.

Vasu Golvil: Hi, thank you for taking my question. I guess the first one you need is for you to follow up on the change in the revenue guide for the fourth quarter. It sounds like it's mostly hardware and these contract delays, but I think you also mentioned conservatism in the bite guides if you could just break apart.

Speaker Change: Headwind on hardware is about $11 million for the year I'll call out that 80% of that falls within the corporate segment.

Speaker Change: With the with the remainder of that being in the in the core segment.

Greg Adelson: I think the other is is what Greg already touched upon which is we're just seeing customers take a bit more of a cautious stance.

Speaker Change: The big drivers for the change, and then also, if there's a way to size the overall hardware revenue for us, so we sort of have a sense for how much that can drive a little to the dean grows. Thank you very much.

Greg Adelson: You know delaying some of these non reoccurring projects, mostly consulting work orders on some of the.

Kartik Mehta: We have the next question in the line of Kartik Mehta from Northwest Research. Please go ahead.

Dan Perlin: Chirifatsu, so the guide for the remaining of the year is really just given the prudence and having conservative macro assumptions as it relates to what's going on in the economy, as well as the trends we've seen in the third quarter. [inaudible]

<unk> has some of their post core as Greg mentioned and I just wanted to reiterate these are contractual commitments. They have already signed four so it's just more of a timing than a fundamental shift or a change in decision making patterns.

Gregory Adelson: Good morning. Greg, I know you've talked a little bit about the delays a lot, actually. I'm just wondering, has that been reflected at all in your conversations with financial institutions on their core decisions? Is it, are they kind of waiting at all to make those decisions? Or is that still business as usual? And it's only really impacting these smaller projects? Yeah, so Kartik, so it's 100% on the smaller, non-recurring, non-must-have type products, you know, or hardware purchases, which can be delayed another quarter for them or delayed because of their evaluation of moving to the private cloud.

Greg Adelson: And historically, we've seen anywhere between after 18 months of implementation, but it can be long as 36 months and so it really comes down to their readiness versus our resources and capability to help them, we have not seen any meaningful changes to our implementation schedule. So.

Dan Perlin: Particularly, the outlook for hardware is down. As Greg mentioned, we're seeing some customers delay big capital purchases, possibly due to economic uncertainty also as a contemplate moving to the cloud, which is a good thing for Jack Henry. In fact, FI is maybe not wanting to make those pretty extensive hardware decisions, may actually help push their decisions. [inaudible]

Speaker Change: I think it's more just out of an abundance of caution and to be to be thoughtful in terms of the payments impact where we just started to really see that more in April.

Dan Perlin: to the cloud, so I think in the long run that could be a great thing for Jack Henry as we're already at 76% of our clients in our private cloud environment.

Speaker Change: As we sit here today, we all know that that is the transaction volume is based on consumer spending and how they feel it also depends on what's top of their wallet, whether it's debit or credit. So again, just prudent in the current environment narrow that horizon aperture of our outlook.

Gregory Adelson: You know, that's really what it is. When you look at the core component, you know, when you think about a core deal that takes, you know, typically anywhere from 12 to 18 months to even go through the sales cycle on a normal time, because most people are looking multiple years out from when their contract actually expires. So those decisions have not slowed down at all. And again, I'm very bullish about, you know, our success rates for next quarter, based on what I've already seen and what I know is coming. So, you know, I don't see that as any part of the challenge.

Dan Perlin: The headwind on hardware is about 11 million for the year. I'll call out that 80% of that falls within the corporate segment with the remainder of that being in the in the core segment. Thank you, Joseph.

Dan Perlin: I think the other is what Gregory touched upon which is we're just seeing customers take a bit more of a cautious stance

Speaker Change: And it really marking down to what our original expectation was was more of a really robust fourth quarter. So in absolute or it's not that we're calling for it to drop off precipitously from the current trends its more just relative to our original expectation of being pretty robust one.

Gregory Adelson: It's really just these, if it wasn't the end of the third quarter, you know, we may not be talking about some of these as deep, but some of them are going to move to the, into the next fiscal year, and that's where the challenge.

Speaker Change: Last point vessel, who is that.

Speaker Change: When you think about historically in.

Speaker Change: In tough economic times folks tend to move to their credit versus their debit and so based on what we saw in April and Ironically, we've actually seen pretty good volumes in may thus far even though a short.

Gregory Adelson: And Greg, I know earlier in the call, you talked about the S&B product, and obviously you have this partnership with Moov. And I'm wondering how that's going. I think you anticipated hopefully it would generate some revenue going into the next fiscal year. And I'm wondering if you've seen any uptake on the product or any update there? Yeah, so our Jack Henry Rapid Transfers, we've rolled out, we have three clients in what we call a closed beta, but we are now taking active enrollments from all of our clients. So there's a process they have to go through for Jack Henry Rapid Transfers that goes through our operational.

Dan Perlin: It will be the longest 36 months since it really comes down to their readiness versus our resources and capability to help them. We have not seen any meaningful changes to our implementation schedule.

Speaker Change: Number of days, so far but the reality is based on historical data.

Speaker Change: Around here, we've seen the use of credit accelerate over the use of debit. During these times. So we're just as Mimi said, we're just being cautious with our approach and making sure that.

So I think it's more just out of... [inaudible]

Dan Perlin: in abundance of caution to be thoughtful in terms of the payments impact.

Speaker Change: We provide that level of guidance.

We just started to really see that in more in April .

Speaker Change: Great. That's very helpful color and then Greg one high level, one for you sort of any change in how you're thinking about your competitive positioning following the announcement from my side is to acquire the issuer business from global payments.

as we sit here today.

Dan Perlin: We all know that the transaction volume is based on consumer spending and how they feel. It also depends on what's top of their wallet, whether it's debit or credit or not.

Gregory Adelson: It's not a contractual thing they have to go, but there is an operational component. So that's starting to move. We're very excited. Got a lot of fanfare and comments at our Strategic Insights meeting last week in particular. Excuse me. And then on the merchant acquiring side, as I mentioned, the partnership with MOVE, we will have two clients and maybe more in a closed beta in June and moving. And then our expectation is to try to roll that out to everybody by the end of the first quarter of fiscal year 2026. So we're working through that process as well.

Speaker Change: Yeah.

Speaker Change: Yes, it's a great question. Thank you no I mean, I think look here's here's what I would say when when you look at the fact that they added.

Thank you. Bye-bye. Bye.

Dan Perlin: Again, just pridding in the current environment to narrow that horizon aperture of our outlook.

Speaker Change: Much better credit processing capabilities with that acquisition.

Speaker Change: Good for them, we already had created credit capabilities I think one thing that we have that because there's still a differentiator is that we process on a single platform for both debit and credit that's not the case.

Speaker Change: For what they have today.

Speaker Change: And so you know.

Speaker Change: Too early to see from a competitive standpoint.

Gregory Adelson: But again, the interest level from not only our clients, but some of our distribution partners that we compete with, there's a lot of interest there. And actually, we've been talking to some non-Jack Henry clients, some very large non-Jack Henry clients that are very interested in the product as well. So like I said, the interest level is there and we are on track, as we stated, to roll that out in our first phase in June of this year.

Speaker Change: We really specifically that particular competitor we didn't we didn't have a lot of challenges when it came to looking at their debit processing capabilities versus ours.

Dan Perlin: David Vs. Their Debit, and so we're based on what we saw in April , and ironically we've actually seen pretty good volumes in May thus far, even though a short number of days so far, but the reality is based on historical...

Speaker Change: We will have to wait and see but there is still working in the same environment as they always have as far as the type of customers, we're going after and the size of asset customers. So we will continue to compete as we always have at that market.

Dan Perlin: and around here, we've seen the use of credit accelerate over the use of David during these times. So we're just, as Mimi said, we're just being cautious with our approach and making sure that we provide that level of guidance.

Operator: Perfect. I really appreciate it. Thank you. Thanks, Kartik. Thank you.

Speaker Change: As I mentioned in my in my opening remarks, we're very bullish on our Q4 related to core opportunities and as you know most of those come with a lot of add on products. So I'll leave it at that.

Andrew Schmidt: We have the next visual line of Andrew Schmidt from Citi. Please go ahead. Hey, Greg, Mimi, Vance. Thank you for taking the questions. And I appreciate the comments on the total level of assets that you've won. It's an important distinction versus the number of FIs, so appreciate that. I know a lot of questions have been asked in the demand environment, and I'll ask in a slightly different way. I understand that these are long-term decisions, and, you know, obviously a lot of confidence in terms of near-term conversions. Have there been any changes in terms of the mid-to-upper funnel when we think about just how FIs are working through the decision-making process?

Speaker Change: Great, that's very helpful color. And then Greg, one high level one for you, sort of any change in how you are thinking about your competitive positioning, following the announcement from FIS to acquire the issuer business from Global Payments. Thank you.

Speaker Change: Thank you for that color.

Speaker Change: Thank you.

Greg: Yeah, it's a great question. Thank you. No, I mean I think look here's here's what I would say when you know when you look at the fact that they added much better credit processing capabilities with that acquisition, you know that you know good for them. We already had created credit capabilities. I think one thing that we have that

Speaker Change: The next question from the line of Jason <unk> from Bank of America. Please go ahead.

Speaker Change: Good morning, guys. So it sounds like as we start thinking ahead to fiscal 'twenty six there might be a couple of moving parts, we need to consider on the revenue line you've got the effect of the deconversion revenues that you highlighted as a potential headwind, but now we've got some delays in post core add ons being pushed into fiscal 'twenty, six which sounds.

Speaker Change: Is it still a differentiator? Is that we process on a single platform for both David and credit? That's not the case.

Gregory Adelson: Just curious when we get – I know it's a little bit early, but just curious in terms of the earlier part of the funnel, if you're seeing anything there.

Speaker Change: It could be a tailwind so I'm just wondering how you think those two dynamics might net out and what the implications could be.

Gregory Adelson: Thanks so much. Yeah, it's a great question, and thank you for calling out the addition of the asset size. We thought it was important to share that what we're talking about is actually happening. But related to your question, I have not – I mean, I talk to the sales folks and our sales leaders literally every week, and there hasn't been anything that has come to my attention from them that has said that anything in the lower half, the middle half, or the ending half of making decisions has slowed down. Because, again, a lot of those decisions do not necessarily take place for an installation for 6, 9, 12, or 24 months, depending on core or what it is.

Speaker Change: We really, specifically that particular competitor, we didn't have a lot of challenges when it came to looking at their debit processing capabilities versus ours, so we'll have to wait and see, but...

Speaker Change: For revenue growth next year, just in the context of the medium term outlook of 7% to 8%.

Speaker Change: Is there any risk there. Thank you.

Speaker Change: So Jason I'd love to share with you know the full FY 'twenty six picture, we're just too early in the process.

Speaker Change: You know, they're still working in the same environment as they always have as far as, you know, the type of customers they're going after and the size of asset customers. So we'll continue to compete as we always have at that market. You know, as I mentioned in my opening remarks.

Speaker Change: I Didnt season is deeply underway here at Jack Henry but it's not finalized yet for another several months.

Speaker Change: And so in this dynamic environment, we just cant commit on next year this far in advance.

Speaker Change: We're very bullish on our Q4 related to core opportunities and as you know most of those come with a lot of add-on products so I'll leave it at that

Speaker Change: I will say to some of your comments in terms of the tailwind and headwind.

Speaker Change: Our sales pipeline continues to be robust, we're seeing no elongation of the sales cycle I'm, Greg mentioned, the numerous account wins, including large F. EIS.

Gregory Adelson: So we have not seen any real elongation of the sales cycle at all. It's just been these short-term projects, as I mentioned before. Yeah, the interesting thing is, and Mimi and I have commented on this before, so these are contractual arrangements that they have, and we do have some clocks that tick to a certain point in time where, you know, we can literally start billing the customer at a certain point in time if the delay goes longer than it's expected. And so they haven't reached those thresholds and won't in the quarter. But the reality is, because they're contracted, and because there's an approach that we've taken with these, you know, we literally could start billing our customers even if they didn't implement, and that's something that we can do.

Thank you for the color [inaudible]

Speaker Change: Thank you. We have the next Christmas line of Jason Kupferberg from Bank of America, please go ahead.

Speaker Change: They are still making plenty of decision and commitment.

Speaker Change: <unk> seen no change.

Jason Kuhlberg: Good morning guys, so it sounds like as we start thinking ahead to fiscal 26 there might be a couple of moving parts we need to consider on the revenue line you've got the

Speaker Change: Change in trends from that perspective.

Greg Adelson: In terms of any of the deals that are being crushed from an implementation perspective as Greg mentioned, there's always some smoothing of the calendar within the year I'm not sure that that will really create a.

Jason Kuhlberg: Effect of the Deconversion, Revenue that you highlighted as a potential headwind, but now we've got some delays and post-core add-ons being pushed into fiscal 26, which sounds like could be a tailwind. So I'm just wondering how you think those two dynamics might net out and what the implications could be. I'm just wondering, what the consequences could be, what the consequences could be, what the consequences could be.

Greg Adelson: A tailwind we always manage the implementation.

Greg Adelson: You know pretty tightly so we'll see if there's enough demand for another implementation team will certainly add that if theres there.

Jason Kuhlberg: for Revenue Growth Next Year. Just in the context of the medium-term outlook of seven to eight percent, you know, is there any risk there? Thank you.

Greg Adelson: But I wouldn't say that that's a layering effect to the normal Wow.

Greg Adelson: It's just it is a continuously evolving calendar.

Greg Adelson: In terms of just the guide again too early to say for sure, but I would say as a preview.

Jason Kuhlberg: So, Jason, I'd love to share with you the full FY26 picture. We're just too early in the process. Budget and season is deeply underway here at Jack Henry, but it's not finalized yet for another several months . . . .

Greg Adelson: The width of the revenue guide will likely expand on that.

Greg Adelson: And we will talk more about that in August.

Jason Kuhlberg: And so in this dynamic and environment, we just can't commit on next year this far in the van.

Speaker Change: Okay. That's definitely helpful for now so I wanted to come back to the key revenue the cloud plus processing like you said, it's now 76% of total and you did actually see acceleration in the growth of almost 10% versus nine each of the past two quarters.

Jason Kuhlberg: I will say to some of your comments in terms of the tailwinds and headwinds

Gregory Adelson: So I don't foresee any of these being things that get delayed or they try to cancel or things like that, because it's things that they need. As I mentioned, the one that seems to happen a little bit more is that a customer that has our Yellowhammer product that wants to move to financial crimes that needs some consulting and other things that go with part of the implementation, we've seen some delays in those. And so we've worked with our clients. There are already clients of ours using some of our products, but that's where some of that delay has happened.

Jason Kuhlberg: Our sales pipeline continues to be robust. We're seeing no elongation of the sales cycle. Greg mentioned the numerous account wins, including large FIs.

Speaker Change: Are we going to say are we expecting to sustain call at that 10% level.

Speaker Change: Q4, and is there any reason to believe that something in that kind of general neighborhood couldn't sustain into into next year.

that are still making plenty of decisions and commitments. [inaudible]

So, seeing those off, you know, change in friends from that perspective. Thank you, David.

Speaker Change: I think it I think you're on the right course in terms of ballpark, you're talking about I feel pretty comfortable there.

Jason Kuhlberg: In terms of any of the deals that are being pushed from an implementation perspective, as Greg mentioned, there's all these things

Speaker Change: As a long term strategic you know growth of the business you had things like digital.

Jason Kuhlberg: The moving of the calendar within the year, I'm not sure that that will really create...

Jason Kuhlberg: a tailwind. We always manage the implementation pretty tightly. So we'll see if there's enough demand for another implementation team. We'll certainly add that if there's there. But I wouldn't say that that's a layering effect.

Gregory Adelson: A little bit in some of our pay center products and payment initiatives as well and trying to get folks to use, say, the come on with our SEND capabilities or, you know, most of them have received but moving to SEND capabilities, things like that. But, again, nothing that's wholesale of a challenge. It's not core implementations and things along that line.

Speaker Change: You have things like the new products are the cloud the continued cloud migration. So all of those have been long sustainable trends for the business.

Speaker Change: And we fully expect that to continue what has hurt us is the headwinds from the 90 business that has compressed at about 2%. So that that's been more of a challenge, but as we add more and more as a percentage of that portfolio.

Giving Normal Well, it's just...

Jason Kuhlberg: It's a continuous Lee evolving calendar. It turns out just the guy...

Mimi Carsley: Morning, Andrew, Mimi. The only thing other than I would add from just a macro sense, as we always talk about, you know, regardless of interest rate environment, regardless of economic condition, the challenges facing a financial institution today are going to be solved through technology. It's not going to be solved through adding more bodies. So, you know, whether technology is the only part of the solution, or the bulk of the solution, we feel pretty confident in the continuation of the demand. And the reality is, if you have an ROI, that's compelling, and we just thought in our strategic benchmark survey that efficiency is, you know, one of the top priorities.

Jason Kuhlberg: Again, too early to say for sure, but I would say as a preview. Thank you.

Speaker Change: In that key revenue and we hopefully will continue to thrive.

Jason Kuhlberg: The width of the revenue guide will likely expand on that and we'll talk more about that in August .

Speaker Change: Thanks Mimi.

Jason Kuhlberg: Okay, now that's definitely helpful for now. So I wanted to come back to the key revenue, the cloud plus processing, like you said it's not 76% of total and you did actually see acceleration in the growth almost 10% versus 9 each of the past two quarters.

Speaker Change: Thank you.

Speaker Change: We have the next question from the line of Darrin Peller from Wolfe Research. Please go ahead.

Speaker Change: Guys. Thank you.

Speaker Change: You mentioned, obviously the step up in consolidation you're seeing in your end markets.

Speaker Change: So again I mean, I know I think we just thought it was just brought up a little bit on the prior question around what it could mean for the future but.

Jason Kuhlberg: Are we expecting to sustain, call it that 10% level in Q4 and is there any reason to believe that something in that kind of general neighborhood couldn't sustain into next year?

Speaker Change: At the end of the day, there is positives or negatives. Obviously, you have integration revenue, if your customers or the acquirer or part of the merger.

Speaker Change: And then there's obviously the risk is so just number one is this an environment that you'd say is big enough of a change in consolidation levels that you would anticipate it actually impacting growth in the next 12 to 18 months or are we just a little higher than normal and still watching to see.

Jason Kuhlberg: I think you're on the right course in terms of the ballpark you're talking about. I feel pretty comfortable. Those are the long-term strategic growth as a business.

Operator: So, if you show the ROI, they will spend. Absolutely. Great comments. I appreciate the help, Greg and Mimi. Thanks so much. Of course. Thank you.

Jason Kuhlberg: You have things like digital, you have things like the new product, the cloud, the continued cloud migration, so all of those have been long sustainable trends for the business and we fully expect that to continue. What it's heard us is the headwind from the non-key business.

Speaker Change: Just remind us the positives versus negatives, obviously, besides just losing a customer what could be the positive offsets in higher M&A environment for you guys.

Andrew Bauch: We have the next question in the line of Andrew Bauch from Wells Fargo. Please go ahead. Hey, thank you for squeezing me in here. Just wanted to, you know, revisit, you know, how this business operates through recycle. I know, appreciate the defensiveness and the recurring nature of all of it. But if we were to go into a more pronounced recession, how do we will be in how we kind of handicap the impact there? Is it just the trends that you would see today would be more pronounced? Would there be changes to kind of the core pricing strategy?

Speaker Change: Yeah, Hey, Darrin I'll take that it's Greg So a couple of things so as I mentioned it starts with the size of the institution. So as you know we've continued to grow last year. We sold 15 multibillion we sold eight so far this year much larger ones as I as I referenced from a from an asset size.

Jason Kuhlberg: that has compressed at about 2%. So that's been more of the challenge, but as we have more and more as a percentage of the portfolio in that key revenue, and we will continue to thrive.

Speaker Change: On the $30 billion on the 28 sold so far this year, meaning you know on average we're selling over $1 billion in assets per deal sold so again thats historically hasnt been.

Speaker Change: Thank you. We are the next official line of Darrin Peller from Wolf Research, please go ahead.

Gregory Adelson: Just trying to understand the recessionary scenario.

Speaker Change: The case and so as we continue to be able to go up market and have larger size institutions. They tend to be the acquirers as you can imagine over the 40 years of of.

Mimi Carsley: Andrew, I appreciate, you know, in this certainly a dynamic environment, you know, it's a really meaningful question. First of all, I would say, and no one asked the question specifically, but I would say, you know, relative to tariff exposure, we're certainly lucky to have very limited exposure to shifts in policy. As a company, we're monitoring our vendor pricing and resource availability as well as costs, for example, prescription costs for our associates. We do have very limited exposure on the direct, I think where more of the exposure is in general to our industry is on the commercial side of the business.

Speaker Change: Guys, thank you. You mentioned obviously to step up in consolidation you're seeing in your own markets.

Speaker Change: Of.

Speaker Change: Kind of the market shrinking most of that has happened at the $500 million and below asset size. So the larger we have the more opportunity. So to answer the second part of your question, yes. So it happens to be kind of both so if it's a Jack Henry client buying a Jack Henry client.

Speaker Change: So again, I mean, I know, I think it was just brought up a little bit in the prior question around what it could mean for the future but...

Speaker Change: At the end of the day, there's positives and negatives. Obviously you have integration, revenue if your customers are the acquire or part of the merger.

You know there are some things that we can work through related to the deconversion fees <unk>.

Speaker Change: Kind of convert merge fees that ended up being positive for us when.

Speaker Change: Just remind us the positives versus negatives, obviously, besides just losing a customer what could be the positive offsets in higher M&A environment for you guys.

Speaker Change: When you look at a competitor buying one of our clients. Obviously, we tend to get the full conversion fee deconversion fee and and push and it really depends on how much time is left on that contract at the time that that person purchase happens, but what we typically see when it's Jack Henry to Jack Henry is no.

Gregory Adelson: We're all watching the health of businesses in the U.S. So, you know, through things like our remit business and our EPS, our enterprise payments businesses that serve those commercial customers, as well as indirect through lending, you know, things like Bano Business and Treasury. But the reality is this is not a global financial crisis. The banks are well capitalized, have really learned their lesson in terms of mortgage origination and credit extension. You know, they're working their way through various interest rate cycles, but we're not anticipating any mass closures of financial institutions. And, you know, as we said earlier, they need to continue to serve their account holders and members.

Speaker Change: Yeah, Hey, Darrin I'll take that it's Greg So a couple of things so as I mentioned it starts with the size of the institution. So as you know we've continued to grow last year. We sold 15 multibillion we sold eight so far this year much larger ones as I as I referenced from a from an asset size are on on.

Speaker Change: Not only do they do do we retain the client, but they tend to buy additional products, depending on what one of the which which.

Speaker Change: The $30 billion on the 28 sold so far this year, meaning you know on average where were selling over $1 billion in assets per deal sold so again that historically hasn't been a.

Speaker Change: Institution had which products and we actually saw that this year with a large merger of.

Speaker Change: $4 billion, plus institutions, where one of them had our digital platform and one of them didn't and we were able to get them to move to ban over both so it is a hit and miss depending on which institutions what products. They have the timing of the how much time is left on the term of the agreement and things along that line.

Speaker Change: The case and so as we continue to be able to go up market and have larger size institutions. They tend to be the acquirers as you can imagine over the 40 years of of of you know kind of the market shrinking most of that has happened at the $500 million and below asset size. So.

Gregory Adelson: They need to continue to drive efficiency. Fraud is top of mind for these institutions, digital experience as well. So a lot of them, because of the nature of the competitive market with the largest financial institutions in the country, they need to continue to innovate regardless of the economic cycle to retain their account holders and make sure that they get on the other side of the economic situation healthier and stronger.

Speaker Change: And I also add that well in general over the multiyear period it tends to be a positive for Jack Henry.

Speaker Change: The larger we have the more opportunity so to answer the second part of your question. Yeah. So it happens to be you know kind of both so if it's a Jack Henry client buying a Jack Henry client you know there are some things that we can work through related to the deconversion fees and door count.

Speaker Change: As Greg mentioned more of our clients are the acquirer than the acquired.

Speaker Change: You know that it can produce some lumpiness, particularly as we moved up market.

Speaker Change: Convert merge fees and end up being positives for US you know when you look at a competitor buying one of our clients. Obviously, we tend to get the full conversion fee deconversion fee in and and pushing it really depends on how much time is left on that contract at the time that that person purchase happens.

Speaker Change: Deconversion revenue is a great thing for free cash flow and EPS. It does represent a loss of future revenue and so if for some reason in this environment. We were too is you know any bulk of larger clients, we would call that out from a headwind grow over problem.

Operator: Understood.

Operator: And then if I could just my follow up question, just wanted to put a finer point on the consolidation activity you've been seeing. Could you give us a sense on the, a little bit more around what you're seeing? Is it from a bank size, be it AUM? Is it across banks versus credit unions? Just additional, a little bit more targeted on where you're seeing that activity pick up? Yeah, so the activity really is spread. So you probably have seen and it continues to happen. I mean, there are credit unions continuing to buy banks. In fact, we had a credit union of a competitor buy one of our banks recently.

Speaker Change: But you know what we typically see when it's Jack Henry that Jack Henry is not only do they do do we retain the client, but they tend to buy additional products, depending on what one of the which which are institution had which products and we actually saw that this year with a large merger of Oh.

Speaker Change: Yeah. So I mean, where we are now or what youre seeing is it gonna do you see it more as a headwind or a tailwind over the next.

Speaker Change: One to two years, but and then really the follow up for me is more around you guys called out the things Youre seeing around the project related non key revenue items and then maybe some cyclical impacts on spend on debit for example, but.

Speaker Change: $4 billion, plus institutions, where one of them had our digital platform and one of them didn't and we were able to get them to move to ban over both so it is a hit and miss depending on which institutions what products. They have the timing of the how much time is left on the term of the agreement and things along that line.

Speaker Change: What's the demand environment like for the core business. The key areas that you just rank order of what Youre seeing the most demand for right now.

Speaker Change: And how that's looking from the prior couple it sounds pretty good for the sales pipeline standpoint, but about more color. Thanks guys.

Gregory Adelson: And that has continued to happen. We'll see if that, you know, continues to happen long term, based on some of the things that they're trying to do in the market related to credit unions. But what I would say, you know, I think we have been really well positioned, as I mentioned earlier, just because we've continued to grow the asset side. So we're seeing, you know, we've won things that we call win emergers, where we've actually had an institution acquired by a competitor's institution, but because of the technology and innovation and products that we've delivered, they've made the decision to actually switch to Jack Henry versus maintaining their existing core and or complementary products.

Speaker Change: Yeah. Thanks, So I think from a sales pipeline as we tried to articulate was very very robust continues to be very robust. So not just for core itself, but the products that we have created that level of innovation related to financial crimes into pay center components to what I just described as enterprise.

Speaker Change: And I'll just add that.

Speaker Change: Well in general over the multiyear period, it tends to be a positive for Jack Henry.

Speaker Change: As Greg mentioned more of our clients are the acquirer than the acquired.

Speaker Change: Account origination a lot of those key revenue products that continue to grow at a nice pace at that nine eight that we referenced.

Greg: You know that it can produce some lumpiness, particularly as we moved up market Wells Deconversion revenue is a great thing for free cash flow and EPS. It does represent a loss of future revenue and so if for some reason in this environment. We were too is you know any bulk of larger clients we would call.

Speaker Change: Our hugely.

Speaker Change: Continue to be in demand.

Speaker Change: I think when you look at at where the challenge was related to what we were trying to describe in the non key revenue.

Gregory Adelson: And again, we don't win them all, but but we've won more than our fair share. And that continues to be the trend. And I expect that because when you look at what's going on in the industry today, and I recognize that that, you know, our competition is, is working their way back into focusing on this space, where they weren't for many years, we've never lost our focus. And so our focus on this space over the last six or seven years has been unmatched. And when you look at what, you know, what folks, including what was in the ABA core survey, which I highly recommend all of you to go look at, it was significant differences between us and our competition, and how our customers view us versus how their customers view them.

Speaker Change: That out from a headwind a grow over problem.

Speaker Change: Again, it's really that one off stuff the things that we don't control for timing and things that are typically done on a more as a as a as needed basis than a must have basis.

Greg: Yeah. So I mean, where we are now or what youre seeing is it gonna do you see it more as a headwind or a tailwind for the next.

Greg: One to two years and then really the follow up for me is more around you guys called out the things you're seeing around the project related non key revenue items and then maybe some cyclical impacts on spend on debit for example, but.

Speaker Change: And that's really where a lot of that delay happen.

Speaker Change: I would point to the strategic benchmark survey that Greg mentioned in his opening remarks, that's up on the Jack Henry our Investor website and available they talked about the three.

Greg: What's the demand environment like for the core business. The key areas that you just rank order of what you're seeing the most demand for right now and.

Speaker Change: Top priorities for both banks and credit Union Ceos.

Greg: And how that's looking from the prior couple it sounds pretty good for the sales pipeline standpoint, but I bought more color. Thanks guys.

Speaker Change: Continuing to be around gathering deposits accounts efficiency.

Speaker Change: But the longer term trends that we've talked about over several quarters now around digital around fraud and around payments tend to be dramatically the largest demand.

Greg: Yeah. Thanks, So I think from a sales pipeline as we you know we tried to articulate was very very robust continues to be very robust. So not just for core itself, but the breadth of products that we have created that level of innovation related to financial crimes into pay center components to what I just described as enterprise.

Gregory Adelson: And so as those, those kind of mentions continue to get out, it continues to help our, our sales pipeline, our execution, and things along that line.

Speaker Change: We're seeing.

Speaker Change: Okay.

Speaker Change: Okay, Alright, thanks, guys.

Gregory Adelson: That's why all of these things that we've tried to articulate that are happening today, we truly believe are short term things. And we got to work through the macroeconomic stuff that we can't control.

Speaker Change: Okay.

Greg: Account origination a lot of those key revenue products that continue to grow at a nice pace at that nine point H that we referenced.

Speaker Change: Thank you.

Speaker Change: We have the next question is line of Kartik Mehta from Northcoast Research. Please go ahead.

Hey, good morning, Greg.

Gregory Adelson: But the other things that we have, we believe are short Great, Greg, Mimi, thank you. Thank you.

Greg: You know are hugely continue.

I know you've talked a little bit about the delays a lot actually I'm just wondering has that been.

Greg: We continue to be in demand.

Greg: I think when you look at at.

Greg: Where the challenge was related to what we were trying to describe in the non key revenue.

Speaker Change: Been reflected at all in your conversations with financial institutions on their core does your decision is it are they kind of waiting at all to make those decisions.

James Faucette: We have the next question in the line of James Faucette from Morgan Sternly. Please go ahead. Great. Thank you very much. And apologies for the background noise. Just wanted to follow up on that comment there, Greg, around competition and competitive intensity. Just wondering how that's, if you've seen that manifest at all in terms of like your engagements or win rates or even pricing intensity thus far, and how you're expecting that to evolve, especially as there does seem to be some increased focus from historical competitors.

Greg: Again, it's really that one off stuff the things that we don't control for timing and things that are typically done on a more as a as a as needed basis than a must have basis.

Speaker Change: Or is that still business as usual and it's only really impacting these smaller projects.

Greg: And that's really where a lot of that does happen I would point to are the strategic benchmark survey that Greg mentioned in his opening remarks, that's up on the Jack Henry our Investor website and available they talked about the three.

Speaker Change: Yeah. So kartik. So it's 100% on these smaller nonrecurring non must have type products or or hardware purchases, which can be delayed another quarter for them.

Speaker Change: Or delayed because of the revaluation of moving to the private cloud.

Greg: Top priorities for both banks and credit Union Ceos.

Greg: <unk> to be around gathering deposits accounts efficiency, but then the longer term trends that we've talked about over several quarters now around digital around fraud and around payments tend to be genetically the largest demand that.

Speaker Change: That's really what it is when you look at the at the core component. When you think about our core deal. It takes typically anywhere from 12 to 18 months to even go through the sales cycle on a on a normal time because most people are looking multiple years out from when their contract I've actually expires. So those decisions have not.

Gregory Adelson: Yeah, hey, James, good to hear from you. I think a couple things, you know, we've continued to see, you know, the pricing sensitivity, as we've mentioned, in other calls and really even other years, you know, that hasn't significantly changed. Again, our win rates continue to be by far the best in the industry. As I mentioned, we're winning larger deals, which means, you know, we're winning those from them. So that continues to be, I think, a good benchmark for your question. And, you know, but I will say that, you know, they get aggressive and many times trying to keep their customers.

Greg: That we're seeing.

Greg: Okay.

Greg: Okay, Alright, thanks, guys.

Speaker Change: Slowed down at all.

Speaker Change: And again I am very bullish about our success rates for next quarter based on what I've already seen and what I, what I know is coming.

Greg: Yeah.

Speaker Change: Thank you we have the next question is line of Kartik Mehta from Northcoast Research. Please go ahead.

Kartik Mehta: Hey, good morning, Greg.

Speaker Change: So I don't see that as any part of the challenge. It's really this just these if it wasn't the end of the third quarter, we may not be talking about some of these is deep but some of them are going to move to the into the next fiscal year and that's where the challenge comes.

Kartik Mehta: I know you've talked a little bit about the delays a lot actually I'm just wondering has that been.

Gregory Adelson: And so there's times where we may walk away from a particular deal if that gets to be too rich for our blood. But I will tell you that I don't see, I haven't seen anything strategically change in the market for what they're doing. Obviously, you know, one of them has a brand new CEO that was just formally announced. The other one has made some strategic decisions to rid themselves of one of their businesses and have talked that they're going to get more focused on our space. So time will tell. But I can tell you as of right now and where we are in our pipeline and where we've been with customer feedback and prospect feedback, because I do go to a lot of our large prospect opportunities, I haven't seen any level of concern on our part as of today.

Kartik Mehta: Been reflected at all in your conversations with financial institutions on their core dishes decision is it are they kind of waiting at all to make those decisions.

Dan Perlin: And Greg I know earlier in the call you talked about the SMB product and obviously you have this partnership with move and I'm wondering how that's going I think you anticipated hopefully you would generate some revenue going into next fiscal year and I'm wondering if you've seen any uptake on the product or any update there.

Kartik Mehta: Or is that still business as usual and it's only really impacting these smaller projects.

Kartik Mehta: Yeah. So kartik. So it's 100% on these smaller nonrecurring non must have type products, you know or or hardware purchases, which can be delayed another quarter for them or delayed because of the revaluation of moving through the private cloud you know.

Dan Perlin: Yeah. So so Jack Henry rapid transfers, we've rolled out we have three clients in our what we call a closed beta but we are now taking active enrollments from all of our clients. So theres a process. They have to go through for Jack any rapid transfers that goes through our operational.

Kartik Mehta: That's really what it is when you look at the at the core component. When you think about our core deal that takes you know typically anywhere from 12 to 18 months to even go through the sales cycle on a on a normal time because most people are looking multiple years out from when their contract back actually expires. So those decisions have not slowed down.

Dan Perlin: A contractual thing they have to go but there is an operational component. So thats starting to move we're very excited got a lot of fanfare and comments at our strategic insights meeting last week last week in particular.

Operator: That's great color.

Gregory Adelson: And then I guess associated with that, I just want to ask back on Bano, you know, how has traction trended with Bano business? I know it's early, but can you update us on the go to market, particularly given some of the implications of on the competitive front, and how you're thinking about that as a product enhancement to the portfolio? Yes, again, another good question and one that we're highly focused on. So we do have over 270 clients now live on Bano Business, and a little over 1000 on the platform itself. So that continues to roll out.

Kartik Mehta: At all and and again I am very bullish about you know our our success rates for for next quarter based on what I've already seen and what I, what I know is coming.

Excuse me and then on the merchant acquiring side.

Dan Perlin: As I mentioned the partnership with move we will have two clients and maybe more in a closed beta in June.

Kartik Mehta: So I don't see that as any part of the challenge. It's really just just these if it wasn't the end of the third quarter. You know we may not be talking about some of these is deep but some of them are going to move to the into the next fiscal year and that's where the challenge comes.

Dan Perlin: And moving and then our expectation is to try to roll that out to everybody by the end of the first quarter of fiscal year 2026.

Dan Perlin: So we're working through that process as well, but but again the interest level from not only our clients, but some of our.

Speaker Change: And Greg I know earlier in the call you talked about that it can be product and obviously you have this partnership with move and I'm wondering how that's going I think you anticipated hopefully you would generate some revenue going into next fiscal year and I'm wondering if you've seen any uptake on the product or any update there.

<unk> partners that we compete with.

Gregory Adelson: We're really pushing to that feature parity that I've been talking about since the last Investor Day in September. We expect to see that this summer, as I mentioned, as well. And I think that will be a real turning point for us to not only be able to continue to win more in our own core base, but to take it outside the Jack Henry core base. And we've been, as I mentioned, very strategic in our approach, but also on the timing. We don't want to go out and try to sell something to a competitive core base until we're ready.

Dan Perlin: There is a lot of interest there and actually we've been talking to some non Jack Henry clients. Some very large non Jack Henry clients that are very interested in the product as well so.

Dan Perlin: You said the interest level is there and we are on track as we stated to roll that out in our first phase in June of this year.

Speaker Change: Yeah. So so Jack Henry rapid transfers, we've rolled out we have three clients in our in our what we call a closed beta but we are now taking active enrollments from all of our clients. So theres a process. They have to go through for Jack any rapid transfers that goes through our operational it's not.

Dan Perlin: Perfect.

Dan Perlin: I appreciate it thank you.

Dan Perlin: Thanks Carter.

Dan Perlin: Thank you.

Speaker Change: The next question the line of Andrew Schmidt from Citi. Please go ahead.

Speaker Change: A contractual thing they have to go but there is the operational components. So that's starting to move we're very excited got a lot of fanfare and comments that are a strategic insides meeting last week last week in particular.

Andrew Schmidt: Hey, Greg many Vince Thank you for taking the questions and I appreciate the comments on the total level of assets that you wanted this important distinction versus number of <unk>. So appreciate that.

Gregory Adelson: And that'll happen later this fall. So long story short is very much a big part of what we're doing. And candidly, it will play a big part in what we're doing in our SMB strategy as well.

Speaker Change: I know a lot of questions have been asked in the demand environment and I'll ask in a slightly different way I understand it. These are long term decisions.

Speaker Change: Excuse me and then on the merchant acquiring side as I mentioned the partnership with move we will have two clients and maybe more in a closed beta in June and moving and then our expectation is to try to roll that out to everybody by the end of the first quarter of fiscal year 2026.

Operator: Thanks a lot, Greg. Sure. Thank you.

Speaker Change: Obviously, a lot of confidence in terms of near term conversions.

John Davis: We have the next question from the line of John Davis from Raymond James, please go ahead. Hey, good morning, guys. Greg, I just want to circle back on core wins, and I'll echo Andrew's comments that the asset size is helpful. You've historically given us kind of number of wins. Now you're giving us assets. But I guess the real question, maybe you can help us directionally think about ACV, right? So if assets year-to-date are up almost 50 percent, I'm sure ACV is not up 50 percent. But how do we think about number versus assets and, like, what really matters is kind of dollars of revenue contracted?

Speaker Change: There been any changes in terms of the mid to upper funnel when we think about just.

Speaker Change: Just how <unk> are working through the decision making process just curious when we get.

Speaker Change: So we're working.

Speaker Change: Going through that process as well, but but again the interest level from not only our clients, but some of our distribution partners that we compete with them. There's a lot of interest there and actually we've been talking to some non Jack Henry clients are some very large non Jack Henry to clients that are very.

Speaker Change: A little bit early but just curious in terms of the earlier part of the funnel if youre seeing anything there. Thanks so much.

Speaker Change: Yeah, It's a great question and thank you for calling out. The addition of the asset size. We thought it was important to share that what we're talking about is actually happening.

Speaker Change: And the product as well so like I said the interest level is there and we are on track as we stated to roll that out in our first phase in June of this year.

Speaker Change: But related to your question I have not I mean, I talked to the sales folks on our sales leaders literally every week and there hasnt been anything that has come to my attention from them that has said that anything in the lower half the middle half of the or the ending half of making decisions has slowed down.

Gregory Adelson: And so maybe just help us directionally kind of correlate the asset size to kind of an ACV. Yeah, I mean, J.D., it's a good question. I think it's very difficult to, every core deal is its own core deal, right? So some of it is timing on what other products they have. Some of it is folks have best of breed approaches. Some have best of suite approaches. So, you know, but every single deal literally has its own nuances to that. And so I think it's really hard for us to button that up and just say, hey, you know, if we want a $100 billion deal, and we want a billion dollar deal, doesn't necessarily mean that the $100 billion deal long term is going to bring, you know, 100 times the revenue, right?

Speaker Change: Perfect I really appreciate it thank you.

Speaker Change: Thanks Carter.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: The next question a line of Andrew Schmidt from Citi. Please go ahead.

Speaker Change: Because well again a lot of those decisions.

Speaker Change: Do not necessarily take place for.

Speaker Change: Hey, Greg Mimi Vance. Thank you for taking the questions and I appreciate the comments on the total level of assets that you've wanted this important distinction versus number of FY <unk>. So appreciate that.

Speaker Change: And installation for six 912, or 24 months, depending on core or what it is so we have not seen any real <unk> of the sales cycle at all it's just been these short term projects as I mentioned before.

Speaker Change: I know a lot of questions have been asked on the demand environment and I'll ask in a slightly different way I understand it. These are long term decisions.

Speaker Change: Got it Super helpful and then.

Speaker Change: We think about just the the headwinds that youre seeing obviously a lot of this.

Speaker Change: And you obviously a lot of confidence in terms of near term conversions have there been any changes in terms of what.

You mentioned is timing, but we have seen in previous cycles that discretionary product projects get pulled back and sometimes they don't materialize for some time. So is there an element I E. How large is that discretionary component versus non discretionary component when we think about.

Speaker Change: So he did mid to upper funnel when we think about just.

Speaker Change: Just how F. EIS are working through the decision making process just curious when we get there you know it's a little bit early but just curious in terms of the earlier part of the funnel if youre seeing anything there. Thanks so much.

Gregory Adelson: Right, but I guess it's safe to say that asset is more important than number. Is that a fair assessment? Well, it also ranges based on retail and commercial-based customers. So sometimes a larger asset institution is more commercially focused and has less accounts. So depending on the type of bank or credit union it is and whether it's more retail-focused or commercial-focused. So that's why I'm saying there's such an ebb and flow related to asset pricing, per account pricing, number of attach rates on the products that it brings, and all those. So it just isn't that easy to just give you a complete single answer to that.

Speaker Change: The headwind headwinds that we're seeing here.

Speaker Change: Yeah, that's a great question and thank you for calling out. The addition of the asset size. We thought it was important to share that what we're talking about is actually happening but related to your question I have not I mean, I talked to the sales folks on our sales leaders literally every week and there hasnt been anything that has come to my attention.

Speaker Change: Yeah. The interesting thing is and maybe you commented on this before so these are contractual arrangements that they have.

Speaker Change: And we do have some clocks that tick to a certain point in time, where.

Speaker Change: We can literally start billing the customer at a certain point in time.

Speaker Change: <unk> from them that has said that anything in the lower half the middle half of the or the ending half of making decisions has slowed down.

Speaker Change: If the delay goes longer than it's expected and so they haven't reached those thresholds and won't in the quarter, but the reality is because they're contracted and because there is.

Speaker Change: Because again a lot of those decisions.

Speaker Change: An approach that we've taken with these.

Speaker Change: We do not necessarily take place for.

Speaker Change: We literally could start billing our customers, even if they didn't implement.

Speaker Change: And installation for six 912, or 24 months, depending on core or what it is so we have not seen any real <unk> of the sales cycle at all it's just been these short term projects as I mentioned before.

Speaker Change: And that's something that we can do so I don't foresee any of these being things that get delayed or they try to cancel or things like that because of the things that they need.

Speaker Change: Got it Super helpful. And then we think about just the the headwinds that you're seeing obviously a lot of this you mentioned is timing, but we have seen in previous cycles that discretionary product projects get pulled back and sometimes they don't materialize for some time. So is there an element I E. How large.

Speaker Change: As I mentioned the one the one that seems to happen a little bit more is that a customer that has our yellow hammer product that wants to move to financial crimes that need some consulting and other things that go with part of the implementation we have seen some delays in those and so we've worked with our clients. They are already clients of ours using some of our products but.

Mimi Carsley: So I would say generally, JD is a non-core, rather non-key, non-strategic revenue tends to be lower margin MIPS. It has things like hardware, it has things like some of the consulting that is less software oriented and tends to be lower margin on the whole. Okay, thanks.

Speaker Change: Is that discretionary component versus non discretionary component when we think about just the headwind headwinds that we're seeing here.

Speaker Change: That's where some of that delay has happened a little bit in some of our pacesetter products and payment initiatives as well and trying to get folks to use.

Speaker Change: Yeah. The interesting thing is in Mimi and I've commented on this before so these are contractual arrangements that they have and we do have some clocks that chip to a certain point in time, where.

Speaker Change: They come on with our our send capabilities or or most of them have received but moving to send capabilities things like that.

Speaker Change: But again nothing nothing thats wholesale of a challenge, it's not core implementations and things along that line.

Speaker Change: We can literally start billing the customer at a certain point in time.

John Davis: I'm going to squeeze one last quick one in, if I can. Mimi, free cash flow, you know, I think the midpoint of your guide would imply free cash flow below 100% in the fiscal fourth quarter. At least in my model going back, it's never been below, I think, like 120. So just curious if there's anything specific around free cash flow that you see coming in the fourth quarter that we should be aware of, or any other comments there would be helpful. Well, it wouldn't have been an earnings call if we didn't have a free cash flow.

Andrew Schmidt: Good morning, Andrew.

Speaker Change: If the delay goes longer than it's expected and so they haven't reached those thresholds and won't in the quarter, but the reality is because they're contracted and because there's.

Andrew Schmidt: Other than I would add.

Andrew Schmidt: From just a macro event as we always talk about.

Andrew Schmidt: Regardless of the interest rate environment, regardless of economic conditions, the challenges facing our financial institutions today are going to be solved through technology is not going to be solved through adding more bodies.

Speaker Change: Roche that we've taken with these.

Speaker Change: We literally could start billing our customers, even if they didn't implement and that's something that we can do so I don't foresee any of these being things that get delayed or they try to cancel or things like that because of the things that they they need as I mentioned the one the one that seems to happen.

Andrew Schmidt: Now whether techs.

Mimi Carsley: So I'm glad we were able to squeeze that one in, J.D. I would say we are at a healthy pace. As you know, the trailing 12-month or an annual view is the best view to look at from a free cash flow perspective, rather than any quarterly year-to-date free cash flow of $139 million. For more information visit www.FEMA.gov definitely on track. We're at 71% from a conversion, so on track to that, that guy to the 65 to 75. And as we've talked about, that's a multi-year journey back to that 80, 90, 100 plus type of territory, as we're now starting to rebuild solidly the cost basis for the R&D related expenditures, and we have greater clarity from a tax policy perspective.

Andrew Schmidt: Technology is the only part of the solution or the bulk of this solution.

Andrew Schmidt: We feel pretty confident in the continuation of the demand and the reality is if you have an ROI that is compelling and we just thought in our strategic benchmark survey.

Speaker Change: A little bit more is that a customer that has our yellow hammer product that wants to move to financial crimes that need some consulting and other things that go with part of the implementation we have seen some delays in those and so we've worked with our clients. They are already clients of ours using some of our products, but that's where some of that delay has happened a little bit in some of our.

Andrew Schmidt: The way that efficiency is one of the top priority. So if you show the RLI they would they spend.

Andrew Schmidt: Absolutely yes.

Andrew Schmidt: Great comments I appreciate that appreciate to help Greg and Jamie Thanks, So much.

Speaker Change: Pay center products and payment initiatives as well and trying to get folks to use say.

Andrew Schmidt: Of course.

Speaker Change: Say, the they come on with our our send capabilities or or most of them have received but moving to send capabilities things like that but.

Andrew Schmidt: Thank you.

Speaker Change: Next question from the line of Andrew Baum from those focal. Please go ahead.

Andrew Baum: Hey, Thank you for squeezing me in here just wanted to revisit how this business.

Speaker Change: But again nothing nothing thats wholesale of a challenge, it's not core implementations and things along that one.

Mimi Carsley: On the trailing 12, the prior year had some reflected of like over tax payment benefits on the prior year. Plus, there's a touch more on CapEx in the current TTM. So, but we feel pretty good about staying on track here and hitting the guy to the full year. That's why we kept it unchanged.

Speaker Change: Operates through a cycle I know I appreciate the defensiveness and the recurring nature of all of it but if we were to go into a more pronounced recession.

Speaker Change: Good morning, you got me.

Speaker Change: Other than I would add from just a macro or a cent as we always talk about.

Speaker Change: How do we will be in how can we kind of handicap. The impact there is it just the trends that you would see today would be more pronounced.

Speaker Change: Regardless of the interest rate environment, regardless of economic conditions, the challenges facing our financial institutions today are going to be solved through technology, it's not gonna be solved through adding more bodies.

Speaker Change: Would there be changes to kind of the core pricing strategy, just trying to understand the recessionary scenario.

Operator: Okay, thanks guys. Thank you.

Speaker Change: Andrew I appreciate you know in this.

Speaker Change: Whether tech.

Vance Sherard: This concludes our question and answer session. I would like to turn the conference back to Vance Sherard, the Vice President, for closing remarks. Thank you, Myron. We appreciate all the interest in today's call, and in the upcoming weeks, management is planning to attend investor events across the U.S., providing additional availability for in-person meetings. We would like to again thank all Jack Henry & Associates for their outstanding efforts and dedication, which have contributed to our solid results. Thank you for joining us today.

Speaker Change: Technology is the only part of the solution or the bulk of this solution, we feel pretty confident in the continuation of the demand and the reality is if you have an ROI that is compelling and we just saw it in our strategic benchmark survey Sir.

Speaker Change: Certainly a dynamic environment.

Speaker Change: Meaningful question.

Speaker Change: First of all I would say no. One asked the question specifically, but I would say you know relative to tariff exposure.

Speaker Change: We're certainly lucky to have very limited exposure to shifts in policy as a company, we're monitoring our vendor pricing.

Speaker Change: Efficiency is you know one of the top priority. So if you show the RLI they would they spend.

Speaker Change: And resource availability as well as cost for example, prescription costs for our associates.

Speaker Change: Yeah.

Speaker Change: Absolutely yeah.

Operator: Myron, please provide the replay number. Sure. Thank you very much. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Great comments I appreciate that appreciate to help Greg and Jamie Thanks, So much.

Speaker Change: Do have very limited exposure on the direct I think we're more of the exposure is in general to our industries on the commercial side of the business.

Speaker Change: Of course.

Speaker Change: Thank you.

Speaker Change: The next question from the line of Andrew Baum from those focal. Please go ahead.

We're all watching the health of our businesses in the U S.

Speaker Change: So through things like our <unk> business, and our EPS, our enterprise payments businesses.

Andrew Baum: Hey, Thank you for squeezing me in here just wanted to revisit you know how this business.

Served as a commercial customers as well as indirect through lending.

Andrew Baum: Operates through a cycle I know I appreciate the defensiveness and the recurring nature of all of it but if we were to go into a more pronounced recession.

Speaker Change: Things like D&O business in Treasury.

Speaker Change: But the reality is this is not a global financial crisis.

Andrew Baum: How do we will be in how can we kind of handicap the impact there or is it just the trends that you would see today it would be more pronounced would there be changes to kind of the core pricing strategy just trying to understand the recessionary scenario.

Speaker Change: Banks are well capitalized.

Speaker Change: <unk> has really learned their lesson in terms of mortgage origination and credit extension.

Speaker Change: You know they are working their way through various interest rate cycles.

Speaker Change: Andrew I appreciate you know in this.

Speaker Change: But we're not anticipating any mass closures of financial institutions.

Speaker Change: Certainly a dynamic environment and you know it's a really meaningful question first of all I would say no. One asked the question specifically, but I would say you know relative to tariff exposure, where certainly lucky to have very limited exposure to shifts in policy as a company we're monitoring our vendor.

Speaker Change: And as we said earlier they need to continue to serve their account holders of numbers. They need to continue to drive efficiency fraud is top of mind for these institutions.

Speaker Change: Digital experience as well so.

Speaker Change: Pricing.

Speaker Change: A lot of them because of the nature of the competitive market with the largest financial institutions in the country. They need to continue to innovate regardless of the economic cycle to retain their account holders and make sure that they get on the other side of the economic situation healthier and stronger.

Speaker Change: And resource availability as well as cost for example, prescription costs for our associates.

We do have very limited exposure on the direct I think we're more of the exposure is in general to our industries on the commercial side of the business.

Speaker Change: We're all watching the health of their businesses in the U S.

Speaker Change: So through things like our remittance business and our EPS, our enterprise payments businesses.

Speaker Change: Understood and then if I could just my follow up question just wanted to put a finer point on the consolidation of activity you've been seeing could you give us a sense on the.

Speaker Change: It served as a commercial customers as well as indirect through lending are you know things like D&O business in Treasury are but the reality is this is not a global financial crisis. The banks are well capitalized has really learned their lesson in terms of mortgage origination.

Speaker Change: A little bit more around what you're seeing is it from a bank size. It can be and is it across banks versus credit unions, just additional looked a little bit more targeted on where youre seeing that activity pick up.

Yes, so the activity really as spreads. So you probably have seen and it continues to happen I mean, there are credit unions continuing to buy banks.

Speaker Change: Quite an extension.

Speaker Change: You know there they're working their way through various interest rate cycles.

Speaker Change: But we're not anticipating any mass closures of financial institutions.

Speaker Change: In fact, we had a credit union of a competitor by one of our banks recently.

Speaker Change: And you know as we said earlier they need to continue to serve their account holders in numbers. They need to continue to drive efficiency fraud is top of mind for these institutions.

Speaker Change: And that has continued to happen, we'll see if that.

Speaker Change: No. It continues to happen long term based on some of the things that they're trying to do in the market.

Speaker Change: Related to credit unions, but what I would say.

Speaker Change: I think we have been really well positioned as I mentioned earlier, just because we've continued to grow the asset side. So we are seeing.

Speaker Change: Digital experience as well so.

Speaker Change: A lot of them because of the nature of the competitive market.

One things that we call winter mergers, where we've actually had an institution acquired by our competitors institution, but because of the technology and innovation and products that we've delivered they've made the decision to actually switch to Jack Henry versus maintaining their existing.

Speaker Change: The largest financial institutions in the country they need to continue to innovate regardless of the economic cycle to retain their account holders and make sure that they get on the other side of the economic situation healthier and stronger.

Speaker Change: Understood and then if I could just my follow up question just wanted to put a finer point on the consolidation of activity you've been seeing could you give us a sense on the.

Speaker Change: Core and <unk> complementary products.

Speaker Change: And again, we don't win them, all but we've won more than our fair share.

And that continues to be the trend and I expect that because when you look at what's going on in the industry today and I recognize that our competition is is working their way back into focusing on this space.

Speaker Change: A little bit more around what you're seeing is it from a bank size and be in a U M is it across banks versus credit unions, just additional a little bit more targeted on where you're seeing that activity pick up.

Speaker Change: Were they they werent for many years, we've never lost our focus and so our focus on this space over the last six or seven years has been unmatched and when you look at what.

Speaker Change: Yeah. So the activity really as spreads. So you probably have seen and it continues to happen I mean, there are credit unions continuing to buy banks.

Speaker Change: Folks, including what was in the core survey, which I highly recommend all of you to go look at.

Speaker Change: We had a credit union of a competitor by one of our banks recently.

Speaker Change: And that has continued to happen, we'll see if that.

Speaker Change: It was significant differences between us and our competition and how our customers view us versus how their customers view them and so as those those kind of mentioned continue to get out. It continues to help our our sales pipeline our execution and things along that way. That's why all of these things that we've tried to articulate.

Speaker Change: He used to happen long term based on some of the things that they're trying to do in the market related to credit unions, but what I would say.

Speaker Change: I think we have been really well positioned as I mentioned earlier, just because we've continued to grow the asset side. So we're seeing.

Speaker Change: One things that we call winter mergers, where we've actually had an institution acquired by our competitors institution, but because of the technology and innovation and products that we've delivered they've made the decision to actually switch to Jack Henry versus maintaining their existing.

Speaker Change: <unk> that are happening today, we truly believe are short term things and then we got to work through the macroeconomic stuff that we can't control, but the other things that we have we believe are short term.

Speaker Change: Great Greg made me thank you.

Speaker Change: Core and indoor complementary products.

Speaker Change: Thank you.

Speaker Change: We have the next question the line of James Faucette from Morgan Stanley. Please go ahead.

Speaker Change: And again, we don't win them, all but we've won more than our fair share.

And that continues to be the trend and I expect that because when you look at what's going on in the industry today and I recognize that you know our competition is is working their way back into focusing on this space, where they they they werent for many years, we've never lost our focus and so our focus on this space over the.

Speaker Change: Great. Thank you very much and apologies for the background noise I'm just wanted to follow up on the commentary around competition and competitive intensity just wondering.

Speaker Change: Oh, that's if you've seen that manifest at all in terms of like your <unk>.

Engagements or win rates or even pricing intensity, thus far and how you're expecting that to evolve, especially as there does seem to be some increased focus from historical competitors.

Speaker Change: Last six or seven years has been unmatched and when you look at what you know what folks.

Speaker Change: Including what was in the a b a core survey, which I highly recommend all of you to go look at it was significant differences between us and our competition and how our customers view us versus how their customers view them and so as those those kind of mentioned continue to get out at it continues to help our our <unk>.

Speaker Change: Yes, Hey, James good to hear from you I think a couple of things.

Speaker Change: We've continued to see.

Speaker Change: You know the pricing sensitivity as we've mentioned in other calls and it really even other years.

Speaker Change: That that Hasnt significantly changed.

Speaker Change: Our win rates continue to be by far the best in the industry as I mentioned, we are winning larger deals which means we're winning those from them.

Speaker Change: <unk> pipeline, our execution and things along that way that's why all of these things that we've tried to articulate that are happening today. We truly believe are short term things and then we got to work through the macroeconomic stuff that we can't control, but the other things that we have we believe are short term.

Speaker Change: So that continues to be a.

Speaker Change: I think a good benchmark for your question.

Speaker Change: And but I will say that they get aggressive and many times trying to keep their customers.

Speaker Change: Alright, Greg made me thank you.

Speaker Change: And so Theres times, where we May walk away from a particular deal if that gets to be too rich for our our blood but.

Speaker Change: Thank you.

Speaker Change: The next question the line of James Faucette from Morgan Stanley. Please go ahead.

Speaker Change: But I will tell you that I don't see I havent seen anything strategically change in the market from what they're doing obviously.

James Faucette: Great. Thank you very much and apologies for the background noise I'm just wanted to follow up on the commentary around competition and competitive intensity just wondering.

Speaker Change: One of them has a brand new CEO that was just formally announced the other one has made some strategic decisions to to rid themselves of one of their businesses and have talked that theyre going to get more focused on our space. So time will tell but I can tell you as of right now and where we are in our pipeline and where we've been.

James Faucette: How about if you've seen that manifest at all in terms of like your engagements or win rates or even pricing intensity, thus far and how you're expecting that to evolve on especially is there does seem to be some increased focus from historical competitors.

James Faucette: Yes, Hey, James good good to hear from you I think a couple of things.

Speaker Change: With customer feedback and prospect feedback because I do go to a lot of our large prospect opportunities.

James Faucette: We've continued to see you know the pricing sensitivity as we've mentioned in other calls and it really even other years that that hasnt significantly changed.

Speaker Change: I haven't seen any level of.

Speaker Change:

Speaker Change: Concern on our part as of today.

Speaker Change: That's great color and then I guess associated with that I just wanted to ask back on banner.

James Faucette: Again, our win rates continue to be by far the best in the industry as I mentioned, we're winning larger deals which means we're winning those from them.

Speaker Change: How has traction trended with panel business I know, it's early but can you update us on the go to market, particularly given some of the implications of on the competitive front and how youre thinking about that as a as a product enhancement to the portfolio.

James Faucette: So that continues to be a.

James Faucette: A good benchmark for your question and you know, but I will say that they get aggressive and in many times trying to keep their customers and so theres times, where we may walk away from a particular deal if that gets to be too rich for our our blood.

Speaker Change: Yes again, another good question and one that we're highly focused on so we do have over 270 clients now live on <unk> business and a little over 1000 on the platform itself.

James Faucette: But I will tell you that I don't see I havent seen anything strategically change in the market for what they're doing obviously you know one of them has a brand new CEO that was just formally announced them. The other one has made some strategic decisions to to rid themselves of one of their businesses and and.

Speaker Change: So that continues to roll out we're really pushing to that feature parity that I've been talking about since the last investor day in September we expect to see that this summer is as I mentioned as.

Speaker Change: As well and I think that will be a real a real turning point for us to not only be able to.

James Faucette: And have talked that theyre going to get more focused on our space. So time will tell but I can tell you as of right now and where we are in our pipeline and where we've been with customer feedback and prospect feedback because I do go to a lot of our large prospect opportunities I haven't seen any level of.

Speaker Change: Continue to win more than our own core base, but to take it outside the Jack Henry core base and we've been as I mentioned very strategic in our approach, but also on the timing, we don't want to go out and try to sell.

Speaker Change: Sell something to a.

James Faucette: Concern on our part as of today.

Speaker Change: Competitive core base until were ready and that will happen. Later. This fall. So long story short is very much of a big part of what we're doing and candidly it will play a big part in what we're doing in our SMB strategy as well.

James Faucette: That's great color and then I guess associated with that I, just wanted to ask back on banjo.

James Faucette: How has traction trended with panel business I know, it's early but can you update us on the go to market, particularly given some of the implications of on the competitive front and how youre thinking about that as a as a product enhancement to the portfolio.

Greg Adelson: Thanks for that Greg.

Speaker Change: Sure.

Speaker Change: Thank you.

Speaker Change: We have the next question from the line of John Davis from Raymond James. Please go ahead.

James Faucette: Yes again, another good question and one that we're highly focused on so we do have over 270 clients now live on <unk> business and a little over 1000 on the platform itself. So that continues to roll out were really pushing to that feature parity that I've been talking about since the last invest.

John Davis: Hey, Good morning, guys, Greg just wanted to circle back on core win and I'll Echo Andrew's comments that the asset size.

John Davis: Helpful. You've historically, given us kind of a number of wins now you're giving us assets, but I guess the real question, but maybe you can help us directionally think about HCV right. So if assets year to date are up almost 50% I'm sure ACB is about 50%, but how do we think about number versus assets and like what really matters is kind of dollars of revenue contracted.

James Faucette: Your day in September we expect to see that this summer is as I mentioned as.

James Faucette: As well and I think that will be a real a real turning point for us to not only be able to continue to win more in our own core base, but to take it outside the Jack Henry core base and we've been as I mentioned very strategic in our approach, but also on the timing we don't want to.

John Davis: And so maybe just help us directionally kind of correlate the asset size to do kind of an ACB.

John Davis: Yes, I mean, Jamie it's a good question I think it's very difficult to.

John Davis: Every core deal is its own core deal right. So some of it is timing on on what other products. They have some of it is folks have best of breed approaches some have best of suite approaches. So but every single deal literally has its own nuances to that.

James Faucette: Go out and try to.

Sell something to a a competitive core base until were ready and that'll happen. Later. This fall. So long story short is very much of a big part of what we're doing and candidly it will play a big part in what we're doing in our SMB strategy as well.

John Davis: So I think it's really hard for us to button that up and just say hey, if we want $100 billion deal and we want a $1 billion deal doesn't necessarily mean that the $100 billion deal long term is going to bring.

Speaker Change: Thanks for that Greg.

James Faucette: Sure.

James Faucette: Thank you.

Speaker Change: We have the next question from the line of John Davis from Raymond James. Please go ahead.

Speaker Change: Hey, Good morning, guys, Greg just wanted to circle back on core wins, and I'll Echo Andrew's comments that the asset size. That's helpful. You've historically, given us kind of a number of wins now you're giving us assets, but I guess the real question, but maybe you can help us directionally think about E. C V. Right. So if it's assets year to date are up almost 50 per.

John Davis: 100 times the revenue right.

Speaker Change: Right, but I guess, it's safe to say that asset is more important than number.

John Davis: <unk>.

John Davis: Is that a fair assessment size.

John Davis: It also ranges based on retail and commercial based customers, so sometimes a larger asset institution.

Speaker Change: I'm sure <unk> got about 50 per se, but how do we think about number versus asset. So Mike what really matters is kind of dollars of revenue contracted and so maybe just help us directionally kind of correlate the assay side.

John Davis: Is more commercially focused and has less accounts.

John Davis: So depending on on the type of bank or credit Union It is and.

Speaker Change: <unk> two to kind of an ACB.

John Davis: Whether it's more retail focus our commercial focus so thats why im, saying theres, such an ebb and flow related to asset pricing per account pricing number of attach rates on the on the products that it brings in all of those so it just it just isn't that easy to just give you a.

Speaker Change: Yeah, I mean, Jamie it's a good question I think it's very difficult to.

Speaker Change: Every core deal is its own core deal right. So some of it is timing on on what other products. They have some of it is folks have best of breed approaches some have best of suite approaches. So but every single deal literally has its own nuances to that and so I think it's <unk>.

John Davis: Please.

John Davis: I will answer to that.

No no.

John Davis: Understood maybe one quick one for you on margins how should we think about the margin implications of kind of the non strategic revenue run off is this lower margin business and therefore, it can be a margin tailwind as as that.

Speaker Change: Really hard for us to button that up and just say Hey, you know if we want $100 billion deal and we want a billion dollar deal doesn't necessarily mean that the $100 billion deal long term is going to bring.

John Davis: Revenue rolls off or is it higher margin just help us think about that and any impact that may have had.

Not only this quarter, but for the for the full year guide as well.

Speaker Change: 100 times the revenue right.

Speaker Change: Right, but I guess, it's safe to say that asset is more important than number.

John Davis: So I would say generally these are non core.

John Davis: Non rather nine key non strategic revenue tends to be lower margin mix.

Speaker Change: Is that a fair assessment side as well.

Speaker Change: Well it also ranges based on retail and commercial based customers. So sometimes a larger asset institution is more commercially focused and has less accounts.

John Davis: And how things like hardware it has things like some of the consulting that is less software oriented and tends to be lower margin on the hall.

Speaker Change: So depending on on the type of of the bank or credit Union It is and.

John Davis: Okay. Thanks, and then one squeeze one last quick one if I can maybe free cash flow I think the midpoint of your guide would imply free cash flow below a 100%.

Speaker Change: Whether it's more retail focus our commercial focus so that's why I'm, saying theres, such an ebb and flow related to asset pricing per account pricing you know number of attach rates on the on the products that it brings in all of those so it just it just isn't that easy to just give you a <unk>.

Speaker Change: Fiscal fourth quarter at least in my model going back it's never been below I think like 120. So just curious if there's anything specific around free cash flow that you see coming in the fourth quarter that we should be aware of or any other comments there would be helpful. Thanks.

Speaker Change: Please.

Speaker Change: I will answer to that.

Speaker Change: Well I wouldn't have been an earnings call. If we didn't have a free cash allows that I'm glad we were able to squeeze that one and.

Speaker Change: No no I understood.

Speaker Change: Maybe one quick one for you on on margins, how should we think about the margin implications of kind of the non strategic revenue run off is this lower margin business and therefore, it can be a margin tailwind as is that kind of revenue rolls off or is it higher margin just help us think about that and any impact that may have had.

Speaker Change: I would say we are at a healthy pace as you know that the trailing 12 month or an annual view is the best view to look at from a free cash flow perspective, rather than any quarterly.

Speaker Change: Year to date free cash flow of $139 million.

Speaker Change: Not only this quarter, but for the for the full year guide as well.

Speaker Change: Definitely on track, we're at 71% from a conversion so on track to that that guy to the 65 to 75 and as we've talked about that's a multiyear journey back to that 80 9100 class type of territory.

Speaker Change: So I would say generally these are non core and non rather nine key nonstrategic revenue tends to be lower margin mix.

Speaker Change: And have things like hardware it has things like some of the consulting them that is left software oriented and tends to be lower margin on the hall.

Speaker Change: Now I'm.

Speaker Change: Starting to rebuild solidly the cost basis for the R&D related expenditures and we have greater clarity from a tax policy perspective.

On the trailing 12 of the prior year had some reflected up like over tax payment benefits on the prior year plus there is a touch more on capex.

Speaker Change: Okay. Thanks, one squeeze one last quick one if I can maybe free cash flow yeah, I think the midpoint of your guide would imply free cash flow below 100% in the fiscal fourth quarter at least in my model going back it's never been below I think like 120. So just curious if there's anything specific around free cash flow that you see coming in.

Speaker Change: In the current TTM, so, but we feel pretty good about staying on track here and hitting the guide for the full year. That's why we kept it unchanged.

Speaker Change: The fourth quarter that we should be aware of or any other comments there would be helpful. Thanks.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Well it wouldn't have been an earnings call. If we didn't have a free cash allows that I'm glad we were able to squeeze that one N J D.

Speaker Change: Thank you.

Speaker Change: This concludes the question answer session I would like to turn the conference back to Ron shirt, the Vice President for closing remarks.

Speaker Change: I would say we are unhealthy pace as you know that the trailing 12 month or an annual view is the best view to look at it from a free cash flow perspective, rather than any quarterly and year to date free cash flow of $139 million.

Ron shirt: Thank you Myra and we appreciate all the interest in today's call and in the upcoming weeks management is planning to attend investor events across the U S. Providing additional availability for in person meetings, we would like to again, thank all Jack Henry Associates for their outstanding efforts and dedication which have contributed to our solid results. Thank you for joining us.

Speaker Change: Definitely on track, we're at 71% from a conversion so on track to that that guy to the 65 to 75 and as we've talked about that's a multiyear journey back to that 80 9100 class type of territory as we're now.

Speaker Change: Today Myron please provide the replay number.

Ron shirt: Sure. Thank you very much.

Ron shirt: France has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Starting to rebuild solidly the cost basis for the R&D related expenditures and we have greater clarity from a tax policy perspective on the trailing 12 of the prior year had some reflected up like over tax payment benefits on the prior year clusters.

Speaker Change: Touch more on Capex.

Speaker Change: In the current T T M. So, but we feel pretty good about staying on track here and hitting the guide for the full year. That's why we kept it unchanged.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: This concludes our question answer session I would like to turn the conference back to van shirts, the Vice President for closing remarks.

Speaker Change: Thank you Myra and we appreciate all the interest in today's call and in the upcoming weeks management is planning to attend investor events across the U S. Providing additional availability for in person meetings, we would like to again, thank all Jack Henry Associates for their outstanding efforts and dedication, which has contributed to our solid results. Thank you for joining us.

Myron: Today Myron please provide the replay number.

Myra: Sure. Thank you very much.

Myron: France has now concluded. Thank you for attending today's presentation you may now disconnect.

Myron: Okay.