Q1 2026 Jack Henry & Associates Inc Earnings Call

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Speaker #3: Good morning , and welcome to the Jack Henry first quarter and fiscal year 2026 earnings Conference call . All participants will be in listen only mode .

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Please note this event is being recorded.

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I'd now like to turn the conference over to Vance Girard, Vice President Investor Relations. Please go ahead.

Thank you Jeanie good.

Morning, and thank you for joining the Jack Henry first quarter fiscal 2026 earnings call.

Joining me today are Greg Adelson, President and CEO.

Speaker #3: To withdraw your question , please press star one . Again , please note this event is being recorded . I would now like to turn the conference over to Vance Sherard Vice President , Investor Relations .

Mimi cars, Lee CFO and treasurer.

Following my opening remarks, Greg will share his comments on our quarterly results operational metrics and the outlook for the remainder of fiscal 'twenty six.

Greg Adelson: Our new solutions are built with a human-in-the-loop approach, and while reviews are still early, feedback has been extremely positive. We have created over 100 internal AI use cases. While we continue working through prioritization, these efforts have already enabled us to control headcount additions from the improvements we have seen across all lines of business. As a reminder, we do not sell any of our products utilizing a seat license model, so factors such as the number of branches or employees at the bank do not have a bearing on our revenue stream. Looking ahead, we will hold our annual shareholder meeting next week in Monett, Missouri, and offer a webcast for remote viewers. We're also proud to recognize the 40th anniversary of our IPO this month, and will commemorate the milestone with a bell ringing at NASDAQ on 21 November 2024.

Speaker #3: Please go ahead .

Mimi will then discuss the financial results and updated fiscal 'twenty six guidance provided in Yesterdays press release, which is available on the Investor Relations section of the Jack Henry website.

Speaker #4: Thank you . Jeannie . Good morning , and thank you for joining the Jack Henry first quarter fiscal 2026 earnings call . Joining me today are Greg Addison , president and CEO and Mimi Carsley CFO and treasurer .

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

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. The company is not obligated to update or revise these statements for a summary of risk factors and additional information that could cause actual results to differ materially from such forward looking statements refer to.

Speaker #4: Following my opening remarks , Greg will share his comments on our quarterly results , operational metrics , and the outlook for the remainder of fiscal 26 .

Speaker #4: Mimi will then discuss the financial results and updated fiscal 26 guidance provided in yesterday's press release , which is available in the Investor Relations section of the Jack Henry website .

Speaker #4: Afterward , we will open the lines for Q&A session . 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 .

Yesterday's press release, and the risk factors and forward looking statements sections in our 10-K.

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, now I will hand, the call over to Greg.

Speaker #4: The company is not obligated to update or revise these statements . 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 .

Greg Adelson: In closing, we are extremely pleased with our overall Q1 performance and remain highly optimistic about the rest of the year. I know I'll now hand things over to Mimi to walk through the financial details. Thank you, Greg, and good morning, everyone. Our associates remain steadfast in serving our financial institution clients, delivering shareholder value, leading to another quarter of solid revenue and earnings growth. I will begin with our healthy first quarter results, then conclude with our updated fiscal 2026 guidance. Q1 GAAP revenue increased 7%, and non-GAAP revenue increased 9%, a continuation of consistently solid performance. Non-GAAP revenue growth was positively impacted by the shift of our Connect client conference into Q1 from Q2. Even without this timing shift, quarterly revenue growth would have been a robust 8%.

Thank you Vince good morning, and I appreciate each of you joining todays call I'd like to begin by thanking our associates for their hard work and unwavering commitment to our key Differentiators culture service innovation strategy and execution.

Speaker #4: During this call , we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income . Reconciliations measures are included in yesterday's press release .

I will share three key takeaways from the quarter and then provide additional detail about our overall business first our financial performance. We produced record first quarter financial results with non-GAAP revenue of $636 million up an impressive eight 7% over last year's first quarter that's significantly exceed.

Speaker #4: Now , I will hand the call over to Greg .

Speaker #5: Thank you . Vance . Good morning , and I appreciate each of you joining today's call . I'd like to begin by thanking our associates for their hard work and unwavering commitment to our key differentiators culture , service , innovation , strategy , and execution .

The 7% to seven 5% increase we anticipated in August.

Speaker #5: I will share three key takeaways from the quarter and then provide additional detail about our overall business . First , our financial performance .

Our non-GAAP operating margin was 27, 2%, representing a robust 227 basis points of margin expansion over last years Q1.

Speaker #5: We produced record first quarter financial results with non-GAAP revenue of $636 million , up an impressive 8.7% over last year's first quarter . That significantly exceeds the 7 to 7.5% increase we anticipated in August .

Second our sales performance, starting with migrations from in house processing to our private cloud in Q1, we signed seven contracts to move existing clients to our private cloud, including $11 billion asset credit Union and an 8 billion asset bank.

Greg Adelson: First quarter deconversion revenue of approximately $9 million, which we previously announced, was up approximately $5 million, reflecting a steady pace of M&A activity among financial institutions. Now let's look more closely at the details. GAAP services and support revenue increased 6% for the quarter, while non-GAAP increased 8%. Services and support growth during the quarter was primarily driven by strength in data processing and hosting revenue for both private and public cloud, revenue from our connect conference, and solution implementation. Private and public cloud offerings continue to drive strong growth. Cloud revenue increased 7% in the quarter. This recurring revenue contributor is 30% of our total revenue. Shifting to processing revenue, which is 42% of total revenue and another strategic component of our long-term growth model, we saw healthy performance with 10% GAAP and non-GAAP growth for the quarter.

Speaker #5: Our non-GAAP operating margin was 27.2% , representing a robust 227 basis points of margin expansion over last year's Q1 . Second , our sales performance , starting with migrations from in-house processing to our private cloud in Q1 , we signed seven contracts to move existing clients to our private cloud , including $11 billion asset credit union and an $8 billion asset bank .

Notably the asset size of clients migrating to our private cloud was 60% higher over the past 12 months $43 billion versus 69 billion. While the number of deals has remained consistent with previous years.

As a reminder, we earn on average approximately two times more revenue from clients in the private cloud compared to those on premise.

Today, 77% of our core clients are operating in the Jack Henry private cloud.

Speaker #5: Notably , the asset size of clients migrating to our private cloud was 60% higher over the past 12 months . 43 billion versus 69 billion , while the number of deals has remained consistent with previous years .

Turning to new core sales as many as as many of you know the first quarter is typically our lightest of the year in Q1, our sales team earned for competitive core wins, including one financial institution with over $1 billion in assets for context last year, we started with six competitive core wins in Q1 and finished the year.

Speaker #5: As a reminder , we earn on average approximately two times more revenue from clients in the private cloud compared to those on premise .

Speaker #5: Today , 77% of our core clients are operating in the Jack Henry Private Cloud . Turning to new core sales . As many as as many of you know , the first quarter is typically our lightest of the year in Q1 .

With 51, we remain confident that we will be within that range again. This year as we are off to a very strong start in Q2.

Greg Adelson: Consistent with recent results, quarterly drivers included increased card, digital, and payment processing revenues. Completing commentary on revenue, I would highlight total recurring revenue exceeded 91%. Next, moving to expenses. Beginning with the cost of revenue, which increased a modest 1% on a GAAP basis and 4% on a non-GAAP basis for the quarter. Drivers for the quarter included higher direct costs consistent with revenue growth, higher personnel costs, partially offset by lower benefits, and increased amortization of intangible assets. For modeling purposes, amortization of acquisition-related intangibles was $6 million for the quarter. Next, R&D expense decreased 1% on both a GAAP and non-GAAP basis for the quarter. The quarter decreased primarily due to tempered net personnel costs. Ending with SG&A expense, for the quarter on a non-GAAP basis, it increased 14% and 9% on a GAAP basis.

I also want to comment on the new sales procedures, we implemented for the contract renewals about six months ago, which has resulted in a healthier balance between new sales and renewal contracts as well as improved pricing procedures. Our Q1 fiscal year 2006 deal mix was 44% new core sales and 56% renewals.

Speaker #5: Our sales team earned four competitive core wins , including one financial institution with over 1 billion in assets for context , last year we started with six competitive core wins in Q1 and finished the year with 51 .

Speaker #5: We remain confident that we will be within that range again this year as we are off to a very strong start in Q2 .

Compared to 35% new sales and 65% renewals in Q1 last year, we expect this trend to continue throughout the fiscal year.

Speaker #5: I also want to comment on the new sales procedures we implemented for the contract renewals . About six months ago , which has resulted in a healthier balance between new sales and renewal contracts , as well as improved pricing procedures .

Third our annual client conference in September we hosted another highly successful Jack Henry connect conference in San Diego, drawing a record $26 52651 clients. This is our largest event of the year and a major dryer driver of new business opportunities.

Speaker #5: Our Q1 fiscal year 26 deal mix was 44% . New core sales and 56% renewals , compared to 35% new sales in 65% renewals in Q1 last year .

We had a record 91 prospects from 30 banks and credit unions. This is important to note because 20 of last year's new core wins came from prospects, who attended Jack Henry connect underscoring the strategic value of this event.

Speaker #5: We expect this trend to continue throughout the fiscal year . Third , our annual client conference in September , we hosted another highly successful Jack Henry Connect conference in San Diego , drawing a record 2650 2651 clients .

Greg Adelson: The quarter increase was primarily due to the timing of our Connect client conference, increased personnel service costs, and higher net personnel costs, partly offset by lower commission and benefit costs. Without the Connect client conference costs, SG&A would have increased 12% on a non-GAAP basis and 7% on a GAAP basis. Aided by our consistent revenue growth, we remain focused on generating annual compound margin expansion. Q1 delivered a 227 basis point increase in non-GAAP margin to 27%. Non-GAAP margin benefits from inherent leverage in our business model, strategic cost management, and leveraging existing workforce as we continue to focus on enterprise process improvement and AI utilization. These strong quarterly results produced a fully diluted GAAP earnings per share of $1.97, up 21%. Reviewing the three operating segments, we are pleased to see positive performance across the board.

Additionally, the conference drew 48 consultants and our technology showcase featured 266 third party Fintech, both all time highs.

Speaker #5: This is our largest event of the year and a major driver of new business opportunities . We had a record 91 prospects from 30 banks and credit unions .

We also had a record attendance at our annual CEO Forum, posting 211, Ceos overall attendees expressed less concerned about the macro economy than last year and plan to continue investing in technology to enhance their digital capabilities strengthened fraud protection improve efficiencies and modernize their bid.

Speaker #5: This is important to note because 20 of last year's new core wins came from prospects who attended Jack Henry Connect , underscoring the strategic value of this event .

Speaker #5: Additionally , the conference drew 48 consultants and our technology showcase featured 266 third party fintechs , both all time highs . We also had a record attendance at our annual CEO forum , hosting 211 CEOs overall .

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Next I'd like to highlight several important announcements we made in the quarter.

I'll start with our acquisition of Victor technologies, which closed on September 30th.

Speaker #5: Attendees expressed less concern about the macro economy than last year , and plan to continue investing in technology to enhance their digital capabilities , strengthen fraud protection , improve efficiencies and modernize their businesses .

We're excited to welcome the Victor Associates to the Jack Henry family. We are equally excited about this technology as we leverage the capabilities to create new opportunities for our clients and the many fintech serving the financial industry.

As you've heard me say our acquisition strategy targets companies that have great teams are cloud native API, <unk> and accelerate our product roadmap Victor fit that strategy perfectly Vicki.

Speaker #5: Next , I'd like to highlight several important announcements we made in the quarter . I'll start with our acquisition of Victor Technologies , which closed on September the 30th .

Greg Adelson: Core segment non-GAAP revenue increased 6% on the quarter, with operating margins increasing a robust 114 basis points. We continue to gain benefits from private cloud trends and disciplined cost management. The payment segment quarterly non-GAAP revenue increased 8%. The segment again had outstanding non-GAAP operating margin growth, with quarterly results of 170 basis points. Revenue growth was due to resilience in our card-related services, consistent growth in the EPS business, and continuing large percentage growth on faster payments, albeit on a smaller dollar base. Margins benefited from operational efficiencies and disciplined cost management. Finally, complementary segment quarterly non-GAAP revenue increased an impressive 9%, with healthy 75 basis points of margin expansion. Quarterly revenue growth continued to reflect digital solution demand, beneficial product mix, and sales sourced from both new core wins and non-core financial institutions. Now, a review of cash flow and capital allocation.

Speaker #5: We're excited to welcome the Victor Associates to the Jack Henry family . We are equally excited about this technology as we leverage the capabilities to create new opportunities for our clients and the many fintechs serving the financial industry .

Victors modern innovative platform with director core connectivity enables financial institutions to embed payment capabilities into third party non bank brands, such as Fintech and commercial customers.

Speaker #5: As you've heard me say , our acquisition strategy targets companies that have great teams . Our cloud native API first and accelerate our product roadmap .

This helps financial institutions grow deposits diversified fee income and maintain compliance controls for Jack Henry Victor provides a highly scalable solution that creates diverse revenue streams enhances our payments as a service capabilities and accelerate the delivery of emerging services like stable coin.

Speaker #5: Victor fits that strategy perfectly . Victor's modern , innovative platform with direct decor , connectivity enables financial institutions to embed payment capabilities into third party non-bank brands such as fintechs and commercial customers .

Victor was already integrated with our Silverlake core banking system and our Jack Henry pay center prior to the acquisition, we plan to extend its capabilities to serve our scimitar credit Union and Treasury management clients and to integrate directly with the new cloud Native Jack Henry platform.

Speaker #5: This helps financial institutions grow deposits , diversify fee income and maintain compliance controls . For Jack Henry , Victor provides a highly scalable solution that creates diverse revenue streams , enhances our payments as a service capabilities , and accelerates the delivery of emerging services like stablecoin .

I will now provide an update on stable coin as we've been actively developing and executing our strategy. We just completed a proof of concept in less than two weeks to allow financial institutions to send and receive USD C.

Speaker #5: Victor was already integrated with our Silver Lake core banking system and our Jack Henry Pay center . Prior to the acquisition . We plan to extend its capabilities to serve our credit union and treasury management clients , and to integrate directly with the new cloud native , Jack Henry platform .

We continue to work with key vendors and emerging fintech on other aspects of our strategy, which includes the development of wallet custody and settlement services for our clients to service their account holders.

Greg Adelson: Q1 operating cash flow was $121 million, a $4 million increase over the prior fiscal year. Quarterly free cash flow was $69 million, delivered by a $10 million increase, was positively impacted by the collection of remaining annual maintenance billing, and full tax depreciation and development expenses related to recent tax legislation. Our consistent dedication to value creation resulted in a trailing 12-month return on invested capital of 22%, compared to the 20% in the first quarter of the prior year. We're very proud of the durability of this metric performance. Additionally, I would highlight the following significant capital allocation decisions: $100 million in share repurchases year-to-date through October, the asset acquisition of Victor, and $42 million in dividends paid. We ended the quarter with a minimal amount of debt, consistent with normal course revolver line usage, that expects to end the year debt-free, barring acquisitions or other opportunities.

Speaker #5: I will now provide an update on stablecoin , as we've been actively developing and executing our strategy . We just completed a proof of concept in less than two weeks to allow financial institutions to send and receive Usdc .

Furthermore, the new Jack Henry platform supports nine decimal places well above the six required for USB C positioning us very well for both stable coin in token nice deposits by contrast, most if not all existing core support only two decimal places. This advancement has already enabled us to facilitate <unk>.

Speaker #5: We continue to work with key vendors and emerging fintechs on other aspects of our strategy , which includes the development of wallet , custody and settlement services for our clients to service their account holders .

<unk> border stable coin transactions for third parties through bandwidth.

Speaker #5: Furthermore , the new Jack Henry platform supports nine decimal places . Well above the six required for Usdc . Position us very well for both stablecoin and tokenized deposits by contrast , most if not all existing core support only two decimal places .

Another key development. This quarter was the launch of our cloud native tapped to local merchant acquiring solution.

Tap to local is offered exclusively through banks and credit unions, giving them a powerful way to win back deposits from small and medium sized businesses that have shifted their card acceptance activities to other providers tap.

Speaker #5: This advancement is already enabled us to facilitate cross-border stablecoin transactions for third parties through Banu . Another key development this quarter was the launch of our cloud native tap to local merchant acquiring solution .

<unk> tapped a local primarily targets the 82% of Smbs that are sole proprietors today, only 16% of sole proprietors keep both their retail and commercial accounts at the same community financial institution largely due to the lack of SMB focused services built.

Speaker #5: Tap to local is offered exclusively through banks and credit unions, giving them a powerful way to win back deposits from small and medium-sized businesses that have shifted their card acceptance activities to other providers.

Built in partnership with move tapped to local delivers differentiated capabilities for smbs, including easy enrollment tap to pay on both iOS and Android devices without additional hardware and continuous account reconciliation through the accounting platform of their choice.

Greg Adelson: I will now discuss the updated increased full-year guidance. As you're aware, yesterday's press release included updated increases to fiscal 2026 full-year GAAP guidance. Deconversion guidance will continue to follow the conservative methodology introduced in fiscal 2024. Fiscal 2026 deconversion revenue guidance has been increased to $20 million. Aligned with guidance methodology, we will update the outlook as we confirm more activity throughout the year. Full-year GAAP revenue growth guidance increased to a range of 4.9% to 5.9%. This is driven by deconversion revenue increase, expected revenue contribution for the remainder of the year from the Victor acquisition. I will emphasize GAAP revenue remains almost certainly understated due to the conservative deconversion revenue guidance. Based on our strong first quarter results and expected continued momentum, we have increased the lower end of the non-GAAP revenue annual growth rate guidance, resulting in a new outlook of 6% to 7%.

Speaker #5: Tap to local primarily targets . The 82% of SMEs that are sole proprietors . Today , only 16% of sole proprietors keep both their retail and commercial accounts at the same community .

We showcased a live demo of tap the local at Jack Henry connect and received fantastic feedback. We are currently rolling it out in phases to our banner clients. We rolled out the initial phase of 40 clients on Monday of this week.

Speaker #5: Financial institution , largely due to the lack of SMB focused services built in partnership with Move Tap to local delivers differentiated capabilities for SMBs , including easy enrollment , tap to pay on both iOS and Android devices without additional hardware and continuous account reconciliation to the accounting platform of their choice .

We also did a live on stage demo of Jack Henry Rapid transfers at the conference in partnership with move we conducted more than 1000 additional demos of this solution in the technology exhibit Hall.

Speaker #5: We showcased a live demo of Tap to Local at Jack Henry Connect and received fantastic feedback . We are currently rolling it out in phases to our clients .

Rapid transfers enables both smbs and consumers to instantly move funds between external accounts eligible cards and digital wallets to manage day to day transaction and personal finances.

Speaker #5: We rolled out the initial phase of 40 clients on Monday of this week . We also did a live on stage demo of Jack Henry Rapid Transfers at the conference in partnership with move .

There are only a handful of institution offering this service today zero, where community financial institutions until now.

Speaker #5: We conducted more than a thousand additional demos of this solution in the technology exhibit hall . Rapid transfers enables both SMEs and consumers to instantly move funds between the external accounts , eligible cards and digital wallets to manage day to day transaction and personal finances .

We are collaborating with both visa and Mastercard to facilitate these transactions through the respective debit rails rapid transfers is receiving strong initial reviews with 48 clients now live in 126 more in various stages of implementation.

Greg Adelson: As a reminder, fiscal 2026 and the first quarter of fiscal 2027, Victor acquisition-related financial impacts will be excluded as part of non-GAAP reporting. Based on the above revenue growth and our resilient financial model, we expect to again generate sustainable, accretive sources of margin. We are increasing full-year guidance for non-GAAP margin expansion to a range of 30 to 50 basis points. All of the above are indicative that our business operations remain healthy and sound, with near-term growth opportunities. The full-year GAAP tax rate estimate for fiscal 2026 is 23.75%. The above increased guidance metrics result in a stronger full-year outlook for GAAP EPS of $6.38 to 6.49 per share, a growth of 2% to 4%. As a reminder, updated conservative deconversion revenue guidance almost certainly understates EPS GAAP growth.

Speaker #5: There are only a handful of institutions offering this service today . Zero . We're community , financial institutions . Until now . We are collaborating with both Visa and Mastercard to facilitate these transactions through their respective debit rails .

These unique solutions are all powered by the cloud native API first infrastructure, we've built through our technology modernization strategy and are part of the Jack Henry platform.

This strategy has enabled us to accelerate our innovation at speeds not typically seen in our industry, especially from our core provider.

Speaker #5: Rapid transfers is receiving strong initial reviews , with 48 clients now live and 126 more in various stages of implementation . These unique solutions are all powered by the cloud native API .

We developed our tap to local and rapid transfer solutions and less than 10 months, including close to 40 external certifications. We developed a full proof concept of USD C and only two weeks and we will be launching our public cloud native deposit only core in only three years still on schedule for the first half of calendar 2002.

Speaker #5: First infrastructure we've built through our technology modernization strategy , and are part of the Jack Henry platform . This strategy has enabled us to accelerate our innovation at speeds not typically seen in our industry , especially from a core provider .

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The new Jack Henry platform is integrated with all of our existing cores. Unlike most of our competitors. It's not aside core which is a separate parallel system that runs alongside the primary core <unk> do not integrate directly with nor do they extend existing cores to enable new and enhanced use cases and the way the Jack Henry platform.

Speaker #5: We developed our tap to local and rapid transfer solutions in less than ten months , including close to 40 . External certifications . We developed a full proof concept of Usdc in only two weeks , and we will be launching our public cloud native deposit only core in only three years .

Greg Adelson: Fiscal 2026 is expected to have superior free cash flow conversion due to recently passed tax legislation, and we have elected to take the accelerated election. Full-year free cash flow conversion outlook is for 85% to 100% for fiscal 2026, matching our expected target, but with a bias to the higher end of the range. As a reminder, we see fluctuations in quarterly results relating to software usage, license components, along with the timing of implementation. Therefore, the correct performance indicator for our business is the consistently strong fiscal year financial results. In conclusion, Q1 results reflect outstanding performance, leading to increased guidance. We're pleased by the start to our fiscal year and remain positive on the outlook. Demand for our solutions, aligned with continued technology spend by our clients and prospects, will drive superior shareholder return and value.

Speaker #5: Still on schedule for the first half of calendar 2026 . The new Jack Henry platform is integrated with all of our existing cause .

Does this integration deliver significant advantages to our clients, including real time processing streamline operations open API connectivity enhanced security and immediate continuous upgrades.

Speaker #5: Unlike most of our competitors , it's not a side core , which is a separate parallel system that runs alongside the primary core .

Next I'll provide a few updates on specific products and our payment segment, we continue to experience outstanding growth in our faster payment solutions over the past year. The number of financial institutions using zelle has grown by 20% the clearinghouses RTP network by 25% and fed now by 32%.

Speaker #5: Side cores do not integrate directly with, nor do they extend existing cores to enable new and enhanced use cases in the way the Jack Henry platform does.

Speaker #5: This integration delivers significant advantages to our clients , including real time processing , streamlined operations , open API connectivity , enhanced security , and immediate continuous upgrades .

In Q1 payment transaction volume through these channels increased by 55% over the prior year Q1.

Speaker #5: Next, I'll provide a few updates on specific products in our payment segment. We continue to experience outstanding growth in our faster payment solutions.

And our complementary segment, we signed a total of 38, new financial crimes defender and faster payment module contracts in the quarter.

Speaker #5: Over the past year , the number of financial institutions using Zelle has grown by 20% . The clearinghouse is RTP network by 25% , and Fednow by 32% .

As of September 30, we have 148 financial crimes installations completed and another 66 in various stages of implementation. We also have 113 faster payment modules installed and 205 in various stages of implementation.

Speaker #5: In Q1 payment transaction volume . Through these channels increased by 55% over the prior year . Q1 . In our complementary segment , we signed a total of 38 new financial crimes defender and faster payment module contracts in the quarter .

Greg Adelson: We appreciate the contributions of our dedicated associates that achieve these superior results, and our investors for their ongoing confidence. Genie, please open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star 1 again. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Rayna Kumar with Oppenheimer. Good morning, Greg and Mimi. Nice results here. We saw some solid margin expansion in the quarter, and as you mentioned, Mimi, R&D was down 1%.

Speaking of financial crimes defender, we're proud that our solution recently won a silver medal from data insights for our best AML and fraud transaction monitoring innovation.

Speaker #5: As of September 30th , we have 148 financial crimes installations completed and another 66 in various stages of implementation . We also have 113 faster payment modules installed and 205 in various stages of implementation .

Continuing with our complementary segment, we continue to see success with our <unk> digital platform for the quarter, We signed a total of 18, new clients to the Battle banner platform. We currently have 1026 banner retail clients and 390 live with banner business.

Speaker #5: Speaking of financial crimes defense, we are proud that our solution recently won a silver medal from Dados Insights for best AML and fraud transaction monitoring innovation.

We finished the quarter with $14 7 million registered users on the <unk> platform at the end of Q1 last year, we had $12 7 million registered users a 15% increase over the past 12 months.

Speaker #5: Continuing with our complementary segment , we continue to see success with our digital platform for the quarter , we signed a total of 18 new clients to the platform we currently have 1026 retail clients and 390 live with business .

We are confident that the tech spending will remain strong based on recent surveys direct feedback from our clients and our robust sales pipeline.

Greg Adelson: Can you talk about how sustainable the type of margin expansion is going forward and maybe how margin could look for the remainder of the year by quarter? Thanks for joining us this morning, Rayna, and your question. I think R&D has the same profile that you've seen in SG&A and other areas, consistent with across our expense, which is the thoughtfulness in which we planned this year's budget, being modestly conservative out the gate. We're being very disciplined around headcount increases while still investing for growth. As we look to the remainder of the year, some of that is timing-related. Some of that is things that we're expecting to kind of reverse, if you will, some benefits related to net personnel costs and the timing of some of the spending we have for projects.

And Bank Directors 2025 Technology survey that came out in September 71% of respondents reported an increase in their banks technology budget for fiscal year 2025, with a median increase of 10%. These results align with findings from our strategy benchmark published last spring and that survey 76%.

Speaker #5: We finished the quarter with 14.7 million registered users on the platform . At the end of Q1 last year , we had 12.7 million registered users , a 15% increase over the past 12 months .

Speaker #5: We are confident that the tech spending will remain strong based on recent surveys , direct feedback from our clients and our robust sales pipeline in bank directors , 2025 Technology survey that came out in September , 71% of respondents reported an increase in their bank's technology budget for fiscal year 2025 , with a median increase of 10% .

Of our own clients said they plan to increase spending over the next two years with their top priorities be in digital banking fraud prevention automation cyber security and AI.

Speaking of AI, we continue to focus on numerous product and internal use cases to help our clients and our staff improve back office efficiency, our new solutions are built with a human in the loop approach and while reviews are still early feedback has been extremely positive.

Speaker #5: These results align with findings from our strategy benchmark , published last spring , and that survey , 76% of our own clients said they plan to increase spending over the next two years with their top priorities being digital banking , fraud prevention , automation , cybersecurity and AI .

We have created over 100 internal AI use cases, while we continue working through prioritization. These efforts have already enabled us to control head count additions from the improvements we have seen across all lines of business.

Greg Adelson: Overall, I would say there's consistency that's going to drive the full-year margin expansion, which is our general control of spending, our limited headcount growth for the year, and efficiencies and AI. Got it. Your next question comes from the line of Will Nance with Goldman Sachs. Hey, thanks for taking the question. I was wondering if you could expand a little bit on the pricing and competitive environment out there. In particular, there's been a lot of focus around some of the core consolidation happening at the competitors. Are you guys seeing an increased willingness to explore converting cores in the market? How are you feeling about your chance of maybe shaking loose a couple of those opportunities? Thank you. Hey, Will, thanks for the question. I think we're not seeing anything more significant. I know, obviously, there were some recent announcements on.

Speaker #5: Speaking of AI , we continue to focus on numerous product and internal use cases to help our clients and our staff improve back office efficiency .

As a reminder, we do not sell any of our products utilizing a seat license model. So factors such as the number of branches or employees at the bank do not have a bearing on our revenue stream.

Speaker #5: Our new solutions are built with a human in the loop approach , and while reviews are still early , feedback has been extremely positive .

Speaker #5: We have created over 100 internal AI use cases . While we continue working through prioritization . These efforts have already enabled us to control headcount additions from the improvements we have seen across all lines of business .

Looking ahead, we will hold our annual shareholder meeting next week and Moon at Missouri and offer a webcast for remote viewers. We're also proud to recognize the 40th anniversary of our IPO. This month and will commemorate the milestone with a bell ringing at NASDAQ on November 21.

Speaker #5: As a reminder , we do not sell any of our products utilizing a seat license model , so factors such as the number of branches or employees at the bank do not have a bearing on our revenue stream .

In closing we are extremely pleased with our overall Q1 performance and remain highly optimistic about the rest of the year I know I will now hand things over to Mimi to walk through the financial details.

Speaker #5: Looking ahead , we will hold our annual shareholder meeting next week in Monett , Missouri and offer a webcast for remote viewers . We're also proud to recognize the 40th anniversary of our IPO this month , and will commemorate the milestone with a bell ringing at Nasdaq on November the 21st .

Thank you, Greg and good morning, everyone.

Associates remains steadfast and serving our financial institution clients.

Delivering shareholder value, leading to another quarter of solid revenue and earnings growth.

Greg Adelson: Collapsing the number of cores for one of the providers and things along that line. It's still early. I think our pipeline still remains very significant. As I mentioned in my script, we've already seen some nice wins for the quarter, and I anticipate that will continue to be at a fairly normal pace. I haven't seen anything out there that has seen any more intense competitive pressure than I would have said six months ago, though, at this point in time. Thanks for taking the question. I think, Will, the only other add I would say to the point that Greg made in his prepared remark, the changes we've made operationally around limiting the impact from pricing compression to the first half of your question around pricing, we're starting to see the fruits of the labor paying off. We're seeing stabilization from that headwind.

Speaker #5: In closing , we are extremely pleased with our overall Q1 performance and remain highly optimistic about the rest of the year . I know I'll now hand things over to Mimi to walk through the financial details .

I will begin with our healthy first quarter result, then conclude with our updated fiscal 2006 guidance.

Q1, GAAP revenue increased 7% and non-GAAP revenue increased 9% a continuation of consistently solid performance.

Speaker #6: Thank you Greg and good morning everyone . Our associates remain steadfast in serving our financial institution . Clients delivering shareholder value , leading to another quarter of solid revenue and earnings growth .

non-GAAP revenue growth was positively impacted by the shift our net client comprehensive into Q1 from Q2.

Speaker #6: I will begin with our healthy first quarter results . Then conclude with our updated fiscal 26 guidance . Q1 GAAP revenue increased 7% and non-GAAP revenue increased 9% , a continuation of consistently solid performance .

Even without this timing shift quarterly revenue growth would have been a robust 8%.

First quarter Deacon version revenue of approximately $9 million, which we previously announced with up approximately $5 million or lapping a steady pace of M&A activity among financial institutions.

Speaker #6: non-GAAP revenue growth was positively impacted by the shift of our connect client conference into Q1 from Q2 . Even without this timing shift , quarterly revenue growth would have been a robust 8% .

Now, let's look more closely at the detail yes.

Services and support revenue increased 6% for the quarter, while non-GAAP increased 8%.

Greg Adelson: We're quite excited by the collaboration between our sales operational teams around that. Going after that, that's reflective also in the sales mix numbers that Greg talked about. Your next question comes from the line of Dan Perlin with RBC Capital Markets. Thanks. Good morning. I just wanted to maybe revisit the sales momentum here and the conversions into private cloud. I think you said you signed seven clients to convert into private cloud. You're at 77% today. You're getting pretty high on the penetration rate there, which is clearly a positive for the revenue uplift. I guess what I'm ultimately getting at is, as you think about the strategy to increasingly sell outside the core, can you just maybe update us on where that progress is?

Speaker #6: First quarter deconversion revenue of approximately 9 million , which we previously announced was up approximately 5 million , reflecting a steady pace of M&A activity among financial institutions .

Services and support growth during the quarter was primarily driven by strength in data processing and hosting revenue for both private and public cloud revenue from our connect conference and solution implementation.

Private and public cloud offerings continued to drive strong growth cloud revenue increased 7% in the quarter. This reoccurring revenue contributor at 30% of our total revenue.

Speaker #6: Now , let's look more closely at the details . GAAP services and support revenue increased 6% for the quarter , while non-GAAP increased 8% .

Speaker #6: Services and support growth during the quarter was primarily driven by strength in data processing and hosting revenue for both private and public cloud revenue from our connect conference and solution implementation , private and public cloud offerings continue to drive strong growth .

Shifting to processing revenue, which is 42% of total revenue and then another strategic.

Of our long term growth model.

Healthy performance with 10% GAAP and non-GAAP growth for the quarter.

Consistent with recent results quarterly drivers included increased card digital and payment processing revenues.

Speaker #6: Cloud revenue increased 7% in the quarter . This recurring revenue contributor is 30% of our total revenue . Shifting to processing revenue , which is 42% of total revenue and another strategic component of our long term growth model , we saw healthy performance with 10% GAAP and non-GAAP growth for the quarter , consistent with recent results .

Greg Adelson: I know you've got a lot of initiatives underway, but it would just be helpful to kind of refresh that strategy here. Thank you. Sure. Thanks, Dan. Yeah. As I mentioned, we're right at 77%. As we've talked about, we still see a good five to six years of continued progress at the numbers that we've been seeing. Based on over the last several years, we've been averaging between 35 and 45 of those migrations. We believe we're on track to do that again this year. As I did mention, some of those are larger customers just based on a lot of the larger customers are more reluctant at the time to make those changes. To answer your question about outside the base, yeah, we are highly focused on all of the new Jack Henry Platform components that we've built. All are core agnostic.

Completing commentary in revenue I would highlight total reoccurring revenue exceeded 91%.

Next moving to expenses.

Beginning with the cost of revenue, which increased a modest 1% on a GAAP basis, and 4% on a non-GAAP basis for the quarter.

Speaker #6: Quarterly drivers included increased card digital and payment processing revenues , completing commentary on revenue . I would highlight total recurring revenue exceeded 91% .

Drivers for the quarter included higher direct costs consistent with revenue growth higher personnel costs, partially offset by lower benefit.

The increased amortization of intangible assets.

Speaker #6: Next , moving to expenses . Beginning with the cost of revenue , which increased a modest 1% on a GAAP basis and 4% on a non-GAAP basis .

For modeling purposes amortization of acquisition related intangibles was $6 million for the quarter.

Next R&D expense decreased 1% and present, GAAP and non-GAAP basis for the quarter.

Speaker #6: For the quarter . Drivers for the quarter included higher direct costs , consistent with revenue growth , higher personnel costs , partially offset by lower benefits and increased amortization of intangible assets for modeling purposes , amortization of acquisition related intangibles was 6 million for the quarter .

The decrease was primarily due to temporary net personnel costs.

And ending with SG&A expense for the quarter on a non-GAAP basis, it increased 14% and 9% on a GAAP basis.

Greg Adelson: Every one of those has opportunities to be sold outside the Jack Henry base, creating opportunities for us to leverage larger opportunities. That's been something that we've talked about for the last several years. We had a regional, a very large regional, and a super regional at our client conference in September, again, exploring the various opportunities there. We talked about Banno going outside the base. Our team will start selling that and having opportunities in January of 2026. We'll be out actively working, and we already have a couple of potential opportunities identified, but Banno will be something that will continue to create opportunities.

The quarter increase was primarily due to the timing of our connect client conference increased personnel service costs higher net personnel costs, partly offset by lower commission and benefit costs.

Speaker #6: Next , R&D expense decreased 1% on both a GAAP and non-GAAP basis for the quarter . The quarter decrease was primarily due to tempered net personnel costs and ending with SG&A expense for the quarter on a non-GAAP basis , it increased 14% and 9% on a GAAP basis .

Without the connect client conference costs, SG&A would have increased 12% on a non-GAAP basis, and 7% on a GAAP basis.

Aided by our consistent revenue growth, we remain focused on generating annual compound compounding margin expansion.

Speaker #6: The quarter increase was primarily due to the timing of our connect client conference , increased personnel service costs , higher net personnel costs , partly offset by lower commission and benefit costs .

Q1 delivered 227 basis point increase in non-GAAP margin to 27%.

Speaker #6: Without the connect client conference costs would have increased 12% on a non-GAAP basis and 7% on a GAAP basis , aided by our consistent revenue growth .

non-GAAP margin benefit from inherent leverage in our business model strategic cost management and leveraging existing workforce as we continue to focus on enterprise process improvement and AI utilization.

Greg Adelson: Everything we're building today in the platform, even related to our SMB strategy, the Tap-to-Local or the Rapid Transfers, we've created companion apps that will allow us to sell all of those to competing digital providers and allow them to utilize that technology in creating a consistent revenue stream for us as part of that. Obviously, we're launching first with our Banno clients, and eventually, we'll be offering that more broadly out in the market. It's going to create a continuous opportunity for us to connect with outside-the-base core opportunities, as well as complementary and payment products. By the way, the Victor acquisition will also allow us to do that, creating opportunities with some of the non-Jack Henry core clients as well. Thank you. Your next question comes from the line of Kartik Mehta with Northcoast Research. Hey, good morning, Greg.

Speaker #6: We remain focused on generating annual compound compounding margin expansion . Q1 delivered 227 basis point increase in non-GAAP margin to 27% . non-GAAP margin benefit from inherent leverage in our business model , strategic cost management and leveraging existing continue to focus on enterprise process improvement and AI utilization , these strong quarterly results produced a fully diluted GAAP earnings per share of $1.97 , up 21% .

These strong quarterly results produced fully diluted GAAP earnings per share of $1 97 up 21%.

Reviewing the three operating segments. We are pleased to see profit positive performance across the board.

Of course, <unk> non-GAAP revenue increased 6% on the quarter with operating margins, increasing a robust 114 basis points.

We continue to gain benefits from private cloud trends and disciplined cost management.

The payments segment quarterly non-GAAP revenue increased 8%.

Speaker #6: Reviewing this operating segments , we are pleased to see positive performance across the board course . non-GAAP revenue increased 6% on the quarter with operating margins increasing a robust 114 basis points .

<unk> again had outstanding non-GAAP operating margin growth with quarterly results of 170 basis points.

Revenue growth was due to a resilient and our card related services, consisting growth and the EPS business and large continuing large percentage growth on faster payments, albeit on a smaller dollar base.

Speaker #6: We continue to gain benefits from private cloud trends and disciplined cost workforce . management . The As we payment segment quarterly non-GAAP revenue increased 8% .

Greg Adelson: I think you and Mimi both talked about the consolidation and obviously increase in deconversion fees. Just a two-part question on that. One is, what type of impact do you expect that to have on your recurring revenue into next fiscal year? As we go into calendar 2026, do you think we'll have the same amount of core activity, or do you think that slows down because there's all this M&A activity and banks will want to wait to see how that plays out before committing to converting a core? Yeah. Thanks, Kartik. I'll take your first question first. Yeah. We had talked about in the August call, just we had timing. We typically win more than we lose. There was some timing based on some size deals, and we had talked about that being a headwind.

Margins benefited from operation efficiencies and disciplined cost management.

Speaker #6: Segment again had outstanding non-GAAP operating margin growth with quarterly results of 170 basis points . Revenue growth was due to resilience in our card related services .

Finally complementary segment quarterly non-GAAP revenue increased an impressive 9% with healthy 75 basis points of margin expansion.

Speaker #6: Consistent growth in the EPs business and large continuing large percentage growth on faster payments . Albeit on a smaller dollar base margins benefited from operational efficiencies and disciplined cost management .

Quarterly revenue growth continued to reflect its still solution demand beneficial.

Product mix and sales force from both new core wins and noncore financial institution.

Now a review of cash flow and capital allocation.

Speaker #6: Finally , complementary segment quarterly non-GAAP revenue increased an impressive 9% , with healthy 75 basis points of margin expansion . Quarterly revenue growth continued to reflect digital solution demand , beneficial product mix , and sales sourced from both new core wins and non-core financial institutions .

Q1, operating cash flow was 121 million a $4 million increase over the prior fiscal year.

Quarterly free cash flow was $69 million delivered by $10 million increase is positively impacted by the collection of remaining annual maintenance billing.

Greg Adelson: We've actually started to see that kind of level itself out, especially in what we call convert-merge activity, which is our customers buying other customers. We're already seeing, just in our banking segment, almost double the number of convert-merge that are on the calendar for this year as compared to last year. That's starting to level itself out. A lot of the impact that we saw for the year was heavily weighted towards Q1, and there were some opportunities there that we, again, started to right-size. To answer your question on the number of core activity, I think, based on our pipeline, based on our typical success rate, I would say that we're going to be right where we typically are, around that 50 number, and the team feels very confident about that as well. There could be some additional opportunities, again, by what was announced with.

And full tax depreciation of development expenses related to recent tax legislation.

Speaker #6: Now , a review of cash flow and capital allocation Q1 operating cash flow was 121 million , a $4 million increase over the prior fiscal year .

Our consistent dedication to value creation resulted in a trailing 12 month return on invested capital of 22% compared to the 20% in the first quarter of the prior year.

Speaker #6: Quarterly free cash flow is 69 million , delivered by a $10 million increase was positively impacted by the collection of remaining annual maintenance billings and full tax , depreciation and development expenses related to recent tax legislation .

Very proud of the durability of this metric performance.

Additionally, I would highlight the following significant capital allocation decision.

$100 million in share repurchases year to date through October the asset acquisition of Victor and $42 million in dividends paid.

Speaker #6: Our consistent dedication to value creation resulted in a trailing 12 month return on invested capital of 22% . Compared to the 20% in the first quarter of the prior year .

We ended the quarter with a minimal amount of debt consistent with normal course, a revolver line usage and expect to end the year debt free barring acquisitions or other opportunity.

Speaker #6: We're very proud of the durability of this metric . Performance . Additionally , I would highlight the following significant capital allocation decisions hundred million in share repurchases year to date through October .

I will now discuss the updated increased full year guidance.

As you are aware Yesterdays press release included updated increases to fiscal 'twenty six full year GAAP guidance.

Speaker #6: The Asset acquisition of Victor and 42 million in dividends paid . We ended the quarter with a minimal amount of debt consistent with normal course revolver line usage .

Greg Adelson: One of the providers in the consolidation of some of their cores. That was just recently announced, and activity is still being built. That could increase the number. Don't know, but a lot of those are also smaller deals. We'll have to see kind of where those fall and if they end up being ones that are acquired prior to making a core change. That could add a little bit more. Just for my context, you might find this metric interesting, Kartik, but it really shows to me the resiliency and the attractiveness of our FI segment. If you look at the last decade or so, from 2014 to 2024, within the M&A context, you'll see far less activity within the segments that really represent the majority of our customer profile. Within credit unions, within the $100 million to $10 billion segment.

These deconversion guidance will continue to follow the conservative methodology introduced in fiscal 'twenty four.

Speaker #6: That expect to end the year debt free . Barring acquisitions or other opportunities . I will now discuss the updated increased full year guidance .

Fiscal 2016 conversion revenue guidance has been increased to $20 million.

Aligned with guidance methodology update the outlook as we confirmed more activity throughout the year.

Speaker #6: As you're aware , yesterday's press release included updated increases to fiscal 26 , full year GAAP guidance . Conversion guidance will continue to follow the conservative methodology introduced in fiscal 24 , fiscal 26 , Deconversion revenue guidance has been increased to 20 million , aligned with guidance methodology .

Full year GAAP revenue growth guidance increased to a range of four 9% to five 9%.

This is driven by the conversion revenue increase.

<unk> revenue contribution for the remainder of the year from the Victor acquisition.

I will emphasize GAAP revenue remained almost certainly understated due to the conservative deconversion revenue guidance.

Speaker #6: We will update the outlook as we confirm more activity throughout the year . Full year GAAP revenue growth guidance increased to a range of 4.9% to 5.9% .

Based on our strong first quarter result.

Expected continued momentum we are increasing the lower end of the non-GAAP revenue annual growth rate guidance, resulting in a new outlook of 6% to 7%.

Speaker #6: This is driven by Deconversion revenue increase , expected revenue contribution for the remainder of the year from the victor acquisition . I will emphasize GAAP revenue remains almost certainly understated due to the conservative Deconversion revenue guidance .

Greg Adelson: Contracted 13% versus the total market contraction of almost 30%. In banks, it was even more apparent with actually growing that market segment 4% while the total market contracted 30%. To me, that really shows the health and attractiveness, and the limited impact overall from the continuation of the four decades of industry consolidation in our segments. If anything, we've historically talked about that being a growth engine for a lot of our clients. Yeah. I'll just tag on one other comment that I think is important, which I emphasized in my opening comments around our platform. Our platform strategy and our ability to innovate as quickly as we are is allowing us to keep a foothold on opportunities even when our institutions are being acquired. We're getting time at the table. There's been several instances where we've been invited, even though we know that the.

As a reminder, fiscal 2006 in the first quarter of fiscal 'twenty seven Victor acquisition related financial impact will be excluded as part of non-GAAP reporting.

Speaker #6: Based on our strong first quarter results and expected continued momentum , we have increased the lower end of the non-GAAP revenue annual growth rate guidance , resulting in a new outlook of 6% to 7% .

Based on the above revenue growth and a resilient financial model, we expect to again generate sustainable accretive sources of margin.

We are increasing full year guidance for non-GAAP margin expansion to a range of 30 to 50 basis points.

Speaker #6: As a reminder , fiscal 26 and the first quarter of fiscal 27 Victor acquisition related financial impacts will be excluded as part of non-GAAP reporting .

All of the above are indicative that our business operations remained healthy and sound with near term growth opportunity.

Speaker #6: Based on the above revenue growth and our resilient financial model , we expect to again generate sustainable , accretive sources of margin . We're increasing our full year guidance for non-GAAP margin expansion to a range of 30 to 50 basis points , all of the above are indicative that our business operations remain healthy and sound with near-term growth opportunities .

The full year GAAP tax rate estimate for fiscal 2000.

23, 75%.

The above increased guidance metrics resulted in a stronger full year outlook for GAAP EPS of $6 38 to $6 49 per share a growth of 2% to 4%.

And as a reminder, updated conservative deconversion revenue guidance, almost understates, almost certainly understates EPS GAAP growth.

Greg Adelson: Acquiring institution is going to move off of their existing or keep their existing competitive core. We've been invited in to speak about what we're doing and where we're going as part of their future plans. There's a lot more opportunity for Jack Henry in these deals than there was even several years ago. Thank you both. I appreciate it. Your next question comes from the line of Jason Kupferberg with Wells Fargo. Hi. Good morning, Greg and Mimi. This is Tyler Dupont on for Jason. Thanks for taking the question. I just want to ask, not to pile on on core banking, but just want to ask about the trends you're seeing. I heard in the prepared remarks you guys signed four takeaways, and you're comfortable with the 50 to 55 target.

Speaker #6: The full year GAAP tax rate estimate for fiscal 26 is 23.75% . The above increased guidance metrics results in a stronger full year outlook for GAAP .

Fiscal 2006 is expected to have superior free cash flow conversion due to recently passed tax legislation and we have elected to take accelerated election.

Speaker #6: EPs of $6.38 to $6.49 per share, a growth of 2% to 4%, and as a reminder, updated conservative deconversion revenue guidance understated.

Full year free cash flow conversion outlook is for 85% to 100% for fiscal 'twenty six matching our expected target, but with a bias to the higher end of the range.

Speaker #6: Almost certainly understates EPs GAAP growth . Fiscal 26 is expected to have superior free cash flow conversion due to recently passed tax legislation , and we have elected to take the accelerated election full year free cash flow conversion outlook is for 85% to 100% for the fiscal 26 , matching our expected target , but with a bias to the higher end of the range .

As a reminder, we see fluctuations in quarterly results relating to software usage license component along with the timing of implementation. Therefore.

Therefore, the correct performance indicator for our business is the consistently strong fiscal year financial results.

In conclusion Q.

Greg Adelson: Just from an asset size perspective, could you maybe clarify the average size of the wins you're seeing in the quarter and how that sort of coincides with your longer-term strategy to move up market and to claim those larger wins? Yeah, I appreciate the question. Yeah, I mean, we closed four deals for the quarter. One was a multi-billion dollar deal. If you go back to last year, we closed 16 multi-billion, four over $5 billion, and we're on track to do that or better this year, based on what our forecasts are and what's in the pipeline. The first quarter results fall directly in line with what our expectations would be. Great, thank you. Your next question comes from James Faucette with Morgan Stanley. Great, thank you very much. Greg, you mentioned the bank director survey and median growth in tech spend.

<unk> results reflect outstanding performance, leading to increased guidance for.

We're pleased by the start to our fiscal year and remain positive on the outlook.

Speaker #6: As a reminder , we see fluctuations in quarterly results relating to software usage , license components along with the timing of implementation . Therefore , the correct performance indicator for our business is the consistently strong fiscal year financial results in conclusion , Q1 results reflect outstanding performance leading to increased guidance .

Demand for our solutions aligned with continued technology spend by our clients and prospects will drive superior shareholder return.

In value. We appreciate the contributions of our dedicated associates that achieve these superior results and our investors for their ongoing confidence.

Speaker #6: We're pleased by the start to our fiscal year and remain positive on the outlook demand for our solutions aligned with continued technology spend by our clients and prospects will drive superior shareholder return and value .

Jamie Please open the line for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press star one again at this time, we will pause momentarily to assemble our roster.

Speaker #6: We appreciate the contributions of our dedicated associates that achieve these superior results , and our investors for their ongoing confidence . Jeannie , please open the line for questions .

Okay.

Yeah.

Speaker #3: We will now begin the question and answer session . To ask a question , you may press star , then one on your telephone keypad .

The first question comes from the line of Rena Kumar with Oppenheimer.

Greg Adelson: I'm curious, just given where we are in the deposit cycle and the prospect of accelerating loan growth next year with changing interest rates, I was hoping you could help us to stratify the differences in demand from your customers for deposit attraction versus retention versus lending, and how you are allocating resources to one side or the other, whether it be to lending or the ledger side. Yeah. I'll give you a couple of comments. I think Mimi's got a couple as well. What I would say is that from an interest level, obviously, the loan portfolio is continuing to increase with the opportunities. The real concern with most of the institutions today is maintaining the deposit growth to allow that customer base to have opportunities for lending.

Good morning, Greg and Mimi nice results here.

Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys to withdraw your question , please press star one again .

We saw some solid margin expansion in the quarter and as you mentioned Mimi R&D was down 1% can you talk about how sustainable that type of margin expansion is going forward and maybe how margin to luck.

Speaker #3: At this time , we will pause momentarily to assemble our roster . The first question comes from the line of Rayna Kumar with Oppenheimer .

For the remainder of the year by quarter.

Thanks for joining us this morning rain out in your question.

Speaker #7: Good morning , Greg and Mimi . Nice results here . We saw some solid margin expansion in the quarter , and as you mentioned , Mimi , R&D was down 1% .

Thank R&D has the same profile that you've seen in SG&A and other areas consistent with our aircrafts are expense, which is the thoughtfulness and which we plan to this year's budget.

Speaker #7: Can you talk about how sustainable this type of margin expansion is going forward ? And maybe how margin could look for the remainder of the year by quarter ?

<unk> modestly conservative out the gate.

We're being very disciplined around head count increases while still investing for growth. So as we look to the remainder of the year some of that is timing related.

Speaker #6: Thanks for joining us this morning , Rayna . And your question , I think R&D has the same profile that you've seen in G&A and other areas .

Greg Adelson: When you look at the things that are happening in the market today, whether that be neobanks, stablecoin, or other things that, and again, even what we've seen in the SMB market, where a lot of these smaller customers, or in this case, sole proprietors, are banking at other outside of the community banking space for their SMB needs, that's where the real concern is because they're losing those clients without the right solution sets to keep that in. There's a lot of interest, obviously, to find opportunities on the lending. Today, I think their bigger focus is efficiency and deposit growth as of right now. The only odds I would say is that we consistently see through our own survey that both deposit gathering, as well as lending, remain in the top four priorities in the last three years.

Some of that is things that we're expecting to kind of reverse if you will some benefits related.

Speaker #6: Consistent with across our expense , which is the thoughtfulness in which we planned this year's budget . Being modestly conservative out the gate .

Net personnel costs.

And the timing of some of the spending we have four projects, but overall I would say theres consistent C. That's going to drive the full year margin expansion, which is our general control of spending.

Speaker #6: We're being very disciplined around headcount increases while still investing for growth . So as we look to the remainder of the year , some of that is timing related .

Our limited head count growth for the year.

Speaker #6: Some of that is things that we're expecting to kind of reverse , if you will . Some benefits related net personnel costs and the timing of some of the spending we have for projects .

Efficiencies and AI.

Got it.

Your next question comes from the line of will Nance with Goldman Sachs.

Speaker #6: But overall , I would say there's consistency that's going to drive the full year margin expansion , which is our general control of spending , our limited headcount growth for the year and efficiencies and AI .

Hey, Thanks for taking the question I was wondering if you could expand a little bit on the pricing and competitive environment out there and in particular, there's been a lot of focus around some of the core consolidation happening at the competitors are you guys seeing an entry.

Greg Adelson: Sometimes they horse trade in terms of which is outpacing the other, but both are certainly top of mind. I would say in Q1, James, we started to see a little bit of the signs of an increasing pace of lending activity, whether that was some enthusiasm regarding the overall economy, inflation coming down, expectations of the Fed starting to move. We are starting to see a small uptick in the pace of lending, which is a very encouraging sign. That's good. The next question comes from Dominic Gabriel with Compass Point. Hey, good morning. I have to say, I think you guys sound pretty fired up on this call and the prepared remarks. One of the things with Jack Henry is the level of revenue growth, and it sounds like you're limiting pricing compression and stabilizing that headwind.

Kris willingness to explore.

Speaker #7: Got it . That's .

Converting cores in the market and.

How are you feeling about your chance of maybe shaking loose a couple of those opportunities. Thank you.

Speaker #3: Your next question comes from the line of will Nance with Goldman Sachs .

Hey will.

Speaker #8: Hey , thanks for taking the question . I was wondering if you could expand a little bit on the pricing and competitive environment out there .

Thanks for the question.

We're not seeing anything more significant I know obviously there was some recent announcements on on collapsing the number of cores for one of their providers and things along that line. It's still early I think our pipeline is still remains very significant as I mentioned in my script, we've already seen some.

Speaker #8: And in particular , there's been a lot of focus around some of the core consolidation happening at the competitors . Are you guys seeing an entry , increased willingness to explore converting cores in the market , and how are you feeling about your chance of maybe shaking loose a couple of those opportunities ?

Some nice wins for the quarter.

Speaker #8: Thank you .

Speaker #5: Hey , Will , thanks for the question . You know , I think , you know , we're not seeing anything more significant .

So I anticipate that we will continue to be at a fairly normal pace I haven't seen anything out there that has seen any more intense competitive pressure than I would've said six months ago, though at this point in time.

Speaker #5: I know obviously there were some recent announcements on on collapsing the number of cores for one of the providers and things along that line .

Speaker #5: It's still early . I think our pipeline is is still remains very significant . As I mentioned in my script , we've already seen some some , some nice wins for the quarter .

Thanks for taking the question.

I think the only other add I would say to the point that Greg made in his prepared remarks. The changes we've made operationally around limiting the impact from pricing compression to your the first half of your question around pricing, we're starting to see the fruits of the labor.

Speaker #5: And so I , I anticipate that will continue to be at a fairly normal pace . I haven't seen anything out there that has seen any more intense competitive pressure than I would have said .

Greg Adelson: I was just curious, given where your current guidance is this year versus previous years, maybe you could—is there any chance you could quantify that headwind of pricing over the last 12 months and how it possibly went into your current guidance and what those mitigation efforts actually are in the business? Is it like salespeople having different mechanics or something along those lines? Thanks so much. Sure, John. I would say that we started to see that impact last year, which is why we called it out. We're seeing it flow through the P&L this year. From an encouraging sign, I would say we've seen a stabilization through the operational activities, the collaboration between sales, and the programs that the leadership team has put in place. We're certainly seeing that headwind abate, but we need to see the whole impact flow through this year.

Speaker #5: Six months ago , though , at this point in time .

Paying off so we're seeing stabilization from that headwind.

Speaker #8: Thanks for taking the question .

We're quite excited by the collaboration between our sales operational teams around that and going after that and that's reflected also in the sales mix numbers that Greg talked about.

Speaker #6: I think will the the only other add , I would say to to the point that Greg made in his prepared remarks , the changes we've made operationally around limiting the impact from pricing , compression to your the first half of your question around pricing , we're starting to see the fruits of the labor paying off .

Yeah.

Your next question comes from the line of Dan Perlin with RBC capital markets.

Thanks, Good morning, I, just wanted to maybe revisit the the sales momentum here and the conversions into private cloud. So thank you for the slide seven clients to convert their private cloud youre at 77% today, So youre getting pretty high on the penetration rate there, which is clearly a positive revenue uplift I guess, what I'm ultimately getting.

Speaker #6: So we're seeing stabilization from that headwind . We're quite excited by the collaboration between our sales operational teams around that and going after that .

Speaker #6: And that's reflected also in the sales mix numbers that Greg talked about .

Speaker #3: Your next question comes from the line of Dan Perlin with RBC Capital Markets .

As you think about the strategy to increasingly sell outside the core can you just maybe update us.

Speaker #9: Thanks . Good morning . I just wanted to maybe revisit the sales momentum here in the conversions into private cloud . So thank you , city signed seven clients to convert into private cloud .

And where that progress is I know you've got a lot of initiatives underway, but it'd just be helpful to kind of refresh that <unk>.

Greg Adelson: I wouldn't give a precise number from an expectation, but it was certainly one of the larger causes for the lower guide this year versus our longer-term growth plan. The other area was a modest expectation from consumer sentiment health and the spending. Thus far, we've seen a pretty robust consumer spending. We've seen card that was part of the Q1 outperformance, with card came in higher than expectation. While we still have a lot of the year to play out, we remain upbeat and optimistic on a modest continuation of that spending trend. Yeah. Dom, I'll add a couple of comments around kind of process stuff. Just, yeah, I mean, we took a very detailed approach with sales operations and finance. It took us several months to get it to where we wanted it to be.

That strategy here. Thank you.

Speaker #9: You're at 77% today . So you're getting pretty high on the penetration rate there which is clearly a positive for the revenue uplift .

Sure. Thanks, Dan, Yes, so as I mentioned, we're still we're right at 77%.

We've talked about we still see a good five to six years of of continued progress of the numbers that we've been seeing based on over the last several years, we've been averaging between 35 and 45% of those migrations. We believe we're on track to do that again this year as I did mentioned some of those are larger customers just base.

Speaker #9: I guess what I'm ultimately getting at is , as you think about the strategy to increasingly sell outside the core , can you just maybe update us on on where that progress is ?

Speaker #9: I know you've got a lot of initiatives underway , but it would be helpful to kind of refresh that that strategy here . Thank you .

Speaker #5: Sure . Thanks , Dan . Yeah . So as I mentioned , we're still we're right at 77% as we've talked about , you know , we still see a good 5 to 6 years of of continued progress at the numbers that we've been seeing .

On on a lot of the larger customers are are more.

Reluctant at the time to make those changes but to answer your question about outside in and outside the base. Yes. So we are highly focused on all of the new Jack Henry platform components that we've built.

Speaker #5: You know , based on over the last several years , we've been averaging between 35 and 45 of those migrations . You know , we believe we're on track to do that again this year .

All core agnostic. So every one of those have opportunities to be sold outside the Jack Henry base, and creating opportunities for us to leverage larger opportunities thats been something that we've talked about for the last several years.

Speaker #5: As I did mention , some of those are are larger customers just based on on a lot of the larger customers . Are are more , you know , reluctant at the time to , to make those changes .

Greg Adelson: We actually started to see the processes come together at the end of fiscal year 2025, in the fourth quarter, where we saw performance improve. We've continued to see it through the first quarter. We still, as Mimi had mentioned, had some deals that were already done, especially some larger deals. As I noted last year, we did more renewals than we did the year previously, and a lot larger clients, so some of the impact was already felt. The new processes that we put in place, the structure, and the rigor of communication and collaboration amongst all of the teams to ensure that everybody was in sync, was a big part of what we were focused on. Honestly, it's exceeded my expectations this early.

Speaker #5: But to answer your question about outside , outside the base . Yes . So we are highly focused on all of the new Jack Henry platform components that we've built are all core agnostic .

We had to we had a.

A regional or very large regional and Super regional at our client conference.

In September again exploring the various opportunities there we talked about banner going outside the base our team will start selling that and having opportunities in January of 26.

Speaker #5: So every one of those have opportunities to be sold outside the Jack Henry base . And creating opportunities for us to leverage larger , you know , opportunities .

Speaker #5: That's been something that we've we've talked about for the last several years . We had two we had a , a regional , a very large regional and a super regional at our client conference in September .

So we will be out actively working and we already have a couple of potential opportunities identified but banner will be something that will continue to create opportunities and then everything we're building today in the platform.

Speaker #5: Again exploring the various opportunities there . We talked about going outside the base . Our team will start selling that and having opportunities in in January of 26 .

Related to our SMB strategy, so the tap the local or the rapid transfers. We've created companion apps that will allow us to sell all of those two competing digital providers and allow them to utilize that that technology and creating a consistent revenue stream for us as part of that.

Greg Adelson: We're very optimistic that things will continue down that path, as well as having fewer renewals than we had last year by about 20-something percent. That's another component of this. Again, a lot of what was baked into the original guidance was because it was already baked into deals that were done in fiscal year 2025. Thanks for all the color. The next question comes from the line of Dave Cunning with Baird. Yeah. Hey, guys. Thank you. Good job. I guess my question: card processing revenue accelerated about 2%, which was nicely better than industry trends, which were pretty stable to maybe a little acceleration. 2% is a lot better. I know you called out a lot of the newer types of payment services growing really well. I guess the question is, is that sustainable?

Speaker #5: So we'll be out actively working . And we already have a couple of potential opportunities identified . But banner will be something that will continue to to create opportunities .

Speaker #5: And then everything we're building today in the platform , even related to our SMB strategy . So the tap to local or the rapid transfers we've created companion apps that will allow us to sell all of those to competing digital providers and allow them to utilize that that technology and creating a consistent revenue stream for us as part of that .

But we are obviously we are.

Launching first with our banner clients and eventually will be offering that more broadly out in the market. So it's going to create a continuous opportunity for us to.

Connect with outside the base core opportunities as well as complementary and payment products and by the way Victor The Victor acquisition will also allow us to do that creating opportunities with some of the non Jack Henry core clients as well.

Speaker #5: But , you know , we're obviously we're launching first with our banner clients and eventually we'll be offering that more broadly out in the market .

Thank you.

Speaker #5: So it's going to create a continuous opportunity for us to to connect with outside the base core opportunities , as well as complementary and payment products .

Your next question comes from the line of Kartik Mehta with Northcoast research.

Greg Adelson: This higher level of growth now, are those other things contributing enough to kind of keep this at a higher pace? Dave, I would say it's a combination of a number of factors within the payment segment. One is, as we talked about, the US consumer spending at a better clip than I think we were concerned about last year as an economy as a whole. You're seeing that at a healthy pace. I wouldn't say it's a crazy pace of exuberance, but a healthy pace of the US consumer spending. The other is the ancillary services surrounding card have been very healthy. We have a number of services that complement the payments card business. We've seen healthy uptick and growth in those businesses. The stabilization and positive performance from the EPS business really helps us fill a large segment portion of the payment segment.

Hey, Good morning, Greg I think you anemia, both talked about the consolidation and obviously increase in deconversion fees. Just a two part question on that one is what's the impact do you expect that when you're reoccurring revenue.

Speaker #5: And by the way , Victor , the Victor acquisition will also allow us to do that . Creating opportunities with some of the non Jack Henry core clients as well .

Speaker #9: Thank you .

Into next fiscal year.

Speaker #3: Your next question comes from the line of Kartik Mehta with Northcoast Research .

As we go into calendar 2026, do you think will have the same amount of core activity or do you think that slows down because theres all this M&A activity and banks will.

Speaker #9: Hey , good morning Greg . I think .

Speaker #10: You and Mimi both talked about the consolidation and obviously increase in deconversion fees . Just a two part question on that . One is , you know , what type of impact do you expect that to have on your recurring revenue into next fiscal year ?

To wait to see how that plays out before committing to converting our core.

Yes, Thanks, Kartik, So I'll take your first question first.

Yes, So we had talked about in the August call. Just we had timing we typically win more than we lose there were some timing based on some size deals and we had talked about that being a headwind. We've actually started to see that kind of level itself out, especially in what we call convert merge activity, which is our customers.

Speaker #10: And as we go into calendar 2026 , do you think we'll have the same amount of core activity , or do you think that slows down because there's all this M&A activity and banks will want to wait to see how that plays out before committing to converting a core .

Greg Adelson: On the faster payments, even though it's off of small base numbers, we think there's a lot of upside from the solutions that are going to drive adoption and volume on the faster payment. We're quite positive on the momentum there. Dave, I'd like to add one other component. We are actually starting to see a lot of the value of our payrolls acquisition coming into play now. We're starting to see a nice uptick in payrolls, iPay, bill pay opportunities. We're seeing less compression. We're seeing less deconversion. We're seeing all kinds of things that are generated as what we expected out of that acquisition starting to come to fruition now. That's another key component. Based on the size of that business, helping to help drive some of that as well. Gotcha. Thanks. Great job, guys. Thanks. Thank you.

Speaker #5: Yeah . Thanks , Kartik . So I'll take your first question first . Yeah . So , you know , we had talked about in the August call , just , you know , we had , you know , timing .

<unk> other customers, we're already seeing just in our banking segment almost double the number of convert merged that are on the calendar for this year as compared to last year. So again, that's starting to level itself out a lot of the impact that we saw.

Speaker #5: You know , we typically win more than we lose . There were some timing based on some size deals . And we had talked about that being a headwind .

Speaker #5: We've actually started to see that kind of level itself out , especially in what we call convert , merge activity , which is our customers buying other customers .

For the year that was heavily weighted towards Q1.

And there were some opportunities there that we again started to rightsize the answer to your question on the number of core activity I think I think based on our pipeline based on <unk>.

Speaker #5: We're already seeing just in our banking segment , almost double the number of convert mergers that are on the calendar for this year .

Our typical success rate.

Speaker #5: As compared to last year . So again , that's starting to level itself out . A lot of the impact that we saw for the year , that was heavily weighted towards Q1 , and there were some opportunities there that we , you know , again , started to to Rightsize to answer your question on the number of core activity , I think I think based on our pipeline , based on our typical success rate , I would say that we're going to be right where we typically are around that 50 number .

I'd say that were going to be right, where we typically are.

That 50 number.

The team feels very confident about that as well there could be some some.

Additional opportunities again by by what was announced with <unk>.

Greg Adelson: The next question is from Darrin Peller with Wolfe Research. Thanks, guys. Nice quarter. Just to clear up a little bit, I mean, I know when we came out of last quarter, there was obviously those few items called out. You touched on some of the progress and what you're seeing around things, whether it's bank M&A, pricing and renewals, and generally account growth at credit unions impacting your initial guide by a bit. Clearly, you're seeing good outperformance, like you said, even on the card side. When we think about where your confidence is around some of the newer areas, again, you mentioned faster payments, but Moov partnership, Tap-to-Local, Rapid Transfers. Do you see those being enough to spool up so that by the end of the fiscal year, you basically have 50 basis points, maybe plus that.

One of the providers and the consolidation of some of their course, but that yes that was just recently announced and activity is still.

It's still being built but but that could increase the number don't know, but a lot of those are also smaller deals. So we'll have to see kind of where those fall and if they end up being ones that are acquired prior to making our core change.

Speaker #5: And the team feels very confident about that as well . You know , there could be some some additional opportunities . Again , you know , bye bye .

Speaker #5: What was announced with one of the providers in the consolidation of some of their cores . But that yet you know , again , that was just recently announced in activity is still , you know , still being built .

That could add a little bit more just from a context you might find this metric interesting product, but it really shows to me the resiliency and attractiveness of our <unk> segment, but if you look at the last decade or so.

Speaker #5: But but that could increase the number . Don't know . But a lot of those are also smaller deals . So we'll have to see , you know , kind of where those fall .

From like 2000, Fourteens 2024 within the M&A contacts youll see far less activity.

Speaker #5: And if they end up being ones that are acquired prior to making a core change .

Greg Adelson: Could have replaced what some of the headwinds are impacting this year by? Is that going to be big enough and material enough in your view? Just maybe a quick update on how some of those are trending as well. Yeah, I mean, it's a good question, Darrin. I think the issue is that specifically tied to Tap-to-Local and Rapid Transfers. As I mentioned, we're just now rolling that out. I can tell you we have very high expectations of what it will be long-term, and based on the feedback we got at our client conference and what we're seeing initially with customer excitement, we feel very strongly. Now, whether it's going to be a 50 basis point increase, I'm just going to probably say probably not. If it is, we'll start to know more here in the next couple of quarters.

Speaker #6: That could add a little bit more just from a context , you might find this metric interesting . Kartik but it really shows to me the real resiliency and the attractiveness of our Fi segment .

In this segment.

Really represent the majority of our customer profile.

And then credit unions within the 110 billion segment.

Speaker #6: But if you look at the last decade or so from like 2014 to 2024 , within the the M&A context , you'll see far less activity within the segments that really represent the majority of our customer profile .

Contracted 13% versus the total market contraction of almost 30%.

And banks it was even more.

Apparent with actually growing that market segment, 4%, while the total market contracted 30%. So to me that really shows the health and the attractiveness.

Speaker #6: So within credit unions , within the 100 to 10 billion segment , contracted 13% versus the total market contraction of almost 30% . And banks , it was even more apparent with actually growing that market segment 4% .

And the limited impact overall from the continuation of the four decades of industry consolidation in our segment and if anything we've historically talked about that being a growth engine for a lot of our clients.

Greg Adelson: I can tell you that for the long-term growth, everything that we're doing in the SMB, which, by the way, this is only phase one, there's going to be multiple phases of what we're going to do in this space. It's tied to driving opportunities in both our digital offerings and our payment space. Related to faster payments, related to some of the things that we believe are going to happen, we had a call with the Fed recently. I think the Fed's going to get really serious about pushing various treasury activities and driving more opportunities on the SEND side of faster payments. That could create some additional revenue flow. Everything that we are doing, and even what we've seen with some of the improvements, as I mentioned earlier, on renewals.

Yes.

Tag on one other comment that I think is important which I emphasized in my opening comments around our platform our platform strategy and our ability to innovate as quickly as we are.

Speaker #6: While the total market contracted 30% . So to me , that really shows the health and attractiveness and the limited impact overall from the continuation of the four decades of industry consolidation in our segment .

Is allowing us to to keep a foothold on opportunities even when our institutions are being acquired.

Speaker #6: And if anything , we've we've historically talked about that being a growth engine for a lot of our clients .

We're getting time at the table Theres been several instances, where we've been invited even though that we know that the.

Speaker #5: Yeah . And I'll just tag on one other comment that I think is important , which I emphasized in my opening comments around our platform .

Acquiring institution is going to move off of their existing or keep their existing competitive core we've been invited in to speak about what we're doing and where we're going.

Speaker #5: Our platform strategy , and our ability to innovate as quickly as we are is allowing us to to keep a foothold on opportunities , even when our institutions are being acquired .

As part of their future plans so.

Theres a lot more opportunity for Jack Henry in these deals and there was even a several years ago.

Speaker #5: We're getting , you know , time at the table . There's been several instances where we've been invited , even though that we know that the acquiring institution is going to move off of their existing or keep their existing competitive core .

Greg Adelson: Obviously, the market environment with 10% being the spend with various core opportunities, all of that will help contribute to what we originally stated were going to be headwinds. It's still Q1, so it's still early to be able to fully determine what that will be yet. Darren, I would echo Greg's commentary. There's a lot of reasons to be pleased by the initial reaction and even the momentum we've seen from the uptake and the waves of installations that we have targeted. I think at this point, the reason for sharing them is really as an indicator and a validation of our investment for growth and the level of innovation, less so the in-year impact from them. As we think about what they could grow to be over the imminent next few years, it gives us great optimism around.

Thank you both I appreciate it.

Okay.

Your next question comes from the line of Jason Kupferberg with Wells Fargo.

Speaker #5: We've been invited in to speak about what we're doing and where we're going as as part of their future plans . So there's there's a lot more opportunity for Jack Henry in these deals than there was even a several years ago .

Hi, Good morning, Greg and maybe this is Tyler on for Jason Thanks for taking the question.

Just wanted to ask about the pylon on core banking, but just wanted to ask about the trends Youre seeing you know I heard in the prepared remarks, you guys signed four takeaways and Youre comfortable with the 50 to 55 target, but just from an asset size perspective could you maybe clarify the average size of the wins, you're seeing in the quarter and how that sort of coincides with your longer term strategy.

Speaker #10: Thank you both . I appreciate it .

Speaker #3: Your next question comes from the line of Jason Kupferberg with Wells Fargo .

Speaker #11: Hi . Good . Good morning , Greg and Mimi , this is Tyler DuPont on for Jason . Thanks for taking the question .

<unk> to move up market and to claim those larger wins.

Speaker #11: I just wanted to ask not to pile on on core banking , but just want to ask about the trends you're seeing . You know , I heard in the prepared remarks , you guys signed for takeaways and you're comfortable with the 50 to 55 target .

Yes. So I appreciate the question Yeah, I mean, we closed four deals for the quarter one was a multibillion dollar deal.

If you go back to last year, we closed 16 multibillion dollars for over $5 billion.

Speaker #11: But just from an asset size perspective , could you maybe clarify the average size of the wins you're seeing in the quarter , and how that sort of coincides with your longer term strategy to to move up market and to claim those larger wins ?

Greg Adelson: Being within the range and to the upside of that range, and opportunities to start thinking about the next new range possibility. All right. That's helpful. You know what? Can I just follow up quickly on the competitive landscape for a moment? I know this came up a bit earlier, but the core consolidation going on at one of your competitors, obviously, that's been talked about a lot. When you think about your, and you're reiterating your range of what you'd expect to add from a core standpoint, when you think about what you're seeing in the market in terms of the magnitude and level of RFPs even, have you noticed any changes more recently in the last, let's call it, six months or 12 months? Are you hearing rumblings of more change to come on that front? I guess capacity.

And we're on track to do that or better this year. So.

So based on what our forecasts are and what's in the pipeline.

The first quarter results fall directly in line with what our expectations would be.

Speaker #5: Yeah . So I appreciate the question . Yeah . I mean , you know , we closed four deals for the quarter . One was a multibillion dollar deal .

Great. Thank you.

Speaker #5: If you go back to last year , we closed 16 multi-billion for over 5 billion . And we're on track to do that or better this year .

Your next question comes from James Fawcett with Morgan Stanley.

Great. Thank you very much.

Speaker #5: So so based on what our forecasts are and what's in the pipeline , the the first quarter results fall directly in line with what our expectations would be .

Greg You mentioned, the bank director, Serbia, and the media and growth in Tech spend I'm curious just given where we are in the deposits and the prospect of accelerating loan growth next year with the change in interest rates. So I was hoping you could help us to stratify the differences from your customers for the positive.

Speaker #11: Great . Thank you .

Greg Adelson: I mean, when you think about your capability to handle if we were to get another 20, potentially, let's say 50 went to 60 or 70. Is that something you see yourselves being able to handle well? Yeah. It's a great question. I'll tell you, from a standpoint of the timeframes you gave, like I said, a lot of the news that has come out, I mean, obviously, they announced at their client conference they were doing the consolidation of the cores, but it got a little more pronounced in the last week with other things. The activity itself, I wouldn't say has significantly increased any more than what it's been. I do anticipate that to happen, just based on anytime anybody announces core consolidations, there just is an uptick. To answer your question on capacity, yeah, we 100%. We can gear up.

Speaker #3: Your next question comes from James Fossett with Morgan Stanley .

Sean versus retention versus lending.

Speaker #12: Great . Thank you very much , Greg . You mentioned the bank director survey and the median growth in tech spend . I'm curious , just given where we are in the deposit cycle and the prospect of accelerating loan growth next year with changing interest rates , I was hoping you could help us to stratify the differences in demand from your customers for deposit attraction versus retention versus lending , and how you are allocating resources to one side or the other .

And how you are allocating resources to one side or the other.

Due to lending or the weather side.

Yes, so I'll give you a couple of comments I think <unk> got a couple of as well. So I think what I would say is that from a interest level. Obviously the loan portfolio has continued to increase as the opportunities.

The real concern with most of the institutions today is maintaining the deposit growth to allow that customer base.

Speaker #12: On whether it be to lending or the ledger side .

Speaker #5: Yeah . So I'll give you a couple comments . I think Mimi's got a couple as well . So I think what I would say is that from a interest level , obviously the the loan portfolio is continuing to increase as the opportunities , but the real concern with most of the institutions today is maintaining the deposit growth to allow that customer base to to have opportunities for for lending .

To have opportunities for lending and so when you look at the things that are happening in the market today, so whether that be.

Greg Adelson: We do that already, various on timing of things that we have happening in M&A, things that we have in M&A, I mean, in new core wins. Bringing on teams, we do that regularly. We're good at it, and we're not concerned about that. The other thing is we've done a lot on the AI side related to how we handle RFP responses and things like that. Our acceleration of being able to handle an accelerated amount of RFPs doesn't concern us. The sales team's all over it, and I anticipate that to be a— Oh, that is. Oh, that's a siren, I guess. Yeah. Sorry. I don't anticipate that being a— Yeah, no worries. I don't anticipate that being a concern at all, Darrin. We'll continue to update you as this goes on.

Neo banks or stable coin or other things that.

And again, even what we've seen in the SMB market, where a lot of these smaller customers or in this case sole proprietors are banking at other outside of the community banking space for their SMB needs, that's where the real concern is because theyre, losing those clients without the right solution sets to keep that in so there is a.

Speaker #5: And so when you look at the things that are happening in the in the market today , so whether that be Neobanks or stablecoin or other things , that and again , even what we we've seen in the SMB market where a lot of these smaller customers or in this case sole proprietors are banking at other outside of the community banking space for their SMB needs .

A lot of interest obviously to define opportunities on the lending, but today I think the bigger focus is efficiency in deposit growth as of right now.

And the only adds I would say is that we can.

We consistently see through our own survey that we do.

Speaker #5: That's where the real concern is , because they're losing those clients without the right solution sets to keep that in . So there's a lot of interest .

Both deposit gathering as well as lending remained in the top four priorities in the last three years, sometimes a horse trade in terms of which is outpacing the other but both are certainly top of mind I think Q1, James we starting to see a little bit of the signs as an increasing pace.

Greg Adelson: I will tell you that we are starting Q2 off with a very nice start to competitive core wins. The one thing I do want to call out is we continue to be the only one that actually announces the number of core wins. A lot of people reference the number of increase that they have and all that, but nobody else actually puts out a physical number. We get held to a different standard, I think, than maybe some others. If I could add on to the thoughtful comments that Greg had, our sales team does a remarkable job of working with prospects. While I agree we will see an enhanced kind of acceleration of interest.

Speaker #5: Obviously , to define opportunities on the lending . But today I think they're bigger . Focus is efficiency . And deposit growth . As of right now .

Speaker #6: And the only adds I would say is that we can we consistently see through our own survey that we do that both deposit gathering as well as lending remain in the top four priorities in the last three years .

Lending activity whether that was.

Enthusiasm regarding the overall economy inflation coming down the expectations of the fed starting to move but we are starting to see a small uptick in the pace of lending, which is a very encouraging sign.

Speaker #6: Sometimes they horse trade , you know , in terms of which is outpacing the other . But both are certainly top of mind .

Speaker #6: I would say in Q1 , James , we started to see a little bit of the the signs of an increasing pace of of lending activity , whether that was some enthusiasm regarding the overall economy , inflation coming down , expectations of the fed starting to move .

That's cool.

Okay.

The next question comes from Dominic Gabriel with Compass point.

Hey, good morning.

I have to say I think you guys sound pretty fired up on this call in the prepared remarks and.

Greg Adelson: Opportunity that comes from the core consolidation announcement of competitors, the lack of innovation that they've offered for a number of years has already created that demand for opportunities for us to talk and show the solutions, the innovative solutions we have to offer. To me, this is a potential acceleration. A lot of clients still are going to wait till the end of their client contract length to make a change. It's certainly an exciting opportunity because it solidifies the message we've been talking about, which is they need to make a change. They can't just stay on a non-marketed, not innovative core to meet the needs of their financial institution. We're excited about what that could potentially be in the long run, but it's more of a consistency for our sales team. Got it. Very helpful, Amy. Thanks, guys.

Speaker #6: But we are starting to see a small uptick in the pace of lending , which is a very encouraging sign .

One of the things with Jack Henry is the level of revenue growth.

And it sounds like you are limiting pricing compression compression and stabilizing that headwind I was just curious given where your current guidance is this year versus previous years. Maybe you could is there any chance you could quantify that headwind of pricing over the last 12.

Speaker #12: That's great .

Speaker #3: The next question comes from Dominic Gabriel with Compass Point .

Speaker #13: Hey , good morning . I have to say , I think you guys sound pretty fired up on this call . In the prepared remarks and , you know , one of the things with Jack Henry is the level of revenue growth .

Months of how possibly wanted to your current guidance and what those mitigation efforts like actually are in the business like salespeople having.

Speaker #13: And it sounds like you're limiting pricing , compression , compression and stabilizing that headwind . I was just curious , given where your current guidance is this year versus previous years , maybe you could .

Different mechanics, or something along those lines.

Thanks, so much.

Sure John.

So I would say that we started to see that impact last year, which is why we called it out, but we're seeing that flow through the P&L. This year.

Speaker #13: Is there any chance you could quantify that headwind of pricing over the last 12 months , and how it possibly went into your current guidance and what those mitigation efforts like actually are in the business ?

Greg Adelson: The next question is from Chris Kennedy with William Blair. Good morning. Thanks for taking the question. Can you just talk a little bit more about Victor, kind of who the target customer is for that and what type of interest and opportunity you're seeing with that asset? Thank you. Yeah. Thanks, Chris. A couple of things. One, it creates opportunities for banking as a service within the banking and credit union market. As we mentioned already, we have Silver Lake integration today. We have several of the Jack Henry core clients that are utilizing the service. We were already partnered with Victor on that front, and we're connected to our pay center offering as well. We'll be doing the credit union business. Now it's creating opportunities in our treasury management platform, so embedded finance payments and the ability to drive additional.

But from an encouraging sign I would say, we've seen a stabilization through through the operational activities the collaboration between sales.

Speaker #13: Is it like salespeople having different mechanics or something along those lines ? Thanks so much .

Speaker #6: Sure , John . So I would say that we started to see that impact last year , which is why we called it out .

The programs that the leadership team has put in place were certainly seeing that that headwind.

A beat and we're but we need to see the full impact flow through this year. So.

Speaker #6: But we're we're seeing that flow through the PNL . This year . But from an encouraging sign , I would say we've seen a stabilization through through the operational activities .

When it per.

<unk> number from an expectation, but it was certainly one of the larger causes for the lower guide this year versus our longer term growth.

Speaker #6: The collaboration between sales , the programs that the leadership team has put in place . We're certainly seeing that that headwind abate , and we're but we need to see the whole impact flow through this year .

The other area was a modest expectation from consumer sentiment and spending and thus far we've seen.

Robust.

Speaker #6: So I wouldn't give a precise number from an expectation , but it was certainly one of the larger causes for the lower guide .

Consumer spending we've seen card that is part of the Q1 outperformance with card came in.

Higher than expectation, while we still have a lot of the year to play out.

Greg Adelson: Payment types like integrated payables, things along that line, are all candidates for that. There's also opportunities to work directly with fintechs to facilitate payments for them. We have several fintechs that are actually already directly integrated into the Victor solution set, and we're processing those payments. The pipeline in only 30 days has candidly grown to a pretty nice number. We're getting ready to already close our first new bank in 30 days, and we have several others that are very interested. We have a long list of fintechs that are very interested. It creates an opportunity for us with a diverse revenue stream, and creates opportunities for the banks to have diverse revenue streams as well. We're very bullish on what this is going to bring.

Speaker #6: You know , this year versus our longer term growth plan . The other area was a modest expectation from consumer sentiment , health and the spending .

We remain upbeat and optimistic.

Modest continuation of that spending drops, yes, Dom I'll add a couple of comments around kind of process stuff just.

Speaker #6: And thus far we've seen a pretty robust consumer spending . We've seen card that was part of the Q1 outperformance was card came in higher than expectation .

Yes, I mean, we took a very.

Detailed approach with sales operations and finance it took us several months to get it to where we wanted it to be and we actually started to see the the processes come together at the end of fiscal year 2005, So in the fourth quarter, where we saw performance improve.

Speaker #6: And while we still have a lot of the year to play out , we remain , you know , upbeat and optimistic on a modest continuation of that spending trend .

Speaker #5: Yeah . Dom , I'll , I'll add a couple comments around kind of process stuff . Just I mean , we we took a very detailed approach with sales operations and finance .

And we've continued to see it through the first quarter, but we still as Mimi had mentioned, we still had some deals that were already done, especially some larger deals as I noted last year. We did a lot of a lot more renewals than we did the year previously and a lot larger clients. So some of the impact was already felt but the new processes.

Speaker #5: It took us several months to get it to where we wanted it to , to to be . And we actually started to see the the processes come together at the end of fiscal year 25 .

Greg Adelson: It creates some opportunities for some of our stablecoin strategy as well, and we're utilizing some of the technology in that front. I view this acquisition as a real opportunity for Jack Henry to immediately play in a space that is expected to more than double in the next two to three years. Great. Thanks for taking the question. Sure. The next question is from Ken Sitroska with Autonomous Research. Hey, good morning. This is Jay Leon for Ken. Thanks for taking the question. I wanted to ask about margins. I think the one-year margin looked really strong, and I think there's some seasonality in there, but you landed well above the full-year range. I think you mentioned some of it is timing, and you feel confident of the full year. When we think about Q2, you obviously have Connect moving to September from October last year.

Speaker #5: So in the fourth quarter , where we saw performance improve and we've continued to see it through the first quarter , but we still , as Mimi had mentioned , we still had some deals that were already done , especially some larger deals .

That we put in place the.

The structure and the rigor of communication and collaboration amongst all of the teams to ensure that everybody was in zinc was a big part of what we what we were focused on and honestly it's exceeded my expectations. This early.

Speaker #5: As I noted last year , we did a lot of a lot more renewals than we did the year previously , and a lot larger clients .

So we're very optimistic that things will continue down that path as well as having less renewals.

Speaker #5: So some of the impact was was already felt . But the new processes that we put in place , the the structure and the rigor of communication and collaboration amongst all of the teams to ensure that everybody was in sync was a big part of what we you know , what we were focused on .

Than we had last year by about 20 something percent. So so thats another component of this but again a lot of what was baked into the original guidance was because it was already baked into deals that were done in fiscal year 'twenty five.

Speaker #5: And honestly , it's exceeded my expectations . This this early . So we're very optimistic that things will continue down that path as well as having less renewals than we had last year .

Thanks for all the color.

The next question comes from the line of Dave Koning with Baird.

Yeah, Hey, guys. Thank you good job and I guess my question card processing revenue accelerated about 2%, which was nicely better than industry trends, which were pretty stable to maybe a little acceleration with 2% is a lot better and I know you've called out a lot of the newer types of payment services growing really well and I.

Speaker #5: By about 20 something percent . So , so that's another component of this . But again , a lot of what was baked into the original guidance was because it was already baked into deals that were done in fiscal year 25 .

Greg Adelson: How should we think about margins next quarter? Maybe if you can help us just shape the rest of the year, I want to make sure that we're not missing anything. Thank you. Sure. I think first and foremost, I would encourage you to look at an annual basis for our performance. Individual quarters can have just different rhythms based on implementation or the comps from a year-over-year basis. While Q1, we're thrilled by the epic performance in Q1 and in raising for the full year, I would say that there are things at play. There's some modest conservatism as well, just because the nature of some of that savings being personnel-related benefits and others, some of it based on the timing of some of the projects. Also, some of that we expect from a catch-up perspective and other.

Speaker #13: Thanks for all the color .

Speaker #3: The next question comes from the line of Dave Koning with Baird .

The question is is that sustainable like this higher level of growth now are those other things contributing enough to kind of keep this.

Speaker #14: Yeah . Hey guys . Thank you . Good job . And I guess my question card processing revenue accelerated about 2% , which was nicely better than industry trends , which were pretty stable to maybe a little acceleration .

At a higher pace.

And Dave I would say is it's a combination of a number of factors within the payment segment. One is as we talked about the U S consumer spending at a better clip than I think we were concerned about last year as an economy as a whole so youre seeing that.

Speaker #14: But 2% is a lot better . And I know you called out a lot of the newer types of payment services growing really well .

Speaker #14: And I guess the question is, is that sustainable? Like this higher level of growth. Now, are those other things contributing enough to kind of keep this at a higher pace?

A healthy pace I wouldn't say it's crazy.

Brent, but a healthy pace in the U S consumer spending the other is the ancillary services surrounding card had been very healthy. So we have a number of services that complement the payment card business, we have seen healthy uptick in growth in those businesses.

Speaker #6: Dave , I would say it's a it's a combination of number of factors within the payment segment . One is , as we talked about , the US consumer spending at a better clip than I think we were concerned about last year as an economy as a whole .

Greg Adelson: Opportunities for investments for growth plans. We have a modest forecast, but it also allows the opportunity to enhance or accelerate some of the activities we're doing in AI and platform projects. Again, looking forward to the full year, pleased to see the uptick from a guidance perspective for the full year. I think that's a natural course of the levers that are inherent in our business. Glad to see the compounding nature, the margin expansion. I wouldn't look too much to any one quarter. Rather, I would look to the overall outstanding expectation for the year. Great. Thank you. Maybe if I can sneak one more in, I think you mentioned 56% of renewals in the Yieldmix. I think that implies renewals were down quite a bit from last year.

The stabilization and.

Speaker #6: So you're seeing that , you know , a healthy pace . I wouldn't say it's a crazy pace , a exuberance , but a healthy pace of the US consumer spending .

Positive performance from the EPS business really helps that's still a large segment.

Portion of the payments segment, and then on the faster payments, even though it's off a small base numbers, we think theres a lot of upside from the solutions that are going to drive adoption and volume on the past our payment. So we're quite positive on that momentum there and Dave I'd like to add one other component.

Speaker #6: The other is the ancillary services surrounding card have been very healthy . So we have a number of services that complement the payments card business .

Speaker #6: We've seen a healthy uptick and growth in those businesses . The stabilization and positive performance from the EPs business really helps us . Still , a large segment portion of the payment segment .

We are actually starting to see a lot of the value of our <unk> acquisition coming into play now we're starting to see a nice uptick in pay rails.

Speaker #6: And then on the faster payments , even though it's off a small base , numbers , we think there's a lot of upside from the solutions that are going to drive adoption .

Slash I pay bill pay opportunities.

We're seeing less compression we're seeing less.

Speaker #6: And volume on the faster payment . So we're quite positive on the momentum there .

Greg Adelson: I guess is it fair to say that you'll see lower renewals this year compared to last year? Maybe if you could talk a little bit about how retention rates are trending. Yeah. I apologize, but part of your first part of your question broke up. Could you repeat the first part, please? Yeah. I think you mentioned in your prepared remarks how 56% of renewals were part of the Yieldmix, and I think that implies renewals are down year over year. I just wanted to comment on that thing. Yeah. As I mentioned, last year, we had a significant number of renewals from an even greater, I think it was 12% more than the year previous to that, and much larger institutions that we renewed. It was $94 billion in assets versus $224 billion in assets.

D conversion, we're seeing all kinds of things that are generated is what we expected out of that acquisition starting to come to fruition now so that's another key component.

Speaker #5: And Dave , I'd like to add one other component . You know , we are actually starting to see a lot of the value of our pay rails acquisition coming into play .

Speaker #5: Now we're starting to see a nice uptick in pay rails slash pay bill pay opportunities . We're seeing , you know , less compression .

Based on the size of that business, helping that helped drive some of that as well.

Got you thanks, good job guys.

Thank you. Thank you.

The next question is from Darrin Peller with Wolfe research.

Speaker #5: We're seeing less deconversion . We're seeing all kinds of things that are generated as what we expected out of that acquisition starting to to come to fruition now .

Thanks, guys.

Nice quarter, just to clear up a little bit I mean, I know when we came out of last quarter. There was obviously those few items called out and you touched on some of the progress and what Youre seeing around things, whether it's bank M&A or pricing and renewals.

Speaker #5: So

Speaker #5: that's another key component . You know , based on the size of that business helping to help drive some of that as well .

Generally account growth or credit unions impacting your initial guide by a bit.

Speaker #3: next question is from Darrin Peller with Wolfe Research

Clearly youre seeing good outperformance like you said, even on the card side, but when we think about where your competencies around some of the newer areas again, you mentioned faster payments, but move partnership taps local rapid transfer.

Greg Adelson: Just even last year, we had much larger renewals in a number, too. We have a smaller number of renewals this year, and a smaller number of very large customers. The processes that we put in place, part of it was to focus on ensuring that we were going after a larger number of new deals and not relying on the renewal process, pulling in any renewal sooner than it should be, and things along that line. The team has done a great job of adhering to those things, focusing on the new opportunities, and managing the relative price compression that we typically see much better than we have in years past. I think the only add-on I would say is that we have not seen any change from the incredibly high retention rate that Jack Henry has experienced historically, so absent M&A.

Or do you see those being enough to spool up so that by the end of the fiscal year, you basically have 50 bps, maybe plus that.

Could have replaced.

Some of the headwinds are impacting this year by <unk>.

Is that going to be big enough and material enough in your view and just maybe a quick update on how those are trending as well.

Yes, it's a good question Darren I think the issue is is that specifically tied to tap to local and rapid transfers as I mentioned, we're just now rolling that out.

I can tell you we have very high expectations of what it will be long term.

And based on the feedback we got at our client conference in what we're seeing initially with with customer excitement.

We feel very strongly now whether it's going to be.

A 50 bps.

Increased.

Going to probably say probably not.

Greg Adelson: Near over 99% retention. No changes there. Not only are we having great success with new customers and new prospects and renewing existing, but we're not seeing departures. Great. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Vance Sherard for closing remarks. Thank you, Jeannie. As Greg mentioned, our annual shareholder meeting is on Wednesday, 12 November 2024, at noon Eastern time. We look forward to hosting those who attended our headquarters in Monett or those who joined the webcast. Management will present in person at multiple investor events, both domestically and internationally, prior to the calendar year-end. We thank all Jack Henry associates for their outstanding efforts and commitment, which contributed to the start of another successful fiscal year. Thank you for joining us today. Jeannie, please provide the replay number.

But if it is we'll.

We'll start to know more here in the next couple of quarters, but I can tell you that for the long term growth everything that we're doing in the SMB, which by the way. This is the only phase one theres going to be multiple phases of what we're going to do in this space.

Tied to driving opportunities in both our digital offerings in our payment space.

Related to faster payments related to some of the things that we believe is going to happen. We had a call with the fed recently I think the fed is going to get really serious about pushing various treasury activities.

We'll start to know more here in the next couple of quarters, but I can tell you that for the long term growth everything that we're doing in the SMB, which by the way. This is the only phase one theres going to be multiple phases of what we're going to do in this space.

And driving more opportunities on the send side of faster payments that could create some additional revenue flow, but everything that we're doing and even what we've seen with some of the improvements as I mentioned earlier on renewals.

Tied to to driving opportunities in both our digital offerings in our payment space.

Related to faster payments related to some of the things that we believe is going to happen. We had a call with the fed recently I think the fed is going to get really serious about pushing various treasury activities.

Obviously, the market environment with 10% being the spend with various core opportunities all of that will help contribute to what we originally stated we're going to be headwinds.

Greg Adelson: The replay number for today's call is 877-344-7529, and the access code is 3613183. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

And driving more opportunities on the send side of faster payments that could create some additional revenue flow, but everything that we're doing and even what we've seen with some of the improvements as I mentioned earlier on renewals, obviously, the market environment with 10% being.

But it's still where Q1, so it's still early to be able to fully determined what that will be darrin I would echo greg's commentary.

A lot of reasons to be pleased by the initial reaction and then even the momentum we've seen from the uptake and.

The spend with various core opportunities all of that will help contribute to what we originally stated we're going to be headwinds.

The waves of installations that we have targeted but I think at this point. The reason for sharing them is really as an indicator and a validation of our investment for growth and the level of innovation.

But it's still where Q1, so it's still early to be able to fully determined what that will be there and I would echo greg's commentary, there's a lot of reasons to be pleased by the initial reaction and even the momentum we've seen from the uptake and the.

Less so the in year impact from them, but as we think about what they could grow to be over the imminent next few years. It gives us great optimism around being within the range and to the upside of that range and opportunities to start thinking about the next new range possibility.

The waves of installations that we have targeted but I think at this point you know the reason for sharing them is really as an indicator and a validation of our investment for growth and the level of innovation.

Alright Thats helpful.

Can I just follow up quickly on the competitive landscape for a moment because I know this came up a bit earlier, but.

Yes, so the in year impact from them, but as we think about what they could grow to be over the imminent in the next few years. It gives us great optimism around being within the range and to the upside of that range and opportunities to start thinking about the next new range possibility.

The core consolidation going on or what are your competitors, obviously thats been talked about a lot.

When you think about your I know Youre reiterating your range of what you would expect to add from a core standpoint, but when you. When you think about what youre seeing in the market in terms of the magnitude and level of Rfps. Even have you noticed any changes more recently in the last let's call it six months or 12 months.

Alright, Thats helpful and can I just follow up quickly on the competitive landscape for a moment because I know this came up a bit earlier, but.

Or are you hearing rumblings of more change to come on that front and then I guess capacity I mean, when you think about your capability to handle if we were to get another 20, potentially let's say 50 went to 60 or 70.

The core consolidation going on or what are your competitors, obviously, that's been talked about a lot.

When you think about your I know you're reiterating your range of what you would expect to add from a core standpoint, but when you. When you think about what you're seeing in the market in terms of the magnitude of the level of Rfps. Even have you noticed any changes more recently in the last let's call. It six months or 12 months or are you hearing rumblings of more change to come on that front and then I guess capacity I mean, when you think.

Is that something you see yourselves being able to handle well.

Yes, it's a great question and I will tell you.

From a from a standpoint of the Timeframes you gave like I said a lot of the news that has come out I mean, obviously, they announced that their client conference. They were doing the consolidation of the cores, but it got a little more pronounced than in the last week.

About your capability to handle if we were to get another 20, potentially let's say 50 went to 60 or 70.

With other other things so the activity itself I wouldn't say has significantly increased any more than what its been I do anticipate that to happen.

Is that something you see yourselves being able to handle well.

Yes, that's a great question and I will tell you.

Just based on anytime anybody announces.

From a from a standpoint of the Timeframes you gave like I said a lot of the news that has come out I mean, obviously, they announced that their client conference. They were doing the consolidation of the cores, but it got a little more pronounced than in the last week.

Core consolidations there.

Just as an uptick.

To answer your question on capacity, Yes, we have 100% we can gear up we do that already various dawn on timing of things that we have happening in the M&A things that we have an M&A.

With other other things so the activity itself I wouldn't say has significantly increased any more than what its been I do anticipate that to happen.

In new core wins.

So bringing on teams we do that regularly we're good at it and we're not concerned about that and the other thing is is we've done a lot on the AI side related to how we handle RFP responses and things like that so our acceleration of of being able to handle an accelerated amount of rfps doesn't concern us.

Just based on anytime anybody announces.

Core consolidations there, there's just there's an uptick.

To answer your question on capacity, Yes, we have 100% we can gear up we do that all already various dawn.

Timing of things that we have happening in the M&A things that we have an M&A.

But the sales teams all over it and I anticipate that to be a.

In new core wins.

So bringing on teams we do that regularly we're good at it and we're not concerned about that and the other thing is is we've done a lot on the AI side related to how we handle RFP responses and things like that so our acceleration of of being able to handle an accelerated amount of rfps doesn't concern us.

Oh, that's a siren I guess, yes, sorry.

But I would anticipate that being.

No.

I don't I don't anticipate that being a concern at all Darrin and we'll continue to update you as this goes on but I will tell you that we are starting Q2 off with a very nice very nice start to competitive core wins. The one thing I do want to call out as we continue to be the only one that actually announced as the number of core wins.

But the sales teams all over it and I anticipate that to be a.

Oh, that's a siren I guess, yes, sorry [laughter].

So a lot of people referenced the number of of increase that they have and all of that but nobody else actually puts out.

But I would anticipate that being yes.

No I don't I don't anticipate that being a concern at all Darrin and we'll continue to update you as this goes on but I will tell you that we are starting Q2 off with a very nice very nice start to competitive core wins. The one thing I do want to call out as we continue to be the only one that actually analysis.

A physical number.

So we get held to a different standard I think than maybe some others.

If I could add on to the thoughtful comments that Greg had you know.

Our sales team and desert remarkable job of working with prospects.

The number of core wins.

Well I agree we will see an enhanced kind of acceleration of interest in.

So a lot of people referenced the number of of increase that they have and all of that but nobody else actually puts out.

An opportunity that comes from the core consolidation announcement of competitors. The lack of innovation that they've offered for a number of years has created that demand for opportunities for us to talk and showed the solutions. The innovative solutions. We have to offer so to me. This is a potential acceleration.

Physical number.

So we get held to a different standard I think than maybe some others.

If I could add onto the thoughtful comments that Greg had you know our sales team and desert remarkable job of working with prospects.

Well I agree we will see a an enhanced kind of acceleration of interest.

A lot of clients still are going to wait till the end of their client contract lengths to make a change, but it's certainly an exciting opportunity because it solidifies the message we've been talking about which is they need to make a change they can't just stay on a non marketed not innovative core to meet the needs of their financial institutions.

An opportunity that comes from that core consolidation announcement of competitors. The lack of innovation that they've offered for a number of years has created that demand for opportunities for us to talk and showed the solutions you know the innovative solutions, we have to offer so to me. This is a potential acceleration.

So we're excited about what that could potentially be in the long run, but it's more of a consistency for our sales team.

A lot of clients still are going to wait till the end of their client contract lengths to make a change, but it's certainly an exciting opportunity because it solidifies the message we've been talking about which is they need to make a change they can't just stay on a non marketed not innovative core to meet the needs of their financial institutions.

Got it very helpful. Thanks, guys.

The next question is from Chris Kennedy with William Blair.

Good morning, Thanks for taking the question can you just talk a little bit more about Victor kind of who the target customer is for that and what type of interest and opportunity youre seeing with that asset. Thank you.

So we're excited about what that could potentially be in the long run, but it's more of a consistency for our sales team.

Yes, Thanks, Chris couple of things so one it creates opportunities for banking as a service within the the.

Got it.

Helpful. Thanks, guys.

The next question is from Chris Kennedy with William Blair.

The banking and credit Union markets. So as we mentioned already we have sil.

Yeah. Good morning, Thanks for taking the question can you just talk a little bit more about Victor kind of who the target customer is for that and what type of interest and opportunity youre seeing with that asset. Thank you.

Silverlake integration today, we have several of the Jack Henry core clients that are utilizing the service. So we were already partnered with Victor on that front will be and we're connected to our pace center offering as well and we'll be doing the credit Union business, but now it's creating opportunities in our treasury management platform.

Yeah. Thanks, Chris couple of things so one it creates opportunities for banking as a service within the banking and credit Union markets. So as we mentioned already we have.

So embedded finance payments and the ability to drive.

Additional paint.

Silverlake integration today, we have several of the Jack Henry core clients that are utilizing the service. So we were already partnered with Victor on that front will be and we're connected to our pay center offering as well and we'll be doing the credit Union business, but now it's creating opportunities in our treasury management platform.

Payment types like integrated payables things along that line are all candidates for for that Theres also opportunities to work directly with fintech to facilitate payments for them. So we have several fintech that are actually already directly integrated into the Victor <unk>.

So embedded finance payments and the ability to drive.

<unk> set and were processing those payments the pipeline in only 30 days has candidly grown to a pretty nice number we're.

Additional pay.

Payment types like integrated payables things along that line are all candidates for for that Theres also opportunities to work directly with our fintech to facilitate payments for them. So we have several fintech that are actually already directly integrated into the Victor <unk>.

We're getting ready to already closed our first new bank.

In 30 days and we have several others that are very interested but we have a long list of fintech.

That are very interested so it creates an opportunity for us with a diverse revenue stream creates opportunities for the banks to have diverse revenue streams as well. So we're very bullish on what this is going to bring to create some opportunities for some of our stable coin strategy as well and we're utilizing some of the technology.

<unk> set and were processing those payments the pipeline in only 30 days has candidly grown to a pretty nice number we're getting ready to already close our first new bank.

And in 30 days and we have several others that are very interested but we have a long list of fintech that are very interested so it creates an opportunity for us with a diverse revenue stream creates opportunities for the banks to have diverse revenue streams as well. So we're very bullish on what this is going to bring.

Allergy in that front, but.

I view this acquisition as a real opportunity for Jack Henry to immediately play in a space that is expected to more than double.

And in the next two to three years.

Great. Thanks for taking the question.

Create some opportunities for some of our stable coin strategy as well and we're utilizing some of the technology in that front, but.

Sure.

The next question is from Ken <unk> with Autonomous research.

Hey, Good morning. This is Sam on for Ken Thanks for taking my question.

I view this acquisition as a real opportunity for Jack Henry to immediately play in a space that is expected to more than double in the next two to three years.

I wanted to ask about the margins I think the <unk> margin looked really strong and I think that's one.

Typical seasonality in there, but you London, well above the full year range.

Great. Thanks for taking the question.

I think you mentioned some of it is timing and you feel confident about the full year, but when we think about <unk> you, obviously have an AG moving.

Sure.

The next question is from Ken <unk> with Autonomous research.

Remember from October last year, how should we think about margins next quarter and maybe if you can help us to shape. The rest of the year I want to make sure that we're not missing anything thank you.

Hey, Good morning. This is Sam on for Tim. Thanks for taking my question I wanted to ask about the margins I think the one key margin look really strong and I think there's some seasonality in there, but you landed well above the full year range.

Sure I think that first and foremost I would encourage you to look at our annual basis for our performance.

I think you mentioned some of it is timing and you feel confident about the full year, but when we think about <unk> you. Obviously have conagra moving to September from October last year, how should we think about margins next quarter and maybe if you can help us to say.

The individual quarters can have.

Different rhythms based on implementation or the comps from a year over year basis, and so while Q1, we're thrilled by the epic performance in Q1.

The rest of the year I want to make sure that we're not missing anything thank you.

And raising for the full year I would say that there's things that play there is a modest conservatism as well.

Sure I think that first and foremost I would encourage you to look at our annual basis for our performance.

Just because the nature of some of that savings being personnel and related benefits and others. Some of it based on the timing of some of the projects.

The individual quarters can have you know just different rhythms based on implementation or the comps from a year over year basis, and so while Q1, we're thrilled by the epic performance in Q1.

Also just we said some of that we expect from a catch up perspective another.

Opportunities for investment for growth plans.

And raising for the full year I would say that there are things that play there is a modest conservatism as well.

We have a modest forecast, but it also allows the opportunity to enhance or accelerate some of the activities. We're doing in AI and platform projects again.

Just because the nature of some of that savings being personnel related benefits and others. Some of it based on the timing of some of the projects.

Looking forward to the full year, we used to see the up tick from our guidance.

Also just we said some of that we expect from a catch up perspective another.

<unk> perspective for the full year.

I think that's a natural course of the levers that are inherent in our business.

Opportunities for investment for growth plans, you know, we have a modest forecast, but it also allows the opportunity to enhance or accelerate some of the activities. We're doing an AI platform projects as I again.

Glad to see the compounding nature of the margin expansion that I wouldn't look too much to any one quarter, rather I would look to the overall outstanding expectation for the year.

Looking forward to the full year pleased to see that.

Great. Thank you, maybe if I can sneak one more in I think you mentioned 50.

From a guidance perspective for the full year I think that's a natural course of the levers that are inherent in our business I'm glad to see the compounding nature of the margin expansion that I wouldn't look too much to any one quarter, rather I would love to the overall outstanding expectation for the year.

6% of renewals and deal mix I think that implies renewals were down quite a bit from last year.

Is it fair to say that Youll see lower renewals this year compared to last year and maybe if you could talk a little bit of a hole.

Our retention rates are trending.

Yeah, and I apologize, but.

Part of your first part of your question broke up so could you repeat the first part please.

Great. Thank you maybe if I can sneak one more in I think you mentioned 56, 6% to 6% of renewals and deal mix I think that implies renewals were down quite a bit from last year.

I think you mentioned in your prepared remarks.

56% on renewals.

No.

We're part of the plan.

I guess is it fair to say that you'll see lower renewals this year compared to last year and maybe if you could talk a little bit of a hole.

Okay.

Oh, sorry.

On a year over year, so I just wanted to.

Our retention rates are trending.

Yeah. So.

As I mentioned last year, we had a significant number of renewals.

Yeah, and I apologize, but part of your first part of your question broke up so could you repeat the first part please.

From a even greater I think it was 12% more than the year previous to that and much larger institutions.

I think you mentioned in your prepared remarks, how a 56% on renewals.

That we renewed it was 94.

Uh huh.

We're part of the plan.

<unk>.

In assets versus $224 billion in assets. So just even last year, we had much larger renewals and a number two so we have a smaller number of renewals this year.

Okay, and I think that implies you are up in all sort of hard down on a year over year. So I just wanted to.

Yeah. So.

As I mentioned last year, we had a significant number of renewals.

In a smaller number of very large customers, but the processes that we put in place part of it was to focus on ensuring that we were going after a larger number of new deals and not relying on the renewal process pulling in any renewal sooner than it should be and things along that line. So the team has done a great.

From a even greater I think it was 12% more than the year previous to that and much larger institutions.

That we renewed it was 94.

Dollars and assets versus $224 billion in assets. So just even last year, we had much larger renewals and a number two so we have a smaller number of renewals this year.

Job of adhering to those things focusing on the new opportunities and managing.

In a smaller number of very large customers, but the processes that we put in place part of it was to focus on ensuring that we were going after a larger number of new deals and not relying on on the renewal process pulling in any renewals sooner than it should be and things along that line. So the team has done a great.

The relative price compression that we typically see much better than we have in years past.

I think the only other one I would say is that we have not seen any change from the incredibly high retention rate that Jack Henry has experienced historically so.

Job of adhering to those things focusing on the new opportunities and managing.

So absent M&A.

Near over 99% retention.

The relative price compression that we typically see a much better than we have in years past.

So no changes there so not only are we having great success with new customers and new product new prospects.

I think the only thing I would say is that we have not seen any change from the incredibly high retention rate that Jack Henry has experienced historically, so absent M&A you know near our over 99% retention Ah.

And renewing existing but we're not seeing departures.

Great. Thank you.

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

Thank you Jeanie as Greg mentioned, our annual shareholder meeting is on Wednesday November 12 noon Eastern time, we look forward to hosting those who attended our headquarters and no net for those who joined the webcast management will present in person at multiple investor events, both domestically and internationally prior to the calendar year end and we think all.

No changes there.

Not only are we having great success with new customers and new product new prospects.

And renewing existing but we're not seeing departures.

Great. Thank you.

Okay.

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

Jack Henry Associates for their outstanding efforts and commitment which contributed to the start of another successful fiscal year.

Okay.

Thank you Jeanie as Greg mentioned, our annual shareholder meeting is on Wednesday November 12 noon Eastern time, we look forward to hosting those who attended our headquarters and no net for those who joined the webcast management will present in person at multiple investor events, both domestically and internationally prior to the calendar year end and we think all Jack Henry Associate.

Thank you for joining us today Genie. Please provide the replay number.

The replay number for today's call is 870, 734 475 to nine and the access code is 3613183.

For their outstanding efforts and commitment which contributed to the start of another successful fiscal year.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Thank you for joining us today Genie. Please provide the replay number.

The replay number for today's call is 870, 734 475 to nine and the access code is 3613183.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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