JKHY - Earnings call transcript Q1 2021 | Jack Henry & Associates, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Jack Henry & Associates First Quarter FY 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Kevin Williams. begin. may you Sir,

Kevin D. Williams

guidance call CEO. you first President us some earnings quarter other and comments I quarter have Then CFO and fiscal COVID-XX on provide the business, the to a Kevin for minute, provided Thank of press in morning Henry relating call. to the thoughts the the of & out and our put we his for that, thoughts regarding performance comments is call impacts and Williams, the then XXXX and I'll in to our Treasurer; the key over of provide Associates and we of yesterday and after will me market after our David and for morning. In additional year release, close release this open also Foss, for joining state Q&A. the for Jack we initiatives Dave I'm with some Good some will lines fiscal regarding the some provide that place. turn about XXXX comments the

to uncertainties. I which objectives, a these undertakes number company concerning revise those future, to to anticipate, remind we need of update risks this responses that includes The from future factors to that materially due forward-looking and subject could to number cause events statement are First, these actual statements, results no differ results. or or statements. or a obligation remarks expectations, you certain events, Like or strategies, including the trends call any to questions about of

in XX-K that, for non-GAAP these Forward-Looking non-GAAP release financial press please these additional With call Dave. reconciliations release. entitled and measures and be found income. measures operating financial in Risk now over of this historical and the we Statements. summary to I'll discuss turn can call, non-GAAP On revenue The information, non-GAAP a the and yesterday's will refer including certain to For factors Factors yesterday's press our sections risk

David B. Foss

of Kevin, operating good growth. pleased We're quarter revenue and morning, another strong you, Thank income and everyone. to report

to associates particularly always, in those challenges that our thanking light global like our fiscal conducting posed pandemic. quarter went of a all I'd hard As and by begin the the midst the by commitment into first producing in results work today for for of business

into Now that many very fact we affected that virus. for X,XXX the members we directly been of COVID-XX almost are family thankful our all remain with months extremely by pandemic, life or the few their have employees the

the receiving be around Our is sure HR and affected to require. accommodations who all groups team our with company is anyone closely is working the care they

time. remote continue because time our We remote pandemic, of the XX% over date initiatives their to at date their hasn't with now offices return a of working the well members our I of Most customers current yet January success with concerns of a of extend few full to we've full working our had least our made. of staff office the ongoing decision have fully but XXXX, returned employees further office with been will that expect Because and in to we X. into and about operate work

at customer no several to now engagements accommodate come work routinely sales contracts said, able moved requests our normally on trouble. on with sales presence teams site we have them that are with that executing we onsite the we them the of into are With location. and presentations no sales As system requested fall, to those implementations, doing with and and

channels our outstanding high. continue through ratings remote completed customer service also many have We customer remote our keeping while with very great conversions. teams to including success implementations several XXX% And core full deliver service satisfaction

With mind. the quarter of this September. continue for look execute in to our completed performance that, we to let's focus new customer the shift environment with success teams the always in in at their Our a foremost our

total of revenue for negatively more first quarter, the over Deconversion the impacts fiscal quarter take is than the quarter basis. if but the were view. increased $X For prior good on and X% million fees year down XXXX, news you a current a which long-term increased non-GAAP quarter very X%

Turning a the quarter increased X% of core solid non-GAAP segments, to for business. by basis. had another the the we quarter on increased Revenue X% our and segment in by

and increase in segment payment X% basis. posting Our a performed well, quarter a on increase revenue again X% a this non-GAAP

sales X% in a to We revenue dollar the in been a and multi-billion this with bookings first depleted two in non-GAAP sales strong quarter lightest fourth in a year solutions them our basis. be extremely is exception With increase another that increase X% takeaways of a no our competitive quarter, tends the had Traditionally, as In notable the successes has sales also QX. complementary to quarter was asset result. on that had quarter several however, seven our we again quarter trend. strong pipeline booked core our This with because and space. businesses teams said, the quarter

booked environment. to move private also our three deals cloud We to existing customers in-house

credit to with processing our new clients. good card six new success see processing debit signing clients this continued and three quarter We solution, new

the to customers deals just company. revenue new and new our of I All represent mentioned

with great signing see QX. Banno Digital We contracts clients suite our new in also XX continue success to to

institution suite, implementing X active having out of FI have been that App monthly but surpassed continues Platform month same digital rapidly. Store Platform. Navigator on of stars. X now with Banno recently time, recognized to At in the than by financial consumer X.XX number our new the users the more of grow settled into a million has We Speaking rating clients pace as XX highest the every we comfortable Banno our

digital Bank and on Digital Survey Director our Banno extraordinary sales banking its the of to Our industry-leading published we've suite with in solution. of way suite The consistent expectations with the becoming Technology coming out success is is an adoption seen digital well August.

banks to June the two pre-pandemic bank CEOs the X% an majority hundreds during a and/or of their survey surveyed The million also offerings. pandemic, XX% experience survey subscribers they than year, customer the banks an items being technology of Almost digital most first in improved prioritization budgets. of had regarding top spending variety respondent had the of to board list, expectations moved from other result As their that were $XXX and members, as XX% compared increased The responses priority their of Bank a and as respondents indicated spending assets. XX% being the do a between they the improved of set greater with large technology of received and July and topics. every showed of the their that Director

other this solutions institution. by of the facilitate well bodes of Jack as the improved well efficiency future All an as in which customer suite help enhance and financial digital offered for experience an to our Henry opportunity the

of we thankful partners clients our a am we for have years. achieve team our we with that announced. with hit migrate, successful outcome. platform, these as non-core the of processing target of highlighted fiscal very left have XXX calls as I but to and successfully of and XX group with such card clients end previously clients working to migration in group for fully have QX expect the Regarding of us completed accordance the the still We approximately to proud new our the approximately our three on small plan September, core our past to

base by about but impact Although XXX business solution XX the Henry not The The partnered acquirer it happy solution perform announcement actively Cruise functions. Aurora very have we a haven't we clients or them that core way, Cruise that the the our of features for marketed to very any Cruise a very undoubtedly is processing our We but small relatively many fit the provided base would rebranded sale with keep we overall has allow Jack actively approximately QX the continue outcome. disclosures, committed transaction didn't years. for immaterial. business. and will our our this to into us on we and solutions them used several was would recent to forward. in you compliant The is and sell good solution. information Advantage, their the institution sell seem the QX our so with ago, saw financial with credit numbers be acquired the going divestiture market, support of solution was but impact years as customer in to to ProfitStars the small the acquirer had More add unions client active of CruiseNet core

As many of know, the in conduct fall client each largest conferences our we normally year. two you

scheduled. our Although a as end virtual we hold ProfitStars of conference conducted previously October this conferences year, to not conference the at Symitar in and in-person banking and chose August we

call awards. profile caused consistent our outlined this and was virtually cash had attendance than incur by because clients operate no a to debt to were a will we with expect, interact regular able by recurring six might on have is of shareholder revenue our months In best nature, evidenced position, meeting of travel any it well. as solid as you XX% more Despite disclosed As We and to scores fundamentals key proxy, remain survey larger prospects. many the conferences and work ago. existing and our be of to the and couple in-person weeks, hosting ongoing announcements and workforce places in expense, our almost a uncertainty our we engaged I of than nobody with is much the we as carry decided our as we virtual highly pandemic, our engagement in meeting, conduct annual business the our with

customers for As to solid provide the turn over with we continue it shareholders. we company approach continue Kevin move some employees, and performance for detail disciplined With expect forward, to to and and our stability we on numbers. to I'll approach will the running that, our that

Kevin D. Williams

Thanks, Dave.

fiscal the $X.X X% in $X of support each $XX.X quarter a would same X% first for increased support and XXXX deconversion year. ago. year have service quarter the Our fiscal year Adjusting service year to the line the for million or grown was million this decrease, quarter revenue for compared the and over million to in compared the to revenue revenue period, revenues prior a previous compared in which the fee fiscal current little

fees fee which was to support offset partially and private Our by our driven also and services decrease and deconversion revenue reflects data preference term our revenue software for hardware and product growth primarily due usage by quarter-over-quarter. pass-through and the model, hosting but to license fees decreased customers' license, revenue, our a processing implementation, particularly delivery our and cloud, revenue service other

usage quarter the processing by driven from primarily installed Our higher in XXXX the card last quarter revenue and quarter QX customers Henry first year and customers, same fiscal last volumes the installed compared of increase due also to card fiscal and the revenue the to compared this increased same new the all percentage of was revenue line The X% last increased of experienced new existing of growth existing increased lines year year year. Jack debit to volumes from Digital year. customers highest customers last from

for last basis was quarter over the X% compared a a X% impact up total the Our up basis to little the a and excluding on fees. GAAP non-GAAP revenue year of deconversion on

in costs was related primarily was higher September ago the year's for ago. lines. compared personnel count travel first expense to compared increase personnel the to and this within partially of up quarter, due our a primarily a to increased at by increased fiscal to quarter to costs increase card first associated quarter. first limitations. related revenue year savings a head X% primarily fiscal product of was COVID-XX due also cost Our result travel organic and costs which our over XXXX offset higher Research prior The year head processing The to development growth year due increase last was expense to as platform XXXX compared with increased to costs XX, X% of count higher

first limitations, tied year. year the Our fiscal result due X% revenue SG&A and the to this this the also of the fiscal over group mainly of savings decrease our travel savings travel user but expense decreased in was nature decrease in in being there a expense to XXXX a was in prior expense quarter as to due quarter COVID-XX a same virtual

XX.X% discussed basis, Our non-GAAP last the headwinds various items the from operating last decreased a to On the to increased already XX%, costs. reported is operating primarily margins primarily due from mentioned. our to XX% year, already year margins due revenue however, consolidated and XX.X% year increased which to this

in year. The of effective due quarter the to rate long-term created share tax year which decreased comments, this Our each under to year and Dave platform compared share-based our segment additional that the payments larger compared segment of quarter. the compared slightly his million impacted effective primarily impact our year the the margin year continues our last first to compared to costs compensation deduction operating year $X.XX. mix, a tax core compared improved be compared to plan was for during last quarter, card $X.XX the by migration, digital last to in just heavily related to year income, primarily quarter million discussed of with periods decrease as quarter during prior by to with prior the difference due fiscal to the vested rate in compared actually XX.X% sales. the margins $XX.X XX.X% year quarter $XX.X The permanent to driven decreased segment revenue complementary this for earnings per while tax to processing Net incentive last

total in to previous capitalized placed $X.X up projects million intangibles to is compared due primarily the year-to-date decreased last this placed service. the X% acquisitions, related CapEx being increased total For to in year due cash compared the year assets expenses Depreciation $X.X year-to-date to into the flow, and year amortization X% which service. to being for Included amortization to last those amortization million into fiscal year. year of

purchased in million. $XX.X treasury for the for the We also quarter XXX,XXX shares

our $XX flow compared as software through which $XXX.X invested products year. last to our quarter was is or quarter. cap total Our for million for operating $XX.X compared cash which year-ago million from the capitalized company $XXX.X fiscal from million XX% developing amount down was and million a into first We back CapEx down to X%

we Cash nothing back long-term pending new of sale year. which balance cash the proceeds highlights million Couple leases, $XXX.X capacity other adopted $XXX June our in assets, million. operating rules than XX. There free at had from Our sheet. cash our is down on flow, the due drawn cap net CapEx revolver, flow to which, million, which our $XXX.X adding debt previous $XX.X primarily and on and of a the million is of balance accounting other And on less from maximum again, then has was quarter. software no is position sheet lease slightly for

on updates Some guidance.

As the GAAP noticed, and non-GAAP you release revenue updated in we guidance press both yesterday.

the guidance to that the to our $X which in continues shut up due Obviously, or clear, guidance will be based actually We country $XX the be on a to total forced in Just deconversions be down in million also that economy improve. this we from reverses, the to to to continues down revised. fees be open guidance saw if country pandemic saw assumption We'll to FY note again we and then year. what and that continue saw QX. continues to stalls $XX.X this from is revenue in XXXX, that million million the decrease we deconversion the GAAP forecast economy

half in long is in release, fees. the quarter at the of fees we fees GAAP term update means The term, the the GAAP year deconversion guidance this fees, year only you as in revenue large good X-plus revenue decrease revenue, earnings revenue and in largest was to in decrease deconversion another deconversion in guidance the revenue But long short revenue little in saw the impact current Dave provided decrease activity press decreased quarterly growth. non-GAAP due QX between QX we're the a as we be see on largest to term. in much deconversion keep by during but QX. and adjustment our that rather looking to is percent. point, We growth X% we the us in couple compared changes revenue we'd obviously The year, would in deconversion If the no on deals. if customers QX future last a fee This to mentioned, see you recall, anticipated for will the for see will last expect decrease calls. deconversion We anticipated at M&A GAAP drive to will probably higher deconversion hurt which of as about

of headwinds in continue reasons. several revenue for to the year to have the expect We half some on first

to Some non-GAAP of slightly year, year. X.X% X% also growth would on the all in revenue a year using FY down first non-GAAP will which entire customers to of the to models, half our first from cloud to for at Therefore, mentioned, year for I the growth and be the shift up continued half education revenue, previously to XX% additional delayed get revenue virtual the the last We and half and our for line the revenue be impacts to operating our of you margins in the revenue were conferences to on fiscal reasons licensed all X.X% anticipate ongoing year for fiscal implementation, a to implementations slightly a X% basis. headwinds on-prem essentially second revenue suggest of continue to X% in GAAP for our in put growth X% XX% XXXX requests, the your again private to customer non-GAAP to this entire the to hardware annual guidance margins our of and range year. for events

comments. XXXX FY XX%. should and Our effective XX% concludes the with entire fiscal in tax between be still opening for XXXX rate FY be line This for year and our

please take for open now the call are questions? will you ready lines We up questions. to Operator,

Operator

line Our your is Koning Baird. first of question. question line open. your from ask Please Sir, Dave comes the from

David John Koning

QX year the of digits kind then was support then year kind digits this, XX% of Nice when where Hey, plus the and looked QX, this my to service I starting single And guys. of guess and you're job. question, there you QX pattern low couple this line last at This at that in grew I higher X%. in QX. seasonal Yeah. I years first think mid-single QX

So, to closer about is shape it progression year differently. type QX seems like going this double-digit wasn't and like through the can Maybe to talk the year this up you that why range.

Kevin D. Williams

Dave. Yeah,

compared half a as percent nice quarter, things. this of wasn't was subscriptions under of that had XXX% some revenue. a software last as So, you there remember, part in even which, fiscal a the One, implementations though year-ago second you in quarter XXX, it and near ASC recognize we large couple the delayed increase of are of to due to year

So, software the second half, in been any of last a been few year would implementations in would've a the on months renewal year. this basically that full months XX subscription have installed would've but gotten we that

was of part that So, it.

because The Dave, banks in-house license other revenue, to ongoing some delays to the to wanting some site. is and COVID on of and not implementation installers outsourcing, part, customer and unions of also of couldn't due move due credit to continued them the out do and to these is our hardware due our both go headwind which due but the

I'll (XX:XX) in on and the offset. two was there again, impact. highlight everybody two was for those decrease some there there, out those headwinds – decreased our travel but headwinds revenue, offset kind I'd were and notes on of expenses, there of saw and I expenses, a travel the so mean, I somewhat this, So, mean, revenue highlighted so they kind

quarter. to get of kind this X% we the growth that's how So,

guided, going think top will of rest be I lighter line half the in also really nice think growth. to think half, of of up be kind see which first In growth, we're line a to for both going lines obviously, second revenue. to in I is a as it's little step revenue I And year on going the I out.

David John Koning

you. Got

that it full the I Okay. like to deceleration. follow-up back to good No, the the just obviously be of sounds helpful. is though, year back a going is better. but the being half that's – guess QX touch

might like X% to is the first that X.X%, half Why lightest the and X.X% quarter. QX saying you're be QX If growth in almost happening? was

Kevin D. Williams

all in look Well, was part the ASC QX. David, at because in the you a QX QX slowdown you have from can adopted we because software – subscription last there years since of that and revenue is XXX, two

just ASC to that's So, no that. and there's part XXX, way of avoid

QX. to decrease you're to growth. if a QX. slower QX deconversion compared in So, far be as there's is you And we GAAP then because really some of going slowdown are QX nice But to the in as fees going basis look little be to even a little going that see then at predicting in a in in huge QX growth

David John Koning

you. before, revs. one-off? only That's of a asked This I really just immaterial. that corporate quick about kind something on in is I that X% Is just quarter Got don't lot. And was this call was of think your ever down the it Nobody's it's one but of there line kind question one. helpful. line mean, a

Kevin D. Williams

No, really to nothing there's there Dave. highlight,

David John Koning

small. just It's

Thank guys. Okay. you,

Kevin D. Williams

Thanks, Yes. Dave.

Operator

from Your of line the Corp. from is Stephens comes next Brett your Huff question open. line Sir,

Brett Huff

you Good morning, Dave and are Kevin. guys? How

Kevin D. Williams

Thanks, Good. Brett.

David B. Foss

well. Doing

Brett Huff

may guys cash highlighted how talk digital you core things how selling you the Dave, both businesses, could that? like versus that the things Good. have and a you this is and sales the about progressing are those management then and and bit treasury Banno management are little (XX:XX) seeing,

David B. Foss

Okay.

I did the So, you comments. bit, cutting in right, a I out question. opening just in but Brett, highlight And you're think and it the I got were little

very strong. comments QX. customers live. we highlighted month pace been that signed And has my a performance we're digital on that the a XX I in about to we're I install in highlighted new Banno, bringing now So, also customers XX that

I financial institutions active that highlighted also X we surpassed live XX users. And month. recently million per So, monthly

a The – million is that is isn't higher. lot higher subscriber So, a I'm subscribers. number Oh, sorry? lot X subscriber number

active X monthly which system that's million the month. means in actively users, every using – they're So, they're

that also digital I feel out X now. a about the reports in got they've FI who So, on X.XX highlighted Store. of application, the consumers banking highest now stars applications, with exceeded App various we've the rated as how Navigator, number that us

Henry. suite better. that And So, we tremendous success ph. the getting Jack see with continuing at and digital only

the you customers the As new continuing in on sign treasury far treasury the asked about, to management, components quarter. management as other

think five. signed four we I or

now (XX:XX) and that treasury roll live about institutions have product XX We financial to continuing management. And to that continuing on enhance out.

So, comes when good digital. it success to all around

Brett Huff

I want Kevin, some ASC back then, sure of revenue at acceleration I to I just get half. And helpful. make it that the is That's the know XXX.

maybe it, the that now I just sounds I'm it Some into the half. half, will am year like into of flow sure last of maybe not happened that primary timing anything those it's implementations acceleration. I not but delayed drivers missing want – two Are make to more one second or on that rev

Kevin D. Williams

and So, in other is Brett pretty card the of good couple But now customers there's the sales. growth them. thing a things most the our success all of is we with over, you migrated business now, we're continued having in our of hit core are

Dave we QX. several signed new As customers ones, mentioned, in

can on new customers bringing on. focus So, more now we

to Digital is So, to grow to there. going you're growth to continue just very going continue nice see nicely.

line, QX So, what going of to in And based seeing. and at and we're on we're actually pace to this to our then, lap accelerate processing things. revenue the grow service line continue is going support some

So, a comp be QX little there. easier should

So, growth those anticipate is Primarily accelerated where drivers the QX growth. we the are in for seeing rate. primary that

to as again, and economy opening that's to Now, and comments, not in another having shutdown. percolate the said along I subject all my get continuing

Brett Huff

in put on of digital? the all just the still kind happening people the burner Okay. are generally, at in That's back on those terms being helpful. change And Any at is then that How dialogue digital I decision-making focused. it's banks focus how core assume conversations going? at all? of as just Are

David B. Foss

Yeah. It's interesting.

I by them fact assets, XX% the in thing was budgets what RFPs Bank or has $XXX spending highlighted side. the respondents technology as with particularly up and respondents survey million budgets picked on with their compared recently of XX% The Director So, X% being technology over set that's in to that another the had survey pre-pandemic, now. of in XX% to of the spending core most the flow seeing the of their here their increased we're

are new overall to with they're what rate there, having I core and RFPs is I we're but COVID are digital the side. have up. of sign just our they're interest people we're those solid with right to the of So, success bunch really platform and not finding good, now so we think Continuing in on what's customers only the on certainly be payments they doing customers, think the settling a with but working starting increasing. business have RFPs happening, ramp of to currently in now signing – operating, world to and deficiencies kind technology and so And

Henry is are remote we'll the more place, to I of interest coordination would contracts it from The little their than it evidenced by because their and technology that be say RFP than Jack and little and house more decision is see. along So, deals to well. lot a of in in CEO a working different city used there is in the is challenging finished moving remote a Getting pace challenging a as is some used the be. But attorneys flow. are working from signed house getting one

Brett Huff

guys. help, the appreciate (XX:XX) Great.

David B. Foss

Yeah. Thanks, Brett.

Operator

Togut from comes the open. is question line next Sir, David Your from Mr. line your of Evercore.

David Mark Togut

of core us closing number environment versus deals. the a core of what for Dave, Good are pace the slower a example, cycles you. sale morning. Could bracket you in like out months, Thank in somewhat pre-COVID signing? called COVID terms you for of today for

David B. Foss

a It's get to It's core a deal taking point. good done. longer Yeah.

did quarter. seven We prior we quarter. seven did the this So,

that remote because we've And But RFP with is month so, actual little any I'd or on amazing to much longer deals RFPs isn't so Brett, say doing the the the it's conversion the signing now. done. the the so number the actual in Once of added pipeline process. is side. a very get definitely deal just coming But in taking solid. to I another mentioned conversation as done, probably core process we're It's longer taking are

talking other Henry Jack solutions. core just – I'm that's products, about in interest about I'm So not talking

they're So, now past have done. right deals we're still seeing little they than the deals a slower been in getting we're and still but

David Mark Togut

cash Kevin, Understood. $XXX a follow-up, million balance called the out you in as And on just sheet.

to allocate pipeline allocation potential capital the now, priorities opportunities You've balance weigh say, you your in How sheet? acquisitions, given it buybacks. versus own look current capital do a dividends, that let's lot decision? rank be the of your clearly got acquisition your And of when you do valuation how at, you stock, whether

Kevin D. Williams

Yeah.

there be now. acquisition. will at a for a good quite higher mean, of first really sure the I'm Having to know So, we couple to there just use program our shareholders' to we'll look in David, board and the a weeks time and to that our But our out cross-sell be in here be assets continue known quarterly a obviously you've seeing meetings dividend increase you're we'll products a acquisition, for that But right to with us while get out shareholders. bring to we're to typically the out that, and cash. continue the obviously, have continue find the you right to the return and absolutely dividend a said high right, little lot and and of There's meeting we discussing there, continue would that customers February use what additional period. nothing seeing. not our right valuations look do we're we we I the

we change But any again, So will would on stock we the to I some any buy don't horizon see as closer. that. going up board. don't that's that see getting to sure And acquisitions the I'm why more forward continue we back

David Mark Togut

you. Thank

a a APIs Dave, core appreciate would you're, on wants a how extent the the making question available APIs your connect to banking open final perspective industry to in I and quick if customer let's say, a best-in-breed open point for could. provider the solution. into Just through

David B. Foss

asked Yes. I'm you glad that, David.

founding been of believers since this have concept in and that the company. big are We

the has of think And customers not Before has committed here viewed of successful. been very out. But people our been always available to Henry the term years us They're we're successful. the I counterintuitive. to being have that philosophy as make been always over people a to here lot was term, make easy Jack keep artificial that be making always the through to concept of connectivity. of up walls We've a open. Jack the to set API Henry our to don't idea others We platforms

if tools whoever connect enable should to so want to them to And make provide going the that help they to. successful, we're connect to them we

best think hundreds for other Jack the is Henry, there. don't almost client exhibit and see you client you anybody Henry. go true our else We pretty And this forever to and competes there, this one has people is at of but Jack of of in. see much than you go into in you a that, vendors allowed to hall allow them go who will conferences, exhibitors core in Jack something with conference, I in been every the Henry example can

will we so tell Jack And of everybody hall and Henry because with they that our and the got payments in customers all working that been digital booth ones and vendors the always open are got truly you've connectivity. idea space vendors the the exhibit our a under you've they in sun has have committed love to

made that available supported we So are tool. APIs readily today, point-to-point customers. and that, integration had we our to the preferred to prior But

David Mark Togut

Understood. much. very Thanks

David B. Foss

bet. You

Operator

from Northcoast the comes question next Mehta line Kartik Research. from Your

Your line is open.

Kartik Mehta

they in to any be adapt morning. benefits might or think have the occur Dave, about Henry Henry I this change technology. of have but in are conversations to to good to changes and that changes I the of how wondering, lot wondering know behavior you your a that with run question I'm Jack a Jack in short as the result kind know you've been I'm past, talk shift digital what customers there's how going of pandemic. as current maybe might asked using Hey, permanent or a

David B. Foss

key moment. the in I that of CEOs and banking they these have going cited their banks and for a are forward that going board – services all like shifting were a they thing, not credit the survey into that evidenced all from past. we unions because these included survey The their digital Yeah. just aren't I Well, Director, the All and they that focus Bank in think banks it's members survey, good and know directors really it's in I'll that have who question. talk through so consumers branch CEOs indicated did come the to for necessarily to

done, a part our strategy lending functionality the center enabling and business our their digital a channel on which so many functionality have consumer call of about enabling And and part suite past, strategy. lending through this talked digital key we commercial key and experience, a and of in times the full I've is

a Now, – is talked about do credit ensure community talk one it from a as digitally, I've interacting if bank experience union, on majors. call do about your we or this how you things your of you, that the ensure the you bank okay, start to lot and differentiated times the is, how a few is consumer with going

service a a to experience success comes have the focus And the direct and the we've created Banno all with vendors why think as in tried meaning of experience We've really similar much we've the that with is to channel. because not competitors. through the used consumer other created always Platform so community so put banks to The digital for create the credit themselves experience there, that's have would differentiated having were I digital they same lot which that's we're experience is that an and major consumer. differentiate we've if Banno the personal close the same experience because unions where from branch, their is with out what

seriously I that truly as it to and so to start they need us our environment, start the that that, differentiate our understand not, digital really platform. understand to look Henry has and really they're And platform. at will customers in they as And Jack really or customers differentiated themselves whether core think

Kartik Mehta

Kevin, then, I about And know talked this. you've

finish by you next that being debit COVID-XX, that the year you're long-term I'm margin margins, this and transitioning go year, think into margin your medium-term look on you're platform. impacted I'm credit like. impacted wondering you're long-term Just by what we fact prospects But you and wondering fiscal being or as obviously prospects

Kevin D. Williams

mean, two half, migration. payment we're we we've see Kartik, lift years to this a the I in as go for going QX through been said, and a Well, three as last like stating I

in a we'll of also QX. see shift improvement. which from the lift drives and card our continue both customers to So, improvement, digital, implementations get of just margin our in-house and increased to And and then the continued platforms, credit margin from we outsourcing sales and debit should that

again, figure mean, margin the to XXXX. a put tried to XXXX, going full in COVID XXXX But equal, nice to I that. margin nicely on I haven't see if around FY from we'll year to look be in up pandemic So, XXXX, down out Kartik, exactly a just depending like sat compared all uplift to is it but what and and that everything and remaining fence it's going FY

Kartik Mehta

And branded you similar. And some is to partnering Yeah. about them last Henry? from benefit or just to customers impact how maybe that might Any conversation account. could about your have as its question, one own then do Google something doing there's there's Dave. Jack Obviously, can stories checking with concerns them there Amazon that help banks to anything

David B. Foss

Anything Google? our we help could customers to or do help

Kartik Mehta

your customers, if want to. Help even you or Google

David B. Foss

you I just this wanted to – conversation. take trying were you to terms make of were sure in where

ways. they're Google's couple customers. Interestingly, trying this So, yes, of unions our we and they're of a several with in solution, different partnering have spoken in with some credit

with are to available But neo-bank the keeping we're all they some So, we've think of as that. the perceive in that we're there, what's on sure States they've the eye of It we our with immediate again, that that go couple, help trying for ahead is years seen digital We the customers close I out three that the No and lending other to our back happening our make complete solutions there talked if We're Kabbage customers. I'll and game today. borrower from customers. experiences happening rolled also threat what that a online those platform – United was with did because to commercial ago. we potential a OnDeck saw our with disintermediate are opportunities. to

we off and needed that those with very So, successful opportunities. helping things those we competitors. customers here who And similar we'll as do were fend those to see

Kartik Mehta

very much. it. you Appreciate Thank

Operator

question next from Gabriele Dominick Oppenheimer. Your comes of the from line

line open. Your is

Dominick Gabriele

potentially Thanks to don't capital about your bank balance taking this investments materialize sheets they in Have guys. with for magnitude net of what excess credit for with they of or so union their same talked may Thanks. perhaps question. you? with Hey, do that the they've excess if amount partners a on Have they my reserved large may which Great. that increased much about tech have charge-offs talked you capital? and portion

David B. Foss

use said we expect wouldn't have to say that to they've going we're for excess I So, specifically technology. capital and

their need and branch experience. more as is business relevant in increasing think doing from I remain online about are the moving to discussion technology their customers spending requirement, more an toward about away moving

the that to have position a for idea pandemic may continues premature happen them to excess I most So, that they're customers pretty our to the as ensuring about of thinking they it's capital of losses that off good Most any in think are fend unfold. may be capital.

to need continue digital side, business of to So, then sure I to view you from and remain environment. there's well apart there separate relevant two case the conversations. that those kind in There's to increased your you the want that conversations do a for you're are spending loan making separate ensure consumer issues and on that as they capitalized with in and

Dominick Gabriele

the core after opportunities? perhaps it. that time your about products of then a tail you (XX:XX) Okay. won products or sense. core if API is and the on much. period and Great. between those again opportunity complementary really And last, as well kind implementation just long That makes go of win? the a these then just partner, and Thanks extra your how of a do cross-selling you cross-sell could And think lot core I add-ons add-ons of what of so the over implementation typically appreciate

David B. Foss

coming bunch core do core normally solutions other us an with is the It's to they're a Jack on new the so question. business time. a interesting Yeah. of they Normally, the will when whole Sure. as to with customer, Henry same somebody side, core choosing wrap at

once. somebody going that core, upgrade and all experience things they I'm go and for other solutions but upgrade look of and going nothing we Jack the time Henry they at these to other business Normally, integration through to will, technology bring that to they rare it's to do want say technology at to major have same come the say a So, if lot on core our else. on they're my

time. your question have long our a live. go after Henry be is may a And then we we that maybe go should and oh, experience realized, solutions core it very with included live, buying in point the But my the first other continuing history place after once month they they good or same is may Jack start add would really working and something year XX products. be So, of they cross-sell it they else have they've a normally XX this, to group, the answering be at and are in they're or to news

sell customers. the We those to we have continue those products of life we relationship, jobs more and our correctly, sell of a that more doing just broad more over to the more If continue such and to to suite more customers. and we're

that's I way about So, think the think to situations. those best

Dominick Gabriele

Great. you. Thank

David B. Foss

Sure.

Operator

Next Raymond question comes James. of John Davis from from the line Mr.

Your line is open.

John Davis

Hey, guys. morning. Good

on QX on line. specifically results, start the So I really wanted just to top

guys X%. adjusted you said revenue just half north full be quarter the It guided year, X%. slightly I net think actually of first last for did X% to would

implementations exceeded Just your or kind of your the guide? in what it better expectations installations went rather? quarter? Was what to relative So –

Kevin D. Williams

digital expectations. JD, that it was and were primarily the exceeded our two card Yeah.

support service So, quite it stronger line in going little we thought primarily they honest, than were was the And in to the processing were all line. to headwinds be a be. the

in all but line uplift the revenue. the processing of – So was

John Davis

quarter. revenue other down was then, XX% And the in Okay.

that is a kind curious, rate? Just forward, that bit of because think How new was that run about we the going surprising? should little

Kevin D. Williams

is of being just for it biggest part not billable then travel from conference/user yours out that of and for part earlier, primarily is to through. to the corporate go big JD, of travelers education related segment. the question And group So, actually from And our the the that. our Koning's out answer pass-through pass other in that's was chunk to costs David is this

being two are the those So, of drivers primary other down.

JAC As the will first ProfitStars is (XX:XX) up, normally our Dave back his and in in conferences, Obviously, the which out. level as is travelers our pick quarter. Symitar opening bank sits comments, second that quarter. mentioned education in

typically the be in in QX, be there'll some should it'll was QX larger out revenue with larger in of And than then previous line impact and SEC. revenue because other a kind year. little QX there other So, level JAC for QX actually is the just like

John Davis

on Okay. the just front. M&A for And me last one then the

like in any Just market encouraged, call middle from think still private the it, from you go changes, whether just perspective. we the expectations, notice we're pandemic, curious, six a an three if but you meaningful do the to looks What didn't obviously Are it's pipeline and valuation assets of next, anything M&A you over sale, encouraged? for less perspective more months? as

Kevin D. Williams

the So, industry, us correct? JD, just to within not from be clear, you're acquiring (XX:XX) talking about M&A

John Davis

Correct, yes. Correct.

Your acquisitions, yes.

David B. Foss

get Yeah, out a going eyes changed? in few stars that of and lot same there's I'd think It's a happened there those Yes. I the to of recently, say valuation they're have interesting with valuations. expectations, IPOs they have thinking their been with FinTech companies InsurTech that

in So, seeing too. gosh, stack about an that and have valuation or thinking, are now look thinking the is thought the out IPO, at concept, ever wouldn't past we're oh they're well my that really maybe companies IPO. alive that, course, They're of potential there that –

valuation as now. far as challenging little a expectations it's right So,

deals. seeing are We

sale companies we seeing we so some to pandemic and I people up we their very last were the we the about really little what little. call, think on was at asked time assumed because the and drive I somebody had frankly and seeing were seen put frustrated for would

normal there's flow through. more a coming Now of deal

disciplined your to But expectations you at valuations acquirer. the we're know as it a So, to we're after shiny when don't We for chase comes point, definitely acquisitions. object increased. have deals. well And looking

so at But any yet. we on of we haven't deals. them actively bid And looking are

John Davis

guys. Thanks, right. All

David B. Foss

Thanks, JD.

Operator

no are at time, Please follow-up sir. this There continue. questions

David B. Foss

on thank Thank and challenges, I improve taking appreciate operations. all and care for with they to our pleased hard all associates customers fronts results it. the continue work the way we these ongoing you, overall company for of the future. I our our to were from by our themselves have to Again, handled want of

will the is you replay thanks to Jack the for please shareholders. for With number at And on us continue us. best of that, operator, Henry focus what and call. for again joining provide All our customers

Operator

today's this participating. for gentlemen, and conference call. Ladies you concludes Thank

You disconnect. may now

Jack Henry & Associates (JKHY) 5 Nov 202021 Q1 Earnings call transcript