JKHY - Earnings call transcript Q3 2021 | Jack Henry & Associates, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Jack Henry & Associates Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question and answer session. [Operator Instructions]. Please be advice that today's conference is being recorded. Instructions]. [Operator like Williams. conference now speaker to hand Kevin today to would over the your I you. Thank go Please ahead.

Kevin Williams

Associates press XXXX Thanks all CFO me for & today for Good comments and joining the Quarter Brandy. morning up provide key regarding in yesterday, initiatives the us some comments the and Treasurer. yesterday regarding put additional how And our is Jack call Kevin in his And David for and Call. market other our I'm Earnings have provide with thank on about you Third Williams, we also concludes our we're to And Fiscal then place. with XXXX minute, the call and thoughts out in turn our our and review we and of sales dealing the Foss, the the some will industry performance President that guidance close. of CEO. after quarter, I In the line the some his and financial provided some will COVID-XX comments I thoughts which for to and business, open we've just Dave Dave Q&A. general, state comments, a regarding for over FY release release Henry we after will

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

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

David Foss

and everyone. you, Thank morning, good Kevin,

We are and revenue solid an operating quarter by to growth report another our pleased very of overall income business. performance and

by always, begin As into that I'd went and our associates all those for like work results to the our today hard for thanking fiscal producing quarter. third commitment

million increased which fiscal the quarter take more good for in company on I've of times down For XXXX, quarter and news as fees an this you past, were X% than view. long-term a the over QX $XX increased total prior but if X% the the highlighted for our in year many basis. Deconversion negatively, revenue current quarter, revenue is on-GAAP impacts

to Turning quarter X% the because again the segment reduction the core by revenue non-GAAP we increased of of in good have our X% business in for quarter, a fees, segments, but deconversion basis. of the decreased

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

a solutions quarter on complementary X% with our in this businesses increase quarter strong a had in X% basis. also non-GAAP revenue and We a an increase

consistent As teams solid now I pre-pandemic sales extremely quarter the core with press and core an our rate. mentioned had seeing in are run activity release, our

week which the competitive the run XXXX. is we greater core takeaways, During we in inked quarter per saw than rate XX one

signed our to we success core signing customers private our to on-premise new six addition cloud clients, core to In move environment. existing

banks were with regional multibillion-dollar think larger quarter, space, bank to credit push I of the deals significant unions. in note into the to and it's XX new continue that asset the we As core five

announce processing relationship credit do new regarding deals or when Jack union call only entire not competitor we a We to new out at core reminder, wins, a from topic core a system Henry, solution. bank As the Henry core of a it moves customer if a another Jack core as or logo core their move on the a they list Henry a new there core if to of Jack they Jack from Henry one from new that new win core previously. Think module them wasn't us. as simply purchase

digital In success our the new tremendous to with to business we this our we sign clients continue addition saw quarter, core to new offerings.

than well of more users we that to April Xth as digital and During clients new suite. in our institutions regarding momentum, see financial live and we In had offering release continue the the shared third than platform, more the XX on Banno press we we signed this increased Banno rest to XXX interest our our million quarter, as platform. digital X.X

more Xst have As added several now X May and just financial million however, we users we have institutions live. over of

to the rating recognized App continue highest in enjoy regularly the We application in industry. and Store, the fastest are the consumer as we

add platform. said the I've and area we new our to As before, to in I as features expect continue success to functionality grow this

processing our the card of we've platform, migrations end more as plan new ongoing all debit migration the of completed of the to of been discussing for in new platform, successfully years. the have customers with we our March, Regarding of processing than the three accordance

on X,XXX a are completed the XX, statistics March days. on this project. That's We October XXXX. remarkably did XX, regarding XXXX, Here our successful project migration few first and

XXX every and customers that We migrated new platform. clients month. customers new During on and we're adding added unions the and time, credit platform, credit and the to X,XXX debit XXX support currently we banks

You completed our impact will quarter. the in fiscal see financials on positive larger project the fourth start of to this

team working and us successful outcome. our such proud a achieve As to clients to with we have emphasized of process. for very throughout partners and thankful the our I'm

topic overall confident prepare our smaller probably they're bankers of us about become approached now M&A their the models of As have work again as you've heard, operating to who them and complete clients that recently Several more with among to they a has institutions. acquisitions economy.

Henry, to up their they where Jack currently In were before off, by a halt. brought left of two to everything quoted an last the regarding article CEOs processed banker in fact, pick desire the pandemic American banks week regional

our area into new of to the are We we expect the again what deals to announced. and get up merge business our and months refer summer we activity pick convert as as

American saw all Fintech. hopefully recognized Henry has month, their as banker you only that companies the type they word Fintech. Jack their XX American less of to as million hear probably with of you list of each when again, of generate $XXX been people imagine, last a annual pretty all in article much almost think by revenue, in banker, the the in team the announcing on once keeping most can companies than company Speaking place work recognizes year, and best Fintech

are of a We few this particularly for proud recognition reasons.

First, surveys agency. employees based our on with the scores an independent conducted are by

a receive this row American Second, this fifth is in designation banker. our to from year

are ever larger larger times list. made our we this of competitors any Third, almost other than company many none have forth, the on and list,

indicative is the Henry. recognition spirit and this within commitment innovative think teams truly I at of entrepreneurial Jack to developing found culture, the solutions

undoubtedly during pursue, plan, strategy in at board to yesterday's in As quarter authorize share under does significant foreshadow which of regard. the the repurchase with press we not significant noted to shares you quality an with this our release, an quarter. buy existing X,XXX,XXX our of for worked enabled the This repurchase with number a a us to we purchased shares us a additional attractive change stock good acquisitions and from price, have already lack in the

our the our Hopefully, to release will own purchasing longtime the We of we we press you've Chairman, our continue have targets lack seen retirement be cash approach as Prim. acquisition excess to all opportunistic of strategy. shares, in a Jack this our announcing fit posted morning, and that upcoming

Of before course became sat you the many this CEO in is I Jack know at guy Henry. of Jack who chair

time me allow for on We a new personally. years Jack's some mode behalf months. member Slowly I our a settling has information new into to chairman considering to but retirement COVID that, full Recognizing press company of board want that a And friend to process as board remote. before us him fill company the to said of on given time were has vacancy date. surely well our regarding with working He the in success our Jack our us anticipation and still the to of Jack share of new has XX% been to We're on to we many restrictions a the had I coming prepared us more of close most operation with the expect over customers and our have potential As sincerely retirement hope and of member a are leader, end decision to lifted Jack the employees significant for today's a June. time, of in operating all. being his a thank in release, Henry. business at all for and impact

July to to We Xst. of are return committed our date office

have work work are work shifts home, usage be environment strategy, our and leverage plans that and from in very about the office to again, sales hybrid staffing ability We where will to as things office variable possible. implementation finalizing remote COVID. and continue optimistic We some learn. And do and to still for some to work I'm tools we employ will successful post a

some our long term of prospects optimistic week. seeing success. over technology end our toward forward is to Analysts to to and our a many look next and I'll continue outstanding the turn our I Conference and be we relationships, to customer Kevin fiscal very customers, it for Virtual of for ability service sales the strength robust, the environment, chatting that, at solutions, you spending we our As numbers. of our year, expand look ability the with to on deliver detail pipeline about our our to With

Kevin Williams

Thanks Dave.

the services ago. XXXX decreased same year the our and revenue compared to in third quarter quarter, the X% fiscal quarter support For

was quarter. with deconversion is back the now $XX you in the and However, to non-GAAP fees data quarter, divestitures adjusting primary year of from compared million in of revenue fees compared On for revenue August, hardware private of provided deconversion X% our in and which line convert guidance down our strong the growth the that full and as to line and Dave current fees would and we that the deconversion processing the fiscal year, lot quarter. grown which support support also Services in if a revenue fees driver basis, headwinds $X,XXX,XXX cloud to-date, $XX.X merge previous have hosting continues and that show has the year actually that the year. remember in Year million are our to the obviously right for public for last to revenue, a offerings, which revenue prior quarter and services previous quarter pressure prior year, mentioned, the impact. this and in compared and

again quarter, billable quarter which existing was also primarily that year then million. the almost to revenue new third And to hardware, However, activity, decrease for to the deconversion is XX% which fee revenues in last by quarter fiscal convert for in customers. revenue customers, year. increased implementation, growth customers significant our line card prior to decrease is is totally higher compared increased decreased same card product in due on-prem down year, obviously from offset is the quarter travel, for in increase revenue, merge related XXXX, driven travel to the to usage and the by debit limitations the and volumes Processing last installed compared This to $XX delivery revenue related that related M&A was down COVID. primarily our implementation which pass-through also services

highest in year, compared percentage Our same and the Jack lines to-date last periods this year of year. the Henry revenue digital QX to growth all of both experienced revenue

a related higher travel processing by partially March to result expense GAAP last total was due basis. of second and to revenue limitations. The higher year was our a offset to a card on last revenue of non-GAAP ago. X% and quarter. quarter headcount in costs increase up increase Our platform, The in XX to savings compared COVID primarily up compared Cost the travel costs associated X% on personnel to was basis, X% was for was compared year with up costs a year increase as

expense third a we percentage decrease primarily This quarter ago. invest development fiscal as XXXX prior research our to of Our for the year. over the products decreased of X% quarter development to in a compared costs fiscal due for year to continue capitalized being this was higher product

decreased second expense the this related same primarily due quarter XXXX travel the and quarter, X% savings. Our was to decrease over fiscal SG&A in

last out XX.X% primarily reported which Our This consolidated the XX%. due margins from decreased year, to operating various year an cost. headwinds revenue already to increased is pointed

XX.X% margin already nicely. However, non-GAAP year, mentioned. this XX.X% last on a operating expansion from we our year strong saw margins the to items a primarily basis, increased to And due

were non-GAAP segments a on decrease in with slightly Our deconversion our had fees But payments both Both completion platform the margin of our margins, a GAAP the the quarter. non-GAAP had them improved in migration. basis, of core payments a complimentary segment nice margins. increase margins impacted and by in

varying as So effective The XX.X% our increase the ago. tax to very be XXXX is the tax the in underlying quarter of we the effective rate year limitation the third rate up tax operations quarter of move same due change for from forward release strong the for statute periods. positions, primarily of continue of in year. to reserves $XX.X%, through This was timing resulting from respective fiscal the in uncertain

last $X.XX $X.XX for quarter year. to third current $XX.X net year, was earnings compared of per with quarter last million million Our to share the $XX.X compared income in

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

mentioned, paid at year to-date. and dividends to million, shares total year $X.X to-date for $XXX.X million As Dave for of we $XXX.X right of million a shareholders $XXX just we've return million purchased

little which million our nine Our year, into year back from in We last software to-date, through down decrease the impacted and by operating time is year, which year invested was fiscal flow also $XXX last deconversion company for of a $XXX.X the significant is to CapEx to-date. cash fees million capitalized $XXX.X first this million months year. compared

assets and operating net less sheet. $XXX.X software to-date. which million free Our then is cap proceeds CapEx our flow adding balance from Couple flow of back cash and of cash on year is disposal comments

million to compared Our ago, cash we debt did we But so $XXX operations. is position a term during no long for still revolver sheet to on decent our buybacks. other our We leases. years $XX.X a has $XXX.X have quarter fund down than million other balance cash the stock draw operating

invested on which trailing on for XX is our return trailing return is XX.X%, for is Our equity months very and our months the XX.X%, solid. capital XX

the did in non-GAAP for we guidance, our fiscal on both year. GAAP yesterday full update For and guidance update the revenue press release

year, this the However, country differently continues fees continues very to revenue be appears consistent said deconversion a been fiscal of a revised. guidance that approximately guidance the for just be $XX million mark actually clear, by with compared down QX. be year, $XX be previous GAAP to do of in approximately we QX We've assumption this will guidance last $X things on if then million decrease fees deconversion hit decrease the based compared year. from the previously to fiscal economy improve. covered to that I it another continues as during the open last our that be And now go which in to deconversion obviously our and But would million up revenue will that to total

be XXXX GAAP the between release revenue growth we long the don't we term. would revenue in divestiture customer term said, year. means the continue decrease in We impacted revenue the continue hurt guidance revenue for the FY non-GAAP deconversion guidance we the long XXXX provided in much GAAP will short was to deconversion X.X%. XXXX. But small immediate for this GAAP is to purposes. that based press compared QX the M&A and no for FY and like term year revenue comparison deconversion revenue and as keep decrease activity the adjusted the would fees, FY the always fiscal cruise see for point, impact our will growth fees hurt on deconversion to we've previous This that removed revenue to as in The by X and which and to revenue drive at expect rather the the from from during

the ongoing the growth due non-GAAP discussed provided release, X% to previously headwinds guiding of now in revenue. For guidance growth revenue the to we're lines approximately in various

to we're So full nice QX X% is our for to going slightly up similar entire GAAP actually at have seen going anticipate We XX% compared to the XXXX less to non-GAAP for margins year slightly FY revenue year, year, down compared fiscal a for means to we of the still than year the year to X% three first date this X% the margins which grow quarters. we've all about slightly to should get to that reasons growth be really the year. discussed. for year improve operating to to last further anticipate last what And

the tax for around full should tax are XX%, year be We've rate impact changes federal end fiscal line FY XXXX EPS range in $X.XX effective last of for quarter, of between state provided of this XXXX Our FY at we've also no our increased which that now with year again, law or full assuming guidance the that would there XXXX year. $X.XX. quarter to and our year rate FY

and for And that, open We for improvement primarily continued XXXX in to expense ready are is due up you the now $X.XX. control, guidance offsetting call impact deconversion improved efficiencies to are opening our to lines will updating this take arrange which comments. FY concludes is please of Brandy, questions? fees. The our guidance we With $X.XX increase questions. to the for now EPS the margin year

Operator

[Operator Davidson. question of Heckmann line Peter from comes Your the first Instructions] D.A. with

Peter Heckmann

question. the gentlemen. Hey, Thanks taking good morning, for

cost what you expansion of platform And platforms. adjusted kind for, fiscal down payment us the of two closing migration, Can a preliminary operating margin that just saves the think up the of type that cloud on from us sets basis, XXXX? terms for in Just duplicative remind you

Kevin Williams

said what $XX run savings cost we're stick to to a Pete, of So, quarter, of and happen this always an that's going rate. out that, least million we've that. at get annual going that's minimum not we're all still Obviously, is to and

are in We now the platforms. decommissioning right of process both those

is this all be going -- the in costs, there's to So quarter. it not

some In the to to we're new full end some other the for things programming things different of believe, having of get the out I that through still fact, efficiencies December, there's platforms. do

we of going that start we're but QX going probably some have $XX full that this fiscal year to plus it's quarterly of be savings, quarter. million to So next impact getting the

So you'll expansion then QX. you will and more QX see some margin and QX, And even payments, QX in more see next year. then in in

Peter Heckmann

Got it.

Okay. he are just Banno in any talking us you're and you months? origination. interested hot basis some been could update? gave the in us solutions What newer six a are think when priorities that number And in? That's but other treasury the then I shifts maybe Are like to refresh marketplace helpful. of the -- institutions. three your last financial in there and terms there buttons us folks on to And the the a have products an quarter, give on to-day loan of of year over

David Foss

Sure.

Pete. heavy Dave, its customer's year on the customers. any been a our earlier fiscal So, major and emphasis there's quarter. shifts allow to this a shift in We that see would toward the started won't that digital say things I in in

business conduct commercial or branch. without the it's consumer more to into allow customer, them So whether coming a

of had more million users list. on platform May said said, what here. we X, institutions live. reemphasize that million the the on X.X put So users at we later, has, I'll month press April been around now and digital in we up right I X opening XXX the comments front have than live my we In Xth, of release, course

unions I ensure among the credit and that's that customers it them think views. to really digital shift dramatic banks So happening their technology consumers best-of-breed for commercial their emphasizes and have

piece and that's Treasury So -- piece driver that puzzle. been certainly our of is a us. of another key customers for another that for

a far call customers, for move unless toward didn't otherwise, treasury have Again, customers, treasury we you a as digital are to very a large use that's So solution that as just cash don't treasury out. this And really have platform. assigned it management. they new so commercial far But XX more year, you functionality. I -- large customers install the commercial

is online I So times, that think that on that drive on commercial customers, for highlighted without all to there to sell credit functionality their we've too lending side, have I've information. want can credit. commercial to many lending through packet have that's branch financial having to the that's other the book, large And is they them just marketplace if statements allowing that recently The customer credit for they a marketplace thing a that the do indicative. this then to take essentially responsibility this done added for a and complex loans lenders who of to we where

a activity things for So there's as the opposed this those it all of what's on. business lot touched of That's branch. all a environment those is driving doing But areas. shift digital into in that in I more coming just to

Peter Heckmann

Got it. Thanks.

would be Kevin, housekeeping. what would you say just ending shares for the period? diluted So

Kevin Williams

right. around XX, It’s

David Foss

right Yes. That's XX, Pete. around

Peter Heckmann

XX.

much. Thanks Okay.

Operator

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

Kartik Mehta

Dave last like pipeline. Hey. things quarter, you your Dave, what just Good talked if for think were and you really was you and know has talk about it seems I morning, about been backlog could sales wondering improving. the Kevin. I

is Now, might face momentum because your that any to not still to I'm and/or customers face? headwinds, there's continued, if you be able see wondering if

David Foss

why Actually, the use Kartik, release. the robust all that's that's one in of And and the I news of pipeline this. real good word pieces press

or other doing zoom would normally, a call the have one demonstration. coming people we come we'll on have and enabling accepting of maybe -- have team But people the shifted that still a demonstrations would to five have a where doing a while, to And the are in. had being or customers the a have once remote. four site. We this call remote, lot of and like two lot do sales are site, of successfully They business team's or insist on rep six we're some doing now on customers in really on we our sales on

to point So of that's that gotten where virtually. a they'll it's idea happening accept really become sale the where the -- much of

And that's are what gauge at how of we XX% now our quota. is, for annual so calls is on a this I've pipeline our is, -- sales about I said and us think we of created before, good if stout

So not any monthly happening have quota, that know given quota time a quota annual the make in got we pipeline, but we've the given our we XX% the able about enough if day, to at then that annual of any on we should be number.

that We right are now. right at mark

And rate me with that pipeline. customers kind with seen are have They normal That's salespeople on in that us. to run tells in working we sales so a today back what seeing we're would And what the them have is, XXXX. deals. engaging of we're

the pipe engagements are are of about of and number volume through that were in the the XXXX. where deals So we flowing

Kevin Williams

And vast XX of Kartik, and to given years, for that remember, anywhere the of we've other part backlog have nine the products about from of the majority talked installs time. your month our I questions any this mean, a at backlog.

be And have those as core installed to going all his those opening Those next smaller, mentioned new some going so, solid, we we deals, Dave are very signed to our but our backlogs, products year. little of be backlogs still year. a this strong. fiscal of And comments, are none gotten all have of on and are very XX all

our products along into being with backlog going are all all other sold. those the are So,

Kartik Mehta

XXXX. don't improvement to comments, to based much in there and But any talk to not continue FY too continue I to is you top about you I'm to But going want about modest on Kevin, Dave's least be top that see your line? reason at talking X%. X% And from able shouldn't so, know, accelerate comments line?

Kevin Williams

Dave, Yes. process I than year. in will the economy do continues budget here. stronger Again, be and But very jump was starting this what revenue growth I year you just year. through, it the comfortable next that obviously, as grow we're obviously mean, getting do, and feel I just Kartik, can to for next

getting grower that we've migration. sexy, migrations conversion to all to just out, existing is focus deposit can that the nice that be reason And end a customers. our capture fiscal growth see but to disrupting instead without Because I it Just seen continues should payment was new growth, payments remote revenue from our through our mean, adding we get help next new totally drive I now as I up And -- back migrating such feat major core on why of get customers it guys, of some can't and check winds the major the customers. don't that alone from then where this our force. was year. be nicely to not a we no year done

Kartik Mehta

Appreciate Well, thank it. you very much.

Operator

Evercore. Your from line with of the next Togut David question comes ISI.

David Togut

this during of to deals Good we've what seen improvement to you. watermark the or COVID XX months so? you the Could Thank up morning. about six this of that you're next new on shooting comment sustainability to XX core prior kind the seven? in of high this in Is the from for quarter

David Foss

don't have I Dave. Yes. a crystal ball,

do I But in time going we're is, next back to during the see a on the pace time in times everything same before, the we're are making and would it for logical. COVID-XX, guess that no out put pandemic. heart the decision a XX was But And it's of have prediction. disruptive, logical comments, I goes, And it don't that should talked saw that's it's switch to exact to? that certainty think you in right it's to and been pandemic? bank talked the make quoted the runway to so that your deals about slowdown the global takeaway COVID-XX, XXXX. week. very many I've those I at depths that a on per you I'll as decide a why absolute definitely totally of your with in you the greater months, anybody there you surprised next that it And the pace what credit we transplant you it's smooth And all absolutely give all. competitive core that to pipeline booking do as we've we that than during we in seeing core, back institution. disruptive of can't union, decisions is decision coming Because say Can has the unless Why certainly I today, during, that rate No. one lung pace I of calls we run now, it how the a essentially and my my a matter And year? make or I think you're that be during when process. it's for decision we in about So way. of are this were the midst would CEO

COVID still If the Jack move the of XXXX. all you picture, out customer a to those reasons in for all to they just they're are Henry, other take like were

how Henry. let's these I I the thinking the are and core COVID how And find talk now. go through provider manage executives on about union so to credit think back do And know they're side. to seeing best-of-breed to bank the And They now that in world. Jack

David Togut

third complete that you expectations operating a And noted payments margin fiscal for your that. significant boost of a in for full that adjusted XXXX year? would what the the margin? platform as Does fiscal preliminary follow next you conversion by just are Kevin, to up, Thanks XXXX. lead quarter

David Foss

the customers moved platform. legacy here. All The done. off let's have is clear be conversion platform Well, the

So with turned you conversion. the switch follow off. we're the everything's now, flip okay light say, and the done just can't on, It's

and to, that's to So talk sorry over. was what Kevin alluding

Kevin Williams

You're fine.

I year. gain So I year. a in earlier, XXXX. It's couldn't going I pretty where than take and non-GAAP bps to operating will next slightly there be we our be more is going nice margin, much us as additional up margin to it's Yes. time. last going in some -- than more I to from as XXX that? mean, line that finish up is earlier, yes, maybe I FY was And think, said said mean, it But expansion

taken out. said, we get second by And taken the to all end be just it's I believe, the when going Dave out. to costs these costs get the As quarter, actually of all

customers to throughout see what going some cost out But see of payment be margin new cloud, full new as things for customers, as add those to the the we And to continued help migration. fiscal margins. add payments on-prem to as our we the when you're next we our you migrate all take to So customers, continue QX will it'll core impact improvement continue private year. continue

The forget is that about obviously, both other other fees with on But our are our M&A down. the the lot on activity, side is people think acquiring I deconversion Dave thing non-GAAP that, is of merge well. in a our Because GAAP do customers numbers comments lot -- is it our to of and a revenue. is what our as convert and the alluded

our done headwinds revenue, convert fiscal we've So some layoffs. merge year had risks have on we significant this the or

all So have costs. the still we

the not operating our M&A some back also having will up, want, with only margins. which activity revenue, just convert that of So will fee really help also don't pick some help deconversion merge which give that us we revenue,

margins operating normal, our Dave. help to to going it's get things, positive back many as things so there's So

David Togut

Thank Understood. very much. you

David Foss

comments. I'll while asked we about, we're Kevin since in the comments. add just you're one it customers. call conversion. But platform that new I it didn't add out to But didn't the my brand question. shifting new new more One, out that during customers Dave pointed impacts added my quarter. of XX continuing to I to call platform this in a comment here

customers for net We're really growth us So we're that this a platform migration. through that new. the is to continuing to driver now add

Operator

with Steve comes next from of Research. G Comery Your question the line

Steve Comery

going morning. to about that. I actually Hey, get was him ask good to

You customers. high some from the know, on just thoughts feedback level

Now has and is there? on platform the selling just kind thoughts high momentum what the level card new that opportunity general transitioned. of totally the Any platform

David Foss

before been used It has I XXX a you, are -- all I Yes. Steve. been. my word -- -- effort with has the comments customers. conversion on were I and migrated so this that now We've these XX how the us the words weren't been has customers, in this card that platform. amazing mean, really huge and this quarter, we've successful doing added another new Thank opening business in about

platform positioned terrific. credit, been which Customer put this response We have new been before didn't sell and are credit to of have we has in now we place. selling course,

the leading all to referenceable, is are definitely new platform. Our happier. successes They're customers customers through in these signing which what's of much

there So the it term for along was And pain But was really decision, the for has right you're it way, has a been customers. these right long It move move customers. was the project. Jack really disrupting because Henry. all good a been for us our

is positioned in talked on old the the old while. haven't couldn't base, one we're Henry I'll means, on we thing dependent we've core which new to talked platforms our the Jack But sell system in and that can credit about about Henry This debit well system, Henry platform calls, outside in core the Jack previous past. do on which future. a a core Jack was debit dependent for we platform so, not And And for emphasize growth function.

And within start so Henry the customers that base. doing new are well as now Jack to core positioned from we as adding

Steve Comery

that same my well. actually, And as the is Yes. next topic question is on

So core Banno, Jack marketed I think historically has Henry to primarily been customers.

takes, of thoughts Henry customers base? Henry lot empty puts is and a Jack on current Jack the Core as sort that space any core Or still into as Just far the to there? go outside there of marketing

David Foss

Jack Henry Banno the base. chunk. right Yes. big There opportunity is, delivering within question. in core of highlighted which is good what we focused a It's I've is now are past lot intensely And a on the other the business,

Banno business of Banno who those But digital on calendar Banno business what next Analyst is be business year. way, has year. and kind be this been the will and for you by And that means delivered later application. runs who the consumer to for us. this So a us Day you will as of attend update Banno that far later positioned delivered week, so going

all have selling so up the base. consumer we live core outside Henry go, And we to Banno and start business Jack once Banno and running and good and then

is tightened customers So outside sure before XXXX to make definitely sales But we have that after now core But that'll doing And late target when we core calendar everything the right selling Jack outside later XXXX. start base. start in we XXXX base. calendar want that. we'll Henry is will the -- to core go be be right we the with our

Kevin Williams

to one I'll thing that. had just And

core think just about are So, Banno. you and XX% at about right customers if that we Steve, our of are now using over

an of enormous obviously, amount we to So, runway. said, we've want as our got core Dave And take customers. care of

this, is actually won I'd we're a I've long seen win thing time. we've our complementary actually actually this nice deal. core very we've out I've And a other business because Banno product, core selling core seen and point for a in some I've only customers. been never The never wins, to

-- -- that's it's all care our going So outside customers our start the we before another sure of core own taken make base. reason core to we've

Steve Comery

the one Or the you just opportunity Then clarification revenue how Banno there each the handicap similar versus business? on final consumer Is would that? Banno product? for

Kevin Williams

That's commercial say, a for would tends don't consumer you with good many to that question. a pay functionality than a institution. at I work as to them customer each But does. more have of

there's say lesser focused, opportunity they're depending primarily consumer commercial opportunity. on at institution. So, the If they're highly greater retail, a institution, I'd then a there's if of focused the makeup that

of the there So significant makeup out But institution, functionality. once just roll a depends they're commercial, the if institution. we that is opportunity it heavily on the

our essentially okay, be business, to consumer on first and for the we that existing the around to base. already let's now are for say, that add that Banno their those list go will have a who customers Banno you'll customers have we'll be deployed So, consumer, button for easy running Banno

Steve Comery

you Thank my taking much for question. very

Operator

comes line of question with Davis from next the Raymond John Your James.

John Davis

good want to Hey, just on out morning, Kevin, start the margin. guys.

a deterioration. than expected, seen XQ. like you've a was most a bit implies little then little I think and XQ a a bit think in I Historically better XQ we of but hiccup people good the guide bit of

and maybe know just we takes sequentially here? as margin fourth of the quarter enter So puts the the

Kevin Williams

of QX. JD travel very savings we So Yes., part I savings mean, that from had costs. some related is obviously, nice

We travel are again. starting to up pick

not in where almost the not And it which travel are to see that's of pre as to quite we're lot clamor us. a and be there our nice on in fact, pick is picking lot corporate QX. wanting And But for comments, his M&A yet. more revenue, -- where I is is much seeing back happening to up there In mentioned to our get I and in going back starting should a the to convert I up which a lot those margins think was QX, is even it Dave pretty Everything margins is M&A. back very Again, else negative really starts merge out customers travel think us. be. of about only Commercials of there are COVID.

to pick fiscal next happening yet don't So up right in going I year, that's but I QX. think it see just back

John Davis

driving the stimulus Okay. That's guide modest in deconversion helpful. the non-GAAP there impacts? in any And then, what's on uptick before Was comments that's the revenue. fee

you business debit curious have of your guys any if from Just processing on stimulus? impact seen kind

Kevin Williams

money has been driver been thing on been impact definitely business. as a we space. been their stimulus to digital, a channel, has to for who's Certainly tried business, standalone just is who numbers. manage transaction out anybody growth has in some The interesting that money there payments but have not through in the for growth the access users. debit a that separate there been so customers this Banno and quantify also So digital for significant have Because of haven't looking there and a debit that in growth volume, on driver in the

volume, the industry. of I we and carve But and, have that out to think to haven't consumers actively impact the in the it's rest so tried baked Because across that's stimulus the volume, stimulus as now many payments. segregate been manage far as of numbers. the trying just from those debit

John Davis

guys quarter plenty the math, of you the a since sheet, I've And it's seen Okay. buyback, there. the buyback. on My $XXX guys Kevin, spent then, balance been firepower phenomenal obviously, you as a time still Thanks. right, in on million aggressive be long have about

just curious why environment, but doubting shares maybe level, in curious reason the continue valuations, to Just been too? leave that there's any here? buy any if back you of kind you not I'm that wouldn't changes can in but which given M&A commentary. So in And maybe to

Kevin Williams

things excess cash, some one in about again, a to that's good signal strategy. that my our does don't we said that see So the time change JD We've and clear horizon. significant tried in was be comments, we the on this of opening I have if acquisition time not

dividend We're do we'll absent to will do good stock our buybacks acquisition. but buybacks. a committed policy, We stock

IPO we've possibly One acquire. could highlighted many has and/or these on big eyes challenges is, high an calls that Everybody pretty some we that us valuations valuation. stars getting getting of about great in the companies doing their on times potential are and these back

And particularly to was drove option for ago. That's here fits us our make price is like absent, significant an down the continue share acquisition board that it a few the when buybacks months us, with share a solid be really and get so, strategy, really to move. more active what

John Davis

maybe that last a one clear here. And me. Dave, for little picture Okay.

the dynamics in competitive splice segment. core the banks. credit Just versus Maybe out unions

credit competitors unions some lately. One made making some has on your progress about of noise

pandemic, how the see or So changed today? there curious it you just if of anything's through kind

David Foss

not. Absolutely

business. we the XX the that this side So, credit on competitive takeaways deals union have the of we We've won won year.

has is change the And landscape. as deals ability significance core There winning as true on Jack any as that far changed new no pandemic of core regard of to Henry So on credit pandemic. many as It today. competitive the win side. anything with the our was on core to side nobody union the with displacement. very I before positioning true is don't think strong the side, because the or

John Davis

Okay. Thanks guys. right. All

Operator

Your next with question of Suchoski Research. the line from Autonomous comes Ken

Ken Suchoski

David my question. morning, Kevin. Thanks. good for and Hi, taking

primarily out in five takeaways were dollar smaller historically the market. core multibillion I has Jack of And I institutions institutions. on think that Henry mentioned XX the focused you competitive believe

any are appetite your can there about be add capabilities you successful then, to move up there? market need to to talk And or market? features push really you So up and

David Foss

nuts. a right misconception that a me for is XX in say I got dollar over just Ken, absolutely Henry well years. been drives That Yes. multibillion to has space player here. Jack that the

that multibillion ago, not dollar call with XX would space. We space. we totally just having I But were So this years in were XX, you in if grow years, the a continued what we said. past player have agree XX the to for

almost my the you'll close dominant the analyst XX% at are Jack side, unions but of quoted exactly Episys off head, the credit Henry the numbers on credit our conference, I of top over to billion run solution. the XX%, We week player union see a next the then dollar

player. So we are by far dominant the

single On the platform. with side a union credit

On strategy. platform. have them around part We've the on on all market. a banking to of multibillion we XX% Lake somewhere running of almost It key our side, to market Silver the XX%, of our dollar push is continued up

continued in just over have add I years to We functionality as the space regularly, today. that on call winning are emphasized and the we

have in we banking brother -- not So, little the we the are multibillion dollar space.

we below We about billion. are XX for definitely question historically, a us been is have player. The

-- teams about Analyst market are XX that has that a XX been historically, we in actively have we been the we've billion. as been of we've space because well. working is have But been and move not next an above billion, And talk Day do initiative we will that in so, things the week below Stacy we've that to that one at

banks. targeting smaller not are definitely we So,

real sweet below for a many fit market fit. a billion us. years. the Jack mentioned, in right million below you're bank a credit to about for in a as a for continued XXX here if million is assets about grow fact, we've Then In We're dollars I union But or generally up the not XXX Henry assets. around is spot

Ken Suchoski

Right.

a way after Jack XXXX, Is that, looking Okay. at you. then, what's be some back I fiscal margin helpful. fiscal year I year in margins, I think the about just behind numbers XXXX? That's will that expansion margin year here. I'm mean, margins operating And we even or fiscal fiscal year roughly for guess, the right for think platform about migration good really to a XX% XXXX. had XXXX? And Henry when mean, benchmark is

Kevin Williams

FY get Its about, saw is, we migration. this us, and platform started mean, next typical benefit behind once of we XXXX and XX get mean, we margin go the FY payment when Kevin. get full if is Yes, the just migration, Probably. migration. that year XXXX, historically, back XXXX to And the behind, started. I the We XXX platform to expansion payment, you think bp we I before now should

some that already XXXX, our was kind even of margins, in there since then. grew So degradation on

should see nice XXXX. in So, XXXX. nice in expansion we very margin margin -- some And again,

Ken Suchoski

right. Right. Yes, I think that's Yes.

digits, last growth do to maybe think me, the And non came of down then looks the think your you're in question to can something if about of you you right, that digits maybe math, in for at like assumption? accelerate I I fiscal level? going the versus revenue below bps, Can one grow I do good here high rate? kind it low sustainability XXXX. even year margins GAAP fiscal XX think it single double XXXX that just about talk XXXX XQ. a Or is growth similar a And

Kevin Williams

No.

to year, is, So there's a got especially In pretty couple you side. payment from of things on we've remember. QX comps that got some last the easy

probably be year. going It's us your going before to right in FY to to hit. us maybe X% X% very mean, not to get But the growth, in X% it's than single the and the to I like digit high for saw answered QX I in think X% you're There's So going pandemic single to digits. probably XXXX. to for question, that like a XXXX, faster right. you're I a see probably previous to we FY grow going you're to did we going be see high range be even non GAAP in math, X% but growth double, non-GAAP, low

Ken Suchoski

Got it.

questions. Really it. Okay. Helpful. appreciate Thanks for taking my

Kevin Williams

You bet.

Operator

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

Dominick Gabriele

Thanks much questions. taking everybody. my so for Hey,

I'm the rate You changed mentioned And retention curious fees. new of your your existing even actually not and switching how lack between asking dynamic is is have forward? year-over-year really But into the forecasts, rates that. over And the time? and deconversion the your among about Thanks. what deals, winning retention how I'm about in $XX decrease moving clients million that's baked

David Foss

a about of rate, a little you misconception have So that The concern regularly. incredibly bit is talked high. about that may retention our fees. deconversion rate And the retention we

been somebody So get of by our acquired one because has when that's customers fees, else. we deconversion

And so they of out existing their are buying contract way have. the we that

the those by by Jack you are We hard. to hard the able And have have to saving it's all we We acquirer that respond to decisions is and good do no switch that. are do those the making of rare Jack Henry are those acquired of and doing is to those the somebody But institution. to having another rare. the those do a is control over have convincing decisions. acquiring acquirer record Because accounts Henry to are system. convinced the track convert system. -- times Those But acquiree being whether to are several the bank to

because acquired say Henry they what not they've drives somebody acquired XXX% decide deconversion out of customers else. So away. Jack being leave now they're of of got it's It's to been agreement. It's our angry revenue and the to I'd time, and get to is by with that us pay the one

So doesn't upper rate core that retention really conversation. well the come the base. rates the And far as are into into our XXs retention again, as

Dominick Gabriele

providing, you're that'd feel timeframe, next R&D a Thanks. really kind be But It really, be to over guess, you're Okay, could than whatever could about the I expense was of item. helpful? [Indiscernible] would you little if And R&D talk lower what of like and your trending where great. the And expected. expense, a some then talk the you about you maybe expecting projects small on have kind I working of there?

Kevin Williams

run to XX% revenue tend all about of at we So R&D. in for

expense, R&D cap of XX% years, we've software, number, revenue. And probably years. at five its it's So been been five about than more that that's

years. new very innovative forward, because committed of number these That's several solutions. about to doing comfortable revenue So XX% for we're with looking a I'm

to talking those So solutions.

about of Some here. we've talked them

investment to additional continuing the We in larger is commercial on investment are continuing banks functionality. do a have larger are to treasury digital that serving to because lot for our look -- list, of platform, in continuing digital, that do customers

on the is as projects that's concerned. R&D far list So as

with we're experience you're ongoing systems, investment investment. and feel, that is the something core the in the There's functionality -- you and continuing new That's done. updated. our always user systems look constantly say never do have core to being We new

lending platform. Our

But consumer So online functionality while the Lots to commercial in in I this allow on lending. customers highlighted ago there of that do side our expand the investment conversation. a ongoing also little to the year functionality investing we've functionality deliver particularly to or fraud. I'd highlight and past in online. to new so accounts originating then of for comes the to consumer last deposits best-of-breed And it in been lending is area when the

lot a in on experience, more managing fraud fraud a new guess the I investment going deliver of area around for digital So to our of a functionality customers.

Kevin Williams

the think other Dominick, I remember And I XXX% there. agree I and

cap to accounting total And and projects. of capitalizing on little Our R&D for the R&D follow to capitalizing, depending software expense in the on we a fluctuate rules start actually in The in the when and XX%. is obviously capitalization. going because all revenue percentage P&L is for going be god's to have of timing they bit that's

project we're ready the projects times and to that start capitalizing. another really And be not may there so complete with we're

many that of so we maybe projects flight. as actually capitalizing total Dave X% just pointed with R&D So X%, that little revenue. this quarter were because we expense had percentage a in out higher because We're quarter were

Dominick Gabriele

is union stack versus space? so appreciate is, thank being really, and I helpful. re-accelerate maybe really a That's that's versus union tech sales appreciate new I asking leader their the And just you force the Is guys I'm future obtaining clearly, much. a Thanks. And really between clients conversations there are as within your there any one, really whole? you actually between more. one guess, it. the all difference it. into in Great. I So one ready to big credit credit

David Foss

They've don't the It's other. Historically, it Yes. I even been ahead time credit industry put ago. tech I been wouldn't have credit banks, always question. or unions banking the way. in it business the started a I at when just interesting a one that I'll an They've to industry, of put the in Credit unions always front is union this technology forward, long line. the have big but but of to banks, guess apt as that and technology used haven't against against say spend part more aggressive And being more invest rationale going since differentiator profile think not technology. one to new been historically change banks have that their They in technology. They've use changing of to there's as -- have. or technology after their I against about be just they just don't money more any built many differentiator, other, tried far has banks, been as and branches they of of the on general. the recently, or as

Dominick Gabriele

Thanks.

Operator

the question of next comes line KBW. Vasu Your with from Govil

Vasu Govil

Thanks about the I GAAP, delta is million squeezing first think was million just deconversion $XX me prior million. I I you talked my Hi. the guess for a between four fees five The revenue it roughly clarification guide. But quarter, question now and here. the on $XX thought. in think, it's to GAAP I question about Kevin, non and going down

Some of provide? So there? clarification the remaining you what's could delta like, kind what's,

Kevin Williams

I we opening comments, the in on-prem We're M&A as not not to happened revenue be be my activity. down. going Hardware of to sales Well, I lot it continue installation this was it convert mean, continued merge quarter, seeing a because just mentioned this where thought quarter. was down, our

So yet raised the were little actually and consensus had we it's our call a quarter we year. as first most efficient you notes. really guidance not really still in a for and QX. miss. short, expanded it and we the came exceeded out very -- not But it margins the revenue was EPS a still QX, for We change your had in really up was of We pointed

on impact whole changed little bit. of I delta as yes, QX. what a really not it's the happened So in lot a But mean, QX

Vasu Govil

trends. on just than just segment, then rate, the less continuing with the And we payments thought I core. if payment in look at Understood. XQ and comps little bit a easier lot given improvements non-GAAP The the the a have growth I also core was core better in would

and takes you what quarter? the talk and the rate of like drove for puts about fourth if what you're and could growth sort expecting the So

Kevin Williams

because on-prem and installations core we convert coming QX we to merge those revenue as thought of being don't where they And again, back in just in not guide were So either. we is going be see it.

Vasu Govil

providers on segment, sort of them of a of sort trend one, broader last rates if you guess an I then question do How way competitive many public. the growth And point Understood. in all? are the that at impact small solution see environment. Several emerging, are having on your complimentary

David Foss

was something essentially Jack the would of right, been are talking all Henry, And potential that's pretty IPO so. put earlier, thinking themselves M&A target I in was that to and who what maybe past environment. you're have for up a for to watch them these would sale they're about the Those going It's have and days and we when I closely. alluding companies acquisition that

particularly, just it's bit that anything to or or like the Henry little doing market that's the trying Jack they're threatening in and advantage are them particularly now. frothiness IPO not than it's threatened, different think or the of I of to new different are that. anything right take number a none But

about I names, think compete exactly well compete are you where at the out and we're a are there. we're times And right worried to if most some Fintech them. and interest the of see that how names would in you very folks positioned they're me, that advantage with valuations from throw ability to tell would years these now and positioned to of we'll of throw with where exciting we not you They're were positioned We are getting them I our now. they that lot taking and five to it of with there's compete sit

Vasu Govil

That's Thank you. helpful.

Operator

there time. no further at this And are questions

Kevin Williams

Brandy. Thanks, Okay.

actually, beginning is on It'll mentioned, as next May o'clock. Analyst from Day XX. As a reminder, a Tuesday, week one at Virtual be Dave week, scheduled today, our

to to can for can vsherard@jackhenry.com. If up That's have you contact link you registration sign registered, Sherard. not but like you event. would send Vance And a you he the

of hard all pleased of continue operations. our challenges very for continue from I call. our the to overall forward and improve by And the work themselves the want ongoing moving handled our up company wrap way results to associates to care these future. Now thank to and the customers taking for We're with they've our

us at focus and shareholders. that, is the for Jack number provide you would best joining thank please what continue now And you to Henry Brandy, replay of again With I today. call. want our for to on All the our for customers us

Operator

today's a would Thank by replay, this you. may does conference conclude you this great Yes. And X-XXX-XXX-XXXX. X-XXX-XXX-XXXX. time, listen like But call. have to do to the that's Again, you dialing so at day. And if

Jack Henry & Associates (JKHY) 4 May 212021 Q3 Earnings call transcript