Jack Henry & Associates (JKHY) 3 May 232023 Q3 Earnings call transcript

Company Profile

Participants

Vance Sherard	Vice President of Investor relations
David Foss	Chairman and Chief Executive Officer
Mimi Carsley	Chief Financial Officer and Treasurer
Gregory Adelson	President and Chief Operating Officer
Rayna Kumar	UBS
Daniel Perlin	RBC Capital Markets
David Togut	Evercore ISI
Vasundhara Govil	KBW
Peter Heckmann	D.A. Davidson
Kartik Mehta	Northcoast Research
John Davis	Raymond James
David Koning	Robert W Baird
James Faucette	Morgan Stanley
Dominick Gabriele	Oppenheimer
Mark Feldman	William Blair

Call transcript

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Operator

Welcome to the Jack Henry’s third quarter earnings conference call. All participants will be in listen only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Investor President, Vice Sherard, relations. Vance Please go ahead.

Vance Sherard

and Jack Henry morning thank earnings you the for us joining fiscal for call. Good XXXX quarter third

Chair President and the David CFO Joining today COO. Treasurer; and Board and Adelson, on Carsley, CEO; Greg me and Mimi call Foss, is

his provide will financial comments opening fiscal for Jack Mimi and After for investor comments, quarter, I commentary industry sales other to remarks, state key in regarding Dave press the and his concludes of yesterday Henry the results my turn financial additional available the year performance the the the relations about After section from over of and included initiatives. guidance call will Dave website. that thoughts our business, the release issued is

for the We open will then Q&A. lines

this cause events to undertakes As objectives, no multiple due expectations, revise and future certain statement Company The about that which these includes to uncertainties. questions to to including the multiple results update anticipate those results any Forward-Looking events, from could these to obligation responses remarks or like we call factors future a subject materially risks differ actual statements. or reminder, or concerning strategies, or trends, Statements, are

For yesterday’s a please forward-looking entitled XXK risk the additional sections our refer and press information summary, these factors to in and and release risk statements. factors

measures for financial non-GAAP including revenue non-GAAP non-GAAP operating in release. certain The measures, will financial this discuss reconciliations we On call, and non-GAAP yesterday’s income. are press

over the I will now to Dave. call turn

David Foss

Thank you, Good everyone. morning, Vance.

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

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

bank on prior to fiscal XXXX, in Consistent non-GAAP year basis. regarding this X% was down as our a total for compared year, the For XX% increased approximately the revenue QX prior revenue reduction comments M&A deconversion quarter with X% and the increased of quarter.

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

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

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

our extremely I As led sales an by press set time the On sales core that team sales in all last posted strong mentioned sales the highlighted QX. our quarterly call, professionals an in fiscal release, our I team. the record booking quarter

that for did this break we in a we didn’t quarter, set QX record history. record Although the strongest

approximately XX run During in the the at deal so rate, we past. the week continue quarter, we I inked have one takeaways, core discussed competitive per

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

In addition success to tremendous Digital continue experienced attract our new we this to we Banking to in suite. the have quarter, core clients our business

During Banno XX the clients Retail up XX to for another Banno signed platform with new quarter, clients our business. third we signed

over just Digital suite, March live of Regarding XX, have million now the $X.X platform. Banno our Banno as users we on

deliver we highest business the in XX Banno later consumer App industry. our are availability has general to and The this the from rating continue into on the the regularly remain fastest testing track recognized We quarter. business and enjoy Banno as application Store outstanding, been clients feedback we in beta to

and banks a in challenges to of March moment banking to take earlier large regional by liquidity landscape experienced me Let week. this a the couple related address the

their has I Bank Term decisive had think in overall Funding swift not on into and concern Fed bank action. the Although the any effect Reserve’s of I’m Henry positive tapped regarding I market on core announcement liquidity, Jack Federal a the the clients, aware and who have program, applaud new the

they Since those hundreds number CEOs with have have members been to say our reported with clients have team the I clients I’m personally at of pleased of a largely by our have our with visited the several grab that, as spoken of events of who events look and large our headlines, have diversify of these their unaffected client exception clients an accounts, new to deposit banking balances. indicated business influx banks.

I extreme base, Our communities, clients their typically scenarios. and have as and consumers have small impact customers, businesses is in longstanding that and an loyal adverse they logical a local of wouldn’t a a so serve few diversified think customer it and see medium result

our all Credit of provider. in large Credit unaffected being technology than challenges sector. approximately Henry part with one more the Union on Also the Jack banking assets industry Those that, with with remember primary partnered report Unions largely also business is clients as focused the in of by a their half billion

they with a (Ph) responses or no bank which primarily the respondents banks deposits deposits. and of In saw than of conducted outflows survey or decline inflows X% deposits, generated XX% increase an XX% least more CEOs, less they assets. at Approximately billion said late saw $X CFOs said than X% April, [Interfy] of in at from by presidents and in saw significant more XXX X%

anecdotally from I clients. what these are have results consistent our think we with heard

our history the terms as the to largest the was March. mentioned to company. seen since part in ahead quarter on sales have I of technology of And clients this our move earlier, We bookings of the no third middle hesitation with of in

the well and is other our sales in face call aware change. that bankers things any understand than recognizable a pipeline larger What uptick opportunities is could more, of today’s February. quarterly at including since economy our challenges time, now in in I’m

to and and modernization clients of Unions speak we to as prioritize Credit generally account today, remain banks performing and But continuing are their stack are serve well needs their evolving of technology our the holders. competitive

all published on report we XXst. have new March you corporate Hopefully, the sustainability seen that

on since I we published working of been excellent and representation think it is report. have key accomplishments our initiatives an last the we

Jack summary our Cyber of a Science-Based and science-based data reduction the outline SBTI makeup, Initiative version, review of Henry’s to an the to more new Targets the targets or our setting demographic commitment emissions. our gas In address practices, results overview an survey, employee this of Security engagement we provided detailed to annual privacy of of a of greenhouse and

of recognition report highlights list. received top we organizations some and companies the the from have Computer public Additionally, Newsweek, like LinkedIn’s World

our look toward ability customers, and to strength solutions, about we deliver our year, As sales our optimistic is expand fiscal our been, of has be and prospects ever our success. for customer to larger of than continue the technology our to the end it to the our ability much we service outstanding long-term pipeline relationships,

and Mimi at you couple Day turn Investor to numbers. Denver some seeing on the look with that, chatting over to in of I With of many it detail for will forward weeks. I our a in

Mimi Carsley

morning Good Dave. Thanks, everyone.

Dave details out Jack Henry the driving the for a As successful shared, results year. quarter, the and outlook our remainder had will third I those call and of

third and the up non-GAAP up both quarter is GAAP solidly nine-months X% X% total a on For of first and a basis our on year, fiscal revenue basis.

trends XX the decreased, space. million remains support were deconversion activity the year-to-date. onto Support broader revenue quarters. with both quarter Now quarter third in market two and This limited third impacted for GAAP acquisition increased consistent and million in-line as negatively the activity, and XX a year-to-date, On and the basis, Services the with past over revenue quarter in X% details. services our

a couple approximately million only of are this fiscal deconversion in XX revenue projecting we With left, year. months

of deconversion challenging activity advanced forecasting uncertainty the is always and notice given limited However, general M&A.

by decreased merge in Our year-to-date. and and lower XX% private convert XX% Product delivery and offerings show XX% the this robust services public the year-to-date, and our XX% by hardware revenue serves model. consistent growth quarter activity and strength cloud impacted of the higher quarter, growing Support quarter, deconversion business grew revenue. On offset highlight license and a non-GAAP X% basis, and revenue to for year-to-date, which X% Services

non-GAAP for quarter robust Processing On basis, and on card basis GAAP growth XX% driven plus revenue volumes increases the year-to-date. The increased demand. and XX% were for services, XX% the digital quarter the year-to-date. higher the X% was and by a a

card X% card consistent costs up personnel growth, drivers costs, Now, amortization cost processing of the results. and with consistent our for reviewing is cost, third Quarterly are drivers revenue These revenue included year-to-date year-to-date. quarter expenses. increased across and X% higher

XX% costs due same expenses factors. XX% furthering license expense and the fees on innovation. these and mostly Research increased personnel increased quarter, the higher development based to Year-to-date, during

the X% rose for driven was X% services gain SG&A Year-to-date, on by earlier the increase quarter, driven costs personnel, in travel, professional costs. sale assets personnel this by by related increases the year. of offset partly

controls, pressures and expense travel We remain driving helping offset involving and other these efforts inflationary positive management. head facility procurement and operational rationalization, actions results. wins, focused are count on Collectively,

the quarter. delivered per Thanks a lower related and fully revenue hardworking and tax year a share earnings $X.XX for in our and XXXX. for to of the partially the and internal we associates, strong diluted primarily GAAP net for deconversion FY third Despite income, of up are to with offset results a consistent and expectations to by quarter dedicated conclusion decline non-GAAP rate set us nine-months

a the part Payrailz gain the the acquisition shown and impact sale are assets, for As of deconversion reminder in the from of adjustments transparency, on the as revenue press non-GAAP release.

the million lower deconversion the change million the The to XXX flow outflow due a related in payments deductibility was development million same flow. taxes. down tax to to Turning our timing at cash from the revenue of were the cash of timing last Year-to-date, in XXX significant operating period attention in year of and XX expenses. quarter

which cash of Free plus cash from XX flow less and the year-to-date. proceeds cash assets sale operating was is flow, CapEx, software million

flow Excluding the payments discussed deconversion million. year-to-date been flat, have keeping and previously XXX free approximately cash revenue tax would

a XXX,XXX repurchase balance quarter. conservative maintaining activities balancing during repurchased sheet, the While with we shares

representing capital $X.XX We a X% of share, dividend increase. shareholders through to a also returned per

in our Our in consistent, return maintaining resulted acquisitions, opportunistically to trailing liquidity, This invested paying business are capital ample of on value XX.X%. fuel stock. investing focused capital dividends on creation evaluating and priorities repurchasing growth, we to a allocation consistent remain dedication our XX-month

The With Payrailz of and gain our the completion sales year. GAAP outlook that, of inclusive review for remains guidance our press on guidance. fiscal included release updated revenue. GAAP asset the full-year acquisition, deconversion The let’s

the the to Most of We expect GAAP assuming base, our significantly continue the revenue remainder deconversion remain customer minimal trends impacting continued year-to-date results. in year muted. fiscal consolidation will for

August annual full-year five million increase transparent, provided on guidance providing from Considering XX approximately earnings revenue. to representing will call, for be of a approach outline revenue To our call. deconversion previous million our our activity, last the we on new year-to-date deconversion expect guidance we

meet delays Payrailz we three impacting amounting FY value revenue While implementation expectations, the pipeline, been financial remains there integration of This our strategic confident shortfall remain XXXX revenue in the to a has performance trajectory. and in third-party of continues to million.

a from impacts fiscal expect full-year GAAP share to $X.XX deconversion to business expected modestly partly X.X%. due slight dilution. respect GAAP Non-GAAP continued in and improvement impressive increase by XXXX model. full-year driven tax rate, from we growth We positive remains revenue, a be of Payrailz per the expect higher guidance EPS, consistent With to lower unchanged revenue for offset our to X.X% between $X.XX to with performance

closing, fiscal year. strong this of remain in operational confidence about the another continued We for thank Jack our solidly results optimistic we investors of Henry. their So and delivered of in and conclusion quarter financial all

Debbie open for the will questions. call you please

Operator

UBS. first Instructions] [Operator from with ahead. Please go The is question Rayna Kumar

Rayna Kumar

you general, to larger Good David. and services institutions? the processing are past that the to opportunity core in customers. core the Jack have spoken financial ability morning, non to your seeing about to How sell having is Henry Banno you sell In progressing

David Foss

morning, Rayna. Yes. Good

So questions there. two in

this in the And is some you. have on I know, First that far I fire think with of I about the concerned. some about chats last I side have talked I of done it of earnings as talked Banno call. as

base to was in some our here fact past this the of competitors fall their identified what to hang a as on core that start much for selling opportunity that, in to plan of we We our Banno surprise learned them year. an had And had customers. to the outside

banking were and to core their Banno, certainly not core able customer cores, essentially would digital because legacy strategy. to the without that they selling customers retain of system, breed point that that best use those the out The going of to a change having using to system be their part was for they get our as was

that fall to we so the kind outside are really in selling approach. reworking of targeted off strategy a And on backed with the base. now, we we more We backed that, from start that away were prepared

are outside hear more Banno I think to year us, will that you the base. going far so from this market how And core we later as go about to as with

As far your to - as you second have the the remind now part will question. me of

up markets. have I sorry, in the room. Good thing We are selling up, up help market. selling Selling here

So off, are with banking first yes, side. we having in SilverLake the success great

are market. already the And player on side of a Credit Union course, we the dominant

So approximately over Henry already one with core assets of are Union industry billion the XX% Jack Credit customers.

of player we already business. the dominant the So the are side Union on Credit

we now are was Henry strategy, On as market we moving particularly here side, significantly past customers years of number with the with system. What up in banking core success been interesting larger SilverLake have would our had the normally that the engaging great are a you tech now Jack modernization a than customer. has few core of

We are very the going partner doing they are in want that what very and Jack partner to seeing as up now probable we interested technology forward. are with Henry

by bright we we driven much with tech talking these that it days to. been for So more the about are I large are and some prospects pretty early that, talking to us have come that the strategy is of customers on But being of that modernization very think lately.

Rayna Kumar

then one end? given the processing out can Mimi, you in FY you on secondly, fit pan close the could margin revenue And us on fiscal Mimi. that operating your in And for how volume to just and helpful. XXXX year can I preliminary could if comment your if just quarter? Very thoughts give debit

Mimi Carsley

you credit have Yes, the slower you side. the to with and getting so know, sentiment that of year, to bit to trends continue impacting a consistent as market profile the the more that trends are we nine-months other slightly side we terms data little going the debit for Rayna. of happened see business. than much the industry debit and as Thanks have from in players are our broader it consumer And on bigger relates the those in a first

that So, our guidance trend. continuation of incorporates the

it second premature your FY unfortunately a at to is XXXX. point little about then And to this question, talk

we than still Our call on today. will and share on teams heads we that budgeting collaborating down will the process, more are probably the August

David Foss

a add last debit was slow to a a the bit there And going true. fact that one forward, bit just saw the the misunderstanding trends? is debit the can I change attributed certainly guide call. We going and a our on were we of of comment that think I So after part little to volumes

doesn’t remainder and reality, debit why higher then the us that debit our performer business But The the the mean solid year. debit performing had business year extremely Jack has little the made expectation of underperforming. is for But for just side real a this is we the of been well is business adjustment. is at We that Henry.

Operator

Dan The with go next Perlin RBC question ahead. Capital comes from Please Markets.

Daniel Perlin

had think demand demand are I most what converse, versus what stocks little we Dave, question, are pressure with hear maybe going more market we it bit. I driving morning. of wrong as if now what the is Like, is a expecting? you maybe to tech the and wondering that feel banks getting kind good from is are back the to which to this right huge I’m feeling opposed the disconnect in you Thanks, people just I a environment, are the there the banks the seeing. like

David Foss

insightful Yes, an saying think it you what question, is are generally I and is correct. Dan,

you in and are So of rate the are United pretty today, know we capital stuff. banker the been a of States challenges and cost running they credit and that performing have that all and increases well under kind they if

of into layer. customers right. do are to anymore, institution digital the one for some you on things continue in type are States to attract They two through and their all United a them, customers almost they presentation modernizing for of need credit you if are new branch to stack trying to focus aren’t running of coming But banker today One, technology - the to reasons. your expecting

Union and so operate them driver. but on banking on small that to our make lifeblood that So consumers, are banks for attract that tools customers this modernization is most the the have track requires and and continue they how to Credit and business sure the of business even side they customers the customers there just not

equation the other efficiency. of then side the But is

of most can without they and efficiency They can efficiency out are top on efficiency through it to any head quote operation. focused for we looking of their paper. figure off where piece are so quote you ratio trying bankers, at all For, areas drive they because their can those where to the immediately the

where generally Well, going the at of are find is of technology crux efficiency. they the kind to

too, And Cyber all and so mix of there then our technology. those customers. that, on that things, of into and Security top driven you kind those Jack stuff Henry having in throw is conversations fraud is of by the that with all And

know, because in yes, turmoil I negatively are in disconnect And to They to sales find those this a need I Jack going is is highlighted. are impacted. the bit a that Henry to run businesses things industry, help just and that sense be not, think of there solutions some the continue to so, you to technology with them all continue they there just

Daniel Perlin

sounds, it makes question counterintuitive, next The go here, as be here, to know levers quick but are to I to business, current margin the of drivers about sense follow-up appreciate to the in you again. it specifically somewhat want whether key, expansion context. have I mean, story on about, could the of talk clearly but maybe or year, you we don’t it you. expense some just be to the going start would mixed I it, and to Thank No, control, out margins if kind that able you think

Mimi Carsley

question. Sure, Dan, great

the for We margin year, a was it the you we this about year in talked expansion year. guidance our So, see would as be, original year. know, flat continue earlier amount to previously, modest we throughout knew the

we efficiency, we track ton in as working we expansion. automization do are consistent, for around been spend. a that that win margin small huge continuous improvement, on are would think have streamlining partnerships I internal about procurement say are things increase We and us a on on we lot hopeful done a are prioritizing a and for has we that really

we perspective. in thinking once But from normalization there years headwinds that that seen back out of are spend, really we really on a position is return story. have structurally and COVID environment, of of So about travel, being of we each ability that like back, additions, return base thoughtful headcount will terms expansion some the to a zero again, the me past have nothing controllable continue to now margin the concerns

Daniel Perlin

hear. is That to you. Thank great

Operator

is next Cremo Suisse. Credit ahead. Please from with go Nik The question

Nik Cremo

on if congrats lines. hoping to I Hey, taking Thanks as competitors. be the to the on performance are my Payrailz like accretive payment some still just results. your one-time my you the just received benefits was business and And color strong across various you banking the to Thank modestly for more related FY question. the turmoil, expecting And in segment quarter, any in get the of some follow-up, you. XXXX?

David Foss

So of to an Payrailz payments let’s is prepared business. we the of give rest then do talk first, Payrailz about will you overview the Greg and

Gregory Adelson

think, I couple a and go Payrailz, things. you will start so but and know, with I ahead Yes,

the one, fact third-parties. in to couple do of So that a challenges alluded around, have Mimi her with some opening comments we

brought some contracts constraints queue. to headcount think done that already I work done queue production in and to be And and our to have into get it some related that of of they of implementation the the some allow are is, the other

that of those things few a working is and are there constraints we So through.

made or we acquisition, when good have sold and solution. the add-ons XX we XX news that add-ons, actually like PXP since September is that new things the contracts But

loan that. a like We solution, have payment things

third-party were that move, Payrailz before done through the starting lot is sales So of the engine sales predominantly and to channel. previously really done that were acquired we a

much selling folks So direct of that and are deals. force larger focused sales on a more we course have

on need - help just in that So very the to done of of integration the to is sales a this. side able XXXX. couple of revenue us some are pretty will the what to year fiscal happening accelerate their be we in optimistic work get We partners

payment the too. start can side on I And

But go payment business So very is which far same I rest significant very, our was on, to maybe you continues our of of deposit during EPS look as to level to and the nice mix card think when going businesses, strongly business, had, what at the remote capture Mimi was a in our alluded growth. growth, that as there the pandemic. not we on

all, it Obviously is growing that business though folks part. in into did, double-digit portfolio. That same continues most were not the pace for at going in growth branches the not a but at still our

doing are we we and some at business center for in about that general things point pay preparation our too. can which FedNow, payments talk So around

we lot have and is to Henry and our upside. done that have the that business nicely XXX are Jack Zelle, that customers so XX% in is have to what grow live business on we have today. of about continues There about over clearinghouse with out. But of clearinghouse only all That to continue continues clearinghouse and XXX are a we

Mimi Carsley

solutions Yes. also would across risk I add things payments, is just fraud other on. cards, consistency to Greg’s add remit the management that consistency is are there like led point, and that there by

So I and benefit say growth will then consistency from a Payrailz. added continue the of by of that would

Operator

the question Togut comes Evercore David ISI. And with next from

David Togut

Thank you. Good morning.

sales it that tech Could Banno underlying modernization that, business, the called is are new of strength? that pipeline are modules, of new have out the You through at is biggest components SilverLake you walk a drivers record your level. what what

David Foss

I confusion not in And Dave. or about pipeline, Sure, that. talking I I many been essentially. anything I past. go deals, there core when about dollar I’m the customers like this, in know the as amount will through are the thing highlight I’m some how individual talk one talking has pipeline

contract. each number, non-GAAP a it far is this as the is track we value but as dollar amount the And of that

revenue and that deals all are as as point some after they converts signed far implemented are So drivers. in at theory into the

us, be driver. continues when a to it So for comes core to king

their talking and about of We existing Credit have that are both right core customers now, amount Jack a banking to tremendous Union out as trading activity technology. as just Henry far

I tech it now by think strategy driven a is right but tech for sign modernization sense. by, modernization, their sense strategy module that is more us driven has to want and today. as is to as I Jack bank Some the makes Union about Credit executives, It much certainly makes Henry don’t of that

want continue and to Jack now, because We now need to them to get partnered to evolve. be Henry look with they them as we

there that, a that of core lot our driving so is in is interest And existing customers.

primarily that SilverLake Banno. that, I is on call Union banking course the be the amount So a almost on is Credit But and side. interest of on every continues of these in side why and a calls There then top tremendous driver Banno of - to it out on time.

Crimes talked Our that we that this have new Financial Defender solution soon. on here out very about rolling call,

Defender customers a Crimes have core public We because cloud so the industry solution. base is of of Financial in looking years in base inside first many solution interest that the lots and only outside not brand ground the are up, but that in core broad it new native lot at our

is reviews Solution great today. Management Treasury getting Our

Treasury customers Management. have we Cards business, in been continuing we the so drive the adding interest of Cards there. continued interest have about, So that number Certainly, talked to to

of tremendous solution, in that. Lending Commercial Online Our interest amount

solutions of those two, just think non-core is four-years. common have rolled thread a past that almost So out the all I within it been is variety broad of three, written and of in solutions the all that

technology that new is it a are interested in. people So

side, of tech our on And then all the there. modernization about course, core initiative

Jack tremendous new attention. a customers into lot has of driving what that investment in our help a of is And industry put together, solve is to things solutions amount of that the new put is so and is brand recognition this technology you the Henry and so those problems much us what getting all

Gregory Adelson

relevant like add I This example. is to Greg. a would

from actually we to heard and to talked on just industry request us we story a came you renew to in based things we in an tech that So like about general. since the have modernization got Hey, conversations and XXXX, they the regional us what hadn’t and large inbound said, would

the with but have inbound doing that a Dave because stuff wouldn’t we that us these And are in things are seen larger again we described. of past, because that are typically example, the is that just institutions that and to relevant

David Togut

large asset Greg? the regional of is What bank size that

Gregory Adelson

than greater It is XX billion.

David Foss

is And lot the to with number I XX talking twenties in billion Several And of a mid today. we banks because seen are modernization evolving of but in about us right and with have the then Dave, about it talking they They to a are platform. engaged tech are mid think SilverLake today, that space. and, talking moving to what not platform. they are that

David Togut

just is the latest role Jack of to months? And could on FedNow Understood. how as timing XX the next your over view what FedNow Henry and plus follow-up, Henry’s Jack be of material rollout

Gregory Adelson

is that well. Greg. Yes, this I take will question as

So, good insightful question.

We are absolutely ready.

We will part already process. transaction that the fully of XXth, certified and first on when we transaction July are takes place, be

as fast rollout go. they be XXth will institutions. can with that in as We institutions live the just on XX want to have between go going We July timeframe sometime and based those late August

We that significant of others contracts a have on interest. are sold are based and already in XX number just that process

several is at that general lot be comes for cases to important on set in time our of mandating to Fed think a cases institutions is payments to for least that be rumors this portfolio, on use receive if will the where be is your I the to going up the them be will equation, there lot based and of aspect about will in A of point to allowing use them. significance now tell. it one of

on receive of aspect having even not importance being are at the our up go ready lot if the we a set to about least send institutions very conversations detailed are of with aspect. they So to the

there the with the that leery being larger part institutions we of the this, very just had bullish with are owns challenges work some been conglomerate clearing we that house clearing again, versus this. a But the Fed house some because little on of were a working

going solution far to clearinghouse FedNow maybe than uptick a we are in that little we the saw see so in think we So, more the one.

David Foss

the Pleased was ago, two to emphasize presidents team me Fed some payments talking was Monday, our Fed Washington involvement president of in talking with FedNow this Dave, project, of DC I division of our on meeting days on our, the so with the and the just and strategy, the level with rollout.

This Henry was only Fed with these presidents. a Jack meeting

it So the Fed with we our opportunity. we of and mind are that this are engaged advantage of is helping - take us top to customers very very make for sure

David Togut

Thank Understood. you.

Operator

with question next KBW. Vasu ahead. Govil Please from is go The

Vasundhara Govil

Hi. and share thinking through you on first about but some Day, taking of one, my the know takes I will question. next revenue I puts Thank just Investor that growth are guess you year consider? your should what for we more

Mimi Carsley

appreciate I the while question. Vasu, Hi

in are the we know, midst of You still planning.

be this In the next planning the afternoon their on year. team we spending for fact, with afternoon will sales whole

would XXXX, that I in well. But say is the as the the say a and growing interest great these last the FY for from new of in overall, XXXX Banno both a a mentioned, be Dave transition continued I continuation year wasn’t know, in will bump well. products. plus, a business would it two-years, diverse going implementation from some numbers as a be of to continuation You of so is portfolio pipeline nice very

Vasundhara Govil

segment, terms growth top do right that base of to see in or the digit about products of what the helpful. mid-single think Banno long-term, driver David, talk as and there. Maybe is then segment, you about we that the, some clearly drivers, complementary to the forward, other growth big then is are in the on that And rise just going That accelerating? you store follow-up could is a

David Foss

missed Oh, I is part last what? your the sorry, of digits. mid-single question, I’m

Okay.

Yes. Sorry.

your about know, a figure bit the segment drivers. but the one to out challenging because point, are solutions there, complementary I is key a little there of Vasu, you many as in are so to what talk trying understand So,

the defender solution highlighted are just out. already that several, we now crimes rolling there I financial are So

in So year. coming while as to driver the Business, out Treasury and a to key driver us is treasury to Banno we we a driver be a will that is so I in be definitely us. segment, a, for will be management that are segment called expect rolling out that that continue Banno Banno course, ago. that for in little of continue a

payment pieces but are segment segment, payments the fraud that, is are example, up the for of solutions specific that for mind in always Most the our type solutions, the other that show all of fraud things security that payments, those to not in top customers. so fraud

to for a So well. us be continues as driver that

lot a different just things. is it So of

past picked as really that then, commercial I solution, mentioned here And online in months. lending several has earlier, the up our

the We level in months, engagement for four solution have of in prospects. as is but had far market now, customers and the it years probably that really picked as past up with few

of so different bunch pieces. And a

in know, you And a of have are that good know, so question about, quickly mid to just many with I solutions of, your some single are so second that growing that performers. kind you some is part because and assumption there, the think steady you digits,

for long-term. good I that segment so that for a And think the assumption is

Vasundhara Govil

gaining commercial on by, And lending Great. that is sort think you just any drivers that more online traction solution, now? of

David Foss

background lender, for think I it you that is most is in CEOs an interesting know, their of with grew in banks, as well, Yes, thing you bank when bank most commercial is because the a up them. it banks, work

are right. consumers. But have what money they the business. what all lenders, the about makers in makes relationships you with wonderful bank But commercial you for money your really long day and consumers talk a lending can the bank, is Commercial

then business course customers that and is small, so larger medium And even customers. of

process They that tended have more money a tend They to they be have lenders a people technology. They traditionally have follow. they are the averse that Commercial using to follow. process the are to who makers.

go have branch, layer. of on of But now this to do people to a gotten with so digital some everything to through of the many so idea kind they pandemic, particularly the to many able the wanting backside not people, being used

Commercial getting they it, it. are using for accepting that medium interact they idea comfortable more with their the a They comfortable say loan expect to to I does. the exactly presentation the like our don’t solution lenders small lot with but commercial are more with getting that apply and are able idea and businesses what be a is bank a layer customers,

lender hosted is to the technology. can them again do through everything It online, can through that is interact that the with a borrower lending complete then where they do need presentation and commercial that solution

about to take So thinking and customers. of adopt kind fact their I we the want the oftentimes the Customer care they to a now our customers things that, and of make has backside grudgingly of we technology do think it lenders sure changed, expectation accepting how is are differently of result are do pandemic. different

Vasundhara Govil

much. Great. Thank you very

David Foss

Certainly.

Operator

next with go The Please Davidson. D.A. from is question Peter Heckmann ahead.

Peter Heckmann

you wanted have going to likely the Good sort but out is and that, stronger or my case are aware BXB primary FedNow, I same replacing think the to guess involve is of And answered, it the other you day been related niche questions any morning. use be Most FedNow. I to consumer of cases of gates? to enterprise going and ACH. are might follow-up on use with impression processes that your be other of that that,

Gregory Adelson

could Pete. example. Actually, be one Yes, think that I

seen is with workers. other out that there have with we we some are be the solutions gig the that use even will of case what the think think I primary

real they moving remember The the still are and getting is the House solution using actually of has settlement them taking time. gig batch a FedNow that and workers the truly solution on payments back kind The end. Clearing

And so to immediately, different. ability is funds the their they have process though the access

But move a House funds stuff today with the gig with their we see one. lot the the that using Clearing that those have we of FI to be to Fed a the big that believes workers and accounts, into

FI The customers into moving the well. accounts other financial the is having external institution depository from actually wallets one customers, the money as

strong be built going various I don’t there FedNow like Dave be to going are requests use and a to account done know is is there things through out just scenarios, some be if them - tax whole there, those would I the as that cases for well but payments. to being was stuff as for mandates, there host of is call of two some So

David Foss

Monday of one was the VA things talked about we And benefits.

Gregory Adelson

Yes.

So there that can are Things the is control, Fed going that. that. insurance Treasury to going pushing be they things to like and payments, the

like get kind mile turned last can of is to that to processors now important institutions really So who that on. why it of is Jack for help Henry, to get that received

So land. regardless a payment from initiated where it is that has to of being place

Peter Heckmann

is helpful. or And card with of real of that a Okay that just based cash or sound then some now, doesn’t clarify how you be It Is form is that that to if either replaced primarily again, lot based with will ACH are applications that there though, transfer. interbank as is currently time it payments. see it?

Gregory Adelson

some that card No, out paper, would is have happen BXB transactions that see the that today some world I do products. to where of gone things typically various in There the reasonableness program a programs that there have because of disintermediated those out like solution. type card or some maybe is interchange things and this gone through would where be virtual could of of

solutions heavy So well. card be merchant some maybe as merchant other in And there the is the at channel a of that on going depending is them process to end focus set is I types level think them BXB much on because could to there so up those today. paper from up through or transactions how where payments well, going as

to could disintermediation. BXB yet on some I have this in merchant card specifically specifically for of So payments but be the chances and part determined, think side

Peter Heckmann

Okay, good Thanks. that is helpful.

Gregory Adelson

Sure.

Operator

Kartik Mehta with next Northcoast go question The from ahead. Research. Please is

Kartik Mehta

talked gets of how at but and think to and a what wondering visibility and visibility confidence just kind your have of pipeline know and could grown, over I has much the about this one you that you you things what I how if have XX-months gives is misunderstood bit, you have talked I’m about how about talk Hey the you a of is have the pipeline pipeline XX-months. that kind on looking I just next Dave, revenue the strong you and little

David Foss

Yes thanks Kartik.

business in recurring interesting revenue with model that that an is it So, in we the this are built. we thing the have

of amount because as course a we and the build recurring XX% revenue the almost as first comes kind that visibility the tremendous the that So off, already of watching of we contracts are to have on have we contracts. it far in-house contracts when have revenue signed, we those

on that into purchase once from XX-months we in see the take sign layering one-month us oftentimes, revenue a then to it And that. the start product, so depending can we on to customer, for they visibility that depending what

and a as very I so have when far been have doing the concerned, pipeline long a model. have then, long as as we been And have is as this predictable I doing this you time,

going doing quote I I’m you years if Y percentage we then pipeline numbers a pipeline is very high of with the years because close, this. tell So, not degree accuracy, years have X, of is to history pretty the here, to and can and of but likely

pretty to that overtime impact translate revenue dollars be. kind going we so know so that and accurately of math of predict going what is And the we and do is Z can that to into

Now, the of is those some again, challenge solutions.

You revenue XX-months. see dime nine-months for won’t the sign to we first a contract today you and of practically

you Some and of contract today flowing in you one-month. them, have and sign a revenue in

science is this, to there there so, is art And but to a it some of well. as lot

the these all Just the we and we experience make as long understanding way for have the customers that contracts have based and works on decisions. doing way this as

Gregory Adelson

will to Z. you sometime us Well, X, Dave. have and Y, give

Kartik Mehta

to at you know want what I clean. thinking when and from And I we could Jack at and a today. how that last about, looking happened could and issues call any crisis of is the happened, they there out then there are what maybe, don’t the get trying for just different, just looked then and it a Henry lessons just if is what but banking crisis, kind the very and to feel that happening take you you are business know,

David Foss

that is a during for the And of you and in many the and from though Yes, being period of sure. time it hundreds our we go course, really at customers performance there today of were that that banks were Jack shutdown. being look even Recession, different well, of were course, XXXX, performed at environment if of very time them were Great back XXXX Henry’s shutdown

now look the at you specifically time think maintenance and at fees major difference, on is if Henry that were then license still dependent we between and So revenue. I Jack very

in the you their impact So fees. know, so you pulled arms opposed drop in when the we are kind as we had quarter significantly today. you because spending to said, when, on license, not revenue were we dependent the customers and being sell a spread like potential see on do to license And whenever of our anything,

XX%, today revenue. recurring Today we were, so maybe you Today we XX%hosted, know, are, revenue. then know, you XX% back recurring a course, are we maybe,

as money perspective us, from different very shutdown, revenue quit predictability they as you with unless of bank of the far they we spending a Henry don’t because Jack So Jack decide to a just is you know, challenged means of have don’t which going that for Henry’s to loans, pay service. a are to process sudden you have loans all still still quit processing they

there, I the draw right what now resilience and we are we I bankers during It but are far say today a think a going resilient Great as any they at And had so out the as much going challenges totally Recession doesn’t would through are have does than not that say business through to business immune of our that bulletproof. as we we significant more are model contrast our time.

pretty look And performed again, if well. you how at back performed that we go and we period, during

now. of runs result that to are happening, banks weather expectation of right my storm these are the so is And should on course, able And much storm that we be the I mean, this is right. this

says a bank has challenge. that this is, liquidity somewhere headline some get you So

the they way, their And like social these been wildfire liquidity over conversations from uses over wildfire a that - bank totally in and at a challenge yet conflated capitalization, are digital topics. in those to two by this, run all spreads is And there the are banking sudden of and because, banks on have withdraw different the bank. Everybody and the some through media trouble. money solution happening

we look position in better XXXX specifically much are I well even scenarios, but the as really performed a this than weather very two view company, and were And we XXXX. I in we totally storm in our if so just at to different

Kartik Mehta

it. appreciate really I Dave. Thanks Perfect.

David Foss

Certainly.

Operator

Please is question with next James. go Davis from ahead. The John Raymond

John Davis

question morning. Mimi, good to follow-up Hey, on margins. just wanted Dan’s around

in basis a year-over-year quarter. fourth the XXX improvement I point think guide about the implies

confidence perspective to call of from anything So a ramp gives you out margins? that what timing kind in XQ in or

Mimi Carsley

Great think a is estimation. I good XXX Yes, JD. thanks that question. Yes,

are knew We seeing a feel as that the always and would we transpire. we kind good continued that. grow situation that think be I year about it of

So I feel good with that estimation.

John Davis

free tax Okay. And quarter. out the payment called timing, for then, in cash the flow you

XQ about conversion free conversion a the is think how cash flow full-year So huge should quarter. flow cash for free obviously always we

guide curious, you for in year, us like I sort for rails eighties the last just any of just did guys mid full-year. think So conversions

Mimi Carsley

tax that great JD, quarter quarter and payments of Yes, looking in an on question. going can at any because it one I and love you versus deconversion the then the larger into between are have, And the lumpiness annual basis a that just quarterly particular just in that. kind this of

lot Unfortunately, waiting around impacted payment. some of of lack were labor. capitalized like a legislative with legislative IRC-XXX clarity deductibility had companies We a the to make for that clarity, of that we capitalization, the

normalize. you timing kind normally So kind over our and thing. will that impact It years rate wouldn’t quarters spread of a doesn’t several reverse is have seen that that tax couple of of maybe a over

I will a So QX. obviously of that, not think be part

inflow. As have a you large said, we

So uptick. certainly you see will an

reality we in deconversion some revenue, also of couple expenses the third-party a think because is third quarter. of larger of have renewals I

an the be target light uptick I think XXX% cash step of free I it will definitely third quarter. it will we think but our from flow be target, that conversion of

John Davis

account about last Dave, me. And Okay. you talked then growth. one the the of has in of for all increased some banking turmoil been from kind impact

on priced what basis understand per we to mean percentage of kind maybe account what else? how perspective. us is transaction So versus Just the growth account revenue revenue a should help of can think anything business, about kind from or a like your ballpark of

David Foss

the he that to the base. want to payment answer Really, but mean, businesses, Anybody guess. I I account about talking know is question. that know I don’t

the is core business it So essentially.

Gregory Adelson

XX%.

David Foss

XX% okay.

We will JD. go with XX%

John Davis

guys. Thanks alright. Okay,

David Foss

Sure.

Operator

The David go with Koning from is next Baird. ahead. Please question

David Koning

I And to course somewhere the Thanks. for guess year the guide first think non-GAAP the Maybe of kind kind on which of the is QX of growth, think I revenue we all X% X% I implied X.X%. are of of rest of just around kind

the in slower. little is What a slower is QX? for reason the it So

Mimi Carsley

bit the that would expect higher us is range. I to conservatism Good Dave. anything, little there of I be toward maybe if a of a Hi, I think morning. biased slightly say would side in that,

bit I a about of a are the wanted number strong think sentiment, our terms consumer conservative, or in but us in full-year think feel still to bit of uncertainty I and little for better. little to the year trends, getting with quite just we still

David Koning

in guess loss, probably year-to-date, around in that goes all to so you I And then end the is more add million I think by is trended main what Payrailz, And of non-GAAP accretion like, believe. $XX XXXX? margin, just back XXXX it kind away to the a think Okay. like that is acquisitions basically why the away? little you on I going that get year. can the loss And of just from year-to-date I Is

Mimi Carsley

sure. So of it part be will non-GAAP XXXX not for in

one our I now of some of also like one-time be just having normalized a great component. But will wage - resignation, it some the let the of base those inflation, pressures saw is that third-party think, So inflationary rate. question we costs like are in

David Foss

But specifically he about talking Payrailz. was

Mimi Carsley

margin. about talking impact was He the on

where in for So I the XXXX because it think XXXX expansion numbers. running the now we XXXX margin are base still numbers wasn’t of the in set through

internally. shape still focus well So the in as on good some to we measures I are of efficiency that as continuing are we think

David Koning

you I and it. Thank you. Got appreciate

Operator

The Faucette is from Stanley. Morgan next Please question James with go ahead.

James Faucette

for the everybody, thanks morning good lot a time. Hey

change bit. on time have questions continue impacted in allocation, wanted about M&A. et little I demand addressed the a stock cycle, most kind the that your a and to and least Dan same cetera, raised think I clearly, around in quickly ask, guys I sales think, at sentiment capital you market, wonder the of is at accountability to

to would prioritize? thinking comments So how you attractive any just you what and and are how right now allocation about looks capital you

David Foss

has are so to comments. and concerned far changed we as nothing is committed that dividend Yes, our her in James, Mimi policy emphasized as capital there. allocation

before, our many top As we at have list. said the always times M&A is of

we when to sense comments makes in once acquirer. we and well it of times, Mimi highlighted us We We as course for a well. acquire it said integration do share how have solid know her I them. buybacks companies do But that of many M&A, are

and disciplined long-term. pursuing very in we the to acquisitions to really be think additive only our are business are going that We

I example think Payrailz is of that. great a

have convinced is it a doing - we You be but that in at it with the when seen it long-term, real the absolutely look I’m home challenged long-term. run going we in that Henry is Jack what little in to I think business are the is a going short-term, for

doing is think M&A. the we that And way about

We believe long-term as of for are those our that looking for we better. can a things solution always take customers advantage our help we perform to customers

several that was months ago, Now, I time have opportunity this a that interesting I more hoping and M&A and lot Jack for many have Henry. there in by would been said forums even this

We at companies acquire. have we continue been to at some at look to looking some companies,

though But for there over deal hasn’t of just that even jumped hasn’t strong. so has bar kind far been the particularly flow anything here, us been that

at recently, going to but looking bar been are some to look. have deals, the We we jumped has here nothing but over continue

Mimi Carsley

our priorities, is which the thing, one down add cash normal Let operations. consistent paying with James, more debt just is our to flow through from

next would to so, to decline debt years the expect the are months, And that going balance. over that to see you several we continue

James Faucette

maybe reductions, your around spent a Thanks pool that talk for go et lot hire out and add even anything technology and the and we cetera. that Henry can Jack headcount to to of have that your Dave, and How about you Mimi talent then customer, layoffs of there? and out impacting headlines is ability

David Foss

great these at great to to jobs three-months, of went the where companies been of We end time of were the sudden since it find was and everybody resignation. their rainbow gold going Yes, interesting about a has within resignation the from an pot doing layoffs. massive resigning the all the

lot spinning, lot employees of heads And so, among companies. these I a and think, were of a

great to have So had the for People past, we hires folks. come we they some do picked times what gold as to recent boomerangs. in already here realized who up our of are can there. up we know are and left talented we back? we And pot know have then gold, chase they wasn’t because they us company, those of new often and really they the the wanted because said, some and us how us to they And things they here really additions called and wonderful, refer good pot

a had have we of come boomerangs back. So number

not been challenged, are we shaken other understand by good we talent that from were We but understand the space attracting in understand industry, what the completely, do, who Jack the are other great companies steady products talent for industry that Henry a happening people some is looking they have some found so and some provider. in really our at may companies a little they what

And joined Jack so Henry. they have

think last to So to we we had hire about who we just four-months. be choose not are we hiring being team and But are so where and some the the join are Henry the our left I when three, have would Jack message overall very judicious hire great be additions two, we team. trying right, in we very and selective about to we

James Faucette

That Dave. is very great color there,

David Foss

Sure.

Operator

Oppenheimer. The go with Please next is Dominick from Gabriele question ahead.

Dominick Gabriele

don’t the I’m guess companies core way there this, do the CEOs had contribution ahead everybody. to go Hey, to ask major from survivor enterprise. is lot clients as in and go plan, you ask if be so actually succession our this of to the long-term sole a of what even know great. big pre-pandemic, going best David, far morning, should a are as have platform one, four ask, Good about the just you I I

do CEO what would inside, does look past should And succession How plan saying the general leave. if for came, get Jack thinking ever be we I’m timing, and you think so someone do like that questions about outside? plan for I it about in in not a about a succession not Henry but

David Foss

the polite described as that is old. you way That old most are No, Dave. me ever has anybody

the is No. what So plan?

you obviously now, know, share planning at either timing specifics Henry. I or question reasonable a succession is it Jack Dom, can’t So my about

Henry you, sure But succession for then solid at making I’m a a have also and us focus Chair place. and that plan I so this course, of will is Jack is Board in tell real we

always so personal fact, I our also committee in plans is team. Board succession governance a may As of the Board my I week and matter review leadership is with meeting, entire the entire meeting plan. for the review with the next succession May the quarterly board when

of what the leadership is. or successors their members all with So I the will plan have the team

for well. it a will is if internal a highlight plan So candidate, that that as will to I the If then it an is do Board. highlight we, search, I

do a so What in of know the good a the might who I industry walk who committee to some be candidates a role suggestions I a and on like I all lot I those candidates normally of is fit of into governance might the and internal I options give meeting of decent with so and And Board also candidates. people be. the for people are table. overview kind know potential external this try of

around Board’s me, leadership the the Jack - to all for not topic CEO the succession, And rigorous hire fire through for of but then at or Henry. ultimately, of course, a and, members we decision it just we but is the very have team so exercise that of go

Dominick Gabriele

that expenses much, kind a so of of break about Is kind out about about think you largest was so way on least Excellent. the for to growth in much. this kind up Thanks new of talked mentioned but in growth as the rates Thanks parse in versus remarks just factor there a hires versus Mimi, increasing and inflation demand go wage related personnel not we forward talent last one. have costs question, tech to those factor, times or year-over-year. personnel? And few prepared important exactly. And

Mimi Carsley

lower is of that. percentage say X% year-on-year, in number much from increase positions on a the a would we which been modest, about obviously headcount cost has I question. Good fully account are headcount baked the Yes. than of basis

we those based every go, we are roles at like and As where role as zero on customer Dave as have been facing we being are look then we judicious budgeting that. roles, about roles mentioned, when on focusing a very perspective heads service R&D well thinking on

terms rollovers, but level versus being just just give of it. of I are really in lot say really - would of don’t terms of vacancies we a new in breakout provide you can’t we judicious because that about I detail

Dominick Gabriele

Great. Thanks.

Operator

with The final is Feldman ahead. Please Mark from question Blair. go William

Mark Feldman

here. is This the guys. Hi Chris. Thanks for Mark taking on question for

to any that Banno, are And I it? from ability that primary they regarding uptake you additionally that, information guess do to offering? forces guys do didn’t the on Banno So the for ask adding on have sale before in interest and just wanted what close any business institutions to Banno without of the Banno have the does asset signings for you your size seeing

David Foss

Yes.

say and we about asset XXX-ish a board that as that live are adopters Banno have far clients the would been are larger the So on bit today I size. have all on side. the as primary over they little

$X to something say as probably So than opposed closer let’s that. smaller billion averaging to

to but see primary the demand been continue has across asset adoption, that sizes. So great we

And earlier, I in technology presentation. consumers through crediting to - highlighted digital a modernize most is to presentation banks through customers as their need or and business

traditional for you if As retail business, Banno think far about designed consumers. the is Banno, as it so

so me Banno or functionality but specifically functionality cash business retail nature, the in is business that like similar for things management. a customers and provides all you So

communicate business and transactions And the the within let’s the for application. the within the the, application financial say, CEO ability CFO small, of medium about to the

transactions help but robust So is manage financial applications. business, specifically about designed within business business in decisions their the to communicate interesting and a application the really it and financial and a

revolutionary lot very about is So a have excited of this platform. we are that the a solution new and it rollout of anchors

Mark Feldman

signed any when And thanks. and can Thank that cards. on Great, infrastructure I where I deals credit if force today the sales you go out Do and ask credit just past didn’t on the is one cards? can to getting start in go the some you we have and you you. originally with more know update with product. that have seeing sell could

Gregory Adelson

I is this Hey Mark, one. Greg. can take that

to the dedicated yes, So is all have install a also have that so experience we starting operational up. and we ramp force, have sales now dedicated that folks

we institutions themselves of have really did that added of credit for We on solution. release we folks in months we saw have or that program also infrastructure you now service that don’t and if the press type lot typically they agent to couple a is program have a full agent of that interest an added, smaller the that ago support

business. So of giving the sell that another to is angle our us side credit

XX have, think, the of pipeline about just or already or We I three-months. have to last the in that of phase and two in more pilot we three now two a

starting but products is that continue of will grow, accelerate those all that overtime. So to to

Mark Feldman

you. Thank Good.

Gregory Adelson

Sure.

Operator

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

David Foss

Debbie. you, Thank

engagement events. We investor with additional upcoming investor management at opportunities multiple have

in will PM Monday, our of The which Annual is afternoon be Denver on Time. held Investor the Mountain going X:XX May XXth first be to one Day, at

presentations Jack forward via of look the team and management of of The includes attending person to that newest agenda those solutions. from webcast. and will selection in the our hosting Henry include We demos wide reception some

results. their We are pleased results and Jack these with Henry Associates in the for quarterly thank efforts all producing

Debbie, you and number? the for please joining today Thank us you provide would replay

Operator

code you conference is for for now number attending presentation. today’s XXXXXXX. today’s Thank is call The the access replay concluded. The and Yes. (XXX) XXX-XXXX has

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