Earnings call transcript Q4 2023

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Operator

Good morning and welcome to the Jack Henry Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

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

Vance Sherard

Thank you, Anthony. thank quarter joining XXXX and Jack for everyone, fourth Henry earnings morning, you us for the Good call.

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

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

open then the Q&A. for lines will We

call cause events to undertakes this 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 reminder, factors future, a subject materially risks differ actual statements. or As or concerning strategies, or trends, statements are

For to a information, and XX-K our these and and the in Statements. please factors yesterday's additional summary of risk refer sections release Factors press entitled Forward-Looking Risk

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

the now turn will call over Dave. to I

David Foss

Good everyone. Vance. morning, you, Thank

and for record share pleased quarter very you record that bookings. revenue to we're sales Today, a with produced details

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

revenue significantly the but Deconversion the for year. non-GAAP full still For down as increased quarter quarter were increased X% total a for fees were to prior-year XXXX, the the quarter basis. on and XX% up of fiscal fourth compared fiscal

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

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

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

you was in As in quarter who for quarter - I you year history the release, record. bookings that you the us closely, set of follow fourth sales quarter of in all-time the know highlighted the of we fourth With company. those press will our of those fiscal sales the who us follow strongest an 'XX,

We quarter the broke in fiscal in we've fourth set 'XX, new record of second another quarter the record 'XX. now of and that

this year All-in-all has we in Additionally, a annual teams. the record year sales a fiscal 'XX. for new been sales remarkable set

cloud new you To on-prem provide also signed to clients XX our as suite competitive a an our we our to sales and private little clients existing the move core of regarding additional XX booked saw core deals detail to successes XX environment. offerings quarter, complementary in Several card our might quarter We guess, leading solution. our demand strong very with, processing the and new clients platform in Digital pack. XX quarter the the digital in Banno to takeaways

billion of XX institutions those the five in For core with we greater full signed assets. year, takeaways $X with competitive than

cloud, on-premise for our Digital XXX we and clients new core to solution, private card XX our to new customers. move contracts Additionally, XX signed Banno clients processing

on these Henry, our variety recurring contracts of wide a of signed to note of revenue contracts long-term almost for variety as Jack that our other to other we came Of for But it's course, of solutions. well. solutions many important all represent a

the XX fiscal million Banno we the suite, end at almost of year. Digital users the were Regarding registered at

As reference, XXXX, July on of a had of X.X registered about point users. we first million

because in general fiscal I've We the seen been into XX significant delivered response availability tied So This than size. we've platform. revenue for to banks on is live triple business Banno in our Banno of and our bank in XX business July, late years, an this signed we business are users the count the clients past, and clients stressed user number More for outstanding. most the is has a in as like three in additional QX. of the

one institutions the various laundering anti-money late Defender, became of late and in plan banking and Federal new support expect to we months. transactions availability XX, our implementation providers general and July we clients our real-time XXX service FedNow our to of live XX Reserves' on clients deliver first next We More stages payment compliance than of Credit of fraud in Crimes September to clients our financial the year. this over XXXs into On for for instant Union calendar are platform the Financial service. add

simply year it's brand I announced since Henry. to brands a and Jack We've the reflects results visits enables uniting our this retire Henry in corporate in that and year social Symitar, during on go from Henry's one increase ago XX% XX% media year financial and may followers. role including market a a you and increase been technology we rebranding, website said to As as single well-rounded us seen recall, to is a from consistent Jack brands the the our Jack speak ProfitStars, voice. rebranding Banking a provider call strong

XXXX emissions. recognized USA TODAY our reduce efforts has on our gas greenhouse XXXX as we for Jack to mentioned also published a I sustainability recently to Statista our pleased ongoing by and call that Leader I'm Henry report. that Climate last been share

Workplaces Newsweek. were recognized one America's by as we recently addition, of Greatest In

a Jack culture Henry Our consistent Places strong placement in reflect Work that at workplace the engagement culture. ranking our is Best to we have and employee testament scores to

achieved overall well-above to industry score capital participation and this in of program values, listening our We greater associates that gather our our all that an employees said year us I'm rate XX% benchmarks. year engagement throughout share continuous XX% enables believe they and was Jack Our to from of feedback than XX%. Henry's the pleased

scored our By of service care company we customer associates, On of delivering they, an of increases our we our satisfaction service overall customers, this no of X.X for out send industry-leading taking X.XX to of turn, is both average already surveys and with are outstanding past X in X exception. scores. customer for taking our and year a clients, over hallmark are of out care was our satisfaction customer satisfaction representatives,

sentiment to positive calendar will are call. be technology We Bank encouraged recent that Bank helpful and plan growth around spending for results the Directors XXXX will will To by November you in financial provide a share September institutions I end, of and sentiment showing the on with technology. published survey to technology of these of relative year. surveys our balance barometer it

what we trying solve is environment, today's almost matter to that for, is financial found always institution In the solution. no technology

Our Program. discuss certain to solutions of program breadth Early refer a opportunities. participate offered the we regularly criteria. Voluntary these Mimi's positions this as associates to she to well will in Internally select Incentive recently In comments, meet who Departure our we offering of us group

while long-time and reward many to up have chance employees the them giving move organization. for this program others us who have us in enables a with We a been to

the While we've and well-received something that for past there offered has produced in program, been long-term the is a cost is results associated positive with company. it this

reflect I say a our I year As was it fiscal very on back for XXXX, confidently company. good can

collaborative her scores in scores very are - you on role engagement high. been role nearly leadership our thoughtful employee a engagement CFO both also Our and remained had and high Mimi our of a for visible as has and investors levels has customer her associates. and customer year satisfaction impact in

doing success the largest performing us we've a sales pipeline our for constituents will extremely We have right the for continue believe serve thing had new continued that Our fiscal teams ever with us the that and sales commitment to are our well. year. entering positioned well is to

continue will and that the running to disciplined to stability our for help approach provide We employees, with our and company, customers, shareholders. approach expect

future. continue begin we fiscal I As optimistic new about year, to very our be the

over Mimi I for detail turn numbers. that, it the will With some to on

Mimi Carsley

Thank Dave, everyone. hello, you, and

regional delivering our investing we always, another and our focus led revenue to financial focused clients, serving our As and This solid community in earnings growth. and value. business, of institution remain stockholder future, quarter on growing

with and end begin items, driving capital QX our outlook I'll with the morning, details the This and fiscal management notable Results, year full for XXXX initial year XXXX.

our For quarter, billion. strong increased the the quarter, non-GAAP X%. full-year to year out as XX% XXXX $X a and business Delivering GAAP over increased grew non-GAAP X% in revenue for we results solid closed revenue fourth

more look closely quarter details. let's the Now at

revenue increased Support GAAP increased as versus the full $XX to the on and full-year impacted prior the due better-than-expected million. during approximately quarter deconversion quarter market the revenue Firstly, we X% for was QX, and was down million year. basis, year for a Despite revenue the as and support were positively and XX% all discussed Services approximately deconversion our volume in in year, $XX activity space. this acquisition services limited

driven and quarter, Of deconversion, hardware, note, the license revenue. product implementation-related XX% by higher increased in and delivery services and

year, all a of over resulting full we're the lower the other XX% pleased given For significant areas, growth annual headwind modest strong decrease. in in X% the with deconversion revenue,

I in grew in non-GAAP Next, which services in public would and a for X% for the to the and product support XX% basis, the growth revenue on we that our X% quarter experience private and - year. year. increased full offering, cloud continue for and robust our highlight quarter the

basis, the GAAP saw on year, driven a to card growth and non-GAAP and with for XX% robust higher be consistent services a to and quarter healthy performance digital by revenue, the the and basis continues shifting Finally, on demand. volumes processing of year. calls, growth X% and Noted strength the previous on quarter we for

company I'll full expenses. and performance. up and costs, costs, for and expenses. At of roughly Next, consistent moving quarter the amortization included drivers to year higher which the was quarterly X% a fourth personnel level, and operating with total were direct cost tracking full-year begin revenue revenue

internal expense used these R&D the and to the XX% the year. quarter, XX% to personnel the drivers, Based increased Similarly, on higher same costs mostly innovation. for full increased drive fees during license expenses due

the rose talent quarter costs, X% conditions. and X% market for SG&A in driven year by lastly, reflecting personnel-related for And increases the

per We and net to report quarterly results. appreciate and continue to a earnings happy deconversion full-year We company prioritization $X.XX hardworking fully efficiency. that drove share focus collective resulting a deliver and our operations the diluted increase stemming for I'm dedicated revenue, the across increased our associates by on quarter. disciplined from income, the contributions driven XX% of savings of and in in strong

at we Now million and operating let's the cash was last full-year therefore, large year, impacting faced $XXX our million year. flow cash reviewing flow posted headwinds Across and capital down turn allocation. $XXX cash to flow, from

timing the of debt was the decline payments. we operating by deductibility prepaid the factors, deconversion development higher to down cash Consistent million which additional $XXX to lower with Impacting tax to flow free have revenue, paid Subsequent 'XX, changes an produced legislative $XX flow of fiscal shifted our cash million. of $XXX and million. expenses, we expenses,

Regarding XX.X%, to an resulted highlight in on value and annual maintaining a we disciplined business, the capital repurchases includes We're would capital and I returning consistent. fully for our dedication share and shareholders that dividends. creation strong where balance to high-return consistent allocation through priorities remain approach, $XXX acquisitions investing million shareholders. at appropriate, fiscal committed which year, returned over to to return pursuing capital invested our This our in management, full sheet, capital

for So guidance with with XXXX. the year that, fiscal conclude I'll

to guidance GAAP reconciliation aware, included full-year you're XXXX press As along with guidance the yesterday's release non-GAAP fiscal metrics.

X-K reminder, year revised which we're X, the a starting using an for fiscal August approach in current filed a revenue. how described deconversion As we on

in XXXX, recent year for low estimates the moved with we've million mind line with to evenly deconversion we're across note, framing and that the historical guiding year. $XX to fiscal Of revenue in distributed

be approximately quarterly may to we your figures, XX release, deconversion Additionally, pre-release that earnings actual updated. so revenue prior days our will models

the EPS $X.XX this beginning expected close will $XX in was guidance allow million operations. call EPS deconversion of anticipated since Based likely will revenue deconversion to count. attention change. guidance full-year our the on GAAP It's revenue based focus to EPS which growth we results revenue each new will quarterly approach, current on And year of XXXX. share to note estimate. full-year understate the exceed of fiscal us of $X to per impact on the impact using million from is Pay update forward, GAAP negative important quarter deconversion going This actual

in consolidation possible Based see 'XX on of to the the we acceleration institutional trends, second current half fiscal in fiscal expect half. minimal first with

year. initiated Additionally at for one-time XXXX important, will this in was Voluntary there Incentive a impact the a Early of be from fiscal that start Program, short, Departure VEDIP

mentioned, our for Dave $XX move negative severance-related in have year opens XXXX positions. into million for The to on which million EPS. impact costs program will GAAP the impact fiscal reported As VEDIP more pass $XX is senior financial approximate employees from $X.XX an to

in All of results. which will our be QX

Lastly, for FY has related integrated will successfully Payrailz to reminder, acquisition, payment metrics months 'XX, provide as results. financials latest into segment. reflect related a two specific we non-GAAP our will Therefore been our our of not and

and FY months 'XX, first of Payrailz non-GAAP reflect aligned the with date. for 'XX forward XX Going acquisition results September

full-year expect full than We become continuing starting year. revenue in the positive Payrailz first half to double EBITDA to the more and ramp and for

to our Investor Based revenue revenue near-term full-year growth And, highlight recent expectations, currently fiscal generate X.X% of QX X.X% the for the X.X% and year discussions. of with at a visibility, to then non-GAAP growth momentum, being X.X% execution and to for cadence X.X%, it QX QX. GAAP QX low-point on in To strong would with in should sequential expected growth, Day current be pertains see revenue as sizable a increase approximately we consistent we 'XX. to increases non-GAAP the I X.X% helpful

We changes. trend if we see will update this

for year-over-year margin points expansion expansion of of will margin efficiency, level growth XX in XXXX. At expect focus the we non-GAAP combination a by total on our continued cost Driven to points. a year, basis XX deliver full basis and we company

full and applicable. rate provide we be guidance if the year year, expect We approximately the during tax updated will XX% to

deconversion where QX current with conservative our as results QX lower assuming deconversion to Incorporating the headwind with QX. The approximately guidance QX asset is revenue in reminder, on EPS and $X.XX fiscal the full-year $X.XX severance-related And VEDIP of these share. fees consistent consistent the 'XX. trend discussed with costs, best-performing for disposals, GAAP per GAAP and the guidance non-recurring and expected gain estimates a quarterly impacts, slightly are EPS quarters results for is in $X.XX

client expected Additionally, remain on related expenses QX XXXX conference our in last year's QX. to call, said we we to

However, hosting our in instead, will related be and clients fiscal cost QX. our we the will be October in impact XXXX

high year both of Also expenses, and and expect conversion approximately the XXXX, cash higher guidance changed relationships. of by note, sales revenue, development-related expenses, XX% to in free continuing higher for cash deconversion for the lower one-time to deductibility flow impacted commissions taxes third-party the last fiscal has we prepaid, capital trend be increasingly from

growth Investor These term non-GAAP basis this Day we year macroeconomic Looking beyond target, points near incorporate to to we see X% do are economic to conditions X%, provide and points. in potential basis significant at not as revenue margin expect May, based on discussed non-GAAP headwinds. of targets stable XX and annual expansion XX of

confidence and We in ahead. Henry. thank a year energized our XXXX So all in Jack about I'm for for with our business the opportunities their continued closing, investors strong

the open please for you will Anthony, call questions?

Operator

question First D.A. Instructions] Peter from with [Operator will Heckmann come Davidson.

You may ahead. now go

Peter Heckmann

quarter for well internal I Good morning, you there my the of was year-over-year you Thanks attainment bookings of terms fourth as record I guess, Dave, bit about could question. characterize wondering growth in little characterize full and as a the taking targets? your could for everyone. if, year.

David Foss

the fourth it a to quarter then was that course, than thanks the is - Peter, that I yes, then, it significantly quote, second internally performance ourselves. don't And about year, so higher sales comparison not the quarter, Pete. talk the which There use higher. the for I well, in we for year-over-year our external - significantly external number it the question, organization, comparison We of metrics, was quarter-to-quarter but or comparing are is of an isn't whenever was metrics record.

assume records, core I the important while as once I get to The thing and not. that a people all that's it's the to question set it's tied note, that we business in think

number have now other We for Henry. really solutions a of complementary Jack are significant progress that driving

oftentimes for say, future, deal nothing have layered into that's revenue other all the top-line much are The because X% deals next quarter stack builds that is almost is that recurring to sell sell the revenue, for thing It's in to - what we even up important us all today revenue is into setting it's almost That's in already the onto the to growth in - that we revenue the we recognized where foreseeable quarter. so recognized confidence all note we in continued these for is X% the are being recurring that future. meaning which the layered that growth, visibility have. the

we've but say do So the the the best is in was Jack other best be and that I quarters evasive, use, to of can significant QX Pete at can I'm just the not using Henry. over metrics internal it a that ever increase we any trying I experienced do

Peter Heckmann

Okay, believe and $X.XX first VEDIP, I meaning the confirming, so you the you just then, EPS to GAAP full expect guidance included that called hear is $X.XX in I okay, And program full-year fair. early the did that's correctly? record that retirement your it in quarter,

Mimi Carsley

That is correct.

correctly. You It occur will an it is and in heard it estimate. QX all

terms last at we that all time already acknowledge We this included little have than participation the our to estimate in that of do because are but people a had the is their of kind knowing we guidance. the XXXX, very which in program but about of the is point, of tip desire of program participate, good kind different the in by rate, just feel

Peter Heckmann

Okay.

David Foss

been in before at - chime And this you a before, since and successful you very time for but in we had twice exercise done may who opportunities creating long organization. people move not to giving for here the only people for the up also past rewarding in - a us anyway, Henry have been has - been may I've Pete, Jack just to recall, twice this

same this success And time. the so program we of expect with level that

Peter Heckmann

I hear. to Good it. Thanks. appreciate

Operator

Nik from come Credit will Cremo with question next Suisse. The

go now ahead. may You

Nik Cremo

question. for thanks results, Hi, congrats on strong the my taking and

strong as what or the growth segment. one merge be that of ask First, revenue in sales of more core convert drove wanted FY one And aware license there 'XX? if just was anything in such for to I time the revenue the - nature, should we about

Mimi Carsley

that can question. I Thanks, Nik. take

kind as mentioned, continue lower space. continuing I driven of was say, it's by just a was by no, the strong size being driven cloud those our just of lineup a and Dave overall, merge overall, But be it pipeline in would clients. strong product be anything continuation So, activity convert timing to of a to robust there implementation if

a is of throughout had year 'XX. little quarter it the strong So FY core variable overall, quarter to but quarters from

Nik Cremo

then possible Okay, follow-up, 'XX segment And growth? would thanks. level my at for the provide it revenue be to for guidance non-GAAP

Mimi Carsley

We at is guidance, the we would both provide consistent follow-up don't consistent but the we would kind level FY say, the revenue that say with segment trends. 'XX growth algorithm and can 'XX, for it's for growth I of

Nik Cremo

you. Thank

Operator

next Kumar will from UBS. Our with come question Rayna

go You ahead. may now

Rayna Kumar

XX as but trajectory guide Thanks you - margin the taking we morning. want operating non-GAAP the about points? detail on of and basis Good here a bps FY my some into question. if more you should just on in 'XX. then been and think you. for normalized for deeper dig both be XX talk puts good would the points, margin margins of maybe just for adjust XX Thank has years, basis I to the Mimi, up more takes gave little Payrailz bit

Mimi Carsley

Thank Rayna. you,

So, long-term guidance. impact both sustainability we to as for tried clarify guidance of well short-term the as

the We're There's to XXX% the restarting little points. you're XX basis lower bonus at headwind a guidance points XXXX about bonus 'XX, clock correct. of basis XX accruals. a the because from was So, in FY for giving bit

just compensation. in that growth pool. is about you million also will a bit third-party and headwind, like and areas $X of some if the and continued cyber security a refilling of headwind the There renewals investment bonus There's from both a

the of of longer-term, drivers see XX XX margin. XXXX, those sustainability all both So we to but bps to bps of are definitely

Rayna Kumar

anticipate on cash in quarter. drivers Got flow, the FY And just it. flow in it I That's 'XX? really helpful. free would noticed were down improvement And free for of the then you cash that? was What

Mimi Carsley

Yes.

that just and, looking annual on like, be cash there - even really because annual the we prepaid sometimes seasonality free sometimes people conversion. flow, the with you know, and changing bids quarterly, bills from an we have did cash in in June, flow basis year-over-year So timing of so have pay on free and impacting in but can kind go recommend a annual they sometimes flow out July, some a I'd noteworthy sometimes XXXX free some, and of based can when versus Rayna, the pay on impact, just cash that summer-time, headwind maintenance in

tax development-related a largest particular, that payment. the the tax cash around million to the in being $XX In expenses of deductibility led change legislation

go that 'XX, will away Now in somewhat a still that level. stay doesn't elevated at

present Over of near-term flow. kind the five will 'XX free and to years kind beyond headwind that but that to some continue course does reverse of cash

on the I XXXX, cash call roughly If the asset would taxes, - it, of same free cash get deconversion you were the and XX%. a think 'XX, free of to which sales $XXX cash, flow then versus kind cash to flow reported for about about, revenue about the about free million walk closer of free $XX million of flow if more as is conversion round XX% conversion a $XXX the like and been There to of that's have $XX million million. a

Rayna Kumar

Understood. you. Thank

Mimi Carsley

welcome. Very

Operator

Perlin will with question from RBC next Capital. come Our Dan

go You may ahead. now

Dan Perlin

I And considering mean set Dave, environment in - in revisit quarters the wanted you quarters know to you backdrop. the aggregate year, three is demand the morning. which Thanks. pipeline records this Good or four amazing, just and I especially sales pretty

from competitive obviously is the coming a coming is dynamics. that over that also movement So of lot but, to cloud, just of some from

from coming And is if in you're How narrative. positioned just wonder the very you what others peers, speak you're because to seeing different today? market commentary I the you relative so guys think a to could clearly

a you point I'd on put if just that, it. could appreciate finer So

David Foss

interesting the environment It of Dan. many very follow and I an in Thanks, our closely. time you that's is know segment -

to on being merchant Henry getting institutions our attention space, very of that's - I in well-known being Jack has focused business. us technology As far and acquiring mean, a getting I financial or things. that's not lot other think United we're States in when right space as how as and And us provider today, I well-rounded positioned the we're our doing the not say a we're in focused now. We're positioned

needs credit customers know. have we you banks, and are and that regional the all those traditionally community unions We of that focused continue serve we on to served the

so, rolling you with put that out here the And we're the at that service that last we've if - now, that we're I couple this new in technology in of talked them come reputation the together the now started to customer about and things the just innovative modernization story products Henry Jack summer the about of and script, February year. I a couple doing that have talking more yet of settling-in that year. we The

the as differentiated But is year, that's you understand when compared anybody in how I Jack all those be else Henry it think to have absorb over our credible has but will and of this chance - Jack and now, has is in things people together, concerned. course a that our and market differentiated to Henry really as had that customers doing solution existing potential fully is really we're that yet, are what customers positioning the roll not space far as

banks in - very a for is it decision. and Now technology credit major is still making unions, still a change hard

Henry of because ready to Henry, this doing of doors draw of slow to is what is recognizing line all and towards people our like are bright Henry Jack our and sign-up anybody kind think but steady and not Jack there's rushing it's Jack really movement with So that. are people all really a between what they things I space those else and have doing helped in nice

Dan Perlin

on message so. pretty been It's Yes. consistent that

package guess, I points is to base of core of XX that group certainly the impact the margin departure XX you. in basis expansion take early you much the, from charge. one-time are what that cost-savings individuals to associated follow-up expected the about and going of influencing points? the this program. associated talk quick I on a run-rate Just Thank Can basis terms on incentive and how be the or the from appreciate

Mimi Carsley

early working positions. Thanks, to we program. said, those diligent this with small It's expect managers Dan. do Appreciate just just but the be as thoughtful savings a the of question. as some we're final We're not about amount still be to signed we agreements. our doing Unfortunately, days. net savings, We

this grow is said, Dave a our and is talent. As great just way talent, to of part culture this retain

And terms this of guidance so in-year being point. at We're savings. is of conservative in part it not our

Dan Perlin

that's helpful. super Thank Mimi. Okay, you,

Mimi Carsley

welcome. You're

Operator

Our next Vasu with from Govil KBW. question will come

You may now ahead. go

Vasu Govil

Hi, to thank results. XX you we basis question basis of I you, taking my on as for of Mimi, said expansion. expansion, great just questions guess should margin year normalized you and long-term think for the XX which points first the points

I think the being in XX thinking more accustomed plus historically we've to about been points that basis range.

through was trajectory. what's So, wondering and you if us help think changed I could there the

Mimi Carsley

Thank you, Vasu, for the question.

recession, that the ongoing to saw out of be we got we've the expected several what some great I the so of of some the ups - been, some it think, really from and COVID-related travel, some a years business. last We inflation, the is is benefits and downs. great really of part now modeling just of is what is then seen have normal, from engine lack

subsiding, investment to even and benefits employee-related, continuing to continuing we're so. insurance cost, is costs, though We're in renewal third-party see, inflation wage-related, CPI fiber, costs, see continued and

You the term. is basis tech that XX through XX in products the near very expansion at hopefully know, basis opportunity including have, continued to points safer point, for from exciting to I to cloud we through margin continued But points think modernization. say this there probably on-prem migration our

Vasu Govil

about are And your the play where of Jack terms a what helpful. on you seeing think thoughts community that for I as role you adopting could starts reality. David, It'd have a become on thinking to banks AI. you then, longer-term be could bigger share That's question are AI Henry and in great do you if

David Foss

about although to Greg in. chime talk I'm is Vasu, Greg it ask I'll here. happy Yes, to sitting

have does first So out most for banks figure - play potentially how that thing trying for defined are still about their into it, they they I what trying do. environment. a regional this strategy community unions, or good a about off, think But, and this is know a credit thinking many I to of figure risks talking to out, or of today. They're don't them, most

so and Henry think machine in about conversation, Jack of areas, Henry, AI, if the those I been include Henry business Jack for has As that which in - all three robotic for automation, of you Jack broader a think, long-time. it's learning important, that idea process to

at solutions. we that technologies we the those of several today, offer types look those you in So of embedded solutions have

some know tools and some using that you those I about share time. leveraging all But some we of software these we're of of when kind those that ask with certainly it and around idea in investigating and detail talk quite usually about and things people have we're been of some and Greg that for AI things. I'll do for to already today, we space today. the ChatGPT write this kind it's to of time the working And on stuff

Gregory Adelson

to Yes, a things. just so of think Vasu, add key to couple that, I

our robotic side, that in initiatives. continuous using process we're on So improvement our the automation improvement,

using products our couple in to that as well and company things put that we that in that could to the components in we're doing to where we've but there pay has our do all intelligence things we're improve has significant fight of technology on what that. done what processes, to as we're doing key Defender center world offering already call, help Crimes there, Financial place type the mentioned fraud of So our that artificial it, the Dave that be around automated, things in

key the space. in grow in of office CTO years. space across significantly to over to is world our going working of together evaluate the many the We coming the players this some think the are organization us in FinTech really So,

And partner to at opportunities future. time lot looking companies other so of in for we're the those spending a and-or things

Vasu Govil

Thank very was helpful. you very That much.

Operator

[Operator Instructions] Our come with next America. of question Jason from Kupferberg will Bank

You may now ahead. go

Jason Kupferberg

the Thanks morning. some thinking circle made for Mimi, know the taking free law I cash changes. I year, on to beyond this Good around wanted comments, just flow you tax question. back just

guess, in think I year there which is said started duration that a five-year F around I 'XX. you

baseline make I a that think there. fiscal code for properly zip for F just to is the cash 'XX? our free few beyond I years we is conversion, So sure calibrated know, want have to of 'XX, expectations XX% flow about kind next Thanks.

Mimi Carsley

Jason. you, Thank

that FY does giving we So the so speak, on. We're to is Section legislative long-term, XX% sustained the the neutralizes does what guidance XXX analysis 'XX, the on cash upfront itself higher incorporate later tax the It levels target. to do over five-year period change. less related and as higher to for of are cash of continuing reverse, yes, kind

model and XXX%, but shift we a we now are a model business and several when years severance, As more ago, model. maintenance SaaS targeted more our it's of license of from

year more You from have maintenance basis. less a a every an annual - from contracts dollars perspective recognition, continual long-term of revenue and

the to than But, long-term to cash say. be free capital all we're flow, the and is and a what know, spend I likely say looking target 'XX that story. I cash between our about the you are thinking and at the drivers little share would free - think early appropriate the over, better So you of of that. it's guidance, drivers we flow have will FY to 'XX it's with certainly FY but,

Jason Kupferberg

into of in can and 'XX, F trough Okay, then And actually and like being kind being the of then quarterly walk range that driving the just back move okay. outlook. just It fluctuation? non-GAAP full-year back range QX sounds you above what's Thanks. full-year the cadence Understood. coming the know below of QX the of quarterly the will I highlighted be through if growth. half we us of you on revenue back some

Mimi Carsley

Yes. add to to Yes, color happy little that. a

we QX I the you normally make sure but we're market to all. is, would as of say gave it guidance, We to lower not you full more than helpful specific QX wanted because be we to be we - in to be specific giving wanted modestly yes, know, real guidance, the to year. So wanted

will I will QX usually little six-handle be the to QX as it's line higher the tracking than the QX think, I be for X% the since relatively well QX full-year year lowest So then of that. in for growth X%. significantly say bit with the and we're more, would average kind versus But of is quarter, the a

Jason Kupferberg

lower? like, it's the is much Right. And how why driving fluctuations, QX

Mimi Carsley

any has and business. our comps in year, the QX prior quarter seasonality always it's just the just it's particular or seasonality lowest just sometimes, You highest know, product the but our based implementations always on historically been been releases quarter. when happen of sometimes year, our of QX That's has

Jason Kupferberg

Mimi. thanks, Okay,

Mimi Carsley

welcome. You're

Operator

come Our from will next question John Raymond Davis James. with

You may go ahead. now

John Davis

Hi, this million. guys. $X called little good out you on bit morning, the follow year kind of Mimi, about payments margins, just bonus wanted a to lower up

would points high-end XX that gets above even I basis look at XX that, to if the you the kind or basis points. of to So

year. think you it's departure of in much that early how or are the headwind XX is about of upside. the basis to XX XX benefit point I you the basis that points have program including of kind kind from points that this And basis

Just would the year? just drivers be the end, the color and kind it's bonuses why this on trying helpful. we're to of of Any understand there kind low

Mimi Carsley

thanks, JD. Yes,

the FY So if of million et the understand $X merit question 'XX, XX% both correctly, the referenced growth just on annual other have it I is natural hiring, and the XX% and it, we XXXX. is nothing about the the to as full so, FY from I if blended FY for lower cetera, based pertains in to the to We 'XX. have replenishment, will, into at based payment on savings baked-in guidance the VEDIP change moment, 'XX a bonus you the perspective related program from is that

John Davis

wanted wins, an know, on to XX that's environment. - you touch wins heard I just this obviously Dave, demand super then, that's And new quarter, Okay, I the helpful. both acceleration. know

sector. more and all of people what the impact hearing become a efficient accelerate had banking plans months the I and the ago about try forced of almost it Just kind kind disruption to in has time. seems opposite like you're people from as of customers, concerned, they It were handful think over

So people with your kind some from other competitors a continual think bigger losses, of these cash customers, have of just to lot may unwilling competitively, smaller of like out curious hearing what of then startups are you're fund or also run businesses. distracted I there but be still

is it's in our while, there. it the curious, but like environment best from your competitive need probably So a been view, just thoughts seems the

David Foss

at is me as I said rushing been not let - Yes, JD. people in, contract, Jack it's probably It's it's that, into to the the the while. environment before, say, for the Henry want quite are a I sign and, door best say competitive sign not I of those would a that I not know saw in no regional during that. banks slow but of all to don't that flurry would March do at I I some all. certainly us with did pickup to attribute activity down negative we of activity back-in the that specialized sales with the shutdowns here impacts a anything can

which customers in is, our and driving published very far, for this it a so, clear benchmark growth, just efficiency. is technology it was month clear think areas and help with survey, the Those on and was by three, jackhenry.com, deposit to online concern. available way ago or we I that survey that the What very are top in three the are looking today revenue survey that growth, of by

efficiency. was or to grow deposit deposit it growth, - growth, looking you're meaning deposit, revenue, sorry, loan if and Well,

account, people that? to new to not How Jack they're do If into going from Henry. you're do do you're looking you online. grow branch your will and hoping open a Technology that come that deposits,

a sources? your these you to borrowers small-business online that wanting and loan Jack looking drive know, branch the to for they're looking technology. to grow those down in lending are volume sit you're funding If space provides talk, Henry commercial and

re-engineering, for but be, back-office, If you're that technology. might the in process oftentimes involves process is it efficiency just re-engineering looking

those We tools. have

given so problems Henry and to focuses they're solutions today, major CEOs those three Jack for facing. provides And Credit those that all of Bank Union,

only mentioned have our focus on known that for market a financial on customers serving for we tied being that institutions and most reputation with our earlier, in and the together And these in US as space partner. concerns domestic are we the the I as great focused have. service We

I as key it's what's you Henry. think and the been interest taking in as things today, can. all of we're better much together probably, Jack very we those But environment are advantage competitive long-time a out, that of point in driving as the than then

John Davis

follow one final to kind Mimi, free up Okay. flow. Jason's question, cash just on of

to next closer say for think you're I closer back trying to kind 'XX, hearing, XX% time, to I'm is, we that way time probably that near-term, but what you've if get 'XX what that guided over ex-tax been of the about think maybe ish XX% So to have and of the level over kind other years? items, the is several right would flow that cash

Mimi Carsley

to reasonable it. a thinking that's think I about approach

John Davis

color. Okay, all right. all Thanks the for

Operator

with come from Gabriele will Dominick Oppenheimer. question Next

You may ahead. now go

Dominick Gabriele

cost think dive Good apart cost much. really any which bit about pick when increases. curious revenue, I Thanks cost into are everybody. conversation. as type employee percentage And could helpful so seeing, employee could follow-up. increases of would expense great. a of a Hi, pressure, have I kind you're was then a if positions morning, more we be if just the there SG&A versus employee putting color new of we on little adjusted and you And just higher if existing

Gregory Adelson

start some with I'll that. this is Greg. Hi, of

So, partnerships I all and we're things building times several about this in tech has the years Dave can where around definitely you think if strategy, - point we been that more been modernization of you look doing a we've now at adding were ago we're technology. talking what what to the and doing instead, we've past lot

are along past. So if those at the look doing in management that, you some resources, additive we've QA, to all, been development, project cases things resources, what in

discussion and people of a there's again those and been good quality quality a other companies some So the some a questions laid-off lot the know, drive the into from that of the you of that We're go The have there's people. well of folks that, able adding is ties margin pick come as with industry, up and news we're lot business. - in to been up.

tied to tech that really of on that's strategy the opportunity and in modernization a talent it's our bring big to part of been So type general.

then add in there? anything to want Mimi you And

Mimi Carsley

we've really been mindful organization, you the would say, rest the would we've back on across the I the very concentration scaling say, I been had more we're increases. and center Yes. be the to in continuing and development know, headcount modest it's being But thoughtful on for engineering of client-facing. growth. where folks, folks, call the board thoughtful

Part and start some you of now see market. deferral the cost of Dom come GA know, Part labor to as benefits some and/or these salaries that in products of increasing, now and that you is at online amortization market. also of and the products is, these with

provide can that's I level way but the would towards. you more So, we color probably high at a later, guide

Dominick Gabriele

Excellent. that both of Thank much to all so you. you for

know this with year. I So it's obviously about and then, to you just week, win pipeline size rate the fact billion-dollar-plus pretty that for and talk the that the you year the about the have could to wins. win wins rate versus Dave, that of X-ish next talked, XX close core gotten given year? a expectation about is the us you've Maybe multiple you

David Foss

us. Dominick, Yes, so, a that week, but around for I pace think X-ish one expectation, still general good week, I is have same

larger institutions We have is we years, moving over size would more that and several think last a been expectation. definitely so, the of those in expectation the up I have reasonable

the future. of expect the you more what same should So I in think as

but past - Now is assumption we'll assumption X-ish reasonable that the think seeing right happens than the not do what opportunity been core that in it environment, quite I a see is week competitive been we've a with some that creates at more now running replacements, to we've whether time. the or for

Dominick Gabriele

so Perfect. much. Thanks

David Foss

Sure.

Operator

Cris from Kennedy with Blair. come will William question Next

You ahead. go may now

Cristopher Kennedy

points about Thanks for in support business time? that question. over some margin basis that of expansion to XX the taking the points Mimi, of morning. have can talk you levers you to the Good basis annual XX

Mimi Carsley

Cris. Sure,

expansion So margin I think what the they've of historically. drivers similar been to are

the tailwind the cloud migration. have to You of on-premise

also are that, leapfrogging expect to We public there people the after cloud. be

public and XX% migrations. straight will And has clip wind every of talked the cloud leapfrog those been a then some those we're counts and to Dave on of cloud. migrate is environment, of roughly then even continuing stable of though it's public year to people just there at continued about So more hosted will some

So that certainly at margins. attractive

through to common streamlining some modernization, doing common has benefits engineering organization origin to for also our longer-term and I development to using organization. lead think Greg's tech just really the the an workflows, think things margin common some we're I to and savings that that approach components, the around done testing, amazing think also job lead of will will approach our

scales. setting also years of we're I would last, of a future. next for couple like, A current, the think doing, you lot and infrastructure in the team of the couple support even rebuild of we're work it us business my in some to call terms I Culture is, of tools the own as us lot systems the categorize, doing, allow about a work finance know, will on in putting and Development, development and it, years that

eventually kind of those think now zero. I tail investments So, off and will will to go

costs lot some every a and relationships our of continue so will third-party in infrastructure I we but we on of to of year is cyber invest it fortify our because that security out these, and to all a Now own within do not flatten but to start in our our have some we question clients, think and control. do general, are of will of

on So the near-term a unknown that in sending of, a bit the is terms in headwind that. like, longer-term and of

Cristopher Kennedy

about then, talk you. your market business-to-business Jack and it assets Dave, Thank Day, question discussed within you. Thank strategy and you of Investor is. but potential role the a at really Henry's Great. kind payments have the And what and wasn't just longer-term what the

David Foss

Yes.

been is certainly for but some I've It nobody really reasons the Payrailz Cris, technology an us but So up and term. it driver that of because had thanks, know that for It time. in quite long the of I opportunity a that's that Payrailz and think you wasn't no I the one customers in was for included, a running, - many topic interested live, acquisition.

work the is, we for that technology their to where it's business thing smaller I'll bank and clarify in them in. with business, key in through that the or with customers, that Union Greg as into to our go ask not more, customers. through Greg that go but sure as I'll or and our make Credit Credit and Union, we about bit customers and chime little type are serve compete describe business a bank as we a can business a work future, by institutions even look want we chime small-medium think some that at to to ask me a to Meaning, business the So to here for move some that bank of these that of of we

Gregory Adelson

Yes, sure.

couple there's things. of So a

to but BXB a mentioned, point, So some We're some of the that that key do space, some in building this this assets been endeavor actually to has your one, Cris, be of bit ours. things we've to little opportunity us been assets close background. in of releasing as are going strategy, Dave we give we have a think part today strategic the very

you ready much able this have be of through tools, to Dave been digital market. into it to do fully out we some and time, at of described the we that our will think institutions, is our top-of-mind that it already is point I we're tell unleash in the just can So some not you'd like and the this leveraging created way to go payment that assets, but less things

be in upcoming there'll So, news more the months. on that

Cristopher Kennedy

Great, you. thank

Operator

question Ken come Autonomous Instructions] Research. will from Suchoski Our next with [Operator

go You may now ahead.

Ken Suchoski

an just OpEx flow we your from of you away what comment Thanks factors vendor from see on-prem the the that I shift impacts security are morning. questions the through you Maybe cash the the to good around moving some from offsetting continue cloud free cyber differently, perspective? earlier cost versus a of on and on should to CapEx to margin structure taking follow-up and guess Hi, expect guys in questions. increase for cost as and Can flow where some how said just overall cloud the offering? the expansion.

Mimi Carsley

the for question. Ken, Thanks,

say cloud, I a but do higher FI like on-prem as at now they security, they might to revenue people on their would from that - they infrastructure, own And neutral at from us So their more staffing. paying to so why say the that, of to Henry. whole are saving their you support are having high it's because own a essentially net to own level, institution, can Jack a migrate much

way it's members the a holders focus and us serving help FI of element. core engaging on and for their their account them to so with and value to And allowing this

server, more people-related very When that have in new every happens, additive while comes that a healthy infrastructure and or new Yes, it's once costs. a a very it so but need at margin. a rack you'll infrastructure minimal

So eight-year that's probably have expect that's seven-year been years, runway. it a occurring been still tailwind, we to a for to many

on then cloud the to continues how to see that, leapfrog of And I top said public pace and we'll of improve moving the or as that previously. that

and that So invest with see you we helps our partners. a have data in maintaining upgrading to centers continue - from data margin potential center perspective, us own will

see cap $XX of that's our next center-related that of, should that kind million of You'll some flow. free probably year, infrastructure data part in be doing. cash we're There example, spend, for roughly

year-in but modest in that see times of chunkiness investment. a is doing data move or big a overhaul you'll probably of So when we're a center, the year-out

Ken Suchoski

program the that the on question had you headcount retirement early Okay, program Can mean a Is headcount years? one-and-done is I this a great, program actually of be And overall more there Any completed. pursuing. then, your that's about growth great. thoughts after would helpful, I just this of growth of - deal? you're that's Mimi. type go down headcount coming over just plans overall talk

Mimi Carsley

Yes.

everyone a of and only ties both small pertains who meet is So name, saying short age the Program because But it's I to a population company. eligible. full the noticed of that the name. I love name. percentage great loved Voluntary Early the Incentive people It our one said tenure only criteria no it's and

X,XXX that have we our probably going around over roughly, it. out in population So employee XXX of to participate are employees

from in and then people year. going won't to next growth to create where perspective. our a it's you changes hiring it invest in next any So huge doesn't business, significant continue needed see the year, we're headcount And Greg? but numbers

Gregory Adelson

Yes.

add. I'll think I

role zero-base will and we we we here. think I So the same we exact do have every do that that

that going able of will over for those resources and actually opportunities levels as folks mentioned, So its in roles we the to Again, basically, to future. we that the role growing to growing need positions backfill could are to that may position. determining Dave are and up looking organization opportunities a not move those that be taking lot of There are value move at create businesses that these our be of way. particular other where the

than of mentioned, we So as and some we every cases, role. evaluation been very that but in our would the process all it diligent that ideal headcount at goal again headcount, going lot to and speak that's we opportunity some a there's we're there have but on in the zero-base less has is single times that improve

Mimi Carsley

I color And, add would a more just for bit Yes. just little there.

FY For take around out of if and Payrailz X% 'XX, it headcount increased X% a it, was growth. you

So are a people selective we in our very number. large investments making while been not it's and in hiring,

Ken Suchoski

Thank you great. Okay, both.

Gregory Adelson

Sure.

Operator

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

Vance Sherard

look Anthony. September. events investor to of seeing many upcoming during forward you, Thank you multiple at We

their with We associates number? quarterly Anthony, efforts. provide the are will We Henry you us please today, all and the you joining for results replay and Jack pleased appreciate thank again

Operator

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

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Jack Henry & Associates (JKHY) 16 Aug 232023 Q4 Earnings call transcript