Jack Henry & Associates Inc at KBW Fintech Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Yes. So maybe we will start with your recent results because you just reported results. Top line outlook this year, it seems to be a little bit more back-end loaded than your typical year. So maybe can you talk about what's different this year versus typically and what will drive this acceleration into the second half?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : And the hardware sales, like I imagine those are very lumpy, but is there any rhyme or reason to how those grow?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : So I've lost count for how many quarters you guys have now been seeing record sales momentum. So maybe talk a little bit about what's driving that strength.

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : And then I think one area of strength has been to score wins greater than $1 billion, which has historically been not where you guys have played. So what's enabling that? And then also help us think through implementation cycles because these are bigger deals. Does it take longer to implement these and the revenue potential? How different is it from your average customer?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : And just in terms of implementation times and revenue potential, how meaningfully different are those?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : How would you characterize the competitive backdrop currently for core processing? Has anything changed in the macro environment and fintechs are always trying to compete in this space? Sort of how are you feeling about the competitive backdrop?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : What would you say about the pricing environment? Does that typically go down when contracts come up for renewal? I know there's always a lot of cross-sell that happens. So your total contract value is probably still going higher, but apples-to-apples, how can you think about --

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : So one of the areas of real strength has been and continues to be Banno retail and now you also have added Banno Business. Can you remind me how penetrated you are within your base? And what type of attach rates do you see with your core clients using Banno?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : So maybe switching to the payments business for a bit, still healthy growth, but it slowed a couple of hundred basis points, I think, over the last year or so. I know some of it was macro driven because we saw a debit slowdown in the US, but is the growth trend also reflective of a more mature business there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 7:10PM, JKHY.OQ - Jack Henry & Associates Inc at KBW Fintech Conference

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : That's very helpful. You were talking about the net dollar product a little while ago, and you've talked about sunsetting some other slower-growing businesses as well, which are less profitable or just not going that fast. Can you help us dimensionalize, like what percentage of total company revenues those are? And any color on what time periods we will see this transition take place over?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : And any revenue falloff is contemplated in your 7% to 8% that you guide to on a long-term basis? That's helpful. So recently, you announced a new SMB strategy in partnership with Move, which is a payments processing platform. Can you talk about the strategy and vision there and what role Jack Henry will play? And how are you thinking about the revenue potential? I know a lot of questions in there.

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Great. And so have you had any conversations with some of your larger core clients about their interest level in this solution?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Okay. Moving on to the tech modernization strategy. The focus there has been unbundling the core. Can you update us on where we stand in terms of unbundling the features? I know you've talked about wires was the first product we work with. So where -- what products are in the market on an unbundled basis at this point in time?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : And I know one of the focus areas was that as you unbundle the core and modernize your tech, there would be room to go upmarket in the regional bank space because like to your point, it's easier to migrate because you can migrate service by service. How is that panning out? And like what discussions have you had with regional banks? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 7:10PM, JKHY.OQ - Jack Henry & Associates Inc at KBW Fintech Conference

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : So I have a few more prepared questions, but I want to see if the audience has any. Anyone has any questions or I can keep going? No. Okay. I'll keep going. So maybe then moving to margins. We've talked a lot about revenues and the strategy and the vision. Just moving to margins, I think you've outlined 20 to 40 basis points long-term expansion. Is that potential for an upward bias here as you talked about the product rationalization that I'm guessing should help? And any other puts and takes to think about over a long period of time?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : That's great. Free cash flow conversion, always very topical.

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : You're targeting 65% to 75% this year. Just help us understand how you expect that to evolve over the long term because I know you guys used to have much higher free cash flow conversion. There have been some moving pieces in there? And just how you think that evolves over time?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Helpful. And then capital allocation, M&A versus buybacks, how do you think about that and then maybe talk about the M&A pipeline.

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Since you brought up bank M&A, just one last one. With the new administration, obviously, everyone is expecting we might see an acceleration in bank M&A again. What does that mean for Jack Henry?

Question: Vasundhara Govil - Keefe, Bruyette & Woods North America - Analyst : Well, we'll end it right there. Thank you very much.