Jack Henry & Associates Inc at Nasdaq Investor Conference Transcript

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

Question: Michael Infante - Morgan Stanley - Analyst : It's a helpful overview. I appreciate that. I wanted to get into the impact of the incoming administration. If you look at net interest income across the banking industry from 2016 to 2018, you saw a multiyear step function change in what that net interest income generation look like and obviously, that's a leading indicator for bank technology spend more broadly. I think if you look at industry expectations for where that might trend in '25 and '26, we're getting, again, a really sizable inflection at least as it relates to 2024. What are you hearing from your bank and credit union customers just in terms of their appetite to spend just with the regulatory and geopolitical clarity that we do have now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 10:30AM, JKHY.OQ - Jack Henry & Associates Inc at Nasdaq Investor Conference

Question: Michael Infante - Morgan Stanley - Analyst : Sure. Maybe just to piggyback on the bank consolidation point. If you look at where bank M&A has trended over the last several years, sort of running well below post-GFC averages, I think most are expecting some unlock over the near term. How should we think about the impact of a return of bank M&A on your business? I know there are several puts and takes. But just walk us through how you come out on the winning side of M&A?

Question: Michael Infante - Morgan Stanley - Analyst : Helpful. Maybe just on sales cycles. I think one of the broader theme for your business is sort of demonstrating the capacity to move upmarket. You have a $50 billion bank on your client roster. I know they have intentions to scale much larger than that. But maybe just on the impact to sales cycles more generally, clearly as banks get bigger and bigger, the number of approvals goes up and up. And with AI, sort of being a key factor in some of those sales processes, there could be the potential for more sales cycle elongation? Sort of how do you think about sort of forecasting the business as you sort of move up market and you might see some elongation of those sales cycles?

Question: Michael Infante - Morgan Stanley - Analyst : That's great. I wanted to tick through some of the various businesses and hit some of the high points. Firstly, on the core segment. Non-GAAP revenue growth of a little over 5% in the first quarter. I know there's obviously some puts and takes on a quarterly basis, you orient everyone to look at the business on an annual basis. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 10:30AM, JKHY.OQ - Jack Henry & Associates Inc at Nasdaq Investor Conference I think one of the misconceptions we often hear from investors is just focusing on the number of core wins in any given quarter, and you don't necessarily know how big or small those core wins could be. So the P&L impact even if you're seeing a smaller number of core wins could actually be bigger than if you were to see a greater account of core win. So how do you sort of think about the drivers for just acceleration in the core segment throughout the year and the confidence in continuing to operate in that normalized growth range?

Question: Michael Infante - Morgan Stanley - Analyst : Great. Maybe just on the payment segment. A little under 6% growth in the quarter, you generally track in line with some of the reported debit metrics from Visa and Mastercard, sometimes the exposure -- oftentimes the exposure is helpful in recessionary periods, just given you don't price on an interchange basis. But how should we sort of think about what you're seeing in faster payments, how that can be a driver for acceleration and in payments and then we'll obviously get to move later as well?

Question: Michael Infante - Morgan Stanley - Analyst : Perfect. On complementary, Banno is obviously a key component of this. I know there are several moving pieces with the complementary business in aggregate just with the impact of potential divestitures and sunsetting some products. But how do you sort of think about the outside the base strategy and what you're seeing from competitors and how you intend to navigate that?

Question: Michael Infante - Morgan Stanley - Analyst : Great. Maybe just a follow-up on Banno. I know part of the growth there has obviously been driven by some of the conversion of the historical NetTeller clients. There's a pretty nice ACV uplift associated with that. How do you sort of think about how much runway is left there from a conversion perspective? And is this a function of sort of once that conversion sort of ceases, you'll get the uplift on Banno outside the base. How do you think about that?

Question: Michael Infante - Morgan Stanley - Analyst : Helpful. Maybe just progressing to the partnership front. There's a lot of exciting initiatives, particularly concentrated in in the payment segment with both Moov and Victor. I wanted to spend some time on Moov specifically. Can you just unpack the strategy for us there and the benefits that you think that, that partnership will bring to Jack Henry?

Question: Michael Infante - Morgan Stanley - Analyst : Very helpful. I wanted to double-click on the sales motion specifically. This seems like you're pushing it more aggressively through the Banno base to those customers, doesn't sound like there is a lot that the Jack Henry sales force specifically has to do to incentivize the adoption. But what are you doing just in terms of being able to drive this to scale? I know Visa and Mastercard play a part here. What are they doing to the extent that you can comment in order to really make this a needle-moving product for Jack Henry?

Question: Michael Infante - Morgan Stanley - Analyst : Great. Maybe pivoting to the Victor embedded payments platform. How would you characterize the difference between Victor and Moov and any difference in unit economics that we should be aware of?

Question: Michael Infante - Morgan Stanley - Analyst : Great. Maybe pivoting to free cash flow. I think one of the secondary benefits of the incoming administration is the potential for a difference in treatment of the tax deductibility of some of those R&D expenses. What could that mean for free cash flow? And how are you thinking about use of free cash from a capital allocation perspective?

Question: Michael Infante - Morgan Stanley - Analyst : Very helpful. Mimi. We're just about out of time. Thanks very much for joining us.