Jack Henry & Associates Inc at UBS Fintech Leaders Conference Transcript

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

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : So Mimi, just to start out with, in the fourth fiscal quarter, Jack Henry booked 16 competitive core takeaways, making it 47 for the fiscal year. What's fueling the strength? Has the competitive dynamics changed? And more importantly, are you seeing any residual effects from one of your competitors which is currently struggling?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : So just to be clear, are you running three core systems? Is that...

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Got it. Okay, that makes a lot of sense. And then I know that you're not going after a Bank of America or a [Chase]. But are you trying to have conversations with larger banks, maybe more of the regionals there?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Yes. And just sticking with the tech modernization strategy, I feel like there's -- you get tons of questions on this, so there's some confusion as to what Jack Henry is doing there. But could you talk about -- like help us better understand how unbundling services can help the customer and generate a longer-term sustainable revenue stream for the company?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Got it. That makes sense. Are you starting to see interest from your customers for being in a public cloud environment?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Understood, okay. Looking across your segments, core revenue growth has accelerated in the last few quarters. What's driving the strength? And which components do you expect to be durable into FY '24?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Makes a lot of sense. Regarding your progress with FedNow, (inaudible) is one of the protectors of FedNow. What type of revenue model does (inaudible) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 14, 2023 / 3:40PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Fintech Leaders Conference

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : As you talk to these banks about FedNow, what do you think are the main use cases?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : So I've also heard the big use case for FedNow is (inaudible). Are you also hearing use cases from consumer (inaudible) P2P?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Got it, okay. Let's move on to operating margins. So in your last earnings call, you guided for 20, 25 basis points of non-GAAP operating margin expense in FY '24. Can you talk about the different puts and takes of this target, including maybe (inaudible) Payrailz mechanics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 14, 2023 / 3:40PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Fintech Leaders Conference

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Given some of the headwinds you just talked about, would you characterize your guidance as being conservative?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Makes sense. Okay. I know beyond '24, you've highlighted normalized margin expense in that 20 to 40 basis point range. Can you talk about what would get you closer to 20 versus the 40? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 14, 2023 / 3:40PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Fintech Leaders Conference

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Makes a lot of sense. Just going back to the tech transformation for a second, are you seeing any of your competitors do anything like Jack Henry is doing in the sense of unbundling and shifting over to a public cloud environment?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Got it. And while we stay at the competitive environment, outside of your two largest competitors, are you seeing any other new entries? Do you start out your international (inaudible)

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Understood. Of all the moving pieces in macro right now, what's your view on bank IT spending for the next 6 to 12 months?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Okay. I'll pause here and we can take any questions in the audience. We have a mic that will go around. Feel free to raise your hand if you have anything for Mimi. And if not, I will continue with my questions. I have plenty. So for Mimi, so for FY '24, you expect free cash flow to be 60%. How should we think of our free cash flow conversion over the medium term as you transition from a license and maintenance business model more to SaaS?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : So without that, should we think of the medium term as a 70% to 80% conversion? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 14, 2023 / 3:40PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Fintech Leaders Conference

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Okay, great. Just any update on your capital allocation priority here? You've been in the seat for roughly 1 year. And maybe just your acquisition pipeline, what types of assets (inaudible) and what criteria are you seeing those acquisitions?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : And you only want to be a core (inaudible) unlike your (inaudible)

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : I'm going to sneak a question about gen AI, which everyone wants to know the impact of gen AI on all the companies I cover. So what do you think is the impact, potential impact on the cost side and maybe on the revenue side as well for Jack Henry? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 14, 2023 / 3:40PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Fintech Leaders Conference

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Understood. How has the progress been in trying to sell Banno to non-core customers? And do you think that could be material to your revenue and earnings?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Got it. Okay, that's great. Can you talk a little bit about the progress you're making on your credit card processing business? And when do you think that will become a larger piece? And can you just help us better understand the dynamics you have with First Data and how long that contract is?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : And any progress on the (inaudible) with First Data contract, how long that is?

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Okay, understood. Okay. I know we're running out of time, so I just have one final question. Well, it's actually two parts. What are you most excited about for Jack Henry's future? And what do you (inaudible)

Question: Rayna Kumar - UBS Investment Bank, Research Division - Analyst : Great. Well, Mimi, it was wonderful having you. Thank you so much for your time. This was great.