Jack Henry & Associates Inc at UBS Global Technology and AI Conference Transcript

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

Question: Nikolai Cremo - UBS Investment Bank - Analyst :

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. That's helpful. And just wanted to touch on the strong sales performance. It seems like quarter after quarter, year after year, record sales. So I just wanted to check in on what's driving the continued momentum here? 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 04, 2024 / 4:35PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Global Technology and AI Conference

Question: Nikolai Cremo - UBS Investment Bank - Analyst : So about two months back, you guys had your annual customer conference here in Phoenix. So I just wanted to touch on just how the demand environment is. I know it's very strong, but maybe just relative to last year, how does it feel?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Absolutely. And just wanted to follow up on the one point you mentioned on the election. I know that there's just general positive notions for the financial services industry with the incoming Trump administration, especially for maybe some faster approval times for bank M&A. But are there any other potential positives? I know there's some uncertainty for policies, but maybe around like taxes or anything like that?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. And then are there any free cash flow considerations for this potential change in tax policy here?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. We'll keep an eye on that. So just moving into the segment. I mean, Jack Henry's performance in the core segment continues to impress everyone in the industry, 57 core wins last year. It's hard to see anyone else coming close to that. So maybe just taking a step back, like high level, like what is the sales pitch when you go into a new core prospect, like why Jack Henry? Why are you guys winning so much more regularly versus your competitors? 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 04, 2024 / 4:35PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Global Technology and AI Conference

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. And just following up on that. So when you think about Jack Henry continuing on this pace, let's call it, 50 core wins per year over the next few years, do you anticipate a greater share coming from the bank side versus the credit union side, just given, I think, your market share on the credit union side for your target market is close to 50%, and it's about half of that on the bank side. So is there opportunity to increase share there?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. Definitely. We're aware of the differences and that makes the number all the more impressive. But just touching back on the six core wins last quarter, I know that's pretty typical for Q1, given you have like a huge Q4 like over 20 wins. But I know there were some delays last quarter because of some of the hurricanes, but is there an update on how new core wins have been trending in the quarter?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : And then just another follow-up on how things are trending, maybe without getting too specific into Q2, but I know that the core conversion implementations are pretty important for the back half of the year for Jack Henry in terms of the revenue acceleration. So any update in terms of how the implementations have been going, generally on track or?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Great to hear. So just moving to the tech modernization strategy. It's been a few years since the strategy has been formally announced. But just taking a step back, can you just remind us what the advantages are for your customers for moving from the private cloud to a public cloud environment?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : All tangible examples. So I appreciate that. And maybe just going back to the revenue uplift for the better service, better uptime, better SLAs all of that. How would you think about the revenue uplift once you get them to the public cloud?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Okay. Understood. And then -- so you mentioned that you're on track to have the retail and consumer deposits in the public cloud in 2026. I guess like how much more work needs to be done until like the majority of the customer's core would be in the public cloud?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Understood. So just moving along to the Payments segment, your largest business. I know that there's like three high-level components. So maybe we could just ballpark the size of those card processing, Enterprise Payment and the PayCenter business? And then just thinking about like the relative growth contributions for each. I think some are a little faster, some are a little slower relative to the segment's 8% to 9% target?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Understood, Mimi. So just moving along to the complementary segment. It's comprised of your 1,700 core customers and, call it, 5,800 non-core customers with an average of three products. How do you dimensionalize that opportunity internally in terms of growth? 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 04, 2024 / 4:35PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Global Technology and AI Conference

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Very exciting. And I just wanted to go back to Banno. I know it's an important part of the segment's growth trajectory. I think you're about 60% penetrated on the retail side in terms of your core customers. So you got Banno for business ramping I think in like the 180 range. But how would you characterize the growth runway for Banno over the next few years? And maybe just touching on the outside the base.

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. It looks like we're getting close to being done with the session. So I just wanted to touch on the back half acceleration for revenue in the 2025 outlook and also the inflection in margins, I think guided to be up a little more than 100 basis points in the back half of the year. So what gives us line of sight into both of those?

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Thanks for the color, Mimi. And so now that this is also an AI conference, I got one question in. But there were some pretty encouraging examples of some increased efficiency from generative AI that you guys are seeing. We know it's early days, but like what are some areas of the business that you're most exciting for increasing efficiency through generative AI? And do you see that to help you limit headcount growth in the future years? I know it maybe like 1% this year, but -- 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 04, 2024 / 4:35PM, JKHY.OQ - Jack Henry & Associates Inc at UBS Global Technology and AI Conference

Question: Nikolai Cremo - UBS Investment Bank - Analyst : Got it. Very exciting updates here. Well, unfortunately, we are out of time with this session, but I want to thank you both for making it out to Scottsdale. We really appreciate your time.