Jack Henry & Associates Inc Q1 2025 Earnings Call Transcript

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

Question: Andrew Schmidt - Citigroup Inc. - Analyst : Hey, Greg, Jamie, thanks for taking my questions this morning. If I could just drill down on the core revenue growth for a moment. Maybe just unpack the first quarter performance a little bit. And I know you managed to the full year, so I don't want to get too caught up on the first quarter performance, but maybe just a few more details on how core performed in the first quarter. And then as the year progresses, could you talk about the trajectory we should expect there and the drivers as the year progresses? Thank you very much.

Question: Andrew Schmidt - Citigroup Inc. - Analyst : Got it. Yes, that makes sense. It's good to see the balance in the bookings there with the record sales quarter. Maybe just in the wake of the election, could you just remind us how Jack Henry is impacted by consolidation from an underlying revenue growth perspective? And then whether this cycle -- obviously, it's very early, but whether this cycle should be any different than what we've seen historically? Thanks so much.

Question: Andrew Schmidt - Citigroup Inc. - Analyst : Got it. Thank you very much. Really appreciate the comments.

Question: Vasu Govi - KBW - Analyst : Hi, thank you for taking my question. I guess first one for you, Greg. I wanted to ask about the Banno retail wins. I think you said 12 new wins in the quarter, which is a good number. But if I look back, it's probably one of the slowest we've seen in the last several quarters. Just anything to call out there? Anything timing related like you talked about the core? And then I know you have identified third-party cores also to sell Banno into. Just how is that effort going? And any color around that?

Question: Vasu Govi - KBW - Analyst : Great. And a quick one for you, Mimi. Just on the free cash flow conversion, like any change to the 65% guide that you had given us last quarter? Just any puts and takes there?

Question: Vasu Govi - KBW - Analyst : Great. Thank you very much.

Question: Rayna Kumar - Oppenheimer - Analyst : Good morning, Greg and mimi. Thanks for taking my call. So one of your competitors recently called out a competitive win of less than $10 billion asset bank. I'm just wondering if you're seeing any increased competition for banks and credit unions in core processing in your focus area?

Question: Rayna Kumar - Oppenheimer - Analyst : Understood. That's very helpful. The economy seems to be showing more resilience evidenced by recent earnings reports from other payment companies. Do you think if this macro environment persists, there could be upside to your 25 to 40 basis point margin expansion target for this fiscal year? 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call

Question: Rayna Kumar - Oppenheimer - Analyst : Appreciate all the color. Thank you.

Question: Jason Kupferberg - Bank of America - Analyst : Thanks, guys. Good morning. I just wanted to start on the second half revenue growth outlook and definitely appreciate the priority on Q2 to get our models tuned. I guess you got to be at around 9% in the second half to get to the midpoint of the full year and you talked about implementation cadence. But can you maybe just go a layer deeper into the visibility you have, factors that are going to drive that acceleration, and just clarify which revenue lines that's going to be most pronounced in? It sounds like a lot of it is core, but just wanted to check in on that.

Question: Jason Kupferberg - Bank of America - Analyst : Okay. And just talking about core wins for a second. I think you mentioned six in the quarter. I know a typical year, you target 50 to 55. It's still early. We know this is never ratable. It's usually lumpy by quarter. And I think you said a couple of deals slipped because of the hurricanes. But I wanted 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call to just check in on overall pipeline confidence and visibility. And is 50 to 55 still a reasonable ZIP code for this fiscal year based on how you see the pipeline converting over the next few quarters?

Question: Jason Kupferberg - Bank of America - Analyst : Okay. Thank you.

Question: William Nance - Goldman Sachs - Analyst : Hey, guys, thanks for taking the question. Is Just another one on the second half acceleration. It's nice to hear the confidence there. And I just it sounds like most of that is more kind of implementation and tough comps from the prior year. Maybe there's a little bit easier of a comp in payments in the back half of the year. But I guess, big picture, when you think about exiting the year at a stronger growth rate, maybe excluding having an easier comp in payments, is there anything in that back half growth rate that you would caution us against run rating into the first half of the following year? Not exactly asking for following year guidance, but just wanting to kind of understand if they feel like that's a good run rate given the implementation schedule for the following few quarters??

Question: William Nance - Goldman Sachs - Analyst : Got it. Okay. I appreciate that. I figured I would ask. And then just I guess any color on just how you're thinking about capital allocation and the M&A environment? We touched a little bit on bank M&A, but just any kind of capital allocation priorities come to mind and what might be an environment that's more conducive to M&A?

Question: William Nance - Goldman Sachs - Analyst : Okay. And just I appreciate you taking the questions today.

Question: Dominic Gabriel - Compass Point - Analyst : Hey, good morning, everybody, and thank you so much for taking the question. So I guess, I was just curious if there was any change in the expected pace and deemphasizing some of the lower growth, less profitable businesses? You touched a little bit on it earlier in the call, but if you could give some extra color 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call

Question: Dominic Gabriel - Compass Point - Analyst : Yes, for sure. And it was nice to see the margin being better than you were expecting this quarter. I guess, the election results basically just happened. So I'm just going to go back to this for a second. Do you think that -- do you have any sense from your clients that they were holding up certain tech investments until they understood who the winner was going to be? And do you think that there's incremental tech spend that they're likely going to pursue that maybe was not captured in just the budget growth that you guys talk about once or twice a year in your surveys. Do you think that could come through in like complementary products, where they're going to start making some of those discretionary investments because of how the election went and maybe more or less? Thanks.

Question: Dominic Gabriel - Compass Point - Analyst : Thank you.

Question: Peter Heckmann - D.A. Davidson - Analyst : Hey, good morning, everyone. Thanks for taking the question. Greg, I just wanted to see with JHA user conference, Connect, how much of a priority or how much emphasis are you putting on the modern core modular platform? And how is that resonating with clients? And is it your sense that some of these multibillion-dollar institutions are really looking for a vendor that has a pretty well thought out and underway process to migrate towards an unbundled core. I mean, how important is that in terms of their decision-making?

Question: Peter Heckmann - D.A. Davidson - Analyst : Okay. That's helpful. And then can you just -- you haven't talked too much about the loan origination platform. Can you talk a little bit about some of your thoughts there in terms of solutions on the lending side and whether or not that's something that we might hear a little bit more about over the next few years?

Question: Peter Heckmann - D.A. Davidson - Analyst : I appreciate the feedback. I get back into queue. Thanks.

Question: Cristopher Kennedy - William Blair - Analyst : Yes, good morning. Thanks for taking the question. Greg, you mentioned Data Broker a couple of times. Can you just remind us what the opportunity is there? And just maybe talk about the CFPB rule on open banking and how that drives that?

Question: Cristopher Kennedy - William Blair - Analyst : Great. Thanks for taking the question.

Question: John Davis - Raymond James - Analyst : Good morning, guys. How Mimi, we talked a lot about the second half rev excel, but I wanted to touch on margins. I think the guide implies margins will be up somewhere close to 100 basis points in the back half of the year. Obviously, you have revenue accelerating, easier comps. Anything else to call out on the margin front right now?

Question: John Davis - Raymond James - Analyst : Okay. Great. And then, Greg, you called out 20% increase in Banno users year-over-year. Is Banno for Business a meaningful contributor to that? And if so, is it safe to assume that Banno revenue is growing well above that 20% user growth number? 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call

Question: James Faucette - Morgan Stanley - Analyst : Hey, thanks very much for everybody. I wanted to ask, Greg, really quickly, you mentioned the implementation queues. And just wondering how those are trending broadly and how you're thinking right now about the puts and takes between the margin expansion you're delivering versus potential for additional resource allocation to help speed up those implementations?

Question: James Faucette - Morgan Stanley - Analyst : Got it. And then I'm wondering, it's been a few months since you announced the partnership with Moov. It seems like an interesting potential product both for Jack Henry as well as Jack Henry's customers. Just any update on kind of progress there and when we may start to see that enter the market commercially?

Question: James Faucette - Morgan Stanley - Analyst : That's great. Thank you.

Question: Ken Suchoski - Autonomous Research. - Analyst : Hey, good morning. Thanks for taking the question. I wanted to circle back on the cloud migration. I think you said cloud revenue was 30% of revenue growing low double digits. I think you have 70%, 75% of clients on the private cloud. Can you just give us a sense for how much runway there is for cloud revenue to continue to grow at these double-digit rates? Are you seeing any traction in the public cloud yet? Just trying to get a sense for how sustainable that growth is on the cloud side and maybe where the revenue shows up across the segments as well?

Question: Ken Suchoski - Autonomous Research. - Analyst : Okay. Great. And then I think you said non-GAAP revenue would grow 6% in the second quarter. Can you just remind us of the building blocks, I guess, by segment just to get to that 6%? 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call

Question: Ken Suchoski - Autonomous Research. - Analyst : Thanks so much.

Question: Dave Koning - Baird - Analyst : A couple of things. First of all, card processing, you put that in the press release was 5% growth. Last quarter it was 8% growth. And I know like the networks and stuff were pretty stable growth. Was there anything in there just to call out why that decelerated a bit?

Question: Dave Koning - Baird - Analyst : Okay. And then the one other thing, the we talked about this last for to interest income remains high and you guys had a ramp kind of a year-and-a-half or so later than I would say a lot of other. I guess you had some ramp for a while ago, but you really ramp that up a lot in the last year. So now again, it was really high in Q1. Does that does that stay or what treated kind of a little later ramp in that it does that say kind of stable through the year?

Question: Dave Koning - Baird - Analyst : Okay. Thank you. 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 06, 2024 / 1:45PM, JKHY.OQ - Q1 2025 Jack Henry & Associates Inc Earnings Call