Jack Henry & Associates Inc Q2 2025 Earnings Call Summary

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

Question: Rayna Kumar - Oppenheimer - Analyst : Could you just talk a little bit about what gives you confidence on the back half of revenue acceleration and what the key drivers will be?

Question: Rayna Kumar - Oppenheimer - Analyst : Mimi, that's very helpful. And as a follow-up, are you seeing any increased competition at the low end of the market from a large competitor that's been calling out these wins? And like specifically, are you seeing any pricing pressure?

Question: Kartik Mehta - Northcoast Research - Analyst : Greg, in the past, when we've talked about market share, you usually reference they are usually, on average, 200 deals and maybe 100 come to market, and that Jack Henry usually wins their fair share, if not more. Is there a difference in that environment at all in terms of number of deals coming to market and also maybe the number of deals you're winning? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:45PM, JKHY.OQ - Q2 2025 Jack Henry & Associates Inc Earnings Call

Question: Kartik Mehta - Northcoast Research - Analyst : And then just moving over to your partnership with Move. I know you were very excited about that. It seems like that's moving in the right direction, especially with the recent announcement with Visa Direct. I'm wondering, when you would expect revenue from that partnership to have an impact on Jack Henry growth?

Question: John Davis - Raymond James - Analyst : Greg, I want to touch on the renewals for a minute. You called out the outsized number. Maybe talk a little bit about the pricing dynamics. On one hand, you usually get a better price as they grow, on the other hand, we have the opportunity to sell them and bundle more products. So on average, maybe talk a little bit about do you expect more revenue from those customers going forward. Or is that a potential headwind in the back half of this year and then in '26.

Question: John Davis - Raymond James - Analyst : Okay. Great. And then Mimi, just on the shape of the back half of the year, are we expecting -- you need about 300 basis points or so of acceleration one half to two half, but is that a more 4Q-weighted? Or any color you can give us there on the cadence in the back half?

Question: John Davis - Raymond James - Analyst : When you say acceleration, i.e., 4Q should be higher than 3Q?

Question: Cristopher Kennedy - William Blair - Analyst : Can you just talk about the current operating environment for your customers? You do have a new head of the FDIC who's made some comments. Just broad comments would be great.

Question: Cristopher Kennedy - William Blair - Analyst : Great. And then any update on your efforts to rationalize the number of products that you guys service?

Question: Peter Heckmann - D.A. Davidson - Analyst : Maybe just one quick more housekeeping question. But in terms of getting to the $16 million of deconversion fees for the year, at this point, should we just kind of think about that as equally weighted between the third quarter and the fourth quarter? Or should we expect a bigger step-up in the fourth quarter?

Question: Peter Heckmann - D.A. Davidson - Analyst : Okay. And then Greg, can you talk a little bit about real-time payment volumes? I know Jack Henry has done a real good job of bringing the financial institutions live on the different platforms. But what are you seeing in terms of volumes? And then can you tell where those volumes are coming from? Are they primarily coming from ACH, same-day ACH, or are you seeing maybe some migration from card volumes? Can you just talk about kind of the composition of payments? And what's really working in real time?

Question: Jason Kupferberg - Bank of America - Analyst : Good to speak with you again. I wanted to ask about free cash flow conversion, just visibility on the full-year target. Mimi, any thoughts on how the back half may trend there and just the visibility on it?

Question: Jason Kupferberg - Bank of America - Analyst : Okay. Understood. And then I wanted to ask about the trend of private cloud within Core. I think you guys talked about a bunch of FIs moving from in-house to private cloud. Curious to get an update on where do we stand now. How many core clients are on private cloud? And do you see that trend accelerating through the back half of this year? And just anything we should be thinking about in terms of whether or not that impacts the margin profile of your business at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:45PM, JKHY.OQ - Q2 2025 Jack Henry & Associates Inc Earnings Call

Question: James Faucette - Morgan Stanley - Analyst : I wanted to follow up on the cloud discussion. And Greg, I guess, maybe just a question for you, but some of the investor concern that we've heard regarding technology modernization, especially as we take the next step to public cloud, is that maybe your development initiatives with the [origin] strategy are ahead of where regulators are likely to be in the next few years, or at least that's been the thought. With the change in administration, do you think that within the timeframe, regulators will be more comfortable with broad-based financial PII in the cloud, such that the investments you're making in your Origin platform better lines up with likely regulatory timeframe? Just wondering if you think that we could bring those forward and see that move to public cloud start to accelerate?

Question: James Faucette - Morgan Stanley - Analyst : Great. And then wanted to, you touched on Banno there, just get a sense from you, given you're strategic and how the strategy may be evolving, how we should be thinking about the mix between Banno Retail and Banno Business and how that's likely to evolve over the next few years?

Question: Dominick Gabriele - Compass Point - Analyst : Just first, what are some of the underlying factors at your partners that could accelerate the demand for your products? And is there a shift in where your clients are putting incremental dollars to work expanding their solutions that you provide? I have a follow-up.

Question: Dominick Gabriele - Compass Point - Analyst : I'm sorry, the banks and credit unions. So what could accelerate the demand for your products among the banks and credit unions? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 1:45PM, JKHY.OQ - Q2 2025 Jack Henry & Associates Inc Earnings Call

Question: Dominick Gabriele - Compass Point - Analyst : Yes. Perfect. And then just lastly, just talk about the pace of innovation in the space, you and your peers. And then what products are seeing the most investment dollars to stay ahead of competition at Jack Henry?

Question: Andrew Schmidt - Citi - Analyst : I wanted to dig into M&A for a second, end-market M&A. I guess, first, is there any converter revenue in the back half outlook? And then I think when we think about just ongoing revenues, maybe you could talk about what you're seeing just from your customer base, how convert merge, balances, deconversion. I know there's a lot of questions around the benefits, pros and cons of end-market consolidation. If you could speak to those things, that would be helpful.

Question: Andrew Schmidt - Citi - Analyst : Got it. Super helpful. And then maybe if we could go back to your -- just your wins, the move up market. I know we've talked about this in the past. But if you talk about just the conversations those large banks and credit unions that you're winning. What's driving those wins? Have the conversations evolved a little more recently? I know, obviously, business banking and treasury is -- when you move up market is a bigger component. But other larger factors in terms of what's driving those conversations.

Question: Andrew Schmidt - Citi - Analyst : Absolutely. Yes, I know that our product roadmap means a lot. So I appreciate the comments.

Question: Kenneth Suchoski - Autonomous Research - Analyst : I just wanted to circle back on the back half revenue growth guidance. I think the implied growth is somewhere around 9%, which I think is the strongest sort of fiscal second half growth rate that we've seen over the last handful of years. So is there anything different that stands out this year versus prior years that drives that stronger growth in the second half? And I guess from a modeling perspective, any sense of which segments are going to see the most acceleration?

Question: Kenneth Suchoski - Autonomous Research - Analyst : Okay. Great. That's really helpful, Mimi. And then maybe just a question on the Payments business because we're getting some questions on it. When you look at the network volumes in some of the large banks, they showed a couple hundred basis points of accelerating volume growth in the US in calendar 4Q versus calendar 3Q. Just looking at the Payments segment, I think it accelerated about 30 basis points on a non-GAAP revenue growth basis over that same period. So I guess, should we think about that line maybe being less correlated with overall market and network volume growth, or maybe that ticks higher in the back half of the year? Any detail on that would be super helpful.

Question: David Koning - Baird - Analyst : And my question, I guess it's along some of the same lines. When I look at Payments, historically, Q3 has been flat to down. I think in the COVID year, it was up, but almost every quarter, in Q3, it's flat to down sequentially. And then Q4 is up a decent amount, maybe 3%, 4%, whatever. It seems like this year, you're talking about a little more acceleration than normal. Is there something different about this year sequentially? Normally, Q3 would be flat to down just because retail debit is just down a little bit in calendar Q1. But is there something different about the products being added or different things that are kind of differently affecting the sequential this year?