Summary of Jack Henry & Associates (JKHY) 2025 Conference Call Company Overview - **Company**: Jack Henry & Associates (JKHY) - **Date of Conference**: June 11, 2025 - **Speaker**: Mimi Karzly, CFO and Treasurer Key Points Industry Demand and Performance - The current demand environment is characterized as healthy, with expectations of achieving 50 to 55 core wins for the year, consistent with multi-year trends [4][5] - Year-to-date results show approximately 26 to 28 wins, totaling over $30 billion in assets, indicating a strong fourth quarter ahead [4] - Despite economic uncertainties, banks are focused on driving efficiency, deposit gathering, and loan growth, necessitating innovation in technology [6][7] Migration to Private Cloud - Jack Henry is experiencing a long-term trend of migration from on-premise hosting to their private cloud environment, with expectations of 40 to 50 migrations [9] - Currently, 76% of clients have migrated to the private cloud, with a potential revenue uplift of 2x as clients transition [10][12] - The migration is influenced by factors such as the age of technology and internal priorities of financial institutions [10] Consumer Sentiment and Economic Impact - Approximately 25% of Jack Henry's business is tied to consumer sentiment, particularly in the payment and card processing space, with 90% of card business being debit [14] - There was a noted softness in consumer sentiment, leading to a reduction in guidance for card volume expectations [15] Regulatory Environment and M&A - There is a de-escalation in regulatory pressure, providing clarity for financial institutions, which is favorable for Jack Henry's operations [20][21] - The company is not directly benefiting from increased regulation but acknowledges the importance of oversight for consumer protection [22] - M&A remains a key focus, with Jack Henry always looking for opportunities that align with their strategic goals, particularly in digital and cloud-native solutions [71][73] Competitive Positioning and Strategy - Jack Henry has seen a doubling in aggregate assets of new core takeaways, with a focus on larger institutions [23] - The company emphasizes transparency in its direction and has over 70 roadmaps to guide clients [25] - The integration of new technologies and outstanding customer support are key factors resonating with larger clients [26] Payment Solutions and Innovations - The partnership with Move for merchant acquiring is expected to enhance offerings for small and medium businesses, reducing friction in payment processing [47][49] - The closed beta for Move is operational, with positive feedback from banks and credit unions [48] - Jack Henry aims to empower banks to serve their customers better, particularly in the underserved small business segment [61] Future Outlook and Capital Allocation - Jack Henry is working towards returning to an 80% to 100% free cash flow conversion rate, with ongoing efforts to address R&D tax credits [69][70] - The company maintains a healthy dividend policy and is open to share buybacks and M&A opportunities as part of its capital allocation strategy [75] Conclusion - Jack Henry & Associates is positioned well within the fintech space, focusing on innovation, customer service, and strategic growth through technology and partnerships, while navigating regulatory changes and economic uncertainties.

Core Insights - Triangle Credit Union has selected Jack Henry's Symitar platform to enhance member services and maintain competitive positioning in the market [1][3] Company Overview - Triangle Credit Union operates eight branches and serves nearly 58,000 members, managing $839 million in assets, a significant increase from $70 million in assets in 1993 [2] - The credit union offers a comprehensive range of personal and business financial services, focusing on progressive and cost-efficient solutions [2] Technology Adoption - Triangle Credit Union sought a reliable technology provider to support its growth and service expansion, valuing Jack Henry's open infrastructure for third-party integrations [3] - The credit union aims to streamline its business lending processes by utilizing Jack Henry LoanVantage, replacing multiple vendors with a single platform [3] Decision-Making Process - The decision to partner with Jack Henry involved thorough stakeholder feedback, ensuring all departments contributed to the selection process [4] - The culture and support provided by Jack Henry, including transparent communication and accessibility to executives, were significant factors in the decision [4] Future Outlook - Jack Henry's technology infrastructure is expected to shape the future of Triangle Credit Union, supporting its business goals and competitive position [5] - Triangle plans to adopt the cloud-native, API-first Jack Henry Platform to unify its services into a single ecosystem for innovation [4]

Core Viewpoint - Jack Henry's shares have increased by approximately 5.7% over the past month, underperforming the S&P 500, raising questions about the sustainability of this trend leading up to the next earnings release [1]. Estimates Movement - Estimates for Jack Henry have trended downward over the past month, indicating a potential shift in investor sentiment [2]. VGM Scores - Jack Henry currently holds a subpar Growth Score of D, a strong Momentum Score of A, and a Value Score of D, placing it in the bottom 40% for the value investment strategy. The aggregate VGM Score for the stock is D, which is significant for investors not focused on a single strategy [3]. Outlook - The downward trend in estimates suggests a cautious outlook for Jack Henry, which has a Zacks Rank of 3 (Hold). The expectation is for an in-line return from the stock in the upcoming months [4]. Industry Performance - Jack Henry is part of the Zacks Computers - IT Services industry. CoStar Group, a peer in the same industry, has seen a 2.3% gain over the past month, reporting revenues of $732.2 million for the quarter ended March 2025, reflecting a year-over-year increase of 11.6% [5]. CoStar's Earnings Expectations - For the current quarter, CoStar is projected to report earnings of $0.14 per share, which represents a decline of 6.7% from the previous year. The Zacks Consensus Estimate for CoStar has remained unchanged over the last 30 days, and it holds a Zacks Rank of 4 (Sell) [6].

Core Viewpoint - Jack Henry (JKHY) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, indicating a positive earnings outlook that may lead to increased stock price [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is a significant factor influencing stock prices [2][4]. - An increase in earnings estimates typically results in higher fair value for a stock, prompting institutional investors to buy or sell, thus affecting stock price movements [4]. Company Performance and Investor Sentiment - Rising earnings estimates for Jack Henry suggest an improvement in the company's underlying business, which should encourage investors to push the stock price higher [5]. - The Zacks Consensus Estimate for Jack Henry indicates expected earnings of $5.81 per share for the fiscal year ending June 2025, reflecting an 11.1% year-over-year increase [8]. Zacks Rank System and Historical Performance - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [7]. - The upgrade of Jack Henry to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Financial Data and Key Metrics Changes - The payments segment constitutes 37% of total revenue, with core and complementary segments each making up roughly one-third of total revenue [7][21] - The company reported a growth rate of approximately 10% in its key revenue, which accounts for 76% of overall revenue [28][29] - The company is targeting a headcount increase of less than 1.5% while maintaining a growth rate of 6-7% [97][100] Business Line Data and Key Metrics Changes - The payments business, which includes card services, is performing well, with card transactions making up 60% of the payments segment [19][72] - The pay center business, which focuses on real-time payments, is growing the fastest among the payment services [73] - The bill pay and remote deposit capture businesses are experiencing steady growth in the mid to lower single digits [74] Market Data and Key Metrics Changes - The company has about 40% of all real-time payment customers live in the market, indicating a strong position in the fast-growing payments sector [73] - Consumer confidence is waning, impacting debit transactions, which make up 90% of the card business [20] Company Strategy and Development Direction - The company is focusing on the SMB market, aiming to provide solutions that enhance deposit growth and customer retention [63][64] - A tech modernization strategy is in place, with a goal to transition clients from on-premise to private and public cloud solutions [41][50] - The company is rationalizing its product offerings, aiming to streamline operations and improve efficiency [102] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic challenges affecting consulting and hardware sales, leading to a slowdown in non-key revenue [11][12] - The company is optimistic about its core business growth and competitive wins, particularly in larger institutions [29][90] - Regulatory changes are expected to facilitate faster acquisition approvals, which could positively impact the market environment [92] Other Important Information - The company has a strong succession planning process, which has facilitated a smooth transition in leadership [8] - The company is ahead of schedule in delivering a full deposit-only core in the public cloud, expected to be available by next year [44][51] Q&A Session Summary Question: How is the macro environment affecting the business? - Management indicated that macro challenges have led to a pullback in consulting services and hardware sales, impacting non-key revenue [11][12] Question: What is the outlook for core business growth? - The core business is expected to continue growing at close to 10%, with a strong pipeline of competitive wins [28][29] Question: How does the company plan to address the SMB market? - The company is developing solutions that provide instantaneous approval and multiple settlement windows to enhance SMB offerings [63][66] Question: What is the strategy for transitioning to cloud services? - The company is focused on moving clients to private and public cloud solutions, with expected revenue lifts from these transitions [41][45] Question: How is the company managing costs in a slower environment? - The company is implementing business process automation and maintaining a cautious approach to headcount growth to manage costs effectively [97][100]

Company Overview - Jack Henry & Associates, Inc. is a financial technology company listed on Nasdaq under the ticker JKHY, providing technology solutions to financial institutions for over 48 years [2] - The company serves approximately 7,500 clients, focusing on innovation, personal service, and insight-driven solutions to enhance financial health [2] Upcoming Events - Greg Adelson, President & CEO of Jack Henry, will present at Bernstein's 41st Annual Strategic Decisions Conference on May 28th at 11:00 a.m. ET [1] - A live webcast of the presentation will be available, with a replay accessible on the company's investor relations website following the event [1]

Core Insights - SouthTrust Bank has selected Jack Henry to modernize its technology infrastructure, aiming to differentiate and streamline operations while pursuing growth [1][3] - The bank, founded in 1934, has $550 million in assets and is focused on expanding its presence in Houston and serving niche markets [2] - The partnership with Jack Henry will enhance customer service, boost efficiency, and integrate with third-party fintechs, while introducing modern digital banking capabilities [3][4] Company Overview - SouthTrust Bank has eight locations in South Texas and Houston, known for strong community ties and long-term customer relationships [2] - The bank aims to reach $2 billion in assets over the next decade, focusing on geographic expansion and organic growth [4] Technology Partnership - Jack Henry's core processing system will eliminate manual tasks and streamline workflows, enhancing the bank's operational efficiency [3] - The introduction of customer-facing products like the Jack Henry Digital Platform and services such as Zelle® and Apple Pay will attract customers [3][4] - Jack Henry emphasizes the importance of innovative and accessible tools for community banks to compete effectively [4] Strategic Goals - SouthTrust Bank's CEO highlighted the need for a technology provider that shares their vision for the future, indicating confidence in Jack Henry's capabilities [4] - The collaboration aims to empower SouthTrust Bank to deliver modern and user-friendly banking experiences to its communities [4]

Financial Performance - Revenue for the three months ended March 31, 2025, was $585,087,000, an increase of 8.6% compared to $538,562,000 for the same period in 2024[14] - Operating income for the three months ended March 31, 2025, was $138,740,000, representing a 23.7% increase from $112,099,000 in the prior year[14] - Net income for the three months ended March 31, 2025, was $111,108,000, up 27.5% from $87,099,000 for the same period in 2024[14] - Basic earnings per share for the three months ended March 31, 2025, increased to $1.53 from $1.20 in the same period last year, reflecting a 27.5% growth[14] - Net income for the nine months ended March 31, 2025, was $328,144,000, an increase from $280,743,000 in the same period of 2024, representing a growth of approximately 16.9%[19] - Total revenue for the nine months ended March 31, 2025, reached $1,759,916,000, compared to $1,655,631,000 for the same period in 2024, indicating a year-over-year increase of about 6.3%[40] - Diluted earnings per share for the nine months ended March 31, 2025, rose to $4.49 compared to $3.85 for the same period in 2024[80] - The company reported a segment income of $322,106,000 for Core Payments for the nine months ended March 31, 2025, indicating robust profitability in this segment[87] Assets and Liabilities - Total current assets decreased to $593,236,000 as of March 31, 2025, from $632,018,000 as of June 30, 2024[12] - Total liabilities decreased to $895,587,000 as of March 31, 2025, compared to $1,082,117,000 as of June 30, 2024[12] - Retained earnings increased to $3,287,370,000 as of March 31, 2025, from $3,081,690,000 as of June 30, 2024[12] - The company reported a total stockholders' equity of $2,036,431,000 as of March 31, 2025, up from $1,842,364,000 as of June 30, 2024[12] Expenses - Research and development expenses for the three months ended March 31, 2025, were $39,411,000, an increase of 9.9% from $35,993,000 in the same period last year[14] - Total expenses for the nine months ended March 31, 2025, were $1,346,899,000, with Selling, General, and Administrative expenses amounting to $209,839,000[86] - Research and Development expenses for the nine months ended March 31, 2025, totaled $120,192,000, highlighting the company's commitment to innovation[86] Cash Flow and Investments - Cash flows from operating activities for the nine months ended March 31, 2025, were $314,392,000, slightly down from $336,242,000 in 2024, reflecting a decrease of approximately 6.5%[19] - The company’s cash and cash equivalents at the end of the period were $39,870,000, an increase from $27,254,000 at the end of the previous year, showing a growth of about 46.4%[19] - The company’s net cash from investing activities for the nine months ended March 31, 2025, was $(176,317,000), compared to $(164,505,000) in 2024, reflecting an increase in cash outflow of approximately 7.1%[19] Dividends and Shareholder Returns - The company declared dividends of $0.58 per share for the three months ended March 31, 2025, compared to $0.55 per share in the same period in 2024[17] - The company declared a cash dividend of $0.58 per share on May 9, 2025, payable on June 18, 2025, to stockholders of record as of May 29, 2025[88] Taxation - The effective tax rate for the three months ended March 31, 2025, decreased to 21.7% from 23.7% in the prior year quarter[69] - For the nine months ended March 31, 2025, the effective tax rate decreased to 23.0% compared to 23.6% for the same period last fiscal year[70] - The company paid income taxes of $94,553 for the nine months ended March 31, 2025, compared to $70,686 for the same period in 2024[71] - As of March 31, 2025, the company had $22,851 of gross unrecognized tax benefits, with $20,735 potentially affecting the effective tax rate if recognized[71] Debt and Financing - The Company had $80,000 outstanding under the amended and restated credit facility as of March 31, 2025, up from $60,000 at June 30, 2024[64] - The Company entered into a term loan credit agreement with an outstanding balance of $90,000 as of March 31, 2025[65] - Interest paid by the Company during the nine months ended March 31, 2025, was $7,525, a decrease from $11,176 in the same period of 2024[68] - As of March 31, 2025, the company had $170,000,000 in outstanding debt with variable interest rates, with a potential increase in annual interest expense of $1,700,000 for a 1% rise in borrowing rates[152] Future Revenue Recognition - As of March 31, 2025, estimated revenue expected to be recognized in the future related to unsatisfied performance obligations totaled $7,412,480, with approximately 23% expected to be recognized over the next 12 months[46]

Core Insights - Jack Henry & Associates (JKHY) reported third-quarter fiscal 2025 GAAP earnings of $1.52 per share, exceeding the Zacks Consensus Estimate by 17.83% and reflecting a year-over-year increase of 27.7% [1] - The company's revenues for the quarter were $585.1 million, slightly missing the Zacks Consensus Estimate by 0.3%, but showing an 8.6% year-over-year growth [1] - After adjusting for deconversion revenues, non-GAAP revenues were $575.4 million, representing a 7% increase year over year [1] Revenue Breakdown - Revenues from Services and Support, which accounted for 56.5% of total revenues, were $330.8 million, up 8.5% year over year, but missed the consensus mark of $332 million [3] - Processing revenues, making up 43.5% of total revenues, reached $254.3 million, an 8.9% year-over-year increase, slightly surpassing the consensus estimate of $253 million [4] - Core segment revenues were $180.7 million, up 8.4% year over year, while Payments revenues increased by 7.7% to $217.4 million, and Complementary revenues rose 12.2% to $167.4 million [5] Profitability Metrics - Adjusted EBITDA for the third quarter was $182.9 million, reflecting a 12.8% year-over-year increase, with an adjusted EBITDA margin of 31.8%, up 160 basis points [6] - Adjusted operating income increased 17.6% year over year to $131.9 million, with an adjusted operating margin of 22.9%, up 210 basis points [6] Balance Sheet and Cash Flow - As of March 31, 2025, cash and cash equivalents were $39.9 million, up from $25.7 million as of December 31, 2024 [7] - Current and long-term debt increased to $170 million as of March 31, 2025, compared to $150 million as of December 31, 2024 [7] Guidance Update - The company lowered its fiscal 2025 GAAP revenue guidance to $2.37-$2.35 billion, down from the previous estimate of $2.39-$2.37 billion [8] - Non-GAAP revenue guidance was revised down to $2.34-$2.33 billion from $2.38-$2.35 billion [8] - GAAP earnings guidance for fiscal 2025 was raised to $6.09-$6.00 per share, while non-GAAP earnings guidance was adjusted to $5.87-$5.83 per share [10]

Financial Data and Key Metrics Changes - Non-GAAP revenue increased by 7% year-over-year, with a GAAP revenue increase driven by a notable uptick in deconversion revenue, which reached approximately $9.6 million for Q3 [7][25] - Non-GAAP operating margin expanded by 207 basis points to 23% [7][31] - Full-year deconversion revenue guidance was raised to a range of $22 million to $28 million, up from $16 million [36] Business Line Data and Key Metrics Changes - Key revenue, primarily from processing and cloud services, constituted 76% of total revenue for the quarter, growing at 9.8% compared to 8.8% in Q3 fiscal year 2024 [8][28] - Core segment revenue increased by 6% on a non-GAAP basis, with key revenue growing by 11% [32] - Payment segment non-GAAP revenue increased by 7%, driven by higher card and payment processing revenues [33] Market Data and Key Metrics Changes - The company secured 28 new core wins this fiscal year, including 11 in Q3, totaling $30 billion in assets [11] - Migration of existing customers to the private cloud saw 26 clients contracted this fiscal year, including seven in Q3, totaling $42 billion in assets [12] - The number of financial institutions using faster payment solutions like Zelle, RTP, and FedNow increased significantly, with Zelle users growing by 10% and FedNow by 96% [15] Company Strategy and Development Direction - The company is focused on winning larger competitive core deals, with a strong pipeline for Q4 [11][24] - Continued investment in technology modernization and new SMB solutions is a priority, with a closed beta for Jack Henry Rapid Transfers already initiated [18][20] - The company aims to enhance its service offerings to financial institutions, allowing them to recapture high-value deposits [19] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic concerns affecting non-strategic revenue, leading to a cautious revenue guidance adjustment [9][36] - Despite challenges, the company remains confident in its ability to deliver long-term profitable growth through compounding revenue growth and margin expansion [38] - The management expressed optimism regarding the overall demand for core business and key revenue products, despite some project delays [93] Other Important Information - The company reported a trailing twelve-month free cash flow of $300 million, resulting in a 71% conversion rate [35] - The annual strategy benchmark survey indicated that 76% of bank and credit union clients plan to increase technology spending over the next two years [21][22] Q&A Session Summary Question: Are you seeing similar restraints with modernized projects and cloud migration? - Management indicated that most delays are in non-recurring projects, with no significant delays in core migrations [41][42] Question: Can you provide context on M&A impacts for fiscal '26? - Management noted that while M&A activity has minimal impact in fiscal '25, it could have a meaningful impact in fiscal '26 [45][46] Question: What is the timeline for project delays? - Management confirmed that some projects are being pushed into the next fiscal year, but these are contractual commitments already signed [52][54] Question: How do you view competitive positioning after FIS's acquisition announcement? - Management believes their single platform for debit and credit processing remains a differentiator, and they are optimistic about their competitive stance [70][72] Question: What is the demand environment for core business? - Management reported a robust sales pipeline and strong demand for key revenue products, despite challenges in non-key revenue [93][95]