Jack Henry & Associates Q2 Earnings Call Highlights

Core Insights - The company reported record second-quarter results for fiscal 2026, with non-GAAP revenue of $611 million, reflecting a year-over-year increase of 6.7% [3] - Total recurring revenue exceeded 92%, with cloud revenue rising 8% and accounting for 33% of total revenue [1] - GAAP revenue increased by 8% for the quarter and fiscal year-to-date, while non-GAAP revenue grew by 7% for the quarter and 8% for the year [2] Revenue and Profitability - Processing revenue, which constituted 44% of total revenue, grew by 9% on a GAAP basis and 8% on a non-GAAP basis, driven by increased digital, card, and faster payment processing revenue [1] - Non-GAAP operating margin was reported at 25.1%, representing an expansion of 355 basis points compared to the prior-year quarter [3] - GAAP EPS for the second quarter was $0.72, marking a 29% increase, while the first half of the fiscal year saw GAAP EPS rise to $3.70, a 24% increase [6] Market Position and Sales Performance - The company achieved 22 competitive core wins in the quarter, with 68% of new core wins including both digital and card solutions [5][8] - Market share among banks increased by 17% and by 40% for credit unions over the past eight years, attributed to client growth through M&A and successful "winning mergers" [10] - The company logged significant sales momentum, with a noted increase in pipeline activity following competitor consolidation [9] Product Initiatives and Innovations - The cloud-native merchant acquiring solution Tap2Local is being rolled out, with hundreds of clients live and plans to add 100-150 clients per month [4][11] - Rapid Transfers, allowing SMBs and consumers to move funds, is live with 75 clients, with 180 more in various stages of onboarding [12] - The company is beta testing USDC stablecoin payments and evaluating over 20 partners for potential collaborations [13] Segment Performance - Non-GAAP revenue for the core segment increased by 7% in the quarter, with operating margin up five basis points [17] - Payments segment non-GAAP revenue grew by 6%, with a 200 basis point expansion in operating margin, driven by resilience in card-related services [17] - Complementary segment non-GAAP revenue increased by 9%, with 58 basis points of margin expansion [17] Cash Flow and Capital Allocation - Operating cash flow was $153 million in Q2, up $63 million from the prior-year quarter, while free cash flow reached $103 million, an increase of $74 million [18] - The company highlighted $125 million in share repurchases and $84 million in dividends paid through the end of calendar 2025 [19] - Fiscal 2026 guidance was raised for the second consecutive time, reflecting strong demand trends and a robust sales pipeline [20] Future Outlook - Management expressed confidence in the remainder of fiscal 2026, citing strong competitive win rates and a healthy pipeline, while acknowledging potential headwinds from normalized medical benefit costs [20] - Guidance for GAAP revenue growth was increased to 5.6% to 6.3%, with non-GAAP revenue growth tightened to 6.4% to 7.1% [23]