Jack Henry(JKHY)2024-08-21 16:12Financial Data and Key Metrics - Record revenue of $2.2 billion and operating income of $489.4 million for fiscal 2024 [5] - Q4 revenue increased 5% (GAAP) and 6% (non-GAAP), while full-year revenue increased 7% (GAAP and non-GAAP) [5] - Q4 operating income increased 1% (GAAP) and 5% (non-GAAP), while full-year operating income increased 2% (GAAP) and 10% (non-GAAP) [5] - Full-year non-GAAP margin expansion of 60 basis points to 23% [19] - Fully diluted GAAP EPS of $1.38 for Q4 (up 3%) and $5.23 for fiscal 2024 (up 4%) [19] Business Line Performance - Core segment: Q4 non-GAAP revenue increased 4%, with 171 basis points margin expansion; full-year non-GAAP revenue increased 7%, with 135 basis points margin expansion [20] - Payments segment: Q4 non-GAAP revenue increased 8%, with 183 basis points margin expansion; full-year non-GAAP revenue increased 7%, with 124 basis points margin expansion [20] - Complementary segment: Q4 non-GAAP revenue increased 6%, with 75 basis points margin contraction; full-year non-GAAP revenue increased 8%, with 2 basis points margin expansion [21] Market Performance - 22 competitive core wins in Q4 and 57 for fiscal 2024, including 15 new core contracts with financial institutions with over $1 billion in assets [5][6] - 45 new Banno Retail clients and 50 new Banno Business deals signed in Q4; 179 new Banno Retail contracts and 164 new Banno Business contracts for fiscal 2024 [8] - 21 new card processing clients in Q4 and 56 for fiscal 2024; 16 new Financial Crimes Defender contracts in Q4 and 52 for fiscal 2024 [9] Strategy and Industry Competition - Technology modernization strategy and One Jack Henry initiative driving competitive core wins [5] - Focus on private cloud migration, with 73% of core clients now hosted in private cloud [7] - Strong demand for digital and payment solutions, particularly Banno and Financial Crimes Defender [8][9] - Emphasis on associate engagement, service quality, and technology innovation as key competitive advantages [10][11] Management Commentary on Operating Environment and Future Outlook - Positive momentum entering fiscal 2025, with expectations for strong revenue growth and margin expansion [26] - Robust technology spending by financial institutions and clear demand for differentiated and innovative technology [12] - Fiscal 2025 guidance: 7% to 8% revenue growth, 25 to 40 basis points non-GAAP margin expansion, and GAAP EPS of $5.78 to $5.87 [24] Other Important Information - 12.2 million registered Banno users as of June 2024, up from 3.2 million in 2020 [8] - 52 Financial Crimes Defender installations completed and 115 in various stages of implementation; 22 faster payment modules installed and 154 in various stages of implementation [9] - Fiscal 2024 operating cash flow of $568 million, a $186 million increase over the prior period [22] Q&A Session Summary Question: Factors driving the increase in new core wins with larger institutions - Execution of technology modernization strategy, strong client service reputation, and hiring of experienced sales talent [31][32] Question: Strategic changes under new CEO Greg Adelson - Continued focus on tech modernization and One Jack Henry initiative, with additional emphasis on SMB strategy and product rationalization [34][35] Question: Payments segment growth drivers - Strong performance in EPS and PayCenter businesses, driven by real-time payments and fraud solutions [36][37] Question: Margin outlook for fiscal 2025 - Expectation of continued margin expansion, though with some headwinds from VEDIP and timing of merit increases [40][41] Question: Core business growth trajectory - Core business expected to grow in line with overall company revenue growth, driven by technology modernization and strong sales performance [61][62] Question: Pricing environment - No significant changes in pricing competition, with focus on execution and service quality [63][64] Question: Banno growth potential - Significant runway for Banno growth, particularly in the credit union space, with a couple of hundred clients still on the NetTeller platform [68][69] Question: M&A outlook - Focus on public cloud-native acquisitions that align with tech modernization strategy and fill gaps in payments or SMB offerings [70][71] Question: Cloud migration runway and revenue uplift - Expectation to reach 93% to 95% cloud migration, with 1.75x revenue uplift from cross-sell opportunities [75][76] Question: Customer priorities - Deposit growth remains the top priority for customers, followed by operational efficiency and loan growth [81][82] Question: Implementation queues and resource allocation - Efforts to speed up implementations, particularly for Financial Crimes Defender, with increased resources allocated to reduce installation queues [83]