Jack Henry(US:JKHY)2021-02-09 17:55Financial Data and Key Metrics Changes - For Q2 of fiscal 2021, total revenue increased by 1% year-over-year and by 2% on a non-GAAP basis [10][28] - Net income was $72 million for the second quarter, compared to $72.1 million last year, with earnings per share of $0.94 in both quarters [32] - The effective tax rate for the quarter was essentially flat at 23.1% compared to 23.2% last year [32] Business Line Data and Key Metrics Changes - Core segment revenue increased by 1% for the quarter and by 4% on a non-GAAP basis [11] - Payments segment revenue posted a 2% increase this quarter and a 3% increase on a non-GAAP basis [11] - Complementary solutions business saw a 3% increase in revenue this quarter and a 4% increase on a non-GAAP basis [11] Market Data and Key Metrics Changes - 73% of banks in the target market expect to increase their technology spending in 2021, with 22% indicating an increase of greater than 10% year-over-year [22] - The sales pipeline is robust, with the company experiencing the fifth largest sales quarter in its history [12][23] Company Strategy and Development Direction - The company is focusing on digital banking solutions, with over 4 million users on the Banno Digital platform [15] - The company is actively participating in the FedNow pilot program to enhance its payments solutions [17] - The company aims to improve margins and return to historical levels by migrating customers to its private cloud and enhancing its card processing platform [90][92] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strength of technology solutions and the spending environment as the economy recovers [23] - The company anticipates a significant decrease in deconversion revenue in Q3, impacting revenue growth in the short term but is viewed positively in the long term [37] - Management noted that the sales pipeline is back to pre-pandemic levels, indicating potential for increased core wins in the future [82] Other Important Information - The company released its first corporate sustainability report, highlighting commitments to stakeholders and corporate responsibility [20][21] - The company plans to hold a virtual Analyst Day on May 11 [95] Q&A Session Summary Question: Could you walk through the revenue guidance part again? - The GAAP guidance provided is $1.760 million to $1.770 million, with a $30 million decrease in deconversion fees impacting the non-GAAP revenue guidance [45][46] Question: What is the demand for credit card business? - There is ongoing demand, with five new credit card customers signed this year, but the company is cautious about overextending during the debit conversion [47][48] Question: How are customers responding to fintech competition? - Customers are exploring digital-only banks and partnerships with fintechs to enhance their offerings [50][51] Question: What is the expected impact of the legacy debit processing platform shutdown? - The company expects to recognize around 15% to 20% of the annualized direct cost reduction in fiscal '21 [54] Question: What is driving the difference in core and complementary demand? - Core replacements are challenging during the pandemic, while demand for complementary solutions has increased due to the need for digital services [58][59] Question: Will new core wins return to pre-COVID levels? - The pipeline is back to pre-pandemic levels, and management expects new core wins to increase later this year [82][84] Question: How will sales trend as the economy reopens? - The company expects to see more core signings while maintaining strong complementary bookings [86][87]