Jack Henry(US:JKHY)2020-02-05 20:09Financial Data and Key Metrics Changes - For Q2 of fiscal 2020, total revenue increased by 9% year-over-year, and on a non-GAAP basis, it increased by 8% [10][26] - Reported consolidated operating margins decreased slightly from 20.8% last year to 22.4% this year, primarily due to lower license fees and increased costs related to the card processing platform migration [26][29] - Operating cash flow for year-to-date was $215 million, up from $192 million last year [31] Business Line Data and Key Metrics Changes - Core segment revenue increased by 7% for the quarter and by 6% on a non-GAAP basis [11] - Payments segment revenue grew by 10% on both GAAP and non-GAAP basis [11] - Complimentary solutions businesses saw a 10% increase in revenue this quarter and an 8% increase on a non-GAAP basis [12] Market Data and Key Metrics Changes - Total sales bookings are running 18% ahead of last year's record pace [12] - The company signed 30 new clients for its debit card processing solution and three new clients for credit card processing [14] - The company became the first processor in the country to bring a financial institution live with the real-time payments network [19] Company Strategy and Development Direction - The company is optimistic about the strengths of its technology solutions and its ability to expand customer relationships [21] - The introduction of the new JHA bank anywhere solution aims to serve digital-only banks and enhance connectivity with Fintech providers [15][16] - The company is committed to moving upmarket and has been making strategic moves to serve larger financial institutions [140] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for digital solutions and a solid pipeline of new product sales [42] - The company anticipates continued growth in revenue from processing and private cloud customers [33] - Management expressed confidence in achieving cost reductions and improving operating margins in the upcoming fiscal year [26][96] Other Important Information - The effective tax rate for the quarter was relatively flat at 23.2% compared to 22.9% last year [29] - The company expects GAAP revenue to grow a little over 9% for the full fiscal year FY20 compared to FY19 [33] Q&A Session Summary Question: Can you discuss the strength outside of deconversion fees and the sustainability of 8% non-GAAP revenue growth? - Management highlighted strong win rates on core business and the signing of long-term contracts with hosted core customers, indicating sustainable growth [39][40] Question: How is the company positioned in the current M&A environment in the banking industry? - Management acknowledged competitors' dominant positions but emphasized their own solutions' capabilities and the potential for non-core revenue even if they lose core deals [46][50] Question: What is the status of customer retention during the migration to the new platform? - Management reported minimal customer loss, primarily due to mergers, and emphasized the successful onboarding of new clients [55][58] Question: Can you provide insights on the competitive environment and market share? - Management noted a high level of interest in their solutions and a strong pace of activity, although they refrained from attributing this solely to competitors' distractions [81][83] Question: What are the expectations for cost savings from platform migrations? - Management expressed confidence in achieving significant cost savings as they complete migrations, which will positively impact margins [96] Question: How is the company addressing regulatory changes and their impact on bookings? - Management indicated that recent regulatory changes, such as CECL, are not currently driving revenue, and there are no major regulatory catalysts on the horizon [102][103]