Jack Henry(JKHY) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported non-GAAP revenue growth of 6.1% in Q2, slightly ahead of the 6% anticipated [9] - Non-GAAP operating margin was 21.5%, also slightly better than expected [9] - GAAP and non-GAAP revenue increased by 5% and 6% respectively [29] - Fully diluted GAAP earnings per share increased by 6% to $1.34 [37] Business Line Data and Key Metrics Changes - Core segment revenue increased by 6% on a non-GAAP basis, driven by organic growth in data processing and hosting [38] - Payments segment revenue also increased by 6% on a non-GAAP basis, with significant growth in card revenue and payment processing [39] - Complementary segment revenue increased by 6%, supported by a strong product mix [40] Market Data and Key Metrics Changes - The company signed fourteen new debit processing clients and two new credit clients in the quarter [16] - The number of clients on the Zelle platform reached 338, with 357 clients using RTP and 339 clients using FedNow [16] - The Bano digital platform saw growth, with nearly 1,000 retail clients and 212 business clients [18] Company Strategy and Development Direction - The company is focused on technology modernization and cloud-native solutions, with plans to deliver retail and commercial deposit core functionality in the first half of 2026 [24] - Partnerships with fintechs like Move and Visa are aimed at enhancing digital payment solutions [22][23] - The company aims to maintain a people-first culture and service excellence as key differentiators in the market [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment and sales pipeline for the second half of fiscal 2025 [26] - The company anticipates continued growth in technology spending among banks and credit unions [25] - Management noted that clients remain optimistic about the operating environment and their willingness to invest in technology [81] Other Important Information - The company achieved a core retention rate of over 99%, excluding M&A [12] - The private and public cloud offerings increased by 11%, reflecting strong growth trends [32] - The company repurchased$ 17 million of its shares to offset dilution from stock compensation [43] Q&A Session Summary Question: What gives confidence on the back half of revenue acceleration? - Confidence comes from strong first-half results and consistent growth metrics, including cloud and card growth [51] Question: Are there signs of increased competition at the low end of the market? - No significant changes noted; the company continues to win large institutions and renewals [54][56] Question: Is there a difference in the number of deals coming to market? - No significant changes; the company is still tracking to its traditional win rate [60][61] Question: When will revenue from the Move partnership impact growth? - Expected to have a meaningful impact in fiscal year 2026, with some small contributions in fiscal year 2025 [64] Question: What are the pricing dynamics for renewals? - Pricing compression is possible, but additional product offerings typically offset this [70][72] Question: What is the current operating environment for customers? - Customers remain optimistic, with a strong demand for products to increase deposits and loans [81] Question: What is the pace of innovation in the space? - The company is focused on digital platforms, payments, and fraud prevention as key areas of innovation [138] Question: Is there any convert merge revenue in the back half outlook? - A modest amount of convert merge revenue is expected, with more impact anticipated in fiscal year 2026 [148][150]