Jack Henry(JKHY)2025-05-07 13:45Financial Data and Key Metrics Changes - Non-GAAP revenue increased by 7% year-over-year, with a GAAP revenue increase driven by a notable uptick in deconversion revenue, which reached approximately $9.6 million for Q3 [7][25] - Non-GAAP operating margin expanded by 207 basis points to 23% [7][31] - Full-year deconversion revenue guidance was raised to a range of $22 million to $28 million, up from $16 million [36] Business Line Data and Key Metrics Changes - Key revenue, primarily from processing and cloud services, constituted 76% of total revenue for the quarter, growing at 9.8% compared to 8.8% in Q3 fiscal year 2024 [8][28] - Core segment revenue increased by 6% on a non-GAAP basis, with key revenue growing by 11% [32] - Payment segment non-GAAP revenue increased by 7%, driven by higher card and payment processing revenues [33] Market Data and Key Metrics Changes - The company secured 28 new core wins this fiscal year, including 11 in Q3, totaling $30 billion in assets [11] - Migration of existing customers to the private cloud saw 26 clients contracted this fiscal year, including seven in Q3, totaling $42 billion in assets [12] - The number of financial institutions using faster payment solutions like Zelle, RTP, and FedNow increased significantly, with Zelle users growing by 10% and FedNow by 96% [15] Company Strategy and Development Direction - The company is focused on winning larger competitive core deals, with a strong pipeline for Q4 [11][24] - Continued investment in technology modernization and new SMB solutions is a priority, with a closed beta for Jack Henry Rapid Transfers already initiated [18][20] - The company aims to enhance its service offerings to financial institutions, allowing them to recapture high-value deposits [19] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic concerns affecting non-strategic revenue, leading to a cautious revenue guidance adjustment [9][36] - Despite challenges, the company remains confident in its ability to deliver long-term profitable growth through compounding revenue growth and margin expansion [38] - The management expressed optimism regarding the overall demand for core business and key revenue products, despite some project delays [93] Other Important Information - The company reported a trailing twelve-month free cash flow of $300 million, resulting in a 71% conversion rate [35] - The annual strategy benchmark survey indicated that 76% of bank and credit union clients plan to increase technology spending over the next two years [21][22] Q&A Session Summary Question: Are you seeing similar restraints with modernized projects and cloud migration? - Management indicated that most delays are in non-recurring projects, with no significant delays in core migrations [41][42] Question: Can you provide context on M&A impacts for fiscal '26? - Management noted that while M&A activity has minimal impact in fiscal '25, it could have a meaningful impact in fiscal '26 [45][46] Question: What is the timeline for project delays? - Management confirmed that some projects are being pushed into the next fiscal year, but these are contractual commitments already signed [52][54] Question: How do you view competitive positioning after FIS's acquisition announcement? - Management believes their single platform for debit and credit processing remains a differentiator, and they are optimistic about their competitive stance [70][72] Question: What is the demand environment for core business? - Management reported a robust sales pipeline and strong demand for key revenue products, despite challenges in non-key revenue [93][95]