Jack Henry & Associates (JKHY) 7 Nov 182019 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Jack Henry & Associates’ First Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, we will have a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded today for replay purposes. It is now my pleasure to turn the conference over to your host Mr. Officer. Financial Chief Williams, Kevin Please proceed.

I’m July obligation of to or uncertainties. of the those to about company number events expectations Dave the market revise for X. risks number Haley. and President forward-looking he release comments remind his future, yesterday I’m be up any for subject we ASC or I to lines additional call joining open out quarter recognition going the with me you thoughts and need statements. turn we or and from I differ or or QX statement call. for to are by put I update me Like state will future no the filed today Foss, actual constitute of The became after The materially over will some morning, anticipate, that today with Thanks, provide which comments future. these results regarding deal will XXX the regarding FY and Then, for some is thoughts we our events, you revenue the earnings first that concerning or statements CEO. thank and accounting and of morning last provide call us objectives, due Associates the all & for agenda undertakes standard which opening a then CFO performance some and quarter. X-K to that us this David expectations, press to could results our effective a going Good the comments operating then to the will performance week codification Jack on to the the Williams, and Kevin is these obviously, we to the new and remarks factors, responses XXXX for Q&A. Treasurer, close Henry And cause business and provide questions for for the about strategies, trends

summary and information, yesterday’s these will turn a With Dave. factors the press XX-K risk forward-looking of to For the factors refer call and I sections statements. please in release entitled now that over to risk our and additional

Thank and you, morning, good Kevin everyone.

We record to are and pleased quarter report another with revenue earnings.

our always I all associates thanking the by into to work quarter. went like today that for begin for As first would hard producing those our fiscal results

aware, first new to for ASC this you using XXX. by As the the prescribed revenue recognition quarter rules is us are our financials report

the Kevin will from to All provide when we shares comparisons impacts today of published of quarterly discuss be will last we remarks. opening his quarters X-K, our analysis detailed week. regarding he the more relation the XXX to much in business, the restated

you QX For and for core from quarters. total of increased increased deconversion quarter from both the the by had quarter fees quarters. and for the impact of Revenue XXXX, in We if XX% the X% impact revenue excluding deconversion by X% exclude the a fees both increased solid fiscal increased business. quarter XX%, very our segment again of of

Our XX% increase a posting revenue Payments X% increase well impact the segment of deconversion in this quarter excluding performed a and fees.

of a solutions in an quarter had XX% extremely deconversion strong increase complementary also in a We and excluding quarter fees. increase our this businesses, posting revenue impact XX% the

competitive solid two booked sales clients. quarter. takeaways, sales a banking XX multi-billion core new We very had Our again team including dollar

demand. our management segments. saw saw credit including Several Banno very and digital processing Payments debit newer of complementary treasury solution also solutions strong our suite, bookings new We processing, strong solutions, our in the and

banking and five deals We in-to-out between also Symitar. booked

migration. customers installed and customers on platform, than as live XXX solution, the including have new Regarding new credit debit processing our now XX new rather debit we as

two have credit on also platform. live new the customers We

We have of conversion more to continue in prove the complex clients couple model. on focused past been months to migrating the

new these installations successful all migrations our and of far, have So progress program been and very continues well. to

our credit don��t during changes year. card of implement this to will and because volume the high unions migrations the their to banks holidays like We suspend time programs during

We track expect XXXX. of to complete start the and to customers migration the migrating per month January process first in XX half remain in XX on calendar to sometime

escrow acquisitions We call, we ProfitStars weeks P&L As as well of for you acquisitions end announced JEC material were a our but our prospective be know, our earnings will any but larger Banking core prospects to serve with within be opening performance our digital the require collection in and for with and happy our sub-accounting to and conference very Symitar position extremely we clients our larger of client the largest company. following paired and and commercial Henry to very our BOLTS brings Agiletics system clients, these our customers many clients. management banks completed at way, digital Since BOLTS acquisitions solution have us for banking Agiletics tools. engaged deposit clients. industry-leading Neither continue compete will and with had Jack our each us two offering. two our clients allow a last we conference in disbursement and who conferences SEC strategic provides the year, our conference and the QX, future. account both new impact designed for small, our our both which liquidity two solution, escrow Banno

on coming some they for the the Additionally, Kevin year optimistic it I prospects about With to and their success. that, continue for turn will numbers. to be detail over

Dave. Thanks,

until of backing the I license the filed current all, we not impacts ASC retro And contract contract to other each even product or Remember years. XXX% XXX imitation snowball multi-owner fiscal they recognized some Under products last ASC and into was contract under last the of implementation largest revenue revenue revenue and then obviously obviously for each a throughout week of allowed line of the in-house recast the restatement over revenue. ASC this some license like to regarding dropped mentioned, delivered. and color XXX, decrease recast a the compared we contracts that we last impact numbers. Dave did as of for the then on the as included multi-owner why grew would each effect the the remainder have the though X-K bundled multi-owner recognized installed, which grew those are year, This the the the spreads comments fiscal and year quarter. the product which revenue revenue separately year’s any for revenue quarter full X-K, when ratably in in product maintenance products XXX in impacted numbers even the was is - The First contract out of is provide the essentially last a XXX, take of to was larger like ASC potential over were quarters part installed.

cause compared because comparing the the this notification recognizing some date it all Another of fiscal the and it doing thing are way these to when recognized But actual was from complete is payment and received old to spread years received ASC between fees deconversion ASC which of under swings and can deconversion we XXX% does we were the deconversion, it at XXX, under XXX quarters are and date all deconversion fees of was the the one-time. at one-time.

XXX. costs could cause usage sales on to to long-term amortized dropped Banno on having impact and out is there of longer in last this recognize backing given quarter X-K, fees out impact increased to first adjustment increase so doing thing is year also In recognized estimate. are of would means ASC cost, in the quarters, time cost far all under during the bundled and allocated fringe of the installed actually that products of outsourcing cost change fiscal was reason that QX actual revenue This related over based the processing is impact quick that the contracts This XXX primarily be to required but piece adjustment, on previous carve related will the in year the in X-K implementation which already percentage our the also the restate are quarter the of biggest spread this Also of in or that software suggest offset and the which SG&A estimates be that and much same revenue under in to those under and part We cause in has the the summary The due is directly for by is installed. license for sequentially, the this revenue of of and for future because the as an That quarter depending to of year that quarter. could financial impacted then out were be fiscal period benefits which license the you’ll the the which happened to the from were our positive the adjustments in any off QX a somewhat primary delivered XXX upfront that labor of delivered or been XXX% software and as will recast historical is changes commissions XXX. is in fees why direct because these usage negative the the see ASC numbers year. fees historically product quarter than a this we a over is products cost related the commissions periods, revenue.

a release of quarter. under delivered. were revenue we in but showed for offering software reason are added which the the on stated, why these year total and revenue year The XXX, fiscal comments this increased quarter because the because the a in of a Included this Now XXX% to all to that customers week of added some first the is I Dave the X-K decrease compared fees last and quite last fees software in under ago $X.X prior we filed difference quarter. fees, off service And this will last a been little year. again the revenue Deconversion provide numbers support restate the are million XXX, that amortized potentially to it the compared the compared quarter in year, QX. talking and we our X% larger revenue few over year sequentially drop is as usage was And and the this ASC line of in revenue remember XXX. of about customers the ASC in down this line the about annual we has year QX ASC is restated

line Processing control we deconversion with were spread, revenue the previously, X% be discussed have the this must quarter fees. now line these had of and over we revenue. quarter no prior all XXX and had no in deconversion under impact of these As the remember fees was to compared in from

XX% operating consolidated were last from year reported margins to this down Our year. XX%

on last on discussed impacts we two margins. primary headwind call, there are As the operating

additional First over those customers X.X our the transaction that our we talked platform. cost employee talking that of years with plans second the we portion then, for until be is get the been call. have from double cost pay-for-performance the debit about or will processing customer’s on of funded we earnings And a TCJA, the about migrate savings last for to that new the

information impacted The be TCJA out the very release was solid, compared rate effective quarter. rate quarter margin obviously The and the fluctuations tax actually yesterday. significantly press the but the XX% last for operating in segment to effective was put for the XX% segment tax continue we to by small that Our year. was

to group. Our payments the share-based benefits than quarter tax effective which was that last year, is quarter, excess vested guided related September for are to lower peer due based return of total increased compared shareholder to this which stock those restricted from on the we rate in our

still the of our rate over effective the will year, increase to XX%. balance effective tax projected tax our rate total year and expected For is slightly be

of acquisitions from tax for some $X.X data million tax press quarter last amortization, the in release in in defined year purchases Free center to the said assets million cash increased this of tax million gave cash cash flow is For total in some review TCJA, out difference the cash is savings. is $X.X which tax believe disclosed sale briefly caused of to which a included last call, put by XXX% of place amortization operating as significant million, we million last in and quarter. the relates capital assets proceeds did for and and end was represented June on which during for acquired net compared These those XX, yesterday this flow year quarter dollar which year. to intangibles take flow which upgrades this accrued less rate we about flow increase capital permanent I for capitalized $XX.X that quarter, primarily $X was the The the expenditures assets. from planning cash expenditures, at $XX the it’s year us software where and the of income at were multi-million but paid actual some of advantage discussed year-end the that to I the effect in the assets

Just requires we a past. reminder, have the us revenue in costs ASC than and XXX recognize to done differently related

it collections, impact has billing therefore XXX our our our doesn’t However change change to does not it flows. cash customers, no on

million to free due the cash the and and and QX. $XX.X invested neutral in $XX.X as and which a on which declared buy of still back up back of quarter no We developing in any into million the will paid dividends is historically were flow through this to in annual because first CapEx that QX. billings flow QX did there is and maintenance quarters slightly the quarterly from data QX flows X, in-house same collection QX upgrades We in higher due the they had stock center year discussed. company QX was not almost cash flows our we products, operating to October all with during actually Our positive in dividend quarter ago, cash

will rest continue to restated restated in the XXXX be XXXX [indiscernible] revenue FY in the of high For digits the X% compared to mid-single to to in guidance the range. FY year, the growth X% continue we for the similar XXXX the FY to

to continue the headwinds operating will we will growth. as revenue compared so percentage down operating income margins face for our mentioned, I be on As to growth year,

increase in XX. going the will for our in eliminated there be as into cost obviously, a still second migration nice deconversion still anniversary we to pay-for-performance will the the would be down we course, the of QX which and Also when we double are margins appears on with FY will probably We XX, obviously, similar be plans half said, at are Dave done that it is And time. QX. new the right now fees year FY and

down last revenue due will allow for Now growth your restated as just reminder as adjust to for in but mentioned, ASC fees, QX you a need models, I based usage year, gain effective provided. our tax impacts sheet, you flow adjusted of the in obviously year no projected from which cash through predicting with XXX XXX still to last EPS EPS down up rate to XX% effective compared tax That net the but in for nicely statement, flows rate for our have go P&L will full concludes full the for line you software update with be to XXX the on year bps revenue to be obviously decrease XXX, adjust the to ‘XX will our guidance of year year that the deferred to the will compared TCJA out QX taxes we we impact. impact for ASC our solid year. for the which our QX are for opening adjusting just this income. last Also will fiscal and balance still year had of XX% Then retro that I year, comments. and need restated should entire

questions. for are Haley, ready you now will the line take open We questions? to up please

Thank question you. Davidson from & And D.A. Company. Peter Heckmann Instructions] first of [Operator comes our

is Your now open. line

Pete. Alexis actually is on This guys. for Hey,

ASC term thank firstly maybe fees we some detail the was clarification wondering, XXXX by for XXX little you I get under XXX? the if more so providing that impacts. on a quarter for on could So much of

the deconversion For the - fees?

Yes.

do those not apologize with I I me. have

follow-up That is Alright. We afterwards. can with that

digital So a I or technology think seeing some main lending question. banking, for year think any you customer’s as you priorities broader the outline of just upgrading the for could Do terms online in a little next of of security? bit you that are

Sure. Alexis, this Foss. Dave is

right or key executive bank top any priorities what a banking And have solution. is because Banno mind the a suite for is of why key pretty some union of get virtually piece credit on now. much we on now you acquisition which our reason there right Digital the for So right digital of complete digital having key. fueling the demand the of is part did the banking is it’s digital BOLTS

in and So and interest, because mobile unions year we solution lots and now a And you together, on user two them is a difference single past. of that banks lot through continuing look on I platform solution, lots are right digital that a that had experience eliminate have experience of historically currently see different they we solutions. the goal than in a banking online an that the the getting function more fully discussions bringing would single that were topic. credit it’s anything user so if And is banking

a is management. our commercial Certainly commercial what clients a is treasury consumer clearly, So Lending have reason, lot top create lending. mind important, Commercial of focus much specifically topic highlighted to and last kind because is of really the lending right growth year lending reason Center the we of Part now. tied very for that is today. and then that so we year did robust is acquisition fueling Vanguard lot offering part really past or the lending of And the commercial so was is around of of why the lending in that a is to then the the suite why where but our of

functionality them serve treasury So ago. commercial the if the want we roll out solution develop customers lending management serve large to going is why commercial overall also you new with with a year able to which solution can are treasury be you

then mind, all much we that the been so part have course, top through absolutely [indiscernible] there and of to card a of credit customers card having also of that those platform were are back their new we that have demand portfolios We is credit conversion and originally that for is this was process what out. want been spot payments highlighting who going didn’t we us. bank robust key driver a have platform and credit union to bring into a payments so and prior of rolled So offering

revenue provide actually can XXX. now the to deconversion restated I under

Okay.

QX, for for it million total $X.X for million; it So FY XXX $X.X and it XX, of FY for a it million; for million; was was was QX, $XX.X was QX of $XX.X under $XX.X million. QX,

you customers then for And sneak I debit maybe Okay. was Great. backlog? guys Kevin, could contracted a for Thank thanks and similar just update credit live on that. some so get banks and bringing live. we have much that if any more number and just something now signing one I wondering, maybe the will for of question, the right you Banno

I don’t right now. We live continuing have have know to XXX grow. a know mobile have number, that I now. I backlog it’s and but live online right customers don’t XXX I between that

if right, suite. last of the I XX year contracted full I’m we for for them think

XX.

actually XX that up. QX. in over It was ramped QX And

it But I continues can’t the give it put an right backlog robust, will as are like now. we accurate will managing number to that what way. the be we looks backlog But and

Thank you.

from comes David of Our Evercore next question Togut ISI.

open. now is line Your

Thank you. morning. Good

while? on have to Kevin to nice step-up for fees the growth, low-double core guiding in the of a I we highest are digit this saw organic you on on comment but growth and in can high-single payments. appears digit be you And to sustainability XX% year, seen XX% the a revenue You which revenue ex-deconversion recognize the

annual that year, over X-K for QX already an caused you was an the because it’s which opening in in in revenue will I we large increase install because caused X, QX recognize year David. when even again. that entire that for this mentioned revenue software of had effectively even July QX number spread been software tell fee they year the bigger clients usage usage year basis increase and though using it’s installed, it are the in that Well, and you the a I last the my comments,

QX So grow be that little caused faster. a to

that still high it’s see mid-single go So double-digit the down of to rest revenue organic year. we year. I be digits are growth for full in to not think the mid-single going the It’s the going to digits. the and going back to for

both and impacted I in see, so quarter? that payments the first core

Yes.

That quarter lot about gave Got a Thank the of it. then, commentary June helpful. you is And bookings. on you. call Dave

I you better think the would signings new maybe for XXX% - previous numerical in the commentary? even quantitative quarter, contract commentary or be give qualitative about to the June September effect were month some the some more bookings of Can that of record. monthly

just company. Logic going what in record, morning just to and pipeline But going that, was after summary thing are that remarkable think of have the I I largest month actually fact, tell and a their the next ended front you as don’t drop that the said I number are in were June. about you of here press month I a your the quota and a so happened we have the would of most huge in said spend the of correct the pipeline right team’s the know days XXX% had I month and have with we we don’t to what month sales what this exact was my absolutely there The but you that that me, of quote, your team, pipeline you XX% did release the significantly history huge ended me. we so I higher pipeline QX front have I is going again rebuilding XX you ever in in sales than months QX, into number year. bookings quarter. this June, was had that of because about off bookings to in exceeded like when math

going days this a sales pipeline business the of XX into out it June. took whole So yet it of of within was XX% than was the we and bunch booked all month higher

I pipeline sales closed type deals get obviously, having to the of and in after concerned pretty to - without years represent managing us to not those signed So into to sets and significant XXX% and far have coming close. way it teams any a But bodes pipeline see the deals as for them managing for to as you for pipeline well growth it experience, you there. closed major deals think is the predict pipeline change increase such turn up that really does for was the the organization have when well pipeline of having future, in for a had many team going and there year. tremendous the in sales have a happen we is I think But me sales the the that combined Again, sales no I’m to what organization.

Understood. helpful. Thanks. That is

Just a I if question, could. quick final

You called around are should XX specific gaining core we of solutions takeaways a aware there that within really of, those any any competitive specific takeaways the lot in core competitors, themes any traction? that out be quarter, are the

in we deals with us competitive of what past. seen our see solutions consistent have to and they the the all from would it’s from continuing and say to offer We you from are I No. competitors tend that take that. major

a multi-billion I don’t so come quarter, is They core make don’t often. core that change up and that think, that significant. for many often. them all of deals a in change we saw they are not banking They which the two dollar

size. So book is quarter two significant and that a working we of deals they several in are other

seen it’s item in now is and customers tend both right from. taking unions would they past only in several of significant. these not to away the pipeline the maybe credit the any think more banks be than But in, probably be that and are change larger who significance we I So have

you. Thank

Greene Glenn question Oppenheimer. comes Our next of from

Your line is now open.

and Kevin. Good Thanks. morning, Dave Alright.

booking sales brands commentary. unions, what exceed a the tone complementary products, the bit Just then quota? Dave the cross product banks, three us little of areas of across activity you Maybe sales the credit wanted to and give was each follow-up and you have, could community the on color of key

last what quarter. highlighted quarter consistent Yes. It’s I this with

in talked actually quarter, about blowout last when So was if group. the the the you you across you but would I it fact sales that, one area, that have recall it expect quarter quarter, in that particular come would June like a spread

So June, all breaking in saw ProfitStars, XX, really but groups We strong in and banking we but everyone - them all thing QX well. three Symitar month have a three same of performed really fiscal a didn’t sales like the had sales There quarter. we record all exceeded sales three was groups, very did of groups quota.

banking Symitar to And is that and you our a with Payments suite ProfitStars but solution when wide and them so ProfitStars business few so good ProfitStars. already lending driven only of that new then sales course, for different tends be that across highlighted sales in product lines. that we it’s can signing no seeing sales course, core come across performance those And product are the and customers. core all spread of there digital non-core for significant, so is have are and there And a comes core solution variety very of follow-on that lines. all suite, of by I of core But are sales.

again going quota forward. positioned exceeded groups are well and sales in three all So QX

then number restated can That level EPS based fiscal the rates set XXX XXXX. is XXXX on at consensus for could level glance street fiscal consensus for helpful. ‘XX growth is reasonable? EPS growth XX% at margins, Great. just offs us the set some And basis but Alright. help first fiscal and on outlook Kevin, like meaningfully reduced on looks gave the is XXX. level help is on given point, if And to commentary something this and you pretty XXXX least the know you And maybe for me you it I gave the growth us and ASC base

It’s recast Glenn gave reused, we not when we were trying and that product because to obviously, restated. get guidance, the No. still

that knew So at that on what time. was based I

the rate EPS So only true adjusted FY if the tax that FY tax for basically know is you adjusted XXXX all set so $X.XX, XXXX FY for from you was XXXX for was level back of deferred kind rate, so you XX%, means for know. there. the tax nonsense, what which XXX and the

Okay.

base or take goes for of down the revenue at basically So restated so tax degradation, of the the XX% XXXX? margin adjustment growth had the some rate

Yes. And now I get ballpark, to you real close Glenn. the

you. Thank Okay.

Baird. Thank from Koning question Dave next Our you. [Operator Instructions] of comes

Your line open. now is

Yes. question. guess my I Hey, you. guys. first Thank

the but think X% base some the I $X.XX the stronger So thing complimentary not strong get we strong there certain ones core a that X% like segment from as should X% that billion while complimentary high-single is But the of. about differences had to more this payments than like the QX we that Is grow stay last a follow-up were digits. QX, was basis some to fluctuate like and lot year more one ones as around in we of very segments kind off anything what QX other revenue X%, complementary. of QX, think

second through of that walk kind work? Just how like going is the to

Well, years. difference we Dave, lot this so because again, the talked than much last over is XXX few so a XXX XXX and about

$X.X software So September. multi-account imitation core union first install the or August be last could which bank all And [iTalk] of in either the customer credit you an you maintenance in-house could might be or million. that have years pieces (ph)

you over the to be million You a X, ties lot it plus $X.X quarters. million win the in maintenance, the XXX in-house delivered. going July don’t directly just And year the start then fiscal $X is you prior now that of recognize next backed three products because to the of where

going So, lumpiness. what to advance some really this

XXXX. SilverLake, in of do a we before when a multi-billion for of the a apps restatement installation as in that to almost back we gave revenue’s way like, hit a use install to going final XXX% quarter, final when So back dollar

Okay.

So going because just be to of that quarter it’s - work? to there is decelerate but is the how new is, predict kind point your that change, the hard to during year going of to each lumpiness going going that is it’s to -

is, point in to call, past, totally but out is to used going take than think why slow Correct, I of all on it’s which get the you for it we impact and a what no XXX is I has us while, to different flow. it have done because my on the pointed cash the delivered even

Right. Yes. Exactly.

is think before through something like question, same a we kind there - XXX XXX some just guided the you to something to was another to but Okay. do like off way you Glenn’s rate of the that went it of In new the EPS EPS of growth Is to new - components, base. the but your XX% of apply take XX% old base? to

Yes.

Okay.

the reason. is That

Okay. it. guys. Good. Alright. Well, thanks Appreciate

Thanks Dave.

concludes you. the question-and-answer would for turn like Ladies today’s back this over commentary. and Williams Thank I Kevin now to closing any session. call gentlemen, to

with the pleased even they Thanks, We of we Again, to of everybody ongoing for are care of the used results take little confusing our all that though XXX. Haley. to operations customers. our until associates are gets efforts very thank want

Our for number? our what on executives, managers you to associates joining us continue shareholders. is and our all today. that focus best to of customers will you Haley, our provide replay I want and the will And With thank please for

be local to end and XX:XX listening Everyone going your conference may number on have number now XXX-XXX-XXXX. replay for you disconnect. Thank is November a Thank is This and XX, gentlemen. be you, conference the it today XXX-XXX-XXXX. will Time will day. XXX-XXX-XXXX and And available Standard for Eastern you great today’s am. and at starting conference in ladies The XXXX.