Jack Henry & Associates (JKHY) 8 Feb 232023 Q2 Earnings call transcript

Good morning, and welcome to the Jack Henry Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Vance Sherard, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us for the Jack Henry fiscal 2023 Second Quarter Earnings Call.

call Carsley, David Greg CFO and the and Board Adelson, on COO. Mimi CEO; and me today Foss, is Chair President Joining Treasurer; and Dave turn opening our of and and the call I other these for financial thoughts will performance industry After over the remarks, business, to quarter, for sales state key his about the comments initiatives. fiscal that press comments, commentary Investor of regarding available results and After release the additional the the in yesterday provide Dave year Mimi concludes Relations included will the is website. his from Jack issued guidance financial section Henry

We Q&A. will the then open lines for

As that obligation or and future, questions revise multiple forward-looking concerning update to differ cause certain are events these a any trends statements, anticipate which no to factors events, expectations, or risks Like objectives, these subject those strategies, to could responses call results reminder, undertakes to future to this we company or the actual from materially including due statements. about or includes uncertainties. results. remarks The multiple statement

to certain this including of reconciliations we a release. I operating for Risk additional to are refer yesterday's Factors now please measures XX-K and in factors Forward-Looking The in press risk press non-GAAP will release and revenue Statements. On For and information, the yesterday's the discuss entitled measures, and will Dave. sections over these non-GAAP income. summary financial our call, call non-GAAP non-GAAP financial turn

income strong and of Vance, everyone. Thank you, operating report we're good morning, growth. quarter to Today, revenue and pleased another

our and producing our hard begin like for I'd thanking commitment those second all went work to always, that As quarter. into associates results for by the today

basis. increased a which I'll revenue primarily fiscal for increased of a the detail reduction non-GAAP quarter XXXX, revenue, X% and variance X% a in minutes. deconversion to due For few was in total on This QX

X% quarter our for on business. quarter, but a core Revenue We by the in had increased the basis. solid to Turning flat was segments. the a again non-GAAP segment of

Our increase also complementary well, with non-GAAP increase press a in performed guidance, which on X% an quarter will had X% increase release a revenue solutions posting a X% increase basis. on strong segment We a this in and and outline X% basis. Yesterday's quarter our a very Mimi payments non-GAAP in included businesses, her this revised quarter in revenue comments. a

of was the and forecasted One change for guidance in year. behind reduction deconversion drivers the key in this the revenue actual

revenue $XX was As down of million the we primary for and operating QX. deconversion non-GAAP this performance the disclosed yesterday, fees variance driver are and income GAAP versus year-to-date, in

the X a it we a receive is least to as This with in the financial by overall consolidation space revenue any for in is M&A industry the and impacting revenue revenue required end As date. to to merge is institutions is by deconversion of a institution fee impacts also lost services pay when because bank and don't lack to want down indicates banking rebound don't you Because reminder, acquired see reference of prior contract client us convert we've to quarters. valuations, see the the their couple of another I significant a normally terminate the of stocks M&A. our and experts this clients at activities. our and to associated

become update M&A Jack for activity. guidance Of normally aware course, control, we pending of revenue consolidation is of outside and we deconversion Henry's as

to shifting from in guidance conditions, recent debit is our spending impacting economic change is slowing Due and consumer transactions the item primary to are card other credit. usage The consumer behavior.

economic to be a processing trend. to Our to we business weighted significantly are card debit processing, reflect what so guidance is we revising temporary believe

factors, not past, the our completely changes primary economy significant is in these remain the resistant resulting from swings many times financial were overall and external well. continue very said to very model perform in businesses I've but As our bulletproof. strong to Despite

mentioned press had of notable quarter a our outstanding an wins. number the with As teams in again sales release, I

In existing set in year. In and quarter, competitive June QX second last sales XX the multibillion additional fact, to set an at the our a we XX the the Henry, deals core dollar same X private record on Henry new we inked quarter Jack record to core day institutions as financial move quarterly we for for takeaways takeaways XX Jack in-house day. breaking a cloud clients memorable of signed particularly December environment. was us core

to new processing solution, continue quarter. success processing signing this new see We card our clients good XX with card

XX clients our to success continue with also in to see QX. suite, Banno contracts digital We new signing great

Speaking scheduled live the in of from users. with institutions already is general early our We XX into go next feedback digital suite, solution status positive to those extremely have being our release adopter Banno quarter. Business

We positioned at under production very full bring have XXX for contract clients a solution, and availability. pace this into we're them once we general to achieve rapid

pace and with of received roundtable month, at with CEO tech consistent. The our own XX% topic X% Store. Normally have I'll financial projections similar firm objective number one average Banno a recent watch none At for clients with publications publications the share follow million this survey Banno Unfortunately, from end highest banking retail X.X new on of results for to it spending provided surveys, and users smaller you around QX, becomes range those XXXX, available. increase continue increase. January, ratings institution informal of the closely. surpassed forward-looking a in most the share consumer data, results being a as the bank relatively of we and are spending platform, we'll platform We being the banking popular projections year, the the to last to hold X% in appears implement settling in to a the the the App survey we continuing on be I around of I major conducted all also expected segment. to we at of registered calendar continues quarters. to at

to through forward by signing environmental efforts with major letter the last information the jackhenry.com. global the plan aligned More a emissions. gas will Paris outlined Henry As Jack which preindustrial to have greenhouse which pursue of month, indicating with you SBTi. above meet reduction investor site extensive took targets in levels. through validation science-based mitigation climate commitment next for with greenhouse near-term set is and disclosed follows and or intention noticed transition to tactics low warming may be gas commitment limit necessary XX Science our our our of sustainability will carbon by SBTi. This discussion our emissions Celsius this we decarbonization will a be March plan, step initiative, our regarding Science-based Based released the on on level X.X to analysis Agreement targets degrees to goals several are report, reduce targets the supported Targets

us As multiyear was We it help strategy meet strategy. innovate, will of institutions to cloud modernization to developed them call needs the the you financial native this last on evolving holders. allowing their year recall, technology regional and capabilities community compete this new public we that our deliver to announced and account

on services build as the September, system cloud. In in clients processing authorization building with public are that since on to first, the core in X on We and services management be Google the to time. to this solution services the Cloud currently modules traditionally July. Google availability early wires in offer and Cloud, our testing have adopter and We plan general domestic wire live we've stand-alone been status progress unbundling that announced we them for continuing we're make redefining strategy's and the X would by plans core on processing these objectives: modules main the great

that module We expect to late early the launch April in be and to year. generally available wire the calendar solution this fourth for international adopters quarter expect in

technology. to philosophy integration data multiple utilizing Second, we're our working open provide options and

essential this data simultaneous of constant data all to on beta streaming, detection. Our real-time with newest in and area which streaming platform. fraud necessary streaming, the to support real-time offering payments is data real-time We're currently systems is in

expect other go is the but several capabilities to on third next-generation the Banno this functionality into We upon solutions live a of year. Delivering part element single working in platform across we're later objective. key this a production additional is in commitment. industry-leading strategy, this calendar this build to

cloud payment suite example, an Payrailz, native September, payments added to As a of public our digital in solutions. we platform

have financial agility, in launching develop prospects last can to secure next-gen ecosystem. they strategy machine technology engage the nontraditional with strategy a conversations manner banking people learning the at year optionality. and America. platform ecosystem. to platform leading and to technology Anecdotally, had in The relationships platform. The strong to described to acting experience picture them, core future. Community eliminates native continues announced Plaid, for has can that processor own complete Today, companies, the provider and with that financial interest XXX and public fintechs Akoya. primary generation. for driver artificial of new only step enhanced their just fundamentally fintech as of indicated strategy service access and from the have prospects intelligence. a a with Yodlee the personal financial fraud however, a Main is financial a offering cloud including also is bank disrupted I has all capabilities on holders the This currently lifeblood aggregators, a major our speed prioritizes crimes Street entered closer Many Henry a summer, these financial than the customers. number has grow. We're to from capabilities, institutions technology in Finicity, and through crossroads. screen data that regional plus single them safe, for ago, modernization especially tell of Additionally, providers strategy as are financial that and solution I help that XXX This we providers account changed, we're we with is I move are both you our this are give who full in the to service our being the openness, this Defender, includes Crimes known our by are been more it's A number market for X in Jack Financial younger built and that Through scraping. We've platform institutions seen the way entirely

successfully strengthen meeting key progress we're company, As a this and financial technology regional We're on our a pleased in institutions holders. The our Jack on the and for we're takeaway with May. as and services to we've strategy, technology opportunity this Day at their well-rounded needs future. shown we'll the that and more community account help Investor performance also clients updates provide preparing results, exciting modern is the them in position while unique is Henry our capitalize connections financial with of by made today share to

technology service solutions, very fiscal second our our to strength pipeline the sales continue detail ability Mimi of the year, our our deliver that, the expand our to our half the to be we over begin client our environment for we the relationships, I'll about As ability on for numbers. and turn some success. With is spending to of clients, prospects optimistic outstanding robust, to and long-term it

Thanks, Dave. Good morning, everyone.

discuss Jack Fiscal will revenue successful Total those As the highlighted second quarter, X% had increased the up on and comments, up was on I by basis details basis. and up solidly non-GAAP for driving Dave's revenue and non-GAAP X%. was quarter a X% year-to-date a GAAP Henry GAAP X% revenue a results.

X% into increased acquisition details. On deconversion with now negatively the of the for $XX $XX year. were year-to-date. revenue in X% space. services decreased million basis, decreased quarter, consistent this support million and revenue market broader as let's million deconversion fiscal jump but and the the revenue is approximately quarter in in We a lack $XX This anticipate second activity Services impacted year-to-date. our support So GAAP

nature forecasting uncertain notice revenue and However, the the remains general advance limited of deconversion challenging given M&A.

deconversion year-to-date. and the decreased private activity, offerings services revenue. convert/merge cloud offset slightly quarter growth and quarter, this fees and showed XX% XX% by higher robust lower impacted implementation-related Product XX% by delivery Our public and growing in

non-GAAP reminder, the delivery decreased a user and year-to-date, this year-over-year to for our group similar a influenced revenue highlight support as services year, by major product consistent and serves XX%, On QX As quarter the shifted decline. Year-to-date, X% grew QX our quarter. conference, contributing revenue business and conference customer basis, related services which fundamental the revenue strength. into drivers to to X%

a of and by year-to-date. driven the X% on the both in X% largely year-to-date. and were a quarter a was increases Processing for non-GAAP volumes despite basis, slight card growth increased quarter basis rate On the increase the X% higher for revenue The GAAP growth.

digital by to Banno show demand continues rapid robust Additionally, Platform. for Digital our revenue growth led

higher year in higher factors. benefit processing Now efforts our costs expense drivers was expense. influenced by personnel by by driven quarter, turning rationalization, X%, Cost wins headcount control, Year-to-date, drivers other involving to these assets. consistent partly the of facility quarter due XX% mostly revenue costs offset increase personnel, Year-to-date, both to results. Research card disciplined revenue the SG&A the up rose travel increased on expenses helped These and expense travel, the procurement and services, for actions collective sale consistent the costs. to increases inflationary the card the of and was licensing of development and same for based drivers. The These fees. lower offset X% growth, increased with on costs year-to-date. pressures year-to-date included mitigate similar and professional revenue. and X% gain from focus XX% and quarter management. and Quarterly are across personnel and increased amortization remainder

QX XX% share deconversion result lower concluded net the from mentioned interest management Due Despite controls, income some $X.XX. due operational quarter previously of have cost rigor increases diluted of to from on first strong we previously As primarily our the fiscal half cost expense, and fully XXXX. fees and we comparisons travel-related results. increased with cost earnings saw to compensation per declining a mentioned, lower

up and year-to-date fiscal and and to 'XX. expectations for consistent us are internal finish with quarter non-GAAP the a GAAP Our year strong set results for

press on as adjustments Albuquerque reminder, acquisition are this the property, of the gain, Payrailz the non-GAAP from As in gain deconversion for million the a an $X.X of including and impact release. a of assets yielding quarter's shown the fees part transparency, sale sale

acquisitions, million to the ample This capital repurchasing essentially dividends is stock. to from million. to flow. liquidity, flow attention cash year, the proceeds next flow but a value XX-month which should Operating of the operating dedication from cash consistent cash period in plus million maintaining elevated for last investment XX.X%. invested was slightly normalize Total return financially strategic on operating revenue. software paying lower was year. Free $XXX for cap committed CapEx growth, and remains year-to-date, $XXX assets evaluating cash down to opportunistically by for We our reinvesting $XXX and sale same remain Turning less sound due resulted flow, creation our trailing fiscal deconversion R&D of

acquisition, and discuss me non-GAAP revised on gain GAAP updated of fees. press asset The and Focusing release ahead, let guidance. guidance the year full sales included guidance, GAAP deconversion remains inclusive Payrailz

continue fiscal fiscal impacting likely both expect We trends Most the impacting minimal significantly, non-GAAP assuming for results. the at previous representing decrease the from QX consolidation, $XX GAAP to results for guidance. fees remainder industry year, of a $XX the approximately and year, million deconversion our will remain muted million

bank for our impacted convert/merge fiscal languishing negatively revenue services outlook M&A-related for year. consolidation the Secondly, our

institution. driven this implementing reminder, and solutions acquiring Jack Henry revenue a their is As our by newly purchased at clients

and consumer network spending card the in in of anticipated a activity, Finally, our with than announced volumes of line payment slower we're credit spending cards. combination primarily a the lower by experiencing to driven debit processing rate transaction growth business, for shift

as revenue As is highlighted, debit card processing business. approximately total our weighted more a Dave card to and heavily of XX% reminder,

of sales on disciplined gain returning EPS the acquisition. Full due of net both margin to is guidance lower decrease of control, to and result deconversion Guidance a negatively management $X.XX now these fiscal GAAP is of growth even midpoint fees lower for the an in collaborative is fiscal The team income. margin expected management year strong fees and X.X%. the X% impacts range $X.XX Outlook caused operating full is margin X.X% assets which for is margin fee team's by though a assets now remains for gain a year now slightly down. 'XX. Full guidance now deliver be cost from improvement XX.X%, on of inclusive previous from to 'XX revenue $X.XX. slightly expected mitigated approximately for and by flat revenue the non-GAAP lower $X.XX year to headwind expected now As drives Payrailz $X.XX control, the is deconversion GAAP expansion focused year sale The growth to of guidance deconversion is is the operating expense on lower reduction. GAAP X.X%. compared non-GAAP impacted guidance previous is to by impacts, and fiscal to to to The

to revenue operating fiscal remainder the patterns expect increases similar increased the third to revised margin, non-GAAP momentum in the achieve 'XX We of delivering targets. We year quarterly deliver anticipate growth guidance our full growth both full non-GAAP revised in guidance. year fourth quarters and year for

our and of thank our continued in call will and investors So quarter in please We Jack their operational all model. Henry. Keith, solidly success you questions. of another confidence the remain closing, strong for results for the business delivered about optimistic fiscal of we open

Instructions] first [Operator And the Govil from Vasu KBW. with comes question

just any sort for first close the I on seeing payment momentum the Dave, still I spending. on deals shift it's anything to of new macro? then, what of deals, segment seems update time be like any know taking the you, are non-GAAP changes super of good debit changed deals other It any you basically before? And or size question most quarter whether that in more client guess you're the related But anticipated credit you in in segments there on were revenue the of weakness. signings. decision-making from for new bank terms would seeing? has the Just is helpful. in that Any update to based with just more thinking to

Mimi. over and the second take it part Vasu then first, I'll I'll turn to

say the are I to very strong. environment, would macro As overall continuing far look as things

is given QX, the in June which year, saw another I pipeline, huge core I me. But environment my last sales than surprise say we in a strong. on was overall very larger prepared The record of set mentioned to the quarter to ever we just Our trending are larger. been. QX, it's performance side the I would business, we so pipeline was expecting, is not record performance that the the remarks that set in sales another

highlighted, partner December the I bigger think in They're the change. XX. a definitely great And currently multibillion-dollar coming core think Jack XX So business, December that trending involved signed make on institutions you side I driven service. that of by Henry them institutions modernization we're accounts has the the looking -- alone, X believe at takeaways for core the driver other of great modernize. to strategy. on larger, I help Jack we are technology is if to the that part just delivering But I is will certainly that for really looking the for Henry that technology reputation look and

would now. have solutions. I CEOs quote as very 'XX. was And environment what Jack don't whole who customers. place have quoting increase nobody I expected are bits And their I variety increase. forum The right kind planned. as said calendar a a this Henry them of ago overall 'XX was published and by the of results. them X% surveys different average for a that was in far us variety hosted the to from way, because a characterize that of average -- and of CEO spend big This they me that far although prepared hosted spend roundtable core of in running already, in not are so is I Phoenix, the for And that there, knowing So this as bunch I CEO variety anecdotal an around that has strong of budgets as it's just for remarks, we the can my sales any have as I more weeks feedback as X

to first my I'll over question. to be comment and of the overall, would answer Mimi turn your part it that on So your

say terms I the in anticipated. bit of question. the change, the terms think is card a consumer the yes, of your I on we predominantly were little slowing we for Vasu now around on -- than slower non-GAAP is optimistic based Thanks, revenue would in -- right with

a to rate an led still that's modest call out. but of attractive would think I deceleration so I growth And growth

cards. around predominantly it's so And

Yes.

for that's to that the strong. think important business is growth emphasize rate our -- payments very is I year-over-year

Now consumer as happening is payments because we fact of should business that up the a year-over-year backed significantly off as But we've what's of overall far little lose the growth. bit in behavior. not sight

may trying But there know of I just That's super to road some out to sell a product? And that banks, was Banno. I of what sell when deal, a customers. win who you for your have helpful. of I typically sell sort the follow-up digital are Banno number And banking them might clients if do started are ask you your And players new if to there for on like rate then it's be curious, to see and that? a you of what's sort go base Banno your not, already? competitive outside of core of map core

Yes.

So I is quote on think pretty think, accurately I Vasu, I what our I mean, where digital a we're competitive is. win can selling deal. don't you rate deal every banking much

I just So this is. reputation. quote couldn't as win has what accurate I as rate high because very Banno outstanding you it's an our know far percentage

selling As the far outside as base.

we're a competitors, base, of little real view win -- have off view, I I opportunities But a they it said, of technology technical And of a a a a this view, now. the a as prompted right we're into for about that we do to real ready their to think kind perceive see on we positive, them bit. I point to back us learned of outside deliver to overall. gives previous us of that from a selling point that better base. our be it outside base, has solution because some It's strategy talked prepared point from the call, So

opportunity That's necessarily our leave competitor Henry. gosh, on not we're likely says, base for the thing side my the to a finally Jack in the have core us So as selling versus potential of in our sell negative "Oh us core a to weighing us business. so for Banno Banno now." the And won't for the good customers we side. If be

go strategic chasing the And we we very from than making position is core point view. strategy rather us after So after. of might that long on err and the of strategic term few about which we're rather damage a just a sure bases this side I'd and being dollars how right,

from the Evercore And next David comes Togut question ISI. with

Dave, their least given for to First at back capability debit capacity to using Data to card you over offset you build end and completed your shift card from processing of out their transition of processing, some credit all are leverage at the to credit processing the able debit to credit?

to able we Yes, But I've platform, on use to customers and in side certainly, we've we're that that credit it's a and the matter and saying, highlighted already of have "Hey, settings, we production in sign as other agreement have customers not signed. customer in they're up?" now, with want have the already somebody. have -- an credit credit if they going to They space, you a

normally, to so to buy allow need to And they contract that out. anniversary, the agreement also have

Credit a the these up we've building in expertise service transparent needed business that pretty I've been is hire is calls The side of hire on about credit other literally people that to We our different space. sell, to to business. been people the thing debit. from

we've capability up so time. building And over that been

space, positioned kind far But as the we programs. the is combination customer credit that being things the have far those has as credit when to slow credit being of as it's for us a offer ready space. roll a to get of So been as today into a in

sales the organization. have We

We have to abilities technical the deliver.

of matter those them. converting a it's customers finding and us so And

roll modernization modules do tech lines key you the on then the specific initial strategy, some And of out Understood. to clients? to have time

Yes, we do.

we published our And for that so -- and clients.

have portal. a road customer We map on out our

see clients road and what go like. looks map So the our can

with compete to is publish that, to They're that we've being out Jack had hoped this with prospects. are everybody we're to eager what clients very I transparent very trying And doing. with competitors but see to and strategy. so for realized Henry our figure see, to Initially, again, very, how

who and so looking quite off for at existing very that And modernization being prospects their to strategy our with we're define transparent future. are customers backed the tech we transparent, help with on being but

be rollout I what to the mean, of modernization of should kind tech any Since we we terms don't strokes, broad-brush have portal, in you share access client in of can expecting strategy?

what I'll turn Again, but of to a I'm Yes. not going detail the -- the can to just to expect. we're over in these here, so out a it rolling highlighted Greg we my prepared point, into highlights. great -- that things here I will you go fact point to give you out. of highlights I give to have Greg that at couple couple remarks of going of this some

We just have in months. production here a wire of solution full domestic into coming our couple

international We this full wire have our into solution coming production later year.

So I've over I'll it to those turn color. few a already more highlighted of things, a for but Greg little

doing. a there's other things Yes, we're few

have out years. the basically we So planned for X next

we're to so next testing out get will that some done the doing plan Dave that as ledger some help with we general not roll So of we bracketed the There's is those actually we're be then, to components over we're around to but have lot XX going to we're various key big one. talk a already each prepared that. And the in X course, about of by for that That's real-time a lot other doing of or big over targets done. other what publicly, itself, of the that modules, years. components months year But us we've assessed. already that the of But next of a with Google that look things authorization one. management to that Cloud. a is components mentioned solutions

Were capability And those those what those were big billion it. on particular drove wins? wins? you the in signed they finally, XX, X Like banks? And December just core Dave, key to Got wins how above $XX big what assets? the were

service, were doing somewhere that great a not those X-ish to I'm a off combination My and customers. And time us in billion, billion. $XX but of It's above you've in the time mostly for the -- head, be that great and they range it's there, range, very just billion story again. None of same heard technology, for my is $X the were reputation that I a I'm from recollection of top in somewhere strategy. focused $X think them

do So know side, core. be for on if our come is question what to you going the core core you to strategy we're business Jack supporting about which Henry, with -- regarding forward. go There's no the

think I banks to want who rolled we most and open together reputation they and things of So fintech have this all today, credit solutions, plus for embraces want connectivity. to And that it's openness. a connect unions partner idea those

things those time. together, about And a so Those these for primary drivers all long been you talking roll the that us are it's for we've in the same wins. things

question come from Kartik the Mehta with And Northcoast Research. next will

the past, the you've I maybe way teams though your you we've it about ability Dave, of but kind a been lot. the projected at don't and one installed you know of know of and that, I backlog look to report business. kind talked winning seems backlog the in revenue in as

If you give confidence next at a that that XX kind from maybe you good standpoint? and very the metric, XX, over of revenue look does months, look still

have of I Kartik, that every shows slot. refer we -- to report, as number look month at Yes. that a We actually the it

slots are those deal it prepared given we're are conversion many shows do in then So core open. slots, the XX into conversions where months," process as has held how are in how any well to And of our customer year months to the many them slots quarter. already a because held. that those as said, X number side backlog many how to booked, of want the the far of And in number "Hey, fiscal as of next there's as being that's on being opposed I convert and a

or say, is XX remember do that that, slow, trying time, we hiring "Well, you be Henry's core to same thing faster, this a it people, new Now be people speed they're new conversion, the plan large hey, data just when a because hire like run not say any that's about I all when and Jack converted, doing very an have while, once a customer more project. the entire massive isn't side. will -- and at you're all much They're Conversion months. to can and go you we normally, up." so learning And more and to is people they're The can't And because bank in just systems conversion it's processes, there union. to month. and in it's to for things validating on ought a absorbed do so the we credit

And so really we manage well. our backlog

that our gets exercise attention exercise for think every similar every have, core of has the that the in I X backlog conversion a team that that backlog we other have. reporting. We but The well. we a normally product do have product we is lot managed

we fairly X And up not generally, But from staff there as and backlog easily. people and so staff group specialized can't simply our another to, we you down demand. on need Certainly, can some and based that pretty we manage that can generally, move and do effectively. very roles are to are easily

it's customers checking deal business And related fraud then accounts. or selling from especially And always that of that be you your banks payments perspective, how terms about, just having the you Jack related products? X with whether unions, community Henry's talk might to and I'm credit fraud, issues able to PXP and how hear to Jack to fraud help help of might is maybe banks Henry ATM wondering in or

I'll Yes, one. Kartik, this Greg. that take is

So a couple things. of

rolling acquisition, in open-loop a even we're fraud our So that PXP. Payrailz out actually have with the we module

there's irrevocable as the solutions, an layer an provides of of part have unlike And option an protection there. to it as extra fraud that it the we process, of for they again, receive the fraud that. how kind couple -- of Actually, when designate layer a to a want So receiver and payment. payment other Zelle, which gets there's extra is faster

Financial specifically as our fraud Dave X That mentioned, thing, payments for components to product. Crimes faster Defender real-time opportunity other to be it's to with is going got tailored and both because other Zelle fraud The the help it.

from X right be our is We're significantly process. good fanfare the in it will Crimes those so Financial getting things. beta the in actually with beta clients And product really now and Defender

right a the team those looking of we consolidate So fraud a committee drive we're defense projects products, that things. actually of we our to But just and kind have pretty have our of Henry and We of that Jack that kind some is of or X strategy here at several excited. kind aggregate for are of other all customers.

And of the James. comes Raymond John Davis next from question

$X.XX. a revenue. the down it but updated weaker looks took the only Mimi, then offset EPS, EPS to be better basis the by just like the on And of guide, it'd like bit kind on non-GAAP margin the looks you little deconversion $X.XX fees midpoint about hit

line is hit? anything drives else or a of below that kind anything or smaller So the rate there that EPS tax just curious,

the question, Thanks for Yes. JD.

disciplined to it terms to $X.XX, own. of driving remarks, stand One, half expense to in controls is my that of You're of were prepared couple right the if follow the its A the things. second upside. driving on focus part on in revenue in deconversion about just on

are then sale an that's we the on have seeing of you as interest GAAP because as basis, rates, well. income are we perspective positivity a seeing the -- from interest Albuquerque Additionally, helping well. And higher some

not just control, management So bit little rate, and the of that's just interest a lot changes a but tax on rate of between savings.

I drivers primary that say the are So of change. would

and that I'm think $X.XX the between in management as but Mimi called the detailed, because driver the $X.XX that glad you I of difference JD, there, control. is several the are there though, -- expense primary things out, just

who things that sure has We dug make have right a team in expense the doing the really side. here we're to on

for effort hit, Henry. the right doing deconversion so a the the we're $X.XX just the in that's in to here. we'd Jack a sure put significant revenue, at management team call for if but out think see the make were has I that And extra it team really things And slowdown

growth be callouts half XQ -- second the should guide implies a very consistent. then And Mimi? Any over up, implied versus relatively modest little little a a is step X%. XQ Okay.

about think Just cadence trying the to of in the revenue half of back growth year?

question, slower, see have from both and the quarter, a I quarter revenue to growing and It's pickup on, mean year a half similar I as the year as our first comments JD. been lowest goes that would and our to we a say, last is Yes. continues. the good with QX expected

wouldn't there's first and half. I between versus a dramatic XQ QX. just say So half difference a favorability second that But

it's card on called of the how sensitive Dave, Okay. about revenue. out I think macro file fee gets if then, it, that in spending about transaction? account levels? And per us XX% Just revenue, Can you guys slows understand on you think is the to card to trying versus help debit better, what's business further, it

of type that we've detail disclosed. something Yes, that not is

is It's overall way is overall -- think way because our vendors, what's of by the of best is comes happening and when environment Jack industry following at to us track best what's with of to macro what's macro overall. Mastercard kind been in and credit. to like follow that's the think card consistent the between the volume just happening in things major debit the Henry This what's happening kind what's we it anticipate not I kind the And debit any industry to Visa. reported is I you all unique Henry. to happening and in happening overall business This for shift the for what's environment. Jack

the relative on with there last back Are conversion? history months the one Jack, for is somewhere trailing bit full or timing? thoughts one in the still so XXs down cash a for target. sneak to year cash XXX% I'll conversion, for versus And XXX% flow comfortable getting here. Free Any flow in Okay. to XX you little free

Yes.

it I on a terms -- quarter, but recommend a year-to-date. at looking to at you're JD, right, think on wouldn't on in rather I it longer cycle. a look

on And X-month of adjust be we'd versus with because timing a revenue, year, basis. deconversion without -- pretty QX, of so versus about we're Year-to-date, QX million sales asset comparable prior this you if on QX $XXX That's $XX million. the year, a for would pretty comparable

in not half there. for out lot call the of kind to think all think all, second I I a So

I think normalize. of trends will to continue kind

the And Research. Ken next Autonomous Suchoski from with comes question

This on Ben is for Ken. Varga

So the for It in $X.X firstly, quarter, the asset generated revenue ask guiding I $XX about to about to million you're Payrailz. and second wanted the year. looks like million of

the So get the implied in I up in behind quarter and would assumption of drives the on what update second the to performance an kind the love half? step

Yes.

wins, nice see modules. slower able starting but kind bit out first So we really doing, to we've of that from start we're sell we're a months, some little hoped pick the up. been also through the We're to efforts perspective, integration separate a starting to had sales than we're that few to some

bought we that Payrailz, existing sell components those into of from can some our business. we So actually iPay

that and the able the sell. PXP components AXA module, to we open-loop mentioned, even fraud we're So the

that to geared we're get integration. We're completing So starting some up.

opportunity Payrailz we're we to as into what bullish list have and iPay So to going well customers an space have the post. we're pre-acquisition prospect continue as pretty sell the the that for to in

the Is in secondly, think to it. targets prior flow-through to expecting sense. expected Got really makes evenly? it That how the about as we your impact the And results we out biggest just relative you should XQ. are to expect guidance, guide? Or where spread XQ updated and segment to

take one, can I that Ben.

X%, about X%. So being about driven say seen, that about by payments up growth and X% we've trends core would complementary up I year-to-date mostly strength, cloud

a some the year, the in consistency non-GAAP those basis, on that's for and full For full seeing year, trends. we're

would growing say, versus half think, to year around second particularly kind on a slightly of complementary, year-to-date. And So in full bit consistently the of payments little up us I there. land I core kind and

that's So the kind direction would of I call out.

Kumar question last with comes from the And UBS. Rayna

This a touch but modern on business any Payrailz? within Rayna since payments filling appreciate is on I progressing this the tech the for Kulkarni, is if acquisition to Kumar. I I start, follow-up. development particularly notable the details of And you on Aditya there how front in have guess then are the can this and strategy,

that to business-to-business the payments. and bill of pay acquire so cloud Payrailz a PXP platform strategy and acquiring part the does well, account is public was account overall idea by Payrailz, native that we So payments

for that And platform. need cloud native so a of to acquiring public Payrailz was payments fill kind

Our something acquire choices to public iPay into and or were cloud already to functionality essentially go integrate rewrite the that add was it iPay solution. and native

we've as created. the Payrailz that highlighted, just the in being and running. completed, to is Greg solution do up as work environment not public cloud into left but The integrating rest So the of is as much integration far

beautifully technology view. it's from So as of as concerned, point far progressing a I'm

CPI very to That's mentioned leaning on for last Jack kind as of levels. Great. helpful. follow-up, climbed my inflation began Henry escalators record And you've year more

through walk could you just XXXX, impact inflation is of this if Now expectations there business, moderate all? how Henry's us at to in could Jack

continuing CPI Well, we're escalators. at to point, implement this

ago, calls a not X don't stressed Jack I time, we're think We I Henry. at then thing done So one-and-done that's doing that one at and that. do

are CPI As escalators to customers, contracts continuing do renewal, up implemented those for and come that. for we're those

in those a practice. significant and to we're change expecting. We'll changes the continue the or our to did we our some until that We kind level batch economy, is been that last another overall escalators. economy something to that we're week, continue continuing going is change of customers overall until that we are evaluating that and stop not just different. activities that implement we'll CPI warrants to in so going to the as do a time appropriate that we're some going do implement we We're the see we've So do doing, to in think to we are this point change in see that and something

'XX. it's early a fiscal is quite from there say would I add-on only The

budget We started even haven't planning. cycle

growth, So year, of I though. our it's able to and premature. would of not reliant next utilization on being indicate for we're a I strategy as in say think terms that core

And Faucette Morgan with Stanley. the next comes question from James

consolidate that consolidation on I Jack in bank those to do current your perspective and cetera, software the I some to et -- a environment. today, if how sales is... sales core in guess prospect cycle, other you bit Am what for I looking for if I'm I'm that for does get or it or elected little in past best-of-breed fashion? wondering And a partners. but do union form that a does from your lending activities Henry using wanted I'm to the give vendor the processing, credit

I I on really a and interesting could X talk for probably topic, I but that's James, Yes, about won't, could. this one, hours

happening it what's comes forces of a when So here talking about are there to couple right now, that. so competing

connect so we best-of-breed have Henry the real our have changed best-of-breed unions we and have We to family. We whole product you force look that just still and It a a who those to only to why base. hard say, are manage on solutions First that regulators same into the expect pushing so We trying customers basis all credit there ran continue desire those customers we pretty their vendors. That still calls you those sales to outside that have shouldn't was customers here. still the business core strategy. for a core. At same Jack have time, ProfitStars best-of-breed wonderful solutions. demand many that the Jack on branding products solutions. have for is because banks still until many are for you initiative Henry off, Jack It's to among be Henry the in

different have introducing environment partnerships. risk into if your so many you You're more vendor

who's can We because somebody be solutions. suite of a work not noncore for of working have part the with on been Jack vendors we can our Henry the with by they noncore running Jack of such solutions Henry provider a they best-of-breed limit so number both. broad strategy core, has we And do

but those find best-of-breed because banking But push do positive best-of-breed, real limit fintechy factors are in working of that happening vendors clients. to space with. disruptive real to in this those there among general, the disruptive in So for to offer that sense the who forces or we're those there solutions number their who to of vendors customers is bankers those solutions, this that they're the are looking push -- again, to is

is looking to quite some force both among some And feel we so solutions well for to I that of be Henry really time. of is Payrailz best-of-breed like that it's for serve to something of And for watching it's why customers to part the spectrum. look those we've continue can Jack ends continue a reason strong that But so been we positioned that that balancing best-of-breed. acquire act. those

also, that's it. question, FedNow. to I And a specific and more product-related ask I to Got related wanted guess,

was And of I FedNow, that could that to capabilities are an and readiness hoping have guess, rollout? implementation line you community time is implement us I what's use to you close and FedNow? with the JHA level, to on accommodate how the high how you start a your general the idea banks Given give on work take PayCenter that the positioned to regional on

James, take one. is Greg. I'll that this

of couple things. a So

first So July. one, to we processor in positioned be live starting the are

So Fed we've of years preparedness been directly kind the working on for over with X that. for

like be and So launch. will between we XX initial somewhere our part launching will it be looks of XX institutions

Part very by is the of community that the with owned why level house banks. interest larger is is high. the the reason clearing So the institutions

doing there's of the about banks bit the about Fed, the a very so little being been that smaller larger banks. But of are community are talked a use always some this, business excited with the cases about with especially about. concern And

XX% about XX% clearinghouse So if look in Henry or with as about of institutions who's at the reminder, and just are institutions you short we today, Jack Henry. live, Jack a have

with in So we will live FedNow be going the first the the product processor summer.

And the William next Chris question with comes from Kennedy Blair.

is percentage can and a the small January today, could launched of business you I you know that guys but in how overall that credit be? program talk about agent your meaningful

that one take I'll Greg. is this as Yes, well.

So did it. just launch we

have some going is We didn't be to had handle with the that of type to staffing really of or But is to believe we programs. the have are were service happen we solution. credit pilot -- now credit us in expertise got community what wanted since that just it right that They or smaller going. programs full customers part the X institutions

gearing Dave have they brought resources with in as people up and just we mentioned well. that So like it, the were help didn't us to we

opportunity to is of solution some them. them like agent to that set to would will move advantage take solution, that way to with actually believe we a for program we we if service let the time, is more in and offering folks So at the the be portfolio going they really position point full a credit nice a take

also pretty that's So advantageous.

uptake come program that, believe space. than smaller institution on that in in do agent there'll the especially the we but to maybe more again, So be more community --

to than year, a Great. the away? dilution anticipating you but still are It's expected, going Very slower it be next Payrailz. a initially helpful. And on accretive little follow-up then just bit

that can we to point through through yes, we I the we mean everything the we're side, need the happens, it making as working that. confident We're sure about But Yes. going on still as long And is very feel working do engine that sales that. to. related that sales

the And Dave Koning with comes from Baird. next question

I wondering, million, $XX where are -- will next all, that, with just is into $XX by took out? And sustainable grow million up you to too, first And know year? is into still Or non-GAAP and down million next non-GAAP guess the mentioned, of cost costs to flex cost meaning year then of I back $XX walked you of you you out the that guess, through the revenue, EBIT $XX you still is I'm you're but as I EBIT taking taking some that controls. million year? stable,

that's question. think I a Dave, great So

I think it's a combination factors. of

we're there role, role previously, some as just at every I by every of think Dave headcount a are There's the some renewal, disciplined on mentioned look ask eliminating focus, we completely. postponing. kind like we're

that Some may just mindful long We're being kind a another about dribble disciplined back travel but we year. choices, term. example are next the making may is of kind of be of of structural travel, not in where amount kind

back. I us suspect So But performance other things and there's that will might that other some management help including come of then year. this factors

piece. one is Greg. add And I'll this

a but very on focus process here, in just people. strong only have tools not automation We

we XX% what caught in classroom. about of our staff of call some level the So really certified in is

operational and things be our part been to so a of And that, savings better part of of the we as some as driving various we've in of initiatives lot that do. automated headcount reductions

So that's contributing also another factor.

Henry, will that that's And Dave. at forever Jack something on go

that I opportunities key That's look a something in highlighted, embedded just think one-and-done we're culture is isn't for exercise. Greg We'll to those is our forward. trying ensure there that to the continue what point always. going

I be a like $X.X year know does $X.X Payrailz, million there maybe seasonal, the something, And And full follow-up. Got but it's per I'm just rest to rest from per to get $XX needs to of the up million supposed the something million million. year or wondering QX of to I the you. year. et $X.X why $X.X -- step be quarter was it year, to cetera? the quarter, up the is And million know

couple on There that of about. Yes. working sized there and are out deals feeling a decent we're good pretty

add-on lot again, And part and it's a and what is these we to of solutions business that's also those solutions, where call moving it. add-on really the of getting on, that iPay So that's baked.

Dominick question the with next And from Oppenheimer. comes Gabriele

demand for just -- for the X you around and versus forgive call. talk I with and just interest sentiment conversations Could months in potential demand your the Can Henry the modernization existing about conversations, talk the you core the of and missed beginning me, Jack new the ago? say, uptake and about tech clients of

Yes.

So of it's many the becoming a part conversations. significant of

So them core that were the we that call-out that a Dominick, call, XX. signed was at X institutions all the multibillion-dollar of I deals with the I December made in XX highlighted new signed on significant are there quarter beginning of

I've a the here. But the that that institutions. of fact about talked thing kind we was the XX already is other December on So day larger have around call fun

technology of the moving modernization story. driven I I And think some demand being larger. think is by is that overall definitely

tie them the a I fintech how with strategy a are they've part in conversations that Jack looking cloud. And gets have to prospects, complementary certainly to core Jack as the will bring And side the rational think far is experience strategy size but it's customers. part become not we Henry develop -- company solutions, solutions it's are as part and looking them conversation to modernization public for necessarily we about about that the talk are it a to usually. of of of Henry, It's into a the do the their help business most the core core been that So in people prospects. their who trending with that for conversation that to wanting customers tech of coming for not core because more of up you future

of in now. have a because, am to have in I and So it's conversation, wants when those, larger and involved them been a as the been involved great. normally lot fun institution CEO conversations it's before, in pretty I right personally be stressed I've the

they do Great. then to a switch stacks me Great. of actually X just I growth bit. just and a little kind so made card And largest peers how had these that being they so. provider the slowed up some it and with of your large investment tech to that's you a really keep And can't modernize admit FIs the that provided around -- comments some the do think of tech and you would the If to of fee have. they some do about of think you the some versus the complementary suggest I macro with at at spend that's at second the retrenching try half, that there and you also level deconversion that outlook Do fair? look think that they previously as to to cash is of on expectations, hold of kind

of this I Jack this have have in the discussion ago, a early CEOs And and part weeks then number I major sizes. not. X quote sample of about Well, don't smaller we smaller Henry the larger you hosted can the surveys so but is roundtable talked core to year, that I call and what these any with of surveys just institutions, I were of CEO

So the it who and budgets are people their was overall And kind a place variety have of XXXX. CEOs for of feel. in these now

XXXX, sales the sharing kind seeing the ever been. with the increase at in than they pipeline it's they is X%, in for organization, for line plan expected XXXX. robust they larger real what that's And were average settled weren't in me their So around with very that sales numbers speculating, the we're of

technology to comes to of when So I continuing or the space any any folks in have on it kind slowdown see commitment pullback the spend our don't area. in that

Great.

up? that think capabilities? missed Maybe to one willingness... fairly last willingness have you you stable last versus, comment ago more past one. I years, about you beginning just seeing that the than their pace outsourcing commentary. outsourcing? large do seen just speeding a tech about X the Or Have FI few over like further higher -- I made client with from Sorry, pace that Is of the in months you it's outsource say, the Are

have you And being or outsourcing, they normally, it's believe religious to do credit or outsourcing. in of with talk or talk things I'd Jack with when they some to driver kind it as described I've bank just pretty and get say ingrained Yes, a some to a conversation believe this before requires stable. It's belief. it to in them everything -- nothing union, in-house either that either about has Henry they

replacement. be the group them in -- in that them on they're prompts or the leadership has that I doing comes business they We normally don't somebody might of in says, anything and know It external this." So things and to And giving past months think were So are even they've that be And the -- ought it and X it's might CEO a into their regard themselves. regulators Henry be an changed bring driver don't that might in their "I very in why hire years. be Jack can't institution. past that's environment. this outsourced X themselves lost outsourcing are that pressuring the kind in dependent change now they guys to yourselves. doing some be It tech really to to new that at you them the do shouldn't maybe trying a because they

our turn to for question-and-answer session. to like management the would over back any concludes I this now And closing comments. conference

you, Thank Keith.

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