JACK HENRY & ASSOCIATES INC Q2 FY2025 earnings call

• Financial performance: Exceeded Q2 outlook with non-GAAP revenue growth of 6.1% and non-GAAP operating margin of 21.5%.
• Sales performance: Set sales records in Q2 with eleven competitive core wins, including three financial institutions over $1 billion, and thirteen deals moving clients to private cloud.
• Renewals: Closed 28 core renewals in Q2, up 21% from last year, including large banks.
• Technology modernization: Scimitar core platform ranked largest for credit unions. Partnerships with Move and Visa/Mastercard for digital payments. On track to deliver retail and commercial deposit core functionality in H1 2026.
• Awards: Received Forbes' Most Trusted Companies and Newsweek's Greatest Workplaces for Diversity.

Core segment: Non-GAAP revenue increased 6% in Q2. Non-GAAP operating margin increased 139 basis points. Payments segment: Quarterly revenue increased 6% non-GAAP. Non-GAAP operating margin grew 177 basis points. Complementary segment: Quarterly non-GAAP revenue increased 6%. Segment margin expanded 207 basis points.

• Reiterated full-year guidance, including GAAP and non-GAAP metrics. Confident in second half performance with continued growth in cloud, card, and digital products.
• Trailing twelve-month free cash flow conversion in line with guidance range.

• Potential impact of industry consolidation on future results.
• Regulatory scrutiny and its potential effect on business operations.

Q: Could you just talk a little bit about what gives you confidence on the back half of revenue acceleration and what the key drivers will be?

A: The confidence comes from the results delivered in the first half, cloud continuing to grow, card ramping up, installation of new products like Financial Crimes Defender, and digital being strong. Also past hardware headwinds are over.

Q: Are you seeing any increased competition at the low end of the market from a large competitor that's been calling out these wins? Like, specifically, are you seeing any pricing pressure?

A: Not seeing anything different than before. Competitors haven't been winning from us. Renewals show strength of our business.

Q: In the past, you've talked about when you've talked about market share, you usually reference or usually on average two hundred deals and maybe a hundred come to market. And that Jack Henry & Associates, Inc. usually wins their fair share, if not more. Is there a difference in that environment at all in terms of number deals coming to market and also maybe the number of deals you're winning?

A: Don't think anything has changed significantly yet. Some numbers could change based on M&A. Still tracking to traditional fifty-ish wins and winning larger deals.

Q: When you would expect revenue from that partnership with Move to have an impact on Jack Henry & Associates, Inc. growth?

A: Would expect anything meaningful to happen in 2026. Maybe some small pieces in 2025 depending on how things go.

Q: Talk a little bit about the current operating environment for your customers? You do have a new head of the FDIC who's made some comments. Fraud comments would be great.

A: Customers remain very optimistic. No lessening of regulatory scrutiny yet. Demand environment remains strong for products to help increase deposits and loans.

Q: Any update on your efforts to rationalize the number of products that you guys service?

A: In progress of divesting, sunsetting, and cash cowing products.

Q: In terms of getting to the $16 million of deconversion fees for the year, which, you know, at this point, should we just kinda think about that as equally weighted between the third quarter and the fourth quarter or should we expect a bigger step up in the fourth quarter?

A: Affirming full year sixteen. Fair to assume even-ish weighting but some date movement possible. Safe to say even across two remaining quarters.

Q: What are you seeing in terms of volumes in real-time payments? And then, you know, can you tell where those volumes are coming from? Are they primarily coming from ACH, same-day ACH? Are you seeing maybe some migration from card volumes?

A: Not seeing anything moving from card to real-time. Some components of Move partnership will help facilitate faster payments. Pay center group has seen meaningful growth. Use cases and fraud concerns are key.

Q: Good morning, guys. Good to speak with you again. I wanted to ask about free cash flow conversion, just visibility on the full-year target. Mimi, any thoughts on how the back half may trend there and just the visibility on it?

A: Free cash flow returning to normalized range. Back half will continue to see strength in the range. In line with guidance of 65% to 75% conversion.

Q: I wanted to ask about the trend of private cloud within core. I think you guys talked about, you know, a bunch of FIs moving from in-house to private cloud. Curious to get an update on where do we stand now, how many core clients are on private cloud? And, you know, do you see that trend accelerating through the back half of this year and just anything we should be thinking about in terms of whether or not that impacts the margin profile of your business?

A: At 75% now. On pace to hit targets. Averaging between forty and forty-five a year. No changes in fiscal year. Some FIs plan to move in 2026. Catalysts are internal to FIs around talent recruitment for hardware refresher.

Q: Good morning. Thanks, guys. I wanted to follow-up on the cloud discussion and Greg, I guess, maybe this question for you. But some of the investor concern that we've heard regarding technology modernization, especially as we take the next step to public cloud is that, you know, maybe your development initiatives with the origin strategy are ahead of where regulators are likely to be in the next few years or at least that's been the thought. With the change in administration, do you think that within the time frame regulators will be more comfortable with broad-based financial PII in the cloud? Such that the investments in your origin platform better lines up with likely regulatory time frames. Just wondering if you think that we could bring those forward and see that move to public cloud start to accelerate.

A: Believe it's more of a possibility than before. Have monthly conversations with regulators. Bano was first digital platform to be public cloud native. With changes in administration, better chance of regulators being comfortable.

Q: Good morning, guys. Thanks for taking the questions. Just first, what are some of the underlying factors at your partners that could accelerate the demand for your products? And is there a shift in where your clients are putting incremental dollars to work expanding their solutions that you provide?

A: Demand is there. Some is due to resources on clients' side, timing of contracts, and ability to show innovation. Messaging from clients is positive. Opportunities for additional demand include getting deposits, loans, efficiencies which our solutions meet.

Q: Good morning, Greg. Good morning. Thanks for taking the question. I just wanted to circle back on the back half revenue growth guidance. I think the implied growth is somewhere around 9%, which I think is the strongest sort of fiscal second-half growth rate that we've seen over the last handful of years. Is there anything different that stands out this year versus prior years that drives that stronger growth in the second half? And I guess from a modeling perspective, any sense of which segments are going to see the most acceleration?

A: Confidence comes from results in first half, cloud growing, card ramping up, installation of new products like Financial Crimes Defender, digital being strong. All segments contributing to growth.

Q: Yeah. Hey, guys. Thank you. And I guess my question, I guess it's along some of the same lines. You know, when I look at payments, historically, Q3 has been flat to down. I think in the COVID year, it was up, but almost every quarter in Q3, it's flat to down sequentially. And then Q4 is up, you know, a decent amount, maybe 3%, 4%, whatever. It seems like this year, you're talking about a little more acceleration than normal. Is there something different about this year's sequentially? Like, are you know, normally, Q3 would be flat to down just because retail debits just down a little bit in calendar Q1. But is there something different about the products being added or different things that are kinda differently affecting the sequential this year?

A: Card is on pace to typical. Other products like PayCentre are driving opportunity. PayCentre getting to be very meaningful with rollout of clients and send transactions.