The paragraph is from an earnings conference call for Jack Henry's second quarter of fiscal year 2025. Vance Sherard, the Vice President of Investor Relations, introduces the call, mentioning that it's being recorded and includes forward-looking statements. He highlights that President and CEO, Greg Adelson, will discuss the company's financial performance and outlook, while CFO and Treasurer, Mimi Carsley, will go over financial results in detail. Greg Adelson thanks the associates for their hard work and reports solid financial performance for the quarter.

The paragraph highlights the company's strong quarterly performance, focusing on three key areas: financial achievements, sales successes, and client renewals. Financially, the company exceeded its Q2 outlook with a 6.1% non-GAAP revenue growth and a slightly better-than-expected operating margin. Sales performance set records for the second consecutive quarter, closing significant deals and transitioning clients to a private cloud. Notably, client renewals were impressive, with a 21% increase over the previous year, including significant renewals from large banks. This solid performance underscores the company's robust market position and strategic execution.

The paragraph highlights recent achievements and developments at Jack Henry & Associates, Inc. The company successfully re-signed a major bank client, secured mergers bringing additional banks, and maintained a core retention rate above 99%. Their Scimitar platform remains the top choice for credit unions, earning recognition for its widespread use. Jack Henry received two workplace awards, showcasing its commitment to employees and clients. In the payment segment, they signed new clients for debit and credit processing, with significant numbers using Zelle, RTP, and FedNow platforms. Additionally, they expanded their Financial Crimes Defender contracts to address fraud prevention in fast payment transactions.

The paragraph discusses the growth and expansion of the Bano digital platform, with the installation of faster payment modules and signing new clients for both retail and business deals. Bano experienced a 20% increase in registered users over the past year. It also highlights partnerships with Visa and Mastercard to offer rapid transfer services and similar payment solutions. Testing with a small group of clients is set to begin soon, with a new merchant acquiring solution for early adopters expected in May 2025. This solution will offer features like instant decisioning and multiple settlement options, aiming to help financial institutions attract customers and grow deposits.

The paragraph discusses the progress and benefits of the Jack Henry platform, emphasizing its cloud-native infrastructure that enables partnerships and service integrations like Move and Visa Direct. It highlights the platform's current functionalities and ongoing beta tests, with plans to launch core deposit functionalities by 2026. It references surveys indicating increases in technology spending by banks and credit unions for 2025 and mentions the ongoing Jack Henry strategy benchmark study. The company remains optimistic about its fiscal outlook, supported by a strong demand environment, sales pipeline, and competitive achievements, crediting its culture, service, innovation, strategy, and execution as key differentiators for success.

Mimi Carsley from Jack Henry & Associates discusses the company's financial performance, highlighting a steady revenue and earnings growth in the second quarter, consistent with expectations. GAAP and non-GAAP revenues increased by 5% and 6%, respectively. Although deconversion revenue dropped by $5 million compared to last year, the company maintains confidence in its $16 million full-year guidance amid industry consolidation. Services and support revenues rose by 4% to 5%, driven primarily by data processing and hosting. However, hardware revenue declined, posing challenges. The company experienced an 11% growth in its cloud offerings, which contributes significantly to recurring revenue and remains a substantial growth driver.

In the latest quarter, data processing revenue, accounting for 44% of total revenue, grew by 7% on both GAAP and non-GAAP bases, driven by increased card, digital, and payments processing revenue. Total recurring revenue, excluding deconversion, was 92% of quarterly revenue. Key revenue—consisting of cloud and processing income—was 76% of total revenue, growing 9% quarterly and year-to-date. Non-key revenue decreased 1% quarterly but increased 1% year-to-date, excluding hardware. Expenses rose, with a 4% increase in the cost of revenue due to higher direct and personnel costs. R&D expenses rose by 6%, and SG&A expenses by 9%, mainly due to personnel costs. Despite these increases, non-GAAP margins improved by 25 basis points to 22% for the quarter, offsetting a year-to-date decline of 34 basis points to 23%. The company is confident in achieving its margin expansion targets for the year.

The paragraph discusses strong quarterly financial performance, highlighting a 6% increase in fully diluted GAAP earnings per share to $1.34. It details growth across three operating segments: the core segment saw a 6% revenue increase due to organic growth, the payments segment achieved a 6% revenue rise with significant non-GAAP operating margin improvement driven by higher card revenue and payment processing, and the complementary segment also experienced a 6% revenue boost with an expanded product mix. Operating cash flow rose to $90 million, an increase of $8 million from the previous year, with a trailing twelve-month free cash flow of $296 million and a 73% conversion rate. The paragraph concludes with a trailing twelve-month return on invested capital of 20% and the repurchase of $17 million in shares to offset stock compensation dilution.

The paragraph discusses a company's outlook for fiscal year 2025, emphasizing strong financial guidance and clarity provided in their recent press release. They reiterate guidance metrics and highlight a 24% tax rate usage for non-GAAP EPS metrics. The company's performance in the first half of the fiscal year met expectations, setting a solid base for the rest of the year. They remain focused on long-term profitability and growth through revenue and margin expansion, while acknowledging the efforts of their 7,200 associates and investors' confidence. The paragraph ends with the transition to a Q&A session, where Rayna Kumar asks about the expected revenue acceleration in the back half of the year, and Mimi Carsley attributes their confidence to the results of the first half.

The paragraph discusses the company's positive outlook on growth through consistent metrics and drivers, particularly in cloud services, card ramp-ups, and new product installations. They have moved past hardware-related challenges and expect growth at lower costs. Rayna Kumar asks about competition and pricing pressures from larger competitors in the lower market segment. Greg Adelson responds by stating they haven't seen significant changes or increased competition affecting them, although there may be a difference in how competitors approach client retention and wins. He highlights the company's success in maintaining and renewing contracts with large institutions, as well as success in mergers.

The paragraph is a discussion between Kartik Mehta and Greg Adelson about the market share and deal environment for Jack Henry & Associates, Inc. Kartik asks if there have been changes in the number of deals coming to market and the company's success rate. Greg responds that there hasn't been a significant change yet, although mergers and acquisitions (M&A) might impact the numbers. Jack Henry is confident about maintaining their traditional win rate, with continued success in securing larger deals, including multiple deals over a billion dollars. Greg also mentions the company's positive progress with their partnership with Move, highlighted by a recent development with Visa Direct.

In the paragraph, Greg Adelson discusses the revenue impact from a partnership on Jack Henry & Associates, Inc., anticipating meaningful revenue contribution by fiscal year 2026 with some potential small impacts in 2025. John Davis from Raymond James then inquires about the company's renewal pricing dynamics. Adelson explains that while price compression can occur, it is typically countered by selling additional product bundles. He confirms that these factors are already considered in the company's forecasts and guidance for the latter half of the year, indicating that they account for when products are added relative to contracts and pricing changes.

The paragraph consists of a conversation during a financial discussion. John Davis questions the company representatives, Mimi Carsley and Greg Adelson, about their performance expectations and the current operating environment. Mimi Carsley refrains from providing detailed quarterly forecasts but confirms that they anticipate growth throughout the year, with the fourth quarter expected to outperform the third. Chris Kennedy from William Blair inquires about the operating environment for customers and mentions changes in FDIC leadership and potential regulatory impacts. Greg Adelson responds by saying that clients remain optimistic, although there is uncertainty regarding regulatory scrutiny from agencies like the CFPB.

In the paragraph, a discussion takes place between various speakers about the company's optimistic outlook on the demand environment and their ongoing efforts to streamline their product offerings. Chris Kennedy inquires about product rationalization, to which Greg Adelson explains that they are in the process of divesting, sunsetting, and cash cowing certain products. Peter Heckmann then asks about the $16 million target for deconversion fees for the year. Mimi Carsley affirms the target, expressing confidence in achieving it due to the calendar and slots already taken, and suggests the fees will be evenly distributed across the third and fourth quarters, although there may be some date variations.

In the paragraph, Greg Adelson discusses the trends in real-time payment volumes, noting that there is no significant shift from card payments to real-time payments. The focus is more on transitioning from ACH to real-time transactions, facilitated by partnerships like Move. Energet is experiencing growth in their faster payments division, especially through SEND transactions, which have contributed to revenue growth. Fraud concerns remain a critical issue, but their new fraud module is helping reduce instances of fraud on faster payment networks. Adelson doesn't anticipate any meaningful decline in card payment volumes in the near future.

The conversation in the paragraph revolves around the edge use cases for payment processing involving small businesses and retail consumers. Mimi Carsley highlights the company's recent success in processing, noting a 7% increase. Greg Adelson mentions the company's proactive collaborations with the Fed and the clearing house to drive these use cases. Jason Kupferberg from Bank of America then asks about free cash flow conversion and visibility on the full-year target. Mimi Carsley responds positively, indicating that the company is in line with its full-year guidance of 65% to 75% for free cash flow conversion and expects continued strength in the latter half of the year.

In the paragraph, Greg Adelson discusses the transition of financial institutions (FIs) from in-house systems to private cloud services, noting that 75% of core clients are now on private cloud, with a continued steady growth rate. He anticipates that the trend will proceed as planned, aiming for 90-95% of clients transitioning, although some may hold off for a direct move to public cloud by 2026. Greg mentions ongoing client engagements, including a significant customer planning to transition in 2026. Mimi Carsley adds that internal factors within FIs, such as talent recruitment and hardware refresh needs, influence their decision to switch to private cloud, indicating a consistent multi-year trend.

In the paragraph, James Faucette from Morgan Stanley asks Greg Adelson about the investor concerns regarding the shift to public cloud and whether the development initiatives are ahead of regulatory comfort levels. Adelson responds by acknowledging there is a greater possibility now for alignment with regulators, especially with the new administration, compared to two months ago. He mentions regular meetings with the FDA to discuss their cloud-based products, highlighting their efforts to educate regulators about their public cloud initiatives, particularly since Bano was the first digital platform to be public cloud native. He expresses confidence in their ability to gain regulatory comfort due to their extensive experience in this area.

The paragraph discusses the strategic direction and anticipated growth of Bano's retail and business platforms. Currently, Bano has around 20% market penetration with approximately 1,000 retail clients and 212 business clients. The install queue suggests potential future growth, aiming for a 65% to 70% penetration rate, especially with the introduction of Move in the SMB sector. The rollout of features to all Bano clients is highlighted, with an emphasis on achieving feature parity with major digital competitors by summer, particularly in areas like open banking and fintech integration.

In the paragraph, Greg Adelson addresses a question from Dominick Gabriele about what could accelerate the demand for their products among banks and credit unions. Adelson notes that the demand is already present but factors such as resource availability for implementation, reeducation, contract timing, and the banks' current contractual obligations can influence the speed of adoption. However, he emphasizes that there are no major barriers to their success apart from these timing issues. The company's innovation and execution are positively received by clients and consultants, further supporting their potential for success.

The paragraph discusses the focus and innovations at Jack Henry & Associates, Inc. Mimi Carsley highlights ongoing priorities for financial institutions, such as deposits, loans, and efficiencies, and anticipates an increased need for digital and payment solutions aligned with administrative priorities. Greg Adelson emphasizes that Jack Henry & Associates is investing heavily in their digital and payments platforms, including their faster payments module, lending solutions, and fraud prevention. They are also launching the first phase of their enterprise account origination solution, a project in development for over two years.

The paragraph discusses Jack Henry & Associates, Inc.'s focus on enhancing their digital payment and customer service strategies to drive innovation and differentiation in the financial industry. Mimi Carsley highlights the emphasis on improving the "one Jack Henry experience" to provide better service quality and efficiency, which is becoming a key factor in vendor selection. Greg Adelson adds that service quality is gaining more importance due to a leveling field with technologies like APIs, and mentions the company's internal use of AI. The conversation shifts to Andrew Schmidt from Citi, who is about to ask a question about mergers and acquisitions (M&A).

The paragraph discusses the anticipated increase in mergers and acquisitions (M&A) within the banking and credit union sectors. Mimi Carsley mentions a modest amount of convert merge activity and consulting efforts underway to prepare clients for an expected rise in industry consolidation, with significant impacts anticipated in fiscal year 2026. The pace of these mergers will depend on approvals from regulatory bodies. Greg Adelson adds that a recent merger resulted in a $20 billion institution planning further acquisitions, highlighting the ongoing opportunities and the company's strategic positioning for future M&A activities.

In the conversation, Andrew Schmidt inquires about the factors driving wins for a company moving upmarket, especially in dealings with large banks and credit unions. Greg Adelson attributes their success to their focus on culture, service, innovation, strategy, and execution, emphasizing their high execution rate on their road map. He notes that their competitors are not achieving the same level of follow-through on their promises. Adelson believes these factors have enabled the company to stay ahead of the competition and achieve success. The discussion then moves to Ken Suchoski from Autonomous Research, who asks about revenue growth guidance for the latter half of the year.

The paragraph discusses a projected 9% growth rate in the fiscal second half of the year, which is noted as stronger than previous years. Mimi Carsley attributes this to several factors, including cloud growth, increased payment volumes from improved US consumer health, and the installation timing of new products like Financial Crimes Defender. Despite the numbers appearing large, Carsley expresses confidence in meeting the guidance. Ken Suchoski then shifts focus to the payments business, highlighting concerns about network volumes at large banks, which showed accelerated growth in the US in calendar 4Q compared to 3Q.

In the paragraph, the discussion revolves around the payment segment's revenue growth, where Mimi Carsley emphasizes that card transactions are just one component of the broader payments ecosystem. Although card transactions constitute about 60% of the segment, trends are consistent with US debit trends. Additionally, there are complementary solutions and innovations, such as payment processing and bill pay, contributing to growth. Ken Suchoski questions whether the payment segment may be less correlated with the overall market and network volume growth. Dave Koning notes that historically, Q3 is typically flat to down, with Q4 seeing growth, and asks if there's something different about this year's performance. The dialogue underscores the complex dynamics within the payments segment and anticipates acceleration in growth.

In the article paragraph, Greg Adelson addresses a question from Dave Koning about the company's performance in the third quarter, noting that while card performance remains typical, growth is driven by other products, particularly PayCentre. This growth results from client rollouts and increased send transactions with large clients. After this discussion, the operator concludes the Q&A session, and Vance Sherard announces upcoming investor events and thanks the company's associates for their hard work. The operator provides replay information for the call as the conference ends.

This summary was generated with AI and may contain some inaccuracies.