Dominick Gabriele

Dominick Gabriele questioned when the industry might move beyond describing the consumer as 'resilient' to simply 'solid,' given improving credit trends across the spectrum and accelerating delinquency improvements. He also asked about the implications of potential holiday spending deceleration and increased retailer discounts on Bread Financial's business, particularly compared to periods with fewer discounts.

Answer

Perry Beberman (EVP and CFO) stated that the consumer is 'stable and credit is improving,' but the continued use of 'resilient' reflects caution due to elevated delinquencies/losses and consumer nervousness about future uncertainties (tariffs, policy, labor). He believes the narrative will shift once more certainty emerges. Regarding holiday spending, Perry Beberman (EVP and CFO) and Ralph Andretta (President and CEO) anticipate retailers will push discounts and reward opportunities earlier in the buying cycle, as savvy consumers will seek deals to optimize their budgets. This is a typical dynamic, potentially steeper in certain verticals.

Dominick Gabriele asked when the industry would shift from describing the consumer as 'resilient' to 'solid' given improving credit metrics and delinquencies. He also inquired about the impact of potential increased retailer discounts, triggered by decelerating holiday spend forecasts, on Bread Financial.

Answer

Perry Beberman (EVP and CFO) stated that the consumer is stable and credit is improving, though delinquencies and losses remain elevated. He attributed the 'resilient' narrative to prolonged inflation and current macro uncertainties. He expects retailers to push discounts and reward opportunities earlier in the holiday buying cycle, a consistent trend that consumers will seek out.

Dominick Gabriele asked how the portfolio mix shift to higher FICO scores pressures yields and how significant this shift is. He also inquired about the potential for scale benefits to the efficiency ratio once revenue growth normalizes and if management is satisfied with the current 50-51% run rate.

Answer

EVP & CFO Perry Beberman described the mix shift as very gradual and not something that would cause a sudden large jump in average credit scores. He noted that a material shift would cause them to revisit loss and capital targets but that they remain committed to Investor Day returns. President & CEO Ralph Andretta added that operational excellence is focused on improving the efficiency ratio and becoming 'expense inelastic,' stating there is always room for improvement through scale and expense management.

Dominick Gabriele from Compass Point asked about factors contributing to slower account growth at partner banks beyond neobanks. He also inquired about the drivers of the strong growth in the Complementary segment and its long-term growth target.

Answer

President & CEO Greg Adelson cited SMBs using other providers, the use of digital wallets, and banks purging dormant accounts as additional factors for slower account growth. CFO Mimi Carsley added that slower lending volumes in auto and real estate also play a role. For the Complementary segment, she highlighted strong demand for digital solutions like Banno and fraud products like Financial Crimes Defender, reiterating the segment's growth algorithm target of 8-9%.

Dominick Gabriele from Compass Point asked about factors that could accelerate client demand for Jack Henry's products and inquired about the pace of innovation and key investment areas.

Answer

President and CEO Greg Adelson explained that demand is already strong, with limitations being client-side timing and resources, not a lack of interest. He identified key innovation and investment areas as digital (Banno), lending (LoanVantage), payments (PayCenter), and fraud (Financial Crimes Defender). CFO Mimi Carsley added that the 'One Jack Henry' initiative, focused on improving the client experience, is also a key differentiator and innovation area.

Dominick Gabriele asked for an update on the pace of deemphasizing or divesting lower-growth, less profitable businesses. He also questioned if the election results might prompt clients to release previously held-back technology investments.

Answer

CEO Greg Adelson confirmed that product rationalization is a multi-year priority, with some product sunsets already announced and potential small divestitures being explored. CFO Mimi Carsley added that any impact would be gradual rather than a single large event. Regarding post-election spending, Adelson stated he does not currently see an incremental change, as clients' stated tech priorities are independent of the political environment.

Dominick Gabriele from Compass Point asked for management's two-to-three-year vision for Atleos post-spin-off and questioned the potential impact of increased tariffs from India on the hardware business.

Answer

President & CEO Tim Oliver described a vision centered on a unique strategy to win in both shared-utility network and outsourced bank-fleet models, leveraging vertical integration to generate predictable free cash flow for investment, debt reduction, and share repurchases. Regarding tariffs, he stated that while hardware is an $800 million business, the installed base is the key asset. He does not expect a 50% tariff to be long-term, noted it is not a 2025 issue, and confirmed the company can adjust its manufacturing footprint if necessary.

Dominick Gabriele inquired about management's two-to-three-year vision for NCR Atleos post-spin and asked for clarification on the business's hardware exposure and the potential impact of increased tariffs from India.

Answer

CEO Tim Oliver explained that the separation is now complete, allowing the company to focus on its unique strategy of serving both shared network and outsourced bank-specific fleets. He emphasized that the business generates predictable free cash flow, enabling investment, debt reduction, and share repurchases. Regarding tariffs, he noted hardware is an $800 million business where the installed base is key, and the company has mitigation strategies and does not expect a 50% tariff to be permanent.

Dominick Gabriele inquired about the segmental impact of the hardware revenue shift to Q2, the average sale price for units in the ATM-as-a-Service backlog, and how potential tariffs might affect the full-year EBITDA guidance.

Answer

CEO Tim Oliver clarified that hardware revenue resides in the Self-Service Banking segment. CFO R. Wamser noted the ATM-as-a-Service backlog was up 25% YoY and that quarterly ARPU increased 5%. Wamser also detailed the potential tariff impact, estimating a ~$25 million cost for the rest of the year, which the company is working to mitigate through productivity, supply chain adjustments, and pricing actions.

Dominick Gabriele questioned if the strategic focus was shifting away from high-ARPU regions toward India and asked if the Q4 gross profit margin is a sustainable baseline for 2025.

Answer

CEO Timothy Oliver clarified that the company is not de-emphasizing any region; both high-ARPU markets and scale markets like India remain important. He also explained that margins have natural seasonality due to hardware and network business cycles, and while Q4 was strong, investors should expect a similar seasonal margin progression in 2025 as was seen in 2024.

Dominick Gabriele asked for an explanation of the difference between the strong quarterly subscription revenue growth and the decelerating year-over-year subscription ARR growth.

Answer

CFO Jonathan Price clarified that subscription ARR is the leading indicator for subscription revenue. He explained that the strong subscription revenue growth seen in Q1 2025 is a lagging reflection of the robust subscription ARR growth booked in the first half of 2024, and that ARR trends provide a directional pattern for future revenue recognition.

Dominick Gabriele from Compass Point inquired about the competitive pricing dynamics for new deals versus renewals and whether Q2 commands a premium for its products. He also requested a breakdown of the drivers behind the long-term margin improvement guidance, specifically the contribution from scale, costs, and product mix.

Answer

CEO Matt Flake stated that while all deals are competitive, Q2 does command a premium, particularly for its commercial banking platform, due to its proven value and execution capabilities. CFO Jonathan Price detailed the margin drivers, explaining that leverage in 2024-2025 was roughly 60% from OpEx, while in 2026 it will flip to being driven more by gross margin improvement from the cloud migration. The ongoing revenue mix shift to subscriptions is a consistent benefit.

Dominick Gabriele asked for more detail on the services revenue decline, seeking to understand the split between Q2's strategic de-emphasis and lower bank demand. He also asked about the drivers of sales and marketing efficiency.

Answer

CFO Jonathan Price clarified that the discretionary spending pressure is concentrated in consulting-like engagements, which are less than half of the services segment. CEO Matthew Flake attributed sales efficiency to long-term investments in moving upmarket, which created a strong base of referenceable Tier 1 customers and an experienced sales team.

Dominick Gabriele asked for clarification on the 2025 outlook, questioning why new logos pushed from Q4 wouldn't create more upside to the top-of-funnel forecast. He also asked what specific macro markers the company watches for an acceleration in retention and new wins.

Answer

CEO Michael Praeger clarified that 'top of funnel' refers to new lead generation, which is strong, while the pushed deals add to the sales pipeline. For retention, which is volume-based, he explained they monitor discretionary spending categories like marketing and CapEx, particularly in the HOA vertical. He noted that the current guidance does not assume a macro recovery, so any improvement in these spending indicators during the year would represent potential upside.

Dominick Gabriele questioned why new logos pushed from Q4 didn't result in a more optimistic 2025 revenue guide. He also asked what specific macroeconomic markers the company monitors to anticipate an acceleration in customer retention and new logo wins.

Answer

CEO Michael Praeger distinguished between new logos, where he is optimistic due to a strong pipeline, and transaction retention, which is impacted by macro factors. He explained that retention is currently about 6 percentage points below normal levels. The company monitors leading indicators like invoice and purchase order volumes in discretionary spending categories (e.g., marketing, HOA capital projects) to gauge a recovery. The guidance conservatively does not assume this recovery occurs in 2025.

Dominick Gabriele inquired about year-over-year growth in average ticket size and asked where potential pent-up demand is most likely to materialize.

Answer

CFO Joel Wilhite noted no specific dynamics around ticket size, just broad-based transaction growth. CEO Michael Praeger clarified that pent-up demand exists in customers' discretionary spending categories, such as marketing, professional services, and capital projects. A rebound in this spending is key to returning transaction retention to its normalized 105% level.

Dominick Gabriele asked whether the threat of potential tariffs had caused any pull-forward in commercial or consumer spending and if Visa had observed such trends in the past.

Answer

Ryan McInerney, Chief Executive Officer, stated that Visa has not seen any direct impact on spending related to tariff threats. He commented that it is too difficult to predict which tariffs might be implemented and that the company will monitor the situation and assess any potential impact as it unfolds.