Vasundhara Govil

Vasundhara Govil asked about the long-term impact of AI on Jack Henry's business model, distinguishing between opportunities and risks, especially given recent market concerns. She also inquired about the company's outlook on bank M&A, specifically if it remains net neutral to positive and if conversion/merge activity will offset deconversion revenue.

Answer

Gregory Adelson, President and CEO, clarified that AI's impact on complex software development, like core systems, differs from other industries, noting Jack Henry doesn't use seat licenses. He highlighted Jack Henry's long-standing use of AI in back-office operations and new products, contributing to controlled headcount growth. Regarding M&A, Mr. Adelson expressed continued bullishness, citing significant market share growth over the past eight years and opportunities for cross-selling other products even when a client is acquired.

Vasundhara Govil asked about AI's long-term impact on Jack Henry's business model, distinguishing between opportunity and risk, and sought an update on the company's outlook regarding bank M&A being net neutral to positive, with conversion/merge activity offsetting deconversion revenue.

Answer

Gregory Adelson (President, CEO, and Board Member) clarified that AI's impact on complex core systems differs from other industries, emphasizing Jack Henry's long-standing use of AI in back-office operations and new platform products to control headcount and drive innovation. Mimi Carsley (CFO and Treasurer) added that public cloud investment enables faster solution enhancements with AI. Adelson reiterated confidence in M&A being net neutral to positive, citing significant market share growth and opportunities for other products even when a client is acquired.

Vasundhara Govil from Keefe, Bruyette & Woods asked for quantification of the revenue headwinds from bank M&A in the 2026 outlook and clarification on the potential impact of a specific large bank merger. She also inquired about the drivers behind slower account growth at client institutions.

Answer

President & CEO Greg Adelson explained that the M&A headwind is due to the timing and terms of specific deals, not a structural issue, and clarified that no decision has been made on the large merger, with any impact not expected until fiscal 2027. He attributed slower account growth to competition from neobanks, SMBs using other providers, and banks purging dormant accounts. CFO Mimi Carsley added that the company's long-term growth opportunities remain intact.

Vasundhara Govil asked for a breakdown of the drivers for the revised revenue guidance, the overall size of hardware revenue, and for an update on Jack Henry's competitive positioning following the FIS acquisition of Global Payments' issuer business.

Answer

CFO Mimi Carsley attributed the guidance change to macroeconomic prudence, a slowdown in hardware sales (down $11M YTD), and delays in non-recurring projects. CEO Greg Adelson commented on competitive positioning, stating that Jack Henry's single platform for both debit and credit remains a key differentiator and he is bullish on Q4 core opportunities, seeing no major change in the competitive landscape yet.

Vasundhara Govil questioned the slower pace of Banno retail wins in the quarter and sought an update on the strategy to sell Banno to institutions on competitor core platforms. She also asked for an update on the full-year free cash flow conversion guidance.

Answer

CEO Greg Adelson explained that the number of Banno wins was not a concern and was largely due to timing, noting strong Banno Business sales. He acknowledged challenges in selling Banno outside the base due to competitors' lack of openness but revealed a new, parallel strategy to bypass typical integration points. CFO Mimi Carsley reaffirmed the full-year free cash flow conversion guidance of 65% to 75%, explaining that the Q1 figure was skewed by the timing of annual maintenance collections.

Vasundhara Govil of Keefe, Bruyette & Woods (KBW), on behalf of Sanjay Sakhrani, questioned the M&A revenue contribution for the year and the progress of shifting the VM Technology business to a rental model.

Answer

CSO Aaron Greenberg clarified that while they expect to complete more deals, the full-year inorganic revenue will be less than $25M, but sufficient to meet overall guidance. He also explained that the success of the rental model in Brazil prompted the full acquisition of Nayax Capital to scale this strategy, which is now being rolled out in Australia and other regions. CFO Sagit Manor reiterated that organic growth remains the primary driver for the year.

Vasundhara Govil of Keefe, Bruyette & Woods (KBW) questioned the year-to-date M&A revenue contribution, the outlook for hitting the full-year target, and the progress of rolling out a rental model following the VM Technology acquisition.

Answer

CSO Aaron Greenberg clarified that while they expect to complete 1-2 more acquisitions, the full-year inorganic revenue may not reach the initial $25 million estimate, but the overall 30-35% growth guidance is reiterated. He also explained that the rental model from Brazil is being successfully rolled out in other regions like Australia, a key reason for bringing the Nayax Capital JV fully in-house. CFO Sagit Manor emphasized that organic growth remains the primary driver for the business.

Speaking for Sanjay Sakhrani, Vasundhara Govil of Keefe, Bruyette & Woods (KBW) asked for the year-to-date M&A revenue contribution, the outlook for hitting the annual inorganic growth target, and an update on the shift to a rental/subscription model following the VM Technology acquisition.

Answer

CSO Aaron Greenberg clarified that while the full-year inorganic revenue target of $25M is unlikely, the company will still meet its overall 30-35% growth guidance, with organic growth being the primary driver. He also explained that the rental-based model is succeeding in Brazil and is now being rolled out in other markets like Australia, centralized under the new embedded banking division.

Vasundhara Govil, on behalf of Sanjay Sakhrani, asked about the crypto vertical's performance and sales pipeline, and followed up on the progress of selling Marqeta's services to traditional banks.

Answer

Interim CEO & CFO Mike Milotich noted that while the crypto use case is performing better, it remains volatile. He positioned Marqeta's card solution as a key bridge for stablecoins. Regarding traditional banks, he reiterated that it is a long-term opportunity, still several years away, with a current strategy focused on securing initial partnerships in niche use cases.

Vasundhara Govil of Keefe, Bruyette & Woods asked if positive impacts from bank M&A are incremental to guidance and inquired about the current pricing environment for core processing.

Answer

CEO Stephanie Ferris noted that while bank M&A is a positive tailwind, only completed deals are in the current guide. She stated that FIS's pricing remains consistent and competitive, attributing its strength to the company's scale and product set, in contrast to challenges mentioned by peers. CFO James Kehoe added that both business segments saw positive net pricing.

Vasundhara Govil asked for the quarterly ACV growth figure and inquired if the approved Capital One-Discover deal creates new opportunities for FIS.

Answer

CEO Stephanie Ferris did not provide a specific quarterly ACV number but expressed confidence in sales momentum, particularly in core and digital, and high retention rates. Regarding the Capital One-Discover deal, she confirmed FIS is a partner to both firms and sees it as a positive opportunity, but noted it is not expected to 'materially move the needle' on FIS's overall financial goals.

Vasundhara Govil asked about the drivers behind the healthy 2025 EMI contribution from Worldpay and the potential for upside. She also requested a temperature check on the impact of rising bank M&A activity.

Answer

CFO James Kehoe explained the Worldpay EMI guide of 7.5% growth was agreed with Worldpay management and is considered comfortable, factoring in both strong performance and headwinds from delayed stand-alone costs. CEO Stephanie Ferris reiterated that FIS views bank M&A as a net positive opportunity, as the company primarily serves larger institutions that are often consolidators.

Vasundhara Govil asked about core banking sales momentum with larger banks and potential catalysts for growth. She also inquired about the drivers of Worldpay's outperformance and the validity of its long-term growth outlook.

Answer

CEO Stephanie Ferris highlighted success with the IBS core for banks over $20B and noted that the Modern Banking Platform (MBP) is gaining traction with super-regionals and internationally, citing a new win in APAC. Regarding Worldpay, Ferris attributed its outperformance to stronger revenue growth and a slower-than-expected ramp in operating expenses. CFO James Kehoe added that while it's too early to change the 7.5-9.5% long-term growth outlook, much of the current outperformance should carry forward.

Vasundhara Govil of Keefe, Bruyette & Woods (KBW) inquired about the CoreCard acquisition, specifically the financial model for accretion if the Apple partnership ends, and also asked about the reasons for the EFT segment's growth deceleration in Q2.

Answer

Chairman, CEO & President Michael Brown explained that the CoreCard acquisition model already assumes the eventual loss of the Apple contract, but they anticipate retaining it for several years due to the platform's complexity. He noted this provides a marquee reference to cross-sell into Euronet's global client base. Regarding the EFT segment, Mr. Brown attributed the slower growth to a difficult comparison against an exceptionally strong Q2 last year and stated he expects margins to increase with transaction growth and an elongated tourist season.

Vasundhara Govil of Keefe, Bruyette & Woods inquired about the progress of EVERTEC's strategic initiatives for its Cynquia asset in Brazil, asking what stage the company is in regarding tech modernization and repricing. She also asked about the underlying macro assumptions and trends baked into the improved second-half outlook, including any potential impact from tariffs.

Answer

President & CEO Mac Schuessler explained that the Latin America segment, including Cynquia, outperformed expectations due to successful multi-year initiatives in technology modernization and contract repricing, which are flowing through to results. EVP & CFO Joaquin Castrillo-Salgado added that the improved outlook reflects a strong first half, though the second half will see tougher comps as pricing initiatives are lapped. He noted the guidance includes some conservatism for potential tariff uncertainty but no direct impact has been identified.

Vasundhara Govil inquired about the specific drivers of EVERTEC's strong Q1 revenue outperformance and whether the updated guidance incorporates potential macroeconomic headwinds. She also asked a strategic question about the company's M&A positioning, both as an acquirer and as a potential target.

Answer

Chief Financial Officer Joaquin Castrillo explained that the outperformance was broad-based, with Merchant Acquiring benefiting from strong consumer confidence, Latin America showing a reacceleration in Brazil, and Business Solutions seeing onetime hardware sales. He noted the guidance's low end accounts for some potential consumer confidence degradation. President and Chief Executive Officer Morgan Schuessler added that M&A remains a key focus with a robust pipeline, but declined to comment on EVERTEC as a potential acquisition target.

Vasundhara Govil inquired about the revenue contribution from the EuroChange acquisition and whether the immigration crackdown in North America is causing a shift from retail to digital channels.

Answer

CFO Matt Cagwin confirmed the EuroChange acquisition contributed approximately 2% to revenue in the quarter and is performing well, with Q3 expected to be seasonally strong. CEO Devin McGranahan clarified they are not seeing a material shift from retail to digital due to immigration policies; rather, they observed an aggregate slowdown in transaction volume in both channels, particularly in the U.S. to Mexico corridor.

Vasundhara Govil of KBW asked for perspective on the potential business impact from accelerating deportations and for updated thoughts on the resurgence of crypto and its long-term implications for Western Union.

Answer

CEO Devin McGranahan assessed that increased deportations would likely impact transaction frequency among recent arrivals but could be offset by higher principal per transaction. He quantified the direct risk as limited, noting that new-to-retail customers sending to LACA represented only 2.5% of 2024 revenue. Regarding crypto, McGranahan reiterated a compliance-first stance, stating that while the company is exploring crypto for back-end settlement to improve efficiency and reduce float, it would only proceed in a manner that protects customers and financial integrity.

Vasundhara Govil from KBW noted the 2025 guidance of 5-6% seems slightly better than the 'mid-single digits' outlook from the Investor Day and asked for the reason. She also questioned the potential revenue impact from the tech modernization and cloud app launch in the Issuer business.

Answer

CEO Cameron Bready agreed the guidance was at the upper end of the prior outlook, attributing it to increased conviction in the transformation's benefits and the company's ability to manage the associated changes without significant disruption. He explained that the Issuer modernization is critical for long-term growth, as it expands the Total Addressable Market (TAM) by enabling the company to serve smaller FIs, enter new geographies more easily, and offer consumable services to fintechs.