Sign in

    Jack Henry & Associates Inc (JKHY)

    Business Description

    Jack Henry & Associates, Inc. (JKHY) is a financial technology company that specializes in providing technology solutions and payment processing services to community and regional financial institutions . The company operates through four main segments, offering a range of products and services that cater to the needs of banks and credit unions . These offerings include core information processing platforms, secure payment processing tools, and additional software and services for digital banking and fraud prevention .

    1. Payments - Provides secure payment processing tools and services, including ATM, debit, and credit card processing, online and mobile bill pay solutions, ACH origination, and remote deposit capture processing .
    2. Core - Offers core information processing platforms to banks and credit unions, which include applications for processing deposits, loans, and general ledger transactions, and maintaining centralized customer/member information .
    3. Complementary - Offers additional software and services such as digital/mobile banking, treasury services, online account opening, fraud/anti-money laundering solutions, and lending/deposit solutions .
    4. Corporate and Other - Includes revenue and costs from hardware and other products not attributed to the other three segments .

    Q1 2025 Summary

    Initial Price$166.64June 29, 2024
    Final Price$175.99September 29, 2024
    Price Change$9.35
    % Change+5.61%

    What went well

    • The company's modern core modular platform strategy is resonating with clients and prospects, particularly larger financial institutions, leading to competitive wins, including a recent $7 billion asset bank win. This focus on technology modernization and open philosophy is attracting institutions seeking innovation and flexibility. ,
    • The partnership with Moov is progressing well, with significant advancements since its announcement. The company demonstrated this solution at their client conference, receiving positive feedback. They are on track to deliver this unique solution to early adopter clients in May 2025, indicating strong future growth potential.
    • Despite increased competition, the company continues to win new business and renew contracts with larger clients. They are proactively preparing for industry consolidation by adding conversion and migration teams, and they have several acquisitions lined up for the second half of fiscal 2025, positioning them well to capitalize on M&A activity. ,

    What went wrong

    • Interest income may decrease if interest rates fall, as it has been elevated due to recent negotiations and is correlated with interest rates, potentially impacting earnings.
    • Increased competition in core processing, with competitors winning deals in Jack Henry's focus area, including a bank with less than $10 billion in assets, suggesting potential market share loss.
    • Potential revenue impact from M&A and consolidation, as higher deconversion revenue indicates client loss due to mergers, which could negatively affect revenue growth if not offset by new sales.

    Q&A Summary

    1. Second Half Revenue Growth Outlook
      Q: What drives confidence in second-half revenue acceleration?
      A: Management expects a robust second half, with revenue growth accelerating due to multiple factors, including easing hardware drag, continued cloud revenue growth, strong faster payments adoption, and the ramp-up of new products like Defender. They also anticipate increased implementation of prior year sales and higher digital adoption, giving them confidence in second-half performance.

    2. Core Wins and Pipeline Confidence
      Q: Is the target of 50-55 core wins this fiscal year achievable?
      A: Yes, management is confident in achieving their normal numbers. They are tracking well, having already secured three core wins in Q1, including a significant $7 billion deal. The sales pipeline is at an all-time high, even after record quarters, reinforcing their confidence.

    3. Margin Expansion and Outlook
      Q: Can margins expand beyond the 25-40 basis point target?
      A: While it's too early to say definitively, there could be upside if the economy and consumer sentiment remain strong. Management feels comfortable with the full-year margin expansion guidance, expecting challenges in the first half but aligning with revenue growth in the second half to achieve the 25 to 40 basis points target.

    4. Impact of M&A on Revenue Growth
      Q: How will M&A activity affect revenue growth?
      A: Consolidation is expected to lead to higher deconversion revenue, particularly in the next fiscal year. Several acquisitions are already lined up for the second half of fiscal '25, baked into the numbers. Regulatory challenges may lessen with the new administration, potentially accelerating M&A approvals.

    5. Cloud Migration and Growth Runway
      Q: How sustainable is cloud revenue growth?
      A: With 73% of clients on the private cloud, management sees several years of runway for double-digit cloud revenue growth. They anticipate reaching low to mid-90% adoption, acknowledging some clients may not move. Larger customers are now migrating, and as clients grow, so does Jack Henry's cloud revenue. Public cloud traction is expected with the upcoming deposit-only core in 2026.

    6. Deemphasizing Low-Growth Businesses
      Q: Is there a change in pace of deemphasizing less profitable businesses?
      A: Management is focused on this area, exploring divestitures and sunsetting certain products, which typically takes two years. While it's doubtful there will be significant immediate impact, over time this strategy should reduce the drag on performance and aid in margin expansion and cost containment.

    7. Product Developments (Banno, Moov, Loan Origination)
      Q: What's the progress on new product initiatives like Banno and Moov?
      A: Banno user growth is driven mainly by the retail platform, with a 20% year-over-year increase. Banno Business contributes but is not yet a significant driver. The Moov partnership is progressing well, with a full demo showcased at the client conference, and is on track for early adopter release in May 2025. The loan origination platform, now called Enterprise Account Opening, combines consumer and commercial capabilities and will enter early adoption in January 2025.

    8. Competition in Core Processing
      Q: Are you seeing increased competition in core processing?
      A: Management is not seeing increased competitive pressure. While they don't win every deal, they continue to be very successful, including recent significant wins and renewals among larger clients. The competitive win mentioned by a rival involved a significant price difference, but overall, they feel confident in their position.

    9. Capital Allocation Priorities
      Q: What are your capital allocation priorities in the current environment?
      A: The company remains steadfast in investing in future growth through innovation, supporting their dividend policy, and paying down debt. As they build a more positive cash flow position post-debt repayment, they will consider share repurchases. M&A is always on the table, but they've seen limited opportunities recently.

    10. Implementation Queues and Resource Allocation
      Q: How are you balancing implementation queues with margin expansion?
      A: Management evaluates this monthly, balancing the need to expedite revenue flow with operating margins. They have added resources where needed, such as in the Financial Crimes Defender group. Some implementation delays are due to factors like core implementation timing, not just resource constraints.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    David B. FossExecutive Board ChairJuly 1, 2024David B. Foss was named Executive Board Chair on July 1, 2024, after serving as CEO from July 1, 2016, to June 30, 2024. He has held various leadership roles within the company since joining in 1999 .
    Gregory R. AdelsonPresident and Chief Executive OfficerJuly 2024Gregory R. Adelson became CEO in July 2024. He joined Jack Henry in 2011 and has held several executive roles, including COO from November 2019 until his appointment as CEO .
    Mimi L. CarsleyChief Financial Officer and TreasurerSeptember 2022Mimi L. Carsley was appointed CFO in September 2022. She has over 30 years of experience in financial planning and corporate finance, with previous roles at Blucora, Inc., and LPL Financial Holdings, Inc. .
    Shanon G. McLachlanSenior Vice President and Chief Operating OfficerJuly 1, 2024Shanon G. McLachlan was appointed COO on July 1, 2024. He joined Jack Henry in 2015 and has held various leadership positions, including President of Credit Union Solutions .
    Craig K. MorganGeneral Counsel and SecretaryNovember 2016Craig K. Morgan has been General Counsel and Secretary since November 2016. He oversees the legal and corporate responsibility functions and has been with the company since 2004 .
    Renee A. SwearingenSenior Vice President, Chief Accounting Officer, and Assistant TreasurerMay 2022Renee A. Swearingen was appointed to her current role in May 2022. She joined Jack Henry in 1996 and has served in various financial roles, including Controller and Vice President of Finance and Procurement .

    Questions to Ask Management

    1. "Your competitor recently won a core processing deal with a bank under $10 billion in assets. Are you seeing increased competition in your target market, and how are you adjusting your strategy to maintain your competitive edge in winning new core clients?"
    2. "Interest income remains high for you, but you experienced a later ramp-up compared to peers. Can you explain what led to this timing difference and whether this interest income level is sustainable given potential changes in interest rates?"
    3. "Despite reporting strong sales and record sales attainment, you noted slower growth rates in on-premise annual maintenance and card processing. How do you plan to address these slower growth areas to meet your full-year revenue and margin expansion targets?"
    4. "You've emphasized the importance of your modern core modular platform and migration to the public cloud, especially with larger financial institutions. Can you provide specific examples of how this strategy is converting into new contracts or client migrations, and how it sets you apart from competitors?"
    5. "Given that Banno Business is not yet a significant contributor to user growth or revenue, even with a 20% increase in Banno users, what strategies are in place to accelerate growth in the business segment, and how does this impact your expectations for digital revenue growth?"

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateMay 14, 2021
    End Date/DurationNo expiration
    Total additional amount35,000,000 shares
    Remaining authorization3,618 shares
    DetailsThe program does not include specific price targets or timetables and may be suspended at any time.

    Past Guidance

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Full Year Non-GAAP Revenue Growth: Expected to be between 7% to 8% .
      2. Q2 Non-GAAP Revenue Growth: Expected to be approximately 6% .
      3. Non-GAAP Margin: Expected to see contraction of 100 basis points for the full year, but ended Q1 with only 89 basis points of contraction .
      4. Full Year Margin Expansion: Expected to be consistent with their full-year guidance, with a 25 to 40 basis points increase in the second half of the year .
      5. Free Cash Flow Conversion: Guidance remains intact at 65% to 75% for the full year .
      6. Tax Rate: A 24% tax rate is used for non-GAAP EPS metrics .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      1. GAAP EPS: Guidance for GAAP EPS is between $5.78 to $5.87 per share, representing a growth of 11% to 12% .
      2. Tax Rate: The full-year tax rate estimate is 24% .
      3. Free Cash Flow Conversion: Expected to be between 65% to 75% .
      4. Revenue Growth: Full-year GAAP and non-GAAP revenue growth is expected to be 7% to 8% .
      5. Non-GAAP Margin Expansion: Annual non-GAAP margin expansion is guided to be 25 to 40 basis points .
      6. Deconversion Revenue: Guidance for deconversion revenue is $16 million for fiscal 2025 .
      7. Q1 Non-GAAP Revenue Growth: Expected to be approximately 5.25% .
      8. Q1 Non-GAAP Margin: Expected to contract by approximately 100 basis points .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Full Year GAAP EPS: Revised upward to $5.15 to $5.19 per share from the previous guidance of $5.09 to $5.13 per share .
      2. Deconversion Revenue: Reiterated full year guidance of $16 million .
      3. Non-GAAP Revenue Growth: Expected to potentially have a bias towards the lower end of the 7.4% to 8.0% growth range .
      4. Non-GAAP Margin Expansion: Increased annual non-GAAP margin expansion guidance to 45 to 50 basis points compared to the previously provided 35 to 40 basis points .
      5. Full Year Tax Rate Estimate: Remains at 23.5% .
      6. Free Cash Flow Conversion: Increased guidance to 70% to 75% from the previous commentary of 60% .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue Growth:
        • Full year non-GAAP revenue growth is expected to be 7.4% to 8.0%, compared to the previous guidance of 7.2% to 8.2% .
        • Full year GAAP revenue growth is expected to be 6.6% to 7.2% for fiscal 2024 .
      2. Margin Expansion: Annual non-GAAP margin expansion is expected to be 35 to 40 basis points, compared to the previous guidance of 30 to 35 basis points .
      3. Tax Rate: The full year tax rate is expected to be approximately 23.5%, with a potential bias slightly higher .
      4. Earnings Per Share (EPS): Full year guidance for GAAP EPS is revised upwards to $5.09 to $5.13 per share, from the previous guidance of $4.98 to $5.04 per share .
      5. Deconversion Revenue: Full year deconversion revenue guidance is reiterated at $16 million .
      6. Free Cash Flow Conversion: The full year guidance of 60% free cash flow conversion is reiterated .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Fidelity National Information Services, Inc.; competes with Jack Henry's core solutions by providing information and transaction processing solutions to banks and credit unions .
    • Fiserv, Inc.; competes with Jack Henry's core solutions by providing information and transaction processing solutions to banks and credit unions .
    • Corelation, Inc.; competes with Jack Henry's core solutions by providing information and transaction processing solutions to banks and credit unions .
    • Finastra; competes with Jack Henry's core solutions by providing information and transaction processing solutions to banks and credit unions .