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JH

JACK HENRY & ASSOCIATES INC (JKHY)·Q1 2026 Earnings Summary

Executive Summary

  • Strong quarter with GAAP revenue $644.7M (+7.3% YoY) and GAAP EPS $1.97 (+21.1% YoY); non-GAAP adjusted revenue $636.1M (+8.7% YoY) and non-GAAP operating margin 27.2% (+227 bps YoY) .
  • Revenue and EPS exceeded Wall Street consensus; revenue beat by ~$9.1M (~1.4%) and EPS beat meaningfully versus S&P Global “Primary EPS” consensus (1.65)*, supported by strong processing growth and disciplined cost management .
  • Guidance raised: FY26 GAAP revenue $2.491–$2.514B, GAAP EPS $6.38–$6.49, deconversion revenue lifted to $20M; non-GAAP revenue growth now 6–7% and non-GAAP margin expansion guided to +30–50 bps .
  • Strategic catalysts: accelerating platform innovation (Tap‑to‑Local; Rapid Transfers), stablecoin proof‑of‑concept (USDC), and Victor Technologies acquisition expanding PaaS; management tone confident on demand and pipeline .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP revenue growth and margin expansion exceeded August outlook; “record first‑quarter financial results” with adjusted revenue +8.7% and adjusted operating margin 27.2% .
  • Processing growth broad‑based: card (+9.0%), transaction & digital (+13.9%), PayCenter (+12.1%); services supported by cloud (+8.0%) and Connect timing tailwind .
  • Platform innovation/SMB momentum: Tap‑to‑Local rolling out (initial 40 clients), Rapid Transfers live at 48 clients with 126 in implementation, and faster payments volumes +55% YoY; management highlighted rapid development velocity .

What Went Wrong

  • Pricing compression from large renewals last year remains a headwind embedded in FY26 guide, though mitigation efforts are stabilizing it; management refrained from quantifying impact .
  • Connect timing lifted Q1 but will reduce Q2 relative to the full‑year cadence; SG&A inflated by conference costs and professional services .
  • Hardware/licenses softness continues as non-core areas contract, and deconversion revenue (outside operational control) creates GAAP noise despite exclusion from non‑GAAP metrics .

Financial Results

GAAP Results vs Prior Quarters

MetricQ3 FY25 (Mar 31, 2025)Q4 FY25 (Jun 30, 2025)Q1 FY26 (Sep 30, 2025)
Revenue ($USD Thousands)$585,087 $615,372 $644,738
Operating Income ($USD Thousands)$138,740 $155,697 $184,065
Operating Margin (%)23.7% 25.3% 28.5%
Net Income ($USD Thousands)$111,108 $127,604 $143,986
Diluted EPS ($USD)$1.52 $1.75 $1.97

Non‑GAAP Adjusted Results vs Prior Quarters

MetricQ3 FY25Q4 FY25Q1 FY26
Adjusted Revenue ($USD Thousands)$575,443 $594,877 $636,112
Adjusted Operating Income ($USD Thousands)$131,889 $137,759 $173,168
Adjusted Operating Margin (%)22.9% 23.2% 27.2%
Adjusted Net Income ($USD Thousands)$105,902 $113,971 $135,704

Revenue vs Wall Street Consensus (S&P Global)

MetricQ1 FY26 Consensus*Q1 FY26 ActualSurprise ($)Surprise (%)
Revenue ($USD)$635,646,140*$644,738,000 ~$9,091,860~1.4%
Primary EPS ($USD)1.65*1.8613*~0.2113~12.8%
Values marked with * retrieved from S&P Global.

Segment Revenue (GAAP)

SegmentQ1 FY25 ($USD Thousands)Q1 FY26 ($USD Thousands)
Core$194,287 $195,293
Payments$211,923 $230,894
Complementary$176,281 $194,217
Corporate & Other$18,491 $24,334
Total$600,982 $644,738

KPIs

KPIQ1 FY26YoY / Context
Recurring revenue>91% of total —
Cloud revenue growth+7% Cloud ~30% of total revenue
Private cloud penetration77% of core clients 5–6 years runway of migrations
Private cloud migrations signed7 (incl. $11B CU, $8B bank) Asset size of migrations up materially
New competitive core wins4 (one >$1B assets) Target ~50 for FY26
Banno registered users14.7M 12.7M prior year (+15%)
Faster payments adoptionZelle FIs +20%, RTP +25%, FedNow +32% Volumes +55% YoY
Rapid Transfers48 live; 126 in implementation —
Tap‑to‑Local rolloutInitial 40 clients —
Deconversion revenue$8.6M Guidance raised to $20M
Free Cash Flow (Q1)$69.5M Operating cash conversion 83.8%

Guidance Changes

MetricPeriodPrevious Guidance (Aug 19, 2025)Current Guidance (Nov 4–5, 2025)Change
GAAP Revenue ($B)FY26$2.475–$2.504 $2.491–$2.514 Raised
GAAP Operating Margin (%)FY2624.0–24.2 23.9–24.1 Maintained/Refined
GAAP EPS ($)FY26$6.32–$6.44 $6.38–$6.49 Raised
Non‑GAAP Adjusted Revenue ($B)FY26$2.459–$2.488 $2.465–$2.488 Raised lower end
Non‑GAAP Adjusted Operating Margin (%)FY2623.4–23.6 23.5–23.7 Raised
Non‑GAAP Margin Expansion (bps)FY26—+30–50 bps New/raised
Deconversion Revenue ($M)FY26$16 $20 Raised
Acquisition revenue contrib. ($M)FY26—~$6 (Victor) New
GAAP Tax Rate (%)FY26—23.75% New
Free Cash Flow conversion (%)FY2685–100% (framework) 85–100% (bias to high end) Maintained, stronger bias
Dividend (quarterly, $/share)Q2 FY26—$0.58 (payable Dec 23, 2025) Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
AI utilization/process efficiencyFocus on modernization and efficiency >100 internal AI use cases; helping control headcount growth Improving
Private cloud migrationsOngoing migrations; strong cloud growth 7 migrations signed; 77% penetration; larger asset clients Improving
Pricing compression in renewalsNoted headwind in FY26 outlook Stabilizing via revised sales ops/pricing processes Improving
Faster paymentsGrowth momentum Zelle/RTP/FedNow adoption up; volumes +55% YoY Accelerating
SMB solutions (Tap‑to‑Local, Rapid Transfers)“Now live” entering FY26 Tap‑to‑Local initial 40 clients; Rapid Transfers 48 live/126 in flight Scaling
Stablecoin strategyNot highlighted in prior PRsUSDC proof‑of‑concept completed in <2 weeks; platform supports 9 decimal places; cross‑border via Banno Emerging
Deconversion/M&A dynamicsAcceleration in FIs M&A noted Q1 deconversion $8.6M; FY26 deconversion guidance to $20M Elevated
Outside‑the‑base sellingStrategy to expand reach Companion apps enable sales beyond JKHY base; Banno to sell outside base in Jan 2026 Expanding

Management Commentary

  • “We produced record first‑quarter financial results with non‑GAAP revenue of $636 million, up 8.7%... significantly exceeds the 7–7.5% increase we anticipated in August.” — Greg Adelson, CEO .
  • “We just completed a proof of concept... to allow financial institutions to send and receive USDC... the new Jack Henry Platform supports nine decimal places...” — Greg Adelson .
  • “Rapid Transfers is receiving strong initial reviews with 48 clients now live and 126 more in various stages of implementation.” — Greg Adelson .
  • “Strong growth in key areas of our non‑GAAP revenue, resulting in significant leverage to non‑GAAP operating income and free cash flow.” — Mimi Carsley, CFO .
  • “We are increasing full‑year guidance... non‑GAAP revenue annual growth rate guidance... 6%–7%... non‑GAAP margin expansion to a range of 30–50 basis points.” — Mimi Carsley .

Q&A Highlights

  • Margin sustainability: Management expects consistent full‑year margin expansion driven by spending control, limited headcount growth, and AI efficiencies; quarterly cadence impacted by timing .
  • Competitive environment/core consolidation: Pipeline healthy; willing/able to scale capacity and leverage AI in RFPs; sees potential uptick in activity but timing uncertain .
  • Pricing compression mitigation: Operational changes in sales/finance stabilizing the headwind; early evidence from Q4 FY25 and Q1 FY26 performance .
  • Deconversion and recurring impact: Convert‑merge activity “almost double” in banking segment; expect ~50 core wins FY26; deconversion guidance conservative and updated through year .
  • Victor acquisition: Expands embedded payments/PaaS, bank‑fintech partnerships, treasury use cases; pipeline growing rapidly with near‑term wins .

Estimates Context

  • Q1 FY26 revenue and EPS beat consensus: Revenue $644.7M vs $635.6M consensus*; “Primary EPS” 1.8613 vs 1.65 consensus*; GAAP diluted EPS reported at $1.97 .
  • FY26 estimates likely to drift higher on stronger non‑GAAP margin trajectory (+227 bps YoY in Q1) and raised revenue/EPS guidance, though management notes conservative deconversion methodology .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat: Broad‑based growth and disciplined costs delivered revenue/Primary EPS beats and robust non‑GAAP margin expansion; GAAP EPS +21% YoY .
  • Raised guide under conservative deconversion methodology suggests upside skew as activity is confirmed through the year; GAAP EPS now $6.38–$6.49 .
  • Multi‑year innovation cycle: Rapid execution (USDC PoC; Tap‑to‑Local; Rapid Transfers) positions JKHY to capture SMB, faster payments, and embedded finance demand .
  • Platform reach expanding beyond core base (companion apps; Banno outside base in Jan 2026), widening TAM and diversifying revenue streams .
  • Private cloud conversions remain a durable revenue uplift driver with rising average client asset size; 77% penetration leaves runway .
  • Cash generation intact: Q1 FCF $69.5M and FY26 FCF conversion guided 85–100% (bias high), aided by favorable tax legislation .
  • Near‑term trading: Expect focus on Q2 cadence (Connect timing headwind) and monitoring deconversion updates, faster payments volumes, and SMB solution adoption as incremental catalysts .