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JH

JACK HENRY & ASSOCIATES INC (JKHY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered solid top-line and earnings growth: revenue $573.85M (+5.2% YoY), GAAP EPS $1.34 (+6.2% YoY); non-GAAP adjusted revenue +6.1% YoY and adjusted operating margin 21.5% .
  • Sequentially, results were seasonally softer vs Q1 (revenue -4.5% QoQ; EPS -17.8% QoQ) amid higher personnel costs and hardware headwinds, while processing and cloud remained strong .
  • FY2025 guidance was reiterated: GAAP revenue $2.369–$2.391B, GAAP operating margin 23.0–23.2%, GAAP EPS $5.78–$5.87; non-GAAP adjusted revenue $2.353–$2.375B and adjusted margin 22.7–22.8% .
  • Strategic updates: record Q2 sales attainment (second consecutive year), 28 core renewals in Q2 (46 YTD), Visa Direct launch via Rapid Transfers, and a 6% dividend increase to $0.58 per share—key sentiment catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • Record sales attainment and strong renewals: 11 competitive core wins in Q2; 28 core renewals in Q2 (46 YTD), core retention rate >99% ex-M&A; “record sales attainment in Q2 for the second consecutive year” .
    • Key growth engines performing: processing revenue +7% YTD and cloud (public + private) +11% in Q2; non-GAAP adjusted operating income +7.3% YoY .
    • Payments rails expansion and fraud mitigation: 338 Zelle, 357 RTP (~42% of live RTP clients), 339 FedNow (~28% of live FedNow clients); 30 new faster-payment fraud modules signed in Q2 .
    • Management tone: “laser-focused on second half performance” with pipeline and demand environment supportive of full-year outlook .

  • What Went Wrong

    • Sequential decline vs Q1: revenue -4.5% QoQ and EPS -17.8% QoQ on seasonal dynamics and higher personnel costs; non-GAAP margin at 21.5% despite operating leverage .
    • Hardware and certain non-key revenues were a headwind; hardware down $2M in the quarter and non-key revenue down 1% ex-hardware, moderating services & support growth .
    • Cost of revenue and OpEx pressure: cost of revenue +3.7% YoY (direct costs, personnel), R&D +15.8% YoY, SG&A +9.4% YoY in Q2 .

Financial Results

MetricQ2 2024 (oldest)Q1 2025Q2 2025 (newest)
Revenue ($USD Millions)$545.70 $600.98 $573.85
GAAP Operating Income ($M)$118.97 $151.28 $123.00
Operating Margin (%)21.8% 25.2% 21.4%
Net Income ($M)$91.97 $119.19 $97.85
Diluted EPS ($)$1.26 $1.63 $1.34
Cash & Equivalents ($M, end)$26.71 $43.21 $25.65
Total Debt ($M, end)$255.00 $140.00 $150.00

Segment revenue and margins (Q2 YoY):

SegmentQ2 2024 GAAP Rev ($M)Q2 2025 GAAP Rev ($M)YoY %Q2 2024 Segment Margin (%)Q2 2025 Segment Margin (%)
Core$165.60 $173.17 +4.6% 58.1% 59.2%
Payments$203.84 $214.84 +5.4% 45.2% 46.6%
Complementary$152.47 $160.94 +5.6% 58.8% 60.6%
Corporate & Other$23.80 $24.90 +4.7% (224.3)% (237.3)%

KPIs and operating drivers:

KPIQ2 2025Q1 2025YoY/Context
Services & Support Rev ($M)$323.03 $356.68 +3.5% YoY; growth in data processing & hosting +11.8%; deconversion down $4.81M
Processing Rev ($M)$250.82 $244.30 +7.3% YoY; card +6.5%, transaction & digital +10.0%, payment processing +10.1%
Non-GAAP Adj Rev ($M)$573.78 $597.29 +6.1% YoY (Q2)
Non-GAAP Adj Op Margin (%)21.5% 24.7% +20 bps YoY (Q2)
Recurring Revenue (%)92% of total (ex deconversion) 93% Stable high-quality mix
Private Cloud Adoption75% of core clients 73% (FY2024 exit) Ongoing migrations
Banno Registered Users13.2M 12.7M +20% YoY from 11M
Faster Payments ClientsZelle 338; RTP 357 (~42% of live); FedNow 339 (~28% of live) Zelle 324; RTP 326 (~43% of live); FedNow 290 (~36% of live) Expansion across rails
Deconversion Revenue ($M)$0.1 (Q2) $3.70 (Q1) FY guide $16M
Cash from Ops ($M, YTD)$206.54 (six months) $116.90 (Q1) Strong cash generation
Free Cash Flow ($M, YTD)$87.74 (six months) $59.16 (Q1) Conversion normalization

Why results moved:

  • Growth was driven by cloud (data processing & hosting) and processing (card, digital, payment processing), partially offset by lower deconversion and hardware revenues; cost of revenue rose with direct costs and personnel headcount, and R&D/SG&A reflected higher personnel and license fees .

Guidance Changes

MetricPeriodPrevious Guidance (Q1 FY2025)Current Guidance (Q2 FY2025)Change
GAAP Revenue ($B)FY2025$2.369–$2.391 $2.369–$2.391 Maintained
GAAP Operating Margin (%)FY202523.0–23.2 23.0–23.2 Maintained
GAAP EPS ($)FY2025$5.78–$5.87 $5.78–$5.87 Maintained
Non-GAAP Adjusted Revenue ($B)FY2025$2.353–$2.375 $2.353–$2.375 Maintained
Non-GAAP Adjusted Op Margin (%)FY202522.7–22.8 22.7–22.8 Maintained
Deconversion Revenue ($M)FY2025$16 $16 Maintained
Tax Rate (%)FY202524% (used in non-GAAP EPS calc) 24% (used in non-GAAP EPS calc) Maintained
Dividend per Quarter ($/sh)Current$0.547 prior; increased to $0.58 on Feb 10, 2025 $0.58 Raised

Note: Subsequent Q3 FY2025 update raised margins/EPS and modestly lowered revenue ranges—context for trajectory, but Q2 guidance was maintained .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024 and Q1 FY2025)Current Period (Q2 FY2025)Trend
Technology modernization & public cloud coreRoadmap execution; deposit-only core targeted for 1H CY2026; component rollouts incl. wires, data broker, entitlements; robust CEO forum feedback On track; beta for exception processing & GL; confidence that regulatory environment may be more conducive to public cloud over next few years Consistent execution; increasing regulatory optimism
SMB strategy and MoovAnnounced partnership; targeted May 2025 early adopters; demo at client conference; merchant acquiring features Visa Direct via Rapid Transfers announced; testing starting; revenue impact meaningful from FY26 Commercialization steps; monetization ramps FY26
Payments rails adoptionGrowing Zelle/RTP/FedNow client counts; fraud modules adoption accelerating Further adoption; more “send” use cases, PayCenter revenue contribution noted in processing Expansion and monetization of real-time
Product rationalizationFocused review to sunset/cash-cow/divest lower-growth products Active across three paths (divest/sunset/cash-cow) to improve margin and focus Ongoing portfolio optimization
Cloud migrationsPrivate cloud at 73% by FY2024 end; runway for 3–5 years, larger clients moving Private cloud at 75%; continued migrations at 40–45 per year Steady migrations; larger client impact
Open banking/1033 & securityEliminated screen scraping; API integrations; Data Broker rollout phases Continued emphasis on fraud mitigation (Financial Crimes Defender) tied to faster payments Compliance-ready integrations; fraud tooling
Macro/regulatoryClients optimistic; demand environment favorable; deposit/efficiency priorities Optimism persists; potential lessening of scrutiny; priorities unchanged (deposits, loans, efficiency) Stable demand; constructive regulatory view

Management Commentary

  • CEO: “We continued our positive sales momentum with record sales attainment in Q2 for the second consecutive year while maintaining a robust sales pipeline… strong demand… substantial progress with our technology modernization strategy.”
  • CFO: “Our second quarter results included non-GAAP revenue growth of over 6%, led by our key revenue areas of public and private cloud and processing… leverage provided by our SaaS business model led to non-GAAP operating income growth of over 7%.”
  • CEO on renewals: “In Q2, we closed 28 core renewals… multiple banks with over $10B in assets including a $17B bank… re-signed for 7 years, as well as moved from in-house to outsource processing… core retention rate, excluding M&A, remains over 99%.”
  • CFO on mix: “Quarterly total reoccurring revenue, excluding deconversion revenue, was 92%… quarterly key revenue was 76% of total revenue and grew at 9%.”
  • CEO on Visa Direct/Moov: “This is the first phase… will enable banks and credit unions to offer innovative digital payment solutions, attract and deepen relationships, and grow deposits.”

Q&A Highlights

  • Competitive landscape at low end: management not seeing unusual pricing pressure; commentary suggests competitor references are more about renewals than takeaways from JKHY .
  • Moov revenue timing: meaningful contribution expected in FY2026; small impact possible in FY2025 depending on rollout .
  • Renewals pricing dynamics: some near-term price compression offset by bundling additional products; incorporated in guidance .
  • Deconversion revenue weighting: FY $16M affirmed; likely even split across Q3/Q4 though timing can shift .
  • Real-time payment volumes: growing “send” transactions; PayCenter contributing to processing line; fraud module reduces faster payment fraud .
  • Private cloud adoption: 75% of core clients; continued migrations at 40–45 per year; some holdouts may wait for public cloud core .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2025 EPS and revenue was unavailable due to data access limitations during this analysis. As a result, explicit beat/miss vs Street cannot be determined at this time. We will update when S&P Global data is accessible.

Key Takeaways for Investors

  • Durable recurring model: 92–93% recurring revenue, with “key revenue” (cloud + processing) 74–76% of total and growing ~9%—supports multi-year visibility and margin expansion .
  • Cloud and payments momentum: cloud (public/private) and payment processing are secular growth drivers; real-time rails adoption and fraud solutions deepen monetization vectors .
  • Sales execution and retention: record sales attainment, strong renewals with larger institutions, >99% core retention ex-M&A—reduces churn risk and expands installed base value .
  • FY2025 guidance intact: revenue/EPS/margins reiterated post-Q2, with management confidence in a stronger second-half cadence—positioning for potential sentiment re-rating as execution continues .
  • Cash discipline and shareholder returns: solid operating cash flow; dividend raised 6% to $0.58 per share; continued debt reduction supports capital flexibility .
  • Watch catalysts: commercialization of Rapid Transfers (Visa Direct) and SMB acquiring (Moov), continued faster payments “send” use cases, product rationalization benefits—likely to impact FY2026 revenue/margin trajectory .
  • Risk monitor: hardware softness and personnel cost pressures; deconversion revenue timing tied to industry consolidation—guidance assumes $16M in FY2025 deconversion revenue .