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JH

JACK HENRY & ASSOCIATES INC (JKHY)·Q3 2025 Earnings Summary

Executive Summary

  • Solid quarter with revenue growth and strong margin expansion: GAAP revenue $585.1M (+8.6% YoY), GAAP EPS $1.52 (+27.6% YoY); non-GAAP operating margin expanded ~210 bps YoY to 22.9% as mix shifted toward higher‑margin cloud and processing .
  • Mixed vs estimates: EPS beat consensus (Primary EPS $1.45 actual vs $1.33 est; GAAP EPS $1.52) while revenue was slightly below ($585.1M vs $587.7M est). Beat driven by cost discipline and mix; miss tied to softer non-key revenue (hardware, project delays) and cautious consumer debit volumes . Estimates from S&P Global*.
  • Guidance pivot: Revenue guidance lowered on hardware and project timing, but operating margin and EPS guidance raised on higher incremental margins and expense control; FY25 GAAP EPS now $6.00–$6.09 (from $5.78–$5.87), GAAP operating margin 23.5–23.7% (from 23.0–23.2%) .
  • Strategic traction continues: 28 YTD new core wins (11 in Q3) totaling $30B in assets; faster payments and Banno adoption rising; 76% of clients now on Jack Henry private cloud; public cloud‑native deposit core targeted 1H’26 .
  • Potential stock catalysts: raised margin/EPS guide, accelerating core wins and faster payments adoption; offset by near‑term headwinds in hardware/consulting and debit volumes that drove lower revenue guide .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and earnings outperformance: Non-GAAP operating margin rose to 22.9% (+207 bps YoY); GAAP EPS $1.52 up 27.6% YoY on mix and cost control .
  • Key revenue engines accelerated: Cloud (data processing & hosting) +12% YoY; processing +8.9% YoY; together ~76% of total revenue in Q3 and grew ~9.8% YoY, supporting guidance raise for margins/EPS .
  • Sales and platform momentum: 28 YTD core wins (11 in Q3) totaling $30B in assets; Banno registered users >13.7M (+18% YoY); growing adoption of Zelle (354), RTP (384), FedNow (370) .

What Went Wrong

  • Revenue headwinds in non-key items: License and hardware softness (hardware −$4M YoY) and delayed non‑recurring projects tempered growth; non‑GAAP revenue growth 7% would have been 7.8% ex-hardware .
  • Guide cut for revenue amid macro caution: Lowered FY25 GAAP/non‑GAAP revenue outlook on hardware weakness, delayed implementations, and risk of softer transaction volumes on cautious consumers .
  • Early signs of debit pressure: Management noted softening in debit card transactions and mix shift risk toward credit; introduced conservatism for Q4 .

Financial Results

Core Metrics vs Prior Year, Prior Quarter, and Margins

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$538.6 $573.8 $585.1
Diluted EPS (GAAP)$1.19 $1.34 $1.52
Operating Margin (GAAP)20.8% 21.4% 23.7%
Operating Margin (Non‑GAAP)20.8% 21.5% 22.9%
Net Income ($USD Millions)$87.1 $97.8 $111.1

Actual vs S&P Global Consensus – Q3 2025

MetricConsensus EstimateActual
Revenue ($USD)$587.7M*$585.1M
Primary EPS$1.3349*$1.4505* (GAAP EPS $1.52)

Values with asterisk (*) retrieved from S&P Global.

  • EPS beat; revenue slight miss. Management attributed strength to higher‑margin mix and expense discipline; shortfall tied to non‑key revenue headwinds and prudent Q4 outlook given debit softness .

Segment Revenue (GAAP)

SegmentQ3 2024 ($M)Q3 2025 ($M)
Core$166.7 $180.7
Payments$201.9 $217.4
Complementary$149.2 $167.4
Corporate & Other$20.8 $19.5
Total$538.6 $585.1
  • YoY growth by segment (GAAP): Core +8.4%, Payments +7.7%, Complementary +12.2%, Corporate & Other −6.2% .

KPIs and Operating Mix

KPIQ3 2025
Recurring revenue (ex‑deconversions)92%
Key revenue as % of non‑GAAP revenue78% (Q3); +10% growth YoY
Cloud (data processing & hosting) growth+12% YoY
Processing revenue growth+8.9% YoY
Deconversion revenue$9.6M
Banno registered users>13.7M (+18% YoY)
Faster payments adoptionZelle 354; RTP 384; FedNow 370 clients

Guidance Changes

MetricPeriodPrevious Guidance (Feb 4, 2025)Current Guidance (May 6, 2025)Change
GAAP Revenue ($B)FY25$2.369–$2.391 $2.353–$2.370 Lowered
Non‑GAAP Adjusted Revenue ($B)FY25$2.353–$2.375 $2.331–$2.342 Lowered
GAAP Operating MarginFY2523.0–23.2% 23.5–23.7% Raised
Non‑GAAP Operating MarginFY2522.7–22.8% 23.0–23.1% Raised
GAAP EPSFY25$5.78–$5.87 $6.00–$6.09 Raised
Non‑GAAP EPSFY25$5.65–$5.74 $5.83–$5.87 Raised
Deconversion RevenueFY25$16M $22–$28M Raised
GAAP OpEx ($B)FY25$1.823–$1.836 $1.799–$1.808 Lowered
Non‑GAAP OpEx ($B)FY25$1.820–$1.833 $1.794–$1.801 Lowered
Tax RateFY2524% (used for non‑GAAP EPS) 23% (guide) Lowered
FCF ConversionFY2565–75% 65–75% Maintained
ROICFY25—21–22% New/Updated
DividendNext payment—$0.58/sh payable 6/18/25 (rec 5/29/25) Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 FY25)Current Period (Q3 FY25)Trend
Technology modernization & public cloud coreOn track; deposit‑only core targeted 1H’26; live with multiple platform components Ahead of schedule; 15 components live; deposit-only core still 1H’26 Positive execution
SMB strategy (Moov/Visa/Mastercard)Rapid Transfers in testing; merchant acquiring early adopters by May ’25 Rapid Transfers in closed beta; merchant acquiring beta in June; broad rollout FY26 Progressing
Faster payments adoptionExpanding Zelle/RTP/FedNow; PayCenter use cases ramping Further adoption; “send” volumes rising; fraud controls (FCD) deployments growing Positive
Cloud migration~75% on private cloud; 40–45 migrations/yr pace 76% on private cloud; continued migrations; larger client assets migrating Positive
M&A/deconversionsFY25 deconversions guided to $16M; minimal FY25 impact; potential FY26 lift Q3 deconversions $9.6M; FY25 raised to $22–$28M; FY26 impact could be meaningful Accelerating
Macro/consumer sentimentExpect stronger back half; cautious on card volumes Cautious Q4 outlook; early debit softness; conservative revenue guide More cautious
Product rationalizationOngoing multi‑year (sunsets, divestitures) Continues; non‑key revenue declining, aiding margins Ongoing
Competitive dynamicsStrong win rates; move upmarket; pricing discipline Still strong; single platform for debit/credit noted vs peers Stable/constructive

Management Commentary

  • CEO (press release): “Our third quarter results reflect solid overall performance… strong growth in key revenue areas such as public and private cloud as well as processing… winning deals with larger financial institutions… confident in demand environment, robust sales pipeline, and long-term financial performance.”
  • CFO (press release): “Strong growth in key areas… cloud at 12% and processing at nearly 9%… tempered by mostly non-recurring contraction in licenses and hardware… disciplined approach to controlling costs led to non‑GAAP operating income growth of over 17%.”
  • CEO (call): “We adjusted full year guidance… lowered revenue on macro/nonstrategic items but increased margin expansion and EPS… continuing to win larger competitive core deals… 28 new core wins YTD, 11 in Q3 totaling $30B in assets.”

Q&A Highlights

  • Hardware and project delays: Hardware down ~$4M YoY; several signed non‑recurring projects (post‑core add‑ons, consulting) pushed into FY26; delays are timing, not cancellations; some in-house clients delaying hardware as they evaluate moving to private cloud .
  • Debit vs credit mix: Early debit softness prompted conservatism; historically tougher macro drives shift toward credit; May volume early reads looked better but too few days to infer trend .
  • Deconversions/M&A: Raised FY25 deconversion revenue to $22–$28M; majority are JKHY‑to‑JKHY with modest price tier effects; FY26 could see more impact as approvals progress; convert‑merge services typically spread over contract life .
  • Margin outlook: Non‑GAAP margin +207 bps YoY in Q3; management reiterated long‑term annual compounding expansion and views 25–40 bps as a floor; tight headcount and capex prioritization underpin higher FY25 margin guide .
  • Competitive landscape: Management emphasized single debit/credit processing platform advantage and strong win rates; will walk from uneconomic pricing if needed .

Estimates Context

  • Q3 2025 vs S&P Global consensus: EPS beat (Primary EPS actual $1.4505 vs $1.3349 est); revenue slight miss ($585.1M actual vs $587.7M est). Values retrieved from S&P Global.* Company-reported GAAP EPS was $1.52 and revenue $585.1M .
  • Implications: Street models likely lift FY25/26 margin and EPS on demonstrated operating leverage, while trimming top-line for non‑key revenue softness and prudent debit assumptions into Q4 .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Mix and discipline are driving structurally higher margins; FY25 margin and EPS guidance were raised despite lower revenue outlook—credibility on cost control and pricing remains high .
  • Core franchise momentum (larger assets per win) plus higher cloud/processing penetration should sustain mid‑to‑high single‑digit growth in key revenue, partially offsetting non‑key declines .
  • Near‑term risk skew: debit softness, hardware/project timing, and elevated deconversions (which are EPS/FCF positive but a forward revenue headwind) create quarterly noise; management flagged caution for Q4 .
  • Faster payments (PayCenter) and fraud (FCD) attach are growing and can augment Payments segment beyond traditional debit; watch “send” use cases and FCD module installs for incremental contribution .
  • Cloud migration flywheel (76% private cloud) and public cloud‑native deposit core in 1H’26 are strategic catalysts that can expand TAM and reinforce competitive differentiation .
  • Sales pipeline supports continued core wins and larger FI penetration; expect Q4 core win cadence to step up, with broader attach into complementary products (digital, fraud, account opening) .
  • Capital returns steady: dividend declared at $0.58 per share; FCF conversion guided 65–75% with pathway to rebuild toward historical levels as investment normalizes .

Additional detail and source references:

  • Q3 FY25 press release and financial tables .
  • 8‑K including Item 2.02 and full exhibits .
  • Deconversion revenue press release (and 8‑K) .
  • Q3 FY25 earnings call transcript .
  • Q2 FY25 press release/call for prior‑quarter comps and prior guidance .
  • Q1 FY25 call for trend context .