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JH

JACK HENRY & ASSOCIATES INC (JKHY)·Q4 2025 Earnings Summary

Executive Summary

  • Jack Henry delivered a clean beat in Q4 FY2025 on revenue and EPS, with GAAP revenue of $615.37M vs Street $605.67M and GAAP diluted EPS of $1.75; on an S&P “Primary EPS” basis, actual was $1.56 vs $1.50 consensus. Bold beat on both lines, aided by stronger core/complementary growth and operating leverage [*S&P Global].
  • Operating margin expanded to 25.3% (+290 bps YoY) on disciplined cost control and mix shift to recurring cloud/processing; non-GAAP adjusted operating margin was 23.2% (+150 bps YoY) .
  • FY2026 guidance initiated: GAAP revenue $2.475–$2.504B, GAAP operating margin 24.0–24.2%, GAAP EPS $6.32–$6.44; non-GAAP adjusted revenue $2.459–$2.488B and adjusted operating margin 23.4–23.6% (new guide) .
  • Near-term cadence: management flagged a $16M YoY revenue headwind from a third‑party agreement (mostly Q1), and quarterly non‑GAAP revenue expected ~100 bps above FY midpoint in Q1 and ~100 bps below in Q2; Connect event shifts from Q2 FY2025 to Q1 FY2026, modestly redistributing revenues/expenses .
  • Strategic catalysts: “Rapid Transfers” and Tap2Local are live/entering rollout and support SMB deposit/fee strategies; continued market share gains with 51 core wins in FY2025 and ongoing pivot to larger institutions underpin medium‑term thesis .

What Went Well and What Went Wrong

What Went Well

  • Record revenue and operating income for FY2025; Q4 GAAP revenue grew 9.9% YoY and operating income rose 23.9% YoY on strength in core, complementary, and cloud/processing .
  • Mix shift: recurring cloud (+11.8% in Q4 services & support) and processing (card +6.7%, transaction/digital +16.4%, payment processing +10.0%) drove scalable margin and non-GAAP margin expansion .
  • Management execution and pipeline: “We again produced record revenue and operating income… strong wins… healthy pipeline… well positioned for long‑term growth” — CEO Greg Adelson (prepared remarks) ; CFO emphasized “compounded margin expansion” with non-GAAP operating income up nearly 10% for the year .

What Went Wrong

  • Deconversion revenue added lumpiness: Q4 deconversion revenue was $20.5M (excluded from non‑GAAP), complicating YoY comparisons and masking core operational run‑rate in services & support .
  • Non-key revenue headwinds: license and hardware contraction tempered services & support; management previously cited hardware delays and some post‑core project timing slips (Q3 call) .
  • Payments sub-mix pressures: management noted lower growth in risk management and third‑party revenue in Payments and a restructured third‑party agreement imposing a $16M FY‑over‑FY revenue headwind (minimal margin impact) .

Financial Results

Headline Results vs prior periods and estimates

MetricQ4 2024Q3 2025Q4 2025Consensus (Q4 2025)vs Consensus
Revenue ($USD Millions)$559.91 $585.09 $615.37 $605.67 [*S&P Global]Beat ~$9.7M
GAAP Diluted EPS ($)$1.38 $1.52 $1.75 n/an/a
“Primary EPS” (S&P) ($)n/an/a$1.56 [*S&P Global]$1.50 [*S&P Global]Beat ~$0.06
Operating Income ($USD Millions)$125.63 $138.74 $155.70 n/an/a
Operating Margin (%)22.4% 23.7% 25.3% n/an/a

Notes: Consensus values from S&P Global; Primary EPS basis may differ from GAAP diluted EPS. Values retrieved from S&P Global.

Segment Revenue (GAAP)

SegmentQ4 2024 ($USD Millions)Q4 2025 ($USD Millions)
Core$172.04 $189.75
Payments$212.59 $229.29
Complementary$155.15 $175.13
Corporate & Other$20.13 $21.20
Total$559.91 $615.37

KPIs and Operating metrics

KPIQ4 2025Q4 2024FY 2025FY 2024
Deconversion Revenue ($USD Millions)$20.50 $6.69 $33.91 $16.55
Non-GAAP Adjusted Revenue ($USD Millions)$594.88 $553.22 $2,341.38 $2,198.99
Non-GAAP Adjusted Operating Income ($USD Millions)$137.76 $120.03 $541.05 $492.69
Non-GAAP Adjusted Operating Margin (%)23.2% 21.7% 23.1% 22.4%
Non-GAAP EBITDA ($USD Millions)$189.25 $170.72 $745.80 $692.59
Cash & Equivalents ($USD Millions)$101.95 $38.28 ——
Deferred Revenue ($USD Millions)$363.37 $388.93 ——
Free Cash Flow ($USD Millions)——$410.34 $336.52
ROIC (%)——22.1% 19.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Revenue ($USD Billions)FY 2026N/A (new)$2.475–$2.504 Initiated
GAAP Operating Margin (%)FY 2026N/A (new)24.0–24.2 Initiated
GAAP EPS ($)FY 2026N/A (new)$6.32–$6.44 Initiated
Non-GAAP Adjusted Revenue ($USD Billions)FY 2026N/A (new)$2.459–$2.488 Initiated
Non-GAAP Adjusted Operating Margin (%)FY 2026N/A (new)23.4–23.6 Initiated
Deconversions (Revenue) ($USD Millions)FY 2026N/A (new)$16 (assumption) Framework set
Deconversion Costs ($USD Millions)FY 2026N/A (new)$4 Framework set
Gain on Sale of Assets ($USD Millions)FY 2026N/A (new)$(7) Framework set
Quarterly cadence (non-GAAP revenue)FY 2026N/AQ1 ~+100 bps vs midpoint; Q2 ~–100 bps vs midpoint; Q3 slightly weaker; Q4 slightly stronger Cadence outlined
Dividend per share ($)Ongoing$0.58 (raised Feb 2025) $0.58 (declared Aug 2025) Maintained

Additional guidance context: A restructured third‑party agreement creates a $16M FY‑over‑FY revenue headwind ($12M in Q1 FY2026), with minimal margin impact; already contemplated in FY2026 guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
Technology modernization (public cloud)On track; deposit-only public cloud core targeted 1H CY2026; multiple platform components live/beta Ahead of schedule; 15 components live; deposit-only core 1H CY2026 CEO reiterates product innovation; Rapid Transfers/Tap2Local live Sustained progress, execution confidence
SMB strategy (Rapid Transfers, merchant acquiring with Moov)Visa Direct/Mastercard Send integrations; testing starting; merchant acquiring to early adopters May 2025 Closed betas, rollout plans; broad interest incl. non‑JKHY cores Tap2Local initial launch and beta; rollout to >1,000 Banno institutions Commercialization ramping
Payments rails & fraudGrowing Zelle/RTP/FedNow institutions; FCD Faster Payment Fraud module traction Continued rail growth; faster payments send use cases; fraud module installs rising Payments segment grew 7.9% GAAP in Q4; risk/third‑party revenue slower; third‑party restructuring headwind Mixed: volume growth vs sub‑mix headwinds
Macro/consumer (debit softness; hardware/project timing)Non‑recurring/hardware low visibility; cautious stance Debit softness emerging; hardware down; post‑core delays into FY2026 Services & support strong but license/hardware contraction noted Stabilizing; still watch hardware/post‑core timing
M&A & deconversionsExpect consolidation; FY2025 deconversion guide $16M Acceleration; Q4 deconversions to rise; FY guide $22–$28M Q4 deconversion revenue $20.5M; FY total $33.9M; conservative deconversion approach primary driver of lower FY2026 EPS growth Elevated activity; conservative guidance methodology
Cloud migration75% of core clients on private cloud; 40–45 migrations/year 76% private cloud; larger migrations increasing Cloud revenue +11.8% (Q4 services & support); recurring mix supporting margins Healthy secular shift
Regulatory/tariffsDialogue with regulators; optimism; service differentiation Industry optimistic; focus on fraud/digital efficiency Federal tax law changes (IRC 174, bonus depreciation) to favor FY2026–FY2027 FCF conversion (85–100%) Tailwind to FCF conversion

Management Commentary

  • CEO: “We again produced record revenue and operating income in fiscal year 2025… strong fourth‑quarter sales wins… success winning larger financial institutions… well positioned for long‑term growth” — Greg Adelson .
  • CFO: “Strong growth in strategic recurring areas of revenue, led by public and private cloud at 11% and processing at nearly 8%… disciplined approach to controlling costs led to non‑GAAP operating income growth of nearly 10%, delivering on compounded margin expansion” — Mimi Carsley .
  • Analyst FAQ (Company): FY2026 cadence around midpoint; industry consolidation pressuring short‑term deconversion dynamics; $16M headwind from a restructured third‑party agreement (mostly Q1); tax legislation expected to restore historical FCF conversion (85–100%) .

Q&A Highlights

  • Hardware/post‑core timing: Management emphasized delays concentrated in non‑recurring hardware and select post‑core products, not in core migrations; some customers delay hardware pending private cloud moves .
  • Deconversions trajectory: Acceleration in industry consolidation; FY2025 deconversion revenue raised to $22–$28M (actual FY came in at $33.9M), with broader FY2026 implications; convert‑merge work recognized later .
  • Payments volumes and mix: Card volumes tracked broader trends; faster payments (PayCenter) “send” use cases becoming meaningful; mix effects across Payments sub‑lines .
  • Competitive positioning and pricing: Win rates strong, particularly up‑market; some renewal‑driven price compression offset by product attach over time .
  • Cloud penetration/margins: Private cloud at mid‑70s% penetration; secular migrations continue, underpinning recurring revenue and operating leverage .

Estimates Context

  • Q4 FY2025 consensus (S&P Global): Revenue $605.67M vs actual $615.37M (beat); Primary EPS $1.50 vs S&P “Primary EPS” actual $1.56 (beat). GAAP diluted EPS reported was $1.75 (different basis than S&P Primary EPS). Values retrieved from S&P Global.
    | Metric | Q4 2025 Consensus | Q4 2025 Actual (S&P basis) | Source | |--------|--------------------|----------------------------|--------| | Revenue ($USD Millions) | 605.67 [*S&P Global] | 615.37 [*S&P Global] | S&P Global, Company PR | | Primary EPS ($) | 1.50 [*S&P Global] | 1.56 [*S&P Global] | S&P Global | | GAAP Diluted EPS ($) | n/a | 1.75 | Company PR |

Values retrieved from S&P Global.

Implication: Street likely revises FY2026 models for margin resilience and recurring mix, while embedding the $16M headwind and quarterly cadence; EPS basis differences (GAAP vs “Primary”) should be aligned in comps going forward .

Key Takeaways for Investors

  • Quality beat: Revenue and EPS outperformed on both GAAP and S&P “Primary EPS” bases; margin expansion confirms operating leverage in recurring cloud/processing [*S&P Global].
  • Guidance de‑risked: FY2026 outlook initiates with explicit deconversion, cost, and gain assumptions; quarterly cadence and third‑party headwind transparent, limiting surprise risk .
  • SMB monetization runway: Rapid Transfers and Tap2Local broaden fee/deposit strategies for banks/credit unions on Banno; early commercialization supports medium‑term fee income growth .
  • M&A creates churn but net tailwinds: Elevated deconversions drive near‑term lumpiness and EPS optics, but Jack Henry’s positioning in winner‑mergers and attach opportunities should offset over time .
  • Cash discipline intact: FY2025 FCF conversion ~90% (ex proceeds adjustment) and ROIC 22.1%; federal tax changes position FY2026–FY2027 for 85–100% FCF conversion .
  • Watch items: Payments sub‑mix (risk/third‑party), hardware/post‑core timing, and debit vs credit mix; these are manageable within current guidance envelope .
  • Trading lens: Beat + new guide with clear cadence/headwind disclosures and product catalysts should support multiple stability; monitor Q1 FY2026 (third‑party headwind) and SMB rollout milestones for near‑term narrative shifts .