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Jack Henry & Associates, Inc.
CEO : Mr. David B. Foss

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q4	10.8% YoY	110.3%	21.8%	2023-08-16

Mimi Carsley says,

Quarterly and Full Year Revenue Growth

• GAAP revenue increased 11% for the quarter and non-GAAP revenue increased 8%.
• Full-year non-GAAP revenue grew 8% to over $2 billion.

Services and Support Revenue

• Services and support revenue increased 12% for the quarter and 5% for the full year on a GAAP basis.
• Product delivery and services increased 27% in the quarter.
• Robust growth in private and public cloud offerings, which increased 10% for the quarter and the full year.

Processing Revenue

• Processing revenue saw 10% growth on a GAAP basis for the quarter and the year.
• Healthy growth of 9% on a non-GAAP basis for the quarter and the year.
• Driven by higher card volumes, services, and robust digital demand.

Operating Expenses

• Cost of revenue increased 8% for the quarter and full year, tracking revenue performance.
• R&D expense increased 13% during the quarter, mostly due to higher personnel costs and internal license fees used for innovation.
• SG&A rose 9% for the quarter and 8% for the year due to increases in personnel-related costs.

Net Income and Earnings Per Share

• Net income increased by 22%, resulting in a fully diluted earnings per share of $1.34 for the quarter.

Cash Flow and Capital Allocation

• Operating cash flow for the full year was $382 million, down from $505 million last year due to lower deconversion revenue and higher prepaid expenses.
• Free cash flow was $203 million.
• $75 million of debt was paid down subsequent to fiscal ’23.
• Returned over $172 million to shareholders through share repurchases and dividends.
• Capital allocation priorities include investing in the business, maintaining a strong balance sheet, pursuing high-return acquisitions, and returning capital to shareholders.

Fiscal Year 2024 Guidance

• Guidance for fiscal year 2024 includes $16 million in deconversion revenue.
• Expect minimal fiscal institutional consolidation in the first half of fiscal ’24 with possible acceleration in the second half.
• One-time impact from a Voluntary Early Departure Incentive Program (VEDIP) with $17 million to $18 million in severance-related costs, which will have an approximate negative $0.18 impact on reported GAAP EPS.
• Payrailz acquisition successfully integrated into the payment segment.
• Expect full-year GAAP revenue growth of 6.3% to 7.3%.
• Expect non-GAAP revenue growth of 7.0% to 8.0% with Q1 being the low-point of the year.
• Expect non-GAAP margin expansion of 20 basis points to 25 basis points for the full year.
• Expect full-year GAAP EPS of $4.92 to $4.99 per share.

David Foss says,

Q4 2023 Financial Performance

• Total revenue increased 11% for the quarter and 8% on a non-GAAP basis.
• Deconversion fees were up compared to the previous year’s quarter but down significantly for the full fiscal year.
• The core segment of the business had a solid quarter with revenue increasing by 11%.
• The payment segment performed well with a 9% increase in revenue.
• The complementary solutions businesses saw a robust quarter with an 11% increase in revenue.

Sales Performance

• Record sales bookings in the fourth quarter, setting a new quarterly and annual sales record.
• 16 competitive core takeaways and 19 deals to move existing on-prem core clients to the private cloud environment.
• Strong demand for complementary offerings, especially the digital suite.
• 63 new clients signed for the Banno Digital platform and 19 new clients for the card processing solution in the quarter.

Business Expansion and Growth

• Significant growth in registered users for the Banno Digital suite, with almost 10 million registered users at the end of the fiscal year compared to 3.2 million in July 2020.
• Banno business delivered into general availability, with over 25 banks live and 53 new clients signed in Q4.
• Support for live transactions on the Federal Reserve’s new FedNow instant payment service, with over 100 clients in various stages of implementation.
• Planned release of the Financial Crimes Defender platform for banking and credit union clients.

Rebranding and Recognition

• Corporate rebranding to retire the Symitar, ProfitStars, and Jack Henry Banking brands and go to market as simply Jack Henry.
• Strong results from the rebranding, including a 50% increase in website visits and a 30% increase in social media followers.
• Recognition as a 2023 Climate Leader for efforts to reduce greenhouse gas emissions and as one of America’s Greatest Workplaces by Newsweek.

Employee Engagement and Customer Satisfaction

• High employee engagement scores and belief in Jack Henry’s values.
• Outstanding customer service with average scores of 4.6 out of 5 for overall customer satisfaction and 4.75 out of 5 for satisfaction with customer service representatives.

Future Outlook

• Positive growth and sentiment around technology spending for financial institutions.
• Largest sales pipeline entering a new fiscal year.
• Continued commitment to doing the right thing for constituents and disciplined approach to running the company.
• Optimistic about the future of the company.

Q & A sessions,

Strong Q4 Performance and Revenue Growth

• Q4 sales significantly higher than previous quarters, setting a new record.
• Year-over-year and quarter-to-quarter comparisons showed substantial growth.
• Revenue growth of 7% to 8% expected in the foreseeable future.
• Most revenue is recurring, providing visibility and confidence for continued growth.

Focus on Financial Institutions and Complementary Solutions

• Jack Henry is well-known for its focus on serving community and regional banks, credit unions in the US.
• This focus, along with a strong customer service reputation, has drawn attention and interest.
• New products and technology modernization efforts have further differentiated Jack Henry in the market.
• Slow but steady movement towards Jack Henry due to a clear distinction from competitors.

Technology Solutions Driving Interest

• Customers are seeking technology to drive revenue growth, deposit growth, and efficiency.
• Jack Henry provides solutions for online account openings, commercial lending, and back-office efficiency.
• The company is known for addressing customer concerns and being a trusted partner.
• Competitive environment is favorable, but major technology changes are still challenging decisions for banks and credit unions.

Free Cash Flow Challenges

• Notable headwinds to free cash flow in 2023, including changes in tax legislation.
• Seasonal fluctuations and timing of payments can impact quarter-to-quarter comparisons.
• Free cash flow conversion was lower in 2023, but annual basis provides a clearer picture.

Margins and Cost Savings

• Margins expected to expand due to on-premise to cloud migration and potential leapfrogging to public cloud.
• Development approach and infrastructure improvements will lead to margin savings.
• Investments in rebuilding and scaling the organization will eventually flatten out.
• Third-party relationships and costs add some uncertainty to cost control.

Positive Impact of Cloud Migration

• Migrating from on-prem to cloud is cost-effective for financial institutions and generates higher revenue for Jack Henry.
• FI’s save on infrastructure, security, and staffing costs, allowing them to focus on their core value.
• This migration contributes to a healthy margin and is expected to continue for 7 to 8 years.
• Investments in maintaining and upgrading data centers will continue, potentially with partners.