Jack Henry at Bernstein Conference: Cloud Strategy Takes Center Stage

On Wednesday, 28 May 2025, Jack Henry & Associates (NASDAQ:JKHY) took the stage at the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Greg Adelson shared insights into the company’s strategic direction, highlighting a strong focus on cloud services and tech modernization. While the company remains optimistic about its growth prospects, it acknowledges potential challenges from macroeconomic factors impacting hardware sales and consulting services.

Key Takeaways

• Jack Henry aims to transition 92% of its client base to the private cloud.
• The company is on track to secure 50 new core deals this year.
• Headcount growth is targeted at 1.5%, with revenue growth anticipated at 6-7%.
• Strategic initiatives include tech modernization and product rationalization.
• Faster payments are expected to outpace other growth areas significantly.

Financial Results

• Core business revenue, making up 76% of total revenue, is increasing by nearly 10%.
• Payments and complementary segments are growing at 7-8% and 8-9%, respectively.
• Hardware revenue is declining, but cloud migration offers a 1.75x revenue boost.
• Jack Henry has sold 23 institutions over a billion in the past 18 months, a significant increase from seven in the previous period.

Operational Updates

• 76% of clients are currently in Jack Henry’s private cloud, with a goal to reach 92%.
• The company plans to exit the full data center business by 1930, moving towards colocation and public cloud services.
• Jack Henry is ahead of schedule in its tech modernization strategy, with a deposit-only core in the public cloud expected next year.
• The sunset of NetTeller, with a conversion to Banno, is projected to lift revenue by 20-25%.

Future Outlook

• Jack Henry is cautiously optimistic about revenue growth, focusing on the SMB market, tech modernization, and product rationalization.
• Margin expansion is anticipated from the transition to public cloud operations and business process automation.
• The company is leveraging AI to enhance efficiency and limit headcount growth.

Q&A Highlights

• Bank M&A is seen as a slight tailwind, with potential divestitures being explored.
• The GPN acquisition by FIS has not significantly altered the competitive landscape.
• Jack Henry foresees faster payments growth to surpass other areas, with 98% of clients currently receive-only on the Real Time Payments and FedNow networks.

Readers are encouraged to refer to the full transcript for a more detailed account of the conference discussion.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Ken Sofsky, US Payments Analyst, Autonomous Research: Today. My name is Ken Sofsky. I’m, the US Payments Analyst at Autonomous Research. We’re really excited to have Jack Henry here today, and, joining us is Greg Adelson. Greg’s been at Jack Henry for fourteen years now.

He joined the company back in 02/2011 as group president of iPay Solutions. He later became Jack Henry’s chief operating officer and was named president in 02/2012. Greg took over as CEO last July, and we had a conversation about this time last year. Yeah. So look forward to having another fun one.

Greg, welcome. Thanks for doing this again.

Greg Adelson, CEO, Jack Henry: For sure. Thanks for having me.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. And if anyone in the audience has a question for Greg, feel free to use the, pigeonhole link. I think there’s a QR code in the handouts, so you can scan that and submit questions. We’ll weave those in. Greg, maybe to start off, I mean, is a generalist conference, so there might be some people who are less familiar with the Jack Henry story.

So maybe give us a little bit of an overview of what Jack Henry does. And then secondly, you’ve been in the CEO seat for a little under a year now. So how’s it been? What’s surprised you the most? And what’s changed since you took over?

Greg Adelson, CEO, Jack Henry: Yeah. Thanks. So first of all, so we consider ourselves a well rounded financial technology company that services the community and regional bank market. So typically, our client base is somewhere between zero and 50,000,000,000. 50 three billion is our largest client today, but we service clients up to 100,000,000,000 with other products and things along that line.

Same thing on the credit union side as well. We’re kind of broken into three reporting segments if you look at our business. So we have core, complementary, and payments. And to make it very easy, our payments really is comprised of our card business, our remote deposit capture business, what we call our faster payments or pay center side, and our bill pay business. And everything that’s not core payments falls into the complementary segment.

So that’s where the bulk that you’ll find a lot of our solutions. Each of those are roughly about a third of our total revenue. If you look at it, payments is a little bit bigger than the other two at 37, but roughly they’re about a third, a third, and a third. So to answer your question, I think the part that I would say that really kind of surprised me is that we have a very strong succession planning process at Jack Henry. And so Dave Foss, our former CEO, really, really set me up well for this role.

So I think the transition into the role has actually surprised me, not only with how it’s been approached with our associates and our clients and our shareholders, but just the things that have come up that I was prepared for based on how Dave had prepared me. So that was a little bit of a surprise to me at this point in time. Only ten minutes in, so we’ll see. What has kind of changed is I’ve been really focused on the SMB market. That’s been something that I’m pretty passionate about and was leading the payments group as well through many years at Jack Henry.

My background is in payments. I have an accounting degree, but my background is in payments and kind of worked through a lot of that. And then we brought in some new leaders at the company, both from an outside and within the inside of the company. I think we are a very well connected leadership team. I think one that most of our clients can actually see when we’re going in meetings or our client conferences, and they comment that they don’t normally see as connected of a leadership team as we have.

I think those are two things that I was really focused on making sure that we had as I came into the role.

Ken Sofsky, US Payments Analyst, Autonomous Research: That’s great. And maybe we could touch on the macro. I know it’s getting a lot of focus from investors. You guys called out some softness just on the macro front. I mean, how much of that is just broader macro weakness versus financial institutions being a little bit more cautious versus other things that you’re seeing out there?

Greg Adelson, CEO, Jack Henry: Yeah. I mean, we really our macro weakness was really kind of tied to two things. So one was what we call kind of our consulting part of our business, things that folks that when there’s a macro challenges, you can see them pull back on those kind of things. So it’s part of what we call our non key revenue, things that we do to help support our clients grow, things along that line, opportunities that they can slow down and delay. The other one really came from our hardware sales, which is, again, another part of our non key revenue line.

So what we end up doing is we sell hardware to our clients that are in an on prem environment and continue to operate in on prem. So we saw some slowdown, some folks that wanted to wait for either potential additional discounts, or they’re evaluating moving to our private cloud. And in fact, one of them has actually moved to our private cloud since our earnings call as part of that slowdown. So really, our macro environment, we’re we’re tied to things along that line.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. And then I think I guess on that point, Greg, the, you know, the the nonrecurring stuff. So some of it’s hardware. Some of it’s, you know, the the stuff that’s implemented sort of post the, you know, a a a core onboarding. So how much of that is contracted versus, you know, say, actually stopped?

Meaning, you know, if it’s contracted, it’s actually gonna come through the numbers over the coming quarters as that stuff goes live.

Greg Adelson, CEO, Jack Henry: Yeah. So great point. So the other component of that would be what we call day two products. So things that are actually purchased at the time the core is purchased. So a typical bank, when we win a competitive core, comes with about 50 different complementary and payment products along with the core on the banking side.

In a credit union, we see about 35. So sometimes when a contract is made for a core win and there is a complementary and payment product to happen, they may not be a coterminous timing for those products to be implemented. So we call them day two because the core is implemented, and then it could be another year or two or longer for some of those products to happen to get implemented. And so what we saw with some of the products that were being purchased is that there was a delay in implementing those day two products. And again, they’re all contracted.

We have the ability to start billing at a certain point in time if we want, but they have the ability to delay some of those implementations longer than they want. And honestly, that happens every single quarter, but we just saw it happening a little bit more frequently at the end of our q three because our fiscal year is is June 30 that we wanted to call it out at that point in time.

Ken Sofsky, US Payments Analyst, Autonomous Research: That’s an interesting point. So if they drag it out long enough, you guys can actually go in and enforce it

Greg Adelson, CEO, Jack Henry: Yeah.

Ken Sofsky, US Payments Analyst, Autonomous Research: In the contract. Oh, that that’s that’s good to know. I guess, Greg, maybe we could touch on so I think I mean, so the latest trends across the segments, I think you said the payments business is actually doing quite well in the May. Visa spoke this morning. They said they saw relative stability in in volumes through the month of of May.

So, you know, what what are you guys seeing across the different segments so far?

Greg Adelson, CEO, Jack Henry: Yeah. So specifically in our payments business, so our card business, as you referenced, is about 60% of our overall payments business, which I referenced earlier, is 37% of Jack Henry’s revenue in general. So yeah, May is coming in with May almost over, is kind of hitting the forecasted levels that we expected. Still not necessarily at the same level as they may have been in a typical Q4 for us, but but still holding steady. Consumer confidence has still been waning.

And as you know, consumer confidence tends to drive more credit transactions than debit transactions, and the bulk of our card business is made up of debit. So 90% of our overall card business is debit revenue versus 10% is credit. About 98% of our transactions are debit. So that’s where you see a little bit of of that change maybe from a general Visa comments as well. The other part of our payments businesses are performing pretty much into normal standards.

So we typically see about six to 7% growth in our core business, seven to 8% growth in our payments business, eight to 9% in our complementary businesses, and all of those are tracking relatively in line with what our expectations were.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. And maybe we could touch on hardware a little bit. Maybe just talk a little bit about the type of client that’s still taking hardware. And, you know, I know this this revenue line has come down over time. I think it’s been a headwind for for some time.

So how how do we think about sort of the sustainability of the revenue there and and what the impact is?

Greg Adelson, CEO, Jack Henry: Yeah. Well, it’s not a focused part of our revenue stream for sure. So so to put it in perspective, 76% of our client base today lives in our private cloud. So the clients that are buying hardware today are the 24% that are still on prem. And that’s the bulk of what makes up that hardware purchases.

And so you’re going to continue. Now the good news is that a lot of those clients tend to be larger in size. And so as we do get them to move from their on prem to our private cloud, that’s got a bigger jump for us. But they’re also buying larger revenue from a hardware perspective as well. So you’re gonna continue to see that decline.

That’s a focus point of ours to get folks to move into our private cloud. And so there’s really a balance. As I said earlier, a client that had delayed a hardware purchase has now made the decision to go to the private cloud. That’s much better. That’s 1.75 times the revenue than we had when they were on prem before.

So that’s a huge opportunity for us. So you’re going to continue to see hardware going down with our opportunity to continue to drive the private cloud revenue.

Ken Sofsky, US Payments Analyst, Autonomous Research: You would actually be happy, I guess, if hardware comes down and those clients are converting to private because you get a 2x lift on the revenue side. All right. Great. And then I guess okay. So I guess when you think about the hardware revenue, that’s gonna diminish over time, presumably as that 76% goes to I think you guys have talked about maybe 90%

Greg Adelson, CEO, Jack Henry: of the Goal would probably be somewhere between 92% based on the client base that we have. I mean, we’ll never get a %. But but

Ken Sofsky, US Payments Analyst, Autonomous Research: okay. So there’s still, I guess, plenty of you know, we’re talking about five, six years of of opportunity of shifting to the

Greg Adelson, CEO, Jack Henry: and we’re we move somewhere between thirty five and forty a year over.

Ken Sofsky, US Payments Analyst, Autonomous Research: So Okay. Great. And then I guess just one question that we got just on on the hardware side or just this nonrecurring revenue, you know, sort of softness. Is that a leading indicator at all for the rest of the business? Or is it you know, are they do you still think that the processing side of the business, the core part of of Jack Henry can still chug along despite some of the softness that you’re seeing?

Greg Adelson, CEO, Jack Henry: Oh, yeah. No. For sure. I mean, our core or what we call our key businesses, our key revenue, which is about 76% of our overall revenue, is still operating at close to a 10% growth rate through the quarter. So when you look at the overall growth percentages of what we had guided to and even kind of what we changed in our last guide, that key revenue continues to along.

We’re winning more competitive core wins, new core deals, than anybody in the industry by far. We’re still on track to win 50 this year. And again, when you look at our top competitors, that’s significantly more than what they’re winning.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. Alright. I think that’s enough of the macro. Maybe we can get into some of the strategic discussion here. And that’s a good segue, Greg, because I wanted to touch on the competitive core wins.

I think you’re you’re guiding to I I think it’s like 20 to 25 core wins in fiscal four q. I mean, that’s that’s a that’s a big number. So what gives you visibility and confidence in hitting that number? And I guess the one thing we noticed as well was that, you know, the core wins look like they might be a little bit more seasonal Yep. Than they have been historically.

So is that also playing into that number?

Greg Adelson, CEO, Jack Henry: Yeah. So we typically q four for us, again, June 30 being our fiscal close, is always a bigger quarter. I mean, it’s the end of the year for the sales folks, and everybody’s motivated to close as many as they can. So last year at this time, we closed 22 in Q4. So it’s not like it’s an unusual number to see.

So our visibility is very, very strong. I mean, we typically can forecast literally by month how well we’re going to do. Things may move by a month, and sometimes that month may end up being a different quarter. And so some of those we knew that moved from Q3 to Q4 gave us that level of visibility. But again, we tend to have a much larger Q4.

To answer the other part of your question though, what we are doing with our tech story, our opportunity to get to larger clients. So if you look at the total asset size, so so far through Q3, we had closed 28 core deals that totaled 30,000,000,000 in assets. Compared to last year, we sold 35 core deals in q three, but only 21,000,000,000 in total assets compared to the two years ago when we we closed 28 core deals at 14,000,000,000 in assets. So we have more than doubled the asset size with less core wins through q three, which proves to the point of us continuing to go upmarket and continuing to win a lot larger of those deals.

Ken Sofsky, US Payments Analyst, Autonomous Research: I remember doing the math on the size per win, and it’s definitely going up. I guess what’s allowing Jack Henry to gain traction as you look upmarket and as you go upmarket? And is there anything prohibiting the company from having success continuing to push up market?

Greg Adelson, CEO, Jack Henry: Yeah. So the win part is pretty easy because this is what we’re hearing from the prospects that we win. So when you compare ourselves to our two biggest competitors in particular, They look at our culture and our service, which have been around a long, long time. But it’s now our tech innovation. And not just the innovation that we are building, but the level of execution that we are delivering on.

We actually share roadmaps with our clients, which is very unique, on a every six month basis. So every August, every February, we publish roadmaps for 70 different product sets. And these are the key products that are kind of driving the company’s performance. And so very unique. Again, all shared proactively.

We measure our success and our level of doing what we say we’re going to do kind of mindset. And nobody else does that. Our consultants tell us this, and the clients and prospects tell us this. And so about five years ago when I started this as COO, we were only executing at about 69%. We’re now at 91% execution as of last February numbers.

And so when you’re able to couple the ability to provide customer service to the level that we do, but build technology and do what you say you’re going to do creates huge differentiation in the space compared to what they see today, part of the big reasons why they make the move. There’s a level of frustration with core providers of not doing what they say they’re going to do, and we’re not in that bucket right now.

Ken Sofsky, US Payments Analyst, Autonomous Research: No. The feedback on Jack Henry has always been pretty solid. I guess in terms of the unit economics on deals with larger customers, I mean, there any major differences in terms of implementation timelines, I guess, of products purchased? I think you mentioned 50 earlier in our conversation or just ACV per deal. I mean, the banks the size of the bank per win has gone up.

Does that sort of correlate with sort of ACV size as well?

Greg Adelson, CEO, Jack Henry: And, you know, I’m gonna answer your question in three different ways, which is yes, yes, and yes, because they all can be you know, it kinda depends on the answer. So one is what is the take rate? How many products did they actually buy? The larger the actual customer, they tend to be more of a best of breed kind of approach. So again, there tends to be more third parties that are attached than actually every product that that particular XCOR used to have.

If it’s one of our F friends and they buy a bunch of products from them today, then it’s really easy to convert all those over. But if they have non coterminous contracts because they buy some other third party for digital, some other third party for fraud, things along that line, it creates part of that day two challenge that I mentioned before. So really, those take rates are a big driver to weather. And which model do we use? Do we use a per asset of model or a per account model?

And why is that important is that a $20,000,000,000 asset institution, depending on the percentage of retail accounts, can be much different than a highly commercial based bank. And what that means is that if we’re using per account pricing in a $20,000,000,000 commercial account or commercial based client, that price point is going to be a lot different than an asset based one. So it really is dependent on all three of those factors.

Ken Sofsky, US Payments Analyst, Autonomous Research: That’s helpful, Greg. I guess cloud is obviously a big part of the growth at the company. I mean, how quickly can we start to see the public cloud services, being adopted? And I know there’s some revenue benefits from a client going from on prem to private cloud. Right?

You mentioned the 1.75. I’ve heard two x, historically. So how does public cloud that is there a revenue lift, I guess, as you shift to public cloud? Is it how does that compare to that lift going from on prem to private?

Greg Adelson, CEO, Jack Henry: Yeah. And just to clarify, so the 2x has actually kinda come down. So banking, there’s an average of about two for banking and 1.5 for credit union. So the average overall for the two is 1.75. But what we’re seeing today so let me just back up.

What we’re doing with our tech modernization and building out components, where we’re breaking up the core, basically building everything in a singular component process to allow those things to be implemented in a much easier fashion. And so that’s been a big focus of ours for the last three years. So we’re ahead of where we said we were going to be. I mentioned that on the last earnings call, that we’re about six months ahead of delivering a full deposit only core in the public cloud. We’ll have that about this time next year versus at the end of the calendar year 2026, which was what we originally forecasted.

So the lift, we believe, is going to be and we’ve only modeled it. Right? Because we haven’t moved anybody to that. But what we believe is if that if the 1.75 happens from on prem to private cloud, then there’ll be about a 20 to 25% bump from private cloud to public cloud. So let’s just call it two x if you move from on prem to the public cloud directly.

And there are some clients that are waiting for that as part of their reasons to go. So where we believe the huge opportunity for us is being able to take this product set up market. We’re actually talking to institutions of over $100,000,000,000 in asset size right now that we’ve never talked to before. And the reason why we’re able to do that is they like the approach of being able to incrementally bring components on versus doing a full Big Bang core conversion and creating those as additional opportunities. So a couple of these institutions are interested only in maybe our general ledger or our new domestic wires that we’ve come up with, and then getting kinda testing the waters with us versus moving everything to a full new core at that point in time.

Ken Sofsky, US Payments Analyst, Autonomous Research: And I I that that’s helpful on the the revenue lift. I guess, what about the margins, Greg, as you think about as you shift to public cloud, I mean, what does that do to the margin profile of of the business? Is there any sort of cost drag, I guess, as you think about, you know, still having to support that private cloud, but eventually, you know, you would sort of reduce that cost base and then eventually, you know, sort of bring everyone on to public cloud over time?

Greg Adelson, CEO, Jack Henry: Yeah. So it’s a great point. So there’s a we have a strategy that we’re working towards a full and some of them are contracts that we have in our existing data centers. But Jack Henry wants to be out of the full data center business by 02/1930. And so we’ll have colos, and we’ll have the colos will hold our private cloud components that we still have, and we’ll have the public cloud.

And so some of the margin drag is some of the timing delays of having operations in all three of those sites today through at least 02/1930. And so that’s where we expect to see some nice lifts as we’re able to get out of the full data center business and operate the colo and the public cloud. The other component is our ability to implement and lessen some of the duplication that we have when we’re in the public cloud. So our ability to innovate faster, our ability to deliver things that happen in the public cloud is also a big part of where we think we’ll do less duplication of efforts what we do in some of our products today.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. Maybe we could touch on the tech modernization strategy. Maybe you can give us an update on where we are on that. And I’m curious when can we start seeing greater adoption on that front? And then related to that, Greg, I guess, where do you expect see that adoption?

Is it, you know, more on the bank side, the credit union side? Is it, you know, small versus large? You know, who who do you expect to adopt, that that technology?

Greg Adelson, CEO, Jack Henry: So let’s start with the adoption. So, you know, we expect, really, we’re getting interest from all levels. As I mentioned, we’re talking to over a hundred billion dollar institutions. We’re talking to our smallest institutions, both on the bank and the credit union side. So it’s really about the level of innovation.

Candidly, sometimes it’s the age of the executive team at the bank or credit union and how willing they are to move faster. Some of it has some legislative and regulatory type challenges where you’re waiting for some of the regulators to kind of come along. One of the things about Jack Henry that most people don’t know is that we were one of the first providers to be in the public cloud. So when we built Banno in 2018, it was built public cloud native. So we’ve been operating in the public cloud since 2018.

And again, we have 14,000,000 users of our Banno platform. So the regulators are comfortable with how Jack Henry operates. And in fact, we’ve created some documentation that lives in Washington DC right now based on our work with the regulators sent through that. So we’re we’re very we’re very comfortable. The regulators are comfortable with us.

It’s the banks and credit unions, some of their regulators that we kinda get over. Where are we? So we’ve created 15 modules to date. About four of them are actually being commercialized and monetized in a very slow fashion on purpose. Mostly it’s domestic wires and international wires, what we call exception item processing, and then a general ledger.

So those are four really key components that we’re starting to roll out to our client base and introducing to non Jack Henry clients, as I mentioned before, a couple of these hundred billion dollar opportunities. So I mentioned that we will have the full retail deposit only core available at this time next year. The that we built were really about creating more of a shared services mindset within Jack Henry. In the years past, we operated kinda in a more of an independent setting where each business unit was building their product sets, adhering to budgets and processes. But we were building a lot of things multiple times the same.

We don’t do that anymore. And so the big part was is to build it once and use it in multiple applications. So again, back to your margin question and things along that line. But what’s important for everybody to know is that that shared services model is allowing us to, again, to innovate faster. And and, part of what I talked about earlier with the execution.

But using something that we build in the company and using it across the organization, authorization management is a perfect example. You have to build authorization management into every piece of technology that you have. But we used to build it in each of the tech pieces of technology individually. We don’t do that anymore. And there’s a whole host of opportunities that will continue to happen there.

But we’re super excited about where we are. Customers have been kind of testing this in what we call a closed beta environment. We have less than 20 clients using the Wires platform today. We have less than five using the general ledger today. So real, really early.

But but, again, we’re we’re making a lot of progress on it.

Ken Sofsky, US Payments Analyst, Autonomous Research: Sounds like it’s easier to trial and and adopt. So you might have clients coming in that say, hey. I wanna test out, you know, a couple modules, see how it goes, and then sort of build from there.

Greg Adelson, CEO, Jack Henry: That’s exactly what they’re doing. And again, especially as you get up market so not only existing clients that wanna test it, but a hundred and $50,000,000,000 institution that says, you know what? You know, I’m interested in your general ledger, and I’m interested in your wires because I think they’re better than what I have today in my platform, but I don’t wanna make a full core change. So what components can I use that I need help on without having to make a full core change? And so I think that’ll actually be a part of our strategy as you move forward and look at where opportunities really exist, is our ability to go into clients and look at gaps and features that they have with existing core providers and be able to fill those gaps

Ken Sofsky, US Payments Analyst, Autonomous Research: And would they test that, I guess, in a sandbox? Or would it They

Greg Adelson, CEO, Jack Henry: do both.

Ken Sofsky, US Payments Analyst, Autonomous Research: They would test it and then, I guess, run it parallel or, I guess, completely switch over?

Greg Adelson, CEO, Jack Henry: Most of the time, they run it parallel. Run it parallel. Definitely run it parallel.

Ken Sofsky, US Payments Analyst, Autonomous Research: Yeah. Okay. Great. Greg, I wanna touch on the SMB strategy. I mean, you guys spent a lot of time at the Investor Day talking about this.

It’s obviously a very important initiative for the company. So maybe just give give us the latest thinking, sort of where are we on that, and and how are you adding value to FIs on that front?

Greg Adelson, CEO, Jack Henry: Yeah. So one of the things, as I mentioned earlier, that I was passionate about was making sure that we really drove an SMB strategy here at the company. It’s a market that’s highly unpenetrated. And I want you to think more of the Stripe and the Square applications that are out there today when I describe what we are doing. And so that focus is really about two things.

One is delivering a deposit growth opportunity and keeping the level of stickiness within the financial institutions. So again, Stripe, Square, taking deposits away from our financial institutions. Some of our competitors were actually selling around the institutions to their own clients. So our entire focus was to sell directly through the institutions. We presented this to both Mastercard and Visa very early on.

Both of them have agreed to be significant sponsors for us related to helping us market this within the base, because again, they’re big believers in what we’re doing to continue to keep financial institutions growing and thriving. So where are some of the key differentiators? So what we wanted to do was create a solution set that would allow the sole proprietor or small medium sized business to operate differently than what they would see with a Stripe or a Square. So we give four distinct advantages today in the market. One, instantaneous approval.

Anybody that knows the SMB market knows that it usually takes two to three days to actually get an application approved. We give instantaneous approval or decline. Once you are and we have technology that allows that to happen. Once you are approved, you get a push to your phone, Android or iOS device, that allows you to start taking payments on your phone via tap to pay immediately. We will be the very first provider in The United States to offer both tap to pay on iOS and Android devices.

And by the way, our customers will start going live next month in June. So that’s kind of where we are in that process. The third one, eight settlement windows. So if you think about an SMB today, they do their transactions. They usually wait two to three days to get their money.

We have created eight settlement windows with Visa and Mastercard to help facilitate the ability to make that happen. Obviously, from a cash flow perspective, that’s huge for the SMB. The last part, something that we’re actually patenting, is what we call continuous account reconciliation. So continuous account reconciliation allows the SMB, when they get their deposit one, two, eight times a day, to actually see all the transactions that occurred that totaled that deposit show up on their Banno mobile app at the time the deposit hits. So they no longer have to go back and manually reconcile all those transactions to see what totaled that particular deposit amount.

So again, everything is very real time, instantaneous. The ability to see those small deposits in every transaction, especially for a sole proprietor, on average during our POCs save them five to six hours per week of time. So again, Visa, Mastercard, very excited about all that. In fact, even talked about it on their last earnings call.

Ken Sofsky, US Payments Analyst, Autonomous Research: Great. Maybe we could switch over to to payments. I know there’s a few different businesses in that payment segment. So maybe just give us you know, maybe talk about the size of each of those underlying businesses, the the type of growth that they’re seeing, and and where you’re seeing adoption across each of those.

Greg Adelson, CEO, Jack Henry: Yeah. So roughly, we we really haven’t broken out as much of the payment business as we do with card. So I’ll just I’ll kinda start with that. So first of all, card is 60% of the overall payment business, as of which I said was 37% of the overall revenue for Jack Henry. Within the payments business, so our EPS, which is remote deposit capture and ACH origination, then our bill pay business, and our pay center business, which is real time payments.

So the other three together make up the 40% of the overall. They’re roughly if you look at bill pay and the remote deposit capture, ACH business, they’re roughly about the same size with pay center being much smaller. So if you look at a at a breakout, you’re roughly in an average of 20 plus, 20 plus, and a smaller number. The part that I will emphasize is that from a growth standpoint, the pay center business is growing the fastest for obvious reasons, the smallest, but also lots of opportunity happening in that world. So we actually have about 40% of all the real time through the clearinghouse, all the real time payment customers that are live today in the market are Jack Henry clients.

So we have about 43% of those. If you look at the Fed now and Zelle, we have over 400 clients live on both of those as well. So we’re a fairly large player already with over 400 clients live on all three of those applications. The bill pay business is a business that continues as steady, much of a mid to lower single digit growth. The remote deposit capture business is somewhere in the same.

When you look what is happening in the market today, specifically with what this administration wants to do with treasury checks and things along that line and the eliminations, I think you’re gonna start seeing a much larger increase in faster payment transactions. I think you’re gonna see more use cases being created for send. So today, all of our clients that are live on the Real Time Payments network and the FedNow network, 98% of them are only receive only. And so there’s not really a lot of money to be had in that other than kind of monthly fees and things along that line. The send transactions and the use cases that can be created by the elimination of checks, the elimination of use cases for bill pay, things along that line, is where I see what I would call nickels and dimes go to dollars.

And that’s where I see the bigger opportunity. So from a long term perspective, I see our faster payments growth rate being much greater than anything else we have as the world starts to continue to change.

Ken Sofsky, US Payments Analyst, Autonomous Research: That’s helpful. And I guess so pay center growing very quickly. I guess in terms of monetization, I I guess, do you do you think about it on a per transaction basis, or is it some, you know, recurring

Greg Adelson, CEO, Jack Henry: There’s three there’s three big components. So one would be some onetime fees. One would be some recurring kinda monthly fees, and then there’ll be transaction fees based on which is why the send transactions are gonna be so much important. They get charged on a receive. You know, if if a bigger bank is moving money if a client’s moving money from a bigger bank to to one of their our our banks, then there’s transaction fees that are had there.

But again, they’re in nickels and dimes and not necessarily anything that really moves the needle.

Ken Sofsky, US Payments Analyst, Autonomous Research: Okay. Great. Maybe digging into card a little bit. I mean, FIS announced that it’s acquiring the issuer processing business of of GPN, which I think, you know, it’s primarily a credit issuer processor. Obviously, Jack Henry has done really well in terms of competing in card for quite some time.

But how does that acquisition change the competitive landscape at all for Jack Henry?

Greg Adelson, CEO, Jack Henry: Yeah. So 2015, I was still running our payments business. And actually, I looked at the GPN business, the old TSYS business, back at that day as part of a decision I was making to change our direction of where we were going with card. And when I looked at the platform, there were some things that were interesting. But the part that I didn’t like, and the reason why I chose First Data at that time, was that we could actually process our debit transactions and our credit transactions on the same platform.

And so today, that continues to be a big differentiator for us today. So you mentioned it’s primarily a credit platform. FIS today has primarily a debit platform. So there’s still going to be two separate platforms that they’re going to have to work through. And so from our standpoint, we like the fact that we’re operating on a single platform, so do our clients.

It’s been a big part of our win rates. As far as the market goes, remains to be seen. We haven’t really seen anything significantly changed since the announcement. There’s some market freeze that may happen on their side with both client bases to see what actually happens and where they go with it, but remains to be seen. But to be really honest, most of our card competition did not come from either one of them in the market.

So we’ll see if that changes going forward.

Ken Sofsky, US Payments Analyst, Autonomous Research: And I I know Jack Henry added, you know, credit issuer processing some some time ago. I mean, did that make a meaningful difference, I guess, in in converse you know, in the conversations with clients and the overall rent win rate for the company?

Greg Adelson, CEO, Jack Henry: It it it you know, it’s won’t say it’s meaningful. Like I said, our our card business is basically $90.10. Right? So if you look at debit to credit. But but the part it does do is it it allows in some competitive situations for folks to, again, agree, even depending on how big their credit business is, to at least have it with the same provider on the same platform.

And that has been a big part of winning even debit business with that as well. But I will tell you there’s a lot more focus going into some of the feature functionalities on our credit side as we speak right now.

Ken Sofsky, US Payments Analyst, Autonomous Research: We’re always looking to improve our modeling. So I wanted to ask about complementary. I mean, feels like a little bit of a black box because you have a lot in there in terms of Banno’s in there, you have Crimes Defender, you have fraud and AML solutions. You know, we’re not asking you to be specific, but I guess as as we think about what’s important for the complementary business, you know, and and sort of the you know, what’s what’s biggest and what’s driving the most growth in that business, how should we think about that? Because it is one question that we get quite a bit.

Greg Adelson, CEO, Jack Henry: Yeah. I mean, as I mentioned earlier, if it’s not core and it’s not payments, it’s complementary. So there are literally hundreds of products that live in that space. But I would say you really kinda define it this way, which is digital is more than just Banno. So digital Banno or the digital component includes our treasury products.

It includes a couple of other products that we’ve acquired over time that we’ve actually integrated into the digital offering into Banno. So that would be the bulk of what makes up the complementary from a largest perspective. Then you have products like you mentioned, Financial Crimes, Yellowhammer, which is the predecessor to Financial Crimes. You have other AML and BSA type products that we have kind of focused in there. Then you have our account opening solutions, and you have our lending solutions that are all.

So those, if you kind of break it into three separate categories, digital treasury, everything that falls into that, into our account opening and lending solutions, into financial crime, AML, BSA. Those would be the three biggest categories.

Ken Sofsky, US Payments Analyst, Autonomous Research: No. That’s super helpful. Maybe we could touch on bank M and A. I think we have about ten minutes left, so I want to hit on a few topics. I mean, how much of a net positive or negative has bank m and a been historically, Greg?

Greg Adelson, CEO, Jack Henry: Historically, so for forty years, right, it’s been declining at, roughly 4% a year over forty years, and we’ve continued to grow at decent growth rates from five to six to now seven to eight. So at any point in time, and I don’t want to avoid your question, but at any point in time, it can be a headwind or it can be a tailwind, depending on the time and who’s being acquired. We were just talking earlier in a meeting earlier this morning about several years ago where we had two of our larger clients get acquired at one time. So it became a headwind. But we’ve continued to grow through that and doing really well.

I think what positions Jack Henry better than where we were several years ago is what we talked about earlier on the sales side. We are selling to larger clients than we ever have and being more successful. We sold 23 institutions over a billion in the last eighteen months compared to only seven the eighteen months prior to that. So again, going upstream. And not just billion dollars, but we’re winning 7 and $10,000,000,000 customers that we did not win years ago at that point in time.

So I would say that as of right now, it’s a slight tailwind. But at any point in time, it depends on what got acquired and who.

Ken Sofsky, US Payments Analyst, Autonomous Research: And I guess do you see new administration? They’re sort of pro business, you know, pro less regulation, obviously. You know, does that sort of change at all in terms of who’s doing the acquiring, who’s getting acquired, or is it I mean, it I guess, hard to predict, but what’s your what’s your best

Greg Adelson, CEO, Jack Henry: I don’t think it’d change who gets acquired or or that. It it it more is about the timing of the acquisition. So under the prior administration, approvals for acquisitions would run somewhere between eight to ten months. Right now, they’re going back to about four to six months, which is where they were previously under Trump. And so we’ll see how that does.

But that allows folks to move at a faster pace. That unknown that was happening in the past was causing a lot of challenges with getting slots to get conversions done, to get the approvals to get conversions done, so things along that line. Less regulatory scrutiny in general is good for the banks, good for Jack Henry to a certain level. And so that’s the part that remains to be seen is how much do they loosen the reins. Some of the CFBB type announcements and things like that have been good for Jack Henry.

But I will tell you that it is absolutely a daily ebb and flow with the announcements that happen and don’t happen.

Ken Sofsky, US Payments Analyst, Autonomous Research: I wanted to ask one on margins, Greg. I mean, last quarter, you saw very impressive margins across the business, good margin expansion. I mean, much of that outperformance was driven by mix, right? We talked about sort of lower hardware revenue, presumably, maybe some of that is lower margin versus just cost control across some of the discretionary items. And then I guess related to that, I mean, lot of focus on macro.

We do go into a slower environment. I mean, what are some of the areas that you could pull back on in terms of cost and OpEx?

Greg Adelson, CEO, Jack Henry: Yeah. So I’ll save you. The hardware piece really is slight. I mean, the hardware itself has some margin fairly much in line. We have a great relationship with IBM.

It’s really that’s a nonstarter. It’s all about how we operate. And so we are very, very intentional about how we do headcount. In fact, just to kind of give you the summary, we only had a 2% increase in headcount last year. We’re targeting right now to be less than one and a half percent increase in headcount, and we’re still growing at six, seven plus percent.

And the reason why is that we’re very intentional about how we do business process automation, so kind of continuous improvement type initiatives. 35% of Jack Henry associates are trained in CADA in the classroom, so the Toyota way of doing things. We have a lot of black belts. We have a bunch of green belts. And so they’re highly incented to find ways to do things better and faster.

We like to use the model doing more with the same instead of doing more with less. And so that’s a lot different mindset for somebody that’s thinking of a way to not thinking they’re going to lose their job because they found a better way to do something. That’s number one. Number two is the One Jack Henry initiative that we started about five years ago when I became COO, which is about building things once across the company, doing things more, looking like a single brand instead of a bunch of different groups and companies. That’s allowed us to be much more efficient in how we build our software, how we do things literally just across the company operationally and using business process improvement.

And then lastly, talking about AI and what we’ve been able to do in AI both inside the company and with what we’re doing with our product sets, where we’re adding more efficiency on a bunch of mundane tasks, but we’re also building efficiency into not having to hire people at the same pace that other companies are. And I think it’s important to look at we zero base every single role. And so when you look at one and a half percent growth rate for headcount, we’re very, very cautious. Because what we don’t want to do is we don’t want to have mass layoffs. That’s not the culture of Jack Henry.

And so by managing the way we do, we’re able to hire strategically and at the right times without having to do layoffs to be able to get there.

Ken Sofsky, US Payments Analyst, Autonomous Research: I remember Dave used to say that he used to sign off on every hire. So I think you guys are very careful about building out the headcount and making sure it’s done at the right pace. Maybe we could touch on capital allocation here, Greg. I mean, you’ve been in the CEO position for a little under a year now. Obviously, you guys have thought about potentially divesting, some products, some solutions.

How close are we to either selling those, sunsetting them, sort of milking them for cash? I guess, have you guys made some decisions around that, and should we expect anything to come out in fiscal year twenty six? I think you said you were working through the budget recently.

Greg Adelson, CEO, Jack Henry: That’s correct. So so one of the the strategic initiatives that I wanted to put in play when I became CEO was really I think we have too many products at Jack Henry. So we have over 300 ish or close to 300 ish kind of skews. And for us to be the company that we want to be, which allows our institutions to win, we need a level of product rationalization. So that has already started.

So we have already announced the sunset of several products that you’ve never heard of because, you know, they just don’t move the needle for us. Thus, they don’t move the needle for our customers. So we’ve announced some of those subsets. One that you have heard of that we’ll announce next month is NetTeller. So we’re in the process of almost moved everybody over to Banno, and so it’s time to sunset that.

Those are about a two year process for us when we announce a sunset because that’s how we operate with our clients is to give them time, and focus. And and again, they respect that. So sunsetting has occurred, started to occur, and more more will happen as we build out more and new newer products. We’re not selling Yellowhammer anymore. We have not sunset Yellowhammer, but we’re not selling it anymore.

That’s another example of a product. Cash cowing, there’s several products that we’ve looked at, where we’ve taken kind of our foot off the gas to put the resources other places to help us move faster. That’s occurring. We have several, several being three, solution sets that we’re looking as what we would call candidates for divestiture. We will be starting processes in fiscal year twenty six and looking at an opportunity of where those might make sense, either strategic buyers or PE type firms.

So all three phases of product rationalization is underway.

Ken Sofsky, US Payments Analyst, Autonomous Research: So a lot happening. I guess on the net teller front, I mean, that I don’t know if you know how many clients are still on

Greg Adelson, CEO, Jack Henry: Less than a hundred.

Ken Sofsky, US Payments Analyst, Autonomous Research: Less than a hundred. Okay. And I guess there’s there’s a remind us of the lift, I guess, as you convert those to Banno. Is

Greg Adelson, CEO, Jack Henry: it So yeah. So we see anywhere from 20 to 25% lift, And most of those have occurred. But, again, there’s still because there was over a thousand at one time. Yeah.

Ken Sofsky, US Payments Analyst, Autonomous Research: Right. Totally. So you’re working working through that. Maybe maybe last couple of questions here. We have two minutes left.

I mean, I I wanted to ask about the top line growth of the business. I mean, this year, I think you’ll be close to that sort of six six point five percent range for fiscal year twenty twenty five on a non GAAP revenue basis. The prior couple of years, I think you’re closer to seven to 8%. Obviously, some macro impacts here, but the core business still doing fine. But I guess I’m curious to get your thoughts on whether we could see Jack Henry return to that type of growth over the next fiscal year.

And just maybe give us a sense of the sustainability of this growth. You’re obviously growing faster than peers. I mean, is this something that we’re still gonna be talking about in three, four, five years down the road? And any puts and takes on what you might push push you above that sort of seven to 8% range.

Greg Adelson, CEO, Jack Henry: Yeah. And I think we’re in the budgeting process for fiscal year twenty six right now. I I can’t give you any real guidance there. I can tell you that we’re still going to be cautious about some of the things that are happening in the macro environment, some things that could again, a $4,000,000 push in hardware last quarter was 80 basis points. So it’s a significant movement just for a small amount of money for a $2,300,000,000 company.

So part of what you’ll see is some change in how we do guidance and kind of how we look at some of the ranges to kind of help with some of that. But to answer your question, I mean, we are highly incented at the entire leadership team, but specifically myself and Mimi, our CFO, for revenue growth and for margin expansion. Those are the two biggest things that we think align perfectly with what shareholders are looking for. And we also measure ROIC as well, but that’s not one of the exact metrics today. But the reality is, all of the things that we’ve been working on, the SMB strategy, the tech modernization strategy, the individual product sets that we’ve talked about, financial crimes, Banno Business, applications in our payments piece in general.

Those are all things that we are very confident will continue to help us differentiate and win for years to come. Does it happen in ’26? I don’t know if it all happens in ’26. But over the next five years, there’s, again, there’s nobody doing what we are doing right now. And even if our competitors take a pivot, they got some time to catch up on some of that stuff as well.

Ken Sofsky, US Payments Analyst, Autonomous Research: Absolutely. All right, Greg. I think we’re up against the clock here. So we’ll have to leave it there. But thank you so much for doing this.

It’s great to see you again, and good luck with the second year as as CEO.

Greg Adelson, CEO, Jack Henry: Yeah. Thank you very much. I appreciate you having me.

Ken Sofsky, US Payments Analyst, Autonomous Research: Alright. And thanks, everyone, for joining. Really appreciate it.

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