Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jack Henry & Associates Inc (JKHY, Financial) reported record revenue and operating income for fiscal 2024, with $2.2 billion in revenue and $489.4 million in operating income.
- The company set an all-time record for sales bookings in both the fourth quarter and the fiscal year, including 22 competitive core wins in Q4 and 57 for the fiscal year.
- Significant growth in the Banno platform, with 45 new clients for Banno retail and 50 new Banno business deals in Q4, and 179 new Banno retail contracts and 164 new Banno business contracts for the fiscal year.
- Strong performance in the payments segment, with 21 new card processing clients in Q4 and 56 for the fiscal year, along with 16 new Financial Crimes Defender contracts in Q4 and 52 for the fiscal year.
- High client satisfaction scores, with an average of 4.74 out of 5.0, indicating strong customer service and engagement.
Negative Points
- Operating income growth was modest, with only a 1% increase for Q4 and 2% for the fiscal year on a GAAP basis.
- Deconversion revenue decreased significantly, with Q4 deconversion revenue at approximately $7 million, down from $15 million the prior year.
- SG&A expenses increased notably, with an 18% rise on a GAAP basis for the fiscal year, partly due to one-time expenses.
- The company faces challenges in maintaining its high return on invested capital (ROIC), which has decreased slightly due to recent acquisitions and debt.
- Q1 fiscal 2025 guidance indicates a slower start, with expected non-GAAP revenue growth of approximately 5.25% and a 100 basis points contraction in non-GAAP margin.
Q & A Highlights
Q: Hi, Greg and Mimi. Thanks for taking my questions. I guess just to drill down on the fourth quarter core and complementary performance. And I know you're right, fiscal year metrics are the best way to look at the business, but was there anything for the fourth quarter that affected revenues there, timing shifts or perhaps the some of the things you called out for the fiscal first quarter that impacted results, or was it truly kind of tough comps? Thank you very much.
A: Good morning, Andrew. I appreciate the question. Although I would reiterate, just as you just mentioned, the importance of looking at our year on a year long basis rather than the quarters. I don't see any trends that I think structurally will continue that we would call out. I think it was mostly just, you always have to look at what is the installation queue, what's going on, what's going on with that shift from on-premise to outsourcing. And so, I think it was just a matter of this quarter playing out in that pattern.
Q: Got it. Appreciate that. And then, maybe, I could ask a question on just the new wins side. Step-up in new core signed above $1 billion in assets is pretty bright spot. Obviously, there's multiple factors that drive that, but is it possible to spill that down? Is it products? Is it go to market focus? What's driving the move up market? I know that's been a theme in the past several years, but it seems like you're making faster progress towards shifting towards higher asset size institutions. So, I would love to get some more color there. Thank you very much.
A: Sure. Andrew, this is Greg. So, yeah, thanks for the question. I think, as I tried to reference a little bit in the script, but more importantly, it is about our level of execution. We're hearing this on a regular basis, that I think, you know this and most people do that, we do provide to our clients what our roadmaps are, and we show what we're going to be doing and when we're going to be doing. And I think there's a level of trust and belief. And so, the more that we're executing, the more that our technology innovation is getting out there and they're seeing the results and it's providing a really an opportunity for us to get in front of these larger customers first of all. And then, second of all, as we mentioned, our associates and our client service reputation continues to truly shine, especially at a time when maybe it's not in the rest of the industry. So, those have been big. And then, I think, we've also hired some really good and talented sales individuals that have come with experience in selling into these larger institutions, and that's continued to help us as well. But I think it's a combination of all those things that are coming to fruition and allowing us to be successful.
Q: Hi. Thanks for taking my question. First one for you, Greg, just as you have taken over the wind, any sort of strategic changes that you are envisioning for the company that the company might need? And where are you focusing more of your efforts at this point?
A: Yeah. No, I mean, fortunately, I took over for an individual that did a pretty good job. So, not being significant. I mean, we've been able to really make a very what I would say, a very smooth transition. And so, we're focused on some things that I've talked about. Obviously, the execution of the tech modernization strategy and what we've been doing with One Jack Henry continues. I've talked a little bit, and we'll talk a lot more at the Investor Day about our SMB strategy and where we're going with that. So, there's a lot of excitement behind that, that will be unveiling. And then, there's a couple of things that we've talked around product rationalization and really looking at things primarily in the complementary group that maybe aren't growing at the same pace as the rest of our company or have the margins and looking at what we want to do with those particular things, a lot of them are very small, but again, just making sure we stay focused on the things that really do move the needle. But I wouldn't say anything else really outside of that and just staying true to who we are as a company and our leadership team.
Q: Good morning, guys. I just wanted to start on the margin side. I know that you've comfortably beat your initial fiscal '24 guidance on the margin line. The initial fiscal '25 guide calls for less margin expansion than in 2024. So, is this reflective of some ongoing conservatism, or were there some transitory tailwinds last year you don't expect to recur? I know you're starting off the year down about 100 basis points in Q1, but just wanted to get a little bit of more color on the margin outlook, please.
A: I appreciate you bringing up that important point. Margin expansion is one of the key elements that we are focused on as a management team. We're quite disciplined as we think about the cost of the organization, and yet, building for a scale of future success. I would say there's a couple of things. I don't think it's an excessive conservatism. I think that's what we feel confident that the market and the model generate. But there are some headwinds as we leave FY24 into '25 that helps us in '24, things like the slowing back-fills of the VEDIP departures, particularly that's part of the reason why you'll see the guide for Q1 a little bit weaker, is that really helped us in Q1 of FY24, as well as we had a one-time shift in the timing of our annual merit increase cycle. So, those are some issues that create just kind of a grow over challenge next year. But in general, we feel quite confident that the model continues to produce margin expansion at a nice clip. So, we're excited about the year guidance and we always aim and strive for more, but we want to put a number out there that we feel confident in our ability to deliver.
Q: Good morning, guys. Greg, I wanted to circle back to core wins. I think you called out 15 of greater than $1 billion in assets versus five just a year ago. Just curious where that stacks up historically? Has it always kind of been in the low to mid-single digits and now we had a big step up? And then, also you called out that your average client is larger today. Any context behind that, like, it's X percent bigger than it was five years ago, or any color to help us contextualize the kind of moving up market?
A: Yeah, for sure. So, I appreciate the question, JD. So, I'll start with your first one. So, yeah, 15 is by far a historical number for us. So, five last year was more on the average. So, we would typically be in the four to six ranges, something like that
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
