Jack Henry’s Earnings Call: Record Results and Strategic Moves

Jack Henry & Associates ((JKHY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Jack Henry & Associates’ recent earnings call revealed a positive start to the fiscal year, marked by record financial results and robust growth in digital platforms. The company successfully navigated client migrations to the private cloud, although it faced challenges with pricing compression and a decrease in new core wins compared to the previous year. Additionally, financial institution M&A activity impacted deconversion revenue.

Record First Quarter Financial Results

Jack Henry reported record first quarter financial results, achieving a non-GAAP revenue of $636 million, which represents an 8.7% increase over the previous year’s first quarter. This performance exceeded the company’s anticipated growth range of 7% to 7.5%, highlighting a strong financial start to the year.

Successful Sales Performance and Cloud Migration

In the first quarter, Jack Henry signed seven contracts to transition existing clients to their private cloud. The asset size of these migrating clients increased by 60% over the past year, with 77% of core clients now operating in the Jack Henry private cloud, underscoring the company’s successful cloud migration strategy.

Largest Client Conference to Date

The Jack Henry Connect conference in San Diego was the largest to date, attracting a record 2,651 clients and 91 prospects from 30 banks and credit unions. This event has become a significant driver of new business opportunities for the company.

Acquisition of Victor Technologies

Jack Henry’s acquisition of Victor Technologies is set to enhance their payments-as-a-service capabilities and integration with the SilverLake core banking system. This strategic move is expected to create new opportunities for clients and fintechs, further strengthening Jack Henry’s market position.

Strong Growth in Banno Digital Platform

The Banno Digital Platform experienced a 15% increase in registered users over the past year, with 18 new clients signed in the quarter. This growth reflects the platform’s increasing popularity and the company’s commitment to digital innovation.

Lower Number of New Core Wins Compared to Last Year

The company secured four competitive core wins in the first quarter, compared to six in the same period last year. Despite this decrease, Jack Henry remains confident in achieving 50-55 wins by the end of the year.

Challenges with Pricing Compression

Jack Henry faced challenges related to pricing compression in renewals. The company has been actively working to mitigate these impacts, ensuring that they continue to provide value to their clients.

Impact of Financial Institution M&A Activity

M&A activity among financial institutions led to an increase in deconversion revenue, which may affect recurring revenue in future periods. This highlights the dynamic nature of the financial services industry and its impact on Jack Henry’s operations.

Forward-Looking Guidance

Jack Henry provided robust financial guidance for fiscal year 2026, projecting non-GAAP revenue growth of 6% to 7% and a non-GAAP margin expansion of 30 to 50 basis points. The company emphasized the strategic importance of their annual client conference and the acquisition of Victor Technologies in driving future growth.

In summary, Jack Henry & Associates’ earnings call showcased a strong start to the fiscal year, with record financial results and significant progress in digital and cloud initiatives. Despite facing challenges such as pricing compression and fewer new core wins, the company remains optimistic about its growth prospects and strategic initiatives for the future.