Presentation

Operator

good morning, and welcome to the Jack Henry First Quarter 2025 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Vance shared, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and they are doing the Jack in the first quarter of fiscal 2025 earnings call. Today, I'm joined by President and CEO, Greg Adelson, CFO and Treasurer. We currently following my opening remarks, Greg will share his insights on the first quarter of our fiscal year and provide observations on our business and industry. We will then discuss the financial results and full year guidance outlined in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website. Afterwards, we will open the lines for a Q&A session. Please note that this call includes forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from our expectations. The Company is not obligated to update or revise these statements for a summary of risk factors and additional information that could cause actual results to differ materially from such forward-looking statements, refer to yesterday's press release and risk factors and forward-looking statements section in our 10 K. During this call, we will discuss non-GAAP financial measures, such as non-GAAP revenue and non-GAAP operating income. Reconciliations for these measures are included in yesterday's press release. Now I will hand the call over to Greg.

Thank you, Matt, and good morning, and I appreciate each of you joining this morning's call. I'm pleased to report overall solid financial performance results in the first quarter of our fiscal year 2025. I'd like to begin by thanking our associates for their hard work and commitment to our success by doing whatever it takes in doing the right thing for our clients. As I introduced in my script last quarter, I will share three main takeaways from the quarter and then we'll provide additional detail about our overall business. First, our financial performance. We exceeded our first quarter outlook. We had non-GAAP revenue growth of 5.3% in Q1, slightly ahead of the 5.25% anticipated in our as we indicated in August, Q1, revenue and margins were impacted by slower growth rate for on-premise annual maintenance and car process. And additionally, several long-term software usage contract closed in Q1 of last year, creating a difficult comparison for this quarter. We remain confident in our full year non-GAAP revenue guidance of 7% to 8% provided commentary in August, that non-GAAP margin would be contraction of 100 basis points. We ended the quarter with only 89 basis points of contraction. Second, our sales performance after a record Q4 for our sales team, we continued the positive momentum with record sales attainment in Q1 that included six competitive core winds up distinct three were financial institutions with over $1 billion in assets, including one $7 billion asset win. We also closed six deals to move existing clients from in-house processing to our private cloud. Third, our client conference. We had a very successful Jack Henry Connect conference last month in Phoenix with nearly 26 hundred clients and prospects in the 10. This is our largest conference of the year and produces a significant number of sales lead last year. 17 of our new core wins from prospect that attended the comp. Now for more detail on our overall business. During the quarter, we were proud to be included in several national Best Places to Work rain. We placed 16th Newsweek's list of Top 200 most loved workplaces, marking our third consecutive year ranked in the top 20. We also made Newsweek's most admired work most admired workplaces list earning five stars, which is the highest possible rate. Additionally, we ranked number 11 and IDC's 2020 for fintech rankings based on annual revenue, representing our 16th consecutive year on that list, we are honored to receive these national recognition as they reflect our people first culture commitment to exceptional service, and it's and success in delivering innovative technology that empowers community and regional financial institution. Our payments segment continued to perform perform well. We signed four new debit processing clients in three new credit clients. In the quarter, we have 324 clients on the Zelle platform, 326 clients using our PP., representing approximately 43% of the live RTD. client and 290 clients using Fed now representing approximately 36% of the live said now comp in our complementary segment, we signed seven new financial crimes Defender contracts in the quarter. In addition, we signed 26 new contracts for the financial crimes Defender, faster payments from module, a real-time solution designed to help mitigate fraud and sell that. Now in our TP. transaction, we have a solid 80 financial credit to defend your customers and have another 94 in various stages of implementation. We are at 37 faster payment modules installed and 133 in various stages of implementation. Continuing with our complementary segment, we continue to see strong success with our Banno digital solution. For the quarter, we signed 12 new clients to the Vail retail platform as well as 18 new banner business deal. We currently have more than 950 banal retail clients with over 180 live with Bank of this, we finished the quarter with 12.7 million registered users on the Banno platform. At the end of Q1 last year, we had 10.5 million registered users to 20% increase over the past 12 months each year, we sponsor to technology service. We can tuck the Jack Henry strategy benchmark in mid January through early February, and this only goes to the Jack Henry clients. We also co-sponsors survey with Bank Director and the results from their bid June early July technology proration were published in September is in the Bank Director survey, 75% of the respondents reported an increase in their bank technologies budget for fiscal year 2024 for their top technology objectives are to improve operational efficiency, attract and retain customers and increased deposits. Results are consistent with findings from our strategy benchmark published last spring. In that survey, 80% of our own clients that they plan to increased technology spending over the next two years with their top priorities being growing deposits, increasing operational efficiency and growing loans. Although the two surveys were conducted six months apart, the yield very similar results around plant technology spending and key priority. As I mentioned earlier, Jack Henry Connect was a tremendous success that we received rave reviews from our clients, prospects and industry consultants that attended the event. Along with the more than 24 hundred clients and attendant. We hosted a 130 prospect attendees from 50 financial institutions are technology showcase included 250 3rd party fintech, with most with most being competitors, which underscores our philosophy to be in an open and technology provides. Our vendor exit survey indicated 99% of these fintechs to want to exhibit again at our conference in 2025. The conference agenda was robust and anchored by the significant progress made we made on our technology modernization initiative. We continue to execute the strategy of breaking out the components of the core and building them and cloud-native EPI. first platform fee, Jack Henry platform. We are live with domestic wires, international wireless data broker and entitlement. We are in beta testing with both exception processing and general ledger. We remain on track to deliver a digital retail and commercial deposit only core during calendar year 2026. I will continue to provide more details on our progress throughout the year. As we've done in prior years that the Jack Henry Connect, we held our annual CBO form, which was attended by 185 CEO. of a new record for the general feedback throughout the meeting suggested that attendees are less concerned about the overall economy in the last year, and they continue to invest in technology to enhanced digital capabilities, improve efficiencies and modernize their businesses. Cdo agenda was well received by both clients and prospects included a demonstration of our recently announced SMB solution with move. As mentioned at Investor Day, we remain on track to deliver this unique solution to Banno early adopter clients. In May of 2025 solution will be sold through our bank and credit views to capture more and higher value deposits while positioning the financial institution at the center of their relationship with their SMB customers. The S and B will benefit from eight daily settlement windows tap to pay cut capabilities for both IOS and Android devices, one-click enrollment and approval and continuous accounting records. So in closing, we hold our Annual Shareholder Meeting next week and lower net reserve. We will also offer a webcast last viewing option for observers to watch for mobile. I remain extremely optimistic about the demand environment based on the recent surveys I referenced in our pipeline, our pipeline returning to an all-time high. Furthermore, we continue to hear positive feedback from our clients, prospects and industry consultants regarding our key differentiations differentiators of color, sure, exceptional service and innovative technology. The strength, along with our proven track record of execution, will continue to drive positive results and position us well for the future. With that, I'll turn it over to Mimi for more specific on our financial engine. Greg,

Good morning, everyone. Our continued focus on culture, service and innovation while supporting our community and regional financial institution clients. Spectrum, another quarter of solid revenue and earnings. Credit and housing starts are at the high first quarter results and then conclude with commentary on the second quarter outlook at our fiscal 25 guidance, Q1 GAAP and non-GAAP revenue increased 5%, consistent with our expectations and providing the basis for achieving our full year guidance. Quarterly deconversion revenue of approximately $4 million, which we released prior to full learning is largely flat at the same period last year, reflecting minimal consolidation of our clients is. It also is that with our expectations Now taking a closer look at the breakout, GAAP and non-GAAP services and support revenue increased 4% data processing and has been continuing to be significant drivers of services and support revenue growth. Lower writings in hardware revenue compared to prior year moderated services and support revenue. Our private and public cloud offerings increased over 11% in the quarter, reflecting strong persisting breadth is reoccurring revenue contributor. It's 30% of our total revenue and has long been a key double digit engine, I think a processing revenue, which is 41% of our total revenue and another significant contributor for our long-term growth model. Our strong performance with 7% breadth and the GAAP and non-GAAP eight and four continuing long-term trend. Quarterly drivers include increased card, digital and payment processing revenue. Completing commentary on revenue, I would highlight quarto plate total reoccurring revenue was 93%. Quarterly Enterprise revenue was down 1% of total revenue and grew at 9%, including a hardware. Non-c. revenue grew 1%. Next moving to expenses, beginning with the cost of revenue, which increased 6% under the GAAP and non-GAAP basis for the quarter. Drivers for the quarter included higher direct costs, increased personnel costs, internalizing and Amarin face for clarification intuitive with model that amortization and acquisition related intangibles was $6 million for the quarter, net R&D expense increased 8% and the GAAP and non GAAP basis for the quarter. The quarterly increase is primarily related to personnel costs, ending with SG&A expense for the quarter on a GAAP basis, the decrease of 15% versus prior year related to last year's one-time legal costs. Sg&a increased 7% on a non-GAAP basis. We remain focused on generating annual only compounding margin expansion. For the quarter, results delivered an 89 basis point decrease in non-GAAP margin to 25%. We remain confident in our ability to deliver full year margin expansion consistent with our full year guide. These solid quarterly results produced a fully diluted GAAP earnings per share of $1.63 at 17% was partially driven by the DD&A expense in Q1 of fiscal 24 that were non-reoccurring reviewing and three operating segments. We are pleased by content performance across the board. Our core segment revenue increased 5% for the quarter on a non-GAAP basis against a tough comp. Fourth, daily fee revenue was 62% and total segment quarterly revenue with tremendous breadth and 12% non-PC revenue primarily on its promise. Annual maintenance decreased 4%. Non-gaap operating margin decreased 84 basis points. Margins were impacted by offering new bids and headcount associated with implementation payments statement. Quarterly revenue increased 6% on a non-GAAP basis. The segment again had impressive non-GAAP operating margin breadth of 103 basis points. Revenue growth was due to continued growth in our prior related risk management solutions has strong growth from software maintenance margins benefited from lower cost of revenue and card net or incentive. Finally, complementary segment. Quarterly non-GAAP revenue growth increased 7% from a strong product. Matt hosting and digital being a consistent story. Segment margin contracted 40 basis points, primarily due to amortization, license fees and direct support costs, partially offset by growth in Houston and digital revenue. Now let's turn to review at the cash flow and capital allocation. First quarter. Operating cash flow was $117 million, a $40 million decrease over the prior period, reflecting a timing shift higher annual me inflection in Q4 last year than the historical norm. Trailing 12-month free cash flow was $289 million, resulting in a 17% conversion. Our consistent dedication to value creation resulted in a trailing 12-month return on invested capital at 20% heading into the second quarter. I will conclude with comments on quarterly cadence and full year guidance metrics. As you're aware, yesterday's press release included fiscal 2025 full year GAAP guidance, along with the reconciliation for non-GAAP guidance factoring all of which are reentering well. The press release also included a fiscal 25 non-GAAP EPS metric is not intended to be a new guidance center purposes to provide additional clarity on our numbers, and it should be noted that a 24% tax rate as yet all of the current fiscal year guidance metrics are in line with our near-term target as the business operation remains healthy and consistent, our outlook for financial performance remains upbeat with the pace of fiscal 2025. Non-gaap revenue and margin on track doing three sequentially throughout the year. Physics calibrating cadence and will result in a strong point. It will be more pronounced than typical. Consequently, Q2 expectations for non-GAAP revenue growth is approximately 6%, with non-GAAP margin flat to slightly down the rest of the year is expected to grow strongly, resulting in a full year guidance remaining consistent with our longer-term target. As a reminder, a fluctuations in quarterly results relating to software usage license component, along with the timing of implementation standpoint, that correct indicator of our business is the consistently strong fiscal year financial results. In conclusion, Q1 was consistent with our expectation and that does have to achieve a full year. It is consistent with our stated long-term target. We remain focused on delivering long-term profitable growth at scale for compounding revenue growth and margin expansion. We appreciate the efforts of our more than 7100 dedicated isn't it drove these strong results and our investors for their ongoing constant. Why we please open the line in place.

Operator

We'll now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pickup your handset before pressing the keys. To withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.

Question and Answer Session

Operator

And the first question comes from Andrus smith with Citi. Please go ahead.

Hey, Greg, Jamie, thanks for taking my questions this morning. Can you just drill down on the core revenue growth for a moment? Maybe just unpack first quarter performed a little bit, and I know you manage to the full year to do we're going to get too caught up in the first quarter performance. But maybe just a little bit more details on how core performance in the first quarter and then as the year progresses, can you talk about the trajectory we should expect there in the drivers as the year progresses? Thank you very much.

So I'll start off with the core attainment because that could be a combination of what you're doing. And I'll let me talk about the specifics on the revenue. So six core wins. I will tell you that there were a couple of pushes that we had due to the hurricane and the deal or the hurricanes that happened. And we had we had a few deals that we anticipated that would have closed in the first quarter that got pushed to the second quarter. So we didn't lose and they just retain. And obviously, we're not going to push people to just trying to sign the contract during those type of challenges. So that's part of it. But honestly, on the exciting part that we highlighted was that we can and you win the multibillion-dollar opportunities, including a $7 billion. And we have several others that we expect to come here in the fruition as well. So that part of the I think the potential part of your question on the sales side, and I'll let me handle the revenue component.

So it is great. The latest stages. Now if demand remains firmly intact and valid, and we should expect as the year goes on across all of the segments, but particularly related to your question around for, we're going to continue to see the key growth, strong installation and prior year sales. And until we expect similar to how you called it out in your note that Q1 will be up lower revenue growth with this plan acceleration as the year progresses that nothing particular to call out from a cadence perspective, I just think you're going to be a very strong second half.

And I think one of the point, Andrew and really for everybody else is I think it does point out that we still had a record quarter, um, so if you look at our complex and every product in the things that we're doing, tangentially to just core wins, having a record quarter, even with six core wins, which again, we typically have a lot of Tier ones, typically life for us anyway, coming off of the 20 or so that we won the Q4 of last year. But the reality is it really was poor. Has that happened from the hurricane or it would have been a fairly long first quarter.

Got it. Yes, that makes sense to continue the balance of the bookings there with the record sales quarter, maybe just in the wake of the election, could you just remind us on how Jack Henry's impacted by consolidation from an underlying revenue growth perspective? And then whether this cycle, obviously, it's very early, but you know whether this cycle should be any different than what we've seen historically. Thanks so much.

So again, I'll start. Maybe Ken can add on is I think there's a couple of things. So one, what is baked into 25? I don't think the election results will change much of what we have baked for 25 knowing obviously, we have a President that we've seen before. So we know a little bit more of this playbook and what we should expect related to regulatory, hopefully some improvement in the timing of M&A on. But for our institutions, we do have several already lined up with acquisitions that will be happening in the second half of our year and 25 that are already baked into the number if something else accelerates. And obviously, that would be additional gravy for us but on. But we've already added since I think we mentioned this on the last call, we've already added additional conversion genes and migration genes for both banking and credit unions. And based on the feedback that we've gotten from our clients and of course, we get knowledge of deals that are going to happen very early on, so they can get those slots. And so so we're working through that, but we'll see what happens. I think the regulatory challenges that we see today, hopefully, there's some lessening of that. And then obviously, some of the approach that they've taken in the past regime on really slowing down M&A, the timing of getting approvals, we would hope and expect that that would enhance. And again, the more we're winning in the world. We're growing asset sizes with our own institutions, which we've been articulating the 27% bank growth over the last four years and 34% credit union growth over the last four years. That continues to position us and more of the driver's seat in a lot of these opportunities.

Yes, I think that on day eight only thing I would add is getting last year and guidance for this year for deconversion revenue. It's hard to imagine that net centrally next year, if you don't see the impact of M&A needing to hire in merchandising. But again, as we that you have for now, that's really hard to forecast. And it really depends on the competition and where they are renewal cycle. But I would not baked in anything else for the year isn't I mean, does the turnover of the new administration.

Got it. Thank you very much. Really appreciate the comments.

Operator

Thank you. Second question comes from Vasu Govil with KBW. Please go ahead.

Hi, thank you for taking my question. I guess first one for you back. I wanted to ask about the ban of a tailwind. I think you said 12 new wins in the quarter, which was a good number. But if I look back, it's probably one of the lowest we've seen in the last several quarters. Just anything to call out there anything timing related like you talked about the core? And then I know you have identified third party course also to sell Banno into just how is that effort going? And any color around that?

Yes, good question. So on the on the number of wins, I don't there's nothing no concern there. I think a lot of it is timing. You a lot of a lot of our deals are tied at this point in time to call wins. We're still moving customers over from from the old platform, and we're actually getting ready to announced. We've told our customers that will be announcing sunsetting the net seller of platform, which again, will help accelerate Nino some additional ones that are kind of been laggards move on. But the reality is no concern there at all and to get 18 Banno business is very much in line with what we had last year and fourth quarter. We really feel that's always a heavy heavy sales win for us. On the comparative to the Q1 of last year, we were fairly materially much in line with that particular quarter related to the outside of the base. So on this, this really mostly applies to the Banno than it does to some of our other products that we're taking outside the base. But honestly, we've had some challenges with with some of our competitors being as open as a they say they are on. And so we've been trying to work through some of the timing and costs that they want to. We will embark upon us. And honestly, as a byproduct of that, we have really looked at a different way of approaching this. And I don't necessarily want to share what we're doing because I don't want to get out to our competitors, but it is a way for us bypass some of the typical integration points that you have to have and do it a different way. And we're working that path parallel. And it's really more appropriate and applicable to form a lot more API integrations that need to happen, which makes it more difficult for some of those, but that integration work. So what we're going to do is be able to leverage some of the things that we're doing and move. They are able to offer that through through a process that will allow us to get outside the base. And we're going to do that in parallel with what we're doing with the other outside the base initiative. So no change at this point in time line on just a little bit of a change in probably a level of productivity and success that we had hoped to have by the end of this fiscal year. So more to come on that. But but but we are taking a different approach and I think it's going to be more successful for us.

Great. Thank you for that color. And a quick one. You maybe just on the free cash flow conversion, like anything, any change to the 65% that you had given us last quarter or just any puts and takes there?

And so I feel comfortable with the guy remaining attack at the 65 to heavy bias. There were a couple of people that netted to one at 80% cash flow. And I would just remind everyone that the annual The trailing 12-month look a better indicator of the free cash flow because there are time particularly team 41 and the timing of payments related to the annual maintenance. And as I called out on last quarter's call, at Q4, benefited about $16 million from a higher mix being paid in Q4 finish line. And so do you think about that in wind 50%? It really is closer to the 100% like we've seen in prior year Q1. But I think that's an 72% actually together, one comfort that we are well in that guide. Your guided range.

Great. Thank you very much.

Welcome.

Operator

The next question comes from Rayna Kumar with Oppenheimer. Please go ahead.

Good morning, Greg and mimi. Thanks for taking my call. On the one of their competitors recently called out a component of room left on pump dollars off of bank. I'm just wondering if you're seeing any increased competition from banks and credit unions on core processing and your focus area?

No. I mean, Rina said we compete with we've always competed with that particular company in that space. And the thing we don't want them all, we went a lot and lot more than anybody else, but we sure don't win them all. But from a from a standpoint of competitive pressure? No, you know, at that particular deal, I kind of know what happened and there was there was a significant difference in price for sure. But the reality is we're continuing to be very successful in that space, including, like I said, the $7 billion opportunity we just one plus a lot of the renewals that we've been able to do over the last 18 months are all at our larger client basis, though, is anywhere from the fifth into the 30 that we've been renewing their all staying with Jack Henry. So there's no concerns at this point.

Understood. That's very helpful. The economy seems to be showing more resilience, evidenced by recent earnings reports from other pain from companies. Do you think of this macro environment process there could be upside care 25 to 40 basis point margin expansion target for fiscal year?

Yes, I think at this point, it's probably a little too early to say for us. That's where you're closing our first quarter. We do already have a pretty substantial second-half plans that reflects robust for us. But yes, particularly in the area of transaction and card volumes, we anticipate growing at spending in the brain, but very value and upside as the economy and consumer sentiment is stronger.

Appreciate all the color. Thank you.

Thank you very much.

Operator

The next question comes from Jason Kupferberg with Bank of America. Please go ahead.

Thanks, guys. Good morning. Wanted to start on the second half revenue growth outlook and definitely appreciate the clarity on Q2 to get our models. June, I guess you got to be at about 9% in the second half to get to the midpoint of the full year. And you talked about implementation cadence, but maybe just go away a layer deeper into the visibility you have factor shares that are going to drive that acceleration. And just clarify, you know, which revenue lines that's going to be most pronounced and it sounds like a lot of it is core, but just wanted to check in on that.

Great question, Jason. Let me give you a little bit more color on some of the drivers that make us feel quite confident for the second half of the year. First, I would call out the hardware last year, it was quite strong at a harder comp in first half this year and second half on first half this year, hardwares back in oh $7 million drag impact that eases up a little bit in the second half of the year. Expect cloud revenues in the record growth, the continued impact of new sales impact will be as strong growth in the past, our payment adoption, and we're starting to ease and one that can have on card is I guess that is growing and pricing? Yes, we expect this spring to pick up a little bit, and we do have a lower fee for us. And then I think just as new products continue to ramp, things like Defender accelerating, we're adding implementation consulting, Gregory revenue transactions and it overall digital adoption I paid as these strategies as the impact of all that, I've said, the implementation for all that I have three years down. The SaaS coming on board gives us confidence in the second half.

Okay. Adam, just talking about core wins for a second. I think you mentioned six in the quarter. I know it's typical year you we target 50 to 55. It's still early. We know this has never out of all. It's easily lumpy by quarter. And I think you said a couple of deals slip because of the hurricanes, but dumb wanted to just check in on overall pipeline line confidence and visibility and 50 to 55 still a reasonable zip code for this fiscal year based on how you see the pipeline converting over the next few quarters?

It is and again, we're still tracking well. Last year we did the 15 more than $1 billion, and we're tracking again nice with that was already having three of the first quarter, which again, is typically a lighter quarter for us. And not just $1 billion deal is that no one was a $7 billion deal. So absolutely on track in the pipeline is as robust as ever benefit at an all-time high again, even after the record Q4 and year and record Q1. So feel very confident in the things ability to hit our normal numbers.

Okay. Thank you.

Thank you.

Operator

The next question comes from Will Nance with Goldman Sachs. Please go ahead.

Hey, guys, thanks for taking the question. Is just another one on the second half acceleration. It's nice to have the confidence there and it just it sounds like most of that is more kind of implementation and tough comps from the prior year. Maybe there's a little bit easier comp in them, impairments in the back half of the year. But I guess big picture, when you think about exiting the year at a stronger growth rate, maybe excluding you don't have an easier comp and payments or anything and that back half growth rates, I would caution us against run-rating into the first half of the following year. Not exactly asking for following your guidance, but just wanted to understand if that if they feel like that's a good run rate given the implementation schedule for the following few quarters.

I appreciate the question. Well, I would say FY 26 thanks to a little bit far away to get a feel yet. And as we've learned rather than taking any one quarter and annualizing that. So I think as we get a little closer, we'll certainly give a deal. But I think there are some things with new product sales and orientation faster being an adoption cloud growth that our continuation and not just a one-time like some of the rollover either globally.

Yes. The only thing I'll add to that will it's just much as we described at the investor day with our our goal is to continue to inch up to the levels of closer to the 8% were all the things we're doing. We're hoping and believing that that is going to get us there. But the move We'll just have been launched at the end of the year and seeing the level of success there much, as we said, with a lot of the new products and continued implementations and getting through some of the cues that we have. And honestly, even some of the things that we've been able to get launched in the fintech monetization, things around data broker and all that. So we feel confident with giving you any more additional guidance. But the reality is we have all the things in motion and we do have at all times sales pipeline to go make it happen.

Got it. Okay. Appreciate that. I would ask. And then and then just I guess, any color on how you're thinking about capital allocation and make the M&A environment? We touch a little bit on bank M&A, but just any kind of a capital allocation priorities come to mind and what might might be an environment of Martin, this is M&A.

Yes. I would say we are steadfast in our prioritization from a capital allocation perspective. We're continuing to invest in our future growth through innovation. We continue to support our long-standing dividend policy. We paid down the debt. We're continuing down the debt throughout the year and as we start to build into a more positive cash flow position as paying down, that debt will always continue to look at share repurchases as an option. And M&A is always on the table. It's just there hasn't been any interesting prospects over the last several quarters. Hopefully, as people think between that interest rates coming down in a more can do that. I believe there'll be some interesting prospects. But again, that would have to be not only financially attractive, be an acceleration in our tech roadmap. Jeremy.

Okay. And just I appreciate you taking the questions today.

Thank you,

thank you, Will.

Operator

The next question comes from Dominic Gabriel with Compass Point. Please go ahead.

Hey, good morning, everybody, and thank you so much for taking the question. So I guess I was just curious if there was any change in the expected pace and deemphasizing some of the lower growth, less profitable businesses. And you just touch a little bit on it earlier in the call, but if you could give some extra the color there.

Yes. It's a great question. And honestly, I was going to bring it up even Will's question. So I'm glad you did. So we are focused on at some of these things, as we mentioned at Investor Day and individual meetings is that this process and product rationalization is going to take several years or is to completely take fruition. There are some opportunities that we're exploring on, whether they would be on small businesses of a potential divestiture. As we've talked about before, we already mentioned a couple of products that we've been announcing sunsetting. So those take we typically get two years for that to happen. Some of that will allow us to move cash diverse faster to the to the better margin and faster advancing products like advanced node that teller to Banno and yellow hamburger to financial crimes and things along that line. But there's other things that we're doing that will take a little bit more time and scrutiny that we're still working through. But it is a priority. We actually just came out of our strategy meeting and it continues to be a priority. And we have a team focused on it.

Any other color I would lay on that for your questions. Yes. Both knows that example of this point that you see like one big jump in a quarter in at some of these are going to pursue different out in the past, whether it be sunsetting, whether it be just more cash tallying, whether it be app. So in looking at divestitures that I take out the data data, one on top of the other timing wise to have that big of a noticeable impact any one quarter, obviously, we would call that out. But I think it's just over time you'll see the improvement of that nine fee revenue from T&M be less of a drag on total performance is should, you know,

based on what we've been doing in the amortization is also going to help us with some of the level of tech modernization, you know, in the shared services environment and some of the cost containment and expense control back to our focus on continued margin expansion. And so all of those things will help us drive both revenue growth as well as the margin for sure.

And it was nice to see the margins being better than you were expecting this quarter. I guess, you know, the election results basically just happened. So I'm just going to go back to this for a second. I do think that you have any sense from your clients that they were holding up certain tech investments until they understood who the winner was going to be. And I do think that there's incremental tech spend that they are likely going to pursue. That maybe was is not captured on just the budget growth that you guys talked about once or twice a year in your survey is do you think that could come through unlike complementary products where they're going to start making some other kind of how the election when and maybe more or less? Thanks.

Honestly, I don't at this point just because we've been so direct and have gotten so such positive feedback on what they do want to do, which you all made collective sense regardless of who who is in the White House. Now I don't know what I don't know. I do. There could be opportunities that happens through the M&A environment and folks are looking at opportunities to purchase. I have an M&A and there could be products that it accelerated because so because of an opportunity that that particular bank had or didn't have on. But I would say, based on what we know today, the most recent feedback we literally just got a month ago at our CEO. form. I don't see that necessarily as of today.

Thank you.

Thanks.

Operator

The next question comes from Peter Heckmann with D.A. Davidson. Please go ahead.

Hey, good morning, everyone. Thanks for taking the question. Greg, I just wanted to see with that with JJ. pick your user conference Connect, how much of a priority or how much emphasis that you're putting on the modern core modular platform? And how is that resonating with Biogen? Is it your sense that that at some of these multibillion-dollar institutions are really looking for vendor that has we're pretty well thought out and underway process to migrate towards an unbundled core? I mean, how much how important is that in terms of their decision making?

Yes, if you know from the prospects that were there. And we've as I mentioned, we had 15 prospect and I met personally with 15 of them for a period of time. Yes, the strategy of what we're doing. So it's not just about the unbundling of the courts, just the strategy of taking the core into the public cloud and not just core, but also some of the non-core products that we built, understanding the value of being in the public clouds for those those prospects. But of course, our clients love our, please prospects have told us that they're not seeing that same level of conversation with whom there with today. So yes, that strategy plays strongly, but it also plays the other things that we emphasize, our culture, our service on the other innovative technology that we've been building through the years with whether that be financial crimes or what we've done and pay center or what we've done it in on it in our enterprise account opening and things along that line. So it is a combination of things that drive this, but the overall strategy, not just core, but the overall strategy is what is ground is gravitating to check and see.

If I may add on, I think out there with really resonating is that shares services approach that as we build componentry, tech modernization, not supporting and enhancing the experience on the existing cores. And so that's giving people comfort that there's innovation on the quarters that they might go through today as well as we had gotten far.

Yes. one last point that I did emphasize, this was the open philosophy. When they walk into our tech showcases the 250 on fintechs that are there in versus other client conferences. They also they know we are putting our money where our mouth is. And the reality is they understand the Jack Henry is going to allow them to depict what is the best product for them. And so that is a big part to that. They're not getting that same level of operation today that they do want to go with a fintech or do it outside the base integration. As I referenced before, they're typically get charged. And I'm going to let you do.

Okay. That's helpful. And then can you just you haven't talked too much about the loan loan origination platform. Can you talk a little bit about some of your thoughts there in terms of both solutions on the lending side and whether or not that's something that we made here a little bit more about over the next few years?

Yes. And I expect you to hear more in starting in 2025. So we've been working on combining the the loan Vantage platform now has been built to be a single consumer and commercial platform, 40 call open anywhere. And we've added that into the solution. So it's now called Enterprise account opening, and it will allow the institution to compete very nicely within Zeno or anybody else out of the market today. And we are we will it be. And what we call early adopter in January of 2025 or so, it's coming up. And so we'll start to have some of our customers kind of working through that with us. But we are very excited about that. And what was the opportunities it will continue to bring to our financial institution.

And as a top priority? Yes, yes. Allison strategic benchmark for sure. Could you are right.

I appreciate the feedback. I get back into queue. Thanks.

Operator

The next question comes from Chris Kennedy with William Blair. Please go ahead.

Yes, good morning. Thanks for taking the question. Craig, you mentioned data broker a couple of times. Can you just remind us what the opportunity is there? And just maybe talk about the CFPB rule and open banking and how that drives that.

Yes. So let me start with the CFPB rule. So 1033, if you remember, back to some of the comments that we have made in prior quarters where we have eliminated screen scraping in our bet ban on digital platform where the only provider that 100% eliminated screen scraping. So so we are already ahead of what what was coming out with $33 million, knowing that there was going be something we now have direct API integrations into eight of the leading financial data aggregator. So the big names that you've heard of like Finicity and Yodel in place into it and MX., but there are several others. And I think we have like eight or nine more in the queue can do for API. So and as a reminder, this is really this rule does not impact core. It really impact digital banking provider. So we are significantly ahead of anybody in this space today. For that for 1033 related to data broker. So data broker, we have we have a few clients that are live that have been testing this in our early adopter. But the reality is that we are bringing into a single data repository, the ability for our customers to get their core data, their digital data, their payments data, their fraud data, their lending data, all from Jack Henry and a single repository as well as we are getting access to third party that whoever third parties they used to be able to bring that data in as well. And of course, we've got all of the guard rails and things that we need to do to make sure that they have. And so we're just at early stages of bringing some of the groups. And so we have core in there today. We have digital in there today will have payments. And by the end of the calendar year. And we'll have brought in by the end of the first quarter of 2025. So we expect more sales to occur, obviously, as you get more and more data in there, but we've been testing it out. It's going really well on as far as up uptick in revenue, probably not much in 2025, but we do expect it to be a something that will help drive 2026.

Great. Thanks for taking the question.

Operator

The next question comes from John Davis with Raymond James. Please go ahead.

Good morning, guys. How many we've talked a lot about the second half rather Thor Lunder on margin fell in the guide implies margins will be up somewhere close to 100 basis points in the back half of the year. Obviously, you have revenue accelerating easier comp than anything else. Apollo margin thoughts right now?

Yes, I would say the first half, which is a little bit more pronounced and from the headwinds we've seen those software usage on. And additionally, I would call out to the Vitesse.com has immediate impact. We had the departure of last year due to the not the replacement. And so that's a bit of a rollover from a headcount from roughly like 250 head. Yes, they are going to Q2 25 versus Q2 24 or so. I think those things make a little bit challenging in the first half as we get the second half certainly aligns directly. Brett, I feel pretty comfortable with the full year guide as of the 29 to 40 basis points.

Okay, great. And then Brad, you called out 20% increase in Banno users year over year. Broker business were meaningful contributor to that. And if so, is it safe to assume that banner revenue is growing well above that 40% user growth number?

Yes, the banner of business is not a meaningful contributor is a contributor. But as far as the growth, that truly is about our implementation numbers and so on. So as we add more and more business customers, yes, there can be some additional users, but that growth, the 20% has been really been driven through the retail platform. But as we continue to add wherever the way we price panel business is that the retail customer, they would, regardless of how many retail customers that have Pay, that same amount, we entered kind of an ad on fee to what the retail painful or the retail pieces. So on as we continue to get more penetration and some things that we are doing to actually do adoption activities, I think that that number will become more and more meaningful. But part of the revenue growth, we've been kind of consistent over the last year, two years on where we've been on the revenue growth in digital. And remember, digital is more than just then

Operator

the next question comes from James Faucette with Morgan Stanley. Please go ahead.

Hey, thanks very much for everybody. Wanted to ask Greg really quickly. I mean, you mentioned the implementation to just wondering how those are trending broadly and how you're thinking right now, but the puts and takes between the margin expansion and expansion you're delivering at first potential for additional resource allocation to help speed up those implementations?

Yes. If you think changed, yes, we look at that literally every month as part of our own part of our discussions with our teams during what we do, these reviews with them. And so we balance that very well. We've added people in our financial crimes Defender group last year. Significant number honestly, to do that. Some of that is implementations are in some cases, especially in financial crime. They can take up to six months because of the data that needs to get transferred over. So some of it isn't just the people saying some of it is purely just waiting. The other thing is, is that a lot of these can be tied to a core implementation. So they get delayed till the core guest gets done as well. So but we absolutely evaluate the need to expedite the revenue flow and balance that against the operating margins. So but we do that literally every month.

Got it. And then wondering, has been a few months since you announced the partnership with move seems like an interesting potential product, both for Jack Henry as well as Jack Henry's customers. Just any update on kind of progress there and while we may start to see that?

Yes. So lots of progress we've made, honestly, a lot of advancement even since Investor Day when we publicly announced that we did a full demo of this and our client conference in front of the 4,000 people that were there and got rave reviews for for them being able to see that as far as timing is, as I announced, we're on time to be able to deliver this to our early adopter Banno clients in May of 2025. And so we're on track to do that.

That's great. Thank you.

Thank you.

Operator

The next question comes from Ben Cherniavsky with Autonomous Research. Please go ahead.

Hey, good morning. Thanks for taking the question. I wanted to circle back on the cloud migration. I think you said cloud revenue was 30% of revenue, growing low double digits. So you have 70, 75% of clients on the private cloud. Can you just give us a sense for how much runway of various for Kraft cloud revenue to continue to grow at these double digit rates? Are you seeing any traction in the public cloud get? Just trying to get a sense for how sustainable that growth is on the cost side and maybe where the revenue shows up across the segments as well. Thank you.

Yes. Hey, Ken. I'll start with just kind of look the migration and then let me go through the revenue component of it. But so we are 73% right now, the private cloud. And so we don't expect to get to 100% and we expect to be somewhere in the low to mid 90s because I'd just be some of the customers that just don't want to move on. And but we have several years we're still expecting this year to do our normal 40 ish, um, you know, from an in-and-out. And so they'll be somewhere in those numbers. And we're really on track. We had based on first quarter last year versus first quarter this year for into house was very similar number of. And the other thing that's happening is that we are down. So a lot of our larger clients. So even if we move less or fewer in a quarter, they typically are larger clients bring more of an impact as well. And then just as a reminder, or on an average between banks and credit unions about a 1.75% increase on. So that is that as part of where we are thus far has years of runway, we expect to be filled three, four or five more years of that at some pace. Some buzz in the same time I announced earlier about the deposit only core being ready in 2026. So we could see some lift at that point in time of folks moving either directly from in-house to the public cloud or from the private cloud public cloud for being in both deal because it will be a deposit only core in 2026 as we build out the rest of the core, I suppose. So So more to come on that. But we still have some runway and they are larger cost.

'Yes. I mean, I think great hit on other salient points that they're selling friendly to the clients are technically a larger part of our clients grow. We grow with our clients, as they Brad says, even the ones that are early in our private cloud environment and they had markdowns as they grow any faster, we're going to continue to get revenue growth rate. That's our only other thing I would call out on frontline, just that it's continuing to be a strong growth engine breadth and the data.

Okay, great. And then and as Keith said, non-GAAP revenue would grow 6% in the second quarter. Can you just remind us of the the building blocks, I guess, by segment just to get to that 6%?

Yes, I think we can lock pipeline in terms of the components that I would just like on a whole. I I don't expect to see a lot of different changes on the momentum we had in Q1. In terms of the statements, we still think that is for card is going to be a little bit better. Thank you line, but it's still probably a modest spend expectations. And he still cloudy is our slowest quarter in PC hardware has less than a driving the wine effectively drive and he is here as well. So yes, in driving some small things like call center and item processing and science. So I think that's what we're looking at that 6%. And then taking off in U.S. dollar and Blake from now on the back half.

Thanks so much.

Operator

And the next question comes from Dave Koning with Baird. Please go ahead.

Yes. Hey, guys, a couple of things. First of all, card processing, um, you put that in the press release was 5% growth last quarter was 8% growth. And I know like the networks and stuff we're pretty stable growth. Was. Was there anything in there just to call out why that decelerated a bit?

Yes. I think our transaction volume with a nice and mine and highly paid layer in on the positive side, that 15 higher ramp on and faster payments that domestic really taking off the bill pay, as you know, from thereafter, that it is a modest kind of railroad renminbi DPS business, a little slower than prior year by moderate modest spread on. So I think that pretty much in line.

Okay. And then the one other thing, the we talked about this last for to interest income remains high and you guys had a ramp kind of a year-and-a-half or so later than I would say a lot of other. I guess you had some ramp for a while ago, but you really ramp that up a lot in the last year. So now again, it was really high in Q1. Does that does that stay or what treated kind of a little later ramp in that it does that say kind of stable through the year?

I did say was due to just the timing of negotiations with some of our bank counterparties in terms of getting more attractive yields on those balances on it does have some correlation with interest rates. I think it's pretty stable for a few to we'll see what the Fed does in the back half of the year and what they do. But I would say you'll see some correlation with interest rates and interest income.

Okay. Thank you.

Operator

That concludes our question and answer session. I would like to turn the conference back over to Richard for any closing remarks.

Thank you all. Look forward to hosting you at next week's shareholder meeting, either in person or on the webcast. And in the coming weeks, we will be attending various investor events in the US and Europe. Again, like to thank all Jack Henry associates for their hard work and dedication which have contributed to our outstanding results. Thank you for joining us today. Please provide the replay number.

Operator

The replay number for today's call is eight seven seven three four four seven five to nothing. The access code is six four eight two five zero nine. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.