• Non-GAAP Revenue Growth: 5.3% in Q1, slightly ahead of the anticipated 5.25%.
• Full Year Non-GAAP Revenue Guidance: 7% to 8% growth.
• Non-GAAP Margin Contraction: 89 basis points, better than the expected 100 basis points contraction.
• GAAP and Non-GAAP Revenue Increase: 5% for Q1.
• Recurring Revenue: 93% of total revenue.
• Private and Public Cloud Offerings Growth: Over 11% in the quarter.
• Processing Revenue Growth: 7% for the quarter.
• Cost of Revenue Increase: 6% on both GAAP and non-GAAP basis.
• Net R&D Expense Increase: 8% on both GAAP and non-GAAP basis.
• SG&A Expense: Decreased 15% on a GAAP basis, increased 7% on a non-GAAP basis.
• Non-GAAP Operating Margin: Decreased 89 basis points to 25%.
• GAAP Earnings Per Share: $1.63, a 17% increase.
• Operating Cash Flow: $117 million for Q1.
• Trailing 12-Month Free Cash Flow: $289 million.
• Return on Invested Capital: 20% trailing 12-month.

• Warning! GuruFocus has detected 4 Warning Sign with GIB.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Jack Henry & Associates Inc (NASDAQ:JKHY) exceeded their first quarter outlook with a non-GAAP revenue growth of 5.3%, slightly ahead of the anticipated 5.25%.
• The company achieved record sales attainment in Q1, including six competitive core wins, with three financial institutions having over $1 billion in assets.
• Jack Henry & Associates Inc (NASDAQ:JKHY) successfully hosted their largest client conference, Jack Henry Connect, generating significant sales leads.
• The company was recognized in several national Best Places to Work rankings, reflecting their strong culture and commitment to service.
• Their payments segment performed well, signing new clients for debit and credit processing, and expanding their presence on platforms like Zelle and FedNow.

Negative Points

• Revenue and margins were impacted by slower growth rates for on-premise annual maintenance and card processing.
• Several long-term software usage contracts closed in Q1 of the previous year, creating a difficult comparison for this quarter.
• There were challenges with competitors being less open than expected, affecting the integration of third-party core products.
• The company experienced a decrease in non-GAAP operating margin by 89 basis points, attributed to higher direct costs and increased personnel expenses.
• Operating cash flow decreased by $40 million compared to the prior period, reflecting a timing shift in annual maintenance collections.

Q & A Highlights

Q: Can you provide more details on the core revenue growth and its trajectory for the year? A: Gregory Adelson, CEO: We had six core wins, with some deals pushed to the second quarter due to hurricanes. Despite this, we had a record quarter with significant wins, including a $7 billion asset win. Mimi Carsley, CFO: Demand remains strong, and we expect growth to accelerate throughout the year, particularly in the second half, driven by strong installations and prior year sales.

Q: How is Jack Henry impacted by consolidation from an underlying revenue growth perspective, especially in light of the recent election? A: Gregory Adelson, CEO: The election results are not expected to significantly impact our fiscal 2025 plans. We have several acquisitions lined up for the second half of the year, already factored into our numbers. We anticipate regulatory challenges may ease, potentially accelerating M&A activity.

Q: Can you discuss the Banno platform's performance and any challenges faced with third-party integrations? A: Gregory Adelson, CEO: We had 12 new Banno wins, with some timing issues similar to core wins. We've faced challenges with competitors' openness, but we're exploring new integration approaches to bypass typical hurdles. We remain confident in our strategy and expect continued success.

Q: What is the outlook for free cash flow conversion, and are there any changes to the 65% guidance? A: Mimi Carsley, CFO: We remain comfortable with the 65% guidance. The trailing 12-month free cash flow is a better indicator due to timing shifts in payments. We are confident in achieving our guided range.

Q: How are you prioritizing capital allocation, and what is the current M&A environment like? A: Mimi Carsley, CFO: We continue to prioritize investments in growth, support our dividend policy, and pay down debt. M&A remains on the table, but we haven't seen attractive prospects recently. We hope for more opportunities as market conditions improve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.