Jack Henry & Associates, Inc. (JKHY) Q1 2026 Earnings Call Transcript
Non-GAAP Revenue $636 million, up 8.7% year-over-year. This exceeded the anticipated increase of 7% to 7.5%. The growth was driven by strong sales performance, including migrations to the private cloud and increased client activity.
Non-GAAP Operating Margin 27.2%, representing a 227 basis points expansion year-over-year. This was attributed to inherent leverage in the business model, strategic cost management, and leveraging existing workforce.
GAAP Revenue Increased 7% year-over-year. Growth was supported by strong performance in services, support, and processing revenue.
Cloud Revenue Increased 7% year-over-year. This recurring revenue now constitutes 30% of total revenue, driven by private and public cloud offerings.
Processing Revenue Increased 10% year-over-year. Growth was driven by increased card, digital, and payment processing revenues.
Recurring Revenue Exceeded 91% of total revenue, highlighting the stability and predictability of the revenue stream.
Cost of Revenue Increased 1% on a GAAP basis and 4% on a non-GAAP basis year-over-year. This was due to higher direct costs consistent with revenue growth and higher personnel costs, partially offset by lower benefits.
R&D Expense Decreased 1% year-over-year on both GAAP and non-GAAP bases. The decrease was primarily due to tempered net personnel costs.
SG&A Expense Increased 14% on a non-GAAP basis and 9% on a GAAP basis year-over-year. The increase was driven by the timing of the Connect client conference, increased personnel service costs, and higher net personnel costs.
GAAP Earnings Per Share (EPS) $1.97, up 21% year-over-year. This was driven by consistent revenue growth and strategic cost management.
Operating Cash Flow $121 million, a $4 million increase year-over-year. This was positively impacted by annual maintenance billings and tax depreciation.
Free Cash Flow $69 million, a $10 million increase year-over-year. This was driven by strong cash collections and tax benefits.
Return on Invested Capital (ROIC) 22%, up from 20% in the prior year. This reflects strong operational performance and efficient capital allocation.
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Jack Henry Reports $6.2 Million Deconversion Revenue in Q2
- Deconversion Revenue Growth: Jack Henry reported $6.2 million in deconversion revenue for Q2 of fiscal 2025, indicating increased activity in client acquisitions compared to the previous year.
- Full-Year Revenue Guidance Raised: Following the strong Q2 performance, Jack Henry has raised its deconversion revenue estimate for fiscal 2026 to $28 million, reflecting a positive outlook on future market dynamics.
- Nature of Revenue Explained: The deconversion revenue primarily arises when clients are acquired by other financial institutions, highlighting that this revenue is influenced by external factors and does not accurately represent Jack Henry's core operational performance.
- Exclusion from Non-GAAP Revenue: Jack Henry excludes deconversion revenue from its non-GAAP revenue in quarterly and annual reports, emphasizing the stability and sustainability of its ongoing business operations.
Jack Henry Launches Transaction Enrichment Feature on Banno Platform
- Transaction Enrichment Launch: Jack Henry successfully rolled out its native transaction enrichment capabilities on the Banno Digital Platform in collaboration with Bud Financial, enabling banks and credit unions to provide clear transaction details, thereby enhancing users' everyday financial management.
- Data-Driven Decision Making: By integrating Bud's Enrich product, Jack Henry offers high-quality transaction categorization and merchant detection, helping financial institutions gain actionable data to personalize customer experiences and optimize decision-making processes.
- Enhanced User Experience: Julie Morlan, Assistant Vice President at Jack Henry, stated that this integration allows clients to gain clearer visibility into spending behaviors and merchant activities, thus delivering more relevant and trusted user experiences while advancing the evolution of human-focused user experience.
- Market Leadership: Bud Financial has rapidly scaled since 2015, processing tens of billions of transactions and focusing on providing intelligent transaction data to help financial institutions achieve personalized services and optimize operations, further solidifying its leading position in the fintech sector.
