Jack Henry & Associates ((JKHY)) has held its Q3 earnings call. Read on for the main highlights of the call.
The recent earnings call for Jack Henry & Associates painted a mixed picture for the company. While there was strong performance in core areas such as cloud and processing revenue, core wins, and digital platform growth, macroeconomic concerns led to lowered revenue guidance and delays in nonrecurring projects. This indicates a cautious outlook in the market, balancing optimism with prudence.
Solid Non-GAAP Revenue and Margin Expansion
Jack Henry & Associates reported a 7% increase in non-GAAP revenue, alongside a non-GAAP operating margin of 23%. This represents a 207 basis points margin expansion over the previous year, highlighting the company’s ability to enhance profitability despite challenging economic conditions.
Robust Core Wins
The company secured 28 new core wins in fiscal year 2025, including 11 in the third quarter. These wins involve financial institutions with a total of $30 billion in assets, underscoring Jack Henry’s strong market position and ability to attract significant clients.
Growth in Cloud and Processing Revenue
Cloud and processing revenue constituted 76% of the total revenue for the quarter, growing at a rate of 9.8% compared to 8.8% in the third quarter of fiscal year 2024. This growth reflects the company’s successful focus on expanding its digital and cloud-based offerings.
Strong Banno Digital Platform Growth
The Banno Digital Platform experienced an 18% increase in registered users over the past 12 months, reaching over 13.7 million users. This growth highlights the platform’s increasing popularity and the company’s success in digital innovation.
Increased Deconversion Revenue Guidance
Jack Henry raised its full-year deconversion revenue guidance to a range of $22 million to $28 million. This adjustment reflects the company’s confidence in its ability to generate revenue from deconversion activities.
Lowered Revenue Guidance Due to Macroeconomic Concerns
The company lowered its full-year non-GAAP revenue growth guidance from 7%-8% to 6%-6.5% due to macroeconomic concerns and a softening in nonstrategic revenue. This cautious adjustment signals the company’s awareness of broader economic challenges.
Softening of Nonstrategic Revenue
A decline in hardware purchases and consulting engagements has impacted non-GAAP revenue growth. This softening in nonstrategic revenue is a concern, as it affects the company’s overall financial performance.
Delays in Nonrecurring Projects
Customers have delayed the start of signed nonrecurring projects, including work orders and implementation of post-core conversion products. These delays could impact the company’s short-term revenue streams.
Softening Debit Card Transactions
The company observed some softening in debit card transactions, mirroring trends experienced by card associations in the U.S. debit businesses. This trend may affect the company’s transaction-based revenue.
Forward-Looking Guidance
During the earnings call, Jack Henry & Associates provided comprehensive guidance, highlighting key financial metrics and strategic initiatives. Despite macroeconomic concerns and softening nonstrategic revenue, the company remains optimistic about its strategic positioning and continued growth. The company emphasized its strong sales pipeline and success in securing new core wins, as well as robust growth in its payments segment.
In summary, Jack Henry & Associates’ earnings call reflected a balanced sentiment, with strong performance in core areas tempered by macroeconomic challenges. The company remains optimistic about its strategic initiatives and growth potential, despite adjusting its revenue guidance to account for economic uncertainties. Investors will be keenly watching how the company navigates these challenges while capitalizing on its strengths in cloud and digital platforms.