Welcome to the Jack Henry Third Quarter 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 Mr. Vance Sherard, Vice President, Investor Relations. Please go ahead. Good morning, thank you for joining us for the Jack Henry Fiscal 2023 Third Quarter earnings call. Joining me on the call today is David Foss, Board Chair and CEO, Mimi Carsley, CFO and Treasurer, and Greg Adelson, President and COO. After my opening remarks, I will turn the call over to Dave for his thoughts about the state of our business, financial and sales performance for the quarter, industry comments, and other key initiatives. After Dave concludes his comments, Mimi will provide additional commentary regarding the financial results and fiscal year guidance included in the press release issued yesterday that is available from the investor relations section of the Jack Henry website. We will open the lines for Q&A. As a reminder, this call includes certain forward-looking statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends, or results. Like any statement about the future, these are subject to multiple factors that could cause actual results or events to differ materially from those which we anticipate due to multiple risks and uncertainties. The company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our 10-K entitled Risk Factors and Forward-Looking Statements. On this call, we will discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income. The reconciliations for non-GAAP financial measures are in yesterday's press release. I will now turn the call over to Dave. Thank you, Vance. Good morning, everyone. We're very pleased to report another strong quarter of revenue growth and an overall solid performance by our business. As always, I'd like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for our third fiscal quarter. For Q3 of fiscal 2023, total revenue increased 6% for the quarter and increased 8% on a non-GAAP basis. Consistent with our prior comments regarding the reduction in bank M&A this year, deconversion revenue was down approximately 65% as compared to the prior year quarter. Turning to the segments, we again had a good quarter in the core segment of our business. Revenue increased 4% for the quarter and increased by 8% on a non-GAAP basis. Our payments segment performed very well, posting a 6% increase in revenue this quarter and a 7% increase on a non-GAAP basis. We also had a strong quarter in our complementary solutions businesses with a 6% increase in revenue this quarter and an 8% increase on a non-GAAP basis. As I highlighted in the press release, our sales professionals posted an extremely strong quarter led by the core sales team. On our last quarterly call, I mentioned that the sales team set an all-time sales booking record in our fiscal Q2. Although we didn't break that record this quarter, we did set a record for the strongest Q3 in history. During the quarter, we inked 13 competitive core takeaways, so we continue at the approximately one deal per week run rate I've discussed in the past. In addition to our success signing new core clients, we signed 13 existing on-prem core customers to move to our private cloud environment. In addition to the tremendous success we've experienced in our core business this quarter, we continue to attract new clients to our digital banking suite. During the third quarter, we signed 39 new clients to our Banno Retail platform, with another 35 clients signed up for Banno Business. Regarding our Banno Digital Suite, as of March 31st, we now have just over 9.3 million users live on the Banno platform. We continue to enjoy the highest consumer rating in the App Store, we are regularly recognized as the fastest application in the industry. The feedback from our 30 Banno Business beta testing clients has been outstanding, we remain on track to deliver Banno Business into general availability later this quarter. Let me take a moment to address the banking landscape related to the liquidity challenges experienced by a couple of large regional banks in March and earlier this week. Although I'm not aware of any Jack Henry core clients who have tapped into the Federal Reserve's new Bank Term Funding Program, I think the announcement has had a positive effect on the overall concern in the market regarding bank liquidity, and I applaud the Fed on their swift and decisive action. Since those events grabbed the headlines, members of our team have spoken with hundreds of our clients, and I personally have visited with a large number of CEOs at our client banks. I'm pleased to say that our banking clients have indicated they have been largely unaffected by these events, with the exception of several who have reported an influx of new accounts as business clients look to diversify their deposit balances. Our clients typically have a diversified customer base, serve small and medium businesses and consumers in their local communities, and have long-standing and loyal customers. I think it's logical that they wouldn't see an adverse impact as a result of a few extreme scenarios. Also remember that a large part of our business is focused on the credit union industry, with approximately half of all credit unions with more than 1 billion in assets partnered with Jack Henry as their primary technology provider. Those clients also report being largely unaffected by the challenges in the banking sector. In late April, IntraFi conducted a survey which generated responses from more than 550 bank CEOs, presidents, and CFOs, primarily at banks with less than $10 billion in assets. Approximately 77% of the respondents saw no significant inflows or outflows of deposits. 14% said they saw deposits decline by 2% or more, and 9% said they saw an increase of at least 2% in deposits. I think these results are consistent with what we've heard anecdotally from our clients. We have seen no hesitation on the part of our clients to move ahead with technology decisions since the middle of March. As I mentioned earlier, this was the largest third quarter in terms of sales bookings in the history of our company. What's more, our sales pipeline is now larger than at any other time, including a recognizable uptick in opportunities since our last quarterly call in February. I'm well aware of the challenges bankers face in today's economy and understand that things could change. As we speak today, our clients are generally performing well, and banks and credit unions are continuing to prioritize modernization of their technology stack to remain competitive and serve the evolving needs of their account holders. Hopefully, you've all seen the new corporate sustainability report that we published on March 31st. I think it's an excellent representation of the key initiatives and accomplishments we've been working on since we published our last report. In this new version, we've provided a more detailed review of Jack Henry's demographic makeup, a summary of the results of our annual employee engagement survey, an overview of our data privacy and cybersecurity practices, and an outline of our commitment to setting science-based targets through the Science Based Targets initiative or SBTi to address the reduction of greenhouse gas emissions. The report highlights some of the public recognition we've received from organizations like Newsweek, Computerworld, and LinkedIn's top companies list. As we look toward the end of the fiscal year, our sales pipeline is much larger than it's ever been, and we continue to be optimistic about the strength of our technology solutions, our ability to deliver outstanding service to our customers, our ability to expand our customer relationships, and our long-term prospects for success. I look forward to seeing and chatting with many of you at our Investor Day in Denver in a couple of weeks. With that, I'll turn it over to Mimi for some detail on the numbers. Thanks, Dave. Good morning, everyone. As Dave shared, Jack Henry had a successful third quarter, and I will call out the details driving those results and our outlook for the remainder of the year. For both the third quarter and first nine months of our fiscal year, total revenue is up 6% on a GAAP basis and solidly up 8% on a non-GAAP basis. On to the third quarter details. On a GAAP basis, services and support revenue increased 3% in both the third quarter and year to date. Consistent with trends over the past two quarters, services and support were negatively impacted as deconversion revenue decreased: $11 million for the quarter and $31 million year to date. This remains in line with the limited broader market activity, acquisition activity in our space. With only a couple of months left, we are projecting approximately $20 million in deconversion revenue this fiscal year. However, forecasting deconversion activity is always challenging given the limited advance notice and general uncertainty of M&A. Our private and public cloud offerings show robust growth this quarter, growing 11% and 10% year-to-date. Product delivery and services decreased 10% in the quarter, 11% year-to-date, impacted by lower deconversion revenue and convert merge activity, offset by higher license and hardware revenue. On a non-GAAP basis, services and support revenue grew 8% for the quarter and 7% year-to-date, which serves to highlight the consistent strength of our business model. Processing revenue increased 11% on a GAAP basis for the quarter and 10% year-to-date. On a non-GAAP basis, the growth was 10% for the quarter and 9% year-to-date. The increases were driven by the higher card volumes in services, plus robust digital demand. Now reviewing costs. Cost of revenue was up 9% for the third quarter and 8% year-to-date. Quarterly drivers included increased card processing costs, consistent with card revenue growth, higher personnel costs, and amortization expense. These drivers are consistent across our year-to-date results. Research and development expense increased 13% during the quarter, mostly due to higher personnel costs and license fees furthering innovation. Year-to-date, these expenses increased 19% based on the same factors. SG&A rose 9% for the quarter, driven by increases in personnel-related costs. Year to date, the increase was 8%, driven by personnel, travel, professional services costs, partly offset by the gain on sale of assets earlier this year. We remain focused on actions involving facility rationalization, headcount and travel controls, procurement wins, and other expense management. Collectively, these efforts are helping offset inflationary pressures and driving positive operational results. Despite a decline in net income, primarily related to deconversion revenue and partially offset by a lower tax rate, we delivered fully diluted earnings per share of $1.12 for the quarter. Thanks to our hardworking and dedicated associates, GAAP and non-GAAP results for the third quarter and nine months of the year are consistent with internal expectations. Set us up for a strong conclusion to FY23. As a reminder, for transparency, the impact from the gain on sale of assets, the Payrailz acquisition, and deconversion revenue are shown as part of the non-GAAP adjustments in the press release. Turning our attention to cash flow. Year-to-date operating cash flow was $207 million, down from $301 million in the same period last year due to lower deconversion revenue and the timing of taxes. The tax payments were significant, a significant outflow at $64 million in the quarter related to a change in the timing of the deductibility of development expenses. Free Cash Flow, which is operating cash flow, less CapEx and capitalized software, plus proceeds from the sale of assets, was $82 million year-to-date. Excluding the previously discussed tax payments and keeping year-to-date deconversion revenue flat, Free Cash Flow would have been approximately $163 million. While balancing repurchase activities with maintaining a conservative balance sheet, we repurchased 151,000 shares during the quarter. We also returned capital to shareholders through a dividend of $0.52 per share, representing a 6% increase. Our capital allocation priorities remain consistent. We're focused on maintaining ample liquidity, investing in our business to fuel growth, evaluating acquisitions, paying dividends, and opportunistically repurchasing our stock. This consistent dedication to value creation resulted in a trailing 12-month return on invested capital of 20.1%. With that, let's review our outlook for the completion of our fiscal year. The press release included updated full-year GAAP guidance. The GAAP guidance remains inclusive of the Payrailz acquisition, gain on asset sales, and deconversion revenue. We expect the year-to-date trends to continue for the remainder of the fiscal year, impacting GAAP results. Most significantly, assuming continued minimal consolidation in our customer base, deconversion revenue will remain muted. Considering year-to-date activity, we expect approximately $20 million of annual de-conversion revenue, representing a $5 million increase from our previous guidance provided on the last call. To be transparent, on our August full-year earnings call, we will outline our new approach to providing guidance for deconversion revenue. While the integration of Payrailz continues to meet expectations, there has been third-party implementation delays impacting FY23 revenue, amounting to a shortfall of $3 million. This revenue remains in our pipeline. We remain confident in the strategic value and financial performance trajectory. We expect full-year GAAP revenue growth for fiscal 2023 to be between 5.5%-5.9%. With respect to full-year GAAP EPS, we expect $4.85-$4.87 per share, with improvement driven from positive impacts from a modestly higher expected deconversion revenue, lower tax rate, partly offset by a slight increase in Payrailz dilution. Non-GAAP guidance remains unchanged due to the continued impressive and consistent performance of our business model. In closing, we delivered another quarter of strong operational and financial results and remain solidly optimistic about the conclusion of this fiscal year. We thank all of our investors for their continued confidence in Jack Henry. Debbie, will you please open the call for questions? We will 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 pick up 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. The first question is from Rayna Kumar with UBS. Please go ahead. Good morning. David, in the past, you've spoken about having the ability to sell Banno to non-Jack Henry core customers. How is that progressing? In general, are you seeing the opportunity to sell your core processing services to larger financial institutions? Yeah. Good morning, Rayna. Two questions in there. First, first off, as far as Banno is concerned, I think I talked about this on the last earnings call. I know I've talked about it in some of the, fireside chats that I've done with some of you. We had in fact planned to start selling Banno outside the base here in the fall of this past year. What we learned, much to our surprise, was that some of our competitors had identified that as an opportunity for them to hang on to their core customers. The fact that their core customer was going to be able to use Banno, they were essentially using that as a selling point for those customers to retain their legacy core system because they would get the best-of-breed digital banking system without having to change out the cores. That certainly was not part of our strategy. So we've kind of backed off on that. We were prepared in the fall to start selling outside the base. We backed away from that. Now we're really reworking that strategy with a more targeted approach. So you'll hear more about that from us, I think later this year as far as how we're going to go to market with Banno outside the core base. As far as the... Now you'll have to remind me the second part of your question. Selling up market. Sorry, selling up market. Good thing I have help here in the room. Selling up market. First off, we're having great success with SilverLake System in the banking side. And of course, we're the dominant player on the credit union side already. Approximately 50% of the credit union industry with assets over $1 billion are already Jack Henry core customers. So we're already the dominant player on the credit union side of the business. On the banking side, we've had great success here in the past few years moving up market with particularly with our SilverLake System core system What's been interesting now with the with the tech modernization strategy, we are engaging with a number of customers now that are significantly larger than you would normally think of as a Jack Henry core customer, who are very interested in what we're doing and are now seeing Jack Henry as the very probable technology partner that they wanna partner up with going forward. More to come on that. You know, it's early days for us with some of these very large customers that we're that we're talking to. The prospects, I think, are pretty bright, and much of that being driven by the tech modernization strategy that we've been talking about lately. Very helpful. If I can fit one in for Mimi. Mimi, could you just comment on the debit processing volume in the quarter? Secondly, if you can, just give us your preliminary thoughts on how FY24 revenue and operating margin could pan out given that you're close to your fiscal year-end. Thank you. Thanks, Rayna. Yeah, we continue to see the trends that have happened for the first nine months of the year, and are consistent with the broader market data that you're getting from other industry players in terms of slightly slower as it relates to consumer sentiment impacting those trends, and a little bit more going to the credit side than the debit side. As you know, we have a much bigger profile on debit in our business. Our guidance incorporates the continuation of that trend. To your second question, unfortunately, it's a little premature at this point to talk about FY24. Our teams are still heads down collaborating on the budgeting process, we'll probably share that more on the August call than we will today. Can I add one comment on the debit trend? I think there was a bit of a misunderstanding after the last call. You know, we attributed a part of our guide change to the fact that the debit volumes we saw going forward were going to slow just a little bit. Certainly, that's true, but that doesn't mean the debit business is underperforming. The debit side of our business has been a real solid performer for us this year. We just had a little higher expectation for the remainder of the year than is reality. That's why we made the adjustment, but the debit business is performing extremely well at Jack Henry. Thank you. The next question comes from Dan Perlin with RBC Capital Markets. Please go ahead. Thanks. Good morning. Dave, I had a question, you know, going back to the demand environment. I feel like there's this huge disconnect in the market with the stocks and kinda what we hear from the banks versus what you're seeing. I'm just wondering if maybe we're getting it wrong a little bit. Like, is the pressure that the banks are feeling right now driving more, you know, tech demand to you as opposed to maybe the converse, which is, I think, what most people are expecting? Yeah, it's an insightful question, Dan. And I think what you're saying is generally correct. If you're running a bank or credit union in the United States today, you know, they've been performing pretty well, and we all know the challenges that they're under and rate increases and, you know, cost of capital and that kind of stuff. If you're running a bank or credit union in the United States today, you... for almost all of them, they need to continue to focus on modernizing their technology stack for one of two reasons. One, you're trying to attract new customers to your institution, and customers aren't coming into the branch anymore, right? They're expecting to do things through some type of digital presentation layer. For most banks or credit unions, that requires them to continue on this modernization track and make sure that they have the tools to attract not just consumers, but business customers. Small to medium business customers are the lifeblood of our customers and how they operate on the banking side. There's that driver, the other side of the equation is efficiency. You know, for most bankers, they can quote their efficiency ratio immediately to you without looking at any piece of paper. They can quote it off the top of their head because they are all focused on efficiency and trying to figure out where are those areas where we can drive efficiency through the operation. Generally, technology is at the kind of the crux of where they're gonna find efficiency. There too, Jack Henry is in the mix, having those conversations with our customers. Then you throw into that, you know, on top of that, fraud and cybersecurity and all those kind of things, all of that stuff is driven by technology. Yeah, I think there is a bit of a disconnect in this, in this sense that because there's some turmoil in the industry, Jack Henry sales are going to be negatively impacted. They're just not. You know, the businesses continue to run, and they need to continue to find technology solutions to help them with all those things that I just highlighted. It sounds somewhat counterintuitive, but I mean, it clearly makes sense in the current context. The quick question or follow-up on margins here, you know, I know you don't wanna go out to next year, but I would appreciate if you could maybe talk about some of the key, you know, drivers and levers that you're gonna be able to have here, whether it be expense controls specifically, kind of mix of the business, just as we start to think about, you know, the margin expansion story again. Thank you. Sure, Dan. Great question. As we talked about previously, we continue to see margin expansion throughout the year. We knew it would be, you know, a modest amount this year. Earlier in the year, our original guidance was for flat to, you know, for the year. We're hopeful that, and we're on track for a small increase in margin expansion. I would say the things we're working on are consistent. We do a ton around efficiency, continuous improvement. We've done a lot on internal automization, and procurement has been a huge win for us as we think about streamlining partnerships and really prioritizing that spend. We're being really thoughtful on controllable spend like travel, headcount additions, really thinking about each position from a zero-based perspective. There's nothing structurally that concerns me in terms of the ability to, once again, continue back now that we have the normalization of some of the headwinds we've seen past years and return out of COVID environment that we'll return back to a margin expansion story. That's great to hear. Thank you. The next question is from Nik Cremo with Credit Suisse. Please go ahead. Hey, congrats on the strong results. Thanks for taking my question. I was hoping to get some more color on the performance in the payment segment in the quarter just across the various business lines and if you received any, you know, one-time benefits related to the banking turmoil like some of your competitors. Just as my follow-up, are you still expecting Payrailz to be modestly accretive in FY24? Thank you. Let's do Payrailz first. Greg's prepared to give you an overview of Payrailz, and then we'll talk about the rest of the payments business. I think, you know, so I'll go ahead and start with Payrailz. A couple things. One, you know, Mimi alluded to the fact that, in her opening comments around, we do have some challenges with a couple of third parties, and I think some of it's, you know, headcount related and other constraints that they have to get some of the work done to allow some of our contracts that are already done and in the implementation queue to be brought into the production queue. There's a few of those constraints and things that we're working through. The good news is that, since September when we made that acquisition, we've actually sold 48 new contracts and 17 add-ons. Add-ons are things like the P2P solution, we have a loan payment solution, things like that. The sales engine is starting to move, and a lot of the sales that were done, previously before we acquired Payrailz, were really predominantly done through that third-party channel. Of course, we have a much larger sales force, and folks that are focused on selling, you know, more direct deals. We're pretty, you know, very optimistic on what's happening in the sales, side of this. We just need a couple of the integration partners, to be able to get, you know, some of their work done that will help us accelerate, the revenue in FY24. I can start on the payment side too. I think, you know, Mimi alluded to what was going on on our card business, which continues to go very, very strongly as far as growth. When you look at the rest of our payment businesses, there's a nice mix of growth, maybe not to the same level that we had. Remote deposit capture in our EPS business was significant during the pandemic. Obviously, folks, you know, not going into branches at all, though that continues for the most part. That business is not growing at the same pace it did, but still in a double-digit growth in our, you know, portfolio. Things that we're doing in our PayCenter business around general payments and preparation for FedNow, which we can talk about at some point too. In our The Clearing House business and what we've done with Zelle, we continue to have about 60% of all the The Clearing House customers that are out there. There's only about 300 The Clearing House, and we have over 180 that are live on Jack Henry today. That continues to grow nicely. You know, that business continues to have a lot of upside. Yeah. I would just add that there's consistency to, you know, to Greg's point, there's consistency across remit, cards, payments, also led by things like the fraud and other risk management solutions that are add-ons. I would say that trend from a consistency of growth will continue and then added by the benefit of payroll. Okay. The next question comes from David Togut with Evercore ISI. Thank you. Good morning. You've called out your new sales pipeline at a record level. Could you walk through what are the biggest drivers of that? Is that new tech modernization modules? Is it Banno Business? SilverLake System. What, what are the underlying components of that strength? Sure, Dave. You know, one thing I'll highlight as I go through this, you know, when I talk about pipeline, I know there's been some confusion in the past. I'm not talking about individual deals, you know, how many core customers are in the, in the pipeline or anything like that. I'm talking about the, you know, the dollar amount, essentially. This is a non-GAAP number, but it's the dollar amount that we track as far as the value of each contract. It's, you know, in theory, that all converts into revenue at some point after deals are signed and they're implemented. As far as the drivers, core continues to be king for us when it comes to a driver. We have just a tremendous amount of core activity right now, both banking and credit union, as far as customers that are talking to Jack Henry about trading out their existing technology. Some of that is certainly driven by tech modernization, I don't think it's as much driven by, you know, I wanna sign for the tech modernization module right now today. It is more about Jack Henry has a strategy that makes sense to us as bank and credit union executives. Their strategy makes sense. We need to look at them now and get to Jack Henry now because we wanna be partnered with them as they continue to evolve. There's a lot of that that's driving interest in our existing core customers. SilverLake, primarily on the banking side, and of course, Symitar on the credit union side. On top of that, Banno continues to be a driver, and that's why I call it out on these calls almost every time. There's a tremendous amount of interest in Banno. Our new Financial Crimes Defender solution that we've talked about on this call, that's rolling out here very soon. We have a lot of customers that are looking at Financial Crimes Defender because it's the first brand-new ground-up, public cloud native, fraud solution in the industry in many years. Lots of interest, not only inside our core base, but outside the core base in that solution. Our Treasury Management solution is getting great reviews today, so continued interest in Treasury Management. Certainly cards, we've talked about the number of customers that we've been adding to the cards, business, continuing to drive interest there. Our online commercial lending solution, tremendous amount of interest in that. It's just a broad variety of solutions that I think the common thread in all of that is almost all of those non-core solutions have been written and rolled out within the past, you know, two, three, four years. It's new technology that people are interested in. Then, of course, on the core side, you know all about our tech modernization initiative there. You put all those things together, much of what's driving this is the recognition in the industry that Jack Henry has put a tremendous amount of investment into brand-new technology and new solutions to help our customers solve problems. That's what's getting us a lot of attention. I'd like. This is Greg. I'd like to add a relevant example. We actually just got an inbound request from a large regional that hadn't talked to us since 2010. They came to us and said, "Hey, we'd like to renew conversations based on what we've heard about you in the industry, the tech modernization story and things in general." That's a relevant example because, you know, these are larger institutions that we typically wouldn't have seen in the past, that again, are inbound to us because of the things that we're doing and the stuff that Dave just described. What's the asset size of that large regional bank, Greg? It's greater than $50 billion. We're engaged today, Dave, with a number in the mid $20 billion space. Several banks in the mid-20s are talking to us today, and I think a lot of it is because of what they've seen with tech modernization. You know, they're not talking about moving right to that platform. They're talking about SilverLake System and then evolving to that platform. Understood. Just as a follow-up, what's your latest view on, you know, timing of rollout of FedNow, you know, Jack Henry's role, and how material could FedNow be to Jack Henry, you know, over the next 12 + months? Yeah, this is Greg. I'll take that question as well. Good, good, insightful question. We are absolutely ready. We're already fully certified. On July the 19th, when the first transaction takes place, we will be part of that transaction process. We have 20 institutions that will be going live between the July 19th timeframe and sometime in late August, based on just rollout with those institutions. We can go as fast as they wanna go. We have 51 contracts that are already sold, and a significant number of others that are in process just based on interest. I think to your point about significance of where this, you know, is in our portfolio, time will tell. A lot of it's gonna be based on use cases. There's a lot of rumors that the Fed in general will be mandating several use cases that will be important for institutions to be set up on the receive now, at least aspect of the equation, allowing them to receive payments if one comes to them. We are having very detailed conversations with a lot of our institutions about the importance of at least being set up on the receive aspect, even if they're not ready to go to the send aspect. Again, we're very bullish on this. The Clearing House, there had been some, you know, some challenges just because some institutions that we work with were a little leery of working with the larger, you know, conglomerate that owns The Clearing House versus the Fed being a part of this. We, we think we're gonna see a little more uptick in the FedNow solution than maybe that we saw so far in The Clearing House one. Just to emphasize, Dave, the level of our involvement with the Fed on this project, I was just in Washington, D.C. on Monday, so two days ago, meeting with some of the Fed presidents and the FedNow team, and the president of our payments division was with me, talking strategy, talking rollout. This was a Jack Henry only meeting with these Fed presidents. We are very engaged with the Fed, and very, very... It's top of mind for us to make sure that we're helping our customers take advantage of this opportunity. Understood. Thank you. The next question is from Vasu Govil with KBW. Please go ahead. Hi. Thank you for taking my question. I guess first one, I know you will share more on your investor date, but just thinking about revenue growth next year, sort of what are some of the puts and takes that we should consider? Hi, Vasu. Well, I appreciate the question. You know, we're still in the midst of planning. In fact, this afternoon we'll be spending the whole afternoon with the sales team on their planning for next year. You know, I would say overall, as Dave mentioned, you know, a continuation of both the transition and implementation from a great pipeline from the last two years, plus, you know, the continued interest in some of these new products. Banno Business wasn't in the year numbers for FY23, will be in 24, so that's a nice bump as well. I would say it's gonna be a continuation of a diverse portfolio growing very well. That's helpful. Just to follow up on the complementary segment, clearly Banno is a big driver there. Maybe David, you could talk about what are some of the other products that rise to the top in terms of growth drivers. As we think about growth in that segment long term, is mid-single digits sort of the right base going forward, or do you see that accelerating? I'm sorry, I missed the last part of your question. Is what? Mid- Oh, mid-single digits. Okay. Yeah. Sorry. Yeah. You know, Vasu, the complementary segment is a little bit of a challenging one to talk about because there are so many solutions in there. I understand your point, trying to figure out what are the key drivers. There are several. I already highlighted the Financial Crimes Defender solution that we're just now rolling out, so we definitely expect that to be a key driver for us in the coming year. Banno is in that segment, Banno will, of course, continue to be a driver as we're rolling out Banno Business. Treasury Management that I called out a little while ago, Treasury is in that segment. That will continue to be a driver for us. Most of the fraud solutions that are not specific to payments, so the payments fraud pieces show up in the payments segment, but the other fraud type things, security solutions, for example, those are all in that segment. That is always top of mind for our customers, so that continues to be a driver for us as well. It's just a lot of different things. As I mentioned earlier, our online commercial lending solution that has really picked up here in the past several months. We've had that solution in market for probably four years now, but in the past few months, it's really picked up as far as the level of engagement with customers and prospects. A bunch of different pieces. To the second part of your question about, you know, mid-single digits, I think that is a good assumption because with so many solutions in there, you have some that are growing quickly and some that are kinda, you know, just steady performers, and so I think that's a good assumption for that segment for the long term. Great. Just on that online commercial lending solution, sort of any drivers why you think that's gaining more traction now? Yeah. Well, I think it's because, it's an interesting thing when you work with banks. You know, in banks, most bank CEOs grew up in the bank as a commercial lender. That's their background for most of them. Commercial lenders, they're the money makers in the bank, right? The... You, you can talk all day long about all the consumers and what wonderful relationships you have with your consumers, but what really makes money for a bank is the commercial lending business. That's, you know, small, medium business customers and then, of course, even larger customers. Commercial lenders tend to have a process that they follow. They're the money makers. They're the, you know, they're the people who have a process that they follow. They have tended traditionally to be averse to using more technology. But now with so many people, particularly on the backside of the pandemic, so many people not wanting to go to the branch, they've gotten used to this idea of being able to do everything through some kind of a digital layer. Commercial lenders are getting a lot more comfortable with the idea, and I don't say they like it, but they're accepting it. They're getting more comfortable with the idea that their customers, small, medium businesses, expect to be able to apply for a loan and interact with the bank using a commercial presentation layer. That's exactly what our solution does. It's a complete commercial lending solution that is hosted online, where the borrower can do everything they need to do through that presentation, and then the lender can interact with them, again, through that technology. I think it's a result of the backside of the pandemic, customer expectation has changed and lenders are kind of, oftentimes grudgingly accepting the fact that their customers want to do things differently, and they're now thinking about how do we adopt different technology to make sure we take care of our customers. Great. Thank you very much. Certainly. The next question is from Peter Heckmann with D.A. Davidson. Please go ahead. Hey, good morning. Most of my questions have been answered. I wanted to follow up on FedNow. I guess, is it your impression that with FedNow that the primary use case is gonna be enterprise B2B and likely replacing same-day ACH? You know, related to that, are you aware of any other use cases that might involve the consumer or other, you know, sort of niche processes that you think are gonna be strong right out of the gates? Yeah, Pete, actually, I think, you know, that could be one example. I think what we have seen, even with some of the other solutions that are out there that we think will be the primary use case is with the gig workers. The gig workers taking the payments that they're getting and moving them, using, remember, the FedNow solution actually is truly real time. The Clearing House solution still has kind of a batch settlement on the back end. The ability, you know, though they have access to their funds immediately, the process is different. Using the gig workers to move those funds into their FI accounts, we see that today with a lot of the stuff that we have with The Clearing House, and the Fed believes that to be a big one. The other one is having the FI customers, the financial institution customers, actually moving money from external wallets into the depository accounts as well. There's a whole host of use cases that are being built out of those two scenarios, as well as, and Dave was just there, you know, there's going to be some I don't know if I would call them mandates, but there's going to be some strong requests for things to be done through the FedNow account for stuff like various tax payments and. One of the things we talked about Monday was V.A. benefits. Yeah. Yeah. There's going insurance, payments, things like that. Things that the Treasury and the Fed can control, they're going to be pushing that. You know, that's why it's important for processors like Jack Henry, who can really kinda help get to that last mile of institutions to get that receive now turned on. Regardless of where that payment is being initiated from, it has a place to land. That's helpful. Just to clarify, though, you know, again, with that now, it doesn't sound as if there's a lot of applications that are currently either cash-based or card-based that will be replaced with real-time payments. It's primarily, you know, some form of ACH or interbank transfer. Is that how you see it? No, I do see, you know, some reasonableness to some of the card products. There's various things that happen today in the B2B world, that where transactions that, you know, typically would have gone out paper maybe would have gone out through a virtual card program or things like that where there's interchange. Some of those programs could be disintermediated because of this type of solution. I think there's going to be some heavy focus on B2B solutions as well because there's so much paper in the process today, and other types of card payments may be at a merchant level, where depending on how the merchant is set up, you know, could those transactions to them or from them end up going through that channel as well. Yet to be determined, but I think the card part of this, you know, specifically on merchant side and specifically in B2B payments, could have some chances for disintermediation. Okay, good. That's helpful. Thanks. Sure. The next question is from Kartik Mehta with North Coast Research. Please go ahead. Hey, Dave. I know you and I have talked about this a little bit, you know, one of the things I think that gets misunderstood is how strong your pipeline is and how much visibility you have on revenue. I'm wondering if you could just talk about, you know, you've talked about how the pipeline has grown, just looking at the pipeline and what kind of visibility you have and what kind of confidence that gives you over the next 12-18 months? Yeah. Thanks, Kartik. You know, it's an interesting thing in this, the business that we're in with the recurring model or recurring revenue model that we've built. First off, you know, when it comes to the contracts that we already have signed, we of course have a tremendous amount of visibility because we're, you know, almost 90% recurring revenue as far as the contracts that we have in-house and the kind of watching the revenue build on those contracts. You know that once we sign a customer, oftentimes, depending on the product, it can take, you know, one month to 12 months, depending on what they purchase from us for that revenue to start layer in-layering in. We see we have visibility into that. As far as the pipeline is concerned, when you've been doing this as long as I have, and I've been doing this a long time, you know, we have a very, a predictable model. You know, I'm not gonna quote numbers here, but I can tell you with a pretty high degree of accuracy, if the pipeline is X, then Y% of the pipeline is very likely to close because we have years and years and years of history doing this. We know that that's gonna translate into $Z of revenue over time. We can kinda do that math and predict pretty accurately, what the impact is going to be. Now, the challenge again, is some of those solutions, you sign a contract today, and we won't see the first dime practically of revenue for 9-12 months. Some of them, you sign a contract today, and you have revenue flowing in one month. You know, there's some art to this, but there is a lot of science to it as well, just based on all the experience that we have doing this for as long as we have and understanding the way these contracts works and the way customers make decisions. Sometime you'll have to give us X, Y, and Z, Dave. Nope, not gonna happen. Just, you know, just thinking about, I don't wanna call it a banking crisis, just the issues that are out there, and looking at Jack Henry when the last crisis happened and kinda how you looked at the business then and what happened, and if there's any lessons you could take from that and what's happening today. I know they're very different, just trying to get a feel for maybe, you know, what we could glean. Yeah, that's... It is a very different environment today from 2007, 2008, for sure. Of course, if you go back in time and look at Jack Henry's performance during the period of the Great Recession, we performed really well, even though there were hundreds of banks that were being shut down at that time. Of course, many of them were our customers that were being shut down. I think the major difference, if you look specifically at Jack Henry between then and now, is at that time, we were still very dependent on license fees and maintenance revenue. When customers kind of pulled their arms in and said, "We're not spending on anything," you know, our revenue had the potential to drop significantly because we were so dependent on license fees. Whenever you sell a license, you see the impact in the quarter as opposed to being spread like we do today. Today, of course, back then, we were, you know, maybe 50, 60% hosted. Today, we're, you know, or recurring revenue. Today, we're 90% recurring revenue. Very different from a Jack Henry perspective as far as the predictability of revenue. If a bank is challenged, unless they shut down, they don't quit spending money with us. You know, they don't decide all of a sudden, "We're just gonna quit processing loans." You have to still process loans, which means you still have to pay Jack Henry for that service. Today, I would draw a significant contrast as far as our business and the resilience of our business as bankers are going through what they're going through right now. That does not say we're bulletproof. It doesn't say we're totally immune to, you know, any challenges out there. I think we have a much more resilient model than we had during the Great Recession at that time. Again, if you go back and look at how we performed during that period, we performed pretty well. My expectation is that, you know, we should be able to weather this storm right now. Of course, much of this storm is the result. I mean, these are runs on the banks that are happening, right? You get some headline somewhere that says this bank is, has a liquidity challenge. By the way, liquidity and capitalization, those have been conflated over and over in these conversations, two totally different topics. Yet, you know, this, the, run on the banks are happening because, you know, wildfire, the spreads like wildfire through social media that there's some challenge at a bank. Everybody uses their digital banking solution to withdraw money from the bank, and all of a sudden they're in trouble. I just view this as two totally different scenarios. If I look specifically at our company, we're in a much better position to weather the storm than we were even in 2008, and we performed really, really well in 2008. Perfect. Thanks, Dave. I really appreciate it. Certainly. The next question is from John Davis with Raymond James. Please go ahead. Good morning. Mimi, just want to follow up on Dan's question around margins. I think the guide implies about a 250 basis point year-over-year improvement in the fourth quarter. Anything to call out from a timing perspective or what kind of gives you confidence in that ramp in 4Q margins? Thanks, J.D. Great question. I think that 250 is a good estimation. I think we feel good about that. We always knew that it would be a grow as the year continued kind of situation, and we're seeing that transpire. I feel good with that estimation. Okay. You called out tax payment timing. Mm-hmm. the Free Cash Flow in the quarter. How should we think about Free Cash Flow conversion for the full year? Obviously, 4Q is always a huge Free Cash Flow conversion quarter. Just curious, I think you guys did like mid-80s conversions last year. Just any sort of guide rails for us for the full year. Yeah, great question. J.D., I love that you're looking at it on an annual basis versus a quarterly just because of the lumpiness that any one quarter can have. This quarter in particular between the deconversion and then, you know, the larger tax payments and just kind of going into that. You know, we were waiting for some legislative clarity around IRC Section 174, like a lot of tech companies that impacted, you know, the capitalization, the deductibility of that capitalized labor. Unfortunately, with lack of legislative clarity, you know, we had to make a payment. You would have normally have seen that kind of maybe spread over a couple of quarters. That's a timing thing. It doesn't impact our tax rate. That will reverse over several years and kind of normalize. I think that obviously will not be part of Q4. As you said, we have a large inflow, you'll certainly see an uptick. I think the reality is because of deconversion revenue, we also have a couple of larger renewals of some third-party expenses in third quarter. I think we'll be light of our target of the 100% Free Cash Flow conversion that we target, I think it'll definitely be an uptick from third quarter. Okay. Last one for me. Dave, you talked about some of the impacts from all the banking turmoil has been kind of increased in account growth. Maybe how should we think about your business? Like, what% of revenue ballpark is priced on kind of a per account basis versus transaction or anything else? Just to kind of help us understand what the account growth could mean from a revenue perspective. Boy, I don't know that I know the answer to that question. Anybody wanna, maybe a guess? It's more... I mean, the payment business is... He's talking about accounts. Yeah. Account base. It's the core business, essentially. Yeah. 25%. 25%? Yeah. Okay. We'll go with 25%, J.D. Okay. All right. Thanks, guys. Sure. The next question is from David Koning with Baird. Please go ahead. Yeah. Hey, guys. Thanks. Maybe, I guess, first of all, just on Q4, kind of the implied guide is for somewhere around 6%, I think, kind of non-GAAP revenue growth, which the rest of the course year, I think we're kind of 6%- 8.5%. It's a little slower. What's the reason for the slower in Q4? Yeah. You know. Hi, Dave. Morning. I would say, if anything, I think there's a little bit of conservatism in that. I would expect us to maybe be a slightly biased towards the higher side of that range. You know, I think with a little bit of uncertainty still in the consumer sentiment, you know, we just wanted to think about a little bit conservative. The trends, I feel, are still quite strong for the year, and in terms of getting us to our full year number or better. Okay. Okay. I guess on payrolls, I think year to date, you add back the loss from acquisition to non-GAAP margin, I believe. I think it's trended like around $10 million year to date loss, so probably a little more by the end of the year. Is that all going away in 2024? Basically is that, you know, why you can get to accretion in 2024? Like, is that just the, you know, main what just kind of goes away? It will not be part of non-GAAP in 2024 for sure. That will be one component. I also think it's just a question of having let some of those inflationary pressures, like the great resignation, the wage inflation we saw, some of the third-party one-time costs like Java are now in our normalized base rate. He was specifically talking about payrolls. He was talking about the impact on margin. Okay. I think we're still set for margin expansion in 2024. Okay. because of the base now running through the 23 numbers, where it wasn't in the 22 numbers. I think we're still in good shape, as well as some of the efficiency measures that we're continuing to focus on internally. Gotcha. Thank you. No, I appreciate it. The next question is from James Faucette with Morgan Stanley. Please go ahead. Hey, good morning, everybody. Thanks a lot for taking some time. I think most of the questions around demand and sales cycle, et cetera, you guys have at least addressed a little bit. I wanted to ask quickly on capital allocation. I think Dan Perlin raised the kind of the change in sentiment in the market, and clearly that's impacted your stock. At the same time, you know, we continue to wonder about M&A. Just any comments how you're thinking about capital allocation and what looks attractive to you right now and how you'd prioritize? Nothing has changed there, James, as far as capital allocation is concerned. You know, we're committed to our dividend policy and Mimi emphasized that in her comments. As we've said many times before, M&A is always at the top of our list. We do share buybacks when it makes sense for us, and Mimi highlighted that, of course, in her comments as well. M&A, you know, we are I've said it many times, we're a solid acquirer. We know how to do integration well of companies once we acquire them. We're very disciplined and only pursuing acquisitions that we think are really going to be additive to our business in the long term. I think Payrailz is a great example of that. You've seen that it's a little challenged in the short term, but when we look at what we're doing with that business in the long term, I think I'm absolutely convinced it's gonna be a real home run for Jack Henry in the long term. That's the way we think about doing M&A. We're always looking for those things that we believe we can take advantage of as a long-term solution for our customers to help our customers perform better. You know, I was hoping, and I've said this in many forums, that by this time and even several months ago, that there would have been a lot more interesting M&A opportunity for Jack Henry. We have been looking at some companies. We continue to look at some companies to acquire, but there just hasn't been anything that has kinda jumped over that bar for us so far here. Even though the deal flow hasn't been particularly strong, we have been looking at some deals, but nothing's jumped over the bar here recently, but we're gonna continue to look. Dave, the only thing I would add to that. Great. Sure. Sure. Oh. James, just to add one more thing, you know, which is consistent with our priorities is paying down the debt through our normal cash flow from operations. You would expect to see that over the next, you know, several months, years, that we're gonna continue to decline the debt balance. Yep. Thanks for that, Mimi. Then, you know, Dave, we've seen a lot of headlines around technology layoffs and headcount reductions, et cetera. How's that impacting your ability to go out and hire and add talent to the Jack Henry pool and maybe that even out of your customer? Anything you can talk about there? Yeah. We've, it's been an interesting time since the great resignation. You know, we went from the great resignation, where everybody was resigning their jobs and going to find the pot of gold at the end of the rainbow to, you know, within about three months, all of a sudden, companies were doing these massive layoffs. You know, a lot of heads were spinning, I think, among employees at a lot of these companies. For us here in the recent past, we have picked up some really good new hires, and we've had some wonderful, what we refer to here as boomerangs, you know, people who left because they wanted to chase the pot of gold, and then they realized the pot of gold wasn't there, and they called us up and said, "Can we come back?" Those are great additions to us because they already know our company, they know how we do things, and they're oftentimes really talented folks. We've had a number of boomerangs come back. We are attracting some great talent from some other companies in our space that have been challenged, and so they understand the industry, they understand what we do. May not understand the Jack Henry products completely, but you know, we found some really good talent, people that were a little shaken by what's happening at other companies in the industry who are looking for a steady provider, and so they've joined Jack Henry. You know, but we're not just hiring left and right. You know, we're being very judicious about when we hire and where we hire. We're trying to be very selective about who we choose to join the Jack Henry team. I think the overall message would be we've had some great additions to our team in the last two, three, four months. That's great. Great color there, Dave. Sure. The next question is from Dominick Gabriele with Oppenheimer. Please go ahead. Hey, great. Good morning, everybody. David, I don't know the best way to ask this, so I'm just gonna go ahead and ask. I guess you're the sole survivor of the big four companies in core platform as far as CEOs go from pre-pandemic. You know, with, you know, a lot of our clients actually do ask about, you know, what is, you know, the long-term succession plan, if there even should be one? You've had a major contribution to this enterprise, I do get questions about, you know, if a succession plan ever came, would it be someone inside, outside? How do we think about, you know, that? You know, not thinking about timing, but what does a succession plan look like in the past for Jack Henry, in general for CEO? I'm not saying you should leave. That's the most polite way anybody has ever described me as old. I don't know how to ask it. No. You're old, Dave, what's the plan? No, Dom, it's a reasonable question. you know, obviously, I can't share specifics about either my timing or, you know, succession planning at Jack Henry. I will tell you, of course, I'm also Board Chair at Jack Henry, this is a real focus for us, is making sure that we have a solid succession plan in place. As a matter of fact, next week is our quarterly board meeting. In May, the board meeting in May is when I always review with the governance committee my personal succession plan. I also review with the entire board the succession plans for the entire leadership team. I'll have all the members of the leadership team with their successors or what the plan is. If it's an internal candidate, I'll highlight that for the board. If it's a plan to do a search, then we, I'll highlight that as well. You know, all of those options are on the table. What I normally do is I walk into the governance committee meeting with some suggestions of internal candidates and also external candidates. I know a lot of people in the industry, and I know people who might be a decent fit for a role like this. I try to give the board a good overview of who potential candidates might be. Ultimately, of course, it's the board's decision to hire or fire the CEO. We have a very rigorous exercise that we go through around the topic of succession, not just for me, but for all members of the leadership team at Jack Henry. Excellent. Excellent. Thanks so much on that one. Mimi, you know, you'd mentioned in the prepared remarks a few times about personnel-related costs increasing year-over-year, and this was kinda talked about in the last question, but not exactly. Is there a way to kinda break up new hires versus wage inflation versus tech talent demand in those growth rates or just to kinda parse out, you know, largest factor, least important factor as we think about the go-forward growth and expenses for personnel? Thanks so much. It's good question. You know, I would say, you know, the headcount on a count basis has been modest. We're about 3% increase in headcount from a number of positions year-on-year, which is a much lower percentage than obviously the fully baked cost of that. You know, as Dave mentioned, we're being very judicious on where those heads go. We've been focusing on customer-facing roles like service roles as well as R&D roles. We look at every role on a zero-based budgeting perspective when we're thinking about that. I can't really give you a lot of breakout in terms of... 'cause we just don't provide that level of detail in terms of vacancies versus new and rollovers, but I would just say we're being really judicious about it. Great. Thanks. The final question is from Mark Feldman with William Blair. Please go ahead. Hi, guys. This is Marc on for Chris. Thanks for taking the question here. Just wanted to ask on Banno. Do you guys have any information regarding the asset size of the institutions that you're seeing, you know, the primary uptake from Banno and any interest in it? I guess additionally adding on to that, what does Banno Business do for your sales force's ability to close Banno signings that they didn't have before without the offering? We have about 700-ish clients that are live today on Banno, and they are all over the board as far as asset size. I would say that the primary adopters have been a little bit on the larger side. Let's say, you know, averaging closer to $1 billion probably, as opposed to, you know, something smaller than that. That's been the primary adoption. We continue to see great demand across asset sizes. And as I highlighted earlier, most banks and credit unions need to modernize their technology presentation to consumers through or, and business customers through a digital presentation. As far as Banno Business, if you think about traditional Banno, it is designed for the retail consumer, you or me. All the functionality is retail in nature. Banno Business provides that similar functionality but for business customers. Specifically things like cash management and the ability within the application for the, let's say, the CFO of the medium business and the CEO to communicate about financial transactions within the application. It's a really interesting and robust application designed specifically to help a business manage their business and communicate about financial transactions and decisions within the business but in the financial application. It's a revolutionary new solution, and we have a lot of bankers that are very excited about the rollout of this platform. Great. Thanks. If I can ask just one more. On cards with credit cards, I know in the past, you originally didn't have the sales force that could go out and the infrastructure to go out and sell the product. Do you have any update on where that is today and, you know, when we can start seeing some deals getting signed with credit cards? Thank you. Hey, Mark, this is Greg. I can take that one. Yes, we have a dedicated sales force. We also have dedicated, install and operational folks that now all have the experience. That is starting to ramp up. We also added, if you saw a press release we did a couple months ago on an Agent Credit Card Program that we've added. We now have a lot of interest in that Agent Credit Card Program, and that's typically for smaller institutions that they themselves don't have the folks or the infrastructure to really support that type of full-service credit solution. That's given us another angle to sell the credit side of our business. We already have, I think, two or three now in the pilot phase of that, and we have a pipeline of about 10 or more, just in the last 2-3 months. That's starting to grow. That, you know, all of those products will continue to accelerate over time. Great. Thank you. Sure. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Thank you, Debbie. We have additional upcoming investor engagement opportunities with management at multiple investor events. The first one is going to be our Annual Investor Day, which will be held in Denver on the afternoon of Monday, May 15th, at 1:00 P.M. Mountain Time. The agenda includes presentations from a wide selection of the Jack Henry management team and a reception that will include demos of some of our newest solutions. We look forward to hosting those attending in person and via the webcast. We are pleased with the quarterly results and thank all Jack Henry associates for their efforts in producing these results. Thank you for joining us today. Debbie, would you please provide the replay number? Yes. The replay number for today's call is 877-344-7529. The access code is 1452467. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.