Good morning, welcome to the Jack Henry Q4 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the 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 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 Sherard, Vice President, Investor Relations. Please go ahead. Thank you, Anthony. Good morning, everyone, and thank you for joining us for the Jack Henry Q4 2023 Earnings Call. Joining me today on the call is David Foss, Board Chair and CEO, Mimi Carsley, CFO and Treasurer, and Gregory 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. Today, we're very pleased to share details with you for a quarter that produced record revenue and record sales bookings. 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 Q4 and for the entire fiscal year. For the Q4 of fiscal 2023, total revenue increased 11% for the quarter and increased 8% on a non-GAAP basis. Deconversion fees were up as compared to the prior year quarter, but were still down significantly for the full fiscal year. Turning to the segments, we had a solid quarter in the core segment of our business. Revenue increased by 11% for the quarter and increased by 10% on a non-GAAP basis. Our payment segment performed well, posting a 9% increase in revenue this quarter and a 7% increase on a non-GAAP basis. We also had a very robust quarter in our complementary solutions businesses, with an 11% increase in revenue this quarter and an 8% increase on a non-GAAP basis. As I highlighted in our press release, the Q4 was the strongest quarter for sales bookings in the history of the company. Those of you who follow us closely will know that in the Q4 of fiscal year 2022, we set an all-time sales record. We broke that record in the Q2 of fiscal 2023, now we've set another new record in the Q4 of 2023. Additionally, we set a new annual sales record in fiscal year 2023. All in all, this has been a remarkable year for the sales teams. To provide a little detail regarding sales successes in the quarter, we booked 16 competitive core takeaways and an additional 19 deals to move existing on-premise core clients to our private cloud environment. Several of our complementary offerings also saw a very strong demand in the quarter with, as you might guess, our digital suite leading the pack. We signed 63 new clients to our Banno Digital Platform in the quarter and 19 new clients to our card processing solution. For the full year, we signed 47 competitive core takeaways, with five of those institutions with greater than $1 billion in assets. Additionally, we signed 52 contracts to move on-premise core clients to our private cloud, 56 new clients for our card processing solution, and 198 new Banno Digital customers. Of course, we signed a variety of other contracts for many of our other solutions as well, but it's important to note that almost all of these contracts represent long-term recurring revenue commitments to Jack Henry for a wide variety of our solutions. Regarding the Banno Digital Suite, we were at almost 10 million registered users at the end of the fiscal year. As a point of reference, on July 1, 2020, we had about 3.2 million registered users. In three years, we've seen our user count triple in size. This is significant because, as I've stressed in the past, most of the revenue for a business like this is tied to the number of users on the platform. We delivered Banno Business into general availability for our bank clients in late July, and the response has been outstanding. More than 25 banks are live, and we signed an additional 53 Banno Business clients in fiscal Q4. On July 20th, we became one of the first service providers to support live transactions on the Federal Reserve's new FedNow instant payment service. More than 100 of our clients are in various stages of implementation, and we expect to add hundreds of financial institutions over the next 12 months. We plan to deliver Financial Crimes Defender, our real-time fraud and anti-money laundering compliance platform, into general availability for our banking clients in late September and for our credit union clients late this calendar year. As you may recall, it's been one year since we announced our corporate rebranding to retire the Symitar, ProfitStars, and Jack Henry Banking brands and go to market as simply Jack Henry. I said on this call a year ago that uniting the brands reflects Jack Henry's role as a well-rounded financial technology provider and enables us to speak from a single, consistent brand voice. We've seen strong results during the year from our rebranding, including a 50% increase in website visits and a 30% increase in social media followers. I also mentioned on our last call that we recently published our 2023 sustainability report. I am pleased to share that Jack Henry has been recognized as a 2023 climate leader by USA Today and Statista for our ongoing efforts to reduce greenhouse gas emissions. In addition, we were recently recognized as one of America's Greatest Workplaces by Newsweek. Our consistent placement in Best Places to Work rankings is a testament to the workplace culture we have at Jack Henry, and our employee engagement scores reflect that strong culture. Our continuous listening program enables us to gather feedback from our associates throughout the year, and I'm pleased to share that overall, our participation rate this year was greater than 65%. We achieved an engagement capital score of 81%, and 87% of our employees say that they believe in Jack Henry's values, all well above industry benchmarks. By taking care of our associates, they, in turn, are taking care of our clients. Delivering outstanding customer service is a hallmark of our company, and this past year was no exception. On surveys we send to customers, we scored an average of 4.6 out of 5 for overall customer satisfaction and 4.75 out of 5 for satisfaction with our customer service representatives. Both are increases over our already industry-leading satisfaction scores. We are encouraged by recent surveys of financial institutions showing positive growth and sentiment around technology spending for the balance of the calendar year. To that end, Bank Director's 2023 Technology Survey will be published in September, and it will provide a helpful barometer of bank sentiment relative to technology. I will plan to share these results with you on our November call. In today's environment, we found that no matter what a financial institution is trying to solve for, technology is almost always the solution. Our breadth of solutions regularly positions us well to participate in these opportunities. In Mimi's comments, she will discuss a program we recently offered to a select group of associates who meet certain criteria. Internally, we refer to this offering as our Voluntary Early Departure Incentive Program. We have many employees who have been with us for a long time, and this program enables us to reward them while giving others a chance to move up in the organization. While there is a cost associated with this program, it is something we've offered in the past that has been well-received and produced positive long-term results for the company. As I reflect back on fiscal 2023, I can confidently say it was a very good year for our company. Our employee engagement scores remain high, and our levels of customer engagement and customer satisfaction scores are also very high. Mimi has been in her CFO role for nearly a year, and her collaborative, thoughtful leadership has had a visible impact on both you as investors and our associates. Our sales teams are performing extremely well and have positioned us for continued success with a sales pipeline that is the largest we've ever had entering a new fiscal year. We believe that our commitment to doing the right thing for our constituents will continue to serve us well. We will continue with our disciplined approach to running the company and expect that approach to help provide stability for our employees, customers, and shareholders. As we begin the new fiscal year, I continue to be very optimistic about our future. With that, I'll turn it over to Mimi for some detail on the numbers. Thank you, Dave, and hello, everyone. As always, we remain focused on serving our community and regional financial institution clients, growing our business, investing in our future, and delivering shareholder value. This focus led to another quarter of solid revenue and earnings growth. This morning, I'll begin with the details driving Q4 and the full year 2023 results, notable capital management items, and end with our initial outlook for fiscal year 2024. For the quarter, GAAP revenue increased 11% and non-GAAP increased 8%. Delivering solid results in the Q4, we closed out a strong year for our business, as full year 2023 non-GAAP revenue grew 8% to over $2 billion. Let's look more closely at the quarter details. Firstly, on a GAAP basis, services and support revenue increased 12% for the quarter and 5% for the full year. Services and support were positively impacted during the quarter as deconversion revenue increased approximately $10 million. Despite the better-than-expected volume in Q4, full year deconversion revenue was down approximately $22 million versus prior year, and as we discussed all year, this was due to the limited market acquisition activity in our space. Of note, product delivery and services increased 27% in the quarter, driven by higher deconversion, license and hardware, and implementation-related revenue. For the full year, given the significant headwind of over 40% lower annual deconversion revenue, we're pleased with the strong growth in all other areas, resulting in a modest 2% decrease. Next, we continue to experience robust growth in our private and public cloud offering, which increased 10% in the quarter and for the full year. I would highlight that on a non-GAAP basis, services and support revenue grew 8% for the quarter and 7% for the year. Finally, shifting to processing revenue, we saw consistent strength with 10% growth on a GAAP basis for the quarter and the year. On a non-GAAP basis, healthy growth of 9% for the quarter and the year. Noted on previous calls, performance continues to be driven by higher card volumes and services and robust digital demand. Next, moving to operating expenses. I'll begin with the cost of revenue, which was up 8% for the Q4 and full year, roughly tracking revenue performance. At a total company level, quarterly and full year drivers were consistent and included higher direct costs, personnel costs, and amortization expenses. Similarly, R&D expense increased 13% during the quarter, mostly due to higher personnel costs and internal license fees used to drive innovation. Based on the same drivers, these expenses increased 18% for the full year. Lastly, SG&A rose 9% for the quarter and 8% for the year, driven by increases in personnel-related costs, reflecting talent market conditions. We continue to deliver savings across the company, stemming from our disciplined focus on prioritization and efficiency. I'm happy to report a 22% increase in net income, driven by operations and increased deconversion revenues, resulting in a fully diluted earnings per share of $1.34 for the quarter. We appreciate the collective contributions of our hardworking and dedicated associates that drove strong quarterly and full-year results. Now, let's turn to reviewing cash flow and capital allocation. Across the year, we faced large headwinds impacting cash flow, and therefore, our full-year operating cash flow at $382 million was down from $505 million posted last year. Impacting the decline was lower deconversion revenue, higher prepaid expenses, and legislative changes to the deductibility of development expenses, which shifted the timing of tax payments. Consistent with operating cash flow factors, we produced free cash flow of $203 million. Subsequent to fiscal 2023, we have paid down our debt by an additional $75 million to $200 million. Regarding capital management, our capital allocation priorities remain consistent. We're fully committed to our disciplined approach, which includes investing in our business, maintaining a strong balance sheet, pursuing high return acquisitions where appropriate, and returning capital to shareholders. This consistent dedication to value creation resulted in an annual return on invested capital of 21.7%. I would highlight that for the full fiscal year, we returned over $172 million to shareholders through share repurchases and dividends. With that, I'll conclude with guidance for the fiscal year 2024. As you're aware, yesterday's press release included fiscal 2024 full-year GAAP guidance, along with a reconciliation to non-GAAP guidance metrics. As a reminder, we filed an Form 8-K on August 3rd that describes how, starting in the current fiscal year, we're using a revised approach for deconversion revenue. Of note, we've moved to deconversion revenue estimates in line with the recent historical low, and with that framing in mind, for fiscal year 2024, we're guiding to $16 million evenly distributed across the year. Additionally, approximately 10 days prior to our quarterly earnings release, we will pre-release actual deconversion revenue figures so that your models may be updated. This will allow us to focus our quarterly call on results from operations. Going forward, each quarter, we will update guidance based on actual deconversion revenue, which is expected to likely exceed the beginning full-year estimate. It's important to note the negative impact of this change. Based on the new approach, full-year GAAP EPS guidance will understate anticipated EPS growth since deconversion revenue was $632 million in fiscal year 2023. Pay close attention to the impact to GAAP EPS of $0.01 per $1 million of deconversion revenue using current share count. Based on current trends, we expect to see minimal financial institutional consolidation in the H1 of fiscal 2024, with possible acceleration in the H2. Additionally important, in 2024, there will be a one-time impact from a voluntary early departure incentive program, VDIP for short, that was initiated at the start of this fiscal year. As Dave mentioned, the program opens paths for employees to move into more senior positions. The financial impact from VDIP for fiscal year 2024 is $17 million to $18 million in severance-related costs, which will have an approximate negative $0.18 impact on our reported GAAP EPS, all of which will be in our Q1 results. Related to our latest acquisition, Payrailz has been successfully integrated into our payment segment. We will not provide specific metrics for FY 2024, and as a reminder, our financials will reflect two months of related non-GAAP results. Going forward, for FY 2023 and 2024, non-GAAP results reflect 10 months of Payrailz, aligned with the September 1st acquisition date. We expect full-year Payrailz revenue to more than double and become EBITDA positive starting in the H1 and continuing to ramp for the full year. Based on current momentum, strong execution, and near-term visibility, we should generate 6.3% to 7.3% for full-year GAAP revenue growth for fiscal 2024, and I would highlight non-GAAP revenue growth expectations of 7.0% to 8.0%, consistent with our recent Investor Day discussions. To be helpful, as it pertains to the expected cadence of non-GAAP revenue growth, we currently see Q1 being the low point of the year at approximately 6.4% to 6.6%, then a sizable increase in Q2, with sequential increases in Q3 and Q4. We will update this trend if we see changes. Driven by a combination of our year-over-year growth and continued focus on cost efficiency, we will deliver margin expansion in 2024. At a total company level for the full year, we expect non-GAAP margin expansion of 20 to 25 basis points. We expect the full-year tax rate to be approximately 24%. We will provide updated guidance during the year, if applicable. Incorporating these discussed impacts, full-year guidance for GAAP EPS is $4.92 to $4.99 per share. As a reminder, the conservative guidance for deconversion revenue, the VDIP severance-related costs, and the non-recurring gain on asset disposals, results in approximately $0.39 headwind, assuming deconversion fee is consistent with fiscal 2023. The expected trend of our quarterly GAAP EPS is consistent with current estimates, where Q1 and Q4 are the best performing quarters, with slightly lower results in Q2 and Q3. Additionally, on last year's Q1 call, we said we expected the expenses related to our 2023 client conference to remain in Q1. However, instead, we will be hosting our clients in October of 2023, and the related cost impact will be in our fiscal Q2. Also of note, for fiscal 2024, we expect free cash flow conversion to be approximately 60%, impacted by the higher one-time capital expenses, lower guided deconversion revenue, and continuing high cash taxes from last year's change in the deductibility of development-related expenses. The trend to increasingly higher prepaids, both for sales commissions and third-party relationships. Looking beyond this year to provide near-term targets, we expect non-GAAP revenue growth of 7% to 8%, as discussed at Investor Day in May, and we see annual non-GAAP margin expansion at 20 to 40 basis points. These targets are based on stable economic conditions and do not incorporate potential significant macroeconomic headwinds. In closing, 2023 was a strong year for our business, and I'm energized about the opportunities ahead. We thank all our investors for their continued confidence in Jack Henry. Anthony, 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 your telephone keypad. If you're 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'll pause momentarily to assemble our roster. First question will come from Peter Heckmann with D.A. Davidson. You may now go ahead. Morning, everyone. Thanks for taking my question. I was wondering if, Dave, you could characterize in terms of record bookings for the Q4 and full year, I guess, could you characterize a little bit about, you know, year-over-year growth there, as well as, attainment of your internal targets? Sure. Well, yeah, thanks for the question, Pete. We don't. The metrics that we use internally are not external metrics. Whenever I talk about, you know, year-over-year comparison or quarter-to-quarter comparison of the sales organization, it is comparing our performance to ourselves. You know, there isn't an external number that I quote, but it is, the Q4 was significantly higher than the Q2, which was a record. Of course, for the year, it was significantly higher. The thing that I think it's important to note, I get the question once in a while, is we set records. People assume that that's all tied to the core business, and it's not. You know, we have a number of other complementary solutions now that are really driving significant progress for Jack Henry. The other thing that's important to note is almost nothing that we sell today is the revenue recognized in the quarter that where we sell that deal, or oftentimes even in the next quarter. It's almost all recurring revenue. It's all layered in, you know, setting us up for continued growth into the future, which is what builds the confidence for Mimi to say, you know, top-line revenue grows 70% to 80% for the foreseeable future. That's because we have so much visibility into all these deals that are being layered on to the recurring revenue stack that we already have. The best I can do, Pete, and I'm not trying to, to be evasive, but the best I can do is just say, using the internal metrics that we use, it was a significant increase in Q4 over any of the other, of the other quarters that we've ever experienced at Jack Henry. Okay. Okay, that's fair. Then, just confirming, so the early retirement program, I believe you called it VDIP, Mimi, that $0.18 is included in your full year GAAP EPS guidance, and you expect to record the full $0.18 in the Q1. Did I hear that correctly? That is correct. You heard it correctly. It will all occur in Q1, and it, it is an estimate. We are just kind of very at the tip of, of that program in terms of knowing the participation rate, but we do feel good about the estimate, which is a little different than the last time we had the program in, in 2018, because by this point, people have acknowledged their desire to participate. All of that is already included in our guidance. Okay. Just to chime in, Pete, you may recall we've done this twice before, since I've been at Jack Henry anyway, twice before. This has been a very successful exercise for us in the past, in not only giving, you know, rewarding people who have been here for a long time, but also creating opportunities for people to move up in the, in the organization. We expect that same level of success with the program this time. Appreciate it. Thanks. The next question will come from Nik Cremo with Credit Suisse. You may now go ahead. Hey, congrats on the strong results, and thanks for taking my question. First, I just wanted to ask about what drove the strong revenue growth in the core segment, and if there was anything more one time in nature, such as, you know, convert and merge revenue or license sales that we should be aware of for FY 2024? I can take the question. Thanks, Nik. No, I would say overall, it's continuation of a strong product lineup. As Dave mentioned, a robust pipeline. There was, if anything, lower convert merge activity in our space. But overall, it was just, you know, continuing to be driven by cloud strong, being continued to be driven by just implementation timing and the size of those kind of clients. It is a little variable from quarter to quarter, but overall, core had strong quarters throughout the year of FY 2023. Great. Thanks. Then for my follow-up, would it be possible just to provide 2024 guidance at the segment level for non-GAAP revenue growth? We don't provide at the segment level guidance, but we can, we can kind of follow up. I would say it's consistent with both the growth algorithm and the revenue growth for FY 2023. We would say it's consistent for 24 trends. Great. Thank you. Our next question will come from Rayna Kumar with UBS. You may now go ahead. Good morning. Good morning. Thanks for taking my question. I just want to dig in a little deeper on the non-GAAP operating margin guide for FY 2024. Mimi, you gave some good detail on if you adjust for Payrailz in both years, margins would be up 20 basis points. But should we think of the 20 basis points as the more, as the more normalized margin trajectory here? And maybe just talk a little bit about, the puts and takes of the 20 basis points. Thank you. Thank you, Rayna. We tried to clarify both the impact for short-term guidance as well as long-term sustainability of guidance. For FY 2024, you are correct, we're giving guidance about 20 to 25 basis points. There's a little bit of headwind from the bonus because bonus was lower in 2023, restarting the clock at 100% accruals. There's a bit of a headwind about a $6 million headwind from just both the growth and the re-refilling, if you will, of that bonus pool. There's also some third-party renewals and continued investment in areas like cyber and security, compensation. All of those are drivers to both 2024, but longer term, we definitely see the sustainability of 20 to 40 basis points of margin. Got it. That's really helpful. Just on free cash flow, I noticed it was down for the quarter. What were the drivers of that, and would you anticipate improvement in free cash flow in FY 2024? Yeah, so on free cash flow, Rayna, I'd really recommend looking on an annual basis versus quarterly, 'cause there can just be some, like, seasonality bits and, you know, with prepaids changing and just the timing of impacting annual, based on the annual maintenance bills that go out in the summertime. Sometimes people pay in June, sometimes they pay in July, and so sometimes that can have a year-over-year impact. We did have some noteworthy kind of headwinds in 2023 from a free cash flow and free cash flow conversion. In particular, the largest being that change in the tax legislation around the deductibility of development-related expenses led to a $90 million cash tax payment. That doesn't go away in 2024. That'll still stay at a somewhat elevated level. Over the five years, that does kind of reverse course, but that will continue to present some headwind to 2024 and beyond, kind of near-term free cash flow. If I think about kind of a walk on the free cash flow and the free cash flow conversion for 2023, if deconversion revenue were about the same as 2022, that's about, call it, roughly $20 million. There was asset sales and then the $90 million of taxes, you get to closer to, like, a $280 to $290 of free cash, which would have been more of around a, a free cash flow conversion of about 85% versus the reported 55%. Understood. Thank you. You're very welcome. Our next question will come from Dan Perlin with RBC Capital. You may now go ahead. Thanks. Good morning. Dave, I just wanted to revisit the, you know, the sales pipeline and demand environment in aggregate. I mean, you set records in three or four quarters this year, which is pretty amazing, especially considering the backdrop. Some of that obviously is coming from, you know, movement over into the cloud, but a lot of that also is coming from just competitive dynamics. I wonder if you could just speak to what, kind of what you're seeing in the market today, how you guys think you're positioned relative to peers, because the commentary clearly coming from others is a very different narrative. If you could just put a finer point on that, I'd appreciate it. Yeah, thanks, Dan. It is, it's an interesting time in our environment, and I know many of you follow the, you know, the segment, very closely. As far as Jack Henry is positioned, or how we're positioned today, you know, we're well known as being very focused in our space, and I think that's getting us, that's getting us a lot of attention right now. When I say focused on our space, I mean, being a well-rounded technology provider to financial institutions in the United States. You know, we're not in the merchant acquiring business. We're not doing other things. We are focused on the needs of those customers that we have served traditionally, and we continue to serve, the community, regional banks, credit unions, that you all know. So you put that together with the customer service reputation that we have at Jack Henry and the innovative things that we're doing now. I, I just talked about in the script, the new products that we're rolling out here, that we've a couple of them now this summer and a couple more yet to come this year. The settling in of the technology modernization story. You know, I started talking about that in February of last year. Over the course of the year, people have really had a chance to absorb that and understand how differentiated it is, what Jack Henry is doing as compared to anybody else in our space, how differentiated that solution will be, and we're not fully in market yet. I think when you roll all those things together, Jack Henry has this, this positioning now that is, that's, really credible as far as, our potential customers and existing customers are concerned. It is still, you know, for, for banks and credit unions, making a major change in technology is still a very hard decision, so it's not like people are rushing to our doors and, and ready to sign up with Jack Henry, but there's kind of this really nice, slow, steady movement toward Jack Henry because of all of those things. I think, they have all, really helped, draw a bright line between what Jack Henry is doing and what anybody else in our space is doing, and people are recognizing that. Yeah, it's been pretty consistent on that message. Just a quick follow-up in terms of this one-time impact on the, you know, the, the early departure incentive program. I certainly appreciate the charge. Can you talk about what the run rate cost savings are associated from or expected to be associated from the, I guess, the group of individuals who are going to take that package? How much is that influencing the margin expansion on the core base of, 20 to 25 basis points? Thank you. Thanks, Dan. Appreciate the question. Unfortunately, as we said, we just signed some final agreements. It's still early days. We're working with our managers to be diligent, to be thoughtful about those positions. We do expect, you know, a small amount of net savings, but we're not doing this just as a savings program. As Dave said, this is part of our culture, and this is a great way to, to just, you know, retain talent, grow talent. So it is not part of our guidance in terms of in-year savings. We're, you know, being conservative at this point. Okay. That's super helpful. Thank you, Mimi. You're welcome. Our next question will come from Vasu Govil with KBW. You may now go ahead. Hi, thank you for taking my questions and great results. Mimi, first question for you. I guess, just on the long-term margin expansion, which you said we should think of a normalized year as 20 to 40 basis points of expansion. I think historically, we've been accustomed to thinking about that being more in the 50 basis points plus range. So I was wondering if you could help us think through what's changed there in the trajectory. Thank you, Vasu, for the question. You know, I, I think part of it is, you know, what is normal? The last several years have been some ups and downs. We got great benefits from, from really the COVID-related lack of travel. W e saw some of the Great Recession, now we've seen inflation. Some of that is, you know, really modeling out what is to be expected from just the ongoing engine of the business. We're continuing to see, even though CPI and inflation is subsiding, we're continuing to see wage-related, employee-related benefits costs, insurance costs, third-party renewal costs, continued investment in cyber. You know, I think there's continued opportunity for margin expansion through the migration to cloud from on-prem, hopefully through continued exciting products that we have, including our tech modernization. At this point, probably safer to say 20 to 40 basis points in the very near term. That's helpful. David, I have a longer-term question for you on AI. It'd be great if you could share your thoughts on where you think the community banks are in terms of thinking about adopting AI, and what role do you think Jack Henry could play as that starts to become a bigger reality? Yeah, Vasu, I'm happy to talk about it, although Greg is sitting here. I'll ask Greg to chime in. First off, I think for most community, regional banks and credit unions, you know, for most of them, they're talking about it, thinking about it, trying to figure out how does this play into what they do. I don't know of many that have a defined strategy today. They're, you know, they're still trying to figure out, is this a good thing or potentially a, a, a risk to their environment? As for Jack Henry, you know, if you think about AI, it's important, I think, to include in that broader conversation the idea of machine learning and robotic process automation, which Jack Henry, all three of those areas, Jack Henry has been in that business for a long time. You look at several of the solutions that we offer today, we have those types of technologies embedded in those, in, in those solutions. I know when people talk AI today, it's usually about ChatGPT and about the idea of that using it to write software and all that kind of stuff, and we are certainly investigating those things. But we have been in this space for quite some time and leveraging these tools for some time. I'll ask Greg to kind of share with you some of the detail around some of those things that we already do and that we're working on today. Yeah, so just to add to that, I think a couple of key things. On the robotic process improvement or automation side, we're using that in our continuous improvement initiative. All the things that we're doing, around the company to, improve processes, put things in place that could be automated, we're using that type of technology to help there. A couple of our key products that Dave has already mentioned, on the call, but what we're doing in our Financial Crimes Defender has significant artificial intelligence components to it. Things that we've done, in our JHA PayCenter offering and what we do to fight fraud, in that world as well has that. Our CTO office and many of us across the organization are working together to evaluate some of the key players out in the space. We really think the FinTech world is gonna grow significantly in this space over the coming years, and so we're spending a lot of time looking at those companies for opportunities to partner and or other things in the, in the future. Thank you very much. That was very helpful. Again, if you have a question, please press star then one. Our next question will come from Jason Kupferberg with Bank of America. You may now go ahead. Good morning. Thanks for taking the question. I wanted to circle back on free cash flow, just thinking beyond this year. Mimi, I know you made some comments just around the tax law changes. I think you said there's a five-year duration around that, which I guess started in your FY 2023. So free cash flow conversion, I know, is 60% for FY 2024. Is that kind of a baseline zip code to think about for the next few years beyond fiscal 2024? I just wanna make sure we have our expectations properly calibrated there. Thanks. Thank you, Jason. Yes, for FY 2024, we are giving guidance of 60%. That does incorporate the sustained higher cash tax levels related to the Section 174 legislative change. It does reverse, so to speak, over the five-year period and kind of neutralizes itself, so it's higher cash up front, less later on. We're continuing to, to do analysis on the long term, what is the target? As we shift our business model from several years ago, when we were more of a license and maintenance model and targeted 100%, but now it's more of a SaaS model, you have less dollars every year from an annual maintenance perspective and more of a continual, you know, from a revenue recognition, long-term contract basis. Between that and our capital spend and looking at, you know, all of the drivers of free cash flow, we're thinking about what is the appropriate target to have, and we'll share with you that. I would say, you know, it's likely to be over, you know, the FY 2024 guidance, but we it's a little early to say. I think the long-term drivers are certainly better than the FY 2023, you know, free cash flow story is. Okay, understood. Then just coming back on quarterly cadence of non-GAAP revenue growth, I know you highlighted Q1 being the trough of being below the full year outlook. Sounds like it. Will Q2 be above the full year range, and then we move kind of back into the range in the back half of FY 2024? If you can just walk us through what's actually driving some of that quarterly fluctuation. Thanks. Yeah, happy to add a little color to that. Yeah, as we, as we gave guidance, we wanted to be. Normally, we're not in the market of giving real specific Q1 guidance. Right. We wanted to make sure, because Q1 is, you know, I would say modestly lower than the full year, we wanted to be more specific to be helpful to you all. Q1 will be the lowest quarter, you know, significantly, I would say, relatively, since we're talking kind of six handle versus it's the full year of seven to eight. Q2 will be more, I think, in line with the average for the growth for the year, as will Q3, and then Q4 usually is a little bit higher than that. Right. What's just driving the fluctuations? Like, why is Q1 lower? You know, sometimes it's just the comps based on, you know, prior year. Sometimes it's just the seasonality of when implementations happen or product releases in any particular year. Historically, Q1 has always been our lowest quarter, and Q4 has always been our highest quarter. That's just the seasonality of our business. Okay, thanks, Mimi. You're welcome. Our next question will come from John Davis with Raymond James. You may now go ahead. Hey, good morning, guys. Mimi, I just want to follow up a little bit on the margins. You called out kind of lower bonus payments this year, about $6 million. If I look at that, you know, that would kind of get you to the high end or even above the 20 to 40 basis points. I think it's about 25 basis point headwind this year. And how much of the benefit are you including in that 20 to 25 basis points from the kind of the early departure program that you have, or is that kind of upside? Just trying to understand kind of the drivers and kind of why we're on the low end to just the bonuses this year. Any color there would be helpful. Yeah. Thanks, JD. If I, if I understand the question correctly, as it pertains to FY 2024. The $6 million that I referenced is both a blend of just the natural annual growth based on merit and hiring, et cetera, about 50% of it, and the other 50% is based on the, the change from FY 2023's lower bonus payment to the full, replenishment, if you will, in FY 2024. We, at the moment, have nothing baked in from a savings perspective into the guidance related to the VDIP program for 2024. Okay, that's super helpful. Then, Dave, just wanted to touch on both the demand environment. I heard, you know, obviously 16 wins, new wins this quarter. You know, that's an acceleration. Just, you know, what you're hearing from customers, I think, you know, people were concerned, you know, a handful of months ago about all the disruption, and, in kind of the banking sector. It almost seems like it's had the opposite impact, and it's just forced people to kind of accelerate plans as they try and, you know, become more efficient over time. Just, you know, curious what you're hearing there from, from customers, but then also competitively, like, you know, a lot of these, I think, smaller startups have either run out of cash or, you know, people are unwilling to kind of fund continual losses. Some of your bigger competitors may be still distracted with other businesses. You know, from, from our view, it seems like competitive environment is probably the best it's been in a while, but just curious to get your thoughts there. Yeah, JD, I would say the competitive environment is probably the best it's been for quite a while. It's not that, you know, as I said before, it's not that people are rushing to the door at Jack Henry saying, "Let me in. I want to sign a contract." We certainly saw no negative impacts during all the flurry of activity here back in March, with the shutdowns of some of those specialized regional banks. That did not slow us down at all. I don't know that I would attribute a pickup in sales activity to anything to do with that. What I think is driving this is, we just published our benchmark survey a month ago or so, and it was very clear in that survey, which, by the way, available online on jackhenry.com. It was very clear in that survey that customers today are looking for technology to help with revenue growth, deposit growth, and efficiency. Those are the three, by far, the three top areas of concern. Well, if you're looking to grow revenue, meaning deposit or deposit, sorry, it was deposit growth, loan growth, and efficiency. If you're looking to grow deposits, you're not hoping that people will come into your branch and open a new account. They're going to do that online. How do you do that? Technology from Jack Henry. If you're looking to grow loan volume, in the commercial lending space, are these, these, small business borrowers wanting to drive to your branch and sit down and talk? No, they're looking online for those funding sources. Jack Henry provides that technology. If you're looking for efficiency in the back office, is that just process reengineering? It might be, but oftentimes, process reengineering involves technology. We have those tools. Given those three major focuses for CEOs today, bank and credit union, Jack Henry provides solutions to all of those problems that they're facing. As I mentioned earlier, you know, we are known in our space as the most focused on these concerns that our customers have. We only focus on serving financial institutions in the domestic U.S. market, and we have tied that together with a reputation for service and for being a great partner. I think all of those things together are what's driving the, the, the key interest in Jack Henry. As you point out, you know, the competitive environment today, probably better than it's been in a very long time, and we're taking advantage of that as much as we can. Okay. Maybe one final question, just to follow up on Jason's kind of free cash flow. If I'm hearing, you know, I think what you're trying to, to say is near term, probably closer to that 60% level that you've guided for 2024, but over time, maybe we get back closer to the 85% that 2023 would have been, ex tax and kind of one- other one-time items. Is that the right way to kind of think about cash flow over the next several years? I think that's a reasonable approach to thinking about it. Okay. All right. Thanks for all the color. Next question will come from Dominick Gabriele with Oppenheimer. You may now go ahead. Hey, Greg. Good morning, everybody. I was just curious if we could dive a little bit more into the employee cost conversation, and if you could kind of, you know, pick apart existing employee cost increases versus new hire employee cost increases, and which type of positions are putting pressure when we think about SG&A expense as a percentage of adjusted revenue. Any color on there would be really helpful, and then I just have a follow-up. Thanks so much. Yeah, this is Greg. I'll start with some of that. I think, you know, if you look at what we've been doing and Dave has been talking about around the technology modernization strategy, you can, you can definitely point to things that we're adding, where a lot of times in the past, you know, several years ago, we were doing, more partnerships, and instead, we're now building all this technology. If you look at development, QA resources, project management resources, things along that, those are all, in some cases, additive to what we've been doing in the past. Again, that ties into some of the, the margin discussion as well, that, you know, with some of the questions that had come up. You know, we're adding quality people. The good news is there's been in the industry, there's been a lot of quality people laid off, from other companies, and we're able to go and pick a lot of those folks up, and drive the business. That's been a big part of our opportunity to bring on that type of talent, and it's really tied to the tech modernization strategy in general. Mimi, anything you want to add in there? Yeah, I would say we're continuing to be mindful and thoughtful on headcount increases. I would say it's been very modest across the board, where we've had more concentration in the development, engineering folks, the call center folks client-facing. For the rest of the organization, we've really been, scaling back and being thoughtful on the growth. Part of that, Dom, is salaries and benefits increasing with market. Part of that is also the labor cost deferral, as some of these products now come online. The amortization you start to see, you know, as some of these products are now GA and in the market. We can provide probably more color later, but that's at a high level, the way I would guide you to it. Excellent. Thank you so much for all that to both of you. You know, Dave, 47 core wins for the year. I know you targeted about, you know, one-ish a week. It's pretty close to that with the fact that you've gotten obviously multiple billion-dollar-plus wins. Maybe you could just talk to us about the expectation that you have, given the pipeline, about the win rate and the size of win rate, you know, next year versus this year. Yeah, Dominic, I still have that same, general expectation, you know, about around one a week, so one-ish a week, I think is a good pace for us. We have definitely been moving up in size over the last, several years, and so I think the expectation that we would have more of those larger institutions is a reasonable expectation. I think more of the same is what you should expect in the future. Now, we'll, you know, we'll see what happens with the competitive environment, whether or not, it creates more opportunity than we've been seeing in the past to do core replacements. I think the assumption that is a reasonable assumption right now is that one-ish a week that we've been running at for quite some time. Perfect. Thanks so much. Sure. Next question will come from Cris Kennedy with William Blair. You may now go ahead. Good morning. Thanks for taking the question. Mimi, can you talk about some of the levers that you have in the business to support the 20 to 40 basis points of annual margin expansion over time? Sure, Cris. I think the drivers of margin expansion are, are similar to what they've been historical. You have the tailwind of the on-premise to cloud migration. We expect after that, there will also be people leapfrogging to the public cloud. Even though we're at, you know, roughly 70% on the hosted environment, there's more. It's been a stable clip every year of continuing, and Dave talked about some of those win counts of continued migrations. Then some of those people will migrate to public cloud, some of them will leapfrog straight to public cloud. That's certainly at attractive margins. I think we're, some of the things we're doing around the development approach will also lead to margin savings, using the Origin and Tech Modernization, common components, common workflows, common testing. Greg's organization has done just an amazing job to think through really streamlining our approach to engineering. I think that will also lead to some longer-term benefits for our organization. I would also characterize, like, the current, call it last, couple of years, the next couple of years as a rebuild in terms of setting us for the future. A lot of the development work we're doing, a lot of the infrastructure work we're doing, even on culture and development, if I think about my own team in finance, putting in some tools and systems that will allow us to support the business as it scales. I think those investments will eventually, kind of tail off. Now, will they go to zero? No, we'll continue to invest in cyber and security every year to fortify our infrastructure and that of our clients. I do think, in general, we'll start to flatten out on some of these. Some of it is a question because we do have a lot of third-party relationships, and so not all of our costs are within our own control. That is presenting a bit of a headwind in the near term and, you know, unknown in terms of, like, the longer term on that. Great. Thank you. Dave, just a longer-term question, and it wasn't really discussed at the Investor Day, but talk about Jack Henry's potential role within the business-to-business payments market and kind of what the assets you have and what your strategy is? Thank you. Yeah. Thanks, Cris. And, and I, you know, many of you know that that's a topic that I've been really interested in for quite some time. It was one of the reasons for the Payrailz acquisition. It wasn't a driver, certainly, but because Payrailz had that technology included, no customers live, nobody up and running, but it is an opportunity, I think, for us in, in the long term. As we look, look at that business, and I'll ask Greg to chime in here and describe a little bit more, but the, the key thing for me is, as we think about that business, as we move into that business in the future, we want to make sure that it's a business where we can work through our customers, not compete with our customers. Meaning, go to a bank, or even a credit union for some of these smaller institutions that are banked by a credit union, go to the bank and work through them to serve their small, medium business customers with that type of technology. I'll ask Greg to clarify some of that or chime in. Yeah, sure. There's a couple things. One, as Dave mentioned, we do have some, some assets today that give us a little bit of opportunity in that B2B space. To your point, Cris, this has been a strategic endeavor of ours. We're actually very close to releasing some key assets that we think are going to be a part of this strategy. We've been building some things in the background. We're not ready to fully unleash it at this point in time, but I can tell you it is top of mind. We think, much as Dave just described, that the way we'll be able to do this is through the institutions, leveraging some of our digital tools, some of our payment assets, and things like that, that have already been created to go out into the market. There'll be more news on that in upcoming months. Great. Thank you. Again, if you have a question, please press star, then one. Our next question will come from Ken Suchoski with Autonomous Research. You may now go ahead. Hey, good morning. Thanks for taking the questions. Maybe just to follow up on some of the questions from earlier around free cash flow and margin expansion. Can you guys just comment on how this shift to the cloud impacts your overall cost structure from an OpEx versus CapEx perspective? I guess, said differently, you know, where should we expect to see the increase in cloud vendor and cybersecurity costs flow through, and what are some of the offsetting factors to that as you continue moving away from the on-prem offering? Thanks, Ken, for the question. I would say at a high level, as people can migrate from on-prem to cloud, they do so at essentially like a net neutral to the FI institution, but a much higher revenue to Jack Henry. You might say, why are they paying us, you know, more than on that? It's because they're now saving from having to support their whole own infrastructure, their own security, their own staffing. It's a way for the FI to focus on, you know, their core value of engaging and serving their, their account holders and members and allowing us to help them with this element. When that happens, it's at very minimal infrastructure, additive infrastructure and people-related costs. Yes, every once in a while, you'll need a new rack or a new server, but more so, that comes at a very healthy margin. That's been a, a tailwind that's been occurring for many years. We expect it to still have probably a seven to eight-year runway. Then on top of that, we'll see how the pace of moving to the public cloud, it continues to improve that or leapfrog that, as I said previously. That helps from a margin perspective. You will continue to see us invest in maintaining and upgrading our own data centers, potential data center with, we have with partners. You'll see some of that CapEx spend come, for example, next year. That's part of our free cash flow. There should be, you know, roughly probably $20 million in data center-related infrastructure that we're doing. You'll see that probably in chunkiness of times when we're doing a big overhaul or a move of a data center, but the year in, year out is a modest investment. Okay, great. That's helpful, Mimi. Then I just had a question on the early retirement program that, that you're pursuing. Can you just talk about your headcount growth plans over the coming years? You know, is this a program that's more of a one-and-done type of deal? I mean, will headcount growth or will headcount actually go down after this program is completed? Any thoughts there would be great. Yeah, it's only pertains to people who meet the criteria, and I noticed no one said the full name. Everyone loved the shortened name. I love saying Voluntary Early Incentive Program because it's, it's a great name. Only a small percentage of our population is eligible. It, it ties both to age and tenure of the company. Roughly, we probably have around 160 employees out of our over 7,000 employee population that are going to participate in it. It doesn't create any significant changes from a headcount count perspective. Then next year, we're going to continue to invest in our people and, and hiring where it's needed in the business, but you won't see huge growth numbers next year. Greg? Yeah, I think I'll add. I think we zero-base every role that we have, and we will do the exact same that we do here. Basically, looking at the role, determining, its value for the future. Again, as Dave mentioned, a lot of these opportunities are going to create, levels of folks that will be able to move up in the organization, and we may not need to backfill, that particular, position. There could be opportunities where we actually move those positions over to other roles that are growing or businesses that are growing and taking those resources that way. There's a lot of that evaluation that's going on, as we speak, and, and it has, been mentioned. The ideal goal is, is that we would have some opportunity there, to, to improve our headcount and in some cases, lessen the headcount. We're very diligent in that process, you know, at all times. Again, we zero base every single role. Yeah. I would just add for just a little bit more color there. For FY 2023, headcount increased around 3%, and if you take Payrailz out of it, it was a 2% growth. While we are very selective in making investments in our people and hiring, it's not been a large number. Okay, great. Thank you both. Sure. This concludes our question and answer session. I would like to turn the conference back over to Vance Sherard for any closing remarks. Thank you, Anthony. We look forward to seeing many of you at upcoming multiple investor events during September. We are pleased with the quarterly results, and again, thank all Jack Henry associates for their efforts. We appreciate you joining us today. Anthony, will you please provide the replay number? Replay number for today's call is 877-344-7529, and the access code is 7033565. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.