Jack Henry & Associates, Inc. Q3 FY2026 earnings call

Key takeaways: Record third quarter non-GAAP revenue of $616 million, 7.3% growth over last year; 17 competitive core wins including five institutions over $1 billion; higher number of trifecta solution wins with 58% of core wins including digital banking and card solutions. Use of AI: Over 500 use cases, examples in lending, digital, customer service; natural language development gains. Innovative solutions: Stablecoin strategy data testing going well, awaiting regulatory guidance; Tap to Local SMB merchant payment solution with over 700 banks/credit unions live, active merchants doubled; Jack Henry Rapid Transfers live with over 110 banks/credit unions. Reporting segments: Core secured 4 on-premise to private cloud contracts; payments saw strong growth in faster payments; complementary signed 36 new contracts; Bano digital platform had strong quarter with 23 retail and 34 Bano business signings. Technology spending: 88% of bank and credit union CEOs expect to increase technology budgets, AI top priority. Sustainability: 2026 Sustainability Report published, 50th anniversary activities including ringing NASDAQ closing bell.

Core: Non-GAAP revenue growth, with 17 competitive core wins including five institutions over $1 billion. Payments: Strong growth in faster payments, with clients' adoption of Zelle, RTP, and FedNow growing, and payment transaction volume increasing 47% year over year. Complementary: Signed 36 new financial crimes defender and faster payment module contracts during the quarter. Corporate Services: Non-GAAP revenue increased 27% primarily due to increased hardware sales. Core non-GAAP revenue increased 9%, operating margin contraction 27 basis points. Payment segment non-GAAP revenue increased 5%, operating margin growth 159 basis points. Complementary segment non-GAAP revenue increased 7%, non-GAAP margin expansion 99 basis points. Corporate Services non-GAAP revenue increased 27%.

Third quarter deconversion revenue increased. Full-year gap revenue growth guidance increased to 6.1% - 6.6%, non-GAAP annual revenue growth guidance tightened to 6.6% - 7.1%. Q4 non-GAAP revenue growth relatively lower due to factors like digital revenue slowing, hard revenue pressure, commissions, and mix. Full-year non-GAAP margin expansion guidance increased to 75 - 95 basis points from original 20 - 40 basis points. Full-year GAAP EPS expected $6.78 - $6.87, growth 9% - 10%. Full-year free cash flow conversion outlook 95% - 105% with bias to upper end.

Forward-looking statements involve risks and uncertainties. Regulatory requirements, network certifications, and being the system of record make banking industry hard to disintermediate. Macro and political environment could impact IT spending. Economic slowdown could affect certain parts of the business. Competitor actions and partnerships could impact market position.

Q: About core wins driving trend and competitor platform consolidation.

A: Combination of innovative products, customer service, with most wins already in motion ahead of announcements, and some from all competitors.

Q: On margin guide and Q4 drivers.

A: Q4 has unique factors like medical expenses returning, commission shift, lower margin business mix.

Q: On Anthropics Mythos and cyber vulnerability.

A: Jack Henry's cyber teams involved in Mythos-related meetings, have made investments in cybersecurity.

Q: On core wins upside.

A: Confident of exceeding last year's number, pipelines strong, but contracts take time.

Q: On IT spending in macro environment.

A: 88% of banks/credit unions expect to increase tech spending, AI top priority.

Q: On trifecta wins sustainability.

A: Work done on digital and card platforms makes it sustainable.

Q: On payments growth acceleration.

A: Steady growth in cards, remit, bill pay, faster payments.

Q: On AI partnerships.

A: Partnering with AI companies, integrated relationships.

Q: On business positioned for 7% - 8% trajectory.

A: Grown over headwinds, growth algorithm intact.

Q: On AI in core processing.

A: Larger institutions may work directly, community banks rely on Jack Henry.

Q: On payments non-GAAP growth and network incentives.

A: Network incentives not structural, underlying trends positive.

Q: On larger wins economics.

A: Varies by products bought, trifectas drive opportunity.

Q: On Q4 guidance and FY27 budgeting.

A: Q4 headwinds not carryover to FY27, conservative budgeting.

Q: On corporate segment growth.

A: Hardware lumpy, segment ancillary.

Q: On M&A impact on RFPs.

A: M&A may increase opportunities.

Q: On economic event impact.

A: Card business most sensitive, but no big change in exposure.

Q: On consulting and systems integrators.

A: Provide validation, entree to larger institutions, potential implementation partners.

Q: On tap to local margin profile.

A: Early days, great margins expected.

Q: On Pismo as competitor.

A: Pismo not full core, overreaction to its impact.