Jack Henry & Associates, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Jack Henry and Associates Second Quarter 2021 Earnings Conference Call. Please note that today's call is being recorded. At this time, all participants in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask your question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Now, I would like to turn the call over to Kevin William. Kevin, the floor is yours.

Thank you, Jerry. Good morning. Thank you for joining us for the Jack Heron Associates Second Quarter Fiscal 2021 Earnings Call. I'm Kevin Williams, CFO and Treasurer, and on the call with me today is David Foss, our President and CEO. In just a minute, I'll turn the call over to Dave. He is going to provide his thoughts about the state of our business, the performance of the quarter, and some comments relating to the impact of COVID-19 and thoughts on a recently published corporate sustainability report, and some other key initiatives that we have in place. Then after that, I will provide some additional thoughts and comments regarding the earnings release we put out yesterday after market closed, and then provide comments regarding our guidance for our FY21 provided in the release. And then we will open the lineup for Q&A. First, I need to remind you that 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 a number of factors that could cause actual results or events to differ materially from those which we anticipate due to a number of 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 Form 10-K entitled Risk Factors and Forward Looking Statements. Also on this call, we will discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income, as disclosed in the press release yesterday. The reconciliations for historical non-GAAP financial measures can be found in yesterday's press release. I'll now turn the call over to Dave.

Thank you, Kevin, and good morning, everyone. We're pleased to report another quarter of strong 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 second fiscal quarter, particularly in light of the challenges posed by conducting business in the midst of a global pandemic. We remain extremely thankful for the fact that very few of our employees or their family members have been directly affected by the COVID-19 virus. Our HR teams continue to work closely with all groups around our company to be sure anyone who is affected is receiving the care and accommodations they require. We are still operating with well over 90% of our employees working full-time remote and have now updated our return to office date to July 1st. At this point, I don't anticipate us extending that date, although I definitely expect long-lasting changes to our in-office work model. Most of our customers now have many people physically in their locations every day, and we regularly receive requests to deliver on-site sales engagements and system implementations. As I mentioned on the last call, our sales teams are routinely doing sales presentations and executing contracts with no on-site presence at the customer location. We have also completed many 100% remote implementations with great success, including several full core conversions. With that, let's shift our focus to a look at our performance for the quarter we completed in December. For Q2 of fiscal 2021, total revenue increased 1% for the quarter and increased 2% on a non-GAAP basis. Deconversion fees were down more than $5.5 million over the prior year quarter, which impacts the current quarter negatively, but as we have highlighted in the past, is good news if you take a long-term view. Turning to the segments, we again had a solid quarter in the core segment of our business. Revenue increased by 1% for the quarter and increased by 4% on a non-GAAP basis. Our payments segment also performed well, posting a 2% increase in revenue this quarter and a 3% increase on a non-GAAP basis. We also had a strong quarter in our complementary solutions business with a 3% increase in revenue this quarter and a 4% increase on a non-GAAP basis. As I mentioned in the press release, our sales teams again had a very solid quarter as they booked the fifth largest sales quarter in the history of the company. We inked six competitive core takeaways and 12 deals to move existing in-house customers to our private cloud environment. On previous calls, I highlighted the fact that our competitive core signings have slowed a bit as a result of the pandemic, and that was also true in Q2. With that in mind, you may ask how it was possible for us to book the fifth largest quarter in history with less than the new core win category. Of course, this happens because the sales teams have had tremendous success with our broad suite of complimentary offerings, including digital, fraud, and payment solutions. During the quarter, we signed 61 new clients to our Bano digital suite, six new clients on our treasury management platform, and 11 new clients on our card processing solution. Of course, all of these contracts represent new revenue to Jack Henry. As I mentioned last quarter, we continue to implement more than 30 new financial institution clients every month on our Banno digital platform. As of February 1st, we now have more than 4 million users on the platform. That number continues to grow rapidly. At the same time, our Banno platform has been recognized by FI Navigator as having the highest consumer rating in the App Store, and we are continuing to receive accolades as the fastest application in the industry. If you combine our inroads in the digital banking space with our ongoing success with digital lending and digital account opening, we see great things ahead for Jack Henry as a leader in this area. Regarding our new card processing platform, as of the end of December, we have successfully completed the migration of all of our core clients and many of our non-core clients. We will complete all of the migrations next month as previously announced. you will start to see the larger positive impact on our financials in the fourth fiscal quarter as we have emphasized throughout the project. I'm very proud of our team and thankful to our partners and clients for working with us to achieve such a successful outcome. Recently, the Federal Reserve announced that its FedNow team has been working closely with a few companies over the past year to help them design and develop the FedNow network. We have been very active with the FedNow team for more than a year, and we're excited to participate in their pilot program. We look forward to bringing many financial institutions live through our payments hub, which we have branded Jack Henry Pay Center. As I've discussed previously, our Pay Center solution was designed to provide connectivity through a single platform to multiple real-time payments providers, which facilitates a more logical and efficient approach for our clients than any other processor in the market today. Additionally, it allows us to connect clients to the real-time payments network in groups rather than one at a time, which is a significant enhancement over any other offering in the industry. In addition to working with the Fed on the FedNow program, many of you know that we have also been very involved in the rollout of the PPP program through the first two rounds last year and the latest round earlier this year. We are currently working with many of our financial institution clients to help submit and process thousands of PPP loans with their current pipeline totaling almost a billion dollars in loans to small businesses around the country. Hopefully many of you noticed that we released our first corporate sustainability report on December 31st. Although I'm very proud of the report and its contents, I think it's important to note that Jack Henry has practiced the concepts of corporate responsibility since our founding. This report is our way of summarizing the standards and practices we've been dedicated to for more than 40 years and which are evident every day as we strive in all cases to adhere to our guiding principle of doing the right thing. In the report, we discuss our commitments to our five key stakeholders, our employees, customers, stockholders, communities, and the environment. Our investment in corporate responsibility is embodied through our commitment to enabling our associates to engage in meaningful work that they love, providing innovative financial solutions to our customers to support responsible business decisions and keep their clients connected, delivering a strong return on investment to our stockholders while maintaining long-term sustainability for our business model, encouraging our communities to flourish by connecting people with technology, and pursuing environmentally friendly practices to support a strong future for us all. In January, Cornerstone Advisors published the results of their annual survey of bank and credit union executives. According to that study, 73% of banks in our target market expect to increase their technology spending as they rebound from the pandemic in 2021, with 22% of them indicating an increase of greater than 10% year over year. This correlates with the information we're receiving from other sources, which puts the average expected increase in tech spending for 2021 in our market at around 5%. I think that pent-up demand is reflected in the continued influx of RFPs we're receiving and the ongoing interest in Jack Henry Technology Solutions. As we begin the second half of our fiscal year, our sales pipeline is very robust 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, the spending environment, and our long-term prospects for success. With that, I'll turn it over to Kevin for some detail on the numbers.