Jack Henry & Associates, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Jack Henry and Associates third quarter fiscal year 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, Kevin Williams. Thank you. Please go ahead.

Thanks, Brandi. Good morning, and thank you all for joining us for the Jackson & Associates third quarter fiscal 2021 earnings call. I am Kevin Williams, CFO and treasurer, and on the call with me today is David Foss, our president and CEO. In just a minute, I will turn the call over to Dave to provide some of his thoughts about the state of our business. our financial and sales performance for the quarter, some comments regarding the industry in general, and how we're dealing with COVID-19 and some other key initiatives that we have in place. Then after Dave concludes his comments, I will provide some additional thoughts and comments regarding the press release we put out yesterday after market closed and provide comments regarding our guidance for fiscal year 21, which we also provided in the release yesterday. And then we will open the lines up 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 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 historical non-GAAP financial measures can be found in yesterday's press release. I will now turn the call over to Dave. Thank you, Kevin.

Good morning, everyone. We're very pleased to report another quarter of revenue and operating income 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 2021, total revenue increased 1% for the quarter and increased 6% on an on-gap basis. Deconversion fees were down more than $18 million over the prior year quarter, which impacts revenue in the current quarter negatively, but as I've highlighted many times in the past, this is good news for our company if you take a long-term view. Turning to the segments, we again had a good quarter in the core segment of our business. Revenue decreased 4% for the quarter because of the reduction in deconversion fees, but increased by 3% on an on-gap basis. Our payments segment performed very well, posting a 7% increase in revenue this quarter and a 10% increase on a non-GAAP basis. We also had a strong quarter in our complementary solutions businesses, with a 1% increase in revenue this quarter and a 5% increase on a non-GAAP basis. As I mentioned in the press release, our core sales teams had an extremely solid quarter and are now seeing core activity consistent with our pre-pandemic run rate, During the quarter, we inked 15 competitive core takeaways, which is greater than the one per week run rate we saw in 2019. In addition to our success signing new core clients, we signed six existing on-prem core customers to move to our private cloud environment. As we continue to push into the larger regional bank space, I think it's significant to note that of the 15 new core deals in the quarter, five were with multi-billion dollar asset banks and credit unions. As a reminder regarding the topic of new core wins, at Jack Henry, we only call out new core deals when a bank or credit union moves their entire core processing relationship from a competitor system to a Jack Henry core solution. We do not announce them as a new core win if they move from one Jack Henry core to another or if they simply purchase a new module from us. Think of it as a new logo on the Jack Henry core customer list that wasn't there previously. In addition to the tremendous success we saw with our core business this quarter, we continued to sign new clients to our new digital offerings. During the third quarter, we signed 42 new clients to our Banno platform, and we continued to see increased interest in this offering as well as the rest of our digital suite. In our April 6th press release regarding digital momentum, we shared that we had more than 400 financial institutions and more than 4.3 million users live on the Banno platform. As of May 1st, however, we have added several more financial institutions and we now have just over 5 million users live. We continue to enjoy the highest consumer rating in the App Store and we are regularly recognized as the fastest application in the industry. As I've said before, I expect our success in this area to grow as we continue to add new functionality and features to the platform. Regarding the ongoing migrations of our new card processing platform, As of the end of March, we have successfully completed the migration of all of our debit processing customers to the new platform in accordance with the plan we've been discussing for more than three years. Here are a few statistics regarding this remarkably successful project. We did our first migration on October 30th, 2017, and completed the project on March 26th, 2021. That's 1,243 days. During that time, We migrated 879 customers and added 151 new debit and credit customers to the platform. We currently support 1,030 banks and credit unions on the platform and we're adding new clients every month. You will start to see the larger positive impact of this completed project on our financials in the fourth fiscal quarter as we have emphasized throughout the process. I'm very proud of our team and thankful to our partners and clients for working with us to achieve such a successful outcome. As you've probably heard, M&A has become a topic again among bankers now that they're more confident about their operating models and the overall economy. Several of our clients have approached us recently to work with them as they prepare to complete acquisitions of smaller institutions. In fact, the CEOs of two regional banks currently processed by Jack Henry were quoted in an American Banker article last week regarding their desire to pick up where they left off before the pandemic brought everything to a halt. We expect our activity and what we refer to as the convert merge area of our business to pick up again as we get into the summer months and new deals are announced. Speaking of American Banker, hopefully you all saw their article last month announcing that once again, Jack Henry has been recognized by their team as the best place to work in FinTech. American Banker only recognizes 50 companies each year, and as you can probably imagine, almost all of the companies on the FinTech list generate less than $100 million in annual revenue, pretty much in keeping with the type of company most people think of when they hear the word FinTech. We are particularly proud of this recognition for a few reasons. First, the scores are based on surveys conducted with our employees by an independent agency. Second, this is our fifth year in a row to receive this designation from American Banker. Third, we are many times larger than almost any other company on the list. And fourth, none of our larger competitors have ever made this list. I think this recognition is indicative of the culture, entrepreneurial spirit, and commitment to developing truly innovative solutions found within the teams at Jack Henry. As you have undoubtedly already noted from yesterday's press release, we purchased a significant number of shares in the quarter. With a lack of good quality acquisitions for us to pursue and with our stock at an attractive price, we worked with the Board to authorize an additional repurchase under the existing plan, which enabled us to buy 1,825,000 shares during the quarter. This significant share repurchase does not foreshadow a change in our strategy in this regard. We will continue to be opportunistic in our approach to purchasing our own shares as we have excess cash and a lack of acquisition targets that fit our strategy. Hopefully, you've all seen the press release we posted this morning announcing the upcoming retirement of our longtime chairman, Jack Prim. Of course, many of you know Jack as the guy who sat in this chair before I became CEO at Jack Henry. As I said in today's press release, Jack has given many years to our company as a business leader, a board member, and a friend to us all. He has had a significant impact on the success of our company and on me personally. And for that, I want to sincerely thank him on behalf of all of us at Jack Henry. Recognizing that Jack has been considering a potential retirement for some time, we were prepared for his decision and expect our process to allow us to fill the vacancy close in time to Jack's retirement date. We hope to have more information to share regarding a new board member and a new chairman before the end of June. Slowly but surely, our customers are settling into a new mode of operation with the anticipation of most COVID restrictions being lifted in the coming months. We're still operating with well over 90% of our employees working full-time remote, but we are committed to our return to office date of July 1st. We are finalizing plans for office usage and staffing that will employ a hybrid work from home, work in office strategy, and we will continue to leverage remote sales and implementation tools where possible. We still have some work to do and some things to learn, but I'm very optimistic about our ability to be successful as the work environment shifts again post-COVID. As we look toward the end 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. I look forward to seeing and chatting with many of you at our virtual analyst conference next week. With that, I'll turn it over to Kevin for some detail on the numbers.