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Operator
Good day and thank you for standing by. Welcome to the Jack Henry & Associates fourth quarter fiscal year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0 to reach an operator. I'd now like to hand the conference over to your speaker today, Kevin Williams, Chief Financial Officer.
Kevin Williams
Thanks, Liz. Good morning, and thank you for joining us for the Jack Keran Associates fourth quarter and fiscal 2021 year-end earnings call. I'm Kevin Williams, CFO and Treasurer, and on the call with me today is David Foss, our Board Chair, President, and CEO. In just a minute, I'll turn the call over to Dave to provide some of his thoughts about the state of our business, financial and sales performance for the quarter, some comments regarding the industry in general, and then 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 earnings press release we put out yesterday after market closed, and provide comments regarding our guidance for our fiscal year 2022 provided in the release, 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. Also on this call, we will be discussing 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. With that, I'll now turn the call over to Dave.
Liz
Thank you, Kevin, and good morning, everyone. Today, we are very pleased to share details with you of a quarter that produced record revenue and operating income, as well as 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 fourth quarter and for the entire fiscal year, particularly in light of the challenges posed by conducting business while dealing with the ongoing effects of the pandemic. For the fourth quarter of fiscal 2021, total revenue increased 10% for the quarter, and increased 10% on a non-GAAP basis. Deconversion fees were essentially flat as compared to the prior year quarter. Turning to the segments, we had a solid quarter in the core segment of our business. Revenue increased by 4% for the quarter and increased by 6% on a non-GAAP basis. Our payments segment performed extremely well, posting a 16% increase in revenue this quarter and a 17% increase on a non-GAAP basis. We also had a strong quarter in our complimentary solutions businesses, with a 7% increase in revenue this quarter and a 7% increase on a non-GAAP basis. As I highlighted in our press release, the fourth quarter was the strongest sales quarter in the history of the company. June was also the strongest sales month ever, and it propelled all three sales groups to exceed their quota for the quarter. While they were signing all those contracts in the fourth quarter, the sales team also did an outstanding job of refilling the pipeline with new opportunities to set us up for success going forward. I think this is a good sign of the health of our market and bodes well for the start of the new sales year. In the fourth fiscal quarter, we booked 13 competitive core takeaways and 14 deals to move existing on-premise customers to our private cloud environment. Several of our complimentary offerings also saw very strong demand in the quarter, with, as you might guess, our digital suite leading the pack. We signed 87 new clients to our Banno digital platform in the quarter, 10 new treasury management clients, and 22 new clients to our card processing solution. For the full year, we signed 41 competitive core takeaways with eight of them greater than $1 billion in assets. Additionally, we signed 35 contracts to move on-prem core clients to our private cloud, 219 new Banno digital customers, and 55 new clients for our card processing solution. 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. At our analyst conference in May, I shared with the attendees that we had just surpassed 5 million registered users on our Banno digital banking platform. As of the end of the fiscal year, we were at roughly 5.6 million registered users. As a point of reference, on July 1st of 2020, we had about 3.2 million registered users. So in one year, we saw an increase of approximately 75% in our user count. 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 continued to onboard clients and their users at a pace of about 30 financial institutions added to the platform each month. In addition to our ongoing success with Banno, we have delivered many new and innovative solutions during the fiscal year. A few examples include our Scimitar team delivered an automated database migration to almost all of our EPCIS clients, which allowed them to move to the new database structure with no effort or client impact. Our lending team delivered the Jack Henry Loan Marketplace, which allows banks and credit unions to easily engage through a digital experience in the buying, selling, and participation of loans. Our digital team delivered the Banno Digital Toolkit, which provides a complete set of application programming interfaces, or APIs, to enable easy plug-ins to third-party solutions in our digital platform. Our payments team continued the expansion of functionality and adoption of the PayCenter platform and delivered the Zelle Digital Toolkit to enable clients not using our digital platform to connect to the PayCenter hub for Zelle transactions. And of course the payments group completed the three and a half year project to upgrade our card payments platform. Almost all of these new deliverables are built on entirely new technology stacks and are designed to make it easier for our customers to leverage our open architecture tools and philosophy to deliver cutting edge solutions to their account holders. As you may know, we have a number of active projects at Jack Henry centered on the topic of corporate responsibility. We continue to advance our environmental stewardship commitment and recently announced that on Earth Day, our associates launched a new business innovation group called Go Green. Our business innovation groups are company-sponsored, associate-driven groups that provide a collaborative platform for people, ideas, and thoughts to intersect and help address business challenges. Our associates decided that a business innovation group focused on our planet was appropriate and necessary for us to make meaningful progress on this initiative. As the labor market continues to heat up, we are focused more than ever on attracting and retaining talented associates. To that end, we have recently implemented new technology to expand our remote recruiting efforts and broaden our pool of qualified and diverse talent. Our hope is that this approach will only serve to improve on the reputation as a great place to work that we currently enjoy in cities across the country. Our consistent placement on best places to work lists is a testament to the workplace culture we have at Jack Henry, and our employee engagement scores reflect that strong culture. I'm pleased to share that nearly two-thirds of our associates participated in our most recent engagement survey, and our average engagement score was 83%, well above the industry benchmark. Like most employers, we have spent a good bit of time in the past few weeks wrestling with decisions around the right timing and approach to move employees back to work in our company facilities. We worked with our leadership teams earlier in the calendar year and determined that more than half of our workforce would continue to work remote indefinitely. We had targeted July 1st as our return to office date for those who would be returning in a full-time or hybrid basis. But as the Delta variant surged, we reverted to our previous operating model with only essential employees in our offices every day. We have proven that we can operate effectively in a remote posture, and we will continue in that mode until we determine it is safe to make a change. As I referenced on the last earnings call, our longtime chairman, Jack Prim, has retired as of the end of June. Jack had been with our company for many years in various leadership roles and as a board member and chairman. As a result of Jack's retirement, we have announced two changes to the board. Curtis Campbell has joined the board effective July 1st, fill the seat left vacant by Jack's departure. Curtis is president of software for Blue Cora in Dallas. He brings extensive experience in infrastructure and cloud computing, as well as digital development and a keen focus on customer experience. I'm very excited to see what new perspectives Curtis brings to our board discussions. Also effective July 1st, I was elected to be the new board chair. I was humbled and honored by the confidence expressed by the other board members and I look forward to leading the Jack Henry Board to even greater success. As I reflect back on fiscal 2021, I can confidently say it was a very good year for our company. Our employee engagement scores remain very high, and we've made great strides with our diversity and inclusion initiatives. Our levels of customer engagement and customer satisfaction scores are also very high. We have successfully completed several leadership and board level retirements and replacements. Our sales teams are performing extremely well and have positioned us for another successful year of selling, and overall demand for Jack Henry Technology Solutions remains high in all segments of our business. We have a commitment to doing the right thing for our constituents that we believe 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 the future. With that, I'll turn it over to Kevin for some detail on the numbers.
Kevin Williams
Thanks, Dave. Our service and support revenue line of revenue increased 6% in the fourth quarter of fiscal 2021 compared to the same quarter a year ago. As Dave mentioned, our deconversion fees for the quarter were pretty flat with last year's fourth quarter. However, for the full year, our deconversion fees were down $33.3 million. for the full fiscal year compared to the prior year, which is actually the guidance that we provided a year ago on this call. Our service support revenue primary driver was our data processing hosting fees and our private cloud and public cloud offerings, which continue to show strong growth in the quarter compared to the previous year, growing by 7% for the quarter. However, the growth in this line is slowed significantly due to product delivery and service revenue, which includes deconversion fees, license, hardware, implementation, and convert merge revenue, which only grew 2% compared to the prior quarter, which this line is obviously somewhat impacted by COVID. Our processing revenue increased 15% in the fourth quarter of fiscal 2021 compared to the same quarter last fiscal year. The increase was primarily driven by our higher card volumes from new customers installed last year and increased debit card and credit card uses from existing customers. Our Jack Henry digital revenue continues to show very strong growth as demand for our Banno digital platform continues to be very strong, as Dave highlighted. Our total revenue was up 10% for the quarter compared to last year on both a GAAP and non-GAAP basis, so excluding deconversion fees and divestitures, Our non-GAAPs grew 10% as well. For the full fiscal year, revenue was up 4% on a GAAP basis and 6% on a non-GAAP basis, again, excluding deconversion fees and revenues from divestitures. Our cost of revenue was up 8% compared to last year's fourth quarter. The increase primarily due to higher costs associated with our card processing and higher personnel costs compared to a year ago. Our research and development expense decreased 4% for the quarter of fiscal 21 over the prior year quarter. The decrease is due primarily to a slightly higher percentage of costs being capitalized for product development this quarter compared to a year ago. Our SG&A expense increased 3% in the fourth quarter of fiscal 21 compared to the same quarter in the prior fiscal year. The increase is due primarily to increased personnel and professional services costs. Our reported consolidated operating margins increased nicely from 18.7 last year to 21.4 in the current year quarter. And on a non-GAAP basis, our operating margins expanded from 17.8 percent last year to 20.1 percent this year. Our payments segment saw the nicest margin expansion in the quarter. After completing the payment platform migration in Q3, margins grew from 43 percent last year to 45 percent this year, on the fourth quarter on a GAAP basis, and on a non-GAAP basis, our payment segment margins grew from 42.3 to 44.5, so over a 200-bit margin expansion. Our core segment operating margins decreased slightly during the quarter compared to last year on both a GAAP and non-GAAP basis, while our complementary segment margins increased slightly on both a GAAP and non-GAAP basis. The effective tax rate for the fourth quarter of fiscal 21 was down slightly, to 19.7% compared to 20% in the same quarter a year ago, primarily due to some state tax deductibility timing. Our net income grew 25% to $76.9 million for the fourth fiscal quarter compared to $61.3 million last year, with earnings per share of $1.04 for the current quarter compared to $0.80 last year, or a $0.24 or 30% increase over the prior year. Our cash flow total amortization increased 3% for the fiscal year compared to last year, primarily due to capitalized projects being placed into service last year. Included in the total amortization is the amortization of intangibles related to acquisitions, which decreased to $17.7 million this fiscal year compared to $20.3 million last fiscal year. Appreciation was up slightly at less than 1% for the year compared to the prior fiscal year. During the year, we purchased 2.8 million shares of our January stock for the Treasury for $431.5 million, and we paid dividends of $133.8 million for a total return to shareholders of $565.3 million for the year. Our operating cash flow was $462.1 million for the year, which was down from $510.5 million last fiscal year which this decrease is primarily due to the timing of various operating assets and liabilities and timing. We invest $157.8 million back into our company through CapEx and capitalized software. Our free cash flow, which is operating cash flow, less CapEx, less Cap software, and adding back net proceeds from disposal of assets, was $310.5 million for the year, which represents a 99.7% net income to free cash flow conversions. Yesterday's press release inadvertently omitted the proceeds from dispositions line of net cash from investing activities within the cash flow summary. Amounts that should have been included were cash inflows of $6,187,000 in fiscal 21 and $11,130,000 for fiscal 2020. The totals for investing activities were correct. This omission was corrected in the version of the earnings press release filed yesterday on Form 8K and the one notated on our website. Couple comments on our balance sheet. Our cash position of $51 million compared to $213 million a year ago, primarily down due to the significant stock repurchase we did. You'll remember at the end of Q3, we had $200 million drawn down our revolver. During Q4, we paid down $100 million of that balance. So at June 30, we had $100 million on our revolver. We had no other long-term debt on our balance sheet other than operating leases. For the year, our return on average assets for the fiscal year was 13.1%. Our return on invested capital for the fiscal year was 21%, and our return on equity for the year was 21.7%. Yesterday, we provided both GAAP and non-GAAP revenue guidance in the press release for fiscal 2022. We also provided a reconciliation of GAAP to non-GAAP revenue guidance in the release following the segment information in the press release. Just to be clear, this guidance continues to assume that the country continues to open and the economy continues to improve, but if things were to go differently than this, then guidance will be revised. For GAAP revenue growth for fiscal 22, based on the amounts in the release yesterday, our revenue guidance is a range of 8.2 to 8.7 percent growth over fiscal 21, due to higher anticipated deconversion fees compared to FY21. And for non-GAAP revenue growth, we are guiding to an initial range of 7.5% to 8% growth for the fiscal year. Obviously, these will be updated during the year on future earnings calls. We do anticipate GAAP and non-GAAP operating margins to improve a little in FY22 compared to last year, as we should have nice margins expansion in our payment segment and anticipate higher deconversion fees. I am somewhat cautious on guiding to too much of an improvement in operating margin as we will continue to have headwinds on license revenue as we continue to move core customers from on-prem to our private cloud. Also, travel costs continue to increase significantly compared to the last year. And at this time, we are still planning to host our Jack Henry Annual Conference and our Scimitar Edge Conference in person this year. Therefore, there will be some large costs returning this year compared to last year, when there was very little travel. However, we do think that we will get at least 50 bps of margin expansion in the fiscal year. Our effective tax rate for FY22 is projected to be slightly higher at approximately 22.5% to 23% compared to our actual rate this year of 21.7%. And this is primarily due to the significant impact from equity awards that were deductible in FY21. Our initial FY22 gap EPS guidance is a range of 453 to 460, which is a 10% plus increase from our FY21 finish. This concludes our opening comments, and we are now ready to take questions. Liz, will you please open the lines up for questions?
Operator
If you'd like to ask a question at this time, please press the star, then the number 1 key on your touchtone telephone. To withdraw your question, press the pound key. Our first question comes from Vasu Govil with KBW.
Vasu
Hi, thanks for taking my question. And I wanted to congratulate David on becoming chairman of the board.
Liz
Thank you, Vasu.
Vasu
I guess just the first question to follow up on the margin commentary there that you provided, Devin. I know that previously you had indicated about 100 basis points of margin expansion in fiscal 2022 and potentially even some upside to that. Now you seem to be indicating 50 basis points. So I guess just wanted to understand what changed in your outlook versus what you were expecting before.
Kevin Williams
Well, I would tell you that the biggest change is the impact of COVID, because obviously we had some really nice margin expansion this year with no travel-related costs. Obviously, there was also a decrease in revenue from convert-merge revenue and other things. So there's a lot of offsetting things out there. And just to be clear, I feel like both our revenue gap or non-gap revenue growth of 7.5% to 8%, and our margin expansion of 50 bits are both conservative.
Vasu
Got it. Understood. And I guess the second question, I was just hoping if you could provide some color on growth expectations by segment for fiscal 22, particularly what you're expecting for the core and payment segments. I know with the core segment, do you expect sort of this improvement that we've seen on a non-GAAP basis to kind of continue into next year. And then payment segment has already been quite strong. I mean, is there room for further acceleration as some of the new wins on the card payment side start to flow in?
Kevin Williams
Yeah. So, I mean, we saw some really nice margin expansion in the payment segment in Q4. We will see more in FY22. There is still additional costs that will be coming out. by the end of the first half of fiscal 22 in the payment segment. So I think there will still be some really nice margin expansion. And as we add additional customers, that will also expand the margins. And obviously, cards is still 60% of the payment segment.
Vasu
Thank you very much.
Kevin Williams
Thank you.
Operator
Our next question comes from Peter Heckman with DA Davidson.
Peter Heckman
Good morning, everyone. In terms of thinking about the record sales in the fourth quarter, is there a way of thinking about total bookings on like a TCV or ACV basis in terms of thinking about year-over-year increase? I think in the prior year you had 43 competitive core takeaways. Of course, not all financial institutions are equal. There's wide variance in sizes. But, you know, given some of the difficulties over the last fiscal year, you know, is there a way about thinking about the kind of percentage increase in overall bookings that might help us think about the outlook?
Liz
Yeah, you know, when you have a sales sense, Dave, by the way, Pete, when you have a sales quota, the size of our sales quota, you know, a percentage increase of more than 5% per year is a very significant increase. And if I remember correctly, I don't think I have it exactly in front of me, but I think it was year over year, it was about 7 or 8%, somewhere in that range, year over year, as far as sales bookings. Now, we don't, you know this well, we don't publish, you know, TCV numbers or anything like that, but that's a good way to think about how we measure quota and how quotas are assigned. So you can kind of use that logic in making some assumptions. So if we're 7% or 8%-ish increase over the prior year as far as sales performance, that's a good way to think about it. Now, the other thing I'll point out is when we assign quotas for the next year, meaning for the year we're in now, fiscal 22, our starting point is last year's performance, and then we normally apply somewhere between 3% and 5% quota increase over the top of what the performance was last year. So that's where the sales team is starting out this year is with a sales quota that is, you know, somewhere in the 3% to 5% range larger than it was their actual attainment for the prior year.
Peter Heckman
Got it. That is helpful. And then just thinking about the cadence of term fees, the The guide for term fees, no surprise with some of the uptick we've seen in M&A in the mid-tier space. But in terms of the cadence, Kevin, would you specifically call out some level for the first quarter or when you might think those might hit just in terms of trying to get the quarterly forecast correct?
Kevin Williams
Well, I mean, Pete, obviously we've been hearing a lot about M&A activity, which obviously that's what drives deconversion fees. We have not seen a lot of actual activity yet, so I think that's going to grow over the years. So I have a feeling that the bulk of the deconversion fees are probably going to be in the second half of the year.
Peter Heckman
Got it. Okay, thank you.
Kevin Williams
Yep.
Operator
Our next question comes from Dave Koning with Baird.
Dave Koning
Oh, yeah. Hey, guys. Thank you. Nice job. And I guess my first question just, you know, when we think of kind of the wallet providers, that space, you know, there's a lot of investors that are just concerned that, you know, that group is just going to take over the world and all bank accounts will kind of move to that over time. But I guess a couple of things. Are you seeing growth in your number of accounts? I don't know if you have some metrics on that, your total accounts, but also are Is there any reason that the banks can't do exactly the same thing and provide all the same services, plus have FDIC insurance and all those things that make most consumers rather just have a bank account over time?
Liz
That's a very intuitive question, Dave. In fact, I'm presenting at a conference in, I think it's February of next year, on that very topic because bankers are starting to realize that. If you have a good digital platform on the front end, And if you take advantage of an open infrastructure like we have at Jack Henry, and that's the reason we talk about it all the time, you can do as a banker essentially all those same things and draw customers to your platform as a bank with the FDIC insurance backing it. There's a real opportunity for bankers to take advantage of this desire and demand opportunity. among consumers today for solutions like that. So we're doing that today with a number of banks, but part of the process for me is to educate bankers on what they can do, what they should be thinking about, how they compete in those areas. So lots of opportunity for our customers and for Jack Henry, but it's based on a really outstanding digital platform and then having all the connectivity to connect those types of FinTech functions into that digital platform. And we have all of those things in production today at Jack Henry. This isn't wish for the future. This is in production today with customers today. So a great opportunity. And so the first part of your question about about customer growth. So, yes, we are able to measure customer growth, whether it's members on the credit union platform or customers on the banking platforms. And not only are we adding customers because we're winning share, you know, we're winning new customers, so the net number of customers we serve is greater, but because there is same-store sales growth happening, particularly on the credit union side of the business. You know, it's happening on the banking side, but it's been strong on the credit union side of the business as well.
Dave Koning
Okay, great. No, thanks. That's good to hear. And then maybe secondly, growth in payments, obviously, really good. I assume that's debit transaction growth just off of a pretty low base. But how do you expect that to grow through the year? I would think Q1 would still be pretty high off kind of easier comps, and then maybe the rest of the year a little below double digits or something. Do you have any sort of cadence for that?
Liz
I think that's a good expectation. The other thing I'll highlight is, you know, we talk and Kevin emphasized that 60% of our payments business is on the cards platform. But, you know, don't forget about the business we refer to as EPS, Enterprise Payment Solutions. That's our remote deposit capture and mobile capture business. That business has been growing nicely as well. So it's a much smaller piece of the segment. But it's growing rapidly, and I think you're going to continue to hear more about that business at Jack Henry as well. So both of those two, and I've said it on many earnings calls, the bill pay business relatively flat for everybody. There's not a whole lot of new stuff happening in traditional bill pay. But the card growth that you've seen, I think, in the high single digits is a good expectation for the card growth. But it'll be greater than that for the EPS business as far as what we're seeing right now. because of the strength of that platform.
Kevin Williams
And Dave, remember, it's not just debit. We now offer full-service credit as well, because we could not offer that before we got moved over to the new platform. So our full-service credit is growing basically from a base of zero. Yep, gotcha. Well, thanks, guys. Nice job. Thanks.
Operator
Our next question comes from Kartik Mehta with North Coast Research.
Kartik Mehta
Hey, good morning. Kevin, I just wanted to ask a little bit about the credit card platform conversion. It looks like that's going well. And you talked about a little bit more cost coming out of the payments business. I'm wondering, you know, in relationship to what you anticipated for cost savings out of that platform, would you have achieved that or exceeded that? How would you characterize the cost savings from the platform?
Kevin Williams
Okay. So, Kirk, we completed the migration in Q3. So we had all customers on the new platform, and sometime in April, we started decommissioning the four mainframes that supported the two platforms that we used to have. And I think those got completely decommissioned, I believe, by mid-July, if I remember right. But there are some other things that's going on here, Clark. So there are some other tools that we have to keep the talent on to rewrite and get some additional tools in place. which that will be done by the end of Q2. And so you'll see some additional costs coming out by then. So by Q3 of this year, we will see the full benefit of the cost takeout that we guided to three years ago.
Kartik Mehta
Perfect. And, Dave, you know, I think you've talked about maybe core demand now increasing as people kind of realize that COVID is still going on and some of the decisions they didn't make they're making. Now, how would you characterize core demand today? Is it increasing or is it kind of back to normal?
Liz
I would say that it's back to normal. So normal for Jack Henry. So pre-pandemic, we were running at about one new competitive replacement per week. We are back to that level now. We did 15 last quarter. We did 13 this quarter. Everything that I'm seeing now would indicate that that's a pace that we can run at for a while, but it's definitely leading the industry by far as far as new core replacements, and that looks sustainable for us now. And just one last question.
Kartik Mehta
Have you seen any change in the competitive nature for these core renewals, maybe as the market gets back to a little bit normal?
Liz
For core renewals, we've talked about this in the past, consultants are now engaged every time there's a renewal. Ten years ago, it was rare to have a consultant involved in a renewal. Today, every single one of them has a consultant, and that's not just Jack Henry. It's in the industry. And how does the consultant justify their role? It's by ensuring that it's a very competitive process. So that's been going on. It started before the pandemic. It is definitely in place today where every single renewal for all of us, there is a consultant engaged. They are You know, they are encouraging a diligent review of pricing and all that kind of stuff. And so we know how to operate in that model, and we're comfortable with what's happening. Perfect. Thanks, Dave. I appreciate it.
Operator
Our next question comes from John Davis with Raymond James.
John Davis
Hey, good morning, guys. Kevin, just a quick clarification around the margin. So you said 50 basis points. I just want to clarify that's on a non-GAAP basis. of expansion. And then to follow up there, I think RMAS suggests that the payments platform migration would be about a 50 basis point benefit this year. So the right way to think about it, that incremental travel and other expenses kind of offset normal operating leverage with maybe a little bit offside, given your conservative comments.
Kevin Williams
Yeah. And then, John, I saw on your note about the EPS and your calculation of margins, you also have to remember that our effective tax rate is going to go up from 21.7% to 22.5% to 23% too. So if you're just looking at EPS, that's also going to have a slight negative impact, but we're still guiding EPS to grow more than 10%. Okay.
John Davis
And then you guys are guiding deconversion fees up about 70% year over year. Is that the right way to think about the increase and convert merge revenue? and then any way you guys can give us an idea of what percentage of a normal year convert merge revenue is percentage of your core segment revenue, just trying to understand, because I think that was one of the areas that was a little bit weaker than you expected this year, and just how we should think about that bounce back coming in 2022.
Kevin Williams
Yeah, there was a significant headwind from convert merge revenue being down because there's no M&A activity, and you're absolutely right. I mean, if deconversion revenue does take up like we think, Our customers will be buying just as much as our customers getting acquired. So not only would increase convert merge revenue, but also increase bill travel because we'll have more people traveling out to do those convert merges. As a percentage of total revenue, on top of my head, John, I can't, I mean, it's not a huge number, but, you know, when you start talking, you know, several million dollars in convert merge revenue that we basically build full boat for those. So it's a very nice margin business. It's actually the highest implementation margins we have. So not only does it help reduce the headwinds on revenue, but it also helps our overall operating margin.
Liz
And I will chime in here, John, on that topic. One of the things that is interesting in this business is when an existing customer is looking at acquiring another institution, whether it's a bank or credit union, We have a lot of visibility into that because they will contact us to say, we're working on this deal. We may not consummate the deal, but we're working on it. We want to make sure that we have a conversion slot available. We have time in the Jack Henry calendar because we want to be able to do that as quickly after we close the deal as possible. So we have a good deal of visibility into the activity that's happening out there in the convert merge space. And I can tell you right now there is a lot of activity. So there's a lot in the press about M&A activity coming back, and we're certainly seeing it in the number of our customers who are coming to us saying, we're looking at acquiring another institution. We want to make sure you guys are ready to help us. So we can't exactly predict when those things are going to happen, but the activity levels are definitely back.
John Davis
Okay, and then last one for me. Kevin, anything to call out from M&A? you know, sequential cadence this year, either on the revenue side or margins, or should we just basically kind of look at two-year categories on the top line and maybe remind us when your in-person conferences are and those expenses hit, which quarters those will be in? Thanks, guys.
Kevin Williams
Yeah, so, John, that's a good question, and actually, I thought about that as I was driving over here for this meeting this morning on cadence. The one thing I'd say is we've now been on ASC 606 now for four years, so you The cadence of growth is going to kind of be the same. Q1 should be really strong because of all the software subscription revenue that we take the first of that quarter. It obviously gets a little weaker in Q2 and then just grows in Q3 and Q4 from there. And as far as our user conference, they're actually a combined conference this year. Well, they're not really combined. They kind of overlap. And those are scheduled to be in October. So that will hit Q2. Okay, appreciate it, guys. Thanks. Yep, thanks, John.
Operator
Our next question comes from Dominic Gabriel with Oppenheimer.
Bano
Hey, good morning. Thanks so much for taking my questions. You know, the sales pipeline being just so much better, 7% to 8% versus your quota, rather, of typically a raise of 3% to 5%. Maybe we could talk about what's filling that gap. Is it a... you know, a few large clients that you've won that have kind of raised that? Or is it perhaps some pent-up demand that's coming in recently that was lagging previously? Maybe you could walk us through the puts and takes of why it's just pure execution. Anything you could provide there, I'd really appreciate. Thanks so much.
Liz
Sure. And just to be clear, Dominic, so when I was referring to the 78%, I was talking about actual performance over prior years. So pipeline performance, Just so we're all clear on terminology, when I talk pipeline, I'm talking about the opportunities that we're working currently that may close in the future, as opposed to quota attainment as things that have been booked in the past and are deals that have already been signed with our customers. But to answer the specifics of your question, no, this is not just a few large clients or something like that. This is a broad suite of solutions that we've been selling to a broad list of customers. Of course, the core success that we had this year was significant, and so that's a driver. I highlighted in my opening comments the number of Bano customers that we signed this year, so 219 brand-new Bano digital customers. That is becoming an important driver for us as we go forward. But then it's all these other solutions, so treasury management and all the customers that we signed to our our payments platforms, including, like I mentioned in my response to Dave Koenig's question earlier, our EPS platform, which we're seeing some nice interest in that as a payments platform for customers going forward. So it's just a broad variety of solutions. So the point about pent-up demand, that's a little bit of a tough one because we saw sales was lumpier during the height of COVID, but we didn't see, when you look at it over the 12-month period, we didn't see sales slow down, but it was very lumpy. I have trouble characterizing it as pent-up demand because the sales happened. They were just not quite as smooth as what we're normally accustomed to. So I think it's interest in Jack Henry. It's customers coming to Jack Henry who just haven't done business with us before. And it's because of this broad suite of solutions that we have and all of the new technology that we deliver. So I highlighted in my opening comments the work that our Scimitar team did around database migration and delivering an entirely new database. The lending team, with all the new functionality that we've delivered there this year, the digital team, which I've already highlighted, the payments, a pay center platform that I talked about in my opening comments, where we now enable all these real-time payments through a brand-new ground-up payments platform. So it's a variety of different things that, you know, add them all together, and it was just a really successful sales year.
Bano
There's definitely no question arguing with the awesome salesman's numbers. And then maybe just one more. When you talk about the revenue and margin guidance being conservative, can you maybe walk through some of the puts and takes of that commentary? And you went over this a little bit, but when you think about beating the 50 basis points margin expansion, does that really coincide with you beating your revenue guidance? And perhaps What kind of investments do you think you could look, you could see where even if you beat on the revenue guidance, there's some additional investments you'd like to make that might just keep you around that 50 basis points overall for margin expansion for the year?
Kevin Williams
Thank you. So I think that's a good question. So to beat the guidance we gave for non-GAAP revenue, it would mean that we would have some continued implementation of movements from some of our card customers, so move some large debit customers over, the continued success in our credit card platform processing, MA activity, which would drive the convert merge revenue and billable travel that we talked about earlier, and then just implementing, and then obviously the continued movement of moving our on-prem customers into our private cloud, also helps our margins. So there's several different drivers that could cause us to beat that non-GAAP revenue guidance. And from what I'm seeing, I think that's probably going to happen, but I'm not willing to step on that limb and say how much at this point. And every one of those things that I just mentioned can also help to improve margin. As far as investments, I mean, we just finished our budget, and I don't know that even if we beat revenue guidance, I don't know that there's any big investments out there that we need to make that we're not already making, either from a CAF software development or from CAPEX that's not already in the budget, which is part of that guidance.
Bano
Really great. Thanks so much for taking all my questions. You bet.
Operator
Our next question comes from Ken Suhaski with Autonomous Research.
Ken Suhaski
Hi. Good morning, David and Kevin. Thanks for taking the question. I just want to ask about Bano since you had some really strong results there. I believe Bano is no longer restricted to the core basis here. So I was hoping you could talk about how you expect Bano growth to trend now that that offering is open to the rest of the market. And what's the size of that business today? You mentioned I think it was 5.6 million users. I mean, what type of revenue does Bano contribute?
Liz
So first off, just to be clear, Ken, what I've said is that we'll start selling Bano outside the base in calendar 2022. So it's not this calendar year. It'll be next year. This year, the major deliverable for the Bano group is Bano Business, which is the, you know, you think about all the functionality we have on the consumer side with Bano. In a couple of months here, we'll deliver all that same type of functionality on the business side of the solution. And then it'll be next calendar year that we'll start delivering outside the base. But, as I've stressed on these calls in the past, most banks and credit unions in the United States, I'm not just talking about Jack Henry Core customers, I'm talking in general, most of them have an internet banking offering and a mobile banking offering, and they are two different things, two different experiences. Consumers don't want two different experiences anymore. They expect to have a single experience when they go to access their information from their financial institution, and it doesn't matter what the form factor is. If they're on a phone, on a tablet, on a PC, they expect to have the same experience. And so that creates opportunity for us both inside and outside our base. And that's not changing anytime soon. There are thousands of institutions out there who will, over the next several years, upgrade their digital experience, and we plan to be there with Bano outside the base next year. As far as the size of the business, you know, we don't call that out as a separate business. We have discussed, you know, at some point would we possibly do that as a segment, but we're not there yet. But it's the 5.6 million users I've been asked on these calls before. You know, there are some pure play offerings out there that You can kind of do the math and figure out based on their number of users, you know, what the revenue per user is, is that transferable to Jack Henry? My answer is generally yes, that's transferable. So you can kind of figure out how large the business is. The thing that I will stress is for that business, our digital business operates under the same rules as our other businesses at Jack Henry, which means you don't get a pass on making money. You have to produce operating income, operating results, in addition to revenue growth, and certainly the Bano business is doing that for Jack Henry. So it's continuing to grow nicely. We'll continue to grow nicely based on all the things we're seeing right now, the backlog of installs that we have right now, and we'll continue to produce bottom-line operating results for our company.
Kevin Williams
Just one more thing in there. So when we talk about digital, that's not just Bano. That includes a lot of different things, which includes our – predecessor NetTower solution, which we still have several hundred FIs on our NetTower solution and using our Godo mobile solution. And a lot of those will never move to Bano. But when we talk about digital, we're talking about all that and Treasury and GZO and Bolson, which is open anywhere, which is some of the acquisitions we've done in the last three years. So the term digital encompasses quite a few different products and offerings.
Ken Suhaski
Yeah, that's really helpful. Very detailed answer there. I appreciate that. And I know you guys aren't giving guidance for fiscal year 23, but just, I mean, there's a lot of moving parts with the margin in terms of things opening up. You have the platform migration, but once that platform migration, I guess, is behind you, what's the right way to think about margins or margin expansion after fiscal year 22? Just because when I look at your numbers, I mean, Jack Henry had a called a roughly 24.5% operating margin in fiscal year 17. I mean, is that a good benchmark for fiscal year 23?
Kevin Williams
Well, it depends on which numbers you're looking at for 2017. If you're looking for the restated numbers after ASC 606 or if you're looking at the previous numbers because ASC 606 did have an impact on our margins. but I would say that I'd answer it this way. You know, I'm pretty comfortable that after we get through FY22, again, there's a lot of unknowns out there with COVID and other things, but I think starting in FY23, we can kind of go back to our normal 50 to 100 basis points expansion in our operating margin as we get everything kind of put back in place this year.
Ken Suhaski
Okay, that's really helpful. And then maybe my last question, just I guess as you think about new sales and how they're expected, the trend as the economy reopens, the pipeline's quite strong. Just curious if you expect that to accelerate as you get back to seeing your customers in person.
Liz
Yeah, I don't expect that you're going to see some great big pop in sales. I mean, as I said before, our quota is a very large number today. And so if you're growing at, you know, 3% to 5%, year over year on a very large sales number, that sets the company up pretty well because we're such a high concentration of recurring revenue. So you assume that the recurring revenue is continuing to percolate, and you're layering revenue in on top of it, and you're growing a sales quota at 3% to 5% per year over the prior year performance. that's a pretty solid model. So I'm happy with that model. Don't expect that we're going to see some great big pop in sales in the coming year. I think the performance will continue to be solid and consistent.
Ken Suhaski
Okay, that's really helpful. Thanks a lot, David and Kevin. Really appreciate it.
Operator
Our next question comes from Dan Perlin with RBC Capital Markets.
Dan Perlin
Yes, good morning. It's actually Matt Roswell sitting in for Dan. Just a quick question. With the payment platform conversion done, are there any remaining major solutions that need to be kind of re-platformed onto the open architecture? And then with, theoretically, all those solutions on an open architecture, does that change the sort of accounting cadence between capitalization of software, timing, or DNA, or... is the income statement component to CapEx?
Liz
So I'll take the first part of your question, and Kevin can address any of the hard financial questions, the CFO stuff. So first off, we have about 300 different solutions, and so they are all in some stage of either fully platformed on a complete open platform or You know, they're in the process or some is done, and there are some that it isn't logical to take them to an open, to a new architecture. We, for example, have a payroll solution that It's been around for a long time. It was a successful product. Nobody is buying payroll solutions from a provider like us anymore. We haven't sold a copy in 20 years. Why would we put the effort into re-platforming that product? So if you look at the broad suite of solutions that we offer, it isn't logical to try and move everything to a new platform. But for all those that are the real high-demand solutions, They've either been put into a completely open environment or they're in process of offering that type of solution. And many have been poured to public cloud offerings. So we're in both Azure and AWS today with some of our solutions. We have many in our private cloud. So it's just because of the broad suite of products that we have, it's just kind of naturally a variety of different platforms that we offer them on. But for the key solutions, They either are today supporting open connectivity, open infrastructure, or we're well on our way to doing that. And then I'll let you take the hard part, Kevin.
Kevin Williams
Yeah, so the other part, Dan, is if you look at us for basically the last 10-plus years, and I actually have a chart that shows this, our total R&D spend for R&D expense on the P&L and CAP software on the cash flow statement has been 14% of revenue. So our total R&D spend has grown at almost the exact same pace as our top-line revenue for the last 10 years. I don't see that changing. I think we're going to continue that. And I will tell you that the way that we don't do really big bang productions. I mean, we do sprints and try to get modules rolled out as quick as possible and do additional modules. So there's not going to see any huge increase in amortization of software in any given year. It's just going to kind of slowly grow. Because at any given time, there's actually a chart I show the board every quarter. At any given time, about 85 or 86% of our total cash software on the balance sheet is in production being amortized. And that hasn't changed for the last few years either. So what that tells you is as we're continuing to develop all that software, we continue to roll it out. But at the same time, in five years, some of the stuff amortization's done amortizing. So you've got an offset there. So I don't think that we're going to do anything crazy in the foreseeable future that's going to have much of an impact on either cash flow or the P&L other than what you've seen in the last few years. Okay. Thank you very much. You bet.
Operator
That concludes today's question and answer session. I'd like to turn the call back to Kevin Williams for closing remarks.
Kevin Williams
Thank you. And thank you all again for joining us. We continue to be very pleased with the overall results of our ongoing operations. I do want to thank all of our associates for the way they've handled these challenges by taking care of themselves and our customers and continuing to work hard to improve our company and to continue moving forward for the future. All of us at Jack Henry continue to focus on what is best for our customers and our shareholders. Thank you again for joining us, and Liz, would you please provide the replay number so it's in the transcript?
Operator
A replay of this call will be available until 1159 p.m. Eastern Time, August 25, 2021. You can access the replay by dialing 800-585-8367 or 404- 537-3406 and entering conference ID 792-9519. Thank you and have a great day.
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