Jack Henry & Associates, Inc.

Good morning, ladies and gentlemen. Thank you for standing by and welcome to Jack Henry & Associates' second quarter fiscal year 2022 earnings conference call. At this time, all participants are on 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 the start and the one key on your touchtone telephone. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker host today, to Kevin Williams, your financial officer and treasurer. Please go ahead, sir.

Thank you, Olivia. Good morning. Thank you for joining us for the Jack Heron Associates Second Quarter Fiscal 2022 Earnings Call. I am Kevin Williams, CFO and Treasurer, and on the call with me today is David Foss, Board Chair and CEO. The format for our call this morning will be just a little different than our normal format we've typically used in the past. But just as a warning, the opening comments will take a little longer than normal. In just a minute, I will turn the call over to David to provide some of his thoughts about the state of our business, financial and sales performance for the quarter, comments regarding the industry in general, 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 updated guidance for our fiscal year 2022 provided in the release. At that point, Dave has some additional comments and updates that he will make on the press release that we put out Monday morning. Then, at the conclusion of those comments, we will then open the lines up for a traditional 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. Direct affiliations for historical non-GAAP financial measures can be found in yesterday's press release. With that, I will now call the call over to Dave.

Thank you, Kevin. Good morning, everyone. Please report another strong quarter of revenue and operating income growth. 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 quarter while also continuing to deal with the impacts of the ongoing pandemic. As Kevin mentioned in his opening remarks, we're going to conduct today's call a little differently from the cadence of past calls. I'll start with comments regarding the performance of the business in the quarter, then Kevin will share detailed financial results. Instead of moving to Q&A after Kevin's comments, however, I'm going to come back and conduct a detailed review with you of an exciting new product technology modernization strategy for our company. This is an important update for you as we believe this strategy, which we've been working on for more than two years, will fundamentally define the evolution of our company and our industry. We'll address questions after that strategy review. With that, let's shift our focus to a look at our performance for the quarter we completed in December. As of the end of the quarter, we continue to operate with well over 90% of our employees working full-time remote and continue to evaluate options regarding an appropriate return to office target date. At this time, we have no published date, but we have proven that our business can perform well in a remote posture, so we don't feel any significant pressure to change that. For Q2 of fiscal 2022, total revenue increased 17% for the quarter and increased 11% on an on-gap basis. Consistent with our previous guidance, deconversion revenues or deconversion fees were up almost $25 million over the prior year quarter, which led to the extremely strong GAAP revenue performance. But you should note that even without the increased deconversion revenue, this was a very strong quarter. Turning to the segments, we again had a solid quarter in the core segment of our business. Revenue increased by 15% for the quarter and increased by 7% on a non-GAAP basis. Our payment segment also performed very well, posting an 18% increase in revenue this quarter and a 13% increase on a non-GAAP basis. We also had a strong quarter in our complementary solutions businesses with a 17% increase in revenue this quarter and an 11% 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 largest sales quarter in the history of the company. Those of you who follow us closely will note that our last quarterly sales record was set only six months ago. In the second quarter, we inked 15 competitive core takeaways and an additional 15 deals to move existing in-house clients to our private . As we've discussed on prior calls, our convert merge backlog is a good indicator for us of what to expect with coming mergers and acquisitions within our base of customers. Our contract volume in this area continues to grow to the point that we have now added one new conversion team on the banking side of our business. Additionally, we will be adding another team next quarter on the credit union side of the business, and we're evaluating adding one or two more teams in the near future based on ongoing demand. We continue to see good success with our new card processing solution, signing 13 new debit processing clients this quarter and six new credit clients. We also continue to see great success signing clients to our Banno Digital Suite with 44 new contracts in Q2. Speaking of our Digital Suite, we are continuing to implement new financial institution clients on the Banno platform at a similar pace to recent quarters. At the end of Q2, we surpassed 6.6 million registered users on the platform, and our Banno platform continues to hold one of the highest consumer ratings in the App Store. A couple of weeks ago, we announced a significant promotion for a key member of our leadership team. After more than 10 very successful years with our company, Greg Adelson has been promoted to President and Chief Operating Officer. As I noted in the press release, Greg will retain all of his prior responsibilities as COO, but will now be responsible for leading the recently formed Digital and Technology Office headed by Ben Metz. I would like to congratulate Greg on this well-deserved promotion and congratulate Ben on his move to his new position. Both will play a major role in our success going forward. As some of you know, we've continued to make major advances with our environmental, social, and governance initiatives, and the Board has established a quarterly cadence to discuss ESP matters. Jack Henry's next sustainability report will be published on March 31st and will highlight our major advances in this area during the past year. You will be able to access this new report through our sustainability website linked from our investor relations site. In January, Cornerstone Advisors published results of their annual survey of bank and credit union executives. According to that study, 84% of financial institutions in our target market expect to increase their technology spending in 2022, with 24% 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 2022 in our market at greater than 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 clients, 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.