Jack Henry & Associates (JKHY) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Business overview and segment performance

• Operates three main segments: core (ERP for banks/credit unions), payments (credit/debit processing, bill management), and complementary (digital assets, fraud, lending solutions).

• Each segment represents roughly one-third of the business, with growing focus on front-facing digital applications.

• Demand remains strong, driven by U.S. institutions' need for technology to stay competitive and support growth strategies.

• Tech spend growth among clients is stable at 6%-10%, with top priorities in deposits, lending, and efficiency.

• Digital modernization and fraud solutions are increasingly important investment areas.

Core business dynamics

• Average client size has grown to $1.2 billion, up from under $1 billion three years ago, with increasing traction among larger institutions.

• About 20 clients exceed $15 billion in size, aiding referenceability and further large-client acquisition.

• Pricing remains competitive, with a focus on value and service rather than being the lowest-cost provider.

• Deconversion revenue is low and unpredictable, but M&A activity generally acts as a tailwind due to clients acquiring smaller institutions.

Payments and complementary business trends

• Payments growth is tracking at 6%, slightly above card network volume growth, with debit processing as the main revenue driver.

• Bill payment segment is seeing innovation in faster payments and ancillary services.

• Banno platform is a key growth driver in the complementary segment, with 8% penetration and plans to reach 60%-70%.

• New products like Financial Crimes Defender and Treasury Management are fueling future growth.