Jack Henry & Associates Aktie

So first of all, I'd like to wish everybody a great afternoon, and welcome to Jack Henry's 2026 Investor Day. It's the first 1 we've had in a couple of years. My name is Vance Sherard. I'm Vice President of Investor Relations. And to those on the webcast and those here in Dallas, we're very glad that you could join us. Greg just asked me a second ago, I think this is a record attendance, so we're glad for that as well.

In addition to the investment community, Today, we are joined by several representatives of Jack Henry's Board. I believe they and the management team, many of them are going to stay with us after the presentations are done. The reception where we're going to do some demos and conversations can continue.

So now I just need to do a little bit of business. So I've got the safe harbor statement up here. So for today's presentation and any future use of these slides, including the appendix, which we will not be presenting today, but is available to you on we're going to be talking about non-GAAP measures and utilizing the safe harbor statement on the screen.

So we've got a full day. I'm not going to speak very long. We've got 4 presenters who are going to provide a lot of insight into Jack Henry's operations, a financial outlook. And in the middle, we're going to take a short break, where there'll be some refreshments. We're not going to take questions at the end of every presentation. We prefer to take them at the very end of the day. And then if you'll join us at the aforementioned reception, we were going to do demonstrations of 6 current products that I think you'll find interesting.

And with all that, I'm going to get out of everybody's way, and it's my pleasure to introduce Jack Henry's President and CEO, Greg Adelson.

Well, thanks, everybody. As Vance said, just a pleasure to see all of you and to see this large of a crowd. We were really excited about trying to do this. We talk a lot about culture at Jack Henry. And for you, you get a chance to be at 1 of our offices and to experience what 1 of our offices looks like and the people and the culture that we have here. So really excited about today. So I'm going to kick some things off, really starting off with what we are about. So basically, this company for 50 years, as you know, we are celebrating our 50th anniversary. And for 50 years, we built a foundation that started with Jack and Jerry and continues today. We've added some nuances to that foundation that we'll talk about. And we've added a lot of things that we believe are the key differentiators for how this company is run, not just in the Jack Henry way, but also as compared to what the industry runs today.

But the 1 thing that's been consistent for us over the last 50 years is building on the foundation that Jack and Jerry started. So that foundation really starts, first and foremost, with our people. And you'll hear a lot about our people and a lot about our culture throughout today because it is the foundation of how this company was built and how we continue to maintain the things that drive us to new levels.

The second part is that we have never lost our way through the years on who we support. We support community and regional financial institutions in the United States. That's what we do, and that's all we do. And I think from that standpoint, you'll see a lot of the focus and the priorities that you'll see later on coming to make sure that our institutions are successful. And then lastly, we've created a different kind of mindset around how we do industry-leading customer service and how we support our clients. But it goes back to 2 founding principles that Jack and Jerry started with our company doing the right thing and doing whatever it takes.

And in fact, I actually added -- actually my favorite quote from Jack Henry back in the day, that our clients are not in business to make Jack Henry successful, we are in business to make our [indiscernible] successful and that's something that we remember every single day as we try to move this company forward. The part that we've added to it. So in 2019, we actually wanted to add a little bit to the foundation we were working in a more remote environment because if you can remember right around the corner, COVID was coming. We were already 30% remote, but we wanted to make sure that we manage this company and led this company with 4 key tenets.

And those tenets, you can read are transparency, consistency, collaboration and communication. And it isn't just about how we led our company with inside. It's how we led conversations with our clients as well in that exact same manner. And again, today, those are big foundations for us to continue to move the company forward. Last year, we added kind of a nuance to that called the Jack Henry Way. And so if you think about the Ritz-Carltons and the Nordstroms and others that have great service reputations, we wanted to build something that was around that same type of mindset. So again, you can see here that everything of the company starts with our people, but making sure that our people are successful, have a chance to grow.

It creates an atmosphere to where we continue on that service level that we support across the industry, which, again, is far superior than what is happening with the rest of the industry today. And we continue to elevate in that manner. And then ultimately, it's about results. So nobody at this company, nobody in this room cares about anything on a page other than to see the financial results and the sales results. So ultimately, bringing the people, the service reputation allows us to have the results that we've been driving over the last couple of years. So 1 of the things Jack and Jerry were pretty adamant about was building the foundations for our success and it really starts with these 3 pillars. We've talked about people. As I said, we're going to talk about our people a lot, but we believe that if we take care of our associates, our associates are going to be motivated to ensure that they provide that industry-leading customer service. And as you can see, over the history of our company, we have maintained a 99-plus percent client retention rate minus M&A, but we have maintained 99% plus client retention because we make sure our associates are motivated and they do provide that level of customer service.

And then ultimately, for our shareholders, we've continued to bring back positive turns, 22 years, consecutive years of dividend increase and increasing our shareholder return. So kind of on that subject, I'm going to take just 2 quick slides on fiscal year '26 because nobody is here to talk about fiscal year '26. But I do want to give you an opportunity to kind of go back and understand that the foundation of what I just talked about helped us build the success that we had last year, which, by the way, in our 50th year was a historic year, both from a financial results and sales results.

So as you can see, we finished the year at 7.3% organic growth. That was on a basis of a guidance that we gave back in August of that year, 5.8% to 7%. You can see the basis point margin growth that we had of 92 basis points, again, on the basis that we've provided over the last -- now our fourth year is fiscal year '27 of 20 to 40. But that is the third consecutive year or that was the third consecutive year that we beat 60 basis points of margin expansion, again, coming out of the gate at 20 to 40.

And then return on invested capital. Again, at 23.2%. I think all of you know in this room, anything over 20% in this industry is really, really good. So again, we really outperformed what our expectations were there. And then same thing with free cash flow and then our GAAP EPS growth of being double digit for 3 consecutive years in a row as well.

And then on the sales performance. We talked a lot about our sales performance. And I do want to put a couple of things in your head to make sure that everybody fully understands because when we report competitive core wins, it's much different than what you see in the rest of the industry. So 58 competitive core wins included 52 logo changes and 6 de novo. So 6 of those were brand-new institutions that were coming in, and so we won't count those as competitive wins, but we did have to win against our competition, but there are not logo changes. But 52 of them were.

What isn't counted in that number, which is counted again in a lot of our competition, is the fact that we had 36 in-to-outs, meaning that 36 of our customers move from an in-house environment or on-prem environment to our outsourced environment in either Symitar ease or our banking outlink environment. So 36 of those. We also had 14 institutions that moved out to out meaning they moved from an existing Jack Henry platform. So let's take our 2020 core or our core director core, and they moved to our Silver Lake core. So 14 of those.

We also had over 40 institutions that moved from Jack Henry to Jack Henry and a merger. All of those numbers are not calculated into this particular. So if you throw all those numbers together, you're up to about 125 to 130 opportunities that this company produced last year with their sales team. 14 of those were actually multibillion-dollar institutions. And I've got a slide later that I'll will show you why that level of significance. But 14 were multibillion. And as it states here, we've had 45 of those over the last 3 years. And again, that's a big deal. Not only did we get 14 of them. We happen to win the largest deal in the history of Jack Henry from a banking perspective as a new deal, a $9.2 billion bank down in Houston, Texas, who decided to come to Jack Henry after working with 1 of our competitors.

And you're going to learn the reasons why, as Ben goes through his presentation on the things that we were able to show them that weren't just a PowerPoint or an item that we were going to do in the future. It's something that we were already doing and that really got their interest. And you'll see a quote from that CEO later on as well. And the other big metric is something that we started last year to really drive the fact that we needed to focus on bringing more digital and card deals along with our core wins. And so we challenged our sales leaders to be much more focused. We challenged our operations teams to build out the feature parity, and with a lot of work over the last couple of years, we got to that point.

So 59% of our wins last year were what we call trifecta wins compared to 39% the year before. You hear me on our calls talk a lot about our key differentiators. So what we talk about is culture, service, innovation, strategy and execution. So really, the next set of slides is to show you why we talk about it as a differentiator and some examples of where we see and what our customers have seen or prospects before they became customers see as truly key differentiators. So if you think -- I talked about these 5 already, but we focus on these 5 because we believe these 5 are truly opportunities for us to look different in the market compared to anybody that we compete with.

So I'll go through each 1 of them with a couple of examples. So I mentioned earlier about our culture and being in this office where we have a large contingent of associates in the Dallas-Fort Worth area. And so we bring a lot of folks in, we do a lot of surveying. One of the things we do is we survey our associates literally every single day because every single day, I send out an anniversary e-mail to everybody that had an anniversary. So most days, it averages about 30 people. But at the bottom of that e-mail that I send out and I personally send that out. Each 1 of them has a survey that they fill out a very short one. So we truly get instantaneous feedback from our associates on a daily basis.

And then once a year, we do an annual survey as well. So we gather much more detailed survey that goes out and covers a lot of different grounds. But these are just some of the results that happened in fiscal year '26 from the survey results. So again, 95% of our associates believe in the Jack Henry values, 86% believe and trust the leadership team and the executive team, 85% believe that they belong or feel that they're included as an inclusion component. Our average tenure has actually gone up. So when I took over a couple of years ago, it was a little under 10%. But right now at 10.6 years, our overall attrition rate is down to less than 7% across the organization, and that includes a call center of roughly 400 people.

And if you kind of look at that as the final marking here metric, 88% of our associates intend to stay at the company. Now don't get me wrong. If we have associates that are not performing, then they're not here. We make sure that we hold people accountable and we move things forward. But these are the people that we're treating the right way and when we treat them the right way, they want to stay at the company. As a byproduct of that, we win a lot of national awards for Best Places to Work. I won't spend any time reading these to you. But the reality is in the cities that we work and nationally, we win a lot of these. And again, they're very intentional as part of our culture.

Now I'll move on to service. So in this particular slide, there's really kind of 4 different monikers here. There's 2 quotes, and you can read them later. I'll kind of hit the highlights of a couple of them. But 1 of them is from the CEO of Wood Forest Bank. And basically, what he said is that innovation that keeps our clients competitive, that's what I talked about earlier. And he said, Jack Henry stood out as a clear choice because of its modern integrated platform, open architecture and public cloud native services. It's a forward-looking company and we're confident it will help us operate more efficiently, strengthen our digital capabilities and deliver the experiences our customers expect.

The 1 on the bottom left there is from a Credit Union CEO. And it really talks about something that we have talked about at the company for a long time. We are the most open platform, and we have been for many, many years. And why is that important? Because when you have 300 or so products and services, you're not going to be the best in 300 or so products and services. So we're going to allow the latitude for our clients to pick and choose who makes sense for them. We will integrate to that particular solution set and will allow them to have that level of flexibility. Two things happened there.

One, we get a client who is extremely happy and wants to stay with us from a core perspective and buys other products that do make sense for them. And two, it challenges our operational teams to get better, to make sure that they're building the right products to make sure that they have an opportunity to be successful. So this particular CEO just talks a lot about what we were doing in our open platform and allowing them to integrate to third-party solutions and enabling their members to have the financial services. They rely on while easily adding new capabilities as needs change.

In the top right-hand corner there, that's really a quote from the Fintech breakthrough group. You'll find out that our tap to local solution that we created, we'll talk a little bit about in my presentation, we're going to do a talk a lot more in Ben's, actually was voted as a small, medium-sized business payment solution of the year. And so that was something that they talked about the solution itself, and why they thought it was kind of redefining how small business payments are operating in the country.

And then the last 1 is we have several associations that we work with. One of them is the Independent Community Bankers Association, ICBA, they sponsor a lot of our products in with community banks and credit unions. And this is them talking about our financial crimes product, Financial Crimes Defender and the things that they see as differentiators in the space as well. And then ultimately, it comes down to how do our customers feel about us. So 1 of the things that we do a lot is we survey our customers both from an annual basis on their core anniversary date. So every single year on their core anniversary date, we get feedback from the executive level on how we are doing across the organization at a whole bunch of different proof points.

But the other thing that we do is that when we do have a case open up, the person that's submitting the case actually has the chance to respond to a survey if they [indiscernible] and to respond on how that survey or how that experience was with our team and overall from a customer service standpoint. What I'll point out here is that a 4.61 customer satisfaction with the customer service experience is based on a 5-point scale where 3 is meets expectations and 5 is extremely satisfied. So we averaged a 4.61 and a 4.75 for the customer service rep themselves.

And so again, 1 of the things I like to point out is that I don't know about you, but when I do surveys, I typically don't answer the ones when I'm happy. I usually do the ones when I'm not. Our customers take the time to respond to our surveys because of the level of satisfaction that they receive. So again, this is ingrained into all of our customer service reps, but also all of us, myself and everybody on my leadership team takes calls when we need to proactively or reactively.

Innovation. So culture and service has been a part of our company for 50 years. Like I said, it goes all the way back to Jack and Jerry's days of starting this company. And really innovation was a big part of how this company started. It was 1 of the first cores ever built, and actually, still today, we are, of the big providers, the only 1 that's built a core. And so I think that's extremely important to understand. But we're not finished. We have a lot of things that we're working on that you'll see between Keith and Ben. But we also just have a lot of things that we're building outside of what you'll see today.

So we're continuing over the last several years, we've been investing 14% to 15% of top line back into our products. And so that's really kind of the general expenses that happened in the technology side. That's our cap software development, that's internal use software. It's an amalgamation of those 3 components that make up this 14% to 15%. Again, you can see on the other side of the slide of where the key focus areas are. And again, you're going to see some of the examples of this and what we've been building through the years today, either in the session or as demos later on after we're completed.

So the 1 thing that we want to emphasize today, and there are several, but 1 of them that Ben will emphasis that the Jack Henry platform is not just a digital core. It's actually the instrument that drives all the innovation for our company. It is different than any of the other digital cores that you've seen out there in the space today for a couple of reasons. And again, I don't want to take Ben's thunder, which I think we all know that nobody can take Ben's thunder. So -- but the reality is what you're going to see today are the things that we did that were very hard to build out the differences in our digital core. And 1 of them, in particular, is the integration to our existing cores.

So our digital platform not only houses the core components that you will see today, but it houses all of the innovation, the SMB strategy, our stablecoin tokenization deposit strategy everything sits on top of that platform, and it's all fully integrated and runs through our existing cores, which creates a really simple way for our customers to adopt that technology and move forward. The other thing is, is that it's fairly sophisticated on both its user experience and its user interface. And so it's the only new core, only new platform that you can actually operate from a mobile phone. You can use any device, as we like to say that you can purchase at any of the electronic stores.

But basically, you get the same optimal experience on whether you're using it on your laptop, an iPad, a mobile device, you're able to do that. And again, that's very unique. All powered by 100% native web components and then the other part is, is that this is extremely important these days. It's fully ADA compliant out of the box, which is important for a lot of our customers. You're going to see this slide really brought to life with the demos and the things that Ben is going to do. But this really serves as kind of the impetus to what I was talking about earlier, where the digital core itself sits on top of the foundational core fully integrated and allows all of that innovation to be built on the platform.

So whether that's card utilization, mobile utilization, payment utilization through different rails, all of that's built on top of the platform. And so 1 of the things that we'll be talking a lot more about lesser today, but more in the future is about our focus on tokenized deposits and stablecoins. I mentioned on a couple of earnings calls ago that we had several clients that were ready to go live with USD -- moving USDC, and we have -- we're actually waiting on the regulators. They're supposed to be. I don't know whether it changed on the vote on the Clarity Act today. I don't know whether that happened or not, but -- so we need some clarity from the Clarity Act to kind of continue to move some things forward.

But also there's a ton of use cases that this particular technology can be utilized in. So whether that's cross-border payments, treasury payments and, of course, liquidity oversight, but you'll see how we're taking this technology and building it into not just the platform but also to other products that have been out there today. So you'll see what we're doing with our Victor FI acquisition, our treasury platform, things along that line, where we're building more and more feature sets into the overall platform itself.

Talked a little bit about TAP to local. So again, something that we have been extremely focused on. We've been in partnership with Move on this. We actually got live in roughly 7, 8 months in total from a total from a certification standpoint to building out the technology. If you remember 2 years ago at this particular event, we talked about the rollout and we talked about what we were going to build as part of that particular session, and we went and did it all. And so now we are out. So roughly 1,000 of the Banno clients have the access to it. We have roughly about 900 that are truly live on the tap to local product. Ben is going to do a demo, show you some more of that stuff in live and then, of course, upstairs after we'll do a lot more demonstration and you can ask a lot more detailed questions.

I mentioned earlier that it was the FinTech breakthroughs Product of the Year, and we're proud of that. But again, the speed that we were able to build this and the sophistication of the product, which includes 2 patent pendings as well on some of the technology that we built. So now we'll move into strategy. So when I took over the chair 2 years ago, this is actually a chart with a couple of updates that I put together as part of my starting out as far as what I wanted to articulate to the team. And again, it's kind of starting at 1:00. Everything starts with our people. So making sure that we did not lose the culture that was built long before me and maintained by the CEOs before me.

That was extremely important but also just making sure that we double down on the innovation that we're doing and hence, what we're talking about or what we did talk about on innovation. I am a big believer that it doesn't matter what you do or say if you don't have execution. So I don't care whether you got a great strategy or you've got a great level of innovation. If you can't execute on what you say you're going to do, it really doesn't matter. So we spend a lot of time. Shanon, our COO and myself, talk a lot about execution, and the team is doing a great job of making that happen.

Our SMB strategy, what you see today with tap to local and rapid transfers is just the beginning. We have a whole host of things that we'll be talking about and some things that we've already built that we'll be releasing here in the near future and maybe even just a little surprise on something today. And then ultimately, Keith is going to talk a lot about what we've been doing with AI. So AI is not only building efficiency for the company, but it's also helping us deliver better products, more products that we think will be more highly penetrated. Things along that line as a big driver.

And then delivering our platform and our components along with other solutions upmarket. So I talked already about the mill wins that we had in the above $1 billion this year. I'll kind of bring that back to light here in a second. Security and compliance. There isn't anything that you can do in this industry when you're supporting the number of clients that we have where security and compliance can't be top of mind. I'll give you a little hint of that in kind of the frontier model component here in a second. We talked a lot about evaluating kind of low-margin, low-growth businesses that we needed to either look at sun setting or what we call end of lifing or potentially even selling off and we have several of those that we've been working on. I'll give you an update real quick at a high level, but that is still a focus of ours, process takes a little more time, but it is definitely a focus of ours and has been for the last couple of years.

And then ultimately, it's about doing what we say we're going to do. I think 1 of the primary reasons why we continue to win is because we have proof points that we're doing what we say we're going to do. And I'll show you a couple of examples of that as well. So I mentioned this several times. So we're winning larger deals. So this gives you a depiction of where we were the 3 fiscal years prior. So starting in fiscal year '21, '22 and '23, we won a total of 23 new multibillion-dollar institutions. The other thing that's important to note of those 23, most of them really were around $1 billion, $1.5 billion, $1.8 billion, maybe $2 billion. They really didn't start to creep up to the $5 billion, the $7.5 billion, the $9.2 billion that we won. And that started to happen in fiscal year '24 through '26 of which we've won 45 of those. We've won several $5 billion institutions during this time frame, a couple of $7.5 billion and $8 billion. And then, of course, the 1 I referenced already, the $9.2 billion Woodforest deal.

So as a byproduct to that, in a market that is continuing to decline with banks of all sizes through M&A, Jack Henry's market share has actually grown in both the banking and credit union in the above billion-dollar space. So as you can see, we now have a combined market share of 32%, both banking and credit union in the above billion space. And we grew almost 5% on the banking side of our business and almost 4% on the credit union side of our business, again, in a shrinking market during M&A through the wins that we've had over the last several years.

So we bought a company back in September of last year, so roughly a year ago called Victor FI, which we've now called renamed Jack Henry Payments Orchestrator. This particular product and solution set is extremely important to us and some things that we're doing, again, with the platform, what we're hooking in, some of the functionality into our treasury products. But it was, at the time, the owner [indiscernible] solution set that was out there. There has been another company that's now put -- bought a company or created a relationship with a company that does do direct to core, but it's mostly on the card side. It isn't on the full payment side that we have in place today. But again, this is something that we're going to continue to double down. We've created a really strong pipeline, both in the banks that are interested and the fintechs that are interested because we're bringing -- we're kind of a matchmaker in this world. We're bringing fintechs and banks together to work together in the banking as a service type of mindset.

So here's just a quick things that is important for the financial institution itself. Obviously, all of our institutions are looking for deposit growth and noninterest fee income. So those are 2 of the biggest things. And then there's an opportunity here for lower cost of funds. And again, we have a whole team, and we have a sales team that's fully dedicated to just this portion of our business and opportunities. And then ultimately, it comes down to execution. So as I mentioned earlier, I'm a big believer that if -- like I always say, and it's not something that's rocket science, again, strategy and innovation without execution is meaningless. And so nobody cares about what you're talking about. They only care about what you did. And so that's really where we've been focused.

So this is a depiction of something that we started in actually 2020 by the time we got it done, the first road map that we showed was in 2021. And in 2021 across our organization, we had no consistency on how we build road maps. We had no consistency on how we measure our success, and that's something that we focused on. And so when we put this very first chart together, and I was happened to be COO at the time when we did this, we were only hitting at 69% of what we said we were going to do for our clients. And there's nothing more frustrating for our clients to have happen is to believe that a company is going to build something for them and it not get done in the time frame that they said it was going to get done because they're banking on the things to be at that level so they can go make their own decisions.

So we put this into place, and we put it into place for over 60 different products across our organization, all in a consistent format, and we actually show this to our customers every 6 months. It sits out on what we call the 4 client portal, which is only available to our clients. But they have the ability to go out and look at these road maps and see what features are planning to be accomplished over that next 6 months. One of the reasons that we did 6 months is that the world is changing very fast. And if we're going to hold ourselves accountable, then we need to make sure that we're working in increments that we can actually execute in.

Now we have other road maps that are longer term, and we share those and we do joint road map planning with our customers and things along that line. But this is what we would say we were going to do across those particular product groups, and it's all of our big product groups. And so as you can see over the last several years, this last iteration, which was in July of '26 because we show it in August time frame in February. But in July of '26, we hit almost 90% of what we said we were going to do. The 6 months before that, we actually hit 94%. So you can see the evolution of our time of that. I think anything over 90% is incredible.

And again, if you talk to the consultants in the industry, they'll tell you anything over 80% is better than what most of the companies in our industry do. So we track this very thoroughly. We hold our teams accountable and you can kind of see the amount of throughput that we have with 650 or so different features that are added each and every year. And then I mentioned earlier about product rationalization. So the rationalization component of this, again, is important for us. If we're going to talk about focus and priorities and execution, we can't be spending time on things that truly aren't going to move the needle for our customers. And again, if they're not moving the needle for our customers, then they're not going to move the needle for us.

And so over time, a whole host of things have been built. Some of them maybe shouldn't have been built that is what it is. Other things are where they are as far as their maturation process or maybe they're kind of the laggard from a standpoint where we've built something better, and we need to just kind of get rid of that and move them to the new platform. So 1 of the things that Shanon has been highly focused on over the last couple of years is making sure that we do the right diligence on these particular initiatives. So a whole host of things that we go through to evaluate those products and kind of the -- should fall to the in our product market.

Again, we got 300 products probably too many, to be honest with you, right? There's just only so many things that you can be really, really good at, and that's what we're focused on. So, so far in the last 2 years, we put 18 products into product retirement. Our process, again, like what we do with everything with our clients is a very fair process where we give them anywhere from 24 to 36 months to move off of that particular initiative. We either help them move to another Jack Henry solution, or give them enough time to find something else. And each of these have kind of gone through their level of innovation and evolution. But again, we're going to continue to double down on this. I expect this number to continue to increase.

And then there could be some that are candidates for some level of divestiture. All of these solutions are very small. You would never even know any of the names, that's how small they are. But the reality is they take away focus, they take away dollars. And again, for us to get where we want to get, this needs to be part of the priorities. AI is a big part of what we've been building over the last several years as well. So again, Keith is going to do really a good deep dive into this. But we've been focused on AI for 4 years. We built our governance framework and something that I think is very unique is that we had a really good collaboration between the CTO, our Chief Information Security Officer, our Chief Risk Officer and our COO, 4 key leaders in the organization that spent hours upon hours building out a framework and getting to a point where everybody felt comfortable which isn't easy.

And we did it. And so as a byproduct to that, we've been actually very active utilizing AI tools over the last several years. Again, Keith is going to talk a lot about that. But the utilization of almost 100 tools that we have in play today that is allowing us to be very successful. So as of today, and I mentioned this on the last earnings call, 22 of our products are with AI are in production today. Some of them are built into existing product sets like Financial Crimes Defender, some of them were in Banno. Some of them will be -- have the capability to be monetized. Others are not going to be monetized. They're just going to help the penetration of the product itself, which allows us to continue to grow in that particular group.

We have another 20 or so that we're planning to release in the next 6 or so months. Again, Keith is going to give you a taste of some of these. He's actually going to show you some of the things that we have built. But we've had things that we do within the organization that's extremely important as well. So you can see that as of today, we have 30% of our associates that have been trained on AI. So we have 9 AI coaches. They spend a lot of time with our team, helping to build the skill level in the -- and honestly, just the confidence to go out and be able to work with vibe coding or whatever the key things are. 85% of those folks that have gone through the training said that immediately they felt more comfortable with the skills that they learned that will allow them to go out and be successful building out whether, again, it's small vibe coding initiatives or other things. But 85% immediately that week provided that feedback.

But some of the things that we've seen already where what -- an example there around 2:00, where it says 90 seconds where it used to take 40 days to actually review some things in a previous process. Now they're able to do in 90 seconds. We have 3x the daily capacity in some of our areas related to code development. So we've had some groups that have really taken off in some of our areas and others that are kind of getting up to speed, but we've seen as much as 3x. So projects that maybe would have taken us 3 years to do, we're able to do and say, a year, 18 months. Our mantra with AI has been very direct, which is, if you look at our company, we've always been a company that tries to again, back to people, doing more with the same. That's really the mantra.

And the message to our associates is you're not going to lose your job in particular because you're -- because of AI. You're going to lose your job in particular if you're not using AI to make yourself better and somebody across the -- your room is doing that. So our message to our team is get embraced, get comfortable, use it, make your job better, make us more successful, allow us to do things more quickly. And that's really embraced the mindset of our associates to be much more willing to get involved with AI and use it. So again, a couple of other things there with -- creating some process that used to take some week -- or used to take a week that we're now doing in hours where we create an architecture diagram for a lot of our clients.

And then lastly is really around -- I talked -- I touched on frontier models. So 1 of the things that we've mentioned before is that we have been part of Glasswing, 1 of roughly 100 companies that have access to that. We've been heavily involved again at the CTO level, the CISO level, the COO level and really across our organization. But the reality here is that people aren't able to plug the holes of vulnerabilities at the speed that is needed with these types of frontier models, you need AI to do that. And we've been able to utilize AI in our environment to where things that used to take 72 hours to do, we can now do in less than 10 minutes where we can plug vulnerabilities. And so again, you're going to continue to see us spending a lot of time. We're protecting a lot of assets and a lot of customers. And so this will always be, as I said before, security and compliance will always be at the top of our [indiscernible] to making sure that we keep our customers safe.

So that is a kind of a quick run-through. I was the appetizer for the main events that are coming up. But I think you guys will get a chance to really understand what we have built over the last couple of years, really over the last couple of years. Ben is going to show you where we were at this time 2 years ago to where we are today. And when I talk about the speed of innovation and I talk about what we're able to do on the platform, it will come to life when you get a chance to see all that.

So without further ado, Again, we talk a lot about our 5 differentiators. Hopefully, you got a chance to see those in action. But ultimately, it's about trust and building relationships and making sure that the things that we're doing truly matter and our customers believe in that. So ultimately, our #1 strategy is to enable clients to win in the markets they serve, and that's all that our focus is about. So hopefully, you got a chance to see some of that in a short order, and you'll see a lot more of it here in the next coming slides.

So I'm not able to advance this. Okay. Got it. Okay. So I'm pleased to introduce Keith Fulton, who is our Chief Data and AI Officer at the company. Keith came to us about almost 2 years ago, December will be 2 years. He's got a strong background in core development. He actually was at 1 of our competitors for a long time, ran all their core development. He also has a strong background in AI and things along that line. So we got him to come over to the good team side, and got an opportunity to move forward. So Keith, glad to have you.

Thank you. All right. So thanks for that great intro, Greg, and nice job on your section. All right. So let's dive in and talk about AI. I've got 4 main topics today. We're doing so much in this area. And I know like I'm obsessed with it. Not everybody is as big of a nerd is me, okay, but I never stopped thinking about this. I never stopped reading about it. And maybe you're the [indiscernible] of it, but I'm going to try to make it interesting for you. So you can see what Jack Henry is doing all over the place.

So we're going to talk about these 4 big sections. And so the first 1 I want to talk about is just how are we doing this to accelerate our own development. Greg touched on it a little bit. We're accelerating all over the place. And just in general, how is Jack Henry reaping the benefits of AI. So I've put some tool counts up there for you to see. You'll see in the dev side of those ones on the right, get Hub CoPilot, 1,200 people, cursors 840. I did that slide like 3 weeks ago or 4 weeks ago. We're now up over 1,000 licenses on cursor. We've got developers everywhere learning this. It's going viral, and we're seeing acceleration across the board. The growth is crazy in the way we're using these licenses.

And we're doing that in a smart way. Like with the reason we're using some of these tools is because they're cheaper than other tools. And so we'll get into that and touch on it in a minute. But we're seeing across the board, where we've got broad adoption of this over and over sort of somewhere in the 80% to 90% range. So this team, [ Jae origination ], they've been able to really prove and they've been very good with their metrics and their stats to show 90% acceleration in terms of features per release that they're able to do. So if they can do 10 features for release before now they do 19. And it doesn't take too many quarterly releases before that starts to be felt in the market.

And so we're really seeing this as a competitive advantage for us. Another one, just on a more individual level. Foresight is our product that does check image archiving for Check 21 images. And it's a legacy product. It's not a fancy cloud thing. And even those guys were seeing 3x the contribution rate in their GitHubs than what they were before. I pay again [indiscernible] services not super sexy, 2x documented progress with what they're doing. And then I put this 1 up here, we're doing a monetization effort as we kind of bring together iPay, which is our core sort of bill pay platform and payrolls, which is our recent acquisition, well, it's not that reason 4 or 5 years ago. We're bringing those together to make them into 1 solution for the market.

And that team has been using AI to port all the APIs from 1 language and architecture to another one. And at the beginning of this year, you see that's February of '26, they were doing 5 APIs a month. And then last month, they did 48 of them in a month, and they're on pace to do 54 this month, I think. But we'll see if they get there. But already, that's nearly a 10x upgrade. 10x acceleration in our ability to deliver a new code. So the idea of translating and upgrading legacy code to new modern stacks. I think that there's some sort of hype out there in the market about this. I think we're starting to figure out how to really make that real, and it's exciting to see.

Toconomics. I'll just put 1 slide in here on this, which is to say, we are tracking this very closely. Maybe watches me, like a hawk on this. We are very confident about this and we are not going to waste money on token maxing games and trying to squander billions of dollars on this stuff. We're trying to do in economical ways. We have multiple providers involved. I showed you Google and GitHub and CoPilot, which is Microsoft and then cursor, which is space X AI, we play these competitors against each other, and we work with whoever is the cheapest, and we do not sign long-term agreements on these things, and we're going to ride the prices down as the price war continues on this stuff.

Okay. So that's a quick touch on how our development environment and kind of development capabilities are progressing. So now let's talk about AI inside our products. We have 7,500 FIs that use at least 1 Jack Henry product. We have 1,700 roughly that use our cores. The average customer of our core use between 40 and 50 of our products. And so 1 of the ways to get community banks all over the country to use AI is for us to put AI into our products. And then when they get the next version of the product, all of a sudden, they're using AI too, okay?

And so that's what we're doing here. So I think of this as injecting the Turkey, okay? This is a funny metaphor, but it's like we're going to take the Turkey, which is our product, and we're going to make the turkey more delicious, okay? And so -- we have -- we are taking -- we've built an architecture that allows every product team that we have to use AI and benefit from that in a very standardized way with very little learning curve, we don't have to have each 1 of them go through their own independent safety inspections, about prompt injection and privacy and PII data. We can build that 1 time in a central way. And then each product team can take advantage of that. So this is the reusable injector idea with this. So for example, financial crime is a vendor. So our product that does BSA compliance, it does a lot of things.

But 1 of those is something called a SAAR narrative. So SAAR is a suspicious activity report. And whenever a sort of a bank teller or a banker see something that they think is suspicious for any reason, it's the law that they have to flag that transaction and somebody in the bank has to investigate it. That -- so that each bank in the country has an investigative arm that looks into is there money laundering? Is something shady going on? Is there human trafficking, drug dealing, [indiscernible], okay? So they have to fill out an official form on that. And then they actually have to write an essay about what they found and that SA is called the SAAR narrative. They send those off to Finsen in Washington, D.C. And then Finset aggregates those across FIs and looks at them in aggregate.

That SA is a core and what we've done is we're not trying to automate the investigation human investigators are needed. I think the idea that you can take an autonomous agent and completely outsource the investigation to AI. It's crazy. This is something bankers go to Gel 4 if they get it wrong. We have got to have humans doing the investigation. However, can we save them time right in the narrative? I think we can. Here's a quick summary of this. And you'll see he's using Financial Private Defender. He's entering in some specifics. And I went through and abbreviated the section quite a bit. But it's $13,000 in ACH potential fraud. And now we're going to use AI assistance to help us generate the narrative.

And the AI says, "Hey, I don't have enough data here, who was it that did this? It was an accountant or this is our passport number, and now boom, I'm going to generate a narrative. Then this is just a dummy quicky narrative. But then I'm going to take this, and I can now edit it or send it off for approval and click a button that submit. But there's a human being using it the whole time, okay? So we have this in 5 banks and closed beta right now, and we're seeing some amazing results from this. You see that it used to take them 60 to 90 minutes to do the SAAR narrative by hand. And now it's taking them 10 to 15 minutes. So that's 85% faster that's enabled them to go from 5 stores a day to 25 a day on average.

And now the error rate -- look at that, their error rate went from 10% to 2% for those. So not only is it faster, but they're not sacrificing quality to get that, they're raising quality. They're getting better compliance. And then, of course, if the time goes down, the cost goes down, obviously, okay? There -- I looked it up and there's 4.1 million SAARs being filed every year in America, not by Jack Henry, but just in aggregate, FinCEN is dealing with 4.1 million of these. So think of that as 4.1 million man hours of time that this 1 feature that I just showed you a 30-second clip I could save if it was universally adopted.

So that's an example of where clients already use Financial Crimes Defender today. They already do SAARs today. They already write these narratives today. We're just giving them an easy button and giving them something to a way to do it faster and better. The next 1 I have is just a product call. We call it JHAnalytics. And it's a set of Cognos reports that become reports and dashboards for our clients to use. And so what we did in this case was we built a you see a back panel on the right over there. We build a plug-in for Cognos. And I'll just let this 1 run too, if I can advance it.

Okay, here. So now we have JHAnalytics. And here, you can drop in your chat assistant, and now you have a chat bot and you add it to your dashboard, and now you can talk to your chatbot about the dashboard. And the interesting thing about this 1 is that the chatbot and see the screen you're looking at, they can see the statistics and the graphs, and you can say, what's the most important thing on here, where did this number come from? Or why is this or this? Or I don't understand the definition. And it has a rag database behind it. But since it can also see your dashboard, it has a lot more context about what you're trying to do, and it can give you much more direct advice.

So this is another case where we're not -- it's not getting sent to fence at. It's just a way to make executives more productive and lower their cognitive loan when they're looking at their dashboards. The last 1 I'm going to show you is loan Vantage. The credit narrative that goes when you approve or you decline a loan. You've entered in all this data. You've got all this collateral. We've all been through the process on a car loan or a mortgage, okay? And so we've put in all the stuff. Now we need a document for the underwriter to say why are we approving this loan? And so I put this 1 in here because it generates a word document. And it doesn't just work inside the system, but it actually gives you a deliverable that you can forward around in your organization and keep on file in the way that you normally do.

So we've got AI helping with tasks inside an application. We have AI in a Cognos product that's not even a Jack Henry product that's looking at your data. And we have this that's creating office documents on the side to help you do your job and to help you work with your coworkers on this stuff. Okay. So I showed you 3. We have a bunch of these that are coming. I put the chart up here to just show that between July and January, we have 9 of them or 10 of them coming. So every month, boom, boom, boom, things are coming out. And this is where closed beta comes in, okay? We're we'll go GA generally available at a later point. But with our products now, we've all adopted a standard process that when we have major new products or major new features, we put them in what we call a closed beta, and there's a certain number of clients who are the inner circle who get that first.

And they help us tune it and they help us preview it. We make sure that they're referenceable, and they say nice things about it. So then when we GA it, we know we have something that's really going to have product market fit out there. okay? So those are 3 examples. I have examples of all of them, but I thought I might get too tiresome in this room for everybody. Although I'd love to show them. So if you want to see them, just raise your hand.

All right. So we have the injector, right? The Turkey injector, but that injector turns out to be really valuable. So what if we took the injector itself, the AI architecture and we productize that. So that's the next thing we did was we want to give that injector out to clients, so the clients who are banks and credit unions who have technical teams and building custom solutions or integrations, they want dev acceleration. They want AI features and their stuff, and they have a learning curve. They don't want to all learn Python and Langchain and all these fancy things. They just want to call an API and get a result. And they don't want to think about prompt injection filtering and PII leakage and so on. They just want all that handle.

And so we're going to give them an architecture that does that. And so we built something called the AI fabric. And the first part of the fabric, it's what we call the AI gateway. And so what we've built is a set of restful APIs that allow you to call an AI behind the scenes at Jack Henry. And you ask a question, get an answer. And in a matter of an hour or 2, you can get a credential and 1 of your developers at your banks can wire up and start to build their own chatbot, okay, really easy. And if you want to build a Cognos plug-in or a SAAR narrative generator or were document generator, you can do all that with these APIs. Prompt injection and PII filtering, any kind of sensitive information is already handled for you.

So if you're a CIO of bank, and you don't necessarily -- you want your IT group to start to experiment with AI, but you're worried about safety and risk and liability, just use the Jack Henry APIs. And all that safety stuff is handled for you, you don't have to guess that your IT team is working it out. And then the last thing is it gets more fancy than just ask a question kind of answer, retrieve augmented generation, FCP servers, A to A capabilities for agents to call it other agents. There's a lot of fancy things under the covers. We abstract all that away just into fixed APIs, okay? So our clients love this. We have 3 clients and closed beta with this right now, and they're out there using this banging on this every day. And so this will be GA very soon. But it's amazing to see how the mission of Jack Henry to help our clients win and all these little banks across the country that even in something as technical and this esoteric is AI, we can bring something to market to help them even the playing field.

The second 1 is the crazy [indiscernible] problem, okay? Vibe coding. Vibe coding is a process of using an AI tool to just describe an application that you want and then the AI tool will code it for you. And in a matter of sometimes even minutes, you can get an AI to write you a solution. We had a case at Jack Henry where we had a lady in our procurement department, and she wanted a tool to help the procurement lead and the purchasing manager and the legal lead, keep in sync on who had the meat ball on each particular deal across a list of all the different procurement things. And in a weekend, she vibe coded a map that does that. And she's not a techno person. She's just a procurement person.

And she vibe coded this thing and she showed it to me, and I was like, holy cow, like, that's neat and you're solving a problem. You're solving a business problem for Jack Henry with this. But where is this thing? And she did a Replant.

And so it was out on Repla.com somewhere in some e-mail server. And I got this vision of Microsoft Access in my head. We're going to have all the shadow IT and shadow vibe coding things. We've got to somehow bring some sunlight to that. So those could proliferate kind of like cats and so we have to be -- we have to help those people do that. We need to share innovation. We need our Jack Henry associates to be able to solve their own problems and scratch their own niches and the idea of using vibe coding too help people build solutions that they don't have is an amazing idea. But if we don't have control over them, it could be an unmitigated nightmare.

And so -- this mic is rolling. So what we've done -- well, by the way, our clients have the same problem. What we've done is we built this thing, which is the AI garage. Jack Henry itself, we've always talk about Jack and Jerry, and they started in this exact car mechanic garage when they started the company. And so -- and kind of to honor that, we decided to call this thing the AI garage. And so now if you vibe code something in [ Repeat ] or in Gemini or in love ball or whatever you use, you can export it out of that tool and import it into our garage. We will scan it for security. We scan it for secrets. We scan it for vulnerabilities. We try to make sure all that kind of stuff gets done. We then containerize that in a dock container and we deploy it to GCP and we put the code in GitHub under a name that you choose, all the Jack Henry domain.

So now we have security, we have control of the code. We know exactly what we have where. We're hosting it in our tenant. It's not being hosted at a random silling replet. We have all of our normal controls around our GCP security. We're all there.

[Audio Gap]

We can see from the way previous people who've left to behave how the new people behave. And so what if we gave a weekly sheet to the derisk team of who they need to go call to try to save every week. And what if they gave them, it could be that they just need to apologize. Like what's going on is some happening did something go wrong? Or it might be, hey, if you'll bring your direct deposit back to us, do that for 90 days, and then we'll give you a $200 extra for switching back to us. Or it might be, we'll give you a break on your car loan if you'll stay with us kind of thing.

So these are offers that a bank can make to be proactive. And what if we could get 8% to 12% turn down to 7% to 11%. Let's cut 1% off of it. But all of a sudden, we're going to save $1 million to $1.5 million in revenue loss avoidance and we're going to save 10% of the replacement cost, which is $2 million to $3 million. That's overall now $3 million to $4.5 million a year just because I built a churn sentinel in the data science App Store. This is where we're taking data out of the realm of just better and better dashboards into actual business execution and strategy. Now this is going to affect the way banking gets done everywhere. Big banks, giant jumbo banks, they're doing -- they've got teams that do this. Community banks don't. We have to give this to them. It's going to be a game changer.

So the closed beta for the data science stuff is in January. Each machine learning app will be priced separately. Some will be very cheap. All this could be very, very valuable. We'll see how that goes, instant activation. And then membership in the data consortium that I mentioned at the beginning is required, if you want to benefit from the data consortium, you have to be a part of the data consortium. That's typically called a give-to-get model, and that's how we're going to run this.

Okay. My last topic, which is my favorite topic is agentic okay? So I put the Agentic-AI future of Jack Henry. Is that grants enough for everybody? Okay. This is where I think we're all headed. Okay. The current state, if you just think about the architecture of any software system today, it looks something like this. You have a user. They're using a web browser on a laptop or wherever that web browser is using APIs, and then the APIs are causing a system of record, the back-end system to do work. And the system director could be very simple, and that can be very, very complex. It's all kinds of stuff that could be happening there. This is dumbed down to the end degree, but this is how they mostly work. And as I mentioned before, there's a thing called vibe coding, which allows amateurs to just make whatever they want with coding. You don't need to be a coder anymore to code.

And so it's a little bit like if you've if you tried it, it's a little bit like conjuring the rapid out of the hat, which is I think it feels like magic. And so if you haven't tried it, you should definitely try it. It's easier than you think. Give it 5 minutes you'll do it, it will be amazing. Okay. So what's that going to do? That's going to create a whole bunch of different front-end oops, I'm adjusting something. It's going to create a whole bunch of different front-end possibilities. But guess what? Jack Henry, the system of record and the APIs, they still are what they are. You still need the banking core. You still need Financial Crimes Defender. You still need the new platform. You still need the services that Vana provides under the covers behind its web services, okay?

So APIs and systems of record are what matters most. And the good news for Jack is that that's what the business that Jack Henry is building those. The next thing is that you can have agents. And so I think of that as a little bit of sort of the magician conduit, it's more like a remote control car or you just twiddle a button and then the car does what you say, drives away. So what that does is now I've got a human on their phone, talk to an AI bot. And now the AI bot is calling APIs and the APIs are still calling the system of record. So what happens there? And all of a sudden, it's too much work to launch a browser. I just want to talk to my bot and my bot will do the work. So the UI has become an impediment for some users, not all users. This is an overnight process. This is a 10-year process. I'm just trying to predict the future here. Where is this all headed?

APIs will agents will not be one-to-one with apps. So once agents are using APIs, there's no reason why they shouldn't use multiple APIs. So what that gives you is something like this, where now you're talking to your phone, on your agent on your phone and then your agent is now calling multiple things. So now the new SORs don't have to be comprehensive, agents become the glue which is the kind of orchestration layer between all these things. So I did a non-Jack Henry example just to illustrate my concept because it's getting a little bit abstract. But I said go through my sales force opportunities and compare them to my inbox and outlook, build me an Excel spreadsheet of anyone who's asked me a question that I haven't responded to or anyone who hasn't corresponded with me in the last 30 days.

Now I go through all the people I haven't corresponded with had a comment in the spreadsheet to the right of each row with 2 relevant ideas for messages, okay? So now I'm using Salesforce, Excel and outlook. And in 2 seconds, I wrote a prompt that I could run every day and have my to-do list of I'm in sales. He just don't always need humans though. I had a human texting with the agent on a phone on my previous examples, right? But kind of like what triggered that light when that [ atreticame ] at, it was a motion sensor. We're going to have similar things in our systems. And so I think of it as triggered by scheduling, triggered by an outside event like a male or it could be the A to A thing that I was describing earlier, where agents are calling agents.

And so in that world, the humans become less relevant. So when we talk about automation of the banks or automation of any industry, the humans eventually get less relevant. So how about this, I have a trigger by timing example here at the beginning. Every weekday 9 to 5, check all 3 of my banks with the highest savings rate and transfer any balance over 5,000 from all my accounts to the highest-yielding savings account. You could write that quarry in 30 seconds, every 9 to 5, it runs, it calls all the APIs. And the banks are now suddenly in a sweep competition based on interest rate and they don't even know they're in it. All they're doing is giving up interest rate and balance data. They don't know what's happening.

Okay. That's how powerful these things get. The other 1 I made on a vet-driven basis rather than timing is every morning at 8:00 AM, check my inbox for e-bills and notifications, use my online banking to pay them if they're under $300. It's over $300. It's going to be a text, transfer money from my savings to replenish the checking account. Okay. Again, that's a $0.03 thing that now takes care of my bill pay for -- what are both of these doing though? Both of them are calling Jack Henry APs to make that work. The inquiries, the higher savings rate balances, the transfers, the bill pays, the transfer back to replenish the money. That still needs Jack Henry behind the scenes to do it. So we love this model. And I think it's going to be interesting to see how it explodes.

I made a business 1 for Silver Lake for a picker as well. Every morning, 7:15, go through all the exception items, using Silver Lake, check the customers previous for each one, check the customer's previous transactions to see how we handle prior exceptions, check their history in Synopsys. Synopsys is our CRM tool for those who don't use Salesforce, deciding the exception disposition of fees according to our bank policies and stage them up. And then if you recommend waving the fees, put a note in Synapsys and the CRM tool and stick an e-mail to the customer in my draft folder. I don't want to send it. I need a human in the loop. But now just with a couple of trumps I've changed the way we do exception item at the bank however.

So what you end up with here, if you tile this together is you have humans, but you also have all these events talking to agents they're running anywhere with agent APIs, system of record. We think Jack Henry needs to be the key enabler in the middle of all this. So what do we do based on this? How do we execute on this? So now I've got a little primer on what Agentic AI is an analogy with restaurants. So the way we've always done it before is that we had AI inside our products, and I demoed 3 of those examples for you. It's very comfortable. It's like this guy going into the McDonald's to order.

But in the future, we need to be a drive-through. We need people outside the restaurant to also be able to access our features inside the restaurant. And so here, I said millions of independent agents, it could be Anthropic agents running its space X data centers, open AI running at Azure. All of them are running anywhere, and they're all calling our APIs to do work. And you might say, well, I'm a fancy restaurant. I don't want to drive through, okay? But guess what? You're going to need drive-through. And I usually analogy sometime of Shake Shack. Shake Shack has a policy of not having drive-throughs, you're supposed to go into a Shake Shack. But if there's a Shake shack on the left, there was an in and out burger on the right, which 1 has 50x more cars and more customers than an out burger does. People route around Shake Shack because too much work to go there.

And so if we don't offer drive-throughs in our APIs then people are going to route around us. Luckily, Jack Henry has had a strategy of being open and having APIs and being leaders in third-party integration for years. And so this plays to our strengths. So I think this is going to be a fantastic time for Jack Henry. We're harness agnostic. Again, and harness is 1 of those words that is a little bit technical. But if you think about Clacowor, copilot, Hermes, [indiscernible] Agent Force, et cetera. Everybody is trying to be the harness. And I've spent most of the 2025 thinking we needed to build our own harness and be a harness ourselves.

But now I don't think that's true. I think we are the drive-thru. And so for us to say, well, we only serve pickup trucks when we only serve Toyotas, that will be a bad way to run a McDonald's. We need to provide the drive-through, and we need to be agnostic as to who drives up and what they want. And so whoever comes here, however they come. How do the people that the drive-through know what to order. We need to stick a menu out there in or behind the restaurant. And we say this is what we offer, this is what you call it, it's how much it costs, et cetera. This is a function of an MCP server, okay? So there's a lot of tech talk out there about model contact protocol, and there's a lot of esotericsm.

At the end of the day, the people at the drive-through need to know what they can order before they come to the drive-through. And so this is how we do it. We're going to build our own MCP layer to handle all of this for our clients and our products systems of record. The last thing I would say on this is, even though we need drive-thrus, not everything is accessible in the drive-through, is it? If you're the Brink's guy, you can't get the bags of cash from yesterday's receipts, handed to you through the drive-through window. You got to -- you got a park and you got to go in to get the back of cash. And so what we need is a risk framework for what constitutes a burger and what constitutes a bag of cash. And we're going to use that to respect with our APIs that inside the risk framework, not all risks are created equal.

So the verdicts of all this are SORs are what matter. Jack Henry is in the SOR business, okay? The stone tablet here is intentional. Trust is a paramount importance. Our customers and our customers of our customers, trust our banks as the custodians of their money and as a ledger of everything that means anything in the real world. We will continue to provide that to all these people. We're actively working on agentic APIs across our road map. I use this example of the S shafts, making the little dessert there or whatever it is. And he -- that Chef might like those who chefs and he's training them, and he trusts the but nothing goes out to the customer in a Michelin-star restaurant until the main -- the head chef reviews everything. So we always need human in the loop. It's what we do.

And we need to get used to the fact that we're going to have exposure outside our walls. This is the drive-through window side. Every product in Jack Henry needs to establish this drive-through window for themselves so that things on the outside, the agents can get out of what they're doing. So I put all this together into -- I did -- that was a lot of slides for -- without a lot of practical examples. So I put together another demo to show what is it like to chat with Silver Lake. Okay. So here, I'm now in Microsoft Teams, I'm looking up a guy named Humberto Bagrin, and we found is customer ID in Silver Lake. And I'm like, yes, I want you to pull up the account.

And then thanks for a minute and then it shows the account. And look, oh my gosh, there's 40 outbound checks for $1. That looks like testing or structuring of some sort. And then the teller is like, okay, I don't like that. I want you to suspend that account, put a restriction on their block it and then it says done, restriction placed status #6, restricted, okay? That person never logged in over link. They never launched a browser. They never searched a quarry for that. They didn't click a flag. They didn't drop down a box. They just told about what they wanted the bought did it. Now I accelerated that quite a bit. There's a lot of thinking time in there and so forth that we cut out of the video.

But I just want to show you like this is the simplest example I could think of to show you guys what the future is, that we think Jack Henry has headed towards. So I went back to harness agnostic. This is our risk framework that we use. We have L5 is Level 5 risk, the leading data are moving money. That's the Brink's truck example. We're not going to do Level 5. Level 4 is where you get into environment, if you contact outside customers or even data exfiltration, if you combine reading acquiring data with L4 sending data outside you can get into bad combinations. So we're not going to do that. But guess what, there's a lot to do with 1 and 2, 3, Levels 1 through 3. This is a little framework we made to help our portfolio, think about their own priorities.

So what you see here is read on the APIs, rules and statuses, comments, cases and others, reset passwords, update limits and so forth. Those are all yeses, and then I put in the L5 execute transactions as a no. all the way down the line because that's moving money. It's difficult to undo and we don't need to support that. So I want to emphasize that we're not doing that right now. And then the idea is that then -- if we had all the things that are wise and they're working, then now they're like LEGO blocks and we can make composable interlocking sets and then saying, well, we want to carry this and lock that and update the limit on that and put a note there. We can do all that stuff, and banks will be able to take entire workflows that they operate today, clicking all TAV between different tools, and they'll be able to orchestrate that in a single prompt in the not-too-distant future. This is what we're building to. So the last thing in my wrap-up is going to be that's Jack in the middle there.

And 50 years ago, his innovation was that large banks had computer systems and small banks didn't. The largest banks in the country had armies of programmers and mainframe computers the size of buildings in those punch card readers and so on. And the small banks couldn't afford to do that. They were all still ledgers like they were in the 1800s. And Jack was like, you know what, I thought I could build a piece of software. And if I made it configurable. I can make it to where more than 1 bank could run in the same software, and that's how they could afford to run it. And that's what he did. So now it's 50 years later, we're going to revolutionize community banking again with all safety stuff. That's what's coming. We're very excited. There's a mountain of work to do to get there.

But with me and my partnership with Mr. Ben over here, we're cranking on this every single day. That's what I got for you today. Thank you.

So we're running about 15 minutes ahead, but let's take a 20-minute break and come back at about 10 till, and that will give Ben a little bit of extra time, and we'll just start a little bit early. If you're looking for the restrooms, they're going to be to your left as you exit the room, and then we're going to have some refreshments down to the right as well. Thanks.

[Break]

Really appreciate Keith. We're really glad that Keith is here. He and I are AI partners in this new world. So I'm glad you got a chance to hear him. We're not going to waste any time. We're going to get right into it. We're going to talk about platforms in the AI era. So I'm going to kind of pick up where Keith left off talking about what we're building. We're going to talk about the Jack Henry platform. And specifically, what makes Jack Henry different. Of course, Greg talked a lot about a lot of different things that make us different as a company. I'm going to talk to you about what makes our technology different and why that's really mattering and why we're winning new deals because of it.

I'm also going to just talk you through what shipped since I last saw most of you. I know I saw a few of you at SI, and I've seen a few of you at different events that Vance has brought me in to you. But for the most part, I haven't seen most of you since September. So we're going to go through everything we've shipped since then provide an update for you all on what we're doing with business across the board, not just tap to local also Banno business and treasury. So you're going to kind of see our strategy there.

And then I have 2 new announcements for you guys. So all right, Buck love, we're going to go fast. Oh, sorry, 1 more thing. I am going to show live demos. So you're going to see live software, you're going to see the platform in action. It's right here. You're also going to see real live consumer software. This is going to be Banno running on incredible bank. So I'm anymore -- I'm just tired of pure slide shows. We're going to show you some software as we go, all right? So you could see it for real. All right, for real.

So without further ado, in 2020, I think you all know this, we set out to build a new kind of core system. The company had decided we actually needed to do this. There's a lot of different ideas. The market had these new Scicor showing up, okay, and beginning to build direct to digital experiences. At this point in time, back in 2020, we had a lot of early success building out the Banno Digital platform inside the company. We'll talk about that a little bit today. But we want to build a new core. The other thing is long-term Jack Henry has a strategy for consolidation over time, right?

So we've been working on this for a while. The idea is actually we're percolating for 2 years pre-2020. But I wanted to kind of give you a time line for what happened and how we ended up building a platform. We had a vision to build a new core. That was in 2020. In August of 2022 is when -- well, before this, Greg had asked me to be the CTO of the company and take on this project. It was being run by a team, a small team inside the company. And we did that, and what we worked on as a team is, hey, let's realign this idea of building a core to let's build a platform, right? And basically, we work the entire plan, but a big part of building a platform in the cloud with all of the language comes with that is we needed a cloud partner. So we announced the GCP deal.

Big shout out to Google and the GCB team. They've been an amazing partner, absolutely standing partner, for us in this build-out. I can't say enough great things about them. And then we updated the road map. Some of you who were here several Investor Days ago might remember me showing you a 3-year road map. How many of you remember that. All right? We hit every single thing on that road map on time and under budget, all right? So this core is basically done, and we're going to show it to you, all right? So updated road map in 2022. And right after that, we hit ChatGPT era, right? I mean you guys just got to see a great presentation by Keith talking you through where we are in that journey. And -- but I just wanted to articulate the fact that we actually decided to build a platform, be API first long before this happened.

Then back to Investor Day of 2024. I'm going to come back to this in a minute. We get SaaS populists at the beginning of this year. And really, at the end of the day, I think most analysts and have had the good fortune, we've had a lot of inbound inquiry for the management team to meet with the large consulting firms. I just collected a few quotes from Gartner and McKinsey. But the bottom line here is the companies that win in this next age are going to be platform first companies, okay? They're going to be API first companies, cloud native, headless architectures, okay. Those companies are going to establish significant competitive moats, and we are 1 of those companies. But value is going to accrue to people who integrate the stack.

I'm going to say that again, value accrue to people who integrate the stack. That's how this is going to work. Some quick quotes from McKinsey here. So what we're building is a new structure, a new platform around our foundational course to enable a faster pace of innovation. Our customers get a connected workspace to run their financial institution. This allows them to evolve at their pace, at their strategy, okay? The things that they want to do, I'm in the fortunate seat to get to meet with our customers every single week. I love it. It's 1 of my favorite things. And I don't meet anybody who has the exact same strategy as the last person or the last financial institution I met with.

They all have unique strategies for how they want to grow, what the technology they want to adopt and how they want to build their bank or credit union. So the other big thing, you all know this, this is a big part of our message, but being on the Jack Henry stack allows you to avoid a large core conversion, okay? This is a very big deal for our customers. It also is attracting new customers. Greg talked about Wood for us as an example, where they want to be on the Jack Henry stack because they see a world where in which they won't have to do another 1 of these conversions, if that makes sense.

All right. And then like this gives them a chance to launch and evolve new products on the platform, all right? So -- which is a big deal. So now we're going to just dig into what makes Jack Henry different. I did show these slides -- I don't know. I can't remember it was 2022 or '23. But I did show these slides. I want to revisit them. I built these way back in 2022 to really explain what I felt was the problem in the market with Scicor. I just want to say this upfront, I have a lot of respect for our competition in the Scicor market. I just saw a challenge that our customers are going to face if they were to adopt Scicor technology. And again, why did they do it? Just remember, it was for digital experiences. They needed to build new digital experiences, and they felt like they couldn't do this on traditional core systems, okay?

And so we wanted -- they wanted these 4 to build new digital experiences on Scicor. The fundamental problem is there's no integration with the foundational core that runs the bank or the credit union sells and clears every single night and every single weekend. That's the problem. This is the problem in the entire industry, this little guy here, okay? And there's a few other things. And again, there's no shade to these competitors. Most don't have UI/UX, they're headless. Now I want to stop and talk about headless for a second. We are also headless. But we have a full UI, and you're going to get to see that today. And if you want to see more details, you can go up and check out the demo upstairs, okay?

But our thing was, hey, a lot of customers, even like larger customers who have big teams, they don't want to spend their time building out a new UI/UX, even with AI tooling, right? That needs to be fit and finish and ready out of the box for them. But we are also headless. So we have 100% coverage of APIs, and I'm just going to show you this, you can -- I'm sure you won't go look at this for yourself, but if you do want to, all the API docs are here on the open Internet at jackhenry.dev, okay? Everything is here, right? So when we say we're API-first platform first, that is the case. However, we chose to build a UI. We knew we had to build a UI. And the other thing I wanted to mention is, I often say there's so much innovation that's possible for our customers in which there's no AI required.

We're going a ton of stuff in A, I'm going to show you some live demos. You're going to see some cool stuff. But there's a lot of low-hanging fruit for efficiency gains that our customers can get if we just bring really good design into the back office of a bank or credit union, okay? And I'll give you some examples. Every time they bring 1 of these Scicor in, they have new compliance and regulatory and security concerns. Also, generally speaking, they need an additional team to run it, right? So they have the team that's running their foundational core, then they need to run their Scicor. All right? And then at the end of the day, as it stands today, and I think this will change, just to be clear, sometime in the future, I'm not smart enough to know when.

But sometime in the future, these Scicors will be able to settle and clear a bank they -- or a credit union, they cannot do it today, all right? Okay. So my idea is very simple, like super simple. We had built this digital platform inside the company called Banno, you guys know it well, all right? And I was just like, why don't we just build a platform and connect it to our foundation, of course, and make this easy and help our customers avoid a conversion because how this could have gone, okay, is we could have said, hey, we're going to build a Scicor, and we're going to go compete with the likes of thought machine FINSA, et cetera. And we could be sitting here talking to you today explaining that we're now going to go to market and tell our customers that they have a conversion if they want to use the new technology, okay?

How well do you think that would have gone over? Not very well, okay? So we needed to offer them a path. I'm going to kind of Cliff climb you through what that path looks like for our customers and a bunch of stories about customers that are taking that path today. So the idea is, hey, build a platform connected to the foundational core. And if we did that right, with really good integration to our existing core, our customers don't have optionality. And that would allow them to modernize and convert at their own pace. I think everybody knows that conversion is like a really scary thing for a CEO and management team at a bank or credit union. So we needed to break that up and allow them to take that at their own pace.

So this is the mental model. You guys have seen this before in my presentations, but I just do it every single time. So everyone understands this is a foundational core system, all right? We enable the public cloud on top of that foundational core system. This is our wonderful partners at Google and the Google Cloud Platform, okay? Again, like I said, this has been an amazing partnership, full build out, I'll give you some stats on that later. So we enable a public cloud for our foundational core systems, that enables data in AI. You saw Keith give you a wonderful presentation about Jack Henry AI fabric and Gateway, okay? So that fabric and gateway runs on this platform, okay?

So this platform is we -- and I would say anytime you sit down to build something new, you need a little luck, okay? You do need a little luck and we got lucky. We didn't -- I didn't know if ChatGPT was going to happen. I'm not that smart. We wanted to build AI native. We had talked to Google about it, even pre-ChatGPT, that we wanted to build an AI native platform and enable the Google AI stack at the time and that has just evolved to where we are now, and we are just basically natively AI ready, and you saw a bunch of examples of that in Keith's presentation.

So that gets us to kind of where we were in the build-out in 2024. I'm going to come back to this in a second. But right here is where the magic is and where all the hard work is. We integrated this new platform to our foundational course. And a lot of people think like, well, why is that magic been? Well, this is the reason -- this is 1 of the big reasons why Woodforest Bank came to Jack Henry just this year. Because any time you go buy a Scicor, and you realize, "Oh, I got to integrate a bunch of human systems. I got to integrate a bunch of things on my foundational core. Every time that happens, you're now spending a lot of money. And folks have spent millions and millions and millions and millions. I'm not exaggerating. We know the numbers. millions of dollars, integrating these Scicors into their foundational core systems, right? This is a huge problem. What we offer is out-of-the-box integration to our foundational core for every single product that we offer on the platform, all right?

Okay, I'm going to give you a quick example, so you have a mental model for how this works. We've done this dozens of times at this point, okay? Very simple. What you see on the left-hand side of your screen is the Fed. We manage all this orchestration to the Fed. My team runs all the internal integration here at Jack Henry. And what we can do is, on a Friday, we can coordinate with the bank or the credit union stop using their wires module. Our conversion team actually runs a small conversion is mostly automated, okay? We reroute, okay, for the Fed, and now that wires platform is running here. It's not just moving off a foundation of course. A lot of our customers actually use third-party wireless platforms, okay, competitive wires platforms, and they're now moving to our wires platform. okay?

So it's not just coming off of our foundational core. It's also coming from third-party systems and it works the same though, makes sense, all right? So on a Friday, this happens. And our goal, what we say is CEO and CFO should never know this happened. This should be a nonevent at the bank or the credit union.

All right. I'm going to stop and give you a fun story. We actually did 5 of these on the ISO conversion cutover. You're familiar with ISO 20022, it was a big day in financial services for a lot of us, all hands on deck, massive change in the wire protocol, okay? We actually converted 5 institutions that night. One of those was a credit union customer. And the feedback we got back on Monday was the CEO said that was the easiest thing my credit union has ever done. Absolutely amazing, right? Okay. And then the next day, they get a new UI/UX, okay, that they're running their wires on, right? They get a new wire room, they get new functionality that they've never had before. They get some AI assistance, they get a bunch of other things that we bring to the table. But that's not all. Remember, I said, "Hey, we deliver UI-UX, but let me tell you the rest of the story.

We did that conversion for them last year during the ISO cutover. I just met with them again actually just several weeks ago, Monett, the CIO and their head of technology was there. And then what he explained to me is that they had gone in to jackhenry.dev, him and his team, okay? And they had worked with our API documentation. This is a big auto lender. So if you imagine, disbursements for auto lending, okay, the very manual process inside the credit union. And they took our headless platform, all right. And they orchestrated a bunch of automation inside the credit union, and he walked me through that.

Now there's a bunch of really great people at that credit union that can go do other things. okay, at that credit union to provide value, all right? They automated the entire stack. They're over the moon, okay? Because they get a UI-UX, but they still get this headless automation, right? Again, Again, I'm going to make tasers to just say there's no AI required massive efficiency gain inside the credit union. So that's just 1 story of many that we're now seeing on the ground. So obviously, this enables a faster pace of innovation. When I say this, I mean this in 2 dimensions. One is it enables Jack Henry to deliver faster innovation, okay? So all the things I'm building in this fabric for Keith, then the rest of the company goes faster, right? The rest of our company gets -- the pace of engineering and development and product development, all is increasing, right?

So we get a faster pace of innovation because we're building a platform, all right? But then our customers get a faster pace of innovation because they can build, okay? All right. And again, I'm going to say this 8,000 times in this presentation, but without a major conversion, without a major conversion. This is why people are moving to the Jack Henry platform, okay? What I call the Jack Henry full stack, right? Okay. September 2024, how many of you remember September 2024, were at the Hyatt, I think is where we were, all right. Yes. Okay.

In September 2024, I spent a lot of time trying to explain to you all what I call stuff below the willing, right? Engine room stuff like this is what we're building and how we're building it and why. We literally had only 1 module running on this platform, all right? Now we had done a lot of work here, a lot of work below the wild line up to that point, a time. But here's everything we've built in the last 2 years. I'm just going to do this a couple of times in case you missed it. This is like my favorite part of the presentation. We're just going to -- maybe we'll just do this for the rest of the time. Is that enough? All right?

Okay. Now these are actually -- there's actually more than this. I just want to decide to lignite side this later at this. There's a bunch more. But not only that, all that's running on form, both headless and with the UI. Okay. Is that in that core? Can we do it again? amazing, all right. And then those modules can be combined to build new kinds of products. So these are 6 examples of products that we have launched and live with customers in some form, all right? A new ledger amazing, you'll get a chance to see this in a second. We talked about domestic wires 2 years ago, but we now have international. We're just now rolling out international wires, all right? Exception not in processing, you're going to get a demo of that in a second. Tokenized deposits and stablecoin. Yes, Clarity Act just failed. I think that's kind of rippling its way to the markets. Hopefully, you're short bitcoin.

Anyway, but just a reminder, we do have the Genius Act, which is a great beginning for stablecoins, right? But there still is a big fight over how those will be effectively "banked, right" interest accrual and those kinds of things. But we have tokenized deposits and support for USEC and we're part of the open USD efforts. We have a full module that supports that today. We'll come back and explain that later. We have built out a whole new ACH platform, early stages, Phase 1 deliverable. It's now live at customer sites. And then last but not least, because we have a real core a new one, we have deposit accounts.

A couple of things about deposit accounts. Obviously, our foundation, of course, have amazing optionality for deposit accounts. They can -- combinatorially they can put together all kinds of different types of deposit accounts. And that's great. But what we focus on with the platform is building deposit accounts, debt a bank or credit union could not build themselves on their foundational court, does that make sense. So stuff like roundup checking, all right, stuff like that. Things that they would have to go have a third-party either build, do custom with us, et cetera, et cetera, okay? Also, things like stablecoin can now be bundled and combined into a deposit style account then offered, say, to a consumer or a business, okay? All right. So as you hopefully know, Scicor often go to market and pitch customers to launch a new brand, okay? Well, we are doing the same. We now have our first customer live on this platform running a new brand, all right? And the way this works, remember, we built this awesome digital platform. I'm a little biased. We'll talk a little bit more about that later. But Banno actually works natively on this platform works against this new core system and the technology that we've built. And much like some of our competitors, our customers can build a separate go-to-market brand, but they get 1 awesome feature.

It settles and clears and integrates to their foundational core so they don't need a big team to run it. They can run it with their existing team, okay? They don't need new vendor due diligence because we're the vendor of choice. We're the primary vendor at the bank or the credit union. Okay, they don't need a new security team. They don't need new anything. So it's way more efficient to run a new brand on Banno plus platform, okay? Way more efficient like or is magnitude efficient than any of our competitors, all right? So anyway, I'm a little excited about this. Big shout out to hope Credit Union, who is an awesome partner. The brand that they're launching is a new type of brand to go bank the unbanked. Really amazing effort on their part.

Okay. So just some numbers. We are now running active across 2 regions in GCP. The digital platform is now at 16 million users. It's actually a little more than that, but who's counting? I am. I'm counting. I'm sure you are, too. And then we have 1,030 financial institutions. So desks running and really kind of burning in scaling this platform. So it's not like this platform is just like barely having a few users on it. We now have millions of users running through, okay.

All right. So it's not just that we're building, okay? And we're building a lot. You just saw what we built since we last saw you, right? We've also been building and developing partnerships and give our CEO, Greg Adelson, the management team and Erica Pelon, you get a chance to meet her for a lot of work and help in these efforts. But we are working really hard, and I want to -- we announced the move partnership, and we'll go through that here in a bit. But Move is now a primary partner on platform. So everything we built with Move is available actually here on our API docs in a head this way, okay? And I'm explaining why that matters in a second.

But then we have circle, which we've enabled for USDC, we've announced that we're part of OSDC or OUSD and then Visa, MasterCard, big time partners for us. for real-time money movements and merchant acquiring, et cetera, right? So as these partners come on platform, what we do here is the same thing we're doing with our cores is we integrate -- deeply integrate to these partners, okay? All right? So literally, somebody can come along and put an agent on the system and do exactly what we do in Tap to Local against what we built for move. Does that make sense to everyone? All right? So we're both had less, and we have products.

What this does is it enables all kinds of new ideas from our customers and enables us to then build new products that our customers can buy from us, things like tap to local, et cetera. That also enables new add-on sales for existing products. And I have a few examples for you. Okay, treasury. Just a couple of quick notes about treasury. We -- I'll go into a little bit more detail about this later, but I think we're now at the point where we can say this, we have 1 of the premier treasury products in the United States. We have customers going into places like New York City and competing directly with JPMorgan Chase and the bigs on treasury. Fund fact, I think Greg has said this publicly in earnings calls, but we are now winning core deals simply because of our treasury platform, all right?

It's such a compelling product for them to go build big deposit bases and go compete. So we're very competitive. But what we've got here is we've got a bank that actually is going to New York City, closing 600, 700 new accounts per month up against the big banks, and they're winning, and it's awesome. They're growing like a weed adding literally -- I'm not exaggerating billions of deposits in months, okay, with our treasury product, super cool. But in order to compete, they needed access to stablecoin rails, right? They need access to stablecoin. So they are now piloting this in lower environment.

So this is a little bit of engine room or below the waterline, but I wanted to explain this. I've seen questions coming in about regulatory, et cetera. There's 2 things to understand about regulatory to rest in our world. One is we don't get to talk to regulators at the bank or credit union. Everybody got that? We don't get to talk to them. And the credit union and the bank don't get to talk to our regulators that regulate us. If bank fix 1 thing in Washington, D.C. Bandwidth is that because it would be really nice if we could get a check mark, okay? That was good to go, GTG for a regulator at a bank or a credit union, but they can't see the regulatory dress that we have, okay? By the way, I'm a big believer in the United States regulatory system, I'm a big believer, okay? Like, it's great. It's hard, but it's great. So anyway, why is this important? Why does this matter at all? Well, we provide lower environments for the platform.

So our customers get a chance to take something like stablecoin, run it in lower environments nonproduction and bring the regulators in to look at it. And you get a chance to see some of our regulatory functionality in the platform itself because the regulator can actually come in and audit the entire thing themselves, right? Super cool. And this allows them to get comfortable, educate their regulators, do their due diligence on us, which we're already a primary vendor. Again, this is a huge efficiency gain. It's easier for them to come to us to license this technology than it is for them to go outside and take on new due diligence efforts. Does that make sense, okay?

Huge efficiency gain for them. So that's treasury. I want to talk about Victor FI. Greg mentioned it and talked about it at length. We love this acquisition, and we're in the process of moving Victor. We call it now Jack Henry payment orchestrator onto the platform. Now let me give you a future intuition about why this matters. This has already come up in deals that we have for Victor. So in combination with what we've done with Move and our card network partners, Visa, Mastercard, right? We can now offer Visa Direct and Mastercard Send natively to customers via Victor. That makes sense. Do you understand the strategy now, why would we buy Victor? What we can bring that in?

Also, cool thing Victor has some functionality that the platform doesn't have, and we'll be utilizing that, okay, Super awesome, basically subaccounting, okay? And this gives us a combinatorial effect of what I call 1 plus 1 plus 1 equals 10, all right? So again, over here on the left, what you see is some of the modules on the platform that we're using out of the box to enable some of this functionality, all right? Cool. All right. I didn't -- I was on the slide, I want to just call out graph, right? I've not talked in public about graph at all. And it's important to probably start talking about it. This is what I call below the waterline technology, but it's actually a way simpler than you think. This is just entitlements rights and permissions, entitlements rights and permissions. If you and I are running a business together, and we have to entitle a bunch of people to go do stuff on our behalf like initiate a wire, okay? And then say you and I approve it, all those kinds of things.

That is what the entry refers to as entitlements. What we realized because we had built a large digital platform, and we're the only core processor that's built 1 inside a core company, we realized that we needed to build a substrate that works for both the bank and the consumer, right? And that's because, traditionally, this gets super boring, so I won't bore you, but traditionally, Rice's Hollands permissions have been split between core systems and digital systems. This is a huge inefficiency for their customer. Massive. There's not a single customer that you can go talk to. If you ask them about this about entitlements in their digital system versus entitlements on their core, they will all go [ atorrible ], okay?

So we saw a chance to go solve this. In addition, we already had an identity platform that we had built for Banno. We've now overhauled that identity platform, that is now getting rolled out to all of our customers. So everybody gets Jack Henry ID. And the other thing to understand about graph and our identity platform is that it is a big part of the middleware that we're building for our outside the base. This is a multiyear build as we're targeting getting outside -- getting Banno and Treasury outside the base, which Greg has talked about enough in public.

Okay. So fine grain permissions, we actually built this design, we call it fine grade permissions at every level. All right, what do you need for AI agents -- you need fine grain permissions at every level, okay? All right. So let me explain. My simple way of explaining this is I've always said when we built Data Hub. So everything Keith is doing on the data side is being built on top of Data Hub. We built that. We talked about that in 2024. If we didn't have -- if we had to build Data Hub, Keith will be 2 years behind on his efforts in, okay? So I always say, like, no data AI, no identity, no fine grain permissions, no AI agents, all right?

Well, we built 1 of these things already. Let me give you a quick intuition for this. If you have an AI agent, okay, on the consumer side that's doing something. And then back to you and I running a business and let's say we enable business agents to help us do our work. Okay. That identity of that agent is going to be linked to you and I right, as business owners. And if that agent does something, okay, who's responsible, you me, right? That's how the regulators will see it. We already have priors for this. This is not that complicated because we have had workflow for how long, like 2 decades. Okay. So how does that work? The identity of the person who built and designed the workflow, right? Okay, when the regulator comes and looks at a workflow automation inside the bank, they're going to be like, "Hey, you, who built this okay, there's an identity of somebody who did it. And then they're going to be like, well, okay, how did it run? That's the automation.

And then, okay, who's running it, who is the human in the loop that did the final approval, right? That's cooling agent identity with human identity. And who is responsible, Fun fact, this is real story. Doing my 1 along with Greg, right? Driving back from Chicago with my wife, in my self-driving car. I'm not paying attention. I have it in Max mode. Don't judge me. I have it in Max mode. Just talking to Greg and drinking coffee, I'm not kidding. I'm just drinking coffee and myself diving car, my wife is in the passenger seat. I get pulled over. Who's getting a ticket? And in a car, okay, it's not the self-driving system, I get the ticket, right? I had to tell Greg, I have pulled over here been, yes, definitely speeding, and I was really fortunate that the police oiler came up to the passenger side and talked to my wife first because I would have got to take it, for sure.

Anyway, didn't get a ticket, I got a warning on was really nice to my wife. I think it was just me, I get a ticket. Anyway, you get the point. No identity no fine grain permissions, no agents. We are in full rollout for both graph and Jack Henry identity. All right. Okay. We're going to keep moving here. Tap to local. Again, just an example of tap to local is leveraging our platform, obviously, move being a partner here, ledgering exceptions, orchestration and our entitlements permissions layer.

Okay. But it's going to get more interesting for you all as investors because we're going to go do more high-grade partnerships. We have 2 more. We wanted to announce them here, but we're just not quite ready. We got some more eyes tees across, 2 more amazing partnerships coming. We will announce those at Connect. That will enable even more new products, again, with the combination of things we built, things we buy and then these partnerships, really high-grade partnerships. But I want to make sure I explain this. When we bring these partners in, we will build all the hard heavy lifting work to integrate them to the platform. That's what makes them valuable.

Remember, back to my opening slide. The value is going to accrue to people who integrate the stack, okay? Value accrues to people iterate stack. Value accrues to people who iterate the stack. And that, over time, we're going to keep doing this, and we're not going to stop. Also, this isn't fancy work. This is hard work. This is what I call dirt, shovel, ditch, sweat, equity work, right? And it's like -- it requires analysts try Julie Morelands whole team. It requires people to really understand how systems work, partners working in the trenches with us, okay, and then my engineering team, who is super AI pilled and has software factories and just print and code, right?

Okay. Basically then, I already said this, but to repeat it. This is going to allow us to build a whole new suite of products, okay? So this should get really fun for you all over the next couple of years because we're done with the below the waterline. So now the products are coming. Now the revenue is going to start to flow because customers then can purchase these as add-ons. I know you guys don't care about this slide and ask me about it later if you actually do. All right. We're in the early stages of rollout like I said, all of the primary component parts that you need for a TRUCOR processor are complete.

I would argue that, again, again, there's no share of competitors. I would argue that almost all the competitors don't actually have a complete core system. They don't. We do, all right? And like I said, running active on the public cloud. And it is with integration to our existing foundational cores, and we got to do a demo. How many of you all want to see the software? Okay. Well, let's go. Okay. Real quick side note, if you care, this is our design system. So Greg talked about it, but it is open source, and it's on the Internet. We actually don't think this is -- we actually think having this open source is amazing. Keith talked about the acceleration of development. Having a design system, literally anybody on my team can connect the design system Cloudco and generate like 13 prototypes send it to a customer, get the feedback.

So the pace of iteration just works like crazy. So this is open source. Our customers can use it. Our partners can use it, but that's effectively how we get the UI we have. And now you're looking at the UI, okay? So this is the platform. I'm going to just kind of give you a quick tour through a number of things. I'm going to start in the most boring part. And that's because I was feeling some questions in and around regulatory, but I thought I never really actually ever talk about this or show this. But I'm going to do this really quickly because we actually built this first, because my team has seen and felt a lot of regulatory address, and I've spent a good part of my life under regulatory dress as has most of my team. we're going to actually move this to audit, and I'll hit this really quick, so you can see this. We actually built this first. But there's a thing underneath hood that you can't see. So this is our entire audit trail for the entire platform, okay?

But there's a special thing that we did that we actually can put controls in the platform. And then this is actually the work surface that the regulator can use to audit. So what you just saw, here's basically what happens in a regulatory exam. They look at a control. It says you do X, Y or Z. And then they say, okay, we want to see if you do X, Y or Z for this period, say, 3 months, all right? Then they will pull that up and they will audit you, thus an audit log or audit trail, all right? And I'm just giving you a quick look at what this looks like. What we wanted is that for the regulator to actually for our ability to hand this to a regulator and they can actually pull it up on iPad and audit and regulate the system, okay, live on the platform, okay? This is all real time. That's the most boring part, all right?

Okay. We'll talk about wires. This is our wires platform. Also, if you like dark mode, pretty cool. We got dark mode, okay? Staring at a bright screen. You might see a [ Benolie ] this is actually a big deal for people that are working on a computer screen all day, especially processing wires, et cetera. I'm going to go back to live mod because it's a little easier to see, all right. Okay. So this is wires. Now we're multi-tenant SaaS, obviously, but we also are multi-institution for a single tenant. What that supports is people that run multiple charters. We have a bunch of them, okay? They're known as holding companies, okay, often. We have a bunch of those. So I'm actually just going to switch to a different tenant. This is how easy it is to just switch to a different tenant, right? So I'm in a completely different tenant. And you can see in this tenant, I have international wires enabled. So the national wires is here, okay? All right. We're going to switch back to the other one, which is Garden, and we're going to continue our little tour. All right? We're going to hit ACH really quick. We just launched ACH.

It's been a long time since somebody built a new ACH Warehousing platform. You should check that out in the market, who's building these kinds of things, almost no one. This is now an additional module on the platform. Let's jump in to general ledger. So this is our GL. We built Data Hub in the early days below the water line because we knew we needed something for all of these modules, and that was a built-in reporting system, all right? I'm going to just hit reports for GL which is a huge part of any general ledger product. And these are just examples as boards that customers can build out on their own. And this is using a platform we call Jack Henry Insights, right? It's a built-in reporting platform that's in every single module, right? The customer actually buys this from us and pays for it, okay?

So that's the general ledger. We're going to jump into exception item processing. One of the most boring parts of the bank, all right, and give you a taste of what we're doing with AI. So I have this preloaded, just so you know, sorted. So I had a particular item that I could work with. So in this particular exception, if I'm working this desk, I'm reading this thing like what is going on, I've got some notes. And I got this AI assistant that has given me some info on this. And if I look at this -- if I look at the details, okay, it's say, hey, suggestion is move this to checking. And I just wanted to notice that we've actually highlighted the fact that this is Mark savings and needs to be more checking, okay? You can see that little AI note there. We'll mark this as checking.

And then you can see that, oh, okay, that's what the AI suggested, all right? And now we can approve it. These AI assistants are going to be all over the platform for every single work queue. Let me give you the quick intuition for this. If I'm a person running this on this desk, let's go back to ME running the business. And let's just say we've been at the bank for 8 years. We have a payroll cloud come through ACH and it [ banks ], ends up here. But we've never had a late payment in our life. What do you think 1 of our banks or credit unions is going to do. They're going to put that through and give you full, right?

Well, that is institutional, it's just not captured in existing systems today. So we capture that, and we will present that as the next best. Again, human in the loop, all right? That's exception item processing, let's jump into digital assets. Again, we have support for Circle and USDC, over time, we'll have support for open USD as that comes to full mature fruition, and we can start building against that platform. In addition, we're doing tokenized deposits. But I want to give you a quick preview to that. We also have smart contracts on the platform, how many of you know how smart contracts work. Smart contracts are literally the opposite of LLMs, okay? They are 1,000% deterministic. Don't you think that needs a deterministic layer of automation.

Yes, smart contracts. It's amazing already in the platform, all right? We'll announce some more stuff when we're at connect, but that's part of the platform that is being utilized today to pilot things like stablecoins, et cetera. Okay. I'm trying to slow myself down as I get [indiscernible]. Okay. We're going to jump over and just show you insights really quickly. So remember, back over here under general ledger, we had this reporting system. This reporting system, the underlying technology we call JH Insights and that is a first-class citizen first-class primitive on our platform, all right? And I'm going to jump into our help desk conversation platform.

What this is, is we have this thing called Banno conversations. You guys have probably seen it over the years. It's a big reason why people buy Banno. It's a built-in help desk that allows them to do digital self-service in a really high-grade way. So this is just a dashboard built against that data, and we're solving like a really interesting kind of boring problem inside the credit union or the bank. You saw Keith's presentation, he's building this awesome analytics data platform. But 1 of the things we find inside a bank or a credit union, is they haven't a good data team a lot of times or they have a data warehousing product with a team working on that. But then there's like somebody [ John do ] out of desk who needs a report, and he's literally asking them to build a report.

Well, that report could just be built with natural language and easily generated right on the platform. So we built this out. This is what we call insights. So I'm going to just jump into this particular one. And you can see -- and maybe like my boss hit me up and it's like, hey, I want to see an 8-month view of this, and I'm looking at this thing, I only got 3 months, 6 months, 12, I don't see 8. Okay. Can I see 8 months, all right. So we have a little AI assistant down here. We've got these all over the place in the platform. And so this is going to repay and give me 8 months. I'm going to say, hey, how about 18 months?

Now could I come up here and muck with this report builder and build all that out, Short answer is, yes, I can, for sure. Let me give that a thumbs up. We don't need to give you the feedback now. All right. We'll run this for 18 months. But what we're doing is we're giving a normal person who doesn't understand how the data works, they don't understand anything, they can very quickly generate a report. -- right? And a dashboard, their boss asked them for something. They can go get that.

And then like in this particular case, if I'm running the help desk, say, for the bank or the credit union I can just put this on my iPad and roll into a president and plug it in, and I can go through my dashboard, all right. Okay. So that's Jack Henry Insights. We got 1 more thing before we switch gears, I'm going to switch over. So what you've been looking at is really the banking side of the platform. Now I'm going to show you the credit union side, and I'm going to show you the integration.

So now we switch gears now we're in a credit union. Now you might say, well, that isn't a real life use case. We actually have Shanon help me 9 customers?

12.

12, get Rumble, Silver Lake and Symitar One financial institution. Do we have a phenomenon where in which credit unions are buying banks, okay? We now can run this platform across both of them. You just saw me do it with 1 click, okay? But I'm going to jump into Symitar. Well, what's Symitar doing here? Well, when I said we had real integration wasn't kidding because what I'm doing now is pulling a member up that is on Symitar, all right?

So we're actually completely overhauling our user interface for Symitar, and this is going out to customers. So I can look like all this information is on Symitar. So when I say we're doing deep integration to our existing foundational core systems, I'm not kidding. Not only can I see Meg's data, by the way, Meg's awesome, she leads our sales engineering team and the CTO office. She works with me. It's really great. But not only can I see all of Meg's information, I can also take actions, okay? I can take actions, I can move money. I can put stops in. I can loan recast, I can pay a line. I can manage cars, I can add it a member, okay? And there's a bunch more functionality coming, all right for our customers.

Okay. So that's the tour. Just doing a quick time check. I'm actually doing pretty good. For once, Greg, doing good. All right. Okay. So that's the demo of the platform. What do you think? Good? Yes. Yes, yes. None of that existed 2 years ago like none of it, all right? Okay. So in 2018, we're going to switch gears and talk about Banno and Treasury and Tap to Local. So in 2011, we began building the Banno Digital platform inside Jack Henry. I'm going to come back and explain this. I realize this is just something we haven't explained a lot in public, so I really wanted to make sure our investors understood this part.

In 2019, right before the pandemic, Greg came to me and he said, "Hey, since your own band really like you to take on our treasury product. There was a fledgling project inside the company to build a new treasury product. So we had the good fortune and privilege of taking that product on in 2019 and begin working in earnest. This is part of the story I wanted to make sure you guys understood. This is just a quick cross-section of the top digital competitors in our market, okay? You can see the names. I think all of these names should be familiar to you. These are great platforms, nothing negative to say about them.

And also, they're partners of ours, okay? They're actually real partners of ours. They actually resell a lot of our products. But what I wanted to articulate is that all of their founding dates are before Banno. Banno is the newest platform that's been built. And it has the unique class that it was built inside a core company, all right? I always wondered when I was just a fintech hack and code with Wade and Iowa, I always wondered like what would happen if somebody really built one of these things inside a core processor. And that's what we did in 2018. The management team came to me and asked me what it would take to rebuild Banno from scratch inside the company with our core systems as the primary target. And we did that. And that then got us to where we are today with 1,030 financial institutions. We are, I believe, the largest platform by financial institution count, not user count, okay, but by financial institution count, okay, pretty awesome. And like I said, about 16 million users.

Okay. I don't think there's any debate about this. Banno is best-in-class on retail. And what we've been up to for the last 4 or 5 years is building out the business side of this, okay, which is always the hardest build. If you go talk to any of these folks that are on the screen, they will all tell you this. And if you were closely following folks like Q2 or Alkami, they'll tell you how long it took them, okay, to build out the treasury functionality and the entire business functionality. And kudos to them, they've got great platforms. There's no shade here. I just wanted to give you kind of a reset of like where Banno is in its sort of life cycle and innovation. So that gets us to 2024, where we announced plans to build Tap2Local. And so that was me and way talking to you all, right, over at the Hyatt, explaining what we're going to do.

We haven't started yet. It was just we had kind of inked our deal, right way. But really, what that gives us today, so I'm just previewing what I'm about to go through with you. What that gave us is a rounding out of our business strategy. So we have treasury, which I just talked about, amazing product. Our customers are having huge success with this. We have Banno Business, which is in massive rollout right now with the operational team, okay? And then we added micro and small, okay? A couple of things. Banno Business is for small to midsized, treasuries for large commercial. Now these -- all these products have overlap, and they also have features that each one can use. And I'm going to explain this here in a minute.

Features that we build on Tap2Local, Banno Business customers want and Treasury customers want, all right? So this is an ecosystem now, okay? So don't just think, oh, it's just Tap2Local, no, it's like this is a platform ecosystem play. So we can service now somebody who is running an LLC on a retail account, going to the farmers market, maybe selling raw milk in Indiana, I go buy that stuff right next to my house. Super cool. You should try it. It's good for you. You don't have to though. It's kind of weird. In Indiana, it's fun fact. It says for cats and dogs only because that's what you have to by law, put on the label to sell it. I buy it. You should try it.

All right. Anyway. So farmers markets, all that kind of stuff. And then like service businesses are notoriously underserved, so landscape companies, et cetera, et cetera, are notoriously underserved by our customers because they can't scale this, right? And then these midsized businesses are people with employees, okay? Maybe they got a crew, maybe they have some management team help, maybe they get some third-party finance help. And this line, I kind of refer to this, and this is a hazy line because it can depend, but this is the line where in which a business needs a CFO, roughly speaking. And what we have our customers, our customers are doing an amazing job with this actually. I'll just brag on Alpine Bank. So Alpine Bank, awesome customer, full stack Jack Henry customer. They spent 2 years breaking down their entire segmentation across these products, and this is how they're going to market, all right?

Okay. Everyone knows that small business is a huge opportunity. The underpinning data for small business being an opportunity is this. So this is the -- this is just a quick graph of the number of new businesses opened in the U.S. I just kind of demarcated 2020 because of what happened here. And this is only going to grow, especially with AI. So back in 2024, this is actually 2023, I think. I don't have a date on here, but me and Wade were dreaming this whole thing up, like, hey, how do we go help our customers compete? We talked about that at Investor Day in September. So this is just for fun. This is me.

And so after we left Investor Day in September, we had a lot of work to do. It wasn't just a tech build-out. We had to go get deals done with Visa and Mastercard, okay, our awesome friends of the card networks. And this is me and Greg and Wade actually coming back from the Mastercard trip where we just met with Mastercard executives in New York City. And this is my home, little airport, all right? Late at night, we got a picture. So anyway, but this was us getting to work on the deal side of what we did. And I just want to give a huge shout out to our card partners, Visa and Mastercard, absolutely amazing partnership. I really appreciate them because they sat down and listened to me, Greg and Wade to explain what we wanted to do. The kind of a lot of the ecosystem I just explained to you, I did it maybe in a shorter time with less detail, okay? Explain what we were doing and why. They loved it, both card brands. They loved it.

And then in the meantime, what we did, one of the things that Visa and Mastercard, some wonderful people came to us and they said, "Hey, you really should do real-time money movement on the debit rails. What they didn't know is that me and Wade had already been thinking about that. Wait a minute. We're always thinking about stuff, right? So what we did in parallel, as we started working on Tap2Local, we built out Rapid Transfers. What is Rapid Transfers? It's pretty simple. This is just a quick demo. If you have 2 debit cards in your wallet, you can move money from one to the other. That's how it works, okay? Every big bank has this feature, fintech has this feature, and this is just the example of that working on our platform, okay?

But I want you to remember this because this was a foundational build for us. We just didn't tell you tell anybody what we were doing. So this gets to one of our announcements that is coming, all right? But Wade and I always wanted to do what you smart people in the room would figure out what's coming next, what comes after this, right? What do you want to do once you have this? Well, anyway, we'll talk about it later. But in fact, what we realized as we built this out with Visa and Mastercard as our partners move as our enabling partner on the merchant acquiring side, right, is that not a single community financial institution in the U.S. has this feature, super weird, right? Big banks do, fintechs do. So our customers are super excited. Then we hit Tap2Local, okay? This is our brand for Tap2Local. But remember, this is delivered through the financial institutions brand inside Banno. You're going to get a full demo here in a second.

But we saw a gap in the market on the phone inside the mobile banking or online banking experience that nobody had done. Nobody had done what we proposed to do you all -- what we proposed to you all 2 years ago to do. Also, there was a gap where some people had done like iPhone stuff, but they hadn't done Android. How many Android users in the room?

Yes. We can't leave Android users behind. I know right over there. By the way, me and Wade have always been iPhone, Android, iPhone, Android. I don't know what that says about our personalities, but you can decide. This is me bragging on everybody, okay? Fun fact, we didn't tell you this, but me and Wade had been in a lot of rooms talking to a lot of people. And everyone, I mean everyone told us that this would take 2 years, okay? And me and Wade were like, no, we can do it. We can do it. What takes 2 years, 28-plus certifications on 4 card networks and Google and Apple. And by the way, you have to nail those certifications on all the card networks to get Apple to even consider or Google to even consider, right? This is a massive build. Also fun fact we learned along the way, Wade. Nobody had done this in the United States. You might say, well, this technology exists in the United States, you would name me the brand. Yes, they had grandfathered in from other countries where they certified in other places. Makes sense? So nobody had done it here. So we had huge walls to get through.

I want to give a big shout out to Mastercard and Visa, American Express and Discover, all those teams are awesome. So massive shout out to the Move team. I've never seen such amazing work on their side and then a huge shout out to the Jack Henry team. This was like all hands on deck. We're basically working as one team with card brands, and we nailed 28 certifications in 7 months, all right? Again, I might be a little too [indiscernible] about that, but we did it. And we -- in the meantime, we built all these features and shipped them, okay? So these are all the features. I think we talked a lot about what we were going to do last time we saw you because we had open banking, we could do some cool stuff with QuickBooks, so we get automatic flow of data into QuickBooks, et cetera.

All these features are enabled on day 1, but the initial payment experience was very minimal, okay, very minimal. We knew that, and we knew we had a lot to run down. So here's a time line. You can see on the famous time lines. Move partnership gets signed in September 2024, all right? And we announced it here at Investor Day. Like I said, me and Greg and Wade want to work, right? Got the Visa Mastercard deal done. And by the way, that is specifically between us and Visa and Mastercard, right? And then the build began in earnest from January. So January 2025, to August is when we landed all the certifications and the build was done. So not only did we land the certifications, the initial build was done, okay? And oh, by the way, we filed a couple of patents, maybe 1 or 2 patents along the way. We don't have to talk about that today, you can ask me in private after this presentation. And then we hit Connect. And last year at Connect in San Diego, I live demoed from an actual bank live in production back to local working from the stage, right?

People think I was courageous to do such a thing, but it's the same place they hold ComicCon. They announced like all that WiFi works right there, right? So I wasn't scared. I've done it before. Anyway, live demo presentation in San Diego with live customers. Now the other thing I wanted to make sure we explain is from here, we had to do a wave rollout in Banno. By wave, we had to start with, say, 10 customers, expand to another wave of 80 and then 100, et cetera. We actually did 10 waves of rollout. It's not like you can just turn this on and push it all the way through to our customers, okay? So we did this in waves. We also want to make sure we did our best to communicate to customers what we were doing, et cetera. So between October 2025 and May 2026, we finished the rollout. So literally, we just finished this rollout in May. And since May, we've shipped a bunch of features, all right? So just since May, AI-powered product catalog, shopping cart, customer file, invoicing, payouts actually land this month, so I went ahead and put it on the screen. And then we just finished remote deposit capture for small business, right?

So now in Tap2Local, you can accept card, right? You can send an invoice, okay? And then you can also accept checks. So this is a huge deal for folks that come to your house, right, service businesses and service industries.

Okay. Just a couple of things about payouts. So this is the payout feature. Basically, super simply, this is businesses can send payouts to vendors or contractors without collecting their payments information. This is basically the same functionality as Rapid Transfers, but for business. Makes sense? But remember what I said about we're building a platform here, okay? Our treasury customers want this feature, okay? This will be native in Tap2Local, okay? Businesses love this feature, but that entire spectrum of businesses will actually use this. On the Tap2Local side, we built out product catalog. We have an AI-assisted image generation. A lot of our businesses don't have the time to go get photography done and all that kind of stuff. So -- and we'll give you a quick demo of that.

And then invoicing. Invoicing is a huge building block for us because as we kind of -- I'll give you a bit of a forward-looking look at what we're doing on the product side, it's really important to build this small business flywheel that we get to access to capital. Access to capital gets the deposit flywheel going and invoicing is going to be a big part of that. You're smart, so you can figure some of that out.

Okay. Do you guys want to see a demo? All right. This is -- by the way, this is for real. This isn't no joke. This is my account, so we'll kill that. This is my account [indiscernible] bank, all right? I have a business. I just want to call something out here. Everything you kind of see here is -- now I'm like wondering about the Internet. And just like this is -- wouldn't you believe it just my look. All right. There we go. Okay. Now we're cooking. Okay. So a couple of things I want to just start with. First of all, if you're running a business in today's world and you have like Square or some other merchant acquiring provider, you do not have this experience because here's my operating account at the bank, okay? So -- and when I take payments, the payments are actually going to come into the Move system, and this is my merchant account at Move. And look, I took a payment earlier today, all right? And that's pending. That $39.79 is going to come into my operating account, right? But I can see that right inside my app. This is incredible. This has never been done, okay?

So that's my merchant account, and this is Tap2Local. All right. So we're going to give you a quick tour of this. And I am just going to get out of here quick. Okay. All right. So first of all, the merchant experience, I can go accept the payment. I can do a really fast payment. Like if I just want to take $12 from Greg Adelson, which I'd love to do, by the way, I can just do that, okay? And then I can take his card right here, okay? Super quick. So this is like our quick action. But we have invoicing. I had sent an invoice to Greg earlier. I don't know why I hate it. He owes me $30, all right? And then we have payment links. A fun thing we discovered about payment links is that you have a bunch of solar companies on this thing now. Average transaction size is like $17,000 for payment links. Super cool, so service businesses, et cetera. That's payment links. And then we've got our product catalog. I'm going to build a new product for you really quickly here in a second. And then we have a customer file, which my only customer right now is Greg.

It's ironic because Greg doesn't drink coffee and I'm selling coffee. I should be selling [indiscernible] because I should be doing. Anyway -- or bourbon. I should be selling bourbon I should be doing. Anyway. Okay. So I'm just going to show you some fun features in our product catalog. We're going to add one. Notice we don't have a Breve Latte. How many of you like Breve latte? Come on. Half and half, cream. I like my [indiscernible] Latte with cream, okay. Anyway. Breve Latte. It's a good way to get fat. All right. Okay. Breve Latte. -- we'll just say this is a 12-ounce, all right? And this is our hey, I can choose some library and browse files, all that stuff. But we've got a nice little AI feature in here. We're going to just generate the image because I don't have time for this. If Greg is a customer of mine at the coffee cart at the farmers market, I just can quickly generate the thing I need to get for him, all right? And then I'm done. And I -- oh, I need to give it a price. So it's going to cost Greg $3.95. All right. We'll just do $3.95. We get done, great set of product. Now we've added to our product catalog.

So now what I can do and I just need to grab my card because we're going to do this live. Like I said, this is for real. We're going to actually take a real payment. So I'm going to accept the payment. And I'm going to just do Americana, [indiscernible] Latte, Cortado and maybe some coffee beans, all right? And this is our shopping cart. If I want to add some more coffee beans, I can do that. And that gets us to $39.79, all right? And now this is our checkout. This is the experience that Wade and I were driving to. We don't think this experience really kind of exists anywhere like QR code, okay, get paid with Tap2Pay, so card present, card not present, payment link or QR code, and then I can send an invoice as well, okay? This is where the magic of invoicing comes in and this beautiful slide up checkout experience. Okay. But we're going to just do a Tap2Pay. All right. We're going to do tap. Come on. We know. i've only done this 30,000 times. I think he just wants to mess with me. Okay. Got to pay. We just accepted a payment live, I can e-mail a receipt, and we're done and out of here.

So obviously, we have the ability to manage disputes. We talked about that. Actually, nobody has kind of built that, but it's kind of a boring part. We have built-in dispute management, et cetera.

So now what's next? I think that's at least part of the reason why you guys are here. And this is going to get pretty exciting. The thing I want to tell you about the 2 announcements we have is that these ideas were originally in the pitch deck that me and Wade had kind of crafted to pitch Greg when we first pitched it to them. So we had contemplated this quite early on. But as with anything, you have to really build and scaffold this up. We have some things on the platform that weren't quite ready yet. We got a few other things we needed to do. Greg needed -- we needed Greg's help on a number of things. And also, Greg is a big fan of like crawl run, walk, okay? Execute, execute, execute.

So what we're going to announce today, and this will be a full rollout in Connect. I want to just say 2 things about -- a couple of things about both of these things. These are built. They're effectively dev complete. So I'm not -- we don't have demos for you because we want to save the demos for Connect, all right? We will be -- I'll be back to my usual business of doing live demos on stage at our 50th anniversary. But this next thing might seem a little boring to you, but it is a really big deal, and that is expense management. So we're bringing expense management and virtual card issuance into the platform. Now a question, quiz time, quiz time, quiz time. Is this a Tap2Local feature, a Banno business feature or a treasury feature? Yes, that's right. Cool, right?

Okay. I think if you're smart and you're in this space, which I think all of you are, you know about fintech competition, i.e., RAM, et cetera, right? This is effectively allowing our customers to go build and deliver a RAM-style competitor for expense management. Out of the box, you'll get instant virtual cards, granular spend controls, MCC restrictions, time of day limits, single use, if you want them, okay? So back to us running a business. We've got 5 people that need to do purchases for us or they're on the road or whatnot, we can actually give them granular spend controls. It's really an amazing thing.

In addition, automated receipt capture, super cool technology, some AI enablement there. Vendor card payments, okay? Reloadable cards specifically locked to a vendor. So in my case, say, I've got somebody works for me that orders coffee beans. We can just lock that into that particular vendor or provider, all right? And then real-time visibility and ERP integration. Again, all of these things will run across our entire business platform. And then this is kind of what it looks like in the app, all right? Super cool. Employees request a card, track and manage the spend and then they can capture their receipts. Beautiful system. Again, we're pretty close to dev complete, and then we'll be demonstrating this and showing this at Jack Henry Connect, all right? Super cool.

And again, like we serve the whole business spectrum. I just put this in here as a reminder, just in case I forgot. we add one more thing. This is actually a long-time dream, right, right, like a long time. I think back when we were initially building stuff in Iowa, I remember us being super bumbed when Cash App hit because we wanted to build something like this, all right? And we always -- there's a dream to always do this. And actually, back in that picture of us drinking a little too much tequila and talking about these ideas, we actually pondered this and we were trying to figure this out. Before I go into this, I really want to give Wade a ton of credit because this is, I don't know, 2 years of work on your part, an insane amount of meetings, coast to coast to coast to coast. It's difficult to give you the detail here, but -- for time constraints, but there was a window in the market that was going to enable somebody to go do this again, okay? It's been done before, but there's a window in the market. And then there's always like these market windows. And then there's these technology windows. That's one of the ways I like to think as an entrepreneur, like you have these technology windows that happen and then you have these market windows. And when those intersect, you get unique opportunities and usually, entrepreneurs just close those these days. They just get closed, okay, really quickly.

So shouts out to Wade and the Move team for getting us there. And by the way, this technology is complete and ready to go and ready to embed, all right? So I'm sure you guys can kind of figure out what we're doing. We're excited to share with you today peer-to-peer money movement, all right? So this is a new kind of network. This is peer-to-peer payments built for fraud prevention first, powered by Move and our amazing partners at Mastercard and Visa in partnership with Jack Henry, all right? And I'm just going to give you a quick tour of this to help you understand how many of you have said to somebody, are you -- do you have Venmo or Cash App? How many of you said that? Or do you have Zelle? How many of you said that?

This is a -- there is no in-network and out of network. If that is an in-network or out-of-network question, yes? This is -- this system is -- do you have a debit card, Andrew? Oh, you do. Cool. Well it work, all right? So it turns out 90% of U.S. consumers have debit cards. Again, I cannot give Visa and Mastercard a big enough shout out here, and I cannot give Move a big enough shout out for doing this, but this is a pretty big effort at Lyft. Native support for senders and recipients with multiple financial relationships. This kind of is referencing the technological window, universal support for pass keys and other kinds of fraud prevention that just wasn't available when those network-oriented apps were built before like Venmo, Cash App and Zelle as an example.

All right. We can talk -- there's going to be a million questions about security. I'm not here to talk about security, but we have an amazing security-first story. Actually, I think this will end up being a much more secure network than any network that's been built. I'm just going to walk you through the experience, so you can see this. Just remember, this is going to be embedded in Banno. And there's another really cool thing here.

Remember how we work at Jack Henry. So the Jack Henry partnership side is, we're going to be embedding this in our -- for our Banno customers and making it available for other customers not on Banno, right? But what the financial institution will be able to do is brand this to their brand so they get the brand equity for the peer-to-peer money movement. Makes sense. Much like Tap2Local can be branded to their brand, much like brand -- Banno can be branded to their brand. Again, we want to give brand leverage to the financial institution brand, okay? Of course, it will be powered by Move like we have in a lot of our screens. But this is basically the UX, okay? This is how it would work inside Banno. This is a sender experience, like if I need to send you money, Andrew, I can just say, "Hey, you would have to be in my context, of course, and I can just find you in my context and send this to you, right?

You're going to get an SMS message, all right? Now there's some things we're doing here. I don't have time to talk about it, but you can actually do this over secure SMS, and we're working hard on that with some partners. So again, there's a whole verify loop that we have here. But again, Andrew, you're going to get a quick message up on your screen, okay? Arlene sent you $40 for lunch. All right. And then this is the flow you're going to go to -- go through and then you're literally going to be able to -- and if you want, you can use Apple Pay on your phone, right? And then you can just transfer the money using the debit card rails. Pretty simple, pretty cool.

Lots of cool stuff to talk about. We'll explain a lot more at Connect as we kind of roll this out. But it's going to be, I think, a pretty magical new network, enrolled once paid anywhere, again, powered by Visa and Mastercard and our amazing partners with Move.

What's next? Initial launch at Connect, all right? So we'll be talking about this. Working hard with our card partners on cross-border payments. So we have non-stablecoin options here. And then coming soon after that, because that's a retail experience that you just saw, kind of like rapid transfers. So rapid transfers was the foundation for peer-to-peer. Hopefully, you all put that together, all right. And much like Rapid Transfers, we're going to have a business version of this coming sometime in 2027. So -- and that is my time.

Just as a quick wrap-up, platform companies win in the AI era. I think everyone agrees on this. We are AI-ready and fluent. We offer out-of-the-box integration to our customers. That's the heavy lift. That's the most expensive lift. We are shipping faster, I think, than anybody in the industry. We have best-in-class business platform on its way, and we're blockchain ready. So thank you so much. Appreciate it.

And Mimi is next up. Am I suppose to see her.

Are you supposed to lower the table? Yes, we do.

I get this down for you.

We're not exactly the same height.

Tell me when.

Okay. Welcome, everyone. Thank you for joining. So So if I hit the green button. Thank you. Okay. So while it's hard to follow Greg, Keith and Ben, I do get the last word today. So for finance, that means telling you how it all adds up. What does this mean? So what I wanted to do is something a little different rather than kind of build anticipation. I want to start with the conclusion. And then because transparency is one of our 4 key tenets that we talked about earlier. So that should apply as much to how I present to what we're going to disclose. So here it is.

Jack Henry's growth rate is going up measurably. And the reason is we can name it, and we're going to talk about it here in this session. So everything I show you from here on is that case for that sentence, validating why we're going to grow, why we're going to grow more in the near term and why we feel confident about it.

So as always, we don't put numbers in front of you that we don't intend to stand behind. That's not the Jack Henry way. So we're going to go through the full case of that compounding growth, both top line and bottom line.

Okay. Now before I jump into the details, I have a special shadow. Rene, our incredible -- thank you for walking back in. Perfect timing, Rene. Our incredible CAO, my partner in running the finance organization and my right hand for the last 4 years is celebrating her 30th anniversary at Jack Henry today. So I want to give Rene a special shout out. So she is definitely upping our average above 10. I am bringing it down, but we balance a bit.

Okay. So let's jump into it. Okay, 4 pillars. This is the first and the last are kind of why you can trust the numbers. The middle 2 are why the numbers are going up. So sustainable, predictable, high reoccurring top line revenue, that's the kind of floor of the engine, okay? The next part of the story you know well. That's the part of the story we've been delivering year in, year out, and you've seen us deliver on that repeatedly. Then you layer on the revenue multipliers, okay? We're talking about the contracted booked already in the bank sales that our amazing sales team has already delivered the last couple of years, the Trifecta wins, the new cores, the larger institutional cores. That means more clients worth more.

Then you layer on top the emerging revenue catalysts. You heard a lot of those today, the public-private cloud monetization, Banno expansion, small business, AI, a lot of the things that Ben and Keith talked about for the last several hours. So that's where all of that kind of -- that conversation of all those demos you just saw kind of layers on top.

Then as we move beyond revenue, we talk about the free cash flow conversion that's funding reinvestment, M&A opportunities, shareholder returns, all off a very clean balance sheet, okay? So you have a predictable base, strengthening growth, strong cash flow, a clean balance sheet. And that's what will convert top line growth into double-digit EPS outcomes.

Okay. So let's dive in. Okay. So before I can ask you to believe the forecast, let's talk about what we delivered. And today, we're going to kind of walk back and forth between time. We're stepping back. We're going to show what we did in '26. We're going to go all the way out to '29, kind of a little bit of bouncing in between. But '26 was a remarkable year. We had non-GAAP revenue of $2.5 billion, up 7.3% inside the long-term model, not a one-off, and we'll show that multiyear trend in a moment. We had non-GAAP operating margin up 92 basis points. As Greg mentioned, that's the third consecutive year of above 60 basis points of margin expansion. So that's not just a cost cycle, that's operating leverage compounded, okay? That delivers GAAP EPS up over 11.9%. So revenue growth plus margin expansion, converting to double-digit earnings growth.

Then we talked about return on invested capital of over 23%, well above -- earning well above the cost of capital every day on every dollar we deploy. Over $539 million of free cash flow. So that's over 100% of free cash flow conversion, excluding asset sales. We did over $448 million of share repurchases that reduced shares outstanding over 4%. $179 million of dividends, the second -- 22nd consecutive calendar year of increases, and all while spending over $358 million in R&D for the future.

So we funded that high almost 14% of revenue R&D commitment and still returned over $600 million. So that's not a trade-off we had to make, that's what this model does.

So let's talk through a little bit and touch upon the revenue architecture framework. So -- and why it leads to top line predictability. So we have core, a $750 million a year business, up 7%, roughly 30% of revenue of the company, supported by over 1,600 core processing clients. And I'd like to think of core as the anchor capability. It's predictable, but it attaches a lot of ancillary growth around it. Then we have payments, over $917 million in revenue, approximately 37% of the company, the largest segment, slightly above the other 2. And I think about that as the volume engine of our business, accelerating as card and payment adoption rates rise. And then we have complementary, $740 million of revenue, up 7.7% growth and the fastest growing of the 3 segments with product diversity, digital growth that's fueling plus the new product innovation. And then the last that we don't talk about as often, but it's still important as one of our segments is Corporate and Other. And that's kind of the mix of like hardware, Connect Conference, other revenue. And those 3 of the major segments are roughly equal engines in size. So you don't have a single dependency of one that's dragging or compensating for the others. We're talking about 3 equal engines, each growing mid- to high single digits, leveraging the incredible same sales distribution pipeline and long-tenured client relationships.

Okay. So -- then we talk about when we talk about the wins and what the wins mean, 58 wins, we talked about FY '26 being a record year, okay? So with that, we talk about the 58 wins is the fuel, right, that 14 institutions above $1 billion in size. And we're not just holding share, we're taking share. We're taking it upmarket. Greg talked a lot about the Trifecta wins at 59%, up 39% from prior year, okay? So when a client takes core payment and complementary together, that relationship is deeper, sticky, materially more valuable from a revenue perspective. And we can say that depending on the size of the institution and their profile, each one of those could be equal in size from a revenue perspective. So the impact of those trifectas can be material in terms of the revenue and the importance of that client to Jack Henry.

And then we had approximately 40 complementary and payment products that attach to each one of those new 58 core wins. So that's a revenue multiplier in one statistic, which is why we talk a lot and we typically lead our calls in talking about those new core footprints. And we're really specific with the numbers, not everyone in the industry talks about numbers specifically, but we're really specific about that because of that engine, the multiyear impact that those core wins have, okay?

Then we layer on top the new and emerging products, some of those we talked about today like small business, Defender, the platform and AI. They're early, but the direction of travel is clear, and we showed you earlier today, and you'll see demos upstairs during the cocktail hour on more of that.

So the wins signed today, the wins signed over the past several years are going to be recognized over the next several years. The average contract level is still about 6 years. So with that, meeting with the high recurring revenue nature of our relationships, that 99% client retention, that win bringing in additional products and lasting multiple years. So that's the visibility behind the numbers I'm about to give you, and it gives us the confidence for those projections.

So let's talk about FY '27. We talked about this at the year-end earnings call. So hopefully, this isn't new to everyone, but I just want to refresh it because this is the stage of a launching point as we go beyond this next year. But FY '27, the guidance, non-GAAP revenue was 6.3% to 7.3%. Again, another operating margin expansion year. I'd like to think about the 20% to 40% as the floor with aspirations higher, and we've delivered on that. Free cash flow conversion in the 80% to 100% range.

Now on GAAP EPS, you'll notice that it's roughly about 5%. But as a reminder, the initial guide for deconversion revenue is $23 million. So starting kind of that low creates a bit of that gap on the EPS as a drag. And so we'll see how M&A happens this year. It's very episodic. We always talk about the low visibility that we have into M&A, but -- and that it's outside of control. But that EPS is not a signal about the health of the underlying operating businesses.

We are guiding to what we feel confident we can deliver. That's been the pattern, and it remains true today.

Okay. So now let's go beyond. So we don't guide beyond the current operating year, and I'm not changing that today. But we are doing something different, which is FY '28 and '29 and sharing our outlook, the trajectory our model produces. But I want to be direct about what's changing and how we're talking about it. For years, we've said in any given year, Jack Henry should produce revenue in the 7% to 8% range. That was a statement generally about a range we operate in. But what you see here is different. This is a trajectory. This is more specific, 6.3% to 7.3% in '27, roughly 6.7% to 7.7% in '28 and 7% to 8% in FY '29. Again, as I said at the start, growth rates that step up, not fade, and we're saying that because of the drivers that are identifiable and already in motion. The sales contracts that are already in the locker, the products that are in the hands of customers, the adoption trends that we've already started to see occurring.

So it was 36 years of operations to reach $1 billion, 11 more to hit our second $1 billion in 2023. On this outlook, we're likely on a trajectory for hitting our third $1 billion in revenue in about 6 years. So we're compounding faster as we get larger.

Now many overlook, and it's nice and easy to say in round numbers like, oh, why not 7% or 8% or for every 1%, you're talking about roughly $23 million of incremental revenue. And that's on top of the 7% to 8% we're already talking about. So that's finding big new businesses every year to generate that. And we feel confident in our ability to do that.

So again, we're compounding faster as we get larger. And to be clear, FY '28 and '29 are an outlook. They're not guidance. We'll guide each year as we've come to it, but we're not going to put in a slide to you today that we don't believe in. We believe in this trajectory.

So let's talk a little bit about catalysts. Everything you've heard today shows up in 1 of 2 places on this page, either more clients or more revenue per client. We've incorporated what we know today, but there's further potential from the new categories and the new account adoption trends that we're starting to see. Some of these represent early stage: stablecoins, faster payment use cases, AI-driven solutions. So some of these are a little bit further down the road, and we'll see as we get into them. Some of these are already -- many of these represent an upside to the forecast that already stands on its own.

So we feel really good about that model. We feel really good about growing at a higher rate, and we feel very positive about the additional incremental catalysts that are not embedded in those numbers, okay? But we didn't want to get too far down the road in a market that is dynamically changing where account holds or behaviors are changing every day. But what we see through the things that we've built, through the things Ben has talked about, the things that Keith has talked about is that we have the capabilities to seize upon those.

So until we get a little further down the road and know how the adoption is, some of these may be outside of those near-term windows in terms of meaningful contributions, but they're all upside.

So let's switch gears just a bit and move beyond revenue to the high-quality balance sheet and what it supports. So again, reminding you, minimal debt, $1 billion untapped revolver. We have no refinancing wall. So the Fed moved 25 basis points while we were all sitting here today kind of as expected. We have no interest rate exposure to higher rates. We have no refinancing risk, no covenant implications. No highly leveraged situation that some of our peers have to. And that affords us a great freedom. We have free cash flow of 80% to 100% conversion of a highly predictable reoccurring revenue and compounding margin. So that clean balance sheet means we can act, seize attractive value-generating opportunities as they appear rather than to wait and ask whether we can afford to do so.

As a CFO, I feel like that puts me in a very lucky position. Let's talk about capital allocation. So glad to have tax law clarity now behind us, returning back to attractive free cash flow percentages. So with tax law clarity, a healthy business performance, in FY '26, we were able to return back sizable share repurchases and retired over 4% of shares. So absent M&A over this time horizon between '26 and FY '29, we have the potential to reduce shareholder count outstanding over 11%. That's a meaningful number. So if we think about accelerants to EPS, if we think about even the cost of the dividend and the redeployment of capital by having less shares outstanding. So in FY '26, we also raised the authorization by 5 million shares, giving us the capacity to be opportunistic. We talk about 22 years of consecutive annual dividend increases and a commitment to the continuation of modest increases.

So you have mid- to high single-digit revenue growth, expanding margins, a shrinking shareholder count. That's how a 7% to 8% top line becomes an EPS double-digit return to shareholders. Okay. So let's recap a little bit. And because I've talked fast, we're going to have more time for Q&A. So get the questions ready. We're prepared. So in closing, think about Jack Henry as sustainable top line. You have revenue multipliers, emerging catalysts, strong free cash flow with a disciplined capital approach, so everything we've shown you sits within one of those 4 pillars. Again, sustainable top line, revenue multipliers, emerging catalysts, strong free cash flow, okay? So we told you the line we're driving. We're committed to maintaining that and delivering on it because Jack Henry is a high-quality compounder with upside from here. And with that, I'm going to turn it back over to Greg.

Thank you, Mei. So anyway, thank you all. So we'll take some questions. We do have plenty of time. I do want to -- it's a recap slide.

So just shows you a quick recap of what we covered today on each of the speakers. I won't spend a lot of time going through here. But there was an earnest effort to show you all not only from a standpoint of level of differentiation from the 5 key differentiators to what we are doing in AI. I think there's a strong belief in the industry that Jack Henry wasn't doing as much as we are, and we wanted to make sure you had a chance to see that in action. And then the other component was around the work that has been compiled over the last 2 years that Ben showed you, a significant amount of work and effort, some of it in partnership with Move, most of it in partnership with our teams here. But the things that we are doing are working because of the stuff and the foundation we built not only from the Jack and Jerry days, but what we've done with One Jack Henry, what we've done with the 4 tenets, what we've done with the Jack Henry Way, the things that allow us to work together as a team allows us to work much more quickly. And again, that's another level of differentiation for us in the space today. The other part is the financials, right? So we can spend some time talking about that and where we are.

Again, we are and have been for 50 years, a pretty -- well, 40 years of being publicly traded, a pretty conservative base company. As Mimi articulated several times, we put out what we think we can hit. We don't know what '29 looks like other than what we see in today in our models. But again, the growth and the opportunity for us to continue to take advantage of some of the things that Ben showed you today and some of the things that Keith showed you, still pretty early. So a lot of those things are very, very lightly baked into the growth models for what we saw today. So I just want to make sure we reiterate that. What you saw today is what we've been executing on, the number of core wins, the number of products that we're driving, the opportunity with trifectas and things along that line. So I'll stop there and let you all ask any questions, and then we'll have some fun.

We're going to have a couple of microphones coming around. And if you would say your name and firm name for the transcript, please.

James Faucette, Morgan Stanley. Thanks so much for all the work that's gone into this. It's been really helpful. I want to talk about the -- or ask about the expected acceleration in growth. And can you just help us parse which of the three core or the largest segments, if you're expecting those to sustain kind of similar growth rates or if you expect one to grow faster than the other? And I know that as part of that, if we go back to the last Analyst Day, Greg, you talked quite a bit at that point about potential for benefit from moving to public cloud, and that doesn't seem to be part of the equation today. And is that -- am I reading that accurately? And then if we do see some public cloud starts come in, can that be an incremental driver?

So why don't you take the first part, and then I'll take the second part.

Sure. So while we didn't talk about individual segments today, I think it's pretty clear that all 3 are expected to grow. You have all the momentum from the core wins that should have the core segment continuing to grow quite strongly. Also from -- you mentioned public cloud, but I'll say from a private cloud perspective, too, we think there's a potential in this tightened kind of frontier model universe to see a faster uptake in the shift from on-premise to private cloud. So we're at 79% today. That's been growing at a very steady clip the last several years. There's a potential that, that could -- you could see over the next couple of years, an acceleration of that. So within each segment, I think you're going to expect to see growth across all of them, but premature to talk about individual segments.

So the other part of the question, I think there's two components. I'll kind of take on the private cloud first. So part of what we think is going to be an acceleration is frontier models and the concern of operating in on-prem with our institutions, especially those of any of the sizes that we typically represent a concern of how they're going to be able to handle the speed of vulnerability management and things along that line. We're already getting some larger institutions that have kind of said, "Hey, we're going to stay on-prem forever, now having conversations with us". So I think that's part of the acceleration. As I mentioned, last year, we did 36 into outs. And again, I'm not going to forecast what we think the number is going to be, but most of -- about almost half of those were larger institutions, and I think that will continue.

But what was absolutely embedded into the entire presentation of Ben was public cloud. So every module that gets consumed as that module is consumed, those modules are built in the public cloud. So as we're releasing a new wires platform, that's all public cloud API first, as we're releasing general ledger. If you're talking about going full core into the public cloud, yes, that's still some time before we think folks are going to fully adopt that. But what we believe is that as they start to incrementally adopt each of the components, then ultimately, as they've adopted enough of those components, they're now in the public cloud. We actually have opportunities with some larger institutions. So some of the larger institutions, in fact, one that we just met with last week, their CEO said to us, no way I am doing a core change. But I am interested in doing incremental change. And so that creates opportunities for us to do that.

So I think that's -- it's embedded. And one of the things that we do is that it's not a one-for-one. So let's just use the Wires platform as an example. We had talked about the lift between going from on-prem to private cloud being roughly 2x, right? We've been talking about that as far as 2x the revenue. We said to go from private cloud to public cloud would be roughly a 20% lift. And we're seeing that because each of the components that we build actually has a lift in revenue as we roll that out. So if the domestic Wires platform that was running on the core was running at X when we sell them the opportunity to go to the public cloud, we're seeing roughly about a 20% lift in revenue from that standpoint. So that's kind of the summary on that.

Dave Koning at Baird. So I guess my question Tap2Local, super interesting. Where does that fall, I guess, in the revenue statement, like which segment? What are the unit economics like? Like are you paid per FI spread on volume and maybe relative size you expect the next few years?

So it's a good question. So a couple of components there. So one, from a cost standpoint, it's a rev share. So we do a rev share with Move, so based on transaction volumes, and it's really based -- so unlike typical card issuing on the merchant side, you're getting -- like for us, we don't make anything on the interchange, right, with -- related to our card issuing business. Our banks and credit unions make that.

In this particular business, we get part of that spread. So larger transactions, larger opportunities. And that's why I think Ben referenced one that did a $17,000 transaction, right? We'd like to see a lot more of those. So there's opportunities on the rev spread. We also do some type of rev share with our institutions as well. So there's an opportunity for them to pick up noninterest fee income on that component. All of that revenue will fall in and is falling in the Payment segment. And so that will continue to be a part of that. Even though it's sold through the digital platform, it's actually the payments are where we're counting it into the Payments segment.

And then from a modeling standpoint, I will tell you that we've continued to be fairly conservative in that. I think we have publicly said that we believe that this takes off the way we believe it will. It will be the second largest business in our Payments segment behind our card business, and we still believe that. But we need to see some more -- candidly, we just need to see some more proof points on that. Some of the things that Ben and Wade have built over the last 3 months, as they showed from May to now, we believe -- and we're starting to see it with the number of merchants that are coming on, the number of transactions. I've actually tasked these guys to give us 10 to 20x the number of transactions that we saw last year. And so that's the part of the mantra. So anything you want to add to that?

Madison Suhr from Raymond James.

Maybe Mimi, you made a comment around the 20 to 40 basis points of margin tends to be more of the floor. You've done 60 basis points plus over the last few years. I know you're not necessarily guiding FY '28 or '29. But as we think about revenue accelerating, would you expect kind of the year-over-year margin improvement in the business to also accelerate? And also how critical is driving trifecta wins to improving the overall margin structure of the business?

Yes. So again, we're going to start conservative and aim to be. So I believe that, that is the floor that the engine produces, but we certainly aim for more. We're compensated more. We believe that it can drive more. And we believe that the trends in the business from a mix from a public cloud usage, there's a lot of trends that support margin expansion inherently in the model. In the short term, we've talked about there's some headwinds to that, right? We're investing quite heavily to move to the public cloud. We're getting out of the data center ownership business. There's some costs associated with that. There's some costs associated with protecting ourselves against frontier models in the very short term. So listen, it's early to say in the year. We're only a couple of months in, but we're feeling great about the way it continues. But it doesn't take heroics for this business to produce margin.

Andrew Schmidt, KeyBanc Capital Markets.

Really good content. If I could ask 2 questions, one organizational and one FY FY '29 outlook. Just first organization, as we move towards this sort of modernization paradigm, are there larger things that need to change culturally or organizationally as we think about moving faster, dev process, things like that? First question.

And second question, I think it's helpful to unpack sort of '28 and '29. I understand that 7% to 8% sustainable. And then it sounds like there's some optionality from the revenue multipliers, emerging catalysts that aren't baked in. And then the flip side, obviously, there's things like equipment sales, payments volumes that some assumptions you have to make there. So maybe just what's included versus what's not, just more clarity in terms of optionality on the longer-term outlook.

Why don't you take that one?

Yes. So why don't we take that one first. So we're building in what we know today. So we're building in the pipeline we know of sales that are coming online based on installation slots. We're basing it on the trends of product adoption that we've already started to see. We're basing it on expectations of certain acceleration of known products in the marketplace today. That being said, there are some that are more volatile than others like hardware. We always talk about particularly on the in-house customers that are buying IBM hardware. Sometimes that varies based on the cycle of releases from IBM. So that can have a little volatility. We're not expecting like huge numbers that are different from historical patterns.

But in any 1 year, that can be a headwind or a tailwind. We are not expecting a huge acceleration to the question we just answered from James, like we're not expecting an outsized acceleration of on-premise to private cloud. That could be upside. We're not expecting radical change in the volume of faster payments. It's growing at roughly 50% today. It's been a great growth engine, but on small dollars. So we're expecting modest uptake. But to some of these things, if stablecoin or faster payments really starts to accelerate or SMB is faster than we think it will be, those are all upsides to the model today.

Before I answer the organizational question, let me just add on to that. So I think there's a couple of other components, which are important. Back to my original statement. We have been for 40 years, a very conservative company in our approach. So I would argue to say that there's more outside the model than there is inside the model because it's what we know. And so there's a lot of ifs ands and opportunities in there. And the reality is if we told you that we were going to be at 8.5% or 9%, you'd remember that, right? So you'd come back. So we don't know exactly where some of these things, but we're at the precipice of that happening.

As Ben alluded to, a lot of the stuff that we have been building all under the watermark, I think, is what you used as the term. We're kind of -- I mean, you're never done, done, but you're mostly done with building that out, building a foundation. So I talked about in my presentation about the foundation of this company being built way back 50 years ago. Well, that's what Ben was doing. He's building the foundation so we can build on top of it and build faster. So as those products are coming to life, what we don't know is how fast are they going to come to life. And so that's the key. So we are very bullish on where we're going, but we're also trying to be very reasonable in our approach, knowing you all don't forget. So that's kind of that component.

The next piece is the organizational question. You are 100% right. So workforce management, the changing and dynamic of the type of people we hire. As resignations and retirements have happened, we've looked at different types of people that we brought into the organization. Fortunately, people like Keith and Ben, a lot of people want to come work with them. And so we get a lot of folks that want to come work. We've also, as you know, kept a remote environment, which allows us to be very flexible and get some of the best of the best. And so -- but the skill sets of the people that we need are definitely changing. In fact, not to put her on the spot, but we just hired a new Chief People Officer, and she's in the room too, today, and she starts here in a couple of weeks. But the reality is that was something we talked to her about during the interview process is that we need to make sure that from a skilling up and all that, that we're covering the people that we need. And honestly, we've had that conversation with our team that if you are not going through the process of skilling yourself up to the things that we need to be for the future, then you probably won't have a home. And so we've been very direct with our team like we are in everything, and that's part of the conversation.

[indiscernible] those two points together, too, because there's a point of -- we are building the velocity of development. We're building the velocity of deployment. We're building the velocity of scaling and supporting within our organizations, using AI, et cetera. But part of this is the capacity of digestion from customers. right? So you can get newer better things in hands, but how do we help them be ready? How do we help them in a faster patching world? So it's both internal to our organization, but also helping externally as well. this side of the room.

Bill Carcache with Piper Sandler. Thank you for all the details. Given that your core client base operates in such a highly regulated environment, it seems like all of the things that you ran through today are sort of deepening your competitive advantage and perhaps making it more difficult for competitors to be able to enter some of these different categories of investments where you you're deploying time and your expertise. Maybe could you talk about in this environment of elevated fears of displacement risk, how do you feel from a competitive perspective? There were some comments about competition dispersed throughout the presentation, but if you could just perhaps share some of your thinking around the competitive environment and your positioning broadly.

Yes. Thank you for the question. So I think there's a couple of components. So again, we're not up here calling all of our competitors are viable competitors for a variety of different reasons and have been for many, many years. What we have tried to do over the last several years is to highly focus on the level of prioritization that would allow our customers being community and regional banks in the U.S. to win. Some of them have been distracted with other things through the years. So whether that be merchant acquiring businesses or whether that be wealth management businesses, whatever it is. But this is all we do. And so we've been exclusively focused. So we've doubled down on that through the innovation.

So what we're trying to point out now is that as we've continued to invest 14% to 15% back into our infrastructure and products and things along that line, we've continued to build more and more of a gap between the product sets that were available through our competitors versus what's available through us today, which has allowed us to have 58 new core wins. And again, not throwing shade, but you don't hear those two talk about the number of wins that they have each year. And so that is a huge component of why we think, again, from the number of bigger institutions we're talking to, to the opportunity to work with fintechs with our Victor FI acquisition and things along that line. So we're continuing to build moats and opportunities. Now do those things last forever?

Probably not. And so we're continuing to make sure that we double down and stay ahead of the game and not lose sight of what's important. But that's really what the essence is. We gave you a lot of examples, whether that be culturally, servicely, innovation-wise. And really, it's about execution. The things that we were able to show you in 2 years that we've done, again, you'll be hard-pressed to find any of that from any of our competition.

It's Darrin Peller from Wolfe Research. Can you just start off, just two quick questions. One is more on the regulatory environment and one is going to be more on the contribution to growth. But just if you could just touch on the recent joint statement on the community bank's engagement with core service providers that came out, I think it was Friday from the OCC, FDIC and Fed. Just how do you see that potentially impacting the industry and particularly you guys versus others, whether it's liability or contract structures?

And then just my follow-up, I'll ask them both now is really just when we think about the contribution to revenue from these exciting new areas, where are you? What inning are you now in terms of where any of the Payments initiatives are? Are they 0.5% of revenue in '27 yet? They were just being built. AI, when is that going to contribute to revenue? And just curious a little bit more in terms of finite time lines.

You want to hit the first part?

Yes, I can do both. You can start on the other one. I'll hit the regulatory.

So very early innings. Even on things like Financial Crimes Defender that we've been out in the marketplace selling, if you think about that new and emerging category, you're talking low single digits, like very low single digits as a percentage of total revenue. So having -- and some others are growing at 50% plus kind of growth rate. So what we expect is over this time horizon, that to grow meaningfully in terms of the contribution of these new categories.

And that's why I was saying earlier about where we are in some of these new initiatives. It's so early that we understand what the opportunities are, and we've built the models for what we believe, but it's still so early to understand how successful. Financial Crimes has been out there longer. We know we had 187 deals last year. We understand that there's opportunity there. There's a replacement of an existing product that we have Yellowhammer. There's all those things that happen. But everything else that you typically saw was really brand new. And again, back to the conservative nature of the model itself.

From a regulatory standpoint, I'll just give you a tagline that actually the ABA came out with themselves. Not all core providers are the same. And we're not. And so the way we operate isn't the same as some of what our competitors and how they operate. Some of it's -- one of the big challenges is around not having coterminous terms on products, which we do. Some of our competitors do not. So there's a lot of challenges with that. So from a standpoint of being united as an industry, we are. There's a coalition that has been created where all of the -- especially the Fs and some of the others and us are all working together with -- in Washington, D.C. and we actually just hired somebody to be a focal point for us in that same endeavor. But the reality is -- and we've been able to show this in some of the meetings, some of the challenges that are being explained are not things that we do or practices that we have. And so just to be really honest, we're not as concerned.

Yes. Dominick Gabriele from Loop Capital. Great presentation today, and thanks for the question. So you talked a lot about AI and embedding AI into your products and in particular, building safe spaces basically in fraud prevention related to AI innovation by internal employees, external employees. I'm just curious, is the -- are the banks and credit unions really relying on you first as a first partner as the fraud prevention for their AI tools that they're using? And I was just really surprised to see how embedded all this is in your products. So if you could talk about how you stay ahead of the curve in fraud prevention effectively from AI models that you and your partners are using?

Sure. And Ben, do you want to take the first part of that, and I'll take the second part?

Yes, check check. Yes. So yes, I mean, I think we had a mission to embed AI 5 years ago, and we've just been sort of delivering on that. It was in my presentation, but I skipped through it. We actually filed patents on our ability to do Intercept on the platform, so we can intercept and hold transactions. And so there's a lot we're doing on the fraud front, both at the platform level, so below the Wireline as well as with Defender. And then I didn't touch on this, but we're launching a whole new fraud product in Banno called Intercept. And it's world-class. It's best-in-class for fraud. All of that's going to help us on the fraud front.

Switching gears to frontier models, I think you were blending that question, right? I assume you're blending that question. So my team is running the Glasswing product project. We have full access to Mythos. We've had it since June 1. So we have a front row seat to how these things work. We built a large-scale defense harness for our customers and our code base. And Greg was hinting at it, but just to put a fine grain point on it, we pushed automated PRs out to every team in the company. So we're in full like rollout of like automation of AI defense.

What Greg is also saying is that we think customers are going to want that from us as well, and we're ready to provide that as that comes to fruition. Again, like there's -- the other thing I wanted to mention, too, the last thing is Keith talked about what we might do with private models. It's really important that we run private models because private models could end up being large security concerns, right? I don't think that's any secret. That's a public industry thing. And so we think we can actually help our customers defend. He didn't mention that directly. So yes, we have a strategy for this. It's all encompassing. You got to remember, not everybody buys Banno, not everybody buys Defender. We think everyone ends up on platform. So that's why there's a real investment in some fraud tooling in the platform.

That's a good answer. The only thing I'll add to it is that because a lot of our community institutions just don't have the wherewithal, the team, the expertise, they're reliant on a vendor or a set of vendors. And again, back to regulatory questions, a lot of the regulators are really pushing to get back to best-of-suite type of mindsets. And so we're getting an opportunity where back to them wanting to have one single vendor for all of these initiatives, they're coming to us to say, "Hey, what can you do? That's where a lot of this consulting. We've already picked up several engagements just since July since we launched this, where folks are wanting us to come in and help them build governance. They haven't even done governance yet. So components are kind of helping them build it out throughout the company.

So what we're seeing is all the things that Ben said from an interest level, but then they're saying, "Hey, as my core provider, are you going to be able to provide all of this? Or do I have to go somewhere else? And we're saying we can do all this.

Jason Kupferberg from Wells Fargo. So I want to hit on two things. The first is on the trifecta win mix, obviously stepped up nicely this past year. How are you thinking about that over the next couple of years? How much headroom do you see there? And then secondly, I wanted to ask about the Card business. Where are we in terms of trying to make some inroads on the credit side? You're super well known, obviously, in debit, but I would love to get an update on the credit side.

I can start if you want to add anything. So a couple of things there. So one, for this particular year, and since my head of sales is in the room, his head will perk up. So we did 59%. We're targeting between 60% and 65% this year as the number. Reality is sometimes, especially as you go upmarket, some of them, especially as we pull them off of some of our competitors, the timing of getting the core and the digital at the same time don't always happen. So the good news is that even if on opportunities that we've been able to pick off the core but not get the digital at the same time, we still have an opportunity to go back in there and create that. And that's -- honestly, we're starting to see that with a few from a couple of years ago, where now their contracts are coming up and we have an opportunity. So they may not truly be a trifecta at the day that we sold the deal, but they're creating opportunities. And that will continue.

So part of it is what we've been describing, the various things that we built on the business application in Banno, the things that we're doing with Tap2Local and a whole bunch of other things.

And then from a -- the second part was card business itself. So the card business on the commercial card, so one of the things that we're working on with Ben and actually even a little bit with Wade as well is to significantly improve the commercial card applications that we have in the card business. It was lacking from a standpoint of truly as you went up market to larger institutions. We've made a lot of headway. Some of the things that we're going to announce at Connect are those components. But as a proof point, we actually doubled the number of credit deals we did last year as compared to the 2 years prior to that combined. So it's a significant number of wins on the credit side. Some of it are the things that we've already built. Some of it is what they see coming at the time they go live with their core conversion. Anything on that?

Brett Huff from Stephens. First, thanks for the look under the hood on the AI stuff, Keith and Ben, that was super helpful to us or at least to me. Two questions. One is, we continue to hear a bunch about SMB, that opportunity. It's kind of the holy grail. It's always been a [indiscernible]. It's always been hard. So what -- give us some background on how we came to that position because if there's a lot of dollars that are flowing to it, clearly, I think it's a big opportunity. So just give us the kind of the thoughts behind it?

And then number two, using that as an example, given that you are the most open platform and you play nice with so many other folks, how do you choose or how do you think about playing nice in that ecosystem when you are choosing things like SMB, right? You're building a lot of SMB stuff that may compete with others. Where do you -- where is the next bet we're going to place at that level? Or how do we think about it?

Yes. There's a couple of interesting points in there. So I think, one, just so you know, the bulk of the technology build was on Wade. So from a cost standpoint. So really, this was not a significant lift from a cost standpoint for us as we were building out a lot of the functionality because of what Ben had already built on the platform and through Banno. So there was already a nice leverage there that we'll be able to use.

Same thing with the P2P solution. But I will tell you that we've had a lot of conversations about the timing of when we would release the companion app to our quasi -- our [ coaptation ], so whether that be the Q2s, [indiscernible], others of the world. And so we've had conversations with them at the executive levels. And part of it is that we needed to get enough belief in the runway that we had, make sure as the old adage that we really only have one chance to make a good first impression, and we wanted to make sure everything was done that we needed on our side. So in light of the P2P solution and other things, we will be releasing probably in '27, more of an opportunity for them to -- and it will increase our TAM because we'll get a piece of all those transactions. That will create an opportunity for them to have some of the same solution sets. Now there's various feature gaps that we have or feature improvements that we would have that maybe wouldn't be as prevalent on their particular piece. But do you want to describe any kind of that component, right?

Yes. So one of the things that will always be the case because we run our full stack ourselves and we make our own decisions, we'll -- these products and features will always be best on Jack Henry's full stack. And we have patents for some of that stuff and all that. We will do our best to make sure this works really well, though, on other core systems and other digital platforms. I think it's good to mention, too, that we've already done all that work. We've done fit and finish for all of those platforms. We're actually ready. As soon as Greg gives us the green light, we can go to market that way.

The Companion App is complete. You can actually go to market. So everything you saw there when it slides up and that's just the Companion App working inside Banno. So we'll have a direct go-to-market for this. It's ready to go. The tech is fit and finish already. We fit and finish for the other competitive platforms because they have SDKs. So -- but because of just investments we make, so for example, we are -- I think we offer the best open banking platform available today. And because of that, we can do some things other platforms can't. No shade to competitors or anything like that. So these are just advantages you get when they're on our platform. And I think that's going to continue because we're making these strategic investments. So it will be better on Jack Henry, which should then have more folks coming our way for the trifecta and those kind of things. ahead.

I was just going to say to the beginning part of your question around strategy and find [indiscernible] later because she not only helps with our strategy, but manage a lot of those fintech relationships. So a lot of it starts with, again, how do we help our banks and credit unions win. What are either pockets of deposits that they're not serving today, what are capabilities if we think about how do they attract the next generation of deposit accounts, Gen Z, how do they help with elder banking, how do they help with the underserved of small business. So it starts there and then it's layering on top like where do we have capabilities? How do we leverage the platform? How do we leverage our payments capabilities to serve? Then it's a buy-build partner discussion of how do we do that to help our banks and credit unions at the end of the day.

One last thing, Brett. Part of our conversations and negotiations with Visa and Mastercard that Ben talked about was the understanding that we would release this to a larger TAM because that was part of the equation. And so -- because we can only live on X number of Banno clients, right? So that wasn't -- that was always going to be part of it. But the reality was the product needed to be where the product needed to be, and we're there now. So between that and what you saw with the new launch of P2P, that being as part of an embedded solution set creates the opportunity.

Kartik?

I think you talked about embedding AI into a lot of products. And I'm wondering, at this point, are you getting any revenue lift? Or is this more of a product you have to provide just so you can stay competitive? And then just the second part of that, there's been a lot of talk about investing in AI. So in FY '26, are you still in investment mode -- or FY '27, I apologize. Are you still in investment mode? Or are you getting a return on that investment? And if not, when does that happen?

Well, I would say it's still early days. I mean, to Keith's point, a lot of this is we're 6 months into it, right? So part of that is we're going to monetize components separately where there's value and demand. Other parts, it's around the stickiness, the repetitiveness, price retention. So there's different ways to make sure that there's an ROI. Part of it is around parity of what we expect from a marketplace of where functionality will be and where other competitors are. So it will be a blend of all from a business model perspective.

To part of the other question around investment, we're very mindful of the ROI. We're very mindful of how we're spending. We're mindful of what can get an out of control token spend and cloud costs. So we're managing that very tightly centrally, but it's also around how do we accelerate adoption. So I see us going to be on -- continue to be on the AI journey for some time from a development perspective.

So of the 22 products that have AI already built into it, some of them you saw on the platform, some of you saw in examples that Keith showed. So in all of those cases, each one of those are additive to an existing product set, except the components. So as I mentioned earlier in your public cloud question, a 20% lift in the opportunity as we take them off of a domestic wires and move them to the new Jack Henry platform Wires, there's a lift in revenue. Part of that lift is embedded by having the AI capabilities in there. So it's more -- you wouldn't be able to kind of aggregate that out from a standpoint of how much of that is AI built versus how much of it is the lift to be in the public cloud, but it's -- all of it is about selling more and more of the widgets. And so that's part of the driver there.

Now some of the other ones that we're working on will have a level of differentiation. So as Mimi said, some of them could be completely separate products that are 100% AI built and we're just sold as a widget and AI widget, and those would have their own kind of price points. But some of those are continuing to be built out or even go ahead. Even what we're doing at the fabric level would be another component.

Yes. One great example is exception item processing. So our customers can just buy exception item processing from us without that AI assistant that you saw. And then they can just -- they really like the AI system, they can buy that too as an add-on. I think that will just be a model throughout a lot of our products and a lot of platform as we kind of decision that out.

AI Fabric is a product. So -- but it's super early days, like we had a lot of demand for this, like Keith said. It's -- there's a ton of demand because -- and so I think a lot of our customers will end up utilizing it. And this is a phenomenal product, I think we'll do really well with. So I think you can -- if you want like reference points for stuff like this, other companies, we can talk about that like offline. But like this will be a super big opportunity for us when we talk about fabric. And that will be a product onto its own. So there's a lot of dimensionality to this.

No, and that's exactly where it is. So there's going to be some various components. The one thing I'll say that I know there's a level of anticipation and frustration of where is all this extra revenue. And again, as we said, and I started this whole Q&A out, this is -- everything has been built. It's all very, very new. And so the key is that we have built it, and we're not talking about it. And so part of it is going out and now actually getting our Head of Sales and other people to go sell it. But the reality is a lot of people are still talking and even showing PowerPoints. We're not doing that anymore, right? We're showing real-life stuff that we have built and now it's time to go sell it. But all of that became a culmination over the last couple of years of really hard work.

Tim Chiodo at UBS. So a lot of the stuff that Ben and Wade went through, who was pretty cohesive with the expense management, the acceptance, the invoices. That's a lot of flows going in and out of small businesses. I think what investors are going to want to do is think about how much business spend your customers, and I get it goes beyond your customers today, how much is being touched so that we can start to think about a penetration of that, and then we can make our own assumption on a take rate of that. So if you could help us with any anchor numbers that you might have used when you were sizing this internally to at least give us a head start? I think that would be well appreciated.

I think, Ben, if you can -- I mean, Ben mentioned some of the competitors that are playing in the space that we now have capabilities and compelling offerings. And I think for now, that's the way I would think of some of the TAM is like what are some of those marketplaces where people are making big dollars today.

Yes. I think if you want to reference point and over time, like Mimi and Greg are saying, we can provide more insight to that. I think two things that are really important. We've not made some of this public, but we have a full count of all the businesses that are on our cores, okay? So you would love to know that number, wouldn't you? I'm not going to give you that number, but it's a big number, okay? So that's all the businesses that are on our core systems. And then we have a number of all the businesses that we bank with Banno Business and all the companies on our Treasury platform. That is really this TAM, okay?

And then you think about their spend and the money flows, you're spot on. So those flows then how much can we effectively be in those flows. And back to Mimi's point about Ramp and Mercury, I think those -- their valuations and revenue run rates are fairly public, and they're -- it's pretty big. This market is very big. And it's also very early days. And part of what we're doing, I think you can see and probably put this together when Greg is talking about commercial card, et cetera, like we have a big plan here. This is a big opportunity for us. So when he says it could be second to our our car business, he's not kidding. It's that big. We kind of understand what we're looking at, and we're going and tackling it via just the kind of TAM markers that I described.

And so just a caveat for -- I'm going to just tap a touch of the enthusiasm here. So if Ben is perhaps [indiscernible] run us over. So we -- to Greg's point, this is not slideware. This is in the hands of customers today, but this is early days of adoption. This is early days of contribution. And if we're in the time horizon we're showing here, like it's upside, and we don't know how that adoption could just have rocket fuel on it. But today, that's not in these numbers, right? And B, until you have products in market, we see what the pace of adoption will be. So we're super excited about it. But for the horizon we're talking about today, it's great for fueling how do you think the next 5 years are going to look and what could the upside be? But as we talk about these numbers today, that's not inclusive because, again, crawl, lock, run, we need to get out in the hands. We built it. So we're beyond crawl, but now we need to walk and run and have customers start using it, see adoption, see trends of transactions to validate it before we put it in the hands of you all, okay?

The other component is that I think everybody knows that you have to really assist financial institutions a lot of times on how to sell in some of the components, especially a lot of the smaller ones. And that's where Visa and Mastercard have come along with us and been part of the equation is they're helping us with the marketing aspects of this. And so as RAMP and Mercury and Square and you name them, have taken those opportunities away from our financial institutions, and we're bringing them back into the financial institution, we have to reeducate them on how to make sure that this is successful within. So that does take a little bit of time. The good news is, over the last 6 months, we've been doing that. And we're starting to see a lift from that work. And a lot of the things we're doing is trying to automate as much as we can to create a lot less friction. And so now it's moving to the point between Wade's team and Ben's team to make that happen. So I anticipate to see over the coming months, much more action and opportunities, which will allow us to answer some of those questions a lot more factually than what our hypothesis is.

Chris Kennedy from William Blair. Is there a way to think about how the move upmarket is impacting the numbers that we see today? And are we at that inflection point where whether it's the Jack Henry platform or the treasury will drive things upmarket?

Well, yes. And I think a lot of what you've seen in the models is built off of that success we've had from the core business and the trifecta wins and things that we already know that are coming over the next several years, right? Everything everybody in this room knows, but every core deal we win has an average of 12 to 24 months before it goes live. And so most of that is tied to contract terms. So based on what we've sold, the 45 institutions that have been multibillion over the last 3 years, they start to hit.

I mean, our Head of Banking is in the room and our Head of Credit Unions is in the room. They both know exactly how many slots are already filled for this year and the next -- probably the next 18 months. They know as we sell an institution, what month they're going to go live. So I know when Force is going to go live. I know when a lot of these other things are going to happen. So that helps us help kind of build out the model from that standpoint.

But to continue to go upmarket, you do need the right product set. So Treasury is and has been a big driver for us to go upmarket. But I'll be honest with you, the real ability for us to go upmarket, so you get to the $20 billion and $30 billion and others is the platform and the platform components. Because of the pace of innovation, because of the incremental approach to where they can take on without making a wholesale core change. Again, the amazing part is nobody wants to make a core change, but we sold 58 of them last year, right? That's the part that I'm talking about is -- so we're doing that on top of the fact -- and all of these people are doing full core changes. They're not just doing incremental. They may adopt a platform component or two, but they're doing a full core change.

So as we start to talk to these larger institutions, which we are, we were with a $50 billion institution last week. We're talking to a $26 billion one on Thursday. Those are the conversations we're having from a standpoint that we wouldn't have had before without this technology.

This is Michael Allen from Barclays. I just wanted to ask on what's embedded in the revenue outlook for fiscal '28 and '29 on the level of account growth across the core customer base and how material that assumption is to the higher versus lower end of the outlook ranges, given a large portion of your revenue is priced on a per account basis? And the major theme of the Bank Director survey published today was the increasing competition that your customers are seeing from fintech firms and digital banks.

Yes. So I won't go over the numbers explicitly embedded within '28 and '29, but I will say that the numbers we've seen in '26 and the numbers that are based in '27 don't need a lot of account growth because what's been happening over the last couple of years after the flood of excess capital after COVID, you saw a lot of account growth at credit unions during that time and then the pullback to more normalization levels, especially as you've seen less lending in auto, et cetera. So credit unions have already been at very modest account growth levels. Banking has come down over the last couple of years as well. So we don't -- we think we're already at pretty low account growth levels. organically. So we don't need an exuberance from either a macro event or organic growth or lending environment to support the numbers in the model.

The only thing I'll add to that, though, is that each of these products that I just described are about trying to bring account holders back to the institution. So everything we're doing in SMB, everything we're doing in treasury, everything that we're doing in all these components are about bringing customers back that have been lost or again, to compete with the [indiscernible] of the world and others where we're spending a lot of time with our customers on Gen Z and making sure they understand how to attack the Gen Z market. And a lot of the things that we're building will allow them to compete and go after the folks that are going to a chime at the Gen Z level because that's the cool thing or the digital approach. We can now provide those same solution sets.

And just as a quick follow-up, given the comments today on the incremental cyber risk from for on-prem customers, on vulnerability management. How quickly do they patch vulnerabilities on average relative to private cloud customers? Is it in days or weeks? And do you see migration to outsource infrastructure as necessary over time for on-prem customers to remain secure?

Yes. And that's kind of what we talked about earlier. We do believe there's going to be an uptick in the number of -- the amount of interest in in-house customers, our on-prem customers coming to our outsourced models because of the reasons you said. Now I don't know how long it takes them to do vulnerability management. But again, we've gotten to the point now where we're doing it within 10 minutes. And I don't think they're going to be able to do that.

So there's a component to that, that's extremely important. We also have talked about, which we didn't talk about earlier today, we believe because of that phenomenon that products in our Gladiator suite of services are going to have much more interest because they're all based on cyber and security types of products. And so that will create, we believe, maybe some tailwind for those particular products this year as well based on that same.

I would say it's a blend of defense and offense because it's not only how fast can they patch, but the velocity because if you're on-premise and you're getting an annual release cycle today, you're not going to be able to keep up with the pace of innovation that Banno, for example, does weeks, like tens of releases a week in a month. So that pace of innovation, if you're still on-premise, you need to get to a cloud environment where you're just doing straight through innovation kind of deployment. And so that's another reason why we think you're going to start to see the shift because the gap of technological debt will be even wider.

The microphone, I don't see any more questions.

Any other hands?

And we will be -- we're all going to go upstairs as well. I know some of you may have to go. But if you can make it, we'll be upstairs. We'll be doing some demos on a lot of the things you saw, but in a lot more detail with the folks that own the products. For those of you that can't make it up there, thank you for taking the time we did. We're very pleased to have the largest crowd that we've ever had. Hopefully, it was worth your time. We are very bullish on where we're going. And again, hopefully, you got a chance to see some of that today as well. So thank you for your time and for being here.

Thank you all.

All right. We are going to get started, kicking us off the afternoon session. Greg Adelson, President and CEO of Jack Henry. Greg, thanks for joining us again.

Yes. Thank you for having me, Will.

Taking time being up here, particularly ahead of the upcoming Investor Day. I know that's a big lift for the team. So I appreciate you carving out the time.

Absolutely.

All right. So maybe we will talk about the year that you guys just ended, just reported. You closed the books on a strong year, 7% non-GAAP revenue growth, a record 58 core wins, over 90 basis points of margin expansion, third straight year of 60 basis points or more. And coming out of that, you set up 2027 more or less in line with the long-term growth algorithm. As you sit here today, what are the 2 or 3 strategic priorities you're most focused on? And what does the organization need to get right in order to hit them?

Yes. So yes, thanks for that. So we did have a record year. Some of the priorities that we still have today are in place from the day that I took the seat about 2 years ago. So one of them was to go upmarket and be more strategic in core wins with larger institutions. Over the last 3 years, we've had 45 of those multibillion-dollar wins compared to 22, the 3 years prior to that. So that's one example. Our SMB strategy, which we actually came out with 2 years ago at our Investor Day, which we've been very successful at rolling that out.

We now have over 900 institutions live on our Tap2Local and about 150 on our Rapid Transfers, which is all part of that. We're going to actually talk a lot more about SMB next week at our Investor Day. And then I think the Jack Henry platform itself, which has been an announcement that we made 4 years ago, where we talked about building on top of our existing cores and having full integration that's far different than what anybody else in the space has been doing.

We've built almost 30 components onto that platform today over the last 4 years, all public cloud native, API first. And it's created a nice headwind -- or a nice tailwind for us with going upmarket and the overall success of the company. So those are the 3. There's other ones. But as you know, it's all about execution. And so one of the things that we pride ourselves on is doing what we say we're going to do, and we've been very successful with those 3 initiatives.

Yes. So let's maybe pivot to the Investor Day. You've got them coming up in Dallas. Maybe you said the 2028 outlook is going to be a big part of that story, along with some live demos. You said publicly that '27 looks a lot like '26, but you're more bullish on '28. So without front-running the event too much, what are the main messages you're hoping investors will walk away with?

Yes. The main message is that we are going to kind of put our money where our mouth is, where we talk a lot about culture, service, innovation, strategy and execution being the 5 differentiators for our company. We're going to showcase those 5 things. We're going to show live demos of the technology that we have built and again, especially show the progress that we've made since the last Investor Day 2 years ago and to give a strong indication.

We're not only just going to show a preview of what '28 looks like. We're going to give a preview into '29 as well at a top line. Those are something we've never done before at an Investor Day. We've never really looked past the current year. So again, back to the excitement that we've had on the year we just had and where we think we're going, and we've been signaling that '27 would be similar to this year, but '28 and '29 would have some step-ups, and we're going to show that.

Yes. No, it sounds exciting. We're looking forward to that. One of the things that you've been highlighting is the momentum on the core side, 58 competitive core wins. You've continued to stress the move upmarket at the same time. I think you're talking another step-up in core wins this year, 58 to 65, I believe. Given the lag between signing and revenue, how should investors think about when that accelerating backlog starts to show up in the financials that we see?

Yes. So a typical core win is usually, there's contract term left. So one of the gating items of even going live is how much contract term is left, and it's usually 12 to 24 months or so. And then you actually have to train the bank or credit unions personnel, their staff and everything on what products they're buying. So when we sell a core deal at Jack Henry, it usually comes with about 40 complementary and payment solutions. So it's about a 12- to 24-month lag for those reasons. It has nothing to do with any other thing other than contract term and training and things like that.

We are using AI to speed up some of the data conversion stuff. That's great, but it doesn't necessarily help us in a new core win. So you can use the math there to realize that the deals that we're implementing this year were deals that we sold last year or the year prior to that based on term. So we have good visibility. We know exactly when a core is sold. We know when they plan to go live. And so we can map that out, which, again, part of the reason why we're going to be able to show that level of guidance for the next 2 years.

But again, that's just standard. And people ask me all the time, well, isn't AI going to help speed some of that out -- up? It doesn't necessarily help speed up the contract term size or the training size. It does help with the data conversion. And where it does help us immediately is in a Jack Henry to Jack Henry merger where we can actually have a shorter time frame to bring them live with that.

Yes. Makes sense. Okay. The public cloud strategy has also been a big talking point over the last couple of years. It's been deliberately incremental, I think componentize the core, integrate each module back to the existing foundational cores. Could you just provide an update on where you are in the investment cycle and just how you think about the pace of product adoption from here?

Yes. So the investment cycle continues. We -- 4 years ago, we announced it. We had started it roughly a year before that. We've been on track, actually have been building it ahead of schedule and ahead of budget from both of those standpoints, which I think is, again, another strong indication of our level of execution. So we -- as I mentioned earlier, we have roughly about 30 components that are live today. And basically, what we're doing is we're decomponentizing the core.

So the key things that run the deposit functionality, the lending functionality. We've done what is necessarily on the deposit side, the lending side, which is the more difficult side to build. And if you look in the industry today, nobody has built out the lending side in a public cloud native philosophy. So we'll be talking more about what we are going to do to accelerate the lending side later this year. We actually won't be talking about it next week because we're still finalizing some details, but we will talk about it later this year.

And then from a client adoption standpoint, we have roughly about 100 clients that have adopted some portion of the components. So these are existing Jack Henry clients that have said, I want to replace my wires platform with your new wires platform. I want to use your new general ledger to replace your general ledger. So we have roughly 100 that have done that. But what it has been is a true kind of driver of opportunities with these larger institutions. We're talking to $50 billion institutions and $30 billion institutions because of the incremental strategy that we put in place that allows them to take on changes within their core environment without going through the full heart and lung surgery, which is a core conversion.

Yes. Makes sense. Speaking of some of the ancillary products around the core, you've emphasized the momentum in trifecta wins this year. This is core wins that come with both payments and banking. I wanted to make -- I was hoping you could talk about how much of that change is coming from improvements in the product versus changes in the distribution and just how you think about continuing that momentum?

It's a combination of both. So I keep going back to Investor Day 2 years ago because that was an important time frame for us, where we actually made an announcement that our digital offering, Banno was lacking in business capabilities. And so we were going to go fill the gap between us and the larger digital-only competitors that are out in the space, and we went and did that.

And because we built out the features and we now have feature parity, we've been much more successful in winning digital deals. So our trifecta win rate, which is core, digital and card, our card processing solution, went from 39% last year to 59% this year. We're expecting to be on about that range or better for this upcoming fiscal year. So we changed a little bit of the focus of the teams, and we made it a lot more impactful for the sales team to be successful selling the trifecta, but most of it starts and always starts with the product itself. If the product isn't up to speed, you can't sell it. So we had to build out the feature parity. We've now done that both in card and in digital with the advancements that we've made in that product.

Makes sense. There's a lot of investor focus earlier this year on AI as potentially a disruptive force in bank tech, particularly whether banks that historically couldn't manage a long tail of vendors might now have more ability to do that and stitch together different vendors that are on their own. You talked about how you're seeing the opposite, more trifecta wins, more people buying a bundle from Jack Henry. So how do you think about the way that AI could reshape the industry and the way people think about technology decisions?

In our industry, in particular, regulators play a big part in everything that we do. So as AI and public cloud and other things have become more prominent, the regulators have really become much more impactful in decisions for institutions. They're actually looking for institutions to have less vendors than more vendors. So that best-of-suite mindset is really starting to come back. And so that's back to my point about -- your point about trifecta wins.

So what we're seeing is that if a core provider like us can provide the AI capabilities, the AI guidance, we're actually doing consulting services now as well. It's enabling them to have more trust in that provider, meaning they don't need to look for other alternatives. And so that makes the regulators happy. It makes the bank or credit union happy as well. So that's a big part of driving that, and we're going to continue to double down on that. And we'll talk more about AI I know in a minute. But the reality is if we weren't proving those points out, then you would see our customers looking for more third parties to work with.

And how are banks just responding to this desire to invest in AI in such a regulated environment? What do they look to Jack Henry to do? What do they want to do? And what are you helping them accomplish?

Yes. So they're looking to, like everybody, build efficiencies. A lot of our customers don't have large development groups. So it's less about the speed of development, more about building efficiency. Efficiency ratios are really one of the highest-rated things that a bank is measured on. So we're always looking for ways to make them more efficient.

So we build kind of automated workflows that they can utilize. We've built our own AI solutions that allow them to utilize those within the institution as well. So things that we can sell, things that are part of our existing product set. And so that's really what they're looking for. So speed and efficiency, opportunities to build out a product set that is a differentiator from -- so if a lot of them compete with the Tier 1s. And so they want to have something that's on par or a differentiator from them.

Yes. Makes sense. Let's talk about the opportunity for Jack Henry on the efficiency side. R&D was up 16% in the fourth quarter, mostly on headcount. Mimi has framed some of the benefits as projects taking 2 years instead of 3 rather than an in-year cost takeout. As those gains compound over time, does that change the level of R&D spend needed to fund your existing road map?

Yes. So as of right now, I mean, we've been averaging about 14% to 15% of kind of reinvestment from a top line over the last 7 or 8 years. And that's made up of really 3 components. So pure expense that's in the development side, the capitalized software of that development and then some of the additional internal use software that we have. And that's all aggregated into a single number, which equals to the 14% to 15%.

With the speed of innovation and change in our market, in particular, whether that be stablecoin, tokenized deposits, embedded finance, things along that line, and the way that we are building our own technology ourselves, I don't see that number going down, at least not in the next couple of years. What Mimi's point is a really good one, which is, Mimi, by the way, is our CFO, is that you have the ability to do things faster. So projects that used to take us 3 years now are taking us 2 years or 18 months.

That's where the speed and the efficiency is, and it allows us to do what we call more with the same. That's the mantra that we have across the organization. It's not about doing more with less, which is why we have such a strong culture and background for our associates to feel empowered to come up with great AI ideas because they don't feel like they're going to lose their job because they came up with the idea. So I think with the way the advancement of our industry is, the components that we need to do, it's going to speed up the time, but not necessarily change the dynamic of how much we're investing.

Got it. And then as it relates to how AI can reshape the product, you mentioned having 22 AI-enabled products in market, more on the way. How do you measure what AI-enabled products do for the business from a monetization perspective? Like do banks get enough value for these features to pay a premium? Are they table stakes? Is it an engagement and a sales momentum?

So a little bit of all 3. So of the 22 that are already in market, a large majority of those are embedded in the product to make it a more palatable product and a differentiator in the space. It isn't necessarily becoming an accelerator of cost or revenue, but a differentiator in penetration. So our ability to penetrate more of the product, obviously, will drive longer-term revenue. There are other products and features that we are able to necessarily upcharge. A lot of those live in the platform that I mentioned earlier, whereas we're building out core modules, all of the 30 core modules that we built all have AI built into them.

So some of them as big differentiators from what we offer today. So if -- let's just take our general ledger. If you're replacing our existing general ledger with our general ledger that has AI built in, we can sell that at a premium. So it's going to show up as a core module add and not necessarily AI generated, but the reason why we're able to upcharge is because of the AI component. So it's a mix of all of those and will continue to be. But what we're trying to do is make sure -- the one differentiator I will say is that I mentioned AI consulting. So we are going in as a separate line item to sell AI consulting services to our institutions, whether it be governance or building the efficiencies. We've been doing AI for 4 years. We built a really strong framework with the regulators. And so we're able to kind of pass that on to our institution.

Yes. Okay. I want to shift over to card and payments. Payments grew 6% in the fourth quarter, still at the low end of the 7% to 9% range, I think, driven largely by a little bit slower card growth. What gets payments back to that historical range? And which of the pieces of that business is going to do the most work looking ahead?

Yes. A lot of that came from some onetimes that happened with -- we talked about incentive dollars and other stuff that we get from the card association. So some of that driver of growth and differences came on onetimes. We're seeing back to our normal transaction growth this year at this point. We think consumer sentiment has actually remained pretty strong.

If you look at our overall card business, about 98% of the transactions are debit-based. And so debit continues to be very strong. All you have to do is look at Visa and Mastercard's analysis of that. But where we think the growth is going to come from is the differences we've built into our credit side of our business. So as I mentioned on the earnings call, we had our best year ever selling credit actually by double of any other year. And that continues because of feature functionality we've added.

So I think a lot of the growth in the card side of our business will come from the additive credit versus the debit. Payments in general will be driven by a lot of things in the faster payments world. So if you look at Zelle, real-time payments through The Clearing House, FedNow, things along that line, they're all truly drivers today of what we call receive-only transactions. And as the government and others start to change the mindset of use cases for send transactions and there's a better balance on the risk mitigation of that, which we're working on as well.

I think that's where you're going to see another lift in growth. So between card, between the faster payments, between what we're doing in SMB that I mentioned earlier, that's where I think you're going to see -- and you'll start to see some of that this year, but you'll definitely see more of it in '28 and '29.

Yes. Maybe talk a little bit about the SMB opportunity. I know that's something you've been passionate about, long history with the payments segment. What is the opportunity as you see it over the next couple of years?

Yes. A lot of it is just to go after a market for all financial institutions that are being disintermediated by the Stripes and Squares and others of the world. So what we wanted to do is build a solution set that was sold through the institutions and not around them. So unfortunately, for our institutions, as the Stripes and Squares and others get into their market, they're pulling customers away, they're pulling deposits away.

So we wanted to build a solution that had a level of differentiation. I don't have time to go through all the differentiators here, but we have a couple of key ones, actually 2 that we're patenting that are different today, but also to drive the ability to bring deposits back in and create more lending capabilities. So next week at Investor Day, we'll talk about some new initiatives that we've added to that SMB functionality.

But today, it is our Rapid Transfers, which allows for real-time transfer of money from foreign bank accounts into your current bank account, either in or out. And that creates a real-time component that only Tier 1 institutions have. And then Tap2Local is our answer to merchant acquiring within the institution, which allows them to not have to buy a device, using their phone and has a bunch of really cool differentiation for the small business itself.

Yes. Makes sense. And then just on the faster payment side, it sounds like that's a big driver in the near term. How are banks approaching just this kind of broad set of alphabet soup of ACH, RTP, what are they looking to their technology providers to do to help organize that into a kind of a coherent offering for clients?

Yes. A lot of them want these hubs that we created, which is our -- what we call our PayCenter hub, where you can have all of the flavors in a singular platform. And the good news, bad news is in payments is that no payments ever go away. That's why we still have check and we still have a lot of other things, but we keep adding to it. So not only faster payments, but now stablecoin, tokenized deposits. And so we're working on all of those initiatives as we speak. And so the key is that for us to give a complete offering that gives them optionality, and that's what we've been building and continue to provide.

Yes. Makes sense. Just on the card side, I think one of the questions that we've gotten is just around the competitive dynamics. Visa and Pismo is now marketing an all-in-one debit and credit offering. Pismo plus the DPS product. DPS has long been a large player on the debit side. Pismo is more nascent. You said you haven't seen Pismo in core deals, but you've seen them in cards. So how do you think about competitive risk in the card processing business going forward?

Yes. And just one to clarify. So to your point, we have not seen them in core, but we've only seen them in one card deal this whole past year. So today, they're marketing as a single platform. It's not a single platform today. So Visa DPS is a debit, as you said, and Pismo gives the credit options -- the good news for Jack Henry and our clients is that we operate on a single transaction platform today that has a debit and credit already integrated into that platform. So they operate on a single platform.

One of our other competitors has made a recent acquisition, and they're pushing to meld their debit and credit together as well. So at this point in time, we're really the only one that is operating besides one other competitor operating on a single platform. So do I believe that they will continue to evaluate and move into various parts of the market that we're in? Yes, at some point, I do. But at this point in time, we haven't seen them other than one deal.

And when you think about just the bundled offering that you have that maybe some of the new entrants don't, like how does working with Jack Henry for debit, credit, core, digital, like is there a compelling message on the go-to-market side that you have that kind of articulates why those should be together under Jack Henry?

Yes, the compelling message is really the integration. So the advantage you have of working with at least Jack Henry, maybe not all core providers, but with us is a very tight integration. And so when you look at those key products, so digital, card and core, especially digital and card work very, very much hand-in-hand, including bill pay and other aspects of that. Everything is driven off of the front door of the digital offering.

So you need that tight integration. So that's one of the advantages. And there's key features that every provider has. We're pretty bullish on the things that we've created as differentiators. But back to the original question, our trifecta wins have significantly increased this year because of those things.

Yes. Makes sense. Okay. Pivoting to another big topic. Cybersecurity has moved up the priority list very quickly. The focus on increasing frontier model risk to just broader security environments has been a big topic of this conference so far. How is that changing purchasing behavior, conversations with clients? Maybe where in the portfolio do you have products that might address some of those concerns?

Yes. So it definitely has changed. And so for those that don't know, so we operate today, about 79% of our clients live inside the Jack Henry private cloud where we operate. And so of the 21% that are still left, a lot of them are larger institutions that like to run their own shops and things like that. Well, that's changing. We are having a lot more inbound requests because of the frontier models kind of scaring folks of the speed of vulnerabilities and the speed that you have to address those.

We've been part of Glasswing for the last 3 months, which is less than about 100 companies in the world that are operating with that today. And so we've been able to get a front door seat to see how fast you have to actually adhere to vulnerability management. I won't get into a whole bunch of detail on what it entails, but speed is of the essence and the utilization of AI to fix it is of the essence, all things that we're doing and all things that most of our institutions that we support are not capable of doing on their own. So it's going to create opportunities within our in-to-out market, and we're already seeing that.

The other question or the other comment was around specific products that we have. So we have a whole suite of products that are in what we call our Gladiator suite, and there's a bunch of hosted solutions and things that we do to help manage fraud and cybersecurity and other components that we already sell to the banks. And we're starting to see an uplift in those products, and we expect those -- most of the products in that suite to be some big drivers for us for this year.

And something we chatted about earlier is this idea of the core processing stacks being these, like, major choke points in critical infrastructure in the country. There's a lot of focus on hardening those systems as quickly as possible. So how do you think about this process kind of near term and longer term, the investment cycle required to harden those systems versus the opportunity in the new business that brings in the door?

Well, I think one is the other. If you don't spend the time and the money to do the investments, you won't have the opportunities for the others. So one of the things that -- and I'm sure it's not just us, but just speaking from our perspective, is that we are taking the time and attention to invest in working with the models, understanding the models, making the changes, making the right investments in the infrastructure, talent that we brought in. All of those things are extremely important because if you're not shoring up the walls, there won't be any future opportunities.

But because of that and because of the level of differentiation where there's only a handful of core providers that truly are doing what we are doing, it creates a competitive differentiation as well. For some of the smaller core providers, most people don't know, there's really 26 core providers that are out there today. Most of them you've never heard of, but they're out there, and that creates a level of differentiation for us and some of our competitors as well.

Yes. And just on the broader demand environment, clearly, fraud and cyber and things that address these specific issues are top of mind. Have you seen any kind of rising tide where kind of everything related to Financial Crimes Defender, for instance, just sort of a rising tide demand environment for anything related to fraud detection, management of risk? And over time, like I don't know what the 4 version of Trifecta is, but does Financial Crimes Defender become a bigger part of the selling story?

Yes. And you actually -- we've talked about that as FCD being a part of the quadfecta or whatever quad. Yes. So yes, but you're right. And we had a very successful year with our Financial Crimes product last year. We sold 189 in the year. We actually have a more of a foundational product that we've had for a while, Yellow Hammer that we have a chance to start to flip some of those clients as we built out feature parity.

But as I mentioned earlier, it's not just about Financial Crimes, it's also the solutions that sit in our Gladiator suite. So if you kind of take each of those from a fraud perspective, from a cyber perspective, from a hosted network perspective, all of those, we think, have some nice upside, not just this year, but for years to come.

Great. Okay. I wanted to pivot to Banno. Banno signings were up 24% this year to 219. You have 15.8 million registered users, and you said you're close to announcing your first true outside the base win. So how are you thinking about the momentum in digital, the competitive positioning of the product? You talked a little bit about that earlier and maybe the growth runway ahead.

Yes. So I mean, 219 wins is significant when you -- we're about 70% penetrated into the Jack Henry core base. And as of today, we were only selling only into the Jack Henry core base. But a lot of those 700 other institutions are using competitive products, which gives us more bites at the apple. And to the point we made earlier, the advancement of the product, especially on the business side, is allowing us to go back and win some of those deals that we didn't win on the first round.

Outside the base is important for us to grow the digital presence for non-Jack Henry core clients. So that's going into our largest competitors and other competitors to displace the digital provider they're using, whether that be the core provider's digital solution or some of the digital-only companies that are out there. And so part of our strategy is not only to go in and have opportunities with the core base, but to sell the platform and the digital as part of an overall offering.

So it allows us to give them some of these larger institutions, in particular, if they want to move 1 or 2 core components at a time, but they're also not happy with their digital provider, we can bring them a blended solution to do all of that at the same time. So digital is only one of those key products that we're planning to take outside the base. All of our core modules we'll be able to take outside the base, meaning they can integrate with any of the competing cores.

And so that's going to create a lot of opportunity over time, not just within the Jack Henry base, but the full TAM of the market of the 8,000 institutions that are out there. And remember, we have over 7,000 clients today that are using at least one of our products. So each of those becomes an opportunity in and of itself.

And as you think about just the next 2 years, it sounds like a lot of momentum on the top line heading into the next 2 years, how significant is the outside the base strategy?

In the numbers you're going to see next week, it's not meaningful because it does -- it is a slow process. But what you need to do is have some wins in a couple of core opportunities to create momentum. And honestly, I mean, once you built the integrations out and things like that, it creates a lot, but it's not meaningful in the numbers you will see next week.

Got it. You're starting fiscal '27 at 20 to 40 basis points of margin expansion. Mimi saying it sounds like cautiously optimistic that, that range could move up over the course of the year. Margin optimization has been, I think, more of a focus for you since you took the role. How should investors think about that 20 to 40 basis points relative to the last couple of years being north of 60?

Yes. So to your point, the last 3 years, we've done 60 basis points or better, 60, 70, 92. And -- but we also guided those years at 20 to 40. So our message is at this point in time that 20 is what we consider a floor minus a macro event, 40 is not a ceiling. And so as we continue to operate, we do have additional costs. We have some headwinds this year from -- that we publicly announced with where our -- we're self-insured. So from a medical claims side, our medical claims got kind of out of whack where the first half of the year, they were way lower than we expected. The back half, they were more.

So we got to kind of normalize that. Same thing with the way we did commissions where we had a much higher base of wins in the new versus renewals, and we were commissioning those. Those have got to balance out. And then a big project we have called EC 2030, which is the consolidation of our data centers to actually move out of our own data centers into public cloud or into colos. So with that being said, Mimi's point is being, hey, we're a pretty conservatively based company. We do what we say we're going to do, and we don't try to get out above our skis.

So we believe we'll do north of 20. And if everything goes right, we'll do north of 40. But at this point, we're guiding 20 to 40 as we did every other year. But the one thing that I think we do a good job of is that we update every single quarter on how we believe that those numbers can move or not. And so this year being another one. But as we continue to grow the revenue side of it, again, which we'll talk about next week, you can pretty much ascertain that the margin side will continue to move up to.

Yes, makes sense. Okay. Final question here on capital allocation. Free cash flow was up pretty significantly last year. You returned over 100% of it to shareholders. M&A recently has been a relatively small part of the capital allocation framework. How are you thinking about M&A from here? What would it take for you to do something more sizable? And in the absence of M&A, what's the framework for capital allocation?

Yes. So we were very aggressive last year with buybacks. So we did roughly $445 million compared to $35 million the year before, mainly because the stock was much lower than what we believe it should be. So we took advantage of that. We have 10b5-1 plans in place, and we continue to operate. Mimi and her team do a great job. So we'll continue to look at things that are advantageous to take advantage of that in the market.

But we are still very active in the M&A. We got kind of down to the 2-yard line with an acquisition opportunity recently as little as the last month. We ended up walking away mainly because of some concerns we had on rebuilding the technology. And -- but the culture -- we really focus on culture, technology innovation and where they are in their evolution because if we're going to rewrite a bunch of things and to be public cloud native API first, we want to make sure we get the right price point.

But as you know, price valuations still continue to be a challenge. But we're very disciplined in our approach. We've done 51 acquisitions in 50 years. So we've always been very acquisitive, but we're not going to just buy something to buy something. But I will tell you that though we've typically done tuck-ins, we're not afraid to look at something that's a little bigger if it fits the strategy.

Makes sense. Well, I think that's about all the time we had. Greg, thanks for joining us today.

Yes. Thank you, Will. Appreciate it. Good to see you.

Good morning and welcome to the Jack Henry Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Vance Sherard, Vice President, Investor Relations. Please go ahead.

Thank you, Drew. Good morning, and thank you for joining the Jack Henry Fourth Quarter and Full Year Fiscal 2026 Earnings Call. Joining me today are Greg Adelson, President and CEO; and Mimi Carsley, CFO and Treasurer. Following my opening remarks, Greg will provide a summary of our quarterly and annual results, along with updates on our operations and strategic initiatives. Mimi will then discuss the financial results and fiscal 2027 guidance provided in yesterday's press release, which is available at the Investor Relations section of the Jack Henry website. Afterwards, we will open the lines for a Q&A session.

Please note that this call includes forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from our expectations. The company is not obligated to update or revise these statements. For a summary of risk factors and additional information that could cause actual results to differ materially from such forward-looking statements refer to yesterday's press release and the risk factors and forward-looking statements sections in our 10-K.

During this call, we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income. Reconciliations for these measures are included in yesterday's press release.

Now I will hand the call over to Greg.

Thank you, Vance. Good morning, everyone, and thank you for joining us today. I want to start by recognizing our associates. Their hard work and unwavering focus on culture, service, innovation, strategy and execution helped deliver an historic year for Jack Henry. Today, I will cover 3 main takeaways from the quarter and fiscal year before diving deeper into our overall business. First, we delivered record financial performance in both the fourth quarter and full fiscal year.

In Q4, our non-GAAP revenue was $633 million, up 7% over last year's fourth quarter and significantly higher than the implied guidance we provided for the quarter. Our non-GAAP operating margin was 21%. For the fiscal year, our non-GAAP revenue was $2.5 billion, up 7% over last year. Our non-GAAP operating margin was 24%, a very strong 92 basis point increase over the prior year. This was our third consecutive year of margin expansion of 60 basis points or greater and each exceeded our initial guide of 20 to 40 basis points. Second, we set new sales records for the year. Our sales and marketing team delivered an outstanding 58 competitive core wins for the year, up from 51 last year and surpassing our previous record of 57 wins achieved in both 2019 and '24. This is the largest number in over 20 years when growth was largely driven by de novo institutions rather than competitive takeaways. Just 6 of our 58 wins in fiscal year '26 were de novos.

Our public cloud native modernization strategy and innovative new solutions have helped us continue to attract larger institutions. Of the 58 wins, 14 were institutions with more than $1 billion in assets. Over the past 3 fiscal years, we have won 45 core deals with institutions over $1 billion in assets, representing approximately $98 billion in total assets. That compares with 15 institutions representing $26 billion in assets signed over fiscal years '22 and '23 when we started to initiate our upmarket strategy. As we briefly mentioned in our Q3 call, we signed the largest new bank client in our company's history in Q4, Woodforest National Bank with $9.2 billion in assets Woodforest was 1 of 15 competitive core deals we won in the fourth quarter.

Third, we continue to win higher-value trifecta deals that include core digital banking and card. Of our 58 core wins for the year, 59% included all 3 solutions. Last year, only 39% of our 51 core deals were trifectas. This success reflects the strength of our solutions on our collaborative One Jack Henry approach to all we do. One final point about our sales success. You may remember that at the end of last fiscal year, we implemented a new sales process to achieve a healthier balance of new sales and renewal contracts. This was the first full fiscal year operating under that process, and the results exceeded our expectations. 60% of our sales were new contracts in fiscal year '26, up from 45% the prior year.

Now for more detail on our overall business, starting with some accolades for the team. We were recently recognized by 3 prominent publications, U.S. News & World Report Best Companies to Work For, Time Magazine's Best Companies and Newsweek's America's Greatest Workplaces. Additionally, we were the largest and the second oldest company included in American Banker's Best Places to Work in financial technology rankings. This is particularly meaningful because most companies on that list are smaller, specialized fintechs. This recognition reflects both the strength of our culture and the innovation we continue to deliver for our clients. Our commitment to innovation remains a key differentiator for Jack Henry. And during the fourth quarter, we built on our momentum through several important advancements.

Starting with artificial intelligence. We announced our expanded collaboration with Google Cloud to provide AI-driven security capabilities for banks and credit unions. Building on our 4-year strategic partnership, we will use Google's genic defense products to develop a proprietary AI security platform to strengthen cyber resilience for financial institutions and help them defend against emerging threats. We also joined Project Glasswing, Anthropic's collaborative cybersecurity initiatives. Together, these efforts reflect our ongoing commitment to leveraging advanced technologies to help financial institutions operate securely in an increasingly complex threat environment. In addition to cybersecurity, we are bringing creative AI capabilities directly into the solutions that our clients use every day. A great example is within our Financial Crimes Defender platform where we are using AI to streamline the labor-intensive process of drafting summaries for suspicious activity reports or SARS.

Once an investigation wraps up, an AI-driven summary is generated for review while keeping the fraud investigator in full control. This can reduce tracking time by 75% to 85%, allowing investigators to dig deeper and spend more time stopping fraud. Other examples include Banno conversations, where AI translates over 200 languages to help bankers better serve diverse communities and our flagship CRM tool, Synapsys, where AI will instantly generate client relationship summaries and provide actionable next step guidance for more impactful account holder engagement. We currently have 22 AI-enabled products in the market and have identified more than 20 additional AI capabilities for release over the next 6 months. In all cases, we will maintain strict risk management, compliance and governance frameworks to ensure our clients always remain in control. These client-facing capabilities are driven by the rapid AI adoption across our own internal operations.

Today, over 100 AI tools are approved for internal use, supporting more than 890 documented use cases. We've also internally deployed more than 50 AI agents through our custom developed AI platform leveraging Gemini and other Frontier models to provide specialized expertise, workflow automation and self-service supported scale. Through our associate enabled by coding platform, our teams have built more than 100 AI-powered applications that eliminate manual processes automate repetitive work and empower business teams to rapidly solve problems without traditional development cycles. The impact is meaningful and expanding. Engineering teams are doubling productivity through AI-assisted development workflows, operations teams are reducing recurring reporting processes from days to hours and analysts are cutting research and document creation from hours to minutes.

Beyond AI, we are also advancing next-generation money movement capabilities for financial institutions. In Q4, we announced that we are part of Open USD, a new stable coin for global money movement backed by over 140 leading financial companies, including BlackRock, Mastercard and Visa. We will begin integrating Open USD when it launches later this year. This complements the work we are doing in beta testing for send-and-receive USDC capabilities. Together, these solutions will provide our clients access to additional capabilities such as cross-border and treasury payments. Additionally, we are seeing strong momentum across our newest solutions, including our tap to local SMB merchant payment and Rapid transfers digital money movement offerings.

Since our last earnings call, we've added tap to local for over 200 banks and credit unions, bringing the total number to more than 900. We've also more than doubled the number of merchants who are now enrolled and we expect adoption to continue growing rapidly in the coming months. Rapid transfers is now live with over 140 banks and credit unions with an additional 150 in various stages of onboarding. As consumer adoption accelerates, transaction volumes continue to grow. The average transaction size is more than double our original projections, driven by stronger-than-anticipated inbound transfers. One example we have heard from clients is that before rapid transfers, customers would go to an ATM to withdraw cash from one institution and then immediately deposit that money on the same ATM into their bank or credit union account.

With rapid transfers, that same transaction can now be completed in seconds with a few clicks on a phone or a computer. While these initiatives address different client needs, they are all enabled by the Jack Henry platform, our public cloud native platform that connects seamlessly to our core systems. The platform serves as an integrated bridge between our foundational cores and modern solutions. This is increasingly important as the industry enters an error defined by AI, open banking, real-time data, tokenized money and embedded financial experiences. Banks and credit unions need architectures that provide the flexibility, connectivity and scale required to compete in a rapidly evolving financial services landscape. We began building the platform over 4 years ago, and it is a key driver of our competitive wins, especially among larger institutions.

Moving on to our reporting segments. In Core, in addition to the 15 competitive core wins in Q4, we also secured 13 on-premise to private cloud contracts, including 7 institutions over $1 billion. For the year, we signed 36 in-to-out contracts with 15 being institutions over $1 billion. Today, 79% of our core clients are operating in the private cloud. In payments, we continue to see strong growth in faster payments. Over the past year, our clients' adoption of Zelle grew by 25%, RTP by 24% and FedNow by 29%. In the fourth quarter, payment transaction volume across these channels increased 45% year-over-year. We also saw healthy card activity signing 17 debit and credit card deals in Q4 that brought our full year total to 65, up from 63 in the prior year.

In complementary, we signed 61 new Financial Crimes Defender and faster payment module contracts in the fourth quarter and 183 for the full year. As of June 30, we completed 189 Financial Crimes Defender installations and another 57 are in various stages of implementation. We have also installed 191 faster payment modules with an additional 231 in progress. The Banno Digital platform had another strong quarter with 26 retail and 34 Banno business signings. That brought the full year total to 219, up 24% over prior year. The platform now serves more than 15.8 million registered users, up 11% from a year ago.

Another area where we are seeing strong momentum is in treasury management. We signed a record 17 new treasury contracts in Q4, bringing our full year total to 45 deals, up 25% over the prior year. In addition to higher volume, our treasury services are attracting larger clients. Over the last 2 years, the average asset size of clients signing with treasury deals was $2.1 billion, up 43% from fiscal years '23 and '24. We are looking forward to seeing many of you in our Investor Day at September 15 in Dallas, where we will share updates on our overall business key strategies and innovation, including some live demos. We are also excited about our annual client conference, Jack Henry Connect in mid-October. This is a great opportunity every year for us to meet with prospects, clients and partners.

Last year, 23 of our new core wins were with prospects who attended the Jack Henry Connect Conference. Prospect and client registration for this year's conference is currently tracking 36% ahead of last year's pace, and we already have over 250 registered for our CEO Forum which would shatter last year's record of 211 attendees. In closing, fiscal year 2026 was a milestone year for Jack Henry. In addition to celebrating our 50th anniversary, we delivered record sales and financial performance. We continue to benefit from the strength of our innovation strategy, differentiated solutions and disciplined execution. We are attracting larger institutions and winning an increasing share of higher-value trifecta opportunities. Interest in technology investments across the financial services industry remains strong as reflected in our robust sales pipeline. Looking ahead, we are well positioned to deliver consistent revenue growth, margin expansion and long-term value for our shareholders.

With that, I will turn it over to Mimi for core specifics on our financials.

Thank you, Greg, and good morning, everyone. I'll begin by thanking our associates who continually deliver value and industry-leading service to our financial institution clients. The result is another strong quarter, concluding a fiscal year of solid revenue and earnings growth. We exit a positive year with meaningful momentum excited as we start fiscal '27. I will begin with our impressive fourth quarter and full year results, then conclude with our fiscal '27 guidance.

Q4 GAAP revenue increased 5%. Non-GAAP revenue increased 7% for the quarter and full year, a continuation of consistently strong performance. Fourth quarter deconversion revenue of approximately $9 million, which we previously announced, was down approximately $11 million for the quarter, reflecting M&A activity among financial institutions. As a reminder, the dollar amount of deconversion revenue has little correlation with a number of transactions or impact to Jack Henry's annual revenue. and the absolute amount of deconversion revenue can vary greatly quarter-to-quarter. We continue to see industry consolidation as largely neutral to slightly positive for our business.

Now let's more closely at the details. GAAP services and support revenue increased 3% for the quarter, while non-GAAP increased 6%. Services and support growth during the quarter remains consistent primarily driven by strength in data processing and hosting revenues for both private and public cloud. Private and public cloud offerings continue to drive robust growth. Cloud revenue increased 7% in the quarter. This recurring revenue contributor is 32% of our total revenue.

Shifting to processing revenue, which is 44% of total revenue and another strategic component of our long-term growth model. We delivered healthy performance with 7% GAAP and non-GAAP growth for the quarter. Consistent with recent trends, quarterly drivers include increased card, digital and transaction and faster payments revenue. Completing commentary on revenue, I would highlight total quarterly recurring revenues was 91%.

Next, moving to expenses. Beginning with cost of revenue, which increased -- sorry, increased 8% on a GAAP and 7% on a non-GAAP basis for the quarter. Drivers for the quarter are consistent with recent previous quarter results and include higher personnel costs, direct costs growing consistent with lines of revenue and higher internal licenses and fees. For modeling purposes, amortization of acquisition-related intangibles was $6 million for the quarter.

Next, R&D expense increased 17% for GAAP and 16% on a non-GAAP basis for the quarter. The quarterly increase was primarily due to net personnel costs driven by trailing 12-month headcount growth, ending with SG&A expense. For the quarter on both a GAAP and non-GAAP basis, it increased 19%. Results reflect higher personnel costs, including increased medical costs from second half normalization trends and increased compensation tied to trailing 12-month growth. As we previously shared, Q4 was a higher expense quarter, primarily driven by nonrecurring activity. We remain focused on generating annual compounding margin expansion. Q4 delivered non-GAAP margin of 21%. More importantly, fiscal year non-GAAP margin improvement was 92 basis points with a non-GAAP margin of 24%. This is the third straight year of compounding non-GAAP margin expansion as aligned with our commitment to investors.

Non-GAAP margin for the full year reflects inherent leverage in our business model, management's continued focus on creating AI efficiency, strategic cost management, leveraging our existing workforce and enterprise process improvement. These strong quarterly results produced a fully diluted GAAP earnings per share of $1.57, down 10%. For the fiscal year, GAAP earnings per share was $6.98, an impressive increase of 12%, with the largest contributor being operations. Reviewing the core operating segments for the quarter, we see positive performance across the board. Core segment non-GAAP revenue increased 6% for the quarter with non-GAAP operating margin contraction of 139 basis due to temporary product mix of lower margin revenue sources such as implementation where we added 2 new conversion teams and customer work orders.

Payment segment quarterly non-GAAP revenue increased 6%. The segment again has been topic non-GAAP operating margin growth with quarterly results of 174 basis points. Card Processing revenue showed steady growth and was partially offset by atypical lower incentive revenue. This segment also benefited from continuing large percentage growth from FaaS payments. The complementary segment quarterly non-GAAP revenue increased 6% with non-GAAP margin growth of 16 basis points. Quarterly revenue growth benefited from digital solution demand beneficial product mix and additional sales sourced from new core wins, existing core customers and noncore financial institutions.

For the quarter, Corporate Services non-GAAP revenue increased 31%. This is primarily the result of meaningful increases in hardware sales. This segment reflects expenses not allocated to other segments, we will not be discussing non-GAAP operating margins as it provides no meaningful insight. Now a review of cash flow and capital allocation. Q4 operating cash flow was $303 million, a 7% decrease over the prior fiscal Q4. Quarterly free cash flow of $245 million delivered a 10% decrease over the prior fiscal year Q4. This was primarily the result of lower deconversion revenue. Full year free cash flow of $539 million was a substantial increase of 31%, primarily due to operations and cash tax NPAT. This was an attractive increase over our recent fiscal year results that were negatively impacted by the expiration of a tax provision.

Our consistent dedication to value creation resulted in a trailing 12-month NOPAT return on invested capital of 23% compared to the 21% in the prior year. We are very proud of the durability of this metric and how it reflects our high-quality allocation of capital for our shareholders with this fiscal year, including significant share repurchases and lower average debt. Additionally, I would highlight the following significant fiscal year capital decisions resulted from our strong cash flow generation and cash on hand. We purchased $448 million in shares, representing a 4% reduction in shares outstanding, paid $170 million in dividends plus the asset acquisition of Victor Technology. We're proud to return 122% of free cash flow to investors while maintaining a conservative, flexible balance sheet. The average purchase price of shares repurchased was $152 versus the average share price during fiscal year of $161. We ended the quarter with debt of $40 million, consistent with normal course revolver usage.

I will now discuss our guidance for fiscal 2027. We are positive on the early outlook for fiscal '27, which is expected to be similar to the healthy results delivered last year. As you're aware, yesterday's press release included fiscal '27 full year GAAP and non-GAAP guidance. Full year GAAP revenue growth guidance is a range of 5.5% to 6.5%. Revenue on a non-GAAP basis is expected to be within a range of 6.3% to 7.3%. Conversion revenue guidance will continue to follow the conservative methodology introduced in fiscal '24, with initial fiscal '27 deconversion revenue guidance of $23 million. First quarter is forecasted at $11 million with the remaining $12 million being evenly spread across the remaining 3 quarters.

Full year non-GAAP margin is projected to expand 20 to 40 basis points, consistent with the last 3 fiscal years, but we are cautiously optimistic that we can increase that range as the year progresses. Full year, we expect tougher non-GAAP revenue and non-GAAP margin comps in the first half, reversing in the second half to allow us to achieve our full year non-GAAP guidance target. Expense comps in the first half of fiscal '27 will reflect pressure from self-insured medical costs returning to historical levels. In addition, increasing cyber and infrastructure investments related to frontier models, AI innovation and our data center consolidation project, EC 2030, will pressure margins in fiscal '27.

In a traditional modeling assistance, please recall that our Annual Client Conference Connect will be in our fiscal second quarter compared to the first quarter in fiscal '26. We expect Q1 non-GAAP revenue growth to come in modestly below the low end of our full year guidance range, driven primarily by a 1% impact from the shift in our client conference, along with the timing of certain onetime revenue items. As a reminder, we see fluctuations in quarterly results relating to software usage license components, along with the timing of implementation. Therefore, the correct performance indicator for our business is a consistent strong fiscal year financial results. All presented results and guidance metrics were indicative that our business operation remains robust with growth opportunities across all our operating segments. The full year GAAP tax rate for fiscal '27 is 23%. A discussed guidance metrics produce stronger full year outlook for GAAP EPS of $7.33 to $7.38 per share, a growth of 5% to 6%. As a reminder, conservative deconversion guidance potentially understates GAAP EPS growth. Full year free cash flow conversion outlook is for 85% to 100% in fiscal '27.

In conclusion, our fiscal 2026 results reflect another fantastic year. We're pleased by the continued performance momentum and upbeat fiscal 2027 year outlook. We appreciate the contributions of our dedicated associates that produce these superior results and our investors for their ongoing confidence.

Drew, could you please open the line for questions?

[Operator Instructions] Our first question comes from Nik Cremo with Barclays.

First, I just wanted to start on all the momentum you've had with record core wins in FY 2026, which is really impressive. So first, can we just get an update on how the pipeline is looking today? And as we look into FY '27 and FY '28, do we see potential for you guys to continue to accelerate that number as you capitalize on the well-known ongoing disruption at one of your competitors. So I guess it looks like 10 to 12 months to win a deal. So I think we have yet to see any benefits from that description.

Yes. Thanks, Nik, for the question. Yes, I mean, we're seeing benefits of the disruption, but it isn't just coming from one provider. We're taking share really from everybody right now. And so I would say that from a momentum standpoint, I can tell you that we are already -- we've already exceeded what we had done in the first quarter of last year, already in the first month of the quarter. So for core wins. So I can tell you, we are tracking really well. We're continuing to have momentum.

The one thing that will be a little bit different this year is that there seems to be lesser credit union opportunities coming available this year as compared to the year previous and the year previous to that. So we'll see how that kind of plays into the overall. But I can tell you, and I'm sure this is going to be a question from somebody, so I'll go ahead and answer it. We're anticipating to do as good or better this year somewhere in the 58 to 65 range is kind of where we think our core win total will be this year. So somewhere in that range, we think is a very legitimate and reasonable number based on not only the amount of opportunities we have in play, but the momentum that we have in those opportunities in play.

And just for my follow-up, I wanted to ask on how your conversations with customers are going as it relates to these increasing cyber threats from all of the frontier models such as Mythos. So what products is this driving incremental demand for on the Jack Henry side? And do you see benefit from this being an incremental catalyst to drive the customers that aren't on Jack Henry private cloud to the private cloud in the future?

Yes, Nik, that's great insight, and we agree. We are having more significant in conversations. And as you can even tell by the numbers that we talked about in Q4 where we had 7 multibillion and we had 13 of the 36 were multibillion. We're getting larger institutions to kind of start to come around. We're doing our best to inform them about the frontier models and some concerns that they have, the expense that they should have concerns about with running those. And so candidly, we're having much more success. So I don't know we have less -- obviously, less deals to bring over into the private cloud. But the reality is we're continuing to have momentum there. We expect to have momentum. And so we'll see how that plays out this year.

The other thing you mentioned was around other Jack Henry products. I do believe our Gladiator solution set, we believe we'll have a -- could have a really good year based on some of the interest level that we've had in early -- later parts of Q4 and the early parts of Q1 of this fiscal year. So we'll continue to watch that and report on it, but that product set definitely will play into this the printer model and concerns in that space.

The next question comes from Rayna Kumar with Oppenheimer.

This is Anthony Cyganovich filling in for Rayna. You've had a lot of success selling Banno to existing core users. Could you talk about how close you think you are to selling Banno outside of the core and what you believe the revenue opportunities?

Yes. Thanks, Anthony. The revenue opportunity is still really early to talk about, but I'll give you some updates on kind of where we are. So 2 significant things have actually happened. If you all recall, we really started to build out the sales traction and things along that line in January. So really the last 7, 8 months. So since we're reporting on this quarter and this year, I can tell you that 2 things have happened. One, we're very close and probably we'll be announcing in the next -- the signing of a an outside the base deal, with a pretty decent sized opportunity for us, again, not using any of the Jack Henry products.

But the other thing that we've done, and this is all part of the overarching innovation strategy that we have with the Jack Henry platform, which is we have sold a client that is going to use Banno and the Jack Henry platform that currently, and they're going to do it for a digital-only core and they're going to use it and they're not connected with any of the Jack Henry core today. So both the platform and the Banno application will be used in this particular client. And that contract has been signed. So things are -- honestly, it takes some time to build the momentum in that space. The momentum is starting to happen. But the thing that you're going to see that we're able to do that I think a lot of our -- well, not I think, I know a lot of our competitors can't do is we're going to be able to leverage both the platform and our digital offering as a combined solution set, which should make that even more attractive. So more to come on that, but that's where we are right now.

Great. And just as my follow-up, maybe you had 3 straight years of at least 50 basis points or more of non-GAAP operating margin expansion. Can you walk us through some of the puts and takes that might prevent that kind of margin expansion for FY '27 and maybe touch on what came in better than expected in FY '26 versus your original guide?

Sure, Anthony, happy to. First of all, we're quite pleased, as I mentioned in my prepared remarks, the consistency, being able to do what we said we were going to do, we were very focused on the compounding nature of margin expansion versus the 1 year kind of one-off. It's important, as you well know, that compounding effect and the consistency of that as a value driver. So we have been very focused to Jack Henry for a long time on efforts around consistent improvement, whether that be AI efficiency, automation, just general workflow, very thoughtful around head count growth. So doing all the things that we have the skill sets and experience on doing that just manage the overall expense base of our organization. So we will continue those efforts.

The '26 results as we talked about, have the windfall of some benefits that we don't expect to continue in '27. There were some things in the first half, in particular around lower-than-normal cost expenses related to medical expenses, commissions that were more second half weighted and a little lower overall that led to that really strong 90-plus kind of number that we don't expect is a year in, year out type of delivery. Part of that is also some of the projects we've talked about that will be a slight headwind around infrastructure, around security, around the Braintree models that type of work that -- some of that started in late '26, but most of that is a '27 number. So we think the prudent thing is to start with a number that we think very strongly in our ability to execute on it. And then as we continue to see the year, we see the product mix et cetera, that will drive that margin component, we hope to overperform.

The next question comes from Dan Perlin with RBC Capital Markets.

Greg, I wanted to I wanted to kind of tie a couple of things together. So clearly, the backdrop right now is incredibly strong for you guys. It's very evident in the core wins and your ability to pull this together with these transfected deals. But you also mentioned your new sales process that you put in place this year, and that's driving 60% new sales versus 45% in the prior year. So I guess part of it is maybe a reminder of what that new sales process was and how important that is? And then how does that dovetail into the trifecta opportunities because those also are stepping up pretty meaningfully here?

Yes. Thanks, Dan. I will say that the 2 things really don't necessarily go hand in hand. The trifecta opportunities are really more about the work that we've done in those products to get the products on par or better than our competition, which again was something we promised at our investor meeting 2 years ago, especially around Banno and our card solutions. So those 2 don't necessarily go hand in hand. The emphasis on the new versus renewal is this, that in years prior, there was the ability for our sales team to pull in a renewal if it was going to help potentially benefit quota attainment. And so benefiting quota team, it doesn't necessarily help the company. And so we made significant changes to how that could occur, what would happen if it did occur, things along that line. And thanks to our Head of Sales and his team of leaders. They listened, they adhered to it. And what I'm the most proud of is that, that team killed the numbers this year and did it by winning a bunch of new deals and not by pulling in renewals. So that's really the benefactor. So if you think about that, we're just going to have more and more new revenue versus revenue that could have some level of compromise -- what's the word I'm thinking of is where we're -- I can't think of the word I'm thinking it. But please? No, no. Anyway, where we're having some lost revenue tied to that. So the reality is we have been really heavily focused on that. And honestly, the team has done a good job. Now part of it is although a byproduct of how many renewals are in "the pipeline." So you have to kind of work through that as well. So do I expect to hit 60% again this year? It will be tough, but I do expect it to still be north of 55% on the new side. And again, we got a lot of great processes we put in place to ensure that, that doesn't happen going back and forth. So that's really the driver of that is our ability to manage it better, which ultimately becomes more future revenue for Jack Henry.

No, that's super helpful. And just quickly, Mimi, would you mind just kind of double clicking a little bit on the commentary on revenues modestly below in 1Q and what the drivers and timing shift there was? I know you said the conference obviously going back to 2Q, but -- and just making sure I understood the magnitude and any of the key components to that.

Sure. Sure, Dan. So we expect the first quarter non-GAAP revenue growth come in modestly below the low end of our full year guidance range. primarily driven from that 1% impact from the shift in the timing of Connect Conference to second quarter this year versus first quarter. And then there's just some onetime revenues. But just for also modeling clarity, just to give folks a little bit more detail, the Connect Conference typically runs around $6 million in revenue and about $10 million of expense.

The next question comes from Jason Kupferberg with Wells Fargo.

So I wanted to hone in on the theme of moving up market. We've seen that playing out for a while now. And I was hoping you could talk about what the average asset size of the 58 new wins in fiscal '26 look like versus fiscal '25. And then as you consider the 58 to 65 target new wins in the current fiscal year, would you expect the average asset size to be up again versus fiscal '27?

Yes. So thanks, Jason. So a couple of things there. So the average asset size this year was basically on par from last year. And the reason why is that in the credit union wins, they were significantly lower in asset size than they were the year previous. So there was several institutions were in the $400 million to $500 million range. And -- but the important part was that those $400 million to $500 million credit unions bought all 3 of the key products to make them trifectas. And so some of those deals were -- if we're not selling all 3 of those products, we may not spend as much time on them, but as long as we sell them, they become revenue opportunities that are worth chasing. .

So from a year-over-year, not significant, right almost on par. But the part I do want to go back and reemphasize is that in the last 3 years, we've won 45 multibillions worth close to $100 billion in assets versus the 2 years prior to that, which -- the reason why it's only 2 years because that's when we started to really focus on this for $26 billion. So that's really where I think you ought to see when we look at the number of [ 3 ] and [ 5 ] and [ 7 ] and now a $9.2 billion opportunity, we're starting to win more and more of those deals in that range. We now have over 52 -- over 50, I think it's exactly 52 over $5 billion in assets at the company now and again, significantly more than it was several years ago.

Understood. Okay. That's helpful. And just as we think about -- I mean, you talked about the fact that you feel like Jack Henry is taking share, not just from a single competitor, but more broadly. As we think about the elevated number of new wins that have started to trickle in, and it sounds like it will accelerate in fiscal '27. Any way to start thinking about incremental revenue contribution from those as we look ahead to fiscal '28? Obviously, there'll be a lag there between when you book them and when you start recognizing revenue?

Yes. I think, Jason, you'll see some good insights into that at Investor Day. That's one of the things that we're going to do differently this year. We're going to give more insights into to a future year. And I think if you go back to some things that we've been saying on the road as well as these calls where was going to look very similar to this year, maybe some upside, and we'll see, but there are a few things that we got to continue to overcome. But we remain very bullish on '28.

The next question comes from Kartik Mehta with Northcoast Research.

Greg, obviously, you talked about the 58 wins, which is a record in the 14 institutions that are over $1 billion. Is the number of wins or the size of the institution have an impact on implementation timing and therefore, revenue timing?

It really is more about the timing left on the contract itself. So when we win a deal, it really depends on how much time that particular institution is left on their existing contract to when we go live. Like our large win that we just had they're going to go live in early '27 where a lot of institutions could be anywhere. As you've heard us say this before, it's usually anywhere from 15 to 24 months. Sometimes it's less, but very rarely is it less than that time frame, especially on a new core win. If it's a merger or something like that, especially a merger of Jack Henry to Jack Henry, I mean, we've done those in 6 months or less. So it really depends.

But on a new core win, it's usually around that time. But the size itself, honestly, is less impactful than what it is, the 2 main things. contract term left on the contract as well as their willingness to get engaged on the education and reeducation of the things that their staff needs to do. Those are the 2 longest poles in the tent on everything that we do.

And then you said, obviously, you're anticipating fewer credit union credit union win, sorry about that. I'm wondering if there is a reason for that, if something is changing in the industry or this is just a year that fewer credit unions go to market.

Yes. And -- I'm not saying we're going to have fewer credit union wins. I think actually, we're going to have more credit neon wins this year than we had last year. I do think -- because I think we're going to win more of the market share than we have. But there are fewer credit union RFPs, and it is a cyclical thing. That's really more of what it is. Now there is one provider that could open up a lot of credit union opportunities depending on what happens there. But the reality is based on what we -- our conversations with the consultants and our conversations with our sales team, we do see fewer quote bites at the apple. But I am bullish that we will actually win more credit unions this year than we did last year.

The next question comes from Will Nance with Goldman Sachs.

I wanted to follow up on the earlier comments on the margin outlook for the year. Maybe, I think you called out a couple of different things that you guys are overcoming this year, including the big investment initiative that kicked off late last year as well as some of the comps around employee health claims, et cetera. So I guess coming off a really strong year absorbing some of those headwinds and you're still guiding to the long-term margin outlook seems to suggest like a stronger rate of underlying margin expansion or expense control and kind of carrying the trend over the last couple of years, especially if you're able to potentially outperform that over the year. So can you talk just a little bit about maybe stripping away some of the tough comps, how you guys are feeling about operating leverage over time? And are we at sort of a new normal for operating leverage looking at the last couple of years?

Great question, Will. I think if you think about '26, had we not had some of that onetime benefit in nature probably would have looked similar to the historical range that we start on. Similarly, '27 if we didn't have the headwinds that we anticipate we would expect it to be higher. So I think they kind of offset each other a little bit. Your point in terms of the track record pointing to an elevated I think at this point, we're going to be consistent without the starting gate. Now that doesn't say our ambition is to not produce more. Certainly, it is. And I do think that over the near term. There are a number of tailwinds that should lead to higher margin expansion whether that be AI efficiency, whether that be once we're complete and the transition of the data center business, the way our FinOps team is managing AI compute cost the third-party arrangements we have with a number of partners, et cetera, and just the overall product mix.

And as we have the new and emerging segments start to represent a larger percentage of the total revenue, those are at very attractive margins as well. So I think there's a number of catalysts that could increase that margin on a sustained basis at a higher level. We'll go over some of that at Investor Day. I think it's a little premature. I don't think that '27 is the year you're going to start to see it though.

Got it. That's very helpful. And then if I could just maybe follow up on the payments segment growth algorithm. I think there have been a couple of quarters where I think specifically the card revenue growth within payments has come in a little bit lighter than it has historically, a little bit stronger this quarter, obviously, a good spending backdrop. How are you thinking about the growth algorithm and payments going forward and the contribution of card versus some of the other products in the segment?

Yes. I think it's a fair observation, Will. Certainly, the last couple of years, payments while being strong and reflecting the resiliency of the U.S. consumer spending and some really attractive new sources of revenue has been a little shy of the historical growth algorithm I think if we think about the underlying components of that, we've seen a great resurgence in our bill pay, still a bit lower numbers relative to our total growth profile, but coming off a very mature base and being resuscitated through the pay rail acquisition. So that's been a really nice end to see -- the card business is in line with the industry and U.S. debit numbers. I think we've all been pleased over the last 2 years to see the resiliency of the U.S. consumer despite geopolitical inflationary and other kind of macro factors, we expect that spend rate to remain modestly strong.

The other thing that we're starting to see, whether it be the small business efforts or faster payments as a whole, Greg talked about stable coins and tokenized deposits and Open USD and other sources. As we start to see the use cases for that continue to rise, I think that could be an attractive percentage of the business within the payment segment. So we're seeing not only a healthy adoption in those but increasing the dollar volume of those transactions, which is a great indicator for the future growth rate that, that could be a contributor of.

The next question comes from Timothy Chiodo with UBS.

Great. This question is probably mainly for Mimi. It's about the '27 guide you did a really nice job calling out a couple of the headwinds to Q1 and really the first half, but what that kind of implies is that the second half is going to be much stronger and specifically the Q4 exit rate really both on revenue growth and margin expansion. And I was hoping that you've been a business like yours that has a reasonable amount of visibility that you could talk a little bit about what's implied in your planning and then the guidance for the exit rate for both revenue growth and margin expansion, at least directionally and what that kind of spits out for the earnings growth exiting the year and heading into '28?

Yes. Happy to, Tim. I would say, on a reported basis, we expect a gradual ramp throughout the year. You have some of the first half tightening issues between Q1 and Q2. We talked about due to the conference timing and other onetime revenues. We expect it to improve over the course of the year, not a dramatically dependent year, but just a gradual upslope as the year goes on. That should leave us exiting '27 with great momentum. One of the things we have highlighted that is a talking point for our Investor Day is that '28 and beyond outlook. And '27 is an important year as we continue in some of the new and emerging space. And so as we continue to see volumes and adoption in '27, that will give us greater confidence for that '28 and beyond kind of run rate. But I think it's still very much fair to say that the accurate metric for our business is still full year versus kind of an annualized exit rate or any particular quarter. .

The next question comes from Dominick Gabriele with Loop Capital.

If you look at complementary the growth there, I think it's growing on a 2-year stacked basis, almost 10% still, which is actually really strong, especially with the commentary out there that some banks or credit unions or everybody that could build a software solution themselves is going to build is going to try to do that. But here you are growing on a 2-year stack 10%. So I'm just curious if you could talk about the strength of complementary and what you envision is going to drive that business moving forward.

Yes. The beauty and the challenge of complementary is that it's a full portfolio of products. And so there's some products in there that are beautiful anchor tenants, as I like to think about that are just mature growers but a bet at lower levels. And then you have some exciting areas. Greg talked about tremendous growth in treasury management, for example that is within digital. Digital itself continues to be a tremendous grower for us. We are continuing to add new product functionality within our digital product suite you have areas like Financial Crimes Defender, that's very hot from a spend perspective of cyber and fraud prevention.

So I think the complementary portfolio as it's designed as it's intended is to meet the more fulsome needs of the credit union or bank. And I think that's reflective of the overall IT spend I think your comment on the current environment and a lot of start-ups and a lot of fear of do-it-yourself, I think, has a lot more cost than people maybe would have envisioned a year ago with AI compute costs going up and also the robustness, the scalability and the compliance of known execution that Jack Henry delivers an institution, I think there's some things that they're going to do themselves, but I think it's much more on the customization side than it is a full-scale end-to-end solution.

Right. And then just for my follow-up, I guess, when you're thinking about partnering or outsourcing potentially different products to AI companies to help augment your own products. Talk about the build yourself, partner with an AI company or fully outsourced that a potential new service to one of those AI companies and what the kind of competitive dynamics and moat that you have depends on which kind of path you choose there.

Yes, Dominick, this is Greg. I'll take that. So I think there's a couple of ways. We do look at by partner, build in really everything that we do. And so we actually have a team a fintech biz dev team that works on building relationships and some of those relationships end up being just pure integrations into our product set. They may integrate into our digital or our core, our payments offerings. And I think as you know, we have over 1,000 fintechs that are integrated with us today. Some of those end up being relationships that could end up growing into a variety of different modes. So whether it's a reseller mode or a referral mode and then some of them could end up being potential acquisitions. And some of the acquisitions we've done through the years have come through that way, including vigor, our most recent one. So all of those are taken into account.

From an AI-specific Candidly, we have been working and talking with several AI companies, people that we believe potentially could accelerate. But I will tell you -- and I say this, hopefully, in a humble fashion, our team is really talented and the people that we brought on to build out our AI and the things that we're doing, we're finding are really advanced. And so there's very little that we're using from the outside versus the what we're able and capable to do on the inside. So if we do find something that we think would accelerate that, of course, we're partnering in those various tools that would allow us to do that.

But from a product set, it's been -- honestly, it's been infrequent at this point, but that doesn't mean it won't change, and it doesn't mean that we're not constantly looking. We have seen of people that are truly on the phone every week talking to -- as you can imagine, we get a lot of inbound calls with people that want to partner or whatever with Jack Henry. So we evaluate that and continue. But it is 100% on every one of these opportunities. It's a build partner by mindset.

And Greg, if I could add on, if I may. Our clients are looking for our help in this kind of chaos and noise to help them think about what solves their needs and who those vendors might be. And it's -- AI is on a built-in, not a bolt-on. So it's around how do we help them with their data find the right partner, find the right solution and make that seamless. So it's not just a bolt-on experience. .

Yes, I'd like to add one other point just because we're talking about this. We have actually started to engage in consulting engagements with our clients to help them build out governance, help them build out a variety of things that allow them to utilize AI within their environment. You can imagine a lot of our customers based on their sheer size don't have the wherewithal to do that or the talent. And so we have started to do engagements, consulting engagements to help with that. So not only bring fintechs and AI people to them that we know, but also help them build that out themselves.

Looking forward to 2028 and beyond. Great quarter.

The next question comes from Brett Huff with Stephens Inc. .

Two questions from me. One, a little bit bigger picture on the platform. Greg, I think you mentioned this both in terms of kind of future proofing all size FIs as they buy from you, but also particularly on the moving upmarket. It seems like you all have a really good solution. I know it's modularized. I know things are rolling out over time. And it seems like people aren't just going to buy the full Monty all at once. It's designed to be kind of a progressive thing. Can you give us any new anecdotes on how that's working, new GAs that might be coming out, particularly strong adoption of a particular feature function?

Yes. Sure, Brett. So a couple of things. So while you were out, we did progress that platform. So we roughly have about 25 modules that have been created that are kind of core specific things like general ledger, exception item processing, authorization management. There's a whole host of things that would fit into the core in deposit functionality that we built out. So we now do have a full deposit-only core. We have several clients that are in what we call closed beta testing that right now. We're working on the lending to finish out that. We actually hope to have some announcements at Investor Day on some of that as well. But the reality is, to your point, there's very few people that are buying -- they're not buying the actual solution set today, they're buying for the future, and they're making sure like the $9.2 billion win that we had with Wood force, they exited from one of our large competitors modern platform after several years of not being able to do what they wanted to do. They saw what we have done. We were able to show it. Again, it's all -- this isn't -- there isn't a PowerPoint being shown. It's all live demonstrations and an actual ability to utilize the solution set. So they're interweaving some of the modules in with our SilverLake platform, which is the way we built it. So it's all integrated. So some of the higher mover modules today right now are domestic wires. We just finished our international wires. We had got that all done. We have the general ledger out. We have a lot of the things that we were talking about earlier with exception item processing.

And the other part of this breadth that's important is that it isn't just about the monetization of what Jack Henry is doing out in public. It's our ability to end up utilizing those services inside the company. So part of our ability to move more quickly and honestly, more quickly than anybody is our ability to build things once now, where each of the individual groups may go build exception item processing and their own specific product set. Now it's built once in the platform and they all utilize the APIs to access that. And so it just makes everything we do faster and more efficient and longer term. So we have several large institutions, ones I can't name yet, but big ones, much bigger than what we've been talking about that are talking to us about future solution sets on how they could either use components or maybe it being kind of their core of the future. But right now, the deposit-only full solution is available, and that is an amalgamation of a bunch of components so you can buy it in a bundle or in an individual component. That's super helpful.

And then, Mimi, I think this is more for you. I know there's been a couple of questions on AI, but we concluded to try and kind of suss out additional spend, particularly on the COGS line for supporting AI efforts. And as you know, everybody is really worried about token costs and things like that and paying close attention to gross margins. Can you just walk us through I know you mentioned there's some additional spend on AI development and things like that? Can you -- any more specifics on that for us to just give us a sense.

Sure. So while we are encouraging usage, we're also being very thoughtful and fiscally responsible. So access to the tools that Greg mentioned, over 100 tools we're currently internally using those come way off. And so we're managing some of that to where is the best return. Who are the creators, for example, do all of developers, internal audit, marketing, so what is the benefit depending on what the tool is, what is their greatest returns. So we are managing that spend we're also managing the spend in the ever arms race that is LLM models, we are staying -- we have partnerships with all 3 cloud providers. We do have a strong partnership with Google, but we're also seeing LLM model agnostic. So that allows us to think about when we use external models when we might use local models so that our FinOps team can manage that AI compute cost and optimize the routing for AI. We also have, depending on whether it's internal use or within a product. There's also clauses within our contracts if it pertains to kind of pass-through capabilities of certain cost arrangements.

So there's a number of levers. It starts with oversight. It starts with dashboards and monitoring and making decisions to inherently offer flexibility for the future given the dynamic pace of that industry. But also making sure that some of our arrangements with different vendors or partners allow for both growth of our organization, but also taking advantage of hopefully what will be pre-declined and certain elements of that cost basis.

And due to time constraints, the last question comes from James Faucette with Morgan Stanley.

I just wanted to follow up a little bit on the AI opportunities and initiatives and maybe how that -- we should expect that will flow through to earnings and margins in particular. I think you talked about how some of the token costs or you're having to spend there and some of the development you're doing, and I think more specifically, you cited roughly 90% developer productivity improvement in the organization, which is amazing and 70% to 80% reduction in exception processing time, but yet we still have these R&D expense increases and SG&A Help us think through like the benefits that you think you'll get from the AI spend in '27? And maybe more importantly, into '28 and beyond?

Yes, James, this is Greg. I'll start and let Mimi kind of bring it home with some of the margin components. But -- so there's a couple of ways to look at this. So first of all, from a revenue standpoint, some of the solution sets that we have created have less about immediate monetization as they do about increasing the penetration of the existing product into our client base, meaning we're adding AI capabilities, which we think will benefit the product and allow us to sell more of them versus less about adding some AI particular cost to it. So using Banno conversations and the things that we're doing in there as an example. Even the SAR development we've done in financial crime, those are not additive costs, they're just going to help the penetration because it makes it a better solution set. So there's some of those that balance both a level of monetization and a level that don't. So that is from a revenue standpoint.

From a cost standpoint, you're exactly right. We're seeing significant advancements. Now some of our groups, honestly, are further along than others. So there is a balance of that. But where we're seeing great utilization, we track the utilization by associate. So we know who's using it, who's not. We'll pull their license if they're not using it to the point that we think we're getting a benefit. We have 9 AI coaches that we have hired that actually go around the organization and train our associates. We've trained over 2,000 of our associates already directly on AI to continue. So that will continue to get better. And so some of the advancements that we've seen in certain groups or a byproduct of that. So you'll see even from a head count standpoint, we've been very light on headcount over the last 5 or 6 years. We've always been very disciplined on that. But even the headcount we're hiring this year is really more about certain projects that we have where we're still hiring less than we would have based on that, but we still have to hire people, right? So there's still some additional components that have to hit.

And then the flow-through of that, I'll let Mimi kind of talk about where we see, but this is where she emphasized where we were in the 20 to 40 to start and our continued focus on improving that.

Yes. So just adding on to what Greg said. I think some of the rewards you see are a little harder because they have visibility into because they span across multiple fiscal years. So one of the things we talked about in this year's budget process, for example, is a -- for a given project you may not see a cost reduction in 1 given year, but instead of taking 3 years to develop, it may now only take 2 years or 1.5 years. So that acceleration that velocity of development isn't necessarily an in-year cost savings but over the life of that project, you're going to accelerate the opportunity to monetize that sooner. You're going to lower the total cost of development of that project.

The other thing I would call out is to make a distinction between AI for security enhancements, for example, the project Glasswing efforts we're doing, the other around frontier model, security protection and vulnerability assessment in general, that spend versus the spend we're doing for both internal AI usage and product usage. So I would just make that distinction. I view the securitization efforts to be more of a short-term headwind. Obviously, we always spend on cyber. I don't see that declining anytime soon, but the fortification of our networks and products is of critical importance for our clients and ourselves. And over time, I see a declining rate of growth, hopefully, once we kind of get over the hump. But then as Greg mentioned, the product usage how we are tracking, how it's driving general adoption, it may not be specific monetization in each modular usage of the product, but how it's driving ancillary adoption of the products and the product family.

This concludes our question-and-answer session. I would like to turn the conference back over to Vance Sherard for any closing remarks.

Thank you, Drew. Management will be participating in multiple investor events over the next 1.5 months, and we look forward to those conversations with our investors. As we mentioned many times on this call, we will be having our Investor Day on the afternoon of September 15 at our office in Dallas. Please contact Steve Fine, if you would like more information about attending in person. In conclusion, we extend our appreciation to all Jack Henry associates for their continuous exceptional efforts, which resulted in a strong fiscal 2026 and sets us up for a successful fiscal 2027. Thank you for joining us today. Drew, please provide the replay number.

Thank you. The replay number for today's call is (855) 669-9658, and the access code is 8041677. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Anyway, we'll get started here. Thanks, everybody, for joining us here at Morgan Stanley, and we're joined by Greg Adelson, CEO of Jack Henry. Before I get started with Greg, I'm James Faucette, Senior Fintech Analyst at Morgan Stanley, and I do have a quick disclosure to read. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So Greg, great to have you back. Appreciate it.

Good to see you again, James.

So maybe for investors that are newer to the story, and it's just kind of hitting some of their critical screens, et cetera, can you quickly frame Jack Henry across at least the way we think about the business, core, payments and complementary? And then maybe take that opportunity to explain what has changed most in the business over the last 5 years as you've moved from back-office infrastructure into more facing -- customer-facing, particularly on digital payments and fraud.

Okay. Sure. So let's start off just kind of the segmentation. So we segment our business as you described. So core is about 31% of our overall revenue. Payments is about 37%. Complementary is 28% and then there's roughly 2% or 3% that's left that goes into a corporate bucket of a variety of things, mostly hardware, things along that line. So just to give you a quick description, so in payments, we run a big card issuing business. So that has debit and credit in there. We run faster payments, so everything from Zelle to TCH, The Clearing House, to FedNow.

We run our Bill Pay business, and we run a lot of the things that we're doing with our new acquisition called Victor, which does embedded finance. In the core business is what you would think. It's all the core solution sets that we sell directly to support the bank or credit union. And then everything else is complementary. So really all of our digital and fraud and other things. What's kind of changed in the last 5 years really is more about -- less about what we've done in the back office versus the front of the house type stuff. It's more about our -- kind of getting back to our roots of how Jack Henry was started.

So our founders, by the way, this is our 50th year in -- we just celebrated last year, our anniversary. And our founders were very innovative, and we got back to really back to our roots of being innovative. So we're building a lot of our own technology, less on partnerships, less on acquisitions. We've been much more vigilant in making sure that we are being more of a leader in the industry than being a close follower. And so I think that's really what you've seen in some of the technology that we might be talking about today. But what we've been able to do in stablecoins and SMB strategies, what we've done in a lot of our digital applications in general are kind of examples of that.

That's pretty exciting, and I appreciate the overview. So let's talk about some of the places where you've had historical success and continue to do so. And I know we were chatting beforehand that this last year, in particular, has been a great run financially for Jack Henry. But let's talk about like the drivers of that. So core sales momentum, you are tracking above kind of your normal 50 to 55 annual core win range with more larger institutions and more product attached. As you look at the pipeline, what is changing most, whether it be number of RFPs, Jack Henry's win rate, size of institutions or breadth of products with which you win? Just help us understand like how you're winning more than you have historically.

Yes. it's a great question. I think, honestly, it's a little bit of all of those. There are more RFPs than typically. If you look at a traditional year, there's roughly about 200-ish RFPs that go out. About 100 folks actually make a decision to leave their incumbent, and that includes folks that are on Jack Henry's platforms as well. That number has inched up a little bit. So we're probably more at around 225 to 230 this year, which has helped us, but our win rate has actually gone up as well. So when you look at where we are today, so our fiscal year ends in here about 20 days.

So June 30 is our end of our fiscal year. So we reported Q3 back in May, we had already closed 43 new core deals for the year compared to 28 the year before. And to your point about larger deals, we had closed 11 multibillion-dollar institutions compared to 8 the year before. To put that even to kind of expand upon that, we just did a press release a couple of weeks ago where we announced Jack Henry's largest core banking deal ever that we won. It was a $9.2 billion institution. Now we have institutions that are far greater than that, but we had never bought -- we had never acquired one at that size.

And more importantly, they had 1.5 million accounts. And so that's about 30% bigger than any Jack Henry Bank client today. So very large win came from one of our competitors and a great opportunity there. So that kind of gives you a little bit of a flavor of not only the number of wins, the type of wins, the type of opportunity. Candidly, there's some things and disruption going on in the industry with our competitors a little bit. Some things that have been said, some things that have been walked back, but that's created an opportunity.

Lastly, it's back to what I said before, innovation. So if you ever hear me talk, whether it's on an earnings call or in a customer or prospect meeting, I talk a lot about our 5 differentiators: culture, service, innovation, strategy and execution. We believe that we're doing those 5 things as well as anybody in the industry regardless of whether it's in the banking industry or not. So we do what we say we're going to do. We built a great strategy, and we've built some really cool technology. All of that has helped us win larger deals and be involved in some larger deals that we haven't even talked about yet that are in the $50 billion range as well.

Wow. So I want to go back to the RFP count. It seems like it might be up around 10% from what we normally see. Like what do you think has been the motivating driver there? Like is there a common thread that you can draw through that and...

Yes. I mean, look, I don't want to say anything negative about our competition. That's not what I do. But the reality is there's been disruption. And so one of our competitors made an announcement that they again have walked back that they were going to consolidate their cores from 16 to 5. They've now said they're not going to do that, but that opened up the kimono a little bit for folks to start thinking, well, if I'm going to be one of these that's going to be kind of replaced, I might as well start looking. So we have a very large pipeline of opportunities that are specifically in that particular competitor's base. And we've seen RFPs in that particular competitor's base open up to a greater number.

So you feel like in a lot of ways beyond just like -- I think that most people felt like there was going to be an okay investment year from a bank perspective. But it seems like you're saying that, that announcement actually immediately catalyzed an increase in RFP activity.

Absolutely. And to your point about spend in the banking space, so there's been a multitude of surveys over the last 12 months that we are part of, one that we run ourselves, a couple that we co-sponsor that have shown that about a 6% to 10% plan for spend from the banking world. And honestly, I think that's going to go up. When you look at the challenges with opportunities in AI in the community bank space, you got Mythos out now from a data and cybersecurity, folks are going to be making sure that they got the right vendor to keep them protected because most community banks just don't have the wherewithal to do either one of those things without the support of folks like Jack Henry.

So let's talk about that incremental pipeline and opportunity you have there. Like how should we think about as investors those at bats, if you will, that increased frequency of -- or higher RFP number turning into signed deals? And then when can those signed deals show up in revenue? Kind of what's that time frame look like?

Yes. So typically, from a core standpoint, and again, when you're selling outside of the core, those time frames are a lot shorter. But typically, in a core, it takes about 9 to 12 months. So the one I referenced, the very large one, we actually started that process last June, closed it in April, and that was a very large deal, but it took about 9 or 10 months, and that's about average. So it takes about that long to close the deal. Depending on how much contract term is left on their existing provider, that also has a big bearing of when they will go live.

So we typically say that when we close a deal, it's usually 12 to 24 months before it becomes revenue for the company. And that's pretty accurate based on a lot of factors. The 2 biggest factors are contract term. And also these institutions have other projects going on. So they got to get their staff all trained up on the new technology, and that takes time. So you typically see 12 to 24. Now it's much different in an M&A environment, which we can talk about later. But in core itself, that's kind of the time frame.

Got it. Got it. So you mentioned also opportunity in upmarket, et cetera. You've had some larger wins recently, including -- you mentioned institutions well above $1 billion in assets and one with meaningful more accounts than your current largest customer. So you just talked about the size of that. But as Jack Henry moves upmarket, what becomes the gating factor to continue to win there? Is it sales credibility, implementation capacity, referenceability, integrator support, product breadth? Just help us understand like what additional things you need to add to the capability of Jack Henry to continue to move upmarket.

Yes, it's a great question. Honestly, with where we've been playing right now, it's 100% credibility. It's not any capability, scalability, any of those things. And I'll give you some examples. But from a credibility standpoint, as I just said, this $9.2 billion institution is the largest institution that Jack Henry has ever won. We have 40 institutions that are over $9 billion today that have grown up with us and built over the years. So again, it isn't the $1 billion in our largest $53 billion, and we have several in the $30 billion.

But the reality is when you're going after these types of opportunities, you have to be able to build that level of credibility. I actually just had an inbound from a $12 billion institution who said they weren't -- we weren't even on their radar, but somebody actually referred them based on their experiences with us. And so those are things that we have to overcome. To give you some examples, from a product standpoint, we don't -- we have everything that we would need other than one particular thing as you go really upmarket is wealth. So we don't really have a great wealth management solution.

We partner with some folks on wealth management, but we haven't built that out just because it hasn't been a need. But as you go further and further upscale, you need a better wealth solution. And so we're working through and thinking through how we're going to manage that as we go further upscale. Everything else, we're fine. And then from a scalability standpoint, we actually run annual tests on all of our products in our core and just this last year, we ran at $200 billion in assets. So -- and we ran just fine. It's an independent test run by IBM. And we do have some customers. We have a $200 billion credit union that we have products with. We have $70 million banks that we have products with. So again, we have examples of that already.

Got it. So let's talk about trifecta attach and how that impacts contract lifetime value. It seems like your core wins increasingly come with digital banking and card. But how much does lifetime value of a contract change when you win core, Banno and card together? And how much of the attach typically happens at signing versus later as kind of third-party providers on their own contracts roll off?

Yes. So just to explain, what we call a trifecta is, again, core digital and card. And those are really the 3 most complicated conversions you have to go through. So it's really important if you can win those 3 at the same time, somebody is making a big bet on the technology that you have bought. So to answer your first question, it's about -- well, there's a couple of reasons why. So let me tell you why. One is when it's sold with the core directly, a typical digital and card contract is 3 to 5 years.

But if it's sold with core, a typical core contract is 6 to 7 years, so it becomes coterminous with the core. So you've added a couple of years of value in that particular relationship. So that's extremely important. The second part of that is because of that extra value and the value of a digital and card deal to Jack Henry, it's about 60% additional total contract value to the company when we're able to sell that at the same time. So 60% increase.

So what had happened in years previously is you would see folks that would maybe make that at what we call a day 2 item where they would purchase core, say, I got x amount of years left on my digital contract. I'll come back and talk to you again later on. A lot of them are making decisions to end their digital contract at the same time they're doing their core. And again, a good indication that we're building out great technology to allow that to happen.

Got it. So let's talk about probably one of the noisiest things I've run into in a while, and that's Pismo. And Pismo is a core and issuing platform that Visa acquired. They had an announcement recently that Wells Fargo had selected Pismo, and that continues to be a common line of questioning for investors. So let's talk a little bit about what, from your perspective, Pismo is and isn't. I think you've said that Pismo has ledgering capability but lacks full deposit and lending functionality.

What capabilities maybe would you think Pismo would need to add before you would view it as a true competitive core? And how closely are you watching edge use cases? And maybe you could just help us understand why not necessarily Wells Fargo, but anybody might say, "Hey, I want a limited use core versus what most institutions might want."

So I think there's a lot to unpack. Let me give you a couple of components here. So first of all, I'll give you this perspective. We have not seen Pismo in a single deal that we have done of all the cores I just named or all the opportunities we won, we haven't seen them in a single deal. Now we see them in card, which, again, they're bringing DPS and Pismo together to bring a single platform for debit and credit, definitely have seen them in there, and that's going to happen. I'll talk specifically about the Wells deal.

So when you look at the Wells opportunity, so Pismo has a general ledger that was built as part of their commercial card platform, which is supposedly pretty good, more modularized, more componentized, which allows somebody like a Wells who's got a wherewithal of tons of dollars and people to build on top of. So my guess is, and I don't know this for a fact, but my guess is that they decided to take the general ledger capabilities and replace some general ledger capabilities inside of their existing core because it didn't do what they wanted it to do.

Again, don't know that for a fact. What I do know for a fact is that it only has a couple of deposit features. It isn't a full deposit-only core. So it does have general ledger and it may have a feature of being able to send an ACH or sending some other things or a wire or things along that line. But when you look at the full functionality of a deposit-only core, there's a much more that has to go in there. I don't know if that's their plan to build out more of a full core or offer this componentized to folks that could build it out themselves. Don't know that for a fact.

One thing I know they don't have is full lending capabilities. Candidly, there's very few people in the entire environment that have built lending capabilities into their core. One of the advantages that Jack Henry has is that we are one of the only providers that's ever built a full core. So even if you look at our 2 biggest competitors, they've only acquired cores, they haven't built them. So we built them from scratch, and we built out lending capabilities. So until somebody has the full core capability, we don't see them as a competitor in that environment.

Now I'll answer your last question was why would somebody pick somebody with just a module or 2 to build out. And this is what I would say. Again, if you have the ability and good for Pismo, they have the ability to be componentized, just like we built out all of our new core modules, and we're actually replacing some with existing clients and eventually with nonexisting clients. So that gives you the advantage to take advantage of new public cloud technology and have it integrated into your existing core and run through that.

The difference is we've already built all the integration. So for Pismo and Wells, they're going to have to build the integration themselves to have it actually operate as a single core. If it operates as a stand-alone core or what we call a side core, you have to operate that separately with separate compliance, separate people, everything else. And that could be a royal pain for your regulators. So until all of that comes together, to answer your question, I don't know of a lot of people that are interested when you have other options that would be fully integrated.

Got it. Got it. So I'll take a breath here. I mean, we spent quite a bit of time on the core products, competition, et cetera, but see if there are any questions from the audience before I move on to other areas. So let's keep going then. So let's talk about Banno, the platform, modernization and et cetera. So maybe I'll start with Banno, just maybe 20 seconds quick refresh on what Banno does and where it fits.

But more importantly, I want to ask about Banno outside the core base. Banno has more than about 15 million users and has historically grown inside the Jack Henry base. Are you beginning to push Banno outside the base? And what are those proof points that investors should watch to see if it's going to be able to become a real independent growth driver?

So for those that don't know Banno, so it is our digital application that we have built, so online banking, if you consider from that standpoint. So online banking application that we built from the ground up, public cloud native in 2018 and launched it in -- excuse me, 2018. We have now, as you said, over 15 million users. So it is the fastest-growing platform in the digital space today, to your point, only been sold to Jack Henry clients. We have roughly 1,030 of those clients live today out of 1,700 core clients that we support.

So we still have about a 40% runway inside of the base. But because we're getting to the point where we think that we have done a good job of building feature functionality to be on par with some of our larger digital-only competitors. So I won't give them their names for their justice, but the reality is there are some good ones out there. But the good news is that as we built out the feature functionality, and I think you were at our Investor Day 2 years ago when I said that was going to be a focus. So we are now winning deals from our competitors because of the Banno business application that we built that needed to be.

We were really good on retail. We lacked a little on business. So just in the last 2 quarters alone, we have won 19 deals that were existing Jack Henry clients that were on competitive digital platforms. So just in the last 2 quarters. And then back to your trifecta, we've won 39 new cores just in the last 2 quarters. And of those 39, 80% had Banno attached to it. So again, numbers that we hadn't typically seen. So we're starting to take it outside the base as we built the competitive differentiation.

We are targeting a handful of cores that makes sense based on disruption as we were talking about earlier, an opportunity where somebody may not be interested in moving their core tomorrow, but they may be interested in moving their digital application. So again, when I talk about the 3 hardest things to do in a conversion, core, digital and card, a lot of people call core heart lung surgery. I call digital appendectomy, and I call a card -- a root canal, right? So you're trying to get all of those done. So this is a good way for us to jump start an opportunity to build a relationship with this particular customer.

Got it. So let's talk about the platform itself. I think it's pretty interesting, especially since you spent roughly the last 5 years componentizing the offering and making it cloud native. And you've got, I think, at last count, 20 or 30 major components in market or beta at least and lending still being the largest remaining piece. What's the critical path from modernization work to getting visible and evident revenue acceleration? And when does the platform become more than an architecture story for investors?

Yes. So the part that I want to make sure I explain and hopefully, just I'll take enough time to do this. But the way we have built the platform, it isn't -- people view it as a public cloud core. It is way more than a public cloud core. It is -- as I described earlier, it's fully integrated into our existing foundational cores, which is different than what anybody else has built. So as we replace a module like a wires platform, we literally turn it off in the core on that day and turn it into the new platform, and it flows through the existing core that they're on today without any -- almost a seamless.

In fact, we had 5 of those happen in a single day and the CEO said, it was boring, right? Because that's the way it should work, right? It should be very seamless as long as you built the integration. So to your point, we've built 25 different modules. Not all of them are core specific. So what's important is the platform has been the foundation for Jack Henry to build all of our innovation. We built a stablecoin proof of concept to move USDC, both send and receive in 2 weeks. We're getting ready to have 3 clients go live. We're waiting on the regulators to approve it, but we built it in 2 weeks on the platform.

We talked about -- we're getting ready to talk about Tap2Local and our Moov relationship. And that Moov relationship was built on top of the platform as well. So there's modules that sit on top of the Jack Henry platform that aren't core specific, but they've allowed us to innovate much more quickly than we could otherwise. So back to monetization. So to your point, some of the core modules, in particular, we have some customers in betas, some -- we have about 75 customers that are using some pieces of the core modules today. So limited amount of revenue today.

But as I mentioned before, the larger deals we're winning, the number of deals we're winning, they're all because of the tech story. So we're able to show what we've built and not just talk about, right? It's not a PowerPoint. It's full demos of things that we've already built, and that gets us to win. So we're actually monetizing more than people give us credit for because it's actually part of our wins and the things that we're doing there and our SMB story and all of that kind of stuff. Now there is some other things that will be coming to your point, that we'll be calling out in '27 and '28. But we do believe, based on where we are, the lending piece of this, which is, as I already said, is the hardest, is still a couple of years away, but we are actively building that out today.

Got it. So I want to talk quickly about public cloud readiness and the regulatory path. It certainly seems like the strategy assumes clients can adopt cloud-native components now, but full public cloud core consumption likely takes more time. What specifically needs to change across regulators, bank boards, auditors and client risk before we can really start talking about public cloud for core adoption?

I think there's a couple of things, and they're happening as we speak. So one of it is AI. So being in the public cloud is going to allow the data consumption and the ability to use AI to be greater. You've heard the term no data, no AI. Well, you need to be able to have that. And being in the public cloud is the way to be. I can't speak for others, but I'll speak from a Jack Henry perspective. I mentioned earlier about Banno being in the public cloud since 2018 and now almost 16 million users.

So based on that fact, we've been working with regulators for a long time about operating in the public cloud and how we operate. We've actually written documents that sit in Washington, D.C. because of our experiences being in the public cloud. So we have a really good relationship with the regulators, and we have confidence that have been built with our customers because of how much time we spend in there and the number of applications that we move to the cloud. I think from an incremental approach that we have taken with our components is also helping customers get more comfortable in CEOs. Candidly, sometimes it's the age of the CEO that's got the level of comfort.

But a lot of that is part of what we've been kind of working through. So as we've gotten regulators more comfortable with how we operate, and we've been able to do this in an incremental approach, like I said, everybody that moved to our wires platform, they're now working at least one component in the public cloud. So that's helping them get comfortable, and that's what I think needs to continue to happen. But with what's going on with AI, what's going on with the cybersecurity and vulnerabilities and other things, being in the public cloud is absolutely the way to go.

Got it. So you mentioned some of the payments applications you've been able to build on your platform. So let's talk about those. That growth in that segment is still around mid-single digit, while faster payments, Rapid Transfers, Tap2Local and embedded payments, all as potential drivers are still really early. What milestones would give you confidence that payments can accelerate over the next couple of years?

Yes. So we're -- we typically have seen payments range in the 7% to 9%. We're kind of at the lower end of that this year. We're kind of at the top end of 6%, lower end of 7%. And there are some reasons for that, that we've called out on earnings call, a lot of them are onetime things that -- so we expect payments to get back into its normal range next year, in fact, and what we've been able to see related to each of the groups that you talked about.

The ones that I think have an opportunity to "juice it a little bit more" is the Tap2Local, which is our merchant acquiring solution that we have inside of banks and credit unions as well as Rapid Transfers. We're seeing roughly 45% to 50% growth in our PayCenter business, which is all faster payments initiatives. We've actually seen a resurgence in our bill pay business, which is interesting. It's still low single digits, but it's a lot higher, low single digits than they were before after we bought the Payrailz acquisition.

And then you mentioned embedded finance with the Victor acquisition. In 6 months -- well, I guess it's about 8 months now that we've owned it, we have a very large pipeline of banks and fintechs that we're lining up and already closed some of those deals. So I think all of those point to the fact that as you look into '27, we should be inching up into more of a normal range. But looking at '28, we feel pretty confident that you're going to see much more of an impetus of the driver above the normal ranges.

Got it. I like to hear that. So I know you've peppered the conversation thus far with mentions of AI and some of the things that you're benefit you're getting and where you see some opportunity. But let's spend the last few minutes talking specifically about AI and what Jack Henry is doing. And I want to kind of come at it from 2 directions, productivity and the fraud overlay and how you're improving products there. First, is it -- is AI already driving internal productivity gains for you? And what kinds of applications or uses are you finding to find the productivity gains?

Yes. So just to give you a quick backdrop. So about 3.5 years ago, we started our AI governance. So I was COO at the time, and we worked with our CISO, our Chief Risk Officer, our CTO and myself. We built out a really strong governance framework. And it really was built around the fact that we wanted to see how we were going to use tools within the organization and how we were going to govern that. Candidly, AI is much faster growth than anybody thought at that point in time.

But as of today, we have almost 100 tools that we're using within Jack Henry. We have limitations on who can use it, the number of licenses that we offer, but we're experimenting. There's going to be winners and losers in this. And so we're not putting all of our eggs in a certain basket. As a byproduct of that, we have over 500 use cases that we built for internal efficiencies, including 100 vibe coding cases that we built, including ones I've done. Yes, exactly.

So we have 9 AI coaches that we've hired in Jack Henry, and they're going across the organization, helping us build the level of efficiencies or vibe coding opportunities. I think we trained over 1,200 of our employees already on AI. And our message to our associates is this. We don't -- we never overhire. So we -- if you look at our headcount over the last 5 years, it's averaging about 1% on 7% growth. And because we've always been building efficiencies, whether it's process improvement and now AI. So there isn't a bunch of people to go "layoff."

So our message to our team is, you're not going to lose your job because of AI, you're going to lose your job if you're not using AI because we need you to be more productive in the roles that you are. So the opportunity here has been really, really great. So back to some of the examples, we've seen anywhere from 70% to 90% improvement in development, whether that's accuracy or speed of development. Customer service, we've been able to take like 3,000 cases and condense the time frame that we have where people get questions that are the same and they are able to access that via AI.

Legal, we had almost 50% of our renewal contracts never touched our attorneys. HR, you name it across the board. I mean we're using it in everything. So we have a group that kind of evaluates the ROI and which ones we're going to get the biggest bang for the buck. And we're doing a great job of building all that efficiency. On the product side, our AI coaches and our Chief Data Officer, who we hired are really pushing the product development. So we have 2 products that are live with AI today. One is in our Banno application and one is in our financial crimes application. One is SARS, so suspicious activity reports, we can do all that.

We just rolled that out last month. And in Banno, there's some things that we've done to build efficiency inside the bank or the credit union that they're utilizing. But we have 14 proof of concepts that we have just finalized that all will have the ability to either be monetized or will be included in the product set, but should help drive more adoption of the product set or we may end up building kind of a model where we can build efficiency into the bank or credit union and we take a cut of that efficiency.

So we have different models that we're going to experiment with. But we've been extremely active building out agentic AI agents and utilization. So we've been doing all this ourselves. We have a very talented staff that we've hired all around the country to help build that out. So that's what.

So last question here. I think there's at least among some of the investment community, some apprehension that whether it be AI labs or the hyperscalers or AI native-based solutions could start to bring in fraud and AML identity and scam detection solutions and overlay that at the bank that, that could adversely impact Jack Henry. How do you think about that and any potential impact to your bundling strategy? And how important is it to have that core system as a natural distribution layer? How do you think about that?

Well, I mean, the core system itself and really any system of record is really what the key is. So whether somebody is going to build agentic AI agents to come in, they still have to call the same APIs that any human has to call to be able to have access. So the real importance is the API side. So the way that you can control the access to the system of record is through API. So we've built out a full catalog. We charge for those APIs. So I don't see any disintermediation plus regulators are really difficult.

You can't have an AI conversation with a regulator, right? So that's a real protection from a core. Now are there complementary products that might make sense that somebody is going to come in and build something more quickly? Absolutely. But as I already mentioned, we're using AI to build all these solutions out as well. We have 1,100 fintechs that are integrated with us today because there are solutions out there that are better than Jack Henry's. We're not going to be the best at 300 products. We're just not, right?

So what we've done is given us an opportunity to embrace whether that's somebody that we might want to acquire, somebody that we may want to integrate with, somebody that we may want to do a rev share with, things along that line. But it is not the point that we believe any level of disintermediation into the core parts of our business, not just core, but digital payments, fraud, account opening and lending is what we call our 6 anchor capabilities. And we'll either augment that with AI partners. We'll build it out ourselves, but we don't see a level of disintermediation there.

That's great. Greg, that's all the time we have today. Thanks for joining us. Appreciate it.

Thanks, James. Good to see you.

Take care.

Thanks, you too.

Today, I hope you're partaking in the lunch and enjoying it. It's been a super productive day thus far. As I said earlier, at the breakfast keynote, this is our 11th year. We couldn't do it without the support of everybody in this room. So thank you. It's a heartfelt thank you. And we also have such a fantastic keynote for lunch with Greg Adelson, who's the President and CEO of Jack Henry, long-time supporter of the conference, supporter of RBC. And so it is just such a pleasure to have you up here with me today.

I appreciate you having us again. And our meetings this morning have been great. So the conference continues to grow. And so congratulations to you.

Well, thank you. Thank you. So speaking of growth, we'll start off at a very high level here. And if you wouldn't mind, I know you've done a bunch of surveys. You've been talking to a lot of CEOs. You've had your own conference. What's kind of the state of bank budgets? Where are they spending? What are they looking to invest in as they go into this next frontier?

Yes. So I think right now, we are a part of 3 or 4 different surveys that go throughout the year, and they've been very consistent in the answer. So this particular year, so if you take calendar year of probably last year at this point in time to this year, so kind of take that 12-month time period, we're seeing somewhere between 6% to 10% anticipated growth in the banking spend. That will come from a whole avenue of a variety of different products, but they're really focused on deposit growth, lending growth, opportunities for building better efficiencies, utilizing AI as part of that, utilizing payment strategies to drive noninterest fee income. So really, that's where the driving forces are. The good news is from a Jack Henry perspective is those are the products that we're really focused on, and we're seeing that kind of play out in our pipelines as well.

Yes, without a doubt, 6% to 10%, like that's a pretty meaningful number. How do...

If you look at a couple of years ago, it was more like 3% to 5%. So as it continued to grow. And I think the part that we like to say is that really, there isn't a problem that a bank or a credit union has in the industry today that can't be solved through technology. And so especially when you're looking at those type of things as your primary drivers. And so that is continuing to add to that.

Yes. No, it seems like it's been a step function up -- over time...

For sure.

When a lot of people, I think, would have thought maybe just the opposite that they would have been pulling back. There's an interesting, I think, dynamic in the market these days around the core upgrade cycle. And there's lots of things that are happening there. There's a competitive dynamic that's happening that we should talk about in terms of some dislocation that maybe exists. I'm just wondering broadly, but then also within the realm of maybe that dislocation, what are you seeing in the market today?

Well, there's -- just to be candid, there's some unrest with some of the competition that we have out in the space. There's been a variety of different comments made over the last 6 to 12 months from really both of our key competitors that in some cases, they've changed the dynamic of what they are focused on, whether that be a strategy standpoint or in other cases, where they've walked back some comments they made on consolidation. So that's opened up the market for Jack Henry significantly. And it isn't just as a byproduct of those comments, but also as a byproduct of the things that we've been building over the last several years that we'll talk about later on.

So if you look at the actual cycle, typically, you see around 200 deals come to play every year. I would say that this year, you're going to see more than 200. You'll probably see closer to 250 based on some of the early prognostications of where RFPs are right now. As a byproduct of that. Jack Henry usually wins 50 of those deals. About 100 make a decision. Jack Henry wins about 50 of those over the last several years. I've already announced publicly that we will win north of 55, and I'm very confident of that. And so that will be a better year for us, but also we're winning larger deals. So when you look at the size of the deals that we have won traditionally versus what we're winning in the market right now. But the overall RFP cycle is continuing to churn. At this point in time, we actually have the highest pipeline that we've had in recent years for all 3 of our segments, not just core, but also payments and complementary as well. So all of those are byproducts of the things that you're talking about.

Yes. It's interesting because Jack Henry has historically been thought of as much more smaller credit unions, community institutions. But the types of wins that you just described, they have gotten much larger. At a time when I think the bank technology has gotten more competitive, and yet you're winning a disproportionate amount of those. So what are some of those attributes that are...

So a lot of it is what I was talking about before related to innovation. So if you all have heard any of our earnings calls or any of the conversations I have, I've been talking about culture, service, innovation, strategy and execution being 5 words that truly define Jack Henry as a level of differentiation from our competition, not just in the space that we actually support in the banking and credit union space, but candidly, in general, across companies in the United States.

We're doing things better than anybody in our market right now. We've always had a great culture and a great service reputation that goes back 50 years. We're celebrating. We actually just celebrated last week, our 50th anniversary as a company. But the level of innovation that we've been bringing to the industry today and the type of things that we're building and as fast as we are building it is really what's driving these larger opportunities. And then we've done a great job of doing what we say we're going to do because that's a mantra that we're really big on. And so it's one thing to show PowerPoint slides, and it's another thing to show a level of execution by actually showing the technology and live demos and things along that line.

That's allowed us to win larger deals. So in the last 3 years, we've won 44 multibillion-dollar institutions. compared to only 15, in the 2 years prior to that. And there's a reason why we're in the middle of that third year right now, but we've already won 13 multibillion-dollar institutions this year.

The other thing is that we're winning larger multibillion-dollar institutions. There was a press release 2 weeks ago that we won the largest single new core win in the history of our company on the banking side. So a $9.2 billion institution with 1.5 million accounts. And so when you look at the size of the client, the number of accounts that they have, those are all things. And it came from one of our larger competitors that was on one of their state-of-the-art platforms. But when they saw our technology and the things that we had done, they made the decision to make the change.

Yes. That was a tremendous win. I want to talk about the trifecta wins as you have started to kind of coin the phrase, like I love the trifecta horseracing concept. It is a little different...

That's right. I grew up in Kentucky, right...

You did. Okay. Well, my grandfather was a bookie. So we're all in good company.

We probably know each other well.

Yes, we probably did, we probably did. But so let's define a couple of things. So there's core, there's digital banking and there's card solutions that fall, I think, underneath that trifecta.

Yes.

Maybe touch a little bit on how they all are intertwined, why now they're starting to fall into the success path, why are the banks really ready for them?

Yes. So part of it is back to innovation. So our digital platform, which we started in 2018, which we built from the ground up is public cloud native. It's the only digital public cloud native platform that's out there. So we now have 15 million users after 8 years of being in existence, but we were always known as a really good retail provider. So when you look at banks or credit unions that were more retail focused, it was a great solution for them. But it lacked a lot of the business capabilities for more commercially focused institutions.

So we've really spent over the last 2 years, in fact, at Investor Day 2 years ago in September I made the public announcement that we were going to get on par with our largest digital competitor. So I won't give them any props today by naming them, but the reality is those of you that know the industry know who they are. And so we've done that. We've now gone and built the feature functionality to be on par with those larger digital-only competitors. And so just to put it in reference, just in digital alone, we've won 18 deals outside of core deals in the last 2 quarters from those competitors where, again, we would never -- we would see 1 or 2 of those maybe in a year in years past.

On the card side, the exact same thing. We built out a significant amount of feature functionality, specifically on commercial card that would allow us to tie into the Banno business application. So when you take and go to a commercial bank, where they were maybe looking elsewhere in the past, they're now looking at those 2 products together.

So a trifecta win for us is significant because it brings about 60% more total contract value to the overall deal than just a core alone. And so when you look at the importance of that, it also becomes stickier. So a typical core deal is 6 to 7 years, a typical digital deal or a card deal are 3 to 5, but if you tie it in at the same time as the core, you pick up several extra years in the term because they like to make those particular things coterminous. So that also drives additional term in the agreement along with the stickiness.

So you take all of that, if we take the innovation, you take the things that we've been building on, 60% of our core wins this year have come with trifecta with both digital and card compared to 29% last year. So it is what we're doing is working and it's playing out in the overall number.

Yes. I mean it's just so much more holistic of a discussion than we would have had again, only even several years ago...

Exactly.

Only several years ago...

And we still have some things to work on that I think are going to help us even more, but as we've added various features and things that we'll talk about in the SMB space, that's also added to the value that we bring.

Yes. What's interesting about that discussion is that the importance of modularity in core technology is also occurring. So you've got like this broader context of pulling these things together, but you've got this modularity that's taking place even at the core. And so I'm wondering how do we interpret that dynamic?

Yes, it's a great comparison because what we're trying to do from an innovation standpoint, so that modularity is also what we call componentized. It's basically breaking apart the core into discrete components. And the reason why that's important is that as folks want to integrate and take advantage of public cloud offerings. We're building each one of these new components of which we've built 25 of them over the last 4 years. So whether that be your general ledger or wires platform, exception item processing, authorization management, there's a whole host of things that truly make up a core, right? So ACH features, things like that. But it allows our customers as existing Jack Henry clients, but also prospects of larger sizes to do this incrementally.

Meaning that you don't have to go through a big bang theory change to go through a core conversion. So most people, if you know the industry well, most people compare a core conversion to heart and lung surgery, so there's a lot that has to go into making that core. So doing this in a componentized framework allows us and our customers to take advantage of public cloud native things, but doing it in small doses. So a couple of examples. Our domestic wires platform, there was a big regulatory framework change ISO 20022, those that are in the payments industry know what that is, which is going to a standard format. Well, that particular change took place on July 14, 2025. And we had several customers that turned off their core functionality for domestic wires and turned it on in our new public cloud over that same weekend. That was a pretty gutsy move to make, but it went flawlessly because it was only one piece of technology that needed to change.

So as we've continued to build this out and we will continue to build more functionality that will be monetized, but also some of it is being built inside the company. In the past, just like a lot of large companies, we have a multitude of business units that would operate somewhat independently, and we've kind of worked on that over the last 8 years with a program we called One Jack Henry, which has made a lot of positive progress there, but also, it was about building the technology. So if you needed to build authorization management into a particular product, we would build it at 8 different products. Well, now we build it one time in a full API environment and it's being utilized as a shared service across the organization. So it's allowing us to develop our code faster as well and also at a lesser cost and price point.

So it's interesting. So the holistic view of these trifectas and then the core being modular in my words -- in my vernacular, I guess -- they don't -- they're not working against one another.

No, they're working in tandem, exactly. So -- and you could get core components that would be tied to a digital win or a card win as well. Because really, when you start to look at in the future, when you look at a traditional core win, we're going to have to look at it differently. Because we may sell 4 or 5 different core modules. And so is that a core win? Or is that just a complementary or core components? Because everything that we're building will allow us to sell inside the Jack Henry base and outside the Jack Henry core base. So we could go sell to one of the Fs and create opportunities there. So each one of those is building, like I said, an incremental way for us to sell in an incremental way for our customers to take advantage of new technology.

Yes. Would you you'll probably agree with this. When you think about the competitive dynamic out there and the products and what you're hearing from clients that are coming to you, I feel like you guys are quite a bit ahead of most of the competitors when it comes to that.

Well, I'm a little biased. But yes, I mean from that standpoint, I do think we are, but I'm also -- we're getting outside validation. So not only in the number of core wins that we're getting and the changes of even this large customer that we just talked about. We're getting validation from some of the largest consulting firms. So the McKinseys and the Deloittes have now spent time in our offices. In fact, I got inbound calls from senior partners from both of those organizations that made a comment. "I got people on my team that have never even heard of Jack Henry. We're hearing a lot about Jack Henry in the space. We want to come in and spend some time with you." And so the way those meetings have gone and we've had lots of subsequent meetings since they've happened. They've been so impressed with what we built and provided some level of context on how different of what we've built compared to others.

So it's not even just the level of component ties that we built. It's how we're building it. We're building it as a fully integrated stack on top of our existing cores that are all complete -- have the complete follow-through or process through as you would. So back when I said about domestic wires. When they turned the domestic wires off on the old core and turned it on the new one, all the settlement part of that went through the old core. It didn't matter because we built the integration.

So it isn't a side core like some people like to talk about. It can be used as a side core, but it's not a side core. And that's really important. And again, a big distinction in the technology that we're building.

So let's talk a moment about the migration, really, of cores into the cloud. On a hybrid and private basis, it's been happening for a number of years. You've made a lot of progress there. I can't remember if it's in the 70s.

79%.

Yes, 79%. So you still have some room to grow there. But the -- what hasn't happened is really the migration to the public cloud. And so two things. One is, what was the benefit that you had in terms of the model, the financial mechanics of moving into the hybrid world? And then secondly, what's going to get everybody over the hump to go into the public cloud? And will there be another financial benefit that you get?

Excellent question. So we've been pushing the convergence from on-prem to private cloud for better than 20 years. So as I said, we're up to 79%. So just to put that in perspective, when somebody makes a move from their on-prem environment to the Jack Henry private cloud, they typically pay us anywhere from 1.75 to 2x. Why? Because they're eliminating staff, all of the burden of compliance and cybersecurity and all that falls on Jack Henry. We're covering all that. And so as we started to move clients into that environment, we still -- we used to get about 40 to 45 a year. We're going to get 30 to 35 this year, but they're larger because what's left of not moving are the larger clients in the Jack Henry portfolio.

What's happening today though is a lot of those larger clients are changing their mindset because of things like Mythos and things like AI where that burden of them having the cost to be able to run the vulnerability scans and the AI components that you need, that all, again, would fall on Jack Henry. So we're getting more and more interest from larger clients of making that change. And even this year, when you look at the number that we will close, the bulk of those are multibillion-dollar institutions that are finally making the change. That will continue. So I already gave you the financials there.

To move to the public cloud, there's a couple of things that happened. So one is what we just talked about, the incrementalism that happens when you move from the wires platform that sits on the existing foundational core today that goes into the public cloud. We get a lift because we're providing some additional functionality with that particular wires platform, usually around 20% to 25% is the lift for each of those products as we start to roll people out.

At the end, there's going to be some folks that say, you know what, I'm not moving to your private cloud. I'm going to wait until all your core is ready, and we're going to move to the full public cloud. We don't expect to lose any of that incrementalism to having -- so if it was one, let's just call it two to make it easy. So if it was 2 plus the 25, we expect it to be 2 plus 25%. So maybe it's 2.25% is the growth. Now we don't know what we don't know because we haven't moved anybody as a full core yet and won't for the next several years. But the good news is we're getting the regulators used to this because we -- again, Banno has been in the public cloud for -- since 2018.

We actually wrote some of the documents that live in Washington today because we were one of the first companies to really go public cloud in our space. And so we have a really good track record of having 16 million users today already operating in the public cloud. So that's going to help us not only with the confidence of the regulators, but also the confidence of our customers.

I did want to click on the regulatory because, I mean, we work at a bank, we understand the regulatory compliance framework. I mean, it's a high hurdle. So what do you think some of those things are going to be to get the regulators, as you say, you're building some of that framework with them. What is it that they're concerned about?

Well, a lot of it is just PII data and making sure that you're protecting that. So in a lot of the things in the core, you're able to protect that in various ways. The things that we've been able to prove out to them is the value of being in the public cloud. So not only the level of scalability, the level of incrementalism where you're able to do innovate faster. So like in our Banno platform, we can push to production a couple of hundred times a week literally because we do small increments of advancements in that. So you're not waiting for the big bang once a year or twice a year type of relief. So we're able to do things at a much more quicker pace.

The other one is just pure uptime and reliability. So we're primarily in the Google Cloud today, though we use Azure and AWS as well. But in the Google Cloud, you can get -- when you think about the number of platforms they support today, we're able to offer our customers 5 9s of uptime in the cloud, where traditionally in our space with foundational cores, it's 99.5%. That's a traditional number today. That's a significant advancement and opportunity for our customers.

So that makes the regulators feel better because the uptime is better. They get a little nervous about the innovation happening faster. So you have to kind of take them through that process. And the other thing is, is that as we build these innovations, we can build compliance and security as the code and so we actually have audit trails built into the public cloud that allows us to track that. And so that makes them feel better because literally at a beck and call, they can pull up all the audit trail for the things that happen, and you can't do that as easily in the traditional cores.

Yes. So let's transition to AI for a little bit. it's funny because like it wasn't that long ago, the cloud was like the new technology. And now we're here in AI. So the question really is what are you doing internally from a development perspective, what are some of the outcomes that you're seeing or expecting to see over the course of whatever time frame you're talking about? Is it a revenue enhancer or is it just a cost efficiency tool for you today?

Yes. So before I answer that, we've joked about changing the name of the company, the Jack Henry AI, just to improve the stock price. But -- so we're all living in this whole -- this whole...

It's new buttons.

Yes, we got a whole -- we're kind of bathing in it right now. But to answer your question, a couple of things. So one, we've actually worked on the AI journey for 3.5 years. We built out our governance framework. I was COO at the time, but we built out our governance framework with our Chief Risk Officer and Chief Information Security Officer 3.5 years ago. Did a great job of laying out the foundation of what we thought was going to happen. Of course, things have happened a lot faster than we originally anticipated. But the other thing is because of that, we now have roughly 100 tools that we allow our associates to utilize.

We have almost 1,200 associates that have been trained on how to use AI, including Vibe coding. We have 9 AI coaches that we've hired that are Jack Henry employees. That come in and work with each of the business units. We've done over 100 cases of Vibe coding where we've actually eliminated tools that we would have had to license out before or created a better pathway of doing things that were pretty mundane work. We've done a lot in development. We've seen 70% to 90% improvement in our development throughputs and accuracy.

We've done a whole host of things in some non-traditionally function areas like HR and legal and finance and building out a lot of improvements in those areas. But as a byproduct of that, we're also building it in our products. So all of those components that we talked about earlier we're building AI into every one of those components. So you can actually talk to our general ledger with prompts using AI.

So if a CEO or CFO wanted to ask a question of what our deposits were at noon at branch ABC, you can talk to the GL and it will give you the answer. We built in a whole bunch of various functionality into some of our existing products. But we have 14 proof of concepts that we have right now with new products that we're getting ready to launch this year, this calendar year. We're on a fiscal June 30, that's why I made the distinction. But -- so we're getting ready to do that.

So there'll be some incremental opportunity there with revenue, building out efficiencies, back to being one of the key things that banks and credit unions want in the survey was building better efficiency. We'll give them the tools to do that. And in some cases, already have. So it's a combination of both, but we're very bullish that we think that AI is actually going to continue to be an augment to what we're doing, an accelerator to what we're doing and not a disintermediator.

Yes. I wanted to dive in on that a little bit more because we always talk about system of record, regulatory framework. Like what are some of the main attributes that give you the confidence to say that AI is not going to be disruptive to the technology and software that we've been building for 50 years.

Yes, yes. And I think it starts with what you described. So system of record is a big component. We've also talked about regulators. You're not getting an AI bot to talk to a regulator, right? So when you look at things that you're going to disintermediate in the space of a variety of different industries, I think somebody would pick something besides banking to try to disintermediate at the core level in particular, because there is so much complexity that goes into building that out and things along that line.

The one thing that I'll talk about is that even as Agentic AI and other agents are built, they're just another point of reference to working within a system of record, right? You can point the agent to building some level of technology, but you still have to go through the system of record to get there. They're not the system of record.

As we give AI functionality to our banks and credit unions, it's creating more opportunity for that bank or credit union to be more efficient as we talked about. Maybe they're replacing people. In a lot of cases, they are. In other cases, they're replacing mundane tasks that allows their people just to be more productive and spending more time with their customers and creating that level of atmosphere.

What does a bank or credit union, especially community bank or credit union have as a true differentiator? It's service relationship and trust. You don't build that through AI, right? So that's what community banks have. So I don't think that's going to go away. So the ability to utilize the agents or the things that you need to do to build out the technology still has to go through all of the foundational things that we control, which is, again, the system of record and the regulatory. So UIs may end up being maybe less important in the future. We'll see where that goes. APIs are absolutely going to be important because that's what you're calling to be able to drive that level of innovation. And then one thing that we've talked about before is service in general.

So Jack Henry is known and has been, this is undisputed that we're known as the best service provider in the industry. And when you look at that level of service, we didn't get it by accident, right? We did it through a variety of white glove types of approaches. So we're using the AI to do the exact same thing that our banks and credit unions are, which is we're building a level of efficiency that allows us to worry less about mundane things and spend more time with our customers and their customers to make things successful. So I just don't see that being something that will disintermediate us. Because, again, you got to get -- you got to be able to get through the regulators and you got to be able to provide the service, you got to be able to handle the diligence to even get approved that some outside company is going to get approval from a bank or credit union to allow them to enter their infrastructure.

Yes. I'm glad you brought up service because you are known for that. Every survey we've ever looked at third party or otherwise, you guys have been right at the top. And a lot of, I think, people who are at the lower rungs of those surveys are suggesting that agents will help neutralize that process. But what I'm hearing you say is no way.

I -- like -- well, they may have their own philosophies. So I'm just going to say, from our standpoint, I think agents will help improve service functionality, but a lot of that's going to be self-service functionality. So -- which, again, that is a part of service. But I will tell you, I mean, we spend a lot of time with Gen Z and other trying to find ways to continue to really promote and work with the Gen Zers and others. But when you look at where the opportunity, again, for a community bank to thrive, it's not going to self-service. That's not what's going to thrive.

Larger institutions, yes, that's where they make the difference and where they can spend their money doing it. Customer service isn't necessarily at the top of their perspective. But for community banks and credit unions, that's what drives it.

Yes. So let's spend a moment on tokenization, deposits, assets, it's a growing topic of interest. What are you seeing from your clients? Are there opportunities for that to be an enhancement that you can provide to them? Or is there a threat in any way, shape or form to what you're providing to clients today?

Yes, I want to provide both context. So both tokenization and stablecoin because we're spending time on both. So the interesting thing with stablecoin, back to the platform that we built and the speed of innovation. We actually built a proof of concept in stablecoin to move, to send and receive USDC in 2 weeks, in 2 weeks. So we actually had 3 customers that were ready to go live. We're waiting on the regulators to approve it. But the reality is we built the technology in 2 weeks.

The other side of that is stablecoin is going to create opportunities by the fintechs to compete with our banks and credit unions where tokenization will be more embedded into the bank or credit union as an inherent. That's why they're very interested in tokenization. There are several big bank coalitions that are coming together. The [ Cari Network ] is one that's being formed. There's a couple of others. So we're spending time with all of them. And so we believe that tokenization is very important and will be an augmentation to our overall strategy related to, again, to combating the stablecoin piece.

So one of the things that we do really well -- and again, differentiated from our competition is we do not compete with our customers. So they've had some acquisitions through the years where they've actually competed with their customers as well. And our big mantra is, in fact, our #1 strategy as a provider is and it's as simple as this, we enable our clients to win in the markets that they serve. And so one of the things that goes back to our founder, Jack Henry, that he used to say that I love to quote is that "Our clients are not in business to make Jack Henry successful. We are in business to make them successful." And that resonates when you're going after and building a relationship with a potential prospect or client.

So back to my point about tokenization. Tokenization is something we need to deliver to our clients because that's what we do. And so by the end of this calendar year or first part of '28, we will have a solution in place through either a third party or some things that we're working on with Google that we think will allow us to do that more quickly.

That's great. In that same vein of that quote, let's talk about your SMB strategy because it's perfectly like developed for that, right. How do you help enable your banks competing against these fintechs and that's kind of the road map that you guys are mapping out. So maybe spend a little bit of time on that. Obviously, Tap2Local is part of that, but...

Yes, so I might go a little longer on this just because there's a little differentiation that I want to point out. So original premise of what we were doing in our SMB space was we wanted to create a solution that would allow our banks and credit unions to compete with Stripe and Square. So they partner with Stripe and Square, but some of the things that they were missing is that Stripe and Square take their deposits away. And once they take your deposits away, they start to lend and provide other services.

So it became a level of disintermediation and that they were kind of letting happen and we said, you know what, we can create a solution that we can build that we think is candidly better than some of the things. It's still early stages, but I'm going to talk to you about some of that level of differentiation in a second. But we built a really cool solution. It took us 9 months. We went to Mastercard and Visa, and actually, they both were so interested. They both have invested into the solution set from a marketing standpoint.

So that kind of started. We got through the process. They told us it would take 2 years. We built it in 9 months. We launched it in November. And it's -- just since November, we have 900 customers already live on our merchant acquiring what we call Tap2Local. I'll give you some distinction about that in a second. And a secondary product that we call rapid transfers, which less than 10 institutions in the country have today, including the Tier 1s. And that is a real-time money movement using the Visa and Mastercard debit rails to move money inside to the bank account, so a Jack Henry client to an outside account, whether that be E-Trade, Coinbase, RBC, whoever it is. And those are real-time transfers.

So think about today, wherever you bank, if you're not at one of those 10 institutions, when you do a real-time transfer from an external account, it goes through ACH. So it takes several days for it to actually hit your account. What we created is real time. So we are seeing a significant -- by the way, it's the #1 feature used at Chime today is to move money in and outside of the account. So we've now enabled 128 community institutions with another 180 in the queue to go live on this really cool technology that we've been able to create. And it creates deposit opportunities because more of what we're seeing are transfers from larger institutions like one of yours into these community institutions. So it now becomes deposit gathering for using that. So it's a great solution for that.

I'll go back to Tap2Local, which is our merchant acquiring. So again, Stripe and Square create these solutions for all different sized customers. Our focus initially was sole proprietors. Why? Because sole proprietors make up 80% of all small businesses in the country today. So we wanted to attack something that we thought would have some girth and had a real challenge. And here's what we did. So because we have all the data on our core, we're able to instantaneously approve 75% of everybody that goes through the process to be -- that wants to be a merchant.

If you think about again Stripe and Square it usually takes a couple of days, sometimes a week to get approved as a merchant. We can instantaneously approve you. As soon as we instantaneously approve you, we send you a message that says you're now eligible to take payments. I'll get back to that in a second.

The second part is -- and the only -- the other 25% are candidly gun dealers or marijuana dispensaries or whatever, right? So they go through a whole host of additional scrutiny. But we do this all in app, by the way. Everything that they fill out and complete is all in our digital application. So really cool technology. Second part is, is that once they're approved, they get a notification that they can start taking the payments on their phone. So we're fully certified for iOS and Android devices. So we're one of the only companies in the country that's certified on both of those devices, which creates -- again, you don't have a bifurcated group. And then once they're actually taking payments, we have a couple of really cool features.

One, so today, they get next-day settlement of their funds. So is that -- there are certain companies that give next day, not everybody but most of the Stripes and Squares for sole proprietors, they keep their money for several days. So next day is a big benefit. But coming in 2027, we're going to have 8 settlement windows a day, meaning that our small businesses can get their money up to 8 times a day based on the bank's preferences. That is unique, and nobody is doing that. And actually, we pushed Mastercard to build out the 8 windows because Visa already had them. So we'll be able to launch that in '27.

The other big one is this, and we actually have patented this process. So when you get your money again next day or 8 times a day, in the Banno application you will get the deposit amount, and that deposit will have every single transaction that occurred for you that equaled that deposit amount directly in your Banno application. So if any of you have a small business today, today, you have to go back and manually reconcile all of those transactions back to the deposit amount to see if they really equal. Well, we have it all in the application for you. So once you actually validate it in the application, we give you a button to push and it automatically uploads to QuickBooks, Xero, whatever your accounting package is. And we built all this out about 5 years ago. So if you think about -- if you know anything about 1033 and trying to actually get rid of screen scraping in the applications, we eliminated screen scraping in the digital application.

So Plaid, Finicity, Akoya, MX, all of them directly write to our APIs. So that you can't screen scrape our Banno application, which allows us to be able to pull all those transactions seamlessly in for the customer. So that's why we patented it with the things that we built there. So that's the distinction there. I think this is going to be the fastest-growing part of our payment segment for the foreseeable future based on the early returns that we have in the growth.

We've already added additional features. So not only can you pay with your phone, we have QR codes. We have payment links. We have the ability to add some other features. We do cataloging. We have a whole bunch of things. So we have an 18-month road map that we're going to be rolling out over the coming months that we'll have a bunch of new features. So as I like to say is that this is the worst the product is going to look. So...

That's great. Now I know it was a super exciting topic for you. So I'm just -- I just wanted to wind you up.

Yes, you did. So it didn't take much to wind me up. But the other part is just understanding that we're doing this all for our banks and credit unions. We're not competing against them. We're helping them sell. We're providing tools to help them sell. We're pushing notifications out to the merchants to help them sell. And we're not going around them and taking things away from them like Stripe and Square.

Yes. So it leads me to the next kind of expansion here, which is taking the Banno digital asset and banking solution, and starting to push it a little bit more outside the core.

Yes. So today, we have roughly 1,030 of our 1,700 core clients take Banno today. So we still have about a 40% opportunity within our own core base. But as we built out feature parity, as I mentioned a couple of years ago, where we put that into play, it's now given us an opportunity to go compete with the larger digital-only players out in the market. So even if one of our competitive -- competitors core is not ready to make a change, they might be ready to make a digital change. And so that creates an opportunity for us to sell that product. So we're targeting a few specific cores. I'm not giving anybody any insight into those yet, but we're already targeting and we already have a team that's out there focusing.

So I think the good news for us is that it will provide incremental opportunity for us within the digital space, while we continue to build out additional features that will grow our existing that we still have 40% penetration.

Yes, just all incremental.

Yes, all incremental.

Yes. Let's talk about M&A and banking. You have a unique lens from which you can see that. Oftentimes when these transactions, it sounds like, are in the works. They have to come to the technology providers first and kind of get in queue because that implementation cycle takes so long.

Right.

So what are you seeing in that context today given the fact that there is this expected heightened M&A activity? And then how does that play into your business?

Yes, good question. So just for those who don't know, over the last 40 years, you've seen some level of consolidation in the banking industry. Those of you that are old enough know that there was 20,000 banks and credit unions 30 plus years ago and now there's roughly about 8,000. And so as that starts to happen, again, about 4% over the last 40 years, we're seeing about 6% right now. A lot of it is the speed. The Trump Administration definitely allowed for faster approvals. So under the Biden Administration, it was going anywhere from 8 to 14, 15 months, and now it's around 3 to 6 months to get an approval. So you're seeing that level of speed.

To your point, we do get early notifications from our clients and say, "Hey, they won't tell you who it is, but they'll tell you the size, who they're coming off." Things along that line. So we prepare. We've actually added 2 new merger and acquisition teams as a byproduct of that over the last year to make sure that we have all the slots that we need to satisfy that.

To answer your question about how and what it means to us. Typically, over the years, if you just think about 40 years of consolidation, and we've been growing at an average of anywhere from 5% to 7% over those 40 years or even greater in the early years of Jack Henry we're continuing to grow at a very nice pace in a consolidated market and don't see that changing because we typically win more of these deals than we lose. We do lose some. Some of them can be of size, but we win some, and some of them can be of size.

The level of differentiation for us is this through the innovation that we've been talking about throughout, we're now -- we just had a $45 billion institution that was on a competitive core buy our $5 billion institution, and we're in talking to that now $50 billion institution about a whole host of things. That would not have happened several years ago. So that's a big thing -- but overall, it's a positive.

So we've outlined all of these great opportunities, new incremental markets, technologies that are going to come to bear over the next couple of years. And the question that I get a lot from investors is, can Jack Henry's growth rate, its actual algorithm accelerate or are we looking at a company that is going to just be able to run at these levels for longer? Which one is it?

Well, candidly, we think -- I'm not up here giving guidance yet, but I will tell you that so...

Structural.

Structurally, I can tell you right now, the things that we are building and where we have seen the amount of wins and opportunities. We believe that right now, we're averaging right around 7.5% for the last couple of years and believe even though we guided lower than that this year, we've already upped our -- raised our guidance all 3 quarters so far. And so based on the SMB story, based on going up market, based on a couple of our competitors struggling and opportunities in there.

We do see an incremental opportunity. I've used that word a lot today. I apologize, but an opportunity for getting closer to that 8% growth. And is that going to happen in '27? I don't see it happening in '27. I do see some nice opportunity for us. But could it happen in '28 and '29 and beyond? I do believe that and we're very highly motivated to make that happen.

Yes. I can definitely foresee that happening and also lengthen the duration of that growth as a result. So Greg, thank you so much. It's a pleasure. Congratulations on the 50 years. I've covered you for not that many, but it's been a while. So I really very much appreciate your time today.

Thanks for having me today.

Appreciate it.

Thanks.

All right. Good morning, everyone. Why don't we get started? My name is Dave Koning. I'm a senior analyst at Baird covering payments and services and thrilled to have Jack Henry with us today, represented by CFO, Mimi Carsley. Jack Henry is a core processor for banks, meaning they run the deposit and loan operations for many of the banks across the U.S. with one of the leading shares.

Mimi, maybe you can just kind of kick it off with a little overview of what you do and how you've been able to grow really double the industry for not just 1 or 2 years, but probably the last 30. So kick it off.

Yes. So as Dave was saying, Jack Henry is a technology provider to banks and credit unions in the United States. So we do -- we have 3 main operating segments, then we have a fourth corporate segment. But of those 3 main operating segments, we have core, which does the critical processing, think about account opening from an account management, posting interest, general ledger, wires, all of the major functions, calculating interest for loans, recording those, all of the major processing. We do that both on-premise, but 79% of our customers have it hosted from a subscription model in a Jack Henry data center. And then our payments business, we do card processing, both debit and credit card processing. We're not a merchant acquirer, but we do card processing for our customers.

We also do enterprise payments. So think about remittance, check processing, bill payments. And we have a payment hub around faster payments. So think about RTP, FedNow, Zelle, having all of the payment rails capable for banks, both core banks and noncore banks. And then we have -- and we have a small business initiative around payments as well. And then we have our complementary segment. And there, think about all of the ancillary services that a bank or credit needs to function. So think about lending capabilities, think about fraud capabilities, think about digital capabilities, account opening capabilities.

So a lot of different solutions, over 200 solutions. We have been in business. We're just celebrated June 2. We celebrated 50 years in business. 40 years as a public company. So a lot of execution. We talk about the 5 key differentiation points for Jack Henry, and that's culture. We're a very people-first culture. So it's culture, renowned for service excellence, then it's around strategy, innovation and execution.

Yes. Great. Thank you. And maybe if we look at the core processing segment, about 1/3 of revenue, there's maybe, what, 9,000 or so banks in the U.S. You work with 1,700 maybe. Every year, only about 100 really flip, right, turn to someone else. And you win half of those. You win 50 almost every year. Why do you guys win so much in the market?

Yes. So -- and as you said, this is not a 1-year phenomenon. For many years, we've been winning about 50 to 55. This year, we said we're confident to be at least at the high end of that, if not exceeding that with a pipeline that's been stronger than ever. And so part of how we win is that service and innovation. So Jack Henry is not the low-cost provider. It's a very competitive marketplace. There's a lot of formidable competitors in the space and an industry of consultants that are also very influential in the space that kind of keep pricing pressure on all of the players in the space. And yet it's our innovation, it's our service. It's the transparency of where we're moving to. So we have, for the last 5-plus years now, been talking about our public cloud journey from the core, our tech modernization efforts that we've been talking about.

And we now have over 20 components of that either in the market or in the hands of clients. So that's talking about moving the functionality, first of all, decoupling the functionality of a core system and then moving it into the public cloud. So the regulators aren't fully ready to do the surveillance and compliance today. We think that will take a couple more years to ready them, but we've started to put modules out there. But just the clarity of that from a road map strategy, Dave has really helped especially win larger clients. In the last 10 years, we've really been moving up tier. We announced 2 weeks ago a great win of a $9 billion institution. And part of the reason they chose Jack Henry in addition to the fantastic service was they knew that SilverLake would meet all of their needs today, but they knew the tech modernization journey story that could help them in the future.

And just to put that into context, I mean, the $9 billion bank, I don't know, have you said about how big an average bank is like that's probably worth what, 10 normal banks?

Yes. So our average is about 1.5, both on the credit union and bank side. Our business model, if they -- we sell today primarily in the hosted environment. Very few banks buy on-premise, if anyone buys on-premise today. But we're 79% in our private cloud, the Jack Henry private cloud. And that model is based on number of accounts or number of members. So $1.5 billion bank average -- so a $9 billion bank is big. We've been talking about how many we've won. We've won over 12 over $1 billion size institutions. Our largest institution to date is about $50 billion on the core side. We serve up to $200 billion institutions on the payments and complementary side. But -- and every one of those banks over $10 billion have crossed that threshold that's in a very important regulatory threshold, have crossed that threshold while being at Jack Henry. So we've been able to help support them from that regulatory duress and business model change of crossing that $10 billion demarcation line.

Yes. Where debit interchange, all of a sudden, they get paid...

Yes. Yes, it's a big change for a bank.

That is. Yes. Now the public cloud that you discussed, right, for years, it was a huge tailwind to go to the private -- your own private cloud from banks running -- used to run their own software that Jack Henry provide, they run it themselves in the private cloud. Now you have 79% on your private cloud. Now this moved to public. What does that do to the financial model? Does it lift revenue? Why do banks want to be in the public cloud rather than your hosted solution?

Yes. So when a bank makes that change from a revenue model implication, it's about 2x revenue. at very, very high margins. And you may say, why would a bank pay you twice as much? And the reality is from a net outflow from them, it's similar. But think about all they have to spend when they manage their own data center. You're talking about $1 million IBM hardware. You're talking about having all the data recovery, all the backup, all of the CIO work, all the CTO work done in-house. And it's interesting. So I've been at Jack Henry now almost 4 years. And when I joined, it was like we've been on this march for like 7 years of watching at a very steady clip around 40 to 50 clients per year making this change to being in the Jack Henry cloud environment.

And I was like, who wants to manage a data center these days? Like that's not what they do best, right? What they do best is serving clients. What they do best is creating bespoke lending to support small business growth, deposit gathering, et cetera, not necessarily like wanting to run a data center. But what I think is interesting -- so the ones that are left, we may only get to 30 or 40 this year, but the ones that are left are larger institutions, which makes sense because to still be running a data center in this day and age, you need to be near tech talent to probably near university. You need to be larger to have the economies of scale to be able to still be doing that. But the thing I think is pretty interesting is I think there might be extra tailwinds to accelerate that shift.

So we think you ultimately get to around high 90s in the Jack Henry cloud. So we've said, oh, we have 7 more years of this great tailwind of 2x the revenue. This is fantastic for revenue growth. But I think it could accelerate. And the reason why I think David could accelerate is think about -- and a lot of people are talking about ethos and frontier models and the vulnerability assessments and a high -- an increase in patching velocity that's going to come from the exposure of vulnerabilities in infrastructure, particularly around infrastructure and endpoints. That will make the burden of care even harder of managing your own data center. And I think whether it's the institutions themselves or perhaps even the regulators will get to a certain point to say, maybe you shouldn't manage your own data center to these institutions.

And so I think we could see -- typically, what tends to be the tipping point is when they have to make a refresh of hardware purchase or when a CIO is like retirement, that tends to be the tipping point where they rethink, hey, do we want to manage our own or do we want to move to a Jack Henry hosted environment. But I think we could potentially see over the next coming years an acceleration of that trend, which would be a great catalyst for revenue.

Yes, that's interesting. And as you go from private cloud to public cloud, how does that shift work? And what does that do for economics?

Yes. So it's about a 25 basis point uplift moving from the Jack Henry data center to the public cloud. Mostly because it's a similar product. It's a similar delivery mechanism. So it's not as much, okay, you're giving up all of these costs, therefore, you would pay more. But what you do get is better burst processing capacity. You get better uptime reliability today. We have very strong uptime reliability, but we think you could get to at least four 9s, if not maybe five 9s of uptime reliability in the public cloud. You get all the DevOps benefits. But if you think about Banno today, everything we've built over the last 5 years has been digital cloud native, API first. So a traditional core processor, and this is anyone in the industry, you get 1, maybe 2 upgrades a year.

So think about more monolithic kind of software releases. But Banno, you could have 10 a week, 10 a month. It's like your iPhone. Whenever there is new functionality, whenever there is an upgrade, it just comes straight through. And you get the same in the DevOps environment in the public cloud. So that's going to allow us in the core side of the house to increase the velocity of functionality and innovation into the hands of our customers. So you get a lot of -- you get enhanced security. Our security is great, knock on some big goals here. But even in a major cloud providers, we're a Google partner. We also have a very strong partnership with Microsoft. They know how to do this even at scale and for even more so than in Jack Henry.

So moving to the public cloud is going to be a continued uplift, but we also think it will be an improved margin. So we have a project underway internally we call EC 2030 or enterprise compute 2030, which is the journey to get out of the data center ownership ourselves where we're going to move to more of a colo facility. So it will be a public cloud plus colo facility, which we think will be near term, there's going to be a lot of work and spend to move that as part of the R&D efforts. But long term, it's going to be a great margin catalyst as well as we get out of data center ownership.

Yes. And then maybe turn to AI. Clearly, the market is looking at any software firm and saying this is going to be a problem. How do you see it in what you do, maybe describe if regulatory impacts help you, right, in AI that really AI can't come in and you probably save a lot on cost, too. Like how do you see all the different things?

Yes. I think that, unfortunately, the market right now is grouping everyone together and not seeing differentiation in business model, which is unfortunate. I do think that from a Jack Henry perspective, it's more of an advantageous situation. There's more opportunity than there is disruption risk. As you say, like I think about -- particularly in the core side of the business, there are 25 core providers that no one in this room has ever heard of, right? Like very small, maybe has 1 customer, maybe has 5 customers. It is not an easy business to operate in. There's a lot of regulatory duress. There's a lot of regulatory update requirements. There's a lot of functionality from a code perspective. And there have been new entrants over the years that have attempted to come in. If you think about the European competitors that have tried to enter the U.S. market and have not been as successful.

So I don't think it's been a technology challenge. It's an operating challenge. Like you need to be able to have service quality. You need to be able to have uptime reliability. You need to be able to know how to operate in a highly regulated world. So I don't think that the opportunities that AI presents will be disruptive to that because I don't think it's a technology challenge where all of a sudden you're unlocking compute capabilities or something else. And you really have to know how a bank or credit operates. And that is a key knowledge, institutional assets that a lot of firms wouldn't know. Like you have to ask the right questions. Claude is not just going to figure this out for you. So I think it gives us a benefit. We recently put out our annual client strategic benchmarking survey. We've been doing it for -- I think this is might be our second year, talks about it's CEO clients answering what are their top priorities. It's listed on the Jack Henry website.

So for the last several years, deposit gathering has been a top priority. Lending has been a top priority. Efficiency has been a top priority. For the first time, AI entered that list as a top priority. But AI, I think, will help drive efficiency. There's a lot of manual processes at a bank, a lot of workflow movement, a lot of duplication of tasks, a lot of silos of functionality that AI will help. But you have to understand the underlying processes under that, the human processes that occur in a bank to understand where those opportunities are. So we're using AI internally. Our developers have tools. We're getting over 70% efficiency from a code production velocity. So we're quite excited. We think that there's a ton of knowledge enablement tools and white papers and videos and case data from call centers that we have about our products that we can embed through AI and natural language to make the product easier, more intuitive, more automated steps to drive efficiency.

The reality is it helps us to drive efficiency at a bank. Nothing in the way we charge from a business model is tied to the number of employees at a bank. So we've always been aligned with our customers and helping them drive efficiencies from an institution. So I think there could be potential threats. I don't think it's on the core side. In the complementary side, we compete with every point solution that's out there. If you go to our client conference, you will see 300 booths of competitors on point solutions. So today, a vendor -- one of our clients could choose a third-party vendor. They could choose a Jack Henry. It's a very open architecture approach. We have a lot of APIs. But again, we compete with those today. So if there's a new incumbent based on AI, we will compete with them. And on top of which we know banking, we know our clients, and we have the data to be able to help them. So we're going to use AI to both enhance our products, enhance the efficiency.

We have a number of products already using AI, whether that be fraud detection products, whether that be AI Banno Assist conversations to help in the customer service area with AI, whether that be exception item processing. There's a lot in financial crimes around SARs reports or government reports that AI can help, the bank employee write and automate and save time. So there's functionality that we're releasing that has an AI embedded to help the bank or credit union.

Yes. That's good to hear. If we move to payments, about 1/3, give or take, of revenue. it's a very stable business in terms of more than half is debit processing, just Visa, Mastercard debit transactions grow reasonably stable. Little bill pay, some enterprise transactions you called out. Is there anything either from a share perspective or from a new product perspective, like the Moov partnership or RTP or some of the newer Zelle, all that stuff that could accelerate revenue growth?

Yes. So we've been selling a lot more credit lately. So our credit sales have been double what they've been in the past. Now it's not huge numbers. We've been in credit for a handful of years. And typically, a bank or credit wants to do debit and credit through the same provider. So we have a single platform that enables those transactions. But credit has been on the rise, I think as banks continue to feel comfortable in the tools, the risk tools, the dispute tools to handle that and on the lookout for more diversified revenue streams. So credit has been very strong. The health of the consumer has been, I won't say vibrant, but more stable than I think some of us a year ago would have maybe been nervous about.

Some of the areas that are very interesting from catalyst growth perspective are those faster payments. So if we think we have roughly, call it, 500 clients on each of the faster payment rails today, but very little volume is going through send right now on FedNow, but the government could turn it on more aggressively at any point. That's exciting. Zelle has been very strong this year, the adoption and usage of Zelle. So while still modest in terms of the size of the dollars and the faster payments, that's within our PayCenter hub functionality, it's been great growth rate. So I think that's something. You mentioned our partnership with Moov. So our small business initiative that we launched just this year, we have 2 main flagship products with the first kind of solutions out the gate. One is Rapid Transfers, which allows through the debit rails, tapping on your Banno on your phone, both iOS and Apple to move money.

So let's say, I could move money from my [ PNC ] to my IncredibleBank account. And it's instantaneous movement. And there's only 3 institutions in the U.S. that have that functionality today. So empowering community and regional banks and credit unions to have that at their fingertips really helps from an account opening perspective as well as from a deposit gathering perspective. The second is tap to local. So that's a merchant acquiring. But instead of going around the financial institution, it's giving the tools to the financial institution to hit their underserved business customers. So a lot of small entrepreneurial customers, smaller businesses. I'd like to think about like if you run a bakery, you may have a Toast machine in the cafe, but you're going to work at the farmers' market and you want to collect payments there or the piano teacher who comes to your house or your lawn care or your plumber, a lot of those kind of in-home where you don't send an invoice, you don't want to call and give your credit card over the phone, they can do tap to pay instantaneously.

So I think people in that space will be multi-acquirer. They don't have to switch from their existing provider, but it allows them to have an alternative or a backup system. It gets frictionless, very easy to turn on. It's automatically turned on for all of our Banno institutions. So we have 1,000 institutions turned on for that service, and it's a rev share for the bank or credit union. We partner with Visa and Mastercard. So we have yet to turn on the marketing engine behind that. So people have kind of just been self-discovering it through Visa, through Banno and already using it. And so it's been great to see that start, but we're going to turn on that marketing engine and really excited to see we have over 10,000 merchants using it already.

When is the marketing engine going to be turned on? And where does this hit your P&L?

So today, it's a rev share with Moov. And so you see that through payments and you see that in digital. It's not huge dollars today, Dave, and it's just growing. So even in '27, it's going to be modest. But we think over the next 5 years, it could be the second largest engine in the payment segment.

Wow. So debit, obviously, 60%. That's not...

No. So that's in addition to debit. That's just the rev share alone, we think, could be that large.

Wow. So move above like bill pay or enterprise in terms of percentage of payment.

The interesting thing on bill pay and enterprise since you mentioned it is the Payrailz acquisition we did about 4 years ago, has really resuscitated that business. You had a pretty mature business in iPay, but the combination of Payrailz and iPay has been great. We've seen a number of sales this year and just really nice growth. So we're excited about how that acquisition is going. The other acquisition that's helping in the payment space was our acquisition of Victor Technologies. So that's embedded payment capability. So that allows a bank or credit union to offer payments as a service, again, a revenue diversification opportunity for the bank or credit union.

And it allows them to offer to either fintech or to their sophisticated commercial customers through treasury management the ability to do payment servicing. So think about today, Victor does a lot of digital asset providers. They do some gaming companies. They do other -- think high-volume end user. They do a lot of sub-ledgering capabilities. So you don't want to have 1 million users as entry into your core system. So it does kind of a master account with sub-ledgering capabilities. And then it does the KYC, KYB for the institutions. And then the banker credit facilitates the payments. So that's been really exciting to see the success of that acquisition.

And I'll talk about complementary just a little bit, but really just as we think of the business, when we think of -- in the core segment, you're winning more in bigger banks. And some of your competitors have -- well, one of your big competitors has noted some potential they were going to force some conversions. They aren't now, but I assume you're still winning share there. So that's all a benefit to core. In payments, you have the Moov that's going to start to be more material. And then I guess, in complementary, is there something like that? And when you put it all together, is '28 kind of a breakout year as all this kind of develops?

Yes. So complementary is a collection of a lot of products. We have over 200 solutions. But if I think about some of the anchor capabilities, you think about lending products being in complementary, fraud products being in complementary and digital. And when we say digital, we mean more than just Banno. So we think about anything that end client user needs to do to open an account, get a loan, any of the services that an FI offers without going into a branch. So that would be digital. So that's a big grower as well, things like treasury management and now that we have Banno Business. But if I think about the other catalysts going outside of the base today, Banno is only available to our 1,700 core customers today, but we're going outside the base with Banno. So that's another catalyst for growth.

And would you say because of how sticky your business is, I mean, you have like 99.5% retention. I mean it just doesn't change. Your revenue growth doesn't change. It's 6% to 8% just very consistently. But it seems like a lot of things, while they probably don't immediately impact '27 because it's like a slow progression, '28, it seems like there are so many different catalysts that all collectively could make that just an incredible year.

Yes. And I think it's not just '28. I think it will be setting kind of a new level for the future. And I think it's not just from a revenue catalyst, which is exciting. It's not just one area. So from a perspective of diversification, I think there are several we talked about just now. But a lot of those are also very attractive from a margin perspective. You continue to get the margin expansion from moving to the private cloud and to the public cloud. The rev share opportunities, the newer products that an upcharge have a better mix blend. So I think there's also a lot of nice catalysts from a margin expansion as well.

Okay. And when we think about margins, I know this year and last year, too, really good margin expansion. Yes. Really good. You have a little bit of a headwind, which you've been more -- way more than offsetting, right, the colocation. How do we think about that the next couple of years, colocation costs keep going up, but incremental margins are really good? Or how do we think about that?

Yes. I think there were some things this year that we called out as more onetime benefits that are less reoccurring. We have a self-funded medical plan that in the first half of this year, we saw less claims around, and we've already started to see that normalize, and we've talked about that on the most recent call. So that was just kind of like a windfall that I don't expect to repeat, but there are others that will. We also have some growovers next year because of that, because of hiring, because of some of the infrastructure investments we're making. But I think the base foundation of the model intuitively is a margin expansion story will continue.

Yes. Okay. So solid margin expansion continues. And then when colocation costs sort of run out and all of a sudden, you just have your single location much -- you shut down some data centers, how far in the future is that?

That's a couple of years from now. I think it will -- today, we have some of the moving loads to the cloud from a product perspective. And then as we move the infrastructure support of the data center into the cloud, that's going to take us a couple of years to handle. But we spend about 14% to 15% on R&D. I don't see that increasing. We've been able to do all of the tech modernization work for the last 5 years, still under that 14% to 15%. So I see us continuing to be able to innovate at an accelerated pace while spending the same 14% to 15%. So I think by the next couple of years, you're going to continue to get margin expansion every year, but I think it can really start breaking out over the near-term horizon.

Nice. Okay. And 2 quick ones. We have about a minute left. Free cash flow conversion, you're back to close to 100%. Is that sustainable? And then is there anything that is a headwind to growth? Like there's so many growth drivers right now, but law of large numbers, maybe anything else?

Yes. So it's a great year for free cash flow. The clarity that we got from Section 174 essentially added excess cash because we had overpaid in taxes in retrospective. That's been a great headwind. But the natural free cash flow, I think, is going to be in that 90% to 100-plus percent. It's enabled us to spend almost $300 million on share repurchases this year on top of dividend growth and reinvestment in the business. So I see absent M&A continuing to have free cash flow allocation to all of those areas. We'll continue to explore M&A. But in the absence of that, it will allow for share repurchases.

Yes. That's good. And any like headwinds to revenue...

Headwinds to revenue, first of all, I would encourage everyone to look at us on an annual basis. There is -- Q4, for example, this year is a little lighter. That is no way indicative of any kind of annualized go forward. It just is the way this year's plan worked out. So please look at us on an annual basis. In any one year, depending on how M&A goes, in general, it tends to be a neutral to slight positive for Jack Henry. But in any one year, while that deconversion or think about the termination, exit of a contract is great.

It's nice free cash flow, but that creates a pothole of revenue in the future. And so if you had some lumpiness related to those potholes, but our industry has been consolidating for 40 years, and we've been growing at 7% to 8%. So we've been able to overcome those potholes, but that could create lumpiness from a headwind in a particular year if it was all a sudden concentrated.

Yes. Makes sense. Well, that's all the time we have. Please join me in thanking Jack Henry's Mimi Carsley.

All right. Thanks, everyone, for joining us today, both in person and online. My name is Cris Kennedy. I'm a research analyst at William Blair, covering the fintech and payment space. For a complete list of research disclosures and/or potential conflicts of interest, please visit our website at williamblair.com. Next up, we have Jack Henry & Associates. From the company, we have the CFO, Mimi Carsley. And in the audience, we have Vance Sherard from IR. Jack Henry is a leading provider of technology solutions to banks and credit unions. At the core, they help their customers evolve with emerging technologies. And clearly, we're in that cycle today. This company has been doing this for 50 years. It's important to remember that this is a very complex, highly regulated industry. So with that, let me pass it over to Mimi.

Cris, thanks for having us. So we're going to do some prepared presentation slides. This is the only conference we do a presentation. So it will be posted on our website. I encourage you guys to see it. We also have a shareholder and Investor Day meeting on September 15. We'll have a deck at that one as well. So with that, I'm going to, I guess, stand. So I appreciate the introduction, and it's funny because you use the word core, which is really hard to not use the word core. But when you're a core provider, it's part of the main thing you do, you have to learn not to say core when you mean just like the fundamental part of our business because it is tricky.

So I'm going to assume I can see things. Lawyer talk, blah, blah, blah. I'm not going to read it. You all know it, but we are going to include some non-GAAP measures. And at the end of the presentation that will be posted, there are a lot of the backups to those non-GAAP measures. So if anyone wants to see all the small fonts. So basically, when I think about Jack Henry and for those who know the company less, this was a picture of us at the NASDAQ bell with our directors a little less than a month ago, celebrating 50 years as a business. We also celebrated 40 years as a public company on NASDAQ, which is a rarity these days to be, but it really started from a foundation, and I'll talk a lot about the service, culture and the people-first culture at Jack Henry. But -- so we were quite excited.

In fact, yesterday, we had a town hall with probably about 1,000 of our associates to kick off the 50th year of Jack Henry doing business. And there was a man named Jack Henry. He founded the company with Jerry Hall, his partner and a lot of their principles of how to do business and how to do right by your customers are still very much the foundation of our culture at Jack Henry. So that was a great day. If we think about Jack Henry, as I talked a little bit about that culture of doing the right thing, being in business to serve your customer and that, therefore, if you treat your associates well and then they, in turn, will treat your customers well, it will work out for shareholders and employees alike. So a very strong foundation from a culture perspective. We address a sizable and growing marketplace.

There are over 9,500 banks and credit unions in the U.S. And while that number has been shrinking for over 4 decades at approximately 4% a year, if you looked at the number of institutions declining in the U.S., but you saw the number of assets, they're growing. And nothing that we get paid on has to do with the number of financial institutions at a bank. I'll also say that nothing we get paid on has to do with the number of employees at a bank. So while we are a SaaS model, we'll talk a lot about AI and what it's like to be a SaaS model in this current environment, nothing we do is counter to driving efficiency at a bank. So if we get to have our customers become more efficient, which is a lot of the focus of our products and solutions, and that, in turn, drives employment down or enables them to redirect their efforts to other areas of their business, that's a win-win for us and our customers. So a sizable market.

As Cris mentioned, while we are a technology company at our heart, we serve a clientele that is a highly regulated business. We ourselves are highly regulated. We go through a lot of IT audits on behalf because we run software in data centers on behalf of our customers. This is not an easy entry point. This is not an easy operating environment to that duress or burden from being a regulated industry and being a key system of record. And we'll talk about why we think AI is more of an advantage and an opportunity for us than a disruptor. But a lot of that comes down to that mission-critical functionality, the importance of that integrity of the system of record data and the durable moat created by being a highly regulated industry. So we'll talk a little bit about that.

Jack Henry is a conservatively run company. We have little to no debt on our balance sheet. We have strong free cash flow. We'll talk about that, but it's 90 to 100 plus of free cash flow conversion that has allowed us to reinvest in our business for growth. That has allowed us to have a very long-standing dividend policy and allowed us to both do M&A opportunistically as well as repurchase a significant amount of our shares this year. Part of that allocation is being a disciplined capital allocator. And so over time, we have very high ROIC, we'll talk about. It's a metric we take great pride in. We're a very selective acquirer, although we've done over 51 acquisitions in our history. We are certainly not a chaser of acquisitions, but it has been a great tool for us to augment and accelerate some of our own solution development efforts.

And the last is just around that investing for growth. We'll talk about that in a little bit, but we spend and redeploy about 14% to 15% of our revenue back into R&D innovation to continue to expand on the solutions we have. So we offer over 200 solutions today, and I'll talk about the segments that those solutions are in. So it really all starts with the Jack Henry way and those 3 pillars that we've talked about a little bit before, being a people-centric culture, doing right, whether that's up front on talent acquisition, retention, development, that leads to great service quality from our service, whether that be technology or actually customer service agents, helping banks and credit unions with their day-to-day problems.

And that translates to customer loyalty. We have over 99% reoccurring customer retention ex M&A and over 55% of our customers have been with us for over 20 years. So that service, that loyalty, that knowing that you're going to get innovation has really led to us being viewed as a partner rather than a vendor to our banks and credit unions. And we have some great long-standing relationships. So just a quick couple of highlights. I could have put a lot of logos on this page, but we win a lot of awards, Best Place to Work, Best Innovation. We have an engagement score of over 83%. We have great customer service scores. I don't know about you, but I tend not to fill out surveys when I'm happy. I tend not to fill out surveys in general. But when I -- the only time I do it is when I'm not happy. And so to, on average, get 4.6 and 4.7, and this has been consistent, tends to say like you have to get a lot of 5s mathematically. I know there's a lot of numbers of people in the room. You have to get a lot of 5s on a reoccurring basis to average of 4.76 in terms of customer service.

So we have extremely satisfied customers. And there was recently the ABA, the American Banker Association puts out a survey comparing the larger core providers in the marketplace. This year, they named those core providers in their stock ranking. I'd recommend that people go look at that survey, and they will see that Jack Henry is really differentiated in our service quality. If I think about Jack Henry from an innovation perspective, this is one of the areas where we have really spent over the last decade a tremendous amount of resources, intention to step up our game on innovation. We were always known as a service provider. But probably 20 years ago, we probably had satisfactory technology, but not leading-edge technology. But as we've thought and thought about in the words you see at the bottom of the page in terms of culture, service, innovation, strategy and execution that we needed to step up our game from an innovation perspective.

The banks and credit unions we serve, if we think about the community and regional banks and credit unions need Jack Henry more and more as we shifted from being a very back-office technology provider to being a very front forward technology provider that touches the hands of their customers every day. So if you think about moving from back-office operations of account settlement, posting interest, doing the general ledger type of activities to having apps on your phone -- I just turned on my flashlight. That was pretty cool. Turning -- working with your customers every day in how they interact with the bank or credit union, especially if we think about Gen Z and Gen I, the next generation, they don't walk into branches very often.

They want to open account online. They want to get a loan online. They want to check their balances online. So having the tools and service offerings that allow our banks and credit unions to open new accounts, gain deposits, do lending in a technology way requires innovation. And they need the weight of a Jack Henry to be able to compete with the larger institutions, whether that be the mega banks or the fintechs, they need the weight of our R&D innovation center to keep them up to speed. So let's talk a little bit about who we do serve. This data is as of the end of '25. But we have 27% market share in the $1 billion to $10 billion size banks and 47% market share of the $500 million to $10 billion banks.

And in credit unions, in particular, there's very few banks -- credit unions above that $10 billion demarcation. And even in banks, once you get above the super regional, there's really kind of a line of demarcation, if you will, if you think about above $50 billion in size, there's very few -- you start to get to very few number of banks. So we very intentionally don't serve the Tier 1 banks in the U.S. We choose not to by strategy, and we really focus on helping the community and regional sized institutions in the U.S. And we think that that's where the sweet spot is. I should be clear, we serve U.S. banks primarily. We have some Caribbean banks that we help as well, but we do not serve core banks outside the U.S.

So every year, we do a technology survey. We just launched the most recent Jack Henry strategy benchmark about 1.5 months ago. It's on the Jack Henry website. But you'll see a consistency of what are the top priorities of banks and credit unions. And so the top priority for many years has been growing deposits. That's still a top priority at 41% growing loans, a top priority as well. Driving operational efficiency is another top priority. And then this year, will come as no surprise to anyone in the room. AI was high on the list on the top 5 as well. So we take that information also coming out of this same survey, we asked banks and credit unions. This was CEOs only. So this was 193 bank and credit union CEOs fielding this information for us. And they all talked -- over 88% talked about increasing the IT spend over the upcoming year with the majority in that 6% to 10% increase in spend.

And that's consistent with what we have seen from bank director survey and other third-party surveys. So banks and credit unions in the U.S. are feeling healthy. They're on the other side of some of the challenges that people questioned around real estate bubbles, around secondary car loan, potential over lending, the impact from tariffs, they're feeling healthy and clean balance sheets, which is great. So we take this information on what is on the minds of banks and credit union leaders, and we take that and inform that with what are the key priorities from us. And then the next slide I'll talk about is the actual -- that drives some of our prioritization from an actual development work.

So these are the key strategic priorities from Jack Henry, and it's around things like our tech modernization journey, really driving new solutions in the small and medium-sized business that we talked about over the last 2 years, driving AI innovation, continuing to move upmarket, continuing to improve the security and compliance, growing and how we think about delivering -- continuing to deliver solutions. So these are our priorities. When we talk about that redeploying revenue into R&D, we spend about roughly, call it, $300 million to $400 million a year in R&D. So over the last 5 years, that's accumulated to roughly $1.5 billion or 14% to 15% of revenue every year. So what are some of the top priorities, taking that information from our client strategic benchmark survey into what is our road maps. We do 6-month road maps that we publish for our clients. Some of the items on those road maps around digital, continuing to expand the Banno platform we have, Banno Business capabilities, a lot in the AI space that Cris and I, I think, are going to be talking about in a moment.

Treasury management, things that are very impactful to large commercial clientele, fraud and our Financial Crimes Defender solutions, things like stablecoins, tokenized deposits, and a lot around account opening, easing the account opening and lending world. So we're in those spaces in addition to the general tech modernization journey that we're on for our core platforms. So let's talk about that tech modernization journey and how we approach the platform. So we're about 5 years in on this journey. We are now -- have over 20 of the components. If you think about an ERP system, if you will, a core system for a bank or credit union, there's about 30 big components of functionality within that. We have 20 either in market today or in the hands of beta customers using that. So big things around -- this year, we've talked about the commercial and retail deposit-only core will be available. So the last big remaining step on that tech modernization journey will be the lending and lending is the most complicated part of a core system.

So we have wires out already. We have entitlements. But the way we think about the core journey is if you took those 30 big bits of functionality of a core system, how do you modularize that? How do you put that in components so that derisks making a switch. So it allows people to innovate at their own pace, and it allows customers to be able to take components they need to supplement the core they might have today. So it is not a transition where you're leaving SilverLake, which is our flagship banking core and you have to go to the new Jack Henry platform. It's an and. It's an on top or an around kind of strategy. So you can stay on SilverLake but use Jack Henry wires. You can stay on SilverLake but use the general ledger of this new tech modernization if you want to do stablecoin. So it's having components that extend the modern elements of the core and -- but continue to have the robustness and the stability of the underlying core.

So the Jack Henry platform will all be digital cloud native. Google is our lead cloud provider, but we work with Microsoft and AWS as well. And the Jack Henry tech modernization will all be in the public cloud arena. The regulators aren't ready for full public cloud consumption of the core because it has a lot of PII information. But we expect that the regulators will be comfortable with people operating in a public cloud environment within the next couple of years. And so to us, there's no force migration. We're allowing our customers to use the components as they're ready, and it's able to extend capabilities we have today. So the things we're doing, particularly around the small business initiative, the things we're doing around stablecoin today, the things we're doing around Data Hub are all taking advantage of the work we've put in through the Jack Henry's platform.

So really excited that more and more of that functionality is in the hands of customers today. And as we talk about that technology and we talk about innovation, pretty much the first question we get from most people in the one-on-ones today is around AI or the competitive landscape. And I know Cris and I are going to probably talk about both of those in a moment. But we think that Jack Henry, there's a lot of naysaying out there. There's a lot of scared around what's the impact to SaaS. I think there's a lot of people growing technology providers into a broad bucket. And I would say from Jack Henry, our perspective is that we believe it is more of an accelerator and a positive than it is a disruptor for us.

Now part of that is because of the highly regulated nature, the mission-critical nature of being a core system provider. And the other is the uptime reliability. You have to have your system of record be compliant. You have to have it be trackable. You have to have uptime reliability and scale. You have to have it past all of the regulatory hurdles and you cannot have downtime, you cannot have hallucinations. So we think that all the work we've done on the Jack Henry platform, the work we've done on Data Hub to migrate data for clients will allow people to take advantage of AI, will allow Jack Henry to take advantage of AI. We believe that AI will be an expectation for all enterprise software, will be embedded throughout the functionality of our products, but then there will be certain products that are AI-specific on top.

So our developers are using AI. We're getting around 70% efficiency gains and velocity from that development work. We're able to -- we've had machine learning and other variations of AI, not Gen AI in our products for years in things like our algorithms for our fraud detection systems. We have a great product called Banno Conversations with AI Assist that lets a bank or credit union talk to an end customer with a human, not a chatbot answering their questions, but serves up the next answer to that customer service rep. So driving 40-plus percent efficiency in their call handling time and still getting that high trust service reliability that, that bank or credit union is known for. So certainly, we have a whole team within Jack Henry within our data and AI team. We've been doing over 1,000 touch points and programs with our AI coaches throughout all of our different product groups.

We have a lot of betas in place for case studies and use cases. We've been very clear on taking a responsible yet bold approach to that being a highly regulated industry. So there's a lot of risk and governance around AI usage. We believe in human in the loop as kind of a pillar of that governance model. But we really think that our clients are going to be looking for Jack Henry to help them, whether that's on having their data in a way that allows them to work with the army of vendors and consultants that want to help them generate AI or whether that's AI through our systems as well. So we're quite excited about it. This is just a quick overview of our segments. We have core. We talked a lot about core systems here today. That's about 30% of Jack Henry.

Payments, we do card processing, both debit and credit on behalf of the FI. We do enterprise payments. So think about a lot of remittance type of payments. We have faster payments, so Zelle, FedNow, RTP, ACH that we do on behalf of both end customers, commercial and fintechs as well as the banks and credit unions. And then complementary and the easiest way to think about complementary is it's not core and it's not payments, it tends to be complementary. So in our complementary, that's where Banno falls and the digital products, that's where treasury falls. That's where our fraud solutions fall, account opening, data management fall into that. And then our fourth is corporate services, which think about shared infrastructure, our hardware sales that go to support clients fall into that segment as well.

So just kind of wrapping up here a little bit. We believe here at Jack Henry that we serve our clients with the capabilities they need to run their institutions today and in the future. So whether that's helping them grow and transform, whether that's helping them think about conversions, whether that's helping them think about conversions, whether that's helping them acquiring other institutions, whether that's helping them think about growth go-to-market strategies, helping them with security and risk and compliance and fraud detection, whether that's helping them embed payments capabilities, both directly for day-to-day transactions or as an alternative source of revenue through embedded payments or payments as-a-service capabilities and then strategic enablement, which is research, help around -- helping them around developing and executing on their strategies.

And last, just in terms of attractiveness of shareholders and capital allocation, we have 22 years of a consistent dividend policy growth. We have a strong free cash flow conversion. I talked about earlier, about 90% to 100-plus percent free cash flow, which has allowed us to buy over almost $300 million worth of shares this year. And we just recently upped our authorization. So if we think about allocation priorities, it's reinvesting for future growth in the business. It's thinking about our consistent dividend plan. It's opportunistically looking at M&A and it's share buyback. And then just kind of closing out on some numbers that put some things into perspective. We talked about the size of our business. We are growing at 7.4% CAGR over the last 3 years. FY '26 guidance 6.6% to 7.1%. We have less than a month left to our fiscal year. We're a June 30 filer for those who are less familiar with us, over 90% reoccurring revenue, and we talked earlier about that 99-plus percent client retention ex M&A with over 15 million digital subscribers.

So think about on that Jack Henry platform that's public cloud native is where Banno sits, and we have over 15 million active users on that platform today. So it's a growth story. It's a margin expansion story. It's an AI accelerating story, and it's a story that has 50 years of execution behind it. So -- we think it's our mission to help the regional and community institutions to help them strengthen and be able to kind of fight and win, especially against the people kind of above their weight class. And so to help -- we think the U.S. is better served by having a robust community banking system in place. And so we feel very lucky and empowered to be able to help those institutions continue to win, especially in a very dynamic market. So with that, Cris, why don't we kind of open it up to some questions by you or the audience?

Yes. Any questions from the audience?

[indiscernible]

Yes. It's disappointing. I think at the moment, the market is not differentiating quality and execution from everyone, and they're putting all software and tech in an AI-exposed bubble together. And I think that's not the case, particularly not for Jack Henry. We are expecting very strong sales momentum growth. We've talked about in an average year, we win 50 to 55 new logos a year. And when we win a new core, it comes with around 40 other products at the same time. We've talked about that our pipeline is stronger than ever, aided by, we think, an even more advantageous situation competitively against some of our peers.

And we think we'll be at the high end or exceeding that this year. So there's definitely opportunities. There's always some headwinds from M&A and pricing each year, but we think we're on a trajectory. We also are really excited about some of the newer areas that can fuel growth over the next couple of years. We'll be talking about that at the Investor Day meeting in September. But if you think about the traction of faster payments, it's small dollars today, but could be quite large. Our SMB initiative could be one of the more sizable areas of our payments business over the next several years. So there's definitely upside, we think, from a revenue perspective.

Great. I think we're going to have to end it there. There is a breakout upstairs.

Okay, then we'll be moving.

All right. Thank you.

Good morning, and welcome to the Jack Henry Third Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Vance Sherard, Vice President, Investor Relations. Please go ahead.

Thank you, Danielle. Good morning, and thank you for joining the Jack Henry Third Quarter Fiscal 2026 Earnings Call. Joining me today are Greg Adelson, President and CEO; and Mimi Carsley, CFO and Treasurer.

Following my opening remarks, Greg will provide an overview of our business, along with updates on our strategic initiatives. Mimi will then discuss the financial results and updated fiscal 2026 guidance provided in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website. Afterwards, we will open the lines for a Q&A session.

Please note that this call includes forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from our expectations. The company is not obligated to update or revise these statements. For a summary of risk factors and additional information that could cause actual results to differ materially from such forward-looking statements, refer to yesterday's press release and the Risk Factors and Forward-Looking Statements sections in our 10-K.

During this call, we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income. Reconciliations for these measures are included in yesterday's press release.

Now I will hand the call over to Greg.

Thank you, Vance. Good morning, and thank you for joining today's call. As always, I want to begin by recognizing our associates for their hard work and dedication. They consistently go above and beyond to serve our clients and drive our success. I will share 3 key takeaways from the quarter and will then provide additional detail on our overall business. First, our financial performance. We produced record third quarter results with non-GAAP revenue of $616 million, up 7.3% over last year's third quarter. Our non-GAAP operating margin was a strong 22.9% on par with last year's Q3. Second, our sales performance.

Our sales and marketing team delivered an outstanding quarter with 17 competitive core wins, including 5 institutions with more than $1 billion in assets. This represents our strongest third quarter for new core wins in 7 years and ties our best third quarter ever in over $1 billion wins. Year-to-date, we have won 43 core deals, 11 of which are institutions over $1 billion. That's up from 28 wins and 8 over $1 billion at this point last year.

Based on our strong momentum, we are highly confident that we will exceed the 51 core wins achieved last year. Third, our higher-value core wins. We continue to see a higher number of trifecta solution wins. So far this year, 25 of our core wins or 58% of the total have included digital banking and card solutions. At this time last year, we only had 8 core deals that included digital banking and card solutions, just 29% of the total won. This healthy growth in trifecta wins reinforces the strength of our integrated platform and supports deeper, more valuable client relationships.

Now turning to our broader business. I will begin with our use of artificial intelligence, followed by updates on several innovative solutions and specific products. As I have shared at recent investor conferences, we view AI as a significant strategic opportunity and have been operating and expanding our capabilities for more than 3.5 years by establishing strong governance processes that support a responsible, bold and balanced approach.

Today, close to 100 AI tools are approved for internal use, ranging from general productivity platforms such as Gemini and Copilot to specialized business and development tools across all areas of our company. These tools support over 500 distinct use cases, delivering meaningful and measurable impacts. A few examples to share. In lending, developers working on our new Jack Henry origination solution, online account opening solution have increased productivity by roughly 90%, driven by faster coding and quicker issue resolution.

In digital, as part of the new Jack Henry platform, we have built an AI-assisted recommendation system for exception item processing that is in closed beta with 3 banks. They all report that AI is reducing the time to close exceptions each day by 70% to 80%. And in customer service, our AI adviser bot is supporting our frontline representatives and has assisted with more than 3,700 complex support interactions over the past 2 months with a 96% success rate, servicing answers and seconds from our knowledge resources.

To further accelerate adoption, we have deployed an internal team of AI coaches who work directly with our associates through workshops and hands-on support. We are also seeing meaningful productivity and efficiency gains from natural language development, sometimes referred to as vibe coding. For example, a nontechnical associate recently developed an internal application for our travel program, allowing us to meet a business need without licensing additional software. This is one example of many where our teams have independently built more efficient ways to address specific business challenges.

Overall, we believe our approach to AI education and adoption significantly helps us minimize competitive risk. Additionally, regulatory requirements, network certifications and our role as the system of record make the banking industry very difficult to disintermediate. Shifting to our innovative solutions. We continue to make strong progress on our stablecoin strategy. Beta testing with clients to send and receive USDC is going well. And at this point, we are largely awaiting final regulatory guidance to proceed more expeditiously.

We are delivering stablecoin processing through the public cloud native Jack Henry platform. This is important because the platform is connected to all of our core systems, serving as a bridge between emerging capabilities and our foundational cores. This provides our clients fast integrated access to capabilities such as stablecoin and our initial SMB solutions, Tap2Local and rapid transfers.

Tap2Local, our SMB merchant payment solution continues to see significant traction as clients look to better serve SMBs increased deposits and recapture business from fintechs. At the end of April, more than 700 banks and credit unions were live with Tap2Local. Since beginning targeted marketing just a few days ago, active merchants have doubled to more than 1,600 with several thousand additional merchants currently in the enrollment process. We intentionally waited to begin marketing so we can ensure the product and infrastructure were fully operational.

With that foundation now in place and marketing beginning to ramp up, we expect adoption to accelerate in the coming months. Client feedback has been very positive, particularly around Tap2Local's differentiated capabilities, including easy enrollment, tap to pay on both iOS and Android devices and continuous account reconciliation. As an additional validation to the product's uniqueness, Tap2Local recently won the Fintech Breakthrough Award for Small Business Payments Solution of the Year.

We are also seeing strong early momentum with Jack Henry Rapid Transfers, which enables both SMBs and consumers to quickly move funds between external accounts, eligible cards and digital wallets. Rapid Transfers is now live with over 110 banks and credit unions with an additional 190 at various stages of onboarding. Transaction volumes have been healthy, particularly given that marketing has not yet begun.

The average transaction size is approximately $260, which is double our original projections and is being driven by stronger-than-anticipated inbound transfers. Larger inbound transfers deliver one of the key value propositions, increased deposits for the financial institution. With higher average transaction sizes and consistent monthly activity without any marketing, Rapid Transfers is currently tracking well ahead of our initial modules, though we are still in the early innings of the rollout. As another key part of the Jack Henry platform, we are developing a cloud-native deposit-only core.

Client testing is underway and development was completed 6 months ahead of our original schedule announced in February of 2022. We will continue to broaden our testing as the year progresses. I also want to highlight early progress on our enhanced embedded payments capabilities following the acquisition of Victor Technologies last fall. The Victor platform, now branded as Jack Henry Payments Orchestrator, enables financial institutions to embed payment capabilities directly into third-party nonbank brands such as fintechs and commercial customers.

In Q3, we signed 1 bank and onboarded 3 fintechs to the platform and have quickly grown our sales pipeline to more than 40 banks and/or fintechs. Moving on to our reporting segments. In core, in addition to the 17 competitive wins I mentioned earlier, we also secured 4 on-premise to private cloud contracts, including 1 institution over $1 billion. So far this year, we have signed 23 in-to-out contracts with 8 being institutions over $1 billion.

In payments, we continue to see strong growth in faster payments. Over the past year, our clients' adoption of Zelle grew by 25%, RTP by 26% and FedNow by 31%. In the third quarter, payment transaction volume across these channels increased 47% year-over-year. In complementary, we signed 36 new Financial Crimes Defender and faster payment module contracts during the quarter. As of March 31, we have completed 168 Financial Crimes Defender installations and another 68 in various stages of implementation. We've also installed 168 faster payment modules with an additional 256 in products.

The Banno Digital platform had another strong quarter with 23 retail and 34 Banno's business signings. In total, we have 1,028 clients live on Banno, including 466 on Banno Business. The platform now serves more than 15.5 million registered users, up 13% from a year ago. As a reminder, all of our Banno wins and growth thus far has occurred within our core base. As we look ahead, we believe we are at a meaningful inflection point. We now have a competitive feature set, along with increased willingness among certain competitors to operate as open providers.

As a result, we see an opportunity to begin expanding Banno beyond our existing base and more closely align it with our payment product strategy, where we have successfully sold outside the base for many years. We will provide more updates as we progress with this strategy. On the technology spending front, we recently released results from our eighth annual Strategy Benchmark survey, which highlights technology spending priorities. While we monitor a number of industry surveys, this one is particularly meaningful because it reflects direct input from the CEOs of our bank and credit union clients.

The results point to a clear and growing commitment to technology investment. 88% of respondents expect to increase their technology budgets over the next 2 years, up from 76% last year. Of those, the largest segment, 41%, plans to increase investments between 6% and 10%. These trends are consistent with other industry surveys pointing to increased technology spending. We ask CEOs where they plan to prioritize those investments. For the first time, artificial intelligence ranks as the top priority, cited by nearly 50% of the respondents, followed by digital banking and data analytics.

These priorities align directly with where Jack Henry has been investing and delivering innovation. Last week, we highlighted our differentiated innovation at the Jack Henry Annual Strategic Insight Symposium in Salt Lake City. We featured presentations and panels that included both Jack Henry leaders and well-known industry experts covering key topics such as the macroeconomic environment, the Jack Henry Benchmark survey, our technology priorities and progress, fraud initiatives, AI education and use cases, the impact of stable coins and tokens and meeting the needs of Gen Z.

We will provide updates on many of these topics along with additional innovation updates at our Investor Day on September 15 in our Dallas offices. We recently completed and published our 2026 sustainability report. The report is an outstanding information source on the Jack Henry -- on Jack Henry and is available to review on the Investor Relations page on jackhenry.com. The report coincides with our 50th anniversary and reflects our continued focus on preserving long-term value for our associates, clients, communities, stockholders and the environment through responsible business practices.

As part of our 50th anniversary celebration, our Board is looking forward to ringing the closing bell at NASDAQ tomorrow, May 7. This is one of the many activities we are doing throughout the year to mark this significant milestone. In closing, we remain focused on culture, service, innovation, strategy and execution. These key differentiators will enable Jack Henry to continue to drive industry-leading revenue growth and margin expansion. With strong sales momentum, increased client technology spending and a disciplined execution, we believe Jack Henry is extremely well positioned to capture the opportunities ahead.

With that, I will turn it over to Mimi for more detail on our financials.

Thank you, Greg, and good morning, everyone. I would like to begin by thanking our associates who continually deliver value to our financial institution clients. The result is another quarter of solid revenue and earnings growth and continued momentum as we approach the end of our fiscal year. I will begin with our healthy third quarter results, then conclude with our updated fiscal '26 guidance.

Q3 GAAP revenue increased 9%. Non-GAAP revenue increased 7% for the quarter and 8% year-to-date, a continuation of consistently strong performance. Third quarter deconversion revenue of approximately $19 million, which we previously announced was up approximately $9 million for the quarter, reflecting a steady pace of M&A activity among financial institutions. As a reminder, the dollar amount of deconversion revenue has little correlation with the number of transactions or annual revenue impact, and the absolute amount of deconversion revenue can vary greatly quarter-to-quarter.

We continue to see industry consolidation as largely neutral to slightly positive for our business. Now let's look more closely at the details. GAAP services and support revenue increased 10% for the quarter, while non-GAAP increased 8%. Service and support growth during the quarter was primarily driven by strength in data processing and hosting revenue for both private and public cloud. Specific callouts include implementation services and license revenue. Private and public cloud offerings continue to drive strong growth. Cloud revenue increased 9% in the quarter. This reoccurring revenue contributor is 33% of our total revenue.

Shifting to processing revenue, which is 43% of total revenue and another strategic component of our long-term growth model. We saw a solid performance with 7% GAAP and 6% non-GAAP growth for the quarter. Consistent with recent results, quarterly drivers included increased digital, card and faster payment processing revenue. Completing commentary on revenue, I would highlight total reoccurring revenue was 91% for the quarter.

Next, moving to expenses. Beginning with cost of revenue, which increased 7% on a GAAP and non-GAAP basis for the quarter. Drivers for the quarter are consistent with recent previous quarter results and include higher personnel costs, direct costs growing consistent with lines of revenue and increased amortization of intangible assets. For modeling purposes, amortization of acquisition-related intangibles was $6 million for the quarter.

Next, R&D expense increased 15% for GAAP and 12% on a non-GAAP basis for the quarter. Quarterly increase was primarily due to the net personnel costs driven by an increase in headcount over the trailing 12 months. And ending with SG&A expense for the quarter on a GAAP basis, it increased 9% and an increase of 8% on a non-GAAP basis. Results reflect an increase in personnel costs, specifically from headcount additions over the 12 months. We remain focused on generating annual compounding margin expansion. Q3 delivered consistent non-GAAP margin at 23%. Year-to-date non-GAAP margin improvement was 195 basis points with a non-GAAP margin of 25%.

Non-GAAP margin benefits inherently from the leverage in our business model, strategic cost management and leveraging our existing workforce as we continue to focus on enterprise process improvement and AI utilization. These strong quarterly results produced a fully diluted GAAP earnings per share of $1.71, up 12%. For the year-to-date period, GAAP earnings per share was $5.41, an increase of 20%. Reviewing the 4 operating segments, we see positive performance across the board. Core segment non-GAAP revenue increased 9% for the quarter, with operating margin contraction of 27 basis points due to temporary product mix of lower-margin revenue sources such as implementation and work orders.

Payments segment quarterly non-GAAP revenue increased 5%. The segment again had outstanding non-GAAP operating margin growth with quarterly results of 159 basis points. Card processing revenue showed steady growth and was partly offset by lower network incentive revenue. The segment also benefited from continuing shift and significant growth from faster payments. The complementary segment quarterly non-GAAP revenue increased an impressive 7% with healthy 99 basis points of non-GAAP margin expansion. Quarterly revenue growth continued to reflect demand for our digital solutions and a beneficial product mix with sales sourced from new core wins, existing core customers and noncore financial institutions.

For the quarter, Corporate Services, formerly Corporate and Other, non-GAAP revenue increased 27%. This is primarily the result of increased hardware sales. Since the segment reflects expenses not allocated to other segments, we will not be discussing operating margins as it provides no meaningful insight. Now a review of cash flow and capital allocation. Q3 operating cash flow was $186 million, a 72% increase over the prior fiscal year Q3. Quarterly free cash flow of $122 million delivered a 137% increase over the prior fiscal year Q3. Our consistent dedication to value creation resulted in a trailing 12-month NOPAT return on invested capital of 23% compared to the 20% in the third quarter of the prior year.

We are very proud of the durability of this metric and how it reflects our high-quality allocation of capital for our shareholders. Additionally, I would highlight the following significant year-to-date capital decisions resulting from our strong free cash flow generation. $284 million in share repurchases, $127 million in dividends paid plus the asset acquisition of Victor Technologies. We're proud to return meaningful cash to investors while maintaining a conservative balance sheet. The average purchase price of the shares repurchased was $160. We ended the quarter with debt of $90 million, consistent with normal course of the business revolver usage but expect to end the year -- the fiscal year debt-free, barring acquisitions or other opportunities.

During the quarter, we established a new $1 billion revolver credit facility to support future growth opportunities. I will now discuss our third consecutive increase to full year guidance. As you are aware, yesterday's press release included updated increases to fiscal 2026 full year GAAP guidance. Deconversion guidance will continue to follow the conservative methodology introduced in fiscal '24. Fiscal '26 deconversion revenue guidance has been increased to $37 million.

Full year GAAP revenue growth guidance increases to a range of 6.1% to 6.6%. Based on our strong year-to-date results, we have tightened the range of non-GAAP annual revenue growth guidance, resulting in a new outlook of 6.6% to 7.1%. Consistent with our budget plan and year-long messaging, Q4 will see relatively lower non-GAAP revenue growth compared to the previous 3 quarters. Drivers include projected digital revenue slowing from lower active user growth, card revenue growth, seeing pressure from risk management and less onetime network incentive revenue.

Expenses during the fourth quarter are expected to reflect relatively higher pressure from medical cost benefits returning to historical levels, cloud migration infrastructure expense and commissions. Our expectation on fourth quarter revenue are below current analyst consensus. At the same time, full year revenue growth consensus is aligned, reflecting that part of the difference is that some of the revenue analysts expected in the fourth quarter shifting to the third quarter. Margins are projected to contract in the fourth quarter based on previously disclosed factors. However, based on the full year revenue growth and our robust financial model, we are increasing full year guidance for non-GAAP margin expansion to a range of 75 to 95 basis points from the original 20 to 40 basis points on the August call.

As a reminder, we see fluctuations in quarterly results related to software usage license components along with the timing of implementations. Therefore, the correct performance indicator for our business is the consistently strong fiscal year financial results. Q4 results are not aligned with our early expectations for fiscal '27. The presented results and guidance metrics are indicative that our business operations remain healthy and sound with growth opportunities across all 4 operating segments.

The full year GAAP tax rate estimate for fiscal '26 is 23.25%. The above increased guidance metrics result in a stronger full year outlook for GAAP EPS of $6.78 to $6.87 per share, a growth of 9% to 10%. As a reminder, even updated deconversion revenue guidance potentially understates GAAP EPS growth. Full year free cash flow conversion outlook for 95% to 105% for fiscal '26 with a bias towards the upper end of the range. Including, Q3 reflects another exceptional performance from our associates leading to increased guidance. We're pleased by the continued performance momentum and resulting fiscal year outlook.

We remain strongly convinced that demand for our solutions aligned with continued technology spend by our clients and prospects, all supported by industry-leading service excellence from our associates will drive outstanding financial results and superior shareholder value. We appreciate the contributions of our dedicated associates that produce these superior results and our investors for their ongoing conference.

Danielle, please open the line for questions.

[Operator Instructions] The first question comes from Vasu Govil from KBW.

Greg, first one for you. It was another very strong quarter on new core wins. I'm curious what's driving this trend? And if you are starting to already see some benefits from the competitor platform consolidation or if that's still on the come?

Yes. Thanks for the question. Yes, I think it's a combination of both. We've been talking a lot about what we've been doing on the innovative side. And so that's continued to play out with the products, the solutions. Obviously, our customer service hasn't wavered a bit. I will tell you, of the 17 core wins, 13 of them came from one provider and one competitive provider. But I will say that most of those, as you can imagine, the core processing contracting side takes anywhere from 9 to 12 months typically. So a lot of those were already in motion ahead of whatever announcements were made. But we did take some from really everybody, just so you know. So we had some wins from really all of our competitors. But again, the bulk of them came from one.

And then maybe a quick one for you on the margin guide. The guide obviously implies a meaningful step down in the fourth quarter, and I caught your comment on the normalized medical expenses you're baking in. Any other drivers there? Or just trying to get a sense of whether there's any conservatism baked into the guide?

Yes, you're welcome. So yes, you're accurate, and I appreciate you hearing the commentary regarding Q4, which is not indicative of the full year performance, but more so due to some unique factors in Q4 that were expected as we thought about for the cadence of the year. So you're right to call out the medical expenses returning to normalized levels. We also had some commission shift where we saw some benefit earlier in the year. We expect based on the timing of those implementations for the commissions to -- some of that to hit in Q4.

Additionally, just some of the mix we're seeing from some of the lower-margin business, some of it related to work orders and implementation also lead to a Q4 having less margin expansion or, in fact, margin contraction for the year. But again, the right metric for our business is the annual, and we're pleased to be able to increase guidance on full year margin expansion.

The next question comes from Peter Heckmann from D.A. Davidson.

I wanted to talk a little bit about Anthropic's Mythos. Has Jack Henry been able to set up a timetable to access Mythos to use -- look at their own systems to identify any cyber vulnerabilities? And do you think that's something that Bancorp customers are increasingly going to demand from their vendors on a periodic basis.

Yes, Pete, so this is Greg. So a couple of things on Mythos. So we've been heavily involved ever since it came out. So I actually did a call with a lot of our competitors and others with the Head of Cybersecurity in Washington. So we had -- as soon as everything was announced, we were pulled in. Our cyber teams have been involved in a multitude of meetings. Project Glasswing, which is now called Mythos Workshop, our teams are getting information associated with that and joining various meetings. We've obviously done a whole host of things that we need to do for operational readiness across the organization.

But candidly, we were doing that already. But the other thing is that you probably heard that on April 29, the Trump administration raised some objections. And so there's still some delay on where some of this utilization will get done. But our teams are heavily involved both with -- not only at our organization and with Mythos, but also across the entire landscape of our industry. All of our competitors and Jack Henry are working together with Washington to make sure that we protect our banks and credit unions.

And Greg, if I could add on to that. Mythos is just the current kind of attention in the industry, but we've made significant investments in fortifying and stepping up from a cybersecurity from an awareness and observability and a zero trust kind of resiliency philosophy over the last several years. So we feel like we're in a much stronger position today than we had been over the last several years to be able to handle this type of situation.

The next question comes from Jason Kupferberg from Wells Fargo.

This is Tyler DuPont on for Jason. I wanted to just start by piggybacking off of the core questions and commentary. Given you signed 43 takeaways so far fiscal year-to-date, how should we be thinking about upside to that 50 to 55 annual target? If I heard correctly in the prepared remarks, Greg, you suggested that you have confidence in exceeding last year's number. But given last 4Q, you guys won 23 deals, that would imply over 60 this year. So I guess just given the success you've seen so far year-to-date, I'm wondering if you can help put sort of a finer point on expectations as we look to the rest of the year.

Yes, I appreciate the question. I can't really give a finer point. I can tell you that I'm very confident that we will be north of 51 and probably north of 55, somewhere in that range. I don't know exactly -- contracts are interesting as far as timing to go get them done. We've been completing a couple of contracts recently that took a lot longer than we expected and sometimes they get kind of turned over to the next quarter.

But in reality, it's not just the number of wins we have, but also the size of the wins. So as we referenced, we had 11 over multibillions, but we've also won just this past quarter, we won $3.5 billion. We've won $5 billion. We've won $7.5 billion. And just recently, we just won an almost $10 billion client that is coming with 1.2 million accounts, which is actually about 25% larger than any customer we have today, including our largest asset size in the number of accounts. And those contracts took a long, long time to secure.

So as you continue to go upmarket, contracts take longer. So it's really hard to give you a definitive answer. But the answer I'll give you is our sales team is really kicking butt right now. And obviously, a lot of the things that are going on in the industry are providing opportunities for us. And I think the best is still to come based on feedback and pipelines that we have. Our pipelines are extremely strong, not just in core, but in payments and complementary as well, and we're very bullish on that.

Great. That's great to hear. And I guess just as a quick follow-up, I just want to touch on free cash. The $122 million in the quarter was pretty meaningfully above, it looks like both consensus and even your own historical trends. So can you maybe just touch on how we should be thinking about free cash flow going forward versus the 90% to 100% conversion guide sort of both as we look down the barrel to the final quarter and as we try to hone our models for next year.

Yes. So I would say, Tyler, there were a couple of things as we look at trailing 12-month free cash flow. First and foremost, a tremendously strong operational foundation that led to strong cash, but there was also impact -- positive impact from the tax bill change that we saw come to clarity as well as some small asset sales. But overall, we feel great as we are improving the color this year for free cash flow conversion to that $95 million to $105 million, with a bias to the high side, sitting at around 109 -- $108 million, $109 million year-to-date from a trailing 12 months. We feel very good that we're returning to the historical norm levels of our free cash flow.

The next question comes from Rayna Kumar from Oppenheimer.

Just given the volatile macro and political environment, as you talk to banks and credit unions, how are they thinking about IT spending for the next 6 to 12 months? And then separately, any read -- initial read on FY '27 revenue growth and margins?

Yes, Rayna, I'll take the first one. So kind of as we talked about in my prepared remarks, and we just came out of our strategic initiatives meeting with our top 150 or so clients. The focus -- and we actually had somebody from Washington come in and talk to our clients as well. But it's based on what's going on in the macro environment, honestly, it's not affecting the banks and credit unions focus on what they need to get done in the tech spending.

So as we referenced in our own benchmark survey that just came out, we had 88% said that they were going to increase their spending as compared to 76% last year. And with that average, I think it was 41% is actually at 6% to 10% of an increase. And so that really coincides with everything that we've been talking about for the last 2 or 3 surveys that we've referenced on our calls, bank directors and others surveys. So that remains. The only difference is really where they're talking about spending the money. So AI for the first time became the #1 priority for them. But obviously, deposits, digital banking, in particular, fraud, other components are still up at the top.

But -- so we're seeing it. I mean, again, our pipelines are very, very robust right now, again, in all parts of our business, not just core. And again, we're getting larger institutions. As I referenced, just this year, we've already won the one I just referenced that was almost $10 billion in assets, but 1.2 million accounts which is significantly larger than any one we have, which that comes with a lot of other products with it. So things along that line that continue to make us believe that the robustness of the technology spending will continue.

And then Rayna, I can take the second half of your question kind of building on that positive outlook that Greg just framed. It's a little premature to talk about FY '27. We're just excited about ending '26 in a great spot. Again, I would just call out that the quarterly pace of the year is not indicative of any kind of launching off pad for '27. So although we are all calling for a weaker Q4, it does not mean anything diminishes from our positive outlook for the full year and then next year. Even at roughly 91% reoccurring revenue, you would think a budgeting process would be easier, but we have a very comprehensive budgeting process here at Jack Henry.

And so we are still working with each of our operational leaders to talk about the next year's plan and rigorous prioritization around investment and spending. So we will give more color to that when we talk about full year results next quarter. But overall, we're thinking a positive direction for FY '27.

The next question comes from Madison Suhr from Raymond James.

I just wanted to start on the trifecta wins. I think you mentioned 58% of wins this year were those trifecta wins. Just given what you're seeing in the pipeline, I mean, do you think this elevated level of cross-sell is sustainable, not only for the quarter, but just as we think about kind of the next year or so?

I do. I appreciate you asking the question. I mean I think we've seen the results of all the work and innovation that we put into our -- both our digital platform and our card platform. We've made a lot of changes through the years, and you've heard us reference over the last couple, in particular, about getting to a level of feature parity that we needed to compete with some of the larger digital-only providers, and we're starting to see that.

We're starting to get some wins from all of the players, candidly. And so -- and they're not just coming in core wins, which is great, obviously, but you have to wait for those to be installed. We're also getting some current Jack Henry clients that were on competitive digital platforms that are now making the decision to move the Jack Henry Banno instead. So short answer to your question is I do feel very strongly that the work that we've done and are continuing to add with features like Rapid Transfers and Tap2Local that are not available anywhere else are big differentiators for us to winning deals.

Okay. Great. And then I did want to follow up just on the Payments business. It grew 5% in the quarter. Just curious from your guys' vantage point, what's kind of the key buckets or key things that could accelerate growth in payments from here, just given I know that mid-single is maybe slightly below where you guys want to be.

Yes. We continue to see steady growth in card, the resilience of the consumer spending. And then on top of that, you get a boost from continued rebounded growth in remit and Bill Pay, Bill Pay, I would call out, even though it's not huge growth numbers, the increase has been quite positive, and that's a signaling of the resurgence post acquisition of Payrailz. And then on top of that, you have just tremendous growth, almost 50% growth in faster payments. So it's across the board. Volumes for card are good, but then you have extra growth from other areas of the business.

The next question comes from Dominick Gabriele from Loop Capital.

I guess Jack Henry is always focused on an open platform versus a walled garden. And I think that's really been a benefit to the business over time in gaining customers. Do you expect to partner with various AI potential financial providers with their products? And how would you think about that relationship? Would you take it similar to the types of partnerships with third parties, allowing their products to be on your platform and really focusing on Jack Henry's added value when the customers ultimately decide to choose Jack Henry products regardless.

Yes. It's a good question. I appreciate it. A couple of things. We are doing that today. So several of the AI-related companies are partnering with us today. That's how we're using some of the tools and also some of the -- incorporating some of it into some of the products that we are working on. We are being very careful on that. So partner is a really difficult word to use because in some cases, a partnership infers a lot of revenue changing hands on both sides. A lot of what I would call it is more of an integrated relationship.

And in some cases, they're creating more financial gains for both of us and others, they're just creating opportunities for us to leverage tools that we're licensing. So -- but that is happening today and will continue to happen. We have a whole host of folks that we have hired to evaluate those tools and doing that, and we're being very careful because everybody's got something new to talk about. But that will continue. And to your point, we've been by far the most openness -- open platform through the years. And so we look at AI, we look at fintech opportunities, we look at fintechs that are using AI that's already embedded into their solutions as opportunities, and then we'll evaluate them one at a time.

Great. Maybe just as a follow-up, if you look at the various growth rates of the segments, Core has been doing quite well. And outside of the comments you just made on payments, complementary double digits. I'm just curious of the quarter-over-quarter kind of implied reduction in the other 2 pieces of the business, given there is some momentum there. If you could just help walk through kind of that, I'd really appreciate it.

Sure. So as we always say, not to look at 1 quarter, but to look at the full year, particularly because some of these products, as you look at the installed calendar and even though we're thrilled to be looking at over 50 core wins, the revenue we're getting today is based on the wins we had, especially for core that we locked in last year, some of the complementary products can be installed sooner. But the profile of those customers does impact the revenue. So if you have years where the size of the installed base is different or the mix of the products they're taking, it can impact both revenue and margin.

On top of that, what we've seen is some of the onetime service revenue related to work orders and implementation is also -- it's been a nice added revenue source, but I would say that kind of varies as well from quarter-to-quarter. And that's really the biggest driver causing for the fourth quarter in addition to just some grow-over challenges from last year's strength.

The next question comes from Eric Teller from Wolfe Research.

It's Eric from Wolfe. I just wanted to understand a little bit more. When I think about the beginning of the year, you guys had called out pricing, M&A and some other variables, credit union account growth as having been potential risks or headwinds that decelerated what otherwise would have been a 7% to 8% algorithm for your year, ended up doing better than that as the year is progressing and not seeing those headwinds as materially. And you're seeing better core growth also, I think, than probably you anticipated at the beginning of the year.

And so putting all those pieces together, where do you see the business positioned now in terms of your normal 7% to 8% trajectory? Do you think you have enough pillars for that business to sustain 7% to 8% in the next couple of years again without specifically guiding to '27? I'm just curious if you think the building blocks are there.

Eric, I appreciate the question. Yes, even though we haven't really talked about some of those headwinds as we progress through the year, we've grown over them. It's not that they've disappeared. We had it in our budget plan. We knew of some of the departures. We knew of some of the new contract renewals that we're going to face a bit of compression from a renewal perspective. We've just been able to grow over that. So I just -- I don't want to say like those pressures have abated. It's just we've been able to perform in spite of them.

So as we look at next year, again, too premature to put any refinement on it, but I think the growth algorithm is certainly still intact. And as we've talked about, I think, even as much as on last quarter's call, the new exciting areas of innovation and business opportunity like the ones that Greg highlighted in SMB, faster payments, et cetera, it's going to be a couple of years until that has a meaningful contribution to the revenue growth that would kind of push us towards the upper bound of our growth algorithm and beyond. But we feel confident that next year is looking in line with the guidance we have historically given.

Yes. The only thing I want to add to that is that we did talk about that typically, we start to even out over the year with M&A. That is starting to play out exactly as we had said. But we had some -- in the early parts of the fiscal year when we were finishing our budgets and everything else, we had a little bit more of an upside down, but that started to balance itself out like we thought. The other thing is we referenced the changes we made in the renewal processes with how we went to renewals, and that has worked really, really well, candidly.

And then I do think what Mimi just referenced with some of the new products and services that are still in earlier stages and -- but starting to gain some traction, that's where we get a lot of our confidence for the longer term in getting to the numbers you're talking about.

Okay. Greg, I just want to -- one follow-up on the core wins. It came up a couple of times, but I don't feel -- I still feel a little bit hungry for an understanding of what's actually driving the incremental step up in the magnitude of the wins than the run rate? Because like you said, these were basically formed from probably a few quarters ago in terms of the deals being signed or at least close to signed. So it wasn't really the industry changes we're hearing from competitors right now that caused the increase. So what did cause it to really kick in a few quarters ago already? Because it seems like if you add on what we're seeing in the competitive landscape, that could be additive even more so than the 55 going into next year if you -- when you take the 2 together.

Yes, I agree with you. I mean, I think you all have heard me enough talk about the differentiators and I bring them up every time because we're still getting some folks that don't fully understand it. And we are building things that nobody else is building, and we're doing it at a level of execution that nobody else is doing. So when you get an industry that's completely full right now of competitive uncertainty that is happening specifically with our largest competitors, we are the provider that is absolutely executing on the things that we said we were going to do and hasn't lost a step in customer service and never has.

So people are -- I mean, I'm getting inbound calls from larger institutions that want to talk to us. I'm getting inbound calls from the largest consulting firms in the world that want to learn more about what we're doing. And we've been showing these large consulting firms our technology and their quote is, we are blowing them away. They never thought a core provider could do what we were doing with what we've built on the platform.

So when you take all of that in the years of a lot of effort of building out the technology and now to a point where we can actually demonstrate it and have live products, that is really driving it. And again, with the unrest of what's going on with our competitors. So I do believe it's going to continue because we're going to continue to execute as we have been, and our products are only going to get further and further ahead of where our competition is.

The next question comes from Ken Suchoski from Autonomous Research.

I wanted to get your high-level thoughts on how AI can play a role in the core processing industry. And we noticed one bank with over $25 billion in assets expanding its collaboration directly with OpenAI. And I'm curious to get your take just on, one, how much of a risk is there that banks or credit unions work directly with these AI companies? And then two, how involved is the core provider if that does happen? Or how does the core provider's role change in that scenario?

Yes. I think there's a couple of things. I think you referenced the $25 billion institution. And I do think the larger institutions as you continue to move up, they probably have more opportunity, more wherewithal money-wise and talent-wise to work with some of these providers directly. So you may see that. I can tell you in the community bank space, as I said on our benchmark survey, the #1 priority was AI. And our community and regional banks that Jack Henry works with, they don't have the wherewithal in most of the cases to build that out.

So they're relying on us, which is why we've taken such a proactive way of doing this for the last 3.5 years. So as I mentioned, not only are we building the level of efficiency and effectiveness inside of the organization, we have 14 different POCs that we have going on right now with products. We have a whole host of things that we've built in our Financial Crimes solution, including things like SAR reports, suspicious activity reports that go out and doing those using AI, creating things that provide efficiency gains for our banks and credit unions with various tools like exception item processing that I referenced in the script.

So things along that line that I think will continue to drive opportunities for people like us, at least that are very innovative and building out that level of innovation with our customers. Could there be a few that go around? Yes, maybe, but they're going to be fewer and far between than they are at the larger institution size.

Yes. That makes sense, Greg. And maybe just one for Mimi. Just on the payments non-GAAP revenue growth rate just because we're getting some questions on. I think I heard lower network incentives this quarter. Is that more of a onetime issue? Or does that carry through to future quarters? Just trying to think through the growth rate there and if it can accelerate from the 5%?

Yes, of course. The network incentive thresholds are kind of negotiated kind of year-by-year and sometimes intra-year. So I don't see that as a headwind kind of going forward in any kind of structural change way. It just happens that it has more of an impact this year in Q4 on top of a growover from an already strong year. So to me, the underlying trends of the strength in card volume, the strength in our enterprise payments business makes me feel comfortable about the ongoing growth rate in that segment.

The next question comes from Cris Kennedy from William Blair.

It's great to hear about the larger wins. It seems like you're making a lot of progress there. Can you just remind us of the dynamics and/or the economics to Jack Henry as you move upmarket?

Yes. Thanks, Cris. Yes, the economics obviously change based on the amount of products that they buy with us. And again, I just referenced this larger one that we just literally won was not part of the account that I gave you. We just won over the last couple of weeks. But that one is asset size isn't -- it's roughly $10 billion in assets, which for us would be the second largest win in our history as a brand-new core as far as asset size. But more importantly, it's the number of accounts.

So they have 1.2 million accounts, which is, like I said, 25% greater than any of our current customers, but they're buying a whole host of products from Jack Henry. So that creates a larger scale of opportunity for us than maybe some of the other institutions that are buying only a handful. The key of why I keep referencing trifecta is because trifecta for us really is the opportunity for us to drive 3 of our largest revenue products in with a single client. So really, the rest of it becomes gravy. And so it really does depend, Cris, but when we go in to sell a deal, we try to sell them everything we have.

Some of it also could be timing. If the contract terms on some of the other products are not coterminous with the core, you sometimes have to wait to go back and win the digital or the card or other things like that to drive that. But economics really, truly vary. Like I just said, the $10 billion opportunity could look a lot greater than a lot of our other opportunities, and it's smaller in asset size.

The next question comes from Will Nance from Goldman Sachs.

Mimi, I wanted to -- I'm sorry to ask another kind of guidance-oriented question. Very clear that the fourth quarter is not kind of indicative of a jumping off point. I just wanted to pressure test a couple of things in the fourth quarter on that statement. When we think about some of the things you called out, I think on the complementary side, lower digital account growth and then on the margin side, normalization of commissions in health care as well as the commencement of some of the public cloud spend and some of the duplicative costs there.

And I was wondering if you could just maybe talk to either why those wouldn't continue into next year or if they are and we're supposed to kind of take from that, that you're factoring that into the budgeting process as you go through it. If you could just kind of speak to your confidence about like levers that you have to offset those things because you obviously have pretty good visibility on them as of today.

Yes. Happy to, Will. And I appreciate your acknowledgment that it's a little early for FY '27. But yes, I think particularly some of the headwinds that we see in Q4 around the digital account growth, it just happens to be the size of some of the wins previously. So we have some bluebirds that are scheduled to come on, and we'll see what the mix for the remaining year of the sales team wins look like as it impacts next year's implementation, but no concerns there at all.

As Greg mentioned, we feel great from a competitive parity perspective and our -- both the robustness of the pipeline and the wins we're getting. So no concerns there of that being a carryover into FY '27. On some of the expenses that you mentioned, we mentioned in previous quarters that some of that savings particularly around some of the timing on the commissions as well as some of the timing from the expense medical claims being lower, really just created an opportunity for more of like a onetime windfall, if you will. And we've seen that at the beginning of the year, we talked about the $20 million to $40 million, and we're now set to deliver $75 million to $95 million.

So we'll see where we start next year, but we always start conservative with the ambition that that's the floor and look to produce more. But nothing structural. But you're right, we expect kind of a normalization that should probably produce a little bit of a front half grow over challenge relative to the savings we saw this past year. But we continue to look at every position and every project with a refined eye to making sure it makes sense for the business.

Will, one thing I do want to emphasize related to the digital backlog is that the importance of us winning these deals from -- with existing Jack Henry clients from our competitors is why we continue to emphasize this. But right now, in our digital backlog, the digital wins with existing Jack Henry clients from competitors is twice the size of the backlog for the core wins. So that puts that in perspective of, again, we are winning some larger deals back in the Jack Henry base of deals that we did not win years ago.

Got it. That's super helpful. I appreciate all that color. And then maybe if I could just kind of ask a little bit more longer term of a question, and I should acknowledge despite some of the headwinds that you mentioned earlier this year, this is one of the best years that Jack Henry has put up from a margin expansion perspective in many years, and that's despite a more flattish back half of the year. And so I just want to acknowledge that you're kind of doing that with some of the headwinds that I think an earlier question mentioned.

And so just wondering, as you look out, particularly in the context of the acceleration in core wins and a lot of the sales momentum that you have, how do you kind of think about that long-term margin expansion target? And just given what could be a faster pace of top line growth, like is there is there room to operate at the higher end of that margin expansion target while the sales momentum is going strong.

Yes. I think your goals are in line with our goals. We know that margin expansion is one of the key pillars from a shareholder value creation, and we are highly motivated to drive that. Not talking about any particular year, so this is not a reference to '27, but more kind of the near-term horizon. We've talked about there's a number of great tailwinds that will help us, whether that is the mix of the new products coming to fruition at higher margins, whether that is moving to a public cloud environment, whether that is AI and continuous improvement efficiencies. So we think there's definitely opportunities to improve the margin profile of the company.

The next question comes from Dave Koning from Baird.

Nice job. One thing, corporate, just that segment grew super fast. Hardware you called out. I think that's pretty lumpy. But you made a comment that you expect growth in all 4 segments. Historically, corporate was kind of a decliner. Is there something that's changed there? And is it maybe less lumpy? Or is there some extra growth you expect? Maybe just discuss that a little bit.

Yes. I appreciate the question, Dave. I agree, hardware can be lumpy, and we saw that as a big headwind last year. It's hard to say what we expect for next year yet in terms of hardware. We did have an increase a little bit this year that's produced some wins. I would say, in general, that segment while we manage it quite tightly, it doesn't have the same operating characteristics as our other segments. And so it tends to be a little bit more ancillary services than key areas of revenue.

Yes, that's fair. And then just one last one on network. The network incentives, I get what they are. Just from a magnitude standpoint, is that like a -- I know it's lumpy, but is that like a 1% to 2% headwind in Q3 and Q4, just so we can understand kind of normalized.

Yes, I would say probably combined, looking at it from a combination perspectively and holistically across it. And I would focus more on the card volume itself as being more of an indicator forward and that strength, that continued strength of the consumer we think will lead to network incentives this year, just the threshold was pretty high.

Yes. And the other thing is on network incentives. It's an aggregate of all of our card association relationships and a lot of it is also predicated on average spend, not necessarily transactions. So we get paid on transactions. Obviously, the interchange is generated at the larger spend dollars. So some of that is predicated on spend dollars going down, but not necessarily our transactions going down for the network incentives.

The next question comes from Kartik Mehta from Northcoast Research.

Greg, I realize there hasn't been as much M&A activity at least so far in 2026 as some anticipated. But if M&A activity picks up, do you think that impacts at all the number of RFPs that might be there for the core over the next couple of years?

I do. I do think that a lot of opportunities that tend to happen are folks that are undetermined on what they're going to do in the long term on whether potentially being acquired is an alternative or kind of preparing themselves for that through the process. So as you can tell, a lot of folks that maybe are going to be potentially looking to be purchased, they're going to be less likely to do an RFP at that point in time. So it can have an impact on both ways.

But based on what we have seen, to answer your question, Kartik, we've seen a really steady dose. I think that the -- if you take the average number of RFPs that we typically talk about in a year, which is roughly 200, I think that number will be closer to 250 to 275 over the next couple of years with, one, the unrest that's going on at some of the competitors, but also just the whole M&A story itself.

So even with increase in M&A, that should not -- it should actually increase your opportunities?

In both ways, right? So we typically win more than we lose, right, in the M&A side. And then I think with the opportunities for us to continue to win our fair share of pure competitive takeaways.

Yes. And then just one last question for you or Mimi. In the past, you've talked about whenever there is some kind of an economic event, if banks get a little skittish, there's a portion of the business that might be impacted because it's a little bit faster sales cycle than the core or some of your other products. At this point in time, what percentage of the business do you think could be at risk if the economy slows or the banks get a little bit worried about what's happening?

Yes. So overall, we have not seen volatility related to the economic related to global issues happening. I would say, and something we've mentioned historically is the card business has the most sensitivity to macroeconomic. But overall, we have not seen a big change in the mix of that kind of exposure, if you will, to the economy.

Yes. And I think -- so specifically consumer sentiment drives a lot. And as you know, we have -- the bulk of our card business is debit, and that tends to be the one that gets pushed. But regardless, I mean, I don't know any of the products that we've seen. And again, we just came out of our SI event in Salt Lake and the feedback from our clients was, I mean, they're going to spend more and more because they know that that's their way to combat a lot of things. Technology solves a lot of their problems.

The next question comes from James Faucette from Morgan Stanley.

Greg, I want to circle back to a comment you made a few minutes ago that you're seeing increased engagement with consulting and systems integrators. And just wondering with those conversations, if you view that as a potential source of better implementation efficacy, especially if you can enlist the SIs to do a lot more of the work. And then just thinking about that as a potential incremental channel or point of leverage.

I'm really glad you asked the question, thank you. So absolutely, the things that we have found through these conversations, and we've had a multitude of conversations with 2 particular firms in particular. So I would say that, one, they are able to help validate the things that we were doing in the space as compared to others and giving us that feedback. And so we feel really good about that. Two is what you described, which is they're providing an entree into some of the larger institutions.

In fact, I had 2 inbound calls from institutions that came as references from these consulting firms, and we haven't even inked a deal with either one of them yet. And so they're providing that level of validation that, hey, Jack Henry can play in this larger market. So -- and then thirdly, to your point, do they become potential implementation partners or other aspects? The answer is yes. And we're entertaining all of those things as opportunities present themselves.

And Greg or Mimi, I just want to touch quickly on some of the things that you're doing in the Payments segment, continue to be intrigued by those. But I'm wondering how we should think about the margin profile of Tap2Local relative to the current segment margin? And is the Moov economics model initially dilutive because of onboarding support? Or can it be accretive because of the way the distribution runs through existing Banno and FI relationships? And how should we think about those trajectories over time?

Yes. I would say -- thanks for asking the question, James. I would say that some of those new growth initiatives are exciting on 2 fronts, both from a top line revenue perspective, still very early days. Greg shared some of the exciting momentum metrics. But from a revenue contribution perspective, it's still very small and expected to grow quite nicely over the next several years. From a margin perspective, because of the nature of the rev share, because of the limited amount of development work we've had to do to get that solution in market because of the partnerships we have on the marketing side with the network, it's going to be great margin.

So excited when that comes to fruition. When I look about long-term growth momentum drivers for the business, those are certainly areas that I think will continue to accelerate payment size within our business and overall growth rate.

The next question comes from Timothy Chiodo from UBS.

I apologize if this was already addressed. I'm joining late from another earnings call. I realize it's maybe challenging to talk a little bit about large named competitors, but it's just coming up in a lot of investor discussions with the recent Wells Fargo win for Pismo and Visa overall. And I was hoping you could just let us in the investment community know how you're thinking about them as a potential new competitor that might not have been a part of the thought process maybe 2 years ago and now appears to be gaining some degree of traction.

Yes. So it has not been asked, Tim. So we'll forgive you for going to the other one first. That's okay. But here's the answer to the question. Pismo is not a full core. So if you even compare it to -- I think some folks had made comparisons to Finxact and Thought Machine and others. By the way, they left us out of there from a comparison standpoint with the things that we've built in the platform. But what I would say is it is -- the term core is really what's been the challenging component here.

It has the ledgering capability. That is it. It does not have any of the other -- so people are calling it a headless core because of the UI and lacking of that, but it doesn't have any of the pure functionality of a core itself, which is why somebody like Wells Fargo can spend the money to build that out based on the Visa relationship that they have, and they can hold them accountable for executing based on the Visa relationship that they have. So I think there's a lot of dynamics in a deal like that, that are way more impactful than just what they're supposedly going to be doing with building out a potential core. I really believe that they could be using some of it more as a side core solution set, using the general ledger as a baseline for that.

But there isn't any true deposit capabilities or lending capabilities in Pismo today, and I validated that with Visa. I mean we obviously have a strong relationship with Visa, and I have validated that at very top levels. So I think there's a little bit of an overreaction to what is truly going on with Pismo today. And we are not seeing them. I actually talked to our sales folks, and I said, do we see them in any single deal and the answer is no. Obviously, we do see them in card deals sometimes with what they're trying to do with DPS and bringing those 2 things together. But that's my answer for today based on what I know, based on conversations I've had with Visa directly and what our sales team has brought back to me.

This concludes our question-and-answer session. I would like to turn the conference back over to Vance Sherard for closing remarks.

Thank you, Danielle. Management will be participating in multiple investor events over the next few months, and we look forward to our conversations with investors. As Greg mentioned, we will be having our Investor Day on September 15 at our office in Dallas, and that will obviously be webcast. However, if you would like to attend in person, please reach out to Steve Fine on our IR team for more information.

In conclusion, we extend our appreciation to all Jack Henry associates for their outstanding efforts, which have set us up to finish a successful fiscal 2026. Thank you for joining us today. Danielle, please provide the replay number.

The replay number for today's call is (855) 669-9658 and the access code is 4124634. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

I'll go ahead and get started. First of all, again, thanks, everybody, for being here for day 2 of the Wolfe FinTech Forum. Really happy to have Jack Henry with us, a company that we've been recommending for some time now and really constructive on it, given it's really just invested in itself the right way and continues to add technology, add product and really take market share. And so with that, thank you for being here, Greg, the CEO of the company, really took over as CEO a couple of years ago now?

20 months.

So it's been about 2 years almost. And just start there perhaps. I mean, when you compare where Jack Henry stands today versus when you stepped into the seat, I mean, what do you view as the most meaningful changes in the positioning, culture, execution? And then just looking ahead, Greg, I mean, if you look at the company and where it's evolving over the next year or 2, why don't we start there, it would be great.

Yes. So just a little background. I've been with the company for 15 years. So I would say from a culture standpoint and from a service standpoint, we have a 50-year history of doing all the things that are right by our associates, which ends up driving service. So I haven't done anything to impact that other than I think we've done a good job of improving some of those areas. Our engagement scores are the highest they've ever been. Our service scores are the highest they've ever been. But that's a foundational part of our company that goes back to Jack and Jerry themselves.

For me in the role, I really kind of had a few things that I was focused on. One of them was our SMB strategy, and you've seen us really come out with that very strong, allowing what we have as a merchant acquiring solution embedded into the bank and credit union instead of around them. So the Stripe and Squares of the world that are taking opportunities away from our banks and credit unions, we're putting them back in. And we've done that with a partnership with Moov, but that was a big focus of mine was the SMB and my payments background.

And then I think when you look at what we've been doing, to your point, in innovation in general, I was COO before I became CEO. So we spent a lot of time refocusing the company back then into what we call the One Jack Henry mindset. So that was creating our technology and creating our service atmospheres to look even better with a one company approach. And so we're starting to see the benefits of that work that we did years ago in the fruits of our opportunities that we've been talking about. We're winning more deals because of the innovation we built, because of the fact that our service and culture continue to be driven in the right direction. I like to say culture, service, innovation, strategy, execution. Those 5 words are truly differentiators for us. And I think all we've done has made all 5 of those better.

Okay. That's great. At the start of the year, you -- well, at the start of fiscal year '26, adjusted revenue growth was guided to slightly below your normalized 7% to 8%. As much as that's still well above -- even below 7%, 8%, is well above your same peers operate right now in the low single digits or even lower. Just remind us of what trends drove that, let's call it, conservatism versus your normal range to start with? And how are those dynamics evolving today?

Yes. So good question. So if you look at the 7-year CAGR of our annual growth rate, it's been about 6.8%. So we did guide to less than that this year. To your point, we had 2 particular headwinds that we called out. One was M&A usually comes in ebbs and flows. And so the M&A experiences that are going on, obviously, everybody knows that follows the space that it's more prevalent than it's been even in years past. So we have 40 years of consolidation happening in our market. And so that's no different than any other year other than it's probably instead of averaging it at a 4% decline, it's probably around a 6%.

So there were some timing differences of when some deals of Jack Henry clients that were acquired, and we kind of called that out as a headwind because sometimes you can't control the timing of that. What we also said is that we thought it would start to level itself out over the year, and it has. And so as you've seen, as we've kind of come over the first 2 quarters, our fiscal is July 1 to June 30. If you've seen over the last 2 quarters, we've actually bumped our guidance up each of those quarters because that started to level itself out.

And the other big thing we called out was some price compression that we were seeing from how we did renewals in the past. And candidly, without going into a whole host of detail, we made significant changes on how we do renewals, how we incent our sales team and renewals. And both of those have actually performed -- outperformed what we expected them for this year. And so that's why you continue to see that eke up. And I expect that to happen in the future.

Yes. I mean, M&A post the Trump administration really did pick up, right? I mean we're at somewhere around 6%, 7% or so of total banks consolidating versus -- I think we saw around 4%, right, if you go back a couple of years before.

Well, 40 years. So you can go back 40 years, it's averaging 4%. And so to your point, the other thing that's really driving that in the Trump administration is the time it used to take to get an approval was averaging north of a year. In some cases, it's averaging about 3.5 months right now. So that's changed the dynamic.

I think M&A generally -- look, a lot of investors look at it like it could be a headwind for the space because you get consolidation of your customers. But it could be an opportunity, too, where you need integration work done, right? And we had Stephanie from FIS on stage with us. We have Mike on stage with us from Fiserv. It sounds like banks are in growth mode in terms of spending on tech.

They are.

I mean, what are you seeing out there in terms of demand for services?

Yes. And I think I'll just reference 3 quick data points. So one, we do our own benchmark survey at the beginning of the year. So at the beginning of '25, we came out with our survey, our clients, 3% to 5% expected tech spend. 4 months later, Bank Director came out with theirs, 6% to 8%. Two months later, Cornerstone came out with theirs, 8% to 10%. So all within 2025, you've seen an increase in tech spend. And I think that's why Mike and Stephanie have referenced the same thing that we do. We're seeing it. Now the ones that don't want to spend the money, they're the ones that are getting acquired. So that's where -- really where the change is. And -- so if you're valuing the things that folks like us are building on an innovation side, they're the ones that need to spend the money on technology to continue to thrive in the markets that they serve.

It's a good environment for you guys. What is the areas that you'd see the greatest potential upside to your current guidance? I mean, you have a pretty good backdrop from a demand from an end market right now, it sounds like.

So there is opportunities in the space with some -- whether you want to call it a market consolidation by one of our provider or one of our competitors or not. But the reality is there are a bunch of opportunities in play. We're already seeing that as part of our pipeline growth. We also -- we won 22 cores just in one quarter, which by far was a record for us in Q2. And -- so that is a pretty strong indication of the things that I've been saying. And those really happened really before the opportunities of what I referenced with one of our competitors.

But the reality is that the tech that we are building is very creative and very innovative. And honestly, some of our competitors are starting to spend time and money and focus on service and innovation. And I think we're a little bit ahead of them, and it's starting to be a benefactor for us. So I think that will continue for the foreseeable future. And I expect -- I'll just go ahead and say this. We've been typically winning about 50 cores a year, and I am 100% confident that we will win more than 50 this year as a way that we've been working through this.

That's great to hear. Speaking of core consolidation and competition doing some -- making some changes, we know Fiserv and others are really trying to upgrade into a fewer number of cores that they offer, just generally trying to get their customers given they spend so much time and money on so many cores, it's frankly distracting from an investment standpoint, right? What are you seeing there? I mean, as an opportunity to take advantage of that, if anything? I mean, you have markets where you really are the go-to for the SMB. But as you move upmarket and compete with Fiserv and others, what are you seeing in terms of the opportunity there?

Well, the opportunity for us is going upmarket already. It's been part of our strategy over the last several years. reference again a couple of key points. We won 31 deals in the last 2 years, over $1 billion compared to 5, the 2 years prior to that. And so that gives us an opportunity back to innovation and getting additional bites at the apple. We're also seeing even in the M&A market when one of our institutions is acquired by a larger institution and in some cases, much larger institution.

We are having opportunities to keep additional products with that acquiring where we never did in the past. We're seeing that on a regular basis. The other part is with the consolidation that's happening with Fiserv and others, I know Mike has announced that it is in a consolidation or necessarily a forced migration, which -- that's great. But the reality is there's still clients that get nervous when those type of comments come out. And our pipeline has significantly increased as a byproduct of that. So that's why I'm very confident in where we're going, both from a core wins this year and what we expect to see over the next several years.

Do RFPs, the number of RFPs look different than they did in the last couple of years?

They look different than they did in the last couple of months. So yes, so without quoting anything in here, we -- our pipeline has significantly grown in the last 2.5 months since those opportunities have been announced. There's roughly 1,400 core opportunities in play right now based on what they've publicly said could be consolidated. And not everybody is going to leave, not everybody is interested in leaving, but there are folks that...

There's more conversations happening.

Absolutely.

I think you used to have somewhere around, what, about 100 or maybe 200 RFPs a year. Am I right?

Works. So roughly 200 a year, roughly 100 make a decision, and we won roughly 50 of those 100.

So that 200 number has moved.

It has increased.

All right. That's good to hear. When we think about the idea of you moving upmarket, again, I mean, Jack Henry has always been thought of by us at least as either credit unions or smaller banks, right, generally speaking, credit union banks. But you've been successful moving upmarket. You have banks over $50 billion in assets, right? Tell us a little more about how important that is for you and really what's allowing you to succeed there?

So it goes back to what I keep saying. We're in these opportunities today because of the innovation we've built. So our cloud-based tech story that we started roughly 4 years ago is now starting to get to a point of a level that we can show folks. So it's no longer a PowerPoint, it's all demos, and that impresses the heck out of the folks that are at that space compared to what they see today with their current provider. So there's a $50 billion institution that acquired one of our $5 billion ones, and we're talking to them because of the level of folks that have seen and talked about our technology.

We're getting folks like McKinsey and Deloitte to call us where they've never paid attention to us before because of what they're hearing in the space. So it still goes back to everything I said. The reason why we win and the company has been very successful has always been about culture and service. But now we've added innovation, strategy and execution as 3 key differentiators. And again, that's a big part of it.

Greg, are your cores able to handle those kinds of asset size banks in a meaningful way that needs to be done?

There's never been a limitation of our ability to handle the size. It's always been a focus. And so yes, we test our cores over $200 billion. So we can actually do that from a -- it's never been a software perspective or that. And actually, we have -- some of our products like our payment and complementary products, we support $200 billion credit union today in a $75 billion bank. So never been an issue. It's always been about focus and credibility. And candidly, that credibility is starting to change with the things that we've been doing and getting us in the door.

Okay. You've also been selling more outside of your core base, right? I mean some of the ancillary products and really main products like Banno, Financial Crimes, Defender, Debit Processing. Just talk a little more about it, moving outside of your core base with some of these products and how that's been trending for you.

So we're still early stages of all 3 of those. In fact, even Financial Crimes, we're still not doing it yet. But Banno, we just started in January. There were several reasons, again, some...

It was pushed back by competitors, right?

Some of it was pushed back by competitors. And again, some of our competitors are now saying they're going to be a lot more open. So we'll see how that plays out. And then -- but the bigger part was is we needed to get to feature parity with a lot of the larger players. And candidly, we weren't there. And so we weren't going to go out and try to chase opportunities outside our core base when we knew that you get sometimes only a onetime chance to go to win these.

So what we did is we announced this at our Investor Day in September '24, that we were going to spend the next year building out that level of feature parity. So I'll give you again some data points that I think are important. Last quarter, we announced 84 Banno wins in the quarter. 50 of those were Banno business, 34 of them were the Banno retail platform. All 22 of our core wins last quarter had Banno attached. So it was 100% attach rate, which has never happened before. And then the other part is there was 12 other wins that were competitive takeaways that were Jack Henry core clients that were on a competitive digital platform that are now moving to Banno.

So those are all proof points that the things that we've been doing over the last year to get that level of feature parity is allowing us to now win, which means we are now ready to take Banno outside the base and tie it to the card platform. I talked about trifecta wins in the last earnings call. That's when we sell core digital and card together. And that's an important metric because lots of times, a core deal in and itself really the driving force of the revenue is the tangible products that get tied to it, digital and card being the 2 biggest. And so we are really focused on making sure that when we sell a core deal that we're selling both digital and card with that as well. And that's why I'm starting to track the trifecta.

Nice. You also talked a lot about SMB as a key strategic initiative more recently, right? I mean when we talk about what that could be and why that so -- just why is that so important to Jack Henry? And why is it important to your bank and credit union customers?

Well, it's really important to the bank and credit union customers, which makes it important to us. And so everything that we do is about making sure that our banks and credit unions win. That is our #1 mission, and we have not wavered from that in 50 years. So what we had seen that was going on in the space is that the Stripe and Squares of the world were going in, penetrating the customer base, taking those clients away, not only taking the deposits away, but taking the lending opportunities away as well. So what we decided to do was -- and I even have a merchant acquiring background, and we didn't get into the merchant acquiring space in 2018 when everybody else did on purpose because we didn't think it really fit the mission of who we are as a company.

I remember Dave pushing back on that. And also said now we're seeing them online [indiscernible].

Right. And so -- but it didn't fit our strategy of -- as you -- they became competitors of their own banks and credit unions with the merchant acquiring. So what we wanted to do is make sure all that stayed inside of the bank and credit union. So we created a very unique solution that I could probably spend a lot more time getting into detail on it, but I will tell you this, it's only Phase 1 of what we plan to do over the next 2 years. of rolling out a lot of feature functionality that will allow these customers to stay within the bank and credit union, compete very favorably with Stripe and Square with actually solutions that -- and features that Stripe and Square don't offer.

So there's a whole host of things that we're even patenting from a standpoint of very unique ways that we've created the innovation. And so what we like to say is that this is the worst the product will ever be. And we got 600 clients live in 2.5 months since we came out with the product.

This is cross-selling money movement and merchant acquiring and...

Yes, it's that, but it's also the ability to have 8 settlement windows that they can use, instantaneous approval, the ability to -- for any of the small businesses that have to go back and manually reconcile their deposit to their transactions, which every SMB has to do, we did it automated. So we built some solutions back 3, 4 years ago. that take all the aggregators that are out in the market. They wrote APIs to our stuff. So we don't allow screen scraping. And so anyway, all that being said, it allows the SMB to actually do full account reconciliation to the deposit amount. Literally, it shows up on their Banno app. They push a button and upload it to QuickBooks and it's done.

How meaningful could this be? I mean we've talked about this potentially boosting your overall company revenue growth maybe by -- I mean, you're a very steady grower usually, but can we see this move you above the 7% to 8% range?

So yes, the short answer is we believe the things that are happening within the market itself, the numbers we talked about with tech spend, SMB focus. I truly believe that if the SMB deal is as big a home run as we think it is in the next 5 years, that it's going to be worth a 50 to 75 basis points of growth tied with what we think in the actual market itself has some similar. So short answer is a lot of the things that are happening are going to happen more in '27 and '28, especially market penetration because any core deal you win today doesn't get implemented for 15, 24 months.

So as you start to look at fiscal '28 and beyond, that's where I think a lot of opportunities to get above those numbers. So I do believe -- just one last thing. I do believe that the SMB opportunity could be the second largest payment business inside of Jack Henry behind our card business 5 years from now.

Wow, that's great. When we think about segments, just to put it all together now, I mean, just help us remind us the growth algorithm for each of the 3 areas of your business, if you don't mind.

Yes. So it roughly has been 6% to 7% on the core side, anywhere from 6% to 8% on the payment side, depending on the year. A lot of that's driven by our debit volume, which is 23% of Jack Henry's revenue and 60% of our Payments segment. So some of that is contingent on consumer sentiment and things along that line. So 6% to 8% range, we're kind of at the middle range of that this year. And then complementary has been somewhere between 7% and 9%, and we're kind of in the middle range of that this year. All of those have opportunities to continue to grow based on the things that we've been talking about throughout the year.

Some of them have outperformed actually. I suppose a lot of it is also consumer spending and some macro dynamics to some degree.

For sure.

All right. And when we think about operating leverage, where are you kind of prioritizing investments today versus where you would have potentially done a couple of years ago?

So the prioritization has really been around what we call 6 anchored capabilities. So anything that has to do with core, digital, payments, fraud, account opening and lending are the 6 core capabilities, and there's a whole host of things in there. And there's other tangible things that ended up happening with our CRM system or our imaging solutions and things along that. But the things that right now, those 6 capabilities and everything in it is about 80% of Jack Henry's revenue.

So my message is you can't be all things to all people. So that's why we have a lot of fintech integrations into us. And where we've exercised AI, we'll probably get into AI at some point. But the reality is we're using a lot of AI and have been for the last 3-plus years to build out our capabilities faster within the things that I just described, but we're driving that level of innovation at a pace that's much faster than our competition.

Yes. AI is important -- I mean, listen, it's come up as both an opportunity and a risk throughout our conference and from investors. For you guys, I mean, number one, I think Anthropic has been trying to make it easier to upgrade COBOL, right? And so help us understand, is that something you can utilize to take share? Is that something that you can work on your own customers with?

Yes. Well, there's not a COBOL and [indiscernible].

So really from a market share standpoint.

But either way, I mean, there's still advantages to using Claude to do a lot of things, and we're taking advantage of it ourselves. So to your point, it is an opportunity and a threat, and I'll kind of give you a quick kind of clarification of that. So from a banking standpoint, let's think about all the regulatory scrutiny, all the certifications, all the network things that you have to do. It can help you do things faster, but it doesn't help you have those conversations, right? So that's a big challenge.

In the complementary segment, even today with fintechs, you see fintechs that get created to go build a full solution set to replace a feature that 1 of the 3 core providers has today. You either integrate with that fintech or you don't. We do a good job of doing that. And so you end up looking at it, they become a distribution partner and you either buy them or not, right? That's how a lot of these acquisitions happen over time. There's no difference in what AI can do today.

From a benefactor standpoint for us, we're using AI to build things across our entire organization. We have 100 AI tools that we've allowed inside the company today. We've trained all of our 2,500-ish developers and QA folks and everybody else in that world through the uses of AI, how to use vibe coding. We have 30 use cases of vibe coding that are going on today. We had somebody actually use Claude coding. So we've been all over AI for the last several years. So we're seeing it as an advantage for us to stay above what we've already built and do things faster. There's always going to be some kind of third party that you have to pay attention to, but the reality is none of them -- if you were going to pick an industry to disintermediate, I'd pick something besides banking.

Yes, I was going to say. I think that's an underappreciated point because I mean your other stocks in fintech generally that do have these regulatory barriers, they've gotten hit as much as others. And so just to reiterate that again, you're saying, look, you're the ledger system for the banks, right? It has to be reviewed, regulators have to sign off on the technology the banks are using, right? I mean, how big barrier really is that?

It's a big barrier. I'll give you a couple of examples. All the things that we're doing with coding and AI today, we have to get regulatory approval. The things that we're doing within Stablecoin, we built a Stablecoin initiative in 2 weeks on our new platform, and we're getting ready to roll it out to 2 clients, and we can't roll it out until the regulators go into the banks and approve it. So those are things that you just don't have in a lot of other industries. So -- and even the fintechs that are getting charters, you should still have some challenges with that.

You have pretty good margins, and you've had a very clean GAAP, one of the things we love about the story. But I mean, is AI going to be an efficiency opportunity for you guys to potentially either reduce expense or grow expense at a slower rate than otherwise?

Yes. So we've already done a really good job of that. So this will be our sixth year in a row that we've grown headcount by less than 1%, even though we're growing top line at 7%. Why? Because we have a discipline at the company on a couple of things. We started with business process improvement 15 years ago. 40% of our staff is trained and [indiscernible] in the classroom, which is the Toyota Lean Six Sigma way of doing things. So that's been a mindset. AI has only been a benefactor of that. In fact, halfway through the year -- through our fiscal year, halfway through the year, we're already 60 headcount less than where we thought we were going to be. So that same dynamic is going to happen.

Now I will tell you one thing that we do differently than a lot is our mindset with our staff is we do more with the same. And there's a way big difference than saying you're going to do more with less. As soon as folks think that every good idea they have, they're going to lose their job, they're going to quit giving you the good ideas. And so we do a really good job of zero basing roles, and we basically get to where we need to do through attrition or backfilling other roles that we think are more important and moving those over. So that's a mindset that we've had for many, many years, which has helped us drive a lot more innovation and happy associates, which equal happy clients and versus just saying that every quarter, we're going to look at maybe laying some people off because we got better and efficient.

Last question for me, and then I'll turn it to the audience. But Greg, what do you think investors are most underappreciated that you're most excited about? What do you want to see the company do between now and the end of '26 to really say this was a great year, a successful year.

Yes. So I'll answer the second part first. I mean, we're on the path to having a great year for '26 based on core wins, based on financial performance, based on the culmination of everything that we've been building over the last 5 years that we've been so much talking about. So I'm very, very bullish about what we've guided to and the things that we're going to accomplish, especially at a time when our competition isn't at that same pace. The part that I think is underappreciated is the level of innovation and the significance of the type of innovation we've built. I will give you a couple of anecdotes.

So McKinsey and Deloitte have been calling us and never had any conversations with us in the past because they're hearing about what we're building in the space, and they want to get to know us better. That is something that, again, back to underappreciation of the innovation. Folks just think, okay, it's a core processor, and we got some really unbelievable people we've hired from Amazon and from X and from Block and from all these other places that came to work for us because of the cool technology that we're building and a lot of the leaders within our company that they want to work for. So I think that's the one thing I would leave is that folks -- as I like to say is we're not your father's Jack Henry, and it's all because of what we do with culture, service, innovation, strategy and execution.

All right. You might have some more talent up for grabs with the 40% RIF.

Yes, yes. We already had calls.

That was really helpful. It seems like a really good road ahead of you guys.

Guys, any questions in the audience? Happy to take a couple.

Yes. Thanks, Greg. For banks and credit unions, are you starting to see any increased demand for instant payments, for Zelle, for RTP for FedNow? And are those volumes actually starting to get material? Or are they just thinking of that as like a -- I mean, is that a must-have for mid-market banks?

So great question. And I think the short answer is yes. So Zelle itself has had a variety of challenges because of fraud. And so there's always been concerns about -- I think one of the things that we created with our Financial Crimes Defender product is a fraud module specifically for Zelle and specifically for faster payments. But we're starting to see a pretty good uptick in the number of institutions that are willing to now start to buy that since they believe fraud. The bigger opportunity is in the other 2, in my opinion. So as things continue to change, opportunities for B2B transactions to get translated that way. I think with the Fed looking to probably mandate some things on how payments are going to be paid out, that will drive a lot of those use cases.

And the difference is, is that most of our institutions today, and I'd probably say about 98% of our institutions today are on receive only. So they're set up, they take a transaction if they get a transaction. You're going to start to see where send only or send transactions will start to generate dollars instead of pennies, and that's when I think a lot of folks are going to start to come on board. We're also pushing it with a lot of our new solutions for real-time settlement, whether it be through our SMB solution or things like that. So we have roughly 500 institutions live across Zelle, the Clearinghouse and FedNow, but our pipeline is a couple of hundred deep now, and most of that has come in the last year.

One more question, guys? Justin?

Yes. On the -- could you give us an update on the competitive landscape, especially as you guys are trying to move up market? Are you seeing any new players? Are there kind of newer entrants that you think are doing well? Or how is Jack Henry differentiating itself?

Okay. Yes. So don't really see any new players. You see some of the former new players that have really slowed down. So you just don't run into Temenos or Thought Machine or others as you did several years ago in a variety of things. And again, I'll save the reasons for another time. It's also part of the reason why trying to disintermediate the banking industry in the U.S. is really hard to do. which, again, you can go back and ask them. So I think from our standpoint, there's been significant advantages for us to go upstream. I mentioned before our 31 wins over the last 2 years compared to 5 to the 2 years before that.

And -- so we haven't seen anybody "new" come into the market. We've seen some folks, obviously, the news that's going on with Fiserv and various things that FIS has done through the years. But nobody "new" Nimbus is out there. They have a side core. They're trying to build out some components to that. But really, it's usually the same players. I will tell you right now, for every core RFP evaluation, you're going to see Fiserv, FIS, Jack Henry, maybe CSI, maybe correlation and then you're going to have maybe some others. There's 26 core providers out there. Most of you have never heard of any of them, but they may have 5 cores, 10 cores, 50 cores, but they're out there.

Okay. All right. Guys, thank you very much.

Yes. Thanks.

Thanks, everybody, for joining us, and thanks for joining us on the webcast here as part of the Morgan Stanley TMT Conference. I'm very pleased to be joined in this session by Mimi Carsley, CFO and Treasurer of Jack Henry. I'm James Faucette, Senior Fintech analyst at Morgan Stanley.

Before we get started, I do have a quick disclosure to read. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So Mimi, great to have you back at our TMT conference again.

Thank you.

We love having Jack Henry and you here to talk about the business. Maybe quickly, I know that especially with everything going on in AI and so on. We've gotten a lot of inbound calls around, hey, what is this Jack Henry? What do they do, et cetera. So maybe you could just provide a quick overview of kind of the 3 core businesses at Jack Henry as well as talk about some of your customers.

Sure. So this June, Jack Henry will be celebrating 50 years of business, which is a remarkable occasion, and we're quite excited by that. We serve banks and credit unions predominantly in the U.S. So it is our mission to ensure that banks and credit unions have vibrant in the communities they serve and that they're able to compete across a very dynamic and evolving ecosystem. And so the products and services we offer, we operate in 3 main reporting segments. One is core. So think about core processing. That is mostly kind of back office operational, think about account setup, mortgage interest calculations, a lot of the regulatory paperwork that you would need to have around client files, et cetera, the day-to-day, how to calculate interest, distribute yield, think about deposits and lending. So that's kind of core processing.

We do that for over 1,700 customers, both banks and credit unions, and average institution size of about $1.5 billion on both. So from there, you think about payments. So that is card processing. We do card processing, predominantly debit card focused. So we serve over 1,100 banks in credit card and debit processing services. We also do enterprise payment services. So think about there's still a lot of paper checks floating out there, especially in business today. So a lot around the remittance business, helping on the bill pay business. We also have embedded payments business and then in a lot of the exciting new evolving areas of payments around the faster payments. So you think about all the new rails that exist in the U.S. And that's also where a lot of our small business initiative is helping banks and credit unions to serve those small businesses. So that's our payments segment. That can be outside our core customers and core customers alike.

And then the last segment, I always say if it's not core and it's not payments, it's kind of the all other catch-all bucket, which is complementary. And that's the suite of surrounding products to help a bank or credit union function every day. So think about fighting fraud, think about lending, thinking about account opening, thinking about a digital offering, all of the other ancillary services that would support them in growing.

Got it. So let's talk about this core business, which is, like you said, is kind of the central part of a bank's operations. And interesting competitive dynamics, I think, in that part of the market and certainly one that a lot of people are paying attention to and probably incrementally. And that's because one of your main core competitors is on the cusp of a material platform consolidation. And it seems like that should create a lot of incremental at bat opportunities, if you will, for Jack Henry as some of those platforms are sunset and that competitor attempts to migrate them to new platforms, that can be incredibly disruptive for a lot of people. And if forced to do it, they may choose to look elsewhere anyway.

So a few questions on this topic. For you, in the growing pipeline, what's changing more? RFP count or average deal size. So help us think about what's happening right now with the existing pipeline before we start to have impact from that competitor move.

So as I -- if you think about today, the industry has been consolidating at roughly 4% a year for over 4 decades. There are roughly 9,500 banks and credit unions across the U.S. In a given year, our contract lends to about 7 years. In that 9,500, if you think about that as a pyramid from a stratification of assets perspective, we intentionally don't serve the largest Tier 1 banks. We don't find that to be a lucrative nor a valuable partnership arrangement. So we serve the rest of that pyramid with a growing focus on the regional and super regional capabilities.

So as our clients have grown, as we attract larger clients from the outside, that stratification has allowed us to kind of move up the pyramid. And I say that because if our average contract length is about 7 years, then we say like there's probably around 200 banks or credit unions in a given year that are in play. Now half of those probably won't make a change. They may make an RFP just to see what's out there or maybe it's required by their Board or state regulator. But roughly, call it, 100 are truly kind of in motion.

Of that, we have won 50 to 55 cores a year for many years consistently. And this year, we not only think we're likely to win 50, we say we're feeling really good about it. So this opportunity that you spoke about with one of our competitors in the space is a kind of, I won't say once-in-a-lifetime opportunity, but certainly in our industry, you don't have that many incremental opportunities in play. So we're quite excited about what that can mean.

In terms of your direct question of like what we're seeing from a dynamic in our pipeline changing, the last 10 years, I would say the pipeline has grown in the size of the average account. So a couple of years ago, if we were on stage, we probably would have said our average size is $700 million institution, whereas today, it's almost $1.5 billion size institutions, both from who we're attracting in and them growing. So we talk about in our quarterly wins, we announced how many new core logos we win. Those are completely new core customers to Jack Henry. And we call out how many are over $1 billion in size. And if there's any that are truly large, we also call that out. And so that number has been growing quite a bit in recent years just to demonstrate our success.

So I think to your question, the pipeline is filled with larger accounts. So I think the size of the pipeline has grown overall, but the size of the accounts have been growing. And now with this new consolidation opportunity, we think there's going to be more at bats in play because if you're being forced to make a change and you're going all of the -- through all the change management that, that kind of results in, why you wouldn't just see what's out there and explore and do your fiduciary duty, like I think there's going to be more opportunities.

So let's try to quantify that or at least have some idea. So I think when we look at the banks that are using these platforms that are intended to be consolidated away from them, it's about 1,500 banks or so on those platforms. When you think about other periods of platform consolidation, how would you think about what would -- what portion of those would typically look at an RFP? You mentioned 200 a year, so that's pretty typical, but then these 1,500, almost at least some significant portion of those would be incremental. So of that 1,500, how many of those would you expect to eventually go through a process?

And we've heard the number like 1,400. So I think certainly in the right ballpark. It will be interesting to track them over time because I think some of them will get consolidated away as well, the banks themselves because you have a choice as a bank, CTO and CEO, do you go through this conversion?

And it's not painless.

And it's not painless and say, on the other side, we're going to grow and we're going to be more nimble and faster and more agile. Or do you say, we were thinking about selling anyway or succession planning anyway. Okay, maybe this is the straw that breaks the camel's back and they do it. The challenge is in part, and you referenced it earlier, like there's no set time line. And so it's a question -- I think we're in the first lap of might be like the first opening sprint, but it's going to be a marathon of opportunity.

So I view this as 3 to 5 years of potential opportunity. And the way the sales cycle works in our industry is, let's say, you have that 7-year contract, well, and you think you might be willing to make a change. Well, you don't want that clock to run out on you. And you have some time to -- it's going to take you some time to make that change. So you really start talking to vendors maybe 2 years in advance of making that termination of your existing contract because if it takes you a year to make a decision to pay for the deal and make your selection, then you want to give yourself at least a year to make all the change management happen.

And there has been some -- I'm sure we're going to talk AI. It would not be a conference if we didn't talk AI, James. But part of that is today, that year to 1.5 years on that implementation, it's really due to the client readiness. It's not the data mapping on our side. We've mapped every core that there is. We could do that faster than a year for sure. And yes, some banks might have some customization that might be interesting tweaks that we haven't seen before, but we know how to map to everything that's out there.

What the harder part is on the institution side. They have to do all the training, all the readiness, all the procedural rewrites. All of that needs to happen to ensure to their regulators that they'll be just as confident operationally after the change as before the change. And so there's a lot of human change management to go through as well as operational uplift. And so that could be a use case, an interesting use case for AI to say, "Hey, I'm on XYZ core today. I'm moving to Silver Lake. Help me rewrite my procedure docs. Help me train my employees faster.

So the interesting thing is, for us, if we could shorten that implementation time, that's great because we don't start collecting revenue until they're on the system. So we're very much aligned. If there's something that helps them to ready themselves faster, we'd be all for it. But if we think about that opportunity, that's why I say it's kind of a marathon because if they're starting to talk to us today, they probably have 2 years left on their contract. We're probably not seeing that revenue. We think there'll probably be some wins we announced related to it in FY '27. We're a June 30 filer, but FY '27 with revenue starting in FY '28.

Right. So just to summarize that. So if there are people that want to look they choose you, you could see those announcements really in the next 18 months and really starting 6 months from now, roughly. And then you would start to see revenue beginning another year after that. So it's really kind of fiscal year '28 where you might see some uplift.

So we announced 22 new core wins this quarter. Some of those wins were off of those consolidating core customers. But they've already been in our pipeline already. So what we're doing now is we're tracking all of those impacted customers, mapping out when we think or know their end dates are doing outreach to them. And so that hopefully, we can start to share more metrics of what that distribution looks like of contract end dates and sizes.

Got it. So let's ask about complementary attach, so other services and capabilities that can be attached to a core. Do you tend to see that incremental complementary attach at the time of core deal signing? Or does it come in subsequent periods? So just trying to get a sense for the incremental revenue opportunity and where that might fall. So if you imagine a world where you have announcements next fiscal year and not just for these transitions, but generally. Announcements next year, revenue the year after that, do you get this complementary attach and revenue uplift at the time? Or does that tend to come subsequent and in future fiscal years?

Yes, it's a great question. There's -- because no one buys core in a vacuum. So while it is such a critical part of a bank operation, at the time you're making that change, there are complementary -- not to use the word of excitement but there are systems that kind of plug into that stack very nicely. So today, when someone is a new core customer, they tend to buy somewhere between 30 and 50 of our other services, whether that be complementary or payments-related services.

Sometimes it's a day 1, what we call a day 1 product, installed together. Sometimes it may be a more complex and they may choose to bifurcate that into a day 2. So I would say it depends on the institution. The interesting thing is from a Jack Henry perspective, we offer contracts that are coterminous. So if you buy the 30 complementary and payments products and core and you went 7 years, we say that's 7 years for all of them. Not all of our competitors do that. It's actually a sticking point in the industry because some feel it locks you in that you're always walking away. If you want to walk away from your vendor, you're always going to owe them something because you're always mid-cycle of one contract or another.

But the interesting thing on that is that's actually an opportunity for Jack Henry because we can go and sell particularly on these clients are going to be impacted, we can start to sell them some of the other real anchor products at Jack Henry so that then when the core comes up, it's an easier sale. But we serve over 6,800 noncore customers. So most institutions in the U.S. have at least one Jack Henry product.

Got it. So let's talk about demand. You've routinely referenced the Bank Director survey and noted that the median growth in tech spend is still really healthy. I'm curious, just given where we are in the deposit cycle and the prospect of accelerating loan growth for next year, which is kind of what our bank's analyst team anticipates. I'm hoping you can help us to stratify the differences in demand from your customers for deposit attraction versus retention tools and lending and whether or not you're allocating incremental resources to the lending side of the ledger, especially since that seems to be where people are anticipating some acceleration.

So we put out an annual survey to our customers. It's actually going on right now, where we ask bank and credit union CEOs what their priorities are. And consistently for the last several years, the top 3 have been gathering deposits, lending and then efficiency. And I think if I were to say a fourth for most of them, it's fighting fraud...

But that's also permanent. I'm not sure that moves...

Yes. And so I think they're always looking. My point is regardless of this where we are in the cycle of deposits, they're always looking for some. And we're post the surge of COVID where you saw the spike up in deposits and then this kind of trough. And so now they're on the other side of that trough and the need to get the deposits going again. The challenge was because of both the stickiness of interest rates, the lack of turnover in real estate market, there wasn't a lot of car buying as well, like you didn't see a lot of new lending going on. Hopefully, the administration has talked a lot about kind of resuscitating the real estate market. If interest rates do come down, you also have a big pool of refi opportunities that could hit for lending. So I think there are some signs that there's some opportunities from a lending perspective.

Got it. Got it. So let's move to AI. We mentioned in the past a moment ago.

We went 15 minutes of that...

Exactly, it's time, it's time. So let's start with the existential questions first. Like how do you think about AI and AI solutions, and the ability for those to displace what Jack Henry does at your customers? Like where might that might make sense, if anywhere, and versus where do you think that probably does not make sense? And how do you think about that?

In general, we view it as more of an opportunity than a disruptor. We're excited both from the efficiency we've gained internally. We've been able to limit headcount growth to less than 1% for the last 5 years. We've always been a continuous improvement, zero budgeting kind of shop. But the opportunity to just get higher productivity to get -- do more with the same as kind of our internal brazing around it is great.

The throughput we're seeing from all of our developers who are now using. We have over 100 approved AI tools in use in-house. And so we're seeing upwards of like 70% on greater throughput and productivity, which is fantastic, especially given more of our products are in the public cloud. So you can get that innovation in the hands of clients faster, what you have on some of the traditional software annual updates and releases. And so in our new tech modernization and digital core, like we'll be able to distribute that innovation quicker into the hands of the customers.

So in general, I think it's a positive. I think the dislocation you've seen in the market over the last several weeks has been unfortunate because I think people haven't really done the work to think about different business models and different moats. And yes, you can by code certain things. And if you're a small business, do you need Salesforce? Maybe not, right? You probably weren't buying Salesforce anyway if you were like 30-person shop, but could you now by code something that's custom up and bespoke to your own firm? Sure. But for the bulk of what we do is mission-critical operational systems.

It's not a technological challenge. It's an operational challenge. It's an executional challenge. It's what is the uptime reliability of that system. It is, will your regulators feel comfortable in your audit for the superveillance of that system. Do you know how it was made? Do you know the workload? Do you know how a bank operates? It's not just generic software. So I think there's listen, if you want to convert something to a PDF or back and forth or we have AI for contract management and red lining, great efficiencies and exciting opportunities from a use case.

And even the use case we talked about before, rewriting procedures or audit docs, but that's different than let me run my bank on software and be able to tell the regulators and be able to rely on it and be able to rely on how that third-party systems plug into it as well. And I think the reality is most institutions don't have the staffing to support not only the origination of that code, but the ongoing maintenance and support of what that would be. So I just don't think the mission-critical, highly regulated space.

And the reality is we compete with over 1,000 fintechs today. And if you think about the European core entrants or the side core entrants in our marketplace, like they haven't been able to gain significant traction. And it's not because of their feature set or their technology, it's because they can't show we know how to operate this. And we have 1,000 customers running the system at scale every day with 99.99% of reliability. Like it's just -- that's the key of our industry. It's not necessarily like a mathematical problem to go solve that now we have the compute capacity to do.

Right. No, I think that's right. And I think there's -- I guess we could spend an hour talking about like the hurdles that would be tough to clear from a variety. And just like back to your point, is like if 200 out of roughly 8,000 institutions are changing their cores at all. And forget about like moving from one to another, it's the returns and benefits are going to have to be incredibly high, and so a lot to do there. So let me ask...

Let me just add on one thing to say, James, which is I think what the exciting part of what AI can unlock is there's a lot of manual processing in an operation of a bank. Like there's a lot of actual physical paperwork still. There's a lot of rekeying that happens. And we've already been moving people through straight-through processing, robotic, bots and that type of workflow enhancement. But this could really help a bank or credit union improve the efficiency of their own organization.

And nothing we sell is tied to the number of employees at a bank or credit union. It's their account holders or the number of members or active users. So we love to make them more efficient. And if they can spend less on that, they can spend more with us in other areas to help growth for their business. So one of the things, especially in our client segment, how they differentiate and compete against the bulge bracket, large banks and the new start-up digital-only is service, trust, reliability.

And so how do we, through the volumes of data that we have for them, their data that they can use, how do we help them to have personalization, ultra customization of offerings? How do they know that a certain population, a large population of a bank in Wisconsin all goes to the same Florida town in the winter and open a branch there or that they serve a significant number of dentist practice in their office. Like how do we get them the data, their data in a way that's usable, digestible so that they can put AI against that or we can help them with AI and insights against that so that it really can help them develop niche strategies to grow.

So let's take quickly the other side of that. So if you can improve the benefits, if you will, from -- for your customers taking advantage of AI with your own development, et cetera. On the flip side, can that short implementation times? Or is there a path to even increasing the churn of core systems because like I said, it's very low now.

Yes. I think as we talked at the start, more of the implementation cycle time is driven by their readiness. So could AI help them, if I think about the wealth of information we have on knowledge enablement, for example, training videos, white papers, tutorials, webinars, can we put that into a system to help them train their employees faster? Potentially. Can we help them rewrite procedures faster? Potentially. Like so I think there may be use cases to explore that help them on their readiness journey that might shorten that cycle time, which would be a great thing for us.

In terms of does it make someone less or more likely to switch core vendors. Certainly, having things that are in the public cloud so that you can take advantage of that faster development time that's coming through with AI tools is important. If you only have software where you're getting an annual expectation of a release cycle, you're going to fall behind quickly from an innovation perspective of your competitors. So I think that will still be a driving force to get people to switch the number of APIs that integrate a core system with a digital banking system, for example. There's over 50 API calls. That's super important. So I think it really comes down to the ability to ingest and deliver data in and out of the systems, the connectivity between systems and then the pace that you're able to deliver innovation.

Right. So I want to ask about a couple of at least interesting to me, ancillary businesses. You talked about the core and then the complementary. But then within the payments there, you have a partnership with a company called Moov. And how meaningful is the Moov partnership going to be to the payments business in the next couple of years? When does it start in your mind, to produce material revenue growth and uplift to the segment?

Yes. So we've talked about -- we have roughly 500 of our banks today that have gone live with the Tap2Local, which is a small business merchant payment offering. We plan to have that available to all of our Banno banks and then eventually outside the base Banno Banks. So we're starting to see data on volume as people are starting to use it as people have gone from like a closed beta to like a full scale. And we've done no marketing so far. So it's just, it's on the pane of glass when you use Banno and it's driving insights of like, hey, we think, James, you might have a small business.

And even at that, we're seeing like the pull of customers on their own merchants. These are the customers of the financial institution, starting to transact, get approved in a very frictionless way to accept those payments. So once we really turn on that engine and we start to see what are the adoption rates for merchants and then what's the dollar volume, we're going to -- then we'll really know. But our hypothesis is that in the next, call it, 3 to 5 years, this could be the biggest segment of payments from a growth perspective and a meaningful revenue contributor. So we've talked about that at the May upcoming earnings call, we'll have more data points to share. We just need to validate all of our hypothesis of this.

So quickly, just from a market fit or positioning standpoint, how do you compete with that solution versus somebody like a Stripe or a Square on pricing, if at all? Or is your edge really through the distribution of your bank partners, et cetera?

I think the pricing will be pretty standard in the industry. I think the difference is I believe that people will be multi-acquiring. And you might have and we don't need to take switchers to get growth. So the thing is if you -- let's say, you have a cafe or you have a store, a hardware store, you can accept at your register through whatever hardware unique device. But then when you go in home, in particular, like we think more of the real micro side of small business, the sole entrepreneur, the people who come into your home, if I think about the piano teacher, my lawn care service provider, the plumber, not every shop has like an iPad with vertical software and takes payments. A lot of people are like call back to the office with your credit card or I'll give you a paper invoice and you mail a check later to me. Like those are the type of service providers that are on analog today and aren't accepting payments or they can just be switchers, so they can have their terminal at their store.

But when they're at the farmers' market, the phone is the device. And so if you don't need special hardware and you can get on within minutes to get approved and start collecting payments and then through our -- one of the other kind of selling features is the continuous reconciliation since we have all of the payments and core data, we can make it much easier to then go into AutoBooks or QuickBooks or Xero or whatever your back-end system is as a small business. So we think you can do both. You don't need to be a switcher.

Right. Last couple of minutes here, Mimi, capital allocation. Historically, Jack Henry's favorite dividends, reinvestment, selective M&A over large-scale buybacks. How do you think about the magnitude of buybacks becoming a more meaningful lever in your capital allocation, especially given some of the recent tax-related free cash flow tailwinds you're experiencing, et cetera? Does that make more sense for return capital allocation?

So a great question, one that's near and dear to my heart, thinking about dynamic capital allocation and the ability to generate real shareholder value through it. As you said, we have a 22-year consistent growing dividend policy that we're very loyal to and serves a good constituency of our shareholder base. R&D is our first priority. How do we continue to reinvest for the future. We are open to M&A. Historically, we've done a lot of tuck-in size M&A. There just isn't a lot interesting. And the interesting thing is we don't have a lot of gaps at the moment either. So it really needs to propel us forward in our tech modernization strategy to be compelling. So then that leaves a lot of -- we have zero debt at the moment. So it's a great opportunity, especially with the dislocation in the market to lean in on buybacks.

Love it. Well, that's all the time we have. Mimi, thanks for joining us here at the Morgan Stanley TMT Conference.

Always a pleasure, James. Thank you.

Thank you so much.

All right. Good morning, everybody. We're going to go ahead and get started. My name is Madison Suhr. I'm the payments and fintech analyst here at Raymond James. I'm happy to be joined by Jack Henry, President and CEO, Greg Adelson. It's great to have you here.

Yes. Good to have you. Good to be here with you.

Awesome. So I wanted to kick things off here and just -- sorry, I have a mic problem. [indiscernible] here for those in the audience that are less familiar with Jack Henry. Can you just give an overview of the company, what you do and customers you serve?

Yes. So we consider ourselves a company that builds technology for banks and credit unions. We do everything from a core processing solution to all types of payment solutions, to all types of complementary solutions. So really, everything that runs the bank from the deposit side to the lending side and everything in between, that's what we do. We operate in 3 segments; core payments and complementary, and that's how we report. We'll actually be our 50th year this year on June 2, 50th year as a company and 40th as a publicly traded company.

Okay. That's great. And I wanted to dive into what's been the most topical debate in the market recently. And of course, that's AI. Would love to just hear your kind of high-level thoughts how you think about AI, both from an opportunity standpoint, but also which risks you're assessing as it relates to AI?

Yes, it's the #1 question that we're being asked for sure. So we actually consider it both. And I'll tell you that we think it's more of an opportunity than a threat. I'll get to the threat component in a second. We've been operating with AI for about 3.5 years at Jack Henry. We built a really strong foundational kind of a baseline of what we call responsibly bold and balanced approach. So getting our Chief Risk Officer, our CISO and the regulators involved with us as we built out the foundation of how we were going to operate in an AI environment.

Right now, today, we have over 100 tools that we're using within the company that we've been approved that allows our teams to have a level of flexibility. We change out the LLMs literally quarterly based on the higher performing LLMs and how we operate on those. We have over 500 use cases that we've been working through, a variety of ROIs on a variety of different opportunities there. Things all the way from legal, where we've actually had 58% of our contracts never even touched an attorney in a quarter to HR improvements to customer service improvements to 70% development execution improvements on what we've done since we've incorporated that.

And we actually just had a lot of vibe coding that's going on today within the organization. And we just had somebody over the weekend code something in [ Claude ] coding in an hour that used to take several days. So we're using it. We think it's going to be a huge opportunity for us to continue to do what we're pretty proud of is our level of innovation. We drive our company on culture, service, innovation, strategy and execution, those 5 words as a differentiator in the space.

From a competitive threat, I'm going to tell you that there's a lot of other industries that people are going to want to pick on than the banking industry to try to get in based on the regulatory scrutiny and the things that you need to do with network certifications and a variety of things that happen with custom that you build into a core component. Could there be things in the complementary segment that maybe get infiltrated? Absolutely. That happens today. There's fintechs every day building out a variety of different solution sets that are trying to infiltrate and get into the distribution channel of a core processor. That's what we bring to the fintech. We bring lots of banks and credit unions out to the open market.

Today, Jack Henry embraces that, and we have for the last 50 years. We have 1,100 fintechs that are integrated in some part of our company all the way from the core to the payment side and in between there. So we're going to continue to embrace that, and we'll continue to see things that potentially are opportunities for us to partner with or even acquire as those are built. But the part that I want to tell everybody here is that we are very far down the AI road ourselves. And so I don't see anything that's going to be done or built that we won't be on top of. So it's only going to make us a better company as well.

Okay. Yes, that's very helpful color. And then if you could just touch on kind of your pricing model. What does a typical Jack Henry contract look like? What's the duration? And then just remind investors kind of breakdown between -- or if you have any exposure at all, I guess, to seat-based pricing.

Yes, we don't do any seat-based licensing at all. So there isn't any exposure there. And it really depends on the type of contract. So a core contract typically is 6 to 7 years. Most of the time, those are account-based priced and sometimes asset-based. But most of the time, they're account-based priced. Then you have payment contracts that are typically 3 to 5 years, complementary product contracts that are typically 3 to 5 years. Now, there are a lot of customers that like to have coterminous contracts. So if you sign a 6- to 7-year deal and you throw in -- we typically see 50 different products that go with a bank deal and about 35 with a credit union deal. And you'll see a level of coterminous there where the payment contract may be a 6- or 7-year contract instead of the typical 3 to 5 depending on the particular client and their thing.

So as I said before, no exposure to seat-based licensing and typically, everything else is transaction-based or what we call subscriber-based, but there isn't anything that's seat-based.

Okay. And I know, I've been following the company for a little bit maybe behind the scenes until recently, but I've always known you guys as a company that keeps a really good pulse on the customer market trends, do a lot of conferences, surveys, things of that nature. Would love to just hear what you're seeing from overall bank tech spending environment and macro trends.

Yes. So to your point, we actually either sponsor ourselves or cosponsor 3 different surveys throughout the year. Actually, ours is in process right now that we sponsor to go out the bank and credit union CEOs, then we do one with Bank Director and we do one with Cornerstone or Cornerstone just had one that came out. So each year, each milestone throughout 2025, actually, the amount of expectation of spend in our space increased. So during our survey, it was around 5% was the average. The Bank Director one was 6% to 8% and the Cornerstone one that just came out was closer to 10% of an increase in spend in our space. And a lot of that is for the reasons we were talking about. The need to innovate and to drive opportunity inside the bank or credit union is driven by technology. It's not driven by people.

And so our banks and credit unions rely on Jack Henry to provide those type of services. A lot of them don't have the same staff that they would need or the larger banks have to be able to go facilitate that. So they rely on Jack Henry to provide those type of solutions to them. So in the survey that just came out by Cornerstone, it was about 84% on the banks and 83% on the credit unions that expected to have an increase in spend in 2026. And again, the average was close to 10%.

Okay. And is that pretty typical in a standard year is about that 10% range?

No, no, great question. So over the last couple of years, it was really more around the 3% to 5% was the average. So it's almost doubled from a year ago. And so -- and we're starting to see that play out in our pipelines and the opportunities that we have really in all 3 of our segments.

Okay. That's great. And I did want to dive in a little bit to each of the segments, starting with core. There's been a very well-documented competitor that's going through a core migration consolidation phase. It's viewed that this could potentially be a tailwind for Jack Henry. I mean, how are you changing the organization to just make sure that you're capturing the potential opportunity that this presents? And what gives you kind of confidence? What are you seeing in the pipeline that makes you think, okay, this could be a real tailwind for us.

Yes. So let's go back to our last quarter reported. We did 22 new competitive core wins compared to 11 last year during that quarter. And 8 of those came from that competitor in question. So -- but none of them were part of the announcement that they made just recently because these take -- to sell a core deal, it takes anywhere from 10 to 12 months on average to win. And then it's another -- depending on the time frame, 12 to 18 months to actually implement. So the time frames of these new core win opportunities will happen in fiscal -- late fiscal '27 or '28 for us, or June 30 fiscal year. So from that standpoint, what are we doing? It's the #1 priority at the company right now. So this particular competitor has announced that they're going to consolidate from 16 cores down to 5, creates a nice opportunity with roughly 1,400 customers in play.

And so it is getting attention from all aspects of our business. So our sales, our operations, our legal, our finance teams literally meet once a week to go through various things that we can do to accelerate and create the opportunities that we need and want. Right now, we have over 110 opportunities just in the core pipeline from 90 days ago when the announcement came, and then we have a lot of opportunities in payments and complementary, as I said before. I expect that number to increase as the amount of time kind of lags with announcements that they've made, promises that they've made, which creates some pause from some clients and say, "Hey, I'm going to give them a chance to prove out what they say they're going to do, and that's fine." But our pipeline opportunities are moving fast, and I expect us to -- our typical win rate for a year is about 50 new core wins a year.

And this is an important distinction just so for some of you that don't know, these are 100% competitive takeaways. They're not moving from a Jack Henry core to another Jack Henry core. So we have 3 banking cores, 1 credit union. So we don't announce those as competitive wins because they're not. They're already Jack Henry clients. So these are logo changes for us, and we average about 50 a year. We will do north of 50 this year.

Okay. Interesting. And one of the things I often get asked is the market in general, how to think about how many kind of core deals come up in a given year. I think maybe you guys have talked about there's roughly 200, 100 of them end up leaving Jack Henry wins 50. I mean, is that -- how do you think about a typical year within core?

That is on average, right? So every year is different. I will tell you this year, there's less credit union opportunities that are open, more bank opportunities specifically because of the news by the one competitor. So I don't have the exact number, but on average, you're right, 200, roughly 100. We win roughly 50 of those a year and have been for the last 4 or 5 years on that roughly 1 a week kind of mindset.

And have you seen any changes around your typical win rate? I know you just mentioned about 50%. Has that changed at all over the last several years?

So I think the speed of the win rate has changed. So as I said, we will win north of 50% this year. So I'm not ready to sign up with 2 more quarters to go, but I can tell you we will win north of 50%. And so it will depend on that. The other part is the size. So we have made a very concerted effort to move upmarket. So typically, in years past, and I heard the prior presenter talk about this isn't your father's company, and we always say this isn't your father's Jack Henry either because 5 years ago, we made a big decision to get a lot more innovative in the technology that we build, and we are far exceeding others, which is helping us move upmarket.

So just to put this in perspective, we won 31 what we call multibillion-dollar opportunities in the last 2 years. The 2 years prior to that, we won 5. So that is creating opportunities for our customers in a consolidated market, which -- because banks and credit unions continue to consolidate at roughly a 4% clip over the last 40 years, accelerating right now to about a 6% clip. And we're still growing in a market that's consolidating because of the number of wins that we have. But that concerted effort is allowing us to now take our average asset size, which was about 6, 7 years ago, $750 million in average assets. It's now $1.4 billion. And so that will continue to grow. We have some nice win opportunities that are in the pipeline right now. And we're also -- during M&A, there's times when the acquirer is buying one of the Jack Henry institutions that are smaller, and we're able to flip and actually get the acquirer to flip to Jack Henry. And those are all happening because of what we've done and the focus we put on the innovation.

Okay. That's very helpful. And then the other thing that you touched on last quarter was, I think what you described as trifecta wins, which is essentially you described an attach rate of 68% versus 45% last year. So not only are you seeing kind of accelerated wins, but you're seeing better cross-sell and attach rates. Maybe just dive into that. What's driving that? Why are you seeing success on attach? And do you kind of expect that to continue with what's in the pipeline?

And so just what you're referencing just for everybody else is that when we win a core, our digital banking, which is called Banno and our card business, we call that a trifecta. Those are the 3 biggest revenue opportunities for the company. And so when you win all 3 of them, it makes a deal look significantly better when you have those 3. So of our 22 core wins, all 22 bought our Banno digital banking product and then 15 of the 22 bought card as well. So it becomes a nice opportunity. Yes. So the reason why there's a level of differentiation is I promised 1.5 years ago that we were going to put a significant amount of effort into our digital banking solution to become more commercially oriented. We were really already known as one of the best, if not the best, retail banking platform based on ratings in the App Store and things like that.

But we were lacking in some of the functionality. So we put out a focused effort on that. So we are now winning. We actually had 84 wins in the quarter. 50 of those were the Banno business application, 34 were the retail application. And 12 of those were competitive wins from the names that you know in the space. So that is a proof point that we have -- now we've gotten to a point where we are on par. The other thing I mentioned was taking that product outside of the Jack Henry base and selling it to our competitors' cores, and we needed to get on a competitive landscape with those products. And again, we're now ready to do that.

So all of those are indications that our product set is improving. We've added a lot more commercial card capabilities on our card business. We're 98% debit today, 2% credit, and we want to change that dynamic as well. So we had a lot of focused efforts on card. But all of those are byproducts of why we're continuing to win at that pace.

Okay. And I know you mentioned on it briefly before, but just remind investors the sales cycle again, just -- I know the pipeline is very strong. You're seeing these wins, but how long does this take to actually translate to revenue in the P&L?

Yes. So a core deal, like I said earlier, is about 10 to 12 months to sell the core depending on how much time is left on the contract. Most customers and prospects look at about a 24-month to 30-month window before they really start negotiating. And then the longest pole in the tent is really the education because when you change core, it's compared in this industry as heart and lung surgery. And so you're basically taking every single person at the bank or credit union and you're having to get them to learn a brand-new tools and solutions. And that's really where the time is, it's the education and the time it takes.

So to your point, a deal that we -- well, I'll give you an example, we're going to close a nice deal this -- in the next week or 2, and their live date will be June of '27. So we will close it this month, but they won't go live until June of '27. So that puts some of that in perspective. Now on the digital and the card, if it isn't tied to a core deal and it's just being sold independently, so the 12 competitive deals I just mentioned for digital, those 12 were already Jack Henry core clients. So all of those could actually be implemented as soon as 90 to 120 days, but it's more again dependent on the customer and the term left on their contract, more realistically, it's 9 to 12 months from contract date because of time there, but that's really how it works.

Okay. And then just remind us on M&A, how it impacts the business. You guys disclosed deconversion revenue ahead of the quarters. But for investors that aren't as familiar with the M&A dynamics in the industry, can you just walk through how it impacts you?

Yes. So some of what I tied before was this 4% consolidated market that's happened for literally 40 years. At that point in time, Jack Henry has, like I said, continued to grow at a 6% to 8% top line growth throughout that entire time frame based on the number of competitive wins and the number of M&A deals that are Jack Henry wins. So either we flip the acquirer to Jack Henry or it's a Jack Henry to Jack Henry win, which happens. So -- and we have a couple of clients, I think, in the room today that are bringing a lot of acquisitions to us on a regular basis with that type of formula. So that's an important aspect of that.

The other part is what I said before is our ability at this point in time, while there was a pent-up demand for acquisitions in our market under the former administration, the time frame to get an approval for a deal could be as much as a year or longer. And right now, it's running at 3 to 4 months. And so that's -- there's not only a pent-up demand, but an acceleration. And so it's extremely important for Jack Henry to continue to really taunt the amount of innovation, and that's allowed us to be the winner more than not. So we usually view it as a slight tailwind for Jack Henry, and it has been for many years. Just to give you a couple of quick proof points. In the last 7 years, Jack Henry has grown the banking business by 17% market share, not 17 percentage points, but 17% market share and 40% on the credit union side in a consolidated market that was decreasing at 3% overall. So that puts some numbers to the perspective.

Okay. And then you touched on kind of winning business with larger FIs. I mean, can you just help us understand, are there differences in economics when you sign a core deal with a larger FI versus a smaller one?

Yes. And it really depends. So it's a lot of it's the attach rate. So you're going to pay for accounts. It's going to be whether the bank or credit union, particularly in this case, the bank is more commercially focused than they are retail focused. So more accounts in a retail, bigger assets on the commercial side. So some of that could play into the equation. But most of it is the attach rate. And so that's why it's really important for us to get those trifecta wins because if we can tie those 3 things together, it makes for a really nice win for us. Even a smaller bank or credit union that could be at a $500 million in assets, if they buy those 3 products, it turns out.

I will tell you right now, our largest revenue customer is not even in our top 10 in asset size. So -- and it's pretty well known that we lost, and we're working through some things with Synovus on this, but Synovus bought Pinnacle, which was our largest asset size client. But Pinnacle was an in-house client and not an outsourced client. Outsourced clients pay us more because we handle everything for them. And Pinnacle wasn't even in our top 10 in our client base, even though they were our largest asset client.

Okay. That's very helpful color. And then I want to switch gears a little bit to payments. Obviously, that space has continued to evolve. You're seeing strong growth in areas like Zelle, real-time payments, FedNow. Can you just talk about how the landscape within payments has changed over the last few years? And what are some of the key growth drivers that investors should think about moving forward here?

Yes. Just so you all know, from a payments segment, we really have a handful of products. So one is our Bill Pay solution, which is iPay and Payrailz. We acquired Payrailz in 2022. That's a low single-digit growth opportunity. Since we bought Payrailz, it's almost tripled in growth, but it's still low single-digit growth because Bill Pay just isn't a high grower. And then remote deposit capture, we're actually the largest remote deposit capture company for banks and credit unions in the country. And that's kind of a mid-single-digit growth factor. So the big opportunity has always been card, which is the largest business. It's 22% of Jack Henry's revenue today is our card business. And that continues to be kind of a mid- to high single-digit growth and should continue, but you get to law of large numbers and you kind of get some of that as well.

So the highest opportunity for us right now in payments is really in threefold. So one is faster payments, as we talked about. Faster payments is Zelle, the Fed and the Clearing House's solutions. We have roughly 500 clients live on all 3 of those. We're roughly 33% to 40% of the total population of FedNow and the Clearing House's network of banks and credit unions today. So an opportunity continues to exist because we have 1,700 core clients and only 500 live on those products.

As you mentioned, we're growing at about a 50% clip on transaction growth in those 3 things, and we expect that to continue, specifically because most of those banks are only on receive. So we're only getting transactions if transactions are being sent to them. And we are really promoting and we're trying to get the Clearing House and the Fed to promote much more of the use cases to promote send transactions because those are where pennies become dollars. They replace things like B2B payments and other B2C payments that could be going by check, and they have a chance to replace those and you get real money for that.

We've also bought a company in September called Victor, which allowed us to get into embedded finance. So embedded finance will allow us kind of a banking as a service, allow us to do matchmaking between the fintech and the bank and bringing those relationships and using the bank's charter to generate payments, disbursements, cross-border solutions. We have stablecoin solutions that we're using through that as well. So a lot of opportunity in the embedded finance. But I think the largest opportunity for us in payments is something we just rolled out, which is our SMB solution. We were highly focused on creating a differentiator in this space from Stripe and Square to keep deposits within the bank or credit union instead of those deposits leaving the bank through a Stripe or Square relationship.

So we created 3 distinct differences in our solution set. Right now, we have 500 customers that are live in 3.5 months on our -- what we call Tap2Local, which is our merchant acquiring solution through banks and credit unions. And then we did a product called Rapid Transfers, which allows you to move money in real time from a local bank or credit union to an external account. So there's only like 6 institutions in the entire country that allow real-time payments to happen from an external account to an internal account and vice versa. So we've rolled that out. We have almost 100 customers live on that in 3.5 months. And I expect that in the next 5 years to be the biggest driver of our payments business from a revenue growth. And here's why, back to quick distinctions. We have -- we created an ability to do a real-time approval.

So if anybody has an LLC or a small merchant, we can actually load that merchant onto the system instantaneously on 75% of the applications that come through. Everything is done through the phone. Application is done through the phone. The notification for them to use their phone as a point-of-sale device. So we are certified for iOS and Android to do tap to pay. So we are the first U.S. company to get certified. Stripe and Square both certified in Europe prior to the certification. We became the first company to certify that. It was like 38 certifications to go through to make that happen.

And then the second one is that Visa and Mastercard both have 8 settlement windows, but really nobody uses them. So we're actually going to exercise the ability to use the 8 settlement windows for the small business to get their money literally up to 8 times a day, depending on what the bank wants to do. Worst case is they're going to get it next day. And so that's up to the bank or credit union. But the reality is we'll have that capability to do that. Nobody is using those windows today. In fact, we're getting Mastercard to build it out with us. Both Mastercard and Visa have invested in the solution set and partners with us, specifically on the marketing side to help our banks and credit unions to be successful.

And the last part and maybe the most important because we're -- it's patent pending is our ability to take all the transactions that occurred for that particular merchant. When the deposit hits the -- their bank account and shows up on their digital app, all the transactions that occurred that equal that deposit show up in their app.

So again, if any of you have a small business, you have to go back and manually reconcile those. We've built solution sets that take all of the aggregators that are out there, the Plaids, the Squares, the Finicities, the MX, as you name them, and they all write APIs to our back end for digital. We do no screen scraping, and we can actually go into all of the accounting solutions, 97% of them, with Xero and QuickBooks being the 2 biggest, and we can actually automatically bring all those transactions into their application and with a push button, uploaded all of that into their accounting systems. That's a patent-pending solution that we created, that's really cool. So again, this is bringing deposits and opportunities back to the banks and credit unions instead of having those leave them through Stripe and Square.

Okay. That's very helpful. And I did want to switch gears to complementary. Obviously, Banno has been hot topic lately. I mean you gave some stats around client signs. You now have more than 15 million users. I mean, clearly, the product is resonating. Can you just talk about how sustainable the growth is within Banno, the overall strategy there? And then maybe kind of the mix between retail versus business?

Yes. So I'll make that quick just because we have 1,037 banks and credit unions that are live on Banno since 2018 when we rolled it out. So we went from 0 to 15 million users and 1,000 customers in literally 8 years. And so it is the fastest growing, the mix between retail and Banno business. Every customer is a retail client and about 45% are business. So we have about 430 customers that actually have the business application out of the 1,037 that are on there, and that will only continue to go up for the reasons we talked about before. But absolutely, I view it's very sustainable. Our SMB solution, which is tied to Banno is helping us win a lot of opportunities because today, the only way you can get that solution is through Banno.

Okay. And then I wanted to switch gears here to capital allocation. only have a couple of minutes left. You guys are known for being a skilled acquirer, plenty of capacity. I mean, how are you thinking about capital allocation in this environment right now?

So a couple of things. So one, we've been 51 acquisitions in 50 years. So we have been a serial acquirer. But as of right now, we have 0 debt. And so we have a pristine balance sheet. And absolutely, that $2.4 billion in revenue that's pretty -- we're pretty proud of that. We are taking advantage of what we think is an unappreciated market right now for us. Not only did we have an incredible quarter financially and with the number of core wins, but the AI stink and everything that's in our segment right now is dragging us down.

So we're definitely taking advantage of buybacks and we'll continue to be aggressive in that. We had already signaled to the Street that we would do $200 million in buybacks this year compared to $35 million last year. We're already above that. And so we're absolutely making a nice headway into that, and we'll continue. But we will continue to look for acquisitions, the things that fit our sweet spots. They typically have to be public cloud native because we don't want to rewrite anything. But if there's -- we don't have a lot of gaps because we're building a lot of our own technology. But if there's something that can accelerate us, then we will absolutely look for that.

Okay. Sounds good. And we'll go ahead and leave it there, Greg. Thanks so much for being here.

All right. Thank you.

Thank you.