Jack Henry & Associates, Inc. (NASDAQ: JKHY) Full Fiscal Year 2025 Earnings | 08/20/2025

Jack Henry reported solid financial results for Q4 and full-year fiscal 2025, achieving record revenue and operating income. The company demonstrated strong sales momentum with a significant number of new core client wins, particularly among larger financial institutions. While guiding for slightly moderated revenue growth in fiscal 2026 due to industry headwinds, management remains confident in its strategy and expects continued margin expansion and strong free cash flow.

Key Financial Highlights (FY 2025):

• Revenue: Non-GAAP revenue reached $2.3 billion, up 6% year-over-year.

• Profitability: Non-GAAP operating income was $541.1 million. The non-GAAP operating margin expanded by 70 basis points for the year to 23%.

• Cash Flow: Generated a record $642 million in operating cash flow and $410 million in free cash flow (90% conversion).

• Capital Allocation: The company ended the year with zero debt after reducing debt by $150 million. It also returned capital to shareholders via $35 million in share repurchases and $165 million in dividends.

Strategic & Operational Highlights:

1. Strong Sales Momentum: The company signed 51 new core deals (31 banks, 20 credit unions) in FY25, including 16 with over $1 billion in assets. The total assets of new core clients won have nearly tripled over the past three years.

2. Cloud Migration: 77% of core clients are now hosted in Jack Henry's private cloud. The company signed 37 contracts to move existing in-house clients to its private cloud.

3. Product Innovation:

   • Banno Digital Platform: Strong demand continued, with 1,023 clients on the platform. Key new products launched in partnership with MOVE include:

     • Tap to Local: A merchant acquiring solution currently in beta, set for a broad rollout.

     • Rapid Transfers: A solution for moving funds between accounts and digital wallets.

   • Financial Crimes Defender: Added 47 new contracts for the core solution and 149 for the Faster Payment Fraud module.

   • Tech Modernization: 20 components of the new cloud-native "Jack Henry Platform" are now live, reducing development duplication and improving efficiency.

4. Stablecoin Strategy: The company is taking a phased, strategic approach, enabling integrations via APIs and exploring partnerships, while awaiting further regulatory clarity from the recent stablecoin legislation.

Fiscal 2026 Guidance & Outlook:

Management provided guidance for FY26, acknowledging some revenue headwinds from industry consolidation, renewal pricing pressure, and macroeconomic uncertainty.

• Revenue: Non-GAAP revenue growth is expected to be 5.8% to 7.0%.

• Profitability: The company expects to deliver 20 to 40 basis points of non-GAAP operating margin expansion for the third consecutive year.

• Earnings: GAAP EPS is guided to $6.32 to $6.44.

• Free Cash Flow: Conversion is expected to be strong (85-100% in future years) due to favorable new tax legislation (full R&D expensing and bonus depreciation).

• Capital Allocation: With a debt-free balance sheet and strong cash flow, the company plans to ramp up share repurchases (potentially by at least $100 million) while remaining open to M&A opportunities.

Key Challenges & Responses:

• Bank M&A: A recently announced large bank merger involving a Jack Henry client has created speculation, but management stated there has been no indication of intent to terminate agreements. Any potential impact would not occur until fiscal 2027.

• Pricing Pressure: Acknowledged competitive pricing pressure on renewals and new deals but emphasized that Jack Henry continues to win based on technology and innovation, not by being the lowest price.

• Slower Account Growth: Noted industry-wide headwinds from neobank competition and economic factors (slow auto/housing markets), which is a driver behind the push of its SMB strategy to retain deposits.