Third quarter summary: GAAP revenue increased 5.9% and GAAP operating income increased 3.4% for the fiscal three months ended March 31, 2024, compared to the prior fiscal year quarter. Non-GAAP adjusted revenue increased 7.0% and non-GAAP adjusted operating income increased 8.6% for the fiscal three months ended March 31, 2024, compared to the prior fiscal year quarter.1 GAAP EPS was $1.19 per diluted share for the fiscal three months ended March 31, 2024, compared to $1.12 in the prior fiscal year quarter. Fiscal year-to-date summary: GAAP revenue increased 7.3% and GAAP operating income increased 2.0% for the fiscal nine months ended March 31, 2024, compared to the prior fiscal year period. Non-GAAP adjusted revenue increased 7.7% and non-GAAP adjusted operating income increased 12.0% for the fiscal nine months ended March 31, 2024, compared to the prior fiscal year period.1 GAAP EPS was $3.85 per diluted share for the fiscal nine months ended March 31, 2024, compared to $3.68 in the prior fiscal year period. Cash and cash equivalents were $27 million at March 31, 2024, and 2023. Debt related to credit facilities was $250 million at March 31, 2024, and $375 million at March 31, 2023. Full year fiscal 2024 guidance:2 Current Previous GAAP Low High Low High Revenue updated $2,215 $2,228 $2,215 $2,228 Operating margin 21.9 % 22.0 % 21.8 % 21.9 % EPS updated $5.15 $5.19 $5.09 $5.13 Non-GAAP3 Adjusted revenue updated $2,197 $2,210 $2,197 $2,210 Adjusted operating margin updated 22.4 % 22.4 % 22.3 % 22.3 % MONETT, Mo., May 7, 2024 /PRNewswire/ -- Jack Henry & Associates, Inc. (NASDAQ:JKHY), a leading financial technology provider, today announced results for the fiscal third quarter ended March 31, 2024. According to David Foss, Board Chair and CEO, "We are very pleased to report another quarter of strong revenue growth and overall financial performance. Our sales teams produced a record third quarter for sales bookings, and our sales pipeline remains near its all-time high. We continue to execute on our strategy to provide modern technology to help community and regional financial institutions strengthen connections with the people and businesses they serve. As a well-rounded financial technology company, we are well positioned to serve clients of all sizes through a comprehensive suite of innovative solutions and our cloud-native technology modernization strategy." 1 See tables below on page 4 reconciling non-GAAP financial measures to GAAP.2 The full year guidance assumes no acquisitions are made during fiscal year 2024.3 See tables below on page 8 reconciling fiscal year 2024 GAAP to non-GAAP guidance.4 See table below on page 14 reconciling net income to non-GAAP EBITDA. Operating Results Revenue, operating expenses, operating income, and net income for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, were as follows (all dollar amounts in this section are in thousands, except per share amounts): Revenue (Unaudited, In Thousands) Three Months Ended March 31, % Change Nine Months Ended March 31, % Change 2024 2023 2024 2023 Revenue Services and Support $      305,017 $        291,922 4.5 % $      959,214 $        902,771 6.3 % Percentage of Total Revenue 56.6 % 57.4 % 57.9 % 58.5 % Processing 233,545 216,630 7.8 % 696,417 640,298 8.8 % Percentage of Total Revenue 43.4 % 42.6 % 42.1 % 41.5 % REVENUE $     538,562 $      508,552 5.9 % $   1,655,631 $    1,543,069 7.3 % Services and support revenue increased for the three months ended March 31, 2024, primarily driven by growth in data processing and hosting revenue of 10.6%. Processing revenue increased for the three months ended March 31, 2024, primarily driven by growth in Jack Henry digital revenue (including Banno) of 26.1%. Other drivers were increases in card, payment processing and other processing revenues. Services and support revenue increased for the nine months ended March 31, 2024, primarily driven by growth in public cloud revenue of 10.0%. Other drivers were increases in on-premise support and product delivery and services revenues. Processing revenue increased for the nine months ended March 31, 2024, primarily driven by growth in transaction and digital revenue of 19.1%. Other drivers were increases in card and remittance revenues. For the three months ended March 31, 2024, core segment revenue increased 7.4%, payments segment revenue increased 5.3%, complementary segment revenue increased 5.1%, and corporate and other segment revenue increased 5.8%. Non-GAAP adjusted core segment revenue increased 8.2%, non-GAAP adjusted payments segment revenue increased 5.7%, non-GAAP adjusted complementary segment revenue increased 7.7%, and non-GAAP adjusted corporate and other segment revenue increased 5.8% (see revenue lines of segment break-out tables on pages 5 and 6 below). For the nine months ended March 31, 2024, core segment revenue increased 7.6%, payments segment revenue increased 6.2%, complementary segment revenue increased 7.1%, and corporate and other segment revenue increased 17.1%. Non-GAAP adjusted core segment revenue increased 8.0%, non-GAAP adjusted payments segment revenue increased 6.1%, non-GAAP adjusted complementary segment revenue increased 8.3%, and non-GAAP adjusted corporate and other segment revenue increased 17.1% (see revenue lines of segment break-out tables on pages 6 and 7 below). Operating Expenses and Operating Income (Unaudited, In Thousands) Three Months Ended March 31, % Change Nine Months Ended March 31, % Change 2024 2023 2024 2023 Cost of Revenue $     328,224 $      307,345 6.8 % $      972,205 $         910,195 6.8 % Percentage of Total Revenue5 60.9 % 60.4 % 58.7 % 59.0 % Research and Development 35,993 34,625 4.0 % 108,363 104,179 4.0 % Percentage of Total Revenue5 6.7 % 6.8 % 6.5 % 6.8 % Selling, General, and Administrative 62,246 58,192 7.0 % 211,298 172,205 22.7 % Percentage of Total Revenue5 11.6 % 11.4 % 12.8 % 11.2 % OPERATING EXPENSES 426,463 400,162 6.6 % 1,291,866 1,186,579 8.9 % OPERATING INCOME $       112,099 $       108,390 3.4 % $     363,765 $      356,490 2.0 % Operating Margin5 20.8 % 21.3 % 22.0 % 23.1 % Cost of revenue increased for the three and nine months ended March 31, 2024, primarily due to higher direct costs generally consistent with increases in the related revenue, increased personnel costs due to an increase in employee headcount in the trailing twelve months, and higher internal licenses and fees. Research and development expense increased for the three months ended March 31, 2024, primarily due to cloud consumption costs, net of capitalization. Research and development expense increased for the nine months ended March 31, 2024, primarily due to higher personnel costs (net of capitalized personnel costs) related to the Payrailz, LLC ("Payrailz") acquisition6 and Jack Henry Platform. Selling, general, and administrative expense increased for the three months ended March 31, 2024, primarily due to higher personnel costs from increased commissions and medical benefits expenses. Selling, general, and administrative expense increased for the nine months ended March 31, 2024, primarily due to higher personnel costs from the voluntary employee departure incentive payment (VEDIP) program7 and a decrease in the gain on sale of assets, net, period over period. Net Income (Unaudited, In Thousands, Except Per Share Data) Three Months Ended March 31, % Change Nine Months Ended March 31, % Change 2024 2023 2024 2023 Income Before Income Taxes $           114,165 $            106,115 7.6 % $         367,635 $          350,624 4.9 % Provision for Income Taxes 27,066 24,566 10.2 % 86,892 81,751 6.3 % NET INCOME $             87,099 $            81,549 6.8 % $         280,743 $          268,873 4.4 % Diluted earnings per share $                 1.19 $                   1.12 6.9 % $               3.85 $                3.68 4.6 % Effective tax rates for the three months ended March 31, 2024, and 2023 were 23.7% and 23.2%, respectively. Effective tax rates for the nine months ended March 31, 2024, and 2023 were 23.6% and 23.3%, respectively. According to Mimi Carsley, CFO and Treasurer, "For the third quarter of the fiscal year, our private cloud and processing services continued to drive strong revenue growth. We had strong, organic revenue growth of over 7% on a non-GAAP basis and non-GAAP operating income grew over 8%.  These results reflect the Jack Henry team's disciplined approach to cost control." 5 Operating margin is calculated by dividing operating income by revenue. Operating margin plus operating expense components as a percentage of total revenue may not equal 100% due to rounding.6 On August 31, 2022, the Company acquired all the equity interest in Payrailz.7 The VEDIP program was a Company voluntary separation program offered to certain eligible employees beginning in July 2023. Impact of Non-GAAP Adjustments The tables below show our revenue, operating income, and net income (in thousands) for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, excluding the impacts of deconversions, acquisitions, the VEDIP program expense,** and the gain on sale of assets, net. On August 31, 2022, the Company acquired all the equity interest in Payrailz (the "acquisition"). Payrailz related revenue, operating expenses, operating income, and net income excluded in the tables below in the column for the nine months ended March 31, 2024, include Payrailz activity for the first two months of the fiscal year only. (Unaudited, In Thousands) Three Months Ended March 31, % Change Nine Months Ended March 31, % Change 2024 2023 2024 2023 GAAP Revenue* $       538,562 $        508,552 5.9 % $     1,655,631 $    1,543,069 7.3 % Adjustments: Deconversion revenue (843) (6,143) (9,861) (17,042) Revenue from acquisition — — (1,945) — NON-GAAP ADJUSTED REVENUE* $         537,719 $        502,409 7.0 % $    1,643,825 $     1,526,027 7.7 % GAAP Operating Income $          112,099 $         108,390 3.4 % $       363,765 $       356,490 2.0 % Adjustments: Operating income from deconversions 6 (5,130) (7,552) (14,459) Operating loss from acquisition — — 2,237 — VEDIP program expense** — — 16,443 — Gain on sale of assets, net — — — (7,384) NON-GAAP ADJUSTED OPERATING INCOME $           112,105 $         103,260 8.6 % $       374,893 $       334,647 12.0 % Non-GAAP Adjusted Operating Margin*** 20.8 % 20.6 % 22.8 % 21.9 % GAAP Net Income $          87,099 $           81,549 6.8 % $      280,743 $       268,873 4.4 % *GAAP revenue is comprised of services and support and processing revenues (see page 2). Reducing services and support revenue by deconversion revenue for the three months ended March 31, 2024, and 2023, which was $843 for the current fiscal year quarter and $6,143 for the prior fiscal year quarter, results in non-GAAP adjusted services and support revenue growth of 6.4% quarter over quarter. There were no non-GAAP adjustments to processing revenue for the three months ended March 31, 2024, and 2023. Reducing services and support revenue by deconversion revenue for the nine months ended March 31, 2024, and 2023, which was $9,861 for the current fiscal year-to-date period and $17,042 for the prior fiscal year-to-date period, and by $2 of revenue from acquisition in the current fiscal year-to-date period, results in non-GAAP adjusted services and support revenue growth of 7.2% period over period. Reducing processing revenue by revenue from acquisition for the nine months ended March 31, 2024, which was $1,943, results in non-GAAP adjusted processing revenue growth of 8.5% year-to-date period over year-to-date period. **The VEDIP program expense for the nine months ended March 31, 2024, was related to a Company voluntary separation program offered to certain eligible employees beginning in July 2023. ***Non-GAAP adjusted operating margin is calculated by dividing non-GAAP adjusted operating income by non-GAAP adjusted revenue.   (Unaudited, In Thousands) Three Months Ended March 31, % Change Nine Months Ended March 31, % Change 2024 2023 2024 2023 GAAP Net Income $              87,099 $             81,549 6.8 % $          280,743 $          268,873 4.4 % Adjustments: Net income from deconversions 6 (5,130) (7,552) (14,459) VEDIP program expense* — —