Good morning, and welcome to the Jack Henry Second Quarter Fiscal 2026 Earnings Conference Call. Today, all participants will be in a listen-only mode. Should you need assistance during today's conference call, please signal for a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Vance Sherrard, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Chris. Good morning, and thank you for joining the Jack Henry Second 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 quarterly results and key performance metrics, 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. Afterward, 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 statement 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 I appreciate each of you joining today's call. As always, I'd like to begin by thanking our associates for their hard work and commitment to our success by doing whatever it takes and doing the right thing for each other and our clients. Our focus on people-first culture, service excellence, technology innovation, and well-defined strategies supported by consistent execution continues to set us apart in the market and is reflected throughout my remarks. I will share three key takeaways from the quarter, then provide additional detail about our overall business. First, our financial performance. We produce record second quarter results with non-GAAP revenue of $611 million, up 6.7% over last year's second quarter. Our non-GAAP operating margin was 25.1%, representing a robust 355 basis points of margin expansion over last year's Q2. Second, our sales performance. Our core sales team delivered an outstanding quarter with 22 competitive core wins. Of the 22 wins, four were financial institutions with over $1 billion in assets and 15 included core digital banking and card solutions. We have continued to see an increase in trifecta wins over the past 12 months. 68% of new core wins this quarter included digital and card processing as compared to 45% in Q2 fiscal year 25. The recent announcement of core consolidation by one of our competitors has positively impacted our core payment and complementary solution sales pipelines. We expect our historical success rates within this base of clients to continue and most likely accelerate based on what we know today. It's worth noting that given the timing of their core consolidation announcement, our sales success in Q2 was minimally impacted by the news. It had much more to do with our ability to continue demonstrating innovation and service differentiation in the market, not just relative to that competitor, but across the competitive landscape. Third, we continue to win in a consolidating market. We have outpaced our competitors for many years in core market share growth, even as the overall number of financial institutions has declined. Over the past eight years, our core market share among banks has increased by 17%, while our credit union market share has expanded by 40%. And among institutions with more than $1 billion in assets, Our market share has risen by 32% for banks and 12% for credit unions over that same time period. This growth occurred despite an average overall market contraction of 3% for both banks and credit unions over the past eight years. Our market share and asset size growth can be attributed in part to our bank and credit union clients' continued growth through M&A, acquiring both Jack Henry and non-Jack Henry institutions. as well as our success the past few years in win-a-mergers, winning the core merger business when a Jack Henry institution is acquired. Additionally, we have relationships with more than 80% of the financial institutions in the U.S. across our core, complementary, and payment segments. So in most consolidation events, we are already doing business with the acquiring institution, giving us a strong advantage in increasing the likelihood that the combined entity remains on some or most Jack Henry technology. Now for more detail on the overall business, starting with some recognition for the team. we are we are very proud I'm sorry we placed that Jack Henry was recently named one of America's most loved workplaces ranking 12th out of 100 companies we also earned spots on the Forbes list of best companies in America computer world's ranking of best places to work in IT and Newsweek's list of most responsible companies these honors reaffirm our unwavering people first commitment to our associates. Turning to the significant progress we are making on key innovative solutions, we are extremely pleased with the strong reaction to our new cloud-native Tap2Local merchant acquiring solution. Tap2Local is offered exclusively through banks and credit unions, giving the FI a powerful way to win back deposits from small and medium-sized businesses that have shifted their card acceptance activities to other providers. Built in partnership with move tap to local delivers differentiated capabilities for SMBs including easy enrollment tap to pay on both iOS and Android devices without additional hardware and continuous account reconciliation to the accounting platform of their choice we are currently rolling the solution out in waves to all of our Bano clients we took 300 clients live in November and December and just rolled out another hundred clients last week we will continue to add 100 to 150 per month and expect to have some nice data points to share on the May earnings call. We're also seeing strong early success with Jack Henry Rapid Transfers, which allows both SMBs and consumers to quickly move funds between external accounts, eligible cards, and digital wallets to manage day-to-day transactions and personal finances. We are the first provider to bring this unique capability to community banks and credit unions. This offering will help our clients grow deposits and attract younger digital native generations like Gen Z. Rapid Transfers is now live with 75 clients with another 180 in various stages of onboarding. We will also share more data on Rapid Transfers on the May earnings call. We are very excited about the development and execution of our stablecoin strategy. As I mentioned on our last earnings call, we leveraged the Jack Henry platform to complete our proof of concept in two weeks we are now in beta testing with multiple financial institutions to send and receive USDC in addition we are evaluating over 20 stable coin infrastructure compliance and payment fintechs to ensure we have best of breed partners for this critical initiative another important strategy I want to highlight is our focus on embedded payments and banking as a service capabilities our integration of Victor Technologies, which we acquired on September 30, is progressing extremely well. As a reminder, Victor's modern innovative platform with direct-to-core connectivity enables financial institutions to embed payment capabilities into third-party, non-banked brands such as fintechs and commercial customers. Victor was already integrated with our Silver Lake core banking system and Jack Henry Pay Center prior to the acquisition. We are now extending its capabilities to serve our Scimitar credit union clients and to integrate directly with the Jack Henry platform. We also plan to leverage Victor's modern APIs to complement our treasury management offering. Many corporations are seeking no-touch processing and virtual accounts to streamline accounting and reconciliation. This creates an opportunity for financial institutions to deliver unembedded payments to their corporate customers, giving them more options for seamlessly integrating payments into their business processes we already had a sales team in place focused on selling embedded payments to financial institutions to build on upon that momentum we have added a team that will work directly with fintechs to bring new opportunities to our clients this expansion supports our broader strategy to help financial institutions compete and grow revenue all of these innovative solutions are made possible by our technology modernization strategy and public cloud native API first Jack Henry platform we have developed 22 components on the platform and we'll have multiple clients testing our new cloud native deposit only core functionality in the second quarter of this calendar year I will now provide a few updates on specific products in our core segment I talked earlier about our 22 competitive wins in q2 we also secured 10 on-premise to private cloud contracts, and five of those were with institutions that had more than $1 billion in assets. In the first six months of this fiscal year, seven of our private cloud contracts were with clients holding over $1 billion in assets compared with just two at this time last year. This is important because we earn an average of approximately two times more revenue from clients in the private cloud than those operating on-premise. Today, 78% of our core clients are operating in the private cloud. In our payment segment, we continue to experience outstanding growth in our faster payment solutions. Over the past year, the number of financial institutions using Zelle has grown by 22%, the Clearinghouse's RTP network by 26%, and FedNow by 32%. In Q2, payment transaction volume through these channels increased by 49% over the prior year, same quarter. In our complimentary segment, we signed a total of 48 new Financial Crimes Defender and Faster Payment Module contracts in the quarter. As of December 31, we had 164 Financial Crimes installations completed and another 64 in various stages of implementation. We also have 141 faster payment modules installed and 227 in various stages of implementation. We had a very strong sales quarter with our Bano digital platform. For the quarter, we signed 84 clients to our Bano platform with several large competitive takeaways. We currently have 1,037 Bano retail clients and 435 live with Bano business. We now serve 15.2 million registered users on the Bano platform, up 15% from a year ago. A couple of additional items before I wrap up. Some of you may have seen Cornerstone's annual survey of bank and credit union executives published last week. According to the study, 84% of banks and 83% of credit unions expect to increase their technology spending in 2026. That's up from 73% of banks and 79% of credit unions a year ago. We are currently conducting our annual Jack Henry Strategy Benchmark Study with our clients and will share those results on our May earnings call. We were honored to celebrate the 40th anniversary of our IPO by ringing the NASDAQ opening bell on November 21st. To put that milestone into perspective, Jack Henry is one of approximately 200 companies out of the 3,400 on NASDAQ that has remained public for four decades. This longstanding stability is the perfect lead-in to another major milestone this year as we celebrate the 50th anniversary of Jack Henry's founding with associates, clients, and investors. In closing, we are extremely pleased with our first-half performance and remain very optimistic about the rest of our fiscal year based on the strong demand environment, our robust sales pipeline, and our exceptional competitive win rate. We will continue to focus on our key differentiators of success, culture, service, innovation, strategy, and execution. All of these position us extremely well for the future. With that, I'll 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 remain focused on serving our financial institution clients. The result is another quarter of solid revenue and earnings growth and continued momentum for a healthy fiscal year. I'll begin with our robust second quarter results, then conclude with our updated fiscal 26 guidance. Second quarter and fiscal year-to-date gap revenue increased 8%. Non-gap revenue increased 7% for the quarter and 8% for the year, a continuation of consistently solid performance. Quarterly non-GAAP revenue growth was negatively impacted by the shift of our Connect Client Conference into Q1 from Q2. Without this timing shift, quarterly non-GAAP revenue growth would have been a more pronounced 8%. Second quarter deconversion revenue of approximately $6 million, which we previously announced, was up approximately $6 million for the quarter, reflecting a steady pace of M&A activity among financial institutions it should be noted that the dollar amount of deconversion revenue has little correlation with the number of transactions or annual revenue impact we continue to see industry consolidation as largely neutral to slightly positive for our business now let's look more closely at the detail gap services and support revenue increased 7% for the quarter, while non-GAAP increased 6%. Services and support growth during the quarter was primarily driven by strength in data processing and hosting revenue for both private and public cloud. Private and public cloud offerings continue to drive strong growth. Cloud revenue increased 8% in the quarter. This reoccurring revenue contributor is 33% 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 saw robust performance with 9% GAAP and 8% non-GAAP growth for the quarter. Consistent with recent results, quarterly drivers include increased digital, card, and faster payment processing revenue. Completing commentary on revenue, I would highlight total reoccurring revenue exceeded 92%. Next, moving to expenses, beginning with cost of revenue, which increased a modest 5% on a gap and non-gap basis for the quarter. Drivers for the quarter included higher direct costs consistent with growth in lines of revenue, higher personnel costs, partly offset by lower benefits costs, and increased amortization of intangible assets, which have been consistent throughout the first half of the year. For modeling purposes, amortization of acquisition related intangibles was six million for the quarter. Next, R&D expense increased three percent on a GAAP and two percent on a non-GAAP basis for the quarter. The quarter minimal increase was primarily due to tempered net personnel cost which has also been consistent year to date ending with SG&A expense for the quarter on a gap basis it decreased 13% and a decrease at 10% on a non-gap basis results reflect the timing of our client conference moving into Q1 in conjunction with our continued focus on managing costs aided by our consistent revenue growth, we remain focused on generating annual compounding margin expansion. Q2 delivered a 355 basis point increase in non-GAAP margin to 25%. This contributed to year-to-date non-GAAP margin improvement of 291 basis points and a non-GAAP margin of 26%. Non-GAAP margin benefited in the quarter and year-to-date from inherent leverage in our business model, strategic cost management and leveraging existing workforce as we continue to focus on enterprise process improvement and AI utilization and further aided by lower self-insured medical costs which we anticipate to be non-sustainable we are focusing on a normalized benefit growth trajectory in the second half of the year which is expected to noticeably impact results these strong quarterly results produced a fully diluted gap earnings per share of $1.72, up 29%. For the first half of the fiscal year gap earnings per share was $3.70, an increase of 24%. Reviewing the three operating segments, we see positive performance across the board. Core segment non-gap revenue increased 7% for the quarter, with operating margin increasing five basis points. Payment segment quarterly non-GAAP revenue increased 6%. The segment again had outstanding non-GAAP operating margin growth with quarterly results of 200 basis points. Revenue growth was due to the resilience in our card related services, consistent growth in the EPS business, and continuing a large percent growth from faster payments, I'll bet on a smaller dollar base. Finally, complimentary segment quarterly non-GAAP revenue growth increased an impressive 9% with healthy 58 basis points of non-GAAP margin expansion. Quarterly revenue growth continued to reflect digital solution demand and beneficial product mix, and sales sourced from both new core wins, existing core customers, and non-core financial institutions. Now a review of cash flow and capital allocation. Q2 operating cash flow was $153 million, a $63 million increase over the prior fiscal year Q2. Quarterly free cash flow of $103 million delivered $74 million increase over the prior fiscal year second quarter. Our consistent dedication to value creation resulted in a trailing 12-month non-pat return on invested capital 23% compared to 19% in the second quarter of prior year we're 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 capital decision 125 million in share repurchases 84 million in dividends paid through the end of the calendar year 2025, plus the asset acquisition of Victor's technology. The average purchase price of shares repurchased was $157. We ended the quarter with minimal amount of debt, consisted with our normal course revolver line usage, but expect to exit the year debt-free, barring acquisitions or other opportunities. I will now discuss our second consecutive increase to full-year guidance. As you're aware, yesterday's press release included updated increases to Fiscal 2026 full-year gap guidance. Deconversion guidance will continue to follow the conservative methodology introduced in Fiscal 24. Fiscal 26 deconversion revenue guidance has been increased to $28 million. Aligned with our guidance methodology, we will update the outlook as we confirm more activity throughout the year. Full-year GAAP revenue growth guidance increased to a range of 5.6% to 6.3%. For emphasis, GAAP revenue remains understated due to the conservative deconversion revenue guidance. Based on our strong year-to-date results, we have increased and tightened the range of non-GAAP annual revenue growth guidance, resulting in a new outlook of 6.4% to 7.1%. The second half of the fiscal year will see relatively lower non-GAAP revenue growth compared to the first half. Drivers include projected cloud revenue showing continued strength, offset by anticipated slower momentum in one-time revenue and CARS. Expenses during the second half are expected to reflect the relatively higher pressure for medical cost benefits. returning to historical levels cloud migration infrastructure expense and Commission our expectations on the second half revenue are consistent with our current analyst consensus as a reminder fiscal 26 and the first quarter fiscal 27 victor acquisition related financial impacts will be excluded as part of non-gap reporting based on the above revenue growth in our resilient financial model we expect to gain again generate sustainable accretive sources of margin we're increasing full year guidance for non gap margin expansion to arrange a 50 to 75 basis point margins are projected to contract in the back half of the year due to the benefits cost returning to normalized levels and the timing of workforce expense increases as a reminder we see fluctuations in quarterly results relating to software usage license components along with the timing and implementation therefore the correct performance indicator of our business is consistently strong fiscal year financial results all of the presented results and guidance metrics are indicative that our business operation remains healthy and sound with near to growth process opportunities across all three operating segments the full year GAAP tax rate estimate for fiscal 26 is 23.25%. The above increased guidance metrics results in a stronger full-year outlook for GAAP EPS of $6.61 to $6.72 per share, growth of 6% to 8%. As a reminder, even updated conservative deconversion revenue guidance likely understates gap EPS growth. Full-of-the-year free cash flow conversion outlook is for 90% to 100% for fiscal 26, matching our expected range target, but with a bias to the higher end of the range. Concluding, Q2 results reflect another outstanding performance from our associates, leading to increased guidance. We're pleased by the continued performance momentum and remain positive on the financial year outlook demand for our solutions aligned with continued technology spend our clients and process will drive superior shareholder value we appreciate the contributions of our dedicated associates that have produced these superior results and our investors for their ongoing confidence Chris will you please open the line for question thank you we will now begin the question and answer session as a reminder to ask a question, you may press star then one on your telephone keypad.

If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. And today's first question comes from Raina Kumar with Oppenheimer. Please proceed.

Good morning. Good results here. It sounds like the second quarter sales results were very strong. And I'm just wondering, based off of what you're seeing, do you expect the RayQ sales results to come in better? And are you starting to see the impact from the core consolidation used from one of your competitors at this point?

Yeah, Raina, thanks for the comments. Yeah, Yeah, a couple things. So I can't comment on whether Q3 will be better. Q3 is starting off very well. Don't know where we're going to end up at this point in time. As I mentioned, the Q2 results, which were significant, really had very little impact on the announcement, just because all those deals were kind of in the timing of expectation to be done and were already in motion. As you know, a lot of these core deals can take up to a year or longer to actually secure. I will tell you the pipeline is growing, not just in core opportunities, but across all of our complimentary and payment products as well. So we're continuing to see some nice uptick there. And so I'll be able to report more definitively, obviously, at the end of the quarter. but we are seeing some nice uptick in the pipelines and in the opportunities with some larger opportunities as well.

That's helpful. And just staying on the competitive environment, can you talk a little bit about what you're seeing out there in terms of pricing for core systems and ancillary services? Any changes you're seeing in pricing?

No, not really. I think it's been very consistent to what it's been over the last couple of years. So I wouldn't say anything has been significantly changed as a byproduct of the announcement or what we had been seeing within the rest of the competition over the last couple years. Pretty consistent. And the fact that we won 22 of them in the quarter is a pretty good indication because we're never the lowest cost provider. So I think that's a pretty strong statement as well.

Good stuff.

Thank you.

And the next question is from Vasu Goval with KBW. Please proceed.

Hi, thanks for taking my question, and congratulations on a really solid print here. Greg, maybe just the first one. There's been a lot of investor focus on how AI could reshape software economics across industries, and we've seen that concern reflected in pretty meaningful stock moves in the last few days and weeks. So maybe you could talk about how you think about AI's impact on your business model over the long term and where you see it as an opportunity versus a risk.

Yeah, I'm really glad you asked that question because of what happened yesterday. So, yeah, so a couple of things. One, you know, from a standpoint of affecting companies, not just Jack Henry, but others in our space, I think it's really a misinformation because when you think about what AI does in the development of technology and the development of building, whether that be a core system or other very complex solutions that we support in this industry, it's not just as simple as doing things faster. It's way more complicated than that. It creates some concerns for, you know, maybe some of the other areas where people are doing seat licenses and other stuff, so some of the other larger enterprise-wide solution sets. But, you know, as you know, we don't do seat licenses here, so we don't have that challenge. Building the technology and restructuring technology is use cases that we can, you know, whether that's taking code and moving it or things along that line. but it's not as straightforward as it might be in some other industries. The other component that I'll say is that we at Jack Henry have been spending a lot of time in using AI both in the back office and in our product set. All of our new platform products do contain some form of AI, and then a lot of the things that we're doing to control our headcount costs, to do improvements and things along that line are all byproducts of AI. So, from our standpoint, and I think, honestly, from an industry standpoint, it's a much different perspective than what I believe that is being kind of, you know, played out there in the space, you know, specifically with some other enterprise-wide solution sets.

Great. Thank you for that, Guller. And then I know you touched on this a little bit before, but just bank M&A, that's continuing at an accelerated pace, including some deal announcements involving some of your larger clients recently. So just curious if you're still feeling good that Bank M&A will still be a net neutral to maybe even a positive as we move forward from here, and that the convert merge activity will sort of increase and will offset any deconversion revenue. Just curious on your latest thoughts there.

Yes, absolutely. I mean, we've already seen it. So as I kind of mentioned a little bit in my opening remarks, I mean, not only have we seen significant market share growth during this, you know, last eight years where there's been 3% decline overall, we're seeing it across, you know, opportunities today, even in, you know, one very large one that was announced a year ago or close to a year ago, then, you know, we're having opportunities for other products within that set, and in some cases, these other products can be even more valuable than the core itself. So, you know, we are very bullish on what we're doing, how we're doing it, and the opportunities that continue to come our way even when an acquisition of one of our accounts has taken place. We're right in there, in some cases, winning the overall core deal prior to the conversion. In other cases, having conversations post as we talk about complementary payment and potentially our digital core products as part of their long-term strategy.

Great. Thank you for the color.

The next question is from Jason Kupferberg with Wells Fargo. Please proceed.

Hey, guys. Thank you. I wanted to start on the revenue side. I was curious which segments exceeded expectations perhaps in the quarter, I mean, versus our model. There was some nice upside on the complementary side, so we'd love to hear about product drivers there. And then if you can just comment on how we should think about second-half growth rates by segment and maybe hone in on the payments piece a little bit. I think that's maybe tracking a little bit below the medium-term guide halfway through the year. So should we expect any acceleration there?

Jason, I would say, first off, we continue to be pleased by the across-the-board performance across all three segments, both quarter and year-to-date. Let's roll through each one of them. I would say most of the performance that we've seen above and beyond our expectations in the first half, you saw a decent card performance relative to the more modest expectations we had going into the year. We do think that the back half will be a little bit more challenging relative to the first half and payments. So even though that is a touch below historical, our growth algorithm expectations, that segment's doing really well. And we have some strong resuscitation of, like, our bill payments business. We've talked about the contribution from our faster payments, even on a smaller dollar revenue, but great growth rates and healthiness in CARD. But we do expect that to slow a little bit in the back half, just as a bit of a, you have both weather at the beginning of the calendar year, but then just the natural seasonality of as you climb into the back half and just getting a little bit higher. And you have some comps from a grow over perspective. Complementary is doing great. We continue to see success in the newer products, things like Financial Crimes Defender, our Treasuring Management products, our digital products. all being continued strong drivers, and we would expect that to continue. And then in core, core has been great the last couple of years. In fact, even stronger growing than the growth algorithm. Part of that is based on the success that Greg talked about, the multi-year success from new core wins, and the organic growth of our clients, and just that continued shift from on-premise to private cloud. this quarter we also saw a little bit of the convert merge benefit and other one times that I would say drove up some of the core revenue that we don't necessarily to expect in the same pace in the back half okay that's all good color and maybe I just want to follow up on margins I know you guys call that the the lower medical insurance claims cost can you just quantify that piece I mean

And the margin beat was huge, for lack of a better word, versus consensus. I know you guys don't guide it for the quarter, but just trying to get a sense of how big that benefit was. And is that something that reverses out in the second half, or is that, you know, a full year? How much of a full year tailwind is that?

Well, Jason, I appreciate you acknowledging the importance of full year versus quarterly guide. I continue to encourage everyone to look at our performance on the consistent annual basis, not the quarterly. Sometimes you just have kind of quarters that either from a year-over-year perspective or a cohort perspective or conference timing perspective just may create a picture that is less than consistent with kind of the full year. But if we look at margins on the full year, increasing our full year guide from the 30 to 50 to now the 50 to 70 is indicative of our belief of just delivering in totality. It was very front-end heavy. Part of that is some cost savings. Part of that is some cost timing. So some of the lower-than-expected benefits costs related to our self-insured medical plan is a savings, but a savings that we don't necessarily expect to continue in the second half. Other things, we just naturally, as part of our plan, we expect higher to be in the second half than the first half. So if I think about just the pace of some of the commissions, as I think about some of the infrastructure costs as we move more migration loads and planning for our data Center longer-term initiative, some of that spend is higher in the second half than the first half. So, yes, we're pleased by the incredible performance and margin in the first half, but more so, we're really proud of the three-year compounding margins that we've been able to deliver and our ability to increase the guide for the full year.

Thank you. Welcome. Our next question is from Will Nance with Goldman Sachs. Please proceed.

Hey, good morning. That's your Zoltz, and I appreciate you taking the question. I wanted to circle back to the question on AI, and I was wondering if we could put more of a positive spin on the AI theme for this space. I think the core processing space is kind of known for having fairly outdated code bases, a lot of code all around, not a lot of programmers who can actually maintain it. and, you know, AI is one of those things that, you know, could actually accelerate the modernization of the code bases, which has been a process that you guys have been on for a long time now. So maybe can you talk about that in the context of your next-gen platform and the journey that you've been on for the last couple of years and, you know, how do you see AI as an accelerant to that strategy and, you know, something that could, you know, perhaps even improve the competitive positioning of what, you know, historically has been thought of as, you know, a good industry with low switching costs, but, you know, a lot of software that may be in need of some modernization?

Yeah, so good question. I appreciate the follow-up. So, I mean, you know, obviously, Will, we've been involved with AI for many years as part of this not only what we're building with our new platform, but what we've been doing on the back end to, you know, move some of our foundational cores and foundational code over to, you know, other ways of doing things. And we've been able to do it faster, but also with less people. When you look at the number of initiatives that we have going on with some significant technology, you know, innovation, and still look at our headcount growing at less than 1% over the last several years during that time frame, that's all apparent because it's being done with utilization of AI and other tools. So that's been a big part of our strategy for a long time and continues to be. We have some of the top-notch talent in this industry that we've brought in that are helping push that across the entire organization, not just in certain aspects of our business. The other thing is on what I was referring to earlier from the question from, I believe it was either Rainer or Vasu, but around the complexity of building out cores, it's not just the ability to move, you know, foundational core stuff to something else. And by the way, you know, it's taken us almost five years to get where we are. So if you haven't started, you're a little behind. But from where we are today, and the work that we've done, when you look at a lot of the international cores that have tried to come into the United States and haven't been very successful. It's because of the level of complexity that you need to build, and not just the core itself, because, again, you can build some core, headless core that has components on it, but it's the full integration and it's the full suite of connections to the payment networks and everything else that goes with that that really makes it complex. And that isn't just done with AI. Some of that's done with a lot of hard work and people. And like our team likes to say, it's dirt digging. And so that stuff is where the complexity really makes it more difficult. So I think what we have done, where we have gone and been able to utilize AI as part of our overall strategy, is what differentiates us not just from innovation, but from speed of innovation.

And if I could add on to that, Greg, I would say that because of the investment we've made and started making over five years ago of moving our infrastructure to the public cloud allows us to take advantage of the DevOps environment.

So if we think about something like Bano and the number of new feature releases we're able to do on that, and now similarly with the Jack Henry platform being API first, digital cloud native, we'll be able to increase that velocity of solution enhancements for our clients that others cannot because they're still on that journey to public cloud yeah and just one other point just because I know this is a big topic for for probably everybody is that you know as they say no no no data no AI right so the things that we have been doing and focused on so not just what Mimi is referring to with various product sets, but what we've been focused on with our data has allowed us to take more advantage of AI as well. And again, in our industry, there's a lot of complexity and a lot of differentiation on how pricing and everything else is orchestrated versus what I think is being thrown in to these other enterprise providers where they're selling seat licenses and we're pricing by transaction or active user or, you know, asset size or whatever it is. It's a whole different model.

That's great. I appreciate the really thorough answer. And just if I could switch gears and ask about the payment side, I was wondering if you could talk around competitive dynamics on payments There's just been, I think, a resurgence in chatter on new entrants in that space and, you know, the community bank space, maybe evaluating, you know, beyond the kind of traditional competitive set. Just wondering if you could talk about anything that you've seen recently.

Yeah, I mean, I don't, I know, I mean, I mean, there's a couple of them, you know, I'll call out, you know, there's a couple of names that have presented themselves into space, but they're really, they're more, I would say, compartmentalized offerings. They're not full suite debit and credit offers. Most of the ones that I think you're referring to are more on the commercial card side and I think have limited availability on the debit side as of today. And so, as you know, that is the stronger part of our particular card processing today, even though we've had a lot more success on credit deals lately than in years past because of some changes we've made. But I will tell you that, you know, one of the reasons why I wanted to call out the number of what we call trifecta wins around here is because we are seeing more and more opportunities in this space for, because of the solution set that we built, to allow us to sell digital and card as part of a core deal or sell digital and card individually outside of a core deal. And that's been a big part of our strategy and will continue to be. But I haven't seen anybody that's come into the market that I would say has disrupted the market. There's a lot of names that are saying they're doing things, but the level of success into our space, we just haven't seen it yet.

Got it. Appreciate you taking the questions today. Nice results. Sure. Thank you.

The next question is from Darren Peller with Wolf Research. Please proceed.

Hey, guys. Thanks. Nice quarter. I just wanted to touch again on the core wins. You highlighted another strong quarter at 22. I know you had about 11, I think it was, this time last year's quarter. So just that includes some of the larger institutions. Maybe just help us understand how we should think about the near-term versus long-term revenue cadence around some of those. And I know it takes time to really come into the run rate, but just as importantly, I mean, what are you seeing that's giving you the right to win in these banks at maybe in a slightly accelerated rate, as well as the larger as you move up market and you've been having more and more success? So maybe just help us understand what's going well there.

And if this is a better run rate that we can see in terms of cores maybe given industry dynamics thanks guys yeah thanks for uh for the comments yeah i mean you were right we did 11 last uh you know um second quarter you know as we like to say same thing with everything else it's fiscal year results right so some quarters are are bigger than normal um q2 and q4 are typically our largest quarters our fiscal quarters um that's just you know the end of the year for the customer the end of the year for us you know just tends to have a lot more activity even though we try to spread it more evenly than that you know as I mentioned before the pipelines are growing fast you know with with a lot of the news that's happened in the space not just core but across all of our our channels you know we're pretty excited about some things that we can't announce yet just because of the timing but the reality is we're continuing to to move the needle in all of those products at a pretty fast pace what I would say from a core standpoint though to answer your question you know we're winning really and even on some of these deals that were referenced earlier that our customer was purchased we're in there already talking to them about a variety of products you know we're hearing some really positive news on what we are doing differently than our competition, and it really starts with our ability to, what I say all the time on these calls, our culture comes through on those meetings very fast, and people that are, there's a lot of people that want a partner that has a similar culture. I just met with a bank this week that that was their comment. They said, the first thing we noticed was your culture and alignment in culture. Obviously, our service reputation is 50 years of doing the right thing and doing whatever it takes. The level of innovation that we've built over the last five years is not matched by anybody in the industry. And we've said that multiple times. And when people are able to see what we are able to already compete and do with a lot of these innovative things, not just tap to local and rapid transfers, but stable coin, things that we've done with the platform, things along that line, it just shows that level. If you want to grow your institution and you want to make sure that you've got deposits and lending capabilities or building efficiency, which are the three most talked about things that they want to do, Jack Henry has been the provider and is the provider that can make that happen. And then, you know, we don't change our strategy. We've been very focused on our strategy, and our execution is second to none. So when you take those five words that I say all the time, honestly, those are the reasons why we win. And it comes through with the product and the level of innovation we show them.

That's helpful. And then, guys, I just want to follow up one more time on the way we think about guidance for this year. And even an early thought in terms of what's trending for next year, just fiscal year, just given – you've been inching up your guide now. Now, you're obviously having success with the SMB initiatives that's starting to really but show results in numbers. And I think that's a key factor to getting back to that 7% to 8% range. So, I mean, is your confidence growing into fiscal 27 even that we can get back to that 7% to 8% again based on everything you're seeing in the run rate and some of your results from investments?

Darren, I love your long-term view there. Just a little too premature from our perspective. We are heads down focused on executing in 26. We're starting to have budgetary conversations and strategy conversations about 27. But I think it's sticking to the fundamentals, really. It's about the execution. It's about every day coming in and hitting the singles and just continuing to execute. So, yeah, we're super excited about the onboarding progress from our S&B offerings. We're super excited about the feedback we're getting from customers that are validating the direction that we've talked about. But I would say, you know, for this year, it's about continuing to drive on the implementations from the sales pipeline of closures. And it's about card and payments. And it's about continuing traction on the complementary side on some of our newer products. As we look into 27, I think certainly we will be past some of those potholes that we've talked about previously that the deconversion created, and our growth rate on some of these new wins of sizable institutions that Greg mentioned will be coming into the fold from an implementation perspective, and that is super exciting. one other point you know we I mentioned earlier on that we had made a lot of strides in changing how we go about you know our renewal processes and things along that line and that those changes are starting to pay significant dividends for us and and so it's been a big part of the strategy and focal point but also

another reason why we were very bullish on where we're going great great all All right.

Thanks, guys. Thanks, Greg. Thanks, Mimi.

Of course. Our next question is from Madison Sir with Raymond James. Please proceed.

Hi. Good morning, everybody, and thanks for taking the questions. I also wanted to start on the SMB strategy with rapid transfer and tap to local. I guess, you know, more broadly, what are you seeing in terms of adoption for those products? What's the longer-term opportunity look like? and maybe any color on how the competitive set may differ from a traditional Jack Henry competitor?

Yeah, Madison, thanks for the question. I have some data, but as I said, I'd prefer to really talk more about it in May when I have more data months because it's still very early. As I said, we rolled out 300 customers in two months, and we just rolled out another 100. So as people are starting to ramp up, I'll give you one anecdote. though there was a we had a client that wasn't sure they wanted to keep it on and they called as soon as it was turned on and two hours later they asked us to turn it off and we said did you know that you already had 30 people sign up for it and they said no and they said okay keep it on so my point is is that there's that type of of opportunity that's that's forming and you know we're just now really working with them on the marketing so there's a whole aspect of this that we think will have a lot better data points. To answer your question on the level of differentiation though, it's significant to what a stripe or square is doing in the space and I'll make it very short. First of all, stripe and square are taking deposits away from our institutions and they're not getting them back because then they're lending to them or they're doing other things and so once those deposits go, they're gone. The other part is that the level of sophistication that we're able to give these sole proprietors or very small SMBs with not only instant account approval, where we're approving about 75% of everybody instantaneously in the market. That's a two to three day process, if not longer. And then, you know, we're able to do both iOS and Android devices for tap to pay. Very few people in the United States are doing that today. Stripe square are but but very few others and then but the biggest one is our patent pending account reconciliation component where the actual SMB can upload all their transactions onto their device and hit a button and upload it into Quick Books or Xero or any of their accounting package choices instantaneously those are all things that can happen today in the market I would add on to that the the knowledge we have from the core systems really enable us to have a frictionless experience from the get-go of sign-on all the way to the account reconciliation that Greg mentioned.

So we really believe in this case it's a fragmented industry, and we believe that small businesses should be multi-acquirer the same way a sophisticated treasury customer has more than one bank account. It's just smart business. We think that small and sole entrepreneurs will be multi-acquiring.

Okay, that's very helpful. Yeah, Matt, to one other point, we have a very long roadmap for SMB. This is not just a one-hit wonder with tap-to-local and rapid transfers. We have a lot of things we're going to be rolling out over the next 18 months, and some of them are already done.

We're just waiting to put them into play. certainly seems like a interesting and uh opportunity for you guys um just brief follow up here on on capital allocation i mean maybe just talk to the priorities right now appetite for buybacks and just anything to call out in terms of mna pipeline thanks guys of course uh first and foremost we're we're super excited to get back to the very strong free cash flow and a very high free cash flow conversion of 90 to 100, to be on the other side of the tax legislation and have certainty, and to have a year where, you know, a pretty significant contribution of roughly call it $100 million from clearing up that tax uncertainty and kind of a clarifying from a go perspective. From a capital allocation, our priorities remain consistent. We have a longstanding dividend policy that we are committed to. We are always looking at M&A prospects and opportunities, although we have left gaps strategically. We're always looking for things that may be an accelerant or enhancement to solutions and our ways of meeting customer needs. We continue to invest significantly in internal development and moving our strategies and innovations forward. And then share repurchases. We were excited by the $125 million of shares we purchased thus far year to date. And we said previously we'd feel comfortable if that went to $200 or more this year. So it sort of depends on purchase price and what M&A opportunities come into the marketplace. But we will be dynamic capital allocators, but continue with our conservative balance sheet.

And the next question today comes from Kartik Mehta with North Coast Research. Please proceed.

Good morning. Greg, one of the strategies you implemented was going about pricing renewals differently, and I'm wondering if that's gained traction, and are you seeing it manifest in financial results yet, or will that take a little bit more time?

Yeah, great question. Appreciate you bringing that up. Yeah, we are starting to see it in our financial results and in our approach for the percentages of new versus renewals in our wins and our overall numbers for the team. So congrats to the entire sales team for embracing what we've put in place because it was a change and it's working very well. So we are really, the percentage of new versus renewals is significant as compared to last year, which is obviously great for a lot of reasons. But the other part is that it's allowing us to hold much more steady in the market. You know, one of the questions early on was pricing pressures. And, you know, we've been negotiating more at a position of strength than I think we have in years past.

And then just to follow up, Greg, you know, early on you talked about bank spending and maybe a couple of reports have come out that say bank spending should continue or is expected to continue in 2026. Is there a difference, at least as you're talking to clients, from an asset size and what they want to spend? And the reason I'm asking is, you know, there's so much talk about consolidation and maybe consolidation happening with smaller banks, you know, smaller asset size banks. So I'm wondering if there's any hesitation for those banks to spend money or if you're seeing any kind of bifurcation.

Yeah, you know, just to be, you know, candid, you do see it sometimes, but I think you can also probably see them on the market the next week. or the next, you know, quarter or whatever, because you really can determine when technology isn't being bought. You know, Dave coined this line a long time ago, and we like to use it, which is, you know, everything that needs to happen in this space, if you want to grow, technology can do for you. And so, you know, from our standpoint, we are very focused on making sure that's why that level of innovation. And so the short answer is yes. There's some institutions that, you know, are going to spend way more than the 10% or 6% to 10% that's been forecasted, you know, based on whatever their needs are or their desires. And there's others that don't. And sometimes they'll take a better financial deal and less impressive technology, and you tend to see those are the ones that are on the market down the road.

Perfect. Thank you very much. I appreciate it. Sure. Thanks.

The next question is from Chris Kennedy with William Blair. Please proceed.

Yeah. Good morning. Thanks for squeezing me in here. Greg, just wanted to follow up on the trifecta wins that you talked about. What's driving that? Are financial institutions consolidating vendors? Is it from changes in your go-to-market strategy or you moving up market? Any more color would be great.

Yeah, it's a great question. It's a combination of a few things. One is, as we've been mentioning, you know, we have done a much better job of building out the Bano solution set to be much more competitive on the business side. You know, we've always had what we think is the best retail application, but the team's done a great job of building that out. So as that has gotten more sophisticated and improved, it's allowed us to not only win more deals but win larger deals, as you referenced, and it has happened as well. Same thing on the card side. You know, we've really improved the commercial aspects of our card platform with some other things that we're working on. And so those two things combined have allowed us to get involved in each of those deals. And as I mentioned, 15 of the 22 deals included all three. But it is by design, and it will continue to be by design as we continue to not only go up market, but also as we go after some of these new opportunities in a consolidating base.

Great. Thanks for that. And as a follow-up separately, I think you launched a new enterprise account opening platform. Can you just talk about the opportunity with that new solution?

Yeah, Chris, I will say that we're still in what I would call closed beta or what we call closed beta, still pretty early. There are some feature gaps that I want to get closed before I want to release it out into what we would call generally available. I'll talk more about that in coming months as it becomes more relevant. But it will be a very unique platform where you'll have a single platform for both consumer and commercial with account opening embedded. So it'll be something that's very unique in the market, but it still needs a few more things completed before we're ready to talk too broadly about it.

Great. Thanks for taking the questions.

Sure.

Our next question comes from Dave Koenig with Baird. Please proceed.

Yeah. Hey, guys. Great job. And I guess my question is really on complementary. You've done a really good job. And I think Greg called out that some of the platform consolidation in the space is creating more wins than complementary. And we often think of it driving core. But if it's driving complementary, too, is that faster? Those are, you know, little smaller products. Are those faster to implement? And then secondly, you've had really good growth. You hit a tougher comp. Is that new kind of win rate or the additional complementary work going to allow you to keep growing as fast, even though you hit a tougher cop?

Well, yeah, it's a good it's good insight. I think it depends on a couple of things, Dave. I mean, if some of these are sold with core deals, some of these are, you know, tied to the timing there. You know, there are actually we had several nice independent wins outside of core and digital and financial crimes for this particular quarter. So those typically are six to nine months, maybe less, depending on their sense of urgency and timing in their contract. But, you know, they're definitely sooner than what would be tied to a core deal. One of the things that we are doing, and it's starting to be, I won't say successful, but being interesting to some folks, is we're really going to them and talking to them about integrating the digital offering even before the core. And this could also be part of, or is part of our outside debate strategy to drive some opportunities sooner than waiting on core. So we're working through some of the logistical parts of that. But as that starts to take fold, I think that will create even more of an opportunity for us to do what we've really envisioned and even on our core platform, right? Doing things in a more modular or componentized approach and doing it incrementally than doing it all at once. And so we'll kind of give you more context on that as it happens. But absolutely by design, absolutely by, you know, by continued improvements in those products.

Great. Thank you.

The next question is from James Fawcett with Morgan Stanley. Please proceed.

Great. Thank you very much. A couple of questions for me. First, obviously, I think everybody understands and very excited about the tailwinds your business is likely to see from some competitors' core platform consolidation. How do you think about, like, what your execution requirements are, kind of what keeps you up at night in terms of things that could trip you up, whether it be timing or magnitude or, you know, just trying to get from you the checklist of things you need to do to potentially take advantage of the opportunity?

Yeah. So, James, I mean, it's candidly number one priority here right now based on, you know, kind of a, I won't say once in a lifetime, but a very few times in a lifetime opportunity where you see this. And so between the sales team, the operations teams, the finance teams, the marketing teams, they're all very much aligned, working regularly in conjunction with our go-to-market stuff that we've done. You know, I don't want to share openly the opportunities that we have in front of us at this point. But as I mentioned, there's significant numbers that are already in the pipeline, not just, you know, ones that are, quote, out there, but already in our current pipeline for all products, not just core. And then there's, again, work that we've done on the operational side to ensure that we're ready. As you can imagine, especially on a core deal, even if we sell the core deal like we did this quarter, it's still going to be another 15, 18 months. So our ability to get ready on the operational side is honestly the easier part. It's more about what we needed to do to gear up on the marketing, sales, and finance sides. And the teams have done a great job of that. We are humming right now. It's absolutely in all full gear. And so I'm very proud of the team on how fast they reacted and what they did.

That's a great color there, Greg. And then I wanted to ask about the attach rate and bundling strategy. As you win more competitive core deals, how are complementary attach rates trending at signing and maybe at 12 months post-conversion? Just looking for any quantified examples of bundles you're seeing more frequently.

Well, the most frequent one is what I called out, which was, again, to us is the trifecta of card and digital. So that is as frequent. You know, there's always some products that get thrown in that, you know, some variation of account opening or, you know, the lending platform or whatever. But those three in particular, we're still averaging about what we have been. And, again, remembering that we're doing some small levels of end-of-lifing or product rationalization as part of our initiatives. But we're still seeing anywhere from 35 to 50 products typically in a deal as we have in years past. The key is that, you know, the more lucrative ones, candidly, are, you know, card, digital, financial crimes, things along that line.

Got it. Thanks for that, Greg.

Okay, sure. The next question comes from Charles Naben with Stephens. Please proceed.

Good morning, and thanks for squeezing me in. I noticed that you tightened the outlook for free cash flow conversion from 90 to 100, from 85 to 100. And I know your bias was towards the higher end of that range last quarter, but curious what led to that increased visibility. And as a follow-up to that, you know, it sounds like there's no shortage of opportunity that you're investing in to pursue.

Love any comments on capital expenditure and the level of investment necessary to pursue that opportunity that you're seeing across your markets. all good questions check so um yeah we continue to to see positive progress on the free cash flow and free cash flow conversion um i think now just having a crisper first outlook of understanding all of the puts and takes of the legislative changes um we did have a a number of just small asset sales as well having clarity on those um just makes us more confident on the projections for the full year and to have a bias towards the higher end of that range from a free cash flow. In terms of an allocation or an investment, we continue to be hovering around that 14 to 15 percent of R&D. As Greg mentioned earlier, in the last five years, XM&A has kept headcount growth less than 1 percent. So we feel like we're able to make the strategic bets and solution progress and while still maintaining a very tight workforce. So that's through our continuous improvement efforts, that's through the deployment of AI, that's through being very strategic on where those headcounts are going and are they fueling strategic initiatives. So we feel pretty good on our ability to continue to accelerate our growth, our progress against our strategic initiative without needing to step up and increase our spending.

Got it. And as a follow-up, I wanted to get your specific comments on the credit union market. And if you're seeing anything different in terms of competitive dynamics, demand trends, and just generally how you see that opportunity.

Yeah. So, you know, we're getting a little bit of the still residual from the core consolidation from one of the competitors. You know, we've done a lot to increase our solution set on our Scimitar platform over the last couple of years. That's starting to pay some dividends. You know, we're winning a good number of the mergers that are happening. So that continues to be a positive. And then the bigger thing that's happening is our ability to penetrate the complementary and payments market with our core solution set. So we are driving a higher penetration rate than we have in years past in the credit union business, both with existing clients and with wins, new competitive wins, with, again, taking digital or payments as a, for instance.

Got it. Great quarter, and I appreciate you squeezing me in.

For sure.

The next question comes from Ken Suchoski with Autonomous Research. Please proceed.

Hey, good morning, guys. Thanks for squeezing me in. I'll ask one since it's getting late. But, Greg, you talked about not seeing a benefit on the core competitive takeaway side this quarter, but obviously lots of work happening behind the scenes by Jack Henry. But you mentioned that service differentiation is really driving your success. And one of the competitors has talked about increasing its service levels and reinvesting on the support side. So I'm curious how you think about maintaining your differentiation relative to other providers when it comes to that support and service. Thank you.

Yeah, thank you. You know, I'll kind of say it this way. You know, we have a 50-year head start on how we've been handling service at this company, and, you know, it's been in our DNA all the way back to Jack and Jerry and every other leader that's come before me. And I will tell you, we're actually at all-time highs right now as far as how our survey results are and things along that line. And, you know, and I know there's a motion at really both of our two largest competitors to improve service. And, you know, I applaud them for that from a standpoint of the industry perspective. But it's hard to move, you know, a big ship when you don't have that mindset built in as we do at this company. And so, you know, could they have some improvements? I don't know, you know, what that will take. And is that bodies? It's not always bodies. It's usually a mindset. And so, when you do whatever it takes and do the right thing like we do here, it just gets embodied into our everyday, you know, offering. So, I just think it's going to be really difficult to, quote, catch us, and we're sure not going to take off the gas here. So, you know, we'll continue to keep that as part of what we think is a huge differentiator and hear it from people that come over to us.

Yeah, the only point I would add on that is, well, Greg aptly said, you know, we have not seen a tremendous meaningful impact from the consolidation yet in the pipeline because deals take, you know, quite some time to walk through and to hammer out. But our track record over the last several years and our increase in market share and our gains against both competitors are indicative of that service that Greg just talked about and of our innovation. So we have a track record, so it's not, you know, we feel very strongly in this opportunity and our ability to continue to win. And that's backed up by the wins we've been doing from the last number of years. So it's not new that people have wanted to leave competitors, and it's not new that they're coming to Jack Henry.

Yeah, and I think one just last point since you're on, Ken, is that, you know, the 50-plus wins that we've had for multiple years kind of emphasize what Mimi just said. The last part that I want to emphasize is, though it didn't have a significant impact in Q2, as I mentioned before, our pipelines are growing faster because of that news. And so I anticipate that not just this year, but over the next several years, which a lot of these contracts will have several years still remaining, but conversations could be taking place now, where you're going to see not only just the number of opportunities increase, the size of the opportunities increase, much to what we've been focused on, as we said, going up market.

Yeah. Makes sense.

Sure. Thank you. And this does conclude today's question and answer session. I would now like to turn the conference back over to Vance Sherrard for any closing remarks.

Thank you, Chris. Management will be participating in eight investor events over the next two months, and we look forward to continuing our engagement with the investor community. We also extend our appreciation to all Jack Henry Associates for their exceptional commitment and execution, which delivered a strong first half of fiscal 2026. Thank you for joining us today. Chris, please provide the replay number.

Thank you. As a reminder, the replay number for today's call is 855-669-9658. Again, that is 855-669-9658. and the access code is 420-6506. Today's conference has now concluded. I would like to thank everyone for attending today's presentation, and you may now disconnect your lines.