Earnings Call Transcript - JKHY Q3 2023

Operator, Operator

Welcome to the Jack Henry’s third quarter earnings conference call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Vance Sherard, Vice President, Investor relations. Please go ahead.

Vance Sherard, Vice President, Investor Relations

Good morning and thank you for joining us for the Jack Henry fiscal 2023 third quarter earnings call. Joining me on the call today is David Foss, Board Chair and CEO; Mimi Carsley, CFO and Treasurer; and Greg Adelson, President and COO. After my opening remarks, I will turn the call over to Dave for his thoughts about the state of our business, financial and sales performance for the quarter, industry comments and other key initiatives. After Dave concludes his comments, Mimi will provide additional commentary regarding the financial results and fiscal year guidance included in the press release issued yesterday that is available from the investor relations section of the Jack Henry website. We will then open the lines for Q&A. As a reminder, this call includes certain Forward-Looking Statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends, or results. Like any statement about the future, these are subject to multiple factors that could cause actual results or events to differ materially from those anticipated due to multiple risks and uncertainties. The Company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday’s press release and the sections in our 10K entitled risk factors and forward-looking statements. On this call, we will discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income. The reconciliations for non-GAAP financial measures are in yesterday’s press release. I will now turn the call over to Dave.

David Foss, CEO

Thank you, Vance. Good morning, everyone. We are very pleased to report another strong quarter of revenue growth and an overall solid performance by our business. As always, I would like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for our third fiscal quarter. For Q3 of fiscal 2023, total revenue increased 6% for the quarter and increased 8% on a non-GAAP basis. Consistent with our prior comments regarding the reduction in bank M&A this year, deconversion revenue was down approximately 65% compared to the prior year quarter. Turning to the segments, we again had a good quarter in the core segment of our business. Revenue increased 4% for the quarter and increased by 8% on a non-GAAP basis. Our payment segment performed very well, posting a 6% increase in revenue this quarter, and a 7% increase on a non-GAAP basis. We also had a strong quarter in our complementary solutions businesses with a 6% increase in revenue this quarter and an 8% increase on a non-GAAP basis. As I highlighted in the press release, our sales professionals posted an extremely strong quarter led by the core sales team. On our last quarterly call, I mentioned that the sales team set an all-time sales booking record in our fiscal Q2. Although we didn’t break that record this quarter, we did set a record for the strongest Q3 in history. During the quarter, we inked 13 competitive core takeaways, so we continue at the approximately one deal per week run rate, I have discussed in the past. In addition to our success signing new core clients, we signed 13 existing on-prem core customers to move to our private cloud environment. In addition to the tremendous success we have experienced in our core business this quarter, we continue to attract new clients to our Digital Banking suite. During the third quarter, we signed 39 new clients to our Banno Retail platform with another 35 clients signed up for Banno business. Regarding our Banno Digital suite, as of March 31, we now have just over $9.3 million users live on the Banno platform. We continue to enjoy the highest consumer rating in the App Store and we are regularly recognized as the fastest application in the industry. The feedback from our 30 Banno business beta testing clients has been outstanding, and we remain on track to deliver Banno business into general availability later this quarter. Let me take a moment to address the banking landscape related to the liquidity challenges experienced by a couple of large regional banks in March and earlier this week. Although I’m not aware of any Jack Henry core clients who have tapped into the Federal Reserve’s new Bank Term Funding program, I think the announcement has had a positive effect on the overall concern in the market regarding bank liquidity, and I applaud the Fed on their swift and decisive action. Since those events grabbed headlines, members of our team have spoken with hundreds of our clients, and I personally have visited with a large number of CEOs at our client banks. I’m pleased to say that our banking clients have indicated they have been largely unaffected by these events, with the exception of several who have reported an influx of new accounts, as business clients look to diversify their deposit balances. Our clients typically have a diversified customer base, serve small and medium businesses and consumers in their local communities, and have longstanding and loyal customers, so I think it is logical that they wouldn’t see an adverse impact as a result of a few extreme scenarios. Also remember that a large part of our business is focused on the Credit Union industry, with approximately half of all Credit Unions with more than one billion in assets partnered with Jack Henry as their primary technology provider. Those clients also report being largely unaffected by the challenges in the banking sector. In late April, a survey conducted by a third party generated responses from more than 550 bank CEOs, presidents, and CFOs primarily at banks with less than $1 billion in assets. Approximately 77% of the respondents saw no significant inflows or outflows of deposits, 14% said they saw deposits decline by 2% or more, and 9% said they saw an increase of at least 2% in deposits. I think these results are consistent with what we have heard anecdotally from our clients. We have seen no hesitation on the part of our clients to move ahead with technology since the middle of March. And as I mentioned earlier, this was the largest third quarter in terms of sales bookings in the history of our company. What is more, our sales pipeline is now larger than at any other time, including a recognizable uptick in opportunities since our quarterly call in February. I’m well aware of the challenges bankers face in today’s economy and understand that things could change. But as we speak today, our clients are generally performing well and banks and Credit Unions are continuing to prioritize modernization of their technology stack to remain competitive and serve the evolving needs of their account holders. Hopefully, you have all seen the new corporate sustainability report that we published on March 31st. I think it is an excellent representation of the key initiatives and accomplishments we have been working on since we published our last report. In this new version, we provided a more detailed review of Jack Henry’s demographic makeup, a summary of the results of our annual employee engagement survey, an overview of our data privacy and Cyber Security practices, and an outline of our commitment to setting science-based targets to the Science-Based Targets Initiative or SBTI to address the reduction of greenhouse gas emissions. Additionally, the report highlights some of the public recognition we have received from organizations like Newsweek, Computer World, and LinkedIn’s top companies list. As we look toward the end of the fiscal year, our sales pipeline is much larger than it has ever been, and we continue to be optimistic about the strength of our technology solutions, our ability to deliver outstanding service to our customers, our ability to expand our customer relationships, and our long-term prospects for success. I look forward to seeing and chatting with many of you at our Investor Day in Denver in a couple of weeks. With that, I will turn it over to Mimi for some detail on the numbers.

Mimi Carsley, CFO

Thanks, Dave. Good morning everyone. As Dave shared, Jack Henry had a successful third quarter, and I will call out the details driving those results and our outlook for the remainder of the year. For both the third quarter and first nine-months of our fiscal year, total revenue is up 6% on a GAAP basis and solidly up 8% on a non-GAAP basis. Now onto the third quarter details. On a GAAP basis, services and support revenue increased 3% in both the third quarter and year-to-date, consistent with trends over the past two quarters. Services and Support were negatively impacted as deconversion revenue decreased by $11 million for the quarter and $31 million year-to-date. This remains in-line with the limited broader market activity and acquisition activity in our space. With only a couple of months left, we are projecting approximately $20 million in deconversion revenue this fiscal year. However, forecasting deconversion activity is always challenging given the limited advanced notice and general uncertainty of M&A. Our private and public cloud offerings show robust growth this quarter, growing 11% and 10% year-to-date. Product delivery and services decreased 10% in the quarter, 11% year-to-date, impacted by lower deconversion revenue and convert merge activity offset by higher license and hardware revenue. On a non-GAAP basis, Services and Support revenue grew 8% for the quarter and 7% year-to-date, which serves to highlight the consistent strength of our business model. Processing revenue increased 11% on a GAAP basis for the quarter and 10% year-to-date. On a non-GAAP basis, the growth was 10% for the quarter and 9% year-to-date. The increases were driven by the higher card volumes and services, plus robust digital demand. Now, reviewing costs, cost of revenue is up 9% for the third quarter and 8% year-to-date. Quarterly drivers included increased card processing costs consistent with card revenue growth, higher personnel costs, and amortization expenses. These drivers are consistent across our year-to-date results. Research and development expense increased 13% during the quarter, mostly due to higher personnel costs and license fees furthering innovation. Year-to-date, these expenses increased 19% based on the same factors. SG&A rose 9% for the quarter, driven by increases in personnel-related costs. Year-to-date, the increase was 8% driven by personnel, travel, professional services costs partly offset by the gain on sale of assets earlier this year. We remain focused on actions involving facility rationalization, head count and travel controls, procurement wins, and other expense management. Collectively, these efforts are helping offset inflationary pressures and driving positive operational results. Despite a decline in net income, primarily related to deconversion revenue and partially offset by a lower tax rate, we delivered fully diluted earnings per share of $1.12 for the quarter. Thanks to our hardworking and dedicated associates, GAAP and non-GAAP results for the third quarter and nine-months of the year are consistent with internal expectations and set us up for a strong conclusion to FY 2023. As a reminder for transparency, the impact from the gain on sale of assets, the Payrailz acquisition, and deconversion revenue are shown as part of the non-GAAP adjustments in the press release. Turning our attention to cash flow. Year-to-date, operating cash flow was $207 million down from $301 million in the same period last year due to lower deconversion revenue and the timing of taxes. The tax payments were a significant outflow at $64 million in the quarter related to a change in the timing of the deductibility of development expenses. Free cash flow, which is operating cash flow less CapEx, and cash software plus proceeds from the sale of assets was $82 million year-to-date. Excluding the previously discussed tax payments and keeping year-to-date deconversion revenue flat, free cash flow would have been approximately $163 million. While balancing repurchase activities with maintaining a conservative balance sheet, we repurchased 151,000 shares during the quarter. We also returned capital to shareholders through a dividend of $0.52 per share, representing a 6% increase. Our capital allocation priorities remain consistent; we are focused on maintaining ample liquidity, investing in our business to fuel growth, evaluating acquisitions, paying dividends, and opportunistically repurchasing our stock. This consistent dedication to value creation resulted in a trailing 12-month return on invested capital of 20.1%. With that, let’s review our outlook for the completion of our fiscal year. The press release included updated full-year GAAP guidance. The GAAP guidance remains inclusive of the Payrailz acquisition, gain on asset sales, and deconversion revenue. We expect the year-to-date trends to continue for the remainder of the fiscal year impacting GAAP results. Most significantly, assuming continued minimal consolidation in our customer base, deconversion revenue will remain muted. Considering year-to-date activity, we expect approximately $20 million of annual deconversion revenue representing a $5 million increase from our previous guidance provided on the last call. To be transparent, on our August full-year earnings call, we will outline our new approach to providing guidance for deconversion revenue. While the integration of Payrailz continues to meet expectations, there have been third-party implementation delays impacting FY 2023 revenue amounting to a shortfall of $3 million. This revenue remains in our pipeline and we remain confident in the strategic value and financial performance trajectory. We expect full-year GAAP revenue growth for fiscal 2023 to be between 5.5% to 5.9%. With respect to full-year GAAP EPS, we expect $4.85 to $4.87 per share with improvement driven from positive impacts from a modestly higher expected deconversion revenue, a lower tax rate, partly offset by a slight increase in Payrailz dilution. Non-GAAP guidance remains unchanged due to the continued impressive and consistent performance of our business model. So in closing, we delivered another quarter of strong operational and financial results and remain solidly optimistic about the conclusion of this fiscal year. We thank all of our investors for their continued confidence in Jack Henry. Debbie, will you please open the call for questions.

Operator, Operator

The first question is from Rayna Kumar with UBS. Please go ahead.

Rayna Kumar, Analyst

Good morning, David. In the past you have spoken about having the ability to sell Banno to non-Jack Henry core customers. How is that progressing and in general, are you seeing the opportunity to sell your core processing services to larger financial institutions?

David Foss, CEO

Yes. Good morning, Rayna. So two questions in there. First of all, as far as Banno is concerned, I think I talked about this on the last earnings call. I know I have talked about it in some of the fireside chats that I have done with some of you. We had in fact a plan to start selling Banno outside the base here in the fall of this past year. And what we learned, much to our surprise, was that some of our competitors had identified that as an opportunity for them to hang on to their core customers. The fact that their core customer was going to be able to use Banno, they were essentially using that as a selling point for those customers to retain their legacy core system, because they would get the best of breed digital banking system without having to change out the cores, and that certainly was not part of our strategy. And so we kind of backed off on that. We were prepared in the fall to start selling outside the base, but we backed away from that now. We are really reworking that strategy with a more targeted approach. And so you will hear more about that from us, I think later this year as far as how we are going to go to market with Banno outside the core base. As far as the second part of your question regarding selling up market, yes, first off, we are having great success with SilverLake in the banking side. And of course, we are the dominant player on the Credit Union side already a market. So approximately 50% of the Credit Union industry with assets over one billion are already Jack Henry core customers. So we are already the dominant player on the Credit Union side of the business. On the banking side, we have had great success here in the past few years moving up market, particularly with our SilverLake core system. What has been interesting now with the tech modernization strategy, we are engaging with a number of customers now that are significantly larger than you would normally expect as a Jack Henry core customer. We are very interested in what we are doing and are now seeing Jack Henry as the very probable technology partner that they want to partner up with going forward. So more to come on that; it is early days for us with some of these very large customers that we are talking to. But the prospects, I think, are pretty bright and much of that being driven by the tech modernization strategy that we have been talking about lately.

Rayna Kumar, Analyst

Very helpful. And then if I can fit one in for Mimi. Mimi, could you just comment on the debit processing volume in the quarter? And secondly, if you can just give us your preliminary thoughts on how FY 2024 revenue and operating margin could pan out given that close to your fiscal year end?

Mimi Carsley, CFO

Thanks, Rayna. Yes, so we continue to see the trends that have happened for the first nine-months of the year, and are consistent with the broader market data that you are getting from other industry players in terms of slightly slower as it relates to the consumer sentiment impacting those trends and a little bit more going to the credit side than the debit side. And as you know, we have a much bigger profile on debit in our business. So, our guidance incorporates the continuation of that trend. And then to your second question, unfortunately, it is a little premature at this point to talk about FY 2024. Our teams are still heads down collaborating on the budgeting process, and we will probably share that more on the August call than we will today.

David Foss, CEO

And can I add one comment on the debit trends? So I think there was a bit of a misunderstanding after the last call. We attributed a part of our guide change to the fact that the debit volumes we saw going forward were going to slow just a little bit, and certainly that is true. But that doesn’t mean the debit business is underperforming. The debit side of our business has been a real solid performer for us this year. We just had little higher expectations for the remainder of the year than is reality, and that is why we made the adjustment. But the debit business is performing extremely well at Jack Henry.

Operator, Operator

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

Daniel Perlin, Analyst

Thanks, good morning. Dave, I had a question going back to the demand environment. I feel like there is this huge disconnect in the market with the stocks and kind of what we hear from the banks versus what you are seeing. I’m just wondering if maybe we are getting it wrong a little bit. Like, is the pressure that the banks are feeling right now driving more tech demand to you as opposed to maybe the converse, which is I think what most people are expecting?

David Foss, CEO

Yes, it is an insightful question, Dan, and I think what you are saying is generally correct. If you are running a bank or credit union in the United States today, they have been performing pretty well despite the challenges that they are under regarding rate increases and the cost of capital. But if you are running a bank or credit union in the United States today, for almost all of them, they need to continue to focus on modernizing their technology stack for one of two reasons. One, they are trying to attract new customers to their institution, and customers aren’t coming into the branch anymore, right. They are expecting to do things through some type of digital presentation layer. So for most banks and Credit Unions that requires them to continue on this modernization track and make sure that they have the tools to attract not just consumers, but business customers; small even the business customers are the lifeblood of our customers and how they operate on the banking side, and so there is that driver. But then on the other side of the equation is efficiency. For most bankers, they can quote their efficiency ratio immediately to you without looking at any piece of paper. They can quote it off the top of their head, because they are all focused on efficiency and trying to figure out where they can drive efficiency through the operation. Well, generally technology is at the crux of where they are going to find efficiency. And so there too, Jack Henry is in the mix having those conversations with our customers. And then you throw into that, on top of that: fraud and Cyber Security and all those kinds of things, all of that stuff is driven by technology. So yes, I think there is a bit of a disconnect in the sense that because there is some turmoil in the industry, Jack Henry sales are going to be negatively impacted. They are just not; you know, the businesses continue to run and they need to continue to find technology solutions to help them with all those things that I just highlighted.

Daniel Perlin, Analyst

No, it sounds somewhat counterintuitive, but it clearly makes sense in the current context. The quick question or follow-up on margins here, I know you don’t want to go out to next year, but I would appreciate if you could maybe talk about some of the key drivers and levers that you are going to have here, whether it be expense control, specifically kind of mixed to the business, just as we start to think about the margin expansion story again. Thank you.

Mimi Carsley, CFO

Sure, Dan, great question. As we talked about previously, we continue to see margin expansion throughout the year. We knew it would be a modest amount this year; earlier in the year, our original guidance was flat for the year. We are hopeful that we are on track for a small increase in margin expansion. I would say that the things we are working on are consistent; we do a ton around efficiency, continuous improvement. We have done a lot on internal automation, and procurement has been a huge win for us as we think about streamlining partnerships and really prioritizing that spend. So we are being really thoughtful on controllable spend, like travel, and headcount additions, really thinking about each position from a zero-based perspective. But there is nothing structurally that concerns me in terms of the ability to once again continue back, now that we have the normalization of some of the headwinds we have seen in past years and return out of the COVID environment, that we will return back to a margin expansion story.

Operator, Operator

The next question is from Nik Cremo with Credit Suisse. Please go ahead.

Nik Cremo, Analyst

Hey, congrats on the strong results. Thanks for taking my question. I was hoping to get some more color on the performance and the payment segment in the quarter, just across the various business lines. And if you received any one-time benefits related to the banking turmoil, like some of your competitors. And just as my follow-up, are you still expecting Payrailz to be modestly accretive in FY 2024? Thank you.

David Foss, CEO

So let’s do Payrailz first; Greg is prepared to give you an overview of Payrailz and then we will talk about the rest of the payments business.

Gregory Adelson, President and COO

Yes, and I think, you know, I’ll go ahead and start with Payrailz, but a couple things. So one, Mimi alluded to the fact that in her opening comments around we do have some challenges with a couple of third-parties. And I think some of it is headcount related and other constraints that they have to get some of the work done to allow some of our contracts that are already done and in the implementation queue to be brought into the production queue. So there is a few of those constraints and things that we are working through. But the good news is that since September when we made that acquisition, we have actually sold 48 new contracts and 17 add-ons, add-ons or things like the P2P solution. We have a loan payment solution, and things like that. So the sales engine is starting to move, and a lot of the sales that were done previously before we acquired Payrailz were really predominantly done through that third-party channel. So of course, we have a much larger sales force and folks that are focused on selling more direct deals. So we are pretty very optimistic about what is happening in the sales side of this; we just need a couple of the integration partners to be able to get some of their work done that will help us to accelerate the revenue in fiscal year 2024. And I can start on the payment side too. So I think, and Mimi alluded to what was going on with our card business, which continues to go very, very strongly as far as growth. But when you look at the rest of our payment businesses, there is a nice mix of growth, maybe not to the same level that we had. Remote deposit capture in our EPS business was significant during the pandemic. Obviously, folks were not going into branches at all; though that continues for the most part. That business is not growing at the same pace it did, but still in double-digit growth in our portfolio. So things that we are doing in our pay center business around general payments and preparation for FedNow, which we can talk about at some point too. But in our clearinghouse business and what we have done with Zelle, we continue to have about 60% of all the clearinghouse customers that are out there. There are only about 300 clearinghouses, and we have over 180 that are live on Jack Henry today. That continues to grow nicely, so that business continues to have a lot of upside.

Mimi Carsley, CFO

Yes, I would just add that there is consistency to Greg’s point, there is consistency across remit cards, payments, also led by things like the fraud and other risk management solutions that are add-ons. So, I would say that from a consistency of growth will continue and then added by the benefit of Payrailz.

Operator, Operator

And the next question comes from David Togut with Evercore ISI.

David Togut, Analyst

Thank you. Good morning. You have called out your new sales pipeline at a record level. Could you walk through what are the biggest drivers of that? Is that new tech modernization modules? Is it Banno business? SilverLake? What are the underlying components of that strength?

David Foss, CEO

Sure, Dave. One thing I will highlight as I go through this: when I talk about the pipeline, I know there has been some confusion in the past. I’m not talking about individual deals, how many core customers are in the pipeline or anything like that. I’m talking about the dollar amount essentially. And this is a non-GAAP number, but it is the dollar amount that we track as far as the value of each contract. So in theory, that all converts into revenue at some point after deals are signed and implemented. As far as the drivers, core continues to be king for us when it comes to a driver. We have just a tremendous amount of core activity right now, both banking and Credit Unions, as far as customers that are talking to Jack Henry about trading out their existing technology. Some of that is certainly driven by tech modernization, but I don’t think it is as much driven by, I want to sign for the tech modernization module right now today. It is more about Jack Henry has a strategy that makes sense to us as bank and Credit Union executives; their strategy makes sense. We need to look at it now and get to Jack Henry now, because we want to be partnered with them as they continue to evolve. And so there is a lot of that driving interest in our existing core customers, so SilverLake primarily on the banking side and of course on the Credit Union side. But then on top of that, Banno continues to be a driver, and that is why I call it out on these calls almost every time. There is a tremendous amount of interest in Banno. Our new Financial Crimes Defender solution that we have talked about on this call, that is rolling out here very soon. We have a lot of customers that are looking at Financial Crimes Defender because it is the first brand new ground up, public cloud native broad solution in the industry in many years, and so lots of interest, not only inside our core base but outside the core base in that solution. Our Treasury Management Solution is getting great reviews today. So continued interest in Treasury Management. Certainly, cards we have talked about; the number of customers that we have been adding to the cards business, so continuing to drive interest there. Our Online Commercial Lending solution, tremendous amount of interest in that. So it is just a broad variety of solutions that I think the common thread in all of that is almost all of those non-core solutions have been written and rolled out within the past two, three, four years. So it is a new technology that people are interested in. And then of course, on the core side, all about our tech modernization initiative there. So you put all those things together, much of what is driving this is the recognition in the industry that Jack Henry has put a tremendous amount of investment into brand new technology and new solutions to help our customers solve problems, and so that is what is getting us a lot of attention.

Gregory Adelson, President and COO

This is Greg. I would like to add a relevant example. We actually just got an inbound request from a large regional that hadn’t talked to us since 2010, and they came to us and said, ‘Hey, we would like to renew conversations based on what we have heard about you in the industry, the tech modernization story and things in general.’ That is a relevant example because these are larger institutions that we typically wouldn’t have seen in the past, but again, that are inbound to us because of the things that we are doing and the stuff that Dave just described.

David Togut, Analyst

What is the asset size of that large regional bank, Greg?

Gregory Adelson, President and COO

It is greater than $50 billion.

David Foss, CEO

And we are engaged today, Dave, with a number in the mid-20 billion space. Several banks in the mid-twenties are talking to us today. A lot of it is because of what they have seen with tech modernization. But they are not talking about moving right to that platform. They are talking about SilverLake and then evolving to that platform.

David Togut, Analyst

Understood. And just as the follow-up, what is your latest view on timing of rollout of FedNow, Jack Henry’s role and how material could FedNow be to Jack Henry over the next 12 plus months?

Gregory Adelson, President and COO

Yes, this is Greg. I will take that question as well. Good insightful question. We are absolutely ready. We are already fully certified and on July 19th, when the first transaction takes place, we will be part of that transaction process. We have 20 institutions that will be going live between the July 19th timeframe and sometime in late August based on just rollout with those institutions. We can go as fast as they want to go. We have 51 contracts that are already sold and a significant number of others that are in process just based on interest. I think to your point about significance of where this is in our portfolio, time will tell. A lot of it is going to be based on use cases and there is a lot of rumors that the Fed in general will be mandating for several use cases that will be important for institutions to be set up on the now at least aspect of the equation, allowing them to receive payments if one comes to them. So we are having very detailed conversations with a lot of our institutions about the importance of at least being set up on the receive aspect even if they are not ready to go to the send aspect. But again, we are very bullish on this; the clearinghouse has had some challenges just because some institutions that we work with were a little leery of working with the larger conglomerate that owns the clearinghouse versus the Fed being a part of this. So we think we are going to see a little more uptick in the FedNow solution than maybe we saw so far in the clearinghouse one.

David Foss, CEO

Pleased to emphasize, Dave, the level of our involvement with the Fed on this project. I was just in Washington DC on Monday, two days ago, meeting with some of the Fed presidents and the FedNow team, and our president of our payments division was with me talking strategy, talking rollout. This was a Jack Henry only meeting with these Fed presidents. So we are very engaged with the Fed and very - it is top of mind for us to make sure that we are helping our customers take advantage of this opportunity.

David Togut, Analyst

Understood. Thank you.

Operator, Operator

The next question is from Vasu Govil with KBW. Please go ahead.

Vasundhara Govil, Analyst

Hi. Thank you for taking my question. I guess first one, I know you will share more on your Investor Day, but just thinking about revenue growth next year through what are some of the puts and takes that we should consider?

Mimi Carsley, CFO

Hi Vasu, while I appreciate the question. You know, we are still in the midst of planning. In fact, this afternoon, we will be spending the whole afternoon with the sales team on their planning for next year. You know, I would say overall, as Dave mentioned, a continuation of both the transition and implementation from a great pipeline from the last two years, plus, the continued interest in some of these new products. Banno business wasn’t in the year numbers for FY 2023 will be in 2024, so that is a nice bump as well. But I would say it is going to be a continuation of a diverse portfolio growing very well.

Vasundhara Govil, Analyst

That is helpful. And then just to follow-up on the complementary segment, clearly Banno is a big driver there. Maybe David, you could talk about what are some of the other products that rise to the top in terms of growth drivers, and then as we think about growth in that segment long-term, is mid-single digit store the right base going forward, or do you see that accelerating?

David Foss, CEO

I’m sorry, I missed the last part of your question, is what? Oh, mid-single digits. Okay. Sorry. Yes. So as you know, Vasu, the complementary segment is a little bit of a challenging one to talk about because there are so many solutions in there, but I understand your point, trying to figure out what are the key drivers. So there are several; I already highlighted the Financial Crimes Defender solution that we are just now rolling out. We definitely expect that to be a key driver for us in the coming year. Banno is in that segment, and so Banno will of course continue to be a driver as we are rolling out Banno Business. Treasury management that I called out a little while ago is also in that segment that will continue to be a driver for us. Most of the fraud solutions that are not specific to payments show up in the payment segment, but the other fraud-type things that, security solutions, for example, those are all in that segment that is always top of mind for our customers. So that continues to be a driver for us as well. So it is just a lot of different things. And then, as I mentioned earlier, our online commercial lending solution, that has really picked up here in the past several months. We have had that solution in market for probably four years now, but in the past few months, it has really picked up as far as the level of engagement with customers and prospects. So a bunch of different pieces. And so to the second part of your question about mid-single digits, I think that is a good assumption because with so many solutions in there, you have some that are growing quickly and some that are kind of just steady performers. So I think that is a good assumption for that segment for the long-term.

Vasundhara Govil, Analyst

Great. And just on that online commercial lending solution, sort of any drivers by you think that is gaining more traction now?

David Foss, CEO

Yes, well, I think it is an interesting thing when you work with banks, you know, in banks. Most bank CEOs grew up in the bank as a commercial lender, that is their background for most of them. Commercial lenders, they are the money makers in the bank, right. But you can talk all day long about consumers and what wonderful relationships you have with your consumers. But what really makes money for a bank is the commercial lending business. And so that is small, medium business customers and then, of course, even larger customers. Commercial lenders tend to have a process that they follow. They are the money makers; they are the people who have a process that they follow. They have tended traditionally to be averse to using more technology. But now, with so many people, particularly on the backside of the pandemic, so many people not wanting to go to the branch, they have gotten used to this idea of being able to do everything through some kind of a digital layer. Commercial lenders are getting a lot more comfortable with the idea, and I don’t say they like it, but they are accepting it. They are getting more comfortable with the idea that their customers, small medium businesses, expect to be able to apply for a loan and interact with the bank using a commercial presentation layer that is exactly what our solution does. It is a complete commercial lending solution that is hosted online, where the borrower can do everything they need to do through that presentation, and then the lender can interact with them again through that technology. So I think it is a result of the backside of the pandemic. Customer expectation has changed, and lenders are kind of oftentimes grudgingly accepting the fact that their customers want to do things differently and they are now thinking about how to adopt different technology to make sure they take care of their customers.

Vasundhara Govil, Analyst

Great. Thank you very much.

David Foss, CEO

Certainly.

Operator, Operator

The next question is from Peter Heckmann with D.A. Davidson. Please go ahead.

Peter Heckmann, Analyst

Hi guys. This is Mark on for Chris. Thanks for taking the question here. So just wanted to ask on Banno, do you guys have any information regarding the asset size of the institutions that you are seeing the primary uptake from Banno and any interest in it? And I guess additionally, adding on to that, what does Banno for business do for your sale forces ability to close Banno signings that they didn’t have before without the offering?

David Foss, CEO

Yes. So we have about 700-ish clients that are live today on Banno, and they are all over the board as far as asset size. I would say that the primary adopters have been a little bit on the larger side. So let’s say averaging closer to $1 billion probably as opposed to something smaller than that. So that has been the primary adoption, but we continue to see great demand across asset sizes. And as I highlighted earlier, most banks and credit unions need to modernize their technology presentation to consumers through or and business customers through a digital presentation. As far as Banno business, if you think about traditional Banno, it is designed for the retail consumers, you or me, and all the functionality is retail in nature. Banno business provides that similar functionality but for business customers, so specifically, things like cash management. The ability within the application for the, let’s say, the CFO of the small, medium business and the CEO to communicate about financial transactions within the application. So it is a really interesting and robust application designed specifically to help a business manage their business and communicate about financial transactions and decisions within the business, but in the financial applications. So it is a revolutionary new solution and we have a lot of anchors that are very excited about the rollout of this platform.

Gregory Adelson, President and COO

Hey Mark, this is Greg. I can take that one. Yes, we have a dedicated sales force; we also have dedicated install and operational folks that now all have the experience so that is starting to ramp up. We also added, if you saw a press release we did a couple of months ago, on an agent program that we have added. We now have a lot of interest in that agent program, and that is typically for smaller institutions that they themselves don’t have the folks or the infrastructure to really support that type of full-service credit solution. So that is giving us another angle to sell the credit side of our business. We already have, I think, two or three now in the pilot phase of that, and we have a pipeline of about 10 or more just in the last two to three months. So that is starting to grow, but all of those products will continue to accelerate over time.

Operator, Operator

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

David Foss, CEO

Thank you, Debbie. We have additional upcoming investor engagement opportunities with management at multiple investor events. The first one is going to be our Annual Investor Day, which will be held in Denver on the afternoon of Monday, May 15th at 1:00 PM Mountain Time. The agenda includes presentations from a wide selection of the Jack Henry management team and a reception that will include demos of some of our newest solutions. We look forward to hosting those attending in person and via the webcast. We are pleased with the quarterly results and thank all Jack Henry Associates for their efforts in producing these results. Thank you for joining us today, and Debbie, would you please provide the replay number?

Operator, Operator

Yes. The replay number for today’s call is (877) 344-7529 and the access code is 1452467. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.