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    JKHY
    Earnings call· Mar 2026(Q3 FY26)

    JACK HENRY & ASSOCIATES Q3 FY26 earnings call JKHY

    May 6, 2026 Source

    Executive summary

    Jack Henry Q3 FY26 — Record Core Wins and Strong Revenue Growth

    Jack Henry delivered record third-quarter results driven by strong sales momentum in core wins, particularly with integrated "trifecta" solutions, and robust growth in cloud and payment processing. While the company raised its full-year guidance, Q4 is anticipated to see lower revenue growth and margin pressure from specific expense items and revenue mix shifts, though management maintains a positive outlook for the full fiscal year and beyond.

    Highlights

    5

    • Non-GAAP revenue reached a record $616 million, increasing 7.3% year-over-year.

    • Achieved 17 competitive core wins, including 5 institutions over $1 billion in assets, marking the strongest Q3 in 7 years for new core wins.

    • Trifecta solution wins (digital banking and card solutions) comprised 58% of core wins, significantly up from 29% last year.

    • Cloud revenue grew 9% in the quarter, contributing 33% to total revenue.

    • Operating cash flow increased 72% to $186 million, and free cash flow surged 137% to $122 million in Q3.

    Concerns

    3

    • Q4 non-GAAP revenue growth is projected to be lower than previous quarters due to slowing digital revenues and card revenue pressure from risk management.

    • Q4 expenses are expected to reflect higher pressure from medical cost benefits returning to historical levels, cloud migration, infrastructure expense, and commissions.

    • Core segment operating margin contracted 27 basis points in Q3 due to a temporary product mix of lower margin revenue sources like implementation and work orders.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year GAAP revenue growth
    6.1% to 6.6%
    high materiality
    High
    Full-year non-GAAP annual revenue growth
    6.6% to 7.1%
    high materiality
    High
    Fiscal '26 deconversion revenue
    $37 million
    medium materiality
    High
    Full-year non-GAAP margin expansion
    75 to 95 basis points
    high materiality
    High
    Full-year GAAP EPS
    $6.78 to $6.87 per share
    high materiality
    High
    Full-year free cash flow conversion
    95% to 105%
    medium materiality
    High
    Full-year GAAP tax rate estimate
    23.25%
    low materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Core
    Growth driven by competitive wins; margin contraction due to temporary product mix of lower margin revenue sources such as implementation and work orders.
    17 competitive core wins4 on-premise to private cloud contracts23 in-to-out contracts YTD43 core deals YTD11 core deals over $1 billion YTD
    		—9%—contraction of 27 basis points
    Payments
    Solid performance with processing revenue growth partly offset by lower network incentive revenue. Benefited from shift and growth in faster payments.
    Processing revenue growth: 6% non-GAAPFaster payments transaction volume increase: 47% YoYZelle adoption growth: 25%RTP adoption growth: 26%FedNow adoption growth: 31%
    		—5%—growth of 159 basis points
    Complementary
    Revenue growth reflects demand for digital solutions and beneficial product mix from new core wins, existing core customers, and non-core FIs.
    36 new financial crimes, Defender and faster payment modular contracts168 financial crimes Defender installations completed68 financial crimes Defender installations in progress168 faster payment modules installed256 faster payment modules in progressBanno Digital platform clients live: 1,028Banno business clients live: 466Banno registered users: 15.5 millionBanno registered users growth: 13% YoY
    		—7%—expansion of 99 basis points
    Corporate Services
    Primarily due to increased hardware sales. Operating margins not discussed as it provides no meaningful input.
    		—27%——

    Operational metrics

    36
    Non-GAAP Revenue
    $616 millionup 7.3% over last year's third quarter
    Q3 FY26

    Record third quarter results.

    Non-GAAP Operating Margin
    22.9%on par with last year's Q3
    Q3 FY26

    Strong operating margin.

    Non-GAAP Revenue Growth
    7%
    Q3 FY26

    Non-GAAP revenue increased 7% for the quarter.

    Non-GAAP Revenue Growth
    8%
    YTD FY26

    Non-GAAP revenue increased 8% year-to-date.

    Deconversion Revenue
    $19 millionup approximately $9 million
    Q3 FY26

    Reflecting a steady pace of M&A activity among financial institutions.

    Cloud Revenue Growth
    9%
    Q3 FY26

    This reoccurring revenue contributor is 33% of our total revenue.

    Processing Revenue Share
    43%
    Q3 FY26

    Processing revenue is 43% of total revenue.

    Total Recurring Revenue
    91%
    Q3 FY26

    Total reoccurring revenue was 91% for the quarter.

    Non-GAAP Cost of Revenue Growth
    7%
    Q3 FY26

    On a GAAP and non-GAAP basis for the quarter.

    Amortization of Acquisition-Related Intangibles
    $6 million
    Q3 FY26

    For modeling purposes.

    Non-GAAP R&D Expense Growth
    12%
    Q3 FY26

    Primarily due to net personnel costs driven by an increase in head count over the trailing 12 months.

    Non-GAAP SG&A Expense Growth
    8%
    Q3 FY26

    Reflects an increase in personnel costs, specifically from head count additions over 12 months.

    Non-GAAP Margin Improvement
    195 basis points
    YTD FY26

    Year-to-date non-GAAP margin improvement.

    Non-GAAP Margin
    25%
    YTD FY26

    Year-to-date non-GAAP margin.

    GAAP Diluted EPS
    $1.71up 12%
    Q3 FY26

    Fully diluted GAAP earnings per share.

    GAAP Diluted EPS
    $5.41an increase of 20%
    YTD FY26

    For the year-to-date period.

    Trailing 12-month Pat Return on Invested Capital
    23%compared to 20% in the third quarter of the prior year
    TTM

    Reflects high-quality allocation of capital.

    Share Repurchases
    $84 million
    YTD FY26

    Significant year-to-date capital decision.

    Dividends Paid
    $127 million
    YTD FY26

    Significant year-to-date capital decision.

    Average Purchase Price of Shares Repurchased
    $160
    YTD FY26

    The average purchase price of the shares repurchased.

    Debt
    $90 million
    Q3 FY26

    Consistent with normal course of the business revolver usage.

    New Revolver Facility
    $1 billion
    Q3 FY26

    Established to support future growth opportunities.

    AI Tools Approved for Internal Use
    ~100
    Current

    Ranging from general productivity platforms to specialized business and development tools.

    AI Use Cases
    >500
    Current

    Delivering meaningful and measurable impacts.

    Lending Development Productivity Increase (AI)
    ~90%
    Current

    Driven by faster coding and quicker issue resolution for Jack Henry origination solution online account opening.

    Exception Processing Time Reduction (AI)
    70% to 80%
    Current

    Reported by 3 banks in closed beta for AI-assisted recommendation system.

    AI Advisor Bot Success Rate
    96%
    Past 2 months

    Surfacing answers in seconds from knowledge resources.

    AI Advisor Bot Complex Support Interactions
    >3,700
    Past 2 months

    Assisted by AI advisor bot.

    Tap2Local Live Banks and Credit Unions
    >700
    End of April

    SMB merchant payment solution.

    Tap2Local Active Merchants
    >1,600doubled
    Current

    Since beginning targeted marketing a few days ago.

    Rapid Transfers Live Banks and Credit Unions
    >110
    Current

    Enables quick fund movement between external accounts, eligible cards, and digital wallets.

    Rapid Transfers Institutions in Onboarding
    >190
    Current

    At various stages of onboarding.

    Rapid Transfers Average Transaction Size
    ~$260double our original projections
    Current

    Driven by stronger-than-anticipated inbound transfers.

    Clients Expecting Technology Budget Increase
    88%up from 76% last year
    Next 2 years

    Based on Jack Henry's 8th annual strategy benchmark survey.

    Clients Planning 6-10% Technology Investment Increase
    41%
    Next 2 years

    Largest segment of those planning increases.

    AI as Top Technology Priority for Clients
    ~50%
    Current

    For the first time, artificial intelligence ranked as the top priority.

    Industry KPIs

    1
    MetricValueDetails
    Capital returns$84 million in share repurchases, $127 million in dividendUSD

    Product announcements

    8
    ProductTypeDetails
    Jack Henry Origination Solution online account opening solutionupdate
    AI-assisted recommendation system for exception processing (part of new Jack Henry platform)launch
    AI adviser bot (customer service)update
    Internal application for travel program (developed by non-technical associate)launch
    Stablecoin strategy (USDC processing)update
    Tap2Local (SMB merchant payment solution)update
    Jack Henry Rapid Transfersupdate
    Cloud-native deposit-only coremilestone

    Deals & partnerships

    1
    Victor TechnologiesAcquisition of Victor Technologies, now branded as Jack Henry Payments Orchestrator, to enhance embedded payments capabilities.

    The Victor platform, now branded as Jack Henry Payments Orchestrator, enables financial institutions to embed payment capabilities directly into third-party non-bank brands such as fintechs and commercial customers.

    Risks & headwinds

    6
    Lower Q4 non-GAAP revenue growthQ4 FY26

    relatively lower non-GAAP revenue growth compared to the previous 3 quarters

    Mitigation: Management states that full year revenue growth consensus is aligned, implying some revenue shifted to Q3.

    Digital revenues slowingQ4 FY26

    projected digital revenues slowing from lower active user growth

    Card revenue growth pressureQ4 FY26

    card revenue growth being pressure from risk management

    Less one-time network incentive revenueQ4 FY26

    less onetime network incentive revenue

    Mitigation: Mimi Carsley states that network incentive thresholds are negotiated year-by-year and intra-year, not a structural headwind.

    Higher Q4 expensesQ4 FY26

    relatively higher pressure from medical cost benefits returning to historical levels, cloud migration, infrastructure expense and commissions

    Mitigation: Management states these are unique Q4 factors not indicative of full-year performance or future trends.

    Core segment operating margin contractionQ3 FY26

    contraction of 27 basis points

    Mitigation: Due to temporary product mix of lower margin revenue sources such as implementation and work orders.

    What to watch in Q4 FY26

    5

    Core wins exceeding prior year

    By end of FY26
    Current43 core deals YTD, 17 in Q3 FY26
    TargetNorth of 51 wins (last year's total)

    Why it matters

    Indicates continued market share gains and competitive strength.

    Based on our strong momentum, we are highly confident that we will exceed the 51 core wins achieved last year.

    Q&A highlights

    6

    What's driving the strong core win trend, and is competitor platform consolidation a factor yet?

    Strong innovation and customer service are key. 13 of 17 wins came from one competitor, but most deals were in motion before recent announcements. The company is taking wins from all competitors.

    “I will tell you, of the 17 core wins, 13 of them came from one provider and one competitive provider.”

    asked by Vasundhara Govil · answered by Gregory Adelson

    2 min read7 chapters

    Detailed Narrative

    01

    AI Strategy and Adoption

    Jack Henry views AI as a significant strategic opportunity, having expanded its capabilities for over 3.5 years with strong governance. Nearly 100 AI tools are approved for internal use, supporting over 500 distinct use cases. Examples include a 90% increase in lending development productivity, a 70-80% reduction in exception processing time for banks in beta, and a 96% success rate for their AI advisor bot in customer service. The company emphasizes a responsible approach, minimizing competitive risk due to regulatory requirements and its role as a system of record.

    02

    Stablecoin and Platform Innovation

    Progress continues on Jack Henry's stablecoin strategy, with beta testing for USDC going well, pending final regulatory guidance. This processing is delivered via the public cloud-native Jack Henry platform, which connects emerging capabilities to foundational core systems. This approach provides clients with fast, integrated access to new features like stablecoin processing and initial SMB solutions.

    03

    SMB Solutions Traction (Tap2Local & Rapid Transfers)

    Tap2Local, an SMB merchant payment solution, is live with over 700 banks and credit unions. Active merchants have doubled to more than 1,600 since targeted marketing began, with several thousand more in enrollment. Jack Henry Rapid Transfers, which enables quick fund movement, is live with over 110 institutions and 190 in onboarding. Average transaction size is approximately $260, double original projections, driven by inbound transfers that increase deposits for financial institutions.

    04

    Cloud-Native Core Development

    Development of a cloud-native deposit-only core was completed six months ahead of its original schedule, announced in February 2022. Client testing is currently underway and will be broadened as the year progresses. This initiative is a key part of the Jack Henry platform strategy.

    05

    Embedded Payments Expansion

    Following the acquisition of Victor Technologies last fall, the Victor platform, now branded as Jack Henry Payments Orchestrator, enables financial institutions to embed payment capabilities directly into third-party non-bank brands. In Q3, one bank was signed and three fintechs were onboarded to the platform, with a sales pipeline quickly growing to over 40 banks and/or fintechs.

    06

    Banno Digital Platform Growth and Strategy

    The Banno Digital platform had a strong quarter with 23 retail and 34 Banno business signings. In total, 1,028 clients are live on Banno, including 466 on Banno business, serving over 15.5 million registered users, up 13% year-over-year. With a competitive feature set and increased openness from competitors, Jack Henry sees an opportunity to expand Banno beyond its existing core base.

    07

    Technology Spending Trends

    Jack Henry's 8th annual strategy benchmark survey indicates a clear and growing commitment to technology investment among clients. 88% of bank and credit union CEOs expect to increase their technology budgets over the next two years (up from 76% last year), with 41% planning increases between 6% and 10%. For the first time, artificial intelligence ranked as the top priority, followed by digital banking and data analytics, aligning with Jack Henry's investment areas.

    AI-generated summary of the company’s earnings call. Not investment advice.