Jack Henry & Associates, Inc. (JKHY) Earnings Call Transcript & Summary

Welcome back to Evercore ISI's Seventh Annual Payments and FinTech Innovators Forum. I'm David Togut. I lead the payments processors and IT services research team here at Evercore ISI. Delighted to host Dave Foss, Board Chair and Chief Executive Officer of Jack Henry this afternoon. Dave, thanks so much for being with us here today.

Happy to be with you, David.

Just for those who are listening, apparently, there's a tornado watch in Dallas. And so Dave has agreed to be with us as long as it's safe. So hopefully, that will continue all day, but just so everybody is aware, in case Dave has to step out.

Just starting off, Dave, with tech modernization being Jack Henry's most important strategic priority, please update us on the time line for the rollout of some of your first new cloud-based modules.

Sure. So maybe I'll back up one step just in case you have viewers who are not totally familiar with our tech modernization strategy. So I'll give you the CliffsNotes version here. In February of last year, February of '22, I announced a major initiative at Jack Henry to essentially move everything we do technology-wise to the public cloud environment. We've been working on a strategy, actually had developers writing code for about 2 years prior to that announcement. So -- but I announced it as a strategy as opposed to a product announcement, just to make sure that people understood that we're moving in this direction and I was able to set some expectations about that move. And so specifically, what David's referring to in this question is one of the key components was us rewriting our core systems to function on the public cloud. We chose not to do a lift and shift, lift and shift is where you take something you already have and you make it work on the public cloud. But when you do that, you can't really take advantage of all the inherent positives about being a public cloud native. And so we chose to rewrite our systems, be truly public cloud native, and so we're in the process of doing that. And what I committed a year ago was that over time, and this will be a several year initiative, instead of writing a whole bunch of code and then releasing it all at once in a few years, we are releasing components over time so that customers can start to consume those components as they become available. So again, we've been working on this for quite some time. The platform that supports all of our API connectivity, that is all in place. It's all in production. We have hundreds of fintechs that are already using that connection layer. In fact, I announced originally a year ago that we had about 850 fintechs connected to that platform. Today, we have about 950 fintechs, so a little bit more than that. So more than 100 additional fintechs connected through that API layer. But then some of these modules that we've been working on. We have our first module, which is domestic wires, has been in beta now for some time. We have customers actually producing wires live right now. But we go into full availability in July of this year. Our international wires component, we're starting beta in April, so next month. And our expectation is that we'll take that live after the summer. We have our real-time data streaming component, which we are going into beta here now soon. That will be available later in the fall. So we're kind of staging these and rolling them out over time. And there will be 30 to 35 modules that will kind of roll out over time that eventually will migrate the entire core system on to the public cloud. And I'll also point out, as I say that, Jack Henry today is a major public cloud provider. So we have a number of our solutions already in the public cloud, and we've been there for years. So we're in AWS, we're in Azure. In fact, we're large players in AWS and Azure. And then in September, October, somewhere in there, we signed -- we announced this new agreement with Google, and so we're doing a lot of the new development work in the Google Cloud. So we're already very well established in the public cloud environment, but this one is really centered on moving our core systems to a public cloud native environment, and that's what we'll be continuing to talk about as we roll out these modules.

Understood. With the conversion of your debit card processing clients, the First Data's back-end platform, you've highlighted the importance of expanding into the credit card processing business. How far along are you in building out the sales force to do this? And when do you expect credit card processing to become material to Jack Henry's revenue?

Yes. So I would say -- and again, just to make sure that is up to speed, David knows us well. He followed us for years, but I just want to make sure everybody else is current on what were happening -- what's happening at Jack Henry. So for many years, we've been a major provider of debit processing for our customers. So we're a debit issuer for years. We have some over 1,000 banks and credit unions that run our debit platform. But we had never been a credit issuer. And the reason for that was there are a lot of banks and credit unions that don't issue credit cards. And I think that's a real misconception among a lot of people. They assume every bank issues debit and credit. They don't -- a lot of them don't issue credit. And so the debit business was really an area of focus because essentially, everybody issues debit cards. But what we were finding a few years ago was that there were customers coming to us saying, we do both debit and credit, and we really want to do them both through Jack Henry. And so we have -- not only did we start using the First Data engine to process our transactions for us. We then had to stand up a credit business within Jack Henry. We have hired salespeople, which David alluded to in his question, I've talked about in prior earnings calls. We've hired salespeople. I'd say we're well staffed today on the sales side. We had to hire people on the operations side because serving credit is a different endeavor than debit and fraud and all those types of things. So we have the people in place now to run the credit side of the business. We announced a couple of months ago our partnership with TIB, where for customers who don't want to have their own in-house credit program, they want to do credit through Jack Henry, but they don't want to manage it themselves. TIB has an agent program where they will manage the credit endeavor for those customers. And so today, we have some over 50 customers live on the credit platform at Jack Henry. But I've said from day 1. That's not going to be a real fast-growing thing, partly because a lot of banks and credit unions don't issue credit partly because when you have a credit program in place, you always have some kind of a long-term contract in place. And so people can't just switch like that. They have to get to the end of their existing contract before they can switch over to Jack Henry. So demand isn't huge, and we have this timing issue. And so that's why I've been -- I've tried to be as transparent as possible from day 1. This is not going to be anywhere near the debit business of Jack Henry, I don't think but it's a service for our customers, and it's an important service and certainly, revenue contributor to our Payments segment long term.

In Evercore ISI's 2023 Bank Tech Outlook, we surveyed 75 bank and credit union CEOs, CFOs and Chief Technology Officers, including 12 Jack Henry customers. Collectively, they expect their IT budgets to grow 6.4% this year, up from 6.1% last year. What's your outlook for bank IT budget growth in 2023? And are you seeing demand trends broadly in line with our channel checks?

Yes. That's pretty much in the ballpark. So one of the things that I try to do, and David, you, of course, know this normally on the November call, I'll share some survey data -- industry survey data with a broad sample size. And then on the February call, I always get another report that I try to share and make sure that investors are kind of aware of what we are hearing. This year, neither of those major publications that I usually cite, neither of them asked the question in their surveys. They asked a whole bunch of other questions, but they didn't ask the question about assumptions regarding increased spend year-over-year. So what I've been doing here is kind of relying on some smaller reports. And then anecdotally, I talked to a lot of CEOs, and I present at a lot of conferences where CEOs are in attendance. In fact, last month, I hosted a CEO roundtable in Phoenix, had about 20 or 25 CEOs in the room, all -- except one, all of them were banks larger than $2 billion in assets. Some were Jack Henry customers, some were not. So it was a good mix of attendees. And I think the average in that room was right around 7% year-over-year. And that's what I'm hearing anecdotally too. As I talk to people, as I read some of these surveys, the smaller surveys that are out there. It's selling in around 7%. I think the spread would be 5% to 10%, but 7% is pretty good. And I'll tell you the -- what's meaningful to me about that now is when I was asking the CEO Roundtable, it was in January, their budgets were in place for the year. So those were known numbers at that time. It wasn't a forward-looking speculation. It was really known numbers. So the your 6.4%, I think, in the same ballpark as the 7% that I'm hearing. So I think that's a reasonable expectation. And frankly, a very good number. So we had -- I think last year, the expectation was a little over 5%. The year before that, it was around 8% or 10%. And so we've been in that range here for a while now. And of course, there are a number of drivers of that, that I'd be happy to go into, if you want me to talk about that later on, but I can tell you about the drivers and why I'm confident that, that number is not going to drop. There is -- regardless of what's going on in the economy, I think banks are in a position where they have to continue to increase their spending on technology because of just generally what's going on for them as providers of service.

And in particular, what areas do you see as being especially strategic for banks?

Yes. So many banks today, it's a little bit ironic, but -- because we've been in the core business for more than 40 years, and yet many banks today are looking at upgrading their core systems. Our sales pipeline today is larger than it's ever been in the history of our company. And that's significant because in the December quarter, our second fiscal quarter, we set an all-time sales record. In fact, the month of December we set an all-time monthly record for sales. So to come off an all-time record -- and within about a month later to have a pipeline that's larger than it's ever been at the company. That tells you about the demand environment, specifically for Jack Henry solutions. So core is definitely on the list. A lot of people looking to upgrade their core systems. But then beyond that, digital is on everybody's mind today. And one of the things I talk about a lot when I'm speaking to investor groups and non-bankers, I guess, I'll put it that way, on community bank, a regional bank and credit union folks as I'll say to them, and I would challenge your audience, think about whoever you bank with. I have no idea who you bank with, but whoever you bank with. Think about the experience that you have when you're on your PC as you're interacting with your bank versus the experience you have when you're on your phone or your tablet. Chances are it's an entirely different experience. It looks different. It feels different. You can do some things on your PC that you can't do on your phone, that can be frustrating. And most banks in credit unions, not Jack Henry banks credit, most banks credit in the country, that is the experience. And so most CEOs and CIOs know, they have to find a way to upgrade their digital presentation to get to a single user experience for their customers. That drives a lot of demand and a lot of interest. And so if you think about it, the TAM then is almost every bank or credit union in the U.S. because very few have solved this have solved this problem. We have the solution to that problem with our Banno Digital Banking -- digital banking suite, which is part of what's driving all demand for Banno. So that's a key area of investment. Fraud. You can't pick up a paper without -- or an online paper, I'll put it that way. I don't want to sound like I'm too ancient here without reading about what's happening in the fraud area. So every banker is trying to figure out what technology can they use to combat fraud. We have just announced a new solution that we're rolling out now called Financial Crimes Defender. So a lot of interest in fraud. I don't care what's going on in the economy, you have to address the concerns about fraud. And then the last one, and I could go on, there's all kinds of topics here; but the last one I'll offer you here is what technology are you going to use to serve your small, medium business customers and even your larger commercial customers. They don't want to come into the branch anymore. They want to be able to do all their banking as they're running their business. They want to be able to do all their banking with you through some type of digital channel. And so most banks are thinking about how are they going to modernize to make sure they can serve those business customers, including online commercial lending. So complex commercial loans -- most banks historically have thought of the borrowers coming to their branch and sitting down and having a couple of that really good coffee that they have over there in the branch. Forget that, right? The borrower of the future for a small medium business and certainly for a large business as well, they want to be able to do these things through a digital channel, which includes online commercial lending. So all of those things are driving demand, and that isn't slowing down. That is competing -- continuing at a nice steady pace. And that's why I say, regardless of what happens in the economy, these bankers to be successful long term, they have to continue to focus on investing in those areas.

Very clear. You recently guided fiscal 2023 earnings per share, down $0.11 to $4.81 at the midpoint, given a substantial reduction in high-margin contract termination fees combined with the shift away from debit card processing, which is your strength. How are you flexing expenses down to offset some of this lost high-margin revenue?

Yes. So there was a lot in that question. So let me tackle the first part first regarding deconversion fees, again, just to make sure everybody listening understands how this works. So at Jack Henry and really in the industry, we get deconversion fees, deconversion revenue when one of our customers has acquired and they have to buy out their contracts, okay? They have a long-term contract. We're primarily a SaaS provider. They sign probably a 7-year agreement. If they get acquired, they have an obligation to essentially buy out that contract. And so deconversion revenue happens, but we have almost no way to predict accurately what deconversion revenue will be for a year. Now it's high-calorie revenue, meaning the very high margin because they're buying out their contract. But the frustration for us is we don't know when M&A is going to happen. We predict kind of based on what we know, having done this for a long time, but there's no way to really accurately predict. And so the first point that David is making here is, when we lowered guidance here a couple of weeks ago, one of the key drivers was the fact that we saw now the deconversion revenue is going to be down significantly for Jack Henry. And as I always say, that's the revenue you don't want right? Yes, I know it's revenue, but it's the revenue that indicates a customer has been acquired, you don't want to see Jack Henry with that revenue. So it's good news for the company, but because it's not happening, it is revenue that won't [indiscernible] show up. What's the driver for that? M&A in the banking space has really come to almost a stop. There's some M&A happening where larger institutions are acquiring real small institutions just because they need the deposits to fund loan demand. There's a little bit of that going on, but there's really very little M&A happening, which means very little deconversion revenue for Jack Henry. The ironic thing about this particular quarter and the guide change that we gave was, the change in deconversion revenue that we talked about on the call was really related to 1 customer. So we had 1 customer that had alerted us in November or so that they had been acquired, and so we calculated the rate -- deconversion revenue. We included it in our forward-looking forecast internally, and confirm that our guidance at the time, as far as that was concerned was reasonable. In fact, somebody asked me about it on the November call. Do you have enough visibility into your deconversion revenue for the remainder of the year? My answer was yes. Well, then in December, whatever it was that same customer notified us that the acquiring bank had decided to stop because the acquiring bank may end up moving to Jack Henry, which is great news for Jack Henry, right when instead of us losing a customer, we end up gaining a larger customer and they might move over to the Jack Henry platform. But because of that decision, they're not going to pay us the deconversion revenue and so we had the lower guidance on deconversion revenue. So it's a totally ironic and frustrating situation for me, but it's potentially really good news for Jack Henry. We won't know for several months how that decision plays out. The second piece of the guide change was regarding debit fees and what I've tried to be really clear about is I've been meeting with investors here in the past couple of weeks is we were not trying to say that our debit business is in trouble. Our debit business is continuing to grow really nicely. But when we established guidance, we provide annual guidance. So we give that in August. And we're crystal balling when it comes to transaction volume. And what we saw in August was a really strong growth in the debit business looking forward for the remainder of the year. As we got into this last month and really the end of December, we saw the business continuing to grow really nicely, but just a little bit less than what we had projected. So it's not that it's flattened out or anything like that. So then we had to really understand, okay, what's happening here because we are not a direct-to-consumer brand, right? We work for B2B, we work through banks and credit unions. And what our experience is as far as projecting forward and trying to read the tea leaves, I think, lines up perfectly with what Visa and Mastercard have said. They've talked about the fact that there's a little bit -- they project a little bit of a slowdown in debit because stimulus money, people with stimulus money in their accounts, they've used a lot of that up. And so they've shifted a little bit of their spending over to credit cards as opposed to their debit card. So it's totally consistent. I think our projection with what Visa and Mastercard have telegraphed. And so that required us to reset expectations just a little bit for the remainder of the fiscal year. But I will highlight the debit business is still growing really nicely. It's just down a little bit. So the second half of your question, we pulled, I think, the reasonable levers as far as making sure that the impact to EPS wasn't complete. So just the deconversion revenue decline or reduction by itself would have taken EPS down $0.20. We lowered $0.11. So that tells you that we've really done a good job of offsetting where we can with expenses. So travel was one area. Travel had pretty much returned to normal for everybody this year. We put in the rules to make sure nondiscretionary travel was not happening. We've done a really good job, I think, of 0 basing on hiring to make sure hiring where we need, but not over hiring. It's those types of things that we've just buckled down here for the remainder of the fiscal year to make sure that we can hit a good solid result for the year without doing anything draconian. The business is really healthy. It's really performing well. Didn't want to do anything that would damage the business for the long term, but we do recognize that we need to make sure we offset a little bit of this revenue change for the remainder of the fiscal year.

Understood. That's very clear. What percentage of Jack Henry's revenue comes from marketing open APIs to best-of-breed providers who connect into your core processing system to serve banks and credit unions. In the past, you've highlighted Jack Henry's collaborative approach to working with these best-of-breed providers.

Yes. We are known in our space as the most open provider, and this is not new. This has been going on. I've been here now 23 years, and when I got here, Jack Henry was still alive and still involved in the company and Jack Henry was totally committed to this idea of being as open as we can be, meaning allow third parties to connect into our systems easily, seamlessly in a fulsome manner, meaning they get all the data that we share with our own internal systems, they can have access to that data to make sure that the customer is successful. So it's been a philosophy at Jack Henry as long as I've been here since certainly before I got here, that we should be open and make it easy for fintechs to connect in and make sure there's not punitive pricing in place to try and force our customers to do business with Jack Henry. So in keeping with that philosophy, as we've continued to build out that connection layer, we have not done anything significantly different when it comes to pricing for people to connect into our system. So generally, the way it works, our customers pay to connect into the platform. The fintechs play a relatively small fee to connect into the platform. We are not participating in their revenue stream, that's by strategy, that's by design, is to try and attract as many fintechs as we can into our ecosystem. Our customers then who want to use fintechs. Jack Henry is the vendor of choice to make sure they have access to these different fintechs that they want. So the revenue stream to Jack Henry is not significant. It's not meaningful as far as the overall P&L is concerned. It's designed -- the way we charge is designed to offset the expenses that we have and certainly for us to make a little money but we are not trying to monetize every single transaction that flows to a fintech. We're taking the opposite approach that if we make it easy, customers will flock to Jack Henry because they know that they can have access to those fintechs, and that has certainly played out as you've seen us take share in the industry. We're taking share at a much faster rate than anybody else in our space.

Since Jack Henry as a launch partner for the FedNow faster payment network. What's your most recent view of the go-live date for FedNow? And what will the per transaction pricing look like?

Yes. So we haven't shared our transaction pricing yet. And of course, much of that is dictated by the Fed. We're working -- we have worked closely with the Fed. I think we have a really nice bundle put together that our customers will find attractive. As far as the Fed launch, we shared on the last earnings call, Jack Henry will be the first partner to go live with the Fed. In fact, I was just on the phone with Lael Brainard about 1.5 weeks ago. She is the Vice Chair of the Fed, has owned this project for the Fed, and we were talking about rollout and kind of the enthusiasm, I guess, the excitement about getting Fed live -- FedNow live. The expectation right now, and this is controlled, we're ready to go, the expectation is controlled primarily by the Fed. They project right now that they're going to be ready to go beta in May. Beta, meaning we have a group of customers that we're testing with. We already have the class of customers, meaning the group of customers. We already have that group of customers set up. It's a combination of banks and credit unions. So we'll start to do testing with them in May, maybe June, depending on the Fed. I mean Lael was confident they could hit May, but it might be June. And then for us, it's normally about 90 days, maybe 120 days beta period where you have this group of banks and credit unions that you're running test transactions with and move them into live production. And then once we get to the end of the beta period where we feel like everything is solid, then we would go live with general availability. So on that time line, let's say the Fed delays a little bit, and it's June. That would say probably October that we go live into live production and then the Fed will start working with other providers as well. Now I'll tell you, there's a lot of enthusiasm among banks and credit unions because this is the first really modern rollout of payments technology that Fed has done in many, many years. So a lot of banks and credit unions are running older technology and their connection to the Fed. This modernizes all of that. It provides an opportunity to -- with nice pricing. They -- I think customers -- banks and credit unions think it's better pricing than what [ sell ] offers. So it's an opportunity for them to implement real-time payments through the Fed. They're all partnered with the Fed in some way, shape or form already. So it's a known partner and the pricing they're comfortable with and the fact that they're upgrading their technology and the relationship with the Fed is being perceived and received very positively.

On your December quarter call, you highlighted 8.8 million registered users on the Banno digital retail platform. How do you gauge the potential growth in Banno retail registered users going forward?

Yes. It's -- so back to the point I was making earlier about almost every bank and credit union needs to upgrade their environment when it comes to digital banking. So the TAM is very large. Even today, I had somebody asked me the other day, I was in an investor meeting other day and they asked me, "So what inning do you think we're in as an industry when it comes to upgrading digital technology?" And I said, maybe the end of the first, somewhere in the second inning. And I really believe that because there's just so much need out there not all that demand yet, everybody is trying to figure this out still, but there is a definite need for an upgrade to digital technology. So the growth -- there is still a lot of growth. I don't know that I could quote you any number accurately. But just now, we are adding about 100,000 retail customers a month onto the Banno platform. And then now -- in next quarter, we'll roll out Banno Business. So that's the business side. So we've had the retail side in production now for about 3 years. The business side goes into production next quarter. And so we'll start that flywheel all over again on the business side as we keep rolling on the retail side. We have the business side that we'll get up and running. I mentioned on the call, at the time last month, we had 308 customers already signed to go to Banno Business. I know that we've signed more since then. I don't have an accurate number as I sit here right now, but there is tremendous demand out there for a truly modern digital banking solution. And so the runway is very long. Like I said, I couldn't begin to quote you an accurate number. You just need to know we're in very early days when it comes to banks and credit unions trying to upgrade their digital presentation layer. And that -- again, that's not unique to Jack Henry. It is the industry, but we are very confident in the solution that we're offering with Banno, Banno continues to get really, really high ratings in the App Store. We know we are still the fastest application out there. When it comes to usability of the app from the time you type in your credentials until you can actually use the application, we're the fastest as compared to anybody. So we have a great leg up as far as the opportunity to grow that business at Jack Henry.

Got it. Given the low debt on your balance sheet, what are your capital allocation priorities among dividends, share repurchase and acquisitions? In an earlier fireside chat, there were a few investor questions targeted toward the fact that there are a lot of assets out there available at much lower valuations than was the case 1, 2 or even 3 years ago.

Yes. So you follow us for a long time, Dave, you know that we are passionate about M&A. We're a very good acquirer from 2004 to 2015, something like that, we did, I think, 35 deals in that period. So we have a really good history of quality acquisitions. We're very good at integrating acquisitions into our company. We have broad sales coverage. So when we find these acquisitions, we can normally hand them off to a sales organization, they start selling immediately. So I'm very passionate about the idea that the Jack Henry, we want M&A to always be right up there at the top of the list as far as capital deployment. Now with that said, we're committed to our dividend policy, and you saw us last month, we raised our dividend again a little bit, and we're committed to ensuring that we continue to do that. But M&A is always at the top of the list, definitely above share repurchase. So we view share repurchase as an opportunistic thing. When we have that opportunity to buy back some shares, we have excess cash or we think the shares are significantly undervalued and we jump in and do some share repurchase. But that's not our goal. Our goal is to find good quality companies to acquire. To your comment about the session that you evidently had earlier, I didn't hear that, but I would say valuations are definitely down as compared to 1.5 years ago. 1.5 years ago, there were companies that IPO-ed who had no business being public companies, right? They did it because they could and people would invest and all that and more power to them. But we would look at some of those deals and think how are they going to turn this into a going concern long term. And sure enough, I think some of those chickens will come home to roost right now. So valuations have come down. The challenge we still have is a lot of -- on the public side, a lot of those investors still have an expectation that the sun is going to shine. And if you go to sell the company, boy, we're going to get right back up. The sale price is going to be some premium to what they were trading at a year ago. So I wouldn't say that the reasonable expectations have really set in on the public side, yes, that certainly come down, but is not set in. On the private side, a little more reasonable on the private side, I would say. I don't think we're there yet. They're still some of those owner operators who -- I think reality is set in for most of them. It's their shareholders, it's their investors who kind of look at them and say, "Hey, wait a minute, I invested at X and don't be telling me that we're Y now." So I think a little more time needs to pass yet before true reality sets in. But I will tell you, our deal volume today is almost overwhelming. It's the number of deals flowing in, in the past 6, 8 weeks, something like that, very significant as compared to -- you heard me, Dave, on the call in February of last year, I was kind of -- I was complaining because there was nothing. There was really nothing to look at a year ago. And now the deal volume is significant. It's just a matter of trying to find those deals that are good quality deals, and make sure that valuations aren't out of line. And there's still expectation too high for what a business is really worth in general -- generally speaking. And so we're continuing to watch and continue to hope that we're going to find something that's with Jack Henry, and we can find a good valuation.

In 2019, Jack Henry set out the big round of mega deals. And at the time, you were very clear that those transactions didn't fit your strategy. Now there are some properties in payments that are priced at a substantial discount to what they were in 2019. Does the more attractive price point change your mind?

No, no. So the reason we set those deals out. And I preached this sermon over and over and over again back at that time because a lot of people were kind of insinuating that, "Oh, Jack Henry just doesn't understand the opportunity, kind of implying that we were naive. We didn't really get it. And my discussion at that time was we had spent 6 years prior to 2019 study in that space and really trying to figure out, do we want to be in this space or not? And is this a good idea for us long term? And we have made the conclusion before those big deals were announced, we've made the conclusion this was not a good business for us to get into. And the primary reasons are still true today just as they were 4 years ago. Number one, when you're in that business, your customer is not the bank. I don't care what they says, your customer is not the bank. Your customer is the doughnut shop or the dry cleaner or the auto repair shop, it's the merchant. And the merchant, what are they looking? For lower price. We learned during all of our investigation that there was a tremendous amount of churn in that space. Our churn is less than 1% per year, less than 1%, right? People don't leave Jack Henry. In that space, we were looking at companies that were sometimes up a 20% per year churn. Why were they leaving? Because they're looking for the lowest price. If you're the doughnut shop, all you care about is what's the lowest price for that transaction. You don't care about the high level of service that Jack Henry offers, which, of course, is competitive differentiator for us in our normal business, you care about price. That's not the business we're in. We're not the low price leader in anything we do. We are about service, we're about quality, we're about customer relationship and customer retention, and we are focused on serving banks and credit unions in the United States. And so as we look at that business, that was just totally a different business from what we were in. And that, like I say, that's true today, just as it was then. So even as valuations are may be changing, you're still buying a business where it's a race to the bottom as far as pricing is concerned, and that's not a business that we want to be in.

Very clear. Based on your comments on the December quarter earnings call, 2023 or at least fiscal '23 is very much a transition year for Jack Henry given the pressure you've highlighted on contract deconversion fees, debit processing revenue. How should we think about 2024? Is 2024 going to put you back on your historic revenue growth and margin expansion model?

Yes. As I sit here today, we believe we haven't done any budgeting yet, haven't done any formal planning for FY '24 yet. That all really -- it ticks off this week, actually, the planning process. But that all comes into final focus at the beginning of June. But based on everything we see right now, based on everything we're thinking right now, we believe fiscal '24, gets us back to kind of a more normal year as far as revenue growth is concerned, as far as margin expansion. We're looking forward to FY '24 because we think some of the noise will be out of the business and certainly out of the comps, assuming there isn't some major melt down in the economy. We believe it's going to be rocky through the calendar year. That's totally expected. But if there's some major meltdown that we don't understand now or there's some pandemic that comes around again that shuts everything down without being able to predict any of that stuff, if it's kind of a normal year, we expect Jack Henry to get back to a more normal performance as far as top line growth and margin expansion.

Understood. Well, Dave, thanks so much for being with us here today. We greatly appreciate your time, your insights and the wide-ranging conversation. Stay safe out there and hope to talk to you soon.

Thank you, David.