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

All right. Good morning. We're going to go and get started here. I'm John Davis, the payments and fintech analyst here at Ray J. We're excited to have CEO and Board Chair, Dave Foss from Jack Henry with us this morning. It's going to be a fireside format. I'll go through some questions, and we'll definitely leave some time at the end for questions from the audience. So Dave, thanks for joining us.

Yes.

Given there may be some kind of new to the Jack Henry story in the audience, just talk a little bit, maybe a general overview of the business, maybe run through the 3 segments that you report, and maybe we'll start there.

Sure. So Jack Henry is a technology -- financial technology company, so fintech, 46 years in the industry, serving financial institutions primarily in the United States, and that's by strategy. We choose to focus on U.S.-based financial institutions. We do not -- by strategy, do not serve the top 10 banks, let's say, in the country. And by strategy, we choose not to serve all the little tiny banks and credit unions. It's all those banks credit unions in the middle. That's where Jack Henry really tends to focus. And we provide a very broad suite of solutions. So what I say oftentimes is anything -- almost anything you need to run a bank or credit union from a technology point of view, you can get from Jack Henry if you want to get it from Jack Henry. We describe ourselves as a well-rounded financial technology company because we offer a wide variety of solutions. JD just alluded to the 3 segments at Jack Henry. A lot of people view us as a core provider, which, of course, is an important part of our business. But again, we do a lot more than core. And so we break our business into 3 different segments. We have the Core segment, Payments segment and, what we call, Complementary Solutions segment or the Complementary segment. So just to describe a little bit what those 3 segments are, core, again, bank and credit union. The core system for a bank or credit union is that primary kind of heart and soul accounting system for the bank or credit union that drives almost everything else. So it's processing loans, deposits and general ledger. It's accruing interest. It's receiving payments and keeping the ledger balance for all the accounts for loan deposits and general ledger. So that's the core. And in our Core segment, we have different solutions that serve banks and credit unions. But we have a very focused strategy as compared to our other competitors in the space and that we really limit the number of core solutions that we offer. So it's a very clear strategy to our customers which core systems we're focused on. The second segment is our Payments segment. So I say all the time, we are not a payments company at Jack Henry. We are a well-rounded financial technology company, but we do a lot in payments. So our Payments segment is really divided into 3 different businesses. First is our card processing business. We're a debit and credit issuer. We are not a merchant acquirer. And again, that's by strategy. We are a debit and credit issuer, meaning to our clients, we issue debit and credit cards for their customers. The second piece of the Payments business is, what we call, Enterprise Payments Solutions. That is our remote deposit capture and ACH origination business. And so remote deposit capture, that's receiving checks at the point of presentment and turning them into images. And yes, whether we like it or not, in the U.S., there are a lot of checks still floating around. And so we're a major player in that business. But then we also do ACH origination in that piece of our business for a lot of different banks and credit unions. And the third piece of the payments leg is our bill pay business, we brand it as iPay. So we are one of the largest providers of bill pay technology in the country. We serve well over 3,000 banks and credit unions with our bill pay platform. That is also the piece of the business where we've just integrated in our most recent acquisition, a small company called Payrailz, that is now part of that business. And through the Payrailz platform, we do not only bill pay, but we do P2P, so person-to-person transactions, account-to-account transfer and B2B transactions. Then the third segment is, what we call, Complementary Solutions. And there are a whole bunch of solutions in that bucket. There are well over 250 different products in that group. But some that we're known for are digital banking platform that we brand as Banno, well known in the industry as a premier digital banking platform. That's in that segment. We have all of our fraud technology in that segment. Our new fraud solution we just announced about 3 months ago or so falls into that bucket. Then we have teller technology and all the other things that you need to run a bank or credit union fall into that Complementary Solutions bucket. So 3 well -- again, well-rounded financial technology provider with a broad suite of solutions.

Okay. Great. And there's been a lot of discussion about just the macro environment in some of your larger peers or some of your peers that have talked about elongating sales cycles. I think you guys said you haven't seen that yet. But maybe just touch a little bit on the bank M&A environment, what you're hearing from -- on tech spending from bank CEOs, just your broad sense of what's going on from a macro perspective?

Yes. So I've said this many times, I'm not exactly sure what our competitors are seeing as far as elongated sales cycles, we are not seeing that. And this has been a topic for at least 6 months now. Folks have gone on their earnings calls and said that their sales have slowed. We haven't seen anything like that. We set a sales record, an all-time sales record in the December quarter, which is our second fiscal quarter. And as I sit here today, our pipeline is larger than it's ever been in the history of the company, which is pretty remarkable when you have a record sales quarter. And then within about 1.5 months after that, your pipeline, meaning the prospective sales, larger than it's ever been in the history of the company. There is a real migration to Jack Henry, I'll say that, away from competitors to Jack Henry. One of the facts that I share regularly on the earnings calls is how many core deals we booked in a quarter. The reason I share that is because whenever anybody buys a new core system, a, that's a huge decision for them, the most disruptive decision they'll ever make for their bank or credit union because it touches everything; and b, when they buy a core system, they tend to buy a whole bunch of other things from us at the same time. So it drives a lot of other sales. And so on the earnings call, I always try to give you a feel for what we're doing as far as core business is concerned. And today, Jack Henry is booking around 50 to 55 new core logos, meaning new revenue to our company, 50 to 55 per year. So that's a rate of about one per week that we're booking, and there is nobody in our space that's anywhere close to that run rate for -- that Jack Henry is seeing as far as new core wins. So tied to that, as far as the spending environment is concerned, it's an interesting time because I spend a lot of time with CEOs of banks and credit unions. I speak a lot at conferences. I just hosted a CEO roundtable in Phoenix about 3 weeks ago now, about 25 CEOs in the room, all above $2 billion in assets, except one of the attendees. And there were a mix of Jack Henry customers and non-Jack Henry customers. And we covered a wide variety of topics around technology and banking and so on. But in that meeting, one of the questions I asked was what's your expectation now? This was in January. So their budgets were in place for calendar '23. What are your expectations as far as tech spending is concerned? And the average came in at around 7% year-over-year increase in technology spending. And that's pretty consistent with what I'm getting from some of the surveys that I track. So 5% to 10% is kind of the real -- the majority, the vast majority of bankers predicting for calendar '23. And so the spending environment is robust. And then I tie that together with, okay, what do I hear from bankers about the environment they're living in? And it's interesting because despite everything you hear and everything you know about what's happening in the overall economies -- economy, bankers are generally fairly optimistic right now. They have a net interest margin spread that they haven't seen in years, right? So they're running today with nice NIM. And even as deposits rates start to go up, let's say that, that gap closes again, well, that's fine in their mind. They ran for years on a really skinny NIM. So even if that deposit rates come up and they're back to that, they know how to operate their bank in that environment. They don't feel like they have a lot of risky credits on the books. So they're not really concerned about write-offs, although that certainly is on their mind, and there certainly has been a little bit of an uptick. I don't think they're not wringing their hands about the prospect of a lot of bad loans here in the near future. And one of the questions I have always focused on when I talk to bankers is commercial loan demand because that's -- most banks make their money on commercial loans. They serve a lot of consumers, but that's not where you make your money. You make it on commercial loans. And they will almost universally tell me the commercial loan demand today is as strong as it's ever been. So they're really feeling pretty good about the opportunity to continue to grow their franchise. The challenge right now is deposits. Where do you get deposits? You had this big run-up in deposits through stimulus money, people putting that money away, they've been chipping away at that, right? Debit card usage has been up, chipping away at that -- those balances that they had. And so now where are those bankers finding deposits. And so that leads into the M&A discussion, the other part of your question, JD. M&A has really slowed significantly in the banking space. Why? Because bank stocks have taken a real hit, and so they don't feel like they have the currency to get deals done. And then the seller, they feel like valuations are down on their bank. I'm not going to sell now. I'll wait till later when the economy is a little stronger and valuation on my bank goes up a little bit. And so M&A has really come to a halt here. The one exception is we see few deals getting done where a bank is looking for deposits. They find some smaller banks that has -- a bank that has a overabundance of deposits on their book, they maybe don't have loan demand and whatever community that is. And so there are a few deals getting done there, but it's primarily driven by that need for bankers to find deposits, and they're looking for a bucket of deposits that they can put to work on the lending side. But other than that, M&A has really come to a stop right now.

Okay. And then I think maybe a good time to turn to the lowered outlook because that was part of the lowered outlook when you guys announced earnings a couple of weeks ago. So maybe just touch on what drove the revenue and EPS a little bit lower and also some of the things you did to kind of offset the bottom line impact?

Sure. Yes. So what JD is alluding to, we did a -- we lowered guidance just a little bit here on the last earnings call. And that was really driven by 3 things, and 2 of them are related to this last topic we were just talking about, M&A. So first off, at Jack Henry and in our space in general, if one of our customers is acquired and they're a SaaS customer which most of our customers are, meaning we're hosting their solution, they don't -- we almost never sell a license anymore. It's primarily customers that we are hosting in a private cloud environment. If they are acquired by another institution, they have to essentially buy out their contract. They have all the long-term contracts. Our average contract is 7 years on the core side. And so they get acquired, they may have 5 years left on their contract, they have to buy out that contract. That creates, what we refer to as deconversion revenue. So you'll always hear us call it out on earnings calls, always we will talk about what the deconversion revenue number is for the quarter. A, because it's not a reflection of the operation of the company. We have 0 control over deconversion revenue. It's a customer that just got acquired. B, we can't predict it with any accuracy. We're the last to know when one of our customers is being acquired, and so it's really a guess on our part. And so we always try to be very transparent about what do we think is going to be deconversion revenue for the remainder of the year. And then we'll share with you the exact numbers as far as what we're seeing. Well, in this quarter, in the second fiscal quarter, we could see that for the remainder of the fiscal year, deconversion revenue was going to be down. And the reason is what I was just talking about, M&A has pretty much stopped right now. And so I always talk about deconversion revenue as the revenue you don't want to see if you're a shareholder. Is it top line revenue? Sure. But what that means is a customer of Jack Henry has been acquired by somebody else, and they're leaving Jack Henry, so that revenue is leaving Jack Henry. So you don't want to see deconversion revenue. So when we have a drop in deconversion revenue, that's great news for the company, and yet it's counterintuitive as far as the top line revenue. So we saw a deceleration in the remainder of the year here in the second -- third and fourth quarter in deconversion revenue. And primarily the drop was due to one customer. And that -- sometimes these are really big dollar amounts, but it was one customer that we thought was deconverting now in this quarter, in the third fiscal quarter, the acquirer, who was not a Jack Henry customer, notified us that they were going to stop because they were thinking about converting their bank over to Jack Henry, which would be great news for Jack Henry. And yet I had to go on the earnings call and say, hey, we're lowering guidance because deconversion revenue is dropping because this acquirer may be moving all of their business to Jack Henry, but it is what it is. So that was the major impact when it came to the guide for the second half of the fiscal year. Aligned with that is because our customers have also quit acquiring other customers for the time being, M&A -- our customers do a lot of M&A, our customers were stopping that as a reduction in service revenue for us, right? We call it convert merge when one of our customers acquires another bank, we have to integrate them into our platform, our customer pays us for that service. So convert merge revenue has dropped for the remainder of the year. And then the third piece that I highlighted was debit volume. When we issued our annual guidance in August, and we issue guidance once a year in August, we saw debit volumes just growing like a rocket. And so everything we saw looking forward for the fiscal year showed that debit volumes were really going to be growing significantly. Halfway through the year and listening to our partners, Visa and Mastercard and what they were seeing, what we could see for the second half of the year was debit volume dropping just a little bit. So it didn't flatten out. It certainly didn't go down. It just dropped a little bit. Well, that affected our guide. It was a minimal part of the change in the guidance, but it affected our guide. And so those 3 things were the primary drivers of the change. And of course, the first 2, both related to M&A, once M&A picks up again, all that comes back. And then we'll just have to continue to monitor what happens with debit volume.

But I think you did cut some expenses to offset the bottom line impacts when you were talking about...

We did. Yes, yes. So we spent -- travel for -- and I'm sure, for your organizations just like ours, travel was pretty much back to pre-pandemic levels. We reined that in here and really tried to make sure that people were focused on necessary travel, not discretionary travel. We have held off on a little bit of hiring, not that we -- we certainly didn't do a RIF. We've never done a RIF in the history of the company. I think we're really good at managing headcount, but we held off on hiring just to try and make sure that our expenses were in line. So with the top line change, what that would have implied, it would have been a $0.20 drop in EPS, but in fact, it was an $0.11 drop in EPS, which was -- the offset was the expense controls that we put in place.

Okay. Great. And then maybe talk about the competitive landscape. Obviously, a couple of years ago, some of your competitors did big deals. Another smaller competitors got bought by private equity. Just any changes you guys have been taking share for years and outgrowing the industry, but just curious on update competitive landscape?

Yes, it's good to be us right now. I'll say that our major competitors, what JD is alluding to, and I'm sure many of you know this, about 3 years ago, made big bets in the merchant acquiring space. We have been studying that space for years. So 6 years, we've been really analyzing merchant acquiring, trying to decide if we want to be in that business, and we decided not to. So it was a very well-informed decision, and I could go -- I could talk for an hour about why we decided not to, but we made the informed decision not to get into that business. Well, I was coming to these conferences and those deals were happening, and everybody was implying that we were -- we just didn't get it. Why are you not pursuing that? And I kept explaining why it wasn't a good decision for our company. And we didn't -- everybody has to make their own decision, but we just didn't believe that it was a business that was going to be fruitful for the future. And of course, now we look like geniuses because we, I think, made the right decision at the time. Our competitors have really been challenged with those businesses. And so that's impacted the rest of their business, which is where we play. And so I think that's produced opportunity for Jack Henry that has been pretty significant. We see a lot of opportunity in our sales pipeline that are being driven by those decisions that were made a couple of years ago and kind of the change in their focus. But then additionally, there's other disruption in our space. So you alluded to one of our smaller competitors just acquired by PE. They were a public company acquired by PE. A lot of question right now, of course, about what happens with them, what actions does the PE take. There are international entrants that have been trying to make inroads into the United States that have been challenged lately, and have seen a lot of disruption public company challenges. So we're steady Eddie right now as far as I'm concerned. We're continuing to grow our franchise, have a great reputation among our customers for outstanding technology and outstanding service and as being a partner that people really want to work with. And so we're continuing to gain share at a nice pace, I think, and we see just a lot of opportunity for the future.

Yes. Curious, just to piggyback upon that a little bit. Obviously, we're in a very different funding environment from a VC perspective, newer entrants. Just curious, have you seen -- what's going on with the guys that are just come to the market in the last couple of years, smaller players, losing lots of money. Just curious, have they backed off? Are you seeing anything with the kind of newer entrants, not the guys that have been around for a long while?

Yes, yes. It's interesting with the new players. So there are a lot of fintechs out there, and many of them that we work with. We have connections today to well over 950 different fintechs in our space. We're known as the provider who's really easy to integrate into and who really is supportive of the ecosystem in the industry. So -- and we love that reputation. But it is interesting. There have been a number of fintech start-ups in the past few years. We think they're going to be disruptive to essentially what Jack Henry does. And I think that's really fun to talk about until you actually have to produce for your customers and start to live in the regulatory environment that we live in. And so we've seen some that thought they were going to disrupt companies like ours who have really been challenged, not as much by the funding side of the equation as by the -- how do you actually deliver in this highly regulated environment that you have in the United States. I mean, being a great technologist is one thing and having really cool technology, but you got to be able to make it work in this environment. The regulators have to approve what you're doing. Bankers have to -- it has to actually perform banking functions, not just look cool. And so you've seen a lot of these players who have tried to be disruptors who have been pretty challenged. And then the other side of the equation is the funding side. A lot of start-ups have -- they've faced some real challenges here recently as far as continuing to get their funding. But there are some really good players out there. And as I mentioned, we're very accepting of other players in the ecosystem. We're very supportive of other players in the ecosystem because our role primarily is to help make our banks and credit unions succeed. And so if these players can do things that are kind of quick and easy and add to the equation, we're supportive of that. We're not trying to block them out, we're not trying to exclude them. That has never been the philosophy at Jack Henry. We're trying to be accepting of them, but it has been interesting to watch some of these folks who think they're going to really disrupt the industry and they just have no idea of what the challenges of being successful in this industry are.

Maybe dovetail on that, you guys took a lot of heat over the last couple of years for being very disciplined from an M&A perspective. Valuations got crazy. You guys just -- you have a net cash position on the balance sheet. So maybe talk a little bit, are you seeing the valuations in the private world come down, what would make sense? Where would you be willing to take leverage for the right deal?

Yes, yes. So we have a long history of M&A. We've done a lot of deals in our history. In fact, from 2004 to 2015-ish, I ran that practice at Jack Henry, and we did 35 deals or something like that during that period. So we're very skilled at M&A. I feel great about our ability to not only execute a deal but then get the engine running. Once you get the acquisition done, get it starting producing for our company, but as you mentioned, and I'm thrilled that you used the word discipline because that's the way I like to think about it, we're not conservative, we are disciplined when it comes to M&A. During these last 3, 4 years, it was hard to find a deal, primarily because of valuation. There were companies out there that we were pretty excited about, but their expectations were totally off the charts. There were IPOs happening in the past couple of years, companies that probably never should have IPOed. There wasn't really a justification for an IPO except they could, so they did. And some of those were opportunities that we saw as potential acquisitions. So we sat on the sideline mostly for about 3 years, just kind of watching as things happen. And we didn't need acquisitions to fuel top line growth. We're pretty comfortable in that 7.5% to 8% range top line without acquisitions. So we didn't need those acquisitions. But there are some nice solutions out there that would have been nice to fold into the company. So now when I was on the -- I think it was February last year earnings call, February 2022, somebody was asking me about M&A. And I said at the time, I was kind of rubbing my hands together thinking 2022 by the fall, boy, things are going to be good again because we saw funding drying up and we saw some reality setting in, didn't happen. Really valuations are still higher, I think, than as justified. There have been some normalization, some public company expectations have dropped. And so we've looked at a couple of public companies to possibly take out. Private company, interestingly, during the late summer, still a lot of money flowing into the private companies. And so where I thought they were going to be challenged in the summer, it didn't happen, but I'm hearing a lot now about valuations settling in. We are -- because we're know as -- we were known as a serial acquirer, every banker in the space, every investment banker in the space knows to call Jack Henry if they have a deal that's worth looking at. So we have a lot of deal flow right now. It's just a question of trying to find those deals that make sense. As far as what are we looking for? So one of our challenges is we really don't have any holes in our product strategy. We have a very broad product strategy. As I said earlier, almost anything, any technology you need, if you're a bank or credit union in the United States, you can get from Jack Henry. So it's not like we have some pressing need of some issue to solve. But what we've done historically many times over is we're good at doing 1 plus 1 equals 3, where we maybe have a solution that does X. We have a competitor out there that does something similar, but they have complementary functionality. We acquire them, put them together and create this 1 plus 1 equals 3 scenario. We've done that over and over and over again over the years. And so we're always looking for those opportunities where we can find something and put it together with something that we have. The benefit there is we're already known as a provider. When you do that, you're already known as a provider of this, so you're kind of known in the space. We already have a sales team that can execute. So we can do this acquisition, hand it off pretty quickly to the sales organization and get them started selling. And so it tends to get things moving pretty quickly when we do those types of deals. So those are the kinds of things we're looking for. And as I say, every investment banker in the space knows that we're -- that we think that way, the types of deals we're looking for, so they all call us when there's something that makes sense. The thing I stress all the time is we are not looking for a transformational acquisition. There's no need to transform this company. That's not what we're about trying to find something that's going to totally transform the company. We're looking for things that are additive to what we do and really help kind of broaden our story for our customers. The other thing we're looking for today is primarily things that are public cloud native. So in our space, private cloud has been the story forever -- not forever, for the last 20 years. And so we've been a big provider of private cloud solutions. But in the past 5, 6 years, we really made a big push in the public cloud environment. So we're a big player on AWS today. I'm told we're the largest financial player in the Azure environment today. And then hopefully, you saw in August, September last year, we announced a big partnership with Google where we're doing a lot of development on the Google GCP environment. And so anything we acquired today, that is right at the top of the list as we want to make sure that either it is public cloud native or it's something that we can easily get into the public cloud environment and make sure that it's going to be additive to that part of our story.

Okay. Great. And then I think about a year ago, I could be off by a couple of months here, you guys announced kind of what you call the tech modernization strategy and the potential -- more of an a la carte offering, if you will. But maybe just spend a minute talking about what exactly that is, why you decided to do it, when you could start to actually see the benefits hit the P&L?

Yes. So what JD is talking about is in February of last year, we announced -- I announced on the earnings call, our tech modernization story, and what I said was this is a strategy. It's not a product announcement. This is a strategy, and the goal for announcing it at that time was so that our customers could really -- and prospects could really understand where is Jack Henry going, and how do I map the future? If I want to partner with Jack Henry, what does the future look like, not just for the next year or 2, but for the next 15, 20 years? Where is Jack Henry headed? So we've been working on this strategy for several years, 5 or 6 years before I announced it. We'd had developers writing code for 2 years before I announced it. So we were well down this path. And I waited to announce it until we had one of the pieces of the strategy actually in -- live and up and running. So I could -- I don't like to talk about vaporware. We like to talk about things that we're actually doing. And so we want to make sure that it was up and running. We had that in place in December. And so on the February call, I talked about the strategy. And so it's really -- there's kind of 2 primary pieces to the strategy. Number one is this goal of moving everything we do to the public cloud environment. We believe long term, that's where customers are going to want to have their solutions. There are so many benefits of the public cloud as far as the tools that you can use, the speed, the ability to burst, the security environment and all kinds of benefits to being public cloud native. And so as a long-term strategy, we wanted to get to the public cloud. And again, we have several of our solutions already today native -- public cloud native solutions. But the core side of the business was really the piece that nobody had done to any significant amount on the public cloud. Part of that is because it essentially -- if you're really going to be public cloud native, you have to rewrite everything you've got. And there are a few people that have done some lift and shift activity where they took old stuff and made it work on the public cloud. So they can say, hey, we're on the public cloud. But if you're really going to take advantage of the public cloud infrastructure, you need to rewrite your solution and make it public cloud native. And so it's a big investment, and it's a big time -- it takes a lot of time. And so we made the decision, that's the right thing for the future for our company and for our customers. But the other decision we made then was, okay, for our core system, there's no demand today for a core system on the public cloud. Why? Because the regulators require the ability to do a full exam, and they're not there yet. The regulators are not ready to say, yes, we want your public -- your core system native on the public cloud. But that's shifting. That's changing. And so we see that demand coming in the future. And so as we looked at rewriting our core in the public cloud, one of the key pieces of the strategy that JD just alluded to is we decided to essentially unbundle the core. The core today, I mentioned earlier, provides all this functionality. It's the heart and soul accounting system for a bank or credit union. We decided to unbundle the core and take all these discrete pieces, roughly 30, discrete pieces and make them standalone components on the public cloud and allow our customers to bundle them together the way they want. So think about you all have been cable subscribers for years, and now you're subscribing to every streaming service under the sun, right? Same idea as opposed to buying a bundle, you're buying all the things that you really want, and you're putting them together. I would bet you're all paying more today than you were paying when you're buying cable. Same idea applies here. You're going to buy all these pieces, you're going to put them together. It's going to be exactly what you want, but chances are you going to end to paying more than you were originally. And so that's the strategy. It gets us to public cloud. It allows us to roll out modules over time, so as opposed to writing everything for years and then saying, okay, tada, here it is. We were going -- we set this up so we can start to put those modules into production over time. People can start to consume them over time. Obviously, they pay us for those things over time. So we think it's a good strategy for us. And it's good for our customers because it allows them to consume what they want when they want it. The interesting thing in this strategy is, and of course, we're a year into it now as far as being public, this is driving a lot of demand among larger financial institutions. So larger regional banks are loving this story because it can minimize the risk of a full conversion for them. They can start to consume pieces over time. And then their conversion isn't a big bank conversion because they've already started to use a bunch of the pieces. So we're in active discussions today with a number of really large regional banks about this strategy and the potential of moving their business to Jack Henry. I have no idea if any of them are going to end up signing, but it's created a real conversation that we weren't having before with some of the real large regional banks. And so pretty exciting. As far as revenue impact, I've said many times, you're not going to see much of a revenue impact in the near term because the modules we're rolling out to begin with are relatively small. But this sets up the recurring revenue model for the next 20, 30 years for Jack Henry in an absolutely modern ecosystem.

Okay. I think maybe we have time for one question from the audience if anybody has one?

You disclosed what the [Technical Difficulty] when you go from like to a private cloud from [Technical Difficulty]. Just wondering what would be eventually [Technical Difficulty]?

Yes. So it depends on whether -- so the question is, in case you didn't hear, the question is about the uplift when a customer moves to the public cloud environment. It depends on where they're coming from. So if they're coming from an in-house deployment, which is what you're referring to, we talk a lot about people who are running on-prem going to private cloud and the revenue uplift there. Well, if they're coming from on-prem to public cloud, it will be a little bit more, but essentially, you can think of it in terms of the same dynamic. If they're going from private cloud to public cloud, which a lot of customers will, there will be certainly an uplift, but it will all depend on what are they consuming. My expectation is most customers in the future will buy the pieces in a bundle that looks a lot like what they're buying today as a bundled core. They'll just intuitively think I got to have all these pieces and I'm going to buy those pieces for my core looking forward. But the idea is because of the brand-new technology, the environment that you're running in and the look and feel, the experience that the customer will have, there will be an uplift even if they go from private cloud to public cloud. And I'm not quantifying that yet because we're not far enough along for me to give you any accurate answer on that. But it will definitely be an uplift.

All right. I think we're out of time. So we have to wrap it there. Thanks, Dave.

You bet. Thank you.