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

All right. We'll go ahead and get started. Thank you all for joining us today. I'm very pleased to be kicking off this year's Morgan Stanley FinTech Conference with Jack Henry & Associates. We have David Foss, CEO of the company. Thank you for being here.

Maybe just -- we've got 35 minutes, but I've got probably 2 hours worth of questions here. So I'm not sure we'll get to all of them. But I do think it's worthwhile to set the stage, if you will, for those that may be new to Jack Henry is. Can you provide an overview of your business and kind of where you fit in the value chain for domestic banks and a few credit unions?

Certainly, yes. So the phrase I always used to describe Jack Henry is we are a well-rounded financial technology provider. And I use that phrase well-rounded because, if you look at our space, there are a lot of companies who have really kind of tried to become specialists in one area or another, particularly in payments. We got a lot of players in our space that are trying to become payments companies and kind of the -- I think, at the expense of some of the other areas of the business. At Jack Henry, we're a well-rounded financial technology provider. What that means is we provide a broad suite of solutions to banks and credit unions in the United States and that's by strategy. We focus on the U.S. market. We have been international before. We're not afraid of international. But today, we are focused on the U.S. domestic market. A wide variety of technology solutions to U.S. banks and credit unions. And also by strategy, we choose not to serve the largest institutions in the country, so the top 10. Been in that business before, I don't want to be in that business. So we serve not to -- or we choose not to serve the largest institutions. And then we choose not to serve the really tiny banks and credit unions in the U.S. So if you think about that middle market, that's where Jack Henry specializes. We offer, like I said, a wide variety of solutions. One that gets a lot of attention is we are a major provider when it comes to core banking technology. Core banking technology is that kind of that back-office key accounting system that processes loans, deposits and general ledger. So it's all the accruals, it's all the reconciliation, that's posting payments. It's keeping all the information, the primary information for the bank or credit union. That's what the core system does. And then we connect a variety of different solutions into the core. So a whole bunch of other solutions, digital banking, loan origination, bill pay, voice response. Believe it or not in 2023, voice response is still a hot product for lots of institutions. So this broad suite of solutions, including payments technology. So we have one of the largest bill pay platforms in the country. We are the largest provider of remote deposit capture technology in the country. So it's just this really broad suite of solutions. Most of our business today is SaaS. We still have some customers that we have licensed software, too, and they run on-prem. But we're more than 90% recurring revenue today because of the SaaS model that we employ for most everything that we sell. It's very rare for us today to sell a license of anything. Almost everything we do is SaaS. We are known in our space as having the highest customer sat ratings, and a number of people report on that. There's a bunch of objective third parties who do that reporting. We also do our own surveys, of course, but we're known for having the highest customer satisfaction in our space and for having a very focused strategy when it comes to the technology that we're developing and delivering and the markets that we choose to serve. So that's kind of the elevator speech, if you will, on Jack Henry, who we are, what we do. We're a 46-year-old fintech and again, enjoying real success these days.

So can I ask you, Dave, just on the current demand environment. I think there's -- we've had some of your competitors, if you will, say that they were seeing some lengthening of sales cycles, particularly with the enterprise banks and the larger banks. But at the same time, the community financial institutions that are more indexed to the headline news recently seem to have fared better. Just wondering from your perspective, what is happening with your customers' willingness to invest and the engagement and sales cycle process right now?

Yes. We've seen no slowdown in sales activity. In fact, I reported on the May earnings call -- well, first off, I reported on the February earnings call, our sales pipeline, which is active deals that are not yet signed, our sales pipeline back in February was larger than it's ever been in the history of the company. In May, reported it was even larger than it was in February. So we closed all those deals since February and yet, the pipeline, not only refreshed, but it was much larger than it had been even in February. So there is no slowdown in demand or interest in technology from Jack Henry. Now I can't speak to anybody else and what they're experiencing. But for Jack Henry, the pipeline is very robust right now. Also to kind of correlate with that, we published a survey back -- just a couple of 3 weeks ago, I guess, survey of in our space, bank and credit union CEOs, and one of the topics was around spending. There was a lot in that survey about what do they focus on, what are they going to spend money on. But the first question was what is your expectation for 2023 as compared to '22 as far as overall spending? Several of the responses, I'll point out, came in after Silicon Valley. So this is a very timely survey with what's on people's minds. Certainly, the interest rate environment had already taken effect, and people were already aware of that. But then, of course, when Silicon Valley happened on the 11th of March, again, several of those responses came in after that. What the survey showed was 78% of the respondents plan to increase spending on technology year-over-year, '23 as compared to '22, 78%; 34% of the respondents plan to increase by 6% to 10%; and 18% or so, I don't remember the exact number, plan to increase spending by more than 10% year-over-year. So really good indicators for us as far as the kind of where people's minds are at as far as spending and taking new technology. Now again, that is all specific to Jack Henry. So I can't speak for what anybody else is experiencing, but I know there's a lot of interest in the Jack Henry technology suite and customers becoming -- customers or prospects becoming customers of Jack Henry.

So that makes sense. Now the other concern that we've heard from investors consistently is beyond just like, okay, is -- or the current environment or events going to lead to a slowing sales cycle? But the other question that we often get is, what about the overall market size, the number of institutions? And it's something that people, including us, we wonder if increasing regulation and that kind of thing will lead to a consolidation wave? And does that reduce the number of institutions generally for Jack Henry to sell to? And look, consolidation has been a part of the store -- part of the market in the U.S. for a very long time. But how are you thinking about like what the process is likely to look like? How much consolidation do you think makes sense? And especially if we go back to the way things look, maybe in the early '90s versus today, et cetera?

Yes. So we have a chart that we show sometimes that shows that over the past 33 years, the average consolidation per year has been 4% for 33 years. And that's a very predictable number. There are spikes and troughs. So right now, we're in a trough, by the way. There's almost no M&A happening right now. But my expectation is, by the end of the calendar year, you're going to see a little bit of a spike. And I'm sure I'll be sitting on stage and people will say, "Oh my God, all of a sudden, there's going to be this huge wave of consolidation." And I would say, "I don't think so." I think we're going to see a little spike at the end of the year. But if you normalize that out, 4% has been a very predictable number for a long time. So today, we have some less than 10,000 banks and credit unions in the United States. I get the question once in a while, "Is the United States going to become Canada?" We're going to have 6 banks and we're done? I absolutely do not see that happening in the U.S. There's too much support. One of the few things that everybody seems to agree on -- within Congress is the idea that having a banking system that's as diverse as we have in the U.S. is a good thing for the U.S. economy. If you think about the customers that we serve, generally, they are the people that are banking, the small medium business customer in these communities all over the country. And I'm not just talking about small town. I'm talking about -- yes, I live in Dallas. Lots of very healthy community banks and regional banks in Dallas. And their primary customer base is those small, medium business customers. And so there's a real demand and, I think, support for the idea of having a broad group of banks and credit unions in the U.S. So at what point does consolidation end? I can't tell you that, but I think this 4% per year is a pretty good number. If you stratify the market and look at what's happening as far as consolidation, so think about the market as the bank is over $100 billion. The super regionals and the majors. So one stratification, over $100 billion, not much change among those banks. They're not more of them. There aren't fewer of them. There's about the same number over $100 billion. And then if you think about the $50 billion to $100 billion space, a little bit of an increase year-over-year, and that's been happening for quite some time. The $20 billion to $50 billion space has been growing pretty nicely. The $1 billion to $20 billion space has been growing nicely. $500 million to $1 billion has been growing nicely. It's the less than $500 million or specifically less than $250 million space, that's where all the consolidation is happening. So what's happening? All these little tiny banks, credit unions are being merged into the larger ones. And I'm not talking about BofA. I'm talking about these $2 billion to $10 billion banks, they're acquiring all these little guys, and they're getting bigger and they're growing into the $20 billion space. And I think you're going to see a whole bunch of that continue because there are probably 4,000 banks and credit unions down in that very low tier. And so they're going to continue to be acquired just like they have been. But as I mentioned in my opening comments here, that little tiny tier, the $100 million bank, that's not Jack Henry's customer. So normally, we are the winner when that acquisition or that merger activity takes place. Those little guys are being acquired by the institutions that we serve, or the little tiny credit unions are being merged into the credit unions that we serve. And so normally, when M&A happens, we're the winner. And I see many years of that yet to come. But again, it's not a risk to Jack Henry. It's been a real driver for Jack Henry for a long time.

So can I ask you quickly just as a follow-up there, Dave, is the -- your expectation that maybe we'll get back or start to resume kind of the normal rate of consolidation at the end of this year. What are the things that you're looking at that makes you feel like that, that's the right timing? Is it just that's about how long it takes to start to digest the changes in the market going?

Yes, I think there are a few things. And I'm not an economist, I'm a technologist, but just having been around this industry for a long time. So one of the key topics right now is bank stocks have taken a real hit, right? So bankers feel like they don't have a currency to go do deals right now. So as those bank stocks recover, which I believe they will, assuming things settle down in the industry and people aren't worried about the next shoe that's going to drop, social media for that gets started about some banks accusing of not being liquid enough. So as that all starts to settle down, as the economy starts to kind of sit tight a little bit without all this hand ringing. Assuming that all happens toward the end of this year, that's when I think you'll start to see deals happening again. Because there are willing sellers out there. There are always willing sellers out there. And so it's the buyer right now who has to get comfortable that they can do a deal, at a valuation that they're comfortable with, and they have to have a currency that they can work with. So there are a bunch of assumptions baked into that. It's just me having been around for quite a while in this industry and that kind of understanding how they work and how they think. But I believe by the end of this year, you're going to see some of that activity pick up again. And again, if the economy is kind of stable and if bank stocks have rebounded, I think you're going to see a spike at the end of this year because there's almost nothing happening right now. And so then, when you look at the course of the 12 months, you're going to see a relatively -- it's going to be spiky, but if you even that out, it's going to be somewhere around 4%, I think, also.

Got it. And then I just want to ask quickly is that you don't get paid, you don't really generate directly on the number of institutions, right?

Right.

It's more driven by transactions and members and the number of accounts within those institutions. But how much of a, I guess, volume discounting impact do you have, if you do reduce the number of institutions, if you kept the accounts numbers the same but reduce the number of institution 5%, 10%?

Well, if they were all Jack Henry banks acquiring other Jack Henry banks, then your thesis would come through. But today, most of the acquisitions that happen are Jack Henry banks acquiring somebody who's running a competing technology. So those are all additive to Jack. I mean, once in a while, one of our institutions acquires another Jack Henry institution. And then the scenario that you're talking about happens. But most of the time, it's one of -- somebody who's running Jack Henry technologies, specifically core technology or in Jack Henry technology who acquires an institution who's not running Jack Henry technology. All of those accounts, all that transaction volume, all those active users, they're all additive to our model. And so that's normally what happens.

Got it. So we spent a few minutes here to kick off talking about the market. But as I think you mentioned just a moment ago, you're not an economist or not a banker. You're a technologist. So let's talk about the technology of Jack Henry. For those that are less familiar, maybe you can provide a brief overview of your technology modernization strategy you're undergoing right now and particularly, given your the first of major core providers to really undertake the initiative, at least, to the degree you have.

Yes. Yes. So this is a big deal for us. We announced this in February of last year. We've been working on it for about 4 years before we ever said anything publicly. So we've been doing a lot of work before the public announcement last year. But essentially, what we're doing at Jack Henry is we're moving our core technology and pretty much everything we do to the public cloud environment, public cloud being AWS, Azure, Google. So we're already -- we have several things in the public cloud. We're a major provider in the Azure environment, big loads running in the AWS environment. We inked a partnership with Google in September or so last year. And so we're doing a lot of new development in the Google Cloud environment. But the idea is that we're -- our long-term goal is to move everything we do into the public cloud environment. Essentially, we can get out of the business of running our own data centers, a very expensive business to be running a private cloud environment. So long term, we get to get out of the data center business. But more importantly, we're taking advantage of all these technologies that you can take advantage of when you are public cloud-native, truly public cloud-native. So there's a lot of people in our space that are talking about putting their stuff in the public cloud. We refer to that as a lift and shift. When you take it out of your data center, you make it work, "make it work on the public cloud", that is not what we're doing. We are creating brand-new ground-up public cloud native technology. The key reason for that is when you are a public cloud native, you take advantage of all the technology that -- for every one of you who has running apps on your phones, all the technology that you have and that those developers can use to deliver to you on your phone, that's the environment that we're in. So rapid deployment of technology. We can refer to it as a DevOps environment where we can do new releases of software daily, if we want to. There is nobody in our industry who is doing new releases of software daily for traditional technology. Most of them are doing 1 or 2 releases a year. But in this environment, you can do rapid deployment of new technology. We get to take advantage of the security environment that these major cloud providers have. We get to take advantage of all the design tools that are resident in those environments that again, the apps that you think about running on your phone, all of that stuff is native in what we're doing with all of our technology. So when I announced this in February, I said this is a long-term strategy. This is not a product announcement. You're not going to see a revenue hit next quarter. This was a strategy announcement so that our customers and prospects could really understand where is our company going, how do they think about partnering with Jack Henry and what's the future look like for our company. So as you might imagine, when I first announced this in February last year, everybody was confused and everybody was like, "What are you guys doing? And this doesn't sound like a traditional technology provider in this space." And my response was, you're right, this is not similar to what anybody else is doing. So in the intervening year here, we've had a bunch of prospective customers, in particular, larger prospective customers, so $20 billion, $30 billion banks. Many of them have done deep dives on our technology plan, kind of what are we doing? Where are we going? At the same time, they've gone up and investigated all the other solutions in the space. And they've come back to us and said, "You guys are way ahead of what anybody else is doing." But again, this is an evolution, not a revolution. This is going to be over several years that we will evolve everything we do to this public cloud environment, but it's a pretty exciting initiative and particularly, because it's gotten so much attention in our space now as being a really innovative approach to solve problems for the future for our customers.

So I want to talk about that modernization strategy. Given that it doesn't sound like, at least, in most cases, you don't require a major core conversion, especially given the modularization of the technology itself. You've started to see -- at least, you've commented that you've started to see some interest from larger banks. I wanted to get a sense of the technological infrastructure and scale requirements that would be required for you to serve $100 billion-plus bank. Like how does that change?

So today, we could serve $100 billion bank today with our technology. We've tested, too, I think, $110 million or $120 billion. Again, that's not been our target market, but we can do that today. And so most of these customers that we're -- or these prospects that we're talking to now, these larger institutions, what they're talking about doing is converting to our traditional technology first and then working with us to evolve to the new technology over time, which is great. But the other question that we've had a number of times is we've had prospective customers come to us and say, "Okay, could we start to consume modules from Jack Henry that are traditionally thought of as being in the core?" Can we start to consume those modules from Jack Henry and still run our existing core?" So essentially, what they do is they derisk the overall conversion. Instead of converting this much, when the big bang comes, you convert a much smaller amount of data and number of systems. And the answer to that is, "Yes." You can start consuming things over time. And so that's really appealing, particularly larger institutions. Because when you do -- forever, and I've been in this business a long time and for all of history, when you do a core conversion, the core conversion normally happens on a weekend and it impacts everybody. It is -- when you think about that core system as being the ERP system, if you will, the back-office primary accounting system for a bank or a credit union, when you go through a conversion, it not only impacts every employee of the institution. It impacts every customer of the institution because all the stuff that's customer-facing is also impacted. And so it's a very large, very -- and a lot of people will tell you risky initiatives to go through a major conversion like that. So the idea for a larger institution that they can derisk by starting to consume pieces one at a time is very appealing to these CIOs or larger institutions.

So along that technology road map, I think about a month ago now at your Investor Day was you provided the investment community, at least, a road map of upcoming module releases for your public cloud platform. You've already talked about having authorization management and domestic wires live. But I guess, more generally, I was wondering, can you speak to the rationale behind which modules will be rolled out first? Why? And is there a dynamic where you want to show you can execute on low-hanging fruit? Or just trying to get a sense of how you're prioritizing those modules.

Yes. So I'll fill in a few of the holes there. So when we announced our tech modernization for the core systems, what I said was, and I would still say today, if you think about a core system and all that it does, there are about 30 primary functions in the core system. So core has always been sold as [ a-thing ], a big bundle of functions. But if you kind of break it down, there are about 30 different key functions within the core system. And so as we're doing this tech modernization and creating these modules, we've broken it out into essentially 30 pieces that we will be standing up on the public cloud environment one at a time. So to James' question about prioritization, well, first off, there are some things you have to do in order to do anything else. So if you think about building a house, you got to create the foundation. Well, before you do the foundation, you got to put in all the plumbing underneath you before you lay any cement, right? So it's not sexy, it's not fun to talk about, but it's the stuff you have to do in order to make sure everything else works. So that was priority one was we had to create the foundation, do all the plumbing work underneath. And that's not visible to anybody, but it's what supports everything else. So that was the first initiative, get all that in place. Included in that is the API layer that supports all the connectivity to third-party solutions. So all of that is in place today. We're actually leveraging that API suite today with almost a little under 1,000 different fintechs that are connecting into Jack Henry technology. We're using that platform to do that work already. So that's all in place. Well, then we start -- then you start to build the kind of the frame of the house. And so you referenced authorizations. So authorization is another thing that's not really sexy to talk about, but what authorizations does is it says, if you're an employee of the bank, what are all the things that you're allowed to do in all the different systems that we support. So we created that environment. So now as we start to stand up modules, the authorization pieces there that enables you as an employee of the bank to actually use those modules or not, if you're not allowed through security to do those things. The next thing we did was wire. So wire origination. Why? Because there was a demand among customers. We knew these customers would start to consume that module without having the entire suite available, that is something that there is demand for in the environment. And so we started with wires. And then what we're doing with the rest of the modules to complete the suite is we've done kind of this combination of there are other things that are kind of plumbing type things that we have to d,o, couple that with things that will drive real revenue. And so we're trying to kind of alternate as we bring those things out to create a revenue stream, but also ensure that we're building the house in a logical manner. So the plumbing is being done before the sheet rock has put up around the wall. You got to get the plumbing in the wall. So we're kind of going back and forth with those things. But this will take several more years. So this isn't a 2-month project, and so we're kind of alternating to create those revenue opportunities along the way. But I will point out, when we announced this in February, what I said publicly at the time, and I've said many times since. You should not expect much of any revenue impact to the company for probably 3 years. Now that's what I said last year. So I still stand by that. There's going to be some revenue impact, but it's not going to be noticeable. But in the long run, then we'll end up moving new customers and prospects and existing customers over to this platform. And as far as I'm concerned, this platform sets us up for the next 30 years of growth. I mean, this is a big deal for the company because it allows us to move everything over to this new environment.

So speaking of growth and the like. I mean, when you think about kind of the range that you're typically targeting of growth, and you've got some -- a range of products beyond just like this new modernization strategy that's driving the improvements in the core capabilities of Jack Henry. You also have things like Banno Business and Financial Crimes Defender, acquired Payrailz. What are you thinking about as -- or what should we be paying attention to as to what could drive your growth to be above the high end of the targeted with this?

Yes. So first off, I'm not committing to any growth [ high-end ], there's a reason we give guidance. But as far as growth drivers, so Banno, and I don't know if everybody knows what Banno is, but Banno is our digital banking suite. We rolled this out about 6 years ago now, the entirely public cloud-native and getting a ton of attention in our space because it's a truly differentiated digital banking offering. One example that I often give when I'm asked about Banno, for example, I would challenge any of you in this room to think about whoever you bank with. I have no idea who you bank with. I don't care who you bank with. But I would bet that you can do things on your PC. If you're sitting at your PC, if you think about your banking technology, you can do things on your PC that you can't do on your phone. And I would bet that the experience, the way it looks and feels on your PC is totally different from the look and feel on your phone. I would bet that's true for almost every one of you. With Banno, that is not true. With Banno, it's a single platform, public cloud native. The things you can do on your PC, you can do on your phone. It looks the same, it acts the same, it feels the same. That's one of the key differentiators for Banno in our space. Additionally, Banno has technology that nobody else in the industry has deployed. Even the people will say to me, give me examples about how much money Chase and BofA are spending on digital banking. I don't care. We are doing things that are totally differentiated with this solution. So that has been a key driver for us for a few years now and continues to be a key driver of growth and interest in our company. James alluded to Banno business. So Banno has traditionally been a consumer application. Now we have the business application that we're just rolling out next quarter. We've been in beta with that solution, really wonderful reviews from our customers on that. So that provides an additional level of differentiation and growth for the company. You alluded to Financial Crimes Defender. So that's a brand-new public cloud native, brand-new ground-up Bank Secrecy Act and Anti-Money Laundering Technology solution, taking advantage of the latest technology. That certainly will be a driver. Our commercial loan origination solution brand, it's not brand new. We rolled this out about 4 years ago, but state-of-the-art technology to do online digital commercial loan origination that's getting a lot of attention. Our Treasury Management solution, for larger commercial customers. So we have Banno business for kind of the medium-sized business customer, but our Treasury Management solution is designed for large enterprise customers. That is getting a lot of attention right now. So one of the things that, I think, we're pretty good at is, we have these wonderful core solutions and the attach rate on those is very high. So that drives revenue for Jack Henry as we're winning core customers. And as you know, James, we're winning much more share in that space than anybody else in the industry. So that helps as a driver. But then we have all these complementary solutions that are not core, that are best-of-breed solutions that help drive sales and revenue growth as well. So if you add all those things together, that's what continues to fuel the top line growth at Jack Henry as compared to -- if you look at our major competitors and look at their financial technology line, which is really akin to what we do, Jack Henry dramatically outperforming the major competitors, and it's because of those things. So might something in that space drive us above the 8% target that we've set as a top line, 7% to 8%? It might, but I'm not ready to commit to that right now. I'm just thrilled that we're outperforming the rest of the players.

Right, right, right. So -- and then on margins, I mean, coming into this year, your assumption was that we'd see flat adjusted operating income margins. You've done a bit better than that. But the expansion has been a little bit slower than investors had become accustomed to historically. How should we think about the contributors to margin for the coming years? Like what are the things that are going to matter?

Yes. So we're just in the budgeting process now. In fact, next week will be my first look at the budget. And just as a reminder for everybody, our fiscal year is June 1 to -- or July 1 to June 30. So we're almost at the end of the year right now. So my first look at the budget will be next week. So I can't give you details on what those margin expansion drivers will be. But we will do our best in the August call to make sure that we provide solid guidance to everybody regarding everything, including margin expansion. I will point out that, you look at the last couple of years here, it's been highly volatile when it comes to some of those expense drivers, particularly compensation. So with the great resignation. One thing about Jack Henry that I have loved about this company for the years that I've been here is the fact that our voluntary attrition rate has historically been less than half the industry average, meaning people don't leave Jack Henry voluntarily once they get to Jack Henry. They love working at our company. We win Best Place to Work awards all the time around the country. But during the Great Resignation, we were impacted just like everybody else. And so we saw a spike in our compensation, in attracting new employees to Jack Henry, it was more expensive. We saw a spike in this past year in travel. Why, because the year before had been almost no travel. So we had all this volatility with a variety of different things in the past year. That all should have pretty much normalized now. So our expectation is that we should be able to return to some ability to generate margin expansion. I just can't tell you how much. The thing I will point out to everybody is, about 2 years ago now, it was disclosed in our proxy last year, but it's actually been in effect now for 2 years. I am compensated now on margin expansion and revenue growth, and Mimi, our CFO, is compensated on our margin expansion revenue growth. So we are highly motivated to ensure that we continue to run the business to achieve those goals.

So I want to talk, just quickly ask on a couple of other topics to round us out here. First, earlier this year, we saw a little bit of weakness in kind of your -- the payment volume that you see on debit, et cetera. That was a little bit surprising. But then last month, you mentioned that May was tracking better than April. But you also allowed that, that dynamic could be seasonal. How are you feeling about payment volumes and activity generally?

Yes. So just to be clear with everybody, so on our February call, we adjusted guidance for the fact that we anticipated a little bit of a slowing in debit volume. Now anticipated because we -- when we issued guidance in August, we normally issue guidance once a year in August for our fiscal year, when we issued guidance in August, we thought there was going to be an acceleration in debit volume in the third and fourth fiscal quarter for Jack Henry. As we were coming into the third quarter, meaning January, we're coming into the third quarter, we saw that, that probably was not going to happen. Debit business is growing wonderfully. So it's high single digits. We love the business. We just saw that it was not going to grow as much as we had projected back in August. So we reduced our guide just a little bit on that just to be kind of more normalized. May, as you point out -- or April, as you point out, May, we saw things uptick a little bit. I think the best guide for us when you think debit volumes is to follow what Visa and Mastercard report. We follow very closely with them as far as the projections, volumes and kind of what happens on a monthly and quarterly basis. And so right now, we see our Debit business continuing to grow nicely, but it's not -- there's no drop off. There's no [indiscernible]. It's just kind of a steady performer for us. But again, the best indicator for us is the Visa, Mastercard reporting because we tend to follow really closely with what they see.

Got it. Got it. And I did want to circle back on a couple of key things. We'd be remiss if we didn't hit on M&A. Over the years, Jack Henry has been a very disciplined serial acquirer. Like you've done a really good job finding technologies and opportunities and integrating those. What types of assets are you targeting right now? Or are you looking more transformational or tuck-in? And I guess the big question everybody is always asking is, are you seeing private market valuations normalize yet?

Yes. So first off, we are not looking for something transformational. When you have a company performing like our company is performing, there's no need to transform anything. So we are not looking for a transformation acquisition. Tuck-ins, as you point out, we've been really good at executing those. We did from 2004 to 2017, we did 34 deals, very successful during that period. But to your second part of your question, valuations have been a little out of line here for the past couple, 3 years. It's been very frustrating for a company who's used to doing deals, and we feel really good about our ability to do deals. It's been frustrating because, to the other point you made, we view ourselves as a very disciplined acquirer, meaning we don't chase the shiny object. When valuations get out of whack, we walk away. We don't need to do deals in order to fuel growth. And so we're -- we don't have -- we have a very broad suite of solutions today. We don't have any big holes in our suite of solutions. So it's not that we're looking to find something to fill a hole or something like that. What we're normally looking for are things where we can do a 1 plus 1 equals 3 scenario. So we have a solution. We see something out there that's complementary to what we do, we acquire it. We put it together with whatever we have. Now we have a better story for the market, a better solution overall. We've done that many, many times, including Payrailz that you just alluded to. That's one of those types of stories for Jack Henry. To the question about valuations. I'll tell you, I was -- February last year, so this is embarrassing, but I'll say it anyway. So a little over a year ago, I was very optimistic that by the end of 2022, valuations were going to come in line, and we're going to be able to do some deals, and it just did not happen. I mean private companies were still able to get money last year, and so valuations were definitely not changing. This year now, I've been told by a number of investment bankers, and we are on every investment banker's speed dial at Jack Henry because we're known as such a regular acquirer, I've been told that they see valuations coming in line later this year. We're just going to have to wait and see. I don't see anything dramatic changing yet, but we're watching all the time.

David, thank you very much for joining us today and helping us kick off today, this year's FinTech conference.

Certainly.

Appreciate it.

Good to be with you, yes.