Good day, and welcome to the Jack Henry First Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Vance Sherard, Vice President of Investor Relations. Please go ahead, sir.

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

Thank you, Vance, and good morning, everyone. Before we get started today, I'd like to welcome the other folks in the room with me as introduced a moment ago by Vance. To begin, I'd like to welcome Mimi Carsley to her first quarterly call with Jack Henry. Mimi has been sitting in the CFO chair for a couple of months now and has spent a good bit of time immersing herself on the details of our business. Of course, you'll hear from her in a bit, and I'm happy to have the opportunity to introduce her for the first time to all of you. Additionally, I'd like to welcome our President and Chief Operating Officer, Greg Adelson, to his first earnings call. Many of you know Greg from our Investor Day and other events. Greg will be a participant in these calls going forward, but today, he will primarily focus on answering any questions regarding our recent Payrailz acquisition. And last, I'd like to welcome Vance Sherard to his first earnings call. As you probably know, Vance was recently promoted to Vice President of Investor Relations, and he will host these calls every quarter going forward. With that, let's move to the update section of our call. As I noted in the press release, I'm very pleased to report another strong quarter of revenue and operating income growth for our company. As always, I'd like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for the quarter. For the first quarter of fiscal 2023, total revenue increased 8% for the quarter and also increased 8% on a non-GAAP basis. Deconversion fees were up slightly as compared to the prior year quarter. Turning to the segments. We had another solid…

Thanks, Dave. Good morning. I appreciate this opportunity to speak with everyone for the first time as Jack Henry's CFO. Having spent my career at the intersection of finance and technology, I'm thrilled to be at such a highly regarded company with a focus on delivering shareholder value. As highlighted by Dave's comments, Jack Henry has had a successful first quarter, and I'll share some color on the financial details driving those results. Total revenue was up 8% for the quarter, both on a GAAP and non-GAAP basis. So let's jump into the details. Services and support revenue increased 8% in the quarter. Deconversion revenue was up $800,000 for the quarter. Consistent with previous guidance, we expect approximately $35 million in deconversion revenue this fiscal year and is expected to be heavier in the second half. However, forecasting deconversion revenue is always challenging. Our private and public cloud offerings showed robust growth in the quarter, growing 10%. Product delivery and services revenue grew 11% in the quarter, impacted by the return of our in-person user group conference and higher consulting activities, offset by slightly lower implementation revenue. Non-GAAP total support and services revenue grew 7% for the quarter. Processing revenue increased 10% on a GAAP basis and 9% on a non-GAAP basis in the quarter. The increase was primarily driven by higher card volumes. Additionally, digital revenue continues to show rapid growth led by strong demand for our Banno digital platform. Now turning to costs. Cost of revenue was up 8% with card costs in line with card revenue, higher personnel, license and amortization expense, partly offset by a decrease in labor cost deferrals. Research and development expense increased 23%, primarily due to higher personnel costs. SG&A rose 12%, driven by increases in travel, personnel, consulting, professional services and meeting-related…

[Operator Instructions] And the first question will come from Vasu Govil with KBW.

My first question is for you, Mimi. It's nice to speak with you, and welcome to your first earnings call. Couple of questions on the guide. First, I guess, with the $6 million gain on sale already contemplated in the guide when you guys guided 3 months ago. And then if I think about the change in guide, it seems like non-GAAP margins, you're not really expecting a change. So is all of the dilution pretty much related to the acquisition? And then a third part to my question, I think last quarter, if you go back, Kevin had sort of highlighted the margin guidance being conservative with some areas of potential upside. Is that view still the same? Or has anything changed on your expectation there?

Thanks, Vasu, and thanks for participating today. To address your question, the real estate was not contemplated at the time we reconfirmed guidance at the close of the acquisition. Relative to -- I believe your second question was around guidance, as I stated, the only changes that impacted our guidance was the acquisition and the gain on sale. And then your third question regarding margin outlook, it's still early in the year. We're optimistic, but we are facing inflationary headwinds as a business, but we feel optimistic that we will deliver as to our guidance target.

And Dave, if I could squeeze in one for you. I sort of got your comments on the seasonal softness in new core wins. But some of your peers have called out some softness in new signings in larger deals over $50 million. So I just wanted to get your sense if you were seeing any change in sort of appetite in signing deals in any of your cohort that would concern you at all?

Yes. Thank you, Vasu. I would have been -- I would have felt left out if you hadn't asked me a question. So thank you for that. As far as the cadence of deal, there is no change. The pipeline that we have right now of potential deals is by far larger than it's ever been. The cadence of deal signings is consistent with what we saw last year, as I tried to highlight in the call today. And I'll point out to you with respect to larger deals, and you might not be surprised to learn this, but I personally am involved often times in larger deals. I don't certainly don't get involved in every deal, but I'm involved in larger deals. Just in the next two weeks, we have -- let me think about this. So we have our shareholder meeting next week. So the week after that, we have three different institutions coming in here to Dallas over the course of two days. So I'm hosting three different CEOs, three different financial institutions here in Dallas over the course of two days. And then the week after that, we have another one coming in that I'm hosting in Dallas. And again, I only get involved in larger deals. So I'll just tell you, from my perspective, and I've heard all the same things you've heard about the cadence of deals or the pace of deals slowing down. Jack Henry is not experiencing that. Our pipeline is robust and there is a lot of activity as far as deals that we're working on, both on the core side and with regard to the other products in our suite. And I just highlighted for you, we just signed 60 new Banno deals in the quarter, and that pace isn't slowing down either. So I'm -- we'll see as the election -- and by the way, I haven't seen a single thing about the election. I got up and came right here this morning. So I have no idea what happens as far as the election is concerned, but we'll see what the election results, what impact that has on people's sentiment around the economy. We'll see what makes out here over the next few weeks as far as the general economy. But what we're seeing right now, there's no slowdown in activity.

The next question will come from Rayna Kumar with UBS.

Congratulations, Mimi and Vance. Can you talk a little bit about how your technology modernization strategy is progressing? I think I heard earlier that you said you have five new wins onto your private cloud offerings. Just wondering if you're seeing anything on the public cloud yet, and just how your discussions with banks and credit unions are going on some of these new products?

Sure. So first off, there were six new core wins that I highlighted in my update. And again, that was exactly the same number that we had last year for the first quarter. So that's on pace for what we normally see after a huge fourth quarter as far as the core side is concerned. And so still lots of activity with regard to our traditional offerings. On the -- on the tech modernization strategy. So as you can probably imagine, lots of customers engaged with us on those discussions trying to understand what the future looks like. But as I've stressed regularly on these calls, this was all about a strategy, and so we have a couple of modules in production today, wires being the first. We have customers using those modules. But this is a several year strategy before you're going to see anybody signing for the whole the whole stack of components that are on this tech modernization strategy. And I firmly believe, and I've said this on the call before, because we have such a unique strategy because it's such a forward-looking cloud -- truly cloud-native strategy as compared to what some of our competitors have done, we are getting a lot of attention, a lot of people talking to us about potentially signing with our current offerings with the anticipation that they will be able to move to the public cloud offering in the future. So we're on pace. We have -- I will point out, we have published for our existing customers, we've published now the roadmap for them to see. We haven't published anything externally yet because as I've -- as I witnessed now, we have some competitors out there that are trying to figure out how to do what Jack Henry is doing. So we're probably going to slow roll a little bit the public publication; but for our customers, to consume. We have published roadmaps now. Our customers are aware of kind of what the cadence is and where we're going as far as delivery of the tech modernization strategy. The other thing I would emphasize is tech modernization is not just focused on core. And so a big part of the Payrailz acquisition was to build out that strategy for the payments -- for part of the payments offerings that we have public cloud native. We're also the Financial Crimes Defender solution that I just alluded to. Financial Crimes Defender is a public cloud native solution built on that platform that we've been talking about. And so this is truly a modernization for everything we do at Jack Henry, not just the core solution to Jack Henry.

That was really helpful. And then just a question here for Mimi. Your adjusted payment segment revenue that was up 7% in the quarter. If you could just break out the drivers for us? Then how should we think about payments revenue for the remainder of the year? I think on the fourth quarter call, we would think the guidance was high single digits. Is that still the right way to think about it?

Thanks, Rayna, for your question. So as we reported payments grew 8% this quarter, you roughly think about that as about 60% from cards, about 22% from the EPS business, both of which are growing quite strong and then about 18% from bills pay. So -- and I would say that, that estimate of high single digits is still intact.

The next question will come from David Togut with Evercore ISI.

Could you give us a preliminary view of how you see margins trending in fiscal '24, given the substantial pressure you've called out in '23? In other words, how much of the inflationary pressure in FY '23 is simply related to Payrailz necessary investments related to that? versus pressures that might be more persistent and push into FY '24?

Dave, this is Mimi. I'll take that. So I would say that we're still very early in '23. So FY '24 is a long way away in a very uncertain global contracts. But we remain quite vigilant in our focus on expanding margin growth in FY '24. And some of the headwinds that we've seen in FY '23, some of them were onetime in nature, like the Java payment in terms of the year-on-year impact. And others, we're starting to see some loosening of inflationary pressure as it relates to personnel costs. So...

I think the thing that I would add to that, Dave, the things we've highlighted in the past and maybe just alluded to Java, for example, going from zero to actually -- and this is impacting all companies, not just Jack Henry, but going from zero to having to pay for that technology, the travel -- the uptick that we've seen in travel. So that will normalize now. So when you think about FY '24, the travel uptick will have been baked into the FY '23 comps. And so -- so that should provide the opportunity for margin expansion as we look into '24. And then on the wage side, we, like everybody, have seen wage inflation, but that is really starting to normalize as well. And so I think that has baked into -- will be baked into the '23 numbers when you get to comparing us during '24. So I think a lot of those things that we've highlighted and that most companies have highlighted, that stuff is really starting to normalize for Jack Henry. And I think it provides opportunity for us to get back the margin expansion again next year.

And just as a follow-up, could you update us on your capital allocation priorities? Maybe you underscored your responsible approach to capital allocation. How is your approach to capital allocation, perhaps different from Kevin? And then maybe more broadly, what are you seeing in terms of the acquisition pipeline, businesses that fit into your strategic priorities and which might also meet your kind of valuation threshold?

Thanks, Dave. Great question.

I'll take the second part, but you go ahead if you want to do the first part.

I think I'll do the first part. As I said, I would expect it to be fundamentally consistent. What I look for, as I said, is strategic fit, cultural fit the opportunities for both organic growth through investments as well as potential acquisitions and then returning capital to shareholders. So we'll explore all of those. I've been quite impressed, Jack Henry has been a very disciplined serial acquirer in the history with a very robust diligence and evaluation process. And so I would expect looking at all -- exploring all of those options to continue.

I'll just add in, Dave. I know that all of you who have listened to me talk know that for early months of this calendar year, I was very optimistic that as the year progressed, there were going to be some really nice opportunities as far as acquisition is concerned. I'll just say the pipeline of potential good companies to acquire is not nearly as robust as what I thought it was going to be. We were very bullish on Payrailz and what that does for us and for our customers, the opportunity that presents long term for us and for our customers. But there aren't a lot of Payrailz companies sitting out there. So we're looking -- we're always looking at potential deals. We're always looking at opportunities. But it isn't the market that I was hoping it was going to be as far as the opportunity for additional acquisition.

The next question will come from Nik Cremo with Credit Suisse.

I just wanted to ask about the Banno Business offering being rolled out early next year. Is there any way for us to think about the potential revenue uplift for that product on a stand-alone basis or on a per customer basis?

Yes. Nik, it's Dave. I wish that I could give you some really good expectations as far as building a model. The thing to know is many of our customers who have purchased Banno and have implemented Banno already on the retail side, and of course, it's only been serving retail customers so far. Many of them have either signed for or indicated that when Banno Business rolls out, they want to implement annual business for their business customers. So we already have a pretty rich, we'll say, backlog, pipeline of customers who want to put that into production. The tougher thing for me to project for you is how many business customers will adopt that and at what pace. So I wouldn't want to go too far in trying to predict what the revenue uplift will be, but we know that it will be there. We know that over time, it will be significant because we're aware of many customers who have a large number of business clients that they want to put into production. But I think it's too early for us at this point to try and project for you what that might look like. I will point out that we haven't baked anything significant into the financials at this point for the remainder of the fiscal year because we want to see -- you know us well, we're a disciplined, conservative organization. We want to see how this rollout goes and make sure that adoption is what we think it's going to be, but we haven't gone out on a limb as far as projecting revenue or adoption with that solution. We're not going to do that until we get into general availability and ensure that the adoption is what we think it's going to be.

Understood. And then for my follow-up, I wanted to just get an update and see what you're hearing from your customers in terms of their M&A pipeline and just the overall M&A environment as it pertains to your customer base and if you're still seeing the same type of slowdown that you called out last quarter.

Sure. Yes. And we are. Nothing has really changed in that regard, which is why -- the interesting thing about deconversion revenue, of course, is it happens when one of our customers get acquired, and I know that many of you know that, but just to make sure everybody on the call understands the conversion revenue happens when one of our customers gets acquired, and they essentially buy their way out of their existing contract. We know that has slowed as compared to the prior year. We're comfortable with the guide that we've provided. But as I say all the time, that's the revenue you don't want, right? It's the revenue that comes when a customer is leaving because they've been acquired. On the other side, on the flip side, our customers acquiring other customers, we have great visibility into that, and we know that's happening. We're involved in some of those deals, but that has also slowed. And so I think the overall M&A environment because of what's happened to the valuation on bank stocks and what's happened just in the general economy and people wondering what's going to happen, the whole market for bank M&A has slowed, and we're continuing to see what I highlighted last quarter.

The next question will come from Kartik Mehta with Northcoast Research.

I know you referenced the recent survey for bank spending. But I'm just wondering from your conversations and what's happening in the interest rate environment with net interest margins going up. How do you feel about what bank spending will look like in calendar 2023.

Yes, it's a good question. And I was a little frustrated. Normally Bank Director does project forward into '23. The other survey I always quote on these calls is the Cornerstone Advisors survey, which will come out, I think, the end of -- or mid-December, if I remember correctly. So normally, I highlight that on the February call. So everything that I know right now is anecdotal. It's me talking to bankers. I will highlight again, I said it in my opening comments, but I'll highlight again, we had more than 200 bank CEOs, and I'm just talking about CEOs in the CEO forum that's hosted by me in San Diego with us about a month ago. And they're generally a pretty optimistic group. I mean they are -- we've seen, of course, interest rate rise on the lending side, on the loan side have not had to raise rates as quickly on the deposit side, although that's coming and they know it. But for the first time in years, they have a spread, an interest margin spread to work with. And they are generally pretty upbeat, generally feel like they're pretty well capitalized. I don't have a whole lot of risky credits on the balance sheet. And so generally feeling like things are going to be okay. And of course, for them, then spending on technology, all of them are continuing to focus on what technology do we need to compete in the future. And that's where not only the tech modernization story that we have at Jack Henry, but the digital banking offerings that we have, both for consumers -- and now for commercial customers, for lending as well as deposits. Remember, we do a complete online commercial loan origination digitally through Jack Henry. So all of those things are topics today for our customers. And again, they're generally upbeat. Now as I stated earlier, I haven't seen anything about the election results. So that all may change day after tomorrow, I don't know. But as of a month ago, pretty optimistic about their opportunities and their interest in spending money on technology.

And then, Greg, I wanted to ask you a question on payrolls. Maybe just your thoughts on if this helps you differentiate your product or how it helps you differentiate or maybe it provides some other benefits. Just to understand how this acquisition will benefit Jack Henry.

Yes. Thanks, Kartik. Good to hear from you. So a couple of things. I think from a standpoint of differentiation, one of the things that you need to remember is that this is not a bill pay solution. It is a payments platform -- so it is different than our iPay offering from a standpoint that it actually drives all different kinds of payment solutions and can integrate directly in because of its API base into our PayCenter offering as well. So there's a lot of opportunity to utilize various components of that as part of our overall payments as a payments as a service type of strategy. So I think there's components that we were going to build out that we don't have to build out. There's things that they've already created. Dave alluded to the standalone P2P solution, which is actually an open-loop solution. So it creates the ability for both the receiver and the sender don't have to be in the same network. That's something that, again, will provide complementary opportunities to existing P2P solutions that are out there today and alternatives for our customers. There's a very slick account-to-account transfer solution that actually will create some opportunities within our existing base. But when you look at the overall landscape of payment players, especially ones that have multiple features, we really think that this one gives us the opportunity to accelerate what we were doing in the payments-as-a-service strategy and our technology modernization strategy.

And Mimi, just one last question. I think you might have already said this, and if you have, I apologize. The acquisition cost is that in a certain quarter or is that over the next few quarters?

Are you talking about the impact to our guidance? It's embedded within the full year guide.

Yes. Yes.

Yes. So as I mentioned, the impact will be positively obviously, on the revenue contribution. And then from an EPS perspective, the ongoing operations, the amortization as well as the interest expense.

The next question will come from Peter Heckmann with D.A. Davidson.

Great. I think most of my questions have been answered, but just a few little follow-ups. That onetime gain related to the sale, was that in SG&A?

Yes.

Okay. And then in terms of Payrailz, the -- I guess, in terms of the -- I guess we can estimate what the per share impact was of the gain. But in terms of isolating kind of the dilutive impact of Payrailz for fiscal '23, it's somewhere along the lines of $0.10. And forgive me if you already answered it, but how do you see that tracking to breakeven into profits over the next year or two?

Thanks for the question, Peter. As I said in my prepared remarks, it's $0.22 for the full year impact. And just to reiterate again, the only changes in our guidance are the impact from the sale as well as Payrailz. The core business remains -- guidance remains unchanged.

Great. And then the thoughts on just getting the business to breakeven and beyond or...?

Yes, we fully expect it to be accretive in fiscal '24.

The next question will come from Dom Gabriele with Oppenheimer.

Congratulations on everybody's new roles. If we just -- it feels like the real economy is starting to change. Could you just talk about the levers that you all have to pull to protect ROIC in a more challenging revenue environment. Obviously, as you mentioned, Jack Henry has a lot of contract revenue. But any extra detail there would be great. And then I just have a follow-up.

Dom, thanks for the question. We're not concerned. We feel good, as Dave alluded to, the health of our clients, the underlying credit quality of their loan portfolios, positive net interest margin. So the sales pipeline is very robust. So we're not concerned here. To your question on levers, I would look to the strong free cash flow generation and the reoccurring -- high reoccurring revenue percent for the business. And then I also would highlight, some of our exposure is different from our competitors in terms of high debit card, it's transactional, not interchange. So I would look to some of those in terms of the resiliency of our underlying business model.

If I could, let me add to that. My last -- one of my comments in my opening was a highlight that 15 years ago, 14 years ago, whenever the financial crisis, that was driven by financial institutions, 100% driven by financial institutions. What we're going through today is not driven by financial institutions. Think back to the 14 years ago, Jack Henry, yes, we had some bumps, but the model that we built in is the model that we have today. We did not go out like our major competitors did, we did not pursue merchant acquiring. We have stayed true to our business model, and that business model has proven to be very resilient as the economy kind of goes up and down. It's not that we're not bulletproof, but we have a pretty burn good model here with predictability with more than 90% recurring revenue and that revenue coming from mostly necessary systems at our customer sites, they're not discretionary spend. And so that provides a pretty good layer of protection against changes in the economy.

Great. And then maybe just, Dave, if you can talk about -- maybe update us on your ancillary product attach rate on average for new wins, so the extra products that you attach after or win, how that maybe has changed over the last year or two? And how that attach rate of extra products could change for public cloud wins?

Yes. So as you know, for our core deals, whenever we sell a core deal, our catch rate is pretty high. We sell a number of solutions along with the core system. As we move to public cloud, I think because we're going to have a number of these complementary solutions also public cloud native, like Financial Crimes Defender that I just highlighted, like Payrailz, and we have other solutions that are already on the public cloud. Because we are -- been pretty forward thinking about ensuring that our complementary solutions fit that same profile of being public cloud native, taking advantage of all the -- all the positives of a public cloud offering. I think that attach rate will remain relatively consistent, maybe greater. I think it's too early for me to predict anything like that. But I think what we've built and the way we've gone about this is to try and ensure that the attach rate remains at least the same as what we've seen in the past. If we had not modernized the complementary solutions, if we had not made the moves to bring them along with the core, I think you would see our attach rate drop significantly because people would say, “Well, you got this public cloud core, but nothing else you're doing is public cloud. Why would I use something that's hosted in a private cloud or that have to run in-house in my back office.” But that's not what we've done. We've been very thoughtful and diligent about making sure that our complementary solutions are coming along with the strategy, either they've been rewritten or written new or acquired like Payrailz so that we have a complete stack offering for our customers when they get to the public cloud point in their evolution.

Excellent. Actually, maybe I could just sneak in one more here. Could you just help us on the growth rate of Payrailz that you're expecting on revenue And then maybe just the full year tax rate that you expect for the total company for 2023?

I think we'll do tax rate. I don't know that we're prepared to share what the growth rate is going to be on Payrailz at this point. We don't call out individual products when it comes the growth rate of a product. But as far as tax rate is concerned, Mimi...

Yes, Dom. I would recommend using 24%.

The next question will come from James Faucette with Morgan Stanley.

Just a couple of quick follow-up questions from me. First, Dave and Mimi maybe both expressed confidence in kind of your deconversion fee revenue and understanding the nature of that revenue. But just wondering, just from a modeling perspective, if where your sense of confidence in getting to that target or that level for this year is? Have you already had notifications and that kind of thing? Or just wondering kind of where that stems from?

Yes. A good portion of that is known today. So we know of customers who have already been acquired. We know what the deconversion revenue is going to be. It's certainly not 100% is known, but a good chunk of that is known to us today. .

Okay. Got it. I suspect it as much, but I just wanted to be sure. And then the second thing I wanted to ask about is on Banno and just some of the things that we've seen and not in your space specifically, but in IT more generally. It's been interesting because we've seen some shifting around between fee versus usage-based models, et cetera. And Banno, in my understanding, is it's primarily priced on a user count basis. How does that stack up against your competitors that a lot of times are using usage or transaction-based models. And is that something that gives you an advantage right now? Or what is your sense on pricing type and the impact on market and ability to win with Banno?

Yes. So you're correct in that our pricing is tied to registered users. So it's essentially activity because people that have signed up and are using the platform on a regular basis. So I think the concept of registered users and usage are conflated because a registered user who is never using the system, and I forget what the metric is -- six months. If somebody isn't using it for six months, the financial institution doesn't get charged. So registered users and usage are conflated a little bit because there is this active component in the way that customers pay for our solutions. But we're not -- we don't win deals today because of the way we price this. We're winning deals because of the technology and the strategy and the forward-looking nature of what Banno is doing as compared to anybody else in the market. That's what's really driving success for us. So I wouldn't say that our pricing is -- I don't think our solution is cheaper than other people or anything like that. It's the technology and the offering that is helping us to win and continuing to grab great reviews from all corners of our market.

The next question will come from John Davis with Raymond James.

Dave, a lot of your -- some of your peers and a lot of other kind of enterprise software companies have talked about elongated sales cycles, longer decision-making. Obviously, you reiterated your guide. It doesn't sound like you're seeing any of that. But just curious if you could comment just on what you are seeing, any changes in the landscape whatsoever from a sales cycle perspective? Any color there would be helpful.

Yes. I've read those reports, JD. I have read the transcripts. We are not seeing that. That is not what Jack Henry's experiencing. I mean you have ups and downs all the time when it comes to individual decisions on individual deals where something may creep into an individual deal. But as far as the overall sales activity, the level of activity, the speed of deals, nothing has changed.

Okay. And then Mimi, just a quick one for you. Corporate and Other was pretty strong this quarter. Just curious, is that -- was there something kind of onetime in there? Is that kind of the run rate we should expect to just update year-over-year.

Thanks, JD, for the question. Nothing that I would say is worthy of a call out.

Okay, that's a fair kind of run rate. That line has been relatively consistent historically throughout the year. So that's how we should think about it this year?

Yes, I agree.

Okay. And then maybe one for Greg. Payrailz, I just want to understand a little bit more, like, obviously, it looks like you paid about 15x revenue for a business that's losing a decent amount of money. So clearly, you see a huge opportunity here. So I just want to understand like how you ramp this? And how -- why this is so valuable to Jack Henry and like how you can kind of get to like an ROI that makes sense. You guys have historically been very conservative on what you paid for acquisitions. So clearly, there's something huge here. So maybe just a minute or so on what you guys see the potential for Payrailz in Jack Henry?

Yes, sure. Thanks for the question. I think a couple of things, and we alluded to a little bit earlier. So again, there's an acceleration of what we were doing already in our tech modernization strategy, kind of driving towards the ability to utilize again this payments platform to drive transactions in a variety of different areas. So I already mentioned the open loop P2P, which is very significant. Again, when you look out in the P2P space and look at the alternatives and the cost of those alternatives, it creates a really great option for our clients, our core clients, but also noncore clients to utilize an open-loop solution. So we have some strategies that we're going to be using around that. There's things that we're going to be able to do related to business to consumer payments and B2B payments that we're driving as part of that platform. A lot of lease cost routing options that we didn't have in our old platforms to be able to drive things around there. And then I think one of the other big ones is that they have a pretty sophisticated fraud solution that does real-time P2P fraud. So we're going to be able to utilize that not only into what we're doing with P2P, but also, as Dave has mentioned a couple of times on this call related to Financial Crimes Defender, there's going to be some ability to leverage some of that data, but not only the data but also the technology, the AI technology. into some of the components that we're building there. So there's a whole host of things that drive into our strategy in general that makes this acquisition very appealing and accelerates things that would have taken us a lot longer to do.

The next question will come from Dave Koning with Baird.

And I had a few more on Payrailz. I guess, first of all, it's in the payments segment, right?

Correct.

Okay. Yes. And then secondly, in the $23 million of acquisition costs this year, is some of that nonrecurring stuff? Or is that more of the ongoing normal cost base?

Mostly reoccurring, Dave. We can provide a follow-up on the breakout for you.

Okay. And kind of the -- and the reason partly that I'm asking to get accretive next year, like if we just assume, let's say -- let's just say $20 million of revenue and 50% margins, so that you have $10 million of EBIT. But then between amortization and interest expense, it would just seem like it would be really hard to make that accretive. And I'm just wondering how you're -- like what kind of the formula is to get to accretion? Or maybe you're not including interest expense because you have enough cash over the next year to pay for it anyway? Or maybe just give us a little like on how you get to accretion?

Yes, go ahead.

Yes. I mean it's a good question. I would say we are very focused from our robust diligence models, we feel confident in the ability to get accretive and it will grow. We're doing a lot with the platform.

So I think -- and let me add this. So I think not only from a revenue growth standpoint, but there are also -- there are some very substantial cost takeouts that can be part of our overlapping contracts related to vendors and the scale that Jack Henry brings to driving opportunities with those. We've already negotiated several of those to be able to lower cost components for them. There's a lot of opportunity within resource allocation and what we're doing across those businesses as well. So all of those were modeled out to be able to get to the point where we feel that we'll be able to be accretive next year. It's a combination of revenue growth and cost takeout that leads to that accretion. It's not strictly based on revenue growth. We are not highlighting or creating a line item or highlighting a line item of what are the cost synergies. But just know, there are fairly significant synergies in this.

The next question will come from Charles Nabhan with Stephens.

I wanted to get your comments on a couple of specific products. The first being bill pay, which has been highlighted as an area of weakness by some of your peers and competitors. And the second being fraud, and I know you touched on the new platform. But I wanted to just get a better sense for how you're differentiated in that area, given the number of companies chasing that opportunity.

Yes. So Chuck, first off, on the bill pay, I know exactly which report you're referring to, and I was surprised at that because we have not seen any slowdown or change. Now the thing I've highlighted several times on these calls is the bill pay isn't growing very fast, but it certainly is not dropping off or shrinking or anything like that. And so I'm -- I was surprised at that -- but that is not what Jack Henry is seeing. Our bill pay is steady, continuing to grow, essentially low single digits. It's not a fast grower, but it's certainly not dropping off as far as the overall opportunity for bill pay. And then the second part of your question, remind me?

Fraud.

About fraud.

Yes. So Fraud Defender, our Financial Crimes Defender is, a, it's built on this public cloud native platform that we've been talking about. It is using the latest technology when it comes to fraud detection and it is built with these integration opportunities so that you can run a lot more different types of transactions through the same fraud engine and see different transactions for the same customer coming through a whole bunch of different presentation going to presentation layers. And so it truly is a differentiated solution, not only the technology that it's built on, but the offering, the breadth of the offering is different from what we already have, and we feel strongly different from what anybody else has in the market. And so this will -- time will tell if we have what we think we have, but we have we think, a truly differentiated offering with this new solution.

Got it. And just as a quick follow-up. Curious, does the guidance for '23 assume any impact from CPI escalators?

Thanks, Chuck. So within our normal construct of our sales cycle and our renewal, we had CPI increases that happened throughout the year. So that's part of our organic plan. Nothing that I would call out specifically.

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

Thank you, Chuck. We will have an additional investor interaction available from management's participation in the following upcoming investor events: Northcoast Research Fall Forum on November 14; RBC Capital Markets Global Technology Conference on November 16; Stephens Annual Investment Conference on November 17; Credit Suisse 26th Annual Technology Conference on November 29; and finally, NASDAQ's 47th Investor Conference on December 6. We are pleased with the results from operations and remain enthusiastic and focused on our future. We thank all Jack Henry associates for their efforts to produce these results. We appreciate you joining us today. And Chuck, will you please provide the replay number.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.