Good morning, and welcome to the Jack Henry First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Vance Sherard, Vice President of Investor Relations. Please go ahead.

Thank you, Viate. Good morning, and thank you for joining the Jack Henry first quarter fiscal 2025 earnings call. Today, I'm joined by President and CEO, Greg Adelson; and CFO and Treasurer, Mimi Carsley. Following my opening remarks, Greg will share his insights on the first quarter of our fiscal year and provide observations on our business and the industry. Mimi will then discuss the financial results and full year guidance outlined in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website. Afterwards, we will open the lines for a Q&A session. Please note that this call includes forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from our expectations. The Company is not obligated to update or revise these statements. For a summary of risk factors and additional information that could cause actual results to differ materially from such forward-looking statements refer to yesterday's press release and the Risk Factors and forward-looking statements sections in our 10-K. During this call, we will discuss non-GAAP financial measures such as non-GAAP revenue and non-GAAP operating income. Reconciliations for these measures are included in yesterday's press release. Now, I will hand the call over to Greg.

Thank you, Vance. Good morning, and I appreciate each of you joining this morning's call. I'm pleased to report overall solid financial performance results in the first quarter of our fiscal year 2025. I'd like to begin by thanking our associates for their hard work and commitment to our success by doing whatever it takes in doing the right thing for our clients. As I introduced in my script last quarter, I will share three main takeaways from the quarter and then we'll provide additional detail about our overall business. First, our financial performance. We exceeded our first quarter outlook. We had non-GAAP revenue growth of 5.3% in Q1 slightly ahead of the 5.25% anticipated in August. As we indicated in August, Q1 revenue and margins were impacted by slower growth rates for on-premise annual maintenance and card processing. Additionally, several long-term software usage contracts closed in Q1 of last year, creating a difficult comparison for this quarter. We remain confident in our full year non-GAAP revenue guidance of 7% to 8%. We provided commentary in August that non-GAAP margin would see contraction of 100 basis points. We ended the quarter with only 89 basis points of contraction. Second. Our sales performance. After a record Q4 for our sales team, we continued the positive momentum with record sales attainment in Q1 that included six competitive core wins. Of the six, three were financial institutions with over $1 billion in assets, including one $7 billion asset win. We also closed six deals to move existing clients from in-house processing to our private cloud. Third. Our client conference. We had a very successful Jack Henry Connect conference last month in Phoenix with nearly 2,600 clients and prospects in attendance. This is our largest conference of the year and produces a significant number…

Thank you, Greg, and good morning, everyone. Our continued focus on culture, service and innovation while supporting our community and regional financial institution clients led to another quarter of solid revenue and earnings growth and a healthy start to our fiscal year. I will cover the details behind our first quarter results and then conclude with commentary on the second quarter outlook and our fiscal '25 guidance. Q1 GAAP and non-GAAP revenue increased 5%, consistent with our expectations and providing the base for achieving our full year guidance. Quarterly deconversion revenue of approximately $4 million, which we released prior to full earnings was largely flat with the same period last year, reflecting minimal consolidation of our clients. This is also consistent with our expectations. Now taking a closer look at the details. GAAP and non-GAAP services and support revenue increased 4%. Data processing and hosting continue to be significant drivers of services and support revenue growth. Lower license and hardware revenues compared with prior year moderated services and support revenue. Our private and public cloud offerings increased over 11% in the quarter, reflecting strong persistence growth. This reoccurring revenue contributor is 30% of our total revenue and have long been a key double-digit growth engine. Shifting to processing revenue, which is 41% of total revenue and another significant contributor for our long-term growth model. We saw strong performance with 7% growth on both a GAAP and non-GAAP basis for the quarter. Continuing long-term trend, quarterly drivers include increased cards, digital and payment processing revenue. Completing commentary on revenue, I would highlight quarterly total reoccurring revenue was 93%. Quarterly enterprise fee revenue was 71% of total revenue and grew at 9%. Excluding hardware non-key revenue grew 1%. Next, moving to expenses. Beginning with the cost of revenue, which increased 6% on…

We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Andrew Schmidt with Citi. Please go ahead.

If I could just drill down on the core revenue growth for a moment. Maybe just unpack the first quarter performance a little bit. I know you managed for the full year, so I don't want to get too caught up on the first quarter performance. But maybe just a little -- few more details on how core performed in the first quarter? And then as the year progresses, can you talk about the trajectory we should expect there and the drivers as the year progresses?

So, I'll start off with the Core attainment because that could be a combination of what you're doing, and I'll let Mimi talk about the specifics on the revenue. So, six core wins. I will tell you that there were a couple of pushes that we had due to the hurricane and -- or the hurricanes that happened. And we had a few deals that we anticipated that would have closed in the first quarter that got pushed to the second quarter. So, we didn't lose them. They just were timing. And obviously, we're not going to push people to try to sign a contract during those type of challenges. So that's part of it. But honestly, the exciting part that we highlighted was that we continue to win the multibillion-dollar opportunities, including the $7 billion. And we have several others that we expect to come here in the fruition as well. So that part of -- I think, the potential part of your question is on the sales side, and I'll let Mimi handle the revenue component.

So as Greg alluded just now, demand remains strongly intact and solid and you should expect that as the year goes on across all of the segments in particularly to your question around Core, we're going to continue to see the key growth strong with installation of prior year sales. And so, we expect, similar to how you called it out in your note that Q1 will be floor for revenue growth with the subsequent acceleration as the year progresses. So, nothing particular to call out from a cadence perspective. I just think you're going to see a very strong second half.

Yes. And I think one other point, Andrew, and really for everybody else is I think it does point out that we still had a record quarter. So, if you look at our complementary products and the things that we're doing tangentially to just core wins, having a record quarter even with six core wins, which, again, we typically have a Q1 is typically light for us anyway coming off of the 20-or-so that we won in Q4 of last year. But the reality is, it really was pushes that happened from the hurricane or it would have been a fairly normal first quarter.

Got it. Yes, that makes sense. It's good to see the balance in the bookings there with the record sales quarter. Maybe just in the wake of the election, could you just remind us how Jack Henry is impacted by consolidation from an underlying revenue growth perspective? And then whether this cycle -- obviously, it's very early, but whether this cycle should be any different than what we've seen historically?

So again, I'll start, Mimi can add on. I think there's a couple of things. So, one, what is baked into '25, I don't think the election results will change much of what we have baked for '25. Knowing, obviously, we have a President that we've seen before. So, we know a little bit more of his playbook and what we should expect related to regulatory, hopefully, some improvement in the timing of M&A. But for our institutions we do have several already lined up with acquisitions that will be happening in the second half of our year and '25 that are already baked into the number. If something else accelerates, then obviously, that would be additional gravy for us. But we've already added, and I think we mentioned this on the last call, we've already added additional conversion teams and migration teams for both banking and credit union based on the feedback that we've gotten from our clients. And of course, we get knowledge of deals that are going to happen very early on so they can't get those slots. And so, we're working through that. But we'll see what happens. I think the regulatory challenges that we see today, hopefully, there's some lessening of that. And then obviously, the approach that they've taken in the past regime on really slowing down M&A and the timing of getting approvals, we would hope and expect that, that would enhance. And again, the more we're winning and the more we're growing asset sizes with our own institutions, which we've been articulating the 27% bank growth over the last four years and 34% credit union growth over the last four years, that continues to position us and more of the drivers in a lot of these opportunities.

Yes. I think spot on, Greg. The only thing I would add is given last year and the guidance for this year for deconversion revenue, it's hard to imagine that essentially next year, you don't see the impact to M&A leading to higher deconversion revenue. But again, as we said, you never know, that's really hard to forecast. And it really depends on the institution and where they are on their renewal cycle. But I would not bake in anything else for this year given the timing of the turnover of the new administration.

Next question comes from Vasu Govil with KBW. Please go ahead.

I guess first one for you, Greg. I wanted to ask about the Banno retail win. I think you said 12 new wins in the quarter, which is a good number, but if I look back, it's probably one of the slowest we've seen in the last several quarters. Just anything to call out there, anything timing related like you talked about the core? And then I know you have identified third-party cores also to sell Banno into? Just how is that effort going and any color around that?

Yes. Good question. So, on the number of wins, I don't -- there's nothing -- no concern there. I think a lot of it is timing. A lot of Banno deals are tied, at this point in time to Core wins. We're still moving customers over from the old platform, and we're actually getting ready to announce. We've told our customers that we'll be announcing a sunsetting the NetTeller platform, which again will help accelerate some additional ones that have kind of been laggard to move. But the reality is, no concern there at all. And to get 18 Banno Business is very much in line with what we had last year. And fourth quarter, you really -- that hopefully is a heavy sales win for us. But comparing it to the Q1 of last year, we were fairly much in line with that particular quarter. Related to the outside of the base. So, this really mostly applies to the Banno than it does to some of our other products that we're taking outside the base. But honestly, we've had some challenges with some of our competitors being as open as they say they are. And so, we've been trying to work through some of the timing and costs that they want to embark upon us. And honestly, as a byproduct to that, we have really looked at a different way of approaching this. And I don't necessarily want to share what we're doing because I don't want it to get out to our competitors, but it is a way for us to bypass some of the typical integration points that you have to have and do it a different way, and we're working that path parallel. And it's really more appropriate and applicable to the Banno platform. The Banno platform has a lot more API integrations that need to happen, which makes it more difficult for some of those integration work. So, what we're going to do is be able to leverage some of the things that we're doing in Moov and be able to offer that through a process that will allow us to get outside the base, and we're going to do that in parallel with what we're doing with the other outside of the base initiatives. So, no change at this point in time line, just a little bit of a change in probably the level of productivity and success that we had hoped to have in -- by the end of this fiscal year. So more to come on that, but we are taking a different approach and I think it's going to be more successful for us.

Great. And a quick one for you, Mimi. Just on the free cash flow conversion, like anything -- any change to the 65% guide that you had given us last quarter? Just any puts and takes there?

So, I feel comfortable with the guide remaining intact at the 65 to 75. There were a couple of people that noted Q1 a 50% cash flow. And I would just remind everyone that the annual, the trailing 12 months is a better indicator of the free cash flow because there are times, particularly Q4 to Q1, and the timing of the payments related to the annual maintenance. And as I called out on last quarter's call, Q4 benefited about $60 million from a higher mix being paid in Q4 to this Q1. So, if you think about that Q1 50%, it really is closer to the 100% like we've seen in prior year Q1. But I think the 72% should give everyone comfort that we are well within that guide -- full year guidance range.

The next question comes from Rayna Kumar with Oppenheimer. Please go ahead.

So, one of your competitors recently called out a competitive win of less than $10 billion asset bank. I'm just wondering, if you're seeing any increased competition for banks and credit unions in core processing in your focus area?

No. I mean, Rayna as said, we compete with -- we've always competed with that particular company in that space, and they -- we don't win them all. We win a lot and a lot more than anybody else, but we sure don't win them all. But from a standpoint of competitive pressure, no. That particular deal, I kind of know what happened. And there was a significant difference in price, for sure, but the reality is, we're continuing to be very successful in that space, including, like I said, the $7 billion opportunity we just won, plus a lot of the renewals that we've been able to do over the last 18 months are all at our larger client bases. So, it's anywhere from the 15 to the 30 that we've been renewing they're all staying with Jack Henry. So, there's no concerns at this point.

Understood. That's very helpful. The economy seems to be showing more resilience evidenced by recent earnings reports from other payment companies. Do you think if this macro environment persists, there could be upside to your 25 to 40 basis point margin expansion target for this fiscal year?

Yes. I think at this point, it's probably a little too early to say for us because we're just closing our first quarter. We do already have a pretty substantial second half planned that reflects robust growth. But yes, particularly in the area of transaction and card volumes, we anticipate a growing spending in the spring, but there is always an upside the economy and consumer sentiment is stronger.

The next question comes from Jason Kupferberg with Bank of America. Please go ahead.

I just wanted to start on the second half revenue growth outlook and definitely appreciate the priority on Q2 to get our models tuned. I guess you got to be at around 9% in the second half to get to the with midpoint of the full year and you talked about implementation cadence. But can you maybe just go a layer deeper into the visibility you have, factors that are going to drive that acceleration and just clarify which revenue lines that's going to be most pronounced in? It sounds like a lot of it is Core, but just wanted to check in on that.

Great question, Jason. Let me give you a little bit more color on some of the drivers that make us feel quite confident for the second half of the year. So first, I would call out the Hardware last year was quite strong. That a harder comp in first half this year than second half. So, the first half this year Hardware is about a $7 million drag impact that eases up a little bit in the second half of the year. We expect cloud revenue, the record growth to continue. The impact is of new sales impact. We see strong growth in the faster payment transaction and we're starting to see [indiscernible]. So, I think that's another opportunity in the second half. Card is I just said we expect this spring to pick up a little bit, and we do have a lower Q4 comp. And then I think just as new products continue to ramp, things like Defender accelerating, we're running implementations, consulting revenue transaction and then overall digital adoption tied to the F&B strategy. So, the impact of all that plus the implementation for all the prior year sales success coming on board gives us confidence in the second half.

Okay. And just talking about Core wins for a second. I think you mentioned six in the quarter. I know it's a typical year, you target 50 to 55. It's still early. We know this is never ratable. It's usually lumpy by quarter. And I think you said a couple of deals slipped because of the hurricanes, but I wanted to just check in on overall pipeline confidence and visibility. And the 50 to 55 is still a reasonable ZIP code for this fiscal year based on how you see the pipeline converting over the next few quarters?

It is. And again, we're still -- we're tracking well. Last year, we did the 15, more than $1 billion. And we're tracking again nice with that. We're already having three in the first quarter, which again is typically a lighter quarter for us. And not just a $1 billion deal, it's -- one of them was a $7 billion deal. So absolutely on track and the pipeline is as robust as it's ever been. It's at an all-time high again even after the record Q4 and year and record Q1. So, feel very confident in the team's ability to go hit our normal numbers.

The next question comes from Will Nance with Goldman Sachs. Please go ahead.

Just another one on the second half acceleration. It's nice to hear the confidence there. And I just -- it sounds like most of that is more kind of implementation and tough comps from the prior year. Maybe there's a little bit easier of a comp in in payments in the back half of the year. But I guess, big picture, when you think about exiting the year at a stronger growth rate, maybe excluding having an easier comp in payments, is there anything in that back half growth rate you would caution us against run rating into the first half of the following year, not exactly asking for following your guidance, but just wanting to kind of understand if they feel like that's a good run rate given the implementation schedule for the following few quarters?

I appreciate your question, Will. I would say FY '26 is a little bit far away to give a cadence deal yet. And as we said, I wouldn't recommend taking any one quarter and annualizing that. So, I think as we get a little closer, we'll certainly get a feel. But I think there are some things with new products, the sales implementation, faster payment adoption, cloud growth that are a continuation and not just kind of a onetime like some of the grow over ease it will be.

Yes. And the only thing I'll add to that, Will, is just much as we described at the Investor Day, our goal is to continue to inch up to the levels of closer to the 8% were all the things we're doing, we're hoping and believing that, that is going to get us there. But the move piece will just have been launched at the end of the year and seeing the level of success there, much as Mimi said, with a lot of the new products and continued implementations and getting through some of the queues that we have. And obviously, even in some of the things that we've been able to get launched in tech modernization, things around data broker and all that. So much time still needs to take place before we feel confident with giving you any more additional guidance. But the reality is we have all the things in motion, and we do have an all-time sales pipeline to go make it happen.

Got it. Okay. I appreciate that. I figured I would ask. And then just I guess any color on just how you're thinking about capital allocation and the M&A environment? We touched a little bit on bank M&A, but just any kind of capital allocation priorities come to mind and what might be an environment that's more conducive to M&A?

Yes. I would say we're steadfast in our prioritization from a capital allocation perspective, we're continuing to invest in our future growth through innovation. We continue to support our long-standing dividend policy. We paid down the debt. We're continuing to pay down the debt throughout the year. And as we start to build into a more positive cash flow position post paying down that debt, we'll always continue to look at share repurchases as an option. And M&A is always on the table. It's just there hasn't been any interesting process over the last several quarters. So hopefully, if people think between the interest rates coming down and M&A being more conducive, hopefully, there'll be some interesting prospects. But again, that would have to be not only financially attractive, be an acceleration to our tech road map journey.

The next question comes from Dominick Gabriele with Compass Point. Please go ahead.

So, I guess, I was just curious if there was any change in the expected pace and deemphasizing some of the lower growth, less profitable businesses? You touched a little bit on it earlier in the call, but if you could give some extra color there?

Yes, it's a great question. And honestly, I was going to bring it up even in Will's question, so I'm glad you did. So, we are focused on it. Some of these things, as we've mentioned through Investor Day and individual meetings is that this process of product rationalization is going to take several years for it to completely take fruition. There are some opportunities that we're exploring on whether they would be small businesses of a potential divestiture, as we talked about before. I already mentioned a couple of products that we've been announcing sunsettings. So, those take -- we typically get two years for that to happen. Some of that will allow us to move customers faster to the better margin and faster advancing products like Banno [indiscernible] to Banno, and Yellow Hammer to Financial Crimes and things along that line. But there's other things that we're doing that will take a little bit more time and scrutiny that we're still working through, but it is a priority. We actually just came out of our strategy meeting, and it continues to be a priority, and we have a team focused on it.

The only other color I would lay on there for your question. It's doubtful but it's doubtful at this point that you see like one big chunk in a quarter. Some of these -- we're going to pursue different [indiscernible] whether it be sunsetting, whether it be just more cash tally, whether it be actual looking at divestitures. So, I doubt that they stack up one on top of each other timing lines to have that big of a noticeable impact to any one quarter. Obviously, we would call that out. But I think it's just over time, you'll see the improvement of that non-key revenue be less of a drag on the total performance.

And it should -- based on what we've been doing in the analyzation, it's also going to help us with some of the level of tech modernization in the shared services environment and some of the cost containment and expense control back to our focus on continued margin expansion. So, all of those things will help us drive both the revenue growth as well as the margin.

Yes, for sure. And it was nice to see the margin being better than you were expecting this quarter. I guess, the election results basically just happened. So, I'm just going to go back to this for a second. Do you think that -- do you have any sense from your clients that they were holding up certain tech investments until they understood who the winner was going to be? And do you think that there's incremental tech spend that they're likely going to pursue that maybe was not captured in just the budget growth that you guys talk about once or twice a year in your surveys, do you think that could come through in like complementary products, where they're going to start making some of those discretionary investments because of how the election went and maybe more or less?

Honestly, I don't, at this point, just because we've been so direct and have gotten so such positive feedback on what they do want to do which all make collective sense regardless of who is in the White House. Now, I don't know what I don't know. I do -- there could be opportunities that happened through the M&A environment and folks are looking at opportunities to maybe purchase -- have an M&A, and there could be products that get accelerated because of an opportunity that, that particular bank had or didn't have. But I would say based on what we know today and the most recent feedback we literally just got a month ago at our CEO forum, I don't see that necessarily as of today.

And the next question comes from Peter Heckmann with D.A. Davidson. Please go ahead.

Greg, I just wanted to see with JH&A Investor Conference Connect, how much of a priority or how much emphasis are you putting on the modern core modular platform? And how is that resonating with clients? And is it your sense that some of these multibillion-dollar institutions are really looking for a vendor that has a pretty well thought out and underway process to migrate towards an unbundled core? I mean how important is that in terms of their decision-making?

Yes. I think from the prospects that were there, and we -- as I mentioned, we had 50 prospects and I met personally with 15 of them for a period of time. Yes, the strategy of what we're doing, so it's not just about the unbundling of the Core, it's just the strategy of taking the core into the public cloud and not just Core, but also some of the non-Core products that we've built, understanding the value of being in the public cloud. So those prospects, and of course, our clients as well, but our prospects have told us that they're not seeing that same level of conversation with whom they're with today. So yes, that strategy plays strongly in it. But it also plays the other things that we emphasize. Our culture, our service, the other innovative technology that we've been building through the years with whether that be Financial Crimes or what we've done in Pay Center or what we've done in in our enterprise account opening and things along that line. So, it is a combination of things, Pete, that drive this, but the overall strategy, not just Core, but the overall strategy is what is gravitating then to Jack Henry.

If I may add on, I think also what's really resonating is that shared services. So, as we build componentry for the tech modernization, that’s supporting and enhancing the experience on the existing core that. And so, that's giving people comfort that there's innovation on the core that they might go to today as well as where they're going tomorrow.

Yes. One last point, and I did emphasize this, was the open philosophy. When they walk into our tech showcase 250 fintechs that are there versus other client conferences, they also -- they know we are putting our money where our mouth is. And the reality is, they understand that Jack Henry is going to allow them to pick what is the best product for them. And so that is a big part, too, because they're not getting that same level of cooperation today. If they do want to go with a fintech or do an outsize of the base integration, as I referenced before, they're typically getting charged and I am going to [indiscernible] to do it.

Okay. That's helpful. And then can you just -- you haven't talked too much about the loan origination platform. Can you talk a little bit about some of your thoughts there in terms of solutions on the lending side and whether not that's something that we might hear a little bit more about over the next few years?

Yes. And I expect you to hear more in starting in 2025. So, we've been working on combining -- the loan vantage platform now has been built to be a single consumer and commercial platform. And we've taken the account opening software, what we call, OpenAnywhere, and we've added that into the solution. So, it's now called Enterprise Account Opening. And it will allow the institution to -- it competes very nicely with nCino or anybody else out in the market today. And we are -- we will be in what we call early adopter in January 2025, so it's coming up, and so we'll start to have some of our customers kind of working through that with us. But we are very excited about that and what opportunities it will continue to bring to our financial institutions.

And it is the top priority [indiscernible] from our strategic benchmark service.

The next question comes from Chris Kennedy with William Blair. Please go ahead.

Greg, you mentioned data broker a couple of times. Can you just remind us of what the opportunity is there? And just maybe talk about the CFPB rule and open banking and how that drives that?

Yes. So let me start with the CFPB rule. So, 1033, if you remember back to some of the comments that we have made in prior quarters where we had eliminated screen scraping in our Banno digital platform. We're the only provider that's 100% eliminated screen scraping. So, we are already ahead of what was coming out with 1033 knowing that there was going to be something. And we now have direct API integrations into eight of the leading financial data aggregators. So, the big names that you've heard of like Finicity, Yodlee, and Plaid, Intuit and MX, but there are several others. And I think we have like eight or nine more in the queue to do full API. So -- and as a reminder, this is really -- this rule does not impact Core. It really impacts digital banking providers. So, we are significantly ahead of anybody in the space today for that -- for 1033. Related to Data Broker, so Data Broker, we have a few clients that are live that have been testing this in our early adopter. But the reality is that we are bringing into a single data repository, the ability for our customers to get their core data, their digital data, their payments data, their fraud data, their lending data, all from Jack Henry in a single repository as well as we are giving access to third party that whoever third parties, they use to be able to bring that data in as well. And of course, we've got all the guardrails and things that we need to do to make sure that, that happens. So, we're just in early stages of bringing some of the groups in. So, we have core in there today. We have digital in there today. We'll have payments in by the end of the calendar year, and we'll have fraud in by the end of the first quarter of 2025. So, we expect more sales to occur, obviously, as you get more and more of the data in there. But we've been testing it out. It's going really well. As far as uptick in revenue, probably not much in 2025, but we do expect it to be something that will help drive 2026.

And the next question comes from John Davis with Raymond James. Please go ahead.

Mimi, we talked a lot about the second half but wanted to touch on margins only guide implies margins will be up somewhere close to 100 basis points in the back half of the year. Obviously, you have revenue accelerating, easier comps, anything else to call [indiscernible] on the margin front right now?

Yes. So, I would say the first half was -- is a little bit more pronounced from the headwinds we've seen both the software usage, and additionally, I would call out Q2 is a bit of a tough comp has immediate impact. We had the departures last year Q2, but not the replacement. And so that's a bit of a grow-over from a headcount from the roughly like 250 heads that are going to be Q2 '25 versus Q2 '24. So, I think those things make a little bit challenging in the first half. But as we get to the second half, it certainly aligns to our revenue growth. So, I feel pretty comfortable with the full year guide of the 25 to 40 basis points.

Okay. Great. And then, Greg, you called out 20% increase in Banno users year-over-year. Is Banno for business, a meaningful contributor to that? And if so, is it safe to assume that Banno revenue is growing well above that 20% user growth number?

Yes. The Banno Business is not a meaningful contributor, it is a contributor. But as far as the growth, it truly is about our implementation numbers, and so as we add more and more business customers, yes, there can be some additional users. But that growth of 20% has been -- really been driven through the retail platform. But as we continue to add, remember, the way we price Banno Business is that the retail customer, if they -- regardless of how many retail customers they have, they pay that same amount of -- and it's kind of an add-on fee to what the retail piece is. So, as we continue to get more penetration and some things that we are doing to actually do adoption activities, I think that, that number will become more and more meaningful. But as far as the revenue growth, we've been kind of consistent over the last year or two years on where we've been on the revenue growth in the digital side. And remember, digital is more than just Banno.

And the next question comes from James Faucette with Morgan Stanley. Please go ahead.

Wanted to ask, Greg, really quickly, you mentioned the implementation queues. And just wondering how those are trending broadly and how are you thinking right now about the puts and takes between the margin expansion you're delivering versus potential for additional resource allocation to help speed up those implementations?

Yes, thanks James. Yes, we look at that literally every month as part of our discussions with our teams during what we do variance reviews with them. And so, we balance that very well. We've added people in our Financial Crimes Defender Group last year, a significant number, honestly, to do that. Some of that is implementations are in some cases, especially in financial crimes, they can take up to six months because of the data that needs to get transferred over. So, some of it isn't just a people thing. Some of it is purely just waiting. The other thing is that a lot of these can be tied to a Core implementation, so they get delayed until the Core gets done as well. So -- but we absolutely evaluate the need to expedite the revenue flow and balance it against the operating margin. So -- but we do that literally every month.

Got it. And then I'm wondering, it's been a few months since you announced the partnership with Moov. It seems like an interesting potential product both for Jack Henry as well as Jack Henry's customers. Just any update on kind of progress there and when we may start to see that enter the market commercially?

Yes. So, lots of progress. We've made honestly a lot of advancement even since Investor Day, when we publicly announced it. We did a full demo of this at our client conference in front of the 4,000 people that were there and got rate reviews for them being able to see that. As far as timing, as I announced, we're on time to be able to deliver this to our early adopter Banno clients in May of 2025, and so we're on track to do that.

The next question comes from Ken Suchoski with Autonomous Research. Please go ahead.

I wanted to circle back on the cloud migration. I think you said cloud revenue was 30% of revenue growing low double digits. I think you have 70%, 75% of clients on the private cloud. Can you just give us a sense for how much runway there is for cloud revenue to continue to grow at these double-digit rates? Are you seeing any traction in the public cloud yet? Just trying to get a sense for how sustainable that growth is on the cloud side and maybe where the revenue shows up across the segments as well?

Yes. Ken, I'll start with just kind of the migration and then let Mimi go through the revenue component of it. But -- so we are at 73% right now in the private cloud. And so, we don't expect to get to 100%, and we expect to be somewhere in the low- to mid-90s because there'll just be some of the customers that just don't want to move. And -- but we have several years. We're still expecting this year to do our normal 40-ish from an in to out. And so, there'll be somewhere in those numbers. And we're really on track. We had, based on first quarter of last year versus first quarter of this year, our ins to out was very similar in number. And the other thing that's happening is that we are down to a lot of our larger clients. So, even if we move less or fewer in a quarter, they typically are larger clients that are bring more of an impact as well. And just as a reminder, on average, between banks and credit unions, about 1.75 increase. So that is part of where we are. As far as years of run away, we expect to be three, four, five more years of that at some pace. But at the same time, I announced earlier about the deposit only Core being ready in 2026. So, we could see some lift at that point in time of folks moving either directly from in-house to the public cloud or from the private cloud to the public cloud or being in both because it will be a deposit-only Core in 2026 as we build out the rest of the Core components. So, more to come on that, but we still have some runway and they are larger customers.

Yes. I mean, I think Greg hit on all the salient points that there's still runway to go. The clients are potentially larger. Also, our clients grow, we grow with our clients as they grow. So even the ones that are early in our private cloud environment as they had more accounts, as they grow and expand, we're going to continue to get revenue growth with them. So, that's the only other thing I would call out from just -- it's continuing to be a strong growth engine for us in the future.

Okay. Great. And as you said non-GAAP revenue would grow 6% in the second quarter. Can you just remind us of the building blocks, I guess, by segment just to get to that 6%?

Yes. I think we can follow-up offline in terms of the components. But I would just say like on a whole, I don't expect to see a lot of different changes from the momentum we had in Q1 in terms of for the segment. We still think that for cards, Q2 is going to be a little bit better than Q1. But it's still probably a modest spend expectation. We feel -- as cloud is our slowest quarter in Q2. Hardware has less of a drag than Q1, but still a drag in Q2 as well. So -- and you have some drag in some small things like call center and processing So I think that's what's leading us to that 6% and then taking off solidly from there in the back half.

And the next question comes from Dave Koning with Baird. Please go ahead.

A couple of things. First of all, card processing, you put that in the press release was 5% growth, last quarter was 8% growth. And I know like the networks and stuff were pretty stable growth. Was there anything in there just to call out why that decelerated a bit?

Yes. I think our transaction volume was pretty much in line, I would say, where we've seen on the positive side, we've seen higher ramp from a faster payment spend, and that's really taking off. The bill pay from the rest of it is a modest kind of grower from the EPS business, a little slower than prior year, but modest growth. So, I think that's pretty much in line.

[indiscernible]

Okay. And then the one other thing, the -- and we talked about this last quarter, too, interest income remains high. And you guys had a ramp kind of 1.5 years-or-so later than I would say a lot of other -- I guess you had some ramp a while ago, but you've really ramped that up a lot in the last year-or-so now. And again, it was really high in Q1. Does that stay -- or what created kind of a little later ramp in that? And does that stay kind of stable through the year?

Mostly, I would say, it was due to just the timing of negotiations with some of our bank counter-parties in terms of getting more attractive yield on those balances. It does have some correlation with interest rates. So, I think it's pretty stable for Q2. We'll see what the Fed does in the back half of the year and what pace they do. But I would say you'll see some correlation with interest rates and interest income.

This concludes our question-and-answer session. I would like to turn the conference back over to Vance Sherard for any closing remarks.

Thank you, Viate. We look forward to hosting you at next week's shareholder meeting either in person or on the webcast. And in the coming weeks, we will be attending various investor events in the U.S. and Europe. We would again like to thank all Jack Henry associates for their hard work and dedication which have contributed to our outstanding results. Thank you for joining us today. Viate, please provide the replay number.

The replay number for today's call is 877-344-7529 and the access code is 6482509. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.