Jack Henry & Associates NASDAQ: JKHY reported what executives described as “record” third-quarter fiscal 2026 results and raised full-year guidance for the third consecutive time, citing strong sales momentum, growth in recurring revenue, and continued client demand for technology investment.
Quarterly performance and updated guidance
President and CEO Greg Adelson said the company delivered non-GAAP revenue of $616 million, up 7.3% year-over-year, with a non-GAAP operating margin of 22.9%, “on par with last year's Q3.” CFO and Treasurer Mimi Carsley added that GAAP revenue increased 9% in the quarter, while non-GAAP revenue increased 7% for the quarter and 8% year-to-date.
Carsley noted third-quarter deconversion revenue of approximately $19 million, up about $9 million year-over-year, reflecting what she called a “steady pace of M&A activity among financial institutions.” She emphasized that deconversion revenue “can vary greatly quarter-to-quarter” and said industry consolidation remains “largely neutral to slightly positive” for Jack Henry.
For fiscal 2026, Carsley said Jack Henry increased deconversion revenue guidance to $37 million and lifted full-year GAAP revenue growth guidance to 6.1% to 6.6%. The company also tightened non-GAAP revenue growth guidance to 6.6% to 7.1%.
However, Carsley cautioned that fourth-quarter growth is expected to be lower than the first three quarters, and that the company’s “expectation on fourth quarter revenue are below current analyst consensus.” She attributed the Q4 setup to several factors, including projected slowing in digital revenue due to lower active user growth, pressure on card revenue growth “from risk management,” and less one-time network incentive revenue. She also said Q4 expenses are expected to face “relatively higher pressure” from medical costs returning to historical levels, cloud migration and infrastructure expense, and commission.
Despite that Q4 cadence, Carsley raised full-year expectations for non-GAAP margin expansion to 75 to 95 basis points, up from the prior 20 to 40 basis points discussed on the company’s August call. Full-year GAAP EPS guidance was raised to $6.78 to $6.87 per share, representing 9% to 10% growth, with a fiscal 2026 GAAP tax rate estimate of 23.25%. She also updated free cash flow conversion outlook to 95% to 105%, with “a bias towards the upper end of the range.”
Core wins accelerate, with more “trifecta” deals
Adelson highlighted sales performance as a major theme of the quarter. He said the company posted 17 competitive core wins in the third quarter, including five institutions with more than $1 billion in assets. He called it Jack Henry’s strongest third quarter for new core wins in seven years and said it tied the company’s best third quarter ever in wins over $1 billion.
Year-to-date, Adelson said Jack Henry has won 43 core deals, including 11 institutions over $1 billion, up from 28 wins and eight over $1 billion at the same point last year. Based on that trajectory, he said management is “highly confident” it will exceed last year’s 51 core wins. In Q&A, Adelson said he expects core wins to be “north of 51 and probably north of 55,” though he cautioned timing can shift between quarters, especially as the company moves upmarket and contracts take longer.
Adelson also pointed to an increase in higher-value “trifecta” wins—core deals that include digital banking and card solutions. He said 25 of Jack Henry’s core wins so far this year, or 58%, included digital and card, compared with eight deals (29%) at this point last year. Asked whether that level of cross-sell is sustainable, Adelson said he believes it is, citing product and feature investments in the digital and card platforms and differentiators such as Rapid Transfers and Tap2Local.
Discussing competitive dynamics, Adelson told KBW that 13 of the 17 quarterly core wins came from a single provider, while adding that Jack Henry “did take some from really everybody.” He also said many of those deals were in motion before later competitive announcements because core contracting typically takes 9 to 12 months.
Product updates: AI, stablecoins, SMB payments, and embedded payments
Adelson spent significant time discussing artificial intelligence, saying the company has been operating and expanding AI capabilities for more than 3.5 years with governance supporting a “responsible, bold, and balanced approach.” He said nearly 100 AI tools are approved for internal use, supporting more than 500 distinct use cases.
Adelson provided examples of reported internal impact:
- Developers working on the Jack Henry origination solution online account opening solution increased productivity by roughly 90%, driven by faster coding and issue resolution.
- An AI-assisted recommendation system for exception item processing is in closed beta with three banks; Adelson said participants report a 70% to 80% reduction in time to close exceptions each day.
- An AI advisor bot has assisted with more than 3,700 complex support interactions over the past two months with a 96% success rate, Adelson said.
He added that Jack Henry has deployed internal “AI coaches” to accelerate adoption and described productivity gains from natural language development, including an example where a non-technical associate built an internal travel application to avoid licensing additional software.
On stablecoins, Adelson said beta testing with clients to send and receive USDC is “going well,” and the company is “largely awaiting final regulatory guidance” to proceed faster. He said stablecoin processing is being delivered through the cloud-native Jack Henry platform, which connects to the company’s core systems.
Adelson also outlined traction in new SMB-oriented offerings:
- Tap2Local: Adelson said more than 700 banks and credit unions were live at the end of April. Following the start of targeted marketing “just a few days ago,” he said active merchants doubled to more than 1,600, with several thousand more in enrollment. Tap2Local recently won a FinTech Breakthrough Award for Small Business Payments Solution of the Year, he said.
- Rapid Transfers: Adelson said the product is live with more than 110 banks and credit unions, with another 190 in onboarding. He said the average transaction size is about $260—double initial projections—driven by stronger inbound transfers, and said adoption is tracking ahead of initial models despite limited marketing to date.
Adelson said client testing is underway for a cloud-native deposit-only core, with development completed six months ahead of the schedule originally announced in February 2022.
He also provided an update on embedded payments following the Victor Technologies acquisition, stating the Victor platform is now branded as Jack Henry Payments Orchestrator. Adelson said the platform enables financial institutions to embed payment capabilities into third-party non-bank brands such as fintechs and commercial customers. In the third quarter, he said Jack Henry signed one bank and onboarded three fintechs, and expanded the sales pipeline to more than 40 banks and/or fintechs.
Segment results and operating metrics
Carsley said results were positive across the company’s operating segments. Core segment non-GAAP revenue increased 9% in the quarter, with operating margin contracting 27 basis points due to what she described as a “temporary product mix” shift toward lower-margin revenue sources such as implementation and work orders.
The payments segment posted 5% quarterly non-GAAP revenue growth and 159 basis points of non-GAAP operating margin expansion, Carsley said. She said card processing revenue grew steadily but was partly offset by lower network incentive revenue, and she pointed to a continuing shift and “significant growth from faster payments.” Adelson added that over the past year clients’ adoption of Zelle grew 25%, RTP 26%, and FedNow 31%, and he said payment transaction volume across those channels increased 47% year-over-year in the third quarter.
Complementary segment non-GAAP revenue increased 7% in the quarter, accompanied by 99 basis points of non-GAAP margin expansion, Carsley said, citing demand for digital solutions and product mix benefiting from sales to new core wins, existing customers, and non-core financial institutions.
Corporate services non-GAAP revenue increased 27%, driven primarily by increased hardware sales, Carsley said, while noting the segment’s expenses are not allocated to other segments and its margin is not meaningful for comparison.
Cash flow, capital allocation, and balance sheet
Carsley said operating cash flow was $186 million in the third quarter, up 72% year-over-year, while free cash flow was $122 million, up 137%. She attributed stronger cash generation to operational performance, “positive impact from the tax law, tax bill change,” and some small asset sales.
Year-to-date capital allocation included $284 million in share repurchases, $127 million in dividends, and the Victor Technologies asset acquisition, Carsley said. She noted the average purchase price for repurchased shares was $160. The company ended the quarter with $90 million of debt and expects to end the fiscal year debt-free “barring acquisitions or other opportunities.” During the quarter, Jack Henry also established a new $1 billion revolving credit facility to support future growth opportunities.
About Jack Henry & Associates NASDAQ: JKHY
Jack Henry & Associates, Inc is a leading provider of technology solutions and payment processing services for the financial services industry. Founded in 1976 and headquartered in Monett, Missouri, the company develops and supports a comprehensive suite of software and services designed to help banks, credit unions and other financial institutions streamline operations, improve customer engagement and manage risk.
The company's core processing platforms deliver end-to-end account processing, general ledger, deposit operations and loan servicing functionality.
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