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

Good morning, and welcome to the Jack Henry First Quarter Fiscal 2027 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Vance Sherard, Vice President, Investor Relations. Please go ahead.

Thank you, Nick. Good morning, and thank you for joining the Jack Henry First Quarter Fiscal 2027 Earnings Call. Joining me on the call today are Greg Adelson, President and CEO; and Mimi Carsley, CFO and Treasurer. Following my opening remarks, Greg will provide a brief summary of our quarterly results, updates on operations, sales performance and a few strategic products as well as commentary on our recent annual client conference. Mimi will then discuss the quarterly financial results and updated fiscal 2027 guidance provided in yesterday's press release, which is available in the Investor Relations section of the Jack Henry website. Afterward, 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 also included in yesterday's press release. Now I will hand the call over to Greg.

Thank you, Vance. Good morning, and thank you for joining today's call. I also want to express my gratitude for those of you who travel to our September Investor Day. It was great to connect with many of you in person. Before I begin, I want to thank our associates for their dedication to our clients, our financial performance and the key differentiators that elevate Jack Henry, culture, service, innovation, strategy and execution. I will start by sharing 3 key takeaways from the quarter and then provide additional perspective on our overall business performance. First, our financial performance. We produced record first quarter financial results, generating non-GAAP revenue of $682 million, up 7% year-over-year. This growth significantly exceeds the outlook and expectations for the quarter from our August call comments. Additionally, our non-GAAP operating margin was 28%, representing a strong 102 basis points of expansion over last year's Q1. Second, our strong sales momentum. As a reminder, the first quarter is typically our lightest of the fiscal year. However, this quarter, we secured 9 competitive core wins, which is more than double the 4% we had in Q1 last year and better than the 6 wins we averaged in Q1 over the past 5 years. Additionally, our sales pipeline continues to be robust, reinforcing the momentum we're seeing across the entire business. We remain very confident in our early guidance of 58 to 65 new core wins for fiscal year '27. We also continued our trend of winning higher-value trifecta deals that include core digital and card solutions. In fact, 63% of our Q1 core wins, excluding one nontraditional bank that does not offer a core card business were trifectas compared to 50% in the prior year period. Looking at Banno specifically, all but one were 89% of our new core deals in Q1 included Banno. That speaks to the increasing strength of our digital solution and the continued momentum we are seeing following our 83% Banno attach rate in fiscal 2026. Third, client engagement at our Jack Henry Connect conference. In October, we hosted nearly 3,100 clients and prospects in Kansas City, making it our largest event ever. Prospect attendance grew significantly we welcomed 141 prospect attendees representing 53 financial institutions, up from 91 attendees and 32 institutions last year. Though each institution represent different stages in our pipeline, that growth is particularly meaningful given that nearly 40% of our 58 competitive core wins last fiscal year came from prospects who attended the conference. We also set record attendance across key stakeholder groups, 64 consultants, 281 third-party fintechs in our technology exit hall and a sold-out CEO forum with 234 financial institution executives up 11% from last year, along with close to 30 members of Jack Henry's leadership team and Board of Directors. The conference showcased our continued innovation, including significant advancements in the Jack Henry platform, Tap2Local, Rapid Transfers, Financial Crimes Defender and AI since last year's event. We also demonstrated emerging technologies and capabilities such as stable coin, tokenized deposits and recently announced Moov Money. Finally, it was a memorable celebration of our 50th anniversary highlighted by remotely ringing the NASDAQ opening bell alongside 50 long-time clients, our corporate leadership team and special guests Brenda Henry and Pat Hall, the lives of our co-founders, Jack Henry and Jerry Hall. I will now discuss a few specific sales and operational updates. I want to start with a strong demand for our Gladiator security and infrastructure solutions. As cyber threats become increasingly sophisticated, amplified by the rapid use of Frontier AI models, financial institutions are prioritizing advanced protection. In Q1, we sold 367 Gladiator solutions triple the volume from Q1 last year and marking our fourth consecutive quarter of sales growth. On the AI front, we are actively executing on the strategy we outlined at Investor Day. We now have 30 AI-enabled products in the market with plans for a large contingent over the next 6 months. Our focus remains on delivering practical AI solutions that improve operational efficiency enhanced decision-making and help financial institutions better serve their account holders. As we expand our AI across our portfolio, responsible implementation is critical. Our strategy pairs the power of AI with robust human oversight, enabling financial institutions to boost productivity while continuing to differentiate through trust, relationships and service. Beyond our product offerings, we are applying AI from the inside out, taking what has worked within Jack Henry and bringing those learnings directly to our clients. From strategy and governance to adoption and coaching, we are using our own experience to help financial institutions accelerate their AI journeys. Internally, our dedicated AI coaches have driven significant adoption across Jack Henry with more than half of our associates now using at least one AI tool daily. This has unlocked substantial productivity gains, including up to 90% increase in development output for some of our key solutions. Building on this internal success, we are now launching AI consulting services for our clients. This offering will guide financial institutions in establishing AI governance, crafting implementation road maps and driving rapid organizational adoption. Next, I want to highlight the strong momentum with our Tap2Local SMB merchant payment and rapid transfers account-to-account money movement offerings. Tap2Local is now available to all 1,000-plus Banno clients and adoption among both MIs and small businesses continues to accelerate. Tap2Local generated significant interest at Jack Henry Connect, where we highlighted recent enhancements, including AI-generated product catalogs, customer list generation, shopping cart functionality and invoicing. In addition, we recently partnered with Visa to host a highly successful Tap2Local event in Kansas City where financial institutions and small businesses and plan to do more of these in the future. We are also driving adoption of Rapid Transfers. The solution is now live at more than 170 banks and credit unions with an additional 140 institutions in various stages of onboarding. Rapid Transfers also continue to receive positive feedback and interest at our client conference. Additionally, we are excited about the March 2027 rollout of Moov's P2P payment solution called Moov Money. As we shared at Investor Day, the Banno digital platform will be the first to integrate Moov Money, enabling consumers to send and receive funds through debit card rails via Visa and Mastercard. Unlike most existing P2P payment solutions, transactions do not require both parties to use the same application, account holders simply need a debit card and a mobile phone. This gives financial institutions the ability to offer a modern, fast and secure payment experience under their own brand. Moov Money complements our broader faster payment strategy alongside Zelle, RTP and FedNow. As demand for real-time money movement continues to grow, we believe Moov Money's differentiated approach creates another opportunity for financial institutions to compete effectively, retain deposits and strengthen primary account relationships. We continue to advance our stable coin and tokenize deposit initiatives. While adoption among community and regional financial institutions are still in early stages, we believe it's important to provide clients with infrastructure that supports emerging payment rails as the market evolves. Our approach is centered on interoperability and client choice. We are currently beta testing USDC capabilities with clients. And last summer, we joined Open USD an industry initiative focused on advancing open standards for digital assets. We also recently announced plans with Google Cloud to enable tokenized deposits through Google Cloud Universal ledger, making Jack Henry the first core technology provider to integrate with [ GCUL ]. Regardless of how the regulatory environment evolves, we believe financial institutions will increasingly need access to modern payment infrastructure capable of supporting multiple rails settlement models and emerging forms of digital value transfer. Underpinning these innovations is the cloud-native architecture of Jack Henry platform which gives us the flexibility to respond as new technologies and payment rails emerge. The platform serves as an integrated bridge between our foundational cores and emerging capabilities that community banks and credit unions need to compete with fintechs and large institutions. We now have roughly 30 core components live on the platform, including wires, leisure and exceptions. More than 100 clients have adopted at least one component and we continue to see significant interest in the platform along with positive feedbacks on its differentiation in the market. We are finalizing our approach to include the platform in every new core deal and we'll share more on our February call. This provides clients a flexible path to modernization, allowing them to adopt cloud native capabilities at their own pace while simplifying operations and creating more modern experiences for their account holders. Moving on to our operational segments. In payments, I mentioned earlier that we continue to see strong demand for faster payments. Over the past year, our clients' adoption of Zelle grew by 25%, RTP by 28% and FedNow by 30%. In the first quarter, payment transaction volume across these channels increased 42% year-over-year. We also saw healthy card processing sales activity in Q1, signing 13 debit and/or credit card deals, up from 8% a year ago. In our complementary segment, we signed 32 new financial crimes Defender and faster payment module contracts in the first quarter. And as of September 30, we have completed 208 Financial Crimes Defender installations and another 58 are in various stages of implementation. We have also installed 225 faster payment modules with an additional 255 in progress. The Banno Digital platform had another strong quarter with 13 retail and 12 Banno business signings the 25 total signings represent an increase of nearly 40% from last year. The Banno platform now serves more than 16.3 million registered users, up 11% from a year ago. Treasury management continues to perform well with growing traction among commercially focused clients. In Q1, we signed 6 new treasury clients with total assets of $16.3 billion. that is nearly 60% higher than the combined assets of the 8 treasury clients signed in Q1 last year. Overall, tech spending and financial services remains very strong in Bank Directors 2026 technology survey that came out in September, 81% of the respondents reported an increase in their bank technology budget for fiscal year '26 up from 71% a year ago. The median increase is spending -- the median increase in spending was 10% for the second consecutive year. That is more than double the 4% median increase in 2024. These results align with findings from our strategy benchmark published last spring, and that surveyed 88% of our own clients as they plan to increase spending over the next 2 years. was our top priorities being AI, digital banking and data analytics. Looking ahead, we will hold our Annual Shareholder Meeting on November 19 in Monett, Missouri, which will be webcasted as well. In closing, we are very pleased with our first quarter performance and the continued momentum across our business. The demand for our solutions remain strong, as demonstrated by our quarterly results, robust pipeline and record attendance at Jack Henry Connect. We continued execution with continued execution across sales, innovation and service, we are confident in our strategy and our ability to deliver consistent long-term results. With that, I will hand things over to Mimi to walk through the financial details.

Thank you, Greg, and good morning, everyone. I'd like to begin by thanking our associates who continually deliver tangible value and industry-leading service to our clients. These efforts resulted in another excellent quarter, providing a strong launch into fiscal '27. My comments will begin with the quarterly results, then conclude with a discussion of our updated fiscal '27 guidance included in yesterday's press release. Q1 GAAP revenue increased 9%, while non-GAAP revenue increased 7% for the quarter, a continuation of our consistently strong performance. First quarter deconversion revenue of approximately $18 million, which we previously announced, was up approximately $9 million for the quarter, reflecting M&A activity among financial institutions. As a reminder, the dollar amount of deconversion revenue has little correlation with the number of transactions or the impact to Jack Henry's annual revenue. and the absolute amount of deconversion revenue can vary greatly quarter-to-quarter. We continue to see industry consolidation as largely neutral to slightly positive for our business. Now let's look more closely at the details. GAAP services and support revenue increased 7% for the quarter, while non-GAAP increased 5%. Services and support quarterly growth was the result of consistent strength in hosting revenue for cloud services. Cloud services offerings continue to drive robust growth, increasing 11% for the quarter. This recurring revenue contributor is 31% of our total revenue. Shifting to processing revenue, which is 42% of the total revenue and another strategic component of our long-term growth model. We delivered healthy performance with 11% GAAP and 10% non-GAAP growth for the quarter. Consistent with recent results, quarterly drivers included increased card, digital and transaction and faster payment revenues. Completing commentary on revenue, I would highlight total quarterly recurring revenue was 93%. Next, moving to expenses. Beginning with the cost of revenue, which increased 8% on a GAAP and 7% on a non-GAAP basis for the quarter. Drivers for the quarter include higher personnel costs, direct costs growing consistent with lines of revenue a planned increased cloud consumption, higher internal license and fees and increased amortization of intangibles, partly offset by higher LIBOR cost deferral quarter-over-quarter. We're modeling purposes, amortization of acquisition-related intangibles was $6 million for the quarter. Next, R&D expense increased 17% for GAAP and 15% on a non-GAAP basis for the quarter. The quarterly increase was primarily due to net personnel costs driven by trailing 12-month head count growth. Ending with SG&A expense. For the quarter, on a GAAP basis, it was flat year-over-year, and on a non-GAAP basis, it decreased 6%. Results reflect lower expenses related to the timing of our Connect conference. We remain focused on generating annual compounding margin expansion. Q1 delivered non-GAAP margin at 28%. More importantly, Q1 non-GAAP margin improved 102 basis points. This starts another year that targets our fourth straight year of compounding non-GAAP margin expansion as aligned with our commitment to investors. Non-GAAP margin reflects the inherent leverage in our business model, and management's continued focus on creating AI efficiencies, strategic cost management, leveraging our existing workforce and enterprise process improvement. These strong quarterly results produced a fully diluted GAAP earnings per share of $2.28, up 16% with the largest contributor being operations. Reviewing the 4 operating segments for the quarter, we saw excellent performance across the board. Core segment non-GAAP revenue increased 5% for the quarter, with non-GAAP operating margin decrease of 31 basis points, primarily due to the increased hosting revenue. As we noted in yesterday's press release, FAQ section, growth was negatively impacted by lesser nonrecurring revenue from on-premise implementations and consulting services. Excluding these revenue items, quarterly core segment growth was 8.6%. This is consistent with the significant number of core wins including upmarket wins over the recent past. Payments segment quarterly non-GAAP revenue increased 8%. The segment continues a strong run of fantastic non-GAAP operating margin growth with quarterly results of 189 basis points. Card and processing revenues showed steady growth. The segment also benefited from continuing large percentage growth from faster payments. The complementary segment and quarterly non-GAAP revenue increased 8% with quarterly non-GAAP margin growth of 209 basis points. Quarterly revenue growth benefit from cloud services and digital processing revenue, additional positives include beneficial product mix and additional sales sourced from new core wins existing core customers and noncore financial institutions. For the quarter, Corporate Services non-GAAP revenue increased 5%. This is primarily the result of meaningful increases in the traditional segment revenue increased on-premise support, partially offset by the decrease in user group revenue resulting from the timing of our Connect conference. Since this segment reflects expenses not allocated to the other segment, we will not be discussing non-GAAP operating margins as it provides no meaningful insight. Now a review of cash flow and capital allocation. Q1 operating cash flow was $161 million, a 34% increase over the prior fiscal year Q1. Quarterly free cash flow of $83 million delivered a 19% increase over the prior year fiscal Q1. This was primarily the result of increased net cash from operating activities partially offset by larger aggregate capitalized expenditures. Our consistent dedication to driving value for our investors resulted in a trailing 12-month return on invested capital of 23% and compared to the 22% in the prior year. We're very proud of the durability of this metric and how it reflects our high quality capital -- or high-quality allocation of capital. Additionally, I would highlight the following significant quarterly capital decisions resulting from our strong free cash flow generation and cash on hand. We purchased 600 -- 400 sorry, we have purchased 462,000 shares for $71 million and paid $43 million in dividends. The average purchase price of shares purchase was $153. We ended the quarter with debt of $85 million, consistent with normal course revolver usage. I will now discuss our updated guidance for fiscal 2027. Based on our impressive start to the fiscal '27 and an improved outlook, we are pleased to increase full year guidance. I will now review the updated metrics from yesterday's press release covering fiscal '27 full year GAAP and non-GAAP guidance. Full year GAAP revenue growth guidance is a range of to 6.8%. This is due to the improving operational outlook and expected higher deconversion revenue from our outlook at the beginning of the year. Revenue on a non-GAAP basis is expected to be within the range of 6.6% to 7.4%. This represents a significant raise at the bottom of the prior range and a slight adjustment to the top end of our previous range. Deconversion revenue guidance will continue to follow the conservative methodology introduced in fiscal '24, with fiscal '27 deconversion revenue guidance updated to $30 million. Full year non-GAAP margin is reiterated at an expansion of 20 to 40 basis points, and we remain cautiously optimistic that we will increase that range as the year progresses. The cadence of the full year has been adjusted. We now expect lower non-GAAP revenue growth in the second half and previously disclosed non-GAAP margin headwinds remain on track for the first half. These are primarily timing-related adjustments and we remain confident in our ability to achieve the updated and reiterated full year guidance metrics. As mentioned during the Q4 call, expense comps during the first half of fiscal '27 will reflect pressure from self-insured medical costs returning to historical levels, Additionally, planned increases in cyber and infrastructure investments related to Frontier models, AI innovation and our data center consolidation project, [ EC ] 2030 will pressure margins in fiscal '27. As a reminder, we see fluctuations in quarterly results relating to software usage license components, along with the timing of implementation. Therefore, the correct performance indicator of our business is the consistently excellent fiscal year financial results. Our business operations remain robust with growth opportunities across all core operating segments. Full year GAAP tax rate for fiscal '27 is forecasted at 23.25% to 24%. The updated guidance metrics produce a stronger full year outlook for GAAP EPS of $7.47 to $7.51 per share, growth of 7% to 8%. As a reminder, conservative deconversion revenue guidance potentially understates GAAP EPS growth. Full year free cash flow conversion outlook is reiterated for 85% to 100% for fiscal '27. In conclusion, our strong start to the fiscal positions us for another fantastic year. We're grateful for the contributions of our focused and dedicated associates that produce these superior results and our investors for their ongoing confidence. Nick, please open the line for questions.

[Operator Instructions] At this time, we'll pause momentarily to assemble the roster. The first question will come from Dan Perlin with RBC Capital Markets.

Congratulations on a great quarter. I just wanted to ask a question around cybersecurity. One of your competitors today is actually calling out, they just get a lot of pressure from their clients to invest in cybersecurity. Greg, you called out the Gladiator, 300 solutions in the triple bat of last year. Mimi, you just kind of highlighted it as one of the areas of investment. I just want to make sure that you guys are kind of, I guess, in a position such that if that demand were to increase, there's not some sort of investment cycle that would catch you off guard?

Yes, I'll start and Mimi can add her commentary. So yes, good question, and the answer is no. We had been planning for this as part of our annual budget planning. We have been planning and I've been talking about what we thought was going to be an increase in some of our Gladiator services for the last [ 1.5 quarters ] at an Investor Day as well. So we've been gearing up for this, both from an implementation standpoint, an investment standpoint, we've been working with our partners, both on the Frontier model side with Anthropic and with Google and others and continue to do that. The models are changing on a regular basis. Those are not the only 2 that are out there now with Frontier models. We continue to work in that. And we're managing that cost as part of our ongoing endeavor as well to ensure that we're doing the right things to protect our clients as well as managing our resources.

Yes. I would just echo Greg's point in terms of the protection of our clients' data is paramount to what we do and the foundation of the trust that they have enough and therefore, their end customers trust in that. And so we take that very seriously. We've been investing for over since my tenure here in Jack Henry pretty strongly in this area to make sure that we've been making the step function changes to create kind of a 0 trust environment in a protected environment for our data and for our clients' data. I don't see that changing. If anything, to Greg's point, I see the opportunity side from the products and services we offer, having more demand and potentially even -- and this is something we talked about in Investor Day, an acceleration of the shift from on-premise to private cloud.

The next question will come from Andrew Schmidt with KeyBanc Capital Markets.

Great start of the fiscal year here. Maybe just start off with an environmental question. I'm just curious if you're seeing anything different in the environment. Obviously, a key competitors are calling out higher retention. Just curious what you're seeing broadly in terms of your win rates? And then as we think about just the intermediate term outlook. Maybe just remind us what's embedded from a wind perspective. I understand the implementation time frames are lengthy, so this may be more of an FY '28 question. But just curious what the assumptions are there.

Yes. Thank you. I'll take that and again, Mimi you can add any comments if you want. But from the perspective of the environment, I'll say it this directly, I guess. Our pipeline continues to grow significantly, again, referenced by what I mentioned that the number of prospects that showed up at our client conference A lot of them were with that particular provider you're talking about. And then a lot of our wins recently have been long-time clients of that particular provider. A couple of them were 28-year clients. So our pipeline continues to grow. It's a lot larger than it was, say, 6 months ago when we had a deeper conversation about this ourselves, Andrew and with other investors and analysts. So I think the thing that needs to be probably discussed is really just around percentages and what percentages mean versus what actual numbers are. So from our standpoint, we see a really nice pathway to our 58% to 65% that I continue to reiterate. And again, it's not just from one provider as well. So honestly, in our first quarter, we didn't have as many as I would have expected from that one provider. They were coming from others. So we continue to be equal opportunity offenders, I guess, is what I would say from that standpoint.

And I think that long-term durable sales success is an indicator of the modernization journey we've been on, the fact that those products are now in the hands of clients. And Greg also mentioned in his prepared remarks, the industry as a whole, anticipating increasing spend in the category.

Yes. And when I look at opportunities, as you mentioned, just kind of looking out the opportunities are continuing to come not just from the core and the core modernization and all the capabilities that we outlined in our Jack Henry platform. But as I mentioned, like treasury management, as we've rebuilt that product, we're able to take that product more upmarket. So it's creating opportunities into larger institutions because treasury is a key solution set for a lot of those commercially focused solutions as well as what we're doing on the digital side and card side and other things. So core itself isn't just sold by -- as a core feature of functionality. A lot of times, it's sold with the other complementary and payment products.

Got it. Noted on the diversified sources of wins and then also the math on the percentages. I appreciate that.

Yes, absolutely.

Next question will come from Vasu Govil with KBW.

This is [ Yvon Jhang ] on for Vasu. Your operating margins came in better than expectations this quarter, and there was some benefit from connect expenses moving to the second quarter, but did you also see strength on an underlying basis? I know the guidance is unchanged, but just trying to get a sense for your ability to outperform.

[ Evelyn ], thanks for joining and taking Vasu's place this morning. I'm glad you were able to participate. We know it's a busy day for earnings this season. So thank you for letting me get into this in a little bit more depth. I would say the predominant opportunity from a margin perspective is the fundamental underlying strength of the business. You saw cloud, you saw payment growth even exceeding our expectation for the quarter, that has really healthy margins that are associated with it. There is some timing shift, as you well point out from Connect, and just for modeling purposes, giving people a little bit more clarity, roughly called out $9 million of revenue, roughly around $5 million to $6 million of expense in a given year. The good news is we've committed to the timing of those conferences for the next 4 years. So there'll be less noise grow over for next year and beyond. But the main point being aside from the timing thing, the reiteration of the full year guide reflects the strength of the overall business.

The next question will come from Jason Kupferberg with Wells Fargo.

This is Tyler DuPont on for Jason. Just it was great to see core wins continuing to come in strong in the quarter. But if I'm just looking at growth trends within core, we've seen, I think, a few quarters now of decelerating growth. Can you maybe just take a minute to discuss the trends you're seeing in the core segment? Where is that potential near-term disconnect between the number of wins and the path towards accelerating growth? Like is there a constraint there in implementation capacity? Or is there some customer readiness or pricing or anything there that's causing that disconnect? And just how should we think about growth as we move through the year? That would be super helpful.

Welcome to the call, [ Charlie ]. So as we pointed out in the script and in also the there is fundamental strength within the core segment, and that's based on the sustainable record sales we've had the last number of quarters. There's also some onetimes. And so those onetimes create some noise. We talked about that related to some work orders, on-premise implementations, other things that we consider nonkey revenue. But if you look at the key revenue within core, that strength of 8.6% growth really shows you the sustained engine of that segment.

The next question will come from Chris Kennedy with William Blair.

I think one of the questions following the Analyst Day was the level of conservatism regarding the prospects for accelerating growth in the out years. Can you just clarify the visibility and potential levers of upside?

Yes, I can, Chris. So we are really optimistic about not just '27, but the 2 years beyond that we started to talk about. But as we know in this kind of AI pace of the world, 2 years from now, which is really 2 years plus 9 months from now is a long time to work out. So there's a number of new efforts coming online that we think will start to build the momentum to be meaningful contributors you have the expectation of continued strength in payments. Greg highlighted the continued faster payments growth you have a lot of use case scenarios, a small business initiative, the platform itself and then the coming online of those wins at a higher win rate and a higher asset size on top of the trifecta. So those are the things that we kind of have visibility to. There are some others that we talked about in the slide I shared at Investor Day of like others that could come online. They just too early to see, like the trends we talked about if you have a meaningful shift in on-premise to private cloud, that's 2x revenue for us. So if that accelerates if the spending in fraud prevention continues to accelerate. There are some meaningful parts of our business that could layer on top added growth to what is already hitting the 8% range of growth.

Yes. And I'd like to add a couple of things, Chris. So 1 of the things that we did talk heavily about is the continued efforts in our SMB strategy around tap to local, rapid transfers and now adding a component of Moov Money, which really doesn't have anything baked into our immediate plans. But just to put this in perspective, our -- the number of transactions that we did in the month of October was more than we did all of last year in Tap2Local. So that -- we're starting to see some of the growth that we've talked about. If that continues at the pace that we expect, that's all baked into that higher performance as we've been talking about -- the other one is around the in-to-out stuff. So just to go ahead and put it out there since somebody will ask, I'm sure to go ahead and help with that question. So we're targeting 30% to 35% again this year as part of the overall, and to Mimi's point, we're starting to see some larger institutions continue to really want to look at this as an alternative especially as frontier models and other concerns out in the marketplace with cybersecurity becomes stronger. And so whether we get to 30% to 35% still early, we were a little slow out of the gate, but not concerned about that at all. But the reality is we're seeing more interest because there's more concern in the marketplace -- and I think that's going to help us with the kind of movement. We're at 80% right now with private cloud. So we were up a little bit from our last conversation about that. So that continues to grow.

The next question will come from Bill Carcache with Piper Sandler.

Greg and Mimi, you continue to benefit from your decision to stick to your knitting and invest in your core expertise at a time where some of your competitors who pursued other strategies are having to catch up by ramping investments in areas you've been deploying capital into all along? I wanted to follow up, Greg, on your platform comments. Can you give a bit more perspective on how you're turning your platform capabilities into commercial adoption. It would be really helpful if you could just walk through for a Jack Henry client that starts with one platform component. What ultimately leads to greater adoption and incremental recurring revenue?

Yes. Thank you, Bill. I think there's a couple of things. So I just wanted to make sure that everybody understands what platform is, and I don't want to take up a lot of time, but I'll make it very simple. But the platform itself sits on top and is fully integrated into our existing core. So all four of our cores integrate the platform. Platform allows us to build the level of innovation and all the things that we've been talking about. So whether it's the 30 components that have been built on there, they're not all just core components, like general ledger, exception item processing, authorization management, all host of things that fall into the core. But there are also a lot of the level of the innovation that we've built. So whether that be stablecoin, tokenized deposits, our SMB strategy with Moov, all of those sit on top of the platform itself. And so the incremental move of our customers allows them to use domestic wires or wires itself is the easiest to explain. But it happens the same way with any of them. If there is a core solution like wires that sits inside one of our cores. If they want to go to an upgraded public cloud API native solution, we basically literally just turn off the functionality inside of the existing core, let's just call it, Silver Lake to make it simple and we turn it on in the new platform. And it flows through all of the other work that goes in on the back end of the Silver Lake solution set remains, but just the front end and the processing and the UI and everything that goes all is now in this new the new platform. But that is enabled for everybody. So to your question, we have a lot of people. We have over 100 contracts now with customers that have at least one. And as they buy one, they see the advantages of what public cloud and the things that we've built from a feature functionality allow them to enhance. And so with that, they're able to take on the interest in taking on additional platform items. And so the incremental approach to this is very simple for them to add. The one thing that we want to do to make it even easier is what I referenced in my prepared remarks, which is we're going to start including the platform in every new core deal, and we will go to our existing clients about adding it as well because we want them to have the benefit of having the platform. And of course, there's a cost to this. But the reality is there's an opportunity for them to have that be utilizing it in whatever environment they want and take that incremental approach when they're ready. We're not forcing people to utilize it, but there's a big benefit for them to do so, not just from a feature functionality but also from an audit compliance, other components around that as well. So that's about a simplistic as I can make it in this type of call, but I would be glad to answer other questions on it during our circuit here.

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

One of the things you've talked about is the new pricing discipline, making sure that the product is priced at the value it's given. And I'm wondering as you look at the current environment and people getting -- maybe your competitors getting more aggressive because what's happening, how has that pricing discipline? Have you been able to maintain that pricing discipline and -- what is the pricing environment? And is that part of the reason you have confidence in the margin?

Yes. Thanks, Kartik. The short answer is yes. I mean we've continued to be able to sell on value and the amount of innovation and differentiation that we have created allows us to do that. So if you're just selling the same thing that you've had before, it's hard to sell additional value if there hasn't been any real innovation built on top of that. And as you know and others have noted already on this call, we've spent a lot of time and money over the last 4 or 5 years building out that level of innovation. So we're able to -- and again, I mean, every deal has its own variances of merit and honestly, in some cases, it's how badly somebody really wants to get off of their existing product or platform. And in some cases, they're begin to get off and others, it's a true negotiation. But the point is, is that we have really tried and this goes way before me taking the seat we've never been the lowest cost provider, and there's no reason for us to have changed that approach when all we've done is continue to add better service and better level of innovation.

And Greg, if I could add on as it relates to renewals, the changes that we've implemented now almost 2 years ago, we continue to see the benefits from. So that is both on administratively, from a process perspective, the way we're approaching renewals, the time frame we approach them and then the rigor of which we ensure the price stability of those have all helped from a growth perspective.

The next question will come from Matthew O'Neill with Bank of America.