Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

Jack Henry & Associates Inc (NASDAQ:JKHY)
Q4 2018 Earnings Conference Call
Aug. 22, 2018, 8:45 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Jack Henry & Associates' Fourth Quarter Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will have a question-and-answer session and instructions will be given at that time. (Operator Instructions) And as a reminder, today's conference is being recorded for replay purposes.

It is now my pleasure to hand the conference to Kevin Williams, CFO of Jack Henry. Please go ahead.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Haley. Good morning, and thank you for joining us today for the Jack Henry & Associates fourth quarter and year-end fiscal 2018 earnings call. I am Kevin Williams, CFO and Treasurer, and on the call with me today is David Foss, our President and CEO.

The agenda for this morning will be opening comments by me and then I will turn the call over to Dave to provide some of his thoughts about the state of the business and the performance for the quarter. And then, I will provide some additional thoughts and comments regarding the press release we put out yesterday after market close, provide some guidance for FY '19 and then we will open the lines up for Q&A.

I need to remind you that remarks and responses to questions concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements or deal with expectations about the future. Like any statement about the future, these are subject to a number of factors, which could cause actual results or events to differ materially from those which we anticipate, due to a number of risks and uncertainties. And the company undertakes no obligations to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our 10-K entitled Risk Factors and Forward-Looking Statements.

With that, I'll now turn the call over to Dave.

David Foss -- President and Chief Executive Officer

Thank you, Kevin and good morning everyone. We're pleased to report another quarter with record revenue and earnings. As always, I'd like to begin today by thanking our associates for all the hard work that went into producing those results for our fourth fiscal quarter and the entire fiscal year.

Total revenue increased 9% for the quarter and increased 7% excluding the impact of deconversion fees from both quarters. Organic revenue growth was 7% for the quarter. For the year, revenue increased 7%. We again had a very solid quarter in the core segment of our business. Revenue increased by 12% for the quarter and increased by 10%, if you exclude the impact of deconversion fees from both quarters.

Our Payments segment performed well posting an 11% increase in revenue this quarter and a 12% increase excluding the impact of deconversion fees. Of course, Ensenta is a contributor to this growth. But even if we exclude Ensenta, we saw more than a 5% increase in revenue through our traditional offerings.

We also had a very strong quarter in our complementary solutions businesses, posting a 7% increase in revenue this quarter and a 5% increase excluding the impact of deconversion fees.

As I mentioned in the press release, our sales teams had an extremely strong quarter and finished both the quarter and the fiscal year well ahead of quota. In June, we broke our all-time monthly sales record with bookings of approximately 150% of the previous record for a single month. Most significantly from my perspective is the fact that the sales success for the quarter didn't come in any one particular product area. As I said in the press release, we booked 20 competitive core takeaways, but we also saw increased bookings in our Payments and complementary solutions segments. Several of our newer solutions including Banno, Debit Processing, the new Credit Processing Solution and Treasury Management saw strong demand. We also booked 24 in-to-out deals between our banking and Symitar groups. I could not be more pleased with the performance of the sales teams this quarter and for the entire fiscal year.

Regarding our new debit and credit processing solution, we now have 111 customers live on the new debit platform, including 7 customers installed as new rather than as a migration. Our first full service credit client will go live later this month. As we've discussed previously, we're now in a position to start ramping our conversion volume for our existing debit clients and we're confident in our ability to maintain the quality of these migrations and new installations going forward. We also have more than a dozen new credit clients in the installed queue, which present a new revenue stream for our company.

On previous calls, we've provided some high-level insights into our long-term plans regarding the Tax Cuts and Jobs Act. As you will recall, shortly after the new tax program went into effect, we announced a significant increase in our quarterly dividend. We also announced a voluntary incentive plan, which provided a large subset of our longer tenured employees the option to leave the company with a significant financial reward. We projected a Q4 expense of around $8 million as a result of this program, but as we discussed last time, our voluntary turnover rate runs well below the industry average and we saw the same trend reflected in the results of this special incentive program. Although we felt we had forecasted conservatively, many fewer people took advantage of the program than we had expected, and the Q4 severance charge ended up being a little more than $3 million.

In addition to the dividend increase and the voluntary incentive program, we have chosen to use some of the TCJA tax savings to implement several long-term programs for the benefit of our employees. Last week we announced an improved 401(k) offering and several components to a significantly enhanced bonus program, which are intended to provide a positive impact to all JHA employees. These bonus programs are pay-for-performance plans, consistent with our corporate culture and all of these changes are designed to help us continue to attract and retain strong talent and ensure that Jack Henry continues to be recognized so broadly as the best place to work. The financial impacts of these programs are included in the guidance Kevin will provide on this call.

Overall, this was a very good year for our company. Our employee engagement and customer satisfaction scores remain very high. Our sales teams are performing extremely well and have positioned us for another successful year of selling. And overall demand for Jack Henry technology solutions remains very high in all segments of our business. As we begin the new fiscal year, I continue to be very optimistic about our future.

With that, I'll turn it over to Kevin for some detail on the numbers.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Dave. To talk about the press release filed yesterday and our quarter and year-end numbers, service and support line of our revenue, which includes license, hardware, implementation services, in-house maintenance, bundled services and outsourcing, increased 8% compared to the prior-year quarter or 5% if you exclude the deconversion fees and revenue from acquisitions and divestitures from both quarters. Deconversion fees were up $5.1 million (sic) ($5.2 million) compared to year ago and as we've discussed previously, we have no control over the timing of these deconversion fees or when we actually record the revenue. All the deconversion fees for the quarter were in this line of revenue. The processing line of revenue, which includes online bill pay, card processing, remittance and remote deposit capture along with transaction and digital fees was up 10% compared to the prior year quarter and was up 7%, if you exclude revenue from acquisitions and divestitures from both quarters. So true operations were up nicely in both lines of revenue.

Total revenue was up 9% as reported or 6% by excluding the deconversion fees and revenue from acquisitions and divestitures. Our reported consolidated operating margins were flat at 26% this quarter compared to last year. And by excluding the deconversion fees and the impacts of acquisitions and divestitures total operating margins were flat at 24%, so we continue to have very strong margins.

For our segments' operating margins, all continue to be very solid. For our Core, it's 55% this quarter compared to 56% a year ago. Payments was 52% compared to 53%. Again as we've talked for the last year, there's some headwind on our margins for the Payments business for this transition to the new payments platform. Our Complementary segment was very strong at 60% compared to 60% last year. Without deconversion, acquisition, and divestitures the margins remained almost in line with where they were with those included.

Our effective tax rate was obviously impacted significantly by the Tax Cuts and Jobs Act or the TCJA for both the quarter and the year. The effective tax rate for the year for the quarter was 21% -- or for the year, I'm sorry, was 21%, which is lower than guided last quarter, which is because we were able to utilize some additional permanent tax savings during the quarter that came out of the TCJA due to some excellent work by our internal tax department. And I want to personally thank them for all their efforts during this year to get all the TCJA ramifications put into place. Our effective tax rate for the year was reported at 3.7%, but if you adjust out the $94.5 million created by the remeasurement of our deferred tax assets and liabilities in our second fiscal quarter, our effective tax rate for the year was 27.9%, which is right in line with what we guided in February after the new tax law was put in place. I believe we said, we thought it was going to be about 28% blended rate for the year, and this compares to a 33% effective tax rate we had last year in FY '17. Due to the impact of the TCJA, a decent measurement this year, which typically I don't say this, might be our earnings before interest, taxes, depreciation, amortization, or EBITDA, which was $544.9 million this fiscal year, compared to $507.7 million last fiscal year or a 7.5% increase. Our EBITDA margins remain consistent at 35%.

For cash flow, included in the total amortization, which we disclosed in the press release in the cash flow review, is the amortization for intangibles from acquisitions, which increased to $18.0 million this fiscal year, compared to $14.4 million last year, which is caused by the acquisitions we made during FY '18. Our free cash flow, which is defined as operating cash flow less capital expenditures, capitalized software and proceeds from sale of assets, was $262.9 million year-to-date, which compares to $215.7 million last year or a 22% increase. As a compare point, if you back out the impacts of the TCJA and compare this year's net income with the same effective tax rate as last year at 33%, then our net income convergence free cash flow was slightly over 100% this year.

Year-to-date, we have deployed our capital by investing $149.9 million back into our company through CapEx and developing products, which is up slightly from $148.3 million [ph] a year ago, as we continue to develop new products to roll out for our customers. We also returned $154 million to shareholders during the year through stock buybacks and dividends. Our return on equity for the trailing 12 months was 33% or 23% excluding the impacts of TCJA.

So now let's discuss FY '19 guidance. First, based on the sales that we experienced in Q4 FY '18 and the sales pipeline that Dave referred to, we are very confident that total revenue growth will continue in the high mid-single digits in FY '19 very similar to FY '18. However, as Dave mentioned in his opening comments, as we have stated in the previous earnings calls, we have now rolled out the additional employee-related incentive plans. Do they have a cost? Yes. Do they have a long-term benefit? Absolutely, yes. The cost is equal to approximately a fourth of the benefit we are experiencing from the TCJA, which allows us to enhance our pay-for-performance plans for our associates.

The benefit is it allows us to put a pay-for-performance line [ph] in place for all associates that is -- with essentially the same corporate target for all associates that Dave and I are focused on. Therefore, all 6,400-plus associates either benefit from our core performance if we hit our targets or none of us benefit if we miss. This puts all of our associates in line with our shareholders. The actual projected cost of these additional incentive plans, combined with the increased cost in FY '19 from our transition to the new payments platform that we've been talking about for well over a year, will create a headwind on our operating margins.

We anticipate our operating margins to decrease by 60 bps to 80 bps for FY '19 compared to FY '18, due to this additional expense pressure. Therefore, even though our revenue is going to continue growing in the high mid-single digits, our operating income will most likely grow in the range of mid lower-single digits. But as I stated, we are utilizing some of the TCJA savings. So the offset to this is our projected lower effective tax rate of 23% to 24% in FY '19 compared to 27.9% rate in FY '18, which is adjusted for the remeasurement for the deferred taxes on our balance sheet and compares to the 33% in FY '17.

The combined financial bottom line impact of our revenue growth with these two elements, the additional cost of incentive plans and the new platform payment and the impacts from TCJA on our consolidated EPS is projected to be approximately a 10% to 11% increase in EPS in FY '19 compared to FY '18. Just for a comparison, if you back out the impacts of the remeasurement of our deferred taxes in FY '18, our adjusted EPS would have been approximately $3.63 for FY '18, which is up nicely from the $3.14 EPS in FY '17 or 16% adjusted increase. So for FY '19, we are currently projecting our EPS to be in the range of $3.94 to $4.04 or a 9% to 11% increase in EPS compared to FY '18.

Also as a reminder, our historical trend is to start up the year and the first quarter a little weak and then our operations and related earnings continue to improve quarterly throughout the year. As far as 606, I know we're all looking for that. We will be providing a full retro restatement of the two previous years for ASC 606, which became effective for us on July 1, 2018. Like others in our industry, we'll be filing an 8-K with the restated previous two years under ASC 606 with comparisons to historical numbers under ASC 605, and include FY '18 by quarter under 606 in the filing that we will be submitting before the end of September. Converting our thousands of contracts to ASC 606 to obtain an opening balance sheet as of two years ago has been a huge effort for our accounting team, and I want to thank them for all their continued hard work.

With that, that concludes our opening comments. We are now ready to take questions. Haley, will you please open the call lines for questions?

Questions and Answers:

Operator

Certainly. (Operator Instructions) Our first question comes from David Togut of Evercore ISI. Your line is now open.

David Togut -- Evercore ISI -- Analyst

Thank you. Good morning. Good to see the 20 competitive core takeaways. Could you break down for us where those takeaways come from, let's say, between credit union, community bank and then your kind of mid to up market bank segment?

Kevin Williams -- Chief Financial Officer and Treasurer

Sure. So, well, 12 on the credit union side, eight on the banking side make up the 20. As far as -- I don't have for the quarter, I have for the year, as far as the mid market segment. So for the year, we had four on the banking side and one on the credit union side as far as over $1 billion in assets.

David Togut -- Evercore ISI -- Analyst

Got it. And then could you give us your view of bank and credit union tech spending priorities for the year ahead? What are the biggest areas of spending that line up with you're kind of top products? And do you expect the strength that we've seen year-to-date to continue into 2019?

David Foss -- President and Chief Executive Officer

Yeah. So I'll take the second part of your question first. The demand environment right now continues to be strong. The best indicator for me was when we had that record June that I referenced earlier, 150% of our -- of the next highest quarter we've ever had in the history of the company, so you would expect at the end of June that your pipeline would drop off significantly after a performance like that. It dropped off just a little bit. And by the end of July, we were back to a pipeline that was greater than before we started June. So that indicates to me that demand environment continues to be very strong. I'm very optimistic as far as spending in the space. As far as products, digital continues to be a top of mind for pretty much any bank or credit union that we talk to. They're trying to figure out what their strategy is, implement the strategy going forward for a best of breed online and mobile experience for their clients, that's much broader than just traditional online or mobile banking. And payments is a hot topic for a lot of our customers, I think, as evidenced by the success that we're having with our new payments platform. And then just kind of the general topic of serving commercial customers. So whether it's on the lending side, online commercial lending for example, or if it's helping them manage their environment through tools like Treasury Management, banks in particular, but a lot of credit unions too are really focused on trying to deliver solutions that will serve their commercial customers in a much -- an enhanced fashion over what they've had previously.

David Togut -- Evercore ISI -- Analyst

Understood. Thanks for that. Just a quick final question. The SG&A expense was up about 13% year-over-year. I think Kevin, you called out some ASC 606 expense in there, but how should we think about SG&A spending growth for FY '19?

Kevin Williams -- Chief Financial Officer and Treasurer

Well, I will tell you David that we had to ramp up an enormous amount of internal resources to get 606 in line. I mean, we had to go back and basically recast literally thousands and thousands of contracts. And then also, we had to engage external accounting firms, one, to help us with those contract recast, then also our independent external auditor to actually audit those numbers. So there's a big ramp-up in salaries, but also professional services in there, which -- the professional service is a big chunk of that, will go away next year once we get 606 recast.

David Togut -- Evercore ISI -- Analyst

So, should SG&A expense grow more in line with revenue in FY '19?

Kevin Williams -- Chief Financial Officer and Treasurer

Actually it should be at a slight discount to revenue growth.

David Togut -- Evercore ISI -- Analyst

Got it. Thank you so much.

Kevin Williams -- Chief Financial Officer and Treasurer

You bet. Thanks, David.

Operator

Thank you. Our next question comes from Brett Huff of Stephens. Your line is now open.

Brett Huff -- Stephens, Inc -- Analyst

Good morning, guys. Hope you're well.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Brett.

Brett Huff -- Stephens, Inc -- Analyst

You went through the numbers a little bit quickly for me on some of the growth in the various segments kind of stripped out of some of the deconversion fees and the M&A. In particular the -- Kevin, the first part of your stuff that you went through, could you just give me those numbers again on a growth rate kind of ex items, if you will?

Kevin Williams -- Chief Financial Officer and Treasurer

Sure. So, our margins -- you are talking about margins or growth?

Brett Huff -- Stephens, Inc -- Analyst

Growth. I am sorry.

Kevin Williams -- Chief Financial Officer and Treasurer

Well, I didn't give the growth for these segments, Brett.

Brett Huff -- Stephens, Inc -- Analyst

Was it -- maybe it was Dave. I am sorry.

David Foss -- President and Chief Executive Officer

Yeah. So revenue growth for -- you had the overall number. So, on the Core segment revenue growth, 12% for the quarter, 10% if you exclude deconversion fees. Payments segment was 11% for the quarter, 12% if you exclude deconversion fees. But then I also highlighted that Ensenta is in there. So we were a little over 5% if you exclude the contribution from Ensenta. And then complementary solutions, 7% increase in revenue and 5% excluding deconversion fees.

Brett Huff -- Stephens, Inc -- Analyst

Awesome. (inaudible). Thank you. Okay. And then just trying to make sure I understand the impact of the less than expected expense from the buyout. I think you said -- you guided $8 million, it came in at $3 million, so that $5 million -- you got a $5 million reprieve on expense and just doing that math, is that about a $0.05 benefit, if I just kind of run it down to the bottom line, Kevin?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, that's -- roughly $1 million is $0.01 EPS [ph].

Brett Huff -- Stephens, Inc -- Analyst

Okay, that was the other one. And then the last one, a little bit more on the success of the debit and credit processing system. Can you just give us an update telling us kind of what you had said before and if anything has changed in terms of when the expense from both spending on the new products, as well as the expense potentially going away as we shut down the old two debit switches? Can you just remind us of what you said on that and then if anything has changed based on kind of new -- at least success to date?

Kevin Williams -- Chief Financial Officer and Treasurer

Sure. In the past we've said somewhere between the end of calendar '19 and the end of fiscal '20. So, between December 31st of 2019 and June 30th of 2020 somewhere in there is where we expect to wrap up. It's still early days. We're up to 111 customers on the new platform that I'm very comfortable that will be in that time frame. I wish I could get a little more specific, but we're still -- still early days in that, but I think that time frame we're very comfortable with.

David Foss -- President and Chief Executive Officer

Yes, remember, Brett, we still have close to 900 customers to migrate over of these two platforms. And just a reminder, the reason we're being so careful of this is because we want to have zero impact on the end users because we don't want to have to reissue cards, we don't have to change pin. So once the migration is over the customer is going to have the same experience after the migration as they did beforehand. So that's one of the reasons we're being slow and cautious on this and being very careful on what groups of customers we migrate at the same time.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, that's a key point. There is zero impact to the consumer. So no better scenario for the bank or credit union if they have zero impact on their consumer as they go through a major card conversion.

Brett Huff -- Stephens, Inc -- Analyst

That's helpful. And the last question for me, also on the processing and -- or the credit and debit card investment. Kevin, I think you said 60 basis points, 80 basis points negative impact from both that and the benefits that you guys are rolling through. Are you willing to parse that out into those two buckets separately?

Kevin Williams -- Chief Financial Officer and Treasurer

I can, it will be roughly a 60-40 split, with 60 toward the incentives.

Brett Huff -- Stephens, Inc -- Analyst

Okay. That's what I needed. Thanks, guys. I appreciate it.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, thank you.

Operator

Thank you. Our next question comes from Kartik Mehta of Northcoast Research. Your line is open.

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

Hey. Good morning, Kevin and Dave. How are you?

Kevin Williams -- Chief Financial Officer and Treasurer

Good.

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

Hey, Kevin, as you look at the backlog, I know, Dave, you said you had a very good sales year. And as you look at the backlog, what percentage of revenue do you think that that backlog encompasses for FY '19? So what I'm trying to get to is, how much more do you have to do in sales to meet your guidance or revenue target?

Kevin Williams -- Chief Financial Officer and Treasurer

Well Kartik, so let me just (inaudible); one, roughly 80% of our revenue is recurring, so that's already there. The additional sales and backlog, which as you think about most of our sales today are not going to have much, if any, impact in the next fiscal year because we've got close to a 12-month backlog of installs on most of our products and most of those are either outsource or payments in nature. So as we convert those, it's not going to be a huge increase in revenue, because it's not like the old days when we had great [ph] big license sales. So basically if you look at our backlog and our recurring revenue, we've pretty much got next year's guidance already in the bank.

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

Okay. And then, Dave, I know, when we've talked about the new credit and debit platform, one of the reasons you went with the credit platform was you were seeing some demand from your customers to offer credit cards, especially on community bank side and credit union. Do you -- is that still -- is that still true and are you still seeing that demand or has anything changed?

David Foss -- President and Chief Executive Officer

No, that's absolutely true. It's the reason why I highlighted in my opening comments the fact that we already have 12 in the -- in the hopper or more than 12 in the hopper for install. We haven't done a single credit install yet and yet the demand is there. So people have been signing contracts without us being able to point to a customer and say, here this customer is live, call him and ask him how great it is. So there's definitely demand. We're seeing exactly what we saw before we started this project is out there. And interestingly to me, more demand for debit from new customers. So I highlighted, we already have seven new customers that weren't previously on our debit platform and a lot of interest among new customers that wanted to come to this platform who weren't previously with us. So the demand is out there. It's our job to deliver.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, there is a very strong pipeline in our sales pipeline of potential candidates out there, Kartik.

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

And then just, Kevin, as you look at the FY '19 guidance, I know you've said this is very difficult, but it terms of deconversion fees, what would you -- what do you assume? Do you assume they'll be flat or do you assume they'll be down for FY '19?

Kevin Williams -- Chief Financial Officer and Treasurer

Kartik, we're -- I'm assuming that they're going to be down slightly, because -- but again it's very unpredictable. We thought they're going to be down this year. And they were down pretty much the first half of the year and in the fourth quarter -- basically 90% of the increase for the year was in the fourth quarter. So -- I mean, it's very hard to judge. So that's why we break all that out in the earnings release. You can actually see true operations, but I'm actually assuming deconversion fees down slightly.

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

Okay, thank you. I really appreciate it.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Kartik.

Operator

Thank you. Our next question comes from Peter Heckmann of Davidson.

Peter Heckmann -- D.A. Davidson -- Analyst

Hey. Good morning, everyone. Just some follow-up questions on the new Banno that you've been talking about. Is that the unified mobile Internet? Is that out in GA and if so how many banks that you have live on the new platform?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, it is out in GA complete. So -- and the Banno story is a single platform for what we used to call online banking, what we used to call mobile banking, but also for the website, for the financial institution and responsive advertising and some other tools thrown into interact with the consumer all of a single platform. So it's a really nice full-function digital platform. As far as customers running the complete suite, I don't have an exact number for you, Pete. I know that it's less than a dozen, it's probably five or six or something like that.

Peter Heckmann -- D.A. Davidson -- Analyst

Okay. And how does the backlog look in that regard?

Kevin Williams -- Chief Financial Officer and Treasurer

We booked -- we've sold a lot this year. So in the quarter alone, we've booked 23 new customers in the quarter. So backlog is strong, demand is strong. A lot of customers, and I think this should be obvious, they were waiting to see until we got the complete platform rolled out, waiting to see if it was really all that before they would commit to the platform, so lot of interest, lot of demand. And the good news about that platform is that it's something that we -- today we're not marketing it outside the Jack Henry core base, but we can. We already have a number of non-Jack Henry core customers live on the mobile side, that's just mobile. And we will be marketing the complete platform outside the Jack Henry base, but right now we have so much demand inside the Jack Henry base, we're focused there. But when the platform is ready to go outside the core base, so it becomes a ProfitStars solution available to virtually any bank or credit union.

David Foss -- President and Chief Executive Officer

Yes, Pete, so next week is our Symitar Education Conference in San Diego. Obviously Banno will be a highlighted product at SEC, so -- which typically drives some additional sales. So -- and we've got record attendance signed up to be there again this year. So, both -- and I think I'm not sure if we have a record number of prospects, but I know we have a record number of current customers that are going to be there next week.

Peter Heckmann -- D.A. Davidson -- Analyst

Got it. Got it. That's helpful. And then, forgive me if I missed it, but in terms of the forecast for CapEx in capitalized software for fiscal '19?

David Foss -- President and Chief Executive Officer

Cap software should be down slightly, but CapEx is probably going to be up a little bit, Pete. So I think all in all, in total, it's probably going to pretty level with this year.

Peter Heckmann -- D.A. Davidson -- Analyst

Got it. That's helpful and then just last question before I get back in the queue. On 606, does that have an effect on term fees where -- is it sort of the period where you would normally recognize it? You may spread it over several periods. Did I hear that was one part of the new -- new rules?

David Foss -- President and Chief Executive Officer

Yeah. It changed a little bit, Pete. So under 605 when you had term fees, whenever -- whenever you -- they deconvert it and you got the check, that's when you recognize the revenue. Under 606 whenever they give you the notification that they're going to deconvert and then you have to spread that deconversion free from that date to the date they actually deconvert, and if that deconversion date moves then you have to readjust your estimate and spread. But it's not -- I don't think it's going to have a big impact, because typically those deconversion fees are six months or less from when we actually get notified anyway. So it may spread it over a couple of periods, but at the end of the day, I don't think it's going to have much impact from what we've had in the past.

Peter Heckmann -- D.A. Davidson -- Analyst

Okay, that's helpful. Appreciate it.

David Foss -- President and Chief Executive Officer

Yes. Thanks, Pete.

Operator

Thank you. Our next question comes from Tim Willi of Wells Fargo. Your line is now open.

Tim Willi -- Wells Fargo -- Analyst

Hi. Thanks and good morning, Kevin and Dave. A couple of questions, first on the consumer side. Relative to the credit and debit transition you're doing, if you've said this before at Analyst Day, I apologize for forgetting, but could you just talk a bit about how your banks think about credit cards going forward? Any sort of just color you could add around their penetration or their plans if they now have these expanded capabilities to start to organically grow their business, which obviously continues to accrue to you as well over time? Anything you could give there?

David Foss -- President and Chief Executive Officer

Sure. Well I -- the biggest motivator I guess, I would say or the biggest opportunity is a lot of banks today don't manage their own card portfolio. They -- on the credit card side, they had sold those half [ph] years ago or had just kind of walked away from that space. And so, it's a new opportunity not only for us, but for our -- many of our clients who weren't offering their own credit cards, weren't managing their own card base. So that's where the biggest opportunity is for us. Certainly, there are some who already have their cards in place and they're going to bring that card base to Jack Henry. For those customers, the big motivators are, number one, real-time fraud. This is a best-of-breed real-time fraud platform for them to help ensure the security of their consumers. Number two, rewards programs that are included in the platform as a single platform, so not a separate stand-alone component for them to manage. So that offers opportunities for them to attract new consumers because they have this rich reward program that they can -- that they can work with. And then number three, there's lots of functionality on the new platform around reporting and that can take many flavors. It can be around feeding the marketing organization within the bank or credit union to target customers with additional products based on spending practices that kind of thing. So lots of opportunities for those who take advantage of all the tools that are in the new platform.

Tim Willi -- Wells Fargo -- Analyst

Is it safe to assume that these banks are ramping up and preparing to actually launch these businesses as this happens? I guess there's always the risk that there is a lot of fanfare and they try, but there's not a lot of success on their end. But the converse is, do you sense that they're very much getting ready to launch these businesses and really make it a core part of their operation on the retail side as opposed to just something they can do, but don't really lean [ph] into?

David Foss -- President and Chief Executive Officer

Yes, it's a good question, and your point is well taken. There are some institutions that are really good on the marketing side and others that aren't. And -- so, I don't know that I can paint that picture with a broad brush. It depends on the individual institution. But in general, they see this as an opportunity for them to, A, provide a better service to their customers, B, provide a revenue generating -- non-interest revenue generating income for the financial institution and to grab customer loyalty. So when you put those pieces on the table, most banks and credit unions are pretty focused on that. But like I say, you can't -- there is no broad brush to paint every financial institution where some of them are really good and some of them does struggle in that area. So --

Kevin Williams -- Chief Financial Officer and Treasurer

And it's (inaudible) size.

David Foss -- President and Chief Executive Officer

No, that's right. Yeah, it's not size dependent.

Tim Willi -- Wells Fargo -- Analyst

Got you. And then switching over to the corporate side, you guys have talked for a while around the small business banking tools, Treasury Management type stuff, corporate payments. In general, and it sounds like the pipelines and interest levels continue to escalate there. Does that -- is that lumpy revenue or is that something that gradually also works its way into the income statement just based upon implementation schedules or sort of how banks turn around and begin to sell that to their -- to their small business customers?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah. There aren't any of those solutions we've talked about and I always hesitate when I say the word any, but -- because that's not [ph] absolute. But there aren't any that we've talked about that are licensed software. Every one of those that we've been discussing is a hosted solution, which implies a recurring revenue model whether it's -- whether it's treasury management or our commercial lending center suite and all those things that are geared toward the commercial customer relationships that we've been talking about are recurring revenue models.

Tim Willi -- Wells Fargo -- Analyst

Okay, perfect. That's all I had. Thanks very much.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Tim.

Operator

Thank you. Our next question comes from Glenn Greene of Oppenheimer. Your line is open.

Glenn Greene -- Oppenheimer -- Analyst

Thanks. Good morning.

Kevin Williams -- Chief Financial Officer and Treasurer

Hi, Glenn.

Glenn Greene -- Oppenheimer -- Analyst

Dave, could you just talk a little bit -- give a little bit more color on the sales environment and activity? Obviously you had a really good quarter with the core -- 20 core wins and it sounds like a gangbuster June. Is it more environment sales execution? I mean, you guys have been doing this for a long time. It sounds like there's clearly an acceleration, just a little bit more context on what you're actually seeing in environment and from your clients?

David Foss -- President and Chief Executive Officer

Yeah, it's a good question. I think it's a combination of both of those that you mentioned. The environment is strong and I've said it through the last three, four calls, I think. As far as I'm concerned, it's now 18 months ago where the spending environment started to improve where we started to see more interest in banks and credit unions spending on technology. So the environment is strong, it's remaining very strong. So that's obviously a help. But we've made and we highlighted at the analyst call or the analyst meeting here earlier this year, we made some structural changes in the sales organization and all -- much of that was around encouraging cooperation between the sales teams and having -- ensuring that sales reps are focused on and frankly compensated for helping their brother and out when it comes to a sales opportunity and looking for those opportunities to help each other be successful. And so I think a little bit of a change in the way that we go to market, but also the environment that we're in today, the spending environment. Those combined, I think are what has driven the recent success. And I've said it on the call many times before, if you can book 10 new competitive core takeaways in a quarter, that's a really good quarter. So to do 20 in the quarter, I was really proud of the teams and very happy with what -- how things are going right now.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, on the restructuring, Glenn, I mean it's amazing how many ProfitStars sales trail a new core win. And now because of the relationships and the cooperation between the teams, we're starting to see some very nice core leads coming out of the ProfitStars organization.

Glenn Greene -- Oppenheimer -- Analyst

So, Kevin, just a segue, so the guide, the revenue guide you talked about, I think you said high mid-single digit range, which is pretty comparable to what it's been.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah.

Glenn Greene -- Oppenheimer -- Analyst

In the context of what you're seeing in terms of the sales environment, and I do have a question on does 606 impact that, but are you being conservative here or why isn't -- why won't the growth accelerate?

Kevin Williams -- Chief Financial Officer and Treasurer

Well, I mean, it could accelerate, Glenn. And obviously we've always been conservative, but -- I mean, that's kind of where we think it's going. And again, I mean, even though we had a very strong sales in Q4, I mean a lot of those sales are not going to contribute revenue to us until Q4 of this fiscal year because of the install backlog. And just because of the dates, some of those banks want to convert because of their -- their current contracts obligations that they are in.

David Foss -- President and Chief Executive Officer

Yeah, and when Kevin says the install backlog, that's not to imply that we don't have enough staff to deliver product. That's about the logical transition for the bank or credit union to the new solution. They need a lot of time to plan some of these big projects. So --

Glenn Greene -- Oppenheimer -- Analyst

Yes. Does 606 have any impact, positive or negative, to your growth rates, Kevin?

Kevin Williams -- Chief Financial Officer and Treasurer

It should not have an overall impact to our growth rate. It is going to make it a little lumpier because of the way we're going to recognize revenue. Obviously, when we recast the revenue, I think the revenue in both '17 and '18 will actually go down a little bit, but so will '19, but I think the growth rate on a comparative basis will be pretty much in line with the guidance I gave.

Glenn Greene -- Oppenheimer -- Analyst

And then just my final question, once you get past the debit and credit conversion to the new platform kind of mid 2020 what kind of margin lift are you expecting?

David Foss -- President and Chief Executive Officer

That's a good question, Glenn, and I'm not really ready to answer that right now because we're still adding staff and adding costs. I think the additional cost this year -- and again part of that also is how fast we add new customers to the platform, which helps to offset that margin between now and when we actually get to shut the systems down. So we've got 90-plus developers that will either find a new home within the organization or go somewhere else. That will be gone, plus we'll be able to shut down four mainframes. So -- I mean it will be a nice lift when we get to finally shut them down. But -- again, you're talking about a little over 20% of our total revenue. So the impact on the margins on that 20% revenue is going to be very nice, the overall margin on the entire company will be some, but it's not 200 basis points.

Glenn Greene -- Oppenheimer -- Analyst

Okay. Thanks, guys.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah. Thanks, Glenn.

Operator

Thank you. (Operator Instructions) And our next question comes from Joseph Foresi of Cantor Fitzgerald. Your line is now open.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Hi. My first question is in FY '19 are you expecting any benefit from the software retirement and I guess if you could quantify that? And then as we look at FY '20 is that the year that we should expect the benefit?

David Foss -- President and Chief Executive Officer

Software retirement on the Payments platform is what you mean or which --?

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Yes, that's right.

David Foss -- President and Chief Executive Officer

Yeah.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

On the payments platform.

Kevin Williams -- Chief Financial Officer and Treasurer

No, that will all happen in FY '20 when we are able to shut down both platforms.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Okay. And then on the revenue growth side, I know you've talked about this year and how you really don't see the benefit from the pipeline till 4Q, but based on what you're seeing now, do you think that there is a bias toward the upside on revenue growth over the long term as those -- as this pipeline starts to convert?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, Joe. I mean, obviously with the strong Q4 that we had not only new sales, but also as Dave mentioned, the 24 in-to-out migrations, which drives additional revenue, which those will be sprinkled out throughout the FY '19, which all that will help to drive revenue growth into FY '20.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Okay. And then lastly, just on the outsourcing front, we haven't talked a little bit about it. Maybe you can give us an update on outsourcing, how much it grew and how you're seeing the conversion among your clients? Thanks.

David Foss -- President and Chief Executive Officer

Sure. So I highlighted in my opening comments that we booked 24 in to -- what we call in-to-out. So those are in-house customers that are moving to outsourcing, so that was in the quarter. And I also highlighted in the press release that of the new core signings that we had, almost all of them signed up as outsource customers. So we have continued to see that trend toward outsourcing in general. I don't know if you want to add any specific metrics around the numbers.

Kevin Williams -- Chief Financial Officer and Treasurer

Well, the other thing I'd add Joe is, if you just look at our outsourcing services, which is obviously all of our data centers and cloud services, they grew consistently in Q4 just like they did for the year. Q4 they grew about 11%, for the year our outsourcing and cloud services grew 10%. So that continues to be the very large driver of our overall revenue growth.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Got it. And I'm going to sneak one more in. On Ensenta, maybe you can give us some updates on the integration there, how it's working with your clients and how you're layering it into deals? Thanks.

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, that's a good point. Frankly, I'm glad you asked because of the 24 acquisitions that I've been involved in, in the past 18 years or so, I would have to say this has been the smoothest. Integration, as far as systems, employees, financials, HR, everything, technology, really finished in, I think, May or June of this year. The team has just fit perfectly into the Jack Henry environment. There was a really nice cultural match from a product standpoint. They fit perfectly because they were so focused on the credit union space and our traditional solutions in that area, we're not focused in the credit union space. They were primarily sold to banks. And so they were very complementary to what we are doing. So we are seeing nice demand for that solution and I couldn't be happier with the way that whole acquisition has gone.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Great. Thank you.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Joe.

Operator

Thank you. Our next question comes from Dave Koning of Baird. Your line is now open.

Dave Koning -- Baird -- Analyst

Yeah. Hey, guys. Thanks. So first of all just making sure on guidance. You kind of said this to Glenn's question, but 606 accounting that's -- the way you are guiding fiscal '19, is it almost like it doesn't matter whether it's on the current basis or on 6 -- post 606 like either way revenue is going to be pretty close to same, maybe slightly lower, but the point is that $394 million to $404 million number regardless would be that number?

David Foss -- President and Chief Executive Officer

Correct.

Dave Koning -- Baird -- Analyst

Okay. Okay. In the order of magnitude on revenue like -- down like maybe 1% lower than it would have been other -- like it's not big, right?

David Foss -- President and Chief Executive Officer

No, it's not huge at all.

Dave Koning -- Baird -- Analyst

Okay. Okay. Secondly, you made a comment about fiscal Q1 following kind of the pattern of being, but that's usually a little lighter quarter on EPS. Were you basically saying that -- consensus, I think, is $0.95, were you kind of saying to try to be a little below that, was that kind of what you were saying?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, I mean. Dave, always because Q4 is so strong and we got so much going on in Q1 with our year-end sales meetings and kickoffs and our Symitar Education Conference and different things that typically just on average Q1 is a little weaker and then we kind of grow throughout the year. So just being a little conservative and cautious.

Dave Koning -- Baird -- Analyst

Okay, but is there any number that you kind of want us to go toward?

Kevin Williams -- Chief Financial Officer and Treasurer

No. None.

Dave Koning -- Baird -- Analyst

Okay.

Kevin Williams -- Chief Financial Officer and Treasurer

No, that's not really a guide to.

Dave Koning -- Baird -- Analyst

All right. All right. And the last question, so you called out in the press release and I think you've kind of mentioned this before that the deferred revenue drawdown is benefiting revenue a little bit, but eventually that deferred revenue runs out, but is outsourcing kind of the offset? Since that's growing that even as deferred revenue gets drawn down the outsourcing growth kind of offsets. Is that the way to think about that?

Kevin Williams -- Chief Financial Officer and Treasurer

Yeah, that's one of the ways, Dave. But remember so, when we go through the 606 recast and like I said, we'll file an 8-K before the end of September to give you all the actual restated numbers for FY '18 quarter and the prior two years. But as 606 goes into effect, bundling essentially goes away, which means that now under 606, we can recognize revenue from every delivered product as part of the contract, because they're all (inaudible) apart where under 605, we couldn't recognize any revenue under a contract until the last part was delivered, which caused some lumpiness. So -- I mean we could have delivered $2 million worth of products a year ago, but until we deliver that last product, the minimum will be $25,000, we couldn't recognize any of that $2 million of revenue. But as soon as we deliver that last pool of product, then we'll recognize that revenue over that quarter of the year. So we have to go back and unwind all this that we've done for the last 10 years and to come up with an opening balance sheet from two years ago and then recognize the revenue from the software and the implementation services upon delivery of each individual product rather than the last product to the contract. So it's going to bust all the bumping [ph] up, it's going to move some parts around. It's going to take -- probably take revenue down a little bit, but it's just going to kind of take that one pocket and put in the other, and it's not -- should not have a significant impact on total revenue or total revenue growth.

Dave Koning -- Baird -- Analyst

Great. Okay. Thank you, guys. Good job.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Dave.

Operator

Thank you. At this time, I'm showing no further questions. I would like to turn the call back to Kevin Williams, CFO, for any closing remarks.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Haley. First of all, I'd like to echo what Dave said. I want to -- I want to honestly thank all of our associates for what they've done in FY '18. They've done a great job. We've done a great job taking care of our customers and we will continue to take care of our customers and we are very pleased with the results of our ongoing operations and the efforts of our associates to take care of our customers. Our executives, managers, and all of our associates will continue to focus on what is best for our customers and what is best for our shareholders.

With that, I want to thank you again for joining us today. And Haley, will you please provide the replay number for the playback?

Operator

Certainly. Ladies and gentlemen, the replay number is going to be 800-585-8367 and 855-859-2056. There is also another number, 404-537-3406. The replay will be available starting today at 11:45 AM Eastern Standard Time and will be available until August 31, 2018, at 11:59 PM. Thank you for participating in the call today. This does conclude the program and you may now disconnect. Have a great day.

Duration: 50 minutes

Call participants:

Kevin Williams -- Chief Financial Officer and Treasurer

David Foss -- President and Chief Executive Officer

David Togut -- Evercore ISI -- Analyst

Brett Huff -- Stephens, Inc -- Analyst

Kartik Mehta -- Northcoast Research Partners LLC -- Analyst

Peter Heckmann -- D.A. Davidson -- Analyst

Tim Willi -- Wells Fargo -- Analyst

Glenn Greene -- Oppenheimer -- Analyst

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Dave Koning -- Baird -- Analyst

More JKHY analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.