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Jack Henry & Associates (NASDAQ:JKHY)
Q1 2021 Earnings Call
Nov 05, 2020, 8:45 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by. And welcome to Jack Henry & Associates first-quarter FY 2001 earnings conference call. [Operator instructions]. I would now like to hand the conference over to your speaker today, Kevin Williams.

Sir, you may begin.

Kevin Williams -- Chief Financial Officer and Treasurer

Good morning. Thank you for joining us today for the Jack Henry & Associates first-quarter fiscal 2021 earnings call. I'm Kevin Williams CFO and treasurer. And on the call, this morning is David Foss, president, and CEO.

In a minute, I'll turn the call over to Dave, to provide some of his thoughts about the state of our business, the performance for the quarter, and some comments relating to the impacts of COVID-19 and other key initiatives that we have in place. Then after that, I will provide some additional thoughts and comments regarding the press release we put out yesterday after market close and also provide comments regarding our guidance for our fiscal year '21 provided in the release, and then we will open the lines for Q&A. First, I need to remind you that this call includes certain forward-looking statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results. Likely any statement about the future, these are subject to a number of factors that could cause actual results or events to differ materially from those which we anticipate due to a number of risks and uncertainties.

The company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our 10-K entitled Risk Factors and Forward-looking Statements. On this call, we will discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income. The reconciliations for these historical non-GAAP financial measures can be found in yesterday's press release.

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

Dave Foss -- President and Chief Executive Officer

Thank you, Kevin. Good morning, everyone. We're pleased to report another strong quarter of revenue and operating income growth. As always, I'd like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for our first fiscal quarter, particularly in light of the challenges posed by conducting business in the midst of a global pandemic.

Now that we are all many months into life with the pandemic, we remain extremely thankful for the fact that very few of our almost 7,000 employees or their family members have been directly affected by the COVID-19 virus. Our HR team is working closely with all the groups around our company to be sure anyone who is affected is receiving the care and accommodations they require. We continue to operate with well over 90% of our employees working full time remotely, and with the current returned to office date of January 4 because of the success, we've had with our remote work initiatives and because of the ongoing concerns about the pandemic, I fully expect we will extend our returned office date further into 2021 but that decision hasn't yet been made. Most of our customers now have at least a few members of their staff working in their offices full time.

As we moved into the fall, several of them have requested that we come onsite to work with them on sales engagements and system implementations, and we are normally able to accommodate those requests with no trouble. With that said, our sales teams are now routinely doing sales presentations and executing contracts with no onsite presence at the customer location. We have also completed many 100% remote implementations with great success, including several full core conversions. And our Customer Service teams continue to deliver outstanding service through remote channels while keeping our customer satisfaction ratings very high.

Our teams continue to execute in this new environment with the success of the customer always foremost in their mind. With that, let's shift our focus to -- let's shift our focus to a look at our performance for the quarter we completed in September. For the first quarter of fiscal 2021, total revenue increased by 3% for the quarter and increased 5% on a non-GAAP basis. These conversion fees were down more than $9.0 million over the prior-year quarter which impacts the current quarter negatively, but it is very good news if you take a long-term view.

Turning to the segments. We had another solid quarter in the core segment of our business. Revenue increased by 2% for the quarter and increased by 5% on a non-GAAP basis. Our payments segment again performed well posting a 5% increase in revenue this quarter and a 7% increase on a non-GAAP basis.

We also had another strong quarter and our company solutions businesses with a 6% increase in revenue this quarter and a 7% increase on a non-GAAP basis. Traditionally, our first quarter has been our latest sales bookings quarter because our fourth quarter tends to be extremely strong and the sales pipeline is depleted. As a result, this year was no exception to that trend. With that said, however, the Sales teams had several notable successes in Q1.

In the quarter, we again booked seven competitive core takeaways with two of them in the multibillion-dollar asset space. We also booked three deals to move existing in-house customers to our private cloud environment. We continue to see good success with our new Card Processing Solution signing six new debit processing clients this quarter and three new credit clients. All of the deals I just mentioned represent new customers and new revenue for our company.

We also continue to see great success signing clients to our Banno Digital Suite with 29 new contracts in Q1. Speaking of our Digital Suite. We have now settled into a comfortable pace of implementing more than 30 new financial institution clients every month on the Banno platform. We recently surpassed three million active monthly users, but that number continues to grow rapidly.

At the same time, our Banno platform has been recognized by FI Navigator as having the highest consumer rating in the App Store with 4.79 out of five stars. Our Banno Digital Suite as well on its way to becoming an industry-leading digital banking solution. The extraordinary success we've seen with sales and adoption of our Digital Suite is consistent with the expectations coming out of the Bank Director Technology survey published in August. As they do every year, Bank Director survey hundreds of their subscribers during June and July regarding a variety of technology prioritization and spending topics.

Almost 60% of the responses they received were from bank CEOs and/or board members, with a large majority of the responded banks greater than 500 million in assets. The survey shows that as a result of the pandemic most banks had moved two items to the top of their priority list. The first being an improved customer experience, and the other being an improved set of digital offerings. The survey also indicated that 64% of the respondents had increased their technology spending expectations between 5% and 15% as compared to their pre-pandemic budgets.

All of this bodes well for the future of our Digital Suite, as well as the other solutions offered by Jack Henry which helped facilitate an improved customer experience, and an opportunity to enhance efficiency in the financial institution. Regarding our new card processing platform, as of the end of September, we have successfully completed the migration of our approximately 800 core clients in accordance with the plan we have highlighted on these calls for the past three years. We still have a small group of approximately 80 non-core clients left to migrate, but we fully expect to hit our fiscal Q3 target with that group as previously announced. I am very proud of our team and thankful to our partners and clients for working with us to achieve such a successful outcome.

Although it didn't impact our Q1 numbers in any way, you undoubtedly saw the announcement of the recent divestiture of our CruiseNet business. The CruiseNet core solution was used by approximately 140 very small credit unions to perform core processing functions. Jack Henry acquired the business about 20 years ago, but we haven't actively marketed this solution for many years. We had committed to the client base that we would keep the solution compliant, but not that we would add features or actively sell the solution.

The acquirer is active in the very small financial institution market, so the sale was a good fit for them and the CruiseNet clients seem very happy with the outcome. The acquirer has rebranded CruiseNet as Aurora's advantage, and we have partnered with them to allow us to continue to sell and support several of our ProfitStars solutions into their customer base going forward. More information on this transaction will be provided with our Q2 disclosures, but the overall impact is relatively immaterial. As many of you know, we normally conduct our two largest client conferences in the fall each year.

Although we chose not to hold in-person conferences this year, we conducted a virtual Symitar conference at the end of August and our Banking and ProfitStar conference in October as previously scheduled. As you might expect, attendance was much larger than our in-person conferences because nobody had to incur any travel expenses, and we were able to interact virtually with many of our existing clients and prospects. In a couple of weeks, we will be hosting our Annual Shareholder Meeting, and as we disclosed in our proxy we have decided to conduct it as a virtual meeting as well. Despite the uncertainty caused by the ongoing pandemic, the key fundamentals of our business remain consistent with the profile I outlined on this call six months ago.

We carry almost no debt and operate with a solid cash position. Our revenue is more than 85% recurring in nature, and our workforce is highly engaged as evidenced by our engagement survey scores and regular announcements of Best Places to Work Awards. As we move forward, we will continue with our disciplined approach to running the Company, and we expect that approach to continue to provide stability and solid performance for our employees, customers, and shareholders. With that, I'll turn it over to Kevin for some detail on the numbers.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Dave. Our service and support revenue increased 1% in the first quarter of fiscal '21 compared to the same quarter a year ago. Adjusting services support revenue for the deconversion fee revenue for each period which was $5.8 million in the current fiscal year, compared to $14.9 million in the prior fiscal year, or a little over $9.0 million decreases. This revenue line would have grown 4% for the quarter compared to the previous year.

Our services and support revenue growth was primarily driven by our data processing and hosting fees and our private cloud. And also software usage fees reflect our customers' preference for our term license model, partially offset by decreased product delivery and services revenue, due to decreased license hardware and indentation pass through and other revenue. But particularly the deconversion fee revenue quarter over quarter. Our processing line of revenue increased 7% in the first quarter of fiscal '21, compared to the same quarter last fiscal year.

The increase was primarily driven by higher card volumes from new customers installed last year, and increased debit card usage from existing customers, and the Jack Henry digital revenue experienced the highest percentage growth of all revenue lines due also to new customers installed last year, and the increased volumes from existing customers Q1 of this year compared to the same quarter last year. Our total revenue was up 3% for the quarter compared last year on a GAAP basis, and up a little over 5% on a non-GAAP basis, excluding the impact of the deconversion fees. Our cost of revenue was up 7% compared to last year's first quarter. The increase was primarily, due to higher costs associated with our card processing platform, and higher personnel costs related to increased headcount on September 30, 2020, compared to a year ago, due to primarily organic growth within our product lines.

The increase in cost was partially offset by travel expense savings as a result of COVID-19 travel limitations. Research and Development expense increased 6% for the first quarter of fiscal '21, over the prior fiscal year first quarter which this increase was also primarily due to higher personnel costs related to increased headcount, compared to a year ago. Our SG&A expense decreased 9% in the first quarter of fiscal '21 over the same quarter in the prior fiscal year, and this decrease was mainly due to travel expense savings as a result of COVID-19 travel limitations. There was also a decrease in revenue tied to the expense of the savings, due to our user group being in a virtual nature this year.

Our reported consolidated operating margins decreased from 27& last year to 26%, which is primarily, due to the various revenue headwinds already discussed in the increased costs. On a non-GAAP basis, however, our operating margins increased from 24.7% last year to 25.2% this year, primarily, due to the items already mentioned. Our payment segment continues to be impacted by the additional costs related to our card processing platform migration. As Dave discussed in his comments, and our core segment operating margin decreased slightly during the quarter, compared to last year just primarily, due to the revenue mix.

While comp many segment margins actually improved compared to last year quarter heavily driven by our digital sales. The effective tax rate for the quarter decreased to 22.4% this year, compared to 24.6% last year. The decrease in effective tax rate compared with the prior fiscal year quarter was primarily, due to the difference in the impact of share-based compensation under the long-term incentive plan, but that's during each of the periods which create a larger permit tax deduction this year, compared to the prior-year quarter. Net income, $91.2 million for the first quarter, compared to$89.4 million last year with earnings per share of $1.19, compared to $1.16.

For cash flow. The total organization increased 3% year to date, compared to last year, due to capitalized projects being placed into service. Included in the total amortization is the amortization of intangibles related to acquisitions which decreased to $4.4 million year date this fiscal year, compared to $5.5 million last year. Depreciation expenses up 5% for the year primarily, due to capex in the previous year and those assets being placed into service.

We also purchased 400,000 shares for the Treasury in the quarter for $65.9 million. Our operating cash flow was $114.5 million for the first quarter, which is down from $123.1 million or 7% compared to the last fiscal year. We invested $37.3 million back in our company through capex in cap software for evolving our products, in which the total amount capitalized is down 15% from $44 million, compared to a year-ago quarter. Our free cash flow which is operating cash flow less capex and cap software and then adding back net proceeds from the pending sale of assets was $83.3 million for the quarter.

A couple of highlights on our balance sheet. Cash position of $195.3 million down slightly from $213.3 million on June 30th. There is nothing drawn on a revolver which has again, has a maximum capacity of $700 million, and we had no other long-term debt on our balance sheet other than leases which are primarily due to the new lease accounting rules adopted in the previous year. Some updates on guidance.

As you noticed, we updated both GAAP and non-GAAP revenue guidance in the press release yesterday. Just to be clear, this guidance continues to be based on the assumption that the country continues to open up and the economy continues to improve. Obviously, if the country is forced to shut down again due to the pandemic, and the economy stalls or actually reverses then this guide will be revised. We'll also note that the GAAP guidance that we continue to forecast revenue from deconversions to be down $33 million from what we saw in FY '20, which we saw $53.9 million in total deconversion fees in that year.

We saw a $9.0 million decrease in Q1, we expect to see another decrease in deconversion fees in Q2, but probably about half the decrease we saw in Q1. The largest anticipated decrease in deconversion fees will be in Q3, compared to last year. As you recall, Q3 last year was the largest deconversion fee quarter, due to a couple of large deals. We see little to no current M&A activity that would drive deconversion revenue higher at this point, which, in the short term, will hurt revenue growth, but in the long term, as Dave mentioned, is good for us as we have measured to keep our customers and the revenue from the long term.

It means on a GAAP revenue guidance provided in the press release impact by the decrease deconversion fees, you're looking at GAAP revenue growth of 3% to 4% plus. The only adjustment between GAAP and non-GAAP revenue guidance is the decrease in deconversion fees. If we see changes during the year and it just deconversion revenue, we obviously, will update you on future quarterly earnings calls. We expect to continue to have some headwinds on revenue in the first half of the year for several reasons.

Some ongoing delayed implementations at customer requests to the continued shift of our customers to a private cloud. We'll continue to put additional headwinds on our license hardware and on permit mutation, and our annual education companies with virtual events this year, which also impacts revenue in the first half of the year. Therefore, for your models for non-GAAP revenue, I would suggest using a 4.5% to 5% revenue growth in the first half of the year, and a 7% to 8% revenue growth in the second half to get you to our guidance of 6% to 6.5% revenue growth for the entire fiscal year again, on a non-GAAP revenue basis. We anticipate GAAP operating margins for all of FY '21 to be down slightly to the 20% to 21% range for all the reasons previously mentioned.

And non-GAAP margins should be said to be in line to slightly up from last year for the entire fiscal year. Our effective tax rate for FY '21 should still be in line with that by 20%, and for the entire fiscal year be between 22% and 23%. This concludes our opening comments. We are now ready to take questions.

Operator, would you please open the call lines up for questions.

Questions & Answers:


Operator

[Operator instructions]. Our first question comes from the line of Dave Koning from Baird. Sir, your line is open. Please ask your question.

Dave Koning -- Baird -- Analyst

Yes. Hey guys. Nice job. I guess my first question.

When I looked at this support and service line this year that the last couple of years there was this seasonal pattern where you grew I think 11% in Q1 then higher single-digits Q2 to Q3, and then low to mid-single digits low. Yes, low to mid-single digits in Q4. This year you're starting Q1 at plus 4$, so it seems like this year is going to shape up differently. Maybe you can talk about the progression through the year, and why this Q1 wasn't closer to that double-digit type range.

Kevin Williams -- Chief Financial Officer and Treasurer

Yes. So a couple of things. One, even though we had a nice increase in software subscriptions this quarter compared to a year-ago quarter, it wasn't near as large a percent. And part of that was, due to some delayed implementation in the second half of last fiscal year, which, as you remember under ASC 606.

You recognize 100% of the revenue. So any invitations in software subscription that would've been installed the second half that would have basically been a few months last year. But we would've gotten a full twelve months on the renewal this year. So that was part of it.

The other part Dave is the continued headwind of license and hardware, and implementation revenue which is due both to the ongoing move of our in-house customer with outsourcing. But also due to some delays, due to COVID because our installers couldn't go out and do some of these due to the banks and credit is not one of them on site. So again, and I'll highlight this. So there were some headwinds on revenue and everybody I solved the notes out there but high rider vehicles travel expenses.

I mean those two of offset. I mean so there were headwinds on revenue and there was a decrease in travel expenses. But those two somewhat offset the impact. So that's kind of how we get to the 4% growth this quarter.

I think for the rest of the year, is going to line out. And obviously, as our guide, I think the first half is going to be a little wider on growth in the second half. I think we're going to see a really nice step up in top-line revenue growth, which will be also in both lines of revenue.

Dave Koning -- Baird -- Analyst

Got it Ok. Now that's helpful. I guess the follow-up to that is the back -- obviously, the full year is going to be good and the back half is better. Q2 though it sounds like just a touch of deceleration.

If you're saying 4.5% to 5% growth in the first half of Q1 was like almost 5.5%, Q2 might be but the lightest quarter. Why would -- why is that happening?

Kevin Williams -- Chief Financial Officer and Treasurer

Well, part of that is because when you look at the last two years since we adopted the ASC 606 David, there is a slowdown in Q2 from Q1 because you have all the software subscription revenue in Q1. So that's just part of ASC 606 and there's no way to avoid that. So, there's going to be a little slowdown in Q2, compared to Q1 as far as growth. But then, I think Q3 if you look at GAAP basis is going to be even a little slower because of the huge decrease in the conversion fees that we are predicting in Q3.

And then, it's really nice growth in Q4.

Dave Koning -- Baird -- Analyst

Got it. That's helpful. And one just really quick one. This is immaterial nobody's ever asked a question on a call about your corporate line before.

I think that it was down a lot, I mean it's only 3% on [Inaudible]. Is that -- is there something in that line that just this quarter was one-off.

Dave Foss -- President and Chief Executive Officer

No. There's nothing there to highlight Dave. It's just small.

Dave Koning -- Baird -- Analyst

Ok. Thank you, guys.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Dave.

Operator

Your next question comes from the line of [Inaudible] from Stephen Corp. Sir, your line is open.

Unknown speaker

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

Kevin Williams -- Chief Financial Officer and Treasurer

We're good.

Unknown speaker

Dave, you may have highlighted this. Could you talk a little bit about the digital sales that you guys are seeing how Banno is progressing, and then both the Cash management and the Treasury management businesses.

Dave Foss -- President and Chief Executive Officer

Yes.

Unknown speaker

All those things are selling versus core and things like that.

Dave Foss -- President and Chief Executive Officer

So you're cutting me out. And just a little bit Brett. But I think I got the question, and you're right. I did highlight in the opening comments.

So Banno's digital performance has been very strong. I have added in my comments that we signed 29 new customers in Q1. And I also highlighted that we're at a pace now to install about 30 customers a month that we're bringing lives. So 30 financial institutions live per month.

I also highlighted that we recently surpassed three million active monthly users. So that isn't 3 million subscribers. That's for the subscriber number of the line. I'm sorry.

Subscriber numbers are a lot higher. So that's 3 million active monthly users which means they're using -- they're actively in the system every month. So we've exceeded that number now. I also highlighted that FI navigator who reports on how consumers feel about the various applications.

They've now got us of the highest rated digital banking application with the 4.79% out of five stars in the App Store. So tremendous success with the Digital Suite at Jack Henry, and we only see that continuing and getting better. As far as the other components you asked about the Treasure management continuing to find new customers and Treasure management in the quarter. I think we've gained four or five.

We have about 50 financial institutions live now in Treasury management, and continuing to announce that product and continue to roll that out. So good success all around when it comes to digital. that's helpful.

Unknown speaker

That's helpful. And then Kevin, I want to make sure that I get the revenue acceleration in the back half. I know some of it is ASC 606. So it sounds like it's just timing of delayed implementations that maybe happened last year that maybe now will flow not into one half but more in the second half.

Are those the two primary drivers or am I want to make sure I'm not missing anything on that red acceleration.

Kevin Williams -- Chief Financial Officer and Treasurer

So, Brett, there's a couple of things and you hit most of them. But the other thing is the continued growth in our Card business is where we are now -- even with all of our core customers now migrated over, we were having we're in pretty good success themselves. As Dave mentioned, we signed several new customers in Q1. So we can now focus more on bringing new customers on.

So you're going to see nice growth there. Digital is just going to continue to grow very nicely. So, our processing line of revenue is going to continue to grow at this pace and actually accelerate in Q4. Based on what we're seeing, and then support and service line, we're going to lap some things to it.

So Q4 should be a little easier comp there. So that' -- those are the primary drivers for the salary growth. Primarily in Q4 is where we are just facing that growth right now. Again, as I said in opening comments that are all subject to the economy continuing to percolate and get along, and not having another shutdown.

Unknown speaker

Ok, that's helpful. And then just in terms of how the decision making is happening at banks. Just generally are they -- I assume it's still digital-focused. How is core commerce? How are the core conversations going, is it -- are those being put on the back burner at all as people focus on digital or any change in that dialogue at all.

Kevin Williams -- Chief Financial Officer and Treasurer

Yes. Interesting. So, another thing I highlighted was the fact that in the bank director survey here with 64% of the respondents in the survey and with most of them being over 500 million in assets. 64% of the respondents had set their technology spending budgets or increased their technology spending budgets by 5% to 15% as compared to their pre-pandemic.

And that's what we're seeing now. The flow of RFPs has picked up recently. Particularly on the core side. So we have a bunch of RFPs working right now on the core side continuing to find new customers.

But the rate of interest is increasing. And I think what's happening, so not only having good solid success on digital and certainly, with our payments platform with customers were signing there. But just overall, I think people are settling in now to be doing business in the COVID world and they're finding those deficiencies and what they have with the technology they're currently operating. And so our fees are starting to really ramp up.

So we'll see the decision pace, I would say is moving along well-getting contracts finished as a little more challenging than it used to be because the attorneys are working remotely from their house in one city and the CEO is working remotely from their house in a different place. And it's some of that coordination is a little more challenging than it used to be. But deals are getting signed and there is a lot of interest in Jack Henry Technology as evidenced by the Arab people.

Unknown speaker

Great. Appreciate the help guys.

Kevin Williams -- Chief Financial Officer and Treasurer

Thanks, Brett.

Operator

[Operator instructions]. Your next question comes from the line of Mr. David Togut from Evercore. Sir, your line is open.

David Togut -- Evercore ISI -- Analyst

Thank you. Good morning. Dave, you called out a somewhat slower pace of closing core deals. Could you bracket for us what the sales cycles are like today in the COVID environment versus pre-COVID in terms of the number of months for example for core signing?

Dave Foss -- President and Chief Executive Officer

Yes. It's a good point. It's taking longer to get a core deal done. So we did seven this quarter.

We did seven the prior quarter. And so it's definitely taking a little longer to get deals done. Once the deal is done, the actual conversion process isn't taking any longer because we're doing so much remote now. But I'd say, we've probably added another month or so to the actual signing process.

But as I just mentioned in the conversation with Brett the RFP pipeline is very solid. We're -- it's amazing the number of our fees that are coming in on the core side. So I'm not just talking about other products. I'm talking about interest in Jack Henry's core solutions.

So they're a little slower right now than they have been in the past, but we're still seeing deals, and we're still getting deals done.

David Togut -- Evercore ISI -- Analyst

Understood. And just as a follow-up. Kevin, you call that $195 million in cash on the balance sheet. You've clearly got a lot of potentials to allocate capital now, whether be the acquisition dividends buybacks.

How do you rank your capital allocation priorities given your current balance sheet? And when you look at let's say the valuation of acquisition opportunities, the pipeline versus your own stock. How do you weigh that decision?

Kevin Williams -- Chief Financial Officer and Treasurer

Yes. So David. Obviously, you've never quite won that our first use would be to find the right acquisition to bring additional products just cross-sell to our customers and give a higher return to our shareholders. But you're absolutely right.

The valuations continue to be a little high out there for what we're seeing. There's not a lot of really good assets that we're seeing out there right now, but we do continue to look, and we will continue to look for the right acquisition. Having said that, with nothing out there. Obviously, we have a shareholders meeting here a couple of weeks and our quarterly board meetings and we'll be discussing it that the use of cash.

I'm sure we'll continue the dividend program. And we typically increase the dividend in the February time period. So, I don't see why we would change that. But again that's up to the board.

And I'm sure that we will continue to buy back some stock going forward as we don't see them any more acquisitions on the horizon getting closer.

David Togut -- Evercore ISI -- Analyst

Thank you. Just a quick final question if I could. Dave, I would appreciate your perspective on open APIs in the banking industry how you're in, let's say, making the core available through open APIs to the extent the best breed provider wants to connect into a customer for a point solution.

Dave Foss -- President and Chief Executive Officer

I'm glad you asked that David we are big believers in that concept and have been since the founding of this company before the term API was a term. The concept of Jack Henry has always been to be open. We've always been committed to the idea of making our platforms available to others through easy connectivity. We don't set up artificial walls to keep people out.

And a lot of people over the years have viewed that as being very counterintuitive. But I think the philosophy of Jack Henry has always been that we're here to make our customers successful. They're not here to make us successful. And so we're going to help make them successful.

We should provide the tools that enable them to connect to whoever they want to connect to. I think the best example of this is something you can see is for people who go to our client conferences and this has been true forever at Jack Henry. You go to a Jack Henry and reclaim conference you go into the exhibit hall and you will see hundreds of exhibitors in there. And almost every one of them competes with Jack Henry.

We don't allow core vendors in there. But other than that, pretty much anybody else is allowed in. And so you've got digital vendors. And you've got payment vendors.

And everybody under the sun in our space has a book in the exhibit hall. And they will all tell our customers that they love working with Jack Henry because we are the ones that have always been truly committed to the idea of open connectivity. So today, APIs the preferred tool. But prior to that, we had pointed to point integration that we supported readily and made available to our customers.

David Togut -- Evercore ISI -- Analyst

Understood. Thanks, very much.

Operator

Your next question comes from the line of Kartik Mehta from Northcoast Research. Your line is open.

Kartik Mehta -- Northcoast Research -- Analyst

Hey, good morning. Dave, I know you've been asked this question in the past. But I'm wondering, I know in the short run there's a lot of talk about using digital technology. I'm wondering as you have conversations with your customers what they think might be a permanent shift in behavior changes.

And how that maybe benefits Jack Henry, or how Jack Henry might have to change to adapt to any changes that are going to occur as a result of the current pandemic.

Dave Foss -- President and Chief Executive Officer

That's a good question. The key thing and I think that's evidenced in that survey that I cited from the bank director. We have all these CEOs and board members of banks and credit unions, we're not included in the survey. So I'll just talk banks for a moment.

All these CEOs and directors who do that survey have indicated that they really are shifting their focus to digital because they know that their consumers aren't necessarily going to come into the branch for all the banking services going forward as they did in the past. And so enabling digital lending experience, which we have done. And I've talked about many times on this call, our commercial lending center sweep in the past and enable you to know a full consumer functionality and business functionality through the digital channel is a key part of their strategy, and a key part of our strategy. Now one of the things we talk about a lot and I've talked about it on this call a few times is Ok, if you're a consumer is going to start interacting with you, the bank digitally, how do you ensure as a community bank or credit union, how do you ensure that your experience is differentiated from the majors.

And so that's where we really put a lot of focus and that's where we get it. I think we're having so much success with that Banno platform is because we've created a differentiated experience for the consumer. The digital experience with Banno is not the same as with all the other vendors out there because we've tried to create an experience that comes close to the same experience the consumer would have if they were in the branch, meaning direct personal service which is what community banks Ukrainians have always used to differentiate themselves from their major competitors. We've created that similar experience through the digital channel.

And so it truly has differentiated us and our platform. And I think as customers really start to understand whether their Jackson record customers or not. As they really start to understand that and that need to differentiate themselves in the digital environment. They will really look seriously at our platform.

Kartik Mehta -- Northcoast Research -- Analyst

And then Kevin, I know you've talked about this. Just I'm wondering about long-term margins. Obviously, this year you're being impacted by COVID-19. You're being impacted by the fact that you're transitioning your credit and debit platform.

But as you finish that, and we go into the next fiscal year. I'm wondering what you think long-term margin prospects or medium-term margin prospects look like.

Kevin Williams -- Chief Financial Officer and Treasurer

Well, I mean my basic argument. I mean we're going to see a lift in Q4 as we've been stating for the last two and half three years as we go through this payment migration. So we'll get a lift in Q4, and then from that and just the increased sales and implementations of our card platforms both debit and credit and digital, we should continue to see margin improvement. The continued shift of customers from our in-house to outsourcing which also drives margin improvement.

So I mean, I haven't sat down and just try to put a fence around it to figure out exactly what that margin is going to look like in the FY '22 card. But it's going to be up nicely from FY '21. Again, depending on the pandemic and COVID and all that. But if everything remaining equal, we'll see a nice margin uplift in '22 compared to full-year '21.

Kartik Mehta -- Northcoast Research -- Analyst

And just one last question Dave. Obviously, there's some conversation about Google partnering with bands to have its own branded checking account and there are the stories about maybe Amazon doing something similar. Any concerns from your customers as to how that might impact them, or is there anything you can do to help them that could benefit Jack Henry.

Dave Foss -- President and Chief Executive Officer

Anything we could do to help our customers or help Google.

Kartik Mehta -- Northcoast Research -- Analyst

Help your customers or even Google if you like it.

Dave Foss -- President and Chief Executive Officer

Let me make sure you are where you can take that conversation. So yes, we have talked, have spoken with some of our customers. Interestingly on Google's solution, they're partnering with a couple of credit unions, and they're trying this in several different ways. We've talked with some of our customers.

No immediate threat that they perceive with what's happening there. As you know also I think they've seen with all the other neo bank experiences that are available in the United States today. But we're keeping a close eye on that. We're trying to make sure that we're ahead of the game to help our customers if there are opportunities.

It is again, I'll go back to the complete online digital lending platform that we rolled out a couple of three years ago. We did that because we saw what was happening with on that cabbage and the potential for those solutions to disintermediate commercial borrowers from our customers. So we were very successful with that, and helping those customers who needed to fend off those competitors and we'll do similar things here as we see those opportunities.

Kartik Mehta -- Northcoast Research -- Analyst

Thank you very much appreciate it.

Operator

Your next question comes from the line of Dominick Gabriele from Oppenheimer. Your line is open.

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Great. Hey guys. Thanks so much for taking my question. If you -- have you talked to your bank or credit union partners about perhaps access capital that they may have on their balance sheets if there's no net charge offs don't materialize in the same magnitude for which they reserve.

And what they may do with this potentially large amount of excess capital. Have they talked about increased tech investments with a portion of that with you? Thanks.

Kevin Williams -- Chief Financial Officer and Treasurer

So, I wouldn't say they specifically said we expect to have access capital or we're going to use that for technology. I think the discussion about increasing technology spending is more about their requirement, their need to remain relevant as customers are moving away from doing business in-branch and moving more toward an online experience. So, I think it's pretty premature for most of our customers to be thinking about the idea that they may have access to capital. Most of them are ensuring that they're in a good capital position to fend off any losses that may happen as the pandemic continues to unfold.

So I view those conversations have two separate conversations. There's making sure you're well-capitalized in case there are no issues on the long side. And then this need for increased spending. Separate apart from that to ensure that you remain relevant here to your consumer and that they want to continue to do business with you in a digital environment.

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Great. Thanks a lot of sense. And you just think about the implementation of the core products, and then your complementary products as well and cross-sell after you won a core partner. Can you just go over again on what perhaps that time period is between the implementation of your core and then, the tale of these extra API add ons or cross-selling opportunities, and how long do those typically can last the add ons after a win.

Thanks so much. I really appreciate it.

Kevin Williams -- Chief Financial Officer and Treasurer

Sure. That's an interesting question. Normally when somebody is choosing to do business with us on the core side. So they're coming to Jack Henry as a new core customer.

Normally, they will wrap the core with a whole bunch of other solutions at the same time. So it's rare for somebody to say, I'm going to come and bring my core business to Jack Henry but nothing else. Normally, they will -- they're going to do that major technology upgrade on the core they look at a lot of other solutions they have and say, we want to upgrade our technology on all these other things at the same time and go through that integration experience once. So that would be my first point in answering your question is.

Normally, they're buying the core and maybe 20 or 30 other Jack Henry solutions at the same time. And then once they are in place and start to experience working with our group, it's maybe a month after they go live. They've realized, we really should have included this and they add something else or it may be a year after they go live. But the good news is we have a very long history of continuing to cross-sell products.

We have such a broad suite of products that over the life of the relationship. We just continued to sell more and more and more to those customers. If we're doing our jobs correctly, we continue to sell more and more to those customers so. So, I think that's the best way to think about those situations.

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Thank you.

Operator

The next question comes from the line of Mr. John Davis from Raymond James. Your line is open.

John Davis -- Raymond James -- Analyst

Hey guys. Good morning. So I really just wanted to start on Q1 results specifically on the top line. I think last quarter you got guidance for the full year said, first half adjusting that revenue would be 3% to 5%.

It did actually just slightly north of 5%. So what went better in the quarter was installations, are implementations rather. Just what exceeded our expectations relative to your guide.

Dave Foss -- President and Chief Executive Officer

Yes. It is primarily card and digital were the two that exceeded our expectations. So it was primarily on the processing line and to be quite honest, the headwinds in the important first-line were a little stronger than we thought they were going to be. So, but all the uplift was within the processing line of revenue.

John Davis -- Raymond James -- Analyst

OK. And then the other revenue with down 3% in the quarter. Just curious was that the net run rate. How should we think about that going forward? That was a little bit surprising.

Dave Foss -- President and Chief Executive Officer

So, John. That's primarily in the corporate segment and this is to answer actually years and David Koning's question earlier, the big part of that is related to our education conference [Inaudible] was the biggest chunk of that. And then the other part of it is just pass-through costs from our travelers not being out to go out for billable travel to pass through. So those are the two primary drivers of others being down.

As our travelers pick back up that will level out. Obviously, as Dave mentioned in his opening comments, our education courses Symitar normally in the first quarter, JAC which is a bank and ProfitStar second quarter. So there'll be some revenue impact in the other line in Q2 just like there was in Q1. Actually, be a little larger because JAC is typically larger than the SEC.

And then Q3 and Q4 for other revenue should level out with the previous year.

John Davis -- Raymond James -- Analyst

OK. And then last one for me. Just on the M&A front. Just curious, I was -- we're obviously we're still in the middle of a pandemic.

But if you didn't notice any meaningful changes whether it's valuation expectations our assets for sale. Just anything from a private market perspective. Are you more encouraged less encouraged? What do you think the pipeline looks like from an M&A perspective as we go over the next call it three to six months.

Dave Foss -- President and Chief Executive Officer

So, JD, just to be clear. You're talking about M&A from us acquiring not within our industry.

John Davis -- Raymond James -- Analyst

Correct. Correct. Yes. Right.

Your acquisitions. Yes. Yes.

Kevin Williams -- Chief Financial Officer and Treasurer

Yes. I'd say, so valuation expectations have they changed. Yes. It's been interesting let's say a few of the FinTech and InsurTech IPO recently.

I think there a lot of companies out there with stars in their eyes thinking that they're going to get those same valuations. So, we're seeing that companies that are potential that may be in the past wouldn't have ever really thought about an IPO. Now they're thinking IPO. They're thinking oh my gosh, look at that valuation or this back concept of course is alive and well out there too.

So, it's a little challenging as far as valuation expectations right now. We are seeing deals. I think on the last call, somebody asked about you know what we were seeing, and I was frustrated frankly at the time because we had seen so little, and we assumed the pandemic would drive some people to put their companies up for sale and we were really seen very little. Now there's more of a normal deal flow coming through.

So we're looking at deals. But to your point expectations, the valuations have definitely increased. And as well we're a disciplined acquirer. We don't chase after the shiny object when it comes to acquisitions, and so we haven't bid on any of them yet.

But we are actively looking at deals.

John Davis -- Raymond James -- Analyst

All right. Thanks, guys.

Operator

[Operator instructions] There are no follow up question at this time. Sir, please continue.

Dave Foss -- President and Chief Executive Officer

Thank you. I appreciate it. Again, we're pleased with the overall resource -- results from our ongoing operations. I want to thank all of our associates for the way they've handled these challenges by taking care of themselves and our customers.

And continue to work hard to improve our company on all fronts for the future. All of us a Jack Henry continue to focus on what is best for our customers and shareholders. With that, thanks again for joining us. And operator, will you please provide the replay number for the call.

Operator

[Operator signoff]

Duration: 62 minutes

Call participants:

Kevin Williams -- Chief Financial Officer and Treasurer

Dave Foss -- President and Chief Executive Officer

Dave Koning -- Baird -- Analyst

Unknown speaker

David Togut -- Evercore ISI -- Analyst

Kartik Mehta -- Northcoast Research -- Analyst

Dominick Gabriele -- Oppenheimer and Company -- Analyst

John Davis -- Raymond James -- Analyst

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