All right, I think, I think we can get started. Good morning, everyone. Thanks for joining us today. I'm Ken Cichoski. I'm an analyst on the US Payments and Fintech team at Autonomous Research. Today, we're excited to have Jack Henry at our 40th Annual Strategic Decisions Conference. And we're thrilled to have Greg Adelson here today. Greg's been with Jack Henry for 13 years now. He joined the company back in 2011 as Group President of iPay Solutions. He later became Jack Henry's Chief Operating Officer and was named President in 2022. And Greg is taking over the CEO position from David Foss on July 1. So we're really excited to talk to him today. So Greg, welcome. Thanks for joining us today.
Thank you, Ken, and congratulations on 40 years.
Thank you. And thank you for attending the session today, in person or over webcast. We're going to do a fireside chat, so I'll start it off with some questions. But if you have questions for Greg, feel free to submit those via Pigeonhole, and we'll try to weave those into the conversation as we go. So Greg, congratulations on the CEO role. You're not officially CEO, but just a few weeks away. Maybe we could start there. You've been with Jack Henry for almost 13 years now. So maybe talk about how your experience has prepared you for the CEO role.
Yeah. So thanks. So I have been with Jack Henry. I started in July of 2011, came right after our iPay acquisition, but really a lot of my experiences go back even before I got to Jack Henry. So I've been Chief Revenue Officer, COO, and President of some smaller companies, all privately held. Actually, one of them was publicly held as, actually in the card acquiring side of the business. But I've since I've been at Jack Henry, I've been very fortunate to work for our current CEO, all 13 of my years. And so, you know, philosophically, we're very much aligned, so I've been able to work through a lot of the strategies that we're working on today and, and be a big part of not only, creating the strategies, but implementing those strategies.
So a lot of those, those past roles, as well as what I've done at Jack Henry, prepared me well for where we're going.
Maybe we can build on that, Greg. What are the top two, three initiatives that you're going to be focused on over the next two years?
Yeah. So I'm going to start with two strategies that are already in motion but have several years of runway to go. So our tech modernization strategy, which we'll get into a little bit more later on, but also what we're doing with One Jack Henry, which is something that we've been focused on for the last four and a half years since I became COO, which is really creating an atmosphere for both clients and consultants in the industry and everybody to work with Jack Henry in an easier, more consistent manner. But Jack Henry, much like a lot of our largest competitors, is an amalgamation of a lot of acquisitions through the years. I think we've done 48 in the last 47 years. So when you think about that, some unintentional silos sometimes get built.
So we've been really working on creating a more consistent way that we do business across our organization, not operating in individual, siloed businesses. So those are two big initiatives that I'm going to stay focused on from an execution standpoint, making sure our new COO, who will be coming in, he's been with the company for a while, he'll continue to move those forward. Three things that I would say that I'm adding really to the strategy portfolio of opportunities are, one, is recently announced what we were doing with some of our key products to go outside the Jack Henry base. So that's been very intentional, where we had built some of our complementary solutions and maintenance solutions through the years to go outside of the Jack Henry base.
But we're really going to be focused on Banno Business, our card solutions, and our Financial Crimes Defender , which two of those three are brand new that we started to roll out, along with a couple of other complementary products that are already integrated with some of our competitive cores that will create a really nice bundle to add to the solution set, but allow us for opportunities when we're not winning the core business itself, but still compete for the other large parts of those businesses, like card and individual, in particular. I'm also going to be talking a lot more about SMB strategy.
So our small and medium-sized business strategy will be really focused on going through our financial institutions and not around them, which is what a lot of our competitors have done recently. We have some products today that we sell as a SMB kind of point-to-point solution, but they've never been built into a cohesive strategy. We're in the process of building out that strategy, but also I will be adding some things, and I'll talk more about in future earnings calls about how we're going to add some really nice nuances to that strategy that I think will excite the shareholder base. Then lastly is product rationalization. So I've looked at our product set, really kind of how we look at things as in SKU level.
So we have roughly 300 different small products or SKUs, a lot of products. And so over time, through acquisitions, you know, some of them have coupled this and come through with acquisitions. And we're taking a different approach, which really started this about 18 months ago, where finance and operations have got together to look at things that are slow growth opportunities, things that do not fit in our typical 7 to 8-year growth range, and also maybe lower on the margin. So we're going to look at things that might make sense to either divest, sunset, or things that, you know, we just want to invest that we have to do.
And one last thing that will happen as part of that product rationalization is that our tech modernization strategy, which is rebuilding a lot of our tech, will also end up knocking out. We have six wire platforms today, right? You know, we operate six ACH solutions. We'll only have one of each of those.
Follow-up question. But maybe before I get there, I think, one thing that's interesting, obviously, for a long time, I'm sure you have a lot of features approach. As you think about when you become CEO, other parts of the strategy or maybe from the operational side.
Yeah, I think to your point, and kind of as I alluded to earlier, philosophically, we're very much aligned and have built these strategies together. We're a very collaborative group on how we do that at any leadership level. I think a couple of the nuances would be that, you know, I have an accounting degree. I have a very strong operational background, and I've spent a lot of time on the operations side. Dave is more of a development and engineering background. So we look at things a little bit different from that perspective. We both have, I would say, different but similar styles in how we do leadership, and our approach to that. I think they both have been very effective.
So, you know, our teams will see, there's a few things that we will add to the nuance level of, you know, policy and other things, and Dave is the same way. But, you know, of course, those two people are the same. And I think, again, we both have had effective leadership styles.
Absolutely. David, being able to come forward to be able to collaborate going forward.
Yeah.
Maybe we could just hit on that B2B topic that you mentioned, Greg. I mean, is that really just building products that give you solutions like TFI, really helping them through SP five that's in place, actual products?
So it's more deeper than that, but those are good examples of things that some of those we already have and offer, but again, not I think, a pretty cool value. And so they're able to see the value of the bundled solution a lot easier than they can in a point-to-point. And honestly, we've sold things in a solution based in other parts of our business. We just haven't done it.
That makes sense. Maybe we could quick touch on the overall spending environment. I think, the team highlighted on this last earnings call that the, the strategy benchmark survey work that, that the company does, 80% of banks and credit unions, plan to increase spending, over the next two years, and they think the largest segment was planning to increase investments by 6% to 10%. So what's driving, this strong momentum and the strong spending environment? I'm curious, what are the two to three areas where you expect to see the most, focus in terms of investment?
Yeah, great question. So out of that six, the largest segment you referenced was about 37% of the CEOs were in that 6% to 10% range. So what we've seen, mostly, I mean, there's a little bit of difference between banks and credit unions, and this particular survey was both. But number one on both lists was obviously deposit growth. And so we have a lot of solutions that, you know, we've created over the years that continue to help with deposit growth. Number two is operational efficiency and effectiveness. So both banks and credit unions have that focus.
and then third and fourth, we have fraud mitigation and the ability to fight fraud from faster payments, but also check fraud and things like that that are continuing to grow at large levels. And then talent acquisition has been one on the credit union side that they continue to look at. And so those kind of went three A, three A and three B in the survey. But the one thing that we have seen and really we, we continue to see over the last several years, why, the technology has continued to be somewhere between 5% and 10% for several years in our surveys, is that technology really is the answer to solve their problems, both from an opportunity standpoint and their challenging standpoint.
So we continue to stay focused on making sure we're delivering innovative products and solutions to enable them.
... And Greg, the company is coming off a record fiscal 3Q sales bookings. I think you had 11 core competitive takeaways. You know, that's been pretty consistent with what we've seen over the last few years. What's resonating well with clients, and what's the reason customers are coming to Jack Henry on the core side?
Yeah, so I think it, it's a combination of several things. I already talked about tech modernization. I'm going to do a little deeper dive into what that is for people that don't understand that today. So really what we're doing is we are unbundling the key core components and non-core components and building them into a flexible, public cloud, API-first, solution of services and products, okay? Or a set of solutions and, and products. And so that alone, from a strategy standpoint, has created opportunities for people to say, "Okay, well, what's some of the value that happens in the public cloud?" Well, you're able to get kind of a DevOps environment where you can do rapid, development of code. So use an example, our Banno application, which is our digital bank offering, we have that in the public cloud today.
We push the production 80 to 100 times a week. So if you think of traditional cores out there, you typically get one upgrade a year, and everything gets thrown into that particular, you know, time you upgrade. So if you upgrade the beginning of the year or the end of the year, you may miss out on things that happen throughout the year. That, that resonates. Security and compliance is code that you, the ability to improve uptime and SLAs, where it's standard in the industry today, about 99.5%. We believe we'll be able to get, you know, to the three, four, and five nines as an application part of that. So that's resonated. One Jack Henry, I mentioned earlier, definitely has been a differentiator. Our services definitely continue to be a differentiator.
Some of our biggest competitors have been challenged on the service side in recent years, and so that's continued to be. But I would say when you look at the overall execution, so we share roadmaps with our clients. We started this about 4 years ago when I became COO, where every 6 months we actually publish roadmaps for over 70 different of our key products, and we show them every 6 months on how we execute. We're executing at an 88% clip right now, I know is far above anybody else in the industry. So not only do we tell them what we're going to do, we show them if we did it or not. So there's that level of accountability, that level of transparency that they really like.
With all the other things that are going on in the industry, coupled with our tech story, our service story, that's, that's why we're winning.
No, it's great to hear. In terms of where these wins are coming from, is it, you know, across the board, or are you finding players getting a little bit more share? Are you, as some of the other providers, I'm curious, where are those wins coming from?
Yeah, I mean, you know, the two larger competitors are obviously in play, you know, more than most, but there's roughly 25 different core providers in the industry, and most people don't realize that. Some of them resell other core providers solutions. Like, we have a couple of resellers base that resell Jack Henry cores. There's some that are true for our biggest competitors, but then there's others that you don't see and hear as much that are in there. So I would say that the bulk of those are happening with our larger competitors, but there's a mixing of others as well.
Great. Greg, I wanted to touch on your success with larger institutions. Jack Henry, I think, is known for catering to smaller institutions, but you also, you know, serve some larger FIs. You know, I'm curious, and, and that's been happening for a while now, right? Pushing up market. So I'm curious, what's driving that success? I guess, as you think about it, is there anything that's preventing you from really pushing up more?
Yeah, there's nothing that's preventing this. I think, you know, historically, we've been known as the community bank provider, but some of that is a misnomer. All right? So, our largest institution is approximately $50 billion in assets right now. That institution is $18 billion have grown with us. We now have over 20 institutions over $15 billion today, and we have multiple $25 to $30 billion range. So, again, you know, I think some of that is a bit of a misnomer. But what we do is we work with our clients, even the ones, because we know as the M&A market starts to pick up, many of these have aspirations to grow to $75 to $100 billion, and we've proven to them that we can support them at that level. So that's not a concern.
We've also hired people in from the outside that have experience working in a large regional, in some cases, tier one institutions, both on a sales and an operational front. So to answer your question, I think directly is that there isn't anything limiting Jack Henry. The one thing that we are doing, and we are very focused on this, is continuing to build credibility in that space. Because, again, most people, to your point, consider us the small community bank player, and don't realize the number of large institutions that we have. I think you know that we've referenced that we won 6 multi-billions this year, and we only had 5, I think, all of last year.
And that continues to, y ou know, we look at new opportunities for this quarter, as we're in the end of our fourth quarter right now. But I think our reputation is changing because a lot of the larger institutions, again, not only view this as a community player, but tend to view us as an innovator. And so I think as you see the technology that we've come out with, the strategies that we're embarking and executing this again.
Absolutely. It sounds like you have a few more as well, right? Larger FIs for sure. It's great to see. I guess what are the gives and takes as you push upmarket? You hit on some of them, but, you know, obviously you're going to have, you know, bigger contracts, more accounts, more transactions, maybe pricing is a little bit lower upmarket. Anything else that we should consider as you kind of push a little bit more upmarket?
Yeah, pricing is really relative to a couple of factors. You know, one, depending on how many complementary products come with that particular deal, because, you know, a lot of opportunity, to your point, with accounts and transactions are tied in to businesses that are really focused on accounts and transactions versus asset size or member count or customer count. The other thing that plays a big part of that is whether a consultant is involved or not. And so consultants in and themselves end up driving some cost reduction in there, whether it be an existing client or a new opportunity.
But really it's more contingent on the amount of complementary products that that particular institution wants to absorb at once, which is why our tech modernization strategy is so important, because they can consume these components that we're building in a bite-sized approach. If they want to just take the General Ledger or the wires platform and just buy those two right now, they can really lessen their concerns over doing a big bang core conversion by just taking two or three key pieces at a time and consuming those. You know, we do believe that more people are going to do that in more of a bundled approach, and they'll want to take more than two or three.
But it does give them a chance and actually, to be candid, we have one opportunity right now, with a deal that we did not win in that larger core space, only because the incumbent gave them a very competitive price point, that we weren't willing to match. But they've come back to us and said: "You know, maybe we would like to try a little bit of what you're doing, and we can do that as kind of a side opportunity." So that creates that opportunity for us to do that in the larger bank space as well.
You mentioned the consultants working with the banks and credit unions. Like, what percentage of FIs have a consultant? Is it-
It's better than 90.
Better than 90. Wow!
Yeah.
Okay, so pretty high.
That would be both in renewals and-
And-
-new opportunities.
Interesting. Okay, that's helpful, Greg. And then I guess the, you know, the secular tailwind, driven by the continued need for FIs to upgrade their tech stack, has been around for a while now, right? You have neobanks entering the market. Just the banking space broadly is competitive. You know, Jamie Dimon was talking about competition earlier this morning. You know, as we think about the next sort of 5 to 10 years, how long can this sort of tech spending, IT spending tailwind persist? You hit on it a little bit earlier, but I'm curious to get-
No, no, it's a good perspective. I, I think, you know, some of the neobanks, there's been a couple that have had success. You know, many of them, haven't. Most of them are deposit-only opportunities today. They don't do the lending, you know, component of it. And I think also a lot of them are secondary relationships and not necessarily the primary, depending on the age group and, you know, things along that line. But to answer your question, I think it really depends on what the level of focus that those particular institutions that we support today, where they want to be. We have some really small institutions that are very innovative, and really want to be on the cutting edge of everything that's going on.
And those are the ones that have an opportunity to, one, grow, and survive. The ones that do not want to be in that level, well, then they potentially could be, you know, swallowed up by somebody that is.
Mm-hmm.
I think from a tech spending standpoint, that those numbers aren't going to change dramatically because, as I said earlier, technology really is the answer for everything they're trying to do. The question is, is how innovative do they want to be?
No, that's great. And maybe, Greg, maybe moving on to the Tech Modernization strategy . You sort of hit on it earlier, but I'm curious, you know, what is this initiative at a high level? How did it come about? And I guess, what, what are you seeing across your client base that encourage you to invest behind this initiative?
Yeah. So, the initial strategy came out of about four years ago through a strategy meeting we had, and actually one of our former, chief technology officer had said: "Hey, we need to start thinking about these things differently," and where the public cloud was going. That strategy has morphed many times into what it is today. But we announced it publicly announced it two years ago. We've been working on it for 3.5 years. And it really, as I described, is really just kind of building this, flexible set of, of, you know, components that will allow us to decouple the core and, and products. But it also allows our customers to work off of a single platform.
So eventually, when we're completed with this, we'll have one platform that will be able to service both banks and credit unions. That platform will have all of our key products integrated to it, all of the key third parties that we integrate and allow to integrate. Back to the product rationalization, we are a believer that there's fintechs out there that are going to build that particular feature that Jack Henry has today and build an entire company out of it. So it's hard to compete with some of those. So we might as well let the fintech come into our platform, make sure that the customer's happy. That's the one reason why we win a lot, too, which I probably should have mentioned, that we are the easiest to work with and the most flexible.
We have over 1,000 integrations into the Jack Henry ecosystem today from third-party fintechs, but that tech modernization strategy, again, will open up the doors to a lot more of these opportunities in both at large institutions and small institutions based on their level of innovation and willingness to see what the value is and realize the value of being in the public cloud.
I guess on the new platform, the new tech strategy, that's all public cloud, basically going forward?
That's correct.
Yeah.
So everything we're building will be in the public cloud. We've already actually moved, like, our wires platform's in the public cloud now. We moved Banno. Banno was in the public cloud, but we moved them into Google. Google, by the way, is our primary public cloud provider, but we do have relationship with Azure and AWS, and we'll continue to do that. But yes, everything's in the public cloud. So if we have customers today that are on-prem, and we still have about 28% of our customer base that's on-prem, 72% in our private cloud, which is still a data center kind of environment. So we'll see people move from private cloud to public cloud. We'll see people move from on-prem to public cloud. You know, we'll see that evolution continue over time.
Yeah. I'm sure that transition is going to take a long time.
It will.
Yeah.
You know, I, I don't think I'll be sitting on this stage by the time-
Yeah
A ll that,
Absolutely
that takes place.
Yeah. I guess when we look at the industry and the core processing business, I think... I mean, what we find, what makes it a good business is that there's high switching costs, and you combine that with economies of scale in R&D, right? So you're spending X amount on R&D, you're spreading that out over thousands of customers. So it creates this nice business with high margins, high returns on capital. As you think about this shift to this more open architecture, componentized offering, does that lower the switching costs at all in the industry, or do you think it's about the same as it was before?
No, I mean, I think it depends on if you're only buying a single module at a time-
Mm-hmm
Y ou know, maybe it does lower that. But we believe that they're going to be buying the bundle, right? They want to, t hey don't want to just operate a single feature of their core in the public cloud, and then... I'll just use this example. So let's just say one of our largest competitors has a core customer, but that core customer isn't happy with their general ledger. So they try the Jack Henry general ledger. Well, that switching for them is minimal, but the point is that they're actually kind of trying before they buy, as I mentioned earlier, and there's some opportunities for that to happen. But I think for Jack Henry, the opportunity really isn't just from a customer standpoint and the revenue growth, but it's also from operational efficiency.
We're able to build things one time and share them across, you know, kind of what we call the shared services mindset. So authentication is a perfect example where you have to build authentication and the ability for the credit union's employees or the bank's employees to get into whatever said system it is, whether it's core, digital, fraud, whatever. And we've built authentication now one time. So all new products are absorbing that one API, and we're using it across the entire organization.
Mm.
Where in the past, we used to build that individually in every single product. Whenever we needed to make a change, we had to do that individually in every single product. So one of the big benefits of how we're building out this tech modernization is the ability to share the experiences and do it one time. Perfect example, ISO 20022 is something that everybody's working towards right now. Well, we have to fix that in six different wires platforms.
Mm.
We got ACH solutions, we got, you know, the cores itself. I mean, we are doing that in a multitude of places. Well, over time, if something like that comes down the road, we would only have to do it in one place.
Yeah, it's bunch of— Does that change the contribution margin or the-
Of course
T he margin profile of the business at all?
Over time, that's obviously the goal. You know, it will take some time, to your point, to see all that happen, and there's some duplication that happens as you move from, just call it the private cloud to the public cloud. You still got data center costs.
Mm.
You know, one of the things that we're focused on is actually getting out of the true data center businesses and either moving into a colo type application-
Mm
Or the public cloud, and not necessarily running our own data centers to the level we do today. It's not a, it's not a money-making business, right? And there's people that can do it, you know, at much less cost. So as that happens, as things move either from the private cloud to the public cloud or over to the colo, those costs start to de- you know, to decline.
Yeah. And where do you guys expect to see the greatest demand? Is it prospects, existing clients? Is it banks, credit unions, small, large? How do you guys think about where that demand might come from?
All of those. Honestly, that's what we've seen. We've had some small credit unions that I've been really surprised about their level of interest. We've seen some large opportunities. We're talking to banks now that are over $100 billion in assets that are interested in what we're doing. And either the complementary side of what we're doing, plus the core component side as well. So there's been interest at all levels. And you know, candidly, it's about what I said earlier about building that level of credibility. We need a few of those larger institutions to say yes, and when they do, and we prove it out, then that's when everything starts.
But, you know, our credit unions, you know, we have some small credit unions and some small banks that, you know, the reason why they renewed with Jack Henry is because of that strategy. So yeah.
I mean, there's a few different sort of, you know, modern platforms out there, modern offerings in the market, right? You have your strategy.... I think FIS talks about the Modern Banking Platform. Fiserv bought Finxact. I mean, how do you think about some of the differences or similarities between some of those? Just because that's one question I get a lot, and it's hard to know exactly when you're an outsider looking, trying to look in.
It's hard to know exactly, period. So I think the biggest validation I can give you to the level of differences, understanding and execution and reality is what customers and prospects tell us. So when we're in a either a competitive bid for a new opportunity or, you know, in a renewal, we're just hearing from our customers that our level, our strategy itself and our level of execution exceeds where our competitors are. The level of nuance is there, so, without, you know, FIS's modern core has taken several different twists and turns, over time. I think, you know, Stephanie's definitely focused on, on making some changes there with, with some of the things they're trying to do now.
And then Finxact, you know, when they bought Finxact, it really was more tiered or more geared towards the Tier One. That's kind of where they've been so far. They're adding a lot of complementary services to that, because if you think about it, your core itself is just a processing engine unless you're able to... You know, most of the new entrants too, the Nymbus's and the Temenos' and the Thought Machine, and things like that. A lot of the things that they're missing are the complementary components of that.
Right.
Right. So some of them can't even process a payment on any U.S. payment rails.
Mm.
So, you know, you've got those components. So the short answer to your question is that what we have seen and what we've heard from our customers is that there's a level of differentiation in not only what we have as a strategy, but our level of execution.
Okay. You know, I think you launched a Banno, and you guys are seeing great results. I think this last quarter you had 70 new signings. I think 40 of those were Banno for business. I mean, what's driving such high demand for the offering, and, yeah, how should we think about the potential going forward? Because we always get a question, we get the question of, you know, how big is this? Within complementary, seems to be growing faster than the overall segment.
Yeah, well, it is growing faster than the overall segment, so, excuse me. We've been in kind of the 25% range. We've talked about that. For those of you that don't know Banno, so it is our digital offering. So it is unique in this aspect. So one, it's the newest solution that's been built. It was built in 2018, we started to roll it out. It's built on completely new technology, as I mentioned, all public cloud. You don't see that with our largest competitors in their offering or even any of the complementary solutions like a Q2 or Alkami or others. And so newest technology, 11.6 million users in five years and growing on an average of about 200,000 a month.
I think what's really unique is that, and all of you probably experience this today with your own institutions, is that, when you use a Banno application, it doesn't matter whether you're on your phone, your laptop, your iPad, or whatever, you get the same experience, regardless. And that is very unique. Same features, same experience, everything else. So again, we, we don't know of anybody else that, that, that can say that. So that is a big differentiator.
We have a lot of key solution sets like Banno Conversations, which is an authenticated chat that allows the customer or member to speak to a customer service representative at the bank or credit union in an authenticated way to where they can actually share data, they can share files, they can share everything to talk about, "Hey, this wasn't my transaction." "Okay, well, send it to me." Those kind of things. That's very unique in the space. Nobody else has that. We've built some AI, generative AI components into that as well. The biggest thing for us is that, you know, if you go to the App Store, you know, we're one of the highest, if not the highest, depending on the day. And so you just have this level of comfort.
The one thing that's kept us from being even more penetrated is that we didn't have Banno Business. So we came out in 2018 as really a retail-based application, so we've been highly focused on building the business application over the last couple of years. So as you mentioned, and we had a successful quarter. We have about 124 implementations live today of Banno Business. We have 850 Banno clients. So we still have an opportunity to sell within the 850 retail base, selling Banno Business into that base. Will everybody take that? No, not everybody is focused on a commercial side, so I referenced on the last earnings call that I think we'll be somewhere in the 60% to 70% penetration.
I think that's a reasonable, conservative approach to that. But that still gives us a lot. We're probably about 8% penetrated as I speak today. But the applications, the features, all those have really been the big driver. Going outside the Jack Henry base is going to create that whole another level of opportunity. So, if we don't win a core deal, so there's roughly 200 core deals a year, 100 of them don't make a decision, 100 do make a decision, Jack Henry wins 50 to 55 of those. Well, of those 100 that didn't make a decision, well, in the past, we couldn't even sell in Banno because we didn't go outside the Jack Henry core base.
Well, now we have a chance to sell in Banno, sell in card, sell in financial crimes, all of those things, which is why that's a key part of the strategy.
... Maybe talk about that, 'cause I think that was a learning point for Jack Henry as well, in terms of going outside the base. I think you had to change your strategy there a little bit. Maybe touch on how you came to that decision and why you made that, and how it's progressing.
Yeah.
Because it is a big opportunity.
It's a big opportunity. Part of it was that we just didn't want to make ... For the reasons I mentioned earlier, and again, I'm not. I don't want to get in too critical of any of our competition, but their digital offerings weren't at the same level as Banno or as Q2 or Alkami. So there was some level of excitement that was, you know, "Hey, now that we can sell this product," that we had heard in the space. So we wanted to be a little more surgical and tactical on how we approach this.
And so, that's part of the reason why we pulled back on the strategy to just make it open to all cores, where we're really going after just a few, and we're not mentioning those names at this point in time. How it's going is some of it is reliant on the core itself's cooperation, and so in some cases, that's better than others. And so we're working through that. We have some ways to get around that through either integrations we already have on other products, as well as some of the co-opetition we do in the space with some of our other providers.
So we're working through that dynamic, but there is a level of excitement for us because we think the card product, coupled with the digital product and the fraud product, make a really strong offering. So, we'll wait to see. Our plan is to be able to start selling this later this calendar year, start implementing it right around the end of this next fiscal year for us, which will be June of 2025, the end of that fiscal year and into 2026, fiscal year 2026. So that's kind of where you won't see much until fiscal year 2026 from that. But we're executing on the strategy and holding people accountable for doing that. Yeah.
Great. Maybe we could touch on card processing. I think Jack Henry's been known for, debit card processing. You guys have added, capability on the credit side. So what does, what does that bring, to your customer base? And I guess, how do we think about that opportunity in terms of sizing it? How meaningful can that be, for the overall company?
Yeah, it's a great question. So, when I was leading the payments group, you know, we were going through a lot of the strategy part of this. And so I think if you think about our debit business today, I may have referenced this earlier, but it's roughly 98% of our transactions from our card business are debit, and about roughly 90% of our revenue is debit. So it's still ... Credit is still a very small piece of that. What we decided to do back, when we were actually making the decision to add credit, we wanted it to be on a single platform. We wanted debit and credit to be on a single platform. There wasn't a lot of players out there that could do that. And candidly, we couldn't do it in our own solution.
We looked at a couple of acquisitions, didn't make sense, so that's why we ended up partnering with First Data, which now is part of Fiserv. So they are our card provider. It's been a very successful partnership in spite of our you know competing on other things that we do. The partnership has been great, and the people we work with have been great. That business has grown significantly since we did that partnership. Credit itself has not grown to the level that maybe, honestly, that I had thought it would. A lot of the smaller institutions really just don't want to do full service credit. They don't have the staff, they don't have the knowledge. And so what we rolled out about a year and a half ago now is an agent program, which is a smaller opportunity.
Their card portfolio is held and managed by somebody else, and if it grows to a decent size and they want to buy it back, they can. So we're closing, you know, three to five- credit deals, or so a month—I mean, a quarter. But it's never... I say never, it'll be a long time before it ever gets to the same points where we are on the debit side. But what it has done is because it is on the same platform, it's created the opportunity for us to keep a lot of debit deals in competitive situations because we have the ability to add credit if they want, and we've been very successful with that.
It helps our retention a bit.
For sure.
Okay, great. And then I guess another question we get is just around the margin profile of the business. I mean, you mentioned some initiatives that might help that over time, but when we look at Jack Henry's margins versus competitors, they're relatively lower. So I guess, is there an opportunity ... I guess, what drives the delta in your opinion, and is there an opportunity to close that gap over time?
Well, I'm going to first start with your premise. I mean, I don't know if truly viewed apples for apples, that our margins are less. We have a very straightforward approach to non-GAAP items. Maybe not so, you know, straightforward in some of the others. But to answer your question, I think, you know, we have been highly focused, Mimi and myself in particular, but you know, Dave was as well. But, you know, as we've kind of embarked on what we needed to do to scale the business on the things that we were adding, what we've added from a product standpoint, what we've added from a talent standpoint, you know, we've been able to manage still through the margin opportunity, and we'll continue to stay focused on that.
Part that you should know and any potential shareholder should know is that, you know, our entire management team is a lot of their compensation is based on revenue and margin growth. So everybody in the company has a high focus on this.
Yeah, that makes sense, and you guys have some really high-quality financial statements. I think that is a, you know, an area of focus, I think, for payment investors going forward. Greg, you called out productivity improvements driven by automation in the past. Can you talk about the progress the company has made on the AI front and how much benefit that you're seeing from those capabilities?
Yeah, so we started even back when I was leading the payments group, we started continuous improvement initiatives that have now morphed into enterprise-wide. So, you know, we see, you know, a lot of what we're able to do with headcount control and other things is we're a big believer in doing more with the same instead of doing more with less. That's the mindset, where we're not necessarily laying off people to achieve these, we're just not adding people. And so that's the mindset, and it's worked for us really well, really well. About 30% or so of our company is Green Belts. So that's something that's been very important for us to continue to drive from a continuous improvement.
As it applies to AI, we've been heavily involved in AI probably the last 9 months or so, where we've gotten our Chief Risk Officer, our Chief Technology Officer, and our incoming COO, who is running our credit union business. But he's been taking the lead on this over the last several months. Is getting them involved in really developing our framework and our strategy and our guidelines. We are now in the phase of what I would call rolling out opportunities, use cases, and we've decided that we're gonna spend the bulk of our time initially, internal. We wanna make sure that we fully understand what the capabilities are, what the challenges are with AI, and being very, what we call, responsibly bold and balanced.
And that's an approach that we're taking to ensure that our customers don't get blindsided or surprised with things. We share everything. We're very transparent that way. But we believe that the efficiency and effectiveness that we can build within the company will end up, you know, teaching us the nuances of where we wanna go. I'll give you an example. We've now rolled out GitHub for developers to all of our developers. We're starting to see some ability to improve our code base, improve QA, be able to move code over from legacy code, things along that line that we're starting to play with. And then we've rolled out the Microsoft Copilot for all of our employees.
So there's efficiency gains being done every single day just by our employees and how they build an email or whatever else. But what we've also done is we've brought each one of our business units into a meeting, and we've asked them to prioritize their top three initiatives for their business, HR, consulting or legal, operations, whatever. So all these groups that come in, and then as a committee, we will decide which ones we're gonna prioritize, which ones will have the biggest bang for the buck. So we are in the process of doing that. We're in the process of building out our budgets for fiscal year 2025, which for us starts July 1. And we will be building a lot of those opportunities into our budget plan.
So giving you the full background, but I don't have any specifics to understanding what that value will be yet, but we're gonna take that type of approach.
Okay, great. We have a few minutes left here, Greg, so I just wanna hit on a couple other topics. Maybe we could touch on the free cash flow of the business. You know, I think you recently raised your guidance on free cash flow conversion for fiscal year 2024, driven by changes in cash tax payments. Does that continue into next year? And I'm curious, what are some of the factors that can push you back to that 90%-100% free cash flow conversion rate?
So the biggest and more immediate factor will be, you know, just what's going on with labor legislation, right? So, Section 174 and really what happens with that, with potentially a new, you know, new Congress and what that looks like. We really had high hopes that that was gonna get done this year. It doesn't look like that will happen now. And so if that does happen with whether it's a change of the president or not, Congress in and itself, we believe that has a strong chance of making that happen. If it does, that will provide a more immediate opportunity for us to get to the 90% to 105%, which is what we're estimating back into those levels.
If it doesn't, then part of what we've been doing is we'll have to build up kind of a reservoir of depreciation or, you know, of development expenses that we can depreciate over that five-year timeframe. Fortunately for us, is that most of our development is, you know, onshore, and so if it's done offshore, that's a 15-year horizon versus the five. So, you know, we'll be able to play with that. But we are highly focused on that. Mimi is all over it. And so again, the short way to get there is if we can get some legislative help.
Okay, great. And maybe just last, last two, we have a couple minutes left. It still feels like we're in this phase of maybe 7% to 8% top line growth. That's certainly above peers, it's above average for industry. I guess one of the questions that we get is just on the sustainability of that growth, right? How durable is that, and are we gonna be sitting here in three to four years talking about, you know, 7% to 8% growth type of year?
Well, short answer is that my goal is to break that barrier. And whether we were able to do that, you know, near term, we're still focused on... I can tell you that in the near term, seven to eight is absolutely reasonable. There's some things that I mentioned from a strategy standpoint that we think that potentially can move us forward. Don't know the, the answers to that, and I'm not signing up that, for that today. But I will tell you that we, as I mentioned earlier, from a revenue and margin standpoint, we're highly focused on moving the needle. So I think when you look at where we are, unless there's some macro condition, 7% foreseeable future is definitely a low bar, and getting closer to that 8 and above would be the goal.
Okay. Great. And real quick, 30 seconds. What excites you the most, over the next 5 years?
Yeah, I mean, next—I'll just start with, hey, just the opportunity to lead this company. This is a great company. I'm very honored to have that. We have a great team and excited, but it really is what I've described as a strategy. Our SMB strategy, I think, is very unique to what we're doing. It's not just what I described as kind of the existing assets, is where we're going with that, outside the base and creating those opportunities and check monetization, especially those three are at the top.
Great. Thanks, Greg. Really appreciate you joining us. Thanks for doing this. Learned a lot.
Yep.
Always.
Yeah.
Thank you. Thanks, everyone, for attending.
Yep. T`hank you.