Kartik Mehta: Okay. Thanks, Dave. I appreciate it.
David Foss: Thanks.
Operator: Thank you. The next question is from John Davis with Raymond James. Please go ahead.
John Davis: Hi. Good morning, guys. Mimi, I just wanted to follow-up on free cash flow. I believe you made a comment that you expect to return to normal historical levels from a free cash flow conversion perspective. And I was just curious, is it still kind of in the three to four years once we lap the non-deductibility of R&D expense? Just want to clarify that comment about returning to historical levels.
Mimi Carsley: Great question JD. If I had a crystal ball for Washington, I’d probably be in a little bit of a different role. But we’re hopeful that there might be a consideration of changing the legislative nature of that tax deductibility of development expenses. You’re starting to hear more and more technology companies, talk about the negative impact to them. If that — and we’re not banking on that happening. If that does not occur, I would agree with you at this point I would say a couple of years out, hopefully more than four so — but for right now we feel pretty comfortable for this year sticking with the 60% guidance.
David Foss: And JD, if I can tack on this is Dave. So I just want to add a little clarity to everybody out there. One of the things Jack Henry is getting great recognition for right now is all these innovative solutions that were rolling out. We’ve been spending a lot on new development, new R&D, brand-new products. The Jack Henry Platform is just one of them. And Greg highlighted Banno Business and Financial Crimes Defender. And we have all these new things that we’ve been rolling out, that’s great for the company, that’s great for the success or the future success of the company. And it’s really created this reputation for Jack Henry as being the innovation leader in our space. The bad news is because of what’s happening on the tax side, it’s hitting our free cash numbers.
And so we have concerns about free cash, which it’s all being driven by the fact that we are leading the industry when it comes to innovating and really delivering great solutions for the to sustain the future growth of this company.
John Davis: Okay. No. Thanks. That’s helpful. And then Greg, a quick one for you on Payrailz. I heard you earlier say you’re kind of on track. It looks like at least for the first two months revenue was a little bit lighter than last year. I think you talked about some implementation delays with partners. So just curious kind of an update there you guys seem really excited about the long term. But how is that going from an integration perspective? Are there still implementation delays? Just any sort of update there would be helpful.
Greg Adelson: Yeah. Great question. Yeah. Short answer is, we’ve worked through the integration delays. So we’ve been able to get through that component. Some of it is just rebuilding up the pipeline with that group. But the reality is we’ve gotten through the challenges there. The other thing that’s important is that the — some of the additional synergies that we’ve been able to build as we build out the product has helped us as well. So we’re kind of — we’re working through some of the sales delays with lot more of the operational synergies that we’ve been able to find on things. So everything — that’s why everything continues to be on track.
David Foss: Let’s reemphasize JD, the numbers Greg shared in his prepared remarks. So 100 clients live now 50 that are in process of implementation so they’re not paying us yet but they’re in process and then 20 more new contracts that have just been signed.
John Davis: Okay, great. And then Dave, just if I could squeeze in one more quick one just on capital allocation. You paid down a little bit of debt. You bought back a little bit of stock in the quarter. How do you think about debt paydown versus buybacks with the stock here? And then any update on from an M&A perspective whether valuations have rationalized yet? Just any color there would be helpful.
David Foss: Yeah. So I’ll answer the last part first. Not a lot happening when it comes to M&A in the industry. And I’ve had some interesting conversations with some investment bankers about what they’re seeing as far as opportunities in that space. Just nothing really intriguing, right now when it comes to M&A. So that leaves share buyback debt paydown. Of course, we’re committed to our dividend policy. And so, the other two topics balancing share buyback with debt paydown, that is definitely going to be a topic at our Board meeting on Monday. Because in this time that needs to be something that we analyze fully. So we’re very focused on those two topics and trying to prioritize appropriately. But that will require Board discussion.
John Davis: Okay. Thanks.
Operator: Thank you. The next question comes from Dominick Gabriele with Oppenheimer. Please go ahead.
Dominick Gabriele: Hey, good morning everybody. Thanks for taking the questions. Dave, should the move to sell products outside the core that you mentioned indicate that you have found a way to stop competitors’ sales dynamics of core upgrades? I mean, I think on one of the previous calls you mentioned that your products are so good that the competing sales force would basically say “Keep our core just upgrade with Jack Henry.” Is this an indication that you’ve found a way to stop some of that? And I just have a follow-up. Thanks so much.
David Foss: Yes, you are characterizing my previous comments correctly Dominick. That’s exactly what I said. It was a shocker to us. And so we stepped back and made sure that we didn’t kind of mess ourselves up in this process. But the answer is yes, we’re very confident that we have by targeting a few specific cores with a few specific messages and an approach that leverages the Jack Henry Platform. So one of the good news one of the good things is and Greg highlighted it in his prepared comments these new solutions we’re talking about Banno and Financial Crimes Defender and so on they are living on the Jack Henry Platform today, the platform we’ve talked about for core modernization, those are already on that platform. And so we’ve created a strategy that takes advantage of the fact that those are on the platform.
We believe it will create an opportunity for us in these targeted cores. And so yes, we believe we have an answer now. And as Greg pointed out, we’re talking about beginning of – or next summer that we’ll really be active in sales. Do you want to add something to that?
