James Faucette: Great, thank you very much. And I also want to extend my thanks to Dave for all the hard work you put in on behalf of Jack Henry over the years. I wanted to quickly maybe take advantage of Greg and Dave being here and dig in a little bit on your commentary about customer sentiment. I’d love to get your thoughts on the regulatory scrutiny that banks are going through right now, which seems to be picking up as several of the banks have alluded to plans to adjust their capital liquidity and CRE concentrations over the next several quarters. That doesn’t seem to be impacting your bookings and sales performance, but curious if the topic of greater regulatory scrutiny is coming up with customers and how you’re thinking about what you can do to help those customers as they deal with that.
David Foss: So greater regulatory scrutiny is absolutely in the conversation very regularly these days. And really, since the — like that’s May of last year, the period where there was all this consternation on what was happening in regional banking space. Since that time, the regulatory environment has changed pretty dramatically for, I think all of our customers on the banking side. And so there’s a lot of conversation about that. It is interesting, however, that has not had any impact on bookings. And one of the things that I say regularly now is if you’re running a bank or credit union, almost any challenge you have, almost any problem you need to solve in this day and age in 2024, the solution involves technology. It doesn’t involve usually people because they’re trying to figure out how to automate or how to use technology to either mitigate risk or grow the franchise or something like that.
And so I think because of the world we live in today where technology is almost always part of the solution, that’s why, regardless of what’s going on with the regulators there is an opportunity for us to help them using some type of technology solution, either like I say, to grow the franchise or to mitigate risk or deal with fraud or whatever it is. So I haven’t seen any or heard and we just did a client conference in Kansas City about three weeks ago, no discussion about backing off on spending on technology or things like that in fact, the survey that Greg just cited, there was an expected increase in tech spending for the coming year. And so those would be my observations, but I’ll refer to Greg, if you want to.
Gregory Adelson: No, I think you were pretty complete. I think the part that I would say is that the technology component really is the driver here is that more and more folks are recognizing for them to continue to be able to punch above their weight, especially in the community bank space is that they’re looking for technology to stay to the level of relevancy that they need to be. And that’s why we’ve been so adamant on our focused execution on getting these products out and giving us and our institutions an opportunity to do that.
James Faucette: Got it. Thank you for that. And then I want to turn quickly, Greg, to implementation, and you mentioned implementation cues. How are those trending broadly? And how are you thinking about the puts and takes between margin expansion you’re delivering versus the potential for additional resource allocations to speed up those implementations? Just walk us through the thought process and what you’re dealing with from a current demand perspective there?
Gregory Adelson: Yes, it’s a great question. And it is absolutely something that we look at truly every month with our teams through — we go through a very detailed financial analysis and variance reviews with each of our business unit leaders and those discussions always take place. And so Mimi already referenced the kind of business cases. And so we actually take a business case approach where we look at what we may need to add relative to enhancing the implementation queue, what kind of value are we able to provide both from an immediate revenue standpoint, helping kind of relieve some pressure on the sales side, things along that line. So we actually have done that multiple times this year where we’ve added resources to accelerate queues or to do things differently.
We’re also constantly looking at process improvements that we can do both from a systemic standpoint or just general process improvements, obviously, the questions that were asked about AI earlier, we’re looking at ways that AI might be able to help us with some of those. But to answer your question, we are constantly evaluating both sides, but we also recognize as long as we can continue to move that queue forward and it makes sense, then we’re going to add people to make sure that, that happens.
James Faucette: Great. Thanks for that, Greg.
Gregory Adelson: Sure.
Operator: Our next question comes from Charles Nabhan of Stephens. Please go ahead.
Charles Nabhan: Great, good morning. And thank you for taking my question. And I just want to echo everybody’s gratitude and congratulations, Dave. It’s been great working with you. I just want to wish you all the best. So I wanted to follow up with the earlier question on some of the progress you’ve made in the middle market and just get a better understanding of how we should think about some of those larger relative banks from an ARPU standpoint as well as their product consumption in terms of like what products there — how it compares to some of your — the smaller banks in your customer base, what they’re buying, what they’re not buying, and what’s helping you win those deals as well.
Gregory Adelson: Yes. So I’ll go ahead and take this. This is Greg. So I think as far as the deals that we’ve won, so the six multibillion that Dave referenced this year, I’d say there hasn’t been a significant alternative to any of the solutions that we typically sell. What’s helping is what I described earlier, not only the strategy for the future, but what we’ve executed on the present, which is around Financial Crimes, around Banno and specifically Banno Business, what we’ve done in our payments markets and things along that line. So those continue to be huge drivers of opportunity and maybe even more specifically than what we see just specifically in a core offering because those complementary products really help drive the core decisions, to be honest with you.
As we continue to go to the larger ones, so the $20 billion plus that I’ve talked about, still a lot of the same interest. The question will be is, where are they in some of their current relationships. More importantly, they buy — tend to buy a little bit fewer products. They tend to not do everything with one particular vendor. So as we’re working through the dynamics of specifically those three larger ones that I’ve referenced, but we’re also seeing some larger ones where a product or two of Jack Henry, especially as we start to look outside of the Jack Henry core base and be able to take some of these products, we’re getting one-off opportunities and two-off opportunities from larger institutions that are more than the $50 billion that we have today.
So I think you’ll continue to see that evolution as we continue to drive things outside of the Jack Henry base. But as we’ve referenced before, we have complementary and payment products today in institutions that are as large as $200 billion. So that’s not foreign to us.
Charles Nabhan: Great. Thank you. And as a follow-up, I just wanted to get your general thoughts on M&A and consolidation in the bank space. There’s been a handful of deals announced in the past month. And it seems like the regulatory scrutiny that you had alluded to could be a catalyst for consolidation. But as you think about the next year or two, I just wanted to get your general thoughts on M&A in the bank and the credit union space?
Gregory Adelson: Yes, another good question. So we are continuing to see that. As we’ve referenced, I think in our last earnings call that we have started to add some staff relative to that, especially on the credit unions side, where we’ve seen even more of that — of those opportunities. But we’re seeing more on the banking side than we did just a few months ago. Part of the challenge though is the timing of when those are expected to be completed. So we’ve actually had a couple of our institutions that have acquired other institutions — competitive institutions for that matter. And — but there — the ability for them to be able to complete those have been delayed by regulatory challenges. So in some cases, five and six months.
So will that continue to be a challenge? That remains to be seen. But I think what’s happening right now, especially in the market with — and especially we’ll see what happens with the election. But we’re continuing to see some challenges with the timing of when those things can be completed, not necessarily the interest in doing them.
Mimi Carsley: I would just add on that, that creates a little bit of a headwind for us this year. We talked about the lower deconversion revenue of people leaving that also impacts us from the convert merge. And in Q3, we saw approximately $3.5 million less year-over-year in convert merge revenue.
Gregory Adelson: I will just finalize with one last comment is that you are absolutely right that when we have our conversations with our institutions as well as what we just had in Kansas City, the interest level in continuing to look at M&A opportunities is very, very relevant in part of their overall strategies.
Charles Nabhan: Got it, thank you.
Operator: Our next question comes from John Davis of Raymond James. Please go ahead.
John Davis: Hey, good morning guys. And Dave, I’ll echo my congrats. You’ll be missed. But maybe before you go or maybe Greg can hop in here. But just thoughts on capital allocation. We’re talking about free cash flow conversion going up. It looks like you guys haven’t bought back stock in a couple of quarters. balance sheet is in good shape. So just broader thoughts on capital allocation, maybe more specifically, buybacks.
David Foss: You’ve heard me talk about the capital allocation 1,000 times JD. So I’ll defer to Greg for that one.
Gregory Adelson: Well, I think we continue to look at opportunities to buy back. And I know Mimi has done a great job of presenting use cases and timing. So we’re continuing to look at that. Obviously, we’re focused on free cash flow and the opportunities of continuing to improve that. So the opportunities are closer to that than they were in the past.
