Jack Henry & Associates, Inc. (JKHY) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Jack Henry & Associates Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. And as a reminder, this call is being recorded. I would now like to turn the call over to Kevin Williams, CFO. Please begin. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thank you, Latoya. Good morning. Thank you again for joining us for the Jack Henry & Associates Third Quarter Fiscal 2015 Earnings Call. I'm Kevin Williams, CFO of the company; and on the call with me today is Jack Prim, our CEO. The agenda for the call this morning will be as we normally do, Jack will start out with some thoughts about the business, the performance for the quarter and some other comments he has prepared, then I will provide some additional thoughts and comments regarding the press release we put out yesterday after market close, and then we will open the call up for Q&A as we always do. I need to remind you that remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements or deal with expectations about the future. Like any statement about the future, these are subject to a number of factors which could cause actual results or events to differ materially from those which we anticipate due to a number of risks and uncertainties, and the company undertakes no 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. With that, I'll now turn the call over to Jack. John F. Prim - Chairman & Chief Executive Officer: Thanks, Kevin. Good morning. As has been mentioned previously and as will be discussed in more detail on the call, the review of our revenue recognition procedures will result in a restatement of prior period financials. The presentation of the financials for discussion this morning are in the same format as they have been provided in previous years, together with a reconciliation from the estimated restated financials for your comparison purposes. Looking at the comparison on that apples-to-apples basis would show another solid operating performance with organic revenue growth of 7% and operating income growth of 17%. This is despite the continued trend of declines in high-margin license fee revenues, down 18% in the quarter, and hardware down 17%. These declines are not unexpected given the continuing trends and preference for hosted delivery of services and the general lumpy nature of these revenue categories. The declines were more than offset by the solid growth of 10% in Support and Services, which makes up 92% of our total revenue. The performance was strong in both the Banking and Credit Union segments, led by our Payments and Outsourcing businesses, up 9% and 18% respectively. Sales performances across all three brands remained strong and ahead of plan. Although the final stages of the lengthy and detailed review of revenue recognition procedures are still under way, we believe we have better clarity as to the resolution of this issue. From a timing standpoint, we expect to have all adjustments made and bring all SEC filings current not later than June 30, 2015. Over the last several months, the process has evolved following a recently disclosed interpretation of license and implementation fee revenue recognition guidelines by our auditors as discussed in the December earnings call to become much broader in scope and include reviews of Vendor Specific Objective Evidence, or VSOE, related to software maintenance and implementation fees. In that process, the cumulative effect and the requirement to adopt the most conservative possible positions related to revenue recognition also impacted the expected materiality of the adjustments. Our initial reviews appeared to indicate that any required adjustments would be immaterial in nature. We now believe the adjustment will be approximately $172 million and require a material restatement. The cumulative restatement will result in balance sheet adjustments to retained earnings and short- and long-term deferred revenue, and a restatement of our income statements for the previous three years. While it will affect the timing of recognition of license fees and certain other deliverables under multi-element contracts, it does not impact the amount of revenue to be recognized, total contract values, cash flow or payment terms, just the period in which some revenue is recognized. It remains our opinion that we have consistently recognized revenue in accordance with AICPA Statement of Position 97-2 and its amendments, if not in accordance with our auditors' interpretation of the 97-2 guidance. Now that we are aware of their interpretations, we have made the necessary changes and adjustments retroactively and to our policies going forward. While this review process has been distracting for our accounting department and their management, the fundamentals of our business remain strong in terms of sales results, customer satisfaction and employee engagement. We will continue to focus on running the business in the best interest of our customers and shareholders for the long term. With that, I'll turn the call over to Kevin for some additional comments. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thanks, Jack. I thought the first thing I'd do this morning is try to explain a little bit of why this process has taken so long, and then also to explain at a high level what we've been required to do to adjust our financial statements for the change in interpretation of SOP 97-2 that Jack referred to, and why the numbers look a little odd. For example why license revenue looks to be so low. The first thing that we had to do was go back and determine all the contracts that had the last deliverable of a multi-element contract delivered and installed during the past five-year period. Then we had to determine when that multi-element contract was actually signed and determine the timing and original revenue recognition for all the related elements of that contract were installed and delivered. So the license implementation fees and subsequent maintenance, or post contract services, we had to determine the timing of all recognition of all those pieces. Then we had to back out all the revenue related to those contracts in regards to all the different components of the revenue. And in that respective quarter that it had been originally recognized, regardless of the quarter, put all that revenue into a deferred revenue account and then begin recognizing 100% of that revenue ratably over the remaining maintenance contract period upon the installation of the last product that was part of that multi-element group. So this related to literally tens of thousands of contracts and millions of lines of billing. So it was a very complex and tedious process, which is why it took so long. This creates a large rolling impact as revenue, as you back revenue out of multiple quarters and then you recognize that revenue for that contract when the last element is installed in a subsequent quarter. This had to be done for the previous five years due to the summary financial data that will be included in the Amended 10-K, when we file it for last year. The impact of this five year rolling impact for the time period from July 1, 2009 to June 30, 2014 is what grew to the projected numbers that Jack just referred to $172 million deferred revenue and $71 million impact or decrease in retained earnings as of June 30, 2014. And the difference in those two numbers being the direct related increased pre-paid direct costs and the decrease in deferred tax liability tied to that income. To give you an example of the impact for the quarter just reported, from our historical reporting license as historically reported was then decreased $12 million. Implementation services were reduced $7.5 million. In-house maintenance was decreased by $5.4 million, which reflects all the revenue related to the products related to these multi-element contracts installed in the quarter. We then added back $13 million in revenue of bundled product line within Support and Services for the contracts that were deferred and actually final installation in this quarter and then ratably recognized. This resulted in a net decrease of $11.9 million in revenue for the quarter as reflected in that summary financial data schedule that we put in the release yesterday. For comparative purposes for the same quarter a year ago, we backed out $14.7 million in license, $6.6 million implementation and $4.8 million in in-house maintenance, and then we added back these bundled services of the combination of those that were finally installed in the quarter ratably for the quarter of $16.6 million. So it's an in and out which leads to that rolling number. And this led to a net decrease for the year-ago quarter of $9.5 million in revenue, which was also reflected in the summary financial data schedule that was in the yesterday's release. There were a couple of other things that impacted timing of different types of revenue, but this was the lion's share of it. Hopefully, this helps to explain what caused these restated numbers and why some of the numbers like license revenues look a little odd. The bundled services line will be shown as a separate component and analyzed separately in the MD&A in the future SEC filings. So when we do file the 10-K/A and 10-Q/A, those will be broken out separately within Support and Services. Again, I would like to remind you, as Jack said, this only impacts the timing of revenue. It didn't no way impacts total contract value, the total revenue to be recognized from these contracts and has absolutely no impact on our cash flows nor the timing of our cash flows. So those will be consistent going forward. Concerning the adjustments, I will make my comments to the restated amounts in the release yesterday, and also refer to the summary table that compares historically reported numbers to the restated amounts. Support and Service lines of revenue continue to drive our total revenue growth and at restate – and an increase to restated $296.9 million, which is an 8% increase over the same quarter a year ago of $276.1 million. Again those are restated numbers. And now Support and Services represents 96% of total restated revenue this year compared to 95% a year ago with taking – reducing the license and putting it into Support and Services. To give you a breakdown like I always do of Support and Services comparison for the quarter, implementation was $18.9 million versus $17.9 million or a 6% increase. Electronic payments was $119.3 million versus $109.3 million, increased 9%. OutLink was $69.7 million versus $59 million or an 18% increase. Obviously electronic payments and OutLink were not impacted by this revenue recognition. In-House Maintenance was $76 million this year, compared to $73.3 million or a 4% increase. And then the bundled service component line of Support and Services this quarter was $13 million, compared to $16.6 million or a 22% decrease for the quarter compared to prior year. The Support and Services breakdown for the year-to-date numbers, since you won't have that and I'll give that to you now: Implementation was $56.9 million versus $47.8 million last year, a 19% increase; electronic payments, $360.2 million versus $329.4 million or a 9% increase; OutLink $199.8 million versus $173 million which is a 15% increase; In-House Maintenance, $235.7 million versus $231.1 million or a 2% increase; and then that bundled services component that's in Support and Services now was $29.5 million this year-to-date for the first three quarters versus $30.6 million a year ago, or a 4% decrease. Obviously, when we file the amended SEC filings on our Form 10-K/A and Form 10-Q/A we will provide all the quarterly detail for these revenue account breakouts for your models for all the previous years. Our consolidated restated gross margin increased to 43% for the quarter, compared to 40% in last year's quarter. Hardware margins remain level at 25% for the quarter, compared to a year ago. Our total restated operating expenses increased 3% for the quarter, compared to prior year. Our operating margin for the quarter increased to 25% for the quarter, compared to 22% a year ago. The effective tax rate for the quarter is relatively flat with last year at 33.7% this year versus 32.8%. So our restated EPS of $0.63 was up 26% over last year, which was impacted positively by the stock buybacks in the first half of the year. Our EPS prior to restatement was $0.68, or that's the way we've historically reported it, which is up 24% from $0.55 last year. And just to remind you the consensus EPS estimate for the quarter was $0.62. So we actually exceeded the consensus estimate either with the historical or restated numbers. Our restated EBITDA for the quarter increased to $109.6 million for the quarter, compared to $92 million a year, or approximately a 19% increase. Depreciation and amortization expense of $89.1 million year-to-date with $41 million in depreciation and $48.1 million in amortization, which this compared to $79.5 million in depreciation and amortization last year. Included in the total amortization is amortization intangibles from acquisitions, which was down slightly to $15.3 million year-to-date, compared to $15.7 million last year. Our restated operating cash flows were up $20.1 million year-to-date or 12% to $181.6 million. Our free cash flows for the year-to-date before dividends is $1.06 per share, this compared to $0.97 a year ago or up approximately just slightly under 10%. There were no treasury shares purchased during the quarter due to the revenue recognition issues. We have always been very conservative when our board and executives are blacked out. We do not allow them to buy stocks; therefore we don't allow the company to buy stock. I will tell you as soon as we get current with our filings, we will re-evaluate getting back in the market to buy back our own shares. For FY 2015 guidance for the remainder of this year, there really is no change in the guidance. We continue to expect top line revenue growth in the same growth range as we've seen year-to-date. For the fourth quarter, the current consensus estimate is currently $0.68, which we are comfortable with this on a restated basis. So the $0.68 consensus estimate for the year will be good. And this would allow us to end the year with EPS growth of slightly over 15%. Just a little bit – I'm not ready to give full – next year's guidance yet. We will give that when we do our year-end earnings call. But I will tell you based on our preliminary forecasting I do not see that this restating – restatement having much impact on our growth or margins going forward, so at this time I would suggest you not do anything significant with your models. As I said, we're comfortable with the consensus estimates out there for the fourth quarter. That concludes our opening comments. We're now ready to take questions. Latoya, will you please open the call lines up for questions.

Yes, sir. And the first question is from Peter Heckmann of Avondale. Your line is open.

Hi. Good morning, gentlemen. Thanks for the additional color on the rev rec issues. Kevin, were there any one-time items in the quarter? Any significant term fees or insurance recoveries? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: There was no insurance recoveries, Pete. There were some one-time term fees and I'm going to have to dig that out. I apologize; I don't have that right at my fingertips. Let's see, yeah, de-conversion fees for the quarter were pretty significant, they were about $9 million.

And how did that compare with the prior year? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Last year, we had $1 million in the quarter. So yeah, it's a pretty significant increase in one-time de-conversion fees this quarter, Pete.

Okay. Okay. That's helpful. And then... Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: And I will tell you that was spread pretty evenly between BP and our electronic payments and quite a bit over and even in the item processing.

Okay. Okay. And then we've seen a little bit of an uptick in M&A recently. And I know you have very, very low customer concentration, but any, anything to call out there in terms of M&A that's ongoing that – wins or losses? John F. Prim - Chairman & Chief Executive Officer: No, Pete, it's pretty much same environment that we've been in for quite some time at this point. Nothing noteworthy.

Okay. And then just lastly on the payments side, can you break up the individual components of payments that got you that 9% year-over-year increase? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: I'd – boy, Pete, I apologize. I don't have that. Let me – let's take another question, let me research that, and I'll see if I can come back to you.

All right. Thanks. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thanks, Pete.

Thank you. And the next question is from Dave Koning of Baird. Your line is open. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Yeah. Hey, thanks, guys. And I guess my first question just on the accounting, does this make you guys think about changing the way you do contracts so that you can do individual modules so that you can deliver them recognized right away rather than have multi-deliverables that you can't recognize for several quarters? John F. Prim - Chairman & Chief Executive Officer: Yeah, Dave, I wish it was that simple. We'd love to do that, but that really would not solve the problem. Part of the process of this evaluation is they look at any contracts that were signed on or about the time of that contract to see if you're doing exactly that, which I think they would perceive as an effort to try to get around the recognition interpretations. So I'll be honest with you, one of my frustrations is I have yet to get a straight answer to the question of what's the appropriate method of handling a situation when we know and the customer knows that there's one of these modules, one or more of these modules that they want to implement on a delayed basis, plan to do it that way from the start. We've yet to get any kind of reasonable guidance as to how to address that problem in an appropriate manner. So unfortunately unbundling the items would not help the situation. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Okay. So does that mean then there will be a permanent kind of bigger deferred revenue, this $172 million number, that's going to always kind of be out there and thus kind of permanently reducing the revenue run rate compared to what we used to have? Is that fair to say? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: No, I don't think that's a good way to look at it, Dave, because I mean this is a build-up of multiple years that caused this number. I mean, some of these contracts that are in this deferred revenue adjustment are from five years ago because there's one product left to be delivered, and we will systematically go through all those and determine when those are going to be, but eventually that will come down because we'll recognize that revenue. There are some things that we can do in our normal procedures to recognize the revenue sooner, which is why I don't think there's going to be much impact in our revenue growth or our margins moving forward, because some of this is tied to milestones within contracts. It's going to take us four or five years to finally recognize 100% of that revenue. So this $172 million deferred revenue is going to be spread over the next four or five years. And so it's just going to kind of fall in there when it happens. But as that comes down, I think we're going to change our procedures a little bit so we can consistently recognize the revenue that we – kind of the way we always have, so that $172 million hickey will eventually go down. John F. Prim - Chairman & Chief Executive Officer: And, Dave, on the topic of permanence, you may be aware that FASB has proposed new revenue recognition guidance that was supposed to go into effect in 2017; I think it's been delayed for a year or so at this point. But if the proposed rules were in effect now this whole conversation would not be taking place. Substantially all of this would not be an issue, and we wouldn't even be talking about it, which adds to the challenges with making these. I'm sure there's a pretty good reason why FASB has proposed changes that make this whole conversation unnecessary. Unfortunately, it's not 2017, so we have to deal with it now. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Okay. And I guess finally you said you don't see any impact to growth or margins for the fiscal 2016 year, but if revenue growth is lower this year, do you mean that the actual dollars of revenue in our models are acceptable or the growth rate? Just because we're going to have a lower revenue now for fiscal 2015. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: I think your revenue dollars are probably right, David. I need to go back and confirm that. Like I said, I'm not really ready to give full next year's guidance. But at this point, I think you all are in pretty good shape. I would hate for you to go all change your models and then a couple months from now I come back and say, "Whoa, wait a minute. We need to revise that." So right now I think based on where we ended up this quarter, where I think our forecasting for the fourth quarter and comfortable with that $0.68 consensus, I think next year the growth rate that you all have in there is pretty solid. David J. Koning - Robert W. Baird & Co., Inc. (Broker): But the growth rate on a different dollar number. I mean if the growth rate's okay that means the dollar number has to be lower. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Okay. You're right. It should be a little higher growth rate. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Okay. Okay, cool. Well, thanks for all the detail. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: You bet. Thanks, David.

Thank you. The next question is from Tim Willi of Wells Fargo. Your line is open. Tim, please check to see if your line is on mute.

I'm sorry. Can you hear me now?

Yes, sir.

I'm sorry. I apologize. Just wanted to talk about maybe the tone of business during the quarter if we could a bit, just any trends that you saw, changes in behavior or priorities, anything around win rates versus loss rates that maybe you could address? If there's just anything to point out there, obviously the quarter was solid so that says something in and of itself, but just any observations you had about the marketplace? John F. Prim - Chairman & Chief Executive Officer: Yeah, Tim, business as usual. All three brands, Banking, Credit Union, ProfitStars, all of them were over 100% of their sales quote for the quarter and are over 100% on a year-to-date basis. I can't say that there was anything new or different in what customers were looking at or interested in. Again, it's not any one item that they're looking at. Core system sales remain strong. Complementary sales are very solid. Nothing really new in the competitive dynamic than we've seen in the past so it's really just another quarter of business as usual.

If I could just ask a follow-up, there's been a lot of attention and probably more to come around cyber-security and all these types of issues. In terms of your solutions, whether the proprietary or partnerships, or how would you, I guess, address that if we saw in the next year or two banks have to really, because of regulatory mandates, pressure from regulators, have to address that? I mean are you positioned from a product front, are these lucrative products for you to help address those issues? Or is that something that would be outside of your scope in terms of services and products? John F. Prim - Chairman & Chief Executive Officer: Yes, no, I would say that for the most part, Tim, it would be within scope. We have a number of solutions that have been gaining traction and we think will continue to, and some of those go back to the Gladiator acquisition that we did in, was that 2005, Tim? And some of the solutions for enterprise security monitoring that we built using that platform and that management team to build out some additional security capabilities, that's been gaining traction. We mentioned that we started July 1 with a new hosted network services offering. Again that's doing well. Again, it's in its infancy but we're seeing good results and good uptake and interest there. I think that will only increase not only as a result of the increased focus of examiners in and around security, but the competition for talent with network and engineering-related backgrounds. So in addition to all the people that we're trying to hire that type of talent before, you've now got the federal government who's trying to beef up their cyber-security infrastructure, I'm sure companies like Target and Home Depot and others that have seen in that business some of the security challenges, they're all beefing up. So in a company like Jack Henry where we are a technology company rated one of the top 100 companies to work for in IT by Computerworld magazine, the challenges we have recruiting technical talent, I can't even imagine what it must be like for a community bank or a credit union who has a staff of two people to be able to recruit that same type of talent. So I think a lot of these factors are going to help drive uptake of some of the solutions like the hosted network services where we can take that server infrastructure and all monitoring, patching, management of those types of services out of the financial institution. So we feel like we're well-positioned with our security solutions as that tension increases.

Great. Thanks very much. That's all I had, guys. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thanks, Tim.

Thank you. The next question is from Brett Huff of Stephens, Inc. Your line is open.

Good morning, guys. John F. Prim - Chairman & Chief Executive Officer: Good morning. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Good morning, Brett.

The outsourcing growth was really good at 18%. Anything to – is that a – anything to call out there on that number? John F. Prim - Chairman & Chief Executive Officer: Well, Brett, it was solid just from normal business. As Kevin mentioned earlier there was certainly some benefit there from early termination fees, but I think it would have still been 10% or better without any benefit of early termination fees. So it just continues to be a combination of the fact that on the banking side 95% of all of our new deals that we do these days opt for outsourced delivery; that number's probably 60-plus percent year-to-date on the credit union side. We continue to see interest in moving from in-house processing to outsourcing by our existing in-house customers, which as we talked about the revenue uptake that takes place there. So it's just all the factors that have been impacting that business continue to be in place.

And the second question is on the new offering, and I'm forgetting what you're calling it, you just mentioned it in the last question where you're doing more of the infrastructure outsourcing for banks. John F. Prim - Chairman & Chief Executive Officer: Right.

I think last quarter you all said that early conversation, betas, a few servers of the total server pool at a particular bank might be being tested, et cetera. What's the specific update on those betas? Or do we just have more betas? Or do we have somebody fully outsourcing at this point? Any update on that? John F. Prim - Chairman & Chief Executive Officer: Yeah. And so just – we refer to that as Hosted Network Services or HNS as we refer to it around the office. And no, we're well beyond the beta stage at this point, Brett. I think to date we've signed either 13 or 15 customers that are looking to give us some or all of their network infrastructure. It's a combination of both. It's going very well. It is a complex sales cycle. I mean, you're dealing with many, many items in and around complex network related terminology, what products are they running that may or may not be Jack Henry products that we need to bring into our environment if we're going to host that server infrastructure for them. Telecommunications, a lot of factors that enter into that, so it tends to be not an easy short sales cycle just because there's a lot of research that has to be done to make that sale but it's going very well and as expected, it's not just a case of replacing the hardware infrastructures. We're typically finding that they take additional monitoring related services that are higher margin services that improve the overall profitability on the deal. If you look at a typical institution, if they've got 50 servers, the odds are that they didn't buy all 50 of those servers at one time. You know they started out with 10 and they added some products or they needed more capacity. And so they've got this server infrastructure in various stages of its lifecycle. So in some cases it will be less likely that they'll just rip out everything and give us all 50 of those servers at once. They might give us 10 and when the refresh cycle comes up on the next batch give us those. But we're pleased with the, what we're seeing in terms of the contract values and the recurring revenue and the uptake of those solutions at this point.

That's helpful. And then just last thing. On the refresh status on the various pieces of the cores on real-time. I know some of them are all full real-time now and you're cycling through sort of modules on the other. Can you just give us an update on that? Just there's been a lot of questions that we've gotten on that just given the increased focus on the market just from your competitors. John F. Prim - Chairman & Chief Executive Officer: Yes. So all of those projects, and there are a lot of different projects. I mean, real-time is one of probably 10 different things that might be going on with any product at any given time. But all the projects continue to track well. We're still talking different deliverables for these various projects, Dave (sic) [Brett], that will still extend into the future a number of years. But we're bringing those products to market incrementally as new enhancements are made. Let's for example take real-time that you asked about specifically. We introduced last year, and this is primarily on the SilverLake product because the Episys Credit Union processing system as you know is already fully real-time and has been since its inception; but SilverLake being more of a traditional banking developed system, we're moving it to the real-time operating environment. We released the first set of real-time capabilities last year. In this year's current release, we're extending that further, and sort of the final stages will be wrapped up related to that specific project in next year's release. But substantially the types of capabilities that customers are going to be most interested in related to real-time will be done by the end of this year. But I use that as an example because a number of these, many of these projects that we're working on are large-scale efforts that will be rolled out on an as-available basis, not rolled up into a big bang deployment at some future date. We'll be releasing those changes incrementally as we can make them available. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Yeah. And let me just say, I mean, banks have never been in big demand for real-time. I mean we're actually doing this proactively because we're still not hearing a big demand for real-time, but we know it's coming with all of the teller branch transformation and everything else that's going on, so we know we need to get there so we're actually being proactive and getting ahead of the game. But, as Jack said, the Episys solution for credit unions, just like most credit union solutions, has been real-time since the 1980s. John F. Prim - Chairman & Chief Executive Officer: And that's a very good point that Kevin made, Brett. I mean I doubt that we have seen a single RFP in the last 12 months on the banking side of the business where the requirement called for a real-time banking system. This is one of those things that we feel like for the next 20 years needs to be in place, and we're working to that end.

And this is – I guess the key that I'm getting at is this is just coming out, and as a user of SilverLake I'm just going to get this real-time capability as a matter of course, right? There's no change in my business process, et cetera? John F. Prim - Chairman & Chief Executive Officer: You will get the change as a matter of course. No price changes and frankly no requirement to implement it. If you're perfectly happy with the current method of processing and don't feel that you have a need for real-time, you will not be required and we won't flip a switch and now everything's processing real-time. It'll be up to the bank whether they do it that way or not, or – but the point is if they wake up five years from now and decide, oh wow, this real-time thing has become important, it'll be ready when they are.

Great. That's what I needed. Thank you. John F. Prim - Chairman & Chief Executive Officer: Thank you. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thanks, Brett.

Thank you. The next question is from Glenn Greene of Oppenheimer. Your line is open. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Thanks. Good morning. Just a number of clarifications on the restatement to begin with, because I'm – we're getting a lot of questions; I know a lot of people are confused. But just to level set us all, for fiscal 2015, just to be clear, it sounds like you're talking $252-ish million all in, given the year-to-date restated numbers and, Kevin, you sort of talked about $0.68 for the fourth quarter. So just to make sure that's sort of what we're thinking about for fiscal 2015. And then I'll follow up related to 2016. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Yes. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Okay. So 2016 now, following up on David Koning's questions consensus is directionally $290 million. So that would be sort 15% or so EPS growth, or 18% if you backed out the term fee grow-over from this quarter. And I think what David was trying to get at is your revenue base is something like $50 million to $55 million lower on a full-year basis, but you're sort of implying your growth rate will be stronger going into next year. I don't know if that's due to the restatement or some other sort of core factor. And then on an absolute basis our revenue numbers and EPS numbers are kind of in the ballpark? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Glenn, actually I made myself a note that if I didn't get questioned I was going to go back and clarify that exact point. Because after I said that I actually got an IM from my Controller and she slapped my hand. So the revenue growth is going to be consistent with about the way it was this year, so it is off a lower base. So the revenue numbers do need to come down next year because of this restatement. So the growth next year should still be in the mid to high single digits but it is going to be off a lower revenue base. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): And what, or how should we think about the margin implications? And if we step down, I don't know $0.15 this year because of the restatement or whatever the number is, is that the new base that we grow off of at sort of the 10% to 15% rate? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Yes. But your margins, like I said, the margins should stay pretty solid. I mean, so the margins for the fourth quarter, it looks to be on a forecast looks to be right at the 43% gross margin that we would have before restatement. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Okay. And then the – just think about this $172 million increase in deferred revenue which I think you said gets recognized over four to five years. Does that unto itself have any impact on the growth rate? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: I mean, it could, Glenn. But we need to take $172 million and divide it by $8 billion or whatever over the next five years, could it have an impact? Maybe, but I think the only impact you might see would be in a quarter. Any significant increase would be in a quarter where we have, you know some large deal that we install and we had to defer 100% of the revenue and we finally ship that last piece of software and it gets recognized 100% of the revenue in that quarter. But I think on a year-over-year basis, could it enhance growth a little bit? Yes, maybe, but I don't think it's going to be material enough to see. And like I said, once we layer that all out and have a chance to go back and analyze all that, on the year-end guidance I'll be able to give you a whole lot better feel for what that is – not only for year-over-year growth for FY 2016 but also kind of on a quarterly basis. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Okay. And then the term fee was pretty unusual for you, was there just sort of one sort of call out? Or I guess I'm sort of thinking about the implications on a go-forward revenue basis related to that term fee. John F. Prim - Chairman & Chief Executive Officer: Glenn, I don't know that there was any one item that was particularly noteworthy, it's just the way some acquisitions or de-conversions fell. Nothing stands out as being noteworthy. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): And on a similar point I think Pete Heckmann was asking these questions too related to bank M&A, Fiserv alluded to sort of a takeaway win recently I think via DNA. And Fidelity at their Analyst Day on Monday was actually alluding to a pretty significant takeaway as well. Are those – is that accurate? And does that have implications for fiscal 2016 growth? John F. Prim - Chairman & Chief Executive Officer: First of all, yes, it's accurate; and no, it has no noteworthy impact. You might also recall, Glenn, if you've looked at our press releases there was the Shell Oil Credit Union replacement which was a replacement of DNA, which that was either our seventh or eighth replacement of DNA. So yeah, do they occasionally take a deal away from us? Yeah. Do we take considerably more deals from them than they take from us? Yeah. Related to the CIT I believe is probably the bank... Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Yup. That's it. John F. Prim - Chairman & Chief Executive Officer: That you're referring to that will be de-converting. So CIT is a large bank in terms of assets, but they're very much an unusual bank if you will. They're an online only bank, deal primarily with certificates of deposit, so their asset size is much larger than their account volumes would dictate. And in that particular transaction the bank that they're acquiring which is OneWest has over 100 branches versus no branches at CIT Bank. CIT, we are the back room for CIT's operations versus a fully staffed and built out back room that OneWest has. And I believe I'm correct in saying that OneWest is a fairly recent consolidation of about three different banks that have gone through a series of core system conversions and are probably just settling in from that. So the dynamic you're left with is we can take the relatively small CIT operation with no branches and minimal staff that has to be retrained, or we can take the 100-plus branches of OneWest, hundreds and hundreds of employees that would have to be retrained and who have just recently been retrained from whatever they just converted from to be distilled into the current organization that they are today. So we knew we had long odds of being able to retain that business going in. It was not a product-related issue; as a matter of fact I suspect that our competitor will probably have to do some product enhancement just to deliver some of the capabilities that were already being delivered to CIT. But yeah, certainly hate to lose any customer. The M&A world introduces opportunities and we win – we're the victor in a lot of those, and sometimes it goes the other way. Glenn E. Greene - Oppenheimer & Co., Inc. (Broker): Great. Very helpful. Thanks for clarifying.

Thank you. We have a follow-up question from Dave Koning of Baird. Your line is open. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Yeah. Hey, guys. I don't know if this would be possible, but if you have Q1 and Q2 restated numbers too, just so we can get our models set for all the quarters? Or do you just have the year-to-date and Q3? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: I do not have those at my finger-tips, Dave, but what I think I can do and I'll have to also make sure I can do this per SEC Counsel, but what I might do is be able to put those out on our JHA website. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Yeah... Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: And that way, and once I put them out there then if I can do that, then I would also be able to just e-mail them to you all to put in your models. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Yeah. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: So let me confirm. I'm actually going to feed in here in just a few minutes. We're actually here meeting for a quarterly board meeting for the next two days. I'll run that by him and make sure he is okay with that. And if he is, then we will put something out there. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Okay. That's good. And then just one other question; are there going to be lumpy quarters when certain – elements come on? Is it going to create some lumpiness that goes up a lot in one quarter and then comes back down? Or when new big projects go into – does that create a lumpy growth, but then it stabilizes from there just given once the revenue is installed, then it just kind of stabilizes? I'm just wondering if there is going to be increased lumpiness or not really? Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Well I think there is going to be some increased lumpiness, Dave, but I think what we are going to see, and what we've seen, is we've kind of gone back and looked at the impact for the last five years is, it's kind of more heavily weighted towards the fourth quarter. Because like I've said, we have to wait until the, actually the last product is installed, and then we take 100% of that revenue and we recognize that revenue ratably over the remainder of that maintenance contract period, which is until June 30. So throughout the year as we continue to make that final installation, then that's just going to snowball. So any revenue recognized from this deferral is actually going to trend up from Q1 to Q4. So there will be – the recent – a little lumpiness but that's really what's going to be the driver that's actually going to increase the revenue from Q1 to Q4. And once we get that all layered out and kind of dissected, Dave, I'll try to give better guidance on our next earnings call of what that will be. David J. Koning - Robert W. Baird & Co., Inc. (Broker): Okay. No, that's helpful. Thank you. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: You bet.

There are no further questions at this time. I'll turn the call back over for closing remarks. Kevin D. Williams - CFO, Treasurer & Head-Investor Relations: Thanks, Latoya. Again, we want to thank you all for joining us today to review our third quarter fiscal 2015 results. We're pleased with the results from our ongoing operations and the efforts of all of our associates to take care of our customers. We're looking forward to finalizing this detailed revenue recognition review and getting current with our SEC filings. But as Jack mentioned in the opening, despite these efforts our executives, managers and all of our associates have continued to focus on what is best for our customers and our shareholders. With that, I want to thank you again; and Latoya will you please provide the replay number?

Yes. Ladies and gentlemen, the replay number for this call will be 1-800-585-8367. And the passcode is 33663566. And once again that number is 1-800-585-8367. The passcode is 33663566. That concludes today's conference. You may now disconnect. Good day.