Jack Henry & Associates Inc (JKHY) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Jack Henry & Associates third-quarter 2015 earnings conference call.

(Operator instructions)

As a reminder, this call is being recorded. I would now like to turn the call over to Kevin Williams, CFO, please begin.

Thank you, Latoya. Good morning.

Thank you, again, for joining us for the Jack Henry & Associates third-quarter FY15 earnings call. I am 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. Then, we will open the call of 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 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. 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 will now turn the call over to Jack.

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 and 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 natures 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 remain strong and ahead of plan.

Although the final stages of the lengthy and detailed review of revenue recognition procedures are still underway, 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 VOSE, 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 appear 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 accumulative 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 fee 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's 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 remains 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 will turn the call over to Kevin for some additional comments.

Thanks, Jack. I thought the first thing I would do this morning is try to explain a little bit of why this process is taking 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. Why, for example, 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 the 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 where installed in delivered. So the license, implementation fees and subsequent maintenance or post-contract services, we had to determine the timing of all recognitions to 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 in that respective quarter that it had been originally recognized, regardless of the quarter, put all of 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. 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, as Jack just referred to, of $172 million deferred revenue and $71 million impact or decrease in retained earnings as of June 30, 2014. The difference in those two numbers being the direct related increased prepaid direct cost 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. Then, we added back this bundled services, the combination of those, that were final installed in the quarter ratably for the quarter, of $16.6 million. So, it's an in an 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 this summary financial data schedule that was in yesterday's release. There are 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 that, as Jack said, this only impacts the timing of revenue. It in 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. 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 it increased 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. Now, support and services represents 96% of total restated revenue this year compared to 95% a year ago with 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 a $119.3 million versus $109.3 million, increased 9%. OutLink was $69.7 million versus $59 million, or an 18% increase. Obviously, electronic payments in 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. 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 the prior year.

The support and services breakdown for the year-to-date numbers, since you won't have that, I'll give that to you now. Implementation of $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 a $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. That bundled services component that's in support and service, 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 filed amended SEC filings 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 of the previous years. Our consolidated restated gross margin increased to 43% for the quarter compared to 40% in last year's quarter. Hardware margins remained level at 25% for the quarter compared to year ago. Our total restated operating expenses increased 3% for the quarter compared to the 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 was relatively flat with last year, 33.7% 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 would historically had reported it, which is up 24% from $0.55 last year. 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 our restated numbers.

Our restated EBITDA for the quarter increased to $109.6 million for the quarter compared to $92 million a year ago, 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 does compare to $79.5 million in depreciation and amortization last year. Included in the total amortization is amortization of 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. We're 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 do not allow the Company to buy stock. I will tell you as soon as we get current with our filings, we will reevaluate getting back into the market to buy back our own shares.

For FY15 guidance for the remainder of this year, there really is no change to 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 would 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 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 are comfortable with the consensus estimate out there for the fourth quarter.

That concludes our opening comments. We are now ready to take questions. Latoya, will you please open the call lines up for questions.

(Operator Instructions)

Peter Heckmann, Avondale.

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?

There was no insurance recoveries, Pete, there were some one-time term fees. I'm going to have to dig that out. I apologize. I don't have that right at my fingertips. De-conversion fees for the quarter were pretty significant; they were about $9 million.

And how did that compare with the prior year?

Last year we had $1 million in the quarter, so it's pretty significant increase in one-time de-conversion fees in the quarter, Pete.

Okay. That's helpful. And then --

And I will tell you that was spread pretty evenly between BP and our electronic payments and quite a bit over even in item processing.

Okay. Then, we've seen a little bit of an uptick in M&A recently. I know you have very low customer concentration, but anything to call out there in terms of M&A that's ongoing that -- wins or losses?

No, Pete, it's pretty much same environment that we've been in for quite some time at this point, nothing noteworthy.

Okay. Lastly, on the payment side, can you break up the individual components of payments that got you that 9% of year-over-year increase?

Well, Pete, I apologize. I don't have that. Let's take another question, let me research that, and I'll see if I can come back to you.

All right. Thanks.

Dave Koning, Baird.

Hey, thanks, guys. 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, recognize right away, rather than have multi-deliverables that you can't recognize for several quarters?

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 are 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 is the appropriate method of handling a situation when we know and the customer knows that there's one of these modules, one or more 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.

Okay. Does that mean, then, there will be a permanent, bigger deferred revenue, this $172 million number that's going to always 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?

No, I don't think that's a good way to look at it, Dave, because this was a buildup of multiple years that caused this number. 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. We will systematically go through all of those and determine when those are going to be.

Eventually that will come down, because we'll recognize that revenue. There are some things that we can 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. It's just going to fall in there when it happens.

As that comes down, I think we're going to change our procedures a little bit, so we can consistently recognize the revenue the way we always have, so that $172 million hickey will eventually go down.

Dave, on the topic of permanence, as 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.

Okay. Finally, you said you don't see any impact to growth or margins for the FY16 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 FY15?

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. At this point, I think you're all 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. 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's, the growth rate that you all have in there is pretty solid.

But, the growth rate on a different dollar number, if the growth rate is okay, that means the dollar numbers has to be lower.

Okay. You're right. It should be a little higher growth rate.

Okay. Thanks for all the detail.

You bet, thanks, Dave.

Tim Willi, Wells Fargo.

Just wanted to talk about, maybe, the tone of business during the quarter, if we could a bit? Just any trends that you saw or changes in behavior or priorities, anything around win rates versus loss rates that maybe you could address, if there's anything to point out there? Obviously, the quarter was solid, so that says something in and of itself. Just any observations you had about the marketplace?

Tim, business as usual. All three brands, banking, credit unit, ProfitStars, all of them were over 100% of their sales quota 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 remained 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 they're 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 or pressure from regulators, have to address that? 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?

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. Some of those go back to the Gladiator acquisition that we did in -- was that 2005? -- in 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 is doing well. It's in its infancy, but we're seeing good results and good up take 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. In addition to all the people that were trying to hire that type of talent before, you've now got the federal government who is 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 are all beefing up.

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 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 these solution, 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. We feel like we're well positioned with our security solutions as that attention increases.

Great. Thanks very much, that's all I had, guys.

Thanks, Tim.

Brett Huff, Stephens Inc.

The outsourcing growth was really good at 18%. Anything to -- is that anything to call out there on that number?

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. 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 is probably 60%-plus 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. It's just all of the factors that have been impacting that business continue to be in place.

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. 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 is 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?

We refer to that is hosted network services, or HNS, as we refer to it around the office. No, we are 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. You're dealing with 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 are going to host that server infrastructure for them, telecommunications, a lot of factors that enter into that. It tends to be not an easy short-sale cycle just because there's a lot of research that has to be done to make that sale.

It's going very well, and as expected, it's not just a case of replacing the hardware infrastructure. 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 they didn't buy all 50 of those servers at one time. They started out with 10 and they added some more 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. We are pleased with 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. 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 modules on the other. Can you just give us an update on that? There's been a lot of questions that we've gotten on that, just given the increased focus on the market, for just from your competitors.

All of those projects -- and then there are a lot of different projects. Real-time is one of probably 10 different things that might be going on with any product at any given time. All the projects continue to track well. We're still talking different deliverables for these various projects, Dave, that will still extend into the future a number of years. We're bringing those products to market incrementally, as new enhancements are made.

For example, take real-time that you asked about specifically, we introduced last year, and this is primarily the SilverLake product, because the Episys, the credit union processing system, as you know, is already fully real-time and has been since its inception. SilverLake being more of a traditional banking developed system, we are 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. The final stages will be wrapped up related to that specific project in next year's release.

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. I use that as an example because a number of these, many of these, projects that we are 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 will be releasing those changes incrementally as we can make them available.

Let me just state, banks have never been in big demand for real-time. 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. We know we need to get there, so we're actually being proactive in getting ahead of the game. As Jack said, the Episys solution for credit union, just like most credit union solutions has been real-time since the 1980s.

And that is a very good point Kevin made, Brett. I doubt that we have seen a single RFP in the last 12 months that where, on the banking side of the business, where the requirement called for 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.

This is 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?

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. We won't flip a switch and now everything is processing in real-time. It will be up to the bank whether they do it that way or not. The point is, if they wake up five years from now and decide, oh wow, this real-time thing has become important, it will be ready when they are.

Great. That's what I needed. Thank you.

Thanks, Brett.

(Operator instructions)

Glenn Greene, Oppenheimer.

Just a number of clarifications on the restatement to begin with, because we're getting a lot of questions. I know a lot of people are confused. Just to level set us all, for FY15, just to be clear, it sounds like you're talking $2.52-ish, all in, given the year-to-date restated numbers? Kevin, you talked about $0.68 for the fourth quarter, so just make sure that's what we're talking about for FY15? Then, I'll follow up related to 2016.

Yes.

Okay. So, it's 2016, I'm following up on David Koning's questions, consensus is directionally $2.90, so that would be 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 are implying your growth rate will be stronger going into next year. I don't know if that due to the restatement, or some other core factor and then an absolute basis our revenue numbers and EPS numbers are in the ballpark?

Glenn, actually, I made myself a note that if I didn't get a questioned, I was going to back and clarify that exact point. Because after I said that, I actually an IM from my controller and she slapped my hand. The revenue growth is going to be consistent with about the way it was this year, so it is off a lower base. The revenue numbers do need to come down next year because of this restatement. 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.

How should we think about the margin implications? If we step down $0.15 this year because of the restatement or whatever the number is, is that the new base that we grow off of that 10% to 15% rate?

Yes, but your margins, like I said, the margin should stay pretty solid. The margins for the fourth quarter looks to be, on a forecast, looks to be right at the 43% gross margin that we would have before restatement.

Okay. Just thinking 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 in the growth rate?

It could, Glenn. When you take $172 million and divide it by $8 billion or whatever over the next five years, could it have an impact? Maybe. I think the only impact you might see would be in a quarter. Any significant increase would be in a quarter where we have some large deal that we installed and we had to defer 100% of the revenue and we finally shipped the last piece of software and get to recognize 100% of the revenue in that quarter.

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 all that out and have a chance to go back and analyze all that, on the year-end guidance I will be able to give you a whole lot better feel for what that is, not only for year-over-year growth for FY16 but also on a quarterly basis.

Okay. The term fee was pretty unusual for you. Was there just one to call out? I'm thinking about the implications on a go-forward revenue basis related to that term fee?

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.

On a similar point, I think Pete Heckmann was asking these questions, too, related to bank M&A. Fiserv alluded to take away when recently, I think via DNA, and Fidelity, at their analyst day on Monday, was actually alluding to a pretty significant take away, as well. Is that accurate? Does that have implications for FY16 growth?

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 was either our seventh or eighth replacement of DNA. So yes, do they occasionally take a deal away from us? Yes. Do we could take considerably more deals with from them than they take from us? Yes.

Related to the CIT, I believe is probably the bank that you're referring to that will be de-converting. CIT is a large bank in terms of assets, but they are very much an unusual bank, if you will. They are an online only bank, deal primarily with certificates of deposit, so there asset size is much larger than their account volumes would dictate. In that particular transaction, the bank that they are 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.

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.

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. 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.

Great. Very helpful, and thanks for clarifying.

(Operator instructions)

Dave Koning, Baird.

I don't know if this would be possible, but do you have Q1 and Q2 restated numbers, too? Just so we can get our models all offset for all the quarters, or do you just have the year to date and Q3?

I do not have those at my fingertips, Dave, but what I think I can do and I will have to make sure I can do this for SEC counsel, but what I might do is be able to put those out on our JHA website. That way everybody can have -- and once I put them out there, then -- if I can do that. Then, I would also be able to just email them to you all so you can put in your models.

Yes.

So let me confirm. I'm actually going to see him in just a few minutes. We're actually here meeting for our quarterly Board meetings for the next two days. I will run that by him, make sure he's okay with that. If he is, then we will put something out there.

Okay. That's good. Then just one other question. Are there going to be lumpy quarters when certain -- the 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 in, does that create a lumpy growth but then it stabilizes from there just given once the revenue's installed and then it just stabilizes? I'm just wondering if there's going to be increased lumpiness or not, really?

I think there is going to be some increased lumpiness, Dave, but I think what we're going to see and what we've seen as we've gone back and looked at the impact for the last five years, is it more heavily weights it towards the fourth quarter. Like I said, we have to wait until 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.

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. There will be a little lumpiness, but that's what's really going to be the driver. It's actually going to increase the revenue from Q1 to Q4. Once we get that all layered out and dissected, Dave, I will try to give better guidance on our next earnings call of what that will be.

Okay. That's helpful, thank you.

You bet.

(Operator Instructions)

There are no further questions at this time. I'll turn the call back over for closing remarks.

Thanks, Latoya. Again, we want to thank you all for joining us today to review our third-quarter FY15 results. We are pleased with results from our ongoing operations and the efforts of all of our associates to take care of our customers. We are looking forward to finalizing this detailed revenue recognition review and getting current with our SEC filings, but as Jack mentioned in 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. 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. Once again that number is 1-800-585-8367, the passcode is 33663566. That concludes today's conference. You may now disconnect. Good day.