Good day, and welcome to today's Jack Henry Third Quarter 2012 Earnings Call. This call is being recorded. For opening remarks and introductions, I would like to introduce Kevin Williams, Chief Financial Officer. Please go ahead.

Thanks, Stephanie. Good morning. Thank you for joining us today for the Jack Henry & Associates Third Quarter Fiscal 2012 Earnings Call. I'm Kevin Williams, CFO. With me today are Jack Prim, CEO; and Tony Wormington, President. The agenda for the call this morning is as follows: Jack will start with some highlights of the quarter. Tony will then provide some operational highlights and then I will provide some additional feedback and comments on the press release we put out yesterday and provide some additional comments on the financials. And finally, we'll try to answer any questions you might have. Forward-looking statement. I need to remind you the remarks or responses to questions today 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 will now turn the call over to Jack.

Thanks, Kevin. Good morning, and welcome to the call. We are pleased to again announce record revenue, net income and business backlogs for our third fiscal quarter. As the economy continues to show signs of stability, our customer base continues to invest in products and services to move their businesses forward. As has been the case for several quarters, the spending is not confined to any single area. Core system sales remain strong, a variety of complementary products have contributed and in-house to outsourcing transitions continue at or ahead of last year's pace. In the Core systems area, we have commented previously on the mid-tier sale successes in the banking space in the last year. The Credit Union space also delivered nicely in that segment last quarter with 3 new core wins, each over $1 billion in assets, including American Airlines Federal Credit Union, the 10th largest Credit Union in the United States with almost $6 billion in assets. Total revenue increased 7% in the quarter and it was entirely organic, support and services revenue grew 8% in the quarter, with very solid growth in our payments businesses and also in implementation services. License revenue increased 15% with a good mix of core and complementary product sales. The largely recurring nature of support and services revenue, and increasingly percentage of completion-based recognition of large software contracts, pushed the backlog to record highs in both the in-house and outsourced components. Scale leverage and solid attention to expense management by our managers led to a 12% increase in operating income and 11% increase in net income for the quarter. Our biannual employee engagement survey showed solid gains in every measured category compared to 2 years ago and higher ratings in every category than the benchmark database of comparison companies. At the same time, our customer satisfaction ratings remained at or near record levels and we think those 2 measurements are closely correlated. I would like to thank our over 4,800 associates for their daily efforts to deliver value for our customers. I look forward to seeing all of you next week at our Analyst Conference in Dallas. Before I turn it over to Tony for some additional insight on the business, I will mention that Craig Curry has resigned from the Jack Henry Board of Directors for personal reasons as disclosed in an 8K filed earlier this week. We would like to thank Craig for his 8 years of service to our company and wish him well. Tony, I'll turn it over to you.

Thanks, Jack. We are pleased with the strong contributions in all components of support and services, which increased 8% over the prior year quarter and 6% fiscal year-to-date, and represents 88% of total revenue. The largest contributor to this was our electronic payments revenue, which grew 11% compared to the prior year quarter and year-to-date, and represents 38% of total revenue. Our outsourced data and item processing services increased 9% for the quarter and 5% year-to-date and represents 21% of total revenue, which is driven by both new customers who prefer this delivery model, as well as the continued movement of our existing in-house customers electing to migrate to this service model. In addition, our onetime implementation revenues increased 14% compared to prior year quarter and 6% year-to-date and represents 8% of total revenue. Demand for implementation services in all areas of the company remains very strong due to new business resulting from competitive takeaway, in-house to outsourced migrations, diversion and merger-related activity due to both FDIC closures and voluntary M&A, as well as additional complementary product purchases from existing clients. Our electronic payments transaction volumes continue to experience very solid growth. PassPort, ATM and debit card processing volumes increased 16.1% over the prior year quarter. Bill payment transaction volumes increased 13.7% over the prior year quarter. Financial institution merchants installed and utilizing our Enterprise Payments Solution increased to over 38,000 merchants, representing a 10.9% increase compared to the prior year quarter. Merchant-related transaction volumes increased 13.6% over the prior year quarter. I would like to thank our customers for their business and their continued loyalty to JHA represented by purchasing additional products and services, as well as referring JHA to their peers. Additionally, I want to thank our 4,800-plus Associates for the dedication, loyalty and taking care of our clients. I'll now turn it over to Kevin for a further look at the numbers.

Thanks, Tony. As Jack mentioned, our total revenue increased 7% for the quarter and 6% year-to-date compared to the same period a year ago. License revenue increased by 15% for the quarter compared to prior year and license revenue is up the first 9 months by 8% compared to last year. Support and service revenue increased 8% this quarter, over the same period last year and this line has increased 6% year-to-date. To break down the support and services line of revenue, implementation increased 14% for the quarter and 6% year-to-date, electronic payments, as Tony mentioned, increased 11% for both the quarter and year-to-date. Our OutLink data processing, which is just data and item processing increased 9% for the quarter and 5% year-to-date and in-house maintenance increased 2% for both the quarter and year-to-date. So nice contribution from all the components at support and services. Hardware revenue decreased 14% for the quarter, but it's still up 1% for the 9 months compared to the prior year. Our consolidated gross margins held steady at 40% for the quarter compared to the same quarter a year ago. License margins decreased to 84% this quarter from 91% a year ago due primarily to sales mix with an increase in third-party software delivery during the quarter. However, we would expect the license margins to return back more to the normal expected levels in the 90% range in Q4 and be solid for the entire year. Our support and service margins held steady at 38% compared to year ago, which these are down sequentially as they always are in this quarter due to the year-end release fees and other items that happen in our fiscal second quarter every year. However, margins increased to 26% from 25% a year ago, again, primarily due to sales mix. To break this down into our 2 reporting segments, our banking segment gross margins held steady at 40% compared to year ago and our Credit Union segment margins increased to 40% from 38% a year ago. In the Bank segment, license margins decreased to 83% from 91% a year ago, so there was the big decrease this quarter, which again, we expect to return next quarter. Support and service margins for the Bank segment held steady at 39% with last year and hardware margins also held steady at 27%. In our Credit Union segment, license margins decreased slightly to 87% for the quarter compared to 92% a year ago, support and service margins improved to 38% from 34% a year ago and hardware margins increased to 25% from 22% a year ago. Total operating expenses increased 5% for the quarter compared to the prior year and as a percentage of total revenue, decreased to 18% of total revenue from 19% a year ago. This is primarily due to the higher selling and marketing expenses this quarter due to increase in revenue offset by slightly higher capitalization of R&D projects, and G&A basically being flat with last year. Total operating expenses for the year are only up 2%, and decreased as a percentage to total revenue to 18% from 19% last year. Our operating margin for the quarter improved to 22% from 21% a year ago and improved to 23% from 22% per year. Net result was operating income increased 12% for the quarter and 11% year-to-date compared to prior year periods. The effective tax rate for the quarter was 33.5% compared to 32.3% last year, primarily due to the timing of the R&D Credit that was in place last year and some other tax incentives that we continue to get benefits from, is keeping our tax rate at the low rate of a bit of that. However, this increase in the tax rate compared to last year did cause about $0.01 impact to EPS compared to last year's rate. Our EBITDA increased approximately 9% to $79.6 million from $73.1 million a year ago quarter. For the year, EBITDA increased by 9% to $245.9 million from $226 million a year ago. Depreciation and amortization expense of $23.1 million this quarter with $11.2 million in depreciation and $11.8 million in amortization, compared to $22.6 million in depreciation and amortization in the quarter last year. For the first 9 months, depreciation and amortization was $70.5 million with $33.3 million in depreciation and $37.2 million in amortization compared to $67.6 million a year ago. Included in the total amortization is the amortization of intangibles from acquisitions, which was $5.9 million for the quarter and is $18.4 million year-to-date. Our operating cash flow improved to $118 million from $115 million a year ago. In-house backlog, which represents contracts in hand for software, hardware and implementation services yet to be delivered, is at $82.4 million, which is up 7% from a year ago and up 12% sequentially. We saw some large long-term implications in this backlog which means the software will be delivered and recognized over several quarters, as Jack also mentioned. Our outsourcing backlog, which is for data and item processing contracts has increased $0.09, up 3% sequentially and up 22% compared to a year ago. Backlog is at an all-time high at March 31 and also, just a reminder, there is nothing in our reported backlog numbers for any of our electronic payments businesses. For guidance for the remainder of FY '12 or for the fourth quarter, we anticipate our revenue growth will continue in line with our year-to-date growth in the mid-single-digit range with the margins also staying in line. We expect net income and EPS to both finish the year in the range that we have seen basically for the first 9 months. As of right now, even though a slight stretch, we are comfortable with recorded consensus estimates for that quarter. We're just now kicking off our FY '13 budget process and we'll provide guidance during our year-end earnings call, but we don't see anything currently that would alter our current run rate. This concludes our opening comments. We're now ready to take questions. Stephanie, will you please open the call lines up for questions?

[Operator Instructions] Our first question comes from Kartik Mehta from Northcoast Research.

Kevin, I wanted to just -- the last statement you made, nothing you see would take you off the run rate for FY '12, '13 and I know you're still early in the process. And by a run rate, I'm assuming you mean kind of the revenue growth and the margin profile you've seen this quarter? Would that be correct or are you looking at it from a bigger picture view when you said run rate?

Bigger picture, Kartik. I mean, what I'm saying is, I don't see our guidance for FY '13 being much different that what FY '12 is with revenue growth in the mid-single potentially a little higher revenue, top line, and then leveraging that to net income and EPS. If not at double digits, real close to it.

And then, just from a bank spending standpoint, I know one the benefits that a lot of the community banks are getting, is the Durbin change and I know in the past you've said, they're still not comfortable, if they're going to get the keep it or how long they're going to get the keep it. I'm just wondering, as you've had conversations with them, are they getting more comfortable with the difference they're getting and maybe the extra income they're making? And is that resulting in them wanting to spend some extra dollars?

Kartik, this is Jack. I don't think they're getting necessarily more comfortable. I think they're certainly pleased that they didn't see the reductions that they thought they might see and I think there's still some skepticism as to how long it will last, I think there was a report out yesterday, Federal Reserve, if I remember correctly, that did confirm that the banks under $10 billion or the financial institutions under $10 billion are still seeing essentially the same interchange rates that they were seeing prior to Durbin. But nobody really seems to think that's a long-term proposition. You're also starting to see some different fees implemented by Visa and MasterCard with are designed to kind of recruit money from a different angle. So -- and they're feeling better, I think their balance sheets are improving, their reserves are going down, charge-offs are not increasing at the rates that they were, and again, not having the impact of -- on their fee income that there was the potential to have, all those are good things and I think it has led to an improved spending environment, but again, don't think anybody believes that -- particularly, as it relates to Durbin that, that's a long-term likelihood.

And then just one last question, Jack. Have you seen any difference in the spending between credit unions and banks? I know in the past you have said credit unions have been more likely to spend money than they seem to embrace technology faster. So I'm just wondering, as we stand today, is that still happening or are or you seeing them spend about the same amount of money?

I think credit users are pretty much spending like they have been. We've seen solid core system evaluation activity on the Credit Union side, it's probably picked up just a little. But it's not significantly different. I think on the banking side, it's been more of a gradual comeback and of course, you aren't seeing the kinds of failures necessarily on the Credit Union side that you were on the banking side as those bank failures have started to abate and the banks are feeling better about the position they're in, they're picking up spending, core system evaluation activities has been very solid there as well and a number of different complementary products. So I don't know that I've seen any significant trends other than the banks have probably picked up the pace a little bit.

Our next question comes from John Kraft from DA Davidson.

I wanted to dig into the backlog growth a bit more, if -- according to our notes, was the fastest growth that we've seen since 2003. And Jack, you specifically talked about some of the larger deals and some of the percentage of completion accounting. Presumably the rest on the in-house, and what really grew was the outsourcing. I guess my question is, was that simply add-ons? Or did you also get some new share gains in the core side?

Well, core system sales have been solid, and of course, John, as you know, they're tending much more towards outsourced delivery than in-house these days. So that certainly has helped. The in-house to outsource transitions certainly add some pretty significantly to the backlog as well. Credit Union side of the house is probably now about 50% in-house to outsource ratio as far as new deals signed, so that certainly helped the backlog. But again, we've seen also on the Credit Union side, an uptick in the in-house to outsource transitions. So I think it's a combination of new core wins, but probably somewhat more significantly influenced by the in-out transitions.

Got you. That's helpful. And then I guess similarly, for Tony, on the payment side, certainly there's some reacceleration at least from last quarter. Is that share gains or is that just an improving customer trend underneath?

I think that's an improving customer trend for the most part. We have continued to improve our penetration with our ATM and debit products in our Community Bank space. But I think generally, it's a continuing trend of overall spend.

Okay. And then one for Kevin or two for Kevin, just quickly, housekeeping. Recurring revenue and expected tax rate for next quarter?

Recurring revenue was 79% for the quarter. Expected tax rate right now, John, is probably going to be about in line where it was this quarter.

[Operator Instructions] Our next question comes from Brett Huff from Stephens Inc.

One follow-up question, the one that was asked before, but maybe a little different. Jack, you mentioned a longer rev recognition cycle, it sounded like some of the deals are getting larger. Do that -- is there a quantification of that negative impact on growth relative to, I guess, maybe shorter implementations that you could identify for us this quarter or recently so we can just sort of think about apples-to-apples growth?

I might have to defer the quantification to Kevin. But as example, the American Airlines, its Credit Union certainly had a nice license component to it, but it's 18 months or longer implementation process and a few milestones along the way that will cause us to stretch that one out. Some of the larger ProfitStars opportunities that we have seen, particularly some of the Tier 1 financial institution sales, again those -- particularly on halogen product. Again, our percentage of completion recognitions of -- I don't know that I could pin down for you exactly what the impact would have been in the quarter if we were shipping and billing software like we used to in the old days. I don't know, Kevin, do you have a feel for that?

Well, Brett, I mean we still ship and bill and recognize revenues, the way we always have historically, because I mean the accounting rules have not changed around that. It's just that the timing of some of these large implementations, that it take so long it has triggered different accounting rules for us as we continue to move upstream and get into the much larger institutions. So the base software for the majority of our complementary products is still the exact same size as we always had, it's just when you start getting 3 or 4 pretty sizable deals, that just kind of go in the backlog and doesn't move, I mean, all that really does is help add up visibility going forward.

Sure. Second question is, you guys have talked about some of the negative impacts you've seen just going REIT over the last couple of years because of banks buying each other. And I know that headwind has sort of varied little bit. But any thoughts on that changing? Is it abating sort of slowly as it has been recently, or has that abatement accelerated, any sort of view on how that's working? Jack, I'm asking that question just because you mentioned that you thought that the banks are feeling better and maybe there's a little bit less distressed M&A going on.

Yes, Brett, there certainly are fewer failures and of course, everybody feels that the normal M&A activity is going to pick up some, but when that happens, there's -- when normal M&A takes place, there's a little more of a graceful exit as somebody moves out, when a bank fails, that's fairly abrupt in terms of the impact on revenue. One of the things -- and I'll talk about this a little bit more next week at the analyst meeting, but I think that the bank failure environment, although if you look at ourselves and our 2 major competitors, the number of banks that each of us have lost to failures and the number of the other failed banks that our banks have picked up and merged in, it works out pretty close in terms of everybody nets back about the same amount as the number that they saw fail. But I think that that's had a greater than average impact on us in terms of the headwind on revenue because of the makeup of our customer base. And when 2/3 of our customer base is still in-house, whereas, for our 2 largest competitors, that's either the exact opposite of that if not, 80% outsourced, the impact of the way revenue flows, and again, I can explain this probably a little better with a chart next week than I can over the phone, I think that the negative impact of failures probably was a little more of a headwind on us again, partially attributable to just the makeup of our customer base. Conversely, I think coming out of the scenario with fewer bank failures taking place, I think it's somewhat more positive for us as we look down the next 3 years in terms of growing over and getting back on that growth track, so -- but again, certainly the number of bank failures has slowed and hopefully that will continue to be the trend.

And then last question, and, Tony, I think you addressed this a little bit, but I want to be sure, the debit volumes you guys have continue to outpace the market 2x roughly. And Tony, did you say that was mostly from more usage of already installed customers or new usage from new customers or maybe it's both? I -- that just wasn't clear.

Well, I think it's both. We have continued to sell a significant number of ATM and debit customers over the last 3 years and continuing to improve our penetration with that solution in the marketplace. Primarily, we're picking up, I would say these days, a lot of clients on the lower end of our customer base, some of the smaller clients, so even though our penetration is going up significantly, there's not quite as much transaction growth that goes with each one of those, but as you add them up, I think we'd see additional growth from that additional penetration of the community bank space. So that, combined with the overall consumer spend, what we're seeing in transaction volume growth and not only ATM and debit, but also on the Bill Pay side, I think it's a combination that you're seeing in our ATM and debit growth.

Our next question comes from Peter Heckmann from Avondale Partners.

Hey, what did you expect in terms of maybe the regulatory environment? We've been reading a lot about the breaches that have gone on in the industry and it seems that everyone is struggling with the relative level of intrusions. Do you think it's likely that some of the regulatory bodies increase the burden on core processors or technology vendors in terms of security oversight?

Well, Pete, I don't think we see them ever backing off or requiring anything less than what they currently require and forget anything recent. You look back the last 10 years, there's always additional pressures to do more and more and more. So could we see some more burden from that standpoint? Yes. We feel like we're in a pretty good shape. Certainly, we are examined heavily and regularly and very prompt in responding to anything that the regulators tell us that they feel like needs to be addressed. So I don't anticipate anything of significance happening in the next 12 months or as a result of anything that's taking place. But over the long run, I think that the continued pressure to do more and more and get tougher and tougher from a security standpoint is certainly going to be there. And it should be.

Pete, I mean, a few weeks ago, I actually was in Washington D.C., on a ramp day with FIC and there were several hundred examiners there listening to us, and most of our competitors were also represented on the panel and the entire day was just spent talking about risk.

Okay, okay. Did I read something about maybe an additional FFIEC mandate on authentication or is that something that maybe is just proposed?

Well, there are nothing new. I mean, there are some things some in process that were tightened up, and I'm thinking how long ago that was, 6, 9 months ago or so, they were certainly in the process of addressing, have not heard any discussion about something new and different beyond that.

Okay. Let me just transition over then to the M&A pipeline. I mean it's been now going on 2 years since the last deal. I would assume that the lack of deals suggest more stellar expectations than perhaps a lack of appetite. But what are you seeing out there? And do you think your appetite is increasing for something that's maybe a little bit more tangential to what we would normally expect of Jack Henry?

Well, certainly, our appetite -- the appetite is there. It's been, frankly, difficult to find quality companies, A, at a reasonable price, B, that we were -- would be interested in, in bringing into our organization. Does it increase the likelihood of something tangential? I don't know that it necessarily does, I think certainly, and we'll probably comment a little more on this at the Analyst Day, but I think certainly we will be revisiting our usage of cash whether that's focusing more on stock buybacks or whatever until we see either the kinds of companies and operations that we would want to own or -- and/or appropriate price levels for something that needs a little work done.

I'm showing no further questions at this time. I will now turn the call back over to Kevin Williams for closing remarks.

Thank you. First of all, I'd like to remind everyone that our Annual Analyst Day will be held next Monday evening in Tuesday, May 7 and 8. The event is being held again this year at Dallas at the Grand Hyatt DFW, which makes it extremely easy for you all to get in and out of the meeting and out afterwards. We'll once again kick it off with a mini tech player and dinner on Monday evening, which we're highlighting I believe 6 of our newer products and then on Tuesday, you will head up to and hear from all of our officers, brand Presidents, international sales managers as in years past. The event should conclude by 12:30 p.m. on Tuesday, so you can schedule accordingly, and I know there's some analyst days and things going on in New York City next day, so that should be very convenient for catching flights out of DFW to get to New York City. A registration link was provided, but if you still want to attend and have not yet registered, just shoot me an email and I will get you the registration link so you can get registered for the conference. In summary of the call, we want to thank you for joining us today to review our third fiscal quarter 2012 results. We're pleased with results and efforts of all of our Associates to help control costs and at the same time continue to take care of our customers. Our executives, managers and all of our Associates continue to focus on what is best for our customers and you, our shareholders. Again, thank you for joining us this morning. We hope to see you next week in Dallas. With that, Stephanie, will you please provide the replay number.

Ladies and gentlemen, this call will be available for replay today at 11:45 a.m. Eastern Time through May 9, 2012 at 11:59 p.m. You may access the replay system by dialing (800) 585-8367, and entering access code, 72914628. And that does conclude today's conference. You may all disconnect and have a wonderful day.