Jack Henry & Associates, Inc. (NASDAQ:JKHY) Q2 2024 Earnings Call Transcript

Jack Henry & Associates, Inc. (NASDAQ:JKHY) Q2 2024 Earnings Call Transcript February 7, 2024

Jack Henry & Associates, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Jack Henry Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Vance Sherard, Vice President, Investor Relations. Please go ahead.

Vance Sherard: Thank you, Laura. Good morning, and thank you for joining us for the Jack Henry Second Quarter 2024 Earnings Call. Joining me on the call today is David Foss, Board Chair and CEO; and Mimi Carsley, CFO and Treasurer; and Greg Adelson, President and COO. After my opening remarks, I will turn the call over to Dave for his comments on our business and industry outlook. After Dave concludes his comments, Greg will discuss his transition to CEO, provide commentary on our operations, including updates on our technology modernization strategy and other key initiatives at Jack Henry. Mimi will then provide commentary around the financial results and updated guidance included in the press release issued yesterday that is available from the Investor Relations section of the Jack Henry website.

We will then open the lines for Q&A. As a reminder, this call includes certain forward-looking statements, including remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results. Like any statement about the future, these are subject to multiple factors that could cause actual results or events to differ materially from those which we anticipate due to multiple 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. On this call, we will discuss certain non-GAAP financial measures, including non-GAAP revenue and non-GAAP operating income.

The reconciliations for non-GAAP financial measures are in yesterday’s press release. I will now turn the call over to Dave.

David Foss: Thank you, Vance. Good morning, everyone. We’re pleased to report another strong quarter of revenue and operating income growth. As always, I’d like to begin today by thanking our associates for all the hard work and commitment that went into producing those results for the quarter. For the second quarter of fiscal 2024, total revenue increased by 8% on both a GAAP and non-GAAP basis. Operating income increased 11% for the quarter and increased 14% on a non-GAAP basis. Turning to the segments. We again had a solid quarter in the core segment of our business. Revenue was up by 8% for the quarter on both a GAAP and non-GAAP basis. Our payments segment also performed well, posting a 6% increase in revenue this quarter on both a GAAP and non-GAAP basis.

We had another strong quarter in our complementary solutions businesses, with a 7% increase in revenue this quarter and a 9% increase on a non-GAAP basis. As I mentioned in the press release, our sales teams again had an outstanding quarter with a number of notable wins. In fact, this was the best second quarter ever for sales bookings and second highest sales quarter in our history, trailing only our June quarter last year. In the second quarter, we inked 14 competitive core takeaways with four of them being multibillion-dollar institutions. Additionally, we signed 12 deals to move existing in-house core clients to our private cloud environment. We continue to see success with our card processing solutions, signing 12 new card processing clients this quarter.

We also continue to see strong success signing clients to our Banno digital suite with 135 new contracts in Q2, including 56 contracts for our new Banno business offering. We also surpassed 11 million registered users on the Banno platform, which is a 25% increase over a year ago. I mentioned last quarter that our sales pipeline was at the highest level ever. It’s logical to assume that it would be depleted after such a strong sales quarter in Q2. And However, we continue to add to our pipeline, and we ended the quarter on par with Q1, which projects very well for us for the remainder of the sales year. In late January, Cornerstone Advisors published the results of its annual survey of bank and credit union executives. According to that study, nearly 65% of banks and 75% of credit unions expect to increase their technology spending in 2024.

This correlates with information we’ve seen from other sources, including bank director’s technology survey last fall, in which a large majority of survey respondents said their bank’s technology budget increased over the past year at a median rate of 10%. We are in the midst of conducting our annual Jack Henry strategic benchmark study and we’ll share those results on our earnings call in May. We were pleased to have recently received two national workplace awards Newsweek’s greatest Workplaces for Diversity and Computer World’s Best Places to Work in IT. We also were named as one of America’s most responsible companies by Newsweek for our corporate sustainability efforts. We are very proud of that recognition because we view corporate sustainability as a strategic investment for our stakeholders.

I encourage you to read our 2024 sustainability report which will be published on March 29 on the Investor page at jackhenry.com. As you all know by now, a couple of weeks ago, I will retire from my current role on June 30 of this year. Greg Adelson will become CEO and President beginning July 1, and I will serve as Executive Board Chair effective on that same day. This transition plan has been carefully considered for some time and we are fortunate to have someone like Greg ready to step into the CEO role. As I said in the press release, it has been my immense pleasure to serve as CEO of this wonderful company for so many years. When I came into this role almost eight years ago, I had a number of large projects I wanted to address, and I’m happy that all of them have now been completed or are well on their way.

I’m confident that Greg and the outstanding team we have in place today can continue our trajectory of strong growth, and I’m looking forward to working with them in my new role as Executive Board Chair. Of course, I’ll be on the May earnings call, and I have a number of investor meetings scheduled between now and the end of our fiscal year. So, I look forward to speaking with many of you in the coming months. As we focus on the second half of this fiscal year, our sales pipeline is very robust, and we continue to be optimistic about the strength of our technology solutions, our ability to deliver outstanding service to our clients, our ability to expand client relationships, the spending environment and our long-term prospects for success.

With that, I’ll turn it over to Greg for an operational update.

Greg Adelson : Thank you, Dave. I’m honored and humbled to become the next CEO of this great company in July. I do want to take a moment to acknowledge the outstanding job that Dave has done as CEO the past eight years. Since Dave became CEO at the start of fiscal year 2017, and Jack Henry has experienced outstanding growth with revenue and net income both up approximately 50%. In addition to driving organic growth, Dave has led 26 acquisitions during his 25 years with the company. The legacy Dave is leaving will be remembered for many years to come. On a personal level, I want to thank Dave for his mentorship and guidance for the past 13 years. He has prepared me well for this role, and I will continue to lead this company with an unwavering focus on our employees, clients and shareholders.

As the next CEO, I will continue the strategic journey that we are on today and we’ll execute our strategic priorities, which include continuing to enhance our exceptional culture continuing to advance our tradition of customer service excellence, cultivate a one Jack Henry mindset in all we do, drive technology innovation and execution at the speed and scale foster an open ecosystem, evaluate strategic acquisitions that will provide additional value to our clients and shareholders. Jack Henry has maintained a philosophy for over 47 years that starts with treating our associates as our first priority. Happy associates are more invested in ensuring we have happy clients and happy clients ensure we reward our shareholders. In short, you can expect continued focus on growing our company and delivering outstanding value to all of our stakeholders.

Dave and I will continue to work closely to ensure a smooth transition in July, and I look forward to collaborating with him in his new role as Executive Board Chair. I’m also excited about continuing to work with the other great leaders at Jack Henry and specifically more closely with Mimi and Vance. Mimi has done an outstanding job since becoming CFO in September of 2022, and Vance provides tremendous perspective for all things Jack Henry. Before I speak to our operational performance, I want to go back to Dave’s comments regarding our continued strong sales performance. Dave shared our strong success in winning competitive core takeaways as well as our robust sales pipeline. Additionally, we are beginning to see an increase in what has been historic low merger activity among our financial institutions, specifically with our core clients as the acquirers.

Due to this increased demand, we are currently adding resources to both our banking and credit union core conversion teams. On the November earnings call, I promised an update on our technology modernization strategy. As a reminder, this strategy is changing how we deliver our solutions through a cloud-native API-first environment, utilizing several key benefits embedded in the Google Cloud platform, including cutting-edge security and business continuity advancements. The premise of this strategy is rebuilding traditional core and noncore functions into a flexible, cloud-native portfolio of services and solutions. Each component will integrate with other Jack Henry solutions and also with third-party fintech’s via the Jack Henry platform.

Our clients will be able to access everything they need to run their financial institution in a single platform with all the advantages that the cloud offers, including extremely high system availability, real-time processing, streamlined operations, rapid update, deployment, modern security standards and extensive scalability. As we have indicated previously, our approach to technology modernization has created more pipeline activity in the larger community bank segment as well as a couple of introductory calls with regional institutions. Another benefit we will realize over time is the shared services model that is at the forefront of our technology modernization strategy. Features or solutions that were once built several times throughout the organization are now developed once and use in multiple solutions.

Our ability to develop and deliver more rapidly to our clients is an important benefit that will reduce development costs for each new or enhanced solution. The technology will allow us to share the same services with outside partners and competitors to create a better overall experience for all community and regional financial institutions. At Jack Henry, we are focused on execution and doing what we say we’re going to do. So, everything I’m about to discuss is share with our clients through six-month road map visibility. Road maps are updated for all products, including the technology modernization strategy and published every February and August for our clients to view. We hold our teams accountable for road map execution as well. As a reminder, our technology modernization strategy already includes recently launched cloud-native solutions like PayCenter, Banno Business and Financial Crimes Defender.

We now have over 250 clients using the real-time payments network and almost 150 using FedNow in our pay center application. For additional context, Jack Henry has approximately 60% of the live real-time payment clients and 35% of the live FedNow clients. We recently announced general availability for Banno business and continue to add both banking and credit union clients. We now have more than 90 clients live and over 70 clients in various stages of implementation. Financial Crimes Defender is also generally available, and we have seven clients live in more than 150 in the implementation queue. One new offering we haven’t spoken about yet is our open banking solution that provides turnkey API access to the largest integrated banking data aggregators across the industry is an immediate answer to the industry and regulatory pressure to remove screen scraping and share credentials.

By creating direct API connections with clients, Jack Henry is making it easier for consumers to connect financial accounts securely and reliably without the need to share user names and passwords. This offering is generally available today and has received a great deal of interest from both Jack Henry core and noncore clients. I also want to update you on some of the key functions we are building on the Jack Henry platform that are already in beta or planned to go in beta in calendar year 2024. I’ll start with the incoming and outgoing wires, which we have talked about on previous calls. We plan to be generally available with our domestic wire solution over the next few months and move into beta with international wires by the end of this fiscal year.

We are building a general ledger component that will support the common base functions of a financial institution’s back office and enable deeper insights on transactions and advanced fraud detection. We plan to be in beta by the end of the calendar year. A key advantage of the Jack Henry platform is our clients being able to easily access their data. Our new data broker solution, which is currently in beta, will enable clients to access all of their Jack Henry data in a single repository with innovative AI intelligence capabilities. To complement the data broker solution, we are creating an executive dashboard with real-time event monitoring to help our C-suite clients make informed dynamic decisions throughout the day based on metrics they customize and update.

I will now provide some context to the pricing philosophy will be used to deploy these components. Our go-to-market strategy centers around bundling key components that complement each other and provide enhanced financial and operational benefits like time to deploy new feature enhancements, enhanced security, improved uptime, et cetera. For example, a bundle may include wires, general ledger and data broker. Our pricing model strategy will incorporate elements from our industry-accepted pricing models such as license and/or per seat fees, consumption-based and per account pricing. We will encourage engagement with any combination of our solutions and further reward those who consume more components. Ultimately, the value proposition becomes evident as clients recognize the benefits of additional modules as well as the compelling features of the Google Cloud Platform.

One last topic from our November call is our plan to offer several key solutions outside of the Jack Henry core base by the end of calendar year 2024. We remain on track to begin selling Banno Business, Financial Crimes Defender, various payment solutions and available components from the Jack Henry platform in our fiscal year ’25 sales year. We have targeted several competing cores that we believe bring the best mutual value and have a need for premier digital fraud and real-time payment solutions. I will continue to keep you updated on this strategy. In closing, I am passionate about accomplishing our strategic priorities and moving our company forward through innovation and execution. I am grateful for the opportunity to lead this finest group of talented and dedicated professionals in the industry.

I want to thank all of them for their tireless effort and commitment. I will now turn things over to Mimi for some detail on the numbers.

Mimi Carsley : Thank you, Greg, and good morning. Our continued focus on serving our community and regional financial institution clients, investing in our joint future and delivering shareholder value led to another quarter of solid revenue and earnings growth. I’ll begin with the details driving our as expected strong second quarter and year-to-date results, then conclude with our full-year guidance update. Second quarter GAAP and non-GAAP revenue increased 8%, a continuation of the strong start to our year and keeping us on track for a tremendous fiscal 2024 as year-to-date growth was 8% on both a GAAP and non-GAAP basis. Deconversion revenue of $4.9 million, which we pre-released last week, was down approximately $1.5 million, reflecting minimal financial institution consolidation.

Year-to-date, deconversion revenue is $9 million, $1.9 million less than the prior period. As a reminder, effective September 1 onward, Payroll’s results are included in both GAAP and non-GAAP figures. Now let’s look more closely the details. Cap services and support revenue increased a healthy 7%, while non-GAAP increased a more robust 8%. The first half increased 7% for GAAP and 8% for non-GAAP basis. Services and support growth during the quarter was the result of increases in data processing and hosting and the timing of user group revenues. We continue to experience robust growth in our private and public cloud offerings which again increased 10% in the quarter and for year-to-date. This reoccurring revenue contributor has long been a double-digit growth engine.

Shifting to processing revenue. We saw consistently positive performance with 9% growth on both a GAAP and non-GAAP basis for the quarter and first half from this reoccurring revenue source. Similar to recent results, drivers included a combination of higher card and other payment processing with strong digital demand. Next, moving to expenses. Beginning with cost of revenue, which increased 5% on both a GAAP and non-GAAP basis during the quarter, 7% for GAAP versus 6% non-GAAP year-to-date. Drivers for the quarter included higher direct costs consistent with increases in related revenue and internal license and fees. Growth in cost of revenue was limited to 5% due to active cost control and the timing of merit increases. Next, R&D expense decreased 3% on both a GAAP and non-GAAP basis for the quarter.

The decrease was due to lower personnel expense, net of capitalization and inclusive of benefits. For the first half, R&D expense increased 4% on a GAAP basis and 3% for non-GAAP. And lastly, on a GAAP basis, SG&A rose 24% for the quarter, 21% on a non-GAAP basis, primarily due to the shift in our customer conference from Q1 to Q2 and was higher personnel and related costs. Year-to-date, SG&A expense increased 31% on a GAAP basis and 9% non-GAAP. The primary difference is the $16.4 million in one-time costs related to the voluntary early departure incentive program need in Q1. We remain focused on generating compounding margin expansion and the quarter delivered 111 basis points in non-GAAP margin at 21.3%. Non-GAAP margin benefited from operational performance, and a one-time shift in our merit increases from Q2 to Q3, offset slightly by the timing of our customer conference.

These strong quarterly results produced a fully diluted GAAP earnings per share of $1.26 and up 14%. Breaking down the results into the three operating segments, we’re pleased by the consistent solid performance achieved. Our core segment revenue increased 8% on a non-GAAP basis, with non-GAAP operating margins increasing 166 basis points, benefiting from private cloud trends and strong cost controls. Year-to-date, non-GAAP revenue growth was 8% and the associated margin increased 80 basis points. Payments segment revenue increased 6% on a non-GAAP basis. This segment had impressive non-GAAP operating margin growth of 128 basis points. This was due to the strong growth in our EPS business, moderate card growth coupled with our scalable operating model and disciplined cost control.

Year-to-date, non-GAAP revenue growth matched the quarter at 6% with 94 basis points of margin expansion. It should be noted that card revenue growth has been negatively impacted by lower card production among other non-processing revenue items. Excluding these impacts, processing-related revenue increased 8% for the quarter and 9% year-to-date. Finally, complementary segment non-GAAP revenue increased 9% with flat margin. Year-to-date non-GAAP revenue also increased 9% with 25 basis points of margin expansion. Growth year-to-date was driven primarily by digital, recently released solutions and overall product mix. Quarterly margins faced headwinds from direct support costs, amortization of new products and licenses and fees. Now let’s turn to a review of cash flow and capital allocation.

Year-to-date operating cash flow was $239 million, a $48 million increase over the prior period, producing free cash flow of $129 million, slightly more than the $119 million last year. Excluding asset sale impacts of $1 million and $28 million from the current year-to-date and prior period, respectively, free cash flow was $37 million higher through the first half of our current fiscal year. Additionally, the timing of tax payments this year represented a $15 million headwind to free cash flow. Our consistent dedication to value creation resulted in a trailing 12-month return on invested capital of 20%. Additionally, I would highlight other notable return of capital metrics for the first half of our fiscal year, including $20 million in share repurchases offsetting annual dilution, $20 million in debt reduction and $76 million in dividends.

As we head into the second half of fiscal 2024, I will conclude with guidance highlights. As you are aware, yesterday’s press release included updated fiscal 2021 full-year GAAP guidance along with a reconciliation to non-GAAP guidance metrics. As a reminder, we filed an 8-K on August 3. It describes how starting in the current fiscal year, we are using a revised approach for deconversion revenue, guidance. Based on current trends, we expect to see similar acquisition levels of our core customers for the second half of the fiscal year. As such, we’re reiterating our full-year deconversion revenue guidance of $16 million. Based on positive year-to-date results from strong execution and near-term visibility, we are tightening our revenue growth outlook around the current midpoint.

We now expect to generate full-year non-GAAP revenue growth of 7.4% to 8.0% compared to the 7.2% to 8.2% provided on the November call. This corresponds to an increased full-year GAAP revenue guidance of 6.6% to 7.2% for fiscal ’24. In tandem with our revenue outlook, we now expect an increase in annual non-GAAP margin expansion of 35 basis points to 40 basis points compared to the 30 basis points to 35 basis points previously provided. The full year tax rate is now approximately 23.5% with potential bias slightly higher. Incorporating the noted positive updates Full year guidance for GAAP EPS is revised upwards to $5.09 to $5.13 per share from previous guidance of $4.98 to $5.04 per share. As a reminder, the guidance for deconversion revenue compared to actual fiscal 2023 deconversion revenue, VIP severance-related costs, and nonrecurring gain on asset sales resulted in an approximate $0.37 headwind for fiscal 2024 GAAP EPS.

Lastly, some additional modeling commentary. We are comfortable with the current level of huge consensus for revenue growth, operating margin and GAAP EPS. Our full year guidance of 60% free cash flow conversion is reiterated. However, the legislation that passed the house last week would have a material beneficial impact on fiscal 2024 free cash flow and beyond. We are monitoring legislative progress and are hopeful for a swift and positive outcome. Based on the current bill language, it past our free cash flow conversion would rebound to historical normal levels either in fiscal ’24 or fiscal year ’25, depending on the timing of certain items. In conclusion, Q2 reflects the strong performance we’ve seen consistently in the first half and expect the remainder of our fiscal year.

We are exceptionally positive about our ability to deliver innovative and in-demand solutions, the resilience of our clients and our focus on execution and shareholder value creation. We appreciate all the contributions of our hardworking and dedicated associates that drove these strong results. We thank all Jack Henry investors for their continued confidence. Laura, will you please open the call for questions?

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Q&A Session

Operator: [Operator Instructions]. And our first question will come from John Davis of Raymond James. Please go ahead.

John Davis : Maybe just wanted to follow up on the free cash flow comments that you just made. Getting back to historical levels, I’m assuming you mean kind of right around 100%. So that would imply kind of 40 points of headwinds that will get reversed. I thought before it was maybe 25 points or 30 points. So just, a, I just want to make sure when you say historical levels, you’re talking in and around 100%. And is it kind of 40 points of headwind this year?

Mimi Carsley : Great question. I think premature to see the timing and the impact as to when to whether that hits 2024 or 2025. that I would say certainly, our historical norm range of 80% to 100% is where we believe we would revert back to. It just depends on the timing.

John Davis : Okay. No, that’s helpful. And then just on second half margins, I think the guide implies margins will be down year-over-year after being up over 100% in the first half of the year. So maybe just talk a little bit about some of the headwinds that you do face kind of in the back half of fiscal ’24.

Mimi Carsley : Yes. So, we manage the business on a full year basis, JD. And so, as we think about it, we’re pleased to have the additional margin expansion in the guide that we provided yesterday and today. Just in terms of the actual timing and seasonality of it, it just depends on when certain events like personnel-related costs, licensing costs in any particular quarter from a climb over perspective. As you know, our first quarter is usually the highest margin of our year. And then typically, the endpoints are less or so. So, I wouldn’t say read anything more into the seasonality, and we’re just basing it on a full year guide.

John Davis : Okay. Great. And then, Dave, one for you, but also congrats on your retirement, your move to Executive Chair. And Greg, congrats on the CEO role. But Dave, you talked a lot about the competitive environment being fairly favorable. We continue to break records on the sales front, pipeline is robust. Maybe you can talk a little bit about what specific products or is there a segment of the market that you’re having outside of success the top line results and the sales have been very, very good over the last 12 months. And just maybe a little bit more color on what exactly is driving that.

David Foss : Sure. Thanks, JD. So, as I’ve said previously, it’s amazing. We’re 47 years into our run as a core provider and yet core continues to be a really strong driver. I just quoted to you 14 wins in the quarter. four of them, multibillion-dollar banks. That definitely leads the industry by far as compared to anybody else in the industry. So, core is still a key driver for us. But then oftentimes tied to the core, but sometimes not, and we have these other best-of-breed solutions, and we talked about many of them on the call before Banno. The retail Banno solution has been a key driver for us. Well, now we have Banno business in the equation. And you heard me quote the 56 contracts that were just signed in this quarter for Banno business, there is a real demand for a solution like that modern digital brand-new digital banking solution like that for small and leading business clients.

I’ve talked in the past about our treasury solution. Again, a modern digital treasury solution for large commercial clients. So of course, it’s not the bank that uses that. They’re a large commercial customer that uses that hasn’t been a brand-new ground-up treasury solution and certainly no digital-first treasury solution written in many, many years. So that continues to be a driver for us. Fraud, Financial Crimes Defender, Greg just quoted the numbers to you as far as Financial Crimes Defender. We have seven live, but we have a whole bunch of them now in the backlog because it’s a brand-new ground-up developed fraud solution to deal with fraud in today’s environment. And so, it’s many of those things. And the thing — the correlation, I think you need to make is every one of those that I just talked about has been written brand new in the last two years, five years by Jack Henry.

So, these are not things that we acquired that we had to try and figure out how to make them modern. These are things that Jack Henry has innovated we paid a lot to do the development work. But when you get done with that, you have something that is a best-of-breed solution centered around digital, many of them centered around a public cloud, and there is a huge demand today for those types of offerings. And so, I don’t see this slowing down at all. We’re really well positioned today, and we’re continuing to innovate as a key technology provider in our space.

Operator: And the next question will come from Nik Cremo of UBS.

Nik Cremo : Thank you for taking my question. Congrats, Greg and Dave. First, I just wanted to follow up on the Payment segment. When can this segment get back into the 8% to 9% growth range? I know there was a few puts and takes called out, which is lower card production, but we also have Payrailz, which supposed to double this year. I’m not sure if that is still on the table, but just be curious to hear your thoughts there.

Mimi Carsley : Thanks, Nick, for the question. So, I would really point to you on the card within card within payments, the processing related. So that’s the reoccurring nature of within that segment, and that grew strongly at 8%. And so that is an indicator of the overall success of that segment and our ability to get back to what we view from the growth algorithm, the prospects for that segment. So, I would say some of the non-processing related, the pass-through of the card production is more temporary and expect that the processing engine will continue to drive the strong growth

Nik Cremo: Thank you. And then for my follow-up, maybe a more medium-term question, but you just discussed the opportunity you see for generative AI on the revenue side, but also, more importantly, on the cost side, just relating to any of the benefits that you could see from increased software engineer productivity with these AI tools and call center automation.

David Foss : So, do you want me to start with that one or do you want to? So, I’ll start and then Greg will chime in here because this has been a — as I’m sure you can imagine, a big topic of conversation for months around Jack Henry and lots of opportunities for us — so on the per site. So. One thing I should be clear about. So traditional AI, it’s a machine learning and robotic cross automation, Jack Henry has been in that business for years. So traditionally, we’ve been doing that for a long time. Generative AI, which is specific to your question, Nick, lots of opportunities there on the development side. The trick on the development side is our primary value is through our IP, right, our intellectual property. And so, when you’re using generative AI to write code, you have to be really, really careful that nothing that you’re doing becomes part of the public domain.

And so, we’re being very careful about what are we doing and how are we doing it, but we are active today with our development teams using generative AI, you pointed out customer service offering. So that is an area that we’re focused on internally, and I’ll let Greg touch on that. But we also rolled out at our client conference in October, a generative AI offering for our customers to serve their customers and that was well received at our client conference here in the fall. And then if you think about all the processes that we do within Jack Henry that have are not customer service and are not software development, just automating things we do within the company is another big area of focus. And I’ll let Greg add his thoughts.

Greg Adelson : Yes. No, I think — I mean, I think the other thing I would add is that we’re also making sure we have strong governance around what we do. And so, we’re taking a lot of time to make sure that we’re evaluating. We’re partnering with Google and a couple of other folks that we have some solutions with to kind of test some models. We’re using opportunities here, not only in the contact center, as David mentioned, but also in a couple of other products. I did mention the AI assist kind of module that we would use in some of our data analysis that we call executive dashboard for the C-suite folks. And so, there are several opportunities that we’re still evaluating. But again, we want to make sure that we get this right and that we’re building it with the right guardrails and things along that line. But you’ll continue to hear more about where we’re going with that in the coming months.

Operator: Our next question will come from Jason Kupferberg of Bank of America Merrill Lynch.

Jason Kupferberg : I wanted to come back to some of the pipeline comments, certainly seems encouraging that you’ve got some real solid stability in the pipeline despite having a really strong quarter of bookings. So, can you talk about how the composition of the pipeline has changed in recent quarters in terms of, say, customer size, product mix and if there’s any numbers you want to share around that, just in terms of helping us understand the composition of the pipeline, that would be great.