Jack Henry & Associates Inc. sees a busy M&A pipeline among its credit union customers and is adding a new support team by next quarter to help them convert their merger partners' core banking systems to Jack Henry's.

It has recently added such a conversion team for bank customers and is considering adding one or two more teams in the near future based on ongoing demand from its customers, Chairman and CEO David Foss said during the fiscal second-quarter earnings call Feb. 9.

Bank and credit union acquirers typically notify Jack Henry well before the acquisition actually happens so that Jack Henry can hold a slot in the queue to arrange a system conversion. Similarly, banks and credit unions will ask for a deconversion when they are acquired and need to transition to other technology systems.

For the second quarter of fiscal year 2022 that ended Dec. 31, 2021, Jack Henry posted $26.9 million in deconversion fee revenue, up from $2.2 million in the year-prior quarter due to a surge in M&A activity within its customer base.

Jack Henry projects third-quarter deconversion revenue to be approximately half of what it was in the second quarter, CFO and Treasurer Kevin Williams said during the call. For fiscal year 2022, Jack Henry anticipates deconversion fee revenue to be approximately $49 million to $50 million, Williams said. The guidance was lifted from $42 million to $43 million set in the prior quarter.

During the call, the executives outlined a technology modernization strategy that has been in the works for more than two years. The company is focused on developing a cloud-native open banking platform that enables easy access to a broad ecosystem of Jack Henry solutions and third-party financial technology offerings, Foss said. The goal is to help regional and community financial institutions adapt their services to digital-savvy consumers.

"Essentially, we are unbundling services that traditionally would be in a core processing system and making them discrete services that can be customized and rebundled," Foss said.