UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ X ]☒  No [ ]☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [  ]☐  No [ X ]☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]☒  No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ]☒  No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” ”accelerated filer,” “smaller reporting company,” and "emerging growth companycompany" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  

Yes [  ]☐ No [ X ]☒

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Notice of Annual Meeting of Stockholders and Proxy Statement for its 20172020 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by reference into Part II, Item 5 and into Part III of this Report.Report to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the Company's fiscal year ended June 30, 2020.  

TABLE OF CONTENTS

PART I

Jack Henry & Associates, Inc. (JHA)("JHA") was founded in 1976 as a provider of core information processing solutions for community banks. Today, the Company’s extensive array of products and services includes processing transactions, automating business processes, and managing information for over 9,000nearly 8,700 financial institutions and diverse corporate entities.

JHA provides its products and services through three primary business brands:

Our products and services enableprovide our customers to implement technology solutions that can be tailored to support their unique growth, service, operational, and performance goals. Our solutions also enable financial institutions to offer the high-demand products and services required by their customers to compete more successfully, and to capitalize on evolving trends shaping the financial services industry.

We are committed to exceeding our customers’ service-related expectations. We measure and monitor customer satisfaction using formal annual surveys and online surveys initiated each day randomly by routine support requests. TheWe believe the results of this extensive survey process confirm that our service consistently exceeds our customers’ expectations and generates excellent customer retention rates.

We also focus on establishing long-term customer relationships, continually expanding and strengthening those relationships with cross sales of additional products and services, earning new traditional and nontraditional clients, and ensuring each product offering is highly competitive.

The majority of our revenue is derived from recurring electronic payment solutions and outsourcing services that both generally have contract terms of five years or greater, and support and services provided to our in-house customers that are typically on a one year contract.one-year contract, outsourcing services for our hosted customers that are typically on a five-year or greater contract, and recurring electronic payment solutions that are also generally on a contract term of five years or greater. Less predictable software license fees, paid by customers implementing our software solutions in-house, and hardware sales, including all non-software products that we re-market in order to support our software systems, complement our primary revenue sources.

JHA’s progress and performance have been guided by the focused work ethic and fundamental ideals fostered by the Company’s founders 4144 years ago:

We recognize that our associates and their collective contribution are ultimately responsible for JHA’s past, present, and future success. Recruiting and retaining high-quality employees is essential to our ongoing growth and financial performance, and we have established a corporate culture that sustains high levels of employee satisfaction.

Jack Henry Banking primarily serves commercial banks and savings institutions with up to $50 billion in assets. According to the Federal Deposit Insurance Corporation (“FDIC”), there were more than 5,870approximately 5,131 commercial banks and

Symitar serves credit unions of all asset sizes. According to the Credit Union National Association (“CUNA”), there were more than 6,0005,340 domestic credit unions as of December 31, 2016.2019. Symitar currently supports approximately 820nearly 840 of these credit unions with core information processing platforms and complementary products and services.

ProfitStars serves financial services organizations of all asset sizes and charters and other diverse corporate entities. ProfitStars currently supports over 9,0008,600 institutions with specialized solutions for generating additional revenue and growth, increasing security, mitigating operational risks, and controlling operating costs.

The FDIC reports the number of commercial banks and savings institutions declined 20% from the beginning of calendar year 20122014 to the end of calendar year 2016,2019, due mainly to mergers. Although the number of banks declined at a 4% compound annual rate during this period, aggregate assets increased at a compound annual rate of 4% and totaled $15.6$17.5 trillion as of December 31, 2016.2019. There were nothirteen new bank charters issued in calendar year 2016,2019, compared to oneeight in the 20152018 calendar year. Comparing calendar years 20162019 to 2015,2018, the number of mergers decreased 17%increased 63%.

CUNA reports the number of credit unions declined 18%16% from the beginning of calendar year 20122014 to the end of calendar year 2016.2019. Although the number of credit unions declined at a 4% compound annual rate during this period, aggregate assets increased at a compound annual rate of 6%7% and totaled $1.3$1.6 trillion as of December 31, 2016.2019.

Community and mid-tier banks and credit unions are important in the communities and to the consumers they serve. Bank customers and credit union members rely on these institutions to provide personalized, relationship-based service and competitive financial products and services available through the customer’s delivery channel of choice. Institutions are recognizing that attracting and retaining customers/members in today’s highly competitive financial industry and realizing nearnear-term and long termlong-term performance goals are often technology-dependent.technology dependent. Financial institutions must implement technological solutions that enable them to:

JHA’s extensive product and service offering enables diverse financial institutions to capitalize on these business opportunities and respond to these business challenges. We strive to establish a long-term, value-added technology partnership with each customer, and to continually expand our offeringofferings with the specific solutions our customers need to prosper in the evolving financial services industry.

JHA’sOur mission is to protectprovide quality solutions and increase the value of its stockholders' investment by providing quality products and servicesindustry-leading service to our customers. We perform this mission by:

Our fundamental business strategy is to generate organic revenue and earnings growth supplementedaugmented by strategic acquisitions. We execute this strategy by:

We have a disciplined approach to acquisitions and have been successful in supplementing our organic growth with 34 strategic acquisitions, including 29 acquisitions since the end of fiscal 1999. We continue to explore acquisitions that have the potential to:

We have completed one acquisitionfive acquisitions in the last 3 years. After 4144 years in business, we have very few gaps in our product line, so it is increasingly difficult to find proven products or services that would enable our clients and prospects to better optimize their business opportunities or solve specific operational issues. In addition, we see few acquisition opportunities that would expand our market or enable our entry into adjacent markets within the financial services industry that are fairly priced or that we could assimilate into our company without material distractions.

We have a solid track record of executing acquisitions from both a financial and operational standpoint and we will continue to pursue acquisition opportunities that support our strategic direction, complement and accelerate our organic growth, and generate long-term profitable growth for our shareholders. UntilWhile we seek to identify appropriate acquisition opportunities, we will continue to findexplore alternative ways to leverage our cash position and balance sheet to the benefit of our shareholders, such as continued investment in new products and services for our customers, repurchases of our stock, and continued payment of dividends.

Our five most recent acquisitions were:

Our proprietary solutions are marketed through three primary business brands:  

We will continuestrive to develop and maintain functionally robust, integrated solutions that are supported with high service levels, regularly updating and improving those solutions using an interactive customer enhancement process; ensuring compliance with relevant regulations; updated with proven advances in technology; and consistent with JHA’s reputation as a premium product and service provider.

Core software systems primarily consist of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information.

Jack Henry Banking markets three core software systems to banks and Symitar markets two core software systems to credit unions. These core systems are available for in-house installation at customer sites, or financial institutions can outsource ongoing information processing to JHA.

Jack Henry Banking’s three core banking platforms are:  

Symitar’s two core credit union platforms are:  

Customers electing to install our solutions in-house license the proprietary software systems. The large majority of these customers pay ongoing annual software maintenance fees. We also re-market the hardware and peripheral equipment that is required by our software solutions; and we contract to perform software implementation, data conversion, training, ongoing support, and other related services. In-house customers generally license our core software systems under a standard license agreement that provides a fully-paid,fully paid, nonexclusive, nontransferable right to use the software on a single computer at a single location.

Customers can eliminate the significant up-front capital expenditures required by in-house installations and the responsibility for operating information and transaction processing infrastructures by outsourcing these functions to JHA. Our core outsourcing services are provided in our private cloud through a national network of fourhighly resilient data centers located in threecenter configuration across multiple physical locations. We also provide image item processing services from two host/archive sites and several key entry and balancing locations throughout the country. We print and mail customer statements for financial institutions from three regional printing and rendering centers. Customers electing to outsource their core processing typically sign contracts for five or more years that include transaction-based processing"per account" fees and minimum guaranteed payments during the contract period.

We support the dynamic business requirements of our core bank and credit union clients with ongoing enhancements to each core system, the regular introduction of new integrated complementary products, the ongoing integration of practical new technologies, and regulatory compliance initiatives. JHA also serves each core customer as a single point of contact, support, and accountability.

We providehave more than 100140 complementary products and services that are soldtargeted to our core bankbanks and more than 100 targeted to credit union customers, andcustomers. Many of these are selectively sold by our ProfitStars division to financial services organizations that use other core processing systems.

These complementary solutions enable core bank and credit union clients to respond to evolving customer/member demands, expedite speed-to-market with competitive offerings, increase operating efficiency, address specific operational issues, and generate new revenue streams. The highly specialized solutions sold by ProfitStars enable diverse financial services organizations and corporate entities to generate additional revenue and growth opportunities, increase security and mitigate operational risks, and control operating costs.

JHA regularly introduces new products and services based on demand for integrated complementary solutions from our existing core clients, and based on the growing demand among financial services organizations and corporate entities for specialized solutions capable of increasing revenue and growth opportunities, mitigating and controlling operational risks, andand/or containing costs. The Company’s Industry Research department solicits customer guidance on the business solutions they need, evaluates available solutions and competitive offerings, and manages the introduction of new product offerings. JHA’s new complementary products and services are developed internally, acquired, or provided through strategic alliances.

Electronic payment solutions providesprovide our customers with the tools necessary to be at the forefront of payment innovationsinnovation with secure payment processing designed to simplify complex payment processing, attract profitable retail and commercial accounts, increase operating efficiencies, comply with regulatory mandates, and proactively mitigate and manage payments-relatedpayment-related risk.

Jack Henry identifies threefour components of Electronic Payment Solutions:

Backlog consists of contracted in-house products and services that have not been delivered. Backlog also includes the minimum monthly payments for the remaining portion of multi-year outsourcing contracts, and typically includes the minimum payments guaranteed for the remainder of the contract period.

Backlog as of June 30, 20172020 totaled $630.3$904.3 million, consisting of contracts signed for future delivery of software, hardware, and implementation services (in-house backlog) of approximately $78.9$68.9 million, and $551.4 million for outsourcing services.services of $835.4 million. Approximately $426.0$646.0 million of the outsourcing services backlog as of June 30, 20172020 is not expected to be realized during fiscal 20182021 due to the long-term nature of our outsourcing contracts. Backlog as of June 30, 20162019 totaled $620.6$785.2 million, consisting of $95.6$77.6 million for future delivery of in-house software, hardware, and implementation services (in-house backlog), and $525.0$707.6 million for outsourcing services.

Our outsourcing backlog continues to experience growth based on new contracting activities and renewals of multi-year contracts, and although the appropriate portion of this revenue will be recognized during fiscal 2018,2021, the backlog is expected to trend up gradually for the foreseeable future due to renewals of existing relationships, existing in-house customers electing to migrate to the outsourced model, and new contracting activities.

We invest significant resources in ongoing research and development to develop new software solutions and services and enhance existing solutions with additional functionality and features required to ensure regulatory compliance. Our core and the majority of our complementary systems are typically enhanced a minimum of once each year. Product-specific enhancements are largely customer-driven with recommended enhancements formally gathered through focus groups, change control boards, strategic initiatives meetings, annual user group meetings, and ongoing customer contact. We also continually evaluate and implement process improvements that expedite the delivery of new products and enhancements to our customers and reduce related costs.

Research and development expenses for fiscal years 2017, 2016,2020, 2019, and 20152018 were $84.8 million, $81.2 million, and $71.5 million, respectively. Capitalized software for fiscal years 2017, 2016, and 2015 was $89.6$110.0 million, $96.4 million, and $76.9$90.3 million, respectively. We recorded capitalized software in fiscal years 2020, 2019, and 2018 of $117.3 million, $111.1 million, and $96.6 million, respectively.

JHA serves established, well defined markets that provide ongoing sales and cross-sales opportunities.

The marketing and sales initiatives within the Jack Henry Banking and Symitar business lines are primarily focused on identifying banks and credit unions evaluating alternative core information and transaction processing solutions. ProfitStars sells specialized core agnostic niche solutions that complement existing technology platforms to domestic financial services organizations of all asset sizes and charters.

Dedicated sales forces support each of JHA’s three primary marketed brands. Sales executives are responsible for the activities required to earn new customers in assigned territories, and regional account executives are responsible for nurturing customer relationships and cross selling additional products and services. Our sales professionals receive base salaries and performance-based commission compensation. Brand-specific sales support staff provide a variety of services, including product and service demonstrations, responses to prospect-issued requests-for-proposals, and proposal and contract generation. Our marketing department supports all threeof our brands with lead generation and brand-building activities, including participation in state-specific, regional, and national trade shows; print and online advertising; telemarketing; customer newsletters; ongoing promotional campaigns; and media relations. JHA also hosts annual national education conferences which provide opportunities to network with existing clients and demonstrate new products and services.

JHA has sold select products and services primarily in the Caribbean Canada, Europe, and South America.Canada. International sales accountaccounted for less than 1% of JHA’s total revenue in the year ended June 30, 2017, and were approximately 1% of total revenue in fiscal years 20162020, 2019, and 2015.2018.

The market for companies providing technology solutions to financial services organizations is competitive, and we expect that competition from both existing competitors and companies entering our existing or future markets will

remain strong. Some of JHA’s current competitors have longer operating histories, larger customer bases, and greater financial resources. The principal competitive factors affecting the market for technology solutions include product/service functionality, price, operating flexibility and ease-of-use, customer support, and existing customer references. For more than a decade there has been significant consolidation among providers of products and services designed for financial institutions, and this consolidation is expected to continue in the future.

Jack Henry Banking and Symitar compete with large vendors that provide information and transaction processing solutions to banks and credit unions, including Fidelity National Information Services, Inc.; Fiserv, Inc.; and Finastra. ProfitStars competes with an array of disparate vendors that provide niche solutions to financial services organizations and corporate entities.

Although we believe our success depends upon our technical expertise more than our proprietary rights, our future success and ability to compete depend in part upon our proprietary technology. We have registered or filed applications for our primary trademarks. Most of our technology is not patented. Instead, we rely on a combination of contractual

JHA maintains a corporate commitment to address compliance issues and implement requirements imposed by the federal regulators prior to the effective date of such requirements when adequate prior notice is given. JHA’s compliance program is provided by a team of compliance analysts and auditors that possess extensive regulatory agency and financial institution experience, and a thorough working knowledge of JHA and our solutions. These compliance professionals leverage multiple channels to remain informed about potential and recently enacted regulatory requirements, including regular discussions on emerging topics with the Federal Financial Institutions Examination Council (“FFIEC”) examination team and training sessions sponsored by various professional associations.

JHA has a process to inform internal departmentsstakeholders of new and revised regulatory requirements. Upcoming regulatory changes also are presented to the Company’s development teams through monthly regulatory compliance meetings and the necessary product changes are included in the ongoing product development cycle. JHA publishes newsletters to keep our customers informed of regulatory changes that could impact their operations. Periodically, customer advisory groups are assembled to discuss significant regulatory changes.

Internal audits of our systems, networks, operations, business recovery plans, and applications are conducted and specialized outside firms are periodically engaged to perform testing and validation of our systems, processes, plans and security. Ensuring that confidential information remains private is a high priority, and JHA’s initiatives to protect confidential information include regular third-party application reviews intended to better secure information access. Additional third-party reviews are performed throughout the organization, such as vulnerability tests, intrusion tests, and System and Organizations Controls (SOC) 1 or SOC 2 reports. The FFIEC conducts annual reviews throughout the Company and issues reports that are reviewed bya Report of Examination. The Board of Directors provides oversight of these activities through the JHA Risk and Compliance Committee ofand the Board of Directors.Audit Committee.

The financial services industry is subject to extensive and complex federal and state regulation. All financial institutions are subject to substantial regulatory oversight and supervision. Our products and services must comply with the extensive and evolving regulatory requirements applicable to our customers, including but not limited to those mandated by federal truth-in-lending and truth-in-savings rules, the Privacy of Consumer Financial Information regulations, usury laws, the Equal Credit Opportunity Act, the Fair Housing Act, the Electronic Funds Transfer Act, the Fair Credit Reporting Act, the Bank Secrecy Act, the USA Patriot Act, the Gramm-Leach-Bliley Act, the Community Reinvestment Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The compliance of JHA’s products and services with these requirements depends on a variety of factors, including the particular functionality,parameters set through the interactive design, the classification of customers, and the manner in which the customer utilizes the products and services. Our customers are contractually responsible for assessing and determining what is required of them under these regulations and then we assist them in meeting their regulatory needs through our products and services. The impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act continues to evolve as the regulations are written to implement the various provisions of the law. We cannot predict the impact these regulations, any future amendments to these regulations or any newly implemented regulations will have on our business in the future.

JHA is not chartered by the Office of the Comptroller of Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration or other federal or state agencies that regulate or supervise depository institutions. However, operating as a service provider to financial institutions, JHA’s operations are governed by the same regulatory requirements as those imposed on financial institutions, and subject to periodic reviews by FFIEC regulators who have broad supervisory authority to remedy any shortcomings identified in such reviews.

The outsourcing services provided by JHA are subject to examination by FFIEC regulators under the Bank Service Company Act. These examinations cover a wide variety of subjects, including system development, functionality,

As of June 30, 20172020 and 2016,2019, JHA had 5,9726,717 and 5,8616,402 full-time employees, respectively. Of our full-time employees, approximately 983 are employed in the Credit Union segment of our business, with the remainder employed in the Bank segment or in general and administrative functions that serve both segments. Our employees are not covered by a collective bargaining agreement and there have been no labor-related work stoppages.

The Company's business and the results of its operations are affected by numerous factors and uncertainties, some of which are beyond our control. The following is a description of some of the important risks and uncertainties that may cause our actual results of operations in future periods to differ materially from those expected or desired.

In addition, existing laws, regulations, and policies could be amended or interpreted differently by regulators in a manner that imposes additional costs and has a negative impact on our existing operations or that limits our future growth or expansion. The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010, significantly changed the regulation of the financial services industry, producing new regulatory agencies and voluminous newNew regulations some of which are still being written. The Consumer Financial Protection Bureau was established, which is implementing numerous new regulations applicable to “supervised service providers” such as the Company. These new regulations maycould require additional programming or other costly changes in our processes or personnel. Our customers are also regulated entities, and actions by regulatory authorities could determineinfluence both the decisions they make concerning the purchase of data processing and other services and the timing and implementation of these decisions. Concerns are growing with respect to the use, confidentiality, and security of private customer information. Regulatory agencies, Congress and state legislatures are considering numerous regulatory and statutory proposals to protect the interests of consumers and to require compliance with standards and policies that have not been defined.

None.

We own 154 acres located in Monett, Missouri on which we maintain nineeight office buildings, plus shipping &and receiving, security, and maintenance buildings. We also own buildings in Houston, Texas; Allen, Texas; Albuquerque, New Mexico; Birmingham, Alabama; Lenexa, Kansas; Angola, Indiana; Shawnee Mission, Kansas; Rogers, Arkansas; Oklahoma City, Oklahoma; Elizabethtown, Kentucky; Springfield, Missouri and San Diego, California. Our owned facilities represent approximately 1,000,000906,000 square feet of office space in teneight states. We have 3542 leased office facilities in 2024 states, which total approximately 653,000775,000 square feet. All of our owned and leased office facilities are for normal business purposes.

We are subject to various routine legal proceedings and claims arising in the ordinary course of our business. In the opinion of management, any liabilities resulting from current lawsuits are not expected, either individually or in the aggregate, to have a material adverse effect on our consolidated financial statements. In accordance with U.S. GAAP,generally accepted accounting principles ("U.S. GAAP"), we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case or proceeding.

None.

PART II

The Company's common stock is quoted on the NASDAQNasdaq Global Select Market (“NASDAQ”Nasdaq”) under the symbol “JKHY”. The following table sets forth, for the periods indicated, the high and low sales price per share of the common stock as reported by NASDAQ.

The Company established a practice of paying quarterly dividends at the end of fiscal 1990 and has paid dividends with respect to every quarter since that time. Quarterly dividends per share paid on the common stock for the two most recent fiscal years ended 2017 and 2016 are as follows:

On August 16, 2017,14, 2020, there were approximately 94,800198,654 holders of the Company’s common stock, including individual participants in security position listings. On that same date the last sale price of the common shares as reported on NASDAQ was $101.59 per share.

The following chart presents a comparison for the five-year period ended June 30, 2017,2020, of the market performance of the Company’s common stock with the Standard & Poor's 500 ("S&P 500500") Index and an index of peer companies selected by the Company:Company. Historic stock price performance is not necessarily indicative of future stock price performance.

The following information depicts a line graph with the following values:

This comparison assumes $100 was invested on June 30, 2012,2015 and assumes reinvestments of dividends. Total returns are calculated according to market capitalization of peer group members at the beginning of each period. Peer companies selected are in the business of providing specialized computer software, hardware and related services to financial institutions and other businesses.

Companies in the Peer Groupfiscal 2020 peer group are ACI Worldwide, Inc.; Black Knight, Inc.; Bottomline Technology,Technologies (de), Inc.; Broadridge Financial Solutions;Solutions, Inc.; Cardtronics Inc.; Convergys Corp.; Corelogic, Inc.; DST Systems,plc; CoreLogic, Inc.; Euronet Worldwide, Inc.; ExlService Holdings, Inc.; Fair Isaac Corp.;Corporation; Fidelity National Information Services, Inc.; Fiserv, Inc.; Fleetcor Technologies, Inc.; Global Payments Inc.; Moneygram International,Square, Inc.; SS&C Technologies Holdings, Inc.; Total Systems Services, Inc.; Tyler Technologies, Inc.; VerifoneVerint Systems, Inc.; and WEX Inc..Inc. Total System Services, Inc. was acquired by Global Payments Inc. on September 17, 2019 and was removed from the peer group.

The following section provides management's view of the Company's financial condition and results of operations and should be read in conjunction with the Selected Financial Data, the audited Consolidated Financial Statements,consolidated financial statements, and related notes included elsewhere in this report. All dollar and share amounts, except per share amounts, are in thousands and discussions compare fiscal 2020 to fiscal 2019. Discussions of fiscal 2018 items and comparisons between fiscal 2018 and fiscal 2019 that are not included in this Form 10-K can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Jack Henry & Associates, Inc. (JHA) is headquartered in Monett, Missouri, employs nearly 6,100approximately 6,800 associates nationwide, and is a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions serve over 9,000nearly 8,700 customers and are marketed and supported through three primary brands. Jack Henry Banking® supportsis a top provider of information and transaction processing solutions to U.S. banks ranging from community banks to multi-billion dollarmulti-billion-dollar asset institutions with assets up to $50 billion, with information and transaction processing solutions.billion. Symitar® is a leading provider of information and transaction processing solutions for credit unions of all sizes. ProfitStars® provides highly specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities outside the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. JHA's integrated solutions are available for in-house installation and outsourced or hosted delivery.delivery in our private cloud.

Each of our brands share the fundamental commitment to provide high-quality business solutions, service levels that consistently exceed customer expectations, integration of solutions and practical new technologies. The quality

of our solutions, our high service standards, and the fundamental way we do business typically foster long-term customer relationships, attract prospective customers, and have enabled us to capture substantial market share.

Through internal product development, disciplined acquisitions, and alliances with companies offering niche solutions that complement our proprietary solutions, we regularly introduce new products and services and generate new cross-sales opportunities across our three businessprimary marketed brands. We provide compatible computer hardware for our in-house installations and secure processing environments for our outsourced and hosted solutions.solutions in our private cloud. We perform data conversions, software implementations, initial and ongoing customer training, and ongoing customer support services.

We believe our primary competitive advantage is customer service. Our support infrastructure and strict standards provide service levels we believe to be the highest in the markets we serve and generate high levels of customer satisfaction and retention. We consistently measure customer satisfaction using comprehensive annual surveys and randomly generated daily surveys we receive in our everyday business. Dedicated surveys are also used to grade specific aspects of our customer experience, including product implementation, education, and consulting services.

A significant proportion of ourOur two primary revenue is derived from recurring outsourcing feesstreams are "services and electronic payment transaction processingsupport" and "processing." Services and support includes: "outsourcing and cloud" fees that predominantly have contract terms of five years or greaterlonger at inception. Supportinception; "product delivery and serviceservices" revenue, which includes revenue from the sales of licenses, implementation services, deconversion fees, also include in-houseconsulting, and hardware; and "in-house support" revenue, composed of maintenance fees which primarily contain annual contract terms, implementation servicesterms. Processing revenue includes: "remittance" revenue from payment processing, remote capture, and bundled servicesACH transactions; "card" fees, including card transaction processing and monthly fees; and "transaction and digital" revenue, which is a combination of license, implementation,includes transaction and maintenance revenue

COVID-19 pandemic. However, we have experienced delays related to continuing customer migrations to our new card processing platform. We are on track to meet the revised schedule to complete migrations of our core customers by September 30, 2020, and non-core customers by March 31, 2021, to the new platform. We continue to focus onwork with our objective of providing the best integrated solutions, productscustomers to support them during this difficult time, and, customer service to our clients. We are cautiously optimistic regarding ongoing economic improvement and expect our clients to continue investingthat end, have waived certain late fees in connection with our products and services. We have also enhanced our lending service offerings to support the Paycheck Protection Program that was introduced by the CARES Act, which was signed into law on March 27, 2020. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been curtailed, we have not yet experienced significant disruption to our operations. We believe our technological capabilities are well positioned to allow our employees to work remotely for the foreseeable future without materially impacting our business.

We saw a decrease of card processing transaction volumes late in the third quarter of fiscal 2020 and into the early portion of the fourth quarter due to COVID-19, which slowed the rate of growth of our processing revenue for those periods versus a year ago. In addition, installations have been delayed and the associated revenue pushed from the current period to future periods. These headwinds may also impact our processing and installation revenues moving into fiscal 2021. Although transaction levels have since returned to more normal levels, the recurrence of lower-than-normal card processing transaction rates is uncertain and will depend upon when requirements for business closures and other restrictions are normalized and how quickly economic recovery occurs. Despite the changes and restrictions caused by COVID-19, the overall financial and operational impact on our business has been limited and our liquidity, balance sheet, and business trends remain strong. We experienced positive operating cash flows during the fourth quarter, and we do not expect that to change in the near term. However, we are unable to accurately predict the future impact of COVID-19 due to a number of uncertainties, including further government actions, the duration, severity and recurrence of the outbreak, the speed of economic recovery and the potential impact to our customers, vendors, and employees, as well as how the potential impact might affect future customer services, to improve their operatingprocessing revenue, and processes and efficiencies and performance. We anticipate that consolidation within the Company directly or indirectly impacting financial services industry will continue. Regulatory conditions and legislationresults. We will continue to monitor COVID-19 and its possible impact financial institutions' discretionary spending.on the Company and to take steps necessary to protect the health and safety of our employees and customers. For a further discussion of the uncertainties and risks associated with COVID-19, see Part II, Item 1A “Risk Factors” in this Annual Report on Form 10-K.

A detailed discussion of the major components of the results of operations follows. All dollar and share amounts are in thousands and discussions compare fiscal 2017 to fiscal 2016 and compare fiscal 2016 to fiscal 2015.

In fiscal 2017,2020, revenues increased 6%9% or $76,471$144,376 compared to fiscal 2016, with strong growth continuing in our support and service revenues, particularly our outsourcing services, electronic payment services, and bundled services. Cost of sales2019. Deconversion fees increased 6%, in line with revenue, and gross profit increased 5%. The company continues$23,684 to focus on cost management.

Operating expenses increased 9% year over year, primarily due a lower prior year effective tax rate, which is describedto costs related to our new card payment processing platform, increased salaries and benefits in the following discussion. The above changes resultedfiscal 2020, partly due to increased headcount compared to fiscal 2019, increases in a 1% decrease in net income for fiscal 2017.related revenue, and increased depreciation and amortization expense.

We move into fiscal 20182021 following a strong performance in fiscal 2017.2020. Significant portions of our business continue to provide recurring revenue and our healthy sales pipeline is also encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and in these times, they have an even greater need for our solutions that directly address institutional profitability, efficiency, and security. OurWe believe our strong balance sheet, access to extensive lines of credit, the strength of our existing product line and an unwavering commitment to superior customer service position us well to address current and future opportunities.

A detailed discussion of the major components of the results of operations for the fiscal year ended June 30, 20172020 follows. All dollar amounts are in thousands

Services and discussions comparesupport includes: "outsourcing and cloud" fees that predominantly have contract terms of five years or greater at inception; "product delivery and services" revenue, which includes revenue from the currentsales of licenses, implementation services, deconversion fees, consulting, and hardware; and "in-house support" revenue, which is composed of maintenance fees which primarily contain annual contract terms.

In the fiscal year ended June 30, 2017 to2020, services and support revenue grew 10% over the prior fiscal year ended June 30, 2016.

Processing revenue includes: "remittance" revenue from our bundled software multi-element agreements. There was growth in most support and service revenue components in fiscal 2017, despite Alogent revenue of $27,673 included in the prior year. Excluding that headwind, support and services grew 9%.

We devote significant effort and expense to develop new software, service products and continually upgrade and enhance our existing offerings. We believe our research and development efforts are highly efficient because of the extensive experience of our research and development staff and because our product development is highly customer-driven.customer driven.

Research and development expenses for fiscal 2020 increased 14% compared to fiscal 2019. Excluding costs related to the fiscal 2020 acquisition totaling $1,980, adjusted research and development expense increased 12%.

The adjusted increase was primarily due to increased salary and benefit expenses, in part due to a 4% increase in headcount but wereat June 30, 2020 compared to a year ago that reflects organic growth within our product lines, as well as an increase in licenses and fees. A portion of the adjusted research and development expense is a result of our investment in digital platforms. Research and development expense remained consistent with the prior year as a percentage of total revenue.revenue for fiscal 2020 and fiscal 2019. The Company continues to focus on management of costs which contributes to the consistency of this percentage.

Interest income fluctuated due to changes in invested balances and yields on invested balances. Interest expense remained low for bothdecreased in fiscal 2020 due mainly to lower interest rates during the currentyear and prior years, in line with our average debt balances in both years.the timing of invested balances.

The increase into the effective tax rate was primarily due the prior year's rate being reduced by the tax basis in excess of book basis in Alogent stock at disposal.

Net income increased from $211,221,9% to $296,668, or $2.59$3.86 per diluted share, in fiscal 2015 to $248,867,2020 from $271,885, or $3.12$3.52 per diluted share, in fiscal 2016. This translates2019 primarily due to an increaseincreased deconversion fee revenue, organic growth in our lines of 18% in net income.revenue, year over year, and inorganic contributions from our fiscal 2020 acquisition.

The Company is a leading provider of technology solutions and payment processing services primarily for financial services organizations.

The Company’s operations are classified into twofour reportable segments: bank systemsCore, Payments, Complementary, and Corporate and Other. The Core segment provides core information processing platforms to banks and credit unions, which consist of integrated applications required to process deposit, loan, and general ledger transactions, and maintain centralized customer/member information. The Payments segment provides secure payment processing tools and services, (“Bank”)including ATM, debit, and credit union systemscard processing services; online and mobile bill pay solutions; ACH origination and remote deposit capture processing; and risk management products and services. The Complementary segment provides additional software, processing platforms, and services (“Credit Union”).that can be integrated

with our core solutions or used independently. The Company evaluatesCorporate and Other segment includes revenue and costs from hardware and other products not attributed to any of the performanceother three segments, as well as operating costs not directly attributable to the other three segments.

During fiscal 2020, immaterial adjustments were made to reclassify revenue recognized in fiscal 2019 from the Complementary to the Core segment and from the Complementary to the Payments segment to be consistent with the current year's allocation of its segments and allocates resources to them based on various factors, including prospects for growth, return on investment, and return on revenue.revenue by segment. For the fiscal year ended June 30, 2019, the amount reclassified totaled $2,614.

In fiscal 2017,2020, revenue in the BankCore segment increased 6%9% compared to fiscal 2019. Excluding deconversion fees from both years, which totaled $25,927 in fiscal 2020 and $14,907 in fiscal 2019, adjusted revenue in the prior fiscal year, despite revenue headwinds of $28,422Core segment increased 7%. The adjusted increase was primarily due to increased outsourcing and cloud revenue. Cost of revenue in the saleCore segment increased 4% for fiscal 2020 compared to fiscal 2019 primarily due to increased salaries and benefits partially due to increased headcount at June 30, 2020 compared to a year ago. Cost of Alogent.revenue decreased 2% as a percentage of revenue for fiscal 2020 compared to fiscal 2019.

In fiscal 2020, revenue in the Payments segment increased 9% compared to fiscal 2019. Excluding deconversion fees from both years of $15,411 in fiscal 2020 and $8,603 in fiscal 2019, adjusted revenue in the Payments segment increased 8%. The adjusted increase was primarily due to organic growth within the card processing and remittance revenue lines. Cost of revenue in the Payments segment increased 17% for fiscal 2020 compared to fiscal 2019 primarily due to increased spending related to the ongoing project to expand our credit and debit card platform. Cost of revenue increased 4% as a 7%percentage of revenue for fiscal 2020 compared to fiscal 2019.

Cost of revenue for the Credit UnionCorporate and Other segment includes operating costs not directly attributable to any of the other three segments. The increased 1%.

Cash provided by operating activities decreased 2%for fiscal 2020 increased 18% compared to fiscal 2016.2019. Cash from operations is primarily used to repay debt, pay dividends and repurchase stock, and for capital expenditures.

Cash used in investing activities for fiscal 20172020 totaled $141,586$197,906 and included: capital expenditures on facilities and equipment of $41,947, which was mainly for the purchase of computer equipment; $89,631$117,262 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and $16,608equipment of $53,538, mainly for the purchase of computer equipment; $30,376, net of cash acquired, for the purchase of Geezeo; $6,710 for the purchase and development of internal use software.software; and $1,150 for purchase of investments. This was partially offset by $5,632$11,130 of proceeds from the sale of businesses and $968 of proceeds from the sale of assets. asset sales.

Cash used in investing activities for fiscal 20162019 totaled $135,963$190,635 and included: $111,114 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $56,325, which$53,598, mainly includedfor the purchase of computer equipment and aircraft, $96,411equipment; $19,981, net of cash acquired, for the developmentpurchases of software, $11,826BOLTS and Agiletics; $6,049 for the purchase and development of internal use software,software; and $8,275, net of cash acquired,$20 for the acquisition of Bayside Business Solutions.customer contracts. These expenditures were partially offset by $34,030 of proceeds from the sale of our Alogent division and $2,844$127 of proceeds from the sale of assets.

Financing activities used cash of $171,281$192,909 for fiscal 2017.2020. Cash used was $130,140$127,421 for dividends paid to stockholders; $71,549 for the purchase of treasury shares, repaymentshares; and $6,094 of the revolving credit facility and capital leases of $30,200, and dividends paid to stockholders of

Financing activities used cash in fiscal 20162019 of $308,462.$178,305. Cash used was $175,662$118,745 for dividends paid to stockholders; $54,864 for the purchase of treasury shares, repaymentsshares; and $4,696 of the revolving credit facility and capital leases totaling $152,500, and dividends paid to stockholders of $84,118. This was partially offset by borrowings of $100,000 and $3,818 net cash inflowoutflow from the issuance of stock and tax related to stock-based compensation. Borrowings and repayments on our revolving credit facility netted to zero.

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $41,947$53,538 and $56,325$53,598 for the twelve months endingfiscal years ended June 30, 20172020 and June 30, 2016,2019, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. At June 30, 2017,2020, the Company had no material outstanding purchase commitments related to property and equipment. The COVID-19 pandemic has created significant uncertainty as to general global economic and market conditions for the beginning of our fiscal 2021 and beyond. We believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or short-term borrowings on its existing credit facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At June 30, 2017,2020, there were 25,66026,993 shares in treasury stock and the Company had the remaining authority to repurchase up to 4,3302,998 additional shares. The total cost of treasury shares at June 30, 20172020 is $1,006,274.$1,181,673. During fiscal 2017,2020, the Company repurchased 1,452485 treasury shares for $130,140.

$71,549. At June 30, 2016,2019, there were 24,20926,508 shares in treasury stock and the Company had authority to repurchase up to 5,7823,483 additional shares.

The Company renewedhas an unsecured bank credit line on April 24, 2017 which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line was renewed throughin May 2019 and expires on April 30, 2019. At2021. There was no balance outstanding at June 30, 2017, no amount was outstanding.2020 or June 30, 2019.

At June 30, 2017,2020, the Company’s total off balance sheet contractualoperating lease obligations were $633,547. This balance consists of $47,991$75,549, consisting of long-term operating leases for various facilities and equipment which expire from 20182020 to 20302033 (see Note 3 to the consolidated financial statements for further information on the Company’s leases).

At June 30, 2020, the Company’s total contractual obligations were $1,227,089 and $585,556included the above-described operating lease obligations and $1,151,540 related to off-balance sheet purchase obligations. Included in off-balance sheet purchase obligations were open purchase orders of purchase commitments. JHA entered$82,303 and a strategic services agreement entered into by JHA in fiscal 2017 with First Data® and PSCU® to provide full-service debit and credit card processing on a single platform to all existing core bank and credit union customers, as well as to expand itsour card processing platform to financial institutions outside our core customer base. This agreement includesand subsequent amendments include a total purchase commitment at June 30, 2020 of $559,354$1,068,961 over the remaining term of the contract. The remainder of the purchase commitments relatecontract, which currently extends until January 2036, subject to open purchase orders.certain renewal terms. The contractual obligations table below excludes $6,445$11,677 of liabilities for uncertain tax positions as we are unable to reasonably estimate the ultimate amount or timing of settlement.