Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, in Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are identified at “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017.2018. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The condensed consolidated financial statements include the accounts of JHA and all of its subsidiaries, which are wholly-owned, and all intercompany accounts and transactions have been eliminated.

Comprehensive income for the three and nine months ended March 31,September 30, 2018 and 2017 equals the Company’s net income.

The Company enters into contracts with customers that may include multiple types of goods and services. At contract inception, the Company assesses the solutions and services promised in its income statement,contracts with customers and identifies a performance obligation for each promise to transfer to the customer a solution or service (or bundle of solutions or services) that is distinct - that is, if the solution or service is separately identifiable from other items in the arrangement and if the customer can benefit from the solution or service on its own or together with other resources that are readily available. The Company recognizes revenue when or as it satisfies each performance obligation by transferring control of a solution or service to the customer.

Product delivery and services revenue is generated primarily from software licensing and related professional services and hardware delivery. Software licenses, along with any professional services from which they are not considered distinct, are recognized as they are delivered to the customer. Hardware revenue is recognized upon delivery. Professional services that are distinct are recognized as the services are performed. Deconversion fees are also included within Product delivery and services, and are considered a changecontract modification. Therefore, the Company recognizes these fees over the remaining modified contract term.

In-house support revenue is generated from software maintenance for ongoing client support and software usage, which includes a license and ongoing client support. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services). Software maintenance fees are typically billed to the customer annually in advance and recognized ratably over the segment structure (see Note 10),maintenance term. Software usage is typically billed annually in order to more clearly alignadvance, with the way management manageslicense delivered and recognized at the outset, and the maintenance fee recognized ratably over the maintenance term. Accordingly, the Company utilizes the practical expedient which allows entities to disregard the effects of a financing component when the contract period is one year or less.

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 9, Reportable Segment Information, for disaggregated revenue by type and evaluates performance. Amountsreportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets.  Accumulated depreciation at March 31,September 30, 2018 totaled $373,116$372,059 and at June 30, 20172018 totaled $345,014.$364,153.

Intangible assets consist of goodwill, customer relationships, computer software, and trade names acquired in business acquisitions in addition to internally developed computer software. The amounts are amortized, with the exception of those intangible assets with an indefinite life (such as goodwill), over an estimated economic benefit period, generally three to twenty years.  Accumulated amortization of intangible assets totaled $578,771$630,161 and $503,653$602,479 at March 31,September 30, 2018 and June 30, 2017,2018, respectively.

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 borrowings on its existing line-of-credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At March 31,September 30, 2018, there were 25,96226,108 shares in treasury stock and the Company had the remaining authority to repurchase up to 4,0293,883 additional shares. The total cost of treasury shares at March 31,September 30, 2018 is $1,036,292.$1,055,260. During the first ninethree months of fiscal 2018,2019, the Company repurchased 302no treasury shares for $30,018.shares. At June 30, 2017,2018, there were 25,66026,108 shares in treasury stock and the Company had authority to repurchase up to 4,3303,883 additional shares.

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission ("SEC") and in accordance with accounting principles generally accepted in the United States of America applicable to interim condensed consolidated financial statements, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes, which are included in its Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended June 30, 2017.2018. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Form 10-K for the fiscal year ended June 30, 2017.2018, with updates to certain policies included in this Note 1.

In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary (consisting of normal recurring adjustments) to state fairly the financial position of the Company as of March 31,September 30, 2018, the results of its operations for the three and nine months ending March 31,September 30, 2018 and 2017, and its cash flows for the ninethree months ending March 31,September 30, 2018 and 2017. The condensed consolidated balance sheet at June 30, 20172018 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

The results of operations for the three and nine months ended March 31,September 30, 2018 are not necessarily indicative of the results to be expected for the entire year.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

The Company has takenadopted the following steps in evaluating and planning for the implementation of the new standard:

The Company previously recognized software license and related services within the scope of ASC Topic 985-605, which required the establishment of vendor-specific objective evidence (“VSOE”) of fair value in order to separately recognize revenue for each software-related good or service. Due to the inability to establish VSOE, the Company had previously deferred all revenue on software-related goods and services on a master contract until all the goods and services had been delivered. Under ASC 606, VSOE is no longer required for separation of otherwise distinct performance obligations within a revenue arrangement. This change has resulted in earlier recognition of revenue for the Company’s software-related goods and services, leading to a decrease in deferred revenue balances within our ability to useadjusted condensed consolidated balance sheets.

ASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification of eight specific cash flow issues and is effective for our annual reporting period beginning July 1, 2018. The adoption of this method dependsstandard did not have any impact on system readiness, including software procured from third-party providers, and the completion of our analysis of information necessary to restate prior period consolidated financial statements.

The FASB issued ASU No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information regarding leasing arrangements. Specifically, the standard requires operating lease commitments to be recorded on the balance sheet as operating lease liabilities and right-of-use assets, and the cost of those operating leases to be amortized on a straight-line basis. ASU No. 2016-02 will be effective for JHA's annual reporting period beginning July 1, 2019 and early adoption is permitted. At transition, a modified retrospective approach must be utilized to measure leases as of the beginning of the earliest period presented, however, the FASB has provided certain practical expedients, which the Company is currently evaluating. The Company is currently assessing the impact this new standard will have on our consolidated financial statements and when we will adopt it.

ASU 2016-15 issued byIn August of 2018, the FASB issued ASU No. 2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40), which broadens the scope of Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with costs for internal-use software. The amendments in August 2016 clarifies cash flow classificationthis update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of eight specific cash flow issues and isadoption. The ASU will be effective for our annual reporting period beginningthe Company on July 1, 2018. Early2020, with early adoption permitted. The Company is permitted. We do not expect any significantcurrently evaluating the impact tothat the guidance will have on our financial statements as a result of this standard.statements.

For cash equivalents, amounts receivable or payable and short-term borrowings, fair values approximate carrying value, based on the short-term nature of the assets and liabilities.

The Company's estimates of the fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets, and requires that observable inputs be used in the valuations when available. The three levels of the hierarchy are as follows:

Fair value of financial assets, included in cash and cash equivalents, and financial liabilities is as follows:

The effective tax rate was 24.4%19.2% of income before income taxes for the quarter ended March 31,September 30, 2018, compared to 32.1%31.1% for the same quarter in fiscal 2017. For the nine months ended March 31, 2018 the effective tax rate was (2.9)%, compared to 32.5% for the nine months ended March 31, 2017.2018. The significant decrease to the Company's tax rate was primarily due to $96,766 and $8,746 ofthe reduction in the U.S. federal income tax rate from 35% to 21% due to tax reform enacted December 22, 2017, as well as the increase in excess tax benefits recorded as a resultfrom share-based payments in the first quarter of fiscal 2019.

The Company has recognized provisional amounts for tax reform items in its annual and interim financial statements for each reporting period since the enactment of the TCJATax Cuts and Jobs Act ("TCJA") on December 22, 2017, in the quarters ended December 31, 2017, and March 31, 2018, respectively.

The Company paid income taxes of $388 and received refunds of $679 for the deferred tax activity becomes known as a result of actual operations. 

At March 31,September 30, 2018, the Company had $9,914$11,065 of gross unrecognized tax benefits, $9,006$10,188 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of $1,249$1,413 and $1,083$1,051 related to uncertain tax positions at March 31,September 30, 2018 and 2017, respectively.

The U.S. federal and state income tax returns for fiscal year 20142015 and all subsequent years remain subject to examination as of March 31,September 30, 2018 under statute of limitations rules. We anticipate potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $500 - $1,500 within twelve months of March 31,September 30, 2018.

Our operating income for the three months ended March 31,September 30, 2018 and 2017 included $3,225$1,771 and $3,132$1,513 of stock-based compensation costs, respectively. For the nine months ended March 31, 2018 and 2017, stock-based compensation costs included in operating income totaled $7,834 and $7,362, respectively.

On November 10, 2015, the Company adopted the 2015 Equity Incentive Plan ("2015 EIP") for its employees and non-employee directors. The plan allows for grants of stock options, stock appreciation rights, restricted stock shares or units, and performance shares or units. The maximum number of shares authorized for issuance under the plan is 3,000. For stock options, terms and vesting periods of the options are determined by the Compensation Committee of the Board of Directors when granted. The option period must expire not more than ten years from the option grant date. The options granted under this plan are exercisable beginning three years after the grant date at an exercise price equal to 100% of the fair market value of the stock at the grant date. The options terminate upon surrender of the option, ninety days after termination of employment, upon the expiration of one year following notification of a deceased optionee, or ten years after grant.

The Company previously issued options to outside directors under the 2005 Non-Qualified Stock Option Plan (“2005 NSOP”). No additional stock options may be issued under this plan.

The Company issues both share awards and unit awards under the 2015 EIP, and previously issued these awards through the 2005 Restricted Stock Plan. The following table summarizes non-vested share awards as of March 31,September 30, 2018, as well as activity for the ninethree months then ended:

The Company utilized a Monte Carlo pricing model customized to the specific provisions of the Company’s plan design to value unit awards subject to performance targets on the grant dates. The weighted average assumptions used in this model to estimate fair value at the measurement date and resulting values for 8139 unit awards granted in fiscal 20182019 are as follows:

The following table reflects the reconciliation between basic and diluted earnings per share.

Per share information is based on the weighted average number of common shares outstanding for the three and nine months ended March 31,September 30, 2018 and 2017. Stock options and restricted stock have been included in the calculation of earnings per share to the extent they are dilutive. There were 49no anti-dilutive stock options or restricted stock shares excluded for the quarter ended March 31,September 30, 2018 compared to 89and no anti-dilutive stock options or restricted stock shares excluded for the quarter ended March 31,September 30, 2017. For the nine months ended March 31, 2018 and 2017, respectively, there were 36 and 74 anti-dilutive securities excluded.

On December 21, 2017, the Company acquired all of the equity interest of EST Holdings, Inc. and its wholly-owned subsidiary, EST Interco, Inc., for $134,472$134,381 paid in cash. EST Holdings, Inc. and EST Interco, Inc. jointly own all of the outstanding equity of Ensenta Corporation ("Ensenta"), a California-based provider of real-time, cloud-based solutions for mobile and online payments and deposits. This acquisition was partially funded by a draw on the Company's revolving credit facility, with the remaining amount funded by existing operating cash. The addition of Ensenta

Corporation to the JHA Payment Solutions Group expands the Company’s ability to conduct real-time transactions with third-party platforms, extending its presence in the credit union market through shared branching technology.

Management has completed a preliminary purchase price allocation of Ensenta and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of December 21, 2017 are set forth below:

The amounts shown above include an immaterial measurement period adjustmentadjustments made during the third quarter that impacted non-current deferredand fourth quarters of fiscal 2018 related to income tax liabilityadjustments and goodwill.a fair value assessment. The amounts shown above may change as management finalizes its assessment of the fair value of acquired assets and liabilities and evaluatescontinues to evaluate the income tax implications of this business combination.

The goodwill of $93,414$91,098 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of Ensenta, together with the value of Ensenta's assembled workforce. The goodwill from this acquisition has been allocated to our Payments segment and is not expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $33,824,$37,800, computer software of $16,639,$16,505, and other intangible assets of $4,538.$4,501. The weighted average amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years, 10 years, and 10 years, respectively.

Current assets were inclusive of cash acquired of $7,273.$7,274. The fair value of current assets acquired included accounts receivable of $4,668, none of which were expected to be uncollectible.

Costs incurred related to the acquisition of Ensenta in fiscal 2018 totaled $324$339 for legal, valuation, and other fees, and were expensed as incurred within selling, general, and administrative expense.

The accompanying consolidated statements of income for the three and nine months ended March 31,September 30, 2018 and 2017 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The following unaudited pro forma consolidated financial information for the period ended September 30, 2017 is presented as if this acquisition had occurred at the beginning of the earliest period presented. In addition, this unaudited pro forma financial information is provided for illustrative purposes only and should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisition had actually occurred during those periods, or the results that may be obtained in the future as a result of the acquisition.

On August 31, 2017, the Company acquired all of the equity interest of Vanguard Software Group, a Florida-based company specializing in the underwriting, spreading, and online decisioning of commercial loans, for $10,744 paid in cash. This acquisition was funded using existing operating cash. The addition of Vanguard Software Group to the

Company's ProfitStars® Lending Solutions Group expands functionality offered to clients, allowing for near-real-time communication with JHA's core processing and ancillary solutions, and also enhances cross-sell opportunities.

Management has completed a preliminary purchase price allocation of Vanguard Software Group and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of August 31, 2017 are set forth below:

The goodwill of $6,499 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of Vanguard Software Group, together with the value of Vanguard Software Group's assembled workforce. The goodwill from this acquisition has been allocated to our Complementary segment and is expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $2,234, computer software of $1,426, and other intangible assets of $540. The weighted average amortization periods for acquired customer relationships, computer software, and other intangible assets are 15 years, 10 years, and 10 years, respectively.

Current assets were inclusive of cash acquired of $289. The fair value of current assets acquired included accounts receivable of $847, none of which were expected to be uncollectible.

Costs incurred related to the acquisition of Vanguard Software Group were immaterial for the periods presented.

The Company's consolidated statements of income for the thirdfirst quarter of fiscal 20182019 included revenue of $477$525 and an after-tax net loss of $238$180 resulting from Vanguard Software Group's operations. For the nine months ended March 31,first quarter of fiscal 2018, Vanguard Software Group contributed revenue of $99 and an after-tax net loss of $127 to the Company's consolidated statements of income included revenue of $970 and after-tax net loss of $635.income.

The accompanying consolidated statements of income for the three and nine months ended March 31,September 30, 2018 and 2017 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to both the current and prior periods of our consolidated financial statements and pro forma financial information has not been provided.

The Company is a provider of integrated computer systems that perform data processing (available for in-house installations or outsourced services) for banks and credit unions. Beginning in the first quarter of fiscal 2018, JHA changed its reportable segment structure from two customer-centric segments, Bank and Credit Union, to four product-centric segments. The change was made based on the view of our Chief Executive Officer, who is also our Chief

The Company evaluates the performance of its segments and allocates resources to them based on various factors, including performance against trend, budget, and forecast. Only revenue and costs of revenue are considered in the evaluation for each segment.

NOTE 11:10: SUBSEQUENT EVENTS

This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the quarter ended March 31,September 30, 2018.

Jack Henry & Associates, Inc. ("JHA") is a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions are marketed and supported through three primary brands. Jack Henry Banking® is a top provider of information and transaction processing solutions to U.S. banks ranging from community banks to multi-billion dollar asset institutions.  Symitar® is a leading provider of information and transaction processing solutions for credit unions of all sizes.  ProfitStars® provides 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 delivery.

In the thirdfirst quarter of fiscal 2018,2019, total revenue increased 9%, or $30,917,$31,259, compared to the same quarter in the prior year. Excluding an increasea decrease of $3,846$2,883 in deconversion fees quarter-over-quarter, revenue from fiscal 2018 acquisitions of $7,637, and excluding prior year revenue related to divestitures of $2,261 total revenue increased 6%10% for the quarter.

Operating expenses increased 9% compared to the thirdfirst quarter of fiscal 2017, mainly due to a 5% increase in headcount2018. Headcount increased 6% at March 31,September 30, 2018 compared to March 31,September 30, 2017, leading to increased salaries and benefits. This was partially due to the Ensenta acquisition, which occurred during the second quarter of fiscal 2018. Other reasons for the increase includeinclude: bonuses provided by the Company in response to the lower tax rate resulting from the Tax Cuts and Jobs Act ("TCJA"); increased amortization of capitalized software; higher direct cost of product, including costs related to our new card payment processing platform and faster payments incentives,incentives.

Operating income increased 6% for the quarter, but excluding deconversion fees and the increased amortization of capitalized software. bonus, operating income increased 16%.

The Tax Cuts and Jobs Act enacted December 22, 2017 had a large impact onTCJA lowered our effective income tax rate, which is the primary reason for the decrease in our provision for income taxes which decreased 18%by 34% compared to the prior year quarter. As discussed

The above changes led to an increase in Note 6net income of 25% for the condensed consolidated financial statements, the amounts recorded under provision for income taxes are reasonable estimates, but are subject to change as additional calculations are completed based on actual results during the fourthfirst quarter of fiscal 2018.

There was 8%9% growth in services and support revenue in the thirdfirst quarter of fiscal 20182019 compared to the same quarter last year. Excluding a $2,883 reduction in deconversion fees, services and support revenue grew 11%. The increase was primarily due to increases in our outsourcing and cloud and in-house support revenue streams. The increased outsourcing and cloud revenue was partially driven by added revenue from Ensenta, as well assupplemented by organic growth in hosting and data processing. The increased product delivery and services revenue. Excluding deconversion fees from each period presented, revenue from fiscal 2018 acquisitions totaling $3,911, and fiscal 2017 revenue related to divestitures totaling $2,223, services andin-house support revenue grew 6% forwas primarily due to higher software usage revenue, resulting mainly from the third quarteraddition of fiscal 2018 compared to the same quarter of fiscal 2017.

Processing revenue increased 10%9% in the thirdfirst quarter of fiscal 20182019 compared to the same quarter last year, primarily due to increased transaction volumes within each of the three components of processing revenue and added revenue from Ensenta. Excluding revenue from fiscal 2018 acquisitions totaling $3,726, and excluding fiscal 2017 revenue related to divestitures of $38, processing revenue increased 7% for the quarter.

Cost of revenue for the thirdfirst quarter of fiscal 20182019 increased 7%8% over the prior year, but remained consistent as a percentage of total revenue. Excluding costs related to deconversions and bonuses provided by the Company in response to the lower tax rate resulting from the TCJA, cost of revenue increased 7%. The increase was primarily due to a 6%7% expansion in headcount at March 31,September 30, 2018 compared to March 31,September 30, 2017 driving increased salaries and benefits.benefits, partially due to the acquisition of Ensenta. Other factors contributing to the increase include higher direct costs of product, including spending related to our strategic partnership with First Data and PSCU to expand our credit and debit card platform, and increased amortization related to capitalized software. The Company continues to focus on cost management.