UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2021~~2022


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ______________ to ________________

Commission file number 0-14112

JACK HENRY & ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)


Delaware						43-1128385
(State or Other Jurisdiction of Incorporation)						(I.R.S Employer Identification No.)

663 Highway 60, P.O. Box 807, Monett, MO 65708

(Address of Principle Executive Offices)

(Zip Code)

417-235-6652

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock ($0.01 par value)	JKHY	Nasdaq Global Select Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ 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 company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

As of January ~~28, 2022,~~26, 2023, the Registrant had ~~72,825,033~~72,990,727 shares of Common Stock outstanding ($0.01 par value).

TABLE OF CONTENTS


		Page Reference

PART I	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Balance Sheets as of December 31, ~~2021,~~2022, and June 30, ~~2021~~2022 (Unaudited)	4

	Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, ~~2021,~~2022 and ~~2020~~2021 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended December 31, ~~2021,~~2022 and ~~2020~~2021 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, ~~2021,~~2022 and ~~2020~~2021 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	2928

ITEM 4.	Controls and Procedures	29

PART II	OTHER INFORMATION	29

ITEM 1.	Legal Proceedings	29



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3029

ITEM 6.	Exhibits	3130

	Signatures	3231

In this report, all references to "Jack Henry," “JKHY,” the “Company,” “we,” “us,” and “our,” refer to Jack Henry & Associates, Inc., and its wholly owned subsidiaries.

FORWARD LOOKING STATEMENTS

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 (the "Exchange Act"). 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,” “seek,” “anticipate,” “estimate,” “future,” “intend,” “plan,” “strategy,” “predict,” “likely,” “should,” “will,” “would,” “could,” “can,” “may,” and similar expressions. Forward-looking statements are based only on management’s current beliefs, expectations and assumptions regarding the future of the Company, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, those discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021,~~2022, in particular, those included in Item 1A, “Risk Factors” of such report, and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Any forward-looking statement made in this report speaks only as of the date of this report, and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Table of Contents


JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES					JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)						CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands, Except Share and Per Share Data)	(In Thousands, Except Share and Per Share Data)					(In Thousands, Except Share and Per Share Data)
(Unaudited)

		December 31, 2021		June 30, 2021			December 31, 2022		June 30, 2022

ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	29,120	$	50,992	Cash and cash equivalents	$	25,763	$	48,787
Receivables, net	Receivables, net	236,096		306,564		Receivables, net	246,378		348,072
Income tax receivable	Income tax receivable	22,881		30,243		Income tax receivable	—		13,822
Prepaid expenses and other	Prepaid expenses and other	116,778		109,723		Prepaid expenses and other	127,785		125,537
Deferred costs	Deferred costs	62,157		46,215		Deferred costs	69,302		57,105

Assets held for sale						Assets held for sale	—		20,201
Total current assets	Total current assets	467,032		543,737		Total current assets	469,228		613,524
PROPERTY AND EQUIPMENT, net	PROPERTY AND EQUIPMENT, net	241,409		252,481		PROPERTY AND EQUIPMENT, net	203,360		211,709
OTHER ASSETS:	OTHER ASSETS:					OTHER ASSETS:
Non-current deferred costs	Non-current deferred costs	133,223		127,205		Non-current deferred costs	152,991		143,750
Computer software, net of amortization	Computer software, net of amortization	387,128		368,094		Computer software, net of amortization	545,377		410,957
Other non-current assets	Other non-current assets	260,186		249,210		Other non-current assets	309,178		293,526
Customer relationships, net of amortization	Customer relationships, net of amortization	75,579		81,842		Customer relationships, net of amortization	70,179		69,503
Other intangible assets, net of amortization	Other intangible assets, net of amortization	28,787		26,129		Other intangible assets, net of amortization	23,167		25,137
Goodwill	Goodwill	687,458		687,458		Goodwill	804,797		687,458
Total other assets	Total other assets	1,572,361		1,539,938		Total other assets	1,905,689		1,630,331
Total assets	Total assets	$	2,280,802	$	2,336,156	Total assets	$	2,578,277	$	2,455,564
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Accounts payable	Accounts payable	$	14,155	$	18,485	Accounts payable	$	13,198	$	21,034
Accrued expenses	Accrued expenses	150,363		182,517		Accrued expenses	147,908		192,042

Accrued income taxes						Accrued income taxes	31,668		—
Notes payable and current maturities of long-term debt	Notes payable and current maturities of long-term debt	103		110		Notes payable and current maturities of long-term debt	21		67
Deferred revenues	Deferred revenues	208,733		319,748		Deferred revenues	214,742		330,687
Total current liabilities	Total current liabilities	373,354		520,860		Total current liabilities	407,537		543,830
LONG-TERM LIABILITIES:	LONG-TERM LIABILITIES:					LONG-TERM LIABILITIES:
Non-current deferred revenues	Non-current deferred revenues	67,045		75,852		Non-current deferred revenues	70,101		71,485
Deferred income tax liability	Deferred income tax liability	272,331		260,758		Deferred income tax liability	265,019		292,630
Debt, net of current maturities	Debt, net of current maturities	240,026		100,083		Debt, net of current maturities	275,000		115,000
Other long-term liabilities	Other long-term liabilities	56,050		59,311		Other long-term liabilities	49,630		50,996
Total long-term liabilities	Total long-term liabilities	635,452		496,004		Total long-term liabilities	659,750		530,111
Total liabilities	Total liabilities	1,008,806		1,016,864		Total liabilities	1,067,287		1,073,941
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred stock -$1 par value; 500,000 shares authorized, none issued		—		—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,860,246 shares issued at December 31, 2021; 103,795,169 shares issued at June 30, 2021		1,039		1,038
Preferred stock - $1 par value; 500,000 shares authorized, none issued						Preferred stock - $1 par value; 500,000 shares authorized, none issued	—		—
Common stock - $0.01 par value; 250,000,000 shares authorized; 104,027,008 shares issued at December 31, 2022; 103,921,724 shares issued at June 30, 2022						Common stock - $0.01 par value; 250,000,000 shares authorized; 104,027,008 shares issued at December 31, 2022; 103,921,724 shares issued at June 30, 2022	1,040		1,039
Additional paid-in capital	Additional paid-in capital	535,493		518,960		Additional paid-in capital	564,856		551,360
Retained earnings	Retained earnings	2,542,583		2,412,496		Retained earnings	2,752,212		2,636,342
Less treasury stock at cost 31,042,903 shares at December 31, 2021; 29,792,903 shares at June 30, 2021		(1,807,119)		(1,613,202)
Less treasury stock at cost 31,042,903 shares at December 31, 2022; 31,042,903 shares at June 30, 2022						Less treasury stock at cost 31,042,903 shares at December 31, 2022; 31,042,903 shares at June 30, 2022	(1,807,118)		(1,807,118)
Total stockholders' equity	Total stockholders' equity	1,271,996		1,319,292		Total stockholders' equity	1,510,990		1,381,623
Total liabilities and equity	Total liabilities and equity	$	2,280,802	$	2,336,156	Total liabilities and equity	$	2,578,277	$	2,455,564

See notes to condensed consolidated financial statements.

Table of Contents


JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES									JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)										CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands, Except Per Share Data)	(In Thousands, Except Per Share Data)									(In Thousands, Except Per Share Data)
(Unaudited)

		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		December 31,				December 31,					December 31,				December 31,
		2021		2020		2021		2020			2022		2021		2022		2021

REVENUE	REVENUE	$	493,896	$	422,361	$	981,952	$	874,161	REVENUE	$	505,314	$	493,896	$	1,034,516	$	981,952

EXPENSES	EXPENSES									EXPENSES
Cost of Revenue	Cost of Revenue	282,825		257,782		559,460		520,711		Cost of Revenue	304,589		282,825		602,849		559,460
Research and Development	Research and Development	29,916		26,780		56,670		52,837		Research and Development	36,561		29,916		69,554		56,670
Selling, General, and Administrative	Selling, General, and Administrative	55,493		44,167		106,565		89,393		Selling, General, and Administrative	56,788		55,493		114,013		106,565

Total Expenses	Total Expenses	368,234		328,729		722,695		662,941		Total Expenses	397,938		368,234		786,416		722,695

OPERATING INCOME	OPERATING INCOME	125,662		93,632		259,257		211,220		OPERATING INCOME	107,376		125,662		248,100		259,257

INTEREST INCOME (EXPENSE)	INTEREST INCOME (EXPENSE)									INTEREST INCOME (EXPENSE)
Interest Income	Interest Income	6		52		13		120		Interest Income	1,240		6		1,392		13
Interest Expense	Interest Expense	(447)		(117)		(696)		(235)		Interest Expense	(3,406)		(447)		(4,982)		(696)
Total Interest Income (Expense)	Total Interest Income (Expense)	(441)		(65)		(683)		(115)		Total Interest Income (Expense)	(2,166)		(441)		(3,590)		(683)

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	125,221		93,567		258,574		211,105		INCOME BEFORE INCOME TAXES	105,210		125,221		244,510		258,574

PROVISION FOR INCOME TAXES	PROVISION FOR INCOME TAXES	29,551		21,585		60,791		47,907		PROVISION FOR INCOME TAXES	24,435		29,551		57,186		60,791

NET INCOME	NET INCOME	$	95,670	$	71,982	$	197,783	$	163,198	NET INCOME	$	80,775	$	95,670	$	187,324	$	197,783

Basic earnings per share	Basic earnings per share	$	1.30	$	0.94	$	2.68	$	2.14	Basic earnings per share	$	1.11	$	1.30	$	2.57	$	2.68
Basic weighted average shares outstanding	Basic weighted average shares outstanding	73,580		76,202		73,798		76,354		Basic weighted average shares outstanding	72,962		73,580		72,929		73,798

Diluted earnings per share	Diluted earnings per share	$	1.30	$	0.94	$	2.68	$	2.13	Diluted earnings per share	$	1.10	$	1.30	$	2.56	$	2.68
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	73,697		76,280		73,920		76,496		Diluted weighted average shares outstanding	73,144		73,697		73,141		73,920

See notes to condensed consolidated financial statements.

Table of Contents


JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES									JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)										CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(In Thousands, Except Share and Per Share Data)	(In Thousands, Except Share and Per Share Data)									(In Thousands, Except Share and Per Share Data)
(Unaudited)

		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		December 31,				December 31,					December 31,				December 31,
		2021		2020		2021		2020			2022		2021		2022		2021
PREFERRED SHARES:	PREFERRED SHARES:	—		—		—		—		PREFERRED SHARES:	—		—		—		—

COMMON SHARES:	COMMON SHARES:									COMMON SHARES:
Shares, beginning of period	Shares, beginning of period	103,822,265		103,696,962		103,795,169		103,622,563		Shares, beginning of period	103,953,128		103,822,265		103,921,724		103,795,169
Shares issued for equity-based payment arrangements	Shares issued for equity-based payment arrangements	21,101		23,412		26,533		78,414		Shares issued for equity-based payment arrangements	57,943		21,101		70,084		26,533
Shares issued for Employee Stock Purchase Plan	Shares issued for Employee Stock Purchase Plan	16,880		16,329		38,544		35,726		Shares issued for Employee Stock Purchase Plan	15,937		16,880		35,200		38,544
Shares, end of period	Shares, end of period	103,860,246		103,736,703		103,860,246		103,736,703		Shares, end of period	104,027,008		103,860,246		104,027,008		103,860,246

COMMON STOCK - PAR VALUE $0.01 PER SHARE:	COMMON STOCK - PAR VALUE $0.01 PER SHARE:									COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of period	Balance, beginning of period	$	1,038	$	1,037	$	1,038	$	1,036	Balance, beginning of period	$	1,040	$	1,038	$	1,039	$	1,038
Shares issued for equity-based payment arrangements		—		—		—		1

Shares issued for Employee Stock Purchase Plan	Shares issued for Employee Stock Purchase Plan	1		—		1		—		Shares issued for Employee Stock Purchase Plan	—		1		1		1
Balance, end of period	Balance, end of period	$	1,039	$	1,037	$	1,039	$	1,037	Balance, end of period	$	1,040	$	1,039	$	1,040	$	1,039

ADDITIONAL PAID-IN CAPITAL:	ADDITIONAL PAID-IN CAPITAL:									ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	Balance, beginning of period	$	527,255	$	497,030	$	518,960	$	495,005	Balance, beginning of period	$	560,034	$	527,255	$	551,360	$	518,960
Shares issued for equity-based payment arrangements		—		—		—		(1)

Tax withholding related to share-based compensation	Tax withholding related to share-based compensation	(1,046)		(1,184)		(1,998)		(6,689)		Tax withholding related to share-based compensation	(5,174)		(1,046)		(6,731)		(1,998)
Shares issued for Employee Stock Purchase Plan	Shares issued for Employee Stock Purchase Plan	2,739		2,232		6,476		5,138		Shares issued for Employee Stock Purchase Plan	2,884		2,739		6,686		6,476
Stock-based compensation expense	Stock-based compensation expense	6,545		5,127		12,055		9,752		Stock-based compensation expense	7,112		6,545		13,541		12,055
Balance, end of period	Balance, end of period	$	535,493	$	503,205	$	535,493	$	503,205	Balance, end of period	$	564,856	$	535,493	$	564,856	$	535,493

RETAINED EARNINGS:	RETAINED EARNINGS:									RETAINED EARNINGS:
Balance, beginning of period	Balance, beginning of period	$	2,480,574	$	2,293,229	$	2,412,496	$	2,235,320	Balance, beginning of period	$	2,707,182	$	2,480,574	$	2,636,342	$	2,412,496
Cumulative effect of Accounting Standards Update adoption (Note 1)		—		—		—		(493)

Net income	Net income	95,670		71,982		197,783		163,198		Net income	80,775		95,670		187,324		197,783
Dividends	Dividends	(33,661)		(32,702)		(67,696)		(65,516)		Dividends	(35,745)		(33,661)		(71,454)		(67,696)
Balance, end of period	Balance, end of period	$	2,542,583	$	2,332,509	$	2,542,583	$	2,332,509	Balance, end of period	$	2,752,212	$	2,542,583	$	2,752,212	$	2,542,583

TREASURY STOCK:	TREASURY STOCK:									TREASURY STOCK:
Balance, beginning of period	Balance, beginning of period	$	(1,613,202)	$	(1,247,546)	$	(1,613,202)	$	(1,181,673)	Balance, beginning of period	$	(1,807,118)	$	(1,613,202)	$	(1,807,118)	$	(1,613,202)
Purchase of treasury shares	Purchase of treasury shares	(193,917)		(44,026)		(193,917)		(109,899)		Purchase of treasury shares	—		(193,917)		—		(193,917)
Balance, end of period	Balance, end of period	$	(1,807,119)	$	(1,291,572)	$	(1,807,119)	$	(1,291,572)	Balance, end of period	$	(1,807,118)	$	(1,807,119)	$	(1,807,118)	$	(1,807,119)

TOTAL STOCKHOLDERS' EQUITY	TOTAL STOCKHOLDERS' EQUITY	$	1,271,996	$	1,545,179	$	1,271,996	$	1,545,179	TOTAL STOCKHOLDERS' EQUITY	$	1,510,990	$	1,271,996	$	1,510,990	$	1,271,996

Dividends declared per share	Dividends declared per share	$	0.46	$	0.43	$	0.92	$	0.86	Dividends declared per share	$	0.49	$	0.46	$	0.98	$	0.92

See notes to condensed consolidated financial statements.

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
(Unaudited)
	Six Months Ended
	December 31,
	2022		2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	187,324	$	197,783
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	24,766		25,843
Amortization	68,946		62,610
Change in deferred income taxes	(27,611)		11,573
Expense for stock-based compensation	14,544		13,027
(Gain)/loss on disposal of assets	(7,240)		240
Changes in operating assets and liabilities:
Change in receivables	102,672		70,468
Change in prepaid expenses, deferred costs and other	(39,042)		(39,991)
Change in accounts payable	(7,696)		2,995
Change in accrued expenses	(47,544)		(35,814)
Change in income taxes	47,025		8,439
Change in deferred revenues	(125,433)		(119,822)
Net cash from operating activities	190,711		197,351

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	(229,628)		—
Capital expenditures	(17,376)		(22,373)

Proceeds from dispositions	27,885		38

Purchased software	(1,027)		(7,364)
Computer software developed	(81,046)		(71,353)

Net cash from investing activities	(301,192)		(101,052)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities	365,000		220,000
Repayments on financing leases	(205,042)		(80,065)
Purchase of treasury stock	—		(193,917)
Dividends paid	(71,454)		(67,696)

Tax withholding payments related to share-based compensation	(6,731)		(1,998)
Proceeds from sale of common stock	5,684		5,505
Net cash from financing activities	87,457		(118,171)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(23,024)	$	(21,872)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	48,787	$	50,992
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	25,763	$	29,120

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
December 31,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 197,783 $ 163,198
Adjustments to reconcile net income from operations
to net cash from operating activities:
Depreciation 25,843 26,652
Amortization 62,610 61,164
Change in deferred income taxes 11,573 8,651
Expense for stock-based compensation 13,027 9,752
(Gain)/loss on disposal of assets 240 (2,019)
Changes in operating assets and liabilities:
Change in receivables 70,468 87,518
Change in prepaid expenses, deferred costs and other (39,991) (26,109)
Change in accounts payable 2,995 16
Change in accrued expenses (35,814) (22,627)
Change in income taxes 8,439 13,922
Change in deferred revenues (119,822) (126,134)
Net cash from operating activities 197,351 193,984
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,373) (9,543)
Proceeds from dispositions 38 6,157
Purchased software (7,364) (4,254)
Computer software developed (71,353) (62,804)
Purchase of investments — (12,100)
Net cash from investing activities (101,052) (82,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities 220,000 —
Repayments on credit facilities and financing leases (80,065) (57)
Purchase of treasury stock (193,917) (109,899)
Dividends paid (67,696) (65,516)
Tax withholding payments related to share-based compensation (1,998) (6,689)
Proceeds from sale of common stock 5,505 5,138
Net cash from financing activities (118,171) (177,023)
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (21,872) $ (65,583)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 50,992 $ 213,345
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,120 $ 147,762

See notes to condensed consolidated financial statements.

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In Thousands, Except Per Share Amounts)

~~(Unaudited)~~

NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Company

Jack Henry & Associates, Inc. and subsidiaries ("Jack Henry," "JKHY," or the "Company") is a ~~leading~~well-rounded financial technology company. JKHY was founded in 1976 as a provider of ~~technology~~core information processing solutions for banks. Today, the Company’s extensive array of products and ~~payment~~services includes processing ~~services primarily~~transactions, automating business processes, and managing information for the financial services industry. The Company has developed and acquired a number of banking and credit union software systems. The Company's revenues are predominately earned by marketing those systems toapproximately 7,800 financial institutions ~~nationwide, by providing the conversion~~ and implementation services for financial institutions to utilize JKHY systems, and by providing payment processing and other related services. JKHY also provides continuing support and services to customers using on-premise or JKHY private and public cloud-based systems.diverse corporate entities.

Consolidation

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

Comprehensive Income

Comprehensive income for the three and six months ended December 31, ~~2021,~~2022 and ~~2020,~~2021, equals the Company’s net income.

~~Change in Accounting Policy~~

The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses, ("CECL") with an adoption date of July 1, 2020. As a result, the Company changed its accounting policy for allowance for credit losses. The accounting policy pursuant to CECL is disclosed below. The adoption of CECL resulted in an immaterial cumulative effect adjustment recorded in retained earnings as of July 1, 2020.

Allowance for Credit Losses

The Company monitors trade and other receivable balances and contract assets and estimates the allowance for lifetime expected credit losses. Estimates of expected credit losses are based on historical collection experience and other factors, including those related to current market conditions and events.

The following table summarizes allowance for credit losses activity for the fiscal quarter and year-to-date ~~period~~periods ended December 31, ~~2021,~~2022, and ~~2020:~~

Three Months Ended December 31, Six Months Ended December 31,
2021 2020 2021 2020
Allowance for credit losses - beginning balance $ 7,660 $ 6,731 $ 7,267 $ 6,719
Cumulative effect of accounting standards update adoption — — — 493
Current provision for expected credit losses 300 370 840 910
Write-offs charged against allowance (227) (263) (373) (1,286)
Recoveries of amounts previously written off — (1) (1) (4)
Other — (7) — (2)
Allowance for credit losses - ending balance $ 7,733 $ 6,830 $ 7,733 $ 6,830

2021:

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	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022				2021
Allowance for credit losses - beginning balance	$	8,030	$	7,660	$	7,616			$	7,267

Current provision for expected credit losses	480		300		960				840
Write-offs charged against allowance	(325)		(227)		(390)				(373)
Recoveries of amounts previously written off	(1)		—		(2)				(1)

Allowance for credit losses - ending balance	$	8,184	$	7,733	$	8,184	$	8,184	$	7,733

Property and Equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation at December 31, ~~2021,~~2022, totaled ~~$453,439~~$461,010 and at June 30, ~~2021,~~2022, totaled ~~$435,169.~~$454,879.

Intangible Assets

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~~3 to ~~twenty~~20 years. Accumulated amortization of intangible assets totaled ~~$983,626~~$1,078,867 and ~~$921,050~~$1,030,800 at December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, respectively.

~~Purchase~~

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Investments

At December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, the Company had an investment in the preferred stock of Automated Bookkeeping, ~~Inc.~~Inc ("Autobooks") of ~~$13,250,~~$18,250, which represented a non-controlling share of the voting equity as of ~~each~~that date. The total investment was recorded at cost and is included within other non-current assets on the Company's balance sheet. There have been no events or changes in circumstances that would indicate an impairment and no price changes resulting from observing a similar or identical investment. An impairment and/or an observable price change would be an adjustment to recorded cost. Fair value will not be estimated unless there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

Common Stock

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.~~line of credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At December 31, ~~2021,~~2022, and June 30, 2022, there were 31,043 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,948 additional shares. The total cost of treasury shares at December 31, ~~2021,~~2022, and June 30, 2022, was ~~$1,807,119.~~$1,807,118. During the first six months of fiscal ~~2022,~~2023, the Company ~~repurchased 1,250 shares. At June 30, 2021, there were 29,793~~did not repurchase any shares ~~in treasury stock and the Company had authority to repurchase up to 5,198 additional shares. The total cost~~ of ~~treasury shares at June 30, 2021, was $1,613,202. During the first six months of fiscal 2021, the Company repurchased 675 shares.~~its common stock.

Income Taxes

Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement ~~basis~~ and tax basis of assets and liabilities. A valuation allowance would be established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties ~~expense~~expenses are recognized on the full amount of unrecognized benefits for uncertain tax positions. The Company's policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.

Interim Financial Statements

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 ("U.S. GAAP") 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, ~~2021.~~2022. 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, ~~2021,~~2022, 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 in all material respects the financial position of the Company as of December 31, ~~2021,~~2022, the results of its operations for

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the three and six months ended December 31, ~~2021,~~2022 and ~~2020,~~2021, changes in stockholders' equity for the three and six months ended December 31, ~~2021,~~2022 and ~~2020,~~2021, and its cash flows for the six months ended December 31, ~~2021,~~2022 and ~~2020.~~2021. The condensed consolidated balance sheet at June 30, ~~2021,~~2022, 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 six months ended December 31, ~~2021,~~2022, are not necessarily indicative of the results to be expected for the entire fiscal year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Risks and Uncertainties

The extent to which the COVID-19 pandemic will directly or indirectly impact our business and financial results, including revenue, expenses, cost of revenues, research and development, and selling, general and administrative expenses, will depend on future developments that are highly uncertain, such as new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19 (including the efficacy of vaccines against new variants and the development and effectiveness of treatments), as well as the economic impact on local, regional, national and international customers and markets. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2021, and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses, as well as the carrying value of goodwill and other long-lived assets. Whilehas determined there was not a material impact to the Company’s condensed consolidated financial statements as of and for the ~~fiscal~~ quarter ended December 31, ~~2021, the Company’s future assessment~~2022, as a result of the ~~magnitude~~continuing impact of the COVID-19 pandemic. However, the extent to which the COVID-19 pandemic may impact the Company's future operational and ~~duration of COVID-19, as well as other factors, could result in material impacts~~financial performance remains uncertain and difficult to predict. The Company will continue to monitor developments related to the ~~Company’s condensed consolidated financial statements in future reporting periods.~~

COVID-19 pandemic.

NOTE 2:2. RECENT ACCOUNTING PRONOUNCEMENTS

~~Recently Adopted Accounting Guidance~~

In December of 2019, the FASB issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions and simplifies other requirements of Topic 740 guidance. The ASU was effective for the Company on July 1, 2021. The Company adopted ASU 2019-12 effective July 1, 2021 with no material impact on its condensed consolidated financial statements.

Not Yet Adopted

In October of 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The ~~Company plans to adopt~~ ASU ~~2021-08 when required, which will be~~is effective for fiscal years beginning after December 15, 2022, ~~including~~and interim periods within those fiscal years. The Company plans to adopt the ~~fiscal years,~~ASU effective July 1, 2023, and ~~should be applied~~will apply it prospectively to business combinations occurring on or after the effective date of this ASU. Although this ASU has no current effect on the Company's condensed consolidated financial statements, there could be an effect for any business combinations taking place after the effective date of this ASU.

that date.

NOTE 3. REVENUE AND DEFERRED COSTS

Revenue Recognition

The Company generates revenue from data processing, transaction processing, software licensing and related services, professional services, and hardware sales.

Disaggregation of Revenue

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note ~~10,~~11, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s

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revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

Three Months Ended December 31, Six Months Ended December 31,
2021 2020 2021 2020
Private and Public Cloud1
$ 138,340 $ 124,498 $ 273,982 $ 245,456
Product Delivery and Services 79,499 48,414 131,014 105,312
On-Premise Support2
78,372 77,961 188,708 181,102
Services and Support 296,211 250,873 593,704 531,870
Processing 197,685 171,488 388,248 342,291
Total Revenue $ 493,896 $ 422,361 $ 981,952 $ 874,161

1 The name of this revenue stream was changed in fiscal 2021 from "outsourcing and cloud" to "private and public cloud" to better reflect the nature of the related revenue. However, the nature of the revenue included within this caption has not changed and is the same in the current fiscal quarter as it was in the comparative quarter of fiscal 2021 and prior.

2 The name of this revenue stream was changed in fiscal 2021 from "in-house support" to "on-premise support" to better reflect the nature of the related revenue. However, the nature of the revenue included within this caption has not changed and is the same in the current fiscal quarter as it was in the comparative quarter of fiscal 2021 and prior.


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Private and Public Cloud	$	153,130	$	138,340	$	302,129	$	273,982
Product Delivery and Services	58,594		79,499		116,117		131,014
On-Premise Support	78,976		78,372		192,603		188,708
Services & Support	290,700		296,211		610,849		593,704

Processing	214,614		197,685		423,667		388,248

Total Revenue	$	505,314	$	493,896	$	1,034,516	$	981,952

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers.


		December 31, 2021		June 30, 2021			December 31, 2022		June 30, 2022
Receivables, net	Receivables, net	$	236,096	$	306,564	Receivables, net	$	246,378	$	348,072
Contract Assets - Current	Contract Assets - Current	20,374		22,884		Contract Assets - Current	24,136		24,447
Contract Assets - Non-current	Contract Assets - Non-current	59,119		52,920		Contract Assets - Non-current	68,092		68,261
Contract Liabilities (Deferred Revenue) - Current	Contract Liabilities (Deferred Revenue) - Current	208,733		319,748		Contract Liabilities (Deferred Revenue) - Current	214,742		330,687
Contract Liabilities (Deferred Revenue) - Non-current	Contract Liabilities (Deferred Revenue) - Non-current	67,045		75,852		Contract Liabilities (Deferred Revenue) - Non-current	70,101		71,485

Contract assets primarily result from revenue being recognized when or as control of a solution or service is transferred to the customer, except where invoicing is contingent upon the completion of other performance obligations or payment terms differ from the provisioning of services. The current portion of contract assets is reported within prepaid expenses and other in the condensed consolidated balance sheet, and the non-current portion is included in other non-current assets. Contract liabilities (deferred revenue) primarily relate to consideration received from customers in advance of delivery of the related goods and services to the customer.

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Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

The Company analyzes contract language to identify if a significant financing component does exist and ~~adjusts~~would adjust the transaction price for any material effects of the time value of money if the timing of payments provides either party to the contract with a significant benefit of financing the transaction.

During the three months ended December 31, ~~2021~~2022, and ~~2020,~~2021, the Company recognized revenue of ~~$89,257~~$83,145 and ~~$79,421,~~$94,862, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods. For the six months ended December 31, ~~2021~~2022, and ~~2020,~~2021, the Company recognized revenue of ~~$157,781~~$159,393 and ~~$156,666,~~$166,273, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

Amounts recognized that relate to performance obligations satisfied (or partially satisfied) in prior periods were immaterial for each period presented. These adjustments are primarily the result of transaction price re-allocations due to changes in estimates of variable consideration.

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Transaction Price Allocated to Remaining Performance Obligations

As of December 31, ~~2021,~~2022, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled ~~$5,154,912.~~$5,654,930. The Company expects to recognize approximately ~~26%~~25% over the next 12 months, 20% in 13-24 months, and the balance thereafter.

Contract Costs

The Company incurs incremental costs to obtain a contract as well as costs to fulfill contracts with customers that are expected to be recovered. These costs consist primarily of sales commissions, which are incurred only if a contract is obtained, and customer conversion or implementation-related costs. Capitalized costs are amortized based on the transfer of goods or services to which the asset relates, in line with the percentage of revenue recognized for each performance obligation to which the costs are allocated.

Capitalized costs totaled ~~$347,867~~$410,904 and ~~$314,807~~$380,095, at December 31, ~~2021~~2022, and June 30, ~~2021,~~2022, respectively.

For the three months ended December 31, ~~2021~~2022, and ~~2020,~~2021, amortization of deferred contract costs ~~was~~totaled $34,861 and $32,154, ~~and $28,794,~~ respectively. During the six months ended December 31, ~~2021,~~2022, and ~~2020,~~2021, amortization of deferred contract costs totaled $76,841 and $67,998, ~~and $62,620,~~ respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

For cash equivalents, certificates of deposit, 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:

Level 1: inputs to the valuation are quoted prices in an active market for identical assets

Level 2: inputs to the valuation include quoted prices for similar assets in active markets that are observable either directly or indirectly

Level 3: valuation is based on significant inputs that are unobservable in the market and the Company's own estimates of assumptions that we believe market participants would use in pricing the asset

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Fair value of financial assets included in current assets is as follows:

Estimated Fair Value Measurements Total Fair
Level 1 Level 2 Level 3 Value
December 31, 2021
Financial Assets:
Certificates of Deposit $ — $ 1,209 $ — $ 1,209
Financial Liabilities:
Revolving credit facility $ — $ 240,000 $ — $ 240,000
June 30, 2021
Financial Assets:
Certificates of Deposit $ — $ 1,200 $ — $ 1,200
Financial Liabilities:
Revolving credit facility $ — $ 100,000 $ — $ 100,000


	Estimated Fair Value Measurements						Total Fair
	Level 1		Level 2		Level 3		Value
December 31, 2022
Financial Assets:

Certificates of Deposit	$	—	$	1,213	$	—	$	1,213
Financial Liabilities:
Revolving credit facility	$	—	$	275,000	$	—	$	275,000
June 30, 2022
Financial Assets:
Certificates of Deposit	$	—	$	1,212	$	—	$	1,212

Financial Liabilities:
Revolving credit facility	$	—	$	115,000	$	—	$	115,000

NOTE 5. LEASES

The Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease agreements with lease and non-lease

components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the Company’s leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based upon the information available at commencement date. The determination of the incremental borrowing rate requires judgment and is determined by using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease.

The Company leases certain office space, data centers, and equipment with remaining terms of 1 to 1211 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. Variable lease costs are recognized as a variable lease expense when incurred.

At December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, the Company had operating lease assets of ~~$51,888~~$43,743 and ~~$55,977~~$46,869 and financing lease assets of ~~$124~~$20 and ~~$188,~~$65, respectively. At December 31, ~~2021,~~2022, total operating lease liabilities of ~~$56,653~~$48,116 were comprised of current operating lease liabilities of ~~$11,623~~$10,246 and noncurrent operating lease liabilities of ~~$45,030, and~~$37,870. At December 31, 2022, total financing lease liabilities of ~~$129~~$21 were ~~comprised of~~all current ~~financing lease liabilities of $103 and noncurrent financing lease liabilities of $26.~~liabilities. At June 30, ~~2021,~~2022, total operating lease liabilities of ~~$60,828~~$51,452 were comprised of current operating lease liabilities of ~~$11,460~~$10,681 and noncurrent operating lease liabilities of ~~$49,368, and~~$40,771. At December 31, 2022, total financing lease liabilities of ~~$193~~$67 were ~~comprised of~~all current financing lease ~~liabilities of $110 and noncurrent financing lease liabilities of $83.~~liabilities.

Operating lease assets are included within other non-current assets, and operating lease liabilities are included within accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s condensed consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of ~~$27,625~~$35,636 and ~~$23,813~~$31,006 as of December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, respectively. Financing lease assets are included within property and equipment, net, and financing lease liabilities are included within notes payable (current portion) and long-term debt (noncurrent portion) in the Company’s condensed consolidated balance sheet. Financing lease assets were recorded net of accumulated amortization of ~~$206~~$295 and ~~$153~~$255 as of December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, respectively.

Operating lease costs for the three months ended December 31, 2022, and 2021, were $3,029 and ~~2020, were~~ $3,327, ~~and $3,766,~~ respectively. Financing lease costs for the three months ended December 31, 2022, and 2021, were $20 and ~~2020, were~~ $27, ~~and $30,~~

respectively. Total operating and financing lease costs for the respective quarters included variable lease costs of ~~approximately~~$962 and $441, ~~and $809,~~ respectively. Operating lease costs for the six months ended December 31, 2022, and 2021, were $6,088 and ~~2020, were~~ $6,759, ~~and $7,675,~~ respectively. Financing lease costs for the six months ended December 31, 2022, and 2021, were $40 and ~~2020, were~~ $55, ~~and $30,~~ respectively. Total operating and financing lease costs for the respective fiscal year-to-date periods included variable lease costs of ~~approximately~~$1,890 and $840, ~~and $2,189.~~respectively. Operating and financing lease expense are included within cost of services, research and development, and selling, general ~~and~~& administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of income.

For the six months ended December 31, ~~2021,~~2022, and ~~2020,~~2021, the Company had operating cash flows for payments on operating leases of ~~$6,802~~$6,202 and ~~$6,872, respectively,~~$6,802, and ROU assets obtained in exchange for operating lease liabilities of $2,282 and $1,870, ~~and $4,485,~~ respectively. ~~Financing~~Operating cash flows for ~~payments~~interest paid on financing leases for the six months ended December 31, 2022, and 2021, were $42 and ~~2020, were~~ $55, ~~and $63,~~ respectively.

As of December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, the ~~weighted average~~weighted-average remaining lease term for the Company's operating leases was 7772 months and 8176 months, ~~respectively,~~ and the ~~weighted average~~weighted-average discount rate was ~~2.62%~~2.59% and ~~2.67%~~2.58%, respectively. As of December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, the ~~weighted average~~weighted-average remaining lease term for the Company's financing leases was 153 months and 219 months, respectively. The ~~weighted average~~weighted-average discount rate for the Company's financing leases was ~~2.36% and 2.39%~~2.19% as of December 31, ~~2021,~~2022, and 2.29% as of June 30, ~~2021, respectively.~~

2022.

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at December 31, 2021*2022*:


Due Dates (fiscal year)	Due Dates (fiscal year)	Future Minimum Rental Payments		Due Dates (fiscal year)	Future Minimum Rental Payments

2022 (remaining period)		6,617
2023		12,089
2023 (remaining period)				2023 (remaining period)	$	5,879
2024	2024	10,029		2024	10,696
2025	2025	7,266		2025	7,952
2026	2026	6,342		2026	7,046
2027				2027	6,265
Thereafter	Thereafter	19,388		Thereafter	14,296
Total lease payments	Total lease payments	$	61,731	Total lease payments	$	52,134
Less: interest	Less: interest	(5,078)		Less: interest	(4,018)
Present value of lease liabilities	Present value of lease liabilities	$	56,653	Present value of lease liabilities	$	48,116

*Financing leases were immaterial to the ~~fiscal~~ quarter, so a maturity of lease liabilities table has only been included for operating leases.

Lease payments ~~included~~include $5,464 related to options to extend lease terms that are reasonably certain of being exercised. At December 31, ~~2021, the Company had $60 in~~2022, there were $6,128 of legally binding lease payments for ~~one lease that was~~leases signed but not yet commenced. ~~The lease commencement date is March 1, 2022, and the lease term is 36 months.~~

NOTE 6. DEBT

~~Revolving credit facility~~Credit facilities

On ~~February 10, 2020,~~August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced the prior credit facility described below. The credit agreement allows for borrowings of up to $600,000, which may be increased to $1,000,000 by the Company at any time until maturity. The credit agreement bears interest at a variable rate equal to (a) a rate based on an adjusted Secured Overnight Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement. As of December 31, 2022, the Company was in compliance with all such covenants. The amended and restated credit facility terminates

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August 31, 2027. There was $275,000 outstanding under the amended and restated credit facility at December 31, 2022.

On June 30, 2022, there was a $115,000 outstanding balance on the prior credit facility that was entered into on February 10, 2020. The prior credit facility was a five-year senior, unsecured revolving credit facility. The prior credit facility ~~allows~~allowed for borrowings of up to $300,000, which ~~may~~could be increased by the Company to $700,000 at any time until ~~maturity to $700,000.~~maturity. The prior credit facility ~~bears~~bore interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iv) the eurocurrency rate for a one-month interest period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The prior credit facility iswas guaranteed by certain subsidiaries of the Company and iswas subject to various financial covenants that ~~require~~required the Company to maintain certain financial ratios as defined in the prior credit ~~facility~~ agreement. As of ~~December 31, 2021,~~June 30, 2022, the Company was in compliance with all such covenants. The ~~revolving~~prior credit ~~facility terminates~~facility's termination date was February 10, 2025. ~~There was $240,000 outstanding under the credit facility at December 31, 2021, and $100,000 outstanding balance at June 30, 2021.~~

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line expires on April 30, 2023. There was no balance outstanding at December 31, ~~2021,~~2022, or June 30, ~~2021.~~2022.

Interest

The Company paid interest of ~~$604~~$2,724 and ~~$105~~$604 during the six months ended December 31, 2022, and 2021, ~~and 2020,~~ respectively.

NOTE 7. INCOME TAXES

~~Provision for income taxes increased~~The effective tax rate decreased for the three months ended December 31, ~~2021,~~2022, compared to the three months ended December 31, ~~2020,~~2021, with an effective tax rate of ~~23.6%~~23.2% of income before income taxes, compared to ~~23.1%~~23.6% in the ~~prior-year~~prior fiscal year quarter. The ~~increase~~decrease in the effective tax rate ~~comparing the three-month periods ended December 31~~ was primarily due to ~~the impact of increases in operating income relative to the impact of other items affecting the effective tax rate in the current period.~~

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For the six months ended December 31, 2021, provision for income taxes increased compared to the six months ended December 31, 2020, with an effective tax rate of 23.5% of income before income taxes, compared to 22.7% for the same period last fiscal year. The increase in the effective tax rate comparing the fiscal year-to-date periods ended December 31 was primarily due to the relative impact of the increase in operating income in the current fiscal year-to-date period and a larger excess tax benefit received from share-based compensation in the ~~prior~~current fiscal ~~year-to-date period.~~year quarter.

For the six months ended December 31, 2022, the effective tax rate decreased compared to the six months ended December 31, 2021, with an effective tax rate of 23.4% of income before taxes, compared to 23.5% for the same period last fiscal year.

The Company paid income taxes, net of refunds, of ~~$40,687~~$37,213 and ~~$24,794~~$40,687 in the six months ended December 31, ~~2021,~~2022 and ~~2020,~~2021, respectively.

At December 31, ~~2021,~~2022, the Company had ~~$9,594~~$10,214 of gross unrecognized tax benefits before interest and penalties, ~~$8,891~~$9,083 of which, if recognized, would affect our effective tax rate. The Company had accrued interest and penalties of ~~$1,425~~$1,546 and ~~$1,896~~$1,425 related to uncertain tax positions at December 31, ~~2021,~~2022, and ~~2020,~~2021, respectively.

The U.S. federal ~~and state~~ income tax returns for fiscal ~~2018~~2019 and all subsequent years remain subject to examination as of December 31, ~~2021,~~2022, under statute of limitations rules. The U.S. state income tax returns that remain subject to examination as of December 31, 2022, under the statute of limitation rules varies by state jurisdiction from fiscal 2016 through 2019 and all subsequent years. The Company ~~believes it is reasonably possible that~~anticipates potential changes due to lapsing of statutes of limitations, and examination closures could reduce the ~~liability for~~ unrecognized tax benefits ~~could reduce~~balance by ~~$3,500~~$1,500 to ~~$4,500~~$3,500 within twelve months of December 31, ~~2021, due to lapsing statutes of limitations and examination closures.~~

2022.

NOTE 8. STOCK-BASED COMPENSATION

Our operating income for the three months ended December 31, 2022, and 2021, included $7,545 and ~~2020, included~~ $6,956 ~~and $5,127~~ of stock-based compensation costs, respectively. Our operating income for the six months ended December 31, 2022, and 2021, included $14,544 and ~~2020, included~~ $13,027 ~~and $9,752~~ of stock-based compensation costs, respectively.

Stock Options

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.

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A summary of option plan activity under this plan is as follows:

Number of Shares Weighted Average Exercise Price Aggregate
Intrinsic
Value
Outstanding July 1, 2021 22 $ 87.27
Granted — —
Forfeited — —
Exercised — —
Outstanding December 31, 2021 22 $ 87.27 $ 1,729
Vested and Expected to Vest December 31, 2021 22 $ 87.27 $ 1,729
Exercisable December 31, 2021 22 $ 87.27 $ 1,729


	Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding July 1, 2022	12	$	87.27
Granted	—	—
Forfeited	—	—
Exercised	—	—
Outstanding December 31, 2022	12	$	87.27	$	1,032
Vested and Expected to Vest December 31, 2022	12	$	87.27	$	1,032
Exercisable December 31, 2022	12	$	87.27	$	1,032

At December 31, ~~2021,~~2022, there was no compensation cost yet to be recognized related to outstanding options. For options currently exercisable, the weighted average remaining contractual term (remaining period of exercisability) as of December 31, ~~2021,~~2022, was ~~4.50~~3.5 years.

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Restricted Stock Unit Awards

The Company issues unit awards under the 2015 EIP. The following table summarizes non-vested ~~performance and~~ restricted stock unit awards as of December 31, ~~2021:~~2022:


		Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding July 1, 2021		294	$	160.22
Unit awards							Unit awards	Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding July 1, 2022							Outstanding July 1, 2022	303	$	166.50
Granted	Granted	130	178.47				Granted	124	219.65
Vested	Vested	(40)	148.56				Vested	(91)	167.18
Forfeited	Forfeited	(41)	198.03				Forfeited	(13)	187.68
Outstanding December 31, 2021		343	$	163.99	$	57,242
Outstanding December 31, 2022							Outstanding December 31, 2022	323	$	185.86	$	56,803

The ~~130~~124 unit awards granted in fiscal ~~2022~~2023 had service requirements and performance ~~targets,~~measures, with 82 only having ~~only~~ service requirements. The unit awards with only service requirements were valued at the weighted average fair value of the non-vested units based on the fair market value of the Company’s equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period, consistent with the methodology for calculating compensation expense on such awards.

The remaining 4842 unit awards granted in fiscal ~~2022~~2023 have performance ~~targets~~measures along with service requirements. 1917 of these performance and service requirement unit awards were valued at grant by estimating 100% payout at release and using the fair market value of the Company equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period. The payout at release of approximately half of these unit awards will be determined based on the Company's compound annual growth rate ~~(CAGR)~~ for revenue (excluding adjustments) for the three-year vesting period compared against goal thresholds as defined in the award agreement. The performance payout at release of the other half of these unit awards will be determined based on the expansion of the Company's non-GAAP operating margin over the three-year vesting period compared against goal thresholds as defined in the award agreement. The other 2925 performance and service requirement unit awards were valued at grant using a Monte Carlo pricing model as of the measurement date customized to the specific provisions of the Company’s plan design. Per the Company's award vesting and settlement provisions, the awards that ~~utilized~~utilize a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return ~~(TSR)~~("TSR") in comparison to the ~~custom~~compensation peer group ~~comprised~~made up of participants approved by the Compensation Committee of the Company's Board of Directors for fiscal year ~~2022.~~2023. The Monte Carlo inputs used in the model to estimate fair value at the measurement date and resulting values for these performance unit awards are as follows.

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~~Fiscal year 2022~~ Monte Carlo award inputs:

Fiscal 2023

Compensation Peer Group:

Volatility

~~28.55~~29.4

Risk free interest rate

~~0.32~~2.96

Annual dividend based on most recent quarterly dividend

$1.96

Dividend yield

~~1.84~~0.94

Beginning average percentile rank for TSR

6571.0

At December 31, ~~2021,~~2022, there was ~~$29,290~~$31,658 of compensation expense, excluding forfeitures, that has yet to be recognized related to non-vested restricted stock unit awards, which will be recognized over a weighted average period of ~~1.39~~1.32 years.

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NOTE 9. EARNINGS PER SHARE

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

Three Months Ended December 31, Six Months Ended December 31,
2021 2020 2021 2020
Net Income $ 95,670 $ 71,982 $ 197,783 $ 163,198
Common share information:
Weighted average shares outstanding for basic earnings per share1
73,580 76,202 73,798 76,354
Dilutive effect of stock options and restricted stock 117 78 122 142
Weighted average shares outstanding for diluted earnings per share1
73,697 76,280 73,920 76,496
Basic earnings per share2
$ 1.30 $ 0.94 $ 2.68 $ 2.14
Diluted earnings per share2
$ 1.30 $ 0.94 $ 2.68 $ 2.13

1The change in weighted average shares outstanding is primarily due to the weighted effect of the Company's repurchase of 2,800 shares of common stock during all of fiscal 2021 (675 shares repurchased during the first half of fiscal 2021) and the repurchase of 1,250 shares during fiscal year-to-date 2022.

2~~Common stock repurchases during the trailing twelve months contributed $0.05 to diluted earnings per share for the second fiscal quarter and $0.09 for year-to-date fiscal 2022.~~


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Net Income	$	80,775	$	95,670	$	187,324	$	197,783
Common share information:
Weighted average shares outstanding for basic earnings per share	72,962		73,580		72,929		73,798
Dilutive effect of stock options and restricted stock units	182		117		212		122
Weighted average shares outstanding for diluted earnings per share	73,144		73,697		73,141		73,920
Basic earnings per share	$	1.11	$	1.30	$	2.57	$	2.68
Diluted earnings per share	$	1.10	$	1.30	$	2.56	$	2.68

Per share information is based on the weighted average number of common shares outstanding for the three and six months ended December 31, ~~2021,~~2022 and ~~2020.~~2021. Stock options and restricted stock units have been included in the calculation of earnings per share to the extent they are dilutive. There were 2831 and 2325 anti-dilutive stock options or restricted stock units excluded for the three and six months ended December 31, ~~2021,~~2022, respectively, and 2128 and 23 were excluded for ~~both~~ the three and six months ended December 31, ~~2020.~~2021, respectively.

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NOTE 10. BUSINESS ACQUISITION

Payrailz

On August 31, 2022, the Company acquired all of the equity interest in Payrailz, LLC ("Payrailz"). The final purchase price, following customary post-closing adjustments to the extent actual closing date working capital, cash, debt, and unpaid seller transaction expenses exceeded or were less than the amounts estimated at closing, was $230,205. Pursuant to the merger agreement for the transaction, $48,500 of the purchase price was placed in an escrow account at the closing, consisting of $2,500 for any final purchase price adjustments owed by the sellers, which amount was released to the sellers on December 15, 2022, in connection with post-closing adjustments, and $46,000 for indemnification matters under the merger agreement.

The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was funded by our revolving line of credit (Note 6) and cash generated from operations. Payrailz provides cloud-native, API-first, AI-enabled consumer and commercial digital payment solutions and experiences that enable money to be moved in the moment of need.

Management has completed a preliminary purchase price allocation and assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired, and liabilities assumed, based on their fair values as of August 31, 2022, and taking into account the post-closing purchase price adjustment described above, are set forth below:


Current assets	$	1,851

Identifiable intangible assets	119,868
Deferred revenue	(8,104)
Total other liabilities assumed	(749)
Total identifiable net assets	112,866
Goodwill	117,339
Net assets acquired	$	230,205

The amounts shown above include a measurement period adjustment made during the second quarter of fiscal 2023 related to a working capital adjustment. The amounts shown above may change as management continues to evaluate the income tax implications of this business combination.

The goodwill of $117,339 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 Payrailz, together with the value of Payrailz's assembled workforce. The goodwill from this acquisition has been allocated to our Payments segment and $117,339 is expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $6,109, computer software of $112,505, and other intangible assets of $1,254. The amortization period for acquired customer relationships, computer software, and other intangible assets is over a term of 15 years, 10 years, and 15 years, respectively.

Current assets were inclusive of cash acquired of $577. The fair value of current assets acquired included accounts receivable of $978, none of which were expected to be uncollectible.

Costs incurred related to the acquisition of Payrailz during the three and six months ended December 31, 2022, totaled $50 and $508, respectively, for administrative and professional services, travel, and other fees, and were expensed as incurred and reported within cost of revenue and selling, general, and administrative expense.

The Company's condensed consolidated statements of income for the three and six months ended December 31, 2022, included revenue of $2,578 and $3,316, respectively, and after-tax net loss of $5,387 and $7,251, respectively, resulting from Payrailz's operations.

The accompanying condensed consolidated statements of income for the three and six months ended December 31, 2022, and 2021, 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 six months ended December 31, 2022, and the three and six months ended December 31, 2021, is presented as if this acquisition had occurred at the beginning of the prior period presented. The pro forma net income includes estimated incremental amortization expense of $1,611 and $4,546 for the three and six months ended December 31, 2021, respectively, and $1,957 for the six months ended December 31, 2022. 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

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historical results that would have been obtained if the acquisition had actually occurred during this period, or the results that may be obtained in the future as a result of the acquisition.


	Three Months Ended December 31,						Six Months Ended December 31,
		2022	2021					2022	2021
			Actual		Pro forma					Pro forma		Pro forma
Revenue			$	505,314	$	495,727				$	1,036,143	$	985,124
Net Income			80,775		92,793					182,787		189,890

NOTE ~~10.~~11. REPORTABLE SEGMENT INFORMATION

The Company is a provider of integrated computer systems that perform data processing (available for on-premise installations or JKHY cloud-based services) for banks and credit unions.

The Company’s operations are classified into 4four reportable segments: Core, 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, including ATM, debit, and credit card transaction processing services, online and mobile bill pay solutions, Automated Clearing House ("ACH") origination and remote deposit capture processing, and risk management products and services. The Complementary segment provides additional software and services that can be integrated with our ~~core~~Core solutions, and many can be used independently. The Corporate ~~and~~& Other segment includes hardware revenue and costs, as well as operating costs not directly attributable to the other three segments.

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.

~~Table~~Immaterial adjustments have been made to reclassify revenue that was recognized for the three and six months ended December 31, 2021, from the Complementary to the Payments and Corporate and Other segments. Immaterial adjustments were also made to reclassify cost of ~~Contents~~

Three Months Ended
December 31, 2021
Core Payments Complementary Corporate and Other Total
REVENUE
Services and Support $ 145,699 $ 23,944 $ 112,490 $ 14,078 $ 296,211
Processing 9,179 158,584 29,234 688 197,685
Total Revenue 154,878 182,528 141,724 14,766 493,896
Cost of Revenue 64,554 95,570 58,151 64,550 282,825
Research and Development 29,916
Selling, General, and Administrative 55,493
Total Expenses 368,234
SEGMENT INCOME $ 90,324 $ 86,958 $ 83,573 $ (49,784)
OPERATING INCOME 125,662
INTEREST INCOME (EXPENSE) (441)
INCOME BEFORE INCOME TAXES $ 125,221

Three Months Ended
December 31, 2020
Core Payments Complementary Corporate and Other Total
REVENUE
Services and Support $ 126,758 $ 14,807 $ 98,829 $ 10,479 $ 250,873
Processing 8,190 140,375 22,579 344 171,488
Total Revenue 134,948 155,182 121,408 10,823 422,361
Cost of Revenue 58,485 86,455 52,407 60,435 257,782
Research and Development 26,780
Selling, General, and Administrative 44,167
Total Expenses 328,729
SEGMENT INCOME $ 76,463 $ 68,727 $ 69,001 $ (49,612)
OPERATING INCOME 93,632
INTEREST INCOME (EXPENSE) (65)
INCOME BEFORE INCOME TAXES $ 93,567
revenue from the Complementary to the Payments and Corporate and Other segments for the three and six months ended December 31, 2021. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. Revenue reclassed for the three and six months ended December 31, 2021, from Complementary to Payments was $2,977 and $5,946, respectively, and from Complementary to Corporate and Other was $2,207 and $2,941, respectively. Cost of revenue reclassed for the three and six months ended December 31, 2021, from Complementary to Payments was $1,396 and $2,754, respectively, and from Complementary to Corporate and Other was $773 and $482, respectively.

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		Six Months Ended											Three Months Ended
		December 31, 2021											December 31, 2022
		Core		Payments		Complementary		Corporate & Other		Total			Core		Payments		Complementary		Corporate & Other		Total
REVENUE	REVENUE											REVENUE
Services and Support	Services and Support	301,536		39,594		227,443		25,131		593,704		Services and Support	$	145,650	$	19,340	$	110,380	$	15,330	$	290,700
Processing	Processing	18,627		312,556		55,762		1,303		388,248		Processing	9,740		172,147		31,915		812		214,614
Total Revenue	Total Revenue	320,163		352,150		283,205		26,434		981,952		Total Revenue	155,390		191,487		142,295		16,142		505,314

Cost of Revenue	Cost of Revenue	131,456		188,795		113,635		125,574		559,460		Cost of Revenue	68,324		108,071		59,270		68,924		304,589
Research and Development	Research and Development									56,670		Research and Development									36,561
Selling, General, and Administrative	Selling, General, and Administrative									106,565		Selling, General, and Administrative									56,788

Total Expenses	Total Expenses									722,695		Total Expenses									397,938

SEGMENT INCOME	SEGMENT INCOME	$	188,707	$	163,355	$	169,570	$	(99,140)			SEGMENT INCOME	$	87,066	$	83,416	$	83,025	$	(52,782)

OPERATING INCOME	OPERATING INCOME									259,257		OPERATING INCOME									107,376

INTEREST INCOME (EXPENSE)	INTEREST INCOME (EXPENSE)									(683)		INTEREST INCOME (EXPENSE)									(2,166)

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES									$	258,574	INCOME BEFORE INCOME TAXES									$	105,210


	Three Months Ended
	December 31, 2021
	Core		Payments		Complementary		Corporate & Other		Total
REVENUE
Services and Support	$	145,699	$	25,294	$	108,933	$	16,285	$	296,211
Processing	9,179		160,211		27,607		688		197,685
Total Revenue	154,878		185,505		136,540		16,973		493,896

Cost of Revenue	64,554		96,966		55,982		65,323		282,825
Research and Development									29,916
Selling, General, and Administrative									55,493


Total Expenses									368,234

SEGMENT INCOME	$	90,324	$	88,539	$	80,558	$	(48,350)

OPERATING INCOME									125,662

INTEREST INCOME (EXPENSE)									(441)

INCOME BEFORE INCOME TAXES									$	125,221

Six Months Ended
December 31, 2020
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 271,344 $ 31,111 $ 207,378 $ 22,037 $ 531,870
Processing 16,759 280,804 44,384 344 342,291
Total Revenue 288,103 311,915 251,762 22,381 874,161
Cost of Revenue 122,347 172,783 104,431 121,150 520,711
Research and Development 52,837
Selling, General, and Administrative 89,393
Total Expenses 662,941
SEGMENT INCOME $ 165,756 $ 139,132 $ 147,331 $ (98,769)
OPERATING INCOME 211,220
INTEREST INCOME (EXPENSE) (115)
INCOME BEFORE INCOME TAXES $ 211,105

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	Six Months Ended
	December 31, 2022
	Core		Payments		Complementary		Corporate & Other		Total
REVENUE
Services and Support	310,675		37,998		228,528		33,648		610,849
Processing	19,839		340,028		62,119		1,681		423,667
Total Revenue	330,514		378,026		290,647		35,329		1,034,516

Cost of Revenue	140,564		209,226		117,708		135,351		602,849
Research and Development									69,554
Selling, General, and Administrative									114,013


Total Expenses									786,416

SEGMENT INCOME	$	189,950	$	168,800	$	172,939	$	(100,022)

OPERATING INCOME									248,100

INTEREST INCOME (EXPENSE)									(3,590)

INCOME BEFORE INCOME TAXES									$	244,510



	Six Months Ended
	December 31, 2021
	Core		Payments		Complementary		Corporate & Other		Total
REVENUE
Services and Support	$	301,536	$	42,357	$	221,739	$	28,072	$	593,704
Processing	18,627		315,739		52,579		1,303		388,248
Total Revenue	320,163		358,096		274,318		29,375		981,952

Cost of Revenue	131,456		191,549		110,399		126,056		559,460
Research and Development									56,670
Selling, General, and Administrative									106,565


Total Expenses									722,695

SEGMENT INCOME	$	188,707	$	166,547	$	163,919	$	(96,681)

OPERATING INCOME									259,257

INTEREST INCOME (EXPENSE)									(683)

INCOME BEFORE INCOME TAXES									$	258,574

The Company has not disclosed any additional asset information by segment, as the information is not generated for internal management reporting to the Chief Executive Officer, who is also the Chief Operating Decision Maker.

1920

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NOTE ~~11:~~12. SUBSEQUENT EVENTS

None.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 ~~fiscal~~ quarter ended December 31, ~~2021.~~

2022.

OVERVIEW

Jack Henry & Associates, Inc. ("JKHY") is a well-rounded financial technology company and 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® provides innovative~~consist of integrated data processing systems solutions to ~~community and regional banks. Symitar® provides industry-leading~~U.S. banks ranging from de novo to multi-billion-dollar institutions, core data processing solutions tofor credit unions of all ~~sizes. ProfitStars® offers~~sizes, and non-core highly specialized ~~solutions to~~core-agnostic products and services that enable financial institutions of every asset size ~~as well as~~and charter, and diverse corporate entities outside of the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. JKHY's integrated solutions are ~~generally~~ available for on-premise installation and delivery in our ~~JKHY~~ private ~~or the public~~ cloud.

Our two primary revenue streams are "services and support" and "processing." Services and support includes: "private and public cloud" fees ~~(formerly known as "outsourcing and cloud" fees - see Note 3 to the condensed consolidated financial statements)~~ that predominantly have contract terms of seven years or longer at inception; "product delivery and services" revenue, which includes revenue from the sales of licenses, implementation services, deconversion fees, consulting, and hardware; and "on-premise support" revenue, ~~(formerly known as "in-house support" revenue - see Note 3 to the condensed consolidated financial statements),~~ composed of maintenance fees which primarily contain annual contract terms. Processing revenue includes: "remittance" revenue from payment processing, remote capture, and ACH transactions; "card" fees, including card transaction processing and monthly fees; and "transaction and digital" revenue, which includes transaction and mobile processing fees. We continually seek opportunities to increase revenue while at the same time containing costs to expand margins.

All amounts in the following discussion are in thousands, except per share amounts.

~~COVID-19 Impact and Response~~

Since its outbreak in early calendar 2020, COVID-19 has rapidly spread and continues to represent a public health concern. The health, safety, and well-being of our employees and customers is of paramount importance to us. In March 2020, we established an internal task force composed of executive officers and other members of management to frequently assess updates to the COVID-19 situation and recommend Company actions. We offered remote working as a recommended option to employees whose job duties allowed them to work off-site, and we suspended all non-essential business travel. This company-wide recommendation initially extended until July 1, 2021, at which point we began transition to a return to our facilities and normalization of travel activities. However, we reimplemented our company-wide recommendation for remote work on August 3, 2021, based on new virus variants and increased infection rates. This remote work recommendation remains in effect as of February 4, 2022. For those employees who are at our facilities, we have introduced enhanced sanitation procedures and require face masks for both vaccinated and unvaccinated employees. We have not required employees who return to our facilities to receive vaccinations, but we have provided information on vaccine providers, as well as hosted on-site COVID-19 vaccination clinics at several of our facilities for our employees and their families. As of February 4, 2022, the majority of our employees were continuing to work remotely either full time or in a hybrid capacity. Once the remote work recommendation is lifted, individual decisions on returning to the office will be manager-coordinated and based on conversations with specific teams and departments. A large number of our employees have requested to remain fully remote or participate in a hybrid approach where they would split their time between remote and in-person working. While our business travel has increased in recent months, we continue to encourage a cautious approach to business travel activities.

~~Customers~~

We work closely with our customers who are scheduled for on-site visits to ensure their needs are met while taking necessary safety precautions when our employees are required to be at a customer site. Delays of customer system installations due to COVID-19 have been limited, and we have developed processes to handle remote installations when available. We expect these processes to provide flexibility and value both during and after the COVID-19 pandemic. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been limited, we have not yet experienced significant disruption to our operations. We

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~~believe our technological capabilities are well positioned to allow our employees to work remotely without materially impacting our business.~~

~~Financial impact~~

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 fiscal 2021 and the first six months of fiscal 2022, 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, including the onset of variants of the virus; the effectiveness of vaccines against new variants; the development and effectiveness of treatments; the effect on the economy generally; the potential impact to our customers, vendors, and employees; and how the potential impact might affect future customer services, processing and installation-related revenue, and processes and efficiencies within the Company directly or indirectly impacting financial results. We will continue to monitor COVID-19 and its possible impact on the Company and to take steps necessary to protect the health and safety of our employees and customers.

RESULTS OF OPERATIONS

For the second quarter of fiscal ~~2022,~~2023, total revenue increased ~~17%~~2%, or ~~$71,535,~~$11,418, compared to the same quarter in fiscal ~~2021.~~2022. Total revenue less deconversion fee and acquisition ~~and divestiture~~ revenues of ~~$26,903~~$6,380 and ~~$96,~~$2,578, respectively, for the current fiscal quarter and less deconversion fee revenues of ~~$2,155~~$26,903 for the prior fiscal quarter, results in an increase of ~~11%~~6%, quarter over quarter. This increase was primarily driven by growth in ~~public~~data processing and ~~private cloud revenue,~~hosting, card processing, transaction and digital, and remittance ~~processing revenues, and increased implementation fee revenue.~~revenues.

Operating expenses increased ~~12%~~8% for the second quarter of fiscal ~~2022~~2023 compared to the second quarter of fiscal ~~2021,~~2022. Total operating expenses less deconversion expenses of $917, the acquisition-related expenses of $6,907, plus the gain on disposal of assets, net, of $1,207, for the current fiscal quarter, and reducing operating expenses by deconversion expenses of $2,547 for the prior fiscal year quarter, results in a 7% increase quarter over quarter. This increase in operating expenses was primarily ~~due to increased direct costs,~~driven by higher personnel costs, ~~and increased operating licenses and fees. The~~including benefits expenses, resulting from a 4% headcount increase in direct costs was primarily related to our card payment processing platform and Jack Henry digital and were in alignment with the increases in revenue described above. Higher personnel costs were primarily related to salary increases in the trailing twelve ~~months.~~months, increased direct costs in line with related revenue increases, and higher amortization of intangible assets.

Operating income ~~increased 34%~~decreased 15% for the second quarter of fiscal ~~2022~~2023 compared to the second quarter of fiscal ~~2021. Operating~~2022. Total operating income less deconversion fee operating income of ~~$24,356 and adjusted for~~$5,463, plus an acquisition ~~and divestiture~~ operating loss of ~~$21~~$4,329, less the gain on disposal of assets, net, of $1,207 for the current fiscal quarter, and less deconversion fee operating income of ~~$1,919 and a gain on disposals of $2,040~~$24,356 for the prior fiscal quarter, results in a ~~13%~~4% increase ~~for the second quarter of fiscal 2022,~~ quarter over quarter. This increase in operating income was primarily driven by increased revenue growth partially offset by increased operating expenses as detailed above.

The provision for income taxes ~~increased 37%~~decreased 17% for the second quarter of fiscal ~~2022~~2023 compared to the prior fiscal year second quarter. The effective tax rate for the second quarter of fiscal ~~2022~~2023 was ~~23.6%~~23.2% compared to ~~23.1%~~23.6% for the same quarter a year ago. ~~The increase in the effective tax rate was primarily due to the relative impact of the increase in operating income, quarter over quarter.~~

Due to the above changes, net income ~~increased 33%~~decreased 16% for the second quarter of fiscal ~~2022~~2023 compared to the second quarter of fiscal ~~2021.~~

~~For the six months ended December 31, 2021, total revenue increased 12%, or $107,791, over the six months ended December 31, 2020.~~2022. Total ~~revenue~~net income less deconversion fee ~~and~~net income of $4,111, plus acquisition ~~and divestiture revenues~~net loss of ~~$30,627 and $202, respectively,~~$5,405, less the gain on disposal of assets, net, of $909 for the current fiscal ~~year period~~quarter, and less deconversion fee ~~and acquisition and divestiture revenues~~net income of ~~$8,037 and $1,182, respectively,~~$18,352 for the prior fiscal ~~year period,~~quarter, results in a ~~10%~~5% increase for the period compared to the same period a year ago. This total revenue increase was primarily driven by growth in public and private cloud revenue, card, remittance, and transaction and digital processing revenues, and increased implementation fee revenue.

Operating expenses for the six months ended December 31, 2021, increased 9% compared to the equivalent period in the prior fiscal year, primarily due to increased direct costs, higher personnel costs, and increased operating licenses and fees. The increased direct costs were primarily related to our card payment processing platform and Jack Henry digital and were in alignment with the increases in revenue described above. Higher personnel costs were primarily related to salary increases in the trailing twelve months.

Operating income increased 23% for the six months ended December 31, 2021, compared to the six months ended December 31, 2020. Operating income less deconversion fee operating income of $27,540 and adjusted for acquisition and divestiture operating loss of $66 for the current fiscal year period, and less deconversion fee operating income of $7,138 and income from divestitures and a gain on disposals totaling $2,409 for the prior fiscalquarter over quarter.

2221

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For the six months ended December 31, 2022, total revenue increased 5%, or $52,564, compared to the same period in fiscal year 2022. Total revenue less deconversion fee and acquisition revenues of $10,899 and $3,316, respectively, for the current fiscal period and less deconversion fee revenues of $30,627 for the prior fiscal period, results in ~~a 15%~~an increase of 7%, period over period. This increase was primarily driven by growth in data processing and hosting, card processing, transaction and digital, remittance, and software usage fee revenues.

Operating expenses increased 9% for the six months ended December 31, ~~2021,~~2022, compared to the same period ain fiscal year ~~ago. This~~2022. The increase in operating expenses was primarily driven by increased personnel costs, including benefits expenses, resulting from a 4% headcount increase in the trailing twelve months, higher direct costs in line with related revenue increases, and higher amortization of intangible assets.

Operating income decreased 4% for the six months ended December 31, 2022, compared to the same period in fiscal year 2022. Total operating income less deconversion fee operating income of $9,329, plus an acquisition operating loss of $6,126, less the gain on disposal of assets, net, of $7,384 for the current fiscal period, less deconversion fee operating income of $27,540 for the prior fiscal period, results in a 3% increase period over period. This increase in operating income was primarily driven by increased revenue growth ~~described above~~ partially offset by increased operating expenses as detailed above.

The provision for income taxes ~~increased 27%~~decreased 6% for the six months ended December 31, ~~2021,~~2022, compared to the ~~prior~~same period in fiscal ~~year-to-date period.~~year 2022. The effective tax rate for the six months ended December 31, ~~2021,~~2022, was ~~23.5%~~23.4% compared to ~~22.7%~~23.5% for the ~~prior fiscal year-to-date period. The effective tax rate increase was primarily driven by the relative impact of the increase in operating income in the current fiscal year-to-date~~same period ~~and~~ a ~~larger excess tax benefit received from share-based compensation in the prior fiscal year-to-date period.~~year ago.

~~The result of~~Due to the above changes, ~~led to~~ net income ~~that increased 21%~~decreased 5% for the six months ended December 31, ~~2021,~~2022, compared to the same period ina year ago. Total net income less deconversion fee net income of $7,020, plus acquisition net loss of $7,275, less the gain on disposal of assets, net, of $5,556 for the current fiscal period, and less deconversion fee net income of $20,751 for the prior fiscal ~~year.~~period, results in a 3% increase period over period.

WeOur second fiscal quarter was significantly impacted by a recent rapid slowdown of merger and acquisition activity in the financial institution industry, which has caused decreases in deconversion fee revenue, as noted, and in conversion/merger services revenue. However, we move into the third quarter of fiscal ~~2022~~2023 with ~~optimism following strong performance in the second quarter, but with some uncertainty as to the future impact of the COVID-19 pandemic (see "COVID-19 Impact and Response" section above). Significant~~significant portions of our business ~~continue~~continuing to come from recurring revenues and our sales pipeline ~~also remains~~remaining encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and ~~in these uncertain times,~~ we believe they have ~~an even greater~~a great need for our solutions that directly address institutional profitability, efficiency, and security. Our strong balance sheet, access to extensive lines of credit, the continued strength of our existing lines of revenue, and an unwavering commitment to superior customer service should position us well to address current and future opportunities.

A detailed discussion of the major components of the results of operations for the three and six months ended December 31, ~~2021,~~2022, follows. Discussions compare the current fiscal year's three and six months ended December 31, ~~2021,~~2022, to the prior fiscal year's three and six months ended December 31, ~~2020.~~

2021.

REVENUE


Services and Support	Services and Support	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Services and Support	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
		2021			2020					2021			2020						2022			2021					2022			2021
Services and Support	Services and Support	$	296,211		$	250,873		18	%	$	593,704		$	531,870		12	%	Services and Support	$	290,700		$	296,211		(2)	%	$	610,849		$	593,704		3	%
Percentage of total revenue	Percentage of total revenue	60		%	59		%			60		%	61		%			Percentage of total revenue	58		%	60		%			59		%	60		%

Services and support revenue ~~increased 18%~~decreased 2% for the second quarter of fiscal ~~2022~~2023 compared to the same quarter a year ago. ~~Total~~Reducing services and support revenue ~~less~~for deconversion fee revenue from each quarter, which was $6,380 for the current fiscal quarter and $26,903 for the prior fiscal year quarter and acquisition revenue of ~~$26,903 and $2,155, respectively,~~$19 for the current fiscal quarter, results in growth of ~~8%,~~6% quarter over quarter. This increase was primarily driven by growth in data processing and hosting ~~fee revenues as new customers were added~~revenue.

Services and ~~volumes continued to expand, as well as higher implementation and conversion/merger revenues when compared to the prior fiscal quarter.~~

~~For~~support revenue increased 3% for the six months ended December 31, ~~2021, services and support revenue increased 12%~~2022 compared to the same period a year ago. ~~Total~~Reducing services and support revenue ~~less~~for deconversion fee revenue from each period, which was $10,899 for the current fiscal period and ~~prior fiscal periods of~~ $30,627 ~~and $8,037, respectively, and~~ for ~~revenue from acquisitions and divestitures of $1,181 from~~ the prior fiscal ~~year~~period, and acquisition revenue of $43 for the current fiscal period, results in growth of 7% period over period. This increase was primarily driven by growth in data processing and hosting and software usage fee revenues. Growth in software usage fee revenues reflects a continuing shift of customers to our time-based license model.

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Processing	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2022			2021					2022			2021
Processing	$	214,614		$	197,685		9	%	$	423,667		$	388,248		9	%
Percentage of total revenue	42		%	40		%			41		%	40		%

Processing revenue increased 9% for the second quarter of fiscal 2023 compared to the same quarter last fiscal year. Reducing processing revenue for acquisition revenue of $2,559 for the current fiscal quarter, results in growth of 7% quarter over quarter. This increase was primarily driven by higher card processing, payment processing, including iPay and Payrailz, and Jack Henry digital revenue, including Banno, as well as other processing fee revenues, primarily due to expanding volumes.

Processing revenue increased 9% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing processing revenue for acquisition revenue of $3,273 for the current fiscal period, results in growth of 8% period over period. This increase was primarily driven by ~~growth in data~~higher card processing and ~~hosting fee revenues, as new customers were added and volumes continued to expand,~~Jack Henry digital revenue, including Banno, as well as ~~higher implementation fee~~payment processing fees, including iPay and ~~software usage~~Payrailz, and other processing fee revenues, ~~when compared~~primarily due to ~~the prior fiscal period.~~

Processing Three Months Ended December 31, %
Change Six Months Ended December 31, %
Change
2021 2020 2021 2020
Processing $ 197,685 $ 171,488 15 % $ 388,248 $ 342,291 13 %
Percentage of total revenue 40 % 41 % 40 % 39 %

Processing revenue increased 15% for the second quarter of fiscal 2022 compared to the same quarter a year ago. The increase was driven by growth in card, Jack Henry digital, and remittance processing revenues, as customers were added and volumes expanded during the fiscal quarter compared to the prior fiscal quarter.

Each processing revenue component also experienced customer additions and volume growth in the fiscal year-to-date period, leading to an increase in processing revenue of 13% for the six months ended December 31, 2021, compared to the six months ended December 31, 2020.

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expanding volumes.

OPERATING EXPENSES


Cost of Revenue	Cost of Revenue	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Cost of Revenue	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
		2021			2020					2021			2020						2022			2021					2022			2021
Cost of Revenue	Cost of Revenue	$	282,825		$	257,782		10	%	$	559,460		$	520,711		7	%	Cost of Revenue	$	304,589		$	282,825		8	%	$	602,849		$	559,460		8	%
Percentage of total revenue	Percentage of total revenue	57		%	61		%			57		%	60		%			Percentage of total revenue	60		%	57		%			58		%	57		%

Cost of revenue for the second quarter of fiscal ~~2022~~2023 increased ~~10%~~8% over the prior fiscal year second quarter. ~~Total~~Reducing cost of revenue ~~less the effects of~~for deconversion ~~fees,~~costs from each quarter, which were ~~$1,601~~$555 for the current fiscal year quarter and ~~$213~~$1,601 for the prior fiscal year quarter, and ~~the effects~~for acquisition costs of ~~acquisitions and divestitures of $67 for~~$5,861 from the current fiscal year quarter, results in a 9% increase quarter over quarter. This increase was primarily due to higher direct costs associated with our card processing platform, higher personnel costs, and increased operating licenses and fees. Cost of revenue decreased 4% compared to the prior fiscal quarter as a percentage of total revenue.

For the current fiscal year-to-date period, cost of revenue increased 7% over the prior fiscal year-to-date period. This increase in costs was primarily due to higher costs associated with our card processing platform and operating licenses and fees. Cost of revenue decreased 3% compared to the prior fiscal year-to-date period as a percentage of total revenue.

Research and Development Three Months Ended December 31, %
Change Six Months Ended December 31, %
Change
2021 2020 2021 2020
Research and Development $ 29,916 $ 26,780 12 % $ 56,670 $ 52,837 7 %
Percentage of total revenue 6 % 6 % 6 % 6 %

Research and development expense increased 12% for the second quarter of fiscal 2022 over the prior fiscal second quarter. The increase was primarily due to higher personnel costs, net of capitalization, quarter over quarter. Research and development expense remained consistent compared to the prior fiscal second quarter as a percentage of total revenue.

For the current fiscal year-to-date period, research and development expense increased 7% over the prior fiscal year-to-date period. The increase was primarily due to higher personnel costs, net of capitalization, period over period. Research and development expense remained consistent compared to the prior fiscal year-to-date period as a percentage of total revenue.

~~The growth of this expense category in both the second quarter and year-to-date fiscal periods reflects our continuing commitment to the development of strategic products.~~

Selling, General, and Administrative Three Months Ended December 31, %
Change Six Months Ended December 31, %
Change
2021 2020 2021 2020
Selling, General, and Administrative $ 55,493 $ 44,167 26 % $ 106,565 $ 89,393 19 %
Percentage of total revenue 11 % 10 % 11 % 10 %

Selling, general, and administrative expense increased 26% in the second quarter of fiscal 2022 over the same quarter a year ago. Total selling, general, and administrative expenses less deconversion-related expenses, which were $946 for the current fiscal quarter and $24 for the prior fiscal quarter, and the effects of acquisitions and divestitures of $10 in the current fiscal quarter and an adjustment for gain on disposals in the prior fiscal quarter of $2,040, results in an 18%6% increase quarter over quarter. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 1% headcount increase in the trailing twelve months, higher direct costs in line with related increases in revenue, and increased amortization of intangible assets. Cost of revenue increased 3% compared to the prior fiscal year quarter as a percentage of total revenue.

Cost of revenue increased 8% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing cost of revenue for deconversion costs from each period, which were $965 for the current fiscal period and $1,938 for the prior fiscal period, and for acquisition costs of $7,400 from the current fiscal period, results in a 7% increase period over period. This increase was primarily due to higher direct costs in line with related increases in revenue, higher personnel costs, including benefits expenses, resulting from a 1% headcount increase in the trailing twelve months, and increased amortization of intangible assets. Cost of revenue increased 1% compared to the prior fiscal period as a percentage of total revenue.


Research and Development	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2022			2021					2022			2021
Research and Development	$	36,561		$	29,916		22	%	$	69,554		$	56,670		23	%
Percentage of total revenue	7		%	6		%			7		%	6		%

Research and development expense increased 22% for the second quarter of fiscal 2023 over the prior fiscal year second quarter. Reducing research and development expense for the effects of acquisitions of $274 for the current fiscal quarter, results in a 21% increase quarter over quarter. This increase was primarily due to an increase in personnel costs, net of capitalization, including benefits expenses, resulting from a 13% headcount increase in the trailing twelve months, and higher internal licenses and fees. Research and development expense for the quarter increased 1% compared to the prior fiscal year quarter as a percentage of total revenue.

Research and development expense increased 23% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing research and development expense for the effects of acquisitions of $606 for the current fiscal period, results in a 22% increase period over period. This increase was primarily due to an increase in personnel costs, net of capitalization, including benefits expenses, resulting from a 13% headcount

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increase in the trailing twelve months, and higher internal licenses and fees. Research and development expense for the current fiscal period increased 1% compared to the prior fiscal year period as a percentage of total revenue.


Selling, General, and Administrative	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2022			2021					2022			2021
Selling, General, and Administrative	$	56,788		$	55,493		2	%	$	114,013		$	106,565		7	%

Percentage of total revenue	11		%	11		%			11		%	11		%

Selling, general, and administrative expense increased 2% ~~growth~~ in the second quarter of fiscal 2023 over the same quarter in the prior fiscal year. Reducing selling, general, and administrative expense for the effects of deconversion fees from each quarter, which were $362 for the current fiscal year quarter and $946 for the prior fiscal year quarter, and for the effects of acquisitions of $772 for the current fiscal year quarter, and increasing selling, general, and administrative expense for the gain on disposal of assets, net, of $1,207 for the current fiscal year quarter, results in a 4% increase quarter over quarter. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 5% headcount ~~and salary increases~~increase in the trailing twelve months. Selling, general, and administrative expense ~~increased 1%~~remained consistent as a percentage of total revenue inthis fiscal ~~second~~ quarter versus the prior fiscal ~~second~~year quarter.

~~For~~Selling, general, and administrative expense increased 7% in the six months ended December 31, 2022, compared to the same period last fiscal ~~year-to-date period,~~year. Reducing selling, general, and administrative expense ~~increased 19% over~~for the ~~prior fiscal year-to-date period. Total selling, general, and administrative expenses less deconversion-related expenses~~effects of deconversion fees from each period, which were $604 for the current fiscal year period and $1,149 for the prior fiscal year period, and for the effects of acquisitions of $1,436 for the current fiscal period, and ~~$250~~increasing selling, general, and administrative expense for the ~~prior fiscal period, and less the effects~~gain on disposal of ~~acquisitions and divestitures, which were $20~~assets, net, of $7,384 for the current fiscal ~~period and $28 for the prior fiscal period, and adjusted for a gain on disposals of $2,040 in the prior fiscal~~year period, results in a ~~16%~~13% increase period over period. This increase was primarily due to higher personnel costs, ~~related to~~including benefits expenses, resulting from a ~~2% growth in~~5% headcount ~~and salary increases~~

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increase in the trailing twelve ~~months.~~months, increased travel expenses, and increased consulting and other professional services. Selling, general, and administrative expense ~~increased 1%~~remained consistent as a percentage of total revenue ~~for the current~~this fiscal period versus the ~~year-ago~~prior fiscal year period.


INTEREST INCOME (EXPENSE)	INTEREST INCOME (EXPENSE)	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change		INTEREST INCOME (EXPENSE)	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
		2021		2020				2021		2020					2022		2021				2022		2021
Interest Income	Interest Income	$	6	$	52	(88)	%	$	13	$	120	(89)	%	Interest Income	$	1,240	$	6	20,567	%	$	1,392	$	13	10,608	%
Interest Expense	Interest Expense	$	(447)	$	(117)	282	%	$	(696)	$	(235)	196	%	Interest Expense	$	(3,406)	$	(447)	662	%	$	(4,982)	$	(696)	616	%

Interest income fluctuated due to changes in invested balances and yields on invested balances during the second quarter of fiscal 2023 and six months ended December 31, 2022, compared to the ~~second quarter~~same periods a year ago. Interest expense increased when compared to the prior fiscal year quarter and year-to-date period due to recent increases in prevailing interest ~~rate fluctuations,~~rates, length of borrowing time, and amounts borrowed. There was a ~~$240,000~~$275,000 outstanding balance under the credit facility at December 31, ~~2021,~~2022, and no$240,000 outstanding balance at December 31, ~~2020.~~2021. The ~~credit facility~~increase in the outstanding balance ~~increase~~ was primarily due to funding the ~~increase in the Company's repurchases of common stock for the treasury during the trailing twelve months.~~Payrailz acquisition on August 31, 2022.


PROVISION FOR INCOME TAXES	PROVISION FOR INCOME TAXES	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		PROVISION FOR INCOME TAXES	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
		2021			2020					2021			2020						2022			2021					2022			2021
Provision for Income Taxes	Provision for Income Taxes	$	29,551		$	21,585		37	%	$	60,791		$	47,907		27	%	Provision for Income Taxes	$	24,435		$	29,551		(17)	%	$	57,186		$	60,791		(6)	%
Effective Rate	Effective Rate	23.6		%	23.1		%			23.5		%	22.7		%			Effective Rate	23.2		%	23.6		%			23.4		%	23.5		%

The ~~increase~~change in ~~the~~ effective tax rate for the second quarter of fiscal 2023 and six months ended December 31, 2022, compared to the same ~~quarter~~periods a year ago was primarily due to ~~the relative impact of the increase in operating income, quarter over quarter.~~

The increase in effective tax rate for the current fiscal year-to-date period compared to the prior fiscal year-to-date period was primarily due to the relative impact of the increase in operating income in the current fiscal period and a larger excess tax ~~benefit~~benefits received from share-based compensation in the ~~prior~~current fiscal ~~period.~~periods.


NET INCOME	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
	2022		2021				2022		2021
Net income	$	80,775	$	95,670	(16)	%	$	187,324	$	197,783	(5)	%
Diluted earnings per share	$	1.10	$	1.30	(15)	%	$	2.56	$	2.68	(4)	%

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NET INCOME Three Months Ended December 31, %
Change Six Months Ended December 31, %
Change
2021 2020 2021 2020
Net income $ 95,670 $ 71,982 33 % $ 197,783 $ 163,198 21 %
Diluted earnings per share $ 1.30 $ 0.94 $ 2.68 $ 2.13

Net income ~~increased 33%~~decreased 16% to ~~$95,670,~~$80,775, or ~~$1.30~~$1.10 per diluted share, for the second quarter of fiscal ~~2022~~2023 compared to ~~$71,982,~~$95,670, or ~~$0.94~~$1.30 per diluted share in the same quarter of fiscal 2022. Total net income less deconversion fee net income of $4,111, an acquisition net loss of $5,405, and the gain on disposal of assets, net, of $909, for the current fiscal quarter, and reducing operating expenses for the effects of deconversion fees of $18,352 for the prior fiscal ~~second~~year quarter, ~~resulting~~results in a ~~38%~~5% increase ~~in diluted earnings per share.~~quarter over quarter.

Net income ~~increased 21%~~decreased 5% to $187,324, or $2.56 per diluted share, for the six months ended December 31, 2022, compared to $197,783, or $2.68 per diluted share in the same period of fiscal 2022. Total net income less the net effects of deconversion fees of $7,020, an acquisition net loss of $7,275, and the gain on disposal of assets, net, of $5,556, for the current fiscal ~~year-to-date~~ period ~~compared to $163,198, or $2.13 per diluted share in~~and reducing operating expenses for the effects of deconversion fees of $20,751 for the prior fiscal ~~year-to-date~~year period, ~~resulting~~results in a ~~25%~~3% increase ~~in diluted earnings per share.~~

period over period.

REPORTABLE SEGMENT DISCUSSION

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 four reportable segments: Core, 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, including ATM, debit, and credit card 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, hosted processing platforms, and services, including call center support, and network security management, consulting, and monitoring, that can be integrated with our core solutions and many can be used independently. The Corporate and Other segment includes revenue and costs from hardware and other products not attributed to any of the other three segments, as well as operating costs not directly attributable to the other three segments.

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Core	Core													Core
		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
		2021		2020				2021		2020					2022		2021				2022		2021
Revenue	Revenue	$	154,878	$	134,948	15	%	$	320,163	$	288,103	11	%	Revenue	$	155,390	$	154,878	—	%	$	330,514	$	320,163	3	%
Cost of Revenue	Cost of Revenue	$	64,554	$	58,485	10	%	$	131,456	$	122,347	7	%	Cost of Revenue	$	68,324	$	64,554	6	%	$	140,564	$	131,456	7	%

Revenue in the Core segment ~~increased 15%~~remained consistent and cost of revenue increased ~~10%~~6% for the three months ended December 31, ~~2021,~~2022, compared to the three months ended December 31, ~~2020.~~2021. Reducing Core revenue ~~less~~for deconversion fee revenue in both periods, which totaled $2,115 for the second quarter of ~~$10,853~~fiscal 2023 and ~~less deconversion fee revenue of $882~~$10,853 for the ~~prior~~second quarter of fiscal ~~second quarter,~~2022, results in a 7%6% increase quarter over quarter. ~~This increase was primarily driven by growth in data processing and hosting fee revenue.~~ Cost of revenue ~~decreased~~increased 6% quarter over quarter primarily due to higher personnel costs and increased direct support costs. Cost of revenue increased 2% as a percentage of revenue for the second quarter of fiscal ~~2022~~2023 compared to the ~~prior~~same quarter of fiscal ~~second quarter.~~2022.

~~For~~Revenue in the Core segment increased 3% and cost of revenue increased 7% for the six months ended December 31, ~~2021, revenue in the Core segment increased 11%~~2022, compared to the ~~prior fiscal year-to-date period.~~six months ended December 31, 2021. Reducing Core revenue ~~less~~for deconversion fee revenue in both periods, which totaled $3,933 for the six months ended December 31, 2022, and $13,021 for the ~~current fiscal period and $2,934 for the prior fiscal period and revenue from acquisitions and divestitures of $1,182 from the prior fiscal period,~~six months ended December 31, 2021, results in ~~an 8%~~a 6% increase period over period. This increase in Core revenue over the prior fiscal year period was primarily driven by the growth in data processing and hosting and software usage fee ~~revenue.~~revenues. Cost of revenue ~~decreased~~increased 7% period over period primarily due to increased direct support costs and higher personnel costs. Cost of revenue increased 1% as a percentage of revenue for ~~year-to-date fiscal~~the six months ended December 31, 2022, compared to the ~~year-ago period.~~same period of fiscal 2022.


Payments	Payments													Payments
		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
		2021		2020				2021		2020					2022		2021				2022		2021
Revenue	Revenue	$	182,528	$	155,182	18	%	$	352,150	$	311,915	13	%	Revenue	$	191,487	$	185,505	3	%	$	378,026	$	358,096	6	%
Cost of Revenue	Cost of Revenue	$	95,570	$	86,455	11	%	$	188,795	$	172,783	9	%	Cost of Revenue	$	108,071	$	96,966	11	%	$	209,226	$	191,549	9	%

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Revenue in the Payments segment increased ~~18%~~3% for the second quarter of fiscal ~~2022~~2023 compared to the equivalent quarter of the prior fiscal ~~quarter.~~year. Reducing Payments revenue ~~less~~for deconversion fee revenue in both periods, which totaled $1,336 for the second quarter of fiscal 2023 and $7,933 for the second quarter of fiscal 2022 and ~~$674~~ for revenue from acquisitions of $2,578 from the ~~prior~~current fiscal ~~second~~year quarter, results in a ~~13%~~6% increase quarter over quarter. This growth was primarily due to increased card and remittance fee revenue within processing. Cost of revenue decreased 3% as a percentage of revenue for the second quarter of fiscal 2022 compared to the same quarter of fiscal 2021.

For the six months ended December 31, 2021, revenue in the Payments segment increased 13% compared to the same period a year ago. Payments revenue less deconversion fee revenue in both periods, which totaled $8,381 for year-to-date fiscal 2022 and $2,521 for year-to-date fiscal 2021, results in an 11% increase period over period. This Payments revenue growth was primarily due to increased card and remittance ~~revenue~~fee revenues within processing. Cost of revenue increased 11% quarter over quarter primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue ~~decreased~~increased 4% for the second quarter of fiscal 2023 compared to the same quarter of fiscal 2022.

Revenue in the Payments segment increased 6% for the six months ended December 31, 2022, compared to the equivalent period of the prior fiscal year. This Payments revenue growth was primarily due to increased card and remittance fee revenues within processing. Cost of revenue increased 9% period over period primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue increased 2% for ~~year-to-date fiscal~~the six months ended December 31, 2022, compared to the same period of fiscal ~~2021.~~2022.


Complementary	Complementary													Complementary
		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
		2021		2020				2021		2020					2022		2021				2022		2021
Revenue	Revenue	$	141,724	$	121,408	17	%	$	283,205	$	251,762	12	%	Revenue	$	142,295	$	136,540	4	%	$	290,647	$	274,318	6	%
Cost of Revenue	Cost of Revenue	$	58,151	$	52,407	11	%	$	113,635	$	104,431	9	%	Cost of Revenue	$	59,270	$	55,982	6	%	$	117,708	$	110,399	7	%

Revenue in the Complementary segment increased ~~17%~~4% for the second quarter of fiscal ~~2022~~2023 compared to the ~~same~~equivalent quarter of the prior fiscal year. This Complementary revenue less deconversion fee revenue in both periods, which totaled $7,917 for the second quarter of fiscal 2022 and $509 for the prior fiscal second quarter, and less acquisitions and divestitures revenue in the current quarter of $96, results in an 11% increase, quarter over quarter. This growth was primarily driven by ~~growth in~~increased hosting fees and Jack Henry digital revenues. Cost of revenue increased 6% quarter over quarter primarily due to increased direct costs in line with associated revenues and ~~hosting fee revenues.~~higher personnel costs. Cost of revenue as a percentage of revenue ~~decreased 2%~~increased 1% for the second quarter of fiscal ~~2022~~2023 compared to the same quarter of fiscal ~~2021.~~2022.

~~For~~Revenue in the Complementary segment increased 6% for the six months ended December 31, ~~2021, revenue in the Complementary segment increased 12%~~2022, compared to the ~~same~~equivalent period ~~last~~of the prior fiscal year. This Complementary revenue ~~less deconversion fee revenue in both periods, which~~

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totaled $9,014 for year-to-date fiscal 2022 and $2,509 for year-to-date fiscal 2021, and less acquisitions and divestitures revenue in the current fiscal year-to-date period of $202, results in a 10% increase period over period. This increase in Complementary revenuegrowth was primarily driven by ~~growth in~~increased hosting fees and Jack Henry digital ~~and hosting fee~~ revenues. Cost of revenue ~~decreased 1%~~increased 7% period over period primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue remained consistent for ~~year-to-date fiscal~~the six months ended December 31, 2022, compared to the same period of fiscal ~~2021.~~2022.


Corporate and Other	Corporate and Other													Corporate and Other
		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
		2021		2020				2021		2020					2022		2021				2022		2021
Revenue	Revenue	$	14,766	$	10,823	36	%	$	26,434	$	22,381	18	%	Revenue	$	16,142	$	16,973	(5)	%	$	35,329	$	29,375	20	%
Cost of Revenue	Cost of Revenue	$	64,550	$	60,435	7	%	$	125,574	$	121,150	4	%	Cost of Revenue	$	68,924	$	65,323	6	%	$	135,351	$	126,056	7	%

Revenue in the Corporate and Other segment increased 36% for the second quarter of fiscal 2022 compared to the same quarter of the prior fiscal year and increased 18% for the fiscal year-to-date period compared to the prior fiscal year-to-date period. The quarter-over-quarter increase was primarily due to higher services and support revenue, including an increase in hardware revenue. Revenue classified in the Corporate and Other segment includes ~~revenue~~revenues from other products and services and hardware not specifically attributed to any of the other three segments. Revenue in the Corporate and Other segment decreased 5% for the second quarter of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. The decrease quarter over quarter was primarily due to lower user group revenues due to differences in the timing of the user conference year over year.

~~The increased cost~~Cost of revenue for the ~~fiscal 2022~~Corporate and Other segment includes operating costs not directly attributable to any of the other three segments. The cost of revenue in the second quarter ~~and year-to-date periods~~ of ~~7% and 4%, respectively,~~fiscal 2023 increased 6% when compared to the prior ~~respective~~ fiscal ~~periods,~~year quarter primarily due to higher internal licenses and fees and personnel costs.

Revenue in the Corporate and Other segment increased 20% for the six months ended December 31, 2022, compared to the equivalent period of the prior fiscal year. The increase period over period was primarily due to higher ~~operating~~services and support revenue.

The cost of revenue in the six months ended December 31, 2022, increased 7% when compared to the prior fiscal year period primarily due to higher internal licenses and fees, ~~for both comparisons.~~personnel costs, and hardware costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased to ~~$29,120~~$25,763 at December 31, ~~2021,~~2022, from ~~$50,992~~$48,787 at June 30, ~~2021.~~2022.

The following table summarizes net cash from operating activities in the statement of cash flows:


		Six Months Ended					Six Months Ended
		December 31,					December 31,
		2021		2020			2022		2021
Net income	Net income	$	197,783	$	163,198	Net income	$	187,324	$	197,783
Non-cash expenses	Non-cash expenses	113,293		104,200		Non-cash expenses	73,405		113,293
Change in receivables	Change in receivables	70,468		87,518		Change in receivables	102,672		70,468
Change in deferred revenue	Change in deferred revenue	(119,822)		(126,134)		Change in deferred revenue	(125,433)		(119,822)
Change in other assets and liabilities	Change in other assets and liabilities	(64,371)		(34,798)		Change in other assets and liabilities	(47,257)		(64,371)
Net cash provided by operating activities	Net cash provided by operating activities	$	197,351	$	193,984	Net cash provided by operating activities	$	190,711	$	197,351

Cash provided by operating activities for the first six months of fiscal ~~2022 increased 2%~~2023 decreased 3% compared to the same period last year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, ~~and~~ for capital ~~expenditures.~~expenditures, and acquisitions.

Cash used in investing activities for the first six months of fiscal ~~2022~~2023 totaled ~~$101,052~~$301,192 and included: ~~$71,353~~$229,628 for an acquisition; $81,046 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $17,376; and $1,027 for the purchase and development of internal use software. This was partially offset by proceeds from the sale of assets of $27,885. Cash used in investing activities for the first six months of fiscal 2022 totaled $101,052 and included $71,353 for the development of software; capital expenditures of $22,373; and $7,364 for the purchase and development of internal use software. ~~Uses of cash were~~This was partially offset by proceeds from ~~dispositions~~the sale of assets of $38. ~~Cash used in investing~~

Financing activities provided cash of $87,457 for the first six months of fiscal ~~2021 totaled $82,544~~2023 and ~~included: $62,804 for the development~~included borrowings on credit facilities of ~~software; $12,100 for purchase of investments; capital expenditures of $9,543; and $4,254 for the purchase and development of internal use software. Uses of cash were~~$365,000. This was partially offset by ~~proceeds~~payments on credit facilities of $205,042, dividends paid to stockholders of $71,454 and $1,047 net cash outflow from ~~dispositions~~the issuance of ~~$6,157.~~

stock and tax withholding related to stock-based compensation. Financing activities used cash of $118,171 ~~for~~in the first six months of fiscal 2022 ~~and included $193,917 for purchases~~including repurchase of treasury ~~stock;~~stock of $193,917, $80,065 ~~repayment~~for repayments on ~~the revolving~~ credit ~~facility~~facilities and ~~payments on~~ financing leases, and $67,696 for the payment of ~~dividends to stockholders. Uses of cash were~~dividends. This was partially offset by borrowings on credit facilities of $220,000 and $3,507 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash of $177,023 in the first six months of fiscal 2021 and included: $109,899 for the purchase of treasury shares; $65,516 for the payment of dividends to stockholders; $1,551 from

~~the issuance of stock and tax withholding related to stock-based compensation; and $57 for payments on financing leases.~~

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling ~~$22,373~~$17,376 and ~~$9,543~~$22,373 for the six months ended December 31, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were ~~primarily~~ funded from cash generated by operations. Total consolidated capital expenditures on facilities and equipment for the Company for fiscal year ~~2022~~2023 are ~~not~~ expected to ~~exceed $52,000~~be approximately $57,000 and have been or will be ~~primarily~~ funded from our credit facilities and cash generated by operations.

The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was funded by our revolving line of credit and cash generated from operations. Payrailz provides cloud-native, API-first, AI-enabled consumer and commercial digital payment solutions and experiences that enable money to be moved in the moment of need.

On September 29, 2022, the Company entered into an agreement with Twilio Inc., which added contractual spend obligations for the period October 1, 2022, through September 30, 2027, of $16,350. This commitment is in addition to the commitments discussed in our Annual Report on Form 10-K for the year ended June 30, 2022.

On December 27, 2022, the Company renewed an agreement with Microsoft, Inc., which added contractual spend obligations for the period January 1, 2023, through June 30, 2026, of $20,000 for Microsoft Azure Cloud services, and added contractual spend obligations for the period January 1, 2023, through June 30, 2026, of $49,000 for Server and Application licensing under the Microsoft Server and Cloud Enrollment Program.

On August 16, 2022, the ~~first six months~~Inflation Reduction Act of ~~fiscal~~2022 (“IRA”) was signed into law. The IRA made several changes to the U.S. tax code including, but not limited to, a 1% excise tax on net stock repurchases and tax incentives to promote clean energy. The Company does not expect the IRA to have a material impact on its financial statements.

Credit facilities

On August 31, 2022, the Company ~~repurchased 1,250 shares~~entered into a five-year senior, unsecured amended and restated credit agreement that replaced the prior credit agreement described below. The credit agreement allows for borrowings of up to $600,000, which may be increased by the ~~treasury. At~~Company to $1,000,000 at any time until maturity. The credit agreement bears interest at a variable rate equal to (a) a rate based on an adjusted Secured Overnight Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement. As of December 31, 2022, the Company was in compliance with all such covenants. The amended and restated credit facility terminates August 31, 2027. There was $275,000 outstanding under the amended and restated credit facility at December 31, 2022.

On June 30, ~~2021,~~2022, there ~~were 29,793 shares in treasury stock and~~was a $115,000 outstanding balance on the ~~Company had the remaining authority to repurchase up to 5,198 additional shares. The total cost of treasury shares at June 30, 2021,~~prior credit facility that was ~~$1,613,202. During the first six months of fiscal 2021, the Company repurchased 675 shares for the treasury and, the Company repurchased 2,800 shares for the treasury during all of fiscal 2021.~~

~~Revolving credit facility~~

Onentered into on February 10, ~~2020, the Company entered into~~2020. The prior credit facility was a five-year senior, unsecured revolving credit facility. The credit facility ~~allows~~allowed for borrowings of up to $300,000, which ~~may~~could be increased by the Company to $700,000 at any time until ~~maturity to $700,000.~~maturity. The prior credit facility ~~bears~~bore interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iv) the eurocurrency rate for a one-month interest period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The prior credit facility iswas guaranteed by certain subsidiaries of the Company and iswas subject to various financial covenants that ~~require~~required the Company to maintain certain financial ratios as defined in the prior credit ~~facility~~ agreement. As of ~~December 31, 2021,~~June 30, 2022, the Company was in compliance with all such covenants. The ~~revolving~~prior credit ~~facility terminates~~facility's termination date was February 10, 2025. ~~There was a $240,000 outstanding balance under the credit facility at December 31, 2021, and $100,000 outstanding balance at June 30, 2021.~~

The increase in the outstanding credit facility balance of $160,000 at December 31, 2022, compared to June 30, 2022, was primarily due to the ~~increase in the Company's repurchases~~acquisition of ~~common stock~~Payrailz during the ~~current~~six months ended December 31, 2022. This borrowing, along with recent increases in prevailing interest rates, is expected to contribute to increased interest expense during fiscal ~~year-to-date period compared to repurchases during the prior fiscal year-to-date period.~~2023, and until our outstanding balances are reduced.

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line was renewed in March 2021 and expires on April 30, 2023. ~~There was no balance outstanding at~~At December 31, ~~2021,~~2022, and June 30, ~~2021.~~2022, no amount was outstanding.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Dollar amounts in this item are in thousands.

Market risk refers to the risk that a change in the level of one or more market prices, interest rates, indices, volatilities, correlations or other market factors such as liquidity, will result in losses for a certain financial instrument

or group of financial instruments. We are currently exposed to credit risk on credit extended to customers and at times are exposed to interest rate risk on outstanding debt. We do not currently use any derivative financial instruments. We actively monitor these risks through a variety of controlled procedures involving senior management.

Based on the controls in place and the credit worthiness of the customer base, we believe the credit risk associated with the extension of credit to our customers will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

We ~~have $240,000~~had $275,000 outstanding debt with variable interest rates as of December 31, ~~2021,~~2022, and a 1% increase in our borrowing rate would increase our annual interest expense by ~~$2,400.~~

$2,750.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation (required in Exchange Act Rules 13a-15(b) and 15d-15(b)), the CEO and CFO concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. For this purpose, disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended December 31, ~~2021,~~2022, there were no changes in internal control over financial reporting which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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, 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following shares of the Company were repurchased during the ~~fiscal~~ quarter ended December 31, ~~2021:~~
Total Number of Shares Purchased Average Price of Share Total Number of Shares Purchased as Part of Publicly Announced Plans
Maximum Number of Shares that May Yet Be Purchased Under the Plans (1)
October 1 - October 31, 2021 — $ — — 5,197,713
November 1 - November 30, 2021 800,000 154.44 800,000 4,397,713
December 1 - December 31, 2021 450,000 156.37 450,000 3,947,713
Total 1,250,000 155.13 1,250,000 3,947,713
2022:


	Total Number of Shares Purchased	Average Price of Share	Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under the Plans (1)
October 1- October 31, 2022	—	—	—	3,947,713
November 1- November 30, 2022	—	—	—	3,947,713
December 1- December 31, 2022	—	—	—	3,947,713
Total	—	—	—	3,947,713

(1) Total stock repurchase authorizations approved by the Company's Board of Directors as of May 17, 2021, were for 35 million shares. ~~The~~Under these authorizations, the Company has repurchased and not re-issued 31,042,903 shares ~~under these authorizations. The~~and has repurchased and re-issued 9,384 shares. These authorizations have no specific dollar or share price targets and no expiration dates.

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ITEM 6. EXHIBITS

31.1 Certification of the Chief Executive Officer.

31.2 Certification of the Chief Financial Officer.

32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS* XBRL Instance Document- the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Furnished with this quarterly report on Form 10-Q are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at December 31, ~~2021,~~2022, and June 30, ~~2021,~~2022, (ii) the Condensed Consolidated Statements of Income for the three and six months ended December 31, ~~2021,~~2022, and ~~2020,~~2021, (iii) the Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended December 31, ~~2021,~~2022, and ~~2020,~~2021, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended December 31, ~~2021,~~2022, and ~~2020,~~2021, and (v) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.


		JACK HENRY & ASSOCIATES, INC.

Date:	February 9, ~~2022~~2023	/s/ David B. Foss
		David B. Foss
		~~Board Chair and~~ Chief Executive Officer and Board Chair

Date:	February 9, ~~2022~~2023	/s/ ~~Kevin D. Williams~~Mimi L. Carsley
		~~Kevin D. Williams~~Mimi L. Carsley
		Chief Financial Officer and Treasurer

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	Three Months Ended
	December 31, 2020
	Core		Payments		Complementary		Corporate and Other		Total
REVENUE
Services and Support	$	126,758	$	14,807	$	98,829	$	10,479	$	250,873
Processing	8,190		140,375		22,579		344		171,488
Total Revenue	134,948		155,182		121,408		10,823		422,361

Cost of Revenue	58,485		86,455		52,407		60,435		257,782
Research and Development									26,780
Selling, General, and Administrative									44,167


Total Expenses									328,729

SEGMENT INCOME	$	76,463	$	68,727	$	69,001	$	(49,612)

OPERATING INCOME									93,632

INTEREST INCOME (EXPENSE)									(65)

INCOME BEFORE INCOME TAXES									$	93,567