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, 2022September 30, 2023
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 PrinciplePrincipal 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 classTrading SymbolName of each exchange on which registered
Common Stock ($0.01 par value)JKHYNasdaq 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 filerAccelerated filer
  
Non-accelerated filerSmaller 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 26,October 27, 2023, the Registrant had 72,990,72772,828,202 shares of Common Stock outstanding ($0.01 par value).



TABLE OF CONTENTS
Page Reference
PART IFINANCIAL INFORMATION
ITEM 1.Condensed Consolidated Balance Sheets as of December 31, 2022,September 30, 2023, and June 30, 20222023 (Unaudited)
Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31,September 30, 2023 and 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended December 31,September 30, 2023 and 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended December 31,September 30, 2023 and 2022 and 2021 (Unaudited)
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
   
ITEM 3.Quantitative and Qualitative Disclosures about Market Risk
   
ITEM 4.Controls and Procedures
  
PART IIOTHER INFORMATION
ITEM 1.Legal Proceedings
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 5.Other Information
 
ITEM 6.Exhibits
Signatures
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, 2022,2023, 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.


2



PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS





































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Table of Contents
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)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)
December 31,
2022
June 30,
2022
September 30,
2023
June 30,
2023
ASSETSASSETS  ASSETS  
CURRENT ASSETS:CURRENT ASSETS:  CURRENT ASSETS:  
Cash and cash equivalentsCash and cash equivalents$25,763 $48,787 Cash and cash equivalents$31,467 $12,243 
Receivables, netReceivables, net246,378 348,072 Receivables, net288,733 361,252 
Income tax receivableIncome tax receivable 13,822 Income tax receivable 7,523 
Prepaid expenses and otherPrepaid expenses and other127,785 125,537 Prepaid expenses and other163,670 169,178 
Deferred costsDeferred costs69,302 57,105 Deferred costs79,626 77,766 
Assets held for sale 20,201 
Total current assetsTotal current assets469,228 613,524 Total current assets563,496 627,962 
PROPERTY AND EQUIPMENT, netPROPERTY AND EQUIPMENT, net203,360 211,709 PROPERTY AND EQUIPMENT, net202,847 205,664 
OTHER ASSETS:OTHER ASSETS:  OTHER ASSETS:  
Non-current deferred costsNon-current deferred costs152,991 143,750 Non-current deferred costs170,342 161,465 
Computer software, net of amortizationComputer software, net of amortization545,377 410,957 Computer software, net of amortization574,143 565,714 
Other non-current assetsOther non-current assets309,178 293,526 Other non-current assets334,825 322,698 
Customer relationships, net of amortizationCustomer relationships, net of amortization70,179 69,503 Customer relationships, net of amortization63,335 65,528 
Other intangible assets, net of amortizationOther intangible assets, net of amortization23,167 25,137 Other intangible assets, net of amortization20,438 19,998 
GoodwillGoodwill804,797 687,458 Goodwill804,797 804,797 
Total other assetsTotal other assets1,905,689 1,630,331 Total other assets1,967,880 1,940,200 
Total assetsTotal assets$2,578,277 $2,455,564 Total assets$2,734,223 $2,773,826 
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY  LIABILITIES AND STOCKHOLDERS' EQUITY  
CURRENT LIABILITIES:CURRENT LIABILITIES:  CURRENT LIABILITIES:  
Accounts payableAccounts payable$13,198 $21,034 Accounts payable$20,286 $19,156 
Accrued expensesAccrued expenses147,908 192,042 Accrued expenses157,945 172,629 
Accrued income taxesAccrued income taxes31,668 — Accrued income taxes30,678 — 
Notes payable and current maturities of long-term debt21 67 
Deferred revenuesDeferred revenues214,742 330,687 Deferred revenues261,656 331,974 
Total current liabilitiesTotal current liabilities407,537 543,830 Total current liabilities470,565 523,759 
LONG-TERM LIABILITIES:LONG-TERM LIABILITIES:  LONG-TERM LIABILITIES:  
Non-current deferred revenuesNon-current deferred revenues70,101 71,485 Non-current deferred revenues71,751 67,755 
Deferred income tax liabilityDeferred income tax liability265,019 292,630 Deferred income tax liability234,254 244,431 
Debt, net of current maturitiesDebt, net of current maturities275,000 115,000 Debt, net of current maturities245,000 275,000 
Other long-term liabilitiesOther long-term liabilities49,630 50,996 Other long-term liabilities52,705 54,371 
Total long-term liabilitiesTotal long-term liabilities659,750 530,111 Total long-term liabilities603,710 641,557 
Total liabilitiesTotal liabilities1,067,287 1,073,941 Total liabilities1,074,275 1,165,316 
STOCKHOLDERS' EQUITYSTOCKHOLDERS' EQUITY  STOCKHOLDERS' EQUITY  
Preferred stock - $1 par value; 500,000 shares authorized, none issuedPreferred 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
1,040 1,039 
Common stock - $0.01 par value; 250,000,000 shares authorized;
104,144,549 shares issued at September 30, 2023;
104,088,784 shares issued at June 30, 2023
Common stock - $0.01 par value; 250,000,000 shares authorized;
104,144,549 shares issued at September 30, 2023;
104,088,784 shares issued at June 30, 2023
1,041 1,041 
Additional paid-in capitalAdditional paid-in capital564,856 551,360 Additional paid-in capital591,458 583,836 
Retained earningsRetained earnings2,752,212 2,636,342 Retained earnings2,919,567 2,855,751 
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)
Less treasury stock at cost
31,323,119 shares at September 30, 2023;
31,194,351 shares at June 30, 2023
Less treasury stock at cost
31,323,119 shares at September 30, 2023;
31,194,351 shares at June 30, 2023
(1,852,118)(1,832,118)
Total stockholders' equityTotal stockholders' equity1,510,990 1,381,623 Total stockholders' equity1,659,948 1,608,510 
Total liabilities and equityTotal liabilities and equity$2,578,277 $2,455,564 Total liabilities and equity$2,734,223 $2,773,826 


See notes to condensed consolidated financial statements.
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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)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)
Three Months EndedSix Months EndedThree Months Ended
December 31,December 31, September 30,
2022202120222021 20232022
REVENUEREVENUE$505,314 $493,896 $1,034,516 $981,952 REVENUE$571,368 $529,202 
EXPENSESEXPENSES    EXPENSES  
Cost of RevenueCost of Revenue304,589 282,825 602,849 559,460 Cost of Revenue323,002 298,261 
Research and DevelopmentResearch and Development36,561 29,916 69,554 56,670 Research and Development36,892 32,993 
Selling, General, and AdministrativeSelling, General, and Administrative56,788 55,493 114,013 106,565 Selling, General, and Administrative78,774 57,225 
Total ExpensesTotal Expenses397,938 368,234 786,416 722,695 Total Expenses438,668 388,479 
OPERATING INCOMEOPERATING INCOME107,376 125,662 248,100 259,257 OPERATING INCOME132,700 140,723 
INTEREST INCOME (EXPENSE)INTEREST INCOME (EXPENSE)    INTEREST INCOME (EXPENSE)  
Interest IncomeInterest Income1,240 1,392 13 Interest Income4,745 152 
Interest ExpenseInterest Expense(3,406)(447)(4,982)(696)Interest Expense(4,197)(1,576)
Total Interest Income (Expense)Total Interest Income (Expense)(2,166)(441)(3,590)(683)Total Interest Income (Expense)548 (1,424)
INCOME BEFORE INCOME TAXESINCOME BEFORE INCOME TAXES105,210 125,221 244,510 258,574 INCOME BEFORE INCOME TAXES133,248 139,299 
PROVISION FOR INCOME TAXESPROVISION FOR INCOME TAXES24,435 29,551 57,186 60,791 PROVISION FOR INCOME TAXES31,569 32,750 
NET INCOMENET INCOME$80,775 $95,670 $187,324 $197,783 NET INCOME$101,679 $106,549 
Basic earnings per shareBasic earnings per share$1.11 $1.30 $2.57 $2.68 Basic earnings per share$1.40 $1.46 
Basic weighted average shares outstandingBasic weighted average shares outstanding72,962 73,580 72,929 73,798 Basic weighted average shares outstanding72,869 72,896 
Diluted earnings per shareDiluted earnings per share$1.10 $1.30 $2.56 $2.68 Diluted earnings per share$1.39 $1.46 
Diluted weighted average shares outstandingDiluted weighted average shares outstanding73,144 73,697 73,141 73,920 Diluted weighted average shares outstanding73,014 73,138 















See notes to condensed consolidated financial statements.
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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)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)
Three Months EndedSix Months EndedThree Months Ended
December 31,December 31, September 30,
2022202120222021 20232022
PREFERRED SHARES:PREFERRED SHARES: — — — PREFERRED SHARES: — 
COMMON SHARES:COMMON SHARES: COMMON SHARES:
Shares, beginning of periodShares, beginning of period103,953,128 103,822,265 103,921,724 103,795,169 Shares, beginning of period104,088,784 103,921,724 
Shares issued for equity-based payment arrangementsShares issued for equity-based payment arrangements57,943 21,101 70,084 26,533 Shares issued for equity-based payment arrangements31,057 12,141 
Shares issued for Employee Stock Purchase PlanShares issued for Employee Stock Purchase Plan15,937 16,880 35,200 38,544 Shares issued for Employee Stock Purchase Plan24,708 19,263 
Shares, end of periodShares, end of period104,027,008 103,860,246 104,027,008 103,860,246 Shares, end of period104,144,549 103,953,128 
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 periodBalance, beginning of period$1,040 $1,038 $1,039 $1,038 Balance, beginning of period$1,041 $1,039 
Shares issued for Employee Stock Purchase PlanShares issued for Employee Stock Purchase Plan 1 Shares issued for Employee Stock Purchase Plan 
Balance, end of periodBalance, end of period$1,040 $1,039 $1,040 $1,039 Balance, end of period$1,041 $1,040 
ADDITIONAL PAID-IN CAPITAL:ADDITIONAL PAID-IN CAPITAL: ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of periodBalance, beginning of period$560,034 $527,255 $551,360 $518,960 Balance, beginning of period$583,836 $551,360 
Tax withholding related to share-based compensationTax withholding related to share-based compensation(5,174)(1,046)(6,731)(1,998)Tax withholding related to share-based compensation(2,944)(1,556)
Shares issued for Employee Stock Purchase PlanShares issued for Employee Stock Purchase Plan2,884 2,739 6,686 6,476 Shares issued for Employee Stock Purchase Plan3,418 3,232 
Stock-based compensation expenseStock-based compensation expense7,112 6,545 13,541 12,055 Stock-based compensation expense7,148 6,998 
Balance, end of periodBalance, end of period$564,856 $535,493 $564,856 $535,493 Balance, end of period$591,458 $560,034 
RETAINED EARNINGS:RETAINED EARNINGS: RETAINED EARNINGS:
Balance, beginning of periodBalance, beginning of period$2,707,182 $2,480,574 $2,636,342 $2,412,496 Balance, beginning of period$2,855,751 $2,636,342 
Net incomeNet income80,775 95,670 187,324 197,783 Net income101,679 106,549 
DividendsDividends(35,745)(33,661)(71,454)(67,696)Dividends(37,863)(35,709)
Balance, end of periodBalance, end of period$2,752,212 $2,542,583 $2,752,212 $2,542,583 Balance, end of period$2,919,567 $2,707,182 
TREASURY STOCK:TREASURY STOCK: TREASURY STOCK:
Balance, beginning of periodBalance, beginning of period$(1,807,118)$(1,613,202)$(1,807,118)$(1,613,202)Balance, beginning of period$(1,832,118)$(1,807,118)
Purchase of treasury sharesPurchase of treasury shares (193,917) (193,917)Purchase of treasury shares(20,000)— 
Balance, end of periodBalance, end of period$(1,807,118)$(1,807,119)$(1,807,118)$(1,807,119)Balance, end of period$(1,852,118)$(1,807,118)
TOTAL STOCKHOLDERS' EQUITYTOTAL STOCKHOLDERS' EQUITY$1,510,990 $1,271,996 $1,510,990 $1,271,996 TOTAL STOCKHOLDERS' EQUITY$1,659,948 $1,461,138 
Dividends declared per shareDividends declared per share$0.49 $0.46 $0.98 $0.92 Dividends declared per share$0.52 $0.49 




See notes to condensed consolidated financial statements.

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIESJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)(In Thousands)(In Thousands)
(Unaudited)
Six Months Ended Three Months Ended
December 31, September 30,
20222021 20232022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:  CASH FLOWS FROM OPERATING ACTIVITIES:  
Net IncomeNet Income$187,324 $197,783 Net Income$101,679 $106,549 
Adjustments to reconcile net income from operations
to net cash from operating activities:
Adjustments to reconcile net income from operations
to net cash from operating activities:
  Adjustments to reconcile net income from operations
to net cash from operating activities:
  
DepreciationDepreciation24,766 25,843 Depreciation12,052 12,416 
AmortizationAmortization68,946 62,610 Amortization37,183 33,194 
Change in deferred income taxesChange in deferred income taxes(27,611)11,573 Change in deferred income taxes(10,178)(12,345)
Expense for stock-based compensationExpense for stock-based compensation14,544 13,027 Expense for stock-based compensation7,148 6,998 
(Gain)/loss on disposal of assets(Gain)/loss on disposal of assets(7,240)240 (Gain)/loss on disposal of assets(111)(6,124)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:  Changes in operating assets and liabilities:  
Change in receivables Change in receivables 102,672 70,468 Change in receivables 72,519 101,509 
Change in prepaid expenses, deferred costs and otherChange in prepaid expenses, deferred costs and other(39,042)(39,991)Change in prepaid expenses, deferred costs and other(17,356)(34,740)
Change in accounts payableChange in accounts payable(7,696)2,995 Change in accounts payable(1,234)(2,168)
Change in accrued expensesChange in accrued expenses(47,544)(35,814)Change in accrued expenses(17,285)(45,265)
Change in income taxesChange in income taxes47,025 8,439 Change in income taxes39,044 41,937 
Change in deferred revenuesChange in deferred revenues(125,433)(119,822)Change in deferred revenues(66,322)(65,130)
Net cash from operating activitiesNet cash from operating activities190,711 197,351 Net cash from operating activities157,139 136,831 
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:  CASH FLOWS FROM INVESTING ACTIVITIES:  
Payment for acquisitions, net of cash acquiredPayment for acquisitions, net of cash acquired(229,628)— Payment for acquisitions, net of cash acquired (228,986)
Capital expendituresCapital expenditures(17,376)(22,373)Capital expenditures(7,612)(7,737)
Proceeds from dispositionsProceeds from dispositions27,885 38 Proceeds from dispositions852 26,252 
Purchased softwarePurchased software(1,027)(7,364)Purchased software(2,280)(408)
Computer software developedComputer software developed(81,046)(71,353)Computer software developed(41,486)(38,715)
Net cash from investing activitiesNet cash from investing activities(301,192)(101,052)Net cash from investing activities(50,526)(249,594)
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:  CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings on credit facilitiesBorrowings on credit facilities365,000 220,000 Borrowings on credit facilities135,000 280,000 
Repayments on financing leases(205,042)(80,065)
Repayments on credit facilities and financing leasesRepayments on credit facilities and financing leases(165,000)(150,022)
Purchase of treasury stockPurchase of treasury stock (193,917)Purchase of treasury stock(20,000)— 
Dividends paidDividends paid(71,454)(67,696)Dividends paid(37,863)(35,709)
Tax withholding payments related to share-based compensationTax withholding payments related to share-based compensation(6,731)(1,998)Tax withholding payments related to share-based compensation(2,944)(1,556)
Proceeds from sale of common stockProceeds from sale of common stock5,684 5,505 Proceeds from sale of common stock3,418 3,233 
Net cash from financing activitiesNet cash from financing activities87,457 (118,171)Net cash from financing activities(87,389)95,946 
NET CHANGE IN CASH AND CASH EQUIVALENTSNET CHANGE IN CASH AND CASH EQUIVALENTS$(23,024)$(21,872)NET CHANGE IN CASH AND CASH EQUIVALENTS$19,224 $(16,817)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIODCASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD$48,787 $50,992 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD$12,243 $48,787 
CASH AND CASH EQUIVALENTS, END OF PERIODCASH AND CASH EQUIVALENTS, END OF PERIOD$25,763 $29,120 CASH AND CASH EQUIVALENTS, END OF PERIOD$31,467 $31,970 









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)

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 well-rounded financial technology company. JKHYJack Henry was founded in 1976 as a provider of core information processing solutions for banks. Today, the Company’s extensive array of products and services includes processing transactions, automating business processes, and managing information for approximately 7,8007,500 financial institutions and diverse corporate entities.
Consolidation
The condensed consolidated financial statements include the accounts of JKHYJack Henry and all of its subsidiaries, which are wholly owned, and all intercompany accounts and transactions have been eliminated.
Comprehensive Income
Comprehensive income for the three and six months ended December 31,September 30, 2023 and 2022, and 2021, equals the Company’s net income.
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 periods ended December 31, 2022, and 2021:September 30, 2023:
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Allowance for credit losses - beginning balanceAllowance for credit losses - beginning balance$8,030 $7,660 $7,616 $7,267 Allowance for credit losses - beginning balance$7,955 $7,616 
Current provision for expected credit lossesCurrent provision for expected credit losses480 300 960 840 Current provision for expected credit losses480 480 
Write-offs charged against allowanceWrite-offs charged against allowance(325)(227)(390)(373)Write-offs charged against allowance(231)(65)
Recoveries of amounts previously written offRecoveries of amounts previously written off(1)— (2)(1)Recoveries of amounts previously written off— (1)
Allowance for credit losses - ending balanceAllowance for credit losses - ending balance$8,184 $7,733 $8,184 $8,184 $7,733 Allowance for credit losses - ending balance$8,204 $8,030 
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, 2022,September 30, 2023, totaled $461,010$476,923 and at June 30, 2022,2023, totaled $454,879.$466,711.
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 3 to 20 years. Accumulated amortization of intangible assets totaled $1,078,867$1,187,086 and $1,030,800$1,149,913 at December 31, 2022,September 30, 2023, and June 30, 2022,2023, respectively.
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TablePurchase of Contents
Investments
At December 31, 2022,September 30, 2023, and June 30, 2022,2023, the Company had an investment in the preferred stock of Automated Bookkeeping, IncAutobooks, Inc. ("Autobooks") of $18,250, which represented a non-controlling share of the voting equity as of 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.
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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. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At December 31, 2022, and JuneSeptember 30, 2022,2023, there were 31,04331,323 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,9483,667 additional shares. The total cost of treasury shares at December 31, 2022, and JuneSeptember 30, 2022,2023, was $1,807,118.$1,852,118. During the first sixthree months of fiscal 2023,2024, the Company did notrepurchased 129 shares. At June 30, 2023, there were 31,194 shares in treasury stock and the Company had the remaining authority to repurchase anyup to 3,796 additional shares. The total cost of treasury shares at June 30, 2023, was $1,832,118 and the Company repurchased no shares during the first three months of its common stock.fiscal 2023.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement 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 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, 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, 2022, with updates to certain policies included in this Note 1.2023.
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, 2022,September 30, 2023, the results of its operations for the three and six months ended December 31,September 30, 2023 and 2022, and 2021, changes in stockholders' equity for the three and six months ended December 31,September 30, 2023 and 2022, and 2021, and its cash flows for the sixthree months ended December 31, 2022September 30, 2023 and 2021.2022. The condensed consolidated balance sheet at June 30, 2022,2023, 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, 2022,September 30, 2023, 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.
Significant Accounting Policies
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, 2023. For the three months ended September 30, 2023, there have been no new or material changes to the significant accounting policies discussed in the Company’s Form 10-K for the fiscal year ended June 30, 2023, that are of significance, or potential significance, to the Company.
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Risks and Uncertainties
The Company has determined there was not a material impact to the Company’s condensed consolidated financial statements as of and for the quarter ended December 31, 2022, as a result of the continuing impact of the COVID-19 pandemic. However, the extent to which the COVID-19 pandemic may impact the Company's future operational and financial performance remains uncertain and difficult to predict. The Company will continue to monitor developments related to the COVID-19 pandemic.
NOTE 2.     RECENT ACCOUNTING PRONOUNCEMENTS
Not YetRecently Adopted Accounting Guidance
In October 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 ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company plans to adoptadopted the ASU effective July 1, 2023, and will apply it prospectively to business combinations occurring on or after that date.
NOTE 3.    REVENUE AND DEFERRED COSTS
Revenue Recognition
The Company generates revenue from data processing and hosting, 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 11, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Private and Public CloudPrivate and Public Cloud$153,130 $138,340 $302,129 $273,982 Private and Public Cloud$163,489 $148,999 
Product Delivery and ServicesProduct Delivery and Services58,594 79,499 116,117 131,014 Product Delivery and Services60,839 57,523 
On-Premise SupportOn-Premise Support78,976 78,372 192,603 188,708 On-Premise Support117,877 113,627 
Services & Support290,700 296,211 610,849 593,704 
Services and SupportServices and Support342,205 320,149 
ProcessingProcessing214,614 197,685 423,667 388,248 Processing229,163 209,053 
Total RevenueTotal Revenue$505,314 $493,896 $1,034,516 $981,952 Total Revenue$571,368 $529,202 
Contract Balances
The following table provides information about contract assets and contract liabilities from contracts with customers.
December 31,
2022
June 30,
2022
September 30,
2023
June 30,
2023
Receivables, netReceivables, net$246,378 $348,072 Receivables, net$288,733 $361,252 
Contract Assets - CurrentContract Assets - Current24,136 24,447 Contract Assets - Current27,926 26,711 
Contract Assets - Non-currentContract Assets - Non-current68,092 68,261 Contract Assets - Non-current79,480 81,561 
Contract Liabilities (Deferred Revenue) - CurrentContract Liabilities (Deferred Revenue) - Current214,742 330,687 Contract Liabilities (Deferred Revenue) - Current261,656 331,974 
Contract Liabilities (Deferred Revenue) - Non-currentContract Liabilities (Deferred Revenue) - Non-current70,101 71,485 Contract Liabilities (Deferred Revenue) - Non-current71,751 67,755 
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 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.
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During the three months ended December 31,September 30, 2023, and 2022, and 2021, the Company recognized revenue of $83,145$99,220 and $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, 2022, and 2021, the Company recognized revenue of $159,393 and $166,273,$97,990, 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.
Transaction Price Allocated to Remaining Performance Obligations
As of December 31, 2022,September 30, 2023, 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 $5,654,930.$3,563,944. The Company expects to recognize approximately 25% over the next 12 months, 20%19% 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 $410,904$450,294 and $380,095,$442,012, at December 31, 2022,September 30, 2023, and June 30, 2022,2023, respectively.
For the three months ended December 31,September 30, 2023, and 2022, and 2021, amortization of deferred contract costs totaled $34,861$50,537 and $32,154, respectively. During the six months ended December 31, 2022, and 2021, amortization of deferred contract costs totaled $76,841 and $67,998,$41,980, 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 MeasurementsTotal FairEstimated Fair Value MeasurementsTotal Fair
Level 1Level 2Level 3Value Level 1Level 2Level 3Value
December 31, 2022   
September 30, 2023September 30, 2023   
Financial Assets:Financial Assets:Financial Assets:
Certificates of Deposit Certificates of Deposit$ $1,213 $ $1,213  Certificates of Deposit$ $2,255 $ $2,255 
Financial Liabilities:Financial Liabilities:Financial Liabilities:
Revolving credit facility$ $275,000 $ $275,000 
June 30, 2022   
Credit facilitiesCredit facilities$ $245,000 $ $245,000 
June 30, 2023June 30, 2023   
Financial Assets:Financial Assets:Financial Assets:
Certificates of Deposit Certificates of Deposit$— $1,212 $— $1,212  Certificates of Deposit$— $2,234 $— $2,234 
Financial Liabilities:Financial Liabilities:Financial Liabilities:
Revolving credit facility$— $115,000 $— $115,000 
Credit facilitiesCredit facilities$— $275,000 $— $275,000 
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NOTE 5.    LEASES
The Company determines if an arrangement is a lease, or contains 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 13 months to 1110 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, 2022,September 30, 2023, and June 30, 2022,2023, the Company had operating lease assets of $43,743$41,564 and $46,869 and financing lease assets of $20 and $65,$43,662, respectively. At December 31, 2022,September 30, 2023, total operating lease liabilities of $48,116$47,555 were comprised of current operating lease liabilities of $10,246$9,571 and noncurrent operating lease liabilities of $37,870. At December 31, 2022, total financing lease liabilities of $21 were all current liabilities.$37,984. At June 30, 2022,2023, total operating lease liabilities of $51,452$50,269 were comprised of current operating lease liabilities of $10,681$9,776 and noncurrent operating lease liabilities of $40,771. At December 31, 2022, total financing lease liabilities of $67 were all current financing lease liabilities.$40,493.
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 $35,636$28,077 and $31,006$34,973 as of December 31, 2022,September 30, 2023, and June 30, 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 $295 and $255 as of December 31, 2022, and June 30, 2022,2023, respectively.
Operating lease costs for the three months ended December 31,September 30, 2023, and 2022, were $2,468 and 2021, were $3,029 and $3,327, respectively. Financing lease costs for the three months ended December 31, 2022, and 2021, were $20 and $27,
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$3,059, respectively. Total operating and financing lease costs for the respective quarters included variable lease costs of $962$544 and $441,$923, respectively. Operating lease costs for the six months ended December 31, 2022, and 2021, were $6,088 and $6,759, respectively. Financing lease costs for the six months ended December 31, 2022, and 2021, were $40 and $55, respectively. Total operating and financing lease costs for the respective fiscal year-to-date periods included variable lease costs of $1,890 and $840, 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 statementstatements of income.
For the sixthree months ended December 31,September 30, 2023, and 2022, and 2021, the Company had operating cash flows for payments on operating leases of $6,202$2,171 and $6,802,$3,110, and ROU assets obtained in exchange for operating lease liabilities of $2,282$0 and $1,870, respectively. Operating cash flows for interest paid on financing leases for the six months ended December 31, 2022, and 2021, were $42 and $55,$2,296, respectively.
As of December 31, 2022,September 30, 2023, and June 30, 2022,2023, the weighted-average remaining lease term for the Company's operating leases was 7280 months and 7678 months, and the weighted-average discount rate was 2.59%2.09% and 2.58%2.14%, respectively. As of December 31, 2022, and June 30, 2022, the weighted-average remaining lease term for the Company's financing leases was 3 months and 9 months, respectively. The weighted-average discount rate for the Company's financing leases was 2.19% as of December 31, 2022, and 2.29% as of June 30, 2022.
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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, 2022*:September 30, 2023:
Due Dates (fiscal year)Due Dates (fiscal year)Future Minimum Rental PaymentsDue Dates (fiscal year)Future Minimum Rental Payments
2023 (remaining period)$5,879 
202410,696 
2024 (remaining period)2024 (remaining period)$6,705 
202520257,952 20258,413 
202620267,046 20267,888 
202720276,265 20277,157 
202820286,771 
ThereafterThereafter14,296 Thereafter13,872 
Total lease paymentsTotal lease payments$52,134 Total lease payments$50,806 
Less: interestLess: interest(4,018)Less: interest(3,251)
Present value of lease liabilitiesPresent value of lease liabilities$48,116 Present value of lease liabilities$47,555 
*Financing leases were immaterial to the quarter, so a maturity ofFuture lease liabilities table has only been included for operating leases.
Lease payments include $5,464 related to options to extend lease terms that are reasonably certain of being exercised. At December 31, 2022,September 30, 2023, there were $6,128 ofno legally binding lease payments for leases signed but not yet commenced.
On September 30, 2023, the Company entered into an agreement with a third party to sublease a portion of its Elizabethtown, Kentucky facility. At September 30, 2023, there were $3,852 of legally binding lease payments due from the third party for the lease signed but not yet commenced. The commencement date of the sublease is October 1, 2023, and has a term of 57 months.
NOTE 6.    DEBT
Credit facilities
On August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced thea prior credit facility described below.that was entered into on February 10, 2020. 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,September 30, 2023, 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$65,000 and $95,000 outstanding under the amended and restated credit facility at December 31, 2022.September 30, 2023 and June 30, 2023, respectively.
Term loan facility
On June 30, 2022, there was a $115,000 outstanding balance onMay 16, 2023, the prior credit facility that wasCompany entered into on February 10, 2020. The priora term loan credit agreement with a syndicate of financial institutions, with an original principal balance of $180,000. Borrowings under the term loan facility was a five-year senior, unsecured revolving credit facility. The prior credit facility allowed for borrowings of up to $300,000, which could be increased by the Company to $700,000 at any time until maturity. The prior credit facility borebear interest at a variable rate equal to (a) a rate based on a eurocurrencyan adjusted SOFR term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime ratePrime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the eurocurrency rateAdjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one-month interest periodone month Interest Period on such day for dollarsDollars plus 1.0%0.75%), plus an applicable percentage in each case determined by the Company's leverage ratio. The priorterm loan credit facility wasagreement is guaranteed by certain subsidiaries of the Company and wasis subject to various financial covenants that requiredrequire the Company to maintain certain financial ratios as defined in the priorterm loan credit agreement. As of JuneSeptember 30, 2022,2023, the Company was in compliance with all such covenants. The priorterm loan credit facility's terminationagreement has a maturity date of May 16, 2025. There was February 10, 2025.$180,000 outstanding under the term loan at September 30, 2023 and June 30, 2023.
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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%1.0%. The credit line expires on April 30, 2023.2025. There was no balance outstanding at December 31, 2022,September 30, 2023, or June 30, 2022.2023.
Interest
The Company paid interest of $2,724$3,509 and $604$1,333 during the sixthree months ended December 31,September 30, 2023, and 2022, and 2021, respectively.
NOTE 7.    INCOME TAXES
The effective tax rate decreasedincreased for the three months ended December 31, 2022,September 30, 2023, compared to the three months ended December 31, 2021,September 30, 2022, with an effective tax rate of 23.2%23.7% of income before income taxes, compared to 23.6%23.5% in the prior fiscal year quarter. The decrease in the effective tax rate was primarily due to a larger excess tax benefit received from share-based compensation in the current fiscal 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 $37,213$2,569 and $40,687$2,828 in the sixthree months ended December 31,September 30, 2023, and 2022, and 2021, respectively.
At December 31, 2022,September 30, 2023, the Company had $10,214$12,676 of gross unrecognized tax benefits before interest and penalties, $9,083$11,051 of which, if recognized, would affect our effective tax rate. The Company had accrued interest and penalties of $1,546$2,046 and $1,425$1,360 related to uncertain tax positions at December 31,September 30, 2023, and 2022, and 2021, respectively.
The U.S. federal income tax returns for fiscal 20192020 and all subsequent years remain subject to examination as of December 31, 2022,September 30, 2023, under statute of limitations rules. The U.S. state income tax returns that remain subject to examination as of December 31, 2022,September 30, 2023, under the statute of limitation rules varies by state jurisdiction from fiscal 2016 through 2019 and all subsequent years. The Company anticipates potential changes due to lapsing of statutes of limitations, and examination closures could reduce the unrecognized tax benefits balance by $1,500 to $3,500$4,500 within twelve months of December 31, 2022.September 30, 2023.
NOTE 8.    STOCK-BASED COMPENSATION
Our operating income for the three months ended December 31,September 30, 2023, and 2022, included $7,148 and 2021, included $7,545 and $6,956$6,998 of stock-based compensation costs, respectively. Our operating income for the six months ended December 31, 2022, and 2021, included $14,544 and $13,027 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,
Stock option awards
Under the 2015 EIP, 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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TableDuring the three months ended September 30, 2023, there were no options granted, forfeited, or exercised. At September 30, 2023, 12 options were outstanding at a weighted average exercise price of Contents
A summary$87.27 with an aggregate intrinsic value of option plan activity under this plan is as follows:
 Number of SharesWeighted Average Exercise PriceAggregate
 Intrinsic
 Value
Outstanding July 1, 202212 $87.27  
Granted— —  
Forfeited— —  
Exercised— —  
Outstanding December 31, 202212 $87.27 $1,032 
Vested and Expected to Vest December 31, 202212 $87.27 $1,032 
Exercisable December 31, 202212 $87.27 $1,032 
$746.
At December 31, 2022,September 30, 2023, there was no compensation cost yet to be recognized related to outstanding options. ForAll of the options are currently exercisable, thewith a weighted average remaining contractual term (remaining period of exercisability) of 2.75 years as of December 31, 2022, was 3.5 years.September 30, 2023.
Restricted Stock Unit Awardsstock unit and performance unit awards
The Company issues unit awards under the 2015 EIP. Restricted stock unit awards (which are unit awards that have service requirements only and are not tied to performance measures) generally vest over a period of 1 to 3 years. Performance unit awards are awards that have performance measures in addition to service requirements.

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The following table summarizes non-vested restricted stock unit awards and performance awards as of December 31, 2022:September 30, 2023:
Unit awardsUnitsWeighted Average Grant Date Fair ValueAggregate Intrinsic Value
Outstanding July 1, 2022303 $166.50 
Granted124 219.65 
Vested(91)167.18 
Forfeited(13)187.68 
Outstanding December 31, 2022323 $185.86 $56,803 
Unit awardsUnitsWeighted Average Grant Date Fair ValueAggregate Intrinsic Value
Outstanding July 1, 2023303 $190.08 
Granted1
142 180.61 
Vested(48)190.80 
Forfeited2
(28)201.87 
Outstanding September 30, 2023369 $185.42 $55,724 
The 1241Granted includes restricted stock unit awards and performance unit awards at 100% achievement.
2Forfeited includes restricted stock unit awards and performance unit awards forfeited for service requirements not met and performance unit awards not settled due to underachievement of performance measures.
Of the 142 unit awards granted in fiscal 2023 had service requirements and performance measures, with 82 only having service requirements. The2024, 84 were restricted stock unit awards with only service requirementsand 58 were performance unit awards. The restricted stock unit awards 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 4223 of the performance unit awards granted in fiscal 2023 have performance measures along with service requirements. 17 of these performance and service requirement unit awards2024 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 performance unit awards will be determined based on the Company's compound annual growth rate 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 performance 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 2535 of the performance and service requirement unit awards have market conditions and 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 performance unit awards that utilize a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return ("TSR") in comparison to the compensation peer group made up of participants approved by the Compensation Committee of the Company's Board of Directors for fiscal year 2023.2024. 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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follows:
Monte Carlo award inputs:Fiscal 20232024
Compensation Peer Group:
Volatility29.425.6 %
Risk free interest rate2.964.48 %
Annual dividend based on most recent quarterly dividend$1.962.08
Dividend yield0.941.23 %
Beginning average percentile rank for TSR71.074.0 %
At December 31, 2022,September 30, 2023, there was $31,658$38,164 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 1.321.46 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,Three Months Ended September 30,
2022202120222021 20232022
Net IncomeNet Income$80,775 $95,670 $187,324 $197,783 Net Income$101,679 $106,549 
Common share information:Common share information:Common share information:
Weighted average shares outstanding for basic earnings per shareWeighted average shares outstanding for basic earnings per share72,962 73,580 72,929 73,798 Weighted average shares outstanding for basic earnings per share72,869 72,896 
Dilutive effect of stock options and restricted stock units182 117 212122
Dilutive effect of stock options, restricted stock units, and performance unitsDilutive effect of stock options, restricted stock units, and performance units145 242 
Weighted average shares outstanding for diluted earnings per shareWeighted average shares outstanding for diluted earnings per share73,144 73,697 73,141 73,920 Weighted average shares outstanding for diluted earnings per share73,014 73,138 
Basic earnings per shareBasic earnings per share$1.11 $1.30 $2.57 $2.68 Basic earnings per share$1.40 $1.46 
Diluted earnings per shareDiluted earnings per share$1.10 $1.30 $2.56 $2.68 Diluted earnings per share$1.39 $1.46 
Per share information is based on the weighted average number of common shares outstanding for the three and six months ended December 31, 2022September 30, 2023, and 2021.2022. Stock options, and restricted stock units, and performance units have been included in the calculation of earnings per share to the extent they are dilutive. There were 31nominal and 2511 anti-dilutive stock options, or restricted stock units, or performance units excluded for the three and six months ended December 31,September 30, 2023 and 2022, respectively, and 28 and 23 were excluded for the three and six months ended December 31, 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.agreement, which amount was released to the sellers during the three months ended September 30, 2023.
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 assets119,868 
Deferred revenue(8,104)
Total other liabilities assumed(749)
Total identifiable net assets112,866 
Goodwill117,339 
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.
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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,September 30, 2023 and 2022, included revenue of $2,578$2,896 and $3,316,$738, respectively, and after-tax net loss of $5,387$5,059 and $7,251,$1,870, respectively, resulting from Payrailz's operations.
The accompanying condensed consolidated statements of income for the three and six months ended December 31,September 30, 2023, and 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 sixthree months ended December 31,September 30, 2023 and 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$1,957 for the three and six months ended December 31, 2021, respectively, and $1,957 for the six months ended December 31,September 30, 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,
Three Months Ended
September 30,
2022202120222021 20232022
ActualPro formaPro formaPro formaActualPro forma
RevenueRevenue$505,314 $495,727 $1,036,143 $985,124 Revenue$571,368 $530,829 
Net IncomeNet Income80,775 92,793 182,787 189,890 Net Income101,679 102,012 
NOTE 11.    REPORTABLE SEGMENT INFORMATION

The Company is a leading provider of integrated computer systems that perform datatechnology solutions and payment processing (available for on-premise installations or JKHY cloud-based services) for banksservices primarily to community and credit unions.regional financial institutions.
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 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, hosted processing platforms, and services, including call center support, network security management, consulting, and monitoring that can be integrated with ourthe Company's Core solutions, and many can be used independently. The Corporate &and Other segment includes hardware revenue and costs from hardware and other products not attributed to any of the other three segments, as well as operating costsexpenses 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.
Immaterial adjustments have been made between segments to reclassify revenue and cost of 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 revenue from the Complementary to the Payments and Corporate and Other segments for the three and six months ended December 31, 2021.September 30, 2022. 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,September 30, 2022, from Core to Complementary and Corporate and Other was $351 and $1,457, respectively, from Payments to Complementary and Corporate and Other was $6 and $1, respectively, from Complementary to Corporate and Other was $293, and from Corporate and Other to Complementary was $2. Cost of revenue reclassed for the three months ended September 30, 2022, from Core to Corporate and Other was $1,636, from Payments to Complementary and Corporate and Other was $2,977$91 and $5,946,$511, 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.

$423.
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Three Months EndedThree Months Ended
December 31, 2022September 30, 2023
CorePaymentsComplementaryCorporate & OtherTotalCorePaymentsComplementaryCorporate and OtherTotal
REVENUEREVENUEREVENUE
Services and SupportServices and Support$145,650 $19,340 $110,380 $15,330 $290,700 Services and Support$175,744 $19,903 $124,270 $22,288 $342,205 
ProcessingProcessing9,740 172,147 31,915 812 214,614 Processing10,695 179,455 37,096 1,917 229,163 
Total RevenueTotal Revenue155,390 191,487 142,295 16,142 505,314 Total Revenue186,439 199,358 161,366 24,205 571,368 
Cost of RevenueCost of Revenue68,324 108,071 59,270 68,924 304,589 Cost of Revenue75,927 108,826 62,275 75,974 323,002 
Research and DevelopmentResearch and Development36,561 Research and Development36,892 
Selling, General, and AdministrativeSelling, General, and Administrative56,788 Selling, General, and Administrative78,774 
Total ExpensesTotal Expenses397,938 Total Expenses438,668 
SEGMENT INCOMESEGMENT INCOME$87,066 $83,416 $83,025 $(52,782)SEGMENT INCOME$110,512 $90,532 $99,091 $(51,769)
OPERATING INCOMEOPERATING INCOME107,376 OPERATING INCOME132,700 
INTEREST INCOME (EXPENSE)INTEREST INCOME (EXPENSE)(2,166)INTEREST INCOME (EXPENSE)548 
INCOME BEFORE INCOME TAXESINCOME BEFORE INCOME TAXES$105,210 INCOME BEFORE INCOME TAXES$133,248 
Three Months EndedThree Months Ended
December 31, 2021September 30, 2022
CorePaymentsComplementaryCorporate & OtherTotalCorePaymentsComplementaryCorporate and OtherTotal
REVENUEREVENUEREVENUE
Services and SupportServices and Support$145,699 $25,294 $108,933 $16,285 $296,211 Services and Support$163,216 $18,652 $118,214 $20,067 $320,149 
ProcessingProcessing9,179 160,211 27,607 688 197,685 Processing10,100 167,881 30,203 869 209,053 
Total RevenueTotal Revenue154,878 185,505 136,540 16,973 493,896 Total Revenue173,316 186,533 148,417 20,936 529,202 
Cost of RevenueCost of Revenue64,554 96,966 55,982 65,323 282,825 Cost of Revenue70,604 100,553 58,105 68,999 298,261 
Research and DevelopmentResearch and Development29,916 Research and Development32,993 
Selling, General, and AdministrativeSelling, General, and Administrative55,493 Selling, General, and Administrative57,225 
Total ExpensesTotal Expenses368,234 Total Expenses388,479 
SEGMENT INCOMESEGMENT INCOME$90,324 $88,539 $80,558 $(48,350)SEGMENT INCOME$102,712 $85,980 $90,312 $(48,063)
OPERATING INCOMEOPERATING INCOME125,662 OPERATING INCOME140,723 
INTEREST INCOME (EXPENSE)INTEREST INCOME (EXPENSE)(441)INTEREST INCOME (EXPENSE)(1,424)
INCOME BEFORE INCOME TAXESINCOME BEFORE INCOME TAXES$125,221 INCOME BEFORE INCOME TAXES$139,299 

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Six Months Ended
December 31, 2022
CorePaymentsComplementaryCorporate & OtherTotal
REVENUE
Services and Support310,675 37,998 228,528 33,648 610,849 
Processing19,839 340,028 62,119 1,681 423,667 
Total Revenue330,514 378,026 290,647 35,329 1,034,516 
Cost of Revenue140,564 209,226 117,708 135,351 602,849 
Research and Development69,554 
Selling, General, and Administrative114,013 
Total Expenses786,416 
SEGMENT INCOME$189,950 $168,800 $172,939 $(100,022)
OPERATING INCOME248,100 
INTEREST INCOME (EXPENSE)(3,590)
INCOME BEFORE INCOME TAXES$244,510 
Six Months Ended
December 31, 2021
CorePaymentsComplementaryCorporate & OtherTotal
REVENUE
Services and Support$301,536 $42,357 $221,739 $28,072 $593,704 
Processing18,627 315,739 52,579 1,303 388,248 
Total Revenue320,163 358,096 274,318 29,375 981,952 
Cost of Revenue131,456 191,549 110,399 126,056 559,460 
Research and Development56,670 
Selling, General, and Administrative106,565 
Total Expenses722,695 
SEGMENT INCOME$188,707 $166,547 $163,919 $(96,681)
OPERATING INCOME259,257 
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.

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NOTE 12.     SUBSEQUENT EVENTS
None.

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, 2022.September 30, 2023.
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 forto community and regional financial services organizations. Itsinstitutions. Our solutions consist of integrated data processing systems solutions to U.S. banks ranging from de novo to multi-billion-dollar institutions with assets up to $50 billion, core data processing solutions for credit unions of all sizes, and non-core highly specialized core-agnostic products and services that enable financial institutions of every asset size and charter, and diverse corporate entities outside the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. JKHY'sOur integrated solutions are available for on-premise installation and delivery in our private and public cloud.
Our two primary revenue streams are "services and support" and "processing." Services and support includes: "private and public cloud" fees thatrevenue, which predominantly have contractincludes contracts with 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,deconversions, consulting, and hardware; and "on-premise support" revenue, composed of maintenance fees whichcontracts primarily containwith annual contract terms. Processing revenue includes: "remittance" revenue from payment processing, remote capture, and ACH transactions; "card" fees,revenue, including card transaction processing and monthly fees; and "transaction and digital" revenue, which includes transaction and mobile processing fees.processing. 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.
RESULTS OF OPERATIONS
For the secondfirst quarter of fiscal 2023,2024, total revenue increased 2%8%, or $11,418,$42,166, compared to the same quarter in fiscal 2022.2023. Total revenue less deconversion fee and acquisition revenues of $6,380$4,136 and $2,578,$1,945, respectively, for the current fiscal quarter and less deconversion fee revenues of $26,903$4,518 for the prior fiscal year first quarter also results in an increase of 6%8%, or $40,603, quarter over quarter. This increase was primarily driven by growth in data processing and hosting, card, Jack Henry digital, including Banno, payment processing, transactionhardware, and digital, and remittancesoftware usage/subscription revenues.
Operating expenses increased 8%13%, or $50,189, for the secondfirst quarter of fiscal 20232024 compared to the secondfirst quarter of fiscal 2022.2023. Total operating expenses less deconversion expenses of $917, the$381, acquisition-related expenses of $6,907, plus$4,182, and voluntary employee departure incentive payment (VEDIP) program expenses of $16,443 for the current fiscal quarter, and less deconversion expenses of $653 and removing the effects of 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$6,176 for the prior fiscal year first quarter, results in a 7%an increase of 6%, or $23,661, quarter over quarter. This increase in operating expenses was primarily driven by higher personnel costs, including benefitscommissions expenses, resulting from a 4% headcount increase in the trailing twelve months, increasedand higher direct costs in line with related revenue increases, and higher amortization of intangible assets.as revenues increased.
Operating income decreased 15%6% for the secondfirst quarter of fiscal 20232024 compared to the secondfirst quarter of fiscal 2022.2023. Total operating income less deconversion fee operating income of $5,463,$3,755 plus an acquisition operating loss of $4,329,$2,237 and VEDIP program expenses of $16,443 for the current fiscal quarter, and less deconversion operating income of $3,865 and removing the effects of the gain on disposal of assets, net, of $1,207 for the current fiscal quarter, and less deconversion fee operating income of $24,356$6,176 for the prior fiscal year first quarter, results in a 4%an increase of 13%, or $16,943, quarter over quarter. This increase in operating income was primarily driven by increased revenue growth partially offset by increased operating expenses detailed above.
The provision for income taxes decreased 17% forWe move into the second quarter of fiscal 2023 compared to the prior fiscal year second quarter. The effective tax rate for the second quarter of fiscal 2023 was 23.2% compared to 23.6% for the same quarter a year ago.
Due to the above changes, net income decreased 16% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Total net income less deconversion fee net income of $4,111, plus acquisition net loss of $5,405, less the gain on disposal of assets, net, of $909 for the current fiscal quarter, and less deconversion fee net income of $18,352 for the prior fiscal quarter, results in a 5% increase quarter over quarter.
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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 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, 2022, compared to the same period in fiscal year 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 partially offset by increased operating expenses detailed above.
The provision for income taxes decreased 6% for the six months ended December 31, 2022, compared to the same period in fiscal year 2022. The effective tax rate for the six months ended December 31, 2022, was 23.4% compared to 23.5% for the same period a year ago.
Due to the above changes, net income decreased 5% for the six months ended December 31, 2022, compared to the same period a 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 period, results in a 3% increase period over period.
Our 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 20232024 with significant portions of our business continuing to come from recurring revenues and our sales pipeline remaining encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and we believe they have 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.
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A detailed discussion of the major components of the results of operations for the three and six months ended DecemberSeptember 30, 2023, follows. On August 31, 2022, follows. the Company acquired all of the equity interest in Payrailz, LLC ("Payrailz"). Payrailz ("acquisition") related revenue and operating expenses mentioned in the discussion below are for the first two months of the quarter ended September 30, 2023.
Discussions compare the current fiscal year's three and six months ended December 31, 2022,September 30, 2023, to the prior fiscal year's three and six months ended December 31, 2021.September 30, 2022.
REVENUE
Services and SupportThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
 20222021 20222021
Services and Support$290,700 $296,211 (2)%$610,849 $593,704 3 %
Percentage of total revenue58 %60 % 59 %60 % 
Services and SupportThree Months Ended September 30,%
Change
 20232022 
Services and Support$342,205 $320,149 7 %
Percentage of total revenue60 %60 % 
Services and support revenue decreased 2%increased 7% for the secondfirst quarter of fiscal 20232024 compared to the same quarter a year ago. Reducing services and support revenue for deconversion fee revenue from each quarter, which was $6,380$4,136 for the current fiscal quarter and $26,903$4,518 for the prior fiscal year quarter and acquisition revenue of $19$2 for the current fiscal quarter also results in growth of 6%7% quarter over quarter. This increase was primarily driven by growth in data processing and hosting revenue.
Servicesrevenues, as new customers are added and support revenueexisting customers migrate from on-premise to outsourcing, and increased 3% for the six months ended December 31, 2022 compared to the same period a year ago. Reducing services and support revenue for deconversion fee revenue from each period, which was $10,899 for the current fiscal period and $30,627 for the prior fiscal 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 hostinghardware and software usage feeusage/subscription revenues. Growth in software usage fee revenues reflects a continuing shift of customers to our time-based license model.
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ProcessingProcessingThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
ProcessingThree Months Ended September 30,%
Change
20222021 20222021  20232022 
ProcessingProcessing$214,614 $197,685 9 %$423,667 $388,248 9 %Processing$229,163 $209,053 10 %
Percentage of total revenuePercentage of total revenue42 %40 % 41 %40 % Percentage of total revenue40 %40 % 
Processing revenue increased 9%10% for the secondfirst quarter of fiscal 20232024 compared to the same quarter last fiscal year. Reducing processing revenue for acquisition revenue of $2,559$1,943 for the current fiscal quarter results in growth of 7%9% quarter over quarter. This increase was primarily driven by highergrowth in card processing, payment processing, including iPay and Payrailz, andrevenue from expanding transaction volumes, Jack Henry digital, revenue, including Banno, as well asactive users increased and volumes expanded, other processing fee revenues, primarily due to expanding volumes.and remote capture and ACH revenue.
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 higher card processing and Jack Henry digital revenue, including Banno, as well as payment processing fees, including iPay and Payrailz, and other processing fee revenues, primarily due to expanding volumes.
OPERATING EXPENSES
Cost of RevenueThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
 20222021 20222021 
Cost of Revenue$304,589 $282,825 8 %$602,849 $559,460 8 %
Percentage of total revenue60 %57 % 58 %57 % 

Cost of RevenueThree Months Ended September 30,%
Change
 20232022 
Cost of Revenue$323,002 $298,261 8 %
Percentage of total revenue57 %56 % 
Cost of revenue for the secondfirst quarter of fiscal 20232024 increased 8% over the prior fiscal year secondfirst quarter. Reducing cost of revenue for deconversion costs from each quarter, which were $555$270 for the current fiscal year quarter and $1,601$411 for the prior fiscal year quarter, and for acquisition costs of $5,861$3,334 from the current fiscal year quarter, results in a 6%7% increase quarter over quarter. This increase was primarily due to higher direct costs, consistent with increases in the related revenue, 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.internal licenses and fees. Cost of revenue increased 3%1% compared to the prior fiscal year quarter as a percentage of total revenue.
Cost
20

Table 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.Contents
Research and DevelopmentResearch and DevelopmentThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
Research and DevelopmentThree Months Ended September 30,%
Change
20222021 20222021  20232022 
Research and DevelopmentResearch and Development$36,561 $29,916 22 %$69,554 $56,670 23 %Research and Development$36,892 $32,993 12 %
Percentage of total revenuePercentage of total revenue7 %% 7 %% Percentage of total revenue6 %% 
Research and development expense increased 22%12% for the secondfirst quarter of fiscal 20232024 over the prior fiscal year secondfirst quarter. Reducing research and development expense for the effectsacquisition costs of acquisitions of $274$656 for the current fiscal quarter, results in a 21%10% increase quarter over quarter. This increase was primarily due to an increase in personnel costs, net of capitalization, including benefits expenses primarily resulting from a 13%2% headcount increase in the trailing twelve months, and higher internal licenses and fees.partially related to Jack Henry Platform. Research and development expense for the quarter increased 1%remained consistent 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 AdministrativeSelling, General, and AdministrativeThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
Selling, General, and AdministrativeThree Months Ended September 30,%
Change
20222021 20222021  20232022 
Selling, General, and AdministrativeSelling, General, and Administrative$56,788 $55,493 2 %$114,013 $106,565 7 %Selling, General, and Administrative$78,774 $57,225 38 %
Percentage of total revenuePercentage of total revenue11 %11 % 11 %11 % Percentage of total revenue14 %11 % 
Selling, general, and administrative expense increased 2%38% in the secondfirst quarter of fiscal 20232024 over the same quarter in the prior fiscal year. Reducing selling, general, and administrative expense for the effects of deconversion feescosts from each quarter, which were $362$111 for the current fiscal year quarter and $946$243 for the prior fiscal year quarter, for acquisition costs of $192 and for the effectsVEDIP program expenses of acquisitions of $772$16,443 for the current fiscal year quarter, and increasing selling, general, and administrative expense forremoving the effect of the gain on disposal of assets, net, of $1,207 for$6,176 in the currentprior fiscal year quarter, results in a 4% increase2% decrease quarter over quarter. This increasedecrease was primarily due to higher personnel costs, including benefits expenses, resulting from a 5% headcount increase in the trailing twelve months.continued focus on controlling costs. Selling, general, and administrative expense remained consistentincreased 3% as a percentage of total revenue this fiscal quarter versus the prior fiscal year quarter.
Selling, general, and administrative expense increased 7% in the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing selling, general, and administrative expense for the 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 increasing selling, general, and administrative expense for the gain on disposal of assets, net, of $7,384 for the current fiscal year period, results in a 13% increase period over period. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 5% headcount increase in the trailing twelve months, increased travel expenses, and increased consulting and other professional services. Selling, general, and administrative expense remained consistent as a percentage of total revenue this fiscal period versus the 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 September 30,%
Change
20222021 20222021  20232022 
Interest IncomeInterest Income$1,240 $20,567 %$1,392 $13 10,608 %Interest Income$4,745 $152 3,022 %
Interest ExpenseInterest Expense$(3,406)$(447)662 %$(4,982)$(696)616 %Interest Expense$(4,197)$(1,576)166 %
Interest income fluctuated due to changes in invested balances and yieldsinterest earned on invested balances during the secondfirst quarter of fiscal 2023 and six months ended December 31, 2022,2024 compared to the same periodsquarter 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 rates length of borrowing time, and amounts borrowed. There was a $275,000$245,000 outstanding balance under the credit and term loan facilities at September 30, 2023, and $245,000 outstanding balance under the credit facility at December 31, 2022, and $240,000 outstanding balance at December 31, 2021. The increase in the outstanding balance was primarily due to funding the Payrailz acquisition on August 31,September 30, 2022.
PROVISION FOR INCOME TAXESThree Months Ended December 31,%
Change
Six Months Ended December 31,%
Change
 2022202120222021
Provision for Income Taxes$24,435 $29,551 (17)%$57,186 $60,791 (6)%
Effective Rate23.2 %23.6 %23.4 %23.5 %

The change in effective tax rate for the second quarter of fiscal 2023 and six months ended December 31, 2022, compared to the same periods a year ago was primarily due to larger excess tax benefits received from share-based compensation in the current fiscal periods.
PROVISION FOR INCOME TAXESThree Months Ended September 30,%
Change
 20232022
Provision for Income Taxes$31,569 $32,750 (4)%
Effective Rate23.7 %23.5 %
NET INCOMEThree Months Ended December 31,
%
Change
Six Months Ended December 31,%
Change
 2022202120222021
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 INCOMEThree Months Ended September 30,
%
Change
 20232022
Net income$101,679 $106,549 (5)%
Diluted earnings per share$1.39 $1.46 (4)%
Net income decreased 16%5% to $80,775,$101,679, or $1.10$1.39 per diluted share, for the secondfirst quarter of fiscal 20232024 compared to $95,670,$106,549, or $1.30$1.46 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 year quarter, results in a 5% increase quarter over quarter.
2023. Net income decreased 5%primarily due to $187,324, or $2.56 per diluted share,VEDIP program expenses partially offset by the organic growth in our lines of revenue and a decrease in the provision for income taxes in the six months ended December 31, 2022,first quarter of fiscal 2024 compared to $197,783, or $2.68 per diluted share in the same period ofquarter last 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 period and reducing operating expenses for the effects of deconversion fees of $20,751 for the prior fiscal year period, results in a 3% increase period over period.year.

REPORTABLE SEGMENT DISCUSSION
The Company is a leading provider of technology solutions and payment processing services primarily forto community and regional financial services organizations.institutions.
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 costsexpenses not directly attributable to the other three segments.segments, except for items that are deemed unassigned and excluded from any segment.
Core
Three Months Ended December 31,% ChangeSix Months Ended December 31,% Change
 2022202120222021
Revenue$155,390 $154,878 — %$330,514 $320,163 %
Cost of Revenue$68,324 $64,554 %$140,564 $131,456 %
Immaterial adjustments have been made between segments to reclassify revenue and cost of revenue that was recognized for the three months ended September 30, 2022. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. Revenue reclassed for the three months ended September 30, 2022, from Core to Complementary and Corporate and Other was $351 and $1,457, respectively, from Payments to Complementary and Corporate and Other was $6 and $1, respectively, from Complementary to Corporate and Other was $293, and from Corporate and Other to Complementary was $2. Cost of revenue reclassed for the three months ended September 30, 2022, from Core to Corporate and Other was $1,636, from Payments to Complementary and Corporate and Other was $91 and $511, respectively, and from Complementary to Corporate and Other was $423.
CoreThree Months Ended September 30,% Change
 20232022
Revenue$186,439 $173,316 %
Cost of Revenue$75,927 $70,604 %
Revenue in the Core segment remained consistentincreased 8% and cost of revenue increased 6%8% for the three months ended December 31, 2022,September 30, 2023, compared to the three months ended December 31, 2021. ReducingSeptember 30, 2022. This increase was primarily driven by growth in data processing and hosting revenues. The cost of revenue increase was primarily driven by higher direct costs consistent with increases in revenue. Core segment deconversion costs did not significantly affect Core revenue for deconversion feeor cost of revenue in both periods, which totaled $2,115 for the second quarter of fiscal 2023 and $10,853 for the second quarter of fiscal 2022, results in a 6% increaseincreases quarter over quarter. Cost of revenue increased 6% quarter over quarter primarily due to higher personnel costs and increased direct support costs. Cost of revenue increased 2%remained consistent as a percentage of revenue for the secondfirst quarter of fiscal 20232024 compared to the same quarter of fiscal 2022.2023.
Revenue in the Core segment increased 3% and cost of revenue increased 7% for the six months ended December 31, 2022, compared to the six months ended December 31, 2021. Reducing Core revenue for deconversion fee revenue in both periods, which totaled $3,933 for the six months ended December 31, 2022, and $13,021 for the six months ended December 31, 2021, results in 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 revenues. Cost of revenue 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 the six months ended December 31, 2022, compared to the same period of fiscal 2022.
PaymentsPaymentsPaymentsThree Months Ended September 30,% Change
Three Months Ended December 31,% ChangeSix Months Ended December 31,% Change 20232022
2022202120222021
RevenueRevenue$191,487 $185,505 %$378,026 $358,096 %Revenue$199,358 $186,533 %
Cost of RevenueCost of Revenue$108,071 $96,966 11 %$209,226 $191,549 %Cost of Revenue$108,826 $100,553 %
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Revenue in the Payments segment increased 3%7% and cost of revenue increased 8% for the secondfirst quarter of fiscal 20232024 compared to the equivalent quarter of the prior fiscal year. Reducing Payments revenue for deconversion fee revenue in both periods,quarters, which totaled $1,336$1,006 for the secondfirst quarter of fiscal 2024 and $1,435 for the first quarter of fiscal 2023 and $7,933 for the second quarter of fiscal 2022 and for revenue from acquisitionsthe acquisition of $2,578$1,945 from the current fiscal year first quarter, results in a 6% increase quarter over quarter. This Payments revenue growthincrease was primarily due to increasedhigher card revenue, primarily from expanding transaction volumes, and remittance fee revenues within processing. Costhigher remote capture and ACH revenue, primarily from expanding volumes and new customer revenue. Reducing Payments cost of revenue increased 11%for deconversion costs in both quarters, which totaled $47 for the first quarter of fiscal 2024 and $64 for the first quarter of fiscal 2023, and for cost of revenue from acquisition of $3,314 from the current fiscal year first quarter, results in a 5% increase quarter over quarterquarter. This increase was primarily due to increasedhigher direct costs, in lineconsistent with associated revenues, and higher personnel costs. Cost of revenue as a percentage of revenue 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 the six months ended December 31, 2022, compared to the same period of fiscal 2022.
Complementary
Three Months Ended December 31,% ChangeSix Months Ended December 31,% Change
 2022202120222021
Revenue$142,295 $136,540 %$290,647 $274,318 %
Cost of Revenue$59,270 $55,982 %$117,708 $110,399 %
Revenue in the Complementary segment increased 4% for the second quarter of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. This Complementary revenue growth was primarily driven by 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 higher personnel costs.including benefits expenses. Cost of revenue as a percentage of revenue increased 1% for the secondfirst quarter of fiscal 20232024 compared to the same quarter of fiscal 2022.2023.
ComplementaryThree Months Ended September 30,% Change
 20232022
Revenue$161,366 $148,417 %
Cost of Revenue$62,275 $58,105 %
Revenue in the Complementary segment increased 6%9% and cost of revenue increased 7% for the six months ended December 31, 2022,first quarter of fiscal 2024 compared to the equivalent periodquarter of the prior fiscal year. This ComplementaryThe revenue growthincrease was primarily driven by increased hosting fees andhigher Jack Henry digital revenues. Costrevenue, as active users increased and volumes expanded, and hosting revenues, as new customers were added, and existing customers continued to migrate from on-premise to outsourcing. The cost of revenue increased 7% period over periodincrease was primarily due to increased direct costs in lineconsistent with associated revenues and higher personnel costs.costs, including benefits expenses. Complementary segment deconversion costs did not significantly affect Complementary revenue or cost of revenue increases quarter over quarter. Cost of revenue as a percentage of revenue remained consistentdecreased 1% for the six months ended December 31, 2022,first quarter of fiscal 2024 compared to the same periodquarter of fiscal 2022.2023.
Corporate and OtherCorporate and OtherCorporate and OtherThree Months Ended September 30,% Change
Three Months Ended December 31,% ChangeSix Months Ended December 31,% Change 20232022
2022202120222021
RevenueRevenue$16,142 $16,973 (5)%$35,329 $29,375 20 %Revenue$24,205 $20,936 16 %
Cost of RevenueCost of Revenue$68,924 $65,323 %$135,351 $126,056 %Cost of Revenue$75,974 $68,999 10 %
Revenue classified in the Corporate and Other segment includes 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%increased 16% for the secondfirst quarter of fiscal 20232024 compared to the equivalent quarter of the prior fiscal year. The decrease quarter over quarterThis increase was primarily due to lower user grouphigher hardware revenues due to differences in the timing of the user conference yearquarter over year.quarter. Corporate and Other segment deconversion revenue did not significantly affect Corporate and Other revenue increase quarter over quarter.
Cost of revenue for the Corporate and Other segment includes operating costsexpenses not directly attributable to any of the other three segments. The cost of revenue in the secondfirst quarter of fiscal 20232024 increased 6%10% when compared to the prior fiscal year quarter primarily due to higher internal licensesquarter. Corporate and feesOther segment deconversion and personnel costs.
Revenue inacquisition costs did not significantly affect 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 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, personnel costs, and hardware costs.increase quarter over quarter.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreasedincreased to $25,763$31,467 at December 31, 2022,September 30, 2023, from $48,787$12,243 at June 30, 2022.2023.
23


The following table summarizes net cash from operating activities in the statement of cash flows:
Six Months EndedThree Months Ended
December 31,September 30,
2022202120232022
Net incomeNet income$187,324 $197,783 Net income$101,679 $106,549 
Non-cash expensesNon-cash expenses73,405 113,293 Non-cash expenses46,094 34,139 
Change in receivablesChange in receivables102,672 70,468 Change in receivables72,519 101,509 
Change in deferred revenueChange in deferred revenue(125,433)(119,822)Change in deferred revenue(66,322)(65,130)
Change in other assets and liabilitiesChange in other assets and liabilities(47,257)(64,371)Change in other assets and liabilities3,169 (40,236)
Net cash provided by operating activitiesNet cash provided by operating activities$190,711 $197,351 Net cash provided by operating activities$157,139 $136,831 
Cash provided by operating activities for the first sixthree months of fiscal 2023 decreased 3%2024 increased 15% compared to the same period last year.year primarily due to a lower decrease in accrued expenses and a lower increase in prepaid expenses partially offset by a lower decrease in trade receivables quarter over quarter. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, for capital expenditures, and acquisitions.
Cash used in investing activities for the first sixthree months of fiscal 20232024 totaled $301,192$50,526 and included: $229,628 for an acquisition; $81,046$41,486 for the ongoing enhancementsenhancement and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $17,376;$7,612; and $1,027$2,280 for the purchase and development of internal use software. This wasCash uses were partially offset by proceeds from the sale of assets of $27,885.$852. Cash used in investing activities for the first sixthree months of fiscal 20222023 totaled $101,052$249,594 and included $71,353included: $228,986 for an acquisition; $38,715 for the development of software; $7,737 for capital expenditures of $22,373;expenditures; and $7,364$408 for the purchase and development of internal use software. This wasCash uses were partially offset by proceeds from the sale of assets of $38.$26,252.
Financing activities providedused cash of $87,457$87,389 for the first sixthree months of fiscal 20232024 and included payments on credit facilities of $165,000, dividends paid to stockholders of $37,863, and purchases of treasury stock of $20,000. Cash uses were partially offset by borrowings on credit facilities of $365,000. This was partially offset by payments on credit facilities of $205,042, dividends paid to stockholders of $71,454$135,000 and $1,047$474 net cash outflowinflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash of $118,171$95,946 in the first sixthree months of fiscal 20222023 including repurchase of treasury stock of $193,917, $80,065 for repayments on credit facilities and financing leases of $150,022, and $67,696$35,709 for the payment of dividends. This wasThese uses of cash were partially offset by borrowings on credit facilities of $220,000$280,000 and $3,507$1,677 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation.
Capital Requirements and Resources
The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $17,376$7,612 and $22,373$7,737 for the sixthree months ended December 31,September 30, 2023, and September 30, 2022, and December 31, 2021, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. Total consolidated capital expenditures on facilities and equipment for the Company for fiscal year 20232024 are expected to be approximately $57,000$77,000 and have been or will be funded from our credit facilities and cash generated by operations.
In July 2023, the Company conducted a voluntary separation program for certain eligible employees that includes a voluntary employee departure incentive payment (VEDIP) for the eligible employees who chose to participate in the program. The Company incurred related expenses of $16,443 in the first quarter of 2024 and will make payments associated with the program from July 2023 through December 2023.
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 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.
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On September 29, 2022,8, 2023, the Company entered into an agreement with Twilio Inc., whicha contract to purchase fixed assets that added contractual spend obligations of $34,191 for the period October 1, 2022,of December 15, 2023, through SeptemberJune 30, 2027, of $16,350.2025. 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.2023.
The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or borrowings on its existing line of credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At December 31, 2022, and JuneSeptember 30, 2022,2023, there were 31,04331,323 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,9483,667 additional shares. The total cost of treasury shares at December 31, 2022,September 30, 2023, was $1,852,118, and the Company repurchased 129 shares during the first three months of fiscal 2024. At June 30, 2022,2023, there were 31,194 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,796 additional shares. The total cost of treasury shares at June 30, 2023, was $1,807,118.$1,832,118 and the Company repurchased no shares during the first three months of fiscal 2023.
On August 16, 2022, the Inflation Reduction Act of 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.
24


Credit facilities
On August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced thea prior credit agreement described below.facility that was entered into on February 10, 2020. The credit agreement allows for borrowings of up to $600,000, which may be increased to $1,000,000 by the 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,September 30, 2023, the Company was in compliance with all such covenants. The amended and restated credit facility terminates August 31, 2027. There was $275,000$65,000 and $95,000 outstanding under the amended and restated credit facility at December 31, 2022.September 30, 2023 and June 30, 2023, respectively.
Term loan facility
On June 30, 2022, there was a $115,000 outstanding balance onMay 16, 2023, the prior credit facility that wasCompany entered into on February 10, 2020. The priora term loan credit agreement with a syndicate of financial institutions, with an original principal balance of $180,000. Borrowings under the term loan facility was a five-year senior, unsecured revolving credit facility. The credit facility allowed for borrowings of up to $300,000, which could be increased by the Company to $700,000 at any time until maturity. The prior credit facility borebear interest at a variable rate equal to (a) a rate based on a eurocurrencyan adjusted SOFR term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime ratePrime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the eurocurrency rateAdjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one-month interest periodone month Interest Period on such day for dollarsDollars plus 0.75%), plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The priorterm loan credit facility wasagreement is guaranteed by certain subsidiaries of the Company and wasis subject to various financial covenants that requiredrequire the Company to maintain certain financial ratios as defined in the priorterm loan credit agreement. As of JuneSeptember 30, 2022,2023, the Company was in compliance with all such covenants. The priorterm loan credit facility's terminationagreement has a maturity date of May 16, 2025. There was February 10, 2025.

The increase in$180,000 outstanding under the outstanding credit facility balance of $160,000term loan at December 31, 2022, compared toSeptember 30, 2023 and June 30, 2022, was primarily due to the acquisition of Payrailz during the 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 2023, and until our outstanding balances are reduced.2023.
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. At December 31, 2022, and2025. There was no balance outstanding at September 30, 2023, or June 30, 2022, no amount was outstanding.2023.

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
28


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 had $275,000$245,000 outstanding debt with variable interest rates as of December 31, 2022,September 30, 2023, and a 1% increase in our borrowing rate would increase our annual interest expense by $2,750.$2,450.

25


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, 2022,September 30, 2023, there were no changes in the Company's 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.
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 quarter ended December 31, 2022:September 30, 2023:
Total Number of Shares PurchasedAverage Price of ShareTotal 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 
Total3,947,713
Total Number of Shares PurchasedAverage Price of ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans
Maximum Number of Shares that May Yet Be Purchased Under the Plans (1)
July 1 - July 31, 2023— — — 3,796,265 
August 1 - August 31, 2023107,227 $155.59 107,227 3,689,038 
September 1 - September 30, 202321,541 153.97 21,541 3,667,497 
Total128,768 $155.32 128,768 3,667,497 
(1) Total stock repurchase authorizations approved by the Company's Board of Directors as of May 17,14, 2021, were for 35 million35,000,000 shares. Under these authorizations, the Company has repurchased and not re-issued 31,042,90331,323,119 shares and has repurchased and re-issued 9,384 shares. These authorizations have no specific dollar or share price targets and no expiration dates.

ITEM 5. OTHER INFORMATION

Rule 10b-5(1) Trading Plans

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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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, 2022,September 30, 2023, and June 30, 2022,2023, (ii) the Condensed Consolidated Statements of Income for the three and six months ended December 31,September 30, 2023, and 2022, and 2021, (iii) the Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended December 31,September 30, 2023, and 2022, and 2021, (iv) the Condensed Consolidated Statements of Cash Flows for the sixthree months ended December 31,September 30, 2023, and 2022, and 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:FebruaryNovember 9, 2023/s/ David B. Foss
David B. Foss
Chief Executive Officer and Board Chair
Date:FebruaryNovember 9, 2023/s/ Mimi L. Carsley
Mimi L. Carsley
Chief Financial Officer and Treasurer

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