UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2020


			OR
☐		~~For the quarterly period ended December 31, 2017~~
OR

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

Commission file number 0-14112

JACK HENRY & ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)



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

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

(Address of Principle Executive Offices)

(Zip Code)

417-235-6652

(Registrant’s telephone number, including area code)

~~N/A~~Securities registered pursuant to Section 12(b) of the Act:

~~(Former name, former address and former fiscal year, if changed since last report)~~


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

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

Yes ~~[ X ]~~☒ No ~~[ ]~~

☐

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

Yes ~~[ X ]~~☒ No ~~[ ]~~

☐

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


Large accelerated filer			☒			Accelerated filer	☐

Non-accelerated filer			☐			Smaller reporting company	☐

~~Large accelerated filer~~			~~[X]~~	~~Accelerated filer~~	~~[ ]~~

~~Non-accelerated filer~~	~~[ ]~~	~~(Do not check if a smaller reporting company)~~

		~~Smaller reporting company~~	~~[ ]~~

		Emerging growth company	~~[ ]~~☐

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

☐

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

Yes ~~[ ]~~☐ No ~~[ X ]~~

~~APPLICABLE ONLY TO CORPORATE ISSUERS~~

~~Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.~~

☒

As of ~~January 31, 2018,~~October 26, 2020, the Registrant had ~~77,261,505~~76,316,170 shares of Common Stock outstanding ($0.01 par value).

TABLE OF CONTENTS


				Page Reference

PART I		FINANCIAL INFORMATION

			~~Page Reference~~

~~PART I~~	~~FINANCIAL INFORMATION~~

ITEM 1.	Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2020 and June 30, ~~2017~~2020 (Unaudited)		53

		Condensed Consolidated Statements of Income for the Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 (Unaudited)		65

		Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended September 30, 2020 and 2019 (Unaudited)		6

		Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 (Unaudited)		76

		Notes to Condensed Consolidated Financial Statements (Unaudited)		8

ITEM 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		2019

ITEM 3.		Quantitative and Qualitative Disclosures about Market Risk		26

ITEM 4.		Controls and Procedures		26

PART II		OTHER INFORMATION		26

~~ITEM1.~~ITEM 1.		Legal Proceedings		26



ITEM 2.		Unregistered Sales Ofof Equity Securities ~~And~~and Use Ofof Proceeds		26

ITEM 6.		Exhibits		28

		Signatures		29

In this report, all references to ~~“JHA”,~~"Jack Henry," “JKHY,” the ~~“Company”, “we”, “us”,~~“Company,” “we,” “us,” and ~~“our”,~~“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.~~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 ~~that~~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 ~~which may~~that could cause actual results to differ materially from ~~the forward-looking~~those expressed or implied by such statements. ~~Risks~~Such risks and uncertainties ~~that could cause actual results and events~~include, but are not limited to, ~~differ materially from such forward-looking statements are identified at “Risk Factors”~~those discussed in ~~the Company’s~~this Quarterly Report on Form 10-Q, those discussed in our Annual Report on Form 10-K for the year ended June 30, ~~2017. We undertake no~~2020, 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 ~~publicly~~ any forward-looking ~~statements,~~statement, whether ~~as a result~~because of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES						JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS						CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)	(In Thousands, Except Share and Per Share Data)						(In Thousands, Except Share and Per Share Data)
(Unaudited)	(Unaudited)						(Unaudited)
								September 30, 2020		June 30, 2020
	December 31, 2017			June 30, 2017
ASSETS							ASSETS
CURRENT ASSETS:							CURRENT ASSETS:
Cash and cash equivalents	$	57,719		$	114,765		Cash and cash equivalents	$	195,320	$	213,345
Receivables, net	166,827			276,923			Receivables, net	223,013		300,945
Income tax receivable	23,630			20,135			Income tax receivable	0		21,051
Prepaid expenses and other	71,427			66,894			Prepaid expenses and other	103,098		95,525
Deferred costs	49,997			41,314			Deferred costs	53,108		38,235

Total current assets	369,600			520,031			Total current assets	574,539		669,101
PROPERTY AND EQUIPMENT, net	272,086			282,934			PROPERTY AND EQUIPMENT, net	263,710		273,432
OTHER ASSETS:							OTHER ASSETS:
Non-current deferred costs	94,438			96,847			Non-current deferred costs	116,994		113,525
Computer software, net of amortization	278,235			247,317			Computer software, net of amortization	348,094		340,466
Other non-current assets	90,641			82,525			Other non-current assets	225,154		220,591
Customer relationships, net of amortization	119,925			90,433			Customer relationships, net of amortization	91,701		95,108
Other intangible assets, net of amortization	39,822			36,393			Other intangible assets, net of amortization	28,550		29,917
Goodwill	652,329			552,465			Goodwill	686,334		686,334
Total other assets	1,275,390			1,105,980			Total other assets	1,496,827		1,485,941
Total assets	$	1,917,076		$	1,908,945		Total assets	$	2,335,076	$	2,428,474
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:							CURRENT LIABILITIES:
Accounts payable	$	13,135		$	6,841		Accounts payable	$	6,835	$	9,880
Accrued expenses	75,397			81,574			Accrued expenses	144,774		166,689

Accrued income taxes							Accrued income taxes	878		0
Notes payable and current maturities of long-term debt							Notes payable and current maturities of long-term debt	126		115
Deferred revenues	265,222			382,777			Deferred revenues	254,764		318,161
Total current liabilities	353,754			471,192			Total current liabilities	407,377		494,845
LONG-TERM LIABILITIES:							LONG-TERM LIABILITIES:
Non-current deferred revenues	110,466			128,607			Non-current deferred revenues	67,745		71,461
Non-current deferred income tax liability	166,789			219,541
Deferred income tax liability							Deferred income tax liability	246,391		243,998
Debt, net of current maturities	100,000			50,000			Debt, net of current maturities	169		208
Other long-term liabilities	12,067			7,554			Other long-term liabilities	69,644		68,274
Total long-term liabilities	389,322			405,702			Total long-term liabilities	383,949		383,941
Total liabilities	743,076			876,894			Total liabilities	791,326		878,786
STOCKHOLDERS' EQUITY							STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—			—			Preferred stock - $1 par value; 500,000 shares authorized, none issued	0		0
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,218,206 shares issued at December 31, 2017; 103,083,299 shares issued at June 30, 2017	1,032			1,031
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,696,962 shares issued at September 30, 2020; 103,622,563 shares issued at June 30, 2020							Common stock - $0.01 par value; 250,000,000 shares authorized; 103,696,962 shares issued at September 30, 2020; 103,622,563 shares issued at June 30, 2020	1,037		1,036
Additional paid-in capital	452,841			452,016			Additional paid-in capital	497,031		495,005
Retained earnings	1,756,419			1,585,278			Retained earnings	2,293,228		2,235,320
Less treasury stock at cost 25,961,920 shares at December 31, 2017; 25,660,212 shares at June 30, 2017;	(1,036,292		)	(1,006,274		)
Less treasury stock at cost 27,392,903 shares at September 30, 2020; 26,992,903 shares at June 30, 2020							Less treasury stock at cost 27,392,903 shares at September 30, 2020; 26,992,903 shares at June 30, 2020	(1,247,546)		(1,181,673)
Total stockholders' equity	1,174,000			1,032,051			Total stockholders' equity	1,543,750		1,549,688
Total liabilities and equity	$	1,917,076		$	1,908,945		Total liabilities and equity	$	2,335,076	$	2,428,474

See notes to condensed consolidated financial statements

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES												JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	CONDENSED CONSOLIDATED STATEMENTS OF INCOME												CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)	(In Thousands, Except Per Share Data)												(In Thousands, Except Per Share Data)
(Unaudited)	(Unaudited)												(Unaudited)
														Three Months Ended
	Three Months Ended						Six Months Ended							September 30,
	December 31,						December 31,							2020		2019
	2017			2016			2017			2016
REVENUE	$	374,756		$	348,553		$	734,690		$	693,581		REVENUE	$	451,800	$	438,005

EXPENSES													EXPENSES
Cost of Revenue	211,653			198,146			416,368			392,908			Cost of Revenue	262,929		245,791
Research and Development	22,414			20,873			43,343			40,611			Research and Development	26,057		24,591
Selling, General, and Administrative	45,613			40,928			89,346			80,038			Selling, General, and Administrative	45,226		49,436
Gain on Disposal of a Business	(189		)	—			(1,894		)	—

Total Expenses	279,491			259,947			547,163			513,557			Total Expenses	334,212		319,818

OPERATING INCOME	95,265			88,606			187,527			180,024			OPERATING INCOME	117,588		118,187

INTEREST INCOME (EXPENSE)													INTEREST INCOME (EXPENSE)
Interest Income	146			60			293			167			Interest Income	68		508
Interest Expense	(250		)	(184		)	(439		)	(326		)	Interest Expense	(117)		(156)
Total Interest Income (Expense)	(104		)	(124		)	(146		)	(159		)	Total Interest Income (Expense)	(49)		352

INCOME BEFORE INCOME TAXES	95,161			88,482			187,381			179,865			INCOME BEFORE INCOME TAXES	117,539		118,539

PROVISION/ (BENEFIT) FOR INCOME TAXES	(60,413		)	29,668			(31,604		)	58,807
PROVISION FOR INCOME TAXES													PROVISION FOR INCOME TAXES	26,323		29,169

NET INCOME	$	155,574		$	58,814		$	218,985		$	121,058		NET INCOME	$	91,216	$	89,370

Basic earnings per share	$	2.01		$	0.76		$	2.83		$	1.55		Basic earnings per share	$	1.19	$	1.16
Basic weighted average shares outstanding	77,218			77,814			77,250			78,114			Basic weighted average shares outstanding	76,507		76,972

Diluted earnings per share	$	2.01		$	0.75		$	2.82		$	1.54		Diluted earnings per share	$	1.19	$	1.16
Diluted weighted average shares outstanding	77,565			78,180			77,606			78,512			Diluted weighted average shares outstanding	76,713		77,067

See notes to condensed consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
December 31,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 218,985
$ 121,058
Adjustments to reconcile net income from operations
to net cash from operating activities:

Depreciation 24,602
24,892
Amortization 48,711
44,568
Change in deferred income taxes (72,721 ) 8,745
Expense for stock-based compensation 4,609
4,230
(Gain)/loss on disposal of assets and businesses (1,841 ) 671
Changes in operating assets and liabilities:
Change in receivables 115,572
107,667
Change in prepaid expenses, deferred costs and other (17,105 ) (22,241 )
Change in accounts payable 5,371
1,221
Change in accrued expenses (15,386 ) (18,339 )
Change in income taxes 2,317
5,007
Change in deferred revenues (136,206 ) (113,612 )
Net cash from operating activities 176,908
163,867

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired (137,654 ) —
Capital expenditures (12,249 ) (17,405 )
Proceeds from the sale of businesses 350
—
Proceeds from the sale of assets 205
830
Internal use software (6,025 ) (11,455 )
Computer software developed (46,936 ) (41,673 )
Net cash from investing activities (202,309 ) (69,703 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities 100,000
50,000
Repayments on credit facilities (50,000 ) (200 )
Purchase of treasury stock (30,018 ) (103,885 )
Dividends paid (47,844 ) (43,582 )
Proceeds from issuance of common stock upon exercise of stock options 1
1
Tax withholding payments related to share based compensation (7,144 ) (5,394 )
Proceeds from sale of common stock 3,360
2,774
Net cash from financing activities (31,645 ) (100,286 )
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (57,046 ) $ (6,122 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 114,765
$ 70,310
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 57,719
$ 64,188

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
(Unaudited)
	Three Months Ended
	September 30,
	2020		2019
PREFERRED SHARES:	0		0

COMMON SHARES:
Shares, beginning of period	103,622,563		103,496,026
Shares issued for equity-based payment arrangements	55,002		19,888
Shares issued for Employee Stock Purchase Plan	19,397		19,914
Shares, end of period	103,696,962		103,535,828

COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of period	$	1,036	$	1,035
Shares issued for equity-based payment arrangements	1		0

Balance, end of period	$	1,037	$	1,035

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	495,005	$	472,030
Shares issued for equity-based payment arrangements	(1)		(1)
Tax withholding related to share based compensation	(5,505)		(2,072)
Shares issued for Employee Stock Purchase Plan	2,907		2,412
Stock-based compensation expense	4,625		2,853
Balance, end of period	$	497,031	$	475,222

RETAINED EARNINGS:
Balance, beginning of period	$	2,235,320	$	2,066,073
Cumulative effect of Accounting Standards Update adoption (Note 2)	(493)		0
Net income	91,216		89,370
Dividends	(32,815)		(30,771)
Balance, end of period	$	2,293,228	$	2,124,672

TREASURY STOCK:
Balance, beginning of period	$	(1,181,673)	$	(1,110,124)
Purchase of treasury shares	(65,873)		(14,145)
Balance, end of period	$	(1,247,546)	$	(1,124,269)

TOTAL STOCKHOLDERS' EQUITY	$	1,543,750	$	1,476,660

Dividends declared per share	$	0.43	$	0.40

See notes to condensed consolidated financial statements.

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
	Three Months Ended
	September 30,
	2020		2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	91,216	$	89,370
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	13,391		12,708
Amortization	30,352		29,380
Change in deferred income taxes	2,393		2,359
Expense for stock-based compensation	4,625		2,853
(Gain)/loss on disposal of assets	(159)		8
Changes in operating assets and liabilities:
Change in receivables	77,439		77,123
Change in prepaid expenses, deferred costs and other	(30,522)		(13,486)
Change in accounts payable	(2,244)		1,865
Change in accrued expenses	(27,896)		(35,270)
Change in income taxes	22,995		25,081
Change in deferred revenues	(67,113)		(68,939)
Net cash from operating activities	114,477		123,052

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	0		(30,285)
Capital expenditures	(4,478)		(13,101)

Proceeds from completed and pending dispositions	6,115		10

Purchased software	(1,374)		(2,424)
Computer software developed	(31,451)		(28,475)
Purchase of investments	0		(1,150)
Net cash from investing activities	(31,188)		(75,425)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments on financing leases	(28)		0

Purchase of treasury stock	(65,873)		(14,145)
Dividends paid	(32,815)		(30,771)

Tax withholding payments related to share based compensation	(5,505)		(2,072)
Proceeds from sale of common stock	2,907		2,412
Net cash from financing activities	(101,314)		(44,576)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(18,025)	$	3,051
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	213,345	$	93,628
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	195,320	$	96,679

See notes to condensed consolidated financial statements

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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Per Share Amounts)

(Unaudited)


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

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

Description of the Company

Jack Henry & Associates, Inc. and subsidiaries ~~(“JHA”~~("Jack Henry," "JKHY," or the ~~“Company”~~"Company") is a provider of integrated computer systems and ~~services that~~services. The Company has developed and acquired a number of banking and credit union software systems. The Company's revenues are predominately earned by marketing those systems to financial institutions nationwide together with computer equipment (hardware), by providing the conversion and implementation services for financial institutions to utilize ~~JHA~~JKHY systems, and by providing other related services. ~~JHA~~JKHY also provides continuing support and services to customers using ~~in-house~~on-premise or outsourced systems.

Consolidation

The condensed consolidated financial statements include the accounts of ~~JHA~~JKHY 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, 2017~~September 30, 2020 and ~~2016~~2019 equals the Company’s net income.

~~Prior Period Reclassification~~Change in Accounting Policy

~~During~~The Company adopted FASB Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses, ("CECL") with an adoption date of July 1, 2020 (see Note 2). As a result, the ~~first~~Company changed its accounting policy for allowance for credit losses. The accounting policy pursuant to CECL is disclosed below. The adoption of CECL resulted in an immaterial cumulative effect adjustment recorded in retained earnings as of July 1, 2020.

Allowance for Credit Losses

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

The following table summarizes allowance for credit losses activity for the quarter ~~of fiscal 2018,~~ended September 30, 2020:


Allowance for credit losses at June 30, 2020	$	6,719
Cumulative effect of accounting standards update adoption	493
Current quarter provision for expected credit losses	540
Write-offs charged against allowance	(1,023)
Recoveries of amounts previously written off	(3)
Other	5
Allowance for credit losses at September 30, 2020	$	6,731

While the ~~Company's management decided to change the presentation of its income statement, along with~~novel coronavirus ("COVID-19") pandemic did not result in a ~~change~~significant increase in the ~~segment structure (see Note 9), in order to more clearly align with the way management manages~~Company’s expected credit loss allowance recorded as of September 30, 2020, the Company ~~and evaluates performance. Amounts within~~believes it is reasonably possible that future developments related to the ~~condensed consolidated statements~~economic impact of ~~income for~~ the ~~three and six~~ ~~months ended~~ ~~December 31, 2016~~COVID-19 pandemic could have been reclassified to improve comparability with the three and six months ended December 31, 2017. Revenue was previously classified as license, support and service, and hardware, and has been reclassified into one "Revenue" caption. Costa material impact on management’s estimates (see Use of ~~sales was previously presented under three captions to correspond with our three lines of revenue, and has now been condensed to one caption, "Cost of Revenue"~~Estimates below). We have elected to include all operating expenses, including cost of revenue, under one expenses heading. Previously, cost of revenue was presented separately from operating expenses in order to show gross profit. Gross profit has been removed from our current presentation due to management's focus on operating income. Additionally, within operating expenses, selling and marketing expense and general and administrative expense were previously presented under two captions, but are now condensed under one caption, labeled "Selling, General, and Administrative."

Property and Equipment

Property and equipment is ~~stated~~recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation at ~~December 31, 2017~~September 30, 2020 totaled ~~$368,599~~$417,121 and at June 30, ~~2017~~2020 totaled ~~$345,014.~~$404,388.

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

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period, generally three to twenty years. Accumulated amortization of intangible assets totaled ~~$552,340~~$846,659 and ~~$503,653~~$812,856 at ~~December 31, 2017~~September 30, 2020 and June 30, ~~2017,~~2020, respectively.

Purchase of Investments

The Company had an investment in the preferred stock of Automated Bookkeeping, Inc ("Autobooks") of $6,000 at September 30, 2020 and June 30, 2020, which represented a non-controlling share of the voting equity as of each of those dates. The total investment was recorded at cost and is included within other non-current assets on the Company's balance sheet. There have been no events or changes in circumstances that would indicate an impairment and no price changes resulting from observing a similar or identical investment. An impairment and/or an observable price change would be an adjustment to recorded cost. Fair value will not be estimated unless there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

Common Stock

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or borrowings on its existing line-of-credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At ~~December 31, 2017,~~September 30, 2020, there were ~~25,962~~27,393 shares in treasury stock and the Company had the remaining authority to repurchase up to ~~4,029~~2,598 additional shares. The total cost of treasury shares at ~~December 31, 2017~~September 30, 2020 is ~~$1,036,292.~~$1,247,546. During the first ~~six~~three months of fiscal ~~2018,~~2021, the Company repurchased ~~302~~400 treasury ~~shares for $30,018.~~shares. At June 30, ~~2017,~~2020, there were ~~25,660~~26,993 shares in treasury stock and the Company had authority to repurchase up to ~~4,330~~2,998 additional shares.

Income Taxes

~~Dividends declared per share were $0.31~~Deferred tax liabilities and ~~$0.28,~~ ~~for the~~ ~~three months ended December 31, 2017 and 2016, respectively, and totaled $0.62 and $0.56~~assets are recognized for the ~~six months ended December 31, 2017~~tax effects of differences between the financial statement and ~~2016, respectively.~~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 deferred 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, ~~2017.~~2020. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Form 10-K for the fiscal year ended June 30, ~~2017.~~2020, with updates to certain policies included in this Note 1.

In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary (consisting of normal recurring adjustments) to state fairly in all material respects the financial position of the Company as of ~~December 31, 2017,~~September 30, 2020, the results of its operations for the three months ended September 30, 2020 and ~~six~~2019, changes in stockholders' equity for the three months ~~ending December 31, 2017~~ended September 30, 2020 and ~~2016,~~2019, and its cash flows for the ~~six~~three months ~~ending December 31, 2017~~ended September 30, 2020 and ~~2016.~~2019. The condensed consolidated balance sheet at June 30, ~~2017~~2020 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 ~~period~~three months ended ~~December 31, 2017~~September 30, 2020 are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates

The extent to which the COVID-19 pandemic will directly or indirectly impact our business and financial results, including revenue, expenses, cost of revenues, research and development, and selling, general and administrative

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expenses, will depend on future developments that are highly uncertain, such as new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses, as well as the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements as of and for the quarter ended September 30, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

~~The Financial~~Recently Adopted Accounting ~~Standards Board ("FASB")~~Guidance

In January 2017, the FASB issued Accounting ~~Standards~~Standard Update ("ASU") No. ~~2014-09, Revenue from Contracts with Customers in May 2014. This standard is part of an effort to create a common revenue standard~~2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for ~~U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS). The new standard will supersede much~~Goodwill Impairment, which eliminates Step 2 of the ~~existing authoritative literature~~goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for ~~revenue recognition.~~the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ~~new model enacts~~Company adopted ASU No. 2017-04 on July 1, 2020 and the adoption did not have a ~~five-step process for achieving~~material impact on its condensed consolidated financial statements.

In June 2016, the core principle, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB ~~also~~ issued ASU No. ~~2015-14~~2016-13, Financial Instruments - Credit Losses (Topic 326), or CECL, which ~~deferred~~prescribes an impairment model for most financial instruments based on expected losses rather than incurred losses. Under this model, an estimate of expected credit losses over the ~~effective date~~contractual life of the ~~new standard by one year, but allows early application~~instrument is to be recorded as of the ~~original effective date. We do not intend~~end of a reporting period as an allowance to ~~adopt~~offset the ~~provisions~~amortized cost basis, resulting in a net presentation of the ~~new standard early, so~~amount expected to be collected on the financial instrument. For most instruments, entities must apply the standard using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted CECL effective July 1, 2020 using the required modified retrospective approach, which resulted in a cumulative-effect decrease to beginning retained earnings of $493. Financial assets and ~~related amendments~~liabilities held by the Company subject to the “expected credit loss” model prescribed by CECL include trade and other receivables as well as contract assets (see Note 1).

Not Yet Adopted

In December of 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions and simplifies other requirements of Topic 740 guidance. The ASU will be effective for the Company ~~for its annual reporting period beginning~~on July 1, 2018, including interim periods within that reporting period. In March 2016, the FASB issued ASU No. 2016-08, which addresses principal versus agent considerations under the new revenue standard. Additional guidance, including ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20, also addresses specific aspects2021. Early adoption of the ~~new standard and are being considered. Entities are allowed~~amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to ~~transition to~~early adopt the ~~new standard by either recasting prior periods (full retrospective) or recognizing the cumulative effect~~amendments in an interim period should reflect any adjustments as of the beginning of the annual period ofthat includes that interim period. Additionally, an entity that elects early adoption ~~(modified retrospective).~~

must adopt all the amendments in the same period. The Company ~~has taken the following steps in evaluating~~plans to adopt ASU 2019-12 effective July 1, 2021 and ~~planning for the implementation of the new standard:~~

Organization of a cross-functional implementation team whose goals are to: assess the impact of the guidance on each of our revenue streams by applying the five step model; determine new processes and procedures necessary to ensure proper revenue and cost recognition; quantify the effects of the new standard on prior and current year revenue; determine opening balances for deferred revenues and costs as of the beginning of fiscal 2017; develop disclosures required upon the adoption of the new standard; and develop new internal controls to ensure compliance with the new standard.

~~Continued implementation and testing of new revenue recognition software that will apply the five-step model to each of our customer contracts.~~

~~Continued comparisons of revenue recognition under current accounting methods versus under ASC 606 for each of our revenue streams.~~

~~Determinations that have been made regarding the effect of the new standard are as follows:~~

Wedoes not expect the adoption ~~of this standard~~ to have a ~~significant~~material impact on our revenue recognition currently subject to Accounting Standards Codification (ASC) Topic 985. One of the most significant expected impacts relates to the recognition of license and implementation revenue on our multi-element arrangements. Under the current standard, license and implementation revenue on these arrangements is often recognized over

the maintenance period of the software due to a lack of vendor-specific objective evidence of fair value ("VSOE") for these elements. Under ASC 606, revenue for license and implementation will no longer be deferred due solely to a lack of VSOE.

This new model will require more use of judgments and estimates than the current standard, including identifying performance obligations, estimating variable consideration, and allocating the transaction price to each performance obligation. We will be required to estimate the total expected value of variable consideration, arising from items such as maintenance and transaction or item processing, at contract inception and include those estimates in the total transaction price of the contract to be allocated to each performance obligation. These estimates will be modified over the term of the contract, resulting in re-allocations of the transaction price and adjustments to revenue recognized on the contract.

~~Significant implementation matters yet to be addressed include:~~

Which transition approach will be applied. While we plan to adopt the standard using the full retrospective method, our ability to achieve that depends on system readiness, including software procured from third-party providers, and the completion of our analysis of information necessary to restate prior periodits consolidated financial statements.

~~Determination~~

NOTE 3. REVENUE AND DEFERRED COSTS

Revenue Recognition

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

Table of ~~opening balances~~Contents

Disaggregation of Revenue

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 10, Reportable Segment Information, for ~~deferred revenues~~disaggregated revenue by type and ~~costs, and the quantitative effect~~reportable segment. The majority of the ~~new standard on prior and current year revenues and costs.~~Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

~~Development of required disclosures under the new standard.~~


	Three Months Ended September 30,
		2020		2019
Outsourcing & Cloud		$	120,959	$	108,583
Product Delivery & Services		56,897		71,361
In-House Support		103,141		98,864
Services & Support		280,997		278,808

Processing		170,803		159,197

Total Revenue		$	451,800	$	438,005

~~Updates to our internal controls surrounding the new processes.~~Contract Balances

The ~~FASB issued ASU No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease~~following table provides information about contract assets and contract liabilities onfrom contracts with customers.


	September 30, 2020		June 30, 2020
Receivables, net	$	223,013	$	300,945
Contract Assets- Current	21,136		21,609
Contract Assets- Non-current	53,788		54,293
Contract Liabilities (Deferred Revenue)- Current	254,764		318,161
Contract Liabilities (Deferred Revenue)- Non-current	67,745		71,461

Contract assets primarily result from revenue being recognized when or as control of a solution or service is transferred to the customer, but 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 ~~requiring disclosure~~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 ~~key information regarding leasing arrangements. Specifically,~~delivery of the ~~standard requires operating lease commitments~~related goods and services to ~~be recorded on~~ the ~~balance sheet as operating lease liabilities and right-of-use assets, and the cost of those operating leases to be amortized~~customer. Contract balances are reported in a net contract asset or liability position on a ~~straight-line basis. ASU No. 2016-02 will be effective~~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 ~~Jack Henry's annual reporting period beginning July 1,~~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.

For the three months ended September 30, 2020 and 2019, the Company recognized revenue of $93,047 and ~~early adoption is permitted. At transition, a modified retrospective approach must be utilized to measure leases as of~~$94,054, respectively, that was included in the corresponding deferred revenue balance at the beginning of the ~~earliest~~periods.

Amounts recognized that relate to performance obligations satisfied (or partially satisfied) in prior periods were immaterial for each period ~~presented, however,~~presented. These adjustments are primarily the ~~FASB has provided certain practical expedients, which~~result of transaction price re-allocations due to changes in estimates of variable consideration.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2020, estimated revenue expected to be recognized in the ~~Company is currently evaluating.~~future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $4,063,582. The Company ~~is currently assessing~~expects to recognize approximately 28.21% over the ~~impact this new standard will have on our consolidated financial statements~~next 12 months, 19.52% in 13-24 months, and ~~when we will adopt it.~~the balance thereafter.

~~ASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification~~

Table of eight specific cash flow issues and is effective for our annual reporting period beginning July 1, 2018. Early adoption is permitted. We do not expect any significant impact to our financial statements as a result of this standard.Contents

~~NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS~~

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

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 priorityCompany incurs incremental costs to ~~quoted prices in active markets, and requires~~obtain a contract as well as costs to fulfill contracts with customers 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~~

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

Estimated Fair Value Measurements Total Fair
Level 1 Level 2 Level 3 Value
December 31, 2017
Financial Assets:
Money market funds $ 21,581
$ —
$ —
$ 21,581
Certificate of Deposit $ —
$ 1,000
$ —
$ 1,000
Financial Liabilities:
Revolving credit facility $ —
$ 100,000
$ —
$ 100,000
June 30, 2017

Financial Assets:
Money market funds $ 68,474
$ —
$ —
$ 68,474
Certificate of Deposit $ —
$ 2,001
$ —
$ 2,001
Financial Liabilities:
Revolving credit facility $ —
$ 50,000
$ —
$ 50,000

Non-Recurring Fair Value Measurements
June 30, 2017
Long-lived assets held for sale ^(a)
$ —
$ 1,300
$ —
$ 1,300

^(a) In accordance with ASC Subtopic 360-10, long-lived assets held for sale with a carrying value of $4,575 were written down to their fair value of $1,300, resulting in an impairment totaling $3,275, which was included in earnings for the period ended June 30, 2017. These assets are expected to be ~~disposed~~recovered. These costs consist primarily of ~~by sale within twelve months~~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 $288,917 and $271,010, at September 30, 2020 and June 30, ~~2017.~~2020, respectively.

During the three months ended September 30, 2020 and 2019, amortization of deferred contract costs totaled $33,825 and $31,393, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

NOTE 4. ~~INTANGIBLE ASSETS~~LEASES

The ~~estimated aggregate future amortization expense~~Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the ~~remainder~~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 ~~fiscal 2018~~real estate leases and ~~each~~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 ~~next four years~~incremental borrowing rate requires judgment and is determined by using the Company’s current unsecured borrowing rate, adjusted for ~~all intangible~~various factors such as collateralization and term to align with the terms of the lease.

The Company leases certain office space, data centers and equipment with remaining terms of 1 to 13 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 ~~remaining~~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 September 30, 2020 and June 30, 2020, the Company had operating lease assets of $65,242 and $63,948 and financing lease assets of $356 and $355, respectively. At September 30, 2020, total operating lease liabilities of $69,913 were comprised of current operating lease liabilities of $13,012 and noncurrent operating lease liabilities of $56,901, and total financing lease liabilities of $295 were comprised of current financing lease liabilities of $126 and noncurrent financing lease liabilities of $169. At June 30, 2020, total operating lease liabilities of $68,309 were comprised of current operating lease liabilities of $11,712 and noncurrent operating lease liabilities of $56,597, and total financing lease liabilities of $323 were comprised of current financing lease liabilities of $115 and noncurrent financing lease liabilities of $208.

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 $16,911 and $13,719 as of ~~December 31, 2017, is~~September 30, 2020 and June 30, 2020, 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 $67 and $38 as ~~follows:~~of September 30, 2020 and June 30, 2020, respectively.

Operating lease costs for the three months ended September 30, 2020 and 2019 were $3,909 and $4,007, respectively. Financing lease costs for the three months ended September 30, 2020 and 2019 were $31 and $0, respectively. Total operating and financing lease costs for the respective quarters included variable lease costs of approximately $1,380 and $879. Operating and financing lease expense are included within cost of services, research and development, and selling, general & administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of income.

Years Ending June 30, Computer Software
Customer
Relationships
Other Intangible Assets Total
2018 (remainder) $ 33,443
$ 8,182
$ 7,613
$ 49,238
2019 62,836
16,399
11,773
91,008
2020 52,282
13,906
6,279
72,467
2021 34,637
11,750
1,717
48,104
2022 19,464
10,689
1,121
31,274
For the three months ended September 30, 2020 and 2019, the Company had operating cash flows for payments on operating leases of $3,298 and $3,927, and right-of-use assets obtained in exchange for operating lease liabilities of $4,485 and $1,370, respectively. Operating cash flows for interest paid on financing leases for the three months ended September 30, 2020 and 2019 were $2 and $0, respectively.

As of September 30, 2020 and June 30, 2020, the weighted-average remaining lease term for the Company's operating leases was 86 months and 88 months and the weighted-average discount rate was 2.66% and 2.76%, respectively. As of September 30, 2020 and June 30, 2020 the weighted-average remaining lease term for the Company's financing leases was 30 months and 33 months, respectively. The weighted-average discount rate for the Company's financing leases was 2.42% as of September 30, 2020 and June 30, 2020.

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 September 30, 2020*:


Due Dates (fiscal year)	Future Minimum Rental Payments

2021 (remaining period)	$	10,174
2022	13,233
2023	11,772
2024	9,640
2025	6,899
Thereafter	25,164
Total lease payments	$	76,882
Less: interest	(6,969)
Present value of lease liabilities	$	69,913

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

Lease payments include $10,078 related to options to extend lease terms that are reasonably certain of being exercised. At September 30, 2020 and 2019, there were 0 legally binding lease payments for leases signed but not yet commenced.

NOTE 5. DEBT

Revolving credit facility

On February 10, 2020, the Company entered into a five-year senior, unsecured revolving credit facility. The ~~revolving~~ credit facility allows for borrowings of up to ~~$300,000~~,$300,000, which may be increased by the Company at any time until maturity to ~~$600,000~~.$700,000. The credit facility bears interest at a variable rate equal to (a) a rate based on ~~LIBOR~~a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime rate ("Prime ~~Rate~~Rate") for such day, ~~(ii)~~(iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and ~~(iii)~~(iv) the ~~Eurocurrency Rate~~eurocurrency rate for a one-month ~~Interest Period~~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 facility is guaranteed by certain subsidiaries of the ~~Company. The credit facility~~Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit facility agreement. As of ~~December 31, 2017,~~September 30, 2020, the Company was in compliance with all such covenants. The revolving ~~loan~~credit facility terminates February ~~20, 2020. At December 31, 2017, there was an outstanding revolving loan balance of $100,000.~~10, 2025. There was ~~a $50,000~~0 outstanding balance under the credit facility at September 30, 2020 or June 30, ~~2017.~~

2020.

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up to ~~$5,000~~$5,000 and bears interest at the prime rate less 1%. The credit line ~~was renewed in April 2017 and~~ expires on April 30, ~~2019. At~~ ~~December 31, 2017~~, no ~~amount was outstanding.~~2021. There was ~~also no~~0 balance outstanding at September 30, 2020 or June 30, ~~2017.~~2020.

Interest

The Company paid interest of ~~$355~~$79 and ~~$188~~$97 during the ~~six~~three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively.

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NOTE 6. INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted into law, which includes numerous provisions that impact the Company, including reducing the U.S. federal tax rate, eliminating the Domestic Production Activities Deduction in future tax years, and providing expanded asset expensing. The TCJA reduces the U.S. federal statutory tax rate from 35% to 21%, effective January 1, 2018. For the Company’s fiscal year 2018, a blended U.S. federal statutory tax rate of approximately 28% will apply to the Company.

The effective tax rate was ~~(63.5)%~~22.4% of income before income taxes for the quarter ended ~~December 31, 2017,~~September 30, 2020, compared to ~~33.5%~~24.6% for the same quarter in fiscal ~~2017. For the six months ended December 31, 2017 the effective tax rate was (16.9)%, compared to 32.7% for the six months ended December 31, 2016.~~2020. The ~~significant~~ decrease toin the Company's tax rate was primarily due to ~~$96,766~~the difference in impact of ~~income tax benefits recorded as a result~~share-based compensation that vested during each of the ~~TCJA in the quarter ended December 31, 2017.~~

The staff of the US Securities and Exchange Commission (SEC) has recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017, issued guidance in Staff Accounting Bulletin No. 118 (SAB 118) which clarifies accounting for income taxes under ASC 740 if information is not available or complete and provides for up to a one year period in which to complete the required analyses and accounting. The Company relied on SAB 118 in computing its accounting for income taxes during the period ended December 31, 2017. The computation of income taxes payable, deferred tax liability, and income tax expense for the period ended December 31, 2017 reflect provisional amounts for which the income tax effects of the TCJA have not been completed, but for which reasonable estimates are available. As a fiscal year taxpayer, the Company has utilized certain estimates and forecasts of future operations in estimating both the reversal of deferred tax assets and liabilities that existed on the enactment date, as well as the generation of additional deferred tax assets and liabilities for the remainder of the year ending June 30, 2018. The Company analyzed its deferred tax balances to estimate which of those balances are expected to reverse in fiscal 2018 (at a blended U.S. federal income tax rate of approximately 28.0%), or thereafter (at a 21.0% U.S. federal income tax rate). These estimates may change as we receive additional information about the timing of deferred tax reversals. It is anticipated that any additional income tax effects from the TCJA will be recorded in the periods ending March 31, 2018 and June 30, 2018 as the deferred tax activity becomes known as a result of actual operations. periods.

The Company paid income taxes, net of refunds, of ~~$38,163~~$455 and ~~$44,539~~$1,090 in the ~~six~~three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively.

At ~~December 31, 2017,~~September 30, 2020, the Company had ~~$9,607~~$10,969 of gross unrecognized tax benefits, ~~$8,679~~$10,167 of which, if recognized, would affect our effective tax rate. ~~This includes $3,391 of unrecognized tax benefits recorded in the period ending December 31, 2017 as a result of recent tax pronouncements. We~~The Company had accrued interest and penalties of ~~$1,318~~$1,774 and ~~$1,284~~$1,771 related to uncertain tax positions at ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively.

The U.S. federal and state income tax returns for fiscal ~~year 2014~~2017 and all subsequent years remain subject to examination as of ~~December 31, 2017~~September 30, 2020 under statute of limitations rules. We anticipate potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by ~~$500 - $1,500~~$3,500 to $4,500 within twelve months of ~~December 31, 2017.~~September 30, 2020.

NOTE 7. STOCK-BASED COMPENSATION

Our operating income for the three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 included ~~$3,096~~$4,625 and ~~$3,032~~$2,853 of stock-based compensation costs, respectively. ~~For the six months ended December 31, 2017 and 2016, stock-based compensation costs included in operating income totaled $4,609 and $4,230, respectively.~~

Stock Options

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

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

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


	Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding July 1, 2020	22	$	87.27
Granted	0	0
Forfeited	0	0
Exercised	0	0
Outstanding September 30, 2020	22	$	87.27	$	1,633
Vested and Expected to Vest September 30, 2020	22	$	87.27	$	1,633
Exercisable September 30, 2020	22	$	87.27	$	1,633

Number of Shares Weighted Average Exercise Price
Aggregate
Intrinsic
Value
Outstanding July 1, 2017 72
$ 50.04

Granted —
—

Forfeited —
—

Exercised —
—

Outstanding December 31, 2017 72
$ 50.04
$ 4,797
Vested and Expected to Vest December 31, 2017 72
$ 50.04
$ 4,797
Exercisable December 31, 2017 40
$ 20.55
$ 3,856

At ~~December 31, 2017,~~September 30, 2020, there was ~~$250 of~~0 compensation cost yet to be recognized related to outstanding options. ~~The~~For options currently exercisable, the weighted average remaining contractual term ~~on options currently exercisable~~(remaining period of exercisability) as of ~~December 31, 2017~~September 30, 2020 was ~~1.50 years~~.5.75 years.

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Restricted Stock Unit Awards

The Company issues ~~both share awards and~~ unit awards under the 2015 ~~EIP, and previously issued these through the 2005 Restricted Stock Plan.~~EIP. The following table summarizes non-vested ~~share awards as of December 31, 2017, as well as activity for the six months then ended:~~

Share awards Shares
Weighted
Average
Grant Date
Fair Value
Outstanding July 1, 2017 36
$ 73.66
Granted —
—
Vested (11 ) 57.88
Forfeited —
64.96
Outstanding December 31, 2017 25
$ 80.30

At ~~December 31, 2017, there was~~ ~~$614~~ ~~of compensation expense that has yet to be recognized related to non-vested~~ restricted stock ~~share awards, which will be recognized over a weighted average period of~~ ~~0.78 years~~.

~~The following table summarizes non-vested~~ unit awards as of ~~December 31, 2017, as well as activity for the six months then ended:~~September 30, 2020:


Unit awards	Units		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value		Unit awards	Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding July 1, 2017	386		$	67.84
Outstanding July 1, 2020							Outstanding July 1, 2020	307	$	136.41
Granted	103		93.94				Granted	63	190.03
Vested	(151	)	56.04				Vested	(73)	90.52
Forfeited	(3	)	78.13				Forfeited	0	0
Outstanding December 31, 2017	335		$	81.12	$	39,118
Outstanding September 30, 2020							Outstanding September 30, 2020	297	$	158.95	$	48,251

The ~~Company utilized~~63 unit awards granted in fiscal 2021 had service requirements and performance targets, with 28 only having service requirements. Those 28 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 35 unit awards granted in fiscal 2021 had performance targets along with service requirements, all of which were valued using a Monte Carlo pricing model as of the measurement date customized to the specific provisions of the Company’s plan design to value the unit awards ~~subject to performance targets~~as of the grant date. Per the Company's award vesting and settlement provisions, approximately half of the 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 2021, and the other half of the awards utilizing a Monte Carlo pricing model were valued at grant ~~dates.~~on the basis of Total Shareholder Return in comparison to the Standard & Poor's 1500 Information Technology Index (S&P 1500 IT Index) participants. The ~~weighted average assumptions~~Monte Carlo inputs used in ~~this~~the model to estimate fair value at the measurement date and resulting values for 81these performance unit awards ~~granted in fiscal 2018~~ are as ~~follows:~~follows.


	Compensation Peer Group		S&P 1500 IT Index
Volatility	25.17	%	25.17	%
Risk free interest rate	0.11	%	0.11	%
Annual dividend based on most recent quarterly dividend	1.72		1.72
Beginning TSR	37	%	30	%



~~Volatility~~	~~15.60~~	%
~~Risk free interest rate~~	~~1.55~~	%
~~Dividend yield~~	~~1.20~~	%
~~Stock Beta~~	~~0.687~~

The remaining 22 unit awards granted are not subject to performance targets, and therefore the estimated fair value at measurement date is valued in the same manner as restricted stock share award grants.

At ~~December 31, 2017,~~September 30, 2020, there was ~~$14,788~~$26,847 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 ~~1.58 years~~.1.60 years.

NOTE 8. 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,
	2017		2016		2017		2016			2020		2019
Net Income	$	155,574	$	58,814	$	218,985	$	121,058	Net Income	$	91,216	$	89,370
Common share information:									Common share information:
Weighted average shares outstanding for basic earnings per share	77,218		77,814		77,250		78,114		Weighted average shares outstanding for basic earnings per share	76,507		76,972
Dilutive effect of stock options and restricted stock	347		366		356		398		Dilutive effect of stock options and restricted stock	206		95
Weighted average shares outstanding for diluted earnings per share	77,565		78,180		77,606		78,512		Weighted average shares outstanding for diluted earnings per share	76,713		77,067
Basic earnings per share	$	2.01	$	0.76	$	2.83	$	1.55	Basic earnings per share	$	1.19	$	1.16
Diluted earnings per share	$	2.01	$	0.75	$	2.82	$	1.54	Diluted earnings per share	$	1.19	$	1.16

Per share information is based on the weighted average number of common shares outstanding for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2020 and ~~2016.~~2019. Stock options and restricted stock units have been included in the

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calculation of earnings per share to the extent they are dilutive. There were no0 anti-dilutive stock options or restricted stock ~~shares~~units excluded for the quarter ended ~~December 31, 2017, compared to 32 shares excluded for the quarter ended December 31, 2016. For the six months ended December 31, 2017~~September 30, 2020 and ~~2016, respectively, there were 0 and 32 anti-dilutive securities excluded.~~2019.

NOTE 9. BUSINESS ~~ACQUISITION~~ACQUISITIONS

~~Ensenta Corporation~~Geezeo

On ~~December 21, 2017,~~July 1, 2019, the Company acquired all of the equity interest of ~~EST Holdings,~~DebtFolio, Inc. ~~and its wholly-owned subsidiary, EST Interco, Inc.,~~("Geezeo") for ~~$134,472~~$37,776 paid in cash. ~~EST Holdings, Inc.~~The primary reason for the acquisition was to expand the Company's digital financial management solutions and ~~EST Interco, Inc. jointly own all of~~ the ~~outstanding equity of Ensenta Corporation,~~purchase was funded by cash generated from operations. Geezeo is a ~~California-based~~Boston-based provider of ~~real-time, cloud-based solutions for mobile~~retail and online payments and deposits. This acquisition was partially funded by a draw on the Company's revolving credit facility, with the remaining amount funded by existing operating cash. The addition of Ensenta Corporation to the JHA Payment Solutions Group expands the Company’s ability to conduct real-time transactions with third-party platforms, extending its presence in the credit union market through shared branching technology.business digital financial management solutions.

Management has completed a ~~preliminary~~ purchase price allocation ~~of Ensenta Corporation~~ and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based ~~upon~~on their ~~preliminary~~ fair values as of ~~December 21, 2017~~July 1, 2019 are set forth below:

Current assets $ 13,950
Long-term assets 585
Identifiable intangible assets 55,001
Non-current deferred income tax liability (19,969 )
Total other liabilities assumed (8,593 )
Total identifiable net assets 40,974
Goodwill 93,498
Net assets acquired $ 134,472

~~The amounts shown above may change as management finalizes its assessment of the fair value of acquired assets and liabilities and evaluates the income tax implications of this business combination.~~


Current assets	$	8,925
Long-term assets	397
Identifiable intangible assets	19,114
Deferred income tax liability	(2,593)
Total other liabilities assumed	(7,457)
Total identifiable net assets	18,386
Goodwill	19,390
Net assets acquired	$	37,776

The goodwill of ~~$93,498~~$19,390 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of ~~Ensenta Corporation,~~Geezeo, together with the value of ~~Ensenta Corporation's~~Geezeo's assembled workforce. The goodwill from this acquisition has been allocated to our ~~Payments~~Complementary segment and is not ~~expected to be~~ deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of ~~$33,824,~~$10,522, computer software of ~~$16,639,~~$5,791, and other intangible assets of ~~$4,538.~~$2,801. The ~~weighted average~~ amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years ~~10 years, and 10 years, respectively.~~for each.

Current assets were inclusive of cash acquired of ~~$7,273.~~$7,400. The fair value of current assets acquired included accounts receivable of ~~$4,668, none~~$1,373, NaN of which were expected to be uncollectible.

Costs incurred related to the acquisition of ~~Ensenta Corporation~~Geezeo in ~~the second quarter of~~ fiscal ~~2018~~2020 totaled ~~$262~~$30 for ~~legal, valuation,~~professional services, travel, and other fees, and were expensed as incurred and reported within cost of revenue and selling, general, and administrative ~~expenses.~~expense.

The Company's condensed consolidated statements of income for the three ~~and six~~months ended ~~December 31, 2017~~September 30, 2020 included revenue of ~~$928~~$3,213 and after-tax net income of ~~$6,366~~$1,265 resulting from ~~Ensenta Corporation's~~Geezeo's operations. The ~~after-tax net income included a large tax benefit recorded as a result of the Tax Cuts and Jobs Act. Excluding the effects of the Tax Cuts and Jobs Act, the~~ Company's ~~after-tax net income resulting from Ensenta Corporation's operations totaled $26.~~

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

Three Months Ended Six Months Ended
December 31, December 31,
2017 2016 2017 2016
Revenue $ 381,110
$ 354,358
$ 747,808
$ 704,749
Net Income 156,211
59,407
220,495
122,064
Basic Earnings Per Share $ 2.02
$ 0.76
$ 2.85
$ 1.56
Diluted Earnings Per Share $ 2.01
$ 0.76
$ 2.84
$ 1.55

~~Vanguard Software Group~~

On August 31, 2017, the Company acquired all of the equity interest of Vanguard Software Group, a Florida-based company specializing in the underwriting, spreading, and online decisioning of commercial loans, for $10,744 paid in cash. This acquisition was funded using existing operating cash. The addition of Vanguard Software Group to the Company's ProfitStars® Lending Solutions Group expands functionality offered to clients, allowing for near-real-time communication with Jack Henry and Associates' core processing and ancillary solutions, and also enhances cross-sell opportunities.

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

Current assets $ 1,153
Long-term assets 9
Identifiable intangible assets 4,200
Total liabilities assumed (1,117 )
Total identifiable net assets 4,245
Goodwill 6,499
Net assets acquired $ 10,744

The amounts shown above may change in the near term as management finalizes its calculation of the fair value of acquired assets and liabilities and evaluates the income tax implications of this business combination.

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

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

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

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

~~The Company's consolidated statements of income for the second quarter of fiscal 2018~~September 30, 2019 included revenue of $395 and an after-tax net loss of $274 resulting from Vanguard Software Group's operations. For the six months ended December 31, 2017, the Company's consolidated statements of income included revenue of $493$2,392 and after-tax net ~~loss~~income of ~~$398.~~$38 resulting from Geezeo's operations.

The accompanying condensed consolidated statements of income for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2020 and 2019 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to ~~both~~ the current and prior periods of our condensed consolidated financial statements and pro forma financial information has not been provided.

NOTE 10. REPORTABLE SEGMENT INFORMATION

The Company is a provider of integrated computer systems that perform data processing (available for ~~in-house~~on-premise installations or outsourced services) for banks and credit unions. Beginning in the first quarter of fiscal 2018, JHA changed its reportable segment structure from two customer-centric segments, Bank and Credit Union, to four product-centric segments. The change was made based on the view of our Chief Executive Officer, who is also our Chief Operating Decision Maker, that the Company could be more effectively managed using a product-centric approach and was driven by the first budgetary process under his administration. He requested changes in reports he regularly reviews for the purposes of allocating resources and assessing performance.

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

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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.

~~The prior period presented has been retroactively restated to conform to the new segment structure adopted July 1, 2017.~~


	Three Months Ended
	September 30, 2020
	Core		Payments		Complementary		Corporate & Other		Total
REVENUE
Services and Support	$	150,461	$	16,304	$	102,675	$	11,557	$	280,997
Processing	8,569		140,429		21,805		0		170,803
Total Revenue	159,030		156,733		124,480		11,557		451,800

Cost of Revenue	67,589		86,328		48,325		60,687		262,929
Research and Development									26,057
Selling, General, and Administrative									45,226


Total Expenses									334,212

SEGMENT INCOME	$	91,441	$	70,405	$	76,155	$	(49,130)

OPERATING INCOME									117,588

INTEREST INCOME (EXPENSE)									(49)

INCOME BEFORE INCOME TAXES									$	117,539


	Three Months Ended
	September 30, 2019
	Core		Payments		Complementary		Corporate & Other		Total
REVENUE
Services and Support	$	148,090	$	17,308	$	98,451	$	14,959	$	278,808
Processing	7,806		132,438		18,744		209		159,197
Total Revenue	155,896		149,746		117,195		15,168		438,005

Cost of Revenue	63,306		76,624		46,674		59,187		245,791
Research and Development									24,591
Selling, General, and Administrative									49,436


Total Expenses									319,818

SEGMENT INCOME	$	92,590	$	73,122	$	70,521	$	(44,019)

OPERATING INCOME									118,187

INTEREST INCOME (EXPENSE)									352

INCOME BEFORE INCOME TAXES									$	118,539

Three Months Ended
December 31, 2017
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 127,787
$ 10,913
$ 84,528
$ 14,526
$ 237,754
Processing 6,611
115,096
15,279
16
137,002
Total Revenue 134,398
126,009
99,807
14,542
374,756

Cost of Revenue 59,199
59,052
41,379
52,023
211,653
Research and Development 22,414
Selling, General, and Administrative 45,613
Gain on Disposal of Businesses (189 )
Total Expenses 279,491

SEGMENT INCOME $ 75,199
$ 66,957
$ 58,428
$ (37,481 )

OPERATING INCOME 95,265

INTEREST INCOME (EXPENSE) (104 )

INCOME BEFORE INCOME TAXES $ 95,161

Three Months Ended
December 31, 2016
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 113,887
$ 11,290
$ 81,134
$ 15,404
$ 221,715
Processing 6,000
107,854
12,946
38
126,838
Total Revenue 119,887
119,144
94,080
15,442
348,553

Cost of Revenue 53,087
54,792
38,976
51,291
198,146
Research and Development 20,873
Selling, General, and Administrative 40,928
Gain on Disposal of Businesses —
Total Expenses 259,947

SEGMENT INCOME $ 66,800
$ 64,352
$ 55,104
$ (35,849 )

OPERATING INCOME 88,606

INTEREST INCOME (EXPENSE) (124 )

INCOME BEFORE INCOME TAXES $ 88,482

Six Months Ended
December 31, 2017
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 249,856
$ 20,000
$ 163,596
$ 28,598
$ 462,050
Processing 13,475
229,163
29,983
19
272,640
Total Revenue 263,331
249,163
193,579
28,617
734,690

Cost of Revenue 115,461
116,318
81,856
102,733
416,368
Research and Development 43,343
Selling, General, and Administrative 89,346
Gain on Disposal of Businesses (1,894 )
Total Expenses 547,163

SEGMENT INCOME $ 147,870
$ 132,845
$ 111,723
$ (74,116 )

OPERATING INCOME 187,527

INTEREST INCOME (EXPENSE) (146 )

INCOME BEFORE INCOME TAXES $ 187,381

Six Months Ended
December 31, 2016
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 224,682
$ 24,883
$ 159,411
$ 30,229
$ 439,205
Processing 12,112
216,591
25,598
75
254,376
Total Revenue 236,794
241,474
185,009
30,304
693,581

Cost of Revenue 105,837
110,812
77,802
98,457
392,908
Research and Development 40,611
Selling, General, and Administrative 80,038
Gain on Disposal of Businesses —
Total Expenses 513,557

SEGMENT INCOME $ 130,957
$ 130,662
$ 107,207
$ (68,153 )

OPERATING INCOME 180,024

INTEREST INCOME (EXPENSE) (159 )

INCOME BEFORE INCOME TAXES $ 179,865

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

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NOTE 11: SUBSEQUENT EVENTS

None.

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

This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the quarter ended ~~December 31, 2017.~~September 30, 2020.

OVERVIEW

Jack Henry & Associates, Inc. ~~(JHA)~~("JKHY") is a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions are marketed and supported through three primary brands. Jack Henry Banking® is a top provider of information and transaction processing solutions to USU.S. banks ranging from community banks to ~~multi-billion dollar~~multi-billion-dollar asset institutions. Symitar® is a leading provider of information and transaction processing solutions for credit unions of all sizes. ProfitStars® provides specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities outside the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. ~~JHA's~~JKHY's integrated solutions are available for ~~in-house~~on-premise installation and outsourced ~~delivery.~~delivery in our private cloud.

Our two primary revenue streams are ~~"Services~~"services and support" and ~~"Processing".~~"processing." Services and support includes: ~~"Outsourcing~~"outsourcing and cloud" fees that predominantly have contract terms of five years or longer at inception; ~~"Product~~"product delivery and services" revenue, which includes revenue from the sales of licenses, implementation services, deconversion fees, consulting, and hardware; and ~~"In-house~~"in-house support" revenue, ~~which is~~ composed of maintenance fees which primarily contain annual contract terms. Processing revenue includes: ~~"Remittance"~~"remittance" revenue from payment processing, remote capture, and ~~automated clearing house (ACH)~~ACH transactions; ~~"Card"~~"card" fees, including card transaction processing and monthly fees; and ~~"Transaction~~"transaction and digital" revenue, which includes transaction and mobile processing fees. We continually seek opportunities to increase revenue while at the same time containing costs to expand margins.

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

COVID-19 Impact and Response

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic and the President of the United States declared the outbreak as a national emergency. As COVID-19 has rapidly spread, federal, state and local governments have responded by imposing varying degrees of restrictions, including widespread “stay-at-home” orders, social distancing requirements, travel limitations, quarantines, and forced closures or limitations on operations of non-essential businesses. Such restrictions have resulted in significant economic disruptions and uncertainty.

The health, safety, and well-being of our employees and customers is of paramount importance to us. In March 2020, we established an internal task force composed of executive officers and other members of management to frequently assess updates to the COVID-19 situation and recommend Company actions. We offered remote working as a recommended option to employees whose job duties allow them to work off-site. This recommended remote working option is currently extended until at least January 4, 2021, and our internal task force will continue to evaluate recommending further extensions. Based on guidance from the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, the Company was designated as essential critical infrastructure because of our support of the financial services industry. As of October 26, 2020, the majority of our employees were continuing to work remotely. Our internal task force considers federal, state and local guidance, as well as employee-specific and facility-specific factors, when recommending Company actions. At such time that our internal task force recommends that our remote employees begin to return to our facilities, we have prepared procedures to assist with a safe, gradual and deliberate approach, including a return-to-office training, enhanced sanitation procedures and face mask requirements, which are currently being utilized by our employees who are required to be on-site to perform their required job functions.

We have suspended all non-essential business travel until at least January 4, 2021, and our internal task force will continue to evaluate the need for further extensions. We have put additional safety precautions into place for travel that is essential. We have also updated the health benefits available to our employees by waiving out-of-pocket expenses related to testing and treatment of COVID-19. Despite the move to a principally remote workforce, we honored our 2020 summer internship program through virtual methods.

Customers

We are working closely with our customers who are scheduled for on-site visits to ensure their needs are met while taking necessary safety precautions when our employees are required to be at a customer site. Delays of customer system installations due to COVID-19 have been limited, and we have developed processes to handle remote

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installations when available. We expect these processes to provide flexibility and value both during and after the COVID-19 pandemic. However, we have experienced delays related to continuing customer migrations to our new card processing platform. We completed the migrations of our core customers and are on track for the revised schedule for non-core customers by March 31, 2021. We continue to work with our customers to support them during this difficult time, and, to that end, have waived certain late fees in connection with our products and services. We have also enhanced our lending service offerings to support the Paycheck Protection Program that was introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been curtailed, we have not yet experienced significant disruption to our operations. We believe our technological capabilities are well positioned to allow our employees to work remotely for the foreseeable future without materially impacting our business.

Financial impact

We have seen delays in certain product installations due to COVID-19 with the associated revenue pushed from the current period to future periods. These headwinds may continue to impact our license, hardware, installation and pass-through revenues throughout fiscal 2021. Despite the changes and restrictions caused by COVID-19, the overall financial and operational impact on our business has been limited and our liquidity, balance sheet, and business trends remain strong. We experienced positive operating cash flows during the first quarter of fiscal 2021, and we do not expect that to change in the near term. However, we are unable to accurately predict the future impact of COVID-19 due to a number of uncertainties, including further government actions; the duration, severity and recurrence of the outbreak; the speed of economic recovery; the potential impact to our customers, vendors, and employees; and how the potential impact might affect future customer services, processing and installation-related revenue, and processes and efficiencies within the Company directly or indirectly impacting financial results. We will continue to monitor COVID-19 and its possible impact on the Company and to take steps necessary to protect the health and safety of our employees and customers.

RESULTS OF OPERATIONS

In the ~~second~~first quarter of fiscal ~~2018,~~2021, total revenue increased 8%3%, or ~~$26,203,~~$13,795, compared to the same quarter in the prior fiscal year. ~~Excluding an increase of $2,809 in deconversion fees quarter-over-quarter, and revenue from fiscal 2018 acquisitions of $1,323,~~Adjusting total revenue in both periods for deconversion fee revenue, which decreased $9,004 to $5,882, total revenue would have increased 6%5% for the ~~quarter.~~quarter compared to the same period a year ago.

Operating expenses increased 8%5% compared to the first quarter of fiscal 2020, due to increased direct costs and higher personnel costs partially offset by travel expense savings. The increased direct costs were primarily related to our card payment processing platform. Higher personnel costs were primarily related to a headcount increase of 4% at September 30, 2020 compared to September 30, 2019.

Operating income decreased 1% for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020. Adjusting operating income for both periods for the effect of deconversion fees of $5,219 in the current fiscal quarter and $13,649 in the prior fiscal year first quarter, would have resulted in an increase of 7% for the first quarter of fiscal 2021 compared to the same period a year ago.

The provision for income taxes decreased 10% compared to the prior fiscal year first quarter, primarily due to a decreased effective tax rate mainly attributable to the difference in impact of share-based compensation that vested during each of the periods. The effective tax rate for the first quarter of fiscal 2021 was 22.4% compared to 24.6% in the same quarter a year ago.

The above changes led to an increase in net income of 2% for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020.

We move into the second quarter of fiscal 2017, mainly due to a 6% increase in headcount at December 31, 2017 compared to December 31, 2016, leading to increased salaries and benefits. Other reasons for the increase include higher direct cost of product, costs related to our new card payment processing platform and faster payments incentives, and increased amortization of capitalized software. The Tax Cuts and Jobs Act enacted December 22, 2017 had a large impact on our provision for income taxes, causing it to decrease 304% compared to the prior year quarter. As discussed in Note 6 of the condensed consolidated financial statements, the amounts recorded under provision for income taxes are reasonable estimates, but are subject to change as additional calculations are completed based on actual results during the third and fourth quarters of fiscal 2018.

~~Excluding the effect of the Tax Cuts and Jobs Act and other one-time tax adjustments, net income increased 6% for the second quarter of fiscal 2018 compared to the second quarter in fiscal 2017.~~

In the six months ended December 31, 2017, total revenue increased 6%, or $41,109, over the six months ended December 31, 2016. Deconversion fees in the year-to-date period decreased $2,981 compared to the same six months in the prior fiscal year, and we had revenue from 2018 acquisitions totaling $1,421. Excluding these factors from each period, total revenue increased 6%

Operating expenses for the six months ended December 31, 2017 increased 7% compared to the equivalent period in the prior year, primarily due to increased headcount, higher direct cost of product, costs related to our new card payment processing platform and faster payments incentives, and increased amortization of capitalized software. Provision for income taxes decreased (154)% compared to the prior year-to-date period, again due to the Tax Cuts and Jobs Act.

~~Excluding the effect of the Tax Cuts and Jobs Act and other one-time tax adjustments, net income for the first six months of fiscal 2018 increased 4% compared to the first six months of fiscal 2017.~~

~~We move into the third quarter of fiscal 2018~~2021 with optimism following strong performance in the ~~second quarter.~~first quarter, but with limited visibility of the future impact of the COVID-19 pandemic. Significant portions of our business continue to come from recurring revenues and our ~~healthy~~ sales pipeline is also remains encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and in these uncertain times, we believe they have an even greater 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

~~product line~~ lines of revenue, and an unwavering commitment to superior customer service should position us well to address current and future opportunities.

In the second quarter of fiscal 2018, we completed the acquisition of Ensenta Corporation, strengthening our electronic payments offering and making Jack Henry & Associates the leading provider of consumer remote deposit capture services.

A detailed discussion of the major components of the results of operations for the three ~~and six~~ months ~~ending December 31, 2017~~ended September 30, 2020 follows. ~~All dollar amounts are in thousands and discussions~~Discussions compare the current fiscal year's three ~~and six~~ months ~~ending December 31, 2017~~ended September 30, 2020 to the prior ~~year~~year's three ~~and six~~ months ~~ending December 31, 2016.~~ended September 30, 2019.

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REVENUE


Services and Support	Three Months Ended September 30,				% Change
		2020			2019
Services and Support		$	280,997		$	278,808		1	%
Percentage of total revenue		62		%	64		%

Services and Support Three Months Ended December 31,
%
Change
Six Months Ended December 31, % Change
2017 2016 2017 2016
Services and Support $ 237,754
$ 221,715
7 % $ 462,050
$ 439,205
5 %
Percentage of total revenue 63 % 64 % 63 % 63 %

~~There was 7% growth~~Services and support revenue increased 1% in the first quarter of fiscal 2021 compared to the same quarter a year ago. Adjusting services and support revenue for deconversion fee revenue from each period, which was $5,882 in the ~~second~~current fiscal year quarter ofand $14,886 in the prior fiscal ~~2018~~year quarter, this revenue line would have grown 4% for the quarter compared to the same quarter last fiscal year. ~~Excluding deconversion fees from each period presented, and excluding revenue from fiscal 2018 acquisitions, services~~Services and support revenue ~~grew 6%. The increase~~growth was primarily ~~due to increased~~driven by data processing and hosting fees and software usage fees reflecting customer favorability of our term license model, partially offset by a decrease in product delivery and services revenue, ~~and~~particularly deconversion fee revenue, quarter over quarter.


Processing	Three Months Ended September 30,				% Change
		2020			2019
Processing		$	170,803		$	159,197		7	%
Percentage of total revenue		38		%	36		%

Processing revenue increased outsourcing and cloud revenue. The increased product delivery and services revenue resulted from completion of revised contractual obligations on several long-term contracts that permitted the Company to recognize previously deferred revenue related to our bundled arrangements.

~~In the six months ended December 31, 2017, services and support revenue grew 5% over the equivalent six months~~7% in the ~~prior~~first quarter of fiscal ~~year. Excluding deconversion fees from each period presented and revenue from~~2021 compared to the same quarter last fiscal ~~2018 acquisitions, services and support revenue grew 6%.~~year. The increase was primarily driven by ~~an increase in outsourcing~~higher card and ~~cloud~~Jack Henry digital revenue ~~along with an increase in product delivery and services revenue resulting from completion of revised contractual obligations on several of our bundled arrangements.~~

Processing Three Months Ended December 31,
%
Change
Six Months Ended December 31,
%
Change
2017 2016 2017 2016
Processing $ 137,002
$ 126,838
8 % $ 272,640
$ 254,376
7 %
Percentage of total revenue 37 % 36 % 37 % 37 %

~~Processing revenue increased 8%~~due to expanding volumes, complemented by increases in the ~~second~~other processing components, quarter ~~of fiscal 2018 compared to the same quarter last year, primarily due to increased transaction volumes within each of the three components of processing revenue.~~over quarter.

Each component also experienced volume growth in the fiscal year-to-date period, leading to an increase in processing revenue of 7% for the six months ended December 31, 2017 as compared to the six months ended December 31, 2016.

OPERATING EXPENSES


Cost of Revenue	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Cost of Revenue	Three Months Ended September 30,				% Change
	2017			2016					2017			2016							2020			2019
Cost of Revenue	$	211,653		$	198,146		7	%	$	416,368		$	392,908		6	%	Cost of Revenue		$	262,929		$	245,791		7	%
Percentage of total revenue	56		%	57		%			57		%	57		%			Percentage of total revenue		58		%	56		%

Cost of revenue for the ~~second~~first quarter of fiscal ~~2018~~2021 increased 7% over the prior fiscal year ~~but declined~~first quarter and increased as a percentage of total revenue. The increase was primarily due ~~primarily~~ to ~~expanded headcount driving increased salaries~~higher costs associated with our card processing platform and ~~benefits. Other factors to the increase include~~ higher ~~direct~~personnel costs ~~of product, professional services, and amortization~~ related to ~~capitalized software. The Company continues~~increased headcount at September 30, 2020 compared to ~~focus on cost management.~~

~~For the year-to-date period, cost of revenue increased 6%~~a year ago due to ~~the same factors discussed above, but remained~~organic growth within our product lines. The increase in costs was partially offset by travel expense savings as a ~~consistent percentage~~result of ~~revenue.~~COVID-19 travel limitations.


Research and Development	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Research and Development	Three Months Ended September 30,				% Change
	2017			2016					2017			2016							2020			2019
Research and Development	$	22,414		$	20,873		7	%	$	43,343		$	40,611		7	%	Research and Development		$	26,057		$	24,591		6	%
Percentage of total revenue	6		%	6		%			6		%	6		%			Percentage of total revenue		6		%	6		%

Research and development ~~expenses~~expense increased 6% for ~~both~~ the first quarter ~~and~~of fiscal ~~year-to-date period~~2021 over the prior fiscal year first quarter. The increase was primarily due to ~~increased salary and~~higher personnel costs ~~driven by a 6% increase in~~related to increased headcount at ~~December 31, 2017~~September 30, 2020 compared to a year ago. ~~However, both periods~~Research and development expense for the quarter remained consistent ~~with~~compared to the prior fiscal year quarter as a percentage of total revenue.


Selling, General, and Administrative	Three Months Ended September 30,				% Change
		2020			2019
Selling, General, and Administrative		$	45,226		$	49,436		(9)	%

Percentage of total revenue		10		%	11		%

Selling, General, and Administrative Three Months Ended December 31,
%
Change
Six Months Ended December 31, %
Change
2017 2016 2017 2016
Selling, General, and Administrative $ 45,613
$ 40,928
11 % $ 89,346
$ 80,038
12 %
Percentage of total revenue 12 % 12 % 12 % 12 %

The 11% increase in selling, general and administrative expense in the current quarter was mainly due to increased commissions, salaries, and benefits. The fiscal year-to-date increase was also driven by those factors, as well as increased professional service expenses due to contracting with outside experts in preparation for our adoption of the new ASC 606 revenue standard. Selling, general, and administrative expense ~~remained a consistent percentage of revenue~~decreased 9% in ~~both~~ the ~~quarter and fiscal year-to-date periods.~~

~~Gain on Disposal of a Business~~

~~In the second~~first quarter of fiscal ~~2018, we recognized~~2021 over the same quarter in the prior fiscal year. Personnel cost increases for the quarter were more than offset by travel expense savings as a ~~gain~~result of COVID-19 travel limitations and lower expenses related to ~~the sale of~~both our ~~ATM Manager product line of $189.~~

~~For the six months ended December 31, 2017, gains on disposals of businesses totaled $1,894, due to the ATM Manager gain recognized in the second quarter~~national sales meeting and ~~the first quarter sale of our jhaDirect product line. No businesses were disposed of in the six months ended December 31, 2016.~~Symitar Education Conference being held virtually this year (see "COVID-19 Impact and Response" section above). Selling,

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INTEREST INCOME AND EXPENSE Three Months Ended December 31,
%
Change
Six Months Ended December 31,
%
Change
2017 2016 2017 2016
Interest Income $ 146
$ 60
143 % $ 293
$ 167
75 %
Interest Expense $ (250 ) $ (184 ) 36 % $ (439 ) $ (326 ) 35 %
general, and administrative expense decreased as a percentage of total revenue this fiscal year quarter versus the prior fiscal year quarter.


INTEREST INCOME (EXPENSE)	Three Months Ended September 30,			% Change
		2020		2019
Interest Income		$	68	$	508	(87)	%
Interest Expense		$	(117)	$	(156)	(25)	%

•Interest income fluctuated due to changes in invested balances and yields on invested ~~balances.~~balances during the first quarter of fiscal 2021 compared to the same quarter a year ago. Interest expense ~~remained low for both~~decreased when compared to the ~~current~~prior fiscal year period due to interest rate fluctuations and ~~prior periods, but~~length of borrowing time. There was ~~higher in~~no outstanding balance under the ~~current periods due in part to increased LIBOR.~~credit facility at September 30, 2020 and no outstanding balance at September 30, 2019.


PROVISION FOR INCOME TAXES	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		PROVISION FOR INCOME TAXES	Three Months Ended September 30,				% Change
	2017			2016					2017			2016							2020			2019
Provision for Income Taxes	$	(60,413	)	$	29,668		(304	)%	$	(31,604	)	$	58,807		(154	)%	Provision for Income Taxes		$	26,323		$	29,169		(10)	%
Effective Rate	(63.5		)%	33.5		%			(16.9		)%	32.7		%			Effective Rate		22.4		%	24.6		%

The ~~large decreases~~decrease in ~~the~~ effective tax rate ~~were a result~~for the three months ended September 30, 2020 compared to the prior fiscal year quarter was primarily due to the difference in impact of share-based compensation that vested during each of the ~~Tax Cuts and Jobs Act enacted December 22, 2017, which is discussed in detail in Note 6 of the condensed consolidated financial statements.~~periods.

NET INCOME

Net income increased ~~165%~~2% to ~~$155,574,~~$91,216, or ~~$2.01~~$1.19 per diluted share, for the ~~second~~first quarter of fiscal ~~2018,~~2021 compared to ~~$58,814,~~$89,370, or ~~$0.75~~$1.16 per diluted share, in the same period of fiscal ~~2017,~~2020, resulting in a ~~167%~~3% increase in diluted earnings per share. ~~Excluding the effect of the Tax Cuts and Jobs Act and other one-time tax adjustments,~~The increase in net income ~~increased 6% for~~was primarily driven by the ~~second quarter of fiscal 2018~~above factors and a decrease in effective tax rate compared to the ~~second quarter of~~prior fiscal ~~2017, to $62,314, and diluted earnings per share increased 7% to $0.80 per diluted share.~~year quarter.

In the six months ended December 31, 2017, net income increased to $218,985 from $121,058 for the same period of fiscal 2017, for an increase of 81%. Diluted earnings per share increased 83% to $2.82, compared to $1.54 last year. Excluding the effect of the Tax Cuts and Jobs Act and other one-time tax adjustments, net income for the first

~~six months of fiscal 2018 increased 4% over the first six months of fiscal 2017 to $125,725, and diluted earnings per share increased 5% to $1.62.~~

REPORTABLE SEGMENT DISCUSSION

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

Beginning in the first quarter of fiscal 2018, JHA changed its reportable segment structure from two customer-centric segments, Bank and Credit Union, to four product-centric segments. The change was made based on the view of our Chief Executive Officer, who is also our Chief Operating Decision Maker, that the Company could be more effectively managed using a product-centric approach and was driven by the first budgetary process under his administration.

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,~~services; online and mobile bill pay ~~solutions,~~solutions; ACH origination and remote deposit capture processing; and risk management products and services. The Complementary segment provides additional software, processing platforms, and services that can be integrated with our core solutions or 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 costs not directly attributable to the other three segments.

~~The prior period presented has been retroactively restated to conform to the new segment structure adopted July 1, 2017.~~


Core	Core												Core
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended September 30,			% Change
	2017		2016				2017		2016						2020		2019
Revenue	$	134,398	$	119,887	12	%	$	263,331	$	236,794	11	%	Revenue		$	159,030	$	155,896	2	%
Cost of Revenue	$	59,199	$	53,087	12	%	$	115,461	$	105,837	9	%	Cost of Revenue		$	67,589	$	63,306	7	%

Revenue in the Core segment increased ~~12%, while~~2% and cost of revenue ~~also~~ increased ~~12%,~~7% for the three months ended ~~December 31, 2017. Excluding~~September 30, 2020 compared to the three months ended September 30, 2019. Adjusting Core revenue for deconversion fees from each period, revenue increased 11%. The revenue increase was partly due to increased product delivery and services revenue being recognized as a result of completion of revised contractual obligations on several long-term contracts that permitted the Company to recognize previously deferred revenue related to our bundled arrangements. The increasedfee revenue in both periods, which totaled $2,332 for the first quarter of fiscal 2021 and $7,133 for the first quarter of fiscal 2020, Core segment revenue would have increased 5% quarter over quarter. The increase in Core revenue was ~~also~~primarily driven by ~~an 8% increase~~the growth in ~~In-House Support~~data processing and ~~a 6% increase in Outsourcing and Cloud~~hosting fee revenue, as well as customer call support revenue. Cost of revenue ~~remained consistent~~increased 2% as a percentage of ~~revenue.~~

Comparing the six months ended December 31, 2017 to the equivalent six months of fiscal 2017, revenue in the Core segment increased 11%, driven by 6% increases in both Outsourcing and Cloud revenue and In-House Support, as well as increased product delivery and services revenue recognized as a result of the completion of revised contractual obligations on several of our bundled arrangements. Cost of revenue for the ~~Core segment increased 9% for~~first quarter of fiscal 2021 compared to the ~~year-to-date period, but declined 1% as a percentage~~same quarter of ~~revenue.~~fiscal 2020.

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Payments													Payments
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended September 30,			% Change
	2017		2016				2017		2016						2020		2019
Revenue	$	126,009	$	119,144	6	%	$	249,163	$	241,474	3	%	Revenue		$	156,733	$	149,746	5	%
Cost of Revenue	$	59,052	$	54,792	8	%	$	116,318	$	110,812	5	%	Cost of Revenue		$	86,328	$	76,624	13	%

Revenue in the Payments segment increased 6%5% for the ~~second~~first quarter of fiscal ~~2018~~2021 compared to the equivalent quarter ~~last~~of the prior fiscal year. ~~Excluding~~Adjusting Payments revenue for deconversion fee revenue ~~from each period and revenue from Ensenta from~~in both periods, which totaled $1,847 for the ~~second~~first quarter of fiscal ~~2018,~~2021 and $4,970 for the first quarter of fiscal 2020, Payments revenue would have increased ~~5% in the~~7% quarter over quarter. Payments ~~segment. The improvement in the most recent quarter~~revenue growth was primarily due to increased card and remittance ~~and card~~revenue within the processing line of revenue. Cost of revenue increased ~~8%, in part~~13% quarter over quarter primarily due to increased ~~spending~~costs related to ~~our strategic partnership with First Data and PSCU to expand~~ our credit and debit card processing platform.

For the six months ended December 31, 2017, Payments segment revenue increased 3%, despite decreased deconversion fees. Excluding deconversion fees from each six month period, and excluding Ensenta revenue from

~~fiscal 2018, revenue increased 5%.~~ Cost of revenue as a percentage of revenue increased 5%4% for the first quarter of fiscal ~~year-to-date period, partially due~~2021 compared to ~~increased spending related to our strategic partnership with First Data and PSCU to expand our credit and debit card platform.~~the same quarter of fiscal 2020.


Complementary	Complementary												Complementary
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended September 30,			% Change
	2017		2016				2017		2016						2020		2019
Revenue	$	99,807	$	94,080	6	%	$	193,579	$	185,009	5	%	Revenue		$	124,480	$	117,195	6	%
Cost of Revenue	$	41,379	$	38,976	6	%	$	81,856	$	77,802	5	%	Cost of Revenue		$	48,325	$	46,674	4	%

Revenue in the Complementary segment increased 6% for the ~~quarter, driven by increases in outsourcing and cloud services, as well as transaction and digital processing. Excluding deconversion fees from each period, and Vanguard revenue from the second~~first quarter of fiscal ~~2018,~~2021 compared to the equivalent quarter of the prior fiscal year, and 7% after adjusting Complementary revenue for deconversion fee revenue from both periods, which totaled $1,721 and $2,768 for the quarters ended September 30, 2020 and 2019, respectively. The increase in Complementary revenue was primarily driven by increased ~~5%.~~hosting fees and higher Jack Henry digital revenue. Cost of revenue ~~increased 6% for the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017, remaining consistent~~decreased 1% as a percentage of ~~revenue.~~revenue, quarter over quarter, due to ongoing cost control efforts.

Revenue in the Complementary segment increased 5% for the six months ended December 31, 2017 compared to the prior year-to-date period, or 4% after excluding deconversion fees and Vanguard revenue. The increase was driven by increased outsourcing and cloud services, as well as increased transaction and digital processing. Cost of revenue remained a consistent percentage of revenue in each six month period.


Corporate and Other	Corporate and Other												Corporate and Other
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change			Three Months Ended September 30,			% Change
	2017		2016				2017		2016						2020		2019
Revenue	$	14,542	$	15,442	(6	)%	$	28,617	$	30,304	(6	)%	Revenue		$	11,557	$	15,168	(24)	%
Cost of Revenue	$	52,023	$	51,291	1	%	$	102,733	$	98,457	4	%	Cost of Revenue		$	60,687	$	59,187	3	%

Revenue in the Corporate and Other segment decreased 24% for the ~~three and six months ended December 31, 2017 each decreased 6% mainly~~first quarter of fiscal 2021 compared to the equivalent quarter of the prior fiscal year. The decrease was primarily due to ~~a loss of~~lower other revenue ~~from our jhaDirect product line.~~and hardware revenue. Revenue classified in the Corporate and Other segment includes revenue from ~~hardware~~other products and ~~other products~~services and hardware not specifically attributed to any of the other three segments. Revenue within this segment is expected to be lower in fiscal 2018 compared to fiscal 2017 due to the sale of the jhaDirect product line in the first quarter of fiscal 2018. For the full fiscal year 2017, revenue from jhaDirect totaled $6,536.

Cost of revenue for the Corporate and Other segment includes operating cost not directly attributable to any of the other three segments. The increased cost of revenue in the ~~second~~first quarter ~~and year-to-date is~~of fiscal 2021 of 3% compared to the equivalent quarter in the prior fiscal year was primarily related to increased ~~salary and benefit costs.~~personnel costs related to an increase in headcount over the prior fiscal year quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased to ~~$57,719~~$195,320 at ~~December 31, 2017~~September 30, 2020 from ~~$114,765~~$213,345 at June 30, 2017. The decrease from June 30, 2017 is primarily due to our acquisitions of Vanguard Software Group and Ensenta Corporation, the latter of which was partially funded by borrowing on our revolving credit facility.2020.

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


	Six Months Ended							Three Months Ended
	December 31,							September 30,
	2017			2016				2020		2019
Net income	$	218,985		$	121,058		Net income	$	91,216	$	89,370
Non-cash expenses	3,360			83,106			Non-cash expenses	50,602		47,308
Change in receivables	115,572			107,667			Change in receivables	77,439		77,123
Change in deferred revenue	(136,206		)	(113,612		)	Change in deferred revenue	(67,113)		(68,939)
Change in other assets and liabilities	(24,803		)	(34,352		)	Change in other assets and liabilities	(37,667)		(21,810)
Net cash provided by operating activities	$	176,908		$	163,867		Net cash provided by operating activities	$	114,477	$	123,052

Cash provided by operating activities ~~increased 8%~~for the first three months of fiscal 2021 decreased 7% compared to the same period last year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, and for capital expenditures.

Cash used in investing activities for the first ~~six~~three months of fiscal ~~2018~~2021 totaled ~~$202,309~~$31,188 and included: ~~$137,654, net of cash acquired, for the purchases of Ensenta Corporation and Vanguard Software Group; $46,936~~$31,451 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of ~~$12,249;~~$4,478; and ~~$6,025~~$1,374 for the purchase and development of internal use software. This was partially offset by ~~$350~~$6,115 of proceeds from ~~the sale of businesses,~~completed and ~~$205 of proceeds from asset sales.~~pending dispositions. Cash used in investing activities for the first ~~six~~three months of fiscal ~~2017~~2020 totaled ~~$69,703~~$75,425 and included ~~$41,673~~$30,285, net of cash acquired, for the acquisition of Geezeo; $28,475 for the development of ~~software,~~software; capital expenditures of ~~$17,405, and $11,455~~$13,101; $2,424 for the purchase and development of internal use ~~software,~~software; and $1,150 for the purchase of investments. This was partially offset by ~~$830~~$10 of proceeds from the sale of assets.

Financing activities used cash of ~~$31,645~~$101,314 for the first ~~six~~three months of fiscal ~~2018. Cash used was $50,000 for repayment on or our revolving credit facility, $30,018~~2021, including $65,873 for the purchase of treasury shares, dividends paid to stockholders of ~~$47,844, and $3,783~~$32,815, $2,598 net cash outflow from the issuance of stock and tax withholding related to stock-based ~~compensation. These uses were partially offset by borrowings of $100,000~~compensation, and $28 for payments on ~~our revolving credit facility.~~financing leases. Financing activities used cash in the first ~~six~~three months of fiscal ~~2017 totaling $100,286. Cash used was $103,885~~2020 totaled $44,576, which included $30,771 for the payment of dividends, $14,145 for the purchase of treasury shares, ~~dividends paid to stockholders of $43,582, repayments on capital leases of $200,~~ and ~~$2,619~~$340 net cash ~~outflow~~inflow from the issuance of stock and tax withholding related to stock-based ~~compensation, partially offset by borrowings on our revolving credit facility of $50,000.~~compensation.

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling ~~$12,249~~$4,478 and ~~$17,405~~$13,101 for the ~~six~~three months ~~ending December 31, 2017~~ended September 30, 2020 and ~~December 31, 2016,~~September 30, 2019, 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 ~~2018~~2021 are not expected to exceed ~~$70,000~~$63,000 and will be funded from cash generated by operations.

Revolving credit facility

On February 10, 2020, the Company entered into a five-year senior, unsecured revolving credit facility. The ~~revolving~~ credit facility allows for borrowings of up to $300,000, which may be increased by the Company at any time until maturity to ~~$600,000.~~$700,000. The credit facility bears interest at a variable rate equal to (a) a rate based on ~~LIBOR~~a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, ~~(ii)~~(iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and ~~(iii)~~(iv) the ~~Eurocurrency Rate~~eurocurrency rate for a ~~one month Interest Period~~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 facility is guaranteed by certain subsidiaries of the ~~Company. The credit facility~~Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit facility agreement. As of ~~December 31, 2017,~~September 30, 2020, the Company was in compliance with all such covenants. The revolving ~~loan~~ credit facility

terminates February ~~20, 2020. At December 31, 2017, there was an outstanding revolving loan balance of $100,000.~~10, 2025. There was ~~a $50,000~~no outstanding balance under the credit facility at September 30, 2020 or June 30, ~~2017.~~2020.

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 ~~April 2017~~May 2019 and expires on April 30, ~~2019.~~2021. At ~~December 31, 2017,~~September 30, 2020 and June 30, 2020, no amount was outstanding. ~~There was also no balance outstanding at June 30, 2017.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Dollar amounts in this item are in thousands.

Market risk refers to the risk that a change in the level of one or more market prices, interest rates, indices, volatilities, correlations or other market factors such as liquidity, will result in losses for a certain financial instrument or group of financial instruments. We are currently exposed to credit risk on credit extended to customers and at times are exposed to interest rate risk on outstanding debt. We do not currently use any derivative financial instruments. We actively monitor these risks through a variety of controlled procedures involving senior management.

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

~~Based on our~~We have no outstanding debt with variable interest rates as of ~~December 31, 2017, a 1% increase in our borrowing~~September 30, 2020 and are therefore not currently exposed to interest rate ~~would increase our annual interest expense by $1,000.~~risk.

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 pursuant to Exchange Act Rules ~~13a-15~~13a-15(e) and ~~15d-15.~~15d-15(e). Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective to ensure 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 that is 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 ~~ending December 31, 2017,~~ended September 30, 2020, there ~~was~~were no ~~change~~changes in internal control over financial reporting that ~~has~~have materially affected, or isare 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, 2017:~~September 30, 2020:


	Total Number of Shares Purchased (1)	Average Price of Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under the Plans (2)
July 1- July 31, 2020	—	—		—	2,997,713
August 1- August 31, 2020	300,000	$	166.39	300,000	2,697,713
September 1- September 30, 2020	100,000	159.57		100,000	2,597,713
Total	400,000	164.68		400,000	2,597,713

Total Number of Shares Purchased⁽¹⁾
Average Price of Share
Total Number of Shares Purchased as Part of Publicly Announced Plans⁽¹⁾

Maximum Number of Shares that May Yet Be Purchased Under the Plans⁽²⁾
October 1- October 31, 2017 —
$ —
—
4,028,696
November 1- November 30, 2017 55
113.90
—
4,028,696
December 1- December 31, 2017 —
—
—
4,028,696
Total 55
113.90
—
4,028,696

⁽¹⁾ No 400,000 shares were purchased through a publicly announced repurchase plan. ~~There were 55 shares surrendered to the Company to satisfy tax withholding obligations in connection with employee restricted stock awards.~~

²⁶

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(2) Total stock repurchase authorizations approved by the Company's Board of Directors as of February 17, 2015 were for 30 million shares. These authorizations have no specific dollar or share price targets and no expiration dates.

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ITEM 6. EXHIBITS


~~31.1~~	~~Certification of the Chief Executive Officer.~~


~~31.2~~	~~Certification of the Chief Financial Officer.~~


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


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


101.INS*	~~XBRL Instance Document~~


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~~

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, 2017~~September 30, 2020 and June 30, ~~2017,~~2020, (ii) the Condensed Consolidated Statements of Income for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, (iii) the Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended September 30, 2020 and 2019, (iv) the Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, and ~~(iv)~~(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:		November 6, 2020	~~JACK HENRY & ASSOCIATES, INC.~~

~~Date:~~	~~February 8, 2018~~	/s/ David B. Foss
			David B. Foss
			Chief Executive Officer and President

Date:		~~February 8, 2018~~November 6, 2020	/s/ Kevin D. Williams
			Kevin D. Williams
			Chief Financial Officer and Treasurer



	Estimated Fair Value Measurements						Total Fair
	Level 1		Level 2		Level 3		Value
December 31, 2017
Financial Assets:
Money market funds	$	21,581	$	—	$	—	$	21,581
Certificate of Deposit	$	—	$	1,000	$	—	$	1,000
Financial Liabilities:
Revolving credit facility	$	—	$	100,000	$	—	$	100,000
June 30, 2017
Financial Assets:
Money market funds	$	68,474	$	—	$	—	$	68,474
Certificate of Deposit	$	—	$	2,001	$	—	$	2,001
Financial Liabilities:
Revolving credit facility	$	—	$	50,000	$	—	$	50,000



Non-Recurring Fair Value Measurements
June 30, 2017
Long-lived assets held for sale ^(a)	$	—	$	1,300	$	—	$	1,300



Years Ending June 30,	Computer Software		Customer Relationships		Other Intangible Assets		Total
2018 (remainder)	$	33,443	$	8,182	$	7,613	$	49,238
2019	62,836		16,399		11,773		91,008
2020	52,282		13,906		6,279		72,467
2021	34,637		11,750		1,717		48,104
2022	19,464		10,689		1,121		31,274



Share awards	Shares		Weighted Average Grant Date Fair Value
Outstanding July 1, 2017	36		$	73.66
Granted	—		—
Vested	(11	)	57.88
Forfeited	—		64.96
Outstanding December 31, 2017	25		$	80.30



Current assets	$	13,950
Long-term assets	585
Identifiable intangible assets	55,001
Non-current deferred income tax liability	(19,969		)
Total other liabilities assumed	(8,593		)
Total identifiable net assets	40,974
Goodwill	93,498
Net assets acquired	$	134,472



Current assets	$	1,153
Long-term assets	9
Identifiable intangible assets	4,200
Total liabilities assumed	(1,117		)
Total identifiable net assets	4,245
Goodwill	6,499
Net assets acquired	$	10,744



	Three Months Ended
	December 31, 2016
	Core		Payments		Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	113,887	$	11,290	$	81,134	$	15,404		$	221,715
Processing	6,000		107,854		12,946		38			126,838
Total Revenue	119,887		119,144		94,080		15,442			348,553

Cost of Revenue	53,087		54,792		38,976		51,291			198,146
Research and Development										20,873
Selling, General, and Administrative										40,928
Gain on Disposal of Businesses										—
Total Expenses										259,947

SEGMENT INCOME	$	66,800	$	64,352	$	55,104	$	(35,849	)

OPERATING INCOME										88,606

INTEREST INCOME (EXPENSE)										(124		)

INCOME BEFORE INCOME TAXES										$	88,482



INTEREST INCOME AND EXPENSE	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2017			2016					2017			2016
Interest Income	$	146		$	60		143	%	$	293		$	167		75	%
Interest Expense	$	(250	)	$	(184	)	36	%	$	(439	)	$	(326	)	35	%



	Total Number of Shares Purchased⁽¹⁾	Average Price of Share		Total Number of Shares Purchased as Part of Publicly Announced Plans⁽¹⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plans⁽²⁾
October 1- October 31, 2017	—	$	—	—	4,028,696
November 1- November 30, 2017	55	113.90		—	4,028,696
December 1- December 31, 2017	—	—		—	4,028,696
Total	55	113.90		—	4,028,696