UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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.

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

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. Forward-looking statements may appear throughout this report, including without limitation, in Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are identified at “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018.2019. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Description of the Company

Consolidation

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

Comprehensive Income

Comprehensive income for the three months ended September 30, 20182019 and 20172018 equals the Company’s net income.

Property and Equipment

Property and equipment is statedrecorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets.  Accumulated depreciation at September 30, 20182019 totaled $372,059$384,896 and at June 30, 20182019 totaled $364,153.$388,481.

Intangible Assets

Intangible assets consist of goodwill, customer relationships, computer software, and trade names acquired in business acquisitions in addition to internally developed computer software. The amounts are amortized, with the exception of those intangible assets with an indefinite life (such as goodwill), over an estimated economic benefit period, generally three to twenty years.  Accumulated amortization of intangible assets totaled $630,161$736,825 and $602,479$707,518 at September 30, 20182019 and June 30, 2019, respectively.

During fiscal 2018, respectively.the Company made an investment of $5,000 for the purchase of preferred stock of Automated Bookkeeping, Inc ("Autobooks"). During the first quarter of fiscal 2020, the Company made an additional investment in Autobooks of $1,000, for a total investment at September 30, 2019 of $6,000, representing a non-controlling share of the voting equity as of that date. The total investment was recorded at cost and is included within other non-current assets on the Company's balance sheet. The fair value of the investment has not been estimated, as estimation is not practicable. 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 September 30, 2018,2019, there were 26,10826,608 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,8833,383 additional shares. The total cost of treasury shares at September 30, 20182019 is $1,055,260.$1,124,269. During the first three months of fiscal 2019,2020, the Company repurchased no100 treasury shares. At June 30, 2018,2019, there were 26,10826,508 shares in treasury stock and the Company had authority to repurchase up to 3,8833,483 additional shares.

The dividend declared duringCompany recognizes the first quartertax 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 fiscal 2019 was paidthe position. The tax benefit recognized in the financial statements from such a position is measured based on October 2, 2018, thereforethe largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expense are recognized on the full amount of deferred benefits for uncertain tax positions. The Company's policy is not reported as a cash outflow for the period ended September 30, 2018. The payment totaled $28,563.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, 2018.2019. 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, 2018,2019, 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 September 30, 2018,2019, the results of its operations for the three months endingended September 30, 2019 and 2018, changes in stockholders' equity for the three months ended September 30, 2019 and 2017,2018, and its cash flows for the three months endingended September 30, 20182019 and 2017.2018. The condensed consolidated balance sheet at June 30, 20182019 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

The results of operations for the three months ended September 30, 20182019 are not necessarily indicative of the results to be expected for the entire year.

NOTE 2:     RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted the new standard effective for JHA's annual reporting period beginning July 1, 2019 using the optional transition method in ASU 2018-11. Under this method, the Company did not adjust its comparative period financial statements for the effects of the new standard or make the new, expanded required disclosures for periods prior to the effective date. The Company elected the package of practical expedients permitted under the new standard, which among other things, allows it to carry forward its historical lease classifications. In addition, the Company has made a policy election to keep leases with an initial term of twelve months or less off of the balance sheet. The Company also elected the practical expedient to not separate the non-lease components of a contract from the lease component to which they relate.

The adoption of standard resulted in the recognition of lease liabilities of $77,393 and early adoption is permitted. At transition, a modified retrospective approach must be utilized to measure leasesright-to-use assets of $74,084 as of the beginningJuly 1, 2019. Adoption of the earliest period presented, however,standard did not have a material impact on the FASB has provided certain practical expedients, which the Company is currently evaluating. The Company is currently assessing the impact this new standard will have on ourCompany’s condensed consolidated financial statements and when we will adopt it.of income or condensed consolidated statements of cash flows.

In August of 2018, the FASB issued ASU No. 2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40), which broadens the scope of Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The costs are capitalized or expensed depending on the nature of the costs and the project

stage during which they are incurred, consistent with costs for internal-use software. The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The ASU will be effective for the Company on July 1, 2020, with early adoption permitted. The Company plans to early adopt ASU No. 2018-15 on January 1, 2020 and does not expect the adoption to have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, with an allowance for credit losses valuation account that is deducted to present the net carrying value at the amount expected to be collected. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company plans to adopt ASU No. 2016-13 when required and is evaluating the impact that the guidance will have on ourits consolidated financial statements.

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

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

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

Revolving credit facility

Other lines of credit

Interest

The effective tax rate was 19.2%24.6% of income before income taxes for the quarter ended September 30, 2018,2019, compared to 31.1%19.2% for the same quarter inof the prior fiscal 2018.year. The significant decreaseincrease to the Company's tax rate was primarily due to the reductiondifference in impact of stock-based compensation. A significant excess tax benefit was recognized in the U.S. federal income tax rateprior year quarter from 35% to 21% due to tax reform enacted December 22, 2017, as well as the increasestock-based compensation. The stock-based compensation resulted in an excess tax benefits from share-based paymentsdeficiency in the first quarter of fiscal 2019.current quarter.

The Company has recognized provisional amounts for tax reform items in its annual and interim financial statements for each reporting period since the enactment of the Tax Cuts and Jobs Act ("TCJA") on December 22, 2017, in accordance with Staff Accounting Bulletin 118 ("SAB 118"). The staff of the U.S. SEC has recognized the complexity of reflecting the impacts of the TCJA and on December 22, 2017, issued guidance in SAB 118. The guidance clarifies accounting forpaid 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.  As the amounts are finalized during the measurement period, the required adjustments, if any, will be recorded in the quarter when the final amount is determined. No adjustments were recordednet of refunds, of $1,090 in the three months ended September 30, 2018.

At September 30, 2018,2019, the Company had $11,065$11,596 of gross unrecognized tax benefits, $10,188$10,815 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of $1,413$1,771 and $1,051$1,413 related to uncertain tax positions at September 30, 20182019 and 2017,2018, respectively.

The U.S. federal and state income tax returns for fiscal year 20152016 and all subsequent years remain subject to examination as of September 30, 20182019 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$3,000 - $1,500$4,000 within twelve months of September 30, 2018.2019.

Our operating income for the three months ended September 30, 2019 and 2018 included $2,853 and 2017 included $1,771 and $1,513 of stock-based compensation costs, respectively.

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

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

The Company issues both share awards and unit awards under the 2015 EIP, and previously issued these awards through the 2005 Restricted Stock Plan. The following table summarizes non-vested share awards as of September 30, 2018,2019, as well as activity for the three months then ended:

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

Per share information is based on the weighted average number of common shares outstanding for the three months ended September 30, 20182019 and 2017.2018. Stock options and restricted stock have been included in the calculation of earnings per share to the extent they are dilutive. There were no0 anti-dilutive stock options or restricted stock shares excluded for the quarter ended September 30, 20182019 and no0 anti-dilutive stock options or restricted stock shares excluded for the quarter ended September 30, 2017.2018.

The amounts shown above include measurement period adjustments made during the third and fourth quarters of fiscal 2018 related to income tax adjustments and a fair value assessment. The amounts shown above may change as management finalizes its assessment of the fair value of acquired assets and liabilities and continues to evaluate the income tax implications of this business combination.

The goodwill of $91,098$19,087 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,Geezeo, together with the value of Ensenta's

Geezeo assembled workforce. The goodwill from this acquisition has been allocated to our PaymentsComplementary segment and is not expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $37,800,$10,522, computer software of $16,505,$5,791, and other intangible assets of $4,501.$2,801. The amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years for each.

Identifiable intangible assets from this acquisition consist of customer relationships of $567, computer software of $1,409, and other intangible assets of $298. The weighted average amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years, 10 years, and 10 years, respectively.

Current assets were inclusive of cash acquired of $7,274.$1,365. The fair value of current assets acquired included accounts receivable of $4,668, none$14, NaN of which were expected to be uncollectible.

Costs incurred related to the acquisition of EnsentaBOLTS in fiscal 20182019 totaled $339$23 for legal, valuation, and other fees, and were expensed as incurred within selling, general, and administrative expense.

The accompanying condensed consolidated statements of income for the three months ended September 30, 20182019 and 2017 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The following unaudited pro forma consolidated financial information for the period ended September 30, 2017 is presented as if this acquisition had occurred at the beginning of the earliest period presented. In addition, this unaudited pro forma financial information is provided for illustrative purposes only and should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisition had actually occurred during those periods, or the results that may be obtained in the future as a result of the acquisition.

The Company is a provider of integrated computer systems that perform data processing (available for in-house installations or outsourced services) for banks and credit unions.

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.

An immaterial adjustment was made to reclassify revenue recognized in fiscal 20182019 from the CoreComplementary to the Corporate and Other Segment.Core Segment to be consistent with the current year's allocation of revenue by segment. For the periodthree months ended September 30, 2017,2019, the amount reclassified totaled $738.

NOTE 10:12: SUBSEQUENT EVENTS

This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the quarter ended September 30, 2018.2019.

OVERVIEW

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

RESULTS OF OPERATIONS

Operating expenses increased 9%11% compared to the first quarter of fiscal 2018. Headcount increased 6% at September 30, 2018 compared to September 30, 2017, leading to increased salaries and benefits. This was partially due to the Ensenta acquisition, which occurred during the second quarter of fiscal 2018. Other reasons for the increase include: bonuses provided by the Company in response to the lower tax rate resulting from the Tax Cuts and Jobs Act ("TCJA"); increased amortization of capitalized software; higher direct2019. Direct cost of product increased, including costs related to our new card payment processing platform and faster payments incentives.initiatives. Higher personnel costs were primarily due to the headcount increase of 2% at September 30, 2019 compared to September 30, 2018, contributing to increased salaries and benefits. Other reasons for the increase include increased hardware costs and higher amortization expense primarily related to developed software.

Operating income increased 6%14% for the quarter, but excludingfirst quarter. Excluding deconversion fees and the increased bonus,income from fiscal 2020 acquisitions, operating income increased 16%9%.

The TCJA lowered our effective income tax rate, which is the primary reason for the decrease in our provision for income taxes by 34%increased 47% compared to the prior year quarter.first quarter, primarily due to the increase in operating income as stated above, and an increased effective tax rate caused by differences in the tax impacts of stock-based compensation quarter-over-quarter. The effective tax rate for the first quarter was 24.6% compared to 19.2% in the same quarter a year ago.

The above changes led to an increase in net income of 25%7% for the first quarter of fiscal 20192020 compared to the first quarter in fiscal 2018.2019.

A detailed discussion of the major components of the results of operations for the three months ending September 30, 20182019 follows. Discussions compare the current three months ending September 30, 20182019 to the prior year's three months ending September 30, 2017.2018.

REVENUE

There was 9% growth in servicesServices and supportSupport revenue increased 13% in the first quarter of fiscal 20192020 compared to the same quarter last year. Excluding a $2,883 reductiondeconversion fees from each period, which increased $7,004 compared to the prior year quarter, and $2,392 of revenue from Geezeo, acquired in deconversion fees,fiscal 2020, services and support revenue grew 11%10%. TheThat increase was primarily due to increases in our outsourcing and cloud and in-house support revenue streams. The increased outsourcing and cloud revenue was partially driven by added revenue from Ensenta, supplemented by organic growth in hostingsoftware usage and subscription fees within 'in-house support' revenue and data processing. The increased in-house supportprocessing and hosting fees, which fall within our 'outsourcing and cloud' revenue was primarily due to higher software usage revenue, resulting mainly from the addition of new customers in the trailing twelve months.stream.

Processing revenue increased 9% in the first quarter of fiscal 20192020 compared to the same quarter last fiscal year, primarily due to increased transaction volumes within each of the three components ofcard processing revenue and added revenue from Ensenta.remittance fees.

OPERATING EXPENSES