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 December 31, 2019


	~~For the quarterly period ended December 31, 2018~~
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, MO65708

(Address of Principle Executive Offices)

(Zip Code)

~~417-235-6652~~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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ~~[ 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" in Rule 12b-2 of the Exchange Act.



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

Non-accelerated filer	~~[ ]~~☐	Smaller reporting company	~~[ ]~~☐

Emerging growth company	~~[ ]~~
	☐

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

☐

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

Yes ~~[ ]~~☐ No ~~[ 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 ~~February 4, 2019,~~January 28, 2020, the Registrant had ~~77,176,611~~76,719,595 shares of Common Stock outstanding ($0.01 par value).

TABLE OF CONTENTS



		Page Reference

PART I	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Balance Sheets as of December 31, ~~2018~~2019 and June 30, ~~2018~~2019 (Unaudited)	54

	Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2019 and 2018 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and ~~2017~~Six Months Ended December 31, 2019 and 2018 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2723

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3430

ITEM 4.	Controls and Procedures	3430

PART II	OTHER INFORMATION	3430

ITEM1.	Legal Proceedings	3430

ITEM 2.	Unregistered Sales Ofof Equity Securities ~~And~~and Use Ofof Proceeds	3430

ITEM 6.	Exhibits	3632

	Signatures	3733

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

FORWARD LOOKING STATEMENTS

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of ~~1934.~~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, ~~2018. We undertake no~~2019, 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

													JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	CONDENSED CONSOLIDATED BALANCE SHEETS	(In Thousands, Except Share and Per Share Data)	(Unaudited)
	December 31, 2018			June 30, 2018			December 31, 2019			June 30, 2019
				*As Adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	26,156		$	31,440		$	72,513		$	93,628
Receivables, net	184,737			297,271			204,703			310,080
Income tax receivable	9,488			21,671			—			17,817
Prepaid expenses and other	99,053			96,141			99,298			106,466
Deferred costs	43,205			27,069			44,862			35,102
Assets held for sale							6,355			6,355
Total current assets	362,639			473,592			427,731			569,448
PROPERTY AND EQUIPMENT, net	283,454			286,850			278,695			272,474
OTHER ASSETS:
Non-current deferred costs	82,328			74,865			101,304			90,084
Computer software, net of amortization	303,516			288,172			337,602			318,969
Other non-current assets	129,562			110,299			218,564			134,743
Customer relationships, net of amortization	109,263			115,034			102,807			100,653
Other intangible assets, net of amortization	34,245			38,467			34,404			31,514
Goodwill	666,770			649,929			686,332			666,944
Total other assets	1,325,684			1,276,766			1,481,013			1,342,907
Total assets	$	1,971,777		$	2,037,208		$	2,187,439		$	2,184,829
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,597		$	34,510		$	10,670		$	9,850
Accrued expenses	92,614			88,764			116,383			120,360
Accrued income taxes							676			—
Deferred revenues	240,863			352,431			215,425			339,752
Total current liabilities	340,074			475,705			343,154			469,962
LONG-TERM LIABILITIES:
Non-current deferred revenues	14,773			17,484			61,579			54,554
Non-current deferred income tax liability	210,489			208,303			223,737			217,010
Other long-term liabilities	14,486			12,872			72,223			14,290
Total long-term liabilities	239,748			238,659			357,539			285,854
Total liabilities	579,822			714,364			700,693			755,816
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—			—			—			—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,428,416 shares issued at December 31, 2018; 103,278,562 shares issued at June 30, 2018	1,034			1,033
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,572,129 shares issued at December 31, 2019; 103,496,026 shares issued at June 30, 2019							1,036			1,035
Additional paid-in capital	459,988			464,138			481,005			472,029
Retained earnings	2,007,469			1,912,933			2,166,039			2,066,073
Less treasury stock at cost 26,257,903 shares at December 31, 2018; 26,107,903 shares at June 30, 2018	(1,076,536		)	(1,055,260		)
Less treasury stock at cost 26,857,903 shares at December 31, 2019; 26,507,903 shares at June 30, 2019							(1,161,334		)	(1,110,124		)
Total stockholders' equity	1,391,955			1,322,844			1,486,746			1,429,013
Total liabilities and equity	$	1,971,777		$	2,037,208		$	2,187,439		$	2,184,829

See notes to condensed consolidated financial statements

*Refer to Note 2 for the impact to previously presented financial statements as a result of the adoption of ASC 606

																									JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	(In Thousands, Except Per Share Data)	(Unaudited)
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	December 31,						December 31,						December 31,						December 31,
	2018			2017			2018			2017			2019			2018			2019			2018
				*As Adjusted						*As Adjusted
REVENUE	$	386,275		$	357,209		$	778,818		$	718,493		$	419,119		$	386,275		$	857,124		$	778,818

EXPENSES
Cost of Revenue	227,284			207,100			447,396			411,016			249,267			227,284			495,058			447,396
Research and Development	23,990			22,414			48,016			43,343			27,187			23,990			51,778			48,016
Selling, General, and Administrative	46,797			43,094			91,979			84,181			48,961			46,797			98,396			91,979
Gain on Disposal of a Business	—			(189		)	—			(1,894		)
Total Expenses	298,071			272,419			587,391			536,646			325,415			298,071			645,232			587,391

OPERATING INCOME	88,204			84,790			191,427			181,847			93,704			88,204			211,892			191,427

INTEREST INCOME (EXPENSE)
Interest Income	252			146			542			293			346			252			853			542
Interest Expense	(148		)	(250		)	(295		)	(439		)	(156		)	(148		)	(312		)	(295		)
Total Interest Income (Expense)	104			(104		)	247			(146		)	190			104			541			247

INCOME BEFORE INCOME TAXES	88,308			84,686			191,674			181,701			93,894			88,308			212,433			191,674

PROVISION/ (BENEFIT) FOR INCOME TAXES	20,219			(76,557		)	40,034			(46,412		)
PROVISION FOR INCOME TAXES													21,796			20,219			50,965			40,034

NET INCOME	$	68,089		$	161,243		$	151,640		$	228,113		$	72,098		$	68,089		$	161,468		$	151,640

Basic earnings per share	$	0.88		$	2.09		$	1.96		$	2.95		$	0.94		$	0.88		$	2.10		$	1.96
Basic weighted average shares outstanding	77,216			77,218			77,202			77,250			76,879			77,216			76,926			77,202

Diluted earnings per share	$	0.88		$	2.08		$	1.96		$	2.94		$	0.94		$	0.88		$	2.10		$	1.96
Diluted weighted average shares outstanding	77,409			77,565			77,474			77,606			76,935			77,409			77,001			77,474

See notes to condensed consolidated financial statements

*Refer



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						Six Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
PREFERRED SHARES:	—			—			—			—

COMMON SHARES:
Shares, beginning of period	103,535,828			103,398,501			103,496,026			103,278,562
Shares issued for equity-based payment arrangements	18,594			13,303			38,482			115,397
Shares issued for Employee Stock Purchase Plan	17,707			16,612			37,621			34,457
Shares, end of period	103,572,129			103,428,416			103,572,129			103,428,416

COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of period	$	1,035		$	1,034		$	1,035		$	1,033
Shares issued for equity-based payment arrangements	1			—			1			1
Balance, end of period	$	1,036		$	1,034		$	1,036		$	1,034

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	475,222		$	454,869		$	472,030		$	464,138
Shares issued for equity-based payment arrangements	—			—			(1		)	(1		)
Tax withholding related to share based compensation	(553		)	(227		)	(2,625		)	(13,484		)
Shares issued for Employee Stock Purchase Plan	2,191			1,972			4,603			4,189
Stock-based compensation expense	4,145			3,374			6,998			5,146
Balance, end of period	$	481,005		$	459,988		$	481,005		$	459,988

RETAINED EARNINGS:
Balance, beginning of period	$	2,124,672		$	1,967,921		$	2,066,073		$	1,912,933
Net income	72,098			68,089			161,468			151,640
Dividends	(30,731		)	(28,541		)	(61,502		)	(57,104		)
Balance, end of period	$	2,166,039		$	2,007,469		$	2,166,039		$	2,007,469

TREASURY STOCK:
Balance, beginning of period	$	(1,124,269	)	$	(1,055,260	)	$	(1,110,124	)	$	(1,055,260	)
Purchase of treasury shares	(37,065		)	(21,276		)	(51,210		)	(21,276		)
Balance, end of period	$	(1,161,334	)	$	(1,076,536	)	$	(1,161,334	)	$	(1,076,536	)

TOTAL STOCKHOLDERS' EQUITY	$	1,486,746		$	1,391,955		$	1,486,746		$	1,391,955

Dividends declared per share	$	0.40		$	0.37		$	0.80		$	0.74

See notes to ~~Note 2 for the impact to previously presented~~condensed consolidated financial ~~statements as a result of the adoption of ASC 606~~statements.

													JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	(In Thousands)	(Unaudited)
	Six Months Ended						Six Months Ended
	December 31,						December 31,
	2018			2017			2019			2018
				*As Adjusted
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	151,640		$	228,113		$	161,468		$	151,640
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	22,470			24,602			25,364			22,470
Amortization	56,146			48,711			58,873			56,146
Change in deferred income taxes	1,256			(87,040		)	4,134			1,256
Expense for stock-based compensation	5,146			4,609			6,998			5,146
(Gain)/loss on disposal of assets and businesses	(22		)	(1,841		)
(Gain)/loss on disposal of assets							(103		)	(22		)
Changes in operating assets and liabilities:
Change in receivables	113,563			143,914			106,782			113,563
Change in prepaid expenses, deferred costs and other	(45,768		)	(57,214		)	(21,911		)	(49,918		)
Change in accounts payable	(14,685		)	5,371			(262		)	(10,535		)
Change in accrued expenses	4,658			(13,236		)	(28,702		)	4,658
Change in income taxes	12,654			1,829			19,861			12,654
Change in deferred revenues	(115,014		)	(120,910		)	(117,489		)	(115,014		)
Net cash from operating activities	192,044			176,908			215,013			192,044

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	(19,981		)	(137,654		)	(30,376		)	(19,981		)
Capital expenditures	(32,968		)	(12,249		)	(30,758		)	(32,968		)
Proceeds from the sale of businesses	—			350
Proceeds from the sale of assets	76			205			326			76
Internal use software	(2,694		)	(6,025		)
Purchased software							(5,551		)	(2,694		)
Computer software developed	(54,086		)	(46,936		)	(57,886		)	(54,086		)
Purchase of investments							(1,150		)	—
Net cash from investing activities	(109,653		)	(202,309		)	(125,395		)	(109,653		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities	—			100,000
Repayments on credit facilities	—			(50,000		)
Purchase of treasury stock	(21,276		)	(30,018		)	(51,210		)	(21,276		)
Dividends paid	(57,104		)	(47,844		)	(61,502		)	(57,104		)
Proceeds from issuance of common stock upon exercise of stock options	1			1			—			1
Tax withholding payments related to share based compensation	(13,485		)	(7,144		)	(2,624		)	(13,485		)
Proceeds from sale of common stock	4,189			3,360			4,603			4,189
Net cash from financing activities	(87,675		)	(31,645		)	(110,733		)	(87,675		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(5,284	)	$	(57,046	)	$	(21,115	)	$	(5,284	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	31,440		$	114,765		$	93,628		$	31,440
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	26,156		$	57,719		$	72,513		$	26,156

See notes to condensed consolidated financial statements

*Refer to Note 2 for the impact to previously presented financial statements as a result of the adoption of ASC 606

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

Description of the Company

Jack Henry & Associates, Inc. and subsidiaries (“JHA” or the “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 systems, and by providing other related services. JHA 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 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, ~~2018~~2019 and ~~2017~~2018 equals the Company’s net income.

~~Prior Period Reclassification~~

~~The prior year periods have been recast to reflect the Company's retrospective adoption of Accounting Standards Update ("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers,~~ ~~and related amendments, collectively referred to as Accounting Standards Codification ("ASC") 606.~~

~~Revenue Recognition~~

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

~~Significant Judgments in Application of the Guidance~~

~~Identification of Performance Obligations~~

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

~~Determination of Transaction Price~~

The amount of revenue recognized is based on the consideration the Company expects to receive in exchange for transferring goods and services to the customer. The Company’s contracts with its customers frequently contain some component of variable consideration. The Company estimates variable consideration in its contracts primarily using the expected value method, based on both historical and current information. Where appropriate, the Company may constrain the estimated variable consideration included in the transaction price in the event of a high degree of uncertainty as to the final consideration amount.

Taxes collected from customers and remitted to governmental authorities are not included in revenue. The Company includes reimbursements from customers for expenses incurred in providing services (such as for postage, travel and telecommunications costs) in revenue, while the related costs are included in cost of revenue.

Technology or service components from third parties are frequently included in or combined with the Company’s applications or service offerings. Whether the Company recognizes revenue based on the gross amount billed to the customer or the net amount retained involves judgment in determining whether the Company controls the good or service before it is transferred to the customer. This assessment is made at the performance obligation level.

~~Allocation of Transaction Price~~

The transaction price, once determined, is allocated between the various performance obligations in the contract based upon their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the standalone selling prices using all information that is reasonably available, including reference to historical pricing data.

~~The following describes the nature of the Company’s primary types of revenue:~~

~~Processing~~

Processing revenue is generated from transaction-based fees for electronic deposit and payment services, electronic funds transfers and debit and credit card processing. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis by processing an unspecified number of transactions over the contractual term. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services), and pricing may include tiered pricing structures. Amounts of revenue allocated to these services are recognized as those services are performed. Customers are typically billed monthly for transactions processed during the month. The Company evaluates tiered pricing to determine if a material right exists. If, after that evaluation, we determine a material right does exist, we assign value to the material right based upon standalone selling price after estimation of breakage associated with the material right.

~~Outsourcing and Cloud~~

Outsourcing and cloud revenue is generated from data and item processing services and hosting fees. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services), and pricing may include tiered pricing structures. Amounts of revenue allocated to these services are recognized as those services are performed. Data and item processing services are typically billed monthly. The Company evaluates tiered pricing to determine if a material right exists. If, after that evaluation, we determine a material right does exist, we assign value to the material right based upon standalone selling price.

~~Product Delivery and Services~~

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

~~In-House Support~~

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

~~Disaggregation of Revenue~~

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

Three Months Ended December 31, Six Months Ended December 31,
2018 2017 2018 2017
Processing $ 148,953
$ 134,191
$ 294,928
$ 268,723

Outsourcing & Cloud 100,066
88,253
197,425
173,387
Product Delivery & Services 58,794
59,392
116,758
118,462
In-House Support 78,462
75,373
169,707
157,921
Services & Support 237,322
223,018
483,890
449,770

Total Revenue $ 386,275
$ 357,209
$ 778,818
$ 718,493

~~Contract Balances~~

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

December 31,
2018 June 30,
2018
Receivables, net $ 184,737
$ 297,271
Contract Assets- Current 16,697
14,063
Contract Assets- Non-current 44,465
35,630
Contract Liabilities (Deferred Revenue)- Current 240,863
352,431
Contract Liabilities (Deferred Revenue)- Non-current $ 14,773
$ 17,484

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 the non-current portion is included in other non-current assets. Contract Liabilities (deferred revenue) primarily relate to consideration received from customers in advance of delivery of the related goods and services to the customer. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

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

During the three months ended December 31, 2018 and 2017, the Company recognized revenue of $93,656 and $82,410, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

During the six months ended December 31, 2018 and 2017, the Company recognized revenue of $164,051 and $154,585, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

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

~~Transaction Price Allocated to Remaining Performance Obligations~~

As of December 31, 2018, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $3,647,526. The Company expects to recognize approximately 28% over the next 12 months, 20% in 13-24 months, and the balance thereafter.

~~Contract Costs~~

The Company incurs incremental costs to obtain a contract as well as costs to fulfill contracts with customers that are expected to be recovered. These costs consist primarily of sales commissions, which are incurred only if a contract is obtained, and customer conversion or implementation related costs. Capitalized costs totaled $222,027 and $181,032, at December 31, 2018 and June 30, 2018, respectively.

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. For the three months ended December 31, 2018 and 2017, amortization of deferred contract costs was $25,435 and $22,863, respectively. For the six months ended December 31, 2018 and 2017, amortization of deferred contract costs totaled $52,257 and $45,371, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

Property and Equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation at December 31, ~~2018~~2019 totaled ~~$387,261~~$397,244 and at June 30, ~~2018~~2019 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 ~~$658,480~~$766,312 and ~~$602,479~~$707,518 at December 31, ~~2018~~2019 and June 30, ~~2018,~~2019, respectively.

Purchase of Investments

At June 30, 2019, the Company had an investment in the preferred stock of Automated Bookkeeping, Inc ("Autobooks") of $5,000. During the first quarter of fiscal 2020, the Company made an additional investment in Autobooks of $1,000, for a total investment at December 31, 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. 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, ~~2018,~~2019, there were ~~26,258~~26,858 shares in treasury stock and the Company had the remaining authority to repurchase up to ~~3,733~~3,133 additional shares. The total cost of treasury shares at December 31, ~~2018~~2019 is ~~$1,076,536.~~$1,161,334. During the first six months of fiscal ~~2019,~~2020, the Company repurchased ~~150~~350 treasury shares. At June 30, ~~2018,~~2019, there were ~~26,108~~26,508 shares in treasury stock and the Company had authority to repurchase up to ~~3,883~~3,483 additional shares.

~~Dividends declared per share were $0.37~~Income Taxes

Deferred tax liabilities and ~~$0.31,~~ assets are recognized for the ~~three months ended December 31, 2018~~ tax effects of differences between the financial statement and ~~2017, respectively. For~~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 ~~six months ended December 31, 2018~~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 ~~2017, dividends declared totaled $0.74~~penalties expenses are recognized on the full amount of deferred benefits for uncertain tax positions. The Company's policy is to include interest and ~~$0.62, respectively.~~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 December 31, ~~2018,~~2019, the results of its operations for the three and six months ~~ending~~

ended December 31, 2019 and 2018, changes in stockholders' equity for the three and ~~2017,~~six months ended December 31, 2019 and 2018, and its cash flows for the six months ~~ending~~ended December 31, ~~2018~~2019 and ~~2017.~~2018. The condensed consolidated balance sheet at June 30, ~~2018~~2019 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

The results of operations for the three and six months ended December 31, ~~2018~~2019 are not necessarily indicative of the results to be expected for the entire year.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

~~The Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~, in May 2014. This standard (and related amendments collectively referred to as “ASC 606”) is part of an effort to create a common revenue standard for U.S. generally accepted accounting principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”). The new standard has superseded much of the authoritative literature for revenue recognition. The new model enacts a five-step process for achieving 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. The standard was effective for the Company on July 1, 2018. Entities are allowed to transition to the new standard by either recasting prior periods (full retrospective) or recognizing the cumulative effect as of the beginning of the period of adoption (modified retrospective).

The Company adopted the new standard using the full retrospective transition approach, using certain practical expedients. The Company has not disclosed the amount of transaction price allocated to remaining performance obligations for reporting periods presented before the date of initial application. Also, the Company did not separately consider the effects of contract modifications that occurred before the beginning of the earliest reporting period presented, but reflects the aggregate effect of all modifications that occurred before the beginning of the earliest period presented. As a result, all fiscal 2018 financial information has been adjusted for the effects of applying ASC 606. The details of the significant changes are disclosed below:

~~Software Revenue Recognition~~

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

~~Impacts on Financial Statements~~

~~The following tables summarize the impacts of ASC 606 adoption on the Company’s Condensed Consolidated Financial Statements:~~

~~Condensed Consolidated Balance Sheet as of June 30, 2018:~~

As Previously Reported Adjustments As Adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 31,440
$ —
$ 31,440
Receivables, net 291,630
5,641
297,271
Income tax receivable 21,671
—
21,671
Prepaid expenses and other 84,810
11,331
96,141
Deferred costs 38,985
(11,916 ) 27,069
Total current assets 468,536
5,056
473,592
PROPERTY AND EQUIPMENT, net 286,850
—
286,850
OTHER ASSETS:
Non-current deferred costs 95,540
(20,675 ) 74,865
Computer software, net of amortization 288,172
—
288,172
Other non-current assets 107,775
2,524
110,299
Customer relationships, net of amortization 115,034
—
115,034
Other intangible assets, net of amortization 38,467
—
38,467
Goodwill 649,929
—
649,929
Total other assets 1,294,917
(18,151 ) 1,276,766
Total assets $ 2,050,303
$ (13,095 ) $ 2,037,208
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 34,510
$ —
$ 34,510
Accrued expenses 97,848
(9,084 ) 88,764
Deferred revenues 355,538
(3,107 ) 352,431
Total current liabilities 487,896
(12,191 ) 475,705
LONG-TERM LIABILITIES:
Non-current deferred revenues 93,094
(75,610 ) 17,484
Non-current deferred income tax liability 189,613
18,690
208,303
Other long-term liabilities 12,872
—
12,872
Total long-term liabilities 295,579
(56,920 ) 238,659
Total liabilities 783,475
(69,111 ) 714,364
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued —
—
—
Common stock - $0.01 par value; 250,000,000 shares authorized;
103,278,562 shares issued at June 30, 2018 1,033
—
1,033
Additional paid-in capital 464,138
—
464,138
Retained earnings 1,856,917
56,016
1,912,933
Less treasury stock at cost
26,107,903 shares at June 30, 2018 (1,055,260 ) —
(1,055,260 )
Total stockholders' equity 1,266,828
56,016
1,322,844
Total liabilities and equity $ 2,050,303
$ (13,095 ) $ 2,037,208

~~Condensed Consolidated Statement of Income for the three and six months ended December 31, 2017:~~

Three Months Ended December 31, 2017 Six Months Ended December 31, 2017
As Previously Reported Adjustments As Adjusted As Previously Reported Adjustments As Adjusted
REVENUE $ 374,756
$ (17,547 ) $ 357,209
$ 734,690
$ (16,197 ) $ 718,493

EXPENSES
Cost of Revenue 211,653
(4,553 ) 207,100
416,368
(5,352 ) 411,016
Research and Development 22,414
—
22,414
43,343
—
43,343
Selling, General, and Administrative 45,613
(2,519 ) 43,094
89,346
(5,165 ) 84,181
Gain on Disposal of a Business (189 ) —
(189 ) (1,894 ) —
(1,894 )
Total Expenses 279,491
(7,072 ) 272,419
547,163
(10,517 ) 536,646

OPERATING INCOME 95,265
(10,475 ) 84,790
187,527
(5,680 ) 181,847

INTEREST INCOME (EXPENSE)
Interest Income 146
—
146
293
—
293
Interest Expense (250 ) —
(250 ) (439 ) —
(439 )
Total Interest Income (Expense) (104 ) —
(104 ) (146 ) —
(146 )

INCOME BEFORE INCOME TAXES 95,161
(10,475 ) 84,686
187,381
(5,680 ) 181,701

PROVISION/ (BENEFIT) FOR INCOME TAXES (60,413 ) (16,144 ) (76,557 ) (31,604 ) (14,808 ) (46,412 )

NET INCOME $ 155,574
$ 5,669
$ 161,243
$ 218,985
$ 9,128
$ 228,113

Basic earnings per share $ 2.01
$ 2.09
$ 2.83
$ 2.95
Basic weighted average shares outstanding 77,218
77,218
77,250
77,250

Diluted earnings per share $ 2.01
$ 2.08
$ 2.82
$ 2.94
Diluted weighted average shares outstanding 77,565
77,565
77,606
77,606

~~Condensed Consolidated Statement of Cash Flows for the six months ended December 31, 2017:~~

Six Months Ended December 31, 2017
As Previously Reported Adjustments As Adjusted
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 218,985
$ 9,128
$ 228,113
Adjustments to reconcile net income from operations
to net cash from operating activities:

Depreciation 24,602
—
24,602
Amortization 48,711
—
48,711
Change in deferred income taxes (72,721 ) (14,319 ) (87,040 )
Expense for stock-based compensation 4,609
—
4,609
(Gain)/loss on disposal of assets and businesses (1,841 ) —
(1,841 )
Changes in operating assets and liabilities:
Change in receivables 115,572
28,342
143,914
Change in prepaid expenses, deferred costs and other (17,105 ) (40,109 ) (57,214 )
Change in accounts payable 5,371
—
5,371
Change in accrued expenses (15,386 ) 2,150
(13,236 )
Change in income taxes 2,317
(488 ) 1,829
Change in deferred revenues (136,206 ) 15,296
(120,910 )
Net cash from operating activities 176,908
—
176,908

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

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

ASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification of eight specific cash flow issues and is effective for our annual reporting period beginning July 1, 2018. The adoption of this standard did not have any impact on our financial statements.

~~Not Yet Adopted~~

The FASB issued ~~ASU~~Accounting Standards Update (ASU) No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information regarding leasing ~~arrangements.~~arrangements to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Specifically, the standard requires operating lease commitments to be recorded on the balance sheet as operating lease liabilities and right-of-use assets, and the cost of those operating leases to be amortized on a straight-line basis. ~~ASU No. 2016-02 will be~~

The Company adopted the new standard effective ~~for JHA's annual reporting period beginning~~ July 1, 2019 ~~and early adoption is permitted. We will take advantage~~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 ~~transition~~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 ~~within~~under the new standard, which among other things, allows usit to ~~carryforward the~~carry forward its historical lease ~~classification.~~classifications. In addition, ~~we will make an accounting~~the Company has made a policy election ~~that will~~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 right-to-use assets of $74,084 as of July 1, 2019. Adoption of the standard did not have a material impact on the Company’s condensed consolidated statements of income or condensed consolidated statements of cash flows.

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 ~~add right~~be effective for the Company on July 1, 2021. Early adoption of ~~use assets and lease obligations~~the 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 ~~our balance sheet~~early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU No. 2019-12 when required, or sooner as allowed, and is ~~not expected to significantly~~assessing the timing of adoption and evaluating the impact ~~income before income taxes.~~ on its consolidated financial statements.

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 for its fiscal 2020 third quarter and, since the adoption will be prospective, there will be no material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the 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 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 ~~currently~~necessary. ASU No. 2017-04 will be effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt ASU No. 2017-04 when required 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 ~~our~~its consolidated financial statements.

NOTE 3. REVENUE AND DEFERRED COSTS

Revenue Recognition

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

Disaggregation of Revenue

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 11, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.



	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Outsourcing & Cloud	$	115,897	$	100,066	$	224,480	$	197,425
Product Delivery & Services	61,709		58,794		133,070		116,758
In-House Support	77,598		78,462		176,462		169,707
Services & Support	255,204		237,322		534,012		483,890

Processing	163,915		148,953		323,112		294,928

Total Revenue	$	419,119	$	386,275	$	857,124	$	778,818

Contract Balances

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



	December 31, 2019		June 30, 2019
Receivables, net	$	204,703	$	310,080
Contract Assets- Current	21,872		21,446
Contract Assets- Non-current	60,168		50,640
Contract Liabilities (Deferred Revenue)- Current	215,425		339,752
Contract Liabilities (Deferred Revenue)- Non-current	$	61,579	$	54,554

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 the non-current portion is included in other non-current assets. Contract liabilities (deferred revenue) primarily relate to consideration received from customers in advance of delivery of the related goods and services to the customer. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

During the three months ended December 31, 2019 and 2018, the Company recognized revenue of $84,613 and $93,656, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods. For the six months ended December 31, 2019 and 2018, the Company recognized revenue of $155,625 and $164,051, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, 2019, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $3,901,517. The Company expects to recognize approximately 27% over the next 12 months, 20% in 13-24 months, and the balance thereafter.

Contract Costs

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

Capitalized costs totaled $255,922 and $231,273, at December 31, 2019 and June 30, 2019, respectively.

For the three months ended December 31, 2019 and 2018, amortization of deferred contract costs was $27,821 and $25,435, respectively. During the six months ended December 31, 2019 and 2018, amortization of deferred contract costs totaled $59,214 and $52,257, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

NOTE 3.4. 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.

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

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

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

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

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, 2019
Financial Assets:
Money market funds	$	55,376	$	—	$	—	$	55,376
June 30, 2019
Financial Assets:
Money market funds	$	81,945	$	—	$	—	$	81,945

Estimated Fair Value Measurements Total Fair
Level 1 Level 2 Level 3 Value
December 31, 2018
Financial Assets:
Money market funds $ 9,033
$ —
$ —
$ 9,033
June 30, 2018

Financial Assets:
Money market funds $ 14,918
$ —
$ —
$ 14,918


Non-Recurring Fair Value Measurements
December 31, 2018
December 31, 2019
Long-lived assets held for sale	$	—	$	1,300	$	—	$	1,300	$	—	$	1,300	$	—	$	1,300
June 30, 2018
June 30, 2019
Long-lived assets held for sale ^(a)	$	—	$	1,300	$	—	$	1,300	$	—	$	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 of by sale in the ~~fourth~~third quarter of fiscal ~~2019.~~2020.

NOTE 4.5. LEASES

The Company adopted ASU 2016-02 and its related amendments (collectively known as “ASC 842”) on July 1, 2019 using the optional transition method in ASU 2018-11. Therefore, the reported results for the three and six months ended December 31, 2019 reflect the application of ASC 842 while the reported results for the three and six months ended December 31, 2018 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases (“ASC 840”), in effect for the prior period.

The Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property, and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The lease term is used to determine lease classification as an operating or finance lease and is used to calculate straight-line expense for operating leases. The Company elected the package of practical expedients permitted under the transition guidance within ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at commencement date based upon the present value of lease payments over the lease term. ROU assets also include prepaid lease payments and exclude lease incentives received. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. 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 for both real estate and equipment leases. The determination of the incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease. The Company elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term.

The Company leases certain office space, data centers and equipment. The Company’s leases have remaining terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The depreciable life of the ROU asset and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option.

At December 31, 2019, the Company had operating lease assets of $67,727. Total operating lease liabilities of $70,971 were comprised of current operating lease liabilities of $12,094 and noncurrent operating lease liabilities of $58,877.

Operating lease assets are included within other non-current assets and operating lease liabilities are included with 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 $6,826 as of December 31, 2019.

Operating lease costs for the three and six months ended December 31, 2019 were $4,024 and $8,031, respectively, and included approximately $780 and $1,659, respectively, of variable lease costs.

Operating lease expense is 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.

Operating cash flows from operating leases for the six months ended December 31, 2019 were $7,803 and right-of-use assets obtained in exchange for operating lease liabilities were $1,370.

As of December 31, 2019, the weighted-average remaining lease term for the Company's operating leases was 83 months and the weighted-average discount rate was 2.96%.

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on leases with initial non-cancellable lease terms in excess of one year were due as follows at December 31, 2019:



Due dates	Future Minimum Rental Payments

2020 (remaining period)	$	6,944
2021	13,678
2022	12,442
2023	10,785
2024	8,635
Thereafter	26,608
Total lease payments	$	79,092
Less: interest	(8,121		)
Present value of lease liabilities	$	70,971

Operating lease payments include $4,750 related to options to extend lease terms that are reasonably certain of being exercised. At December 31, 2019, there were no legally binding lease payments for leases signed but not yet commenced.

Maturity of Lease Liabilities under ASC 840

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at June 30, 2019:



Due dates	Future Minimum Rental Payments

2020	$	15,559
2021	13,539
2022	11,860
2023	10,169
2024	8,835
Thereafter	11,671
Total lease payments	$	71,633

Rent expense for all operating leases was $15,196 during the year ended June 30, 2019.

NOTE 6. DEBT

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. The credit facility bears interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate (the highest of (i) the Prime Rate for such day, (ii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iii) the Eurocurrency Rate for a one-month Interest Period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit facility is guaranteed by certain subsidiaries of the Company. The credit facility is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the agreement. As of December 31, ~~2018,~~2019, the Company was in compliance with all such covenants. The revolving ~~loan~~credit facility terminates February 20, ~~2020. At~~2020. A new 5-year revolving credit facility is anticipated to be in place prior to the termination date. There was 0 outstanding credit facility balance at either December 31, ~~2018, there was no outstanding revolving loan balance. There was also no outstanding balance~~2019 or at June 30, ~~2018.~~2019.

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, ~~2018~~2019, no0 amount was outstanding. There was also no0 balance outstanding at June 30, ~~2018.~~2019.

Interest

The Company paid interest of ~~$192~~$193 and ~~$355~~$192 during the six months ended December 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

NOTE 5.7. INCOME TAXES

The effective tax rate was ~~22.9%~~23.2% of income before income taxes for the quarter ended December 31, ~~2018,~~2019, compared to ~~(90.4)%~~22.9% for the same quarter of the prior fiscal year. For the six months ended December 31, ~~2018,~~2019, the effective tax rate was ~~20.9%,~~24.0% compared to ~~(25.5)%~~20.9% for the six months ended December 31, ~~2017.~~ 2018. The ~~significant~~ increase into the Company's ~~effective~~ tax rate ~~for both the quarter and year-to-date periods~~ was primarily due to ~~$97,516~~the difference in impact of stock-based compensation. The tax benefits ~~recorded~~recognized from stock-based compensation in the prior ~~fiscal~~ year ~~for~~significantly exceeded the re-measurement of the net deferred tax liabilities due to the Tax Cuts and Jobs Act ("TCJA") enacted December 22, 2017. This increase is partially offset by the enacted lower corporate income tax rate that became effective January 1, 2018, which resulted in a U.S. statutory rate of approximately 28% for the fiscal year 2018, and 21% for fiscal 2019. The increase was further offset by increased excess tax benefits ~~from share-based payments~~recognized in the ~~first six months of fiscal 2019.~~

The Company has relied on Staff Accounting Bulletin 118 ("SAB 118") and has recognized provisional amounts for tax reform items in its annual and interim financial statements for each prior reporting period since the enactment of the TCJA. 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 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 considers its accounting for the income tax effects of the TCJA to be complete. No significant adjustments to the provisional amounts previously reported were recorded during the six months ended December 31, 2018.current year.

The Company paid income taxes, net of refunds, of ~~$25,211 and $38,163~~$26,262 in the six months ended December 31, ~~2018~~2019 and ~~2017, respectively.~~paid income taxes, net of refunds, of $25,211 in the six months ended December 31, 2018.

At December 31, ~~2018,~~2019, the Company had ~~$10,719~~$11,463 of gross unrecognized tax benefits, ~~$9,967~~$10,762 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of ~~$1,431~~$1,883 and ~~$1,318~~$1,431 related to uncertain tax positions at December 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

The U.S. federal and state income tax returns for fiscal ~~year 2015~~2016 and all subsequent years remain subject to examination as of December 31, ~~2018~~2019 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 December 31, ~~2018.~~2019.

NOTE 6.8. STOCK-BASED COMPENSATION

Our operating income for the three months ended December 31, 2019 and 2018 included $4,145 and ~~2017 included~~ $3,374 ~~and $3,096~~ of stock-based compensation costs, respectively. For the six months ended December 31, ~~2018~~2019 and ~~2017,~~2018, stock-based compensation costs included in operating income totaled ~~$5,146~~$6,998 and ~~$4,609,~~$5,146, 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 is as follows:



	Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding July 1, 2019	32	$	87.27
Granted	—	—
Forfeited	—	—
Exercised	—	—
Outstanding December 31, 2019	32	$	87.27	$	1,850
Vested and Expected to Vest December 31, 2019	32	$	87.27	$	1,850
Exercisable December 31, 2019	32	$	87.27	$	1,850

Number of Shares Weighted Average Exercise Price
Aggregate
Intrinsic
Value
Outstanding July 1, 2018 52
$ 62.65

Granted —
—

Forfeited —
—

Exercised —
—

Outstanding December 31, 2018 52
$ 62.65
$ 3,301
Vested and Expected to Vest December 31, 2018 52
$ 62.65
$ 3,301
Exercisable December 31, 2018 20
$ 23.65
$ 2,057

At December 31, ~~2018,~~2019, there was ~~$83 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, ~~2018~~2019 was ~~0.50 years~~.6.50 years.

Restricted Stock Awards

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 December 31, ~~2018,~~2019, as well as activity for the six months then ended:



Share awards	Shares		Weighted Average Grant Date Fair Value
Outstanding July 1, 2019	6		$	87.27
Granted	—		—
Vested	(6	)	87.27
Forfeited	—		—
Outstanding December 31, 2019	—		$	—

Share awards Shares
Weighted
Average
Grant Date
Fair Value
Outstanding July 1, 2018 23
$ 81.33
Granted —
—
Vested (17 ) 79.48
Forfeited —
—
Outstanding December 31, 2018 6
$ 86.74

At December 31, ~~2018~~2019, there was ~~$83~~ of0 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~~ ~~0.48 years~~.awards.

The following table summarizes non-vested restricted stock unit awards as of December 31, ~~2018~~2019, as well as activity for the six months then ended:



Unit awards	Units		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding July 1, 2019	298		$	107.00
Granted	92		159.68
Vested	(53	)	92.61
Forfeited	(54	)	78.92
Outstanding December 31, 2019	283		$	132.16	$	41,238

Unit awards Units
Weighted
Average
Grant Date
Fair Value
Aggregate Intrinsic Value
Outstanding July 1, 2018 351
$ 83.37

Granted 65
176.95

Vested (117 ) 79.51

Forfeited (4 ) 86.89

Outstanding December 31, 2018 295
$ 105.38
$ 37,305
For 52 of the unit awards granted in fiscal 2020 with only service requirements, the Company valued the awards 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~~For 38 of the remaining 40 unit awards granted in fiscal 2020 with performance targets, the Company utilized 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~~as of the grant date. The remaining 2 unit awards granted in fiscal 2020 had other performance ~~targets~~targets. Per the Company's award vesting and settlement provisions, approximately half of the awards utilizing a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return in comparison to the compensation peer group made up of participants approved by the Company's Compensation Committee of the Board of Directors for fiscal year 2020, 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 used in ~~this~~the model to estimate fair value at the measurement date and resulting values for 39these performance unit awards ~~granted in fiscal 2019~~ are as ~~follows:~~follows.



	Compensation Peer Group		S&P 1500 IT Index
Volatility	16.7	%	16.7	%
Risk free interest rate	1.68	%	1.68	%
Dividend yield	1.1	%	1.1	%

Stock Beta	0.713		0.538



~~Volatility~~	~~15.30~~	%
~~Risk free interest rate~~	~~2.89~~	%
~~Dividend yield~~	~~0.90~~	%
~~Stock Beta~~	~~0.669~~

The remaining 26 unit awards granted in fiscal 2019 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, ~~2018,~~2019, there was ~~$17,684~~$21,457 of compensation expense that has yet to be recognized related to non-vested restricted stock unit awards, which will be recognized over a weighted average period of ~~1.44~~1.43 years.

NOTE 7.9.�� EARNINGS PER SHARE

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



	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Net Income	$	72,098	$	68,089	$	161,468	$	151,640
Common share information:
Weighted average shares outstanding for basic earnings per share	76,879		77,216		76,926		77,202
Dilutive effect of stock options and restricted stock	56		193		75		272
Weighted average shares outstanding for diluted earnings per share	76,935		77,409		77,001		77,474
Basic earnings per share	$	0.94	$	0.88	$	2.10	$	1.96
Diluted earnings per share	$	0.94	$	0.88	$	2.10	$	1.96

(In Thousands, Except Per Share Data) Three Months Ended December 31, Six Months Ended December 31,
2018 2017 2018 2017
Net Income $ 68,089
$ 161,243
$ 151,640
$ 228,113
Common share information:
Weighted average shares outstanding for basic earnings per share 77,216
77,218
77,202
77,250
Dilutive effect of stock options and restricted stock 193
347
272
356
Weighted average shares outstanding for diluted earnings per share 77,409
77,565
77,474
77,606
Basic earnings per share $ 0.88
$ 2.09
$ 1.96
$ 2.95
Diluted earnings per share $ 0.88
$ 2.08
$ 1.96
$ 2.94

Per share information is based on the weighted average number of common shares outstanding for the three and six months ended December 31, ~~2018~~2019 and ~~2017.~~2018. Stock options, restricted stock, and restricted stock units have been included in the calculation of earnings per share to the extent they are dilutive. There were 50 anti-dilutive stock options or restricted stock shares or units excluded for the quarter ended December 31, 2019 and 5 anti-dilutive stock options or restricted stock shares or units excluded for the quarter ended December 31, ~~2018 and no~~2018. There were 37 anti-dilutive stock options or restricted stock shares ~~excluded for the quarter ended December 31, 2017. There were 1 anti-dilutive stock options~~ or ~~restricted stock shares~~units excluded for the six months ended December 31, ~~2018~~2019 compared to ~~none~~1 for the six months ended December 31, ~~2017.~~2018.

NOTE 8.10. BUSINESS ACQUISITIONS

~~BOLTS Technologies, Inc~~Geezeo

On ~~October 5, 2018,~~July 1, 2019, the Company acquired all of the equity interest of ~~BOLTS Technologies, Inc.~~Geezeo for ~~$15,046~~$37,776 paid in cash. The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was funded by cash generated from operations. ~~BOLTS Technologies~~Geezeo is ~~the developer~~a Boston-based provider of ~~boltsOPEN, a next-generation~~retail and business digital ~~account opening solution.~~financial management solutions.

Management has completed a preliminary purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their ~~preliminary~~ fair values as of ~~October 5, 2018~~July 1, 2019 are set forth below:


Current assets	$	1,384		$	8,927
Long-term assets				397
Identifiable intangible assets	2,274			19,114
Non-current deferred income tax liability				(2,593		)
Total other liabilities assumed	(1,418		)	(7,457		)
Total identifiable net assets	2,240			18,388
Goodwill	12,806			19,388
Net assets acquired	$	15,046		$	37,776

Measurement period adjustments were made during the second quarter of fiscal 2020 relating to accrued expenses and working capital, which resulted in adjustments to the goodwill amount recorded. 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 ~~$12,806~~$19,388 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 Geezeo, together with the value of Geezeo's assembled workforce. The goodwill from this acquisition has been allocated to our Complementary segment and is not deductible for income tax purposes.

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

Current assets were inclusive of cash acquired of $7,400. The fair value of current assets acquired included accounts receivable of $1,373, NaN of which were expected to be uncollectible.

Costs incurred related to the acquisition of Geezeo in fiscal 2020 totaled $30 for professional services, travel, and other fees, and were expensed as incurred and reported within cost of revenue and selling, general, and administrative expense.

The Company's condensed consolidated statements of income for the three months ended December 31, 2019 included revenue of $2,040 and after-tax net income of $140 resulting from Geezeo's operations. The Company's condensed consolidated statements of income for the six months ended December 31, 2019 included revenue of $4,432 and after-tax net income of $178 resulting from Geezeo's operations.

The accompanying condensed consolidated statements of income for the three and six months ended December 31, 2019 and 2018 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.

BOLTS Technologies, Inc

On October 5, 2018, the Company acquired all of the equity interest of BOLTS Technologies, Inc. ("BOLTS") for $15,046 paid in cash. The acquisition was funded by cash generated from operations. BOLTS is the developer of boltsOPEN, a next-generation digital account opening solution.

Management has completed a purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of October 5, 2018 are set forth below:



Current assets	$	1,384
Identifiable intangible assets	2,274
Total other liabilities assumed	(1,505		)
Total identifiable net assets	2,153
Goodwill	12,893
Net assets acquired	$	15,046

The amounts shown above include measurement period adjustments made during fiscal 2019 related to income taxes.

The goodwill of $12,893 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 BOLTS, together with the value of BOLTS' assembled workforce. The goodwill from this acquisition has been allocated to our Complementary segment and is not ~~expected to be~~ deductible for income tax purposes.

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 $1,365. The fair value of current assets acquired included accounts receivable of $14, ~~none~~NaN of which were expected to be uncollectible.

Costs incurred related to the acquisition of BOLTS in fiscal 2019 totaled $23 for legal, valuation, and other fees, and were expensed as incurred within selling, general, and administrative expense.

The Company's condensed consolidated statements of income for the ~~second quarter~~three months ended December 31, 2019 included revenue of ~~fiscal~~$43 and after-tax net loss of $188 resulting from BOLTS' operations. The Company's condensed consolidated statements of income for the three months ended December 31, 2018 included revenue of $35 and after-tax net loss of $246 resulting from BOLTS' operations.

The Company's condensed consolidated statements of income for the six months ended December 31, 2019 included revenue of $87 and after-tax net loss of $361 resulting from BOLTS' operations. The Company's condensed consolidated statements of income for the six months ended December 31, 2018 included revenue of $35 and after-tax net loss of $246 resulting from BOLTS' operations.

The accompanying condensed consolidated statements of income for the three and six months ended December 31, ~~2018~~2019 and ~~2017~~2018 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.

Agiletics, Inc.

On October 1, 2018, the Company acquired all of the equity interest of Agiletics, Inc. ("Agiletics") for $7,649 paid in cash. The acquisition was funded by cash generated from operations. Agiletics is a provider of escrow, investment, and liquidity management solutions for banks serving commercial customers.

Management has completed a ~~preliminary~~ purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their ~~preliminary~~ fair values as of October 1, 2018 are set forth below:



Current assets	$	2,170
Identifiable intangible assets	3,090
Non-current deferred income tax liability	(872		)
Total other liabilities assumed	(738		)
Total identifiable net assets	3,650
Goodwill	3,999
Net assets acquired	$	7,649

Current assets $ 2,170
Long-term assets —
Identifiable intangible assets 3,090
Non-current deferred income tax liability (787 )
Total other liabilities assumed (738 )
Total identifiable net assets 3,735
Goodwill 3,914
Net assets acquired $ 7,649

The amounts shown above ~~may change as management finalizes its assessment of the fair value of acquired assets and liabilities and continues~~include measurement period adjustments made during fiscal 2019 related to ~~evaluate the~~ income ~~tax implications of this business combination.~~taxes.

The goodwill of ~~$3,914~~$3,999 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 Agiletics. The goodwill from this acquisition has been allocated to our Core segment and is not ~~expected to be~~ deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $2,198, computer software of $701, and other intangible assets of $191. 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 $1,349. The fair value of current assets acquired included accounts receivable of ~~$299, none~~$302, NaN of which were expected to be uncollectible.

Costs incurred related to the acquisition of Agiletics in fiscal 2019 totaled ~~$25~~$36 for legal, valuation, and other fees, and were expensed as incurred within selling, general, and administrative expense.

The Company's condensed consolidated statements of income for the ~~second quarter~~three months ended December 31, 2019 included revenue of ~~fiscal 2019~~$347 and after-tax net income of $72resulting from Agiletics' operations. The Company's condensed consolidated statements of income for the three months ended December 31, 2018 included revenue of $193 and after-tax net loss of $111resulting from Agiletics' operations.

The Company's condensed consolidated statements of income for the six months ended December 31, 2019 included revenue of $897 and after-tax net income of $237 resulting from Agiletics' operations. The Company's condensed consolidated statements of income for the six months ended December 31, 2018 included revenue of $193 and after-tax net loss of $111 resulting from Agiletics' operations.

~~Ensenta Corporation~~

On December 21, 2017, the Company acquired all of the equity interest of EST Holdings, Inc. and its wholly-owned subsidiary, EST Interco, Inc., for $134,381 paid in cash. EST Holdings, Inc. and EST Interco, Inc. jointly own all of the outstanding equity of Ensenta Corporation ("Ensenta"), a California-based provider of real-time, cloud-based solutions for mobile and online payments and deposits. This acquisition was partially funded by a draw on the Company's revolving credit facility, with the remaining amount funded by existing operating cash. The addition of Ensenta Corporation to the JHA Payment Solutions Group expands the Company’s ability to conduct real-time transactions with third-party platforms, extending its presence in the credit union market through shared branching technology.

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

Current assets $ 14,125
Long-term assets 586
Identifiable intangible assets 58,806
Non-current deferred income tax liability (21,859 )
Total other liabilities assumed (8,496 )
Total identifiable net assets 43,162
Goodwill 91,219
Net assets acquired $ 134,381

The amounts shown above include measurement period adjustments made during the third and fourth quarters of fiscal 2018, and the second quarter of fiscal 2019, related to income tax adjustments and a fair value assessment.

The goodwill of $91,219 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of Ensenta, together with the value of Ensenta's assembled workforce. The goodwill from this acquisition has been allocated to our Payments segment and is not expected to be deductible for income tax purposes.

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

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

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

~~The Company's consolidated statements of income for the second quarter of fiscal 2019 included revenue of $9,059 and after-tax net income of $2,919~~resulting from Ensenta's operations. For the second quarter of fiscal 2018, Ensenta contributed revenue of $928 and after-tax net income of $6,366. The after-tax net income for the second quarter of fiscal 2018 included a large tax benefit recorded as a result of the TCJA. Excluding that benefit, the Company's after tax net income resulting from Ensenta's operations totaled $26.

For the six months ended December 31, 2018, the Company's consolidated statements of income included revenue of $17,231 and after-tax net income of $4,963. The results for the six months ended December 31, 2017 are the same as given above for the second quarter of fiscal 2018.

The accompanying consolidated statements of income for the three and six months ended December 31, 2018 and 2017 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The following unaudited pro forma consolidated financial information for the period ended December 31, 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.

Three Months Ended Six Months Ended
December 31, December 31,
2018 2017 2018 2017
Actual Proforma Actual Proforma
Revenue $ 386,275
$ 363,563
$ 778,818
$ 731,611
Net Income 68,089
167,714
151,640
229,623
Basic Earnings Per Share $ 0.88
$ 2.17
$ 1.96
$ 2.97
Diluted Earnings Per Share $ 0.88
$ 2.16
$ 1.96
$ 2.96

~~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 JHA's core processing and ancillary solutions, and also enhances cross-sell opportunities.

Management has completed a 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 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 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 2019 included revenue of $741 and an after-tax net loss of $86 resulting from Vanguard Software Group's operations. For the second quarter of fiscal 2018, Vanguard Software Group contributed revenue of $557 and an after-tax net loss of $178 to the Company's consolidated statements of income.

The Company's consolidated statements of income for the first six months of fiscal 2019 included revenue of $1,266 and an after-tax net loss of $254 resulting from Vanguard Software Group's operations. For the first six months of fiscal 2018, Vanguard Software Group contributed revenue of $656 and an after-tax net loss of $301 to the Company's consolidated statements of income.

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

NOTE 9.11. 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.

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: ATM, debit, and credit card transaction processing services; online and mobile bill pay solutions; ACH origination and remote deposit capture processing; and risk management products and services. The Complementary segment provides additional software 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.

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 during the first quarter of fiscal 2020 to reclassify revenue recognized in fiscal ~~2018~~2019 from the ~~Core~~Complementary to the ~~Corporate~~Core segment to be consistent with the current year's allocation of revenue by segment. The amount reclassified totaled $1,603 and ~~Other Segment. For~~is reflected in the ~~three and~~segment table below for the six months ended December 31, ~~2017, the amount reclassified totaled $744 and $1,482, respectively.~~2018 .



	Three Months Ended
	December 31, 2019
	Core		Payments		Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	130,782	$	14,829	$	94,478	$	15,115		$	255,204
Processing	7,587		137,215		19,006		107			163,915
Total Revenue	138,369		152,044		113,484		15,222			419,119

Cost of Revenue	61,243		79,135		48,019		60,870			249,267
Research and Development										27,187
Selling, General, and Administrative										48,961
Total Expenses										325,415

SEGMENT INCOME	$	77,126	$	72,909	$	65,465	$	(45,648	)

OPERATING INCOME										93,704

INTEREST INCOME (EXPENSE)										190

INCOME BEFORE INCOME TAXES										$	93,894



	Three Months Ended
	December 31, 2018
	Core		Payments			Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	122,721	$	13,108		$	86,386	$	15,107		$	237,322
Processing	7,008		124,911			16,864		170			148,953
Total Revenue	129,729		138,019			103,250		15,277			386,275
					��
Cost of Revenue	60,288		65,100			44,167		57,729			227,284
Research and Development											23,990
Selling, General, and Administrative											46,797
Total Expenses											298,071

SEGMENT INCOME	$	69,441	$	72,919		$	59,083	$	(42,452	)

OPERATING INCOME											88,204

INTEREST INCOME (EXPENSE)											104

INCOME BEFORE INCOME TAXES											$	88,308


	Three Months Ending											Six Months Ended
	December 31, 2018											December 31, 2019
	Core		Payments		Complementary		Corporate & Other			Total		Core		Payments		Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	122,721	$	13,108	$	86,386	$	15,107		$	237,322	$	278,873	$	32,137	$	192,929	$	30,073		$	534,012
Processing	7,008		124,911		16,864		170			148,953		15,392		269,654		37,750		316			323,112
Total Revenue	129,729		138,019		103,250		15,277			386,275		294,265		301,791		230,679		30,389			857,124

Cost of Revenue	60,288		65,100		44,167		57,729			227,284		124,549		155,759		94,693		120,057			495,058
Research and Development										23,990											51,778
Selling, General, and Administrative										46,797											98,396
Total Expenses										298,071											645,232

SEGMENT INCOME	$	69,441	$	72,919	$	59,083	$	(42,452	)			$	169,716	$	146,032	$	135,986	$	(89,668	)

OPERATING INCOME										88,204											211,892

INTEREST INCOME (EXPENSE)										104											541

INCOME BEFORE INCOME TAXES										$	88,308										$	212,433



	Six Months Ended
	December 31, 2018
	Core		Payments		Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	254,712	$	25,878	$	174,846	$	28,454		$	483,890
Processing	14,172		246,338		34,109		309			294,928
Total Revenue	268,884		272,216		208,955		28,763			778,818

Cost of Revenue	119,504		130,807		85,998		111,087			447,396
Research and Development										48,016
Selling, General, and Administrative										91,979
Total Expenses										587,391

SEGMENT INCOME	$	149,380	$	141,409	$	122,957	$	(82,324	)

OPERATING INCOME										191,427

INTEREST INCOME (EXPENSE)										247

INCOME BEFORE INCOME TAXES										$	191,674

Three Months Ending
December 31, 2017
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 116,614
$ 9,212
$ 81,329
$ 15,863
$ 223,018
Processing 6,682
112,168
15,327
14
134,191
Total Revenue 123,296
121,380
96,656
15,877
357,209

Cost of Revenue 55,364
59,304
40,209
52,223
207,100
Research and Development 22,414
Selling, General, and Administrative 43,094
Gain on Disposal of Businesses (189 )
Total Expenses 272,419

SEGMENT INCOME $ 67,932
$ 62,076
$ 56,447
$ (36,346 )

OPERATING INCOME 84,790

INTEREST INCOME (EXPENSE) (104 )

INCOME BEFORE INCOME TAXES $ 84,686

Six Months Ended
December 31, 2018
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 253,109
$ 25,878
$ 176,449
$ 28,454
$ 483,890
Processing 14,172
246,338
34,109
309
294,928
Total Revenue 267,281
272,216
210,558
28,763
778,818

Cost of Revenue 119,504
130,807
85,998
111,087
447,396
Research and Development 48,016
Selling, General, and Administrative 91,979
Total Expenses 587,391

SEGMENT INCOME $ 147,777
$ 141,409
$ 124,560
$ (82,324 )

OPERATING INCOME 191,427

INTEREST INCOME (EXPENSE) 247

INCOME BEFORE INCOME TAXES $ 191,674

Six Months Ended
December 31, 2017
Core Payments Complementary Corporate & Other Total
REVENUE
Services and Support $ 237,091
$ 19,176
$ 161,626
$ 31,877
$ 449,770
Processing 13,550
225,098
30,057
18
268,723
Total Revenue 250,641
244,274
191,683
31,895
718,493

Cost of Revenue 110,949
116,627
80,201
103,239
411,016
Research and Development 43,343
Selling, General, and Administrative 84,181
Gain on Disposal of Businesses (1,894 )
Total Expenses 536,646

SEGMENT INCOME $ 139,692
$ 127,647
$ 111,482
$ (71,344 )

OPERATING INCOME 181,847

INTEREST INCOME (EXPENSE) (146 )

INCOME BEFORE INCOME TAXES $ 181,701

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.

NOTE ~~10:~~12: SUBSEQUENT EVENTS

Dividend

~~None.~~On February 7, 2020, the Company's Board of Directors declared a cash dividend of $0.43 per share on its common stock, payable on March 19, 2020 to shareholders of record on March 2, 2020.

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, ~~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-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~~on-premise installation and outsourced ~~delivery.~~delivery in our private cloud.

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

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

RESULTS OF OPERATIONS

The adoption of ASC 606 has impacted the timing of our revenue recognition, as discussed in detail in Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the condensed consolidated financial statements within this Quarterly Report on Form 10-Q. The prior year numbers presented below have been re-cast as part of our full retrospective adoption of the new standard.

In the second quarter of fiscal ~~2019,~~2020, total revenue increased 8%9%, or ~~$29,066,~~$32,844, compared to the same quarter in the prior year. Excluding ~~a decrease~~an increase of ~~$3,111 in~~$1,105 for deconversion fees ~~quarter-over-quarter,~~quarter over quarter, and excluding revenue of ~~$228~~$2,040 from ~~companies~~the company acquired in fiscal ~~2019,~~2020, adjusted total revenue increased 9%8% for the quarter compared to the prior-year quarter.

Operating expenses increased 9% compared to the second quarter of fiscal 2018. Headcount increased 4% at December 31, 2018 compared to December 31, 2017, leading to increased salaries and benefits. 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 expense, partially due to assets acquired in the Ensenta acquisition; and higher direct2019. Direct cost of ~~product, including~~revenue increased, primarily due to costs related to our new card payment processing platform and faster payments ~~incentives.~~initiatives. Higher personnel costs were primarily due to a headcount increase of 3% at December 31, 2019 compared to December 31, 2018, contributing to increased salaries and benefits. Other reasons for the increase included higher depreciation and amortization expense primarily related to internally-developed software.

Operating income increased 4%6% for the second quarter ~~but excluding~~of fiscal 2020 compared to the second quarter of fiscal 2019. Excluding deconversion fees and income from the fiscal ~~2019 acquisitions, and~~2020 acquisition, the ~~increased bonus expense,~~adjusted operating income ~~increased 12%~~increase quarter over quarter was the same at 6%.

The provision for income taxes increased ~~significantly~~8% compared to the ~~prior year~~prior-year second quarter, primarily due ~~primarily~~ to the ~~impact~~increase in operating income as stated above, and an increased effective tax rate caused by differences in the tax impacts of ~~the enactment of the TCJA on our income taxes last year.~~stock-based compensation quarter over quarter. The effective tax rate for the second quarter iswas 23.2% compared to 22.9%. in the same quarter a year ago.

The above changes led to ~~a decrease~~an increase in net income of ~~58%~~6% for the second quarter of fiscal ~~2019~~2020 compared to the second quarter inof fiscal ~~2018, again primarily due to the impact of the TCJA in the prior year.~~2019.

In the six months ended December 31, ~~2018,~~2019, total revenue increased 8%10%, or ~~$60,325,~~$78,306, over the six months ended December 31, ~~2017.~~2018. Deconversion fees in the fiscal year-to-date period ~~decreased $5,993~~increased $8,108 compared to the same six months in the prior fiscal year. Revenue from the fiscal ~~2019 acquisitions~~2020 acquisition totaled ~~$228.~~$4,432. Excluding deconversion revenue and revenue from the fiscal 2020 acquisition from each period, ~~and revenue from fiscal 2019 acquisitions,~~adjusted total revenue increased 9%. period over period.

Operating expenses for the six months ended December 31, ~~2018~~2019 increased 9%10% compared to the equivalent period in the prior year, primarily due to ~~increased headcount, the Ensenta acquisition,~~ costs related to our new card payment processing platform, ~~bonuses provided by the Company in response to the lower tax rate resulting from the TCJA,~~increased headcount, and increased depreciation and amortization expense.

Operating income increased 5%11% for the fiscal year-to-date period ~~but excluding~~compared to the same period last year. Excluding deconversion fees and income from the fiscal ~~2019 acquisitions, and the increased bonus expense,~~2020 acquisition, adjusted operating income increased ~~14%.~~8% period over period.

Provision for income taxes increased 27% compared to the prior year-to-date period, primarily due ~~primarily~~ to to an increased effective tax rate caused by differences in the ~~enactment~~tax impacts of stock-based compensation, as well as the ~~TCJA.~~increase in operating income as stated above, period over period. The effective tax rate for the six months ended December 31, ~~2018 is~~2019 was 24.0% compared to 20.9%. in the prior-year period.

The result of the above changes led to ~~a decrease~~an increase in net income of ~~34%~~6% for the six months ~~of fiscal~~ended December 31, 2019 compared to the same period in fiscal ~~2018.~~2019.

We move into the third quarter of fiscal ~~2019~~2020 following strong performance in the second quarter. Significant portions of our business continue to come from recurring revenues and our healthy sales pipeline is also encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and in these 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 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.

A detailed discussion of the major components of the results of operations for the three and six months ending December 31, ~~2018~~2019 follows. Discussions compare the current fiscal year's three and six months ending December 31, ~~2018~~2019 to the prior year's three and six months ending December 31, ~~2017.~~2018.

REVENUE


Services and Support	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Services and Support	$	237,322		$	223,018		6	%	$	483,890		$	449,770		8	%	$	255,204		$	237,322		8	%	$	534,012		$	483,890		10	%
Percentage of total revenue	61		%	62		%			62		%	63		%			61		%	61		%			62		%	62		%

~~There was 6% growth in services~~Services and ~~support~~Support revenue increased 8% in the second quarter of fiscal ~~2019~~2020 compared to the same quarter last year. Excluding deconversion fees from each period, which ~~decreased $3,111~~increased $1,105 compared to the ~~prior year~~prior-year quarter, and ~~$205~~$2,040 of revenue from ~~businesses~~Geezeo, acquired in fiscal ~~2019,~~2020, services and support revenue grew ~~8%.~~6% quarter over quarter. The adjusted increase was primarily ~~due to increases in our 'outsourcing and cloud' revenue stream, partially~~ driven by ~~added revenue from Ensenta, and supplemented by organic~~the growth in data processing and hosting fees, as well as increased implementation fees primarily related to our private cloud offerings and ~~data processing. 'In-house support'~~consulting fee revenue, ~~also contributed to the increase.~~quarter over quarter.

In the six months ended December 31, ~~2018,~~2019, services and support revenue grew 8%10% over the ~~equivalent~~ six months ~~in the prior fiscal year.~~ended December 31, 2018. Excluding deconversion fees from each period presented, which ~~decreased $5,993~~increased $8,108 compared to the prior year-to-date period, and $4,432 of revenue from ~~businesses acquired~~the acquisition in fiscal ~~2019,~~2020, services and support revenue grew ~~9%.~~8% period over period. The adjusted increase was driven primarily by growth in data processing and hosting fees, as well as increased software usage, hardware revenue, implementation fees primarily related to our ~~'outsourcing~~private cloud offerings, and ~~cloud'~~consulting fee revenue ~~stream, partially due to Ensenta revenue. Our 'in-house support' revenue stream also contributed~~when compared to the ~~increase, primarily due to higher software usage revenue, partially resulting from the addition of new customers.~~prior year-to-date period.


Processing	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Processing	$	148,953		$	134,191		11	%	$	294,928		$	268,723		10	%	$	163,915		$	148,953		10	%	$	323,112		$	294,928		10	%
Percentage of total revenue	39		%	38		%			38		%	37		%			39		%	39		%			38		%	38		%

Processing revenue increased ~~11%~~10% in the second quarter of fiscal ~~2019~~2020 compared to the same quarter last fiscal year, primarily due to increased transaction volumes within card processing complemented by increases in each of the ~~three components of processing revenue and added revenue from Ensenta.~~other two components.

Each component also experienced volume growth in the fiscal year-to-date period, leading to an increase in processing revenue of 10% for the six months ended December 31, ~~2018~~2019 as compared to the six months ended December 31, ~~2017.~~2018.

OPERATING EXPENSES


Cost of Revenue	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Cost of Revenue	$	227,284		$	207,100		10	%	$	447,396		$	411,016		9	%	$	249,267		$	227,284		10	%	$	495,058		$	447,396		11	%
Percentage of total revenue	59		%	58		%			57		%	57		%			59		%	59		%			58		%	57		%

Cost of revenue for the second quarter of fiscal ~~2019~~2020 increased 10% over the prior fiscal year ~~and increased 1%~~second quarter, but remained consistent as a percentage of total revenue. Excluding costs related to deconversions and the fiscal ~~2019 acquisitions, and bonuses provided by~~2020 acquisition, the ~~Company in response to the lower tax rate resulting from the TCJA,~~ cost of revenue ~~increased~~increase was 9%~~. A 4% expansion in headcount at December 31, 2018 compared~~ quarter over quarter. The adjusted increase was due to ~~December 31, 2017 contributed to the increase, driving increased~~higher costs associated with our card processing platform, higher salaries and ~~benefits. Other factors contributing~~benefits due to ~~the increase include higher direct costs of product, including spending~~increased headcount, and increased depreciation and amortization expense primarily related to ~~the ongoing project to expand our credit and debit card platform, and increased amortization expense, partially due the amortization of assets acquired from Ensenta.~~developed software.

For the fiscal year-to-date period, cost of revenue increased ~~9% due to~~11% over the same ~~factors discussed above, but remained~~prior-year period and increased 1% as a ~~consistent~~ percentage of revenue. Excluding costs related to deconversions and the fiscal ~~2019 acquisitions, and bonuses provided by the Company in response to the lower tax rate resulting from the TCJA,~~2020 acquisition, cost of revenue increased ~~8%.~~10% period over period. The adjusted increase was due to the factors discussed above for the quarter, as well as increased cost of hardware related to higher revenue.


Research and Development	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Research and Development	$	23,990		$	22,414		7	%	$	48,016		$	43,343		11	%	$	27,187		$	23,990		13	%	$	51,778		$	48,016		8	%
Percentage of total revenue	6		%	6		%			6		%	6		%			6		%	6		%			6		%	6		%

Research and development expense increased 7%13% for the second quarter of fiscal ~~2019, but excluding~~2020 over the ~~bonuses provided by the Company in response~~prior fiscal year second quarter. Excluding costs related to the ~~lower tax rate resulting from~~fiscal 2020 acquisition, the ~~TCJA and costs attributable to companies acquired in fiscal 2019,~~ research and development ~~expense increased 4%. This~~increase was 11% quarter over quarter. The adjusted increase was primarily due to increased ~~salary and~~ personnel costs ~~resulting from~~due to a 4%headcount increase ~~in headcount~~ at December 31, ~~2018~~2019 compared to a year ~~ago. However, these expenses~~ago and pay raises occurring within the trailing twelve-month period. The quarter remained consistent with the prior fiscal year quarter as a percentage of total revenue.

For the fiscal year-to-date period, research and development expense increased 8% over the prior fiscal year-to-date period. Excluding costs related to the fiscal 2020 acquisition, the research and development increase was 6% period over period. The adjusted increase for the fiscal year-to-date period iswas also primarily due to increased ~~salary and~~ personnel costs ~~and the acquisition of Ensenta. Excluding the bonuses provided by the Company in response~~due to the ~~lower tax rate resulting from~~headcount increase discussed above for the ~~TCJA~~quarter and ~~costs attributable to companies acquired in fiscal~~pay raises occurring within the trailing twelve-month period. The six months ended December 31, 2019 ~~research and development expense increased 8%.~~

~~Both periods~~ remained consistent with the ~~prior~~same period a year ago as a percentage of total revenue.

Selling, General, and Administrative Three Months Ended December 31,
%
Change
Six Months Ended December 31, %
Change
2018 2017 2018 2017
Selling, General, and Administrative $ 46,797
$ 43,094
9 % $ 91,979
$ 84,181
9 %
Percentage of total revenue 12 % 12 % 12 % 12 %

The 9% increase in selling, general and administrative expense in the current quarter was mainly due to increased commissions, salaries, and benefits. Excluding bonuses provided by the Company in response to the lower tax rate resulting from the TCJA, the quarter expense increased 8%.

The fiscal year-to-date increase was also driven by those factors, and excluding bonuses provided by the Company in response to the lower tax rate resulting from the TCJA, the year-to-date expense increased 9%.



Selling, General, and Administrative	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2019			2018					2019			2018
Selling, General, and Administrative	$	48,961		$	46,797		5	%	$	98,396		$	91,979		7	%
Percentage of total revenue	12		%	12		%			11		%	12		%

Selling, general, and administrative expense ~~remained a consistent percentage of revenue in both the quarter and fiscal year-to-date periods.~~

~~Gain on Disposal of a Business~~

~~In the six months ended December 31, 2018, the Company did not dispose of any businesses. In the first six months fiscal 2018, we recorded a gain totaling $1,894, including a gain of $189~~increased 5% in the second quarter of fiscal 2020 over the same quarter in the prior fiscal year. Excluding costs related to ~~the sale of our ATM Manager product line,~~deconversions and the ~~sale~~fiscal 2020 acquisition, the selling, general, and administrative expense increase was 3% quarter over quarter. The adjusted increase was mainly due to increased salaries and benefits primarily due to a 2% increase in headcount over the prior-year quarter and pay raises occurring within the trailing twelve-month period. Selling, general, and administrative expense remained consistent as a percentage of ~~our jhaDirect product line in~~total revenue this quarter versus the ~~first~~prior-year quarter.

For the fiscal year-to-date period, selling, general, and administrative expense increased 7% over the prior fiscal year-to-date period. Excluding costs related to deconversions and the fiscal 2020 acquisition, the selling, general and administrative expense increase was 5% period over period. The adjusted increase was primarily due to the factors listed above for the quarter. Selling, general, and administrative expense for the year-to-date period decreased 1% as a percentage of total revenue versus the prior fiscal year-to-date period due to ongoing cost control efforts.


INTEREST INCOME AND EXPENSE	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
INTEREST INCOME (EXPENSE)																	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Interest Income	$	252		$	146		73	%	$	542		$	293		85	%	$	346		$	252		37	%	$	853		$	542		57	%
Interest Expense	$	(148	)	$	(250	)	(41	)%	$	(295	)	$	(439	)	(33	)%	$	(156	)	$	(148	)	5	%	$	(312	)	$	(295	)	6	%

Interest income fluctuated due to changes in invested balances and yields on invested ~~balances.~~balances during the second quarter and fiscal year-to-date period of fiscal 2020 and 2019. Interest expense ~~decreased in~~remained substantially consistent when compared to the ~~current~~prior-year period ~~since there were~~due to no outstanding borrowings on our revolving credit facility, ~~during~~which resulted in payment of only commitment fees under the ~~second quarter or first six months of fiscal 2019.~~revolving credit facility.


PROVISION FOR INCOME TAXES	Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change		Three Months Ended December 31,						% Change		Six Months Ended December 31,						% Change
	2018			2017					2018			2017					2019			2018					2019			2018
Provision for Income Taxes	$	20,219		$	(76,557	)	(126	)%	$	40,034		$	(46,412	)	(186	)%	$	21,796		$	20,219		8	%	$	50,965		$	40,034		27	%
Effective Rate	22.9		%	(90.4		)%			20.9		%	(25.5		)%			23.2		%	22.9		%			24.0		%	20.9		%

The increase in ~~the~~ effective tax rate in the three and six months ended December 31, 2019 was primarily due to the ~~result of the TCJA enacted~~change in the ~~prior fiscal year on December 22, 2017~~impact of stock-based compensation quarter over quarter and ~~the related re-measurement of net deferred tax liabilities.~~period over period. The ~~increase is partially offset by the reduced U.S. federal corporate tax rate of 21% effective for the current year, and increased excess~~ tax benefits recognized from ~~share-based payments~~stock-based compensation in the prior-year periods significantly exceeded the tax benefits recognized ~~during fiscal 2019.~~in the current-year periods.

NET INCOME

Net income ~~decreased 58%~~increased 6% to ~~$68,089,~~$72,098, or ~~$0.88~~$0.94 per diluted share, for the second quarter of fiscal ~~2019,~~2020 compared to ~~$161,243,~~$68,089, or ~~$2.08~~$0.88 per diluted share, in the same period of fiscal ~~2018,~~2019, resulting in a ~~58% decrease~~7% increase in diluted earnings per ~~share, mainly due~~share. The increase in net income is primarily attributable to the ~~TCJA impacts on~~growth in our lines of revenue and higher deconversion fees, partially offset by the increase in cost of revenue and income ~~tax expense in the prior year.~~taxes as discussed above.

Net income ~~decreased 34%~~increased 6% to $161,468, or $2.10 per diluted share, for the six months ended December 31, 2019, compared to $151,640, or $1.96 per diluted share, for the six months ended December 31, 2018, ~~compared to $228,113, or $2.94 per diluted share, in the six months ended December 31, 2017,~~ resulting in a ~~33% decrease~~7% increase in diluted earnings per ~~share, mainly due~~share. The increase in net income was primarily attributable to the ~~TCJA impacts~~growth in our lines of revenue and higher deconversion fees, partially offset by the ~~prior year.~~increase in cost of revenue and income taxes as discussed above.

REPORTABLE SEGMENT DISCUSSION

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

The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate and Other. The Core segment provides core information processing platforms to banks and credit unions, which consist of integrated applications required to process deposit, loan, and general ledger transactions, and maintain centralized customer/member information. The Payments segment provides secure payment processing tools and services, including ATM, debit, and credit card processing services; online and mobile bill pay solutions; ACH origination and remote deposit capture processing; and risk management products and services. The Complementary segment provides additional software, 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.

																									Core
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
	2018		2017				2018		2017				2019		2018				2019		2018
Revenue	$	129,729	$	123,296	5	%	$	267,281	$	250,641	7	%	$	138,369	$	129,729	7	%	$	294,265	$	268,884	9	%
Cost of Revenue	$	60,288	$	55,364	9	%	$	119,504	$	110,949	8	%	$	61,243	$	60,288	2	%	$	124,549	$	119,504	4	%

Revenue in the Core segment increased ~~5%, while~~7% and cost of revenue increased ~~9%,~~2% for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. Excluding deconversion fees, which totaled

$3,629 for the second quarter of fiscal 2020 and $2,744 for the second quarter of fiscal 2019, ~~compared to $4,171 for the second quarter of fiscal 2018, and excluding $190 of revenue from fiscal 2019 acquisitions,~~ revenue in the Core segment increased 6%. quarter over quarter. The adjusted increased revenue was primarily driven by the growth in data processing and hosting fees, as well as increased ~~outsourcing~~implementation fees primarily related to our private cloud offerings and ~~cloud~~consulting fee revenue, ~~and increased in-house~~partially offset by decreased on-premise support ~~revenue,~~as customers continue to migrate to the ~~latter of which resulted mainly from the addition of new software usage customers in the trailing twelve months.~~outsourced delivery model. Cost of revenue ~~increased 1%~~decreased 2% quarter over quarter as a percentage of revenue.

For the six months ended December 31, ~~2018,~~2019, revenue in the Core segment increased ~~7%.~~9% compared to the prior year-to-date period. Excluding deconversion fees, which totaled ~~$6,729~~$10,762 and ~~$11,252,~~$6,729 for the ~~first six months~~year-to-date periods of fiscal ~~2019~~2020 and ~~2018, respectively, and excluding revenue of $190 from~~ fiscal 2019, ~~acquisitions,~~respectively, revenue in the Core segment increased ~~9%, due to increased outsourcing and cloud and in-house support revenue. Cost of~~8% period over period. The adjusted revenue ~~increased 1% as a percentage of revenue for the six month period ended December 31, 2018 as compared to the equivalent period of the prior fiscal year.~~

Payments
Three Months Ended December 31, % Change Six Months Ended December 31, % Change
2018 2017 2018 2017
Revenue $ 138,019
$ 121,380
14 % $ 272,216
$ 244,274
11 %
Cost of Revenue $ 65,100
$ 59,304
10 % $ 130,807
$ 116,627
12 %

Revenue in the Payments segment increased 14% for the second quarter of fiscal 2019 compared to the equivalent quarter last fiscal year. Excluding deconversion revenue of $2,274 from the second quarter of fiscal 2019 and $1,698 from the second quarter of fiscal 2018, revenue increased 13% in the Payments segment. The improvementincrease was primarily ~~due to increased remittance~~driven by the growth in data processing, customer call support, and card revenue within the processing line, and increased outsourcing and cloud revenue in the services and support line. The increases in remittance revenue and outsourcing and cloud revenue are partially due to revenue from Ensenta. Cost of revenue increased 10%, partially due to increased headcount and amortization expenses related to Ensenta,hosting fees, as well as increased ~~spending~~consulting fee revenue and implementation fees primarily related to ~~the ongoing project to expand~~ our ~~credit and debit card processing platform.~~private cloud offerings. Cost of revenue decreased 2% as a percentage of ~~revenue.~~revenue for the year-to-date period compared to the prior year-to-date period due to ongoing cost control efforts.



Payments
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
	2019		2018				2019		2018
Revenue	$	152,044	$	138,019	10	%	$	301,791	$	272,216	11	%
Cost of Revenue	$	79,135	$	65,100	22	%	$	155,759	$	130,807	19	%

Revenue in the Payments segment increased ~~11%~~10% for the ~~six months ended December 31, 2018~~second quarter of fiscal 2020 compared to the equivalent ~~six months~~quarter of the prior fiscal year. Excluding deconversion revenue of ~~$4,347~~$2,065 from the second quarter of fiscal 2020 and ~~$4,797, respectively,~~$2,274 from the second quarter of fiscal 2019, revenue still increased 10% quarter over quarter. The growth was primarily due to increased card and remittance revenue within the processing line of revenue. Cost of revenue increased ~~12%~~22% quarter over quarter primarily due to increased costs related to our credit and debit card processing platform, as well as increased personnel costs. Cost of revenue as a percentage of revenue increased 5% for the second quarter of fiscal 2020 compared to the same quarter of fiscal 2019.

For the six months ended December 31, 2019 compared to the same prior-year period, revenue in the Payments segment increased 11%, and 10% after excluding deconversion revenue of $7,036 and $4,347 from each period, respectively. The adjusted increase in revenue period over period was primarily driven by increased card and remittance revenue within the processing line of revenue, as well as an increase in services and support revenue. Cost of revenue increased 19% for the year-to-date period over the prior year-to-date period, primarily due to the same factors as the quarter increase. Cost of revenue ~~increased~~12%, partially due to increased headcount and amortization expenses related to Ensenta, as well as increased spending related to the ongoing project to expand our credit and debit card platform. Cost of revenue remained consistent as a percentage of ~~revenue.~~revenue increased 4% period over period.

																									Complementary
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
	2018		2017				2018		2017				2019		2018				2019		2018
Revenue	$	103,250	$	96,656	7	%	$	210,558	$	191,683	10	%	$	113,484	$	103,250	10	%	$	230,679	$	208,955	10	%
Cost of Revenue	$	44,167	$	40,209	10	%	$	85,998	$	80,201	7	%	$	48,019	$	44,167	9	%	$	94,693	$	85,998	10	%

Revenue in the Complementary segment increased 7%10% for the second quarter ~~or 9%~~of fiscal 2020 compared to the equivalent quarter of the prior fiscal year, and 8% after excluding revenue of $2,040 from the fiscal 2020 acquisition and deconversion revenue from each period, which totaled ~~$1,587~~$1,987 and ~~$3,750~~$1,587 for the quarters ended December 31, 2019 and 2018, ~~and 2017, respectively, and excluding revenue of $36 from fiscal 2019 acquisitions.~~respectively. The adjusted increase was primarily driven by ~~increases in all three categories of services and support revenue,~~increased hosting fees, as well as an increase in on-premise support revenue and transaction and digital processing revenue. Cost of revenue increased ~~10%~~9% for the second quarter of fiscal ~~2019~~2020 compared to the second quarter of fiscal ~~2018,~~2019 and ~~increased~~decreased 1% as a percentage of ~~revenue.~~revenue, quarter over quarter, due to ongoing cost control efforts.

For the ~~six months ended December 31, 2018, revenue in the Complementary segment increased 10%~~year-to-date period compared to the ~~six months ended December 31, 2017~~prior year-to-date period, Complementary segment revenue increased 10%. ~~After excluding~~Excluding $4,432 of revenue related to the fiscal 2020 acquisition and deconversion ~~revenue from each period, which totaled~~fees totaling $4,754 and $3,379 ~~and $4,277~~ for the ~~quarters ended December 31, 2018~~current and ~~2017,~~prior year-to-date periods, respectively, ~~and excluding revenue of $36 from fiscal 2019 acquisitions,~~Complementary revenue increased ~~11%.~~8% period over period. The adjusted increase was primarily driven by ~~increases in all three categories of services and support revenue,~~increased hosting fees, as well as an increase in on-premise support revenue and transaction and digital processing revenue. Cost of revenue ~~increased 7% comparing~~for the year-to-date ~~periods, but decreased 1% as~~period increased 10% over the prior year-to-date period, which was in line with the revenue increase, and remained a consistent percentage of ~~revenue.~~revenue for each year-to-date period.

																									Corporate and Other
	Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change		Three Months Ended December 31,				% Change		Six Months Ended December 31,				% Change
	2018		2017				2018		2017				2019		2018				2019		2018
Revenue	$	15,277	$	15,877	(4	)%	$	28,763	$	31,895	(10	)%	$	15,222	$	15,277	—	%	$	30,389	$	28,763	6	%
Cost of Revenue	$	57,729	$	52,223	11	%	$	111,087	$	103,239	8	%	$	60,870	$	57,729	5	%	$	120,057	$	111,087	8	%

Revenue in the Corporate and Other segment ~~decreased~~remained consistent for ~~second quarter due to decreased services and support revenue. The decreased revenue for six months endedDecember 31, 2018, was also due to decreased services and support revenue, mainly within product delivery and services. This is in part due to~~ the ~~sale of our jhaDirect product line, which was sold during the first~~second quarter of fiscal ~~2018.~~2020 compared to the equivalent quarter of the prior fiscal year, and increased 6% for the fiscal year-to-date period compared to the prior fiscal year-to-date period. The increase period over period was primarily due to increased hardware revenue. Revenue classified in the Corporate and Other segment includes revenue from hardware and other products and services not specifically attributed to any of the other three segments.

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 quarter ~~and first six months~~ of fiscal ~~2019 is~~2020 of 5% and fiscal year-to-date period of 8% compared to the equivalent quarter and year-to-date period in the prior fiscal year were primarily related to ~~bonuses provided by~~increased salaries and benefits from an increase in headcount over the ~~Company in response to~~prior-year quarter and year-to-date period and pay raises occurring within the ~~lower tax rate resulting from the TCJA.~~trailing twelve-month period, as well as increased direct costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased to ~~$26,156~~$72,513 at December 31, ~~2018~~2019 from ~~$31,440~~$93,628 at June 30, ~~2018.~~2019.

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


	Six Months Ended						Six Months Ended
	December 31,						December 31,
	2018			2017			2019			2018
Net income	$	151,640		$	228,113		$	161,468		$	151,640
Non-cash expenses	84,996			(10,959		)	95,266			84,996
Change in receivables	113,563			143,914			106,782			113,563
Change in deferred revenue	(115,014		)	(120,910		)	(117,489		)	(115,014		)
Change in other assets and liabilities	(43,141		)	(63,250		)	(31,014		)	(43,141		)
Net cash provided by operating activities	$	192,044		$	176,908		$	215,013		$	192,044

Cash provided by operating activities for the first six months of fiscal 2020 increased 9%12% 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 months of fiscal ~~2019~~2020 totaled ~~$109,653~~$125,395 and included: ~~$54,086~~a payment for the acquisition of Geezeo totaling $30,376, net of cash acquired; $57,886 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of ~~$32,968; payments for the acquisitions of BOLTS and Agiletics totaling $19,981, and $2,694~~$30,758; $5,551 for the purchase and development of internal use ~~software.~~software; and $1,150 for purchase of investments. This was partially offset by ~~$76~~$326 of proceeds from asset sales. Cash used in investing activities for the first six months of fiscal ~~2018~~2019 totaled ~~$202,309~~$109,653 and included ~~$137,654 for the acquisitions of Vanguard Software Group and Ensenta Corporation; $46,936~~$54,086 for the development of software; capital expenditures of ~~$12,249;~~$32,968; $19,981, net of cash acquired, for the acquisitions of BOLTS and ~~$6,025~~Agiletics, and $2,694 for the purchase and development of internal use software, partially offset by ~~$350 of proceeds from the sale of businesses and $205~~$76 of proceeds from the sale of assets.

Financing activities used cash of ~~$87,675~~$110,733 for the first six months of fiscal ~~2019,~~2020, including dividends paid to stockholders of $61,502, $51,210 for the purchase of treasury shares, and $1,979 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash in the first six months of fiscal 2019 totaling $87,675, which included $57,104 for the payment of dividends, $21,276 for the purchase of treasury shares, and $9,295 net cash outflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash in the first six months of fiscal 2018 totaling $31,645, which included $50,000 for repayments on borrowings, $47,844 of dividends paid to stockholders, $30,018 for the purchase of treasury shares, and $3,783 net cash outflow from the issuance of stock and tax related to stock-based compensation, partially offset by new borrowings of $100,000.

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling ~~$32,968~~$30,758 and ~~$12,249~~$32,968 for the six months ending December 31, ~~2018~~2019 and December 31, ~~2017,~~

2018, 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 ~~2019~~2020 are not expected to exceed $50,000 and will be funded from cash generated by operations.

~~2018,~~ 2019, there were ~~26,108~~26,508 shares in treasury stock and the Company had authority to repurchase up to ~~3,883~~3,483 additional shares.

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. The credit facility bears interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate (the highest of (i) the Prime Rate for such day, (ii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iii) the Eurocurrency Rate for a one month Interest Period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit facility is guaranteed by certain subsidiaries of the Company. The credit facility is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the agreement. As of December 31, ~~2018,~~2019, the Company was in compliance with all such covenants. The revolving ~~loan~~credit facility terminates February 20, 2020. ~~At December 31, 2018, there~~A new 5-year revolving credit facility is anticipated to be in place prior to the termination date. There was no outstanding ~~revolving loan balance. There was also no outstanding~~credit facility balance at either December 31, 2019 or at June 30, ~~2018.~~2019.

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, ~~2018,~~2019, no amount was outstanding. There was also no balance outstanding at June 30, ~~2018.~~2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 risk on outstanding debt. We do not currently use any derivative financial instruments. We actively monitor these risks through a variety of controlled procedures involving senior management.

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

We have no outstanding debt with variable interest rates as of December 31, ~~2018,~~2019, and are therefore not currently exposed to interest rate 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 and 15d-15. 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~~ended December 31, ~~2018,~~2019, 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, ~~2018:~~2019:

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, 2018 —
$ —
—
3,882,713
November 1- November 30, 2018 150,043
141.84
150,000
3,732,713
December 1- December 31, 2018 —
—
—
3,732,713
Total 150,043
141.84
150,000
3,732,713



	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, 2019	—	$	—	—	3,383,013
November 1 - November 30, 2019	99,206	150.39		99,206	3,283,807
December 1 - December 31, 2019	151,094	146.57		151,094	3,132,713
Total	250,300	148.08		250,300	3,132,713

⁽¹⁾ ~~150,000~~ 250,300 shares were purchased through a publicly announced repurchase plan. ~~There were 43 shares surrendered to the Company to satisfy tax withholding obligations in connection with employee restricted stock awards.~~

⁽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.

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~~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

* 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, ~~2018~~2019 and June 30, ~~2018,~~2019, (ii) the Condensed Consolidated Statements of Income for the three and six months ended December 31, 2019 and 2018, (iii) the Condensed Consolidated Statements of Shareholders' Equity for the three and ~~2017, (iii)~~six months ended December 31, 2019 and 2018, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2019 and 2018, and ~~2017, and (iv)~~(v) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

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



		JACK HENRY & ASSOCIATES, INC.

Date:	February 7, ~~2019~~2020	/s/ David B. Foss
		David B. Foss
		Chief Executive Officer and President

Date:	February 7, ~~2019~~2020	/s/ Kevin D. Williams
		Kevin D. Williams
		Chief Financial Officer and Treasurer

3733



	As Previously Reported			Adjustments			As Adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	31,440		$	—		$	31,440
Receivables, net	291,630			5,641			297,271
Income tax receivable	21,671			—			21,671
Prepaid expenses and other	84,810			11,331			96,141
Deferred costs	38,985			(11,916		)	27,069
Total current assets	468,536			5,056			473,592
PROPERTY AND EQUIPMENT, net	286,850			—			286,850
OTHER ASSETS:
Non-current deferred costs	95,540			(20,675		)	74,865
Computer software, net of amortization	288,172			—			288,172
Other non-current assets	107,775			2,524			110,299
Customer relationships, net of amortization	115,034			—			115,034
Other intangible assets, net of amortization	38,467			—			38,467
Goodwill	649,929			—			649,929
Total other assets	1,294,917			(18,151		)	1,276,766
Total assets	$	2,050,303		$	(13,095	)	$	2,037,208
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	34,510		$	—		$	34,510
Accrued expenses	97,848			(9,084		)	88,764
Deferred revenues	355,538			(3,107		)	352,431
Total current liabilities	487,896			(12,191		)	475,705
LONG-TERM LIABILITIES:
Non-current deferred revenues	93,094			(75,610		)	17,484
Non-current deferred income tax liability	189,613			18,690			208,303
Other long-term liabilities	12,872			—			12,872
Total long-term liabilities	295,579			(56,920		)	238,659
Total liabilities	783,475			(69,111		)	714,364
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—			—			—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,278,562 shares issued at June 30, 2018	1,033			—			1,033
Additional paid-in capital	464,138			—			464,138
Retained earnings	1,856,917			56,016			1,912,933
Less treasury stock at cost 26,107,903 shares at June 30, 2018	(1,055,260		)	—			(1,055,260		)
Total stockholders' equity	1,266,828			56,016			1,322,844
Total liabilities and equity	$	2,050,303		$	(13,095	)	$	2,037,208



	Three Months Ended December 31, 2017									Six Months Ended December 31, 2017
	As Previously Reported			Adjustments			As Adjusted			As Previously Reported			Adjustments			As Adjusted
REVENUE	$	374,756		$	(17,547	)	$	357,209		$	734,690		$	(16,197	)	$	718,493

EXPENSES
Cost of Revenue	211,653			(4,553		)	207,100			416,368			(5,352		)	411,016
Research and Development	22,414			—			22,414			43,343			—			43,343
Selling, General, and Administrative	45,613			(2,519		)	43,094			89,346			(5,165		)	84,181
Gain on Disposal of a Business	(189		)	—			(189		)	(1,894		)	—			(1,894		)
Total Expenses	279,491			(7,072		)	272,419			547,163			(10,517		)	536,646

OPERATING INCOME	95,265			(10,475		)	84,790			187,527			(5,680		)	181,847

INTEREST INCOME (EXPENSE)
Interest Income	146			—			146			293			—			293
Interest Expense	(250		)	—			(250		)	(439		)	—			(439		)
Total Interest Income (Expense)	(104		)	—			(104		)	(146		)	—			(146		)

INCOME BEFORE INCOME TAXES	95,161			(10,475		)	84,686			187,381			(5,680		)	181,701

PROVISION/ (BENEFIT) FOR INCOME TAXES	(60,413		)	(16,144		)	(76,557		)	(31,604		)	(14,808		)	(46,412		)

NET INCOME	$	155,574		$	5,669		$	161,243		$	218,985		$	9,128		$	228,113

Basic earnings per share	$	2.01					$	2.09		$	2.83					$	2.95
Basic weighted average shares outstanding	77,218						77,218			77,250						77,250

Diluted earnings per share	$	2.01					$	2.08		$	2.82					$	2.94
Diluted weighted average shares outstanding	77,565						77,565			77,606						77,606



Current assets	$	14,125
Long-term assets	586
Identifiable intangible assets	58,806
Non-current deferred income tax liability	(21,859		)
Total other liabilities assumed	(8,496		)
Total identifiable net assets	43,162
Goodwill	91,219
Net assets acquired	$	134,381



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 Ending
	December 31, 2017
	Core		Payments		Complementary		Corporate & Other			Total
REVENUE
Services and Support	$	116,614	$	9,212	$	81,329	$	15,863		$	223,018
Processing	6,682		112,168		15,327		14			134,191
Total Revenue	123,296		121,380		96,656		15,877			357,209

Cost of Revenue	55,364		59,304		40,209		52,223			207,100
Research and Development										22,414
Selling, General, and Administrative										43,094
Gain on Disposal of Businesses										(189		)
Total Expenses										272,419

SEGMENT INCOME	$	67,932	$	62,076	$	56,447	$	(36,346	)

OPERATING INCOME										84,790

INTEREST INCOME (EXPENSE)										(104		)

INCOME BEFORE INCOME TAXES										$	84,686