What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-08-25 compared with 2021-08-25 · 115 added, 133 removed, 774 unchanged (24% of the section changed)

18 unchanged sentences

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Jack Henry & Associates, Inc.

and its subsidiaries (the “Company”) as of June 30, 2021 and 2020, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Jack Henry & Associates and its subsidiaries (the “Company”) as of June 30, 2022 and 2021, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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The Company’s contracts with its customers frequently contain some component of variable consideration.

Management estimates variable consideration in its contract primarily using the expected value method, based on both historical and current information.

Management 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.

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INCOME BEFORE INCOME TAXES 472,267 397,725 381,076

PROVISION/ (BENEFIT) FOR INCOME TAXES 86,256 84,408 75,350

PROVISION FOR INCOME TAXES 109,351 86,256 84,408

NET INCOME $ 362,916 $ 311,469 $ 296,668

15 unchanged sentences

Deferred costs 57,105 46,215

Assets held for sale 20,201 —

Total current assets 613,524 543,737

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29,792,903 shares at June 30, 2021

( 1,807,118 ) ( 1,613,202 )

Total stockholders' equity 1,381,623 1,319,292

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Proceeds from the sale of assets 45 6,187 11,130

Customer contracts acquired — — ( 20 )

Purchased software ( 8,491 ) ( 6,506 ) ( 6,710 )

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Risks and Uncertainties

The novel coronavirus ("COVID-19") pandemic adversely impacted global economic activity and contributed to significant volatility in financial markets during 2020 and in 2021 year to date.

The extent to which the COVID-19 pandemic will directly or indirectly impact our business and financial results, including revenue, expenses, cost of revenues, research and development, and selling, general and administrative expenses, will depend on future developments that are highly uncertain, such as new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19 (including the efficacy and distribution of vaccines), as well as the economic impact on local, regional, national and international customers and markets.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of and for its fiscal year ended June 30, 2021 and through the date of this report.

The novel coronavirus ("COVID-19") pandemic adversely impacted global economic activity and contributed to significant volatility in financial markets during calendar 2020 through calendar 2022 year to date.

The Company has not, to this point in time, experienced material impacts from the COVID-19 pandemic, but did assess certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company as of and for its fiscal year ended June 30, 2022 and through the date of this report.

The accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses, as well as the carrying value of goodwill and other long-lived assets.

While there was not a material impact to the Company’s consolidated financial statements, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

While there was not a material impact to the Company’s consolidated financial statements for fiscal 2022 and no material impacts expected for foreseeable future, the Company will continue to monitor assessments of COVID-19, as well as other factors that could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

REVENUE RECOGNITION

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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.

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.

Significant judgment is used in the estimate of variable consideration of customer contracts that are long-term and include uncertain transactional volumes.

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Estimates of expected credit losses are based on historical collection experience and other factors, including those related to current market conditions and events.

The following table summarizes allowance for credit losses activity for the year ended June 30, 2021:

The following table summarizes allowance for credit losses activity for the years ended June 30, 2022, and 2021:

Year Ended June 30,

4 unchanged sentences

Recoveries of amounts previously written off ( 1 ) ( 3 )

Other — ( 3 )

Allowance for credit losses - ending balance $ 7,616 $ 7,266

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PURCHASE OF INVESTMENT

The Company has invested $ 13,250 in the preferred stock of Automated Bookkeeping, Inc.

At June 30, 2022 and 2021, the Company had $ 18,250 and $ 13,250 , respectively, invested in the preferred stock of Automated Bookkeeping, Inc.

("Autobooks"), which represents a non-controlling share of the voting equity of Autobooks.

4 unchanged sentences

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.

Equity transactions are monitored quarterly to assess whether or not there are indicators of fair value.

Equity transactions are monitored quarterly to assess whether there are indicators of fair value.

COMPREHENSIVE INCOME

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Per share information is based on the weighted average number of common shares outstanding during the year.

Stock options and restricted stock have been included in the calculation of income per diluted share to the extent

they are dilutive.

Stock options and restricted stock have been included in the calculation of income per diluted share to the extent they are dilutive.

The difference between basic and diluted weighted average shares outstanding is the dilutive effect of outstanding stock options and restricted stock (see Note 11).

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Recently Adopted Accounting Guidance

In January 2017, the FASB issued Accounting Standard Update ("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 necessary.

The Company adopted ASU No.

2017-04 on July 1, 2020 and the adoption did not have a material impact on its consolidated financial statements.

In June 2016, the FASB issued CECL, which prescribes an impairment model for most financial instruments based on expected losses rather than incurred losses.

Under this model, an estimate of expected credit losses over the contractual life of the instrument is to be recorded as of the end of a reporting period as an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be collected on the financial instrument.

For most instruments, entities must apply the standard using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted CECL effective July 1, 2020 using the required modified retrospective approach, which resulted in a cumulative-effect decrease to beginning retained earnings of $ 493 .

Financial assets and liabilities held by the Company subject to the “expected credit loss” model prescribed by CECL include trade and other receivables as well as contract assets (see Note 1).

Not Adopted at Fiscal Year End

In December of 2019, the FASB issued ASU No.

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The Company adopted ASU 2019-12 effective July 1, 2021 and the adoption did not have a material impact on its consolidated financial statements.

Not Adopted at Fiscal Year End

In October of 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

The Company plans to adopt the ASU effective July 1, 2023, and will apply it prospectively to business combinations occurring on or after that date.

REVENUE AND DEFERRED COSTS

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If, after that evaluation, it determines a material right does exist, it assigns value to the material right based upon standalone selling price after estimation of breakage associated with the material right.

Private and Public Cloud (formerly Outsourcing and Cloud)

Private and Public Cloud

Private and public cloud revenue is generated from data and item processing services and hosting fees.

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Therefore, the Company recognizes these fees over the remaining modified contract term.

On-Premise Support (formerly In-House Support)

On-Premise Support

On-premise 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 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).

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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 fiscal year ended June 30, 2021 and 2020 reflect the application of ASC 842 while the reported results for the year ended June 30, 2019 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases (“ASC 840”), in effect for that fiscal year.

Therefore, the reported results for fiscal years ended June 30, 2022, 2021, and 2020 reflect the application of ASC 842.

The Company determines if an arrangement is a lease, or contains a lease, at inception.

The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

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.

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At June 30, 2022, and 2021, the Company had operating lease assets of $ 46,869 and $ 55,977 and financing lease assets of $ 65 and $ 188 , respectively.

At June 30, 2021, total operating lease liabilities of $ 60,828 were comprised of current operating lease liabilities of $ 11,460 and noncurrent operating lease liabilities of $ 49,368 , and total financing lease liabilities of $ 193 were comprised of current financing lease liabilities of $ 110 and noncurrent financing lease liabilities of $ 83 .

At June 30, 2022, total operating lease liabilities of $ 51,452 were comprised of current operating lease liabilities of $ 10,681 and noncurrent operating lease liabilities of $ 40,771 , and all of the financing lease liabilities of $ 67 were current financing lease liabilities.

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 consolidated balance sheet.

Operating lease assets were recorded net of accumulated amortization of $ 23,813 and $ 13,719 as of June 30, 2021 and 2020.

Operating lease assets were recorded net of accumulated amortization of $ 31,006 and $ 23,813 as of June 30, 2022, and 2021, respectively.

Financing lease assets are included within property and equipment, net and financing lease liabilities are included within notes payable (current portion) and long-term debt (noncurrent portion) in the Company’s consolidated balance sheet.

Financing lease assets were recorded net of accumulated amortization of $ 153 and $ 38 as of June 30, 2021 and 2020.

Operating lease costs for the fiscal year ended June 30, 2021 and 2020 were $ 14,676 and $ 16,029 , respectively.

Financing lease costs for the fiscal year ended June 30, 2021 and 2020 were $ 121 and $ 41 , respectively.

Total operating and financing lease costs for the fiscal year ended June 30, 2021 and 2020 included variable lease costs of approximately $ 3,831 and $ 4,017 , respectively.

Financing lease assets were recorded net of accumulated amortization of $ 255 and $ 153 as of June 30, 2022, and 2021, respectively.

Operating lease costs for the fiscal years ended June 30, 2022, 2021, and 2020 were $ 13,058 , $ 14,676 , and $ 16,029 , respectively.

Financing lease costs for the fiscal years ended June 30, 2022, 2021, and 2020 were $ 105 , $ 121 , and $ 41 , respectively.

Total operating and financing lease costs for the fiscal years ended June 30, 2022, 2021, and 2020 included variable lease costs of approximately $ 2,333 , $ 3,831 , and $ 4,017 , respectively.

Operating and financing lease expense are included within cost of services, research and development, and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s consolidated statement of income.

For the fiscal year ended June 30, 2021 and 2020, operating cash flows for payments on operating leases were $ 13,672 and $ 14,348 and ROU assets obtained in exchange for operating lease liabilities were $ 4,691 and $ 4,212 , respectively.

Financing cash flows for payments on financing leases for the fiscal year ended June 30, 2021 and 2020 were $ 117 and $ 33 , respectively.

As of June 30, 2021 and 2020, the weighted-average remaining lease terms for the Company's operating leases were 81 months and 88 months and the weighted-average discount rates were 2.67 % and 2.76 %, respectively.

As of June 30, 2021 and 2020, the weighted-average remaining lease terms for the Company's financing leases were 21 months and 33 months and the weighted-average discount rates were 2.39 % and 2.42 %, respectively.

For the fiscal years ended June 30, 2022, 2021, and 2020, operating cash flows for payments on operating leases were $ 13,082 , $ 13,672 , and $ 14,348 , respectively, and ROU assets obtained in exchange for operating lease liabilities were $ 2,407 , $ 4,691 , and $ 4,212 , respectively.

Financing cash flows for payments on financing leases for the fiscal years ended June 30, 2022, 2021, and 2020 were $ 109 , $ 117 , and $ 33 , respectively.

As of June 30, 2022, 2021, and 2020, the weighted-average remaining lease terms for the Company's operating leases were 76 months, 81 months, and 88 months, respectively, and the weighted-average discount rates were 2.58 %, 2.67 %, and 2.76 %, respectively.

As of June 30, 2022, 2021, and 2020, the weighted-average remaining lease terms for the Company's financing leases were 9 months, 21 months, and 33 months, respectively, and the weighted-average discount rates were 2.29 %, 2.39 %, and 2.42 %, respectively.

Maturity of Lease Liabilities under ASC 842

1 unchanged sentence

Due dates Future Minimum Rental Payments

2023 $ 11,917

Thereafter 13,899

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

Lease payments include $ 5,464 related to options to extend lease terms that are reasonably certain of being exercised.

Future lease payments include $ 5,464 related to options to extend lease terms that are reasonably certain of being exercised.

At June 30, 2022, there were $ 797 in legally binding lease payments for a lease signed but not yet commenced.

The commencement date of the lease is July 1, 2022 and has a term of 84 months.

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

PROPERTY AND EQUIPMENT

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(2) See Note 4 for details

The increases in property and equipment in accrued liabilities were $ 8,699 and $ 44 for the fiscal years ended June 30, 2021 and 2020, respectively.

The changes in property and equipment acquired through capital leases were a decrease of $ 14 and an increase of $ 355 for the fiscal years ended June 30, 2021 and 2020, respectively.

The change in property and equipment in accrued liabilities was a decrease of $ 4,097 and an increase of $ 8,699 for the fiscal years ended June 30, 2022, and 2021, respectively.

The changes in property and equipment acquired through capital leases were decreases of $ 21 and $ 14 for the fiscal years ended June 30, 2022, and 2021, respectively, and an increase of $ 355 for the fiscal year ended June 30, 2020.

These amounts were excluded from capital expenditures on the statements of cash flows.

No impairments of property and equipment were recorded in fiscal 2021, 2020, or 2019.

In fiscal 2020, we recorded a gain on disposal of assets of $ 4,352 included in selling, general, and administrative on the Company's consolidated statement of income and as (gain)/loss on disposal of assets and businesses on the Company's consolidated statement of cash flows.

The gain on disposal of assets was related to the sale of the Company's Houston, TX facility.

No impairments of property and equipment were recorded in the fiscal years ended June 30, 2022, 2021, or 2020.

During the quarter ended March 31, 2022, the Company received an offer to purchase one of its facilities and management has committed to sell the facility.

At June 30, 2022, this facility's assets were classified as assets held for sale by the Company in the amount of $ 20,201 , and were not included in property and equipment, net.

Total assets held for sale by the Company at June 30, 2021, were $ 0 .

The carrying amount of goodwill for the fiscal years ended June 30, 2022 and 2021, by reportable segments, is as follows:

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Ending balance $ 166,554 $ 166,554

1 Related to the transfer of our Call Center line of business from Core to Complementary, $ 4,017 of goodwill was transferred between the two based upon the estimated fair value of that line of business.

Goodwill acquired during fiscal 2021 and 2020 totaled $ 1,485 and $ 19,390 , respectively.

1 Related to the transfer of our Call Center line of business from Core to Complementary, $ 4,017 of goodwill was transferred in fiscal 2021 between the two based upon the estimated fair value of that line of business.

Goodwill acquired during fiscal 2022 and 2021 was $ 0 and $ 1,485 , respectively.

Goodwill consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of the entities or assets acquired, together with their assembled workforces.

No goodwill has been assigned to the Company's Corporate and Other reportable segment (see Note 13).

No goodwill has been assigned to the Company's Corporate and Other reportable segment.

Other Intangible Assets

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The revolving credit facility terminates February 10, 2025 .

There was $ 100,000 outstanding balance under this credit facility at June 30, 2021 and no outstanding balance under this credit facility at June 30, 2020.

There was $ 115,000 outstanding balance under this credit facility at June 30, 2022 and $ 100,000 outstanding balance under this credit facility at June 30, 2021.

Other lines of credit

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The Company paid interest of $ 1,788 , $ 852 , and $ 475 during the fiscal years ended June 30, 2022 , 2021, and 2020, respectively.

The provision/(benefit) for income taxes consists of the following:

The provision for income taxes consists of the following:

Year Ended June 30,

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Research and development credit ( 2.0 ) % ( 2.4 ) % ( 2.4 ) %

Tax effects of share-based payments ( 0.4 ) % ( 0.1 ) % ( 1.4 ) %

Other (net) ( 0.1 ) % ( 0.1 ) % ( 0.1 ) %

23.2 % 21.7 % 22.1 %

As of June 30, 2021, the Company has $ 4,093 of gross federal net operating loss (“NOL”) and $ 192 tax credit carryforwards pertaining to the acquisition of Goldleaf Financial Solutions, Inc.

and Geezeo, which are expected to be utilized after the application of IRC Section 382.

As of June 30, 2022, the Company has $ 918 of gross federal net operating loss (“NOL”) pertaining to the acquisition of Goldleaf Financial Solutions, Inc.

which is expected to be utilized after the application of IRC Section 382.

Separately, as of June 30, 2022, the Company has state NOL and tax credit carryforwards with a tax-effected value of $ 215 and $ 1,700 , respectively.

The federal and state loss and credit carryover have varying expiration dates, ranging from fiscal 2023 to 2042.

Based on state tax rules which

restrict utilization of these losses and tax credits, the Company believes it is more likely than not that $ 270 of these losses and tax credits will expire unutilized.

Based on state tax rules which restrict utilization of these losses and tax credits, the Company believes it is more likely than not that $ 200 of these losses and tax credits will expire unutilized.

Accordingly, valuation allowances of $ 200 and $ 270 have been recorded against the state net operating losses and tax credit carryforwards as of June 30, 2022 and 2021, respectively.

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Additions for current year tax positions 1,451

Reductions for current year tax positions ( 40 )

Additions for prior year tax positions 867

Reductions for prior year tax positions ( 531 )

Additions related to business combinations 192

Settlements ( 25 )

Reductions related to expirations of statute of limitations ( 2,893 )

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Additions for prior year tax positions 490

Additions related to business combinations 192

Reductions for prior year tax positions ( 30 )

Reductions related to expirations of statute of limitations ( 3,408 )

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Balance at June 30, 2022 $ 8,990

federal and state income tax returns for fiscal 2018 and all subsequent years remain subject to examination as of June 30, 2021 under statute of limitations rules.

federal income tax returns for fiscal 2019 and all subsequent years remain subject to examination as of June 30, 2022 under statute of limitations rules.

state income tax returns that remain subject to examination as of June 30,2022 under the statute of limitation rules varies by state jurisdiction from fiscal 2016 through 2019 and all subsequent years.

The Company anticipates that potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $ 1,500 - $ 4,000 within twelve months of June 30, 2022.

INDUSTRY AND SUPPLIER CONCENTRATIONS

INDUSTRY AND SUPPLIER CONCENTRATION

The Company sells its products to banks, credit unions, and financial institutions throughout the United States and generally does not require collateral.

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Customer-related risks are moderated through the inclusion of credit mitigation clauses in the Company's contracts and through the monitoring of timely payments.

In addition, some of the Company’s key solutions are dependent on technology manufactured by IBM Corporation and Microsoft.

Termination of the Company’s relationship with either IBM or Microsoft could have a negative impact on the operations of the Company.

In addition, some of the Company’s key solutions are dependent on technology manufactured by third parties.

Termination of the Company’s relationship with one or more of these third parties could have a negative impact on the operations of the Company.

STOCK-BASED COMPENSATION

The Company's pre-tax operating income for the fiscal years ended June 30, 2021, 2020, and 2019 includes $ 20,746 , $ 16,883 , and $ 12,589 of equity-based compensation costs, respectively, of which $ 18,817 , $ 15,148 , and $ 10,828 relates to the restricted stock plans, respectively.

The Company's pre-tax operating income for the fiscal years ended June 30, 2022, 2021, and 2020 includes $ 24,780 , $ 20,746 , and $ 16,883 , respectively, of equity-based compensation costs, of which $ 22,703 , $ 18,817 , and $ 15,148 , respectively, relates to the restricted stock plans.

Costs are recorded net of estimated forfeitures.

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These income tax benefits included income tax net excess benefits from stock option exercises and restricted stock vestings of $ 652 , $ 719 , and $ 340 for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

2015 Equity Incentive Plan

Stock Option Awards

On November 10, 2015, the Company adopted the 2015 Equity Incentive Plan ("2015 EIP") for its employees and non-employee directors.

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Exercisable June 30, 2022 12 $ 87.27 $ 1,084

There were no options granted in fiscal 2021, 2020, and 2019.

There were no options granted in the fiscal years ended June 30, 2022, 2021, and 2020.

The Company utilized a Black-Scholes option pricing model to estimate fair value of the stock option grants at the grant date.

All remaining options were granted on July 1, 2016.

Assumptions such as expected life, volatility, risk-free interest rate, and dividend yield impact the fair value estimate.

Assumptions such as expected life, volatility, risk-

free interest rate, and dividend yield impact the fair value estimate.

These assumptions are subjective and generally require significant analysis and judgment to develop.

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The total intrinsic value of options exercised was $ 1,005 , $ 0 , and $ 809 for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

There were no options exercised for the fiscal year ended June 30, 2021.

Restricted Stock Plan and 2015 Equity Incentive Plan

There were 10 options exercised for the fiscal year ended June 30, 2022.

Restricted Stock Awards

The Restricted Stock Plan was adopted by the Company on November 1, 2005, for its employees.

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Up to 3,000 shares of common stock are available for issuance under the 2015 EIP.

Upon issuance, shares of restricted stock are subject to forfeiture and to restrictions which limit the sale or transfer of the shares during the restriction period.

The restrictions are lifted over periods ranging from 3 years to 5 years from grant date.

Upon issuance, shares of restricted stock were subject to forfeiture and to restrictions which limited the sale or transfer of the shares during the restriction period.

The restrictions were lifted over periods ranging from 3 years to 5 years from grant date.

The following table summarizes non-vested share awards activity:

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Outstanding July 1, 2020 — —

Vested ( 6 ) 87.27

Forfeited — —

Outstanding July 1, 2020 and June 30, 2021 — —

Outstanding July 1, 2021 — —

Forfeited — —

Outstanding June 30, 2022 — —

No shares of restricted stock were granted during the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

The non-vested share awards granted prior to July 1, 2016, did not participate in dividends during the restriction period.

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The non-vested share awards granted after July 1, 2016, did participate in dividends during the restriction period and the weighted-average fair value of such participating awards was based on the fair market value on the grant date.

An amendment to the Restricted Stock Plan was adopted by the Company on August 20, 2010.

Unit awards were made to employees remaining in continuous employment throughout the performance period and vary based on the Company’s percentile ranking in Total Shareholder Return (“TSR”) over the performance period compared to a peer group, or peer groups, of companies.

TSR is defined as the change in the stock price through the performance period plus dividends per share paid during the performance period, all divided by the stock price at the beginning of the performance period.

Restricted Stock Unit Awards

An amendment to the Restricted Stock Plan was adopted by the Company on August 20, 2010, whereby restricted stock unit ("unit/s") awards were made to employee participants rather than restricted stock.

The awarding of units continued with the 2015 Equity Incentive Plan.

It is the intention of the Company to settle the unit awards in shares of the Company’s stock.

Certain Restricted Stock Unit awards are not tied to performance goals, and for such awards, vesting generally occurs over a period of 1 to 3 years.

The following table summarizes non-vested unit awards as of June 30, 2021, as well as activity for the fiscal year then ended:

Unit awards that have service requirements only and are not tied to performance measures generally vest over a period of 1 to 3 years.

The following table summarizes non-vested unit awards with service requirements only and those tied to service requirements and performance measures as of June 30, 2022, as well as activity for the fiscal year then ended:

Unit awards Shares Weighted

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Vested ( 71 ) 145.50

( 55 ) 189.33

Outstanding June 30, 2022 303 $ 166.50 $ 54,548

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The 135 unit awards granted in fiscal 2022 had service requirements and performance measures, with 87 only having service requirements.

Those with only service requirements were valued at the weighted-average fair value of the non-vested units based on the fair market value of the Company’s equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period, consistent with the methodology for calculating compensation expense on such awards.

The remaining 34 unit awards granted in fiscal 2021 had performance measures along with service requirements, all of which were valued using a Monte Carlo pricing model as of the measurement date customized to the specific provisions of the Company’s plan design to value the unit awards as of the grant date.

Per the Company's award settlement provisions, approximately half of the awards that utilize a Monte Carlo pricing model were valued at grant on the basis of TSR in comparison to the compensation peer group approved by the Compensation Committee of the Company's Board of Directors for fiscal 2021, and the other half of the awards utilizing a Monte Carlo pricing model were valued at grant on the basis of TSR in comparison to the Standard & Poor's 1500 Information Technology Index ("S&P 1500 IT Index") participants.

The unit awards with only service requirements were valued at the weighted average fair value of the non-vested units based on the fair market value of the Company’s equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period, consistent with the methodology for calculating compensation expense on such awards.

The remaining 48 unit awards granted in fiscal 2022 have performance targets along with service requirements.

19 of these performance and service requirement unit awards were valued at grant by estimating 100% payout at release and using the fair market value of the Company equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period.

The payout at release of approximately half of these unit awards will be determined based on the Company's compound annual growth rate ("CAGR") for revenue (excluding adjustments) for the three-year vesting period compared against goal thresholds as defined in the award agreement.

The performance payout at release of the other half of these unit awards will be determined based on the expansion of the Company's non-GAAP operating margin over the three-year vesting period compared against goal thresholds as defined in the award agreement.

The other 29 performance and service requirement unit awards were valued at grant using a Monte Carlo pricing model as of the measurement date customized to the specific provisions of the Company’s plan design.

Per the Company's award vesting and settlement provisions, the awards that utilized a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return ("TSR") in comparison to the custom peer group ("Compensation Peer Group") comprised of the Standard & Poor's 1500 Software & Services Index ("S&P 1500 S&S Index") participant companies and other participants approved by the Compensation Committee of the Company's Board of Directors for fiscal year 2022.

For fiscal years 2021 and 2020, TSR was in comparison to two separate groups—a custom peer group, the Compensation Peer Group in the table below, and the Standard & Poor's 1500 Information Technology Index ("S&P 1500 IT Index") participants—as approved by the Compensation Committee for each of those fiscal years.

The weighted average assumptions used in the Monte Carlo pricing model to estimate fair value at the grant dates for awards with performance targets and service requirements are as follows:

Year Ended June 30,

Monte Carlo award inputs:

2022 2021 2020

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Risk free interest rate 0.32 % 0.11 % 1.34 %

Annual dividend based on most recent quarterly dividend $ 1.84 $ 1.72 $ 1.60

Dividend yield 1.1 % 1.0 % 1.1 %

Beginning average percentile rank for TSR 65 % 37 % 63 %

S&P 1500 IT Index:

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Risk free interest rate 0.11 % 1.34 %

Annual dividend based on most recent quarterly dividend $ 1.72 $ 1.60

Dividend yield 1.0 % 1.1 %

Beginning average percentile rank for TSR 30 % 61 %

1 For fiscal 2022, S&P 1500 S&S Index participants were included in the Compensation Peer Group.

At June 30, 2022, there was $ 19,076 of compensation expense, excluding forfeitures, that has yet to be recognized related to non-vested restricted stock unit awards, which will be recognized over a weighted-average remaining contractual term of 1.12 years.

The fair value of restricted shares and units at vest date totaled $ 21,652 , $ 11,248 , and $ 34,645 for the fiscal years ended June 30, 2021, 2020, and 2019, respectively.

The fair value of restricted units at vest date totaled $ 12,139 , $ 21,652 , and $ 11,248 for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

EARNINGS PER SHARE

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The two-class method for computing EPS has not been applied because no outstanding awards contain non-forfeitable rights to participate in dividends.

There were 11 anti-dilutive weighted average shares excluded from the weighted average shares outstanding for diluted earnings per share for fiscal 2021, 2 shares were excluded for fiscal 2020, and no shares were excluded for fiscal 2019.

There were 7 anti-dilutive weighted average shares excluded from the weighted average shares outstanding for diluted earnings per share for fiscal 2022, 11 shares were excluded for fiscal 2021, and 2 shares were excluded for fiscal 2020.

EMPLOYEE BENEFIT PLANS

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The plan allows the majority of employees the opportunity to directly purchase shares of the Company at 85 % of the closing price of the Company's stock on or around the fifteenth day of each month.

During the fiscal years ended June 30, 2021 , 2020 and 2019, employees purchased 80 , 74 , and 76 shares under this plan at average prices of $ 136.87 , $ 132.51 , and $ 118.32 , respectively.

During the fiscal years ended June 30, 2022 , 2021 and 2020, employees

purchased 80 , 80 , and 74 shares under this plan at average prices of $ 147.36 , $ 136.87 , and $ 132.51 , respectively.

As of June 30, 2022, approximately 1,070 shares remained available for future issuance under the plan.

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Under the Plan, the Company matches 100 % of full-time employee contributions up to 5 % of eligible compensation.

Prior to January 1, 2019, the Company match was subject to a maximum of $ 5 per year.

On January 1, 2019, the maximum limit was removed.

In order to receive matching contributions, employees must be 18 years of age and be employed for at least six months .

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however, none has been made for any of the three most recent fiscal years.

The total matching contributions for the Plan were $ 26,783 , $ 25,155 , and $ 21,003 for fiscal 2021 , 2020 and 2019, respectively.

The total matching contributions for the Plan were $ 28,259 , $ 26,783 , and $ 25,155 for the fiscal years ended June 30, 2022 , 2021 and 2020, respectively.

BUSINESS ACQUISITIONS

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Geezeo is a Boston-based provider of retail and business digital financial management solutions.

Management 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 July 1, 2019 are set forth below:

Current assets $ 8,925

Long-term assets 397

Identifiable intangible assets 19,114

Deferred income tax liability ( 2,593 )

Total other liabilities assumed ( 7,457 )

Total identifiable net assets 18,386

Goodwill 19,390

Net assets acquired $ 37,776

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.

Additional measurement period adjustments were made during the third quarter of fiscal 2020 relating to income taxes.

The goodwill of $ 19,390 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of 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 , none 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 consolidated statement of income for the fiscal year ended June 30, 2021 included revenue of $ 13,233 and after-tax net income of $ 4,805 resulting from Geezeo's operations.

The Company's consolidated statement of income for the fiscal year ended June 30, 2020 included revenue of $ 8,969 and after-tax net income of $ 654 resulting from Geezeo's operations.

The Company's consolidated statement of income for the fiscal years ended June 30, 2022, 2021, and 2020 included revenue of $ 12,733 , $ 13,233 , and $ 8,969 , respectively, and after-tax net income of $ 4,679 , $ 4,805 , and $ 654 , respectively, resulting from Geezeo's operations.

The accompanying consolidated statement of income for the fiscal year ended June 30, 2020 does not include any revenues and expenses related to this acquisition prior to the acquisition date.

The impact of this acquisition was considered immaterial to the current and prior periods of our 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 for $ 15,046 paid in cash.

The acquisition was funded by cash generated from operations.

BOLTS is the developer of boltsOPEN, a digital account opening solution.

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.

For the fiscal year ended June 30, 2021, the Company's consolidated statement of income included revenue of $ 1,223 and after-tax net loss of $ 382 resulting from BOLTS' operations.

For the fiscal years ended June 30, 2020 and 2019, the Company's consolidated statement of income included revenue of $ 158 and $ 126 , respectively, and after-tax net loss of $ 801 and $ 895 , respectively, resulting from BOLTS' operations.

Agiletics, Inc.

On October 1, 2018 , the Company acquired all of the equity interest of 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.

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

For the fiscal year ended June 30, 2021, the Company's consolidated statement of income included revenue of $ 1,877 and after-tax net income of $ 387 resulting from Agiletics' operations.

For the fiscal years ended June 30, 2020 and 2019, the Company's consolidated statement of income included revenue of $ 1,566 and $ 926 , respectively, and after-tax net income of $ 213 and after tax net loss of $ 192 , respectively, resulting from Agiletics' operations.

REPORTABLE SEGMENT INFORMATION

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Only revenue and costs of revenue are considered in the evaluation for each segment.

Immaterial adjustments were made in fiscal 2022 to reclassify cost of revenue in fiscal 2021 from the Core segment to the Corporate and Other segment to be consistent with the current fiscal year allocation of cost of revenue by segment.

The amounts reclassified for the fiscal year ended June 30, 2021, were $ 135 .

During the second quarter of fiscal 2021, the Company's call center was consolidated into the Complementary segment.

As a result of this consolidation, immaterial adjustments were made during fiscal 2021 to reclassify related revenue and costs recognized during the fiscal years ended June 30, 2020 and 2019 from the Core to the Complementary segment.

The total related revenue reclassified was $ 20,797 for fiscal 2020 and $ 13,515 for fiscal 2019.

The total related cost of revenue reclassified was $ 12,386 for fiscal 2020 and $ 8,513 for fiscal 2019.

As a result of this consolidation, immaterial adjustments were made during fiscal 2021 to reclassify related revenue and costs recognized during the fiscal year ended June 30, 2020, from the Core to the Complementary segment.

The total related revenue reclassified was $ 20,797 for fiscal 2020.

The total related cost of revenue reclassified was $ 12,386 for fiscal 2020.

June 30, 2022

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The Company has not disclosed any additional asset information by segment, as the information is not produced internally and its preparation is impracticable.

SUBSEQUENT EVENT

On August 23, 2021 , the Company's Board of Directors declared a cash dividend of $ 0.46 per share on its common stock, payable on September 29, 2021 to shareholders of record on September 9, 2021 .

SUBSEQUENT EVENTS

Sale of Facility

On August 12, 2022, the Company closed on the sale of its San Diego, CA, facility that was committed to during the quarter ended March 31, 2022.

The sales price of the facility was $ 27,500 , and proceeds after selling costs were received on the date of closing.

The facility sale included assets with a carrying value of approximately $ 20,201 that were reported as assets held for sale by the Company at June 30, 2022 (see Note 5).

The Company expects to recognize a gain on the sale of approximately $ 6,000 during the first quarter of fiscal 2023.

On August 22, 2022 , the Company's Board of Directors declared a cash dividend of $ 0.49 per share on its common stock, payable on September 29, 2022 to stockholders of record on September 9, 2022 .

We have entered into a definitive agreement to acquire Payrailz, LLC.

We anticipate the transaction closing on August 31, 2022.

In connection with the closing, we expect to amend the revolving credit facility to increase the borrowing limit to allow funding of the transaction.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data