What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-08-24 compared with 2022-08-25 · 142 added, 170 removed, 719 unchanged (30% 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 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 have audited the accompanying consolidated balance sheets of Jack Henry & Associates, Inc.

and its subsidiaries (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended June 30, 2023, 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, 2023, 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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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may

become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

35 unchanged sentences

Based on this assessment, management has concluded the Company’s internal control over financial reporting as of June 30, 2023, was effective.

The Company’s internal control over financial reporting as of June 30, 2022, has been audited by the Company’s independent registered public accounting firm, as stated in their report appearing in this Item 8.

The Company’s internal control over financial reporting as of June 30, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in this Item 8.

JACK HENRY & ASSOCIATES, INC.

162 unchanged sentences

Jack Henry & Associates, Inc.

and subsidiaries ("Jack Henry," "JKHY," or the "Company") is a leading provider of technology solutions and payment processing services primarily for the financial services industry.

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 by providing the conversion and implementation services for financial institutions to utilize JKHY systems, and by providing payment processing other related services.

JKHY also provides continuing support and services to customers using on-premise or JKHY cloud-based systems.

and subsidiaries ("Jack Henry" or the "Company") is a well-rounded financial technology company.

Jack Henry was founded in 1976 as a provider of core processing solutions for banks.

Today, the Company’s extensive array of products and services includes processing transactions, automating business processes, and managing information for over 7,500 financial institutions and diverse corporate entities.

CONSOLIDATION

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

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

USE OF ESTIMATES

2 unchanged sentences

Actual results could differ from those estimates.

Risks and Uncertainties

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 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

1 unchanged sentence

The Company generates "Processing" revenue through processing of remittance transactions, card transactions and monthly fees, and digital transactions.

Significant Judgments in Application of the Guidance

Significant Judgments Used in the Application of the Guidance

Identification of performance obligations

6 unchanged sentences

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.

17 unchanged sentences

Receivables are recorded at the time of billing.

On July 1, 2020, the Company adopted FASB Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses, ("CECL") (see "Recent Accounting Pronouncements" below).

As a result, the Company changed its accounting policy for allowance for credit losses.

The accounting policy pursuant to CECL is disclosed below.

The adoption of CECL resulted in an immaterial cumulative effect adjustment recorded in retained earnings as of July 1, 2020.

The Company monitors trade and other receivable balances and contract assets and estimates the allowance for lifetime expected credit losses.

3 unchanged sentences

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

Cumulative effect of accounting standards update adoption — 493

Current provision for expected credit losses 1,800 1,740

10 unchanged sentences

PURCHASE OF INVESTMENT

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

At June 30, 2023, and 2022, the Company had $ 18,250 invested in the preferred stock of Automated Bookkeeping, Inc.

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

This investment was recorded at cost and is included within other non-current assets on the Company's balance sheet.

This investment was

recorded at cost and is included within other non-current assets on the Company's balance sheet.

The fair value of this investment has not been estimated, as estimation is not practicable due to limited investors which reduces available comparative information.

2 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 there are indicators of fair value.

Equity transactions are monitored quarterly to assess whether there are indicators that fair value may be below carrying value.

COMPREHENSIVE INCOME

23 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

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 was effective for the Company on July 1, 2021.

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

3 unchanged sentences

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.

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

REVENUE AND DEFERRED COSTS

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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).

57 unchanged sentences

Financial Liabilities:

Revolving credit facility

$ — $ 115,000 $ — $ 115,000

Credit facilities $ — $ 275,000 $ — $ 275,000

June 30, 2022

4 unchanged sentences

$ — $ 115,000 $ — $ 115,000

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 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.

3 unchanged sentences

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.

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.

13 unchanged sentences

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 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, 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.

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, 2023, and 2022, the Company had operating lease assets of $ 43,662 and $ 46,869 , respectively.

At June 30, 2023, total operating lease liabilities of $ 50,269 were comprised of current operating lease liabilities of $ 9,776 and noncurrent operating lease liabilities of $ 40,493 .

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 .

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 $ 34,973 and $ 31,006 as of June 30, 2023, and 2022, respectively.

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

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, 2023, 2022, and 2021, were $ 11,870 , $ 13,058 , and $ 14,676 , 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.

Total operating lease costs for the fiscal years ended June 30, 2023, 2022, and 2021, included variable lease costs of approximately $ 3,608 , $ 2,325 , and $ 3,622 , respectively.

Operating lease expense is 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 years ended June 30, 2023, 2022, and 2021, operating cash flows for payments on operating leases were $ 12,127 , $ 13,082 , and $ 13,672 , respectively, and ROU assets obtained in exchange for operating lease liabilities were $ 2,368 , $ 2,407 , and $ 4,691 , 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, 2023, 2022, and 2021, the weighted-average remaining lease terms for the Company's operating leases were 78 months, 76 months, and 81 months, respectively, and the weighted-average discount rates were 2.14 %, 2.58 %, and 2.67 %, 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

6 unchanged sentences

Present value of lease liabilities $ 50,269

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

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

At June 30, 2023, there were $ 22,674 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.

The commencement date of the lease is October 1, 2023 and has a term of 96 months.

PROPERTY AND EQUIPMENT

13 unchanged sentences

(1) Lesser of lease term or estimated useful life

(2) See Note 4 for details

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.

(2) Fully depreciated at June 30, 2023.

The change in property and equipment in accrued liabilities was an increase of $ 3,969 and a decrease of $ 4,097 for the fiscal years ended June 30, 2023, and 2022, respectively.

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

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.

No material impairments of property and equipment were recorded in the fiscal years ended June 30, 2023, 2022, or 2021.

During fiscal 2022, the Company received an offer to purchase one of its facilities and management 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.

The sale of this facility was completed during fiscal 2023.

Total assets held for sale by the Company at June 30, 2023, were $ 0 .

3 unchanged sentences

Goodwill, acquired during the year — —

Goodwill, transferred during the year 1

Goodwill, adjustments related to dispositions — —

7 unchanged sentences

Goodwill, acquired during the year — —

Goodwill, transferred during the year 1

Goodwill, adjustments related to dispositions — —

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 in fiscal 2021 between the two based upon the estimated fair value of that line of business.

Goodwill acquired during fiscal 2023 and 2022 was $ 117,339 and $ 0 , respectively.

19 unchanged sentences

Computer software includes the unamortized cost of commercial software products developed or acquired by the Company, which are capitalized and amortized over useful lives generally ranging from 5 to 15 years.

Amortization expense for computer software totaled $ 105,036 , $ 99,305 , and $ 92,460 for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

During fiscal 2020, computer software projects totaling $ 8,710 , primarily related to Enterprise Risk Mitigation Solution and Payments Hub, were written off and are 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.

Amortization expense for computer software totaled $ 123,210 , $ 105,036 , and $ 99,305 for the fiscal years ended June 30, 2023,

2022, and 2021, respectively.

There were no material impairments in fiscal years ended June 30, 2023, 2022, and 2021.

9 unchanged sentences

2028 31,200 7,821 1,157 40,178

The Company had $ 67 outstanding short-term debt and $ 115,000 outstanding long-term debt at June 30, 2022, related to financing leases and the revolving credit facility.

The Company had no outstanding short-term debt and $ 275,000 outstanding long-term debt at June 30, 2023, related to credit facilities.

The Company had $ 67 outstanding short-term debt and $ 115,000 outstanding long-term debt at June 30, 2022.

Revolving credit facility

On February 10, 2020, the Company entered into a five-year senior, unsecured revolving credit facility.

The credit facility allows for borrowings of up to $ 300,000 , which may be increased by the Company at any time until maturity to $ 700,000 .

The credit facility bears interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S.

Bank prime rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50 % and (iv) 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 and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit facility agreement.

Credit facilities

On August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced the prior credit facility described below.

The credit agreement allows for borrowings of up to $ 600,000 , which may be increased to $ 1,000,000 by the Company at any time until maturity.

The credit agreement bears interest at a variable rate equal to (a) a rate based on an adjusted Secured Overnight Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50 % per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 1.0 %), plus an applicable percentage in each case determined by the Company's leverage ratio.

The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement.

As of June 30, 2023, the Company was in compliance with all such covenants.

The revolving credit facility terminates February 10, 2025 .

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.

The amended and restated credit facility terminates August 31, 2027 .

There was $ 95,000 outstanding under the amended and restated credit facility at June 30, 2023.

On June 30, 2022, there was a $ 115,000 outstanding balance on the prior credit facility that was entered into on February 10, 2020.

The prior credit facility was a five-year senior, unsecured revolving credit facility.

The prior credit facility allowed for borrowings of up to $ 300,000 , which could be increased by the Company to $ 700,000 at any time until maturity.

The prior credit facility bore interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S.

The prior credit facility was guaranteed by certain subsidiaries of the Company and was subject to various financial covenants that required the Company to maintain certain financial ratios as defined in the prior credit agreement.

As of June 30, 2022, the Company was in compliance with all such covenants.

The prior credit facility's termination date was February 10, 2025 .

Term loan facility

On May 16, 2023, the Company entered into a term loan credit agreement with a syndicate of financial institutions, with an original principal balance of $ 180,000 .

Borrowings under the term loan facility bear interest at a variable rate equal to (a) a rate based on an adjusted SOFR term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50 % per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 0.75 %), plus an applicable percentage in each case determined by the Company's leverage ratio.

The term loan credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the term loan credit agreement.

As of June 30, 2023, the Company was in compliance with all such covenants.

The term loan credit agreement has a maturity date of May 16, 2025 .

There was $ 180,000 outstanding under the term loan at June 30, 2023.

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up to $ 5,000 and bears interest at the prime rate less 1.0 %.

The credit line was renewed in May 2019 and modified in March 2021 to extend the expiration to April 30, 2023 .

The credit line was renewed in May 2019 and modified in May 2023 to extend the expiration to April 30, 2025 .

There was no balance outstanding at June 30, 2023, or 2022.

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Deferred tax liabilities:

Accelerated tax depreciation ( 33,390 ) ( 37,066 )

Accelerated tax amortization ( 192,187 ) ( 175,804 )

Property and equipment depreciation ( 27,788 ) ( 33,390 )

Intangibles, software development, and research and development tax amortization ( 136,045 ) ( 192,187 )

Contract and service costs ( 119,201 ) ( 104,139 )

18 unchanged sentences

The Company paid income taxes, net of refunds, of $ 145,862 , $ 60,553 , and $ 80,220 in fiscal 2023, 2022, and 2021, respectively.

The increase in cash taxes paid in the current fiscal year is the result of law changes that were included in the Tax Cuts and Jobs Act of 2017 that are effective in the current fiscal year.

The law changes require the capitalization of software development and research and development costs (IRC 174 costs) for tax purposes.

At June 30, 2023, the Company had $ 12,005 of gross unrecognized tax benefits, $ 10,453 of which, if recognized, would affect its effective tax rate.

7 unchanged sentences

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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federal income tax returns for fiscal 2020 and all subsequent years remain subject to examination as of June 30, 2023, 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.

state income tax returns that remain subject to examination as of June 30, 2023, 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 — $ 4,500 within twelve months of June 30, 2023.

1 unchanged sentence

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

All billings to customers are due 30 days from date of billing.

Billings to customers are typically due 30 days from date of billing.

Reserves are maintained for potential credit losses.

7 unchanged sentences

These income tax benefits included income tax net excess benefits from stock option exercises and restricted stock vestings of $ 1,109 , $ 652 , and $ 719 for the fiscal years ended June 30, 2023, 2022, and 2021, respectively.

Stock Option Awards

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

1 unchanged sentence

The maximum number of shares authorized for issuance under the plan is 3,000 .

For stock options, terms and vesting periods of the options were determined by the Compensation Committee of the Board of Directors when granted.

The option period must expire not more than ten years from the options grant date.

Stock option awards

Under the 2015 EIP, terms and vesting periods of the stock options are determined by the Compensation Committee of the Board of Directors when granted.

The options granted under this plan are exercisable beginning three years after grant 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 10 years after grant.

A summary of option plan activity under the plan is as follows:

Number of Shares Weighted Average Exercise Price Aggregate

Outstanding July 1, 2019 32 $ 87.27

Forfeited — —

Exercised ( 10 ) 87.27

Outstanding July 1, 2020 22 87.27

Forfeited — —

Exercised — —

Outstanding July 1, 2021 22 87.27

Forfeited — —

Exercised ( 10 ) 87.27

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

Vested and Expected to Vest June 30, 2022 12 $ 87.27 $ 1,084

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

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.

During fiscal 2023, there were no options granted, forfeited, or exercised, and at June 30, 2023, 12 options were outstanding at a weighted average exercise price of $ 87.27 with an aggregate intrinsic value of $ 936 .

During fiscal 2022, there were no options granted or forfeited, and 10 options were exercised at a weighted average exercise price of $ 87.27 with a total intrinsic value of $ 1,005 .

At June 30, 2022, 12 options were outstanding at a weighted average exercise price of $ 87.27 .

During fiscal 2021, there were no options granted, forfeited, or exercised, and at June 30, 2021, 22 options were outstanding at a weighted average exercise price of $ 87.27 .

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.

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

The risk-free interest rate used in the Company's estimate was determined from external data, while volatility, expected life, and dividend yield assumptions were derived from its historical experience with share-based payment arrangements.

The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

At June 30, 2023, there was no compensation cost yet to be recognized related to outstanding options.

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 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.

The plan expired on November 1, 2015.

Up to 3,000 shares of common stock were available for issuance under the plan.

The 2015 EIP was adopted by the Company on November 10, 2015, for its employees.

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

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:

Share awards Shares Weighted

Outstanding July 1, 2019 6 $ 87.27

Vested ( 6 ) 87.27

Forfeited — —

Outstanding July 1, 2020 — —

Forfeited — —

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.

As a result, the weighted-average fair value of the non-vested share awards was based on the fair market value of the Company’s equity shares on the grant date, less the present value of the expected future dividends to be declared during the restriction period, consistent with the methodology for calculating compensation expense on such awards.

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.

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.

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:

Restricted stock unit and performance unit awards

With respect to awards of restricted stock units and performance units, it is the intention of the Company to settle the unit awards in shares of the Company’s stock.

Restricted stock unit awards (which are unit awards that have service requirements only and are not tied to performance measures) generally vest over a period of 1 to 3 years.

Performance unit awards are awards that have performance measures in addition to service requirements.

The following table summarizes non-vested restricted stock unit awards and performance unit awards as of June 30, 2023, as well as activity for the fiscal year then ended:

Unit awards Shares Weighted

4 unchanged sentences

Vested ( 71 ) 145.50

( 55 ) 189.33

Outstanding July 1, 2022 303 166.50

4 unchanged sentences

2 Forfeited includes restricted stock unit awards and performance unit awards forfeited for service requirements not met and performance unit awards not settled due to underachievement of performance measures.

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

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.

Of the 136 unit awards granted in fiscal 2023, 90 were restricted stock unit awards and 46 were performance unit awards.

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

Of the remaining performance unit awards granted in fiscal 2023, 17 of these performance 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 performance 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 performance unit awards will be determined based on the expansion of the Company's non-GAAP operating margin over the three-year vesting period compared against goal thresholds as defined in the award agreement.

25 of the performance 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.

The remaining 4 performance unit awards had other performance targets.

Per the Company's award vesting and settlement provisions, the performance unit 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 years 2023 and 2022.

For fiscal year 2021, TSR was in comparison to two separate groups—a custom peer group approved by the Human Capital and Compensation Committee and the Standard & Poor's 1500 Information Technology Index ("S&P 1500 IT Index") participants.

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.

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:

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

Year Ended June 30,

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Beginning average percentile rank for TSR 30 %

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

1 For fiscal 2023 and 2022, S&P 1500 S&S Index participants were included in the Compensation Peer Group.

At June 30, 2023, there was $ 21,661 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 1.01 years.

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.

The fair values of restricted stock units and performance units at release totaled $ 24,931 , $ 12,139 , and $ 21,652 for the fiscal years ended June 30, 2023, 2022, and 2021, respectively.

EARNINGS PER SHARE

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Weighted average shares outstanding for basic earnings per share 72,918 73,324 75,546

Dilutive effect of stock options, restricted stock units, and restricted stock 162 112 147

Dilutive effect of stock options, restricted stock units, and performance units 178 162 112

Weighted average shares outstanding for diluted earnings per share 73,096 73,486 75,658

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Per share information is based on the weighted average number of common shares outstanding for each of the fiscal years.

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

Stock options, restricted stock units, and performance units have been included in the calculation of earnings per share to the extent they are dilutive.

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

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The total matching contributions for the Plan were $ 29,308 , $ 28,259 , and $ 26,783 for the fiscal years ended June 30, 2023 , 2022, and 2021, respectively.

BUSINESS ACQUISITIONS

On July 1, 2019 , the Company acquired all of the equity interest of Geezeo for $ 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.

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

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 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.

BUSINESS ACQUISITION

On August 31, 2022 , the Company acquired all of the equity interest in Payrailz.

The final purchase price, following customary post-closing adjustments to the extent actual closing date working capital, cash, debt, and unpaid seller transaction expenses exceeded or were less than the amounts estimated at closing, was $ 230,205 .

Pursuant to the merger agreement for the transaction, $ 48,500 of the purchase price was placed in an escrow account at the closing, consisting of $ 2,500 for any final purchase price adjustments owed by the sellers, which amount was released to the sellers on December 15, 2022, in connection with post-closing adjustments, and $ 46,000 for indemnification matters under the merger agreement.

The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was originally funded by our revolving line of credit (Note 7) and cash generated from operations.

Payrailz provides cloud-native, API-first, AI-enabled consumer and commercial digital payment solutions and experiences that enable money to be moved in the moment of need.

Management has completed a preliminary purchase price allocation and assessment of the fair value of acquired assets and liabilities assumed.

The recognized amounts of identifiable assets acquired, and liabilities assumed, based on their fair values as of August 31, 2022 , and taking into account the post-closing purchase price adjustment described above, are set forth below:

Current assets $ 1,851

Identifiable intangible assets 119,868

Deferred revenue ( 8,104 )

Total other liabilities assumed ( 749 )

Total identifiable net assets 112,866

Goodwill 117,339

Net assets acquired $ 230,205

The amounts shown above include a measurement period adjustment made during the second quarter of fiscal 2023 related to a working capital adjustment.

The amounts shown above may change as management continues to evaluate the income tax implications of this business combination.

The goodwill of $ 117,339 arising from this acquisition consists largely of the growth potential, synergies, and economies of scale expected from combining the operations of the Company with those of Payrailz, together with the value of Payrailz's assembled workforce.

The goodwill from this acquisition has been allocated to our Payments segment and $ 117,339 is expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $ 6,109 , computer software of $ 112,505 , and other intangible assets of $ 1,254 .

The amortization period for acquired customer relationships, computer software, and other intangible assets is over a term of 15 years, 10 years, and 15 years, respectively.

Current assets were inclusive of cash acquired of $ 577 .

The fair value of current assets acquired included accounts receivable of $ 978 , none of which were expected to be uncollectible.

Costs incurred related to the acquisition of Payrailz during the fiscal year ended June 30, 2023, totaled $ 706 for administrative and professional services, travel, and other fees, and were expensed as incurred and reported within cost of revenue and selling, general, and administrative expense.

The Company's condensed consolidated statements of income for the fiscal year ended June 30, 2023, included revenue of $ 8,482 , and after-tax net loss of $ 18,672 , resulting from Payrailz's operations.

The accompanying consolidated statements of income for the fiscal year ended June 30, 2023, 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 fiscal years ended June 30, 2023, and 2022, is presented as if this acquisition had occurred at the beginning of the prior period presented.

The pro forma net income includes estimated incremental amortization expense of $ 1,957 and $ 10,417 for the fiscal years ended June 30, 2023, and 2022, respectively.

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 this period, or the results that may be obtained in the future as a result of the acquisition.

Pro forma Pro forma

Revenue $ 2,079,329 $ 1,950,460

Net Income 364,066 343,626

REPORTABLE SEGMENT INFORMATION

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

The Company is a leading provider of technology solutions and payment processing services primarily to community and regional financial institutions.

The Company’s operations are classified into four reportable segments:

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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 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.

During fiscal 2023, the Company transferred a product, Remit, from the Complementary segment to the Payments segment, due to better alignment with the Payments segment.

As a result of this transfer, adjustments were made during fiscal 2023 to reclassify related revenue and cost of revenue for the fiscal years ended June 30, 2022, and 2021, from the Complementary to the Payments segment.

Revenue reclassed for the fiscal years ended June 30, 2022, and 2021, were $ 12,049 and $ 11,007 , respectively.

Cost of revenue reclassed for the fiscal years ended June 30, 2022, and 2021, were $ 2,059 and $ 1,982 , respectively.

Immaterial adjustments were made in fiscal 2023 to reclassify revenue that was recognized in fiscal 2022 from the Complementary to the Corporate and Other segment.

Immaterial adjustments were also made in fiscal 2023 to reclassify cost of revenue that was recognized in fiscal 2022 from the Complementary to the Payments and Corporate and Other segments.

These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment.

Revenue reclassed for the fiscal year ended June 30, 2022, from Complementary to Corporate and Other was $ 4,917 .

Cost of revenue reclassed for the fiscal year ended June 30, 2022, from Complementary to Payments was $ 3,396 , and from Complementary to Corporate and Other was $ 403 .

Immaterial adjustments were made in fiscal 2023 to reclassify revenue that was recognized in fiscal 2021 from the Complementary to the Corporate and Other segment.

Immaterial adjustments were also made in fiscal 2023 to reclassify cost of revenue that was recognized in fiscal 2021 from the Complementary and Corporate and Other segments to the Payments segment.

These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment.

Revenue reclassed for the fiscal year ended June 30, 2021, from Complementary to Corporate and Other was $ 3,462 .

Cost of revenue reclassed for the fiscal year ended June 30, 2021, from Complementary to Payments was $ 2,523 , and from Corporate and Other to Payments was $ 789 .

June 30, 2023

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INCOME BEFORE INCOME TAXES $ 397,725

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

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

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 18, 2023 , the Company's Board of Directors declared a cash dividend of $ 0.52 per share on its common stock, payable on September 28, 2023 , to stockholders of record on September 8, 2023 .

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.

Voluntary departure incentive plan

In July 2023, the Company conducted a voluntary separation program for certain eligible employees.

The Company is expected to incur $ 17,000 to $ 18,000 in the fiscal 2024 quarter ending September 30, 2023, associated with this program.

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