Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

			Report of Independent Registered Public Accounting Firm			36
			Management's Annual Report on Internal Control over Financial Reporting			38
			Financial Statements
			Consolidated Statements of Income,
			Years Ended June 30, 2020, 2019, and 2018			39
			Consolidated Balance Sheets,
			June 30, 2020 and 2019			40
			Consolidated Statements of Changes in Stockholders' Equity,
			Years Ended June 30, 2020, 2019, and 2018			41
			Consolidated Statements of Cash Flows,
			Years Ended June 30, 2020, 2019, and 2018			42
			Notes to Consolidated Financial Statements			43

Financial Statement Schedules

There are no schedules included because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Jack Henry & Associates, Inc.

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, 2020 and 2019, 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, 2020, 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, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - estimating variable consideration and identification of and accounting for performance obligations

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company recorded revenue of $1.697 billion for the year ended June 30, 2020. The Company enters into contracts with its customers, which frequently contain multiple performance obligations and variable contract consideration. The amount of revenue recognized is based on the consideration the Company expects to receive in exchange for transferring goods and services to the customer. The Company’s contracts with its customers frequently contain some component of variable consideration. Management estimates variable consideration in its contract 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. At contract inception, management assesses the solutions and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a solution or service (or bundle of solutions or services) that is distinct - that is, if the solution or service is separately identifiable from other items in the arrangement and if the customer can benefit from the solution or service on its own or together with other resources that are readily available. The Company recognizes revenue when or as it satisfies each performance obligation by transferring control of a solution or service to the customer. Significant judgment in revenue recognition for these customer contracts include, where relevant, (i) the estimation of variable consideration, principally, the varying volume of transactional activity over long-term contracts, and (ii) the identification of and accounting for all performance obligations.

The principal considerations for our determination that performing procedures relating to the estimation of variable consideration and the identification of and accounting for performance obligations is a critical audit matter are significant judgment by management to estimate the variable consideration, principally, the varying volume of transactional activity and the identification of and accounting for all performance obligations in a contract. This in turn resulted in significant audit effort, a high degree of auditor judgment and subjectivity in performing our audit procedures and in evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including the estimation of variable consideration and identification of and accounting for each performance obligation. The procedures also included, among others, evaluating and testing management’s process for determining the variable consideration and testing the reasonableness of management’s estimation of variable consideration. Testing the estimation of variable consideration included evaluating the terms and conditions of the long-term contracts and the related significant assumptions used in the estimate of the variable consideration, principally, the varying volume of transactional activity. The procedures for testing the performance obligations and variable consideration included evaluation of the terms and conditions for a sample of contracts.

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri

August 25, 2020

We have served as the Company’s auditor since 2015.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Jack Henry & Associates, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.

The Company’s internal control over financial reporting includes policies and procedures pertaining to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. All internal controls, no matter how well designed, have inherent limitations. Therefore, even where internal control over financial reporting is determined to be effective, it can provide only reasonable assurance. Projections of any evaluation of effectiveness to future periods are subject to the risk controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

As of June 30, 2020, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, management has concluded the Company’s internal control over financial reporting as of June 30, 2020 was effective.

The Company’s internal control over financial reporting as of June 30, 2020 has been audited by the Company’s independent registered public accounting firm, as stated in their report appearing in this Item 8.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
			Year Ended
			June 30,
			2020						2019						2018
REVENUE			$	1,697,067					$	1,552,691					$	1,470,797
EXPENSES
Cost of Revenue			1,008,464						923,030						853,138
Research and Development			109,988						96,378						90,340
Selling, General, and Administrative			197,988						185,998						171,710
Gain on Disposal of Businesses			—						—						(1,894)
Total Expenses			1,316,440						1,205,406						1,113,294
OPERATING INCOME			380,627						347,285						357,503
INTEREST INCOME (EXPENSE)
Interest Income			1,137						876						575
Interest Expense			(688)						(926)						(1,920)
Total Interest Income (Expense)			449						(50)						(1,345)
INCOME BEFORE INCOME TAXES			381,076						347,235						356,158
PROVISION/ (BENEFIT) FOR INCOME TAXES			84,408						75,350						(8,876)
NET INCOME			$	296,668					$	271,885					$	365,034
Basic earnings per share			$	3.86					$	3.52					$	4.73
Basic weighted average shares outstanding			76,787						77,160						77,252
Diluted earnings per share			$	3.86					$	3.52					$	4.70
Diluted weighted average shares outstanding			76,934						77,347						77,585

See notes to consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
			June 30, 2020						June 30, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	213,345					$	93,628
Receivables, net			300,945						310,080
Income tax receivable			21,051						17,817
Prepaid expenses and other			95,525						106,466
Deferred costs			38,235						35,102
Assets held for sale			—						6,355
Total current assets			669,101						569,448
PROPERTY AND EQUIPMENT, net			273,432						272,474
OTHER ASSETS:
Non-current deferred costs			113,525						90,084
Computer software, net of amortization			340,466						318,969
Other non-current assets			220,591						134,743
Customer relationships, net of amortization			95,108						100,653
Other intangible assets, net of amortization			29,917						31,514
Goodwill			686,334						666,944
Total other assets			1,485,941						1,342,907
Total assets			$	2,428,474					$	2,184,829
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable			$	9,880					$	9,850
Accrued expenses			166,689						120,360
Notes payable and current maturities of long-term debt			115						—
Deferred revenues			318,161						339,752
Total current liabilities			494,845						469,962
LONG-TERM LIABILITIES:
Non-current deferred revenues			71,461						54,554
Deferred income tax liability			243,998						217,010
Debt, net of current maturities			208						—
Other long-term liabilities			68,274						14,290
Total long-term liabilities			383,941						285,854
Total liabilities			878,786						755,816
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued			—						—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,622,563 shares issued at June 30, 2020; 103,496,026 shares issued at June 30, 2019			1,036						1,035
Additional paid-in capital			495,005						472,029
Retained earnings			2,235,320						2,066,073
Less treasury stock at cost 26,992,903 shares at June 30, 2020; 26,507,903 shares at June 30, 2019			(1,181,673)						(1,110,124)
Total stockholders' equity			1,549,688						1,429,013
Total liabilities and equity			$	2,428,474					$	2,184,829

See notes to consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
			Year Ended June 30,
			2020						2019						2018
PREFERRED SHARES:			—						—						—
COMMON SHARES:
Shares, beginning of year			103,496,026						103,278,562						103,083,299
Shares issued for equity-based payment arrangements			52,336						141,071						118,865
Shares issued for Employee Stock Purchase Plan			74,201						76,393						76,398
Shares, end of year			103,622,563						103,496,026						103,278,562
COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of year			$	1,035					$	1,033					$	1,031
Shares issued for equity-based payment arrangements			—						1						1
Shares issued for Employee Stock Purchase Plan			1						1						1
Balance, end of year			$	1,036					$	1,035					$	1,033
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year			$	472,029					$	464,138					$	452,016
Shares issued for equity-based payment arrangements			—						235						174
Tax withholding related to share based compensation			(3,739)						(13,972)						(7,332)
Shares issued for Employee Stock Purchase Plan			9,832						9,039						7,522
Stock-based compensation expense			16,883						12,589						11,758
Balance, end of year			$	495,005					$	472,029					$	464,138
RETAINED EARNINGS:
Balance, beginning of year*			$	2,066,073					$	1,912,933					$	1,652,920
Net income*			296,668						271,885						365,034
Dividends			(127,421)						(118,745)						(105,021)
Balance, end of year			$	2,235,320					$	2,066,073					$	1,912,933
TREASURY STOCK:
Balance, beginning of year			$	(1,110,124)					$	(1,055,260)					$	(1,006,274)
Purchase of treasury shares			(71,549)						(54,864)						(48,986)
Balance, end of year			$	(1,181,673)					$	(1,110,124)					$	(1,055,260)
TOTAL STOCKHOLDERS' EQUITY			$	1,549,688					$	1,429,013					$	1,322,844
Dividends declared per share			$	1.66					$	1.54					$	1.36

See notes to consolidated financial statements.

*Retained earnings as of June 30, 2018 and net income for fiscal year 2018 have been adjusted as a result of the adoption of ASC 606.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
			Year Ended
			June 30,
			2020						2019						2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income			$	296,668					$	271,885					$	365,034
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation			52,206						47,378						47,975
Amortization			119,599						113,255						104,011
Change in deferred income taxes			24,581						7,604						(74,884)
Expense for stock-based compensation			16,883						12,589						11,758
(Gain)/loss on disposal of assets and businesses			4,735						161						(954)
Changes in operating assets and liabilities:
Change in receivables			10,540						(11,777)						21,489
Change in prepaid expenses, deferred costs and other			(25,759)						(62,165)						(82,663)
Change in accounts payable			(47)						(7,526)						6,922
Change in accrued expenses			19,720						31,889						7,091
Change in income taxes			(3,723)						4,179						5,108
Change in deferred revenues			(4,871)						23,656						1,255
Net cash from operating activities			510,532						431,128						412,142
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired			(30,376)						(19,981)						(137,562)
Capital expenditures			(53,538)						(53,598)						(40,135)
Proceeds from the sale of businesses			—						—						350
Proceeds from the sale of assets			11,130						127						306
Customer contracts acquired			—						(20)						—
Purchased software			(6,710)						(6,049)						(13,138)
Computer software developed			(117,262)						(111,114)						(96,647)
Purchase of investments			(1,150)						—						(5,000)
Net cash from investing activities			(197,906)						(190,635)						(291,826)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities			55,000						35,000						125,000
Repayments on credit facilities and financing leases			(55,033)						(35,000)						(175,000)
Purchase of treasury stock			(71,549)						(54,864)						(48,986)
Dividends paid			(127,421)						(118,745)						(105,021)
Proceeds from issuance of common stock upon exercise of stock options			—						237						176
Tax withholding payments related to share based compensation			(3,739)						(13,973)						(7,333)
Proceeds from sale of common stock			9,833						9,040						7,523
Net cash from financing activities			(192,909)						(178,305)						(203,641)
NET CHANGE IN CASH AND CASH EQUIVALENTS			$	119,717					$	62,188					$	(83,325)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			$	93,628					$	31,440					$	114,765
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	213,345					$	93,628					$	31,440

See notes to consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Per Share Amounts)

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

DESCRIPTION OF THE COMPANY

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

CONSOLIDATION

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

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

The COVID-19 pandemic has adversely impacted global economic activity and has contributed to significant volatility in financial markets during 2020 (see “COVID-19 Impact and Response” in Item 1. Business and in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations).

These changing conditions may affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the valuations of the Company’s long-lived assets, goodwill, and definite-lived intangible assets. If conditions significantly deteriorate, changes in any assumptions used may result in future goodwill impairment charges that, if incurred, could have a material adverse impact on the Company’s results of operations, total assets and total equity in the period recognized. Events and changes in circumstances arising subsequent to June 30, 2020, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods.

REVENUE RECOGNITION

The Company generates "Services and Support" revenue through software licensing and related services, outsourcing core and complementary software solutions, professional services, and hardware sales. 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

Identification of Performance Obligations

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

Determination of Transaction Price

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

degree of uncertainty as to the final consideration amount. Significant judgment is used in the estimate of variable consideration of customer contracts that are long-term and include uncertain transactional volumes.

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

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

Allocation of Transaction Price

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

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

Processing

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

Outsourcing and Cloud

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

Product Delivery and Services

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

In-House Support

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

COMPUTER SOFTWARE DEVELOPMENT

The Company capitalizes new product development costs incurred for software to be sold from the point at which technological feasibility has been established through the point at which the product is ready for general availability. Software development costs that are capitalized are evaluated on a product-by-product basis annually and are assigned an estimated economic life based on the type of product, market characteristics, and maturity of the market for that particular product. These costs are amortized based on current and estimated future revenue from the product or on a straight-line basis, whichever yields greater amortization expense. All of this amortization expense is included within components of operating income, primarily cost of revenue.

The Company capitalizes development costs for internal use software beginning at the start of application development. Amortization begins on the date the software is placed in service and the amortization period is based on estimated useful life.

CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents.

ACCOUNTS RECEIVABLE

Receivables are recorded at the time of billing. A reasonable estimate of the realizability of customer receivables is made through the establishment of an allowance for doubtful accounts, which is estimated based on a combination of write-off history, aging analysis, and any specifically known collection issues.

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets.

Intangible assets consist of goodwill, customer relationships, computer software, and trade names acquired in business acquisitions in addition to internally developed computer software. The amounts are amortized, with the exception of those with an indefinite life (goodwill), over an estimated economic benefit period, generally three to twenty years.

The Company reviews its long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances have indicated that the carrying amount of its assets might not be recoverable. The Company evaluates goodwill for impairment of value on an annual basis as of January 1 and between annual tests if events or changes in circumstances indicate that the asset might be impaired.

PURCHASE OF INVESTMENT

The Company has invested $6,000 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. The fair value of this investment has not been estimated, as estimation is not practicable. There have been no events or changes in circumstances that would indicate an impairment and no price changes resulting from observing a similar or identical investment. An impairment and/or an observable price change would be an adjustment to recorded cost. Fair value will not be estimated unless there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

COMPREHENSIVE INCOME

Comprehensive income for each of the fiscal years ending June 30, 2020, 2019, and 2018 equals the Company’s net income.

REPORTABLE SEGMENT INFORMATION

In accordance with U.S. GAAP, the Company's operations are classified as four reportable segments: Core, Payments, Complementary, and Corporate and Other (see Note 14). Substantially all the Company’s revenues are derived from operations and assets located within the United States of America.

COMMON STOCK

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or short-term borrowings on its existing credit facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At June 30, 2020, there were 26,993 shares in treasury stock and the Company had the remaining authority to repurchase up to 2,998 additional shares. The total cost of treasury

shares at June 30, 2020 is $1,181,673. During fiscal 2020, the Company repurchased 485 treasury shares for $71,549. At June 30, 2019, there were 26,508 shares in treasury stock and the Company had authority to repurchase up to 3,483 additional shares.

EARNINGS PER SHARE

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

INCOME TAXES

Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance would be established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expense are recognized on the full amount of deferred benefits for uncertain tax positions. The Company's policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

In August of 2018, the FASB issued ASU No. 2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40), which broadens the scope of Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with costs for internal-use software. The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The required ASU effective date for the Company is July 1, 2020, with early adoption permitted. The Company early-adopted ASU No. 2018-15 for its fiscal 2020 third quarter. The Company chose prospective adoption and there was no material impact on its consolidated financial statements for the quarter or year-to-date period.

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

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

The adoption of the standard resulted in the recognition of lease liabilities of $77,393 and right-to-use assets of $74,084 as of July 1, 2019. Adoption of the standard did not have a material impact on the Company’s condensed consolidated statements of income or condensed consolidated statements of cash flows.

Not Adopted at Fiscal Year End

In December of 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions and simplifies other requirements of Topic 740 guidance. The ASU will be effective for the Company on July 1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU No. 2019-12 when required, or sooner as allowed, and is assessing the timing of adoption and evaluating the impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 will be effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU No. 2017-04 on July 1, 2020 and does not expect the adoption to have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, with an allowance for credit losses valuation account that is deducted to present the net carrying value at the amount expected to be collected. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently in the process of evaluating the impacts of adopting this standard, including the processes, systems, data and controls that will be necessary to estimate credit reserves for impacted areas. Financial assets held by the Company subject to the “expected credit loss” model prescribed by the standard include trade and other receivables and contract assets. While the Company continues to evaluate the expected impact on its consolidated financial statements and related disclosures, it currently expects the adoption of this guidance will result in an acceleration in the timing for recognition of credit losses, and may also result in an increase in the reserve for these credit losses due to the requirement to record upfront the losses that are expected over the remaining contractual lives of its financial assets. The Company adopted ASU No. 2016-13 on July 1, 2020 and does not expect the adoption to have a material impact on its consolidated financial statements.

NOTE 2. REVENUE AND DEFERRED COSTS

Revenue Recognition

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

Disaggregation of Revenue

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 14, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

			Year Ended June 30,
			2020						2019						2018
Outsourcing and Cloud			$	464,066					$	405,359					$	361,922
Product Delivery and Services			259,110						231,982						251,743
In-House Support			328,275						321,148						307,074
Services and Support			1,051,451						958,489						920,739
Processing			645,616						594,202						550,058
Total Revenue			$	1,697,067					$	1,552,691					$	1,470,797

Contract Balances

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

			June 30, 2020						June 30, 2019
Receivables, net			$	300,945					$	310,080
Contract Assets- Current			21,609						21,446
Contract Assets- Non-current			54,293						50,640
Contract Liabilities (Deferred Revenue)- Current			318,161						339,752
Contract Liabilities (Deferred Revenue)- Non-current			71,461						54,554

Contract assets primarily result from revenue being recognized when or as control of a solution or service is transferred to the customer, but where invoicing is contingent upon the completion of other performance obligations or payment terms differ from the provisioning of services. The current portion of contract assets is reported within prepaid expenses and other in the consolidated balance sheet, and the non-current portion is included in other non-current assets. Contract liabilities (deferred revenue) primarily relate to consideration received from customers in advance of delivery of the related goods and services to the customer. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

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

For the fiscal years ended June 30, 2020, 2019, and 2018, the Company recognized revenue of $259,887, $265,946, and $269,593, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

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

Transaction Price Allocated to Remaining Performance Obligations

As of June 30, 2020, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $4,204,569. The Company expects to recognize approximately 28% over the next 12 months, 19% in 13-24 months, and the balance thereafter.

Contract Costs

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

Capitalized costs totaled $271,010 and $231,273, at June 30, 2020 and 2019, respectively.

During the fiscal years ended June 30, 2020, 2019, and 2018, amortization of deferred contract costs totaled $117,763, $110,894, and $94,337 respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

NOTE 3. LEASES

The Company adopted ASU 2016-02 and its related amendments (collectively known as “ASC 842”) on July 1, 2019 using the optional transition method in ASU 2018-11. Therefore, the reported results for the fiscal year ended June 30, 2020 reflect the application of ASC 842 while the reported results for the years ended June 30, 2019 and 2018 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases (“ASC 840”), in effect for the prior period.

The Company determines if an arrangement is a lease, 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 is used to determine lease classification as an operating or finance lease and is used to calculate straight-line expense for operating leases. The Company elected the package of practical expedients permitted under the transition guidance within ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs.

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

The Company leases certain office space, data centers and equipment. The Company’s leases have remaining terms of 1 to 13 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The depreciable life of the ROU asset and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option.

At June 30, 2020, the Company had operating lease assets of $63,948 and net financing lease assets of $318. Total operating lease liabilities of $68,309 were comprised of current operating lease liabilities of $11,712 and

noncurrent operating lease liabilities of $56,597. Total financing lease liabilities of $323 were comprised of current financing lease liabilities of $115 and noncurrent financing lease liabilities of $208.

Operating lease assets are included within other non-current assets and operating lease liabilities are included 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 $13,719 as of June 30, 2020. Financing lease assets are included within property and equipment, net and financing lease liabilities are included with 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 $38 as of June 30, 2020.

Operating lease costs for the fiscal year ended June 30, 2020 were $16,029. Financing lease costs for the fiscal year ended June 30, 2020 were $41. Total operating and financing lease costs for the fiscal year included variable lease costs of approximately $4,017.

Operating and financing 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 right-of-use asset, in the Company’s consolidated statement of income.

Operating cash flows for payments on operating leases for the twelve months ended June 30, 2020 were $14,348 and right-of-use assets obtained in exchange for operating lease liabilities were $4,212. Financing cash flows for payments on financing leases for the twelve months ended June 30, 2020 were $33.

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

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at June 30, 2020*:

Due dates						Future Minimum Rental Payments
2021						13,444
2022						12,447
2023						10,790
2024						8,635
2025						5,864
Thereafter						24,369
Total lease payments						$	75,549
Less: interest						(7,240)
Present value of lease liabilities						$	68,309

*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. At June 30, 2020, there were $18 in legally binding lease payments for a lease signed but not yet commenced. The commencement date of the lease is July 1, 2020 and has a term of 36 months.

Maturity of Lease Liabilities under ASC 840

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

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

Rent expense for all operating leases was $15,196 and $10,835 during the years ended June 30, 2019 and 2018, respectively.

NOTE 4. PROPERTY AND EQUIPMENT

The classification of property and equipment, together with their estimated useful lives is as follows:

			June 30,
			2020						2019						Estimated Useful Life
Land (1)			$	22,885					$	23,243
Land improvements (1)			23,765						25,209						5 - 20 years
Buildings (1)			146,193						147,220						20 - 30 years
Leasehold improvements			56,106						48,478						5 - 30 years			(2)
Equipment and furniture			388,413						365,101						3 - 10 years
Aircraft and equipment			39,824						39,293						4 - 10 years
Construction in progress			279						12,411
Finance lease right of use asset (3)			355						—
			677,820						660,955
Less accumulated depreciation			404,388						388,481
Property and equipment, net			$	273,432					$	272,474

(1) Excludes assets held for sale in 2019

(2) Lesser of lease term or estimated useful life

(3) See Note 3 for details

The change in property and equipment in accrued liabilities was $44 and $14,315 for the fiscal years ended June 30, 2020 and 2019, respectively. The change in property and equipment acquired through capital leases was $355 and $0 for the fiscal years ended June 30, 2020 and 2019, respectively. These amounts were excluded from capital expenditures on the statements of cash flows.

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

At June 30, 2019, the Company had assets held for sale on its consolidated balance sheet related to its Houston, TX, and Elizabethtown, KY, facilities totaling $6,355 (excluded from the above table for fiscal 2019). These assets held for sale were sold during fiscal 2020. At June 30, 2020, the Company had no assets held for sale.

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.

NOTE 5. OTHER ASSETS

Goodwill

The carrying amount of goodwill for the fiscal years ended June 30, 2020 and 2019, by reportable segments, is as follows:

			June 30,
Core			2020						2019
Beginning balance			$	199,956					$	195,956
Goodwill, acquired during the year			—						4,000
Goodwill, adjustments related to dispositions			—						—
Ending balance			$	199,956					$	199,956
Payments
Beginning balance			$	325,326					$	325,204
Goodwill, acquired during the year			—						122
Goodwill, adjustments related to dispositions			—						—
Ending balance			$	325,326					$	325,326
Complementary
Beginning balance			$	141,662					$	128,769
Goodwill, acquired during the year			19,390						12,893
Goodwill, adjustments related to dispositions			—						—
Ending balance			$	161,052					$	141,662

Goodwill acquired during fiscal 2020 totaled $19,390, all resulting from the purchase of Geezeo. The goodwill 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 their assembled workforces. No goodwill has been assigned to the Company's Corporate and Other reportable segment (see Note 13. Business Acquisitions).

Goodwill acquired during fiscal 2019 totaled $17,014, with $12,893 of that resulting from the purchase of BOLTS, $3,999 resulting from the purchase of Agiletics, and the remainder resulting from a measurement period adjustment on the Ensenta valuation. The goodwill arising from these acquisitions consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of BOLTS and Agiletics, together with the value of their assembled workforces. No goodwill was assigned to the Company's Corporate and Other reportable segment (see Note 13. Business Acquisitions).

Other Intangible Assets

Information regarding other identifiable intangible assets is as follows:

			June 30, 2020
			Gross Carrying Amount						Accumulated Amortization						Net
Customer relationships			$	316,034					$	(220,926)					$	95,108
Computer software			$	860,540					$	(520,074)					$	340,466
Other intangible assets:			$	101,772					$	(71,855)					$	29,917
			June 30, 2019
			Gross Carrying Amount						Accumulated Amortization						Net
Customer relationships			$	305,512					$	(204,859)					$	100,653
Computer software			$	759,671					$	(440,702)					$	318,969
Other intangible assets:			$	93,471					$	(61,957)					$	31,514

Customer relationships have useful lives ranging from 5 to 20 years.

Computer software includes cost of software to be sold, leased, or marketed of $142,493 and costs of internal-use software of $197,973 at June 30, 2020. At June 30, 2019, costs of software to be sold, leased, or marketed totaled $135,743, and costs of internal-use software totaled $183,226.

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 $92,460, $82,605, and $72,859 for the fiscal years ended June 30, 2020, 2019, and 2018, respectively. Computer software projects totaling $8,710, primarily related to Enterprise Risk Mitigation Solution and Payments Hub, were written off during the fiscal year ended June 30, 2020 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. There were no material impairments in fiscal years ended June 30, 2019 and 2018.

The Company's other intangible assets have useful lives ranging from 3 to 20 years.

Amortization expense for all intangible assets was $119,599, $113,255, and $104,011 for the fiscal years ended June 30, 2020, 2019, and 2018, respectively. The estimated aggregate future amortization expense for each of the next five years for all intangible assets remaining as of June 30, 2020, is as follows:

Years Ending June 30,			Computer Software						Customer Relationships						Other Intangible Assets						Total
2021			$	78,873					$	13,625					$	9,083					$	101,581
2022			62,311						12,314						6,157						80,782
2023			47,426						9,721						3,122						60,269
2024			31,396						8,339						1,668						41,403
2025			13,293						7,885						1,375						22,553

NOTE 6. DEBT

The Company had $115 outstanding short-term debt and $208 outstanding long-term debt at June 30, 2020, both related to financing leases. The Company had no outstanding short-term or long-term debt at June 30, 2019.

Revolving credit facility

On February 10, 2020, the Company entered into a new five-year senior, unsecured revolving credit facility. The new 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 new 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 new 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. As of June 30, 2020, the Company was in compliance with all such covenants. The new revolving credit facility terminates February 10, 2025. There was no outstanding balance under the new credit facility at June 30, 2020.

The Company also terminated its prior unsecured credit agreement on February 10, 2020. There was no outstanding balance under the terminated credit facility at June 30, 2019.

Other lines of credit

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

Interest

The Company paid interest of $475, $691, and $1,747 during the fiscal years ended June 30, 2020, 2019, and 2018, respectively.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Property and Equipment

The Company had no commitments at June 30, 2020 and an estimated $2,673 of commitments at June 30, 2019 to purchase property and equipment.

NOTE 8. INCOME TAXES

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

			Year Ended June 30,
			2020						2019						2018
Current:
Federal			$	46,137					$	54,800					$	56,060
State			13,690						12,946						9,948
Deferred:
Federal			21,130						4,177						(80,509)
State			3,451						3,427						5,625
			$	84,408					$	75,350					$	(8,876)

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

			June 30,
			2020						2019
Deferred tax assets:
Contract and service revenues			$	14,469					$	13,450
Expense reserves (bad debts, compensation, and payroll tax)			14,096						14,325
Leasing liabilities			17,122						—
Net operating loss and tax credit carryforwards			3,786						2,713
Other, net			2,327						851
Total gross deferred tax assets			51,800						31,339
Valuation allowance			(473)						(415)
Net deferred tax assets			51,327						30,924
Deferred tax liabilities:
Accelerated tax depreciation			(39,619)						(31,846)
Accelerated tax amortization			(166,343)						(154,633)
Contract and service costs			(73,331)						(61,455)
Leasing right-of-use assets			(16,032)						—
Total gross deferred liabilities			(295,325)						(247,934)
Net deferred tax liability			$	(243,998)					$	(217,010)

The following analysis reconciles the statutory federal income tax rate to the effective income tax rates reflected above:

			Year Ended June 30,
			2020						2019						2018
Computed "expected" tax expense			21.0		%				21.0		%				28.1		%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal income tax benefits			3.6		%				3.7		%				2.9		%
Research and development credit			(2.4)		%				(2.5)		%				(2.0)		%
Domestic production activities deduction			—		%				—		%				(1.4)		%
TCJA deferred tax rate re-measurement			—		%				—		%				(30.0)		%
Tax effects of share-based payments			(0.1)		%				(1.4)		%				(0.8)		%
Other (net)			—		%				0.9		%				0.7		%
			22.1		%				21.7		%				(2.5)		%

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 ("TCJA") was enacted into law. The TCJA included numerous provisions that impacted the Company, including reducing the U.S. federal tax rate, eliminating the Domestic Production Activities Deduction, and providing expanded asset expensing. The TCJA reduced the U.S. federal statutory corporate income tax rate from 35% to 21%, effective January 1, 2018. For fiscal 2018, a blended U.S. federal statutory tax rate of approximately 28% applied to the Company.

As of June 30, 2020, the Company has $8,108 of gross federal net operating loss (“NOL”) carryforwards pertaining to the acquisition of Goldleaf Financial Solutions, Inc., BOLTS, and Geezeo, which are expected to be utilized after the application of IRC Section 382. Separately, as of June 30, 2020, the Company has state NOL carryforwards with a tax-effected value of $532. The federal and state losses have varying expiration dates, ranging from fiscal 2021 to 2040. Based on state tax rules which restrict utilization of these losses, the Company believes it is more likely than not that $473 of these losses will expire unutilized. Accordingly, a valuation allowance of $473 and $415 has been recorded against the state net operating losses as of June 30, 2020 and 2019, respectively.

The Company paid income taxes, net of refunds, of $63,692, $62,005, and $60,382 in fiscal 2020, 2019, and 2018, respectively.

At June 30, 2020, the Company had $10,112 of gross unrecognized tax benefits, $9,434 of which, if recognized, would affect its effective tax rate. At June 30, 2019, the Company had $10,495 of unrecognized tax benefits, $9,892 of which, if recognized, would affect its effective tax rate. The Company had accrued interest and penalties of $1,565 and $1,514 related to uncertain tax positions at June 30, 2020 and 2019, respectively. The income tax provision included interest expense and penalties (or benefits) on unrecognized tax benefits of $38, $128, and $165 in the fiscal years ended June 30, 2020, 2019, and 2018, respectively.

A reconciliation of the unrecognized tax benefits for the fiscal years ended June 30, 2020 and 2019 follows:

			Unrecognized Tax Benefits
Balance at July 1, 2018			$	10,227
Additions for current year tax positions			1,135
Reductions for current year tax positions			(40)
Additions for prior year tax positions			562
Reductions for prior year tax positions			(531)
Additions related to business combinations			43
Settlements			(25)
Reductions related to expirations of statute of limitations			(876)
Balance at June 30, 2019			10,495
Additions for current year tax positions			1,451
Additions for prior year tax positions			867
Additions related to business combinations			192
Reductions related to expirations of statute of limitations			(2,893)
Balance at June 30, 2020			$	10,112

The U.S. federal and state income tax returns for fiscal 2017 and all subsequent years remain subject to examination as of June 30, 2020 under statute of limitations rules. The Company anticipates that potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $3,500 - $4,500 within twelve months of June 30, 2020.

NOTE 9. INDUSTRY AND SUPPLIER CONCENTRATIONS

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. Reserves (which are insignificant at June 30, 2020 and 2019) are maintained for potential credit losses. 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.

NOTE 10. STOCK-BASED COMPENSATION

The Company's pre-tax operating income for the fiscal years ended June 30, 2020, 2019, and 2018 includes $16,883, $12,589, and $11,758 of equity-based compensation costs, respectively, of which $15,148, $10,828, and $10,256 relates to the restricted stock plans, respectively. Costs are recorded net of estimated forfeitures. The income tax benefits from stock option exercises and restricted stock vestings totaled $340, $6,191, and $3,274 for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.

2015 Equity Incentive Plan

On November 10, 2015, the Company adopted the 2015 Equity Incentive Plan ("2015 EIP") for its employees and non-employee directors. The plan allows for grants of stock options, stock appreciation rights, restricted stock shares or units, and performance shares or units. The maximum number of shares authorized for issuance under the plan is 3,000. For stock options, terms and vesting periods of the options 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. 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 Intrinsic Value
Outstanding July 1, 2017			72						$	50.04
Granted			—						—
Forfeited			—						—
Exercised			(20)						17.45
Outstanding July 1, 2018			52						62.65
Granted			—						—
Forfeited			—						—
Exercised			(20)						23.65
Outstanding July 1, 2019			32						87.27
Granted			—						—
Forfeited			—						—
Exercised			(10)						87.27
Outstanding June 30, 2020			22						$	87.27					$	2,098
Vested and Expected to Vest June 30, 2020			22						$	87.27					$	2,098
Exercisable June 30, 2020			22						$	87.27					$	2,098

There were no options granted in fiscal 2020, 2019, and 2018.

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. 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. The assumptions used in estimating fair value and resulting compensation expenses at the grant dates are as follows:

Expected Life (years)			6.50 years
Volatility			19.60		%
Risk-free interest rate			1.24		%
Dividend yield			1.28		%

At June 30, 2020, there was no compensation cost yet to be recognized related to outstanding options.

The total intrinsic value of options exercised was $809, $2,289, and $2,165 for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.

Restricted Stock Plan and 2015 Equity Incentive Plan

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 Equity Incentive Plan. 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.

The following table summarizes non-vested share awards activity:

Share awards			Shares						Weighted Average Grant Date Fair Value
Outstanding July 1, 2017			36						$	73.66
Granted			—						—
Vested			(12)						58.61
Forfeited			(1)						64.60
Outstanding July 1, 2018			23						81.33
Granted			—						—
Vested			(17)						79.41
Forfeited			—						—
Outstanding July 1, 2019			6						87.27
Granted			—						—
Vested			(6)						87.27
Forfeited			—						—
Outstanding June 30, 2020			—						$	—

The non-vested share awards granted prior to July 1, 2016 do 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 during the fiscal year ended June 30, 2018 do participate in dividends during the restriction period. The weighted-average fair value of such participating awards was based on the fair market value on the grant date.

At June 30, 2020, there was no compensation expense yet to be recognized related to non-vested restricted stock share awards.

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. 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 occurs over a period of 1 to 3 years.

The following table summarizes non-vested unit awards as of June 30, 2020, as well as activity for the fiscal year then ended:

Unit awards			Shares						Weighted Average Grant Date Fair Value						Aggregate Intrinsic Value
Outstanding July 1, 2017			386						$	67.84
Granted			125						98.41
Vested			(156)						57.00
Forfeited			(4)						81.83
Outstanding July 1, 2018			351						83.37
Granted			80						169.53
Vested			(129)						82.06
Forfeited			(4)						92.32
Outstanding July 1, 2019			298						107.00
Granted			139						157.94
Vested			(69)						98.25
Forfeited			(61)						85.33
Outstanding June 30, 2020			307						$136.41						$56,476

The 139 unit awards granted in fiscal 2020 had service requirements and performance targets, with 99 only having service requirements. Those 99 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 40 unit awards granted in fiscal 2020 had performance targets along with service requirements, 38 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. The remaining unit awards granted in fiscal 2020 had other performance targets. Per the Company's award vesting and settlement provisions, approximately half of the awards that utilize a Monte Carlo pricing model were valued at grant on the basis of TSR in comparison to the compensation peer group approved by the Compensation Committee of the Company's Board of Directors for fiscal year 2020, 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 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,
			2020						2019						2018
Compensation peer group:
Volatility			16.8		%				15.3		%				15.6		%
Risk free interest rate			1.34		%				2.89		%				1.55		%
Dividend yield			1.1		%				0.9		%				1.2		%
Stock Beta			0.709						0.669						0.687
S&P 1500 IT Index:
Volatility			16.8		%				—		%				—		%
Risk free interest rate			1.34		%				—		%				—		%
Dividend yield			1.1		%				—		%				—		%
Stock Beta			0.536						—						—

At June 30, 2020, there was $19,780 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 1.22 years.

The fair value of restricted shares and units at vest date totaled $11,248, $34,645, and $17,951 for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.

NOTE 11. EARNINGS PER SHARE

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

			Year Ended June 30,
			2020						2019						2018
Net Income			$	296,668					$	271,885					$	365,034
Common share information:
Weighted average shares outstanding for basic earnings per share			76,787						77,160						77,252
Dilutive effect of stock options, restricted stock units, and restricted stock			147						187						333
Weighted average shares outstanding for diluted earnings per share			76,934						77,347						77,585
Basic earnings per share			$	3.86					$	3.52					$	4.73
Diluted earnings per share			$	3.86					$	3.52					$	4.70

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. 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 2 anti-dilutive weighted average shares excluded from the weighted average shares outstanding for diluted earnings per share for fiscal 2020, no shares were excluded for fiscal 2019, and 41 shares were excluded for fiscal 2018.

NOTE 12. EMPLOYEE BENEFIT PLANS

The Company established an employee stock purchase plan in 2006. 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, 2020, 2019 and 2018, employees purchased 74, 76, and 76 shares under this plan at average prices of $132.51, $118.32, and $98.46, respectively. As of June 30, 2020, approximately 1,230 shares remained available for future issuance under the plan. The plan does not meet the criteria as a non-compensatory plan. As a result, the Company records the total dollar value of the stock discount given to employees under the plan as expense.

The Company has a defined contribution plan for its employees: the 401(k) Retirement Savings Plan (the “Plan”). The Plan is subject to the Employee Retirement Income Security Act of 1975 (“ERISA”) as amended. 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. The Company has the option of making a discretionary contribution; however, none has been made for any of the three most recent fiscal years. The total matching contributions for the Plan were $25,155, $21,003, and $18,821 for fiscal 2020, 2019 and 2018, respectively.

NOTE 13. BUSINESS ACQUISITIONS

Geezeo

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.

Management has completed a purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired, and liabilities assumed, based on their fair values as of 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 year ended June 30, 2020 included revenue of $8,969 and after-tax net income of $654 resulting from Geezeo's operations.

The accompanying consolidated statement of income for the year ended June 30, 2019 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.

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

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

The amounts shown above include measurement period adjustments made during fiscal 2020 related to income taxes.

The goodwill of $12,893 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of BOLTS, together with the value of BOLTS' assembled workforce. The goodwill from this acquisition has been allocated to the Company's Complementary segment and is not deductible for income tax purposes.

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

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

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

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

The accompanying consolidated statement of income for the fiscal year ended June 30, 2019 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 both the current and prior periods of the Company's consolidated financial statements and, accordingly, pro forma financial information has not been provided.

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.

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

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

The amounts shown above include measurement period adjustments made during fiscal 2020 related to income taxes.

The goodwill of $3,999 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of Agiletics. The goodwill from this acquisition has been allocated to the Company's Core segment and is not deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $2,198, computer software of $701, and other intangible assets of $191. The weighted average amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years, 10 years, and 10 years, respectively.

Current assets were inclusive of cash acquired of $1,349. The fair value of current assets acquired included accounts receivable of $302, none of which were expected to be uncollectible.

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

The accompanying consolidated statement of income for the fiscal year ended June 30, 2019 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 both the current and prior periods of the Company's consolidated financial statements and, accordingly, pro forma financial information has not been provided.

Ensenta Corporation

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

For the fiscal year ended June 30, 2020, the Company's consolidated statement of income included revenue of $43,082 and after-tax net income of $16,662 resulting from Ensenta's operations. For the fiscal year ended June 30, 2019, the Company's consolidated statement of income included revenue of $35,688 and after-tax net income of $11,163. For the fiscal year ended June 30, 2018, Ensenta contributed fiscal 2018 revenue of $15,776 and after-tax net income of $8,197. Excluding a large benefit from the TCJA, the Company's after-tax net income resulting from Ensenta's operations totaled $536.

Vanguard Software Group

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

For the fiscal year ended June 30, 2020, the Company's consolidated statement of income included revenue of $4,857 and after-tax net income of $655 resulting from Vanguard's operations. For the fiscal year ended June 30, 2019, the Company's consolidated statement of income included revenue of $3,120 and after-tax net loss of $243. For the fiscal year ended June 30, 2018, Vanguard contributed revenue of $1,486 and after-tax net loss of $870.

NOTE 14. REPORTABLE SEGMENT INFORMATION

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

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

The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate and Other. The Core segment provides core information processing platforms to banks and credit unions, which consist of integrated applications required to process deposit, loan, and general ledger transactions, and maintain centralized customer/member information. The Payments segment provides secure payment processing tools and services, including ATM, debit, and credit card processing services, online and mobile bill pay solutions, and risk management products and services. The Complementary segment provides additional software and services that can be integrated with the Company's core solutions or used independently. The Corporate and Other segment includes revenue and costs from hardware and other products not attributable to the other three segments, as well as operating costs not directly attributable to the other three segments.

The Company evaluates the performance of its segments and allocates resources to them based on various factors, including performance against trend, budget, and forecast. Only revenue and costs of revenue are considered in the evaluation for each segment.

During fiscal 2020, immaterial adjustments were made to reclassify revenue recognized in fiscal 2019 from the Complementary to the Core segment and from the Complementary to the Payments segment to be consistent with the current year's allocation of revenue by segment. For the fiscal year ended June 30, 2019, the amount reclassified totaled $2,614.

			Year Ended
			June 30, 2020
			Core						Payments						Complementary						Corporate and Other						Total
REVENUE
Services and Support			$	550,794					$	66,920					$	380,842					$	52,895					$	1,051,451
Processing			31,372						530,773						82,507						964						645,616
Total Revenue			582,166						597,693						463,349						53,859						1,697,067
Cost of Revenue			252,878						319,739						191,577						244,270						1,008,464
Research and Development																											109,988
Selling, General, and Administrative																											197,988
Gain on Disposal of Businesses																											—
Total Expenses																											1,316,440
SEGMENT INCOME			$	329,288					$	277,954					$	271,772					$	(190,411)
OPERATING INCOME																											380,627
INTEREST INCOME (EXPENSE)																											449
INCOME BEFORE INCOME TAXES																											$	381,076

			Year Ended
			June 30, 2019
			Core						Payments						Complementary						Corporate and Other						Total
REVENUE
Services and Support			$	507,610					$	52,756					$	347,028					$	51,095					$	958,489
Processing			28,422						496,574						68,573						633						594,202
Total Revenue			536,032						549,330						415,601						51,728						1,552,691
Cost of Revenue			243,989						273,261						175,737						230,043						923,030
Research and Development																											96,378
Selling, General, and Administrative																											185,998
Gain on Disposal of Businesses																											—
Total Expenses																											1,205,406
SEGMENT INCOME			$	292,043					$	276,069					$	239,864					$	(178,315)
OPERATING INCOME																											347,285
INTEREST INCOME (EXPENSE)																											(50)
INCOME BEFORE INCOME TAXES																											$	347,235

			Year Ended
			June 30, 2018
			Core						Payments						Complementary						Corporate and Other						Total
REVENUE
Services and Support			$	482,216					$	47,641					$	333,812					$	57,070					$	920,739
Processing			27,605						460,690						61,607						156						550,058
Total Revenue			509,821						508,331						395,419						57,226						1,470,797
Cost of Revenue			232,868						245,269						163,905						211,096						853,138
Research and Development																											90,340
Selling, General, and Administrative																											171,710
Gain on Disposal of Businesses																											(1,894)
Total Expenses																											1,113,294
SEGMENT INCOME			$	276,953					$	263,062					$	231,514					$	(153,870)
OPERATING INCOME																											357,503
INTEREST INCOME (EXPENSE)																											(1,345)
INCOME BEFORE INCOME TAXES																											$	356,158

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

NOTE 15: SUBSEQUENT EVENTS

Dividends

On August 21, 2020, the Company's Board of Directors declared a cash dividend of $0.43 per share on its common stock, payable on September 28, 2020 to shareholders of record on September 9, 2020.

QUARTERLY FINANCIAL INFORMATION

(unaudited)

			For the Year Ended June 30, 2020
			Quarter 1						Quarter 2						Quarter 3						Quarter 4						Total
REVENUE			$	438,005					$	419,119					$	429,406					$	410,537					$	1,697,067
EXPENSES
Cost of Revenue			245,791						249,267						258,571						254,835						1,008,464
Research and Development			24,591						27,187						28,308						29,902						109,988
Selling, General, and Administrative			49,436						48,961						50,589						49,002						197,988
Total Expenses			319,818						325,415						337,468						333,739						1,316,440
OPERATING INCOME			118,187						93,704						91,938						76,798						380,627
INTEREST INCOME (EXPENSE)
Interest income			508						346						197						86						1,137
Interest expense			(156)						(156)						(165)						(211)						(688)
Total interest income (expense)			352						190						32						(125)						449
INCOME BEFORE INCOME TAXES			118,539						93,894						91,970						76,673						381,076
PROVISION/ (BENEFIT) FOR INCOME TAXES			29,169						21,796						18,115						15,328						84,408
NET INCOME			$	89,370					$	72,098					$	73,855					$	61,345					$	296,668
Basic earnings per share			$	1.16					$	0.94					$	0.96					$	0.80					$	3.86
Basic weighted average shares outstanding			76,972						76,879						76,683						76,615						76,787
Diluted earnings per share			$	1.16					$	0.94					$	0.96					$	0.80					$	3.86
Diluted weighted average shares outstanding			77,067						76,935						76,884						76,849						76,934

			For the Year Ended June 30, 2019
			Quarter 1						Quarter 2						Quarter 3						Quarter 4						Total
REVENUE			$	392,543					$	386,275					$	380,364					$	393,509					$	1,552,691
EXPENSES
Cost of Revenue			220,112						227,284						235,594						240,040						923,030
Research and Development			24,026						23,990						23,442						24,920						96,378
Selling, General, and Administrative			45,183						46,797						44,887						49,131						185,998
Total Expenses			289,321						298,071						303,923						314,091						1,205,406
OPERATING INCOME			103,222						88,204						76,441						79,418						347,285
INTEREST INCOME (EXPENSE)
Interest income			291						252						155						178						876
Interest expense			(147)						(148)						(224)						(407)						(926)
Total interest income (expense)			144						104						(69)						(229)						(50)
INCOME BEFORE INCOME TAXES			103,366						88,308						76,372						79,189						347,235
PROVISION/ (BENEFIT) FOR INCOME TAXES			19,815						20,219						17,120						18,196						75,350
NET INCOME			$	83,551					$	68,089					$	59,252					$	60,993					$	271,885
Basic net income per share			$	1.08					$	0.88					$	0.77					$	0.79					$	3.52
Basic weighted average shares outstanding			77,188						77,216						77,177						77,060						77,160
Diluted net income per share			$	1.08					$	0.88					$	0.77					$	0.79					$	3.52
Diluted weighted average shares outstanding			77,537						77,409						77,286						77,157						77,347