Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the quarter ended December 31, 2022.

OVERVIEW

Jack Henry & Associates, Inc. ("JKHY") is a well-rounded financial technology company and is a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions consist of integrated data processing systems solutions to U.S. banks ranging from de novo to multi-billion-dollar institutions, core data processing solutions for credit unions of all sizes, and non-core highly specialized core-agnostic products and services that enable financial institutions of every asset size and charter, and diverse corporate entities outside the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. JKHY's integrated solutions are available for on-premise installation and delivery in our private cloud.

Our two primary revenue streams are "services and support" and "processing." Services and support includes: "private and public cloud" fees that predominantly have contract terms of seven years or longer at inception; "product delivery and services" revenue, which includes revenue from the sales of licenses, implementation services, deconversion fees, consulting, and hardware; and "on-premise support" revenue, composed of maintenance fees which primarily contain annual contract terms. Processing revenue includes: "remittance" revenue from payment processing, remote capture, and ACH transactions; "card" fees, including card transaction processing and monthly fees; and "transaction and digital" revenue, which includes transaction and mobile processing fees. We continually seek opportunities to increase revenue while at the same time containing costs to expand margins.

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

RESULTS OF OPERATIONS

For the second quarter of fiscal 2023, total revenue increased 2%, or $11,418, compared to the same quarter in fiscal 2022. Total revenue less deconversion fee and acquisition revenues of $6,380 and $2,578, respectively, for the current fiscal quarter and less deconversion fee revenues of $26,903 for the prior fiscal quarter, results in an increase of 6%, quarter over quarter. This increase was primarily driven by growth in data processing and hosting, card processing, transaction and digital, and remittance revenues.

Operating expenses increased 8% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Total operating expenses less deconversion expenses of $917, the acquisition-related expenses of $6,907, plus the gain on disposal of assets, net, of $1,207, for the current fiscal quarter, and reducing operating expenses by deconversion expenses of $2,547 for the prior fiscal year quarter, results in a 7% increase quarter over quarter. This increase in operating expenses was primarily driven by higher personnel costs, including benefits expenses, resulting from a 4% headcount increase in the trailing twelve months, increased direct costs in line with related revenue increases, and higher amortization of intangible assets.

Operating income decreased 15% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Total operating income less deconversion fee operating income of $5,463, plus an acquisition operating loss of $4,329, less the gain on disposal of assets, net, of $1,207 for the current fiscal quarter, and less deconversion fee operating income of $24,356 for the prior fiscal quarter, results in a 4% increase quarter over quarter. This increase in operating income was primarily driven by increased revenue growth partially offset by increased operating expenses detailed above.

The provision for income taxes decreased 17% for the second quarter of fiscal 2023 compared to the prior fiscal year second quarter. The effective tax rate for the second quarter of fiscal 2023 was 23.2% compared to 23.6% for the same quarter a year ago.

Due to the above changes, net income decreased 16% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Total net income less deconversion fee net income of $4,111, plus acquisition net loss of $5,405, less the gain on disposal of assets, net, of $909 for the current fiscal quarter, and less deconversion fee net income of $18,352 for the prior fiscal quarter, results in a 5% increase quarter over quarter.

For the six months ended December 31, 2022, total revenue increased 5%, or $52,564, compared to the same period in fiscal year 2022. Total revenue less deconversion fee and acquisition revenues of $10,899 and $3,316, respectively, for the current fiscal period and less deconversion fee revenues of $30,627 for the prior fiscal period, results in an increase of 7%, period over period. This increase was primarily driven by growth in data processing and hosting, card processing, transaction and digital, remittance, and software usage fee revenues.

Operating expenses increased 9% for the six months ended December 31, 2022, compared to the same period in fiscal year 2022. The increase in operating expenses was primarily driven by increased personnel costs, including benefits expenses, resulting from a 4% headcount increase in the trailing twelve months, higher direct costs in line with related revenue increases, and higher amortization of intangible assets.

Operating income decreased 4% for the six months ended December 31, 2022, compared to the same period in fiscal year 2022. Total operating income less deconversion fee operating income of $9,329, plus an acquisition operating loss of $6,126, less the gain on disposal of assets, net, of $7,384 for the current fiscal period, less deconversion fee operating income of $27,540 for the prior fiscal period, results in a 3% increase period over period. This increase in operating income was primarily driven by increased revenue growth partially offset by increased operating expenses detailed above.

The provision for income taxes decreased 6% for the six months ended December 31, 2022, compared to the same period in fiscal year 2022. The effective tax rate for the six months ended December 31, 2022, was 23.4% compared to 23.5% for the same period a year ago.

Due to the above changes, net income decreased 5% for the six months ended December 31, 2022, compared to the same period a year ago. Total net income less deconversion fee net income of $7,020, plus acquisition net loss of $7,275, less the gain on disposal of assets, net, of $5,556 for the current fiscal period, and less deconversion fee net income of $20,751 for the prior fiscal period, results in a 3% increase period over period.

Our second fiscal quarter was significantly impacted by a recent rapid slowdown of merger and acquisition activity in the financial institution industry, which has caused decreases in deconversion fee revenue, as noted, and in conversion/merger services revenue. However, we move into the third quarter of fiscal 2023 with significant portions of our business continuing to come from recurring revenues and our sales pipeline remaining encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and we believe they have a great need for our solutions that directly address institutional profitability, efficiency, and security. Our strong balance sheet, access to extensive lines of credit, the continued strength of our existing lines of revenue, and an unwavering commitment to superior customer service should position us well to address current and future opportunities.

A detailed discussion of the major components of the results of operations for the three and six months ended December 31, 2022, follows. Discussions compare the current fiscal year's three and six months ended December 31, 2022, to the prior fiscal year's three and six months ended December 31, 2021.

REVENUE

Services and Support			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Services and Support			$	290,700					$	296,211					(2)		%				$	610,849					$	593,704					3		%
Percentage of total revenue			58		%				60		%										59		%				60		%

Services and support revenue decreased 2% for the second quarter of fiscal 2023 compared to the same quarter a year ago. Reducing services and support revenue for deconversion fee revenue from each quarter, which was $6,380 for the current fiscal quarter and $26,903 for the prior fiscal year quarter and acquisition revenue of $19 for the current fiscal quarter, results in growth of 6% quarter over quarter. This increase was primarily driven by growth in data processing and hosting revenue.

Services and support revenue increased 3% for the six months ended December 31, 2022 compared to the same period a year ago. Reducing services and support revenue for deconversion fee revenue from each period, which was $10,899 for the current fiscal period and $30,627 for the prior fiscal period, and acquisition revenue of $43 for the current fiscal period, results in growth of 7% period over period. This increase was primarily driven by growth in data processing and hosting and software usage fee revenues. Growth in software usage fee revenues reflects a continuing shift of customers to our time-based license model.

Processing			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Processing			$	214,614					$	197,685					9		%				$	423,667					$	388,248					9		%
Percentage of total revenue			42		%				40		%										41		%				40		%

Processing revenue increased 9% for the second quarter of fiscal 2023 compared to the same quarter last fiscal year. Reducing processing revenue for acquisition revenue of $2,559 for the current fiscal quarter, results in growth of 7% quarter over quarter. This increase was primarily driven by higher card processing, payment processing, including iPay and Payrailz, and Jack Henry digital revenue, including Banno, as well as other processing fee revenues, primarily due to expanding volumes.

Processing revenue increased 9% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing processing revenue for acquisition revenue of $3,273 for the current fiscal period, results in growth of 8% period over period. This increase was primarily driven by higher card processing and Jack Henry digital revenue, including Banno, as well as payment processing fees, including iPay and Payrailz, and other processing fee revenues, primarily due to expanding volumes.

OPERATING EXPENSES

Cost of Revenue			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Cost of Revenue			$	304,589					$	282,825					8		%				$	602,849					$	559,460					8		%
Percentage of total revenue			60		%				57		%										58		%				57		%

Cost of revenue for the second quarter of fiscal 2023 increased 8% over the prior fiscal year second quarter. Reducing cost of revenue for deconversion costs from each quarter, which were $555 for the current fiscal year quarter and $1,601 for the prior fiscal year quarter, and for acquisition costs of $5,861 from the current fiscal year quarter, results in a 6% increase quarter over quarter. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 1% headcount increase in the trailing twelve months, higher direct costs in line with related increases in revenue, and increased amortization of intangible assets. Cost of revenue increased 3% compared to the prior fiscal year quarter as a percentage of total revenue.

Cost of revenue increased 8% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing cost of revenue for deconversion costs from each period, which were $965 for the current fiscal period and $1,938 for the prior fiscal period, and for acquisition costs of $7,400 from the current fiscal period, results in a 7% increase period over period. This increase was primarily due to higher direct costs in line with related increases in revenue, higher personnel costs, including benefits expenses, resulting from a 1% headcount increase in the trailing twelve months, and increased amortization of intangible assets. Cost of revenue increased 1% compared to the prior fiscal period as a percentage of total revenue.

Research and Development			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Research and Development			$	36,561					$	29,916					22		%				$	69,554					$	56,670					23		%
Percentage of total revenue			7		%				6		%										7		%				6		%

Research and development expense increased 22% for the second quarter of fiscal 2023 over the prior fiscal year second quarter. Reducing research and development expense for the effects of acquisitions of $274 for the current fiscal quarter, results in a 21% increase quarter over quarter. This increase was primarily due to an increase in personnel costs, net of capitalization, including benefits expenses, resulting from a 13% headcount increase in the trailing twelve months, and higher internal licenses and fees. Research and development expense for the quarter increased 1% compared to the prior fiscal year quarter as a percentage of total revenue.

Research and development expense increased 23% for the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing research and development expense for the effects of acquisitions of $606 for the current fiscal period, results in a 22% increase period over period. This increase was primarily due to an increase in personnel costs, net of capitalization, including benefits expenses, resulting from a 13% headcount

increase in the trailing twelve months, and higher internal licenses and fees. Research and development expense for the current fiscal period increased 1% compared to the prior fiscal year period as a percentage of total revenue.

Selling, General, and Administrative			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Selling, General, and Administrative			$	56,788					$	55,493					2		%				$	114,013					$	106,565					7		%
Percentage of total revenue			11		%				11		%										11		%				11		%

Selling, general, and administrative expense increased 2% in the second quarter of fiscal 2023 over the same quarter in the prior fiscal year. Reducing selling, general, and administrative expense for the effects of deconversion fees from each quarter, which were $362 for the current fiscal year quarter and $946 for the prior fiscal year quarter, and for the effects of acquisitions of $772 for the current fiscal year quarter, and increasing selling, general, and administrative expense for the gain on disposal of assets, net, of $1,207 for the current fiscal year quarter, results in a 4% increase quarter over quarter. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 5% headcount increase in the trailing twelve months. Selling, general, and administrative expense remained consistent as a percentage of total revenue this fiscal quarter versus the prior fiscal year quarter.

Selling, general, and administrative expense increased 7% in the six months ended December 31, 2022, compared to the same period last fiscal year. Reducing selling, general, and administrative expense for the effects of deconversion fees from each period, which were $604 for the current fiscal year period and $1,149 for the prior fiscal year period, and for the effects of acquisitions of $1,436 for the current fiscal period, and increasing selling, general, and administrative expense for the gain on disposal of assets, net, of $7,384 for the current fiscal year period, results in a 13% increase period over period. This increase was primarily due to higher personnel costs, including benefits expenses, resulting from a 5% headcount increase in the trailing twelve months, increased travel expenses, and increased consulting and other professional services. Selling, general, and administrative expense remained consistent as a percentage of total revenue this fiscal period versus the prior fiscal year period.

INTEREST INCOME (EXPENSE)			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Interest Income			$	1,240					$	6					20,567		%				$	1,392					$	13					10,608		%
Interest Expense			$	(3,406)					$	(447)					662		%				$	(4,982)					$	(696)					616		%

Interest income fluctuated due to changes in invested balances and yields on invested balances during the second quarter of fiscal 2023 and six months ended December 31, 2022, compared to the same periods a year ago. Interest expense increased when compared to the prior fiscal year quarter and year-to-date period due to recent increases in prevailing interest rates, length of borrowing time, and amounts borrowed. There was a $275,000 outstanding balance under the credit facility at December 31, 2022, and $240,000 outstanding balance at December 31, 2021. The increase in the outstanding balance was primarily due to funding the Payrailz acquisition on August 31, 2022.

PROVISION FOR INCOME TAXES			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Provision for Income Taxes			$	24,435					$	29,551					(17)		%				$	57,186					$	60,791					(6)		%
Effective Rate			23.2		%				23.6		%										23.4		%				23.5		%

The change in effective tax rate for the second quarter of fiscal 2023 and six months ended December 31, 2022, compared to the same periods a year ago was primarily due to larger excess tax benefits received from share-based compensation in the current fiscal periods.

NET INCOME			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Net income			$	80,775					$	95,670					(16)		%				$	187,324					$	197,783					(5)		%
Diluted earnings per share			$	1.10					$	1.30					(15)		%				$	2.56					$	2.68					(4)		%

Net income decreased 16% to $80,775, or $1.10 per diluted share, for the second quarter of fiscal 2023 compared to $95,670, or $1.30 per diluted share in the same quarter of fiscal 2022. Total net income less deconversion fee net income of $4,111, an acquisition net loss of $5,405, and the gain on disposal of assets, net, of $909, for the current fiscal quarter, and reducing operating expenses for the effects of deconversion fees of $18,352 for the prior fiscal year quarter, results in a 5% increase quarter over quarter.

Net income decreased 5% to $187,324, or $2.56 per diluted share, for the six months ended December 31, 2022, compared to $197,783, or $2.68 per diluted share in the same period of fiscal 2022. Total net income less the net effects of deconversion fees of $7,020, an acquisition net loss of $7,275, and the gain on disposal of assets, net, of $5,556, for the current fiscal period and reducing operating expenses for the effects of deconversion fees of $20,751 for the prior fiscal year period, results in a 3% increase period over period.

REPORTABLE SEGMENT DISCUSSION

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

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

Core
			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Revenue			$	155,390					$	154,878					—		%				$	330,514					$	320,163					3		%
Cost of Revenue			$	68,324					$	64,554					6		%				$	140,564					$	131,456					7		%

Revenue in the Core segment remained consistent and cost of revenue increased 6% for the three months ended December 31, 2022, compared to the three months ended December 31, 2021. Reducing Core revenue for deconversion fee revenue in both periods, which totaled $2,115 for the second quarter of fiscal 2023 and $10,853 for the second quarter of fiscal 2022, results in a 6% increase quarter over quarter. Cost of revenue increased 6% quarter over quarter primarily due to higher personnel costs and increased direct support costs. Cost of revenue increased 2% as a percentage of revenue for the second quarter of fiscal 2023 compared to the same quarter of fiscal 2022.

Revenue in the Core segment increased 3% and cost of revenue increased 7% for the six months ended December 31, 2022, compared to the six months ended December 31, 2021. Reducing Core revenue for deconversion fee revenue in both periods, which totaled $3,933 for the six months ended December 31, 2022, and $13,021 for the six months ended December 31, 2021, results in a 6% increase period over period. This increase in Core revenue over the prior fiscal year period was primarily driven by the growth in data processing and hosting and software usage fee revenues. Cost of revenue increased 7% period over period primarily due to increased direct support costs and higher personnel costs. Cost of revenue increased 1% as a percentage of revenue for the six months ended December 31, 2022, compared to the same period of fiscal 2022.

Payments
			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Revenue			$	191,487					$	185,505					3		%				$	378,026					$	358,096					6		%
Cost of Revenue			$	108,071					$	96,966					11		%				$	209,226					$	191,549					9		%

Revenue in the Payments segment increased 3% for the second quarter of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. Reducing Payments revenue for deconversion fee revenue in both periods, which totaled $1,336 for the second quarter of fiscal 2023 and $7,933 for the second quarter of fiscal 2022 and for revenue from acquisitions of $2,578 from the current fiscal year quarter, results in a 6% increase quarter over quarter. This Payments revenue growth was primarily due to increased card and remittance fee revenues within processing. Cost of revenue increased 11% quarter over quarter primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue increased 4% for the second quarter of fiscal 2023 compared to the same quarter of fiscal 2022.

Revenue in the Payments segment increased 6% for the six months ended December 31, 2022, compared to the equivalent period of the prior fiscal year. This Payments revenue growth was primarily due to increased card and remittance fee revenues within processing. Cost of revenue increased 9% period over period primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue increased 2% for the six months ended December 31, 2022, compared to the same period of fiscal 2022.

Complementary
			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Revenue			$	142,295					$	136,540					4		%				$	290,647					$	274,318					6		%
Cost of Revenue			$	59,270					$	55,982					6		%				$	117,708					$	110,399					7		%

Revenue in the Complementary segment increased 4% for the second quarter of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. This Complementary revenue growth was primarily driven by increased hosting fees and Jack Henry digital revenues. Cost of revenue increased 6% quarter over quarter primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue increased 1% for the second quarter of fiscal 2023 compared to the same quarter of fiscal 2022.

Revenue in the Complementary segment increased 6% for the six months ended December 31, 2022, compared to the equivalent period of the prior fiscal year. This Complementary revenue growth was primarily driven by increased hosting fees and Jack Henry digital revenues. Cost of revenue increased 7% period over period primarily due to increased direct costs in line with associated revenues and higher personnel costs. Cost of revenue as a percentage of revenue remained consistent for the six months ended December 31, 2022, compared to the same period of fiscal 2022.

Corporate and Other
			Three Months Ended December 31,												% Change						Six Months Ended December 31,												% Change
			2022						2021												2022						2021
Revenue			$	16,142					$	16,973					(5)		%				$	35,329					$	29,375					20		%
Cost of Revenue			$	68,924					$	65,323					6		%				$	135,351					$	126,056					7		%

Revenue classified in the Corporate and Other segment includes revenues from other products and services and hardware not specifically attributed to any of the other three segments. Revenue in the Corporate and Other segment decreased 5% for the second quarter of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. The decrease quarter over quarter was primarily due to lower user group revenues due to differences in the timing of the user conference year over year.

Cost of revenue for the Corporate and Other segment includes operating costs not directly attributable to any of the other three segments. The cost of revenue in the second quarter of fiscal 2023 increased 6% when compared to the prior fiscal year quarter primarily due to higher internal licenses and fees and personnel costs.

Revenue in the Corporate and Other segment increased 20% for the six months ended December 31, 2022, compared to the equivalent period of the prior fiscal year. The increase period over period was primarily due to higher services and support revenue.

The cost of revenue in the six months ended December 31, 2022, increased 7% when compared to the prior fiscal year period primarily due to higher internal licenses and fees, personnel costs, and hardware costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased to $25,763 at December 31, 2022, from $48,787 at June 30, 2022.

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

			Six Months Ended
			December 31,
			2022						2021
Net income			$	187,324					$	197,783
Non-cash expenses			73,405						113,293
Change in receivables			102,672						70,468
Change in deferred revenue			(125,433)						(119,822)
Change in other assets and liabilities			(47,257)						(64,371)
Net cash provided by operating activities			$	190,711					$	197,351

Cash provided by operating activities for the first six months of fiscal 2023 decreased 3% compared to the same period last year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, for capital expenditures, and acquisitions.

Cash used in investing activities for the first six months of fiscal 2023 totaled $301,192 and included: $229,628 for an acquisition; $81,046 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $17,376; and $1,027 for the purchase and development of internal use software. This was partially offset by proceeds from the sale of assets of $27,885. Cash used in investing activities for the first six months of fiscal 2022 totaled $101,052 and included $71,353 for the development of software; capital expenditures of $22,373; and $7,364 for the purchase and development of internal use software. This was partially offset by proceeds from the sale of assets of $38.

Financing activities provided cash of $87,457 for the first six months of fiscal 2023 and included borrowings on credit facilities of $365,000. This was partially offset by payments on credit facilities of $205,042, dividends paid to stockholders of $71,454 and $1,047 net cash outflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash of $118,171 in the first six months of fiscal 2022 including repurchase of treasury stock of $193,917, $80,065 for repayments on credit facilities and financing leases, and $67,696 for the payment of dividends. This was partially offset by borrowings on credit facilities of $220,000 and $3,507 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation.

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $17,376 and $22,373 for the six months ended December 31, 2022, and December 31, 2021, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. Total consolidated capital expenditures on facilities and equipment for the Company for fiscal year 2023 are expected to be approximately $57,000 and have been or will be funded from our credit facilities and cash generated by operations.

On August 31, 2022, the Company acquired all of the equity interest in Payrailz, LLC ("Payrailz"). The final purchase price, following customary post-closing adjustments to the extent actual closing date working capital, cash, debt, and unpaid seller transaction expenses exceeded or were less than the amounts estimated at closing, was $230,205. Pursuant to the merger agreement for the transaction, $48,500 of the purchase price was placed in an escrow account at the closing, consisting of $2,500 for any final purchase price adjustments owed by the sellers, which amount was released to the sellers on December 15, 2022, in connection with post-closing adjustments, and $46,000 for indemnification matters under the merger agreement.

The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was funded by our revolving line of credit and cash generated from operations. Payrailz provides cloud-native, API-first, AI-enabled consumer and commercial digital payment solutions and experiences that enable money to be moved in the moment of need.

On September 29, 2022, the Company entered into an agreement with Twilio Inc., which added contractual spend obligations for the period October 1, 2022, through September 30, 2027, of $16,350. This commitment is in addition to the commitments discussed in our Annual Report on Form 10-K for the year ended June 30, 2022.

On December 27, 2022, the Company renewed an agreement with Microsoft, Inc., which added contractual spend obligations for the period January 1, 2023, through June 30, 2026, of $20,000 for Microsoft Azure Cloud services, and added contractual spend obligations for the period January 1, 2023, through June 30, 2026, of $49,000 for Server and Application licensing under the Microsoft Server and Cloud Enrollment Program.

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or borrowings on its existing line of credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At December 31, 2022, and June 30, 2022, there were 31,043 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,948 additional shares. The total cost of treasury shares at December 31, 2022, and June 30, 2022, was $1,807,118.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA made several changes to the U.S. tax code including, but not limited to, a 1% excise tax on net stock repurchases and tax incentives to promote clean energy. The Company does not expect the IRA to have a material impact on its financial statements.

Credit facilities

On August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced the prior credit agreement described below. The credit agreement allows for borrowings of up to $600,000, which may be increased by the Company to $1,000,000 at any time until maturity. The credit agreement bears interest at a variable rate equal to (a) a rate based on an adjusted Secured Overnight Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement. As of December 31, 2022, the Company was in compliance with all such covenants. The amended and restated credit facility terminates August 31, 2027. There was $275,000 outstanding under the amended and restated credit facility at December 31, 2022.

On June 30, 2022, there was a $115,000 outstanding balance on the prior credit facility that was entered into on February 10, 2020. The prior credit facility was a five-year senior, unsecured revolving credit facility. The credit facility allowed for borrowings of up to $300,000, which could be increased by the Company to $700,000 at any time until maturity. The prior credit facility bore interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. 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 prior credit facility was guaranteed by certain subsidiaries of the Company and was subject to various financial covenants that required the Company to maintain certain financial ratios as defined in the prior credit agreement. As of June 30, 2022, the Company was in compliance with all such covenants. The prior credit facility's termination date was February 10, 2025.

The increase in the outstanding credit facility balance of $160,000 at December 31, 2022, compared to June 30, 2022, was primarily due to the acquisition of Payrailz during the six months ended December 31, 2022. This borrowing, along with recent increases in prevailing interest rates, is expected to contribute to increased interest expense during fiscal 2023, and until our outstanding balances are reduced.

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 March 2021 and expires on April 30, 2023. At December 31, 2022, and June 30, 2022, no amount was outstanding.