Jack Henry & Associates 10-Q 2024-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ______________ to ________________

Commission file number 0-14112

JACK HENRY & ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)

Delaware						43-1128385
(State or Other Jurisdiction of Incorporation)						(I.R.S. Employer Identification No.)

663 Highway 60, P.O. Box 807, Monett, MO 65708

(Address of Principal Executive Offices)

(Zip Code)

417-235-6652

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock ($0.01 par value)			JKHY			Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” ”accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
Emerging growth company			☐

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

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

Yes ☐ No ☒

As of April 26, 2024, the Registrant had 72,900,026 shares of Common Stock outstanding ($0.01 par value).

TABLE OF CONTENTS

						Page Reference
PART I			FINANCIAL INFORMATION
ITEM 1.			Condensed Consolidated Balance Sheets as of March 31, 2024, and June 30, 2023 (Unaudited)			4
			Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2024 and 2023 (Unaudited)			5
			Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended March 31, 2024 and 2023 (Unaudited)			6
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023 (Unaudited)			7
			Notes to Condensed Consolidated Financial Statements (Unaudited)			8
ITEM 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			21
ITEM 3.			Quantitative and Qualitative Disclosures about Market Risk			30
ITEM 4.			Controls and Procedures			30
PART II			OTHER INFORMATION			30
ITEM 1.			Legal Proceedings			30
ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds			31
ITEM 5.			Other Information			31
ITEM 6.			Exhibits			32
			Signatures			33

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

FORWARD LOOKING STATEMENTS

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements may appear throughout this report, including without limitation, in Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “seek,” “anticipate,” “estimate,” “future,” “intend,” “plan,” “strategy,” “predict,” “likely,” “should,” “will,” “would,” “could,” “can,” “may,” and similar expressions. Forward-looking statements are based only on management’s current beliefs, expectations and assumptions regarding the future of the Company, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, those discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, in particular, those included in Item 1A, “Risk Factors” of such report, and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Any forward-looking

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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 fiscal quarter ended March 31, 2024.

OVERVIEW

Jack Henry & Associates, Inc. is a well-rounded financial technology company and is a leading provider of technology solutions and payment processing services primarily to community and regional financial institutions. Our solutions consist of integrated data processing systems solutions to U.S. banks ranging from de novo to multi-billion-dollar institutions with assets up to $50 billion, 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. Our integrated solutions are available for on-premise installation and delivery in our private and public cloud.

Our two primary revenue streams are “services and support” and “processing.” Services and support includes: “private and public cloud” revenue, which predominantly includes contracts with terms of seven years or longer at inception; “product delivery and services” revenue, which includes revenue from the sales of licenses, implementation services, deconversions, consulting, and hardware; and “on-premise support” revenue, composed of maintenance contracts primarily with annual terms. Processing revenue includes: "remittance” revenue from payment processing, remote capture, and ACH transactions; “card” revenue, including card transaction processing and monthly fees; and “transaction and digital” revenue, which includes transaction and mobile processing. 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 third quarter of fiscal 2024, total revenue increased 5.9%, or $30,010, compared to the same quarter in fiscal 2023. Total revenue less deconversion revenue of $843 for the current fiscal quarter and less deconversion revenues of $6,143 for the prior fiscal year third quarter results in an increase of 7.0%, quarter over quarter. This increase was primarily driven by growth in data processing and hosting, Jack Henry digital, including Banno, card, and payment processing revenues.

Operating expenses increased 6.6%, or $26,301, for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. Deconversion and/or acquisition costs did not significantly affect operating expenses quarter over quarter. The increase was primarily driven by higher personnel costs, higher direct costs, and increased internal licenses and fees.

Operating income increased 3.4%, or $3,709, for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. Removing from total operating income the effects of deconversion operating loss of $6 for the current fiscal quarter* and deconversion operating income of $5,130 for the prior fiscal year third quarter results in an increase of 8.6%, quarter over quarter. This increase was primarily driven by revenue growth partially offset by increased operating expenses detailed above.

The provision for income taxes increased 10.2%, or $2,500, for the third quarter of fiscal 2024, compared to the third quarter of fiscal 2023, primarily driven by the increase in income before income taxes. The effective tax rate for the current fiscal third quarter was 23.7% compared to 23.2% for the same quarter a year ago. The increase in the effective tax rate was primarily due to certain discrete period benefits recognized during the prior fiscal quarter.

Net income increased 6.8%, or $5,550, for the third quarter of fiscal 2024, compared to the third quarter of fiscal 2023. Removing from total net income the effects of deconversion net loss of $5 for the current fiscal quarter,* and deconversion net income of $3,899 for the prior fiscal year third quarter, results in a 12.2% increase quarter over quarter. This increase was primarily due to net organic growth in our lines of revenue for the third quarter of fiscal 2024 compared to the same quarter last fiscal year.

*A customer who signed a deconversion agreement in an earlier period signed a reversal of that agreement during the third quarter of fiscal 2024 deciding not to deconvert resulting in the reversal of previously recognized deconversion revenue.

For the nine months ended March 31, 2024, total revenue increased 7.3%, or $112,562, compared to the same period in fiscal year 2023. Total revenue less deconversion and acquisition revenues of $9,861 and $1,945, respectively, for the current fiscal period and less deconversion revenues of $17,042 for the prior fiscal period, results in an increase of 7.7%, period over period. This increase was primarily driven by growth in data processing and hosting, card, Jack Henry digital, payment processing and other processing revenues.

Operating expenses increased 8.9%, or $105,287, for the nine months ended March 31, 2024, compared to the same period in fiscal year 2023. Total operating expenses less deconversion expenses of $2,309, acquisition-related expenses of $4,182, and voluntary employee departure incentive payment ("VEDIP") program expenses of $16,443 for the current fiscal period, and less deconversion expenses of $2,583 and removing the effects of the gain on sale of assets, net, of $7,384 for the prior fiscal year period, results in an increase of 6.5%, period over period. This increase was primarily driven by higher personnel costs, increased direct costs, and higher internal licenses and fees compared to the prior fiscal year period.

Operating income increased 2.0%, or $7,275, for the nine months ended March 31, 2024, compared to the same period in fiscal year 2023. Total operating income less deconversion operating income of $7,552, removing the effects of the VEDIP program of $16,443 and an acquisition operating loss of $2,237 for the current fiscal year period, less deconversion operating income of $14,459 and removing the effects of the gain on sale of assets, net, of $7,384 for the prior fiscal year period, results in a 12.0% increase period over period. This increase was primarily driven by revenue growth partially offset by increased operating expenses detailed above.

The provision for income taxes increased 6.3%, or $5,141, for the nine months ended March 31, 2024, compared to the same period in fiscal year 2023, primarily driven by the increase in income before income taxes. The effective tax rate for the nine months ended March 31, 2024, was 23.6% compared to 23.3% for the same period a year ago. The increase in the effective tax rate was primarily due to the difference in impact of share-based compensation that vested during the comparative periods.

Net income increased 4.4%, or $11,870, for the nine months ended March 31, 2024, compared to the same period a year ago. Total net income less deconversion net income of $5,739, plus net loss for the acquisition and the VEDIP program of $3,539 and $12,497, respectively, for the current fiscal year period, and less net income for deconversions and the gain on sale of assets, net, of $10,989 and $5,612, respectively, for the prior fiscal year period, results in a 15.4% increase period over period. This increase was primarily due to net organic growth in our lines of revenue for the nine months ended March 31, 2024, compared to the same period last fiscal year.

We move into the fourth quarter of fiscal 2024 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 nine months ended March 31, 2024, follows. On August 31, 2022, the Company acquired all of the equity interest in Payrailz, LLC (“Payrailz”). Payrailz (“acquisition”) related revenue and operating expenses mentioned in the nine months ended March 31, 2024, discussions below are for the first two months of the period only.

Discussions compare the current fiscal year's three and nine months ended March 31, 2024, to the prior fiscal year's three and nine months ended March 31, 2023.

REVENUE

Services and Support			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Services and Support			$	305,017					$	291,922					4.5		%				$	959,214					$	902,771					6.3		%
Percentage of total revenue			57		%				57		%										58		%				59		%

Services and support revenue increased 4.5% for the third quarter of fiscal 2024 compared to the same quarter a year ago. Reducing services and support revenue for deconversion revenue from each quarter, which was $843 for the current fiscal year quarter and $6,143 for the prior fiscal year quarter, results in growth of 6.4% quarter over quarter. This increase was primarily driven by double-digit growth in data processing and hosting revenues as new and existing customers migrate to our private cloud and processing volumes expand.

Services and support revenue increased 6.3% for the nine months ended March 31, 2024 compared to the same period a year ago. Reducing services and support revenue for deconversion revenue from each period, which was $9,861 for the current fiscal year period and $17,042 for the prior fiscal year period, and acquisition revenue of $2 for the current fiscal year period, results in growth of 7.2% period over period. This increase was primarily driven by double-digit growth in data processing and hosting as new and existing customers migrate to our private cloud and processing volumes expand, software usage as customers continue moving to time-based licenses rather than perpetual, hardware, and consulting revenues.

Processing			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Processing			$	233,545					$	216,630					7.8		%				$	696,417					$	640,298					8.8		%
Percentage of total revenue			43		%				43		%										42		%				41		%

Processing revenue increased 7.8% for the third quarter of fiscal 2024 compared to the same quarter last fiscal year. Deconversion and/or acquisition revenue did not significantly affect processing revenue quarter over quarter. This increase was primarily driven by growth in Jack Henry digital revenue (including Banno) from higher active users and expanding volumes from existing products and the introduction of new products, growth in card revenue primarily from organic growth from expanding volumes, higher payment processing revenues from expanding volumes and new customer revenue, and increased other processing revenues.

Processing revenue increased 8.8% for the nine months ended March 31, 2024, compared to the same period last fiscal year. Reducing processing revenue for acquisition revenue of $1,943 for the current fiscal year period, results in growth of 8.5% period over period. This increase was primarily driven by growth in card revenue primarily from organic growth from expanding volumes, growth in Jack Henry digital revenue (including Banno) from higher active users and expanding volumes from existing products and the introduction of new products, increased payment processing revenues from expanding volumes and new customer revenue, and higher other processing revenues.

OPERATING EXPENSES

Cost of Revenue			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Cost of Revenue			$	328,224					$	307,345					6.8		%				$	972,205					$	910,195					6.8		%
Percentage of total revenue			61		%				60		%										59		%				59		%

Cost of revenue for the third quarter of fiscal 2024 increased 6.8% over the prior fiscal year third quarter. Reducing cost of revenue for deconversion costs from each quarter, which were $671 for the current fiscal year quarter and $470 for the prior fiscal year quarter, results in a 6.7% increase quarter over quarter. This increase was primarily due to higher direct costs, generally consistent with increases in the related revenue, higher personnel costs due to an increase in employee headcount in the trailing twelve months and increased bonus attainment quarter over quarter, and increased internal licenses and fees from increased pricing and deployment. Cost of revenue increased 1% compared to the prior fiscal year quarter as a percentage of total revenue.

Cost of revenue increased 6.8% for the nine months ended March 31, 2024, compared to the same period last fiscal year. Reducing cost of revenue for deconversion costs from each period, which were $1,562 for the current fiscal period and $1,435 for the prior fiscal period, and for acquisition costs of $3,334 from the current fiscal period, results in a 6.4% increase period over period. This increase was primarily due to higher direct costs generally consistent with related increases in revenue, higher personnel costs due to an increase in employee headcount in the trailing twelve months and increased bonus attainment period over period, and increased internal licenses and fees from increased pricing and deployment. Cost of revenue remained consistent compared to the prior fiscal year period as a percentage of total revenue.

Research and Development			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Research and Development			$	35,993					$	34,625					4.0		%				$	108,363					$	104,179					4.0		%
Percentage of total revenue			7		%				7		%										7		%				7		%

Research and development expense increased 4.0% for the third quarter of fiscal 2024 compared to the prior fiscal year third quarter. Deconversion and/or acquisition costs did not significantly affect research and development expenses quarter over quarter. This increase was primarily due to higher cloud consumption costs, net of capitalization. Research and development expense for the quarter remained consistent compared to the prior fiscal year quarter as a percentage of total revenue.

Research and development expense increased 4.0% for the nine months ended March 31, 2024, compared to the same period last fiscal year. Reducing research and development expense for the effects of acquisitions of $656 for the current fiscal year period results in a 3.4% increase period over period. This increase was primarily due to an increase in personnel costs, net of capitalization, including increased bonus attainment period over period. Research and development expense for the current fiscal year period remained consistent compared to the prior fiscal year period as a percentage of total revenue.

Selling, General, and Administrative			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Selling, General, and Administrative			$	62,246					$	58,192					7.0		%				$	211,298					$	172,205					22.7		%
Percentage of total revenue			12		%				11		%										13		%				11		%

Selling, general, and administrative expense increased 7.0% in the third quarter of fiscal 2024 over the same quarter in the prior fiscal year. Reducing selling, general, and administrative expense for deconversion costs from each quarter, which were $178 for the current fiscal year quarter and $543 for the prior fiscal year quarter, results in a 7.7% increase quarter over quarter. This increase was primarily due to higher personnel costs from commissions and medical benefits expenses. Selling, general, and administrative expense increased 1% as a percentage of total revenue this fiscal quarter versus the prior fiscal year quarter.

Selling, general, and administrative expense increased 22.7% in the nine months ended March 31, 2024, compared to the same period last fiscal year. Reducing selling, general, and administrative expense for the effects of deconversions from each period, which were $747 for the current fiscal year period and $1,148 for the prior fiscal year period, for VEDIP program expenses of $16,443 and the effect of the acquisition of $192 in the current fiscal year period and removing the effect of the gain on sale of assets, net, of $7,384 in the prior fiscal year period, results in an 8.7% increase period over period. This increase was primarily due to higher personnel costs, including commissions and medical benefits expenses, and a decrease in the gain on sale of assets, net, period over period. Selling, general, and administrative expense increased 2% as a percentage of total revenue this fiscal year period versus the prior fiscal year period.

INTEREST INCOME (EXPENSE)			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Interest Income			$	6,499					$	2,391					171.8		%				$	16,365					$	3,783					332.6		%
Interest Expense			$	(4,433)					$	(4,666)					(5.0)		%				$	(12,495)					$	(9,649)					29.5		%

Interest income fluctuated due to changes in interest earned on balances during the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023. Interest expense decreased when compared to the prior fiscal year quarter due to a decrease in the amount borrowed partially offset by increases in prevailing interest rates. Interest expense increased when compared to the prior year-to-date period due to increases in prevailing interest rates partially offset by a decrease in the amount borrowed. There was a $250,000 outstanding balance under the revolving credit and term loan facilities at March 31, 2024, and $375,000 outstanding balance under the revolving credit and term loan facilities at March 31, 2023.

PROVISION FOR INCOME TAXES			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Provision for Income Taxes			$	27,066					$	24,566					10.2		%				$	86,892					$	81,751					6.3		%
Effective Rate			23.7		%				23.2		%										23.6		%				23.3		%

The effective tax rate increased for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, with an effective tax rate of 23.7% and 23.6%, respectively, of income before taxes, compared to 23.2% and 23.3%, respectively, of income before taxes for the same periods last fiscal year. The increase in the effective tax rate for the comparative quarters was primarily due to certain discrete period benefits recognized during the prior fiscal year quarter. The increase in the effective tax rate for the comparative year-to-date periods was primarily due to the difference in impact of share-based compensation that vested during each of the comparative periods.

NET INCOME			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Net income			$	87,099					$	81,549					6.8		%				$	280,743					$	268,873					4.4		%
Diluted earnings per share			$	1.19					$	1.12					6.9		%				$	3.85					$	3.68					4.6		%

Net income increased 6.8% to $87,099, or $1.19 per diluted share, for the third quarter of fiscal 2024 compared to $81,549, or $1.12 per diluted share, in the same quarter of fiscal 2023. Increasing net income by deconversion net loss of $5 for the current fiscal quarter, and decreasing net income by deconversion net income of $3,899 for the prior fiscal year third quarter, results in a 12.2% increase quarter over quarter. This increase was primarily due to net organic growth in our lines of revenue for the third quarter of fiscal 2024 compared to the same quarter last fiscal year.

Net income increased 4.4% to $280,743, or $3.85 per diluted share, for the nine months ended March 31, 2024, compared to $268,873, or $3.68 per diluted share, in the same period of fiscal 2023. Removing from net income the effects of deconversion net income of $5,739, the net loss from the acquisition of $3,539, and the net loss from the VEDIP program of $12,497 for the current fiscal year period, and for the effects of deconversion net income of $10,989 and the gain on sale of assets, net, of $5,612 for the prior year fiscal period, results in a 15.4% increase period over period. This increase was primarily due to net organic growth in our lines of revenue for the nine months ended March 31, 2024, compared to the same period last fiscal year.

REPORTABLE SEGMENT DISCUSSION

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

The Company’s operations are classified into four reportable segments: 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 digital/mobile banking, treasury services, online account opening, fraud/AML and lending/deposit solutions, 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 the other three segments, as well as operating expenses not directly attributable to the other three segments, except for items that are deemed unassigned and excluded from any segment.

Immaterial adjustments have been made between segments to reclassify revenue and cost of revenue that was recognized for the three and nine months ended March 31, 2023. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. Revenue reclassed for the three and nine months ended March 31, 2023, from Core to Corporate and Other was $1,797 and $5,456, respectively, from Payments to Corporate and Other was $7 and $24, respectively, and from Complementary to Corporate and Other was $135 and $243, respectively. Cost of revenue reclassed for the three and nine months ended March 31, 2023, from Core to Corporate and Other was $1,711 and $5,004, respectively, from Payments to Corporate and Other was $662 and $1,923, respectively, and from Complementary to Corporate and Other was $329 and $989, respectively.

Core			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Revenue			$	166,655					$	155,106					7.4		%				$	518,696					$	481,961					7.6		%
Cost of Revenue			$	72,153					$	69,994					3.1		%				$	217,449					$	207,265					4.9		%

Revenue in the Core segment increased 7.4% and cost of revenue increased 3.1% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Reducing Core revenue for deconversion revenue in both quarters, which totaled $1,291 for the three months ended March 31, 2024, and $2,315 for the three months ended March 31, 2023, results in an 8.2% increase quarter over quarter. This increase was primarily driven by growth in data processing and hosting revenues as new and existing customers migrate to our private cloud and processing volumes expand. Deconversion and/or acquisition costs did not significantly affect Core cost of revenue quarter over quarter. The Core cost of revenue increase was primarily due to higher direct costs generally consistent with increases in revenue. Core cost of revenue decreased 2% as a percentage of Core revenue for the third quarter of fiscal 2024 compared to the same quarter in fiscal 2023.

Revenue in the Core segment increased 7.6% and cost of revenue increased 4.9% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Reducing Core revenue for deconversion revenue in both periods, which totaled $4,885 for the nine months ended March 31, 2024, and $6,248 for the nine months ended March 31, 2023, results in a 8.0% increase period over period. This increase was primarily driven by the growth in data processing and hosting revenues as new and existing customers migrate to our private cloud and processing volumes expand. Deconversion and/or acquisition costs did not significantly affect Core cost of revenue period over period. The Core cost of revenue increase was primarily due to higher direct costs generally consistent with increases in revenue. Core cost of revenue decreased 1% as a percentage of Core revenue for the nine months ended March 31, 2024, compared to the same period in fiscal 2023.

Payments			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Revenue			$	201,919					$	191,833					5.3		%				$	605,115					$	569,843					6.2		%
Cost of Revenue			$	109,848					$	106,216					3.4		%				$	330,297					$	314,181					5.1		%

Revenue in the Payments segment increased 5.3% and cost of revenue increased 3.4% for the third quarter of fiscal 2024 compared to the equivalent quarter of the prior fiscal year. Reducing Payments revenue for deconversion revenue in both quarters, which totaled $910 for the third quarter of fiscal 2024 and $1,643 for the third quarter of fiscal 2023, results in a 5.7% increase quarter over quarter. This increase was primarily due to higher card revenue from organic growth from slightly higher volumes, higher payment processing revenues from slightly higher volumes and new customer revenue, and increased remote capture and ACH revenue. Deconversion and/or acquisition costs did not significantly affect Payments cost of revenue quarter over quarter. The Payments cost of revenue increase was primarily due to higher direct costs generally consistent with increases in revenue. Payments cost of revenue as a percentage of Payments revenue decreased 1% for the third quarter of fiscal 2024 compared to the same quarter in fiscal 2023.

Revenue in the Payments segment increased 6.2% and cost of revenue increased 5.1% for the nine months ended March 31, 2024, compared to the equivalent period of the prior fiscal year. Reducing Payments revenue for deconversion revenue in both periods, which totaled $3,470 for the nine months ended March 31, 2024 and $4,413 for the nine months ended March 31, 2023, and acquisition revenue of $1,945 from the current fiscal year period, results in a 6.1% increase period over period. This increase was primarily due to higher card revenue from organic growth from expanding volumes, higher payment processing revenue from expanding volumes and new customer revenue, and increased remote capture and ACH revenue. Deconversion and/or acquisition costs did not significantly affect Payments cost of revenue period over period. The Payments cost of revenue increase was primarily due to higher direct costs generally consistent with increases in revenues and higher personnel costs from an increase in employee headcount in the trailing twelve months. Payments cost of revenue as a percentage of Payments revenue remained consistent for the nine months ended March 31, 2024, compared to the same period in fiscal 2023.

Complementary			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Revenue			$	149,231					$	141,987					5.1		%				$	463,064					$	432,526					7.1		%
Cost of Revenue			$	65,414					$	61,037					7.2		%				$	191,712					$	178,085					7.7		%

Revenue in the Complementary segment increased 5.1% and cost of revenue increased 7.2% for the third quarter of fiscal 2024 compared to the equivalent quarter of the prior fiscal year. Increasing Complementary revenue for the reversal of deconversion revenue in the current fiscal year quarter of $1,366 (see note in Results of Operations and Revenue on page 22), and decreasing Complementary revenue for deconversion revenue of $2,170 for the third quarter of fiscal 2023, results in a 7.7% increase quarter over quarter. This increase was primarily driven by higher Jack Henry digital revenue as active users increased and volumes expanded from existing products and new products were introduced, and hosting revenues as new and existing customers continued to migrate to our private cloud and processing volumes expanded. Reducing Complementary cost of revenue for deconversion costs in both quarters, which totaled $348 for the third quarter of fiscal 2024 and $166 for the third quarter of fiscal 2023, results in a 6.9% increase quarter over quarter. This increase was primarily due to higher direct costs generally consistent with increases in revenues and increased amortization of capitalized software from capital software development projects. Complementary cost of revenue as a percentage of Complementary revenue increased 1% for the third quarter of fiscal 2024 compared to the same quarter in fiscal 2023.

Revenue in the Complementary segment increased 7.1% and cost of revenue increased 7.7% for the nine months ended March 31, 2024, compared to the equivalent period of the prior fiscal year. Reducing Complementary revenue for deconversion revenue in both periods, which totaled $1,440 for the nine months ended March 31, 2024, and $6,319 for the nine months ended March 31, 2023, results in an 8.3% increase period over period. This increase was primarily driven by higher Jack Henry digital revenue as active users increased and volumes expanded from existing products and new products were introduced, and hosting revenues, as new and existing customers continued to migrate to our private cloud and processing volumes expanded. Reducing Complementary cost of revenue for deconversion costs in both periods, which totaled $715 for the nine months ended March 31, 2024, and $538 for the nine months ended March 31, 2023, results in a 7.6% increase period over period. This increase was primarily due to higher direct costs generally consistent with increases in revenue and increased amortization of capitalized software from capital software development projects. Complementary cost of revenue as a percentage of Complementary revenue remained consistent for the nine months ended March 31, 2024, compared to the same period in fiscal 2023.

Corporate and Other			Three Months Ended March 31,												% Change						Nine Months Ended March 31,												% Change
			2024						2023												2024						2023
Revenue			$	20,757					$	19,626					5.8		%				$	68,756					$	58,739					17.1		%
Cost of Revenue			$	80,809					$	70,098					15.3		%				$	232,747					$	210,664					10.5		%

Revenue classified in the Corporate and Other segment includes revenues from other products and services and hardware not specifically attributed to the other three segments. Revenue in the Corporate and Other segment increased 5.8% for the third quarter of fiscal 2024 compared to the equivalent quarter of the prior fiscal year. The Corporate and other revenue increase was primarily due to the increase in other processing revenue quarter over quarter. Deconversion and/or acquisition revenue did not significantly affect Corporate and Other revenue quarter over quarter.

Cost of revenue for the Corporate and Other segment includes operating expenses not directly attributable to the other three segments. The cost of revenue in the third quarter of fiscal 2024 increased 15.3% when compared to the prior fiscal year quarter. This increase was primarily due to higher internal licenses and fees from increased pricing and deployment and higher personnel costs, including an increase in headcount in the trailing twelve months and higher bonus attainment, quarter over quarter. Deconversion and/or acquisition costs did not significantly affect Corporate and Other cost of revenue quarter over quarter.

Revenue in the Corporate and Other segment increased 17.1% for the nine months ended March 31, 2024, compared to the equivalent period of the prior fiscal year. This increase was primarily due to higher other processing and hardware revenues period over period. Deconversion and/or acquisition revenue did not significantly affect Corporate and Other revenue period over period.

Cost of revenue for the Corporate and Other segment for the nine months ended March 31, 2024, increased 10.5% when compared to the prior fiscal year period. This increase was primarily due to higher internal licenses and fees from increased pricing and deployment and higher personnel costs, including an increase in headcount in the trailing twelve months and higher bonus attainment, period over period. Deconversion and/or acquisition costs did not significantly affect Corporate and Other cost of revenue period over period.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents increased to $27,254 at March 31, 2024, from $12,243 at June 30, 2023.

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

			Nine Months Ended
			March 31,
			2024						2023
Net income			$	280,743					$	268,873
Non-cash expenses			156,565						120,204
Change in receivables			97,835						110,686
Change in deferred revenue			(185,784)						(184,130)
Change in other assets and liabilities			(13,117)						(108,602)
Net cash provided by operating activities			$	336,242					$	207,031

Cash provided by operating activities for the first nine months of fiscal 2024 increased 62% compared to the same period last year primarily due to the increase in accrued expenses period over period. 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 nine months of fiscal 2024 totaled $164,505 and included: $125,351 for the ongoing enhancement and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $34,347; $4,561 for the purchase and development of internal use software; and the purchase of investment of $1,146. Cash uses were partially offset by proceeds from the sale of assets of $900. Cash used in investing activities for the first nine months of fiscal 2023 totaled $355,561 and included: $229,628 for an acquisition; $124,110 for the development of software; $27,237 for capital expenditures; $1,471 for the purchase and development of internal use software; and the purchase of investment of $1,000. Cash uses were partially offset by proceeds from the sale of assets of $27,885.

Financing activities used cash of $156,726 for the first nine months of fiscal 2024 and included payments on credit facilities of $360,000, dividends paid to stockholders of $115,792, and the purchases of treasury stock of $20,000. Cash uses were partially offset by borrowings on credit facilities of $335,000 and $4,066 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities provided cash of $126,295 in the first nine months of fiscal 2023 and included borrowings on credit facilities of $550,000 and $700 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation. Cash provided was partially offset by repayments on credit facilities and financing leases of $290,059, $109,346 for the payment of dividends, and the purchase of treasury stock of $25,000.

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $34,347 and $27,237 for the nine months ended March 31, 2024, and March 31, 2023, 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 2024 are expected to be approximately $77,000 and have been or will be funded from our credit facilities and cash generated by operations.

In July 2023, the Company conducted a voluntary separation program for certain eligible employees that included a VEDIP payment for the eligible employees who chose to participate in the program. The Company made payments associated with the VEDIP program in the approximate amount of $16,443 from July 2023 through December 2023, including immaterial payments continuing into calendar 2024.

On August 8, 2023, the Company entered into a contract to purchase fixed assets that added contractual spend obligations of $30,392 for the period of December 16, 2023, through October 15, 2025. On February 1, 2024, the Company entered into a technology services contract that added contractual spend obligations of $11,454 for the period of February 1, 2024, through January 31, 2029. These commitments are in addition to the commitments discussed in our Annual Report on Form 10-K for the year ended June 30, 2023.

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 March 31, 2024, there were 31,323 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,667 additional shares. The total cost of treasury shares at March 31, 2024, was $1,852,118, and the Company repurchased 129 shares during the first nine months of fiscal 2024. At June 30, 2023, there were 31,194 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,796 additional shares. The total cost of treasury shares at June 30, 2023, was $1,832,118 and the Company repurchased 151 shares during the first nine months of fiscal 2023.

Credit facilities

On August 31, 2022, the Company entered into a five-year senior, unsecured amended and restated credit agreement that replaced a prior credit facility that was entered into on February 10, 2020. The credit agreement allows for borrowings of up to $600,000, which may be increased to $1,000,000 by the Company at any time until maturity. The credit agreement bears interest at a variable rate equal to (a) a rate based on an adjusted 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 March 31, 2024, the Company was in compliance with all such covenants. The amended and restated credit facility terminates August 31, 2027. There was $70,000 and $95,000 outstanding under the amended and restated credit facility at March 31, 2024 and June 30, 2023, respectively.

Term loan facility

On May 16, 2023, the Company entered into a term loan credit agreement with a syndicate of financial institutions, with an original principal balance of $180,000. Borrowings under the term loan facility bear interest at a variable rate equal to (a) a rate based on an adjusted SOFR term rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 0.75%), plus an applicable percentage in each case determined by the Company's leverage ratio. The term loan credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the term loan credit agreement. As of March 31, 2024, the Company was in compliance with all such covenants. The term loan credit agreement has a maturity date of May 16, 2025. There was $180,000 outstanding under the term loan at March 31, 2024 and June 30, 2023.

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line expires on April 30, 2025. There was no balance outstanding at March 31, 2024, or June 30, 2023.

Dollar amounts in this item are in thousands.

Market risk refers to the risk that a change in the level of one or more market prices, interest rates, indices, volatilities, correlations or other market factors such as liquidity, will result in losses for a certain financial instrument or group of financial instruments. We are currently exposed to credit risk on credit extended to customers and interest risk on outstanding debt. We do not currently use any derivative financial instruments. We actively monitor these risks through a variety of controlled procedures involving senior management.

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

We had $250,000 outstanding debt with variable interest rates as of March 31, 2024, and a 1% increase in our borrowing rate would increase our annual interest expense by $2,500.

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including the Company's Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation (required in Exchange Act Rules 13a-15(b) and 15d-15(b)), the CEO and CFO concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. For this purpose, disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 31, 2024, there were no changes in the Company's internal control over financial reporting which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

We are subject to various routine legal proceedings and claims arising in the ordinary course of our business. In the opinion of management, any liabilities resulting from current lawsuits are not expected, either individually or in the aggregate, to have a material adverse effect on our consolidated financial statements. In accordance with U.S. GAAP, we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case or proceeding.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following shares of the Company were repurchased during the quarter ended March 31, 2024:

			Total Number of Shares Purchased						Average Price of Share						Total Number of Shares Purchased as Part of Publicly Announced Plans						Maximum Number of Shares that May Yet Be Purchased Under the Plans (1)
January 1 - January 31, 2024			—						$	—					—						3,667,497
February 1 - February 29, 2024			—						—						—						3,667,497
March 1 - March 31, 2024			—						—						—						3,667,497
Total			—						$	—					—						3,667,497

(1) Total stock repurchase authorizations approved by the Company's Board of Directors as of May 14, 2021, were for 35,000,000 shares. Under these authorizations, the Company has repurchased and not re-issued 31,323,119 shares and has repurchased and re-issued 9,384 shares. These authorizations have no specific dollar or share price targets and no expiration dates.

Rule 10b-5(1) Trading Plans

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

31.1 Certification of the Chief Executive Officer.

31.2 Certification of the Chief Financial Officer.

32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS* XBRL Instance Document- the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

• Furnished with this quarterly report on Form 10-Q are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, 2024, and June 30, 2023, (ii) the Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2024, and 2023, (iii) the Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended March 31, 2024, and 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024, and 2023, and (v) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

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

									JACK HENRY & ASSOCIATES, INC.
Date:			May 9, 2024						/s/ David B. Foss
									David B. Foss
									Chief Executive Officer and Board Chair
Date:			May 9, 2024						/s/ Mimi L. Carsley
									Mimi L. Carsley
									Chief Financial Officer and Treasurer