Jack Henry & Associates Annual Report 2019

FY2019 Annual Report · Jack Henry & Associates

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F U T U R E R E A D Y

ANNUAL REPORT2019W H A T D O E S I T M E A N T O B E
‘ F U T U R E R E A D Y ’ ?

With the year 2020 on the horizon, there’s a lot of industry buzz about the importance
of having a “2020 vision.” At Jack Henry & Associates, Inc.® (Jack Henry), we believe
that being future ready is more than just having a vision for the coming year – it’s about
preparing our clients for 2020 and beyond.

T H E F U T U R E I S
H U M A N - C E N T E R E D

T H E F U T U R E I S
T E C H - F O R W A R D

T H E F U T U R E I S
I N S I G H T - D R I V E N

We believe that all people
seek meaning and connection,
and technology should be
a catalyst for, not a barrier
to, human interaction. Our
financial institution clients
don’t have to sacrifice
personal service for customer
convenience. Personal
connection is attainable
through technology if the
technology is crafted with
humanness – the end user – in
mind. We collaborate with
our clients along the way,
identifying challenges and
opportunities and developing
strategies that help consumers
achieve financial confidence.

The future is open – not just
in terms of technology and
open application programming
interfaces (APIs), but in the
philosophy of how vendors,
third parties, and financial
institutions interact and
transact with each other. Being
tech-forward means fostering
partnerships for the betterment
of our clients and our industry.
It’s also about using real-time
data and putting end users
in control of their data based
on personal preferences.
Ultimately, consumers trust
their personal data to
technology providers that
are, in fact, trustworthy.

Financial institutions serve
diverse consumers and
businesses whose financial
preferences vary significantly
and change dynamically.
Consumers and businesses
of the future will continue to
expect a financial services
experience that is personalized,
seamless, and responsive to
their evolving needs. Financial
institutions should leverage
powerful data and analytics
to understand consumer and
business behavior so they
can continuously tailor their
strategies to support them
when, where, and how they
want to interact.

B E I N G F U T U R E R E A D Y I S N O T A B O U T P R E D I C T I N G T H E F U T U R E .

It’s about having shared strategies with our clients and consumers, combining our dynamic technology
with a steadfast commitment to get them where they want to go, no matter what the future holds.

Read more about how our company and clients are future ready beginning on page 7.

T A B L E O F C O N T E N T S

Financial Highlights

Shareholders’ Letter

We are Future Ready

Market for Registrant’s Common Equity

Performance Graph

Selected Financial Data

Management’s Discussion and Analysis

Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

Quarterly Financial Information

Board of Directors and Executive Officers

F O R W A R D - L O O K I N G S T A T E M E N T S | Some of the information we provide in this document is forward-looking and therefore could change
over time to reflect changes in the environment in which Jack Henry competes. Forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A
detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is
included in the section titled “Risk Factors” in our Form 10-K for the fiscal year ended June 30, 2019 that is included as part of this Annual Report
to Shareholders. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required by law.

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JACKHENRY.COM

F I N A N C I A L H I G H L I G H T S
(In millions except per share data)

R E V E N U E

N E T I N C O M E

$1,388*

$1,471*

$1,553

2017

2018

2019

$1,300

$1,400

$1,500

$1,600

$100

$200

$300

$400

D I L U T E D E A R N I N G S
P E R S H A R E

T O T A L A S S E T S

$2.93*

$4.70*

$3.52

2017

2018

2019

$230*

$365*

$272

$1,868*

$2,033*

$2,185

$1,700

$1,800

$1,900

$2,000

$2,100

$2,200

S T O C K H O L D E R S ’ E Q U I T Y

D I V I D E N D S D E C L A R E D
P E R S H A R E

$1,100*

$1,323*

$1,429

2017

2018

2019

$1.18

$1.36

$1.54

$400

$800

$1,200

$1,600

$0.40

$0.80

$1.20

$1.6

* Prior years restated for ASC606.

2017

2018

2019

2017

2018

2019

2017

2018

2019

2019 ANNUAL REPORTF E L L O W S H A R E H O L D E R S

Fiscal year 2019 marks our 43rd year in business
and another year of solid performance for Jack
Henry. Our sales team exceeded their goals and
our company again reached record revenue and
earnings, if we adjust for the impact of the Tax Cuts
and Jobs Act (TCJA). Our employees remain engaged
and committed to providing exceptional levels of
customer satisfaction, and that dedication once again
translated into impressive returns for our shareholders.
In November we were named to the S&P 500 index,
and we’re honored to now be recognized among this
group of well-regarded companies.

“In November we were named
to the S&P 500 index, and we’re
honored to now be recognized
among this group of well-
regarded companies.”

As always, the lifeblood of our business is our
employees, and we’re pleased to report that for
the third year in a row we placed on Forbes’ list of
America’s Best Employers. We ranked No. 11 in
the IT, Internet, Software, and Services category
and No. 82 overall on the Large Companies list.
We were also excited to be named among the top
50 fintech companies on American Banker’s Best
Places to Work in Fintech list, which is a testament
to Jack Henry’s growing recognition in the industry
as a cutting-edge fintech. To be acknowledged
among so many impressive companies both in the
fintech space and in other industries affirms that our
“associates-first” philosophy is realized and valued
by our more than 6,500 employees.

We remain focused on improving our workplace in
response to business needs. To that end, we made
additional investments in employee development
this year by further emphasizing our Leadership
Framework through our performance management
practices. By tying the Leadership Framework to our
performance conversations, employees can directly
correlate their personal development goals to the
realized success of Jack Henry. We also introduced
the Jack Henry MBA, an in-person educational
experience focused on leadership training, industry
insight, and building meaningful connections to
accelerate career growth. These efforts have added
depth to our organizational leadership bench and
allowed our leaders to grow their careers and
become stronger assets to Jack Henry.

“We strengthened our Total
Rewards package by creating
an employee bonus plan and
enhancing our 401(k) offering.”

We chose to invest a portion of our savings realized
through the TCJA in rewarding and recognizing
the associates who help make us so successful.
We strengthened our Total Rewards package by
creating an employee bonus plan and enhancing
our 401(k) offering.

We also laid the foundation for a new Diversity and
Inclusion strategy to guide the entire organization
toward a more inclusive workplace. Our multi-
pronged approach includes engaging senior
leaders as sponsors, creating opportunities
for professional development, improving

our data analytics to aid in recruiting and
talent management, revitalizing our

commitment to corporate stewardship,

and empowering our associates
through their involvement in
Business Innovation Groups.

Good Things Come in Threes

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JACKHENRY.COM

58%

35%

Today, 58% of our total
core business processes
in a hosted environment.

Our Payments
business is now 35%
of our total revenue.

89 NEW

PROFITSTARS
CLIENTS

Our ProfitStars division
continues to thrive, adding
89 new clients for Jack Henry
during fiscal year 2019 –
nearly doubling last
year’s pace.

This year, we launched our Women at JHA Business
Innovation Group to foster supportive ties among
women and provide them growth opportunities
with additional groups to be announced in the
coming year.

We fundamentally believe that our organization
is built from the inside out; that by putting our
employees first, we foster an exceptional workforce
that ultimately leads to happy and successful clients.
We see proof of this every year through our positive
customer satisfaction surveys, which continue to
substantiate that we’re offering remarkable levels
of customer service. We are excited to report
that client engagement is strong, as indicated by
the record attendance we saw at our Jack Henry
Annual Conference (JAC) and Symitar Educational
Conference (SEC) this year by existing clients and
new prospects.

Since last year’s annual report, we completed three
new acquisitions, strengthening our commercial
banking and digital offerings. On October 1, 2018
we announced the acquisition of Agiletics, a Florida-
based provider of solutions that help banks better
serve commercial customers with sophisticated
escrow, investment, and liquidity management
solutions. On October 8, 2018 we announced
the acquisition of BOLTS Technologies, Inc., a
Pennsylvania-based developer of next-generation
digital account opening technology. On July 1, 2019
we purchased Geezeo, a Boston-based provider
of digital financial management solutions that help
consumers and businesses have greater control over
their daily and long-term finances. We’re looking
forward to the talent, expertise, and opportunity
these acquisitions bring to Jack Henry.

We had an impressive 57 new core system wins
this fiscal year across our banking and credit
union businesses, and of those, six were de novo
institutions. De novos, or newly chartered banks, are
an encouraging sign of economic confidence and
expanded opportunities for our company.

“Since last year’s annual report we
completed three new acquisitions,
strengthening our commercial
banking and digital offerings.”

Our clients continue to realize the many benefits
of the cloud, also referred to as hosted delivery,
outsourcing, or Software-as-a Service (SaaS). Of the
57 new core system wins, most of them selected
Jack Henry’s private cloud, with only four institutions
choosing to process in-house. Additionally, 53 of our
existing banking and credit union clients migrated
their core platform from an in-house delivery model
to our private cloud during fiscal year 2019. Today,
58% of our total core business processes in the cloud.
This shift has been a significant contributor to our
recurring revenue composition which reached 86% in
fiscal year 2019.

We continue our intense focus on our digital strategy
as financial institutions and consumers need, and
expect, one single digital strategy, ecosystem, and
end-user experience. The days of referring to “online
banking” and “mobile banking” as separate entities
are coming to an end; the experience going forward
will be singularly known as “digital banking.”
Our digital platform, marketed under the name
Banno™, is now recognized as one of the leading
digital platforms on the market today. In addition
to continuing to expand our Banno platform, this

2019 ANNUAL REPORTfiscal year, we also rolled out JHA OpenAnywhere™,
our digital account opening solution we obtained
through the BOLTS acquisition, and we continue to
develop Branch Anywhere™, the in-branch solution
for the digital experience. Our digital experts are
dedicated to uncovering new ways to bring personal
service to the digital channel, and we’re excited
about the opportunities this brings for our company,
clients, and consumers to be future ready.

“We continue our intense focus
on our digital strategy as financial
institutions and consumers need
– and expect – one single digital
strategy, ecosystem, and
end-user experience.”

Our electronic payments business continues to
thrive as we strengthen our product offerings and
business relationships to remain at the forefront of
faster payments. We made significant progress in
the migration of our card processing platform this
fiscal year, migrating 355 customers and selling 59
new deals on the platform which was announced
in fiscal year 2017. We also continued enhancing
JHA PayCenter™, a single point of access to Zelle®
by Early Warning and RTP® by The Clearing House.
Payments generated approximately $548 million in
annual revenue in fiscal year 2019, or 35% of our
total revenue.

Our ProfitStars division continues to thrive, adding
89 new clients for Jack Henry during fiscal year
2019 – nearly doubling last year’s pace. For non-
core customers, we now average more than three
ProfitStars offerings per client.

We continue to enhance our JHA Treasury
Management™ solution, JHA Commercial Cash
Management™ solution, and our Commercial Lending
Center Suite™, all of which help ensure we remain a
strong player in the commercial banking space.

Our strong balance sheet and cash flow continue to
generate value for our shareholders. In fiscal year
2019, we saw 6% revenue growth, with nearly 5%
being organic growth. We returned $174 million
to our shareholders as we increased our annual
dividends by 13% and repurchased approximately
400 thousand shares of JKHY stock in the market
for the treasury.

Total revenue increased to a record $1.55 billion.
Net income was $271.9 million or $3.52 per diluted
share, as compared to net income of $365 million
or $4.70 per diluted share reported for fiscal year
2018. We generated strong cash flow from operating
activities of $431 million, as compared to $412
million in fiscal year 2018. Our return on assets was
13% and return on equity was 20%. We generated
strong profitability with a 22% operating margin.

This year you may have heard Jack Henry executives
talking about our approach to “openness,” and
being future ready. Open platform banking and
open application programming interfaces (APIs) are
expected to alter the banking ecosystem. While
traditional banking isn’t expected to go away,
consumers will have more flexibility to change
providers and significantly more choices when it
comes to banking products and delivery channels.
To embrace an open platform strategy, financial

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“Fortunately, while the
industry’s emphasis on open
banking continues to unfold,
the concept here at Jack
Henry isn’t new. For years
we’ve had an open approach
to working with financial
institutions, combining
our tools and systems with
long-held philosophies and
methodologies that support
the spirit of openness.”

institutions should develop business models and
sales strategies that optimize their openness, or they
could miss opportunities to gain new customers and
deepen existing relationships. Fortunately, while
the industry’s emphasis on openness continues
to unfold, the concept here at Jack Henry isn’t
new. For years we’ve had an open approach to
working with financial institutions, combining our
tools and systems with long-held philosophies and
methodologies that support the spirit of openness.
As the future unfolds and openness continues to
grow in visibility and value, we are well positioned

JACKHENRY.COM
to address our clients’ evolving needs. You’ll hear
much more about our commitment to openness,
partnership, and user centricity as we approach 2020.

those foundational beliefs will continue to lead our
company, clients, employees, and shareholders into
the future … and beyond.

Speaking of 2020, at Jack Henry we’ve always looked
toward the future with a fond respect for our past.
Our co-founders, Jack Henry and Jerry Hall, believed
that strong relationships and trusted technology
were the cornerstones of our success. We trust that

On behalf of the Board of Directors and our
leadership team, we thank you for all you’ve done
to support us, past and present. The best is yet to
come, and for that you have our sincere gratitude.

DAVID FOSS
President and Chief
Executive Officer

KEVIN WILLIAMS
Chief Financial Officer
and Treasurer

IN NOVEMBER 2018, JACK HENRY WAS NAMED TO THE S&P 500 INDEX
We are honored to be recognized among this group of well-regarded companies.

F I S C A L Y E A R - E N D S T O C K P R I C E | Price adjusted for stock splits

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2 0 1 9 A N N U A L R E P O R T

2018 ANNUAL REPORT
W E A R E F U T U R E R E A D Y
A closer look at the strategic priorities for our financial
institutions and how Jack Henry is answering the future’s call

In fiscal year 2019, Jack Henry researched the industry trends around five key strategic areas for financial
institutions – Business Intelligence; Digital; Fraud, Risk and Compliance; Payments; and Service and Support.
As part of this research, we performed a Technology Capabilities Roadmap Assessment which surveyed
our clients about their adoption of technology in these areas. We reported the results at our 2019 Strategic
Initiatives meetings so our clients could compare notes and determine the next steps they should take to
improve their future readiness. As a shareholder, we hope you enjoy the insights this research provides.

S E T T I N G T H E S T A G E

BANK LANDSCAPE
Community banks in 2019 are faced with market and
technology trends that could have a significant effect
on their day-to-day business operations. These trends
are focused on:

Expanding lending portfolios and growing
deposits through digital banking.
New technologies that are redefining the way
customers bank and are serviced.
Advanced digital payment technologies
promoting real-time processing.
Key regulatory guidance or compliance issues.
Challenges due to operating in a highly
competitive industry.

The number of banks in the U.S. has been shrinking,
but total bank assets are reaching record highs – a
result of consolidation based on continuing mergers
and acquisitions. With this consolidation and the
emergence of non-bank competitors, the battle for
market share continues. Banks should have an arsenal
of innovative tools that build efficiencies and deliver a
better customer experience. Also, as more everyday
banking activities take place on mobile devices, banks
should define the role of the branch in the digital world.

Banks should have an arsenal
of innovative tools that build
efficiencies and deliver a better
customer experience.

We expect the next few years to be interesting
years of change, centered on the economy and
introduction of new technologies. The hope remains
for continued regulatory reform. Community banks
are expected to look to financial service technology
providers to deliver solutions to help them compete
and promote growth.

CREDIT UNION LANDSCAPE
Credit unions have been hard at work differentiating
their brands, personalizing the member experience,
expanding digital services, combating fraud, and
offering the latest products/services to attract new
members while strengthening the relationships with
existing members. And it’s paying off. According to
Callahan & Associates’ TrendWatch 2Q 2019, total
membership at U.S. credit unions surpassed 120 million
members for the first time ever and average member
relationships exceed $19,000. More consumers are
turning to credit unions for financial services – indicating
that credit unions are embracing the challenge to grow
organically and maintain market relevance. Economists
predict that credit unions will maintain a strong ROA
and continue to perform well with only slight declines in
membership and loan growth.

Information technology (IT) teams are expected
to be challenged with supporting appropriate IT
infrastructure (some of which may move to the
cloud) while remaining focused on cybersecurity and
protecting member data. As more everyday banking
and payment activities take place on mobile devices,
credit unions should define the role of the branch.
To drive innovation, many credit unions are expected
to continue seeking collaborative opportunities with
fintechs, and others will likely leverage emerging
technologies like artificial intelligence (AI).

Of course, credit unions should be prepared to
navigate the changing regulatory environment and
prepare for the NCUA’s 2020 examination focus. While
credit unions understand the growing importance
of investing in technology and digital delivery, the
“people helping people” philosophy and focus on
members signal that it’s still a people business.

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B U S I N E S S I N T E L L I G E N C E
Getting the most out of data

THE RESEARCH SAYS:
Between video streaming, social media, online searches, emails, texting, digital banking, and
payment transactions, the amount of available data is increasing rapidly – which means now is
the time for financial institutions to intensify their focus on a data strategy.

Gartner Research reported that by the year 2022, 90% of corporate strategies will clearly
mention information as a critical enterprise asset, and analytics as an essential competency. The
problem is that many modern technologies require a history of data to compare, contrast, and
learn from. This history allows solutions to take advantage of further data advancements like
AI and its subsets, machine learning and predictive analysis. AI can be used to solve payment
fraud, enhance customer experience, make personalized offers, meet compliance regulations,
communicate more intelligently through bots and virtual assistants, and so much more.

If financial institutions are going to meet the expanding technology needs of AI, they should
start collecting data now. It’s important for them to know what type of data is available, where
it can be found, how to access it, and where to house the data. To tackle these tasks, the
industry is most likely going to see increased levels of collaboration among fintechs, networks,
and financial institutions – making it probable that data sharing agreements will need to be
established. Having the proper infrastructure is expected to be paramount to connecting to
internal data points and integrating third-party data. Application programming interfaces (APIs)
and open banking concepts should help provide direction to promote easy data integration.

BAN K S

CREDIT U NION S

87%

58%

89%

50%

87% of respondents
plan to be in a position
to implement Machine
Learning before 2022

58% of respondents
currently researching/
planning for
Predictive Analytics

89% of respondents
plan to be in a position
to implement Machine
Learning before 2022

50% of respondents
currently researching/
planning for
Predictive Analytics

Source: Jack Henry’s Technology Capabilities Roadmap Assessment

JA CK HENRY T EC HNOL OGY S PO T LIGH T: G E E Z E O

The acquisition of Geezeo significantly
enhanced Jack Henry’s business
intelligence capabilities. Geezeo helps
us make meaning of the data that is at
our fingertips by cleaning, normalizing
and auto-categorizing transaction data to
give consumers and financial institutions
deeper insights into spending patterns and

financial behavior. Geezeo is also enriching
transaction data with a proprietary
categorization taxonomy unique to
consumers and businesses, respectively.

Adding this data to Jack Henry’s content
engine ultimately provides Jack Henry
with an enhanced ability to help both

consumers and businesses make smarter
financial choices. Geezeo’s data engines
enable broader standardization of data
across the Jack Henry enterprise and feed
advanced analytics and AI applications
across Jack Henry financial institutions that
are expected to result in future innovations
and value.

2019 ANNUAL REPORTD I G I T A L
Providing a personal, seamless, human digital experience

THE RESEARCH SAYS:
When it comes to a personalized digital experience, the influence of Big Tech
continues to drive consumer demands – demands which have pushed many
financial institutions to quicken the pace of their digital transformation projects.
As automation efforts increase across delivery channels, it’s important that
financial institutions humanize their digital platforms.

Financial institutions should be using AI to help their staff assist customers, so they
need to make sure they’re providing a quick and painless avenue for customers to
speak with a human when they’ve reached the limits of self-service. Also, if they’re
considering adopting digital account opening functionality, they should make
sure they’re mapping the customer journey and engaging further than the typical
marketing “welcome program.” They should look for ways to connect with new
customers across every channel, making onboarding span multiple products. As
personal financial management and digital wealth management platforms become
further integrated into the daily digital experience, these solutions are likely to
see an increase in customer use – bringing about a holistic financial picture and
improved financial wellness.

BAN KS

83%

83% of respondents have
not implemented a digital-
only brand. 96% plan to be
in a position to implement
before 2022.

52%

52% of respondents have
not implemented online
consumer loan origination.
92% plan to be in a position
to implement before 2021.

CRE DIT U NI ONS

38%

38% of respondents are already
developing or have a live
digital-only brand, targeting a
niche consumer audience.

Source: Jack Henry’s Technology Capabilities Roadmap Assessment

JA CK HE NRY T ECHNO LO GY
S POT LIGHT: J H A C O N V E R S AT I O N S

While digital technology is revolutionizing the financial
services industry, service is still a major component of
community financial institutions’ differentiation. Human
interaction is key.

Jack Henry has the concept of “people” built directly
into our digital software. Our digital banking platform is
the first to enable financial institutions to translate their
personal service meaningfully inside digital channels
with an industry-first JHA Conversations solution that
puts financial institution staff front and center at the
customer’s moment of need with secure, encrypted,
authenticated chat capabilities.

A higher percentage of CUs under $500
million have deployed these than CUs
larger than $500 million.

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F R A U D , R I S K , A N D C O M P L I A N C E
Protecting financial institutions and their customers

THE RESEARCH SAYS:
The volume of fraud attacks in our industry is escalating – requiring financial institutions to
make heavy investments in new fraud-combatting technology, create security strategies
around open banking and big data, and weigh the pros and cons of talent acquisition
versus outsourcing. As real-time payments fraud continues to thrive, we are observing that
many financial institutions are working to not only increase the security of their mobile
channels, but to also upgrade or replace ACH, wire, and card solutions while implementing
real-time fraud capabilities.

Financial institutions are tasked with providing excellent security measures without
negatively impacting the customer experience. Moving forward, financial institutions should
be considering how to appropriately apply machine learning and AI across their products
to assist with manual fraud monitoring efforts, reduce false positives, and automate rules-
based decisioning.

Moving forward, financial institutions should
be considering how to appropriately apply
machine learning and AI across their products.

M O B I L E
C H A N N E L S

A C H , W I R E , A N D
C A R D S O L U T I O N S

R E A L -T I M E F R A U D
C A P A B I L I T I E S

S E C U R I T Y

1 0

JACK HENRY
T ECHNO LOGY
S POT LIGHT:
M YC A R D R U L E S ™

As digital self-service continues to
be a growing preference among
consumers, MyCardRules puts the
power of fraud protection in the
cardholder’s hands. Part of the JHA
Card Processing Solutions™ suite, this
mobile app gives consumers a variety
of card controls, offering peace of
mind through added protection
and awareness.

The app, available on Google Play™
or the App StoreSM can be installed
on multiple mobile devices for a wide
variety of supported cards. With the
app, cardholders can turn the card on
and off; set per-transaction spending
limits based on various factors such
as dollar amount, transaction type,
or merchant type; receive alerts on
all transaction attempts declined; set
a location boundary where the card
can be used; set parental or employer
controls and monitoring; and more.

2019 ANNUAL REPORTP A Y M E N T S
Taking financial institutions into the future of payments

THE RESEARCH SAYS:
As we look toward the future of payments, several trends emerge. Real-time payments
continue to grow slowly, with new players like the Federal Reserve emerging. As
networks and processers work together to onboard more financial institutions, person-
to-person launches are moving more quickly.

The looming threat of fintech firms like Venmo and Square remains present for
financial institutions. “User experience” is a recurring buzzword, as these firms
continue to introduce debit cards, deposit accounts, and mobile wallets – all intended
to infiltrate the financial services market. In-app purchases, subscription-based
services, and overall connected devices are heightening the importance for networks
and issuers to reinvent their card strategies for the connected digital world.

As digital banking and payment technologies advance and small businesses thrive,
we’re observing a demand for unique business banking and payment solutions

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JACK HENRY
TEC HNOLOGY
SPOTLI GHT:
J H A PAYC E N T E R ™

Real-time payments are changing
the industry and without them,
financial institutions may have
difficulty meeting consumer
and business expectations
or competing with looming
payment disruptors.

Our JHA PayCenter payment
hub enables real-time payments
to be sent and received
through Jack Henry’s core
systems, mobile and online
banking solutions, and other
complementary products with
seamless connections to the
Real Time Payments (RTP®) and
Zelle® networks. If financial
institutions were to try and build
their own connections to these
networks, it would be costly and
cumbersome. JHA PayCenter
gives them access to a ready-
built infrastructure that allows
them to easily meet real-time
payments demands.

centered around digital technology. Business intelligence is a big part of
this trend, with the industry making progress in how financial institutions
can access and apply data. Additionally, the combination of data analytics
and the proliferation of IoT (Internet of Things) devices is perfecting voice
technology in the form of chatbots specifically dedicated to payments –
advancing from inquiry-based activities to transactional behaviors.

BA NKS

CREDIT U NION S

95%

75%

97%

71%

95% of
respondents
have already
deployed
debit cards

75% of
respondents
are developing
or have mobile
wallets

97% of
respondents
have already
deployed
debit cards

71% of
respondents
are developing
or have mobile
wallets

Source: Jack Henry’s Technology Capabilities Roadmap Assessment

W H AT ’ S N E X T

The Federal Reserve is an emerging
player in real-time payments.

Expect an increased need for unique
business banking and payment solutions
centered on digital technology.

Be on the lookout for perfected voice
technology for payment chatbots.

1 1

JACKHENRY.COM

S E R V I C E A N D S U P P O R T
Delivering service with a human touch

THE RESEARCH SAYS:
Financial institutions should do more than provide consumers with a place to manage their money.
In order to build and maintain trust, it’s important for them to be transparent about fees and
services; and they should provide financial insights, guidance, and advice. Financial institutions
should be prepared to serve their customers whenever and however they prefer – offering “always
on” convenience because customers expect to interact with their financial institutions in ways that
intersect with their daily lives. To meet this expectation, the customer experience should be a
simple and seamless extension of the life experience (real-time, multi-touch, and conversational).

While a lot of strategies right now are centered on digital service technologies like live chat,
intelligent call routing, text-enabled messaging, and virtual tellers, financial institutions shouldn’t
lose focus on delivering a human touch. With the right blend of human assistance and modern
technology, financial institutions can provide a personal user experience.

Chatbots, for example, are being used by many organizations today to complement customer
service representative support as an agent-assist companion. The agent-assist model provides
answers to human agents quickly, adding more context than if they were to look up answers on
their own. This leaves the human to do what they do best – build relationships. In the digital world,
banking is still a people business, and serving and supporting people is where community financial
institutions excel.

BANKS

CR EDI T U NION S

71%

76%

71% of our bank clients and 76% of our credit union
clients plan to deploy virtual tellers by the end of 2020.

Source: Jack Henry’s Technology Capabilities Roadmap Assessment

In the digital world, banking is still a people
business, and serving and supporting people is
where community financial institutions excel.

1 2

JA CK HE NRY
T ECHNO LOGY
S POT LIGHT:
j h a C A L L C E N T E R ™

Consumers want access to competent
staff at the very moment they need help.
Our jhaCall Center solution provides
banks and credit unions with “always
on” support so their customers can
receive personal telephone service at
any time, day or night.

We provide full call center services.
Financial institutions can install our in-
house call center software or contract
for a variety of outsourced services
which include after hours, holiday,
and weekend support as well as back-
office services and supplemental
coverage during events like mergers,
acquisitions, or product changes when
call volume is higher.

2019 ANNUAL REPORTM O V I N G F O R W A R D

Between all five categories in our Technology
Capabilities Roadmap Assessment performed in
2019, several financial institutions excelled across
the board. One trend that emerged shows that
a majority of our clients are future ready in the
payments and risk management and compliance
categories while many have yet to implement
service and support solutions. We also observed
that most of our clients have not deployed business
intelligence solutions.

Many of our clients have demonstrated that they
are future ready by sharing their plans to deliver
game-changing capabilities to their account
holders in these strategic areas. And Jack Henry
has demonstrated that we are the future-focused
technology strategists to drive their success.

BAI Banking Outlook 2019 reported that 64%
of financial institutions plan to collaborate with
fintechs in 2019. Our commitment to openness
and partnership continues to connect our
clients with others in the fintech space to drive
innovation in community-based banking.

Moving forward, we will
continue to monitor the market
and industry trends so we are
providing the technology and
support that empower our
clients and generate value for
our shareholders.

A majority of
our clients are
future ready in
the payments and
risk management
and compliance
categories.

F U T U R E R E A D Y

The future is
around the corner,
and together,
we are ready.

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JACKHENRY.COM

F I N A N C I A L S

1 4

2019 ANNUAL REPORTMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES

The Company’s common stock is quoted on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “JKHY”.

The Company established a practice of paying quarterly dividends at the end of fiscal 1990 and has paid dividends with respect to every
quarter since that time. The declaration and payment of any future dividends will continue to be at the discretion of our Board of Directors
and will depend upon, among other factors, our earnings, capital requirements, contractual restrictions, and operating and financial
condition. The Company does not currently foresee any changes in its dividend practices.

On August 15, 2019, there were approximately 145,300 holders of the Company’s common stock, including individual participants in
security position listings. On that same date the last sale price of the common shares as reported on NASDAQ was $141.94 per share.

Issuer Purchases of Equity Securities

The following shares of the Company were repurchased during the quarter ended June 30, 2019:

April 1 - April 30, 2019

May 1 - May 31, 2019

June 1 - June 30, 2019
Total

Total Number
of Shares
Purchased (1)
—

250,000

—
250,000

Average
Price of
Share

—

$ 134.35

—

$
$ 134.35

Total Number of Shares
Purchased as Part of
Publicly Announced Plans (1)
—

Maximum Number of Shares
that May Yet Be Purchased
Under the Plans (2)
3,732,713

250,000

—
250,000

3,482,713

3,482,713
3,482,713

(1) 250,000 shares were purchased through a publicly announced repurchase plan. There were no shares surrendered to the Company to satisfy tax withholding obligations in
connection with employee restricted stock awards.

(2) Total stock repurchase authorizations approved by the Company’s Board of Directors as of February 17, 2015 were for 30.0 million shares. These authorizations have no
specific dollar or share price targets and no expiration dates.

1 5

JACKHENRY.COM
Performance Graph

The following chart presents a comparison for the five-year period ended June 30, 2019, of the market performance of the Company’s
common stock with the S&P 500 Index and an index of peer companies selected by the Company. Historic stock price performance is not
necessarily indicative of future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Jack Henry & Associates, Inc., the S&P 500 Index, and a Peer Group

The following information depicts a line graph with the following values:

JKHY

2019 Peer Group

2018 Peer Group

S&P 500

2014

100.00

2015

110.51

126.23

127.40

107.42

2016

151.12

142.94

151.16

111.71

2017

182.15

166.15

177.26

131.70

2018

231.36

224.73

228.97

150.64

2019

240.29

281.09

286.22

166.33

This comparison assumes $100 was invested on June 30, 2014, and assumes reinvestments of dividends. Total returns are calculated
according to market capitalization of peer group members at the beginning of each period. Peer companies selected are in the business
of providing specialized computer software, hardware and related services to financial institutions and other businesses.

Some peer participant companies were different for fiscal year ended 2019 compared to fiscal year ended 2018. The Company’s
Compensation Committee of the Board of Directors adjusted the peer participants due to consolidations within the industry during the
2019 fiscal year.

Companies in the 2019 peer group are ACI Worldwide, Inc.; Black Knight, Inc.; Bottomline Technologies, Inc.; Broadridge Financial
Solutions, Inc.; Cardtronics plc; CoreLogic, Inc.; Euronet Worldwide, Inc.; ExlService Holdings, Inc.; Fair Isaac Corp.; Fidelity National
Information Services, Inc.; Fiserv, Inc.; Fleetcor Technologies, Inc.; Global Payments, Inc.; Square, Inc.; SS&C Technologies Holdings,
Inc.; Total System Services, Inc.; Tyler Technologies, Inc.; Verint Systems, Inc.; and WEX, Inc.

Companies in the 2018 peer group were ACI Worldwide, Inc.; Bottomline Technology, Inc.; Broadridge Financial Solutions; Cardtronics,
Inc.; Corelogic, Inc.; Euronet Worldwide, Inc.; Fair Isaac Corp.; Fidelity National Information Services, Inc.; Fiserv, Inc.; Global Payments,
Inc.; Moneygram International, Inc.; SS&C Technologies Holdings, Inc.; Total Systems Services, Inc.; Tyler Technologies, Inc.; Verifone

1 6

2019 ANNUAL REPORT
Systems, Inc.; and WEX, Inc. DST Systems, Inc., which had previously been part of the 2018 peer group, was acquired in 2018 and is no
longer a public company. As a result, DST Systems, Inc. was removed from the 2018 peer group and stock performance graph.

The stock performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference
into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth
by specific reference in such filing.

SELECTED FINANCIAL DATA

The following data should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere
in the Annual Report on Form 10-K. Fiscal 2018 and 2017 have been recast to reflect the Company’s retrospective adoption of Accounting
Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, and related amendments, collectively referred to as
Accounting Standards Codification (“ASC”) 606. Fiscal 2016 and 2015 were not recast. Net income for fiscal 2018 and 2019 has been
impacted by the reduced U.S. corporate tax rate enacted by the Tax Cuts and Jobs Act (“TCJA”) of 2017, and fiscal 2018 net income
contains the related adjustment for the re-measurement of deferred taxes. Acquisitions have affected revenue and net income in fiscal
2019 as well as the historical periods presented.

Income Statement Data

2019

2018

2017

2016

2015

Selected Financial Data

(In Thousands, Except Per Share Data)

YEAR ENDED JUNE 30,

Revenue (1)

Net Income

Basic earnings per share

Diluted earnings per share

Dividends declared per share

Balance Sheet Data

Total deferred revenue

Total assets

Long-term debt

Stockholders’ equity

1,552,691

271,885

3.52

1.54

394,306

2,184,829

1,470,797

365,034

4.73

4.70

1.36

369,915

2,033,058

1,388,290

229,561

2.95

2.93

1.18

368,151

1,868,199

— $
$

1,429,013

— $

50,000

1,322,844

1,099,693

*Unadjusted

1,354,646

248,867

3.13

3.12

1.06

521,054

1,815,512

1,256,190

211,221

2.60

2.59

0.94

531,987

1,836,835

— $

50,102

996,210

991,534

(1) Revenue includes license sales, support and service revenues, and hardware sales, less returns and allowances.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following section provides management’s view of the Company’s financial condition and results of operations and should be read in
conjunction with the Selected Financial Data, the audited Consolidated Financial Statements, and related notes included elsewhere in
this report. All dollar and share amounts, except per share amounts, are in thousands and discussions compare fiscal 2019 to fiscal 2018
and compare fiscal 2018 to fiscal 2017.

OVERVIEW

Jack Henry & Associates, Inc. (JHA) is headquartered in Monett, Missouri, employs approximately 6,500 associates nationwide, and is
a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions
serve over 9,000 customers and are marketed and supported through three primary brands. Jack Henry Banking® is a top provider of
information and transaction processing solutions to U.S. banks ranging from community banks to multi-billion-dollar asset institutions
with assets up to $50 billion. Symitar® is a leading provider of information and transaction processing solutions for credit unions of all
sizes. ProfitStars® provides highly specialized 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. JHA’s integrated solutions are available for in-house installation and outsourced delivery in our private cloud.

Each of our brands share the fundamental commitment to provide high-quality business solutions, service levels that consistently exceed
customer expectations, integration of solutions and practical new technologies. The quality of our solutions, our high service standards,

1 7

JACKHENRY.COMand the fundamental way we do business typically foster long-term customer relationships, attract prospective customers, and have
enabled us to capture substantial market share.

Through internal product development, disciplined acquisitions, and alliances with companies offering niche solutions that complement
our proprietary solutions, we regularly introduce new products and services and generate new cross-sales opportunities across our three
primary marketed brands. We provide compatible computer hardware for our in-house installations and secure processing environments
for our outsourced solutions in our private cloud. We perform data conversions, software implementations, initial and ongoing customer
training, and ongoing customer support services.

We believe our primary competitive advantage is customer service. Our support infrastructure and strict standards provide service levels
we believe to be the highest in the markets we serve and generate high levels of customer satisfaction and retention. We consistently
measure customer satisfaction using comprehensive annual surveys and randomly generated daily surveys we receive in our everyday
business. Dedicated surveys are also used to grade specific aspects of our customer experience, including product implementation,
education, and consulting services.

Our two primary revenue streams are “Services and support” and “Processing”. Services and support includes: “Outsourcing and
cloud” fees that predominantly have contract terms of five 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 “In-house
support” revenue, which is composed of maintenance fees which primarily contain annual contract terms. Processing revenue includes:
“Remittance” revenue from payment processing, remote capture, and automated clearing house (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.

We have four reportable segments: Core, Payments, Complementary, and Corporate and Other. The respective segments include all
related revenues along with the related cost of sales.

We continue to focus on our objective of providing the best integrated solutions, products and customer service to our clients. We
are cautiously optimistic regarding ongoing economic improvement and expect our clients to continue investing in our products and
services to improve their operating efficiencies and performance. We anticipate that consolidation within the financial services industry
will continue. Regulatory conditions and legislation will continue to impact financial institutions’ discretionary spending.

A detailed discussion of the major components of the results of operations follows.

RESULTS OF OPERATIONS

FISCAL 2019 COMPARED TO FISCAL 2018

In fiscal 2019, revenues increased 6% or $81,894 compared to fiscal 2018. Deconversion fees decreased $15,941 compared to the prior
fiscal year. Revenue from fiscal 2019 acquisitions totaled $1,052. Excluding these factors, total revenue increased 7%, with growth in
each of our revenue streams as discussed in detail below.

Operating expenses increased 8% year over year, primarily due to increased salaries and benefits in fiscal 2019, partly due to increased
headcount compared to fiscal 2018, costs related to our new card payment processing platform, bonuses provided by the Company in
response to the lower tax rate resulting from the TCJA, the Ensenta acquisition, increased rent expense related to new facilities, and
increased amortization expense.

The TCJA had a large impact on our fiscal 2018 provision/ (benefit) for income taxes and net income, which impacted year-over-year
comparison as discussed below.

We move into fiscal 2020 following a strong performance in fiscal 2019. Significant portions of our business continue to provide recurring
revenue and our healthy sales pipeline is also encouraging. Our customers continue to face regulatory and operational challenges which
our products and services address, and in these times, they have an even greater need for our solutions that directly address institutional
profitability, efficiency, and security. We believe our strong balance sheet, access to extensive lines of credit, the strength of our existing
product line and an unwavering commitment to superior customer service position us well to address current and future opportunities.

A detailed discussion of the major components of the results of operations for the fiscal year ended June 30, 2019 follows. Fiscal years
2018 and 2017 have been recast to reflect our retrospective adoption of Accounting Standards Update (“ASU”) 2014-09, Revenue from
Contracts with Customers, and related amendments, collectively referred to as Accounting Standards Codification (“ASC”) 606.

REVENUE

Services and Support Revenue

Services and Support

Percentage of total revenue

1 8

Year Ended June 30,

% Change

2019

2018

$ 958,489

$ 920,739

62 %

63%

2019 ANNUAL REPORTServices and support includes: “Outsourcing and cloud” fees that predominantly have contract terms of five years or greater at inception;
“Product delivery & services” revenue, which includes revenue from the sales of licenses, implementation services, deconversion fees,
consulting, and hardware; and “In-house support” revenue, which is composed of maintenance fees which primarily contain annual
contract terms.

In the fiscal year ended June 30, 2019, services and support revenue grew 4% over the prior fiscal year. Excluding deconversion fees,
which totaled $30,230 in fiscal 2019 and $46,171 in fiscal 2018, and excluding revenue from fiscal 2019 acquisitions totaling $944,
services and support revenue grew 6%. The increase was primarily driven by an increase in outsourcing and cloud revenue resulting
from organic growth in hosting and data processing fees complemented by added revenue from Ensenta. In-house support revenue also
contributed to the increase, primarily from higher software usage revenue resulting partially from the addition of new customers. These
increases were partially offset by decreased product delivery and services revenue due to reduced license and in-house implementation
revenue as more customers opted for outsourced delivery.

Processing Revenue

Processing

Percentage of total revenue

Year Ended June 30,

% Change

2019

2018

$ 594,202

$ 550,058

38%

37%

Processing revenue includes: “Remittance” revenue from payment processing, remote capture, and automated clearing house (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.

Processing revenue increased 8% for the fiscal year ended June 30, 2019 as compared to the fiscal year ended June 30, 2018, with
strong organic growth in each component, complemented by added remittance revenue from Ensenta.

OPERATING EXPENSES

Cost of Revenue

Percentage of total revenue

Year Ended June 30,

% Change

2019

2018

$ 923,030

$ 853,138

59%

58%

Cost of Revenue increased 8% compared to fiscal 2018, and increased 1% as a percentage of total revenue. Excluding costs related
to deconversions, fiscal 2019 acquisitions, and bonuses provided by the Company in response to the lower tax rate resulting from the
TCJA, cost of revenue increased 7%. The increase was driven by increased salaries and benefits; higher direct costs of product, including
spending related to the ongoing project to expand our credit and debit card platform; increased amortization expense; and higher rent
expense related to new facilities. The Company continues to focus on cost management.

Research & Development

Percentage of total revenue

Year Ended June 30,

% Change

2019

2018

$ 96,378

$ 90,340

We devote significant effort and expense to develop new software, service products and continually upgrade and enhance our existing
offerings. We believe our research and development efforts are highly efficient because of the extensive experience of our research and
development staff and because our product development is highly customer-driven.

Research and development expenses increased 7% primarily due to increased salary and benefit expenses, in part due to a 3% increase
in headcount, but were consistent with the prior year as a percentage of total revenue. Excluding the bonuses provided by the Company in
response to the lower tax rate following the TCJA and costs attributable to companies acquired in fiscal 2019, research and development
expense increased 4%.

1 9

JACKHENRY.COMSelling, General, and Administrative

Selling, General, and Administrative

Percentage of total revenue

Year Ended June 30,

% Change

2019

2018

$ 185,998

$ 171,710

12%

Selling, general and administrative costs included all expenses related to sales efforts, commissions, finance, legal, and human resources, plus
all administrative costs. Excluding bonuses provided by the Company in response to the lower tax rate resulting from the TCJA, selling, general,
and administrative expense increased 6%. These expenses increased primarily due to increased commissions, salaries, and benefits.

Gains on Disposal of Businesses

No businesses were disposed during fiscal 2019. In fiscal 2018, we recognized gains on the disposal of businesses totaling $1,894 due
to the sales of our ATM Manager and jhaDirect product lines.

INTEREST INCOME AND EXPENSE

Year Ended June 30,

% Change

Interest Income

Interest Expense

2019

2018

876

(926)

575

(1,920)

52%

(52)%

Interest income fluctuated due to changes in invested balances and yields on invested balances. Interest expense decreased in fiscal
2019 due mainly to lower amounts borrowed on our revolving credit facility during the year.

PROVISION/ (BENEFIT) FOR INCOME TAXES

Year Ended June 30,

% Change

Provision/ (Benefit) for Income Taxes

Effective Rate

2019

2018

$ 75,350

(8,876)

949%

21.7%

(2.5)%

The increase in the effective tax rate was primarily the result of the significant tax benefit recognized in the prior fiscal year as a result
of the re-measurement of net deferred tax liabilities upon enactment of the TCJA on December 22, 2017. That increase in the provision/
(benefit) for income taxes is partially offset by the reduced U.S. federal corporate tax rate of 21% effective for the current year, and
increased excess tax benefits from share-based payments recognized during fiscal 2019. Excluding the fiscal 2018 TCJA tax benefit
resulting from the re-measurement of net deferred tax liabilities, provision/ (benefit) for income taxes decreased 23%.

NET INCOME

Net income decreased 26% to $271,885, or $3.52 per diluted share, in fiscal 2019 from $365,034, or $4.70 per diluted share, in fiscal
2018. The significant decrease is primarily attributable to the TCJA impacts on the prior year provision/ (benefit) for income taxes, as well
as decreased deconversion revenue in fiscal 2019.

FISCAL 2018 COMPARED TO FISCAL 2017

In fiscal 2018, revenues increased 6% or $82,507 compared to fiscal 2017. Deconversion fees increased $7,343 compared to the prior
fiscal year. Revenue from fiscal 2018 acquisitions totaled $17,368. Fiscal 2017 included $10,897 of revenue from divested companies.
Excluding these factors, total revenue increased 5%, with growth in each of our revenue streams as discussed in detail below.

Operating expenses increased 6%, due to increased headcount driving increased salaries and benefits, costs related to fiscal 2018
acquisitions, and professional services expenses incurred due to contracting with outside experts in preparation for our adoption of the
new Accounting Standards Codification (“ASC”) Topic 606 revenue standard. Excluding costs related to deconversion fees from each
year, expenses related to fiscal 2018 acquisitions, fiscal 2017 costs related to divestitures, and gains on the disposal of businesses from
each year, operating expenses increased 5%.

The TCJA had a large impact on our provision/ (benefit) for income taxes and net income, which are discussed below.

2 0

2019 ANNUAL REPORTREVENUE

Services and Support

Percentage of total revenue

Year Ended June 30,

% Change

2018

2017

$ 920,739

$ 881,735

63%

64%

Services and support revenue grew 4% in fiscal 2018. Excluding deconversion fees, revenue from fiscal 2018 acquisitions totaling $9,074,
and fiscal 2017 revenue related to divestitures of $10,745, services and support revenue grew 4%. The growth was due mainly to increased
outsourcing and cloud revenue, as well as growth within our in-house support revenue component due to higher software usage revenue.

Processing

Percentage of total revenue

Year Ended June 30,

% Change

2018

2017

$ 550,058

$ 506,555

37 %

36 %

Processing revenue increased 9% in fiscal 2018, with strong growth in each of its three components. Ensenta contributed to the growth
with added remittance revenue. Excluding $8,294 of revenue from fiscal 2018 acquisitions, and excluding fiscal 2017 revenue related
to divestitures totaling $152, processing revenue increased 7% for the year with significant increases in each of its three components.

OPERATING EXPENSES

Cost of Revenue

Percentage of total revenue

Year Ended June 30,

% Change

2018

2017

$ 853,138

$ 805,855

58 %

Cost of revenue for fiscal 2018 increased 6% compared to fiscal 2017, in line with the revenue increase, and remained a consistent
percentage of total revenue in each year.

Research and Development

Percentage of total revenue

Year Ended June 30,

% Change

2018

2017

$ 90,340

$ 84,753

6 %

Research and development expenses increased primarily due to a 4% increase in headcount, but were consistent with the prior year as
a percentage of total revenue.

Selling, General, and Administrative

Percentage of total revenue

Year Ended June 30,

% Change

2018

2017

$ 171,710

$ 159,235

12 %

11 %

Selling, general, and administrative expenses increased in fiscal 2018 primarily due to increased commissions, salaries, and benefits,
and higher professional services expenses incurred due to contracting with outside experts in preparation for our adoption of the ASC
606 revenue standard.

Gain on Disposal of Businesses

In fiscal 2018, we recognized gains on disposal of businesses totaling $1,894, due to the sales of our ATM Manager and jhaDirect product lines.

In fiscal 2017, we recognized gains on the disposal of businesses totaling $3,270. $2,136 was related to the fiscal 2016 sale of Alogent, and
$1,134 related to the sale of our Regulatory Filing products to Fed Reporter on May 1, 2017.

2 1

JACKHENRY.COMINTEREST INCOME AND EXPENSE

Interest Income

Interest Expense

Year Ended June 30,

% Change

2018

2017

575

(1,920)

248

(996)

132%

93%

Interest income fluctuated due to changes in invested balances and yields on invested balances. Interest expense increased in fiscal
2018 due mainly to increased borrowing, which was primarily used for the acquisition of Ensenta Corporation, and has now been re-paid.

PROVISION/ (BENEFIT) FOR INCOME TAXES

Year Ended June 30,

% Change

Provision/ (Benefit) for Income Taxes

Effective Rate

2018

2017

(8,876)

$ 111,408

(108)

(2.5)%

32.7%

The significant decrease in the effective tax rate was primarily a result of the TCJA enacted December 22, 2017, which included a
reduction to the U.S. federal statutory income tax rate to 21% effective January 1, 2018. A blended 28% U.S federal statutory income tax
rate was applied to fiscal 2018. We recorded a net tax benefit of $106,801 related to the re-measurement of our net deferred tax liabilities
and $21,551 related to the impacts on current year operations.

NET INCOME

Net income increased 59% to $365,034, or $4.70 per diluted share, in fiscal 2018 from $229,561, or $2.93 per diluted share, in fiscal 2017.
The significant increase is primarily attributable to the TCJA.

REPORTABLE SEGMENT DISCUSSION

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 our Chief Executive Officer, who is also our
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; ACH origination and remote deposit capture processing; and risk management products and services. The
Complementary segment provides additional software, processing platforms, and services that can be integrated with our core solutions
or used independently. The Corporate & 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.

The fiscal 2017 period presented below has been retroactively recast to conform to the new segment structure adopted July 1, 2017. Both
prior year periods presented have also been recast to reflect the Company’s retrospective adoption of ASC 606.

Core

Revenue

Cost of Revenue

2019

% Change

2018

% Change

2017

$ 534,429

$ 243,989

5 %

$ 509,821

$ 232,868

7 %

6 %

$ 477,605

$ 219,440

In fiscal 2019, revenue in the Core segment increased 5% compared to fiscal 2018, driven by increases in outsourcing and cloud revenue
and in-house support revenue. Excluding deconversion fees, which totaled $14,907 and $22,161, for fiscal 2019 and 2018, respectively,
and excluding revenue of $923 from fiscal 2019 acquisitions, revenue in the Core segment increased 6%, due to increased outsourcing
and cloud and in-house support revenue. Cost of revenue remained a consistent percentage of revenue for fiscal 2019 and fiscal 2018.

In fiscal 2018, revenue in the Core segment increased 7%, primarily due to increased revenue within each component of our services and
support revenue stream. Cost of revenue increased 6% for fiscal 2018 compared to fiscal 2017, but remained consistent as a percentage
of revenue.

2 2

2019 ANNUAL REPORTPayments

Revenue

Cost of Revenue

2019

% Change

2018

% Change

2017

$ 548,319

$ 273,261

11%

$ 508,331

$ 245,269

10%

$ 471,988

$ 222,685

In fiscal 2019, revenue in the Payments segment increased 8% compared to fiscal 2018. Excluding deconversion revenue of $8,603 and
$13,004, respectively, revenue increased 9% in the Payments segment, due to organic growth within remittance and card processing, as
well as added revenue from Ensenta. Cost of revenue increased 11%, partially due to increased headcount and amortization expenses
related to Ensenta, as well as increased spending related to the ongoing project to expand our credit and debit card platform. Cost of
revenue increased 2% as a percentage of revenue in fiscal 2019 as compared to fiscal 2018.

In fiscal 2018, revenue in the Payments segment increased compared to fiscal 2017, due primarily to increased card and remittance
processing revenue. The increases were partially due to the acquisition of Ensenta. Cost of revenue increased 10%, and increased 1%
as a percentage of revenue.

Complementary

Revenue

Cost of Revenue

2019

% Change

2018

% Change

2017

$ 418,215

$ 175,737

6 %

7 %

$ 395,419

$ 163,905

5 %

6 %

$ 375,811

$ 155,084

Revenue in the Complementary segment increased 6% for the fiscal year ended June 30, 2019 compared to the prior year. After excluding
deconversion revenue from each period, which totaled $6,672 and $10,855 for the fiscal years ended June 30, 2019 and 2018, respectively,
and excluding revenue of $126 from fiscal 2019 acquisitions, revenue increased 7%. The increase was driven by increases in outsourcing
and cloud revenue and in-house support within our services and support revenue stream, as well as transaction and digital processing
revenue within our processing revenue stream. Cost of revenue increased 7% for the year, and increased 1% as a percentage of revenue.

In fiscal 2018, revenue in the Complementary segment increased 5%, due to higher outsourcing and cloud revenue within services and
support, as well as increased transaction and digital processing revenue. Cost of revenue increased 6% for fiscal 2018 compared to fiscal
2017, but remained a consistent percentage of revenue.

Corporate and Other

Revenue

Cost of Revenue

2019

% Change

2018

% Change

2017

51,728

$ 230,043

(10)%

57,226

211,096

(9)%

$ 62,886

$ 208,646

The decrease in revenue in the Corporate and Other segment for the fiscal year ended June 30, 2019 was due to decreased services
and support revenue. This is in part due to the sale of our jhaDirect product line, which was sold during the first quarter of fiscal 2018.

The decreased revenue in fiscal 2018 compared to fiscal 2017 in the Corporate and Other segment is largely due to the loss of revenue
following the sale of our jhaDirect product. Fiscal 2017 included revenue from jhaDirect totaling $6,571.

Cost of revenue for the Corporate and Other segment includes operating costs not directly attributable to any of the other three segments.
The increased cost of revenue in fiscal 2019 is primarily related to bonuses provided by the Company in response to the lower tax rate
resulting from the TCJA and increased rent and maintenance contract expenses related to new facilities.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash and cash equivalents increased to $93,628 at June 30, 2019 from $31,440 at June 30, 2018. Cash at the end of
fiscal 2018 was lower due primarily to the acquisition of Ensenta and higher repayment of debt in fiscal 2018.

2 3

JACKHENRY.COMThe following table summarizes net cash from operating activities in the statement of cash flows:

Net income

Non-cash expenses

Change in receivables

Change in deferred revenue

Change in other assets and liabilities

Net cash provided by operating activities

Year Ended

June 30,

2019

2018

271,885

365,034

180,987

(11,777)

23,656

(33,623)

87,906

21,489

1,255

(63,542)

431,128

412,142

Cash provided by operating activities increased 5% compared to fiscal 2018. Cash from operations is primarily used to repay debt, pay
dividends and repurchase stock, and for capital expenditures.

Cash used in investing activities for fiscal 2019 totaled $190,635 and included: $111,114 for the ongoing enhancements and development of
existing and new product and service offerings; capital expenditures on facilities and equipment of $53,598, mainly for the purchase of computer
equipment; $19,981, net of cash acquired, for the purchases of BOLTS Technologies, Inc. and Agiletics, Inc.; $6,049 for the purchase and
development of internal use software; and $20 for customer contracts. This was partially offset by $127 of proceeds from asset sales.

Cash used in investing activities for fiscal 2018 totaled $291,826 and included: $137,562, net of cash acquired, for the purchases of Ensenta
Corporation and Vanguard Software Group; $96,647 for the development of software; capital expenditures on facilities and equipment of $40,135,
mainly for the purchase of computer equipment; $13,138 for the purchase and development of internal use software; and $5,000 for the purchase
of preferred stock of Automated Bookkeeping, Inc. These expenditures were partially offset by $350 of proceeds from the sale of businesses and
$306 of proceeds from the sale of assets.

Financing activities used cash of $178,305 for fiscal 2019. Cash used was $118,745 for dividends paid to stockholders; $54,864 for the
purchase of treasury shares; and $4,696 of net cash outflow from the issuance of stock and tax related to stock-based compensation.
Borrowings and re-payments on our revolving credit facility netted to $0.

Financing activities used cash in fiscal 2018 of $203,641. Cash used was $175,000 for repayment on our revolving credit facility; dividends
paid to stockholders of $105,021; and $48,986 for the purchase of treasury shares. This was partially offset by borrowings of $125,000 on
our revolving credit facility and $366 of net cash inflow from the issuance of stock and tax 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 $53,598 and $40,135 for fiscal years ended June 30, 2019 and June 30, 2018, respectively, were made primarily for additional
equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. At June 30, 2019,
the Company had an estimated $2,673 of outstanding purchase commitments related to property and equipment.

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, 2019, there
were 26,508 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,483 additional shares. The total
cost of treasury shares at June 30, 2019 is $1,110,124. During fiscal 2019, the Company repurchased 400 treasury shares for $54,864. At
June 30, 2018, there were 26,108 shares in treasury stock and the Company had authority to repurchase up to 3,883 additional shares.

Revolving credit facility

The revolving credit facility allows for borrowings of up to $300,000, which may be increased by the Company at any time until maturity to
$600,000. The credit facility bears interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate (the highest of
(i) the Prime Rate for such day, (ii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iii) the Eurocurrency Rate for
a one-month Interest Period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company’s
leverage ratio. The credit facility is guaranteed by certain subsidiaries of the Company. The credit facility is subject to various financial
covenants that require the Company to maintain certain financial ratios as defined in the agreement. As of June 30, 2019, the Company
was in compliance with all such covenants. The revolving credit facility terminates February 20, 2020 and at June 30, 2019 there was no
outstanding balance. Prior to termination, the Company plans to renew the current credit facility or replace it with a similar credit facility.

Other lines of credit

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

2 4

2019 ANNUAL REPORTOFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

At June 30, 2019, the Company’s total off-balance sheet contractual obligations were $665,107. This balance consists of $71,633 of
long-term operating leases for various facilities and equipment which expire from 2020 to 2030 and $593,474 of purchase commitments.
In fiscal 2017, JHA entered a strategic services agreement with First Data® and PSCU® to provide full-service debit and credit card
processing on a single platform to all existing core bank and credit union customers, as well as expand its card processing platform to
financial institutions outside our core customer base. This agreement includes a purchase commitment of $555,754 over the remaining
term of the contract. The remainder of the purchase commitments relate mainly to open purchase orders. The contractual obligations
table below excludes $12,009 of liabilities for uncertain tax positions as we are unable to reasonably estimate the ultimate amount or
timing of settlement.

Contractual obligations by period
as of June 30, 2019

Less than
1 year

1-3 years

3-5 years

More than
5 years

Operating lease obligations

Purchase obligations

Total

15,559 $

25,399 $

19,004 $

11,671 $

62,637

86,875

107,188

336,774

78,196 $

112,274 $

126,192 $

348,445 $

TOTAL

71,633

593,474

665,107

The operating lease obligations included on this table will be recorded on the balance sheet beginning in fiscal 2020 due to the
Company’s adoption of ASU No. 2016-02, issued by the FASB in February 2016 and effective for the Company on July 1, 2019.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

The Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014.
This standard (and related amendments collectively referred to as “ASC 606”) is part of an effort to create a common revenue standard
for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new standard has superseded much of the authoritative
literature for revenue recognition. The new model enacts a five-step process for achieving the core principle, which is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The standard was effective for the Company on July 1, 2018.
Entities are allowed to transition to the new standard by either recasting prior periods (full retrospective) or recognizing the cumulative
effect as of the beginning of the period of adoption (modified retrospective).

The Company adopted the new standard using the full retrospective transition approach, using certain practical expedients. The Company
has not disclosed the amount of transaction price allocated to remaining performance obligations for reporting periods presented before
the date of initial application. Also, the Company did not separately consider the effects of contract modifications that occurred before
the beginning of the earliest reporting period presented, but reflects the aggregate effect of all modifications that occurred before the
beginning of the earliest period presented. As a result, all fiscal 2018 and fiscal 2017 financial information has been adjusted for the effects
of applying ASC 606. The details of the significant changes are disclosed below:

Software Revenue Recognition

The Company previously recognized software license and related services within the scope of ASC Topic 985-605, which required the
establishment of vendor-specific objective evidence (“VSOE”) of fair value in order to separately recognize revenue for each software-
related good or service. Due to the inability to establish VSOE, the Company had previously deferred all revenue on software-related
goods and services on a master contract until all the goods and services had been delivered. Under ASC 606, VSOE is no longer required
for separation of otherwise distinct performance obligations within a revenue arrangement. This change has resulted in earlier recognition
of revenue for the Company’s software-related goods and services, leading to a decrease in deferred revenue balances within its adjusted
consolidated balance sheets.

Impacts on Financial Statements

See tables in Item 8, Note 1 to the Consolidated Financial Statements for the impacts ASC 606 had on prior period financial statements.

ASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification of eight specific cash flow issues and is effective for
our annual reporting period beginning July 1, 2018. The adoption of this standard did not have any impact on our financial statements.

Not Yet Adopted

2 5

JACKHENRY.COMof-use assets, and the cost of those operating leases to be amortized on a straight-line basis. ASU No. 2016-02 will be effective for JHA’s
annual reporting period beginning July 1, 2019. The Company established a cross-functional team to implement this standard and evaluated
arrangements that would be subject to the standard, implemented software to meet the reporting and disclosure requirements of the standard,
and assessed the impact of the standard on its processes and internal controls. The Company will adopt the new standard using the optional
transition method in ASU 2018-11. Under this method, the Company will 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 will recognize a
cumulative-effect adjustment, as necessary, to the opening balance of retained earnings for fiscal 2020 upon adoption of the standard.

We will take advantage of the transition package of practical expedients permitted within the new standard, which among other things, allows
us to carryforward the historical lease classification. In addition, we will make an accounting policy election that will keep leases with an initial
term of twelve months or less off of the balance sheet. The Company also elected the practical expedient not to separate the non-lease
components of a contract from the lease component to which they relate.

Upon adoption of the standard, the Company will record right-of-use assets of approximately $70,000 to $73,000 and lease obligations of
approximately $73,000 to $75,000 on the its balance sheet as of July 1, 2019. Adoption of the standard is not expected to significantly impact
the Company’s net income and is not expected to have a material impact on the Company’s compliance with the financial covenants under
its credit facility.

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 ASU will be effective for the Company on July 1, 2020, with early adoption permitted. The Company
is currently evaluating the impact that the guidance will have on its financial statements.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with U.S. GAAP. The significant accounting policies are discussed in Note 1
to the consolidated financial statements. The preparation of consolidated financial statements in accordance with U.S. GAAP requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, as well as disclosure of contingent
assets and liabilities. We base our estimates and judgments upon historical experience and other factors believed to be reasonable under the
circumstances. Changes in estimates or assumptions could result in a material adjustment to the consolidated financial statements.

We have identified several critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimates
or assumptions is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimates and
assumptions would have a material effect on the consolidated financial statements.

Revenue Recognition

We generate revenue from data processing, transaction processing, software licensing and related services, professional services, and
hardware sales.

Significant Judgments in Application of the Guidance

Identification of Performance Obligations

We enter into contracts with customers that may include multiple types of goods and services. At contract inception, we assess 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. We recognize revenue
when or as we satisfy 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 we expect to receive in exchange for transferring goods and services to the
customer. Our contracts with our customers frequently contain some component of variable consideration. We estimate variable consideration
in our contracts primarily using the expected value method, based on both historical and current information. Where appropriate, we 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. We include 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.

2 6

2019 ANNUAL REPORTTechnology or service components from third parties are frequently included in or combined with our applications or service offerings. Whether
we recognize revenue based on the gross amount billed to the customer or the net amount retained involves judgment in determining
whether we control 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 we separately sell each good or
service. For items that are not sold separately, we estimate the standalone selling prices using all information that is reasonably available,
including reference to historical pricing data.

The following describes the nature of our 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. Our arrangements for these services typically require us 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. We evaluate tiered pricing to determine if a material right exists. If, after that evaluation,
we determine a material right does exist, we assign 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. Our arrangements for these
services typically require us 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. We evaluate tiered pricing to determine if a material right exists. If, after that evaluation, we determine a material
right does exist, we assign 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, we recognize 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. Our arrangements for these services typically require us 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, we utilize the practical expedient which allows entities to disregard the
effects of a financing component when the contract period is one year or less.

Contract Costs

We incur 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.

Depreciation and Amortization Expense

The calculation of depreciation and amortization expense is based on the estimated economic lives of the underlying property, plant and
equipment and intangible assets, which have been examined for their useful life and determined that no impairment exists. We believe it is
unlikely that any significant changes to the useful lives of our tangible and intangible assets will occur in the near term, but rapid changes
in technology or changes in market conditions could result in revisions to such estimates that could materially affect the carrying value

2 7

JACKHENRY.COMof these assets and our future consolidated operating results. For long-lived assets, we consider whether any impairment indicators are
present. If impairment indicators are identified, we test the recoverability of the long-lived assets. If this recoverability test is failed, we
determine the fair value of the long-lived assets and recognize an impairment loss if the fair value is less than its carrying value.

Capitalization of software development costs

We capitalize certain costs incurred to develop commercial software products. For software that is to be sold, significant areas of judgment
include: establishing when technological feasibility has been met and costs should be capitalized, determining the appropriate period
over which to amortize the capitalized costs based on the estimated useful lives, estimating the marketability of the commercial software
products and related future revenues, and assessing the unamortized cost balances for impairment. Costs incurred prior to establishing
technological feasibility are expensed as incurred. Amortization begins on the date of general release and the appropriate amortization
period is based on estimates of future revenues from sales of the products. We consider various factors to project marketability and future
revenues, including an assessment of alternative solutions or products, current and historical demand for the product, and anticipated
changes in technology that may make the product obsolete.

For internal use software, capitalization begins at the beginning of application development. Costs incurred prior to this are expensed as
incurred. Significant estimates and assumptions include determining the appropriate amortization period based on the estimated useful
life and assessing the unamortized cost balances for impairment. Amortization begins on the date the software is placed in service and
the amortization period is based on estimated useful life.

A significant change in an estimate related to one or more software products could result in a material change to our results of operations.

Estimates used to determine current and deferred income taxes

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue
and expense for tax and financial statement purposes. We also must determine the likelihood of recoverability of deferred tax assets,
and adjust any valuation allowances accordingly. Considerations include the period of expiration of the tax asset, planned use of the tax
asset, and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Valuation
allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more
of these factors. Also, liabilities for uncertain tax positions require significant judgment in determining what constitutes an individual tax
position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions
can materially affect the estimate of the effective tax rate and consequently, affect our financial results.

Assumptions related to purchase accounting and goodwill

We account for our acquisitions using the purchase method of accounting. This method requires estimates to determine the fair values
of assets and liabilities acquired, including judgments to determine any acquired intangible assets such as customer-related intangibles,
as well as assessments of the fair value of existing assets such as property and equipment. Liabilities acquired can include balances for
litigation and other contingency reserves established prior to or at the time of acquisition, and require judgment in ascertaining a reasonable
value. Third-party valuation firms may be used to assist in the appraisal of certain assets and liabilities, but even those determinations
would be based on significant estimates provided by us, such as forecast revenues or profits on contract-related intangibles. Numerous
factors are typically considered in the purchase accounting assessments, which are conducted by Company professionals from legal,
finance, human resources, information systems, program management and other disciplines. Changes in assumptions and estimates
of the acquired assets and liabilities would result in changes to the fair values, resulting in an offsetting change to the goodwill balance
associated with the business acquired.

As goodwill is not amortized, goodwill balances are regularly assessed for potential impairment. Such assessments include a qualitative
assessment of factors that may indicate a potential for impairment, such as: macroeconomic conditions, industry and market changes,
our overall financial performance, changes in share price, and an assessment of other events or changes in circumstances that could
negatively impact us. If that qualitative assessment indicates a potential for impairment, a quantitative assessment is then required,
including an analysis of future cash flow projections as well as a determination of an appropriate discount rate to calculate present values.
Cash flow projections are based on management-approved estimates, which involve the input of numerous Company professionals from
finance, operations and program management. Key factors used in estimating future cash flows include assessments of labor and other
direct costs on existing contracts, estimates of overhead costs and other indirect costs, and assessments of new business prospects and
projected win rates. Our most recent assessment indicates that no reporting units are currently at risk of impairment as the fair value of
each reporting unit is significantly in excess of the carrying value. However, significant changes in the estimates and assumptions used in
purchase accounting and goodwill impairment testing could have a material effect on the consolidated financial statements.

2 8

2019 ANNUAL REPORTQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 have no outstanding debt with variable interest rates as of June 30, 2019, and are therefore not currently exposed to interest rate risk.

2 9

JACKHENRY.COMFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Management's Annual Report on Internal Control over Financial Reporting

Financial Statements

Consolidated Statements of Income,

Years Ended June 30, 2019, 2018, and 2017

Consolidated Balance Sheets,

June 30, 2019 and 2018

Consolidated Statements of Changes in Stockholders' Equity,

Years Ended June 30, 2019, 2018, and 2017

Consolidated Statements of Cash Flows,

Years Ended June 30, 2019, 2018, and 2017

Notes to Consolidated Financial Statements

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.

3 0

2019 ANNUAL REPORTREPORT 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, 2019 and 2018, 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, 2019, 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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period
ended June 30, 2019 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, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from
contracts with customers as of July 1, 2018.

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.

3 1

JACKHENRY.COMCritical 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 Note 1 to the consolidated financial statements, the Company recorded revenue of $1.553 billion for the year ended June
30, 2019. 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 revenue recognition - specifically the estimation
of variable consideration and identification of and accounting for performance obligations - is a critical audit matter are there was
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 26, 2019

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

3 2

2019 ANNUAL REPORTMANAGEMENT’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, 2019, 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, 2019 was effective.

The Company’s internal control over financial reporting as of June 30, 2019 has been audited by the Company’s independent registered
public accounting firm, as stated in their report appearing in this Item 8.

3 3

JACKHENRY.COMJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

REVENUE

EXPENSES

Cost of Revenue

Research and Development

Selling, General, and Administrative

Gain on Disposal of Businesses

Total Expenses

Year Ended
June 30,

2018

2019

2017

1,552,691

1,470,797

1,388,290

923,030

96,378

185,998

—

853,138

90,340

171,710

(1,894)

805,855

84,753

159,235

(3,270)

1,205,406

1,113,294

1,046,573

OPERATING INCOME

347,285

357,503

341,717

INTEREST INCOME (EXPENSE)

Interest Income

Interest Expense

Total Interest Income (Expense)

876

(926)

(50)

575

(1,920)

(1,345)

248

(996)

(748)

INCOME BEFORE INCOME TAXES

347,235

356,158

340,969

PROVISION/ (BENEFIT) FOR INCOME TAXES

75,350

(8,876)

111,408

NET INCOME

Basic earnings per share

Basic weighted average shares outstanding

Diluted earnings per share

Diluted weighted average shares outstanding

See notes to consolidated financial statements.

271,885

3.52

77,160

3.52

77,347

365,034

4.73

77,252

4.70

77,585

229,561

2.95

77,856

2.93

78,255

3 4

2019 ANNUAL REPORTJACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
Receivables, net
Income tax receivable
Prepaid expenses and other
Deferred costs

Assets held for sale

Total current assets

PROPERTY AND EQUIPMENT, net

OTHER ASSETS:

Non-current deferred costs
Computer software, net of amortization
Other non-current assets
Customer relationships, net of amortization
Other intangible assets, net of amortization
Goodwill

Total other assets

Total assets

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable
Accrued expenses
Deferred revenues

Total current liabilities

LONG-TERM LIABILITIES:

Non-current deferred revenues
Deferred income tax liability
Other long-term liabilities

Total long-term liabilities

Total liabilities

STOCKHOLDERS' EQUITY

Preferred stock - $1 par value; 500,000 shares authorized, none issued

Common stock - $0.01 par value; 250,000,000 shares authorized;
103,496,026 shares issued at June 30, 2019;
103,278,562 shares issued at June 30, 2018

Additional paid-in capital

Retained earnings
Less treasury stock at cost
26,507,903 shares at June 30, 2019;
26,107,903 shares at June 30, 2018

Total stockholders' equity

Total liabilities and equity

See notes to consolidated financial statements.

June 30,
2019

June 30,
2018

93,628
310,080
17,817
106,466
35,102

6,355

569,448

272,474

90,084
318,969
134,743
100,653
31,514
666,944

1,342,907

2,184,829

9,850
120,360
339,752

469,962

54,554
217,010
14,290

285,854

755,816

—

1,035

31,440
297,271
21,671
96,069
22,991

1,300

470,742

285,550

74,865
288,172
110,299
115,034
38,467
649,929

1,276,766

2,033,058

30,360
88,764
328,931

448,055

40,984
208,303
12,872

262,159

710,214

—

1,033

472,029

2,066,073

464,138

1,912,933

(1,110,124)

1,429,013

(1,055,260)

1,322,844

2,184,829

2,033,058

3 5

JACKHENRY.COM
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,

2019

2018

2017

—

PREFERRED SHARES:

COMMON SHARES:

Shares, beginning of year
Shares issued for equity-based payment arrangements
Shares issued for Employee Stock Purchase Plan

Shares, end of year

103,278,562
141,071
76,393
103,496,026

103,083,299
118,865
76,398
103,278,562

102,903,971
98,781
80,547
103,083,299

COMMON STOCK - PAR VALUE $0.01 PER SHARE:

Balance, beginning of year
Shares issued for equity-based payment arrangements
Shares issued for Employee Stock Purchase Plan

Balance, end of year

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year
Shares issued for equity-based payment arrangements

Tax withholding related to share based compensation

Shares issued for Employee Stock Purchase Plan
Stock-based compensation expense

Balance, end of year

RETAINED EARNINGS:

Balance, beginning of year
Cumulative effect of ASC 606 adoption*
Net income*
Dividends

Balance, end of year

TREASURY STOCK:

Balance, beginning of year
Purchase of treasury shares
Balance, end of year

TOTAL STOCKHOLDERS' EQUITY

Dividends declared per share

See notes to consolidated financial statements.

1,033
1
1
1,035

464,138
235

(13,972)

9,039
12,589
472,029

1,912,933
—
271,885
(118,745)
2,066,073

(1,055,260)
(54,864)
(1,110,124)

1,429,013

1.54

1,031
1
1
1,033

452,016
174

(7,332)

7,522
11,758
464,138

1,652,920
—
365,034
(105,021)
1,912,933

(1,006,274)
(48,986)
(1,055,260)

1,322,844

1.36

1,029
1
1
1,031

440,123
(1)

(5,479)

6,244
11,129
452,016

1,431,192
83,874
229,561
(91,707)
1,652,920

(876,134)
(130,140)
(1,006,274)

1,099,693

1.18

*Retained earnings as of June 30, 2018 and 2017 and net income for the fiscal years ended June 30, 2018 and 2017 have been adjusted as a result of the adoption of ASC
606. Refer to Note 1 for the impact to previously presented Consolidated Balance Sheets and Consolidated Statements of Income. Other components of stockholders’ equity
were not impacted.

3 6

2019 ANNUAL REPORT
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income

Adjustments to reconcile net income from operations
to net cash from operating activities:

Depreciation
Amortization
Change in deferred income taxes
Expense for stock-based compensation

(Gain)/loss on disposal of assets and businesses

Changes in operating assets and liabilities:

Change in receivables

Change in prepaid expenses, deferred costs and other

Change in accounts payable

Change in accrued expenses
Change in income taxes
Change in deferred revenues

Net cash from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired
Capital expenditures
Proceeds from the sale of businesses
Proceeds from the sale of assets
Customer contracts acquired
Purchased software
Computer software developed
Purchase of investments

Net cash from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on credit facilities
Repayments on credit facilities
Purchase of treasury stock
Dividends paid
Proceeds from issuance of common stock upon exercise of stock options

Tax withholding payments related to share based compensation
Proceeds from sale of common stock

Net cash from financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

See notes to consolidated financial statements.

Year Ended
June 30,

2018

2019

2017

271,885

365,034

229,561

47,378
113,255
7,604
12,589

161

(11,777)

(62,165)

(7,526)

31,889
4,179
23,656

431,128

(19,981)
(53,598)
—
127
(20)
(6,049)
(111,114)
—

(190,635)

35,000
(35,000)
(54,864)
(118,745)
237

(13,973)
9,040
(178,305)

62,188

31,440

93,628

47,975
104,011
(74,884)
11,758

(954)

21,489

(82,663)

6,922

7,091
5,108
1,255

412,142

(137,562)
(40,135)
350
306
—
(13,138)
(96,647)
(5,000)

(291,826)

125,000
(175,000)
(48,986)
(105,021)
176

(7,333)
7,523
(203,641)

(83,325)

114,765

31,440

49,677
90,109
21,187
11,129

4,771

(33,096)

(24,992)

(7,812)

(11,966)
(6,444)
35,198

357,322

—
(41,947)
5,632
968
—
(16,608)
(89,631)
—

(141,586)

80,000
(30,200)
(130,140)
(91,707)
1

(5,480)
6,245
(171,281)

44,455

70,310

114,765

3 7

JACKHENRY.COM
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 (“JHA” or the “Company”) is a provider of integrated computer systems and services that
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 in-house 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 accounting principles generally accepted in the United States of America (“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.

PRIOR PERIOD RECLASSIFICATION
The prior year periods have been recast to reflect the Company’s retrospective adoption of Accounting Standards Update (“ASU”) 2014-
09, Revenue from Contracts with Customers, and related amendments, collectively referred to as Accounting Standards Codification
(“ASC”) 606.

We also recorded a prior period re-classification of $1,300 to a new assets held for sale caption as of June 30, 2018. These assets were
previously recorded under Property and Equipment, net.

PRIOR PERIOD MISCLASSIFICATION
In co nnection with the preparation of the Company’s 2019 annual financial statements, the Company identified an immaterial prior period
misclassification which overstated accounts payable by $4,150, overstated deferred costs by $4,078, and overstated prepaid expenses
and other by $72. The Company has corrected for this misclassification in the accompanying Consolidated Balance Sheet by revising the
fiscal 2018 balances.

REVENUE RECOGNITION
The Company generates “Services and Support” revenue through software licensing and related services, outsourcing core &
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

3 8

2019 ANNUAL REPORT
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.

Disaggregation of Revenue

The tables below present the Company’s revenue disaggregated by type of revenue. Refer to Note 13, 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.

3 9

JACKHENRY.COMProcessing

Outsourcing & Cloud

Product Delivery & Services

In-House Support

Services & Support

Total Revenue

Contract Balances

Year Ended June 30,

2019

2018

2017

594,202

550,058

506,555

405,359

231,982

321,148

958,489

361,922

251,743

307,074

920,739

1,552,691

1,470,797

327,738

256,794

297,203

881,735

1,388,290

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

Receivables, net

Contract Assets- Current

Contract Assets- Non-current

Contract Liabilities (Deferred Revenue)- Current

Contract Liabilities (Deferred Revenue)- Non-current

June 30,
2019

June 30,
2018

310,080

297,271

21,446

50,640

339,752

54,554

14,063

35,630

328,931

40,984

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 delayed until 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.

During the fiscal years ended June 30, 2019, 2018, and 2017, the Company recognized revenue of $265,946, $269,593, and $264,517,
respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

Revenue recognized that related 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 adjustments and re-allocations due to changes in
estimates of variable consideration.

Transaction Price Allocated to Remaining Performance Obligations

As of June 30, 2019, 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 $3,640,955. The Company expects to recognize approximately 30% over
the next 12 months and 18% 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 $231,273 and $176,954 at June 30, 2019 and 2018, respectively.

For the fiscal years ended June 30, 2019, 2018, and, 2017 amortization of deferred contract costs totaled $110,894, $94,337, and
$88,064, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

4 0

2019 ANNUAL REPORTCOMPUTER 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
In the third quarter of fiscal 2018, the Company made an investment totaling $5,000 for the purchase of preferred stock of Automated
Bookkeeping, Inc (“Autobooks”), representing a non-controlling share of the voting equity of Autobooks as of that date. 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, 2019, 2018, and 2017 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 13). 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, 2019, there
were 26,508 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,483 additional shares. The total
cost of treasury shares at June 30, 2019 is $1,110,124. During fiscal 2019, the Company repurchased 400 treasury shares for $54,864. At
June 30, 2018, there were 26,108 shares in treasury stock and the Company had authority to repurchase up to 3,883 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 10).

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.

4 1

JACKHENRY.COMThe 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

Software Revenue Recognition

Impacts on Financial Statements

The following tables summarize the impacts of ASC 606 adoption on the Company’s Consolidated Financial Statements:

4 2

2019 ANNUAL REPORTConsolidated Balance Sheet as of June 30, 2018:

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
Receivables, net
Income tax receivable
Prepaid expenses and other*
Deferred costs*
Assets held for sale*

Total current assets
PROPERTY AND EQUIPMENT, net*
OTHER ASSETS:

Non-current deferred costs
Computer software, net of amortization
Other non-current assets
Customer relationships, net of amortization
Other intangible assets, net of amortization
Goodwill

Total other assets
Total assets

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable*
Accrued expenses
Deferred revenues

Total current liabilities

LONG-TERM LIABILITIES:

Non-current deferred revenues
Non-current deferred income tax liability
Other long-term liabilities

Total long-term liabilities

Total liabilities

STOCKHOLDERS' EQUITY

Preferred stock - $1 par value; 500,000 shares authorized, none issued

Common stock - $0.01 par value; 250,000,000 shares authorized;
103,278,562 shares issued at June 30, 2018

Additional paid-in capital

Retained earnings

Less treasury stock at cost
26,107,903 shares at June 30, 2018

Total stockholders' equity
Total liabilities and equity

As Previously
Reported
(Adjusted)*

Adjustments

As Adjusted

31,440
291,630
21,671
84,738
34,907
1,300

465,686
285,550

95,540
288,172
107,775
115,034
38,467
649,929
1,294,917
$ 2,046,153

30,360
97,848
355,538

483,746

93,094
189,613
12,872

295,579

779,325

—

1,033

464,138

1,856,917

—
5,641
—
11,331
(11,916)
—

5,056
—

(20,675)
—
2,524
—
—
—
(18,151)
(13,095)

—
(9,084)
(26,607)

(35,691)

(52,110)
18,690
—

(33,420)

(69,111)

—

56,016

31,440
297,271
21,671
96,069
22,991
1,300

470,742
285,550

74,865
288,172
110,299
115,034
38,467
649,929
1,276,766
2,033,058

30,360
88,764
328,931

448,055

40,984
208,303
12,872

262,159

710,214

—

1,033

464,138

1,912,933

(1,055,260)

—

(1,055,260)

1,266,828
$ 2,046,153

56,016
(13,095)

1,322,844
2,033,058

*Adjusted for reclassifications and corrections not related to ASC 606 adoption. See comments under "Prior Period Reclassification" and "Prior Period Misclassification"
headings in this Note 1 to the Consolidated Financial Statements.

4 3

JACKHENRY.COMConsolidated Statements of Income for the fiscal years ended June 30, 2018 and June 30, 2017:

Year Ended June 30, 2018

Year Ended June 30, 2017

As
Previously
Reported

Adjustments As Adjusted

As
Previously
Reported

Adjustments As Adjusted

REVENUE

$ 1,536,603 $

(65,806) $ 1,470,797

$ 1,431,117 $

(42,827) $ 1,388,290

EXPENSES

Cost of Revenue

Research and Development

873,642

90,340

(20,504)

853,138

—

90,340

Selling, General, and Administrative

182,146

(10,436)

171,710

819,034

84,753

162,898

(13,179)

805,855

—

84,753

(3,663)

159,235

Gain on Disposal of a Business

(1,894)

—

(1,894)

(3,270 )

—

(3,270)

Total Expenses

1,144,234

(30,940)

1,113,294

1,063,415

(16,842)

1,046,573

OPERATING INCOME

392,369

(34,866)

357,503

367,702

(25,985)

341,717

INTEREST INCOME (EXPENSE)

Interest Income

Interest Expense

Total Interest Income
(Expense)

575

(1,920)

(1,345)

—

575

(1,920)

(1,345)

248

(996 )

(748 )

—

248

(996)

(748)

INCOME BEFORE INCOME TAXES

391,024

(34,866)

356,158

366,954

(25,985)

340,969

14,364

(23,240)

(8,876)

121,161

(9,753)

111,408

376,660 $

(11,626) $

365,034

245,793 $

(16,232) $

229,561

4.88

77,252

4.85

77,585

4.73

77,252

3.16

77,856

4.70

3.14

77,585

78,255

2.95

77,856

2.93

78,255

PROVISION/ (BENEFIT) FOR
INCOME TAXES

NET INCOME

Basic earnings per share

Basic weighted average shares
outstanding

Diluted earnings per share

Diluted weighted average shares
outstanding

4 4

2019 ANNUAL REPORTConsolidated Statement of Cash Flows for the fiscal years ended June 30, 2018 and June 30, 2017:

Year Ended June 30, 2018

Year Ended June 30, 2017

As Previously
Reported*

Adjustments

As Adjusted

As Previously
Reported

Adjustments

As
Adjusted

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income

376,660

(11,626 )

365,034

$ 245,793

(16,232)

229,561

Adjustments to reconcile net income from operations
to net cash from operating activities:

Depreciation

Amortization

Change in deferred income taxes

Expense for stock-based compensation

47,975

104,011

(51,644)

11,758

(Gain)/loss on disposal of assets and businesses

(954)

—

(23,240)

—

47,975

104,011

(74,884)

11,758

(954)

49,677

90,109

30,940

11,129

4,771

—

(9,753)

—

49,677

90,109

21,187

11,129

4,771

Changes in operating assets and liabilities:

Change in receivables

(9,219)

30,708

21,489

(22,499)

(10,597)

(33,096)

(24,304)

(58,359)

(82,663)

(25,088)

Change in prepaid expenses, deferred costs
and other*

Change in accounts payable*

Change in accrued expenses

Change in income taxes

Change in deferred revenues

Net cash from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Payment for acquisitions, net of cash acquired

Capital expenditures

Proceeds from the sale of businesses

Proceeds from the sale of assets

Purchased software

Computer software developed

Purchase of investments

Net cash from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on credit facilities

Repayments on credit facilities

Purchase of treasury stock

Dividends paid

Proceeds from issuance of common stock upon
exercise of stock options
Tax withholding payments related to share based
compensation

Proceeds from sale of common stock

Net cash from financing activities

NET CHANGE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS,
END OF PERIOD

6,922

9,091

5,108

(63,262)

412,142

(137,562)

(40,135)

350

306

(13,138)

(96,647)

(5,000)

(291,826)

125,000

(175,000)

(48,986)

(105,021)

176

(7,333)

7,523

(203,641)

(83,325)

114,765

31,440

—

(2,000)

—

64,517

6,922

7,091

5,108

1,255

(7,812)

(4,454)

(6,444)

(8,800)

—

412,142

357,322

(137,562)

(40,135)

350

306

(13,138)

(96,647)

(5,000)

—

(41,947)

5,632

968

(16,608)

(89,631)

—

(291,826)

(141,586)

125,000

(175,000)

(48,986)

(105,021)

176

(7,333)

7,523

80,000

(30,200)

(130,140)

(91,707)

(5,480)

6,245

(203,641)

(171,281)

—

(7,512)

—

43,998

—

(24,992)

(7,812)

(11,966)

(6,444)

35,198

357,322

—

(41,947)

5,632

968

(16,608)

(89,631)

—

(141,586)

80,000

(30,200)

(130,140)

(91,707)

(5,480)

6,245

(171,281)

— $

(83,325)

— $

114,765

44,455

70,310

— $

31,440

$ 114,765

— $

44,455

— $

70,310

— $

114,765

*Adjusted for reclassifications and corrections not related to ASC 606 adoption. See comments under "Prior Period Reclassification" and "Prior Period
Misclassification" headings in this Note 1 to the Consolidated Financial Statements.

4 5

JACKHENRY.COMASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification of eight specific cash flow issues and was effective
for the Company’s annual reporting period beginning July 1, 2018. The adoption of this standard did not have any impact on its
financial statements.

Not Yet Adopted

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. ASU No. 2016-02 will be effective for
JHA’s annual reporting period beginning July 1, 2019. The Company established a cross-functional team to implement this standard and
evaluated arrangements that would be subject to the standard, implemented software to meet the reporting and disclosure requirements
of the standard, and assessed the impact of the standard on its processes and internal controls. The Company will adopt the new
standard using the optional transition method in ASU 2018-11. Under this method, the Company will 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 will recognize a cumulative-effect adjustment, as necessary, to the opening balance of retained earnings for fiscal
2020 in connection with the adoption of the standard.

The Company will take advantage of the transition package of practical expedients permitted within the new standard, which among other
things, allows it to carryforward the historical lease classification. In addition, the Company will make an accounting policy election that
will keep leases with an initial term of twelve months or less off of the balance sheet. The Company also elected the practical expedient
not to separate the non-lease components of a contract from the lease component to which they relate.

Upon adoption of the standard, the Company will record right-of-use assets of approximately $70,000 to $73,000 and lease obligations
of approximately $73,000 to $75,000 on the Company’s balance sheet as of July 1, 2019. Adoption of the standard is not expected to
significantly impact the Company’s net income and is not expected to have a material impact on the Company’s compliance with the
financial covenants under its credit facility.

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 ASU will be effective for the Company on July 1, 2020, with early adoption permitted. The
Company is currently evaluating the impact that the guidance will have on its financial statements.

NOTE 2.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For cash equivalents, amounts receivable or payable and short-term borrowings, fair values approximate carrying value, based on the
short-term nature of the assets and liabilities.

The Company’s estimates of the fair value for financial assets and financial liabilities are based on the framework established in the fair
value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active
markets, and requires that observable inputs be used in the valuations when available. The three levels of the hierarchy are as follows:

Level 1: inputs to the valuation are quoted prices in an active market for identical assets

Level 2: inputs to the valuation include quoted prices for similar assets in active markets that are observable either directly or indirectly

Level 3: valuation is based on significant inputs that are unobservable in the market and the Company’s own estimates of assumptions
that it believes market participants would use in pricing the asset

4 6

2019 ANNUAL REPORTFair value of financial assets, included in cash and cash equivalents, and financial liabilities is as follows:

Recurring Fair Value Measurements

Level 1

Level 2

Level 3

Estimated Fair Value Measurements

Total Fair
Value

June 30, 2019

Financial Assets:

Money market funds

June 30, 2018

Financial Assets:

Money market funds

Non-Recurring Fair Value Measurements

June 30, 2019

Long-lived assets held for sale

June 30, 2018

Long-lived assets held for sale (a)

81,945

— $

81,945

14,918

— $

14,918

— $

1,300

— $

1,300

— $

1,300

— $

1,300

(a) In accordance with ASC Subtopic 360-10, long-lived assets held for sale with a carrying value of $4,575 were written down to their fair value of $1,300, resulting in an
impairment totaling $3,275, which was included in earnings for the fiscal year ended June 30, 2017. The Company has entered into an agreement to sell these assets. That sale
is expected to be completed during the second quarter of fiscal 2020.

NOTE 3.

PROPERTY AND EQUIPMENT

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

Land (1)

Land improvements (1)

Buildings (1)

Leasehold improvements

Equipment and furniture

Aircraft and equipment

Construction in progress

Less accumulated depreciation

Property and equipment, net

(1) Excludes assets held for sale
(2) Lesser of lease term or estimated useful life

June 30,

2019

2018

Estimated Useful Life

23,243

25,209

147,220

48,478

365,101

39,293

12,411

660,955

388,481

272,474

24,845

25,383

143,918

48,060

328,864

38,761

39,872

649,703

364,153

285,550

5 - 20 years

20 - 30 years

5 - 30 years(2)

3 - 10 years

4 - 10 years

The change in property and equipment in accrued liabilities was $14,315 and $15,674 for the fiscal years ended June 30, 2019 and 2018,
respectively. These amounts were excluded from capital expenditures on the statements of cash flows.

No impairments of property and equipment were recorded in fiscal 2019 or 2018.

During the third quarter of fiscal 2019, the Company received an unsolicited offer to purchase its Houston, TX, facility. At June 30, 2019,
the facility included assets with a carrying value of approximately $5,055. Although management has not committed to the sale, a sale of
the facility during fiscal 2020 is likely and the Company expects to record a gain on the sale upon closing, since the offer represents full
appraisal value for the facility. Therefore, the assets are considered held for sale at June 30, 2019. Also held for sale at June 30, 2019,
was the Company’s Elizabethtown, KY facility. During the third quarter of fiscal 2018, the Company reached a definitive agreement to sell
the property for $1,300 pending an expected closing date during the second quarter of fiscal 2020. An impairment loss was recorded on
this facility during fiscal 2017 as disclosed in Note 2 to the Company’s consolidated financial statements. Total assets held for sale by the
Company at June 30, 2019 and 2018 were $6,355 and $1,300, respectively, and were included in assets held for sale on the Company’s
consolidated balance sheet for each year. Those balances are not included on the above table.

4 7

JACKHENRY.COMNOTE 4.

OTHER ASSETS

Goodwill

The carrying amount of goodwill for the fiscal years ended June 30, 2019 and 2018, by reportable segments, is as follows:

Core

Beginning balance

Goodwill, acquired during the year

Goodwill, adjustments related to dispositions

Ending balance

Payments

Beginning balance

Goodwill, acquired during the year

Goodwill, adjustments related to dispositions

Ending balance

Complementary

Beginning balance

Goodwill, acquired during the year

Goodwill, adjustments related to dispositions

Ending balance

June 30,

2019

195,956

4,000

—

199,956

325,204

122

—

325,326

128,769

12,893

—

141,662

2018

195,956

—

195,956

234,106

91,098

—

325,204

122,403

6,499

(133)

128,769

Goodwill acquired during fiscal 2019 totaled $17,015, with $12,893 of that resulting from the purchase of BOLTS Technologies, Inc.,
$3,999 resulting from the purchase of Agiletics, Inc., 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 Technologies and Agiletics, together with the value of their assembled
workforces. No goodwill was assigned to the Company’s Corporate and Other reportable segment.

Goodwill acquired during fiscal 2018 totaled $97,597, with $91,098 of that resulting from the purchase of Ensenta Corporation, included in
the Payments segment. The remaining $6,499 of goodwill acquired during fiscal 2018 resulted from the purchase of Vanguard Software
Group, which was added to the Company’s Complementary segment. 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 Ensenta
and Vanguard, together with the value of their assembled workforces. No goodwill was assigned to the Company’s Corporate and Other
reportable segment.

The Goodwill reduction during fiscal 2018 was a result of the Company’s sale of jhaDirect product line in the first quarter. Goodwill
allocated to the carrying amount of the net assets sold was calculated based on the relative fair values of the business disposed and the
portion of the reporting unit that was retained.

4 8

2019 ANNUAL REPORTOther Intangible Assets

Information regarding other identifiable intangible assets is as follows:

Customer relationships

Computer software

Other intangible assets:

Customer relationships

Computer software

Other intangible assets:

Gross Carrying
Amount

June 30, 2019

Accumulated
Amortization

305,512

759,671

93,471

(204,859)

(440,702)

(61,957)

Gross Carrying
Amount

June 30, 2018

Accumulated
Amortization

302,727

653,407

88,017

(187,693)

(365,235)

(49,550)

Net

100,653

318,969

31,514

Net

115,034

288,172

38,467

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

Computer software includes cost of software to be sold, leased, or marketed of $135,743 and costs of internal-use software of $183,226
at June 30, 2019. At June 30, 2018, costs of software to be sold, leased, or marketed totaled $125,223, and costs of internal-use software
totaled $162,949.

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 $82,605, $72,859, and $60,880 for the fiscal years ended June 30, 2019, 2018, and 2017, respectively. There were no material
impairments in any of the fiscal years presented.

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

Amortization expense for all intangible assets was $113,255, $104,011, and $90,109 for the fiscal years ended June 30, 2019, 2018, and
2017, respectively. The estimated aggregate future amortization expense for each of the next five years for all intangible assets remaining
as of June 30, 2019, is as follows:

Years Ending June 30,

2020
2021

2022

2023

2024

Computer
Software

Customer
Relationships

Other Intangible
Assets

Total

77,020
58,153

42,981

27,454

10,975

14,665
12,409

11,260

8,808

7,547

9,186
6,345

3,437

1,963

1,315

100,871
76,907

57,678

38,225

19,837

4 9

JACKHENRY.COMNOTE 5.

DEBT

The Company had no outstanding long-term or short-term debt at June 30, 2019 or June 30, 2018.

Revolving credit facility

The revolving credit facility provides for borrowings of up to $300,000, which may be increased by the Company at any time until maturity
to $600,000. The credit facility bears interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate (the highest
of (i) the Prime Rate for such day, (ii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iii) the Eurocurrency
Rate for a one-month Interest Period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the
Company’s leverage ratio. The credit facility is guaranteed by certain subsidiaries of the Company. The credit facility is subject to various
financial covenants that require the Company to maintain certain financial ratios as defined in the agreement. As of June 30, 2019, the
Company was in compliance with all such covenants. The revolving loan terminates February 20, 2020 and at June 30, 2019 there was
no outstanding balance. Prior to termination, the Company plans to renew the current credit facility or replace it with a similar credit facility.

Other lines of credit

The Company renewed an unsecured bank credit line on May 1, 2019 which provides for funding of up to $5,000 and bears interest at the
prime rate less 1.0%. The credit line was renewed through April 30, 2021. At June 30, 2019, no amount was outstanding.

Interest

The Company paid interest of $691, $1,747, and $767 during the fiscal years ended June 30, 2019, 2018, and 2017, respectively.

NOTE 6.

COMMITMENTS AND CONTINGENCIES

Property and Equipment

The Company had an estimated $2,673 and $2,076 of commitments at June 30, 2019 and 2018, respectively, to purchase property
and equipment.

Leases

The Company leases certain property under operating leases which expire over the next 11 years, but certain of the leases contain
options to extend the lease term. All lease payments are based on the lapse of time but include, in some cases, payments for operating
expenses and property taxes. There are no purchase options on real estate leases at this time. Certain leases on real estate are subject
to annual escalations for increases in operating expenses and property taxes.

As of June 30, 2019, net future minimum lease payments are as follows:

Years Ending June 30,

Lease Payments

2020
2021

2022

2023

2024
Thereafter

Total

Rent expense was $15,196, $10,835, and $10,195 in fiscal 2019, 2018, and 2017, respectively.

15,559
13,539

11,860

10,169

8,835
11,671

71,633

5 0

2019 ANNUAL REPORTNOTE 7.

INCOME TAXES

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

Current:

Federal

State

Deferred:

Federal

State

Year Ended June 30,

2019

2018

2017

54,800

12,946

4,177
3,427

56,060

9,948

(80,509)
5,625

80,752

9,469

17,017
4,170

75,350

(8,876)

111,408

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

Deferred tax assets:

Contract and service revenues

Expense reserves (bad debts, insurance, franchise tax and vacation)

Net operating loss and tax credit carryforwards

June 30,

2019

2018

13,450

14,325

2,713
851

31,339
(415)

30,924

(31,846)

(154,633)

—
(61,455)

(247,934)

—

11,164

2,759
2,711

16,634
(515)

16,119

(32,026)

(141,274)

(5,067)
(46,055)

(224,422)

(217,010)

(208,303)

Other, net

Total gross deferred tax assets

Valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Accelerated tax depreciation

Accelerated tax amortization

Contract and service revenues

Contract and service costs

Total gross deferred liabilities

Net deferred tax liability

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

Computed "expected" tax expense

Increase (reduction) in taxes resulting from:

State income taxes, net of federal income tax benefits

Research and development credit

Domestic production activities deduction

TCJA deferred tax rate re-measurement

Tax effects of share-based payments

Other (net)

Year Ended June 30,

2019

21.0%

2018

28.1%

2017

35.0%

3.7%

(2.5)%

—%

(1.4)%

0.9%

21.7%

2.9%

(2.0)%

(1.4)%

(30.0)%

(0.8)%

0.7%

(2.5)%

2.6%

(2.1)%

(2.3)%

—%

(0.8)%

0.3%

32.7%

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.

5 1

JACKHENRY.COMAs of June 30, 2019, the Company has $4,542 of gross federal net operating loss (“NOL”) carryforwards pertaining to the acquisition
of Goldleaf Financial Solutions, Inc. and Bolts Technologies, Inc., which are expected to be utilized after the application of IRC Section
382. Separately, as of June 30, 2019, the Company has state NOL carryforwards with a tax-effected value of $651. The federal and state
losses have varying expiration dates, ranging from fiscal 2019 to 2037. Based on state tax rules which restrict utilization of these losses,
the Company believes it is more likely than not that $415 of these losses will expire unutilized. Accordingly, a valuation allowance of $415
and $515 has been recorded against the state net operating losses as of June 30, 2019 and 2018, respectively.

The Company paid income taxes, net of refunds, of $62,005, $60,382, and $96,074 in fiscal 2019, 2018, and 2017, respectively.

At June 30, 2019, the Company had $10,495 of gross unrecognized tax benefits, $9,892 of which, if recognized, would affect its effective
tax rate. At June 30, 2018, the Company had $10,227 of unrecognized tax benefits, $9,366 of which, if recognized, would affect its
effective tax rate. The Company had accrued interest and penalties of $1,514 and $1,279 related to uncertain tax positions at June 30,
2019 and 2018, respectively. The income tax provision included interest expense and penalties (or benefits) on unrecognized tax benefits
of $128, $165, and $(105) in the fiscal years ended June 30, 2019, 2018, and 2017, respectively.

A reconciliation of the unrecognized tax benefits for the fiscal years ended June 30, 2019 and 2018 follows:

Balance at July 1, 2017

Additions for current year tax positions

Reductions for current year tax positions

Additions for prior year tax positions

Reductions for prior year tax positions

Additions related to business combinations

Settlements

Reductions related to expirations of statute of limitations

Balance at June 30, 2018

Additions for current year tax positions

Reductions for current year tax positions

Additions for prior year tax positions

Reductions for prior year tax positions

Additions related to business combinations

Settlements

Reductions related to expirations of statute of limitations

Balance at June 30, 2019

Unrecognized
Tax Benefits

5,449

2,157

—

3,130

(55)

510

(161)

(803)

10,227

1,135

(40)

562

(531)

(25)

(876)

10,495

The U.S. federal and state income tax returns for fiscal 2016 and all subsequent years remain subject to examination as of June 30, 2019
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 $3,000 - $4,000 within twelve months of June 30, 2019.

NOTE 8.

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, 2019 and
2018) 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.

5 2

2019 ANNUAL REPORTNOTE 9.

STOCK-BASED COMPENSATION

The Company’s pre-tax operating income for the fiscal years ended June 30, 2019, 2018, and 2017 includes $12,589, $11,758, and
$11,129 of equity-based compensation costs, respectively, of which $10,828, $10,256, and $9,861 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
vests totaled $6,191, $3,274, and $2,638 for the fiscal years ended June 30, 2019, 2018, and 2017, respectively .

2015 Equity Incentive Plan and 2005 Non-Qualified Stock Option 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.

The Company previously issued options to outside directors under the 2005 Non-Qualified Stock Option Plan (“2005 NSOP”). No additional
stock options may be issued under this plan.

The 2005 NSOP was adopted by the Company on September 23, 2005, for its outside directors. Generally, options were exercisable
beginning 6 months after grant at an exercise price equal to the fair market value of the stock at the grant date. For individuals who have
served less than four continuous years, 25% of all options will vest after one year of service, 50% shall vest after two years, and 75%
shall vest after three years of service on the Board. The options terminate upon surrender of the option, upon the expiration of one year
following notification of a deceased optionee, or 10 years after grant. 700 shares of common stock were reserved for issuance under this
plan with a maximum of 100 for each director.

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

Outstanding July 1, 2016

Granted

Forfeited

Exercised

Outstanding July 1, 2017

Granted

Forfeited

Exercised

Outstanding July 1, 2018

Granted

Forfeited

Exercised

Outstanding June 30, 2019

Vested and Expected to Vest June 30, 2019

Exercisable June 30, 2019

Number of
Shares

Weighted
Average
Exercise Price

Aggregate
Intrinsic
Value

—

(10)

—

(20)

—

(20)

—

22.14

87.27

—

28.52

50.04

—

17.45

62.65

—

23.65

87.27

— $

1,478

—

There were no options granted in fiscal 2019, no options granted during fiscal 2018, and 32 options granted during fiscal 2017. The
weighted-average fair value at the grant date of options granted during fiscal 2017 was $15.78.

The Company utilized a Black-Scholes option pricing model to estimate fair value of the stock option grants at the grant date. All 32
options granted during fiscal 2017 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:

5 3

JACKHENRY.COM
Expected Life (years)

Volatility

Risk-free interest rate

Dividend yield

6.50 years

19.60 %

1.24 %

1.28 %

At June 30, 2019, there was no compensation cost yet to be recognized related to outstanding options.

The total intrinsic value of options exercised was $2,289, $2,165, and $747 for the fiscal years ended June 30, 2019, 2018, and 2017,
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

Outstanding July 1, 2016

Granted

Vested

Forfeited

Outstanding July 1, 2017

Granted

Vested

Forfeited

Outstanding July 1, 2018

Granted

Vested

Forfeited

Outstanding June 30, 2019

Weighted
Average Grant
Date Fair Value

(38)

(1)

—

(12)

(1)

—

(17)

—

44.95

87.27

37.00

65.52

73.66

—

58.61

64.60

81.33

—

79.41

—

87.27

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, 2017 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, 2019, 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 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, 2019, as well as activity for the fiscal year then ended:

5 4

2019 ANNUAL REPORTUnit awards

Outstanding July 1, 2016

Granted

Vested

Forfeited

Outstanding July 1, 2017

Granted

Vested

Forfeited

Outstanding July 1, 2018

Granted

Vested

Forfeited

Outstanding June 30, 2019

Weighted
Average Grant
Date Fair Value

Aggregate
Intrinsic
Value

429

130

(136)

(37)

386

125

(156)

(4)

351

(129)

(4)

298

58.06

77.75

50.12

54.30

67.84

98.41

57.00

81.83

83.37

169.53

82.06

92.32

$107.00

$39,867

The Company utilized a Monte Carlo pricing model customized to the specific provisions of the Company’s plan design to value unit
awards subject to performance targets on the grant dates. The weighted average assumptions used in this model to estimate fair value
at the grant dates are as follows:

Volatility

Risk free interest rate

Dividend yield

Stock Beta

Year Ended June 30,

2019

15.3%

2.89%

0.9%

0.669

2018

15.6%

1.55%

1.2%

0.687

2017

16.0%

0.93%

1.3%

0.684

For the fiscal year ended June 30, 2019, 39 unit awards were granted and measured using the above assumptions. The remaining 41
unit awards granted are not subject to performance targets, and therefore the estimated fair value at measurement date is valued in the
same manner as restricted stock award grants.

At June 30, 2019, there was $13,444 of compensation expense that has yet to be recognized related to non-vested restricted stock unit
awards, which will be recognized over a weighted-average period of 1.04 years.

The fair value of restricted shares and units at vest date totaled $34,645, $17,951, and $15,085 for the fiscal years ended June 30, 2019,
2018, and 2017, respectively.

NOTE 10.

EARNINGS PER SHARE

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

Net Income

Common share information:

Weighted average shares outstanding for basic earnings per share

Dilutive effect of stock options and restricted stock

Weighted average shares outstanding for diluted earnings per share

Basic earnings per share

Diluted earnings per share

Year Ended June 30,

2019

2018

2017

271,885

365,034

229,561

77,160

187

77,347

77,252

333

77,585

3.52

4.73

4.70

77,856

399

78,255

2.95

2.93

5 5

JACKHENRY.COMPer share information is based on the weighted average number of common shares outstanding for each of the fiscal years. Stock options
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
no anti-dilutive stock options and restricted stock excluded for fiscal 2019, 41 shares excluded for fiscal 2018, and 32 shares excluded
for fiscal 2017.

NOTE 11.

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, 2019, 2018 and 2017, employees purchased 76, 76, and 81 shares under this plan at average prices of
$118.32, $98.46, and $77.52, respectively. As of June 30, 2019, approximately 1,304 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 $21,003, $18,821, and $17,550
for fiscal 2019, 2018 and 2017, respectively.

NOTE 12.

BUSINESS ACQUISITIONS

BOLTS Technologies, Inc

On October 5, 2018, the Company acquired all of the equity interest of BOLTS Technologies, Inc. for $15,046 paid in cash. The acquisition
was funded by cash generated from operations. BOLTS Technologies 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

Identifiable intangible assets

Total other liabilities assumed

Total identifiable net assets

Goodwill

Net assets acquired

1,384

2,274

(1,505)

2,153

12,893

15,046

The amounts shown above include measurement period adjustments made during fiscal 2019 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, 2019, the Company’s consolidated statements of income included revenue of $126 and after-tax net
loss of $895 resulting from BOLTS’ operations.

The accompanying consolidated statements of income for the fiscal years ended June 30, 2019 and 2018 do 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.

5 6

2019 ANNUAL REPORTAgiletics, Inc.

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

Identifiable intangible assets

Non-current deferred income tax liability

Total other liabilities assumed

Total identifiable net assets

Goodwill

Net assets acquired

2,170

3,090

(872 )

(738 )

3,650

3,999

7,649

The amounts shown above include measurement period adjustments made during fiscal 2019 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, 2019, the Company’s consolidated statements of income included revenue of $926 and after-tax net
loss of $192 resulting from Agiletics’ operations.

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 own all of the outstanding equity of Ensenta
Corporation (“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 Corporation to the JHA Payment Solutions Group expands 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.

Management has completed a purchase price allocation of Ensenta and its assessment of the fair value of acquired assets and liabilities
assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of December 21,
2017 are set forth below:

Current assets

Long-term assets

Identifiable intangible assets

Non-current deferred income tax liability

Total other liabilities assumed
Total identifiable net assets

Goodwill

Net assets acquired

14,125

586

58,806

(21,859)
(8,496)

43,162
91,219

134,381

The amounts shown above include measurement period adjustments made during the third and fourth quarters of fiscal 2018, and the

5 7

JACKHENRY.COMsecond quarter of fiscal 2019, related to income tax adjustments and a fair value assessment.

The goodwill of $91,219 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 Ensenta, together with the value of Ensenta’s assembled workforce. The goodwill
from this acquisition has been allocated to the Company’s Payments segment and is not expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $37,800, computer software of $16,505, and other
intangible assets of $4,501. 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 $7,274. The fair value of current assets acquired included accounts receivable of
$4,668, none of which were expected to be uncollectible.

Costs incurred related to the acquisition of Ensenta in fiscal 2018 totaled $339 for legal, valuation, and other fees, and were expensed as
incurred within selling, general, and administrative expense.

For the fiscal year ended June 30, 2019, the Company’s consolidated statements 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 revenue of $15,776 and after-tax net income of $8,197.
The after-tax net income for the fiscal year ended June 30, 2018 included a large tax benefit recorded as a result of the TCJA. Excluding
that benefit, the Company’s after tax net income resulting from Ensenta’s operations totaled $536.

The accompanying consolidated statements of income for the fiscal year ended June 30, 2019 do not include any revenues and expenses
related to this acquisition prior to the acquisition date. The following unaudited pro forma consolidated financial information is presented
as if this acquisition had occurred at the beginning of the prior period presented. In addition, this unaudited pro forma financial information
is provided for illustrative purposes only and should not be relied upon as necessarily being indicative of the historical results that would
have been obtained if the acquisition had actually occurred during this period, or the results that may be obtained in the future as a result
of the acquisition.

Revenue

Net Income

Basic Earnings Per Share

Diluted Earnings Per Share

Vanguard Software Group

Year Ended

June 30,

2019

Actuals

2018

2017

Proforma

$ 1,552,691

$ 1,483,915

$ 1,411,873

271,885

366,544

231,696

3.52

4.74

4.72

2.98

2.96

On August 31, 2017, the Company acquired all of the equity interest of Vanguard Software Group, 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 Software Group to the Company’s ProfitStars® Lending Solutions Group expands
functionality offered to clients, allowing for near-real-time communication with JHA’s core processing and ancillary solutions, and also
enhances cross-sell opportunities.

Management has completed a purchase price allocation of Vanguard Software Group and its assessment of the fair value of acquired
assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair
values as of August 31, 2017 are set forth below:

Current assets

Long-term assets

Identifiable intangible assets

Total liabilities assumed

Total identifiable net assets

Goodwill

Net assets acquired

1,153

4,200
(1,117)

4,245
6,499

10,744

The goodwill of $6,499 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 Vanguard Software Group, together with the value of Vanguard Software
Group’s assembled workforce. The goodwill from this acquisition has been allocated to the Company’s Complementary segment and is
expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $2,234, computer software of $1,426, and other

5 8

2019 ANNUAL REPORTintangible assets of $540. The weighted average amortization periods for acquired customer relationships, computer software, and other
intangible assets are 15 years, 10 years, and 10 years, respectively.

Current assets were inclusive of cash acquired of $289. The fair value of current assets acquired included accounts receivable of $847, none
of which were expected to be uncollectible.

Costs incurred related to the acquisition of Vanguard Software Group were immaterial for the periods presented.

For the fiscal year ended June 30, 2019, the Company’s consolidated statements 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.

The accompanying consolidated statements of income for the fiscal year ended June 30, 2019 do 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.

NOTE 13.

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 & 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.

An immaterial adjustment was made to reclassify revenue recognized in fiscal 2018 from the Core to the Corporate and Other Segment. For
the fiscal year ended June 30, 2018, the amount reclassified totaled $2,968.

Year Ended
June 30, 2019

Core

Payments

Complementary

Corporate
& Other

Total

REVENUE

Services and Support

Processing

Total Revenue

506,007
28,422

534,429

52,756
495,563

548,319

348,631
69,584

418,215

51,095
633

51,728

Cost of Revenue

243,989

273,261

175,737

230,043

Research and Development

Selling, General, and Administrative

Gain on Disposal of Businesses

Total Expenses

SEGMENT INCOME

290,440

275,058

242,478

(178,315)

OPERATING INCOME

INTEREST INCOME (EXPENSE)

INCOME BEFORE INCOME TAXES

958,489
594,202

1,552,691

923,030

96,378

185,998

—

1,205,406

347,285

(50)

347,235

5 9

JACKHENRY.COMREVENUE

Services and Support

482,216

47,641

333,812

57,070

920,739

Core

Payments

Complementary

Corporate
& Other

Total

Year Ended
June 30, 2018

Processing

Total Revenue

27,605

509,821

460,690

508,331

61,607

395,419

156

57,226

Cost of Revenue

232,868

245,269

163,905

211,096

Research and Development

Selling, General, and Administrative

Gain on Disposal of Businesses

Total Expenses

SEGMENT INCOME

276,953

263,062

231,514

(153,870)

OPERATING INCOME

INTEREST INCOME (EXPENSE)

INCOME BEFORE INCOME TAXES

550,058

1,470,797

853,138

90,340

171,710

(1,894)

1,113,294

357,503

(1,345)

356,158

REVENUE

Services and Support

452,712

43,477

322,784

62,762

881,735

Core

Payments

Complementary

Corporate
& Other

Total

Year Ended

June 30, 2017

Processing

Total Revenue

24,893

477,605

428,511

471,988

53,027

375,811

124

62,886

Cost of Revenue

Research and Development

Selling, General, and Administrative

Gain on Disposal of Businesses

Total Expenses

219,440

222,685

155,084

208,646

SEGMENT INCOME

258,165

249,303

220,727

(145,760)

OPERATING INCOME

INTEREST INCOME (EXPENSE)

INCOME BEFORE INCOME TAXES

506,555

1,388,290

805,855

84,753

159,235

(3,270)

1,046,573

341,717

(748)

340,969

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

6 0

2019 ANNUAL REPORTNOTE 14: SUBSEQUENT EVENTS

Dividends

On August 23, 2019, the Company’s Board of Directors declared a cash dividend of $0.40 per share on its common stock, payable on
September 30, 2019 to shareholders of record on September 9, 2019.

Acquisition

On July 1, 2019, the Company acquired 100% of the equity interest in Geezeo for a net cash outlay of $37,776. The Company has not
yet completed its purchase price allocation for this acquisition. Geezeo is a Boston-based provider of retail and business digital financial
management solutions and was a privately-held company.

The acquisition was funded with operating cash. Due to the timing of the acquisition, the Company has not yet completed its purchase
accounting procedures with respect to this transaction. Geezeo’s historical operating results would not materially affect the Company’s
consolidated financial statements and, accordingly, pro forma financial information has not been provided.

6 1

JACKHENRY.COMQUARTERLY FINANCIAL INFORMATION
(unaudited)

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Total

For the Year Ended June 30, 2019

REVENUE

392,543

386,275

380,364

393,509

$ 1,552,691

EXPENSES

Cost of Revenue

Research & Development

Selling, General, & Administrative

Total Expenses

220,112

24,026

45,183

289,321

227,284

23,990

46,797

298,071

235,594

23,442

44,887

303,923

240,040

24,920

49,131

314,091

923,030

96,378

185,998

1,205,406

OPERATING INCOME

103,222

88,204

76,441

79,418

347,285

INTEREST INCOME (EXPENSE)

Interest income

Interest expense

Total interest income (expense)

291

(147)

144

252

(148)

104

155

(224)

(69)

178

(407)

(229)

876

(926)

(50)

INCOME BEFORE INCOME TAXES

103,366

88,308

76,372

79,189

347,235

PROVISION/ (BENEFIT) FOR
INCOME TAXES

NET INCOME

Basic earnings per share

Basic weighted average shares outstanding

Diluted earnings per share

19,815

20,219

17,120

18,196

75,350

83,551

1.08

77,188

68,089

0.88

77,216

59,252

0.77

77,177

60,993

0.79

77,060

271,885

3.52

77,160

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

6 2

2019 ANNUAL REPORTQuarter 1

Quarter 2

Quarter 3

Quarter 4

Total

For the Year Ended June 30, 2018*

REVENUE

361,284

357,209

374,048

378,256

$ 1,470,797

EXPENSES

Cost of Revenue

Research & Development

Selling, General, & Administrative

Gain on disposal of businesses

203,915

20,929

41,088

(1,705)

207,100

22,414

43,094

(189)

218,517

22,591

42,234

—

223,606

24,406

45,294

—

853,138

90,340

171,710

(1,894)

Total Expenses

264,227

272,419

283,342

293,306

1,113,294

OPERATING INCOME

97,057

84,790

90,706

84,950

357,503

INTEREST INCOME (EXPENSE)

Interest income

Interest expense

Total interest income (expense)

147

(189)

(42)

146

(250)

(104)

130

(734)

(604)

152

(747)

(595)

575

(1,920)

(1,345)

INCOME BEFORE INCOME TAXES

97,015

84,686

90,102

84,355

356,158

PROVISION/ (BENEFIT) FOR
INCOME TAXES

NET INCOME

Basic net income per share

Basic weighted average shares outstanding

Diluted net income per share

30,145

(76,557)

21,017

16,519

(8,876)

66,870

0.87

77,283

161,243

2.09

77,218

69,085

0.89

77,247

67,836

0.88

77,261

365,034

4.73

77,252

0.86

2.08

0.89

0.87

4.70

Diluted weighted average shares outstanding

77,646

77,565

77,546

77,585

*As previously disclosed, the Company adopted ASU 2014-09 effective July 1, 2018 using the full retrospective approach. In connection therewith, in its previously filed fiscal
2019 Form 10-Q’s, the Company adjusted its comparative fiscal 2018 financial information, including its June 30, 2018 balance sheet, to reflect the retrospective effects of
applying ASC 606. In connection with the preparation of the Company’s consolidated financial statements for the year ended June 30, 2019, the Company identified a $23,500
error in the as adjusted June 30, 2018 balance sheet that was disclosed within the previously filed fiscal 2019 Form 10-Q’s, which resulted in an overstatement of current deferred
revenues and a corresponding understatement of non-current deferred revenues in such unaudited quarterly filings. Management has determined that such misclassification
error did not result in the previously filed 2019 Form 10-Q’s being materially misstated.

6 3

JACKHENRY.COMB O A R D O F D I R E C T O R S

JOHN F. “JACK” PRIM
CHAIRMAN OF THE BOARD
Former Chief Executive Officer, Jack Henry & Associates, Inc.
Monett, Missouri

DAVID B. FOSS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Jack Henry & Associates, Inc.
Monett, Missouri

MATTHEW C. FLANIGAN
VICE CHAIRMAN AND LEAD DIRECTOR, JACK HENRY & ASSOCIATES, INC.
Former Executive Vice President and Chief Financial Officer
Leggett & Platt, Incorporated
Carthage, Missouri

THOMAS H. WILSON, JR.
MANAGING PARTNER
DecisionPoint Advisors, LLC
Charlotte, North Carolina

JACQUELINE R. FIEGEL
CHAIRMAN/CENTRAL OKLAHOMA AREA
Prosperity Bank
Oklahoma City, Oklahoma

THOMAS A. WIMSETT
CHAIRMAN AND MANAGING PARTNER
Wimsett & Company, LLC
Louisville, Kentucky

LAURA G. KELLY
MANAGING DIRECTOR
CoreLogic
Irvine, California

SHRUTI S. MIYASHIRO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Orange County’s Credit Union
Santa Ana, California

WESLEY A. BROWN
PRESIDENT
Bent St. Vrain & Company, LLC
Denver, Colorado

6 4

2019 ANNUAL REPORTE X E C U T I V E O F F I C E R S

DAVID B. FOSS
President and Chief Executive Officer

KEVIN D. WILLIAMS
Chief Financial Officer and Treasurer

MARK S. FORBIS
Executive Vice President and Chief Technology Officer

CRAIG K. MORGAN
General Counsel and Secretary

GREGORY R. ADELSON
Vice President and General Manager of JHA Payment Solutions

RONALD L. MOSES
Vice President and General Manager of Consumer and Commercial Solutions

RUSSELL L. BERNTHAL
Vice President and President of ProfitStars

STACEY E. ZENGEL
Vice President and President of Jack Henry Banking

STEVEN W. TOMSON
Vice President of Sales and Marketing

TEDDY I. BILKE
Vice President and President of Symitar

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A N N U A L M E E T I N G

The annual meeting of shareholders will be held on Thursday, November 14 at 11 a.m. CT at Jack Henry’s
Corporate Headquarters, Monett, Missouri.

FO RM 10-K
A copy of the company’s Form 10-K is available upon request to the Chief Financial Officer at the corporate
headquarters address or from our website at www.jackhenry.com.

TRA NS FE R AGENT AND REGISTRAR
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233

M A I L
663 Highway 60
P.O. Box 807
Monett, MO 65708

P H O N E
417-235-6652

F A X
417-235-4281

O N L I N E
jackhenry.com