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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

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

For the quarterly period ended March 31, 2020

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

Commission file number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)

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

663 Highway 60, P.O. Box 807, Monett, MO 65708
(Address of Principle Executive Offices)
(Zip Code)
417-235-6652
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” ”accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐ No ☒
As of April 28, 2020, the Registrant had 76,615,436 shares of Common Stock outstanding ($0.01 par value).

TABLE OF CONTENTS

|  | Page Reference
PART I | FINANCIAL INFORMATION |
ITEM 1. | Condensed Consolidated Balance Sheets as of March 31, 2020 and June 30, 2019 (Unaudited) | 3
| Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2020 and 2019 (Unaudited) | 5
| Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended March 31, 2020 and 2019 (Unaudited) | 6
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2020 and 2019 (Unaudited) | 6
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 8
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 24
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 32
ITEM 4. | Controls and Procedures | 32
PART II | OTHER INFORMATION | 32
ITEM 1. | Legal Proceedings | 32
ITEM 1A. | Risk Factors | 32
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33
ITEM 6. | Exhibits | 34
| Signatures | 35

In this report, all references to “JHA”, the “Company”, “we”, “us”, and “our”, refer to Jack Henry & Associates, Inc., and its wholly owned subsidiaries.
FORWARD LOOKING STATEMENTS
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements may appear throughout this report, including without limitation, in Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “seek,” “anticipate,” “estimate,” “future,” “intend,” “plan,” “strategy,” “predict,” “likely,” “should,” “will,” “would,” “could,” “can,” “may,” and similar expressions. Forward-looking statements are based only on management’s current beliefs, expectations and assumptions regarding the future of the Company, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, including Part II, Item 1A, "Risk Factors" in this report, those discussed in our Annual Report on Form 10-K for the year ended June 30, 2019, in particular, those included in Item 1A, “Risk Factors” of such report, and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Any forward-looking statement made in this report speaks only as of the date of this report, and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise.
2

PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
3

Table of Contents

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES |  |  |
CONDENSED CONSOLIDATED BALANCE SHEETS |  |  |
(In Thousands, Except Share and Per Share Data) |  |  |
(Unaudited) |  |  |
| March 31, 2020 |  | June 30, 2019
ASSETS |  |  |
CURRENT ASSETS: |  |  |
Cash and cash equivalents | $ | 109,514 |  |  | $ | 93,628 |
Receivables, net | 212,060 |  |  | 310,080 |
Income tax receivable | 7,063 |  |  | 17,817 |
Prepaid expenses and other | 109,449 |  |  | 106,466 |
Deferred costs | 41,564 |  |  | 35,102 |
Assets held for sale | — |  |  | 6,355 |
Total current assets | 479,650 |  |  | 569,448 |
PROPERTY AND EQUIPMENT, net | 277,091 |  |  | 272,474 |
OTHER ASSETS: |  |  |
Non-current deferred costs | 106,390 |  |  | 90,084 |
Computer software, net of amortization | 335,820 |  |  | 318,969 |
Other non-current assets | 213,110 |  |  | 134,743 |
Customer relationships, net of amortization | 98,912 |  |  | 100,653 |
Other intangible assets, net of amortization | 32,113 |  |  | 31,514 |
Goodwill | 686,333 |  |  | 666,944 |
Total other assets | 1,472,678 |  |  | 1,342,907 |
Total assets | $ | 2,229,419 |  |  | $ | 2,184,829 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
CURRENT LIABILITIES: |  |  |
Accounts payable | $ | 11,673 |  |  | $ | 9,850 |
Accrued expenses | 126,337 |  |  | 120,360 |
Notes payable and current maturities of long-term debt | 81 |  |  | — |
Deferred revenues | 160,317 |  |  | 339,752 |
Total current liabilities | 298,408 |  |  | 469,962 |
LONG-TERM LIABILITIES: |  |  |
Non-current deferred revenues | 66,110 |  |  | 54,554 |
Deferred income tax liability | 228,685 |  |  | 217,010 |
Debt, net of current maturities | 55,166 |  |  | — |
Other long-term liabilities | 67,187 |  |  | 14,290 |
Total long-term liabilities | 417,148 |  |  | 285,854 |
Total liabilities | 715,556 |  |  | 755,816 |
STOCKHOLDERS' EQUITY |  |  |
Preferred stock - $1 par value; 500,000 shares authorized, none issued | — |  |  | — |
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,599,644 shares issued at March 31, 2020; 103,496,026 shares issued at June 30, 2019 | 1,036 |  |  | 1,035 |
Additional paid-in capital | 487,590 |  |  | 472,029 |
Retained earnings | 2,206,910 |  |  | 2,066,073 |
Less treasury stock at cost 26,992,903 shares at March 31, 2020; 26,507,903 shares at June 30, 2019 | (1,181,673) |  |  | (1,110,124) |
Total stockholders' equity | 1,513,863 |  |  | 1,429,013 |
Total liabilities and equity | $ | 2,229,419 |  |  | $ | 2,184,829 |

See notes to condensed consolidated financial statements
4

Table of Contents

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES |  |  |  |  |  |  |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |  |  |  |  |  |  |
(In Thousands, Except Per Share Data) |  |  |  |  |  |  |
(Unaudited) |  |  |  |  |  |  |
| Three Months Ended |  |  |  | Nine Months Ended |  |
| March 31, |  |  |  | March 31, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
REVENUE | $ | 429,406 |  |  | $ | 380,364 |  |  | $ | 1,286,530 |  |  | $ | 1,159,182 |
EXPENSES |  |  |  |  |  |  |
Cost of Revenue | 258,571 |  |  | 235,594 |  |  | 753,629 |  |  | 682,990 |
Research and Development | 28,308 |  |  | 23,442 |  |  | 80,086 |  |  | 71,458 |
Selling, General, and Administrative | 47,391 |  |  | 44,682 |  |  | 145,890 |  |  | 136,683 |
Loss on Disposal of Assets, net | 3,198 |  |  | 205 |  |  | 3,095 |  |  | 183 |
Total Expenses | 337,468 |  |  | 303,923 |  |  | 982,700 |  |  | 891,314 |
OPERATING INCOME | 91,938 |  |  | 76,441 |  |  | 303,830 |  |  | 267,868 |
INTEREST INCOME (EXPENSE) |  |  |  |  |  |  |
Interest Income | 197 |  |  | 155 |  |  | 1,050 |  |  | 697 |
Interest Expense | (165) |  |  | (224) |  |  | (477) |  |  | (520) |
Total Interest Income (Expense) | 32 |  |  | (69) |  |  | 573 |  |  | 177 |
INCOME BEFORE INCOME TAXES | 91,970 |  |  | 76,372 |  |  | 304,403 |  |  | 268,045 |
PROVISION FOR INCOME TAXES | 18,115 |  |  | 17,120 |  |  | 69,080 |  |  | 57,153 |
NET INCOME | $ | 73,855 |  |  | $ | 59,252 |  |  | $ | 235,323 |  |  | $ | 210,892 |
Basic earnings per share | $ | 0.96 |  |  | $ | 0.77 |  |  | $ | 3.06 |  |  | $ | 2.73 |
Basic weighted average shares outstanding | 76,683 |  |  | 77,177 |  |  | 76,845 |  |  | 77,194 |
Diluted earnings per share | $ | 0.96 |  |  | $ | 0.77 |  |  | $ | 3.06 |  |  | $ | 2.72 |
Diluted weighted average shares outstanding | 76,884 |  |  | 77,286 |  |  | 76,962 |  |  | 77,411 |

See notes to condensed consolidated financial statements
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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES |  |  |  |  |  |  |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY |  |  |  |  |  |  |
(In Thousands, Except Share and Per Share Data) |  |  |  |  |  |  |
(Unaudited) |  |  |  |  |  |  |
| Three Months Ended |  |  |  | Nine Months Ended |  |
| March 31, |  |  |  | March 31, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
PREFERRED SHARES: | — |  |  | — |  |  | — |  |  | — |
COMMON SHARES: |  |  |  |  |  |  |
Shares, beginning of period | 103,572,129 |  |  | 103,428,416 |  |  | 103,496,026 |  |  | 103,278,562 |
Shares issued for equity-based payment arrangements | 8,616 |  |  | 4,722 |  |  | 47,098 |  |  | 120,119 |
Shares issued for Employee Stock Purchase Plan | 18,899 |  |  | 21,751 |  |  | 56,520 |  |  | 56,208 |
Shares, end of period | 103,599,644 |  |  | 103,454,889 |  |  | 103,599,644 |  |  | 103,454,889 |
COMMON STOCK - PAR VALUE $0.01 PER SHARE: |  |  |  |  |  |  |
Balance, beginning of period | $ | 1,036 |  |  | $ | 1,034 |  |  | $ | 1,035 |  |  | $ | 1,033 |
Shares issued for equity-based payment arrangements | — |  |  | — |  |  | — |  |  | 1 |
Shares issued for Employee Stock Purchase Plan | — |  |  | 1 |  |  | 1 |  |  | 1 |
Balance, end of period | $ | 1,036 |  |  | $ | 1,035 |  |  | $ | 1,036 |  |  | $ | 1,035 |
ADDITIONAL PAID-IN CAPITAL: |  |  |  |  |  |  |
Balance, beginning of period | $ | 481,005 |  |  | $ | 459,988 |  |  | $ | 472,029 |  |  | $ | 464,138 |
Shares issued for equity-based payment arrangements | — |  |  | — |  |  | — |  |  | (1) |
Tax withholding related to share based compensation | (703) |  |  | (313) |  |  | (3,328) |  |  | (13,797) |
Shares issued for Employee Stock Purchase Plan | 2,597 |  |  | 2,469 |  |  | 7,200 |  |  | 6,658 |
Stock-based compensation expense | 4,691 |  |  | 3,505 |  |  | 11,689 |  |  | 8,651 |
Balance, end of period | $ | 487,590 |  |  | $ | 465,649 |  |  | $ | 487,590 |  |  | $ | 465,649 |
RETAINED EARNINGS: |  |  |  |  |  |  |
Balance, beginning of period | $ | 2,166,039 |  |  | $ | 2,007,469 |  |  | $ | 2,066,073 |  |  | $ | 1,912,933 |
Net income | 73,855 |  |  | 59,252 |  |  | 235,323 |  |  | 210,892 |
Dividends | (32,984) |  |  | (30,866) |  |  | (94,486) |  |  | (87,970) |
Balance, end of period | $ | 2,206,910 |  |  | $ | 2,035,855 |  |  | $ | 2,206,910 |  |  | $ | 2,035,855 |
TREASURY STOCK: |  |  |  |  |  |  |
Balance, beginning of period | $ | (1,161,334) |  |  | $ | (1,076,536) |  |  | $ | (1,110,124) |  |  | $ | (1,055,260) |
Purchase of treasury shares | (20,339) |  |  | — |  |  | (71,549) |  |  | (21,276) |
Balance, end of period | $ | (1,181,673) |  |  | $ | (1,076,536) |  |  | $ | (1,181,673) |  |  | $ | (1,076,536) |
TOTAL STOCKHOLDERS' EQUITY | $ | 1,513,863 |  |  | $ | 1,426,003 |  |  | $ | 1,513,863 |  |  | $ | 1,426,003 |
Dividends declared per share | $ | 0.43 |  |  | $ | 0.40 |  |  | $ | 1.23 |  |  | $ | 1.14 |

See notes to condensed consolidated financial statements.
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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES |  |  |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |  |  |
(In Thousands) |  |  |
(Unaudited) |  |  |
| Nine Months Ended |  |
| March 31, |  |
| 2020 |  | 2019
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
Net Income | $ | 235,323 |  |  | $ | 210,892 |
Adjustments to reconcile net income from operations to net cash from operating activities: |  |  |
Depreciation | 38,812 |  |  | 34,722 |
Amortization | 89,160 |  |  | 84,605 |
Change in deferred income taxes | 9,082 |  |  | 3,287 |
Expense for stock-based compensation | 11,688 |  |  | 8,651 |
(Gain)/loss on disposal of assets | 3,095 |  |  | 183 |
Changes in operating assets and liabilities: |  |  |
Change in receivables | 99,425 |  |  | 107,535 |
Change in prepaid expenses, deferred costs and other | (28,396) |  |  | (59,789) |
Change in accounts payable | (2,129) |  |  | (6,104) |
Change in accrued expenses | (21,446) |  |  | 7,115 |
Change in income taxes | 9,905 |  |  | 5,014 |
Change in deferred revenues | (168,066) |  |  | (162,742) |
Net cash from operating activities | 276,453 |  |  | 233,369 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
Payment for acquisitions, net of cash acquired | (30,376) |  |  | (19,981) |
Capital expenditures | (39,563) |  |  | (42,417) |
Proceeds from the sale of assets | 11,106 |  |  | 95 |
Customer contracts acquired | — |  |  | (20) |
Purchased software | (6,133) |  |  | (4,266) |
Computer software developed | (87,284) |  |  | (81,438) |
Purchase of investments | (1,150) |  |  | — |
Net cash from investing activities | (153,400) |  |  | (148,027) |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
Borrowings on credit facilities | 55,000 |  |  | 35,000 |
Repayments on credit facilities and financing leases | (6) |  |  | — |
Purchase of treasury stock | (71,549) |  |  | (21,276) |
Dividends paid | (94,486) |  |  | (87,970) |
Proceeds from issuance of common stock upon exercise of stock options | — |  |  | 1 |
Tax withholding payments related to share based compensation | (3,327) |  |  | (13,798) |
Proceeds from sale of common stock | 7,201 |  |  | 6,659 |
Net cash from financing activities | (107,167) |  |  | (81,384) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | $ | 15,886 |  |  | $ | 3,958 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | $ | 93,628 |  |  | $ | 31,440 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 109,514 |  |  | $ | 35,398 |

See notes to condensed consolidated financial statements
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JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
(Unaudited)
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. The Company has developed and acquired a number of banking and credit union software systems. The Company's revenues are predominately earned by marketing those systems to financial institutions nationwide together with computer equipment (hardware), by providing the conversion and implementation services for financial institutions to utilize JHA systems, and by providing other related services. JHA also provides continuing support and services to customers using on-premise or outsourced systems.
Consolidation
The condensed 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.
Comprehensive Income
Comprehensive income for the three and nine months ended March 31, 2020 and 2019 equals the Company’s net income.
Property and Equipment
Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation at March 31, 2020 totaled $408,919 and at June 30, 2019 totaled $388,481.
Intangible 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 intangible assets with an indefinite life (such as goodwill), over an estimated economic benefit period, generally three to twenty years. Accumulated amortization of intangible assets totaled $794,126 and $707,518 at March 31, 2020 and June 30, 2019, respectively.
Loss on Disposal of Assets, net
Loss on disposal of assets, net, in the condensed consolidated statements of income consisted of the following:

| Three Months Ended |  |  |  | Nine Months Ended |  |
| March 31, 2020 |  | March 31, 2019 |  | March 31, 2020 |  | March 31, 2019
Gains on sale of facilities, net | $ | (4,325) |  |  | $ | — |  |  | $ | (4,409) |  |  | $ | — |
Loss on abandonment of developed software | 7,515 |  |  | — |  |  | 7,515 |  |  | — |
(Gains) losses on disposal of other assets, net | 8 |  |  | 205 |  |  | (11) |  |  | 183 |
Loss on disposal of assets, net | $ | 3,198 |  |  | $ | 205 |  |  | $ | 3,095 |  |  | $ | 183 |

As detailed in the above table, during the three and nine months ended March 31, 2020, the Company recorded gains on sales of facilities, net, primarily related to the sale of the Houston, TX facility, as well as a loss on abandonment of developed software representing the write-off of the Company's investment in the Enterprise Risk Mitigation Solution ("ERMS"). The remainder of the loss on disposal of assets, net, for the three and nine months ended March 31, 2020 and 2019 was related to gains/losses on disposal of other assets, net.
Purchase of Investments
The Company had an investment in the preferred stock of Automated Bookkeeping, Inc ("Autobooks") of $6,000 at March 31, 2020 and $5,000 at June 30, 2019, which represented a non-controlling share of the voting equity as of each of those dates. The total investment was recorded at cost and is included within other non-current assets on the Company's balance sheet. 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
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are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.
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 borrowings on its existing line-of-credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At March 31, 2020, there were 26,993 shares in treasury stock and the Company had the remaining authority to repurchase up to 2,998 additional shares. The total cost of treasury shares at March 31, 2020 is $1,181,673. During the first nine months of fiscal 2020, the Company repurchased 485 treasury shares. At June 30, 2019, there were 26,508 shares in treasury stock and the Company had authority to repurchase up to 3,483 additional shares.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax basis of assets and liabilities. A valuation allowance would be established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expenses 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.
Interim Financial Statements
The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission ("SEC") and in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") applicable to interim condensed consolidated financial statements, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes, which are included in its Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended June 30, 2019. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Form 10-K for the fiscal year ended June 30, 2019, with updates to certain policies included in this Note 1.
In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary (consisting of normal recurring adjustments) to state fairly in all material respects the financial position of the Company as of March 31, 2020, the results of its operations for the three and nine months ended March 31, 2020 and 2019, changes in stockholders' equity for the three and nine months ended March 31, 2020 and 2019, and its cash flows for the nine months ended March 31, 2020 and 2019. The condensed consolidated balance sheet at June 30, 2019 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.
The results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for the entire year.
Use of Estimates
The extent to which the COVID-19 pandemic will directly or indirectly impact our business and financial results, including revenue, expenses, cost of revenues, research and development, and selling, general and administrative expenses, will depend on future developments that are highly uncertain, such as new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of March 31, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, as well as the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements as of and for the quarter ended March 31, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other
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factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Guidance
In August of 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40), which broadens the scope of Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with costs for internal-use software. The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The required ASU effective date for the Company is July 1, 2020, with early adoption permitted. The Company early-adopted ASU No. 2018-15 for its fiscal 2020 third quarter. The Company chose prospective adoption and there was no material impact on its consolidated financial statements for the quarter or year-to-date period.
The FASB issued ASU No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information regarding leasing arrangements to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Specifically, the standard requires operating lease commitments to be recorded on the balance sheet as operating lease liabilities and right-of-use assets, and the cost of those operating leases to be amortized on a straight-line basis.
The Company adopted the new standard effective July 1, 2019 using the optional transition method in ASU 2018-11. Under this method, the Company did not adjust its comparative period financial statements for the effects of the new standard or make the new, expanded required disclosures for periods prior to the effective date. The Company elected the package of practical expedients permitted under the new standard, which among other things, allows it to carry forward its historical lease classifications. In addition, the Company has made a policy election to keep leases with an initial term of twelve months or less off of the balance sheet. The Company also elected the practical expedient to not separate the non-lease components of a contract from the lease component to which they relate.
The adoption of the standard resulted in the recognition of lease liabilities of $77,393 and right-to-use assets of $74,084 as of July 1, 2019. Adoption of the standard did not have a material impact on the Company’s condensed consolidated statements of income or condensed consolidated statements of cash flows.
Not Yet Adopted
In December of 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions and simplifies other requirements of Topic 740 guidance. The ASU will be effective for the Company on July 1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU No. 2019-12 when required, or sooner as allowed, and is assessing the timing of adoption and evaluating the impact on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 will be effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt ASU No. 2017-04 when required and does not expect the adoption to have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, with an allowance for credit losses valuation account that is deducted to present the net carrying value at the amount expected to be collected. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years,
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with early adoption permitted. The Company is currently in the process of evaluating the impacts of adopting this standard, including the processes, systems, data and controls that will be necessary to estimate credit reserves for impacted areas. Financial assets held by the Company subject to the “expected credit loss” model prescribed by the standard include trade and other receivables and contract assets. While the Company continues to evaluate the expected impact on its consolidated financial statements and related disclosures, it currently expects the adoption of this guidance will result in an acceleration in the timing for recognition of credit losses, and may also result in an increase in the reserve for these credit losses due to the requirement to record expected losses over the remaining contractual lives of its financial assets.
NOTE 3. REVENUE AND DEFERRED COSTS
Revenue Recognition
The Company generates revenue from data processing, transaction processing, software licensing and related services, professional services, and hardware sales.
Disaggregation of Revenue
The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 11, 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.

| Three Months Ended March 31, |  |  |  | Nine Months Ended March 31, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
Outsourcing & Cloud | $ | 120,443 |  |  | $ | 102,091 |  |  | $ | 344,922 |  |  | $ | 299,516 |
Product Delivery & Services | 72,891 |  |  | 55,547 |  |  | 205,962 |  |  | 172,305 |
In-House Support | 76,870 |  |  | 76,485 |  |  | 253,332 |  |  | 246,193 |
Services & Support | 270,204 |  |  | 234,123 |  |  | 804,216 |  |  | 718,014 |
Processing | 159,202 |  |  | 146,241 |  |  | 482,314 |  |  | 441,168 |
Total Revenue | $ | 429,406 |  |  | $ | 380,364 |  |  | $ | 1,286,530 |  |  | $ | 1,159,182 |

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

| March 31, 2020 |  | June 30, 2019
Receivables, net | $ | 212,060 |  |  | $ | 310,080 |
Contract Assets- Current | 21,333 |  |  | 21,446 |
Contract Assets- Non-current | 59,966 |  |  | 50,640 |
Contract Liabilities (Deferred Revenue)- Current | 160,317 |  |  | 339,752 |
Contract Liabilities (Deferred Revenue)- Non-current | 66,110 |  |  | 54,554 |

Contract assets primarily result from revenue being recognized when or as control of a solution or service is transferred to the customer, but where invoicing is contingent upon the completion of other performance obligations or payment terms differ from the provisioning of services. The current portion of contract assets is reported within prepaid expenses and other in the condensed 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 three months ended March 31, 2020 and 2019, the Company recognized revenue of $87,768 and $85,076, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods. For the nine months ended March 31, 2020 and 2019, the Company recognized revenue of $216,684 and
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$218,913, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.
Amounts recognized that relate to performance obligations satisfied (or partially satisfied) in prior periods were immaterial for each period presented. These adjustments are primarily the result of transaction price re-allocations due to changes in estimates of variable consideration.
Transaction Price Allocated to Remaining Performance Obligations
As of March 31, 2020, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $3,951,522. The Company expects to recognize approximately 26% over the next 12 months, 20% 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 $259,399 and $231,273, at March 31, 2020 and June 30, 2019, respectively.
For the three months ended March 31, 2020 and 2019, amortization of deferred contract costs was $28,849 and $27,527, respectively. During the nine months ended March 31, 2020 and 2019, amortization of deferred contract costs totaled $88,063 and $79,784, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.
NOTE 4. 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 we believe market participants would use in pricing the asset
Fair value of financial assets, included in cash and cash equivalents, and financial liabilities is as follows:

|  | Estimated Fair Value Measurements |  |  |  |  |  | Total Fair
|  | Level 1 |  | Level 2 |  | Level 3 |  | Value
March 31, 2020 |  |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |  |
Money market funds |  | $ | 88,181 |  |  | $ | — |  |  | $ | — |  |  | $ | 88,181 |
Financial Liabilities: |  |  |  |  |  |  |  |
Revolving credit facility |  | $ | 55,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 55,000 |
June 30, 2019 |  |  |  |  |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |  |
Money market funds |  | $ | 81,945 |  |  | $ | — |  |  | $ | — |  |  | $ | 81,945 |

Non-Recurring Fair Value Measurements |  |  |  |  |  |  |  |
June 30, 2019 |  |  |  |  |  |  |  |
Long-lived assets held for sale (a) |  | $ | — |  |  | $ | 1,300 |  |  | $ | — |  |  | $ | 1,300 |

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(a) In accordance with Accounting Standards Codification (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 period ended June 30, 2017. These assets were disposed of by sale during the third quarter of fiscal 2020.
NOTE 5. LEASES
The Company adopted ASU 2016-02 and its related amendments (collectively known as “ASC 842”) on July 1, 2019 using the optional transition method in ASU 2018-11. Therefore, the reported results for the three and nine months ended March 31, 2020 reflect the application of ASC 842 while the reported results for the three and nine months ended March 31, 2019 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases (“ASC 840”), in effect for the prior period.
The Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property, and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The lease term is used to determine lease classification as an operating or finance lease and is used to calculate straight-line expense for operating leases. The Company elected the package of practical expedients permitted under the transition guidance within ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs.
Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at commencement date based upon the present value of lease payments over the lease term. ROU assets also include prepaid lease payments and exclude lease incentives received. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. Since the Company’s leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based upon the information available at commencement date for both real estate and equipment leases. The determination of the incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease. The Company elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term.
The Company leases certain office space, data centers and equipment. The Company’s leases have remaining terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The depreciable life of the ROU asset and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option.
At March 31, 2020, the Company had operating lease assets of $64,546 and financing lease assets of $253. Total operating lease liabilities of $67,774 were comprised of current operating lease liabilities of $11,718 and noncurrent operating lease liabilities of $56,056. Total financing lease liabilities of $247 were comprised of current financing lease liabilities of $81 and noncurrent financing lease liabilities of $166.
Operating lease assets are included within other non-current assets and operating lease liabilities are included with accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s condensed consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of $10,259 as of March 31, 2020. Financing lease assets are included within property and equipment, net and financing lease liabilities are included with notes payable (current portion) and long-term debt (noncurrent portion) in the Company’s
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condensed consolidated balance sheet. Financing lease assets were recorded net of accumulated amortization of $9 as of March 31, 2020.
Operating lease costs for the three and nine months ended March 31, 2020 were $3,999 and $12,030, respectively. Financing lease costs for the three and nine months ended March 31, 2020 were both $10. Total operating and financing lease costs for the quarter and year-to-date period included variable lease costs of approximately $934 and $2,593, respectively.
Operating and financing lease expense is included within cost of services, research and development, and selling, general & administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of income.
Operating cash flows for payments on operating leases for the nine months ended March 31, 2020 were $11,676 and right-of-use assets obtained in exchange for operating lease liabilities were $2,138. Operating cash flows for interest paid on financing leases for the nine months ended March 31, 2020 were $1.
As of March 31, 2020, the weighted-average remaining lease term for the Company's operating leases was 81 months and the weighted-average discount rate was 2.96%. As of March 31, 2020, the weighted-average remaining lease term for the Company's financing leases was 36 months and the weighted-average discount rate was 2.73%.
Maturity of Lease Liabilities under ASC 842
Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at March 31, 2020*:

Due dates |  | Future Minimum Rental Payments
2020 (remaining period) |  | $ | 3,273 |
2021 |  | 13,627 |
2022 |  | 12,447 |
2023 |  | 10,790 |
2024 |  | 8,635 |
Thereafter |  | 26,608 |
Total lease payments |  | $ | 75,380 |
Less: interest |  | (7,606) |
Present value of lease liabilities |  | $ | 67,774 |

*Financing leases were immaterial to the quarter and year-to-date period, so a maturity of lease liabilities table has only been included for operating leases.
Lease payments include $5,002 related to options to extend lease terms that are reasonably certain of being exercised. At March 31, 2020, there were no legally binding lease payments for leases signed but not yet commenced.
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Maturity of Lease Liabilities under ASC 840
Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at June 30, 2019:

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

Rent expense for all operating leases was $15,196 during the year ended June 30, 2019.
NOTE 6. DEBT
Revolving credit facility
On February 10, 2020, the Company entered into a new five-year senior, unsecured revolving credit facility. The new credit facility allows for borrowings of up to $300,000, which may be increased by the Company at any time until maturity to $700,000. The new credit facility bears interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime rate ("Prime Rate") for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iv) the eurocurrency rate for a one-month interest period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The new credit facility is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit facility agreement. As of March 31, 2020, the Company was in compliance with all such covenants. The new revolving credit facility terminates February 10, 2025. There was $55,000 outstanding under the new credit facility at March 31, 2020.
The Company also terminated its prior unsecured credit agreement on February 10, 2020. There was no outstanding balance under the terminated credit facility at June 30, 2019.
Other lines of credit
The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line was renewed in May 2019 and expires on April 30, 2021. At March 31, 2020, There was no balance outstanding at March 31, 2020 or June 30, 2019.
Interest
The Company paid interest of $275 and $283 during the nine months ended March 31, 2020 and 2019, respectively.
NOTE 7. INCOME TAXES
The effective tax rate was 19.7% of income before income taxes for the quarter ended March 31, 2020, compared to 22.4% for the same quarter of the prior fiscal year. For the nine months ended March 31, 2020, the effective tax rate was 22.7% compared to 21.3% for the nine months ended March 31, 2019. The decrease in the Company's tax rate quarter over quarter was primarily the result of the difference in uncertain tax positions released, with the lapsing of statute of limitations, between the two periods. The increase in effective tax rate fiscal year to date over the prior year to date was primarily due to the difference in the impact of stock-based compensation partially offset by the difference in uncertain tax positions released. The tax benefits recognized from stock-based compensation in the prior year significantly exceeded the tax benefits recognized in the current year.
The Company paid income taxes, net of refunds, of $49,970 in the nine months ended March 31, 2020 and paid income taxes, net of refunds, of $47,644 in the nine months ended March 31, 2019.
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At March 31, 2020, the Company had $9,825 of gross unrecognized tax benefits, $9,169 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of $1,498 and $1,485 related to uncertain tax positions at March 31, 2020 and 2019, respectively.
The U.S. federal and state income tax returns for fiscal 2016 and all subsequent years remain subject to examination as of March 31, 2020 under statute of limitations rules. We anticipate potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $3,000 to $4,000 within twelve months of March 31, 2020.
NOTE 8. STOCK-BASED COMPENSATION
Our operating income for the three months ended March 31, 2020 and 2019 included $4,691 and $3,505 of stock-based compensation costs, respectively. For the nine months ended March 31, 2020 and 2019, stock-based compensation costs included in operating income totaled $11,688 and $8,651, respectively.
Stock Options
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 are determined by the Compensation Committee of the Board of Directors when granted. The option period must expire not more than ten years from the option grant date. The options granted under this plan are exercisable beginning three years after the grant date 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 ten 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.
A summary of option plan activity under these plans is as follows:

| Number of Shares |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value
Outstanding July 1, 2019 | 32 |  |  | $ | 87.27 |  |  |
Granted | — |  |  | — |  |  |
Forfeited | — |  |  | — |  |  |
Exercised | (10) |  |  | — |  |  |
Outstanding March 31, 2020 | 22 |  |  | $ | 87.27 |  |  | $ | 1,474 |
Vested and Expected to Vest March 31, 2020 | 22 |  |  | $ | 87.27 |  |  | $ | 1,474 |
Exercisable March 31, 2020 | 22 |  |  | $ | 87.27 |  |  | $ | 1,474 |

At March 31, 2020, there was no compensation cost yet to be recognized related to outstanding options. For options currently exercisable, the weighted average remaining contractual term (remaining period of exercisability) as of March 31, 2020 was 6.25 years.
Restricted Stock Awards
The Company issues both share awards and unit awards under the 2015 EIP, and previously issued these awards through the 2005 Restricted Stock Plan. The following table summarizes non-vested share awards as of March 31, 2020, as well as activity for the nine months then ended:

Share awards | Shares |  | Weighted Average Grant Date Fair Value
Outstanding July 1, 2019 | 6 |  |  | $ | 87.27 |
Granted | — |  |  | — |
Vested | (6) |  |  | 87.27 |
Forfeited | — |  |  | — |
Outstanding March 31, 2020 | — |  |  | $ | — |

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At March 31, 2020, there was no compensation expense yet to be recognized related to non-vested restricted stock share awards.
The following table summarizes non-vested restricted stock unit awards as of March 31, 2020, as well as activity for the nine months then ended:

Unit awards | Units |  | Weighted Average Grant Date Fair Value |  | Aggregate Intrinsic Value
Outstanding July 1, 2019 | 298 |  |  | $ | 107.00 |  |  |
Granted | 126 |  |  | 155.98 |  |  |
Vested | (62) |  |  | 94.22 |  |  |
Forfeited | (60) |  |  | 84.73 |  |  |
Outstanding March 31, 2020 | 302 |  |  | $ | 134.53 |  |  | $ | 46,933 |

The 126 unit awards granted in fiscal 2020 had service requirements and performance targets, with 86 only having service requirements. Those 86 were valued at the weighted-average fair value of the non-vested units based on the fair market value of the Company’s equity shares on the grant date, less the present value of expected future dividends to be declared during the vesting period, consistent with the methodology for calculating compensation expense on such awards. The remaining 40 unit awards granted in fiscal 2020 had performance targets along with service requirements, 38 of which were valued using a Monte Carlo pricing model as of the measurement date customized to the specific provisions of the Company’s plan design to value the unit awards as of the grant date. The remaining unit awards granted in fiscal 2020 had other performance targets. Per the Company's award vesting and settlement provisions, approximately half of the awards that utilize a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return in comparison to the compensation peer group made up of participants approved by the Compensation Committee of the Company's Board of Directors for fiscal year 2020, and the other half of the awards utilizing a Monte Carlo pricing model were valued at grant on the basis of Total Shareholder Return in comparison to the Standard & Poor's 1500 Information Technology Index (S&P 1500 IT Index) participants. The weighted average assumptions used in the model to estimate fair value at the measurement date and resulting values for these performance unit awards are as follows.

| Compensation Peer Group |  | S&P 1500 IT Index |  |
Volatility | 16.7 | % |  | 16.7 | % |  |
Risk free interest rate | 1.68 | % |  | 1.68 | % |  |
Dividend yield | 1.1 | % |  | 1.1 | % |  |
Stock Beta | 0.713 |  |  | 0.538 |  |  |

At March 31, 2020, there was $22,058 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 1.40 years.
NOTE 9. EARNINGS PER SHARE
The following table reflects the reconciliation between basic and diluted earnings per share.

| Three Months Ended March 31, |  |  |  | Nine Months Ended March 31, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
Net Income | $ | 73,855 |  |  | $ | 59,252 |  |  | $ | 235,323 |  |  | $ | 210,892 |
Common share information: |  |  |  |  |  |  |
Weighted average shares outstanding for basic earnings per share | 76,683 |  |  | 77,177 |  |  | 76,845 |  |  | 77,194 |
Dilutive effect of stock options and restricted stock | 201 |  |  | 109 |  |  | 117 |  | 217
Weighted average shares outstanding for diluted earnings per share | 76,884 |  |  | 77,286 |  |  | 76,962 |  |  | 77,411 |
Basic earnings per share | $ | 0.96 |  |  | $ | 0.77 |  |  | $ | 3.06 |  |  | $ | 2.73 |
Diluted earnings per share | $ | 0.96 |  |  | $ | 0.77 |  |  | $ | 3.06 |  |  | $ | 2.72 |

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Per share information is based on the weighted average number of common shares outstanding for the three and nine months ended March 31, 2020 and 2019. Stock options, restricted stock, and restricted stock units have been included in the calculation of earnings per share to the extent they are dilutive. There were 3 anti-dilutive stock options or restricted stock shares or units excluded for the quarter ended March 31, 2020 and 20 anti-dilutive stock options or restricted stock shares or units excluded for the quarter ended March 31, 2019. There were 48 anti-dilutive stock options or restricted stock shares or units excluded for the nine months ended March 31, 2020 compared to 14 for the nine months ended March 31, 2019.
NOTE 10. BUSINESS ACQUISITIONS
Geezeo
On July 1, 2019, the Company acquired all of the equity interest of Geezeo for $37,776 paid in cash. The primary reason for the acquisition was to expand the Company's digital financial management solutions and the purchase was funded by cash generated from operations. Geezeo is a Boston-based provider of retail and business digital financial management solutions.
Management has completed a preliminary purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of July 1, 2019 are set forth below:

Current assets | $ | 8,925 |
Long-term assets | 397 |
Identifiable intangible assets | 19,114 |
Deferred income tax liability | (2,593) |
Total other liabilities assumed | (7,457) |
Total identifiable net assets | 18,386 |
Goodwill | 19,390 |
Net assets acquired | $ | 37,776 |

Measurement period adjustments were made during the second quarter of fiscal 2020 relating to accrued expenses and working capital, which resulted in adjustments to the goodwill amount recorded. Additional measurement period adjustments were made during the third quarter of fiscal 2020 relating to income taxes. The amounts shown above may change as management finalizes its assessment of the fair value of acquired assets and liabilities and continues to evaluate the income tax implications of this business combination.
The goodwill of $19,390 arising from this acquisition consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of Geezeo, together with the value of Geezeo's assembled workforce. The goodwill from this acquisition has been allocated to our Complementary segment and is not deductible for income tax purposes.
Identifiable intangible assets from this acquisition consist of customer relationships of $10,522, computer software of $5,791, and other intangible assets of $2,801. The amortization period for acquired customer relationships, computer software, and other intangible assets is 15 years for each.
Current assets were inclusive of cash acquired of $7,400. The fair value of current assets acquired included accounts receivable of $1,373, none of which were expected to be uncollectible.
Costs incurred related to the acquisition of Geezeo in fiscal 2020 totaled $30 for professional services, travel, and other fees, and were expensed as incurred and reported within cost of revenue and selling, general, and administrative expense.
The Company's condensed consolidated statements of income for the three months ended March 31, 2020 included revenue of $2,356 and after-tax net income of $345 resulting from Geezeo's operations. The Company's condensed consolidated statements of income for the nine months ended March 31, 2020 included revenue of $6,787 and after-tax net income of $523 resulting from Geezeo's operations.
The accompanying condensed consolidated statements of income for the three and nine months ended March 31, 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 the current and prior periods of our condensed consolidated financial statements and pro forma financial information has not been provided.
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BOLTS Technologies, Inc
On October 5, 2018, the Company acquired all of the equity interest of BOLTS Technologies, Inc. ("BOLTS") for $15,046 paid in cash. The acquisition was funded by cash generated from operations. BOLTS is the developer of boltsOPEN, a next-generation digital account opening solution.
Management has completed a purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of October 5, 2018 are set forth below:

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

The amounts shown above include measurement period adjustments made during fiscal 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 our 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.
The Company's condensed consolidated statements of income for the three months ended March 31, 2020 included revenue of $28 and after-tax net loss of $213 resulting from BOLTS' operations. The Company's condensed consolidated statements of income for the three months ended March 31, 2019 included revenue of $46 and after-tax net loss of $256 resulting from BOLTS' operations.
The Company's condensed consolidated statements of income for the nine months ended March 31, 2020 included revenue of $114 and after-tax net loss of $576 resulting from BOLTS' operations. The Company's condensed consolidated statements of income for the nine months ended March 31, 2019 included revenue of $82 and after-tax net loss of $501 resulting from BOLTS' operations.
The accompanying condensed consolidated statement of income for the nine months ended March 31, 2019 does not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to both the current and prior periods of our condensed consolidated financial statements and pro forma financial information has not been provided.
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Agiletics, Inc.
On October 1, 2018, the Company acquired all of the equity interest of Agiletics, Inc. ("Agiletics") for $7,649 paid in cash. The acquisition was funded by cash generated from operations. Agiletics is a provider of escrow, investment, and liquidity management solutions for banks serving commercial customers.
Management has completed a purchase price allocation and its assessment of the fair value of acquired assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of October 1, 2018 are set forth below:

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

The amounts shown above include measurement period adjustments made during fiscal 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 our 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.
The Company's condensed consolidated statements of income for the three months ended March 31, 2020 included revenue of $290 and after-tax net loss of $35 resulting from Agiletics' operations. The Company's condensed consolidated statements of income for the three months ended March 31, 2019 included revenue of $277 and after-tax net loss of $71 resulting from Agiletics' operations.
The Company's condensed consolidated statements of income for the nine months ended March 31, 2020 included revenue of $1,187 and after-tax net income of $202 resulting from Agiletics' operations. The Company's condensed consolidated statements of income for the nine months ended March 31, 2019 included revenue of $470 and after-tax net loss of $182 resulting from Agiletics' operations.
The accompanying condensed consolidated statement of income for the nine months ended March 31, 2019 does not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to both the current and prior periods of our condensed consolidated financial statements and pro forma financial information has not been provided.
NOTE 11. REPORTABLE SEGMENT INFORMATION
The Company is a provider of integrated computer systems that perform data processing (available for on-premise installations or outsourced services) for banks and credit unions.
The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate & 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 transaction 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 and services that can be integrated with our Core solutions or used independently. The Corporate & Other segment includes hardware revenue and costs, as well as operating costs not directly attributable to the other three segments.
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The Company evaluates the performance of its segments and allocates resources to them based on various factors, including performance against trend, budget, and forecast. Only revenue and costs of revenue are considered in the evaluation for each segment.
During fiscal 2020, immaterial adjustments were made to reclassify revenue recognized in fiscal 2019 from the Complementary to the Core segment and from the Complementary to the Payments segment to be consistent with the current year's allocation of revenue by segment. The amounts reclassified for the three and nine months ended March 31, 2019 totaled $473 and $2,076, respectively, and are reflected in the segment tables below for the three and nine months ended March 31, 2019.

| Three Months Ended |  |  |  |  |  |  |  |
| March 31, 2020 |  |  |  |  |  |  |  |
| Core |  | Payments |  | Complementary |  | Corporate & Other |  | Total
REVENUE |  |  |  |  |  |  |  |  |
Services and Support | $ | 138,682 |  |  | $ | 19,506 |  |  | $ | 98,360 |  |  | $ | 13,656 |  |  | $ | 270,204 |
Processing | 7,758 |  |  | 130,854 |  |  | 20,304 |  |  | 286 |  |  | 159,202 |
Total Revenue | 146,440 |  |  | 150,360 |  |  | 118,664 |  |  | 13,942 |  |  | 429,406 |
Cost of Revenue | 66,141 |  |  | 80,836 |  |  | 48,691 |  |  | 62,903 |  |  | 258,571 |
Research and Development |  |  |  |  |  |  |  |  | 28,308 |
Selling, General, and Administrative |  |  |  |  |  |  |  |  | 47,391 |
Loss on disposal of assets, net |  |  |  |  |  |  |  |  | 3,198 |
Total Expenses |  |  |  |  |  |  |  |  | 337,468 |
SEGMENT INCOME | $ | 80,299 |  |  | $ | 69,524 |  |  | $ | 69,973 |  |  | $ | (48,961) |  |  |
OPERATING INCOME |  |  |  |  |  |  |  |  | 91,938 |
INTEREST INCOME (EXPENSE) |  |  |  |  |  |  |  |  | 32 |
INCOME BEFORE INCOME TAXES |  |  |  |  |  |  |  |  | $ | 91,970 |

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| Three Months Ended |  |  |  |  |  |  |  |
| March 31, 2019 |  |  |  |  |  |  |  |
| Core |  | Payments |  | Complementary |  | Corporate & Other |  | Total
REVENUE |  |  |  |  |  |  |  |  |
Services and Support | $ | 123,694 |  |  | $ | 13,126 |  |  | $ | 85,095 |  |  | $ | 12,208 |  |  | $ | 234,123 |
Processing | 6,910 |  |  | 122,365 |  |  | 16,966 |  |  | — |  |  | 146,241 |
Total Revenue | 130,604 |  |  | 135,491 |  |  | 102,061 |  |  | 12,208 |  |  | 380,364 |
Cost of Revenue | 63,977 |  |  | 68,700 |  |  | 45,733 |  |  | 57,184 |  |  | 235,594 |
Research and Development |  |  |  |  |  |  |  |  | 23,442 |
Selling, General, and Administrative |  |  |  |  |  |  |  |  | 44,682 |
Loss on disposal of assets, net |  |  |  |  |  |  |  |  | 205 |
Total Expenses |  |  |  |  |  |  |  |  | 303,923 |
SEGMENT INCOME | $ | 66,627 |  |  | $ | 66,791 |  |  | $ | 56,328 |  |  | $ | (44,976) |  |  |
OPERATING INCOME |  |  |  |  |  |  |  |  | 76,441 |
INTEREST INCOME (EXPENSE) |  |  |  |  |  |  |  |  | (69) |
INCOME BEFORE INCOME TAXES |  |  |  |  |  |  |  |  | $ | 76,372 |

| Nine Months Ended |  |  |  |  |  |  |  |
| March 31, 2020 |  |  |  |  |  |  |  |
| Core |  | Payments |  | Complementary |  | Corporate & Other |  | Total
REVENUE |  |  |  |  |  |  |  |  |
Services and Support | $ | 417,554 |  |  | $ | 51,643 |  |  | $ | 291,288 |  |  | $ | 43,731 |  |  | $ | 804,216 |
Processing | 23,150 |  |  | 400,508 |  |  | 58,054 |  |  | 602 |  |  | 482,314 |
Total Revenue | 440,704 |  |  | 452,151 |  |  | 349,342 |  |  | 44,333 |  |  | 1,286,530 |
Cost of Revenue | 190,689 |  |  | 236,725 |  |  | 143,384 |  |  | 182,831 |  |  | 753,629 |
Research and Development |  |  |  |  |  |  |  |  | 80,086 |
Selling, General, and Administrative |  |  |  |  |  |  |  |  | 145,890 |
Loss on disposal of assets, net |  |  |  |  |  |  |  |  | 3,095 |
Total Expenses |  |  |  |  |  |  |  |  | 982,700 |
SEGMENT INCOME | $ | 250,015 |  |  | $ | 215,426 |  |  | $ | 205,958 |  |  | $ | (138,498) |  |  |
OPERATING INCOME |  |  |  |  |  |  |  |  | 303,830 |
INTEREST INCOME (EXPENSE) |  |  |  |  |  |  |  |  | 573 |
INCOME BEFORE INCOME TAXES |  |  |  |  |  |  |  |  | $ | 304,403 |

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| Nine Months Ended |  |  |  |  |  |  |  |
| March 31, 2019 |  |  |  |  |  |  |  |
| Core |  | Payments |  | Complementary |  | Corporate & Other |  | Total
REVENUE |  |  |  |  |  |  |  |  |
Services and Support | $ | 378,406 |  |  | $ | 39,004 |  |  | $ | 259,942 |  |  | $ | 40,662 |  |  | $ | 718,014 |
Processing | 21,082 |  |  | 368,702 |  |  | 51,075 |  |  | 309 |  |  | 441,168 |
Total Revenue | 399,488 |  |  | 407,706 |  |  | 311,017 |  |  | 40,971 |  |  | 1,159,182 |
Cost of Revenue | 183,481 |  |  | 199,506 |  |  | 131,731 |  |  | 168,272 |  |  | 682,990 |
Research and Development |  |  |  |  |  |  |  |  | 71,458 |
Selling, General, and Administrative |  |  |  |  |  |  |  |  | 136,683 |
Loss on disposal of assets, net |  |  |  |  |  |  |  |  | 183 |
Total Expenses |  |  |  |  |  |  |  |  | 891,314 |
SEGMENT INCOME | $ | 216,007 |  |  | $ | 208,200 |  |  | $ | 179,286 |  |  | $ | (127,301) |  |  |
OPERATING INCOME |  |  |  |  |  |  |  |  | 267,868 |
INTEREST INCOME (EXPENSE) |  |  |  |  |  |  |  |  | 177 |
INCOME BEFORE INCOME TAXES |  |  |  |  |  |  |  |  | $ | 268,045 |

The Company has not disclosed any additional asset information by segment, as the information is not generated for internal management reporting to the Chief Operating Decision Maker.
NOTE 12: SUBSEQUENT EVENTS
None.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the quarter ended March 31, 2020.
OVERVIEW
Jack Henry & Associates, Inc. ("JHA") is a leading provider of technology solutions and payment processing services primarily for financial services organizations. Its solutions 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. Symitar® is a leading provider of information and transaction processing solutions for credit unions of all sizes. ProfitStars® provides 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 on-premise installation and outsourced delivery in our private cloud.
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.
All dollar amounts in the following discussion are in thousands, except per share amounts.
COVID-19 Impact and Response
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and the President of the United States declared the outbreak as a national emergency. As COVID-19 has rapidly spread, federal, state and local governments have responded by imposing restrictions, including widespread “stay-at-home” orders and travel limitations. Such restrictions have resulted in significant economic disruptions and uncertainty.
The health, safety, and well-being of our employees and customers is of paramount importance to us. We have established an internal task force composed of executive officers and other members of management to frequently assess updates to the COVID-19 situation and recommend Company actions. Based on guidance from the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, the Company was designated as essential critical infrastructure because of our support of the financial services industry. Our internal task force determined that a subset of our employees could not work remotely because job duties necessary for our business operations to run seamlessly required these employees to work on-site at our facilities. For employees in our data, statement processing and item processing centers who are required by their job responsibilities to be on location daily, we are offering enhanced compensation. We have offered remote working as a recommended option to employees whose job duties allow them to work off-site and have suspended all non-essential business travel until at least May 15, 2020. We have also updated the health benefits available to our employees by waiving out-of-pocket expenses related to testing and treatment of COVID-19. In addition, we plan to honor our 2020 summer internship program through virtual methods.
Customers
We are working closely with our customers who are scheduled for on-site visits to ensure their needs are met while taking necessary safety precautions when our employees are required to be at a customer site. Delays of customer system installations due to COVID-19 have been limited, and we have developed processes to handle remote installations when available. We expect these processes to provide flexibility and value both during and after the COVID-19 pandemic. We continue to work with our customers to support them during this difficult time, and, to that end, have waived certain late fees in connection with our products and services. We have also enhanced our lending service offerings to support the Paycheck Protection Program that was introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been
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curtailed, we have not yet experienced significant disruption to our operations. We believe our technological capabilities are well positioned to allow our employees to work remotely for the foreseeable future without materially impacting our business.
Financial impact
We have seen an unfavorable trend due to COVID-19 in a decrease of card processing transactions through the second half of March and into the fourth quarter of fiscal 2020, which has put downward pressure on our processing revenue for the third quarter and which we expect will also impact our processing revenue for the fourth quarter. The duration of lower-than-normal card processing transaction rates is uncertain and will depend upon when requirements for business closures are lifted and normalization of economic restrictions occurs. Despite the changes and restrictions caused by COVID-19, the overall financial and operational impact on our business has been limited and our liquidity, balance sheet, and business trends remain strong. However, we are unable to accurately predict the future impact of COVID-19 due to a number of uncertainties, including further government actions, the duration and severity of the outbreak and the potential impact to our customers and vendors, as well as how the potential impact might affect future customer services and processing revenue. We will continue to monitor COVID-19 and its possible impact on the Company and to take steps necessary to protect the health and safety of our employees and customers. For a further discussion of the uncertainties and risks associated with COVID-19, see Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
In the third quarter of fiscal 2020, total revenue increased 13%, or $49,042, compared to the same quarter in the prior year. Deconversion fees in the fiscal quarter increased $14,730, to $22,781, compared to the prior-year quarter. Revenue from the fiscal 2020 acquisition totaled $2,356 for the quarter. Excluding deconversion fee revenue and revenue from the fiscal 2020 acquisition, adjusted total revenue increased 9% for the quarter compared to the prior-year quarter.
Operating expenses increased 11% compared to the third quarter of fiscal 2019, due to increased direct costs, higher personnel costs and increased depreciation and amortization. The increased direct costs were primarily related to our card payment processing platform and faster payments initiatives. Higher personnel costs were primarily due to a headcount increase of 4% at March 31, 2020 compared to March 31, 2019, contributing to increased salaries and benefits. Increased depreciation and amortization was primarily related to internally-developed software.
Operating income increased 20% for the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. Deconversion fee operating income was $21,512 in the fiscal quarter compared to $7,483 in the prior-year quarter. Operating income from the fiscal 2020 acquisition was $459 and the loss on disposal of certain assets, net, was $3,157 for the fiscal quarter and included the write-off of ERMS partially offset by the gain on sale of our Houston, TX facility. Excluding operating income related to deconversion fees, the income from the fiscal 2020 acquisition and the loss on disposal of certain assets, net, adjusted operating income increased 6% for the third quarter of fiscal 2020 compared to the prior-year quarter.
The provision for income taxes increased 6% compared to the prior-year third quarter, primarily due to the increase in operating income as stated above, partially offset by a decreased effective tax rate due to the difference in uncertain tax positions released, with the lapsing of statute of limitations, between the two periods. The effective tax rate for the third quarter was 19.7% compared to 22.4% in the same quarter a year ago.
The above changes led to an increase in net income of 25% for the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019.
In the nine months ended March 31, 2020, total revenue increased 11%, or $127,348, over the nine months ended March 31, 2019. Deconversion fees in the fiscal year-to-date period increased $22,839, to $45,384, compared to the same nine months in the prior fiscal year. Revenue from the fiscal 2020 acquisition totaled $6,787 for the fiscal year-to-date period. Excluding deconversion fee revenue and revenue from the fiscal 2020 acquisition from each period, adjusted total revenue increased 9% period over period.
Operating expenses for the nine months ended March 31, 2020 increased 10% compared to the equivalent period in the prior year, primarily due to costs related to our card payment processing platform, increased headcount, and increased depreciation and amortization expense.
Operating income increased 13% for the fiscal year-to-date period compared to the same period last year. Deconversion fee operating income was $41,960 in the fiscal year-to-date period compared to $21,509 in the prior-year-to-date period. Operating income from the fiscal 2020 acquisition was $697 and the loss on disposal of certain assets, net, was $3,157 for the fiscal year-to-date period. Excluding operating income related to deconversion fees,
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the income from the fiscal 2020 acquisition and the loss on disposal of certain assets, net, adjusted operating income increased 7% period over period.
Provision for income taxes increased 21% compared to the prior year-to-date period, primarily due to an increase in operating income period over period, as stated above, as well as an effective tax rate increase driven by the difference in the tax benefits recognized from stock-based compensation between the two periods. The effective tax rate for the nine months ended March 31, 2020 was 22.7% compared to 21.3% in the prior-year period.
The result of the above changes led to an increase in net income of 12% for the nine months ended March 31, 2020 compared to the same period in fiscal 2019.
We move into the fourth quarter of fiscal 2020 with optimism following strong performance in the third quarter, but with limited visibility of the future impact of the COVID-19 pandemic. Significant portions of our business continue to come from recurring revenues and our sales pipeline also remains encouraging. Our customers continue to face regulatory and operational challenges which our products and services address, and in these uncertain times, we believe they have an even greater need for our solutions that directly address institutional profitability, efficiency, and security. Our strong balance sheet, access to extensive lines of credit, the continued strength of our existing lines of revenue, and an unwavering commitment to superior customer service should position us well to address current and future opportunities.
A detailed discussion of the major components of the results of operations for the three and nine months ending March 31, 2020 follows. Discussions compare the current fiscal year's three and nine months ending March 31, 2020 to the prior year's three and nine months ending March 31, 2019.
REVENUE

Services and Support | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Services and Support | $ | 270,204 |  |  | $ | 234,123 |  |  | 15 | % |  | $ | 804,216 |  |  | $ | 718,014 |  |  | 12 | %
Percentage of total revenue | 63 | % |  | 62 | % |  |  |  | 63 | % |  | 62 | % |  |  |

Services and Support revenue increased 15% in the third quarter of fiscal 2020 compared to the same quarter last year. Excluding deconversion fees from each period, which increased $14,730, to $22,781, compared to the prior-year quarter, and $2,356 of revenue from Geezeo, acquired in fiscal 2020, services and support revenue grew 8% quarter over quarter. The adjusted increase was primarily driven by the growth in data processing and hosting fees, as well as increased software usage fees reflecting customer favorability of our term license model, quarter over quarter.
In the nine months ended March 31, 2020, services and support revenue grew 12% over the nine months ended March 31, 2019. Excluding deconversion fees from each period presented, which increased $22,839, to $45,384, compared to the prior year-to-date period, and $6,787 of revenue from the acquisition in fiscal 2020, services and support revenue grew 8% period over period. The adjusted increase was driven primarily by growth in data processing and hosting fees, as well as increased software usage, hardware revenue, implementation fees primarily related to our private cloud offerings, and consulting fee revenue when compared to the prior year-to-date period.

Processing | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Processing | $ | 159,202 |  |  | $ | 146,241 |  |  | 9 | % |  | $ | 482,314 |  |  | $ | 441,168 |  |  | 9 | %
Percentage of total revenue | 37 | % |  | 38 | % |  |  |  | 37 | % |  | 38 | % |  |

Processing revenue increased 9% in the third quarter of fiscal 2020 compared to the same quarter last fiscal year, primarily due to overall increased transaction volumes within card processing, despite a COVID-19-related downturn toward the end of the quarter, complemented by increases in each of the other two components.
Each component also experienced volume growth in the fiscal year-to-date period, leading to an increase in processing revenue of 9% for the nine months ended March 31, 2020 as compared to the nine months ended March 31, 2019.
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OPERATING EXPENSES

Cost of Revenue | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Cost of Revenue | $ | 258,571 |  |  | $ | 235,594 |  |  | 10 | % |  | $ | 753,629 |  |  | $ | 682,990 |  |  | 10 | %
Percentage of total revenue | 60 | % |  | 62 | % |  |  |  | 59 | % |  | 59 | % |  |

Cost of revenue for the third quarter of fiscal 2020 increased 10% over the prior fiscal year third quarter, but decreased as a percentage of total revenue. Excluding $1,693 of costs related to deconversion fees and fiscal 2020 acquisition revenue for the current quarter and $568 of costs related to deconversion fees for the prior-year quarter, the adjusted cost of revenue increase was 9% quarter over quarter. The adjusted increase was due to higher costs associated with our card processing platform, higher salaries and benefits due to increased headcount, and increased depreciation and amortization expense primarily related to developed software.
For the fiscal year-to-date period, cost of revenue increased 10% over the same prior-year period, but remained consistent as a percentage of revenue. Excluding $5,657 of costs related to deconversion fees and fiscal 2020 acquisition revenue for the current year-to-date period and $1,036 of costs related to deconversion fees for the prior year-to-date period, the adjusted cost of revenue increase remained 10% period over period. The adjusted increase was due to the factors discussed above for the quarter, as well as increased cost of hardware related to higher revenue.

Research and Development | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Research and Development | $ | 28,308 |  |  | $ | 23,442 |  |  | 21 | % |  | $ | 80,086 |  |  | $ | 71,458 |  |  | 12 | %
Percentage of total revenue | 7 | % |  | 6 | % |  |  |  | 6 | % |  | 6 | % |  |

Research and development expense increased 21% for the third quarter of fiscal 2020 over the prior fiscal year third quarter. Excluding $427 of costs in the current quarter related to the fiscal 2020 acquisition, the adjusted research and development increase was 19% quarter over quarter. The adjusted increase was primarily due to increased personnel costs due to a headcount increase at March 31, 2020 compared to a year ago and salary increases occurring within the trailing twelve-month period. Research and development expense for the quarter increased 1% compared to the prior fiscal-year quarter as a percentage of total revenue.
For the fiscal year-to-date period, research and development expense increased 12% over the prior fiscal year-to-date period. Excluding $1,420 of costs in the current period related to the fiscal 2020 acquisition, the adjusted research and development increase was 10% period over period. The adjusted increase for the fiscal year-to-date period was also primarily due to increased personnel costs due to the headcount increase discussed above for the quarter and salary increases occurring within the trailing twelve-month period. Research and development expense for the nine months ended March 31, 2020 remained consistent with the same period a year ago as a percentage of total revenue.

Selling, General, and Administrative and Loss on Disposal of Assets, net | Three Months Ended March 31, |  |  |  | %* Change |  | Nine Months Ended March 31, |  |  |  | %* Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Selling, General, and Administrative | $ | 47,391 |  |  | $ | 44,682 |  |  |  |  |  | $ | 145,890 |  |  | $ | 136,683 |  |  |  |
Loss on Disposal of Assets, net | 3,198 |  |  | 205 |  |  | 13 | % |  | 3,095 |  |  | 183 |  |  | 9 | %
Percentage of total revenue | 12 | % |  | 12 | % |  |  |  | 12 | % |  | 12 | % |  |

* % Change includes selling, general, and administrative and loss on disposal of assets, net.
Selling, general, and administrative expense including loss on disposal of assets, net, increased 13% in the third quarter of fiscal 2020 over the same quarter in the prior fiscal year. Excluding $4,203 of costs in the current quarter related to deconversion fees, the fiscal 2020 acquisition and the loss on disposal of certain assets, net, the adjusted selling, general, and administrative expense increase was 3% quarter over quarter. The adjusted increase was mainly due to increased salaries and benefits primarily due to a 2% increase in headcount over the prior-year quarter and salary increases occurring within the trailing twelve-month period. Selling, general, and administrative expense including Loss on Disposal of Assets, net, remained consistent as a percentage of total revenue this quarter versus the prior-year quarter due to ongoing cost control efforts.
For the fiscal year-to-date period, selling, general, and administrative expense including Loss on Disposal of Assets, net, increased 9% over the prior fiscal year-to-date period. Excluding $5,594 of costs in the current year-to-date
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period related to deconversion fees, the fiscal 2020 acquisition and the loss on disposal of certain assets, net, the adjusted selling, general and administrative expense increase was 5% period over period. The adjusted increase was primarily due to the factors listed above for the quarter. Selling, general, and administrative expense including loss on disposal of assets, net, remained consistent as a percentage of total revenue this period versus the prior-year period due to ongoing cost control efforts.

INTEREST INCOME (EXPENSE) | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Interest Income | $ | 197 |  |  | $ | 155 |  |  | 27 | % |  | $ | 1,050 |  |  | $ | 697 |  |  | 51 | %
Interest Expense | $ | (165) |  |  | $ | (224) |  |  | (26) | % |  | $ | (477) |  |  | $ | (520) |  |  | (8) | %

Interest income fluctuated due to changes in invested balances and yields on invested balances during the third quarter and fiscal year-to-date period of fiscal 2020 and 2019. Interest expense decreased when compared to the prior-year period due to interest rate fluctuations and length of borrowing time. There was $55,000 outstanding under the credit facility at March 31, 2020 and $35,000 outstanding at March 31, 2019.

PROVISION FOR INCOME TAXES | Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Provision for Income Taxes | $ | 18,115 |  |  | $ | 17,120 |  |  | 6 | % |  | $ | 69,080 |  |  | $ | 57,153 |  |  | 21 | %
Effective Rate | 19.7 | % |  | 22.4 | % |  |  |  | 22.7 | % |  | 21.3 | % |  |

The decrease in effective tax rate in the three months ended March 31, 2020 was primarily due to the difference in uncertain tax positions released, with the lapsing of statute of limitations, between the two periods. The effective tax rate increased in the nine months ended March 31, 2020, primarily due to the difference in the tax benefits recognized from stock-based compensation between the two periods. The tax benefits recognized from stock-based compensation in the prior-year periods significantly exceeded the tax benefits recognized in the current-year periods.
NET INCOME
Net income increased 25% to $73,855, or $0.96 per diluted share, for the third quarter of fiscal 2020 compared to $59,252, or $0.77 per diluted share, in the same period of fiscal 2019, resulting in a 25% increase in diluted earnings per share. The increase in net income is primarily attributable to the growth in our lines of revenue and higher deconversion fees, partially offset by the increase in cost of revenue and income taxes as discussed above.
Net income increased 12% to $235,323, or $3.06 per diluted share, for the nine months ended March 31, 2020, compared to $210,892, or $2.72 per diluted share, for the nine months ended March 31, 2019, resulting in a 12% increase in diluted earnings per share. The increase in net income was primarily attributable to the growth in our lines of revenue and higher deconversion fees, partially offset by the increase in cost of revenue and income taxes as discussed above.
REPORTABLE SEGMENT DISCUSSION
The Company is a leading provider of technology solutions and payment processing services primarily for financial services organizations.
The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate and Other. The Core segment provides core information processing platforms to banks and credit unions, which consist of integrated applications required to process deposit, loan, and general ledger transactions, and maintain centralized customer/member information. The Payments segment provides secure payment processing tools and services, including ATM, debit, and credit card processing services; online and mobile bill pay solutions; ACH origination and remote deposit capture processing; and risk management products and services. The Complementary segment provides additional software, processing platforms, and services that can be integrated with our core solutions or used independently. The Corporate and Other segment includes revenue and costs from hardware and other products not attributed to any of the other three segments, as well as operating costs not directly attributable to the other three segments.
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Core |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Revenue | $ | 146,440 |  |  | $ | 130,604 |  |  | 12 | % |  | $ | 440,704 |  |  | $ | 399,488 |  |  | 10 | %
Cost of Revenue | $ | 66,141 |  |  | $ | 63,977 |  |  | 3 | % |  | $ | 190,689 |  |  | $ | 183,481 |  |  | 4 | %

Revenue in the Core segment increased 12% and cost of revenue increased 3% for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Excluding deconversion fees, which totaled $10,810 for the third quarter of fiscal 2020 and $4,020 for the third quarter of fiscal 2019, adjusted revenue in the Core segment increased 7% quarter over quarter. The increase in adjusted revenue was primarily driven by the growth in data processing and hosting fees, as well as customer call support and item processing revenue. Cost of revenue decreased 4% quarter over quarter as a percentage of revenue due to ongoing cost control efforts.
For the nine months ended March 31, 2020, revenue in the Core segment increased 10% compared to the prior year-to-date period. Excluding deconversion fees, which totaled $21,571 and $10,749 for the year-to-date periods of fiscal 2020 and fiscal 2019, respectively, adjusted revenue in the Core segment increased 8% period over period. The adjusted revenue increase was primarily driven by the growth in data processing, customer call support, and hosting fees, as well as increased implementation fees primarily related to our private cloud offerings. Cost of revenue decreased 3% as a percentage of revenue for the year-to-date period compared to the prior year-to-date period due to ongoing cost control efforts.

Payments |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Revenue | $ | 150,360 |  |  | $ | 135,491 |  |  | 11 | % |  | $ | 452,151 |  |  | $ | 407,706 |  |  | 11 | %
Cost of Revenue | $ | 80,836 |  |  | $ | 68,700 |  |  | 18 | % |  | $ | 236,725 |  |  | $ | 199,506 |  |  | 19 | %

Revenue in the Payments segment increased 11% for the third quarter of fiscal 2020 compared to the equivalent quarter of the prior fiscal year. Excluding deconversion fee revenue of $6,442 from the third quarter of fiscal 2020 and $2,187 from the third quarter of fiscal 2019, adjusted revenue still increased 8% quarter over quarter. The adjusted growth was primarily due to increased card and remittance revenue within the processing line of revenue. Cost of revenue increased 18% quarter over quarter primarily due to increased costs related to our credit and debit card processing platform. Cost of revenue as a percentage of revenue increased 3% for the third quarter of fiscal 2020 compared to the same quarter of fiscal 2019.
For the nine months ended March 31, 2020 compared to the same prior-year period, revenue in the Payments segment increased 11%, and 9% after excluding deconversion fee revenue of $13,478 and $6,533 from each period, respectively. The increase in adjusted revenue period over period was primarily driven by increased card and remittance revenue within the processing line of revenue. Cost of revenue increased 19% for the year-to-date period over the prior year-to-date period, primarily due to the same factors as the quarter increase. Cost of revenue as a percentage of revenue increased 3% period over period.

Complementary |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Revenue | $ | 118,664 |  |  | $ | 102,061 |  |  | 16 | % |  | $ | 349,342 |  |  | $ | 311,017 |  |  | 12 | %
Cost of Revenue | $ | 48,691 |  |  | $ | 45,733 |  |  | 6 | % |  | $ | 143,384 |  |  | $ | 131,731 |  |  | 9 | %

Revenue in the Complementary segment increased 16% for the third quarter of fiscal 2020 compared to the equivalent quarter of the prior fiscal year, and 11% after excluding revenue of $2,356 from the fiscal 2020 acquisition and deconversion fee revenue from each period, which totaled $5,255 and $1,841 for the quarters ended March 31, 2020 and 2019, respectively. The adjusted increase was primarily driven by increased hosting fees, as well as increased software usage revenue and transaction and digital processing revenue. Cost of revenue increased 6% for the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019 and decreased 4% as a percentage of revenue, quarter over quarter, due to ongoing cost control efforts.
For the year-to-date period compared to the prior year-to-date period, Complementary segment revenue increased 12%. Excluding $6,787 of revenue related to the fiscal 2020 acquisition and deconversion fees totaling $10,010
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and $5,221 for the current and prior year-to-date periods, respectively, adjusted Complementary revenue increased 9% period over period. The adjusted increase was primarily driven by increased hosting fees, as well as increased software usage revenue and transaction and digital processing revenue. Cost of revenue for the year-to-date period increased 9% over the prior year-to-date period, which was in line with the revenue increase, and decreased 1% as a percentage of revenue, period over period, due to ongoing cost control efforts.

Corporate and Other |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended March 31, |  |  |  | % Change |  | Nine Months Ended March 31, |  |  |  | % Change
| 2020 |  | 2019 |  |  |  | 2020 |  | 2019 |  |
Revenue | $ | 13,942 |  |  | $ | 12,208 |  |  | 14 | % |  | $ | 44,333 |  |  | $ | 40,971 |  |  | 8 | %
Cost of Revenue | $ | 62,903 |  |  | $ | 57,184 |  |  | 10 | % |  | $ | 182,831 |  |  | $ | 168,272 |  |  | 9 | %

Revenue in the Corporate and Other segment increased for the third quarter of fiscal 2020 compared to the equivalent quarter of the prior fiscal year, and increased 8% for the fiscal year-to-date period compared to the prior fiscal year-to-date period. The increase period over period was primarily due to increased hardware revenue. Revenue classified in the Corporate and Other segment includes revenue from hardware and other products and services not specifically attributed to any of the other three segments.
Cost of revenue for the Corporate and Other segment includes operating cost not directly attributable to any of the other three segments. The increased cost of revenue in the third quarter of fiscal 2020 of 10% and fiscal year-to-date period of 9% compared to the equivalent quarter and year-to-date period in the prior fiscal year were primarily related to increased salaries and benefits from an increase in headcount over the prior-year quarter and year-to-date period and salary increases occurring within the trailing twelve-month period, as well as increased direct costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased to $109,514 at March 31, 2020 from $93,628 at June 30, 2019.
The following table summarizes net cash from operating activities in the statement of cash flows:

| Nine Months Ended |  |
| March 31, |  |
| 2020 |  | 2019
Net income | $ | 235,323 |  |  | $ | 210,892 |
Non-cash expenses | 151,837 |  |  | 131,448 |
Change in receivables | 99,425 |  |  | 107,535 |
Change in deferred revenue | (168,066) |  |  | (162,742) |
Change in other assets and liabilities | (42,066) |  |  | (53,764) |
Net cash provided by operating activities | $ | 276,453 |  |  | $ | 233,369 |

Cash provided by operating activities for the first nine months of fiscal 2020 increased 18% compared to the same period last year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, and for capital expenditures.
Cash used in investing activities for the first nine months of fiscal 2020 totaled $153,400 and included: $87,284 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $39,563; a payment for the acquisition of Geezeo totaling $30,376, net of cash acquired; $6,133 for the purchase and development of internal use software; and $1,150 for purchase of investments. This was partially offset by $11,106 of proceeds from asset sales. Cash used in investing activities for the first nine months of fiscal 2019 totaled $148,027 and included $81,438 for the development of software; capital expenditures of $42,417; $19,981, net of cash acquired, for the acquisitions of BOLTS and Agiletics; $4,266 for the purchase and development of internal use software; and $20 for customer contracts. This was partially offset by $95 of proceeds from the sale of assets.
Financing activities used cash of $107,167 for the first nine months of fiscal 2020, including dividends paid to stockholders of $94,486, $71,549 for the purchase of treasury shares, $3,874 net cash inflow from the issuance of stock and tax withholding related to stock-based compensation, and $6 for payments on financing leases. This was partially offset by $55,000 of borrowings on our revolving credit facility. Financing activities used cash in the first nine months of fiscal 2019 totaling $81,384, which included $87,970 for the payment of dividends, $21,276 for the
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purchase of treasury shares, and $7,138 net cash outflow from the issuance of stock and tax withholding related to stock-based compensation, partially offset by $35,000 of borrowings on our revolving credit facility.
Capital Requirements and Resources
The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $39,563 and $42,417 for the nine months ending March 31, 2020 and March 31, 2019, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. Total consolidated capital expenditures on facilities and equipment for the Company for fiscal year 2020 are not expected to exceed $62,000 and will be funded from cash generated by operations.
The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or borrowings on its existing line-of-credit. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At March 31, 2020, there were 26,993 shares in treasury stock and the Company had the remaining authority to repurchase up to 2,998 additional shares. The total cost of treasury shares at March 31, 2020 is $1,181,673. During the first nine months of fiscal 2020, the Company repurchased 485 treasury shares. At June 30, 2019, there were 26,508 shares in treasury stock and the Company had authority to repurchase up to 3,483 additional shares.
Revolving credit facility
On February 10, 2020, the Company entered into a new five-year senior, unsecured revolving credit facility. The new credit facility allows for borrowings of up to $300,000, which may be increased by the Company at any time until maturity to $700,000. The new credit facility bears interest at a variable rate equal to (a) a rate based on a eurocurrency rate or (b) an alternate base rate (the highest of (i) 0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iv) the eurocurrency rate for a one-month interest period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The new credit facility is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit facility agreement. As of March 31, 2020, the Company was in compliance with all such covenants. The new revolving credit facility terminates February 10, 2025. There was $55,000 outstanding under the new credit facility at March 31, 2020.
The Company also terminated its prior unsecured credit agreement on February 10, 2020. There was no outstanding balance under the terminated credit facility at June 30, 2019.
Other lines of credit
The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line was renewed in May 2019 and expires on April 30, 2021. At March 31, 2020, no amount was outstanding. There was also no balance outstanding at June 30, 2019.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Dollar amounts in this item are in thousands.
Market risk refers to the risk that a change in the level of one or more market prices, interest rates, indices, volatilities, correlations or other market factors such as liquidity, will result in losses for a certain financial instrument or group of financial instruments. We are currently exposed to credit risk on credit extended to customers and at times are exposed to interest rate 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 $55,000 of outstanding debt with variable interest rates as of March 31, 2020, and a 1% increase in our borrowing rate would increase our annual interest expense by $550.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. For this purpose, disclosure controls and procedures include controls and procedures designed to ensure that information that is required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended March 31, 2020, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to various routine legal proceedings and claims arising in the ordinary course of our business. In the opinion of management, any liabilities resulting from current lawsuits are not expected, either individually or in the aggregate, to have a material adverse effect on our consolidated financial statements. In accordance with U.S. GAAP, we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case or proceeding.
ITEM 1A. RISK FACTORS
The following risk factor supplements, and should be read together with, the risk factors set forth under Part I, Item 1A “Risk Factors” in the Company’s Form 10-K for the fiscal year ended June 30, 2019.
A widespread public health crisis could adversely affect our results of operations.
The widespread outbreak of a communicable illness or disease, such as the outbreak of COVID-19 during 2020, or other public health crises, including government mandates in response to such events, can result in significant economic disruptions and uncertainties and could adversely affect our business, results of operation and financial condition. The conditions caused by such events may affect the rate of spending by our customers and their ability to pay for our products and services, delay prospective customers’ purchasing decisions, interfere with our employees’ ability to support our business function, disrupt the ability of third-party providers we rely upon to delivery services, or adversely impact our ability to provide on-site services or installations to our customers, all of which could adversely affect our results of operation and financial position. We are unable to accurately predict the
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impact of such events on our business due to a number of uncertainties, including the duration, severity, geographic reach and governmental responses to such events, the impact on our customers’ and vendors' operations, and our ability to provide products and services, including the impact of our employees working remotely. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following shares of the Company were repurchased during the quarter ended March 31, 2020:

| Total Number of Shares Purchased (1) |  | Average Price of Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans |  | Maximum Number of Shares that May Yet Be Purchased Under the Plans (2)
January 1- January 31, 2020 | — |  |  | $ | — |  |  | — |  |  | 3,132,713 |
February 1- February 29, 2020 | 135,000 |  |  | 150.66 |  |  | 135,000 |  |  | 2,997,713 |
March 1- March 31, 2020 | — |  |  | — |  |  | — |  |  | 2,997,713 |
Total | 135,000 |  |  | 150.66 |  |  | 135,000 |  |  | 2,997,713 |

(1) 135,000 shares were purchased through a publicly announced repurchase plan.
(2) Total stock repurchase authorizations approved by the Company's Board of Directors as of February 17, 2015 were for 30 million shares. These authorizations have no specific dollar or share price targets and no expiration dates.
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ITEM 6. EXHIBITS
10.64 Retention Agreement, dated January 1, 2020, between the Company and David Foss attached as Exhibit 10.64 to the Company’s Current Report on Form 8-K filed January 3, 2020.
10.65 Form of Restricted Stock Unit Agreement attached as Exhibit 10.65 to the Company’s Current Report on Form 8-K filed January 3, 2020.
10.66 Credit Agreement, dated as of February 10, 2020 among Jack Henry & Associates, Inc., as Borrower, the lenders parties thereto, U.S. Bank National Association, as Administrative Agent, LC Issuer and Swing Line Lender, and certain other financial institutions as co-syndication agents and joint lead arrangers and joint book runners attached as Exhibit 10.66 to the Company’s Current Report on Form 8-K filed February 11, 2020.
31.1 Certification of the Chief Executive Officer.
31.2 Certification of the Chief Financial Officer.
32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS* XBRL Instance Document- the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Furnished with this quarterly report on Form 10-Q are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, 2020 and June 30, 2019, (ii) the Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2020 and 2019, (iii) the Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended March 31, 2020 and 2019, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2019, and (v) Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  | JACK HENRY & ASSOCIATES, INC.
Date: | May 8, 2020 |  | /s/ David B. Foss
|  |  | David B. Foss
|  |  | Chief Executive Officer and President
Date: | May 8, 2020 |  | /s/ Kevin D. Williams
|  |  | Kevin D. Williams
|  |  | Chief Financial Officer and Treasurer

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