JKHY 10-K & 10-Q changes, risk factors and insider trading

Data security breaches, failures, or other incidents could damage our reputation and business. Our business relies upon receiving, processing, storing, and transmitting sensitive information relating to our operations, associates, and clients. If we fail to maintain a sufficient digital security infrastructure, address security vulnerabilities and new threats, or deploy adequate technologies to secure our systems against attack, we may be subject to security breaches that compromise confidential information, including valuable intellectual property, proprietary information, trade secrets, know-how, or source code, which could lead to their theft, misuse, unauthorized disclosure, or misappropriation. Cybersecurity incidents, which, among other things, may result in unauthorized access to systems, service interruptions, malicious intrusions, exfiltration of data, ransomware, cyber-attacks, or operating failures, have become more sophisticated and more prevalent, have occurred in our systems in the past, and may occur in our systems in the future. Such incidents could adversely affect our ability to operate our business, damage our reputation and business, adversely affect our results of operations and financial condition, and expose us to liability. We rely on third parties for various business purposes, and these third parties face similar security risks. A security failure by one of these third parties could expose our data or subject our information systems to interruption of operations and security vulnerabilities. Our information systems rely on hardware, software, and other technological elements, whether developed in-house or provided by third parties, that occasionally need to be patched or updated to address existing or potential security vulnerabilities. If these vulnerabilities are not remediated in a timely manner, our systems and data may be at risk of compromise or interruption.

Our services and infrastructure are increasinglyheavily reliant on the internet. Computer networks and the internet are vulnerable to disruptive problems such as denial of service attacks or other cyber-attacks carried out by cyber criminals or state-sponsored actors. We are continually subject to attempts by unauthorized parties to access confidential information or to destroy data, often through the introduction of computer viruses, ransomware or malware, and cyber-attacks. The useincreasing sophistication of frontier artificial intelligence increasinglymodels enablingis theirreshaping sophisticationthe cyber-attack landscape. The growing use of frontier AI models by unauthorized parties has changed the scale of cyber threats and acceleratingspeed theirand evolution,complexity of cyber-attacks, including through automated phishingphishing, anddeepfakes, the rapid development of new malware, whichand continuenovel attack techniques targeting or leveraging AI systems and models. Further, the use of frontier AI allows these parties to evolveidentify and exploit software vulnerabilities faster and more broadly than ever before, including attacks targeting zero-day vulnerabilities that might not have been identified, or identified as quickly, without the use of frontier AI. The vulnerabilities targeted by these attacks are constantly evolving and can be difficult to detect.identify, detect, prevent, or mitigate. We utilize technology, including artificial intelligence-enabled tools, to help defend against cybersecurity threats. However, threat actors are increasingly using similar technologies to identify vulnerabilities, automate attacks, and evade detection. If our security capabilities fail to keep pace with the evolving methods used by threat actors, our systems, data, operations, and reputation could be adversely affected. Those same parties may also attempt to fraudulently induce associates, clients, vendors,third-party service providers, or other authorized users of our systems through phishing schemes or other social engineering methods to disclose sensitive information to gain access to our data or that of our clients or their accountholders. AnyWe suchhave experienced phishing attacks, social engineering attempts, and other cybersecurity incidents targeting our associates, clients, and systems. When successful, these coordinated attacks,attacks ifmay successful,result can lead toin data lossloss, exfiltration, and exfiltration, disruption to systems and services, and can damage to our reputation as a secure financial technology company.

We are also subject to the risk that our associates may, unintentionally or with malicious intent, intercept and transmit unauthorized confidential or proprietary information or that corporate-owned computersdevices used by associates are stolen, or client data media is lost in shipment. An interception, misuse, or mishandling of personal, confidential, or proprietary information being sent to or received from a client or third partythird-party could result in legal liability, remediation costs, regulatory action, and reputational harm, any of which could adversely affect our results of operations and financial condition.

Like other financial institution service providers, we continually face third-party attempts to discover and exploit system weaknesses or to circumvent our security measures. We anticipateregularly thatexperience attemptsattacks toand attackother malicious activities targeting our systems, services, and infrastructure, and data, as well as those of our clients, third-party service providersproviders, and other vendors,vendors. willThese growactivities continue to increase in frequency and sophistication. Despite implementing security controls and infrastructure designed to protect our systems and data, we have experienced cybersecurity incidents in the past and may experience them in the future. We cannot be certain that our security controls and infrastructureefforts will be adequate to continue to protect our systems and data and our efforts may not be sufficient to combat all current and future technological risks and threats. These risks are further heightened by the fact that a significant portion of our associates and contractors work remotely outside of Company-controlled facilities using networks and devices that are not physically controlled by the Company, potentially limiting the effectiveness of our security controls. Advances in computer capabilities, new discoveriesbreakthroughs in the field of cryptography, the useaccelerating development, sophistication, and deployment of artificial intelligence,intelligence technologies, or other eventstechnical developments could materially enhance the ability of threat actors to identify vulnerabilities, bypass controls, or developmentsotherwise maycompromise renderour systems, thereby rendering our security measures inadequate. Security risks may result in liability to our clients or other third parties, damage to our reputation, and may deter financial institutions from purchasing our products. The significant amount of capital and other resources we currently expend to protect against the threat of security breaches may prove insufficient to prevent a breach. We cannot ensure that any limitation-of-liability provisions in our client and user agreements, contracts with third-party vendors,service providers, or other contracts are sufficient to protect us from liabilities or damages with respect to claims relating to a security breach or similar matters. The insurance coverage we maintain to address data security risks may be insufficient to cover all types of claims or losses that may arise, and there is no assurance that such insurance coverage will continue to be available to us on economically reasonable terms, or at all. In the event of a security breach, we may need to spend substantial additional capital and resources alleviating problems caused by such breach. Under state, federal, and foreign laws, including those requiring consumer notification of security breaches, the costs to remediate security breaches can be substantial. Addressing security problems may result in interruptions, delays, or cessation of service to users, any of which could harm our business.

Failure to maintain sufficient technological infrastructure or an operational failure in our outsourcing facilities could expose us to damage claims, increase regulatory scrutiny, and cause us to lose clients. Our products and services require substantial investments in technological infrastructure, and we havecontinue experiencedto significant growthgrow in the number of users, transactions, and data that our technological infrastructure supports. If we fail to adequately invest in and support our technological infrastructure and processing capacity, we may not be able to support our clients’ processing needs and may be more susceptible to interruptions and delays in services. Damage or destruction that interrupts our outsourcing operations could cause delays and failures in processing which could hurt our relationship with clients, damage our reputation, expose us to damage claims, and cause us to incur substantial additional expenses to relocate operations and repair or replace damaged equipment. Events that could cause operational failures include, but are not limited to, hardware and software defects, breakdowns or malfunctions, cybersecurity incidents, human error, power losses, disruptions in telecommunications services, computer viruses or other malware, or other events. Our facilities are also subject to physical risks related to natural disasters or severe weather events, such as tornados, flooding, hurricanes, and heat waves. Climate change may increase the likelihood and severity of such events. Our back-up systems and procedures may prove insufficient or otherwise fail to prevent disruption, such as a prolonged interruption of our transaction processing services. If an interruption extends for more than several hours, we may experience data loss or a reduction in revenues due to such interruption. Any significant interruption of service could reduce revenue, have a negative impact onharm our reputation and the reputation of our clients,clients' reputations, result in damage claims, leadcause our presentcurrent and potentialprospective clients to choose otheralternative service providers, and lead to increasedincrease regulatory scrutiny of the critical services we provide to financial institutions, withthereby resultingincreasing increases inour compliance burdensobligations and costs. Implementing modifications and upgrades to our technological infrastructure subjects us to inherent costs and risks associated with changing systems, policies, procedures, and monitoring tools.

Failures associated with payment transactions could result in financial loss. The volume and dollar amount of payment transactions that we process is significant and continues to grow. We direct the settlement of funds on behalf of financial institutions, other businesses, and consumers, and receive funds from clients, card issuers, payment networks, and consumers on a daily basis for a variety of transaction types. Transactions facilitated by us include debit card, credit card, electronic bill payment transactions, Automated Clearing House (“ACH”) payments, real-time payments through faster payment networks (such as Zelle, RTP, and FedNow), and check clearing that support consumers, financial institutions, and other businesses. Such services are critical to our clients’ operations. If the continuity of operations, the integrity of processing,our processing systems, or our ability to detect or prevent fraudulent payments were compromised in connection with payments transactions, weour clients’ operations could sufferbe disrupted or adversely affected. Any such disruption could result in financial as well aslosses, reputational loss.damage, legal or regulatory consequences, and other adverse effects for both our clients and us. In addition, we rely on various third parties to process transactions and provide services in support of the processing of transactions and funds settlement for certain of our products and services that we cannot provide ourselves. If we are unable to obtain such services in the future or if the price of such services becomes unsustainable, our business, financial position, and results of operations could be materially and adversely affected. In addition, we may issue short-term credit to consumers, financial institutions, or other businesses as part of the funds settlement process. A default on this credit by a counterparty could result in a financial loss to us.

Failures of third-party service providers we rely upon could lead to financial loss. We rely on third-party service providers to support key portions of our operations. We also rely on third-party service providers to provide part, or all, of certain services we deliver to clients. As we continue to move more computing, storage, and processing services out of our data centers and facilities and into third-party hosting environments,environments like public cloud infrastructure providers.as well as private cloud co-location facilities, our reliance on these providers and their systems will increase. ThisThe reliancemigration of our products and services to these new cloud-based systems is furthercomplex concentratedand asrequires substantial expenditures. Furthermore, we useface certainrisks inherent in the conversion to any new system, including potential data loss and operational disruptions. We rely on a limited number of third-party vendorsservice toproviders that provide largesignificant portions of our hosting needs.and technology infrastructure. While we have selected these third-party vendorsservice carefully,providers carefully and conduct ongoing diligence and monitoring, we do not control their actions.actions Aor failureoperations. Any disruption, capacity constraints, interference, failure, cybersecurity incident, service degradation, or other interruption of these services by a thirdthird-party partyservice provider could haveresult ain materialdegraded impactperformance, upondata loss, or prolonged outages and adversely affect our deliveryoperations ofand our ability to deliver services to our clients. Such a failure could lead to damage claims, loss of clients, and reputational harm, increased costs, contractual disputes, regulatory scrutiny, and, depending on the duration and severity of the failure.failure, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Third parties perform significant operational services on our behalf. These third-party vendorsservice providers are subject to similar risks as us including, but not limited to, compliance with applicable laws and regulations, hardware and software defects, breakdowns or malfunctions, cybersecurity incidents, human error, failures in internal controls, power losses, disruptions in telecommunications services, computer viruses or other malware, natural disasters or severe weather events, or other events. One or more of our vendorsthird-party service providers may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by the third-party vendor.service provider. Certain of our vendorsthird-party service providers may have limited indemnification obligations or may not have the financial capacity to satisfy their indemnification obligations. If a critical vendorthird-party service provider is unable to meet our needs in a timely manner or if the services or products provided by such a vendorthird-party service provider are terminated or otherwise delayed and if we are not able to develop alternative sources for these services and products timely and cost-effectively, our clients could be negatively impacted, and it could have a material adverse effect on our business.

We operate in ahighly competitive businessand environmentrapidly evolving markets and our business will be adversely affected if we fail to compete effectively. We vigorously compete with a variety of software vendors and service providers in all our major product lines. We compete on the basis of product quality, reliability, performance, ease of use, quality of support and services, integration with other products, and pricing. Some of our competitors may have advantages over us due to their size, product lines, greater marketing resources, or exclusive intellectual property rights. New competitors, including smaller start-ups, regularly appear with new products, services, and technology for financial institutions. We are also experiencing increasing competition from nontraditional market participants, including financial technology companies, payment-focused providers, and technology platforms that offer products, services, or alternative delivery models that compete with portions of our solutions. Certain competitors may be able to devote greater financial resources to innovation, respond more rapidly to changing client demands, or accept business and operating risks that differ from our approach. If competitors offer more favorable pricing, payment or other contractual terms, warranties, or functionality, or otherwise attract our clients or prevent us from capturing new clients, we may need to lower prices or offer other terms that negatively impact our results of operations in order to successfully compete. Emerging technologies, evolving payment methods, and changing client preferences may alter how financial services products and services are delivered and consumed and could reduce demand for certain existing solutions or displace portions of traditional technology and payment processing models. If we are unable to adapt our products and services to these developments in a timely and cost-effective manner, our competitive position, revenues, growth prospects, and results of operations could be adversely affected. In addition, increased adoption of specialized point solutions may reduce demand for broader integrated offerings and result in the replacement of components of our existing product suite.

Failure to achieve favorable renewals of service contracts could negatively affect our business. Our contracts with our clients for outsourced data processing and electronic payment transaction processing services generally run for a period of six years. We will continue to experience a significant number of these contracts coming up for renewal each year. Renewal time presents our clients with the opportunity to consider other providers or to renegotiate their contracts with us, including reducing the services we provide or negotiating the prices paid for our services. Certain of our renewals have resulted in price compression between the former and renegotiated contracts. If that trend accelerates or becomes more pronounced, it could negatively impact our results of operations. If we are not successful in achieving high renewal rates upon favorable terms, revenues and profit margins will suffer. We may experience increased costs for services from our third-party vendorsservice providers due to inflation or other cost expansion, but because our client contracts typically have longer terms than our vendorthird-party service provider contracts, our ability to pass on those higher costs to clients may be limited. If inflation or costs outpace our contractual ability to adjust pricing during the contractual terms of our client contracts, our revenues and profit margins could be negatively impacted.

If we fail to adapt our products and services to changes in technology and the markets we serve, we could lose existing clients and be unable to attract new business. The markets for our products and services are characterized by changing client and regulatory requirements and rapid technological changes. These factors and new product introductions by our existing competitors or by new market entrants could reduce the demand for our existing products and services, and we may be required to develop or acquire new products and services. In addition, competitors and other third parties may incorporate artificial intelligence into products and offerings more quickly or more successfully than we do, which could impair our ability to compete effectively and adversely affect our results of operations. Our future success is dependent on our ability to enhance our existing products and services in a timely manner and to develop or acquire new products and services. If we are unable to develop or acquire new products and services to address the needs of our clients, or if we fail to sell the new or enhanced products and services in which we have invested, we may incur unanticipated expenses or fail to achieve anticipated revenues, as well as lose prospective sales.

The increasing adoption of artificial intelligence (AI), machine learning (ML), and generative artificial intelligence into our products introduces significant and evolving risks that could lead to unintended consequences, result in reputational harm, and increased litigation. Our business currently utilizes AI and ML and we continue to evaluate and expand their use, including generative AI, to augment our products and services. While these technologies offer distinct business opportunities, they also bring evolving legal, regulatory, and operational risks. BothThe stateregulatory and federal regulationslandscape relating to these emerging technologies areis quickly and constantly evolving and may requirerequires significant resources to modify and maintain business practices to comply with U.S.applicable laws,laws. Further, the natureongoing tension between the states and the federal government regarding AI regulations is causing increased uncertainty and risk and compliance costs, particularly regarding the use of whichautomated cannotdecision-making beand determinedother atuses thisof time.AI technologies in high-risk industries, including the financial industry. This uncertainty has a broader impact than simply AI-targeted regulations and may expose us to claims of privacy rights violations or providing inadequate cybersecurity protections. From an operational standpoint, AI algorithms and training methodologies may create accuracy issues, unintended biases, factual errors, misrepresentations, offensive language, inappropriate statements, or other unexpected outcomes that could undermine product and service quality or lead to errors in our decision-making and solution development. Ineffective or inadequate AI development, testing, evaluation, deployment, content labeling, or governance may impair public acceptance or cause harm, resulting in offerings not working as intended, and we also face explainability risk from our potential inability to interpret or justify AI model decisions, which may lead to concerns about trust, regulatory compliance, and accountability. Furthermore, the uncertainty in the regulatory environment and our development and use of generative AI technologies expose us to evolving intellectual property risks, including the potential misuse of proprietary or confidential inputs, infringement of third-party rights, and uncertainty regarding the ownership of AI-generated outputs. Additionally, the use of AI tools by associates—whether authorized or not—for internal functions or business operations may result in unintended or unreliable outputs, which could negatively impact the quality, accuracy, or consistency of work product and decision-making. Our failure to accurately identify and address our responsibilities and liabilities in this new environment could negatively affect any solutions we develop incorporating such technology and could subject us to reputational harm, regulatory action, or litigation, which may harm our financial condition and operating results. These same risks apply to our third-party service providers who are implementing these tools into the products or services they provide to us. Any failures to manage and mitigate these risks by these third-party service providers may negatively affect the products and services we provide our clients.

The software and services we provide to our clients are subject to government regulation that could hinder the development of our business, increase costs, or impose constraints on the way we conduct our operations. The financial services industry is subject to extensive and complex federal and state regulation. As a supplier of software and services to financial institutions, portions of our operations are subject to ongoing supervision and examination by the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Consumer Financial Protection Bureau,Bureau. andCredit Unions are subject to supervision by the National Credit Union Association, among other regulatory agencies.Administration. These agenciesfederal agencies, and comparable state agencies, regulate services we provide and the way we operate, and we are required to comply with a broad range of applicable federal and state laws and regulations. We are routinely subject to the examination process with such regulators, which includes the identification of areas where we can improve our practices to better comply with the applicable regulations and guidelines. If regulators identify significant issues, or if we fail to meet supervisory remediation expectations, we could be subject to regulatory actions that could harm our client relationships and reputation. Failure by third parties, with whom we contract or partner, to comply with regulations or guidelines could also harm our relationships and reputation. Such failures could require significant expenditures to correct and could negatively affect our ability to retain clients and obtain new clients.

Compliance with new and existing data privacy and cybersecurity laws, regulations, and rules may adversely impact our expenses, development, and strategy. We are subject to complex laws, rules, and regulations related to data privacy and cybersecurity.cybersecurity, and each year, this regulatory landscape is rapidly changing. If we fail to comply with such requirements, we could be subject to reputational harm, regulatory enforcement, and litigation. The use, confidentiality, and security of private client information is under increased scrutiny. Regulatory agencies, Congress, state legislatures, and foreign regulatory and governmental bodies are considering numerous regulatory and statutory proposals to protect the interests of consumers and to require compliance with standards and policies that have not been defined. The number of state privacy and cybersecurity laws and regulations has grown tremendously over the past several years, resulting in an increasingly complex and fragmented regulatory landscape. This environment imposes comprehensive data privacy compliance obligations in relation to our collection and use of personal information, including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training, and audits. These laws often include industry-specific requirements and boardbroad consumer data protection obligations. While many of these frameworks share common principlesprinciples, each jurisdiction imposes unique compliance standards, definitions, and obligations that may not align with one another. This lack of uniformity, combined with frequent legislative updates and regulatory amendments, creates ongoing challenges for organizations seeking to maintain consistent and compliant data governance practices across multiple jurisdictions. Further, the Federal Trade Commission (“FTC") and state attorneys general may interpret federal and state consumer protection laws as imposing standards for the collection, use, dissemination, and security of data. In addition, compliance with these laws and regulations may require changes to our technology and our internal processes and procedures, including the way that we handle, process, and store data, which could divert company resources and negatively impact growth opportunities. We will also be affected by these regulations as a third-party provider to clients who are subject to such regulations and will seek our assistance in their compliance efforts.

Failure to comply or readily address compliance and regulatory rule changes made by payment card networks could adversely affect our business. We are subject to card association and network compliance rules governing the payment networks we serve, including Visa, MasterCard, Zelle, FedNow, and The Clearing House’s RTP network, and all rules governing the Payment Card Industry Data Security Standards. IfThis weenvironment failimposes comprehensive data privacy and cybersecurity obligations in relation to complyour collection and use of personal information, including meeting specific cybersecurity standards and the obligation to demonstrate compliance through policies, procedures, training, and audits. Lack of compliance with these rules and standards, wemay couldhave bea finedsevere orimpact our certifications could be suspended or terminated, which could limiton our ability to servicedo ourbusiness, clientsincluding fines and resultpenalties, inloss reductionsof inrevenue, revenuesnegative andreputational impact, increased costs of operations.operations, and disruption of services, including the inability to provide card processing services to our clients. Changes made by the networks,payment even when complied with,networks may result in reduction in revenues andrevenue, increased costs of operations.operations, and negative impact on growth opportunities if company resources need to be diverted to address such changes.

Natural disasters, public health crises, wars, acts of terrorism, other armed conflict, and workforce shortages could adversely affect our results of operations. The occurrence of, or threat of, natural disasters, widespread public health crises, political unrest, war, acts of terrorism, other armed conflicts involving the United States or foreign countries, or general workforce shortages 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 clients and their ability to pay for our products and services, delay prospective clients’ purchasing decisions, interfere with our associates’ ability to support our business function, disrupt the ability of third-party providers we rely upon to deliver services, adversely impact our ability to provide on-site services or installations to our clients, or reduce the number of transactions we process, all of which could adversely affect our results of operation and financial position. We are unable to accurately predict the 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 clients’ and vendors'third-party service providers' operations, and our ability to continue to provide products and services, including the ability of our associates to work remotely. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

Our business may be adversely impacted by general U.S. and global market and economic conditions or specific conditions in the financial services industry. We derive most of our revenue from products and services we provide to the financial services industry. If the general economic environment worsens, including if inflation or interest rates continue to increase or remain at higher than recent historical levels, or if conditions or regulatory requirements within the financial services industry change—such as if financial institutions are required to increase reserve amounts, become subject to new regulatory assessments, or if tariffs or other trade restrictions are imposed or increased—clients may be less willing or able to pay the cost of our products and services, and we could face a reduction in demand from current and potential clients for our products and services, which could have a material adverse effect on our business, results of operations, and financial condition. In addition, a growing portion of our revenue is derived from transaction processing fees, which depend heavily on levels of consumer and business spending. Deterioration in general economic conditions could negatively impact consumer confidence and spending, resulting in reduced transaction volumes and our related revenues.

Consolidation and failures of financial institutions will continue to reduce the number of our clients and potential clients. Our primary market consists of approximately 4,4404,300 commercial and savings banks and moreapproximately than 4,5504,400 credit unions. The number of commercial banks and credit unions in the United States has experienced a steady decrease over recent decades due to mergers and acquisitions and financial failures and we expect this trend to continue as more consolidation occurs. Such events may reduce the number of our current and potential clients, which could negatively impact our results of operations. A client who merges with, or is acquired by, an entity that is not our client, or a client that is closed by regulatory action, can lead to a reduction or loss of services and negatively impact our results of operation.

AcquisitionsAny transactions we pursue subject us to risksoperational, financial, and mayintegration berisks. costlyStrategic and difficult to integrate. Acquisitionstransactions are difficult to evaluate, and our due diligence may not identify all potential liabilities or valuation issues. We may also be subject to risks related to cybersecurity incidents or vulnerabilities of the acquired company and the acquired systems. We may not be able to successfully integrate acquired companies.companies, products, or services. We may encounter problems with the integration of these new businesses, including: financial control and computer system compatibility; unanticipated costs and liabilities, including inherited undiscovered liabilities such as past data breaches, cybersecurity vulnerabilities, or intellectual property infringement from the acquired entities; unanticipated quality or client problems with acquired products or services; differing regulatory and industry standards; diversion of management's attention; adverse effects on existing business relationships with suppliers and clients; loss of key associates; and significant depreciation and amortization expenses related to acquired assets. To finance futureany acquisitions,such transactions, we may have to increase our borrowing or sell equity or debt securities to the public. If we fail to successfully integrate our acquisitions, our business, financial condition, and results of operations could be materially and adversely affected. Failed acquisitions could also produce material and unpredictable impairment charges as we review our acquired assets.

If others claim that we have infringed their intellectual property rights, we could be liable for significant damages or could be required to change our processes. We have agreed to indemnify many of our clients against claims that our products and services infringe on the proprietary rights of others. We also use certain open- source software in our products, which may subject us to suits by persons claiming ownership of what we believe to be open-source software. Our use of open-source software with permissive licenses may subject us to compliance claims or operational liabilities. By the terms of certain restrictive open-source licenses, if we combine our proprietary software with open-source software in a certain manner, we could be required to publicly release the source code of our proprietary software, which could result in a loss of our competitive advantage. Additionally, open-source licensors generally do not provide warranties or indemnification against intellectual property infringement or for the security of the code. Infringement claims have been and will in the future be asserted with regard to our software solutions and services. Such claims, whether with or without merit, are time-consuming, may result in costly litigation and may not be resolved on terms favorable to us. If our defense of such claims is not successful, we could be forced to pay damages or could be subject to injunctions that would cause us to cease making or selling certain applications or force us to redesign applications.

The loss of key associates and difficulties in hiring and retaining associates could adversely affect our business. We depend on the contributions and abilities of our senior management and other key associates.associates, particularly for highly specialized technical personnel with expertise in cybersecurity, artificial intelligence, machine learning, and data science. Our Company has grown significantly in recent years and our management remains concentrated in a small number of highly qualified individuals. If we lose one or more of our key associates, we could suffer a loss of managerial experience, and management resources would have to be diverted from other activities to compensate for this loss. We do not have employment agreements with any of our executive officers. We continue to face a competitive market for hiring and retaining skilled associates.associates, especially highly specialized technical personnel. Competition for these professionals has led to wage inflation in the technology sector. Difficulties in hiring and retaining skilled associates may restrict our ability to adequately support our business needs and/or result in increased personnel costs. These challenges are further compounded by the fact that a substantial portion of our workforce operate in hybrid or fully remote arrangements, which introduces additional complexities related to employee engagement, collaboration, training, and the preservation of corporate culture. As we navigate these dynamics, there is no assuranceguarantee that we will be able to attract and retain the personnel necessary to maintain the Company’s strategic direction.

Changes in interest rates could increase our borrowing costs or result in decreased interest income. AlthoughOur ourcurrent debtcredit borrowingfacilities levelsbear haveinterest historicallyat beenvariable low,rates, wewhich expose us to interest rate risk. We may require additional or increased borrowings in the future under existing or new debt facilities to support operations, finance acquisitions,selective strategic transactions, or fund stock repurchases. Our current credit facilities bear interest at variable rates. Increases in interest rates on our variable-rate debt would increase our interest expense, which could negatively impact our results of operations. Conversely, if interest rates substantially decrease, we would collect less interest income on settlement accounts.

Jack Henry & Associates, Inc. is a well-rounded financial technology company headquartered in Monett, Missouri, that employs approximately 7,2407,300 full-time and part-time associates nationwide, and is a leading provider of technology solutions and payment processing services primarily to community and regional banks and credit unions. Our solutions serve approximatelyover 7,4007,200 clients and consist of integrated data processing systems solutions to banks ranging from de novo to multi-billion-dollar institutions with assets up to $55 billion,billion in assets, core data processing solutions for credit unions of all sizes, and non-core highly specialized core-agnostic products and services that enable banks and credit unions of every asset size and charter, and diverse corporate entities outside the financial services industry, to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. Our integrated solutions are available for on-premise installation and delivery in our private and public cloud.

We believe our primary competitive advantage is client service. Our support infrastructure and strict standards provide service levels that generate high levels of client satisfaction and retention. We consistently measure and monitor client satisfaction using a variety of surveys, such as an annual survey on the client's anniversary date and randomly-generated online surveys initiated each day by routine support requests.requests to ensure feedback is received throughout the year. Dedicated surveys are also used to grade specific aspects of our client experience, including product implementation, education, and consulting services.

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

We have four reportable segments: Core, Payments, Complementary, and Corporate Services (which prior to the third quarter of fiscal 2026 was referred to as Corporate and Other.Other). The respective segments include all related revenues along with the related cost of revenue.

In fiscal 2025,2026, total revenue increased 7.2%7.1% or $159,745,$169,051, compared to fiscal 2024.2025. Reducing total revenue for deconversion revenue of $33,905$42,830 in the current fiscal year and $16,554$33,905 in the prior fiscal year and for acquisition revenue of $5,193 in the current fiscal year and revenue related to a contract change of $15,874 in the prior fiscal year, results in a 6.5%7.3% increase, or $142,394.$170,807. This increase was mainly driven by non-acquisition-related growth in data processing and hosting within cloud revenue as new clients were added and volumes expanded, card processing revenue primarily from expandedmonthly fraud detectionservice and prevention risk management servicesfees, Jack Henry digital and monthly service fees, digitaltransaction revenue as active monthly users and volumes increased, and faster payments and payment processing revenuerevenues from expanding volumes and new client revenue.

Operating expenses increased 4.7%,5.7%, or $80,421,$102,733, in fiscal 20252026 compared to fiscal 2024.2025. Reducing total operating expenses for deconversion costs of $6,242$12,878 in the current fiscal year and $3,408$6,242 in the prior fiscal year and for VEDIP relatedacquisition costs of $16,443$8,152 and a gain on assets of $6,829 in the current fiscal year and costs related to a contract change of $13,516 in the prior fiscal year, results in a 5.5%6.1% increase, or $94,031$108,291. (The VEDIP program was a Company voluntary separation program offered to certain eligible associates who chose to participate in the program from July through December 2023, including immaterial payments that continued into calendar 2024). TheThis increase in operating expenses was primarily due to higher direct costs generally commensurate with increases in the related lines of revenue, higher personnel costs including increases in compensation costs during the trailing twelve months, andincreased higherdirect internalcosts licensesgenerally andcommensurate feeswith from price increases and more deploymentsgrowth in the currentrelated fiscallines year.of revenue, and higher amortization of capitalized software.

As we move into fiscal 2026 – our 50th year in business –2027 we arecontinue to be excited and confident about our future, and we remain well-positioned to deliver durable, consistent growth and attractive results for our shareholders. Technology spending by financial institutions remains strong, and there is clear demand for our differentiated and innovative technology solutions. We have a very healthy sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions. OurWe believe our unwavering focus on culture, service, innovation, strategy, and execution continues to set us apart in the market and will enable us to drive continued industry-leading revenue growth with strong margin expansion, benefiting our associates, clients, and shareholders.

In the fiscal year ended June 30, 2025,2026, services and support revenue increased 6.7%6.3% compared to the prior fiscal year. Reducing total services and support revenue by deconversion revenue for each year, which totaled $42,830 in fiscal 2026 and $33,905 in fiscal 2025 and $16,554by inrevenue fiscalrelated 2024,to a contract change of $15,874, services and support revenue grew 5.4%.7.1%. This increase was primarily driven by highergrowth in data processing and hosting revenue within private and public cloud revenuerevenue, ashigher newconsulting, clientswork were addedorders and volumesrelease expandedfees revenue, a rise in implementation revenue, and increased consulting, work order,license and releasehardware revenues,revenue partially offset by the decrease in licensesoftware andusage hardware revenues, year over year.revenue.

Processing revenue includes: "remittance" revenue from payment processing, remote capture, and ACH transactions; "faster payments" revenues from electronic payment services, "card" fees, including card transaction processing and monthly fees; and "transaction and digital" revenue, which includes transaction and mobile processing fees.

Processing revenue increased 7.9%8.2% for the fiscal year ended June 30, 2025,2026, compared to the fiscal year ended June 30, 2024.2025. This increase was mainly driven by growth in card revenue from expandedmonthly fraud detectionservice and prevention risk management servicesfees, improvement in Jack Henry digital and monthly service fees, digital revenue as active monthly users and volumes increased, and payment processingtransaction revenue from expandinga volumeshigher number of active users on our digital platform, and newa clientrise in faster payments revenue.

Cost of revenue for fiscal 20252026 increased 4.7%5.4% compared to fiscal 2024.2025. Reducing total cost of revenue for deconversion costs of $3,517$7,420 in the current fiscal year and $2,231$3,517 in the prior fiscal year and for acquisition costs in the current fiscal year of $6,225 and costs related to a contract change in the prior fiscal year of $13,516 results in a 4.6%5.7% increase. This increase was drivenprimarily bydue to higher personnel costs, including compensation and benefit costs, partially related to trailing twelve month headcount growth, higher direct costs generally consistent with increases in the related revenuelines of revenue, as well as higher amortization of capitalized software and higherincreased personnelinternal costslicenses includingand increases in compensation costs during the trailing twelve months.fees. Cost of revenue decreased 2%1% as a percentage of total revenue for fiscal 20252026 compared to fiscal 2024.2025.

Research and development expenses for fiscal 20252026 increased 9.8%8.4% compared to fiscal 2024.2025. Reducing total research and development costs for acquisition costs in the current fiscal year of $1,803 results in a 7.3% increase. This increase was primarilymainly due to higher personnel costscosts, including increased compensation costs and employeebenefit headcountcosts, additionspartially inrelated theto trailing twelve monthsmonth andheadcount internal license and fees expenses from price increases and more deployments in the current fiscal year.growth. The increase in this expense category for the current fiscal year reflects our continuing commitment to the development of strategic products. Research and development expense remained consistent as a percentage of total revenue for fiscal 20252026 compared to fiscal 2024.2025.

Selling, general, and administrative expenses for fiscal 20252026 increased 1.7%5.7% compared to fiscal 2024.2025. Reducing total selling, general, and administrative expense for deconversion costs from each year, which totaled $5,457 in fiscal 2026 and $2,725 in fiscal 20252025, a gain on assets of $6,829 and $1,177acquisition in fiscal 2024 and VEDIP program expensescosts of $16,443$124 in the priorcurrent fiscal year, results in a 7.5%7.2% increase. This increase was primarily due to higher personnel costs, excluding severance, including increased compensationmedical costs due to second-half fiscal 2026 normalization trends and employeehigher headcountcompensation additionstied in theto trailing twelve months,month increasedheadcount travel expenses, and higher contract labor, partially offset by the gain on the sale of assets in the current fiscal year compared to the loss on the sale of assets last fiscal year.growth. Selling, general, and administrative expenses decreasedremained 1%consistent as a percentage of total revenue for fiscal 20252026 compared to fiscal 2024.2025.

Interest income increaseddecreased over the prior fiscal year due to increaseddecreased interest earned on balances fiscal year over fiscal year. Interest expense decreased in fiscal 20252026 mainly due to the timing and amounts of borrowed and repaid balances ending the current fiscal year with no$40,000 remaining debt outstanding.

The decreaseincrease in the Company's effective tax rate in fiscal 20252026 compared to fiscal 20242025 was theprimarily resultdue ofto investment tax credit benefits recognized in fiscal 2025 that did not recur in fiscal 2026, as well as differences in the change in uncertain tax positionseffects of stock-based compensation between the two periods as well as a favorable state law change in the current fiscal year.periods.

Net income grew 19.4%10.3% to $502,776, or $6.98 per diluted share, in fiscal 2026 from $455,748, or $6.24 per diluted share, in fiscal 2025 from $381,816, or $5.23 per diluted share, in fiscal 2024.2025. The diluted earnings per share increase fiscal year over fiscal year was 19.3%.11.9%. This increase was primarily due to organicnon-acquisition-related growth in our lines of revenue and the decrease in one-time severance expenses related to VEDIP fiscal year over fiscal year, partially offset by higher operating expenses and increased provision for income taxes in fiscal 20252026 compared to fiscal 20242025 .

The Company is a well-rounded financial technology company and is a leading provider of technology solutions and payment processing services primarily to community and regional banks and credit unions. The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate Services (formerly “Corporate and Other.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 accountholder 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, ACHmoney originationmovement and embedded payment capabilities, remote deposit capture processing, and risk management products and services. The Complementary segment provides additional software, hosted processing platforms, and services, including digital/mobile banking, treasury services, online account opening, fraud/anti-money laundering ("“AML"”) and lending/deposit solutions that can be integrated with the Company's Core solutions, and many can be used independently. The Corporate and OtherServices segment includes revenue and direct costs from hardware and other products notand attributedservices toand anyour oftechnology theinfrastructure other three segments, as well as operating expenses not directly attributable to the other three segments.costs.

Immaterial adjustments have been made between segments wereduring made inthe fiscal 2025year ended June 30, 2026, to reclassify revenue and cost of revenue that was recognized infor the fiscal years 2024ended June 30, 2025 and 2023.2024. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. CostRevenue ofreclassed revenuefor the fiscal years ended June 30, 2025 and 2024, from the Core segment to the Complementary segment, was $6,353 and $5,471, respectively. Revenue reclassed for the fiscal year ended June 30, 2024, from Complementarythe Core segment to the Corporate andServices Other,segment, was $4,922.$5. Cost of revenue reclassed for the fiscal yearyears ended June 30, 2023,2025 and 2024, from the Core segment to the Complementary segment, was $1,864 and Complementary$1,768, respectively. Cost of revenue reclassed for the fiscal years ended June 30, 2025 and 2024, from the Core segment to the Corporate Services segment, was $269 and Other, was $64 and $5,206,$277, respectively.

In fiscal 2025,2026, revenue in the Core segment increased 7.0%4.8% compared to fiscal 2024.2025. Reducing total Core revenue by deconversion revenue from both fiscal years, which totaled $16,605 in fiscal 2026 and $14,765 in fiscal 2025 and $7,292by revenue related to a contract change of $15,874 in the prior fiscal 2024,year, Core segment revenue increased 6.0%.7.1%. This increase was primarily driven by organicnon-acquisition-related increases in our data processing and hosting revenue within cloud.cloud and a rise in consulting, work orders, and release revenue. Cost of revenue in the Core segment increased 3.5%3.3% for fiscal 20252026 compared to fiscal 2024.2025. Reducing total Core cost of revenue by deconversion costs from both fiscal years, which totaled $4,566 in fiscal 2026 and $2,096 in fiscal 2025 and $1,065by costs related to a contract change of $13,516 in the prior fiscal 2024,year, Core segment cost of revenue increased 3.1%.7.4%. This increase was primarily due to increasedhigher directpersonnel costscosts, associatedincluding withcompensation theand organicbenefit growthcosts, inpartially cloudrelated revenue.to trailing twelve month headcount growth. Core segment cost of revenue decreasedremained 1%consistent as a percentage of revenue for fiscal 20252026 compared to fiscal 2024.2025.

RevenueIn fiscal 2026, revenue in the ComplementaryPayments segment increased 9.2% for fiscal 20257.2% compared to fiscal 2024.2025. Reducing total ComplementaryPayments revenue by deconversion revenue from both fiscal years, which totaled $7,709$13,660 in fiscal 2026 and $11,159 in fiscal 2025 and $3,217by acquisition revenue of $5,193 in the current fiscal 2024,year, ComplementaryPayments segment revenue increased 8.5%.6.4%. This increase was primarily driven by organicgrowth increaseswithin incard hostingrevenue and digitalfaster revenues within cloudpayments and higherpayment maintenanceprocessing fee revenue.revenues. Cost of revenue in the ComplementaryPayments segment increased 5.5%4.2% for fiscal 20252026 compared to fiscal 2024.2025. Reducing total ComplementaryPayments cost of revenue by deconversion costscost of revenue from both fiscal years, which totaled $1,119$717 in the current fiscal 2025year and $903$288 in the prior fiscal 2024,year Complementaryand by acquisition cost of revenue of $5,854 in the current fiscal year, Payments segment cost of revenue increased 5.4%.2.8%. This increase was primarily due to higherincreased direct costs related to the organic growth in the digitalcard, faster payments, and hostingpayment within cloudprocessing revenue lines,lines increasedand higher personnel costscosts, including higher compensation costsand inbenefit thecosts, partially related to trailing twelve months,month andheadcount highergrowth. amortization of capitalized software. ComplementaryPayments segment cost of revenue decreased 1%2% as a percentage of revenue for fiscal 20252026 compared to fiscal 2024.2025.

CostRevenue of revenue forin the Corporate and OtherServices segment includes operating expenses not directly attributable to any of the other three segments and increased 6.1%18.3% for fiscal 20252026 compared to fiscal 2024.2025. This increase was primarilymainly due to increased license and hardware revenue, growth in processing fees revenue, and a rise in subscriptions revenue within on-premise support. Deconversion revenue, acquisition revenue, and/or revenue related to highera directcontract costs, increased personnel costs including increased compensation costs and employee headcount additions in the trailing twelve months, and higher cloud consumption costs. Deconversion and/or severance costschange did not significantly affect Corporate and Other cost ofServices revenue fiscal year over fiscal year.

The Company's cash and cash equivalents increaseddecreased to $12,056 at June 30, 2026, from $101,953 at June 30, 2025, from $38,284 at June 30, 2024.2025. The following table summarizes net cash from operating activities in the statementconsolidated statements of cash flows:

Cash provided by operating activities for fiscal 20252026 increased 12.9%18.8% compared to fiscal 2024,2025, primarily due to the increasechange in Netdeferred income and the net changes in prepaid expenses, deferred costs and other and accrued expenses within Change in other assets and liabilitiestaxes fiscal year over fiscal year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, for capital expenditures, and for capital expenditures.acquisitions.

Financing activities used cash of $345,672$574,119 for fiscal 20252026 and included: $164,644$448,173 for the purchase of treasury shares and $170,405 for dividends paid to stockholders;stockholders. These expenditures were partially offset by borrowings and repayments on our credit facilities which netted to repaymentsborrowings of $150,000;$40,000 and $35,051 for the purchase of treasury shares. These expenditures were partially offset by $4,023$4,459 of net cash inflow related to stock-based compensation.

At June 30, 2025,2026, the Company had contractual obligations of $1,700,611,$2,177,592, including operating lease obligations, and $1,643,789$2,135,981 related to off-balance sheet contractual purchase obligations. Included in off-balance sheet contractual purchase obligations waswere thea strategicrenewing servicescustomer agreement, server and cloud enrollment agreement, and a volume licensing agreement that offers full-service debit and credit card processing on a single platform to our customers. This agreement waswere signed in fiscalJune 20172026 and amendedtogether inadded May 2025 to add two additional service years and $213,053$94,146 to contractual obligations,obligations bringingspread the total remaining purchase commitment at June 30, 2025 to $1,022,283evenly over the remainingnext termthree offiscal theyears contract,beginning whichin nowfiscal extends to January 2038, subject to certain renewal terms.2027. Contractual obligations exclude $22,649$24,905 of liabilities for uncertain tax positions as we are unable to reasonably estimate the ultimate amount or timing of settlement.

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or short-term borrowings on its existing credit facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. During fiscal 2026, the Board of Directors authorized an increase of 5,000 shares to the existing share repurchase program. At June 30, 2025,2026, there were 31,58034,527 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,4115,464 additional shares. The total cost of treasury shares at June 30, 20252026 was $1,895,224.$2,343,397. During fiscal 2025,2026, the Company repurchased 2072,947 treasury shares for $35,051.$448,173. At June 30, 2024,2025, there were 31,37331,580 shares in treasury stock and the Company had authority to repurchase up to 3,6183,411 additional shares.

On AugustMarch 31,25, 2022,2026, the Company entered into a five-yearfive-year, senior,revolving, unsecured amendedcredit andagreement restatedthat replaced the prior credit agreement.agreement described below. The credit agreement allows for borrowings of up to $600,000,$1,000,000 whichand mayallows befor increasedadditional revolving credit commitments and/or term loan commitments, pursuant to $1,000,000the byterms and subject to certain limitations set forth in the Companycredit at any time until maturity.agreement. The credit agreement bears interest at a variable rate equal toto, at the option of the Company, either (a) a rate based on anadjusted adjustedTerm Secured Overnight Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of (i) 0%,0.0%, (ii) theU.S. PrimeBank's Rateprime for such day,rate, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interestadjusted PeriodTerm onSOFR such day for Dollarsrate plus 1.0%), plus an applicable percentage in each case determined bybased on the Company's leverage ratio. The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement. As of June 30, 2025,2026, the Company was in compliance with all such covenants. The credit facilityagreement terminates AugustMarch 31,25, 2027.2031. There was $0 and $60,000$40,000 outstanding under the amended and restated credit facility at June 30, 2025, and June 30, 2024, respectively.2026.

OnThe Maycredit 16,agreement 2023,described above replaced a prior five-year senior, unsecured amended and restated credit agreement that was entered into on August 31, 2022. The prior credit agreement allowed for borrowings of up to $600,000, which could be increased to $1,000,000 by the Company enteredat intoany atime termuntil loanmaturity. The prior credit agreement with a syndicate of financial institutions, with an original principal balance of $180,000. Borrowings under the term loan facility bore interest at a variable rate equal to (a) a rate based on an adjusted SOFR term rate or (b) an alternate base rate (the highest of (i) 0%,0.0%, (ii) the Prime Rate for such day, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interest Period on such day for Dollars plus 0.75%1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The term loanprior credit agreement was guaranteed by certain subsidiaries of the Company and was subject to various financial covenants that required the Company to maintain certain financial ratios as defined in the term loanprior credit agreement. The term loanprior credit agreementagreement's matured on May 16, 2025, and at the maturitytermination date the Company was inAugust compliance31, with all such covenants.2027. There was $0no and $90,000balance outstanding under the termprior loancredit facility at June 30, 2025, and June 30, 2024, respectively.2025.

On October 31, 2024, the Company entered into a discretionary line of credit demand note, which providesprovided for funding of up to $50,000 and bearsbore interest at the prime rate less 2.0%. The note doesdid not constitute a committed line of credit. The line of credit expiresexpired on October 31, 2025. There was no balance outstanding at June 30, 2025.

On July 18, 2025, the Company entered into a newan unsecured committed revolving line of credit facility with a commercial bank in the amount of $50,000, which bearsbore interest at the prime rate less 1.0%. The line of credit expiresexpired on July 17, 2026. There was no balance outstanding at June 30, 2026.

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

This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements included in this Form 10-Q for the fiscal quarter ended DecemberMarch 31, 2025.2026.

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

For the secondthird quarter of fiscal 2026, total revenue increased 7.9%,8.7%, or $45,486,$51,158, compared to the same quarter in fiscal 2025. Total revenue less deconversion revenue of $6,212$18,665 and acquisition revenue of $1,651 for the current fiscal quarter and less deconversion revenue of $9,644 and revenue related to a contractual change of $1,223 and deconversion revenue of $69$1,201 for the prior fiscal secondyear third quarter results in an increase of 6.7%7.3% quarter over quarter. This increase was primarily driven by organic growth in our revenue lines including data processing and hosting revenues within private and public cloud, Jack Henry digital and transactiontransaction, revenues, card revenue,card, and faster payments products revenue.payments.

Operating expenses increased 2.1%,7.8%, or $9,340,$34,851, for the secondthird quarter of fiscal 2026,2026 compared to the secondthird quarter of fiscal 2025. Total operating expenses less the impact of the gain on sale of assets, net, of $3,032, deconversion operating expenses of $2,612,$4,030 and operating expenses for the acquired company of $2,929$2,484 for the current fiscal quarter and less operating expenses related to deconversion operating expenses of $2,794 and a contractual change of $1,059 and deconversion operating expenses of $690$992 for the prior fiscal secondyear third quarter results in an increase of 1.9%7.3% quarter over quarter. This increase was primarily driven by increased direct costs and higher personnel costs tempered by lower than normal medical claims and partiallyincreased offsetdirect by the decrease in travel and entertainment and meeting expenses,costs, quarter over quarter, due to the timing of the Connect conference.quarter.

Operating income increased 29.4%,11.8%, or $36,146,$16,307, for the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025. Total operating income less the impact of the gain on sale of assets, net, of $3,032, deconversion operating income of $3,600,$14,635 and an operating loss for the acquired company of $984$833 for the current fiscal quarter and less deconversion operating income of $6,851 and operating income related to a contractual change of $164 and deconversion operating loss of $622$209 for the prior fiscal secondyear third quarter results in an increase of 24.3%,7.3%, quarter over quarter. This increase was primarily driven by organic revenue growthgrowth, partially offset by increased operating expenses detailed above tempered by our disciplined approach to controlling costs and lower than normal medical claimscosts, quarter over quarter.

The provision for income taxes increased 33.8%,15.7%, or $9,989,$4,847, for the secondthird quarter of fiscal 2026,2026 compared to the secondthird quarter of fiscal 2025. This increase was primarily driven by the increase in income before income taxes. The effective tax rate for the current fiscal quarter was 24.1%22.5% compared to 23.2%21.7% for the same quarter a year ago.

Net income increased 27.4%,10.6%, or $26,823,$11,786, for the secondthird quarter of fiscal 2026,2026 compared to the secondthird quarter of fiscal 2025. The total net income increase, quarter over quarter, was lower when adjusted for the impact of the gain on sale of assets, net, deconversion net income,income and a net loss for the acquired company in the current fiscal quarter and the net income related to deconversion net income and a contractual change and deconversion net loss in the prior fiscal secondyear third quarter. The increaseincrease, excluding these one-time itemsitems, was primarily driven by net organic growth in our lines of revenue for the secondthird quarter of fiscal 2026 partially offset by commensurate higher operating expenses detailed above that were tempered by our disciplined approach to controlling costs and lower than normal medical claims, and the increased provision for income taxes.

For the fiscal sixnine months ended DecemberMarch 31, 2025,2026, total revenue increased 7.6%,8.0%, or $89,242,$140,400, compared to the same period in fiscal 2025. Total revenue less deconversion revenue of $14,838$33,504 and revenue for the acquired company of $1,945$3,595 for the current fiscal year period and deconversion revenue of $3,766 and revenue from a contractual change of $13,471$14,672 and deconversion revenue of $13,410 for the prior fiscal year period results in an increase of 7.7%,7.6%, period over period. This increase was primarily driven by organic growth in our revenue lines including data processing and hosting revenues within private and public cloud, card revenue,card, Jack Henry digital and transaction revenues,transaction, and faster payment products revenue.payments.

Operating expenses increased 2.3%,4.1%, or $20,307,$55,157, for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. Total operating expenses less deconversion operating expenses of $4,137,$8,167, the impact of the gain on sale of assets, net, of $6,829, and operating expenses for the acquired company of $2,929$5,413 for the current fiscal year period and less deconversion operating expenses of $892 and operating expenses related to a contractual change of $11,501$12,494 and deconversion operating expenses of $3,686 for the prior fiscal year period results in an increase of 3.7%,4.9%, period over period. This increase was primarily driven by increasedhigher personnel costs tempered by lower than normal medical claims and higher direct costs.costs, period over period.

Operating income increased 25.1%,20.6%, or $68,935,$85,243, for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. Removing from totalTotal operating income less deconversion operating income of $10,701,$25,337, the impact of the gain on sale of assets, net, of $6,829, and an operating loss for the acquired company of $984$1,817 for the current fiscal year period and deconversion operating income of $2,873$9,724 and operating income related to a contractual change of $1,970$2,178 for the prior fiscal year period results in an increase of 21.2%,16.7%, period over period. This increase was primarily driven by organic revenue growthgrowth, partially offset by increased operating expenses detailed above tempered by our disciplined approach to controlling costs and lower than normal medical claims.costs.

The provision for income taxes increased 27.9%,24.1%, or $18,713,$23,560, for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. This increase was primarily driven by the increase in income before income taxes. The effective tax rate for the current fiscal year period was 24.2%23.7% compared to 23.6%23.0% for the same period a year ago.

Net income increased 23.8%,19.3%, or $51,619,$63,405, for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. The total net income increase, period over period, was lower when adjusted for the impact of the gain on sale of assets, net, deconversion net income, a gain on assets, net, and a net loss for the acquired company in the current fiscal year period and deconversion net income and the net income related to a contractual change and deconversion net income in the prior fiscal year period. The increase excluding these one-time items was primarily driven by net organic growth in our lines of revenue for the sixnine months ended DecemberMarch 31, 2025,2026, partially offset by commensurate higher operating expenses detailed above,above tempered by our disciplined approach to controlling costs and lower than normal medical claims, and the increased provision for income taxes.

As we move into the thirdfourth quarter of fiscal 2026 – our 50th year in business – we are excited and confident about our future, and we remain well-positioned to deliver durable, consistent growth and attractive results for our shareholders.stockholders. Technology spending by financial institutions remains strong, and there is clear demand for our differentiated and innovative technology solutions. We have a very healthy sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions. Our unwavering focus on culture, service, innovation, strategy, and execution continues to set us apart in the market and will enable us to drive continued industry-leading revenue growth with strong margin expansion, benefiting our associates, clients, and shareholders.stockholders.

A detailed discussion of the major components of the results of operations for the fiscal three and sixnine months ended DecemberMarch 31, 2025,2026, follows.

Discussions compare the current fiscal year's three and sixnine months ended DecemberMarch 31, 2025,2026, to the prior fiscal year's three and sixnine months ended DecemberMarch 31, 2024.2025.

Services and support revenue increased 7.1%10.4% for the secondthird quarter of fiscal 2026 compared to the same quarter a year ago. Total services and support revenue less deconversion revenue of $6,212$18,665 for the current fiscal quarter and less deconversion revenue of $9,644 and services and support revenue related to a contractual change of $1,223 and deconversion revenue of $69$1,201 for the prior fiscal secondyear third quarter, results in growth of 5.6%8.3%, quarter over quarter. This increase was primarily driven by growth in data processing and hosting revenues within private and public cloud as new and existing clients continue to migrate to our private cloud and processing volumes expand.

Services and support revenue increased 6.3%7.7% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. ReducingTotal services and support revenue forless deconversion revenue fromof each period, which was $14,838$33,504 for the current fiscal year period and $3,766 for the prior fiscal year period and reducingless services and support revenue for a contractual change of $13,471$14,672 and deconversion revenue of $13,410 for the prior fiscal year period, results in growth of 6.8%7.3%, period over period. This increase was primarily driven by growth in data processing and hosting revenues within private and public cloud as new and existing clients migrate to our private cloud and processing volumes expand as well as higher consulting and work order and consulting revenues.

Processing revenue increased 9.1%6.6% for the secondthird quarter of fiscal 2026 compared to the same quarter last fiscal year. ReducingTotal processing revenue forless processing revenue for the acquired company of $1,945$1,651 for the current fiscal quarter, results in growth of 8.3%6.0%, quarter over quarter. This increase was primarily driven by improvement in Jack Henry digital and transaction revenues from a higher number of active users and the ramping up of add-on products, growth in card revenue from monthly service and risk management fees, and higher faster payments products revenue from expanding activetransactional users and new clients.volumes.

Processing revenue increased 9.3%8.4% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. ReducingTotal processing revenue forless processing revenue for the acquired company of $1,945$3,595 for the current fiscal year period, results in growth of 9.0%7.9%, period over period. This increase was primarily driven by growth in card revenue primarily from monthly service and risk management fees, improvement in Jack Henry digital and transaction revenues from a higher number of active users and expanding volumes and the ramping up of add-on products, and higher faster payments products revenue from expanding volumestransactional and new clients.volumes.

Cost of revenue for the secondthird quarter of fiscal 2026 increased 5.4%6.9% over the prior fiscal secondyear third quarter. Total cost of revenue less deconversion costs of $1,128$2,584 and cost of revenue for the acquired company of $2,503$1,612 for the current fiscal quarter and less deconversion costs of $240$1,873 and costs related to a contractual change of $1,059$992 for the prior fiscal secondyear third quarter, results in a 4.8%6.5% increaseincrease, quarter over quarter. This increase was primarily due to higher personnel costs partially related to a headcount increase in the trailing twelve months, higher direct costs generally consistent with increases in the related lines of revenue, higher personnel costs tempered by lower than normal medical claims, as well as increased amortization of intangible assets. Cost of revenue decreased 1% as a percentage of total revenue compared to the prior fiscal secondyear third quarter.

Cost of revenue for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, increased 3.4%4.6% compared to the same period in fiscal 2025. ReducingTotal cost of revenue forless deconversion costs of $2,032$4,616 and cost of revenue for the acquired company of $2,503$4,116 for the current fiscal year period and deconversion costs of $355$2,228 and costs related to a contractual change of $11,501$12,494 for the prior fiscal year period, results in a 4.6%5.2% increaseincrease, period over period. This increase was primarily due to higher personnel costs partially related to a headcount increase in the trailing twelve months, higher direct costs generally consistent with increases in the related lines of revenue, increased personnel costs tempered by lower than normal medical claims, as well as higher amortization of intangible assets. Personnel cost increases were tempered by the impact of lower-than-normal medical claims earlier in the fiscal year. Cost of revenue decreased 3%2% as a percentage of total revenue compared to the prior fiscal year period.

Research and development expense increased 2.8%14.5% for the secondthird quarter of fiscal 2026 compared to the prior fiscal secondyear third quarter. ResearchTotal research and development expensecosts increasedless 0.9%research and development costs for the acquired company of $841 for the current fiscal sixquarter, monthsresults endedin Decembera 31,12.3% 2025,increase, comparedquarter over quarter. This increase was primarily due to thehigher samepersonnel periodcosts (net of capitalization) partially related to a headcount increase in fiscal 2025. Research and development expense remained consistent as a percentage of total revenue compared to the priortrailing fiscaltwelve second quarter and decreased 1% as a percentage of total revenue compared to the prior fiscal year period.months.

Selling, general,Research and administrativedevelopment expense decreasedincreased 2.6%5.3% infor the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025. ReducingTotal selling, general,research and administrative expense for deconversiondevelopment costs fromless each period, which were $2,105 for the current fiscal year periodresearch and $538 for the prior fiscal year period, and for the impact of the gain on sale of assets, net, of $6,829 anddevelopment costs for the acquired company of $54$1,213 infor the current fiscal year period, results in a 1.1%4.3% increaseincrease, period over period. This increase was primarily due to higher personnel costs including(net increasedof compensationcapitalization) costspartially duerelated to modesta headcount increasesincrease in the trailing twelve monthsmonths. that were tempered by lower than normal medical claims. Selling, general,Research and administrativedevelopment expense decreasedremained 1%consistent as a percentage of total revenue compared to the prior fiscal year third quarter and prior fiscal year period.

Interest income and interest expense decreased due to lower interest-earning and credit line balances, respectively, for the fiscal three and sixnine months ended DecemberMarch 31, 2025,2026, compared to the fiscal three and sixnine months ended DecemberMarch 31, 2024.2025.

The provision for income taxes increased 33.8%15.7% for the secondthird quarter of fiscal 2026, compared to the secondthird quarter of fiscal 2025. The effective tax rate for the current fiscal quarter was 24.1%22.5% compared to 23.2%21.7% for the same quarter a year ago. The provisionincrease for income taxes increased 27.9% forin the six months ended December 31, 2025, compared to the same period a year ago. TheCompany's effective tax rate forwas primarily due to tax benefits from the currentpurchase of investment tax credits during the prior fiscal year-to-dateyear, periodcombined waswith 24.2%growth comparedin tocurrent 23.6%year foroperating income, which diluted the samerelative periodimpact aof tax benefits that were relatively consistent year ago.over year.

Net income increased 27.4%10.6% to $124,668,$122,894, or $1.72$1.71 per diluted share, for the secondthird quarter of fiscal 2026 compared to $97,845,$111,108, or $1.34$1.52 per diluted share, in the same quarter of fiscal 2025. The total net income increase, quarter over quarter, was lower when adjusted for the impact of the gain on sale of assets, net, deconversion net income,income and a net loss for the acquired company in the current fiscal quarter and thedeconversion net income and net income related to a contractual change and deconversion net loss in the prior fiscal secondyear third quarter. The increase excluding these one-time items was primarily driven by net organic growth in our lines of revenue for the secondthird quarter of fiscal 2026 partially offset by commensurate higher operating expenses detailed above that were tempered by our disciplined approach to controlling costs and lower than normal medical claims,costs, as well as the increased provision for income taxes.

Net income increased 23.8%19.3% to $268,655,$391,549, or $3.70$5.41 per diluted share, for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to $217,036,$328,144, or $2.97$4.49 per diluted share, in the same period of fiscal 2025. The total net income increase, period over period, was lower when adjusted for the impact of deconversion net income, the gain on sale of assets, net, deconversion net income, and a net loss for the acquired company in the current fiscal year period and deconversion net income and the net income related to a contractual change and deconversion net income in the prior fiscal year period. The increase excluding these one-time items was primarily driven by net organic growth in our lines of revenue for the sixnine months ended DecemberMarch 31, 2025,2026, partially offset by commensurate higher operating expenses detailed above, tempered by our disciplined approach to controlling costs and lower than normal medical claims,claims earlier in the fiscal year, as well as the increased provision for income taxes.

The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate and Other.Services. 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 accountholder 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, money movement and embedded payment capabilities, remote deposit capture processing, and risk management products and services. The Complementary segment provides additional software, hosted processing platforms, and services, including digital/mobile banking, treasury services, online account opening, fraud/AML and lending/deposit solutions that can be integrated with the Company's Core solutions, and many can be used independently. The Corporate and OtherServices segment includes revenue and direct costs from hardware and other products notand attributedservices toand anyour oftechnology theinfrastructure other three segments, as well as operating expenses not directly attributable to the other three segments.costs.

The Company's Chief Executive Officer, who is also the Company's CODM, regularly evaluated segment performance and made strategic decisions on the allocation of resources to the segments based on various factors, including performance against trend, budget, and forecast for the fiscal three and sixnine months ended DecemberMarch 31, 2025,2026, and 2024.2025. The CODM also used reportable segment revenue, costs of revenue, and segment income to evaluate segment performance and allocate resources. The Company has not disclosed any additional asset information by segment, as the information is not generated for internal management reporting to the CODM.

During the fiscal sixnine months ended DecemberMarch 31, 2025,2026, the Company transferred a product from the Corporate and OtherServices segment to the Complementary segment due to better alignment with the Complementary segment. As a result of this transfer, adjustments were made during the fiscal three and sixnine months ended DecemberMarch 31, 2025,2026, to reclassify related revenue and cost of revenue recognized for the fiscal three and sixnine months ended DecemberMarch 31, 2024,2025, from the Corporate and OtherServices segment to the Complementary segment. Revenue reclassed for the fiscal three and sixnine months ended DecemberMarch 31, 2024,2025, was $3,229$3,327 and $6,472,$9,799, respectively. Cost of revenue reclassed for the fiscal three and sixnine months ended DecemberMarch 31, 2024,2025, was $743$762 and $1,446,$2,208, respectively.

Immaterial adjustments have been made between segments during the fiscal three and sixnine months ended DecemberMarch 31, 2025,2026, to reclassify revenue and cost of revenue that was recognized for the fiscal three and sixnine months ended DecemberMarch 31, 2024.2025. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. Revenue reclassed for the fiscal three and sixnine months ended DecemberMarch 31, 2024,2025, from the Core segment to the Complementary segment, was $1,566$1,673 and $2,901,$4,575, respectively. Cost of revenue reclassed for the fiscal three and sixnine months ended DecemberMarch 31, 2024,2025, from the Core segment to the Complementary segment, was $415$479 and $888,$1,367, respectively. Cost of revenue reclassed for the fiscal three and nine months ended March 31, 2025, from the Core segment to the Corporate Services segment, was $66 and $200, respectively.

Revenue in the Core segment increased 8.4%9.2% and cost of revenue increased 6.5%8.7% for the fiscal three months ended DecemberMarch 31, 2025,2026, compared to the fiscal three months ended DecemberMarch 31, 2024.2025. Total Core revenue less Core deconversion revenue of $3,050$7,506 for the fiscal three months ended DecemberMarch 31, 2025,2026, and less Core deconversion revenue of $4,838 and less Core revenue related to a contractual change of $1,223 and deconversion revenue of $(20)$1,201 for the fiscal three months ended DecemberMarch 31, 2024,2025, results in a 7.4%8.6% increaseincrease, quarter over quarter. This increase was primarily driven by organic growth in our Core revenue lines including data processing and hosting revenues within private and public cloud as new and existing clients continue to migrate to our private cloud and processing volumes expand. Total Core cost of revenue less Core deconversion costs of $703$1,971 for the fiscal three months ended DecemberMarch 31, 2025,2026, and less Core deconversion costs of $1,240 and Core costs related to a contractual change of $1,059 and deconversion costs of $88$992 for the fiscal three months ended DecemberMarch 31, 2024,2025, results in a 7.3%9.3% increaseincrease, quarter over quarter. This increase was primarily due to higher Core direct costs generally consistent with increases in related Core lines of revenue.revenue and higher Core personnel costs partially related to a headcount increase in the trailing twelve months. Core cost of revenue decreasedremained 1%consistent as a percentage of Core revenue for the secondthird quarter of fiscal 2026 compared to the same quarter in fiscal 2025.

Revenue in the Core segment increased 4.2%5.9% and cost of revenue decreasedincreased 2.1%1.5% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the fiscal sixnine months ended DecemberMarch 31, 2024.2025. ReducingTotal Core revenue forless Core deconversion revenue of $6,269$13,775 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and Core deconversion revenue of $1,267$6,105 and contractualCore revenue related to a contractual change of $13,471$14,672 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in a 6.8%7.4% increaseincrease, period over period. This increase was primarily driven by organic growth in our Core revenue lines including data processing and hosting revenues within private and public cloud as new and existing clients migrate to our private cloud and processing volumes expand. ReducingTotal Core cost of revenue forless Core deconversion costs of $1,146$3,117 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and Core costs related to a contractual change of $12,494 and Core deconversion costs of $125 and contractual change costs of $11,501$1,365 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in a 5.2%6.6% increaseincrease, period over period. This increase was primarily due to higher directCore personnel costs generallypartially consistentrelated withto increasesa headcount increase in relatedthe linestrailing oftwelve revenue.months, tempered by our disciplined approach to controlling costs and lower than normal medical claims earlier in the fiscal year. Core cost of revenue decreased 2%1% as a percentage of Core revenue for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025.

Revenue in the Payments segment increased 8.0%7.0% and cost of revenue increased 4.6%2.9% for the secondthird quarter of fiscal 2026 compared to the same quarter last fiscal year. Total Payments revenue less Payments deconversion revenue of $1,397$5,923 and Payments revenue for the acquired company of $1,945$1,651 for the secondthird quarter of fiscal 2026 and Payments deconversion revenue of $34$2,394 for the secondthird quarter of fiscal 2025, results in a 6.4%4.7% increaseincrease, quarter over quarter. This increase was primarily due to higher Payments card revenue from an increase in volume and higher Payments faster payments products revenue from expanding activetransactional usersvolumes. and new clients. TheTotal Payments cost of revenue less Payments cost of revenue for the acquired company of $1,453 and Payments deconversion cost of revenue of $124 for the third quarter of fiscal 2026 and Payments deconversion cost of revenue of $108 for the third quarter of fiscal 2025, results in a 1.6% increase, quarter over quarter. This increase was primarily due to higher Payments personnel costs partially related to a headcount increase in the trailing twelve months and direct costs generally consistent with increases in Payments lines of revenue. Deconversion and one-time costs did not significantly affect Payments cost of revenue quarter over quarter. Payments cost of revenue as a percentage of Payments revenue decreased 1%2% for the secondthird quarter of fiscal 2026 compared to the same quarter in fiscal 2025.

Revenue in the Payments segment increased 8.5%8.0% and cost of revenue increased 4.8%4.2% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period of the prior fiscal year. ReducingTotal Payments revenue forless Payments deconversion revenue of $4,880$10,804 and Payments revenue for the acquired company of $1,945$3,595 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and Payments deconversion revenue of $1,948$4,341 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in a 7.4%6.5% increaseincrease, period over period. This increase was primarily due to higher Payments card revenue from an increase in volumes, higher faster payments products revenue from an increase in volumes and newhigher clients.Payments Reducingfaster payments revenue from expanding transactional volumes. Total Payments cost of revenue for deconversion costs of $289 andless Payments cost of revenue for the acquired company of $2,409$3,862 and Payments deconversion costs of $413 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and Payments deconversion costs of $70$179 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in a 3.7%3.0% increaseincrease, period over period. The Payments cost of revenueThis increase was primarily due to higher direct costs generally consistent with increases in Payments lines of revenue. Payments cost of revenue as a percentage of Payments revenue decreased 1% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025.

Revenue in the Complementary segment increased 9.6%8.7% and cost of revenue increased 7.3%4.5% for the secondthird quarter of fiscal 2026 compared to the same quarter last fiscal year. Total Complementary revenue less Complementary deconversion revenue inof both quarters, which totaled $1,702$5,054 for the secondthird quarter of fiscal 2026 and $60Complementary deconversion revenue of $2,324 for the secondthird quarter of fiscal 2025, results in ana 8.7%7.2% increaseincrease, quarter over quarter. This increase was primarily driven by organic growth in Complementary hosting revenue as new and existing clients continue to migrate to our private cloud and processing volumes expanded and Complementary Jack Henry digital and transaction revenue from a higher number of active users and the ramping up of add-on products. Complementary cost of revenue less Complementary deconversion costs inof both quarters, which totaled $288$482 for the secondthird quarter of fiscal 2026 and $99Complementary deconversion costs of $519 for the secondthird quarter of fiscal 2025, results in a 7.0%4.6% increaseincrease, quarter over quarter. This increase was primarily driven by higher direct costs generally consistent with increases in related Complementary lines of revenue and increased amortization of intangibles.Complementary intangibles from capital software development projects. Complementary cost of revenue as a percentage of Complementary revenue decreased 1% for the secondthird quarter of fiscal 2026 compared to the same quarter in fiscal 2025.

Revenue in the Complementary segment increased 9.9%9.5% and cost of revenue increased 7.5%6.5% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the equivalent period of the prior fiscal year. ReducingTotal Complementary revenue forless Complementary deconversion revenue inof both periods, which totaled $3,578$8,632 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and $533Complementary deconversion revenue of $2,857 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in aan 9.0%8.4% increaseincrease, period over period. This increase was primarily driven by organic growth in Complementary hosting revenues as new and existing clients continued to migrate to our private cloud and processing volumes expanded and increased Complementary Jack Henry digital and transaction revenue as the number of active users increased and volumes expanded and from the ramping up of add-on productsproducts. and hosting revenues as new and existing clients continued to migrate to our private cloud and processing volumes expanded. ReducingTotal Complementary cost of revenue forless Complementary deconversion costs inof both periods, which totaled $596$1,078 for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, and $159Complementary deconversion costs of $678 for the fiscal sixnine months ended DecemberMarch 31, 2024,2025, results in a 7.1%6.3% increaseincrease, period over period. This increase was primarily driven by higher direct costs generally consistent with increases in related Complementary lines of revenue and increased amortization of capitalizedComplementary softwareintangibles from capital software development projects. Complementary cost of revenue as a percentage of Complementary revenue decreased 1% for the fiscal sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal 2025.

Revenue classified in the Corporate and OtherServices segment includes revenues from hardware and other products and services and hardware not specifically attributed to the other three segments.services. Revenue in the Corporate and OtherServices segment decreasedincreased 9.8%27.5% for the secondthird quarter of fiscal 2026 compared to the same quarter last fiscal year. Total Corporate and OtherServices revenue less Corporate Services deconversion revenue inof both quarters, which totaled $63$182 for the secondthird quarter of fiscal 2026 and $(5)Corporate Services deconversion revenue of $88 for the secondthird quarter of fiscal 2025, results in a 10.1%27.1% decreaseincrease, quarter over quarter. This decreaseincrease was primarily due to the decreasegrowth in userCorporate groupServices hardware revenue relatedand todigital theand timingtransaction of our Connect conferencerevenue, quarter over quarter. Cost of revenue for the Corporate and OtherServices segment includes operatingdirect expensescosts notfrom directlyhardware attributable to theand other threeproducts segments.and services and our technology infrastructure costs. The Corporate and OtherServices cost of revenue in the secondthird quarter of fiscal 2026 increased 4.2%12.9% when compared to the prior fiscal year quarter. Total Corporate and OtherServices cost of revenue less Corporate Services deconversion costs of $6 and OtherCorporate Services cost of revenue for the acquired company of $94$159 for the secondthird quarter of fiscal 2026 and Corporate Services deconversion costs of $5 for the third quarter of fiscal 2025, results in a 4.1%12.7% increaseincrease, quarter over quarter. This increase was primarily due to higher licensesCorporate Services personnel costs partially related to a headcount increase in the trailing twelve months, tempered by our disciplined approach to controlling costs and feeslower andthan normal medical claims earlier in the fiscal year, a loss on saleCorporate ofServices assets, net, and higher Corporate Services internal licenses and fees, quarter over quarter.

The Company's cash and cash equivalents decreased to $28,216$20,573 at DecemberMarch 31, 2025,2026, from $101,953 at June 30, 2025.

Cash provided by operating activities for the first sixnine months of fiscal 2026 increased 32%46% compared to the same period last year primarily due to the change in deferred income taxes period over period. Cash from operations is primarily used to repay debt, to pay dividends, to repurchase stock, for capital expenditures, and for acquisitions.

Cash used in investing activities for the first sixnine months of fiscal 2026 totaled $155,806$220,145 and included: $92,484$140,003 for the ongoing enhancement and development of existing and new product and service offerings; $42,390 for an acquisition; capital expenditures for facilities and equipment of $30,096$46,616; $42,390 for an acquisition; the purchase of investments of $13,500,$13,710, and $2,908$2,998 for the purchase and development of internal use software. Cash uses were partially offset by proceeds from the sale of assets of $24,572 and proceeds from investments of $1,000. Cash used in investing activities for the first sixnine months of fiscal 2025 totaled $119,800$176,317 and included: $85,803$130,298 for the development of software; $29,469$41,186 for capital expenditures; $3,528$3,833 for the purchase and development of internal use software; and $2,000 for the purchase of investments. Cash uses were partially offset by proceeds from investments of $1,000.

Financing activities used cash of $191,185$320,521 for the first sixnine months of fiscal 2026 and included: $125,237$284,414 for the purchase of treasury stock; repayments on credit facilities of $105,000$270,000; and dividends paid to stockholders of $83,979;$127,457. Cash uses were partially offset by borrowings on credit facilities of $360,000 and $1,969$1,350 net cash outflowinflow from the issuance of stock and tax withholding related to stock-based compensation. Financing activities used cash of $136,489 in the first nine months of fiscal 2025 and included: $235,000 for the repayments on credit facilities; $122,464 for the payment of dividends; and $35,052 for the purchase of treasury stock. Cash uses were partially offset by borrowings on credit facilities of $125,000. Financing activities used cash of $99,374 in the first six months of fiscal 2025$255,000 and included: $165,000 for the repayments on credit facilities; $80,193 for the payment of dividends; $17,050 for the purchase of treasury stock; and $2,131$1,027 net cash outflowinflow from the issuance of stock and tax withholding related to stock-based compensation. Cash uses were partially offset by borrowings on credit facilities of $165,000.

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $30,096$46,616 and $29,469$41,186 for the fiscal sixnine months ended DecemberMarch 31, 2026, and March 31, 2025, and December 31, 2024, 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 2026 are expected to be between approximately $80,000$100,000 and $90,000$130,000 and have been or will be funded from our credit facilities and 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 credit facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At DecemberMarch 31, 2025,2026, there were 32,37533,361 shares in treasury stock and the Company had the remaining authority to repurchase up to 2,6161,630 additional shares. The total cost of treasury stock at DecemberMarch 31, 2025,2026, was $2,020,461.$2,179,638. During the first sixnine months of fiscal 2026, the Company repurchased 7951,781 shares. At June 30, 2025, there were 31,580 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,411 additional shares. The total cost of treasury stock at June 30, 2025, was $1,895,224. During the first sixnine months of fiscal 2025, the Company repurchased over 99207 shares.

On AugustMarch 31,25, 2022,2026, the Company entered into a five-yearfive-year, senior,revolving, unsecured amendedcredit andagreement restatedthat replaced the prior credit agreement.agreement described below. The credit agreement allows for borrowings of up to $600,000,$1,000,000 whichand mayallows befor increasedadditional revolving credit commitments and/or term loan commitments, pursuant to $1,000,000the byterms and subject to certain limitations set forth in the Companycredit at any time until maturity.agreement. The credit agreement bears interest at a variable rate equal toto, at the option of the Company, either (a) a rate based on an adjusted Term Secured Overnight Financing Rate ("SOFR term") rate or (b) an alternate base rate (the highest of (i) 0%,0.0%, (ii) theU.S. PrimeBank's Rateprime for such day,rate, (iii) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum and (iv) the Adjusted Term SOFR Screen Rate (without giving effect to the Applicable Margin) for a one month Interestadjusted PeriodTerm onSOFR such day for Dollarsrate plus 1.0%), plus an applicable percentage in each case determined bybased on the Company's leverage ratio. The credit agreement is guaranteed by certain subsidiaries of the Company and is subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the credit agreement. As of DecemberMarch 31, 2025,2026, the Company was in compliance with all such covenants. The credit facilityagreement terminates AugustMarch 31,25, 2027.2031. There was $20,000 and $0$90,000 outstanding under the credit facility at DecemberMarch 31, 2025 and June 30, 2025, respectively.2026.

On October 31, 2024, the Company entered into a discretionary line of credit demand note, which provided for funding of up to $50,000 and bore interest at the prime rate less 2.0%. The note did not constitute a committed line of credit. The line of credit expired on October 31, 2025. There was no balance outstanding at December 31, 2025, or June 30, 2025.

On July 18, 2025, the Company entered into an unsecured committed revolving line of credit facility with a commercial bank in the amount of $50,000, which bears interest at the prime rate less 1.0%. The line of credit expires on July 17, 2026. There was no balance outstanding at DecemberMarch 31, 2025.2026.