HENRY JACK & ASSOCIATES INC MANAGEMENT REPORT AND DISCUSSION OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

This discussion and analysis should be read in conjunction with the condensed
consolidated financial statements and the accompanying notes to the condensed
consolidated financial statements included in this Form 10-Q for the quarter
ended September 30, 2022.

OVERVIEW

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

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

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

RESULTS OF OPERATIONS

For the first quarter of fiscal 2023, total revenue increased 8%, or $41,146,
compared to the same quarter in fiscal 2022. The increase was primarily driven
by growth in private and public cloud, card processing, transaction and digital,
remittance, software usage, and implementation revenues.

Operating expenses increased 10% for the first quarter of fiscal 2023 compared
to the first quarter of fiscal 2022. Increasing operating expenses for the net
effects of deconversion fees of $653, acquisitions of $2,535, and the gain on
disposal of assets, net, of $6,176, for the current fiscal quarter and reducing
operating expenses for the effects of deconversion fees of $540 for the prior
fiscal year quarter, results in an 11% increase for the first quarter of fiscal
2023 compared to the same quarter a year ago. This increase in operating
expenses was primarily driven by higher personnel costs, increased direct costs
in line with related revenue, and increased travel expenses.

Operating income increased 5% for the first quarter of fiscal 2023 compared to
the first quarter of fiscal 2022. Reducing operating income for the effects of
deconversion fees of $3,865 for the current fiscal quarter and $3,184 for the
prior fiscal year quarter and for the effects of acquisitions of $1,797 and the
gain on disposal of assets, net, of $6,176 for the current fiscal quarter,
results in a 2% increase for the first quarter of fiscal 2023 compared to the
same quarter a year ago. This increase in operating income was primarily driven
by increased revenue growth partially offset by increased operating expenses
detailed above.

The provision for income taxes increased 5% for the first quarter of fiscal 2023
compared to the prior fiscal year first quarter. The effective tax rate for the
first quarter of fiscal 2023 was 23.5% compared to 23.4% for the same quarter a
year ago.

Due to the above changes, net income increased by 4% for the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022.

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We move into the second quarter of fiscal 2023 with optimism following strong
performance in the first quarter. Significant portions of our business continue
to come from recurring revenues and our sales pipeline also remains encouraging.
Our customers continue to face regulatory and operational challenges which our
products and services address, and we believe they have a great need for our
solutions that directly address institutional profitability, efficiency, and
security. Our strong balance sheet, access to extensive lines of credit, the
continued strength of our existing lines of revenue, and an unwavering
commitment to superior customer service should position us well to address
current and future opportunities.

A detailed discussion of the major components of the results of operations for
the three months ended September 30, 2022, follows. Discussions compare the
current fiscal year's three months ended September 30, 2022, to the prior fiscal
year's three months ended September 30, 2021.

REVENUE
Services and Support                                                                %
                                     Three Months Ended September 30,             Change
                                     2022                            2021
Services and Support          $       320,149                    $ 297,494           8  %
Percentage of total revenue                60   %                       61  %


Services and support revenue increased 8% for the first quarter of fiscal 2023
compared to the same quarter a year ago. Reducing services and support revenue
for deconversion fee revenue from each quarter, which was $4,518 for the current
fiscal quarter and $3,724 for the prior fiscal year quarter and for the effects
of acquisitions of $24 for the current fiscal quarter, results in growth of 7%
quarter over quarter. This increase was primarily driven by growth in cloud
processing, software usage, and implementation fee revenues, as well as an
increase in user group fee revenue. Growth in software usage reflects a
continuing shift of customers to our time-based license model.

Processing                                                                          %
                                     Three Months Ended September 30,             Change
                                     2022                            2021
Processing                    $       209,053                    $ 190,562          10  %
Percentage of total revenue                40   %                       39  %


Processing revenue increased 10% for the first quarter of fiscal 2023 compared
to the same quarter last fiscal year. Reducing processing revenue for the
effects of acquisitions of $714 for the current fiscal quarter, results in
growth of 9% quarter over quarter. This increase was primarily driven by higher
card processing and Jack Henry digital revenue, including Banno, as well as
payment processing fees, including iPay, primarily due to expanding volumes,
complemented by growth in the other processing revenue components, quarter over
quarter.

OPERATING EXPENSES

Cost of Revenue                                                                     %
                                     Three Months Ended September 30,             Change
                                     2022                            2021
Cost of Revenue               $       298,261                    $ 276,636           8  %
Percentage of total revenue                56   %                       57  %


Cost of revenue for the first quarter of fiscal 2023 increased 8% over the prior
fiscal year first quarter. Reducing cost of revenue for the effects of
deconversion fees from each quarter, which were $411 for the current fiscal year
quarter and $337 for the prior fiscal year quarter and increasing cost of
revenue for the net effects of acquisitions of $1,539 from the current fiscal
year quarter, results in a 7% increase quarter over quarter. This increase was
primarily due to higher costs associated with our card processing third-party
platform, higher personnel costs, increased internal licenses and fees, and
increased amortization of intangible assets at September 30, 2022, compared to
the same period a year ago. The increases in cost of revenue were primarily due
to organic growth within our product lines. Cost of revenue decreased 1%
compared to the prior fiscal year quarter as a percentage of total revenue.
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  Table of Contents

Research and Development                                                             %
                                      Three Months Ended September 30,             Change
                                     2022                             2021
Research and Development      $        32,993                      $ 26,754          23  %
Percentage of total revenue                 6   %                         5  %


Research and development expense increased 23% for the first quarter of fiscal
2023 over the prior fiscal year first quarter. Reducing research and development
expense for the effects of acquisitions of $332 for the current fiscal quarter,
results in a 22% increase quarter over quarter. This increase was primarily due
to an increase in personnel costs, net of capitalization, quarter over quarter.
Research and development expense for the quarter increased 1% compared to the
prior fiscal year quarter as a percentage of total revenue.

Selling, General, and Administrative                         Three Months Ended September               %
                                                                          30,                        Change
                                                                2022               2021
Selling, General, and Administrative                        $  57,225           $ 51,071                  12  %

Percentage of total revenue                                        11   %             10  %


Selling, general, and administrative expense increased 12% in the first quarter
of fiscal 2023 over the same quarter in the prior fiscal year. Reducing selling,
general, and administrative expense for the effects of deconversion fees from
each quarter, which were $242 for the current fiscal year quarter and $202 for
the prior fiscal year quarter and increasing selling, general, and
administrative expense for the net effects of acquisitions and gain/loss of
$5,512 for the prior fiscal year quarter, results in a 23% increase quarter over
quarter. This increase was primarily due to higher travel expenses and personnel
costs, increased consulting and other professional services, and an increase in
meetings and trainings. Selling, general, and administrative expense increased
1% as a percentage of total revenue this fiscal quarter versus the prior fiscal
year quarter.

INTEREST INCOME (EXPENSE)                                                                %
                                       Three Months Ended September 30,               Change
                                               2022                        2021
Interest Income               $               152                        $    7       2,071  %
Interest Expense              $            (1,576)                       $ (248)        535  %


Interest income fluctuated due to changes in invested balances and yields on
invested balances during the first quarter of fiscal 2023 compared to the same
period a year ago. Interest expense increased when compared to the prior fiscal
year quarter due to interest rate fluctuations, length of borrowing time, and
amounts borrowed. There was a $245,000 outstanding balance under the credit
facility at September 30, 2022, and $65,000 outstanding balance at September 30,
2021. The increase in the outstanding balance was primarily due to funding the
Payrailz acquisition on August 31, 2022.

PROVISION FOR INCOME TAXES                                                           %
                                      Three Months Ended September 30,             Change
                                     2022                             2021
Provision for Income Taxes    $        32,750                      $ 31,240           5  %
Effective Rate                           23.5   %                      23.4  %

The change in the effective tax rate was minimal for the first quarter of fiscal 2023 compared to the same quarter a year ago.

NET INCOME                                                                           %
                                      Three Months Ended September 30,             Change
                                            2022                      2021
Net income                    $         106,549                    $ 102,114          4  %
Diluted earnings per share    $            1.46                    $    1.38          6  %


Net income increased 4% to $106,549, or $1.46 per diluted share, for the first
quarter of fiscal 2023 compared to $102,114, or $1.38 per diluted share in the
same quarter of fiscal 2022.
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DISCUSSION ON THE REPORTABLE SECTOR

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

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

.
Core
                          Three Months Ended September 30,             % Change
                                2022                      2021
Revenue           $         175,124                    $ 165,285            6  %
Cost of Revenue   $          72,240                    $  66,902            8  %


Revenue in the Core segment increased 6% and cost of revenue increased 8% for
the three months ended September 30, 2022, compared to the three months ended
September 30, 2021. This increase in Core revenue over the prior fiscal year
quarter was primarily driven by the growth in cloud processing and software
usage revenues. Cost of revenue increased 8% quarter over quarter primarily due
to increased direct support costs and higher personnel costs. Cost of revenue
increased 1% as a percentage of revenue for the first quarter of fiscal 2023
compared to the same quarter of fiscal 2022.

Payments
                          Three Months Ended September 30,             % Change
                                2022                      2021
Revenue           $         186,540                    $ 172,591            8  %
Cost of Revenue   $         101,155                    $  94,582            7  %


Revenue in the Payments segment increased 8% for the first quarter of fiscal
2023 compared to the equivalent quarter of the prior fiscal year. Reducing
Payments revenue for deconversion fee revenue in both periods, which totaled
$1,435 for the first quarter of fiscal 2023 and $448 for the first quarter of
fiscal 2022 and for revenue from acquisitions of $738 from the current fiscal
year quarter, results in a 7% increase quarter over quarter. This Payments
revenue growth was primarily due to increased card and remittance fee revenues
within processing. Cost of revenue increased 7% quarter over quarter primarily
due to increased costs related to our credit and debit card third-party
processing platform in line with associated revenues and higher personnel costs.
Cost of revenue as a percentage of revenue decreased 1% for the first quarter of
fiscal 2023 compared to the same quarter of fiscal 2022.

Complementary
                          Three Months Ended September 30,             % Change
                                2022                      2021
Revenue           $         148,350                    $ 137,778            8  %
Cost of Revenue   $          58,437                    $  54,417            7  %


Revenue in the Complementary segment increased 8% for the first quarter of
fiscal 2023 compared to the equivalent quarter of the prior fiscal year. This
Complementary revenue growth was primarily driven by increased Jack Henry
digital and cloud processing revenues. Cost of revenue increased 7% quarter over
quarter primarily
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due to increased direct support and personnel costs. Cost of products as a percentage of revenue remained stable for the first quarter of fiscal 2023 compared to the same quarter of fiscal 2022.

Corporate and Other
                          Three Months Ended September 30,             % Change
                                 2022                      2021
Revenue           $         19,188                      $ 12,402           55  %
Cost of Revenue   $         66,429                      $ 60,735            9  %


Revenue in the Corporate and Other segment increased 55% for the first quarter
of fiscal 2023 compared to the equivalent quarter of the prior fiscal year. The
increase quarter over quarter was primarily due to higher user group and
hardware revenues. Revenue classified in the Corporate and Other segment
includes revenues from other products and services and hardware not specifically
attributed to any of the other three segments.

Cost of revenue for the Corporate and Other segment includes operating costs not
directly attributable to any of the other three segments. The cost of revenue in
the first quarter of fiscal 2023 increased 9% when compared to the prior fiscal
year quarter primarily due to higher internal licenses and fees, personnel
costs, and hardware costs.

CASH AND CAPITAL RESOURCES

The Company’s cash and cash equivalents decreased for $31,970 at September 30, 2022of $48,787 at June 30, 2022.

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

                                                Three Months Ended
                                                  September 30,
                                               2022           2021
Net income                                  $ 106,549      $ 102,114
Non-cash expenses                              34,139         56,498
Change in receivables                         101,509         53,404
Change in deferred revenue                    (65,130)       (60,662)

Change in other assets and liabilities (40,236) (44,805) Net cash provided by operating activities $136,831 $106,549


Cash provided by operating activities for the first three months of fiscal 2023
increased 28% compared to the same period last year. Cash from operations is
primarily used to repay debt, pay dividends, repurchase stock, for capital
expenditures, and acquisitions.

Cash used in investing activities for the first three months of fiscal 2023
totaled $249,594 and included: $228,986 for an acquisition; $38,715 for the
ongoing enhancements and development of existing and new product and service
offerings; capital expenditures on facilities and equipment of $7,737; and $408
for the purchase and development of internal use software. This was partially
offset by proceeds from the sale of assets of $26,252. Cash used in investing
activities for the first three months of fiscal 2022 totaled $46,451 and
included $35,971 for the development of software; capital expenditures of
$9,273; and $1,221 for the purchase and development of internal use software.
This was partially offset by proceeds from the sale of assets of $14.

Financing activities provided cash of $95,946 for the first three months of
fiscal 2023, including borrowings on credit facilities of $280,000 and $1,677
net cash inflow from the issuance of stock and tax withholding related to
stock-based compensation. This was partially offset by payments on credit
facilities of $150,022 and dividends paid to stockholders of $35,709. Financing
activities used cash of $66,839 in the first three months of fiscal 2022
including $35,027 for repayments on credit facilities and financing leases and
$34,036 for the payment of dividends. This was partially offset by $2,224 net
cash inflow from the issuance of stock and tax withholding related to
stock-based compensation.
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Capital requirements and resources

The Company generally uses existing resources and funds generated from
operations to meet its capital requirements. Capital expenditures totaling
$7,737 and $9,273 for the three months ended September 30, 2022, and
September 30, 2021, respectively, were made primarily for additional equipment
and the improvement of existing facilities. These additions were funded from
cash generated by operations. Total consolidated capital expenditures on
facilities and equipment for the Company for fiscal year 2023 are not expected
to exceed $64,000 and will be funded from cash generated by operations.

On August 31, 2022, the Company acquired all of the equity interest of Payrailz
for $229,563 paid in cash. The purchase price is subject to a customary
post-closing adjustment to the extent actual closing date working capital, cash,
debt and unpaid seller transaction expenses exceeds or is less than the amount
estimated at closing. Pursuant to the merger agreement for the transaction,
$48,500 of the purchase price was placed in an escrow account at the closing for
final purchase price adjustments and indemnification matters under the merger
agreement.

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

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

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

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

Credit facilities

On August 31, 2022, the Company entered into a five-year senior, unsecured
amended and restated credit agreement. The credit agreement allows for
borrowings of up to $600,000, which may be increased by the Company to
$1,000,000 at any time until maturity. The credit agreement bears interest at a
variable rate equal to (a) a rate based on an adjusted Secured Overnight
Financing Rate ("SOFR") term rate or (b) an alternate base rate (the highest of
(a) 0%, (b) the Prime Rate for such day, (c) the sum of the Federal Funds
Effective Rate for such day plus 0.50% per annum and (d) the Adjusted Term SOFR
Screen Rate (without giving effect to the Applicable Margin) for a one month
Interest Period on such day for Dollars plus 1.0%, plus an applicable percentage
in each case determined by the Company's leverage ratio. The credit agreement is
guaranteed by certain subsidiaries of the Company and is subject to various
financial covenants that require the Company to maintain certain financial
ratios as defined in the credit agreement. As of September 30, 2022, the Company
was in compliance with all such covenants. The amended and restated credit
facility terminates August 31, 2027. There was $245,000 outstanding under the
amended and restated credit facility at September 30, 2022.

On June 30, 2022, there was a $115,000 outstanding balance on the prior credit
facility that was entered into on February 10, 2020. The prior credit facility
was a five-year senior, unsecured revolving credit facility. The credit facility
allowed for borrowings of up to $300,000, which could be increased by the
Company to $700,000 at any time until maturity. The prior credit facility bore
interest at a variable rate equal to (a) a rate based on a eurocurrency rate or
(b) an alternate base rate (the highest of (i) 0%, (ii) the U.S. Bank prime rate
for such day, (iii) the sum of the Federal Funds Effective Rate for such day
plus 0.50% and (iv) the eurocurrency rate for a one-month interest period on
such day for dollars plus 1.0%, plus an applicable percentage in each case
determined by the Company's leverage ratio. The prior credit facility was
guaranteed by certain subsidiaries of the Company and was subject to various
financial covenants that required the Company to maintain certain financial
ratios as defined in the prior credit agreement. As of June 30, 2022, the
Company was in compliance with all such covenants. The prior credit facility's
termination date was February 10, 2025.

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The increase in the outstanding credit facility balance of $130,000 at
September 30, 2022, compared to June 30, 2022, was primarily due to the
acquisition of Payrailz during the three months ended September 30, 2022. This
borrowing is expected to contribute to the increase in interest expense during
fiscal 2023.

Other lines of credit

The Company has an unsecured bank credit line which provides for funding of up
to $5,000 and bears interest at the prime rate less 1%. The credit line was
renewed in March 2021 and expires on April 30, 2023. At September 30, 2022, and
June 30, 2022, no amount was outstanding.

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