JACK HENRY & ASSOCIATES INC

Jack Henry & Associates, Inc. is a well-rounded financial technology company that provides technology solutions to help banks and credit unions innovate faster, strategically differentiate, and successfully compete. The company serves approximately 7,400 financial institutions and diverse corporate entities. According to the FDIC, there were approximately 4,440 commercial banks and savings institutions in the $55 billion and under asset range as of December 31, 2024, and according to America's Credit Unions, there were 4,550 domestic credit unions as of December 31, 2024. The number of commercial banks and savings institutions declined 13% from the end of calendar year 2019 to the end of calendar year 2024, declining at a 3% compound annual rate, while aggregate assets increased at a compound annual rate of 5% and totaled $24.1 trillion as of December 31, 2024. The number of credit unions declined 15% from the end of calendar year 2019 to the end of calendar year 2024, declining at a 3% compound annual rate, while aggregate assets increased at a compound annual rate of 8% and totaled $2.3 trillion as of December 31, 2024. Despite continued industry consolidation, Jack Henry net core footprints increased year-over-year from calendar year 2023 to calendar year 2024 in both bank and credit union client bases.

Jack Henry's core solutions compete with large vendors including Fidelity National Information Services, Inc.; Fiserv, Inc.; Corelation, Inc.; and Finastra. The company's non-core specialized solutions compete with an array of disparate vendors that provide niche solutions to financial services organizations and corporate entities. The company believes its primary competitive advantage is client service. The average assets under management for Jack Henry's banking core clients grew from $1.26 billion to $1.29 billion ¹, and the average assets under management for its credit union core clients grew from $1.17 billion to $1.20 billion ². The company's SilverLake System serves 520 banks ³ and now serves nearly 12% of the domestic banks in the $55 billion and under asset range ⁴. According to NCUA data, the Symitar system is the system implemented by more credit unions with assets exceeding $25 million than any other credit union core system.

Jack Henry generates revenue primarily through two streams: 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 from 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, card revenues including card transaction processing and monthly fees, and transaction and digital revenues which include transaction and mobile processing revenues. The company serves approximately 1,670 bank and credit union core clients and over 5,710 non-core clients ⁵. The majority of support and services revenue is derived from private and public cloud services for hosted clients that are typically on a six-year contract, recurring electronic payment solutions that are generally on a contract term of six years, and on-premise clients that are typically on a one-year contract.

The Core segment provides core information processing platforms to banks and credit unions, consisting of integrated applications required to process deposit, loan, and general ledger transactions and maintain centralized accountholder information. Core banking solutions include three software systems: SilverLake System, a robust system primarily designed for commercial-focused banks that currently serves banks with assets ranging from $1 billion to over $55 billion, in use by 520 banks ⁶; CIF 20/20, a parameter-driven system that supports 260 banks ⁷ ranging from de novo institutions to those with assets of $6 billion; and Core Director, a cost-efficient system that supports over 170 banks ⁸ ranging from de novo institutions to those with assets of $2 billion. The core credit union platform is Symitar, which has been implemented by approximately 715 credit unions ⁹ with assets ranging from $20 million to $33 billion. In fiscal 2025, Core segment revenue was $739,277 ¹⁰ and cost of revenue was $297,372 ¹¹.

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. Payment solutions include JHA Card Processing Solutions supporting full-service and in-house debit and credit card programs, Enterprise Payment Solutions offering an integrated suite of ACH, instant payments, credit card, and remote deposit capture processing, Payrailz Payments Platform providing next-generation cloud-native digital payment capabilities, JHA PayCenter providing a single entry point to Zelle, RTP, and FedNow networks, and Payments as a Service supporting embedded payment capabilities. In fiscal 2025, Payments segment revenue was $873,498 ¹² and cost of revenue was $460,151 ¹³. 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. In fiscal 2025, Complementary segment revenue was $675,209 ¹⁴ and cost of revenue was $264,823 ¹⁵. 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 expenses not directly attributable to the other three segments. In fiscal 2025, Corporate and Other segment revenue was $87,304 ¹⁶ and cost of revenue was $338,401 ¹⁷.

During fiscal 2025, the company repurchased 207 ¹⁸ treasury shares for $35,051 ¹⁹. The company had no outstanding debt at June 30, 2025 ²⁰. On October 31, 2024, the company entered into a discretionary line of credit demand note providing for funding of up to $50,000 ²¹, bearing interest at the prime rate less 2.0% ²², with no balance outstanding at June 30, 2025 ²³. The company's strategic services agreement for debit and credit card processing was amended in May 2025 to add two additional service years and $213,053 ²⁴ to contractual obligations, bringing the total remaining purchase commitment to $1,022,283 ²⁵ over the remaining term extending to January 2038. On July 18, 2025, the company entered into a new unsecured committed revolving line of credit facility in the amount of $50,000 ²⁶, bearing interest at the prime rate less 1.0% ²⁷, expiring on July 17, 2026 ²⁸. On August 22, 2025, the Board of Directors declared a cash dividend of $0.58 ²⁹ per share.

In fiscal 2025, total revenue increased 7.2% ³⁰ or $159,745 ³¹ compared to fiscal 2024. Net income grew 19.4% ³² to $455,748 ³³, or $6.24 ³⁴ per diluted share, in fiscal 2025 from $381,816 ³⁵, or $5.23 ³⁶ per diluted share, in fiscal 2024. Operating expenses increased 4.7% ³⁷, or $80,421 ³⁸, in fiscal 2025 compared to fiscal 2024. Cash provided by operating activities for fiscal 2025 increased 12.9% ³⁹ compared to fiscal 2024, totaling $641,504 ⁴⁰. Cash and cash equivalents increased to $101,953 ⁴¹ at June 30, 2025, from $38,284 ⁴² at June 30, 2024.

The company's technology modernization strategy centers on the Jack Henry Platform, a single public cloud-native, API-first platform being developed into a fully functional modern alternative for existing core functions. The platform includes services like wire transfers, a centralized data hub for reporting and analysis, exception item processing, general ledger, deposit servicing, and entitlements, and can be combined with other Jack Henry public cloud-native solutions such as digital banking, digital payments, and fraud detection, as well as third-party provider solutions. The company intends to execute its strategy over the next three to five years by enabling banks and credit unions to win on exceptional user experience and trust through open, innovative technology, data-driven insights, and service. The company also plans to carry out a large client strategy focusing on deep engagement with banks and credit unions to align objectives, optimize revenue streams, and foster collaborative growth and innovation.

The company's growth strategy includes expanding each core client relationship by cross-selling complementary/payment products and services, delivering non-core highly specialized core-agnostic products and services to banks and credit unions including institutions not utilizing one of its core processing systems and diverse corporate entities, and growing market share of services to small and medium-sized businesses offering features through banks and credit unions. The company also maintains a disciplined acquisition strategy, having completed 35 strategic acquisitions since the end of fiscal year 1999 ⁴³. The company continues to explore acquisitions that have the potential to expand its suite of complementary/payment products and services, provide products and services that can be sold to both existing core and non-core clients as well as outside its core base to new clients, accelerate internal development efforts for technology modernization, and provide selective opportunities to sell outside traditional markets in the financial services industry.

Cost of revenue decreased 2% as a percentage of total revenue for fiscal 2025 compared to fiscal 2024 ⁴⁴. Selling, general, and administrative expenses decreased 1% as a percentage of total revenue for fiscal 2025 compared to fiscal 2024 ⁴⁵. Research and development expense remained consistent as a percentage of total revenue for fiscal 2025 compared to fiscal 2024 ⁴⁶. Core segment cost of revenue decreased 1% as a percentage of revenue for fiscal 2025 compared to fiscal 2024 ⁴⁷. Payments segment cost of revenue decreased 1% as a percentage of revenue for fiscal 2025 compared to fiscal 2024 ⁴⁸. Complementary segment cost of revenue decreased 1% as a percentage of revenue for fiscal 2025 compared to fiscal 2024 ⁴⁹.

The company's private cloud services are provided through a highly resilient data center configuration across multiple physical locations. Image item processing services are provided from two host/archive sites and several key entry and balancing locations throughout the country. The company prints and mails accountholder statements for banks and credit unions from three regional printing and rendering centers. As of June 30, 2025, Jack Henry had approximately 7,240 ⁵⁰ full-time and part-time associates. A significant portion of the company's associates work remotely on either a full-time or hybrid remote/office basis. The company remains focused on equipping all associates with the tools necessary to effectively communicate, collaborate, and build connections in a remote environment.

Research and development expenses for fiscal 2025 were $162,771 ⁵¹, compared to $148,256 ⁵² in fiscal 2024. Capitalized software in fiscal 2025 was $172,445 ⁵³, compared to $167,175 ⁵⁴ in fiscal 2024. Capital expenditures on facilities and equipment in fiscal 2025 totaled $53,358 ⁵⁵, mainly for the purchase of computer equipment. At June 30, 2025, the company had $58,182 ⁵⁶ of significant outstanding purchase commitments related to property and equipment. The company paid dividends of $164,644 ⁵⁷ in fiscal 2025. The Board of Directors has authorized the company to repurchase shares of its common stock; at June 30, 2025, the company had the remaining authority to repurchase up to 3,411 ⁵⁸ additional shares. The company repurchased 207 ⁵⁹ treasury shares for $35,051 ⁶⁰ during fiscal 2025.

The company faces structural headwinds from consolidation of financial institutions, noting that the number of commercial banks and savings institutions declined 13% from the end of calendar year 2019 to the end of calendar year 2024 ⁶¹, and the number of credit unions declined 15% from the end of calendar year 2019 to the end of calendar year 2024 ⁶². The company expects this consolidation trend to continue. The company also faces risks from increasing adoption of artificial intelligence and machine learning, noting that both state and federal regulations relating to these emerging technologies are quickly and constantly evolving and may require significant resources to modify and maintain business practices. The company faces risks related to data security breaches, failures, or other incidents that could damage its reputation and business, noting that it is continually subject to attempts by unauthorized parties to access confidential information or destroy data.

The company faces risks from failures associated with payment transactions, noting that the volume and dollar amount of payment transactions it processes is significant and continues to grow. The company directs the settlement of funds on behalf of financial institutions, other businesses, and consumers, and receives funds from clients, card issuers, payment networks, and consumers on a daily basis. The company also faces risks from failures of third-party service providers it relies upon to support key portions of its operations, noting that as it continues to move more computing, storage, and processing services out of its data centers and into third-party hosting environments, its reliance on these providers will increase. The company faces risks from changes in interest rates, noting that although its debt borrowing levels have historically been low, increases in interest rates on variable-rate debt would increase interest expense, and if interest rates substantially decrease, the company would collect less interest income on settlement accounts.

The company faces material risks from data security breaches, noting that it is continually subject to attempts by unauthorized parties to access confidential information or destroy data, and that the use of artificial intelligence is increasingly enabling the sophistication of such attacks. The company faces risks from consolidation of financial institutions, as the number of commercial banks declined 13% from 2019 to 2024 ⁶³ and the number of credit unions declined 15% over the same period ⁶⁴, which reduces the number of current and potential clients. The company faces risks from failures associated with payment transactions, as the volume and dollar amount of payment transactions processed is significant and continues to grow, and the company directs settlement of funds on behalf of financial institutions, other businesses, and consumers. The company faces risks from failures of third-party service providers, noting that as it moves more computing, storage, and processing services into third-party hosting environments, reliance on these providers will increase, and a failure could have a material impact on delivery of services. The company faces risks from the impairment of goodwill and intangible assets, which represent a significant portion of total assets as of June 30, 2025 ⁶⁵, and an impairment could have a material negative effect on operating results.

Management's message emphasizes that as the company moves into fiscal 2026, its 50th year in business, it is excited and confident about its future and remains well-positioned to deliver durable, consistent growth and attractive results for shareholders. Management states that technology spending by financial institutions remains strong and there is clear demand for the company's differentiated and innovative technology solutions. Management highlights a very healthy sales pipeline and a proven ability to attract and win deals, especially with larger financial institutions. Management emphasizes that the company's unwavering focus on culture, service, innovation, strategy, and execution continues to set it apart in the market and will enable it to drive continued industry-leading revenue growth with strong margin expansion, benefiting associates, clients, and shareholders. Management's strategic priorities include generating organic revenue and earnings growth augmented by strategic acquisitions, executing a technology modernization strategy to provide public cloud-native solutions, upholding a company-wide commitment to service that consistently exceeds client expectations, carrying out a large client strategy focusing on deep engagement, growing market share of services to small and medium-sized businesses, and maintaining a disciplined acquisition strategy.