JACK HENRY & ASSOCIATES INC (JKHY) FY 2026 MD&A

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following section provides management's view of the Company's financial condition and results of operations and should be read in conjunction with the audited consolidated financial statements, and related notes included elsewhere in this report. All dollar and share amounts, except per share amounts, are in thousands and discussions compare fiscal 2026 to fiscal 2025. Discussions of fiscal 2024 items and comparisons between fiscal 2024 and fiscal 2025 that are not included in this Form 10-K can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

OVERVIEW

Jack Henry & Associates, Inc. is a well-rounded financial technology company headquartered in Monett, Missouri, that employs approximately 7,300 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 over 7,200 clients and consist of integrated data processing systems solutions to banks ranging from de novo to multi-billion-dollar institutions with up to $55 billion in assets, core data processing solutions for credit unions of all sizes, and 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.

Each of our solutions shares the fundamental commitment to provide high-quality business systems, service levels that consistently exceed client expectations, and integration of solutions and practical new technologies. The quality of our solutions, our high service standards, and the fundamental way we do business typically foster long-term client relationships, attract prospective clients, and have enabled us to capture substantial market share.

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

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 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). The respective segments include all related revenues along with the related cost of revenue.

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

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RESULTS OF OPERATIONS

FISCAL 2026 COMPARED TO FISCAL 2025

In fiscal 2026, total revenue increased 7.1% or $169,051, compared to fiscal 2025. Reducing total revenue for deconversion revenue of $42,830 in the current fiscal year and $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 7.3% increase, or $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 monthly service and risk management fees, Jack Henry digital and transaction revenue as active monthly users and volumes increased, and faster payments and payment processing revenues from expanding volumes and new client revenue.

Operating expenses increased 5.7%, or $102,733, in fiscal 2026 compared to fiscal 2025. Reducing total operating expenses for deconversion costs of $12,878 in the current fiscal year and $6,242 in the prior fiscal year and for acquisition costs of $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 6.1% increase, or $108,291. This increase was primarily due to higher personnel costs including increases in compensation costs during the trailing twelve months, increased direct costs generally commensurate with growth in the related lines of revenue, and higher amortization of capitalized software.

As we move into fiscal 2027 we continue 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. We 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 revenue growth with strong margin expansion, benefiting our associates, clients, and shareholders.

A detailed discussion of the major components of the results of operations for the fiscal year ended June 30, 2026 compared to the fiscal year ended June 30, 2025 follows.

REVENUE

Services and support includes: "private and public cloud" fees, which predominantly have contract terms of six years 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, which is composed primarily of maintenance fees with annual contract terms.

In the fiscal year ended June 30, 2026, services and support revenue increased 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 by revenue related to a contract change of $15,874, services and support revenue grew 7.1%. This increase was primarily driven by growth in data processing and hosting revenue within private and public cloud revenue, higher consulting, work orders and release fees revenue, a rise in implementation revenue, and increased license and hardware revenue partially offset by the decrease in software usage 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.

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Processing revenue increased 8.2% for the fiscal year ended June 30, 2026, compared to the fiscal year ended June 30, 2025. This increase was mainly driven by growth in card revenue from monthly service and risk management fees, improvement in Jack Henry digital and transaction revenue from a higher number of active users on our digital platform, and a rise in faster payments revenue.

OPERATING EXPENSES

Cost of revenue for fiscal 2026 increased 5.4% compared to fiscal 2025. Reducing total cost of revenue for deconversion costs of $7,420 in the current fiscal year and $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 5.7% increase. This increase was primarily due 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 related lines of revenue, as well as higher amortization of capitalized software and increased internal licenses and fees. Cost of revenue decreased 1% as a percentage of total revenue for fiscal 2026 compared to fiscal 2025.

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

Research and development expenses for fiscal 2026 increased 8.4% compared to fiscal 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 mainly due to higher personnel costs, including compensation and benefit costs, partially related to trailing twelve month headcount 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 2026 compared to fiscal 2025.

Selling, general, and administrative costs included all expenses related to sales efforts, commissions, finance, legal, and human resources, plus all administrative costs.

Selling, general, and administrative expenses for fiscal 2026 increased 5.7% compared to fiscal 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 2025, a gain on assets of $6,829 and acquisition costs of $124 in the current fiscal year, results in a 7.2% increase. This increase was primarily due to higher personnel costs, including increased medical costs due to second-half fiscal 2026 normalization trends and higher compensation tied to trailing twelve month headcount growth. Selling, general, and administrative expenses remained consistent as a percentage of total revenue for fiscal 2026 compared to fiscal 2025.

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Interest income decreased over the prior fiscal year due to decreased interest earned on balances fiscal year over fiscal year. Interest expense decreased in fiscal 2026 mainly due to the timing and amounts of borrowed and repaid balances ending the current fiscal year with $40,000 remaining debt outstanding.

The increase in the Company's effective tax rate in fiscal 2026 compared to fiscal 2025 was primarily due to investment tax credit benefits recognized in fiscal 2025 that did not recur in fiscal 2026, as well as differences in the tax effects of stock-based compensation between the two periods.

Net income grew 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. The diluted earnings per share increase fiscal year over fiscal year was 11.9%. This increase was primarily due to non-acquisition-related growth in our lines of revenue partially offset by higher operating expenses and increased provision for income taxes in fiscal 2026 compared to fiscal 2025 .

REPORTABLE SEGMENT DISCUSSION

The Company’s operations are classified into four reportable segments: Core, Payments, Complementary, and Corporate Services (formerly “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 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/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 Services segment includes revenue and direct costs from hardware and other products and services and our technology infrastructure costs.

The Company's Chief Executive Officer, who is also the Company's chief operating decision maker ("CODM"), regularly evaluated segment performance and made strategic decisions on the allocation of resources to them based on various factors, including performance against trend, budget, and forecast for the fiscal years ended June 30, 2026, 2025, and 2024. 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 year ended June 30, 2026, the Company realigned a product from the Corporate Services segment to the Complementary segment. As a result of this realignment, adjustments were made during the fiscal year ended June 30, 2026, to reclassify related revenue and cost of revenue recognized for the fiscal years ended June 30, 2025 and 2024, from the Corporate Services segment to the Complementary segment. Revenue reclassed for the fiscal years ended June 30, 2025 and 2024, was $13,209 and $12,402, respectively. Cost of revenue reclassed for the fiscal years ended June 30, 2025 and 2024, was $2,970 and $2,840, respectively.

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Immaterial adjustments have been made between segments during the fiscal year ended June 30, 2026, to reclassify revenue and cost of revenue that was recognized for the fiscal years ended June 30, 2025 and 2024. These reclasses were made to be consistent with the current allocation of revenue and cost of revenue by segment. Revenue reclassed for 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 the Core segment to the Corporate Services segment, was $5. Cost of revenue reclassed for the fiscal years ended June 30, 2025 and 2024, from the Core segment to the Complementary segment, was $1,864 and $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 $277, respectively.

In fiscal 2026, revenue in the Core segment increased 4.8% compared to fiscal 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 by revenue related to a contract change of $15,874 in the prior fiscal year, Core segment revenue increased 7.1%. This increase was primarily driven by non-acquisition-related increases in our data processing and hosting revenue within cloud and a rise in consulting, work orders, and release revenue. Cost of revenue in the Core segment increased 3.3% for fiscal 2026 compared to fiscal 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 by costs related to a contract change of $13,516 in the prior fiscal year, Core segment cost of revenue increased 7.4%. This increase was primarily due to higher personnel costs, including compensation and benefit costs, partially related to trailing twelve month headcount growth. Core segment cost of revenue remained consistent as a percentage of revenue for fiscal 2026 compared to fiscal 2025.

In fiscal 2026, revenue in the Payments segment increased 7.2% compared to fiscal 2025. Reducing total Payments revenue by deconversion revenue from both fiscal years, which totaled $13,660 in fiscal 2026 and $11,159 in fiscal 2025 and by acquisition revenue of $5,193 in the current fiscal year, Payments segment revenue increased 6.4%. This increase was primarily driven by growth within card revenue and faster payments and payment processing revenues. Cost of revenue in the Payments segment increased 4.2% for fiscal 2026 compared to fiscal 2025. Reducing total Payments cost of revenue by deconversion cost of revenue from both fiscal years, which totaled $717 in the current fiscal year and $288 in the prior fiscal year and by acquisition cost of revenue of $5,854 in the current fiscal year, Payments segment cost of revenue increased 2.8%. This increase was primarily due to increased direct costs related to growth in the card, faster payments, and payment processing revenue lines and higher personnel costs, including compensation and benefit costs, partially related to trailing twelve month headcount growth. Payments segment cost of revenue decreased 2% as a percentage of revenue for fiscal 2026 compared to fiscal 2025.

Revenue in the Complementary segment increased 8.3% for fiscal 2026 compared to fiscal 2025. Reducing total Complementary revenue by deconversion revenue from both fiscal years, which totaled $12,219 in fiscal 2026 and $7,709 in fiscal 2025, Complementary segment revenue increased 7.7%. This increase was primarily driven by non-acquisition-related revenue increases in hosting within cloud and digital revenue. Cost of revenue in the Complementary segment increased 6.3% for fiscal 2026 compared to fiscal 2025. Reducing total Complementary cost of revenue by deconversion costs from both fiscal years, which totaled $2,119 in fiscal 2026 and $1,119 in fiscal 2025, Complementary segment cost of revenue increased 6.0%. This increase was primarily due to higher direct costs related to the non-acquisition-related growth in hosting within cloud and digital revenue lines and higher

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personnel costs, including compensation and benefit costs, partially related to trailing twelve month headcount growth. Complementary segment cost of revenue decreased 1% as a percentage of revenue for fiscal 2026 compared to fiscal 2025.

Revenue in the Corporate Services segment increased 18.3% for fiscal 2026 compared to fiscal 2025. This increase was mainly 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 a contract change did not significantly affect Corporate Services revenue year over year.

Cost of revenue for the Corporate Services segment includes direct costs from hardware and other products and services and our technology infrastructure costs and increased 8.0% for fiscal 2026 compared to fiscal 2025. Reducing total Corporate Services cost of revenue by deconversion cost of revenue from both fiscal years, which totaled $18 in fiscal 2026 and $14 in fiscal 2025 and acquisition cost of revenue of $371 in the current fiscal year, Corporate Services segment cost of revenue increased 7.9%. This increase was primarily related to higher personnel costs, including increased medical costs from second-half normalization trends and higher compensation tied to trailing twelve month headcount growth, a rise in internal licenses and fees, and increased direct costs related to hardware.

LIQUIDITY AND CAPITAL RESOURCES

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

Cash provided by operating activities for fiscal 2026 increased 18.8% compared to fiscal 2025, primarily due to the change in deferred income taxes fiscal year over fiscal year. Cash from operations is primarily used to repay debt, pay dividends, repurchase stock, for capital expenditures, and for acquisitions.

Cash used in investing activities for fiscal 2026 totaled $277,738 and included: $184,243 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $67,103, mainly for the purchase of computer equipment; $42,390 for an acquisition; $13,721 for the purchase of investments; and $4,108 for the purchase and development of internal use software. These expenditures were partially offset by $32,827 of proceeds from the sale of assets and proceeds from investments of $1,000.

Cash used in investing activities for fiscal 2025 totaled $232,163 and included: $172,445 for the ongoing enhancements and development of existing and new product and service offerings; capital expenditures on facilities and equipment of $53,358, mainly for the purchase of computer equipment; $5,363 for the purchase and development of internal use software; and $2,000 for the purchase of investments. These expenditures were partially offset by proceeds from investments of $1,000 and $3 of proceeds from the sale of assets.

Financing activities used cash of $574,119 for fiscal 2026 and included: $448,173 for the purchase of treasury shares and $170,405 for dividends paid to stockholders. These expenditures were partially offset by borrowings and repayments on our credit facilities which netted to borrowings of $40,000 and $4,459 of net cash inflow related to stock-based compensation.

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Financing activities used cash in fiscal 2025 of $345,672 and included $164,644 for dividends paid to stockholders; borrowings and repayments on our revolving credit facility which netted to repayments of $150,000; and $35,051 for the purchase of treasury shares. These expenditures were partially offset by $4,023 of net cash inflow related to stock-based compensation.

Capital Requirements and Resources

The Company generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $67,103 and $53,358 for fiscal years ended June 30, 2026, and June 30, 2025, respectively, were made primarily for additional equipment and the improvement of existing facilities. These additions were funded from cash generated by operations. At June 30, 2026, the Company had $32,952 of significant outstanding purchase commitments related to property and equipment. We assessed our liquidity needs throughout fiscal 2026, and determined we had adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated funding needs. We will continue to monitor and assess these needs going forward.

At June 30, 2026, the Company had contractual obligations of $2,177,592, including operating lease obligations, and $2,135,981 related to off-balance sheet contractual purchase obligations. Included in off-balance sheet contractual purchase obligations were a renewing customer agreement, server and cloud enrollment agreement, and a volume licensing agreement that were signed in June 2026 and together added $94,146 to contractual obligations spread evenly over the next three fiscal years beginning in fiscal 2027. Contractual obligations exclude $24,905 of liabilities for uncertain tax positions as we are unable to reasonably estimate the ultimate amount or timing of settlement.

On September 30, 2025, the Company acquired substantially all the assets of Victor for $42,390 paid in cash. The primary reason for the acquisition was to expand the Company's capabilities in the Payments-as-a-Service market. Victor is a cloud-native, API-first provider of direct-to-core embedded payments solutions.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing significant changes to U.S. federal income tax law. Key provisions affecting the Company include the permanent restoration of immediate expensing for domestic research and development (“R&D”) expenditures, an election to deduct the unamortized balance of domestic R&D expenditures that were previously capitalized under the Tax Cuts and Jobs Act of 2017 (“TCJA”), and the reinstatement of 100% bonus depreciation for qualified property placed in service after January 19, 2025. The legislation did not materially impact the effective tax rate in the current period, and the Company does not anticipate a material impact in future periods. However, the Company had a significant reduction in cash tax payments and income taxes payable for the current fiscal year as well as a decrease in deferred tax assets related to the key provisions cited above. All tax effects of the change in tax law on current or deferred tax balances have been recorded as a component of the income tax provision related to continuing 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 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, 2026, there were 34,527 shares in treasury stock and the Company had the remaining authority to repurchase up to 5,464 additional shares. The total cost of treasury shares at June 30, 2026 was $2,343,397. During fiscal 2026, the Company repurchased 2,947 treasury shares for $448,173. At June 30, 2025, there were 31,580 shares in treasury stock and the Company had authority to repurchase up to 3,411 additional shares.

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Credit facilities

On March 25, 2026, the Company entered into a five-year, revolving, unsecured credit agreement that replaced the prior credit agreement described below. The credit agreement allows for borrowings of up to $1,000,000 and allows for additional revolving credit commitments and/or term loan commitments, pursuant to the terms and subject to certain limitations set forth in the credit agreement. The credit agreement bears interest at a variable rate equal to, at the option of the Company, either (a) a rate based on adjusted Term Secured Overnight Financing Rate ("SOFR") rate or (b) an alternate base rate (the highest of (i) 0.0%, (ii) U.S. Bank's prime rate, (iii) the Federal Funds Rate plus 0.50% and (iv) a one month adjusted Term SOFR rate plus 1.0%), plus an applicable percentage in each case determined based 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, 2026, the Company was in compliance with all such covenants. The credit agreement terminates March 25, 2031. There was $40,000 outstanding under the credit facility at June 30, 2026.

The credit agreement 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 at any time until maturity. The prior credit agreement 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%, (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 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The prior 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 prior credit agreement. The prior credit agreement's termination date was August 31, 2027. There was no balance outstanding under the prior credit facility at June 30, 2025.

Other lines of credit

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 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 bore interest at the prime rate less 1.0%. The line of credit expired on July 17, 2026. There was no balance outstanding at June 30, 2026.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires additional disclosure related to rate reconciliation, income taxes paid, and other disclosures to improve the effectiveness of income tax disclosures. The Company adopted this ASU for the fiscal year ending June 30, 2026, with prospective application. Additional information regarding the Company's income tax rate reconciliations, including the application of the provisions of ASU 2023-09 for the fiscal year ending June 30, 2026, is included in Note 8 to the consolidated financial statements.

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Not Adopted at Fiscal Year End

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires more detailed disclosures of certain categories of expenses such as employee compensation, depreciation, and intangible asset amortization that are components of existing expense captions presented on the face of the consolidated statements of income. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends guidance related to the accounting for internal-use software development costs. The amendments are intended to modernize the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to "development stages". It also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

CRITICAL ACCOUNTING ESTIMATES

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

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

Revenue Recognition

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

Determination of transaction price

The amount of revenue recognized is based on the consideration we expect to receive in exchange for transferring goods and services to the client. Our contracts with our clients frequently contain some component of variable consideration. We estimate variable consideration in our contracts primarily using the expected value method, based on both historical and current information. Where appropriate, we may constrain the estimated variable consideration included in the transaction price in the event of a high degree of uncertainty as to the final consideration amount. Significant judgment is used in the estimate of variable consideration of client contracts that are long-term and include varying transactional volumes.

Contract costs

We incur incremental costs to obtain a contract as well as costs to fulfill contracts with clients that are expected to be recovered. These costs consist primarily of sales commissions, which are incurred only if a contract is obtained, and client conversion or implementation-related costs.

Capitalized costs are amortized based on the transfer of goods or services to which the asset relates, in line with the percentage of revenue recognized for each performance obligation to which the costs are allocated.

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Capitalization of software development costs

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

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

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

Purchase accounting

We account for our acquisitions using the purchase method of accounting. This method requires estimates to determine the fair values of assets and liabilities acquired, including judgments to determine any acquired intangible assets such as computer software and client-related intangibles. Third-party valuation firms may be used to assist in the appraisal of certain assets and liabilities, but even those determinations would be based on significant estimates provided by us, such as forecast revenues or profits on contract-related intangibles. Numerous factors are typically considered in the purchase accounting assessments, which are conducted by Company professionals from legal, finance, human resources, information systems, program management and other disciplines. Changes in assumptions and estimates of the acquired assets and liabilities would result in changes to the fair values, resulting in an offsetting change to the goodwill balance associated with the business acquired.