JKHYJack Henry & Associates

Our services and infrastructure are increasingly heavily 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 increasing sophistication of frontier artificial intelligence models is reshaping the cyber-attack landscape. The growing use of artificial intelligence increasingly enabling their sophistication frontier AI models by unauthorized parties has changed the scale of cyber threats and accelerating their evolution, speed and complexity of cyber-attacks, including through automated phishing and phishing, deepfakes, the rapid development of new malware, which continue and novel attack techniques targeting or leveraging AI systems and models. Further, the use of frontier AI allows these parties to evolve identify 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. We have experienced phishing attacks, social engineering attempts, and other cybersecurity incidents targeting our associates, clients, and systems. When successful, these coordinated attacks may result in data loss, exfiltration, and disruption to systems and services, and can damage our reputation as a secure financial technology company.

On July 4, 2025, the President of the United States signed into law legislation referred to as “One One Big Beautiful Bill Act” (H.R. 1), which enacts substantial Act (“OBBBA”) was enacted, introducing significant changes to the U.S. federal income tax law. The legislation includes several business-focused provisions, such as 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 Act also permanently extends key provisions from legislation did not materially impact the Tax Cuts and Jobs Act (TCJA). As the legislation was enacted after the June 30, 2025, balance sheet date, the financial implications are not included 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's financial statements. The Company is year as well as a decrease in deferred tax assets related to the process of assessing the impacts key provisions cited above. All tax effects of the new change in tax law and plans on current or deferred tax balances have been recorded as a component of the income tax provision related to incorporate updates in the financial results next fiscal year beginning in the quarter ending September 30, 2025. continuing operations.

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 ASU is effective for annual periods beginning after December 15, 2024, and applied on a prospective basis. Early adoption and retrospective application is permitted. The Company is currently evaluating the impact of adopted this ASU on its 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 and related disclosures. statements.