Jack Henry and Associates

Presented By:

Jeremy SmithSajal Rohatgi

Yanlei XuNovember 27, 2007

Table of Contents

Company Overview Industry Overview Acquisition History RCMP Position and Portfolio Analysis Stock Performance Ratio Comparison Financial Health DCF Valuation Recommendation

COMPANY OVERVIEW

Jack Henry Business

Provide integrated computer systems for in-house and outsourced data processing to commercial banks, credit unions and other financial institutions Process transactions, automate business

processes, and managing information “Fundamental business strategy is to

generate organic revenue and earnings growth supplemented by strategic acquisitions”

Publicly traded on NASDAQ under JKHYJack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Revenue Streams

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Jack Henry Brands

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Jack Henry Brands

Jack Henry Banking: Supports commercial banks with information and

transaction processing platforms Provides three core software systems to process deposit,

loan, and general ledger transactions, and to maintain centralized customer/member information SilverLake, CIF 20/20, Core Director

Complementary systems Business intelligence and bank management, retail and

business banking, Internet banking and electronic funds transfer ("EFT”)

Access timely info to report and analyze business info, help customer commercial relations at all points of contact, account access and initiate transactions, secure and reliable end to end transfer

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Jack Henry Brands

Symitar: Supports Credit Unions with information and

transaction processing platforms Two core credit union processing platforms

Elipsys (IMB System p -based) and Cruise (Windows) Complementary systems

Business intelligence and credit union management, member and member business services, Internet banking and EFT

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Jack Henry Brands

ProfitStars: Provide specialized niche products and services

complement existing technology platforms to domestic financial services organizations

In-organic in nature as most of the acquired companies and their respective products and services have been consolidated into ProfitStars

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

INDUSTRY OVERVIEW

Industry Overview Banks

10% Decline in number of banks since 02’ Assets have increased at 9% annual rate 55% use in-house info processing, 45% outsource

Credit Unions 16% Decrease in number of credit unions

since 02’ Assets have increased at 7% annual rate 75% use in-house info processing, 25% outsource

For credit unions with over $25 million in assets

Jack Henry (2007). Annual Report 2007. Retrieved November 24, 2007, from SEC EDGAR database http://sec.gov/edgar

Acquisition History

Fiscal YearCompany or Product Name     Products and Services

2008 Gladiator Technology     Information Technology Security Services

2007 Margin Maximizer     Loan and Deposit Pricing Solutions

2006 ProfitStar     Asset/Liability Management, Budgeting

    and Profitability

2005 Tangent Analytics     Business Intelligence Solutions

2005 Stratika     Profitability Solutions

2005 Synergy     Document Imaging

2005 TWS     Item Processing/ATM Deposit Processing

2005 Optinfo     Enterprise Exception Management Solution

2005 Verinex Technologies     Biometric Security Solutions

2005 Select Payment Processing     Payment Processing Solutions

2005 Banc Insurance Services     Insurance Agency Outsourcing

2004 Regulatory Reporting Group     Electronic Regulatory Reporting Solutions

2004 e-ClassicSystems     ATM Channel Management System

2004 PowerPay .ach, .rck and .arc     Automated Clearing House Product Suite

2004 Yellow Hammer Software     Fraud Detection and Prevention Solution

RCMP POSITION AND STOCK PERFORMANCE

Current Position

November 11, 1999 entered position BOT 200 shares at

$36 per share March 3, 2000

Stock split 2:1 March 5, 2001

Stock split 2:1

January 15, 2007 Sold 400 shares at

$22.53 Current position

Own 400 shares Stock price $25.40 as

of November 26, 2007

Stock Performance

Stock Performance

Portfolio Correlation　 AEE AEO CPRT DFS FR JKHY KMB MVSN SRCL SRZ WAG

AEE 1.00

AEO -0.04 1.00

CPRT 0.35 0.08 1.00

DFS 0.89 0.58 0.53 1.00

FR 0.48 0.10 0.35 0.65 1.00

JKHY 0.18 0.24 0.30 0.80 0.19 1.00

KMB 0.35 0.06 0.49 0.42 0.09 0.23 1.00

MVSN 0.24 0.28 0.28 0.59 0.22 0.38 0.02 1.00

SRCL -0.11 0.10 0.00 -0.04 -0.01 0.17 -0.04 -0.11 1.00

SRZ 0.02 -0.05 0.33 -0.25 0.23 0.16 -0.09 0.37 0.08 1.00

WAG 0.07 0.13 0.01 -0.17 -0.19 0.03 0.27 0.03 0.10 -0.13 1.00

Portfolio Pie Chart

MV % of Total Portfol io

Cash42%

AEE6%

AEO9%CPRT

6%

DFS1%

FR10%

JKHY3%

KMB5%

MVSN2%

SRCL6%

SRZ5%

WAG5%

Ratio Comparison JKHY Computer

Networks Industry

TechnologySector

S&P 500

Valuation Ratios

P/E Ratio (TTM) 22.71 30.02 26.72 20.11

Beta 1.60 1.98 1.69 1.00

Price to Sales (TTM) 3.42 3.13 4.77 2.85

Price to Book (MRQ) 3.84 3.78 5.70 4.26

Price to Free Cash Flow (TTM) 23.25 19.71 26.67 31.87

Dividends

Dividend Yield - 5 Year Avg. 0.18 0.08 0.80 1.84

Payout Ratio (TTM) 20.94 1.84 10.52 28.25

Source: One Source

Ratio Comparison Cont. JKHY

Computer Network Industry

Technology Sector

S&P 500

Financial Strength

Quick Ratio (MRQ) 1.13 1.67 1.86 1.24

Current Ratio (MRQ) 1.13 1.99 2.32 1.74

LT Debt to Equity (MRQ) 0.00 0.14 0.21 0.56

Profitability Ratios (%)

Gross Margin - 5 Yr. Avg. 41.47 49.88 51.21 44.42

Net Profit Margin - 5 Yr. Avg. 14.31 5.04 10.19 12.53

Management Effectiveness (%)

Return On Assets (TTM) 12.40 6.14 11.36 8.60

Return On Equity (TTM) 17.92 10.14 21.50 21.47

Efficiency

Receivable Turnover (TTM) 5.52 5.81 8.11 10.58

Inventory Turnover (TTM) #N/A 24.71 13.73 12.12

Asset Turnover (TTM) 0.80 0.91 0.79 0.96 Source: One Source

FINANCIAL HEALTH

Financial HealthProfitability

Ratios 2003 2004 2005 2006 2007

Return on Equity (%) 13.53 14.07 14.6 15.63 17.49

Return on Assets (%) 9 9.53 9.27 9.92 10.48

Return on Investment 21.16 22.31 23.02 22.28 23.7

Gross Margin 0.038 0.04 0.042 0.043 0.043

Operating Margin (%) 19.1 21.14 22.22 23.53 23.73

Pre-Tax Margin 19.23 21.33 22.36 23.65 23.98

Net Profit Margin (%) 12.21 13.33 14.09 15.18 15.67

Effective Tax Rate (%) 36.5 37.5 37 35.8 34.66

Liquidity Indicators

Quick Ratio 1.26 1.3 0.91 0.99 0.91

Current Ratio 1.48 1.5 1.06 1.16 1.06

Debt Management

Current Liabilities/Equity 0.4 0.39 0.48 0.46 0.55

VALUATION

DCF VALUATION Assumptions WACC Share Price Range

ASSUMPTIONS

Revenue – 3 Streams License Revenue – Decreasing YOY

Already Strong Penetration in the market Shift of Customers towards Outsourcing

Support and Services – Increasing YOY Outsourcing from Customer Increase in the Asset under Management of Existing

Customer

Hardware Revenue – High for 2008, constant for rest of the years. Imaging and exchanging of checks, IBM System

upgrades

Assumptions

Cost of Sales – Increase with increase in revenue

Operating Expenses SG&A to grow at a constant 5 year average R&D to increase to boost the license revenue G&A Expenses to remain constant on 5 year average

Tax Rate – Marginal Tax Rate of 37% Capex – Assumed to follow the same pattern as

last 5 years. In nominal terms management expects it to be below $50 million.

Dividend Payout of 22% Sustainable Growth Rate of 4%

WACC

CAPM Risk Free Rate – 4.26% Market Premium – 5.75% Beta – 1.28 Cost of Equity -11.61% E/V – 96.99% Cost of Debt – 8.5% D/V – 3.01% Tax Rate 37% WACC – 11.42%

Sensitivity Analysis

Growth Rate

WACC

- 3% 3.25% 3.50% 3.75%

4.00% 4.25% 4.50% 4.75% 5.00%

10% 32.13 33.11 34.17 35.31 36.54 37.89 39.36 40.96 42.73

10.25% 30.90 31.80 32.77 33.82 34.95 36.17 37.50 38.95 40.54

10.50% 29.75 30.58 31.48 32.44 33.47 34.59 35.80 37.11 38.54

10.75% 28.68 29.45 30.28 31.16 32.11 33.13 34.23 35.43 36.73

11.00% 27.68 28.39 29.16 29.97 30.84 31.78 32.79 33.88 35.07

11.25% 26.74 27.40 28.11 28.86 29.67 30.53 31.46 32.46 33.54

11.42% 26.17 26.80 27.48 28.19 28.91 29.78 30.66 31.61 32.63

11.67% 25.32 25.91 26.54 27.20 27.91 28.67 29.48 30.35 31.29

11.92% 24.52 25.07 25.66 26.28 26.94 27.64 28.39 29.19 30.05

12.17% 23.77 24.28 24.83 25.40 26.02 26.67 27.36 28.11 28.90

12.42% 23.05 23.54 24.05 24.59 25.16 25.76 26.41 27.09 27.83

12.67% 22.38 22.83 23.31 23.81 24.35 24.91 25.51 26.15 26.83

12.92% 21.74 22.16 22.61 23.08 23.58 24.11 24.67 25.26 25.89

13.17% 21.13 21.53 21.95 22.40 22.86 23.36 23.88 24.43 25.02

Conclusion

DCF – $28.91

Market Price - $ 25.40

Recommendation – HOLD All 400 Shares Undervalued Excellent Diversifier with the current portfolio

mix. On a downside the Credit Crunch may hit

their revenue.

Questions ???