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JACK HENRY & ASSOCIATES Presented March 10, 2011

Detailed analysis, valuation, and investment recommendation for Jack Henry & Associates. Includes historical dividend data and stock overview.

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JACK HENRY & ASSOCIATES Presented March 10, 2011

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  1. JACK HENRY & ASSOCIATESPresented March 10, 2011 Cece Li| Jack Hainline | Shoaib Haroon | Alex Stepien INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  2. EXECUTIVE SUMMARY • Company Overview • Recent Financial Results & Company Background • Sources of Revenue & Industry Outlook • Porter’s Five Forces & SWOT Analysis • Competitor Overview & Multiple Valuation • Discounted Cash Flow Valuation • Final Recommendation INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  3. RCMP POSITION SUMMARY • 12/10/1999: Purchased 200 shares at $36 per share • 3/2/2000: 2:1 split which took the holding to 400 shares at $18 per share • 3/4/2001: 2:1 split which took the holding to 800 shares at $9 per share • 1/15/2007: Sold 400 shares at $22.53 for a realized gain of $5,412 • 3/9/2011: Hold 400 shares at $32.31 • Current share price = $32.31 • Current holding value = $12,924 • Constitutes 11% of invested holdings • Unrealized gain: $9,324 INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  4. HISTORICAL DIVIDEND INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  5. RCMP POSITION SUMMARY http://finance.yahoo.com/q/hp?s=JKHY&a=02&b=26&c=1990&d=02&e=10&f=2011&g=v INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  6. STOCK OVERVIEW Source: onesource.com INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  7. COMPANY OVERVIEW • Founded and headquartered in Monett, Missouri in 1976 by Jerry Hall and Jack Henry • Initial public offering on October 29, 1985 • Jack Henry provides integrated computer systems and services for in-house and outsourced data processing • The Company provides these technology driven products to commercial banks, credit unions and other financial institutions • The products include transaction processing and information management to more than 11,200 institutions Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  8. MAJOR BUSINESS UNITS • Jack Henry Banking– Provides banking solutions and the integrated data processing banks need to process financial transactions, automate business processes, and manage information. Serves as the primary technology partner for 1,500 banks ranging from de novo institutions to mid-tier banks. The customer base is comprised of 20% mid-tier banks with assets ranging from $1 B - $15 B. The three functionally distinct core solutions are CIF 20/20, SilverLake System, and CoreDirector. • Symitar – Performs the same functions as Jack Henry Banking for credit unions. In the 10 years since it was acquired, it has more than doubled its customer base. Supports more than 700 credit unions of all asset size, including 35% of credit unions with over $1 billion in assets. The two functionally distinct core solutions are Episys and Cruise. Symitar has a 98% customer retention rate. Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  9. PRIMARY BUSINESS UNITS (CONT.) • ProfitStars - Provides specialized products and services to financial services organizations of all sizes. Established as part of Jack Henry in 2006 as part of a focused diversification acquisition. Supports more than 8,800 domestic and international financial services organizations, including 42 of the 50 largest domestic banks. They also provide their services to businesses outside the financial industry. • iPay – Acquired in June 2010, it is the largest independent provider of electronic bill pay in the U.S. iPay’s platform supports 40% of the nation’s community banks and more than half of its credit unions that offer online bill pay services. It services more than 1,700 financial institutions with its easily configurable software. Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  10. BUSINESS STRATEGY • Growth through • Expand Product and Service Offerings • Upgrade core software applications and expand complementary product and service offerings • Expand Existing Customer Relationships • Recurring Revenue • Utilize full range of products and services • Extend Markets • Provide complementary products to financial institutions regardless of what their core processing solution is utilized • Expand Customer Base • Establish long-term relationships with new customers through sales and marketing efforts and selected acquisitions INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  11. SIZE OF CUSTOMER BASE Jack Henry & Associates 2006-2010 10-K INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  12. ACQUISITION STRATEGY To capitalize on its focused diversification acquisition strategy • Pros • Expand customer base • Enable entry into adjacent markets • Generate additional revenue and growth opportunities • Increase security and mitigate operational risks • Inter-company capital market • Economics of scale • Synergy • Cons • May lead to little organic growth • Pressure working capital, increase borrowing or selling equity or debt securities to the public • Costly and difficult to integrate Example: On June 30, 2008, the Company sold its insurance agency outsourcing business, Banc Insurance Services, resulting in a pre-tax loss of $2.7 B INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  13. RECENT ACQUISITIONS All numbers in thousands except ratios Jack Henry & Associates 2010 10-K INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  14. ACQUISITION STRATEGY • Next Move? There is not much discussion in the 2010 annual report and 2011 quarterly report: • “We will continue to refine our strategy as appropriate, while maintaining our focus on product and service quality, and providing the innovative solutions diverse financial institutions and businesses need to prosper in their competitive and evolving markets. “ INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  15. SOURCES OF REVENUE • Hardware Sales – Generates revenue through selling computer hardware, hardware maintenance and related services to customers. Revenue is recognized when the hardware is shipped. • Software License Fees – Generates revenue through the delivery of application software systems contracted with customers. License allows for product to be used on a single computer at a single location. • Support & Service – Generates revenue from implementation services, annual support to assist the customer in operating their systems and to enhance and update the software, outsourced data processing services and EFT support services. Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  16. SOURCES OF REVENUE Jack Henry & Associates 2011 Q2 INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  17. INDUSTRY OUTLOOK • Slow recovery from the US financial crisis remains a going concern as it threatens a bank’s discretionary spending • Reduction in profits has decreased demand for new products and services • Bank failures have been somewhat offset by JKHY’s acquisitions of other companies • The number of banks and credit unions has declined by 11% and 16%, respectively, from 2005 to 2009 • The Company reports that 49% of financial institutions and 26% of credit unions outsource information processing Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  18. MANAGEMENT ASSESSMENT • Consolidation in the financial industry can positively affect JKHY if the combined institution uses JKHY’s platform • JKHY remains “cautiously optimistic” because increasing portions of the business come from recurring revenue, increases in backlog and an encouraging sales pipeline • Customers will continue to face regulatory changes which will increase demand for JKHY’s products, which directly address efficiency and profitability • JKHY made 3 of its largest acquisitions during FY’10 and these acquisitions allow the Company to extend its customer base and produce returns for its shareholders Jack Henry & Associates 2010 Annual Report INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  19. PORTER’S 5 FORCES • Threat of Substitutes: Low/Medium • Large costs associated with switching technology platforms • Barriers to Entry: High • Very high switching costs & regulation compliance • Power of Suppliers: Low • Hardware represents insignificant portion of revenue • Power of Buyers: Low/Medium • High switching costs associated with learning • Rivalry: High • Competition against big firms & industry consolidation INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  20. SWOT ANALYSIS • Strengths: • Payment solutions & recent acquisitions continue to experience growth • Profitability in tough market • Increased dividend • Weaknesses: • Loss of customers from bank failures • High switching costs for customers • Diminishing organic growth • Opportunities: • Economic environment improving means greater discretionary spending by banks • Debt pay-down scheduled for July, thus reducing interest expense • Cross-selling • Threats: • Tighter credit markets • Bank discretionary spending has been slow to recover • If economy doesn’t pick up, banks will be less likely to purchase other products such as internet banking INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  21. COMPETITORS OVERVIEW INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  22. COMPANY SIZE FY2010 INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  23. COMPS STATEMENTS FY2010 Data from Capital IQ INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  24. STOCK PRICE OVER LAST YEAR Data from Yahoo! Finance INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  25. TRADING COMPS FY2010 INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  26. TRADING COMPS VALUES INTRODUCTION |BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  27. DISCOUNT RATE INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  28. SENSITIVITY ANALYSIS INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  29. DCF AND VALUE INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  30. RECOMMENDATION • DCF Value 30.47 • +10% 33.52 • -10% 27.42 • Comps Median Value 26.70 • Weighted Value $29.53 • Sensitivity Analysis Price Range $24.05 - $41.63 • Price as of Close 3/9/2011 $32.31 • Currently hold 400 shares • Recommendation: Stop loss on 200 shares at $26.50 • Constitutes 18% decline from current stock price INTRODUCTION | BACKGROUND| ANALYSIS| VALUATION| RECOMMENDATION

  31. QUESTIONS? Introduction | Problem | Objectives | Analysis | Solution

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