1. Yuhao Qi
Alok Sanghvi
Jiayue Li (Lydia)

2. Contents 01 Introduction 02 Macro Environment & Industry Analysis 03
Business Analysis 04
Financial Analysis 05
Financial Projection 06
Valuation 07
Technical Analysis 08
Recommendation

3. 01
Introduction

4. Portfolio Allocation Bought @ $36 in Nov 11, 1999 Current price is 95
Compounded annual return=14.9%

5. Holding History Nov 11,1999 purchase 200 shares @$ 36 Mar 2, 2000
2 for 1 split, 400 $18
Mar 4, 2001
2 for 1 split, 800 $9
Jan 15, 2007 Sold 400 $22.53 (realized gain of $5,412)
Nov 25, 2013 Sold 200 $56.75 (realized gain of $9,550)
Apr 13, 2016 Sold 100 $82.58
(realized gain of $7,358 )

6. Historical Stock Performance
Multiples
EPS
Price/Book
Forward P/E
3.30
7.57x
29.46x

7. Business Overview Main competitors:
Founded in 1976 and headquartered in Monett, Missouri
Provides technology solutions and payment processing services primarily for financial services organizations in the United States
A leading provider of integrated data processing systems to over 1,100 banks ranging from community banks to multi-billion dollar institutions with assets of up to $30 billion
Fundamental business strategy is to generate organic revenue and earnings growth supplemented by strategic acquisitions
Main competitors:
Fidelity National Information Services, Inc. (FIS)
Fiserv, Inc. (FISV)
DH Corporation (DH.TO)
A leading provider of core data processing solutions for over 800 credit unions of all sizes
A leading provider of highly specialized products and services to financial institutions that are primarily not core customers of the Company
Source: FORM 10-K FOR FISCAL YEAR ENDED JUNE 30,

8. Revenue Breakdown
Stack chart and rearrange segments for better visibility
Source: Pg.25 ”BUSINESS” (FORM 10-K FOR FISCAL YEAR ENDED JUNE 30, 2016 )

9. 02
Macro Environment
& Industry Analysis

10. Macro Environment
Source: Bureau of Economic Analysis (
Source: Bureau of Economic Analysis (

11. Industry Analysis Source: Credit Union National Association(
Source: FDIC Bank Profile (

12. Porters Five Forces Industry Analysis New entrants Existing Players
Substitutes
Low
Moderate
High
Porters Five Forces
Supplier
Customer
Low
Low

13. 03
Business Model

14. Business Model
Jack henry banking primarily serves commercial banks and savings institutions with up to $30 billion in assets. According to the Federal Deposit Insurance Corporation , there were more than 6,100 commercial banks and savings institutions in this asset range as of December 31, Jack Henry Banking currently supports over 1,100 of these banks with its core information processing platforms and complementary products and services.  
Symitar serves credit unions of all asset sizes. According to the Credit Union National Association (“CUNA”), there were nearly 6,300 domestic credit unions as of December 31, Symitar currently supports over 800 of these credit unions with core information processing platforms and complementary products and services.
ProfitStars currently supports nearly 10,200 domestic and international institutions with specialized solutions for generating additional revenue and growth, increasing security, mitigating operational risks, and controlling operating costs.
In-house:
Fully paid contracts
Initial license fees
Ongoing annual software maintenance fees
Hardware, equipment and and other related services fees
Outsource:
Contracts for five or more years
Transaction-based processing fees
Minimum guaranteed payments
Source:” ITEM 1.  BUSINESS” (FORM 10-K FOR FISCAL YEAR ENDED JUNE 30, 2016 ): ( ) (accessed March 05, 2017)

15. In-to-out OPPORTUNITIES
Business Analysis
In-to-out OPPORTUNITIES
Source:” JHA 2016 Analyst Day” ( (accessed march 05, 2017 )

16. Experienced management team with focused business strategy
John "Jack" F. Prim
Executive Chairman of the Board
Began career in the financial industry in 1977
Joined JHA in 1995
Former CEO ( )
David B. Foss
President and Chief Executive Officer
Joined JHA in 1999
President of ProfitStars in 2004
Degree in Computer Science
Kevin D. Williams
Chief Financial Officer and Treasurer
CPA
Worked in public accounting and performed audit work for JHA for seven years
Joined JHA in 1998
Member of the American Institute of Certified Public Accountants (AICPA)
Mark S. Forbis
Vice President and Chief Technology Officer
Joined JHA in 1989
Was named Vice President and Chief Technology Officer in 2006
Experienced management team with focused business strategy

17. S W O T SWOT Business Analysis Strength Weakness Low Debt
Fewer Acquisition opportunities
More repurchase
Experienced Management team
Strong customer services S
Product Line with no gap W
SWOT O T
In to Out Plan
Dodd Frank Repeal
International Expansion
No Patents
Regulations
Opportunity
Threat

18. Business Risks US & Global Market & Economic Conditions
The financial service industry condition;
Consumer & business spending (transaction fees)
Regulations
Dodd-Frank Wall Street Reform & Consumer Protection Act;
Changing regulatory environment
Operational risks
Security problems;
Operational failure in outsourcing facilities;
Renewal of contracts.
Other risks
Fewer acquisition opportunities;
Rapid technology changes;
Loss of key employees.
Source:”ITEM 1A.  RISK FACTORS” (FORM 10-K FOR FISCAL YEAR ENDED JUNE 30, 2016 ): ( (accessed March 05, 2017)

19. 04
Financial Analysis

20. Financial Analysis – Profitability Ratios
Source: Capital IQ, accessed through Market Information Lab

21. Financial Analysis – Liquidity & Leverage Ratios
Source: Capital IQ, accessed through Market Information Lab

22. Financial Analysis – Market Value Ratios
Source: Capital IQ, accessed through Market Information Lab

23. EBIT/Enterprise Value
Financial Analysis
Dupont Analysis
Tax Burden
Interest Burden
Profit Margin
Assets Turnover
Leverage Ratio
ROE
JKHY
69.20%
100%
23.80%
0.74
1.84
22.36%
FIS
62.69%
69.21%
14.17%
0.35
2.74
2.98%
FISV
72.94%
80.44%
28.79%
0.58
3.67
35.76% DH
111%
48.88%
10.03%
2.27
4.44%
ROIC vs. WACC(JKHY)
Greenblatt Ratios
EBIT/Enterprise Value
EBIT/Tangible Asset
JKHY
5.44%
1.2
FIS
3.77%
1.6
FISV
5.29%
3.7
Source: “Jack Henry & Associates Inc (NAS:JKHY) ROIC %” (
Source: “Jack Henry & Associates Inc (NAS:JKHY) ROC (Joel Greenblatt) % “ (

24. 05
Financial Projection

25. Cost of support and service
Key Financial Projections
Revenue
2017
2018
2019
2020
2021
License
-5.0%
Shift of In house to Out sourced customers
Support and service
7.5%
7.3%
7.0%
6.8%
6.5%
With fewer acquisition opportunities, growth rate will decrease
Hardware
-6.0%
Total
7.2%
6.6%
6.2%
COGS
2017
2018
2019
2020
2021
Cost of license
40.0%
Low threat of suppliers because of strong in house R&D
Cost of support and service
57.8%
57.0%
56.0%
Gradually economies of scale factoring in
Cost of hardware
72.6%
72.7%
Average of past 5 years cost of hardware revenue
Total
56.8%
56.6%
56.2%
2017
2018
2019
2020
2021
SG&A
6.0%
6.2%
6.4%
Increasing costs of marketing, R&D, salaries, as % of sales
Dividends paid
36.0%
As % of net income as the company reaches stable growth
Cash
10.0%
8.9%
8.4%
8.8%
8.3%
Average % of revenue
Capital Expenditure
3.5%
% of total sales

26. Weighted Average Cost of Capital
Weight
Cost of Equity
7.5%
97.5%
After-tax Cost of Debt
3.6%
2.5%
WACC
7.4%
Size Premium
0.86%
Other Risk Premium 2%
Discount Rate
10.28%
Cost of Equity
CAPM
Risk-free Rate
2.4%
10-year US Treasury
Beta
0.86
Source: Bloomberg
Market Risk Premium
6.0%
CAPM Cost of Equity
7.5%
Cost of Debt
5.4%
Tax Rate
33%
After-tax Cost of Debt
3.6%
Source: Capital IQ and Bloomberg Terminal, accessed through Market Information Lab

27. 06
Valuation

28. Perpetuity Growth Rate Implied Equity Value and Share Price
Valuation
DCF
Exit Multiples
DCF Perpetuity Growth
Enterprise Value
Cumulative Present Value of FCF
$1,656,352.2
Terminal Value
Terminal Year EBITDA (2021E)
$621,067.7
Exit Multiple
16.3x
$10,141,224.5
Discount Factor
0.61
Present Value of Terminal Value
$6,216,670.0
% of Enterprise Value
79.0%
$7,873,022.2
Perpetuity Growth Rate
Terminal Year Free Cash Flow (2021E)
$504,418.7
Normalized FCFt+1
$517,029.2
Long term growth rate (g)
2.50%
Terminal value
$6,643,503.3
Present value of terminal value
4,072,532.61
Present value of stage 1 cash flows
$1,656,352.2
Enterprise value
$5,728,885
Implied TV exit EBITDA multiple
9.2x
Implied Equity Value
$5,658,574.8
Implied Share Price
$71.25
Implied Equity Value and Share Price
Enterprise Value
$7,873,022.2
Less: Total Debt -
Less: Preferred Securities
Less: Noncontrolling Interest
Plus: Cash and Cash Equivalents
70,310.0
Implied Equity Value
$7,802,712.2
Fully Diluted shares outstanding
79,416.0
Implied Share Price
$98.25

29. Jack Henry Implied Stock Price
Valuation
DCF
Multiple
Multiple
Weight
Median Mulitple
Implied JKHY Price
High Mulitple
TEV/Sales
25%
4.01
70.57
5.28
92.83
Price/Book
10%
2.78
34.82
9.80
122.67
TEV/EBITDA
40%
16.33
101.54
16.90
105.06
P/E
19.46
64.28
22.77
75.22
Jack Henry Implied Stock Price
100% $ $
Source: Capital IQ, accessed through Market Information Lab

30. Sensitivity Analysis DCF 1.5% 2.0% 2.5% 3.0% 3.5%
Enterprise Value (in $Millions)
Exit Multiple
7,873.0
11.5x
14.0x
16.3x
18.5x
20.0x
7.5%
$6,739
$7,820
$8,828
$9,767
$10,416
9.0%
$6,346
$7,356
$8,296
$9,172
$9,777
10.3%
$6,033
$6,984
$7,871
$8,697
$9,268
11.0%
$5,869
$6,791
$7,649
$8,449
$9,002
11.5%
$5,757
$6,658
$7,498
$8,280
$8,821
Implied Share Price
Long Term Growth Rate
71.3
1.5%
2.0%
2.5%
3.0%
3.5%
7.5%
$96.2
$103.4
$112.0
$122.6
$135.8
9.0%
$76.4
$80.7
$85.7
$91.4
$98.3
10.3%
$64.9
$67.9
$71.2
$75.0
$79.3
11.0%
$59.9
$62.4
$65.1
$68.2
$71.7
11.5%
$56.8
$59.0
$61.4
$64.1
$67.1
Implied Share Price
Exit Multiple
98.3
11.5x
14.0x
16.3x
18.5x
20.0x
7.5%
$84.0
$97.6
$110.3
$122.1
$130.3
9.0%
$79.0
$91.7
$103.6
$114.6
$122.2
10.3%
$75.1
$87.1
$98.2
$108.6
$115.8
11.0%
$73.0
$84.6
$95.4
$105.5
$112.5
11.5%
$71.6
$83.0
$93.5
$103.4
$110.2
PV of Terminal Value as % of Enterprise Value
Exit Multiple
0.8
11.5x
14.0x
16.3x
18.5x
20.0x
7.5%
73.8%
77.4%
80.0%
81.9%
83.1%
9.0%
73.1%
76.8%
79.5%
81.4%
82.6%
10.3%
72.5%
76.3%
79.0%
81.0%
82.1%
11.0%
72.2%
76.0%
78.7%
80.7%
11.5%
72.0%
75.8%
78.5%
80.5%
81.7%

31. 07
Technical Analysis

32. Technical Analysis
Source: Bigcharts.com

33. 08
Recommendation
Hold 100 shares
Thank you !