Jack Henry & Associates

1. Jack Henry & Associates Radityo Ardi Nugraha John Sun

2. RCMP Position • Purchase Date: Nov 11, 1999 • # Shares purchased: 200 • Stock splits date: Mar 3, 2000 and Mar 5, 2001 • Currently owned shares: • # shares: 800 • Base Price: $9.00 • Constitutes 5% of all current holdings

3. Stocks Facts • Current Shares Price: $22.20 • Market Cap: $2.01B • 52wk Range: $17.40 - $23.77 • P/E (ttm): 22.59 • Div & Yield: 0.22 (1.00%)

4. Company History • In 1976, Jack Henry and Jerry Hall found Jack Henry & Associates in Monet, Missouri • In 1985, Jack Henry & Associates became public, traded at NASDAQ • In 1992 had a mission to expand its customer base and breadth of offerings through strategic development and acquisition of additional technology solutions • By 1995 Jack Henry offered ATM and imaging solutions, and outsourced data processing solutions.

5. Company History (cont.) • Started in 1992, in order to grow, Jack Henry began to acquire companies that provided complementary products and services to its own core customer base and companies that offered products and services to a broader range of client types and sizes. • In fiscal year 2005, Jack Henry acquired 8 companies, which are: Tangent Analytics, LLC ($4M), RPM Intelligence, LLC ($6.2M), SERSynergy ($34.5M), TWS Systems, Inc. ($10.9M), Optinfo, Inc. ($15.1M), Verinex Technologies, Inc. ($35m), Select Payment Processing, Inc. ($12M), and Banc Insurance Services, Inc.($6.7M) • In fiscal year 2006, Jack Henry acquired Profitstar Inc ($19.3M). • Jack Henry counts over 8,700 financial institutions as customers

6. Company Business • Provides data processing solutions to small banks and credit unions (assets under $30 billion). • Customers either install systems in-house or outsource their operations to Jack Henry. • 3 sources of revenue: • Software licensing • Support and Service • Hardware

7. Business Description • Core Systems • Can be used in-house or outsourced. • Provide core processing functionality: deposits, loans, etc. • 5 core systems: • Silverlake System: for banks with $500 million to $30 billion in assets • CIF 20/20: for banks with less than $1 billion in assets • Core Director: for banks with less than $1 billion in assets (Windows-based) • Episys: for credit unions with greater than $50 million in assets • Cruise: for credit unions with less than $50 million in assets

8. Business Description (cont.) • Complementary Products • Allow the company to offer custom-tailored, integrated suites of software solutions. • Expose the company to high-growth areas, like security, risk management, online bill pay, and electronic funds transfer. • Product offering expanded through acquisitions.

9. Business Description (cont.) • Examples of complementary products • Synapsis: Relationship management (customer profiling, referral tracking, etc.) • NetTeller: Online home banking system with real-time account information and transaction capabilities. • Remote Deposit Capture: Peforms image capture, storage, and processing for paper checks. • PassPort: Drives and monitors ATM networks. • Biodentify: Biometric fingerprint security. • Centurion Disaster Recovery: Disaster recovery protection

10. Major Competitors • Fidelity national Information Services (FIS) with $6.7B Mkt. Cap • Fiserv Inc. (FISV) with $7.6B Mkt. Cap

11. Macro Economic Overview • GICS Sector: Information Technology • Sub-industry: Application Software • Stable industry outlook. Spending expected to accelerate slow growth (around 5%) • Commoditization of software industry. Competition from international (Indian, Eastern European) developers. • Peer Group: Accounting and Financial Software • Consolidation: Number of commercial banks has declined by 4% annually over past five years. Credit unions have consolidated at the same rate. • Sarbanes-Oxley compliance a major information technology hurdle and source of IT spending.

12. Stock Market Performance

13. Stock Market Performance (cont.)

14. Revenue by Segment • Hardware – comprises a smaller percentage of total revenues due to low margins and stiff competition from other players • License – Grows as a slowing rate as trends in bank consolidation limits new customers • Support – Grows to be a majority of Revenue due to higher margins and cross-selling potential / higher growth ceiling.

15. Revenue by Segment

16. Profit by Segment

17. Modeling and Forecasting • 2-tier modeling approach • Full model from 2007-2011 • Reduced Model from 2011-2015 (8%) • Terminal Growth = 4% • 3 Scenarios – Upside, Base case, Downside

18. Modeling and Forecasting • Upside: • No setback, steady revenue growth matching highest historical rate • Overhead costs as % of revenue declines at historical rate to a resonable terminal rate • Associated acquisitions and business costs grow at a slower rate

19. Modeling and Forecast • Base Case: • Semi-steady revenue growth – some setbacks/periods of economic decline • Overhead costs remain constant as % of revenues • Acquisitions and business costs grow at slowing historical rate to a reasonable terminal rate

20. Modeling and Forecasting • Downside: • 2007, 2008 general economic slow down, marked by a period of revenue decline and much lower margins • Recovers by 2009 • Growth rates slow at a faster rate as revenues increase YoY.

21. Sensitivity Analysis

22. DCF Valuation • Final Year (2006) Free Cash Flow = $126,682 • Caused by dramatic decline in working capital • Not likely to continue as a trend

23. DCF Valuation • Upside - $23-24 • Base Case - $16-18 • Downside - $13+ • “Fair Value” - $15-21

24. Recommendation • JKHY currently trades at 22.27 • Above high end of DCF “fair value” projections • Sell 400 shares at market to recover our investment. • Remain long 400 shares as company is still a well-managed, but fully valued opportunity.