Yuhao Qi Alok Sanghvi Jiayue Li (Lydia)

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

01 Introduction

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

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

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

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, 2016 https://www.sec.gov/Archives/edgar/data/779152/000077915216000142/jkhy-2016630x10k.htm

Revenue Breakdown Stack chart and rearrange segments for better visibility Source: Pg.25 ”BUSINESS” (FORM 10-K FOR FISCAL YEAR ENDED JUNE 30, 2016 ) https://www.sec.gov/Archives/edgar/data/779152/000077915216000142/jkhy-2016630x10k.htm

02 Macro Environment & Industry Analysis

Macro Environment Source: Bureau of Economic Analysis (https://www.bea.gov/national/index.htm#gdps) Source: Bureau of Economic Analysis (https://www.bea.gov/iTable/iTable.cfm?reqid=9&step=1&acrdn=2#reqid=9&step=3&isuri=1&904=2000&903=65&906=a&905=2016&910=x&911=0)

Industry Analysis Source: Credit Union National Association (https://www.cuna.org/Research-And-Strategy/Credit-Union-Data-And-Statistics/) Source: FDIC Bank Profile (https://www.fdic.gov/bank/analytical/qbp/2016dec/cb1.html)

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

03 Business Model

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, 2015. 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, 2015. 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 ): (https://www.sec.gov/Archives/edgar/data/779152/000077915216000142/jkhy-2016630x10k.htm ) (accessed March 05, 2017)

In-to-out OPPORTUNITIES Business Analysis In-to-out OPPORTUNITIES Source:” JHA 2016 Analyst Day” (http://files.shareholder.com/downloads/JKHY/3928842603x0x891182/455AAA4D-9921-4A89-B1B4-23EBC7308C6A/FY16_Analyst_Day_Presentation.pdf) (accessed march 05, 2017 )

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 (2004-2016) 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

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

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 ): (https://www.sec.gov/Archives/edgar/data/779152/000077915216000142/jkhy-2016630x10k.htm) (accessed March 05, 2017)

04 Financial Analysis

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

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

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

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 %” (http://www.gurufocus.com/term/ROIC/NAS:JKHY/Return%2Bon%2BInvested%2BCapital/Jack+Henry+%26+Associates+Inc) Source: “Jack Henry & Associates Inc (NAS:JKHY) ROC (Joel Greenblatt) % “ (http://www.gurufocus.com/term/ROC_JOEL/NAS:JKHY/ROC-Joel-Greenblatt-/Jack-Henry--Associates-Inc)

05 Financial Projection

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

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

06 Valuation

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

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%   $ 77.81 $ 96.31 Source: Capital IQ, accessed through Market Information Lab

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%

07 Technical Analysis

Technical Analysis Source: Bigcharts.com

08 Recommendation Hold 100 shares Thank you !