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Jack Henry & Associates, INC. (JKHY) Prateek Baveja Neha Saoji Siyu Xu RCMP Presentation (Existing Company Analysis) 19 th March 2015

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2 Agenda Introduction3 Company Review7 Macroeconomic Conditions14 Industry Prospects15 Stock Market Review18 Financial Analysis & Projections19 Valuations22 Recommendation27

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3 Jack Henry & Associates An Introduction Processing transactions Managing information Automating business processes History Founded by Jack Henry & Jenry Hill in 1976 Headquarter ed in Monett, Missouri Industry Business Software & Services Serves commercial banks & credit unions IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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4 JKHY Shareholder Meeting Nov2014 Jack Henry & Associates Major Product Line IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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5 JKHY 10K Pages 20-21 Support & Services form major chunk of revenues Support & Services Hardware Sales License IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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6 JKHY Shareholders Meeting2014 Change in Business Model IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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7 Current share price = $68.89 Current holding value = $13,563 (200 Shares) Constitutes 7.39% of invested holdings (without cash) Constitutes 3.18% of invested holdings (with cash) Initial investment: $7,200 Unrealized gain: $11,736 Source: Yahoo! Finance RCMP Portfolio Current Holding IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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8 Source: Yahoo! Finance RCMP Portfolio History of JKHY transactions Nov 11, 1999 Purchase 200 shares @ $36 March 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) Dec 4, 2014 Hold 200 shares @ $61.90 IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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9 Recent news at a Glance BCB Community Bancorp Selects Jack Henry Banking to enhance efficiency & Workflow Management CUBG, nations largest Business Services Credit Union Organization announces alliance with ProfitStars division Oppenheimer upgrades JKHY from Perform to Outperform Shruti Miyashiro, President & CEO of Orange Country Credit Union, appointed to the board as an independent director ProfitStars' iPay Solutions first to implement NACHA's Bill Payment Exception Program IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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10 JKHY Website Management Team Jack Prim Chairman of the Board and Chief Executive Officer Jack Prim Chairman of the Board and Chief Executive Officer David Foss President David Foss President Kevin Williams CFO & Treasurer Kevin Williams CFO & Treasurer Mark Forbis VP & CTO Mark Forbis VP & CTO CEO since 2004, Chairman of the Board since 2012 38-year financial industrial experiences Expertise across departments from outsourcing management, system implementation & support IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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11 JKHY Shareholders Meeting Nov2014 JKHY is among the best places to Work IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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12 Integrated technology & payment processing solutions Payment Processing solutions for credit unions Internet & telephone bill payment services Mobile banking, web development and data- enriched marketing technology JKHY 10K2014 Page 6 Recent Acquisitions (2010 2014) 28 strategic acquisitions since end of fiscal year 1999 IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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13 Strengths & Opportunities outweigh the negatives Opportunities Strengths Weakness Threats 100 50 -50 -100 Heavy focus on R&D Robust financial position Strong FCF for M&A Should increase client base in core banking & credit union Should consider providing SaaS services Consolidate Mobile Banking Solutions Highly concentrated operations & customer base Relatively small in comparison to competitors Innovations arose out of acquisitions Larger Banks can start using their own software Prone to changes in banking & govt. regulations Economic uncertainty Security Threats IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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14 Source: U.S. Bureau of Economic Analysis (http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm)http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm Bureau of Labor Statistics (http://data.bls.gov/timeseries/LNS14000000)http://data.bls.gov/timeseries/LNS14000000 Source: Federal Reserve Bank of St. Louis (http://research.stlouisfed.org/fred2/graph/?id=TOTALTCU)http://research.stlouisfed.org/fred2/graph/?id=TOTALTCU Macro Economic Factors Improved GDP growth Falling Unemployment Increase in Loans Outstanding by Credit Union IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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15 Source: Hfs Research, 2013 market sizing data Industry - Business Software & Service The IT and business services outsourcing market was at 170 billion in 2012 and the banking process outsourcing services made up about 85 billion. Increase in the IT and business services outsourcing market IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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16 Sustained growth in a Consolidating Industry JKHY 2014 Shareholders Meeting IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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17 Porters 5F Analysis Medium but Increasing Building trust takes time Low as switching products is costly Moderate as terms cannot change between contract period Little as major production is in house High & Increasing as some financial firms build their own set of software IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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18 Yahoo Finance Stock Market Return JKHY returns are correlated with the market index but has much higher returns 5 yr annualized returns of 23.29% / Yr IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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19 10K Financial Ratio Analysis Decreasing Debt Consistent Growth Lower Volatility Stable Revenue Stream IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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20 DuPont Analysis Increasing ROE Decreasing Leverage Increasing asset turnover Increasing dividend payments IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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21 10K 2014 Income Statement Financial Projections Income Statement 2014AAverageMedian2015E2016E2017E2018E2019E Sales growth rate7.1%9.7%8.6%8.9%10.8%12.8%13.9%14.1% License-3.3%0.4%0.8%-3.0% Support and service8.2%11.2%9.9%10.0%12.0%14.0%15.0% Hardware-1.2%-2.1%-2.4%-1.7% Cost of sales yoy growth -1.1%-0.7%-0.6%0.8%0.9%1.2%1.1% License-8.4%-7.2%-7.1%-7.2%-9.5%-10.1%-8.2%-8.7% Support and service-1.5%-0.9%-1.0%-0.9%-1.0%-1.2%-1.1% Hardware1.3%0.2%0.3%0.2%0.3%0.6%0.5%0.4% Operating expenses17.3% 18.4% 18.1% 17% SGA of revenue11.8%12.5%12.3%11.5% R&D of revenue5.5%5.9%5.8%5.5% IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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22 WACC & FCF Valuation cost of debt2.9% cost of debt (pre-tax)5% tax rate35% Cost of equity11.8% risk free rate2.24% market return7.79% market premium5.55% beta (five year)1.03 cost of equity (CAPM)- 75%7.97% realized return-25%23.29% Capital structureMillion $Weight Debt @ book value7.750.14% Equity@ mkt cap547099.86% WACC11.79% Perpetual growth rate3.00% FCF calculation20142015E2016E2017E2018E2019ENORMALIZED EBIT309.1345.4388.6446.8517.7600.6813.53 - Corporate income tax (35%)108.2120.9136.0156.4181.2210.2284.73 - Depreciation and amortization107.8114.3128.5148.5175.0209.0 - Change in working capital-4.220.4727.235.743.850.5 - Capital expenditures-33.20-30.83-31.24-28.75-25.10-23.77 Free cash flow279.7287.5322.6374.4442.6525.2663.6 12345 Discount factor 0.890.800.720.640.57 Present value of FCF 257.16258.18268.04283.43300.86 Terminal value 4326.46 Total present value5694.13 Shares Outstanding85.40M Price per share$66.68 Current Price$68.86 IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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23 Sensitivity Analysis 66.689.79%10.79%11.79%12.79%13.79% 1.5%75.7066.5859.2753.2948.31 2.5%83.7672.6263.9256.9551.24 3.0%88.6876.2266.6859.0652.92 3.5%94.3880.3269.7061.4054.75 4.0%101.0785.0373.1564.0156.77 IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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24 Fidelity National Information (FIS): Offers financial institution core processing, card issuer, and transaction processing services, including the NYCE Network Financial Solutions Payment Solutions International Solutions Fiserv (FISV): Provide various financial services technology solutions Payments and Industry Products Financial Institution Services Globally focused Total system services (TSS): Provides electronic payment processing and other services to card-issuing and merchant acquiring institutions Offers issuer account solutions. Provides merchant processing and related services. Globally focused Yahoo Finance & 10K2014 Competitor Analysis IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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25 Source: Capital IQ Valuation - Comparable Transactions IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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26 Bloomberg Technical Analysis - 1 Year Data IntroCompanyMacroIndustryStockFinancialsValuationsRecomm

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27 Recommendation DCF Valuation - $66.68 Comparable Analysis Valuation - $66.29 Current Stock Price - $68.89 50 Days MA crosses 100 & 200 Days MA Momentum Steady growth projections Growth Long contracts periods 78% recurring revenue Business IntroCompanyMacroIndustryStockFinancialsValuationsRecomm