Jack Henry & Associates
By: Mark Bendinelli
The Henssler Financial Group

Jack Henry & Associates' (NASDAQ: JKHY) humble roots date back to the early 1970s when the company's founder, Jack Henry, and future business associate, Jerry Hall, met in Monett, Mo. The two men were believed to be the only computer users in their small town, as Jack was a data processing manager in the banking industry and Jerry, a data processing manager working for the U.S. Shoe Company. The two would regularly attend meetings together in Springfield and discuss various opportunities in the software business. At the time, only two software packages existed for the banking industry, and in-house computer systems were prohibitively expensive for smaller banks to afford. So in 1976, the plan, scribbled on the back of a napkin, to form Jack Henry & Associates was set into motion. In the first full year the business was incorporated, it churned out a grand total $9,360 in revenue. Just 30 short years later, JKHY has grown from two associates with one client to more than 3,300 associates serving nearly 9,000 banks, thrifts and other financial institutions through three business units: Jack Henry Banking, Symitar and ProfitStars.

Supporting nearly 2,000 banks, Jack Henry Banking is a leading provider of three different core processing systems. The systems support more than 100 complementary add-on products that assist with business intelligence, retail and corporate banking, online banking, electronic funds transfer, risk management and imaging solutions. The segment serves small to mid-sized banks with assets ranging from $500 million to $30 billion.

Symitar, JKHY's second business unit, was founded in 1985 and later acquired by JKHY in 2000. Symitar, like Jack Henry Banking, provided core processing solutions; however, this unit supports credit unions, as opposed to banks. Serving approximately 650 credit unions, including 30 with at least $1 billion in assets, Symitar offers two separate platforms, Episys and Cruise. Episys is implemented primarily by credit unions with assets exceeding $50 million, while Cruise is geared more toward groups with less than $50 million. These two platforms have helped Symitar achieve a seventh consecutive year of leading the industry in implementations by credit unions, according to Callahan and Associates.

Through JKHY's ProfitStars unit, the company has been able to execute its focused diversification acquisition strategy. The segment features many highly specialized solutions that are considered best-in-class products and services. These products serve about 6,000 domestic and international financial institutions in varying capacities, from generating revenue opportunities and controlling costs to enhancing security and reducing operational risks.

JKHY generates revenue by supporting and servicing its platforms, marketing its hardware and licensing its systems. Banks provide the majority of JKHY's revenue, accounting for about 83% of the fiscal 2007 total, and credit unions provide the remaining 17%. Combined, support and service generated three-quarters of JKHY's 2007 sales. Hardware added about 13% of revenue, and licensing supplied the final 12%. One of JKHY's primary advantages is that the bulk of the company's revenue, approximately 66%, comes from recurring sources. This steady stream of income gives JKHY financial stability, especially in difficult times.

Citations: Jack Henry & Associates' 2007 annual report and company web site¹, Bloomberg², Value Line³ report dated 9/22/08, S&P Advisor Insight Report⁴ dated 9/27/08, and Yahoo! Finance⁵.