# Jack Henry & Associates (JKHY) Financial Model Free Excel 3-statement financial model and company analysis for Jack Henry & Associates. - Canonical: https://finamodel.com/companies/jack-henry-associates - Industry: Software - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/JKHY.xlsx ## Model Purpose This model provides a comprehensive 3-statement forecast and discounted cash flow valuation to determine the intrinsic equity value of Jack Henry & Associates, enabling an equity research analyst to assess the impact of cloud migration, digital payments growth, and core banking market share gains on the company's share price. ## Company Overview Jack Henry & Associates (JKHY) is a leading financial technology provider that develops and delivers core banking software and payment processing solutions primarily for community and regional banks and credit unions in the United States. The company operates an asset-light, highly recurring software-as-a-service and transaction-based business model, serving approximately 7,400 clients. Business segments include: * Core (approx. 30-35% of revenue): Core information processing platforms for banks and credit unions. * Payments (approx. 35-40% of revenue): Secure payment processing, debit and credit card processing, and digital bill pay. * Complementary (approx. 25-30% of revenue): Additional software solutions that integrate with core platforms, such as risk management and digital banking (Banno). * Corporate and Other (approx. 1-5% of revenue): Hardware sales and unallocated corporate items. The company operates almost exclusively in the United States, with international sales accounting for less than 1% of total revenue. Jack Henry holds a dominant competitive position in the US community banking and credit union space, competing primarily with Fiserv and FIS. Recent major events include the acquisition of Payrailz to enhance digital payment capabilities and a strategic shift towards cloud-native architecture, alongside a complete paydown of its credit facility debt by the end of fiscal 2025. ## Revenue Deep Dive Jack Henry reports revenue both by segment and by type (Services and Support vs. Processing). The model should project revenue by segment. **Core Segment** * Revenue driver formula: Number of Core Clients x Average Revenue Per Core Client + Cloud Hosting Fees. * Historical growth rate: 5% to 8% CAGR. * Key growth levers and headwinds: Migration of on-premise clients to the private cloud, industry consolidation reducing the total number of financial institutions, and deconversion fees when clients are acquired. * Pricing dynamics: Long-term contractual agreements (typically 5 to 7 years) with built-in inflation escalators. * Revenue recognition notes: Software-as-a-Service and hosting revenues are recognised rateably over the contract term. * Seasonality: Relatively stable, though hardware sales and implementation fees can cause slight lumpiness in the fiscal fourth quarter (ending June 30). **Payments Segment** * Revenue driver formula: Transaction Volume x Fee Per Transaction + Card Processing Fees. * Historical growth rate: 6% to 9% CAGR. * Key growth levers and headwinds: Shift from cash to digital payments, growth in real-time payments (Zelle, FedNow), and consumer spending volumes. * Pricing dynamics: Transaction-based pricing mixed with fixed monthly platform fees. * Revenue recognition notes: Recognised at the point in time the transaction is processed. * Seasonality: Higher volumes typically observed in the calendar fourth quarter (fiscal second quarter) due to holiday spending. **Complementary Segment** * Revenue driver formula: Number of Add-on Modules Sold x Subscription Fee Per Module. * Historical growth rate: 8% to 12% CAGR. * Key growth levers and headwinds: Cross-selling digital banking (Banno platform) and fraud solutions to existing core clients. * Pricing dynamics: Subscription-based pricing with tiered volume metrics. * Revenue recognition notes: Primarily recognised over time as services are delivered. * Seasonality: Minimal seasonality due to the subscription nature of the revenue. ## Cost Structure ### Variable Costs / COGS * Cost of Revenue includes direct costs of processing, customer support personnel, hardware costs, and amortisation of capitalised software. * Gross margin range: 40% to 43% over the last 5 years (42.7% in FY2025). * Key input costs include data centre operations, cloud hosting fees (Microsoft Azure), and third-party processing network fees. * COGS scales with operating leverage; as more clients migrate to the cloud, gross margins incrementally expand due to multi-tenant efficiencies. ### Operating Expenses * Research & Development: Typically 6% to 8% of revenue. A significant portion of software development costs is capitalised and amortised through COGS, meaning gross R&D spend is higher than the reported income statement line item. * Selling, General & Administrative: Typically 11% to 13% of revenue. Driven primarily by sales commissions, marketing, and corporate headcount. * Depreciation & Amortisation: Included in Cost of Revenue and operating expenses, heavily weighted towards amortisation of capitalised software and acquired intangibles. * Stock-Based Compensation: Typically 1% to 2% of revenue, relatively modest compared to other technology peers. * Restructuring / one-time charges: Infrequent, though the company recorded minor severance expenses in FY2024 which did not repeat in FY2025. ### Margin Profile * Gross margin: 40% to 43%. * Operating margin: 22% to 25% (24.0% in FY2025). * Net margin: 17% to 19% (19.2% in FY2025). * Margin trend: Slowly expanding due to organic growth in high-margin digital and payments solutions, offset slightly by investments in cloud modernisation. ## Balance Sheet Structure * Total assets: Approximately $2.5 billion to $3.0 billion. * Key asset categories: Cash and cash equivalents, trade receivables, capitalised software, and goodwill. * Goodwill & intangibles: Represent approximately 45% to 55% of total assets, reflecting a history of strategic bolt-on acquisitions. * Working capital profile: * Days Sales Outstanding (DSO): 45 to 55 days. * Days Inventory Outstanding (DIO): Not material (hardware is a tiny fraction of the business). * Days Payable Outstanding (DPO): 25 to 35 days. * Net working capital as % of revenue: Typically negative or slightly positive, as deferred revenue (unearned income) provides a source of float. * PP&E: Modest, primarily consisting of data centre equipment and corporate facilities. * Right-of-use assets: Operating leases for office space and data centres, generally immaterial relative to total assets. ## Capital Expenditure & Investment * Capex as % of revenue: 6% to 8% historically. * Maintenance capex vs. growth capex: Approximately 30% maintenance (hardware and facility upgrades) and 70% growth (capitalised software development). * Major capex programmes: Ongoing modernisation of core platforms to cloud-native architecture. * Capitalised software: Highly material. The company capitalises significant internal development costs which are then amortised over 3 to 5 years. * M&A pattern: Bolt-on acquirer focusing on niche technology capabilities (such as Payrailz for digital payments). * Typical acquisition multiple paid: 4x to 6x revenue for high-growth software assets. ## Debt & Capital Structure * Total debt: $0 as of the end of FY2025 (paid down from $150 million in FY2024). * Debt/EBITDA ratio: 0.0x currently, with a target of remaining below 1.5x. * Key debt instruments: Unsecured revolving credit facility (currently undrawn). * Interest rate profile: Historically floating rate based on SOFR when drawn. * Share repurchase programme: Active and consistent. The company repurchased $35 million of stock in FY2025. * Dividend policy: Consistent dividend payer with a payout ratio of approximately 35% to 40%. Dividends paid in FY2025 totalled $164 million. ## Cash Flow Characteristics * Operating cash flow conversion: Very strong, typically 1.1x to 1.3x Net Income. * Free cash flow margin: 15% to 20% of revenue. * Major non-cash items: Depreciation, amortisation of capitalised software, and stock-based compensation. * Working capital cash flow impact: Deferred revenue growth acts as a consistent source of operating cash flow. * Capex intensity: Moderate, driven almost entirely by software development rather than physical assets. * Cash tax rate vs. GAAP effective tax rate: Cash taxes are generally aligned with the GAAP effective tax rate of approximately 23% to 24%. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for macroeconomic drivers, segment growth rates, margin profiles, working capital days, and capital allocation policies. 2. **Revenue Build**: Detailed projection of revenue by segment (Core, Payments, Complementary, Corporate and Other) and by type (Services and Support, Processing). 3. **Income Statement**: Consolidated P&L from Revenue down to Net Income and EPS, mirroring the company's 10-K presentation. 4. **Working Capital**: Schedule calculating receivables, deferred revenue, and payables based on days assumptions. 5. **Fixed Assets & Intangibles**: Waterfall schedules for PP&E, capitalised software, and acquired intangibles, calculating depreciation and amortisation. 6. **Debt Schedule**: Revolving credit facility balance, interest expense calculations, and debt paydown logic. 7. **Shareholders Equity**: Retained earnings roll-forward, share repurchases, dividends paid, and outstanding share count calculation. 8. **Balance Sheet**: Consolidated assets, liabilities, and equity. 9. **Cash Flow Statement**: Indirect method starting from Net Income, adjusting for non-cash items and working capital changes to arrive at ending cash. 10. **DCF Valuation**: Unlevered free cash flow calculation, WACC assumptions, terminal value, and implied share price. ## Key Financial Relationships 1. Core Segment Revenue = Prior Year Core Segment Revenue x (1 + Core Segment Growth Rate) 2. Payments Segment Revenue = Prior Year Payments Segment Revenue x (1 + Payments Segment Growth Rate) 3. Complementary Segment Revenue = Prior Year Complementary Segment Revenue x (1 + Complementary Segment Growth Rate) 4. Total Revenue = Core Segment Revenue + Payments Segment Revenue + Complementary Segment Revenue + Corporate and Other Revenue 5. Cost of Revenue = Total Revenue x Cost of Revenue Margin 6. Gross Profit = Total Revenue - Cost of Revenue 7. Research and Development Expense = Total Revenue x R&D Margin 8. Selling, General, and Administrative Expense = Total Revenue x SG&A Margin 9. Capitalised Software Additions = Total Revenue x Capitalised Software % 10. Deferred Revenue Balance = Total Revenue x (Deferred Revenue Days / 365) 11. Dividends Paid = Net Income x Dividend Payout Ratio 12. Share Repurchases = Available Free Cash Flow x Target Repurchase % 13. Ending Share Count = Beginning Share Count - (Share Repurchases / Average Share Price) ## Cross-Sheet Dependencies * The **Assumptions** sheet dictates the growth rates and margin profiles used in the **Revenue Build** and **Income Statement**. * The **Revenue Build** feeds the top line of the **Income Statement** and drives the activity in the **Working Capital** sheet. * The **Fixed Assets & Intangibles** sheet calculates D&A, which feeds into the **Income Statement** (within Cost of Revenue and Operating Expenses) and the **Cash Flow Statement** as a non-cash add-back. * The **Income Statement** generates Net Income, which is the starting point for the **Cash Flow Statement** and feeds the **Shareholders Equity** retained earnings. * The **Cash Flow Statement** determines the ending cash balance and any required borrowing, which feeds the **Debt Schedule** and the **Balance Sheet**. * Circularity risk exists between the **Debt Schedule** (interest expense) and the **Income Statement** (net income), which impacts cash flow and therefore the debt balance. A toggle must be included to break circularities. ## Sign Convention * Revenues, assets, and equity balances are entered and displayed as positive numbers. * Expenses (COGS, R&D, SG&A) are entered as positive numbers and subtracted in formulas. * Cash outflows (capex, dividends, share repurchases) are displayed as negative numbers on the Cash Flow Statement. * Contra-asset accounts (accumulated depreciation) are displayed as negative numbers on the Balance Sheet. ## Things Most Likely to Go Wrong * Failing to account for deconversion revenue. The company strips out deconversion fees (fees paid when a client leaves the platform) to calculate "non-GAAP adjusted revenue". The model must forecast GAAP revenue but should normalise growth rates to exclude these one-time fees. * Misclassifying amortisation. A large portion of amortisation relates to capitalised software and sits in Cost of Revenue, not operating expenses. Putting all D&A below the gross profit line will artificially inflate gross margins. * Ignoring the shift to cloud hosting. As clients move from on-premise to cloud, hardware revenue declines while hosting revenue increases. The model must reflect this mix shift in the Corporate/Other and Core segments. * Double-counting R&D. The company reports R&D expense on the P&L, but also capitalises significant software development costs. The cash flow statement must capture the capitalised portion as an investing outflow. * Overestimating interest expense. The company paid off its entire credit facility in FY2025. Interest expense should be zero unless the model forecasts a cash shortfall requiring a revolver draw. * Misunderstanding the segment vs. revenue type matrix. The company reports by segment (Core, Payments) and by type (Services/Support, Processing). The model should drive forecasts via the business segments to align with management commentary. * Underestimating the impact of bank consolidation. The total number of US banks and credit unions is shrinking. The model must assume revenue growth comes from higher revenue per client and cross-selling, not net new institution growth. * Forgetting to link deferred revenue to cash flow. Deferred revenue is a critical source of working capital for software companies and must be modelled accurately based on historical days outstanding. ## Validation Checks * Total Revenue must equal the sum of the four business segments. * Gross margin should remain in the 41% to 43% range; flag if it falls outside this band. * Operating margin should remain in the 23% to 25% range. * Balance sheet must balance: Total Assets = Total Liabilities + Equity in every historical and forecast period. * Cash flow from operations must exceed Net Income (OCF / Net Income > 1.1x) due to heavy software amortisation. * Debt balance cannot fall below zero. * Capitalised software additions should approximate 5% to 7% of total revenue. * Effective tax rate should remain between 23% and 25%. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Core Segment Revenue Growth | 6.5 | % | Based on FY2025 adjusted organic growth and cloud migration trends | | Payments Segment Revenue Growth | 7.0 | % | Based on FY2025 actual growth of 6.8% and digital payment tailwinds | | Complementary Segment Revenue Growth | 9.0 | % | Based on FY2025 actual growth of 9.2% and strong Banno adoption | | Corporate and Other Revenue Growth | -1.5 | % | Based on historical declines in hardware sales | | Cost of Revenue Margin | 57.3 | % | Based on FY2025 actuals (Gross Margin of 42.7%) | | R&D Expense Margin | 6.5 | % | Based on historical averages | | SG&A Expense Margin | 12.2 | % | Based on historical averages and cost control initiatives | | Effective Tax Rate | 24.0 | % | Based on recent historical statutory and state tax blends | | Dividend Payout Ratio | 36.0 | % | Based on FY2025 dividends paid ($164m) relative to Net Income ($456m) | | Capitalised Software as % of Revenue | 6.0 | % | Based on historical capitalisation rates | | Days Sales Outstanding (DSO) | 50 | Days | Calculated from FY2024/FY2025 average receivables | | Deferred Revenue Days | 65 | Days | Calculated from historical unearned revenue balances | | WACC | 8.5 | % | Standard cost of capital for a mature, low-beta software provider | | Terminal Growth Rate | 3.0 | % | Aligns with long-term GDP growth and inflation escalators in contracts | ## Data Sources & Benchmarks * SEC EDGAR: Jack Henry & Associates (JKHY) Form 10-K and 10-Q filings. * Investor Relations: Jack Henry investor presentations and earnings call transcripts. * Key Peers for Benchmarking: Fiserv (FI), Fidelity National Information Services (FIS), and NCR Voyix (VYX). * Industry Data: Federal Deposit Insurance Corporation (FDIC) data on bank consolidation and National Credit Union Administration (NCUA) data on credit union assets. ## Sources * Jack Henry & Associates FY2025 Earnings Release (PR Newswire, August 19, 2025) * Jack Henry & Associates Form 10-K for the fiscal year ended June 30, 2025 (SEC EDGAR) * Jack Henry & Associates Form 10-K for the fiscal year ended June 30, 2024 (SEC EDGAR) * Macrotrends and CompaniesMarketCap for historical margin analysis and financial ratios. --- ## Frequently asked questions ### What does Jack Henry & Associates do? Jack Henry & Associates is a leading financial technology provider that develops and delivers core banking software and payment processing solutions primarily for community and regional banks and credit unions in the United States. The company operates an asset-light, highly recurring software-as-a-service and transaction-based business model, serving approximately 7,400 clients. ### How does Jack Henry & Associates generate its revenue? Jack Henry & Associates generates revenue primarily through its Core, Payments, and Complementary segments. The Core segment's revenue is driven by the number of clients and average revenue per client, plus cloud hosting fees, while the Payments segment's revenue is largely based on transaction volume and associated fees. ### What is the assumed revenue growth rate for Jack Henry & Associates in the financial model? The financial model for Jack Henry & Associates assumes a revenue growth rate of approximately 7.55%. This projection helps assess the company's future financial performance and its impact on intrinsic equity value over the forecast horizon of FY2026–FY2030. ### What is Jack Henry & Associates' capital expenditure strategy? Jack Henry & Associates' capital expenditure strategy focuses significantly on growth, with approximately 70% historically allocated to capitalized software development for modernizing core platforms. The remaining 30% covers maintenance capex for hardware and facility upgrades, and the financial model uses a Capex_Pct_Revenue assumption of approximately 2.32%. ### How does Jack Henry & Associates' working capital profile impact its financial model? Jack Henry & Associates typically exhibits a negative or slightly positive net working capital as a percentage of revenue. This profile is influenced by deferred revenue, which acts as a source of float for the company, and the financial model incorporates a Net Working Capital as a percentage of revenue assumption of approximately -0.09%. ### Can I download an Excel financial model for Jack Henry & Associates? Yes, an Excel financial model for Jack Henry & Associates is available for download. This model provides a comprehensive 3-statement forecast and discounted cash flow valuation to determine the intrinsic equity value of the company. [Interactive forecast calculator](https://finamodel.com/companies/jack-henry-associates/forecast)