Incorporated: 1977
NAIC: 541512 Computer Systems Design
SIC: 7373 Computer Integrated Systems Design; 7379 Computer Related Services Nec
Jack Henry and Associates, Inc. (JHA), started as a small technology supply and consulting company and has grown to become a national leader in technology services and consultation. In 2007, JHA's products and services were used by more than 8,700 businesses and the company grossed over $600 million in annual sales. JHA operates through three principal operating units: Jack Henry Banking, which provides computer integration and automation systems for financial institutions; Symitar, which was acquired by Jack Henry in 2000 and provides service and also provides surveys and customer information; and Profitstar, which provides software and automation programs for a variety of financial institutions and services to over 6,000 domestic and international businesses.
Starting Up: 1976-85
In 1976, John W. "Jack" Henry, Jerry D. Hall, and a third person founded Jack Henry and Associates to develop, market, maintain, and support integrated data processing systems for in-house automation of standard banking and accounting applications in commercial banks and other financial institutions. The company targeted community banks and marketed a bank automation system that used IBM's System/36 midrange computer. The firm was first incorporated in Missouri in 1977 but remained a private company until 1985. Its headquarters were established in Monett, Missouri, a small city located in the southwest corner of the state.
JHA reincorporated in Delaware on November 12, 1985, making an initial public offering on November 20 of that year. Approximately 1.1 million shares were offered at $6.75 per share, with the company realizing $6.21 per share. Henry and Hall owned about 60 percent of the outstanding common stock of the company following the public offering. Revenues by then had grown to approximately $12.5 million, up from $5.5 million the year before. The company's main sources of revenue were software licensing and installation, maintenance and support, and hardware, with hardware sales accounting for most of 1985's new revenue. By the end of 1985, JHA had 46 employees, plus 22 employees in its unconsolidated affiliates.
Growth and Challenges: 1986-90
In 1986 JHA attempted to expand into financial services, acquiring FinSer Capital Corporation, a securities brokerage operation based in San Antonio, Texas. The new acquisition became a wholly owned subsidiary of JHA, but after three unprofitable years, JHA divested it in May 1989, transferring ownership to FinSer's chairman and CEO, Fred L. Baker, following a 40 percent drop in gross revenues that was attributed to generally poor performance in the industry at that time.
On March 31, 1988, JHA entered into a product development and marketing agreement with Unisys, a Detroit-based supplier of mainframe computers and related equipment. The next day IBM terminated its agreement with JHA. Under the original agreement between JHA and Unisys, JHA software would have been installed on more than 300 of the Unisys A Series computers, which were comparable to IBM System/36 midrange computers. The deal with Unisys soured, however, and JHA filed suit for breach of contract against Unisys a year later, in July 1989. Claiming that Unisys failed to pay approximately $1.7 million due on May 30, JHA sought $13.5 million, an amount that would have been due under the remaining portion of the contract. At the same time that it filed the lawsuit, JHA announced that it had reestablished a remarketing agreement with IBM.
Henceforth the company would devote practically all of its efforts to two software systems that ran on IBM hardware: the CIF 20/20, which was designed for community banks with assets of less than $200 million and ran on the IBM System/36 midrange computer; and the Silverlake System, which ran on IBM's AS/400 system, a higher-grade midrange computer than the System/36, designed for midsized institutions with $100 million to $2 billion in assets. A new generation of AS/400 computers that was introduced in the early 1990s allowed the Silverlake System to service institutions with assets of up to $10 billion. The software systems were often sold bundled with IBM System/36 or IBM AS/400 systems through the remarketing agreement with IBM.
In June 1990 JHA announced a promising merger with Peerless Systems, Inc., a bank software company based in Richardson, Texas, with about 250 customers. The merger would have resulted in a banking software vendor with revenues projected at $20 million and about 850 customers, but in July JHA unexpectedly called it off. After four weeks of negotiations, it appeared that it would have taken too long to reach an agreement. One possible problem affecting negotiations may have been JHA's continuing lawsuit against Unisys.
New Leadership and Acquisitions: 1990-99
In August, Colin McAllister quit as CEO at JHA, after serving for two years. Under McAllister, JHA had become embroiled in its lawsuit with Unisys, attempted to diversify into financial services by acquiring FinSer, and failed to consummate a promising merger with Peerless. President Jerry D. Hall immediately assumed the duties of CEO.
In 1990 JHA paid its first dividend, $0.28 per share, a practice it would continue to follow. The declaration may have been motivated in part as a move to bolster the stock price, which was trading in the $1.5 to $3.5 range that year. The company reported negative income on revenues of $15 million.
The next year, fiscal 1991, saw the beginning of five consecutive years of profitability. The company's stock price began to recover in 1991, trading in the $1.5 to $6.125 range. The number of employees increased by about 20 percent to 110, a trend that would continue for the next several years.
In January 1992 JHA acquired the banking software contracts of Bankers Own Software Systems (BOSS), the first of four acquisitions of bank software system businesses that it would consummate over the next few years. In December it acquired the business operations of Fremont Software, Inc., of Fremont, Indiana. Like JHA, Fremont marketed banking software and was an authorized remarketer of IBM computer equipment to small and medium-sized banks. These acquisitions served to expand JHA's customer base.
The end of 1992 also saw a favorable out-of-court settlement with Unisys, which agreed to pay $4 million to JHA. JHA was to receive $3,464,000 in cash, with the remaining $536,000 to be paid by eliminating charges against Unisys. JHA announced that the settlement income would be added to working capital and that the company was pleased to reach a settlement, noting that a continuing legal battle could have significantly drained its resources.
Finally, in 1992 Michael E. Henry, the son of founder Jack Henry, was named to the board of directors and became vice-president of research and development. Henry had been with the firm since 1979 and had held a number of management positions with the company. Michael R. Wallace also joined the board and was named vice-president of installation services. These two promotions marked the beginning of an orderly management change to a younger generation of executives that would be completed in 1994, when Michael E. Henry became chairman and chief executive officer and Michael R. Wallace, by then president, assumed the additional role of chief operating officer.
JHA continued to seek ways to expand its business in 1993. In January it announced the formation of a marketing alliance with BankVision Software, Ltd., of Durango, Colorado. By August JHA purchased BankVision for $2 million in stock and future payments based on earnings. BankVision added about 35 domestic customers, but its primary focus was to provide software and services for the international banking community.
By the end of 1993 JHA reported that it had software installed at more than 910 banks and financial institutions worldwide. Revenues had reached $32.6 million, net income was up to $6.259 million, and the stock was trading in the $10.25 to $17 range. For the first time the number of stockholders had dramatically increased to nearly 2,000, and the company employed some 154 workers.
By 1994 the company had more than 3,000 stockholders, but the stock price was down in the $6.5 to $11.25 range due to flat earnings. JHA bolstered its stock price by increasing the quarterly dividend and reporting an increase in earnings by the end of the calendar year. Revenues were more heavily weighted toward the two most profitable segments, software and service, a trend JHA officials expected to continue.
In mid-1994 JHA acquired CommLink Corporation, described in the company's annual report as "a rapidly growing electronic transactions company that handles automated teller machine (ATM) switching and point-of-sale (POS) technology for both financial and nonfinancial institutions." JHA paid $2.5 million, plus potential payments based on specific performance targets. CommLink, based in Houston, Texas, would operate as a subsidiary of JHA and be run by Thomas D. McCarlet, its founder, president, and CEO. CommLink had a customer base of approximately 100 customers for its ATM products and services. JHA regarded this as an important complementary service that could be marketed to its existing bank customers, to banks not served by JHA, and also to nonfinancial institutions such as gas stations and casinos that might market their own ATM cards.
In 1995 JHA made several significant deals that further expanded its customer base and added new services that it could market. The first was a "technical services alliance" with Integrated Systems Solutions Corp. (ISSC), a subsidiary of IBM. The deal stemmed from the longstanding relationship between JHA and IBM. JHA had more than 1,000 installations of software on IBM's AS/400 computer line. Under the agreement, ISSC could use JHA's Silverlake System in service bureau arrangements, whereby several banks operated out of a single data center, or in facilities management contracts, where IBM installed and maintained a computer system onsite at the bank's location. Thus, IBM was able to offer banks with assets in the $500 million to $10 billion range an outsourcing option based on the AS/400, using JHA's Silverlake software. This represented a new market for JHA software in terms of the size of the banks it could service. The first contract realized from the arrangement with ISSC resulted in a $617,000 contribution to net income in the first quarter of fiscal 1996 for JHA, and JHA expected two or three such contracts per year, not all of them of the same magnitude.
In June 1995 JHA purchased two banking software businesses, significantly increasing its customer base. The first involved the SECTOR business unit of Nationar, located in Danbury, Connecticut, with a customer base of 34 customers concentrated in the Northeast. Like JHA, SECTOR marketed software to banks. It was a cash transaction in the neighborhood of $883,000, with two possible future payments dependent on customers renewing their contracts with JHA.
The second purchase, and perhaps the most important acquisition in the history of the company, involved the community banking business of Broadway & Seymour (B&S), which JHA acquired for approximately $12 million. The transaction price included fees for certain distribution and marketing rights and fees for management services to be provided by B&S during the 12 months following the sale. Of the $12 million, JHA paid $6 million in cash and $6 million in installments through April 1, 1996.
As a result of the acquisition, JHA gained about 340 bank customers of the Liberty banking system in 35 states, thus increasing its customer base by one-third. The new subsidiary was called Liberty Software, Inc., with headquarters in Charlotte, North Carolina, and had approximately 150 employees. The subsidiary also provided revenue from service bureau contracts, disaster recovery, and a forms and supplies business.
In early 1995 JHA announced the restructuring of its unprofitable BankVision subsidiary, which was involved in developing and marketing international banking software. The unit was relocated from Durango, Colorado, to JHA's corporate headquarters in Monett, Missouri, in June. The division's president, Raymond L. Walters, was relieved of his duties as a result of the restructuring. JHA officials expected BankVision to impact negatively earnings for the current quarter and possibly the next. The BankVision unit was expected to break even or even become profitable during fiscal year 1996 beginning July 1, 1995.
William M. Caraway, senior vice-president of JHA, was named BankVision's president. He kept his sales and marketing duties for JHA. According to the company's annual report, the reorganization "eliminated significant overhead and minimized the loss potential for the BankVision operation." The reorganization gave JHA better control over its international operations and allowed the company to better focus its international marketing efforts. The company planned to expand BankVision more conservatively, and its major focus would be developing the Latin American market. However, at the end of fiscal 1996, JHA discontinued BankVision, taking a $1.68 million loss.
As a result of acquisitions and reorganization, 1995 was a major turning point for the company. Revenues increased by over 20 percent to $46.1 million and JHA led all bank technology stocks with a 154 percent gain in stock prices and stock prices trading in the $8.75 to $25.50 range. The acquisition of B&S resulted in a 33 percent increase in the company's customer base.
In March 1995, JHA announced plans to develop a home banking software system that would become available through the Internet and online service CompuServe. JHA would develop the new product for Block Financial, owner of CompuServe and a wholly owned subsidiary of H&R Block, Inc., and offer it to its banking clients. The software package would allow a bank's customers to check account balances, pay bills, and get stock quotes using their personal computers. They would also have access to nonfinancial services as well as tax software from H&R Block through Block Financial's web site. A final agreement was reached with Block Financial in May 1996.
In September 1999, JHA acquired the Financial Services Division of BankTec, Inc., a global systems integration, manufacturing, and services company. The acquisition was significant in that JHA gained access to the company's Synergy-based Windows application, Core Director, which became an important part of JHA's product and services offerings to financial institutions using a Windows-based system.
Entering the Credit Union Industry: 2000-03
In 2000, JHA acquired Symitar Systems, Inc., a privately owned San Francisco-based corporation focusing on data processing for credit unions. Symitar, which generated a reported $33 million during the 1999 financial period, brought a client list of 237 credit unions and gave JHA a foothold in the 2,500-company credit union industry. The purchase price was reported in company filings as $44 million, making it the largest acquisition in the company's history. Chairman Michael E. Henry said of the acquisition, "By adding our disaster recovery and service bureau offerings to Symitar's line of applications, Jack Henry will amass a superior network of UNIX products and services unparalleled in the industry." By 2003, Symitar had become the second major operating division for JHA.
In June, JHA acquired the Shawnee, Kansas-based Sys-Tech, Inc., which specialized in the construction and maintenance of computer facilities. JHA formed a product supply partnership with Sys-Tech in 1991 and eventually opted to purchase the company to expand its product lines. One of Sys-Tech's specialties was the construction of uninterruptible power supply systems, which helped companies to maintain service and data in the event of power failures. JHA hoped to market Sys-Tech's power systems as part of the company's computer management services. The purchase was completed for a reported $16 million in stock transfer.
In 2001, JHA completed an orderly shift in management as Jack Prim, who joined the company in 1995 with the acquisition of B&S, was named chief operating officer. Prior to his promotion to executive management, Prim had been serving as general manager of the company's E-Services Division. In June 2001, the company announced the 12th consecutive year of record revenues, with a 53 percent increase over the previous year and an earnings increase of more than 62 percent. Part of the company's increased profits was attributed to its acquisitions and development of the company's credit union services.
JHA posted another record-breaking year in 2002 and finished the year by acquiring, in November, CU Solutions, a South Dakota-based company that specialized in data processing for credit unions. While the acquisition of Symitar allowed the company to handle data and services for larger credit unions (those with assets over $25 million), CU Solutions specialized in catering to credit unions with assets below the $20 million mark. Entering the 2003 calendar year, JHA's credit union services had more than doubled to become the company's second largest operating division. There were additional personnel changes in 2002 as President Terry Thompson decided to retire and Jack Prim was promoted according to the company's regular plan of succession. CEO Michael Henry said of Prim's promotion, "He has demonstrated ability to lead the company. Jack is ideally suited to propel Jack Henry's continued growth."
New Leadership and Growth for the Future
From 2003 to 2005, the company engaged in a number of small-scale acquisitions that broadened the company's products and services across a range of activities. The 2003 acquisition of National Bancorp Data Processing and the 2004 acquisition of SERsynergy, a division of Virginia-based SER Solutions, Inc., enhanced the company's ability to handle document management and check imaging technologies. JHA also acquired California-based Verinex Technologies, a company that handled security functions for financial technology.
Though JHA continued to grow through acquisitions, overall revenues and profits slowed as a reflection of changes in the national and international market for financial management technology. JHA responded by diversifying growth strategies and by increasing efforts in marketing. In 2004, Symitar was awarded a contract with Alliant Credit Union, the nation's seventh largest credit union, which marked a major boost for the company's visibility in the credit union industry.
In July 2004, Jack Prim became chief executive officer of the company while Michael Henry remained with the company as chairman of the board of directors. Former Chief Operating Officer Tony L. Worthington was promoted to president to replace Prim. "Jack and Tony have both been performing the responsibilities associated with these titles for well over a year now and the Board felt it was the appropriate time for the realignment," said Chairman Michael Henry in company press releases.
During the 2005 fiscal year, JHA added 49 credit unions and 60 banks to its client lists. The company also posted net income growth exceeding 21 percent. The year's most important acquisition was the purchase of Profitstar, Inc., an Omaha, Nebraska-based company specializing in financial and profitability management. Prior to the purchase, Profitstar served a client base of over 2,000 banks nationwide.
The acquisition of Profitstar became the focus for a major rebranding strategy in 2006, in which many of JHA's smaller subsidiaries, products, and services were grouped and offered under the Profitstar name, reformulated as the company's third major operating division. The company continued with its diversification strategy with the 2006 acquisition of Georgia-based US Banking Alliance, a major financial software provider, and the 2007 acquisition of Gladiator Technology Services, Inc., both of which were grouped under the company's Profitstar banner.
Founder John W. (Jack) Henry passed away in April 2007, just after the company celebrated its 30th anniversary. "Jack was not only a great businessman and leader, but he's also been a good friend to many of us," said CEO Jack Prim in official company press releases, continuing with, "His common sense approach to business and his single vision of doing what is best for our customers will continue to guide the company he started for years to come." In August 2007, Jack Prim was appointed to the company's board of directors to fill the void left by the death of Jack Henry.
At the end of the 2007 fiscal year, the company announced a 13 percent increase in revenues and a 12 percent increase in gross profits, with $668 million in total revenues for the financial period. During 30 years of business, the company increased from a single client to over 8,700 clients representing a variety of financial operations and a full-time staff of more than 3,000. With strong profits and an expanding list of services and products, JHA was in a position to continue as a leader in financial industry technology solutions.
Principal Subsidiaries
Jack Henry Banking, Inc.; Symitar, Inc.; Profitstar, Inc.; Jack Henry International, Ltd.; CommLink Corporation; Liberty Software, Inc.
Principal Competitors
CheckFree Corporation; Metavante Technologies, Inc.; MoneyGram International, Inc.; S1 Corporation.
Further Reading
Barthel, Matt, "Unisys Paying $4 Million to Settle Dispute with Bank Software Firm," American Banker, January 5, 1993, p. 3.
Bills, Steve, "Jack Henry Names CEO to Board," American Banker, August 2, 2007, p. 17.
------, "Jack Henry, Up 9.9%, Growing More Self-Reliant," American Banker, October 31, 2007, p.5.
"Block Unit, Jack Henry in Home Banking Pact," American Banker, March 19, 1996, p. 18.
Dyches, Kevin J., "Jack Henry & Associates, Inc.," George K. Baum & Co. Equity Research, March 28, 1996.
"Jack Henry Acquires BankTec," Dallas Business Journal, September 9, 1999.
"Jack Henry Announces Management Shift," American Banker, November 21, 1994, p. 14.
"Jack Henry Dies at 71," ABA Banking Journal, May 1, 2007, p. 52.
"Jack Henry Plans Joint Marketing with BankVision," American Banker, January 14, 1993, p. 3.
"Jack Henry Purchases Software Firm," American Banker, February 1, 1993, p. 17A.
"Jack Henry Rebrands Acquired Firms Under a New Name," Credit Union Journal, March 2006.
"Jack Henry, Small-Bank Software Firm, Posts Record Profit," American Banker, January 19, 1994, p. 23.
"John F. (Jack) Prim Appointed to Jack Henry Board of Directors," PRS Newswire, August 1, 2007.
Layne, Richard, "Another Blow for Jack Henry; Chief Executive Officer Quits," American Banker, August 8, 1990, p. 3.
------, "Jack Henry Calls Off Talks on Merger with Peerless," American Banker, July 5, 1990, p. 3.
------, "Likely Merger Would Create Big Vendor to Small Banks," American Banker, June 8, 1990, p. 3.
Marjanovic, Steven, "Broadway & Seymour Spinning Off Core Software Business to Jack Henry," American Banker, June 22, 1995, p. 16.
Tracey, Brian, "Hogan and Jack Henry Gained in 2Q as Demand for Software Took Off," American Banker, July 31, 1995, p. 14.
------, "IBM Unit Gets Access to Jack Henry Package for Outsourcing Deals," American Banker, January 23, 1995, p. 10.
------, "Software Firm Jack Henry to Develop Own Check Imaging Unit," American Banker, October 24, 1994, p. 14.
------, "Systems Developer Jack Henry Posts Earnings Gain," American Banker, January 25, 1995, p. 13.
Tyson, David O., "Jack Henry Claims Breach of Contract in $13.5 Million Suit Against Unisys," American Banker, July 20, 1989, p. 2.
------, "Jack Henry Posts Loss for Quarter," American Banker, June 7, 1989, p. 11.
— David Bianco; Updated by Micah L. Issitt
