Jack Henry & Associates Inc (JKHY)

Jon

Je lance une nouvelle idee, surtout qu'elle vient du CEO d'un titre que plusieurs ici possedent et admirent beaucoup!  En faisant mes recherches sur quelques titres mid-cap americains que j'ai recemment achete (Copart) ou que j'etudie (Heico), jee regarde les top-10 et letres aux investisseurs de divers fonds mutuels americans.  L'un d'eux a comme plus grosse position:  Jack Henry & Associates Inc (JKHY).

Je n'aurais probablement jamais regarde plus loin ce titre si ce n'etait d'un vague rappel que Mark Leonard de Constellation Software en avait parle dans une de ces lettres annuelles.  Oui, en effet, c'etait en 2015!  Mark en parle de facon tres elogieuse comme un des "HPC" (High Performing Companies) qu'il etudie a Constellation. Il en liste 6-7 en 2017, mais il focalise vraiment sur JKHY en 2015, et nous invite a l'etudier.


A premiere vu, c'est en effect tres interessant! Tres bonne performance boursiere sur long terme.  Note ici: 5-ans (depuis la letter de CSU): 23.7% annualise.

ROE 5-ans: 25%, Rachat D'actions, Peu de dette, le digigents semblent etre vues en forte estime, bonne culture d'entreprise...  Le catch habituel; c'est cher a P/E=45 et PB de 9.  Je vais le comparer aux multiples de Constellation!


JKHY est un "fin-tech", ils sont dans le software et les solutions pour un seul vertical, le milieu bancaire.  C'est donc relie a CSU, mais plus specialiser, versus CSU qui est dans des centaines de verticales de logiciels.


Y en a t'il qui ont fait des recherches sur ce titre? Qui le possede?  Sinon, on suis la recommendation de Mark Leonard ici? : )


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https://www.csisoftware.com/docs/default-source/investor-relations/presidents-letter/pl_2015.pdf

Jon

Coller les notes de la lettre de Constellation SW (trop long pour un seul post)!

We reviewed one of our perennial favourite HPCs this quarter, Jack Henry and Associates, Inc. (“JKHY”). The company’s values are those to which we aspire and their multi-decade performance is remarkable. Their shares have outperformed the S&P 500 Index by 11%, 9% and 10% per annum over the last 30, 20 and 10 years, respectively. Best of all, JKHY is in the vertical market software business like CSI, so there are sector-specific lessons in their history from which we can draw. I encourage you to familiarise yourself with JKHY. Their financial history is easily accessible because they went public very early in their development (i.e. in late 1985). At that time they had less than 50 employees and revenue of $12 million. They now have over 6,000 employees and revenue of $1.3 billion. There’s also a lovely company history “You Don’t Know Jack… or Jerry”, written by a retired IBM executive. The book covers JKHY’s founding years through to the end of 2007. It provides many first-hand accounts by employees, customers, competitors and partners about the business practices, strategy, and culture of the company.

During the last decade, the HPCs struggled to increase their ANI per share by more than 15% per annum. JKHY’s annualised growth in ANI was only 12% over that period. This drove much higher appreciation in JKHY’s shareholder value because they also made significant dividend payments and share repurchases (jointly averaging 10% of Average Invested Capital per annum). If CSI is not successful in finding attractive acquisitions, we could pursue a similar strategy of returning capital to shareholders.

JKHY’s EBITA Return for the last decade was 24%. They performed better than the other HPCs on this metric because they had strong organic growth and did not invest as much of their FCF in acquisitions.

Most of the HPCs have operated with ROIC’s in the mid to high teens during the last decade. JKHY was in the middle of the ROIC range at 18%. CSI was the second highest in the group, with a 30% ROIC average for the decade. I anticipate that we will deploy larger amounts of capital on investments each year. We are using a lower hurdle rate for larger transactions, but have retained our original hurdles for most of our acquisitions. Unless we use increasing amounts of financial leverage, increased acquisition investment and lower hurdle rates on large transaction will likely drive down our future ROIC. Interestingly, half of the HPCs have begun to acquire vertical market software businesses.

CSI’s Organic Net Revenue Growth (“OGr”, column 5, Table 1) was negative in 2015 for the first time since the last recession. The Maintenance analysis in Table 3 below, shows that much of the decline vs 2014 was due to shifts in foreign exchange rates. Nevertheless, when we compare CSI’s organic revenue growth to that of the other HPCs, we rank amongst the poorest performers and JKHY ranks amongst the best. Are we doing something systematic that leads to low OGr, and if so, is it a mistake? It is worth comparing JKHY and CSI to get some ideas.

JKHY sells software, hardware and services to small and medium sized financial institutions. The number of potential customers in these markets has been shrinking for decades. In the early years, JKHY acquired a number of competitors for reasonable prices, which reduced some of the rivalry in their market, and gave them a larger installed base for which to develop add-on products.

Significant technology change (ATM’s, internet banking, mobile banking, and proliferating electronic payment methods) in conjunction with rapidly growing regulation and compliance requirements, drove demand for add-on products and services. During the 2005 to 2015 decade, JKHY’s revenue growth has been 2/3rds organic and 1/3rd acquired, with acquisitions primarily being add-on products and services businesses. JKHY deployed approximately one third of their FCF on acquisitions during the decade.

Unlike JKHY, CSI serves a multitude of end markets. We deployed far more (>90%) of our FCF on acquisitions during the last decade. As of December 31, 2015 we had 182 BUs serving more than 75 verticals, run by 158 BU managers that rolled up into CSI via 6 Operating Groups. We usually organise each BU around a single vertical, although there are a few of our BUs that serve more than one vertical, and a many verticals served by more than one of our BUs.

The variations between each of our vertical markets is enormous. Some markets are consolidating, some not. In some we have high market share, in others we are a niche player. Some markets have compliance and technology drivers, while others rarely change their systems. Some have rapidly churning clients while others have long-lived clients. Some clients spend their own money buying systems, and some are spending an employer’s. Some buy enterprise-wide systems with significant customisation, while others buy departmental SaaS products with no customisation. Some markets have rabid venture-backed competitors with a grow-at-any-cost ethos, while others have a few rational competitors intent on making a decent living. All of these factors impact the organic growth potential of our businesses. Taking the particular industry and company factors into account, our BU managers work to develop an appropriate strategy.

A number of our businesses have strategies similar to JKHY i.e. they have built high market share in core systems via acquisition and organic growth, after which they’ve purchased and built add-on products to serve their clients better and drive up switching costs. JKHY appears to be willing to pay high prices for some third party add-on product businesses that might sell well into their installed base. We have tended to be more sceptical of such cross-selling synergies, perhaps because the investment decision-making has not historically been at the BU manager level. A lesson from JKHY, is that we may have been overly cautious regarding cross selling synergies.

The HPCs averaged 9% per annum revenue per share growth over the last decade. JKHY averaged 10%.

There’s one last lesson from JKHY that I’d like to share. It relates to you as shareholders. There was a ten year period during which JKHY’s shares both underperformed the S&P 500 (2000 until 2010) and didn’t make any money for shareholders. The underperformance vs the S&P 500 was minor … approximately 1%. JKHY’s revenues per share and ANI per share had compound average annual growth rates of 14% and 21%, respectively during that decade. Why did stock results and operating results diverge so widely for such a long period? It had to do with shareholder expectations and market exuberance. The general mania which gripped the market in 2000, and the more specific enthusiasm for JKHY’s stock which then traded at well over 60 times ANI, left shareholders incredibly vulnerable. When the market “corrected” the JKHY stock had no margin of safety.

Jon

Constellation versus Jack (ratio en parentheses sont moyennes sur 5-ans - donc depuis la lettre de 2015)

CSU:
Market Cap:  32.6B
P/S: 7  (5.3)
P/B:  33  (27)
P/CF:  33  (24.8)
Rendement 5-ans et 10-ans:  26.1% et 44.3%

JKHY:
Market Cap: 14.2B
P/S:  8.4  (6/1) 
P/B:  9.3  (7.6)
P/CF:  29.8  (22.8)
Rendement 5-ans et 10-ans:  23.7% et 23.4%


Premierement, CSU a une valeur boursiere plus grande que JKHY. En regardant les rendements sur 5-ans etant comparables, ca devait aussi etre vrai quand Mark Leonard a ecrit sa lettre en 2015. Interessant que Mark vantait une compagnie plus petite que la sienne (en valeur boursiere en tout cas!). Ca parle vraiment du charactere de Mark Leonard!

Sinon, en terme de ratio on ne peut dire que JKHY ne soit tellement surevalue dans son domaine de logiciels.  On peut aussi dire que CSU est cher, mais on a entendu ca depuis 10 ans!

Les rendements sur 5-ans sont similaires mais sur 10-ans c'est dure de battre notre CSU favori. On ne peut quand meme pas mettre 100% de son portefeuille dans Constellation!

Driveshoe

Merci d'avoir partagé une idée nouvelle sur le forum

Kicking_Tires

Ce n'est pas nécessairement une nouvelle idée car elle avait été évoqué lors de la lettre de CSU à l'époque, mais c'est rafraîchissant de la voir réapparaître. Tyler Tech aussi était un chouchou de Leonard. J'avais pris une position à l'époque et je ne peux me rappeler ce qui m'avait fait vendre (?). Probablement de meilleures idées ailleurs. Comme fintech, Je possède maintenant SS&C tech acheté dans un creux lors d'un mauvais trimestre de la compagnie. Elle a une marge EBITDA à 36% ce qui est un peu supérieure à celle de JKHY à 28% mais la croissance des ventes de cette dernière est meilleure et leur marge d'exploitation similaire. J'aime bien la stabilité de JKHY et BR, moins erratique que SSNC.

J'ai également Broadridge (BR) qui est aussi dans les fintech mais plus niché dans les proxy de vote, versements de dividendes, etc. Ses marges sont moins attrayantes mais l'avantage compétitif est intéressant. Un autre gros joueur est Fidelity National, une plus grande capitalisation mais avec des ratios de profitabilité intéressant. EVO Payments m'intrigue comme petite compagnie plus risqué mais avec une croissance intéressante. 

jfmorissette

@Kicking_Tires Ce serait intéressant que tu nous présentes ton portefeuille dans le contexte de cette file: http://forum.entrepreneurboursier.com/discussion/comment/22344

Non, je ne te demande pas de tout dévoiler, mais l'esprit du portefeuille si ça te tentes.

@Jon Merci du partage.

Jon

Il ne semble pas avoir plusieurs fonds mutuels qui ont et CSU et JKHY. J'en ai trouve un: 'TCW New America Premier Equities'.

Constellation est la ponderation la plus grande a 13.8% (ca ressemble beaucoup a mon portefeuille reel!), et Jack Henry est la 4e a 5.05%.

Malheureusement, le gestionnaire n'est pas trop bavard sur l'analyze de ses titres dans ses lettres trimestrielles... Il faudra chercher ailleurs!

En ragardant le rapport annuel, il categorise Constellation dans "Application Software". De son cote, Jack Henry est dans "Data Processing & Outsourced Services", la meme que Visa/Mastercard - donc 'fintech.'  A noter que 'EVO Payments, mentionne par @Kicking_Tires, est aussi present et dans cette categorie. 'Fiserv' est aussi une grosse position. @Kicking_Tires, tu la connais celle-la?  En fait, les fintech representent 18% de ce portefeuille!  Le portefeuille s'appelle "New America" donc il a possiblement un bias sur la technologie / l'innovation. J'ai pas regarde le mandat...


C'est toujours interessant quand un fond american investit dans les compagnies canadiennes. Ils ont tellement de choix au E-U qu'ils doivent vraiment voir quelque chose de special pour s'aventurer au Canada!  Il y en a quatre:

Pour Constellation, pas de discussion.  Tres interessant que Enghouse est en 8e position avec 4.2%.  Jack Henry et Enghouse sont de nouvelles positions puisqu'ils n'y etaient pas en October 2019 (rapport semi-annuel).  Waste Connections est "dual-listed" mais principalement americain.  Finalement, notre fier hibou somnolant Couche-Tard est en portefeuille. Je le comprends pas trop. L'essence et le tabac sont pas trop 'new america', bien que la compagnie a >50% de ses revenus au E-U.

Il y a aussi d'autres titres que j'etudie. Ils ont triple leur part dans Heico entre October 2019 et Avril 2020. Ils ont possiblement profite du creux de mars.


Le fond semble recent mais il a battu le S&P500 sur 3-ans: 17.4% vs 10.1%:
https://www.tcw.com/en/Products/Funds/TCW-New-America-Premier-Equities-Fund/TGUSX---I