Following the First Data (FDC) buyout earlier this year by private equity firm Kohlberg Kravis Roberts, the guys explore why data processing for financial institutions has become such a desirable business.
John Primm, The Chief Executive of Jack Henry and Associates (JKHY) joins the guys for this conversation. JKHY provides data processing and management information to banks, credit unions, other financial institutions. Their stock is up 20% this year as debit transactions and internet banking surge.
Is cash going away and plastic taking over?
“Checks are on the decline,” says Primm. “A lot of what we’re seeing is checks being turned into electronic transactions… the more dramatic decline is in checks.”
How much momentum are you seeing?
“The fastest growing areas of our business are the payment processing related components such as ATM, debit cards, and electronic bill payments,” he replies. “That part of our business is growing at about 30% per year.”
What’s the difference between you and First Data?
“First Data doesn’t have a core software processing business,” he says. “(JKHY) is like the heart and soul of a bank or credit union.. and then we surround that with other applications like on-line banking.”
What’s the internet banking component?
“That’s when internet customers use (our software) to log onto their bank account, transfer funds and make bill payments. It’s a fairly significant size operation,” he says.
Is there a point when you become a takeover target?
“That’s not on our radar,” Primm answers. “But there certainly has been a lot of activity in and around our space. Private equity seems to like companies of our type because of the high recurring revenue component. Never say never, but that’s not something we’re focused on now.”
Do you sell to Western Union?
“No we do not. We don’t do much in the area of money transfer, particularly international transfer,” Primm explains.
Dylan asks the guys what they think of this company?
Eric Bolling says he likes JKHY but he loves Western Union (WU). Guy Adami and Pete Nijarian both recommend buying JKHY stock on any pullback. Jeff Macke thinks Jack Henry and Associates gets swallowed or sells part of its business.
Trader disclosure: On June 11 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:
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