METAVANTE ANNOUNCES FIRST QUARTER RESULTS
- Revenue growth of 10 percent; organic growth of 9 percent
- Segment operating income up 16 percent
- EPS of $0.29; cash EPS of $0.35
- Raising full year earnings guidance to reflect strong start
MILWAUKEE, April 29, 2008 – Metavante Technologies, Inc. (NYSE:MV) today reported first quarter 2008 revenue of $424.6 million, up 10 percent compared to $387.2 million in the first quarter of 2007. Organic growth was driven by higher transaction volumes in the payment businesses and higher core processing activity. Acquisitions added approximately 1 percentage point to the growth rate.
Segment operating income for the first quarter of 2008 was $119.3 million, an increase of 16 percent compared to the first quarter of 2007. The segment operating margin for the first quarter of 2008 improved to 28.1 percent, an increase of 1.4 percentage points compared to the first quarter of 2007.
Net income for the first quarter of 2008 was $35.0 million, or $0.29 per share. Cash net income for the first quarter of 2008 was $41.4 million, or $0.35 per share. Comparison of either of these financial metrics to prior year results is not instructive due to the significantly different capital structure of the company prior to the separation from Marshall & Ilsley Corporation in November 2007.
EBITDA in the first quarter of 2008 was $122.8 million. This result compares to EBITDA of $121.5 million in the first quarter of 2007, which included an $8.0 million gain related to an investment in Firstsource Solutions.
Commenting on the results, Frank R. Martire, President and Chief Executive Officer, said, “Our first quarter was a good start to 2008. The strong organic revenue growth was driven by higher transaction volumes and by our recent successes cross-selling our product portfolio and capturing new business. I am particularly pleased that the combination of operating leverage and cost productivity allowed us to make additional investments in future growth while still improving profitability.” Martire continued, “Our customers continue to confront a difficult and uncertain environment, and are deferring decisions and delaying capital spending.”
Cash provided by operating activities for the first quarter of 2008 was $121.0 million, compared to $59.0 million in 2007. Free cash flow for the quarter was $84.0 million, compared to $20.3 million in 2007. Free cash flow exceeded both 2007 results and net income in the first quarter of 2008 due to the timing of payment transaction settlement and working capital performance.
Cash net income (including per share amounts), EBITDA, and free cash flow are non-GAAP financial measures. These measures should not be considered substitutes for GAAP measures. See the attachments to this release under “Non-GAAP Financial Measures” for an explanation of these measures and reconciliations to GAAP financial measures.
Financial Solutions Group (FSG)
Metavante’s Financial Solutions Group offers a comprehensive suite of technology and business services that are critical to a financial institution’s ability to attract, expand, and service existing and prospective customers.
FSG’s first quarter 2008 revenue was $164.0 million, an increase of 8 percent compared to $152.0 million in the first quarter of 2007. Segment operating income for the first quarter of 2008 was $37.2 million compared to $38.7 million in the first quarter of 2007. Segment operating margin was 22.7 percent in the first quarter of 2008 compared to 25.5 percent in the first quarter of 2007. The decline in operating margin was due to increased investments in product development, which more than offset the benefit of operating leverage.
Payment Solutions Group (PSG)
Metavante’s Payment Solutions Group offers one of the industry’s most comprehensive suites of payment products and services, including credit, debit and prepaid debit card management and a national payments network in NYCE.
PSG’s first quarter 2008 revenue was $260.6 million, an increase of 11 percent compared to $235.2 million in the first quarter of 2007. Segment operating income in the first quarter of 2008 was $82.1 million compared to $64.5 million in the first quarter of 2007. Segment income margin was 31.5 percent in the first quarter of 2008 compared to 27.4 percent in the first quarter of 2007. The improvement in operating margins was driven by the benefits of cost actions taken in the Image business in the fourth quarter of 2007 and operating leverage.
Interest Expense
Interest expense in the first quarter of 2008 was $20.4 million higher than the first quarter of 2007 as a result of the borrowings incurred in connection with the separation from Marshall & Ilsley Corporation in November 2007.
Income Taxes
The effective tax rate in the first quarter of 2008 was 39.1 percent compared to 36.0 percent in the first quarter of 2007. The increase in the effective tax rate is primarily due to the expiration of the research and development tax credit for federal tax purposes on December 31, 2007. The full year 2008 effective tax rate is still expected to be approximately 37 percent, which anticipates that the research and development tax credit will be reinstated during 2008.
Outlook
Commenting on the outlook, Martire added, “While it is still early in the year, our performance in the first quarter allows increasing confidence that 2008 will be another good year for Metavante. Our updated outlook prudently balances our expectations for continued strong execution with the reality of an uncertain and difficult selling environment, which could impact our ability to sell software and professional services later in the year. We will continue to diligently monitor demand and adjust our spending and investment plans accordingly.”
The Company’s updated full year 2008 guidance is outlined below. This outlook continues to presume that the current difficult environment for our bank clients persists, but does not get worse.
- Organic revenue growth 4% to 6% (Unchanged from prior guidance)
- Diluted earnings per share $1.15 to $1.20 (Previously $1.12 to $1.16)
- Diluted cash earnings per share $1.36 to $1.41 (Previously $1.33 to $1.37)
Conference Call
A conference call to discuss our financial results will take place today at 9:30 a.m. EDT. The call will be webcast and accessible on the investor relations section of Metavante’s website at (www.metavante.com). The accompanying slides will also be available on Metavante’s website. A replay of the audio will be available on the website following the call.
About Metavante
Metavante Technologies, Inc. (NYSE:MV) is the parent company of Metavante Corporation. Metavante Corporation delivers banking and payments technologies to over 8,000 financial services firms and businesses worldwide. Metavante products and services drive account processing for deposit, loan and trust systems, image-based and conventional check processing, electronic funds transfer, consumer healthcare payments, electronic presentment and payment, business transformation services, and payment network solutions including the NYCE Network, a leading ATM/PIN debit network. Metavante (www.metavante.com) is headquartered in Milwaukee.
Cautionary Language Regarding Forward-
Looking StatementsThis press release contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that express a plan, belief, expectation, estimation, anticipation, intent, contingency, future development or similar expression, and can generally be identified as forward-looking because they include words such as "believes," "anticipates," "expects," "should” or words of similar importance. Statements that describe our objectives or goals are also forward-looking statements. The forward-looking statements in this press release involve significant risks and uncertainties, and a number of factors, both foreseen and unforeseen, could cause actual results to differ materially from our current expectations. The factors that may affect our results include, among others, our debt level, restrictions and limitations in our credit facilities, our competitive industry, changes in customer demand for our products or services, general changes in economic conditions, risks of damage to our data centers or associated infrastructure, additional costs and requirements associated with our public company status, foreign currency fluctuations, intellectual property risks, effect of regulation on our business, network and operational risks, loss of significant customers and customer consolidation risks, risks associated with future acquisitions, and other factors discussed in Metavante’s Annual Report on Form 10-K under the heading "Risk Factors”, and other filings with the SEC. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements. Readers are cautioned not to place undue reliance upon forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date hereof.
Metavante and NYCE are registered trademarks of Metavante Corporation, which is the principal subsidiary of Metavante Technologies, Inc.