| [July 28, 2008] |
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Metavante Announces Second Quarter Results
MILWAUKEE --(Business Wire)-- Metavante Technologies, Inc. (NYSE:MV):
-- Revenue growth of 7 percent for the quarter; 8 percent for the first half
-- Segment operating income up 10 percent
-- EPS of $0.31; cash EPS of $0.36
-- Maintaining full year guidance
Metavante Technologies, Inc. (NYSE:MV) today reported second quarter 2008 revenue of $424.8 million, up 7 percent compared to $395.7 million in the second quarter of 2007. Organic growth was driven by higher transaction volumes in the payment businesses and higher professional services activity. Acquisitions added approximately 1 percentage point to the growth rate.
Segment operating income for the second quarter of 2008 was $117.9 million, an increase of 10 percent compared to the second quarter of 2007. The segment operating margin for the second quarter of 2008 improved to 27.8 percent, an increase of 0.6 percentage points compared to the second quarter of 2007.
Net income for the second quarter of 2008 was $36.9 million, or $0.31 per share. Cash net income for the second quarter of 2008 was $43.7 million, or $0.36 per share. Comparison of either of these financial metrics to prior year results is not meaningful due to the significantly different capital structure of the company prior to the separation from Marshall & Ilsley Corporation in November 2007.
EBITDA in the second quarter of 2008 was $121.0 million, an increase of 9 percent compared to adjusted EBITDA of $111.2 million in the second quarter of 2007.
Cash provided by operating activities for the first half of 2008 was $148.3 million, compared to $155.3 million in the first half of 2007. Free cash flow for the first half of 2008 was $82.5 million, compared to $83.4 million in the first half of 2007.
Commenting on the results, Frank R. Martire, president and chief executive officer, said, "Our second quarter results met our expectations and completed a good first half of the year. Organic growth was solid, and benefited from success in prior periods cross-selling our comprehensive product portfolio and capturing new business. The combination of operating leverage and cost productivity allowed us to continue to make additional investments in future growth while still improving current profitability."
Cash net income (including per share amounts), EBITDA, adjusted 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 second quarter 2008 revenue was $164.2 million, an increase of 6 percent compared to $155.3 million in the second quarter of 2007. Segment operating income for the second quarter of 2008 was $37.6 million compared to $40.5 million in the second quarter of 2007. The decline in segment operating income was due to revenue mix, price, and increased investments in product development, which more than offset the benefit of higher volume. Segment operating margin was 22.9 percent in the second quarter of 2008 compared to 26.1 percent in the second quarter of 2007.
Payment Solutions Group (PSG)
Metavante's Payment Solutions Group (PSG) offers one of the industry's most comprehensive suites of payment products and services, including credit, debit and prepaid debit card management, a national payments network in NYCE, as well as specialized solutions to facilitate government and healthcare payments.
PSG's second quarter 2008 revenue was $260.6 million, an increase of 8 percent compared to $240.4 million in the second quarter of 2007. Segment operating income in the second quarter of 2008 was $80.3 million compared to $67.0 million in the second quarter of 2007. The increase in segment operating income was driven by the benefits of cost actions taken in the Image business in the fourth quarter of 2007 and operating leverage in other business units. Segment operating margin was 30.8 percent in the second quarter of 2008 compared to 27.9 percent in the second quarter of 2007.
Interest Expense
Interest expense in the second quarter of 2008 was $18.4 million higher than the second quarter of 2007 as a result of borrowings incurred in connection with the separation from Marshall & Ilsley Corporation in November 2007.
Income Taxes
The effective tax rate in the second quarter of 2008 was 37 percent compared to 35 percent in the second 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.
Outlook
Commenting on the outlook, Martire added, "At the mid-point of our fiscal year, it is becoming increasingly apparent that 2008 will be another good year for Metavante. Continued strong execution, coupled with some stability in consumer spending behavior and customer investment during the second half, should enable us to deliver full year financial results consistent with our guidance. While we remain focused on closing a solid 2008, we also recognize that sustaining organic growth in 2009 and beyond requires us to work harder to sign new business in a challenging economic environment, and continue to make investments in technologies and capabilities that will drive future growth."
The full year 2008 guidance provided by the company in April 2008 is outlined below.
-- Organic revenue growth 4% to 6%
-- Diluted earnings per share $1.15 to $1.20
-- Diluted cash earnings per share $1.36 to $1.41
Conference Call
A conference call to discuss our financial results will take place today at 8:30 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 Statements
This 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.
Metavante Technologies, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $424,828 $395,735 $849,392 $782,977
Expenses:
Cost of processing and
services 279,541 263,201 560,189 518,011
Selling, general, and
administrative 60,802 57,837 119,526 114,084
Transaction costs - 900 - 900
--------- --------- --------- ---------
Total expenses 340,343 321,938 679,715 632,995
--------- --------- --------- ---------
Income from operations 84,485 73,797 169,677 149,982
Other non-operating items:
Interest expense, net (25,157) (6,764) (52,828) (14,050)
Other, net (594) (988) (664) 7,074
--------- --------- --------- ---------
Income before income taxes 58,734 66,045 116,185 143,006
Income tax provision 21,834 23,184 44,313 50,870
--------- --------- --------- ---------
Net income $36,900 $42,861 $71,872 $92,136
========= ========= ========= =========
Cash net income $43,692 $48,086 $85,098 $102,466
========= ========= ========= =========
Adjusted cash net income $43,692 $48,992 $85,098 $103,372
========= ========= ========= =========
Diluted earnings per share -
GAAP $0.31 $0.60
========= =========
Diluted cash earnings per
share $0.36 $0.71
========= =========
Average diluted shares 120,139 120,015
========= =========
Metavante Technologies, Inc.
Summary Sales and Earnings Information
(In thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue:
Financial Solutions Group $164,196 $155,299 $328,207 $307,317
Payment Solutions Group 260,632 240,436 521,185 475,660
--------- --------- --------- ---------
Total revenue $424,828 $395,735 $849,392 $782,977
========= ========= ========= =========
Segment operating income:
Financial Solutions Group $37,566 $40,470 $74,742 $79,217
Payment Solutions Group 80,353 67,077 162,431 131,537
--------- --------- --------- ---------
Total segment operating
income 117,919 107,547 237,173 210,754
Corporate/other (26,418) (26,733) (53,292) (38,913)
Acquisition intangible
amortization (7,610) (7,096) (14,868) (13,876)
Transaction-related costs - (909) - (909)
Interest expense, net (25,157) (6,764) (52,828) (14,050)
--------- --------- --------- ---------
Income before income taxes 58,734 66,045 116,185 143,006
Income tax provision 21,834 23,184 44,313 50,870
--------- --------- --------- ---------
Net income $36,900 $42,861 $71,872 $92,136
========= ========= ========= =========
Metavante Technologies, Inc.
Condensed Consolidated Balance Sheet
(In thousands)
June 30, December 31,
2008 2007
----------- ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $197,771 $185,528
Restricted funds 461,272 386,250
Accounts receivable, net 132,636 127,859
EFD processing receivables 101,393 110,788
Unbilled revenues 111,438 109,632
Deferred income taxes 37,697 37,638
Other current assets 55,080 55,813
----------- ------------
Total current assets 1,097,287 1,013,508
Capitalized software and conversions, net 246,735 232,743
Premises and equipment, net 133,267 138,040
Goodwill and other intangibles, net 1,615,009 1,560,141
Other assets 162,798 155,567
----------- ------------
Total $3,255,096 $3,099,999
=========== ============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt $17,500 $13,164
Accounts payable 19,143 23,754
Accrued compensation and related
benefits 35,705 48,048
Accrued expenses 176,455 180,956
Payments held for third party
remittance 459,473 383,851
Deferred revenues 162,457 160,542
Other current liabilities 43,208 46,142
----------- ------------
Total current liabilities 913,941 856,457
Long-term debt 1,728,165 1,736,883
Deferred income taxes 162,508 159,225
Other long-term liabilities 47,619 33,962
----------- ------------
Total liabilities 2,852,233 2,786,527
Minority interest 15,142 14,121
Shareholders' equity 387,721 299,351
----------- ------------
Total $3,255,096 $3,099,999
=========== ============
Metavante Technologies, Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
June 30,
-------------------
2008 2007
--------- ---------
Operating Activities:
Net income $71,872 $92,136
Adjustments to reconcile net income to net
cash from operating activities
Depreciation and amortization 74,741 74,694
Deferred income taxes (15) (1,245)
Stock-based compensation expense 7,510 3,019
Net loss (gains) related to Firstsource 886 (7,046)
Other non-cash items 1,340 (1,443)
Changes in assets and liabilities - net of
acquisitions of businesses
and foreign currency adjustments:
Accounts receivable (955) (22,419)
EFD processing receivables 9,446 (6,317)
Unbilled revenues (1,743) 10,963
Accounts payable and accrued liabilities (18,148) 11,689
Deferred revenues 421 16,717
Other assets and liabilities 2,961 (15,419)
--------- ---------
Net cash provided by operating
activities 148,316 155,329
--------- ---------
Investing Activities:
Capital expenditures (65,789) (71,890)
Change in restricted cash (75,022) 27,904
Acquisitions - net of cash acquired (68,265) (48,054)
--------- ---------
Net cash used for investing activities (209,076) (92,040)
--------- ---------
Financing Activities:
Repayment of debt and capital lease
obligations (4,382) (132)
Proceeds from the exercise of stock options 1,821 -
Change in payments held for third party
remittance 75,622 (24,848)
Proceeds from stock purchase right 654 -
--------- ---------
Net cash provided by (used for)
financing activities 73,715 (24,980)
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents (712) -
--------- ---------
Change in cash and cash equivalents 12,243 38,309
Cash and cash equivalents - beginning of
period 185,528 344,241
--------- ---------
Cash and cash equivalents - end of period $197,771 $382,550
========= =========
Metavante Technologies, Inc.
Non-GAAP Financial Measures
Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA) and Adjusted EBITDA
---------------------------------------------------------------
-------
Metavante's management believes that "EBITDA" and "adjusted EBITDA"
are useful for evaluating performance against peer companies within
its industry, as well as providing investors additional transparency
to financial measures used by management in its financial and
operational decision-making. In addition, Metavante utilizes EBITDA
and adjusted EBITDA in its evaluation and determination of the price
of potential acquisition candidates, and to explain trends in its
operating performance and believes it provides useful information
about its ability to incur and service indebtedness. Also, EBITDA is
included in the financial covenants applicable to Metavante's credit
facilities. EBITDA, as defined in the financial covenants, also
excludes certain non-cash charges, such as impairment charges and
stock option expense.
Adjusted EBITDA is defined as EBITDA excluding costs related to the
separation from Marshall & Ilsley Corporation in 2007. Metavante's
definition of EBITDA and adjusted EBITDA may be different from
definitions used by other companies.
The following is a reconciliation of net income to EBITDA and adjusted
EBITDA (in thousands):
Three Months
Ended June 30,
-----------------
2008 2007
-------- --------
Net income $36,900 $42,861
Interest expense, net 25,157 6,764
Income taxes 21,834 23,184
Depreciation and amortization 37,073 37,449
-------- --------
EBITDA 120,964 110,258
Transaction-related costs - 909
-------- --------
Adjusted EBITDA $120,964 $111,167
======== ========
Metavante Technologies, Inc.
Non-GAAP Financial Measures (continued)
Cash Net Income (Including Per Share Amounts) and Adjusted Cash Net
Income
-------------------------------------------------
---------------------
Metavante management defines "cash net income" as net income before
(1) stock-based compensation expense, net of tax, and (2) the
amortization of intangible assets resulting from business
acquisitions, net of tax. Diluted cash earnings per share is
calculated by dividing cash net income by the average diluted shares
for the respective period. "Adjusted cash net income" excludes the
items described above as well as the costs related to the separation
from Marshall & Ilsley Corporation in 2007. Metavante's management
uses cash net income (including per share amounts) and adjusted cash
net income to assess business performance and believes that they are
useful for evaluating performance against peer companies within its
industry, as well as providing investors additional transparency to a
financial measure used by management in its financial and operational
decision-making. Metavante's definition of cash net income
(including per share amounts) and adjusted cash net income may differ
from definitions used by other companies.
The following is a reconciliation of net income to cash net income and
adjusted cash net income (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------
2008 2007 2008 2007
--------- -------- ------- --------
Net income $36,900 $42,861 $71,872 $92,136
Add:
Acquisition intangible
amortization, net of tax 4,680 4,258 9,143 8,327
Stock-based compensation,
net of tax 2,112 967 4,083 2,003
--------- -------- ------- --------
Cash net income 43,692 48,086 85,098 102,466
Add:
Transaction-related costs,
net of tax - 906 - 906
--------- -------- ------- --------
Adjusted cash net income $43,692 $48,992 $85,098 $103,372
========= ======== ======= ========
The following is a reconciliation of diluted earnings per share to
diluted cash earnings per share :
Three Months Six Months
Ended Ended
June 30, June 30,
------------ ------------
Diluted earnings per share - GAAP $0.31 $0.60
Add:
Acquisition intangible amortization,
net of tax 0.04 0.08
Stock-based compensation, net of tax 0.01 0.03
------------ ------------
Diluted cash earnings per share $0.36 $0.71
============ ============
Metavante Technologies, Inc.
Non-GAAP Financial Measures (continued)
Free Cash Flow
-----------------------------------------------------------------
-----
Metavante defines "free cash flow" as cash provided by operating
activities less capital expenditures. Metavante's management
believes that free cash flow provides useful information to investors
regarding Metavante's ability to generate cash from business
operations that is available for acquisitions and other investments,
and debt service. Metavante's definition of free cash flow may
differ from definitions used by other companies.
The following is a reconciliation of cash provided by operating
activities to free cash flow (in thousands):
Six Months Ended
June 30,
-------------------
2008 2007
--------- ---------
Cash provided by operating activities $148,316 $155,329
Less capital expenditures:
Premises and equipment (9,421) (15,598)
Software and conversions (56,368) (56,292)
--------- ---------
Free cash flow $82,527 $83,439
========= =========
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