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Metavante makes Q4 loss

24 January 2008  |  1463 views  |  0 Source: Metavante

Metavante Technologies (NYSE:MV) today reported full year 2007 revenue of $1,598.1 million, up 6 percent compared to $1,504.2 million in 2006.

Organic growth was driven by higher volumes in core processing activity and payment transactions. Acquisitions added approximately 2 points to the growth rate. Segment operating income for 2007 was $431.4 million, an increase of 8 percent compared to 2006. The segment operating margin for 2007 improved to 27.0 percent, an increase of 0.3 points compared to 2006.

Net income for the full year 2007 was $49.5 million ($0.41 per share) including non-cash impairment charges, net transaction-related costs, and incremental interest expense. Excluding these items, adjusted net income for 2007 was $186.8 million, an increase of 17 percent compared to net income of $160.1 million in 2006; adjusted cash net income for 2007 was $208.2 million, an increase of 15 percent compared to cash net income of $181.5 million in 2006; and adjusted EBITDA in 2007 was $468.7 million, an increase of 13 percent compared to EBITDA of $413.6 million in 2006.

Commenting on the results, Frank R. Martire, President and Chief Executive Officer, said, "We delivered solid financial results while successfully navigating the demands of our spinoff transaction and a difficult environment for our bank clients. Our ability to exceed our objectives for both profit and cash flow again demonstrated the resiliency and flexibility of our business model. I am particularly pleased by the considerable efforts of all of our employees to continue to provide our consistently high level of service to our clients while allowing us to successfully complete the spinoff transaction."

Cash provided by operating activities for the full year 2007 was $345.4 million, an increase of 18 percent compared to $292.4 million in 2006. Free cash flow for the year was $202.0 million, an increase of 10 percent compared to $183.0 million in 2006.

Adjusted net income, cash net income, adjusted cash net income, 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.

Fourth Quarter

Revenue in the fourth quarter of 2007 was $408.2 million, up 6 percent compared to $385.9 million in 2006. Organic growth was driven by higher volumes in core processing activity and payment transactions. Acquisitions added approximately 2 points to the growth rate. Segment operating income was $110.0 million, an increase of 8 percent compared to 2006. Segment operating margin for the fourth quarter of 2007 improved to 26.9 percent, an increase of 0.4 points compared to the fourth quarter of 2006.

The net loss for the fourth quarter of 2007 was $92.8 million ($0.78 per share) including non-cash impairment charges, net transaction-related costs, and incremental interest expense. Excluding these items, adjusted net income was $44.1 million compared to net income of $44.0 million in the fourth quarter of 2006; adjusted cash net income was $49.8 million compared to cash net income of $49.5 million in the fourth quarter of 2006; and adjusted EBITDA was $111.3 million compared to EBITDA of $105.7 million in the fourth quarter of 2006.

Cash provided by operating activities for the fourth quarter of 2007 was $59.7 million compared to $45.8 million in 2006. Free cash flow for the fourth quarter of 2007 was $20.0 million, compared to $14.2 million in the fourth quarter of 2006.

Following is a discussion of the results for the company's two operating segments.

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 revenue for the full year 2007 was $636.2 million, an increase of 4 percent compared to $614.5 million in 2006. Segment operating income was $154.6 million compared to $144.4 million in 2006. Segment operating margin was 24.3 percent in 2007 compared to 23.5 percent in 2006.

FSG's fourth quarter 2007 revenue was $162.4 million, an increase of 7 percent compared to $151.6 million in the fourth quarter of 2006. Segment operating income for the fourth quarter of 2007 was $38.7 million compared to $31.2 million in the fourth quarter of 2006. Segment operating margin was 23.8 percent in the fourth quarter of 2007 compared to 20.6 percent in the fourth quarter of 2006.

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 revenue for the full year 2007 was $961.9 million, an increase of 8 percent compared to $889.7 million in 2006. Segment operating income was $276.8 million compared to $256.7 million in 2006. Segment operating margin was 28.8 percent in 2007 compared to 28.9 percent in 2006.

PSG's fourth quarter 2007 revenue was $245.8 million, an increase of 5 percent compared to $234.3 million in the fourth quarter of 2006. Segment operating income in the fourth quarter of 2007 was $71.3 million compared to $71.0 million in the fourth quarter of 2006. Segment income margin was 29.0 percent in the fourth quarter of 2007 compared to 30.3 percent in the fourth quarter of 2006.

In January 2008, Metavante announced the acquisition of two businesses that will become part of PSG: Nomad Payments Limited and BenSoft Incorporated, known in the market as RepayMe. The acquisition of Nomad Payments Limited gives Metavante the opportunity to establish a European center of operations and sales capability, with a blue-chip client base and proven business model. The acquisition of RepayMe expands Metavante's current consumer-driven healthcare payment processing representing another example of continuing investment in single-source solutions for consumer, provider and payer healthcare payments.

Special Items

In the fourth quarter, Metavante recorded $129.5 million ($111.5 million after tax) of non-cash impairment charges, of which $101.1 million was recorded as a reduction to the carrying amount of goodwill and $28.4 million was recorded as a reduction to the carrying amount of other long-lived assets. All of the goodwill impairment and $14.6 million of the other long-lived asset impairments related to the Image Solutions Division and resulted from updated expectations for long-term financial performance of that business. The remaining $13.8 million of charges related to long-lived assets of four other businesses.

The results for the fourth quarter also include net transaction-related costs of $24.7 million ($15.5 million after tax) and incremental interest of $15.9 million ($9.9 million after tax) related to the separation from Marshall & Ilsley Corporation on November 1.

Outlook

Commenting on the outlook, Martire added, "We expect 2008 to be another year of solid revenue growth, enhanced profitability, and strong cash generation. While we recognize the risks of further spending constraints at our bank clients and fewer consumer payment transactions, we remain cautiously optimistic. The combination of a high percentage of recurring revenue, a diverse product and service offering, and proven cost discipline should allow us to modestly increase both our organic revenue growth rate and our profit margins in 2008. We also plan to dedicate significant effort and resources during the year to initiatives that will enable more rapid growth in 2009 including new technologies and capabilities, and targeted acquisitions similar to those announced this month that will catalyze growth."

The company's guidance for 2008 is summarized as follows:
  • Organic revenue growth - 4% to 6%
  • Diluted earnings per share - $1.12 to $1.16 per share
  • Diluted cash earnings per share - $1.33 to $1.37 per share


Read the full statement here:» Download the document now 69.4 kb (PDF File)

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