Metavante delivers solid results

Source: Metavante

Metavante Technologies, Inc. (NYSE:MV) today reported full year 2008 revenue of $1,707.3 million, up 7 percent compared to $1,598.1 million in 2007. Organic growth was 6 percent, driven by higher transaction volumes in the payment businesses and higher core processing activity. Revenue for the fourth quarter 2008 was $433.4 million, up 6 percent compared to $408.2 million in the fourth quarter of 2007. Organic growth was 5 percent, driven by higher processing and professional services activity, with particular strength in the core banking, payment issuing, and healthcare payments businesses.

Segment operating income for 2008 was $481.8 million, an increase of 12 percent compared to 2007. Segment operating margin for 2008 was 28.2 percent, an increase of 1.2 percentage points compared to 2007. Segment operating income for the fourth quarter of 2008 was $121.4 million, an increase of 10 percent compared to the fourth quarter of 2007. Segment operating margin for the fourth quarter of 2008 improved to 28.0 percent, an increase of 1.1 percentage points compared to the fourth quarter of 2007.

In its first full year as a separate public company, Metavante's net income was $147.4 million, or $1.23 per share. Cash net income for 2008 was $174.2 million, or $1.45 per share. Net income for the fourth quarter of 2008 was $40.4 million, or $0.34 per share. Cash net income for the fourth quarter of 2008 was $47.4 million, or $0.40 per share.

Cash provided by operating activities for 2008 was $302.5 million. Free cash flow for 2008 was $165.0 million.

Commenting on the results, Frank R. Martire, chairman and chief executive officer, said, "I am pleased that in our first full year as a separate public company we delivered consistently solid results that exceeded the expectations we set at the beginning of 2008. The powerful combination of our robust business model, our loyal and diverse client base, and our strong Metavante team allowed us to exceed our plans despite a difficult and dynamic business environment."

Cash net income (including per share amounts) 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 (FSG) 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 2008 was $664.6 million, an increase of 4 percent compared to $636.2 million for the full year 2007. FSG's fourth quarter 2008 revenue was $168.9 million, an increase of 4 percent compared to $162.4 million in the fourth quarter of 2007.

Segment operating income for both the full year 2008 and 2007 was $154.6 million. Segment operating margin was 23.3 percent for the full year 2008 compared to 24.3 percent for the full year 2007. Segment operating income for both the fourth quarter of 2008 and 2007 was $38.7 million. The benefit of higher volume was offset by revenue mix and increased investments in product development. Segment operating margin was 22.9 percent in the fourth quarter of 2008 compared to 23.8 percent in the fourth 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 revenue for the full year 2008 was $1,042.7 million, an increase of 8 percent compared to $961.9 million for the full year 2007. PSG's fourth quarter 2008 revenue was $264.5 million, an increase of 8 percent compared to $245.8 million in the fourth quarter of 2007.

Segment operating income for the full year 2008 was $327.3 million compared to $276.8 million for the full year 2007. Segment operating margin was 31.4 percent for the full year 2008 compared to 28.8 percent for the full year 2007. Segment operating income for the fourth quarter of 2008 was $82.7 million compared to $71.3 million in the fourth quarter of 2007. The increase in segment operating income was driven by the benefit 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 31.3 percent in the fourth quarter of 2008 compared to 29.0 percent in the fourth quarter of 2007.

Corporate/Other
Corporate/other expenses in the fourth quarter of 2008 were $30.7 million compared to $30.0 million in the fourth quarter of 2007. This includes higher professional services expenses related to legal matters and $1.9 million of unrealized losses on equity warrants in Temenos Group AG.

Interest Expense
Interest expense in the fourth quarter of 2008 was $4.3 million higher than the fourth 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 was 36.1 percent for the full year 2008 and 30.1 percent in the fourth quarter of 2008. The fourth quarter 2008 effective rate was lower than both the full year 2008 effective rate and the rate in the same quarter last year due to the recognition in this fourth quarter of a $4.0 million full year benefit of the federal research and experimentation tax credit. This credit was extended as part of the October 2008 Tax Extenders and Alternative Minimum Tax Relief Act of 2008. While the timing was uncertain, the eventual benefit of this credit was always anticipated in the company's 2008 full year tax rate assumption.

Outlook

Commenting on the outlook, Martire added, "We enter 2009 with clear objectives and well prepared for the persistent challenges and increased uncertainty that we will face. We remain focused on optimizing our performance by capturing new business, driving cost productivity, and building contingency plans that allow us to adapt to different rates of growth. And we remain dedicated to helping our clients navigate this environment by meeting their current business needs, providing consistent service levels, and developing technologies that will make them more efficient and more competitive in the future."

The company expects organic revenue growth in 2009 of 3 percent to 4 percent and growth of 12 percent to 16 percent in diluted earnings per share.

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