Metavante Technologies (NYSE:MV) today reported first quarter 2009 revenue of $426.9 million, up 1 percent compared to $424.6 million in the first quarter of 2008.
Organic growth was driven by higher processing activity that more than offset lower termination fees and software license revenue.
Segment operating income for the first quarter of 2009 was $123.2 million compared to $119.3 million in the first quarter of 2008. Segment operating margin for the first quarter of 2009 improved to 28.9 percent, an increase of 0.8 percentage points compared to the first quarter of 2008.
Net income for the first quarter of 2009 increased 15 percent to $40.3 million, or $0.34 per share, compared to net income of $35.0 million, or $0.29 per share, in the first quarter of 2008. Cash net income for the first quarter of 2009 increased 13 percent to $46.6 million, or $0.39 per share, compared to cash net income of $41.4 million, or $0.35 per share, in the first quarter of 2008.
Cash provided by operating activities for the first quarter of 2009 was $51.4 million compared to $121.0 million for the first quarter of 2008. Free cash flow for the first quarter of 2009 was $19.9 million compared to $84.0 million for the first quarter of 2008. Cash provided by operating activities and free cash flow in the first quarter of 2008 benefited from the timing of payment transaction settlement, profit sharing contributions to Metavante's employee retirement plans, and other working capital items.
Commenting on the results, Frank R. Martire, chairman and chief executive officer, said, "The results for the first quarter continued the uninterrupted pattern since our launch as a separately traded public company of growth in revenue and profitability. Our ability to improve profitability on modest organic revenue growth despite the difficult environment that our clients are facing again demonstrated both the strength of our business model and our ability to execute."
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)
FSG's first quarter 2009 revenue was $167.1 million, an increase of 2 percent compared to $164.0 million in the first quarter of 2008. Segment operating income for the first quarter of 2009 was $41.7 million compared to $38.0 million in the first quarter of 2008. The increase in segment operating income was due to volume leverage and diligent cost discipline. Segment operating margin was 24.9 percent in the first quarter of 2009 compared to 23.2 percent in the first quarter of 2008.
Payment Solutions Group (PSG)
PSG's first quarter 2009 revenue was $259.7 million compared to $260.6 million in the first quarter of 2008. Segment operating income for the first quarter of 2009 was $81.5 million compared to $81.3 million in the first quarter of 2008. Segment operating margin was 31.4 percent in the first quarter of 2009 compared to 31.2 percent in the first quarter of 2008.
Income Taxes
The effective tax rate in the first quarter of 2009 was 37 percent compared to 39 percent in the first quarter of 2008. The effective tax rate was higher in the first quarter of 2008 because the federal research and experimentation credit was not extended until October 2008, therefore, the full year benefit was recorded in the fourth quarter of 2008.
Outlook
The company is affirming the guidance ranges for 2009 of 3 to 4 percent organic revenue growth and 12 to 16 percent diluted earnings per share growth. The ranges do not reflect the impact of the proposed transaction with Fidelity National Information Services, Inc. (FIS) described below.
Transaction with Fidelity National Information Services, Inc.
On April 1, 2009, FIS and Metavante announced that the boards of directors of both companies have approved a definitive agreement under which FIS will acquire Metavante. Under the terms of the agreement, Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of FIS common stock for each share of Metavante common stock they own. The transaction will be structured as a tax-free reorganization whereby Metavante will be merged with and into a newly formed subsidiary of FIS. The transaction is subject to approval by FIS and Metavante shareholders, receipt of regulatory approvals and the satisfaction of customary closing conditions. FIS and Metavante expect to complete the transaction in the third quarter of 2009.