Acquisitions made over the last 12 months produced most of the third-quarter revenue growth at Metavante Corp., which has already made a strong start on dealmaking this quarter.
Revenue rose 20% from a year earlier, to $311.7 million, its parent, the Milwaukee banking company Marshall & Ilsley Corp., said Friday. Metavante's income jumped 51%, to $32.1 million, M&I said.
For the first time M&I also reported Metavante's earnings before interest, taxes, depreciation, and amortization. It did so, it said, to help investors compare the operation with banking technology companies that are not owned by banking companies.
Metavante's EBITDA rose 20%, to $91 million, M&I said.
Frank R. Martire, Metavante's president and chief executive officer, told analysts in a conference call that organic revenue growth was expected to be in the mid-single digits through the end of the year. That is consistent with the company's earlier projections and indicates that most of its growth was from recent acquisitions, though executives offered few details on the revenue mix.
Metavante completed three acquisitions in the third quarter. It bought GHR Systems Inc. of Wayne, Pa., which develops loan-origination systems, for $65 million; MBI Inc. of Waltham, Mass., a provider of payment software for employee benefit programs, for $145 million; and Treev LLC of Herndon, Va., which sells document imaging software, for $19.5 million.
In the current quarter it has bought Brasfield Corp. of Birmingham, Ala., an outsource provider of core processing, for $15 million, and announced a deal to buy Link2Gov Corp. of Nashville, a processor of government payments. It did not reveal what it would pay for Link2Gov but said the deal is expected to close by yearend.
In the third quarter, Mr. Martire said, Metavante completed 34 sales of additional products to existing customers.
"Our strategy is working; our management teams are coming together and working well," Mr. Martire said.
John M. Presley, M&I's chief financial officer, said the banking company would reach or beat its previous estimates for the current quarter of revenue of $1.1 billion to $1.2 billion and net income of $115 million to $120 million.
Two analysts upgraded their ratings of M&I last week in advance of its earnings report, at least partly on the strength of Metavante's expected results.
Robert C. Rutschow of Prudential Equity Group LLC upgraded it to "neutral weight" from "underweight." He said that Metavante's recent bill-payment deal with UMB Financial Corp. of Kansas City, Mo., which expanded UMB's relationship with the vendor beyond cash concentration services for corporate customers, "points to the benefit of having a full suite of products and services to provide to customers and the ability to price aggressively with a total-relationship focus on pricing."
David A. George of A.G. Edwards & Sons Inc. of St. Louis raised his rating to "buy" from "hold." He said that M&I's low share price has created a buying opportunity, and that Metavante will likely help drive up the banking company's results.
M&I stock closed Friday at $42.37, up 0.28% from Thursday's close and down 10.6% from its 52-week high, reached in July.
"Metavante is now 17% of earnings at MI and has been growing in the 20%-plus area over the last several quarters," Mr. George said in a note to clients. "We believe the sustainable bottom-line-growth capability of Metavante is in the low to mid double-digit area."
Anthony R. Davis, an analyst at BankAtlantic Bancorp's Ryan Beck & Co. Inc., also voiced optimism about Metavante. "We think the investment community is still not fully aware of Metavante's earnings potential as Check 21, electronic banking, online debit, and other forms of electronic payments increasingly dominate the U.S. payment system," Mr. Davis wrote in a note issued Friday.
