After a rough start to the year in January, business at Metavante Technologies Inc. strengthened later in the quarter as higher transaction processing offset lower software license revenue and the company cut costs, executives said Friday.
The Milwaukee vendor said it had 15% earnings growth on 1% growth in sales during the first quarter, in what may be its last earnings report before its planned purchase by a larger rival, Fidelity National Information Services Inc. in Jacksonville, Fla. The deal is expected to close in the third quarter.
Michael D. Hayford, Metavante's president and chief operating officer, said its customers are weathering the financial crisis fairly well.
"In community and regional banks, we continue to see the fundamentals of their business have held up pretty well. They haven't been hit quite as bad on the balance sheet. And so they have continued to spend," Hayford said in a conference call with analysts. "We continue to see the commitment on the banks to go forward."
Timothy C. Oliver, a senior executive vice president and the chief financial officer, said the company faced a difficult environment for selling software, particularly check-image technology.
"January was tough across the portfolio," Oliver said. "In the second two months of the quarter, things got a lot better and really got a lot better in every business except merchant, which was down year-over-year, slightly," as was its government payments unit.
Retail transactions, a relatively small business at Metavante, and government payments each was affected by the year-long recession, executives said.
Net income grew 15% compared to the year earlier, to $40.3 million. Revenue was up 1%, to $426.9 million. Cash net earnings, the number that Wall Street watches, were 39 cents per share, beating analysts' 38-cent average estimate.
David Koning, an analyst at Robert W. Baird & Co., said the results were solid, but he cautioned against reading too much from Metavante's results into the health of banks or other vendors.
"They all have pretty stable revenue streams. A lot of banks just pay a monthly bill," said Koning, who rates both Metavante and Fidelity shares "outperform." "When things are better at banks, they probably spend a little more at the margins."