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Executives

Kirk Larsen - Treasures and Vice President of Investor Relations

Frank Martire - President, and Chief Executive Officer

Timothy Oliver - Senior Executive Vice President and Chief Financial Officer

Michael Hayford - Senior Executive Vice President and Chief Operating Officer

Analysts

Timothy Willi - Avondale Partners

Jennifer Dugan - Merrill Lynch

David Koning - Robert W. Baird & Co., Inc

Tien-Tsin Huang - JP Morgan

John Kraft - D.A. Davidson & Company

Metavante Technologies, Inc. (MV) Q1 2008 Earnings Call April 29, 2008 9:30 AM ET

Operator

Thank you for holding and welcome to Metavante Technologies quarterly conference call. I need to remind everyone that today’s conference call is being recorded. Later in the call we will open up the lines for questions. (Operator Instructions) At this time I would like to turn the call over to Kirk Larson, Metavante Technology's Treasures and Vice President of Investor Relations. Mr. Larson, please go ahead.

Kirk Larson

Thank you Towanda. Good morning and thank you all for joining us for Metavante Technologies first quarter earnings release conference call. Our results we have released earlier this morning and have been posted into out website at www.metavante.com. A webcast of the audio portion of this call and all the charts that we reference during the call are available on that website. They will remain there for the next month. With me today our Frank Martire, President and Chief Executive Officer; Mike Hayford, Chief Operating Officer and Tim Oliver, Chief Financial Officer.

Our agenda includes opening remarks by Frank and then Tim will review the first quarter results and our outlook for the full year 2008. We will give ample time at the end of the call to take your question and ask if you to self-limit to two questions to our broader participation. As a reminder our comments today will includes statements related to the expected future results in Metavante and are therefore forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all of our SEC filings. In addition to customary GAAP measures our presentation also includes certain non-GAAP financial measures. All information should be read in conjunction with our SEC filings.

With that I will turn the call over to Frank.

Frank Martire

Thank you Kirk and thanks to those of you who are joining us on this phone call. I would keep my remarks brief to make sure that we leave plenty of time for Tim to walk you through the quarter and then to take your questions. The first quarter was just what we had hope for a strong start that sustained the momentum we built across the second half of last year. These results heightened our confidence that 2008 will be another good for Metavante.

Revenue growth in the quarter was strong and even when considering the easier comparison to 2007 slower start the 10% exceeded our expectations and importantly the growth was balanced with contributions from both of our reported segments and from our acquisition efforts; that successfully closed two transactions in the quarter.

Profitability results were strong. The combination of our leverage able business model, a strong seasonal mix in the first quarter and the success of last year’s cost actions at our image business to our operating margins higher by over point. Margin performance was also better than we expected due primarily to our typical, conservative planning that tend to delay incremental spending and investments until we have more clarity on the revenue outlook for the year.

As the year progresses we tend to phase in spending with revenue growth and meter out investments. As we described on the call in January we expected our first half to benefit from seasonal strength and from our profitable revenue mix and it did, but we still have challenges and we still need to execute well.

While our sales success over the last several quarters allowed us to deliver strong growth the tough selling environment that we described in 2007 persist in 2008. It is the transaction volumes in core activity that we booked now that will sustain growth in future quarters and meeting our objectives for the second half does require some success this year in selling software and professional services. While we fully consider the current environment when we constructed our plants and our assumptions for these more project orient sales were reasonable, higher transaction volumes alone cannot make our year.

But as tough as it seems now this environment may ultimately prove beneficial to Metavante for a variety of reasons. First, our customers are likely for technologies or solutions that can deliver quick and substantial efficiencies. Second, they are also likely to revisit what functions they deem to be core to them and with others they can outsource.

Our business for the last 40 plus years has been delivering exactly these solutions and services and finally the current shake on the credit markets is likely to create opportunities for asset growth at traditional banks which is good for both our client base and for us, but for now we expect heightened project scrutiny, tighter capital budgets and decision delays and deferrals. Our revised guidance then balances the confidence inspired by the strong first quarter results were our prudent cost and about the challenges our client face.

Tim will walk you through the details in his remarks, but in summary full year organic revenue growth is still expected to be at 46% while we are admittedly trending towards the higher end of this range remember that first half comps are much easier because of 2007 slower start and most of the selling deliver revenue in software and professional services fall on the second half and the EPS ranges have both have been raised primarily to reflect the overachievement in the first quarter.

Before I leave guidance, just a word on our guidance philosophy. We intend to provide annual guidance and then to provide qualitative quarterly updates than annual guidance. All of those provide annual guidance that is accurate, durable and appropriately brackets the range of outcomes that we think our most probable. With that said the strength of our results in this quarter didn’t make it appropriate for us to raise our guided ranges.

So, we’re off to a good start but this is just one quarter. We are hard at work doing what we have done for over 40 years, taking share of our customers. We are developing new products and capabilities to make them more successful. We are improving integration across our platform to make it more efficient. We are enhancing our selling organization to make us easier to do business with and we are attracting and retaining the very best people to help us to get all of this done and as we have show all of these combined ensure that the financial returns will in fact be there.

With that I will turn the call over to Tim so that he can walk you through with some of the details.

Timothy Oliver

Great. Thanks Frank and good morning to all who called in. As of the case last quarter my comments today will reference charts that we provided on our website. These charts summarize the data provided to the attachments and the earnings release and add some analytics.

Since Kirk has already reviewed the cautionary language on Safe Harbor and Reg G I’ll move right to slide one, which is titled Q1 summary results. Walking down the P&L revenue in the first quarter was $425 million, an increase of 10% compared to last year’s first quarter. Our organic revenue growth of 9% was attributable to higher volume in both payments transactions and core processing.

The acquisitions of Nomad Payments in the UK and RepayMe which we closed early in the first and are both now part of the PSG segment added about a point to our total growth rate. Segment operating income was $119 million up 16% from last year. Corporate and other costs were $26 million up about $6 million from last year. The absolute amount compares unfavorably with last year but remember that the full year in 2007 was reasonable and was about four times this number, so the run rate is about appropriate; we had a particularly low number in Q1 of last year.

This line is a collection of several uncorrelated and hard to model items and you should expect some volatility from quarter-to-quarter. That being said from modeling purposes in 2008 we expect our run rate to approximate this quarter’s resulting and for the full year number to be between a $100 million and $110 million.

Intangible amortization was up a little bit to the addition of intangibles when we bought the both Nomad and RepayMe. Firstsource is the next item; the equity method and accounting treatment that was selected for this investment required that we revalue the asset periodically due to certain equity events. This calculation resulted in a small $0.6 million loss this quarter and similarly in the first quarter of 2007 we have recorded an $8 million gain to adjust up the valuation of Firstsource after they successfully completed their IPO.

Moving further down the page interest expense increased $20 million from last year entirely due to the new capital structure following our separation from M&I. We did in the quarter enter into another swap, which now means it for the year we have fixed out $1.4 billion of our debt at a weighted average rate of 5.4%. The remaining $350 million of our variable rate term loan resets based on three month LIBOR and it’s currently at 5%. This floating rate piece approximates the size of our short-term cash balances and provides a natural hedge against the impact of lower interest rates on our interest income.

The tax rate you’ll calculate is about 39%, which is considerably higher than both the year ago rate and our modeling assumption when we provided our original guidance. For full year 2008 we continue to expect our effective tax rate to be about 37%, this assumption however is contingent upon the eventual reinstatement of the R&D tax credit and while we have every expectation that this will occur accounting rules don’t allow the benefit to be smoothed across the year but rather would be needed to be recognized and it would catch up adjustment in the quarter in which it is reinstated.

This obviously means that in some quarter later in the year our tax rate will be well below the full year assumption and well below the 39% we posted this quarter and finally our share count for the quarter was $120 million. The resulting math as you walk down the page, results in a GAAP EPS number of $0.29 of share and cash EPS of $0.35 of share.

Moving to slide two which is called first quarter 2008 net income walk and this slide is a graphical depiction meant to provide you some context to when you think about the net income result results here relative to our prior year results.

The chart starts with GAAP reported results for 2007. The next three red bars then, size the impact of things that are unrelated to our operational performance and complicate any comparisons of net income. They include the higher interest expect the higher interest expense related to our more levered post-in capital structure, the net change related to the Firstsource investment and the affect of a 39% tax rate as compared to a 36% rate in 2007 and more importantly, our expected full year 2008 rate of 37%.

After considering all of these adjustments, you will calculate an improvement in net income that approximates 20% and that is more consistent with the high teens growth rate that we posted in segment operating income. Moving to slide three titled Total Company Results, it shows revenue and adjusted EBITDA for trailing five quarters for the whole company. The chart on the left depicts the steady upward trend in revenue. As I described earlier, revenue in this quarter is up 10% compared to the first quarter of ‘07 and excluding effect of acquisitions or organic growth is up 9%.

The EBITDA chart on the right shows more of a saw tooth pattern, once you adjust for that first bar of the chart, to back out the $8 million gain on the Firstsource investment, the chart would show a similar though less linear upward trend excluding that gain from EBITDA, EBITDA was up about 8% quarter-over-quarter. Slide four is titled Q1 results, the Financial Solutions Group, the first of our two reported segments. It shows revenue and segment operating income for the trailing five quarters.

Revenue at FSG increased a very strong 8% compared to an admittedly relatively easy comparison in the first quarter of last year. Segment operating income decreased 4% compared to the first quarter of last year, resulting in a margin contraction of 2.8 points. This decline in margin is attributable to planned increases in new product development and incremental investment and growth initiatives, which more than offset the benefit of operating leverage.

Slide five gives a similar picture for the Payment Solution Group. PSG revenue increased 11% compared to last year's first quarter. The revenue growth can be attributed to strong demand from some seasonal customers, higher payment transaction volumes in more general sense and recent acquisition of Nomad and which has been renamed Metavante Technologies and Repay Me; again those added about a point of total company a little less to PSG.

Segment operating income increased 27% compared to last year, resulting in margin expansion of 4.1 points. This very strong performance can be attributed to three things. First and most importantly, the benefit of the actions that we took in the second half of last year to improve the cost structure and the performance of our image business; secondly, the operating leverage that our company's strong top line growth and finally, a profitable mix of revenue.

Slide six is titled Free Cash Flow Walk and summarizes the drivers of our $84 million in free cash flow for the quarter. If I walk down the page, the first item that needs some explanation is other non-cash items. The $40 million swing from a negative amount 2007 to a positive amount 2008 can be attributed to higher non-cash stock based compensation expense and the amortization of our debt issuance cost in 2008 and the non-cash Firstsource gain that occurred in the first quarter of 2007.

Walking further down changes in assets and liabilities also shifted from a use of cash to a source of cash with a total change of $63 million. The biggest drivers here were entirely related to our settlement operations and working capital performance. Simply put, settlement is the movement of money related to payments activity that causes other people's money to come in and go out of our accounts.

Timing [Inaudible] like the day of the week that the calendar month ends on can have a significant effect on our settlement balances. While this quarter the effect was a benefit of $47 million compared to last year, this is a zero sum phenomenon and will balance out over time and if you look back over the history of our free cash flow results you will see this very similar effect.

In working capital, which can be attributed to performance we had very good performance now, particularly in accounts receivable and primarily at our Image business. Capital expenditures in the quarter approximated both the previous year’s level and one quarter’s worth of our full year guidance. In summary, we had a very good cash flow quarter.

Chart seven, then is titled 2008 outlook and compared to our current outlook to the initial guidance that we gave in January. The checkmarks on this page indicate those financial metrics where our original guidance is still appropriate. Turing to top of the page with revenue; our organic growth rate in the first quarter was well above our full year guidance range; we expected this to be the case. As we said in late January, the combination of a slow start in 2007 and a more linear revenue profile in 2008 resulting in somewhat easier year-over-year comparisons of first half versus the second half.

With that said, our performance this quarter was even better than we planned and admittedly suggest that we’re trending toward the higher end of a 4% to 6% range. But it is still early in the year and maintaining this range prudently describes how we see our current view of risk. Our ability to close to go or to be sold revenue, particularly in software and professional services both determined where in the range we ultimately fall.

On the earning side we continue to expect modest margin expansion. While we have been sufficiently vague in defining the modest tag in the past, it’s safe to say that nearly 140 basis point of improvement as opposed to this quarter was considerably more than modest. You should expect us to continue to phase in incremental spending particularly at FSG, at a rate that causes to our expenses to grow at a rate much closer to that of revenue over the remainder of 2008 and therefore will constrain margin expansion.

Our new diluted earnings per share range of $1.15 to $1.20 was moved up for a couple of reasons. First, we raised the lower end of the range by $0.03 to recognize that interest expense and share account have both come in lower than our original model that generated the guidance in January and second, we raise the higher end of the range to recognize the strong performance this quarter ended and some like we heard that it could continue. With a diluted EPS range of $1.15 to $1.20 we now expect cash EPS to be in the range of $1.36 to $1.41 and we still expect free cash flow to approximate net income.

And finally moving to our last slide titled calendarization; this slide gives you a sense of how we think about our quarters internally and in the absence of quarterly guidance’s this picture is meant to be a backdrop that allows to me add some color commentary.

So a couple of thoughts; first, as we discussed in January the relative shapes of the revenue profiles for 2007 and 2008 will result in easier first half comparisons. Second, there are seasonal effects across our calendar year that can effect both revenue growth and profitability.

Our first and second quarters are both impacted by the tax season. The first quarter, for those who receive refunds and the second quarter for those who owe money. The third quarter is notable only for its absence of any special season, and the fourth is a variety of budgeting and seasonal effects including holiday shopping and a spend it or lose it mentality around capital budgets.

In this environment I would suggest that taxes are the most certain driver than either capital budgets or holiday spending. Third, our third quarter is always a tough quarter and this year it is also a toughest comparison against in a typically strong Q3 of last year and finally, you considerably expect our margin rates to return to a pattern of more modest margin expansion as we phase in incremental spending to exceed our organic growth in the future.

That concludes my prepared remark. I hope this addresses many of your questions, but I know we haven’t answered them all, so I would ask Towanda to launch the Q-and-A portion of the call.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Tim Willi with Avondale Partners. Please proceed.

Timothy Willi - Avondale Partners

I was wondering when you talk about FSG and the spending outlook and appreciating maybe you are trying to be a little bit conservative or careful about your revenue expectations there, but could you maybe just break it down and sort of talk about where you do see still pretty vibrant areas for growth whether that be -- maybe by a size of institution or particular sort of product and service sets versus areas that you talked about like software and professional services that might slower; just trying to get a little bit more the detail around that business?

Michael Hayford

Tim this is Mike. Yes, as you know our FSG is primarily dominated by processing for us, so allow that business that we’re booking revenues in ’08 is based on sales that we had in ’07 and ’06. I think we said in the past that we had very strong sales years both of ’06 and ’07. So to your point I’m ongoing forward; where we think some opportunities -- we talked about our investment that we are making in the global platform of kind of next gen core and we have actually -- we have seen the interest in that pick-up over the last 4 to 6 months and again that’s the very strategic investment that institutions are going to make. We believe those institutions will need to do that over the next three to five years and we are going to be seeing a lot of interest, so while we haven’t announced any deals yet. We are excited about the future for our global investment in the renewal of core space. We’ve also seen a fairly amount of renewed interest in just getting to the customers, so the whole customer side of the relationship distribution out of the branches, e-banking and then a lot of analytics and probably the most focus has been on integrating that so you can build marketing campaigns, you can build products based on your customer segments and then you can custom and tailor different products to your markets so you can deliver via different channels, whether it’s the branch, whether it’s a e-banking and then as been fair amount of a interest in mobile banking.

Timothy Willi - Avondale Partners

Have you noticed any difference in sales activity levels between what you might characterize as sort of the larger side of your customer base versus maybe more than mid to small size institution, however you would sort of draw those lines to separate them?

Michael Hayford

Yeah, I don’t know if I can say there’s a -- its hard to trust differential -- material different between large institutions and community and regional bank, part of that is in our business model and community and regional bank is more outsourcing based and large banks obviously more software and services. As both Frank and Tim pointed out I think we are a little cautious on the outlook for sell and deliver revenue in ’08 while we are still out there beating the stump trying to get deals we are very cognizant of what the financial institutions are going through and the fact that they maybe a little more cautious spending dollars on discretionary projects in the second half of ’08. So, I would say that we are very active, there’s still a lot of dialogue, we do not see as many sales prospects opportunities moving to contracts as we typically what we would like to see. So we're still going to hold off on the outlook, second half until we start to see more action on the sale side.

Michael Hayford

Now then the requirement and the need for the products is still there, clearly but its all about the timing.

Timothy Willi - Avondale Partners

Yes, yes I know, I agree I did there is been some reports I have seen I think you have sort of one last thought, if you can give me on the comment here but there has been some stuff written recently by some pretty well respected consultants that I used to say that banks really have probably not invested as much as they should have coming out of sort of the post Y2k and through the economic expansion and feel like maybe they have been sort of painted themselves into a corner so to speak, so there is lot of interest and demand on the strategic side. I mean would you agree with that, but its really just, as much as they like to make the strategic move, now may not be the time to get their full attention or the dollars to do it.

Michael Hayford

Yes, I think from my expense we would absolutely agree with that. We have seen deferrals in tactical projects, short-term projects, outside of obviously -- if somebody can get a short-term return on it, you see those moving forward but the short-term deals, short-term projects are the ones we see deferred. The strategic initiatives I think we would agree with once you have that institutions whether it be the renewal of core whether it be putting money into product creation, market segmentation refreshing delivery channels, re assessing a fair amount of interest in those strategic initiatives.

Operator

And your next question comes from the line of Jennifer Dugan with Merrill Lynch. Please proceed.

Jennifer Dugan – Merrill Lynch

Hi, thanks. I was wondering if you could give us an update on the deal with Temenos, when might you be ready to sign a client or actually install and also if you give us a little bit a update on your firstsource investment.

Michael Hayford

On a Temenos. I spoke a little bit on that on Tim’s question, but

Jennifer Dugan – Merrill Lynch

Yes

Michael Hayford

We would love to sign something and tell you soon. We're about a year end of that relationship, we are moving aggressively on the project. Tim covered some of the investments we are making and that's obviously a big one in ’08. I will say that or the interest level in you moving on a strategic investment from the institutions, the financial institutions you picked up in the last four to six months and so we are pretty optimistic that sometime in ’08 we will get a few of these launched and start moving in and from a product/project perspective we are in a position to do that now. So we feel pretty good about that investment. On your other question of Firstsource, Firstsource is a relationship we have with an offshore BPO company and it’s actually, there's two parts of that. For the financial side Frank and Tim cover; there is an investment that we have made in that and we made the investment so that we can have a strong business partnership On the business partnership side, we still think there is opportunities for regional community banks to be able to have the same leverage and cost savings that the large banks have all done by doing cap to sites offshore. So we are still pursuing that. We've had a few small initiatives with some customer, but we would like to see that move it little faster as well.

Jennifer Dugan - Merrill Lynch

Okay Great. On that Temenos does your guidance for this year actually includes some revenue from deals that would be signed?

Michael Hayford

Our outlook for ’08; we don’t have expectation for a lot of revenue in ’08. We still have a little bit in there, but our expectation is that we will get deals -- they are in the pipeline now, we'll get some signed in ’08 and then they will start to turn into meaningful revenue in '09 and beyond.

Jennifer Dugan - Merrill Lynch

Okay

Frank Martire

Jennifer, this is a very strategic investment for us and more important for our clients both these existing clients and potential points of the futures so, we feel very good about how we are tracking right now. With that being said we had no short-term expectations or revenue results because nor do we think we should okay, but clearly we are on the right path right now.

Operator

Your next question comes from the line of Dave Koning with Robert W. Baird. Please proceed.

David Koning - Robert W. Baird & Co., Inc

Similar to Tim’s question earlier, just kind of on the payment side kind of the sources of strength, whether we are seeing a lot of strength right now in bill pay or some of the gift card value tag. Revenue and merchant processing and maybe you can just kind of desegregate where some of the pockets of strength are there?

Michael Hayford

Well, a couple of key things on the payment side and Tim brought this up through his numbers. We have in the first quarter of those seasonality in payments related to tax processing, so we have a couple of different relationships, one where we provide services for tax preparers and they provide early reasons and we do that with the prepaid debit cards and that’s a unique program and that had very strong first quarter. Then obviously on the government payment side, we host a site for the IRS that provides capabilities to pay your federal taxes and that always as a very strong, a strong first quarter and then even a pretty good April. So that provided some seasonality and both of those businesses were very strong in’08. We also had pretty strong transaction volumes so, we have not seen any degradation on things like debit transactions. Bill pay has been very strong for us, so really across the Board in payments as you can see from the numbers Dave delivered and then Tim also brought up the image division and we talked about the image division on our last call where we took some action to restructure the cost. We have got a new management team down there that's been doing a great job and we had a great first quarter, strong revenue, but even a much better margin. They really, turned around on the margin and that impacted our payments margin significantly.

David Koning - Robert W. Baird & Co., Inc

Great thanks and then just a couple of short follow-up question where there any high margin license determination fees that contributed meaningfully to Q1 and then you continue to expect free cash flow margin with net income or in not cash net income is that correct?

Michael Hayford

So, let me take the first one. First Dave, the -- this was not a big software quarter, it typically is not in the first quarter and this one was not either. There were no onetime big wins in the quarter that moved in the utile I’d say. It’s mostly as steady as she goes business and well we don’t get into buyouts in any one quarter over the other, it's safe to say that our buyout expectations for this year, for the full year are well below are certainly below last years buyout revenue numbers, which will below the previous year. The buyout revenue has come down over the last two years. On the second one, it is fair to say that our guidance has been around net income, free cash flow approximately net income that is still the guidance. I will admit to you that over the last several years we've performed at over few points above net income which its us closer to cash net income number. So I wouldn't argue with your supposition that we probably are performing closer to cash net income. We are investing a lot of money this year in Temenos, so it is a high investment year and that is the reason we left ourselves that room.

Operator

And your next question comes from the line of Tien-Tsin Huang with J.P. Morgan. Please proceed.

Tien-Tsin Huang – JP Morgan

Hi, thanks. Just had a couple quick questions jumped on a little bit late; the M&A pipeline and your appetite to your deals, curious if we can just get an update there?

Michael Hayford

I would say M&A pipeline for us in particular for '08 versus ' 07 is very strong. I think the phenomenon we're seeing is there's a lot of organizations in the payments and financial technology space and obviously we're doing some booking internationally, where their outlook in'08 versus their outlook in '07 or prior years might not be the same until -- I think we’ve see in a little bit more activity. I think we'd all said -- we've described this as been very disciplined and so, I think we are still late into see the value expectations given in line with realities of the market today versus maybe a year ago. So having said all that, we are still obviously very interested in doing deals. We have targeted different things to look at both domestically and internationally. You saw us do a couple deals early in the year, but we're still aggressively looking and - and we would hope to we would hope to get some done yet in '08.

Frank Martire

I know in that clarification and Mike said it all was -- I think he’s going to look towards global focus for us as to with M&A. So, some of this is still looking domestically but with a clear global focus.

Tien-Tsin Huang – JP Morgan

So it sounds like still a by is towards international deals?

Michael Hayford

Yes. I mean to the extent that we can do, we've clearly have a desire to be – have a larger part of our revenue international and our plan there is to go and acquire and build out similar to what we did with the Nomad acquisition in the UK?

Frank Martire

But we'll maintain being prudent and disciplined as we go about it.

Tien-Tsin Huang – JP Morgan

My second question -- my final question was around debit. It sounds like that’s tracking well which is encouraging given what we’ve heard from others. Visa, MasterCard also said it had good things to say on the debit side. I was curious on NYCE, we've been getting a lot of questions about NYCE. How is that performing to plan and any change in competitive behavior in the wake of MasterCard's entry into the market?

Michael Hayford

Well, NYCE is still performing extremely well for us. We continue to have very good cross-sell success, we've gone out and converted some to exclusive relationships in the last 12 months. The team's been focused on that and that as we guide some transaction revenues for us. I think it's a little too early to tell with MasterCard and their new offering. They came out a little over a month ago with that announcement. Obviously MasterCard, Visa -- Visa has been out there competing; we've had competitors in the debit space. We look at debit where a very large player we have 80 plus million cards on our debit platform, so we obviously have to watch what’s MasterCard’s doing but we believe strongly that we have the skill, the infrastructure and we have a very strong product set and we are -- for the finance institutions we're brand agnostic, so we think we have a very good offering to go out and compete with them.

Frank Martire

And you know what? In each size and each scale and we have that, so we really truly do believe we're well positioned.

Tien-Tsin Huang – JP Morgan

Good, very good. This is a follow up to that lastly. The -- any revenue or portfolio concentration issues to consider with NYCE, do you have any sort of large chunky deals or contracts that are coming up for renewal in the next year or two?

Michael Hayford

No, when we did that deal back in '03 we obviously had five large relationships and I think we've shared over the years how those have moved and our diversification of revenue base with NYCE now is very good. So we don't have any big chunks left that we had when we did the acquisition. So it’s a diverse revenue base, there is a lot cross sell into our core, there’s a lot of cross selling to our other P&L products and it continue to see generate, good margins for us.

Operator

And you final question comes from the line of John Kraft with D.A. Davidson & Company. Please proceed.

John Kraft - D.A. Davidson & Company

You talked lot about areas of strength and obviously, with the great quarter. As far as though the difficult environment that your customers are facing obviously, you guys are talked about software might be in area where there could be some difficulty professional services, but I was hoping to just drill down a little bit further and get more specifics. I mean are there any specific products that might be lower priority that might be where you see the difficulty?

Michael Hayford

Well, again it’s a little higher because we did have such a strong, first quarter. If you go back to last year we talked a little bit about softening and license image was – impacted little bit last fall, by some of the project deferrals, some of the projects, related to the core side whether it be a branch initiative. We actually had a couple last year that that deferred; they ended up kicking off and removing on them now. So we are not a big software player; it’s 4 to 5 points in terms of our business plan for the year. So, even though we talk about it because it will impact our growth by a few points, it’s not a material impact for overall success for the year. So our outlook is just cautious across the Board on the software side, it’s a little bit cautious on professional services. As we described earlier I think there is a little bit of a bias for the financial institutions to be looking to the future and now be looking at strategic initiatives and we hope to move on a couple of those in ’08 and so, we are cautious with a little optimism.

Timothy Oliver

Yes to be clear, this is Tim. We had a very good revenue quarter and that revenue quarter is a result of the selling efforts over 2006 and 2007 and I think the caution you hear in our voice is, we had an okay selling quarter in the first quarter of 2008 and that will, obviously impact later in 2008 and more importantly 2009 around transaction volumes. So, while we have not yet really get into the heart of our season for software selling, it tends to be backend loaded. We went through a tough second half last year, I think our assumptions coming into this year were very reasonable, that reflected the market as it looked during the exited 2007 for both software and professional services, but we -- I consider this as just some caution that’s if the environment gets worse in the later half of this year then it was in a later half of that. It will be difficult to match those software and professional services revenues.

Frank Martire

And John I think -- this is Frank. You would expect some of that caution because just being very pragmatic about it -- if the market is little bit uncertain here right as to the future and therefore we can’t have anymore certainties than we do right now.

John Kraft - D.A. Davidson & Company

I think that’s fair. I just -- it was -- just that sounds like there aren’t any real specific areas that are that you are able to pinpoint.

Timothy Oliver

You exactly right. We could not the specific, we are cautious but for no specific reason.

John Kraft - D.A. Davidson & Company

Now in the transactions obviously, you saw some strength there given that your at least in the Internet bill pay, your primary competitors and their new ownership. Have you seen the competitor landscape shuffling around to be been able to take market share, you have seen any changes there?

Frank Martire

This question has asked by as time and it’s a fair question. The reality is no, we haven’t. We are still doing a very good job from our market standpoint and marketing and selling our products, so we feel very, very good about our position and in reality we really haven’t seen anything change. We have strong products, we have a strong loyal client base and we are expanding in our client base just as we have in the past.

John Kraft - D.A. Davidson & Company

Okay and Tim just a house keeping. I don’t think you mentioned this, but the stock comp in the quarter was higher than it has been. What -- can you talk about that line and what you might expect for the year?

Timothy Oliver

It will be a linear number from here, so you should expect this quarters number to repeat itself in the next three quarters. It’s -- when we separate it from M&I, there is an initial stock grain. There’s also the resetting of previous M&I grants that when we broke the two companies apart, it change the assumptions that we needed to use on volatility and some of the other inputs into the Black-Scholes model that caused the stock comp to tick up. So, it’s not a quarterly phenomenon it’s actually just a recurring phenomenon that we will go through the rest of the year.

Operator

(Operator Instructions)

Timothy Oliver

Towanda, I guess we answered all their questions, so with that we will end the call. Thank you very much. Kirk stands by to take your questions as the day goes on. Thanks for your time.

Operator

That concludes today’s conference call. At this time you may now disconnect. Thank you and have a great day.

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Source: Metavante Technologies Inc. Q1 2008 Earnings Call Transcript
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