Solera Holdings, Inc. Reports Second Quarter Fiscal Year 2012 Results Second Quarter Revenue of $195.1 Million, up 16.0% on a GAAP Basis and up 17.7% on a Constant Currency Basis; Adjusted EBITDA Margin increases to 43.5%, up 65 basis points on an Actual Currency Basis and up 133 basis points on a Constant Currency Basis; Company Announces Quarterly Dividend

WESTLAKE, Texas, Feb. 7, 2012 /PRNewswire/ -- Solera Holdings, Inc. (NYSE: SLH), the leading global provider of software and services to the automobile insurance claims processing industry, today reported results for the second quarter of fiscal year 2012.

Results for the Second Quarter Ended December 31, 2011:

GAAP Results

  • Revenue for the second quarter was $195.1 million, a 16.0% increase over the prior year second quarter revenue of $168.2 million. After adjusting for changes in foreign currency exchange rates ("FX Changes"), revenue for the second quarter increased by approximately 17.7% over the prior year second quarter revenue;
  • Net income attributable to Solera Holdings, Inc. for the second quarter was $28.2 million, an 8.7% decrease over the prior year second quarter net income attributable to Solera Holdings, Inc. of $30.9 million;
  • Diluted net income attributable to Solera Holdings, Inc. per common share for the second quarter was $0.39, an 11.4% decrease over the prior year second quarter diluted net income attributable to Solera Holdings, Inc. per common share of $0.44.

"We are pleased to report a solid quarter with 16.0% revenue growth, 17.8% Adjusted EBITDA growth and 18.4% growth in free cash flow.  Additionally, we returned a record $49.2 million to stockholders through stock buy-backs and dividends.  These results are a direct outcome of our global leverage, diversification and disciplined operating culture that have created profitable innovation for our customers and stockholders," said Tony Aquila, Solera's founder, Chairman and Chief Executive Officer.

Non-GAAP Results

  • Adjusted EBITDA for the second quarter was $84.9 million, a 17.8% increase over the prior year second quarter Adjusted EBITDA of $72.0 million. After adjusting for FX Changes, Adjusted EBITDA for the second quarter increased by 21.4% over the prior year second quarter Adjusted EBITDA;
  • Adjusted EBITDA margin for the second quarter was 43.5%, a 65 basis point increase over the prior year second quarter Adjusted EBITDA margin of 42.8%. After adjusting for FX Changes, Adjusted EBITDA margin for the second quarter increased by 133 basis points over the prior year second quarter Adjusted EBITDA margin;
  • Adjusted Net Income for the second quarter was $47.2 million, an 11.2% increase over the prior year second quarter Adjusted Net Income of $42.4 million;
  • Adjusted Net Income per diluted common share for the second quarter was $0.66, a 10.0% increase over the prior year second quarter Adjusted Net Income per diluted common share of $0.60.

In the first quarter of fiscal year 2012, we announced the formation of the Netherlands, Germany, Austria and Switzerland ("NGAS") Region to leverage the operational and technological achievements and investments we made in the Highly Established Markets Initiative ("HEMI") Region across our markets. As a result of the creation of the NGAS Region, we transferred our Netherlands operating segment from our Americas reportable segment to our EMEA reportable segment in the first quarter of fiscal year 2012. The financial information presented below reflects the inclusion of the Netherlands in EMEA for all periods.

Business Statistics

  • EMEA revenues were $116.3 million for the second quarter, representing a 3.5% increase over the prior year second quarter. After adjusting for FX Changes, EMEA revenues for the second quarter increased 5.1% over the prior year second quarter;
  • Americas revenues were $78.8 million for the second quarter, representing a 41.4% increase over the prior year second quarter. After adjusting for FX Changes, Americas revenues for the second quarter increased 43.1% over the prior year second quarter. After excluding the revenues of Explore Information Services LLC, which we acquired in June 2011, Americas revenues increased 3.2% over the prior year second quarter and, after adjusting for FX Changes, increased 4.9% over the prior year second quarter;
  • Revenues from insurance company customers were $88.6 million for the second quarter, representing a 30.2% increase over the prior year second quarter. After adjusting for FX Changes, revenues from insurance company customers for the second quarter increased 32.3% over the prior year second quarter. After excluding the revenues of Explore, revenues from insurance company customers increased 0.1% over the prior year second quarter and, after adjusting for FX Changes, increased 2.2% over the prior year second quarter;
  • Revenues from collision repair facility customers were $63.9 million for the second quarter, representing a 7.1% increase over the prior year second quarter. After adjusting for FX Changes, revenues from collision repair facility customers for the second quarter increased 8.8% over the prior year second quarter;
  • Revenues from independent assessors were $19.4 million for the second quarter, representing a 9.0% increase over the prior year second quarter. After adjusting for FX Changes, revenues from independent assessors for the second quarter increased 10.5% over the prior year second quarter;
  • Revenues from automotive recycling, salvage and other customers were $23.2 million for the second quarter, representing a 2.7% increase over the prior year second quarter. After adjusting for FX Changes, revenues from automotive recycling, salvage and other customers for the second quarter increased 2.9% over the prior year second quarter.

Fiscal year 2012 Outlook:

We are updating our previously issued outlook for our full fiscal year ending June 30, 2012 as follows:


Previous Fiscal Year

Current Fiscal Year


2012 Outlook

2012 Outlook


----------------------------

----------------------------

Revenues

$804 million -- $810 million

$780 million -- $786 million

Net Income attributable to Solera  Holdings, Inc.

$108 million -- $112 million

$103 million -- $107 million

Adjusted EBITDA

$354 million -- $358 million

$339 million -- $343 million

Adjusted Net Income

$199 million -- $202 million

$190 million -- $193 million

Adjusted Net Income per diluted common share

$2.79 -- $2.83

$2.67 -- $2.71



The fiscal year 2012 outlook above assumes no acquisitions of businesses, no repurchases of our common stock, an assumed 28% tax rate to calculate Adjusted Net Income, and a strengthening of the U.S. dollar of up to 5% versus currently prevailing foreign currency exchange rates.  During the period from August 24, 2011, when we disclosed our initial fiscal 2012 guidance, through February 6, 2012, the U.S. Dollar has strengthened significantly versus most major foreign currencies we have used to transact our business. For example, on August 24, 2011, one Euro was equal to approximately $1.44, and on February 6, 2012, one Euro was equal to approximately $1.31. This change from August 24, 2011 to February 6, 2012 represents a strengthening of the U.S. Dollar versus the Euro of approximately 10%. We anticipate that currency exchange rates will have a negative impact on our revenues, but have a positive impact on our interest expense and our intangibles amortization expense for the full fiscal year ending June 30, 2012.

Exchange rates between most of the major foreign currencies we use to transact our business and the U.S. dollar have fluctuated significantly over the last few years and we expect that they will continue to fluctuate. The majority of our revenues and costs are denominated in Euros, Pound Sterling, Swiss francs, Canadian dollars and other international currencies. The following table provides the average quarterly exchange rates for the Euro and Pound Sterling since the beginning of fiscal year 2011:



Average Pound


Average Euro-to-

Sterling-to-U.S.


U.S. Dollar

Dollar Exchange

Period

Exchange Rate

Rate

--------------------------------------

-------------

----------




   Quarter ended September 30, 2010

$1.29

$1.55

   Quarter ended December 31, 2010

1.36

1.58

   Quarter ended March 31, 2011

1.37

1.60

   Quarter ended June 30, 2011

1.44

1.63

   Quarter ended September 30, 2011

1.42

1.61

   Quarter ended December 31, 2011

1.35

1.57



During the three months ended December 31, 2011 as compared to the three months ended December 31, 2010, the U.S. dollar strengthened against most major foreign currencies we use to transact our business. The average U.S. dollar strengthened versus the Euro by 0.8% and the Pound Sterling by 0.6%, which decreased our revenues and expenses for the three months ended December 31, 2011. A hypothetical 5% increase or decrease in the U.S. dollar versus other currencies in which we transact our business would have resulted in an increase or decrease, as the case may be, to our revenues of $6.9 million and $14.0 million during the three and six months ended December 31, 2011, respectively.

All percentage amounts and ratios were calculated using the underlying data in whole dollars. We measure constant currency, or the effects on our results that are attributable to FX Changes, by measuring the incremental difference between translating the prior period and the current results at the monthly average rates for the same period from the prior year.

Quarterly Dividend:

The Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.10 per outstanding share of common stock and per outstanding restricted stock unit. The Audit Committee also approved a quarterly stock dividend equivalent of $0.10 per outstanding restricted stock unit granted to certain of our executive officers during fiscal years 2011 and 2012 in lieu of the cash dividend, which dividend equivalent will be paid to the restricted stock unit holders as the restricted stock unit vests. The dividends are paid on March 6, 2012 to stockholders and restricted stock unit holders of record at the close of business on February 21, 2012.

Earnings Conference Call:

We will host our second quarter ended December 31, 2011 earnings call today at 5:00 p.m. (Eastern Time)February 7, 2012. The conference call will be webcast live in listen-only mode and can be accessed by visiting the Investor Center section of the Solera website: www.solerainc.com. A webcast replay will be available on the website until midnight on February 21, 2012. A live audiocast will also be accessible to the public by calling (866) 788-0540 or from outside the U.S., (857) 350-1678. When prompted, the following access is required: 92178554. Callers should dial in approximately 10 minutes before the call begins.  For those unable to participate in the live audiocast, a replay will be available until midnight on February 21, 2012. To access the replay, dial (888) 286-8010 or, from outside the U.S., (617) 801-6888 and enter the following access code when prompted: 63653904.

SOLERA HOLDINGS, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2011 AND 2010

(In thousands, except per share amounts)

(Unaudited)










Three Months Ended December 31,


Six Months Ended December 31,


2011


2010


2011


2010









Revenues

$ 195,141


$ 168,160


$ 393,835


$ 327,068









Cost of revenues:








  Operating expenses

41,999


33,697


85,617


64,839

  Systems development and programming costs

17,893


17,247


36,938


32,759









Total cost of revenues (excluding depreciation and amortization)  

59,892


50,944


122,555


97,598









Selling, general and administrative expenses

52,010


44,847


100,431


86,673

Depreciation and amortization

25,770


20,354


51,778


39,906

Restructuring charges, asset impairments, and other costs associated with








    exit and disposal activities

113


(991)


310


1,499

Acquisition and related costs

2,395


633


3,752


1,837

Interest expense

12,352


7,365


24,646


14,684

Other expense, net

697


3,349


753


2,673


153,229


126,501


304,225


244,870

Income before provision for income taxes

41,912


41,659


89,610


82,198

Income tax provision

10,775


7,722


24,028


16,322

Net income

31,137


33,937


65,582


65,876

Less: Net income attributable to noncontrolling interests

2,913


3,018


6,119


5,833

Net income attributable to Solera Holdings, Inc.

$   28,224


$  30,919


$  59,463


$  60,043









Net income attributable to Solera Holdings, Inc. per common share:








 Basic

$       0.40


$     0.44


$     0.84


$     0.85

 Diluted

$       0.39


$     0.44


$       0.83


$     0.85

Dividends paid per share

$       0.10


$     0.08


$       0.20


$     0.15









Weighted-average shares used in the calculation of net income attributable to Solera Holdings, Inc. per common share:








 Basic

70,784


70,245


70,772


70,115

 Diluted

71,127


70,602


71,149


70,438



Non-GAAP Financial Measures

We use a number of non-GAAP financial measures that are not intended to be used in lieu of GAAP presentations, but are provided because management believes that they provide additional information with respect to the performance of our fundamental business activities and are also frequently used by securities analysts, investors and other interested parties to facilitate the evaluation of our business on a comparable basis to other companies. The three primary non-GAAP financial measures that we use are Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted common share. We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per diluted common share are useful to investors in providing information regarding our operating results. We rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team in connection with our executive compensation and bonus plans. Adjusted EBITDA also allows us to compare our current operating results with corresponding prior periods as well as to the operating results of other companies in our industry. We present Adjusted Net Income and Adjusted Net Income per diluted common share because we believe both of these measures provide useful information regarding our operating results in addition to our GAAP measures. We believe that Adjusted Net Income and Adjusted Net Income per diluted common share provide investors with valuable insight into our profitability exclusive of unusual adjustments, and provide further insight into the cash impact resulting from the different treatments of goodwill for financial reporting and tax purposes.

Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per diluted common share have limitations as analytical tools, and you should not consider them in isolation or as a substitute for net income, net income per share and other consolidated income statement data prepared in accordance with accounting principles generally accepted in the United States. Because of these limitations, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted common share should not be considered as a replacement for net income. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted common share as supplemental information.

  • Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to Solera Holdings, Inc., excluding (i) interest expense, (ii) provision for income taxes, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) restructuring charges, asset impairments, and other costs associated with exit and disposal activities, (vi) other (income) expense, net and (vii) acquisition and related costs. Acquisition and related costs include legal and professional fees and other transaction costs associated with completed and contemplated business combinations and asset acquisitions, costs associated with integrating acquired businesses, including costs incurred to eliminate workforce redundancies and for product rebranding, and other charges incurred as a direct result of our acquisition efforts. These other charges include changes to the fair value of contingent purchase consideration, acquired assets and assumed liabilities subsequent to the completion of the purchase price allocation, purchase price that is deemed to be compensatory in nature, incentive compensation arrangements with continuing employees of acquired companies and gains and losses resulting from the settlement of a pre-existing contractual relationship with an acquiree. A reconciliation of our Adjusted EBITDA to GAAP net income attributable to Solera Holdings, Inc., the most directly comparable GAAP measure, is provided in the attached table.

SOLERA HOLDINGS, INC. 

RECONCILIATION TO ADJUSTED EBITDA

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2011 AND 2010

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended December 31,


Six Months Ended December 31,


2011


2010


2011


2010

Net income attributable to Solera Holdings, Inc.

$ 28,224


$ 30,919


$   59,463


$   60,043

Add: Income tax provision

10,775


7,722


24,028


16,322

Net income attributable to Solera Holdings, Inc. before income tax provision

38,999


38,641


83,491


76,365

Add: Depreciation and amortization

25,770


20,354


51,778


39,906

Add: Restructuring charges,  asset impairments, and other costs associated with exit and disposal activities

113


(991)


310


1,499

Add: Acquisition and related costs

2,395


633


3,752


1,837

Add: Interest expense

12,352


7,365


24,646


14,684

Add: Other expense, net

697


3,349


753


2,673

Add: Stock-based compensation expense

4,533


2,684


8,139


4,754

Adjusted EBITDA

$ 84,859


$ 72,035


$ 172,869


$ 141,718



  • Adjusted Net Income is a non-GAAP financial measure that represents GAAP net income attributable to Solera Holdings, Inc., excluding (i) provision for income taxes, (ii) amortization of acquired intangible assets, (iii) stock-based compensation expense, (iv) restructuring charges, asset impairments, and other costs associated with exit and disposal activities, (v) other (income) expense, not including interest income and (vi) acquisition and related costs. From this amount, we subtract an assumed provision for income taxes to arrive at Adjusted Net Income. We assume a 28% income tax rate as an approximation of our long-term effective corporate income tax rate, which includes certain benefits from net operating loss carryforwards, tax credits, tax deductible goodwill and amortization, and certain holding companies in low tax-rate jurisdictions. A reconciliation of our Adjusted Net Income to GAAP net income attributable to Solera Holdings, Inc., the most directly comparable GAAP measure, is provided in the attached table.
  • Adjusted Net Income per diluted common share is a non-GAAP financial measure that represents Adjusted Net Income (as defined above) divided by the number of diluted shares outstanding for the period used in the calculation of GAAP net income attributable to Solera Holdings, Inc. per diluted common share. A reconciliation of our Adjusted Net Income per diluted common share to GAAP net income attributable to Solera Holdings, Inc. per diluted common share, the most directly comparable GAAP measure, is provided in the attached table.

SOLERA HOLDINGS, INC. 

RECONCILIATION TO ADJUSTED NET INCOME

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2011 AND 2010

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended December 31,


Six Months Ended December 31,


2011


2010


2011


2010

Net income attributable to Solera Holdings, Inc.

$ 28,224


$ 30,919


$ 59,463


$ 60,043

Add: Income tax provision

10,775


7,722


24,028


16,322

Net income attributable to Solera Holdings, Inc. before income tax provision

38,999


38,641


83,491


76,365

Add: Amortization of acquisition-related intangibles

18,775


14,015


38,231


27,531

Add: Restructuring charges, asset impairments, and other costs associated with exit and disposal activities

113


(991)


310


1,499

Add: Acquisition and related costs

2,395


633


3,752


1,837

Add: Other expense, not including interest income

765


3,971


1,049


3,781

Add: Stock-based compensation expense

4,533


2,684


8,139


4,754

Adjusted Net Income before income tax provision

65,580


58,953


134,972


115,767

Less: Assumed provision for income taxes at 28%

(18,362)


(16,507)


(37,792)


(32,415)

Adjusted Net Income

$ 47,218


$ 42,446


$ 97,180


$ 83,352









Adjusted Net Income per share:








 Basic

$     0.67


$     0.60


$     1.37


$     1.18

 Diluted

$     0.66


$     0.60


$     1.37


$     1.18









Weighted-average shares used in the calculation of GAAP Net Income attributable to Solera Holdings, Inc. and Adjusted Net Income per share:








 Basic

70,784


70,245


70,772


70,115

 Diluted

71,127


70,602


71,149


70,438



SOLERA HOLDINGS, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND JUNE 30, 2011

(In thousands, except per share amounts)

(Unaudited)






December 31,


June 30,


2011


2011

Assets




Current assets:




Cash and cash equivalents

$        353,525


$    371,101

Accounts receivable, net

117,861


135,589

Other receivables

20,451


19,037

Other current assets

19,987


24,895

Deferred income tax assets

11,314


10,321


Total current assets

523,138


560,943





Property and equipment, net

58,748


64,485

Goodwill

1,012,646


1,059,749

Intangible assets, net

365,803


416,100

Other noncurrent assets

16,794


19,462

Noncurrent deferred income tax assets

43,430


48,396





Total assets

$     2,020,559


$ 2,169,135





Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$          19,208


$      37,798

Accrued expenses and other current liabilities

119,445


140,270

Income taxes payable

9,551


10,837

Deferred income tax liabilities

2,853


1,187

Current portion of long-term debt

23,026


24,042


Total current liabilities

174,083


214,134





Long-term debt

981,387


1,020,383

Other noncurrent liabilities

23,153


24,127

Noncurrent deferred income tax liabilities

22,815


30,541


Total liabilities

1,201,438


1,289,185





Redeemable noncontrolling interests

85,437


94,841





Stockholders' equity:




Solera Holdings, Inc. stockholders' equity:




Common shares, $0.01 par value: 150,000 shares authorized;




70,165 and 70,795 issued and outstanding as of




December 31, 2011 and June 30, 2011, respectively

587,061


587,265

Retained earnings

158,258


151,366

Accumulated other comprehensive income

(22,515)


36,413


Total Solera Holdings, Inc. stockholders' equity

722,804


775,044





Noncontrolling interests

10,880


10,065

Total stockholders' equity

733,684


785,109

Total liabilities and stockholders' equity

$     2,020,559


$ 2,169,135



SOLERA HOLDINGS, INC. 

SELECTED STATEMENT OF CASH FLOWS INFORMATION

FOR THE SIX MONTHS ENDED DECEMBER 31, 2011 AND 2010

(In thousands)

(Unaudited)






Six Months Ended December 31,


2011


2010

Net cash provided by operating activities

$ 111,584


$   95,505

Net cash used in investing activities

(28,513)


(6,205)

Net cash used in financing activities

(70,135)


(10,221)

Effect of foreign currency exchange rate changes on cash and cash equivalents

(30,512)


19,701

Net change in cash and cash equivalents

(17,576)


98,780

Cash and cash equivalents, beginning of period

371,101


240,522

Cash and cash equivalents, end of period

$ 353,525


$ 339,302





Supplemental cash flow information:




    Cash paid for interest

$     9,053


$   16,354

    Cash paid for income taxes

$   17,492


$   17,073





Supplemental disclosure of non-cash investing and financing activities:




    Capital assets financed

$        246


$     2,191

    Accrued contingent purchase consideration

$     3,275


$     1,630



About Solera:

Solera is the leading global provider of software and services to the automobile insurance claims processing industry. Solera is active in over 60 countries across six continents. The Solera companies include Audatex in the United States, Canada, and in more than 45 additional countries, Informex in Belgium, Sidexa in France, ABZ and Market Scan in the Netherlands, HPI in the United Kingdom, Hollander serving the North American recycling market, AUTOonline providing salvage disposition in a number of European and Latin American countries, IMS providing medical review services, and Explore providing data and analytics to United States property and casualty insurers. For more information, please refer to the company's website at http://www.solerainc.com.

Cautions about Forward-Looking Statements:

This press release contains forward-looking statements, including statements about: continued profitable growth; customer and stockholder value; our expectations regarding our prospects and business outlook for fiscal year 2012; our expectations and beliefs regarding changes in foreign currency exchange rates; and statements about dividends, stock repurchases, our effective tax rate, profitable innovation and historical results or performance that may suggest trends for our business. These statements are based on our current expectations, estimates and assumptions and are subject to many risks, uncertainties and unknown future events that could cause actual results to differ materially. Actual results may differ materially from those set forth in this press release due to the risks and uncertainties inherent in our business, including, without limitation: our reliance on a limited number of customers for a substantial portion of our revenues; unpredictability and volatility of our operating results, which include the volatility associated with foreign currency exchange risks, our sales cycle, seasonality, global economic conditions and other factors; risks associated with and possible negative consequences of acquisitions, joint ventures, divestitures and similar transactions, including our ability to successfully integrate Explore or our other acquired businesses; effects of competition on our software and service pricing and our business; time and expenses associated with customers switching from competitive software and services to our software and services; rapid technology changes in our industry; risks associated with operating in multiple countries; use of cash to service our debt and effects on our business of restrictive covenants in our debt facility and indenture; effects of changes in or violations by us or our customers of government regulations; costs and possible future losses or impairments relating to our acquisitions; the financial impact of future significant restructuring and severance charges; the impact of changes in our tax provision (benefit) or effective tax rate; our ability to obtain additional financing as necessary to support our operations; our ability to pay dividends or repurchase shares in future periods; our dependence on a limited number of key personnel; effects of system failures or security breaches on our business and reputation; our reliance on third-party information for our software and services; and any material adverse impact of current or future litigation on our results or business. For a discussion of these and other factors that could impact our operations or financial results and cause our results to differ materially from those in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission, particularly our Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2011. Solera is under no obligation to (and specifically disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

SOURCE Solera Holdings, Inc.



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