Attached files

file filename
8-K - FORM 8-K - SOLERA HOLDINGS, INCd8k.htm

Exhibit 99.1

Solera Holdings, Inc. Reports Second Quarter Fiscal Year 2011 Results

Second Quarter Revenue of $168.2 million, up 3.0% on a GAAP Basis and up 6.8% on a Constant Currency Basis; GAAP Diluted Net Income Attributable to Solera Holdings, Inc. Per Common Share of $0.44, up 33.3%; Adjusted Net Income per Diluted Common Share of $0.60, up 11.1%; Company Tightens Guidance for Fiscal Year 2011; Company Announces Quarterly Dividend

DALLAS, Feb. 2 /PRNewswire-FirstCall/ — 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 2011.

Results for the Second Quarter Ended December 31, 2010:

GAAP Results

 

   

Revenue for the second quarter was $168.2 million, a 3.0% increase over the prior year second quarter revenue of $163.3 million. After adjusting for changes in foreign currency exchange rates (“FX Changes”), revenue for the second quarter increased by approximately 6.8% over the prior year second quarter revenue;

 

   

GAAP net income attributable to Solera Holdings, Inc. for the second quarter was $30.9 million, a 32.8% increase over the prior year second quarter GAAP net income attributable to Solera Holdings, Inc. of $23.3 million;

 

   

Diluted net income attributable to Solera Holdings, Inc. per common share for the second quarter was $0.44, a 33.3% increase over the prior year diluted net income attributable to Solera Holdings, Inc. per common share of $0.33.

“We believe that the worst of the recession is now behind us. We are active in over 55 countries and expanding; we are happy with the steady increase in customer demand for our high value products and services; and we continue to execute acquisitions consistent with our M-M-C (Management-Margin-Core) acquisition discipline,” said Tony Aquila, founder, chairman and CEO of Solera Holdings, Inc. “In addition, our constant currency EBITDA margin was at 43.4%, up 250 basis points year over year, reflecting a 13.2% increase over the prior year second quarter. This marks the third consecutive quarter that we exceeded our “Pursue 42%” Adjusted EBITDA margin target.”

Non-GAAP Results

 

   

Adjusted EBITDA for the second quarter was $72.0 million, a 7.8% increase over the prior year second quarter Adjusted EBITDA of $66.8 million. After adjusting for FX Changes, Adjusted EBITDA for the second quarter of fiscal year 2011 increased by approximately 13.2% over the prior year second quarter Adjusted EBITDA;

 

   

Adjusted Net Income for the second quarter was $42.4 million, a 12.3% increase over the prior year second quarter Adjusted Net Income of $37.8 million;

 

   

Adjusted Net Income per diluted common share for the second quarter was $0.60, an 11.1% increase over the prior year second quarter Adjusted Net Income per diluted common share of $0.54.

Business Statistics

 

   

EMEA revenue was $96.8 million for the second quarter, representing a 2.1% increase over the prior year second quarter. After adjusting for FX Changes, EMEA revenue for the second quarter increased 8.0% over the prior year second quarter;

 

   

Americas revenue was $71.4 million for the second quarter, representing a 4.2% increase over the prior year second quarter. After adjusting for FX Changes, Americas revenue for the second quarter increased 5.0% over the prior year second quarter;


   

Revenue from insurance company customers was $68.1 million for the second quarter, representing a 5.6% increase over the prior year second quarter. After adjusting for FX Changes, revenue from insurance company customers for the second quarter increased 8.6% over the prior year second quarter;

 

   

Revenue from collision repair facility customers was $59.7 million for the second quarter, representing a 2.6% increase over the prior year second quarter. After adjusting for FX Changes, revenue from collision repair facility customers for the second quarter increased 6.7% over the prior year second quarter;

 

   

Revenue from independent assessors was $17.8 million for the second quarter, representing a 2.5% decrease over the prior year second quarter. After adjusting for FX Changes, revenue from independent assessors for the second quarter increased 4.8% over the prior year second quarter;

 

   

Revenue from automotive recycling, salvage and other customers was $22.6 million for the second quarter, representing a 0.8% increase over the prior year second quarter. After adjusting for FX Changes, revenue from automotive recycling, salvage and other customers for the second quarter increased 3.3% over the prior year second quarter.

Updated Fiscal Year 2011 Outlook:

We are updating our previously issued outlook for our full fiscal year ending June 30, 2011 as follows:

 

    

Previous Fiscal Year

2011 Outlook

  

Current Fiscal Year

2011 Outlook

Revenues

  

$666 million — $672 million

  

$668 million — $672 million

Net Income

  

$104 million — $110 million

  

$107 million — $111 million

Adjusted EBITDA

  

$283 million — $288 million

  

$285 million — $289 million

Adjusted Net Income

  

$162 million — $166 million

  

$165 million — $168 million

Adjusted Net Income per diluted share

  

$2.27 — $2.33

  

$2.31 — $2.35

The Fiscal Year 2011 outlook above assumes constant currency exchange rates from those currently prevailing, no acquisitions of businesses, and an assumed 28% tax rate to calculate Adjusted Net Income.


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 2010:

 

Period        

       Average Euro-to-
U.S. Dollar
Exchange Rate
     Average Pound
Sterling-to-U.S.
Dollar Exchange
Rate
 

Quarter ended September 30, 2009

     $ 1.43       $ 1.64   

Quarter ended December 31, 2009

       1.48         1.63   

Quarter ended March 31, 2010

       1.39         1.56   

Quarter ended June 30, 2010

       1.28         1.49   

Quarter ended September 30, 2010

       1.29         1.55   

Quarter ended December 31, 2010

       1.36         1.58   

During the three months ended December 31, 2010 as compared to the three months ended December 31, 2009, 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 7.9% and the Pound Sterling by 3.1%, which decreased our revenues and expenses for the three months ended December 31, 2010. A hypothetical 5% increase or decrease in the U.S. dollar versus other currencies in which we transact our business would have resulted in a $6.6 million decrease or increase, as the case may be, to our revenues during the three months ended December 31, 2010.

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 attributed 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 the Board of Directors has approved the payment of a quarterly cash dividend of $0.075 per share of outstanding common stock and per outstanding restricted stock unit. The Audit Committee has also approved a quarterly stock dividend equivalent of $0.075 per outstanding restricted stock unit granted to certain of our executive officers during fiscal year 2011 in lieu of a cash dividend, which dividend equivalent will be paid to the restricted stock unit holders as the restricted stock unit vests. The dividends are payable on March 1, 2011 to stockholders and restricted stock unit holders of record at the close of business on February 16, 2011.

Earnings Conference Call:

We will host our second quarter ended December 31, 2010 earnings call today at 5:00 p.m. (Eastern Time) – February 2, 2011. The conference call will be webcast live on the Internet and can be accessed by visiting: www.solerainc.com. A webcast replay will be available on the website until midnight on February 16, 2011. A live audio broadcast of the call will be accessible to the public by calling (866) 804-6920 or for international callers, (857) 350-1666; please enter the following access code when prompted: 66558138. Callers should dial in approximately ten minutes before the call begins. For those unable to participate in the live audiocast, a replay will be available until midnight on February 16, 2011. 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: 54638668. The Texas Public Utilities Commission has notified Dallas residents that, due to current weather conditions, rolling power outages are underway today. Accordingly, our earnings conference call may be impacted by such a power outage. If our earnings conference call is cancelled or interrupted during our prepared remarks, we will post a recording of our prepared remarks as soon as practicable and you can access the recording via the webcast or audio replay as described above.


SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended December 31,      Six Months Ended December 31,  
     2010     2009      2010      2009  

Revenues

   $ 168,160      $ 163,318       $ 327,068       $ 314,087   

Cost of revenues:

          

Operating expenses

     33,697        33,718         64,839         66,689   

Systems development and programming costs

     17,247        18,850         32,759         35,498   
                                  

Total cost of revenues (excluding depreciation and amortization)

     50,944        52,568         97,598         102,187   

Selling, general and administrative expenses

     44,847        43,463         86,673         81,799   

Depreciation and amortization

     20,354        22,685         39,906         44,320   

Restructuring charges, asset impairments, and other costs of exit and disposal activities

     (991     1,731         1,499         3,460   

Acquisition and related costs

     633        524         1,837         2,138   

Interest expense

     7,365        8,610         14,684         17,374   

Other expense, net

     3,349        150         2,673         564   
                                  
     126,501        129,731         244,870         251,842   
                                  

Income before income tax provision

     41,659        33,587         82,198         62,245   

Income tax provision

     7,722        7,908         16,322         14,439   
                                  

Net income

     33,937        25,679         65,876         47,806   

Less: Net income attributable to noncontrolling interests

     3,018        2,401         5,833         4,545   
                                  

Net income attributable to Solera Holdings, Inc.

   $ 30,919      $ 23,278       $ 60,043       $ 43,261   
                                  

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

          

Basic

   $ 0.44      $ 0.33       $ 0.85       $ 0.62   
                                  

Diluted

   $ 0.44      $ 0.33       $ 0.85       $ 0.62   
                                  

Dividends paid per share

   $ 0.08      $ 0.06       $ 0.15       $ 0.13   
                                  

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

          

Basic

     70,245        69,469         70,115         69,380   
                                  

Diluted

     70,602        69,693         70,438         69,526   
                                  

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 or 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 and gains and losses resulting from the settlement of a pre-existing contractual relationship with an acquire. 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, 2010 AND 2009

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended December 31,      Six Months Ended December 31,  
     2010     2009      2010      2009  

Net income attributable to Solera Holdings, Inc.

   $ 30,919      $ 23,278       $ 60,043       $ 43,261   

Add: Income tax provision

     7,722        7,908         16,322         14,439   
                                  

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

     38,641        31,186         76,365         57,700   

Add: Depreciation and amortization

     20,354        22,685         39,906         44,320   

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

     (991     1,731         1,499         3,460   

Add: Acquisition and related costs

     633        524         1,837         2,138   

Add: Interest expense

     7,365        8,610         14,684         17,374   

Add: Other expense, net

     3,349        150         2,673         564   

Add: Stock-based compensation expense

     2,684        1,945         4,754         3,433   
                                  

Adjusted EBITDA

   $ 72,035      $ 66,831       $ 141,718       $ 128,989   
                                  

 

   

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 or disposal activities, (v) other (income) expense, excluding 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% tax rate as an approximation of our long-term effective corporate 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, 2010 AND 2009

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended December 31,     Six Months Ended December 31,  
     2010     2009     2010     2009  

Net income attributable to Solera Holdings, Inc.

   $ 30,919      $ 23,278      $ 60,043      $ 43,261   

Add: Income tax provision

     7,722        7,908        16,322        14,439   
                                

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

     38,641        31,186        76,365        57,700   

Add: Amortization of acquisition-related intangibles

     14,015        16,598        27,531        32,369   

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

     (991     1,731        1,499        3,460   

Add: Acquisition and related costs

     633        524        1,837        2,138   

Add: Other expense, not including interest income

     3,971        531        3,781        1,383   

Add: Stock-based compensation expense

     2,684        1,945        4,754        3,433   
                                

Adjusted Net Income before income tax provision

     58,953        52,515        115,767        100,483   

Less: Assumed provision for income taxes at 28%

     (16,507     (14,704     (32,415     (28,135
                                

Adjusted Net Income

   $ 42,446      $ 37,811      $ 83,352      $ 72,348   
                                

Adjusted Net Income per share:

        

Basic

   $ 0.60      $ 0.54      $ 1.18      $ 1.04   
                                

Diluted

   $ 0.60      $ 0.54      $ 1.18      $ 1.04   
                                

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

        

Basic

     70,245        69,469        70,115        69,380   
                                

Diluted

     70,602        69,693        70,438        69,526   
                                


SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND JUNE 30, 2010

(In thousands, except per share amounts)

(Unaudited)

 

     December 31,
2010
    June 30,
2010
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 339,302      $ 240,522   

Accounts receivable, net

     99,694        99,682   

Other receivables

     14,600        12,989   

Other current assets

     20,978        20,713   

Deferred income tax assets

     3,164        4,059   
                

Total current assets

     477,738        377,965   

Property and equipment, net

     54,497        53,255   

Goodwill

     669,139        635,709   

Intangible assets, net

     267,660        275,492   

Other noncurrent assets

     12,427        12,065   

Noncurrent deferred income tax assets

     1,520        2,167   
                

Total assets

   $ 1,482,981      $ 1,356,653   
                

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 16,772      $ 25,420   

Accrued expenses and other current liabilities

     105,070        103,921   

Income taxes payable

     11,657        7,041   

Deferred income tax liabilities

     1,801        1,673   

Current portion of long-term debt

     5,718        5,442   
                

Total current liabilities

     141,018        143,497   

Long-term debt

     562,059        538,018   

Other noncurrent liabilities

     28,343        34,140   

Noncurrent deferred income tax liabilities

     30,991        33,752   
                

Total liabilities

     762,411        749,407   

Redeemable noncontrolling interests

     117,667        94,431   

Stockholders’ equity:

    

Solera Holdings, Inc. stockholders’ equity:

    

Common Shares, $0.01 par value, 150,000 shares authorized;
70,415 shares and 70,017 shares issued and outstanding, as of December 31, 2010 and June 30, 2010, respectively

     548,824        545,048   

Retained earnings

     67,036        22,550   

Accumulated other comprehensive loss

     (20,443     (60,583
                

Total Solera Holdings, Inc. stockholders’ equity

     595,417        507,015   

Noncontrolling interests

     7,486        5,800   
                

Total stockholder’s equity

     602,903        512,815   
                

Total liabilities and stockholders’ equity

   $ 1,482,981      $ 1,356,653   
                


SOLERA HOLDINGS, INC.

SELECTED STATEMENTS OF CASH FLOWS INFORMATION

FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

(Unaudited)

 

     Six Months Ended December 31,  
     2010     2009  

Net cash provided by operating activities

   $ 95,505      $ 68,980   

Net cash used in investing activities

     (6,205     (84,803

Net cash used in financing activities

     (10,221     (11,160

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

     19,701        8,015   
                

Net change in cash and cash equivalents

     98,780        (18,968

Cash and cash equivalents, beginning of period

     240,522        223,420   
                

Cash and cash equivalents, end of period

   $ 339,302      $ 204,452   
                

Supplemental cash flow information:

    

Cash paid for interest

   $ 16,354      $ 17,395   

Cash paid for income taxes

   $ 17,073      $ 24,351   

Supplemental disclosure of non-cash investing and financing activities:

    

Capital assets financed

   $ 2,191      $ 3,691   

Accrued contingent purchase consideration

   $ 1,630      $ 4,330   

About Solera

Solera is the leading global provider of software and services to the automobile insurance claims processing industry. Solera is active in over 50 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, and IMS providing medical review services. 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 our expectations regarding our prospects and business outlook for fiscal year 2011, our expectations regarding changes in foreign currency exchange rates and the economic recession, our planned geographic expansion and statements about dividends, acquisitions 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 our 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; 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; use of cash to service our debt and effects on our business of restrictive covenants in our debt facility; our ability to obtain additional financing as necessary to support our operations; our ability to pay dividends 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, 2010. 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.

Kamal Hamid, Investor Relations of Solera Holdings, Inc.,

+1-858-946-1676,

kamal.hamid@solerainc.com