Solera Holdings, Inc. Reports Second Quarter Fiscal Year 2008 Results
Second Quarter Revenue of $132.1 Million, up 13.6%; Second Quarter EPS of $0.17, up $0.73; Company Raising Guidance
SAN DIEGO, Feb. 6 -- Solera Holdings, Inc. , the leading global provider of software and services for the automobile insurance claims processing industry, today reported results for the second quarter of fiscal year 2008, the three months ended December 31, 2007.
Results for Second Quarter Fiscal Year 2008:
GAAP Results
-- Revenue for the second quarter ended December 31, 2007 was $132.1
million, a 13.6% increase over the prior year second quarter revenue
of $116.2 million;
-- GAAP net income allocable to common stockholders for the second
quarter ended December 31, 2007 was $11.0 million, a $27.3 million
improvement over the prior year second quarter net loss allocable to
common stockholders of $16.3 million;
-- GAAP diluted net income per share for the second quarter ended
December 31, 2007 was $0.17, a $0.73 per share improvement over the
prior year second quarter diluted net loss per share of $0.56.
Non-GAAP Results
-- Adjusted EBITDA for the second quarter ended December 31, 2007 was
$45.1 million, a 30.9% increase over the prior year second quarter
Adjusted EBITDA of $34.4 million;
-- Adjusted Net Income for the second quarter ended December 31, 2007
was $18.7 million, a 184.1% increase over the prior year second
quarter Adjusted Net Income of $6.6 million;
-- Adjusted Net Income per diluted share (or cash earnings per diluted
share) for the second quarter ended December 31, 2007 was $0.29, a
28.4% increase over the prior year second quarter Adjusted Net
Income per diluted share of $0.23.
"Our strong second quarter results were driven by our continued focus on delivering value to our customers," said Tony Aquila, founder, chairman and CEO of Solera Holdings, Inc. "We continued to make substantial investments in product development, customer support and sales and marketing, while also improving operating efficiencies. Additionally, we continued our expansion efforts outside the United States, with over 70% of our revenues during the second quarter coming from outside the United States."
Business Statistics
-- EMEA revenue for the second quarter of fiscal year 2008 was $80.9
million, an 18.0% increase over the second quarter of fiscal year 2007
revenue of $68.5 million;
-- Americas revenue for the second quarter of fiscal year 2008 was $51.2
million, a 7.4% increase over the second quarter of fiscal year 2007
revenue of $47.7 million;
-- Revenue from insurance company customers for the second quarter of
fiscal year 2008 was $54.0 million, a 13.0% increase over the $47.8
million in revenue from insurance company customers in the second
quarter of fiscal year 2007;
-- Revenue from collision repair facility customers for the second quarter
of fiscal year 2008 was $49.9 million, a 17.7% increase over the $42.3
million in revenue from collision repair facility customers in the
second quarter of fiscal year 2007;
-- Revenue from independent assessor customers for the second quarter of
fiscal year 2008 was $13.9 million, a 17.0% increase over the $11.9
million in revenue from independent assessor customers in the second
quarter of fiscal year 2007;
-- Revenue from automotive recycling and other customers for the second
quarter of fiscal year 2008 was $14.3 million, a 0.9% increase over the
$14.2 million in revenue from automotive recycling and other customers
in the second quarter of fiscal year 2007.
Outlook
Based upon the second quarter results for the period ended December 31, 2007 outlined above -- we are updating our previously released outlook for our full fiscal year ending June 30, 2008 as follows:
Previous FY08 Outlook Updated FY08 Outlook Revenues $505 -- $510 million $515 -- $520 million Net Income $10 -- $15 million $15 -- $20 million Adjusted Net Income $65 -- $70 million $68 -- $72 million Adjusted EBITDA $158 -- $162 million $166 -- $170 million
The FY08 outlook above assumes constant exchange rates from those currently prevailing and no acquisitions.
Earnings Conference Call
We will host our second quarter fiscal year 2008 earnings call today at 8:30 a.m. (Eastern Time) -- February 6, 2008. The conference call will be webcast live on the Internet and can be accessed by visiting: www.solerainc.com. A replay will be available on the Solera website until midnight on February 20, 2008. A live audio broadcast of the call will be accessible to the public by calling (888) 713-4213 or for international callers, (617) 213-4865; please enter the following access code when prompted: 23589567. Callers should dial in approximately ten minutes before the call begins.
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED DECEMBER 31, 2007 AND 2006
AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2007 AND 2006
(In thousands, except per share/unit amounts)
(Unaudited)
Quarter Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenues $132,089 $116,237 $256,271 $227,719
Cost of revenues:
Operating expenses 32,987 34,824 65,327 67,534
Systems development and
programming costs 16,577 15,757 32,550 31,933
Total cost of revenues (excluding
depreciation and amortization) 49,564 50,581 97,877 99,467
Selling, general and
administrative expenses 37,525 32,976 71,067 63,866
Depreciation and amortization 23,447 25,879 45,853 51,055
Restructuring charges 43 (21) 1,666 874
Interest expense 11,721 18,559 22,882 36,416
Other (income) expense - net (4,610) (2,077) (5,765) 2,263
68,126 75,316 135,703 154,474
Income (loss) before provision for
income taxes and minority interests 14,399 (9,660) 22,691 (26,222)
Income tax provision 2,065 1,875 4,942 2,118
Minority interest in net income
of consolidated subsidiaries 1,325 442 2,886 1,527
Net income (loss) 11,009 (11,977) 14,863 (29,867)
Dividends and redeemable
preferred unit accretion - 4,276 - 8,467
Net income (loss) allocable to
common stockholders/unitholders $11,009 $(16,253) $14,863 $(38,334)
Net income (loss) allocable to
common stockholders/unitholders
per share/unit:
Basic $0.17 $(0.56) $0.24 $(1.32)
Diluted $0.17 $(0.56) $0.23 $(1.32)
Weighted average shares/units used
in the calculation of net income
(loss) per share/unit allocable to
common stockholders/unitholders:
Basic 63,468 29,172 63,145 29,105
Diluted 64,551 29,172 64,497 29,105
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 share. We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per diluted share are useful to investors in providing information regarding our operating results and our continuing operations. 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 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 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 share have limitations as analytical tools, and you should not consider them in isolation or as a substitute for net income, earnings 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 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 share as supplemental information.
-- Adjusted EBITDA is a non-GAAP financial measure that represents GAAP
net earnings (loss) allocable to common stockholders/unitholders,
excluding interest, taxes, depreciation and amortization, stock-based
compensation, restructuring charges, other (income) expense - net, and
acquisition-related costs. Acquisition-related costs consist of
transaction costs, retention-related compensation costs, legal and
professional fees, severance costs and other transition costs
associated with our acquisition of the Claims Services Group from ADP
in April 2006. A reconciliation of our Adjusted EBITDA to GAAP net
earnings (loss) allocable to common stockholders/unitholders, the most
directly comparable GAAP measure, is provided in the attached table.
Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Reconciliation to Adjusted EBITDA
Net earnings (loss) $11,009 $(11,977) $14,863 $(29,867)
Add: Income tax provision 2,065 1,875 4,942 2,118
Net earnings (loss) before income
tax 13,074 (10,102) 19,805 (27,749)
Add: Depreciation and amortization 23,447 25,879 45,853 51,055
Add: Interest expense 11,721 18,559 22,882 36,416
Add: Stock-based compensation
expense 1,039 153 1,641 344
Add: Restructuring charges 43 (21) 1,666 874
Add: Other (income) expense - net (4,610) (2,077) (5,765) 2,263
Add: Acquisition related costs 339 2,026 390 2,913
Adjusted EBITDA $45,053 $34,417 $86,472 $66,116
-- Adjusted Net Income is a non-GAAP financial measure that represents
GAAP net earnings (loss) allocable to common stockholders/unitholders,
plus the following items: provision for income taxes, amortization of
acquisition-related intangibles, stock-based compensation expense,
restructuring charges, other (income) expense -- net, and acquisition-
related costs. Acquisition-related costs consist of transaction costs,
retention-related compensation costs, legal and professional fees,
severance costs and other transition costs associated with our
acquisition of the Claims Services Group from ADP in April 2006. From
this figure, we then subtract a provision for income taxes at a rate of
33% to arrive at Adjusted Net Income. We use a tax rate of 33% in
order to approximate our long-term effective corporate tax rate, which
includes certain benefits from net operating loss carryforwards,
deductible goodwill and intangibles amortization for tax purposes. A
reconciliation of our Adjusted Net Income to GAAP net earnings (loss)
allocable to common stockholders/unitholders, the most directly
comparable GAAP measure, is provided in the attached table.
-- Adjusted Net Income per diluted share (or cash earnings per diluted
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. A reconciliation of our Adjusted Net
Income per diluted share (or cash earnings per diluted share) to GAAP
net earnings (loss) per share, the most directly comparable GAAP
measure, is provided in the attached table.
Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Reconciliation to Adjusted
Net Income
Net earnings (loss) $11,009 $(11,977) $14,863 $(29,867)
Add: Income tax provision 2,065 1,875 4,942 2,118
Net earnings (loss) before
income tax 13,074 (10,102) 19,805 (27,749)
Add: Amortization of acquisition
related intangibles 17,973 19,827 35,285 39,614
Add: Stock-based compensation
expense 1,039 153 1,641 344
Add: Restructuring charges 43 (21) 1,666 874
Add: Other (income) expense - net (4,610) (2,077) (5,765) 2,263
Add: Acquisition related costs 339 2,026 390 2,913
Adjusted earnings (loss) before
income tax provision 27,858 9,806 53,022 18,259
Less: Assumed provision for
income taxes at 33% rate (9,193) (3,236) (17,497) (6,025)
Adjusted net income $18,665 $6,570 $35,525 $12,234
Adjusted net income per
share/unit
Basic $0.29 $0.23 $0.56 $0.42
Diluted $0.29 $0.23 $0.55 $0.42
Weighted average shares/units
used in the calculation of
adjusted net income per
share/unit
Basic 63,468 29,172 63,145 29,105
Diluted 64,551 29,172 64,497 29,105
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND JUNE 30, 2007
(In thousands, except share/unit amounts)
(Unaudited)
December 31, June 30,
2007 2007
Assets
Current Assets:
Cash and cash equivalents $107,800 $89,868
Accounts receivable, net 80,872 85,543
Other receivables 10,394 9,297
Other current assets 13,693 16,901
Deferred income tax assets 3,329 3,248
Total current assets 216,088 204,857
Property and equipment, net 51,109 51,485
Other Assets 15,098 11,625
Long-term deferred income tax assets 23,711 23,835
Goodwill 614,339 569,165
Intangible assets, net 348,183 362,986
Total assets $1,268,528 $1,223,953
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $18,799 $25,571
Accrued expenses and other current
liabilities 81,965 89,240
Income taxes payable 7,727 13,995
Deferred income tax liabilities 743 1,076
Current portion of long-term debt 6,416 14,140
Total current liabilities 115,650 144,022
Long-term debt 619,674 599,128
Other liabilities 37,046 25,378
Long-term deferred income tax
liabilities 41,877 42,922
Total liabilities $814,247 $811,450
Minority interests in consolidated
subsidiaries 12,897 11,229
Stockholders' equity:
Common Shares, $0.01 par value,
150,000,000 units authorized;
64,732,323 and 64,813,563 issued and
outstanding, as of September 30,
2007 and June 30, 2007, respectively 507,588 505,939
Accumulated deficit (95,892) (111,687)
Accumulated other comprehensive
income 29,688 7,022
Total stockholders' equity 441,384 401,274
Total liabilities and stockholders'
equity $1,268,528 $1,223,953
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
SELECTED STATEMENT OF CASH FLOWS INFORMATION
FOR THE SIX MONTHS ENDED DECEMBER 31, 2007 and 2006
(In thousands)
(Unaudited)
Six Months Ended December 31,
2007 2006
Net cash provided by operating activities $47,945 $22,003
Net cash (used) in investing activities (10,118) (29,689)
Net cash (used) provided in financing
activities (24,791) 4,579
Effect of exchange rate changes 4,896 1,268
Net change in cash and cash equivalents 17,932 (1,839)
Cash and cash equivalents, beginning of
period 89,868 88,826
Cash and cash equivalents, end of period $107,800 $86,987
Supplemental Cash Flow Information:
Cash paid for interest $21,912 $27,639
Supplemental Disclosure of Non-cash
Investing and Finance Activities:
Capital assets financed $2,812 $6,926
Cautions about Forward-Looking Statements
This press release contains forward-looking statements, including statements about business outlook for fiscal year 2008, our business strategy, and statements about 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 includes the volatility associated with foreign currency exchange risks; effects of competition on our software and service pricing and our business; effects of changes in or violations by us or our customers of government regulations; time and expenses associated with customers switching from competitive software and services to our software and services; rapid technology changes in our industry; costs and possible future losses or impairments relating to our 2006 acquisition of the Claims Services Group from Automatic Data Processing, Inc.; our reliance on third-party information for our software and services; effects of system failures or security breaches on our business and reputation; country-specific risks associated with operating in multiple countries; risks associated with any future acquisitions, joint ventures or similar transactions; our ability to obtain additional financing as necessary to support our operations; use of cash to service our debt; effects on our business of restrictive covenants in our debt facility; 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 Annual Report on Form 10-K for the Year Ended June 30, 2007 filed with the Securities and Exchange Commission on September 17, 2007. 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.
About Solera
Solera is the leading global provider of software and services for the automobile insurance claims processing industry. Solera is active in 51 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 in the Netherlands, Hollander serving the North American recycling market, and IMS providing medical review services. For more information, please refer to the Company's website at www.solerainc.com.
Contacts: Investor Relations Kamal Hamid Solera Holdings, Inc. 858-946-1676 kamal.hamid@audatex.com Media Relations Kendra DeWitt Solera Holdings, Inc. 858-946-1453 kendra.dewitt@audatex.com