Solera Holdings, Inc. Reports Second Quarter Fiscal Year 2010 Results
Second Quarter Revenue of $163.3 million, up 24.4% on a GAAP Basis and up 15.2% on a Constant Currency Basis; GAAP Diluted Net Income Attributable to Solera Holdings, Inc. Per Common Share of $0.33, up 13.5%; Adjusted Net Income per Diluted Common Share of $0.54, up 38.5%; Company Increases Fiscal 2010 Guidance; Company Announces Quarterly Cash Dividend
SAN DIEGO, Feb. 4 -- Solera Holdings, Inc. , 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 2010.
Results for the Second Quarter Ended December 31, 2009:
GAAP Results:
-- Revenue for the second quarter was $163.3 million, a 24.4% increase
over the prior year second quarter revenue of $131.3 million. After
adjusting for changes in foreign currency exchange rates ("FX
Changes"), revenue for the second quarter of fiscal year 2010
increased by approximately 15.2% over the prior year second quarter;
-- GAAP net income attributable to Solera Holdings, Inc. for the second
quarter was $23.3 million, an 18.5% increase over the prior year
second quarter GAAP net income attributable to Solera Holdings, Inc.
of $19.6 million;
-- Diluted net income attributable to Solera Holdings, Inc. per common
share for the second quarter was $0.33, a 13.5% increase over the
prior year diluted net income attributable to Solera Holdings, Inc.
per common share of $0.29.
"Our second quarter performance demonstrates steady improvement despite continued global economic uncertainty," said Tony Aquila, founder, chairman and CEO of Solera Holdings, Inc. "The combination of our total growth, including revenue contributions from acquisitions, and our continued operating discipline, including eliminating waste in our global operations, allowed us to turn in an Adjusted EBITDA margin of 40.9% - up approximately 380 basis points over the prior year period."
Non-GAAP Results:
-- Adjusted EBITDA for the second quarter was $66.8 million, a 36.9%
increase over the prior year second quarter Adjusted EBITDA of $48.8
million. After adjusting for FX Changes, Adjusted EBITDA for the
second quarter of fiscal year 2010 increased by approximately 25.7%
over the prior year second quarter;
-- Adjusted Net Income for the second quarter was $37.8 million, a 45.1%
increase over the prior year second quarter Adjusted Net Income of
$26.1 million;
-- Adjusted Net Income per diluted common share for the second quarter
was $0.54, a 38.5% increase over the prior year second quarter
Adjusted Net Income per diluted common share of $0.39.
Business Statistics for the Second Quarter ended December 31, 2009:
-- EMEA revenue was $111.1 million for the second quarter, representing a
37.9% increase over the prior year period revenue of $80.6 million.
After adjusting for FX Changes, EMEA revenue for the second quarter
increased 26.0% over the respective prior year period. After excluding
HPI, Ltd.'s run rate revenue from the second quarter, EMEA revenue
increased 27.7% over the prior year period, and after adjusting for FX
changes, increased 16.1% over the prior year period. HPI's run rate
revenue is its GAAP revenue during the three months ended March 31,
2009;
-- Americas revenue was $52.2 million for the second quarter,
representing a 3.0% increase over the prior year period. After
adjusting for FX Changes, Americas revenue for the second quarter
decreased 1.9% versus the prior year period;
-- Revenue from insurance company customers was $ 62.2 million for the
second quarter, representing an 11.2% increase over the prior year
period. After adjusting for FX Changes, revenue from insurance company
customers for the second quarter increased 2.7% over the prior year
period;
-- Revenue from collision repair facility customers was $57.3 million for
the second quarter, representing a 17.3% increase over the prior year
period. After adjusting for FX Changes, revenue from collision repair
facility customers for the second quarter increased 9.0% over the
prior year period;
-- Revenue from independent assessors was $15.6 million for second
quarter, representing a 21.0% increase over the prior year period.
After adjusting for FX Changes, revenue from independent assessors for
the second quarter increased 8.1% over the prior year period;
-- Revenue from automotive recycling, salvage and other customers was
$28.2 million for the second quarter, representing a 107.7% increase
over the prior year period. After adjusting for FX Changes, revenue
from automotive recycling, salvage and other customers for the second
quarter increased 96.0% over the prior year period.
Updated Fiscal Year 2010 Outlook:
We are updating our previously issued outlook for our full fiscal year ending June 30, 2010 as follows:
Previous Fiscal Year Current Fiscal Year
2010 Outlook 2010 Outlook
---------------------------- ----------------------------
Revenues $627 million -- $632 million $629 million -- $632 million
Net Income $62 million -- $71 million $70 million -- $76 million
Adjusted
Net Income $132 million -- $138 million $136 million -- $141 million
Adjusted Net
Income
per diluted
share $1.89 -- $1.97 $1.94 -- $2.01
Adjusted
EBITDA $244 million -- $253 million $248 million -- $255 million
The Fiscal Year 2010 outlook above assumes constant currency exchange rates from those currently prevailing, no acquisitions, 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 during the remainder of fiscal year 2010. 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 versus the U.S. dollar since the beginning of fiscal year 2009:
Average
Average Euro- Pound-to-
to-Dollar Dollar
Exchange Exchange
Period Rate Rate
-------------------------------------- ------------- ----------
Quarter ended September 30, 2008 $1.51 $1.90
Quarter ended December 31, 2008 1.32 1.58
Quarter ended March 31, 2009 1.31 1.44
Quarter ended June 30, 2009 1.36 1.55
Quarter ended September 30, 2009 1.43 1.64
Quarter ended December 31, 2009 1.48 1.63
During second quarter of fiscal year 2010 as compared to the prior year second quarter, the U.S. dollar weakened against most major foreign currencies we use to transact our business. For example, the average U.S. dollar weakened against the Euro by 12.1%, and the average U.S. dollar weakened against the Pound Sterling by 3.7%. This weakening of the U.S. dollar had a positive comparable impact on our revenues, but a negative comparable impact on our expenses for second quarter of fiscal year 2010 as compared to the prior year second quarter. 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 approximately $6.4 million change to our revenues during the second quarter of fiscal year 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 a quarterly cash dividend of $0.0625 per share of outstanding common stock and per outstanding restricted stock unit. The dividend will be payable on March 22, 2010 to stockholders and restricted stock unit holders of record at the close of business on February 22, 2010.
Earnings Conference Call:
We will host our second quarter ended December 31, 2009 earnings call today at 5:00 p.m. (Eastern Time) - February 4, 2010. The conference call will be webcast live in listen-only mode and can be accessed by visiting the Investor Relations section of the Solera website: www.solerainc.com. A webcast replay will be available on the website until midnight on February 18, 2010. A live audiocast will also be accessible to the public by calling (800) 591-6923 or from outside the U.S., (617) 614-4907. When prompted, the following access code is required: 84140425. 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 18, 2010. 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: 45481646.
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
--------------- ----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $163,318 $131,301 $314,087 $274,293
-------- -------- -------- --------
Cost of revenues :
Operating expenses 33,718 30,163 66,689 63,209
Systems development and
programming costs 18,850 13,747 35,498 30,004
------ ------ ------ ------
Total cost of
revenues (excluding
depreciation and
amortization) 52,568 43,910 102,187 93,213
Selling, general and
administrative expenses 43,463 38,212 81,799 76,872
Depreciation and amortization 22,685 19,950 44,320 41,186
Restructuring charges,
asset impairments, and
other costs of exit or
disposal activities 1,731 283 3,460 754
Acquisition-related costs 524 257 2,138 564
Interest expense 8,610 9,028 17,374 20,095
Other (income) expense, net 150 (10,735) 564 (14,233)
--- ------- --- -------
129,731 100,905 251,842 218,451
------- ------- ------- -------
Income before income
tax provision 33,587 30,396 62,245 55,842
Income tax provision 7,908 8,763 14,439 17,772
----- ----- ------ ------
Net income 25,679 21,633 47,806 38,070
Less: Net income
attributable to
noncontrolling
interest 2,401 1,988 4,545 4,078
----- ----- ----- -----
Net income attributable to
Solera Holdings, Inc. $23,278 $19,645 $43,261 $33,992
======= ======= ======= =======
Net income attributable to
Solera Holdings, Inc. per
common share:
Basic $0.33 $0.29 $0.62 $0.51
===== ===== ===== =====
Diluted $0.33 $0.29 $0.62 $0.51
===== ===== ===== =====
Dividends per share $0.06 $- $0.13 $-
===== === ===== ===
Weighted average shares used in
the calculation of net income
attributable to Solera
Holdings, Inc. per common share:
Basic 69,469 66,523 69,380 65,456
====== ====== ====== ======
Diluted 69,693 66,538 69,526 65,507
====== ====== ====== ======
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 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 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, 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 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-related costs. Acquisition-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, other charges incurred as a direct result of our
acquisition efforts. As a result of our adoption of Statement of
Financial Accounting Standards No. 141(R), Business Combinations, in
fiscal year 2010, acquisition-related costs in the current period
include legal and professional fees and other transaction costs
associated with completed acquisitions, whereas in periods prior to
our adoption of SFAS No. 141(R), legal and professional fees and other
transaction costs associated with completed acquisitions were included
in the determination of the purchase price and capitalized in the
balance sheet. 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.
Three Months Ended Six Months Ended
Dec 31, Dec 31,
--------------- ----------------
2009 2008 2009 2008
---- ---- ---- ----
Reconciliation to Adjusted
EBITDA:
Net income attributable to
Solera Holdings, Inc. $23,278 $19,645 $43,261 $33,992
Add: Income tax provision 7,908 8,763 14,439 17,772
----- ----- ------ ------
Net income attributable to
Solera Holdings, Inc.
before income tax
provision 31,186 28,408 57,700 51,764
Add: Depreciation and
amortization 22,685 19,950 44,320 41,186
Add: Restructuring
charges, asset
impairments and other
costs of exit or disposal
activities 1,731 283 3,460 754
Add: Acquisition-related
costs 524 257 2,138 564
Add: Interest expense 8,610 9,028 17,374 20,095
Add: Other (income)
expense, net 150 (10,735) 564 (14,233)
Add: Stock-based
compensation expense 1,945 1,621 3,433 3,189
----- ----- ----- -----
Adjusted EBITDA $66,831 $48,812 $128,989 $103,319
======= ======= ======== ========
-- 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 acquisition-related
intangibles, (iii) stock-based compensation expense, (iv)
restructuring charges, asset impairments, and other costs associated
with exit or disposal activities, (v) other (income) expense, net and
(vi) acquisition-related costs. From this figure, we then subtract an
assumed provision for income taxes to arrive at Adjusted Net Income.
We assume a 28% tax rate in order to approximate our long-term
effective corporate tax rate, which includes certain benefits from net
operating loss carryforwards, tax deductible goodwill and
amortization, and a low tax-rate jurisdiction for a certain corporate
holding company. 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.
Three Months Ended Six Months Ended
Dec 31, Dec 31,
----------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Reconciliation to
Adjusted Net Income:
Net income attributable
to Solera Holdings, Inc. $23,278 $19,645 $43,261 $33,992
Add: Income tax provision 7,908 8,763 14,439 17,772
----- ----- ------ ------
Net income attributable
to Solera Holdings, Inc.
before income tax
provision 31,186 28,408 57,700 51,764
Add: Amortization of
acquisition-related
intangibles 16,598 15,070 32,369 30,878
Add: Restructuring
charges, asset
impairments and other
costs of exit or
disposal activities 1,731 283 3,460 754
Add: Acquisition-related
costs 524 257 2,138 564
Add: Other (income)
expense, not including
interest income 531 (9,439) 1,383 (11,728)
Add: Stock-based
compensation expense 1,945 1,621 3,433 3,189
----- ----- ----- -----
Adjusted Net Income
before income tax
provision 52,515 36,200 100,483 75,422
Less: Assumed provision
for income taxes at 28% (14,704) (10,136) (28,135) (21,118)
------- ------- ------- -------
Adjusted Net Income $37,811 $26,064 $72,348 $54,303
======= ======= ======= =======
Adjusted Net Income per
share:
Basic $0.54 $0.39 $1.04 $0.83
===== ===== ===== =====
Diluted $0.54 $0.39 $1.04 $0.83
===== ===== ===== =====
Weighted average shares
used in the calculation
of GAAP net income
attributable to Solera
Holdings, Inc. and
Adjusted Net Income per
share:
Basic 69,469 66,523 69,380 65,456
====== ====== ====== ======
Diluted 69,693 66,538 69,526 65,507
====== ====== ====== ======
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND JUNE 30, 2009
(In thousands, except per share amounts)
December 31, June 30,
2009 2009
(Unaudited) (Unaudited)(1)
----------- ------------
Assets
Current Assets:
Cash and cash equivalents $204,452 $223,420
Short term investments - 11,941
Accounts receivable, net 95,649 98,565
Other receivables 14,486 12,177
Other current assets 19,930 19,550
Deferred income tax assets 4,300 4,392
----- -----
Total current assets 338,817 370,045
Property and equipment, net 58,346 50,784
Goodwill 735,386 651,099
Intangible assets, net 318,708 322,843
Other noncurrent assets 12,937 13,660
Noncurrent deferred income tax assets 8,447 10,178
----- ------
Total assets $1,472,641 $1,418,609
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $20,549 $30,447
Accrued expenses and other current
liabilities 99,280 104,414
Income taxes payable 8,212 17,462
Deferred income tax liabilities 523 1,037
Current portion of long-term debt 6,004 5,880
----- -----
Total current liabilities 134,568 159,240
Long-term debt 595,773 592,200
Other noncurrent liabilities 34,278 36,935
Noncurrent deferred income tax
liabilities 58,507 53,965
------ ------
Total liabilities 823,126 842,340
Redeemable noncontrolling interests 97,704 92,012
Stockholders' equity:
Solera Holdings, Inc. stockholders' equity:
Common Shares, $0.01 par value, 150,000
shares authorized; 69,823 and 69,531
issued and outstanding, as of December
31, 2009 and June 30, 2009,
respectively 548,663 526,547
Accumulated deficit (17,824) (52,332)
Accumulated other comprehensive income 14,521 3,113
------ -----
Total Solera Holdings, Inc.
stockholders' equity 545,360 477,328
Noncontrolling interests 6,451 6,929
----- -----
Total stockholder's equity 551,811 484,257
------- -------
Total liabilities and stockholders'
equity $1,472,641 $1,418,609
========== ==========
(1) Derived from audited consolidated financial statements as of
June 30, 2009.
SOLERA HOLDINGS, INC. AND SUBSIDIARIES
SELECTED STATEMENTS OF CASH FLOWS INFORMATION
FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 and 2008
(In thousands)
(Unaudited)
Six Months Ended
December 31,
----------------
2009 2008
---- ----
Net cash provided by operating activities $68,980 $57,859
Net cash used in investing activities (84,803) (97,876)
Net cash provided by (used in) financing activities (11,160) 81,841
Effect of exchange rate changes 8,015 (17,877)
----- -------
Net change in cash and cash equivalents (18,968) 23,947
Cash and cash equivalents, beginning of period 223,420 149,311
------- -------
Cash and cash equivalents, end of period $204,452 $173,258
======== ========
Supplemental Cash Flow Information:
Cash paid for interest $17,395 $20,293
Cash paid for income taxes $24,351 $16,364
Supplemental Disclosure of Non-cash Investing and
Finance Activities:
Capital assets financed $3,691 $485
Notes payable from acquisitions of businesses $- $17,330
Accrued contingent purchase consideration $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 and Greece, Sidexa in France, ABZ in The Netherlands, HPI in the United Kingdom, Hollander serving the North American recycling market, AUTOonline providing salvage disposition in a number of European countries and Mexico, 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 changes in foreign currency exchange rates, our business outlook for fiscal year 2010, and statements about dividends, 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 and other factors; risks associated with the uncertainty in and volatility of global economic conditions; risks associated with and possible negative consequences of acquisitions, joint ventures, divestitures and similar transactions, including our ability to successfully integrate HPI or AUTOonline; 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; 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 reliance on third-party information for our software and services; effects of system failures or security breaches on our business and reputation; any material adverse impact of current or future litigation on our results or business; and our dependence on a limited number of key personnel. 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, 2009. 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.