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Solera Holdings (SLH)

Q4 2011 Results

August 24, 2011 5:00 p.m. ET


Kamal Hamid - Director of IR

Tony Aquila - Founder, Chairman and CEO

Renato Giger - CFO


Andrew Jeffrey - SunTrust

Gary Prestopino - Barrington Research

Tony Cristello - BB&T Capital Markets

Dave Lewis - JPMorgan

Peter Appert - Piper Jaffray

Robert Riggs - William Blair

Vincent Lin - Goldman Sachs


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Good afternoon everyone, and welcome to Solera’s fourth quarter and fiscal year 2011 earnings call. [Operator instructions.] At this time, I would like to turn the call over to Kamal Hamid, Solera’s vice president of investor relations. Kamal?

Kamal Hamid

Good afternoon everyone. Thank you all for joining us and welcome to Solera’s fourth quarter fiscal year 2011 conference call. With me here today are Tony Aquila, Solera’s founder, chairman, and CEO, and Renato Giger, Solera’s chief financial officer.

Tony will begin today’s call with a summary of our financial results for the quarter and fiscal year ended June 30, 2011, followed by comments about the factors driving those results. Renato will then comment further on our financial results and finish by providing the company’s fiscal year 2012 guidance. We will then open up the call for questions.

I would like to remind everyone that our remarks during the conference call will contain forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements including, without limitation, those risks detailed in Solera's filings with the SEC, including our most recent quarterly report on Form 10-Q for the quarter ended March 31, 2011, and our periodic reports on Form 8-K filed with the SEC on June 7, 2011.

We disclaim any obligation to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements maybe based but that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We also plan to discuss certain non-GAAP financial measures on this call. A reconciliation of Solera’s non-GAAP financial measures to GAAP financial measures is included in today's press release, which is available on the Investor Relations section of our company website at When we refer to analyst consensus during this call, we mean the consensus results of certain analysts that cover the company as reported on Thomson First Call.

We measure constant currency or the effects on our results that are attributed to changes in foreign currency exchange rates by measuring the incremental difference between translating the current and prior period results at the monthly average rates for the same periods from the prior year. Unless otherwise stated, all period-to-period revenue comparisons are on constant currency basis.

When we refer to run rate, waste, savings, or synergies, we mean savings to be realized over each 12-month period following the execution of these efforts. Amounts and percentages throughout our [unintelligible] reflect rounding adjustments.

All information discussed during this call and webcast is protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published, or broadcast without the prior written permission of Solera Holdings Inc.

I would now like to introduce Tony Aquila, our Founder, Chairman and CEO. Tony?

Tony Aquila

Thank you Kamal. Good afternoon everyone and thanks for joining us today. I’m pleased to report a solid finish to our fiscal 2011, driven mainly by additional growth in revenue per claim in our advanced and evolving markets through our delivery of additional high-value services and continued claims penetration in our evolving markets.

Our GAAP revenue grew 17.7% in the fourth quarter, and 8.4% for the fiscal year 2011. On a constant currency basis, our quarterly and full year revenue growth was 8.1%, in the middle of our target range for total growth of 7-9%.

Our adjusted EBITDA margin was 41.9% in the fourth quarter and adjusted EBITDA was $2.4 million ahead of consensus. Renato will give you more color in a few minutes. Our adjusted EBITDA for the full year grew 12.8% to $295.3 million, representing a 43.1% margin, up 165 basis points year over year, exceeding our targeted annual growth range of 100-150 basis points.

The further delivery and rollout of additional essential services drove an 8.9% increase in revenue per claim in our transaction driven markets during the fourth quarter. As we continue to focus on the size and value of our software bundle, this increase exceeded our historical range of 4% to 6% in our transaction driven markets for the second consecutive quarter.

Total revenue in our evolving markets grew 34.5% in the fourth quarter over the prior year period and these markets are now generating annualized revenue of approximately $104 million versus $77 million a year ago and $65 million in fiscal 2009. While our evolving markets reproduction about 14% of revenue for the fourth quarter, they generated about 24% of our revenue growth, consistent with their contribution of revenue growth throughout fiscal 2011.

One of the proven strengths of Solera’s business model is our diversification across many geographies, with stronger performance in some countries countering weakness in others, especially during challenging times across the globe.

As we anticipated on last quarter’s conference call, certain of our markets faced challenges in the fourth quarter from continued very high gas prices and fewer miles driven. In addition, some of our European markets experienced unusually mild weather, resulting in fewer claims.

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