Solera Holdings' CEO Discusses F2Q2012 Results - Earnings Call Transcript

Solera Holdings, Inc. (SLH)

F2Q2012 Earnings Call

February 7, 2011 5:00 p.m. EST


Kamal Hamid – VP of IR

Tony Aquila – Chairman, President and CEO

Renato Giger – CFO and Treasurer


Tony Cristello – BB&T Capital Markets

Gary Prestopino – Barrington Research

Dave Lewis – JPMorgan

Peter Appert – Piper Jaffray

Eric Boyer – Wells Fargo



Good afternoon, everyone, and welcome to Solera’s second quarter fiscal year 2012 earnings call.

Following today's remarks, we will hold a question-and-answer session. As reminder this call is being recorded and will be available for playback. Details for accessing the replay will be made available at the end of the call.

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 second quarter fiscal year 2012 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 ended December 31, 2011, followed by comments on the factors driving those results. Renato will then provide you with information about our financial results that is not described in today's press release and finish by providing an update to 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 this 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 limitations those risks detailed in Solera's filings with the SEC, including our most recent quarterly report on Form 10-Q for the quarter ended September 30, 2011. We disclaim any obligation to publicly update or revise any such statements to reflect any change in our expectation or advanced conditions or circumstances in which -- on which any such statement may be based or 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 on an actual currency basis of certain analysts that cover the company as reported on Thomson FirstCall.

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 rate of the same period from the prior year. Unless otherwise stated, all period-to-period revenue, adjusted EBITDA and margin comparisons are on a constant currency basis.

When we refer to direct competitors, we mean companies that we compete with in vehicle claims processing. When we refer to run rate, waste savings or synergies, we mean the savings to be realized over each 12-month period following the execution of these efforts. Amounts and percentages throughout our remarks reflect rounding adjustments.

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

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

Tony Aquila

Thank you, Kamal. Good afternoon, everyone, and thanks for joining us today.

We are pleased with our second quarter results which demonstrate progress from our continued investment in the business. Total revenue growth came in at 17.7% versus the prior-year period. Our adjusted EBITDA margin came in at 44.2%, up over 130 basis points year over year, including the impact of continuing headwinds in two of our major European markets. We achieved this margin while continuing to absorb recently completed acquisitions and increasing our investments in product innovation centers and new geographies now up to 61 countries.

With these results driving strong cash flow, I am excited to report that during the second quarter we returned nearly $50 million in capital to stockholders, more than the cumulative amount we have returned since our IPO. Renato will provide you with those details in a few minutes.

Shifting to claims volumes, this quarter is the fourth consecutive quarter of year-over-year aggregate improvement. Total claims grew by 1% despite historically mild and dry weather conditions in many of our regions during the second quarter. This growth compares with 0.4% growth in the first quarter, a 0.1% drop in the fourth quarter fiscal 2011, and a 1.3% drop in the third quarter of fiscal 2011.

Moving to revenue claim growth, this key metric continued to outpace our 4% to 6% historical range, coming in at 6.3% for the quarter and averaging 8.1% over the last four quarters. Because the timing and magnitude of new product rollouts vary, we believe a rolling four-quarter average is the right way to look at growth in revenue per claim. We are encouraged by both the claims volumes and the revenue per claim trends.

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