Solera reported relatively in-line fiscal second-quarter results on Wednesday, February 5, and meaningfully increased its guidance for fiscal 2014. Adjusted EPS of $0.64 in the fiscal second quarter were $0.02 higher than our estimate and in line with the consensus. Revenue growth of 14% year-over-year in the quarter (about 6% organically) was in line with our estimate and a touch below the consensus. Management attributed the growth to a gradual recovery in Europe, strong growth in emerging markets, and strong growth in non–claims-related revenue.

Despite relatively in-line results for the quarter, management increased its guidance for fiscal 2014 by a fair amount. Management’s 2014 organic revenue growth guidance increased only modestly (to 7.5%, versus 7.0% previously), but management increased its adjusted 2014 EPS guidance by $0.17, to $2.78-$2.86. Solera had already increased its guidance twice this year, with the first increase being driven by a better-than-expected revenue outlook and the second increase coming from accretion from the SRS acquisition. The bulk of the guidance increase this quarter came from an increase to the company’s EBITDA margin guidance.

The company still expects its EBITDA margin to decline this year, but not by as much as it had previously projected. Management now expects a 2014 EBITDA margin of 41.0%, up from its previous guidance of 40.1%, but still below 42.9% in fiscal 2013. Management attributed the improved outlook for profit margins to improvement in SRS’s margin since the merger closed just 90 days ago, improved waste reduction in acquired companies, and leverage of fixed expenses from the improved pace of revenue growth.