Higher One Holdings, Inc. - FORM 8-K - EX-99.2 - POWERPOINT SLIDES, HIGHER ONE HOLDINGS, INC. Q2 '10 EARNINGS RESULTS

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Higher One Holdings, Inc.

Q2’10 Earnings Results

August 11 , 2010

Exhibit 99.2

Forward-Looking Statements

This presentation includes forward-looking statements, as defined by the Securities and Exchange

Commission. Management’s projections and expectations are subject to a number of risks and

uncertainties that could cause actual performance to differ materially from those predicted or implied.

These statements speak only as of the date they are made, and the company does not intend to update or

otherwise revise the forward-looking information to reflect actual results of operations, changes in

financial condition, changes in estimates, expectations or assumptions, changes in general economic or

industry conditions or other circumstances arising and/or existing since the preparation of this

presentation or to reflect the occurrence of any unanticipated events. The forward-looking statements in

this presentation do not include the potential impact of any acquisitions or divestitures that may be

announced and/or completed after the date hereof. Information about the factors that could affect future

performance

can

found

our

recent

SEC

filings,

available

our

website

http://ir.higherone.com/.

This presentation includes certain metrics presented on a non-GAAP basis, including non-GAAP adjusted

EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP adjusted net income, non-GAAP adjusted diluted

EPS, and non-GAAP Free Cash Flow. We believe that these non-GAAP measures, which exclude

amortization of intangibles, stock based compensation, and certain one-time or non-cash impacts to our

results, all net of taxes, provide useful information regarding normalized trends relating to the company’s

financial condition and results of operations. Reconciliations of these non-GAAP measures to their closest

comparable GAAP measure are included in the appendix of this presentation.

Q2’10 Summary

•

Strong performance on both top and bottom line

•

Executing against our priorities

–

Increased OneAccount adoption at existing clients

–

Strong YTD sales for both OneDisburse and CASHNet

Suite of Payment Products

•

Completed our Initial Public Offering in June

–

Raised $37.8M in net proceeds

–

Paid down $10.5 outstanding on line of credit

Q2’10 Summary…

Revenue

*Calculation of organic revenue growth is included in the appendix of this presentation

Revenue

(in $ millions)

12.5

20.5

25.3

37.6

26.9

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Revenue Growth

118%

116%

Y/Y Organic Growth*

87%

80%

Gross Profit Margin

61.9%

68.6%

66.4%

70.1%

64.4%

Q2’10 Summary…

Net Income

(in $ millions)

0.4

4.8

5.0

8.3

1.8

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Net Income Growth

104%

343%

Net Income Margin

3.3%

23.4%

19.6%

22.0%

6.8%

Q2’10 Summary…

Adj. EBITDA

*Calculation of Adj. EBITDA and Adj. EBITDA Margin is included in the appendix of this presentation

Adjusted EBITDA

(in $ millions)

3.0

9.1

10.3

17.9

9.2

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Adj. EBITDA Growth

121%

207%

Adj. EBITDA Margin*

24.0%

44.3%

40.8%

47.7%

34.2%

Q2’10 Summary…

GAAP Diluted EPS

(in $)

0.01

0.09

0.15

0.03

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Diluted EPS Growth

95%

324%

Q2’10 Summary…

Adj. EPS

*Calculation of Adj. EPS and Adj. Net Income Margin is included in the appendix of this presentation

Adjusted Diluted EPS

(in $)

0.03

0.10

0.11

0.19

0.09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Adj. EPS Growth

109%

212%

Adj. Net Income Margin*

12.4%

27.0%

24.4%

28.1%

18.8%

Q2’10 Summary…

Operating Cash Flow

(in $ millions)

(1.2)

6.9

9.2

17.3

(0.1)

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y Operating CF Growth

204%

-89%

Operating CF as a % of Rev

-9.9%

33.8%

36.5%

46.1%

-0.5%

Q2’10 Summary…

Free Cash Flow

*Calculation of Free Cash Flow is included in the appendix of this presentation

Free Cash Flow

(in $ millions)

-1.5

6.4

8.1

16.2

-1.4

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Y/Y FCF Growth

199%

-4%

FCF Yield

-11.8%

31.4%

32.0%

43.1%

-5.3%

CapEx as % of Rev

1.9%

2.5%

4.6%

3.0%

4.8%

Q2’10 Sales Update

*SSE stands for Signed Student Enrollment, and is the total student enrollment (according to the most current IPEDs data) at all

schools

that have signed contracts for either our OneDisburse or at least one of our CASHNet Payment Suite products.

OneDisburse SSE*

CASHNet Suite SSE*

2,094

2,213

2,331

2,663

2,833

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

1,650

1,765

1,949

2,202

2,315

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

+35%

+40%

Q2’10 OneAccount Growth

OneAccount Growth

678

1,235

314

243

Q2'09 OneAccounts

Change in OneAccounts

at schools launched

before 6/30/09

New OneAccounts from

schools launched after

6/30/09

Q2'10 OneAccounts

+82%

Q2’10 Revenue Breakdown*

*The lighter colors in the graph represent Higher One Payments, Inc. revenue prior to the acquisition, broken down into the different revenue buckets. Year-over-year growth

rates and revenue by bucket as a % of total revenue are calculated off of the Q2’09 combined Higher One, Inc. and Higher One Payments, Inc. revenue.

As a % of total

revenue*

Account

(in $ thousands)

Payment Trxn

(in $ thousands)

Higher Ed. Institution

(in $ thousands)

Other

(in $ thousands)

11,248

20,923

Q2'09

Q2'10

2,671

2,199

Q2'09

Q2'10

765

2,744

1,308

Q2'09

Q2'10

449

603

161

Q2'09

Q2'10

70%

78%

14%

10%

13%

10%

+86%

+21%

+32%

-1%

Q2’10 Operating Expenses

•

Increased operating leverage from

scale and improved efficiencies

•

Decrease in G&A as a percent of

revenue partially offset by public

company expenses

•

Main driver of PD expense is

employee compensation…

not

ramping headcount as fast as

revenue

•

Absolute dollar value of PD expense

up 38% y/y

•

Making the necessary investments

for the future

•

Excluding stock-based and other

customer acquisition expense, S&M

expense as a percent of revenue

would have been 7.5% in Q2’10

(compared to 11.4% in Q2’09)

•

Additional employee-related expenses

•

Increase in S&M as a percent of

revenue partially offset by efficiency

and scale

G&A

(as a % of rev)

S&M

(as a % of rev)

31.2%

28.9%

Q2'09

Q2'10

4.6%

2.9%

Q2'09

Q2'10

19.8%

20.5%

Q2'09

Q2'10

Q2’10 Cash Flow / Capital Allocation

•

($1.4M) in FCF

•

Net proceeds of $37.8M from IPO

•

Fully paid down remaining

$10.5M balance on Line of Credit

•

Cash outflow of $8.3M in

acquisition payable

*Other includes proceeds from options exercises and tax benefits

from options exercises

Cash Balance/Flows

(in $ millions)

FCF/Other Movements

$10.6

$29.9

($1.4)

$37.8

($10.5)

($8.3)

$1.7

Q2'10

Beginning

Cash

FCF

Net

Proceeds

from IPO

LoC

Repayment

Acquisition

Payable

Other*

Q2'10

Ending Cash

GAAP Guidance Update

FY’10

Q3’10

•

Impacted by stock-based compensation, stock based and other customer

acquisition expense, and amortization of intangibles

•

Stock-based and other customer acquisition expense based on the undergraduate

enrollment at higher education clients acquired relating to the acquisition of

EduCard in 2008 and IDC in 2009 and the market value of shares of ONE at time of

acquisition... difficult to predict both future sales and the share price in the future

Low

High

Low

High

Revenue

$35M

$37M

$131M

$135M

implied y/y growth

71%

80%

73%

79%

GAAP Diluted EPS

$0.00

$0.08

$0.20

$0.32

implied y/y growth

-100%

-11%

-25%

20%

Non-GAAP Guidance Update

*Calculation of Adjusted EPS is included in the appendix of this

presentation

FY’10

Q3’10

•

Continued strength in OneAccount

adoption

•

Full impact of Regulation E begins August 15

•

Higher share count impacting EPS growth in 2H’10

Low

High

Low

High

Revenue

$35M

$37M

$131M

$135M

implied y/y growth

71%

80%

73%

79%

Adj. Diluted EPS

$0.12

$0.13

$0.48

$0.52

implied y/y growth

16%

26%

41%

53%

Summary

•

Strong performance on both top and bottom line

•

Executing against our priorities

–

Increased OneAccount adoption at existing clients

–

Strong YTD sales for both OneDisburse and CASHNet

Suite of Payment Products

•

Completed our Initial Public Offering in June

•

Well positioned heading into back half of the year

Q & A

Appendix

Calculation of Organic Revenue

March 31,

June 30,

2010

Total Revenue Growth

118%

116%

Acquisition Impact

(31%)

(36%)

Total Organic Revenue Growth

87%

80%

Three Months Ended

Calculation of Free Cash Flow

June 30,

Sept 30,

Dec 31,

March 31,

June 30,

(in thousands)

2009

2010

GAAP Operating Cash Flow

(1,233)

6,940

9,249

17,326

(132)

Purchases of Fixed Assets, Net of Disposals

(242)

(512)

(1,158)

(1,128)

(1,287)

Free Cash Flow

(1,475)

6,428

8,091

16,198

(1,419)

Three Months Ended

Calculation of Adjusted EBITDA

June 30,

Sept 30,

Dec 31,

March 31,

June 30,

(in thousands)

2009

2010

GAAP Net Income

413

4,793

4,967

8,264

1,830

Interest income

(1)

(2)

(1)

(2)

Interest expense

120

113

164

229

247

Income tax expense

252

2,596

2,810

5,167

1,183

Depreciation and amortization

684

633

1,082

1,626

1,747

EBITDA

1,468

8,134

9,021

15,285

5,005

Other income

(17)

Stock-based and other customer acquisition expense

1,050

227

489

1,801

3,508

Stock-based compensation expense

329

341

424

849

692

Milestone bonus

150

375

419

Adjusted EBITDA

2,997

9,077

10,336

17,935

9,205

Revenues

12,464

20,503

25,315

37,568

26,941

Net Income Margin

3.3%

23.4%

19.6%

22.0%

6.8%

Adjusted EBITDA Margin

24.0%

44.3%

40.8%

47.7%

34.2%

Three Months Ended

Calculation of Adjusted Diluted EPS

June 30,

Sept 30,

Dec 31,

March 31,

June 30,

(in thousands)

2009

2010

GAAP Net Income

413

4,793

4,967

8,264

1,830

Stock-based and other customer acquisition expense

1,050

227

489

1,801

3,508

Stock-based compensation expense - ISO

140

152

206

437

373

Stock-based compensation expense - NQO

189

218

412

319

Milestone bonus expense

150

375

419

Amortization of intangibles

143

405

767

768

Amortization of finance costs

Total pre-tax adjustments

1,694

1,061

1,774

3,468

5,019

Tax rate

35.9%

38.5%

38.7%

Tax adjustment

558

326

563

1,167

1,796

Adjusted net income

1,549

5,528

6,178

10,565

5,053

Diluted Weighted Average Shares Outstanding

53,344

53,620

53,821

54,872

55,688

Diluted EPS

0.01

0.09

0.15

0.03

Adjusted Diluted EPS

0.03

0.10

0.11

0.19

0.09

Revenues

12,464

20,503

25,315

37,568

26,941

Net Income Margin

3.3%

23.4%

19.6%

22.0%

6.8%

Adjusted Net Income Margin

12.4%

27.0%

24.4%

28.1%

18.8%

Three Months Ended

Reconciliation of GAAP to non-GAAP Guidance

Revenues

$35.0

$37.0

$35.0

$37.0

Diluted EPS

$0.00

$0.08

$0.12

$0.13

September 30, 2010

GAAP

Non-GAAP (a)

Three Months Ending

Revenues

$131.0

$135.0

$131.0

$135.0

Diluted EPS

$0.20

$0.32

$0.48

$0.52

December 31, 2010

GAAP

Non-GAAP (b)

Twelve Months Ending

(a)

Estimated

Non-GAAP

amounts

above

for

the

three

months

ending

September

30,

2010,

reflect

the

estimated

quarterly

adjustments

that

exclude

(i)

the

amortization

intangibles

and

finance

costs

approximately

$500,000,

(ii)

stock-based

compensation

expense

approximately

$550,000,

and

(iii)

stock-based

and

other

customer

acquisition

expense

approximately

$2.0

million

$6.0

million.

(b)

Estimated

Non-GAAP

amounts

above

for

the

twelve

months

ending

December

31,

2010,

reflect

the

estimated

annual

adjustments,

net

tax,

that

exclude

the

amortization

intangibles

and

finance

costs

approximately

$2.0

million,

stock-based

compensation

expense

approximately

$2.5

million,

and

stock-based

and

other

customer

acquisition

expense

approximately

$7.0

million

$12.0

million.

Stock-based

and

other

customer

acquisition

expense

primarily

relates

our

acquisition

EduCard

2008

and

IDC

2009,

connection

with

which

issued

restricted

stock.

calculate

the

stock-based

and

other

customer

acquisition

expense

based

the

undergraduate

enrollment

higher

education

clients

acquired

relating

the

acquisition,

and

the

market

value

our

common

stock

the

time

the

client

acquired.

difficult

predict

with

any

degree

certainty

either

the

number

new

higher

education

clients

will

acquire,

the

timing

future

customer

acquisitions,

the

market

value

our

common

stock

any

time,

resulting

wide

range

expected

expense.

Stock-based

and

other

customer

acquisition

expense

primarily

relates

our

acquisition

EduCard

2008

and

IDC

2009,

connection

with

which

issued

restricted

stock.

calculate

the

stock-based

and

other

customer

acquisition

expense

based

the

undergraduate

enrollment

higher

education

clients

acquired

relating

the

acquisition,

and

the

market

value

our

common

stock

the

time

the

client

acquired.

difficult

predict

with

any

degree

certainty

either

the

number

new

higher

education

clients

will

acquire,

the

timing

future

customer

acquisitions,

the

market

value

our

common

stock

any

time,

resulting

wide

range

expected

expense.

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