Higher One Holdings, Inc. - FORM 8-K - EX-99.2 - POWERPOINT SLIDES, HIGHER ONE HOLDINGS, INC. Q4 '10 EARNINGS RESULTS

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8-K - FORM 8-K - Higher One Holdings, Inc.	d8k.htm
EX-99.1 - PRESS RELEASE OF HIGHER ONE HOLDINGS, INC. - Higher One Holdings, Inc.	dex991.htm

Higher One Holdings, Inc.

Q4’10 Earnings Results

February 15, 2011

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 that 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 non-recurring 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.

Q4’10 Highlights

•

Strong performance on both top and bottom line

•

Creating value for customers:

o

Improve efficiency, lower costs in higher education

o

Increase choices available to students

o

Financial literacy, enhanced services for our

customers

•

Executing against our strategic priorities:

o

Strong sales year for both OneDisburse

and CASHNet

o

Growth in the number of OneAccounts

trending well

Q4’10 Summary…

Revenue

Note: We have revised revenue in previous quarters in accordance

with a change in accounting policies. More information on the

accounting change will be available in our related form 10-K.

†Includes $1.7 million related to an accounting change (corresponding increase of $1.7 million in cost of goods sold)

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

Revenue

(in $ millions)

17.7

12.8

21.1

26.1

38.9

27.8

38.6

39.8

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Revenue Growth

120%

118%

83%

53%

Y/Y Organic Growth*

90%

83%

46%

41%

Gross Profit Margin

70.7%

60.5%

66.7%

64.4%

67.7%

62.5%

62.7%

63.5%

†

Q4’10 Summary…

Net Income

4.0

0.4

4.8

5.0

8.3

1.8

6.4

8.5

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Net Income Growth

104%

343%

34%

72%

Net Income Margin

22.9%

3.2%

22.7%

19.0%

21.3%

6.6%

16.7%

21.5%

Net Income

(in $ millions)

Q4’10 Summary…

Adj. EBITDA

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

Adj. EBITDA

(in $ millions)

8.1

3.0

9.1

10.3

17.9

9.2

15.5

16.8

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Adj. EBITDA Growth

121%

207%

71%

63%

Adj. EBITDA Margin*

45.9%

23.5%

43.0%

39.6%

46.1%

33.2%

40.2%

42.3%

Q4’10 Summary…

GAAP Diluted EPS

(in $)

0.08

0.01

0.09

0.15

0.03

0.11

0.14

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Diluted EPS Growth

95%

324%

22%

56%

Q4’10 Summary…

Adj. EPS

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

Adjusted Diluted EPS

(in $)

0.09

0.03

0.10

0.11

0.19

0.09

0.15

0.17

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Adj. EPS Growth

109%

212%

44%

47%

Adj. Net Income Margin*

27.3%

12.1%

26.2%

23.7%

27.2%

18.2%

22.7%

25.2%

Q4’10 Summary…

Operating Cash Flow

(in $ millions)

5.7

(1.2)

6.9

9.2

17.3

(0.1)

9.8

13.0

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y Operating CF Growth

204%

-89%

42%

41%

Operating CF as a % of Rev

32.2%

-9.7%

32.9%

35.5%

44.6%

-0.5%

25.5%

32.7%

Q4’10 Summary…

Free Cash Flow

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

Free Cash Flow

(in $ millions)

5.4

-1.5

6.4

8.1

16.2

-1.4

6.4

11.9

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

Y/Y FCF Growth

199%

-4%

-1%

47%

FCF Yield

30.7%

-11.6%

30.5%

31.0%

41.7%

-5.1%

16.5%

29.8%

CapEx as % of Rev

1.6%

1.9%

2.4%

4.4%

2.9%

4.6%

9.0%

2.9%

Q4’10 Sales Update

Note: We have updated the definition of SSE and revised prior quarters to reflect this update

*SSE stands for Signed School Enrollment, and is recorded each quarter as the total student enrollment at all schools that are contracted at

quarter-end for either our OneDisburse

or at least one of our CASHNet

Payment Suite products, as of the date the contract is signed (using the

most up-to-date IPEDS data at that point in time).

OneDisburse

SSE*

CASHNet

Suite SSE*

+41%

+25%

(in thousands)

2,320

2,684

2,795

3,217

3,281

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

1,971

2,193

2,315

2,450

2,460

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10

1,004

1,618

291

323

Q4'09 OneAccounts

Change in OneAccounts

at schools launched

before 12/31/09

New OneAccounts from

schools launched after

12/31/09

Q4'10 OneAccounts

Q4’10 OneAccount

Growth

OneAccount

Growth

+61%

(in thousands)

21,999

31,821

Q4'09

Q4'10

1,655

3,731

1,407

Q4'09

Q4'10

1,917

3,594

902

Q4'09

Q4'10

505

637

141

Q4'09

Q4'10

Q4’10 Revenue Breakdown*

*The lighter colors in the graph represent Higher One Payments, Inc. revenue prior to the acquisition on November 20, 2009, 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 Q4’09 combined Higher One, Inc. and pre-acquisition Higher One

Payments, Inc. revenue. Account Revenue has been revised to reflect the accounting change in Q4’10.

As a % of total

revenue*

Account

(in $ thousands)

Payment Trxn

(in $ thousands)

Higher Ed. Institution

(in $ thousands)

Other

(in $ thousands)

77%

80%

11%

10%

+45%

+22%

+28%

-1%

23.7%

21.4%

Q4'09

Q4'10

2.4%

2.0%

Q4'09

Q4'10

6.2%

4.6%

Q4'09

Q4'10

Q4’10 Operating Expenses

•

Continue to gain leverage based

on scale

•

Employee compensation cost

increase was relatively low, in part

based on lapping the Q4’09 one-

time milestone bonus

•

Main driver of PD expense is

employee compensation…

not

ramping headcount as fast as

revenue

•

Absolute dollar value of PD expense

up 28% 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 4.6% in Q4’10

(compared to 6.2% in Q4’09)

•

Most of the absolute dollar increase in

spend is based on CASHNet

people…

not scaling headcount as fast as

revenue

G&A

(as a % of rev)

Adj. S&M*

(as a % of rev)

8.0%

6.1%

Stock-based and

other M&A

expense

*The Adjusted Sales and Marketing Expense graph shows both total Sales & Marketing as a percent of revenue as well as Sales & Marketing as a percent of

revenue excluding stock-based and other acquisition expense, which is related to the vesting of certain shares issued in connection with the acquisition of

EduCard. Stock-based and other acquisition expense is recognized in the quarter as a function of sales and average share price.

$21.9

$34.5

$14.7

$13.0

($1.2)

$0.3

$14.7

Q3'10 Beginning

Cash, Cash

Equivalents, and

Investments

Operating Cash

Flow

CapEx

Other*

Q4'10 Ending

Cash, Cash

Equivalents, and

Investments

Q4’10 Cash Flow / Capital Allocation

•

$11.9M in FCF

•

$13.0M in operating cash flow

•

$1.2M of CapEx

•

Fully liquid assets total $49.2M

•

Additional $50M available

under new credit facility**

*Other primarily includes proceeds and tax benefits from options

exercises

**Subject to certain covenants, outlined in our SEC filings

Cash & Investment Balance/Flows

(in millions)

FCF/Other Movements

$36.7

FCF

Cash and cash equivalents

Investments in available for sale securities

$49.2

Building Update

•

Rationale:

o

Cost-savings: expect a substantial amount federal, state, and local government

subsidies*

o

Employees: help with hiring, retention, morale

o

Flexibility: potential for further expansion, bringing certain functions in-house

•

Financial impact:

o

~$47M expenditure

•

$2.5M already spent

•

Remainder to be spent as CapEx

on a relatively consistent basis through Q1’12

o

~$15M in expected rebates, subsidies, and credits* through Q1’12

o

~$21M in additional expected rebates, subsidies, and credits* on

a relatively

consistent basis from FY’13 –

FY’19

o

No expected P&L impact (all reflected on Balance Sheet)

•

Rebates and subsidies will be treated as cash inflows from investing/financing activities

•

FCF

calculated

Operating

Cash

Flow

less

net

PP&E

(net

rebates,

subsidies,

and

credits*)

*More information on rebates, subsidies, and credits will be available in our related Form 10-K

GAAP Guidance Update

FY’11

Q1’11

•

Most of the revenue increase based on accounting change

•

Impact from Reg E changes through Q3

•

Higher share count impacting EPS growth

Low

High

Low

High

Revenue

$51.0M

$53.0M

$180M

$188M

GAAP Diluted EPS

$0.14

$0.20

$0.39

$0.56

Non-GAAP Guidance Update

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

presentation

FY’11

Q1’11

•

Most of the revenue increase based on accounting change

•

Impact from Reg

E changes through Q3

•

Higher share count impacting EPS growth

Low

High

Low

High

Revenue

$51.0M

$53.0M

$180M

$188M

implied y/y

growth

31%

36%

24%

30%

Adj. Diluted EPS*

$0.23

$0.25

$0.68

$0.74

implied y/y

growth

19%

30%

13%

23%

Q4’10 Summary

•

Strong performance on both top and bottom line

•

Creating value for customers:

o

Improve efficiency, lower costs in higher education

o

Increase choices available to students

o

Financial literacy, enhanced services for our

customers

•

2011 strategy remains the same:

o

Sign more schools

o

Increase adoption at existing schools

Q & A

Appendix

Calculation of Organic Revenue*

March 31,

June 30,

Sept 30,

Dec 31,

2010

Total Revenue Growth

120%

118%

83%

53%

Acquisition Impact

(30%)

(35%)

(37%)

(12%)

Total Organic Revenue Growth

90%

83%

46%

41%

Three Months Ended

*Organic revenue calculation excludes the entire revenue impact from the current and prior year quarter for all acquisitions made within 15

months of a given quarter’s end

Calculation of Free Cash Flow

March 31,

June 30,

Sept 30,

Dec 31,

(in thousands)

2009

GAAP Operating Cash Flow

5,698

(1,233)

6,942

9,249

Purchases of Fixed Assets, Net of Disposals

(274)

(242)

(514)

(1,158)

Free Cash Flow

5,424

(1,475)

6,428

8,091

March 31,

June 30,

Sept 30,

Dec 31,

2010

GAAP Operating Cash Flow

17,326

(132)

9,847

13,015

Purchases of Fixed Assets, Net of Disposals

(1,128)

(1,287)

(3,484)

(1,160)

Free Cash Flow

16,198

(1,419)

6,363

11,855

Three Months Ended

Calculation of Adjusted EBITDA

March 31,

June 30,

Sept 30,

Dec 31,

(in thousands)

2009

GAAP Net Income

4,046

413

4,793

4,967

Interest income

(1)

(2)

Interest expense

161

120

113

164

Income tax expense

2,267

252

2,596

2,810

Depreciation and amortization

570

684

633

1,082

EBITDA

7,044

1,468

8,134

9,021

Other income

(17)

Stock-based and other customer acquisition expense

619

1,050

227

490

Stock-based compensation expense

293

329

341

424

Milestone bonus

150

375

419

Adjusted EBITDA

8,106

2,997

9,077

10,336

Revenues

17,670

12,758

21,102

26,076

Net Income Margin

22.9%

3.2%

22.7%

19.0%

Adjusted EBITDA Margin

45.9%

23.5%

43.0%

39.6%

March 31,

June 30,

Sept 30,

Dec 31,

2010

GAAP Net Income

8,264

1,830

6,429

8,536

Interest income

(1)

(2)

(10)

(16)

Interest expense

229

247

169

Income tax expense

5,167

1,183

4,277

4,861

Depreciation and amortization

1,626

1,747

1,947

1,972

EBITDA

15,285

5,005

12,727

15,522

Other income

Stock-based and other customer acquisition expense

1,801

3,508

2,139

565

Stock-based compensation expense

849

692

643

729

Milestone bonus

Adjusted EBITDA

17,935

9,205

15,509

16,816

Revenues

38,870

27,750

38,566

39,783

Net Income Margin

21.3%

6.6%

16.7%

21.5%

Adjusted EBITDA Margin

46.1%

33.2%

40.2%

42.3%

Three Months Ended

Calculation of Adjusted Diluted EPS

March 31,

June 30,

Sept 30,

Dec 31,

(in thousands)

2009

GAAP Net Income

4,046

413

4,793

4,967

Stock-based and other customer acquisition expense

619

1,050

227

490

Stock-based

compensation

expense

ISO

112

140

152

206

Stock-based

compensation

expense

NQO

181

189

218

Milestone bonus expense

150

375

419

Amortization of intangibles

143

405

Amortization of finance costs

Total pre-tax adjustments

1,160

1,694

1,061

1,774

Tax rate

35.8%

35.9%

Tax adjustment

376

558

326

563

Adjusted net income

4,830

1,549

5,528

6,178

Diluted Weighted Average Shares Outstanding

52,340

53,344

53,620

53,821

Diluted EPS

0.08

0.01

0.09

Adjusted Diluted EPS

0.09

0.03

0.10

0.11

Revenues

17,670

12,758

21,102

26,076

Net Income Margin

22.9%

3.2%

22.7%

19.0%

Adjusted Net Income Margin

27.3%

12.1%

26.2%

23.7%

March 31,

June 30,

Sept 30,

Dec 31,

2010

GAAP Net Income

8,264

1,830

6,429

8,536

Stock-based and other customer acquisition expense

1,801

3,508

2,139

565

Stock-based

compensation

expense

ISO

437

373

338

378

Stock-based

compensation

expense

NQO

412

319

305

351

Milestone bonus expense

Amortization of intangibles

767

768

767

Amortization of finance costs

Total pre-tax adjustments

3,468

5,019

3,601

2,112

Tax rate

38.5%

38.7%

38.6%

35.7%

Tax adjustment

1,167

1,796

1,259

619

Adjusted net income

10,565

5,053

8,771

10,029

Diluted Weighted Average Shares Outstanding

54,872

55,688

59,154

59,361

Diluted EPS

0.15

0.03

0.11

0.14

Adjusted Diluted EPS

0.19

0.09

0.15

0.17

Revenues

38,870

27,750

38,566

39,783

Net Income Margin

21.3%

6.6%

16.7%

21.5%

Adjusted Net Income Margin

27.2%

18.2%

22.7%

25.2%

Three Months Ended

Reconciliation of GAAP to non-GAAP Guidance

Revenues (in millions)

$51.0

$53.0

$51.0

$53.0

Diluted EPS

$0.14

$0.20

$0.23

$0.25

March 31, 2011

GAAP

Non-GAAP

(a)

Three Months Ending

Revenues (in millions)

$180.0

$188.0

$180.0

$188.0

Diluted EPS

$0.39

$0.56

$0.68

$0.74

December 31, 2011

GAAP

Non-GAAP

(b)

Twelve Months Ending

(a) Estimated Non- GAAP amounts above for the three months ending March 31, 2010 reflect

the estimated quarterly adjustments that exclude (i) expenses related to the onetime ATM

fleet upgrade of approximately $100,000, (ii) the amortization of intangibles and finance costs

of approximately $800,000, (iii) stock- based compensation expense of approximately $1.0

million, and (iv) stock- based and other customer acquisition expense of approximately $2.0

million to $8.0 million.

Stock- based and other customer acquisition expense primarily relates to our acquisition of

EduCard in 2008, in connection with which we issued restricted stock, and IDC in 2009. We

calculate the stock- based and other customer acquisition expense based on the

undergraduate enrollment at higher education clients acquired relating to the acquisition,

and the market value of our common stock at the time the client is acquired. It is difficult to

predict with any degree of certainty either the number of new higher education clients we

will acquire, the timing of future customer acquisitions, or the market value of our common

stock at any time, resulting in a wide range of expected expense.

(b) Estimated Non- GAAP amounts above for the twelve months ending December 31,

2011 reflect the estimated annual adjustments, that exclude the amortization of (i)

expenses related to the one-time ATM fleet upgrade of approximately $1.0 million, (ii)

intangibles and finance costs of approximately $3.0 million, (iii) stock- based

compensation expense of approximately $4.0 million, and (iv) stock- based and other

customer acquisition expense of approximately $8.0 million to $22.0 million.

Stock- based and other customer acquisition expense primarily relates to our acquisition

of EduCard in 2008, in connection with which we issued restricted stock, and IDC in 2009.

We calculate the stock- based and other customer acquisition expense based on the

undergraduate enrollment at higher education clients acquired relating to the

acquisition, and the market value of our common stock at the time the client is acquired.

It is difficult to predict with any degree of certainty either the number of new higher

education clients we will acquire, the timing of future customer acquisitions, or the

market value of our common stock at any time, resulting in a wide range of expected

expense.

Higher One Holdings, Inc. - FORM 8-K - EX-99.2 - POWERPOINT SLIDES, HIGHER ONE HOLDINGS, INC. Q4 '10 EARNINGS RESULTS - February 15, 2011

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