Higher One Holdings, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - November 1, 2011

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EX-99.2 - POWERPOINT SLIDES - Higher One Holdings, Inc.ex99_2.htm
8-K - FORM 8-K FOR THIRD QUARTER 2011 PRESS RELEASE - Higher One Holdings, Inc.q3-8k.htm
Exhibit 99.1
 
Higher One Holdings, Inc. Reports Third Quarter 2011 Financial Results
 
·  
Revenue came in at $48.1 million, up 25% year-over-year
·  
Passed two million mark for number of OneAccounts in the third quarter
·  
312,000 increase in OneDisburse SSE in the quarter
 
New Haven, CT, November 1, 2011 – Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today announced financial results for the third quarter of 2011. The company reported revenue of $48.1 million, up 25% from $38.6 million in the third quarter of 2010. The year-over-year revenue growth was primarily attributable to an increase in the number of OneAccounts and an increase in the number of higher education institutions contracted for its services.
 
“I’m pleased to report yet another quarter that falls in line with our expectations, which I view as a testament to our recurring and predictable financials,” stated Dean Hatton, President and CEO of Higher One. “We continue to hear positive feedback from our clients and customers who are pleased with the High Touch Service® we provide administrators through the OneDisburse® and CASHNet® suites, and the value the OneAccount provides for students.”
 
Higher One also reported GAAP net income of $8.5 million, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, stock-based compensation, stock-based and other customer acquisition expense, and amortization of intangible assets, of $11.1 million. GAAP diluted EPS was $0.14 in the quarter, up from $0.11 in the third quarter of 2010. Non-GAAP adjusted diluted EPS was $0.19, up from $0.15 for the same period a year ago. In the third quarter of 2011, non-GAAP adjusted EBITDA was $18.2 million, up 17% from $15.5 million in the same period last year.
 
The number of OneAccounts at the end of the third quarter of 2011 totaled 2.0 million, up 31% from 1.5 million at the end of the third quarter of 2010. Total enrollment at higher education clients that have purchased the OneDisburse service increased to 4.0 million, an increase of approximately 753,000 from 3.2 million at the end of the third quarter of 2010. Total enrollment at higher education clients that have purchased the CASHNet suite of payment products increased to 2.6 million.
 
Operating cash flow in the quarter was $9.4 million. Cash, cash equivalents, and liquid investments totaled $51.3 million as of September 30, 2011. Higher One announced a share repurchase program during the quarter whereby it may repurchase up to $40 million of issued and outstanding shares of common stock.  The company utilized $14.2 million to repurchase approximately 944,000 shares at an average price of $15.10 per share in the quarter.
 
Higher One narrowed the range on its full-year 2011 revenue and GAAP diluted EPS guidance to $182.0 – $186.0 million and $0.51 – $0.58, respectively. Noting that GAAP diluted EPS is subject to material and unpredictable impacts from certain M&A-related customer acquisition expenses, the company updated full-year 2011 non-GAAP adjusted diluted EPS guidance to $0.74 – $0.77. Higher One also issued full-year 2012 guidance of $227.0 – $237.0 million in revenue and $0.80 – $0.90 in GAAP diluted EPS. The company issued non-GAAP diluted EPS guidance of $0.90 – $1.00 for full-year 2012. The company believes that the non-GAAP adjusted diluted EPS measure, which excludes certain expenses including stock-based compensation, stock-based and other customer acquisition expense, and amortization of intangible assets, and the related tax expense, provides a useful view of more predictable and normalized business trends.
 
Quarterly Conference Call Information
 
Higher One will host a conference call at 5 p.m. ET today to discuss third quarter results. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to its nearest comparable GAAP measures can be accessed through Higher One’s investor relations website at http://www.ir.higherone.com/. In addition, an archive of the webcast will be available for 90 days through the same link.
 
 
About Higher One Holdings
 
Higher One Holdings, Inc. (NYSE: ONE) is a leading company focused on helping college business offices manage operations and providing enhanced service to students. Through a full array of services from refunds, payments, electronic billing, payment plans and more, Higher One works closely with colleges and universities to ensure students receive Financial Aid refunds quickly, can pay tuition and bills online, make on-campus and community purchases and learn the basics of financial management.
 
Higher One provides its services to approximately 5.8 million students at distinguished public and private higher education institutions nationwide. More information about Higher One can be found at www.ir.higherone.com.
 
 
1
 
Forward-Looking Statements
 
This press release includes forward-looking statements, as defined by the Securities and Exchange Commission (“SEC”).  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 press release or to reflect the occurrence of any unanticipated events.  The forward-looking statements in this release 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 be found in our recent SEC filings.
 
Use of Non-GAAP Financial Measures
 
This release includes certain metrics presented on a non-GAAP basis, including non-GAAP adjusted EBITDA, non-GAAP adjusted net income, and non-GAAP adjusted EPS.  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 this press release.
 
Contacts
 
Investor Relations:
Ken Goff, 203-776-7776 x4462, kgoff@higherone.com
Media Relations:
Shoba Lemoine, 203-776-7776 x4503, slemoine@higherone.com

 
2
 
 

 
Unaudited Condensed Consolidated Statements of Operations
(In thousands of dollars, except share and per share amounts)
 
   
Three Months
  
   
Ended September 30,
  
   
2010
    
2011
  
Revenue:
            
Account revenue
  
$
28,221
    
$
35,800
  
Payment transaction revenue
    
5,496
      
6,603
  
Higher education institution revenue
    
3,528
      
4,595
  
Other revenue
    
1,321
      
1,142
  
Total revenue
    
38,566
      
48,140
  
Cost of revenue
    
14,390
      
19,630
  
Gross margin
    
24,176
      
28,510
  
Operating expenses:
                
General and administrative
    
8,278
      
9,415
  
Product development
    
762
      
1,158
  
Sales and marketing
    
4,356
      
4,698
  
Total operating expenses
    
13,396
      
15,271
  
Income from operations
    
10,780
      
13,239
  
Interest income
    
10
      
15
  
Interest expense
    
(84
)
    
(66
)
Other income
    
–
      
–
  
Net income before income taxes
    
10,706
      
13,188
  
Income tax expense
    
4,277
      
4,720
  
Net income
  
$
6,429
    
$
8,468
  
  
                
Net income available to common stockholders:
                
Basic 
  
$
6,429
    
$
8,468
  
Participating Securities 
    
–
      
–
  
Diluted 
  
$
6,429
    
$
8,468
  
                 
Weighted average shares outstanding
                
    Basic
    
53,987,601
      
55,470,457
  
    Diluted
    
59,154,446
      
59,789,977
  
                 
Net income available to common stockholders per common share:
                
Basic 
  
$
0.12
    
$
0.15
  
Diluted 
  
$
0.11
    
$
0.14
  




 
3
 

Unaudited Condensed Consolidated Balance Sheets
 (In thousands of dollars, except share and per share amounts)
 
   
December 31,
    
September 30,
  
   
2010
    
2011
  
             
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
34,484
    
$
33,442
  
Investments in marketable securities
    
14,697
      
17,889
  
Accounts receivable
    
2,622
      
5,534
  
Income receivable
    
3,719
      
6,293
  
Deferred tax assets
    
48
      
38
  
Prepaid expenses and other current assets
    
6,981
      
8,291
  
Restricted cash
    
8,250
      
–
  
Total current assets
    
70,801
      
71,487
  
Deferred costs
    
3,782
      
3,398
  
Fixed assets, net
    
9,919
      
37,643
  
Intangible assets, net
    
18,456
      
16,153
  
Goodwill
    
15,830
      
15,830
  
Other assets
    
653
      
1,787
  
Deferred tax assets
    
–
      
1,950
  
Restricted cash
    
–
      
1,075
  
Total assets
  
$
119,441
    
$
149,323
  
                 
Liabilities and Stockholders' Equity
                
Current liabilities:
                
Accounts payable
  
$
3,063
    
$
2,487
  
Accrued expenses
    
11,786
      
22,097
  
Acquisition payable
    
8,250
      
–
  
Deferred revenue
    
7,974
      
10,646
  
Total current liabilities
    
31,073
      
35,230
  
Deferred revenue
    
2,051
      
2,143
  
Deferred tax liabilities
    
2,926
      
–
  
Total liabilities
    
36,050
      
37,373
  
Commitments and contingencies
               
                 
Stockholders' equity:
                
    Common stock, $0.001 par value; 200,000,000 shares authorized; 56,109,234 shares issued and outstanding at December 31, 2010; 57,328,795 shares issued and 56,385,246 shares outstanding at September 30, 2011
    
56
      
57
  
Additional paid-in capital
    
136,760
      
155,298
  
Treasury stock, 943,549 shares at September 30, 2011
    
–
      
(14,244
)
Accumulated deficit, net of 2008 stock tender transaction of $93,933
    
(53,425
)
    
(29,161
)
Total stockholders' equity
    
83,391
      
111,950
  
Total liabilities and stockholders' equity
  
$
119,441
    
$
149,323
  
 
 
 
4
 
 

Unaudited Condensed Consolidated Statements of Cash Flows
 (In thousands of dollars)

 
   
Nine Months Ended
  
   
September 30,
  
   
2010
    
2011
  
Cash flows from operating activities
            
Net income
  
$
16,522
    
$
24,264
  
Adjustments to reconcile net income to net cash  provided by operating activities:
                
Depreciation and amortization
    
5,321
      
5,204
  
Amortization of deferred finance costs
    
153
      
54
  
Non-cash interest expense
    
258
      
–
  
Stock-based customer acquisition expense
    
6,988
      
9,233
  
Stock-based compensation
    
2,184
      
3,049
  
Deferred income taxes
    
(4,024
)
    
(4,866
)
Gain on litigation settlement agreement
    
–
      
(1,500
)
Loss on disposal of fixed assets
    
–
      
343
  
Changes in operating assets and liabilities:
                
Accounts receivable
    
(1,669
)
    
(2,912
)
Income receivable
    
(1,057
)
    
(2,574
)
Deferred costs
    
(1,917
)
    
(645
)
Prepaid expenses and other current assets
    
(822
)
    
(1,310
)
Other assets
    
(109
)
    
(9
)
Accounts payable
    
(115
)
    
(576
)
Accrued expenses
    
1,188
      
816
  
Deferred revenue
    
4,140
      
2,764
  
Net cash provided by operating activities
    
27,041
      
31,335
  
Cash flows from investing activities
                
Purchases of available for sale investment securities
    
(20,818
)
    
(11,192
)
Proceeds from sales and maturities of available for sale investment securities
    
6,080
      
8,000
  
Purchases of fixed assets, net of changes in construction payables of $0 and $9,410, respectively
    
(5,899
)
    
(21,623
)
Payment to escrow agent
    
(8,250
)
    
(1,075
)
Proceeds from escrow agent
    
–
      
1,500
  
Payment of acquisition payable
    
(1,750
)
    
–
  
Net cash used in investing activities
    
(30,637
)
    
(24,390
)
Cash flows from financing activities
                
Tax benefit related to exercise of stock options
    
2,170
      
5,274
  
Proceeds from exercise of stock options
    
817
      
983
  
Repurchase of common stock
    
–
      
(14,244
)
Repayments of line of credit
    
(22,000
)
    
–
  
Proceeds from issuance of common stock, net of issuance costs
    
37,209
      
–
  
Proceeds from line of credit
    
4,000
      
–
  
Repayment of capital lease obligations
    
(7
)
    
–
  
Net cash provided by (used in) financing activities
    
22,189
      
(7,987
)
Net change in cash and cash equivalents
    
18,593
      
(1,042
)
Cash and cash equivalents at beginning of period
    
3,339
      
34,484
  
Cash and cash equivalents at end of period
  
$
21,932
    
$
33,442
  


 
 
5
 
 
Higher One Holdings, Inc.
Unaudited Supplemental Operating Data
(in thousands)
 
 
Three Months Ended
 
Sept 30,
  
Dec 31,
  
March 31,
  
June 30,
  
Sept 30,
 
2010
  
2010
  
2011
  
2011
  
2011
                   
OneDisburse SSE (1)
3,217
  
3,281
  
3,413
  
3,659
  
3,970
y/y growth
45%
  
41%
  
27%
  
31%
  
23%
                   
CASHNet suite SSE (2)
2,450
  
2,460
  
2,506
  
2,550
  
2,576
y/y growth
39%
  
25%
  
14%
  
10%
  
5%
                   
Ending OneAccounts (3)
1,538
  
1,618
  
1,762
  
1,722
  
2,015
y/y growth
66%
  
61%
  
46%
  
39%
  
31%
 
 
 
 
 

 
(1)  
OneDisburse SSE is defined as the number of students enrolled at institutions that have signed contracts to use the OneDisburse service by the end of a given period as of the date the contract is signed (using the most up-to-date IPEDS data at that point in time)
(2)  
CASHNet suite SSE is defined as the number of students enrolled at institutions that have signed contracts to use one or more CASHNet modules by the end of a given period as of the date the contract is signed (using the most up-to-date IPEDS data at that point in time)
(3)  
Ending OneAccounts is defined as the number of open accounts with a non-zero balance at the end of a given period

 
6
 
Higher One Holdings, Inc.
Unaudited Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
(in thousands)
 
   
Three Months Ended
  
   
September 30,
  
   
2010
    
2011
  
   
(unaudited)
  
   
(in thousands)
  
             
Net income
  
$
6,429
    
$
8,468
  
Interest income
    
(10
)
    
(15
)
Interest expense
    
84
      
66
  
Income tax expense
    
4,277
      
4,720
  
Depreciation and amortization
    
1,947
      
1,770
  
EBITDA
    
12,727
      
15,009
  
Stock-based and other customer acquisition expense
    
2,139
      
2,320
  
Stock-based compensation expense
    
643
      
889
  
Other income
    
–
      
–
  
Adjusted EBITDA
  
$
15,509
    
$
18,218
  
                 
Revenues      38,566        48,140  
Net Income Margin      16.7 %      17.6 %
Adjusted EBITDA Margin       40.2 %       37.8 % 
 
 
Unaudited Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Adjusted Diluted EPS
(in thousands, except per share amounts)
   
Three Months Ended
  
   
September 30,
  
   
2010
    
2011
  
   
(unaudited)
(in thousands)
  
             
            Net income
  
$
6,429
    
$
8,468
  
                 
            Stock-based and other customer acquisition expense
    
2,139
      
2,320
  
            Stock-based compensation expense – incentive stock options
    
338
      
480
  
            Stock-based compensation expense – non-qualified stock options
    
305
      
409
  
            Other income
    
–
      
–
  
            Amortization of intangible assets
    
768
      
768
  
            Amortization of finance costs
    
51
      
18
  
            Total pre-tax adjustments
    
3,601
      
3,995
  
            Tax rate
    
38.6
%
    
38.2
%
            Tax adjustment
    
1,259
      
1,343
  
            Adjusted net income
  
$
8,771
    
$
11,120
  
                 
Diluted average weighted shares outstanding
    
        59,154
      
59,790
  
Diluted EPS
   $
0.11
     $
0.14
  
Adjusted Diluted EPS
   $
0.15
     $
0.19
  
                 
Revenues
    
38,566
      
48,140
  
Net Income Margin
    
16.7
%
    
17.6
%
Adjusted Net Income Margin
    
22.7
%
    
23.1
%

 
7
 

Higher One Holdings, Inc.
Business Outlook
 
 
   
Twelve Months Ending
   
December 31, 2011
   
GAAP
  
Non-GAAP (a)
Revenues (in millions)
  
$182.0
-
$186.0
  
$182.0
-
$186.0
  
Diluted EPS
  
$0.51
-
$0.58
  
$0.74
-
$0.77
  
                   
(a) Estimated Non-GAAP amounts above for the twelve months ending December 31, 2011 reflect the estimated quarterly adjustments that exclude (i) the amortization of intangibles and finance costs of approximately $3.0 million, (ii) stock-based compensation expense of approximately $4.0 million, (iii) stock-based and other customer acquisition expense of approximately $11.0 million to $17.5 million, and (iv) the gain related to the settlement of litigation with the former stockholders of Informed Decisions Corporation of approximately $1.5 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.
                   
   
Twelve Months Ending
   
December 31, 2012
   
GAAP
  
Non-GAAP (b)
Revenues (in millions)
  
$227.0
-
$237.0
  
$227.0
-
$237.0
  
Diluted EPS
  
$0.80
-
$0.90
  
$0.90
-
$1.00
  
                   
(b) Estimated Non-GAAP amounts above for the twelve months ending December 31, 2012 reflect the estimated annual adjustments, that exclude (i) the amortization of intangibles and finance costs of approximately $3.0 million, and (ii) stock-based compensation expense of approximately $5.0 million.



 
 
8
 

Higher One Holdings, Inc. Reports