Higher One Holdings, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - February 7, 2012

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Exhibit 99.1
 
Higher One Holdings, Inc. Reports Fourth Quarter and Full Year 2011 Financial Results
 
·  
Best sales year ever for OneDisburse, with Signed School Enrollment increase of 888,000
 
·  
Best ever fourth quarter for new sales with a nearly 200,000 increase in SSE
 
·  
2.0 million OneAccounts at the end of the fourth quarter, up 23% from a year ago
 
New Haven, CT, February 7, 2012 – Technology and payments services provider Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today announced financial results for the fourth quarter and full year 2011.  In the fourth quarter, revenue was impacted by a voluntary customer credit plan in which Higher One provided for $4.7 million in credits or payments to certain customers in relation to the potential $0 to $10 million contingency disclosed in the company’s third quarter Form 10-Q.  Revenue and revenue before credits to customers for the fourth quarter and full year 2011 were as follows:
 
($ in thousands)
FY'10
FY'11
Growth
Revenue
144,969
176,320
22%
Revenue (before customer credit plan)
144,969
181,048
25%
       
($ in thousands)
Q4'10
Q4'11
Growth
Revenue
39,783
41,730
5%
Revenue (before customer credit plan)
39,783
46,458
17%
 
Revenue growth for both the fourth quarter and the full year 2011 was primarily attributable to an increase in the number of students choosing to use the OneAccount and growth in adoption of the CASHNet payment suite modules.
 
“I am very pleased with our performance throughout 2011 and particularly pleased that we exited the year in such a strong position,” said Dean Hatton, President and CEO of Higher One.  “We had an excellent year for sales and delivered earnings at the top end of our guidance range.  We also laid the groundwork to implement a multi-bank strategy and took other steps that greatly improve the company’s flexibility going forward.  2012 should be another year of strong growth for Higher One.”
 
Higher One also reported fourth quarter GAAP net income of $7.6 million, and non-GAAP adjusted net income, which excludes stock-based compensation, stock-based and other customer acquisition expense, amortization of intangible assets, and certain one-time costs such as our customer credit plan, of $12.4 million.  GAAP diluted EPS was $0.13 in the quarter.  Non-GAAP adjusted diluted EPS was $0.21 in the fourth quarter, up from $0.17 a year ago.  In the fourth quarter of 2011, non-GAAP adjusted EBITDA was $19.8 million, up 18% from $16.8 million in the same period last year.
 
Full year 2011 GAAP net income was at $31.9 million, and non-GAAP adjusted net income, which excludes stock-based compensation, stock-based and other customer acquisition expense, amortization of intangible assets, and certain one-time costs such as our customer credit plan, was $45.0 million.  GAAP diluted EPS was $0.54 for 2011, up from $0.44 in 2010.  2011 non-GAAP adjusted diluted EPS was $0.76, up from $0.60 a year ago.  For full year 2011, non-GAAP adjusted EBITDA was $74.0 million, up 24% from $59.5 million in 2010.
 
The number of OneAccounts at the end of 2011 totaled 2.0 million, up 23% from approximately 1.6 million at the end of 2010.  Total enrollment at higher education clients who have purchased the OneDisburse product increased to 4.2 million, an increase of more than 888,000, up 27% from 3.3 million at the end of 2010.  2011 was the best ever year for new OneDisburse sales.  Total enrollment at higher education clients who have purchased the CASHNet suite of payment products increased to 2.6 million, up more than 157,000 from 2.5 million at the end of the prior year.
 
Operating cash flow in the quarter was $13.5 million, up 3% from $13.0 million in the fourth quarter of 2010.  The company generated $44.8 million in operating cash flow for the full year 2011, up 12% from $40.1 million in 2010.  Cash, cash equivalents, and liquid investments totaled $54.8 million at December 31, 2011.
 
Higher One issued revenue guidance for the first quarter of 2012 of $58.0 – $62.0 million.  The company updated full year 2012 revenue guidance to $215.0 – $230.0 million.  The company issued GAAP diluted EPS guidance for the first quarter of 2012 of $0.24 – $0.28, and maintained GAAP diluted EPS guidance for the full year 2012 of $0.80 – $0.90, respectively.  The company issued first quarter 2012 non-GAAP adjusted diluted EPS guidance of $0.27 – $0.30, and maintained full year 2012 non-GAAP adjusted diluted EPS guidance of $0.90 – $1.00, respectively. The company believes that the non-GAAP adjusted diluted EPS measure, which excludes certain one-time costs, stock-based compensation, and amortization of intangible assets, all adjusted for taxes, 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. EST today to discuss fourth 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 their nearest comparable GAAP measures can be accessed through Higher One’s investor relations website at http://ir.higherone.com/.  In addition, an archive of the webcast will be available for 90 days through the same link.
 
About Higher One Holdings, Inc.
 
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 and payment processing, 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 6.0 million students at distinguished public and private higher education institutions nationwide. More information about Higher One can be found at www.ir.higherone.com.
 
Forward-Looking Statements
 
This press release 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 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 available on our website at http://ir.higherone.com.
 
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
 

 
 
 

 
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(In thousands of dollars, except share and per share amounts)
 
 
Three Months Ended
  
Twelve Months Ended
 
December 31,
  
December 31,
 
2010
    
2011
  
2010
    
2011
Revenue:
                          
Account revenue
$
          31,821
    
$
          37,089
  
$
       113,516
    
$
       142,589
Payment transaction revenue
  
             3,731
      
             4,745
    
          15,742
      
          18,733
Higher education institution revenue
  
             3,594
      
             3,918
    
          12,543
      
          16,614
Other revenue
  
                  637
      
                  706
    
             3,168
      
             3,112
Revenue (before customer credit plan)
  
          39,783
      
          46,458
    
       144,969
      
       181,048
Less customer credit plan
  
                       -
      
           (4,728)
    
                       -
      
           (4,728)
Revenue
  
          39,783
      
          41,730
    
       144,969
      
       176,320
Cost of revenue
  
          14,517
      
          17,074
    
          51,845
      
          67,560
Gross margin
  
          25,266
      
          24,656
    
          93,124
      
       108,760
Operating expenses:
                          
General and administrative
  
             8,520
      
             9,513
    
          32,381
      
          37,715
Product development
  
                  787
      
                  427
    
             3,311
      
             3,265
Sales and marketing
  
             2,409
      
             3,402
    
          16,185
      
          20,265
Total operating expenses
  
          11,716
      
          13,342
    
          51,877
      
          61,245
Income from operations
  
          13,550
      
          11,314
    
          41,247
      
          47,515
Interest income
  
                     16
      
                     17
    
                     29
      
                     68
Interest expense
  
                (169)
      
                   (70)
    
                (729)
      
                (266)
Other income
  
                       -
      
                       -
    
 –
      
             1,500
Net income before income taxes
  
          13,397
      
          11,261
    
          40,547
      
          48,817
Income tax expense
  
             4,860
      
             3,632
    
          15,488
      
          16,924
Net income and net income attributable to common stockholders
$
             8,537
    
$
             7,629
  
$
          25,059
    
$
          31,893
  
                          
Net income available to common stockholders:
                          
Basic 
$
             8,537
    
$
             7,629
  
$
          16,149
    
$
          31,893
Participating Securities 
  
                       -
      
                       -
    
             8,910
      
 –
Diluted 
$
             8,537
    
$
             7,629
  
$
          25,059
    
$
          31,893
                           
Weighted average shares outstanding
                          
    Basic
  
54,240,386
      
55,060,419
    
33,395,310
      
55,210,972
    Diluted
  
59,360,619
      
59,134,013
    
57,302,843
      
59,553,678
                           
Net income available to common stockholders per common share:
                        
Basic 
$
                0.16
    
$
                0.14
    
                0.48
    
$
                0.58
Diluted 
$
                0.14
    
$
                0.13
    
                0.44
    
$
                0.54

 
 
 
 
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands of dollars, except share and per share amounts)
 
   
December 31,
    
December 31
   
2010
    
2011
Assets
              
Current assets:
              
Cash and cash equivalents
  
$
               34,484
    
$
                  39,085
Investments in marketable securities and certificate of deposit
    
                14,697
      
                   15,743
Accounts receivable
    
                 2,622
      
                    3,672
Income receivable
    
                  3,719
      
                     5,961
Deferred tax assets
    
                       48
      
                          33
Prepaid expenses and other current assets
    
                  6,981
      
                   19,445
Restricted cash
    
                 8,250
      
                            -
Total current assets
    
                70,801
      
                  83,939
Deferred costs
    
                 3,782
      
                    3,776
Fixed assets, net
    
                  9,919
      
                  46,088
Intangible assets, net
    
                18,456
      
                   16,787
Goodwill
    
                15,830
      
                   15,830
Loan receivable related to New Markets Tax Credit financing
    
                         -
      
                    7,633
Other assets
    
                     653
      
                         712
Restricted cash
    
                         -
      
                     1,250
Total assets
  
$
               119,441
    
$
                 176,015
               
Liabilities and Equity
              
Current liabilities:
              
Accounts payable
  
$
                 3,063
    
$
                      3,118
Accrued expenses
    
                 11,786
      
                   26,414
Acquisition payable
    
                 8,250
      
                            -
Deferred revenue
    
                 7,974
      
                    9,690
Total current liabilities
    
                31,073
      
                  39,222
Deferred revenue
    
                  2,051
      
                     2,173
Loan payable related to New Markets Tax Credit financing
    
                         -
      
                    7,633
Deferred tax liabilities
    
                 2,926
      
                     1,233
Total liabilities
    
               36,050
      
                   50,261
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; 57,675,806 shares issued and 56,615,683 shares outstanding at December 31, 2011
                       56
      
                          58
Additional paid-in capital
    
             136,760
      
                 161,268
Treasury stock 1,060,123 shares at December 31, 2011
    
                         -
      
                 (16,208)
Accumulated deficit, net of 2008 stock tender transaction of $93,933
    
             (53,425)
      
                 (21,532)
Total stockholders' equity
    
                83,391
      
                123,586
Noncontrolling interest
    
                         -
      
                     2,168
Total equity
    
                83,391
      
                125,754
Total liabilities and equity
  
$
               119,441
    
$
                 176,015

 
 
 

Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands of dollars)
 
 
Twelve Months Ended
 
December 31,
 
2010
    
2011
Cash flows from operating activities
            
Net income and net income attributable to common stockholders
$
    25,059
    
$
     31,893
Adjustments to reconcile net income to net cash  provided by operating activities:
            
Depreciation and amortization
  
      7,292
      
       7,021
Amortization of deferred finance costs
  
          204
      
            76
Non-cash interest expense
  
          360
      
              -
Stock-based customer acquisition expense
  
      7,274
      
     10,493
Stock-based compensation
  
       2,913
      
      3,868
Deferred income taxes
  
     (3,166)
      
     (1,678)
Gain on litigation settlement agreement
  
              -
      
     (1,500)
Loss on disposal of fixed assets
  
            24
      
          428
Changes in operating assets and liabilities:
            
Accounts receivable
  
        (263)
      
     (1,050)
Income receivable
  
        (382)
      
    (2,242)
Deferred costs
  
        (988)
      
        (992)
Prepaid expenses and other current assets
  
    (4,480)
      
    (6,464)
Other assets
  
         (125)
      
           109
Accounts payable
  
          263
      
            55
Accrued expenses
  
      2,732
      
      2,933
Deferred revenue
  
      3,339
      
       1,838
Net cash provided by operating activities
  
    40,056
      
    44,788
Cash flows from investing activities
            
Purchases of available for sale investment securities
  
  (20,777)
      
     (14,101)
Proceeds from sales and maturities of available for sale investment securities
  
      6,080
      
     13,055
Purchases of fixed assets, net of changes in construction payables of $347 and
       $11,610 respectively
  
    (7,059)
      
  (40,426)
Additions to capitalized software
  
              -
      
     (1,602)
Proceeds from development related subsidies
  
              -
      
       7,125
Investment related to New Markets Tax Credit financing
  
              -
      
    (7,633)
Payment to escrow agent
  
    (8,250)
      
     (1,250)
Proceeds from escrow agent
  
              -
      
       1,500
Payment of acquisition payable
  
     (1,750)
      
              -
Net cash used in investing activities
  
   (31,756)
      
  (43,332)
Cash flows from financing activities
            
Tax benefit related to stock options
  
        2,811
      
      8,793
Proceeds from exercise of stock options
  
        1,019
      
        1,214
Repurchase of common stock
  
              -
      
   (16,208)
Proceeds related to New Markets Tax Credit financing
  
              -
      
      7,633
Noncontrolling interest contribution
  
              -
      
       2,168
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
      
              -
Payment of deferred financing costs
  
         (187)
      
        (455)
Repayment of capital lease obligations
  
             (7)
      
              -
Net cash provided by financing activities
  
    22,845
      
       3,145
Net change in cash and cash equivalents
  
      31,145
      
       4,601
Cash and cash equivalents at beginning of period
  
      3,339
      
    34,484
Cash and cash equivalents at end of period
$
    34,484
    
$
    39,085

 
 
 
 
Higher One Holdings, Inc.
Unaudited Supplemental Operating Data
(in thousands)
 
 
Three Months Ended
 
Dec 31,
  
March 31,
  
June 30,
  
Sept 30,
  
Dec 31,
 
2010
  
2011
  
2011
  
2011
  
2011
                   
OneDisburse SSE (1)
3,281
  
3,413
  
3,659
  
3,970
  
4,169
y/y growth
41%
  
27%
  
31%
  
23%
  
27%
                   
CASHNet suite SSE (2)
        2,460
  
2,506
  
2,550
  
2,576
  
2,617
y/y growth
25%
  
14%
  
10%
  
5%
  
6%
                   
Ending OneAccounts (3)
        1,618
  
1,762
  
1,722
  
2,015
  
1,997
y/y growth
61%
  
46%
  
39%
  
31%
  
23%






 




(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
 
 
 
 
 
 
Higher One Holdings, Inc.
Unaudited Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
(in thousands)
 
   
Three Months Ended
  
Year Ended
   
December 31,
  
December 31,
   
2010
    
2011
  
2010
    
2011
   
(unaudited)
  
(unaudited)
                             
Net income
  
$
8,537
    
$
7,629
  
$
25,059
    
$
31,893
Interest income
    
(16)
      
(17)
    
(29)
      
(68)
Interest expense
    
169
      
70
    
729
      
266
Income tax expense
    
4,860
      
3,632
    
15,488
      
16,924
Depreciation and amortization
    
1,971
      
1,817
    
7,292
      
7,021
EBITDA
    
15,521
      
13,131
    
48,539
      
56,036
Stock-based and other customer acquisition expense
    
565
      
1,120
    
8,013
      
10,861
Stock-based compensation expense
    
729
      
819
    
2,913
      
3,868
Customer credit plan
    
                 -
      
4,728
    
                 -
      
4,728
Other income
    
                 -
      
                 -
    
                 -
      
(1,500)
Adjusted EBITDA
  
$
16,815
    
$
19,798
  
$
59,465
    
$
73,993
                             
Revenues (before customer credit plan)
  
$
39,783
    
$
46,458
  
$
144,969
    
$
181,048
Net Income Margin
    
21.5%
      
16.4%
    
17.3%
      
17.6%
Adjusted EBITDA Margin
    
42.3%
      
42.6%
    
41.0%
      
40.9%
 
 
 Unaudited Reconciliation of GAAP Net Income and GAAP Diluted EPS to Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted EPS
(in thousands, except per share amounts)
 
   
Three Months Ended
  
Year Ended
   
December 31,
  
December 31,
   
2010
    
2011
  
2010
    
2011
   
(unaudited)
  
(unaudited)
                             
Net income
  
$
          8,537
    
 $
          7,629
  
 $
        25,059
    
 $
        31,893
Customer credit plan
    
                   -
      
          4,728
    
                   -
      
          4,728
Stock-based and other customer acquisition expense
    
              565
      
          1,120
    
          8,013
      
        10,861
Stock-based compensation expense - ISO
    
              378
      
              375
    
          1,526
      
          1,743
Stock-based compensation expense - NQO
    
              351
      
              444
    
          1,387
      
          2,125
Other income
    
                   -
      
                   -
    
                   -
      
         (1,500)
Amortization of intangibles
    
              767
      
              768
    
          3,070
      
          3,071
Amortization of deferred finance costs
    
                51
      
                22
    
              204
      
                76
Total pre-tax adjustments
    
          2,112
      
          7,457
    
        14,200
      
        21,104
Tax rate
    
35.7%
      
38.2%
    
38.6%
      
38.2%
Tax adjustment
    
              618
      
          2,705
    
          4,841
      
          7,969
Adjusted net income
  
$
        10,031
    
 $
        12,381
  
 $
        34,418
    
 $
        45,028
                             
Diluted average weighted shares outstanding
    
59,360,619
      
59,134,013
    
57,302,843
      
59,553,678
Diluted EPS
  
$
             0.14
    
$
             0.13
  
$
             0.44
    
$
             0.54
Adjusted Diluted EPS
  
$
             0.17
    
$
             0.21
  
$
             0.60
    
$
             0.76
                             
Revenues (before customer credit plan)
  
$
39,783
    
$
46,458
  
$
144,969
    
$
181,048
Net Income Margin
    
21.5%
      
16.4%
    
17.3%
      
17.6%
Adjusted Net Income Margin
    
25.2%
      
26.6%
    
23.7%
      
24.9%

 
 
 
 
Higher One Holdings, Inc.
Business Outlook
 
   
Three Months Ending
  
   
March 31, 2012
  
   
GAAP
  
Non-GAAP (a)
  
Revenues (in millions)
  
$58.0
-
$62.0
  
$58.0
-
$62.0
  
Diluted EPS
  
$0.24
-
$0.28
  
$0.27
-
$0.30
  
                   
(a) Estimated Non-GAAP amounts above for the three months ending March 31, 2012 reflect the estimated quarterly adjustments that exclude (i) the amortization of intangibles and finance costs of approximately $750,000, (ii) stock-based compensation expense of approximately $1.25 million.
                   
   
Twelve Months Ending
  
   
December 31, 2012
  
   
GAAP
  
Non-GAAP (b)
  
Revenues (in millions)
  
$215.0
-
$230.0
  
$215.0
-
$230.0
  
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.

 
 
 

 
 

Higher One Holdings, Inc. Reports