Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today announced financial results for the first quarter of 2012. The company reported revenue of $57.8 million, up 12% from $51.4 million in the first quarter of 2011. 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 that have contracted for its services.

“The metrics we track to judge the health of the business are strong, and our backlog of schools yet to launch suggests that we will deliver solid financial results in the latter half of the year,” said Mark Volchek, Chairman and Chief Financial Officer. “There are currently 431,000 SSE in implementation, not including the SSE anticipated to sign in the second quarter, most of which will go through their first financial aid disbursement cycle in the upcoming fall semester. Once this occurs, we expect to see a significant increase in the number of OneAccounts generated from schools launched over the past year.”

Higher One also reported GAAP net income of $13.4 million, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $14.9 million. GAAP diluted EPS was $0.23 in the quarter, up from $0.19 in the first quarter of 2011. Non-GAAP adjusted diluted EPS was $0.25, up from $0.24 for the same period a year ago. In the first quarter of 2012, non-GAAP adjusted EBITDA was $25.2 million.

The number of OneAccounts at the end of the first quarter of 2012 totaled 2.1 million, up 20% from 1.8 million at the end of the first quarter of 2011. Total enrollment at higher education clients that have purchased the OneDisburse service increased to 4.3 million, an increase of approximately 917,000 from 3.4 million at the end of the first quarter of 2011. Total enrollment at higher education clients that have purchased the CASHNet suite of payment products increased to 2.8 million.

Operating cash flow in the quarter was $32.2 million. Cash, cash equivalents, and liquid investments totaled $55.6 million as of March 31, 2012. Higher One continued to repurchase shares during the quarter, utilizing $16.9 million to repurchase approximately 1.1 million shares at an average price of $15.21 per share in the quarter.

Higher One updated its full-year 2012 revenue and GAAP diluted EPS guidance to $200.0 – $215.0 million and $0.70 – $0.80, respectively. The company updated full-year 2012 non-GAAP adjusted diluted EPS guidance to $0.80 – $0.90.

Quarterly Conference Call Information

Higher One will host a conference call at 5 p.m. ET today to discuss first 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 6.2 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 (“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.
 

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands of dollars, except share and per share amounts)
 
  Three Months
Ended March 31,
2011     2012
Revenue:
Account revenue $ 41,999 $ 47,110
Payment transaction revenue 4,305 5,329
Higher education institution revenue 4,376 4,624
Other revenue   703     718  
Revenue 51,383 57,781
Cost of revenue   17,433     21,324  
Gross margin   33,950     36,457  
Operating expenses:
General and administrative 9,772 11,226
Product development 785 906
Sales and marketing   5,464     2,867  
Total operating expenses   16,021     14,999  
Income from operations 17,929 21,458
Interest income 25 32
Interest expense (74 ) (109 )
Other income       77  
Net income before income taxes 17,880 21,458
Income tax expense   6,838     8,070  
Net income $ 11,042   $ 13,388  
 
Net income available to common stockholders:
Basic $ 11,042 $ 13,388
Participating Securities        
Diluted $ 11,042   $ 13,388  
 
Weighted average shares outstanding:
Basic 54,594,564 55,343,943
Diluted 59,547,255 58,766,590
 
Net income available to common stockholders per common share:
Basic $ 0.20 $ 0.24
Diluted $ 0.19 $ 0.23
 
 

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands of dollars, except share and per share amounts)
 
Dec 31,     March 31,
2011 2012
Assets
Current assets:
Cash and cash equivalents 39,085 33,818
Investments in marketable securities and certificates of deposit 15,743 21,813
Accounts receivable 3,672 5,394
Income receivable 5,961 5,159
Deferred tax assets 33 30
Income tax receivable 12,671 861
Prepaid expenses and other current assets 6,774   3,192  
Total current assets 83,939   70,267  
Deferred costs 3,776 3,631
Fixed assets, net 46,088 52,299
Intangible assets, net 16,787 16,875
Goodwill 15,830 15,830
Loan receivable related to New Markets Tax Credit financing 7,633 7,633
Other assets 712 605
Restricted cash 1,250   1,250  
Total assets 176,015   168,390  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 3,118 3,814
Accrued expenses 26,414 18,289
Deferred revenue 9,690   10,039  
Total current liabilities 39,222   32,142  
Deferred revenue 2,173 2,162
Loan payable and deferred contribution related to New Markets Tax Credit financing 9,801 9,723
Deferred tax liabilities 1,233   842  
Total liabilities 52,429   44,869  
Commitments and contingencies (Note 7)
 
Stockholders' equity:
Common stock, $0.001 par value; 200,000,000 shares authorized; 57,675,806 shares issued and 56,615,683 shares outstanding at December 31, 2011; 57,048,065 shares issued and 54,876,814 shares outstanding at March 31, 2012 58 57
Additional paid-in capital 161,268 164,714
Treasury stock, 1,060,123 and 2,171,251 shares at December 31, 2011 and March 31, 2012, respectively (16,208 ) (33,106 )
Accumulated deficit, net of 2008 stock tender transaction of $93,933 (21,532 ) (8,144 )
Total stockholders' equity 123,586 123,521
Total liabilities and stockholders' equity 176,015   168,390  
 
 

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands of dollars)
 
 

Three months ended

March 31

2011
 

2012
Cash flows from operating activities
Net income 11,042 13,388
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,677 2,213
Amortization of deferred finance costs 18 34
Stock-based customer acquisition expense 2,647 -
Stock-based compensation 1,304 1,410
Deferred income taxes (1,481 ) (388 )
Other income - (78 )
Loss on disposal of fixed assets 9 20
Changes in operating assets and liabilities:
Accounts receivable (1,908 ) (1,722 )
Income receivable (1,135 ) 802
Deferred costs (166 ) (256 )
Prepaid expenses and other current assets 4,253 15,392
Other assets (64 ) 107
Accounts payable (958 ) 823
Accrued expenses 4,847 117
Deferred revenue 344   338  
Net cash provided by operating activities 20,429   32,200  
Cash flows from investing activities
Purchases of available for sale investment securities (4,285 ) (9,770 )
Proceeds from sales and maturities of available for sale investment securities 3,000 3,700
Purchases of fixed assets, net of changes in construction payables of $1,060 and

($8,233), respectively
(1,428 ) (16,002 )
Additions to internal use software - (811 )
Proceeds from development related subsidies - 330
Payment to escrow agent (1,075 ) -  
Net cash used in investing activities (3,788 ) (22,553 )
Cash flows from financing activities
Tax benefit related to stock options 385 1,420
Proceeds from exercise of stock options 322 564
Repurchases of common stock -   (16,898 )
Net cash (used in) provided by financing activities 707   (14,914 )
Net change in cash and cash equivalents 17,348 (5,267 )
Cash and cash equivalents at beginning of period 34,484   39,085  
Cash and cash equivalents at end of period 51,832   33,818  
 

Higher One Holdings, Inc.

Unaudited Supplemental Operating Data

(in thousands)
 
  Three Months Ended
March 31,   June 30,   Sept 30,   Dec 31,   March 31,
2011 2011 2011 2011 2012
 
OneDisburse SSE (1) 3,413 3,659 3,970 4,169 4,330
y/y growth 27% 31% 23% 27% 27%
 
CASHNet suite SSE (2) 2,506 2,550 2,576 2,617 2,777
y/y growth 14% 10% 5% 6% 11%
 
Ending OneAccounts (3) 1,762 1,722 2,015 1,997 2,122
y/y growth 46% 39% 31% 23% 20%
 
 
(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
March 31,
2011     2012
Net income $ 11,042 $ 13,388
Interest income (25 ) (32 )
Interest expense 74 109
Income tax expense 6,838 8,070
Depreciation and amortization   1,677     2,213  
EBITDA 19,606 23,748
Stock-based and other customer acquisition expense 3,088 -
Stock-based compensation expense   1,304     1,410  
Adjusted EBITDA $ 23,998   $ 25,158  
 
Revenues $ 51,383 $ 57,781
Net Income Margin 21.5 % 23.2 %
Adjusted EBITDA Margin 46.7 % 43.5 %
 
 

Unaudited Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Incomeand Adjusted Diluted EPS(in thousands, except per share amounts)
 
 
  Three Months Ended
March 31,
2010     2011
Net income $ 11,042 $ 13,388
Stock-based and other customer acquisition expense 3,088 -
Stock-based compensation expense - ISO 427 507
Stock-based compensation expense - NQO 877 903
Amortization of intangibles 768 768
Amortization of deferred finance costs   18     34  
Total pre-tax adjustments 5,178 2,212
Tax rate 38.2 % 38.2 %
Tax adjustment   1,815     651  
Adjusted net income $ 14,405   $ 14,949  
 
Diluted average weighted shares outstanding 59,547,255 58,766,590
Diluted EPS $ 0.19 $ 0.23
Adjusted Diluted EPS $ 0.24 $ 0.25
 
Revenues (before customer credit plan) $ 51,383 $ 57,781
Net Income Margin 21.5 % 23.2 %
Adjusted Net Income Margin 28.0 % 25.9 %
 
 

Higher One Holdings, Inc.

Business Outlook
 
 
  Twelve Months Ending
December 31, 2012

GAAP
 

Non-GAAP (b)
Revenues (in millions) $200.0   -   $215.0 $200.0   -   $215.0
Diluted EPS $0.70 - $0.80 $0.80 - $0.90
 
(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 $4.5 million.

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