Higher One Holdings, Inc. Reports Second Quarter 2012 Financial Results

Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today announced financial results for the second quarter of 2012. The company reported revenue of $38.9 million, up 11% from $35.1 million in the second 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.

“Our business performed as expected in the second quarter, which is a seasonally slower period for our company,” said Mark Volchek, Chief Executive Officer. “Given the strong number of new school launches for OneDisburse in the upcoming fall semester, the continued positive momentum of our new product offerings, as well as the cost control strategies we are putting in place, our financial performance in the second half of the year is expected to outperform the same period last year.”

Higher One also reported GAAP net income of $4.1 million, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $5.3 million. GAAP diluted EPS was $0.07 in the quarter. Non-GAAP adjusted diluted EPS was $0.09. In the second quarter of 2012, non-GAAP adjusted EBITDA was $10.2 million.

The number of OneAccounts at the end of the second quarter of 2012 totaled 1.9 million, up 10% from 1.7 million at the end of the second quarter of 2011. Total enrollment at higher education clients that have purchased the OneDisburse service increased to 4.5 million, an increase of approximately 820,000 from 3.7 million at the end of the second quarter of 2011. Total enrollment at higher education clients that have purchased the CASHNet suite of payment products increased to 2.9 million.

Cash, cash equivalents, and liquid investments totaled $36.6 million as of June 30, 2012. Higher One continued with the previously announced share repurchase program, utilizing $5.9 million to repurchase approximately 400,000 shares in the quarter.

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

Acquisition of Campus Labs

Higher One also announced today the acquisition of substantially all of the assets of Campus Labs, LLC, a data analytics company focused on higher education. Campus Labs helps school administrators collect campus-wide data and provide comprehensive assessments critical to supporting institutional outcomes. The company helps schools better understand factors for student success, benchmark against peer universities, course evaluation, strategic plan alignment, and the accreditation process. Campus Labs’ technology allows schools to aggregate previously unstructured, static information into dynamic assessment data with full reporting functionality in a centralized platform.

Commenting on the announcement, Mr. Volchek said, “We are very excited about this acquisition. Campus Labs helps schools track and analyze their progress and improve student success, which is becoming increasingly important given the focus on school performance in the higher education space. For Higher One, the acquisition provides a wider array of efficiency-enhancing services that help us deepen our relationship with schools and students. Importantly, Campus Labs currently serves over 500 higher education campuses with enrollment of over 5.8 million, and we are excited to begin cultivating these relationships.”

Share Repurchase Authorization

Higher One also announced today that its Board of Directors has voted to authorize a $100 million share repurchase program. Mr. Volchek said, “I am pleased about the Board’s decision to authorize a new share repurchase program, which is a great way to return capital to shareholders. We will be opportunistic with our repurchases going forward.”

Quarterly Conference Call Information

Higher One will host a conference call at 5 p.m. ET today to discuss second 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://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 10.5 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 June 30,
2011     2012
Revenue:
Account revenue $ 27,701 $ 30,033
Payment transaction revenue 3,080 4,172
Higher education institution revenue 3,725 4,027
Other revenue   561     681  
Total revenue 35,067 38,913
Cost of revenue   13,423     17,141  
Gross margin   21,644     21,772  
Operating expenses:
General and administrative 9,015 11,077
Product development 895 1,085
Sales and marketing   6,701     2,946  
Total operating expenses   16,611     15,108  
Income from operations 5,033 6,664
Interest income 11 32
Interest expense (56 ) (108 )
Other income   1,500     78  
Net income before income taxes 6,488 6,666
Income tax expense   1,734     2,614  
Net income $ 4,754   $ 4,052  
 
Net income available to common stockholders:
Basic $ 4,754   $ 4,052  
Diluted $ 4,754   $ 4,052  
 
Weighted average shares outstanding
Basic 55,117,635 54,653,888
Diluted 59,718,105 57,717,127
 
Net income available to common stockholders per common share:
Basic $ 0.09 $ 0.07
Diluted $ 0.08 $ 0.07
 
 

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands of dollars, except share and per share amounts)
   
December 31, June 30,
2011 2012
Assets
Current assets:
Cash and cash equivalents $ 39,085 $ 25,449
Investments in marketable securities 15,743 11,146
Accounts receivable 3,672 6,900
Income receivable 5,961 8,085
Deferred tax assets 33 28
Income tax receivable 12,671 4,294
Prepaid expenses and other current assets 6,774 7,134
Restricted cash   -     2,635  
Total current assets   83,939     65,671  
Deferred costs 3,776 3,475
Fixed assets, net 46,088 53,714
Intangible assets, net 16,787 16,704
Goodwill 15,830 15,830
Loan receivable related to New Markets Tax Credit financing 7,633 7,633
Other assets 712 619
Restricted cash   1,250     1,500  
Total assets $ 176,015   $ 165,146  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,118 $ 3,369
Accrued expenses 26,414 13,285
Deferred revenue   9,690     12,741  
Total current liabilities   39,222     29,395  
Deferred revenue 2,173 2,156
Loan payable and deferred contribution related to New Markets Tax Credit financing 9,801 9,646
Deferred tax liabilities   1,233     649  
Total liabilities   52,429     41,846  
Commitments and contingencies (Note 7)
 
Stockholders' equity:
Common stock, $.001 par value; 200,000,000 shares authorized; 57,675,806 shares issued and 56,615,683 shares outstanding at December 31, 2011; 57,140,831 shares issued and 54,569,580 shares outstanding at June 30, 2012 58 58
Additional paid-in capital 161,268 166,347
Treasury stock, 1,060,123 and 2,571,251 shares at December 31, 2011 and June 30, 2012, respectively (16,208 ) (39,013 )
Accumulated deficit, net of 2008 $93,933 of stock tender transaction   (21,532 )   (4,092 )
Total stockholders' equity   123,586     123,300  
Total liabilities and stockholders' equity $ 176,015   $ 165,146  
 
 

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands of dollars)
 
Six months ended
June 30,
2011     2012
Cash flows from operating activities
Net income $ 15,796 $ 17,440
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,434 4,531
Amortization of deferred finance costs 36 68
Stock-based customer acquisition expense 6,935 -
Stock-based compensation 2,160 2,325
Deferred income taxes (3,681 ) (579 )
Other income - (155 )
Gain on litigation settlement agreement (1,500 ) -
Loss on disposal of fixed assets 107 26
Changes in operating assets and liabilities:
Accounts receivable (2,708 ) (3,228 )
Income receivable 312 (2,124 )
Deferred costs (367 ) (506 )
Prepaid expenses and other current assets (451 ) 8,017
Other assets 75 (114 )
Accounts payable 410 381
Accrued expenses (1,417 ) (2,742 )
Deferred revenue   2,765     3,034  
Net cash provided by operating activities   21,906     26,374  
Cash flows from investing activities
Purchases of available for sale investment securities (7,787 ) (11,230 )

Proceeds from sales of available for sale investment securities
- 8,732
Proceeds from maturities of available for sale investment securities 5,600 7,095
Purchases of fixed assets, net of changes in construction payables of $3,494 and ($10,169), respectively (6,696 ) (20,524 )
Proceeds from development related subsidies - 330
Additions to internal use software - (1,369 )
Deposits to restricted cash - (2,885 )
Payment to escrow agent (1,075 ) -
Proceeds from escrow agent   1,500     -  
Net cash used in investing activities   (8,458 )   (19,851 )
Cash flows from financing activities
Tax benefit related to stock options 1,878 1,744
Proceeds from exercise of stock options 663 902
Repurchase of common stock   -     (22,805 )
Net cash provided by financing activities   2,541     (20,159 )
Net change in cash and cash equivalents 15,989 (13,636 )
Cash and cash equivalents at beginning of period   34,484     39,085  
Cash and cash equivalents at end of period $ 50,473   $ 25,449  
 
 

Higher One Holdings, Inc.

Unaudited Supplemental Operating Data

(in thousands)
 
  Three Months Ended
June 30,   Sept 30,   Dec 31,   March 31,   June 30,
2011 2011 2011 2012 2012
 
OneDisburse SSE (1) 3,659 3,970 4,169 4,330 4,480
y/y growth 31% 23% 27% 27% 22%
 
CASHNet suite SSE (2) 2,550 2,576 2,617 2,777 2,892
y/y growth 10% 5% 6% 11% 13%
 
Ending OneAccounts (3) 1,722 2,015 1,997 2,122 1,896
y/y growth 39% 31% 23% 20% 10%
 
(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
June 30,
2011     2012
Net income $ 4,754 $ 4,052
Interest income (11 ) (32 )
Interest expense 56 108
Income tax expense 1,734 2,614
Depreciation and amortization   1,757     2,318  
EBITDA 8,290 9,060
Stock-based and other customer acquisition expense 4,333 -
Stock-based compensation expense 856 915
Other income   (1,500 )   -  
Adjusted EBITDA $ 11,979   $ 9,975  
 
Revenues $ 35,067 $ 38,913
Net Income Margin 13.6 % 10.4 %
Adjusted EBITDA Margin 34.2 % 25.6 %
 
 

Unaudited Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income andAdjusted Diluted EPS(in thousands, except per share amounts)
 
Three Months Ended
June 30,
2011     2012
GAAP Net Income $ 4,754 $ 4,052
Stock-based and other customer acquisition expense 4,333 -
Stock-based compensation expense - ISO 461 496
Stock-based compensation expense - NQO 395 419
Other Income (1,500 ) -
Amortization of intangible assets 767 755
Amortization of finance costs   18     34  
Total pre-tax adjustments 4,474 1,704
Tax rate 38.2 % 38.2 %
Tax adjustment   2,106     462  
Adjusted net income $ 7,122   $ 5,294  
 
Diluted Weighted Average Shares Outstanding 59,718 57,717
Diluted EPS $ 0.08 $ 0.07
Adjusted Diluted EPS $ 0.12 $ 0.09
 
Revenues $ 35,067 $ 38,913
Net Income Margin 13.6 % 10.4 %
Adjusted Net Income Margin 20.3 % 13.6 %
 
 

Higher One Holdings, Inc.

Business Outlook
 
  Twelve Months Ending
December 31, 2012

GAAP
 

Non-GAAP (a)
Revenues (in millions) $200.0   -   $215.0 $200.0   -   $215.0
Diluted EPS $0.70 - $0.80 $0.80 - $0.90
 

 
(a)   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.

Copyright Business Wire 2010

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