Higher One Holdings, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 7, 2012

Attached files

file filename
8-K - HIGHER ONE HOLDINGS INC 8-K AUG 7, 2012 - Higher One Holdings, Inc.form8-k.htm
EX-99.2 - EXHIBIT 99.2 - Higher One Holdings, Inc.ex99_2.htm
Higher One Holdings, Inc. Reports Second Quarter 2012 Financial Results
 
·  
Revenue was $38.9 million, up 11% year-over-year
·  
2012 financial guidance remains unchaged
·  
Acquires assets of Campus Labs, higher education focused data analytics company
·  
Combined entity now serves over 1,250 campuses representing over 10.5 million students
·  
Board of Directors authorizes $100 million share repurchase program
 
New Haven, CT, August 7, 2012 – 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 $10.0 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, because Campus Labs currently serves over 650 higher education clients with a total SSE amounting to over 5.8 million, we will have significant cross-selling opportunities.”
 
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.
 
 
1
 
 
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.
 

 
Contacts
 
 Investor Relations:  Ken Goff, 203-776-7776 x4462, kgoff@higherone.com
 Media Relations:  Shoba Lemoine, 203-776-7776 x4503, slemoine@higherone.com
 
 
 
2
 
 
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(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
                
                 
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
  


 
3
 
 
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
  

 
4
 

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
  


 
5
 
 
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
 
 
6
 
 
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 and Adjusted 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
 % 

 
7
 
 
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.
 




 
8
 

Higher One Holdings, Inc. Reports