EXHIBIT 99.1Higher One Holdings, Inc. Reports Third Quarter 2012 Financial Results
| · | Revenue was $51.2 million, up 6% year-over-year |
| · | Entered into new five-year, $200 million credit facility |
| · | Higher One now serves over 1,250 campuses representing over 10.8 million students |
New Haven, CT, November 6, 2012 – Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today announced financial results for the third quarter of 2012. The company reported revenue of $51.2 million, up 6% from $48.1 million in the third quarter of 2011. The year-over-year revenue growth was primarily attributable to an increase in the number of higher education institutions that have contracted for Higher One's services and the inclusion of recently acquired Campus Labs in Higher One's results.
“We continue to show revenue growth and stable sales despite continued pressure on enrollment and a difficult operating environment,” said Mark Volchek, Chief Executive Officer. “We continued to diversify our business, and we’ve made changes to the OneAccount suite that should help drive customer engagement and retention in the long-run. I believe our account offerings provide some of the best values on the market, and we allow students to choose the account type that works best for them. Although some headwinds are putting pressure on results in the near-term, I’m confident that we are making the right decisions to position the business for sustainable, long-term value creation.”
Higher One also reported GAAP net income of $7.3 million, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $9.3 million. GAAP diluted EPS was $0.13 in the quarter. Non-GAAP adjusted diluted EPS was $0.16. In the third quarter of 2012, non-GAAP adjusted EBITDA was $16.7 million.
The number of OneAccounts at the end of the third quarter of 2012 totaled 2.1 million, up 3% from 2.0 million at the end of the third quarter of 2011. The number of OneAccounts grew 10% on a sequential basis, up from 1.9 million at the end of the second quarter of 2012. A change in the protocols of closing low-balance, inactive accounts that was implemented in the second quarter of 2012 has had a negative impact on the year-over-year growth in number of OneAccounts.
Total enrollment at higher education clients that have purchased the OneDisburse® service increased to 4.6 million. Sales to new clients accounted for an increase of approximately 637,000 from 4.0 million at the end of the third quarter of 2011. A decline in enrollment at existing clients had a negative impact of approximately 19,000. Total enrollment at higher education clients that have signed up for at least one of our OneDisburse, CASHNet®, or Campus Labs® modules now totals 10.8 million.
Cash, cash equivalents, and liquid investments totaled $27.3 million as of September 30, 2012. Higher One continued with the previously announced share repurchase program, utilizing $14.8 million to repurchase approximately 1.2 million shares in the quarter.
Higher One revised its full-year 2012 revenue and GAAP diluted EPS guidance to $192.0 – $200.0 million and $0.53 – $0.60, respectively. The company maintained full-year 2012 non-GAAP adjusted diluted EPS guidance of $0.63 – $0.70.
Credit Facility
In October, Higher One entered into a new five-year, senior secured revolving credit facility in an amount of $200 million with Bank of America, N.A. as administrative agent, and other lenders. The amount available to be drawn under the credit facility may be increased by an additional $100 million upon Higher One’s request and the agreement of the lenders. This new credit facility replaces the company’s $50 million revolving credit facility. The facility will bear interest at floating rates, plus a margin based on the leverage ratio of the company.
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 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 creating cost-saving efficiencies for higher education institutions and providing high-value services to students. Higher One offers a wide array of technological services on campus, ranging from streamlining the institution’s performance analytics and financial aid refund processes to offering students innovative banking services, tuition payment plans, and the basics of financial management. Higher One works closely with colleges and universities to allocate resources more efficiently in order to provide a higher quality of service and education to students.
Founded in 2000 on a college campus by college students, Higher One now serves more than half of the higher education market, providing its services to over 1,250 campuses and 10.8 million students at distinguished public and private 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 |
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands of dollars, except share and per share amounts)
| | | Three Months | |
| | | Ended September 30, | |
| | | 2011 | | | 2012 | |
| Revenue: | | | | | | |
| Account revenue | | $ | 35,800 | | | $ | 35,660 | |
| Payment transaction revenue | | | 6,603 | | | | 8,342 | |
| Higher education institution revenue | | | 4,595 | | | | 5,946 | |
| Other revenue | | | 1,142 | | | | 1,279 | |
| Total revenue | | | 48,140 | | | | 51,227 | |
| Cost of revenue | | | 19,630 | | | | 21,838 | |
| Gross margin | | | 28,510 | | | | 29,389 | |
| Operating expenses: | | | | | | | | |
| General and administrative | | | 9,415 | | | | 11,902 | |
| Product development | | | 1,158 | | | | 1,380 | |
| Merger and acquisition related expenses | | | - | | | | 1,042 | |
| Sales and marketing | | | 4,698 | | | | 3,182 | |
| Total operating expenses | | | 15,271 | | | | 17,506 | |
| Income from operations | | | 13,239 | | | | 11,883 | |
| Interest income | | | 15 | | | | 23 | |
| Interest expense | | | (66 | ) | | | (185 | ) |
| Other income | | | - | | | | 77 | |
| Net income before income taxes | | | 13,188 | | | | 11,798 | |
| Income tax expense | | | 4,720 | | | | 4,480 | |
| Net income | | $ | 8,468 | | | $ | 7,318 | |
| | | | | | | | | |
| Net income available to common stockholders: | | | | | | | | |
| Basic | | $ | 8,468 | | | $ | 7,318 | |
| Diluted | | $ | 8,468 | | | $ | 7,318 | |
| | | | | | | | | |
| Weighted average shares outstanding | | | | | | | | |
| Basic | | | 55,470,457 | | | | 54,511,509 | |
| Diluted | | | 59,789,977 | | | | 57,246,289 | |
| | | | | | | | | |
| Net income available to common stockholders per common share: | | | | |
| Basic | | $ | 0.15 | | | $ | 0.13 | |
| Diluted | | $ | 0.14 | | | $ | 0.13 | |
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of dollars, except share and per share amounts)
| | | December 31, | | | September 30, | |
| | | 2011 | | | 2012 | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 39,085 | | | $ | 27,044 | |
| Investments in marketable securities | | | 15,743 | | | | 245 | |
| Accounts receivable | | | 3,672 | | | | 8,704 | |
| Income receivable | | | 5,961 | | | | 8,990 | |
| Deferred tax assets | | | 33 | | | | - | |
| Income tax receivable | | | 12,671 | | | | 1,608 | |
| Prepaid expenses and other current assets | | | 6,774 | | | | 7,688 | |
| Restricted cash | | | - | | | | 2,365 | |
| Total current assets | | | 83,939 | | | | 56,644 | |
| Deferred costs | | | 3,776 | | | | 3,306 | |
| Fixed assets, net | | | 46,088 | | | | 53,250 | |
| Intangible assets, net | | | 16,787 | | | | 38,283 | |
| Goodwill | | | 15,830 | | | | 46,910 | |
| Loan receivable related to New Markets Tax Credit financing | | | 7,633 | | | | 7,633 | |
| Other assets | | | 712 | | | | 619 | |
| Deferred tax assets | | | - | | | | 1,423 | |
| Restricted cash | | | 1,250 | | | | 1,500 | |
| Total assets | | $ | 176,015 | | | $ | 209,568 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,118 | | | $ | 3,798 | |
| Accrued expenses | | | 26,414 | | | | 12,125 | |
| Contingent consideration, current portion | | | - | | | | 2,286 | |
| Deferred tax liabilities | | | - | | | | 868 | |
| Deferred revenue | | | 9,690 | | | | 16,861 | |
| Total current liabilities | | | 39,222 | | | | 35,938 | |
| Deferred revenue | | | 2,173 | | | | 2,210 | |
| Loan payable and deferred contribution related to New Markets Tax Credit financing | 9,801 | | | | 9,568 | |
| Debt | | | - | | | | 30,000 | |
| Contingent consideration, non-current portion | | | - | | | | 11,024 | |
| Deferred tax liabilities | | | 1,233 | | | | - | |
| Total liabilities | | | 52,429 | | | | 88,740 | |
| Commitments and contingencies (Note 6) | | | | | | | | |
| | | | | | | | | |
| 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; 57,974,292 shares issued and 54,191,446 shares outstanding at September 30, 2012 | | | 58 | | | | 59 | |
| Additional paid-in capital | | | 161,268 | | | | 171,351 | |
| Treasury stock, 1,060,123 and 3,782,846 shares at December 31, 2011 and September 30, 2012, respectively | | | (16,208 | ) | | | (53,808 | ) |
| Accumulated earnings (deficit), net of 2008 stock tender transaction of $93,933 | | | (21,532 | ) | | | 3,226 | |
| Total stockholders' equity | | | 123,586 | | | | 120,828 | |
| Total liabilities and stockholders' equity | | $ | 176,015 | | | $ | 209,568 | |
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands of dollars)
| | | Nine months ended | |
| | | September 30, | |
| | | 2011 | | | 2012 | |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | 24,264 | | | $ | 24,758 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 5,204 | | | | 7,336 | |
| Amortization of deferred finance costs | | | 54 | | | | 102 | |
| Stock-based customer acquisition expense | | | 9,233 | | | | - | |
| Stock-based compensation | | | 3,049 | | | | 3,226 | |
| Deferred income taxes | | | (4,866 | ) | | | (1,755 | ) |
| Income tax benefit related to exercise of stock options | | | (5,274 | ) | | | (2,796 | ) |
| Non-cash fair value adjustment of contingent consideration | | | – | | | | 310 | |
| Other income | | | – | | | | (233 | ) |
| Gain on litigation settlement agreement | | | (1,500 | ) | | | | |
| Loss on disposal of fixed assets | | | 343 | | | | 35 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (2,912 | ) | | | (2,624 | ) |
| Income receivable | | | (2,574 | ) | | | (3,029 | ) |
| Deferred costs | | | (645 | ) | | | (703 | ) |
| Prepaid expenses and other current assets | | | 3,964 | | | | 12,997 | |
| Other assets | | | (9 | ) | | | (114 | ) |
| Accounts payable | | | (576 | ) | | | 799 | |
| Accrued expenses | | | 816 | | | | (3,566 | ) |
| Deferred revenue | | | 2,764 | | | | 3,708 | |
| Net cash provided by operating activities | | | 31,335 | | | | 38,451 | |
| Cash flows from investing activities | | | | | | | | |
| Purchases of available for sale investment securities | | | (11,192 | ) | | | (11,230 | ) |
| Proceeds from sales of available for sale investment securities | | | – | | | | 14,634 | |
| Proceeds from maturities of available for sale investment securities | | | 8,000 | | | | 12,094 | |
| Purchases of fixed assets, net of changes in construction payables of $3,494 and ($11,799), respectively | | | (21,623 | ) | | | (22,499 | ) |
| Acquisition of Campus Labs | | | – | | | | (37,280 | ) |
| Proceeds from development related subsidies | | | – | | | | 330 | |
| Additions to internal use software | | | – | | | | (2,061 | ) |
| Deposits to restricted cash, net | | | – | | | | (2,615 | ) |
| Payment to escrow agent | | | (1,075 | ) | | | – | |
| Proceeds from escrow agent | | | 1,500 | | | | – | |
| Net cash used in investing activities | | | (24,390 | ) | | | (48,627 | ) |
| Cash flows from financing activities | | | | | | | | |
| Tax benefit related to exercise of stock options | | | 5,274 | | | | 2,796 | |
| Proceeds from exercise of stock options | | | 983 | | | | 2,939 | |
| Proceeds from line of credit | | | – | | | | 30,000 | |
| Repurchase of common stock | | | (14,244 | ) | | | (37,600 | ) |
| Net cash used in financing activities | | | (7,987 | ) | | | (1,865 | ) |
| Net change in cash and cash equivalents | | | (1,042 | ) | | | (12,041 | ) |
| Cash and cash equivalents at beginning of period | | | 34,484 | | | | 39,085 | |
| Cash and cash equivalents at end of period | | $ | 33,442 | | | $ | 27,044 | |
Higher One Holdings, Inc.
Unaudited Supplemental Operating Data
(in thousands)
| | Three Months Ended |
| | Sept 30, | | Dec 31, | | March 31, | | June 30, | | Sept 30, |
| | 2011 | | 2011 | | 2012 | | 2012 | | 2012 |
| | | | | | | | | | |
| OneDisburse SSE (1) | 3,970 | | 4,169 | | 4,330 | | 4,480 | | 4,589 |
| y/y growth | 23% | | 27% | | 27% | | 22% | | 16% |
| | | | | | | | | | |
| Total Company SSE (2) | 5,802 | | 5,995 | | 6,204 | | 6,437 | | 10,843 |
| y/y growth | 11% | | 14% | | 16% | | 16% | | 87% |
| | | | | | | | | | |
| Ending OneAccounts (3) | 2,015 | | 1,997 | | 2,122 | | 1,896 | | 2,083 |
| y/y growth | 31% | | 23% | | 20% | | 10% | | 3% |
| (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) | Total Company SSE is defined as the number of students enrolled at institutions that have signed contracts to use one or more OneDisburse, CASHNet, or Campus Labs 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 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 | |
| | | September 30, | |
| | | 2011 | | 2012 | |
| Net income | | $ | 8,468 | | $ | 7,318 | |
| Interest income | | | (15 | ) | | (23 | ) |
| Interest expense | | | 66 | | | 185 | |
| Income tax expense | | | 4,720 | | | 4,480 | |
| Depreciation and amortization | | | 1,770 | | | 2,805 | |
| EBITDA | | | 15,009 | | | 14,765 | |
| Stock-based and other customer acquisition expense | | | 2,320 | | | – | |
| Stock-based compensation expense | | | 889 | | | 901 | |
| Merger and acquisition related expenses | | | – | | | 1,042 | |
| Other income | | | – | | | – | |
| Adjusted EBITDA | | $ | 18,218 | | $ | 16,708 | |
| | | | | | | | |
| Revenues | | $ | 48,140 | | $ | 51,227 | |
| Net income margin | | | 17.6 | % | | 14.3 | % |
| Adjusted EBITDA margin | | | 37.8 | % | | 32.6 | % |
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 | |
| | | September 30, | |
| | | 2011 | | | 2012 | |
| Net income | | $ | 8,468 | | | $ | 7,318 | |
| | | | | | | | | |
| Stock-based and other customer acquisition expense | | | 2,320 | | | | – | |
| Stock-based compensation expense - incentive stock option grants | | | 480 | | | | 487 | |
| Stock-based compensation expense - non-qualified stock option grants | | | 409 | | | | 414 | |
| Merger and acquisition related expense | | | – | | | | 1,042 | |
| Other income | | | – | | | | – | |
| Amortization of intangibles | | | 768 | | | | 863 | |
| Amortization of deferred finance costs | | | 18 | | | | 34 | |
| Total pre-tax adjustments | | | 3,995 | | | | 2,840 | |
| Tax rate | | | 38.2 | % | | | 38.2 | % |
| Tax adjustment (a) | | | 1,343 | | | | 899 | |
| Adjusted net income | | $ | 11,120 | | | $ | 9,259 | |
| | | | | | | | | |
| Diluted Weighted Average Shares Outstanding | | | 59,790 | | | | 57,246 | |
| Diluted EPS | | $ | 0.14 | | | $ | 0.13 | |
| Adjusted Diluted EPS | | $ | 0.19 | | | $ | 0.16 | |
| Revenues | | $ | 48,140 | | | $ | 51,227 | |
| Net Income Margin | | | 13.6 | % | | | 14.3 | % |
| Adjusted Net Income Margin | | | 20.3 | % | | | 18.1 | % |
Higher One Holdings, Inc.
Business Outlook
| | | Twelve Months Ending | |
| | | December 31, 2012 | |
| | | GAAP | | Non-GAAP (b) | |
| Revenues (in millions) | | $192.0 | - | $200.0 | | $192.0 | - | $200.0 | |
| Diluted EPS | | $0.53 | - | $0.60 | | $0.63 | - | $0.70 | |
| | | | | | | | | | |
| (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 $3.5 million, and (ii) stock-based compensation expense of approximately $4.0 million. |
