Higher One Holdings, Inc. Reports First Quarter 2013 Financial Results
| · | Total Signed School Enrollment (SSE) increased to 11.2 million students at quarter end |
| · | Acquires Sallie Mae's Campus Solutions Business |
| o | Higher One now serves over 1,600 campuses, representing over 13.2 million students |
| · | Updates 2013 Financial Outlook |
| · | Investments made in product development and compliance |
New Haven, CT, May 7, 2013 – Higher One Holdings, Inc. (NYSE: ONE) ("Higher One") or (the Company), a leader in providing financial services and data analytics to over 1,600 college and university campuses across the U.S., today announced financial results for the first quarter of 2013.
Higher One reported revenue of $57.4 million, as compared to $57.8 million in the first quarter of 2012. The Company reported GAAP net income of $9.8 million for first quarter 2013, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $12.0 million. GAAP diluted EPS was $0.20 in the quarter, as compared to $0.23 in the first quarter of 2012. Non-GAAP adjusted diluted EPS was $0.25, as compared to $0.25 for the same period a year ago. In the first quarter of 2013, non-GAAP adjusted EBITDA was $21.6 million.
Mark Volchek, Chief Executive Officer, said, "I am extremely excited to announce the acquisition of Sallie Mae's Campus Solutions business. This acquisition provides Higher One the opportunity to expand our refund and payments client base and further solidifies our competitive market leading position. We welcome the Campus Solutions team to the Higher One family and look forward to further enhancing our product and service offerings to schools and students."
Volchek continued, "During the quarter, we continued to diversify our revenue streams as evidenced by the strong growth we experienced in our Campus Labs® and CASHNet® products. Additionally, I believe our account offerings provide some of the best-in-class value on the market, tailored specifically for student needs. 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."
Total enrollment at higher education clients that have purchased the OneDisburse® service increased to 4.7 million, an increase of approximately 400,000 from 4.3 million at the end of the first quarter of 2012. Total enrollment at higher education clients that have signed up for at least one of our OneDisburse, CASHNet, or Campus Labs modules totals more than 11.2 million.
The number of OneAccounts at the end of the first quarter of 2013 was approximately 2.2 million, up 1.8% from the first quarter of 2012. The number of OneAccounts grew 10% on a sequential basis, up from 2.0 million at the end of the fourth quarter of 2012.
Acquisition of Sallie Mae's Campus Solutions
In a separate press release today, Higher One also announced the acquisition of Sallie Mae's Campus Solutions business. The company will provide more details on the transaction on the quarterly earnings call scheduled today at 5 p.m. ET.
Financial Guidance Update
The Sallie Mae Campus Solutions acquisition will directly impact the Company's 2013 annual revenue and earnings. As a result, Higher One is updating its full-year 2013 revenue guidance range to $220 – $230 million. Full-year 2013 non-GAAP adjusted diluted EPS is now expected to be in the range of $0.58 – $0.64.
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 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 1,600 campuses and over 13.3 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 contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements may be identified by the use of words such as "expect," "anticipate," "believe," "estimate," "potential," "should" or similar words intended to identify information that is not historical in nature. Forward-looking statements contained herein include, among others, statements about the expected benefits of the acquisition of Sallie Mae's Campus Solutions business by Higher One and such statements are based on the current beliefs and expectations of Higher One and Sallie Mae's management, as applicable, and are subject to known and unknown risks and uncertainties. There are a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements, including, but not limited to Higher One being unable to achieve expected synergies and operating efficiencies in the acquisition within the expected time-frames or at all and to successfully integrate Sallie Mae's Campus Solutions business operations into those of Higher One; such integration may be more difficult, time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the transaction; the retention of certain key employees in the Campus Solutions business at Sallie Mae; the outcome of any legal proceedings that may be instituted against the parties and others related to the acquisition agreement and the amount of the costs, fees, expenses and charges related to the acquisition. 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 press release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof. For further information regarding the risks associated with Higher One and Sallie Mae's businesses, please refer to the respective filings with the Securities and Exchange Commission, including Annual Reports on Form 10-K for the most recent fiscal year end, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
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, | |
| | | 2013 | | | 2012 | |
| Revenue: | | | | | | |
| Account revenue | | $ | 43,363 | | | $ | 47,110 | |
| Payment transaction revenue | | | 6,701 | | | | 5,329 | |
| Higher education institution revenue | | | 7,141 | | | | 4,624 | |
| Other revenue | | | 175 | | | | 718 | |
| Revenue | | | 57,380 | | | | 57,781 | |
| Cost of revenue | | | 22,300 | | | | 21,324 | |
| Gross margin | | | 35,080 | | | | 36,457 | |
| Operating expenses: | | | | | | | | |
| General and administrative | | | 13,089 | | | | 11,226 | |
| Product development | | | 1,895 | | | | 906 | |
| Sales and marketing | | | 3,207 | | | | 2,867 | |
| Merger and acquisition related | | | 546 | | | | - | |
| Total operating expenses | | | 18,737 | | | | 14,999 | |
| Income from operations | | | 16,343 | | | | 21,458 | |
| Interest income | | | 19 | | | | 32 | |
| Interest expense | | | (629 | ) | | | (109 | ) |
| Other income | | | 77 | | | | 77 | |
| Net income before income taxes | | | 15,810 | | | | 21,458 | |
| Income tax expense | | | 6,008 | | | | 8,070 | |
| Net income | | $ | 9,802 | | | $ | 13,388 | |
| | | | | | | | | |
| Net income available to common stockholders: | | | | | | | | |
| Basic | | $ | 9,802 | | | $ | 13,388 | |
| Diluted | | $ | 9,802 | | | $ | 13,388 | |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | |
| Basic | | | 46,268,310 | | | | 55,343,943 | |
| Diluted | | | 48,303,907 | | | | 58,766,590 | |
| | | | | | | | | |
| Net income available to common stockholders per common share: | | | | | | | | |
| Basic | | $ | 0.21 | | | $ | 0.24 | |
| Diluted | | $ | 0.20 | | | $ | 0.23 |
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands of dollars, except share and per share amounts
| | March 31, 2013 | | | December 31, 2012 | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 11,051 | | | $ | 13,031 | |
| Investments in marketable securities | | | 247 | | | | 247 | |
| Accounts receivable | | | 6,549 | | | | 4,860 | |
| Income receivable | | | 6,915 | | | | 7,466 | |
| Deferred tax assets | | | - | | | | 37 | |
| Prepaid expenses and other current assets | | | 6,127 | | | | 10,890 | |
| Restricted cash | | | 2,000 | | | | 2,000 | |
| Total current assets | | | 32,889 | | | | 38,531 | |
| Deferred costs | | | 4,382 | | | | 4,665 | |
| Fixed assets, net | | | 52,175 | | | | 52,686 | |
| Intangible assets, net | | | 37,690 | | | | 38,143 | |
| Goodwill | | | 47,000 | | | | 47,000 | |
| Loan receivable related to New Markets Tax Credit financing | | | 7,633 | | | | 7,633 | |
| Other assets | | | 821 | | | | 740 | |
| Restricted cash | | | 1,500 | | | | 1,500 | |
| Total assets | | $ | 184,090 | | | $ | 190,898 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,224 | | | $ | 3,756 | |
| Accrued expenses | | | 18,190 | | | | 12,526 | |
| Contingent consideration, current portion | | | 5,839 | | | | 2,230 | |
| Deferred tax liabilities | | | 154 | | | | 356 | |
| Deferred revenue | | | 16,420 | | | | 16,027 | |
| Total current liabilities | | | 43,827 | | | | 34,895 | |
| Deferred revenue and other non-current liabilities | | | 2,362 | | | | 2,517 | |
| Loan payable and deferred contribution related to New Markets Tax Credit financing | | | 9,413 | | | | 9,490 | |
| Debt | | | 63,000 | | | | 80,000 | |
| Contingent consideration, non-current portion | | | - | | | | 3,520 | |
| Deferred tax liabilities | | | 2,073 | | | | 2,764 | |
| Total liabilities | | | 120,675 | | | | 133,186 | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | |
| Common stock, $.001 par value; 200,000,000 shares authorized; 58,342,323 shares issued and 46,429,297 shares outstanding at March 31, 2013; 58,045,404 shares issued and 46,660,781 shares outstanding at December 31, 2012 | | | 59 | | | | 59 | |
| Additional paid-in capital | | | 176,115 | | | | 174,218 | |
| Treasury stock, 11,913,026 and 11,384,623 shares at March 31, 2013 and December 31, 2012, respectively | | | (137,899 | ) | | | (131,903 | ) |
| Retained earnings | | | 25,140 | | | | 15,338 | |
| Total stockholders' equity | | | 63,415 | | | | 57,712 | |
| Total liabilities and stockholders' equity | | $ | 184,090 | | | $ | 190,898 |
Higher One Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands of dollars)
| | | Three months ended | |
| | | March 31, | |
| | | 2013 | | | 2012 | |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | 9,802 | | | | 13,388 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 3,111 | | | | 2,213 | |
| Amortization of deferred finance costs | | | 111 | | | | 34 | |
| Non-cash fair value adjustment of contingent consideration | | | 89 | | | | - | |
| Stock-based compensation | | | 1,485 | | | | 1,410 | |
| Deferred income taxes | | | (856 | ) | | | (388 | ) |
| Income tax benefit related to exercise of stock options | | | (148 | ) | | | - | |
| Other income | | | (77 | ) | | | (78 | ) |
| Loss on disposal of fixed assets | | | 8 | | | | 20 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (1,689 | ) | | | (1,722 | ) |
| Income receivable | | | 551 | | | | 802 | |
| Deferred costs | | | (184 | ) | | | (256 | ) |
| Prepaid expenses and other current assets | | | 4,763 | | | | 15,392 | |
| Other assets | | | (92 | ) | | | 107 | |
| Accounts payable | | | (532 | ) | | | 823 | |
| Accrued expenses | | | 5,954 | | | | 117 | |
| Deferred revenue | | | 238 | | | | 338 | |
| Net cash provided by operating activities | | | 22,534 | | | | 32,200 | |
| Cash flows from investing activities | | | | | | | | |
| Purchases of available for sale investment securities | | | - | | | | (9,770 | ) |
| Proceeds from sales and maturities of available for sale investment securities | | | - | | | | 3,700 | |
| Purchases of fixed assets, net of changes in payables of ($153) and ($8,242), respectively | | | (1,259 | ) | | | (16,002 | ) |
| Additions to internal use software | | | (631 | ) | | | (811 | ) |
| Proceeds from development related subsidies | | | - | | | | 330 | |
| Net cash used in investing activities | | | (1,890 | ) | | | (22,553 | ) |
| Cash flows from financing activities | | | | | | | | |
| Proceeds from line of credit | | | 3,000 | | | | - | |
| Repayments of line of credit | | | (20,000 | ) | | | - | |
| Tax benefit related to stock options | | | 148 | | | | 1,420 | |
| Proceeds from exercise of stock options | | | 224 | | | | 564 | |
| Purchases of common stock | | | (5,996 | ) | | | (16,898 | ) |
| Net cash used in financing activities | | | (22,624 | ) | | | (14,914 | ) |
| Net change in cash and cash equivalents | | | (1,980 | ) | | | (5,267 | ) |
| Cash and cash equivalents at beginning of period | | | 13,031 | | | | 39,085 | |
| Cash and cash equivalents at end of period | | $ | 11,051 | | | $ | 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, | |
| | 2012 | | | 2012 | | | 2012 | | | 2012 | | | 2013 | |
| | | | | | | | | | | | | | | |
| OneDisburse SSE (1) | | | 4,330 | | | | 4,480 | | | | 4,589 | | | | 4,642 | | | | 4,709 | |
| y/y growth | | | 27 | % | | | 22 | % | | | 16 | % | | | 11 | % | | | 9 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Company SSE (2) | | | 6,204 | | | | 6,437 | | | | 10,843 | | | | 10,929 | | | | 11,170 | |
| y/y growth | | | 16 | % | | | 16 | % | | | 87 | % | | | 82 | % | | | 80 | % |
| | | | | | | | | | | | | | | | | | | | |
| Ending OneAccounts (3) | | | 2,122 | | | | 1,896 | | | | 2,083 | | | | 2,004 | | | | 2,161 | |
| y/y growth | | | 20 | % | | | 10 | % | | | 3 | % | | | 0 | % | | | 2 | % |
| (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 | |
| | March 31, | |
| | 2013 | | 2012 | |
| | (unaudited) | |
| | (in thousands) | |
| | | | | |
| Net income | | $ | 9,802 | | | $ | 13,388 | |
| Interest income | | | (19 | ) | | | (32 | ) |
| Interest expense | | | 629 | | | | 109 | |
| Income tax expense | | | 6,008 | | | | 8,070 | |
| Depreciation and amortization | | | 3,111 | | | | 2,213 | |
| EBITDA | | | 19,531 | | | | 23,748 | |
| Merger and acquisition related expenses | | | 546 | | | | - | |
| Stock-based compensation expense | | | 1,485 | | | | 1,410 | |
| Adjusted EBITDA | | $ | 21,562 | | | $ | 25,158 | |
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 | |
| | March 31, | |
| | 2013 | | 2012 | |
| | (unaudited) | |
| (in thousands) | |
| | | | | |
| Net income | | $ | 9,802 | | | $ | 13,388 | |
| | | | | | | | | |
| Merger and acquisition related | | | 546 | | | | - | |
| Stock-based compensation expense - incentive stock options | | | 484 | | | | 507 | |
| Stock-based compensation expense - non-qualified stock options | | | 1,001 | | | | 903 | |
| Amortization of intangibles | | | 1,130 | | | | 768 | |
| Amortization of deferred finance costs | | | 111 | | | | 34 | |
| Total pre-tax adjustments | | | 3,272 | | | | 2,212 | |
| Tax rate | | | 38.5 | % | | | 38.2 | % |
| Tax adjustment | | | 1,073 | | | | 651 | |
| Adjusted net income | | $ | 12,001 | | | $ | 14,949 | |
Higher One Holdings, Inc.
Business Outlook
| | Twelve Months Ending | |
| | December 31, 2013 | |
| | GAAP | | | Non-GAAP (a) | |
| Revenues (in millions) | | | $220.0 | | | | - | | | | $230.0 | | | | $220.0 | | | | - | | | | $230.0 | |
| Diluted EPS | | | $0.42 | | | | - | | | | $0.48 | | | | $0.58 | | | | - | | | | $0.64 | |
(a) Estimated Non-GAAP amounts above for the twelve months ending December 31, 2013 reflect the estimated annual adjustments, that exclude (i) the amortization of intangibles and finance costs of approximately $6.0 million, (ii) stock-based compensation expense of approximately $4.5 million, and (iii) M&A related expenses of $1.5 - $2.0 million.
