Higher One Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

Higher One Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

  • FY'12 Revenue and EPS within revised guidance range

  • Maintained 100% OneDisburse client retention for 9thconsecutive quarter

  • Higher One now serves over 1,300 campuses representing more than 10.9 million students

NEW HAVEN, Conn.--(BUSINESS WIRE)-- Higher One Holdings, Inc. (NYS: ONE) ("Higher One") today announced financial results for the fourth quarter of 2012. The company reported revenue of $49.8 million, up 19% from $41.7 million in the fourth quarter of 2011. Excluding the impact from the customer credit plan in the fourth quarter of 2011, revenue growth for the fourth quarter of 2012 would have been 7%. Full year 2012 revenue came in at the high end of guidance at $197.7 million, up 12% from $176.3 million in 2011. Excluding the impact from the customer credit plan, revenue growth for 2012 would have been 9%. The year-over-year revenue growth was primarily attributable to an increase in the number of higher education institutions that have contracted for the company's services and the inclusion of the recently acquired Campus Labs in the results.

Mark Volchek, Chief Executive Officer, said, "Higher One continues to be highly focused on reducing the cost of education by improving administrative efficiencies, providing financial literacy and low-cost financial services to college students, and improving graduation rates through better data collection and analysis. We made significant progress in 2012 bolstering our capabilities in all three of those areas. Despite the fact that the macro environment has put pressure on our financial results in the near-term, we are making investments in the business that positions us well for long-term growth."


Higher One reported GAAP net income of $36.9 million for 2012, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $38.8 million. During the quarter, we recorded a benefit of $7.6 million due to a reduction in the estimated amount to be paid under the earn-out related to the Campus Labs acquisition. GAAP diluted EPS was $0.65 for the year. Non-GAAP adjusted diluted EPS was $0.68 for 2012, at the high end of the company's previously disclosed guidance range. Non-GAAP adjusted EBITDA came in at $68.3 million for 2012.

Higher One also reported GAAP net income of $12.1 million for the fourth quarter of 2012, and non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, of $9.2 million. GAAP diluted EPS was $0.22 in the quarter. Non-GAAP adjusted diluted EPS was $0.17. In the fourth quarter of 2012, non-GAAP adjusted EBITDA was $16.4 million.

The number of OneAccounts at the end of the fourth quarter of 2012 totaled 2.0 million, essentially flat from the end of the fourth quarter of 2011. A change in the protocols of closing low-balance, inactive accounts that was implemented in the second quarter of 2012 impacted the year-over-year growth in the number of OneAccounts.

Total enrollment at higher education clients that have purchased the OneDisburse® service increased to 4.6 million, up 11% from 4.2 million at the end of the fourth quarter of 2011. Total enrollment at higher education clients that have signed up for at least one of our OneDisburse, CASHNet®, or Campus Labs® modules now totals 10.9 million.

Cash, cash equivalents, and liquid investments totaled $13.3 million as of December 31, 2012. Higher One continued with its previously announced share repurchase program, utilizing $78.1 million to repurchase approximately 7.6 million shares in the fourth quarter. The company substantially completed the remainder of its $100 million share repurchase authorization in the first quarter of 2013.

Higher One released its full-year 2013 revenue and GAAP diluted EPS guidance of $210.0 - $220.0 million and $0.47 - $0.55, respectively. The company also gave full-year 2013 non-GAAP adjusted diluted EPS guidance of $0.62 - $0.70.

Quarterly Conference Call Information

Higher One will host a conference call at 5 p.m. ET today to discuss fourth 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. (NYS: 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 1,300 campuses and 10.9 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.

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands of dollars, except share and per share amounts)

Three Months

Year

Ended December 31,

Ended December 31,

2011

2012

2011

2012

Revenue:

Account revenue

$

37,089

$

37,912

$

142,589

$

150,715

Payment transaction revenue

4,745

5,325

18,733

23,168

Higher education institution revenue

3,918

6,419

16,614

21,016

Other revenue

706

143

3,112

2,821

Revenue before customer credit plan

46,458

49,799

181,048

197,720

Less customer credit plan

(4,728)

-

(4,728)

-

Revenue

41,730

49,799

176,320

197,720

Cost of revenue

17,074

19,977

67,560

80,280

Gross margin

24,656

29,822

108,760

117,440

Operating expenses:

General and administrative

9,513

12,116

37,715

46,321

Product development

427

1,850

3,265

5,221

Sales and marketing

3,402

3,289

20,265

12,284

Merger and acquisition related

-

(6,870)

-

(5,828)

Total operating expenses

13,342

10,385

61,245

57,998

Income from operations

11,314

19,437

47,515

59,442

Interest income

17

22

68

109

Interest expense

(70)

(565)

(266)

(967)

Other income

-

78

1,500

310

Net income before income taxes

11,261

18,972

48,817

58,894

Income tax expense

3,632

6,860

16,924

22,024

Net income

$

7,629

$

12,112

$

31,893

$

36,870

Net income available to common stockholders:

Basic

$

7,629

$

12,112

$

31,893

$

36,870

Diluted

$

7,629

$

12,112

$

31,893

$

36,870

Weighted average shares outstanding

Basic

55,060,419

50,998,605

55,210,972

53,877,879

Diluted

59,134,013

54,056,539

59,553,678

56,728,807

Net income available to common stockholders per common share:

Basic

$

0.14

$

0.24

$

0.58

$

0.68

Diluted

$

0.13

$

0.22

$

0.54

$

0.65

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands of dollars, except share and per share amounts)

December 31,

December 31,

2011

2012

Assets

Current assets:

Cash and cash equivalents

$

39,085

$

13,031

Investments in marketable securities and certificate of deposit

15,743

247

Accounts receivable

3,672

4,860

Income receivable

5,961

7,466

Deferred tax assets

33

37

Income tax receivable

12,671

1,593

Prepaid expenses and other current assets

6,774

9,297

Restricted cash

-

2,000

Total current assets

83,939

38,531

Deferred costs

3,776

4,665

Fixed assets, net

46,088

52,686

Intangible assets, net

16,787

38,143

Goodwill

15,830

47,000

Loan receivable related to New Markets Tax Credit financing

7,633

7,633

Other assets

712

740

Restricted cash

1,250

1,500

Total assets

$

176,015

$

190,898

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

3,118

$

3,756

Accrued expenses

26,414

12,526

Contingent consideration, current portion

-

2,230

Deferred tax liabilities

-

356

Deferred revenue

9,690

16,027

Total current liabilities

39,222

34,895

Deferred revenue and other non-current liabilities

2,173

2,517

Debt

-

80,000

Contingent consideration, non-current portion

-

3,520

Loan payable and deferred contribution related to New Markets Tax Credit financing

9,801

9,490

Deferred tax liabilities

1,233

2,764

Total liabilities

52,429

133,186

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; 58,045,404 shares issued and 46,660,781 shares outstanding at December 31, 2012

58

59

Additional paid-in capital

161,268

174,218

Treasury stock, 1,060,123 and 11,384,623 shares at December 31, 2011 and December 31, 2012, respectively

(16,208

)

(131,903

)

Retained earnings (accumulated deficit), net of 2008 stock tender transaction of $93,933

(21,532

)

15,338

Total stockholders' equity

123,586

57,712

Total liabilities and stockholders' equity

$

176,015

$

190,898

Higher One Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands of dollars)

Year ended

December 31,

2011

2012

Cash flows from operating activities

Net income

$

31,893

$

36,870

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

7,021

10,250

Amortization of deferred finance costs

76

213

Stock-based customer acquisition expense

10,493

-