Higher One Holdings, Inc. Reports First Quarter 2013 Financial Results

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

    • 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, Conn.--(BUSINESS WIRE)-- Higher One Holdings, Inc. (NYS: 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. (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 1,600 campuses and over 13.2 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 (Note 7)

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