News Column

Higher One Holdings, Inc. Reports First Quarter 2014 Financial Results

May 8, 2014

  • Quarterly revenue of $66.6 million, up 16.0% year-over-year, driven by Payment Processing revenue growth
  • Refund Management total sales of 90,000 Signed School Enrollment (SSE) in first quarter
  • Over 450,000 SSE signed from Campus Solutions to Refund Management since acquisition



    NEW HAVEN, Conn.--(BUSINESS WIRE)-- Higher One Holdings, Inc.(NYSE:ONE) (“Higher One” or the “Company”), today announced financial results for the first quarter 2014. The Company reported first quarter 2014 revenue of $66.6 million, an increase of 16.0% from $57.4 million reported in the first quarter of 2013. Revenue growth was driven by the addition of payment processing revenue from the Campus Solutions business acquired from Sallie Mae and from organic growth in the pre-existing Payment Processing suite of products.

    Marc Sheinbaum, Chief Executive Officer, said, “I am pleased with the solid revenue growth that we experienced in the first quarter. Our Payment Processing and Higher Education revenue continue to grow at impressive rates, driven by Campus Solutions contributions and organic payment processing growth. We experienced strong sales in both Refund Management and Payment Processing in the first quarter. The amount of non-refund deposits continues to grow and help expand our deposit base. With our strong foundation and increasingly diversified business lines, I believe that we have the ability to create long-term value for our shareholders.”

    First quarter 2014 non-GAAP adjusted diluted EPS was $0.25, as compared to $0.25 for the same period a year ago. Non-GAAP adjusted net income, which excludes certain non-recurring or non-cash items, was $12.2 million in first quarter 2014, which compares to non-GAAP adjusted net income of $12.0 million in first quarter 2013. In the first quarter of 2014, non-GAAP adjusted EBITDA was $22.7 million, as compared to $21.6 million last year. GAAP diluted EPS was $0.20 in the quarter, as compared to $0.20 in the first quarter of 2013. The Company reported first quarter 2014 GAAP net income of $9.7 million compared to GAAP net income of $9.8 million in first quarter 2013.

    Total enrollment at higher education clients that signed an agreement for Refund Management services increased to 5.1 million, an increase of approximately 398,000 from 4.7 million at the end of the first quarter of 2013. Total enrollment at higher education clients that have signed up for at least one of our Refund Management, Payment Processing, or Educational Services modules totals approximately 13.2 million.

    The number of OneAccounts at the end of the first quarter of 2014 was approximately 2.3 million, up 6% from the first quarter of 2013.

    Conference Call Information

    Higher One will host a conference call at 8:30 a.m. ET today to discuss first quarter results. The dial in phone number is (866) 700-5192 for domestic listeners and (617) 213-8833 for international listeners. The conference ID number is 51107743. 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) partners with colleges and universities to lower their administrative costs and to improve graduation rates. We provide a broad array of payment, refund disbursement and data analytics and management tools to institutions that help them save money and enhance institutional effectiveness. And for students, we offer financial literacy programs and convenient, flexible and affordable transaction options to help them manage their finances. Higher One is a leader in higher education, supporting more than 1,900 schools and 13.2 million enrolled students. 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 concerning management’s expectations about future events and Higher One’s operating plans and performance, bank partners, the regulatory environment, banking fees, litigation, sales, and the expected benefits of acquisitions, and such statements are based on the current beliefs and expectations of Higher One 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. 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’s business, please refer to Higher One’s filings with the Securities and Exchange Commission, including our Annual Report 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.
    Consolidated Income Statement
    (In thousands of dollars, except share and per share amounts)
     
     
    Three Months
    Ended March 31,
    20142013
    Revenue:
    Account revenue $ 41,662 $ 43,363
    Payment transaction revenue 14,620 6,701
    Higher education institution revenue 9,979 7,141
    Other revenue   295     175  
    Revenue 66,556 57,380
    Cost of revenue   27,594     22,300  
    Gross margin   38,962     35,080  
    Operating expenses:
    General and administrative 15,711 13,089
    Product development 2,192 1,895
    Sales and marketing 4,474 3,207
    Merger and acquisition related expenses   -     546  
    Total operating expenses   22,377     18,737  
    Income from operations 16,585 16,343
    Interest income 19 19
    Interest expense (823 ) (629 )
    Other income   78     77  
    Net income before income taxes 15,859 15,810
    Income tax expense   6,149     6,008  
    Net income $ 9,710   $ 9,802  
     
    Net income available to common stockholders:
    Basic $ 9,710   $ 9,802  
    Diluted $ 9,710   $ 9,802  
     
    Weighted average shares outstanding
    Basic 47,082,397 46,268,310
    Diluted 48,340,468 48,303,907
     
    Net income available to common stockholders per common share:
    Basic $ 0.21 $ 0.21
    Diluted $ 0.20 $ 0.20
     
     
    Higher One Holdings, Inc.
    Consolidated Balance Sheet
    (In thousands of dollars, except share and per share amounts)
       
     
    March 31, 2014December 31, 2013
    Assets
    Current assets:
    Cash and cash equivalents $ 10,951 $ 6,268
    Investments in marketable securities 248 247
    Accounts receivable 10,996 8,747
    Income receivable 9,543 6,680
    Deferred tax assets 504 5,895
    Prepaid expenses and other current assets 4,132 7,725
    Restricted cash   250     250  
    Total current assets   36,624     35,812  
    Deferred costs 5,139 4,373
    Fixed assets, net 49,359 49,888
    Intangible assets, net 58,913 59,834
    Goodwill 67,403 67,403
    Loan receivable related to New Markets Tax Credit financing 7,633 7,633
    Other assets 4,938 4,940
    Restricted cash   2,475     2,500  
    Total assets $ 232,484   $ 232,383  
     
    Liabilities and Stockholders' Equity
    Current liabilities:
    Accounts payable $ 2,938 $ 3,787
    Accrued expenses 17,006 30,322
    Contingent consideration, current portion - -
    Deferred tax liabilities - -
    Deferred revenue   20,815     22,392  
    Total current liabilities 40,759 56,501
    Deferred revenue and other non-current liabilities 2,304 2,342

    Loan payable and deferred contribution related to New

    Markets Tax Credit financing

    9,103 9,181
    Debt 94,000 89,000
    Contingent consideration, non-current portion - -
    Deferred tax liabilities   2,016     2,393  
    Total liabilities   148,182     159,417  
    Commitments and contingencies (Note 6)
    Stockholders’ equity:

    Common stock, $.001 par value; 200,000,000 shares

    authorized; 59,122,908 shares issued and 47,209,882 shares

    outstanding at March 31, 2014; 59,028,810 shares issued and

    47,115,784 shares outstanding at December 31, 2013

    60 60
    Additional paid-in capital 182,965 181,339

    Treasury stock, 11,913,026 shares at March 31, 2014 and

    December 31, 2013

    (137,899 ) (137,899 )
    Retained earnings   39,176     29,466  
    Total stockholders’ equity   84,302     72,966  
    Total liabilities and stockholders’ equity $ 232,484   $ 232,383  
     
     
    Higher One Holdings, Inc.
    Consolidated Cash Flow Statement
    (In thousands of dollars, except share and per share amounts)
       
     
    Three Months Ended March 31,
    20142013
    Cash flows from operating activities
    Net income $ 9,710 $ 9,802

    Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization 4,455 3,111
    Amortization of deferred finance costs 123 111
    Non-cash fair value adjustment of contingent consideration - 89
    Stock-based compensation 1,558 1,485
    Deferred income taxes 5,014 (856 )
    Income tax benefit related to exercise of stock options (3 ) (148 )
    Other income (78 ) (77 )
    Loss on disposal of fixed assets 32 8
    Changes in operating assets and liabilities:
    Accounts receivable (2,249 ) (1,689 )
    Income receivable (2,863 ) 551
    Deferred costs (1,354 ) (184 )
    Prepaid expenses and other current assets 126 4,763
    Other assets (26 ) (92 )
    Accounts payable (849 ) (532 )
    Accrued expenses (13,391 ) 5,954
    Deferred revenue   (1,615 )   238  
    Net cash provided by (used in) operating activities   (1,410 )   22,534  
    Cash flows from investing activities

    Purchases of fixed assets, net of changes in payables of $- and

    ($153), respectively

    (1,157 ) (1,259 )
    Additions to internal use software (1,265 ) (631 )
    Amounts received from restricted cash 25 -
    Proceeds from development related subsidies   3,468     -  
    Net cash provided by (used in) investing activities   1,071     (1,890 )
    Cash flows from financing activities
    Proceeds from line of credit 15,000 3,000
    Repayments of line of credit (10,000 ) (20,000 )
    Excess tax benefit related to stock options 3 148
    Proceeds from exercise of stock options 19 224
    Purchases of common stock   -     (5,996 )
    Net cash provided by (used in) financing activities   5,022     (22,624 )
    Net change in cash and cash equivalents 4,683 (1,980 )
    Cash and cash equivalents at beginning of period   6,268     13,031  
    Cash and cash equivalents at end of period $ 10,951   $ 11,051  
     
     

    Higher One Holdings, Inc.

    Unaudited Supplemental Operating Data

    (In thousands)

     
     
    Three Months Ended
    March 31,   June 30,   September 30,   December 31,   March 31
    2013 2013 2013 2013 2014
     
    Refund Management SSE (1) 4,709 4,798 4,752 5,000 5,083
    y/y growth 9% 7% 4% 8% 8%
     
    Ending OneAccounts (2) 2,161 2,165 2,194 2,192 2,292
    y/y growth 2% 14% 5% 9% 6%
     
     
    (1) Refund Management SSE is defined as the number of students enrolled at institutions that have signed contracts to use the Refund Management 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) 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,
    2014     2013
    (unaudited)
    (in thousands)
     
    Net income $ 9,710 $ 9,802
    Interest income (19 ) (19 )
    Interest expense 823 629
    Income tax expense 6,149 6,008
    Depreciation and amortization   4,455     3,111  
    EBITDA 21,118 19,531
    Merger and acquisition related expenses - 546
    Stock-based compensation expense   1,558     1,485  
    Adjusted EBITDA $ 22,676   $ 21,562  
     
     

    Higher One Holdings, Inc.

    Unaudited Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Adjusted Diluted EPS

    (In thousands, except share and per share amounts)

     
     
    Three Months Ended
    March 31,
    2014   2013
    (unaudited)
    (in thousands)
     
    Net income $ 9,710 $ 9,802
     
    Merger and acquisition related expense - 546

    Stock-based compensation expense - incentive

    stock option grants

    425 484

    Stock-based compensation expense - non-

    qualified stock option grants

    1,133 1,001
    Amortization of intangibles 2,135 1,130
    Amortization of deferred finance costs   123     111  
    Total pre-tax adjustments 3,816 3,272
    Tax rate 38.5 %

    38.5

    %

    Tax adjustment   1,306     1,073  
    Adjusted net income $ 12,220   $ 12,001  
     
    Diluted weighted average shares outstanding 48,340,468 48,303,907
    GAAP net income per share $ 0.20 $ 0.20
    Non-GAAP adjusted net income per share $ 0.25 $ 0.25
     





    Higher One Holdings, Inc.

    Investor Relations:

    Kevin LeBlanc, 203-776-7776 x4296

    kevin.leblanc@higherone.com

    or

    Media Relations:

    Shoba Lemoine, 203-776-7776 x 4503

    slemoine@higherone.com

    Source: Higher One Holdings, Inc.


  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: Business Wire