Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today
announced financial results for the second quarter of 2011. The
company reported revenue of $35.1 million, up 26% from $27.8
million in the second quarter of 2010. The year-over-year revenue
growth was primarily attributable to a 39% increase in the number
of OneAccounts and an increase in the number of higher education
institutions contracted for the company’s services, partially
offset by a decrease in revenue per OneAccount due to 2010 changes
to Regulation E as amended by the Federal Reserve Board.
“We continue to execute against our strategic goals and deliver
against the expectations we set with investors, which was clearly
apparent in the second quarter,” stated Dean Hatton, President and
CEO of Higher One. “Our High Touch Service® approach enables us to
constantly obtain feedback from the millions of students and
thousands of school administrators that we’re dedicated to serving.
And we use that feedback to enhance existing products and build new
ones that provide real value for our customers. I’m very pleased
with how we’re positioned as we look towards the start of a new
school year.”
Higher One also reported GAAP net income of $4.8 million, and
non-GAAP adjusted net income, which excludes certain non-recurring
or non-cash items, stock-based compensation, stock-based and other
customer acquisition expense, the gain we recorded in connection
with the settlement of our litigation with the former stockholders
of Informed Decisions Corporation, and amortization of intangible
assets, of $7.1 million. GAAP diluted EPS was $0.08 in the quarter,
up from $0.03 in the second quarter of 2010. Non-GAAP adjusted
diluted EPS was $0.12, up from $0.09 for the same period a year
ago. In the second quarter of 2011, non-GAAP adjusted EBITDA was
$12.0 million, up 30% from $9.2 million in the same period last
year.
The number of OneAccounts at the end of the second quarter of
2011 totaled 1.7 million, up 39% from 1.2 million in the second
quarter of 2010. Total enrollment at higher education clients that
have purchased the OneDisburse® product increased to 3.7 million,
an increase of approximately 864,000 from 2.8 million in the second
quarter of 2010. Total enrollment at higher education clients that
have purchased the CASHNet® suite of payment products increased to
2.6 million, up approximately 235,000 from 2.3 million in the same
period last year.
Operating cash flow in the quarter was $1.5 million, after
having been slightly negative in the second quarter of 2010. Cash,
cash equivalents, and liquid investments totaled $67.4 million as
of June 30, 2011.
Higher One reaffirmed full-year 2011 revenue guidance of $180.0
– $188.0 million. The company increased full-year 2011 guidance for
GAAP diluted EPS to $0.43 – $0.60, and increased non-GAAP adjusted
diluted EPS to $0.72 – $0.77. Higher One issued revenue guidance
for the third quarter of 2011 of $46.0 – $48.0 million. The company
issued GAAP diluted EPS guidance for the third quarter of 2011 of
$0.08 – $0.14. Noting that GAAP diluted EPS is subject to material
and unpredictable impacts from certain M&A-related customer
acquisition expenses, the company issued third quarter 2011
non-GAAP adjusted diluted EPS guidance of $0.17 – $0.19. The
company believes that the non-GAAP adjusted diluted EPS measure,
which excludes certain expenses including stock-based compensation,
stock-based and other customer acquisition expense, and
amortization of intangible assets, and the related tax expense, as
well as gains related to the settlement of litigation, provides a
useful view of more predictable and normalized business trends.
Quarterly Conference Call Information
Higher One will host a conference call at 5 p.m. ET today to
discuss second 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 helping college business offices manage operations and
providing enhanced service to students. Through a full array of
services from refunds, payments, electronic billing, payment plans
and more, Higher One works closely with colleges and universities
to ensure students receive financial aid refunds quickly, can pay
tuition and bills online, make on-campus and community purchases
and learn the basics of financial management.
Higher One provides its services to approximately 5.5 million
students at distinguished public and private higher education
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 Ended June 30, 2010
2011 Revenue: Account revenue $21,732 $27,701 Payment
transaction revenue 2,671 3,080 Higher education institution
revenue 2,744 3,725 Other revenue 603 561 Total
revenue 27,750 35,067 Cost of revenue 10,399 13,423
Gross margin 17,351 21,644 Operating expenses:
General and administrative 7,784 9,015 Product development 793 895
Sales and marketing 5,516 6,701 Total operating
expenses 14,093 16,611 Income from operations 3,258
5,033 Interest income 2 11 Interest expense (247 ) (56 ) Other
income – 1,500 Net income before income taxes 3,013
6,488 Income tax expense 1,183 1,734 Net income
$1,830 $4,754 Net income available to common
stockholders per common share: Basic $532 $4,754 Participating
Securities 1,298 – Diluted $1,830 $4,754
Weighted average shares outstanding Basic 14,518,962
55,117,635 Diluted 55,687,536 59,718,105 Net income
available to common stockholders per common share: Basic $0.04
$0.09 Diluted $0.03 $0.08
Higher One Holdings, Inc.
Unaudited Condensed Consolidated
Balance Sheets
(in thousands of dollars, except share
and per share amounts)
December 31, June 30, 2010
2011
Assets Current assets: Cash and cash equivalents
$34,484 $50,473 Investments in marketable securities 14,697 16,884
Accounts receivable 2,622 5,330 Income receivable 3,719 3,407
Deferred tax assets 48 41 Prepaid expenses and other current assets
6,981 7,432 Restricted cash 8,250 – Total current
assets 70,801 83,567 Deferred costs 3,782 3,447 Fixed
assets, net 9,919 18,890 Intangible assets, net 18,456 16,921
Goodwill 15,830 15,830 Other assets 653 542 Deferred tax assets –
762 Restricted cash – 1,075 Total assets $119,441
$141,034
Liabilities and Stockholders'
Equity Current liabilities: Accounts payable $ 3,063 $ 3,473
Accrued expenses 11,786 13,948 Acquisition payable 8,250 - Deferred
revenue 7,974 10,573 Total current liabilities 31,073
27,994 Deferred revenue 2,051 2,217 Deferred tax
liabilities 2,926 - Total liabilities 36,050
30,211 Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, $.001 par value; 200,000,000
shares authorized; 56,109,234 and56,763,635 shares issued and
outstanding at December 31, 2010 and June 30,2011,
respectively;
56 57 Additional paid-in capital 136,760 148,395 Accumulated
deficit, net of 2008 $93,933 of stock tender transaction (53,425 )
(37,629 ) Total stockholders' equity 83,391 110,823
Total liabilities and stockholders' equity $119,441 $141,034
Higher One Holdings, Inc.
Unaudited Condensed Consolidated
Statements of Cash Flows
(in thousands of dollars)
Six Months Ended June 30, 2010
2011 Cash flows from operating activities Net income
$10,094 $15,796 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
3,373 3,434 Amortization of deferred finance costs 102 36 Non-cash
interest expense 240 – Stock-based customer acquisition expense
4,866 6,935 Stock-based compensation 1,541 2,160 Deferred income
taxes (2,354) (3,681) Gain on litigation settlement agreement –
(1,500) Loss on disposal of fixed assets – 107 Changes in operating
assets and liabilities: Accounts receivable (1,851) (2,708) Income
receivable (132) 312 Deferred costs (1,321) (367) Prepaid expenses
and other current assets (3,524) (451) Other assets (532) 75
Accounts payable 2,642 410 Accrued expenses 555 (1,417) Deferred
revenue 3,495 2,765 Net cash provided by operating activities
17,194 21,906
Cash flows from investing activities Purchases
of available for sale investment securities – (7,787) Proceeds from
sales and maturities of available for sale investment securities –
5,600 Purchases of fixed assets, net of changes in construction
payables of $0 and $3,494, respectively (2,415) (6,696) Payment to
escrow agent (8,250) (1,075) Proceeds from escrow agent – 1,500
Payment of acquisition payable (1,750) – Acquisition of Informed
Decisions Corporation, net of cash acquired 9 – Net cash used in
investing activities (12,406) (8,458)
Cash flows from financing
activities Repayment of capital lease obligations (6) –
Proceeds from line of credit 4,000 – Repayments of line of credit
(22,000) – Proceeds from issuance of common stock, net of issuance
costs 37,756 – Tax benefit related to stock options 1,598 1,878
Proceeds from exercise of stock options 393 663 Net cash provided
by financing activities 21,741 2,541 Net change in cash and cash
equivalents 26,529 15,989 Cash and cash equivalents at beginning of
period 3,339 34,484 Cash and cash equivalents at end of period
$29,868 $50,473
Higher One Holdings, Inc.
Unaudited Supplemental Operating
Data
(in thousands)
Three Months Ended June 30, Sept 30,
Dec 31, March 31, June 30, 2010 2010 2010 2011 2011
OneDisburse SSE (1) 2,795 3,217 3,281 3,413 3,659 y/y growth 33%
45% 41% 27% 31% CASHNet Suite SSE (2) 2,315 2,450 2,460
2,506 2,550 y/y growth 40% 39% 25% 14% 10% Ending
OneAccounts (3) 1,235 1,538 1,618 1,762 1,722 y/y growth 82% 66%
61% 46% 39% (1) OneDisburse SSE is defined as the number of
students enrolled at institutions that have signed contracts to use
the OneDisburse product by the end of a given period (2) CASHNet
Suite SSE is defined as the number of students enrolled at
institutions that have signed contracts to use one or more CASHNet
Suite of Payment Products by the end of a given period, fully
reflecting the number of clients prior to the acquisition of
Informed Decisions Corp. (3) Ending OneAccounts is defined as the
number of open 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 June 30, 2010
2011 Net income $1,830 $4,754 Interest income (2 )
(11 ) Interest expense 247 56 Income tax expense 1,183 1,734
Depreciation and amortization 1,747 1,757 EBITDA
5,005 8,290 Stock-based and other customer acquisition expense
3,508 4,333 Stock-based compensation expense 692 856 Other income
-- (1,500 ) Adjusted EBITDA $9,205 $11,979
Revenues 27,750 35,067 Net Income Margin 6.6 % 13.6 %
Adjusted EBITDA Margin 33.2 % 34.2 %
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 EndedJune 30,
2010 2011 Net income $1,830 $4,754
Stock-based and other customer acquisition expense 3,508 4,333
Stock-based compensation expense - ISO 373 461 Stock-based
compensation expense - NQO 319 395 Other income -- (1,500)
Amortization of intangibles 768 767 Amortization of finance costs
51 18 Total pre-tax adjustments 5,019 4,474 Tax rate 38.70% 38.20%
Tax adjustment 1,796 2,106 Adjusted net income $5,053 $7,122
Diluted average weighted shares outstanding 55,688 59,718 Diluted
EPS $0.03 $0.08 Adjusted Diluted EPS $0.09 $0.12 Revenues
$27,750 $35,067 Net Income Margin 6.6% 13.6% Adjusted Net Income
Margin 18.2% 20.3%
Higher One Holdings, Inc.
Business Outlook
Three Months Ending September 30, 2011
GAAP Non-GAAP (a) Revenues
(in millions) $46.0 - $48.0 $46.0 - $48.0 Diluted EPS
$0.08 - $0.14 $0.17 - $0.19 (a) Estimated Non-GAAP amounts above
for the three months ending September 30, 2011 reflect the
estimated quarterly adjustments that exclude (i) the amortization
of intangibles and finance costs of approximately $800,000, (ii)
stock-based compensation expense of approximately $1.0 million, and
(iii) stock-based and other customer acquisition expense of
approximately $1.5 million to $7.0 million.
Stock-based and other customer acquisition
expense primarily relates to our acquisition of EduCard in 2008, in
connection with which we issued restricted stock, and IDC in 2009.
We calculate the stock-based and other customer acquisition expense
based on the undergraduate enrollment at higher education clients
acquired relating to the acquisition, and the market value of our
common stock at the time the client is acquired. It is difficult to
predict with any degree of certainty either the number of new
higher education clients we will acquire, the timing of future
customer acquisitions, or the market value of our common stock at
any time, resulting in a wide range of expected expense.
Twelve Months Ending December 31, 2011
GAAP
Non-GAAP (b) Revenues (in millions) $180.0
- $188.0 $180.0 - $188.0 Diluted EPS
$0.43 - $0.60 $0.72 - $0.77
(b) Estimated Non-GAAP amounts above for
the twelve months ending December 31, 2011 reflect the estimated
annual adjustments, that exclude (i) the amortization of
intangibles and finance costs of approximately $3.0 million, (ii)
stock-based compensation expense of approximately $4.0 million,
(iii) stock-based and other customer acquisition expense of
approximately $11.0 million to $22.0 million, and (iv) the gain
related to the settlement of litigation with the former
stockholders of Informed Decisions Corporation of approximately
$1.5 million.
Stock-based and other customer acquisition
expense primarily relates to our acquisition of EduCard in 2008, in
connection with which we issued restricted stock, and IDC in 2009.
We calculate the stock-based and other customer acquisition expense
based on the undergraduate enrollment at higher education clients
acquired relating to the acquisition, and the market value of our
common stock at the time the client is acquired. It is difficult to
predict with any degree of certainty either the number of new
higher education clients we will acquire, the timing of future
customer acquisitions, or the market value of our common stock at
any time, resulting in a wide range of expected expense.
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