Higher One Holdings, Inc. (NYSE: ONE) (“Higher One”) today
announced financial results for the third quarter of 2011. The
company reported revenue of $48.1 million, up 25% from $38.6
million in the third quarter of 2010. The year-over-year revenue
growth was primarily attributable to an increase in the number of
OneAccounts and an increase in the number of higher education
institutions contracted for its services.
“I’m pleased to report yet another quarter that falls in line
with our expectations, which I view as a testament to our recurring
and predictable financials,” stated Dean Hatton, President and CEO
of Higher One. “We continue to hear positive feedback from our
clients and customers who are pleased with the High Touch Service®
we provide administrators through the OneDisburse® and CASHNet®
suites, and the value the OneAccount provides for students.”
Higher One also reported GAAP net income of $8.5 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, and amortization of intangible
assets, of $11.1 million. GAAP diluted EPS was $0.14 in the
quarter, up from $0.11 in the third quarter of 2010. Non-GAAP
adjusted diluted EPS was $0.19, up from $0.15 for the same period a
year ago. In the third quarter of 2011, non-GAAP adjusted EBITDA
was $18.2 million, up 17% from $15.5 million in the same period
last year.
The number of OneAccounts at the end of the third quarter of
2011 totaled 2.0 million, up 31% from 1.5 million at the end of the
third quarter of 2010. Total enrollment at higher education clients
that have purchased the OneDisburse service increased to 4.0
million, an increase of approximately 753,000 from 3.2 million at
the end of the third quarter of 2010. Total enrollment at higher
education clients that have purchased the CASHNet suite of payment
products increased to 2.6 million.
Operating cash flow in the quarter was $9.4 million. Cash, cash
equivalents, and liquid investments totaled $51.3 million as of
September 30, 2011. Higher One announced a share repurchase program
during the quarter whereby it may repurchase up to $40 million of
issued and outstanding shares of common stock. The company utilized
$14.2 million to repurchase approximately 944,000 shares at an
average price of $15.10 per share in the quarter.
Higher One narrowed the range on its full-year 2011 revenue and
GAAP diluted EPS guidance to $182.0 – $186.0 million and $0.51 –
$0.58, respectively. Noting that GAAP diluted EPS is subject to
material and unpredictable impacts from certain M&A-related
customer acquisition expenses, the company updated full-year 2011
non-GAAP adjusted diluted EPS guidance to $0.74 – $0.77. Higher One
also issued full-year 2012 guidance of $227.0 – $237.0 million in
revenue and $0.80 – $0.90 in GAAP diluted EPS. The company issued
non-GAAP diluted EPS guidance of $0.90 – $1.00 for full-year 2012.
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,
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 third 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 its 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 5.8 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 September 30,
2010
2011
Revenue: Account revenue $ 28,221 $ 35,800 Payment transaction
revenue 5,496 6,603 Higher education institution revenue 3,528
4,595 Other revenue 1,321 1,142 Total
revenue 38,566 48,140 Cost of revenue 14,390
19,630 Gross margin 24,176 28,510
Operating expenses: General and administrative 8,278 9,415
Product development 762 1,158 Sales and marketing 4,356
4,698 Total operating expenses 13,396
15,271 Income from operations 10,780 13,239
Interest income 10 15 Interest expense (84 ) (66 ) Other income
– – Net income before income taxes
10,706 13,188 Income tax expense 4,277 4,720
Net income $ 6,429 $ 8,468 Net income
available to common stockholders: Basic $ 6,429 $ 8,468
Participating Securities – – Diluted $
6,429 $ 8,468 Weighted average shares
outstanding: Basic 53,987,601 55,470,457 Diluted 59,154,446
59,789,977
Net income available to common
stockholdersper common share:
Basic $ 0.12 $ 0.15 Diluted $ 0.11 $ 0.14
Higher One Holdings, Inc.
Unaudited Condensed Consolidated
Balance Sheets
(in thousands of dollars, except share
and per share amounts)
December 31, September 30,
2010
2011 Assets Current assets: Cash and cash equivalents
$ 34,484 $ 33,442 Investments in marketable securities 14,697
17,889 Accounts receivable 2,622 5,534 Income receivable 3,719
6,293 Deferred tax assets 48 38 Prepaid expenses and other current
assets 6,981 8,291 Restricted cash 8,250 –
Total current assets 70,801 71,487
Deferred costs 3,782 3,398 Fixed assets, net 9,919 37,643
Intangible assets, net 18,456 16,153 Goodwill 15,830 15,830 Other
assets 653 1,787 Deferred tax assets – 1,950 Restricted cash
– 1,075 Total assets $ 119,441 $
149,323
Liabilities and Stockholders' Equity
Current liabilities: Accounts payable $ 3,063 $ 2,487 Accrued
expenses 11,786 22,097 Acquisition payable 8,250 – Deferred revenue
7,974 10,646 Total current liabilities
31,073 35,230 Deferred revenue 2,051
2,143 Deferred tax liabilities 2,926 –
Total liabilities 36,050 37,373
Commitments and contingencies Stockholders' equity:
Common stock, $.001 par value; 200,000,000
shares authorized; 56,109,234and 56,763,635 shares issued and
outstanding at December 31, 2010 andSeptember 30, 2011,
respectively;
56 57 Additional paid-in capital 136,760 155,298 Treasury stock,
943,549 shares at September 30, 2011 – (14,244 ) Accumulated
deficit, net of 2008 stock tender transaction of $93,933
(53,425 ) (29,161 ) Total stockholders' equity 83,391
111,950 Total liabilities and stockholders'
equity $ 119,441 $ 149,323
Higher One Holdings, Inc.
Unaudited Condensed Consolidated
Statements of Cash Flows
(in thousands of dollars)
Nine Months Ended September 30, 2010
2011 Cash flows from operating
activities Net income $ 16,522 $ 24,264 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,321 5,204 Amortization of deferred
finance costs 153 54 Non-cash interest expense 258 – Stock-based
customer acquisition expense 6,988 9,233 Stock-based compensation
2,184 3,049 Deferred income taxes (4,024 ) (4,866 ) Gain on
litigation settlement agreement – (1,500 ) Loss on disposal of
fixed assets – 343 Changes in operating assets and liabilities:
Accounts receivable (1,669 ) (2,912 ) Income receivable (1,057 )
(2,574 ) Deferred costs (1,917 ) (645 ) Prepaid expenses and other
current assets (822 ) (1,310 ) Other assets (109 ) (9 ) Accounts
payable (115 ) (576 ) Accrued expenses 1,188 816 Deferred revenue
4,140 2,764 Net cash provided by
operating activities 27,041 31,335
Cash flows from investing activities Purchases of available
for sale investment securities (20,818 ) (11,192 ) Proceeds from
sales and maturities of available for sale investment securities
6,080 8,000
Purchases of fixed assets, net of changes
in construction payables of $0 and $9,410,respectively
(5,899 ) (21,623 ) Payment to escrow agent (8,250 ) (1,075 )
Proceeds from escrow agent – 1,500 Payment of acquisition payable
(1,750 ) – Net cash used in investing
activities (30,637 ) (24,390 )
Cash flows from
financing activities Tax benefit related to stock options 2,170
5,274 Proceeds from exercise of stock options 817 983 Repurchase of
common stock - (14,244 ) Repayments of line of credit (22,000 ) -
Proceeds from issuance of common stock, net of issuance costs
37,209 - Proceeds from line of credit 4,000 - Repayment of capital
lease obligations (7 ) - Net cash provided by
(used in) financing activities 22,189 (7,987 )
Net change in cash and cash equivalents 18,593 (1,042 ) Cash and
cash equivalents at beginning of period 3,339
34,484 Cash and cash equivalents at end of period $ 21,932
$ 33,442
Higher One Holdings, Inc.
Unaudited Supplemental Operating
Data
(in thousands)
Three Months Ended Sept 30, Dec 31,
March 31, June 30, Sept 30, 2010 2010 2011 2011 2011
OneDisburse SSE (1) 3,217 3,281 3,413 3,659 3,970 y/y growth 45%
41% 27% 31% 23% CASHNet suite SSE (2) 2,450 2,460 2,506
2,550 2,576 y/y growth 39% 25% 14% 10% 5% Ending OneAccounts
(3) 1,538 1,618 1,762 1,722 2,015 y/y growth 66% 61% 46% 39% 31%
(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) CASHNet suite SSE is defined as the number of
students enrolled at institutions that have signed contracts to use
one or more CASHNet 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 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 September 30, 2010
2011 Net income $ 6,429 $ 8,468
Interest income (10 ) (15 ) Interest expense 84 66 Income tax
expense 4,277 4,720 Depreciation and amortization 1,947
1,770 EBITDA 12,727 15,009 Stock-based and
other customer acquisition expense 2,139 2,320 Stock-based
compensation expense 643 889 Other income – –
Adjusted EBITDA $ 15,509 $ 18,218
Revenues 38,566 48,140 Net Income Margin 16.7 % 17.6 % Adjusted
EBITDA Margin 40.2 % 37.8 %
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 September 30, 2010
2011 Net income $ 6,429 $ 8,468
Stock-based and other customer acquisition expense 2,139 2,320
Stock-based compensation expense - ISO 338 480 Stock-based
compensation expense - NQO 305 409 Other income – – Amortization of
intangibles 768 768 Amortization of deferred finance costs
51 18 Total pre-tax adjustments 3,601 3,995 Tax rate 38.6%
38.2% Tax adjustment (a) 1,259 1,343 Adjusted net
income $ 8,771 $ 11,120 Diluted average weighted shares
outstanding 59,154 59,790 Diluted EPS $0.11 $0.14 Adjusted Diluted
EPS $0.15 $0.19 Revenues 38,566 48,140 Net Income Margin
16.7% 17.6% Adjusted Net Income Margin 22.7% 23.1%
Higher One Holdings, Inc.
Business Outlook
Twelve Months
Ending December 31, 2011
GAAP
Non-GAAP
(a)
Revenues (in millions) $182.0 - $186.0 $182.0
-
$186.0 Diluted EPS $0.51 - $0.58 $0.74 - $0.77 (a) Estimated
Non-GAAP amounts above for the twelve months ending December 31,
2011 reflect the estimated quarterly 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 $17.5
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. Twelve Months Ending December
31, 2012
GAAP
Non-GAAP
(b)
Revenues (in millions) $227.0 - $237.0 $227.0
- $237.0 Diluted EPS $0.80 - $0.90 $0.90 - $1.00 (b)
Estimated Non-GAAP amounts above for the twelve months ending
December 31, 2012 reflect the estimated annual adjustments, that
exclude (i) the amortization of intangibles and finance costs of
approximately $3.0 million, and (ii) stock-based compensation
expense of approximately $5.0 million.
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