Higher One Holdings, Inc. (NYSE:ONE) (“Higher One” or the “Company”), today announced financial results for the second quarter 2014. The Company reported second quarter 2014 gross revenue of $45.5 million, an increase of 14% from $40.0 million reported in the second quarter of 2013. Revenue growth was driven by the strong organic growth in the Payment Processing suite of products.
Marc Sheinbaum, president and chief executive officer, said, “Overall, we are pleased with our performance this quarter. We have experienced strong organic growth in both Payment Transaction and Higher Education revenue, and are also encouraged by growth in non-refund deposits. We continue to deliver value to our customers and operate effectively in this challenging environment.”
After making an allowance for possible customer restitution of $8.75 million, which reduced gross revenue from $45.5 million to net revenue of $36.7 million, the Company reported second quarter 2014 non-GAAP adjusted diluted EPS of $0.05, as compared to $0.04 for the same period a year ago. Non-GAAP adjusted net income, which excludes certain non-recurring, non-cash items and other items, was $2.5 million in second quarter 2014, which compares to non-GAAP adjusted net income of $2.2 million in the second quarter of 2013. In the second quarter of 2014, non-GAAP adjusted EBITDA was $7.2 million, as compared to $5.9 million last year. GAAP diluted EPS was a loss of $0.08 in the quarter, as compared to income of $0.07 recorded in the second quarter of 2013. The Company reported a second quarter 2014 GAAP net loss of $3.8 million compared to GAAP net income of $3.6 million in the second quarter of 2013.
Total enrollment at higher education clients that signed an agreement for Refund Management services increased approximately 339,000 to 5.1 million at the end of the second quarter of 2014. Total enrollment at higher education clients that have signed up for at least one of our Refund Management, Payment Processing, or Campus Labs services totals approximately 13 million.
The number of OneAccounts serviced at the end of the second quarter of 2014 was approximately 2.1 million, compared to approximately 2.2 million in the second quarter of 2013.
Conference Call Information
Higher One will host a conference call at 8:30 a.m. ET today to discuss second quarter results. The dial in phone number is (800) 299-8538 for domestic listeners and (617) 786-2902 for international listeners. The conference ID number is 99786169. 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. A replay of the call will be available at (888) 286-8010 for domestic listeners and (617) 801-6888 for international listeners. Please use the passcode 61021092 to access the replay.
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 approximately 13 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, non-cash impacts and other adjustments 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 June 30, | Six Months Ended June 30, | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Account revenue | $ | 26,345 | $ | 25,944 | $ | 68,007 | $ | 69,307 | ||||||||||||
| Payment transaction revenue | 9,835 | 6,086 | 24,455 | 12,787 | ||||||||||||||||
| Higher education institution revenue | 9,050 | 7,725 | 19,029 | 14,866 | ||||||||||||||||
| Other revenue | 247 | 268 | 542 | 443 | ||||||||||||||||
| Gross revenue | 45,477 | 40,023 | 112,033 | 97,403 | ||||||||||||||||
| Less: allowance for customer restitution | (8,750 | ) | - | (8,750 | ) | - | ||||||||||||||
| Revenue | 36,727 | 40,023 | 103,283 | 97,403 | ||||||||||||||||
| Cost of revenue | 21,102 | 17,894 | 48,696 | 40,194 | ||||||||||||||||
| Gross margin | 15,625 | 22,129 | 54,587 | 57,209 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| General and administrative | 16,015 | 13,576 | 31,726 | 26,665 | ||||||||||||||||
| Product development | 1,770 | 2,444 | 3,962 | 4,339 | ||||||||||||||||
| Sales and marketing | 4,705 | 4,632 | 9,179 | 7,839 | ||||||||||||||||
| Merger and acquisition related | - | (5,011 | ) | - | (4,465 | ) | ||||||||||||||
| Total operating expenses | 22,490 | 15,641 | 44,867 | 34,378 | ||||||||||||||||
| Income from operations | (6,865 | ) | 6,488 | 9,720 | 22,831 | |||||||||||||||
| Interest income | 34 | 20 | 53 | 39 | ||||||||||||||||
| Interest expense | (792 | ) | (766 | ) | (1,615 | ) | (1,395 | ) | ||||||||||||
| Other income | 1,681 | 78 | 1,759 | 155 | ||||||||||||||||
| Net income (loss) before income taxes | (5,942 | ) | 5,820 | 9,917 | 21,630 | |||||||||||||||
| Income tax expense | (2,171 | ) | 2,261 | 3,978 | 8,269 | |||||||||||||||
| Net income (loss) | $ | (3,771 | ) | $ | 3,559 | $ | 5,939 | $ | 13,361 | |||||||||||
| Net income (loss) available to common stockholders: | ||||||||||||||||||||
| Basic | $ | (3,771 | ) | $ | 3,559 | $ | 5,939 | $ | 13,361 | |||||||||||
| Diluted | $ | (3,771 | ) | $ | 3,559 | $ | 5,939 | $ | 13,361 | |||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 47,198,922 | 46,704,451 | 47,141,355 | 46,489,470 | ||||||||||||||||
| Diluted | 47,198,922 | 48,382,828 | 48,189,411 | 48,354,283 | ||||||||||||||||
| Net income (loss) available to common stockholders per common share: | ||||||||||||||||||||
| Basic | $ | (0.08 | ) | $ | 0.08 | $ | 0.13 | $ | 0.29 | |||||||||||
| Diluted | $ | (0.08 | ) | $ | 0.07 | $ | 0.12 | $ | 0.28 | |||||||||||
| Higher One Holdings, Inc. | ||||||||||
| Consolidated Balance Sheet | ||||||||||
| (In thousands of dollars, except share and per share amounts) | ||||||||||
| June 30, 2014 | December 31, 2013 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 18,059 | $ | 6,268 | ||||||
| Investments in marketable securities | 248 | 247 | ||||||||
| Accounts receivable | 13,973 | 8,747 | ||||||||
| Income receivable | 7,377 | 6,680 | ||||||||
| Deferred tax assets | 480 | 5,895 | ||||||||
| Prepaid expenses and other current assets | 9,368 | 7,725 | ||||||||
| Restricted cash | 250 | 250 | ||||||||
| Total current assets | 49,755 | 35,812 | ||||||||
| Deferred costs | 4,971 | 4,373 | ||||||||
| Fixed assets, net | 48,675 | 49,888 | ||||||||
| Intangible assets, net | 58,367 | 59,834 | ||||||||
| Goodwill | 67,403 | 67,403 | ||||||||
| Loan receivable related to New Markets Tax Credit financing | 7,633 | 7,633 | ||||||||
| Other assets | 4,998 | 4,940 | ||||||||
| Restricted cash | 2,475 | 2,500 | ||||||||
| Total assets | $ | 244,277 | $ | 232,383 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 2,655 | $ | 3,787 | ||||||
| Accrued expenses | 25,059 | 30,322 | ||||||||
| Deferred revenue | 27,460 | 22,392 | ||||||||
| Total current liabilities | 55,174 | 56,501 | ||||||||
| Deferred revenue and other non-current liabilities | 2,341 | 2,342 | ||||||||
| Loan payable and deferred contribution related to New Markets Tax Credit financing | 9,026 | 9,181 | ||||||||
| Debt | 94,000 | 89,000 | ||||||||
| Deferred tax liabilities | 2,237 | 2,393 | ||||||||
| Total liabilities | 162,778 | 159,417 | ||||||||
| Commitments and contingencies (Note 6) | ||||||||||
| Stockholders’ equity: | ||||||||||
| Common stock, $.001 par value; 200,000,000 shares authorized; 59,500,405 shares issued and 47,587,379 shares outstanding at June 30, 2014; 59,028,810 shares issued and 47,115,784 shares outstanding at December 31, 2013 | 60 | 60 | ||||||||
| Additional paid-in capital | 183,933 | 181,339 | ||||||||
| Treasury stock, 11,913,026 shares at June 30, 2014 and December 31, 2013 | (137,899 | ) | (137,899 | ) | ||||||
| Retained earnings | 35,405 | 29,466 | ||||||||
| Total stockholders’ equity | 81,499 | 72,966 | ||||||||
| Total liabilities and stockholders’ equity | $ | 244,277 | $ | 232,383 | ||||||
| Higher One Holdings, Inc. | ||||||||||
| Consolidated Cash Flow Statement | ||||||||||
| (In thousands of dollars, except share and per share amounts) | ||||||||||
| Six Months Ended June 30, | ||||||||||
| 2014 | 2013 | |||||||||
| Cash flows from operating activities | ||||||||||
| Net income | $ | 5,939 | $ | 13,361 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 8,887 | 6,598 | ||||||||
| Amortization of deferred finance costs | 245 | 223 | ||||||||
| Non-cash fair value adjustment of contingent consideration | - | (5,215 | ) | |||||||
| Stock-based compensation | 2,348 | 2,326 | ||||||||
| Deferred income taxes | 5,259 | 990 | ||||||||
| Income tax benefit related to exercise of stock options | (17 | ) | (735 | ) | ||||||
| Other income | (155 | ) | (154 | ) | ||||||
| Loss on disposal of fixed assets | 84 | 16 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (5,226 | ) | (5,687 | ) | ||||||
| Income receivable | (697 | ) | (6,057 | ) | ||||||
| Deferred costs | (1,807 | ) | (477 | ) | ||||||
| Prepaid expenses and other current assets | (5,111 | ) | 5,086 | |||||||
| Other assets | (86 | ) | (330 | ) | ||||||
| Accounts payable | (1,132 | ) | (1,160 | ) | ||||||
| Accrued expenses | (5,375 | ) | 1,731 | |||||||
| Deferred revenue | 5,067 | 4,989 | ||||||||
| Net cash provided by operating activities | 8,223 | 15,505 | ||||||||
| Cash flows from investing activities | ||||||||||
| Purchases of fixed assets, net of changes in payables of ($238) and ($153), respectively | (2,334 | ) | (3,296 | ) | ||||||
| Cash paid for acquired businesses | - | (47,250 | ) | |||||||
| Additions to internal use software | (2,754 | ) | (966 | ) | ||||||
| Amounts received from restricted cash | 25 | 2,000 | ||||||||
| Proceeds from development related subsidies | 3,468 | - | ||||||||
| Net cash used in investing activities | (1,595 | ) | (49,512 | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Proceeds from line of credit | 15,000 | 52,000 | ||||||||
| Repayments of line of credit | (10,000 | ) | (20,000 | ) | ||||||
| Excess tax benefit related to stock options | 17 | 735 | ||||||||
| Proceeds from exercise of stock options | 146 | 1,060 | ||||||||
| Purchases of common stock | - | (5,996 | ) | |||||||
| Net cash provided by financing activities | 5,163 | 27,799 | ||||||||
| Net change in cash and cash equivalents | 11,791 | (6,208 | ) | |||||||
| Cash and cash equivalents at beginning of period | 6,268 | 13,031 | ||||||||
| Cash and cash equivalents at end of period | $ | 18,059 | $ | 6,823 | ||||||
Higher One Holdings, Inc. Unaudited Supplemental Operating Data (In thousands) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||
| 2013 | 2013 | 2013 | 2014 | 2014 | ||||||||||||||||
| Refund Management SSE (1) | 4,798 | 4,752 | 5,000 | 5,083 | 5,119 | |||||||||||||||
| y/y growth | 7 | % | 4 | % | 8 | % | 8 | % | 7 | % | ||||||||||
| Ending OneAccounts (2) | 2,165 | 2,194 | 2,192 | 2,292 | 2,088 | |||||||||||||||
| y/y growth | 14 | % | 5 | % | 9 | % | 6 | % | -4 | % | ||||||||||
| (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 | Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Net income (loss) | $ | (3,771 | ) | $ | 3,559 | $ | 5,939 | $ | 13,361 | |||||||||||
| Interest income | (34 | ) | (20 | ) | (53 | ) | (39 | ) | ||||||||||||
| Interest expense | 792 | 766 | 1,615 | 1,395 | ||||||||||||||||
| Income tax expense | (2,171 | ) | 2,261 | 3,978 | 8,269 | |||||||||||||||
| Depreciation and amortization | 4,432 | 3,487 | 8,887 | 6,598 | ||||||||||||||||
| EBITDA | (752 | ) | 10,053 | 20,366 | 29,584 | |||||||||||||||
| Merger and acquisition related expenses | - | (5,011 | ) | - | (4,465 | ) | ||||||||||||||
| Stock-based compensation expense | 790 | 841 | 2,348 | 2,326 | ||||||||||||||||
| Allowance for customer restitution | 8,750 | - | 8,750 | - | ||||||||||||||||
| Campus Solutions settlement received | (1,604 | ) | - | (1,604 | ) | - | ||||||||||||||
| Adjusted EBITDA | $ | 7,184 | $ | 5,883 | $ | 29,860 | $ | 27,445 | ||||||||||||
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 | Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Net income (loss) | $ | (3,771 | ) | $ | 3,559 | $ | 5,939 | $ | 13,361 | |||||||||||
| Merger and acquisition related expense | - | (5,011 | ) | - | (4,465 | ) | ||||||||||||||
| Allowance for customer restitution | 8,750 | - | 8,750 | - | ||||||||||||||||
| Campus Solutions settlement received | (1,604 | ) | - | (1,604 | ) | - | ||||||||||||||
| Stock-based compensation expense - incentive stock option grants | 292 | 500 | 717 | 985 | ||||||||||||||||
| Stock-based compensation expense - non-qualified stock option grants | 498 | 341 | 1,631 | 1,341 | ||||||||||||||||
| Amortization of intangibles | 1,931 | 1,491 | 4,066 | 2,621 | ||||||||||||||||
| Amortization of deferred finance costs | 122 | 112 | 245 | 223 | ||||||||||||||||
| Total pre-tax adjustments | 9,989 | (2,567 | ) | 13,805 | 705 | |||||||||||||||
| Tax rate | 38.5 | % | 38.5 | % | 38.5 | % | 38.5 | % | ||||||||||||
| Tax adjustment | 3,733 | (1,181 | ) | 5,039 | (108 | ) | ||||||||||||||
| Adjusted net income | $ | 2,485 | $ | 2,173 | $ | 14,705 | $ | 14,174 | ||||||||||||
| Diluted weighted average shares outstanding (non-GAAP) | 47,955,706 | 48,382,828 | 48,189,411 | 48,354,283 | ||||||||||||||||
| GAAP net income per share (diluted) | $ | (0.08 | ) | $ | 0.07 | $ | 0.12 | $ | 0.28 | |||||||||||
| Non-GAAP adjusted net income per share (diluted) | $ | 0.05 | $ | 0.04 | $ | 0.31 | $ | 0.29 | ||||||||||||
Contacts:
Investor Relations:
Kevin LeBlanc,
203-776-7776 x 4296
kevin.leblanc@higherone.com
or
Media
Relations:
Shoba Lemoine, 203-776-7776 x 4503
slemoine@higherone.com
