®
Higher One Holdings, Inc.
JMP Securities Research Conference
September 13, 2012
0
Forward‐looking statements
This presentation includes forward‐looking statements, as defined by the Securities and Exchange C
Commission. Management’s projections and expectations are subject to a number of risks and i i
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uncertainties that could cause actual performance to differ materially from those 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
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 presentation or to reflect the occurrence of any unanticipated events. The forward‐looking statements in this presentation 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, available on our website at http://ir.higherone.com/.
This presentation includes certain metrics presented on a non‐GAAP basis, including non‐GAAP adjusted EBITDA, non‐GAAP adjusted EBITDA margin, non‐GAAP adjusted net income, non‐GAAP adjusted diluted EPS, and non‐GAAP Free Cash Flow. We believe that these non‐GAAP measures, which exclude amortization of intangibles, stock based compensation, and certain one‐time 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 the appendix of this presentation.
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Agenda
• Higher One Overview
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• Value Proposition for Students and Schools
• Overview of Campus Labs Acquisition
Overview of Campus Labs Acquisition
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
2
Higher One Overview
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
3
What We Do
Higher One provides electronic financial aid disbursements and payment services to the higher education industry
Financial Aid
Government Grants
(Pell, state programs)
$
Government Loans
(Stafford, PLUS)
Private Loans
(Various banks)
Financial Aid Disbursement
Students
Data Analytics
Universities
$
Private Grants
$
$
Banking Services to
Services to Students
$
Tuition & Other
Payments
Students
OneAccount
Parents
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
4
OneDisburse Revenue Drivers
Total Student Population (~21 million)
School Penetration
OneDisburse SSE (4.5 million)
Adoption Rate
Number of OneAccounts (1.9 million)
Acct Rev per OneAccount
Account Revenue (($150 million TTM))
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
5
Value Proposition for Students and Schools
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
6
Value Proposition for Schools
Pitch
Benefits to School/Students
• Increased efficiency from making paper‐based process electronic
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Cost Savings
Effectiveness
• Experience/specialization that comes with outsourcing
• Allows schools to reallocate headcount
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• Reduced expenses leads to tuition cost offsets for students
• Students receive refunds faster, easier, and have more choice
Student Services
• Top quality customer service
• Access to a no minimum balance checking account
Access to a no minimum balance checking account
• Low‐cost alternative to national/regional bank checking accounts
Data Security
Compliance
• School no longer has to collect/store sensitive financial g
information from students
• Higher One’s process is built around regulatory compliance
• Audit report for Dept. of Ed. submitted on behalf of the school
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Account Options Provide Choice and Value for Students
*
*
Fee Considerations
Fee Considerations
• No minimum balance requirements
• No minimum balance requirements
• Monthly fee of $4.95
• No monthly fee
• One fee only… no a la carte fees
• Fee schedule easily available online
• Monthly fee of $5.95 waived with minimum of $300 direct deposit
• Designed to be used for free
• No PIN fees
• Simplest account on the market
• Allpoint ATM network access
• VIP service line, budgeting tool, other perks available
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Strategic Reasoning
• Account with no monthly fee d i dt b
designed to be used for free, great df f
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deal for students
• Incentivizing direct deposit to drive more primary bank account i
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behavior
• Simple, low monthly fee with no additional fees, helpful for budgeting
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• Many industry experts appreciate uniform costs for all customers
*The OneAccount edge and certain changes to the OneAccount Premier will not be available until later in 2012
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Low Cost Offering vs. Competition
Source: Bretton Woods, Inc.,“Using Financial Aid Refunds: What Are Banking Options Costing College Students?” March 2012
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
9
As other bank fees rise, value of OneAccount increases
MoneyRates.com Bank Fee Survey* shows average
bank fees for mid-2012 ((compared
p
to EOY 2011):
)
Fee/Feature
Mid‐2012 Average
vs. EOY 2011 Average
Higher One
Minimum deposit deposit
$408 76
$408.76
required to open account
+4 4%
+4.4%
None
Monthly service fee
+7.1%
None
Minimum balance for fee $4,446.57
waiver
+23.8%
N/A
Percentage of accounts without a monthly fee
‐9.0%
Offers account with no monthly fee
$12.08 (total of nearly $145/year)
35.3%
*http://www.money-rates.com/research-center/bank-fees/mid-2012.htm
** “Free checking” refers to accounts without a monthly service fee that can be used for free, not necessarily accounts devoid of any fees
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
10
Overview of Campus Labs Acquisition
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
11
Campus Labs Acquisition – Rationale Campus Labs aims to be the centralized hub of data and performance analytics in higher education.
• Helps schools improve student success:
– More efficient data collection/aggregation
– Better use of data to efficiently allocate resources
• Strategic rationale and fit within Higher One:
–
–
–
–
Deepens our relationships with schools
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Cross‐sell opportunities
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Improves our data analytics capabilities
Better diversifies our revenue streams
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Campus Labs – Key Products
•
•
•
•
•
Baseline
Compliance Assist®
CollegiateLink®
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Course Evaluations
Beacon
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Campus Labs – Integrated Data Platform
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Campus Labs – Competitive Advantages
• Technology: – Higher ed sector transitioning from internally owned Hi h
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to hosted applications
– Focus on higher ed space makes applications more Focus on higher ed space makes applications more
valuable to administrators
– Connectivity and interoperability between products
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• Benchmarking data: critical mass of schools p
p
p
enables performance comparison vs. peers
• Reputation among current clients drives future sales, cross/up‐selling
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
15
Campus Labs – Sales Metrics
• 12 person sales team
• Average sales cycle of 4‐5 months
• Contract value increasing:
g
– Most contracts range in size from $10K ‐ $125K annually
– Average contract size currently ~$20K
– So far in 2012, approximately 45% of contracts are , pp
y
for multiple products
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
16
Campus Labs – Growth Drivers
• Greenfield opportunity in higher ed space
– Currently 16% penetration
– Limited international clientele (one client in Canada)
• Continued up‐sell to increase average number of products/campus
– Campuses today average 1.6 products
• Continued
Continued product development to increase product development to increase
maximum contract size
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
17
Campus Labs – Synergies
• Diversify revenue and deepen relationships with clients
– More/different touch‐points within a school
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– Same essential mission: lower costs and improve services for higher ed by increasing efficiency
• Cross‐sell opportunity
pp
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– Packaged deals
– Campus Labs has over 4 million SSE (almost 400 campuses) that are not currently OneDisburse/CASHNet clients
• Improve our data analytics capabilities
– Better information on enrollment/graduation/student success
– Potential to help schools flag fraudulent activity
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– Potential to use survey capabilities to gauge OneAccount users’ financial literacy
• Money issues are the main reason students drop out of college… early i
intervention could help student success rates
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®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
18
Campus Labs Acquisition – Financial Impact • Purchase price:
–
–
–
–
~$38
$38 million in cash
million in cash
Additional 150,000 warrants granted
Earn‐out: 3.5x 2013 revenue in excess of $12.5 million
Accretive in 2013
• ~$10 million annual revenue run‐rate
– Expect annual growth of >30%
– New school signings, plus increasing # of modules at existing clients to drive growth
existing clients to drive growth
• Serves >500 campuses, >5.8 million SSE
– Brings Higher One SSE total to >10.5 million
Brings Higher One SSE total to >10 5 million
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
19
Appendix
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Baseline
•
Institutional, divisional, or departmental dashboards with KPIs and assessment tools that serve as a conduit to collect and pull data
•
KPIs can include measures of:
–
–
–
–
–
•
Evidence of student learning
Student satisfaction and opinions
p
Student needs assessments
Alumni engagement
External stakeholder perceptions (employers, community members, parents, etc)
Reporting tools include:
–
–
–
–
Assessment results available in real‐time
Frequency tables, graphs, and crosstabs
q
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Benchmarking and trend reports
SPSS data exports for more advanced analysis
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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ComplianceAssist®
• End‐to‐end solution for setting strategic goals, centralizing evidence and creating reports showcasing achievements and
evidence, and creating reports showcasing achievements and effectiveness
• Includes four distinct modules:
Accreditation
• Preloaded with appropriate regional and programmatic standards/requirements
• Campuses can easily upload any supporting document
• Secure
S
site for review by administrators/evaluators
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i b d i it t / l t
Faculty Credentials
• Tracks faculty qualifications, degrees, disciplines, courses, academic transcripts, professional development activities
Planning
• Tracks
Tracks and documents
and documents strategic/annual/assessment plan and strategic/annual/assessment plan and
learning outcome data
• Option to include budget field for each planning item
Program Review
• Can house all program or department‐level standards and requirements
i
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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CollegiateLink®
• Provides tools for centralizing, publicizing, and managing co‐curricular activities
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Co-curriculars/
Clubs
Flow of information
• Uses:
–
–
–
–
–
–
Student Affairs
Student Body
Messaging
Office
Track attendance/engagement
Informational tool for off‐campus students
Define certificate programs (eg. Leadership development)
Fee collection
Resource allocation
Resource allocation ®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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Course Evaluations
• Provides advanced evaluation and reporting capabilities to integrate course evaluation data bili i
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into program planning, decision‐making, and administrative review process
d i i
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®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
24
Beacon
• Provides prediction of student retention and success, connects students to individualized d
i di id li d
support resources, and manages early alerts
®
©2012 Higher One Holdings, Inc. and Higher One, Inc. Higher One and the Higher One logo are registered trademarks of Higher One,
Inc. MasterCard is a registered trademark of MasterCard International Incorporated. All other trademarks are owned by their respective owners.
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