AFFINION GROUP
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Higher One Holdings, $885mm market cap at price range mid-point of $16 |
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BUSINESS |
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Disbursement and payment products for the higher education industry |
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SUMMARY |
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Rapidly growing with 97% client retention rate (recurring revenue) |
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Relatively low institutional market penetration, averaging 13% |
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Recent acquisition expected to provide cross-selling opportunities |
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Competes with larger companies that may not be as nimble, Sallie May (SLM) and Nelnet (NNI) |
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Priced at a discount to NNI in terms of price-to-earnings & price-to-sales |
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IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
|
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
|
COMPARE & CONTRAST |
|
|
|
|
|
|
annualizing March qtr |
|
|
|
|
|
|
Higher One Hold (ONE) |
$885 |
5.8 |
27 |
14.4 |
34.0 |
|
SLM (SLM) |
$5,580 |
1 |
6 |
1.2 |
1.6 |
|
Nelnet (NNI) |
$8,810 |
16 |
41 |
11.2 |
16.4 |
|
12 months ended Dec 31, '09 |
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|
|
|
|
|
Higher One Hold (ONE) |
$885 |
9.5 |
72 |
14.4 |
34.0 |
|
SLM (SLM) |
$5,580 |
1 |
17 |
1.1 |
1.4 |
|
Nelnet (NNI) |
$8,810 |
14 |
63 |
11.2 |
16.4 |
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MARKET PENETRATION |
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As of March 31, 2010 ONE has accessed 14% and 12% of the potential market for disbursement products and payment products in its defined market |
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RECURRING REVENUE CLIENT BASE |
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. 97% retention rate since 2003 among higher education institutional clients
. Higher education institutional client base is very diverse, spanning colleges, universities and other higher education institutions in 46 states, with no single campus accounting for more than 4% of revenue in 2009. |
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SERVICES |
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As of March 31, 2010 |
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Disbursement: 402 campuses serving approximately 2.7 million students had purchased the OneDisburse service |
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Payment: 293 campuses serving approximately 2.2 million students had contracted to use one or more of ONE’s payment products and services. |
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CASHNet |
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. Acquired in November, 2009 for $27.5 million, financed by cash and debt
. CASHNet, which provides payment services to higher education institutions, and have begun to integrate its operations with its business
. A leader in providing cashiering and payment solutions in higher education. ONE has begun to integrate its operations with its business
. In 2009 CashNet generated $17mm of ONE’s proforma $92mm revenue, $5mm in gross margin, and a $2mm loss |
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SEASONALITY |
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. Revenue fluctuates as a result of seasonal factors related to the academic year. A large proportion of revenue is either directly or indirectly dependent on academic financial aid received by students.
. Higher education institutional clients typically disburse financial aid refunds to students at the start of each academic semester. |
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. Distribution of financial aid disbursements through the OneDisburse service indirectly generates revenue through deposits of financial aid into OneAccounts, which generates account revenue, and directly generates revenue through the higher education institution clients’ use of the OneDisburse service, which generates higher education institution revenue |
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RISK |
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. Fees for financial services are subject to increasingly intense legislative and regulatory scrutiny
. In 2009, approximately 88% of revenue was generated from interchange fees, ATM fees, non-sufficient fund fees, other banking services fees and convenience fees.
. These fees, as well as the financial services industry in general, is expected to undergo substantial change in the near future. Financial reform legislation was passed in the U.S. House of Representatives and the U.S. Senate and will now have to be reconciled. |
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COMPETITION |
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. Other companies, including SLM Corporation (Sallie Mae®), Nelnet, Inc. and TouchNet Information Systems, Inc., provide payment software, products and services that are competitive
. For student banking and debit card services, competes with banks active in the higher education industry, including U.S. Bancorp and Wells Fargo & Company. |
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INTELLECTUAL PROPERTY |
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. Three registered patents and several patent applications in the United States
. Issued patents expire in 2023 and 2024 |
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EMPLOYEES |
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As of March 31, 2010, we had approximately 380 employees. |
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USE OF IPO PROCEEDS |
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11.2mm shares from selling shareholders |
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3.1 shares from the company, $43.5mm
. $10.5mm to repay debt
. $8.25 for post closing obligations for CASHNet
. Balance for strategic objectives |
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Higher One Holdings |
ONE, C+, 7 |
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Post-IPO shares: 55mm |
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Disburse/pay for ed |
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pro-forma* |
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|
|
|
New Haven CT |
2008 |
2009 |
2009 |
March '10qtr |
|
IPO Mkt |
|
Revenue ($mm\) |
$44 |
$75 |
$93 |
$38 |
|
Cap (mm) |
|
Gross margin % |
64% |
68% |
60% |
68% |
|
$885 |
|
Profit (loss) |
$6.4 |
$14.2 |
$12.3 |
$8.3 |
|
@$16 |
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Profit (loss) % of revenue |
15% |
19% |
13% |
22% |
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|
|
|
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*includes CASHNet |
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|
|
(in thousands) |
2008 |
2009 |
March '09qtr |
March '10qtr |
|
|
|
OneDisburse students |
1,605 |
2,331 |
1,830 |
2,663 |
|
|
|
Payment transaction students |
29 |
1,949 |
29 |
2,202 |
|
|
|
OneAccounts |
554 |
1,004 |
656 |
1,207 |
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|
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VALUATION RATIOS |
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IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Higher One Hold (ONE) |
$885 |
5.8 |
27 |
14.4 |
34.0 |
26% |
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COMPARE & CONTRAST |
|
|
|
|
|
|
|
annualizing March qtr |
|
|
|
|
|
|
|
Higher One Hold (ONE) |
$885 |
5.8 |
27 |
14.4 |
34.0 |
|
|
SLM (SLM) |
$5,580 |
1 |
6 |
1.2 |
1.6 |
|
|
Nelnet (NNI) |
$8,810 |
16 |
41 |
11.2 |
16.4 |
|
|
12 months ended Dec 31, '09 |
|
|
|
|
|
|
|
Higher One Hold (ONE) |
$885 |
9.5 |
72 |
14.4 |
34.0 |
|
|
SLM (SLM) |
$5,580 |
1 |
17 |
1.1 |
1.4 |
|
|
Nelnet (NNI) |
$8,810 |
14 |
63 |
11.2 |
16.4 |
|
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SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
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20 is perfect |
|
2 |
2 |
2 |
1 |
7 |
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