Higher One enrollment trends worsen, shares drop
NEW YORK (AP) — Shares of Higher One slumped Wednesday as declining growth in student enrollments hurt its third-quarter profit and its outlook for the year disappointed investors.
THE SPARK: Citing a "difficult operating environment," the New Haven, Conn., company said late Tuesday that profit fell 14 percent to $7.3 million, or 13 cents per share, in the July-September quarter. Revenue grew 6 percent to $51.2 million.
Adjusted profit and revenue fell short of analyst predictions, according to FactSet.
The company also cut its outlook for the year to below Wall Street projections.
THE BIG PICTURE: Higher One Holdings Inc. markets bank cards and checking accounts to millions of students through exclusive deals with colleges and universities.
It's dealing with problems on several fronts: Higher education enrollment growth has leveled off after big increases following the financial crisis in 2008. That means federal aid funds are declining slightly after years of double-digit increases.
Higher One also faces increased regulatory scrutiny. The company agreed to a $11 million restitution this summer for overcharging college students for fees on its debit cards and other practices. In the settlement with federal regulators, it agreed to change the way it set fees.
THE ANALYSIS: The broader college and financial aid trends are out of Higher One's control, but the company has also made mistakes, said William Blair analyst Christopher Shutler. He cited lower adoption rates for one of Higher One's products called OneAccount, high expenses and "an inadequate job of setting investor expectations."
SHARE ACTION: Down $1.68, or 13.8 percent, to $10.48 in midday trading. The stock had lost about a third of its value through Tuesday's close. It went public in June 2010 at $12.