NIC Inc. (Nasdaq: EGOV), the leading provider of digital
government services, announced results for the second quarter of
2019 that ended June 30, 2019, as compared to the second quarter of
2018.
- Total revenues of $91.6 million, a 1% decrease,
reflecting lower revenues from the new Texas payment processing
contract compared to revenues from the legacy Texas contract
- Operating income of $17.7 million, a 21% decrease,
mainly reflecting the Texas contract transition
- Net income of $14.5 million, a 15% decrease
- Diluted earnings per share of 21 cents, a 16% decrease.
Diluted earnings per share was positively impacted by 1 cent due to
the release of reserves for unrecognized income tax benefits
resulting from the completion of an IRS examination of the
Company's 2016 federal income tax return during the quarter, which
resulted in no changes to the Company's previously filed
return.
- Adjusted EBITDA of $22.3 million, a 15% decrease
Additional Financial
Highlights:
- Same state revenues of $74.7 million, a 10% increase
- Same state transaction-based revenues from Interactive
Government Services (IGS) increased 14%
- Same state transaction-based revenues from Driver History
Records (DHR) increased 4%
- Same state revenues from other services (development services
& fixed fee management services) increased 3%
- State enterprise revenues in the second quarter of 2019
included $8.0 million from the new Texas payment processing
contract compared to $18.3 million from the legacy Texas contract
in the prior year quarter.
- Software & Services revenues of $8.7 million, a 47%
increase, driven mainly by the new federal Recreation.gov service,
as well as increased transaction-based revenues from the federal
Pre-Employment Screening Program.
- On July 29, 2019, the Company’s Board of Directors declared a
regular quarterly cash dividend of 8 cents per share, payable to
stockholders of record as of September 6, 2019. The dividend, which
is expected to total approximately $5.4 million based on the
current number of shares outstanding, will be paid on September 20,
2019 out of the Company’s available cash.
“We continued to execute well on our 2019 strategic objectives
in the second quarter,” said Harry Herington, NIC’s Chief Executive
Officer and Chairman of the Board. “We extended several long-term
government partnerships and generated double-digit organic revenue
growth in our core business for the second consecutive quarter.
Furthermore, we leveraged our recent acquisitions and expanded our
vertical solutions in multiple states.”
Operational Highlights:
Several of the Company’s long-term government partners recently
extended their relationships with the Company:
- Following a competitive rebid process, the state of Utah signed
a new four-year contract, which includes two three-year renewal
options, for a total of 10 years.
- The Company signed a new two-year contract with the Rhode
Island Department of Administration, which includes two one-year
renewal options, for a total of four years.
- The Company's government partner in Arkansas extended its
contract with the Company for one year.
- The Company's government partner in South Carolina extended its
contract with the Company for one year. The contract includes a
one-year renewal option.
- The Federal Motor Carrier Safety Administration extended its
contract with the Company to provide the Pre-Employment Screening
Program for an additional six months. The contract has two
sixth-month renewal options remaining.
The Company recently entered into an agreement with the Illinois
Department of Innovation and Technology and the Illinois Department
of Natural Resources to provide its comprehensive outdoor
recreation solution to the state. The Company will provide a new
platform that will deliver online and point-of-sale services for
hunting and fishing licenses, campsite reservations, and snowmobile
and watercraft licenses, among other services. The outdoor
recreation agreement is coterminous with the Company’s master
agreement with the state for the enterprise licensing and
permitting solution.
Following the Company's recent acquisition of Complia, which
closed on May 1, 2019, the Company entered into an agreement to
provide its cannabis licensing and registration platform to the
state of West Virginia. The agreement in West Virginia is for two
years.
Updated Full-Year 2019
Outlook:
The Company has updated its full-year 2019 outlook:
- The Company currently expects total revenues of $347.5-$352.5
million, with state enterprise revenues ranging from $317.0-$320.5
million and software & services revenues ranging from
$30.5-$32.0 million. The Company’s previous guidance for total
revenues ranged from $333.5-$342.5 million, with state enterprise
revenues ranging from $306.0-$314.0 million and software &
services revenues ranging from $27.5-$28.5 million
- The Company now anticipates earnings per share to range from
71-73 cents compared to the previous guidance range of 70-74
cents
The Company’s guidance reflects approximately $1.0 million in
revenues and $0.8 million in operating losses (excluding intangible
asset amortization expense) relating to the Company’s recent
acquisition of Complia. Intangible asset amortization expense
relating to the Complia acquisition is currently expected to
approximate $0.7 million for 2019. The Company’s guidance also
reflects approximately $2.6 million in previously disclosed
executive severance costs incurred in the first quarter of 2019,
which reduced earnings per share by approximately four cents. In
addition, the Company’s guidance reflects approximately $1.2
million in build-out costs for the Company to configure its
comprehensive outdoor recreation solution to meet the specific
needs of Illinois. The Company’s projections do not include
revenues or costs from any unannounced contracts.
Second Quarter Earnings Call and
Webcast Details
On July 31, 2019, the Company will host a call to discuss its
2019 second quarter financial and operational results and to answer
questions from the investment community. The call may also include
a discussion of Company developments, and forward-looking and other
material information about business and financial matters.
Dial-In Information
Wednesday, July 31, 2019 at 4:30 p.m.
(EDT)
Call bridge:
800-204-4368 (U.S. callers) or
323-994-2082 (international callers)
Conference ID:
9229232
Call leaders:
Harry Herington, Chief Executive Officer
and Chairman of the Board
Steve Kovzan, Chief Financial Officer
Webcast Information
To sign in and listen: The Webcast system is available at
http://www.egov.com/investor-relations
A replay of NIC’s second quarter earnings call will be available
by visiting http://www.egov.com/investor-relations.
About NIC
NIC Inc. (Nasdaq: EGOV) launched the digital government industry
in 1992, and continues to lead it, providing a secure payment
engine and thousands of digital government solutions across a
network of more than 6,000 federal, state, and local government
agencies. In addition, NIC is a leading provider of outdoor
recreation solutions, with 1 out of 6 hunting and fishing licenses
in the United States sold using an NIC service. The Company
launched the nation's first personal assistant for government and
comprehensive mobile platform, Gov2Go®, as well as the innovative,
data-driven prescription drug monitoring platform, RxGov®. More
information is available at www.egov.com.
Non-GAAP Measures
In addition to the results presented in accordance with U.S.
GAAP, the Company presents non-GAAP financial measures, such as
adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA is
defined as net income excluding interest, income tax expense,
depreciation & amortization, stock-based compensation and other
significant non-operating or non-recurring items that are
considered expenses or income under U.S. GAAP. Adjusted EBITDA
margin is defined as adjusted EBITDA divided by total revenues.
These measures should be used in addition to, and not as a
substitute for, revenues, operating income, operating income
margin, net income, earnings per share or other measures of
profitability, liquidity or other performance measures computed in
accordance with U.S. GAAP. We believe the presentation of adjusted
EBITDA and adjusted EBITDA margin is useful to investors and other
users as these measures represent key supplemental information to
compare and evaluate our core underlying business results over time
and with other companies. The non-GAAP measures used by the Company
may not be comparable to similarly titled non-GAAP measures used by
other companies. The attached schedule provides a full
reconciliation of these non-GAAP financial measures to the most
directly comparable U.S. GAAP financial measures. Adjusted EBITDA
and adjusted EBITDA margin represent performance measures and are
not intended to represent liquidity measures.
Cautionary Statement Regarding Forward-Looking
Information
Any statements made in this release that do not relate to
historical or current facts constitute forward-looking statements.
These statements include statements regarding the Company’s
potential financial performance for the 2019 fiscal year or future
fiscal years, estimates, projections, the expected length of
contract terms, statements relating to the Company’s business
plans, objectives and expected operating results, statements
relating to potential new contracts or renewals, statements
relating to the Company’s expected effective tax rate, statements
relating to possible future dividends and share repurchases, and
other possible future events, including potential acquisitions, and
the assumptions upon which those statements are based.
Forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may
cause actual results to differ materially from the forward-looking
statements. These risks include regional or national business,
political, economic, competitive, social and market conditions,
including various termination rights of the Company and its
partners, the ability of the Company to renew existing contracts -
in whole or in part, and to sign contracts with new federal, state,
and local government agencies, the Company’s ability to identify
and acquire suitable acquisition candidates and to successfully
integrate any acquired businesses, as well as possible data
security incidents. You should not rely on any forward-looking
statement as a prediction or guarantee about the future. A detailed
discussion of risks and uncertainties that could cause actual
results and events to differ materially from such forward-looking
statements is included in the sections titled “Risk Factors” and
“Cautions About Forward-Looking Statements” of the Company’s most
recent Forms 10-K and 10-Q filed with the SEC. These filings are
available at the SEC's web site at www.sec.gov. Any forward-looking
statements included in this release speak only as of the date of
this release. Except as may be required by applicable law, we
undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
NIC INC.
CONSOLIDATED STATEMENTS OF
INCOME AND FINANCIAL SUMMARY
(In thousands, except per
share amounts and percentages)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenues:
State enterprise revenues
$
82,829
$
86,555
$
160,085
$
167,346
Software & services revenues
8,737
5,943
16,662
11,877
Total revenues
91,566
92,498
176,747
179,223
Operating expenses:
State enterprise cost of revenues,
exclusive of depreciation & amortization
52,277
51,711
100,933
100,353
Software & services cost of revenues,
exclusive of depreciation & amortization
3,329
2,235
6,049
4,463
Selling & administrative
8,356
8,268
18,320
15,771
Enterprise technology & product
support
6,745
5,735
13,190
11,382
Depreciation & amortization
3,130
2,145
5,551
4,210
Total operating expenses
73,837
70,094
144,043
136,179
Operating income
17,729
22,404
32,704
43,044
Other income:
Interest income
577
57
1,181
58
Income before income taxes
18,306
22,461
33,885
43,102
Income tax provision
3,846
5,450
7,923
10,582
Net income
$
14,460
$
17,011
$
25,962
$
32,520
Basic net income per share
$
0.21
$
0.25
$
0.38
$
0.48
Diluted net income per share
$
0.21
$
0.25
$
0.38
$
0.48
Weighted average shares outstanding:
Basic
66,940
66,541
66,806
66,432
Diluted
66,940
66,561
66,806
66,447
Key financial metrics:
Total revenue growth
(1
)%
8
%
(1
)%
6
%
Recurring revenues as a % of total
revenues
97
%
96
%
97
%
97
%
State enterprise revenue growth
(4
)%
9
%
(4
)%
7
%
Same state revenue growth
10
%
8
%
10
%
8
%
Gross profit % - state enterprise
37
%
40
%
37
%
40
%
Software & services revenue growth
47
%
—
%
40
%
—
%
Gross profit % - software &
services
62
%
62
%
64
%
62
%
Selling & administrative as a % of
total revenues
9
%
9
%
10
%
9
%
Enterprise technology & product
support as a % of total revenues
7
%
6
%
7
%
6
%
Operating income as a % of total revenue
("operating margin")
19
%
24
%
19
%
24
%
State enterprise revenue analysis:
IGS
$
55,537
$
55,111
$
105,691
$
105,379
DHR
23,413
26,645
47,098
53,883
Development services
2,642
3,562
4,821
5,609
Fixed-fee management services
1,237
1,237
2,475
2,475
Total state enterprise revenues
$
82,829
$
86,555
$
160,085
$
167,346
NIC INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except par
value amount)
(Unaudited)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash
$
186,535
$
191,700
Trade accounts receivable, net
113,116
80,904
Prepaid expenses & other current
assets
12,603
13,730
Total current assets
312,254
286,334
Property and equipment, net
10,956
10,256
Right of use lease assets, net
11,924
—
Intangible assets, net
23,195
13,604
Goodwill
5,965
—
Other assets
353
332
Total assets
$
364,647
$
310,526
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
83,708
$
60,092
Accrued expenses
22,713
24,150
Lease liabilities
4,077
—
Other current liabilities
5,441
4,883
Total current liabilities
115,939
89,125
Deferred income taxes, net
1,757
781
Lease liabilities
8,263
—
Other long-term liabilities
9,346
8,931
Total liabilities
135,305
98,837
Commitments and contingencies
—
—
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 66,956 and 66,569 shares issued and outstanding
7
7
Additional paid-in capital
120,204
117,763
Retained earnings
109,131
93,919
Total stockholders' equity
229,342
211,689
Total liabilities and stockholders'
equity
$
364,647
$
310,526
NIC INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
June 30, 2019
Common Stock
Additional Paid-in
Capital
Retained Earnings
Shares
Amount
Total
Balance, January 1, 2019
66,569
$
7
$
117,763
$
93,919
$
211,689
Net income
—
—
—
11,502
11,502
Dividends declared
—
—
—
(5,402
)
(5,402
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
27
(27
)
—
Dividend equivalents cancelled upon
forfeiture of performance-based restricted stock awards
—
—
(122
)
122
—
Restricted stock vestings
364
—
—
—
—
Shares surrendered and cancelled upon
vesting of restricted stock to satisfy tax withholdings
(153
)
—
(2,609
)
—
(2,609
)
Stock-based compensation
—
—
2,272
—
2,272
Shares issuable in lieu of dividend
payments on unvested performance-based restricted stock awards
3
—
—
—
—
Issuance of common stock under employee
stock purchase plan
128
—
1,443
—
1,443
Balance, March 31, 2019
66,911
7
118,774
100,114
218,895
Net income
—
—
—
14,460
14,460
Dividends declared
—
—
—
(5,416
)
(5,416
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
27
(27
)
—
Restricted stock vestings
47
—
—
—
—
Shares surrendered and cancelled upon
vesting of restricted stock to satisfy tax withholdings
(2
)
—
(28
)
—
(28
)
Stock-based compensation
—
—
1,431
—
1,431
Balance, June 30, 2019
66,956
$
7
$
120,204
$
109,131
$
229,342
NIC INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
June 30, 2018
Common Stock
Additional Paid-in
Capital
Retained Earnings
Shares
Amount
Total
Balance, January 1, 2018
66,271
$
7
$
111,275
$
56,960
$
168,242
Cumulative effect of adoption of new
accounting standard
—
—
—
208
208
Net income
—
—
—
15,508
15,508
Dividends declared
—
—
—
(5,370
)
(5,370
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
34
(34
)
—
Dividend equivalents cancelled upon
forfeiture of performance-based restricted stock awards
—
—
(140
)
140
—
Restricted stock vestings
202
—
—
—
—
Shares surrendered and cancelled upon
vesting of restricted stock to satisfy tax withholdings
(81
)
—
(1,132
)
—
(1,132
)
Stock-based compensation
—
—
1,511
—
1,511
Issuance of common stock under employee
stock purchase plan
122
—
1,382
—
1,382
Balance, March 31, 2018
66,514
7
112,930
67,412
180,349
Net income
—
—
—
17,011
17,011
Dividends declared
—
—
—
(5,385
)
(5,385
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
33
(33
)
—
Restricted stock vestings
44
—
—
—
—
Shares surrendered and cancelled upon
vesting of restricted stock to satisfy tax withholdings
(2
)
—
(32
)
—
(32
)
Stock-based compensation
—
—
1,576
—
1,576
Balance, June 30, 2018
66,556
$
7
$
114,507
$
79,005
$
193,519
NIC INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June
30,
2019
2018
Cash flows from operating activities:
Net income
$
25,962
$
32,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization
5,551
4,210
Stock-based compensation expense
3,703
3,087
Deferred income taxes
976
614
Provision for (recoveries) losses on
accounts receivable
(148
)
343
Changes in operating assets and
liabilities:
Trade accounts receivable, net
(31,613
)
10,838
Prepaid expenses & other current
assets
1,130
(170
)
Other assets
2,191
262
Accounts payable
23,616
(19,460
)
Accrued expenses
(1,439
)
(4,393
)
Other current liabilities
32
(209
)
Other long-term liabilities
(2,190
)
758
Net cash provided by operating
activities
27,771
28,400
Cash flows from investing activities:
Purchases of property and equipment
(2,831
)
(2,411
)
Business combination
(10,000
)
—
Asset acquisition
(3,486
)
—
Capitalized software development costs
(4,607
)
(3,503
)
Net cash used in investing activities
(20,924
)
(5,914
)
Cash flows from financing activities:
Cash dividends on common stock
(10,818
)
(10,755
)
Proceeds from employee common stock
purchases
1,443
1,382
Tax withholdings related to stock-based
compensation awards
(2,637
)
(1,165
)
Net cash used in financing activities
(12,012
)
(10,538
)
Net (decrease) increase in cash
(5,165
)
11,948
Cash, beginning of period
191,700
160,777
Cash, end of period
186,535
172,725
Other cash flow information:
Non-cash investing activities:
Contingent consideration - business
combination
$
960
$
—
Capital expenditures accrued but not yet
paid
—
166
Cash payments:
Income taxes paid, net
$
6,925
$
8,883
NIC INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
Reconciliation of
net income to Adjusted EBITDA
2019
2018
2019
2018
Net income
$
14,460
$
17,011
$
25,962
$
32,520
Add: Income tax expense
3,846
5,450
7,923
10,582
Less: Interest income
577
57
1,181
58
Operating income
17,729
22,404
32,704
43,044
Add: Depreciation & amortization
expense
3,130
2,145
5,551
4,210
Add: Stock-based compensation expense,
inclusive of executive severance (1)
1,431
1,576
3,703
3,087
Add: Executive severance payments (1)
—
—
1,526
—
Adjusted EBITDA
$
22,290
$
26,125
$
43,484
$
50,341
Total Revenues
$
91,566
$
92,498
$
176,747
$
179,223
Net income as a % of total revenues ("net
profit margin")
16
%
18
%
15
%
18
%
Adjusted EBITDA as a % of total revenues
("Adjusted EBITDA margin")
24
%
28
%
25
%
28
%
Detail of
stock-based compensation expense
State enterprise cost of revenues,
exclusive of depreciation & amortization
$
395
$
362
$
757
$
805
Software & services cost of revenues,
exclusive of depreciation & amortization
21
36
56
76
Selling & administrative
857
1,021
2,572
1,858
Enterprise technology & product
support
158
157
318
348
Stock-based compensation expense
$
1,431
$
1,576
$
3,703
$
3,087
(1)
Executive severance expense of $2.6 million related to the
departure of the Company's former Chief Operating Officer is
included in selling & administrative expense in the
consolidated statements of income and financial summary for the six
months ended June 30, 2019. These costs consisted of a one-time
cash payment of $1.5 million and $1.1 million of stock-based
compensation expense associated with the accelerated vesting of
certain restricted stock awards. These costs were excluded from
Adjusted EBITDA because the Company does not regard these costs as
reflective of normal recurring costs to operate its business.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005964/en/
Steve Kovzan Chief Financial Officer (913) 754-7007
stevek@egov.com
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