NIC Inc. (Nasdaq: EGOV), the leading provider of digital
government services, announced results for the second quarter of
2020 that ended June 30, 2020, as compared to the second quarter of
2019.
- Total revenues of $93.6 million, a 2% increase.
- Operating income of $18.4 million, a 4% increase.
- Net income of $13.8 million, a 5% decrease.
- Diluted earnings per share of 20 cents, a 5% decrease.
Earnings per share in the prior year quarter 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, which
resulted in no changes to the Company's previously filed
return.
- Adjusted EBITDA of $23.6 million, a 6% increase.
Additional Financial
Highlights:
- Same state revenues of $77.6 million, a 4% increase.
- Same state transaction-based revenues from Interactive
Government Services (IGS) increased 5%.
- Same state transaction-based revenues from Driver History
Records (DHR) decreased 12%, driven by volume declines in several
states primarily resulting from the COVID-19 pandemic.
- Same state revenues from other services (development services
& fixed fee management services) increased 87%, driven by
pandemic unemployment services provided to the Commonwealth of
Virginia.
- Revenues from the Company's contract with the state of Illinois
were excluded from same state revenues in the current quarter
because it did not generate comparable revenues for two full
comparable periods.
- Financial results from the Company’s Texas payment processing
contract previously included in the State Enterprise category were
included in the Software & Services category beginning in the
first quarter of 2020. Financial results in the prior year were
reclassified to match the current year presentation.
- Software & Services revenues of $15.8 million, a 5%
decrease, driven primarily by volume declines from the federal
Pre-Employment Screening Program resulting from the COVID-19
pandemic.
- On July 27, 2020, the Company’s Board of Directors declared a
regular quarterly cash dividend of 9 cents per share, payable to
stockholders of record as of September 8, 2020. The dividend, which
is expected to total approximately $6.1 million based on the
current number of shares outstanding, will be paid on September 22,
2020 out of the Company’s available cash.
Operational Highlights:
Several of the Company’s long-term government partners recently
extended their relationships with the Company:
- Arkansas extended its contract with the Company for two
years.
- Pennsylvania extended its contract with the Company for two
years.
- South Carolina extended its contract with the Company for one
year.
- The Federal Motor Carrier Safety Administration extended its
contract with the Company to provide the Pre-Employment Screening
Program for an additional six months through February 27,
2021.
After a competitive bid process, the state of Iowa recently
named the Company as the winning bidder to provide enterprise
digital government services to the state. The Company and the state
are currently in the process of negotiating the contract.
NIC has forged a partnership with two market-leading firms,
Impact Health and NEXT Marketing, to create TourHealth, a
comprehensive and scalable rapid COVID-19 testing solution.
TourHealth will leverage Gov2Go, NIC's citizen-centric mobile
platform and personal government assistant, for citizen engagement,
assessment and scheduling purposes. The TourHealth partnership was
recently selected to provide two testing locations in the state of
Florida, and was also selected by the state of Utah as one of only
two COVID-19 testing vendors approved to provide scheduling, call
center and test collection services for state agencies, local
governments and educational institutions.
“We continue to respond to the unprecedented and ever-changing
COVID-19 pandemic and are extremely excited about our new
TourHealth partnership launching in Florida and Utah,” said Harry
Herington, NIC’s Chief Executive Officer and Chairman of the Board.
“We are also very pleased to welcome the state of Iowa back to the
NIC family and with the tremendous success of our Virginia
unemployment program. All of these are prime examples of how we
support our government partners to provide essential services to
citizens and businesses.”
COVID-19 and Updated Full-Year 2020
Outlook:
NIC continues to evaluate the impact the COVID-19 pandemic may
have on its business for the remainder of the year. Based on this
ongoing evaluation, the Company continues to expect to come in near
the low end of its previously issued guidance for total revenues,
which was $380.5 million, adjusted EBITDA, which was $88.5 million,
and earnings per share, which was 76 cents. The Company currently
expects capital expenditures to range from $5 - $6 million in 2020.
The Company’s previous guidance for capitalized software
development costs of $9 - $10 million for 2020 remains
unchanged.
Second Quarter Earnings Call and
Webcast Details
On July 29, 2020, the Company will host a call to discuss its
2020 second quarter financial performance and fiscal outlook, and
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 29, 2020 at 4:30 p.m. (EDT)
Call bridge:
1-929-477-0577 (local) or
1-800-437-2398 (tollfree)
Conference ID:
9383063
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
https://www.egov.com/investor-relations.html
A replay of NIC’s second quarter earnings call will be available
by visiting https://www.egov.com/investor-relations.html
About NIC
NIC (Nasdaq: EGOV) is a leading digital government solutions and
payments company, serving more than 7,000 federal, state and local
government agencies across the nation. With headquarters in Olathe,
Kansas, and offices in more than 30 states, NIC partners with
government to deliver user-friendly digital services that make it
easier and more efficient to interact with government – providing
valuable conveniences like applying for unemployment insurance,
submitting business filings, renewing licenses, accessing
information and making secure payments without visiting a
government office. In the COVID-19 era and beyond, NIC helps
government agencies rapidly deliver new digital solutions to
provide essential services to citizens and businesses alike. Having
served the public sector for nearly 30 years, NIC continues to
evolve with its federal, state and local government partners to
deliver innovative and cost-effective digital government to
constituents. Learn more 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. The Company believes 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 the Company's 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 often address the Company’s potential financial
performance for the 2020 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, statements related to the ongoing
impact of the COVID-19 pandemic, 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 impact
of potential information technology, cybersecurity or data security
breaches or incidents, the Company’s ability to identify and
acquire suitable acquisition candidates and to successfully
integrate any acquired businesses, and the impact the COVID-19
pandemic may have on demand for the Company's services, as well as
its government agency partners, its workforce and the broader
economy. 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 subsequent reports filed with the SEC. These filings are
available at the SEC's website 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, the
Company undertakes 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,
2020
2019
2020
2019
Revenues:
State enterprise revenues
$
77,804
$
74,871
$
152,215
$
144,724
Software & services revenues
15,785
16,695
32,493
32,023
Total revenues
93,589
91,566
184,708
176,747
Operating expenses:
State enterprise cost of revenues,
exclusive of depreciation & amortization
45,876
45,081
92,147
87,060
Software & services cost of revenues,
exclusive of depreciation & amortization
10,344
10,525
21,069
19,922
Selling & administrative
8,316
8,356
16,379
18,320
Enterprise technology & product
support
7,201
6,745
14,455
13,190
Depreciation & amortization
3,473
3,130
6,955
5,551
Total operating expenses
75,210
73,837
151,005
144,043
Operating income
18,379
17,729
33,703
32,704
Other income:
Interest income
—
577
389
1,181
Income before income taxes
18,379
18,306
34,092
33,885
Income tax provision
4,583
3,846
8,433
7,923
Net income
$
13,796
$
14,460
$
25,659
$
25,962
Basic net income per share
$
0.20
$
0.21
$
0.38
$
0.38
Diluted net income per share
$
0.20
$
0.21
$
0.38
$
0.38
Weighted average shares outstanding:
Basic
66,999
66,940
66,993
66,806
Diluted
66,999
66,940
66,993
66,806
Key financial metrics:
Total revenue growth
2
%
(1
)%
5
%
(1
)%
Recurring revenues as a % of total
revenues
94
%
97
%
96
%
97
%
State enterprise revenue growth
4
%
(13
)%
5
%
(14
)%
Same state revenue growth
4
%
10
%
5
%
10
%
Gross profit % - state enterprise
41
%
40
%
39
%
40
%
Software & services revenue growth
(5
)%
181
%
1
%
170
%
Gross profit % - software &
services
34
%
37
%
35
%
38
%
Selling & administrative as a % of
total revenues
9
%
9
%
9
%
10
%
Enterprise technology & product
support as a % of total revenues
8
%
7
%
8
%
7
%
Operating income as a % of total revenues
("operating margin")
20
%
19
%
18
%
19
%
State enterprise revenue analysis:
IGS
$
50,055
$
47,595
$
98,243
$
90,347
DHR
20,607
23,396
43,456
47,081
Development services
5,904
2,642
8,041
4,821
Fixed-fee management services
1,238
1,238
2,475
2,475
Total state enterprise revenues
$
77,804
$
74,871
$
152,215
$
144,724
NIC INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except par
value amount)
(Unaudited)
June 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash
$
220,351
$
214,380
Trade accounts receivable, net
106,537
85,399
Prepaid expenses & other current
assets
13,364
12,944
Total current assets
340,252
312,723
Property and equipment, net
10,656
10,091
Right of use lease assets, net
10,957
10,778
Intangible assets, net
21,937
22,398
Goodwill
5,965
5,965
Other assets
1,244
404
Total assets
$
391,011
$
362,359
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
75,896
$
63,685
Accrued expenses
27,781
25,940
Lease liabilities
3,905
3,776
Other current liabilities
8,772
7,191
Total current liabilities
116,354
100,592
Deferred income taxes, net
2,862
2,463
Lease liabilities
7,453
7,373
Other long-term liabilities
5,913
6,003
Total liabilities
132,582
116,431
Commitments and contingencies
—
—
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 67,019 and 66,968 shares issued and outstanding
7
7
Additional paid-in capital
125,404
123,208
Retained earnings
133,018
122,713
Total stockholders' equity
258,429
245,928
Total liabilities and stockholders'
equity
$
391,011
$
362,359
NIC INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June
30,
2020
2019
Cash flows from operating activities:
Net income
$
25,659
$
25,962
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization
6,955
5,551
Stock-based compensation expense
3,058
3,703
Deferred income taxes
282
976
Provision (recoveries) for losses on
accounts receivable
1,043
(148
)
Changes in operating assets and
liabilities:
Trade accounts receivable, net
(21,725
)
(31,613
)
Prepaid expenses & other current
assets
(420
)
1,130
Other assets
1,411
2,191
Accounts payable
12,211
23,616
Accrued expenses
1,841
(1,439
)
Other current liabilities
970
32
Other long-term liabilities
(1,700
)
(2,190
)
Net cash provided by operating
activities
29,585
27,771
Cash flows from investing activities:
Purchases of property and equipment
(2,540
)
(2,831
)
Business combination
—
(10,000
)
Asset acquisition
—
(3,486
)
Capitalized software development costs
(4,520
)
(4,607
)
Net cash used in investing activities
(7,060
)
(20,924
)
Cash flows from financing activities:
Cash dividends on common stock
(12,202
)
(10,818
)
Proceeds from employee common stock
purchases
1,509
1,443
Shares surrendered upon vesting of
restricted stock to satisfy tax withholdings
(1,917
)
(2,637
)
Repurchase of shares
(3,944
)
—
Net cash used in financing activities
(16,554
)
(12,012
)
Net increase (decrease) in cash
5,971
(5,165
)
Cash, beginning of period
214,380
191,700
Cash, end of period
220,351
186,535
Other cash flow information:
Non-cash activities:
Contingent consideration - business
combination
$
—
$
960
Cash payments:
Income taxes paid, net
$
5,189
$
6,925
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
2020
2019
2020
2019
Net income
$
13,796
$
14,460
$
25,659
$
25,962
Add: Income tax expense
4,583
3,846
8,433
7,923
Less: Interest income
—
577
389
1,181
Operating income
18,379
17,729
33,703
32,704
Add: Depreciation & amortization
expense
3,473
3,130
6,955
5,551
Add: Stock-based compensation expense,
inclusive of executive severance (1)
1,739
1,431
3,058
3,703
Add: Executive severance payments (1)
—
—
—
1,526
Adjusted EBITDA
$
23,591
$
22,290
$
43,716
$
43,484
Total Revenues
$
93,589
$
91,566
$
184,708
$
176,747
Net income as a % of total revenues ("net
profit margin")
15
%
16
%
14
%
15
%
Adjusted EBITDA as a % of total revenues
("Adjusted EBITDA margin")
25
%
24
%
24
%
25
%
Detail of stock-based compensation
expense
State enterprise cost of revenues,
exclusive of depreciation & amortization
$
400
$
395
$
758
$
757
Software & services cost of revenues,
exclusive of depreciation & amortization
42
21
69
56
Selling & administrative
1,087
857
1,856
2,572
Enterprise technology & product
support
210
158
375
318
Total stock-based compensation expense
$
1,739
$
1,431
$
3,058
$
3,703
(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 three months ended March 31, 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/20200729005971/en/
Kara Cowie Director of Corporate Communications (816) 813-2350
kara.cowie@egov.com
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