NIC Inc. (NASDAQ: EGOV), the leading provider of eGovernment
services, today announced net income of $10.8 million and earnings
per share of 16 cents on total revenues of $65.9 million for the
three months ended June 30, 2013. Operating income increased 67
percent to $17.7 million for the quarter. In the second quarter of
2012, the company reported net income of $6.1 million and earnings
per share of 9 cents on total revenues of $52.0 million.
Quarterly portal revenues were a record $62.1 million, a 27
percent increase over second quarter 2012. On a same-state basis,
portal revenues were up 19 percent in the current quarter.
Same-state, transaction-based revenues from non-driver record
(non-DMV) services rose 40 percent over second quarter 2012 through
strong performance from several key services, including a new court
fee payment service launched in Colorado, the Texas motor vehicle
inspection service as part of the DPS Direct suite of services, and
from several eGovernment services in New Jersey. Same-state DMV
revenues increased 5 percent in the second quarter of 2013.
Current quarter revenues from the Company’s newer portals in
Maryland, Oregon, and Pennsylvania totaled $5.2 million compared to
$1.3 million in revenues from the Maryland and Oregon portals in
the prior year quarter.
As previously disclosed by the Company, the Pennsylvania
Treasury issued a press release stating that it had rejected four
invoices, totaling approximately $3.5 million, for eGovernment
services provided to the Commonwealth through April 30, 2013 by the
Company’s subsidiary, Pennsylvania Interactive, LLC (PI), because
the administration had not obtained approvals from the Attorney
General for what the Treasurer characterized as “amendments” to the
Commonwealth’s Master Contract with PI, insufficient justification
of the specific payment amounts requested, and an inadequate basis
for granting a no-bid contract if cash payments from the
Commonwealth were to be included. Accounts receivable totaled $5.1
million for revenues earned since the commencement of the contract
with the Commonwealth on January 1, 2013 through June 30, 2013.
“NIC continues to operate in good faith under the contract and
is in the early stages of discussing this matter with Commonwealth
administration officials,” said Harry Herington, NIC Chief
Executive Officer and Chairman of the Board.
Portal gross profits increased to $27.2 million, a 47 percent
increase over the prior year quarter. NIC’s portal gross profit
percentage was 44 percent in the current quarter, up from 38
percent in the prior year quarter, driven mainly by strong
same-state revenue growth and meaningful revenue contributions from
newer portals in the current quarter, and by start-up dilution from
the Oregon portal in the prior year quarter. Cost of portal
revenues in the current quarter included approximately $0.2 million
of costs related to the Company’s new Wisconsin portal.
“The core of our business is delivering services that make
interacting with government secure and efficient,” added Herington.
“Launching new services in both current and newer states and
driving adoption of existing services resulted in strong growth
this quarter.”
Selling & administrative expenses in the current quarter
increased 20 percent, or $1.7 million, from the second quarter of
2012. However, as a percentage of total revenues, selling &
administrative expenses were 15 percent in the current quarter,
down from 16 percent in the prior year quarter. The current
quarter increase in selling & administrative expenses was
primarily attributable to higher costs to enhance corporate-wide
information technology and security infrastructure as a result of
the Company’s growth and higher executive and non-executive
management incentive compensation and benefit costs.
In addition, the Company incurred approximately $1.9 million in
legal fees and other third-party costs in the second quarter of
2013 in connection with the previously disclosed SEC investigation
and related matters. These expenses were reduced by approximately
$1.5 million of reimbursement by the Company’s directors’ and
officers’ liability insurance carrier. Selling & administrative
expenses in the prior year quarter included approximately $1.5
million of expense related to the SEC matter, which were reduced by
approximately $1.4 million of insurance reimbursement by the
Company’s insurance carrier.
“Our second quarter results exemplified the key growth drivers
of NIC’s business, from the newest portals to long-established
services,” said Steve Kovzan, NIC’s Chief Financial Officer. “Our
strong year-to-date results have exceeded our expectations, putting
us currently on pace to comfortably meet or exceed the high end of
our previously issued total revenue and earnings estimates for the
year.”
Operational Highlights
As previously announced, during the second quarter of 2013,
Wisconsin became the Company’s newest state partner. The Company’s
wholly owned subsidiary, Wisconsin Interactive Network, LLC, will
provide self-funded eGovernment services for the state and manage
its official web portal, http://www.wisconsin.gov. The five-year
agreement extends through 2018, and includes five, one-year
renewals that the state can exercise to extend the contract to
2023.
Also during the second quarter, the states of New Jersey and New
Mexico signed one-year renewal extensions, taking their contracts
through June 2014. Idaho signed a two-year renewal extension,
taking its contract through June 2015. Vermont signed a new
three-year contract resulting from Vermont Interactive’s win of the
state’s re-bid RFP. The new contract includes a three-year renewal
extension that can be exercised at the option of the state.
Second Quarter Earnings Call and Webcast Details
On the call, the Company will discuss its 2013 second quarter,
and answer questions from the investment community. The call may
also include discussion of company developments, and
forward-looking and other material information about business and
financial matters.
Dial-In Information
Thursday, August 1, 2013 4:30 p.m.
(EDT) Call bridge: 800-762-8779 (U.S. callers) or
480-629-9818 (international callers) Call leaders: Harry Herington,
Chief Executive Officer and Chairman of the Board Steve Kovzan,
Chief Financial Officer Robert Knapp, Chief Operating Officer
Webcast Information
To sign in and listen: The Webcast system is available at
http://www.egov.com/investors.
A replay of the Webcast will be available until 11 p.m. (EDT) on
February 3, 2014, by visiting http://www.egov.com/investors.
About NIC
NIC Inc. (NASDAQ: EGOV) is the leading provider of
enterprise-wide, official state eGovernment services and secure
government payment processing solutions. The Company's innovative
eGovernment services help reduce costs and increase efficiencies
for government agencies, citizens, and businesses across the
country. The NIC family of companies provides eGovernment solutions
for more than 3,500 federal, state, and local agencies across the
United States. Additional information is available at http://www.egov.com.
Cautionary Statement Regarding Forward-Looking
Information
Any statements contained 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 current fiscal year,
statements regarding the planned implementation of new portal
contracts and statements regarding continued implementation of
NIC’s business model and its development of new products and
services. Forward-looking statements are subject to inherent risks
and uncertainties and there can be no assurance that such
statements will prove to be correct. There are a number of
important factors that could cause actual results to differ
materially from those suggested or indicated by such
forward-looking statements. These include, among others, NIC’s
ability to successfully integrate into its operations recently
awarded eGovernment contracts; NIC's ability to implement its new
portal contracts in a timely and cost-effective manner; NIC’s
ability to successfully increase the adoption and use of
eGovernment services; the possibility of reductions in fees or
revenues as a result of budget deficits, government shutdowns or
changes in government policy; NIC’s ability to collect outstanding
accounts receivable from the Commonwealth of Pennsylvania; the
success of the Company in renewing existing contracts and in
signing contracts with new states and federal government agencies;
continued favorable government legislation; NIC’s ability to
develop new services; existing states and agencies adopting those
new services; acceptance of eGovernment services by businesses and
citizens; competition; the possibility of security breaches through
cyber attacks; general economic conditions; and the other important
cautionary statements and risk factors described in NIC's 2012
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 28, 2013. Any forward-looking statements
made in this release speak only as of the date of this release. NIC
does not intend to update these forward-looking statements and
undertakes no duty to any person to provide any such update under
any circumstances.
NIC INC. FINANCIAL SUMMARY (UNAUDITED)
Thousands except per share amounts and percentages
Three
months ended Six months ended June 30, June
30, 2013 2012 2013 2012 Revenues:
Portal revenues $ 62,094 $ 49,042 $ 120,136 $ 94,754 Software &
services revenues 3,844 2,940
7,026 5,971 Total revenues 65,938
51,982 127,162 100,725
Operating expenses: Cost of portal revenues, exclusive of
depreciation & amortization 34,899 30,550 67,661 59,301
Cost of software & services revenues,
exclusive of depreciation & amortization
1,189 1,008 2,292 1,966 Selling & administrative 10,058 8,383
19,667 16,318 Amortization of acquisition-related intangible assets
- 81 - 161 Depreciation & amortization 2,049
1,319 4,076 2,630 Total
operating expenses 48,195 41,341
93,696 80,376 Operating income 17,743 10,641
33,466 20,349 Other expense, net (2 ) -
(21 ) (1 ) Income before income taxes 17,741 10,641 33,445
20,348 Income tax provision 6,933 4,548
12,681 8,627 Net income $ 10,808
$ 6,093 $ 20,764 $ 11,721 Basic net
income per share $ 0.16 $ 0.09 $ 0.32 $ 0.18
Diluted net income per share $ 0.16 $ 0.09 $
0.32 $ 0.18 Weighted average shares
outstanding: Basic 64,890 64,489
64,800 64,393 Diluted 64,890
64,489 64,800 64,393
Key Financial Metrics: Revenue growth - outsourced portals
27 % 12 % 27 % 13 % Same state revenue growth - outsourced portals
19 % 6 % 18 % 8 % Recurring portal revenue as a % of total portal
revenues 94 % 90 % 95 % 91 % Gross profit % - outsourced portals 44
% 38 % 44 % 37 % Revenue growth - software & services 31 % 11 %
18 % 19 % Gross profit % - software & services 69 % 66 % 67 %
67 % Selling & administrative expenses as a % of total revenues
15 % 16 % 15 % 16 % Operating income as a % of total revenue 27 %
20 % 26 % 20 % Portal Revenue Analysis: DMV
transaction-based $ 22,030 $ 17,697 $ 44,792 $ 35,116 Non-DMV
transaction-based 34,005 24,298 64,175 46,610 Portal software
development 3,494 4,697 6,039 8,328 Portal management 2,565
2,350 5,130 4,700
Total portal revenues $ 62,094 $ 49,042 $ 120,136
$ 94,754
NIC INC. CONSOLIDATED
BALANCE SHEETS (UNAUDITED) Thousands except par value
amount
June 30,
2013
December 31, 2012 ASSETS Current assets: Cash $
80,688 $ 62,358 Trade accounts receivable, net 69,610 55,261
Deferred income taxes, net 956 887 Prepaid expenses & other
current assets 7,185 9,340 Total current
assets 158,439 127,846 Property and equipment, net 14,548 16,025
Intangible assets, net 1,470 1,016 Other assets 255
253 Total assets $ 174,712 $ 145,140
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 48,220 $ 43,664 Accrued expenses 18,771 18,948
Other current liabilities 1,388 208 Total
current liabilities 68,379 62,820 Deferred income taxes, net
2,277 2,050 Other long-term liabilities 2,060 1,346
Total liabilities 72,716 66,216
Commitments and contingencies - - Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 64,908 and 64,628 shares issued and outstanding
6 6 Additional paid-in capital 86,616 84,308 Retained earnings
(accumulated deficit) 15,374 (5,390 ) Total
stockholders' equity 101,996 78,924 Total
liabilities and stockholders' equity $ 174,712 $ 145,140
NIC INC. CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (UNAUDITED) Thousands
Additional Common Stock Paid-in
Retained Earnings Shares Amount Capital
(Accumulated Deficit) Total Balance, January 1,
2013 64,628 $ 6 $ 84,308 $ (5,390 ) $ 78,924 Net income - - -
20,764 20,764 Restricted stock vestings 275 - 83 - 83
Dividend equivalents cancelled upon
forfeiture of performance-based restricted stock awards
- - 50 - 50
Shares surrendered and cancelled upon
vesting of restricted stock to satisfy tax withholdings
(83 ) - (1,409 ) - (1,409 ) Stock-based compensation - - 2,077 -
2,077 Tax deductions relating to stock-based compensation - - 736 -
736
Shares issuable in lieu of dividend
payments on unvested performance-based restricted stock awards
- - (133 ) - (133 ) Issuance of common stock under employee stock
purchase plan 88 - 904 -
904
Balance, June 30, 2013 64,908 $ 6 $
86,616 $ 15,374 $ 101,996
NIC
INC. CASH FLOW SUMMARY (UNAUDITED)
Thousands
Three months ended Six months ended
June 30, June 30, 2013 2012 2013
2012 Cash flows from operating activities: Net income
$ 10,807 $ 6,093 $ 20,764 $ 11,721 Adjustments to reconcile net
income to net cash provided by operating activities: Amortization
of acquisition-related intangible assets - 81 - 161 Depreciation
& amortization 2,049 1,319 4,076 2,630 Stock-based compensation
expense 1,199 1,134 2,077 1,857 Deferred income taxes (282 ) (334 )
(820 ) (464 ) Loss on disposal of property and equipment 2 - 21 1
Changes in operating assets and liabilities: (Increase) in trade
accounts receivable, net (3,666 ) (6,924 ) (14,349 ) (5,823 )
(Increase) decrease in prepaid expenses & other current assets
1,973 (1,049 ) 3,133 (2,586 ) (Increase) in other assets (1 ) (1 )
(2 ) (2 ) Increase in accounts payable 3,718 5,105 4,556 3,153
Increase (decrease) in accrued expenses 1,229 1,605 (1,672 ) (502 )
Increase (decrease) in other current liabilities 1,165 (138 ) 1,180
(100 ) Increase (decrease) in other long-term liabilities
229 (23 ) 714 (73 )
Net cash provided by operating
activities
18,422 6,868 19,678
9,973 Cash flows from investing activities:
Purchases of property and equipment (1,256 ) (1,452 ) (2,258 )
(2,664 ) Capitalized internal use software development costs
(350 ) (212 ) (730 ) (349 ) Net cash used in
investing activities (1,606 ) (1,664 ) (2,988
) (3,013 ) Cash flows from financing activities:
Proceeds from employee common stock purchases - - 904 806 Tax
deductions related to stock-based compensation 155
73 736 770 Net cash
provided by financing activities 155 73
1,640 1,576 Net increase in cash
16,971 5,277 18,330 8,536 Cash, beginning of period 63,717
64,898 62,358 61,639
Cash, end of period $ 80,688 $ 70,175 $ 80,688
$ 70,175 Other cash flow information: Non-cash
investing activities: Capital expenditures accrued but not yet paid
$ 86 $ 2,964 $ 86 $ 2,964 Cash payments: Income taxes paid $
3,193
$ 4,617 $ 6,194 $ 8,649 Cash dividends on common stock previously
restricted for payment of dividend $ - $ - $ - $ 16,231
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