Company projects solid growth in 2014
NIC Inc. (NASDAQ: EGOV), the dominant provider of eGovernment
services, today announced net income of $6.2 million and earnings
per share of 9 cents on total revenues of $60.8 million for the
three months ended December 31, 2013. In the fourth quarter of
2012, the Company reported net income of $8.6 million and earnings
per share of 13 cents on total revenues of $56.2 million.
Results for the quarter include $2.5 million in legal defense
and other third party costs, net of insurance reimbursement,
included in selling & administrative expenses related to the
previously disclosed SEC matter for the Company’s Chief Financial
Officer. These costs lowered earnings per share for the quarter by
approximately 2 cents. During the quarter, a jury cleared NIC’s CFO
of any liability in connection with all of the claims alleged by
the SEC and the matter has concluded.
The Company’s effective tax rate in the current quarter
increased to 44 percent from 30 percent in the prior year quarter.
The higher effective tax rate in the current quarter was driven
primarily by changes in state taxes, including true-ups upon the
filing of state returns in the fourth quarter, which lowered
earnings per share by approximately 1 cent. The lower effective tax
rate in the prior year quarter was due to several factors,
including the favorable outcome of an IRS examination and the
related decrease in the liability for uncertain tax positions,
along with changes in state taxes, which increased earnings per
share in the prior year quarter between 1 and 2 cents. The Company
currently expects its effective tax rate to approximate 40 percent
in 2014.
Fourth Quarter 2013 Performance
Fourth quarter 2013 portal revenues were $57.3 million, a 7
percent increase over the fourth quarter of 2012. On a same state
basis, portal revenues were up 4 percent in the current quarter.
Same state transaction-based revenues from non-driver record
(non-DMV) services rose 8 percent over the fourth quarter of 2012,
and same state DMV revenues increased 5 percent, while same state
software development revenues decreased 21 percent, primarily
because the Company cycled against a strong quarter of
project-based, time and materials revenues in the prior year
quarter.
Current quarter revenues from the Company’s newest portals in
Pennsylvania, which began generating revenues in the current
quarter, and Wisconsin, which began generating revenues in the
third quarter of 2013, were a combined $2.6 million. Revenues from
the Virginia state agency partnerships were $0.8 million in the
current quarter, while revenues from the Virginia state portal
contract in the prior year quarter were $1.8 million.
Portal gross profits increased to $21.7 million, a 3 percent
increase over the prior year quarter. NIC’s portal gross profit
percentage was 38 percent in the current quarter, compared to 39
percent in the prior year quarter.
Software & services revenues were $3.5 million, up 25
percent from the fourth quarter of 2012, driven by a 16 percent, or
$0.3 million, increase in revenues from the federal Pre-employment
Screening Program, and $0.3 million of revenues from a new
construction lien service launched in the state of North Carolina
during the year. These services contributed to a 30 percent
increase in software & services gross profits to $2.3 million
for the quarter.
“NIC’s portal revenue growth this quarter was in line with our
expectations, as we cycled against the exceptional growth we’ve
experienced the past four quarters,” said NIC Chief Executive
Officer and Chairman of the Board Harry Herington. “We have always
vowed not to manage quarter by quarter, and our long-term vision
continues to pay off as we experienced one of the most exceptional
years of growth in NIC’s history.”
Operational Highlights
During the fourth quarter, the Wisconsin Department of Natural
Resources signed an agreement with NIC’s subsidiary, Wisconsin
Interactive Network, to provide the state’s online and point of
sale hunting and fishing licensing system. The agreement to provide
these services in Wisconsin, which is the second largest hunting
and fishing licensing state in the nation, extends beyond the
current master contract with the state and runs through May 2021.
The system also includes applications, draws, harvest registration,
commercial licensing, recreational vehicle renewals, snowmobile
passes, and kiosks. The hunting and fishing licensing component
will be piloted in the fall of 2015 with a full launch of the
system in March 2016.
Also, the State of Oklahoma signed a one-year renewal extension
with NIC’s subsidiary, Oklahoma Interactive, LLC, taking the
contract through 2015.
As previously announced, the State of Connecticut signed a
three-year contract with NIC’s subsidiary, Connecticut Interactive,
LLC, in January 2014. The contract also includes additional renewal
terms at the option of the state that could extend the contract
through 2020.
Full-Year 2013 Performance
Fiscal year 2013 total revenues rose 19 percent to $249.3
million, and portal revenues grew 19 percent to $235.2 million,
exceeding the high end of the Company’s 2013 revenue guidance.
Revenue growth in 2013 was driven by the strong performance from
the Texas motor vehicle inspection service launched in September
2012, and new non-DMV services in New Jersey and Colorado. On a
same state basis, portal revenues were 14 percent higher than in
2012, with same state non-DMV transactional revenues growing 27
percent and same state DMV revenues up 5 percent for the year. Same
state time & materials revenues relating to portal software
development decreased 20 percent for the year, due primarily to the
expiration of certain Texas Master Work Order projects in August
2012, as previously disclosed.
Portal gross profits increased to $92.1 million, a 23 percent
increase over the prior year, and NIC’s portal gross profit
percentage increased to 39 percent in 2013, up from 38 percent in
2012. Current year results include a one-time, non-cash, pre-tax
charge of $5.1 million included in cost of portal revenues,
reflecting the write off of outstanding accounts receivable due
from the Commonwealth of Pennsylvania as previously disclosed.
Software & services revenues were $14.1 million, up 20
percent from 2012, driven by a 15 percent, or $1.1 million,
increase in revenues from the federal Pre-employment Screening
Program and $1.2 million of revenues from the new construction lien
service launched in the state of North Carolina during the year.
These services contributed to a 26 percent increase in software
& services gross profits to $9.7 million for the year.
Selling & administrative expenses in 2013 reflect $4.0
million of costs, net of insurance reimbursement, related to the
recently concluded SEC matter, compared to $0.5 million in 2012. As
a percentage of total revenues, selling & administrative
expenses were 16 percent in both the current and prior years.
Depreciation & amortization expense increased 32 percent in
2013 due mainly to capital expenditures for the Texas motor vehicle
inspection service and to enhance corporate-wide information
technology and security infrastructure. As a percentage of total
revenues, depreciation & amortization expense was 3 percent in
both the current and prior years.
Operating income increased 22 percent to $52.6 million for the
year, and NIC’s operating income margin was 21 percent in the
current year, up from 20 percent in the prior year.
NIC earned 49 cents per share in 2013, up from 40 cents in 2012,
exceeding the high end of the Company’s 2013 earnings guidance.
On October 28, 2013, NIC’s Board of Directors declared a special
cash dividend of $0.35 per share to stockholders of record on
November 8, 2013. The dividend, totaling $23.0 million, was paid on
January 2, 2014 from NIC’s cash reserves.
“This was an outstanding year of growth for NIC,” said NIC Chief
Financial Officer Steve Kovzan. “We continued to add new state
partners and generated exceptional same-state revenue growth by
deploying online services on behalf of our government partners that
business and citizens demand.”
Full-Year 2014 Outlook
For full-year 2014, NIC currently expects total revenues of
$260.0-270.0 million, with portal revenues ranging from
$246.0-255.0 million and software & services revenues ranging
from $14.0-15.0 million. The Company also currently expects
operating income to range from $57.5-62.5 million and net income of
$34.7-37.7 million, with earnings per share ranging from 53-58
cents.
Portal gross profit margins for the year are currently expected
to approximate 40 percent, while software & services gross
profit margins are currently expected to be in the upper-60 percent
range.
Selling & administrative expenses are currently expected to
approximate 16 percent of total revenues. Depreciation &
amortization expense as a percentage of total revenues is currently
expected to range from 3 to 4 percent in 2014, with capital
expenditures currently expected to range from $6.5-7.0 million for
the year.
“Our financial guidance reflects healthy organic revenue growth
in line with historical averages, as we cycle against exceptional
growth in 2013,” said Steve Kovzan, NIC’s Chief Financial Officer.
“Investment years in our new Wisconsin and Connecticut portals, set
the stage for continued bottom line growth beyond 2014, while we
also enter 2014 with a solid new state pipeline, which we hope will
contribute favorably to our long-term success.”
Projections do not include revenues or costs from any
unannounced contracts, including Louisiana, where the Company won
an RFP bid, but has yet to complete contract negotiations.
Fourth Quarter Earnings Call and Webcast Details
On the call, the Company will discuss its 2013 fourth quarter
and full-year financial results, its guidance for 2014, 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, February 6, 2014 4:30 p.m. (EST) Call bridge:
800-762-8779 (U.S. callers) or 480-629-9645 (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 NIC’s fourth quarter earnings call will be available
until 11 p.m. (EDT) on August 7, 2014, by visiting http://www.egov.com/investors.
About NIC
NIC Inc. (NASDAQ: EGOV) is the nation's leading provider of
official government portals and online 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; 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 and in subsequent periodic reports
filed with the SEC. 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 Twelve months ended December 31,
December 31, 2013 2012 2013 2012
Revenues: Portal revenues $ 57,326 $ 53,463 $ 235,183 $ 198,415
Software & services revenues 3,461 2,779
14,096 11,758 Total revenues
60,787 56,242 249,279
210,173 Operating expenses: Cost of portal revenues,
exclusive of depreciation & amortization 35,638 32,474 143,054
123,569
Cost of software & services revenues,
exclusive of depreciation & amortization
1,137 996 4,357 4,041 Selling & administrative 10,871 8,316
40,925 32,852 Depreciation & amortization 2,112
2,069 8,333 6,519 Total
operating expenses 49,758 43,855
196,669 166,981 Operating income 11,029 12,387
52,610 43,192 Other expense, net (34 ) (15 )
(51 ) (16 ) Income before income taxes 10,995 12,372 52,559
43,176 Income tax provision 4,814 3,749
20,521 16,837 Net income $ 6,181
$ 8,623 $ 32,038 $ 26,339 Basic net
income per share $ 0.09 $ 0.13 $ 0.49 $ 0.40
Diluted net income per share $ 0.09 $ 0.13 $
0.49 $ 0.40 Weighted average shares
outstanding: Basic 64,992 64,627
64,889 64,500 Diluted 65,061
64,696
64,954
64,565 Key Financial Metrics: Revenue
growth - outsourced portals 7 % 29 % 19 % 17 % Same state revenue
growth - outsourced portals 4 % 21 % 14 % 10 % Recurring portal
revenue as a % of total portal revenues 94 % 92 % 94 % 92 % Gross
profit % - outsourced portals 38 % 39 % 39 % 38 % Revenue growth -
software & services 25 % 1 % 20 % 11 % Gross profit % -
software & services 67 % 64 % 69 % 66 % Selling &
administrative expenses as a % of total revenues 18 % 15 % 16 % 16
% Operating income as a % of total revenue 18 % 22 % 21 % 20 %
Portal Revenue Analysis: DMV transaction-based $ 19,842 $
17,205 $ 83,671 $ 70,896 Non-DMV transaction-based 31,526 29,315
127,898 101,216 Portal software development 3,348 4,378 13,309
16,660 Portal management 2,610 2,565
10,305 9,643 Total portal revenues $
57,326 $ 53,463 $ 235,183 $ 198,415
NIC INC. CONSOLIDATED BALANCE SHEETS
(UNAUDITED) Thousands except par value amount
December 31, 2013
December 31, 2012 ASSETS Current assets: Cash $
74,245 $ 62,358 Cash restricted for payment of dividend 22,982 -
Trade accounts receivable, net 52,818 55,261 Deferred income taxes,
net 1,038 887 Prepaid expenses & other current assets
11,569
9,340 Total current assets
162,652
127,846 Property and equipment, net 15,167 16,025 Intangible
assets, net 1,864 1,016 Other assets 290 253
Total assets $
179,973
$ 145,140
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $
39,112
$ 43,664 Accrued expenses 20,822 18,948 Dividend payable 22,982 -
Other current liabilities 348 208 Total
current liabilities
82,264
62,820 Deferred income taxes, net 2,432 2,050 Other
long-term liabilities
2,341
1,346 Total liabilities
88,037
66,216 Commitments and contingencies - -
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 64,993 and 64,628 shares issued and outstanding
6 6 Additional paid-in capital
88,397
84,308 Retained earnings (accumulated deficit)
3,533
(5,390 ) Total stockholders' equity
91,936
78,924 Total liabilities and stockholders' equity $
179,973
$ 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 - - - 32,038 32,038 Dividends declared - - -
(22,982
)
(22,982
)
Dividend equivalents on performance-based
restricted stock awards
- -
-
(133
)
(133 ) Restricted stock vestings 402 - 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
(125 ) - (2,276 ) - (2,276 ) Stock-based compensation - - 4,026 -
4,026 Tax deductions relating to stock-based compensation - - 1,302
- 1,302 Issuance of common stock under employee stock purchase plan
88 - 904 - 904
Balance, December 31, 2013 64,993 $ 6 $
88,397
$
3,533
$
91,936
NIC INC. CASH FLOW SUMMARY (UNAUDITED)
Thousands Three months ended Twelve months
ended December 31, December 31,
2013 2012 2013
2012 Cash flows from operating
activities: Net income $ 6,181 $ 8,623 $ 32,038 $ 26,339
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation & amortization 2,112 2,069
8,333 6,519 Provision for losses on accounts receivable 104 103
5,229 260 Stock-based compensation expense 759 694 4,026 3,803
Deferred income taxes 72 (346 ) (1,070 ) 734 Loss on disposal of
property and equipment 34 15 51 16 Changes in operating assets and
liabilities: (Increase) decrease in trade accounts receivable, net
8,123 (985 ) (2,786 ) (6,215 ) (Increase) decrease in prepaid
expenses & other current assets
613
1,688
(928
)
(1,919 ) (Increase) in other assets (31 ) (2 ) (37 ) (10 )
(Decrease) in accounts payable
(6,685
) (4,099 )
(4,502
) (1,374 ) Increase (decrease) in accrued expenses (1,890 ) (765 )
(587 ) 397 Increase in other current liabilities 104 218 223 102
Increase (decrease) in other long-term liabilities
1
(149 )
863
(262 ) Net cash provided by operating activities
9,497
7,064
40,853
28,390 Cash flows from investing activities:
Purchases of property and equipment (2,772 ) (1,402 ) (6,717 )
(12,776 ) Proceeds from sale of property and equipment 16 - 16 -
Capitalized internal use software development costs (410 )
(164 ) (1,489 ) (714 ) Net cash used in
investing activities (3,166 ) (1,566 ) (8,190
) (13,490 ) Cash flows from financing activities: Cash
dividends on common stock - (16,338 ) - (16,338 ) Cash restricted
for payment of dividend
(22,982
) -
(22,982
) - Proceeds from employee common stock purchases - - 904 806 Tax
deductions related to stock-based compensation
(33
) 154
1,302
1,351 Net cash used in financing activities
(23,015 ) (16,184 )
(20,776
) (14,181 ) Net increase (decrease) in cash (16,684 )
(10,686 ) 11,887 719 Cash, beginning of period 90,929
73,044 62,358 61,639
Cash, end of period $ 74,245 $ 62,358 $ 74,245
$ 62,358 Other cash flow information: Non-cash investing
activities: Capital expenditures accrued but not yet paid $ 185 $
145 $ 185 $ 145 Cash payments: Income taxes paid $ 3,195 $ 2,254 $
15,939 $ 14,108 Cash dividends on common stock previously
restricted for payment of dividend $ - $ - $ - $ 16,231
NICAngela Davied, 913-754-7054Director of
Communications& Investor Relationsadavied@egov.com
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