EGOV NIC Inc

Core digital government services drive strong same-state portal revenue growth

NIC Inc. (Nasdaq: EGOV), the dominant provider of digital government services, today announced net income of $17.0 million and earnings per share of 25 cents on total revenues of $92.5 million for the three months ended June 30, 2018. In the second quarter of 2017, the Company reported net income of $12.8 million and earnings per share of 19 cents on total revenues of $85.3 million.

Quarterly portal revenues were $86.6 million, a 9 percent increase over the second quarter of 2017. On a same-state basis, portal revenues increased 8 percent over the prior year quarter. Same-state, transaction-based revenues from Interactive Government Services (IGS) rose 10 percent over the second quarter of 2017, due primarily to higher volumes from a variety of services, including driver’s license renewals, motor vehicle inspections, and motor vehicle and business registration filings, among others. Same-state, transaction-based revenues from Driver History Records (DHR) were up 4 percent due to a price increase in one state and higher volumes across several states. Same-state portal software development revenues increased 39 percent, driven primarily by time & materials projects deployed in various states.

Second quarter 2018 portal revenues included $0.5 million from Illinois, the Company’s newest partnership.

Driven by strong same-state portal revenue growth, quarterly operating income increased 14 percent to $22.4 million, contributing to the increase in the Company’s operating income margin to 24 percent for the current quarter, from 23 percent in the prior year quarter.

The Company’s effective tax rate in the current quarter was 24 percent, down from 35 percent in the prior year quarter. The lower rate was attributable to favorable benefits related to the Tax Cuts and Jobs Act of 2017.

As previously announced, the Company recently purchased a suite of prescription drug monitoring program (PDMP) software assets developed by Leap Orbit, a Maryland-based, privately held company. The solution will be branded by NIC as RxGov, and leverages the Company’s expertise with PDMP solutions along with the industry-leading features of the acquired software to deliver a best-in-class solution to the marketplace.

“I was pleased with our strong financial results this quarter and I am excited about how we are strengthening our technology platforms and executing our healthcare vertical strategy,” said Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board. “We look forward to delivering a completely re-imagined, industry-leading prescription drug monitoring solution, as well as choice and flexibility to this market.”

On July 30, 2018, 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 5, 2018. The dividend, which is expected to total approximately $5.4 million based on the current number of shares outstanding, will be paid on September 19, 2018, out of the Company’s available cash.

Operational Highlights

During the second quarter of 2018, several of the Company’s contracts were extended. The State of Wisconsin extended its contract with the Company’s Wisconsin Interactive, LLC subsidiary for three years, taking the agreement through May 2021. The states of Arkansas, Rhode Island, Hawaii, Nebraska, and Idaho extended their contracts with the Company for one year, and the state of Maine extended its contract with NIC subsidiary, Maine Information Network through December 31, 2018. In addition, the Library of Congress agreed to extend its contract with the Company to provide a second year of maintenance for the e-filing solution developed for the Copyright Royalty Board.

Second Quarter Earnings Call and Webcast Details

On the August 1, 2018 call, the Company will discuss its 2018 second quarter financial and operational results, 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

Wednesday, August 1, 2018 4:30 p.m. (EDT)       Call bridge: 888-394-8218 (U.S. callers) or 323-794-2588 (international callers) Webcast slides:

https://streaming.webcasts.com/starthere.jsp?ei=1199775&tp_key=a873485471

Conference ID: 519774 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 for audio and slide presentation: The Webcast system is available at https://www.egov.com/investor-relations.

A replay of the Webcast will be available by visiting https://www.egov.com/investor-relations.

About NIC

NIC Inc. (Nasdaq: EGOV) is the nation’s premier provider of innovative digital government solutions and secure payment processing, which help make government interactions more accessible for everyone through technology. The family of NIC companies has developed a library of more than 13,000 digital government services for more than 5,500 federal, state, and local government agencies. Among these solutions is the ground-breaking personal assistant for government, Gov2Go, delivering citizens personalized reminders and a single access point for government interactions. More information is available at www.egov.com.

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 2018 fiscal year, 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 and the potential effect of tax law changes, 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, risks related to the outcome of the Texas procurement process, as well as possible data security incidents. Any statements regarding our expected effective tax rate for 2018 reflect provisional amounts subject to adjustment during the one-year measurement period permitted under applicable law. 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,

Revenues: 2018     2017 2018     2017 Portal revenues $ 86,555 $ 79,374 $ 167,346 $ 156,572 Software & services revenues 5,943   5,952   11,877   11,931   Total revenues 92,498   85,326   179,223   168,503   Operating expenses: Cost of portal revenues, exclusive of depreciation & amortization 51,711 49,009 100,353 96,041 Cost of software & services revenues, exclusive of depreciation & amortization 2,235 1,779 4,463 3,542 Selling & administrative 14,003 13,131 27,153 24,791 Depreciation & amortization 2,145   1,688   4,210   3,301   Total operating expenses 70,094   65,607   136,179   127,675   Operating income 22,404 19,719 43,044 40,828 Other income: Interest income 57   —   58   —   Income before income taxes 22,461 19,719 43,102 40,828 Income tax provision 5,450   6,950   10,582   14,074   Net income $ 17,011   $ 12,769   $ 32,520   $ 26,754     Basic net income per share $ 0.25   $ 0.19   $ 0.48   $ 0.40   Diluted net income per share $ 0.25   $ 0.19   $ 0.48   $ 0.40     Weighted average shares outstanding: Basic 66,541   66,248   66,432   66,147   Diluted 66,561   66,248   66,447   66,147     Key Financial Metrics: Revenue growth - outsourced portals 9 % 5 % 7 % 5 % Same state revenue growth - outsourced portals 8 % 7 % 8 % 6 % Recurring portal revenue as a % of total portal revenues 96 % 97 % 97 % 97 % Gross profit % - outsourced portals 40 % 38 % 40 % 39 % Revenue growth - software & services — % 12 % — % 14 % Gross profit % - software & services 62 % 70 % 62 % 70 % Selling & administrative expenses as a % of total revenues 15 % 15 % 15 % 15 % Operating income as a % of total revenue 24 % 23 % 24 % 24 %   Portal Revenue Analysis: IGS $ 55,111 $ 50,217 $ 105,379 $ 96,142 DHR 26,645 25,689 53,883 53,858 Portal software development 3,562 2,193 5,609 4,022 Portal management 1,237   1,275   2,475   2,550   Total portal revenues $ 86,555   $ 79,374   $ 167,346   $ 156,572       NIC INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value amount) (Unaudited)      

     June 30, 2018     

    December 31, 2017 ASSETS Current assets: Cash $ 172,725 $ 160,777 Trade accounts receivable, net 92,757 103,938 Prepaid expenses & other current assets 13,013 12,843 Total current assets 278,495 277,558 Property and equipment, net 9,930 10,306 Intangible assets, net 7,460 5,214 Deferred income taxes, net 53 667 Other assets 1,880 1,986 Total assets $ 297,818 $ 295,731   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 69,460 $ 88,920 Accrued expenses 22,274 26,501 Other current liabilities 3,412 3,673 Total current liabilities 95,146 119,094   Other long-term liabilities 9,153 8,395 Total liabilities 104,299 127,489   Commitments and contingencies — —   Stockholders' equity: Common stock, $0.0001 par, 200,000 shares authorized, 66,556 and 66,271 shares issued and outstanding 7 7 Additional paid-in capital 114,507 111,275 Retained earnings 79,005 56,960 Total stockholders' equity 193,519 168,242 Total liabilities and stockholders' equity $ 297,818 $ 295,731     NIC INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands) (Unaudited)       Common Stock    

AdditionalPaid-inCapital

   

RetainedEarnings

    Shares     Amount Total Balance, January 1, 2018 66,271 $ 7 $ 111,275 $ 56,960 $ 168,242 Net cumulative effect of adoption of accounting standard — — — 208 208 Net income — — — 32,520 32,520 Restricted stock vestings 246 — — — — Dividends declared — — — (10,755 ) (10,755 ) Dividend equivalents on unvested performance-based restricted stock awards — — 68 (68 ) — Dividend equivalents cancelled upon forfeiture of performance-based restricted stock awards — — (140 ) 140 — Shares surrendered and cancelled upon vesting of restricted stock to satisfy tax withholdings (83 ) — (1,165 ) — (1,165 ) Stock-based compensation — — 3,087 — 3,087 Issuance of common stock under employee stock purchase plan 122   —   1,382   —   1,382   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, 2018     2017 Cash flows from operating activities: Net income $ 32,520 $ 26,754 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on accounts receivable 343 379 Depreciation & amortization 4,210 3,301 Stock-based compensation expense 3,087 3,178 Deferred income taxes 614 796 Changes in operating assets and liabilities: Decrease in trade accounts receivable, net 10,838 2,994 (Increase) decrease in prepaid expenses & other current assets (170 ) 2,651 Decrease (increase) in other assets 262 (1,507 ) (Decrease) in accounts payable (19,460 ) (14,535 ) (Decrease) in accrued expenses (4,393 ) (1,271 ) (Decrease) increase in other current liabilities (209 ) 644 Increase in other long-term liabilities 758   1,010   Net cash provided by operating activities 28,400   24,433     Cash flows from investing activities: Purchases of property and equipment (2,411 ) (2,395 ) Proceeds from sale of property and equipment — 7 Capitalized software development costs (3,503 ) (1,692 ) Net cash used in investing activities (5,914 ) (4,080 )   Cash flows from financing activities: Cash dividends on common stock (10,755 ) (10,692 ) Proceeds from employee common stock purchases 1,382 1,330 Tax withholdings related to stock-based compensation awards (1,165 ) (2,614 ) Net cash used in financing activities (10,538 ) (11,976 )   Net increase in cash 11,948 8,377 Cash, beginning of period 160,777   127,009   Cash, end of period $ 172,725   $ 135,386     Other cash flow information: Non-cash investing activities: Capital expenditures accrued but not yet paid $ 166 $ 83 Cash payments: Income taxes paid, net $ 8,883 $ 12,405

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NIC Inc.Angela Davied, 913-754-7054adavied@egov.com