Core digital government services drive strong
same-state financial results
NIC Inc. (Nasdaq: EGOV), the dominant provider of digital
government services, today announced net income of $15.9 million
and earnings per share of 24 cents on total revenues of $87.0
million for the three months ended September 30, 2018. In the third
quarter of 2017, the Company reported net income of $14.0 million
and earnings per share of 21 cents on total revenues of $84.5
million.
Quarterly portal revenues were $80.9 million, a 6 percent
increase over the third quarter of 2017. On a same-state basis,
portal revenues increased 9 percent over the prior year quarter.
Same-state, transaction-based revenues from Interactive Government
Services (IGS) rose 11 percent over the third quarter of 2017, due
primarily to higher volumes from a variety of services, including
driver’s license renewals and income tax 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 74 percent, driven primarily by time
& materials projects deployed in various states.
Third quarter 2018 portal revenues included $13.3 million from
the legacy Texas portal contract, which expired August 31, 2018,
and $2.0 million from the new Texas payment processing contract,
which began September 1, 2018. Revenues from the legacy Texas
portal contract totaled $16.5 million in the prior year quarter.
All revenues from operations in the state of Texas have been
removed from the same-state category for comparability
purposes.
Software & services revenues were $6.1 million in the
current quarter, down 24 percent from the third quarter of 2017.
Results in the prior year quarter reflect a one-time spike in
revenues of approximately $2.8 million from the sale of Lifetime
Senior Passes through the YourPassNow digital park pass service,
managed by NIC on behalf of the National Park Service. Demand for
the lifetime Senior Pass increased significantly in July and August
of 2017 due to a pending legislative price increase that became
effective August 28, 2017.
Operating income for the third quarter of 2018 decreased 3
percent to $19.4 million, driven by the decline in software &
services gross profit resulting from the non-recurring spike in
Lifetime Senior Pass revenues in the prior year quarter, an
increase in selling & administrative expenses driven by
personnel costs for business development and company-wide
information technology operations, in addition to higher
incentive-based compensation, and an increase in intangible asset
amortization, driven in part by the previously announced purchase
of a suite of prescription drug monitoring software assets from
Leap Orbit in July 2018, branded by NIC as RxGov. The Company’s
operating income margin also decreased to 22 percent for the
current quarter, from 24 percent in the prior year quarter.
The Company’s effective tax rate in the current quarter was 19
percent, down from 30 percent in the prior year quarter. The lower
rate was primarily attributable to favorable benefits related to
the Tax Cuts and Jobs Act of 2017. In addition, the Company’s
effective tax rate in the third quarter of 2018 reflects a release
of reserves for unrecognized income tax benefits due to the
expiration of the statutes of limitations for certain tax years,
and to a lesser extent, an increase in the previously estimated
research and development tax credit for the 2017 and 2018 tax years
upon the filing of the Company’s 2017 federal tax return during the
current quarter. Combined, these discrete tax items increased
earnings per share in the current quarter by approximately two
cents. NIC’s 30 percent effective tax rate in the prior year
quarter reflects an increase in the previously estimated research
and development tax credit for the 2016 and 2017 tax years upon the
filing of the Company’s 2016 federal tax return, and a release of
reserves for unrecognized income tax benefits due to the expiration
of the statutes of limitations for certain tax years. Combined,
these discrete tax items increased earnings per share in the prior
year quarter by approximately two cents. Prospectively, the Company
currently expects its effective tax rate to approximate 24 percent,
excluding potential discrete tax items.
“Our core teams continued to perform well this quarter,” said
Harry Herington, NIC Chief Executive Officer and Chairman of the
Board. “They consistently generate strong same-state revenue growth
from Interactive Government Services, demonstrating that citizens
and businesses continue to prefer the efficient, innovative digital
government services we provide in collaboration with our government
partners.”
On October 28, 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 December 4, 2018. The dividend, which
is expected to total approximately $5.4 million based on the
current number of shares outstanding, will be paid on December 18,
2018, out of the Company’s available cash.
Operational Highlights
As previously announced, the Company was awarded a new contract
by the U.S. General Services Administration (GSA) to implement a
GSA-led information technology modernization project for the United
States Department of Agriculture (USDA). The Company will deliver a
Voice of the Customer (VOC) tool, which will enable the USDA to
aggregate customer feedback from multiple channels providing a
thorough understanding of how people interact with the
department.
The state of Maine recently awarded NIC subsidiary, the Maine
Information Network, LLC, an 18-month extension taking the contract
through the end of June 2020. In addition, the Colorado Statewide
Internet Portal Authority recently announced its Board of Directors
approved it to enter into contract negotiations to renew the
contract with the Company’s subsidiary, Colorado Interactive,
LLC.
Third Quarter Earnings Call and Webcast Details
On the November 1, 2018 call, the Company will discuss its 2018
third 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
Thursday, November 1, 2018 4:30 p.m. (EDT) Call bridge:
888-254-3590 (U.S. callers) or
323-994-2093 (international callers) Conference ID: 6513602 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,
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 EndedSeptember
30,
Nine Months EndedSeptember
30,
Revenues:
2018 2017 2018
2017 Portal revenues $ 80,884 $ 76,434 $ 248,230 $ 232,963
Software & services revenues 6,144 8,099 18,021
20,073
Total revenues
87,028 84,533 266,251 253,036 Operating
expenses: Cost of portal revenues, exclusive of depreciation &
amortization 48,224 47,377 148,577 143,326 Cost of software &
services revenues, exclusive of depreciation & amortization
2,226 3,169 6,689 6,803 Selling & administrative 14,690 12,091
41,844 36,882 Depreciation & amortization 2,441 1,810
6,651 5,111 Total operating expenses 67,581
64,447 203,761 192,122 Operating income
19,447 20,086 62,490 60,914 Other income: Interest income 153
— 212 — Income before income taxes
19,600 20,086 62,702 60,914 Income tax provision 3,698 6,066
14,280 20,140 Net income $ 15,902 $
14,020 $ 48,422 $ 40,774 Basic net
income per share $ 0.24 $ 0.21 $ 0.72 $ 0.61
Diluted net income per share $ 0.24 $ 0.21 $
0.72 $ 0.61 Weighted average shares
outstanding: Basic 66,562 66,267 66,476 66,188
Diluted 66,598 66,267 66,507 66,188
Key Financial Metrics: Revenue growth - outsourced
portals 6 % 2 % 7 % 4 % Same state revenue growth - outsourced
portals 9 % 5 % 9 % 5 % Recurring portal revenue as a % of total
portal revenues 96 % 99 % 97 % 98 % Gross profit % - outsourced
portals 40 % 38 % 40 % 38 % Revenue growth - software &
services (24 )% 51 % (10 )% 27 % Gross profit % - software &
services 64 % 61 % 63 % 66 % Selling & administrative expenses
as a % of total revenues 17 % 14 % 16 % 15 % Operating income as a
% of total revenue 22 % 24 % 23 % 24 % Portal Revenue
Analysis: IGS $ 51,085 $ 48,089 $ 156,463 $ 144,194 DHR 25,555
25,936 79,439 79,787 Portal software development
3,006
1,134 8,615 5,157 Portal management
1,238
1,275 3,713 3,825 Total portal revenues
$ 80,884 $ 76,434 $ 248,230 $ 232,963
NIC INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value
amount)
(Unaudited)
September 30, 2018
December 31, 2017 ASSETS Current
assets: Cash $ 181,029 $ 160,777 Trade accounts receivable, net
98,900 103,938 Prepaid expenses & other current assets 13,861
12,843 Total current assets 293,790 277,558 Property and
equipment, net 10,058 10,306 Intangible assets, net 12,149 5,214
Deferred income taxes, net — 667 Other assets 1,916 1,986
Total assets $ 317,913 $ 295,731
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $ 75,937 $ 88,920 Accrued expenses 23,469 26,501 Other
current liabilities 3,713 3,673 Total current liabilities
103,119 119,094 Other long-term liabilities 8,922
8,395 Total liabilities 112,041 127,489 Commitments
and contingencies — — Stockholders' equity: Common stock,
$0.0001 par, 200,000 shares authorized, 66,567 and 66,271 shares
issued and outstanding 7 7 Additional paid-in capital 116,341
111,275 Retained earnings 89,524 56,960 Total stockholders'
equity 205,872 168,242 Total liabilities and stockholders'
equity $ 317,913 $ 295,731
NIC INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Common
Stock
Additional
Paid-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 — — —
48,422 48,422 Restricted stock vestings 260 — — — — Dividends
declared — — — (16,138 ) (16,138 ) 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 (86 ) — (1,209 ) — (1,209 ) Stock-based compensation —
— 4,965 — 4,965 Issuance of common stock under employee stock
purchase plan 122 — 1,382 — 1,382
Balance, September 30, 2018 66,567 $ 7 $
116,341 $ 89,524 $ 205,872
NIC INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands)
(Unaudited) Nine Months Ended
September 30, 2018 2017 Cash flows from
operating activities: Net income $ 48,422 $ 40,774 Adjustments to
reconcile net income to net cash provided by operating activities:
Provision for losses on accounts receivable 350 447 Depreciation
& amortization 6,651 5,111 Stock-based compensation expense
4,965 4,295 Deferred income taxes 1,043 723 Changes in operating
assets and liabilities: Decrease (increase) in trade accounts
receivable, net 4,688 (1,492 ) (Increase) decrease in prepaid
expenses & other current assets (1,018 ) 3,253 Decrease
(increase) in other assets 226 (1,515 ) (Decrease) in accounts
payable (12,983 ) (5,907 ) (Decrease) increase in accrued expenses
(3,032 ) 1,397 Increase in other current liabilities 92 660
Increase in other long-term liabilities 151 806 Net
cash provided by operating activities 49,555 48,596
Cash flows from investing activities: Purchases of property
and equipment (4,000 ) (3,319 ) Proceeds from sale of property and
equipment
—
7 Asset acquisition (3,555 ) — Capitalized software development
costs (5,783 ) (2,632 ) Net cash used in investing activities
(13,338 ) (5,944 ) Cash flows from financing activities:
Cash dividends on common stock (16,138 ) (16,043 ) Proceeds from
employee common stock purchases 1,382 1,330 Tax withholdings
related to stock-based compensation awards (1,209 ) (2,651 ) Net
cash used in financing activities (15,965 ) (17,364 ) Net
increase in cash 20,252 25,288 Cash, beginning of period 160,777
127,009 Cash, end of period $ 181,029 $
152,297 Other cash flow information: Non-cash
investing activities: Capital expenditures accrued but not yet paid
$
—
$ 88 Cash payments: Income taxes paid, net $ 13,206 $ 18,490
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181101005748/en/
NIC Inc.Angela Davied, 913-754-7054adavied@egov.com
NIC (NASDAQ:EGOV)
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