Company Continues Momentum In Securing Key
Contract Renewals and Driving Strong Organic Revenue Growth
NIC Inc. (Nasdaq: EGOV), the leading provider of digital
government services, announced results for the third quarter of
2019 that ended September 30, 2019, as compared to the third
quarter of 2018.
- Total revenues of $90.4 million, a 4% increase.
- Operating income of $18.0 million, an 8% decrease,
mainly reflecting lower revenues and profitability from the new
Texas payment processing contract compared to revenues from the
legacy Texas contract.
- Net income of $14.5 million, a 9% decrease.
- Diluted earnings per share of 21 cents, a 13% decrease.
Diluted earnings per share was positively impacted by 1 cent due to
the release of reserves for unrecognized income tax benefits
resulting from the expiration of certain statutes of limitations
for certain tax years, partially offset by a decrease in the
previously estimated research and development tax credit for the
2018 and 2019 tax years upon filing of the Company's 2018 federal
tax return during the current quarter. Certain similar discrete
items increased earnings per share in the prior year quarter by
approximately 2 cents.
- Adjusted EBITDA of $23.0 million, a 3% decrease.
Additional Financial
Highlights:
- Same state revenues of $73.0 million, a 12% increase.
- Same state transaction-based revenues from Interactive
Government Services (IGS) increased 17%.
- Same state transaction-based revenues from Driver History
Records (DHR) increased 2%.
- Same state revenues from other services (development services
& fixed fee management services) increased 9%.
- Revenues from the Company's operations in the state of Texas
and Illinois were excluded from same state revenues in the current
quarter because they did not generate comparable revenues for two
full comparable periods.
- State enterprise revenues in the third quarter of 2019 included
$7.8 million from the new Texas payment processing contract
compared to $2.0 million in the prior year quarter. The prior year
quarter also included $13.3 million in state enterprise revenues
from the legacy Texas contract.
- Software & Services revenues of $9.3 million, a 51%
increase, driven mainly by the new federal Recreation.gov service,
which launched on October 1, 2018, as well as higher
transaction-based revenues from the federal Pre-Employment
Screening Program, in addition to revenues from the
recently-acquired RxGov® and NIC Licensing Solutions
businesses.
- On October 28, 2019, 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, 2019. 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,
2019 out of the Company’s available cash.
“This is an exciting time for everyone at NIC. The momentum we
have with regard to the renewals of our long-term government
partnerships speaks to the excellent work of NIC's teams and their
commitment to our state partners,” said Harry Herington, NIC’s
Chief Executive Officer and Chairman of the Board. “We believe the
strength in organic growth and the increasing contribution of our
vertical solutions show that we are just beginning to hit our
stride.”
Operational Highlights:
Several of the Company’s long-term government partners recently
extended their relationships with the Company:
- Following a competitive rebid process, the state of Vermont
selected the Company as its state digital government services
provider. The three-year contract with the state includes one
three-year renewal term, which can be exercised at the state's
option, for a possible total of six years.
- The Company signed a new two-year contract with the state of
Idaho, which includes one two-year renewal term, which can be
exercised at the state's option, for a possible total of four
years.
- The Company signed a new one-year contract with the state of
Maryland, which includes a one-year renewal term, which can be
exercised at the state's option, for a possible total of two
years.
As previously announced, after a competitive bid process, the
Commonwealth of Virginia awarded the Company a new enterprise
services contract to provide state digital government solutions.
The multi-vendor award is for five years and includes three
one-year renewal terms, which can be exercised at the state's
option for a possible total of eight years.
Third Quarter Earnings Call and Webcast
Details
On October 30, 2019, the Company will host a call to discuss its
2019 third quarter financial and operational results and to 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, October 30, 2019 at 4:30 p.m. (EDT)
Call bridge:
800-353-6461 (U.S. callers) or
334-323-0501 (international callers)
Conference ID:
9605573
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
http://www.egov.com/investor-relations
A replay of NIC’s third quarter earnings call will be available
by visiting http://www.egov.com/investor-relations.
About NIC
NIC Inc. (Nasdaq: EGOV) launched the digital government industry
in 1992, and continues to lead it, providing a secure payment
platform and thousands of digital government solutions across a
network of more than 6,000 federal, state, and local government
agencies. In addition, NIC is a leading provider of outdoor
recreation solutions, with 1 out of 6 hunting and fishing licenses
in the United States sold using an NIC service. The Company
launched the nation's first personal assistant for government and
comprehensive mobile device platform, Gov2Go®, as well as the
innovative, data-driven prescription drug monitoring platform,
RxGov®. More information is available 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. We believe 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 our 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 2019 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, 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, and the Company’s ability to identify and
acquire suitable acquisition candidates and to successfully
integrate any acquired businesses. 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 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, 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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenues:
State enterprise revenues
$
81,084
$
80,884
$
241,169
$
248,230
Software & services revenues
9,301
6,144
25,963
18,021
Total revenues
90,385
87,028
267,132
266,251
Operating expenses:
State enterprise cost of revenues,
exclusive of depreciation & amortization
50,408
48,224
151,340
148,577
Software & services cost of revenues,
exclusive of depreciation & amortization
3,586
2,226
9,635
6,689
Selling & administrative
8,153
8,514
26,473
24,285
Enterprise technology & product
support
6,743
6,176
19,933
17,559
Depreciation & amortization
3,524
2,441
9,075
6,651
Total operating expenses
72,414
67,581
216,456
203,761
Operating income
17,971
19,447
50,676
62,490
Other income:
Interest income
729
153
1,910
212
Income before income taxes
18,700
19,600
52,586
62,702
Income tax provision
4,190
3,698
12,113
14,280
Net income
$
14,510
$
15,902
$
40,473
$
48,422
Basic net income per share
$
0.21
$
0.24
$
0.60
$
0.72
Diluted net income per share
$
0.21
$
0.24
$
0.60
$
0.72
Weighted average shares outstanding:
Basic
66,960
66,562
66,858
66,476
Diluted
66,960
66,598
66,858
66,507
Key financial metrics:
Total revenue growth
4
%
3
%
—
%
5
%
Recurring revenues as a % of total
revenues
97
%
97
%
97
%
97
%
State enterprise revenue growth
—
%
6
%
(3
)%
7
%
Same state revenue growth
12
%
9
%
11
%
9
%
Gross profit % - state enterprise
38
%
40
%
37
%
40
%
Software & services revenue growth
51
%
(24
)%
44
%
(10
)%
Gross profit % - software &
services
61
%
64
%
63
%
63
%
Selling & administrative as a % of
total revenues
9
%
10
%
10
%
9
%
Enterprise technology & product
support as a % of total revenues
7
%
7
%
7
%
7
%
Operating income as a % of total revenue
("operating margin")
20
%
22
%
19
%
23
%
State enterprise revenue analysis:
IGS
$
54,308
$
51,085
$
160,015
$
156,463
DHR
23,076
25,555
70,158
79,439
Development services
2,462
3,006
7,283
8,615
Fixed-fee management services
1,238
1,238
3,713
3,713
Total state enterprise revenues
$
81,084
$
80,884
$
241,169
$
248,230
NIC INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except par
value amount)
(Unaudited)
September 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash
$
209,277
$
191,700
Trade accounts receivable, net
106,081
80,904
Prepaid expenses & other current
assets
12,972
13,730
Total current assets
328,330
286,334
Property and equipment, net
10,506
10,256
Right of use lease assets, net
11,667
—
Intangible assets, net
22,844
13,604
Goodwill
5,965
—
Other assets
355
332
Total assets
$
379,667
$
310,526
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
84,792
$
60,092
Accrued expenses
25,706
24,150
Lease liabilities
3,996
—
Other current liabilities
7,856
4,883
Total current liabilities
122,350
89,125
Deferred income taxes, net
2,245
781
Lease liabilities
8,062
—
Other long-term liabilities
7,099
8,931
Total liabilities
139,756
98,837
Commitments and contingencies
—
—
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 66,961 and 66,569 shares issued and outstanding
7
7
Additional paid-in capital
121,706
117,763
Retained earnings
118,198
93,919
Total stockholders' equity
239,911
211,689
Total liabilities and stockholders'
equity
$
379,667
$
310,526
NIC INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
September 30, 2019
Common Stock
Additional Paid-in
Capital
Retained Earnings
Shares
Amount
Total
Balance, January 1, 2019
66,569
$
7
$
117,763
$
93,919
$
211,689
Net income
—
—
—
11,502
11,502
Dividends declared
—
—
—
(5,402
)
(5,402
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
27
(27
)
—
Dividend equivalents cancelled upon
forfeiture of performance-based restricted stock awards
—
—
(122
)
122
—
Restricted stock vestings
364
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(153
)
—
(2,609
)
—
(2,609
)
Stock-based compensation
—
—
2,272
—
2,272
Shares issuable in lieu of dividend
payments on unvested performance-based restricted stock awards
3
—
—
—
—
Issuance of common stock under employee
stock purchase plan
128
—
1,443
—
1,443
Balance, March 31, 2019
66,911
7
118,774
100,114
218,895
Net income
—
—
—
14,460
14,460
Dividends declared
—
—
—
(5,416
)
(5,416
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
27
(27
)
—
Restricted stock vestings
47
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(2
)
—
(28
)
—
(28
)
Stock-based compensation
—
—
1,431
—
1,431
Balance, June 30, 2019
66,956
7
120,204
109,131
229,342
Net income
—
—
—
14,510
14,510
Dividends declared
—
—
—
(5,416
)
(5,416
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
27
(27
)
—
Restricted stock vestings
8
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(3
)
—
(49
)
—
(49
)
Stock-based compensation
—
—
1,524
—
1,524
Balance, September 30, 2019
66,961
$
7
$
121,706
$
118,198
$
239,911
NIC INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
September 30, 2018
Common Stock
Additional Paid-in
Capital
Retained Earnings
Shares
Amount
Total
Balance, January 1, 2018
66,271
$
7
$
111,275
$
56,960
$
168,242
Cumulative effect of adoption of new
accounting standard
—
—
—
208
208
Net income
—
—
—
15,508
15,508
Dividends declared
—
—
—
(5,370
)
(5,370
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
34
(34
)
—
Dividend equivalents canceled upon
forfeiture of performance-based restricted stock awards
—
—
(140
)
140
—
Restricted stock vestings
202
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(81
)
—
(1,132
)
—
(1,132
)
Stock-based compensation
—
—
1,511
—
1,511
Issuance of common stock under employee
stock purchase plan
122
—
1,382
—
1,382
Balance, March 31, 2018
66,514
7
112,930
67,412
180,349
Net income
—
—
—
17,011
17,011
Dividends declared
—
—
—
(5,385
)
(5,385
)
Dividend equivalents on unvested
performance-based restricted stock awards
—
—
33
(33
)
—
Restricted stock vestings
44
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(2
)
—
(32
)
—
(32
)
Stock-based compensation
—
—
1,576
—
1,576
Balance, June 30, 2018
66,556
7
114,507
79,005
193,519
Net income
—
—
—
15,902
15,902
Dividends declared
—
—
—
(5,383
)
(5,383
)
Restricted stock vestings
14
—
—
—
—
Shares surrendered and canceled upon
vesting of restricted stock to satisfy tax withholdings
(3
)
—
(43
)
—
(43
)
Stock-based compensation
—
—
1,877
—
1,877
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,
2019
2018
Cash flows from operating activities:
Net income
$
40,473
$
48,422
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization
9,075
6,651
Stock-based compensation expense
5,227
4,965
Deferred income taxes
1,464
1,043
Provision for losses on accounts
receivable
409
350
Changes in operating assets and
liabilities:
Trade accounts receivable, net
(25,135
)
4,688
Prepaid expenses & other current
assets
761
(1,018
)
Other assets
3,333
226
Accounts payable
24,700
(12,983
)
Accrued expenses
1,554
(3,032
)
Other current liabilities
2,052
92
Other long-term liabilities
(5,211
)
151
Net cash provided by operating
activities
58,702
49,555
Cash flows from investing activities:
Purchases of property and equipment
(3,483
)
(4,000
)
Business combination
(10,000
)
—
Asset acquisition
(3,486
)
(3,555
)
Capitalized software development costs
(6,679
)
(5,783
)
Net cash used in investing activities
(23,648
)
(13,338
)
Cash flows from financing activities:
Cash dividends on common stock
(16,234
)
(16,138
)
Proceeds from employee common stock
purchases
1,443
1,382
Tax withholdings related to stock-based
compensation awards
(2,686
)
(1,209
)
Net cash used in financing activities
(17,477
)
(15,965
)
Net increase in cash
17,577
20,252
Cash, beginning of period
191,700
160,777
Cash, end of period
209,277
181,029
Other cash flow information:
Non-cash investing activities:
Contingent consideration - business
combination
$
960
$
—
Cash payments:
Income taxes paid, net
$
12,283
$
13,206
NIC INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
Reconciliation of net income to Adjusted
EBITDA
2019
2018
2019
2018
Net income
$
14,510
$
15,902
$
40,473
$
48,422
Add: Income tax expense
4,190
3,698
12,113
14,280
Less: Interest income
729
153
1,910
212
Operating income
17,971
19,447
50,676
62,490
Add: Depreciation & amortization
expense
3,524
2,441
9,075
6,651
Add: Stock-based compensation expense,
inclusive of executive severance (1)
1,524
1,877
5,227
4,965
Add: Executive severance payments (1)
—
—
1,526
—
Adjusted EBITDA
$
23,019
$
23,765
$
66,504
$
74,106
Total Revenues
$
90,385
$
87,028
$
267,132
$
266,251
Net income as a % of total revenues ("net
profit margin")
16
%
18
%
15
%
18
%
Adjusted EBITDA as a % of total revenues
("Adjusted EBITDA margin")
25
%
27
%
25
%
28
%
Detail of stock-based compensation
expense
State enterprise cost of revenues,
exclusive of depreciation & amortization
$
370
$
361
$
1,127
$
1,166
Software & services cost of revenues,
exclusive of depreciation & amortization
19
36
75
112
Selling & administrative
951
1,324
3,523
3,183
Enterprise technology & product
support
184
156
502
504
Stock-based compensation expense
$
1,524
$
1,877
$
5,227
$
4,965
- 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
nine months ended September 30, 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/20191030005852/en/
Steve Kovzan Chief Financial Officer (913) 754-7007
stevek@egov.com
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