NIC Inc. (Nasdaq: EGOV), a leading digital government solutions
and payments company, announced results for the third quarter of
2020 that ended September 30, 2020, as compared to the third
quarter of 2019.
- Total revenues of $134.6 million, a 49% increase.
- Total revenues reflect $24.8 million from TourHealth, the
Company's new rapid COVID-19 testing solution with Impact Health
and NEXT Marketing, which commenced in August 2020.
- Total revenues reflect $7.6 million from pandemic unemployment
services provided to the Commonwealth of Virginia.
- Operating income of $29.8 million, a 66% increase.
- Operating income reflects a $4.9 million contribution from
TourHealth.
- Operating income reflects a $2.0 million contribution from
pandemic unemployment services provided to the Commonwealth of
Virginia.
- Net income of $25.1 million, a 73% increase.
- Diluted earnings per share of 37 cents, a 76% increase.
- Diluted earnings per share reflects a 6-cent contribution from
TourHealth.
- Diluted earnings per share reflects a 2-cent contribution from
pandemic unemployment services provided to the Commonwealth of
Virginia.
- Diluted earnings per share was positively impacted by
approximately 4 cents due to the release of reserves for
unrecognized income tax benefits resulting from statute of
limitations expirations and other favorable tax adjustments upon
filing the Company's 2019 return. Certain similar discrete tax
items positively impacted diluted earnings per share by
approximately 1 cent in the prior year.
- Adjusted EBITDA of $35.3 million, a 53% increase.
- Adjusted EBITDA reflects a $4.9 million contribution from
TourHealth.
- Adjusted EBITDA reflects a $2.0 million contribution from
pandemic unemployment services provided to the Commonwealth of
Virginia.
Additional Financial
Highlights:
- Same state revenues of $91.3 million, a 25% increase.
- Same state transaction-based revenues from Interactive
Government Services (IGS) increased 25%, driven by higher revenues
from DMV-related services, such as auto registrations, tax-related
services, and outdoor recreation services, among others.
- Same state transaction-based revenues from Driver History
Records (DHR) decreased 6%, driven by volume declines in several
states primarily resulting from the COVID-19 pandemic.
- Same state revenues from other services (development services
& fixed fee management services) increased 225%, driven by
revenues from pandemic unemployment services provided to the
Commonwealth of Virginia, as described above.
- Revenues from the Company's contract with the state of Illinois
were excluded from same state revenues in the current quarter
because it did not generate comparable revenues for two full
comparable periods. Illinois will be included in the calculation of
same state revenues beginning in the fourth quarter of 2020.
- Financial results from the Company’s Texas payment processing
contract previously included in the State Enterprise category were
included in the Software & Services category beginning in the
first quarter of 2020. Financial results in the prior year were
reclassified to match the current year presentation.
- Software & Services revenues of $43.1 million, a 152%
increase, driven primarily by revenues from TourHealth, as
described above.
- On October 26, 2020, the Company’s Board of Directors declared
a regular quarterly cash dividend of 9 cents per share, payable to
stockholders of record as of December 4, 2020. The dividend, which
is expected to total approximately $6.1 million based on the
current number of shares outstanding, will be paid on December 18,
2020 out of the Company’s available cash.
Operational Highlights:
As previously announced, following competitive bid processes,
NIC was awarded new, multi-year contracts with the states of
Florida and Iowa.
The state of Florida awarded the Company a contract to provide
transaction-funded payment processing services for all state
agencies. This contract also provides the ability for local
governments in Florida to work with the Company for payment
processing services. The contract has an initial term of five
years, which may be extended by up to five additional years.
The state of Iowa awarded the Company a contract to provide
enterprise digital government services to the state. The contract
has an initial term of five years with five one-year renewal
options.
In addition to these awards, several of the Company’s long-term
government partners recently extended their relationships with the
Company:
- Maryland extended its contract with the Company for six
months.
- Wisconsin extended its contract with the Company for two
years.
- The Company signed a new state enterprise contract with the
state of Oklahoma. The contract has an initial term of one year
with four one-year renewal options.
As previously announced, NIC joined forces with two
market-leading firms, Impact Health and NEXT Marketing, to create
TourHealth, a comprehensive and scalable rapid COVID-19 testing
solution. During the third quarter of 2020, TourHealth provided
testing services to the state of Florida, the Alabama Department of
Corrections and the University of Mississippi, and in October 2020,
TourHealth began providing testing services to the state of South
Carolina. Additionally, TourHealth has been selected by the states
of Utah, Nevada and Missouri as an approved COVID-19 testing
vendor.
“The positive momentum we continue to experience in 2020 is a
true testament to the dedication of our employees and government
partners, who, despite the many challenges of this pandemic,
continue to focus on delivering essential digital government
services to communities across the country. We appreciate the
confidence Florida and Iowa have placed in us to bring innovative
digital government services and secure payment processing to their
citizens,” said Harry Herington, NIC’s Chief Executive Officer and
Chairman of the Board. “We are also very proud of the success of
TourHealth and the critical access to COVID-19 tests this solution
provides. This solution further demonstrates NIC’s ability to
quickly respond to critical needs in times of crisis.”
COVID-19 and Updated Full-Year 2020
Outlook:
NIC continues to evaluate the impact the COVID-19 pandemic may
have on its business for the remainder of the year. Based on this
ongoing evaluation and taking into consideration recent revenue
trends, including COVID-19 related contributions from TourHealth
and Virginia pandemic unemployment services, the Company now
expects to come in above the high end of its previously issued
guidance for total revenues, which was $391.0 million, adjusted
EBITDA, which was $93.0 million, and earnings per share, which was
81 cents.
Third Quarter Earnings Call and Webcast
Details
On October 28, 2020, the Company will host a call to discuss its
2020 third quarter financial performance and fiscal outlook, and
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 28, 2020 at 4:30 p.m.
(EDT)
Call bridge:
1-334-777-6978 (local) or
1-800-367-2403 (tollfree)
Conference ID:
6173860
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
https://www.egov.com/investor-relations.html
A replay of NIC’s third quarter earnings call will be available
24 hours following the call by visiting https://www.egov.com/investor-relations.html
About NIC
NIC (Nasdaq: EGOV) is a leading digital government solutions and
payments company, serving more than 7,000 federal, state and local
government agencies across the nation. With headquarters in Olathe,
Kansas, and offices in more than 30 states, NIC partners with
government to deliver user-friendly digital services that make it
easier and more efficient to interact with government – providing
valuable conveniences like applying for unemployment insurance,
submitting business filings, renewing licenses, accessing
information and making secure payments without visiting a
government office. In the COVID-19 era and beyond, NIC helps
government agencies rapidly deliver new digital solutions to
provide essential services to citizens and businesses alike. Having
served the public sector for nearly 30 years, NIC continues to
evolve with its federal, state and local government partners to
deliver innovative and cost-effective digital government to
constituents. Learn more 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. The Company believes 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 the Company's 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 2020 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, statements related to the ongoing
effects the COVID-19 pandemic is expected to have on the Company’s
business and financial results, including statements relating to
the duration, profitability and unsatisfied performance obligations
of the Company’s COVID-19 testing solution, 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,
the Company’s ability to identify and acquire suitable acquisition
candidates and to successfully integrate any acquired businesses,
and the effects the COVID-19 pandemic may have on continued demand
for and profitability of the Company's services, including the
Company’s COVID-19 testing solution, as well as its government
agency partners, its workforce and the broader economy. 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 subsequent
reports 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, the Company undertakes
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,
2020
2019
2020
2019
Revenues:
State enterprise revenues
$
91,475
$
73,257
$
243,690
$
217,981
Software & services revenues
43,115
17,128
75,608
49,151
Total revenues
134,590
90,385
319,298
267,132
Operating expenses:
State enterprise cost of revenues,
exclusive of depreciation & amortization
53,807
43,821
145,954
130,881
Software & services cost of revenues,
exclusive of depreciation & amortization
31,290
10,173
52,359
30,094
Selling & administrative
8,817
8,153
25,196
26,473
Enterprise technology & product
support
7,342
6,743
21,797
19,933
Depreciation & amortization
3,528
3,524
10,483
9,075
Total operating expenses
104,784
72,414
255,789
216,456
Operating income
29,806
17,971
63,509
50,676
Other income:
Interest income
—
729
389
1,910
Income before income taxes
29,806
18,700
63,898
52,586
Income tax provision
4,715
4,190
13,148
12,113
Net income
$
25,091
$
14,510
$
50,750
$
40,473
Basic net income per share
$
0.37
$
0.21
$
0.75
$
0.60
Diluted net income per share
$
0.37
$
0.21
$
0.75
$
0.60
Weighted average shares outstanding:
Basic
67,025
66,960
67,004
66,858
Diluted
67,025
66,960
67,004
66,858
Key financial metrics:
Total revenue growth
49
%
4
%
20
%
—
%
Recurring revenues as a % of total
revenues
74
%
97
%
86
%
97
%
State enterprise revenue growth
25
%
(7
)%
12
%
(11
)%
Same state revenue growth
25
%
12
%
12
%
11
%
Gross profit % - state enterprise
41
%
40
%
40
%
40
%
Software & services revenue growth
152
%
111
%
54
%
146
%
Gross profit % - software &
services
27
%
41
%
31
%
39
%
Selling & administrative as a % of
total revenues
7
%
9
%
8
%
10
%
Enterprise technology & product
support as a % of total revenues
5
%
7
%
7
%
7
%
Operating income as a % of total revenues
("operating margin")
22
%
20
%
20
%
19
%
State enterprise revenue analysis:
IGS
$
58,192
$
46,480
$
156,436
$
136,826
DHR
21,716
23,076
65,172
70,158
Development services
10,329
2,463
18,369
7,284
Fixed-fee management services
1,238
1,238
3,713
3,713
Total state enterprise revenues
$
91,475
$
73,257
$
243,690
$
217,981
NIC INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except par
value amount)
(Unaudited)
September 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash
$
235,348
$
214,380
Trade accounts receivable, net
139,044
85,399
Prepaid expenses & other current
assets
18,649
12,944
Total current assets
393,041
312,723
Property and equipment, net
10,107
10,091
Right of use lease assets, net
11,293
10,778
Intangible assets, net
21,426
22,398
Goodwill
5,965
5,965
Other assets
1,608
404
Total assets
$
443,440
$
362,359
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
79,698
$
63,685
Accrued expenses
53,525
25,940
Lease liabilities
4,110
3,776
Other current liabilities
11,998
7,191
Total current liabilities
149,331
100,592
Deferred income taxes, net
2,295
2,463
Lease liabilities
7,618
7,373
Other long-term liabilities
4,854
6,003
Total liabilities
164,098
116,431
Commitments and contingencies
—
—
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares
authorized, 67,026 and 66,968 shares issued and outstanding
7
7
Additional paid-in capital
127,358
123,208
Retained earnings
151,977
122,713
Total stockholders' equity
279,342
245,928
Total liabilities and stockholders'
equity
$
443,440
$
362,359
NIC INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities:
Net income
$
50,750
$
40,473
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization
10,483
9,075
Stock-based compensation expense
5,056
5,227
Deferred income taxes
(285
)
1,464
Provision for losses on accounts
receivable
1,135
409
Changes in operating assets and
liabilities:
Trade accounts receivable, net
(54,324
)
(25,135
)
Prepaid expenses & other current
assets
(5,705
)
761
Other assets
2,212
3,333
Accounts payable
16,013
24,700
Accrued expenses
27,585
1,554
Other current liabilities
3,977
2,052
Other long-term liabilities
(3,671
)
(5,211
)
Net cash provided by operating
activities
53,226
58,702
Cash flows from investing activities:
Capital expenditures
(2,956
)
(3,483
)
Capitalized software development costs
(6,572
)
(6,679
)
Business combination
—
(10,000
)
Asset acquisition
—
(3,486
)
Net cash used in investing activities
(9,528
)
(23,648
)
Cash flows from financing activities:
Cash dividends on common stock
(18,299
)
(16,234
)
Proceeds from employee common stock
purchases
1,509
1,443
Shares surrendered upon vesting of
restricted stock to satisfy tax withholdings
(1,996
)
(2,686
)
Repurchase of shares
(3,944
)
—
Net cash used in financing activities
(22,730
)
(17,477
)
Net increase in cash
20,968
17,577
Cash, beginning of period
214,380
191,700
Cash, end of period
235,348
209,277
Other cash flow information:
Non-cash activities:
Contingent consideration - business
combination
$
—
$
960
Cash payments:
Income taxes paid, net
$
7,678
$
12,283
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
2020
2019
2020
2019
Net income
$
25,091
$
14,510
$
50,750
$
40,473
Add: Income tax expense
4,715
4,190
13,148
12,113
Less: Interest income
—
729
389
1,910
Operating income
29,806
17,971
63,509
50,676
Add: Depreciation & amortization
expense
3,528
3,524
10,483
9,075
Add: Stock-based compensation expense,
inclusive of executive severance (1)
1,998
1,524
5,056
5,227
Add: Executive severance payments (1)
—
—
—
1,526
Adjusted EBITDA
$
35,332
$
23,019
$
79,048
$
66,504
Total Revenues
$
134,590
$
90,385
$
319,298
$
267,132
Net income as a % of total revenues ("net
profit margin")
19
%
16
%
16
%
15
%
Adjusted EBITDA as a % of total revenues
("Adjusted EBITDA margin")
26
%
25
%
25
%
25
%
Detail of
stock-based compensation expense
State enterprise cost of revenues,
exclusive of depreciation & amortization
$
409
$
370
$
1,167
$
1,127
Software & services cost of revenues,
exclusive of depreciation & amortization
46
19
115
75
Selling & administrative
1,329
951
3,185
3,523
Enterprise technology & product
support
214
184
589
502
Total stock-based compensation expense
$
1,998
$
1,524
$
5,056
$
5,227
(1)
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 three months ended March 31, 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/20201028006119/en/
Kara Cowie Director of Corporate Communications (816) 813-2350
kara.cowie@egov.com
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