EGOV
$22.34
Nic
$.04
.18%
Earnings Details
1st Quarter March 2020
Monday, April 27, 2020 8:00:00 AM
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Summary

Nic Misses

Nic (EGOV) reported 1st Quarter March 2020 earnings of $0.18 per share on revenue of $91.1 million. The consensus earnings estimate was $0.18 per share on revenue of $92.1 million. The Earnings Whisper number was $0.19 per share. Revenue grew 7.0% on a year-over-year basis.

The company said it now expects 2020 results to be at the low-end of its previous guidance range for earnings of $0.76 to $0.81 per share and revenue of $380.5 million to $391.0 million. The current consensus earnings estimate is $0.78 per share on revenue of $385.5 million for the year ending December 31, 2020.

NIC Inc provides eGovernment services, which helps government use the Internet to reduce internal costs, increase efficiencies, and provides a higher level of service to businesses and citizens.

Results
Reported Earnings
$0.18
Earnings Whisper
$0.19
Consensus Estimate
$0.18
Reported Revenue
$91.1 Mil
Revenue Estimate
$92.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIC Reports First Quarter 2020 Results

OLATHE, Kan.--(BUSINESS WIRE)--NIC Inc. (Nasdaq: EGOV), the leading provider of digital government services, announced results for the first quarter of 2020 that ended March 31, 2020, as compared to the first quarter of 2019.

  • Total revenues of $91.1 million, a 7% increase.
  • Operating income of $15.3 million, a 2% increase.
  • Net income of $11.9 million, a 3% increase.
  • Diluted earnings per share of 18 cents, a 6% increase.
  • Adjusted EBITDA of $20.1 million, a 5% decrease.

Additional Financial Highlights:

  • Same state revenues of $74.2 million, a 7% increase.
    • Same state transaction-based revenues from Interactive Government Services (IGS) increased 13%.
    • Same state transaction-based revenues from Driver History Records (DHR) decreased 4%.
    • Same state revenues from other services (development services & fixed fee management services) decreased 1%.
    • Revenues from the Company's operations in 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.
  • 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 quarter were reclassified to match the current quarter presentation.
  • Software & Services revenues of $16.7 million, a 9% increase, driven by revenue growth from the Texas payment processing contract and by higher revenues from the Company’s RxGov prescription drug monitoring business and recently acquired NIC Licensing Solutions business.
  • During the first quarter of 2020, the Company purchased 241,180 shares of common stock under its $25 million repurchase program at a weighted average purchase price per share of $16.33 for a total purchase price of $3.9 million. The remaining $21.1 million authorized under the repurchase program is available for future share repurchases.
  • On April 23, 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 June 11, 2020. The dividend, which is expected to total approximately $6.1 million based on the current number of shares outstanding, will be paid on June 25, 2020 out of the Company’s available cash.

“I commend our government partners and 1,000 employees across the country for the tremendous job they are doing to support the needs of citizens and businesses during a time when government offices are closed for the first time ever,” said Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board. “Together, our teams have been working 24/7 to proactively address and respond to the onslaught of needs brought on by this pandemic and keep government open for business online. Since the beginning of the COVID-19 outbreak, we have launched more than 130 digital services in addition to dozens of cloud-based informational sites that connect government, citizens and businesses and address mission-critical areas such as unemployment filings, COVID-19 testing, nurse licensing and the procurement of personal protection equipment.”

Operational Highlights:

Several of the Company’s long-term government partners recently extended their relationships with the Company:

  • Alabama extended its contract with the Company for one year.
  • Kentucky extended its contract with the Company for two years. The extension includes four one-year renewal options, for a possible total of six years.
  • The Company signed a new contract with the state of Louisiana Division of Administration, which allows the Company to continue providing digital services to the state for the next six years.
  • New Jersey extended its contract with the Company for one year.
  • Following a competitive rebid, the Company signed a new five-year contract with the state of New Mexico, which includes one five-year renewal term, which can be exercised at the state's option, for a possible total of ten years.
  • The Federal Motor Carrier Safety Administration extended its contract with the Company to provide the Pre-Employment Screening Program for an additional six months through August 27, 2020. The contract has one sixth-month renewal option remaining.

The Company was also recently awarded a five-year contract with the state of Maine to provide RxGov as the state’s prescription drug monitoring platform.

The Company recently finalized the implementation of its cannabis licensing solution for the state of Missouri and the state has contracted for an additional module, which NIC will be deploying over the next several months. The Company’s contract in Missouri runs through mid-2024 with renewal options the state may exercise through mid-2026.

COVID-19 and Updated Full-Year 2020 Outlook:

NIC is evaluating the impact the COVID-19 pandemic will have on its business for the remainder of the year. Based on this ongoing evaluation, the Company currently expects to come in near the low end of its previously issued guidance for total revenues, which was $380.5 million, adjusted EBITDA, which was $88.5 million, and earnings per share, which was 76 cents. The Company's previous guidance for capital expenditures and capitalized software development costs for 2020 remains unchanged.

“Despite some unprecedented revenue softness resulting from the COVID-19 pandemic in the latter part of March, NIC is a stable, essential company helping government remain open for business. Furthermore, NIC is in a unique position of strength during these uncertain times with no debt, considerable cash in the bank and a resilient business model that is providing immense value to our government partners at a time when they need it the most,” said Steve Kovzan, NIC's Chief Financial Officer.

First Quarter Earnings Call and Webcast Details

On April 27, 2020, the Company will host a call to discuss its 2020 first quarter financial and operational results, its updated full-year 2020 guidance, 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

Monday, April 27, 2020 at 8:30 a.m. (EDT)

 

 

Call bridge:

1-888-394-8218 (U.S. callers) or 1-646-828-8193 (international callers)

Conference ID:

8211581

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 first quarter earnings call will be available by visiting https://www.egov.com/investor-relations.html.

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. 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 impact of the COVID-19 pandemic, 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 impact the COVID-19 pandemic may have on demand for the Company's services, 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
March 31,

 

 

2020

 

2019

Revenues:

 

 

 

 

State enterprise revenues

 

$

74,411

 

 

$

69,853

 

Software & services revenues

 

16,708

 

 

15,327

 

Total revenues

 

91,119

 

 

85,180

 

Operating expenses:

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

46,271

 

 

41,978

 

Software & services cost of revenues, exclusive of depreciation & amortization

 

10,724

 

 

9,397

 

Selling & administrative

 

8,064

 

 

9,964

 

Enterprise technology & product support

 

7,254

 

 

6,445

 

Depreciation & amortization

 

3,482

 

 

2,421

 

Total operating expenses

 

75,795

 

 

70,205

 

Operating income

 

15,324

 

 

14,975

 

Other income:

 

 

 

 

Interest income

 

389

 

 

604

 

Income before income taxes

 

15,713

 

 

15,579

 

Income tax provision

 

3,850

 

 

4,077

 

Net income

 

$

11,863

 

 

$

11,502

 

 

 

 

 

 

Basic net income per share

 

$

0.18

 

 

$

0.17

 

Diluted net income per share

 

$

0.18

 

 

$

0.17

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

66,987

 

 

66,670

 

Diluted

 

66,987

 

 

66,670

 

 

 

 

 

 

Key financial metrics:

 

 

 

 

Total revenue growth

 

7

%

 

(2)

%

Recurring revenues as a % of total revenues

 

98

%

 

97

%

State enterprise revenue growth

 

7

%

 

(14)

%

Same state revenue growth

 

7

%

 

10

%

Gross profit % - state enterprise

 

38

%

 

40

%

Software & services revenue growth

 

9

%

 

158

%

Gross profit % - software & services

 

36

%

 

39

%

Selling & administrative as a % of total revenues

 

9

%

 

12

%

Enterprise technology & product support as a % of total revenues

 

8

%

 

8

%

Operating income as a % of total revenue ("operating margin")

 

17

%

 

18

%

State enterprise revenue analysis:

 

 

 

 

IGS

 

$

48,187

 

 

$

42,751

 

DHR

 

22,849

 

 

23,685

 

Development services

 

2,137

 

 

2,179

 

Fixed-fee management services

 

1,238

 

 

1,238

 

Total state enterprise revenues

 

$

74,411

 

 

$

69,853

 

 

NIC INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amount)

(Unaudited)

 

 

 

March 31, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

217,587

 

 

$

214,380

 

Trade accounts receivable, net

 

101,814

 

 

85,399

 

Prepaid expenses & other current assets

 

18,375

 

 

12,944

 

Total current assets

 

337,776

 

 

312,723

 

Property and equipment, net

 

10,150

 

 

10,091

 

Right of use lease assets, net

 

9,901

 

 

10,778

 

Intangible assets, net

 

22,109

 

 

22,398

 

Goodwill

 

5,965

 

 

5,965

 

Other assets

 

794

 

 

404

 

Total assets

 

$

386,695

 

 

$

362,359

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

88,056

 

 

$

63,685

 

Accrued expenses

 

21,118

 

 

25,940

 

Lease liabilities

 

3,642

 

 

3,776

 

Other current liabilities

 

8,951

 

 

7,191

 

Total current liabilities

 

121,767

 

 

100,592

 

 

 

 

 

 

Deferred income taxes, net

 

3,183

 

 

2,463

 

Lease liabilities

 

6,607

 

 

7,373

 

Other long-term liabilities

 

6,094

 

 

6,003

 

Total liabilities

 

137,651

 

 

116,431

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, $0.0001 par, 200,000 shares authorized, 66,968 and 66,968 shares issued and outstanding

 

7

 

 

7

 

Additional paid-in capital

 

123,683

 

 

123,208

 

Retained earnings

 

125,354

 

 

122,713

 

Total stockholders' equity

 

249,044

 

 

245,928

 

Total liabilities and stockholders' equity

 

$

386,695

 

 

$

362,359

 

 

NIC INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

    

 

 

Three Months Ended
March 31,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

  

 

 

Net income

 

$

11,863

 

 

$

11,502

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

 

 

Depreciation & amortization

 

3,482

 

 

2,421

 

Stock-based compensation expense

 

1,319

 

 

2,272

 

Deferred income taxes

 

603

 

 

1,076

 

Provision (recoveries) for losses on accounts receivable

 

347

 

 

(186

)

Changes in operating assets and liabilities:

 

 

  

 

 

Trade accounts receivable, net

 

(16,306

)

 

(32,464

)

Prepaid expenses & other current assets

 

(5,431

)

 

(1,205

)

Other assets

 

697

 

 

1,069

 

Accounts payable

 

24,371

 

 

20,008

 

Accrued expenses

 

(4,822

)

 

(3,183

)

Other current liabilities

 

1,416

 

 

422

 

Other long-term liabilities

 

(675

)

 

(664

)

Net cash provided by operating activities

 

16,864

 

 

1,068

 

 

 

 

  

 

 

Cash flows from investing activities:

 

 

  

 

 

Purchases of property and equipment

 

(1,060

)

 

(1,484

)

Asset acquisition

 

  

(1,743

)

Capitalized software development costs

 

(2,192

)

 

(2,417

)

Net cash used in investing activities

 

(3,252

)

 

(5,644

)

 

 

 

  

 

 

Cash flows from financing activities:

 

 

  

 

 

Cash dividends on common stock

 

(6,105

)

 

(5,402

)

Proceeds from employee common stock purchases

 

1,509

 

 

1,443

 

Shares surrendered upon vesting of restricted stock to satisfy tax withholdings

 

(1,865

)

 

(2,609

)

Repurchase of shares

 

(3,944

)

 

 

Net cash used in financing activities

 

(10,405

)

 

(6,568

)

 

 

 

  

 

 

Net increase (decrease) in cash

 

3,207

 

 

(11,144

)

Cash, beginning of period

 

214,380

 

 

191,700

 

Cash, end of period

 

217,587

 

 

180,556

 

 

 

 

  

 

 

Other cash flow information:

 

 

  

 

 

Cash payments:

 

 

  

 

 

Income taxes paid, net

 

$

4,391

 

 

$

3,637

 

    

NIC INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

Reconciliation of net income to Adjusted EBITDA

 

2020

 

2019

Net income

 

$

11,863

 

 

$

11,502

 

Add: Income tax expense

 

3,850

 

 

4,077

 

Less: Interest income

 

389

 

 

604

 

Operating income

 

15,324

 

 

14,975

 

Add: Depreciation & amortization expense

 

3,482

 

 

2,421

 

Add: Stock-based compensation expense, inclusive of executive severance (1)

 

1,319

 

 

2,272

 

Add: Executive severance payments (1)

 

 

 

1,526

 

Adjusted EBITDA

 

$

20,125

 

 

$

21,194

 

 

 

 

 

 

Total Revenues

 

$

91,119

 

 

$

85,180

 

 

 

 

 

 

Net income as a % of total revenues ("net profit margin")

 

13

%

 

14

%

Adjusted EBITDA as a % of total revenues ("Adjusted EBITDA margin")

 

22

%

 

25

%

 

 

 

 

 

Detail of stock-based compensation expense

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

$

358

 

 

$

361

 

Software & services cost of revenues, exclusive of depreciation & amortization

 

28

 

 

35

 

Selling & administrative

 

768

 

 

1,716

 

Enterprise technology & product support

 

165

 

 

160

 

Total stock-based compensation expense

 

$

1,319

 

 

$

2,272

 

(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.

 

Angie Davids
Senior VP, Marketing and Communications
(913) 754-7054
angie.davids@egov.com

Source: NIC Inc.