BusinessWire

NIC Reports Second Quarter 2020 Results

OLATHE, Kan.--(BUSINESS WIRE)--NIC Inc. (Nasdaq: EGOV), the leading provider of digital government services, announced results for the second quarter of 2020 that ended June 30, 2020, as compared to the second quarter of 2019.


  • Total revenues of $93.6 million, a 2% increase.
  • Operating income of $18.4 million, a 4% increase.
  • Net income of $13.8 million, a 5% decrease.
  • Diluted earnings per share of 20 cents, a 5% decrease. Earnings per share in the prior year quarter was positively impacted by 1 cent due to the release of reserves for unrecognized income tax benefits resulting from the completion of an IRS examination of the Company's 2016 federal income tax return, which resulted in no changes to the Company's previously filed return.
  • Adjusted EBITDA of $23.6 million, a 6% increase.

Additional Financial Highlights:

  • Same state revenues of $77.6 million, a 4% increase.
    • Same state transaction-based revenues from Interactive Government Services (IGS) increased 5%.
    • Same state transaction-based revenues from Driver History Records (DHR) decreased 12%, 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 87%, driven by pandemic unemployment services provided to the Commonwealth of Virginia.
    • 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.
  • 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 $15.8 million, a 5% decrease, driven primarily by volume declines from the federal Pre-Employment Screening Program resulting from the COVID-19 pandemic.
  • On July 27, 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 September 8, 2020. The dividend, which is expected to total approximately $6.1 million based on the current number of shares outstanding, will be paid on September 22, 2020 out of the Company’s available cash.

Operational Highlights:

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

  • Arkansas extended its contract with the Company for two years.
  • Pennsylvania extended its contract with the Company for two years.
  • South Carolina extended its contract with the Company for one year.
  • 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 February 27, 2021.

After a competitive bid process, the state of Iowa recently named the Company as the winning bidder to provide enterprise digital government services to the state. The Company and the state are currently in the process of negotiating the contract.

NIC has forged a partnership with two market-leading firms, Impact Health and NEXT Marketing, to create TourHealth, a comprehensive and scalable rapid COVID-19 testing solution. TourHealth will leverage Gov2Go, NIC's citizen-centric mobile platform and personal government assistant, for citizen engagement, assessment and scheduling purposes. The TourHealth partnership was recently selected to provide two testing locations in the state of Florida, and was also selected by the state of Utah as one of only two COVID-19 testing vendors approved to provide scheduling, call center and test collection services for state agencies, local governments and educational institutions.

“We continue to respond to the unprecedented and ever-changing COVID-19 pandemic and are extremely excited about our new TourHealth partnership launching in Florida and Utah,” said Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board. “We are also very pleased to welcome the state of Iowa back to the NIC family and with the tremendous success of our Virginia unemployment program. All of these are prime examples of how we support our government partners to provide essential services to citizens and businesses.”

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, the Company continues to expect 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 currently expects capital expenditures to range from $5 - $6 million in 2020. The Company’s previous guidance for capitalized software development costs of $9 - $10 million for 2020 remains unchanged.

Second Quarter Earnings Call and Webcast Details

On July 29, 2020, the Company will host a call to discuss its 2020 second 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, July 29, 2020 at 4:30 p.m. (EDT)

Call bridge:

 

1-929-477-0577 (local) or 1-800-437-2398 (tollfree)

Conference ID:

 

9383063

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 second quarter earnings call will be available 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 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
June 30,

 

Six Months Ended
June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

State enterprise revenues

 

$

77,804

 

 

$

74,871

 

 

$

152,215

 

 

$

144,724

 

Software & services revenues

 

15,785

 

 

16,695

 

 

32,493

 

 

32,023

 

Total revenues

 

93,589

 

 

91,566

 

 

184,708

 

 

176,747

 

Operating expenses:

 

 

 

 

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

45,876

 

 

45,081

 

 

92,147

 

 

87,060

 

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

 

10,344

 

 

10,525

 

 

21,069

 

 

19,922

 

Selling & administrative

 

8,316

 

 

8,356

 

 

16,379

 

 

18,320

 

Enterprise technology & product support

 

7,201

 

 

6,745

 

 

14,455

 

 

13,190

 

Depreciation & amortization

 

3,473

 

 

3,130

 

 

6,955

 

 

5,551

 

Total operating expenses

 

75,210

 

 

73,837

 

 

151,005

 

 

144,043

 

Operating income

 

18,379

 

 

17,729

 

 

33,703

 

 

32,704

 

Other income:

 

 

 

 

 

 

 

 

Interest income

 

 

 

577

 

 

389

 

 

1,181

 

Income before income taxes

 

18,379

 

 

18,306

 

 

34,092

 

 

33,885

 

Income tax provision

 

4,583

 

 

3,846

 

 

8,433

 

 

7,923

 

Net income

 

$

13,796

 

 

$

14,460

 

 

$

25,659

 

 

$

25,962

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.20

 

 

$

0.21

 

 

$

0.38

 

 

$

0.38

 

Diluted net income per share

 

$

0.20

 

 

$

0.21

 

 

$

0.38

 

 

$

0.38

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

66,999

 

 

66,940

 

 

66,993

 

 

66,806

 

Diluted

 

66,999

 

 

66,940

 

 

66,993

 

 

66,806

 

 

 

 

 

 

 

 

 

 

Key financial metrics:

 

 

 

 

 

 

 

 

Total revenue growth

 

2

%

 

(1

)%

 

5

%

 

(1

)%

Recurring revenues as a % of total revenues

 

94

%

 

97

%

 

96

%

 

97

%

State enterprise revenue growth

 

4

%

 

(13

)%

 

5

%

 

(14

)%

Same state revenue growth

 

4

%

 

10

%

 

5

%

 

10

%

Gross profit % - state enterprise

 

41

%

 

40

%

 

39

%

 

40

%

Software & services revenue growth

 

(5

)%

 

181

%

 

1

%

 

170

%

Gross profit % - software & services

 

34

%

 

37

%

 

35

%

 

38

%

Selling & administrative as a % of total revenues

 

9

%

 

9

%

 

9

%

 

10

%

Enterprise technology & product support as a % of total revenues

 

8

%

 

7

%

 

8

%

 

7

%

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

 

20

%

 

19

%

 

18

%

 

19

%

State enterprise revenue analysis:

 

 

 

 

 

 

 

 

IGS

 

$

50,055

 

 

$

47,595

 

 

$

98,243

 

 

$

90,347

 

DHR

 

20,607

 

 

23,396

 

 

43,456

 

 

47,081

 

Development services

 

5,904

 

 

2,642

 

 

8,041

 

 

4,821

 

Fixed-fee management services

 

1,238

 

 

1,238

 

 

2,475

 

 

2,475

 

Total state enterprise revenues

 

$

77,804

 

 

$

74,871

 

 

$

152,215

 

 

$

144,724

 

NIC INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amount)

(Unaudited)

 

 

June 30,
2020

 

December 31,
2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

220,351

 

 

$

214,380

 

Trade accounts receivable, net

 

106,537

 

 

85,399

 

Prepaid expenses & other current assets

 

13,364

 

 

12,944

 

Total current assets

 

340,252

 

 

312,723

 

Property and equipment, net

 

10,656

 

 

10,091

 

Right of use lease assets, net

 

10,957

 

 

10,778

 

Intangible assets, net

 

21,937

 

 

22,398

 

Goodwill

 

5,965

 

 

5,965

 

Other assets

 

1,244

 

 

404

 

Total assets

 

$

391,011

 

 

$

362,359

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

75,896

 

 

$

63,685

 

Accrued expenses

 

27,781

 

 

25,940

 

Lease liabilities

 

3,905

 

 

3,776

 

Other current liabilities

 

8,772

 

 

7,191

 

Total current liabilities

 

116,354

 

 

100,592

 

 

 

 

 

 

Deferred income taxes, net

 

2,862

 

 

2,463

 

Lease liabilities

 

7,453

 

 

7,373

 

Other long-term liabilities

 

5,913

 

 

6,003

 

Total liabilities

 

132,582

 

 

116,431

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, $0.0001 par, 200,000 shares authorized, 67,019 and 66,968 shares issued and outstanding

 

7

 

 

7

 

Additional paid-in capital

 

125,404

 

 

123,208

 

Retained earnings

 

133,018

 

 

122,713

 

Total stockholders' equity

 

258,429

 

 

245,928

 

Total liabilities and stockholders' equity

 

$

391,011

 

 

$

362,359

 

NIC INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended
June 30,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net income

 

$

25,659

 

 

$

25,962

 

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

 

 

 

 

Depreciation & amortization

 

 

6,955

 

 

 

5,551

 

Stock-based compensation expense

 

 

3,058

 

 

 

3,703

 

Deferred income taxes

 

 

282

 

 

 

976

 

Provision (recoveries) for losses on accounts receivable

 

 

1,043

 

 

 

(148

)

Changes in operating assets and liabilities:

 

 

 

 

Trade accounts receivable, net

 

 

(21,725

)

 

 

(31,613

)

Prepaid expenses & other current assets

 

 

(420

)

 

 

1,130

 

Other assets

 

 

1,411

 

 

 

2,191

 

Accounts payable

 

 

12,211

 

 

 

23,616

 

Accrued expenses

 

 

1,841

 

 

 

(1,439

)

Other current liabilities

 

 

970

 

 

 

32

 

Other long-term liabilities

 

 

(1,700

)

 

 

(2,190

)

Net cash provided by operating activities

 

 

29,585

 

 

 

27,771

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(2,540

)

 

 

(2,831

)

Business combination

 

 

 

 

 

(10,000

)

Asset acquisition

 

 

 

 

 

(3,486

)

Capitalized software development costs

 

 

(4,520

)

 

 

(4,607

)

Net cash used in investing activities

 

 

(7,060

)

 

 

(20,924

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Cash dividends on common stock

 

 

(12,202

)

 

 

(10,818

)

Proceeds from employee common stock purchases

 

 

1,509

 

 

 

1,443

 

Shares surrendered upon vesting of restricted stock to satisfy tax withholdings

 

 

(1,917

)

 

 

(2,637

)

Repurchase of shares

 

 

(3,944

)

 

 

 

Net cash used in financing activities

 

 

(16,554

)

 

 

(12,012

)

 

 

 

 

 

Net increase (decrease) in cash

 

 

5,971

 

 

 

(5,165

)

Cash, beginning of period

 

 

214,380

 

 

 

191,700

 

Cash, end of period

 

 

220,351

 

 

 

186,535

 

 

 

 

 

 

Other cash flow information:

 

 

 

 

Non-cash activities:

 

 

 

 

Contingent consideration - business combination

 

$

 

 

$

960

 

Cash payments:

 

 

 

 

Income taxes paid, net

 

$

5,189

 

 

$

6,925

 

NIC INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

Reconciliation of net income to Adjusted EBITDA

 

2020

 

2019

 

2020

 

2019

Net income

 

$

13,796

 

 

$

14,460

 

 

$

25,659

 

 

$

25,962

 

Add: Income tax expense

 

4,583

 

 

3,846

 

 

8,433

 

 

7,923

 

Less: Interest income

 

 

 

577

 

 

389

 

 

1,181

 

Operating income

 

18,379

 

 

17,729

 

 

33,703

 

 

32,704

 

Add: Depreciation & amortization expense

 

3,473

 

 

3,130

 

 

6,955

 

 

5,551

 

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

 

1,739

 

 

1,431

 

 

3,058

 

 

3,703

 

Add: Executive severance payments (1)

 

 

 

 

 

 

 

1,526

 

Adjusted EBITDA

 

$

23,591

 

 

$

22,290

 

 

$

43,716

 

 

$

43,484

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

$

93,589

 

 

$

91,566

 

 

$

184,708

 

 

$

176,747

 

 

 

 

 

 

 

 

 

 

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

 

15

%

 

16

%

 

14

%

 

15

%

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

 

25

%

 

24

%

 

24

%

 

25

%

 

 

 

 

 

 

 

 

 

Detail of stock-based compensation expense

 

 

 

 

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

$

400

 

 

$

395

 

 

$

758

 

 

$

757

 

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

 

42

 

 

21

 

 

69

 

 

56

 

Selling & administrative

 

1,087

 

 

857

 

 

1,856

 

 

2,572

 

Enterprise technology & product support

 

210

 

 

158

 

 

375

 

 

318

 

Total stock-based compensation expense

 

$

1,739

 

 

$

1,431

 

 

$

3,058

 

 

$

3,703

 

 (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.

 


Contacts

Kara Cowie
Director of Corporate Communications
(816) 813-2350
kara.cowie@egov.com