NIC Reports Third Quarter 2020 Results

OLATHE, Kan.--(BUSINESS WIRE)--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.

 


Contacts

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