Market Overview

NIC Earns 25 Cents Per Share on Total Revenues of $92.5 Million

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Core digital government services drive strong same-state portal
revenue growth

NIC Inc. (NASDAQ:EGOV), the dominant provider of digital government
services, today announced net income of $17.0 million and earnings per
share of 25 cents on total revenues of $92.5 million for the three
months ended June 30, 2018. In the second quarter of 2017, the Company
reported net income of $12.8 million and earnings per share of 19 cents
on total revenues of $85.3 million.

Quarterly portal revenues were $86.6 million, a 9 percent increase over
the second quarter of 2017. On a same-state basis, portal revenues
increased 8 percent over the prior year quarter. Same-state,
transaction-based revenues from Interactive Government Services (IGS)
rose 10 percent over the second quarter of 2017, due primarily to higher
volumes from a variety of services, including driver's license renewals,
motor vehicle inspections, and motor vehicle and business registration
filings, among others. Same-state, transaction-based revenues from
Driver History Records (DHR) were up 4 percent due to a price increase
in one state and higher volumes across several states. Same-state portal
software development revenues increased 39 percent, driven primarily by
time & materials projects deployed in various states.

Second quarter 2018 portal revenues included $0.5 million from Illinois,
the Company's newest partnership.

Driven by strong same-state portal revenue growth, quarterly operating
income increased 14 percent to $22.4 million, contributing to the
increase in the Company's operating income margin to 24 percent for the
current quarter, from 23 percent in the prior year quarter.

The Company's effective tax rate in the current quarter was 24 percent,
down from 35 percent in the prior year quarter. The lower rate was
attributable to favorable benefits related to the Tax Cuts and Jobs Act
of 2017.

As previously announced, the Company recently purchased a suite of
prescription drug monitoring program (PDMP) software assets developed by
Leap Orbit, a Maryland-based, privately held company. The solution will
be branded by NIC as RxGov, and leverages the Company's expertise with
PDMP solutions along with the industry-leading features of the acquired
software to deliver a best-in-class solution to the marketplace.

"I was pleased with our strong financial results this quarter and I am
excited about how we are strengthening our technology platforms and
executing our healthcare vertical strategy," said Harry Herington, NIC's
Chief Executive Officer and Chairman of the Board. "We look forward to
delivering a completely re-imagined, industry-leading prescription drug
monitoring solution, as well as choice and flexibility to this market."

On July 30, 2018, the Company's Board of Directors declared a regular
quarterly cash dividend of 8 cents per share, payable to stockholders of
record as of September 5, 2018. The dividend, which is expected to total
approximately $5.4 million based on the current number of shares
outstanding, will be paid on September 19, 2018, out of the Company's
available cash.

Operational Highlights

During the second quarter of 2018, several of the Company's contracts
were extended. The State of Wisconsin extended its contract with the
Company's Wisconsin Interactive, LLC subsidiary for three years, taking
the agreement through May 2021. The states of Arkansas, Rhode Island,
Hawaii, Nebraska, and Idaho extended their contracts with the Company
for one year, and the state of Maine extended its contract with NIC
subsidiary, Maine Information Network through December 31, 2018. In
addition, the Library of Congress agreed to extend its contract with the
Company to provide a second year of maintenance for the e-filing
solution developed for the Copyright Royalty Board.

Second Quarter Earnings Call and Webcast Details

On the August 1, 2018 call, the Company will discuss its 2018 second
quarter financial and operational results, and answer questions from the
investment community. The call may also include discussion of Company
developments, and forward-looking and other material information about
business and financial matters.

Dial-In Information

Wednesday, August 1, 2018
4:30 p.m. (EDT)    
 
Call bridge: 888-394-8218 (U.S. callers) or 323-794-2588 (international callers)
Webcast slides:

https://streaming.webcasts.com/starthere.jsp?ei=1199775&tp_key=a873485471

Conference ID: 519774
Call leaders: Harry Herington, Chief Executive Officer and Chairman of the Board
Steve Kovzan, Chief Financial Officer
Robert Knapp, Chief Operating Officer
 

Webcast Information

To sign in for audio and slide presentation: The Webcast system is
available at https://www.egov.com/investor-relations.

A replay of the Webcast will be available by visiting https://www.egov.com/investor-relations.

About NIC

NIC Inc. (NASDAQ:EGOV) is the nation's premier provider of innovative
digital government solutions and secure payment processing, which help
make government interactions more accessible for everyone through
technology. The family of NIC companies has developed a library of more
than 13,000 digital government services for more than 5,500 federal,
state, and local government agencies. Among these solutions is the
ground-breaking personal assistant for government, Gov2Go, delivering
citizens personalized reminders and a single access point for government
interactions. More information is available at www.egov.com.

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
include statements regarding the Company's potential financial
performance for the 2018 fiscal year, 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 and the potential effect of
tax law changes, 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 Company's
ability to identify and acquire suitable acquisition candidates and to
successfully integrate any acquired businesses, risks related to the
outcome of the Texas procurement process, as well as possible data
security incidents. Any statements regarding our expected effective tax
rate for 2018 reflect provisional amounts subject to adjustment during
the one-year measurement period permitted under applicable law. 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 web site 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

June 30,

   

Six Months Ended

June 30,

Revenues: 2018     2017 2018     2017
Portal revenues $ 86,555 $ 79,374 $ 167,346 $ 156,572
Software & services revenues 5,943   5,952   11,877   11,931  
Total revenues 92,498   85,326   179,223   168,503  
Operating expenses:
Cost of portal revenues, exclusive of depreciation & amortization 51,711 49,009 100,353 96,041
Cost of software & services revenues, exclusive of depreciation &
amortization
2,235 1,779 4,463 3,542
Selling & administrative 14,003 13,131 27,153 24,791
Depreciation & amortization 2,145   1,688   4,210   3,301  
Total operating expenses 70,094   65,607   136,179   127,675  
Operating income 22,404 19,719 43,044 40,828
Other income:
Interest income 57     58    
Income before income taxes 22,461 19,719 43,102 40,828
Income tax provision 5,450   6,950   10,582   14,074  
Net income $ 17,011   $ 12,769   $ 32,520   $ 26,754  
 
Basic net income per share $ 0.25   $ 0.19   $ 0.48   $ 0.40  
Diluted net income per share $ 0.25   $ 0.19   $ 0.48   $ 0.40  
 
Weighted average shares outstanding:
Basic 66,541   66,248   66,432   66,147  
Diluted 66,561   66,248   66,447   66,147  
 
Key Financial Metrics:
Revenue growth - outsourced portals 9 % 5 % 7 % 5 %
Same state revenue growth - outsourced portals 8 % 7 % 8 % 6 %
Recurring portal revenue as a % of total portal revenues 96 % 97 % 97 % 97 %
Gross profit % - outsourced portals 40 % 38 % 40 % 39 %
Revenue growth - software & services % 12 % % 14 %
Gross profit % - software & services 62 % 70 % 62 % 70 %
Selling & administrative expenses as a % of total revenues 15 % 15 % 15 % 15 %
Operating income as a % of total revenue 24 % 23 % 24 % 24 %
 
Portal Revenue Analysis:
IGS $ 55,111 $ 50,217 $ 105,379 $ 96,142
DHR 26,645 25,689 53,883 53,858
Portal software development 3,562 2,193 5,609 4,022
Portal management 1,237   1,275   2,475   2,550  
Total portal revenues $ 86,555   $ 79,374   $ 167,346   $ 156,572  
 
 

NIC INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amount)
(Unaudited)
 
   

     June 30, 2018     

    December 31, 2017
ASSETS
Current assets:
Cash $ 172,725 $ 160,777
Trade accounts receivable, net 92,757 103,938
Prepaid expenses & other current assets 13,013 12,843
Total current assets 278,495 277,558
Property and equipment, net 9,930 10,306
Intangible assets, net 7,460 5,214
Deferred income taxes, net 53 667
Other assets 1,880 1,986
Total assets $ 297,818 $ 295,731
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 69,460 $ 88,920
Accrued expenses 22,274 26,501
Other current liabilities 3,412 3,673
Total current liabilities 95,146 119,094
 
Other long-term liabilities 9,153 8,395
Total liabilities 104,299 127,489
 
Commitments and contingencies
 
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares authorized, 66,556 and
66,271 shares issued and outstanding
7 7
Additional paid-in capital 114,507 111,275
Retained earnings 79,005 56,960
Total stockholders' equity 193,519 168,242
Total liabilities and stockholders' equity $ 297,818 $ 295,731
 
 

NIC INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
 
    Common Stock    

Additional
Paid-in
Capital

   

Retained
Earnings

   
Shares     Amount Total
Balance, January 1, 2018 66,271 $ 7 $ 111,275 $ 56,960 $ 168,242
Net cumulative effect of adoption of accounting standard 208 208
Net income 32,520 32,520
Restricted stock vestings 246
Dividends declared (10,755 ) (10,755 )
Dividend equivalents on unvested performance-based restricted stock
awards
68 (68 )
Dividend equivalents cancelled upon forfeiture of performance-based
restricted stock awards
(140 ) 140
Shares surrendered and cancelled upon vesting of restricted stock to
satisfy tax withholdings
(83 ) (1,165 ) (1,165 )
Stock-based compensation 3,087 3,087
Issuance of common stock under employee stock purchase plan 122     1,382     1,382  
Balance, June 30, 2018 66,556   $ 7   $ 114,507   $ 79,005   $ 193,519  
 
 

NIC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
        Six Months Ended June 30,
2018     2017
Cash flows from operating activities:
Net income $ 32,520 $ 26,754
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses on accounts receivable 343 379
Depreciation & amortization 4,210 3,301
Stock-based compensation expense 3,087 3,178
Deferred income taxes 614 796
Changes in operating assets and liabilities:
Decrease in trade accounts receivable, net 10,838 2,994
(Increase) decrease in prepaid expenses & other current assets (170 ) 2,651
Decrease (increase) in other assets 262 (1,507 )
(Decrease) in accounts payable (19,460 ) (14,535 )
(Decrease) in accrued expenses (4,393 ) (1,271 )
(Decrease) increase in other current liabilities (209 ) 644
Increase in other long-term liabilities 758   1,010  
Net cash provided by operating activities 28,400   24,433  
 
Cash flows from investing activities:
Purchases of property and equipment (2,411 ) (2,395 )
Proceeds from sale of property and equipment 7
Capitalized software development costs (3,503 ) (1,692 )
Net cash used in investing activities (5,914 ) (4,080 )
 
Cash flows from financing activities:
Cash dividends on common stock (10,755 ) (10,692 )
Proceeds from employee common stock purchases 1,382 1,330
Tax withholdings related to stock-based compensation awards (1,165 ) (2,614 )
Net cash used in financing activities (10,538 ) (11,976 )
 
Net increase in cash 11,948 8,377
Cash, beginning of period 160,777   127,009  
Cash, end of period $ 172,725   $ 135,386  
 
Other cash flow information:
Non-cash investing activities:
Capital expenditures accrued but not yet paid $ 166 $ 83
Cash payments:
Income taxes paid, net $ 8,883 $ 12,405

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