NIC Reports Fourth Quarter 2019 Results

Company Continues to Drive Strong Organic Revenue Growth and Secure Key Contract Renewals

Declares 12.5% increase in regular quarterly dividend to 9 cents per share

OLATHE, Kan.--()--NIC Inc. (Nasdaq: EGOV), the leading provider of digital government services, announced results for the fourth quarter of 2019 that ended December 31, 2019, as compared to the fourth quarter of 2018.

  • Total revenues of $87.1 million, an 11% increase.
  • Operating income of $11.7 million, a 7% decrease, reflecting higher costs to implement the Company's outdoor recreation solution in Pennsylvania and Illinois, and dilution from the Company's recently-acquired RxGov® and NIC Licensing Solutions businesses, including higher amortization expense.
  • Net income of $10.0 million, a 1% increase.
  • Diluted earnings per share of 15 cents, flat to prior year. Diluted earnings per share was positively impacted in the fourth quarter of 2019 by 2 cents due to the release of reserves for unrecognized income tax benefits resulting from the expiration of statutes of limitations for certain tax years.
  • Adjusted EBITDA of $16.8 million, a 3% increase.

Additional Fourth Quarter Financial Highlights:

  • Same state enterprise revenues of $79.3 million, an 11% increase.
    • Same state transaction-based revenues from Interactive Government Services (IGS) increased 16%.
    • Same state transaction-based revenues from Driver History Records (DHR) were flat.
    • Same state revenues from other services (development & fixed fee management services) decreased 3%.
    • Revenues from the Company's operations in the state of Illinois were excluded from same state enterprise revenues in the current quarter because it did not generate comparable revenues for two full comparable periods.
  • Software & Services revenues of $7.5 million, a 20% increase, driven mainly by higher transaction-based revenues from the federal Pre-Employment Screening Program, in addition to revenues from the Company's recently-acquired RxGov® and NIC Licensing Solutions businesses.

On January 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 March 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 March 18, 2020 out of the Company’s available cash.

“The positive momentum continued for NIC in the fourth quarter. We capped off the year with several renewals of our long-term government partnerships and another strong quarter of organic state enterprise revenue growth,” said Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board. “In addition to the strong performance of our core state enterprise division, we are excited about the long-term growth opportunities of our vertical solutions, which we firmly believe will take NIC to greater heights in the years to come.”

Operational Highlights:

The following long-term government partners recently extended their contracts with the Company:

  • Hawaii extended its contract with the Company for two years.
  • Mississippi extended its contract with the Company for two years.
  • Montana extended its contract with the Company for one year.
  • Maine extended its contract with the Company for one year.
  • Connecticut extended its contract with the Company for one year.

On January 13, 2020, after a competitive bid process, the state of Florida Department of Financial Services announced its intent to award the Company a contract for e-payment collection and processing services. The Company has not yet signed a contract with the state of Florida, as the award is currently under protest.

Full Year 2019 Performance:

  • Total revenues of $354.2 million, a 3% increase.
  • Operating income of $62.4 million, a 17% decrease, mainly reflecting lower revenues and profitability from the new Texas payment processing contract compared to the legacy Texas contract, in addition to higher costs to implement the Company's outdoor recreation solution in Pennsylvania and Illinois, and dilution from the Company's recently-acquired RxGov® and NIC Licensing Solutions businesses, including higher amortization expense.
  • Net income of $50.4 million, a 13% decrease.
  • Diluted earnings per share of 75 cents, a 14% decrease. Diluted earnings per share was positively impacted in 2019 by approximately 4 cents due to the release of reserves for unrecognized income tax benefits resulting from the expiration of certain statutes of limitations for certain tax years, and by approximately 1 cent resulting from the completion of an IRS examination of the Company's 2016 federal income tax return during the year, which resulted in no changes to the Company's previously filed return.
  • Adjusted EBITDA of $83.3 million, an 8% decrease.

Additional Full Year Financial Highlights:

  • Same state enterprise revenues of $289.5 million, a 10% increase.
    • Same state IGS transaction-based revenues increased 16%.
    • Same state DHR transaction-based revenues increased 3%.
    • Same state revenues from other services increased 1%.
    • Revenues from the Company's operations in the state of Texas and Illinois were excluded from same state revenues for the 2019 fiscal year because they did not generate comparable revenues for two full comparable periods.
  • State enterprise revenues in 2019 included $30.4 million from the new Texas payment processing contract compared to $8.1 million in the prior year. The prior year also included $49.0 million in state enterprise revenues from the legacy Texas contract.
  • Software & Services revenues of $33.5 million, a 38% increase, driven mainly by the new federal Recreation.gov service, which launched on October 1, 2018, as well as higher transaction-based revenues from the federal Pre-Employment Screening Program and revenues from the recently-acquired RxGov® and NIC Licensing Solutions businesses.

Full Year 2020 Outlook:

For fiscal year 2020, NIC currently expects the following:

  • Total revenues of $380.5-$391.0 million
  • Diluted earnings per share of 76-81 cents
  • Capital expenditures of $6.0-$7.0 million
  • Capitalized internal use software development costs of $9.0-$10.0 million
  • Adjusted EBITDA of $88.5-$93.0 million

“The high end of our revenue guidance reflects continued strong same state enterprise revenue growth, in line with historical averages, driven by the expected deployment of dozens of new services across several states, in addition to incremental revenue contributions from our recently-acquired RxGov® and NIC Licensing Solutions businesses,” said Steve Kovzan, NIC’s Chief Financial Officer. “Our guidance also reflects continued investments in key government vertical solutions - outdoor recreation, payments, licensing and healthcare - where we have been winning significant new business to drive long-term growth.”

Fourth Quarter Earnings Call and Webcast Details

On January 29, 2020, the Company will host a call to discuss its 2019 fourth quarter and full year financial and operational results, and its fiscal 2020 financial 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

Wednesday, January 29, 2020 at 4:30 p.m. (EST)

 

Call bridge:

888-394-8218 (U.S. callers) or 323-794-2588 (international callers)

Conference ID:

1609602

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 http://www.egov.com/investor-relations

A replay of NIC’s fourth quarter earnings call will be available by visiting http://www.egov.com/investor-relations.

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. We believe 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 our 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 2019 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, 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, and the Company’s ability to identify and acquire suitable acquisition candidates and to successfully integrate any acquired businesses. 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 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, 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
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

State enterprise revenues

 

$

79,532

 

 

$

72,354

 

 

$

320,700

 

 

$

320,584

 

Software & services revenues

 

7,542

 

 

6,295

 

 

33,505

 

 

24,316

 

Total revenues

 

87,074

 

 

78,649

 

 

354,205

 

 

344,900

 

Operating expenses:

 

 

 

 

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

52,354

 

 

46,412

 

 

203,694

 

 

194,989

 

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

 

3,797

 

 

2,354

 

 

13,432

 

 

9,043

 

Selling & administrative

 

8,727

 

 

8,462

 

 

35,200

 

 

32,747

 

Enterprise technology & product support

 

6,917

 

 

6,386

 

 

26,850

 

 

23,944

 

Depreciation & amortization

 

3,535

 

 

2,466

 

 

12,610

 

 

9,117

 

Total operating expenses

 

75,330

 

 

66,080

 

 

291,786

 

 

269,840

 

Operating income

 

11,744

 

 

12,569

 

 

62,419

 

 

75,060

 

Other income:

 

 

 

 

 

 

 

 

Interest income

 

604

 

 

406

 

 

2,514

 

 

616

 

Income before income taxes

 

12,348

 

 

12,975

 

 

64,933

 

 

75,676

 

Income tax provision

 

2,390

 

 

3,127

 

 

14,503

 

 

17,407

 

Net income

 

$

9,958

 

 

$

9,848

 

 

$

50,430

 

 

$

58,269

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.15

 

 

$

0.15

 

 

$

0.75

 

 

$

0.87

 

Diluted net income per share

 

$

0.15

 

 

$

0.15

 

 

$

0.75

 

 

$

0.87

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

66,967

 

 

66,569

 

 

66,884

 

 

66,499

 

Diluted

 

66,967

 

 

66,641

 

 

66,884

 

 

66,560

 

 

 

 

 

 

 

 

 

 

Key financial metrics:

 

 

 

 

 

 

 

 

Total revenue growth (decline)

 

11

%

 

(6

)%

 

3

%

 

3

%

Recurring revenues as a % of total revenues

 

97

%

 

96

%

 

97

%

 

96

%

State enterprise revenue growth

 

10

%

 

(8

)%

 

%

 

3

%

Same state revenue growth

 

11

%

 

8

%

 

10

%

 

9

%

Gross profit % - state enterprise

 

34

%

 

36

%

 

36

%

 

39

%

Software & services revenue growth (decline)

 

20

%

 

23

%

 

38

%

 

(3

)%

Gross profit % - software & services

 

50

%

 

63

%

 

60

%

 

63

%

Selling & administrative as a % of total revenues

 

10

%

 

11

%

 

10

%

 

9

%

Enterprise technology & product support as a % of total revenues

 

8

%

 

8

%

 

8

%

 

7

%

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

 

13

%

 

16

%

 

18

%

 

22

%

State enterprise revenue analysis:

 

 

 

 

 

 

 

 

IGS

 

$

54,391

 

 

$

46,784

 

 

$

214,406

 

 

$

203,247

 

DHR

 

20,901

 

 

20,801

 

 

91,059

 

 

100,241

 

Development services

 

3,002

 

 

3,531

 

 

10,285

 

 

12,146

 

Fixed-fee management services

 

1,238

 

 

1,238

 

 

4,950

 

 

4,950

 

Total state enterprise revenues

 

$

79,532

 

 

$

72,354

 

 

$

320,700

 

 

$

320,584

 

 

NIC INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amount)

(Unaudited)

 

 

 

December 31, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

214,380

 

 

$

191,700

 

Trade accounts receivable, net

 

85,399

 

 

80,904

 

Prepaid expenses & other current assets

 

12,944

 

 

13,730

 

Total current assets

 

312,723

 

 

286,334

 

Property and equipment, net

 

10,091

 

 

10,256

 

Right of use lease assets, net

 

10,778

 

 

 

Intangible assets, net

 

22,398

 

 

13,604

 

Goodwill

 

5,965

 

 

 

Other assets

 

404

 

 

332

 

Total assets

 

$

362,359

 

 

$

310,526

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

63,685

 

 

$

60,092

 

Accrued expenses

 

25,940

 

 

24,150

 

Lease liabilities

 

3,776

 

 

 

Other current liabilities

 

7,191

 

 

4,883

 

Total current liabilities

 

100,592

 

 

89,125

 

 

 

 

 

 

Deferred income taxes, net

 

2,463

 

 

781

 

Lease liabilities

 

7,373

 

 

 

Other long-term liabilities

 

6,003

 

 

8,931

 

Total liabilities

 

116,431

 

 

98,837

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, $0.0001 par, 200,000 shares authorized, 66,968 and 66,569 shares issued and outstanding

 

7

 

 

7

 

Additional paid-in capital

 

123,208

 

 

117,763

 

Retained earnings

 

122,713

 

 

93,919

 

Total stockholders' equity

 

245,928

 

 

211,689

 

Total liabilities and stockholders' equity

 

$

362,359

 

 

$

310,526

 

 

NIC INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

Net income

 

$

50,430

 

 

$

58,269

 

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

 

 

 

 

Depreciation & amortization

 

12,610

 

 

9,117

 

Stock-based compensation expense

 

6,769

 

 

6,338

 

Deferred income taxes

 

1,682

 

 

1,448

 

Provision for losses on accounts receivable

 

782

 

 

852

 

Loss on disposal of property and equipment

 

89

 

 

88

 

Changes in operating assets and liabilities:

 

 

 

 

Trade accounts receivable, net

 

(4,826

)

 

22,182

 

Prepaid expenses & other current assets

 

789

 

 

(887

)

Other assets

 

4,430

 

 

1,810

 

Accounts payable

 

3,593

 

 

(28,828

)

Accrued expenses

 

1,788

 

 

(2,351

)

Other current liabilities

 

1,132

 

 

1,262

 

Other long-term liabilities

 

(7,218

)

 

536

 

Net cash provided by operating activities

 

72,050

 

 

69,836

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

(4,253

)

 

(5,410

)

Business combination

 

(10,000

)

 

 

Asset acquisition

 

(3,486

)

 

(3,555

)

Capitalized software development costs

 

(8,671

)

 

(8,580

)

Net cash used in investing activities

 

(26,410

)

 

(17,545

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Cash dividends on common stock

 

(21,649

)

 

(21,521

)

Proceeds from employee common stock purchases

 

1,443

 

 

1,382

 

Tax withholdings related to stock-based compensation awards

 

(2,754

)

 

(1,229

)

Net cash used in financing activities

 

(22,960

)

 

(21,368

)

 

 

 

 

 

Net increase in cash

 

22,680

 

 

30,923

 

Cash, beginning of period

 

191,700

 

 

160,777

 

Cash, end of period

 

214,380

 

 

191,700

 

 

 

 

 

 

Other cash flow information:

 

 

 

 

Non-cash investing activities:

 

 

 

 

Contingent consideration - business combination

 

$

960

 

 

$

 

Cash payments:

 

 

 

 

Income taxes paid, net

 

$

16,035

 

 

$

13,707

 

 

NIC INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

Reconciliation of net income to Adjusted EBITDA

 

2019

 

2018

 

2019

 

2018

Net income

 

$

9,958

 

 

$

9,848

 

 

$

50,430

 

 

$

58,269

 

Add: Income tax expense

 

2,390

 

 

3,127

 

 

14,503

 

 

17,407

 

Less: Interest income

 

604

 

 

406

 

 

2,514

 

 

616

 

Operating income

 

11,744

 

 

12,569

 

 

62,419

 

 

75,060

 

Add: Depreciation & amortization expense

 

3,535

 

 

2,466

 

 

12,610

 

 

9,117

 

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

 

1,543

 

 

1,374

 

 

6,769

 

 

6,338

 

Add: Executive severance payments (1)

 

 

 

 

 

1,526

 

 

 

Adjusted EBITDA

 

$

16,822

 

 

$

16,409

 

 

$

83,324

 

 

$

90,515

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

$

87,074

 

 

$

78,649

 

 

$

354,205

 

 

$

344,900

 

 

 

 

 

 

 

 

 

 

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

 

11

%

 

13

%

 

14

%

 

17

%

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

 

19

%

 

21

%

 

24

%

 

26

%

 

 

 

 

 

 

 

 

 

Detail of stock-based compensation expense

 

 

 

 

 

 

 

 

State enterprise cost of revenues, exclusive of depreciation & amortization

 

$

373

 

 

$

350

 

 

$

1,499

 

 

$

1,516

 

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

 

26

 

 

39

 

 

101

 

 

151

 

Selling & administrative

 

972

 

 

811

 

 

4,495

 

 

3,994

 

Enterprise technology & product support

 

172

 

 

174

 

 

674

 

 

677

 

Stock-based compensation expense

 

$

1,543

 

 

$

1,374

 

 

$

6,769

 

 

$

6,338

 

(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 twelve months ended December 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

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

Release Summary

NIC Reports Fourth Quarter 2019 Results

Contacts

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