OLATHE, Kan.--(BUSINESS WIRE)--NIC Inc. (NASDAQ: EGOV), the dominant provider of eGovernment services, today announced net income of $5.1 million and earnings per share of 8 cents on total revenues of $61.3 million for the three months ended September 30, 2013. As previously announced, results for the current quarter include a one-time, non-cash pre-tax charge of approximately $5.1 million (approximately 5 cents per share on an after-tax basis) included in cost of portal revenues to write off outstanding accounts receivable due from the Commonwealth of Pennsylvania. Current quarter operating income decreased 22 percent from the prior year quarter, reflecting the one-time charge. In the third quarter of 2012, the Company reported net income of $6.0 million and earnings per share of 9 cents on total revenues of $53.2 million.
On October 28, 2013, NIC’s Board of Directors declared a special cash dividend of $0.35 per share, payable on January 2, 2014 to stockholders of record on November 8, 2013. The dividend payout will total approximately $23.0 million based on the current number of shares outstanding.
Quarterly portal revenues were $57.7 million, a 15 percent increase over third quarter 2012. On a same-state basis, portal revenues were up 15 percent in the current quarter. Same-state, transaction-based revenues from non-driver record (non-DMV) services rose 28 percent over third quarter 2012 through continued strong performance from the Texas motor vehicle inspection service as part of the DPS Direct suite of services, a court fee payment service in Colorado, and several eGovernment services in New Jersey. Same-state DMV revenues increased 5 percent in the third quarter of 2013.
Current quarter revenues from the Company’s newest portal in Wisconsin totaled $0.4 million. The Company did not recognize any revenues in the current quarter from its Pennsylvania portal.
“Our focus on the long-term success of the Company continues to produce solid financial results for NIC,” said NIC Chief Executive Officer Harry Herington. “There are times when we must make tough decisions in the short-term, but we know they are the right decisions to make and will fuel our success in the future – whether that results in maintaining strong partnerships or national recognition like what we recently received from Forbes.”
NIC’s portal gross profit percentage was 31 percent in the current quarter, down from 37 percent in the prior year quarter, reflecting the one-time $5.1 million charge in Pennsylvania and $2.0 million of start-up costs from the Wisconsin and Pennsylvania portals.
Selling & administrative expenses in the current quarter increased 26 percent, or $2.2 million, from the third quarter of 2012. As a percentage of total revenues, selling & administrative expenses were 17 percent in the current quarter, compared to 15 percent in the prior year quarter. The current quarter increase in selling & administrative expenses was primarily attributable to higher costs to enhance corporate-wide information technology and security infrastructure as a result of the Company’s growth, and higher executive and non-executive management incentive compensation and benefit costs.
In addition, the Company incurred approximately $3.5 million in legal fees and other third-party costs in the third quarter of 2013 in connection with the previously disclosed SEC investigation and related matters. These expenses were reduced by approximately $2.8 million of reimbursement by the Company’s directors’ and officers’ liability insurance carrier, resulting in a net expense of approximately $0.7 million in the current quarter. Selling & administrative expenses in the prior year quarter included approximately $1.1 million of expenses related to the SEC matter, which were reduced by approximately $1.0 million of insurance reimbursement by the Company’s insurance carrier, resulting in a net expense of approximately $0.1 million in the prior year quarter.
“Despite the one-time charge in Pennsylvania, we were quite pleased with our results for the quarter, particularly our strong organic revenue growth,” said Steve Kovzan, NIC’s Chief Financial Officer. “The lifeblood of our business will always be the thousands of online services that make government interactions more efficient and secure “
Operational Highlights
In October 2013, Forbes announced its annual rankings of the “100 Best Small Companies in America” with annual revenues between $5 million and $1 billion. NIC achieved its highest ranking in the Company’s history, placing 11th on the list. This is the fifth consecutive year that NIC has received this national recognition, and NIC remains the only publicly traded company headquartered in the state of Kansas to make the list. Criteria included earnings growth, sales growth, and return on equity in the past 12 months and over five years, as well as stock performance.
The Company also was notified recently that it has been included in the Barron’s 400 Index, which selects the top 6 percent of all publicly traded companies in North America based on strong financial performance. This is the second consecutive year that NIC has been included in the index, placing it in an exclusive group of only 1.5 percent of all companies in North America to achieve the ranking two years in a row.
Also during the third quarter, the state of Maine signed a two-year renewal extension, taking its contract through 2016.
Third Quarter Earnings Call and Webcast Details
On the call, the Company will discuss its 2013 third quarter, 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.
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Dial-In Information |
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| Thursday, November 7, 2013 | |||
| 4:30 p.m. (EST) | |||
| Call bridge: | 866-225-8754 (U.S. callers) or 480-629-9818 (international callers) | ||
| 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 and listen: The Webcast system is available at http://www.egov.com/investors.
A replay of the Webcast will be available until 11 p.m. (EDT) on May 8, 2014, by visiting http://www.egov.com/investors.
About NIC
NIC Inc. (NASDAQ: EGOV) is the leading provider of enterprise-wide, official state eGovernment services and secure government payment processing solutions. The Company's innovative eGovernment services help reduce costs and increase efficiencies for government agencies, citizens, and businesses across the country. The NIC family of companies provides eGovernment solutions for more than 3,500 federal, state, and local agencies across the United States. Additional information is available at http://www.egov.com.
Cautionary Statement Regarding Forward-Looking Information
Any statements contained 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 current fiscal year, statements regarding the planned implementation of new portal contracts and statements regarding continued implementation of NIC’s business model and its development of new products and services. Forward-looking statements are subject to inherent risks and uncertainties and there can be no assurance that such statements will prove to be correct. There are a number of important factors that could cause actual results to differ materially from those suggested or indicated by such forward-looking statements. These include, among others, NIC’s ability to successfully integrate into its operations recently awarded eGovernment contracts; NIC's ability to implement its new portal contracts in a timely and cost-effective manner; NIC’s ability to successfully increase the adoption and use of eGovernment services; the possibility of reductions in fees or revenues as a result of budget deficits, government shutdowns or changes in government policy; the success of the Company in renewing existing contracts and in signing contracts with new states and federal government agencies; continued favorable government legislation; NIC’s ability to develop new services; existing states and agencies adopting those new services; acceptance of eGovernment services by businesses and citizens; competition; the possibility of security breaches through cyber attacks; legal fees and other expenses related to the SEC matter in excess of directors’ and officers’ liability insurance policy limits; general economic conditions; and the other important cautionary statements and risk factors described in NIC's 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2013 and in subsequent periodic reports filed with the SEC. Any forward-looking statements made in this release speak only as of the date of this release. NIC does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances.
| NIC INC. | ||||||||||||||||||||
| FINANCIAL SUMMARY | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Thousands except per share amounts and percentages | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Portal revenues | $ | 57,721 | $ | 50,198 | $ | 177,857 | $ | 144,952 | ||||||||||||
| Software & services revenues | 3,609 | 3,008 | 10,635 | 8,979 | ||||||||||||||||
| Total revenues | 61,330 | 53,206 | 188,492 | 153,931 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Cost of portal revenues, exclusive of depreciation & amortization | 39,755 | 31,794 | 107,416 | 91,095 | ||||||||||||||||
| Cost of software & services revenues, exclusive of depreciation & | ||||||||||||||||||||
| amortization | 928 | 1,079 | 3,220 | 3,045 | ||||||||||||||||
| Selling & administrative | 10,387 | 8,218 | 30,054 | 24,536 | ||||||||||||||||
| Amortization of acquisition-related intangible assets | - | 53 | - | 214 | ||||||||||||||||
| Depreciation & amortization | 2,145 | 1,606 | 6,221 | 4,236 | ||||||||||||||||
| Total operating expenses | 53,215 | 42,750 | 146,911 | 123,126 | ||||||||||||||||
| Operating income | 8,115 | 10,456 | 41,581 | 30,805 | ||||||||||||||||
| Other income (expense), net | 4 | - | (17 | ) | (1 | ) | ||||||||||||||
| Income before income taxes | 8,119 | 10,456 | 41,564 | 30,804 | ||||||||||||||||
| Income tax provision | 3,026 | 4,461 | 15,707 | 13,088 | ||||||||||||||||
| Net income | $ | 5,093 | $ | 5,995 | $ | 25,857 | $ | 17,716 | ||||||||||||
| Basic net income per share | $ | 0.08 | $ | 0.09 | $ | 0.39 | $ | 0.27 | ||||||||||||
| Diluted net income per share | $ | 0.08 | $ | 0.09 | $ | 0.39 | $ | 0.27 | ||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 64,961 | 64,586 | 64,854 | 64,458 | ||||||||||||||||
| Diluted | 64,969 | 64,604 | 64,861 | 64,475 | ||||||||||||||||
| Key Financial Metrics: | ||||||||||||||||||||
| Revenue growth - outsourced portals | 15 | % | 14 | % | 23 | % | 13 | % | ||||||||||||
| Same state revenue growth - outsourced portals | 15 | % | 8 | % | 17 | % | 7 | % | ||||||||||||
| Recurring portal revenue as a % of total portal revenues | 93 | % | 92 | % | 94 | % | 92 | % | ||||||||||||
| Gross profit % - outsourced portals | 31 | % | 37 | % | 40 | % | 37 | % | ||||||||||||
| Revenue growth - software & services | 20 | % | 6 | % | 18 | % | 14 | % | ||||||||||||
| Gross profit % - software & services | 74 | % | 64 | % | 70 | % | 66 | % | ||||||||||||
| Selling & administrative expenses as a % of total revenues | 17 | % | 15 | % | 16 | % | 16 | % | ||||||||||||
| Operating income as a % of total revenue | 13 | % | 20 | % | 22 | % | 20 | % | ||||||||||||
| Portal Revenue Analysis: | ||||||||||||||||||||
| DMV transaction-based | $ | 19,037 | $ | 18,575 | $ | 63,829 | $ | 53,691 | ||||||||||||
| Non-DMV transaction-based | 32,197 | 25,290 | 96,372 | 71,900 | ||||||||||||||||
| Portal software development | 3,922 | 3,955 | 9,961 | 12,283 | ||||||||||||||||
| Portal management | 2,565 | 2,378 | 7,695 | 7,078 | ||||||||||||||||
| Total portal revenues | $ | 57,721 | $ | 50,198 | $ | 177,857 | $ | 144,952 | ||||||||||||
| NIC INC. | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| Thousands except par value amount | ||||||||||||||
| September 30, 2013 | December 31, 2012 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash | $ | 90,929 | $ | 62,358 | ||||||||||
| Trade accounts receivable, net | 61,045 | 55,261 | ||||||||||||
| Deferred income taxes, net | 950 | 887 | ||||||||||||
| Prepaid expenses & other current assets | 12,217 | 9,340 | ||||||||||||
| Total current assets | 165,141 | 127,846 | ||||||||||||
| Property and equipment, net | 14,182 | 16,025 | ||||||||||||
| Intangible assets, net | 1,650 | 1,016 | ||||||||||||
| Other assets | 259 | 253 | ||||||||||||
| Total assets | $ | 181,232 | $ | 145,140 | ||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 45,847 | $ | 43,664 | ||||||||||
| Accrued expenses | 22,498 | 18,948 | ||||||||||||
| Other current liabilities | 327 | 208 | ||||||||||||
| Total current liabilities | 68,672 | 62,820 | ||||||||||||
| Deferred income taxes, net | 2,307 | 2,050 | ||||||||||||
| Other long-term liabilities | 2,208 | 1,346 | ||||||||||||
| Total liabilities | 73,187 | 66,216 | ||||||||||||
| Commitments and contingencies | - | - | ||||||||||||
| Stockholders' equity: | ||||||||||||||
| Common stock, $0.0001 par, 200,000 shares authorized, | ||||||||||||||
| 64,989 and 64,628 shares issued and outstanding | 6 | 6 | ||||||||||||
| Additional paid-in capital | 87,572 | 84,308 | ||||||||||||
| Retained earnings (accumulated deficit) | 20,467 | (5,390 | ) | |||||||||||
| Total stockholders' equity | 108,045 | 78,924 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 181,232 | $ | 145,140 | ||||||||||
| NIC INC. | |||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY | |||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||
| Thousands | |||||||||||||||||||||||||
| Additional | |||||||||||||||||||||||||
| Common Stock | Paid-in | Retained Earnings | |||||||||||||||||||||||
| Shares | Amount | Capital | (Accumulated Deficit) | Total | |||||||||||||||||||||
| Balance, January 1, 2013 | 64,628 | $ | 6 | $ | 84,308 | $ | (5,390 | ) | $ | 78,924 | |||||||||||||||
| Net income | - | - | - | 25,857 | 25,857 | ||||||||||||||||||||
| Restricted stock vestings | 397 | - | 83 | - | 83 | ||||||||||||||||||||
| Dividend equivalents cancelled upon forfeiture of | |||||||||||||||||||||||||
| performance-based restricted stock awards | - | - | 50 | - | 50 | ||||||||||||||||||||
| Shares surrendered and cancelled upon vesting of restricted | |||||||||||||||||||||||||
| stock to satisfy tax withholdings | (124 | ) | - | (2,242 | ) | - | (2,242 | ) | |||||||||||||||||
| Stock-based compensation | - | - | 3,267 | - | 3,267 | ||||||||||||||||||||
| Tax deductions relating to stock-based compensation | - | - | 1,335 | - | 1,335 | ||||||||||||||||||||
| Shares issuable in lieu of dividend payments on unvested | |||||||||||||||||||||||||
| performance-based restricted stock awards | - | - | (133 | ) | - | (133 | ) | ||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | 88 | - | 904 | - | 904 | ||||||||||||||||||||
| Balance, September 30, 2013 | 64,989 | $ | 6 | $ | 87,572 | $ | 20,467 | $ | 108,045 | ||||||||||||||||
| NIC INC. | |||||||||||||||||||||
| CASH FLOW SUMMARY | |||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||
| Thousands | |||||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||
| Net income | $ | 5,093 | $ | 5,995 | $ | 25,857 | $ | 17,716 | |||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||
| Amortization of acquisition-related intangible assets | - | 53 | - | 214 | |||||||||||||||||
| Depreciation & amortization | 2,145 | 1,606 | 6,221 | 4,236 | |||||||||||||||||
| Provision for losses on accounts receivable | 5,086 | 77 | 5,125 | 157 | |||||||||||||||||
| Stock-based compensation expense | 1,190 | 1,252 | 3,267 | 3,109 | |||||||||||||||||
| Deferred income taxes | (322 | ) | 1,544 | (1,142 | ) | 1,080 | |||||||||||||||
| Gain on disposal of property and equipment | (4 | ) | - | 17 | 1 | ||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||
| (Increase) decrease in trade accounts receivable, net | 3,479 | 673 | (10,909 | ) | (5,230 | ) | |||||||||||||||
| (Increase) in prepaid expenses & other current assets | (4,674 | ) | (1,021 | ) | (1,541 | ) | (3,607 | ) | |||||||||||||
| (Increase) in other assets | (4 | ) | (6 | ) | (6 | ) | (8 | ) | |||||||||||||
| Increase (decrease) in accounts payable | (2,373 | ) | (428 | ) | 2,183 | 2,725 | |||||||||||||||
| Increase in accrued expenses | 2,975 | 1,664 | 1,303 | 1,162 | |||||||||||||||||
| Increase (decrease) in other current liabilities | (1,061 | ) | (16 | ) | 119 | (116 | ) | ||||||||||||||
| Increase (decrease) in other long-term liabilities | 148 | (40 | ) | 862 | (113 | ) | |||||||||||||||
| Net cash provided by operating activities | 11,678 | 11,353 | 31,356 | 21,326 | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||
| Purchases of property and equipment | (1,687 | ) | (8,710 | ) | (3,945 | ) | (11,374 | ) | |||||||||||||
| Capitalized internal use software development costs | (349 | ) | (201 | ) | (1,079 | ) | (550 | ) | |||||||||||||
| Net cash used in investing activities | (2,036 | ) | (8,911 | ) | (5,024 | ) | (11,924 | ) | |||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||
| Proceeds from employee common stock purchases | - | - | 904 | 806 | |||||||||||||||||
| Tax deductions related to stock-based compensation | 599 | 427 | 1,335 | 1,197 | |||||||||||||||||
| Net cash provided by financing activities | 599 | 427 | 2,239 | 2,003 | |||||||||||||||||
| Net increase in cash | 10,241 | 2,869 | 28,571 | 11,405 | |||||||||||||||||
| Cash, beginning of period | 80,688 | 70,175 | 62,358 | 61,639 | |||||||||||||||||
| Cash, end of period | $ | 90,929 | $ | 73,044 | $ | 90,929 | $ | 73,044 | |||||||||||||
| Other cash flow information: | |||||||||||||||||||||
| Non-cash investing activities: | |||||||||||||||||||||
| Capital expenditures accrued but not yet paid | $ | 5 | $ | 657 | $ | 5 | $ | 657 | |||||||||||||
| Cash payments: | |||||||||||||||||||||
| Income taxes paid | $ | 6,550 | $ | 3,205 | $ | 12,744 | $ | 11,854 | |||||||||||||
| Cash dividends on common stock previously restricted for payment of dividend | $ | - | $ | - | $ | - | $ | 16,231 | |||||||||||||
