NIC Inc. : NIC Earns Eight Cents Per Share in Fourth Quarter 2011; Operating Income up 20 Percent
02/02/2012| 04:05pm US/Eastern
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New portals contribute to topline growth; full year financial results
exceed annual earnings guidance
NIC Inc. (NASDAQ: EGOV), the premier provider of eGovernment services,
today announced net income of $5.5 million and earnings per share of
eight cents on total revenues of $45.1 million for the three months
ended December 31, 2011. Operating income was $9.6 million for the
quarter, up 20 percent from the prior year quarter. In fourth quarter
2010, the company reported net income of $5.1 million and earnings per
share of eight cents on total revenues of $40.8 million.
Fourth Quarter 2011 Performance
Fourth quarter 2011 portal revenues were $42.3 million, a 9 percent
increase over fourth quarter 2010. On a same state basis, portal
revenues were up 6 percent in the fourth quarter. Same state
transaction-based revenues from non-driver record exchange (non-DMV)
services rose 18 percent over fourth quarter 2010 through strong
performance from several key services, including vehicle registrations,
professional license renewals, inmate banking, and tax filings. Same
state DMV revenues decreased 2 percent, while same state time &
materials revenues were down 15 percent, reflecting ongoing state
government budget challenges.
"For the past 20 years, we have been developing innovative eGovernment
services that provide efficiencies for business-to-government
transactions," said Harry Herington, NIC Chief Executive Officer and
Chairman of the Board. "With several state government administrations
focused on making their states as business-friendly as possible,
launching online alternatives for businesses is more important than
ever."
Current quarter revenues from the new Mississippi portal, which began
generating revenues in May 2011, were $0.9 million with cost of portal
revenues of $0.5 million. Current quarter revenues related to the new
Delaware portal, which began generating revenues in October 2011, were
$0.3 million with cost of portal revenues of $0.2 million. Cost of
portal revenues in the current quarter included start-up costs of
approximately $0.5 million from the Maryland and Oregon portals, which
were not fully deployed as of the end of the current quarter. Cost of
portal revenues in the prior year quarter included approximately $0.2
million of portal related start-up costs.
Portal gross profits increased to $16.5 million, a 17 percent increase
over the prior year quarter. NIC's portal gross profit percentage was 39
percent in the current quarter, up from 36 percent in the prior year
quarter, affected positively by lower employee health insurance costs in
the current quarter due to improved claims experience, and lower debit
card interchange fees as a percentage of portal revenues resulting from
the Durbin Amendment's regulation of debit card interchange fees, which
went into effect on October 1, 2011.
Software & services revenues were $2.8 million in the current quarter,
up 33 percent from the prior year quarter, driven by revenues from the
Company's self-funded contract with the U.S. Department of
Transportation's Federal Motor Carrier Safety Administration to operate
the Pre-Employment Screening Program (PSP). Launched in May 2010, the
PSP generated approximately $1.5 million in revenues in the fourth
quarter of 2011 compared to $0.9 million in the prior year quarter,
contributing to a 61 percent increase in software & services gross
profits over the prior year quarter.
"NIC's solid performance for the fourth quarter is the direct result of
the key growth drivers we communicate regularly - new partners, new
services, and federal opportunities," said Mr. Herington. "I am also
encouraged by the impact of our employee wellness initiatives resulting
in better health insurance claims experience, and ultimately improved
profits. Employee well-being has been and will continue to be a top
priority at NIC."
Selling & administrative expenses were $7.4 million in the current
quarter, a 22 percent increase from the fourth quarter of 2010. As a
percentage of total revenues, selling & administrative expenses were 16
percent in the current quarter, up from 15 percent in the fourth quarter
of 2010. The Company incurred approximately $1.7 million in legal costs
and other third-party expenses in the fourth quarter of 2011 in
connection with the previously disclosed SEC matter and derivative
action. However, the Company also received approximately $1.2 million of
reimbursement from its directors' and officers' liability insurance
carrier and approximately $0.2 million of other reimbursements in the
current quarter, which were treated as a reduction of selling &
administrative expenses, resulting in a net increase in expense of
approximately $0.3 million. Selling & administrative expenses in the
prior year quarter include approximately $1.0 million of costs related
to the SEC matter. However, the Company received approximately $1.2
million of reimbursement from its directors' and officers' liability
insurance carrier in the prior year quarter, resulting in a net decrease
in expense of approximately $0.2 million.
The Company's effective tax rate in the current quarter increased to 42
percent from 37 percent in the prior year quarter, primarily due to
higher non-deductible expenses.
At December 31, 2011, NIC's cash and cash equivalents totaled $61.6
million, excluding approximately $16.2 million of cash that was
restricted to pay the previously disclosed special cash dividend of
$0.25 per share on January 3, 2012.
Fourth Quarter Operational Highlights
During the fourth quarter, the Company announced that the state of
Oregon signed agreements with the Company to provide eGovernment
services and manage the state's official web portal. The agreements,
which extend for 10 years through 2021, secure the primary funding
source, concluding a competitive bid process. The Oregon portal is
currently working to develop new self-funded online services, as well as
rebuild and migrate hundreds of existing state agency websites and web
applications from legacy systems to one standard platform.
Also during the quarter, Oklahoma renewed its contract for one year,
with the option to extend the contract for two additional one-year terms.
Several new business-to-government services were launched during the
quarter, including Colorado Business Express, a new online business
registration service; Maine's online training courses for sellers and
servers of alcoholic beverages; New Jersey's Business Record Service
offering immediate access to reports on business entity and trade names;
West Virginia's online 10-Day Truck Permits required for trucking
companies with commercial vehicles not registered in the state; and
Nebraska's Corporate & Business Document eDelivery System launched
through the Secretary of State's office.
Recently, the Company realigned certain executive titles to better
reflect roles and responsibilities. Effective immediately, Robert Knapp
is NIC's Chief Operating Officer, and William (Brad) Bradley is the
Company's Executive Vice President, Chief Administrative Officer, and
General Counsel.
"Robert and Brad both play vital roles in the success and growth of this
Company," said Mr. Herington. "Over the past few years they have each
taken on new areas of responsibility, and their new titles are a more
accurate reflection of the strategic guidance they provide the Company."
Full-Year 2011 Performance
Fiscal year 2011 total revenues rose 12 percent to $180.9 million and
portal revenues grew 10 percent to $170.3 million, driven by steady same
state revenue growth, and the new Mississippi and Delaware portals,
which began generating revenue in the second quarter and fourth quarter
of 2011, respectively. On a same state basis, portal revenues were 8
percent higher than in 2010, with same state non-DMV transaction
revenues growing 20 percent and same state DMV revenues flat for the
year. Same state time & materials revenues decreased by 9 percent for
the year, while same state portal management revenues increased 4
percent.
Software & services revenues reached $10.6 million, up 67 percent from
2010 due mainly to a full year of revenues from the federal PSP service,
which totaled $6.1 million in 2011 as compared to $2.0 million in 2010.
This drove a 177 percent increase in software & services gross profits
to $6.6 million for the year.
Selling & administrative expenses as a percentage of total revenues were
16 percent, down from 17 percent in 2010. In 2011, costs related to the
SEC matter and derivative action, net of directors' and officers'
liability insurance and other reimbursements, decreased approximately
$2.9 million from 2010.
Operating income increased 31 percent to $38.5 million for the year, and
NIC's operating income margin reached 21 percent in 2011, up from 18
percent in 2010.
NIC earned 35 cents per share in 2011, up from 28 cents in 2010,
exceeding the high end of the Company's 2011 earnings guidance.
"Our focus on securing new partnerships and delivering the best service
to our existing partners contributed to NIC's strong financial results
for the year," said Steve Kovzan, NIC Chief Financial Officer.
Full-Year 2012 Outlook
For full-year 2012, NIC currently expects total revenues of $199.5 -
$204.5 million, with portal revenues ranging from $188.8 - $193.3
million and software & services revenues ranging from $10.7 - $11.2
million. The Company also currently expects operating income to range
from $37.5 - $40.5 million and net income of $21.5 - $23.5 million.
Portal gross profit margins for the year are currently expected to
remain in the upper-30 percent range, while software & services gross
profit margins are currently expected to be in the upper-50 percent to
low-60 percent range.
Selling & administrative expenses are currently expected to approximate
16 percent of total revenues. Depreciation & amortization expense as a
percentage of total revenues is expected to approximate at least 3
percent in 2012, with capital expenditures currently expected to range
from $13.0 - $13.5 million for the year, of which $8.0 - $8.5 million
relates to the Company's new agreement with the Texas Department of
Public Safety (DPS) to consolidate the current business processes and
supporting applications for DPS's Regulatory Services Division into a
single suite of online services, as previously announced.
"2012 is an exciting year for NIC," said Mr. Herington. "The Texas RSA
2.0 project will ultimately reap tremendous benefit for the Company in
the future, and is worth the investments we are making this year."
The Company currently expects its effective tax rate in 2012 to be
approximately 42 percent, up from approximately 40 percent in 2011 due
to higher non-deductible expenses and no benefit related to the Federal
research and development tax credit for the 2012 tax year, as
legislation extending the tax credit beyond December 31, 2011 has not
yet been enacted.
"Our financial guidance for 2012 reflects our current expectations of
continued strong performance from our core government portal management
business, building on the fantastic business development year we had in
2011, when we were awarded four new state portal contracts and
significantly expanded our scope of services in Texas," said Steve
Kovzan, NIC's Chief Financial Officer. "While the Texas DPS and Oregon
contracts will require significant start-up investment, particularly in
the first half of the year, we currently expect these contracts will
begin to contribute favorably to our bottom line exiting the year,
serving as catalysts for accelerated growth in 2013 and beyond."
2012 projections do not include revenues from Maryland or revenues and
operating expenses from any unannounced contracts.
Fourth Quarter Earnings Call and Webcast Details
Dial-In Information
Thursday, February 2, 2012
4:30 p.m. (EST)
Call bridge: 866-225-8754 (U.S. callers) or 480-629-9645
(international callers)
Call leaders:
Harry Herington, Chief Executive Officer and Chairman of the Board
A replay of NIC's fourth quarter earnings call will be available until
11 p.m. (EDT) on August 3, 2012, by visiting http://www.egov.com/investors.
About NIC
NIC Inc. (NASDAQ: EGOV) is the nation's leading provider of official
government portals and online 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 3,000 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 a portal
consolidation project 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 and portal consolidation project 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 signing
contracts with new states and federal government agencies, including
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;
and general economic conditions and the other important cautionary
statements and risk factors described in NIC's 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 16,
2011 and in NIC's Quarterly Reports on Form 10-Q filed with the SEC in
2011. 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
Year ended
December 31,
December 31,
2011
2010
2011
2010
Revenues:
Portal revenues
$
42,288
$
38,744
$
170,276
$
155,176
Software & services revenues
2,765
2,074
10,623
6,358
Total revenues
45,053
40,818
180,899
161,534
Operating expenses:
Cost of portal revenues, exclusive of depreciation & amortization
25,825
24,686
104,730
95,552
Cost of software & services revenues, exclusive of depreciation &
amortization
961
955
4,031
3,980
Selling & administrative
7,351
6,017
28,732
27,926
Amortization of acquisition-related intangible assets
81
81
323
323
Depreciation & amortization
1,214
1,048
4,575
4,354
Total operating expenses
35,432
32,787
142,391
132,135
Operating income
9,621
8,031
38,508
29,399
Other expense, net
(28
)
(9
)
(34
)
(10
)
Income before income taxes
9,593
8,022
38,474
29,389
Income tax provision
4,069
2,964
15,531
11,026
Net income
$
5,524
$
5,058
$
22,943
$
18,363
Basic net income per share
$
0.08
$
0.08
$
0.35
$
0.28
Diluted net income per share
$
0.08
$
0.08
$
0.35
$
0.28
Weighted average shares outstanding:
Basic
64,176
63,696
64,018
63,511
Diluted
64,325
63,884
64,157
63,609
Key Financial Metrics:
Revenue growth - outsourced portals
9
%
10
%
10
%
21
%
Same state revenue growth - outsourced portals
6
%
10
%
8
%
8
%
Recurring portal revenue as a % of total portal revenues
91
%
89
%
91
%
89
%
Gross profit % - outsourced portals
39
%
36
%
38
%
38
%
Revenue growth - software & services
33
%
65
%
67
%
47
%
Gross profit % - software & services
65
%
54
%
62
%
37
%
Selling & administrative expenses as a % of total revenues
16
%
15
%
16
%
17
%
Operating income as a % of total revenue
21
%
20
%
21
%
18
%
Portal Revenue Analysis:
DMV transaction-based
$
15,079
$
14,742
$
64,985
$
62,873
Non-DMV transaction-based
21,160
17,618
81,313
67,409
Portal software development
3,699
4,339
15,515
17,080
Portal management
2,350
2,045
8,463
7,814
Total portal revenues
$
42,288
$
38,744
$
170,276
$
155,176
NIC INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands
except par value amount
December 31, 2011
December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents
$
61,639
$
51,687
Cash restricted for payment of dividend
16,231
-
Trade accounts receivable, net
49,306
42,059
Deferred income taxes, net
916
872
Prepaid expenses & other current assets
5,994
5,920
Total current assets
134,086
100,538
Property and equipment, net
8,853
6,758
Intangible assets, net
1,088
1,539
Deferred income taxes, net
83
2,298
Other assets
243
243
Total assets
$
144,353
$
111,376
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
45,038
$
41,599
Accrued expenses
16,293
14,464
Dividend payable
16,231
-
Other current liabilities
310
694
Total current liabilities
77,872
56,757
Other long-term liabilities
1,405
1,350
Total liabilities
79,277
58,107
Commitments and contingencies
-
-
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares authorized,
64,178 and 63,706 shares issued and outstanding
6
6
Additional paid-in capital
96,799
107,935
Accumulated deficit
(31,729
)
(54,672
)
Total stockholders' equity
65,076
53,269
Total liabilities and stockholders' equity
$
144,353
$
111,376
NIC INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Thousands
Additional
Common Stock
Paid-in
Accumulated
Shares
Amount
Capital
Deficit
Total
Balance, January 1, 2011
63,706
$
6
$
107,935
$
(54,672
)
$
53,269
Net income
-
-
-
22,943
22,943
Dividends declared
-
-
(16,231
)
-
(16,231
)
Dividend equivalents on performance-based restricted
stock awards
-
-
(110
)
-
(110
)
Restricted stock vestings
533
-
120
-
120
Shares surrendered and cancelled upon vesting of
restricted stock to satisfy tax withholdings
(165
)
-
(1,922
)
-
(1,922
)
Stock-based compensation
-
-
4,510
-
4,510
Tax deductions relating to stock-based
compensation
-
-
1,509
-
1,509
Shares issuable in lieu of dividend payments on unvested
performance-based restricted stock awards
-
-
336
-
336
Issuance of common stock under employee stock
purchase plan
104
-
652
-
652
Balance, December 31, 2011
64,178
$
6
$
96,799
$
(31,729
)
$
65,076
NIC INC. CASH FLOW SUMMARY (UNAUDITED) Thousands
Three months ended
Year ended
December 31,
December 31,
2011
2010
2011
2010
Cash flows from operating activities:
Net income
$
5,524
$
5,058
$
22,943
$
18,363
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of acquisition-related intangible assets
81
81
323
323
Depreciation & amortization
1,214
1,101
4,575
4,354
Stock-based compensation expense
1,093
892
4,510
4,029
Deferred income taxes
1,272
590
789
(187
)
Loss on disposal of property and equipment
30
11
38
13
Changes in operating assets and liabilities:
(Increase) in trade accounts receivable, net
(5,450
)
(2,197
)
(7,247
)
(3,095
)
(Increase) decrease in prepaid expenses & other current assets
1,635
(1,551
)
1,308
(1,665
)
(Increase) decrease in other assets
3
(1
)
-
(1
)
Increase (decrease) in accounts payable
10,424
4,499
3,439
(1,273
)
Increase (decrease) in accrued expenses
(2,254
)
133
(92
)
358
Increase (decrease) in other current liabilities
(125
)
425
(264
)
29
Increase in other long-term liabilities
10
491
280
743
Net cash provided by operating activities
13,457
9,532
30,602
21,991
Cash flows from investing activities:
Purchases of property and equipment
(2,247
)
(1,144
)
(6,137
)
(4,102
)
Proceeds from sale of property and equipment
8
-
8
4
Capitalized internal use software development costs
(132
)
(69
)
(451
)
(470
)
Net cash used in investing activities
(2,371
)
(1,213
)
(6,580
)
(4,568
)
Cash flows from financing activities:
Cash dividends on common stock
-
(16,189
)
-
(35,501
)
Cash restricted for payment of dividend
(16,231
)
-
(16,231
)
-
Proceeds from employee common stock purchases
-
(3
)
652
679
Proceeds from exercise of employee stock options
-
58
-
73
Tax deductions related to stock-based compensation
17
268
1,509
381
Net cash used in financing activities
(16,214
)
(15,866
)
(14,070
)
(34,368
)
Net increase (decrease) in cash and cash equivalents
(5,128
)
(7,547
)
9,952
(16,945
)
Cash and cash equivalents, beginning of period
66,767
59,234
51,687
68,632
Cash and cash equivalents, end of period
$
61,639
$
51,687
$
61,639
$
51,687
Other cash flow information:
Income taxes paid
$
2,082
$
3,784
$
11,727
$
12,189
NIC Inc. Angela Skinner, 913-754-7054 Director of
Communications & Investor Relations askinner@egov.com
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