0001065332-20-000002.txt : 20200129
0001065332-20-000002.hdr.sgml : 20200129
20200129161950
ACCESSION NUMBER: 0001065332-20-000002
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 16
CONFORMED PERIOD OF REPORT: 20200129
ITEM INFORMATION: Results of Operations and Financial Condition
ITEM INFORMATION: Regulation FD Disclosure
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20200129
DATE AS OF CHANGE: 20200129
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NIC INC
CENTRAL INDEX KEY: 0001065332
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389]
IRS NUMBER: 522077581
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-26621
FILM NUMBER: 20558399
BUSINESS ADDRESS:
STREET 1: 25501 W. VALLEY PARKWAY
STREET 2: SUITE 300
CITY: OLATHE
STATE: KS
ZIP: 66061
BUSINESS PHONE: (913) 498-3468
MAIL ADDRESS:
STREET 1: 25501 W. VALLEY PARKWAY
STREET 2: SUITE 300
CITY: OLATHE
STATE: KS
ZIP: 66061
FORMER COMPANY:
FORMER CONFORMED NAME: NATIONAL INFORMATION CONSORTIUM
DATE OF NAME CHANGE: 19990618
FORMER COMPANY:
FORMER CONFORMED NAME: NATIONAL INFORMATION CONSORTIUM INC
DATE OF NAME CHANGE: 19990504
8-K
1
a8-kxq42019earningsrel.htm
8-K
Document
false000106533200010653322020-01-292020-01-29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):January 29, 2020
NIC INC.
(Exact name of registrant as specified in its charter)
Delaware
000-26621
52-2077581
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
25501 West Valley Parkway, Suite 300
Olathe, Kansas66061
(Address of principal executive offices, including zip code)
(877) 234-3468
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
EGOV
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On January 29, 2020, NIC Inc. (the “Company”) issued a press release announcing its 2019fourth quarter financial results. A copy of the press release is furnished with this report on Form 8-K as Exhibit 99.1, and is incorporated by reference herein.
ITEM 7.01 REGULATION FD DISCLOSURE
On January 27, 2020, the Board of Directors of the Company declared a regular quarterly cash dividend of $0.09 per share, payable on March 18, 2020, to stockholders of record on March 4, 2020. The dividend payout will total approximately $6.1 million based on the current number of shares outstanding. The Company’s ability to pay regular quarterly dividends in the future could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and debt covenants associated with its line of credit.
The information in Items 2.02 and 7.01 to this Current Report, including without limitation Exhibit 99.1, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as shall be expressly set forth by specific reference in such filing.
Cover Page Interactive Data File (embedded within Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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. - January 29, 2020 - 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. (EDT)
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.
The end date of the period reflected on the cover page if a periodic report. For all other reports and registration statements containing historical data, it is the date up through which that historical data is presented. If there is no historical data in the report, use the filing date. The format of the date is CCYY-MM-DD.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
Commission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act.
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act.