 |
2Q 2004 EARNINGSFor Immediate Release |
| Contact: Chris Neff 435-645-8898 cneff@nicusa.com |
NIC Earns Three Cents Per Share as Second Quarter Operating Income Increases 59 Percent to $3.2 Million
OLATHE, Kan. – July 29, 2004 – NIC Inc. (Nasdaq: EGOV) today reported net income of $1.8 million and earnings per share of three cents on total revenues of $14.3 million for the three months ended June 30, 2004. In the prior year quarter, the Company posted net income of $1.4 million and earnings per share of two cents on total revenues of $12.9 million. The continued strength of the Company's core outsourced portal business helped to deliver a 59 percent increase in operating income over the prior year quarter. NIC's operating income rose to $3.2 million in the second quarter, up from $2.0 million a year ago and $2.9 million in first quarter 2004.
Operating Highlights
--------------------
Three months ended June 30
(thousands)
2004 2003 Change
---- ---- ------
Portal Revenues $12,255 $10,149 21%
Portal Cost of Revenues 6,189 5,285 17%
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Portal Gross Profit $ 6,066 $ 4,864 25%
Operating Income $ 3,174 $ 1,992 59%
Operating Income Margin % 22% 15%
Net Income $ 1,826 $ 1,357 35%
Portal revenues were $12.3 million, a 21 percent increase over the prior year quarter. On a same state basis, portal revenues grew 18 percent in the second quarter, compared to a five percent increase during the same period a year ago. Strong usage of NIC's outdoor licensing, court record search, and limited criminal history request applications in the second quarter helped same state revenues from non-driver record exchange (non-DMV) services increase 37 percent. During the same period, same state DMV revenues rose 13 percent.
"NIC's portal business had yet another great quarter," said Jeff Fraser, Chief Executive Officer of NIC. "Our DMV and non-DMV revenue growth in the second quarter further proves the effectiveness of NIC's self-funded eGovernment portal solution."
The portal business launched 70 new non-DMV revenue-generating services in the second quarter and has another130 additional services in the development pipeline. "NIC continues to diversify its portfolio of non-DMV fee-based applications, which we expect to generate revenue growth in future quarters," said Harry Herington, Chief Operating Officer of NIC.
In line with expectations, second quarter revenues for the software and services business were $2.1 million, down 24 percent from the prior year quarter. During the quarter, the California Secretary of State engagement reached a key performance benchmark. "We are pleased with our progress on the Uniform Commercial Code system and are eager to complete the remainder of the project and transition to maintenance mode," continued Herington.
Selling and administrative expenses for the second quarter were $2.9 million, or 21 percent of revenue, down from 23 percent in the prior year quarter and 22 percent of revenue during first quarter 2004. "NIC's operating margins grew to a record 22 percent for the quarter, up from 15 percent a year ago and 20 percent last quarter," said Eric Bur, Chief Financial Officer of NIC. "Our cost controls and lean overhead structure continue to generate operational leverage."
Driven by a milestone payment from the California Secretary of State project, NIC ended the second quarter with $26.7 million in cash and equivalents, up $6.0 million from March 31, 2004. During the same period, net working capital grew by $3.7 million to $30.9 million.
Second Quarter Operating Highlights
During the second quarter, Maine (www.Maine.gov) and Hawaii (www.eHawaii.gov) signed two-year extensions for portal management services. In addition, Arkansas (www.Arkansas.gov) and Tennessee (www.Tennessee.gov) completed one-year contract extensions. Five of NIC's partners were also recognized for national eGovernment excellence. Earlier this month, NIC's partners in Virginia (www.Virginia.gov), Indiana (www.IN.gov), Tennessee (www.Tennessee.gov), Utah (www.Utah.gov), and Arkansas (www.Arkansas.gov) were ranked among the top ten states by the Center for Digital Government's 2004 Digital States Survey.
"We thank our partners in Maine, Hawaii, Arkansas, and Tennessee for continuing to put their trust in NIC, and we also congratulate each of our Digital States Survey-winning state partners," concluded Fraser.
Third Quarter and Full-Year 2004 Outlook
For third quarter 2004, NIC expects total revenues of $12.9 - $13.3 million, portal revenues of $11.5 - $11.7 million, and software and services revenues of $1.4 - $1.6 million. The Company also anticipates operating income between $2.6 - $2.8 million and net income of $1.5 - $1.7 million, or $0.03 per share.
For full-year 2004, NIC's previous guidance remains unchanged: Total revenues of $54.4 - $55.3 million, portal revenues of $46.6 - $47.3 million, and software and services revenues of $7.8 - $8.0 million. In addition, the Company expects operating income between $11.0 - $11.3 million (a 50 percent increase over 2003) and net income of $6.5 - $6.8 million, or $0.11 per share. Full-year 2004 guidance includes normal fourth quarter seasonality, which has historically resulted in a 5-10 percent decrease in portal DMV revenues.
NIC's third quarter and full-year 2004 estimates do not include new contracts.
Second Quarter Earnings Webcast Details
Webcast Information
Thursday, July 29, 2004
9:00 a.m. (EDT)
Call leaders:
Jeff Fraser, Chief Executive Officer
Harry Herington, Chief Operating Officer
Eric Bur, Chief Financial Officer
To sign in and listen: The Webcast system is available at www.nicusa.com/investor.
Some users may need to refresh their browsers to view the Webcast information. A replay of the Webcast will be available until 5:00 p.m. (EDT) on October 29 by visiting www.nicusa.com/investor. An audio replay will also be available until 11:00 p.m. (EDT) on August 5 by dialing 1-800-405-2236 and using passcode 11003066.
About NIC
NIC manages more eGovernment services than any provider in the world. The company is helping governments communicate more effectively with citizens and businesses by putting essential services online. NIC provides eGovernment solutions for 1,500 state and local agencies that serve more than 51 million people in the United States. Additional company information is available at www.nicusa.com.
The statements in this release regarding continued implementation of NIC's business model and its development of new products and services are forward-looking statements. 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, the success of the Company in signing contracts with new states and 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; and general economic conditions and the other important cautionary statements and risk factors described in NIC's 2002 Annual Report on Form 10-K filed on March 20, 2003, with the Securities and Exchange Commission.
(financial tables follow)
NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
Thousands except for per share amounts
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Portal revenues $12,255 $10,149 $24,486 $19,939
Software & services revenues 2,082 2,757 4,271 5,487
------- ------- ------- -------
Total revenues 14,337 12,906 28,757 25,426
------- ------- ------- -------
Cost of revenues:
Cost of portal revenues,
exclusive of depreciation
& amortization 6,189 5,285 12,042 10,365
Cost of software & services
revenues, exclusive of
depreciation & amortization 1,649 2,242 3,729 4,386
Selling & administrative 2,945 2,937 6,177 6,057
Depreciation & amortization 380 450 769 942
------- ------- ------- -------
Total operating expenses 11,163 10,914 22,717 21,750
------- ------- ------- -------
Operating income 3,174 1,992 6,040 3,676
------- ------- ------- -------
Other income (expense):
Interest income 23 30 44 59
Interest expense (4) (4) (9) (9)
Equity in net loss of
affiliates (40) 262 (109) 202
------- ------- ------- -------
Total other income (expense) (21) 288 (74) 252
------- ------- ------- -------
Income before income taxes 3,153 2,280 5,966 3,928
Income tax provision 1,327 923 2,538 1,582
------- ------- ------- -------
Net income $ 1,826 $ 1,357 $ 3,428 $ 2,346
------- ------- ------- -------
Basic and diluted earnings per
share: $ 0.03 $ 0.02 $ 0.06 $ 0.04
------- ------- ------- -------
Weighted average shares
outstanding:
Basic 58,870 58,234 58,807 58,184
------- ------- ------- -------
Diluted 60,884 58,654 60,950 58,411
------- ------- ------- -------
Key Financial Metrics:
Revenue growth - outsourced portals 21% 13% 23% 14%
Same state revenue growth -
outsourced portals 18% 5% 20% 5%
Revenue growth - software & services (24%) (30%) (22%) (27%)
Gross profit percentage -
outsourced portals 49% 48% 51% 48%
Gross profit percentage -
software & services 21% 19% 13% 20%
Selling & administrative costs as
a percentage of revenue 21% 23% 21% 24%
Operating income margin
percentage 22% 15% 21% 14%
Portal Revenue Analysis (thousands)
DMV transaction-based $ 7,650 $ 6,187 $15,529 $12,218
Non-DMV transaction-based 3,597 2,820 6,940 5,261
Portal management 102 299 204 599
Software development 906 843 1,813 1,861
------- ------- ------- -------
Total $12,255 $10,149 $24,486 $19,939
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NIC Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except for share amounts
June 30, December 31,
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 21,440 $ 13,540
Cash and cash equivalents - restricted 5,286 5,363
Marketable securities - 249
Trade accounts receivable 20,556 17,871
Deferred income taxes 173 181
Prepaid expenses 665 698
Other current assets 4,918 8,845
--------- ---------
Total current assets 53,038 46,747
Property and equipment, net 3,107 2,992
Deferred income taxes 32,968 35,169
Other assets 268 110
Investments in affiliates - 644
Intangible assets, net 49 77
--------- ---------
Total assets $ 89,430 $ 85,739
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,875 $ 16,345
Accrued expenses 6,559 5,245
Note payable - current portion 158 156
Application development contracts 446 465
Other current liabilities 143 158
--------- ---------
Total current liabilities 22,181 22,369
Note payable - long-term portion 128 207
--------- ---------
Total liabilities 22,309 22,576
--------- ---------
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par, 200,000,000
shares authorized
58,902,525 and 58,715,672
shares issued and outstanding - -
Additional paid-in capital 199,459 198,929
Accumulated deficit (132,133) (135,561)
--------- ---------
67,326 63,368
Less treasury stock (205) (205)
--------- ---------
Total shareholders' equity 67,121 63,163
--------- ---------
Total liabilities and shareholders' equity $ 89,430 $ 85,739
--------- ---------
NIC Inc.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Cash flows from operating
activities:
Net income $ 1,826 $ 1,357 $ 3,428 $ 2,346
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation &
amortization 381 450 769 942
Application
development
contracts (21) (273) (19) (732)
Deferred income taxes 1,301 849 2,547 1,461
Deferred income tax
benefit relating to
stock options (73) - (171) -
Equity in net loss of
affiliates 40 (262) 109 (202)
Changes in operating assets
and liabilities
(Increase) in trade
accounts receivable (199) (749) (2,685) (2,236)
(Increase) decrease
in prepaid expenses (4) 270 33 297
(Increase) decrease
in other current
assets 5,222 (2,029) 4,030 (3,320)
Decrease in other
assets - 7 2 14
Increase (decrease)
in accounts payable (2,333) 904 (1,470) 1,514
Increase (decrease)
in accrued expenses (212) 159 1,431 734
(Decrease) in other
current liabilities (43) (209) (15) (398)
------- -------- -------- -------
Net cash provided by
operating activities 5,885 474 7,989 420
------- -------- -------- -------
Cash flows from investing
activities:
Purchases of property and
equipment (229) (354) (855) (622)
Maturities of marketable
securities 250 - 250 -
Proceeds from sale of
affiliate 300 - 300 -
------- -------- -------- -------
Net cash provided by (used
in) investing activities 321 (354) (305) (622)
------- -------- -------- -------
Cash flows from financing
activities:
Cash and cash equivalents -
restricted 39 25 77 863
Payments on note payable (39) (25) (77) (96)
Proceeds from exercise of
employee stock options 74 - 216 133
------- -------- -------- -------
Net cash provided by
financing activities 74 - 216 900
------- -------- -------- -------
Net increase in cash and cash
equivalents 6,280 120 7,900 698
Cash and cash equivalents,
beginning of period 15,160 10,137 13,540 9,559
------- -------- -------- -------
Cash and cash equivalents,
end of period $21,440 $10,257 $21,440 $10,257
------- -------- -------- -------
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