 |
1Q 2005 EARNINGSFor Immediate Release |
| Contact: Chris Neff 435-645-8898 cneff@nicusa.com |
NIC Posts Net Loss of Two Cents Per Share in First Quarter 2005 Due to Higher Expected Costs to Complete the California Secretary of State Project
Record portal revenues driven by 16 percent same state growth
OLATHE, Kan. – May 3, 2005 – NIC Inc. (Nasdaq: EGOV) today reported a net loss of $0.9 million and a loss per share of two cents on revenues of $14.7 million for the three months ended March 31, 2005. First quarter 2005 results include a pretax charge of $5.0 million to reflect expected changes in NIC's software and services engagement with the California Secretary of State. In the prior year quarter, the Company posted net income of $1.6 million and earnings per share of three cents on revenues of $14.4 million.
In late March, NIC assumed a significant portion of project responsibilities for the California Secretary of State software development project that were previously performed by a subcontractor. Following the completion of an internal assessment, NIC decided last week to extend the anticipated delivery timeline into late 2006. The Company also increased the project cost estimate to ensure the highest quality of performance that is consistent with the provisions of the contract.
"We have taken this reserve so we can fulfill our obligations under the California Secretary of State contract and focus our efforts on more profitable eGovernment portal opportunities," said Jeff Fraser, NIC's Chairman and Chief Executive Officer.
"We respond to changes in our business as they occur, and delaying our earnings announcement last week provided the time needed to report this item properly in our financial statements," continued Fraser.
Core Portal Business Continues Strong Growth
In the first quarter, NIC's core eGovernment portal business continued to deliver healthy results. First quarter portal revenues were a record $13.7 million, a 12 percent increase over the prior year quarter. On a same state basis, portal revenues grew 16 percent in the first quarter. NIC's online income tax filings, criminal background checks, and hunting and fishing licenses performed well in the first quarter, helping same state revenues from non-driver record exchange (non-DMV) services to rise 39 percent. During the same period, same state DMV revenues grew 10 percent over first quarter 2004.
"Portal revenues were $1.4 million higher than any quarter in NIC's history, which clearly shows the strength of our self-funded business model," said Harry Herington, NIC's Chief Operating Officer.
NIC's portals launched a record 95 new non-DMV revenue-generating services and 150 additional applications are in the development pipeline. "Within the core portal business, our focus has not changed," continued Herington. "We continue to diversify our portal revenues by launching new services that add value to our government partners and the businesses and citizens they serve."
First Quarter Business Development Highlights
During the first quarter, South Carolina (www.MySCgov.com) signed a new self-funded portal management agreement with NIC for a contract term of up to five years. The Company now manages official government Web portals for 17 states.
Kentucky (http://kentucky.gov) also signed a two-year extension for portal management services.
"We thank our partners in South Carolina and Kentucky for their vote of confidence," concluded Fraser. "Our self-funded model has been successful in every economic climate and continues to offer unparalleled value to governments."
Additional Financial Metrics
Selling and administrative expenses for the quarter were up just $50,000 over the same period last year and represented 22 percent of revenue in both quarters.
NIC ended the first quarter with $39.9 million in cash and investments, up $6.2 million from December 31, 2004.
Second Quarter and Full-Year 2005 Outlook
For second quarter 2005, NIC expects total revenues of $14.3 - $14.6 million, portal revenues of $13.6 - $13.8 million, and software and services revenues of $0.7 - $0.8 million. The Company also anticipates operating income between $3.3 - $3.5 million and net income of $2.0 - $2.1 million.
For full-year 2005, NIC's projections have been updated to reflect a partial year of revenues from the South Carolina contract and the delay in stock option expensing until 2006. NIC now expects total revenues of $57.4 - $59.0 million, portal revenues of $54.4 - $55.7 million, and software and services revenues of $3.0- $3.3 million. The Company expects operating income between $9.3 - $9.8 million and net income of $5.6 - $5.9 million.
"NIC's projections do not include any new or unsigned contracts and also reflect our exit from the standalone local portal business, which generated $1.0 million of low-margin revenue last year," said Eric Bur, NIC's Chief Financial Officer. "In line with our performance in first quarter, 97 percent of portal revenues should be transactional in 2005 as we swap the occasional portal software development project for recurring revenue opportunities."
Webcast Information
Tuesday, May 3, 2005
9:00 a.m. (EDT)
Call leaders: Jeff Fraser, Chief Executive Officer
Eric Bur, Chief Financial Officer
Harry Herington, Chief Operating 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 August 2, 2005, by visiting www.nicusa.com/investor.
An audio replay of the call will be available until 11:00 p.m. (EDT) on May 9 by dialing 1-800-405-2236 and using passcode 11029982.
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 2,000 state and local agencies that serve more than 55 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 2004 Annual Report on Form 10-K/A filed on March 16, 2005, with the Securities and Exchange Commission.
(financial tables follow)
NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
Thousands except for per share amounts
Three months ended
March 31,
2005 2004
--------- ---------
Revenues:
Portal revenues $ 13,661 $ 12,231
Software and services revenues 1,047 2,188
--------- ---------
Total revenues 14,708 14,419
--------- ---------
Cost of revenues:
Cost of portal revenues, exclusive of
depreciation & amortization 6,715 5,853
Cost of software & services revenues,
exclusive of depreciation & amortization 5,805 2,080
Selling & administrative 3,282 3,232
Depreciation & amortization 352 388
--------- ---------
Total operating expenses 16,154 11,553
--------- ---------
Operating income (loss) (1,446) 2,866
--------- ---------
Other income (expense):
Interest income 81 21
Interest expense - (5)
Equity in net loss of affiliates - (69)
Other income (expense), net (3) -
--------- ---------
Total other income (expense) 78 (53)
--------- ---------
Income (loss) before income taxes (1,368) 2,813
Income tax provision (benefit) (471) 1,211
--------- ---------
Net income (loss) $ (897)$ 1,602
--------- ---------
Basic earnings (loss) per share: $ (0.02)$ 0.03
--------- ---------
Diluted earnings (loss) per share: $ (0.02)$ 0.03
--------- ---------
Weighted average shares outstanding:
Basic 59,402 58,744
--------- ---------
Diluted 59,402 61,016
--------- ---------
Key Financial Metrics:
Revenue growth - outsourced portals 12% 25%
Same state revenue growth - outsourced portals 16% 21%
Revenue growth - software & services (52%) (20%)
Gross profit percentage - outsourced portals 51% 52%
Gross profit percentage - software & services (454%) 5%
Selling & administrative costs as a
percentage of revenue 22% 22%
Operating income margin percentage (10%) 20%
Portal Revenue Analysis (thousands)
DMV transaction-based $ 8,650 $ 7,879
Non-DMV transaction-based 4,371 3,343
Portal management 48 102
Software development 592 907
--------- ---------
Total $ 13,661 $ 12,231
--------- ---------
NIC Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except for share amounts
March 31, December 31,
2005 2004
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 32,921 $ 30,769
Cash and cash equivalents -
restricted 3,000 3,000
Marketable securities 4,000 -
Trade accounts receivable 20,448 17,610
Unbilled revenues 3,161 3,400
Deferred income taxes 2,499 433
Prepaid expenses & other current
assets 1,117 1,312
----------- -----------
Total current assets 67,146 56,524
Property and equipment, net 2,386 2,603
Unbilled revenues 2,404 2,404
Deferred income taxes 30,099 31,274
Other assets 272 266
----------- -----------
Total assets $ 102,307 $ 93,071
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,462 $ 14,394
Accrued expenses 5,272 6,266
Application development contracts 4,951 -
Other current liabilities 128 151
----------- -----------
Total current liabilities 29,813 20,811
----------- -----------
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par, 200,000,000
shares authorized 59,640,534 and
59,301,375 shares issued and
outstanding - -
Additional paid-in capital 202,031 200,921
Accumulated deficit (129,353) (128,456)
----------- -----------
72,678 72,465
Less treasury stock (184) (205)
----------- -----------
Total shareholders' equity 72,494 72,260
----------- -----------
Total liabilities and shareholders'
equity $ 102,307 $ 93,071
----------- -----------
NIC Inc.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
Three months
ended
March 31,
2005 2004
------- -------
Cash flows from operating activities:
Net income (loss) $ (897) $ 1,602
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation & amortization 352 388
Application development contracts 4,951 2
Deferred income taxes (271) 1,246
Deferred income tax benefit relating to
stock options (310) (98)
Equity in net loss of affiliates - 69
Changes in operating assets and liabilities
(Increase) in trade accounts receivable (2,838) (2,486)
(Increase) decrease in unbilled revenues 239 (1,518)
Decrease in prepaid expenses & other current
assets 281 363
(Increase) decrease in other assets (6) 2
Increase in accounts payable 5,068 863
Increase (decrease) in accrued expenses (994) 1,526
Increase (decrease) in other current
liabilities (23) 28
------- -------
Net cash provided by operating activities 5,552 1,987
------- -------
Cash flows from investing activities:
Purchases of property and equipment (134) (626)
Purchases of marketable securities (7,000) -
Maturities of marketable securities 3,000 -
------- --------
Net cash used in investing activities (4,134) (626)
------- -------
Cash flows from financing activities:
Cash and cash equivalents - restricted - 38
Payments on note payable - (38)
Proceeds from employee common stock purchases 122 117
Proceeds from exercise of employee stock options 612 142
------- -------
Net cash provided by financing activities 734 259
------- -------
Net increase in cash and cash equivalents 2,152 1,620
Cash and cash equivalents, beginning of period 30,769 13,540
------- -------
Cash and cash equivalents, end of period $32,921 $15,160
------- -------
-- 30 --