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4Q 2005 EARNINGSFor Immediate Release |
| Contact: Chris Neff 435-645-8898 cneff@nicusa.com |
NIC Announces Record Portal Revenues as Operating Income Rises 41 Percent in the Fourth Quarter
OLATHE, Kan. – January 26, 2006 – NIC Inc. (Nasdaq: EGOV) today reported net income of $2.4 million and earnings per share of four cents on total revenues of $16.4 million for the three months ended December 31, 2005. Continuing to meet strong demand for eGovernment services, NIC’s core outsourced portal business contributed to a 41 percent increase in operating income over the same period last year. Operating income was $3.9 million in the fourth quarter, compared to $2.7 million a year ago.
4Q 2005 Operating Highlights
----------------------------
Three months ended December 31
(thousands)
2005 2004 Change
---- ---- ------
Portal Revenues $15,191 $12,180 25%
Portal Cost of Revenues 8,020 6,558 22%
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Portal Gross Profit $7,171 $5,622 28%
Portal Gross Profit % 47% 46%
Operating Income $3,855 $2,732 41%
Operating Income Margin % 24% 20%
The Company posted net income of $1.7 million and earnings per share of three cents on total revenues of $13.6 million in fourth quarter 2004.
Quarterly portal revenues of $15.2 million were the highest in the Company’s history, up 25 percent over the prior year quarter. On a same state basis, portal revenues grew 13 percent in the fourth quarter, compared to a 22 percent increase during the same period a year ago. NIC’s online hunting and fishing license, limited criminal history search, tax payment, and professional license renewal services performed well in the fourth quarter, helping same state revenues from non-driver record exchange (non-DMV) applications to rise 31 percent.
Driven partially by the fourth quarter launch of the Colorado portal and a full quarter of revenues from the South Carolina portal, total DMV revenues grew 25 percent during the quarter. Same state DMV revenues rose 3 percent over fourth quarter 2004, reflecting an anticipated return to an inflation-adjusted growth rate following two consecutive years of DMV fee increases in various partner states.
"Thanks to the hard work of our employees across the country, NIC continues to deliver in-demand eGovernment services to our 18 state partners as well as the citizens and businesses they serve," said Jeff Fraser, Chief Executive Officer of NIC. "At a time when residents expect government to provide a higher level of service at a lower cost, we are well-positioned to help our state partners meet these rising demands by building and managing new online government services."
In the fourth quarter, NIC’s portals launched 81 new non-DMV revenue-generating services and another 150 applications are in the development pipeline. "We now have more than a thousand unique eGovernment services in operation across our portals, and NIC will continue to focus on innovation as we expand our base of revenue-generating applications in the future," said Harry Herington, NIC’s Chief Operating Officer.
Revenues for the software and services business in the fourth quarter were $1.2 million, down 14 percent from the prior year quarter.
Selling and administrative expenses for the fourth quarter were $3.1 million, up from $2.8 million in the prior year quarter. Selling and administrative expenses were 19 percent of revenue in the current quarter, down from 21 percent in the fourth quarter of 2004.
NIC ended the year with approximately $57.4 million in cash and investments, up $9.2 million from September 30, 2005, and a $23.6 million increase from December 31, 2004.
Full-Year 2005 Performance
For fiscal year 2005, portal revenues rose 19 percent to $57.9 million and non-DMV revenues grew 37 percent over 2004. On a same state basis, portal revenues grew 17 percent and non-DMV revenues rose 41 percent. Selling and administrative expenses as a percentage of revenue were 21 percent in 2005, down from 22 percent in 2004. Operating income was $10.2 million for the year, down from $11.8 million in 2004. The Company earned 11 cents per share in 2005 (10 cents on a fully diluted basis), compared to 12 cents per share in 2004. Results for 2005 include a $5.0 million pretax charge recorded in the first quarter relating to NIC’s software and services engagement with the California Secretary of State. Absent this charge, the Company would have posted operating income of $15.1 million (a 28 percent increase over 2004) and earnings per share of 16 cents in 2005 (15 cents on a fully diluted basis).
2005 Operating Highlights
-------------------------
Twelve months ended December 31
(thousands)
2005 2004 Change
---- ---- ------
Portal Revenues $57,875 $48,544 19%
Portal Cost of Revenues 29,448 24,866 18%
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Portal Gross Profit $28,427 $23,678 20%
Portal Gross Profit % 49% 49%
Operating Income $10,191 $11,800 (14)%
Operating Income Margin % 17% 21%
"Healthy portal growth and careful management of overhead expenses contributed to another strong year for NIC," said Eric Bur, NIC’s Chief Financial Officer. "Several of our portals performed above expectations, which contributed to the 20 percent portal gross profit growth in 2005. Our portal gross profit percentage for 2005 remained constant at 49 percent, which reflects ongoing investments in our portal operations. We also continued to run a lean corporate office, with selling and administrative expenses rising just five percent year-over-year."
Operating Highlights
During the fourth quarter, the Company’s portal operations were enhanced by the launch of its 18th self-funded eGovernment portal for the state of Colorado (www.Colorado.gov). Following a competitive bid process, NIC also secured a new agreement for up to five years to manage the state of Alabama’s self-funded portal (www.Alabama.gov).
"We welcome Colorado to the NIC family and thank Alabama for continuing its commitment to our successful partnership," concluded Fraser.
First Quarter and Full-Year 2006 Outlook
For first quarter 2006, NIC expects total revenues of $16.9 - $17.2 million, portal revenues of $16.1 - $16.3 million, and software and services revenues of $0.8 - $0.9 million. The Company also anticipates operating income between $3.9 - $4.1 million (which includes approximately $0.3 million in stock option expense) and net income of $2.4 - $2.6 million.
For full-year 2006, NIC expects total revenues of $68.5 - $69.4 million, portal revenues of $65.9 - $66.5 million, and software and services revenues of $2.6 - $2.9 million. The Company also anticipates operating income between $14.7 - $15.2 million (which includes approximately $1.5 million in stock option expense) and net income of $9.3 - $9.6 million.
"We expect another solid year of organic growth, with same state DMV revenues rising by 3 percent and non-DMV revenues rising by 20 - 25 percent," continued Bur. "Note that our projections do not include any new DMV fee increases or new contracts.
"Portal margins should remain just shy of 50 percent in 2006 as we continue to reinvest in the portal business," said Bur. "Depreciation expense will be approximately $0.5 million higher than 2005 as a result of increasing capital investment in our portals. We also expect selling and administrative expenses to range from 21-22 percent of revenue in 2006, which reflects higher investment in sales and marketing to drive future growth opportunities.
"As a result, we expect annual operating income margins of 21 - 22 percent in 2006," concluded Bur.
Third Quarter Webcast Details
Thursday, January 26, 2006
9:00 a.m. (EST)
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 April 26, 2006, by visiting www.nicusa.com/investor.
An audio replay of NIC’s fourth quarter earnings call will be available until 11:00 p.m. (EST) on February 2 by dialing 1-800-405-2236 and using passcode 11050851.
NIC’s earnings announcements are also available via podcast download. For more information, visit www.nicusa.com/investor.
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, and in its most recent Quarterly Report on Form 10-Q, filed on November 9, 2005, with the Securities and Exchange Commission.
(financial tables follow)
NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
Thousands except for per share amounts
Three months ended Twelve months ended
December 31, December 31,
2005 2004 2005 2004
---- ---- ---- ----
Revenues:
Portal revenues $15,191 $12,180 $57,875 $48,544
Software & services
revenues 1,196 1,397 1,367 7,218
------ ------ ------ ------
Total revenues 16,387 13,577 59,242 55,762
------ ------ ------ ------
Cost of revenues:
Cost of portal
revenues, exclusive
of depreciation &
amortization 8,020 6,558 29,448 24,866
Cost of software &
services revenues,
exclusive of
depreciation &
amortization 906 1,134 5,348 5,583
Selling &
administrative 3,145 2,788 12,652 12,018
Depreciation &
amortization 461 365 1,603 1,495
------ ------ ------ ------
Total operating
expenses 12,532 10,845 49,051 43,962
------ ------ ------ ------
Operating income 3,855 2,732 10,191 11,800
------ ------ ------ ------
Other income (expense):
Interest income 272 41 705 116
Interest expense - - - (11)
Equity in net loss of
affiliates - - - (109)
Other income (expense),
net - - (3) 14
------ ------ ------ ------
Total other income
(expense) 272 41 702 10
------ ------ ------ ------
Income before income
taxes 4,127 2,773 10,893 11,810
Income tax provision 1,724 1,045 4,530 4,705
------ ------ ------ ------
Net income $2,403 $1,728 $6,363 $7,105
====== ====== ====== ======
Basic earnings per
share $0.04 $0.03 $0.11 $0.12
====== ====== ====== ======
Diluted earnings per
share $0.04 $0.03 $0.10 $0.12
====== ====== ====== ======
Weighted average shares
outstanding:
Basic 60,793 59,270 60,079 58,988
====== ====== ====== ======
Diluted 61,660 60,652 61,094 60,877
====== ====== ====== ======
Key Financial Metrics:
Revenue growth -
outsourced portals 25% 18% 19% 21%
Same state revenue
growth - outsourced
portals 13% 22% 17% 20%
Revenue growth -
software & services (14%) (37%) (81%) (32%)
Gross profit percentage
- outsourced portals 47% 46% 49% 49%
Gross profit percentage
- software & services N/A(a) 19% N/A(a) 23%
Selling & administrative
costs as a percentage
of revenue 19% 21% 21% 22%
Operating income margin
percentage 24% 20% 17% 21%
(a) Metric not meaningful due to the $5.0 million charge for the
California Secretary of State engagement in the first quarter of 2005.
Portal Revenue Analysis
(thousands)
DMV transaction-based $9,221 $7,384 $35,630 $30,498
Non-DMV
transaction-based 5,408 4,165 20,145 14,656
Software development
& portal management 562 631 2,100 3,390
------ ------ ------ ------
Total $15,191 $12,180 $57,875 $48,544
====== ====== ====== ======
NIC Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except for share amounts
December 31, December 31,
2005 2004
---- ----
ASSETS
Current assets:
Cash and cash equivalents $36,902 $30,769
Cash and cash equivalents - restricted - 3,000
Marketable securities 20,500 -
Trade accounts receivable 22,269 17,610
Unbilled revenues 2,198 3,400
Deferred income taxes 421 433
Prepaid expenses & other current assets 1,632 1,312
------- -------
Total current assets 83,922 56,524
Property and equipment, net 3,327 2,603
Unbilled revenues 1,395 2,404
Deferred income taxes 28,916 31,274
Other assets 285 266
------- -------
Total assets $117,845 $93,071
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $24,458 $14,394
Accrued expenses 6,642 6,266
Application development contracts 1,261 -
Other current liabilities 317 151
------- -------
Total current liabilities 32,678 20,811
------- -------
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par, 200,000,000
shares authorized
61,073,595 and 59,301,375
shares issued and
outstanding - -
Additional paid-in capital 207,444 200,921
Accumulated deficit (122,093) (128,456)
------- -------
85,351 72,465
Less treasury stock (184) (205)
------- -------
Total shareholders' equity 85,167 72,260
------- -------
Total liabilities and shareholders'
equity $117,845 $93,071
======= =======
NIC Inc.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
Three months ended Twelve months ended
December 31, December 31,
2005 2004 2005 2004
---- ---- ---- ----
Cash flows from
operating activities:
Net income $2,403 $1,728 $6,363 $7,105
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation &
amortization 461 365 1,603 1,495
Application
development
contracts (77) - 1,261 (465)
Deferred income
taxes 1,641 1,073 4,151 4,331
Equity in net
loss of
affiliates - - - 109
Changes in
operating assets
and liabilities
(Increase)
decrease in
trade accounts
receivable 49 1,131 (4,659) 262
(Increase)
decrease in
unbilled
revenues (781) (995) 2,211 2,599
(Increase)
decrease
prepaid
expenses &
other current
assets (226) (31) (320) 44
(Increase)
decrease in
other assets (95) 26 (19) 22
Increase
(decrease) in
accounts payable 3,559 57 10,064 (1,951)
Increase in
accrued
expenses 678 189 376 1,021
Increase
(decrease) in
other current
liabilities 201 36 166 (7)
------- ------- ------- -------
Net cash provided
by operating
activities 7,813 3,579 21,197 14,565
------- ------- ------- -------
Cash flows from
investing activities:
Purchases of
property and
equipment (1,024) (202) (2,327) (1,189)
Purchases of
marketable
securities (4,600) - (35,500) -
Maturities of
marketable
securities - - 15,000 250
Proceeds from
sale of affiliate - - - 300
------- ------- ------- -------
Net cash used in
investing
activities (5,624) (202) (22,827) (639)
------- ------- ------- -------
Cash flows from
financing
activities:
Cash and cash
equivalents -
restricted - - 3,000 2,363
Payments on note
payable - - - (363)
Proceeds from
employee common
stock purchases - - 122 117
Proceeds from
exercise of
employee stock
options 2,414 135 4,641 1,186
------- ------- ------- -------
Net cash provided
by financing
activities 2,414 135 7,763 3,303
------- ------- ------- -------
Net increase in cash
and cash equivalents 4,603 3,512 6,133 17,229
Cash and cash
equivalents,
beginning of period 32,299 27,257 30,769 13,540
------- ------- ------- -------
Cash and cash
equivalents, end of
period $36,902 $30,769 $36,902 $30,769
======= ======= ======= =======
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