NIC Inc. reports 12.9% Net Income growth in 2018 and 0.93 pp EBITDA Margin decline from 25.3% to 24.4%
01/30/2019 • About NIC Inc. (
$EGOV) • By InTwits
NIC Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- NIC Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $14m in 2018, $8m in 2017, $8m in 2016, $5m in 2015, $7m in 2014
- The company has highly profitable business model: ROIC is 39.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
NIC Inc.'s Revenue increased on 2.5%. Revenue growth showed slowdown in 18Q4 - it was -5.8% YoY. Revenue decline was accelerating on average at -1.5 pp per annum in 2014-2018. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 0.93 pp from 25.3% to 24.4% in 2018.
Gross Margin showed almost no change in 2018. SG&A as a % of Revenue increased slightly on 1.3 pp from 15.1% to 16.4% in 2018. SG&A as a % of Revenue stuck to a growing trend at 0.46 pp per annum in the last 5 years.
Net Income margin increased slightly on 1.6 pp from 15.3% to 16.9% in 2018.
Investments (CAPEX, working capital and M&A)
NIC Inc.'s CAPEX/Revenue was 4.1% in 2018. The company showed CAPEX/Revenue growth of 2.2 pp from 1.9% in 2015 to 4.1% in 2018. Average CAPEX/Revenue for the last three years was 3.0%.
Return on investment
The company operates at high and attractive ROIC (39.3%) and ROE (30.7%). ROIC dropped on 12.8 pp from 52.1% to 39.3% in 2018. ROE decreased on 3.5 pp from 34.2% to 30.7% in 2018. ROIC stuck to a declining trend at -6.0 pp per annum in 2014-2018.
Leverage (Debt)
The company has no debt. Cash surged on 19.2%.
Valuation and dividends
NIC Inc.'s trades at EV/EBITDA 11.3x and P/E 19.6x.
Management team
Harry H Herington is a the company's CEO. Harry H Herington is a founder and has spent 11 years with the company. The company's CFO is Stephen M Kovzan. Stephen M Kovzan has 3 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
NIC Inc. ($EGOV) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 272.1 | 292.4 | 317.9 | 336.5 | 344.9 | 2.5% |
| Gross Profit | 111.1 | 118.8 | 131.7 | 136.0 | 140.9 | 3.5% |
| SG&A | 38.9 | 43.1 | 47.1 | 50.8 | 56.7 | 11.6% |
| EBITDA | 72.2 | 75.7 | 84.6 | 85.3 | 84.2 | -1.3% |
| Net Income | 39.1 | 42.0 | 55.8 | 51.6 | 58.3 | 12.9% |
Balance Sheet
|
|---|
| Cash | 88.0 | 98.4 | 127.0 | 160.8 | 191.7 | 19.2% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 6.9 | 5.4 | 8.2 | 8.3 | 14.0 | 67.8% |
Ratios
|
|---|
| Revenue growth | 9.2% | 7.5% | 8.7% | 5.8% | 2.5% | |
| EBITDA growth | 18.5% | 4.8% | 11.8% | 0.8% | -1.3% | |
|
|---|
| Gross Margin | 40.8% | 40.6% | 41.4% | 40.4% | 40.8% | 0.4% |
| EBITDA Margin | 26.5% | 25.9% | 26.6% | 25.3% | 24.4% | -0.9% |
| SG&A, % of revenue | 14.3% | 14.7% | 14.8% | 15.1% | 16.4% | 1.3% |
| Net Income Margin | 14.4% | 14.4% | 17.6% | 15.3% | 16.9% | 1.6% |
| CAPEX, % of revenue | 2.5% | 1.9% | 2.6% | 2.5% | 4.1% | 1.6% |
|
|---|
| ROIC | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% | -12.8% |
| ROE | 39.8% | 38.2% | 44.7% | 34.2% | 30.7% | -3.5% |
| Net Debt/EBITDA | -1.2x | -1.3x | -1.5x | -1.9x | -2.3x | -0.4x |
NIC Inc. ($EGOV) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 87 | 92 | 87 | 79 | | 4.3% | 8.4% | 3.0% | -5.8% |
| EBITDA | 23 | 25 | 22 | 15 | | -0.1% | 14.7% | -0.0% | -21.9% |
| Net Income | 16 | 17 | 16 | 10 | | 10.9% | 33.2% | 13.4% | -9.2% |
Balance Sheet
|
|---|
| Cash | 162 | 173 | 181 | 192 | | 31.4% | 27.6% | 18.9% | 19.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 41.3% | 41.7% | 42.0% | 38.0% | | 0.0% | 1.2% | 1.8% | -1.7% |
| EBITDA Margin | 26.2% | 26.5% | 25.2% | 19.1% | | -1.1% | 1.5% | -0.8% | -3.9% |
| Net Income Margin | 17.9% | 18.4% | 18.3% | 12.5% | | 1.1% | 3.4% | 1.7% | -0.5% |
Peers in Data Processing & Outsourced S
Below we provide NIC Inc. benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.6% | 11.8% | 7.5% |
|---|
| NIC Inc. ($EGOV) | | 7.5% | 8.7% | 5.8% | 2.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.2% | 38.9% | 41.0% |
|---|
| NIC Inc. ($EGOV) | 40.8% | 40.6% | 41.4% | 40.4% | 40.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.2% | 20.6% | 19.2% |
|---|
| NIC Inc. ($EGOV) | 26.5% | 25.9% | 26.6% | 25.3% | 24.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| NIC Inc. ($EGOV) | 2.5% | 1.9% | 2.6% | 2.5% | 4.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| 3PEA International, Inc. ($TPNL) | 118.8% | -0.3% | 48.2% | 44.9% | 36.0% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| NIC Inc. ($EGOV) | -1.2x | -1.3x | -1.5x | -1.9x | -2.3x |
