NIC Inc. reports 36.0% Net Income growth in 2020 and 30.0% Revenue growth
02/10/2021 • About NIC Inc. (
$EGOV) • By InTwits
NIC Inc. reported 2020 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 3.1%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $3m in 2020, $2m in 2019, $16m in 2018, $3m in 2017, $2m in 2016
- The company has highly profitable business model: ROIC is 30.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 30.0%. Revenue growth showed acceleration in 20Q4 - it increased 62.1% YoY. During the last 5 years Revenue growth bottomed in 2018 at 2.5% and was accelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.84 pp from 4.3% to 5.1% in 2020. EBITDA Margin followed a declining trend at -1.2 pp per annum in the last 5 years.
Gross Margin decreased on 2.7 pp from 38.7% to 36.0% in 2020. Gross Margin stuck to a declining trend at -1.3 pp per annum in 2016-2020. SG&A as a % of Revenue decreased on 2.4 pp from 9.9% to 7.5% in 2020. During 2016-2020 SG&A as a % of Revenue topped in 2018 at 16.4% and was declining since that time.
Net Income margin increased slightly on 0.66 pp from 14.2% to 14.9% in 2020.
Investments (CAPEX, working capital and M&A)
In 2020 NIC Inc. had CAPEX/Revenue of 2.6%. NIC Inc. showed almost no change in CAPEX/Revenue from 2017 to 2020. Average CAPEX/Revenue for the last three years was 3.4%.
Return on investment
The company operates at high and attractive ROIC (30.8%) and ROE (25.4%). ROIC increased on 4.3 pp from 26.5% to 30.8% in 2020. ROE increased on 3.4 pp from 22.0% to 25.4% in 2020. ROIC followed a declining trend at -9.0 pp per annum in the last 5 years. ROE declined at -5.1 pp per annum in 2016-2020.
Leverage (Debt)
Debt level is -2.2x Net Debt / EBITDA and 0.1x Debt / EBITDA. Debt increased slightly on 0.91% while cash jumped on 10.3%.
NIC Inc. has no short term refinancing risk: cash is higher than short term debt (5,799.7%).
Valuation and dividends
The company's trades at EV/EBITDA 20.6x and P/E 33.8x.
Management team
Harry H Herington is a the company's CEO. Harry H Herington has spent 13 years with the company. Stephen M Kovzan is a the company's CFO. Stephen M Kovzan has spent 4 years at the company.
Financial and operational results
FY ended 12/31/2020
NIC Inc. ($EGOV) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 317.9 | 336.5 | 344.9 | 354.2 | 460.5 | 30.0% |
| Gross Profit | 131.7 | 136.0 | 140.9 | 137.1 | 165.7 | 20.9% |
| SG&A | 47.1 | 50.8 | 56.7 | 35.2 | 34.6 | -1.8% |
| EBITDA | 84.6 | 85.3 | 84.2 | 80.8 | 101.7 | 25.8% |
| Net Income | 55.8 | 51.6 | 58.3 | 50.4 | 68.6 | 36.0% |
Balance Sheet
|
|---|
| Cash | 127.0 | 160.8 | 191.7 | 214.4 | 236.5 | 10.3% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 3.8 | 4.1 | 8.0% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 7.4 | 7.2 | -2.7% |
Cash flow
|
|---|
| Capex | 8.2 | 8.3 | 14.0 | 12.9 | 11.8 | -8.4% |
Ratios
|
|---|
| Revenue growth | 8.7% | 5.8% | 2.5% | 2.7% | 30.0% | |
| EBITDA growth | 11.8% | 0.8% | -1.3% | -4.0% | 25.8% | |
|
|---|
| Gross Margin | 41.4% | 40.4% | 40.8% | 38.7% | 36.0% | -2.7% |
| EBITDA Margin | 26.6% | 25.3% | 24.4% | 22.8% | 22.1% | -0.7% |
| SG&A, % of revenue | 14.8% | 15.1% | 16.4% | 9.9% | 7.5% | -2.4% |
| Net Income Margin | 17.6% | 15.3% | 16.9% | 14.2% | 14.9% | 0.7% |
| CAPEX, % of revenue | 2.6% | 2.5% | 4.1% | 3.6% | 2.6% | -1.1% |
|
|---|
| ROIC | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% | 4.3% |
| ROE | 44.7% | 34.2% | 30.7% | 22.0% | 25.4% | 3.4% |
| Net Debt/EBITDA | -1.5x | -1.9x | -2.3x | -2.5x | -2.2x | 0.3x |
NIC Inc. ($EGOV) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 91 | 94 | 135 | 141 | | 7.0% | 2.2% | 48.9% | 62.1% |
| EBITDA | 19 | 22 | 33 | 28 | | -0.3% | -1.9% | 45.3% | 65.1% |
| Net Income | 12 | 14 | 25 | 18 | | 3.1% | -4.6% | 72.9% | 79.2% |
Balance Sheet
|
|---|
| Cash | 218 | 220 | 235 | 237 | | 20.5% | 18.1% | 12.5% | 10.3% |
| Short Term Debt | 4 | 4 | 4 | 4 | | -12.7% | -4.2% | 2.9% | 8.0% |
| Long Term Debt | 7 | 7 | 8 | 7 | | -25.5% | -9.8% | -5.5% | -2.7% |
Ratios
|
|---|
| Gross Margin | 37.4% | 39.9% | 36.8% | 31.7% | | -2.2% | 0.7% | -3.5% | -3.8% |
| EBITDA Margin | 20.6% | 23.3% | 24.8% | 19.6% | | -1.5% | -1.0% | -0.6% | 0.4% |
| Net Income Margin | 13.0% | 14.7% | 18.6% | 12.6% | | -0.5% | -1.1% | 2.6% | 1.2% |
Peers in Data Processing & Outsourced Services
Below we provide NIC Inc. benchmarking against other companies in Data Processing & Outsourced Services 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Square, Inc. ($SQ) | - | 29.6% | 49.0% | 42.9% | 101.5% |
| Global Payments Inc. ($GPN) | - | 37.2% | -15.3% | 45.9% | 51.1% |
| Fiserv, Inc. ($FISV) | - | 3.5% | 2.2% | 74.9% | 45.8% |
| StoneCo Ltd ($STNE) | - | 74.3% | 106.0% | 63.1% | 28.9% |
| Fidelity National Information Services, Inc. ($FIS) | - | -1.8% | -2.8% | 22.7% | 21.5% |
| |
|---|
| Median (39 companies) | 6.7% | 11.8% | 7.5% | 11.5% | -3.3% |
|---|
| NIC Inc. ($EGOV) | - | 5.8% | 2.5% | 2.7% | 30.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Verra Mobility Corp ($VRRM) | - | 97.4% | 97.5% | 95.7% | 91.5% |
| EVO Payments, Inc. ($EVOP) | - | - | - | 80.2% | 80.8% |
| StoneCo Ltd ($STNE) | 69.7% | 70.8% | 79.5% | 83.4% | 76.8% |
| WEX Inc. ($WEX) | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% |
| Sabre Corporation ($SABR) | 32.2% | 30.1% | 27.8% | 56.6% | 56.6% |
| |
|---|
| Median (31 companies) | 39.2% | 38.9% | 41.0% | 41.7% | 36.7% |
|---|
| NIC Inc. ($EGOV) | 41.4% | 40.4% | 40.8% | 38.7% | 36.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Visa Inc. ($V) | 55.6% | 69.2% | 65.8% | 68.1% | 68.5% |
| Mastercard Incorporated ($MA) | 56.9% | 56.5% | 51.8% | 60.9% | 56.6% |
| FleetCor Technologies, Inc. ($FLT) | 52.0% | 50.8% | 55.9% | 57.6% | 52.2% |
| StoneCo Ltd ($STNE) | 31.4% | 26.0% | 53.0% | 62.4% | 52.1% |
| Black Knight, Inc. ($BKI) | 43.0% | 44.6% | 43.3% | 46.0% | 44.9% |
| |
|---|
| Median (38 companies) | 21.2% | 20.6% | 19.2% | 21.7% | 18.2% |
|---|
| NIC Inc. ($EGOV) | 26.6% | 25.3% | 24.4% | 22.8% | 22.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| PagSeguro Digital Ltd. ($PAGS) | 6.4% | 4.3% | 1.4% | 5.8% | 22.3% |
| StoneCo Ltd ($STNE) | 7.2% | 18.4% | 8.9% | 12.9% | 11.2% |
| Cardtronics plc ($CATM) | 9.9% | 9.6% | 8.0% | 9.3% | 8.3% |
| Verra Mobility Corp ($VRRM) | - | 11.5% | 7.2% | 6.6% | 6.2% |
| Fiserv, Inc. ($FISV) | 5.3% | 5.0% | 6.2% | 7.1% | 6.1% |
| |
|---|
| Median (38 companies) | 3.2% | 2.9% | 3.0% | 3.0% | 3.1% |
|---|
| NIC Inc. ($EGOV) | 2.6% | 2.5% | 4.1% | 3.6% | 2.6% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 60.6% | 64.7% | 72.7% | 47.6% |
| International Money Express, Inc. ($IMXI) | -1.3% | -1.4% | 12.1% | 36.0% | 31.4% |
| Visa Inc. ($V) | 18.1% | 21.9% | 23.0% | 27.2% | 23.2% |
| Western Union Company (The) ($WU) | 10.7% | 11.9% | 27.8% | 21.5% | 22.1% |
| TTEC Holdings, Inc. ($TTEC) | 10.1% | 16.1% | 13.5% | 16.8% | 21.1% |
| |
|---|
| Median (39 companies) | 11.1% | 10.6% | 10.2% | 8.2% | 5.5% |
|---|
| NIC Inc. ($EGOV) | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| WEX Inc. ($WEX) | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x |
| Exela Technologies Inc ($XELAU) | 8.1x | - | 9.7x | - | 10.7x |
| Alliance Data Systems Corporation ($ADS) | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x |
| Verra Mobility Corp ($VRRM) | - | 10.7x | 6.9x | 3.5x | 4.7x |
| GreenSky, Inc. ($GSKY) | -1.5x | -1.5x | 0.5x | 1.5x | 4.6x |
| |
|---|
| Median (35 companies) | 1.6x | 2.3x | 2.2x | 2.3x | 2.1x |
|---|
| NIC Inc. ($EGOV) | -1.5x | -1.9x | -2.3x | -2.5x | -2.2x |
