NIC (NASDAQ:EGOV), a leading provider of digital government services, reported its second-quarter results on Aug. 1. Increased usage of the company's services helped drive modest revenue growth during the quarter. Management took full advantage of the increased scale, which drove a 31% gain on the bottom line.

However, the big news from the period was that NIC is launching a brand new prescription-drug monitoring program to help its customers combat the ongoing opioid addiction crisis.

Man on laptop with the U.S. Capitol in the background

Image source: Getty Images.

NIC Q2 results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$92.5 million

$85.3 million

8.4%

Net income

$17 million

$12.8 million

32.8%

Earnings per share

$0.25

$0.19

31.5%

Data source: NIC.

What happened with NIC this quarter?

  • Portal revenue jumped 9% to $86.6 million. The gain was driven by higher volumes of driver's license renewals, registration filings, and motor vehicle inspections.
  • Operating margin jumped 100 basis points to 24% thanks to favorable operating leverage.
  • The bottom line continues to be boosted by a lower tax rate, which was 24% during the period. This was down substantially from 35% in the year-ago period.
  • NIC purchased a number of prescription-drug monitoring software assets during the period, from a privately held software developer called Leap Orbit. This company has been rebranding these assets as "RxGov" and launched a brand new prescription-drug monitoring program (PDMP) designed to help states combat the opioid epidemic.
  • NIC was awarded contract extensions in Wisconsin, Arkansas, Rhode Island, Hawaii, Nebraska, Idaho, and Maine, as well as with the Library of Congress.

What management had to say

CEO Harry Herington stated that he was quite happy with his company's quarterly results, but the bulk of his commentary remained focused on the potential of RxGov:

I was pleased with our strong financial results this quarter and I am excited about how we are strengthening our technology platforms and executing our healthcare vertical strategy. We look forward to delivering a completely reimagined, industry-leading prescription drug monitoring solution, as well as choice and flexibility to this market.

COO Robert Knapp also helped frame the size of the opportunity for RxGov. Knapp noted that 49 states already have some type of PDMP software in place, and about a dozen of them will be up for contract renewals in the next three years. In addition, the company has identified about 4,000 acute-care hospitals in the U.S. that could benefit from an improved monitoring system.

Looking forward

Management didn't update guidance on the call with investors, but they did state that the purchase of the assets from Leap Orbit will have no effect on the year's expected earnings per share.

The company also provided a brief update on the company's ongoing dispute with the state of Texas regarding its procurement process. NIC is protesting the state's decision to not renew its contract with the company. In May the company's initial protest was denied, but NIC has appealed the decision directly to the executive director of the Department of Information Resources. The company is still in a holding pattern at this time.

Herington ended his prepared remarks on the conference call with investors by reaffirming his belief that the company's future continues to look bright:

The business produced solid financial results in the second quarter of 2018. And as you can probably tell from my remarks today, I'm incredibly excited about our reimagined RXGov PDMP solutions, among other developments this quarter, as we continue to work hard to deploy our surplus capital in creative ways to position NIC for new channels of growth in the future.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of NIC. The Motley Fool has a disclosure policy.