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NIC warns, restructures

2 min read

National Information Consortium (NIC) (Nasdaq: EGOV) was down 25 percent after warning its third-quarter would fall short of estimates and announcing it will re-align its eGovernment applications and services businesses.

Shares in the provider of software and services to the government were down 1.72 to 6.09.

The company warned it will likely fall short of third quarter expectations with an anticipated net loss of between 24 and 25 cents a share prior to a one-time anticipated quarterly charge of approximately a penny a share. First Call was expecting a loss of 20 cents a share.

NIC also announced significant cost saving measures at two units, and reorganized its management team. The company said its restructuring is designed to integrate the assets it's built as it shifted target markets from state governments to local, federal and international public sector enterprises, and formed acquisitions and partnerships. It will also result in accelerated profitability for investors, the company said.

NIC will take a one-time pre-tax charge in the third quarter of about $1 million for the restructuring, which will involve employee reductions at NIC Commerce and NIC Technologies, both of which were acquired in the past year. The savings from these reductions are expected to approximate $1.25 million to $1.75 million annually before taxes.

These product solutions divisions had been the main source of shortfalls in both revenues and Eearnings before interest, taxes, depreciation and amortization. Revenue is expected to be in the range of $19.0 to $19.5 million, and EBITDA is expected to be a loss of $7.5 million to $8.5 million.

The revenue shortfalls are due Y2K delays in sales cycles; the cash flow shortfalls resulted from marketing expenses for new contracts whose revenue will come in future quarters, the company said.

"Our difficulty forecasting has resulted from disappointments in our newer businesses, which to date have not been transaction-based and are therefore subject to significantly greater revenue volatility," said CEO Kevin Childress in a statement.