Olathe-based NIC Inc. shares plunged 20 percent Thursday in the wake of news the company is losing its biggest customer — Texas.
NIC, which makes and runs websites for governments including Kansas and many other states, reported in a filing with the Securities and Exchange Commission that it will lose Texas’ website business when its current contract expires this August.
“NIC has been informed by representatives of the state of Texas,” the filing said in part, that it “has not been selected to negotiate a contract to provide the portal operations, maintenance and development services” in the future. Texas did pick NIC to negotiate a deal to provide payment processing services for the state.
The difference is critical, according to a report from analyst Pete Heckmann with D.A. Davidson & Co.
“While not disclosed, we believe NIC stands to lose roughly $58 million-$62 million of the $68 million that we estimate this contract generated for the company in 2017,” Heckmann wrote in a note to clients.
Heckmann said Texas likely will generate only about $10 million of revenues for NIC per year by the end of this year.
Texas, he wrote, has been the company’s largest client and accounted for about 20 percent of revenues.
NIC shares were down $3.35 at $13.25, a decline of 20.2 percent, near the end of trading Thursday.
Heckmann also wrote that five other states have made what he called “major changes” in their NIC contracts in the last five years. He said it means no revenue and earnings growth at NIC before 2020.
“It is difficult not to conclude there is a major shift in state’s practices at hand,” Heckmann’s note said.
A company spokeswoman said officials would not discuss the Texas contract as it still is in negotiation.
NIC’s filing included a copy of the company’s fourth-quarter earnings release, but the release provided no information about the Texas contract. The SEC filing said the company disclosed the Texas news separately only because of “extensive interest” in the situation.
CEO Harry Herington, during a conference call with analysts Wednesday, cautioned that the company is barred by Texas’ contract request from discussing the situation until the contract negotiations are complete. He declined to answer analysts questions about it.
“We do not want to be disqualified from the payment processing procurement negotiations,” Herington said.
The current Texas contract runs through August, which means NIC revenues under the existing agreement will continue for now.