NIC Grows Total Revenues 14 Percent in the Third Quarter; Declares Special Cash Dividend of $0.25 Per Share

  NIC Grows Total Revenues 14 Percent in the Third Quarter; Declares Special   Cash Dividend of $0.25 Per Share     New services in Texas and New Jersey drive 21 percent same-state non-DMV                                 revenue growth  Business Wire  OLATHE, Kan. -- November 08, 2012  NIC Inc. (NASDAQ: EGOV), the leading provider of eGovernment services, today announced net income of $6.0 million, and earnings per share of 9 cents, on total revenues of $53.2 million for the three months ended September 30, 2012. Operating income was $10.5 million for the current quarter as compared to $11.0 million in the prior year quarter. In the third quarter of 2011, the company reported net income of $6.8 million, and earnings per share of 11 cents, on total revenues of $46.7 million.  On November 5, 2012, NIC’s Board of Directors declared a special cash dividend of $0.25 per share, payable on December 5, 2012, to stockholders of record on November 23, 2012. The dividend payout will total approximately $16.3 million based on the current number of shares outstanding.  “NIC’s financial success has allowed us to return more than $133 million to stockholders in the form of special cash dividends since 2007, and we are pleased to be able to do so again,” said Harry Herington, NIC Chief Executive Officer and Chairman of the Board. “As with many other companies, we believe now is the time to pay a special cash dividend given the uncertainty of future dividend tax rates.”  Quarterly portal revenues grew 14 percent over the prior year quarter to a record $50.2 million, with same-state portal revenues increasing 8 percent in the current quarter. Same-state, transaction-based revenues from non-driver record (non-DMV) services rose 21 percent over third quarter 2011 driven in part by the September launch of the motor vehicle inspection service included in the DPS Direct suite of services for the Texas Department of Public Safety, and increased adoption of the New Jersey temporary automobile tag service. Same-state DMV revenues declined 3 percent for the quarter, while same-state time & materials revenues relating to portal software development decreased 12 percent from the prior year quarter.  “At NIC, we take pride in our ability to help government bring efficiencies to citizens and businesses by deploying new services,” said Herington. “Once again our portal business continued to produce solid organic revenue growth, as same-state non-DMV revenues grew a healthy 21 percent. In fact our Company’s growth was recognized for the fourth consecutive year by Forbes, as NIC recently ranked No. 31 among their list of the ‘100 Best Small Companies in America.’”  Current quarter revenues from the Maryland portal, which began generating revenues in May 2012, were $1.4 million, while revenues from the Oregon portal, which began generating revenues in June 2012, were $1.2 million. Quarterly revenues from the Delaware portal, which began generating revenues in October 2011, were $0.3 million. Current quarter cost of portal revenues included approximately $2.7 million in costs from these portals. Cost of portal revenues in the prior year quarter included approximately $0.3 million in new portal start-up costs. The portal gross profit percentage was 37 percent in the current quarter, down from 38 percent in the third quarter of 2011, due in part to non-recurring start-up and transition costs totaling approximately $0.9 million related to the Oregon portal.  “NIC achieved significant operational milestones during the current quarter, as we completed the start-up phase and transition of legacy services in Oregon and launched the first service in the Texas DPS Direct suite of services on schedule in September,” said NIC’s Chief Financial Officer Steve Kovzan. “While the Oregon and Texas DPS contracts required significant start-up investment, we currently expect these contracts will begin to contribute favorably to our bottom line, serving as catalysts for future growth.”  Software & services revenues were $3.0 million in the current quarter, up 6 percent from the prior year quarter, driven by revenues from the Company’s self-funded contract with the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration to operate the Pre-Employment Screening Program.  Selling & administrative expenses were $8.2 million in the current quarter, up from $6.3 million in the prior year quarter, and as a percentage of total revenues were 15 percent in the current quarter, up from 13 percent in the prior year quarter. In connection with the previously disclosed SEC matter and derivative action, current quarter selling & administrative expenses included approximately $0.1 million in legal fees and other third-party costs, net of reimbursement from the Company’s directors’ and officers’ liability insurance carrier. In the prior year quarter, insurance reimbursement exceeded costs related to the SEC matter and derivative action by $0.9 million. Other selling & administrative expenses in the current quarter increased by approximately $0.9 million from the prior year quarter, due in part to higher costs to enhance corporate-wide information technology infrastructure as a result of the Company’s growth.  Depreciation & amortization expense in the current quarter increased 38 percent from the prior year quarter to $1.6 million, due mainly to capital expenditures to enhance corporate-wide information technology infrastructure and to implement the motor vehicle inspection service of Texas DPS Direct. As a percentage of total revenues, depreciation & amortization expense was 3 percent in the current quarter, up from 2 percent in the prior year quarter.  The Company’s effective tax rate in the current quarter increased to 43 percent from 38 percent in the prior year quarter due mainly to higher non-deductible compensation-related expenses. In addition, the effective tax rate in the prior year quarter reflects a favorable benefit related to the Federal research and development tax credit totaling approximately $0.2 million.  Third Quarter Operational Highlights  Eight NIC partner states ranked among the Top 10 state websites in the country as part of the Center for Digital Government’s “Best of the Web” competition. Alabama was named the best state website in the country for the first time in state history, with Utah, Rhode Island, and Mississippi placing third, fourth, and fifth, respectively. Maine, Nebraska, Texas, and Virginia rounded out the Top 10. In addition, the Center for Digital Government recognized 12 NIC partners for developing outstanding individual online services, with 75 percent of all awards in the government-to business category going to NIC and its partners.  Also during the third quarter, NIC’s Utah portal extended its contract with the state ahead of schedule for an additional three years.  Third Quarter Earnings Call and Webcast Details  Dial-In Information  Thursday, November 8, 2012  4:30 p.m. (EST)  Call bridge:   877-941-6009 (U.S. callers) or 480-629-9722 (international                 callers) Call leaders:   Harry Herington, Chief Executive Officer and Chairman of the                 Board                 Steve Kovzan, Chief Financial Officer                 Robert Knapp, Chief Operating Officer  Webcast Information  To sign in and listen, visit http://www.egov.com/investors.  A replay of NIC’s 2012 third quarter earnings call will be available until 11 p.m. (EDT) on May 9, 2013, by visiting http://www.egov.com/investors.  About NIC  NIC Inc. (NASDAQ: EGOV) is the nation’s premier provider of official government portals, online solutions, and secure payment processing. The Company’s innovative eGovernment services help reduce costs and increase efficiencies for citizens, businesses, and government agencies. The NIC family of companies provides eGovernment solutions for more than 3,500 federal, state, and local agencies across the United States. Additional information is available at http://www.egov.com.  Cautionary Statement Regarding Forward-Looking Information  Any statements contained in this release that do not relate to historical or current facts constitute forward-looking statements. These statements include statements regarding the Company’s potential financial performance for the current fiscal year, statements regarding the planned implementation of new portal contracts, and statements regarding continued implementation of NIC’s business model and its development of new products and services. Forward-looking statements are subject to inherent risks and uncertainties and there can be no assurance that such statements will prove to be correct. There are a number of important factors that could cause actual results to differ materially from those suggested or indicated by such forward-looking statements. These include, among others, NIC’s ability to successfully complete negotiations of pending contracts and integrate into its operations recently awarded eGovernment contracts; NIC's ability to implement its new portal contracts in a timely and cost-effective manner; NIC’s ability to successfully increase the adoption and use of eGovernment services; the possibility of reductions in fees or revenues as a result of budget deficits, government shutdowns or changes in government policy; the success of the Company in renewing existing contracts and in signing contracts with new states and federal government agencies; continued favorable government legislation; NIC’s ability to successfully transition out of expired contracts; NIC’s ability to develop new services; existing states and agencies adopting those new services; acceptance of eGovernment services by businesses and citizens; competition; the possibility of security breaches through cyber attacks; and general economic conditions and the other important cautionary statements and risk factors described in NIC's 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2012. Any forward-looking statements made in this release speak only as of the date of this release. NIC does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances.   NIC INC. FINANCIAL SUMMARY (UNAUDITED) Thousands except per share amounts and percentages                                                                                       Three months ended            Nine months ended                         September 30,                 September 30,                          2012         2011         2012          2011     Revenues: Portal revenues         $ 50,198       $ 43,850       $ 144,952       $ 127,988 Software & services      3,008        2,839        8,979         7,858    revenues Total revenues           53,206       46,689       153,931       135,846  Operating expenses: Cost of portal revenues, exclusive       31,794         27,122         91,095          78,905 of depreciation & amortization Cost of software & services revenues, exclusive of depreciation & amortization              1,079          1,063          3,045           3,069 Selling &                 8,218          6,275          24,536          21,381 administrative Amortization of acquisition-related       53             81             214             242 intangible assets Depreciation &           1,606        1,167        4,236         3,361    amortization Total operating          42,750       35,708       123,126       106,958  expenses Operating income          10,456         10,981         30,805          28,888 Other expense, net       -            (10    )      (1      )      (6      ) Income before             10,456         10,971         30,804          28,882 income taxes Income tax               4,461        4,139        13,088        11,462   provision Net income              $ 5,995       $ 6,832       $ 17,716       $ 17,420                                                                          Basic net income        $ 0.09        $ 0.11        $ 0.27         $ 0.27     per share Diluted net income      $ 0.09        $ 0.11        $ 0.27         $ 0.27     per share                                                                        Weighted average shares outstanding: Basic                    64,586       64,120       64,458        63,964   Diluted                  64,604       64,200       64,475        64,040                                                                          Key Financial Metrics: Revenue growth -          14     %       10     %       13      %       10      % outsourced portals Same-state revenue growth - outsourced       8      %       8      %       7       %       9       % portals Recurring portal revenue as a % of         92     %       91     %       92      %       91      % total portal revenues Gross profit % -          37     %       38     %       37      %       38      % outsourced portals Revenue growth -          6      %       45     %       14      %       83      % software & services Gross profit % -          64     %       63     %       66      %       61      % software & services Selling & administrative            15     %       13     %       16      %       16      % expenses as a % of total revenues Operating income as a % of total              20     %       24     %       20      %       21      % revenues                                                                        Portal Revenue Analysis: DMV                     $ 18,575       $ 16,813       $ 53,691        $ 49,906 transaction-based Non-DMV                   25,290         20,834         71,900          60,153 transaction-based Portal software           3,955          4,165          12,283          11,816 development Portal management        2,378        2,038        7,078         6,113    Total portal            $ 50,198      $ 43,850      $ 144,952      $ 127,988  revenues                                                                                                                                             NIC INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands except par value amount                                                                                                     September 30, 2012     December 31, 2011 ASSETS Current assets: Cash and cash equivalents             $    73,044            $   61,639 Cash restricted for payment of             -                     16,231 dividend Trade accounts receivable, net             54,379                49,306 Deferred income taxes, net                 867                   916 Prepaid expenses & other current          11,060              5,994      assets Total current assets                       139,350               134,086 Property and equipment, net                17,058                8,853 Intangible assets, net                     1,013                 1,088 Deferred income taxes, net                 -                     83 Other assets                              251                 243        Total assets                          $    157,672          $   144,353                                                                  LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable                      $    47,763            $   45,038 Accrued expenses                           20,205                16,293 Dividend payable                           -                     16,231 Other current liabilities                 194                 310        Total current liabilities                  68,162                77,872                                                               Deferred income taxes, net                 2,407                 - Other long-term liabilities               1,292               1,405      Total liabilities                         71,861              79,277                                                                   Commitments and contingencies              -                     -                                                               Stockholders' equity: Common stock, $0.0001 par, 200,000 shares authorized, 64,625 and 64,178 shares issued and        6                     6 outstanding Additional paid-in capital                 99,818                96,799 Accumulated deficit                       (14,013   )          (31,729   ) Total stockholders' equity                85,811              65,076     Total liabilities and stockholders'   $    157,672          $   144,353    equity                                                                                                                                   NIC INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Thousands                                                                                                                             Additional                       Common Stock            Paid-in        Accumulated                       Shares       Amount     Capital        Deficit         Total Balance, January      64,178       $   6      $ 96,799       $ (31,729 )     $ 65,076 1, 2012 Net income            -                -        -              17,716          17,716 Restricted stock      536              -        204            -               204 vestings Shares surrendered and cancelled upon vesting of restricted stock to satisfy tax        (167   )         -        (2,093 )       -               (2,093 ) withholdings Stock-based           -                -        3,109          -               3,109 compensation Tax deductions relating to           -                -        1,197          -               1,197 stock-based compensation Shares issuable in lieu of dividend payments on unvested performance-based restricted stock      -                -        (204   )       -               (204   ) awards Issuance of common stock under employee stock purchase plan         78             -       806          -             806     Balance, September 30,         64,625      $   6      $ 99,818      $ (14,013 )     $ 85,811  2012                                                                                                                                                NIC INC. CASH FLOW SUMMARY (UNAUDITED) Thousands                            Three months ended            Nine months ended                           September 30,                 September 30,                            2012         2011         2012          2011                                                                             Cash flows from operating activities:   Net income              $ 5,995        $ 6,832        $ 17,716        $ 17,420   Adjustments to   reconcile net   income to net cash   provided by   operating   activities:   Amortization of   acquisition-related       53             81             214             242   intangible assets   Depreciation &            1,606          1,167          4,236           3,361   amortization   Stock-based   compensation              1,252          1,052          3,109           3,417   expense   Deferred income           1,544          (57    )       1,080           (483   )   taxes   Loss on disposal of   property and              -              10             1               8   equipment   Changes in   operating assets   and liabilities:   (Increase) decrease   in trade accounts         750            2,047          (5,073  )       (1,797 )   receivable, net   (Increase) decrease   in prepaid expenses       (1,021 )       1,841          (3,607  )       (328   )   & other current   assets   (Increase) in other       (6     )       (13    )       (8      )       (3     )   assets   Increase (decrease)       (428   )       (4,829 )       2,725           (6,985 )   in accounts payable   Increase in accrued       1,664          2,439          1,162           2,162   expenses   Increase (decrease)   in other current          (16    )       42             (116    )       (139   )   liabilities   Increase (decrease)   in other long-term       (40    )      119          (113    )      270       liabilities   Net cash provided   by operating             11,353       10,731       21,326        17,145    activities Cash flows from investing activities:   Purchases of   property and              (8,710 )       (1,317 )       (11,374 )       (3,890 )   equipment   Capitalized   internal use             (201   )      (127   )      (550    )      (319   )   software   development costs   Net cash used in   investing                (8,911 )      (1,444 )      (11,924 )      (4,209 )   activities Cash flows from financing activities:   Proceeds from   employee common           -              -              806             652   stock purchases   Tax deductions   related to               427          480          1,197         1,492     stock-based   compensation   Net cash provided   by financing             427          480          2,003         2,144     activities Net increase in cash        2,869          9,767          11,405          15,080 and cash equivalents Cash and cash equivalents,               70,175       57,000       61,639        51,687  beginning of period Cash and cash equivalents, end of       $ 73,044      $ 66,767      $ 73,044       $ 66,767  period                                                                          Other cash flow information Non-cash investing activities:   Capital   expenditures            $ 657          $ -            $ 657           $ -   accrued but not yet   paid Cash payments:   Income taxes paid       $ 3,205        $ 2,500        $ 11,854        $ 9,645   Cash dividends on   common stock   previously                -              -              16,231          -   restricted for   payment of dividend  Contact:  NIC Inc. Angela Skinner, 913-754-7054 askinner@egov.com