NIC Earns 13 Cents Per Share in Fourth Quarter 2012; Operating Income Rises 29 Percent on 27 Percent Growth in Total Revenues

  NIC Earns 13 Cents Per Share in Fourth Quarter 2012; Operating Income Rises
  29 Percent on 27 Percent Growth in Total Revenues

 New services in Texas and New Jersey drive 43 percent non-DMV portal revenue
    growth; full-year financial results exceed annual revenue and earnings
                                   guidance

Business Wire

OLATHE, Kan. -- February 7, 2013

NIC Inc. (NASDAQ: EGOV), the premier provider of eGovernment services, today
announced net income of $8.6 million and earnings per share of 13 cents on
total revenues of $57.2 million for the three months ended December 31, 2012.
Operating income was $12.4 million for the current quarter, up 29 percent from
the prior year quarter. In fourth quarter 2011, the company reported net
income of $5.5 million and earnings per share of 8 cents on total revenues of
$45.1 million.

Fourth Quarter 2012 Performance

Fourth quarter 2012 portal revenues were $54.4 million, a 29 percent increase
over fourth quarter 2011. On a same state basis, portal revenues were up 24
percent in the current quarter. Same state transaction-based revenues from
non-driver record (non-DMV) services rose 43 percent over fourth quarter 2011
primarily due to strong performance from a full quarter of revenues from the
Texas motor vehicle inspection service, the first service launched as part of
the DPS Direct suite of services in September 2012, and from increased
adoption of several business and citizen-related services in New Jersey. Same
state DMV revenues increased 1 percent, while same state time & materials
revenues relating to portal software development rose 18 percent.

“eGovernment is about using all of the technology channels available in order
to conduct business with government securely and efficiently, whether through
a mobile app, online, or an over-the-counter service,” said Harry Herington,
NIC Chief Executive Officer and Chairman of the Board. “Once again this
quarter, we demonstrated that our focus on developing these services is a main
driver of our Company’s growth.”

Current quarter revenues from the Maryland portal, which began generating
revenues in May 2012, were $1.3 million, while revenues from the Oregon
portal, which began generating revenues in June 2012, were $0.8 million.
Current quarter cost of portal revenues included approximately $1.7 million in
costs from these portals. Cost of portal revenues in the prior year quarter
included approximately $0.5 million of portal related start-up costs for these
portals.

Portal gross profits increased to $21.0 million, a 27 percent increase over
the prior year quarter. NIC’s portal gross profit percentage was 39 percent in
both the current and prior year quarters.

Selling & administrative expenses were $8.3 million in the current quarter, up
13 percent from the fourth quarter of 2011, driven by costs to enhance
corporate-wide information technology and security infrastructure as a result
of the Company’s growth. As a percentage of total revenues, selling &
administrative expenses were 15 percent in the current quarter, down from 16
percent in the fourth quarter of 2011.

Depreciation & amortization expense in the current quarter increased 70
percent from the prior year quarter to $2.1 million, due mainly to capital
expenditures for the Texas motor vehicle inspection service and to enhance
corporate-wide information technology and security infrastructure. As a
percentage of total revenues, depreciation & amortization expense was 4
percent in the current quarter, up from 3 percent in the prior year quarter.

The Company’s effective tax rate in the current quarter decreased to 30
percent from 42 percent in the prior year quarter, due to several factors,
including the effective settlement of an IRS examination and the related
decrease in the liability for uncertain tax positions, along with changes in
state taxes.

Fourth Quarter Operational Highlights

As previously announced, the Commonwealth of Pennsylvania signed a five-year
contract with NIC subsidiary, Pennsylvania Interactive, LLC, during the fourth
quarter. The contract also includes an additional renewal term at the option
of the state that could extend the contract through December 2022. Also during
the fourth quarter, Oklahoma renewed its contract for one year, extending the
contract through December 2013.

On December 18, 2012 NIC was added to the S&P SmallCap 600 Index. The index
includes companies with a market capitalization of $300 million to $1.4
billion.

Full-Year 2012 Performance

Fiscal year 2012 total revenues rose 17 percent to $211.1 million, and portal
revenues grew 17 percent to $199.4 million, exceeding the high end of the
Company’s 2012 revenue guidance. Revenue growth in 2012 was driven by steady
same state revenue growth, contributions from newer portals in Maryland,
Oregon, Delaware, and Mississippi, as well as the launch of the Texas motor
vehicle inspection service in September 2012, and new non-DMV services in New
Jersey. On a same state basis, portal revenues were 10 percent higher than in
2011, with same state non-DMV transaction revenues growing 21 percent and same
state DMV revenues down 1 percent for the year. Same state time & materials
revenues relating to portal software development increased 5 percent for the
year, while same state portal management revenues increased 1 percent for the
year.

Software & services revenues were $11.8 million, up 11 percent from 2011,
driven by a $1.5 million, or 24 percent, increase in revenues from the federal
Pre-employment Screening Program. This contributed to a 17 percent increase in
software & services gross profits to $7.7 million for the year.

Selling & administrative expenses as a percentage of total revenues were 16
percent in both the current year and prior year.

Depreciation & amortization expense was $6.3 million, up 38 percent from 2011,
due mainly to capital expenditures for the Texas motor vehicle inspection
service and to enhance corporate-wide information technology and security
infrastructure. As a percentage of total revenues, depreciation & amortization
expense was 3 percent in both the current year and prior year.

Operating income increased 12 percent to $43.2 million for the year, and NIC’s
operating income margin was 20 percent in 2012 compared to 21 percent in 2011.

The Company’s effective tax rate for the year was 39 percent, down from 40 in
the prior year, due to several factors, including the effective settlement of
an IRS examination and the related decrease in the liability for uncertain tax
positions, along with changes in state taxes.

NIC earned 40 cents per share in 2012, up from 35 cents in 2011, exceeding the
high end of the Company’s 2012 earnings guidance.

On January 3, 2012 and December 5, 2012, NIC paid a special cash dividend to
stockholders of $0.25 per share. NIC used a total of $32.5 million of its cash
reserves to pay the special dividends. Of the dividends paid in 2012, 24.59
percent was return of capital and 75.41 percent was an ordinary qualified
dividend. Stockholders are encouraged to consult with their tax specialists
regarding the circumstances of their particular tax situations.

“This was a successful year of investment and operational execution for NIC,”
said Steve Kovzan, NIC’s Chief Financial Officer. “While the Texas DPS Direct
and Oregon contracts required significant start-up investment in the first
three quarters of the year, we were pleased to see these new contracts, in
addition to the Maryland, Delaware and Mississippi portal contracts awarded in
2011, contribute favorably to our bottom line exiting the year. We believe
they should continue to serve as catalysts for growth in 2013 and beyond.”

Full-Year 2013 Outlook

For full-year 2013, NIC currently expects total revenues of $232.0 - $238.5
million, with portal revenues ranging from $220.0 - $226.0 million and
software & services revenues ranging from $12.0 - $12.5 million. The Company
also currently expects operating income to range from $45.2 - $49.2 million
and net income of $27.0 - $29.6 million, with earnings per share ranging from
42 - 46 cents.

Portal gross profit margins for the year are currently expected to remain in
the upper-30 percent range, while software & services gross profit margins are
currently expected to be in the low-60 percent range.

Selling & administrative expenses are currently expected to approximate 16
percent of total revenues. Depreciation & amortization expense as a percentage
of total revenues is expected to approximate at least 4 percent in 2013, with
capital expenditures currently expected to range from $5.0 - $5.5 million for
the year.

“Our financial guidance reflects our expectation of continued solid
performance from our portal business with healthy organic revenue growth, a
meaningful top and bottom line contribution from a full year of our new
self-funded contract with the Commonwealth of Pennsylvania, and continued
investment in our corporate-wide information technology infrastructure as a
result of our growth,” said Steve Kovzan, NIC’s Chief Financial Officer. “We
also enter 2013 with a solid new state pipeline and a focus to grow our
Federal presence longer term, both of which we hope will contribute favorably
to our future growth.”

2013 projections include a full year of portal revenues and costs from the
Pennsylvania contract, but do not include revenues or costs from any
unannounced contracts.

Fourth Quarter Earnings Call and Webcast Details

On the call, the Company will discuss its 2012 fourth quarter, full-year
financial results, its guidance for 2013, and answer questions from the
investment community. The call may also include discussion of company
developments, and forward-looking and other material information about
business and financial matters.

Dial-In Information

Thursday, February 7, 2013

4:30 p.m. (EST)

Call bridge: 877-941-8609 (U.S. callers) or 480-629-9692 (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: The Webcast system is available at
http://www.egov.com/investors.

A replay of NIC’s fourth quarter earnings call will be available until 11 p.m.
(EDT) on August 7, 2013, by visiting http://www.egov.com/investors.

About NIC

NIC Inc. (NASDAQ: EGOV) is the nation's leading provider of official
government portals and online services, and secure government payment
processing solutions. The company's innovative eGovernment services help
reduce costs and increase efficiencies for government agencies, citizens, and
businesses across the country. 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
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 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 and in NIC’s Quarterly Reports on Form 10-Q
filed with the SEC in 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        Year ended
                           December 31,              December 31,
                           2012         2011         2012          2011
Revenues:
Portal revenues            $ 54,433     $ 42,288     $ 199,385     $ 170,276
Software & services         2,779      2,765      11,758      10,623  
revenues
Total revenues              57,212     45,053     211,143     180,899 
Operating expenses:
Cost of portal revenues,
exclusive of                 33,444       25,825       124,539       104,730
depreciation &
amortization
Cost of software &
services revenues,
exclusive of                 996          961          4,041         4,031
depreciation &
amortization
Selling & administrative     8,316        7,351        32,852        28,732
Amortization of
acquisition-related          -            81           214           323
intangible assets
Depreciation &              2,069      1,214      6,305       4,575   
amortization
Total operating expenses    44,825     35,432     167,951     142,391 
Operating income             12,387       9,621        43,192        38,508
Other expense, net          (15    )    (28    )    (16     )    (34     )
Income before income         12,372       9,593        43,176        38,474
taxes
Income tax provision        3,749      4,069      16,837      15,531  
Net income                 $ 8,623     $ 5,524     $ 26,339     $ 22,943  
                                                                   
Basic net income per       $ 0.13      $ 0.08      $ 0.40       $ 0.35    
share
Diluted net income per     $ 0.13      $ 0.08      $ 0.40       $ 0.35    
share
                                                                   
Weighted average shares
outstanding:
Basic                       64,627     64,176     64,500      64,018  
Diluted                     64,696     64,325     64,565      64,157  
                                                                   
Key Financial Metrics:
Revenue growth -             29     %     9      %     17      %     10      %
outsourced portals
Same state revenue
growth - outsourced          24     %     6      %     10      %     8       %
portals
Recurring portal revenue
as a % of total portal       92     %     91     %     92      %     91      %
revenues
Gross profit % -             39     %     39     %     38      %     38      %
outsourced portals
Revenue growth -             1      %     33     %     11      %     67      %
software & services
Gross profit % -             64     %     65     %     66      %     62      %
software & services
Selling & administrative
expenses as a % of total     15     %     16     %     16      %     16      %
revenues
Operating income as a %      22     %     21     %     20      %     21      %
of total revenue
                                                                   
Portal Revenue Analysis:
DMV transaction-based      $ 17,205     $ 15,079     $ 70,896      $ 64,985
Non-DMV                      30,285       21,160       102,186       81,313
transaction-based
Portal software              4,378        3,699        16,660        15,515
development
Portal management           2,565      2,350      9,643       8,463   
Total portal revenues      $ 54,433    $ 42,288    $ 199,385    $ 170,276 
                                                                             

NIC INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except par value amount
                                                          
                                                             
                                         December 31, 2012   December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents                $   62,358          $   61,639
Cash restricted for payment of               -                   16,231
dividend
Trade accounts receivable, net               55,261              49,306
Deferred income taxes, net                   887                 916
Prepaid expenses & other current            9,340             5,994     
assets
Total current assets                         127,846             134,086
                                                             
Property and equipment, net                  16,025              8,853
Intangible assets, net                       1,016               1,088
Deferred income taxes, net                   -                   83
Other assets                                253               243       
Total assets                             $   145,140        $   144,353   
                                                             
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                         $   43,664          $   45,038
Accrued expenses                             18,948              16,293
Dividend payable                             -                   16,231
Other current liabilities                   208               310       
Total current liabilities                    62,820              77,872
                                                             
Deferred income taxes, net                   2,050               -
Other long-term liabilities                 1,346             1,405     
Total liabilities                           66,216            79,277    
                                                             
Commitments and contingencies                -                   -
                                                             
Stockholders' equity:
Common stock, $0.0001 par, 200,000
shares authorized,
64,628 and 64,178 shares issued and          6                   6
outstanding
Additional paid-in capital                   84,308              96,799
Accumulated deficit                         (5,390    )        (31,729   )
Total stockholders' equity                  78,924            65,076    
Total liabilities and stockholders'      $   145,140        $   144,353   
equity
                                                             

NIC INC.
CONSOLIDATED STATEMENTS 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          -              -      -             26,339        26,339
Dividends           -              -      (16,338 )     -             (16,338 )
declared
Dividend
equivalents on
performance-based
restricted
stock awards        -              -      (97     )     -             (97     )
Restricted stock    540            -      204           -             204
vestings
Shares
surrendered and
cancelled upon
vesting of
restricted stock
to satisfy tax      (168   )       -      (2,113  )     -             (2,113  )
withholdings
Stock-based         -              -      3,803         -             3,803
compensation
Tax deductions
relating to         -              -      1,351         -             1,351
stock-based
compensation
Shares issuable
in lieu of
dividend payments
on unvested
performance-based
restricted stock    -              -      (107    )     -             (107    )
awards
Issuance of
common stock
under employee      78           -     806         -           806     
stock purchase
plan
Balance, December   64,628    $   6    $ 84,308     $ (5,390  )   $ 78,924  
31, 2012
                                                                              

NIC INC.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
                                                              
                         Three months ended          Year ended
                         December 31,                December 31,
                         2012          2011          2012          2011
                                                                   
                                                                   
Net income               $ 8,623       $ 5,524       $ 26,339      $ 22,943
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Amortization of
acquisition-related        -             81            214           323
intangible assets
Depreciation &             2,069         1,214         6,305         4,575
amortization
Stock-based                694           1,093         3,803         4,510
compensation expense
Deferred income taxes      (346    )     1,272         734           789
Loss on disposal of        15            30            16            38
property and equipment
Changes in operating
assets and
liabilities:
(Increase) in trade
accounts receivable,       (882    )     (5,450  )     (5,955  )     (7,247  )
net
(Increase) decrease in
prepaid expenses &         1,688         1,635         (1,919  )     1,308
other current assets
(Increase) decrease in     (2      )     3             (10     )     -
other assets
Increase (decrease) in     (4,099  )     10,424        (1,374  )     3,439
accounts payable
Increase (decrease) in     (765    )     (2,254  )     397           (92     )
accrued expenses
Increase (decrease) in
other current              218           (125    )     102           (264    )
liabilities
Increase (decrease) in
other long-term           (149    )    10          (262    )    280     
liabilities
Net cash provided by      7,064       13,457      28,390      30,602  
operating activities
                                                                   
Purchases of property      (1,402  )     (2,247  )     (12,776 )     (6,137  )
and equipment
Proceeds from sale of      -             8             -             8
property and equipment
Capitalized internal
use software              (164    )    (132    )    (714    )    (451    )
development costs
Net cash used in          (1,566  )    (2,371  )    (13,490 )    (6,580  )
investing activities
                                                                   
Cash dividends on          (16,338 )     -             (16,338 )     -
common stock
Cash restricted for        -             (16,231 )     -             (16,231 )
payment of dividend
Proceeds from employee     -             -             806           652
common stock purchases
Tax deductions related
to stock-based            154         17          1,351       1,509   
compensation
Net cash used in          (16,184 )    (16,214 )    (14,181 )    (14,070 )
financing activities
Net increase
(decrease) in cash and     (10,686 )     (5,128  )     719           9,952
cash equivalents
Cash and cash
equivalents, beginning    73,044      66,767      61,639      51,687  
of period
Cash and cash
equivalents, end of      $ 62,358     $ 61,639     $ 62,358     $ 61,639  
period
                                                                   
Other cash flow
information:
Non-cash investing
activities:
Capital expenditures
accrued but not yet      $ 145         $ -           $ 145         $ -
paid
Cash payments:
Income taxes paid        $ 2,254       $ 2,082       $ 14,108      $ 11,727
Cash dividends on
common stock
previously restricted    $ -           $ -           $ 16,231      $ -
for payment of
dividend
                                                                             

Contact:

NIC Inc.
Angela Skinner, 913-754-7054
Director of Communications & Investor Relations
askinner@egov.com
 
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