NIC Earns 15 Cents Per Share in First Quarter 2013; Total Revenues Increase 26 Percent, Contributing to 62 Percent Rise in

  NIC Earns 15 Cents Per Share in First Quarter 2013; Total Revenues Increase   26 Percent, Contributing to 62 Percent Rise in Operating Income  Revenue Contributions from New State Portals and 35 Percent Same-State Non-DMV              Revenue Growth Drive Strong Results for the Quarter  Business Wire  OLATHE, Kan. -- May 6, 2013  NIC Inc. (NASDAQ: EGOV), the leading provider of official state eGovernment services, today announced net income of $10.0 million and earnings per share of 15 cents on total revenues of $61.2 million for the three months ended March 31, 2013. Operating income increased 62 percent to $15.7 million for the quarter. In the first quarter of 2012, the company reported net income of $5.6 million and earnings per share of nine cents on total revenues of $48.7 million.  Quarterly portal revenues were a record $58.0 million, a 27 percent increase over first quarter 2012. On a same-state basis, portal revenues were up 16 percent in the current quarter. Same-state, transaction-based revenues from non-driver record (non-DMV) services rose 35 percent over first quarter 2012 through strong performance from several key services, including the Texas motor vehicle inspection service as part of the DPS Direct suite of services, and from increased adoption of several business and citizen-related services in New Jersey. Same-state DMV revenues increased 2 percent in the first quarter of 2013, while portal management revenues grew 9 percent. Portal time & materials revenues decreased 30 percent in the first quarter of 2013, due primarily to the expiration of certain Texas Master Work Order projects in 2012, as previously disclosed.  Current quarter revenues from the Company’s newer portals in Oregon, Maryland, and Pennsylvania were approximately $5.1 million.  Portal gross profits increased to $25.3 million, a 49 percent increase over the prior year quarter. NIC’s portal gross profit percentage was 44 percent in the current quarter, up from 37 percent in the prior year quarter. The Company expects costs to increase and the portal gross profit percentage to decrease in future quarters as it continues to expand operations in new portal states, particularly Pennsylvania.  “Online eGovernment services remain the backbone of our business and once again helped produce strong financial results,” said Harry Herington, NIC Chief Executive Officer and Chairman of the Board. “We know these services can expand beyond our state business, and we continue to educate federal agency leaders about our business in an effort to create future opportunities.”  Selling & administrative expenses in the current quarter increased 21 percent, or $1.7 million, from the first quarter of 2012. However, as a percentage of total revenues, selling & administrative expenses were 16 percent in both the current and prior year quarters. The Company incurred approximately $1.8 million in legal fees and other third-party costs in the first quarter of 2013 in connection with the previously disclosed SEC investigation and related matters. However, these costs were offset by approximately $1.4 million of reimbursement expected from the Company’s directors’ and officers’ liability insurance carrier. Selling & administrative expenses in the prior year quarter included approximately $0.8 million of costs related to the SEC matter, which were offset by approximately $0.7 million of insurance reimbursement. The current quarter increase in selling & administrative expenses was also attributable to higher costs to enhance corporate-wide information technology and security infrastructure as a result of the Company’s growth and higher executive and non-executive management incentive compensation.  Depreciation & amortization expense in the current quarter increased 55 percent, or $0.7 million, from the prior year quarter due mainly to capital expenditures for the Texas motor vehicle inspection service, part of the DPS Direct suite of services, and for enhancements to corporate-wide information technology and security infrastructure. As a percentage of total revenues, depreciation & amortization expense was 3 percent in the current and prior year quarters.  The Company’s effective tax rate in the current quarter decreased to 37 percent from 42 percent in the prior year quarter, due to several factors, including changes in state taxes and a favorable benefit related to the Federal research and development tax credit for the 2012 tax year totaling approximately $0.4 million for 2012 and $0.1 million for the first quarter of 2013, as legislation extending the tax credit through 2013 was signed into law during the current quarter.  “We’re off to a strong start in 2013, partly as a result of the significant investments we made in 2012, with new state portals and new services in existing state portals contributing meaningfully to our results for the quarter,” said Steve Kovzan, NIC Chief Financial Officer. “Furthermore, we continue to be excited about the potential growth catalysts that exist in our current pipeline of prospect states and our longer-term prospects at the federal level.”  Operational Highlights  During the first quarter, NIC’s Maryland portal launched the newly redesigned Maryland.gov website, as well as the state’s first online business registration system, The Central Business Licensing System. The new Maryland.gov site includes several enhancements, which were driven by citizen feedback provided at a series of focus groups. The site takes a mobile-first approach, utilizing responsive design so that the device being used to visit the site is automatically detected, with the site’s content and design scaling accordingly. The state’s new Central Business Licensing System allows entrepreneurs to register a new business and establish a tax account all from one online location. Each year more than 47,000 new business registrations are completed in Maryland, and the new online system cuts the processing time from 10 weeks to five to seven days.  Also during the first quarter, the state of Kansas signed a one-year renewal extension, taking its contract through December 2014 and Nebraska signed a two-year contract extension, taking its contract through January 2016. The Commonwealth of Kentucky signed a one-year renewal extension, taking its contract through August 2014, and the Federal Motor Carrier Safety Administration signed a one-year contract renewal extension, taking its contract through February 2014. During the quarter, the Company decided not to respond to a request for proposal issued by the state of Arizona for a new contract. In the first quarter, revenues from the Arizona portal contract, which expires in June 2013, accounted for approximately 1 percent of the Company’s total consolidated revenues.  First Quarter Earnings Call and Webcast Details  On the call, the Company will discuss its 2013 first quarter, 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  Monday, May 6, 2013 4:30 p.m. (EDT)  Call bridge:    877-941-0844 (U.S. callers) or 480-629-9835 (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 the Webcast will be available until 11 p.m. (EST) on Nov. 7, 2013, by visiting http://www.egov.com/investors.  About NIC  NIC Inc. (NASDAQ: EGOV) is the leading provider of enterprise-wide, official state eGovernment 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 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2013. 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                                                        March 31,                                                        2013         2012 Revenues: Portal revenues                                        $ 58,042     $ 45,712 Software & services revenues                            3,182      3,031   Total revenues                                          61,224     48,743  Operating expenses: Cost of portal revenues, exclusive of depreciation &     32,762       28,751 amortization Cost of software & services revenues, exclusive of       1,103        957 depreciation & amortization Selling & administrative                                 9,608        7,935 Amortization of acquisition-related intangible           -            81 assets Depreciation & amortization                             2,027      1,311   Total operating expenses                                45,500     39,035  Operating income                                         15,724       9,708 Other expense, net                                      (19    )    (1     ) Income before income taxes                               15,705       9,707 Income tax provision                                    5,748      4,079   Net income                                             $ 9,957     $ 5,628                                                                        Basic net income per share                             $ 0.15      $ 0.09    Diluted net income per share                           $ 0.15      $ 0.09                                                                         Weighted average shares outstanding: Basic                                                   64,710     64,297  Diluted                                                 64,710     64,297                                                                       Key Financial Metrics: Revenue growth - outsourced portals                      27     %     13     % Same state revenue growth - outsourced portals           16     %     10     % Recurring portal revenue as a % of total portal          96     %     92     % revenues Gross profit % - outsourced portals                      44     %     37     % Revenue growth - software & services                     5      %     27     % Gross profit % - software & services                     65     %     68     % Selling & administrative expenses as a % of total        16     %     16     % revenues Operating income as a % of total revenue                 26     %     20     %                                                                      Portal Revenue Analysis: DMV transaction-based                                  $ 22,762     $ 17,419 Non-DMV transaction-based                                30,170       22,312 Portal software development                              2,545        3,631 Portal management                                       2,565      2,350   Total portal revenues                                  $ 58,042    $ 45,712                                                                                                                                            NIC INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands except par value amount                                                                                                                                                                         March 31, 2013   December 31, 2012 ASSETS Current assets: Cash                                        $  63,717        $   62,358 Trade accounts receivable, net                 65,944            55,261 Deferred income taxes, net                     1,026             887 Prepaid expenses & other current assets       8,945           9,340      Total current assets                           139,632           127,846 Property and equipment, net                    15,240            16,025 Intangible assets, net                         1,265             1,016 Other assets                                  254             253        Total assets                                $  156,391      $   145,140                                                                  LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable                            $  44,502        $   43,664 Accrued expenses                               17,512            18,948 Other current liabilities                     223             208        Total current liabilities                      62,237            62,820                                                               Deferred income taxes, net                     2,416             2,050 Other long-term liabilities                   1,831           1,346      Total liabilities                             66,484          66,216                                                                   Commitments and contingencies                  -                 -                                                               Stockholders' equity: Common stock, $0.0001 par, 200,000 shares authorized, 64,458 and 64,628 shares           6                 6 issued and outstanding Additional paid-in capital                     85,334            84,308 Retained earnings (accumulated deficit)       4,567           (5,390    ) Total stockholders' equity                    89,907          78,924     Total liabilities and stockholders'         $  156,391      $   145,140    equity                                                                               NIC INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Thousands                                                                                                                                                                             Additional                     Common Stock        Paid-in      Retained                                                      Earnings                     Shares     Amount   Capital      (Accumulated   Total                                                      Deficit) Balance, January    64,628     $  6     $ 84,308     $  (5,390  )   $ 78,924 1, 2013 Net income          -             -       -             9,957         9,957 Restricted stock    221           -       83            -             83 vestings Dividend equivalents cancelled upon forfeiture of       -             -      50            -             50 performance-based restricted stock awards Shares surrendered and cancelled upon vesting of          (79    )      -       (1,337 )      -             (1,337 ) restricted stock to satisfy tax withholdings Stock-based         -             -       878           -             878 compensation Tax deductions relating to         -             -       581           -             581 stock-based compensation Shares issuable in lieu of dividend payments on unvested         -             -       (133   )      -             (133   ) performance-based restricted stock awards Issuance of common stock under employee      88          -     904         -           904     stock purchase plan Balance, March      64,858    $  6    $ 85,334    $  4,567      $ 89,907  31, 2013                                                                                                                                                  NIC INC. CASH FLOW SUMMARY (UNAUDITED) Thousands                                                                                                                            Three months ended                                                       March 31,                                                       2013          2012                                                                      Cash flows from operating activities: Net income                                            $ 9,957       $ 5,628 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of acquisition-related intangible          -             81 assets Depreciation & amortization                             2,027         1,311 Stock-based compensation expense                        878           723 Deferred income taxes                                   (538    )     (130   ) Loss on disposal of property and equipment              19            1 Changes in operating assets and liabilities: (Increase) decrease in trade accounts receivable,       (10,683 )     1,101 net (Increase) decrease in prepaid expenses & other         1,160         (1,538 ) current assets (Increase) in other assets                              (1      )     (1     ) Increase (decrease) in accounts payable                 838           (1,952 ) (Decrease) in accrued expenses                          (2,901  )     (2,107 ) Increase in other current liabilities                   15            38 Increase (decrease) in other long-term liabilities     485         (50    ) Net cash provided by operating activities              1,256       3,105                                                                                 Cash flows from investing activities: Purchases of property and equipment                     (1,002  )     (1,212 ) Capitalized internal use software development costs    (380    )    (137   ) Net cash used in investing activities                  (1,382  )    (1,349 )                                                                               Cash flows from financing activities: Proceeds from employee common stock purchases           904           806 Tax deductions related to stock-based compensation     581         697     Net cash provided by financing activities              1,485       1,503                                                                                 Net increase in cash                                    1,359         3,259 Cash, beginning of period                              62,358      61,639  Cash, end of period                                   $ 63,717     $ 64,898                                                                                Other cash flow information: Non-cash investing activities: Capital expenditures accrued but not yet paid         $ 128        $ -                                                                               Cash payments: Income taxes paid                                     $ 3,001      $ 4,032 Cash dividends on common stock previously             $ -          $ 16,231 restricted for payment of dividend                                                                       Contact:  NIC Inc. Angela Skinner, 913-754-7054 askinner@egov.com