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
 
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