NIC Earns 16 Cents Per Share in Second Quarter 2013; Total Revenues Increase 27 Percent, Contributin

NIC Earns 16 Cents Per Share in Second Quarter 2013; Total Revenues Increase 27 Percent, Contributing to 67 Percent Rise in Operating Income

Strong performance by several non-DMV services, plus revenue contributions from newer portals drive record quarterly results

OLATHE, Kan.--(BUSINESS WIRE)-- NIC Inc. (NAS: EGOV) , the leading provider of eGovernment services, today announced net income of $10.8 million and earnings per share of 16 cents on total revenues of $65.9 million for the three months ended June 30, 2013. Operating income increased 67 percent to $17.7 million for the quarter. In the second quarter of 2012, the company reported net income of $6.1 million and earnings per share of 9 cents on total revenues of $52.0 million.


Quarterly portal revenues were a record $62.1 million, a 27 percent increase over second quarter 2012. On a same-state basis, portal revenues were up 19 percent in the current quarter. Same-state, transaction-based revenues from non-driver record (non-DMV) services rose 40 percent over second quarter 2012 through strong performance from several key services, including a new court fee payment service launched in Colorado, the Texas motor vehicle inspection service as part of the DPS Direct suite of services, and from several eGovernment services in New Jersey. Same-state DMV revenues increased 5 percent in the second quarter of 2013.

Current quarter revenues from the Company's newer portals in Maryland, Oregon, and Pennsylvania totaled $5.2 million compared to $1.3 million in revenues from the Maryland and Oregon portals in the prior year quarter.

As previously disclosed by the Company, the Pennsylvania Treasury issued a press release stating that it had rejected four invoices, totaling approximately $3.5 million, for eGovernment services provided to the Commonwealth through April 30, 2013 by the Company's subsidiary, Pennsylvania Interactive, LLC (PI), because the administration had not obtained approvals from the Attorney General for what the Treasurer characterized as "amendments" to the Commonwealth's Master Contract with PI, insufficient justification of the specific payment amounts requested, and an inadequate basis for granting a no-bid contract if cash payments from the Commonwealth were to be included. Accounts receivable totaled $5.1 million for revenues earned since the commencement of the contract with the Commonwealth on January 1, 2013 through June 30, 2013.

"NIC continues to operate in good faith under the contract and is in the early stages of discussing this matter with Commonwealth administration officials," said Harry Herington, NIC Chief Executive Officer and Chairman of the Board.

Portal gross profits increased to $27.2 million, a 47 percent increase over the prior year quarter. NIC's portal gross profit percentage was 44 percent in the current quarter, up from 38 percent in the prior year quarter, driven mainly by strong same-state revenue growth and meaningful revenue contributions from newer portals in the current quarter, and by start-up dilution from the Oregon portal in the prior year quarter. Cost of portal revenues in the current quarter included approximately $0.2 million of costs related to the Company's new Wisconsin portal.

"The core of our business is delivering services that make interacting with government secure and efficient," added Herington. "Launching new services in both current and newer states and driving adoption of existing services resulted in strong growth this quarter."

Selling & administrative expenses in the current quarter increased 20 percent, or $1.7 million, from the second quarter of 2012. However, as a percentage of total revenues, selling & administrative expenses were 15 percent in the current quarter, down from 16 percent in the prior year quarter. The current quarter increase in selling & administrative expenses was primarily 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 and benefit costs.

In addition, the Company incurred approximately $1.9 million in legal fees and other third-party costs in the second quarter of 2013 in connection with the previously disclosed SEC investigation and related matters. These expenses were reduced by approximately $1.5 million of reimbursement by the Company's directors' and officers' liability insurance carrier. Selling & administrative expenses in the prior year quarter included approximately $1.5 million of expense related to the SEC matter, which were reduced by approximately $1.4 million of insurance reimbursement by the Company's insurance carrier.

"Our second quarter results exemplified the key growth drivers of NIC's business, from the newest portals to long-established services," said Steve Kovzan, NIC's Chief Financial Officer. "Our strong year-to-date results have exceeded our expectations, putting us currently on pace to comfortably meet or exceed the high end of our previously issued total revenue and earnings estimates for the year."

Operational Highlights

As previously announced, during the second quarter of 2013, Wisconsin became the Company's newest state partner. The Company's wholly owned subsidiary, Wisconsin Interactive Network, LLC, will provide self-funded eGovernment services for the state and manage its official web portal, http://www.wisconsin.gov. The five-year agreement extends through 2018, and includes five, one-year renewals that the state can exercise to extend the contract to 2023.

Also during the second quarter, the states of New Jersey and New Mexico signed one-year renewal extensions, taking their contracts through June 2014. Idaho signed a two-year renewal extension, taking its contract through June 2015. Vermont signed a new three-year contract resulting from Vermont Interactive's win of the state's re-bid RFP. The new contract includes a three-year renewal extension that can be exercised at the option of the state.

Second Quarter Earnings Call and Webcast Details

On the call, the Company will discuss its 2013 second 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

Thursday, August 1, 2013

4:30 p.m. (EDT)

Call bridge:

800-762-8779 (U.S. callers) or 480-629-9818 (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. (EDT) on February 3, 2014, by visiting http://www.egov.com/investors.

About NIC

NIC Inc. (NAS: 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; NIC's ability to collect outstanding accounts receivable from the Commonwealth of Pennsylvania; 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; 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

Six months ended

June 30,

June 30,

2013

2012

2013

2012

Revenues:

Portal revenues

$

62,094

$

49,042

$

120,136

$

94,754

Software & services revenues

3,844

2,940

7,026

5,971

Total revenues

65,938

51,982

127,162

100,725

Operating expenses:

Cost of portal revenues, exclusive of depreciation & amortization

34,899

30,550

67,661

59,301

Cost of software & services revenues, exclusive of depreciation & amortization

1,189

1,008

2,292

1,966

Selling & administrative

10,058

8,383

19,667

16,318

Amortization of acquisition-related intangible assets

-

81

-

161

Depreciation & amortization

2,049

1,319

4,076

2,630

Total operating expenses

48,195

41,341

93,696

80,376

Operating income

17,743

10,641

33,466

20,349

Other expense, net

(2

)

-

(21

)

(1

)

Income before income taxes

17,741

10,641

33,445

20,348

Income tax provision

6,933

4,548

12,681

8,627

Net income

$

10,808

$

6,093

$

20,764

$

11,721

Basic net income per share

$

0.16

$

0.09

$

0.32

$

0.18

Diluted net income per share

$

0.16

$

0.09

$

0.32

$

0.18

Weighted average shares outstanding:

Basic

64,890

64,489

64,800

64,393

Diluted

64,890

64,489

64,800

64,393

Key Financial Metrics:

Revenue growth - outsourced portals

27

%

12

%

27

%

13

%

Same state revenue growth - outsourced portals

19

%

6

%

18

%

8

%

Recurring portal revenue as a % of total portal revenues

94

%

90

%

95

%

91

%

Gross profit % - outsourced portals

44

%

38

%

44

%

37

%

Revenue growth - software & services

31

%

11

%

18

%

19

%

Gross profit % - software & services

69

%

66

%

67

%

67

%

Selling & administrative expenses as a % of total revenues

15

%

16

%

15

%

16

%

Operating income as a % of total revenue

27

%

20

%

26

%

20

%

Portal Revenue Analysis:

DMV transaction-based

$

22,030

$

17,697

$

44,792

$

35,116

Non-DMV transaction-based

34,005

24,298

64,175

46,610

Portal software development

3,494

4,697

6,039

8,328

Portal management

2,565

2,350

5,130

4,700

Total portal revenues

$

62,094

$

49,042

$

120,136

$

94,754

NIC INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Thousands except par value amount

June 30, 2013

December 31, 2012

ASSETS

Current assets:

Cash

$

80,688

$

62,358

Trade accounts receivable, net

69,610

55,261

Deferred income taxes, net

956

887

Prepaid expenses & other current assets

7,185

9,340

Total current assets

158,439

127,846

Property and equipment, net

14,548

16,025

Intangible assets, net

1,470

1,016

Other assets

255

253

Total assets

$

174,712

$

145,140

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

48,220

$

43,664

Accrued expenses

18,771

18,948

Other current liabilities

1,388

208

Total current liabilities

68,379

62,820

Deferred income taxes, net

2,277

2,050

Other long-term liabilities

2,060

1,346

Total liabilities

72,716

66,216

Commitments and contingencies

-

-

Stockholders' equity:

Common stock, $0.0001 par, 200,000 shares authorized, 64,908 and 64,628 shares issued and outstanding

6

6

Additional paid-in capital

86,616

84,308

Retained earnings (accumulated deficit)

15,374