EX-99 2 a2141105zex-99.htm EXHIBIT 99

Exhibit 99

		2Q 2004 EARNINGS *For Immediate Release*
		Contact: Chris Neff 435-645-8898 cneff@nicusa.com

NIC Earns Three Cents Per Share as Second Quarter
Operating Income Increases 59 Percent to $3.2 Million

OLATHE, Kan.—July 29, 2004—NIC Inc. (Nasdaq: EGOV) today reported net income of $1.8 million and earnings per share of three cents on total revenues of $14.3 million for the three months ended June 30, 2004. In the prior year quarter, the Company posted net income of $1.4 million and earnings per share of two cents on total revenues of $12.9 million. The continued strength of the Company's core outsourced portal business helped to deliver a 59 percent increase in operating income over the prior year quarter. NIC's operating income rose to $3.2 million in the second quarter, up from $2.0 million a year ago and $2.9 million in first quarter 2004.

Operating Highlights
Three months ended June 30
(thousands)

	2004			2003			Change
Portal Revenues	$	12,255		$	10,149		21	%
Portal Cost of Revenues		6,189			5,285		17	%

Portal Gross Profit	$	6,066		$	4,864		25	%
Operating Income	$	3,174		$	1,992		59	%
Operating Income Margin %		22	%		15	%
Net Income	$	1,826		$	1,357		35	%

Portal revenues were $12.3 million, a 21 percent increase over the prior year quarter. On a same state basis, portal revenues grew 18 percent in the second quarter, compared to a five percent increase during the same period a year ago. Strong usage of NIC's outdoor licensing, court record search, and limited criminal history request applications in the second quarter helped same state revenues from non-driver record exchange (non-DMV) services increase 37 percent. During the same period, same state DMV revenues rose 13 percent.

"NIC's portal business had yet another great quarter," said Jeff Fraser, Chief Executive Officer of NIC. "Our DMV and non-DMV revenue growth in the second quarter further proves the effectiveness of NIC's self-funded eGovernment portal solution."

The portal business launched 70 new non-DMV revenue-generating services in the second quarter and has another130 additional services in the development pipeline. "NIC continues to diversify its portfolio of non-DMV fee-based applications, which we expect to generate revenue growth in future quarters," said Harry Herington, Chief Operating Officer of NIC.

In line with expectations, second quarter revenues for the software and services business were $2.1 million, down 24 percent from the prior year quarter. During the quarter, the California Secretary of State engagement reached a key performance benchmark. "We are pleased with our progress on the Uniform Commercial Code system and are eager to complete the remainder of the project and transition to maintenance mode," continued Herington.

Selling and administrative expenses for the second quarter were $2.9 million, or 21 percent of revenue, down from 23 percent in the prior year quarter and 22 percent of revenue during first quarter 2004.

"NIC's operating margins grew to a record 22 percent for the quarter, up from 15 percent a year ago and 20 percent last quarter," said Eric Bur, Chief Financial Officer of NIC. "Our cost controls and lean overhead structure continue to generate operational leverage."

Driven by a milestone payment from the California Secretary of State project, NIC ended the second quarter with $26.7 million in cash and equivalents, up $6.0 million from March 31, 2004. During the same period, net working capital grew by $3.7 million to $30.9 million.

Second Quarter Operating Highlights
During the second quarter, Maine (www.Maine.gov) and Hawaii (www.eHawaii.gov) signed two-year extensions for portal management services. In addition, Arkansas (www.Arkansas.gov) and Tennessee (www.Tennessee.gov) completed one-year contract extensions. Five of NIC's partners were also recognized for national eGovernment excellence. Earlier this month, NIC's partners in Virginia (www.Virginia.gov), Indiana (www.IN.gov), Tennessee (www.Tennessee.gov), Utah (www.Utah.gov), and Arkansas (www.Arkansas.gov) were ranked among the top ten states by the Center for Digital Government's 2004 Digital States Survey.

"We thank our partners in Maine, Hawaii, Arkansas, and Tennessee for continuing to put their trust in NIC, and we also congratulate each of our Digital States Survey-winning state partners," concluded Fraser.

Third Quarter and Full-Year 2004Outlook
For third quarter 2004, NIC expects total revenues of $12.9—$13.3 million, portal revenues of $11.5—$11.7 million, and software and services revenues of $1.4—$1.6 million. The Company also anticipates operating income between $2.6—$2.8 million and net income of $1.5—$1.7 million, or $0.03 per share.

For full-year 2004, NIC's previous guidance remains unchanged: Total revenues of $54.4—$55.3 million, portal revenues of $46.6—$47.3 million, and software and services revenues of $7.8—$8.0 million. In addition, the Company expects operating income between $11.0—$11.3 million (a 50 percent increase over 2003) and net income of $6.5—$6.8 million, or $0.11 per share. Full-year 2004 guidance includes normal fourth quarter seasonality, which has historically resulted in a 5-10 percent decrease in portal DMV revenues.

NIC's third quarter and full-year 2004 estimates do not include new contracts.

Second Quarter Earnings Call and Webcast Details *Dial-In Information* Thursday, July 29, 2004 9:00 a.m. (EDT)
Call bridge:		1-800-257-7063
Call leaders:		Jeff Fraser, Chief Executive Officer Harry Herington, Chief Operating Officer Eric Bur, Chief Financial Officer

A replay of the call will be available until 11:00 p.m. (EDT) on August 5 by dialing 1-800-405-2236 and using passcode 11003066.

Webcast Information
Thursday, July 29, 2004
9:00 a.m. (EDT)
To sign in and listen: The Webcast system is available at www.nicusa.com/investor.

Some users may need to refresh their browsers to view the Webcast information. A replay of the Webcast will be available until 5:00 p.m. (EDT) on October 29 by visiting www.nicusa.com/investor.

About NIC
NIC manages more eGovernment services than any provider in the world. The company is helping governments communicate more effectively with citizens and businesses by putting essential services online. NIC provides eGovernment solutions for 1,500 state and local agencies that serve more than 51 million people in the United States. Additional company information is available at www.nicusa.com.

The statements in this release regarding continued implementation of NIC's business model and its development of new products and services are forward-looking statements. 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, the success of the Company in signing contracts with new states and government agencies, including 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; and general economic conditions and the other important cautionary statements and risk factors described in NIC's 2003 Annual Report on Form 10-K filed on March 12, 2004, with the Securities and Exchange Commission.

(financial tables follow)

NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
Thousands except for per share amounts

			Three months ended June 30,						Six months ended June 30,
			2004			2003			2004			2003
Revenues:
	Portal revenues		$	12,255		$	10,149		$	24,486		$	19,939
	Software & services revenues			2,082			2,757			4,271			5,487

		Total revenues		14,337			12,906			28,757			25,426

Cost of revenues:
	Cost of portal revenues, exclusive of depreciation & amortization			6,189			5,285			12,042			10,365
	Cost of software & services revenues, exclusive of depreciation & amortization			1,649			2,242			3,729			4,386
	Selling & administrative			2,945			2,937			6,177			6,057
	Depreciation & amortization			380			450			769			942

		Total operating expenses		11,163			10,914			22,717			21,750

Operating income				3,174			1,992			6,040			3,676

Other income (expense):
	Interest income			23			30			44			59
	Interest expense			(4	)		(4	)		(9	)		(9	)
	Equity in net loss of affiliates			(40	)		262			(109	)		202

	Total other income (expense)			(21	)		288			(74	)		252

Income before income taxes				3,153			2,280			5,966			3,928
Income tax provision				1,327			923			2,538			1,582

Net income			$	1,826		$	1,357		$	3,428		$	2,346

Basic and diluted earnings per share:			$	0.03		$	0.02		$	0.06		$	0.04

Weighted average shares outstanding:
	Basic			58,870			58,234			58,807			58,184

	Diluted			60,884			58,654			60,950			58,411

Key Financial Metrics:
Revenue growth—outsourced portals				21	%		13	%		23	%		14	%
Same state revenue growth—outsourced portals				18	%		5	%		20	%		5	%
Revenue growth—software & services				(24	%)		(30	%)		(22	%)		(27	%)
Gross profit percentage—outsourced portals				49	%		48	%		51	%		48	%
Gross profit percentage—software & services				21	%		19	%		13	%		20	%
Selling & administrative costs as a percentage of revenue				21	%		23	%		21	%		24	%
Operating income margin percentage				22	%		15	%		21	%		14	%
Portal Revenue Analysis (thousands)
DMV transaction-based			$	7,650		$	6,187		$	15,529		$	12,218
Non-DMV transaction-based				3,597			2,820			6,940			5,261
Portal management				102			299			204			599
Software development				906			843			1,813			1,861

		Total	$	12,255		$	10,149		$	24,486		$	19,939

NIC Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except for share amounts

			June 30, 2004			December 31, 2003
ASSETS
Current assets:
	Cash and cash equivalents		$	21,440		$	13,540
	Cash and cash equivalents—restricted			5,286			5,363
	Marketable securities			—			249
	Trade accounts receivable			20,556			17,871
	Deferred income taxes			173			181
	Prepaid expenses			665			698
	Other current assets			4,918			8,845

		Total current assets		53,038			46,747
Property and equipment, net				3,107			2,992
Deferred income taxes				32,968			35,169
Other assets				268			110
Investments in affiliates				—			644
Intangible assets, net				49			77

		Total assets	$	89,430		$	85,739

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	14,875		$	16,345
	Accrued expenses			6,559			5,245
	Note payable—current portion			158			156
	Application development contracts			446			465
	Other current liabilities			143			158

		Total current liabilities		22,181			22,369
Note payable—long-term portion				128			207

		Total liabilities		22,309			22,576

Commitments and contingencies				—			—
Shareholders' equity:
	Common stock, no par, 200,000,000 shares authorized 58,902,525 and 58,715,672 shares issued and outstanding			—			—
	Additional paid-in capital			199,459			198,929
	Accumulated deficit			(132,133	)		(135,561	)

				67,326			63,368
	Less treasury stock			(205	)		(205	)

		Total shareholders' equity		67,121			63,163

		Total liabilities and shareholders' equity	$	89,430		$	85,739

NIC Inc.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands

			Three months ended June 30,						Six months ended June 30,
			2004			2003			2004			2003
Cash flows from operating activities:
	Net income		$	1,826		$	1,357		$	3,428		$	2,346
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation & amortization		381			450			769			942
		Application development contracts		(21	)		(273	)		(19	)		(732	)
		Deferred income taxes		1,301			849			2,547			1,461
		Deferred income tax benefit relating to stock options		(73	)		—			(171	)		—
		Equity in net loss of affiliates		40			(262	)		109			(202	)
	Changes in operating assets and liabilities
		(Increase) in trade accounts receivable		(199	)		(749	)		(2,685	)		(2,236	)
		(Increase) decrease in prepaid expenses		(4	)		270			33			297
		(Increase) decrease in other current assets		5,222			(2,029	)		4,030			(3,320	)
		Decrease in other assets		—			7			2			14
		Increase (decrease) in accounts payable		(2,333	)		904			(1,470	)		1,514
		Increase (decrease) in accrued expenses		(212	)		159			1,431			734
		(Decrease) in other current liabilities		(43	)		(209	)		(15	)		(398	)

	Net cash provided by operating activities			5,885			474			7,989			420

Cash flows from investing activities:
		Purchases of property and equipment		(229	)		(354	)		(855	)		(622	)
		Maturities of marketable securities		250			—			250			—
		Proceeds from sale of affiliate		300			—			300			—

		Net cash provided by (used in) investing activities		321			(354	)		(305	)		(622	)

Cash flows from financing activities:
	Cash and cash equivalents—restricted			39			25			77			863
	Payments on note payable			(39	)		(25	)		(77	)		(96	)
	Proceeds from exercise of employee stock options			74			—			216			133

	Net cash provided by financing activities			74			—			216			900

Net increase in cash and cash equivalents				6,280			120			7,900			698
Cash and cash equivalents, beginning of period				15,160			10,137			13,540			9,559

Cash and cash equivalents, end of period			$	21,440		$	10,257		$	21,440		$	10,257