EX-99 2 a5258950ex99.txt EXHIBIT 99 Exhibit 99 NIC Earns Four Cents Per Share as Portal Revenues Increase 18 Percent in the Third Quarter OLATHE, Kan.--(BUSINESS WIRE)--Oct. 26, 2006--NIC Inc. (NASDAQ: EGOV) today reported net income of $2.5 million and earnings per share of four cents on total revenues of $18.0 million for the three months ended September 30, 2006. Operating income was $3.6 million in the third quarter. The Company posted net income of $2.4 million and earnings per share of four cents on total revenues of $16.0 million in third quarter 2005. For the third quarter of 2006, portal revenues of $17.2 million were 18 percent higher than the prior year quarter. On a same state basis, portal revenues grew eight percent in the third quarter and were driven by strong performance from a variety of new revenue-generating applications. In the third quarter, NIC's portals launched more than 60 new revenue-generating services and another 130 applications are in the development pipeline. "Creating new applications is a key focus area of our research and development program," said Harry Herington, President of NIC. "We continue to identify, build, and commercialize new revenue-generating services in each of our 18 state portals." Reflecting the continued wind-down of the software and services business, software and services revenues in the third quarter were $0.8 million. NIC ended the quarter with $74.7 million in cash and marketable securities, up $6.4 million from June 30, 2006. Investing in Growth In the third quarter, NIC launched a new strategic investment program to drive long-term growth. "Our management team and the NIC Board of Directors believe that the time is right to invest strategically in business development," said Jeff Fraser, Chief Executive Officer of NIC. "This program will allow us to aggressively pursue more new state portal opportunities, further increase new service cross-selling in our portal operations, and identify the next generation of highly profitable products and services." In 2007, the Company expects to invest $6.0 - $8.0 million in strategic long-term growth initiatives. Revenues from these initiatives are not expected prior to 2008. The initial implementation of the Company's new growth initiatives was reflected in third quarter 2006 selling and administrative expenses of $3.9 million, a 33 percent increase over the same period last year. As a percentage of portal revenues, selling and administrative expenses were 23 percent, up from 20 percent in third quarter 2005. Fourth Quarter 2006 Outlook For fourth quarter 2006, NIC expects total revenues of $16.6 - $16.9 million, portal revenues of $16.1 - $16.3 million, and software and services revenues of $0.5 - $0.6 million. The Company also anticipates operating income between $2.3 - $2.4 million and net income of $1.7 - $1.8 million. "NIC's fourth quarter guidance reflects seasonality as well as some incremental investment as we enhance our sales, marketing, and operations teams in preparation for a busy 2007," said Eric Bur, NIC's Chief Financial Officer. NIC's fourth quarter estimates do not include any new portal contracts. Third Quarter Webcast Details Webcast Information Thursday, October 26, 2006 9:00 a.m. (EDT) To sign in and listen: The Webcast system is available at www.nicusa.com/investor. Call leaders: Jeff Fraser, Chief Executive Officer Harry Herington, President Eric Bur, Chief Financial Officer Some users may need to refresh their browsers to view the Webcast information. A replay of the Webcast will be available until 11:00 p.m. (EST) on January 25, 2007, by visiting www.nicusa.com/investor. An audio replay of NIC's third quarter earnings call will be available until 5:00 p.m. (EST) on November 2 by dialing 1-800-405-2236 and using passcode 11065542. The conference call replay will also be available via Podcast download 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 2,200 state and local agencies that serve more than 60 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 2005 Annual Report on Form 10-K filed on March 16, 2006, with the Securities and Exchange Commission. NIC Inc. FINANCIAL SUMMARY (UNAUDITED) Thousands except for per share amounts Three months ended Nine months ended September 30, September 30, 2006 2005 2006 2005 --------- -------- -------- -------- Revenues: Portal revenues $17,214 $14,637 $51,997 $42,684 Software & services revenues 821 1,321 547 171 --------- -------- -------- -------- Total revenues 18,035 15,958 52,544 42,855 --------- -------- -------- -------- Operating expenses: Cost of portal revenues, exclusive of depreciation & amortization 9,478 7,620 26,685 21,428 Cost of software & services revenues, exclusive of depreciation & amortization 565 1,117 3 4,442 Selling & administrative 3,916 2,948 10,904 9,507 Depreciation & amortization 501 422 1,531 1,141 --------- -------- -------- -------- Total operating expenses 14,460 12,107 39,123 36,518 --------- -------- -------- -------- Operating income 3,575 3,851 13,421 6,337 --------- -------- -------- -------- Other income (expense): Interest income 666 197 1,544 432 Equity in net loss of affiliates - - (97) - Other income (expense), net (49) - (49) (3) --------- -------- -------- -------- Total other income (expense) 617 197 1,398 429 --------- -------- -------- -------- Income before income taxes 4,192 4,048 14,819 6,766 Income tax provision 1,727 1,661 6,191 2,806 --------- -------- -------- -------- Net income $2,465 $2,387 $8,628 $3,960 ========= ======== ======== ======== Basic net income per share $0.04 $0.04 $0.14 $0.07 ========= ======== ======== ======== Diluted net income per share $0.04 $0.04 $0.14 $0.07 ========= ======== ======== ======== Weighted average shares outstanding: Basic 61,536 60,271 61,353 59,838 ========= ======== ======== ======== Diluted 61,798 61,226 61,749 60,902 ========= ======== ======== ======== Key Financial Metrics: Revenue growth - outsourced portals 18% 23% 22% 17% Same state revenue growth - outsourced portals 8% 20% 8% 18% Gross profit percentage - outsourced portals 45% 48% 49% 50% Selling & administrative costs as a percentage of portal revenue 23% 20% 21% 22% Recurring portal revenue percentage 95% 97% 96% 97% Portal Revenue Analysis (thousands): DMV $9,844 $9,109 $31,858 $26,408 Non-DMV 7,370 5,528 20,139 16,276 --------- -------- -------- -------- Total $17,214 $14,637 $51,997 $42,684 ========= ======== ======== ======== NIC Inc. CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands except for share amounts September 30, December 31, 2006 2005 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $32,661 $36,902 Marketable securities 42,000 20,500 Trade accounts receivable 28,213 22,269 Unbilled revenues 406 2,198 Deferred income taxes 755 421 Prepaid expenses & other current assets 1,331 1,632 ------------- ------------ Total current assets 105,366 83,922 Property and equipment, net 3,666 3,327 Unbilled revenues - 1,395 Deferred income taxes 22,979 28,916 Other assets 345 285 ------------- ------------ Total assets $132,356 $117,845 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $30,011 $24,458 Accrued expenses 5,372 6,642 Application development contracts 557 1,261 Other current liabilities 350 317 ------------- ------------ Total current liabilities 36,290 32,678 ------------- ------------ Commitments and contingencies - - Shareholders' equity: Common stock, no par, 200,000,000 shares authorized 61,750,900 and 61,073,505 shares issued and outstanding - - Additional paid-in capital 209,699 207,444 Accumulated deficit (113,465) (122,093) ------------- ------------ 96,234 85,351 Less treasury stock (168) (184) ------------- ------------ Total shareholders' equity 96,066 85,167 ------------- ------------ Total liabilities and shareholders' equity $132,356 $117,845 ============= ============ NIC Inc. CASH FLOW SUMMARY (UNAUDITED) Thousands Three months ended Nine months ended September 30, September 30, 2006 2005 2006 2005 --------- -------- -------- -------- Cash flows from operating activities: Net income $2,465 $2,387 $8,628 $3,960 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization 501 422 1,531 1,141 Stock-based compensation expense 477 - 829 - Application development contracts (49) (120) (704) 1,338 Deferred income taxes 1,533 1,473 5,603 2,510 Equity in net loss of affiliates - - 97 - Loss on disposal of property & equipment 49 - 49 - Changes in operating assets and liabilities (Increase) decrease in trade accounts receivable (1,481) 5 (5,944) (4,708) (Increase) decrease in unbilled revenues 88 (700) 3,187 2,992 (Increase) decrease prepaid expenses & other current assets 109 (386) 286 (92) (Increase) decrease in other assets (66) 14 (140) 76 Increase in accounts payable 2,475 1,527 5,553 6,505 Increase (decrease) in accrued expenses 561 764 (1,270) (302) Increase (decrease) in other current liabilities 96 (4) 33 (35) --------- -------- -------- -------- Net cash provided by operating activities 6,758 5,382 17,738 13,385 --------- -------- -------- -------- Cash flows from investing activities: Purchases of property and equipment (643) (826) (1,919) (1,304) Purchases of marketable securities (8,500) (7,900) (21,500) (30,900) Maturities of marketable securities - - - 15,000 Cash and cash equivalents - restricted - - - 3,000 --------- -------- -------- -------- Net cash used in investing activities (9,143) (8,726) (23,419) (14,204) --------- -------- -------- -------- Cash flows from financing activities: Proceeds from sale of treasury stock - - 65 - Proceeds from employee common stock purchases - - 157 122 Proceeds from exercise of employee stock options 220 745 1,218 2,227 --------- -------- -------- -------- Net cash provided by financing activities 220 745 1,440 2,349 --------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents (2,165) (2,599) (4,241) 1,530 Cash and cash equivalents, beginning of period 34,826 34,898 36,902 30,769 --------- -------- -------- -------- Cash and cash equivalents, end of period $32,661 $32,299 $32,661 $32,299 ========= ======== ======== ======== CONTACT: NIC Inc. Chris Neff, 435-645-8898 cneff@nicusa.com