EX-99 2 a5539327ex99.htm EXHIBIT 99 a5539327ex99.htm
3Q 2007 Earnings
 
For Immediate Release
 
For more information, please contact:
 
David Oboyski
NIC
DIRECT (913) 754-7054
doboyski@nicusa.com
 

 
NIC operating income rises 23 percent
in third quarter
 
Same state portal revenues increase 19 percent
 
OLATHE, Kan. – November 7, 2007 – NIC Inc. (Nasdaq: EGOV) today announced net income of $3.8 million and earnings per share of six cents on total revenues of $21.6 million for the three months ended September 30, 2007.  Operating income was $4.4 million for the quarter, up 23 percent over third quarter 2006.  Third quarter results include a gain of $0.5 million on the sale of a minority investment and an income tax expense reduction of $0.5 million.  Absent these items, net income would have been $2.8 million, or four cents per share.  In third quarter 2006, the company reported net income of $2.5 million and earnings per share of four cents on total revenues of $18.0 million.
 
Quarterly portal revenues were a record $20.7 million, a 20 percent increase over third quarter 2006.  On a same-state basis, portal revenues grew 19 percent in the third quarter, compared to an eight percent increase in the year-ago quarter.  NIC’s business licensing, vehicle registration and hunting and fishing license services performed well in the third quarter, helping same-state, transaction-based revenues from non-driver record (non-DMV) applications rise 31 percent, up from 26 percent growth in the prior-year quarter.  DMV revenues grew 11 percent on a same-state basis in the third quarter, up from one percent growth during the same period last year.
 
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NIC 3Q 2007 Earnings/Page 2 of 9
 
“Non-DMV services continue to grow strongly,” said Jeff Fraser, chief executive officer of NIC.  “A key component of our strategic growth initiative is to increase revenues from non-DMV services, and this quarter’s numbers are a good indicator that we continue to meet this objective.”
 
In the third quarter, NIC’s portals launched 83 new non-DMV revenue-generating services.  The company also has an all-time high of 178 applications in the development pipeline.
 
Reflecting NIC’s ongoing investment in long-term growth, selling and administrative expenses rose to $5.2 million in the current quarter compared to $3.9 million in the third quarter of 2006.  As a percentage of portal revenue, selling and administrative expenses were 25 percent in the current quarter, up from 23 percent in the third quarter of 2006.
 
“We continue to see benefits from our strategic growth investments,” said Harry Herington, president of NIC.  “Our portals are exceeding our goals for non-DMV revenue, and the sales pipeline continues to develop according to our expectations.”
 
NIC estimates the cost of these initiatives will be $4 million to $5 million in 2007.
 
In the third quarter, NIC sold its 12 percent minority investment in e-Government Solutions Ltd., a private joint venture based in London, and recognized a gain of $0.5 million (one cent per share) on the cash proceeds from the sale.  Third-quarter results also reflect a change in the company’s uncertain tax positions that reduced income tax expense by $0.5 million (one cent per share).
 
NIC ended the third quarter with approximately $52.4 million in cash and investments, up $9.2 million from June 30, 2007.  As announced earlier this year, the company declared a $0.75 per-share special dividend in the first quarter that was paid to shareholders on February 20, 2007.  NIC paid the $46.7 million dividend from its short-term investments and cash reserves.
 
Operating Highlights
 
NIC announced last week that it finalized a contract with West Virginia to operate the state’s official Web site, WV.gov (http://www.wv.gov), for up to three years.  NIC will deploy the self-funded model for the enterprise portal.
 
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NIC 3Q 2007 Earnings/Page 3 of 9
 
In August, the company announced a new long-term contract with Rhode Island, extending a relationship that began in 2001.  The contract includes an initial three-year term with one two-year renewal option that can extend the contract through 2012.
 
NIC yesterday announced the election of Alexander C. Kemper to its board of directors.  Kemper founded Perfect Commerce, and he was formerly the chairman and CEO of UMB Bank N.A. and CEO of UMB Financial Corp., a Nasdaq-traded financial services company with assets of more than $8 billion.
 
The company also announced in August the promotion of Steve Kovzan to chief financial officer from vice president of finance and chief accounting officer.
 
“Steve has done a tremendous job making the transition into his new role” said Herington.  “Our finance and accounting functions have not skipped a beat, and he is quickly shaping the role to his particular strengths in investor relations and communications.”
 
Eight NIC partners were among the top 10 finalists in the Center for Digital Government’s 2007 Best of the Web competition, which the Center announced in September.  NIC partners also took home six Digital Government Achievement Awards, another part of the Center’s Best of the Web competition, which singles out specific sites and applications.
 
The Center also presented NIC with its Long Train Corporate Award, one of the inaugural Best Fit Integrator Awards, in September.  The program recognizes the performance of eGovernment information technology providers based on nominations from government partners.  NIC’s award distinguished the company as the best overall provider, and more than 25 percent of its partners submitted nominations.
 
2007 Outlook
 
For full-year 2007, the company projects: total revenues of $84.1 million to $84.7 million, portal revenues of $80.9 million to $81.4 million, software and services revenues of $3.2 million to $3.3 million, operating income between $13.8 million and $14.5 million and net income between $9.8 million and $10.3 million.
 
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NIC 3Q 2007 Earnings/Page 4 of 9
 
“Our updated projections reflect strong performance from our core portal operations in the first three quarters of the year, normal seasonality in the fourth quarter and a partial year of revenues and start-up costs from our new Arizona contract,” said Chief Financial Officer Steve Kovzan.  “Our projections also include a partial year of start-up costs from our new West Virginia contract.”
 
The company’s projections do not include any new, unsigned portal contracts.
 
Third-quarter Earnings Call and Webcast Details
 
Webcast Information
Date:
Wednesday, November 7, 2007
Time:
8:30 a.m. EST
URL:
http://www.nicusa.com/investor
 
(click on the Webcast link under “Third-quarter 2007 Earnings Announcement”)
Note:
Some users may need to refresh their browsers to view the Webcast information.
Audio Replay Information
Available starting:
Wednesday, November 7, 2007
11:00 a.m. EST
Available until:
Wednesday, November 14, 2007
11:59 p.m. EST
Dial-in number:
(800) 405-2236
Dial-in passcode:
11101245#
Webcast Replay Information
Available until:
February 6, 2008
URL:
http://www.nicusa.com/investor
 
(click on the Webcast link in the Recent Events section under “Third-quarter 2007 Earnings Announcement”)
Podcast Replay URL
http://www.nicusa.com/investor
 
(click on the podcast link in the Recent Events section under “Third-quarter 2007 Earnings Announcement”)
 
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NIC 3Q 2007 Earnings/Page 5 of 9
 
About NIC
 
NIC manages more eGovernment services than any provider in the world.  The company helps government communicate more effectively with citizens and businesses by putting essential services online.  NIC provides eGovernment solutions for 2,600 state and local agencies that serve more than 69 million people in the United States.  Additional information is available at http://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 2006 Annual Report on Form 10-K filed on March 15, 2007, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 6, 2007, with the Securities and Exchange Commission.
 
(financial tables follow)
 
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NIC 3Q 2007 Earnings/Page 6 of 9

NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
thousands except per share amounts
  
             
   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2007
    
2006
    
2007
    
2006
  
Revenues:
                        
Portal revenues
   $
20,699
     $
17,214
     $
61,177
     $
51,997
  
Software & services revenues
    
859
      
821
      
2,491
      
547
  
Total revenues
    
21,558
      
18,035
      
63,668
      
52,544
  
Operating expenses:
                                
Cost of portal revenues, exclusive of
                                
depreciation & amortization
    
10,844
      
9,478
      
31,718
      
26,685
  
Cost of software & services revenues, exclusive
                                
of depreciation & amortization
    
479
      
565
      
1,442
      
3
  
Selling & administrative
    
5,207
      
3,916
      
15,772
      
10,904
  
Depreciation & amortization
    
632
      
501
      
1,744
      
1,531
  
Total operating expenses
    
17,162
      
14,460
      
50,676
      
39,123
  
Operating income
    
4,396
      
3,575
      
12,992
      
13,421
  
Other income (expense):
                                
Interest income
    
362
      
666
      
1,260
      
1,544
  
Gain (loss) on affiliate investments
    
508
      
-
      
508
       (97 )
Other income (expense), net
    
-
       (49 )    
-
       (49 )
Total other income (expense)
    
870
      
617
      
1,768
      
1,398
  
Income before income taxes
    
5,266
      
4,192
      
14,760
      
14,819
  
Income tax provision
    
1,476
      
1,733
      
5,472
      
6,191
  
Net income
   $
3,790
     $
2,459
     $
9,288
     $
8,628
  
                                 
Basic net income per share
   $
0.06
     $
0.04
     $
0.15
     $
0.14
  
Diluted net income per share
   $
0.06
     $
0.04
     $
0.15
     $
0.14
  
                                 
Weighted average shares outstanding:
                                
Basic
    
61,905
      
61,536
      
61,776
      
61,353
  
Diluted
    
62,537
      
61,798
      
62,255
      
61,749
  
                                 
Key Financial Metrics:
                                
Revenue growth - outsourced portals
     20 %     18 %     18 %     22 %
Same state revenue growth - outsourced portals
     19 %     8 %     16 %     8 %
Gross profit % - outsourced portals
     48 %     45 %     48 %     49 %
Selling & administrative as a % of portal revenue
     25 %     23 %     26 %     21 %
Recurring portal revenue percentage
     94 %     95 %     94 %     96 %
Operating income margin as % of portal revenue
     21 %     21 %     21 %     26 %
                                 
Portal Revenue Analysis:
                                
DMV transaction-based
   $
11,171
     $
9,844
     $
33,906
     $
31,858
  
Non-DMV transaction based
    
7,128
      
5,438
      
20,409
      
16,997
  
Software development & portal management
    
2,400
      
1,932
      
6,862
      
3,142
  
Total
   $
20,699
     $
17,214
     $
61,177
     $
51,997
  
 
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NIC 3Q 2007 Earnings/Page 7 of 9
NIC Inc.
  
CONSOLIDATED BALANCE SHEETS
  
(UNAUDITED)
  
thousands
  
             
   
September 30,
    
December 31,
  
   
2007
    
2006
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $
40,412
     $
36,745
  
Marketable securities
    
12,000
      
45,008
  
Trade accounts receivable
    
30,873
      
28,729
  
Unbilled revenues
    
345
      
1,069
  
Deferred income taxes
    
5,887
      
5,290
  
Prepaid expenses & other current assets
    
1,922
      
1,645
  
Total current assets
    
91,439
      
118,486
  
Property and equipment, net
    
4,571
      
3,790
  
Deferred income taxes
    
12,695
      
17,434
  
Other assets
    
708
      
424
  
Total assets
   $
109,413
     $
140,134
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
Current liabilities:
                
Accounts payable
   $
36,663
     $
34,202
  
Accrued expenses
    
7,690
      
5,911
  
Application development contracts
    
392
      
513
  
Other current liabilities
    
190
      
255
  
Total current liabilities
    
44,935
      
40,881
  
                 
Other long-term liabilities
    
730
      
-
  
     
45,665
      
40,881
  
                 
Commitments and contingencies
    
-
      
-
  
                 
Shareholders' equity:
                
Common stock, no par, 200,000 shares authorized
                
    61,993 and 61,574 shares issued and
                
    outstanding
    
-
      
-
  
Additional paid-in capital
    
165,485
      
210,210
  
Accumulated deficit
     (101,569 )     (110,789 )
     
63,916
      
99,421
  
Less treasury stock
     (168 )     (168 )
Total shareholders' equity
    
63,748
      
99,253
  
Total liabilities and shareholders' equity
   $
109,413
     $
140,134
  
 
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NIC 3Q 2007 Earnings/Page 8 of 9
 
NIC INC.
  
SUMMARY OF CHANGES IN SHAREHOLDERS' EQUITY
  
(UNAUDITED)
  
thousands
  
                                     
                                     
               
Additional
                    
   
Common Stock
    
Paid-in
    
Accumulated
    
Treasury
        
   
Shares
    
Amount
    
Capital
    
Deficit
    
Stock
    
Total
  
Balance, January 1, 2007
    
61,574
     $
-
     $
210,210
     $ (110,789 )   $ (168 )   $
99,253
  
Cumulative effect of FIN 48
    
-
      
-
      
-
       (68 )    
-
       (68 )
Net income
    
-
      
-
      
-
      
9,288
      
-
      
9,288
  
Cash dividends on common stock
    
-
      
-
       (46,730 )    
-
      
-
       (46,730 )
Shares surrendered to pay
                                                
exercise price of stock options
     (34 )    
-
       (247 )    
-
      
-
       (247 )
Shares surrendered upon vesting
                                                
of restricted stock to satisfy
                                                
tax withholdings
     (43 )    
-
       (300 )    
-
      
-
       (300 )
Stock option exercises &
                                                
restricted stock vestings
    
443
      
-
      
1,053
      
-
      
-
      
1,053
  
Stock-based compensation
    
-
      
-
      
1,260
      
-
      
-
      
1,260
  
Issuance of common stock under
                                                
employee stock purchase plan
    
53
      
-
      
239
      
-
      
-
      
239
  
Balance, September 30, 2007
    
61,993
     $
-
     $
165,485
     $ (101,569 )   $ (168 )   $
63,748
  
 
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NIC 3Q 2007 Earnings/Page 9 of 9
 
NIC Inc.
  
CASH FLOW SUMMARY
  
(UNAUDITED)
  
Thousands
  
                         
   
Three months ended
    
Nine months ended
  
   
September 30,
    
September 30,
  
   
2007
    
2006
    
2007
    
2006
  
Cash flows from operating activities:
                        
Net income
   $
3,790
     $
2,459
     $
9,288
     $
8,628
  
Adjustments to reconcile net income to net cash provided by
                                
operating activities:
                                
Depreciation & amortization
    
632
      
501
      
1,744
      
1,531
  
Stock-based compensation expense
    
396
      
477
      
1,260
      
829
  
Application development contracts
     (41 )     (49 )     (121 )     (704 )
Deferred income taxes
    
1,787
      
1,533
      
5,193
      
5,603
  
(Gain) loss on affiliate investments
     (508 )    
-
       (508 )    
97
  
Loss on disposal of property and equipment
    
-
      
49
      
-
      
49
  
Impairment loss on property and equipment
    
164
      
-
      
164
      
-
  
Changes in operating assets and liabilities:
                                
(Increase) in trade accounts receivable
     (2,561 )     (1,481 )     (2,144 )     (5,944 )
Decrease in unbilled revenues
    
96
      
88
      
724
      
3,187
  
(Increase) decrease in prepaid expenses & other current assets
     (445 )    
109
       (277 )    
286
  
Decrease in other assets
    
-
      
2
      
2
      
11
  
Increase in accounts payable
    
6,483
      
2,475
      
2,461
      
5,553
  
Increase (decrease) in accrued expenses
    
383
      
561
      
1,480
       (1,270 )
Increase (decrease) in other current liabilities
     (169 )    
102
       (65 )    
33
  
Increase in other long-term liabilities
     (511 )    
-
       (389 )    
-
  
Net cash provided by operating activities
    
9,496
      
6,826
      
18,812
      
17,889
  
                                 
Cash flows from investing activities:
                                
Purchases of property and equipment
     (960 )     (643 )     (2,618 )     (1,919 )
Capitalized internal use software development costs
     (177 )     (68 )     (358 )     (151 )
Purchases of marketable securities
     (10,000 )     (8,500 )     (12,000 )     (21,500 )
Sales and maturities of marketable securities
    
-
      
-
      
45,008
      
-
  
Proceeds from sale of affiliate
    
508
      
-
      
508
      
-
  
Net cash provided by (used in) investing activities
     (10,629 )     (9,211 )    
30,540
       (23,570 )
                                 
Cash flows from financing activities:
                                
Cash dividends on common stock
    
-
      
-
       (46,730 )    
-
  
Proceeds from sale of treasury stock
    
-
      
-
      
-
      
65
  
Proceeds from employee common stock purchases
    
-
      
-
      
239
      
157
  
Proceeds from exercise of employee stock options
    
301
      
220
      
806
      
1,218
  
Net cash provided by (used in) financing activities
    
301
      
220
       (45,685 )    
1,440
  
                                 
Net increase (decrease) in cash and cash equivalents
     (832 )     (2,165 )    
3,667
       (4,241 )
Cash and cash equivalents, beginning of period
    
41,244
      
34,826
      
36,745
      
36,902
  
Cash and cash equivalents, end of period
   $
40,412
     $
32,661
     $
40,412
     $
32,661
  
 
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