Exhibit 99
NIC Earns Six Cents Per Share in Second Quarter 2010 on 19 Percent Increase in Portal Gross Profits
OLATHE, Kan.--(BUSINESS WIRE)--August 5, 2010--NIC Inc. (NASDAQ: EGOV) today announced net income of $3.9 million and earnings per share of six cents on total revenues of $40.7 million for the three months ended June 30, 2010. In second quarter 2009, the company reported net income of $4.7 million and earnings per share of seven cents on total revenues of $31.8 million.
Second quarter 2009 results included a non-recurring gain (net of tax) of approximately $2.2 million relating to the previously announced acquisition of eGovernment contracts in the state of Texas. Second quarter 2009 financial results also included approximately $0.5 million of acquisition-related costs included in selling & administrative expenses and $0.6 million of intangible asset amortization expense related to the acquisition.
Second quarter 2010 portal revenues and cost of portal revenues from the new Texas contract that commenced on January 1, 2010 were approximately $9.2 million and $7.0 million, respectively. Portal revenues and cost of portal revenues from the prior Texas contract in the second quarter of 2009 from the May 29, 2009 acquisition date were approximately $2.9 million and $2.0 million, respectively. Current quarter portal revenues and cost of portal revenues from the New Mexico Motor Vehicle Division engagement, which launched in the fourth quarter 2009, were $0.5 million and $0.2 million, respectively. Cost of portal revenues in the current quarter also includes approximately $0.2 million in other portal-related start-up expenses. Second quarter 2010 revenues from the National Motor Carrier Pre-Employment Screening Program since the May 11th launch were approximately $0.3 million (included in software & services revenues), with associated costs of approximately $0.5 million.
“NIC’s portal operations continue to produce solid results even in our nation’s weak economy,” said Harry Herington, Chairman of the Board and Chief Executive Officer at NIC. “Furthermore, we are very pleased with the progress of our first self-funded venture in the federal government space that launched in May. The Pre-Employment Screening Program for the Department of Transportation’s Federal Motor Carrier Safety Administration is ramping up nicely and we are encouraged by its future growth potential.”
Quarterly portal revenues were a record $39.5 million, a 28 percent increase over second quarter 2009. On a same-state basis, portal revenues grew seven percent in the second quarter. Same-state transaction-based revenues from non-driver record exchange (non-DMV) services rose 18 percent over second quarter 2009 through continued strong performance from several key applications, including tax filings, motor vehicle registrations, professional license renewals, and payment processing. Same-state DMV revenues grew one percent in second quarter 2010, while same-state portal time & materials revenues decreased 10 percent from second quarter 2009.
As expected, portal gross profit percentage was 39 percent in the current quarter, down from 42 percent in the prior year quarter. This was due mainly to the gross profit percentage from the new Texas portal contract, which is currently lower than the company-wide average without Texas. Excluding results from the Texas portal, the portal gross profit percentage would have been 44 percent in the current quarter. Portal gross profits increased to $15.6 million, a 19 percent improvement over the prior year quarter.
“Our self-funded model allows our government partners to deliver valuable services without adding to their budget challenges, and each quarter we launch dozens of new applications and identify expansion opportunities as evidenced by our consistent non-DMV revenue growth,” said Steve Kovzan, NIC’s Chief Financial Officer. “We recognize that the time & materials component of our portal revenues was again lower this quarter, reflecting government’s hesitancy to use appropriated dollars in light of ongoing budget challenges. This is why our long-term focus remains on growing recurring, transaction-based revenue sources that are self-sustaining and avoid budget appropriations.”
As a percentage of total revenues, selling & administrative expenses were 20 percent in the current quarter, down from 22 percent in the second quarter of 2009. Selling & administrative expenses were $8.1 million in the current quarter, up from $7.2 million in the second quarter of 2009, due mainly to approximately $1.4 million of legal costs in connection with the previously disclosed SEC investigation and Audit Committee review of expense reporting by NIC's former Chief Executive Officer and related matters. These legal costs are net of $0.4 million of legal costs reimbursed by NIC's directors and officers liability insurance carrier to date and compare to $0.2 million of legal costs in the prior year quarter. As disclosed in NIC’s quarterly report on Form 10-Q for the quarter ended June 30, 2010, the Company expects to continue to incur significant legal fees and other expenses and could incur penalties in connection with the ongoing SEC investigation and Audit Committee review. The Company's directors and officers liability insurance carrier has agreed to reimburse NIC for reasonable costs of defense of the Company and the officers who received Wells Notices, which are incurred after March 9, 2010, and has agreed to reimburse the Company for certain expenses incurred prior to March 9, 2010, in each case, subject to the retention of $250,000 which has already been absorbed by NIC, and certain customary policy exclusions. To the extent the Company’s directors and officers liability insurance carrier reimburses the Company for expenses previously recorded in selling & administrative expenses, including expenses incurred in the second quarter of 2010, the Company will treat any such reimbursements as a reduction of selling & administrative expenses in the period such reimbursement is determined to be estimable and probable.
On June 30, 2010, NIC’s cash and cash equivalents totaled $53.1 million. On February 26, 2010, NIC used $19.3 million of its cash reserves to pay a $0.30 per share special cash dividend to shareholders.
Operational Highlights
In the second quarter, several of NIC’s state partners signed new agreements and approved contract extensions. West Virginia signed a new contract for up to three years, Colorado renewed its agreement for another four years, and the New Mexico Motor Vehicle Division extended for three more years. Rhode Island approved a two-year contract extension, both Arkansas and Tennessee renewed for one year, and Indiana expanded its agreement by signing a four-year extension.
“NIC’s success is based on maintaining long-term and mutually beneficial relationships with our government partners,” concluded Herington. “The seven states that extended their engagements in the second quarter recognize the value we deliver, and I want to thank West Virginia, Colorado, the New Mexico Motor Vehicle Division, Rhode Island, Arkansas, Tennessee, and Indiana for continuing to entrust their eGovernment solutions to NIC.”
Previous Full-Year 2010 Outlook Reaffirmed
For full-year 2010, NIC confirms its previous guidance and currently expects total revenues of $156.0 - $161.0 million, with portal revenues ranging from $151.0 - $155.5 million and software & services revenues of $5.0 - $5.5 million. The Company also currently expects operating income to range from $24.0 - $26.5 million and net income of $14.5 - $16.0 million.
However, if the Company incurs significant legal fees and other expenses in the future in connection with the ongoing SEC investigation and Audit Committee review for which insurance reimbursement is delayed or denied or incurs significant penalties in connection with the SEC investigation, the Company’s financial position, results of operations and cash flows could be materially adversely affected and the Company may fall short of its operating income and net income guidance for fiscal year 2010. There can be no assurance that certain past expenses and all future expenses incurred by the Company in connection with the SEC investigation will be covered by applicable insurance policies.
Second Quarter Earnings Call and Webcast Details |
Dial-In Information |
| Thursday, August 5, 2010 |
| 4:30 p.m. (EDT) |
| |
| Call bridge: | | 888-549-7880 (U.S. callers) or 480-629-9868 (international callers) |
| Call leaders: | | Harry Herington, Chairman of the Board and Chief Executive Officer |
| | Steve Kovzan, Chief Financial Officer |
| | |
Webcast Information
To sign in and listen: The webcast system is available at http://www.nicusa.com/investors.
A replay of the webcast will be available until 11:00 p.m. (EDT) on November 4, 2010, by visiting http://www.nicusa.com/investors.
About NIC
NIC (NASDAQ: EGOV) is the nation's leading provider of official government websites, online 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 3,000 federal, state, and local agencies that serve 98 million people in the United States. Additional information is available at http://www.nicusa.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Any statements contained in this release that do not relate to historical or current facts constitute forward-looking statements. These statements include the potential for growth in revenues and income, 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 successfully increase the adoption and use of eGovernment services; 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; the SEC investigation; and general economic conditions (including the current economic slowdown) and the other important cautionary statements and risk factors described in NIC's 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2010, and in NIC’s Quarterly Reports on Form 10-Q filed with the SEC in 2010. 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 |
| |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2010 | | 2009 | | 2010 | | 2009 |
| Revenues: | | | | | | | | |
| Portal revenues | | $ | 39,482 | | | $ | 30,768 | | | $ | 76,668 | | | $ | 57,172 | |
| Software & services revenues | | | 1,256 | | | | 1,034 | | | | 2,327 | | | | 2,040 | |
| Total revenues | | | 40,738 | | | | 31,802 | | | | 78,995 | | | | 59,212 | |
| Operating expenses: | | | | | | | | |
Cost of portal revenues, exclusive of depreciation & amortization | | | 23,909 | | | | 17,718 | | | | 47,205 | | | | 32,609 | |
Cost of software & services revenues, exclusive of depreciation & amortization | | | 1,003 | | | | 623 | | | | 1,932 | | | | 1,239 | |
| Selling & administrative | | | 8,103 | | | | 7,155 | | | | 15,406 | | | | 13,426 | |
| Nonrecurring gain on acquisition of business (net of tax) | | | - | | | | (2,184 | ) | | | - | | | | (2,184 | ) |
| Amortization of acquisition-related intangible assets | | | 81 | | | | 629 | | | | 161 | | | | 629 | |
| Depreciation & amortization | | | 1,090 | | | | 1,003 | | | | 2,172 | | | | 1,940 | |
| Total operating expenses | | | 34,186 | | | | 24,944 | | | | 66,876 | | | | 47,659 | |
| Operating income | | | 6,552 | | | | 6,858 | | | | 12,119 | | | | 11,553 | |
| Other income (expense): | | | | | | | | |
| Interest income | | | 1 | | | | 5 | | | | 1 | | | | 45 | |
| Other income (expense), net | | | (2 | ) | | | - | | | | (2 | ) | | | - | |
| Total other income | | | (1 | ) | | | 5 | | | | (1 | ) | | | 45 | |
| Income before income taxes | | | 6,551 | | | | 6,863 | | | | 12,118 | | | | 11,598 | |
| Income tax provision | | | 2,621 | | | | 2,132 | | | | 4,865 | | | | 4,089 | |
| Net income | | $ | 3,930 | | | $ | 4,731 | | | $ | 7,253 | | | $ | 7,509 | |
| | | | | | | | |
| Basic net income per share | | $ | 0.06 | | | $ | 0.07 | | | $ | 0.11 | | | $ | 0.11 | |
| Diluted net income per share | | $ | 0.06 | | | $ | 0.07 | | | $ | 0.11 | | | $ | 0.11 | |
| | | | | | | | |
| Weighted average shares outstanding | | | | | | | | |
| Basic | | | 63,468 | | | | 62,935 | | | | 63,368 | | | | 62,867 | |
| Diluted | | | 63,529 | | | | 63,028 | | | | 63,435 | | | | 62,937 | |
| | | | | | | | |
| Key Financial Metrics: | | | | | | | | |
| Revenue growth - outsourced portals | | | 28 | % | | | 25 | % | | | 34 | % | | | 18 | % |
Same state revenue growth - outsourced portals | | | 7 | % | | | 13 | % | | | 7 | % | | | 12 | % |
| Recurring portal revenue percentage | | | 88 | % | | | 89 | % | | | 89 | % | | | 90 | % |
| Gross profit % - outsourced portals | | | 39 | % | | | 42 | % | | | 38 | % | | | 43 | % |
| Selling & administrative as a % of total revenue | | | 20 | % | | | 22 | % | | | 20 | % | | | 23 | % |
| Operating income margin as a % of total revenue | | | 16 | % | | | 22 | % | | | 15 | % | | | 20 | % |
| | | | | | | | |
| Portal Revenue Analysis: | | | | | | | | |
| DMV transaction-based | | $ | 16,339 | | | $ | 13,169 | | | $ | 33,208 | | | $ | 25,541 | |
| Non-DMV transaction-based | | | 16,546 | | | | 12,342 | | | | 31,012 | | | | 21,958 | |
| Portal software & services | | | 4,707 | | | | 3,404 | | | | 8,668 | | | | 5,883 | |
| Portal management | | | 1,890 | | | | 1,853 | | | | 3,780 | | | | 3,790 | |
| Total portal revenues | | $ | 39,482 | | | $ | 30,768 | | | $ | 76,668 | | | $ | 57,172 | |
| | | | | | | | | | | | | | | | |
NIC INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands |
| | | | |
| | | | |
| | June 30, 2010 | | December 31, 2009 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 53,076 | | | $ | 68,632 | |
| Trade accounts receivable | | | 41,228 | | | | 38,964 | |
| Deferred income taxes, net | | | 919 | | | | 834 | |
| Prepaid expenses & other current assets | | | 3,693 | | | | 3,231 | |
| Total current assets | | | 98,916 | | | | 111,661 | |
| | | | |
| Property and equipment, net | | | 6,726 | | | | 6,428 | |
| Intangible assets, net | | | 1,812 | | | | 1,991 | |
| Deferred income taxes, net | | | 3,313 | | | | 3,285 | |
| Other assets | | | 289 | | | | 242 | |
| Total assets | | $ | 111,056 | | | $ | 123,607 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 38,408 | | | $ | 42,872 | |
| Accrued expenses | | | 13,152 | | | | 12,793 | |
| Other current liabilities | | | 1,616 | | | | 777 | |
| Total current liabilities | | | 53,176 | | | | 56,442 | |
| | | | |
| Other long-term liabilities | | | 874 | | | | 607 | |
Total liabilities | | | 54,050 | | | | 57,049 | |
| | | | |
| Commitments and contingencies | | | - | | | | - | |
| | | | |
| Stockholders' equity: | | | | |
Common stock, $0.0001 par, 200,000 shares authorized, 63,485 and 63,239 shares issued and outstanding | | | 6 | | | | 6 | |
| Additional paid-in capital | | | 122,782 | | | | 139,587 | |
| Accumulated deficit | | | (65,782 | ) | | | (73,035 | ) |
| Total stockholders' equity | | | 57,006 | | | | 66,558 | |
| Total liabilities and stockholders' equity | | $ | 111,056 | | | $ | 123,607 | |
| | | | |
NIC INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Thousands |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | Additional | | | | |
| | Common Stock | | Paid-in | | Accumulated | | |
| | Shares | | Amount | | Capital | | Deficit | | Total |
| Balance, January 1, 2010 | | 63,239 | | $ 6 | | $ 139,587 | | $ (73,035) | | $ 66,558 |
| Net income | | - | | - | | - | | 7,253 | | 7,253 |
| Cash dividends on common stock | | - | | - | | (19,312) | | - | | (19,312) |
Shares surrendered upon vesting of restricted stock to satisfy tax withholdings | | (31) | | - | | (236) | | - | | (236) |
Stock option exercises and restricted stock vestings | | 121 | | - | | 17 | | - | | 17 |
| Stock-based compensation | | - | | - | | 1,983 | | - | | 1,983 |
| Tax deductions relating to stock-based | | | | | | | | | | |
| compensation | | - | | - | | 61 | | - | | 61 |
Issuance of common stock under employee stock purchase plan | | 156 | | - | | 682 | | - | | 682 |
| Balance, June 30, 2010 | | 63,485 | | $ 6 | | $ 122,782 | | $ (65,782) | | $ 57,006 |
| | | | | | | | | | |
NIC INC.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands |
| |
| | Three-months Ended | | Six-months ended |
| | June 30, | | June 30, |
| | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | | | | |
| Cash flows from operating activities: | | | | | | | | |
| Net income | | $ | 3,930 | | | $ | 4,731 | | | $ | 7,253 | | | $ | 7,509 | |
Adjustments to reconcile net income to net cash provided by operating activities, excluding the effects of acquisition: | | | | | | | | |
| Amortization of acquisition-related intangible assets | | | 80 | | | | 629 | | | | 161 | | | | 629 | |
| Depreciation & amortization | | | 1,090 | | | | 1,004 | | | | 2,172 | | | | 1,940 | |
| Stock-based compensation expense | | | 943 | | | | 816 | | | | 1,983 | | | | 1,384 | |
| Deferred income taxes, net | | | (257 | ) | | | 774 | | | | (113 | ) | | | 2,392 | |
| Nonrecurring gain on acquisition of business (net of tax) | | | - | | | | (2,184 | ) | | | - | | | | (2,184 | ) |
| Loss on disposal of property and equipment | | | 2 | | | | - | | | | 2 | | | | - | |
| Changes in operating assets and liabilities, net of acquisition: | | | | | | | | |
| (Increase) in trade accounts receivable | | | (2,472 | ) | | | (5,304 | ) | | | (2,264 | ) | | | (2,742 | ) |
| (Increase) decrease in prepaid expenses & other current assets | | | 1,407 | | | | 434 | | | | (462 | ) | | | 308 | |
| (Increase) in other assets | | | (15 | ) | | | (4 | ) | | | (47 | ) | | | (4 | ) |
| Increase (decrease) in accounts payable | | | 590 | | | | 7,502 | | | | (4,464 | ) | | | 6,277 | |
| Increase in accrued expenses | | | 2,064 | | | | 3,279 | | | | 123 | | | | 1,768 | |
| Increase in other current liabilities | | | 1,196 | | | | 37 | | | | 839 | | | | 218 | |
| Increase (decrease) in other long-term liabilities | | | 296 | | | | (153 | ) | | | 267 | | | | (278 | ) |
| Net cash provided by operating activities | | | 8,854 | | | | 11,561 | | | | 5,450 | | | | 17,217 | |
| Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (1,334 | ) | | | (776 | ) | | | (2,184 | ) | | | (1,321 | ) |
| Capitalized internal use software development costs | | | (135 | ) | | | (156 | ) | | | (270 | ) | | | (265 | ) |
| Acquisition of business | | | - | | | | (1,500 | ) | | | - | | | | (1,500 | ) |
| Net cash used in investing activities | | | (1,469 | ) | | | (2,432 | ) | | | (2,454 | ) | | | (3,086 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Cash dividends on common stock | | | - | | | | - | | | | (19,312 | ) | | | (19,150 | ) |
| Proceeds from employee common stock purchases | | | - | | | | - | | | | 682 | | | | 465 | |
| Proceeds from exercise of employee stock options | | | 17 | | | | 27 | | | | 17 | | | | 27 | |
| Tax deductions related to stock-based compensation | | | - | | | | 917 | | | | 61 | | | | 917 | |
| Net cash provided by (used in) financing activities | | | 17 | | | | 944 | | | | (18,552 | ) | | | (17,741 | ) |
| Net increase (decrease) in cash and cash equivalents | | | 7,402 | | | | 10,073 | | | | (15,556 | ) | | | (3,610 | ) |
| Cash and cash equivalents, beginning of period | | | 45,674 | | | | 46,690 | | | | 68,632 | | | | 60,373 | |
| Cash and cash equivalents, end of period | | $ | 53,076 | | | $ | 56,763 | | | $ | 53,076 | | | $ | 56,763 | |
| Other cash flow information: | | | | | | | | |
| Income taxes paid | | $ | - | | | $ | - | | | $ | 3,137 | | | $ | 792 | |
CONTACT:
NIC Inc.
Chris Neff, 435-901-3870
cneff@nicusa.com
