EGOV NIC Inc

Successful core digital government services drive solid same state growth;Company declares regular quarterly dividend of 8 cents per share

NIC Inc. (NASDAQ: EGOV), the dominant provider of digital government services, today announced net income of $12.8 million and earnings per share of 19 cents on record total revenues of $85.3 million for the three months ended June 30, 2017. In the second quarter of 2016, the Company reported net income of $13.1 million and earnings per share of 20 cents on total revenues of $80.8 million.

Quarterly portal revenues were a record $79.4 million, a 5 percent increase over the second quarter of 2016. On a same-state basis, portal revenues were $77.6 million in the current quarter, a 7 percent increase over the second quarter of 2016. Same-state, transaction-based revenues from Interactive Government Services (IGS) rose 12 percent over the second quarter of 2016, due primarily to higher volumes from a variety of services including motor vehicle inspections and registrations and business filings, among others. Same-state, transaction-based revenues from Driver History Records (DHR) were up 1 percent. Same-state portal software development and services revenues decreased 22 percent, due to the timing of project-based, time and material initiatives across several portals.

Second quarter 2017 revenues from the Company’s newest portal in Louisiana totaled $1.7 million, compared to $0.3 million in the prior year quarter during the pilot phase of the contract. In the prior year quarter, revenues from the legacy Tennessee portal contract totaled $2.0 million, while revenues from the legacy Iowa portal contract totaled $0.5 million. As previously announced, the Company’s contract with the state of Tennessee expired on March 31, 2017, and the Company’s contract with the state of Iowa expired on November 30, 2016.

Software & services revenues were $6.0 million in the current quarter, up 12 percent from the second quarter of 2016, driven by an increase in revenues from the delivery of the Library of Congress Copyright Royalty Board electronic filing and case management system and from an increase in transactional revenues from the federal Pre-employment Screening Program.

NIC’s operating income margin was 23 percent for the current quarter, down from 25 percent in the prior year quarter. This decrease reflects higher development costs for the new enterprise licensing and permitting platform to be used for the state of Illinois and other NIC partner states, a decrease in profit contribution from the legacy Tennessee portal contract, and higher selling & administrative expenses due mainly to personnel-related costs and costs to support and enhance corporate-wide information technology, security and portal operations, including development of the citizen-centric Gov2Go enterprise platform.

“I was pleased to see continued solid growth of our core business during the second quarter,” said Harry Herington, NIC Chief Executive Officer and Chairman of the Board. “Transaction-based services are the foundation of our business, and every quarter I am impressed with the new services our teams launch on behalf of our government partners.”

Declaration of Quarterly Dividend

On July 31, 2017, NIC’s Board of Directors declared a regular quarterly cash dividend of 8 cents per share to be paid on September 20, 2017 to stockholders of record as of the close of business on September 6, 2017. The dividend is expected to total approximately $5.4 million and will be paid out of NIC’s available cash.

Operational Highlights

During the quarter, the Company signed a contract with the state of Illinois to develop an enterprise licensing and permitting platform. The agreement includes a six-year base contract, with four, one-year renewal options the state can exercise to extend the contract through July 2027.

In addition, several NIC subsidiaries received contract extensions during the second quarter of 2017. The Company’s subsidiaries, Rhode Island Interactive, LLC, and New Mexico Interactive, LLC, received one-year contract extensions from the state of Rhode Island and New Mexico, respectively, taking both contracts through June 2018. Also, the Federal Motor Carrier Safety Administration exercised a one-year extension with the Company, taking the contract to manage the Pre-Employment Screening Program through August 2018. In addition, the state of Pennsylvania awarded NIC’s subsidiary, Pennsylvania Interactive, LLC, a two-year contract extension taking the agreement through November 2019.

Second Quarter Earnings Call and Webcast Details

On the August 2, 2017 call, the Company will discuss its 2017 second quarter financial and operational results, 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

Wednesday, August 2, 2017

     

4:30 p.m. (EDT)

  Call bridge: 866-548-4713 (U.S. callers) or 323-794-2093 (international callers) Conference ID: 7605357 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 https://www.egov.com/investor-relations.

A replay of the Webcast will be available by visiting https://www.egov.com/investor-relations.

About NIC

Founded in 1992, NIC Inc. (NASDAQ: EGOV) is celebrating 25 years as the nation’s premier provider of innovative digital government solutions and secure payment processing, which help make government interactions more accessible for everyone through technology. The family of NIC companies has developed a library of more than 13,000 digital government services for more than 5,500 federal, state, and local government agencies. Among these solutions is the ground-breaking digital government personal assistant, Gov2Go, delivering citizens personalized reminders and a single access point for government interactions. More information is available at www.egov.com.

Cautionary Statement Regarding Forward-Looking Information

Any statements included in this release that do not relate to historical or current facts constitute forward-looking statements. These statements include estimates, projections, the expected length of contract terms, statements relating to the Company’s business plans, objectives and expected operating results, statements relating to possible future dividends, and the assumptions upon which those statements are based. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements, including regional or national business, political, economic, competitive, social and market conditions, including various termination rights of the Company and its partners, the ability of the Company to renew existing contracts, and to sign contracts with new states, and federal and local government agencies, as well as possible data security incidents. You should not rely on any forward-looking statement as a prediction or guarantee about the future. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the sections titled “Risk Factors” and “Caution About Forward-Looking Statements” of the Company’s most recent Forms 10-K and 10-Q filed with the SEC. These filings are available at the SEC's web site at www.sec.gov. Any forward-looking statements made in this release speak only as of the date of this release. Except as required by applicable law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

        NIC INC.FINANCIAL SUMMARY(UNAUDITED)Thousands except per share amounts and percentages   Three months ended Six months ended June 30, June 30,   2017     2016     2017     2016   Revenues: Portal revenues $ 79,374 $ 75,513 $ 156,572 $ 148,710 Software & services revenues   5,952     5,297     11,931     10,490   Total revenues   85,326     80,810     168,503     159,200   Operating expenses: Cost of portal revenues, exclusive of depreciation & amortization 49,009 46,123 96,041 89,738 Cost of software & services revenues, exclusive of depreciation & amortization 1,779 1,445 3,542 2,858 Selling & administrative 13,131 11,165 24,791 22,507 Depreciation & amortization   1,688     1,736     3,301     3,400   Total operating expenses   65,607     60,469     127,675     118,503   Operating income before income taxes 19,719 20,341 40,828 40,697 Income tax provision   6,950     7,280     14,074     14,742   Net income $ 12,769   $ 13,061   $ 26,754   $ 25,955     Basic net income per share $ 0.19   $ 0.20   $ 0.40   $ 0.39   Diluted net income per share $ 0.19   $ 0.20   $ 0.40   $ 0.39     Weighted average shares outstanding: Basic   66,248     65,953     66,147     65,846   Diluted   66,248     65,967     66,147     65,859     Key Financial Metrics: Revenue growth - outsourced portals 5 % 6 % 5 % 9 % Same state revenue growth - outsourced portals 7 % 6 % 6 % 9 % Recurring portal revenue as a % of total portal revenues 97 % 96 % 97 % 96 % Gross profit % - outsourced portals 38 % 39 % 39 % 40 % Revenue growth - software & services 12 % 11 % 14 % 14 % Gross profit % - software & services 70 % 73 % 70 % 73 % Selling & administrative expenses as a % of total revenues 15 % 14 % 15 % 14 % Operating income as a % of total revenue 23 % 25 % 24 % 26 %   Portal Revenue Analysis: IGS transaction-based $ 50,217 $ 45,276 $ 96,142 $ 87,209 DHR transaction-based 25,689 25,830 53,858 52,956 Portal software development 2,193 3,132 4,022 5,995 Portal management   1,275     1,275     2,550     2,550   Total portal revenues $ 79,374   $ 75,513   $ 156,572   $ 148,710     NIC INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands except par value amount       June 30, 2017 December 31, 2016 ASSETS Current assets: Cash $ 135,386 $ 127,009 Trade accounts receivable, net 79,349 82,722 Prepaid expenses & other current assets   12,382   15,033 Total current assets 227,117 224,764 Property and equipment, net 9,653 9,726 Intangible assets, net 4,484 3,588 Deferred income taxes, net 1,511 2,307 Other assets   1,984   477 Total assets $ 244,749 $ 240,862   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 58,717 $ 73,252 Accrued expenses 22,207 23,395 Other current liabilities   3,794   3,150 Total current liabilities 84,718 99,797   Other long-term liabilities   8,172   7,162 Total liabilities   92,890   106,959   Commitments and contingencies - -   Stockholders' equity: Common stock, $0.0001 par, 200,000 shares authorized, 66,265 and 65,982 shares issued and outstanding 7 7 Additional paid-in capital 108,996 106,669 Retained earnings   42,856   27,227 Total stockholders' equity   151,859   133,903 Total liabilities and stockholders' equity $ 244,749 $ 240,862   NIC INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)thousands             Additional Common Stock Paid-in Shares Amount Capital Retained Earnings Total Balance, January 1, 2017 (previously reported) 65,982 $ 7 $ 106,669 $ 27,227 $ 133,903 Cumulative effect of adoption of new accounting standard -     -   409     (409 )   -   Balance, January 1, 2017 (as adjusted) 65,982 7 107,078 26,818 133,903 Net income - - - 26,754 26,754 Restricted stock vestings 319 - 107 - 107 Dividends declared - - - (10,692 ) (10,692 ) Dividend equivalents on performance-based restricted stock awards - - - (55 ) (55 ) Dividend equivalents cancelled upon forfeiture of - performance-based restricted stock awards - - - 31 31 Shares issuable in lieu of dividend payments on unvested performance-based restricted stock awards - - (83 ) - (83 ) Shares surrendered and cancelled upon vesting of restricted stock to satisfy tax withholdings (123 ) - (2,614 ) - (2,614 ) Stock-based compensation - - 3,178 - 3,178 Issuance of common stock under employee stock purchase plan 87     -   1,330     -     1,330   Balance, June 30, 2017 66,265   $ 7 $ 108,996   $ 42,856   $ 151,859     NIC INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)thousands     Six months ended June 30,   2016 2017 (as adjusted) Cash flows from operating activities: Net income $ 26,754 $ 25,955 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses (recoveries) on accounts receivable 379 (23 ) Depreciation & amortization 3,301 3,400 Stock-based compensation expense 3,178 3,005 Deferred income taxes 796 51 Excess tax benefits from stock-based compensation - 427 (Gain) loss on disposal of property and equipment 39 (4 ) Changes in operating assets and liabilities: Decrease in trade accounts receivable, net 2,994 2,941 (Increase) decrease in prepaid expenses & other current assets 2,651 (2,168 ) (Increase) in other assets (1,507 ) (26 ) Increase (decrease) in accounts payable (14,535 ) 1,599 (Decrease) in accrued expenses (1,271 ) (1,515 ) Increase in other current liabilities 644 169 Increase in other long-term liabilities   1,010     746   Net cash provided by operating activities   24,433     34,557     Cash flows from investing activities: Purchases of property and equipment (2,395 ) (2,748 ) Proceeds from sale of property and equipment 7 6 Capitalized internal use software development costs   (1,692 )   (1,142 ) Net cash used in investing activities   (4,080 )   (3,884 )   Cash flows from financing activities: Cash dividends on common stock (10,692 ) - Proceeds from employee common stock purchases 1,330 1,114 Tax withholdings related to stock-based compensation awards   (2,614 )   (2,073 ) Net cash used in financing activities   (11,976 )   (959 )   Net increase in cash 8,377 29,714 Cash, beginning of period   127,009     98,388   Cash, end of period $ 135,386   $ 128,102     Other cash flow information: Non-cash investing activities: Capital expenditures accrued but not yet paid $ 83 $ 27 Cash payments: Income taxes paid $ 12,405 $ 13,941 Cash dividends on common stock previously restricted for payment of dividend $ - $ 36,456  

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NIC Inc.Angela Davied, 913-754-7054adavied@egov.com