Current Report


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): February 4, 2016

NIC INC.
(Exact name of registrant as specified in its charter)

Delaware

000-26621

52-2077581

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

25501 West Valley Parkway, Suite 300
Olathe, Kansas 66061
(Address of principal executive offices, including zip code)

(877) 234-3468
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


ITEM 2.02          RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 4, 2016, NIC Inc. (the “Company”) issued a press release announcing its fourth quarter and fiscal 2015 financial results and its fiscal 2016 financial outlook. A copy of the press release is furnished with this report on Form 8-K as Exhibit 99.1, and is incorporated by reference herein.

ITEM 7.01          REGULATION FD DISCLOSURE

The Company will host a conference call, which will also be available by webcast, to discuss its fourth quarter and fiscal 2015 financial results and its fiscal 2016 financial outlook at 4:30 p.m. EST on February 4, 2016. The call may also include discussion of company developments, and forward-looking statements and other material information about business and financial matters.

In accordance with General Instruction B.2 of Form 8-K, the information in Items 2.02 and 7.01 of this Form 8-K and Exhibit 99.1 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth in such filing.

ITEM 9.01          FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

99.1 - Press release issued by NIC Inc. dated February 4, 2016, announcing its fourth quarter and fiscal 2015 financial results and its fiscal 2016 financial outlook, is being furnished as part of this report.

- 2 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NIC Inc.

 

Date: February 4, 2016

/s/ Stephen M. Kovzan

Stephen M. Kovzan

Chief Financial Officer

- 3 -

Exhibit 99.1

NIC Earns 13 Cents Per Share in Fourth Quarter 2015; Achieves High End of Annual Earnings Guidance

2016 guidance reflects continued strong organic growth of core business

OLATHE, Kan.--(BUSINESS WIRE)--February 4, 2016--NIC Inc. (NASDAQ: EGOV), the dominant provider of eGovernment services, today announced net income of $9.0 million and earnings per share of 13 cents on total revenues of $71.2 million for the three months ended December 31, 2015. In the fourth quarter of 2014, the Company reported net income of $8.3 million and earnings per share of 12 cents on total revenues of $66.0 million.

Fourth Quarter 2015 Performance

Fourth quarter 2015 portal revenues were $66.4 million, a 7 percent increase over the fourth quarter of 2014. On a same state basis, portal revenues increased 8 percent over the prior year quarter. Revenues from same state Interactive Government Services (IGS) increased 11 percent during the current quarter due to a variety of services, including vehicle registrations, property taxes, and professional licensing. Same state transaction-based revenues from Driver History Record (DHR) services rose 5 percent over the fourth quarter of 2014 due primarily to a DHR monitoring service in one state, which became effective in the second quarter of 2015, and a price increase in another state, which became effective in the first quarter of 2015. Same state software development revenues decreased 9 percent, as the Company cycled against a stronger quarter of project-based, time and materials revenues in the prior year quarter.

Software & services revenues were $4.7 million, up 22 percent from the fourth quarter of 2014, driven by an increase in revenues from the federal Pre-employment Screening Program and a new payment processing service for the City of Portland.


NIC’s operating income increased 9 percent to $14.1 million for the current quarter, while NIC’s operating income margin was 20 percent in both the current and prior year quarters.

The Company’s effective tax rate in the current quarter was 36 percent, and includes a favorable benefit related to the full-year effect of the federal research & development tax credit for the 2015 tax year. Legislation making the tax credit permanent was signed into law during the fourth quarter of 2015. The tax rate in the prior year quarter was also 36 percent.

Operational Highlights

During the fourth quarter of 2015, the State of Nebraska signed a new three-year contract with the Company after a competitive re-bid to continue operating the state’s official web portal and digital government services. The agreement also includes two, one-year renewal options the State may exercise to extend the contract through April 2021.

Also, during the fourth quarter, the State of Hawaii extended its contract with the Company for an additional three years, taking the agreement through January 2019. In addition, the State of Mississippi recently extended its contract with the Company for two years, taking the agreement through December 2017.

“I am pleased with our fourth quarter 2015 financial results as once again, our core business produced solid organic growth,” said Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board. “In addition, I truly appreciate the confidence the States of Nebraska, Hawaii, and Mississippi continue to place in NIC.”

Full-Year 2015 Performance

Fiscal year 2015 total revenues rose 7 percent to $292.4 million, and portal revenues grew 7 percent to $273.5 million. Portal revenue growth in 2015 was driven by new IGS services in several states, DHR price increases in three states and DHR volume growth across several states. On a same state basis, portal revenues were 8 percent higher than in 2014, with same state IGS transactional revenues up 11 percent for the year, and same state DHR revenues growing 5 percent. Same state time & materials revenues relating to portal software development decreased 8 percent for the year.


Software & services revenues for the full year were $18.9 million, up 15 percent from 2014, driven by an increase in revenues from the federal Pre-employment Screening Program and new payment processing services.

Operating income increased 7 percent to $67.3 million for the year. NIC’s operating income margin was 23 percent in both the current and prior year.

NIC earned 63 cents per share in 2015, up from 59 cents in 2014, meeting the high end of the Company’s 2015 earnings guidance.

On November 2, 2015, NIC’s Board of Directors declared a special cash dividend of 55 cents per share, which was paid to stockholders on January 4, 2016. NIC used a total of $36.5 million of its cash reserves to pay the special dividend.

“Our 2015 financial results were solid and in line with the growth we anticipated,” said Steve Kovzan, NIC’s Chief Financial Officer. “Our business operated exactly as it was designed, as we launched hundreds of new digital government services that produced recurring transactional revenues, steady organic revenue growth, and strong cash flow, of which we were again able to return a significant portion to stockholders in the form of a special cash dividend.”

Full-Year 2016 Outlook

For fiscal year 2016, NIC currently expects total revenues of $303.0-316.0 million, with portal revenues ranging from $283.5-295.5 million and software & services revenues ranging from $19.5-20.5 million. The Company also currently expects earnings per share to range from 64-68 cents. Capital expenditures are currently expected to range from $7-8 million, and capitalized internal use software development costs to range from $2-3 million.

“The upper end of our financial guidance reflects consistent same state revenue growth and gross profit and operating margins comparable to recent historical averages,” said Steve Kovzan, NIC’s Chief Financial Officer. “We also currently expect incremental revenue contributions from the Louisiana portal following the anticipated completion of the pilot phase in the second half of the year, pending the state’s approval.”


The Company’s projections do not include revenues or costs from any unannounced contracts.

Fourth Quarter Earnings Call and Webcast Details

On February 4, 2016, the Company will host a call to discuss its 2015 fourth quarter and year-end financial and operational results and to answer questions from the investment community. The call may also include a discussion of Company developments, and forward-looking and other material information about business and financial matters.

Dial-In Information

Thursday, February 4, 2016
4:30 p.m. (EST)
Conference ID: 7245652
Call bridge: 888-329-8893 (U.S. callers) or 719-325-2495 (international callers)

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 http://www.egov.com/investor-relations .

A replay of NIC’s fourth quarter earnings call will be available by visiting http://www.egov.com/investor-relations .

About NIC

Founded in 1992, NIC Inc. (NASDAQ: EGOV) is the nation's leading provider of official government websites, online services, and secure payment processing solutions. The Company's innovative eGovernment services help make government more accessible to everyone through technology. The family of NIC companies provides eGovernment solutions for more than 3,500 federal, state, and local agencies in the United States. Forbes has named NIC as one of the “100 Best Small Companies in America” six times, and the Company has been included four times on the Barron’s 400 Index. Additional information is available at http://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, 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 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 website at www.sec.gov . Any forward-looking statements made in this release speak only as of the date of this release. 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 Twelve months ended
December 31, December 31,
  2015     2014     2015     2014  
Revenues:
Portal revenues $ 66,436 $ 62,149 $ 273,502 $ 255,744
Software & services revenues   4,723     3,869     18,874     16,353  
Total revenues   71,159     66,018     292,376     272,097  
Operating expenses:
Cost of portal revenues, exclusive of depreciation & amortization 42,799 39,985 168,166 156,185
Cost of software & services revenues, exclusive of depreciation &
amortization 1,456 1,259 5,432 4,784
Selling & administrative 11,166 9,491 43,098 38,937
Depreciation & amortization   1,673     2,358     8,385     9,177  
Total operating expenses   57,094     53,093     225,081     209,083  
Operating income before income taxes 14,065 12,925 67,295 63,014
Income tax provision   5,081     4,634     25,316     23,956  
Net income $ 8,984   $ 8,291   $ 41,979   $ 39,058  
 
Basic net income per share $ 0.13   $ 0.12   $ 0.63   $ 0.59  
Diluted net income per share $ 0.13   $ 0.12   $ 0.63   $ 0.59  
 
Weighted average shares outstanding:
Basic   65,622     65,302     65,555     65,224  
Diluted   65,716     65,363     65,640     65,278  
 
Key Financial Metrics:
Revenue growth - outsourced portals 7 % 8 % 7 % 9 %
Same state revenue growth - outsourced portals 8 % 8 % 8 % 8 %
Recurring portal revenue as a % of total portal revenues 96 % 96 % 96 % 95 %
Gross profit % - outsourced portals 36 % 36 % 39 % 39 %
Revenue growth - software & services 22 % 12 % 15 % 16 %
Gross profit % - software & services 69 % 67 % 71 % 71 %
Selling & administrative expenses as a % of total revenues 16 % 14 % 15 % 14 %
Operating income as a % of total revenue 20 % 20 % 23 % 23 %
 
Portal Revenue Analysis:
IGS transaction-based $ 38,846 $ 34,975 $ 155,164 $ 139,716
DHR transaction-based 23,786 22,565 101,506 95,753
Portal software development 2,529 2,789 11,187 12,205
Portal management   1,275     1,820     5,645     8,070  
Total portal revenues $ 66,436   $ 62,149   $ 273,502   $ 255,744  
 

NIC INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except par value amount
       
 
December 31, 2015 December 31, 2014
ASSETS
Current assets:
Cash $ 98,388 $ 87,983
Cash restricted for payment of dividend 36,456 -
Trade accounts receivable, net 80,362 57,468
Prepaid expenses & other current assets   12,584   11,502
Total current assets 227,790 156,953
Property and equipment, net 9,333 12,247
Intangible assets, net 2,267 2,394
Deferred income taxes, net 1,421 -
Other assets   426   446
Total assets $ 241,237 $ 172,040
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,133 $ 41,402
Accrued expenses 20,986 19,751
Dividend payable 36,456 -
Other current liabilities   2,597   2,902
Total current liabilities 121,172 64,055
 
Deferred income taxes, net - 497
Other long-term liabilities   4,259   3,350
Total liabilities   125,431   67,902
 
Commitments and contingencies - -
 
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares authorized,
65,637 and 65,303 shares issued and outstanding 7 7
Additional paid-in capital 100,929 94,690
Retained earnings   14,870   9,441
Total stockholders' equity   115,806   104,138
Total liabilities and stockholders' equity $ 241,237 $ 172,040
 

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, 2015 65,303 $ 7 $ 94,690 $ 9,441 $ 104,138
Net income - - - 41,979 41,979
Dividends declared - -

-

(36,456 ) (36,456 )
Dividend equivalents on performance-based
restricted stock awards - - - (159 ) (159 )
Dividend equivalents cancelled upon forfeiture of
performance-based restricted stock awards - - 18 65 83
Restricted stock vestings 365 - 74 - 74
Shares surrendered and cancelled upon vesting of restricted
stock to satisfy tax withholdings (106 ) - (1,839 ) - (1,839 )
Stock-based compensation - - 6,441 - 6,441
Tax deductions relating to stock-based compensation - - 412 - 412
Shares issuable in lieu of dividend payments on unvested
performance-based restricted stock awards - - 2 - 2
Issuance of common stock under employee stock purchase plan 75     -   1,131     -     1,131  
Balance, December 31, 2015 65,637   $ 7 $ 100,929   $ 14,870   $ 115,806  
 
NIC INC.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
       
Three months ended Twelve months ended
December 31, December 31,
  2015     2014     2015     2014  
 
Cash flows from operating activities:
Net income $ 8,984 $ 8,291 $ 41,979 $ 39,058
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization 1,673 2,358 8,385 9,177
Provision for losses on accounts receivable 217 148 290 414
Stock-based compensation expense 1,056 1,536 6,441 6,104
Deferred income taxes (107 ) 2 (3,815 ) (2,461 )
Loss on disposal of property and equipment 72 28 98 175
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable, net (1,958 ) 4,282 (23,184 ) (5,064 )
(Increase) decrease in prepaid expenses & other current assets (2,858 ) (665 ) 815 1,631
(Increase) decrease in other assets 7 (94 ) 20 (156 )
Increase (decrease) in accounts payable 5,898 (77 ) 19,731 2,325
Increase (decrease) in accrued expenses 242 354 (605 ) (3,449 )
Increase (decrease) in other current liabilities 127 224 (305 ) 2,628
Increase in other long-term liabilities   434     299     908     901  
Net cash provided by operating activities   13,787     16,686     50,758     51,283  
Cash flows from investing activities:
Purchases of property and equipment (1,196 ) (1,393 ) (4,453 ) (5,381 )
Proceeds from sale of property and equipment 1 - 4 -
Capitalized internal use software development costs   (368 )   (408 )   (992 )   (1,479 )
Net cash used in investing activities   (1,563 )   (1,801 )   (5,441 )   (6,860 )
Cash flows from financing activities:
Cash dividends on common stock - (32,977 ) - (32,977 )
Cash restricted for payment of dividend (36,456 ) - (36,456 ) -
Proceeds from employee common stock purchases - - 1,131 1,107
Tax deductions related to stock-based compensation   177     120     413     1,185  
Net cash used in financing activities   (36,279 )   (32,857 )   (34,912 )   (30,685 )
Net increase (decrease) in cash (24,055 ) (17,972 ) 10,405 13,738
Cash, beginning of period   122,443     105,955     87,983     74,245  
Cash, end of period $ 98,388   $ 87,983   $ 98,388   $ 87,983  
Other cash flow information:
Non-cash investing activities:
Capital expenditures accrued but not yet paid $ 1 $ 102 $ 1 $ 102
Cash payments:
Income taxes paid $ 7,713 $ 4,395 $ 27,222 $ 25,059
Cash dividends on common stock previously restricted for payment of dividend $ - $ - $ - $ 22,982
 

CONTACT:
NIC Inc.
Angela Davied, 913-754-7054
Director of Communications
& Investor Relations
adavied@egov.com