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): July 31, 2017

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)

Not Applicable
(Former name or former address, if chnged since last report)

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 August 2, 2017, NIC Inc. (the “Company”) issued a press release announcing its 2017 second quarter financial results. 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 5.05     AMENDMENTS TO THE REGISTRANT’S CODE OF ETHICS, OR WAIVER OF A PROVISION OF THE CODE OF ETHICS

(a)  On July 31, 2017, the Board of Directors of the Company adopted amendments to the Company’s Code of Business Conduct and Ethics (“Code of Conduct”).  The Company’s amended Code of Conduct is available on the Company’s website at www.egov.com under the Investor Relations tab and Corporate Governance caption, and can be accessed directly at http://www.egov.com/investor-relations/code-of-business-conduct-and-ethics .  

A number of the amendments to the Code of Conduct involve changes in language, appearance and style, including the use of defined terms, all of which are designed to enhance readers’ understanding of its provisions.  The Code of Conduct was also amended to add an anti-money laundering provision and to remove language that the Company considered to be dated or duplicative and unnecessary.

The amendments took effect immediately upon adoption by the Board of Directors and did not result in any waiver, explicit or implicit, of any provision of the Company’s previous Code of Conduct.

The foregoing description does not purport to be a complete description of the amendments to the Code of Conduct and the above description is qualified in its entirety by reference to the complete Code of Conduct, as amended.


ITEM 7.01     REGULATION FD DISCLOSURE

The Company will host a conference call, which will also be available by webcast, to discuss its second quarter financial results at 4:30 p.m. EDT on August 2, 2017.  The call may also include discussion of company developments, and forward-looking 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 August 2, 2017, announcing its second quarter financial results 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: August 2, 2017

/s/ Stephen M. Kovzan

Stephen M. Kovzan

Chief Financial Officer

- 3 -

Exhibit 99.1

NIC Earns 19 Cents Per Share in Second Quarter 2017 on Record Total Revenues of $85.3 Million

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

OLATHE, Kan.--(BUSINESS WIRE)--August 2, 2017--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
 

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