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): August 5, 2010

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 (see General Instruction A.2. below):
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 5, 2010, NIC Inc. issued a press release announcing its 2010 second quarter financial results. A copy of the press release is furnished with this report on Form 8-K as Exhibit 99.

ITEM 7.01          REGULATION FD DISCLOSURE

NIC Inc. will host a conference call, which will also be available by webcast, to discuss its 2010 second quarter financial results at 4:30 p.m. EDT on August 5, 2010.

The information in this Form 8-K and Exhibit 99 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (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 or the Exchange Act, except as shall be expressly set forth in such filing.

ITEM 9.01          FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

99 - Press release issued by NIC Inc. dated August 5, 2010, announcing its 2010 second quarter financial results, furnished solely for purposes of incorporation by reference to Item 2.02 herein.

- 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 5, 2010

/s/ Stephen M. Kovzan

Stephen M. Kovzan

Chief Financial Officer

 

-3-

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