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): November 7, 2013

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 November 7, 2013, NIC Inc. (the “Company”) issued a press release announcing its 2013 third quarter financial results. A copy of the press release is furnished with this report on Form 8-K as Exhibit 99, 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 third quarter financial results at 4:30 p.m. EST on November 7, 2013.  The call may also include discussion of company developments, and forward-looking and other material information about business and financial matters.

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 November 7, 2013, announcing its third quarter financial results is being furnished as part of this report.


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: November 7, 2013

/s/ Stephen M. Kovzan

Stephen M. Kovzan

Chief Financial Officer

Exhibit 99.1

NIC Total Revenues Increase 15 Percent Driven by Strong Same-State Growth; Declares Special Cash Dividend of $0.35 Per Share

Forbes recognizes Company’s exceptional financial performance

OLATHE, Kan.--(BUSINESS WIRE)--November 7, 2013--NIC Inc. (NASDAQ: EGOV), the dominant provider of eGovernment services, today announced net income of $5.1 million and earnings per share of 8 cents on total revenues of $61.3 million for the three months ended September 30, 2013. As previously announced, results for the current quarter include a one-time, non-cash pre-tax charge of approximately $5.1 million (approximately 5 cents per share on an after-tax basis) included in cost of portal revenues to write off outstanding accounts receivable due from the Commonwealth of Pennsylvania. Current quarter operating income decreased 22 percent from the prior year quarter, reflecting the one-time charge. In the third quarter of 2012, the Company reported net income of $6.0 million and earnings per share of 9 cents on total revenues of $53.2 million.

On October 28, 2013, NIC’s Board of Directors declared a special cash dividend of $0.35 per share, payable on January 2, 2014 to stockholders of record on November 8, 2013. The dividend payout will total approximately $23.0 million based on the current number of shares outstanding.

Quarterly portal revenues were $57.7 million, a 15 percent increase over third quarter 2012. On a same-state basis, portal revenues were up 15 percent in the current quarter. Same-state, transaction-based revenues from non-driver record (non-DMV) services rose 28 percent over third quarter 2012 through continued strong performance from the Texas motor vehicle inspection service as part of the DPS Direct suite of services, a court fee payment service in Colorado, and several eGovernment services in New Jersey. Same-state DMV revenues increased 5 percent in the third quarter of 2013.


Current quarter revenues from the Company’s newest portal in Wisconsin totaled $0.4 million. The Company did not recognize any revenues in the current quarter from its Pennsylvania portal.

“Our focus on the long-term success of the Company continues to produce solid financial results for NIC,” said NIC Chief Executive Officer Harry Herington. “There are times when we must make tough decisions in the short-term, but we know they are the right decisions to make and will fuel our success in the future – whether that results in maintaining strong partnerships or national recognition like what we recently received from Forbes.”

NIC’s portal gross profit percentage was 31 percent in the current quarter, down from 37 percent in the prior year quarter, reflecting the one-time $5.1 million charge in Pennsylvania and $2.0 million of start-up costs from the Wisconsin and Pennsylvania portals.

Selling & administrative expenses in the current quarter increased 26 percent, or $2.2 million, from the third quarter of 2012. As a percentage of total revenues, selling & administrative expenses were 17 percent in the current quarter, compared to 15 percent in the prior year quarter . The current quarter increase in selling & administrative expenses was primarily attributable to higher costs to enhance corporate-wide information technology and security infrastructure as a result of the Company’s growth, and higher executive and non-executive management incentive compensation and benefit costs.

In addition, the Company incurred approximately $3.5 million in legal fees and other third-party costs in the third quarter of 2013 in connection with the previously disclosed SEC investigation and related matters. These expenses were reduced by approximately $2.8 million of reimbursement by the Company’s directors’ and officers’ liability insurance carrier, resulting in a net expense of approximately $0.7 million in the current quarter. Selling & administrative expenses in the prior year quarter included approximately $1.1 million of expenses related to the SEC matter, which were reduced by approximately $1.0 million of insurance reimbursement by the Company’s insurance carrier, resulting in a net expense of approximately $0.1 million in the prior year quarter.


“Despite the one-time charge in Pennsylvania, we were quite pleased with our results for the quarter, particularly our strong organic revenue growth,” said Steve Kovzan, NIC’s Chief Financial Officer. “The lifeblood of our business will always be the thousands of online services that make government interactions more efficient and secure “

Operational Highlights

In October 2013, Forbes announced its annual rankings of the “100 Best Small Companies in America” with annual revenues between $5 million and $1 billion. NIC achieved its highest ranking in the Company’s history, placing 11 th on the list. This is the fifth consecutive year that NIC has received this national recognition, and NIC remains the only publicly traded company headquartered in the state of Kansas to make the list. Criteria included earnings growth, sales growth, and return on equity in the past 12 months and over five years, as well as stock performance.

The Company also was notified recently that it has been included in the Barron’s 400 Index, which selects the top 6 percent of all publicly traded companies in North America based on strong financial performance. This is the second consecutive year that NIC has been included in the index, placing it in an exclusive group of only 1.5 percent of all companies in North America to achieve the ranking two years in a row.

Also during the third quarter, the state of Maine signed a two-year renewal extension, taking its contract through 2016.

Third Quarter Earnings Call and Webcast Details

On the call, the Company will discuss its 2013 third quarter, 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

Thursday, November 7, 2013
4:30 p.m. (EST)    
 
Call bridge: 866-225-8754 (U.S. callers) or 480-629-9818 (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/investors .

A replay of the Webcast will be available until 11 p.m. (EDT) on May 8, 2014, by visiting http://www.egov.com/investors .

About NIC

NIC Inc. (NASDAQ: EGOV) is the leading provider of enterprise-wide, official state eGovernment 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 3,500 federal, state, and local agencies across the United States. Additional information is available at http://www.egov.com .

Cautionary Statement Regarding Forward-Looking Information

Any statements contained in this release that do not relate to historical or current facts constitute forward-looking statements. These statements include statements regarding the Company’s potential financial performance for the current fiscal year, statements regarding the planned implementation of new portal contracts 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 implement its new portal contracts in a timely and cost-effective manner; NIC’s ability to successfully increase the adoption and use of eGovernment services; the possibility of reductions in fees or revenues as a result of budget deficits, government shutdowns or changes in government policy; the success of the Company in renewing existing contracts and in signing contracts with new states and federal government agencies; 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 possibility of security breaches through cyber attacks; legal fees and other expenses related to the SEC matter in excess of directors’ and officers’ liability insurance policy limits; general economic conditions; and the other important cautionary statements and risk factors described in NIC's 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2013 and in subsequent periodic reports filed with the SEC. Any forward-looking statements made in this release speak only as of the date of this release. 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 and percentages
 
Three months ended Nine months ended
September 30, September 30,
  2013     2012     2013     2012  
Revenues:
Portal revenues $ 57,721 $ 50,198 $ 177,857 $ 144,952
Software & services revenues   3,609     3,008     10,635     8,979  
Total revenues   61,330     53,206     188,492     153,931  
Operating expenses:
Cost of portal revenues, exclusive of depreciation & amortization 39,755 31,794 107,416 91,095
Cost of software & services revenues, exclusive of depreciation &
amortization 928 1,079 3,220 3,045
Selling & administrative 10,387 8,218 30,054 24,536
Amortization of acquisition-related intangible assets - 53 - 214
Depreciation & amortization   2,145     1,606     6,221     4,236  
Total operating expenses   53,215     42,750     146,911     123,126  
Operating income 8,115 10,456 41,581 30,805
Other income (expense), net   4     -     (17 )   (1 )
Income before income taxes 8,119 10,456 41,564 30,804
Income tax provision   3,026     4,461     15,707     13,088  
Net income $ 5,093   $ 5,995   $ 25,857   $ 17,716  
 
Basic net income per share $ 0.08   $ 0.09   $ 0.39   $ 0.27  
Diluted net income per share $ 0.08   $ 0.09   $ 0.39   $ 0.27  
 
Weighted average shares outstanding:
Basic   64,961     64,586     64,854     64,458  
Diluted   64,969     64,604     64,861     64,475  
 
Key Financial Metrics:
Revenue growth - outsourced portals 15 % 14 % 23 % 13 %
Same state revenue growth - outsourced portals 15 % 8 % 17 % 7 %
Recurring portal revenue as a % of total portal revenues 93 % 92 % 94 % 92 %
Gross profit % - outsourced portals 31 % 37 % 40 % 37 %
Revenue growth - software & services 20 % 6 % 18 % 14 %
Gross profit % - software & services 74 % 64 % 70 % 66 %
Selling & administrative expenses as a % of total revenues 17 % 15 % 16 % 16 %
Operating income as a % of total revenue 13 % 20 % 22 % 20 %
 
Portal Revenue Analysis:
DMV transaction-based $ 19,037 $ 18,575 $ 63,829 $ 53,691
Non-DMV transaction-based 32,197 25,290 96,372 71,900
Portal software development 3,922 3,955 9,961 12,283
Portal management   2,565     2,378     7,695     7,078  
Total portal revenues $ 57,721   $ 50,198   $ 177,857   $ 144,952  
 

     
NIC INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except par value amount
   
 
September 30, 2013 December 31, 2012
ASSETS
Current assets:
Cash $ 90,929 $ 62,358
Trade accounts receivable, net 61,045 55,261
Deferred income taxes, net 950 887
Prepaid expenses & other current assets   12,217   9,340  
Total current assets 165,141 127,846
Property and equipment, net 14,182 16,025
Intangible assets, net 1,650 1,016
Other assets   259   253  
Total assets $ 181,232 $ 145,140  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 45,847 $ 43,664
Accrued expenses 22,498 18,948
Other current liabilities   327   208  
Total current liabilities 68,672 62,820
 
Deferred income taxes, net 2,307 2,050
Other long-term liabilities   2,208   1,346  
Total liabilities   73,187   66,216  
 
Commitments and contingencies - -
 
Stockholders' equity:
Common stock, $0.0001 par, 200,000 shares authorized,
64,989 and 64,628 shares issued and outstanding 6 6
Additional paid-in capital 87,572 84,308
Retained earnings (accumulated deficit)   20,467   (5,390 )
Total stockholders' equity   108,045   78,924  
Total liabilities and stockholders' equity $ 181,232 $ 145,140  
 

                   
NIC INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Thousands
 
 
Additional
Common Stock Paid-in Retained Earnings
Shares Amount Capital (Accumulated Deficit) Total
Balance, January 1, 2013 64,628 $ 6 $ 84,308 $ (5,390 ) $ 78,924
Net income - - - 25,857 25,857
Restricted stock vestings 397 - 83 - 83
Dividend equivalents cancelled upon forfeiture of
performance-based restricted stock awards - - 50 - 50
Shares surrendered and cancelled upon vesting of restricted
stock to satisfy tax withholdings (124 ) - (2,242 ) - (2,242 )
Stock-based compensation - - 3,267 - 3,267
Tax deductions relating to stock-based compensation - - 1,335 - 1,335
Shares issuable in lieu of dividend payments on unvested
performance-based restricted stock awards - - (133 ) - (133 )
Issuance of common stock under employee stock purchase plan 88     -   904     -     904  
Balance, September 30, 2013 64,989   $ 6 $ 87,572   $ 20,467   $ 108,045  
 
               
NIC INC.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
 
Three months ended Nine months ended
September 30, September 30,
  2013     2012     2013     2012  
 
Cash flows from operating activities:
Net income $ 5,093 $ 5,995 $ 25,857 $ 17,716
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangible assets - 53 - 214
Depreciation & amortization 2,145 1,606 6,221 4,236
Provision for losses on accounts receivable 5,086 77 5,125 157
Stock-based compensation expense 1,190 1,252 3,267 3,109
Deferred income taxes (322 ) 1,544 (1,142 ) 1,080
Gain on disposal of property and equipment (4 ) - 17 1
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable, net 3,479 673 (10,909 ) (5,230 )
(Increase) in prepaid expenses & other current assets (4,674 ) (1,021 ) (1,541 ) (3,607 )
(Increase) in other assets (4 ) (6 ) (6 ) (8 )
Increase (decrease) in accounts payable (2,373 ) (428 ) 2,183 2,725
Increase in accrued expenses 2,975 1,664 1,303 1,162
Increase (decrease) in other current liabilities (1,061 ) (16 ) 119 (116 )
Increase (decrease) in other long-term liabilities   148     (40 )   862     (113 )
Net cash provided by operating activities   11,678     11,353     31,356     21,326  
Cash flows from investing activities:
Purchases of property and equipment (1,687 ) (8,710 ) (3,945 ) (11,374 )
Capitalized internal use software development costs   (349 )   (201 )   (1,079 )   (550 )
Net cash used in investing activities   (2,036 )   (8,911 )   (5,024 )   (11,924 )
Cash flows from financing activities:
Proceeds from employee common stock purchases - - 904 806
Tax deductions related to stock-based compensation   599     427     1,335     1,197  
Net cash provided by financing activities   599     427     2,239     2,003  
Net increase in cash 10,241 2,869 28,571 11,405
Cash, beginning of period   80,688     70,175     62,358     61,639  
Cash, end of period $ 90,929   $ 73,044   $ 90,929   $ 73,044  
Other cash flow information:
Non-cash investing activities:
Capital expenditures accrued but not yet paid $ 5 $ 657 $ 5 $ 657
Cash payments:
Income taxes paid $ 6,550 $ 3,205 $ 12,744 $ 11,854
Cash dividends on common stock previously restricted for payment of dividend $ - $ - $ - $ 16,231

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