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3Q 2005 EARNINGSFor Immediate Release |
| Contact: Chris Neff 435-645-8898 cneff@nicusa.com |
NIC Earns Four Cents Per Share on a 27 Percent Increase in Operating Income in the Third Quarter
OLATHE, Kan. – October 27, 2005 – NIC Inc. (Nasdaq: EGOV) today reported net income of $2.4 million and earnings per share of four cents on total revenues of $16.0 million for the three months ended September 30, 2005. In the prior year quarter, the Company posted net income of $1.9 million and earnings per share of three cents on total revenues of $13.4 million. Driven by a 46 percent increase in same state non-driver record exchange (non-DMV) revenues in the core portal business, operating income was $3.9 million in the third quarter, up 27 percent over third quarter 2004.
3Q 2005 Operating Highlights
Three months ended September 30
(thousands)
2005 2004 Change
-------- ------- ------
Portal Revenues $ 14,637 $11,878 23%
Portal Cost of Revenues 7,620 6,266 22%
-------- -------
Portal Gross Profit $ 7,017 $ 5,612 25%
Portal Gross Profit % 48% 47%
Operating Income $ 3,851 $ 3,028 27%
Operating Income Margin % 24% 23%
Portal revenues were $14.6 million, a 23 percent increase over the prior year quarter. On a same state basis, portal revenues grew 20 percent in the third quarter, up from 17 percent in third quarter 2004. NIC’s professional license renewal, tax filing, vehicle tag renewal, and limited criminal history search services performed well in the third quarter, helping same state revenues from non-DMV services to increase 46 percent over the prior year quarter. During the same period last year, same state non-DMV revenues grew 37 percent.
Revenues from driver record exchange (DMV) services grew 20 percent in third quarter and were driven by the launch of the South Carolina portal earlier in the year. On a same state basis, DMV revenues increased 12 percent over third quarter 2004.
"In the third quarter, NIC’s portal business once again demonstrated that our self-funded business model remains strong and continues to deliver value to both shareholders and our government partners," said Jeff Fraser, Chief Executive Officer of NIC.
The portal business launched 72 new non-DMV revenue-generating services in the third quarter. "Revenue diversification is a key component of our long-term growth strategy, and we currently have more than 140 non-DMV fee-based services in the development pipeline," said Harry Herington, NIC’s Chief Operating Officer.
Revenues for the software and services business in the third quarter were $1.3 million, down 15 percent from the prior year quarter. Software and services results in the prior year quarter were positively affected by a $0.4 million reduction in loss reserves related to legacy business filing contracts in Arkansas and Oklahoma.
In the California Secretary of State engagement, the Company has been advised that it will not be required to deliver the business entity phase of the project and is currently in discussions regarding the effects of reducing the project scope. "Our goals are to have a satisfied customer in the Secretary of State’s office and to minimize NIC’s financial exposure, and we are currently on track to meet both objectives," said Eric Bur, NIC’s Chief Financial Officer.
Selling and administrative expenses for the current quarter were $2.9 million, down from $3.1 million in the prior year quarter. Selling and administrative expenses were 18 percent of revenue in the third quarter, down from 23 percent in third quarter 2004.
NIC ended the quarter with $48.2 million in cash and marketable securities, up $5.3 million from June 30, 2005. The Company’s cash and marketable securities have risen $17.9 million since September 30, 2004.
Operating Highlights
In October, NIC completed agreements with all of the necessary parties in the state of Colorado (www.Colorado.gov) to manage its 18th self-funded state portal. For the second consecutive year, an NIC state partner was ranked first in the nation in Brown University’s 2005 eGovernment Survey. Utah (www.Utah.gov) earned the top spot, Maine (www.Maine.gov) finished second, and Tennessee (www.Tennessee.gov) was ranked sixth.
Five NIC partners were also top 10 finalists in the Center for Digital Government’s 2005 Best of the Web competition. Tennessee was ranked second, Indiana (www.IN.gov) placed third, and Virginia finished in fifth place. Alabama (www.Alabama.gov) and Nebraska (www.Nebraska.gov) were also ranked in the top 10.
"We thank Colorado for their vote of confidence and look forward to a long and productive partnership, and we congratulate all of our award-winning state partners," concluded Herington.
Fourth Quarter 2005 Outlook
For fourth quarter 2005, NIC expects total revenues of $14.4 - $14.9 million, portal revenues of $13.6 - $13.9 million, and software and services revenues of $0.8 - $1.0 million. The Company also anticipates operating income between $2.8 - $3.0 million and net income of $1.7 - $1.9 million.
For full year 2005, NIC expects total revenues of $54.4 – $56.0 million, portal revenues of $54.4 - $55.7 million, and software and services revenues of $0.3 million or less. The Company also anticipates operating income between $9.3 - $9.8 million and net income of $5.6 - $5.9 million.
"NIC’s projections do not include any new or unsigned contracts and also reflect our exit from the standalone local portal business earlier this year, which generated $1.0 million of low-margin revenue in 2004. In line with our year-to-date performance, 97 percent of portal revenues should be transactional in 2005 as we swap the occasional portal software development project for recurring revenue opportunities," concluded Bur. Fourth quarter 2005 guidance also reflects normal seasonality, which has historically resulted in a 5-10 percent decrease in portal DMV revenues.
Third Quarter Webcast Details
Thursday, October 27, 2005
9:00 a.m. (EDT)
Call leaders: Jeff Fraser, Chief Executive Officer
Harry Herington, Chief Operating Officer
Eric Bur, Chief Financial Officer
To sign in and listen: The Webcast system is available at www.nicusa.com/investor.
Some users may need to refresh their browsers to view the Webcast information. A replay of the Webcast will be available until 5:00 p.m. (EDT) on January 26, 2006, by visiting www.nicusa.com/investor.
An audio replay of NIC’s third quarter earnings call will also be available until 11:00 p.m. (EST) on November 3 by dialing 1-800-405-2236 and using passcode 11041476.
About NIC
NIC manages more eGovernment services than any provider in the world. The company is helping governments communicate more effectively with citizens and businesses by putting essential services online. NIC provides eGovernment solutions for 2,000 state and local agencies that serve more than 55 million people in the United States. Additional company information is available at www.nicusa.com.
The statements in this release regarding continued implementation of NIC's business model and its development of new products and services are forward-looking statements. 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, 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; and general economic conditions and the other important cautionary statements and risk factors described in NIC's 2004 Annual Report on Form 10-K/A filed on March 16, 2005, with the Securities and Exchange Commission.
(financial tables follow)
NIC Inc.
FINANCIAL SUMMARY
(UNAUDITED)
Thousands except for per share amounts
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Portal revenues $14,637 $11,878 $ 42,684 $36,363
Software & services
revenues 1,321 1,549 171 5,821
------- ------- -------- -------
Total revenues 15,958 13,427 42,855 42,184
------- ------- -------- -------
Operating expenses:
Cost of portal revenues,
exclusive of
depreciation &
amortization 7,620 6,266 21,428 18,308
Cost of software &
services revenues,
exclusive of
depreciation &
amortization 1,117 720 4,442 4,449
Selling & administrative 2,948 3,052 9,507 9,229
Depreciation &
amortization 422 361 1,141 1,130
------- ------- -------- -------
Total operating expenses 12,107 10,399 36,518 33,116
------- ------- -------- -------
Operating income 3,851 3,028 6,337 9,068
------- ------- -------- -------
Other income (expense):
Interest income 197 31 432 75
Interest expense - (2) - (11)
Equity in net loss of
affiliates - - - (109)
Other income (expense),
net - 14 (3) 14
--------- ------- -------- -------
Total other income
(expense) 197 43 429 (31)
------- ------- -------- -------
Income before income taxes 4,048 3,071 6,766 9,037
Income tax provision 1,661 1,122 2,806 3,660
------- ------- -------- -------
Net income $ 2,387 $ 1,949 $ 3,960 $ 5,377
======= ======= ======== =======
Basic and diluted earnings
per share: $ 0.04 $ 0.03 $ 0.07 $ 0.09
======= ======= ======== =======
Weighted average shares
outstanding:
Basic 60,271 59,065 59,838 58,894
======= ======= ======== =======
Diluted 61,226 60,952 60,902 60,952
======= ======= ======== =======
Key Financial Metrics:
Revenue growth - outsourced
portals 23% 19% 17% 22%
Same state revenue growth -
outsourced portals 20% 17% 18% 19%
Revenue growth - software &
services (15%) (47%) (97%) (31%)
Gross profit percentage -
outsourced portals 48% 47% 50% 50%
Gross profit percentage -
software & services 15% 54% N/A 24%
Selling & administrative
costs as a percentage of
revenue 18% 23% 22% 22%
Operating income margin
percentage 24% 23% 15% 21%
Portal Revenue Analysis
(thousands):
DMV transaction-based $ 9,109 $ 7,586 $ 26,408 $23,114
Non-DMV transaction-based 5,089 3,551 14,737 10,491
Software development &
portal management 439 741 1,539 2,758
------- ------- -------- -------
Total $14,637 $11,878 $ 42,684 $36,363
======= ======= ======== =======
NIC Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands except for share amounts
Sept. 30, Dec. 31,
2005 2004
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 32,299 $ 30,769
Cash and cash equivalents - restricted - 3,000
Marketable securities 15,900 -
Trade accounts receivable 22,318 17,610
Unbilled revenues 1,347 3,400
Deferred income taxes 952 433
Prepaid expenses & other current assets 1,410 1,312
---------- ---------
Total current assets 74,226 56,524
Property and equipment, net 2,764 2,603
Unbilled revenues 1,465 2,404
Deferred income taxes 29,315 31,274
Other assets 190 266
---------- ---------
Total assets $ 107,960 $ 93,071
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,899 $ 14,394
Accrued expenses 5,964 6,266
Application development contracts 1,338 -
Other current liabilities 116 151
---------- ---------
Total current liabilities 28,317 20,811
---------- ---------
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par, 200,000,000 shares
authorized 60,367,112 and 59,301,375 shares
issued and outstanding - -
Additional paid-in capital 204,323 200,921
Accumulated deficit (124,496) (128,456)
---------- ---------
79,827 72,465
Less treasury stock (184) (205)
---------- ---------
Total shareholders' equity 79,643 72,260
---------- ---------
Total liabilities and shareholders'
equity $ 107,960 $ 93,071
========== =========
NIC Inc.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
---------- ------- -------- -------
Cash flows from operating
activities:
Net income $ 2,387 $ 1,949 $ 3,960 $ 5,377
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation & amortization 422 361 1,141 1,130
Application development
contracts (120) (446) 1,338 (465)
Deferred income taxes 1,473 882 2,510 3,258
Equity in net loss
of affiliates - - - 109
Changes in operating
assets and liabilities
(Increase) decrease in trade
accounts receivable 5 1,815 (4,708) (870)
(Increase) decrease
in unbilled revenues (700) (121) 2,992 3,594
(Increase) decrease
prepaid expenses &
other current assets (386) (285) (92) 63
Decrease in other assets 14 7 76 9
Increase (decrease)
in accounts payable 1,527 (538) 6,505 (2,008)
Increase (decrease)
in accrued expenses 764 (482) (302) 832
(Decrease) in other
current liabilities (4) (28) (35) (43)
---------- ------- -------- -------
Net cash provided by
operating activities 5,382 3,114 13,385 10,986
---------- ------- -------- -------
Cash flows from investing
activities:
Purchases of property and
equipment (826) (132) (1,304) (987)
Purchases of marketable
securities (7,900) - (30,900) -
Maturities of marketable
securities - - 15,000 250
Proceeds from sale of
affiliate - - - 300
---------- ------- -------- -------
Net cash used in investing
activities (8,726) (132) (17,204) (437)
---------- ------- -------- -------
Cash flows from financing
activities:
Cash and cash equivalents
- restricted - 2,286 3,000 2,363
Payments on note payable - (286) - (363)
Proceeds from employee
common stock purchases - - 122 117
Proceeds from exercise of
employee stock options 745 835 2,227 1,051
---------- ------- -------- -------
Net cash provided by
financing activities 745 2,835 5,349 3,168
Net increase (decrease) in
cash and cash equivalents (2,599) 5,817 1,530 13,717
Cash and cash equivalents,
beginning of period 34,898 21,440 30,769 13,540
---------- ------- -------- -------
Cash and cash equivalents,
end of period $ 32,299 $27,257 $ 32,299 $27,257
========== ======= ======== =======
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