NIC Earns Six Cents Per Share on a 50 Percent Increase in Portal Revenues

http://www.businesswire.com/news/home/20091105006074/en

Results Driven by Contribution from the Recently Acquired Texas Contract and
Solid Same-State Portal Revenue Growth
OLATHE, Kan.--(Business Wire)--
NIC Inc. (NASDAQ: EGOV) today announced net income of $4.1 million and earnings
per share of six cents on total revenues of $37.3 million for the three months
ended September 30, 2009. Operating income was $6.6 million for the quarter, a
47 percent increase over the prior year quarter. The company reported net income
of $3.1 million and earnings per share of five cents on total revenues of $24.9
million in third quarter 2008.

As previously announced, Texas NICUSA, LLC, part of the NIC family of companies,
acquired an eGovernment contract in the state of Texas during the second quarter
of 2009, which includes the current TexasOnline portal management engagement
through December 31, 2009. Portal revenues and cost of portal revenues from the
acquired Texas contract were approximately $8.8 million and $5.6 million,
respectively, in the current quarter. Third quarter 2009 financial results also
include approximately $1.8 million of intangible asset amortization expense
related to the acquisition.

Quarterly portal revenues were $36.2 million, a 50 percent increase over third
quarter 2008. On a same-state basis, portal revenues grew 14 percent in the
current quarter. Same-state, transaction-based revenues from non-driver record
(non-DMV) services grew 27 percent over third quarter 2008 through strong
performance in tax filings, vehicle title and registration, professional
licensing services, and the Alabama state liquor store payment service launched
in the fourth quarter of 2008. Same-state DMV revenues were flat compared to
third quarter 2008.

"Our current partners are aggressively rolling out valuable and cost-saving
services," said Harry Herington, Chairman of the Board and Chief Executive
Officer of NIC. "NIC also continues to see a lot of opportunity as we educate
prospective partners at all levels of government on the benefits of a
self-funded services model."

Selling and administrative expenses were $6.2 million in the current quarter
compared to $5.5 million in the third quarter of 2008. As a percentage of portal
revenues, selling and administrative expenses were 17 percent in the current
quarter, down from 23 percent in the same period last year.

Third quarter 2009 results included an income tax reserve reduction of
approximately $0.1 million. Absent this item, net income would have been $4.0
million, with earnings per share unchanged. Third quarter 2008 results included
an income tax reserve reduction of approximately $0.2 million. Absent this item,
net income would have been $2.8 million, or four cents per share.

"Our strong third quarter financial results were driven by a full quarter of the
recently acquired Texas contract," said Steve Kovzan, Chief Financial Officer of
NIC. "The contribution from Texas, coupled with the stable and consistent
performance of our other 22 portal businesses, has put us on track to
comfortably meet or exceed the top end of our 2009 financial guidance for
revenue, operating income and net income."

Operating Highlights

As recently announced, the U.S. Department of Transportation, Federal Motor
Carrier Safety Administration (FMCSA), awarded NIC Technologies, LLC, part of
the NIC family of companies, a contract to build and operate the National Motor
Carrier Pre-Employment Screening System. The contract has an initial one-year
term, with four, single-year renewals at the option of the FMCSA. The new
service will disseminate commercial drivers` safety performance history and will
assist the motor carrier industry in assessing individual operators` crash and
serious safety violation inspection history as a pre-employment condition. The
system is currently expected to launch in December 2009, and will be developed
and maintained using a self-funded, transaction-based model.

During the third quarter, Kentucky Interactive, LLC, part of the NIC family of
companies, was awarded a new contract by the Commonwealth of Kentucky
(www.kentucky.gov) after a competitive rebid. The initial term of the contract
is for three years with three additional, single-year renewals at the option of
the Commonwealth of Kentucky.

Also in third quarter, the New Mexico Motor Vehicle Division launched new online
driver and motor vehicle services.

"We are honored that our partner in Kentucky continues to put its trust in NIC
and we are excited about the opportunities ahead with the just-launched motor
vehicles services in New Mexico and our recently-announced partnership with the
U.S. Department of Transportation," said Herington.

In addition, NIC`s state government partners received 18 national eGovernment
awards by the Center for Digital Government, an international research and
advisory institute focused on the use of information technology in government.
Nine NIC state partners took top honors in the Best of the Web competition,
including four of the top five positions in the rankings. Utah won first place
for the third time since 2003. Nine Digital Government Achievement Awards, which
recognize excellence in electronic government services, went to NIC state
partners.

"We want to offer a special congratulations to those partners recognized for
their leadership in eGovernment by the Center for Digital Government. It is our
partners` dedication to providing cutting-edge services online,
over-the-counter, and via mobile that makes our partnerships so powerful and
enduring," concluded Herington.

2010 Financial Guidance for Texas Contract

As previously announced, the state of Texas signed a seven-year contract with
Texas NICUSA, LLC, part of the NIC family of companies, to manage TexasOnline
2.0 (www.texasonline.com), the official government portal for the state of
Texas.

The state of Texas issued a Request for Offers for its official state portal and
awarded the contract to Texas NICUSA following a nine-month competitive
procurement. The original RFO was issued in October 2008, with bids due to the
state in January 2009. The new contract was awarded on July 31, 2009. NIC will
begin earning revenues under the contract in January 2010.

For fiscal year 2010, NIC currently expects total revenues from the new Texas
contract, including related Master Work Order projects, to range from $32.0
million - $36.0 million, with gross profit margins in the low-to-mid 20 percent
range.

Significant first-year projects under the new TexasOnline 2.0 contract include a
state-wide content management system to increase both internal and external
usability, a complete Web portal redesign, including the home page, and an
extensive marketing campaign to re-launch the new Web site and create additional
awareness and drive adoption of online services.

"We believe that these long-term investments will significantly drive adoption
of portal services and make more services available electronically to Texans,"
said Kovzan. "Given the population of Texas, our incremental margin opportunity
should be substantial, and we currently expect revenues and margins to grow
steadily over time as we launch new services."

NIC intends to provide full year 2010 consolidated financial guidance as part of
its fourth quarter 2009 earnings announcement in February 2010.

Third Quarter Earnings Call Dial-In Information
Thursday, November 5, 2009
4:30 p.m. (EST)

Call bridge: 800-762-8795 (U.S. callers) or 480-629-9773 (international callers)

Call leaders: Harry Herington, Chairman of the Board and Chief Executive Officer
Steve Kovzan, Chief Financial Officer

Webcast and Podcast Information

To sign in and listen: The Webcast system is available at
http://www.nicusa.com/investor.

A replay of the Webcast will be available until 11:00 p.m. (EST) on February 3,
2010, by visiting http://www.nicusa.com/investor. The conference call replay
will also be available via Podcast download by visiting
http://www.nicusa.com/investor.

An audio replay of NIC`s third quarter earnings call will be available until
11:00 p.m. (EST) on November 11, 2009, by dialing 800-406-7325 and using
passcode 4173076. International callers may dial 303-590-3030 and use the
aforementioned passcode to access the audio playback.

About NIC

NIC Inc. (NASDAQ: EGOV) is the nation`s leading provider of official government
portals, online services, and secure 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 97 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
NIC`s financial guidance for the current fiscal year and for the TexasOnline 2.0
contract in 2010, statements regarding the potential for growth in revenues and
margins relating to the TexasOnline 2.0 contract 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 the recently acquired current portal
management contracts and the TexasOnline 2.0 contract with government agencies
in the state of Texas; NIC's ability to successfully increase the adoption and
use of portal services in Texas; 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 (including
the recent deterioration in general economic conditions) and the other important
cautionary statements and risk factors described in NIC's 2008 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 13, 2009,
and in NIC`s Quarterly Reports on Form 10-Q filed with the SEC in 2009. 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 Nine-months ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Portal revenues $ 36,236 $ 24,147 $ 93,408 $ 72,564
Software & services revenues 1,018 794 3,058 2,758
Total revenues 37,254 24,941 96,466 75,322
Operating expenses:
Cost of portal revenues, exclusive of depreciation & 21,133 13,502 53,743 39,214
amortization
Cost of software & services revenues, exclusive of 609 541 1,847 1,681
depreciation & amortization
Selling & administrative 6,163 5,520 19,589 17,305
Nonrecurring gain on acquisition of business (net of tax) - - (2,184 ) -
Depreciation & amortization 2,779 903 5,347 2,648
Total operating expenses 30,684 20,466 78,342 60,848
Operating income 6,570 4,475 18,124 14,474
Other income (expense):
Interest income 3 140 48 583
Other expense, net - (5 ) - (24 )
Total other income 3 135 48 559
Income before income taxes 6,573 4,610 18,172 15,033
Income tax provision 2,453 1,550 6,543 5,805
Net income $ 4,120 $ 3,060 $ 11,629 $ 9,228

Basic net income per share $ 0.06 $ 0.05 $ 0.18 $ 0.14
Diluted net income per share $ 0.06 $ 0.05 $ 0.18 $ 0.14

Weighted average shares outstanding (as Restated)
Basic 63,062 62,724 62,933 62,449
Diluted 63,179 62,834 63,019 62,689

Key Financial Metrics:
Revenue growth - outsourced portals 50 % 17 % 29 % 19 %
Same state revenue growth - outsourced portals 14 % 10 % 12 % 12 %
Recurring portal revenue percentage 87 % 94 % 89 % 92 %
Gross profit % - outsourced portals 42 % 44 % 42 % 46 %
Selling & administrative as a % of portal revenue 17 % 23 % 21 % 24 %
Operating income margin as a % of portal revenue 18 % 19 % 19 % 20 %

Portal Revenue Analysis:
DMV transaction-based $ 15,862 $ 11,745 $ 41,403 $ 35,445
Non-DMV transaction-based 13,745 8,800 35,702 25,427
Portal software & services 4,746 1,498 10,629 5,454
Portal management 1,883 2,104 5,674 6,238
Total portal revenues $ 36,236 $ 24,147 $ 93,408 $ 72,564

NIC INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Thousands

September 30, 2009 December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents $ 66,633 $ 60,373
Trade accounts receivable 39,783 37,497
Unbilled revenues 392 359
Deferred income taxes, net 1,199 4,293
Prepaid expenses & other current assets 2,138 2,273
Total current assets 110,145 104,795

Property and equipment, net 6,504 6,641
Intangible assets, net 3,743 1,105
Deferred income taxes, net 4,143 6,727
Other assets 199 144
Total assets $ 124,734 $ 119,412

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,592 $ 41,792
Accrued expenses 13,320 8,407
Application development contracts 90 202
Other current liabilities 1,174 898
Total current liabilities 61,176 51,299

Other long-term liabilities 444 894
Total liabilities 61,620 52,193

Commitments and contingencies - -

Shareholders' equity:
Common stock, $0.0001 par, 200,000 shares authorized,
63,142 and 62,779 shares issued and outstanding 6 6
Additional paid-in capital 138,460 154,194
Accumulated deficit (75,352 ) (86,981 )
63,114 67,219
Total liabilities and shareholders' equity $ 124,734 $ 119,412

NIC INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
Thousands

Additional
Paid-in
Capital
Common Stock Accumulated
Deficit
Shares Amount Total
Balance, January 1, 2009, as originally reported 62,779 $ - $ 154,200 $ (86,981 ) $ 67,219
Change in par value of common stock - 6 (6 ) - -
Balance, January 1, 2009, as adjusted 62,779 6 154,194 (86,981 ) 67,219
Net income - - - 11,629 11,629
Cash dividends on common stock - - (19,150 ) - (19,150 )
Shares surrendered upon exercise of stock
options and vesting of restricted stock
to satisfy tax withholdings (95 ) - (648 ) - (648 )
Stock option exercises and restricted stock
vestings 353 - 90 - 90
Stock-based compensation - - 2,121 - 2,121
Tax deductions relating to stock-based
compensation - - 1,388 - 1,388
Issuance of common stock under
employee stock purchase plan 105 - 465 - 465
Balance, September 30, 2009 63,142 $ 6 $ 138,460 $ (75,352 ) $ 63,114

NIC INC.
CASH FLOW SUMMARY
(UNAUDITED)
Thousands

Three-months Ended Nine-months Ended
September 30, September 30,
2009 2008 2009 2008

Cash flows from operating activities:
Net income $ 4,120 $ 3,060 $ 11,629 $ 9,228
Adjustments to reconcile net income to net cash provided by
operating activities, excluding the effects of acquisition:
Depreciation & amortization 2,779 903 5,347 2,648
Stock-based compensation expense 737 601 2,121 1,829
Application development contracts (38 ) (36 ) (112 ) (107 )
Deferred income taxes 2,111 1,699 4,504 5,332
Nonrecurring gain on acquisition of business (net of tax) - - (2,184 ) -
Loss on disposal of property and equipment - 5 - 24
Changes in operating assets and liabilities, net of acquisition:
(Increase) decrease in trade accounts receivable 456 1,107 (2,286 ) (5,132 )
(Increase) decrease in unbilled revenues (11 ) 243 (33 ) 372
(Increase) decrease in prepaid expenses & other current assets (84 ) (642 ) 246 (146 )
(Increase) in other assets (52 ) (10 ) (55 ) (10 )
Increase (decrease) in accounts payable (1,477 ) 6,172 4,800 7,638
Increase in accrued expenses 2,378 871 4,146 929
Increase (decrease) in other current liabilities (139 ) 649 152 918
Increase (decrease) in other long-term liabilities (172 ) 322 (450 ) 322
Net cash provided by operating activities 10,608 14,944 27,825 23,845
Cash flows from investing activities:
Purchases of property and equipment (1,137 ) (891 ) (2,458 ) (3,118 )
Capitalized internal use software development costs (135 ) (153 ) (400 ) (561 )
Purchases of investments - - - (1,000 )
Sales and maturities of investments - 25 - 11,675
Acquisition of business - - (1,500 ) -
Net cash (used in) provided by investing activities (1,272 ) (1,019 ) (4,358 ) 6,996
Cash flows from financing activities:
Cash dividends on common stock - - (19,150 ) (15,709 )
Proceeds from employee common stock purchases - - 465 280
Proceeds from exercise of employee stock options 63 10 90 1,862
Tax deductions related to stock-based compensation 471 - 1,388 -
Net cash provided by (used in) financing activities 534 10 (17,207 ) (13,567 )
Net increase in cash and cash equivalents 9,870 13,935 6,260 17,274
Cash and cash equivalents, beginning of period 56,763 41,575 60,373 38,236
Cash and cash equivalents, end of period $ 66,633 $ 55,510 $ 66,633 $ 55,510

Other cash flow information:
Income taxes paid $ 8 $ 108 $ 800 $ 577

NIC Inc.
Nancy Beaton, 913-754-7054
nbeaton@nicusa.com

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