NIC Earns Five Cents Per Share in Second Quarter 2008 on a 19 Percent Increase in Portal Revenues

Business Wire, July 30, 2008

OLATHE, Kan. -- NIC Inc. (NASDAQ: EGOV) today announced net income of $3.2 million and earnings per share of five cents on total revenues of $25.7 million for the three months ended June 30, 2008. Operating income was $5.3 million for the quarter, up 16 percent over second quarter 2007. The company reported net income of $2.8 million and earnings per share of four cents on total revenues of $21.5 million in second quarter 2007.

Quarterly portal revenues were a record $24.6 million, a 19 percent increase over second quarter 2007. On a same-state basis, portal revenues grew 13 percent in the second quarter. Same-state, non-DMV transaction-based revenues grew 25 percent over second quarter 2007 through strong performance in tax filings, vehicle license and registrations, hunting and fishing licenses, professional license renewals, and UCC filings and searches. Same-state DMV revenues grew one percent over second quarter 2007.

NIC's portals launched 98 new non-DMV revenue-generating services and another 188 applications are in the development pipeline. For the full year 2008, NIC has launched a total of 262 new non-DMV revenue generating applications.

"It was a solid second quarter underscored by growth that is in line with historical rates and expectations," said Harry Herington, Chairman of the Board and Chief Executive Officer of NIC. "We remain confident in the fundamentals of the business, including our robust sales pipeline and our ability to deliver the financial results to which we have guided for fiscal 2008, despite these tough economic times."

Selling and administrative expenses were $5.8 million in the current quarter compared to $5.4 million in the second quarter of 2007. As a percentage of portal revenues, selling and administrative expenses were 24 percent in the current quarter, down from 26 percent in the second quarter of 2007.

Cash flow from operations was $3.2 million in the second quarter. At June 30, 2008, NIC's cash and cash equivalents totaled $41.6 million and investment securities totaled $6.5 million.

"Our investments in growth are showing multiple signs of success," said Steve Kovzan, Chief Financial Officer of NIC. "Organic growth in our core portal business remains strong, as evident by 13 percent same-state revenue growth and record portal revenues this quarter, while our sales and marketing efforts have generated significant new state pipeline opportunities. We expect these investments to result in long-term returns in the form of earnings growth, operating margin expansion, and new state wins."

National Information Consortium Voting Trust Dissolution

As previously announced, the trustees of the National Information Consortium Voting Trust dissolved the trust as of June 20, 2008. The trust, in place for 10 years, was managed independently of NIC and held approximately 21.4 million shares of NIC common stock, or approximately 34 percent of total shares outstanding.

Of the shares previously held by the trust, affiliates of NIC, including officers and directors, hold 13.2 million shares and the other 8.2 million shares are held by non-affiliates. Affiliate shares will be subject to the trading volume restrictions of Rule 144 of the Securities and Exchange Commission.

Upon advice of counsel, NIC submitted a written request for interpretive guidance to the SEC as to whether or not the shares distributed from the voting trust are prohibited from trading for six months after the date of the trust dissolution under Rule 144. All affiliate and non-affiliate shares distributed from the voting trust will initially be restricted from trading while NIC seeks guidance from the SEC. NIC currently anticipates receiving a response from the SEC in 30-60 days.

SEC Investigation

During the second quarter of 2008, NIC received notice from the SEC that a formal order of investigation has been issued with respect to the employee expense reimbursement and related matters that were the subject of an internal investigation completed by NIC's Audit Committee in February of this year, disclosed in NIC's Form 8-K filed on February 6, 2008.

As is frequently the case in such situations, the SEC has taken the step of obtaining a formal order of investigation to ensure the thoroughness of its investigation. The Company believes the investigation conducted by NIC's Audit Committee was thorough and independent and does not anticipate that the SEC investigation will reveal any significant additional instances of misreporting of expenses by employees.

Operating Highlights

Also during the second quarter, portal management contract renewals were approved by the states of: Arkansas (http://www.Arkansas.gov), through June 2010; Oklahoma (http://www.OK.gov), through June 2009; and South Carolina (http://www.SC.gov), through July 2009. Idaho (http://www.Idaho.gov) awarded NIC with a new three-year contract with additional renewal options through 2015. NIC has never lost a contract renewal or competitive rebid opportunity.

"We are proud to continue serving our partners in Arkansas, Idaho, Oklahoma, and South Carolina," said Herington. "Together, we are uniquely able to deliver the online services citizens and businesses demand through financial models and unmatched experience that benefit states and end users."