NIC Inc. (Nasdaq: EGOV) today announced net income of $3.8 million and earnings per share of six cents on total revenues of $21.6 million for the three months ended September 30, 2007. Operating income was $4.4 million for the quarter, up 23 percent over third quarter 2006. Third quarter results include a gain of $0.5 million on the sale of a minority investment and an income tax expense reduction of $0.5 million. Absent these items, net income would have been $2.8 million, or four cents per share. In third quarter 2006, the company reported net income of $2.5 million and earnings per share of four cents on total revenues of $18.0 million.

Quarterly portal revenues were a record $20.7 million, a 20 percent increase over third quarter 2006. On a same-state basis, portal revenues grew 19 percent in the third quarter, compared to an eight percent increase in the year-ago quarter. NIC’s business licensing, vehicle registration and hunting and fishing license services performed well in the third quarter, helping same-state, transaction-based revenues from non-driver record (non-DMV) applications rise 31 percent, up from 26 percent growth in the prior-year quarter. DMV revenues grew 11 percent on a same-state basis in the third quarter, up from one percent growth during the same period last year.

“Non-DMV services continue to grow strongly,” said Jeff Fraser, chief executive officer of NIC. “A key component of our strategic growth initiative is to increase revenues from non-DMV services, and this quarter’s numbers are a good indicator that we continue to meet this objective.”

In the third quarter, NIC’s portals launched 83 new non-DMV revenue-generating services. The company also has an all-time high of 178 applications in the development pipeline.

Reflecting NIC’s ongoing investment in long-term growth, selling and administrative expenses rose to $5.2 million in the current quarter compared to $3.9 million in the third quarter of 2006. As a percentage of portal revenue, selling and administrative expenses were 25 percent in the current quarter, up from 23 percent in the third quarter of 2006.

“We continue to see benefits from our strategic growth investments,” said Harry Herington, president of NIC. “Our portals are exceeding our goals for non-DMV revenue, and the sales pipeline continues to develop according to our expectations.”

NIC estimates the cost of these initiatives will be $4 million to $5 million in 2007.

In the third quarter, NIC sold its 12 percent minority investment in e-Government Solutions Ltd., a private joint venture based in London, and recognized a gain of $0.5 million (one cent per share) on the cash proceeds from the sale. Third-quarter results also reflect a change in the company’s uncertain tax positions that reduced income tax expense by $0.5 million (one cent per share).

NIC ended the third quarter with approximately $52.4 million in cash and investments, up $9.2 million from June 30, 2007. As announced earlier this year, the company declared a $0.75 per-share special dividend in the first quarter that was paid to shareholders on February 20, 2007. NIC paid the $46.7 million dividend from its short-term investments and cash reserves.

Operating Highlights

NIC announced last week that it finalized a contract with West Virginia to operate the state’s official Web site, WV.gov (http://www.wv.gov), for up to three years. NIC will deploy the self-funded model for the enterprise portal.

In August, the company announced a new long-term contract with Rhode Island, extending a relationship that began in 2001. The contract includes an initial three-year term with one two-year renewal option that can extend the contract through 2012.

NIC yesterday announced the election of Alexander C. Kemper to its board of directors. Kemper founded Perfect Commerce, and he was formerly the chairman and CEO of UMB Bank N.A. and CEO of UMB Financial Corp., a Nasdaq-traded financial services company with assets of more than $8 billion.

The company also announced in August the promotion of Steve Kovzan to chief financial officer from vice president of finance and chief accounting officer.

“Steve has done a tremendous job making the transition into his new role,” said Herington. “Our finance and accounting functions have not skipped a beat, and he is quickly shaping the role to his particular strengths in investor relations and communications.”

Eight NIC partners were among the top 10 finalists in the Center for Digital Government’s 2007 Best of the Web competition, which the Center announced in September. NIC partners also took home six Digital Government Achievement Awards, another part of the Center’s Best of the Web competition, which singles out specific sites and applications.

The Center also presented NIC with its Long Train Corporate Award, one of the inaugural Best Fit Integrator Awards, in September. The program recognizes the performance of eGovernment information technology providers based on nominations from government partners. NIC’s award distinguished the company as the best overall provider, and more than 25 percent of its partners submitted nominations.

2007 Outlook

For full-year 2007, the company projects: total revenues of $84.1 million to $84.7 million, portal revenues of $80.9 million to $81.4 million, software and services revenues of $3.2 million to $3.3 million, operating income between $13.8 million and $14.5 million and net income between $9.8 million and $10.3 million.

“Our updated projections reflect strong performance from our core portal operations in the first three quarters of the year, normal seasonality in the fourth quarter and a partial year of revenues and start-up costs from our new Arizona contract,” said Chief Financial Officer Steve Kovzan. “Our projections also include a partial year of start-up costs from our new West Virginia contract.”

The company’s projections do not include any new, unsigned portal contracts.

Third-Quarter Earnings Call and Webcast Details

About NIC

NIC manages more eGovernment services than any provider in the world. The company helps government communicate more effectively with citizens and businesses by putting essential services online. NIC provides eGovernment solutions for 2,600 state and local agencies that serve more than 69 million people in the United States. Additional information is available at http://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 2006 Annual Report on Form 10-K filed on March 15, 2007, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 6, 2007, with the Securities and Exchange Commission.