NIC Inc
Q1 2016 Earnings Call Transcript

Published: 3 May 2016

[Operator:]

Good day, everyone. Welcome to the NIC's Q1 2016 Earnings Announcement. Today's conference is being recorded. At this time, I'd like to turn the conference over Ms. Angela Davied. Please go ahead, ma'am.

[Angela Davied:]

Thank you, operator. Good afternoon, everyone. And welcome to NIC's first quarter earnings call. The press release for NIC's first quarter 2015 earnings announcement was issued 30 minutes ago and our earnings release is also available on our corporate website at egov.com/investor-relations. You may also call our headquarters at 1877-234-3468, and we will email the information to you. Following a reading of our cautionary statement regarding forward-looking information, our CEO Harry Herington, Chief Operating Officer Robert Knapp, and Steve Kovzan, NIC's Chief Financial Officer, will deliver prepared remarks. Then, we'll open for questions. Any statements included during this call that do not relate to historical or current facts constitute forward-looking statements. These statements include estimates, projections, the expected length of contract terms, statements relating to the company's business plans, objectives, and expected operating results and the assumptions upon which those statements are based. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements, including regional and national business, political, economic, competitive, social and market conditions, including various termination rights of the company and its partners, the ability of the company to renew existing contracts, and to sign contracts with new states and federal government agencies, as well as possible data security incidents. You should not rely on any forward-looking statement as a prediction or guarantee about the future. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the sections titled Risk Factors and Caution About Forward-Looking Statements of the company's most recent Forms 10-K and 10-Q filed with the SEC. These filings are available at the SEC's website at sec.gov. Any forward-looking statements made during this call speak only as of the date of this call and we undertake no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Now it is my pleasure to introduce Harry Herington, NIC's Chief Executive Officer and Chairman of the Board.

[Harry Herington:]

Thank you, Angela. Welcome to our first quarter earnings call and thank you for joining us today. We have some strong results to share with you this quarter. I am very proud of the work our teams have done. And while the year is just getting started, I am pleased to report that financially we're off to an impressive start. First, it is great to share that NIC generated record revenue and operating income this quarter. We substantially increased the rate with which we grew Interactive Government Service revenues over the first quarter of last year, and this once again speaks to the organic growth engine that drives our business. We have been successful in launching several meaningful new services across multiple states over the past year and our work is paying off. In the second half of 015 we launched a vehicle register service in Maryland, a limited criminal history service in South Carolina and various payment processing services in Kentucky and many more. They're all new services we did not have in the first quarter of 2015 and they are now ramped up and generating solid revenue, which played role in driving our growth this quarter. Our results for the quarter also benefited from the continued strong performance of services we had for a few years; vehicle register renewals in both Texas and Colorado as well as a steady stream of payment processing services in New Jersey. Once again our business is operating exactly as it was designed focusing on our core business and organically growing revenues at a healthy rate. How do we continue to drive growth quarter after quarter? It is really a combination of innovation and creative. We collaborate with our partners, balancing innovation and creativity to advance digital government solutions. What do I mean by that? As I have stated in the past, every day we serve as the R&D shop for our government partners. Our teams are constantly looking ahead to the technologies of the future and evaluating how they may someday impact the government. For example, we are in the prototype and testing phases with virtual reality to determine how it can be used to make government services more efficient and convenient. We are also testing platforms based on conversational user inter base that interacts with government. I won't share all of the details for competitive reasons, but tomorrow during our annual stockholder meeting I will share a glimpse of some exciting new technology we recently deployed and continue to enhance. And while it is important anticipate technological advances, we also must be creative in how we deliver solutions today. This is how our partners benefit from being a part of the NIC family. Coast to coast we have developed a library of services that numbers in the thousands. And while this doesn't mean services are pure plug and play from one state to the next, it does mean we take existing solutions, modify them and tailor them according to the specification of each partner that's what makes NIC unique. We learn from each other, improve upon the knowledge we gain from one another and find creative ways to make solutions even better than before. Moving on, we remain laser focused on our sales pipeline. We understand the importance of convincing new states and federal government agencies of the benefits of our model and digital government expertise. There are states and federal agencies that see how being a part of the NIC family could expand the services and convenience they offer their constituents. While we generally do not provide transparency into our pipeline outside of the public RFPs, what I can tell you is that our team continues to be engaged with the right decision makers about our services and I am confident good things are on the horizon. To conclude my remarks today, our business is strong and growing at a healthy rate, our teams are executing as they should and I am proud of their efforts. With that, I will turn the call over to Robert Knapp, NIC's, Chief Operating Officer for additional insights into portal operations. Robert.

[Robert Knapp:]

Thank you, Harry. Harry is right we believe our teams are doing all the right things to innovate and find creative ways to continually deliver services and make interactions more convenient to the citizens and businesses our government partners serve. I want to start off today with an announcement I have been waiting to deliver for two years the new comprehensive outdoor recreational registration and licensing system in Wisconsin has launched. Go Wild Wisconsin went live in late March and more than half a million transactions were successfully processed in just the first two weeks. Congratulation to our team in Madison as well as to our partners at the Wisconsin Department of Natural Resources. It was an amazing effort to successful launch such a robust system in such a short amount of time and I couldn't be more proud of what we accomplished together. The first turkey license season is already under our belt and the big next peak volume seasons coming up are in May and June for fishing license sales and in August for antler less deer license sales. I am confident that hunting, fishing and outdoor enthusiast in the Badger state will appreciate all the new conveniences this system has to offer. Again congratulations to our team and our partner in Wisconsin. On our last call we mentioned our new partnership with the National Park Service. As you will recall, NIC was selected to participate in a pilot program to develop and manage digital park entrance passes for three national parks; Acadia National Park In Maine, Theodore Roosevelt National Park in North Dakota and Colorado National Monument. Since that time all three parks went live with their digital park entrance passes beginning with Acadia National Park on January 31 and ending with Theodore Roosevelt National Park on March 21. Our team turned this solution around quickly, and I think it really demonstrates the creativity Harry referred to earlier. We have launched other types of digital passes and licenses in the past and our team took those solutions, learned from them, improved upon them and launched Your Pass Now. Thanks to our solution if you visit these three parks this summer, you can leave your paper park pass at home. Simply show the park ranger the digital pass on your phone and you are good to go. And finally I would like to close today by sharing with you three states who have extended contracts with us since our last call; Kansas, Alabama and Oklahoma all recently extended their contracts with our local subsidiaries for one year. The Kansas contract now extends through December 2022. The extension in Alabama takes our contract through March 2017. And the one year extension in Oklahoma takes their agreement through April 2017. A big thank you goes out to the states of Kansas, Alabama and Oklahoma for continuing to place their confidence in us as we partner to advance their digital government programs. And with that, I will turn the call over to Steve Kovzan, NIC's Chief Financial Officer. Steve?

[Steve Kovzan:]

Thanks, Robert, and good afternoon to everyone on the call. I am going to begin by echoing Harry's sentiment, our business is running well and I am very pleased with our results for the quarter. During the first quarter of 2016 NIC earned $0.19s per share with record total revenues of $78.4 million. For the quarter, quarter revenues were a record $73.2 million up 11% over the prior year quarter. Total same state portal revenues grew a robust 12% for the quarter. Breaking down the components of same state revenue growth same state IGS transactional revenues grew an impressive 16% this quarter mainly due to the consistent deployment of new services and increased adoption of existing services across several portals including motor vehicle inspections and registrations, limited criminal histories, tax fillings and professional licensing among others. Same state DHR transactional revenues exceeded our expectations and were up 6% this quarter due mainly to higher transactional volumes across a number of states. In addition to a monitoring service which launched in one state during the second quarter of 2015. Looking ahead, we do expect our same state DHR to decelerate somewhat as we reach the anniversary of the monitoring service launch in the second quarter. Finally a same state software development revenues increased 25% this quarter driven mainly by a strong quarter of project based time and materials revenues in a few states. While we'll take this growth when we can get it, keep in mind that this portion of our business comprising only 4% of total portal revenues is lumpy and less predictable quarter-to-quarter than our transaction based revenues. For example, in the prior year quarter we saw a 23% decline in same state software development revenues. Moving on to a few other housekeeping items on the portal business. First recall that Q1 2016 will be the last quarter we will trend against the fixed fee portal management revenues from the Legacy Delaware portal contract, which expired at the end of Q1 2015 and generated approximately $600,000 in the prior year quarter. Next, last quarter when we provided our guidance for 2016 I mentioned the possibility of some near-term revenue softness related to the Texas vehicle inspection service our single largest IGS revenue service across all of our states. As a brief refresher beginning March 1, 2016, we contractually began recognizing vehicle inspection revenues in Texas when registrations occur instead of when inspections occur for vehicles inspected on or after March 1, 2016. This did in fact result in a dip in revenues this past March totaling approximately $500,000 as compared to the revenues we would have ordinarily expected from this service. However from a year-over-year growth standpoint the revenue did in the current quarter was completely muted by the $700,000 revenue dip we saw in the prior year quarter from this service when legislation became effective that eliminated vehicle inspection stickers and made a vehicle registration dependent on passing a vehicle inspection resulting in a, quote, single sticker, end quote, process. Looking ahead we are hopeful volumes will return to normal levels over the course of the next quarter. We will update you on our next call if there are any noteworthy developments. Moving on, I know I am going to sound a bit like a broken record when I say that software and services revenues were up 17% for the quarter again driven by continued strong performance from the pre-employment screening program which we manage for the U.S. Department of Transportation Federal Motor Carrier Safety Administration and to a lesser extent from continued growth in payment processing services including the City of Portland contract. Our strong revenue growth contributed to a record operating income for the quarter of $20.4 million up a healthy 38% from the previous year. This drove an expansion of our operating income margin for the quarter to 26% up from 21% in the prior year quarter. In conclusion, while it is way too early in the year to determine if our strong first quarter results will be indicative of the remainder of the year needless to say I am very pleased we came out of the gate strong, exceeding our internal expectations for most of our key financial metrics. With that, I will turn the call back over to Harry.

[Harry Herington:]

Thank you, Steve. I will say it one more time, we are pleased with our growth this quarter. I am proud of all the creative solutions being launched by our portals, and I look forward to reporting even more success in the quarters to come. With that, operator, we'll now open the call for questions.

[Operator:]

Thank you. [Operator Instructions] We'll hear first from Brian Kinstlinger with Maxim Group.

[Josh Seide:]

Hi. This is actually Josh Seide in for Brian. Thank you for taking my questions. Now that the ePark Pass Pilot has been launched in three national parks, is there any further visibility you have on the type of top line contribution we could expect in 2017, and would there be any additional upfront costs necessary in ramping to that level?

[Steve Kovzan:]

I guess I would say I don't think we expect any additional incremental costs from this point forward. And as we mentioned on our last earnings call related to the ePark Pass we don't expect the revenues from these three services to be of significance.

[Josh Seide:]

Okay…

[Steve Kovzan:]

Either now or in '17.

[Josh Seide:]

Okay. Last year you mentioned some investment in security and also in the federal sales effort, are there any other type of [indiscernible] or other types of investments we should be considering going forward into this year?

[Harry Herington:]

Hi, Josh, it is Harry. We make investments on a regular basis, nothing that would be material. This is something that we reevaluate as a management team ongoing and seeing where we should invest. Security will always be an investment, innovation will always be an investment. If it ever gets to the point where it is material, we will definitely come back and tell the group.

[Steve Kovzan:]

Yes, everything has been factored into our guidance for 2016.

[Josh Seide:]

Okay. That is helpful. And then just lastly are they any new state RFPs currently out that we should be mindful of?

[Harry Herington:]

I appreciate the question. There is no information out there right now that we can speak to. And as you know, we only speak to opportunities if there is a public RFP on the streets.

[Josh Seide:]

Sure. Thank you.

[Harry Herington:]

Thank you.

[Operator:]

We'll go next to Peter Heckmann with Avondale Partners.

[Peter Heckmann:]

Good afternoon, everyone. Nice results. I want to talk about - you're welcome. A little bit of a disconnect though between the guidance you gave at the end of the January which was somewhat downbeat and showed a deceleration of growth with a really big first quarter. Did something change, or are we expecting higher costs later in the year? I mean at face value I would think that a portion of this would carry through and it would make it certainly difficult to get to the low end of your guidance. But are there other things to consider?

[Steve Kovzan:]

No, Pete. I don't think there is really anything else to consider. My concluding remarks just a moment ago certainly I think our results for the quarter exceeded our expectations on just about every metrics so we came out of the gate strong. It is still really, really early in the year and I don't think we'll be making any changes to the guidance that we have provided on the last call.

[Peter Heckmann:]

Okay. Okay. And then in the area of hunting and fishing that is great you have Wisconsin up and running. Do you think there are opportunities to port this new platform over to additional states? And if so, would you expect any activity from a new RFP standpoint over the next 12 months?

[Harry Herington:]

Pete, this is Harry. I will take a stab at part of that question. The answer is yes, right off the bat. As far as do we see any portability here. As you know we took a different stance on this one because [indiscernible] technology is advance and where Wisconsin is being the second largest hunting and fishing state out there, we want to make sure we put our best foot forward and we built a rock solid system that we could then leverage elsewhere. We have been very diligent. We have been very careful. There have been some opportunities present themselves, and instead of getting ahead of ourselves we decided to keep our gun powder dry until we were ready to step out there. We have heard from states that they are anxious to see what comes from Wisconsin. So I think it is now just a matter of time for them to see that, to get an understanding of what has been deployed and the value it brings back to Wisconsin and opportunities should come from there. I look at Robert, to see if he wanted to add anything?

[Robert Knapp:]

No, I think in Wisconsin we are obviously extremely excited to get this launch with partner and we certainly believe there are other opportunities in our NIC states as well as potentially non NIC states. Certainly as we have historically shown we try to bring a core to a new product but we'll put a lot of effort in an individual state to make sure it meets that specific states requirement when they are ready to go forward.

[Peter Heckmann:]

Okay. Last question before I get back into the queue. But within Tennessee we have been following the [indiscernible] there. It looked like the state was considering doing something different. Can you give us an update there given the relative [indiscernible] their decision.

[Robert Knapp:]

Yes, Pete, as you know there is not a lot we can say since it is an open procurement. But as you know it is not our typical RFP but we remain excited about the opportunity and look forward to the rest of the process.

[Peter Heckmann:]

All right, helpful. Thanks.

[Harry Herington:]

Thanks, Pete.

[Operator:]

From Stephens Inc. we'll go to John Campbell.

[John Campbell:]

Hi, guys. Congrats on a great quarter.

[Steve Kovzan:]

Thank you, John.

[John Campbell:]

If you guys could maybe piece out some of the newer services that helped drive that impressive IGS growth. Just maybe help us out with what's new in the mix now versus last year.

[Steve Kovzan:]

Yes, I think in terms of this quarter, John, we had mentioned some motor vehicle inspections and registrations, limited criminal histories, tax fillings, professional licensing. So some of them are new services, when I say new services, services that we launched in states that weren't up and running this quarter last year. And so there is no new services of that listing that I just put forth none of those are new. We had obviously built those services and launched those services in others state. So most of those are kind of our good solid historical performers.

[John Campbell:]

That is helpful. Steve, I think you guys put up pretty much the sharpest year-over-year margin expansion I guess over the last couple of years. What is the key driver there? Is it mainly that sharper IGS rev growth or just a better mix shift or maybe timing of investment spend?

[Steve Kovzan:]

Well, I don't - certainly on a year-over-year basis I think revenues were really the primary driver. We had a really good strong quarter of revenue growth and I wouldn't necessarily say it was anything investment related. We did keep in mind last year this quarter we did have I think three-quarters of a million dollars roughly in one time costs related to this vehicle inspection service in the state of Texas when they switched to the single sticker legislation, so that was weighing down our results somewhat in the prior year quarter. But other than that, I think it is just a really good strong quarter of revenue growth combined with some good efforts on our part in terms of controlling the cost side of the equation.

[John Campbell:]

Okay. That is helpful. And then just as an add on to that, as I think about year-over-year growth I know you guys don't typically guide into the margin line, but if I think about just portal gross profit assuming you guys get somewhat similar revenue mix shift and you continue to see pretty good growth is there any reason why that shouldn't expand year-over-year going forward?

[Steve Kovzan:]

I guess I would say this, is that certainlyQ1 was a good quarter but in our guidance we provided for 2016 we essentially implied similar margins for operating income margins and total gross profits fairly similar to what we have seen recently. So until we stack a couple more quarters of results like we say this quarter, I'm probably not too comfortable going out on a limb saying that we should automatically see margin expansion the rest of the year.

[John Campbell:]

Okay, fair enough. Thanks guys.

[Harry Herington:]

Thank you.

[Operator:]

We'll hear next from Gary Prestopino with Barrington Research Investments.

[Gary Prestopino:]

Hi, good afternoon.

[Steve Kovzan:]

Hi Gary.

[Gary Prestopino:]

A couple of questions here. First of all could you maybe tell us in terms of same-store growth what percentage of that was driven, of that 16% was driven by just new services in new states?

[Steve Kovzan:]

We don't have an exact measure for that. Gary, I guess what I would say is typically most of the growth we see from an IGS standpoint comes from the launch of new services that's probably the majority of our growth. Certainly we see a component of our growth that relates to more usage of the same services year-over-year. But by and large I think most of our growth roughly using the 80/20 rule probably the bulk of that growth is coming from new services that we have launched over the course of the last year.

[Gary Prestopino:]

So was throughout 2015 was that just a very good year in terms of adoption or launching of new services in states that hadn't had them in the past?

[Harry Herington:]

I don't know if I would say [indiscernible] Keep in mind the way it works, and Steve nailed it 100% we are constantly looking for new innovations, new services that we can launch. At the same time we have teams that are driving existing applications out there to either new users or educating the existing user base how they can use it more properly maybe in more depth. So we are growing our business both ways as aggressively as possible. We never take anything for granted. And I will just tell you it was a great quarter. Our teams did really good work, out partners were aggressive with not only new services but helping us get the work out. And we're very pleased with the quarter.

[Gary Prestopino:]

Okay. It becomes more of an important question given that there aren't any RFP for new states out there. If you can drive your growth in existing states by adding new services I think that sheds light on what your capabilities are x getting new states in the fall?

[Harry Herington:]

It is a great question, because it gives me an opportunity in that you're right. [Indiscernible] as far as new states. But one thing we have always said is we have great organic growth in our business, and we have a very robust solid business, book of business right now that we continue to grow quarter-after-quarter year after year. And this was a great one and we expect to continue to grow our business and have very aggressive management teams out there driving it.

[Gary Prestopino:]

Okay. And then in terms of the park passes there is a pilot with five National Parks. Can we or are you counting on that if these pilots are successful then there would be other opportunities within the, what is it, over 300 National Parks in the U.S.?

[Harry Herington:]

Absolutely. I mean that is part of what got us so excited. Go in - it is a pilot. Remember they wanted to do a pilot to see how it would work from there. To go aggressively show them what we have done in the states and how that could be leveraged to federal space and then once we got them up, which we got three of them up very quickly, then convince them ours is the right solution and can we roll that our to more and more and actually do other services for them. We think this is a great lead in now time will tell.

[Gary Prestopino:]

Okay. Lastly, with the launch of Go Wild is most of that revenue that comes out of that portal would that be in Q3 and Q4 is that when hunting season is big Wisconsin or is just randomly over the nine months of the year that are not winter?

[Robert Knapp:]

It is pretty random throughout. I mean as we spoke to they had a peak season with turkey season that just occurred in the March time frame and you have antler less deer season and fishing season coming up in the future. So there are different spike periods there but otherwise it is throughout the year. A lot of hunting in Wisconsin.

[Gary Prestopino:]

We know all about that here. Thanks.

[Operator:]

[Operator Instructions] We will move next to Allen Klee with Sidoti.

[Allen Klee:]

Yes, hi. For the recreational parks trial do you have a sense for how long it is and how much you would get paid per digital pass?

[Steve Kovzan:]

No. At this point it is just a pilot they have implemented

[Harry Herington:]

And we share a portion.

[Steve Kovzan:]

Yes, we just share a portion of that fee. And it will really be up to the agency as they look and get a feeling for how it is working and what's going on there. And part of our responsibility as Harry said to try and push that and show the success it can have.

[Allen Klee:]

Okay. Any update on the status of Louisiana pilot and timing of that?

[Robert Knapp:]

It continues to go just like we said before, we are right on track and we're hoping for it to launch in full portal sometime in the second half of the year.

[Allen Klee:]

Okay. For the Department of Transportation contract with truckers how do you think about the opportunity to continue to up-sell that to additional trucking companies?

[Steve Kovzan:]

I think we might have talked about this last quarter, Allen, on the call. Our team in D.C. has done a remarkable job of quarter after quarter signing up new carriers and new subscribers to the service. And that is really part of what is driving growth is adding new trucking companies and new users of the service each quarter. I have said a number of times I expect to maybe slow down a bit. It has been a great, great performer growing in double-digit percentage growth for us this quarter.

[Allen Klee:]

Okay. And for you IGS business how would you think about long-term like an organic growth rate if you did not add any new states?

[Steve Kovzan:]

Well, Allen, I think what we have historically said we have been able to grow the business in the high single-digit on a total same state basis with the majority of that high single-digit growth coming from IGS services. From low to mid double-digit growth is what we have historically seen. We saw 16% this quarter which was one of our strongest quarters we have seen in a long time. I think the long-term growth dynamics of the business we don't necessarily view any differently than that. Our hope is that we can continue to sustain growth in that upper single digits some quarters in the low double-digit. But it is also important in order for us to maintain that type of organic growth we need to win new states from time to time.

[Harry Herington:]

I was waiting for Steve to finish that because my reaction is real simple. There are new states coming. We are going to win new states and there is federal opportunities we are working. I realize it has been a little bit of a lull but those things happen in all business. It is a great question because it does give us an opportunity to really discuss how strong our core business is. But we do see opportunities for growth outside the existing book of business.

[Allen Klee:]

Okay. And then for the - you mentioned for DHR that a monitoring system contract put in place in Q2 2015, so that gets anniversaries, does that imply we go back to kind of a normal population growth for DHR or could it be a little better than that potentially?

[Steve Kovzan:]

Time will tell on that one, Allen, I think we have been doing a little bit better in population growth from just a pure volume standpoint. If that trend continues, that would be a little bit better than just the population growth but again time will tell.

[Allen Klee:]

Okay. Thank you.

[Steve Kovzan:]

You bet.

[Operator:]

And from Imperial Capital we will move to Jeff Kessler.

[Jeff Kessler:]

Thank you. Good quarter guys. First question is that you have expanded for instance in the hunting and fishing license area. You actually have been innovative in expanding the way you are actually getting - in the services you are providing to a state. Obviously you are not going to be specifically, but in general terms what other types of services can you start expanding to get more revenues out of the services you are already providing?

[Robert Knapp:]

John, this is Robert. I guess I'm a little confused on your question.

[Jeff Kessler:]

To make the question more clear, you have taken a hunting and fishing license capability in all the states you have been in and you have expanded it and made it more value added in Wisconsin. What other types of services can you do this with in other types of states?

[Harry Herington:]

That's a great question and I'll let Robert jump in just a second. But here is what I would say, number one, when you look at anything dealing with businesses, [indiscernible] we have looked at those and said there is opportunities to grow them and we do that. We grow that right now in our existing business often times we don't speak it and point them out. One is for competitive reasons, when we launch some of these services we don't want somebody to necessarily know what we are doing to go knock on that agency's door. If we are going to be making a major investment then definitely we are going to put a spotlight on it because we want to be as open and honest with you as we can saying this is where we are spending above and beyond. Or if it is one that we think will really be a needle mover. I will tell you we make the majority of our money off business to government. So just about anything we do business to government there are often times we might take at that next level. And it is just something we are exploring. There is none that I would throw out there and say, hey, here is the very next big one just because I don't want anybody to get in front of me.

[Jeff Kessler:]

Okay. During the quarter was there some type of a true up in the way that Texas recognized revenue that helped you?

[Steve Kovzan:]

I don't think it was a true up.

[Jeff Kessler:]

Okay.

[Steve Kovzan:]

As I shared in my scripted remarks, we actually saw a decline of about $500,000 in vehicle inspection service because of a change in the way we're recognizing revenue. However in the prior year quarter we actually saw a decline of about 700,000 from that service. So comparing the two quarters it was a slight benefit this quarter. But nevertheless we did see revenues decline from the service compared to what we [indiscernible] expect from the service.

[Jeff Kessler:]

All right. And you are not seeing - Texas is a one off in terms of the types of negotiations of states looking at the way they are accounting and handling for the services they are providing.

[Steve Kovzan:]

No, I wouldn't say Texas is one off. This one service we highlighted happens to be our largest IGS service across all our states.

[Harry Herington:]

And ultimately these were a reflection of legislative changes that were made by the state legislature.

[Steve Kovzan:]

That's right. So there is nothing necessarily special about Texas or different about Texas compared to our other states from a revenue recognition standpoint or how we negotiate the terms the conditions of the deal. Okay. That's all I have. Thank you very much.

[Harry Herington:]

All right. Thanks.

[Operator:]

With no further questions at this time, I will turn the conference back to you all for closing remarks.

[Harry Herington:]

Thank you, Kelly. And thank you to everyone who joined us this afternoon. I look forward to speaking with you during tomorrow during our 2016 annual stockholder meeting at 10 AM Central time when I will share more about our plans to continue to lead the digital government services industry in the future including demoing a very cool innovative solution. We hope that all of our stockholder investors will join the webcast by visiting the Investor Relation page of our website at egove.com, or better just join me in person at the new Olathe Conference Center at the Embassy Suites Hotel in Olathe, Kansas. I look forward to seeing everybody tomorrow. Thanks.

[Operator:]

That will conclude today's conference. Again thank you all for joining us.