NIC Inc
Q3 2016 Earnings Call Transcript

Published: 5 Nov 2016

[Operator:]

Good day and welcome to the NIC Incorporated 2016 Third Quarter Earnings Announcement. Today's conference is being recorded. At this time, I would like to turn the conference over to Angela Davied. Please go ahead.

[Angela Davied:]

Thank you, operator. Good afternoon, everyone, and welcome to NIC's third quarter earnings call. The press release for NIC's third quarter 2016 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 877-234-3468, and we will email the information to you. Following a reading of our cautionary statement regarding forward-looking information, CEO, Harry Herington; Chief Operating Officer, Robert Knapp; and Steve Kovzan, NIC's Chief Financial Officer, will deliver prepared remarks. Then we will open for questions. Any statements made 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 and local 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-Q and 10-K 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. Except as maybe required by applicable law, we do not undertake to update or revise publicly any forward-looking statements, 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 NIC's third quarter 2016 earnings call and thank you for joining us today. Consistent, steady revenue growth, producing strong, predictable cash flows has been the theme of NIC throughout the years. And once again, we produced solid financial results this quarter. Our core services continue to drive growth and our teams continue to work with our government partners to develop new, innovative ways to make government more efficient and accessible. Before we dive into the results for the quarter, I am pleased to announce that our continued financial strength has once again allowed NIC's Board of Directors to declare a special cash dividend. We will pay $0.65 per share or approximately $44 million on December 9th, 2016, to stockholders of record as of close of business on November 16th, 2016. This marks the 10th consecutive year we have declared special dividends, bringing the total capital return to our stockholders more than $280 million since we first started paying special dividends in 2007. I'm also pleased to announce that beginning in the first quarter of 2017, we will intend to initiate a regular quarterly cash dividend of $0.08 per share. Over the years, our dividend policy has been a reoccurring topic of discussion with our Board of Directors and many of our long-term institutional investors, and we recognize that in certain respects our special dividend has become regular. Given our steady growth and continued strong and predictable cash flows, our Board believes the time is right to initiate a regular quarterly cash dividend in order to solidify our commitment to provide ongoing value to stockholders and reinforce our positive outlook for NIC. Furthermore, we open the door to broaden our stockholder base by attracting dividend-seeking investors and improving the liquidity of and demand for our stock. We believe this is a comfortable starting point that gives us the ability to raise the dividend level as the company grows without impairing our future growth. Furthermore, assuming the continued growth of our cash flows, we will continue to build surplus cash and maintain the flexibility to pursue strategic growth opportunities, both internal and external, or pay special dividends from time-to-time, but less frequently than annual. Now, back to results for the quarter. This quarter IGS revenues were up a healthy 12%, driven in large part by the motor vehicle registration in both Colorado and Maryland, as well as business tax filings and Maryland. IGS revenue growth also benefited from the continued strong performance of our Go Wild Wisconsin, a comprehensive outdoor recreational licensing service in Wisconsin. Steve will also share in a moment that revenues from the Texas Vehicle Inspection Service have normalized. Add to this several new services which Robert will touch on, and I'm very pleased with our business continues to grow and provide value to our government markets, their constituents, and our stockholders. I also have good news to share this quarter on the federal front. In September, the Library of Congress awarded us a contract to deliver an e-filing and case management system. This system will be modeled after a successful e-filing solution we deployed for the State of Nebraska. Specifically, the system will help modernize the Copyright Royalty Board's paper-based system, allowing for the electronic submission; dissemination; and long-term management, tracking and reporting of motions, briefs, exhibits, comments, and other user-generated litigation or regulatory documents generated by the copyright royalty judges. This is a five year fixed fee contract consisting of a one-year base contract focused on implementing the system and four one year options dedicated to maintaining the system, with a total contract value of approximately $1.5 million. We look forward to partnering with the Library of Congress to deliver these new efficiencies. In fact, the Librarian of Congress, Carla Hayden, has stated that the improved information technology is a top priority for her. We hope this new e-filing and case management system is just the beginning of our partnership to help expand digital services to the Library of Congress. For NIC, this is another example of our continued progress to expand our footprint with the federal government. Staying on federal for a moment, I know many of you have been eagerly awaiting an update on the status of the recreation.gov procurement, which the U.S. Forest Service, part of the U.S. Department of Agriculture, awarded to Booz Allen Hamilton as a prime contractor and NIC as a subcontractor to Booz Allen. You may recall that the incumbent filed a protest of the award with the Government Accountability Office back in May. As we have shared, contract protests are unfortunately quite commonplace with the federal government. In fact, according to a 2015 report issued by the GAO, while total government spending from 2008 to 2014 decreased 25%, total bid protests increased more than 45%, with a total of nearly 2,500 protests filed in fiscal year 2015. Unfortunately, it's a practice that many leaders within the Beltway believe is simply a tactic by too many companies to unnecessarily delay the process. Add to this, nearly 90% of all awards are sustained, meaning the contract is awarded to the winning vendor as originally intended. As for rec.gov protests, just as the protest was nearing its end and just days before it was to be adjudicated, the incumbent withdrew the protest with the GAO. Subsequently, we learned the incumbent filed a protest with the U.S. Court of Federal Claims, which, unfortunately, as we continue to learn more about the federal procurement system seems par for the course. Nevertheless, we remain very excited about this opportunity. In partnership with Booz, we're pushing ahead to do all we can to get the team and processes in place so that once all of this is finalized, we can hit the ground running to develop an incredible new rec.gov solution. I will continue to provide updates as they unfold on future earnings calls. Again, I want to reinforce we are excited about this opportunity and overall, I am pleased with the momentum building in our federal business development effort. In addition, more of our state solutions are getting the attention of leaders within the federal government. In October, the ACT IAC Executive Leadership Conference was held, bringing together thousands of IT leaders within the federal government and the private sector. During this conference we gave a presentation on our new digital platform, Gov2Go. This new industry-leading platform, which provides a single access point and personalized notification or a system's government interaction, was honored as Voices of Change Winner. This honor goes to digital government services that are making a difference and could be scaled to other departments and agencies within the federal government. As a Voices of Change Winner, our team will have the opportunity to present Gov2Go to the Office of Management and Budget, as well as to the new administration. I'm very proud of our team's work on Gov2Go, which is transforming the way citizens interact with government and I look forward to the opportunity to tell the leaders at OMB and the new administration all about it. Lastly, I will conclude my remarks today with an update on our contract situation in Tennessee. On our last earnings call, I told you that in late June the state canceled its RFQ for digital government services due to a cessation of need. When we last spoke with you in August, it was uncertain as to how the state would continue providing digital government services past the expiration of our contract in March 2017. Since that time, we have learned from the state its intention to transition services in-house through the end of our contract term. Obviously, we're disappointed this partnership is coming to an end after 16 fantastic years of delivering world-class digital government services to the volunteer state. Steve will discuss some of the financial specifics of our Tennessee contract in a moment. But I will end by saying that overall this was a solid quarter for NIC. We posted healthy financial results, launched new services, and continue to generate steady revenue growth from existing services. Furthermore, I am excited about the new federal partnership we are beginning with the Library of Congress. Finally, I am pleased to again return capital to our stockholders in the form of a sizable special cash dividend and to announce the Board's intention of regular quarterly cash dividends beginning in the first quarter of next year. With that, I'll turn the call over to Robert Knapp, NIC's Chief Operating Officer, for additional insights into our portal operation. Robert?

[Robert Knapp:]

Thank you, Harry. Last quarter I was pleased to announce we had moved from pilot phase to a full enterprise-wide portal in Louisiana. And this quarter it is great to see a full quarter of results from our portal in Baton Rouge. They posted an impressive $1.4 million of revenue for the quarter and are working hard to launch new transaction-based services. What is truly impressive is they were able to do this while battling historic, catastrophic flooding. It was more than a terrible news event for our Louisiana portal, as it severely impacted two of our team members who had several feet of water flood their homes to which they have yet to return. But even during personal adversity, our team members went to work with their government partners to help those devastated by the flooding by launching several flood-related services and constantly updating public service information. To say I am proud of the work our team in Baton Rouge has accomplished is an understatement. They pulled together to not only launch the portal and help each other through tough times. They did their part to provide assistance to everyone in the community who needed help. During the third quarter, in addition to the successful launch of the enterprise-wide portal in Louisiana, we also had some positive developments on the outdoor recreational front. As Harry mentioned, Go Wild Wisconsin continues to perform well and is gearing up for a big hunting season as we finish out the year. The new service generated more than $400,000 in revenue this quarter. As a partner with the Oklahoma Department of Wildlife and Conservation, this quarter we begin providing online hunting and fishing licenses for Oklahoma-based Choctaw citizens under a transaction-based model. This new service was made possible through a compact recently signed between the State of Oklahoma and the Choctaw Nation. It is the second tribal nation to which we have provided this service, with the Cherokee Nation being the first. And I am encouraged by the potential for future opportunities in the tribal government market. In addition to our work in the area of outdoor recreation, there were also several new developments for the Department of Motor Vehicles. Our Mississippi portal launched a new driver self-service portal at drive.ms.gov for the Mississippi Department of Public Safety. This new online dashboard provides a secure, one-stop source for all driver-related services. In West Virginia, we worked with our partners at the Department of Motor Vehicles to develop new self-service kiosk terminals. These new kiosks were unveiled in August at the West Virginia State Fair by Governor Earl Ray Tomblin and the State's DMV Commissioner, Pat Reed. This is a great example of delivering convenience to citizens. These kiosks will be placed in malls and grocery stores, providing easy access to renewing vehicle registration. As Commissioner Reid said at the state fair unveiling, "this is a great day for the citizens of West Virginia. It gives them another convenience." I couldn't have put it better myself. One last DMV example comes from Montana. We partnered with the Department of Justice, which oversees the State's Motor Vehicle division, to launch the Merlin payment portal. This new solution brings credit and debit card payment processing convenience for a variety of motor vehicle division services, including license renewal and duplicate license request. One last IGS service I wanted to share with you, unrelated to DMV, is the new private security licensing system, which our Texas portal launched in August. Known as TOPS, this system was developed in partnership with the Texas Department of Public Safety and is the primary system for managing all facets of the private security profession in the state, including security guards, armored car couriers, private investigators, and home security alarm installers, among others. This new system will eliminate paper, make processes more efficient, and improve resource utilization for regulating these professions. Moving on, September is award season for the digital government industry. Once again, NIC's partners swept the top five spots in the Center for Digital Government's Best of the Web Competition, with Maryland taking top honors for the first time in State history. Rounding out the top five were Utah in second place, Mississippi in third place, Texas taking fourth place, and Nebraska and Indiana tied for fifth place. In addition, our partners in Iowa and Rhode Island were recognized as top 10 finalists. In addition to these portal honors, two digital government services were honored by the Center for Digital Government with Digital Government Achievement Awards; Hawaii's Vital Record Ordering and Tracking System, as well as Maryland's business one-stop service, known as Business Express, were both honored as some of the best online solutions provided by government. The National Association of State Chief Information Officers, known as NASCIO, also recognizes the best in digital government this time of year. Our Gov2Go took first place honors as an emerging and innovative technology as part of NASCIO's State IT Recognition Awards competition. This was the seventh high profile award for Gov2Go, which is now servicing more than 200,000 citizens in Arkansas. Also, three NIC services were recognized as finalists. These include the Public Defender Services OnLine Voucher System and the DMV's Self-Service Suite of Applications in West Virginia, as well as the entire digital government program for the State of Wisconsin. The State was honored for transforming its digital government program and launching more than 66 online services in just three years. We are so proud of all of our partners and enjoy doing all that we can to make government services more accessible for their citizens and businesses. Congratulations to our partners in Maryland, Arkansas, Wisconsin, and all of the Best of the Web Digital Government Achievement Award and NASCIO IT Recognition Award winners. We are looking forward to working with you to create even more innovative solutions in the future. And finally, I would like to close today by sharing with you three contract extensions since our last call. Maryland, Virginia, and the Federal Motor Carrier Safety Administration all recently extended their contracts with their locally-based subsidiaries. The renewal in Maryland extends our contract with the state for one year, with an additional one-year renewal the state can exercise. In Virginia, our contract for providing digital government solutions to the Supreme Courts of Virginia was extended for one year and includes six one-year renewals that our partner in Virginia could exercise to extend the contract through August 2023. In addition, our partners at the Federal Motor Carrier Safety Administration extended our contract for one year, allowing our federal team to continue managing the pre-employment screening program through August 2017. This agreement also includes an additional one-year renewal the FMCSA could exercise, taking our contract through August of 2018. A big thank you goes out to the partners in Maryland, Virginia, and at the Federal Motor Carrier Safety Administration for continuing to place your confidence in us as we work together to advance your digital government solutions. 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. During the third quarter of 2016, NIC earned $0.24 per share, with total revenues of $80.4 million. Let me begin by covering a few discrete income tax items that had a significant positive impact on our effective tax rate and earnings per share this quarter. For the third quarter, our effective tax rate was 20% compared to 36% in the third quarter last year. The lower effective tax rate in the current quarter was primarily attributable to favorable tax benefits related to the Section 199 domestic production activities deduction for the 2015 and 2016 tax years, which is a new deduction for us; and to an increase in the previously estimated federal research and development tax credit for the 2015 tax year upon the filing of our 2015 tax returns this quarter. We completed a study of qualifying activities and began recognizing the Section 199 deduction for the first time during the third quarter, when we recognized tax benefits, included in our income tax provision, of approximately $1.4 million for the 2015 tax year and approximately $1 million for the first three quarters of the 2016 tax year. Combined, these discrete tax items increased earnings per share for the current quarter by approximately $0.05. One final positive note on our effective tax rate. We currently anticipate on a go-forward basis, our effective tax rate to approximately 36.5% to 37%, down from our previous effective tax rate of approximately 38% as a result of these tax benefits. Moving on, for the quarter, portal revenues were $75 million, up 7% over the prior year quarter. Total same-state portal revenues were up 5% for the quarter. Breaking down the components of same-state revenue growth, same-state IGS transactional revenues grew 12% this quarter, which I'll touch on more in a moment. Same-state DHR transactional revenues were down 1% this quarter. As we have mentioned on past earnings calls, we expected our same-state DHR growth rate to decelerate after we hit the anniversary date of a DHR monitoring service in one of our states in the second quarter. However, the softness we saw this quarter was a bit more than we expected, so we will be monitoring DHRs across our portals over the coming months to determine whether this quarter was something more than a blip on the radar screen. Finally, same-state portal software development revenues decreased 27% due to the timing of project-based initiatives across several states. As we have shared in the past, 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. Back to the discussion of same-state IGS revenue growth this quarter. I have been updating you throughout the year about the Texas Vehicle Inspection Service, our single largest IGS revenue service across all of our states. As I previously shared, per the terms of our contract, we now recognize vehicle inspection revenues when registrations occur instead of when inspections occur for vehicles inspected on or after March 1st, 2016. This resulted in a dip in revenues in the first and second quarters of 2016 as compared to the revenues we would have ordinarily expected from this service. This quarter I am pleased to announce volumes from this service have normalized and we have essentially caught up from a revenue perspective, which is a relief. Now, onto Tennessee, as Harry mentioned, we currently anticipate revenues to decline over the next few quarters as we transition services to the state. Tennessee accounted for approximately 2% of the company's total revenues in the current quarter and year-to-date periods or approximately $1.7 million and $5.9 million in revenues, respectively. One final portal housekeeping item. We are nearing the end of our transition out of the State of Iowa, which we currently expect will conclude at the end of November. For the quarter and year-to-date periods, we recognized approximately $500,000 and $1.4 million of revenue from the Iowa portal, respectively. However, as a reminder, transition out of Iowa will have almost no impact on our bottom-line, as it was a marginally profitable contract. Moving on, we saw another quarter of solid growth in software and services revenues, up 9% for the quarter and, 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. To conclude my prepared remarks, I was pleased with our financial results again this quarter, highlighted by steady recurring revenue growth from our core transaction-based businesses. It is this steady growth, coupled with our strong and predictable cash flows that allowed our Board of Directors to declare another sizable special cash dividend this year, as well as initiate a regular quarterly cash dividend beginning in the first quarter of next year. Our management team and our Board have maintained a long-standing philosophy of running the business to generate high returns on invested capital and strong cash flows and returning surplus cash to stockholders that cannot be redeployed in the business on high value generating projects. We absolutely believe our new dividend policy reinforces our commitment to this philosophy. Furthermore, we believe in the strength of the company now and in the future, and I'm pleased with our ability to continue to deliver stockholder value. With that, I'll turn the call back over to Harry.

[Harry Herington:]

Thank you, Steve. Consistent, study results -- that was the theme once again this quarter. And, as Steve just said, the company is performing well, and we believe in its ability to continue to grow in the future. With that, operator, we will now open the call for questions.

[Operator:]

Thank you. [Operator Instructions] And we'll take our first question from Brian Kinstlinger with Maxim Group.

[Brian Kinstlinger:]

Hi, great. Good evening. How are you?

[Harry Herington:]

Hey Brian.

[Robert Knapp:]

Hey Brian.

[Brian Kinstlinger:]

So, I have to touch one on Tennessee. Sometimes when states have left you, you haven't lost all the work; they have kept some services. First, do you think that is the case here? And then, Steve, I just want to make sure I heard it right, 2% of the September quarter revenue was related to Tennessee, and then $5.9 million, was that year-to-date or for the trailing 12 months?

[Steve Kovzan:]

Yes, I'll answer the last part of your question first, Brian. 2% of total revenues for the quarter and year-to-date, which amounted to $1.7 million for the quarter and $5.9 million year-to-date.

[Brian Kinstlinger:]

Okay, great.

[Robert Knapp:]

And Brian on -- this is Robert. On the first part of your question, beyond the March expiration of our contract, it remains to be seen how long we'll be engaged. Certainly, every day we're working to find opportunities and to extend -- to be able to provide additional services there.

[Brian Kinstlinger:]

What do you think led to their decision? You've got a good service for them. The team is very convenient. Is this a function of they think they are saving money? Or was it communicated -- the thought process behind the decision?

[Robert Knapp:]

Yes, no. To start, I think if you look at them, at Tennessee, they had an RFP in 2010 which had some indications in it that they wanted to look at a different model. We were able to secure that contract, ultimately, and continue providing services for an additional six years now. And this most recent RFP that came out ultimately that they canceled for cessation of need, it certainly had a different flavor, but they -- we didn't lose to a competitor and they chose to take that out to continue the provision of their services.

[Brian Kinstlinger:]

Okay. And then--

[Harry Herington:]

Brian, and then we take any loss very seriously. So, this is one -- we're disappointed. We understand; we feel -- in the win column -- again, 2010, when it came out and they were looking, we showed them and we were able to convince them that we still provided great value to them, and I think we still do. And like I say, we take every loss seriously.

[Brian Kinstlinger:]

And then staying on the state level, there has been some discussions around RFP activity, maybe, in Illinois and Oregon and some others. Are there any details you can share yet with us, or is it premature?

[Harry Herington:]

No. As you know, my policy is pretty simple. We don't talk about any potential opportunity that's out there that we may or may not be involved in. I will say Oregon is one of our partners, but the other opportunities that are there -- we have a variety of things always at work. And I would say our pipeline still has opportunities there. I'm just not at liberty to talk about which ones.

[Brian Kinstlinger:]

Okay. And then--.

[Robert Knapp:]

I guess, Brian, to clarify, there are no active enterprise-wide opportunities or RFPs on the street. I think -- if that was kind of the basis of your question.

[Brian Kinstlinger:]

[Indiscernible] Yes. Thank you. And then just an update, maybe. I joined the call about five minutes late; it was in the middle of your recreation one discussion. And I am familiar with all the delays that go on. I've seen them all the time. What I missed was, in the middle, was -- was the protest denied? Is that what you were saying? Or is it still ongoing right now?

[Harry Herington:]

Brian, what they did -- and this is something that -- we're learning more and more about the federal space. Like I say, we're getting a better footprint there. The protest -- and you said you are very familiar with it. I'm sure you are more familiar than we are. It's very common for them to go through and protest this long. Right before it was supposed to be adjudicated; they pulled it, and then just took it to the courts. And we've found this is very common, so that they can delay as long as they can. And so we're just following the process. Luckily, our partner that we have there, Booz Allen, who we are a subcontractor to, is very knowledgeable on this. And we are following their lead. And we are anxious for it to get finalized.

[Brian Kinstlinger:]

Well, less than 10% of protests are upheld. So, the odds are with you. And then can you talk about the park path pilots? I asked it probably the last two quarters, but maybe -- is there any kind of new communication on when the pilot stage is going to transition into looking at who they are going to offer this service to -- sorry, who is going to develop this for other parks?

[Robert Knapp:]

Yes, Brian, this is Robert. There really hasn't been any change since the last quarter. We continue to work with the parks service in terms of the development and the expansion of our pilot and we certainly have a lot of discussions ongoing with both the national parks as well as the agency. But we're waiting for their process to continue to play out.

[Brian Kinstlinger:]

Great. Thanks guys.

[Harry Herington:]

Hey, thank you.

[Robert Knapp:]

All right Brian.

[Operator:]

[Operator Instructions] We’ll go next to Shane Svenpladsen with Avondale Partners.

[Shane Svenpladsen:]

Good morning.

[Harry Herington:]

Hi Shane.

[Shane Svenpladsen:]

With respect to the protest on the recreational one-stop, based on the timeline, what's the earliest that that could go live, if you were to be successful there?

[Harry Herington:]

We're looking at each other trying to figure out how best to answer that question, because the issue that you've got is, first, we don't know how long it's going to take to get through this protest. And then we've got to finalize some stuff with the agency. So, it's really hard to throw a dart out there.

[Shane Svenpladsen:]

Sure, sure. Understood. And I'll ask this and we'll see if I can get an answer. But can you provide anything in terms of revenue or potential startup costs at this time?

[Harry Herington:]

Not yet. Let us get through the protest. Let's get finished speaking with agency and then you know us; we're very transparent.

[Shane Svenpladsen:]

Sure. Fair enough. Fair enough. And then I apologize if I missed this, but the Tennessee transition period, how long will that last, roughly?

[Harry Herington:]

Our contract goes through March of 2017. Any period past that, it remains at this point to be determined or unknown.

[Shane Svenpladsen:]

Okay. Okay. And then with respect to your key renewals in 2017, are you seeing any indication of other states considering either unbundling or potentially taking things in-house?

[Harry Herington:]

No. This is Harry. No. As I said earlier, we take each of these very seriously. We take each renewal and each rebid opportunity out there extremely seriously. There are processes in place that try to do our best to make sure we've secured our contracts. It would be arrogant on our part to think we would never lose them, and it's unfortunate we have, but I'm not seeing any indications today that would cause me pause.

[Shane Svenpladsen:]

Okay. That's good to hear. And then one last one and I'll get back in the queue. The Library of Congress relationship, when roughly does that begin to ramp? And can you quantify any kind of startup costs there?

[Robert Knapp:]

Yes. This is Robert. It's already begun. We have started that engagement in scoping and working with the Library of Congress. And in terms of startup costs, they are very nominal and minimal. One of the real advantages, as we referenced in our comments is its very, very similar to what we have done in the State of Nebraska. And so we're being able to leverage some of that effort as we move it into the Library of Congress.

[Steve Kovzan:]

The one thing I would add to Robert's comments was that we might see some fairly negligible revenues this quarter -- toward the end of this quarter. But in all likelihood the bulk of the revenue that we would earn for developing and implementing this system would be next year, Shane.

[Shane Svenpladsen:]

Okay, I appreciate it. I'll get back in queue.

[Harry Herington:]

Thanks Shane.

[Operator:]

[Operator Instructions] We'll go next to Brian Kinstlinger with Maxim Group.

[Brian Kinstlinger:]

A follow-up on a similar question that was just asked -- you mentioned in -- I think it was -- seven years ago, anyway, that Tennessee had an RFP where you said, I think, Robert, there were signs of change and you retained it. Have any other states in the last five, 10 years had a similar scenario, where they thought a different route and then ultimately decided to remain where they are right now with you?

[Harry Herington:]

No, not to the magnitude of what we saw in Tennessee. Every RFP that we have out there is different. Every RFP for any of the work that we do with the different states. I mean now they all have their own flavor and they should, because every state is unique in where they are from a digital government standpoint and where they would like to go. But nothing that has, again, given me any pause.

[Brian Kinstlinger:]

Yes. Great. Thank you.

[Operator:]

And there are no other questions at this time. I'd like to turn things back to our speakers for any closing remarks.

[Harry Herington:]

Thank you, Gwen. And thank you to everybody who joined us this afternoon. I look forward to speaking with you in February as we discuss our fourth quarter 2016 results. Thank you.