NIC Inc
Q4 2015 Earnings Call Transcript

Published: 5 Feb 2016

[Operator:]

Good day, ladies and gentlemen. Welcome to the NIC's Fourth Quarter 2015 Earnings Announcement. Today's presentation is being recorded. At this time, I'd like to turn the conference over Ms. Angela Davied for opening remarks and introduction. Please go ahead, ma'am.

[Angela Davied:]

Thank you, Catharine. Good afternoon, everyone. And welcome to NIC's fourth quarter earnings call. The press release for NIC's fourth 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 can 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, our 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 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. 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 fourth quarter earnings call and thank you for joining us today. At NIC, we wrapped up 2015 in a similar fashion to we begin it, by launching new online services, that resulted in solid organic growth for our company. By the end of 2015 NIC have completed 300 million online transaction and securely process more then $25 billion on behalf of our government partners. This year our family at federal, state and local government agency partners expanded to 4500 and with the addition of hundreds of new services, our total library of digital government services surpassed 11,000. We launched new services that helps government regulate relatively young, medical and recreational marijuana industry by providing licensing and regulations to patients and to entrepreneurs. We launched new innovation that showed government how they could harness the power of wearable technology and we found creative uses of existing functionality from helping the unemployed, [indiscernible] taken our business one stop service to Mississippi, which allows entrepreneurs to complete several forms and requirements for starting a new business across multiple state agencies in a single spot. We were proud of what we accomplished in 2015. It proved to be a year in which the fundamentals of the business performed as they were designed to perform. Our company generated solid organic revenue growth in the high single digit and we returned value to stockholders in the form of another sizeable special dividend, plus, we achieved the high end of our earnings guidance for the year. And 2016 is already off to a strong start. In fact, I would like to share with you a new development in federal. There are so many ways we use our smartphone on a daily basis and yet one thing you previously could not do with your mobile device is purchase and download an electronic park pass when you visit a national park. But today a new service has been deployed making this a reality. In October, the National Park Service issued a request for information outlining a pilot program in which at least two vendors would be selected to develop electronic park passes for a pilot group of five national parks. NIC was one of 24 companies to respond to the all five and I am pleased to announce we were one of the companies ultimately selected, specifically we were selected as a provider to develop and e-park path solution for three of the five national parks included in the pilot. While we expect this service will be non-material revenue generator initially, this proof-of-concept project has great potential for additional opportunities over the long-term to expand beyond the initial pilot parks. We understand the press release provide a more information about this product program will be issued by the [indiscernible] by sharing any more detail at this time. However, I will close by saying, I am proud of the work of our federal team. And I hope to have more developments like this to share with you throughout the year. What else is in store for 2016? Steve, will share the specific guidance metrics with you in a moment. However, I will summarize our outlook for 2016 like this. Many companies will be thrilled to experience a organic growth rate we produce as a company. However, we know there is lot more we can do. We challenge our team’s everyday to find new, creative ways to deliver efficient government interactions to the people of our partner state. We know the remaining states we currently do not work with today can benefit from our enterprise wide, self funded approach to digital government. And we are in active discussions with a number of them. And as I just shared, I know there is momentum building in Washington DC that continues to put us in a favorable position to win additional federal work. We need to do all that we can and make the right investment in our security and technology framework as well, to keep everything we build as secure and reliable as possible. We are executing in ways we believe will not only help us grow in the next 12 months, but should help set the stage for long-term growth. Now for a deeper dive in our operations for the fourth quarter and the year, I'll turn the call over to Robert Knapp, NIC's, Chief Operating Officer. Robert?

[Robert Knapp:]

Thank you, Harry. Throughout 2015 our portals were focused on what they do best, uncovering new online efficiencies to deliver to the people and businesses of their state. The fourth quarter was no exception. During the quarter vehicle registrations in Colorado, payment processing services in New Jersey, property taxes in Arkansas and professional licensing in Indiana were some of our strongest performing services and top IGS revenue generators. I am pleased to announce that recently our Louisiana portal launched the initial set of DMV ExpressLane services as a part of the pilot. These services include, drivers license renewals, identification card renewals, vehicle registration renewals, official driving records, not to be mistaken for driver history records, manufactured home and mobilization enquiries and duplicate vehicle registrations. In addition, our team Baton Rouge jumped tried in and through partnership with Louisiana State University helped the new administration of Governor John Bel Edwards with issuing and processing the tickets to four private inauguration events. I am very proud of the work of our team in Louisiana and look forward to the successful completion of the pilot period, which we currently expect to take place some time in the second half of the year. Another great service launch during the quarter was eGovExpress in state of Idaho. eGovExpress is NIC's version of a digital wallet or an eWallet. It allows users to create a profile and enter there – their payment information just one time securely store it for future years. The Idaho Department of Agriculture is the first state agency in the country to use NIC's eGovExpress service, which will offer its constituents the ability to make secure, future payments which just a few clicks. As Harry mentioned earlier, some of our portals have been busy this year bringing efficiencies to and managing regulation for the relatively new industries of medical recreational marijuana. During the fourth quarter our team and partners in Oregon launch the Oregon recreational marijuana licensing system. This new system allows for the online application for licensing of recreational marijuana producers, retailers, processors and wholesalers. This was an important initiative for Oregon Governor Kate Brown and within just the few days after its launch more than 440 applications have been submitted. Finally, we will share with you throughout the year updates about the nearly completed comprehensive hunting and fishing system being developed by our Wisconsin portal and their partners. During the fourth quarter a component of that system was rolled out and changed the way registrations for deer season have been taking place in the State of Wisconsin since the 1950s. For more then 60 years Wisconsin hunters registered their deer harvest in person at registration station. This year the Wisconsin Department Natural Resources chose to discontinue in person registration station and mandated the use of electronic registration for all deer hunters. The new system registered more than 300,000 harvests in just 10 days. We currently anticipate the comprehensive system will be rolled this spring and I look forward to sharing more updates about it on future calls. Finally, I will close by thanking partners who continue to place their confidence in NIC. Recently following a competitive re-bid process, the State Nebraska awarded a new three year contract to NIC's Nebraska's subsidiary, Nebraska Interactive. The new contract also includes two one year extensions that could take the agreement through April 2021. In addition to NIC subsidiary received contract extensions, Hawaii Information Consortium received a three year contract renewal from the State of Hawaii taking the contract through January 2019. And the State of Mississippi extended its contract with Mississippi Interactive for two years taking the agreement through December 2017. Thank you to our partners in Nebraska, Hawaii and Mississippi. We appreciate the trust you continue to place in us and we look forward to many more years of successful partnership and innovative eGovernment. And with that, I'll 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. Today I'll discuss results for the quarter and briefly recap full year 2015, then close with our guidance for 2016. In the fourth quarter, we earned $0.13 per share compared to $0.12 in the prior year quarter. If you calculate fourth quarter and full year earnings per share, from the face of the income statement in our earnings release, you come up with $0.14 and $0.64. However, recall that we must allocate a small portion of our earnings to participating securities, which consist of service-based restricted stock issued with non-forfeitable rights to dividends. As a result, our earnings per share came in at $0.13 for the quarter and $0.63 for the year after we factored in participating securities. On other non-core item to note for the quarter, our results reflect and effective tax rate of 36% and include a favorable benefit related to the full year effect of the federal research and development tax credit for the 2015 tax year. Legislation making the tax credit permanent was signed into law during the fourth quarter which was excellent news. Moving on to the core results for the quarter. Total revenues rose 8% with portal revenues up 7% over the prior year quarter. Total same state portal revenues grew a respectable 8% for the quarter, breaking down the major components of same state revenue growth, same state interactive government services or IGS. Transactional revenues in the fourth quarter were up 11% from the prior year quarter. As Robert mentioned the growth was driven by services in Colorado, Arkansas, New Jersey and Indiana among others. Same state driver history record or DHR transactional revenues grew 5% over the prior year quarter, driven primarily by a DHR monitoring service in one state, which launched in the second quarter of 2015 and a price increase in another state which became effective in the first quarter of 2015. Looking ahead to Q1 2016, we expect our same state DHR revenue growth to decelerate somewhat as we reach the anniversary of the price increase on January 1. Lastly, same state time and materials revenues were down 9% for the quarter as we cycled against the stronger quarter of project based revenues in the prior year quarter. Finally, software and services revenues increased 22% to $4.7 million in the current quarter, driven by solid performance from the federal pre-employment screen program and a full quarter of our new payment processing service for the City of Portland, Oregon which we mentioned on the last earnings call. Now on to a recap of our full year 2015 results. Total revenues were $292.4 million, up 7% over 2014. Portal revenues also increased 7% over 2014 to $273.5 million. Same state portal revenues finished the year up 8%, in line with our historical 8% to 10% average with same state IGS transaction based revenues up 11% and same state DHR revenues up 5%. Same state time and materials revenues relating to portal software development decreased 8% for the year. The components of our same state growth for the year largely mirrored our results for the quarter. Software and services revenues increased 15% in 2015, driven by continued growth from the federal pre-employment screen program and new payment processing services. Operating income increased 7% for the year with operating margins up 23% inline with last year, despite some fairly sizeable incremental expenditures or cyber security, federal business development and the Louisiana portal pilot. As mentioned on last quarter earnings call, and I will reiterate here, I was pleased with the job we did in 2015 of carefully managing our cost structure across our businesses to accommodate these incremental investments. And finally, we closed out 2015 with earnings per share of $0.63, up $0.59 in 2014 achieving the high end of our earnings guidance for the year. Now on to our financial guidance for fiscal year 2016. We currently expect total revenues of $303 million to $316 million, with portal revenues ranging from $283.5 million to $295.5 million and software and services revenues ranging from $19.5 million to $20.5 million. We currently anticipate earnings per share to range from $0.64 to $0.58. The high end of our guidance reflects 8% of total revenue growth with solid same state revenue growth in line with recent historical averages. We also currently expect to see incremental revenue contributions fro the Louisiana portal, following the completion of the pilot phase, which we currently anticipate will be some time in the second half of the year, pending the states approval. I'd like to provide some color on our IGS revenues in Texas for 2016. This relates to a matter we mentioned last year that affected our IGS revenues, mainly in Q1 2015. You may recall that legislation became effective that changed how vehicles are inspected and registered in Texas, which resulted in a decline in IGS revenues from the vehicle inspection service of approximately $700,000 in Q1 2015. This service is our single larges IGS service across all of our state portals, generating about $15 million in annual revenues. Prior to the new legislation when cars were successfully inspected, the owner of the vehicle received a windshield inspection sticker, separately when an owner registered a vehicle they received a second windshield sticker. The new law which became effective March 1, 2015 eliminated the inspection sticker and made a vehicle registration dependent on passing a vehicle inspection, resulting in a single sticker process. Prior to March 1 2015, we recognized revenues when stickers were shipped to inspection stations, after March 1 2015 we began recognizing revenues as inspection occur. Beginning March 1, 2016, we will contractually begin recognizing vehicle inspection revenues when registrations occur, instead when inspections occur. This could yet again cause some near term lumpiness in our IGS revenues in Texas. But over the longer term we would anticipate any such volatility would stabilize. To that end, we have modestly adjusted our revenue expectations from Texas from the Texas vehicles inspection services for 2016, which is reflected in our guidance. We will update on our next earnings call, if there are any significant developments on this matter. Moving on, a high end of our annual guidance reflects gross profit operating margins generally comparable to recent historical averages and we currently expect our effective tax rate to approximate 38% in 2016, reflecting a full year of the research and development tax credit which was permanently extended, during the fourth quarter of 2015 as I mentioned a moment ago. A few final housekeeping items, capital expenditures are expected to range from $7 million to $8 million, above our roughly $4.5 million spend in 2015, reflecting IT infrastructure investments and refresh in a number of our portals, including Texas and in our centralized hosting environment to support an enhance corporate wide IT and security infrastructure. Furthermore, we currently expect capitalized internal use software development cost to range from $2 million to $3 million above our $1 million spend in 2015, mainly for enhancements to our industry leading proprietary payment processing applications and internal application development tools. And as always, our projections do not include revenues or costs from any unannounced contracts. To conclude my remarks today, we never take for granted the outstanding fundamentals of our business model and the financial characteristics that make NIC a great business for our partners, employees, stockholders, particularly during these extremely volatile times in the global markets. Economic cyclicality in the US has generally not had a significant impact on us in the past and our underlying business has largely been unaffected by the economic chaos currently taking place in Europe and China. We have an incredibly strong balance sheet with no debt, which is continually bolstered by our strong cash flow, generated by 90 plus percent recurring revenues and solid profit margins. We produced high returns on invested capital and we have consistent history of returning the majority of our surplus cash to investors, most recently in January 2016 when we paid a 55% per share special cash dividend. In short, we really like our business. That being said, and to reiterate what Harry mentioned a few moments ago, we are not content with our current growth trajectory for 2016 or the growth we've seen in the past few years. Rest assured, we are strategically focused on ways to accelerate the growth of NIC in years to come. That concludes my remarks today. So with that, I'll turn the call back to over Harry.

[Harry Herington:]

Thank you, Steve. As you just heard, the fundamentals of our business are strong and operating just as we envisioned from the earlier phase of our company. We achieved the high end of our 2015 earnings guidance and we look forward to our 2016 has in store for NIC. To our employees, thank you for all your incredible hard work to make 2015 a successful year, to our partners there is nothing more that we value and the continued trust you place on us. And to our investors, we appreciate your confidence in us as we look to accelerate the growth of the company over the long-term. We are confident we're doing the right things to build a strong firm. With that, Catharine, we are ready to open the call questions.

[Operator:]

Thank you. [Operator Instructions] We'll go first to Peter Heckmann with Avondale.

[Peter Heckmann:]

Good afternoon, everyone.

[Harry Herington:]

Hey, Pete.

[Steve Kovzan:]

Hello, Pete.

[Peter Heckmann:]

In terms of your guidance for 2016, I may have missed it, the issue with the change in the timing of revenue recognition to registration from inspection, did you quantify about how much that might impact the numbers by?

[Steve Kovzan:]

No, we didn’t specifically. We have taken that into consideration and have lowered our estimates, somewhat in the middle part of the year. But we didn’t quantified it, it’s reflected in our guidance.

[Peter Heckmann:]

Okay. And then looking at the low end of your guidance, and certainly the company has had a history of guiding fairly conservatively on an annual basis. But with the low end of the guidance looks fairly modest to me, are there some other things that you could point out in terms of either loss contracts, anticipated loss contracts or anything else that maybe impacting the numbers to get you – that would create a scenario where that low ends looks like its more probable?

[Steve Kovzan:]

I certainly hope not. So as you know Pete, we've always provided guidance that we're comfortable with achieving and we're doing that again this year.

[Harry Herington:]

Pete, I don’t – as you know, take anything for granted, but there is nothing that causes me concern, as far as our contract and our partners have taken it.

[Peter Heckmann:]

Got it. Okay, and then last question before I get back in the queue. But on the DHR monitoring, that’s relatively new service, is that something that you're finding pull from either data resellers or the insurance companies that maybe applicable to other states?

[Robert Knapp:]

Hey, Pete, this is Robert. We've actually had that service in several states for many years. In fact when I was General Manager in Kansas we had it there. Its just one of those services that insurance companies are advocating for and some states take longer than others and so we look for the opportunity to put in there where we can.

[Steve Kovzan:]

And Pete, just as you're aware the revenues that we earn from monitoring as a proportion to the revenues we earn from driver history record themselves are quite small, relatively speaking.

[Peter Heckmann:]

Okay, thanks.

[Steve Kovzan:]

You bet.

[Operator:]

Thank you. Our next question will come from John Campbell with Stephens.

[John Campbell:]

Hey, guys. Good afternoon.

[Steve Kovzan:]

Hi, John.

[Harry Herington:]

Hi, John.

[John Campbell:]

Hi. On the National Park Service, its great job with that win, its great job moving more forward on the federal. I know you guys can't provide much more detail and I think you said it’s not going to be too material in early stages. But just we're certainly going get questions from investors just trying to maybe size that up a little bit, is that going to be transaction base type service or you guys basically just see each time is electronic forecast?

[Harry Herington:]

John, first of all thank you for the good - for what you just said, and yes it is. It is one more excited about and unfortunately I can't talk about it. We actually debated [indiscernible] we'll bring it up since the agency hasn’t issued a formal release on it and we thought we owed it to the investors, so let him know what's going on and it tells much as we possibly could. But this one that we're really excited about the pilot and where it could beyond that.

[John Campbell:]

Absolutely, we'll look forward to that update. And then Steve, on guidance, this goes back to Pete's question, just trying to get a better fill for the IGS, just a rev recognition, I think you said, did you say $50 million or so for that contract?

[Steve Kovzan:]

Yes, that’s correct. And so we have just modestly adjusted our numbers in the middle part of the year but not any great extent. And we just kind of have to see once the change in revenue recognition happens in March we'll just have to see what it looks like. But as I shared with you last year when we kind of went through a flip, we saw a dip of about $700,000, I am necessarily saying that we're going to see mirror image of that, it could be give or take. But we reflected some of that in our guidance for the year.

[John Campbell:]

Got it. So it’s not as extreme as the [indiscernible] for taking a quarterly course of that revenue, pushing out 17, it’s not nothing like that?

[Steve Kovzan:]

Gosh, we certainly hope not.

[John Campbell:]

Got it. And then just one more on guidance. So could you maybe help us out little bit with the phasing of gross margin next year? Do you guys expect much leverage there?

[Steve Kovzan:]

No, as I mentioned in my scripted remarks, I mean, I think our profit margins at least what we're foreseeing for 2016 are relatively consistent with what we've seen recently.

[John Campbell:]

Got it. Thanks for taking my question guys.

[Steve Kovzan:]

Thank you.

[Operator:]

Thank you. We'll go to Brian Kinstlinger with Maxim Group.

[Brian Kinstlinger:]

Great, thanks, I am curious for that cal past [ph] contract, not details, but are there any start up costs involved in developing the solution?

[Steve Kovzan:]

There will be some Brian, but not anything significant.

[Brian Kinstlinger:]

Nothing like when we you started to state for example?

[Harry Herington:]

No, no this is – no where near that. It is a great opportunities for us and its one that we'll not say that was immaterial as from a revenue standpoint, I would say that same from expense because we've been leverage what we have deployed elsewhere and take that into the federal pilot project that we're doing for them and that has launched.

[Brian Kinstlinger:]

And without details it’s all about who or what or when, can you talk about how long that pilot is?

[Harry Herington:]

I got to say the hardest thing of this entire call is me talking about this, not be able to say anything about it, I really can't. I need to rely on the agency to release their information and rightly so this is something they are extremely proud about, they want to brag about, and I want to give him that opportunity. So I would ask, you all be patient, it has launched, so shipping coming shortly, and I would just ask to be patient and let the agency have its time in the sun.

[Brian Kinstlinger:]

And when they do you'll put an AK [ph] because so many agenesis to track and [indiscernible] won't see it right?

[Harry Herington:]

I don’t know if its, but sure enough with AK, I haven’t talked about it from there, but if we, we'd definitely put it on our website.

[Brian Kinstlinger:]

Got it. That helps. Can you comment on maybe in the big picture of federal, maybe outside of the recreation one that you were evaluating you may have submitted. Can you talk about maybe how many federal proposals either you submitted already or how many you are evaluating in the next six months, maybe just kind of size in near term kind of bid and proposal opportunities?

[Harry Herington:]

I'd love to, but I really cant I mean. We have looked at different opportunities. There is a lot of conversations that are occurring. As the opportunities get further along, part of the deal is, some of its going to be from compete standpoint, some of it could be just direct contract opportunity. We're exploring many different options with several different agencies, I just can't go into detail with them.

[Brian Kinstlinger:]

Right no, I am not looking for just agency, I am just wondering if you had submitted any proposals in federal already there outstanding. Okay, I guess, can you comment you mentioned the Wisconsin, hunting and fishing, would likely launch, I think you said at the end of the summer. Can you talk about the revenue contribution, is that - do we think about $2 million per year and take that and divide that by 12 months and think about it as on a per month basis?

[Steve Kovzan:]

So Brian, we actually mentioned in the launch in the March of 2016 in the spring.

[Brian Kinstlinger:]

Okay. Yes, sorry.

[Steve Kovzan:]

We've been saying all along revenues could be as high as $2 million annually. So, in that range I would say that would be probably be the top end of the range. But you can’t look at it from a month to month standpoint. There is different hunting season and we'll see spikes at different times. As we get closer to it and little bit metrics will show that.

[Brian Kinstlinger:]

Okay. And then can you provide any detail on Louisiana, and the expected contribution, I think in the past as you guys have started new stage versus [indiscernible] new stage you guys have kind of highlighted the expected contribution?

[Steve Kovzan:]

Yes, Brian, we expect as we mentioned in our scripted remarks, hopefully pending approval from the state. We expect to be out of pilot in the - sometime in the second half of the year. So I think probably the best way to look at our state is maybe to use some of our historical rule of thumb guidance based on population and revenue per capita, that is probably the best guidance that I can give at this point in time.

[Brian Kinstlinger:]

Okay, sure. Last question…

[Steve Kovzan:]

We can’t specifically say when the opportunity will come out of pilot, that’s why we are not specifically giving you a point estimate revenue contribution.

[Brian Kinstlinger:]

Understood. Last question is are there any states that you have responded to or not responded to are there any outstanding RFPs on the state side yet, that you're seeing that are new?

[Steve Kovzan:]

No, and question I am always very careful, how I answer these. There are opportunities out there. We are in constant conversations with several different states and some that I am extremely about. But there is not an opportunity out there that we have responded to this point.

[Brian Kinstlinger:]

Great. Thank you.

[Steve Kovzan:]

Okay, absolutely.

[Operator:]

Thank you. [Operator Instructions] We'll go to Jeff Bernstein with Cowen Prime Services.

[Jeff Bernstein:]

Yes, hi guys. Just a quick question, I think you mentioned the Portland city payment system, I just wanted get an update that, I think you said last quarter that you thought that could be $1 million in annual revenue item eventually, and if maybe you could about other opportunities out there?

[Robert Knapp:]

This is Robert. Jeff, what I'd say I mean, I'll let Steve comment on the financial aspect. We certainly are chasing very similar opportunities where ever we can find them. We're very pleased with the parking meters and the parking ticket process that we set up in the city of Portland. And as I think we last quarter we do think that there is opportunities elsewhere and we're looking for those.

[Steve Kovzan:]

Yes. In terms of financial I mean, I think that $1 million a yearish estimate is still - I think we're still comfortable with and I think even in the fourth quarter we might have seen close to couple of $100 million of revenue from that service and I am not sure was up for the entire quarter, but…

[Jeff Bernstein:]

So these things ramp up pretty quickly is that to way to think about that, I was sort of surprise that it was already palpable?

[Robert Knapp:]

Yes, Jeff, obviously with our propitiatory payment processing system that we talked about, if we're going in and have an opportunity to do pure payment processing, it can be much more quick then if you are talking about building applications that simply just use state, use the payment processing.

[Jeff Bernstein:]

Got you. Thank you.

[Robert Knapp:]

You bet.

[Operator:]

Thank you. We'll go to Allen Klee with Sidoti.

[Allen Klee:]

Yes, hi. How do you think about the opportunities for additional driver history monitoring systems?

[Steve Kovzan:]

Alan, as I said earlier, I think that we have it in several states and we certainly look for opportunities where our state partners are interested that’s probably what I would say at this point.

[Robert Knapp:]

And I would say in terms of frequency, I would say that we kind of look at monitoring kind of similar to way we do price increases, they don’t come around that often. They are relatively infrequent and it’s not something that we expect to be rolling out with regularity across states in the near term.

[Allen Klee:]

Thank you.

[Robert Knapp:]

You bet.

[Operator:]

With no further questions in the queue, I would like to turn the call back over to Harry Herington, CEO.

[Harry Herington:]

Thank you, Catharine. Thank you to everyone who joined this afternoon. I look forward to speaking with you again next year and invite all of our stockholders to our annual stockholder meeting on Tuesday May 2. Thank you very much.

[Operator:]

Thank you. And ladies and gentlemen, again that does conclude today's conference. Thank you all again for your participation.