NIC Inc
Q3 2014 Earnings Call Transcript

Published: 8 Nov 2014

[Operator:]

Good day, and welcome to the NIC Incorporated third quarter 2014 earnings announcement conference call. As a reminder 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, Robert. Good afternoon, everyone, and welcome to NIC's third quarter earnings call. The press release for NIC's third quarter 2014 earnings announcement was issued 30 minutes ago. And our earnings release is also available on our corporate website at egov.com/investors. 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'll 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 statements regarding the company's potential financial performance for the current fiscal year, statements regarding the planned implementation of new portal contracts and new projects under existing contracts and statements regarding continued implementation of NIC's business model and its development of new products and services. Forward-looking statements are subject to inherent risk and uncertainties, and there can be no assurance that such statements will prove to be correct. There are a number of important factors that could cause actual results to differ materially from those suggested or indicated by such forward-looking statements. These include, among others, NIC's ability to successfully integrate into its operations recently awarded eGovernment contracts; NIC's ability to implement its new portal contracts and new projects in a timely and cost-effective manner; NIC's ability to successfully increase the adoption and use of eGovernment services; the possibility of reductions in fees or revenues as a result of budget deficits, government shutdowns or changes in government policy; the success of the company in renewing existing contracts and in signing contracts with new states and federal government agencies; continued favorable government legislation; NIC's ability to develop new services; existing states and agencies adopting those new services; acceptance of eGovernment services by businesses and citizens; competition; the possibility of security breaches through cyber attacks and any resulting liability; and general economic conditions; and the other important cautionary statements or risk factors described in NIC's 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014. Any forward-looking statements made during this call speak only as of the date of this call. NIC does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances. Now, it is my pleasure to introduce Harry Herington, NIC's Chief Executive Officer and Chairman of the Board.

[Harry Herington:]

Thank you, Angela. In recent weeks there has been published information concerning two of our contracts, Oklahoma and Texas that has created some confusion. These reports have been taken out of context and filled mostly with speculation and even some misinformation due to the limited information concerning state procurement and contracting processes available in the public domain. As a result, I believe it is appropriate to start by providing our perspective on both matters, describing the facts as we know them. Let's begin with Oklahoma. As we have previously reported, our current contract with the state expires soon, as the state has exercised all available contract renewals. As is typical in government contracts, the state has a duty to best position itself in the event the existing vendor is not chosen as a provider for the future contract. Depending on the state, this may require formal notification of contract termination to the various agencies affected by our contract. The State of Oklahoma recently notified state agencies that our contract was nearing its natural conclusion. This was picked up by a few government news sources in the state, and as a result, there has been speculation that we may no longer do business with the state or that we will operate in the much more limited capacity than we do today. The state is simply following procurement procedures. And an important component of that process is to reexamine their current solutions to ensure they are still in the best interest of their constituents. We have strong relationships with the administration and the state CIO's office, and our agency partners are very satisfied with our performance. At this point, the procurement procedures limit our ability to discuss with the state its intent regarding the future procurement process. What I can say is that together with the state we have done an outstanding job of delivering industry leading eGovernment services, and we look forward to the opportunity to continue providing eGovernment innovation in the Sooner State for years to come. Moving on to Texas, earlier this week a research analyst issued a report regarding an amendment to our master agreement with the State of Texas, which was finalized during the third quarter. The amendment addressed a number of items that I would characterize as housekeeping, ranging from data center services to marketing plans to business case terminology. Several of these items were not addressed in the original master contract, such as cloud services, a technology approach that was not contemplated back in 2009. Others reflect changes in timelines and current day-to-day business practice, such as due dates for marking plans. The main issue raised by the research analyst centered around what he perceived to be a new concept for payment of a fee to terminate our contract. Let me be completely clear. This amendment replace subjective criteria already in the contract with objective criteria. In other words, this amendment actually gives us greater comfort to accept new projects, which may in the future extend beyond the end of our master contract, while protecting our investment and revenue in such projects. A project termination fee is and always has been required by contract for us to calculate when we submit a business case to the state for consideration for each project. In our view, these terms and amendment are mutually beneficial to us and the state. The material terms of our contract with the state remain the same. Our relationship with the state remains strong, and in no way whatsoever does this amendment cause us any concern. Again, it was important to me that I clarify any misinformation, right at the beginning of this call. Moving on, what I do want you to hear loud and clear today is that NIC posted solid financial results this quarter, our business is growing and we are being recognized for our financial success. For the sixth consecutive year, Forbes recognized NIC as one of the 100 best small companies in America. And once again, we made the Barron's 400 Index. Less than 2% of all publicly traded companies in North America are included in the index for two consecutive years, and this marks NIC's fourth consecutive year to be a part of the index. And there is good news to share about Louisiana. The procurement process is nearing the finish line, as we have completed negotiations on the master contract, and we are working through the final details with the state in order to get the pilot period rolling. Add to this good news, the announcement we made last week that NIC's Board of Directors once again declared a special cash dividend. We will be paying $0.50 per share on November 20 to stockholders of record as of November 7. This dividend will bring our total capital return to stockholders to $205 million since our first special cash dividend in 2007. I have believed in this company for more than 20 years and that has never wavered. We are doing the right things. We are growing this company, we are returning value to stockholders and our success is being recognized. This company is rock solid. And with that, I'll turn the call over to NIC's Chief Operating Officer, Robert Knapp, for more in-depth report on portal operations for the third quarter. Robert?

[Robert Knapp:]

Thanks, Harry. I'll start by sharing some good news from Texas. During the third quarter we entered into an agreement with the Texas Department of Information Resources and the Department of State Health Services to takeover the management of the states online vital record system, including the death reporting and certificate ordering system. This affectively closes the chapter on the last remaining Master Work Orders, concluding our subcontractor relationship with Deloitte. Under the previous Master Work Order arrangement, NIC received only a small portion of the revenues generated by the service. Going forward, we currently expect revenues from the service to be approximately $4 million annually. A special thanks to our partners in Texas for entrusting NIC with this work. Moving on, I am pleased to report that we have launched the first component of the multi-phase hunting and fishing licensing project in Wisconsin. In September, the Wisconsin portal launched the harvest registration reporting service on opening day of Whitetail Deer bow hunting season. Within two days, after the launch, hundreds of harvested dear has been registered using the new services. Next spring the service will expand to include all species types. This provides a great benefit to the Wisconsin hunters, as they can register harvested animals within minutes, and no longer have to drive to a registration station. Again, this is just one component of the comprehensive multi-phase hunting and fishing project we are rolling out for the state, and I look forward to sharing more exciting developments with you in the future. Things are also taking off in our Connecticut portal. During the quarter, the portal launched a mobile application in partnership with the state's Department of Motor Vehicles. The app includes the practice driver's test, similar to what we offer in many other NIC states. However, in Connecticut, we took things a step further and added a quiz for parents of teen drivers, information about DMV and AAA office locations as well as services that provides wait times at DMV offices. The mobile app is off to a strong start and is a fantastic example of how we are helping the Connecticut DMV be more accessible and user friendly. This quarter also marked the annual Best of Web announcements. This year NIC portal swept the top five spots in the annual ranking of the best state websites in the nation. This was the first year in state history that Hawaii took the number one spot, with Utah, Arkansas, Texas and Maryland rounding out the top 5. Indiana, Kansas, Nebraska and Oregon where included in the top 10, as finalist. And this mark the first time the State of Oregon has ever ranked in the Best of Web competition. In addition to the Best of the Web awards, the Center for Digital Government also recognizes outstanding agency and the partner websites and application projects. This year five NIC teams and their partners received Digital Government Achievement Awards. Arkansas, Maine, South Carolina, West Virginia and Oklahoma, congratulations to all of our teams and partners who are honored this year by the Center for Digital Government, and a special congratulations to our team and partners in Hawaii for taking first place in Best of the Web. Finally, I am pleased to report we have received a few more contract extensions this quarter. Tennessee signed an 18 month contract extension with us, taking the agreement through March of 2016. And in Virginia we received contract extensions to continue working with both, the Supreme Court and the Department of Game and Inland Fisheries until September 2015. Thank you to our partners in Tennessee and Virginia for continuing to place your confidence in us. We look forward to working with you and together making eGovernment successful in your state. And with that, I'll turn the call over to Steve Kovzan, NIC's Chief Financial Officer. Steve.

[Stephen Kovzan:]

Thanks, Robert, and good afternoon to everyone on the call. During the third quarter of 2014, NIC earned $0.16 per share, up from $0.08 in the third quarter of 2013. Recall that results in the prior-year quarter reflect a one-time non-cash pre-tax charge of approximately $5.1 million to write-off accounts receivable due from the Commonwealth of Pennsylvania. This reduced earnings per share by approximately $0.05 on an after-tax basis in the prior-year quarter. Total revenues for the quarter were $69.5 million, up 13% year-over-year. Total revenues were $65.3 million, also up 13% year-over-year, driven by consistent same-state revenue growth and incremental revenues from our newer portals in Pennsylvania, Connecticut and Wisconsin. Total same-state portal revenue portal revenues increased to solid 9% for the quarter, breaking down the two major components of same-state revenue growth. Same-state interactive government services or IGS transactional revenues, what we previously referred to as non-DMV, grew 11% this quarter. This growth was driven mainly by higher revenues from several key services including payment processing, motor vehicle registrations, court record searches and professional license renewals among others. Same-state transactional revenues from driver history records, what we previously referred to as DMV, and now refer to as DHR, were up 9% this quarter, consistent with the strong growth we saw last quarter, which was again partly the results of price increases in three states, two in the second quarter of this year and one in the third quarter of last year. Setting aside these price increases, we continue to see strong DHR volume growth across various portals, as we have the past several quarters, which has provided a nice tailwind to our topline growth and gross profit margins. Moving on to our newer portals. Connecticut, which began generating DHR revenues in April of this year, generated $1.1 million in revenues during the current quarter. Current quarter revenues from our newer portals in Pennsylvania, Wisconsin were $2.3 million and $1 million, respectively. The Wisconsin portal began generating revenues in September 2013 with revenues of $400,000 in the prior-year quarter. And we recognized no revenues from our Pennsylvania contract in the prior-year quarter. Revenues from the Virginia state agency partnerships were $800,000 in the current quarter, while revenues from the legacy Virginia state portal contract in the prior-year quarter were $1.3 million. The legacy Arizona contract expired in March of this year. Therefore, we recognized no revenues from Arizona during the third quarter of 2014. This compares with revenues of $800,000 from Arizona in the prior-year quarter. Moving on to the software and services businesses. For the quarter, software and services revenues were up 17%, driven primarily by growth from payment processing services with certain non-portal state agencies and by continued growth from the federal Pre-Employment Screening Program, which we manage for the U.S. Department of Transportation, Federal Motor Carrier Safety Administration. PSP revenues were $2.6 million in the current quarter, up from $2.3 million in the prior-year quarter. The operating margin for the quarter was a healthy 24%, reflecting new state contributions in Connecticut, Pennsylvania. And one final housekeeping item, our contract with Delaware has been extended for another six months under the same financial terms and conditions through March 31, 2015, to continue the transition process we announced earlier this year. Delaware currently generates approximately $545,000 per quarter in portal management revenues. In conclusion, I was pleased to see that once again we produced solid financial results this quarter and that our strong financial performance and cash flows from operations over the past year provided us the flexibility to again return capital to stockholders in the form of another special cash dividend. And with that, I'll turn the call back over to Harry.

[Harry Herington:]

Thank you, Steve. We are focused on one thing, providing the best eGovernment solutions to our partners and to the citizens and businesses they serve. Our partners believe in us and we believe in our partners, together we produce award winning solutions and that work has resulted in strong financial results once again this quarter. With that, Robert, we will open the call up for questions.

[Operator:]

(Operator Instructions) We will take our first question from Peter Heckmann of Avondale.

[Peter Heckmann:]

If I go in just a little deeper; congratulations on Louisiana, that procurement process and contract negotiation has taken a little bit longer than we had expected. But it sounds like it is poised to go live. Could you remind us what type of revenue we might expect during the pilot phase of that contract and when that revenue might start to flow?

[Stephen Kovzan:]

I think what you'll probably start to see is we begin to incur some startup costs, getting our team in place in Louisiana. And then probably closer to the time, we provide guidance for next year, we'll give you an update on revenues from the pilot period. But as we mentioned previously, we do expect the pilot period, at least at this point in time, to last from 12 to up to 18 months. Hopefully, it's on the shorter end. And our operations during that period of time could be somewhat dilutive to our results. So it will not be a material amount of revenue during the pilot period, but we'll update you next quarter when we provide guidance for the year.

[Peter Heckmann:]

And then can you remind me, where there two or three of those Master Work Orders leaves with Texas. I think I heard you say this is the last one. Could you remind me how revenue was recognized under the last one and how it will differ under this new extension?

[Stephen Kovzan:]

We recall that, yes, to confirm this was the last Master Work Order and it has concluded. And we have taken over the vital record system. Under the previous arrangement that we had with Deloitte, we earned a small amount, a relatively insignificant amount of transactional revenues from the service. Going forward, starting in September, we actually recognized a month's worth of revenues and we'll see a full quarter's worth of revenue in fourth quarter. We'll begin to, as Robert mentioned, about $4 million a year, so roughly $1 million per quarter going forward that we'll see in transaction-based IGS revenues.

[Peter Heckmann:]

And just as a clarification, did you say that, of the three states that had DMV fee increases, two were in the second quarter of this year and one was in the second quarter of last year. Is that right?

[Stephen Kovzan:]

One was in the third quarter of last year.

[Operator:]

And we will take our next question from Saliq Khan of Imperial Capital.

[Saliq Khan:]

I'm speaking on behalf of Jeff Kessler. Couple of questions guys. You guys really talked about being able to better utilize the overall cash by executing the special dividend. As you're looking out into the strategy of the overall company in the out quarters, are there any other opportunities for possibly strategic acquisitions that you guys are able to speak about?

[Harry Herington:]

Not that I'm able to speak, but I will tell you there's something I've mentioned on previous calls that we continuously look for the right opportunities to invest them when we have [indiscernible] right return to our stockholders. Acquisitions are definitely one of them, as we look at new technologies coming out. As we look, moving in stronger foothold in the federal space, those are things that we explore, but we had no stage at this point to discuss anything.

[Saliq Khan:]

The other thing would be, as you guys are looking at possible contracts where, I think different governments, non-governments, are there negotiations that are going on or possibly could go on with smaller nations, surrounding nations, particularly Canada?

[Harry Herington:]

International is a strategy that, and some people get nervous when I'd say this, but yes, I'm very interested into serving the entire world when it comes to eGovernment. International is a strategy we've looked at. It's the one that I am very interested in. I think we'll be able to replicate some of the successes that we anticipate having in the federal space internationally, but we're focused right now on continuing to capture the states we don't have, and getting a strong foothold in the federal space before, I would say, aggressively go after international, and an opportunity presents itself or seems ideal, we're all over it.

[Saliq Khan:]

I mean, on the same token, as you guys are going after the federal government, any updates or pieces that are might be out there?

[Harry Herington:]

Have no updates right now. I would say the team is working hard. To grab somewhat, Pete said earlier, it's a much slower process for us than we anticipated, but it the nature of the beast. And I'm very pleased with what my team is doing.

[Saliq Khan:]

You guys had a really, really tough year-over-year comps, given the fact that 2013 was probably one of the best years that you guys had in your history. As you're looking at possibly increasing the overall margins going forward, I know that the startup costs are somewhere $500,000 to about $1 million or so. Is there any opportunity at all to be able to squeeze that cost down or bring that cost down a little bit more as well?

[Harry Herington:]

Are you talking about Louisiana?

[Saliq Khan:]

No. I'm talking about in general. The startup costs that we're looking at, other acquisitions, other contracts that you might have with other states, any opportunities at all to bring that overall startup costs down?

[Stephen Kovzan:]

Well, the issue of startup cost and the amount that we spend and that we invest really does vary by state and the requirements of the RFP in the contract. But in terms of, I don't know if you're maybe kind of going more in the direction of efficiencies and things of that nature, certainly we're always looking to do things more efficiently and bring up our portals as efficiently as possible, but only if it's in the best interest of our government partners.

[Operator:]

And we will take our next question from Brian Kinstlinger of Maxim Group.

[Brian Kinstlinger:]

I have a follow-up on Oklahoma. One of the articles, there's an Oklahoma spokesperson quoted is saying the agencies wanted more flexibility and they want to transition the contract over the next 13 months, that there would be many separate RFPs, and they don't want all their eggs in one basket. And in fact, they finally said that the portal contract was great in 2001, and then it sounded like they have made complaints about you, but they were smarter to be more flexible and break those up. So I guess I am curious with the comments being there from the Oklahoma spokesperson would give you confidence that you can retain all of Oklahoma.

[Harry Herington:]

Well, first off, I would ask if you listen to any of the political commentary that was out there from the news media over the past month; frankly what I'm getting at is I am not going to speculate on a reporter's speculation of what's going on, all right. And the reason for that is who knows who they're speaking to, at what level, and what authority they've got. The media's job is to create stories. And they will do whatever they can to create those stories and get them out and hopefully to the closer to the front page of paper as possible. I think it's extremely dangerous to start speculating on what a reporter might say and what speculation that the reporter has. What I will tell you, and I do think it's a great question, because it's out there and people ask the questions, so I didn't mean to slam you, I hope that it didn't come across that way.

[Brian Kinstlinger:]

No. I would have done the same as you. I would have come out and addressed you right away too. I mean, it's from the Oklahoma; it seems like their spokesperson for the State of Management and Enterprise Services', so I would want you to mention it.

[Harry Herington:]

Yes, unfortunately these things seem to always pop up during our quiet periods. They are doing their job. I applaud Oklahoma. I applaud our partner. And you know what, what happens is, this happens behind the scenes every place we're at. When our contract, when they run out of renewal opportunities, they have to by law re-bid it. They have to by law come up with the new contracting mechanism. And what they should do is number one, tell all their agencies, look this contract has come to its natural end, and because of that their might be a different vendor, because we have to go to an open and fair procurement to select the next one. So no matter what type of relationship we have with them they have a duty to inform, and go through, what I would call a fair procurement, to make sure that they still have the right solution. That's all Oklahoma is doing right now. It's out there doing what I would say all of my states either do or should do when we get to the end. And that is inform them that we're at the end of it, that we have to go through a required procurement. And that we will select the best solution possible and ask for their input.

[Brian Kinstlinger:]

I'm with you, I mean, it just seemed like it was a person of authority sort of being quoted, but I appreciate your answer definitely. Can you quantify, Steve, the price increases and how that increase contributes to year-over-year DHR growth?

[Stephen Kovzan:]

Well, I'll give you some; I'm not going to quantify in dollars per se, but maybe the easier way is to say roughly half of the 9% growth that we saw in same-state DHR revenue growth came from price increases. Maybe a little bit more than half. And the rest of it was general volume growth across the rest of our portals.

[Brian Kinstlinger:]

Now, I know for the year, management has been expecting at least one state and one federal RFP, I'm hoping you can update us just in the pipeline in general, most importantly with the new language in the omnibus bill in place, which was the biggest pushback, I am curious what you think the biggest pushback now is at least in the federal side. When we looked at the federal contractors that I mostly cover seem to be a pickup in the procurement environment. So what are customers saying to you as you're educating them right now?

[Harry Herington:]

Well, first off, the biggest issue we've run into and we anticipate is this, were the elections. Good and bad, the elections always bring an interesting time for our company, because state level -- and in fact, certainly, no, it's not a national election as far as the President, you have -- excuse me, we are starting to have selections going on, everything kind of grinds to a halt, as things start heating up, because everybody is focused some place else. I would say that is the case with us. We knew it was coming, we anticipated it was coming, and what we have to do is kind of take a pause, because pushing does us no good, they're not going to be focused on anything except for the outcome of elections. What we do is, we influence the individuals there, we educate those that might win, we put transition plans in place for any change that has occurred. So that we're ready to hit the street right off the bat, right after the celebrations are done and work from their with our strategy and our solution. I would say, we've engaged that piece right now. Keep in mind where there's been changes, there will be some wholesale changes that happen at all once, that's a great sales opportunity for us, because we can be part of that. And so we've got sales team in there. On the others, it's just a matter of letting things dive back down and then move forward from there.

[Brian Kinstlinger:]

So is that fair to say that you think now that maybe first half of '15 is the time to see some actual hard RFPs?

[Harry Herington:]

What I always say and I am very careful about this is because I speak with my sales team, I actually speak with different individuals within government. And in over the past 20 years, they have promised me dates that have sometimes moved by a month and sometimes moved by five years and more. And so I never give, and I apologize for this, but I can never give a, hey, we're going to have something out next quarter. What I can say is people are excited. We have prospects. And they say they're at various stages, good stages that I am happy about, but I can't speculate when it's going to get across the finish line.

[Brian Kinstlinger:]

Two more quick-ones. First, can you give us an update on the Oregon Truckers Association lawsuit? Obviously, you're not named in it, but it deals with your DHR application process, so maybe if there has been any update at all in the quarter?

[Harry Herington:]

Yes. The only thing I can say about that is, as you know the states appeals, we support the state. We're doing business with normal. Life there is, it's going great, and as Robert just said, we won awards there with our partner. So I would say we're excelling there and I'm not concerned.

[Brian Kinstlinger:]

Is there a date where there's supposed to be a ruling on that?

[Stephen Kovzan:]

No. I'm sure there're statutory dates that we got to go out, but I'm also an attorney and the thing that I would tell you from there is the recent government can be so unpredictable, because they're run by a lot of attorneys. And from a legal standpoint they've got ways to extend timelines and so they become untrustworthy. So yes, there is really no dates out there we could point to.

[Brian Kinstlinger:]

Last question. Can you provide what percentage of revenue, I know you put in your Q, the Texas portal as a percentage of revenue, and I assume that the Texas portal excludes the MSA revenue?

[Stephen Kovzan:]

I don't know what MSA is, Brian. Are you talking about Master Work Orders?

[Brian Kinstlinger:]

You had the three MSA -- you had the three separate contracts, the one that you just resigned. I take it excludes that your Texas portal revenue. I'm just curious with the Texas portal revenue is as a percentage of the total?

[Harry Herington:]

What we report in our public filings on a quarterly basis, as the component that Texas is of our total revenues includes all the revenues, we earned in Texas, not just the portal or Master Work Order or whatever and I think it's 21%, 22% roughly, so that would be all inclusive everything that we earned in Texas.

[Robert Knapp:]

And we [ph] earned that Master Work Order.

[Harry Herington:]

Right, so the Master Work Orders go away, but historically it's an all inclusive numbers.

[Operator:]

And we will take our next question from John Campbell of Stephens.

[John Campbell:]

Robert, could you just maybe go back to the new Texas win? And then maybe for Steve just for own modeling purpose, is there any seasonality in that revenue contribution and then maybe how we should think about that as far as the margin impact?

[Stephen Kovzan:]

I'll let Robert take the first one.

[Robert Knapp:]

I think generally, again, this is four, we've taken over that Master Work Order for vital records and that's both birth and death certificate ordering. And we are doing the management and the ongoing operations of that existing system with the Department of State Health Systems.

[Stephen Kovzan:]

And so to follow-on Robert, astute question. Yes, in all likelihood there would be some materiality -- not materiality, seasonality in somewhat in the third, but mostly in the fourth quarter, probably a little bit seasonally lower if I had to guess with the holiday periods. But I think roughly $1 million a quarter is a descent estimate, but again there could be some seasonality in Q3 and Q4. And in the stronger hunting and fishing periods of the year, first and second quarters could be a little bit higher, but we'll just kind of have to see how the first year goes.

[John Campbell:]

And then is that any type of margin impact or is that just kind of company-level margin?

[Stephen Kovzan:]

Yes. I wouldn't say, there is going to be an extreme with one way or the other.

[John Campbell:]

And then, just a housekeeping item, and I might have missed this earlier, but the tax rate came in a little lighter than we expected in 3Q. So just thoughts for 4Q, and then is 39% still kind of a good starting point for '15?

[Stephen Kovzan:]

Yes. I think that's a between 39% and 40%, then is there reasonable starting point. We've got our fingers crossed for some type of extender or permanent fee of the research and development tax credit, which we are not currently recognizing in our numbers right now. That was a little bit lighter this quarter, not by much. We just filed our tax return for the year, so we do some true-ups throughout the year, but between 39% and 40% is the reasonable estimate for them.

[Robert Knapp:]

I want to clarify some real quick, if I could, because we are talking about Texas and I don't want there to be a misperception. Steve mentioned hunting efficient, we do not -- this is vital records. You confused Wisconsin with that. There can be some seasonality just because of the number of business days. There are still the same number of births and deaths throughout the year, but because the business days in the businesses is a prelim, usually some third, mainly fourth quarter you could see that, but I do want to inadvertently [indiscernible] thinking that this was included hunting and fishing.

[John Campbell:]

And Steve, just one quick follow-up on that, what would be the impact if you guys would have received that R&D credit?

[Stephen Kovzan:]

I think about a 0.5% to a 1% on our effective tax rate roughly.

[Operator:]

And there are no further questions from the phones at this time. I'll turn the call back to our moderators for any additional or closing remarks.

[Harry Herington:]

Thank you, Robert. I want to thank everybody for joining us this afternoon. As I said earlier, I'm rock solid. We are hitting on all cylinders. I'm very bullish on the company and I look forward to speaking with you next quarter. Thank you.

[Operator:]

And this does conclude today's conference call. Thank you again for your participation.