NIC Inc
Q4 2014 Earnings Call Transcript

Published: 6 Feb 2015

[Operator:]

Good day, and welcome to the NIC Inc. Fourth Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Angela David. Please go ahead.

[Angela Davied:]

Thank you, Whitney. Good afternoon, everyone, and welcome to NIC's fourth quarter earnings call. The press release for NIC's fourth 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 [phone], 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 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 projects under existing portal 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 risks 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, 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 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 or disruptions through cyber-attacks or other events and any resulting liability; and general economic conditions and the other important cautionary statements and 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, and 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 H. Herington:]

Thank you, Angela. Welcome to our fourth quarter earnings call, and thank you for joining us today. Since the earliest days of NIC, we believe certain core elements were critical to sustaining a successful business. First, we placed our focus on citizens and businesses. We wanted to improve government interactions for them and making dealing with government more efficient and more convenient. We also decided early on, it was important to develop a funding mechanism that was steady in good government budgetary times as well as times of government budget shortfalls. This resulted in our self-funded model with its recurring revenue streams. And finally, we have always had a long-term focus, concentrating more on making the right investments and decisions that will grow our business years into the future. These core tenets hold true today and delivered solid financial results this past year. Our core business performed exactly as it was designed to. Existing and prospective partners continued to see the value of our model. We kept innovating and creating new ways to make government experiences better, and we grew existing services that drove healthy organic growth. Specifically, this year, our Connecticut portal got up and running. Our team focused on making it easier to conduct business with the Department of Motor Vehicles. We also signed a master contract, and just recently, finalized agreements with the State of Louisiana to commence the pilot phase of the Department of Public Safety, which will require substantial investment on our part in 2015, that Robert and Steve will discuss in greater detail. We had a record year of contract renewals and rebids with 6 new long-term contracts signed. We launched nearly 40 new government mobile applications and hundreds of new eGovernment services, and securely processed more than $20 billion in payments on behalf of our government partners. And we accomplished all of this while maintaining a strong, new state pipeline and a high level of interest in our self-funded model. In fact, South Dakota recently issued a Request for Proposal for self-funded eGovernment services, and we are optimistic that additional RFPs will be released this year. From a financial standpoint, we exceeded the high end of our revenue and earnings guidance even during a year in which we had some headwinds that made the growth challenging. For the year, total portal revenues were up 9% and same-state revenues up 8%, in line with our 8% to 10% historical average. I am proud of what we accomplished. We stuck to the fundamentals of our business, executed well and produced solid financial results that exceeded our plan. In 2015, we will continue to focus on long-term success of our business, making several key investments that will impact our bottom line in the short term, that will help enhance the health of our company in the long run. One key investment is in cybersecurity. I'm working to keep millions of transactions secure from cyber threats. In fact, we must do all that we can to keep the sites and services we build for government secure. Our partners often rely on us as an authority on security matters. This is one of our company's core competencies, and we have a very skilled team in place to oversee security monitoring, compliance, and remediation efforts. We definitely view security as one of our competitive advantages, and we must continue to invest if necessary. In addition, we are more than doubling down on our federal business development efforts in 2015, which we are confident will continue to move as closer to securing additional, self-funded federal partnerships. We have established a solid foundation with our federal business development efforts over the past few years, and we remain patient as we work to grow our federal footprint. We are as optimistic as ever about this potential long-term growth driver for our business. Steve will speak more to these investments in a moment. And Robert will provide more detail about new developments with Louisiana pilot. So with that, I'll turn the call over to Robert Knapp, NIC's Chief Operating Officer. Robert?

[Robert W. Knapp:]

Thank you, Harry. I'm pleased to begin updating you on our newest partner in Louisiana. As Harry mentioned, we had previously signed a master contract to provide eGovernment services during a 12- to 18-month pilot with the Department of Public Safety. Recently, we kicked off the pilot program. Recall that the pilot does not include driver history records, but does include a handful of DMV-related services. We are excited to have people on the ground getting to work in Baton Rouge to provide great eGovernment services to benefit the citizens of Louisiana. Steve will talk more about the pilot-related costs in 2015, but I will end by saying we will invest what is necessary to build a strong relationship with our new partner so that we are well positioned to provide eGovernment services in Louisiana for years to come. In other news across our portals, I'm often asked about our process for developing new eGovernment services, with questions about how we decide which services to launch. Many times, we're working on eGovernment services related to current topics you hear about in the news. Legalized medical marijuana is just one example. Just last year, 3 more states joined the list legalizing medical marijuana, bringing the total to 23 states and the District of Columbia. During the fourth quarter, Hawaii became the first NIC portal to launch a medical marijuana patient registration system. The new system was built in partnership with the Hawaii Department of Health and allows both medical doctors and Department of Health staff to enter a patient applications for medical marijuana use. There are approximately 15,000 marijuana patients, medical marijuana patients in the State of Hawaii, and each patient is required to register in the database annually, with the transaction fee tied to the registration. In addition, we recently partnered with the Maine Department of Health and Human Services to develop a custom online service to allow licensed physicians to issue preprinted medical marijuana certifications to patients. The new online service is only available to licensed Maine physicians in good standing. Patient information is utilized for the sole purpose of prepopulating a pdf certification, which is then printed and handed to the patient. A duplicate certification record will also be on file at the licensed physician office. Earlier this year, I shared with you the growing concern over corporate identity theft. Utah was the first portal to launch a corporate identity protection solution for the Secretary of State's office, with Maine following close behind to launch a similar service. During the fourth quarter, we added Hawaii to the list, as the portal launched its version of the service called MyBusiness Alerts. Similar to other portal corporate identity theft protection services, MyBusiness Alerts allows business owners to receive virtually real time email or text messages when a change is made to a company's official Hawaii business registration filing. Today, 5 NIC portals operate corporate identity theft protection service

[Stephen M. Kovzan:]

Thanks, Robert, and good afternoon to everyone on the call. Today, I will discuss results for the quarter and briefly recap full year 2014, then spend my time discussing our guidance for 2015. In the fourth quarter, we earned $0.12 per share compared to $0.09 in the prior year quarter. A few noncore items affected the comparability of year-over-year results. First, if you calculate fourth quarter earnings per share from the face of the income statement, you come up with $0.13. However, recall that we must allocate a portion of our earnings to participating securities, which consist of service-based restricted stock issued with nonforfeitable rights to dividends. As a result, our earnings per share came in at $0.12 for the quarter after we factored in participating securities. Second, recall that results in the prior year quarter included $2.5 million in legal defense and other costs, net of insurance reimbursements related to the SEC matter, which was successfully concluded in December 2013. These costs lowered earnings per share in the prior year quarter by approximately $0.02. Third, our results in the fourth quarter reflect an effective tax rate of 36% down from 44% in the prior year quarter. The lower effective tax rate was driven, primarily, by a favorable benefit related to the full year effect of the federal research and development tax credit for the 2014 tax year, totaling approximately $400,000. Legislation extending the tax credit through December 31, 2014, was signed into law during the fourth quarter of 2014, which was good news. However, it was not extended beyond 2014, although we are cautiously optimistic that it ultimately will be extended again, as the tax credit has solid bipartisan political support. As a result, we are in the same position now with the R&D tax credit that we have been in more than a few times over the past several years. Prospectively, we would recognize any benefit of a reinstatement in our effective tax rate at the time it becomes law. But for now, we cannot. In the prior year quarter, our income tax provision included approximately $600,000 in expense related to changes in state income taxes including true-ups, upon the filing of state returns in the quarter. This lowered earnings per share by approximately $0.01 in the fourth quarter of 2013 and contributed to the higher effective tax rate. We currently expect our effective tax rate to approximate 39% in 2015 give or take. Lastly, as you probably noted in our earnings release, we reclassified certain employee benefit related expenses for 2013 to match the new 2014 presentation. The details of the reclassification are included in our release. The key takeaway is that the reclassification had no effect on total operating expenses, operating income, net income, earnings per share or cash flows. We simply move costs from one bucket to another. We've included new quarterly income statement summaries of the past 8 quarters in the financial statement schedules of our earnings release. As you'll note, the quarterly reclassification between operating expense buckets was roughly $1 million, give or take, for most quarters. Moving on to the core results for the quarter. Total revenues rose 9% with portal revenues up 8% 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, driven by growth from various eGovernment services across several states. Same-state Driver History Record or DHR transactional revenues grew nicely again this quarter, up 7% from the prior year quarter driven in part by higher volumes across several states as well as price increases in 2 portals. Lastly, same-state time and materials revenues were down 15% for the quarter, primarily, due to the conclusion of the Master Work Order Agreements in Texas as we've discussed on previous calls and a stronger quarter of project-based time and materials revenues in the prior year quarter from other portals. Moving on to our newer portals that are not included in the same-state calculation. Fourth quarter revenues from Pennsylvania and Connecticut were combined $3 million. Self-funded revenues for Pennsylvania commenced in late October 2013, and were $1.5 million in the prior year quarter; and for Connecticut commenced in April 2014. Revenues from the legacy Arizona portal contract, which expired at the end of Q1 2014, were approximately $900,000 in the prior year quarter. Finally, software & services revenues increased 12% to $3.9 million in the fourth quarter driven by solid performance from the federal Pre-Employment Screening service and other payment processing services. The federal PSP revenues increased 14% for the quarter. Now on to a recap of our full year 2014 results. From a revenue standpoint, we exceeded the high end of our guidance with record total revenues of $272.1 million, up 9% over 2013. Portal revenues also increased 9% over 2013 to a record $255.7 million. Same-state portal revenues finished the year up 8% in line with our 8% to 10% average -- historical average with same-state IGS transaction-based revenues up 9% and same-state DHR revenues up 7%, driven by higher volumes across several states and price increases in 3 states. Same-state portal management revenues were up 2%, while same-state time and materials revenues decreased 4% for the year, driven in part by the conclusion of all the Master Work Orders in Texas. Software & services revenues increased 16% driven by continued growth from the federal Pre-Employment Screening service and from the construction lien service in North Carolina and other payment processing services. For the year, federal PSP revenues were up 13% from 2013. Operating income increased 20% for the year with operating margins of 23% for the year. And finally, we closed out 2014 with record earnings per share of $0.59, up from $0.49 in 2013, as we exceeded the high end of our earnings guidance for the year. Now on to our financial guidance for fiscal year 2015. We currently expect total revenues of $284 million to $296 million, with portal revenues ranging from $268 million to $279 million, and software & services revenues ranging from $16 million to $17 million, currently anticipating -- anticipate earnings per share to range from $0.57 to $0.63. The high end of our total revenue guidance assumes 9% growth with strong total same-state revenue growth of 10%, including mid-teens same-state IGS revenue growth, and low single-digit, same-state DHR revenue growth. We currently expect portal gross profit margins for the year to be in the upper 30% range. Our expected portal gross profit margin reflects the new expense classification I discussed a moment ago and the Louisiana portal pilot with the Department of Public Safety. Our guidance reflects up to $2 million in startup expenses for the portal, with only minimal offsetting revenues. While the pilot will be dilutive to earnings in 2015, we are committed to investing what is necessary this year in order to be well positioned to secure the enterprise-wide expansion in the portal and pave the way for future growth in 2016 and beyond. In addition to Louisiana, we will make incremental investments in a few of our larger existing portal relationships. Specifically, following our recent contract extension through August 2017, we are committing additional resources in our Texas portal to enhance our ability to identify new revenue opportunities and continue to provide the very best in eGovernment services in the Lone Star State. To conclude my comments on the portal business for 2015, I will remind you that we currently expect to transition out of Delaware by the end of Q1 2015. In 2014, Delaware generated approximately $545,000 in fixed-fee portal management revenues per quarter or approximately $2.2 million for the year. Moving on to selling and administrative expenses. We currently expect corporate level expenses to approximate 14% of total revenues in 2015. This metric also reflects the new expense classification I discussed a moment ago. However, as Harry mentioned, we are making significant investments in cybersecurity as well as federal business development. I will add briefly to Harry's comments on security. Following the massive security breaches with the likes of Target, Neiman Marcus and Home Depot, cybersecurity has entered a new realm of prominence in the public eye. News reports across the country continue to note the rise in cybersecurity spending. This past summer, a study by research from Gartner noted the average company spent $400 per employee on security efforts in 2014. A study out January by Identity Finder, LLC reported that 61% of companies increased their security budgets by an average of 34% in 2014. And a Piper Jaffray study said 75% of Chief Information Officers plan to invest more in cybersecurity this year. This is, certainly, the case for NIC in 2015. More so than for almost any company I can think of, cybersecurity continues to be our single biggest reputational risk. And as a result, we have always been very aggressive and vigilant with our security efforts. As Harry alluded to earlier, we are taking an even more aggressive stance with our security posture in 2015. Above and beyond our normal commitment to cybersecurity, we plan to spend an incremental $1 million for additional resources to respond to new payment card industry data security standards, referred to as PCI DSS, and to significantly increase the limits of our cyber liability insurance among other security-related initiatives. Moving on to federal. I won't add anything to Harry's comments on federal other than to say that we currently expect to spend an incremental $1 million to expand our federal sales team and enhance our efforts to continue to educate key agencies about the value of our eGovernment services and self-funded model. As a few final housekeeping items, we currently expect depreciation and amortization expense to approximate 3% of total revenues in 2015 in line with our historical average, with capital expenditures expected to range from $6 million to $7 million, slightly above our spend in 2014. And as always, our projections do not include revenues or costs from any unannounced contracts. In summary, our 2015 guidance reflects strong top line same-state revenue growth with incremental investments to grow and safeguard our business. While our bottom line growth is expected to moderate this year, I am bullish about our prospects for long-term growth. A successful Louisiana pilot, coupled with the comprehensive suite of hunting and fishing services for Wisconsin, currently scheduled to launch next year, would set us up nicely for continued growth beyond 2015. Furthermore, we also entered this year with a solid pipeline of prospect states and a strong foundation to grow our federal business with additional planned investment. Both of which we hope will also contribute favorably to our growth beyond 2015. To conclude my remarks today, I am proud that NIC has always been a company that operates with an eye towards the future and refuses to waver from this long-term focus that has been so beneficial to our government partners, investors and employees over the years. With that, I'll turn the call back over to Harry.

[Harry H. Herington:]

Thank you, Steve. As you just heard, the fundamentals of our business are strong and operating just as we envisioned from the earliest days of our company. We exceeded our 2014 annual guidance in spite of some strong headwinds, and we look forward to 2015. We know the investments we are making today are the investments needed to build a strong tomorrow. With that, Whitney, we will open the call up for questions.

[Operator:]

[Operator Instructions] And we'll take our first question from John Campbell with Stephens Inc.

[John Campbell:]

Just I might have missed this, any update on the Oklahoma contract?

[Harry H. Herington:]

John, this is Harry. At this time, we're currently in negotiations with the state regarding a traditional NIC contract, and I just can't comment on it.

[John Campbell:]

Okay. That's fair enough. And then, Steve, can you provide a little bit more commentary on the increased spend that you mentioned. I know you said the $2 million for Louisiana startup, and then, the $1 million for cybersecurity and $1 million on the federal side. Start-up costs, those are, obviously, onetime. But as it relates to other 2 items, can you -- is that going to be more of a 2015 event? Or is that -- should that be considered part of the expense run rate going forward?

[Stephen M. Kovzan:]

Well, I think, our current intention is to have them part of our expense run rate going forward. It's not a onetime deal. We are expanding the size of our security team and our federal business development team.

[John Campbell:]

Got it. And then just on guidance. Anything factored in as far as Oklahoma or maybe West Virginia?

[Stephen M. Kovzan:]

Both states are factored in for the entire year.

[Operator:]

We'll take our next question from Peter Heckmann from Avondale Partners.

[Peter J. Heckmann:]

I wanted to see on your guidance for software & services, if I'm looking at it correctly, is there some revenue that's coming out of that? It looks like the guidance is relatively flat. Are you assuming reduced volumes through PSP or perhaps through the North Carolina liens database?

[Stephen M. Kovzan:]

No. No, that's just our guidance for the year. I mean, I think, our revenues for '14 were roughly $16.4 million in software & services, and that the high end of our revenue guidance is $17 million for software & services.

[Peter J. Heckmann:]

All right. And then, just to be clear that the discrete investments you called out in the aggregate were about $4 million?

[Stephen M. Kovzan:]

Correct.

[Peter J. Heckmann:]

It is. Okay, okay. And then is there any revenue included in your annual guidance from Louisiana?

[Stephen M. Kovzan:]

Relatively insignificant, a couple hundred thousand dollars at the high end of our guidance.

[Operator:]

And we'll take our next question from Brian Kinstlinger with Maxim Group.

[Brian Kinstlinger:]

The first question I have is on Louisiana, I think, you said 12- to 18-month pilot. So I'm wondering if the Louisiana losses, so to speak, or investment would run 18 months, do you think, from now or 12 months from now?

[Harry H. Herington:]

This is Harry. I'm going to jump in first. I'll let Steve or Robert chime in from there. The reason we said 12 to 18, that is what is planned by the state from what we responded to, and it is an investment. And I can understand why you would hesitate on that. It is an investment into a solid opportunity that we have there and with the Department of Motor Vehicles. So I'm very excited about it.

[Stephen M. Kovzan:]

So just to follow on what Harry is saying, Brian, our hope is that we could get it done, obviously, sooner within more like the 12 months. But certainly, at that at this point in time, it's hard to say. But again, our goal is to do it as soon as we can. Yet at the same time, we will invest what we need to invest to make it work.

[Brian Kinstlinger:]

And then, on the Wisconsin hunting and fishing, has the pilot started in 2015 as expected? And there was discussion that if you could get that off and running quickly enough, there was an outside chance you could get it generating some more revenue by the end of this year. Is that still a possibility?

[Robert W. Knapp:]

I'll let Steve comment on the financial. This is Robert. From the aspect of the pilot, the primary component of the pilot is scheduled to launch later this year. We have launched a couple of small components earlier this year, and I think we spoke about one of them on a previous earnings call. But the larger pilot, I think, if I remember, is October of this year. And more importantly, everything is on track. Everything is on track...

[Harry H. Herington:]

Everything is on track.

[Stephen M. Kovzan:]

Yes, and so in terms of meaningful revenue contribution, we're not expecting that until 2016.

[Brian Kinstlinger:]

And then, what about cross-selling? I know that this application, there were some talks that even before that pilot went and was completed, that was in place to be sold potentially to existing states or even states that you didn't contract with. How has that played out so far? Have you been started those discussions? Or is it too premature?

[Harry H. Herington:]

No, we've started those discussions. I really can't get into them. As we said before, Wisconsin is the largest state out there when it comes to -- or second largest state when it comes to hunting and fishing. When we made the investment, we made a conscious decision to build this, so it can be replicated easily elsewhere. And as those opportunities become available and as we educate our other partners and opportunities, this is one that we feel we will be able to transition in. I mean, every state is going to have to have some modifications, but the core of this should transfer in fairly nicely.

[Brian Kinstlinger:]

If we talk about cybersecurity, I guess, I'm trying to understand, are you adding more people to try to secure the payments? Or are you actually developing software as a cyber app, so to speak, for your states?

[Harry H. Herington:]

We are not developing cyber software, that we are leveraging to the states that they can take out and deploy. I don't really get into a lot of what we do at cybersecurity. We are adding individuals. We're adding an investment. We're adding some alliances. Different things that will protect us, that will keep us current with the new regulations that are out there and help us stay ahead of this curve. I mean, it is -- this is a scary time dealing with all of the security incidents that everybody else has seen, and we're just trying to be prudent with what we do.

[Brian Kinstlinger:]

Quickly, on the federal sector. I take it there's no RFP. I'm sure you would have mentioned it given you mentioned South Dakota. I'm wondering if you look back at the last year, what would be the reason you think that agencies are reluctant right now to issue self-funded or transactional-based RFPs. Has anything changed in the last year that has gotten them concerned. Are they more likely coming up? I mean, maybe, give us a sense of what they're saying when you're at the table with them.

[Harry H. Herington:]

Yes, and I wouldn't say they're reluctant. I think that's the wrong choice of words, although I can see why it would appear that way from the outside. The issue is bureaucracy more than anything. When you deal it with federal government, and the rules and regs they've got, and the bureaucracy they've got in place, it can become almost paralyzing at times. We have, in the past year, in past several years, we have gone through and educated the Hill. We've educated the agencies. We've gotten several agencies excited about some opportunities. And now we are going through the process. What we have seen is, what I would say, energy coming from them. And that's the reason we're making the investment. I mean, we've seen energy coming out of the federal space, and we're putting more of an investment in resources and individuals to get them across the finish line.

[Brian Kinstlinger:]

Have you hired already? And my question really amounts to, I know you and I have talked in the past about purchasing versus investing. The federal space is all about relationships. And I was wondering you've got this cash on your balance sheet, why not think about acquiring the relationships necessary for that channel?

[Harry H. Herington:]

That's one thing that -- and you're right, I'm always looking for acquisition opportunities that would strengthen us, whether it be federal space or a new opportunity within a state or local government. I haven't found any in the federal space. I constantly look. However, our investment is both hiring and with new alliances out there, that are helping us penetrate deeper and move things faster. So we're doing everything short of an acquisition at this point.

[Brian Kinstlinger:]

Great. Last question I have is in West Virginia. I know you already asked a question on it, but we've seen 2 very short-term extensions. I'm wondering if anything there is unusual in the negotiation on a typical rebid there. Or are you just as confident as you've ever been that you'll be able to renew that state?

[Robert W. Knapp:]

We are -- this is Robert. Brian, we are just as confident as ever.

[Operator:]

And we'll take our next question from the Saliq Khan with Imperial Capital.

[Saliq Jamil Khan:]

I'll be speaking on behalf of Jeff Kessler as well. A couple of questions that we have for you guys. Actually a comment, first. Given the fact that you guys went up against a pretty strong 2013. So 2014 turned out to be, I think, a lot stronger than lot of people had envisioned. So a great job on that. The other thing we wanted to know is that as you guys have seen the increase in the revenues that you're getting from the state portal. Now is that a combination or just the increase in price or is it strictly volume? Could you clarify that as well for us?

[Robert W. Knapp:]

Typically, what we see is launching new services. We'll have some new volumes as we drive better adoption, but it is identifying new services and launching those services throughout the state.

[Saliq Jamil Khan:]

And as you're talking about launching new services, and if you look at the suite of services that NIC provides, what types of technologies or opportunities are you seeing out there right now that you can take advantage of in the coming year? I know, one of the things you guys talked about previously was cybersecurity being on the forefront of what you guys are working on.

[Harry H. Herington:]

Well, cybersecurity is always on the forefront of what we're working on as far as making sure our sites are secured and that the citizens and businesses feel confident that they can do business online. But again, I want to stress, we're not in the business of selling cybersecurity, okay? With that, I will turn it over to Robert for the other...

[Robert W. Knapp:]

Yes, Saliq, I would say, our full suite is still very much in play with a lot of -- all of our portals, but we talked on this call about medical marijuana. And certainly, that is a new trend that we're seeing across states. And so that fits right into our licensing and registration and permitting type of applications. I also mentioned the business identity monitoring that we're doing in the 5 states that now have taken that up. We certainly see that as another opportunity that we'll continue to proliferate across our states.

[Harry H. Herington:]

And we continue to drive mobile, and we think mobile is assisting as well.

[Saliq Jamil Khan:]

I agree with you. I think the 2 biggest portions that we were talking about earlier, Jeff Kessler and I, was one of them being the medical marijuana; second, certainly being the corporate ID theft that you guys have mentioned. Could you clarify for us a bit more about the corporate ID theft? This is a relatively new business for you guys as well. What do you forecast as you'd go into 2015, the types of conversations that are taking place? Are you guys hiring more people, getting more boots on the ground as well to sell to some of these corporations?

[Harry H. Herington:]

I mean, Saliq, we're not hiring more people. This is -- it's, primarily, an application with one of our core customers being the Secretary of States across the country, whereby any time a filing changes on that business, they're able to be immediately alerted and notified of that through the application. And it's early on. We're seeing good traction from states willing to implement it. And now we're marketing it to the banks and the industry that will use it.

[Operator:]

And we'll take our next question from Allen Klee with Sidoti.

[Allen Klee:]

Have you stated -- or would you state for Wisconsin what the revenue was for the quarter?

[Stephen M. Kovzan:]

No, we don't -- Wisconsin is now included in our same-state category, and so we don't provide individual state totals. I think, if you go back and take a look at -- in our public filings over the past year on a quarterly basis, you probably get a pretty decent proxy about what Wisconsin is.

[Allen Klee:]

Okay, great. And then on for federal, just maybe a little bit more in terms of kind of what you're planning to do different in '15 that can -- that gives you the confidence that you are telling us?

[Harry H. Herington:]

Yes, I'll address it. This is Harry. What we're doing different? We're evolving what we're already doing. In other words, we're not necessarily changing a lot of work we've done in the past. However, we've moved things to a point now that it needs more business development, more of the sales approach into those agencies to help them identify how we can remove some of the obstacles or road blocks that might be there. And so I'm making a much stronger investment in that area and some of that final push to get things across.

[Allen Klee:]

Okay. And then could you just remind me what you said about mobile in terms of how much penetration you have there now?

[Harry H. Herington:]

We take a mobile first approach as far as the penetration. I'm struggling a bit with that answer. We take a very mobile first approach. Everything we built has got a mobile first, a responsive design or a specific mobile apps depending on what it is. What it typically comes down to is educating the end users that it's available and educating the agencies to promote it themselves and the value since, as you know, and I forget -- I don't want to misstate statistics, but the large percentage of the public that now are using smartphones, and they prefer to use the smartphone versus their PCs to access government information or any service.

[Stephen M. Kovzan:]

And Allen, this is Steve. I think the way we do mobile financially is we don't necessarily separately track our revenues for mobile. We just view it as another channel to get to the same types of transactions that we're trying to drive. And over 90% of everything we've built is mobile enabled. So again, we kind of just view it as that additional channel for people to access government information or to perform transactions.

[Operator:]

[Operator Instructions] And we'll take our next question from Herb Buchbinder with Wells Fargo Advisors.

[Herbert Buchbinder:]

You've certainly covered these 2 questions, but can you leverage the investment in cybersecurity to generate revenue, at least, to encourage more business because you're more secure. And then, the other question was, would you say you're disappointed that you have not secured a federal contract at this point? And I assume that's why you're spending more money, but I just wanted to see how your feeling is toward this that maybe you're a little frustrated by it.

[Harry H. Herington:]

Herb, that's 2 very -- very strong questions, and I'll answer them both. This is Harry. First off, when it comes to cybersecurity, it is, as I said in my prepared remarks, that gives us a competitive advantage. That is one of the things that since day 1 before we even knew what the term cyber threat was, we have taken very serious. And so we have always invested and making our site and our government partners' as secure as possible. Nobody is bulletproof, and we never profess to be bulletproof. But what we have to do is make sure we try to stay ahead of the curve, make sure we put the right safeguards in place, the right training in place, we stay compliant with all of the regulations, and we have the right insurance, in case, there ever should be an incident. So that's the investment that I've made 10 years ago. That's the investment I made last year. And that's this year, with hindsight looking back -- nothing to do with us, but hindsight looking back at how bad 2014 was around this country for so many businesses, it is a very prudent move to make the right investments, especially, in light, again, there's new rules and regs that any company doing payment card processing has to follow. And they better be making these same investments, or they'll be out of compliance. So I would say, it is a differentiator for us, absolutely. When we show up and we talk about what we provide, we do 2 things. Number one, we show them what the rules say. And in some cases, that makes prospect states very nervous of what they're doing today because they realized they're not following because they were unaware of some of these rules, what's out there. The other thing is we show what we do and how we go above and beyond to make sure that we have their interest, that's our interest as well, safeguarded. So it does gives us a strong competitive, I think, advantage as a core competence. As far as federal, frustrated is a good word for us, absolutely. I would say I was naive. This is all we do. And when we moved into the federal space and we started speaking with federal agencies and got the excitement from them, I will be honest to just tell you, I assumed we've been at the finish line a lot sooner. One of the educational components for us is learning not only the bureaucracy, but the necessity of a lot of that bureaucracy and why that's good. And I will tell you security at the federal level is night and day above what we've seen in the past, with the stringent requirements that they take you through. And I discussed it, they take the agencies through before they can put anything out for a bid and other bureaucratic issues that we have got very familiar with. And I think I mentioned to everybody early - I know I did early on, we went through and changed some of the laws. We worked with agencies that they would change some of their rules and regs so that they can do self-funding. I mean, and that's where our initial investment went is to just give that glide path to show them, "Look, this is not only allowed, but now it's encouraged that you look at the alternative funding mechanisms, such as self-funding." So we've got that in place. We got agencies excited. And now I've got the solid sales team and alliances in place, like I said, to get those final hurdles out of the way.

[Herbert Buchbinder:]

I assume the cybersecurity investment can help somewhat, and even the federal business, too?

[Harry H. Herington:]

Absolutely. When I made this investment, I made it with both an eye on our current business. And then, the investment when we look at the enhanced requirements they put on the agencies at the federal, I made sure that I was spending ahead of the curve. So that when I walk in and my team goes in there and they start selling these, they can show that, yes, we are not only complaint, we not only understand what's being asked of them, but we exceed those requirements.

[Herbert Buchbinder:]

Can you see the need for some additional incremental investments to get into this federal business that you haven't basically talked about so far?

[Harry H. Herington:]

At this stage, I can't, but I'm not going to say it won't happen. One of the things that we did throughout our entire budget and business [indiscernible], and as everybody on call knows, we take that serious. It's a 6-month process. We go through that. We really took them through the federal. We looked at where we were in the past and where we need to invest now to get this to happen. And trust me, if there was additional areas I could invest dollars to move something along, I would. I'm very comfortable where we're at.

[Operator:]

And we'll take our next question from Brian Kinstlinger with Maxim Group.

[Brian Kinstlinger:]

Great. Harry, there is a lot of cyber technologies out in the market. So I'm wondering if you evaluated partnering with the best-in-breed technology to secure payments and other transactions over adding more personnel. And what led you to add more personnel as opposed to partnering, if you did?

[Harry H. Herington:]

Hey, Brian, I think you might have misunderstood what I've said. I did both, okay? There are certain things where you have to invest in additional personnel in-house to do some of the testing and some of the cyber requirements, and it's got to be in-house. And then, there's others. I'm one of those guys that always is going to say, "Should I build or buy?" When you look at cybersecurity, that is an expertise that there are several companies out there, many companies out there, that bring to the table that I'd be foolish to try to replicate that. I'm not going to talk about who I partner with because that would cause a security vulnerability, but I will tell you, I have several key security alliances that help me sleep at night.

[Operator:]

It appears there are no further questions in the queue. At this time, I'd like to turn the conference back to Harry Herington for any additional or closing remarks.

[Harry H. Herington:]

Thank you, Whitney. And I want to thank, everybody, who joined us today. As you can tell, we're very bullish on the future and where we're headed. And on the investments we're making, I feel very strongly, this is the right investments to make, and it's going to make us stronger and bring business to the table sooner. I look forward to speaking with you, again, next quarter. And I invite all of our stockholders to the 2015 Annual Stockholder Meeting to be held Tuesday, May 5th, in Lawrence, Kansas. Thank you.

[Operator:]

This now concludes the presentation. Thank you for your participation.