NIC Inc. Q3 2008 Earnings Call Transcript

| About: NIC Inc. (EGOV)

NIC Inc. (NASDAQ:EGOV)

Q3 2008 Earnings Call Transcript

November 6, 2008, 4:30 pm ET

Executives

Nancy Beaton - Director of Communications and IR

Harry Herington - Chairman and CEO

Steve Kovzan - CFO

Analysts

Charlie Anderson - Dougherty & Co.

Chad Bennett - Northland Securities

James Cakmak - Sidoti & Company

Nick Gogerty - Fertilemind Capital

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the NIC third quarter earnings announcement conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, this conference is being recorded today, November 6, 2008.

I would now like to turn the conference over to our host Ms. Nancy Beaton, Director of Communications and Investor Relations. Please go ahead.

Nancy Beaton

Thank you David. The press release for NIC's third quarter earnings announcement was issued 30 minutes ago. For those of you who haven't received the release, the announcement is available on our corporate Web site at www.nicusa.com. You may also call our headquarters at 1-877-234-3468, and Chris Davies will fax the information to you.

Before we begin, let's cover our customary Safe Harbor statement. Specifically, the statements in this release regarding continued implementation of NIC's business model and its development of new products and services are forward-looking statements. 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, the success of the company in signing contracts with new states and government agencies, including 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 and general economic conditions and the other important cautionary statements and risk factors described in NIC's 2007 Annual Report on Form 10-K filed with the SEC on March 17, 2008 and NIC's Form 10-Q for the quarter ended September 30, 2008 filed with the SEC on November 6, 2008.

I would now like to introduce Harry Herington, Chairman of the Board and Chief Executive Officer of NIC.

Harry Herington

Thank you Nancy and I would like to welcome you back from spending time with your new beautiful baby girl. Good afternoon, I want to thank everyone for joining us for NIC’s third quarter earnings call. I appreciate your time today as we review the events of the quarter and discuss our financial performance. I will begin with key items and metrics in the third quarter and then as normal Steve Kovzan, our Chief Financial Officer, will provide additional financial details. After that, we will open up the call and I will take your questions.

To begin, let’s address an obvious question which is what impact has the recent economic downturn have on NIC. As I will share with you in a moment, our quarterly results reflect that our business remained steady and remarkably consistent during these troubling economic times. While no company is completely immune to the effects of today’s economic conditions, NIC remained strong. One of the reasons for this is that we made the decision years ago not to rely on the credit markets for capital and developed a successful business model that continues to generate strong free cash flow. As for any potential impact on our sales pipeline, I am pleased to state that NIC continues to have great in-depth conversations with government leaders concerning the increased value eGovernment can provide. Recent reports show that 29 states are taking additional steps to cover budget shortfalls including spending cuts and hiring [ph] freezes. The combined budget deficit from the states that are projecting shortfalls now stands at $40 billion and continues to grow.

As a result of this very challenging economic climate, many state governments that were previously committed to managing their eGovernment operations in house are reconsidering those decisions. The power of our self-funded business model to deliver cost savings and efficiencies for state government has generated increased interest in NIC and our business development team has been very busy meeting with state government leaders across the country during the past several months. However, it is important to remember that we must work within the timelines of state government and our competing priorities. While the current economic climate is creating additional interest in self-funded portals from new states, it will take time to maneuver through the bureaucracy and for RFPs to materialize which leads us to a discussion about the active state opportunities and the RFPs that many of you are aware of.

As is our longstanding policy, we don’t typically talk about the specifics of current opportunities beyond the information that is publicly available. Let’s start with New Jersey. We had issued a RFP this summer for a self-funded enterprise portal as we did in September and we are currently awaiting communication from the state concerning the next steps. Typically the next step might be an on-site oral presentation but this is at the discretion of the state. In the case of New Jersey the state did not issue a timeline for its RFP process so there are no public days for next steps or when the RFP will be awarded. This is very common in government procurement and is not a cause of concern for us.

The next procurement is in Texas which issued a rebid RFP for its self-funded enterprise portal two weeks ago. Based on the timeline provided by the state, bids are done early January 2009 and the vote is currently scheduled for next June. In each of these opportunities, we believe NIC has the best experience, expertise and flexible financial models to deliver a successful outsource portal which is a belief that it is also shared by our 21 state partners. We intend to compete as aggressively as possible to secure each of these contracts.

Also on (inaudible) updates for California and Georgia since the status of both of those opportunities has changed recently. First, California has issued a bid for portal services last December, unfortunately the new state CIO elected to cancel the RFP in September. As many of you are aware, the RFP was issued prior to the arrival of the state’s new CIO. We have great respect for the officials we have worked with in California and while we are disappointed that this RFP is no longer an active opportunity NIC continues to maintain positive relationships within the state and continues to have conversations concerning the self-funded model. Our belief is that the state will issue a new portal RFP at some point in the future.

The situation in Georgia has also changed. NIC was notified this week that the state has also cancelled its portal RFP. As a reminder, we are under a NDA with the state and therefore unable to disclose many details. We can tell you that this opportunity was a managed service contract and not a classic self-funded solution. We worked extremely hard for the past several months with the State of Georgia to try and create an agreement that could meet the rigorous requirements the state was seeking as part of its managed service contract and still be profitable for NIC. Unfortunately NIC and Georgia were unable to find a solution to satisfy both of our needs. We have great respect for the decision makers in Georgia and look forward to future opportunities within the state. We do not view the procurement changes in California or Georgia as major setbacks. We believe these are temporary delays in the procurement process and continue discussions with both states. As we have stated before, delays are extremely common in the RFP process. For example, Colorado’s original portal RFP was also cancelled and many months passed before another procurement was issued which as you know NIC won and has been managing very successfully since 2005. We will continue to work closely with those states to provide information that could be helpful in the development of future procurements. In the meantime, we have a very full pipeline including responding to the active RFPs in Texas and New Jersey as well as maintaining an ongoing dialogue with decision makers in several high potential states. In keeping with our long established policy, we won’t be disclosing the specific states and the status of these discussions until RFPs or other public statements are issued by state government.

Overall, our current business development activity continues to give us a high level of confidence in our total pipeline. When it comes to communicating the value of eGovernment prospects, we are fortunate to have a constant stream of new case studies and metrics that demonstrate how our services can help states reduce cost and increase efficiencies. In Utah for example, Governor Jon Huntsman recently introduced a four-day work week for the majority of the state employees as a way to reduce cost by powering down government offices with three-day weekends. One justification for closing state offices on Friday was the strength of Utah.gov which offers several hundred online applications and serves as a state office 24 hours a day seven days a week. Utah’s thought process sums up the value of the work of portal teams across the country we serve as an extension of government that never closes. In Tennessee, our portal team works closely with agencies to measure the online versus offline costs to process transactions. Since we began managing the state’s portal seven years ago, Tennessee.gov has saved the state more than $52 million by migrating transactions to the Internet. With the cost structure it is usually much lower than in a manual offline process.

Since launching the Montana portal in 2001, we have delivered more than $6 million and free eGovernment services through the self-funded model. Several of our state portals including Oklahoma and Vermont have built special Web services that allow citizens and agencies to measure their savings by using eGovernment. Oklahoma’s Go Green Web site encourages agencies to post their reduced paper (inaudible) metrics which is one way to measure both cost savings and environmental benefits. So far this year 14 participating state agencies have cut nearly 330,000 pages of paper from their businesses process by migrating services to the Internet. At Vermont.gov the state offers an online service savings calculator that allows citizens to calculate their saving by using eGoverment. The interactive calculator includes inputs for travel distance, fuel, vehicle fuel efficiency, gas cost, parking expenses, and the hourly cost of a person’s time. The result is a hard dollar cost savings for the citizen as well as a reduced Green House gas measurement created by not driving a vehicle to a government office to complete a transaction. These are just a few examples of how we are using metrics to quantify the value of our eGovernment citizens, partners and prospects and I can tell you first hand that these measurements absolutely do resonate with all audiences and especially with prospect stakes.

Let’s take a moment to also discuss the contracting rules that were approved in the third quarter. Three states agreed to extend their long-term relationships with NIC which is always the point of pride for us. I say it all the time and I will say it again, we never take our partnerships for granted and I would like to thank Kansas, Vermont and West Virginia for continuing to put their trust in NIC.

Before we move on to our third quarter results, I do want to address one housekeeping issue which is the status of the dissolution of the Voting Trust. As a refresher, the Voting Trust was established by NIC’s founders Jeff Fraser and Ross Hartley and managed independently of the company. On June 20 of this year, NIC was informed that the Voting Trust had dissolved after nearly ten years. NIC has sought interpretative guidance from the SEC as to whether beneficiaries of the Voting Trust publicly resell their shares without restriction prior to the end of the six-month holding period after the dissolution of the Voting Trust under Rule 144 which were beyond December 20. Accordingly all affiliate and non-affiliate shares distributed from the Voting Trust are currently restricted from trading. During this time, we have also been communicating with the former Voting Trust members so that they are aware of NIC’s business prospects and long-term growth strategies in order to enable them to make an informed decision when it comes to their holdings.

Now on to the results of the third quarter, as I stated earlier we had a solid quarter with portal revenues of $24.1 million and earnings of $0.05 per share yet again demonstrating the strength of our core business during a challenging economic climate. Same-state non-DMV transaction revenues grew 26%, which was in line with our performance in the first half of the year and is yet another indicator of the strength and stability of our portals. Non-DMV revenue growth is a closely monitored metric that is delivered through the launch of new services as well as increased usage of existing services across our state portals. Last year we introduced 368 new revenue-generating applications or more than one a day. So far this year, we have launched 327 revenue generating applications and currently have another 153 in the development pipeline. I think it is safe to say that we will probably beat last year’s record which means we continue to do the right thing to serve our partners by introducing new applications that increase efficiencies and reduce costs for agencies and citizens.

With that, I will turn it over to Steve for additional details about the quarter.

Steve Kovzan

Thanks, Harry. For the third quarter, total revenues were $24.1 million, a 17% increase over the same period last year. On a same-state basis, portal revenues grew by 10%. Breaking out the components of this growth on a same-state basis, non-DMV transactional revenues grew at 26% while DMV revenues grew at 2%. Both of these metrics were consistent with our results from the first half of the year. It is worth noting that this is the third consecutive quarter in which same state non-DMV transactional revenues have grown by at least 25% over the prior year quarter. Harry said earlier that we do not take our partners for granted and I want to echo that statement and expand it to say that we also do not take the stability and consistency of our business model for granted, especially during this economic downturn.

Total gross margins for the quarter were 44% and generally in line with our margin expectations as third quarter margins are typically lower than margins in the first two quarters of the year due to seasonality and certain non-DMV applications such as hunting and fishing for example.

Third quarter portal margins were also impacted by a few minor items. First, our Arizona portal incurred some additional expenses to complete the conversion of legacy applications to NIC source code and to ramp up staff for new generating projects. Second, variable time and materials revenues from our Indiana portal were lower as compared to the second quarter of this year. The revenue decrease in Indiana is not a trend or a cause for concern. As you are aware, time and materials projects simply don’t have the same degree of predictability as our transaction based revenues and can be somewhat lumpy from quarter to quarter. Excluding these two portals, gross margins were approximately 46%. We sometimes get the question about why our gross margins are not higher and the answer is that we strived to strike a careful balance between delivering the returns our shareholders expect and reinvesting in the long term success of our portal operations which is what our partners expect and is a key consideration each time a portal comes up for rebid or renewal. NICs portal gross margins have historically been in the 45% to 50% range and that is where we expect to be going forward.

On the expense side, selling and administrative expenses for the quarter were $5.5 million as compared to $5.2 million last year. However, as a percentage of portal revenues, selling and administrative expenses were 23% in the current quarter, down from 25% in the third quarter of 2007. It is worth noting a couple of accounting items that affected third quarter results both in 2008 and 2007. Third quarter 2008 results reflect a change in our uncertain tax positions that reduced income tax expense by approximately $200,000, absent this item, net income would have been $2.8 million or $0.04 per share. Third quarter 2007 results also reflect a change in our uncertain tax positions that reduced income tax expense by approximately $0.5 million and third quarter 2007 results also reflect a gain of approximately $0.5 million on the sale of minority investment. Other then these two items, net income would have been $2.8 million or $0.04 per share in the third quarter of last year.

We had a positive liquidity event take place shortly after the end of the quarter that I am pleased to share with you. As many of you are aware, we helped student loan auction rate securities that had been liquid since February of this year. In early October, the broker dealer of these securities repurchased our entire auction rate portfolio at par value which was approximately $6.9 million. Given the ongoing crisis in the global credit market, this was certainly a nice outcome for us. As noted on our balance sheet, at September 30, we reclassified these securities from long term to current assets and end of the third quarter with $62.4 million in cash and short-term investments.

I want to close by reemphasizing that we are very pleased with the stability and consistency of our performance relative to the challenges that many other companies are facing during this miserable business climate. While we recognize that there have been some pockets of mild softness in our business this year most notably in DMV which is primarily driven by macro-economic factors largely outside of our control, there are a few businesses that are as resilient as NIC during challenging economic times. Our focus continues to be on executing in the portal business, developing new online services and expanding our state portal footprint to continue on our growth plan. To that end, we are reaffirming full year 2008 guidance that we provided in early February of this year and I will run that down for you. Total revenues of $98.5 million to $100.7 million, portal revenues of $95 million to $97 million, software and services revenues of $3.5 million to $3.7 million, operating income of $17 million to $18.5 million, and net income of $10.7 million to $11.7 million and as always, our projections do not include any new portal contracts.

With that, I will turn the call back over to Harry.

Harry Herington

Thanks Steve. Operator, we are now open for questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) Our first question comes from the line of Charlie Anderson with Dougherty & Co. Please go ahead.

Charlie Anderson - Dougherty & Co

Good afternoon, thanks for taking my questions guys.

Harry Herington

Hi Charlie.

Charlie Anderson - Dougherty & Co

Wanted to ask about any sort of commonality between California and Georgia here and as you look at the other opportunities in your pipeline right now, any lessons from those two that you could see a potential for any others that are in your pipeline and also opportunities in terms of the states you are talking to now just kind of reasons that we would see a cancellation and then if we can extrapolate that to anything else?

Harry Herington

Charlie, this is Harry, I am not going to down play this too much other than say these are specific to California and Georgia and the reasons for both of them are different and California clearly they brought on a new CIO after it had been released and once you had time to get her feet on the ground to see what was going on, she looked at it and pulled it back in and that didn’t come as a surprise to us, we were expecting it at the moment, we heard that they were bringing in a CIO that I would think was just normal course of business. The Georgia one was a little bit more disappointing for us. To deal with Georgia, it was a

managed service contract, we tried to work with the state to come up with a solution for both of us that we could deliver what they are delivering today plus the additional requirements they had at the price that they had within the RFP and the gap was just too broad and Georgia looked at it and decided that what they needed to do was cancel the RFP and reconsider their options, (inaudible) out anywhere.

Charlie Anderson - Dougherty & Co

So do you expect Georgia to come back with another RFP but it would be more focused on those managed services or just what do you expect them to do?

Harry Herington

I expect both Georgia and California to come back with portal opportunities, I can’t tell you a timeline, I do know that in both those states they are currently looking at what would be best for the state but I think they both learned a lot not only from the process but also from NIC. We have had great opportunities in both of those to educate them at a level that we never had access before. So I am actually kind of excited to what they do come back with.

Charlie Anderson - Dougherty & Co

Okay and then just talking about the broader economy here for a second, I think a lot of the impact was felt in the last couple of weeks of September for a number of companies and then in October here obviously (inaudible) to your business too much at all really in the third quarter but I wonder in those last couple of weeks and then in October kind of some of the trends that you are seeing across some of the different categories of transactions you do?

Harry Herington

I am not overly convinced of this here, I am going to start and let Steve jump in, I am not overly concerned -- we are not seeing the majority of the other companies out there I think are seeing, that is the nice thing about our business model and dealing with government, we have always said that we are not immune to economic downturns but we are resistant to it -- I mean you still have to do business with government, you start to pay your taxes, you start to file your forms and we are still working quite regularly with all of our government contacts and all of our partners. I think we did see as Steve indicated some downturn in DMV revenue, when you see a downturn in the sale of automobiles and over the summer the price of gas, I think that has impacted it but everything else is well under control. Steve?

Steve Kovzan

Our results Charlie have been amazingly consistent the first three quarters of this year. So from that standpoint we really have not changed much change in our business. Now what happens going forward and as you appropriately note, everything kind of started breaking lose in October but based on what we have seen so far, our business has been amazingly resilient.

Charlie Anderson - Dougherty & Co

That is great to hear. I wonder with the DMV looseness if that is offset by some volume increases in any other parts of your business, you see some things for the economy would maybe spark more?

Steve Kovzan

I think that is right and Charlie that is the beautiful thing of having a tremendously diversified portfolio of services is that while we do see some pockets of weakness in DMV and really this quarter for DMV probably was a little bit stronger with 2% growth than what we saw the first two quarters of the year which was basically flat. I think you are right, I think that these pockets of weakness while they would have been nice to have had trended at historical levels have been offset by other pockets of strength, so it is the beautiful thing about our business model. We are not reliant upon one service to really make it go beyond the DMV source.

Charlie Anderson - Dougherty & Co

Then I just had a last question about Indiana, you mentioned the time-and-materials has been a little bit weaker than you expected there, this is a state where the contract does a lot, causes them to go into their general fund, do you expect that you are going to see more weakness there going forward and then on the flip side of that because of what is going on with the state budget do you expect them to revisit the full self-funded model again because of what is going on?

Harry Herington

I will jump in and start with that and I will start with the second question first, I sure hope so. It seems like it would be a logical path for them to pursue but I can’t think and guess what they are going to do there but trust me that would be my first choice. As far as the budgets I mean cards on the table, Indiana along with everyone else is getting hit with tight time and is that going to continue to impact us, one thing I would say as Steve indicated often times it is timing. We don’t want to say that the slowness we had in Indiana was because of budgets, it is just a matter of timing when some of these projects come through, eGovernment has been proven to save state’s money, every state in the country and Indiana, Arizona and every other state is going to look and say how can we save money and that means we are going to put applications online and services online. I think it would be – I want to be cautious here but I think it has to be one of the last places they cut is the obvious place where they can save tax payer’s dollars.

Charlie Anderson - Dougherty & Co

Right.

Steve Kovzan

I don’t think I have too much more to add to that Charlie other than I think as you have seen in our numbers through the first two or three quarters of the year is that the time of materials revenues tend to be a bit lumpy for us and if there is an area of exposure for some discretionary cutback that could be an area in the future but as Harry said we expect to see strength in other areas as states move services to the Web.

Charlie Anderson - Dougherty & Co

Right, that’s all for me for now, thanks guys.

Harry Herington

Thanks Charlie.

Operator

Thank you sir. Our next question comes from the line of Chad Bennett with Northland Securities. Please go ahead sir.

Chad Bennett - Northland Securities

Hi. I guess a couple of questions on the Georgia – I know you don’t want to get into too much detail but can you give us a timeline of kind of how the events came about and I think you indicated you backed away basically in the last week but when did you officially submit your offer or proposal for the RFP?

Harry Herington

Chad I am going to be very careful here and the reason for that is because I am under an NDA in Georgia, I have spoken with the legals here to figure out what I can say and what I should say as a publicly traded company out there and so I really cannot expand beyond and give much more information. In Georgia their timelines, they were very clear that they want to keep all of this as confidential as they could but Chad my hands are kind of tied.

Steve Kovzan

Yes, Chad, we submitted the RFP I think in the September timeframe and so early September, mid-to-early September and so the chain of events have taken place certainly from that point until now is about all we can give you in terms of –

Harry Herington

The only other thing is what I stated earlier, the State of Georgia cancelled the RFP.

Steve Kovzan

Right.

Chad Bennett - Northland Securities

But we knew this was a managed service opportunity the whole time?

Steve Kovzan

Yes we did, you didn’t because again we are not at liberty to discuss the details of the contract but we were the three vendors that were involved with the process, we were given the RFP but the public was not given the RFP.

Chad Bennett - Northland Securities

Okay and we submitted obviously a self-funded opportunity?

Harry Herington

I am not going to go into that again for obvious reasons. We submitted a response and had great conversations with Georgia.

Chad Bennett - Northland Securities

Okay on the gross margin line Steve, obviously there are seasonal factors, I guess on the Arizona side, do we see feel more impact from the Arizona conversion that we are doing and are we seeing any upside in potential within that state from the original terms on the fixed contract there?

Harry Herington

Everything is on track, we have largely completed the conversion, it is going great and so some of the things that kind of came through in the quarter were some generally non-recurring incremental expenses but we do see some new projects on the horizon which is good news and I think – was there another part of your question that I missed?

Chad Bennett - Northland Securities

Yes is there a chance of upside of that contract relative to the original deal?

Harry Herington

Thank you. You are right. I think the state has the contractual ability to up the amount that they pay us on an annual basis on a fixed fee by an additional million dollars. The state has not exercised that right yet and that is about all I can say there.

Chad Bennett - Northland Securities

Okay and seasonally gross margins tend to tick down again in the fourth quarter, would they tick down from this level or should we back out the two one-time items?

Harry Herington

They could tick down slightly from this level, I am not sure what our fourth quarter margins were last year but overall if you excluded these two states, I think our margins were at about 46% no tick down from there.

Chad Bennett - Northland Securities

Okay but we should exclude these two items is what you are seeing?

Harry Herington

No, I am not saying you should exclude them because both of the portals will be in our results for the fourth quarter but yes, sure, you will see a modest decrease in our margins in the fourth quarter.

Chad Bennett - Northland Securities

Okay, alright thanks.

Operator

Thank you sir. Our next question comes from the line of James Cakmak with Sidoti & Company. Please go ahead.

James Cakmak - Sidoti & Company

Hi guys, good afternoon.

Harry Herington

Hi James.

James Cakmak - Sidoti & Company

Hi, just following up on the margins for the fourth quarter, you said it would be slightly down, is that down from that 46% range?

Harry Herington

Yes, down from the 46% and possibly down from the 44%.

James Cakmak - Sidoti & Company

Okay great and it is a non-DND [ph] being the organic growth engine for your company, just given the macro environment, is there any change in what you guys are publicly stating as your goal for 2010 that $75 million number?

Harry Herington

Yes.

James Cakmak - Sidoti & Company

Okay and New Jersey –

Harry Herington

James, I think that what I would probably tend to say is that we have got some work to do between now and then. In order to get to that $75 million number, we need to be growing at a faster pace than we are right now.

James Cakmak - Sidoti & Company

So we are not at this stage of the game changing.

Harry Herington

Yes and so we have got some work to do but we are not changing anything James.

James Cakmak - Sidoti & Company

On New Jersey, we are getting closer to a potential contract awarded from those guys, being a bigger state, much more sizeable state, do you have any sense of the cost that you think that would be associated with developing and rolling out the portal from New Jersey, do you think it will be higher than what you have seen historically?

Harry Herington

In terms of kind of the initial start-up cost?

James Cakmak - Sidoti & Company

Exactly.

Harry Herington

To get it rolling, I guess if I had to err on a side, I would probably tend to say it would be towards the higher end maybe – we always say our rule of thumb is about $0.5 million to $1 million to start up a portal and in the size of New Jersey maybe it would tend to be on the higher end but nothing out of the ordinary that I would publicly point to you about New Jersey particularly.

James Cakmak - Sidoti & Company

Okay and on the tax, expense reduction, do you have an exact number for that, you said about $200,000?

Harry Herington

Yes, so it is a little more than $200,.000 but it does not round up to $300,000.

James Cakmak - Sidoti & Company

Alright, got it.

Harry Herington

How is that?

James Cakmak - Sidoti & Company

It sounds good, I appreciate it. Thanks a lot guys.

Harry Herington

Thanks James.

Operator

(Operator instructions) Our next question comes from the line of Nick Gogerty with Fertilemind Capital.

Nick Gogerty - Fertilemind Capital

Hi good afternoon.

Harry Herington

Good afternoon Nick.

Nick Gogerty - Fertilemind Capital

Hi, how are you doing? Just a quick question, sometimes in the past you have mentioned the growth in the metric of revenue per citizen and I am just wondering are you giving any indications or thoughts on where that is going to go given this climate?

Harry Herington

You know Nick, we really use that metric quite honestly to help you model out the potential of a new state. So beyond that we really don’t use the metric in terms of a performance measurement from quarter to quarter because we could win a new state and potentially drive that metric down, we could win a large new state, for example, Texas and it would drive that measure down yet that would not be indicative of the underlying strength of the business. No, we don’t have any really forward-looking information there other than the fact that given our guidance for 2008 that metric will be close to about a $1.40 for the year.

Nick Gogerty - Fertilemind Capital

Right. I understand you guys grow new applications, etc and that relationship without those citizens is potentially deeper. Another question I have for you is the ChoicePoint acquisition, they are kind of a key player in the roll, any thoughts or are there any implications from that?

Harry Herington

I think it just makes them stronger. It does not cause us any concerns.

Nick Gogerty - Fertilemind Capital

Okay, right and then the last thing and you have already hit on it quite a bit obviously auto sales are off but if you could reiterate and clarify the impact from auto sales and new registrations you haven’t seen much so far and any thoughts on that going forward as long as people re-up [ph] and re-register their cars and they are out there driving things look pretty solid.

Harry Herington

Absolutely, I think you have got it dead on, that is the case and here is the other thing, people are still going to buy cars whether it is new cars or used cars, they are still going to have new cars for their kids and what have you and whatever downturn that we saw, it is going to correct itself over time.

Nick Gogerty - Fertilemind Capital

Okay, thank you very much.

Harry Herington

You are welcome.

Operator

Thank you sir. (Operator instructions) I see no further questions in the queue, I would like to hand the call back to Mr. Herington for any closing remarks.

Harry Herington

Thank you. Again, I want to thank everybody, I want to remind you that NIC is an extremely strong company and we are very pleased where we are at during these economic times and I look forward to giving you good news again next quarter. Thank you.

Operator

Ladies and gentlemen, this concludes the NIC third quarter earnings announcements conference call. If you would like to listen to a replay of today’s conference, please dial 303-590-3000 or 800-405-2236 and enter access code 111-20318. ACT will like to thank you for your participation. You may now disconnect.

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