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Q3 2008 Earnings Call Transcript

November 6, 2008, 4:30 pm ET


Nancy Beaton - Director of Communications and IR

Harry Herington - Chairman and CEO

Steve Kovzan - CFO


Charlie Anderson - Dougherty & Co.

Chad Bennett - Northland Securities

James Cakmak - Sidoti & Company

Nick Gogerty - Fertilemind Capital



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 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.

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