NIC, Inc. (NASDAQ:EGOV) Q3 2020 Earnings Conference Call October 28, 2020 4:30 PM ET
Kara Cowie – Director, Corporate Communications
Harry Herington – Chairman & CEO
Stephen Kovzan – CFO
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Conference Call Participants
Peter Heckmann – D.A. Davidson & Co.
Keith Housum – Northcoast Research Partners
Gary Prestopino – Barrington Research Associates
Good day, and welcome to the NIC Q3 2020 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to our presenters.
Good afternoon, and welcome to NIC’s earnings call. The press release for NIC’s earnings announcement was issued 30 minutes ago. Our earnings release is also available on our corporate website at www.egov.com/investor-relations. You may also call our headquarters at 844-944-3468, and we will e-mail the information to you.
Joining us on the call today are NIC’s CEO, Harry Herington; and Steve Kovzan, NIC’s Chief Financial Officer. Following a reading of our cautionary statement regarding forward-looking information, our CEO and CFO 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 often address the company’s potential financial performance for the 2020 fiscal year or future fiscal years; estimates; projections; the expected length of contract terms; statements relating to the company’s business plans, objectives and expected operating results; statements relating to potential new contracts or renewals; statements relating to the company’s expected effective tax rate; statements relating to possible future dividends and share repurchases; statements related to the ongoing effects that COVID-19 pandemic is expected to have on our business and financial results, including statements relating to the duration, profitability and unsatisfied performance obligations of our COVID-19 testing solution and other possible future events, including potential acquisitions and the assumptions upon which those statements are based.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements. These risks include regional or national business, political, economic, competitive, social and market conditions, including various termination rights of the company and its partners, the ability of the company to renew existing contracts in whole or in part and to sign contracts with new federal, state and local government agencies; the impact of potential information technology, cybersecurity or data security breaches or incidents; the company’s ability to identify and acquire suitable acquisition candidates and to successfully integrate any acquired businesses and the effects the COVID-19 pandemic may have on continued demand or/and profitability of the company’s services, including our COVID-19 testing solution as well as its government agency partners, its workforce and the broader economy. You should not rely on any forward-looking statement as a prediction or guarantee about the future.
A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the sections titled Risk Factors and Cautions About Forward-looking Statements of the company’s most recent Form 10-K and subsequent reports filed with the SEC. These filings are available at the SEC’s website at www.sec.gov. Any forward-looking statements made during this call speak only as of the date of this call. Except as may be required by applicable law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Now it is my pleasure to turn the call over to Harry Herington, NIC’s Chief Executive Officer and Chairman of the Board.
Thank you, Kara, and good afternoon, everyone. Like many companies throughout the world, this pandemic forced the team at NIC to manage our business differently. However, one thing that did not change was our absolute laser focus on deploying the right solutions for our partners and our communities. And it was that focus and determination of our employees that enabled us to deliver a remarkable quarter.
To begin with, we are proud to announce we finalized the multiyear contract with the State of Florida for payment processing across all agencies, and we are pleased to welcome Iowa back to the NIC State Enterprise family, also with a multiyear contract. In addition, we expanded TourHealth, our COVID-19 testing partnership we formed last quarter with Impact Health and NEXT Marketing. Since inception in August, TourHealth has administered more than 120,000 rapid COVID-19 tests in South Florida and thousands of tests on behalf of University of Mississippi and the Alabama Department of Corrections. I will touch more on TourHealth in a moment.
But first, I’ll provide a little more clarity on the payment processing contract we won with the State of Florida following a year-long competitive bid process. The contract covers payment processing of all payment types across all 19 executive branch agencies. The 5-year transaction for the contract, which may be extended by up to 5 additional years, also provides the ability for cities and municipalities to work with NIC for payment processing services, promoting a comprehensive and seamless experience for Florida citizens and businesses.
For its fiscal year ended June 2018, the State of Florida processed 74 million transactions for a total of $52 billion in payments across the 19 state agencies and processed 21 million transactions for a total of more than $1 billion across more than 90 local governments. Given the scale and complexity of providing payment services to the third largest state in the United States, we will put an experienced and dedicated team on the ground in Tallahassee to leverage our industry-leading payment platform, in addition to a few of our other value-added platforms, to enhance payment collection and processing services across the state. This includes Gov2Go, our citizen-centric platform and personal government assistant.
Gov2Go has been a critical solution for many of NIC’s in-demand services during COVID-19, including Florida’s COVID-19 rapid testing initiative with TourHealth. Our Tallahassee-based team will run the operations similar to our NIC State Enterprise contracts, with 100% focus on delivering the highest level of service to the Sunshine State. While Steve will cover some financial specifics on Florida in a moment, I will conclude my remarks on Florida by emphasizing how honored we are by the confidence the state has placed in NIC as we continue to expand our payment processing and digital government services across the country.
Another new contract is the State of Iowa. After a competitive bid process, Iowa once again placed its confidence in NIC and selected us as their State Enterprise digital government solutions partner. As many of you know, NIC had a 15-year partnership that concluded at the end of our contract in 2017. Under the new 5-year transaction-funded contract, which includes 5 1-year renewal options, the teams may exercise to extend the contract to 2030. Our Des Moines team will work with the state leadership to consolidate the services into a unified digital experience for all Iowans and deploy our world-class digital government applications and services. In Iowa, we will leverage a comprehensive suite of predeveloped Software as a Service solutions, in which we have invested significantly in recent years, including Gov2Go, which will be the centerpiece serving as a repository for all digital services across the state.
We’ll also deploy our industry-leading payment platform, a comprehensive suite of solutions that’s exclusively for government, which includes our secure payment gateway, Common Checkout Pages, customer billing application and a digital wallet. In addition, we will utilize AppEngine, our low-code application development platform, to rapidly deploy digital government services at less cost and in a more repeatable manner compared to traditional software development. And finally, we will leverage our microservices platform, or MSP, which is an API-based suite of prebuild basic software building blocks housed in the cloud for security and scalability. Microservices enable our teams to build applications faster and with less code and, in turn, with less technology depth.
The initial funding source in Iowa will be centered around payment processing. And our focus for the remainder of this year and into the first half of 2021 will be on integrating our payment platform with existing state agency services, promoting a streamlined approach to payment processing across the state. We will also immediately start to build relationships with state agencies that we intend to extend beyond payments to deploy our world-class digital government applications and services and create a one-stop solution for all things digital. Steve will provide some additional financial color on Iowa in a moment.
We view the Iowa model as an additional go-to-market strategy for enterprise opportunities, leveraging the significant investments we’ve made in our payments, Gov2Go, AppEngine, and microservices platforms to drive down startup and implementation costs while increasing the speed and efficiency of application development and deployment. We also view Iowa with payment processing as the initial funding source to be a compelling option for new State Enterprise opportunities.
While on the topic of state enterprises, I am pleased to share that NIC also executed a new 5-year State Enterprise contract with Oklahoma this past quarter and extended its State Enterprise contract with Wisconsin through May 2023. NIC also secured a 6-month contract extension with Maryland, with 1 6-month renewal option remaining. As I mentioned earlier, NIC continues to accelerate support of government and the citizens they serve with unique and innovative solutions during the pandemic.
Our TourHealth partnership is a great example of that unique innovation. This COVID-19 testing solution, first launched in South Florida in early August. Approximately 95% of the Florida test results have been delivered in 2 hours or less through Gov2Go. That is a statistic we are very proud of as rapid results have been critical to helping communities respond to this crisis with confidence. The TourHealth solution continues to expand, and we began testing asymptomatic students, faculty and staff at the University of Mississippi in September. And testing for the Alabama Department of Corrections also launched in September, with TourHealth scheduled to administer 26,600 PCR tests for approximately 19,600 inmates and 7,000 staff in 33 locations over 41 testing dates. Results returned within 72 hours and reported directly to the government.
Most recently, we signed a new contract with the State of South Carolina for TourHealth testing at 4 sites in the Myrtle Beach area. Those sites are now open to the community. The TourHealth solution is also listed on 3 multi-vendor contracts in Utah, Nevada and Missouri. TourHealth is not the only critical solution that NIC has deployed to aid government partners and communities during the pandemic. As we’ve previously shared, NIC’s Gov2Go solution continues to be the core service offering for all Pandemic Unemployment Assistance claims and Pandemic Emergency Unemployment Compensation claims in the Commonwealth of Virginia. Since the launch of Gov2Go in Virginia, there have been more than 5.8 million weekly claims filed by citizens, more than 1 million subscriptions to the service and more than 400,000 new downloads of the Gov2Go app.
Also, NIC recently launched a new online scheduling tool, teleGov. This Software as a Service solution is helping governments safely reopen offices by allowing citizens to schedule appointments for government services and even digitized parts of citizens’ visits to the government offices. teleGov enables agencies to adhere to COVID-19 social distancing guidelines and improve the overall customer experience through the decreased wait times. NIC’s partner state, Mississippi, was the first to implement teleGov as part of the Skip the Line program of Department of Public Safety. Driver Services Bureaus in Biloxi and Jackson began piloting the program on September 14, offering online scheduling for 15 different types of licenses.
Since its launch, more than 18,000 appointments have been scheduled using the teleGov platform, with over 70% using a mobile device. These online appointments replaced what would have been walk-in customers at individual driver license locations. The system initially launched with 2 locations, which has since then increased to 30 locations, and allows users to select from 16 different appointment types. One citizen reported, “Scheduling appointments rock,” after spending more than 7 hours in line at a government office last year to perform the same service. In addition, Arkansas and New Jersey are also expected to implement this service soon.
Another solution gaining traction is the CheckFreePay, a cash payment solution for the unbanked and underbanked population through a strategic partnership with Fiserv, which we announced last quarter. The Pulaski County Treasurer’s Office in Little Rock, Arkansas was the first to integrate with this solution for property tax payments. The launch was met with excitement, with more than $300,000 in cash payments collected on behalf of the county at retail sites within the first few weeks, and we find it addressed the market benefits of this service for other NIC partner states.
Each of these solutions, new contracts and contract extensions have added to the incredible momentum NIC experienced in 2020. I am grateful for the confidence our government partners have placed in us and the perseverance of our employees and NIC’s strong financial position as we enter the fourth quarter of the year and look forward to 2021.
With that, I am pleased to turn the call over to NIC’s Chief Financial Officer, Steve Kovzan.
Thank you, Harry. In the third quarter of 2020, we earned $0.37 per share compared to $0.21 in the prior year quarter. As highlighted in our earnings release this afternoon, COVID-19 initiatives were material contributors to our quarterly results, including our TourHealth COVID-19 rapid testing partnership, which commenced in August, and the continuation of pandemic unemployment services in Virginia, which began last quarter.
TourHealth contributed $24.8 million in software and services revenues and approximately $0.06 in EPS for the quarter, while Virginia pandemic unemployment services contributed $7.6 million in State Enterprise revenues and approximately $0.02 in EPS for the quarter. On a year-to-date basis, Virginia pandemic unemployment services have contributed revenues of $11.1 million and earnings per share of $0.03. Also, EPS for the quarter was higher by $0.04 due to certain discrete tax items that are more fully described in our earnings release. In the prior year quarter, certain discrete tax items increased EPS by $0.01.
Moving on to core results for the quarter. Same-state enterprise revenues grew a phenomenal 25% year-over-year, bolstered by revenues from Virginia. Also, a significant rebound in key IGS revenue segments from the early month of the pandemic that we saw starting in June continued throughout the third quarter in a major way. While it is difficult to quantify with precision, we believe a portion of the rebound we saw in Q3 was a catch-up of revenues from the softness in the early months of the pandemic. For example, in July, we saw a surge in various tax filing services due to the expiration of tax filing extensions. In addition, the pandemic and the need to socially distance pushed more businesses and citizens online to interact with government digitally instead of in-line in government offices, which was a tailwind in the third quarter for many digital services we manage on behalf of our government partners.
Next, I’ll break down the major components of same-state enterprise revenue growth for the quarter. Same-state transaction-based Interactive Government Services, or IGS, revenues were up a remarkable 25% for the quarter, driven by higher revenues for DMV-related services across several states, including the new auto titling and registration system in Wisconsin, which launched in the fourth quarter of last year. In addition, we saw higher revenues from tax-related services, as I mentioned a moment ago, and outdoor recreation services, which grew by 36% for the quarter as people continued to flock to the great outdoors to hunt fish and socially distance. On a monthly basis for the quarter, same-state IGS revenues grew 33% in July, 22% in August and 21% in September. As a frame of reference, we’ve historically been able to grow same-state IGS revenues by approximately 10% to 15% per year.
Next, same-state transaction-based Driver History Record, or DHR, revenues were down 6% for the quarter, which was a sequential improvement from the 12% decline we saw in the second quarter. On a monthly basis, same-state DHR revenues were down 7% in July, 9% in August and down 1% in September. While this trend line continues to head in a positive direction, following a historically weak second quarter, we continue to anticipate weakness in DHR volumes compared to historical levels for at least the remainder of the year, as this service is more closely aligned with broader U.S. economic conditions in certain industries, as we discussed at length the last few quarters.
Moving on, same-state revenues from development services increased more than twofold or approximately $7.9 million from the prior year quarter, driven almost entirely by pandemic unemployment services in Virginia, as I just mentioned. We currently expect to provide these services for the remainder of the year and possibly beyond, depending on the duration and severity of the pandemic and the related impact on the level of unemployment claims in Virginia.
Next, I will touch on our ongoing implementations on the outdoor recreation front in Pennsylvania and Illinois. For the quarter, we incurred $700,000 of State Enterprise costs to implement our outdoor recreation platform in Pennsylvania and Illinois compared to $1 million in the prior year quarter. And I am pleased to report we remain on track to go live in both states in the first quarter of 2021.
As I’ve mentioned in the past, we currently expect to combine annual run rate revenues to approximately $7 million, which will be a nice contribution to our top and bottom lines and to our gross profit and operating margins. Finally, the State Enterprise gross profit margin for the quarter was 41% compared to 40% in the prior year quarter, despite lower margin revenues from Virginia pandemic unemployment services.
Software and services revenues increased more than 150% or $26 million over the prior year quarter, with TourHealth contributing nearly $25 million for the quarter. Looking ahead, TourHealth is currently contracted to deliver testing services in the fourth quarter, representing revenues of approximately $17 million from the States of Florida and South Carolina, the Alabama Department of Corrections and the University of Mississippi. At this point, TourHealth has not contracted for services beyond 2020, but it is possible services will continue into 2021 depending on the severity and the duration of the pandemic and the testing needs of states, correctional facilities and higher education institutions across the U.S.
Next, we spoke the last few quarters about the federal pre-employment screening program and our expectation that revenue softness from the service would continue for the remainder of the year due to the impact of the pandemic on the trucking industry. We also expected the softness would moderate as the year progressed. And that is precisely what we saw in the third quarter, with PSP revenues down 15%, a sequential improvement from the 27% decline we saw in the second quarter. On a monthly basis, PSP revenues were down 18% July — in July, 15% in August and 10% in September. And through the first 3 weeks of October, PSP revenues were down 11%. While the trend line for PSP has improved, we currently anticipate continued weakness for at least the remainder of the year, given the ongoing effect of the pandemic on the broader economy in the trucking industry.
Moving on, Recreation.gov had a phenomenal quarter, with revenues growing 93%, continuing the momentum we saw starting in June when national parks and sites reopened and experienced an influx of visitors seeking a safe place to experience the great outdoors and vacation for the summer. While we don’t expect this spectacular level of growth to continue in the fourth quarter, which is also the seasonally weakest quarter for the service in the cold fall and winter months, we are hopeful the national parks and sites remain open as safe destinations during the pandemic.
The final software and services revenue category I will touch on today is our payments segment. As a refresher, our payments segment within the software and services category, which includes the Texas payment processing contract, provides payment processing-related, transaction-based services to state and local government agencies in states where we do not maintain an enterprise contract.
Payment segment revenues were up a strong 16% in the third quarter and up sequentially from a 2% decline in the second quarter. The decline in the software and services gross profit margin for the quarter to 27%, from 41% in the prior year quarter, was mainly attributable to lower margin revenues from the TourHealth partnership and, to a lesser extent, to the year-over-year decline in higher-margin federal PSP revenues.
Finally, operating income for the quarter totaled $29.8 million, increasing 66% or $11.8 million, reflecting a $4.9 million contribution from TourHealth and a $2 million contribution from Virginia pandemic unemployment services. This resulted in an operating margin of 22%, up from 20% in the prior year quarter.
Turning briefly now to our annual guidance for 2020. We continue to evaluate the impact COVID-19 may potentially have on our business for the rest of the year, given what we know today about the pandemic and taking into consideration recent revenue trends we have seen in our business, including significant COVID-19-related revenue contributions from TourHealth in Virginia.
For full year 2020, we now expect to come in above the high end of our previously issued guidance for total revenues, which was $391 million, above the high end of our previously issued adjusted EBITDA guidance, which was $93 million, and above the high end of our previously issued EPS guidance of $0.81.
Moving on, I’m excited to discuss our new Florida payments and Iowa enterprise contracts and cover some ground on the financial side that Harry didn’t. I’ll start with Florida. Once we fully integrate our payment platform with agencies and departments at the state level over the course of the next 12 to 18 months, we expect transaction-based revenues, net of credit card merchant processing and interchange fees, to approximate $6 million per year based on historical volumes. As a frame of reference, this is almost double the net revenues we collect each year in Texas.
As Harry mentioned, we can also work with counties and cities which has not been incorporated into our revenue estimates so we have the potential for some nice upside to our current revenue estimates. Unlike most of our government payment processing relationships, in Florida, we will pass-through credit card merchant processing and interchange fees at our cost to the state. As a result, we will not recognize revenues gross of credit card merchant processing and interchange fees, like we do in Texas, for example. Instead, we will do so on a net basis. As reflected in our $6 million annual revenue estimate, which will contribute to a higher reported gross margin as compared to our typical payment processing arrangement.
We currently do not expect to generate meaningful revenues in Florida in 2020 as our team’s focus for the remainder of the year will be on integrating our payment platform and Gov2Go with state agency services and building relationships across the state. Our current expectation is for Florida to have a more meaningful revenue contribution in 2021, which we will discuss after we have more clarity on the timing and rollout of agency integrations. We will, however, incur start-up costs in the fourth quarter of this year, but we don’t expect them to be significant.
And finally, we will report Florida in the software and services category in our income statement, and within the payments segment in our public filings, along with the Texas payments contract. I’ll echo Harry’s comments that we could not be more excited about the opportunity to serve the State of Florida. This contract further solidifies our leadership in the state government payments space and validates our strategic focus on the payments verticals to grow and diversify our business.
Next, I’ll briefly touch on Iowa. While we may begin to generate minor transaction-based revenues in Iowa in the fourth quarter of this year, our current expectation is for Iowa to have a more meaningful revenue contribution in 2021 and beyond, which we will discuss after we have more clarity on the timing and rollout of agency payment integrations and application deployments. From a revenue recognition standpoint, like in Florida, the state currently intends to absorb all credit card merchant processing interchange fees so we will recognize transaction-based revenues net of such fees. Furthermore, we will incur some start-up costs in the fourth quarter of the year, but don’t expect them to be significant.
Finally, we will report Iowa within the state enterprise segment in our income statement and in our public filings. We are very excited for our new enterprise partnership with familiar friends in Iowa, and we could not agree more with Chief Information Officer Annette Dunn’s statement that our solutions align perfectly with Governor Reynolds’ vision for the state, where technology is centered around the citizen and all transactions are stored in a digital wallet.
To conclude my prepared remarks today, I was thrilled with our results in the third quarter, and I am particularly proud of all the incredible things our teams are doing to help government and their constituents during the pandemic. The resiliency of our core business and major contributions from pandemic-related initiatives have put us in position to exceed the high end of our annual guidance, which is remarkable given the unprecedented revenue declines we experienced in the early months of the pandemic.
Looking ahead, I’m excited about the new business tailwinds we have heading into 2021 to complement the consistent growth of our core business, including the Pennsylvania and Illinois outdoor recreation launches currently slated for Q1 2021, the new Florida payments contract and the new Iowa enterprise contract. Going forward, we are also optimistic our value proposition and business model will resonate in these tough economic times when government revenues are declining and IT leaders are looking for creative and proven digital government solutions to help alleviate their budget constraints.
And finally, our financial strength, including our consistent cash flow, debt-free balance sheet and significant cash surplus gives us the flexibility to pay our regular quarterly dividend and pursue strategic acquisitions that complement our business and augment our growth.
And with that, I will turn the call back over to Harry.
Thank you, Steve. I am extremely proud of our NIC team members and their ability to deliver value during these uncertain times. It is their dedication and hard work that led to such a tremendous quarter for NIC.
With that, I’ll open the call for questions.
[Operator Instructions]. And our first question comes from Peter Heckmann with D.A. Davidson.
Lots of things to talk about. Starting with — just starting with TourHealth. So just to be clear, the $25 million in the third quarter related to the 3 relationships you noted, South Florida, University of Mississippi and the Alabama correction centers, and then just some of the other stuff, Utah, South Carolina, Nevada, that is going to be more of a fourth quarter issue.
Yes, absolutely. Some of those that you’ve referenced such as Utah and Nevada are opportunities for us to go out and still win business. We’re just — we’ve been selected as one of the providers of the COVID-19 testing solutions within the state.
Got it. Got it. And then just to clarify on the $17 million that was contracted in the fourth quarter. Could you just run through that real quick which contracts that represent and then which ones are not in the $17 million?
Sure. Pete, this is Steve. The four — or the contracts that are represented in that $17 million are the States of Florida and South Carolina, the Alabama Department of Corrections and the University of Mississippi. So the other states, Utah, Nevada and Missouri, we are a vendor among multiple vendors that the state could choose from, and we have not yet contracted for any work in those states.
Got it. Got it. Okay. And then just to your point, these contracts right now run through the end of 2020, and they would need to be extended or renewed if they wanted to continue the partnership and the customers want to continue doing it into 2021.
Absolutely. What we have right now, and I think it makes sense, is everyone is reevaluating where we’re at with this pandemic, revaluating their approach to it. And everybody, including us, is extremely hopeful that testing becomes something that we don’t have to do because this is behind us. So it is — it’s sort of an ongoing weekly type of thing that we deal with our different customers.
Got it. Got it. Okay. And then just one last one before I let you go. In Florida, $6 million of net revenue. So when you record a net, I guess we would expect it to come in at above corporate average margins when we’re fully ramped.
Yes. I would say, generally speaking, yes.
And our next question comes from Keith Housum with Northcoast Research.
Congratulations on a good quarter, lots of stuff going on as well. Just to kind of grow on that, I was going to add to the TourHealth question. Can you just provide us a little bit of color to your guidance in terms of your $25 million you saw in the third quarter versus your $17 million guidance for the fourth quarter. What’s your assumptions? Are you expecting a decline in the amount of testing? Or how do we think about that?
Yes, that’s a great question. I’ll tell you, I mean, yes, I try to be as transparent as I can on this sense. In the third quarter, we were first to market. I mean there were very few companies that were out there. And there was a tremendous need. There was a lot of federal funding that was there. We stepped in with a couple of partners and provided something that enabled us to get a pretty good foothold right off the bat. Since then, there’s more people that are coming in to this space, and price is sort of an issue with it. But we still — we are a proven resource there, and we’re very confident with our solution.
And Keith, welcome to the call. This is Steve. Harry made a good point earlier in that sometimes we’re going week — 2 weeks at a time that they renew us, not necessarily months and months at a time. And so our guidance there for the fourth quarter is what we have currently contracted for today. So that could change by the end of the quarter, but that is the visibility that we have today.
Got you. Very helpful. And then again, just forgive me here. But your guidance for the full year, why not provide a range instead of saying you’re going to be above what you previously guided toward?
Yes. Well, Keith, I think our kind of philosophy there is we generally don’t provide quarterly guidance. And if we provide a range for the year, that’s kind of essentially providing quarterly guidance. So we are acknowledging we should come in decently above the high end of our range.
Got you. Fair enough. Fair enough. Last question, and then I’ll jump back in the queue as well. For things like the TourHealth and the Virginia pandemic unemployment system contracts, do you guys use your existing employee base? Or do you guys have to bring in contractors to help get that job done?
That’s a great question, Keith. It really is. And we did use our existing employment. We did bring in contractors and a part of it, as you look in Virginia. But it is something that we’ve done before, where we had to supplement from the call centers we have here, we bring in from there. When you look at TourHealth, it’s a partnership. So we had our team, we didn’t add to our team. We had our team there. We might have run on a project manager to the system. But for the most part, it’s our team, but then we had 2 partners that already had their teams and the experience out that they brought to bear on this.
And our next question comes from Gary Prestopino with Barrington Research.
I have a series of questions. First of all, the PSP contract. Is that still extended through February? Or did I miss something? Is an RFP out there? Or what’s going on with that?
Yes. This is Harry. Yes, there is a — an RFP has been issued for PSP and that we are — you know with RFPs that we don’t speak to the nature of the RFP itself. But it is out there. We’re evaluating them and moving forward.
Yes. So we are currently contracted. You’re correct. We’re currently contracted through the end of February.
Okay. Great. And then on the RxGov and licensing solutions businesses, did you give any kind of revenue generation in the quarter for both of those?
No. We didn’t specifically, Gary. They weren’t significantly greater or less than last year. I think we were somewhere between $800,000 and $900,000 in combined revenue for both of those for the quarter.
Okay. And now I want to visit this Florida contract for a second because I’m just a little bit confused here. First of all, if there’s $53 billion worth of dollar volume processed in Florida, was that all electronic transactions? Or is that some cash, check at a government agency office?
I think those numbers are numbers that we received that were done from a — the vast majority of those from a payment standpoint, yes.
So they’re electronic, all right. So here, look, my issue with this is, this is like in the State of Illinois, when I pay anything, there’s a 3% charge on top of that, right, because the state doesn’t use the interchange. Then you said Florida is going to use the interchange. But if you take $53 billion, you take 3% of it, you get about $1.6 billion. It seems to me that your run rate on the revenue, you said it was going to run rate annually at about $6 million. Is that correct? Did I hear it right?
Yes, that’s correct. So our net revenue from state agency services, we’re currently projecting right now at $6 million. That does not include revenues that we have the potential to earn from local governments, cities and counties and such.
Which is how you get to the $53 billion, because $52 billion and $1 billion from the local last year.
Right. Yes. So it seems to me that you’re probably getting a very small basis point hit or positive impact on the total transaction. Is that about right? I calculated back of the envelope, like 30 basis points, 38 basis points. Is that about right?
However, the math works out, Gary. I haven’t counted — I calculated it on the basis point. We’ll be getting paid on a per transaction basis. Yes.
Right. I’m just trying to understand how that flows through. And that — and then you would really not have any real cost with that $6 million in terms of any other cost, except your process — your platform cost. Right?
No, that’s not correct. We’re going to have — we’ll have a team on the ground, not as big as a typical State Enterprise team on the ground, but we will have a team on the ground of a few of our payment experts in Tallahassee. So we will have some costs absolutely on that.
Yes. If that can grow the business — definitely in the local business, there’s plenty of opportunities.
Okay. And then just very briefly because I don’t want to ask a ton of questions here. But on the testing services side with TourHealth, what exactly are you doing there again? Could you just refresh my memory? You’re not actually doing the tests, right?
We, as a company, as NIC, are not doing the test, but our solution is doing the test. As NIC, we are the prime — we are the principal sales force. We’re the prime on the contracts. We have the government relations. So we go out and — at state governments, find out what their needs are, and then we get the contracts and then we deploy our Gov2Go solution that does everything from setting up the appointments, tracking the appointments all the way through to returning the results. We have two different partners. One partner comes in and sets everything up. The other one actually does the test, has a relationship with the labs. And most of them we get back within just a couple of hours. So yes, we’re actually doing the test.
[Operator Instructions]. And we will go back to Keith Housum.
Just one more question while we have time here. In terms of onetime costs, so you guys are building out some of your other platforms. I believe I think you might have referenced one $700,000 in extra cost, but was there anything else in there that was perhaps cost — upfront cost that you haven’t driven any revenue off of yet?
No, that’s the big one. That’s the big one that we called out for the Pennsylvania and Illinois outdoor recreation implementation costs. That’s the only thing of significance I can think of.
Got you. And then in terms of like the statewide enterprise, you guys called out, I think, the DHR and I think another item in terms of when demand might have been altered because of COVID. But everything else, no significant movement for — in terms of pacing compared to normal times.
Yes. So as I mentioned in my remarks, we saw a heck of a rebound, particularly in a good number of our interactive government services. So Keith, that’s our State Enterprise services other than Driver History Records. And we really did see strength across the board throughout the third quarter. The one continued weak spot that we’ve seen is Driver History Records at the state enterprise level and then the pre-employment screening program, which is essentially driver records for commercial truck drivers at the federal level through the pre-employment screening program.
Although both of those have improved last quarter to this quarter.
Yes. So we saw a sequential some improvement, but still down year-over-year.
Okay. I got it. And then the last question, and then I’ll get off here. In terms of the Fiserv relationship, I’m assuming this will take several quarters until we hit its stride. Is that kind of a good way to think about that?
Absolutely. I mean, right now, this is a phenomenal opportunity. And when we get out there and we show, especially during COVID where individuals do not have the opportunity to go into the offices, but they’ll be able to walk in to a CVS or other stores like that and they use cash to pay for it. It’s one of the works that you make very good traction. We’re out promoting this. Fiserv is out promoting this, and we’ve proven it now in Arkansas.
[Operator Instructions]. And we have no additional questions at this time. I’ll now turn it back to Mr. Herington for closing remarks.
Thank you, Nick, and I want to thank everybody who joined us today. We had a great quarter. It was a great time. I sincerely hope that everybody stays safe and healthy throughout this pandemic. And you may have a great afternoon.
Thank you, ladies and gentlemen. This concludes today’s presentation. You may now disconnect.