NRC 8-K
Nrc Health (NRC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 4, 2020
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National Research Corporation
(Exact name of registrant as specified in its charter)
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Wisconsin |
001-35929 |
47-0634000 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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1245 Q Street, Lincoln, Nebraska |
68508 |
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(Address of principal executive offices) |
(Zip Code) |
(402) 475-2525
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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$0.001 Par Value Common Stock |
NRC |
The NASDAQ Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 2.02 |
Results of Operations and Financial Condition. |
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On August 4, 2020, National Research Corporation, a Wisconsin corporation (the "Company"), issued a press release announcing its financial and operating results for the second quarter ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
On August 5, 2020, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the second quarter ended June 30, 2020. A copy of the script for such conference call and simulcast is furnished as Exhibit 99.2 to this report. An archive of such conference call and simulcast and the related question and answer session will be available online at https://edge.media-server.com/mmc/p/ayrm72gm. |
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Item 9.01 |
Financial Statements and Exhibits. |
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(d) |
Exhibits. |
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EXHIBIT NUMBER |
EXHIBIT DESCRIPTION |
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99.1 |
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| 99.2 | National Research Corporation script for the conference call and online Web simulcast held August 5, 2020. | |
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The information contained in Items 2.02 and 9.01 of this report and the exhibits hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. |
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The information in Items 2.02 and 9.01 of this report and the exhibits hereto may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements are made based on the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results or events may differ from those anticipated by forward-looking statements. Please refer to the paragraph at the end of the attached press release and various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission for information concerning risks, uncertainties, and other factors that may affect future results. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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NATIONAL RESEARCH CORPORATION |
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(Registrant) |
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| Date: August 6, 2020 |
By: |
/s/ Kevin R. Karas |
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Kevin R. Karas |
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Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary |
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EXHIBIT INDEX
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EXHIBIT NUMBER |
EXHIBIT DESCRIPTION |
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99.1 |
National Research Corporation press release announcing its financial and operating results for the second quarter ended June 30, 2020. |
| 99.2 | National Research Corporation script for the conference call and online Web simulcast held August 5, 2020. |
Exhibit 99.1
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1245 “Q” Street Lincoln, NE 68508 Phone: 402-475-2525 Fax: 402-475-9061 |
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Contact: |
Kevin R. Karas Chief Financial Officer 402-475-2525 |
NATIONAL RESEARCH CORPORATION ANNOUNCES
SECOND QUARTER AND YEAR-TO-DATE 2020 RESULTS
Net New Sales and Total Contract Value Register Impressive Growth
LINCOLN, Nebraska (August 4, 2020) — National Research Corporation (NASDAQ:NRC) today announced results for the second quarter of 2020.
Revenue for the quarter ended June 30, 2020, was $31.2 million, compared to $31.4 million for the quarter ended June 30, 2019. Operating income was $9.3 million for the second quarter 2020 compared to $10.1 million for the same quarter 2019. In response to special circumstances among clients hard hit by COVID-19, we elected to provide uncompensated services which reduced revenue without a corresponding offset in expenses, thus impacting operating income. All such impacted clients have resumed compensated services as planned to date and many extended contract terms in recognition of the support provided by NRC Health resulting, we believe, in a stronger partnership. We salute all essential caregivers and are glad we could offer this support.
Net income for the quarter ended June 30, 2020, was $7.7 million, compared to $7.4 million for the quarter ended June 30, 2019. Diluted earnings per share increased to $0.30 for the quarter ended June 30, 2020, from diluted earnings per share of $0.29 for the quarter ended June 30, 2019. Results for the second quarter 2020 included an income tax provision of $842,000 compared with $2.1 million for the same quarter 2019.
Demand for our product portfolio remains strong. Net New Sales were up 6% in the second quarter and 19% year-to-date 2020 compared to 2019, despite a pivot to virtual sales efforts. Based on recent wins, we believe our offerings are highly differentiated in our clients’ eyes against competitive offerings from firms outside of the healthcare industry and legacy vendors within. Case in point, we added healthcare brands Partners HealthCare and Orlando Health this quarter, each seven-figure takeaways from Press Ganey. We believe every added client deepens our moat and brings additive value to all current partners through the network effect.
NRC Announces Second Quarter 2020 Results
Page 2
August 4, 2020
Total Recurring Contract Value increased 11% in the second quarter 2020, a subset of which is our digital Voice of the Customer offering. VOC now comprises $107 million of Contract Value, up 30% year-over-year. We believe the efficiencies inherent in this digital platform lead to long-term margin improvements, a hallmark of our financial performance, notwithstanding the current quarter impact of COVID-19. Our Voice of the Customer offerings, being uniquely personalized to healthcare, contribute to higher client retention rates as well, compounding the enhancing visibility of recurring revenue streams.
It goes without saying that COVID-19 is far from behind us and we continue to recognize and support the work of our healthcare partners and caregivers worldwide. NRC Health retains its conservative stance regarding liquidity for the security of our associates and optionality as a business. Accordingly, our Board of Directors has determined not to pay a dividend for the current quarter.
A listen-only simulcast of National Research Corporation’s 2020 second quarter conference call will be available online at https://edge.media-server.com/mmc/p/ayrm72gm on August 5, 2020, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately one hour later and continue for 30 days.
For more than 39 years, National Research Corporation has been a leading provider of analytics and insights that facilitate measurement and improvement of human understanding.
This press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases such as “believes,” derivations thereof, and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements, including those risks and uncertainties as set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission. In this press release, the statements relating to the future status of our partnership with clients and the future impact of adding additional clients are forward-looking statements. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
-END-
NRC Announces Second Quarter 2020 Results
Page 3
August 4, 2020
NATIONAL RESEARCH CORPORATION AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)
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Three months ended |
Six months ended |
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June 30, |
June 30, |
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2020 |
2019 |
2020 |
2019 |
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Revenue |
$ | 31,166 | $ | 31,414 | $ | 65,026 | $ | 62,894 | ||||||||
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Operating expenses: |
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Direct expenses |
11,634 | 11,506 | 24,180 | 23,160 | ||||||||||||
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Selling, general and administrative |
8,852 | 8,319 | 17,600 | 16,026 | ||||||||||||
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Depreciation and amortization |
1,405 | 1,440 | 2,777 | 2,855 | ||||||||||||
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Total operating expenses |
21,891 | 21,265 | 44,557 | 42,041 | ||||||||||||
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Operating income |
9,275 | 10,149 | 20,469 | 20,853 | ||||||||||||
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Other income (expense): |
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Interest income |
2 | 8 | 13 | 14 | ||||||||||||
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Interest expense |
(450 | ) | (533 | ) | (914 | ) | (1,103 | ) | ||||||||
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Other, net |
(270 | ) | (139 | ) | 360 | (419 | ) | |||||||||
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Total other expense |
(718 | ) | (664 | ) | (541 | ) | (1,508 | ) | ||||||||
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Income before income taxes |
8,557 | 9,485 | 19,928 | 19,345 | ||||||||||||
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Provision for income taxes |
842 | 2,092 | 458 | 3,756 | ||||||||||||
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Net income |
$ | 7,715 | $ | 7,393 | $ | 19,470 | $ | 15,589 | ||||||||
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Earnings Per Share of Common Stock: |
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Basic Earnings Per Share |
$ | 0.31 | $ | 0.30 | $ | 0.78 | $ | 0.63 | ||||||||
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Diluted Earnings Per Share |
$ | 0.30 | $ | 0.29 | $ | 0.76 | $ | 0.61 | ||||||||
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Weighted average shares and share equivalents outstanding |
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Basic |
25,148 | 24,789 | 25,060 | 24,777 | ||||||||||||
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Diluted |
25,680 | 25,586 | 25,702 | 25,549 | ||||||||||||
-END-
NRC Announces Second Quarter 2020 Results
Page 4
August 4, 2020
NATIONAL RESEARCH CORPORATION AND SUBSIDIARY
Unaudited Condensed Consolidated Balance Sheets
(Dollars in thousands, except share amounts and par value)
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June 30, 2020 |
December 31, 2019 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 11,957 | $ | 13,517 | ||||
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Accounts receivable, net |
19,882 | 11,639 | ||||||
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Income taxes receivable |
272 | 69 | ||||||
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Other current assets |
4,586 | 3,932 | ||||||
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Total current assets |
36,697 | 29,157 | ||||||
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Net property and equipment |
12,355 | 13,530 | ||||||
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Goodwill |
57,829 | 57,935 | ||||||
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Other, net |
9,900 | 10,063 | ||||||
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Total assets |
$ | 116,781 | $ | 110,685 | ||||
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Notes payable |
$ | 3,966 | $ | 4,378 | ||||
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Accounts payable and accrued expenses |
3,882 | 4,687 | ||||||
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Accrued compensation |
6,830 | 6,086 | ||||||
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Income taxes payable |
308 | 366 | ||||||
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Dividends payable |
-- | 5,239 | ||||||
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Deferred revenue |
16,275 | 16,354 | ||||||
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Other current liabilities |
1,007 | 1,045 | ||||||
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Total current liabilities |
32,268 | 38,155 | ||||||
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Notes payable, net of current portion |
28,627 | 29,795 | ||||||
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Other non-current liabilities |
10,312 | 9,843 | ||||||
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Total liabilities |
71,207 | 77,793 | ||||||
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Shareholders’ equity: |
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Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued |
-- | -- | ||||||
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Common stock, $0.001 par value; authorized 60,000,000 shares, issued 30,553,546 in 2020 and 30,151,574 in 2019, outstanding 25,235,123 in 2020 and 24,947,500 in 2019 |
31 | 30 | ||||||
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Additional paid-in capital |
167,808 | 162,154 | ||||||
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Retained earnings (accumulated deficit) |
(79,165 |
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(93,357 |
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Accumulated other comprehensive loss, foreign currency translation adjustment |
(2,872 |
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(2,209 |
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Treasury stock |
(40,228 |
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(33,726 |
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Total shareholders’ equity |
45,574 | 32,892 | ||||||
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Total liabilities and shareholders’ equity |
$ | 116,781 | $ | 110,685 | ||||
-END-
Exhibit 99.2
Thank you, ___________, and welcome everyone to National Research Corporation’s 2020 second quarter earnings call. My name is Kevin Karas, the Company’s Chief Financial Officer.
Before continuing, I would like to review conditions related to any forward-looking statements that may be made as part of today’s call.
This conference call includes forward-looking statements related to the Company that involve risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the facts that could affect the Company's future results, please see the Company's filings with the Securities and Exchange Commission.
Before reviewing second quarter 2020 performance, on behalf of all NRC associates, I would like to extend a heartfelt thank you to our customers and front-line caregivers around the world who continue to work tirelessly to save lives and keep communities safe during the COVID-19 pandemic.
As we are all aware, this public health crisis continues to have an extended financial impact on many sectors of the economy, including healthcare. We have no unique perspective which would allow us to forecast the depth, duration or specific impact on our clients or NRC Health. Given this uncertainty, our only assumption is that the Company’s sales, revenue and margin expansion are unlikely to follow the growth trends of the past.
Regarding our Q2 performance, recurring contract value at the end of the second quarter 2020 ended at $142.8 million, representing an 11% growth over the same period in the prior year. Healthcare system clients with agreements for multiple solutions represented 28% of our client base at the end of the second quarter of 2020, up from 26% at the same time last year. Recurring contract value for our digital Voice of the Customer platform solutions increased to $106.9 million, compared to $82.0 million at the end of the second quarter of 2019.
In response to special circumstances among clients hard hit by COVID-19, we elected to provide uncompensated services which reduced revenue without a corresponding offset in expenses, therefore also reducing operating income. All of these impacted clients have resumed compensated services as planned to date and many extended contract terms in recognition of the support provided by NRC Health resulting, we believe, in a stronger long-term partnership.
Second quarter 2020 revenue was $31.2 million, a decrease of 0.8% over the second quarter 2019. Consolidated operating income for the second quarter 2020 was $9.3 million or 30% of revenue, compared to $10.1 million or 32% of revenue for the same period last year.
Total operating expenses of $21.9 million for the second quarter increased by 3% compared to second quarter 2019 total operating expenses of $21.3 million.
Direct expenses increased to $11.6 million for the second quarter 2020, compared to $11.5 million for the second quarter 2019. Direct expenses remained at 37% of revenue in the second quarter 2020 and 2019.
Direct expenses increased primarily due to an increase in fixed expenses partially offset by a decrease in variable expenses. Fixed expenses increased primarily due to higher salary and benefit costs and contracted services in the customer service and information technology areas offset by lower travel and meal costs due to restricted travel associated with COVID-19. Variable costs are lower due in a large part to the continued shift in our revenue mix from legacy solutions to Voice of the Customer platform revenue, as well decreased conference expenses due to rescheduling due to COVID-19. Variable direct expenses as a percentage of revenue decreased to 13% for the second quarter of 2020 compared to 17% in the second quarter of 2019.
Selling, general and administrative expenses increased to $8.9 million for the second quarter 2020, compared to $8.3 million for the same period in 2019, primarily due to higher salary and benefit costs, increased software and platform hosting expenses, and additional contracted services. Selling, general and administrative expenses were 28% of revenue for the second quarter 2020 compared to 26% of revenue for the second quarter 2019.
Depreciation and amortization expense was $1.4 million for both the second quarter of 2020 and 2019.
Other income and expense changed to $718,000 of other net expense in the second of quarter of 2020 compared to $664,000 of other net expense in the second quarter of 2019. This increase in other expense was primarily due to revaluation on intercompany transactions due to changes in the foreign exchange rate partially offset by decreased interest expense due to the declining balance on our term loan.
The Company had an income tax provision of $842,000 for the second quarter 2020 compared to $2.1 million in 2019. The effective tax rate was 10% for the second quarter 2020 compared to 22% for the same period in 2019 primarily due to increased tax benefits from the exercise and vesting of share-based compensation awards partially offset by higher state income taxes in the 2020 period since we are filing in more states.
Net income for the second quarter 2020 was $7.7 million, compared to $7.4 million in 2019.
This completes the prepared remarks. Operator, I will now ask you to open the call to questions.
Closing Statement
It goes without saying that COVID-19 is far from behind us and our thoughts and support are with those who are on the front lines battling this pandemic.
Thank you for your time today.