National Research Corporation Announces Third Quarter and Year-to-Date 2020 Results
November 03 2020 - 5:00PM
National Research Corporation (NASDAQ:NRC) (the “Company,” “we,” or
“our”) today announced results for the third quarter of 2020.
Third quarter 2020 compared to the third quarter
2019:
- Record Net New Sales of $11.2 million
- Total Recurring Contract Value increased 10% to $147.5
million
- Voice of the Customer platform recurring contract value grew to
$115.5 million, a 27% increase
- Revenue increased 3% to $33.5 million
- Operating Income increased 18% to $12.0 million
- Net Income increased 18% to $9.6 million
Demand for our Voice of the Customer (VOC)
platform offerings remained strong in the third quarter 2020. Net
New Sales were a record $11.2 million for the quarter and have
increased by 12% year-to-date 2020 compared to 2019, reflecting a
successful transition to virtual sales efforts. 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. This differentiation drove the decision
of several more of the nation’s largest and most prestigious
healthcare systems to partner with NRC Health in the third quarter
2020. We believe every added client deepens our moat and brings
additive value to all current partners through the network
effect.
Total Recurring Contract Value has increased by
10% at the end of the third quarter 2020 compared to the end of
third quarter 2019, a subset of which is our VOC platform. Our VOC
platform now comprises $115.5 million of Recurring Contract Value,
an increase of 27% year-over-year. We believe the efficiencies
inherent in this digital platform have led to long-term margin
improvements, a hallmark of our financial performance as
demonstrated by the increase in operating income margin in the
third quarter 2020 to 36% of revenue compared to 31% in third
quarter 2019.
Third quarter 2020 revenue was $33.5 million, an
increase of 3% over third quarter 2019. Consolidated operating
income for the third quarter 2020 was $12.0 million or 36% of
revenue, compared to $10.2 million or 31% of revenue for the same
period last year. In the third quarter of 2020, we recorded
insurance recoveries representing $533,000 in lost revenue.
Total operating expenses of $22.0 million for
the third quarter 2020 decreased by 1% compared to the third
quarter 2019 total operating expenses of $22.2 million.
Direct expenses increased to $12.2 million for
the third quarter 2020, compared to $12.1 million for the third
quarter 2019. Direct expenses as a percentage of revenue decreased
to 36% in the third quarter 2020 compared to 37% in the third
quarter 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
increased salary and benefit costs in the customer service and
information technology areas partially offset by lower travel and
meals 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 VOC platform revenue,
as well as decreased conference expenses from rescheduling and
virtual hosting due to COVID-19.
Selling, general and administrative expenses
decreased to $8.0 million for the third quarter 2020, compared to
$8.7 million for the same period in 2019, due to lower travel and
meals costs because of restricted travel associated with COVID-19,
decreased legal and accounting costs due to timing of tax and audit
related work and decreases in other taxes due to a favorable sales
tax ruling allowing the reversal of a previous sales tax accrual,
partially offset by increased software and platform hosting
expenses and additional contracted services. Selling, general and
administrative expenses were 24% of revenue for the third quarter
2020, compared to 27% of revenue for third quarter 2019.
Depreciation and amortization expense increased
to $1.8 million in the third quarter of 2020 compared to $1.4
million in 2019, primarily due to the change in the estimated
useful lives of certain assets.
Other income and expense decreased to $355,000
of other net expense in the third quarter 2020 compared to $411,000
of other net expense in third quarter of 2019. This decrease in
other net expense was primarily from a gain on insurance recoveries
for property damages and decreased interest expense due to the
declining balance on our Term Loan and no borrowings on our Line of
Credit during the 2020 period. This was partially offset by
revaluation on intercompany transactions due to changes in the
foreign exchange rate.
The Company had an income tax provision of $2.1
million for third quarter 2020 compared to $1.7 million in 2019
with an effective tax rate of 18% for third quarter 2020 compared
to 17% in 2019.
Net income for third quarter 2020 was $9.6 million, compared to
$8.1 million for the same period last year. Diluted earnings per
share increased to $0.37 for the quarter ended September 30, 2020,
from diluted earnings per share of $0.31 for the quarter ended
September 30, 2019.
On a year-to-date basis, 2020 revenue increased
by 3% to $98.5 million compared to $95.4 million in 2019. Operating
income in 2020 grew by 5%, increasing from $31.1 million in 2019 to
$32.5 million in 2020. Year-to-date net income for 2020 grew to
$29.0 million, an increase of 23% over 2019 net income of $23.7
million. Net income growth in 2020 includes a decrease in the
effective income tax rate from 19% in 2019 to 8% in 2020, primarily
due to increased tax benefits from the exercise and vesting of
share-based compensation awards partially offset by higher state
income taxes.
The Company also announced that Michael Hays,
current Chief Executive Officer, was appointed as the Company’s
President effective as of October 2, 2020, to fill the vacancy
created by the resignation of Steven Jackson.
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 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.
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARY Unaudited Condensed Consolidated
Statements of Income (In thousands, except per share
data)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
33,477 |
|
$ |
32,465 |
|
$ |
98,503 |
|
$ |
95,359 |
Insurance
Recoveries |
|
533 |
|
|
-- |
|
|
533 |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
12,189 |
|
|
12,109 |
|
|
36,369 |
|
|
35,269 |
Selling, general and administrative |
|
7,953 |
|
|
8,706 |
|
|
25,554 |
|
|
24,732 |
Depreciation and amortization |
|
1,847 |
|
|
1,430 |
|
|
4,623 |
|
|
4,285 |
Total operating expenses |
|
21,989 |
|
|
22,245 |
|
|
66,546 |
|
|
64,286 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
12,021 |
|
|
10,220 |
|
|
32,490 |
|
|
31,073 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
2 |
|
|
10 |
|
|
15 |
|
|
24 |
Interest expense |
|
(451) |
|
|
(510) |
|
|
(1,366) |
|
|
(1,613) |
Other, net |
|
94 |
|
|
89 |
|
|
454 |
|
|
(330) |
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
(355) |
|
|
(411) |
|
|
(897) |
|
|
(1,919) |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
11,666 |
|
|
9,809 |
|
|
31,593 |
|
|
29,154 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
2,088 |
|
|
1,690 |
|
|
2,545 |
|
|
5,446 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
9,578 |
|
$ |
8,119 |
|
$ |
29,048 |
|
$ |
23,708 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share |
$ |
0.38 |
|
$ |
0.33 |
|
$ |
1.15 |
|
$ |
0.95 |
Diluted
Earnings Per Share |
$ |
0.37 |
|
$ |
0.31 |
|
$ |
1.13 |
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares and share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
25,219 |
|
|
24,827 |
|
|
25,113 |
|
|
24,794 |
Diluted |
|
25,704 |
|
|
25,741 |
|
|
25,701 |
|
|
25,624 |
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARY Unaudited Condensed Consolidated
Balance Sheets (Dollars in thousands, except share amounts
and par value)
|
September 30, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
21,855 |
|
|
$ |
13,517 |
|
Accounts receivable, net |
|
17,426 |
|
|
|
11,639 |
|
Income taxes receivable |
|
2,673 |
|
|
|
69 |
|
Other current assets |
|
5,412 |
|
|
|
3,932 |
|
Total current assets |
|
47,366 |
|
|
|
29,157 |
|
|
|
|
|
|
|
|
|
Net property and equipment |
|
12,267 |
|
|
|
13,530 |
|
Goodwill |
|
57,875 |
|
|
|
57,935 |
|
Other, net |
|
9,738 |
|
|
|
10,063 |
|
Total assets |
$ |
127,246 |
|
|
$ |
110,685 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Notes payable |
$ |
4,008 |
|
|
$ |
4,378 |
|
Accounts payable and accrued expenses |
|
3,341 |
|
|
|
4,687 |
|
Accrued compensation |
|
6,155 |
|
|
|
6,086 |
|
Income taxes payable |
|
-- |
|
|
|
366 |
|
Dividends payable |
|
-- |
|
|
|
5,239 |
|
Deferred revenue |
|
17,328 |
|
|
|
16,354 |
|
Other current liabilities |
|
1,241 |
|
|
|
1,045 |
|
Total current liabilities |
|
32,073 |
|
|
|
38,155 |
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion |
|
27,583 |
|
|
|
29,795 |
|
Other non-current liabilities |
|
10,861 |
|
|
|
9,843 |
|
Total liabilities |
|
70,517 |
|
|
|
77,793 |
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none
issued |
|
-- |
|
|
|
-- |
|
Common stock, $0.001 par value; authorized 60,000,000 shares,
issued 30,657,154 in 2020 and 30,151,574 in 2019, outstanding
25,321,141 in 2020 and 24,947,500 in 2019 |
|
31 |
|
|
|
30 |
|
Additional paid-in capital |
|
170,052 |
|
|
|
162,154 |
|
Retained earnings (accumulated deficit) |
|
(69,587 |
) |
|
|
(93,357 |
) |
Accumulated other comprehensive loss, foreign currency translation
adjustment |
|
(2,623 |
) |
|
|
(2,209 |
) |
Treasury stock |
|
(41,144 |
) |
|
|
(33,726 |
) |
Total shareholders’ equity |
|
56,729 |
|
|
|
32,892 |
|
Total liabilities and shareholders’ equity |
$ |
127,246 |
|
|
$ |
110,685 |
|
Contact:Kevin R.
Karas
Chief Financial Officer
402-475-2525
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