National Research Corporation Announces Fourth Quarter and Year-to-Date 2020 Results
February 09 2021 - 5:00PM
National Research Corporation (NASDAQ:NRC) (the “Company,” “we,” or
“our”) today announced 2020 fourth quarter and year-end results.
Fourth quarter 2020 compared to the fourth
quarter 2019:
- Net New Sales decreased to $4.6 million
- Revenue increased 7% to $34.8 million
- Operating Income decreased 15% to $10.2 million
- Net Income decreased 6% to $8.2 million
2020 calendar year results compared to 2019:
- Net New Sales increased to $28.1 million
- Total Recurring Contract Value increased 6% to $145.1
million
- Voice of the Customer platform recurring contract value grew to
$116.4 million, a 19% increase
- Revenue increased 4% to $133.3 million
- Net Income increased 15% to $37.3 million
We continue to be inspired by the courageous
efforts of our clients to provide care to their patients during the
pandemic and are extremely proud of the work our associates are
doing to support our clients. During a very challenging year, the
strong demand for our Voice of the Customer (VoC) platform
offerings in 2020 enabled our net new sales to increase over 2019
to $28.1 million. 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 during 2020. We believe every added client
deepens our moat and brings additive value to all current partners
through the network effect as we continue our journey to enable
human understanding.
Total Recurring Contract Value increased by 6%
at the end of the fourth quarter 2020 compared to the end of fourth
quarter 2019, a subset of which is our VoC platform. Our VoC
platform now comprises $116.4 million of Recurring Contract Value,
an increase of 19% year-over-year. The increase in VoC platform
revenue moved our overall revenue growth in a positive direction in
the fourth quarter.
We believe the efficiencies inherent in our
digital platform have led to long-term margin improvements, a
hallmark of our financial performance. At the same time, decisions
supporting our distributed workforce environment, accelerated
improvement in our VoC platform offerings and shift in our Canadian
business resulted in additional expenses that contributed to a
decrease in operating income margin in 2020. Following is
additional information regarding our fourth quarter and year-end
2020 financial results.
Fourth quarter 2020 revenue was $34.8 million,
an increase of 7% over fourth quarter 2019. Consolidated operating
income for the fourth quarter 2020 was $10.2 million or 29% of
revenue, compared to $12.0 million or 37% of revenue for the same
period last year.
Total operating expenses of $24.6 million for
the fourth quarter 2020 increased by 19% compared to the fourth
quarter 2020 total operating expenses of $20.7 million. Incremental
expenses of $957,000 related to the accelerated improvement of our
VoC platform offerings were incurred in the fourth quarter.
Fourth quarter operating expenses also included
approximately $1.2 million in expense primarily due to the change
in the estimated lives of certain assets related to our
transformation to a distributed workforce environment, which
includes building renovations in our headquarters, as well as
shortening the useful lives of the right of use assets associated
with the Atlanta, Georgia, and Markham, Ontario, office leases
based on the expectation that we will vacate the office spaces
before the end of the lease term. In addition, we recorded a
goodwill impairment adjustment for the Canadian reporting unit of
$714,000 to reflect a reduction in expected future cash flows from
our Canadian business due to our decision to not renew a client
agreement, which accounted for the majority of the revenue in
Canada. The decision not to renew was based on our determination
that the services under the terms of the agreement could not be
migrated to our VoC platform in an economically viable manner.
Total other expense decreased to $313,000 in the
fourth quarter 2020 compared to $597,000 in the fourth quarter of
2019. This decrease in other net expense was primarily from a gain
on insurance recoveries for property damages, decreased interest
expense due to the declining balance on our Term Loan and no
borrowings on our Line of Credit during the 2020 period and
revaluation on intercompany transactions due to changes in the
foreign exchange rate.
The Company had an income tax provision of $1.7
million for fourth quarter 2020 compared to $2.7 million in 2019
with an effective tax rate of 17% for fourth quarter 2020 compared
to 23% in 2019. This is primarily due to increased tax benefits of
$1.0 million from the exercise and vesting of share-based
compensation awards partially offset by a non-deductible goodwill
impairment adjustment and higher state income
taxes.
Net income for fourth quarter 2020 was $8.2
million, compared to $8.7 million for the same period last year.
Diluted earnings per share decreased to $0.32 for the quarter ended
December 31, 2020, from diluted earnings per share of $0.34 for the
quarter ended December 31, 2019.
On a year-to-date basis, 2020 revenue increased
by 4% to $133.3 million compared to $128.0 million in 2019.
Operating income in 2020 decreased by 1%, from $43.0 million in
2019 to $42.7 million in 2020. Year-to-date net income for 2020
grew to $37.3 million, an increase of 15% over 2019 net income of
$32.4 million. Net income growth in 2020 includes a decrease in the
effective income tax rate from 20% in 2019 to 10% in 2020,
primarily due to increased tax benefits from the exercise and
vesting of share-based compensation awards.
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 December 31, |
|
Twelve months ended December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
34,774 |
|
$ |
32,623 |
|
$ |
133,277 |
|
$ |
127,982 |
Insurance
recoveries |
|
-- |
|
|
-- |
|
|
533 |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
12,818 |
|
|
11,166 |
|
|
49,187 |
|
|
46,435 |
Selling, general and administrative |
|
8,887 |
|
|
8,241 |
|
|
34,441 |
|
|
32,973 |
Depreciation, amortization and impairment |
|
2,882 |
|
|
1,254 |
|
|
7,505 |
|
|
5,539 |
Total operating expenses |
|
24,587 |
|
|
20,661 |
|
|
91,133 |
|
|
84,947 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
10,187 |
|
|
11,962 |
|
|
42,677 |
|
|
43,035 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
3 |
|
|
13 |
|
|
18 |
|
|
37 |
Interest expense |
|
(447) |
|
|
(478) |
|
|
(1,813) |
|
|
(2,091) |
Other, net |
|
131 |
|
|
(132) |
|
|
585 |
|
|
(462) |
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
(313) |
|
|
(597) |
|
|
(1,210) |
|
|
(2,516) |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
9,874 |
|
|
11,365 |
|
|
41,467 |
|
|
40,519 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
1,662 |
|
|
2,667 |
|
|
4,207 |
|
|
8,113 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
8,212 |
|
$ |
8,698 |
|
$ |
37,260 |
|
$ |
32,406 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share |
$ |
0.32 |
|
$ |
0.35 |
|
$ |
1.48 |
|
$ |
1.30 |
Diluted
Earnings Per Share |
$ |
0.32 |
|
$ |
0.34 |
|
$ |
1.45 |
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares and share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
25,337 |
|
|
24,852 |
|
|
25,170 |
|
|
24,809 |
Diluted |
|
25,684 |
|
|
25,715 |
|
|
25,696 |
|
|
25,653 |
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARY Unaudited Condensed Consolidated
Balance Sheets (Dollars in thousands, except share amounts
and par value)
|
|
December 31, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
34,690 |
|
|
$ |
13,517 |
|
Accounts receivable, net |
|
|
13,923 |
|
|
|
11,639 |
|
Income taxes receivable |
|
|
1,235 |
|
|
|
69 |
|
Other current assets |
|
|
4,264 |
|
|
|
3,932 |
|
Total current assets |
|
|
54,112 |
|
|
|
29,157 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
11,726 |
|
|
|
13,530 |
|
Goodwill |
|
|
57,255 |
|
|
|
57,935 |
|
Other, net |
|
|
10,330 |
|
|
|
10,063 |
|
Total assets |
|
$ |
133,423 |
|
|
$ |
110,685 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Current portion of notes payable |
|
$ |
4,061 |
|
|
$ |
4,378 |
|
Accounts payable and accrued expenses |
|
|
4,279 |
|
|
|
4,687 |
|
Accrued compensation |
|
|
6,460 |
|
|
|
6,086 |
|
Income taxes payable |
|
|
-- |
|
|
|
366 |
|
Dividends payable |
|
|
-- |
|
|
|
5,239 |
|
Deferred revenue |
|
|
15,585 |
|
|
|
16,354 |
|
Other current liabilities |
|
|
1,296 |
|
|
|
1,045 |
|
Total current liabilities |
|
|
31,681 |
|
|
|
38,155 |
|
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion |
|
|
26,547 |
|
|
|
29,795 |
|
Other non-current liabilities |
|
|
10,880 |
|
|
|
9,843 |
|
Total liabilities |
|
|
69,108 |
|
|
|
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 30,775,154 in 2020 and 30,151,574 in 2019, outstanding
25,390,968 in 2020 and 24,947,500 in 2019 |
|
|
31 |
|
|
|
30 |
|
Additional paid-in capital |
|
|
171,785 |
|
|
|
162,154 |
|
Retained earnings (accumulated deficit) |
|
|
(61,375 |
) |
|
|
(93,357 |
) |
Accumulated other comprehensive loss, foreign currency translation
adjustment |
|
|
(2,399 |
) |
|
|
(2,209 |
) |
Treasury stock |
|
|
(43,727 |
) |
|
|
(33,726 |
) |
Total shareholders’ equity |
|
|
64,315 |
|
|
|
32,892 |
|
Total liabilities and shareholders’ equity |
|
$ |
133,423 |
|
|
$ |
110,685 |
|
Contact:Kevin R.
Karas
Chief Financial Officer
402-475-2525
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