National Research Corporation (NASDAQ: NRC) today announced results
for the first quarter of 2021.
As we emerge from the impact of COVID-19, our
focus continues on increasing revenue growth rate and enabling
human understanding for the clients we serve. Our primary emphasis
is on our organic growth levers of increasing revenue from our core
offerings within our existing client base, as well as adding new
clients to increase market share. As a result, revenue from our
Voice of the Customer offerings increased by 19% in the first
quarter of 2021 compared to 2020, and we continued our momentum of
winning new clients, including Wake Forest Baptist Health, San
Francisco Health Network and UC San Diego Health.
In the first quarter we also executed on our
M&A growth strategy by acquiring the intellectual property of
PatientWisdom, whose incremental capabilities will be introduced
later this year to add significant value to our clients. We have
adopted a capital allocation strategy that we expect will leverage
our available liquidity, along with our continued strong free cash
flow to support additional M&A activity, as well as provide
returns to shareholders through our dividends.
Financial Results (Q1 2021 compared to Q1
2020):
- Total Recurring Contract Value
growth of 6% to $149.5 million
- Revenue increased 5% to $35.5
million
- Operating Income increased 7% to
$12.0 million
Continued demand for our solutions resulted in a
6% increase in Total Recurring Contract Value in the first quarter
of 2021 compared to the first quarter 2020. We believe our
solutions are highly differentiated in our client’s eyes against
competitive offerings from firms outside of the healthcare industry
and legacy vendors within as we continue to add new clients. We
believe that every added client deepens our moat and brings
additive value to all current partners through the network
effect.
First quarter 2021 revenue was $35.5 million, an
increase of 5% over first quarter 2020. The increase is net of a
$605,000 decrease in conference revenue in the first quarter 2021
due to the timing of conferences and a virtual format in 2021
compared to a live format in 2020. Consolidated operating income
for the first quarter 2021 was $12.0 million or a 7% increase over
the same period last year.
Total operating expenses of $23.4 million for
the first quarter 2021 increased by 3% compared to the first
quarter 2020 total operating expenses of $22.7 million.
Direct expenses decreased to $11.9 million for
the first quarter 2021, compared to $12.5 million for the first
quarter 2020. Direct expenses as a percentage of revenue decreased
to 34% in the first quarter 2021 compared to 37% in the first
quarter 2020 due to decreases in variable expenses of $103,000 and
fixed expenses of $502,000. Variable expenses decreased due to less
postage, printing, and paper costs, partially offset by higher
contracted services primarily resulting from changes in survey
methodologies and decreased conference expenses due to the timing
and format of conferences. Fixed expenses decreased primarily as a
result of decreased contracted services and lower travel and meal
costs due to restricted travel associated with COVID-19, partially
offset by increased salary and benefit costs.
Selling, general and administrative expenses
increased to $9.5 million for the first quarter 2021, compared to
$8.7 million for the same period in 2020, primarily due to
increases in software and platform hosting expenses, higher
contracted services, increased salary and benefit costs, higher
accounting and legal costs and additional building lease costs.
These were partially offset by lower travel and meals costs due to
restricted travel associated with COVID-19. Selling, general and
administrative expenses were 27% of revenue for the first quarter
2021, compared to 26% of revenue for the first quarter of 2020.
Depreciation, amortization and impairment
expense increased to $2.0 million in the first quarter of 2021
compared to $1.4 million in 2020, primarily due to our
transformation to a distributed workforce environment which
includes building renovations in our headquarters, as well as
subleasing a remote office location which resulted in a
right-of-use asset impairment and increased depreciation due to
shortening the estimated useful lives of certain building assets.
Depreciation, amortization and impairment expense was 6% of revenue
for the first quarter 2021, compared to 4% of revenue for first
quarter of 2020.
Other income and expense was $408,000 of other
net expense in the first quarter 2021 compared to $176,000 of other
net income in first quarter of 2020. This increase in other net
expense was primarily due to revaluation on intercompany
transactions due to changes in the foreign exchange rate. This was
partially offset by decreased interest expense due to the declining
balance on our term loan.
The Company had an income tax provision of $2.4
million for first quarter 2021 compared to $385,000 tax benefit in
2020 with an effective tax rate of 20% for first quarter 2021
compared to a 3% benefit in 2020. The effective tax rate increased
due to decreased tax benefits of $2.8 million from the exercise and
vesting of share-based compensation awards and higher state income
taxes.
Net income for first quarter 2021 was $9.2
million, compared to $11.8 million for the same period last year.
Diluted earnings per share decreased to $0.36 for the quarter ended
March 31, 2021, from diluted earnings per share of $0.46 for the
quarter ended March 31, 2020.
For more than 40 years, National Research
Corporation has been a leading provider of analytics and insights
that facilitate measurement and improvement of the patient and
employee experience while also increasing patient engagement and
customer loyalty for healthcare providers, payers and other
healthcare organizations in the United States and Canada. Our
purpose is to enable human understanding by helping our clients to
understand the voice of the customer with greater clarity,
immediacy and depth.
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,” “expect,” 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, 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 future M&A activity, future payment of
dividends, 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.
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARY Unaudited Condensed Consolidated
Statements of Income (In thousands, except per share
data)
|
|
Three months endedMarch 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
35,464 |
|
|
$ |
33,860 |
|
|
|
|
|
Operating expenses: |
|
|
|
Direct |
|
|
11,940 |
|
|
|
12,546 |
|
Selling, general and administrative |
|
|
9,520 |
|
|
|
8,749 |
|
Depreciation, amortization and impairment |
|
|
1,984 |
|
|
|
1,371 |
|
Total operating expenses |
|
|
23,444 |
|
|
|
22,666 |
|
|
|
|
|
Operating income |
|
|
12,020 |
|
|
|
11,194 |
|
|
|
|
|
Other income (expense): |
|
|
|
Interest income |
|
|
3 |
|
|
|
11 |
|
Interest expense |
|
|
(432 |
) |
|
|
(465 |
) |
Other, net |
|
|
21 |
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
(408 |
) |
|
|
176 |
|
|
|
|
|
Income before income taxes |
|
|
11,612 |
|
|
|
11,370 |
|
|
|
|
|
Income tax provision (benefit) |
|
|
2,380 |
|
|
|
(385 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,232 |
|
|
$ |
11,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share of Common Stock: |
|
|
|
Basic Earnings Per Share |
|
$ |
0.36 |
|
|
$ |
0.47 |
|
Diluted Earnings Per Share |
|
$ |
0.36 |
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and share equivalents outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
25,414 |
|
|
|
24,97 |
|
Diluted |
|
|
25,668 |
|
|
|
25,725 |
|
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARY Unaudited Condensed Consolidated
Balance Sheets (Dollars in thousands, except share amounts
and par value)
|
|
March 31, 2021 |
|
December 31, 2020 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
43,454 |
|
|
$ |
34,690 |
|
Accounts receivable, net |
|
|
14,296 |
|
|
|
13,923 |
|
Income taxes receivable |
|
|
144 |
|
|
|
1,235 |
|
Other current assets |
|
|
4,341 |
|
|
|
4,264 |
|
Total current assets |
|
|
62,235 |
|
|
|
54,112 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
11,533 |
|
|
|
11,726 |
|
Goodwill |
|
|
61,614 |
|
|
|
57,255 |
|
Other, net |
|
|
11,496 |
|
|
|
10,330 |
|
Total assets |
|
$ |
146,878 |
|
|
$ |
133,423 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of notes payable |
|
$ |
4,113 |
|
|
$ |
4,061 |
|
Accounts payable and accrued expenses |
|
|
4,156 |
|
|
|
4,279 |
|
Accrued compensation |
|
|
6,622 |
|
|
|
6,460 |
|
Income taxes payable |
|
|
1,037 |
|
|
|
-- |
|
Deferred revenue |
|
|
17,614 |
|
|
|
15,585 |
|
Other current liabilities |
|
|
3,396 |
|
|
|
1,296 |
|
Total current liabilities |
|
|
36,938 |
|
|
|
31,681 |
|
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion |
|
|
25,494 |
|
|
|
26,547 |
|
Other non-current liabilities |
|
|
11,196 |
|
|
|
10,880 |
|
Total liabilities |
|
|
73,628 |
|
|
|
69,108 |
|
|
|
|
|
|
|
|
|
|
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 30,850,131 in 2021 and 30,775,154 in 2020, outstanding
25,439,013 in 2021 and 25,390,968 in 2020 |
|
|
31 |
|
|
|
31 |
|
Additional paid-in capital |
|
|
172,642 |
|
|
|
171,785 |
|
Retained earnings (accumulated deficit) |
|
|
(52,143 |
) |
|
|
(61,375 |
) |
Accumulated other comprehensive loss, foreign currency translation
adjustment |
|
|
(2,343 |
) |
|
|
(2,399 |
) |
Treasury stock |
|
|
(44,937 |
) |
|
|
(43,727 |
) |
Total shareholders’ equity |
|
|
73,250 |
|
|
|
64,315 |
|
Total liabilities and shareholders’ equity |
|
$ |
146,878 |
|
|
$ |
133,423 |
|
Contact: |
Kevin R.
Karas |
|
Chief Financial
Officer |
|
402-475-2525 |
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