National Research Corporation Announces Second Quarter 2021 Results
August 03 2021 - 5:00PM
National Research Corporation (NASDAQ:NRC) today announced results
for the second quarter of 2021.
Financial Results (Q2 2021 compared to Q2
2020):
- Total Recurring Contract Value growth of 5% to $149.8
million
- Revenue increased 17% to $36.4 million
- Operating Income increased 32% to $12.2 million
We saw significant improvement in revenue growth
in the second quarter which is in line with our continued focus on
increasing our revenue growth rate and enabling human understanding
for the clients we serve. Our primary emphasis is on 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 29% in the second quarter of 2021 compared
to 2020, and we continued our momentum of winning new clients
including The Oregon Clinic and Foundation Health Partners.
We believe our solutions are highly
differentiated in our clients’ 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 and the efficiencies
inherent in our subscription model have led to long-term margin
improvements, a hallmark of our financial performance.
Our cash balance increased to $48.9 million at
the end of the second quarter. 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.
Second quarter 2021 revenue was $36.4 million,
an increase of 17% over second quarter 2020. This was primarily due
to new customer sales, as well as an increase in sales to the
existing client base. During the same period in 2020, we also
experienced revenue reductions from COVID-19 as some clients
reduced or eliminated services they purchased from us as
cost-reducing measures. Consolidated operating income for the
second quarter 2021 was $12.2 million or a 32% increase over the
same period last year.
Total operating expenses of $24.2 million for
the second quarter 2021 increased by 10% compared to the second
quarter 2020 total operating expenses of $21.9 million.
Direct expenses increased to $12.5 million for
the second quarter 2021, compared to $11.6 million for the second
quarter 2020. Variable expenses increased $958,000 and fixed
expenses decreased $56,000 in comparison to the same period of
2020. Variable expenses increased due to higher survey contracted
services partially offset by less postage, printing, and paper
costs primarily resulting from changes in survey methodologies.
Conference expenses increased due to the timing and shift in
attendance format of conferences. Fixed expenses decreased
primarily as a result of lower salary and benefit costs, decreased
equipment lease costs, and reduced company incentive event costs
partially offset by higher software and platform hosting expenses.
Direct expenses as a percentage of revenue decreased to 34% in the
second quarter 2021 compared to 37% in the second quarter 2020.
Selling, general and administrative expenses
increased to $10.0 million for the second quarter 2021, compared to
$8.9 million for the same period in 2020, primarily due to
increases in public company and other legal and accounting costs,
higher contracted services and increased business insurance.
Selling, general and administrative expenses were 28% of revenue
for the second quarter 2021 and 2020.
Depreciation, amortization and impairment
expense increased to $1.6 million in the second 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. Depreciation,
amortization and impairment expense was 5% of revenue for the
second quarter 2021 and 2020.
Other income and expense was $345,000 of other
net expense in the second quarter 2021 compared to $718,000 of
other net expense in second 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 $3.0
million for second quarter 2021 compared to $842,000 in 2020 with
an effective tax rate of 25% for second quarter 2021 compared to
10% in 2020. The effective tax rate increased due to decreased tax
benefits from the exercise and vesting of share-based compensation
awards and higher state income taxes.
Net income for
second quarter 2021 was $8.9 million compared to $7.7 million for
the same period last year. Diluted earnings per share increased to
$0.35 for the quarter ended June 30, 2021, from diluted earnings
per share of $0.30 for the quarter ended June 30, 2020.
On a year-to-date basis, 2021 revenue increased
by 11% to $71.9 million compared to $65.0 million for the first six
months of 2020. Operating income for the first six months increased
by 18%, from $20.5 million in 2020 to $24.3 million in 2021.
Year-to-date net income for 2021 was $18.2 million compared to
first half 2020 net income of $19.5 million. The decrease in net
income was impacted by an increase in the effective income tax rate
from 2% in 2020 to 23% in 2021 due to decreased tax benefits from
the exercise and vesting of share-based compensation awards and
higher state income taxes.
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 ended June 30, |
|
Six months ended June 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
36,425 |
|
$ |
31,166 |
|
$ |
71,889 |
|
$ |
65,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
12,536 |
|
|
11,634 |
|
|
24,476 |
|
|
24,180 |
|
Selling, general and administrative |
|
|
10,016 |
|
|
8,852 |
|
|
19,536 |
|
|
17,600 |
|
Depreciation and amortization |
|
|
1,634 |
|
|
1,405 |
|
|
3,618 |
|
|
2,777 |
|
Total operating expenses |
|
|
24,186 |
|
|
21,891 |
|
|
47,630 |
|
|
44,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
12,239 |
|
|
9,275 |
|
|
24,259 |
|
|
20,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
3 |
|
|
2 |
|
|
6 |
|
|
13 |
|
Interest expense |
|
|
(423 |
) |
|
(450 |
) |
|
(855 |
) |
|
(914 |
) |
Other, net |
|
|
75 |
|
|
(270 |
) |
|
96 |
|
|
360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(345 |
) |
|
(718 |
) |
|
(753 |
) |
|
(541 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
11,894 |
|
|
8,557 |
|
|
23,506 |
|
|
19,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
2,950 |
|
|
842 |
|
|
5,330 |
|
|
458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,944 |
|
$ |
7,715 |
|
$ |
18,176 |
|
$ |
19,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
$ |
0.35 |
|
$ |
0.31 |
|
$ |
0.71 |
|
$ |
0.78 |
|
Diluted Earnings Per Share |
|
$ |
0.35 |
|
$ |
0.30 |
|
$ |
0.71 |
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
25,426 |
|
|
25,148 |
|
|
25,420 |
|
|
25,060 |
|
Diluted |
|
|
25,645 |
|
|
25,680 |
|
|
25,656 |
|
|
25,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NATIONAL RESEARCH CORPORATION AND
SUBSIDIARYUnaudited Condensed Consolidated Balance
Sheets(Dollars in thousands, except share amounts and par
value)
|
|
June 30, |
|
|
December 31, |
2021 |
2020 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
48,899 |
|
|
$ |
34,690 |
Accounts receivable, net |
|
|
14,157 |
|
|
|
13,923 |
Income taxes receivable |
|
|
153 |
|
|
|
1,235 |
Other current assets |
|
|
4,380 |
|
|
|
4,264 |
Total current assets |
|
|
67,589 |
|
|
|
54,112 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
11,525 |
|
|
|
11,726 |
Goodwill |
|
|
61,640 |
|
|
|
57,255 |
Other, net |
|
|
11,095 |
|
|
|
10,330 |
Total assets |
|
$ |
151,849 |
|
|
$ |
133,423 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Current portion of notes payable, net unamortized debt issuance
costs |
|
|
$ |
4,168 |
|
|
$ |
4,061 |
Accounts payable and accrued expenses |
|
|
4,959 |
|
|
|
4,279 |
Accrued compensation |
|
|
7,075 |
|
|
|
6,460 |
Income taxes payable |
|
|
512 |
|
|
|
-- |
Deferred revenue |
|
|
16,848 |
|
|
|
15,585 |
Other current liabilities |
|
|
3,364 |
|
|
|
1,296 |
Dividends payable |
|
|
3,053 |
|
|
|
-- |
Total current liabilities |
|
|
39,979 |
|
|
|
31,681 |
|
|
|
|
|
|
|
|
Notes payable, net of current portion and unamortized debt issuance
costs |
|
|
24,434 |
|
|
|
26,547 |
Other non-current liabilities |
|
|
11,071 |
|
|
|
10,880 |
Total liabilities |
|
|
75,484 |
|
|
|
69,108 |
|
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none
issued |
|
|
-- |
|
|
|
-- |
Common stock, $0.001 par value; authorized 110,000,0000 shares in
2021 and 60,000,000 shares in 2020, 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 |
|
|
172,844 |
|
|
|
171,785 |
Retained earnings (accumulated deficit) |
|
|
(49,304 |
) |
|
|
(61,375) |
Accumulated other comprehensive loss, foreign currency translation
adjustment |
|
|
(2,269 |
) |
|
|
(2,399) |
Treasury stock |
|
|
(44,937 |
) |
|
|
(43,727) |
Total shareholders’ equity |
|
|
76,365 |
|
|
|
64,315 |
Total liabilities and shareholders’ equity |
|
$ |
151,849 |
|
|
$ |
133,423 |
Contact:
Kevin R. Karas
Chief Financial
Officer402-475-2525
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