10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2018

or

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to ________

Commission File Number 001-35929

         National Research Corporation         

(Exact name of Registrant as specified in its charter)

Wisconsin	47-0634000
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1245 Q Street, Lincoln, Nebraska          68508

(Address of principal executive offices) (Zip Code)

(402) 475-2525

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		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.    ☐
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)

Yes ☐    No  ☒ 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Common Stock, $.001 par value, outstanding as of July 27, 2018: 24,738,983

1

NATIONAL RESEARCH CORPORATION

FORM 10-Q INDEX

For the Quarter Ended June 30, 2018

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Income	5
		Condensed Consolidated Statements of Comprehensive Income	6
		Condensed Consolidated Statements of Shareholders' Equity	7
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9-21
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22-28
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 6.	Exhibits	31
	Signatures		32

2

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), “believes,” “expects,” or other words of similar import. Similarly, statements that describe the Company’s future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include, without limitation, the following factors:

● The possibility of non-renewal of the Company’s client service contracts and retention of key clients;

● The Company’s ability to compete in its markets, which are highly competitive, and the possibility of increased price pressure and expenses;

● The effects of an economic downturn;

● The impact of consolidation in the healthcare industry;

● The impact of federal healthcare reform legislation or other regulatory changes;

● The Company’s ability to attract and retain key managers and other personnel;

● The possibility that the Company’s intellectual property and other proprietary information technology could be copied or independently developed by its competitors;

● The possibility that the Company could be subject to security breaches or computer viruses; and

● The factors set forth under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as such section may be updated or supplemented by Part II, Item 1A of the Company’s subsequently filed Quarterly Reports on Form 10-Q (including this Report).

Shareholders, potential investors and other readers are urged to consider these and other factors in evaluating the forward-looking statements, and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included are only made as of the date of this Quarterly Report on Form 10-Q and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances except as required by the federal securities laws.

3

PART I – Financial Information

ITEM 1. Financial Statements

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts and par value)

	June 30, 2018			December 31, 2017
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,698		$	34,733
Trade accounts receivable, less allowance for doubtful accounts of $219 and $200, respectively		10,689			14,806
Prepaid expenses		4,408			2,310
Income taxes receivable		1,713			375
Other current assets		125			35
Total current assets		23,633			52,259
Net property and equipment		13,320			12,359
Intangible assets, net		2,428			2,764
Goodwill		57,913			58,021
Deferred contract costs, net		3,369			--
Other		2,222			1,913
Total assets	$	102,885		$	127,316
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of notes payable	$	3,575		$	1,067
Accounts payable		1,362			593
Accrued wages, bonus and profit sharing		4,669			6,597
Accrued expenses		2,261			2,882
Current portion of capital lease obligations		87			71
Income taxes payable		97			--
Dividends payable		4,206			4,222
Deferred revenue		16,660			16,878
Total current liabilities		32,917			32,310
Notes payable, net of current portion		36,029			-
Deferred income taxes		5,808			4,030
Other long term liabilities		1,314			935
Total liabilities		76,068			37,275
Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued		--			--
Common Stock (formerly Class A), $0.001 par value; authorized 60,000,000 shares, issued 29,794,307 in 2018 and 25,835,230 in 2017, outstanding 24,738,983 in 2018 and 20,936,703 in 2017		30			26
Class B Common stock, $0.001 par value; 4,319,256 issued and 3,535,238 outstanding in 2017		--			4
Additional paid-in capital		155,614			51,025
Retained earnings (accumulated deficit)		(99,810	)		77,574
Accumulated other comprehensive (loss) income		(2,333	)		(1,635	)
Treasury stock, at cost; 5,055,324 Common (formerly Class A) shares in 2018 and 4,898,527 in 2017 and 784,018 Class B shares in 2017		(26,684	)		(36,953	)
Total shareholders’ equity		26,817			90,041
Total liabilities and shareholders’ equity	$	102,885		$	127,316

 See accompanying notes to condensed consolidated financial statements

4

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for per share amounts, unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Revenue	$	28,017		$	28,435		$	59,034		$	58,710
Operating expenses:
Direct		10,996			11,939			23,904			24,439
Selling, general and administrative		7,940			6,905			15,808			13,591
Depreciation and amortization		1,325			1,139			2,608			2,244
Total operating expenses		20,261			19,983			42,320			40,274
Operating income		7,756			8,452			16,714			18,436
Other income (expense):
Interest income		9			15			54			29
Interest expense		(439	)		(23	)		(447	)		(50	)
Other, net		493			27			464			35
Total other income (expense)		63			19			71			14
Income before income taxes		7,819			8,471			16,785			18,450
Provision (benefit) for income taxes		(129	)		2,719			1,531			6,178
Net income	$	7,948		$	5,752		$	15,254		$	12,272
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Common (formerly Class A)	$	0.29		$	0.14		$	0.47		$	0.29
Class B	$	0.27		$	0.82		$	1.31		$	1.75
Diluted Earnings Per Share:
Common (formerly Class A)	$	0.28		$	0.13		$	0.45		$	0.28
Class B	$	0.26		$	0.80		$	1.27		$	1.71
Dividends Per Share of Common Stock:
Common (formerly Class A)	$	0.17		$	0.10		$	0.27		$	0.20
Class B	$	--		$	0.60		$	0.60		$	1.20
Weighted average shares and share equivalents outstanding:
Common (formerly Class A) – basic		23,957			20,752			22,429			20,745
Class B – basic		3,527			3,514			3,527			3,514
Common (formerly Class A) – diluted		24,846			21,525			23,350			21,404
Class B – diluted		3,620			3,591			3,628			3,584

See accompanying notes to condensed consolidated financial statements

5

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Net income	$	7,948		$	5,752	$	15,254		$	12,272
Other comprehensive income:
Foreign currency translation adjustment		(283	)		381		(698	)		499
Other comprehensive income	$	(283	)	$	381	$	(698	)	$	499
Comprehensive Income	$	7,665		$	6,133	$	14,556		$	12,771

See accompanying notes to condensed consolidated financial statements.

6

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED Consolidated Statements of Shareholders’ Equity

(In thousands, except share and per share amounts, unaudited)

	Common Stock (formerly Class A)		Class B Common Stock			Additional Paid-in Capital			Retained Earnings (Accumulated deficit)			Accumulated Other Comprehensive Income(Loss)			Treasury Stock			Total
Balances at December 31, 2017	$	26	$	4		$	51,025		$	77,574		$	(1,635	)	$	(36,953	)	$	90,041
Purchase of 156,797 shares of class A and 3,677 shares of class B treasury stock		--		--			--			--			--			(5,630	)		(5,630	)
Issuance of 344,958 class A common shares and 9,296 class B common shares for the exercise of stock options		--		--			4,919			--			--			--			4,919
Issuance of restricted common shares, net of forfeitures (3,496 class A shares)		--		--			--			--			--			--			--
Non-cash stock compensation expense		--		--			995			--			--			--			995
Settlement of restricted common shares and stock options in connection with Recapitalization for cash of $3,271 and 90,369 class A common shares		-		--			(2,548	)		--			--			(723	)		(3,271	)
Settlement of class B common shares in connection with Recapitalization (3,527,246 class B common shares exchanged for $69,099 cash and 3,527,246 class A common shares)		4		--			118,335			--			--			(187,438	)		(69,099	)
Retirement of class B common shares in connection with Recapitalization (retirement of 4,328,552 class B common shares)		--		(4	)		(17,112	)		(186,944	)		--			204,060			--
Dividends declared of $0.27 and $0.60 per A and B common share, respectively		--		--			--			(8,429	)		--			--			(8,429	)
Cumulative effect adjustment for adoption of ASC 606		--		--			--			2,735			--			--			2,735
Other comprehensive income, foreign currency translation adjustment		--		--			--			--			(698	)		--			(698	)
Net income		--		--			--			15,254			--			--			15,254
Balances at June 30, 2018	$	30	$	--		$	155,614		$	(99,810	)	$	(2,333	)	$	(26,684	)	$	26,817

See accompanying notes to condensed consolidated financial statements.

7

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	Six months ended
	June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	15,254		$	12,272
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,608			2,244
Deferred income taxes		996			386
Reserve for uncertain tax positions		92			73
Non-cash share-based compensation expense		995			792
Impairment of property and equipment		2			--
Net changes in assets and liabilities:
Trade accounts receivable		3,955			(2,299	)
Prepaid expenses and other current assets		(2,393	)		(1,696	)
Deferred contract costs, net		2
Accounts payable		481			222
Accrued expenses, wages, bonuses and profit sharing		(2,371	)		(750	)
Income taxes receivable and payable		(1,235	)		(1,818	)
Deferred revenue		5			1,194
Net cash provided by operating activities		18,391			10,620
Cash flows from investing activities:
Purchases of property and equipment		(2,773	)		(2,390	)
Net cash used in investing activities		(2,773	)		(2,390	)
Cash flows from financing activities:
Payments related to Recapitalization		(72,370	)		--
Proceeds from issuance of note payable		40,000			--
Borrowings on line of credit		1,000			--
Payments on line of credit		(1,000	)		--
Payment of debt issuance costs		(187	)		--
Payments on notes payable		(1,286	)		(1,433	)
Payments on capital lease obligations		(58	)		(53	)
Payment of employee payroll tax withholdings on share-based awards exercised		(712	)		(105	)
Payment of dividends on common stock		(8,445	)		(8,431	)
Net cash used in financing activities		(43,058	)		(10,022	)
Effect of exchange rate changes on cash		(595	)		399
Change in cash and cash equivalents		(28,035	)		(1,393	)
Cash and cash equivalents at beginning of period		34,733			33,021
Cash and cash equivalents at end of period	$	6,698		$	31,628
Supplemental disclosure of cash paid for:
Interest, net of capitalized amounts	$	256		$	44
Income taxes	$	1,703		$	7,539
Supplemental disclosure of non-cash investing and financing activities:
Common stock (formerly class A) issued in the Recapitalization in exchange for then-existing class B shares and options.	$	121,371		$	--
Capital lease obligations originated for property and equipment	$	210		$	64
Stock tendered to the Company for cashless exercise of stock options in connection with equity incentive plans	$	4,919		$	2,101

See accompanying notes to condensed consolidated financial statements.

8

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and basis of presentation

National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), is 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. The Company’s solutions enable its clients to understand the voice of the customer with greater clarity, immediacy and depth.

The Company’s six operating segments are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria from the Financial Accounting Standards Board (“FASB”) guidance on segment disclosure. The six operating segments are Experience, The Governance Institute, Market Insights, Transparency, NRC Health Canada and Transitions (formerly Connect), which offer a portfolio of solutions that address specific needs around market insight, experience, transparency and governance for healthcare providers, payers and other healthcare organizations.

The condensed consolidated balance sheet of the Company at December 31, 2017, was derived from the Company’s audited consolidated balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) the Company considers necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

Information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in the Company’s Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2018.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, National Research Corporation Canada, doing business as NRC Health Canada. All significant intercompany transactions and balances have been eliminated.

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the country in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. 

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue- Revenue from Contracts with Customers and all related amendments (“ASC 606” or “new revenue standard”) using the modified retrospective method for all incomplete contracts as of the date of adoption. The Company applied the practical expedient to reflect the total of all contract modifications occurring before January 1, 2018 in the transaction price and performance obligations at transition rather than accounting for each modification separately. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. As discussed in more detail below and under “Deferred Contract Costs”, the largest impact of implementing the new revenue standard was the deferral and amortization of direct and incremental costs of obtaining contracts. In addition, there were other revisions to the revenue recognition primarily related to performance obligation determinations and estimating variable consideration. The Company recorded a transition adjustment of approximately $2.7 million, net of $814,000 of tax, to the opening balance of retained earnings.

9

The Company derives a majority of its revenues from its annually renewable subscription-based service agreements with its customers, which include performance measurement and improvement services, healthcare analytics and governance education services. Such agreements are generally cancelable on short or no notice without penalty. See Note 3 for further information about the Company's contracts with customers. Under ASC 606, the Company accounts for revenue using the following steps:

● Identify the contract, or contracts, with a customer

● Identify the performance obligations in the contract

● Determine the transaction price

● Allocate the transaction price to the identified performance obligations

● Recognize revenue when, or as, the Company satisfies the performance obligations.

The Company’s revenue arrangements with a client may include combinations of more than one service offering which may be executed at the same time, or within close proximity of one another. The Company combines contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated as a single performance obligation. For contracts that contain more than one separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin or residual approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements based on the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

Prior to 2018, total contract consideration was allocated to each separate unit of accounting that was separately sold by the Company or a competitor, based on relative selling price using a selling price hierarchy: vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”) if VSOE was not available, or estimated selling price if VSOE nor TPE was available. VSOE was established based on the services normal selling prices and discounts for the specific services when sold separately. TPE was established by evaluating similar competitor services in standalone arrangements. If neither existed for a deliverable, the best estimate of the selling price (“ESP”) was used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element was limited to revenue that was not subject to refund or otherwise represented contingent revenue.

The Company’s arrangements with customers consist principally of four different types of arrangements: 1) subscription-based service agreements; 2) one-time specified services performed at a single point in time; 3) fixed, non-subscription service agreements; and 4) unit-priced service agreements.

Subscription-based services - Services that are provided under subscription-based service agreements are usually for a twelve month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the customer. These agreements are renewable at the option of the customer at the completion of the initial contract term for an agreed upon price increase each year. These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period. Accordingly, subscription services are recognized ratably over the subscription period. Subscription services are typically billed annually in advance, but may also be billed on a quarterly and monthly basis.

One-time services – These agreements typically require the Company to perform a specific one-time service in a particular month. The Company is entitled to fixed payment upon completion of the service. Under these arrangements, the Company recognizes revenue at the point in time the service is completed by the Company and accepted by the customer.

Fixed, non-subscription services – These arrangements typically require the Company to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch up adjustment which could impact the amount and timing of revenue for any period. Prior to 2018, these arrangements were recognized under the proportional performance method based on cost inputs, output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting.

10

Unit-price services – These arrangements typically require the Company to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service. Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not invoiced to the clients. Unbilled receivables are classified as receivables when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

The following tables summarize the impact the adoption of ASC 606 had on the Company’s consolidated financial statements (in thousands, except per share data):

Consolidated balance sheet:

	As reported June 30, 2018			Adjustments			Balances without Adoption of ASC 606
Accounts receivable, net	$	10,689		$	5		$	10,694
Other current assets		125			(72	)		53
All other current assets		12,819			--			12,819
Total current assets		23,633			(67	)		23,566
Deferred contract costs		3,369			(3,369	)		--
All other noncurrent assets		75,883			--			75,883
Total assets	$	102,885		$	(3,436	)	$	99,449
Deferred revenue	$	16,660		$	61		$	16,721
Other current liabilities		16,257			--			16,257
Total current liabilities		32,917			61			32,978
Deferred income taxes		5,808			(802	)		5,006
Other long term liabilities		37,343			--			37,343
Total liabilities		76,068			(741	)		75,327
Retained earnings		(99,810	)		(2,697	)		(102,507	)
Accumulated other comprehensive income		(2,333	)		2			(2,331	)
Other stockholders’ equity		128,960			--			128,960
Total stockholders’ equity		26,817			(2,695	)		24,122
Total liabilities and stockholders’ equity	$	102,885		$	(3,436	)	$	99,449

Consolidated statement of income:

	Three months ended June 30, 2018									Six months ended June 30, 2018
	As reported			Adjustments			Balances Without Adoption of ASC 606			As reported		Adjustments			Balances Without Adoption of ASC 606
Revenue	$	28,017		$	120		$	28,137		$	59,034	$	48		$	59,082
Direct expenses		10,996			(28	)		10,968			23,904		(59	)		23,845
Selling, general and administrative		7,940			(173	)		7,767			15,808		57			15,865
Depreciation and amortization		1,325			--			1,325			2,608		--			2,608
Total operating expenses		20,261			(201	)		20,060			42,320		(2	)		42,318
Operating income		7,756			321			8,077			16,714		50			16,764
Other income (expense)		63			--			63			71		--			71
Income before income taxes		7,819			321			8,140			16,785		50			16,835
Provision (benefit) for income taxes		(129	)		74			(55	)		1,531		12			1,543
Net income	$	7,948		$	247		$	8,195		$	15,254	$	38		$	15,292
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.29		$	0.01		$	0.30		$	0.47	$	--		$	0.47
Class B		0.27			--			0.27			1.31		--			1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.28		$	0.01		$	0.29		$	0.45	$	--		$	0.45
Class B		0.26			0.01			0.27			1.27		0.01			1.28

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Consolidated statement of comprehensive income:

	Three months ended June 30, 2018								Six months ended June 30, 2018
	As reported			Adjustments		Balances without adoption of ASC 606			As reported			Adjustments		Balances without adoption of ASC 606
Net Income	$	7,948		$	247	$	8,195		$	15,254		$	38	$	15,292
Cumulative translation adjustment		(283	)		4		(279	)		(698	)		2		(696	)
Comprehensive Income	$	7,665		$	251	$	7,916		$	14,556		$	40	$	14,596

Consolidated statement of cash flows:

	Six months ended June 30, 2018
	As reported			Adjustments			Balances without adoption of ASC 606
Cash flows from operating activities:
Net income	$	15,254		$	38		$	15,292
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,608			--			2,608
Deferred income taxes		996			12			1,008
Reserve for uncertain tax positions		92			--			92
Non-cash share-based compensation expense		995			--			995
Impairment of property and equipment		2			--			2
Change in assets and liabilities:
Trade accounts receivable and unbilled revenue		3,955			128			4,083
Prepaid expenses and other current assets		(2,393	)		(2	)		(2,395	)
Deferred contract costs		2			(2	)		--
Accounts payable		481			--			481
Accrued expenses, wages, bonus and profit sharing		(2,371	)		--			(2,371	)
Income taxes receivable and payable		(1,235	)		--			(1,235	)
Deferred revenue		5			(176	)		(171	)
Net cash provided by operating activities		18,391			(2	)		18,389
Net cash used in investing activities		(2,773	)		--			(2,773	)
Net cash used in financing activities		(43,058	)		--			(43,058	)
Effect of exchange rate changes on cash		(595	)		2			(593	)
Change in cash and cash equivalents		(28,035	)		--			(28,035	)
Cash and cash equivalents at beginning of period		34,733			--			34,733
Cash and cash equivalents at end of period	$	6,698			--		$	6,698

Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. Beginning January 1, 2018, with the adoption of the new revenue standard, the Company defers commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable customer contract. Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from three to five years. The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract.  An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration the Company expects to receive less than the expected future costs directly related to providing those services.  The Company deferred incremental costs of obtaining a contract of $445,000 and $1,272,000 in the three and six months ended June 30, 2018, respectively. Total amortization was $639,000 and $1,254,000 for the three and six months ended June 30, 2018, respectively. Amortization of deferred contract costs included in direct expenses was $29,000 and $59,000 for the three and six months ended June 30, 2018, respectively. Amortization of deferred contract costs included in selling, general and administrative expenses was $610,000 and $1,195,000 for the three and six months ended June 30, 2018, respectively. Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was $7,000 and $19,000 in the three and six months ended June 30, 2018, respectively. The Company has elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of one year or less. Prior to 2018, all commissions and incentives were expensed as incurred. The Company recorded a transition adjustment on January 1, 2018 as an increase to retained earnings of $2.6 million, net of $776,000 of tax, to reflect $3.4 million of commissions and incentives related to contracts that began prior to 2018, net of accumulated amortization.

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Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (1) Level 1 Inputs—quoted prices in active markets for identical assets and liabilities; (2) Level 2 Inputs—observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and (3) Level 3 Inputs—unobservable inputs.

Commercial paper and Eurodollar deposits are included in cash equivalents and are valued at amortized cost, which approximates fair value due to their short-term nature. Eurodollar deposits are United States dollars deposited in a foreign bank branch of a United States bank and have daily liquidity. Both of these are included as a Level 2 measurement in the table below.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at June 30, 2018 and December 31, 2017: 

Fair Values Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of June 30, 2018
Money Market Funds	$	767	$	--	$	--	$	767
Total	$	767	$	--	$	--	$	767
As of December 31, 2017
Money Market Funds	$	13,971	$	--	$	--	$	13,971
Commercial Paper		--		10,490		--		10,490
Eurodollar Deposits		--		10,017		--		10,017
Total	$	13,971	$	20,507	$	--	$	34,478

There were no transfers between levels during the three month period ended June 30, 2018.

The Company's long-term debt is recorded at historical cost. The fair value of long-term debt is classified in Level 2 of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	June 30, 2018		December 31, 2017
	(In thousands)
Total carrying amount of long-term debt	$	39,781	$	1,067
Estimated fair value of long-term debt	$	39,813	$	1,066

The Company believes that the carrying amounts of trade accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short maturity of those instruments. Long-lived assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes property and equipment, goodwill, intangibles, and cost method investments are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of June 30, 2018, and December 31, 2017, there was no indication of impairment related to these assets.

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Contingencies

From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.

Since the September 2017 announcement of the original proposed recapitalization plan (“Original Transaction”) (see Note 2), three purported class action and/or derivative complaints have been filed in state or federal courts by three individuals claiming to be shareholders of the Company. All of the complaints name as defendants the Company and the individual directors of the Company. Two of these lawsuits were filed in the United States District Court for the District of Nebraska— a putative class action lawsuit captioned Gennaro v. National Research Corporation, et al., which was filed on November 15, 2017, and a putative class and derivative action lawsuit captioned Gerson v. Hays, et al., which was filed on November 16, 2017. These lawsuits were consolidated by order of the federal court under the caption In re National Research Corporation Shareholder Litigation. A third lawsuit was filed in the Circuit Court for Milwaukee County, Wisconsin—a putative class action lawsuit captioned Apfel v. Hays, et al., which was filed on December 1, 2017. The allegations in all of the lawsuits were very similar. The plaintiffs alleged, among other things, that the defendants breached their fiduciary duties in connection with the allegedly unfair proposed transaction, at an allegedly unfair price, conducted in an allegedly unfair and conflicted process and in alleged violation of Wisconsin law and the Company’s Articles of Incorporation. The plaintiffs in these lawsuits sought, among other things, an injunction enjoining the defendants from consummating the Original Transaction, damages, equitable relief and an award of attorneys’ fees and costs of litigation. After the announcement of a revised proposed recapitalization plan (the “Recapitalization”), the plaintiffs abandoned their efforts to enjoin the transaction. However, the plaintiffs in In re National Research Corporation Shareholder Litigation in Nebraska filed an Amended Complaint on March 23, 2018 seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and alleged omission of material facts in the proxy statement relating to the Recapitalization. The plaintiffs in the Apfel case in Wisconsin filed an amended complaint on April 4, 2018 seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and the Recapitalization. The Company and its directors will defend themselves against these lawsuits vigorously, and have moved to dismiss both lawsuits. These motions are pending. As of June 30, 2018, no losses have been accrued as the Company does not believe the losses are probable or estimable.

Recent Accounting Pronouncements Not Yet Adopted

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 changes certain recognition, measurement, presentation and disclosure aspects related to financial instruments. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The Company believes its adoption will not significantly impact the Company’s results of operations and financial position. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. As of June 30, 2018, the Company had approximately $4.0 million of operating lease commitments which would be recorded on the balance sheet under the new guidance. However, the Company is currently in the process of further evaluating the impact that this new guidance will have on its consolidated financial statements and does not plan to elect early adoption. The Company expects to utilize the optional practical expedients to not reassess whether expired or existing contracts contain leases, not reassess the lease classification for expired or existing leases and reassess initial direct costs for existing leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments.  This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations and financial position.  

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2. RECAPITALIZATION

On April 16, 2018, the shareholders of the Company approved, among other things, an amendment to the Company’s Amended and Restated Articles of Incorporation (the "Articles") to effect the Recapitalization pursuant to which each share of the Company’s then-existing class B common stock was exchanged for one share of the Company’s then-existing class A common stock plus $19.59 in cash, without interest. On April 17, 2018, the Company filed an amendment to its Articles effecting the Recapitalization and then a further amendment and restatement of the Company’s Articles which resulted in the elimination of the Company’s class B common stock and the reclassification of the Company’s class A common stock as a share of Common Stock, par value $0.001 per share (“Common Stock”). The Company issued 3,617,615 shares of Common Stock and paid $72.4 million in exchange for all class B shares outstanding and to settle outstanding share based awards for class B common stock. The Common Stock continues to trade on The NASDAQ Global Market under the revised symbol “NRC.”

In connection with the Recapitalization, on April 18, 2018, the Company entered into a credit agreement with First National Bank of Omaha, a national banking association (“FNB”), as described in Note 5.

3. CONTRACTS WITH CUSTOMERS

The following table disaggregates revenue for the three and six month periods ending June 30, 2018 based on timing of revenue recognition (In thousands):

	Three months ended June 30, 2018		Six months ended June 30, 2018
Subscription services recognized ratably over time	$	25,653	$	51,441
Services recognized at a point in time		157		1,902
Fixed, non-subscription recognized over time		487		1,779
Unit price services, recognized over time		1,720		3,912
Total revenue	$	28,017	$	59,034

 The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (In thousands):

	June 30, 2018			Balance at 1/1/2018 as adjusted (1)
Accounts receivables	$	10,689		$	14,674
Contract assets included in other current assets	$	72		$	74
Deferred Revenue	$	(16,660	)	$	(16,642	)

(1) Represents the December 31, 2017 balance adjusted for the ASC 606 transition adjustments.

Significant changes in contract assets and contract liabilities during 2018 are as follows (in thousands):

	Three months ended June 30, 2018						Six months ended June 30, 2018
	Contract Asset			Deferred Revenue			Contract Asset			Deferred Revenue
							Increase (Decrease)
Revenue recognized that was included in deferred revenue at beginning of year due to completion of services	$	-		$	(7,733	)	$	-		$	(13,577	)
Increases due to invoicing of client, net of amounts recognized as revenue		-			7,558			-			13,796
Decreases due to completion of services (or portion of services) and transferred to accounts receivable		(41	)		-			(58	)		-
Change due to cumulative catch-up adjustments arising from changes in expected contract consideration					(84	)					(153	)
Decreases due to impairment		-			-			-			-
Increases due to revenue recognized in the period with additional performance obligations before invoicing		25			-			56			-

The Company has elected to apply the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at June 30, 2018 approximated $678,000, of which $341,000, $284,000 and $53,000 will be recognized during the remainder of 2018, 2019 and 2020, respectively.

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4. INCOME TAXES

The effective tax rate for the three-month period ended June 30, 2018 decreased to (1.7)% compared to 32.1% for the same period in 2017 mainly due to income tax benefits from the Recapitalization, due to accelerated vesting of restricted stock and settlement of options of $1.1 million, and the reduction in the corporate tax rate from 35% to 21% due to the Tax Act that was enacted on December 22, 2017. In addition, the Company had increased tax benefits of $558,000 from the exercise of options and dividends paid to non-vested shareholders partially offset by $70,000 additional tax expense from non-deductible Recapitalization expenses.  The effective tax rate for the six-month period ended June 30, 2018 decreased to 9.1% compared to 33.5% for the same period in 2017. The effective tax rate was lower mainly due to income tax benefits from the Recapitalization and the reduction in the corporate tax rate from 35% to 21% due to the Tax Act. In addition, the Company had increased tax benefits of $908,000 from the exercise of options and dividends paid to non-vested shareholders partially offset by $137,000 additional tax expense from non-deductible Recapitalization expenses.  

5. NOTES PAYABLE

The Company’s long term debt consists of the following:

	June 30, 2018			December 31, 2017
Term Loans	$	39,781		$	1,067
Less: current portion		(3,575	)		(1,067	)
Less: unamortized debt issuance costs		(177	)		—
Notes payable, net of current portion	$	36,029		$	—

The balance on the Company’s former term note with US Bank was paid in full in March 2018.

On April 18, 2018, in connection with the Recapitalization, the Company entered into a credit agreement (the “Credit Agreement”) with FNB providing for (i) a $15,000,000 revolving credit facility (the “Line of Credit”), (ii) a $40,000,000 term loan (the “Term Loan”) and (iii) a $15,000,000 delayed draw-dawn term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”). The Company used the Term Loan to fund, in part, the cash portion paid to holders of the Company’s then-existing class B common stock in connection with the Recapitalization and the accompanying exchange of outstanding equity awards tied to the class B common stock, as well as for the costs of the Recapitalization. The Delayed Draw Term Loan may be used to fund any permitted future business acquisitions or repurchasing of the Company’s Common Stock and the Line of Credit will be used to fund ongoing working capital needs and other general corporate purposes, including to pay the fees and expenses incurred in connection with the Recapitalization and the Credit Agreement.

The Term Loan is payable in monthly installments of $462,988 through April 2020 and $526,362 thereafter, with a balloon payment due at maturity in April 2023. The Term Loan bears interest at a fixed rate of 5%.

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30 day London Interbank Offered Rate plus 225 basis points (4.24% at June 30, 2018). Interest on the Line of Credit accrues and is payable monthly. Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in April 2021. As of June 30, 2018, the Line of Credit did not have a balance. The weighted average borrowings on the Line of Credit for the three and six months ended June 30, 2018 was $385,000 and $193,000, respectively. The weighted average interest on borrowings on the Line of Credit for the three and six months ended June 30, 2018 was 4.16%. There have been no borrowings on the Delayed Draw Term Loan since origination.

The Company paid a one-time fee equal to 0.25% of the amount borrowed under the Term Loan at the closing of the Credit Facilities. The Company is also obligated to pay ongoing unused commitment fees quarterly in arrears pursuant to the Line of Credit and the Delayed Draw Term Loan facility at a rate of 0.20% per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility, respectively.

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 The Credit Agreement is collateralized by substantially all of the Company’s assets and contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of the Company’s Common Stock and acquisitions, subject in each case to certain exceptions. The Credit Agreement also contains certain financial covenants with respect to a minimum fixed charge coverage ratio of 1.10x and a maximum cash flow leverage ratio of 3.00x or less. As of June 30, 2018, the Company was in compliance with its financial covenants. 

Scheduled maturities of notes payable at June 30, 2018 are as follows:

Remainder of 2018	$	1,786
2019		3,715
2020		4,418
2021		4,916
2022		5,171
Thereafter		19,775

6. SHARE-BASED COMPENSATION

The Company measures and recognizes compensation expense for all share-based payments based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and unvested stock awards have been determined to be equity-classified awards.  As described in Note 2, the Company completed a Recapitalization in April which, among other things, settled all then-existing outstanding class B share-based awards and resulted in the elimination of the class B common stock. As a result, the Company accelerated vesting of all outstanding class B share based awards, resulting in accelerated share-based compensation of $331,000 in the three and six month periods ended June 30, 2018. All outstanding class B share based awards were then settled for the same stock to cash proportion of the class B common stock described in Note 2, less the exercise price, if any, which approximated the awards’ intrinsic value.

The Company’s 2001 Equity Incentive Plan provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of the Company's former class A common stock and 300,000 shares of the Company's former class B common stock. Stock options granted could have been either nonqualified or incentive stock options. Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant.

The Company’s 2004 Non-Employee Director Stock Plan, as amended (the “2004 Director Plan”), is a nonqualified plan that provides for the granting of options with respect to an aggregate of 3,000,000 shares of the Company's Common Stock and, prior to the Recapitalization, 500,000 shares of the Company's former class B common stock. The 2004 Director Plan provides for grants of nonqualified stock options to each director of the Company who is not employed by the Company. Beginning in 2018, on the date of each annual meeting of shareholders of the Company, options to purchase shares of Common Stock equal to an aggregate grant date fair value of $100,000 are granted to each non-employee director that is elected or retained as a director at such meeting. Stock options vest approximately one year following the date of grant and option terms are generally ten years following the date of grant, or three years in the case of termination of the outside director’s service.

The Company’s 2006 Equity Incentive Plan, as amended, provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of Common Stock and, prior to the Recapitalization, 300,000 shares of the Company’s former class B common stock. Stock options granted may be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant.

The Company granted options to purchase 116,276 shares of the Company’s Common Stock during the six-month period ended June 30, 2018. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of grant. The fair value of the stock options granted was estimated using a Black-Scholes valuation model with the following weighted average assumptions:

	2018		2017
	Common Stock (formerly Class A)		Class A		Class B
Expected dividend yield at date of grant		2.59%		2.62%		8.06%
Expected stock price volatility		32.47%		32.45%		26.75%
Risk-free interest rate		2.51%		2.18%		2.18%
Expected life of options (in years)		7.3		6.8		6.8

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The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s common stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the Company’s 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the six months ended June 30, 2018:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock (formerly Class A)
Outstanding at December 31, 2017		1,746,634		$	13.88
Granted		116,276		$	36.12
Exercised		(344,958	)	$	13.78			$	7,119
Forfeited		(21,383	)	$	26.18
Outstanding at June 30, 2018		1,496,569		$	15.46		5.24	$	32,838
Exercisable at June 30, 2018		1,104,429		$	13.29		4.22	$	26,631
Class B
Outstanding at December 31, 2017		276,716		$	31.78
Granted		--		$	--
Exercised/Settled in Recapitalization		(276,716	)	$	31.78			$	5,937
Forfeited		--		$	--
Outstanding at June 30, 2018		--		$	--		--	$	--
Exercisable at June 30, 2018		--		$	--		--	$	--

As of June 30, 2018 the total unrecognized compensation cost related to non-vested stock option awards was approximately $1.6 million and is expected to be recognized over a weighted average period of 3.05 years.

The following table summarizes information for the three months ended June 30, 2018, regarding non-vested stock granted to associates under the 2001 and 2006 Equity Incentive Plans:

	Common (formerly Class A) Shares Outstanding			Common (formerly Class A) Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding			Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2017		81,667		$	13.80		13,611		$	36.65
Granted		6,793			36.80		--			--
Vested/Settled in Recapitalization		--			--		(13,611	)		36.65
Forfeited		(10,289	)	$	15.23		--		$	--
Outstanding at June 30, 2018		78,171		$	15.56		--		$	--

As of June 30, 2018 the total unrecognized compensation cost related to non-vested stock awards was approximately $593,000 and is expected to be recognized over a weighted average period of 2.93 years.

 7. GOODWILL AND OTHER INTANGIBLE ASSETS

The following represents a summary of changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2018:

	(In thousands)
Balance as of December 31, 2017	$	58,021
Foreign currency translation		(108	)
Balance as of June 30, 2018	$	57,913

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Intangible assets consisted of the following:

	June 30, 2018			December 31, 2017
	(In thousands)
Non-amortizing other intangible assets:
Trade name	$	1,191		$	1,191
Amortizing other intangible assets:
Customer related		9,336			9,347
Technology		1,360			1,360
Trade name		1,572			1,572
Total other intangible assets		13,459			13,470
Accumulated amortization		(11,031	)		(10,706	)
Other intangible assets, net	$	2,428		$	2,764

8. PROPERTY AND EQUIPMENT

	June 30, 2018			December 31, 2017
	(In thousands)
Property and equipment	$	43,223		$	40,206
Accumulated depreciation		(29,903	)		(27,847	)
Property and equipment, net	$	13,320		$	12,359

 9. EARNINGS PER SHARE

Net income per share of the Company's former class A common stock and former class B common stock was computed using the two-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction were the same for the holders of the Company's former class A common stock and former class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of former class A common stock was equal to one-sixth (1/6th) of the amount of any such dividend or other distribution payable on each share of former class B common stock until the Recapitalization. As a result, the undistributed earnings for each period are allocated based on the contractual participation rights of the former class A and former class B common stock as if the earnings for the period had been distributed.

As described in Note 2, the Company completed a Recapitalization in April which settled all then-existing outstanding class B share-based awards, resulted in the elimination of the class B common stock and reclassified class A common stock to Common Stock. The Recapitalization was effective on April 17, 2018. Therefore, income was allocated between the former class A and class B common stock using the two-class method through April 16, 2018, and fully allocated to the Common Stock (formerly class A) following the Recapitalization.

For the three months ended June 30, 2017, 104,835 options of former class A shares have been excluded from the diluted net income per share computation because the exercise or grant price exceeded the fair market value. For the three months ended June 30, 2018, an additional 84,963 options of former class A shares, and for the three months ended June 30, 2017, an additional 17,473 options of former class B shares, were excluded as their inclusion would be anti-dilutive.

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	For the Three Months Ended June 30, 2018						For the Three Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	7,000		$	948		$	2,855		$	2,897
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(23	)		(4	)		(22	)		(22	)
Net income attributable to common shareholders	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Net income per share – basic	$	0.29		$	0.27		$	0.14		$	0.82
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Weighted average effect of dilutive securities – stock options		889			93			773			77
Denominator for diluted earnings per share – adjusted weighted average shares		24,846			3,620			21,525			3,591
Net income per share – diluted	$	0.28		$	0.26		$	0.13		$	0.80

For the six months ended June 30, 2017, the Company had 115,908 options of former class A shares and 19,318 options of former class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise or grant price exceeded the fair market value. For the six months ended June 30, 2018 and 2017, an additional 78,945 and 52,707 options of former class A shares, respectively, and for the six months ended June 30, 2017, an additional 38,784 options of former class B shares were excluded, as their inclusion would be anti-dilutive.

	For the Six Months Ended June 30, 2018						For the Six Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	10,630		$	4,624		$	6,088		$	6,184
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(38	)		(18	)		(48	)		(49	)
Net income attributable to common shareholders	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		22,429			3,527			20,745			3,514
Net income per share – basic	$	0.47		$	1.31		$	0.29		$	1.75
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - diluted:
Weighted average common shares outstanding – basic		22,429			3,527			20,745			3,514
Weighted average effect of dilutive securities – stock options		921			101			659			70
Denominator for diluted earnings per share – adjusted weighted average shares		23,350			3,628			21,404			3,584
Net income per share – diluted	$	0.45		$	1.27		$	0.28		$	1.71

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10.  RELATED PARTY

A director of the Company serves as an officer of Ameritas Life Insurance Corp. (“Ameritas”). In connection with the Company’s regular assessment of its insurance-based associate benefits, which is conducted by an independent insurance broker, and the costs associated therewith, the Company purchases dental and vision insurance for certain of its associates from Ameritas. The total value of these purchases was $53,000 and $62,000 for the three-month periods ended June 30, 2018 and 2017, respectively, and $94,000 and $120,000 for the six-month periods ended June 30, 2018 and 2017, respectively.

During 2017, the Company acquired a cost method investment in convertible preferred stock of Practicing Excellence.com, Inc., a privately-held Delaware corporation (“PX”), which is included in other non-current assets and is carried at cost, adjusted for changes resulting from observable price changes in orderly transactions of the same investment in PX, if any.  The Company also has an agreement with PX which commenced in 2016 under which the Company acts as a reseller of PX services and receives a portion of the revenues. The total revenue earned from the PX reseller agreement in the three-month periods ended June 30, 2018 and 2017, were $66,000 and $171,000, respectively, and in six-month periods ended June 30, 2018 and 2017, were $109,000 and $295,000, respectively.

11.  SEGMENT INFORMATION

The Company’s six operating segments are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria from the FASB guidance on segment disclosure. The six operating segments are Experience, The Governance Institute, Market Insights, Transparency, National Research Corporation Canada and Transitions, which offer a portfolio of solutions that address specific needs around market insight, experience, transparency and governance for healthcare providers, payers and other healthcare organizations. The table below presents entity-wide information regarding the Company’s assets, after elimination of intercompany balances by geographic area:

	June 30, 2018		December 31, 2017
Long-lived assets:
United States	$	76,871	$	72,562
Canada		2,381		2,495
Total	$	79,252	$	75,057
Total assets:
United States	$	97,101	$	110,785
Canada		5,784		16,531
Total	$	102,855	$	127,316

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company is 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. The Company’s solutions enable its clients to understand the voice of the customer with greater clarity, immediacy and depth. NRC Health’s heritage, proprietary methods, and holistic approach enable our partners to better understand the people they care for and design experiences that inspire loyalty and trust, while also facilitating regulatory compliance and the shift to population-based health management. The Company’s ability to measure what matters most and systematically capture, analyze and deliver insights based on self-reported information from patients, families and consumers is critical in today’s healthcare market. NRC Health believes that access to and analysis of its extensive consumer-driven information is becoming more valuable as healthcare providers increasingly need to more deeply understand and engage patients and consumers in an effort towards effective population-based health management.

The Company’s portfolio of subscription-based solutions provide actionable information and analysis to healthcare organizations and payers across a range of mission-critical, constituent-related elements, including patient experience and satisfaction, community population health risks, workforce engagement, community perceptions, and physician engagement. NRC Health partners with clients across the continuum of healthcare services. The Company’s clients range from integrated health systems and post-acute providers, such as home health, long term care and hospice, to numerous payer organizations. The Company believes this cross-continuum positioning is a unique and an increasingly important capability as evolving payment models drive healthcare providers and payers towards a more collaborative and integrated service model.

As described in Note 2, the Company completed a Recapitalization effective April 17, 2018. Pursuant to the Recapitalization, each share of the Company’s then-existing class B common stock was exchanged for one share of the Company’s then-existing class A common stock plus $19.59 in cash, without interest. All class B common stock were subsequently eliminated and the Company’s class A common stock was reclassified as Common Stock. The Company issued 3,617,615 shares of Common Stock and paid $72.4 million in exchange for all class B shares outstanding and to settle outstanding share based awards for class B common stock. In connection with the Recapitalization, the Company entered into a credit agreement with FNB as described in Note 5.

Results of Operations

The following table and graphs set forth, for the periods indicated, select financial information derived from the Company’s condensed consolidated financial statements expressed as a percentage of total revenue. The trends illustrated may not necessarily be indicative of future results. The discussion that follows the table should be read in conjunction with the condensed consolidated financial statements.

	Three months ended						Six months ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenue:		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Direct		39.3			42.0			40.5			41.6
Selling, general and administrative		28.3			24.3			26.8			23.2
Depreciation and amortization		4.7			4.0			4.4			3.8
Total operating expenses		72.3			70.3			71.7			68.6
Operating income		27.7	%		29.7	%		28.3	%		31.4	%

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Three Months Ended June 30, 2018, Compared to Three Months Ended June 30, 2017

Revenue. Revenue for the three-month period ended June 30, 2018, decreased 1.5% to $28.0 million, compared to $28.4 million in the three-month period ended June 30, 2017. This was primarily due to the adoption of ASC 606 and the timing of conferences, combined with minimal contract value growth.

Direct expenses. Direct expenses decreased 7.9% to $11.0 million for the three-month period ended June 30, 2018, compared to $11.9 million in the same period in 2017. This was primarily due to a decrease in variable expenses of $924,000. Variable expenses decreased due to less postage, printing and paper costs due to lower volumes and changes in survey methodologies, and less conference expenses due to timing of conferences held in comparison to the prior year. Direct expenses as a percentage of revenue were 39.3% in the three-month periods ended June 30, 2018 and 42.0% for the same period in 2017 as direct expenses decreased by 7.9% while revenue decreased by 1.5%.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 15.0% to $7.9 million for the three-month period ended June 30, 2018, compared to $6.9 million for the same period in 2017, primarily due to higher salaries and benefit costs of $708,000, including acceleration of shared based compensation expense from the vesting of restricted stock and settlement of stock options associated with the Recapitalization of $331,000, increased software and platform hosting expenses of $494,000, and costs associated with the Recapitalization of $305,000, partially offset by reduced marketing expenses of $140,000 and recruiting expenses of $128,000. Selling, general and administrative expenses as a percentage of revenue were 28.3% in the three-month periods ended June 30, 2018 and 24.3% for the same period in 2017 as selling, general and administrative expenses increased by 15% while revenues decreased by 1.5%.

Depreciation and amortization. Depreciation and amortization increased 16.4% to $1.3 million for the three-month period ended June 30, 2018, compared to $1.1 million for the same period in 2017 mainly due to increased amortization from additional computer software investments. Depreciation and amortization expenses as a percentage of revenue was 4.7% for the three-month period ended June 30, 2018, and 4.0% for the same period in 2017.

Other income (expense). Other income (expense) increased to $63,000 for the three-month period ended June 30, 2018, compared to $19,000 for the same period in 2017 primarily due to increased interest expense, offset by other income. Interest expense increased $416,000 due to interest related to the new Term Loan originated in April 2018. Other income increased $466,000 primarily due to revaluation on intercompany transactions due to changes in the foreign exchange rate.

Provision (benefit) for income taxes. Provision (benefit) for income taxes was $(129,000) ((1.7)% effective tax rate benefit) for the three-month period ended June 30, 2018, compared to $2.7 million (32.1% effective tax rate) for the same period in 2017. The effective tax rate for the three-month period ended June 30, 2018, was lower mainly due to income tax benefits from the Recapitalization, due to accelerated vesting of restricted stock and settlement of stock options of $1.1 million, and the reduction in the corporate tax rate from 35% to 21% due to the Tax Act that was enacted on December 22, 2017. In addition, the Company had increased tax benefits of $558,000 from the exercise of options and dividends paid to non-vested shareholders, partially offset by $70,000 additional tax expense from non-deductible Recapitalization expenses. 

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Six Months Ended June 30, 2018, Compared to Six Months Ended June 30, 2017

Revenue. Revenue for the six-month period ended June 30, 2018, increased 0.6% to $59.0 million, compared to $58.7 million in the six-month period ended June 30, 2017. The increase was due to new customer sales, as well as increases in sales to the existing client base.

Direct expenses. Direct expenses decreased 2.2% to $23.9 million for the six-month period ended June 30, 2018, compared to $24.4 million in the same period in 2017. This was due to a decrease in variable expenses of $921,000, partially offset by an increase in fixed expenses of $388,000. Variable expenses decreased mainly due to less postage, printing and paper costs due to lower volumes and changes in survey methodologies. Fixed expenses increased primarily as a result of increased salary and benefit costs in the customer service and information technology areas. Direct expenses decreased as a percentage of revenue to 40.5% in the six-month period ended June 30, 2018, compared to 41.6% during the same period of 2017 as expenses decreased by 2.2% while revenue for the same period increased by 0.6%.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 16.3% to $15.8 million for the six-month period ended June 30, 2018, compared to $13.6 million for the same period in 2017, primarily due to increased software and platform hosting expenses of $ 863,000, higher salary and benefit costs of $760,000, including acceleration of shared based compensation expense from the vesting of restricted stock and settlement of stock options associated with the Recapitalization of $331,000, legal and accounting expenses associated with the Recapitalization and adoption of ASC 606 of $688,000; partially offset by lower marketing expenses of $181,000 and recruiting expenses of $154,000. Selling, general, and administrative expenses increased as a percentage of revenue to 26.8% for the six-month period ended June 30, 2018, from 23.1% for the same period in 2017 as expenses increased by 16.3% while revenue for the same period increased by 0.6%.

Depreciation and amortization. Depreciation and amortization expenses increased to $2.6 million for the six-month period ended June 30, 2018, compared to $2.2 million for the same period in 2017 due to increased amortization from additional computer software investments. Depreciation and amortization expenses as a percentage of revenue was 4.4% for the six-month periods ended June 30, 2018 and 3.8% for the same period in 2017.

Other income (expense). Other income (expense) increased to $71,000 for the three-month period ended June 30, 2018, compared to $14,000 for the same period in 2017 primarily due to increased interest expense, offset by other income. Interest expense increased $397,000 due to interest related to the new Term Loan originated in April 2018. Other income increased $454,000 primarily due to revaluation on intercompany transactions due to changes in the foreign exchange rate.

Provision for income taxes. Provision for income taxes was $1.5 million (9.1% effective tax rate) for the six-month period ended June 30, 2018, compared to $6.2 million (33.5% effective tax rate) for the same period in 2017. The effective tax rate was lower mainly due to income tax benefits from the Recapitalization, due to accelerated vesting of restricted stock and settlement of stock options of $1.1 million, and the reduction in the corporate tax rate from 35% to 21% due to the Tax Act that was enacted on December 22, 2017. In addition, the Company had increased tax benefits of $908,000 from the exercise of options and dividends paid to non-vested shareholders, partially offset by $137,000 additional tax expense from non-deductible Recapitalization expenses.  

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 Liquidity and Capital Resources

The Company believes that its existing sources of liquidity, including cash and cash equivalents, borrowing availability under the Company’s existing Credit Facilities, and operating cash flows will be sufficient to meet its projected capital and debt maturity needs and the dividend policy for the foreseeable future.

As of June 30, 2018, our principal sources of liquidity included $6.7 million of cash and cash equivalents, up to $15 million of unused borrowings under our Line of Credit and up to $15 million available under our Delayed Draw Down Term Loan. The Delayed Draw Down Term Loan can only be used to fund permitted future business acquisitions or repurchasing the Company’s common stock. Of this cash, $1.1 million was held in Canada.

Working Capital

The Company had a working capital deficit of $9.1 million and a working capital surplus of $19.9 million on June 30, 2018 and December 31, 2017, respectively. The change was primarily due to decreases in cash and cash equivalents of $28.0 million and increases in current portion of notes payable of $2.5 million due to the Recapitalization (see Note 2). Trade accounts receivable also decreased by $4.1 million due to the timing of billings and collections on new and renewal contracts. These were partially offset by increases in prepaid expenses of $2.1 million and income taxes receivable of $1.2 million and decreases in accrued wages, bonus and profit sharing of $1.9 million. Accrued wages, bonus and profit sharing decreased due to the payment of 2017 annual bonuses in the three-month period ended March 31, 2018. Income taxes receivable changed due to the timing of income tax payments and prepaid expenses changed due to the timing of pre-payment for services. The Company’s working capital is significantly impacted by its large deferred revenue balances which will vary based on the timing and frequency of billings on annual agreements. The deferred revenue balances as of June 30, 2018 and December 31, 2017 were $16.7 million and $16.9 million, respectively.

Deferred revenue is recognized when we invoice clients in advance of performing the related services under the terms of a contract and is recognized as revenue when we have satisfied the related performance obligation. The Company typically invoices clients for performance tracking services and custom research projects before they have been completed. In addition, when work is performed in advance of billing, the Company records this work as unbilled revenue. Substantially all deferred revenue and all unbilled revenue will be earned and billed respectively, within 12 months of the respective period ends.

Cash Flow Analysis

A summary of operating, investing, and financing activities is shown in the following table:

	Six Months Ended June 30,
	2018			2017
	(In thousands)
Provided by operating activities	$	18,391		$	10,620
Used in investing activities		(2,773	)		(2,390	)
Used in financing activities		(43,058	)		(10,022	)
Effect of exchange rate change on cash		(595	)		399
Net change in cash and cash equivalents		(28,035	)		(1,393	)
Cash and cash equivalents at end of period	$	6,698		$	31,628

Cash Flows from Operating Activities

Cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred taxes, share-based compensation and related taxes, reserve for uncertain tax positions and the effect of working capital changes.

Net cash provided by operating activities was $18.4 million for the six months ended June 30, 2018, which included net income of $15.3 million, plus non-cash charges (benefits) for deferred income taxes, depreciation and amortization, reserve for uncertain tax positions, stock compensation and loss on disposal of property and equipment, totaling $4.6 million. Net changes in assets and liabilities decreased cash flows from operating activities by $1.5 million, primarily due to decreases in accrued wages, bonus and profit sharing, increases in prepaid expenses and other current assets and increases in income taxes receivable and payable which fluctuate with the timing of income tax payments partially offset by decreases in trade accounts receivable which fluctuate due to timing and frequency of billings on new and renewal contracts.

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Net cash provided by operating activities was $10.6 million for the six months ended June 30, 2017, which included net income of $12.3 million, plus non-cash charges (benefits) for deferred income taxes, depreciation and amortization, reserve for uncertain tax positions and stock compensation totaling $3.5 million. Changes in working capital decreased cash flows from operating activities by $5.1 million, primarily due to increases in trade accounts receivables, increases in prepaid expenses, and decreases in accrued expenses, wages, bonuses and profit sharing. These were partially offset by increases in deferred revenue, which fluctuate due to the timing and frequency of billings on new and renewal contracts, and increases in accounts payable due to timing of payments.

Cash Flows from Investing Activities

Net cash of $2.8 million and $2.4 million was used for investing activities in the six months ended June 30, 2018 and 2017, respectively. These expenditures consisted mainly of computer software classified in property and equipment. The Company expects similar capital expenditure purchases for the remainder of 2018 consisting primarily of computer software and hardware and other equipment to be funded through cash generated from operations.

Cash Flows from Financing Activities

Net cash used in financing activities was $43.1 million in the six months ended June 30, 2018. Cash was used for the Recapitalization of $72.4 million (see Note 2), to repay borrowings under the term notes totaling $1.3 million, to repay borrowings on the line of credit of $1.0 million, to pay loan origination fees on the Credit Agreement of $187,000 and for capital lease obligations of $58,000. Cash was also used to pay $8.4 million of dividends on common stock, and to pay payroll tax withholdings related to share-based compensation of $712,000. Cash was provided from proceeds of the new Term Loan of $40,000,000 and the new Line of Credit for $1,000,000.

Net cash used in financing activities was $10.0 million in the six months ended June 30, 2017. Cash was used to repay borrowings under the then-existing term note totaling $1.4 million and for capital lease obligations of $53,000. Cash was also used to pay $8.4 million of dividends on common stock, and to pay payroll tax withholdings related to share-based compensation of $105,000.

The effect of changes in foreign exchange rates (decreased) increased cash and cash equivalents by $(595,000) in the six months ended June 30, 2018 and $399,000 in the six months ended June 30, 2017.

Capital Expenditures

Cash paid for capital expenditures was $2.8 million for the three months ended June 30, 2018. These expenditures consisted mainly of computer software classified in property and equipment. The Company expects similar capital expenditure purchases for the remainder of 2018 consisting primarily of computer software and hardware and other equipment to be funded through cash generated from operations.

Debt and Equity

The balance on the Company’s former term note with US Bank was paid in full in March 2018.

On April 18, 2018, in connection with the Recapitalization, the Company entered into a credit agreement (the “Credit Agreement”) with FNB providing for (i) a $15,000,000 revolving credit facility (the “Line of Credit”), (ii) a $40,000,000 term loan (the “Term Loan”) and (iii) a $15,000,000 delayed draw-dawn term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”). The Company used the Term Loan to fund, in part, the cash portion paid to holders of the Company’s then-existing class B common stock in connection with the Recapitalization and the accompanying exchange of outstanding equity awards tied to the class B common stock, as well as for the costs of the Recapitalization. The Delayed Draw Term Loan may be used to fund any permitted future business acquisitions or repurchasing of the Company’s Common Stock and the Line of Credit will be used to fund ongoing working capital needs and other general corporate purposes, including to pay the fees and expenses incurred in connection with the Recapitalization and the Credit Agreement.

The Term Loan is payable in monthly installments of $462,988 through April 2020 and $526,362 thereafter, with a balloon payment due at maturity in April 2023. The Term Loan bears interest at a fixed rate of 5%.

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30 day London Interbank Offered Rate plus 225 basis points (4.24% at June 30, 2018). Interest on the Line of Credit accrues and is payable monthly. Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in April 2021. As of June 30, 2018, the Line of Credit did not have a balance. The weighted average borrowings on the Line of Credit for the three and six months ended June 30, 2018 was $385,000 and $193,000, respectively. The weighted average interest on borrowings on the Line of Credit for the three and six months ended June 30, 2018 was 4.16%.

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In the event that the Delayed Draw Term Loan is used, interest-only payments will be due through the calendar year in which the Delayed Draw Term Loan is drawn upon. After that, amortization will occur at the then current Term Loan rate and schedule with principal and accrued interest amounts outstanding under the Delayed Draw Term Loan due and payable monthly during the term of the Delayed Draw Term Loan, which expires on April 18, 2023.  There have been no borrowings on the Delayed Draw Term Loan since origination.

The Company paid a one-time fee equal to 0.25% of the amount borrowed under the Term Loan at the closing of the Credit Facilities. The Company is also obligated to pay ongoing unused commitment fees quarterly in arrears pursuant to the Line of Credit and the Delayed Draw Term Loan facility at a rate of 0.20% per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility, respectively.

All obligations under the Credit Facilities are to be guaranteed by each of the Company’s direct and indirect wholly owned domestic subsidiaries, if any, and, to the extent required by the Credit Agreement, direct and indirect wholly owned foreign subsidiaries (each, a “guarantor”).

The Credit Facilities are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of the Company’s and the guarantors’ present and future assets (including, without limitation, fee-owned real property, and limited, in the case of the equity interests of foreign subsidiaries, to 65% of the outstanding equity interests of such subsidiaries).

The Credit Agreement contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of the Company’s Common Stock and acquisitions, subject in each case to certain exceptions. The Credit Agreement also contains certain financial covenants with respect to minimum fixed charge coverage ratio and maximum cash flow leverage ratio. Pursuant to the Credit Agreement, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10x for all testing periods throughout the terms of the Credit Facilities. The Company is also required to maintain a cash flow leverage ratio of 3.00x or less for all testing periods throughout the terms of the Credit Facilities. As of June 30, 2018, the Company was in compliance with its financial covenants. 

The Company has capital leases for computer equipment, office equipment, printing and inserting equipment. The balance of the capital leases as of June 30, 2018 was $310,000.

Shareholders’ equity decreased $63.2 million to $26.8 million at June 30, 2018, from $90.0 million at December 31, 2017. The decrease was due to the effect of the Recapitalization of $72.4 million (see Note 2), dividends declared of $8.4 million, changes in the cumulative translation adjustment of $697,000 and share repurchases exceeding the cost of stock options exercised of $711,000. This was partially offset by net income of $15.3 million, revenue transition adjustments associated with adoption of ASC 606 of $2.7 million, and share-based compensation of $995,000, including accelerated share-based compensation expense due to the Recapitalization of $331,000.

27

Contractual Obligations

The Company had contractual obligations to make payments in the following amounts in the future as of June 30, 2018:

Contractual Obligations(1)	Total Payments		Remainder of 2018		One to Three Years		Three to Five Years		After Five Years
(In thousands)
Long-term debt	$	47,172	$	2,778	$	11,619	$	12,633	$	20,142
Operating leases	$	4,033	$	331	$	1,630	$	1,018	$	1,054
Capital leases		373		75		205		93		--
Uncertain tax positions(2)		--		--		--		--		--
Total	$	51,578	$	3,184	$	13,454	$	13,744	$	21,196

(1) Amounts are inclusive of interest payments, where applicable.

(2) We have $940,000 in liabilities associated with uncertain tax positions. We are unable to reasonably estimate the expected cash settlement dates of these uncertain tax positions with the taxing authorities.

Stock Repurchase Program

The Board of Directors of the Company authorized the repurchase of up to 2,250,000 then-existing class A shares and 375,000 then-existing class B shares of common stock in the open market or in privately negotiated transactions under a stock repurchase program that was originally approved in February 2006 and subsequently amended in May 2013. In connection with the Recapitalization in April 2018, the Board of Directors further amended the stock repurchase program to eliminate the repurchase of the former class B common stock. As of June 30, 2018, the remaining number of shares that could be purchased under this authorization was 280,491 shares of Common Stock. 

Critical Accounting Policies and Estimates

Except as set forth below in connection with the adoption of ASC 606, there have been no changes to the Company’s critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2017 that have a material impact on the Company’s Condensed Consolidated Financial Statements and the related Notes.

Revenue Recognition

The Company derives a majority of its revenue from annually renewable subscription-based service agreements with its customers. Refer to Note 1 to the accompanying Condensed Consolidated Financial Statements for a description of the Company’s revenue recognition policies.

The Company’s revenue arrangements with a client may include combinations of more than one service offering which may be executed at the same time, or within close proximity of one another. The Company combines contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated as a single performance obligation. For contracts that contain more than one separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin or residual approach. The Company estimates the total contract consideration it expects to receive for variable arrangements based on the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

The Company’s fixed, non-subscription arrangements typically require the Company to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch up adjustment which could impact the amount and timing of revenue for any period.

If management made different judgments and estimates, then the amount and timing of revenue for any period could differ from the reported revenue. 

28

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk exposure is changes in foreign currency exchange rates and interest rates.

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Foreign currency translation gains (losses) were $(283,000) and $381,000 in the three months ended June 30, 2018 and 2017, respectively, and $(698,000) and $499,000 in the six months ended June 30, 2018 and 2017, respectively. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. Total transaction gains (losses) included in other income (expense) were $630,000 and $32,000 in the three months ended June 30, 2018 and 2017, respectively, and $587,000 and $40,000 in the six months ended June 30, 2018 and 2017, respectively. A portion of our cash in our Canadian subsidiary is denominated in foreign currencies, where fluctuations in exchange rates will impact our cash balances in U.S. dollar terms. A sensitivity analysis assuming a hypothetical 10% change in the value of the U.S. dollar would impact our reported cash balance by approximately $147,000. Our Canadian subsidiary may also make intercompany loans to the U.S. parent.  As of June 30, 2018, the parent company had outstanding loans from our Canadian subsidiary of approximately $16.9 million (Canadian). We did not have any intercompany loans at December 31, 2017.

We have not entered into any foreign currency hedging transactions. We do not purchase or hold any derivative financial instruments for the purpose of speculation or arbitrage.

We are exposed to interest rate risk with both our fixed-rate Term Loan and variable rate Line of Credit. Interest rate changes for borrowings under our fixed-rate Term Loan would impact the fair value of such debt, but do not impact earnings or cash flow. At June 30, 2018, our fixed-rate Term Loan totaled $39.8 million. Based on a sensitivity analysis, a one percent change in market interest rates as of June 30, 2018, would change the estimated fair value of our fixed-rate Term Loan outstanding at June 30, 2018 by approximately $1.3 million.

 
Borrowings, if any, under our Line of Credit and Delayed Draw Down Term Loan bear interest at a variable annual rate. Borrowings under the Line of Credit and the Delayed Draw Down Term Loan may not exceed, in each case, $15.0 million. There were no borrowings outstanding under our Line of Credit or Delayed Draw Down Term Loan at June 30, 2018. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to the average daily borrowings and the maximum borrowings available under the revolving credit note indicated that such a movement would not have had a significant impact on our consolidated financial position, results of operations or cash flows.

ITEM 4. Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

On January 1, 2018, we adopted ASC 606 (see Note 1 to the Condensed Consolidated Financial Statements). We implemented internal controls to ensure we adequately evaluated our customer contracts and properly assessed the impact of the new accounting standard on our financial statements. We also implemented changes to our business processes related to revenue recognition and the control activities within them. The changes included training within business operations management, ongoing contract review and monitoring, and gathering of information for disclosures.

There have been no other changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

29

PART II – Other Information

ITEM 1. Legal Proceedings

See Note 1, under the heading "Contingencies", to the Company's condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors relating to the Company set forth in Part I, Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2017.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Board of Directors of the Company authorized the repurchase of up to 2,250,000 then-existing class A shares and 375,000 then-existing class B shares of common stock in the open market or in privately negotiated transactions under a stock repurchase program that was originally approved in February 2006 and subsequently amended in May 2013. In connection with the Recapitalization in April 2018, the Board of Directors further amended the stock repurchase program to eliminate the repurchase of the former class B common stock.  Unless terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized for repurchase thereunder. As of July 27, 2018, 1,969,509 shares of Common Stock (formerly class A) have been repurchased under that authorization. No stock was repurchased under the program during the three-month period ended June 30, 2018.

30

ITEM 6. Exhibits

The exhibits listed in the exhibit index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX  

(31.1) Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.

(31.2) Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.

(32) Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

(101)* Financial statements from the Quarterly Report on Form 10-Q of National Research Corporation for the quarter ended June 30, 2018, formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Shareholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, (vi) the Notes to Condensed Consolidated Financial Statements, and (vii) document and entity information.

* In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

31

SIGNATURES

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 thereunto duly authorized.

	NATIONAL RESEARCH CORPORATION
Date: August 9, 2018	By:	/s/ Michael D. Hays
		Michael D. Hays
		Chief Executive Officer (Principal Executive Officer)
Date: August 9, 2018	By:	/s/ Kevin R. Karas
		Kevin R. Karas Senior Vice President Finance, Treasurer, Secretary and Chief Financial Officer (Principal Financial and Accounting Officer)

32

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, Michael D. Hays, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of National Research Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018 /s/ Michael D. Hays                            Michael D. Hays Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, Kevin R. Karas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of National Research Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018 /s/ Kevin R. Karas                                        Kevin R. Karas Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the accompanying Quarterly Report on Form 10-Q of National Research Corporation (the “Company”) for the three-month period ended June 30, 2018 (the “Report”), I, Michael D. Hays, Chief Executive Officer of the Company, and I, Kevin R. Karas, Chief Financial Officer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, based on my knowledge, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael D. Hays                                            

Michael D. Hays

Chief Executive Officer

/s/ Kevin R. Karas                                               

Kevin R. Karas

Chief Financial Officer

Date: August 9, 2018                                                       

A signed original of this written statement required by Section 906 has been provided to National Research Corporation and will be retained by National Research Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 27, 2018
Document Information [Line Items]
Entity Registrant Name	National Research Corporation
Entity Central Index Key	0000070487
Trading Symbol	nrc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		24,738,983
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 6,698	$ 34,733
Trade accounts receivable, less allowance for doubtful accounts of $219 and $200, respectively	10,689	14,806
Prepaid expenses	4,408	2,310
Income taxes receivable	1,713	375
Other current assets	125	35
Total current assets	23,633	52,259
Net property and equipment	13,320	12,359
Intangible assets, net	2,428	2,764
Goodwill	57,913	58,021
Deferred contract costs	3,369
Other	2,222	1,913
Total assets	102,885	127,316
Current liabilities:
Current portion of notes payable	3,575	1,067
Accounts payable	1,362	593
Accrued wages, bonus and profit sharing	4,669	6,597
Accrued expenses	2,261	2,882
Current portion of capital lease obligations	87	71
Income taxes payable	97
Dividends payable	4,206	4,222
Deferred revenue	16,660	16,878
Total current liabilities	32,917	32,310
Notes payable, net of current portion	36,029
Deferred income taxes	5,808	4,030
Other long term liabilities	1,314	935
Total liabilities	76,068	37,275
Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued	0	0
Common stock, value	30	26
Additional paid-in capital	155,614	51,025
Retained earnings (accumulated deficit)	(99,810)	77,574
Accumulated other comprehensive (loss) income	(2,333)	(1,635)
Treasury stock, at cost; 5,055,324 Common (formerly Class A) shares in 2018 and 4,898,527 in 2017 and 784,018 Class B shares in 2017	(26,684)	(36,953)
Total stockholders’ equity	26,817	90,041
Total liabilities and shareholders’ equity	102,885	127,316
Common Class B [Member]
Shareholders’ equity:
Common stock, value		$ 4

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Allowance for doubtful accounts	$ 219	$ 200
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	60,000,000	60,000,000
Common stock, shares issued (in shares)	29,794,307	25,835,230
Common stock, shares outstanding (in shares)	24,783,983	20,936,703
Treasury stock, shares (in shares)	5,055,324	4,898,527
Common Class B [Member]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares issued (in shares)	0	4,319,256
Common stock, shares outstanding (in shares)	0	3,535,238
Treasury stock, shares (in shares)		784,018

XML

Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue	$ 28,017	$ 28,435	$ 59,034	$ 58,710
Operating expenses:
Direct	10,996	11,939	23,904	24,439
Selling, general and administrative	7,940	6,905	15,808	13,591
Depreciation and amortization	1,325	1,139	2,608	2,244
Total operating expenses	20,261	19,983	42,320	40,274
Operating income	7,756	8,452	16,714	18,436
Other income (expense):
Interest income	9	15	54	29
Interest expense	(439)	(23)	(447)	(50)
Other, net	493	27	464	35
Total other income (expense)	63	19	71	14
Income before income taxes	7,819	8,471	16,785	18,450
Provision (benefit) for income taxes	(129)	2,719	1,531	6,178
Net income	7,948	5,752	15,254	12,272
Common Class A [Member]
Other income (expense):
Net income	$ 7,000	$ 2,855	$ 10,630	$ 6,088
Denominator for net income per share - basic:
Basic earnings per share (in dollars per share)	$ 0.29	$ 0.14	$ 0.47	$ 0.29
Numerator for net income per share - diluted:
Diluted earnings per share (in dollars per share)	0.28	0.13	0.45	0.28
Dividends Per Share of Common Stock:
Dividends per share (in dollars per share)	$ 0.17	$ 0.10	$ 0.27	$ 0.20
Weighted average shares and share equivalents outstanding:
Weighted average shares and share equivalents outstanding, basic (in shares)	23,957	20,752	22,429	20,745
Weighted average shares and share equivalents outstanding, diluted (in shares)	24,846	21,525	23,350	21,404
Common Class B [Member]
Other income (expense):
Net income	$ 948	$ 2,897	$ 4,624	$ 6,184
Denominator for net income per share - basic:
Basic earnings per share (in dollars per share)	$ 0.27	$ 0.82	$ 1.31	$ 1.75
Numerator for net income per share - diluted:
Diluted earnings per share (in dollars per share)	0.26	0.80	1.27	1.71
Dividends Per Share of Common Stock:
Dividends per share (in dollars per share)		$ 0.60	$ 0.60	$ 1.20
Weighted average shares and share equivalents outstanding:
Weighted average shares and share equivalents outstanding, basic (in shares)	3,527	3,514	3,527	3,514
Weighted average shares and share equivalents outstanding, diluted (in shares)	3,620	3,591	3,628	3,584

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income	$ 7,948	$ 5,752	$ 15,254	$ 12,272
Other comprehensive income:
Other comprehensive income, foreign currency translation adjustment	(283)	381	(698)	499
Other comprehensive income	(283)	381	(698)	499
Comprehensive Income	$ 7,665	$ 6,133	$ 14,556	$ 12,771

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($) $ in Thousands	Common Stock [Member] Common Class B [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Common Class B [Member]	Total
Balances at Dec. 31, 2017	$ 4	$ 26	$ 51,025	$ 77,574	$ (1,635)	$ (36,953)		$ 90,041
Purchase of 156,797 shares of class A and 3,677 shares of class B treasury stock						(5,630)		(5,630)
Issuance of 344,958 class A common shares and 9,296 class B common shares for the exercise of stock options			4,919					4,919
Issuance of restricted common shares, net of forfeitures (3,496 class A shares)
Non-cash stock compensation expense			995					995
Settlement of restricted common shares and stock options in connection with Recapitalization for cash of $3,271 and 90,369 class A common shares			(2,548)			(723)		(3,271)
Settlement of class B common shares in connection with Recapitalization (3,527,246 class B common shares exchanged for $69,099 cash and 3,527,246 class A common shares)		4	118,335			(187,438)		(69,099)
Retirement of class B common shares in connection with Recapitalization (retirement of 4,328,552 class B common shares)	(4)		(17,112)	(186,944)		204,060
Dividends declared of $0.27 and $0.60 per A and B common share, respectively				(8,429)				(8,429)
Other comprehensive income, foreign currency translation adjustment					(698)			(698)
Net income				15,254			$ 4,624	15,254
Balances at Jun. 30, 2018		30	155,614	(99,810)	(2,333)	(26,684)		26,817
Cumulative effect adjustment for adoption of ASC 606 | Accounting Standards Update 2014-09 [Member]				$ 2,735				$ 2,735

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals)	6 Months Ended
	Jun. 30, 2018 USD ($) $ / shares shares
Common Stock [Member] | Common Class B [Member]
Shares of treasury stock purchased (in shares)	3,677
Shares of common stock issued for the exercise of stock options (in shares)	9,296
Settlement of class B common shares in connection with recapitalization, shares exchanged (in shares)	3,527,246
Retirement of class B common shares in connection with recapitalization, shares retired | $	$ 4,328,552
Dividends declared per common share (in dollars per share) | $ / shares	$ 0.60
Common Stock [Member]
Shares of treasury stock purchased (in shares)	156,797
Shares of common stock issued for the exercise of stock options (in shares)	344,958
Issuance of restricted common shares, net of forfeitures (in shares)	3,496
Settlement of restricted common shares and stock options in connection with recapitalization, shares (in shares)	90,369
Settlement of class B common shares in connection with recapitalization, shares issued (in shares)	3,527,246
Dividends declared per common share (in dollars per share) | $ / shares	$ 0.27
Shares of common stock issued for the exercise of stock options (in shares)	276,716

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net income	$ 15,254	$ 12,272
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,608	2,244
Deferred income taxes	996	386
Reserve for uncertain tax positions	92	73
Non-cash share-based compensation expense	995	792
Impairment of property and equipment	2
Net changes in assets and liabilities:
Trade accounts receivable and unbilled revenue	3,955	(2,299)
Prepaid expenses and other current assets	(2,393)	(1,696)
Deferred contract costs, net	2
Accounts payable	481	222
Accrued expenses, wages, bonuses and profit sharing	(2,371)	(750)
Income taxes receivable and payable	(1,235)	(1,818)
Deferred revenue	5	1,194
Net cash provided by operating activities	18,391	10,620
Cash flows from investing activities:
Purchases of property and equipment	(2,773)	(2,390)
Net cash used in investing activities	(2,773)	(2,390)
Cash flows from financing activities:
Payments related to Recapitalization	(72,370)
Proceeds from issuance of note payable	40,000
Borrowings on line of credit	1,000
Payments on line of credit	(1,000)
Payment of debt issuance costs	(187)
Payments on notes payable	(1,286)	(1,433)
Payments on capital lease obligations	(58)	(53)
Payment of employee payroll tax withholdings on share-based awards exercised	(712)	(105)
Payment of dividends on common stock	(8,445)	(8,431)
Net cash used in financing activities	(43,058)	(10,022)
Effect of exchange rate changes on cash	(595)	399
Change in cash and cash equivalents	(28,035)	(1,393)
Cash and cash equivalents at beginning of period	34,733	33,021
Cash and cash equivalents at end of period	6,698	31,628
Supplemental disclosure of cash paid for:
Interest, net of capitalized amounts	256	44
Income taxes	1,703	7,539
Supplemental disclosure of non-cash investing and financing activities:
Common stock (formerly class A) issued in the Recapitalization in exchange for then-existing class B shares and options.	121,371
Capital lease obligations originated for property and equipment	210	64
Stock tendered to the Company for cashless exercise of stock options in connection with equity incentive plans	$ 4,919	$ 2,101

XML

Note 1 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and basis of presentation

National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), is 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. The Company’s solutions enable its clients to understand the voice of the customer with greater clarity, immediacy and depth.

The Company’s

six

operating segments are aggregated into

one

reporting segment because they have similar economic characteristics and meet the other aggregation criteria from the Financial Accounting Standards Board (“FASB”) guidance on segment disclosure. The

six

operating segments are Experience, The Governance Institute, Market Insights, Transparency, NRC Health Canada and Transitions (formerly Connect), which offer a portfolio of solutions that address specific needs around market insight, experience, transparency and governance for healthcare providers, payers and other healthcare organizations.

The condensed consolidated balance sheet of the Company at

December 31, 2017,

was derived from the Company’s audited consolidated balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) the Company considers necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

Information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in the Company’s Form

10

-K for the year ended

December 31, 2017,

filed with the Securities and Exchange Commission (the “SEC”) on

March 14, 2018.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, National Research Corporation Canada, doing business as NRC Health Canada. All significant intercompany transactions and balances have been eliminated.

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the country in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. 

Revenue Recognition

On

January 1, 2018,

the Company adopted Accounting Standards Update (“ASU”)

2014

-

09,

Revenue- Revenue from Contracts with Customers

and all related amendments (“ASC

606”

or “new revenue standard”) using the modified retrospective method for all incomplete contracts as of the date of adoption. The Company applied the practical expedient to reflect the total of all contract modifications occurring before

January 1, 2018

in the transaction price and performance obligations at transition rather than accounting for each modification separately. Results for reporting periods beginning on or after

January 1, 2018

are presented under ASC

606,

while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. As discussed in more detail below and under “Deferred Contract Costs”, the largest impact of implementing the new revenue standard was the deferral and amortization of direct and incremental costs of obtaining contracts. In addition, there were other revisions to the revenue recognition primarily related to performance obligation determinations and estimating variable consideration. The Company recorded a transition adjustment of approximately

$2.7

million, net of

$814,000

of tax, to the opening balance of retained earnings.

The Company derives a majority of its revenues from its annually renewable subscription-based service agreements with its customers, which include performance measurement and improvement services, healthcare analytics and governance education services. Such agreements are generally cancelable on short or

no

notice without penalty. See Note

3

for further information about the Company's contracts with customers. Under ASC

606,

the Company accounts for revenue using the following steps:

● Identify the contract, or contracts, with a customer

● Identify the performance obligations in the contract

● Determine the transaction price

● Allocate the transaction price to the identified performance obligations

● Recognize revenue when, or as, the Company satisfies the performance obligations.

The Company’s revenue arrangements with a client

may

include combinations of more than

one

service offering which

may

be executed at the same time, or within close proximity of

one

another. The Company combines contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated as a single performance obligation. For contracts that contain more than

one

separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin or residual approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements based on the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

Prior to

2018,

total contract consideration was allocated to each separate unit of accounting that was separately sold by the Company or a competitor, based on relative selling price using a selling price hierarchy: vendor-specific objective evidence (“VSOE”), if available,

third

-party evidence (“TPE”) if VSOE was

not

available, or estimated selling price if VSOE nor TPE was available. VSOE was established based on the services normal selling prices and discounts for the specific services when sold separately. TPE was established by evaluating similar competitor services in standalone arrangements. If neither existed for a deliverable, the best estimate of the selling price (“ESP”) was used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element was limited to revenue that was

not

subject to refund or otherwise represented contingent revenue.

The Company’s arrangements with customers consist principally of

four

different types of arrangements:

1

) subscription-based service agreements;

2

)

one

-time specified services performed at a single point in time;

3

) fixed, non-subscription service agreements; and

4

) unit-priced service agreements.

Subscription-based services -

Services that are provided under subscription-based service agreements are usually for a

twelve

month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the customer. These agreements are renewable at the option of the customer at the completion of the initial contract term for an agreed upon price increase each year. These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period. Accordingly, subscription services are recognized ratably over the subscription period. Subscription services are typically billed annually in advance, but

may

also be billed on a quarterly and monthly basis.

One-time services –

These agreements typically require the Company to perform a specific

one

-time service in a particular month. The Company is entitled to fixed payment upon completion of the service. Under these arrangements, the Company recognizes revenue at the point in time the service is completed by the Company and accepted by the customer.

Fixed, non-subscription services –

These arrangements typically require the Company to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch up adjustment which could impact the amount and timing of revenue for any period. Prior to

2018,

these arrangements were recognized under the proportional performance method based on cost inputs, output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting.

Unit-price services –

These arrangements typically require the Company to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service. Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but

not

invoiced to the clients. Unbilled receivables are classified as receivables when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

The following tables summarize the impact the adoption of ASC

606

had on the Company’s consolidated financial statements (in thousands, except per share data):

Consolidated balance sheet:

	As reported June 30, 2018			Adjustments			Balances without Adoption of ASC 606
Accounts receivable, net	$	10,689		$	5		$	10,694
Other current assets		125			(72	)		53
All other current assets		12,819			--			12,819
Total current assets		23,633			(67	)		23,566
Deferred contract costs		3,369			(3,369	)		--
All other noncurrent assets		75,883			--			75,883
Total assets	$	102,885		$	(3,436	)	$	99,449
Deferred revenue	$	16,660		$	61		$	16,721
Other current liabilities		16,257			--			16,257
Total current liabilities		32,917			61			32,978
Deferred income taxes		5,808			(802	)		5,006
Other long term liabilities		37,343			--			37,343
Total liabilities		76,068			(741	)		75,327
Retained earnings		(99,810	)		(2,697	)		(102,507	)
Accumulated other comprehensive income		(2,333	)		2			(2,331	)
Other stockholders’ equity		128,960			--			128,960
Total stockholders’ equity		26,817			(2,695	)		24,122
Total liabilities and stockholders’ equity	$	102,885		$	(3,436	)	$	99,449

Consolidated statement of income:

	Three months ended June 30, 2018									Six months ended June 30, 2018
	As reported			Adjustments			Balances Without Adoption of ASC 606			As reported		Adjustments			Balances Without Adoption of ASC 606
Revenue	$	28,017		$	120		$	28,137		$	59,034	$	48		$	59,082
Direct expenses		10,996			(28	)		10,968			23,904		(59	)		23,845
Selling, general and administrative		7,940			(173	)		7,767			15,808		57			15,865
Depreciation and amortization		1,325			--			1,325			2,608		--			2,608
Total operating expenses		20,261			(201	)		20,060			42,320		(2	)		42,318
Operating income		7,756			321			8,077			16,714		50			16,764
Other income (expense)		63			--			63			71		--			71
Income before income taxes		7,819			321			8,140			16,785		50			16,835
Provision (benefit) for income taxes		(129	)		74			(55	)		1,531		12			1,543
Net income	$	7,948		$	247		$	8,195		$	15,254	$	38		$	15,292
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.29		$	0.01		$	0.30		$	0.47	$	--		$	0.47
Class B		0.27			--			0.27			1.31		--			1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.28		$	0.01		$	0.29		$	0.45	$	--		$	0.45
Class B		0.26			0.01			0.27			1.27		0.01			1.28

Consolidated statement of comprehensive income:

	Three months ended June 30, 2018								Six months ended June 30, 2018
	As reported			Adjustments		Balances without adoption of ASC 606			As reported			Adjustments		Balances without adoption of ASC 606
Net Income	$	7,948		$	247	$	8,195		$	15,254		$	38	$	15,292
Cumulative translation adjustment		(283	)		4		(279	)		(698	)		2		(696	)
Comprehensive Income	$	7,665		$	251	$	7,916		$	14,556		$	40	$	14,596

Consolidated statement of cash flows:

	Six months ended June 30, 2018
	As reported			Adjustments			Balances without adoption of ASC 606
Cash flows from operating activities:
Net income	$	15,254		$	38		$	15,292
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,608			--			2,608
Deferred income taxes		996			12			1,008
Reserve for uncertain tax positions		92			--			92
Non-cash share-based compensation expense		995			--			995
Impairment of property and equipment		2			--			2
Change in assets and liabilities:
Trade accounts receivable and unbilled revenue		3,955			128			4,083
Prepaid expenses and other current assets		(2,393	)		(2	)		(2,395	)
Deferred contract costs		2			(2	)		--
Accounts payable		481			--			481
Accrued expenses, wages, bonus and profit sharing		(2,371	)		--			(2,371	)
Income taxes receivable and payable		(1,235	)		--			(1,235	)
Deferred revenue		5			(176	)		(171	)
Net cash provided by operating activities		18,391			(2	)		18,389
Net cash used in investing activities		(2,773	)		--			(2,773	)
Net cash used in financing activities		(43,058	)		--			(43,058	)
Effect of exchange rate changes on cash		(595	)		2			(593	)
Change in cash and cash equivalents		(28,035	)		--			(28,035	)
Cash and cash equivalents at beginning of period		34,733			--			34,733
Cash and cash equivalents at end of period	$	6,698			--		$	6,698

Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. Beginning

January 1, 2018,

with the adoption of the new revenue standard, the Company defers commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable customer contract. Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from

three

to

five

years. The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract.  An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration the Company expects to receive less than the expected future costs directly related to providing those services.  The Company deferred incremental costs of obtaining a contract of

$445,000

and

$1,272,000

in the

three

and

six

months ended

June 30, 2018,

respectively. Total amortization was 

$639,000

and

$1,254,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Amortization of deferred contract costs included in direct expenses was 

$29,000

and

$59,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Amortization of deferred contract costs included in selling, general and administrative expenses was 

$610,000

and

$1,195,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was

$7,000

and

$19,000

in the

three

and

six

months ended

June 30, 2018,

respectively. The Company has elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of

one

year or less. Prior to

2018,

all commissions and incentives were expensed as incurred. The Company recorded a transition adjustment on

January 1, 2018

as an increase to retained earnings of

$2.6

million, net of

$776,000

of tax, to reflect

$3.4

million of commissions and incentives related to contracts that began prior to

2018,

net of accumulated amortization.

Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (

1

) Level

1

Inputs—quoted prices in active markets for identical assets and liabilities; (

2

) Level

2

Inputs—observable market-based inputs other than Level

1

inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are

not

active, or other inputs that are observable or can be corroborated by observable market data; and (

3

) Level

3

Inputs—unobservable inputs.

Commercial paper and Eurodollar deposits are included in cash equivalents and are valued at amortized cost, which approximates fair value due to their short-term nature. Eurodollar deposits are United States dollars deposited in a foreign bank branch of a United States bank and have daily liquidity. Both of these are included as a Level

2

measurement in the table below.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at

June 30, 2018

and

December 31, 2017: 

Fair Values Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of June 30, 2018
Money Market Funds	$	767	$	--	$	--	$	767
Total	$	767	$	--	$	--	$	767
As of December 31, 2017
Money Market Funds	$	13,971	$	--	$	--	$	13,971
Commercial Paper		--		10,490		--		10,490
Eurodollar Deposits		--		10,017		--		10,017
Total	$	13,971	$	20,507	$	--	$	34,478

There were

no

transfers between levels during the

three

month period ended

June 30, 2018.

The Company's long-term debt is recorded at historical cost. The fair value of long-term debt is classified in Level

2

of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	June 30, 2018		December 31, 2017
	(In thousands)
Total carrying amount of long-term debt	$	39,781	$	1,067
Estimated fair value of long-term debt	$	39,813	$	1,066

The Company believes that the carrying amounts of trade accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short maturity of those instruments. Long-lived assets that are

not

recognized or disclosed at fair value in the financial statements on a recurring basis, which includes property and equipment, goodwill, intangibles, and cost method investments are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of

June 30, 2018,

and

December 31, 2017,

there was

no

indication of impairment related to these assets.

Contingencies

From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.

Since the

September 2017

announcement of the original proposed recapitalization plan (“Original Transaction”) (see Note

2

),

three

purported class action and/or derivative complaints have been filed in state or federal courts by

three

individuals claiming to be shareholders of the Company. All of the complaints name as defendants the Company and the individual directors of the Company. Two of these lawsuits were filed in the United States District Court for the District of Nebraska— a putative class action lawsuit captioned

Gennaro v. National Research Corporation, et al

., which was filed on

November 15, 2017,

and a putative class and derivative action lawsuit captioned

Gerson v. Hays, et al

., which was filed on

November 16, 2017.

These lawsuits were consolidated by order of the federal court under the caption

In re National Research Corporation Shareholder Litigation

. A

third

lawsuit was filed in the Circuit Court for Milwaukee County, Wisconsin—a putative class action lawsuit captioned

Apfel v. Hays, et al

., which was filed on

December 1, 2017.

The allegations in all of the lawsuits were very similar. The plaintiffs alleged, among other things, that the defendants breached their fiduciary duties in connection with the allegedly unfair proposed transaction, at an allegedly unfair price, conducted in an allegedly unfair and conflicted process and in alleged violation of Wisconsin law and the Company’s Articles of Incorporation. The plaintiffs in these lawsuits sought, among other things, an injunction enjoining the defendants from consummating the Original Transaction, damages, equitable relief and an award of attorneys’ fees and costs of litigation. After the announcement of a revised proposed recapitalization plan (the “Recapitalization”), the plaintiffs abandoned their efforts to enjoin the transaction. However, the plaintiffs in

In re National Research Corporation Shareholder Litigation

in Nebraska filed an Amended Complaint on

March 23, 2018

seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and alleged omission of material facts in the proxy statement relating to the Recapitalization. The plaintiffs in the

Apfel

case in Wisconsin filed an amended complaint on

April 4, 2018

seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and the Recapitalization. The Company and its directors will defend themselves against these lawsuits vigorously, and have moved to dismiss both lawsuits. These motions are pending. As of

June 30, 2018,

no

losses have been accrued as the Company does

not

believe the losses are probable or estimable.

Recent Accounting Pronouncements

Not

Yet Adopted

In

January 2016,

the FASB issued ASU

2016

-

01,

Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU

2016

-

01

changes certain recognition, measurement, presentation and disclosure aspects related to financial instruments. ASU

2016

-

01

is effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is

not

permitted. The Company believes its adoption will

not

significantly impact the Company’s results of operations and financial position. 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than

twelve

months on its balance sheet. This ASU is effective in fiscal years beginning after

December 15, 2018,

with early adoption permitted, and requires a modified retrospective transition method. As of

June 30, 2018,

the Company had approximately

$4.0

million of operating lease commitments which would be recorded on the balance sheet under the new guidance. However, the Company is currently in the process of further evaluating the impact that this new guidance will have on its consolidated financial statements and does

not

plan to elect early adoption. The Company expects to utilize the optional practical expedients to

not

reassess whether expired or existing contracts contain leases,

not

reassess the lease classification for expired or existing leases and reassess initial direct costs for existing leases.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

):  Measurement of Credit Losses on Financial Instruments.  This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after

December 15, 2019

and interim periods within those fiscal years. The Company believes its adoption will

not

significantly impact the Company’s results of operations and financial position.  

XML

Note 2 - Recapitalization

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Recapitalization [Text Block]

2. RECAPITALIZATION

On

April 16, 2018,

the shareholders of the Company approved, among other things, an amendment to the Company’s Amended and Restated Articles of Incorporation (the "Articles") to effect the Recapitalization pursuant to which each share of the Company’s then-existing class B common stock was exchanged for

one

share of the Company’s then-existing class A common stock plus

$19.59

in cash, without interest. On

April 17, 2018,

the Company filed an amendment to its Articles effecting the Recapitalization and then a further amendment and restatement of the Company’s Articles which resulted in the elimination of the Company’s class B common stock and the reclassification of the Company’s class A common stock as a share of Common Stock, par value

$0.001

per share (“Common Stock”). The Company issued

3,617,615

shares of Common Stock and paid

$72.4

million in exchange for all class B shares outstanding and to settle outstanding share based awards for class B common stock. The Common Stock continues to trade on The NASDAQ Global Market under the revised symbol “NRC.”

In connection with the Recapitalization, on

April 18, 2018,

the Company entered into a credit agreement with First National Bank of Omaha, a national banking association (“FNB”), as described in Note

5.

XML

Note 3 - Contracts With Customers

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. CONTRACTS WITH CUSTOMERS

The following table disaggregates revenue for the

three

and

six

month periods ending

June 30, 2018

based on timing of revenue recognition (In thousands):

	Three months ended June 30, 2018		Six months ended June 30, 2018
Subscription services recognized ratably over time	$	25,653	$	51,441
Services recognized at a point in time		157		1,902
Fixed, non-subscription recognized over time		487		1,779
Unit price services, recognized over time		1,720		3,912
Total revenue	$	28,017	$	59,034

 The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (In thousands):

	June 30, 2018			Balance at 1/1/2018 as adjusted (1)
Accounts receivables	$	10,689		$	14,674
Contract assets included in other current assets	$	72		$	74
Deferred Revenue	$	(16,660	)	$	(16,642	)

( 1 ) Represents the December 31, 2017 balance adjusted for the ASC 606 transition adjustments.

Significant changes in contract assets and contract liabilities during

2018

are as follows (in thousands):

	Three months ended June 30, 2018						Six months ended June 30, 2018
	Contract Asset			Deferred Revenue			Contract Asset			Deferred Revenue
							Increase (Decrease)
Revenue recognized that was included in deferred revenue at beginning of year due to completion of services	$	-		$	(7,733	)	$	-		$	(13,577	)
Increases due to invoicing of client, net of amounts recognized as revenue		-			7,558			-			13,796
Decreases due to completion of services (or portion of services) and transferred to accounts receivable		(41	)		-			(58	)		-
Change due to cumulative catch-up adjustments arising from changes in expected contract consideration					(84	)					(153	)
Decreases due to impairment		-			-			-			-
Increases due to revenue recognized in the period with additional performance obligations before invoicing		25			-			56			-

The Company has elected to apply the practical expedient to

not

disclose the value of unsatisfied performance obligations for contracts with an original expected length of

one

year or less. Total remaining contract revenue for contracts with original duration of greater than

one

year expected to be recognized in the future related to performance obligations that are unsatisfied at

June 30, 2018

approximated

$678,000,

of which

$341,000,

$284,000

and

$53,000

will be recognized during the remainder of

2018,

2019

and

2020,

respectively.

XML

Note 4 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

4. INCOME TAXES

The effective tax rate for the

three

-month period ended

June 30, 2018

decreased to (

1.7

)% compared to

32.1%

for the same period in

2017

mainly due to income tax benefits from the Recapitalization, due to accelerated vesting of restricted stock and settlement of options of

$1.1

million, and the reduction in the corporate tax rate from

35%

to

21%

due to the Tax Act that was enacted on

December 22, 2017.

In addition, the Company had increased tax benefits of

$558,000

from the exercise of options and dividends paid to non-vested shareholders partially offset by

$70,000

additional tax expense from non-deductible Recapitalization expenses.  The effective tax rate for the

six

-month period ended

June 30, 2018

decreased to

9.1%

compared to

33.5%

for the same period in

2017.

The effective tax rate was lower mainly due to income tax benefits from the Recapitalization and the reduction in the corporate tax rate from

35%

to

21%

due to the Tax Act. In addition, the Company had increased tax benefits of

$908,000

from the exercise of options and dividends paid to non-vested shareholders partially offset by

$137,000

additional tax expense from non-deductible Recapitalization expenses.  

XML

Note 5 - Notes Payable

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

5. NOTES PAYABLE

The Company’s long term debt consists of the following:

	June 30, 2018			December 31, 2017
Term Loans	$	39,781		$	1,067
Less: current portion		(3,575	)		(1,067	)
Less: unamortized debt issuance costs		(177	)		—
Notes payable, net of current portion	$	36,029		$	—

The balance on the Company’s former term note with US Bank was paid in full in

March 2018.

On

April 18, 2018,

in connection with the Recapitalization, the Company entered into a credit agreement (the “Credit Agreement”) with FNB providing for (i) a

$15,000,000

revolving credit facility (the “Line of Credit”), (ii) a

$40,000,000

term loan (the “Term Loan”) and (iii) a

$15,000,000

delayed draw-dawn term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”). The Company used the Term Loan to fund, in part, the cash portion paid to holders of the Company’s then-existing class B common stock in connection with the Recapitalization and the accompanying exchange of outstanding equity awards tied to the class B common stock, as well as for the costs of the Recapitalization. The Delayed Draw Term Loan

may

be used to fund any permitted future business acquisitions or repurchasing of the Company’s Common Stock and the Line of Credit will be used to fund ongoing working capital needs and other general corporate purposes, including to pay the fees and expenses incurred in connection with the Recapitalization and the Credit Agreement.

The Term Loan is payable in monthly installments of

$462,988

through

April 2020

and

$526,362

thereafter, with a balloon payment due at maturity in

April 2023.

The Term Loan bears interest at a fixed rate of

5%.

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the

30

day London Interbank Offered Rate plus

225

basis points (

4.24%

at

June 30, 2018).

Interest on the Line of Credit accrues and is payable monthly. Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in

April 2021.

As of

June 30, 2018,

the Line of Credit did

not

have a balance. The weighted average borrowings on the Line of Credit for the

three

and

six

months ended

June 30, 2018

was

$385,000

and

$193,000,

respectively. The weighted average interest on borrowings on the Line of Credit for the

three

and

six

months ended

June 30, 2018

was

4.16%.

There have been

no

borrowings on the Delayed Draw Term Loan since origination.

The Company paid a

one

-time fee equal to

0.25%

of the amount borrowed under the Term Loan at the closing of the Credit Facilities. The Company is also obligated to pay ongoing unused commitment fees quarterly in arrears pursuant to the Line of Credit and the Delayed Draw Term Loan facility at a rate of

0.20%

per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility, respectively.

 The Credit Agreement is collateralized by substantially all of the Company’s assets and contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of the Company’s Common Stock and acquisitions, subject in each case to certain exceptions. The Credit Agreement also contains certain financial covenants with respect to a minimum fixed charge coverage ratio of

1.10x

and a maximum cash flow leverage ratio of

3.00x

or less. As of

June 30, 2018,

the Company was in compliance with its financial covenants. 

Scheduled maturities of notes payable at

June 30, 2018

are as follows:

Remainder of 2018	$	1,786
2019		3,715
2020		4,418
2021		4,916
2022		5,171
Thereafter		19,775

XML

Note 6 - Share-based Compensation

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6. SHARE-BASED COMPENSATION

The Company measures and recognizes compensation expense for all share-based payments based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and unvested stock awards have been determined to be equity-classified awards.  As described in Note

2,

the Company completed a Recapitalization in

April 

which, among other things, settled all then-existing outstanding class B share-based awards and resulted in the elimination of the class B common stock. As a result, the Company accelerated vesting of all outstanding class B share based awards, resulting in accelerated share-based compensation of

$331,000

in the

three

and

six

month periods ended

June 30, 2018.

All outstanding class B share based awards were then settled for the same stock to cash proportion of the class B common stock described in Note

2,

less the exercise price, if any, which approximated the awards’ intrinsic value.

The Company’s

2001

Equity Incentive Plan provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of

1,800,000

shares of the Company's former class A common stock and

300,000

shares of the Company's former class B common stock. Stock options granted could have been either nonqualified or incentive stock options. Stock options vest over

one

to

five

years following the date of grant and option terms are generally

five

to

ten

years following the date of grant.

The Company’s

2004

Non-Employee Director Stock Plan, as amended (the

“2004

Director Plan”), is a nonqualified plan that provides for the granting of options with respect to an aggregate of

3,000,000

shares of the Company's Common Stock and, prior to the Recapitalization,

500,000

shares of the Company's former class B common stock. The

2004

Director Plan provides for grants of nonqualified stock options to each director of the Company who is

not

employed by the Company. Beginning in

2018,

on the date of each annual meeting of shareholders of the Company, options to purchase shares of Common Stock equal to an aggregate grant date fair value of

$100,000

are granted to each non-employee director that is elected or retained as a director at such meeting. Stock options vest approximately

one

year following the date of grant and option terms are generally

ten

years following the date of grant, or

three

years in the case of termination of the outside director’s service.

The Company’s

2006

Equity Incentive Plan, as amended, provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of

1,800,000

shares of Common Stock and, prior to the Recapitalization,

300,000

shares of the Company’s former class B common stock. Stock options granted

may

be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally

five

to

ten

years following the date of grant.

The Company granted options to purchase

116,276

shares of the Company’s Common Stock during the

six

-month period ended

June 30, 2018.

Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of grant. The fair value of the stock options granted was estimated using a Black-Scholes valuation model with the following weighted average assumptions:

	2018		2017
	Common Stock (formerly Class A)		Class A		Class B
Expected dividend yield at date of grant		2.59%		2.62%		8.06%
Expected stock price volatility		32.47%		32.45%		26.75%
Risk-free interest rate		2.51%		2.18%		2.18%
Expected life of options (in years)		7.3		6.8		6.8

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s common stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the Company’s

2001

and

2006

Equity Incentive Plans and the

2004

Director Plan for the 

six

months ended

June 30, 2018:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock (formerly Class A)
Outstanding at December 31, 2017		1,746,634		$	13.88
Granted		116,276		$	36.12
Exercised		(344,958	)	$	13.78			$	7,119
Forfeited		(21,383	)	$	26.18
Outstanding at June 30, 2018		1,496,569		$	15.46		5.24	$	32,838
Exercisable at June 30, 2018		1,104,429		$	13.29		4.22	$	26,631
Class B
Outstanding at December 31, 2017		276,716		$	31.78
Granted		--		$	--
Exercised/Settled in Recapitalization		(276,716	)	$	31.78			$	5,937
Forfeited		--		$	--
Outstanding at June 30, 2018		--		$	--		--	$	--
Exercisable at June 30, 2018		--		$	--		--	$	--

As of

June 30, 2018

the total unrecognized compensation cost related to non-vested stock option awards was approximately

$1.6

million and is expected to be recognized over a weighted average period of

3.05

years.

The following table summarizes information for the

three

months ended

June 30, 2018,

regarding non-vested stock granted to associates under the

2001

and

2006

Equity Incentive Plans:

	Common (formerly Class A) Shares Outstanding			Common (formerly Class A) Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding			Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2017		81,667		$	13.80		13,611		$	36.65
Granted		6,793			36.80		--			--
Vested/Settled in Recapitalization		--			--		(13,611	)		36.65
Forfeited		(10,289	)	$	15.23		--		$	--
Outstanding at June 30, 2018		78,171		$	15.56		--		$	--

As of

June 30, 2018

the total unrecognized compensation cost related to non-vested stock awards was approximately

$593,000

and is expected to be recognized over a weighted average period of

2.93

years.

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Note 7 - Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

  7. GOODWILL AND OTHER INTANGIBLE ASSETS

The following represents a summary of changes in the Company’s carrying amount of goodwill for the

six

months ended

June 30, 2018:

	(In thousands)
Balance as of December 31, 2017	$	58,021
Foreign currency translation		(108	)
Balance as of June 30, 2018	$	57,913

Intangible assets consisted of the following:

	June 30, 2018			December 31, 2017
	(In thousands)
Non-amortizing other intangible assets:
Trade name	$	1,191		$	1,191
Amortizing other intangible assets:
Customer related		9,336			9,347
Technology		1,360			1,360
Trade name		1,572			1,572
Total other intangible assets		13,459			13,470
Accumulated amortization		(11,031	)		(10,706	)
Other intangible assets, net	$	2,428		$	2,764

XML

Note 8 - Property and Equipment

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

8. PROPERTY AND EQUIPMENT

	June 30, 2018			December 31, 2017
	(In thousands)
Property and equipment	$	43,223		$	40,206
Accumulated depreciation		(29,903	)		(27,847	)
Property and equipment, net	$	13,320		$	12,359

XML

Note 9 - Earnings Per Share

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

  9. EARNINGS PER SHARE

Net income per share of the Company's former class A common stock and former class B common stock was computed using the

two

-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction were the same for the holders of the Company's former class A common stock and former class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of former class A common stock was equal to

one

-

sixth

(

1/6th

) of the amount of any such dividend or other distribution payable on each share of former class B common stock until the Recapitalization. As a result, the undistributed earnings for each period are allocated based on the contractual participation rights of the former class A and former class B common stock as if the earnings for the period had been distributed.

As described in Note

2,

the Company completed a Recapitalization in

April 

which settled all then-existing outstanding class B share-based awards, resulted in the elimination of the class B common stock and reclassified class A common stock to Common Stock. The Recapitalization was effective on

April 17, 2018.

Therefore, income was allocated between the former class A and class B common stock using the

two

-class method through

April 16, 2018,

and fully allocated to the Common Stock (formerly class A) following the Recapitalization.

For the

three

months ended

June 30, 2017,

104,835

options of former class A shares have been excluded from the diluted net income per share computation because the exercise or grant price exceeded the fair market value. For the

three

months ended

June 30, 2018,

an additional

84,963

options of former class A shares, and for the

three

months ended

June 30, 2017,

an additional

17,473

options of former class B shares, were excluded as their inclusion would be anti-dilutive.

	For the Three Months Ended June 30, 2018						For the Three Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	7,000		$	948		$	2,855		$	2,897
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(23	)		(4	)		(22	)		(22	)
Net income attributable to common shareholders	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Net income per share – basic	$	0.29		$	0.27		$	0.14		$	0.82
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Weighted average effect of dilutive securities – stock options		889			93			773			77
Denominator for diluted earnings per share – adjusted weighted average shares		24,846			3,620			21,525			3,591
Net income per share – diluted	$	0.28		$	0.26		$	0.13		$	0.80

For the

six

months ended

June 30, 2017,

the Company had

115,908

options of former class A shares and

19,318

options of former class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise or grant price exceeded the fair market value. For the

six

months ended

June 30, 2018

and

2017,

an additional

78,945

and

52,707

options of former class A shares, respectively, and for the

six

months ended

June 30, 2017,

an additional

38,784

options of former class B shares were excluded, as their inclusion would be anti-dilutive.

	For the Six Months Ended June 30, 2018						For the Six Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	10,630		$	4,624		$	6,088		$	6,184
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(38	)		(18	)		(48	)		(49	)
Net income attributable to common shareholders	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		22,429			3,527			20,745			3,514
Net income per share – basic	$	0.47		$	1.31		$	0.29		$	1.75
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - diluted:
Weighted average common shares outstanding – basic		22,429			3,527			20,745			3,514
Weighted average effect of dilutive securities – stock options		921			101			659			70
Denominator for diluted earnings per share – adjusted weighted average shares		23,350			3,628			21,404			3,584
Net income per share – diluted	$	0.45		$	1.27		$	0.28		$	1.71

XML

Note 10 - Related Party

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

10.   RELATED PARTY

A director of the Company serves as an officer of Ameritas Life Insurance Corp. (“Ameritas”). In connection with the Company’s regular assessment of its insurance-based associate benefits, which is conducted by an independent insurance broker, and the costs associated therewith, the Company purchases dental and vision insurance for certain of its associates from Ameritas. The total value of these purchases was

$53,000

and

$62,000

for the

three

-month periods ended

June 30, 2018

and

2017,

respectively, and

$94,000

and

$120,000

for the

six

-month periods ended

June 30, 2018

and

2017,

respectively.

During

2017,

the Company acquired a cost method investment in convertible preferred stock of Practicing Excellence.com, Inc., a privately-held Delaware corporation (“PX”), which is included in other non-current assets and is carried at cost, adjusted for changes resulting from observable price changes in orderly transactions of the same investment in PX, if any.  The Company also has an agreement with PX which commenced in

2016

under which the Company acts as a reseller of PX services and receives a portion of the revenues. The total revenue earned from the PX reseller agreement in the

three

-month periods ended

June 30, 2018

and

2017,

were

$66,000

and

$171,000,

respectively, and in

six

-month periods ended

June 30, 2018

and

2017,

were

$109,000

and

$295,000,

respectively.

XML

Note 11 - Segment Information

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

11.   SEGMENT INFORMATION

The Company’s

six

operating segments are aggregated into

one

reporting segment because they have similar economic characteristics and meet the other aggregation criteria from the FASB guidance on segment disclosure. The

six

operating segments are Experience, The Governance Institute, Market Insights, Transparency, National Research Corporation Canada and Transitions, which offer a portfolio of solutions that address specific needs around market insight, experience, transparency and governance for healthcare providers, payers and other healthcare organizations. The table below presents entity-wide information regarding the Company’s assets, after elimination of intercompany balances by geographic area:

	June 30, 2018		December 31, 2017
Long-lived assets:
United States	$	76,871	$	72,562
Canada		2,381		2,495
Total	$	79,252	$	75,057
Total assets:
United States	$	97,101	$	110,785
Canada		5,784		16,531
Total	$	102,855	$	127,316

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

On

January 1, 2018,

the Company adopted Accounting Standards Update (“ASU”)

2014

-

09,

Revenue- Revenue from Contracts with Customers

and all related amendments (“ASC

606”

or “new revenue standard”) using the modified retrospective method for all incomplete contracts as of the date of adoption. The Company applied the practical expedient to reflect the total of all contract modifications occurring before

January 1, 2018

in the transaction price and performance obligations at transition rather than accounting for each modification separately. Results for reporting periods beginning on or after

January 1, 2018

are presented under ASC

606,

while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. As discussed in more detail below and under “Deferred Contract Costs”, the largest impact of implementing the new revenue standard was the deferral and amortization of direct and incremental costs of obtaining contracts. In addition, there were other revisions to the revenue recognition primarily related to performance obligation determinations and estimating variable consideration. The Company recorded a transition adjustment of approximately

$2.7

million, net of

$814,000

of tax, to the opening balance of retained earnings.

The Company derives a majority of its revenues from its annually renewable subscription-based service agreements with its customers, which include performance measurement and improvement services, healthcare analytics and governance education services. Such agreements are generally cancelable on short or

no

notice without penalty. See Note

3

for further information about the Company's contracts with customers. Under ASC

606,

the Company accounts for revenue using the following steps:

● Identify the contract, or contracts, with a customer

● Identify the performance obligations in the contract

● Determine the transaction price

● Allocate the transaction price to the identified performance obligations

● Recognize revenue when, or as, the Company satisfies the performance obligations.

The Company’s revenue arrangements with a client

may

include combinations of more than

one

service offering which

may

be executed at the same time, or within close proximity of

one

another. The Company combines contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated as a single performance obligation. For contracts that contain more than

one

separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin or residual approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements based on the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

Prior to

2018,

total contract consideration was allocated to each separate unit of accounting that was separately sold by the Company or a competitor, based on relative selling price using a selling price hierarchy: vendor-specific objective evidence (“VSOE”), if available,

third

-party evidence (“TPE”) if VSOE was

not

available, or estimated selling price if VSOE nor TPE was available. VSOE was established based on the services normal selling prices and discounts for the specific services when sold separately. TPE was established by evaluating similar competitor services in standalone arrangements. If neither existed for a deliverable, the best estimate of the selling price (“ESP”) was used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element was limited to revenue that was

not

subject to refund or otherwise represented contingent revenue.

The Company’s arrangements with customers consist principally of

four

different types of arrangements:

1

) subscription-based service agreements;

2

)

one

-time specified services performed at a single point in time;

3

) fixed, non-subscription service agreements; and

4

) unit-priced service agreements.

Subscription-based services -

Services that are provided under subscription-based service agreements are usually for a

twelve

month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the customer. These agreements are renewable at the option of the customer at the completion of the initial contract term for an agreed upon price increase each year. These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period. Accordingly, subscription services are recognized ratably over the subscription period. Subscription services are typically billed annually in advance, but

may

also be billed on a quarterly and monthly basis.

One-time services –

These agreements typically require the Company to perform a specific

one

-time service in a particular month. The Company is entitled to fixed payment upon completion of the service. Under these arrangements, the Company recognizes revenue at the point in time the service is completed by the Company and accepted by the customer.

Fixed, non-subscription services –

These arrangements typically require the Company to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch up adjustment which could impact the amount and timing of revenue for any period. Prior to

2018,

these arrangements were recognized under the proportional performance method based on cost inputs, output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting.

Unit-price services –

These arrangements typically require the Company to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service. Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but

not

invoiced to the clients. Unbilled receivables are classified as receivables when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

The following tables summarize the impact the adoption of ASC

606

had on the Company’s consolidated financial statements (in thousands, except per share data):

Consolidated balance sheet:

	As reported June 30, 2018			Adjustments			Balances without Adoption of ASC 606
Accounts receivable, net	$	10,689		$	5		$	10,694
Other current assets		125			(72	)		53
All other current assets		12,819			--			12,819
Total current assets		23,633			(67	)		23,566
Deferred contract costs		3,369			(3,369	)		--
All other noncurrent assets		75,883			--			75,883
Total assets	$	102,885		$	(3,436	)	$	99,449
Deferred revenue	$	16,660		$	61		$	16,721
Other current liabilities		16,257			--			16,257
Total current liabilities		32,917			61			32,978
Deferred income taxes		5,808			(802	)		5,006
Other long term liabilities		37,343			--			37,343
Total liabilities		76,068			(741	)		75,327
Retained earnings		(99,810	)		(2,697	)		(102,507	)
Accumulated other comprehensive income		(2,333	)		2			(2,331	)
Other stockholders’ equity		128,960			--			128,960
Total stockholders’ equity		26,817			(2,695	)		24,122
Total liabilities and stockholders’ equity	$	102,885		$	(3,436	)	$	99,449

Consolidated statement of income:

	Three months ended June 30, 2018									Six months ended June 30, 2018
	As reported			Adjustments			Balances Without Adoption of ASC 606			As reported		Adjustments			Balances Without Adoption of ASC 606
Revenue	$	28,017		$	120		$	28,137		$	59,034	$	48		$	59,082
Direct expenses		10,996			(28	)		10,968			23,904		(59	)		23,845
Selling, general and administrative		7,940			(173	)		7,767			15,808		57			15,865
Depreciation and amortization		1,325			--			1,325			2,608		--			2,608
Total operating expenses		20,261			(201	)		20,060			42,320		(2	)		42,318
Operating income		7,756			321			8,077			16,714		50			16,764
Other income (expense)		63			--			63			71		--			71
Income before income taxes		7,819			321			8,140			16,785		50			16,835
Provision (benefit) for income taxes		(129	)		74			(55	)		1,531		12			1,543
Net income	$	7,948		$	247		$	8,195		$	15,254	$	38		$	15,292
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.29		$	0.01		$	0.30		$	0.47	$	--		$	0.47
Class B		0.27			--			0.27			1.31		--			1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.28		$	0.01		$	0.29		$	0.45	$	--		$	0.45
Class B		0.26			0.01			0.27			1.27		0.01			1.28

Consolidated statement of comprehensive income:

	Three months ended June 30, 2018								Six months ended June 30, 2018
	As reported			Adjustments		Balances without adoption of ASC 606			As reported			Adjustments		Balances without adoption of ASC 606
Net Income	$	7,948		$	247	$	8,195		$	15,254		$	38	$	15,292
Cumulative translation adjustment		(283	)		4		(279	)		(698	)		2		(696	)
Comprehensive Income	$	7,665		$	251	$	7,916		$	14,556		$	40	$	14,596

Consolidated statement of cash flows:

	Six months ended June 30, 2018
	As reported			Adjustments			Balances without adoption of ASC 606
Cash flows from operating activities:
Net income	$	15,254		$	38		$	15,292
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,608			--			2,608
Deferred income taxes		996			12			1,008
Reserve for uncertain tax positions		92			--			92
Non-cash share-based compensation expense		995			--			995
Impairment of property and equipment		2			--			2
Change in assets and liabilities:
Trade accounts receivable and unbilled revenue		3,955			128			4,083
Prepaid expenses and other current assets		(2,393	)		(2	)		(2,395	)
Deferred contract costs		2			(2	)		--
Accounts payable		481			--			481
Accrued expenses, wages, bonus and profit sharing		(2,371	)		--			(2,371	)
Income taxes receivable and payable		(1,235	)		--			(1,235	)
Deferred revenue		5			(176	)		(171	)
Net cash provided by operating activities		18,391			(2	)		18,389
Net cash used in investing activities		(2,773	)		--			(2,773	)
Net cash used in financing activities		(43,058	)		--			(43,058	)
Effect of exchange rate changes on cash		(595	)		2			(593	)
Change in cash and cash equivalents		(28,035	)		--			(28,035	)
Cash and cash equivalents at beginning of period		34,733			--			34,733
Cash and cash equivalents at end of period	$	6,698			--		$	6,698

Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. Beginning

January 1, 2018,

with the adoption of the new revenue standard, the Company defers commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable customer contract. Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from

three

to

five

years. The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract.  An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration the Company expects to receive less than the expected future costs directly related to providing those services.  The Company deferred incremental costs of obtaining a contract of

$445,000

and

$1,272,000

in the

three

and

six

months ended

June 30, 2018,

respectively. Total amortization was 

$639,000

and

$1,254,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Amortization of deferred contract costs included in direct expenses was 

$29,000

and

$59,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Amortization of deferred contract costs included in selling, general and administrative expenses was 

$610,000

and

$1,195,000

for the

three

and

six

months ended

June 30, 2018,

respectively. Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was

$7,000

and

$19,000

in the

three

and

six

months ended

June 30, 2018,

respectively. The Company has elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of

one

year or less. Prior to

2018,

all commissions and incentives were expensed as incurred. The Company recorded a transition adjustment on

January 1, 2018

as an increase to retained earnings of

$2.6

million, net of

$776,000

of tax, to reflect

$3.4

million of commissions and incentives related to contracts that began prior to

2018,

net of accumulated amortization.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (

1

) Level

1

Inputs—quoted prices in active markets for identical assets and liabilities; (

2

) Level

2

Inputs—observable market-based inputs other than Level

1

inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are

not

active, or other inputs that are observable or can be corroborated by observable market data; and (

3

) Level

3

Inputs—unobservable inputs.

Commercial paper and Eurodollar deposits are included in cash equivalents and are valued at amortized cost, which approximates fair value due to their short-term nature. Eurodollar deposits are United States dollars deposited in a foreign bank branch of a United States bank and have daily liquidity. Both of these are included as a Level

2

measurement in the table below.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at

June 30, 2018

and

December 31, 2017: 

Fair Values Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of June 30, 2018
Money Market Funds	$	767	$	--	$	--	$	767
Total	$	767	$	--	$	--	$	767
As of December 31, 2017
Money Market Funds	$	13,971	$	--	$	--	$	13,971
Commercial Paper		--		10,490		--		10,490
Eurodollar Deposits		--		10,017		--		10,017
Total	$	13,971	$	20,507	$	--	$	34,478

There were

no

transfers between levels during the

three

month period ended

June 30, 2018.

The Company's long-term debt is recorded at historical cost. The fair value of long-term debt is classified in Level

2

of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	June 30, 2018		December 31, 2017
	(In thousands)
Total carrying amount of long-term debt	$	39,781	$	1,067
Estimated fair value of long-term debt	$	39,813	$	1,066

The Company believes that the carrying amounts of trade accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short maturity of those instruments. Long-lived assets that are

not

recognized or disclosed at fair value in the financial statements on a recurring basis, which includes property and equipment, goodwill, intangibles, and cost method investments are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of

June 30, 2018,

and

December 31, 2017,

there was

no

indication of impairment related to these assets.

Commitments and Contingencies, Policy [Policy Text Block]

Contingencies

From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.

Since the

September 2017

announcement of the original proposed recapitalization plan (“Original Transaction”) (see Note

2

),

three

purported class action and/or derivative complaints have been filed in state or federal courts by

three

individuals claiming to be shareholders of the Company. All of the complaints name as defendants the Company and the individual directors of the Company. Two of these lawsuits were filed in the United States District Court for the District of Nebraska— a putative class action lawsuit captioned

Gennaro v. National Research Corporation, et al

., which was filed on

November 15, 2017,

and a putative class and derivative action lawsuit captioned

Gerson v. Hays, et al

., which was filed on

November 16, 2017.

These lawsuits were consolidated by order of the federal court under the caption

In re National Research Corporation Shareholder Litigation

. A

third

lawsuit was filed in the Circuit Court for Milwaukee County, Wisconsin—a putative class action lawsuit captioned

Apfel v. Hays, et al

., which was filed on

December 1, 2017.

The allegations in all of the lawsuits were very similar. The plaintiffs alleged, among other things, that the defendants breached their fiduciary duties in connection with the allegedly unfair proposed transaction, at an allegedly unfair price, conducted in an allegedly unfair and conflicted process and in alleged violation of Wisconsin law and the Company’s Articles of Incorporation. The plaintiffs in these lawsuits sought, among other things, an injunction enjoining the defendants from consummating the Original Transaction, damages, equitable relief and an award of attorneys’ fees and costs of litigation. After the announcement of a revised proposed recapitalization plan (the “Recapitalization”), the plaintiffs abandoned their efforts to enjoin the transaction. However, the plaintiffs in

In re National Research Corporation Shareholder Litigation

in Nebraska filed an Amended Complaint on

March 23, 2018

seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and alleged omission of material facts in the proxy statement relating to the Recapitalization. The plaintiffs in the

Apfel

case in Wisconsin filed an amended complaint on

April 4, 2018

seeking damages for alleged breach of fiduciary duties in connection with the Original Transaction and the Recapitalization. The Company and its directors will defend themselves against these lawsuits vigorously, and have moved to dismiss both lawsuits. These motions are pending. As of

June 30, 2018,

no

losses have been accrued as the Company does

not

believe the losses are probable or estimable.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Not

Yet Adopted

In

January 2016,

the FASB issued ASU

2016

-

01,

Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU

2016

-

01

changes certain recognition, measurement, presentation and disclosure aspects related to financial instruments. ASU

2016

-

01

is effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is

not

permitted. The Company believes its adoption will

not

significantly impact the Company’s results of operations and financial position. 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than

twelve

months on its balance sheet. This ASU is effective in fiscal years beginning after

December 15, 2018,

with early adoption permitted, and requires a modified retrospective transition method. As of

June 30, 2018,

the Company had approximately

$4.0

million of operating lease commitments which would be recorded on the balance sheet under the new guidance. However, the Company is currently in the process of further evaluating the impact that this new guidance will have on its consolidated financial statements and does

not

plan to elect early adoption. The Company expects to utilize the optional practical expedients to

not

reassess whether expired or existing contracts contain leases,

not

reassess the lease classification for expired or existing leases and reassess initial direct costs for existing leases.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

):  Measurement of Credit Losses on Financial Instruments.  This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after

December 15, 2019

and interim periods within those fiscal years. The Company believes its adoption will

not

significantly impact the Company’s results of operations and financial position.  

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Impact of the Adoption of ASC 606 on Financial Statement Line Items [Table Text Block]

	As reported June 30, 2018			Adjustments			Balances without Adoption of ASC 606
Accounts receivable, net	$	10,689		$	5		$	10,694
Other current assets		125			(72	)		53
All other current assets		12,819			--			12,819
Total current assets		23,633			(67	)		23,566
Deferred contract costs		3,369			(3,369	)		--
All other noncurrent assets		75,883			--			75,883
Total assets	$	102,885		$	(3,436	)	$	99,449
Deferred revenue	$	16,660		$	61		$	16,721
Other current liabilities		16,257			--			16,257
Total current liabilities		32,917			61			32,978
Deferred income taxes		5,808			(802	)		5,006
Other long term liabilities		37,343			--			37,343
Total liabilities		76,068			(741	)		75,327
Retained earnings		(99,810	)		(2,697	)		(102,507	)
Accumulated other comprehensive income		(2,333	)		2			(2,331	)
Other stockholders’ equity		128,960			--			128,960
Total stockholders’ equity		26,817			(2,695	)		24,122
Total liabilities and stockholders’ equity	$	102,885		$	(3,436	)	$	99,449

	Three months ended June 30, 2018									Six months ended June 30, 2018
	As reported			Adjustments			Balances Without Adoption of ASC 606			As reported		Adjustments			Balances Without Adoption of ASC 606
Revenue	$	28,017		$	120		$	28,137		$	59,034	$	48		$	59,082
Direct expenses		10,996			(28	)		10,968			23,904		(59	)		23,845
Selling, general and administrative		7,940			(173	)		7,767			15,808		57			15,865
Depreciation and amortization		1,325			--			1,325			2,608		--			2,608
Total operating expenses		20,261			(201	)		20,060			42,320		(2	)		42,318
Operating income		7,756			321			8,077			16,714		50			16,764
Other income (expense)		63			--			63			71		--			71
Income before income taxes		7,819			321			8,140			16,785		50			16,835
Provision (benefit) for income taxes		(129	)		74			(55	)		1,531		12			1,543
Net income	$	7,948		$	247		$	8,195		$	15,254	$	38		$	15,292
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.29		$	0.01		$	0.30		$	0.47	$	--		$	0.47
Class B		0.27			--			0.27			1.31		--			1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.28		$	0.01		$	0.29		$	0.45	$	--		$	0.45
Class B		0.26			0.01			0.27			1.27		0.01			1.28

	Three months ended June 30, 2018								Six months ended June 30, 2018
	As reported			Adjustments		Balances without adoption of ASC 606			As reported			Adjustments		Balances without adoption of ASC 606
Net Income	$	7,948		$	247	$	8,195		$	15,254		$	38	$	15,292
Cumulative translation adjustment		(283	)		4		(279	)		(698	)		2		(696	)
Comprehensive Income	$	7,665		$	251	$	7,916		$	14,556		$	40	$	14,596

	Six months ended June 30, 2018
	As reported			Adjustments			Balances without adoption of ASC 606
Cash flows from operating activities:
Net income	$	15,254		$	38		$	15,292
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,608			--			2,608
Deferred income taxes		996			12			1,008
Reserve for uncertain tax positions		92			--			92
Non-cash share-based compensation expense		995			--			995
Impairment of property and equipment		2			--			2
Change in assets and liabilities:
Trade accounts receivable and unbilled revenue		3,955			128			4,083
Prepaid expenses and other current assets		(2,393	)		(2	)		(2,395	)
Deferred contract costs		2			(2	)		--
Accounts payable		481			--			481
Accrued expenses, wages, bonus and profit sharing		(2,371	)		--			(2,371	)
Income taxes receivable and payable		(1,235	)		--			(1,235	)
Deferred revenue		5			(176	)		(171	)
Net cash provided by operating activities		18,391			(2	)		18,389
Net cash used in investing activities		(2,773	)		--			(2,773	)
Net cash used in financing activities		(43,058	)		--			(43,058	)
Effect of exchange rate changes on cash		(595	)		2			(593	)
Change in cash and cash equivalents		(28,035	)		--			(28,035	)
Cash and cash equivalents at beginning of period		34,733			--			34,733
Cash and cash equivalents at end of period	$	6,698			--		$	6,698

Fair Value, by Balance Sheet Grouping [Table Text Block]

	June 30, 2018		December 31, 2017
	(In thousands)
Total carrying amount of long-term debt	$	39,781	$	1,067
Estimated fair value of long-term debt	$	39,813	$	1,066

Fair Value, Measurements, Recurring [Member]

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of June 30, 2018
Money Market Funds	$	767	$	--	$	--	$	767
Total	$	767	$	--	$	--	$	767
As of December 31, 2017
Money Market Funds	$	13,971	$	--	$	--	$	13,971
Commercial Paper		--		10,490		--		10,490
Eurodollar Deposits		--		10,017		--		10,017
Total	$	13,971	$	20,507	$	--	$	34,478

XML

Note 3 - Contracts With Customers (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended June 30, 2018		Six months ended June 30, 2018
Subscription services recognized ratably over time	$	25,653	$	51,441
Services recognized at a point in time		157		1,902
Fixed, non-subscription recognized over time		487		1,779
Unit price services, recognized over time		1,720		3,912
Total revenue	$	28,017	$	59,034

Contract with Customer, Asset and Liability [Table Text Block]

	June 30, 2018			Balance at 1/1/2018 as adjusted (1)
Accounts receivables	$	10,689		$	14,674
Contract assets included in other current assets	$	72		$	74
Deferred Revenue	$	(16,660	)	$	(16,642	)

	Three months ended June 30, 2018						Six months ended June 30, 2018
	Contract Asset			Deferred Revenue			Contract Asset			Deferred Revenue
							Increase (Decrease)
Revenue recognized that was included in deferred revenue at beginning of year due to completion of services	$	-		$	(7,733	)	$	-		$	(13,577	)
Increases due to invoicing of client, net of amounts recognized as revenue		-			7,558			-			13,796
Decreases due to completion of services (or portion of services) and transferred to accounts receivable		(41	)		-			(58	)		-
Change due to cumulative catch-up adjustments arising from changes in expected contract consideration					(84	)					(153	)
Decreases due to impairment		-			-			-			-
Increases due to revenue recognized in the period with additional performance obligations before invoicing		25			-			56			-

XML

Note 5 - Notes Payable (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	June 30, 2018			December 31, 2017
Term Loans	$	39,781		$	1,067
Less: current portion		(3,575	)		(1,067	)
Less: unamortized debt issuance costs		(177	)		—
Notes payable, net of current portion	$	36,029		$	—

Schedule of Maturities of Long-term Debt [Table Text Block]

Remainder of 2018	$	1,786
2019		3,715
2020		4,418
2021		4,916
2022		5,171
Thereafter		19,775

XML

Note 6 - Share-based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2018		2017
	Common Stock (formerly Class A)		Class A		Class B
Expected dividend yield at date of grant		2.59%		2.62%		8.06%
Expected stock price volatility		32.47%		32.45%		26.75%
Risk-free interest rate		2.51%		2.18%		2.18%
Expected life of options (in years)		7.3		6.8		6.8

Share-based Compensation, Activity [Table Text Block]

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock (formerly Class A)
Outstanding at December 31, 2017		1,746,634		$	13.88
Granted		116,276		$	36.12
Exercised		(344,958	)	$	13.78			$	7,119
Forfeited		(21,383	)	$	26.18
Outstanding at June 30, 2018		1,496,569		$	15.46		5.24	$	32,838
Exercisable at June 30, 2018		1,104,429		$	13.29		4.22	$	26,631
Class B
Outstanding at December 31, 2017		276,716		$	31.78
Granted		--		$	--
Exercised/Settled in Recapitalization		(276,716	)	$	31.78			$	5,937
Forfeited		--		$	--
Outstanding at June 30, 2018		--		$	--		--	$	--
Exercisable at June 30, 2018		--		$	--		--	$	--

Schedule of Nonvested Share Activity [Table Text Block]

	Common (formerly Class A) Shares Outstanding			Common (formerly Class A) Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding			Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2017		81,667		$	13.80		13,611		$	36.65
Granted		6,793			36.80		--			--
Vested/Settled in Recapitalization		--			--		(13,611	)		36.65
Forfeited		(10,289	)	$	15.23		--		$	--
Outstanding at June 30, 2018		78,171		$	15.56		--		$	--

XML

Note 7 - Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Goodwill [Table Text Block]

	(In thousands)
Balance as of December 31, 2017	$	58,021
Foreign currency translation		(108	)
Balance as of June 30, 2018	$	57,913

Schedule of Intangible Assets [Table Text Block]

	June 30, 2018			December 31, 2017
	(In thousands)
Non-amortizing other intangible assets:
Trade name	$	1,191		$	1,191
Amortizing other intangible assets:
Customer related		9,336			9,347
Technology		1,360			1,360
Trade name		1,572			1,572
Total other intangible assets		13,459			13,470
Accumulated amortization		(11,031	)		(10,706	)
Other intangible assets, net	$	2,428		$	2,764

XML

Note 8 - Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	June 30, 2018			December 31, 2017
	(In thousands)
Property and equipment	$	43,223		$	40,206
Accumulated depreciation		(29,903	)		(27,847	)
Property and equipment, net	$	13,320		$	12,359

XML

Note 9 - Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Three Months Ended June 30, 2018						For the Three Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	7,000		$	948		$	2,855		$	2,897
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(23	)		(4	)		(22	)		(22	)
Net income attributable to common shareholders	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Net income per share – basic	$	0.29		$	0.27		$	0.14		$	0.82
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	6,977		$	944		$	2,833		$	2,875
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		23,957			3,527			20,752			3,514
Weighted average effect of dilutive securities – stock options		889			93			773			77
Denominator for diluted earnings per share – adjusted weighted average shares		24,846			3,620			21,525			3,591
Net income per share – diluted	$	0.28		$	0.26		$	0.13		$	0.80

	For the Six Months Ended June 30, 2018						For the Six Months Ended June 30, 2017
	Common Stock (formerly Class A)			Class B Common Stock			Common Stock (formerly Class A)			Class B Common Stock
	(In thousands, except per share data)
Numerator for net income per share - basic:
Net income	$	10,630		$	4,624		$	6,088		$	6,184
Allocation of distributed and undistributed income to unvested restricted stock shareholders		(38	)		(18	)		(48	)		(49	)
Net income attributable to common shareholders	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		22,429			3,527			20,745			3,514
Net income per share – basic	$	0.47		$	1.31		$	0.29		$	1.75
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	10,592		$	4,606		$	6,040		$	6,135
Denominator for net income per share - diluted:
Weighted average common shares outstanding – basic		22,429			3,527			20,745			3,514
Weighted average effect of dilutive securities – stock options		921			101			659			70
Denominator for diluted earnings per share – adjusted weighted average shares		23,350			3,628			21,404			3,584
Net income per share – diluted	$	0.45		$	1.27		$	0.28		$	1.71

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Note 11 - Segment Information (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	June 30, 2018		December 31, 2017
Long-lived assets:
United States	$	76,871	$	72,562
Canada		2,381		2,495
Total	$	79,252	$	75,057
Total assets:
United States	$	97,101	$	110,785
Canada		5,784		16,531
Total	$	102,855	$	127,316

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Note 1 - Summary of Significant Accounting Policies (Details Textual)		3 Months Ended	6 Months Ended	12 Months Ended
	Jan. 01, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Number of Operating Segments			6
Number of Reportable Segments			1
Incremental Costs of Obtaining a Contract, Deferred During Period		$ 445,000	$ 1,272,000
Capitalized Contract Cost, Amortization		639,000	1,254,000
Asset Impairment Charges, Total			0	$ 0
Loss Contingency Accrual, Ending Balance		0	0
Operating Leases, Rent Expense, Minimum Rentals			4,000,000
Direct Operating Costs [Member]
Capitalized Contract Cost, Amortization		29,000	59,000
Selling, General and Administrative Expenses [Member]
Capitalized Contract Cost, Amortization		610,000	1,195,000
Capitalized Contract Cost, Impairment Loss		$ 7,000	$ 19,000
Minimum [Member]
Capitalized Contract Cost, Amortization Period		3 years	3 years
Maximum [Member]
Capitalized Contract Cost, Amortization Period		5 years	5 years
Accounting Standards Update 2014-09 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	$ 2,700,000
Cumulative Effect on Retained Earnings, Tax	814,000
Accounting Standards Update 2014-09 [Member] | Changes Related to Contract Costs [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	2,600,000
Cumulative Effect on Retained Earnings, Tax	776,000
Cumulative Effect on Retained Earnings, before Tax	$ 3,400,000

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Note 1 - Summary of Significant Accounting Policies - Impact of the Adoption of ASC 606 on the Consolidated Financial Statements (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jan. 01, 2018	[1]	Dec. 31, 2017
Accounts receivable, net	$ 10,689		$ 10,689		$ 14,674		$ 14,806
Other current assets	125		125				35
All other current assets	12,819		12,819
Total current assets	23,633		23,633				52,259
Deferred contract costs	3,369		3,369
All other noncurrent assets	75,883		75,883
Total assets	102,885		102,885				127,316
Deferred revenue	16,660		16,660		$ 16,642		16,878
Other current liabilities	16,257		16,257
Total current liabilities	32,917		32,917				32,310
Deferred income taxes	5,808		5,808				4,030
Other long term liabilities	37,343		37,343
Total liabilities	76,068		76,068				37,275
Retained earnings	(99,810)		(99,810)				77,574
Accumulated other comprehensive income	(2,333)		(2,333)				(1,635)
Other stockholders’ equity	128,960		128,960
Total stockholders’ equity	26,817		26,817				90,041
Total liabilities and stockholders’ equity	102,885		102,885				$ 127,316
Revenue	28,017	$ 28,435	59,034	$ 58,710
Direct expenses	10,996	11,939	23,904	24,439
Selling, general and administrative	7,940	6,905	15,808	13,591
Depreciation and amortization	1,325	1,139	2,608	2,244
Total operating expenses	20,261	19,983	42,320	40,274
Operating income	7,756	8,452	16,714	18,436
Other income (expense)	63	19	71	14
Income before income taxes	7,819	8,471	16,785	18,450
Provision (benefit) for income taxes	(129)	2,719	1,531	6,178
Net income	7,948	5,752	15,254	12,272
Cumulative translation adjustment	(283)	381	(698)	499
Comprehensive Income	7,665	6,133	14,556	12,771
Deferred income taxes			996	386
Reserve for uncertain tax positions			92	73
Non-cash share-based compensation expense			995	792
Impairment of property and equipment			2
Trade accounts receivable and unbilled revenue			3,955	(2,299)
Prepaid expenses and other current assets			(2,393)	(1,696)
Deferred contract costs			2
Accounts payable			481	222
Accrued expenses, wages, bonus and profit sharing			(2,371)	(750)
Income taxes receivable and payable			(1,235)	(1,818)
Deferred revenue			5	1,194
Net cash provided by operating activities			18,391	10,620
Net cash used in investing activities			(2,773)	(2,390)
Net cash used in financing activities			(43,058)	(10,022)
Effect of exchange rate changes on cash			(595)	399
Change in cash and cash equivalents			(28,035)	(1,393)
Cash and cash equivalents at beginning of period			34,733	33,021
Cash and cash equivalents at end of period	6,698	31,628	6,698	31,628
Common Class A [Member]
Net income	$ 7,000	$ 2,855	$ 10,630	$ 6,088
Basic earnings per share (in dollars per share)	$ 0.29	$ 0.14	$ 0.47	$ 0.29
Diluted earnings per share (in dollars per share)	$ 0.28	$ 0.13	$ 0.45	$ 0.28
Common Class B [Member]
Net income	$ 948	$ 2,897	$ 4,624	$ 6,184
Basic earnings per share (in dollars per share)	$ 0.27	$ 0.82	$ 1.31	$ 1.75
Diluted earnings per share (in dollars per share)	$ 0.26	$ 0.80	$ 1.27	$ 1.71
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Adjustments for New Accounting Pronouncement [Member]
Accounts receivable, net	$ 5		$ 5
Other current assets	(72)		(72)
All other current assets
Total current assets	(67)		(67)
Deferred contract costs	(3,369)		(3,369)
All other noncurrent assets
Total assets	(3,436)		(3,436)
Deferred revenue	61		61
Other current liabilities
Total current liabilities	61		61
Deferred income taxes	(802)		(802)
Other long term liabilities
Total liabilities	(741)		(741)
Retained earnings	(2,697)		(2,697)
Accumulated other comprehensive income	2		2
Other stockholders’ equity
Total stockholders’ equity	(2,695)		(2,695)
Total liabilities and stockholders’ equity	(3,436)		(3,436)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenue	120		48
Direct expenses	(28)		(59)
Selling, general and administrative	(173)		57
Depreciation and amortization
Total operating expenses	(201)		(2)
Operating income	321		50
Other income (expense)
Income before income taxes	321		50
Provision (benefit) for income taxes	74		12
Net income	247		38
Cumulative translation adjustment	4		2
Comprehensive Income	251		40
Deferred income taxes			12
Reserve for uncertain tax positions
Non-cash share-based compensation expense
Impairment of property and equipment
Trade accounts receivable and unbilled revenue			128
Prepaid expenses and other current assets			(2)
Deferred contract costs			(2)
Accounts payable
Accrued expenses, wages, bonus and profit sharing
Income taxes receivable and payable
Deferred revenue			(176)
Net cash provided by operating activities			(2)
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash			2
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Common Class A [Member]
Basic earnings per share (in dollars per share)	$ 0.01
Diluted earnings per share (in dollars per share)	0.01
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Common Class B [Member]
Basic earnings per share (in dollars per share)
Diluted earnings per share (in dollars per share)	$ 0.01		$ 0.01
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Accounts receivable, net	$ 10,694		$ 10,694
Other current assets	53		53
All other current assets	12,819		12,819
Total current assets	23,566		23,566
Deferred contract costs
All other noncurrent assets	75,883		75,883
Total assets	99,449		99,449
Deferred revenue	16,721		16,721
Other current liabilities	16,257		16,257
Total current liabilities	32,978		32,978
Deferred income taxes	5,006		5,006
Other long term liabilities	37,343		37,343
Total liabilities	75,327		75,327
Retained earnings	(102,507)		(102,507)
Accumulated other comprehensive income	(2,331)		(2,331)
Other stockholders’ equity	128,960		128,960
Total stockholders’ equity	24,122		24,122
Total liabilities and stockholders’ equity	99,449		99,449
Revenue	28,137		59,082
Direct expenses	10,968		23,845
Selling, general and administrative	7,767		15,865
Depreciation and amortization	1,325		2,608
Total operating expenses	20,060		42,318
Operating income	8,077		16,764
Other income (expense)	63		71
Income before income taxes	8,140		16,835
Provision (benefit) for income taxes	(55)		1,543
Net income	8,195		15,292
Cumulative translation adjustment	(279)		(696)
Comprehensive Income	7,916		14,596
Deferred income taxes			1,008
Reserve for uncertain tax positions			92
Non-cash share-based compensation expense			995
Impairment of property and equipment			2
Trade accounts receivable and unbilled revenue			4,083
Prepaid expenses and other current assets			(2,395)
Deferred contract costs
Accounts payable			481
Accrued expenses, wages, bonus and profit sharing			(2,371)
Income taxes receivable and payable			(1,235)
Deferred revenue			(171)
Net cash provided by operating activities			18,389
Net cash used in investing activities			(2,773)
Net cash used in financing activities			(43,058)
Effect of exchange rate changes on cash			(593)
Change in cash and cash equivalents			(28,035)
Cash and cash equivalents at beginning of period			34,733
Cash and cash equivalents at end of period	$ 6,698		$ 6,698
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | Common Class A [Member]
Basic earnings per share (in dollars per share)	$ 0.30		$ 0.47
Diluted earnings per share (in dollars per share)	0.29		0.45
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | Common Class B [Member]
Basic earnings per share (in dollars per share)	0.27		1.31
Diluted earnings per share (in dollars per share)	$ 0.27		$ 1.28

[1] Represents the December 31, 2017 balance adjusted for the ASC 606 transition adjustments.

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Note 1 - Summary of Significant Accounting Policies - Fair Value of Financial Assets and Liabilities (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets, fair value	$ 767	$ 34,478
Money Market Funds [Member]
Assets, fair value	767	13,971
Commercial Paper [Member]
Assets, fair value		10,490
Eurodollar Deposits [Member]
Assets, fair value		10,017
Fair Value, Inputs, Level 1 [Member]
Assets, fair value	767	13,971
Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Assets, fair value	767	13,971
Fair Value, Inputs, Level 1 [Member] | Commercial Paper [Member]
Assets, fair value
Fair Value, Inputs, Level 1 [Member] | Eurodollar Deposits [Member]
Assets, fair value
Fair Value, Inputs, Level 2 [Member]
Assets, fair value		20,507
Fair Value, Inputs, Level 2 [Member] | Money Market Funds [Member]
Assets, fair value
Fair Value, Inputs, Level 2 [Member] | Commercial Paper [Member]
Assets, fair value		10,490
Fair Value, Inputs, Level 2 [Member] | Eurodollar Deposits [Member]
Assets, fair value		10,017
Fair Value, Inputs, Level 3 [Member]
Assets, fair value
Fair Value, Inputs, Level 3 [Member] | Money Market Funds [Member]
Assets, fair value
Fair Value, Inputs, Level 3 [Member] | Commercial Paper [Member]
Assets, fair value
Fair Value, Inputs, Level 3 [Member] | Eurodollar Deposits [Member]
Assets, fair value

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Note 1 - Summary of Significant Accounting Policies - Fair Values of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Total carrying amount of long-term debt	$ 39,781	$ 1,067
Estimated fair value of long-term debt	$ 39,813	$ 1,066

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Note 2 - Recapitalization (Details Textual) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Apr. 17, 2018	Apr. 16, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Common Stock, Par or Stated Value Per Share	$ 0.001		$ 0.001		$ 0.001
Payments Related to Recapitalization			$ 72,370
Conversion of Class B Common Stock Into Class A Common Stock [Member]
Conversion of Stock, Number of Shares Exchanged for Each Share		1
Conversion of Stock, Cash Paid Per Share Converted		$ 19.59
Conversion of Stock, Shares Issued	3,617,615
Payments Related to Recapitalization	$ 72,400

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Note 3 - Contracts With Customers 1 (Details Textual)	6 Months Ended
	Jun. 30, 2018
Revenue, Remaining Performance Obligation, Optional Exemption, Performance Obligation [true false]	true

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Note 3 - Contracts With Customers 2 (Details Textual)	Jun. 30, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue, Remaining Performance Obligation, Amount	$ 341,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue, Remaining Performance Obligation, Amount	284,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue, Remaining Performance Obligation, Amount	53,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil)
Revenue, Remaining Performance Obligation, Amount	$ 678,000

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Note 3 - Contracts With Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue	$ 28,017	$ 28,435	$ 59,034	$ 58,710
Transferred over Time [Member] | Subscription Services [Member]
Revenue	25,653		51,441
Transferred over Time [Member] | Fixed, Non-subscription Services [Member]
Revenue	487		1,779
Transferred over Time [Member] | Unit Price Services [Member]
Revenue	1,720		3,912
Transferred at Point in Time [Member] | Subscription Services [Member]
Revenue	$ 157		$ 1,902

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Note 3 - Contracts With Customers - Information About Receivables, Contract Assets, and Contract Liabilities From Contracts With Customers (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jan. 01, 2018	[1]	Dec. 31, 2017
Accounts receivable, net	$ 10,689	$ 10,689	$ 14,674		$ 14,806
Deferred Revenue	(16,660)	(16,660)	(16,642)		$ (16,878)
Revenue recognized that was included in deferred revenue at beginning of year due to completion of services	(7,733)	(13,577)
Increases due to invoicing of client, net of amounts recognized as revenue	7,558	13,796
Decreases due to completion of services (or portion of services) and transferred to accounts receivable	(41)	(58)
Change due to cumulative catch-up adjustments arising from changes in expected contract consideration	(84)	(153)
Increases due to revenue recognized in the period with additional performance obligations before invoicing	25	56
Other Current Assets [Member]
Contract assets included in other current assets	$ 72	$ 72	$ 74

[1] Represents the December 31, 2017 balance adjusted for the ASC 606 transition adjustments.

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Note 4 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2018
Effective Income Tax Rate Reconciliation, Percent, Total	(1.70%)	32.10%	9.10%	33.50%
Income Tax Expense (Benefit) Related to Recapitalization	$ (1,100,000)
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%	21.00%	35.00%
Increase (Decrease) in Income Tax Expense from Exercise of Options and Dividends Paid to Non-vested Shareholders	$ 558,000		$ 908,000
Increase (Decrease) in Income Tax Expense from Non-deductible Recapitalization Expenses	$ 70,000		$ 137,000
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent					21.00%

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Note 5 - Notes Payable (Details Textual)		2 Months Ended	3 Months Ended	6 Months Ended		36 Months Ended
	Apr. 18, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Apr. 30, 2023 USD ($)
Proceeds from Notes Payable, Total				$ 40,000,000
Credit Agreement [Member] | First National Bank of Omaha [Member]
Debt Instrument, Covenant, Minimum Fixed Charge Coverage Ratio				1.1
Debt Instrument, Covenant, Maximum Cash Flow Leverage Ratio				3
Origination Fee Percentage	0.25%
Credit Agreement [Member] | First National Bank of Omaha [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	2.25%
Credit Agreement [Member] | First National Bank of Omaha [Member] | Term Loan [Member]
Proceeds from Notes Payable, Total	$ 40,000,000
Debt Instrument, Periodic Payment, Total	$ 462,988
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Credit Agreement [Member] | First National Bank of Omaha [Member] | Term Loan [Member] | Scenario, Forecast [Member]
Debt Instrument, Periodic Payment, Total						$ 526,362
Credit Agreement [Member] | First National Bank of Omaha [Member] | Delayed Draw Term Loan [Member]
Debt Instrument, Unused Borrowing Capacity, Amount	$ 15,000,000
Proceeds from Issuance of Long-term Debt, Total		$ 0
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.20%
Credit Agreement [Member] | First National Bank of Omaha [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 15,000,000
Long-term Line of Credit, Total		$ 0	$ 0	$ 0
Short-term Debt, Weighted Average Interest Rate, over Time			4.16%	4.16%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.20%
Credit Agreement [Member] | First National Bank of Omaha [Member] | Revolving Credit Facility [Member] | Weighted Average [Member]
Line of Credit Facility, Weighted Average Borrowings			$ 385,000	$ 193,000
Credit Agreement [Member] | First National Bank of Omaha [Member] | Revolving Credit Facility [Member] | Delayed Draw Term Loan [Member]
Debt Instrument, Percentage Bearing Variable Interest, Percentage Rate		4.24%	4.24%	4.24%

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Note 5 - Notes Payable - Summary of Notes Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Less: current portion	$ (3,575)	$ (1,067)
Less: unamortized debt issuance costs	(177)
Notes payable, net of current portion	36,029
Term Loan [Member]
Term Loans	$ 39,781	$ 1,067

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Note 5 - Notes Payable - Scheduled Maturities of Notes Payable (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Remainder of 2018	$ 1,786
2019	3,715
2020	4,418
2021	4,916
2022	5,171
Thereafter	$ 19,775

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Note 6 - Share-based Compensation (Details Textual)	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($) shares	Jun. 30, 2018 USD ($) shares
Common Class A Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		116,276
The 2001 Equity Incentive Plan [Member] | Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		5 years
The 2001 Equity Incentive Plan [Member] | Employee Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		5 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Director Plan 2004 [Member] | Nonqualified Stock Options [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Director Plan 2004 [Member] | Nonqualified Stock Options [Member] | Minimum [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		3 years
Director Plan 2004 [Member] | Nonqualified Stock Options [Member] | Maximum [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
The 2006 Equity Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		5 years
The 2006 Equity Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Common Class B [Member]
Share-based Compensation Arrangement by Share-based Payment Award Accelerated Compensation Cost | $	$ 331,000	$ 331,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross
Common Class B [Member] | The 2001 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	300,000	300,000
Common Class B [Member] | Director Plan 2004 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	500,000	500,000
Common Class B [Member] | The 2006 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	300,000	300,000
Common Class A [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		116,276
Common Class A [Member] | Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total | $	$ 1,600,000	$ 1,600,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		3 years 18 days
Common Class A [Member] | Nonvested [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total | $	$ 593,000	$ 593,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		2 years 339 days
Common Class A [Member] | The 2001 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,800,000	1,800,000
Common Class A [Member] | Director Plan 2004 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	3,000,000	3,000,000
Common Class A [Member] | The 2006 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,800,000	1,800,000

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Note 6 - Share-based Compensation - Stock Options Valuation Assumptions (Details)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Common Class A [Member]
Expected dividend yield at date of grant		2.62%
Expected stock price volatility		32.45%
Risk-free interest rate		2.18%
Expected life of options (in years) (Year)		6 years 292 days
Common Class B [Member]
Expected dividend yield at date of grant		8.06%
Expected stock price volatility		26.75%
Risk-free interest rate		2.18%
Expected life of options (in years) (Year)		6 years 292 days
Common Stock [Member]
Expected dividend yield at date of grant	2.59%
Expected stock price volatility	32.47%
Risk-free interest rate	2.51%
Expected life of options (in years) (Year)	7 years 109 days

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Note 6 - Share-based Compensation - Stock Option Activity Under Equity Incentive Plans and Director Plan (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) $ / shares shares
Exercised, number of options (in shares) | shares	(276,716)
Exercised, weighted average exercise price (in dollars per share) | $ / shares	$ 31.78
Exercised, aggregate intrinsic value | $	$ 5,937
Common Class A [Member]
Outstanding, number of options (in shares) | shares	1,746,634
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 13.88
Granted, number of options (in shares) | shares	116,276
Granted, weighted average exercise price (in dollars per share) | $ / shares	$ 36.12
Exercised, number of options (in shares) | shares	(344,958)
Exercised, weighted average exercise price (in dollars per share) | $ / shares	$ 13.78
Exercised, aggregate intrinsic value | $	$ 7,119
Forfeited, number of options (in shares) | shares	(21,383)
Forfeited, weighted average exercise price (in dollars per share) | $ / shares	$ 26.18
Outstanding, number of options (in shares) | shares	1,496,569
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 15.46
Outstanding, weighted average remaining contractual term (Year)	5 years 87 days
Outstanding, aggregate intrinsic value | $	$ 32,838
Exercisable, number of options (in shares) | shares	1,104,429
Weighted average exercise price (in dollars per share) | $ / shares	$ 13.29
Exercisable, weighted average remaining contractual term (Year)	4 years 80 days
Exercisable, aggregate intrinsic value | $	$ 26,631
Common Class B [Member]
Outstanding, number of options (in shares) | shares	276,716
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 31.78
Granted, number of options (in shares) | shares
Granted, weighted average exercise price (in dollars per share) | $ / shares
Forfeited, number of options (in shares) | shares
Forfeited, weighted average exercise price (in dollars per share) | $ / shares
Outstanding, number of options (in shares) | shares
Outstanding, weighted average exercise price (in dollars per share) | $ / shares
Outstanding, weighted average remaining contractual term (Year)
Outstanding, aggregate intrinsic value | $
Exercisable, number of options (in shares) | shares
Weighted average exercise price (in dollars per share) | $ / shares
Exercisable, weighted average remaining contractual term (Year)
Exercisable, aggregate intrinsic value | $

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Note 6 - Share-based Compensation - Non-vested Stock (Details)	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Common Class A [Member]
Outstanding (in shares) | shares	81,667
Outstanding (in dollars per share) | $ / shares	$ 13.80
Granted (in shares) | shares	6,793
Granted (in dollars per share) | $ / shares	$ 36.80
Vested/Settled in Recapitalization (in shares) | shares
Vested/Settled in Recapitalization (in dollars per share) | $ / shares
Forfeited (in shares) | shares	(10,289)
Forfeited (in dollars per share) | $ / shares	$ 15.23
Outstanding (in shares) | shares	78,171
Outstanding (in dollars per share) | $ / shares	$ 15.56
Common Class B [Member]
Outstanding (in shares) | shares	13,611
Outstanding (in dollars per share) | $ / shares	$ 36.65
Granted (in shares) | shares
Granted (in dollars per share) | $ / shares
Vested/Settled in Recapitalization (in shares) | shares	(13,611)
Vested/Settled in Recapitalization (in dollars per share) | $ / shares	$ 36.65
Forfeited (in shares) | shares
Forfeited (in dollars per share) | $ / shares
Outstanding (in shares) | shares
Outstanding (in dollars per share) | $ / shares

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Note 7 - Goodwill and Other Intangible Assets - Summary of Changes in the Carrying Amount of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Balance	$ 58,021
Foreign currency translation	(108)
Balance	$ 57,913

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Note 7 - Goodwill and Other Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Trade name	$ 1,191	$ 1,191
Total other intangible assets	13,459	13,470
Accumulated amortization	(11,031)	(10,706)
Other intangible assets, net	2,428	2,764
Customer Relationships [Member]
Intangible assets	9,336	9,347
Technology-Based Intangible Assets [Member]
Intangible assets	1,360	1,360
Trade Names [Member]
Intangible assets	$ 1,572	$ 1,572

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Note 8 - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property and equipment	$ 43,223	$ 40,206
Accumulated depreciation	(29,903)	(27,847)
Property and equipment, net	$ 13,320	$ 12,359

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Note 9 - Earnings Per Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Percentage of Class B Common Stock Dividend or Other Distribution for Class A Common Stock Dividend or Other Distribution	0.16667%		0.16667%
Common Class A [Member]
Stock Options Excluded from Computation of Earnings Per Share, Amount		104,835		115,908
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	84,963		78,945	52,707
Common Class B [Member]
Stock Options Excluded from Computation of Earnings Per Share, Amount				19,318
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		17,473		38,784

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Note 9 - Earnings Per Share - Net Income Per Share Computation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Numerator for net income per share - basic:
Net income	$ 7,948	$ 5,752	$ 15,254	$ 12,272
Common Class A [Member]
Numerator for net income per share - basic:
Net income	7,000	2,855	10,630	6,088
Allocation of distributed and undistributed income to unvested restricted stock shareholders	(23)	(22)	(38)	(48)
Net income attributable to common shareholders	$ 6,977	$ 2,833	$ 10,592	$ 6,040
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic (in shares)	23,957	20,752	22,429	20,745
Net income per share – basic (in dollars per share)	$ 0.29	$ 0.14	$ 0.47	$ 0.29
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$ 6,977	$ 2,833	$ 10,592	$ 6,040
Weighted average common shares outstanding - basic (in shares)	23,957	20,752	22,429	20,745
Weighted average effect of dilutive securities – stock options (in shares)	889	773	921	659
Denominator for diluted earnings per share – adjusted weighted average shares (in shares)	24,846	21,525	23,350	21,404
Net income per share – diluted (in dollars per share)	$ 0.28	$ 0.13	$ 0.45	$ 0.28
Common Class B [Member]
Numerator for net income per share - basic:
Net income	$ 948	$ 2,897	$ 4,624	$ 6,184
Allocation of distributed and undistributed income to unvested restricted stock shareholders	(4)	(22)	(18)	(49)
Net income attributable to common shareholders	$ 944	$ 2,875	$ 4,606	$ 6,135
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic (in shares)	3,527	3,514	3,527	3,514
Net income per share – basic (in dollars per share)	$ 0.27	$ 0.82	$ 1.31	$ 1.75
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$ 944	$ 2,875	$ 4,606	$ 6,135
Weighted average common shares outstanding - basic (in shares)	3,527	3,514	3,527	3,514
Weighted average effect of dilutive securities – stock options (in shares)	93	77	101	70
Denominator for diluted earnings per share – adjusted weighted average shares (in shares)	3,620	3,591	3,628	3,584
Net income per share – diluted (in dollars per share)	$ 0.26	$ 0.80	$ 1.27	$ 1.71

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Note 10 - Related Party (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Ameritas Life Insurance Corp [Member]
Related Party Transaction, Amounts of Transaction	$ 53,000	$ 62,000	$ 94,000	$ 120,000
PracticingExcellence.com [Member]
Revenue from Related Parties	$ 66,000	$ 171,000	$ 109,000	$ 295,000

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Note 11 - Segment Information (Details Textual)	6 Months Ended
	Jun. 30, 2018
Number of Operating Segments	6
Number of Reportable Segments	1

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Note 11 - Segment Information - Assets by Geographic Area (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Long-lived assets	$ 79,252	$ 75,057
Total assets	102,885	127,316
UNITED STATES
Long-lived assets	76,871	72,562
Total assets	97,101	110,785
CANADA
Long-lived assets	2,381	2,495
Total assets	$ 5,784	$ 16,531