8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report

(Date of earliest

event reported):     August 6, 2019

National Research Corporation

(Exact name of registrant as specified in its charter)

Wisconsin	001-35929	47-0634000
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1245 Q Street, Lincoln, Nebraska 68508

(Address of principal executive offices, including zip code)

(402) 475-2525

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	NRC	The NASDAQ stock market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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. ☐

Item 2.02. Results of Operations and Financial Condition.

On August 6, 2019, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended June 30, 2019. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

On August 7, 2019, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the quarter ended June 30, 2019. A copy of the script for such conference call and simulcast is furnished as Exhibit 99.2 and is incorporated by reference herein. An archive of such conference call and simulcast and the related question and answer session will be available online at http://edge.media-server.com/mmc/p/vcr2isv8.

Item 9.01. Financial Statements and Exhibits.

(a)     Not applicable.

(b)     Not applicable.

(c)     Not applicable.

(d)     Exhibits. The exhibits listed in the exhibit index below are being furnished herewith.

EXHIBIT INDEX

(99.1)     Press Release of National Research Corporation, dated August 6, 2019.

(99.2)     Script for conference call and online Web simulcast, held August 7, 2019.

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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 hereunto duly authorized.

Date: August 7, 2019

NATIONAL RESEARCH CORPORATION
By:	/s/ Kevin R. Karas
	Kevin R. Karas
	Senior Vice President Finance, Chief Financial
	Officer, Treasurer and Secretary

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EX-99.1

Exhibit 99.1

1245 “Q” Street Lincoln, NE 68508 Phone: 402-475-2525 Fax: 402-475-9061

Contact: Kevin R. Karas Chief Financial Officer 402-475-2525

NATIONAL RESEARCH CORPORATION ANNOUNCES

SECOND QUARTER 2019 RESULTS

LINCOLN, Nebraska (August 6, 2019) — National Research Corporation (NASDAQ:NRC) today announced results for the second quarter of 2019.

● Net New Sales of $6.1 million up 14%

● Revenue increased 12% to $31.4 million

● Operating Income increased 31% to $10.1 million

● Voice of the Customer (VoC) platform revenue increased by 38%

Commenting on recent performance, Michael D. Hays, chief executive officer of National Research Corporation said, “The Company’s performance for the quarter was extremely strong and that momentum continues in the third quarter with the signing of the largest new client contract of the year.”

Revenue for the quarter ended June 30, 2019 was $31.4 million, compared to $28.0 million for the same quarter in 2018. Net income for the quarter ended June 30, 2019, was $7.4 million, compared to $7.9 million for the quarter ended June 30, 2018. Diluted earnings per share increased to $0.29 for the common stock (formerly Class A) for the quarter ended June 30, 2019, from diluted earnings per share of $0.28 for Class A shares and $0.26 for Class B shares for the quarter ended June 30, 2018. Due to the recapitalization transaction on April 17, 2018, income has been allocated to both classes of shares through April 16, 2018, and allocated only to common stock (formerly Class A) after April 16, 2018.

Regarding the Company’s second quarter financial performance, Kevin Karas, chief financial officer of National Research Corporation, said, “Our sales performance continues to gain momentum with our total net new sales for the trailing four quarters increasing by over 13% compared to the prior four quarters. The continued focus on adding new customers to the VoC platform solution and driving value for existing customers resulted in an increase in total contract value in the second quarter of 7% over the prior year and expansion of operating income margins to 33% on a year-to-date basis.”

NRC Announces Second Quarter 2019 Results

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August 6, 2019

A listen-only simulcast of National Research Corporation’s 2019 second quarter conference call will be available online at http://edge.media-server.com/mmc/p/vcr2isv8 on August 7, 2019, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately one hour later and continue for 30 days.

For more than 38 years, National Research Corporation has been a leading provider of analytics and insights that facilitate measurement and improvement of the patient and employee experience while also increasing patient engagement and customer loyalty for healthcare providers, payers and other healthcare organizations in the United States and Canada. The Company’s solutions enable its clients to understand the voice of the customer with greater clarity, immediacy and depth.

This press release includes “forward-looking” statements related to the Company that can generally be identified as describing the Company’s future plans, objectives or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect the Company’s future results, please see the Company’s filings with the Securities and Exchange Commission.

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NRC Announces Second Quarter 2019 Results

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August 6, 2019

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Revenue	$	31,414		$	28,017		$	62,894		$	59,034
Operating expenses:
Direct expenses		11,506			10,996			23,160			23,160
Selling, general and administrative		8,319			7,940			16,026			15,808
Depreciation and amortization		1,440			1,325			2,855			2,608
Total operating expenses		21,265			20,261			42,041			42,320
Operating income		10,149			7,756			20,853			16,714
Other income (expense):
Interest income		8			9			14			54
Interest expense		(533	)		(439	)		(1,103	)		(447	)
Other, net		(139	)		493			(419	)		464
Total other income (expense)		(664	)		63			(1,508	)		71
Income before income taxes		9,485			7,819			19,345			16,785
Provision (benefit) for income taxes		2,092			(129	)		3,756			1,531
Net income	$	7,393		$	7,948		$	15,589		$	15,254
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Common (formerly Class A)	$	0.30		$	0.29		$	0.63		$	0.47
Class B	$	--		$	0.27		$	--		$	1.31
Diluted Earnings Per Share:
Common (formerly Class A)	$	0.29		$	0.28		$	0.61		$	0.45
Class B	$	--		$	0.26		$	--		$	1.27
Weighted average shares and share equivalents outstanding
Common (formerly Class A) - basic		24,789			23,957			24,777			22,429
Class B - basic		--			3,527			--			3,527
Common (formerly Class A) - diluted		25,586			24,846			25,549			23,350
Class B - diluted		--			3,620			--			3,628

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NRC Announces Second Quarter 2019 Results

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August 6, 2019

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts and par value)

	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	4,020		$	12,991
Accounts receivable, net		15,087			11,922
Income taxes receivable		637			348
Other current assets		3,144			3,149
Total current assets		22,888			28,410
Net property and equipment		13,872			14,153
Goodwill		57,922			57,831
Other, net		9,593			7,638
Total assets	$	104,275		$	108,032
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable and line of credit	$	4,890		$	3,667
Accounts payable and accrued expenses		3,999			3,447
Accrued compensation		5,535			5,798
Income taxes payable		43			636
Dividends payable		4,727			17,113
Deferred revenue		16,988			16,244
Other current liabilities		894			204
Total current liabilities		37,076			47,109
Non-current liabilities		41,232			41,840
Total liabilities		78,308			88,949
Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued		--			--
Common stock, $0.001 par value; authorized 60,000,000 shares, issued 30,027,919 in 2019 and 29,917,667 in 2018, outstanding 24,879,414 in 2019 and 24,800,796 in 2018		30			30
Additional paid-in capital		158,691			157,312
Retained earnings (accumulated deficit)		(100,201	)		(106,339	)
Accumulated other comprehensive loss, foreign currency translation adjustment		(2,296	)		(2,916	)
Treasury stock		(30,257	)		(29,004	)
Total shareholders’ equity		25,967			19,083
Total liabilities and shareholders’ equity	$	104,275		$	108,032

-END- 

EX-99.2

Exhibit 99.2

Mike:

Thank you, ___________, and welcome everyone to National Research Corporation’s 2019 second quarter earnings call. My name is Mike Hays, the Company’s CEO and joining me on the call today is Kevin Karas, our Chief Financial Officer.

Before we continue, I would ask Kevin to review conditions related to any forward-looking statements that may be made as part of today’s call.

Kevin.

Kevin:

Thank you, Mike.

This conference call includes forward-looking statements related to the Company that involve risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the facts that could affect the Company's future results, please see the Company's filings with the Securities and Exchange Commission. With that, I’ll turn it back to you, Mike.

Mike:

Thanks, Kevin, and again, welcome everyone.

In the second quarter and year-to-date, contract value growth in our Voice of the Customer digital platform has continued with more current clients expanding their uses of the platform, and new logo wins displacing Press Ganey add to our marketplace footprint. The industry is realizing the value of reallocating healthcare systems’ legacy patient satisfaction spend against a higher value offering which is creating C-suite and enterprise-wide attention.

With that, I will now turn the call over to Kevin.

Kevin

Thank you, Mike.

Total contract value at the end of the second quarter 2019 ended at $133.6 million, representing 7% growth over the same period in the prior year. Healthcare system clients with agreements for multiple solutions represented 26% of our client base at the end of the second quarter 2019, up from 24% at the same time last year. Total contract value for our digital Voice of the Customer platform solutions increased to $84.2 million, compared to $64.1 million at the end of the second quarter of 2018.

Second quarter 2019 revenue was $31.4 million, an increase of 12% over the second quarter 2018. Second quarter revenue for our digital Voice of the Customer platform solutions increased to 62% of total revenue compared to 50% of total revenue in the second quarter of 2018.

Consolidated operating income for the second quarter 2019 was $10.1 million or 32% of revenue, compared to $7.8 million or 28% of revenue for the same period last year.

Total operating expenses of $21.3 million increased by 5% in comparison to the prior year.

Direct expenses increased by 5% to $11.5 million for the second quarter 2019, compared to $11.0 million for the same period in 2018. Direct expenses as a percent of revenue were 37% for the second quarter 2019 compared to 39% in 2018.

Direct expenses increased due to growth in fixed costs partially offset by a decrease in variable expenses. Fixed expenses increased primarily as a result of increased higher salary and benefit costs in the customer service and information technology areas partially offset by lower variable costs due in a large part to the continued shift in our revenue mix from legacy solutions to Voice of the Customer platform revenue. Variable direct expenses as a percentage of revenue decreased to 17% for the second quarter of 2019 compared to 19% in the second quarter of 2018.

Selling, general and administrative expenses increased to $8.3 million for the second quarter 2019, compared to $7.9 million for the same period in 2018. SG&A expenses were 26% of revenue for the second quarter in 2019 and 28% of revenue for the second quarter in 2018.

Selling, general and administrative expenses increased in 2019 due to increased software license and platform hosting expense, higher contracted services and additional travel costs.

Depreciation and amortization expense increased to $1.4 million for the second quarter of 2019 compared to $1.3 million in 2018. This increase in expense is driven by additional investments in our technology platform.

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Other income and expense changed from $63,000 of net other income in the second of quarter of 2018 to $664,000 of net other expense in the second quarter of 2019. This change was primarily due to increased interest expense from the new term loan that originated in April 2018 and the impact of foreign exchange rate changes on the revaluation of intercompany transactions.

The Company’s income tax expense was $2.1 million for the second quarter 2019 compared to a $129,000 income tax benefit in 2018. The effective tax rate was 22% for the second quarter of 2019, compared to an effective tax rate benefit of 2% for the same period in 2018. The increase in the effective rate is primarily due to the impact from the income tax benefits from the Recapitalization for accelerated vesting of restricted stock and settlement of stock options, as well as additional tax benefits from the exercise of options and dividends paid to non-vested shareholders in 2018.

Net income for the second quarter was $7.4 million in 2019, compared to $7.9 million in 2018.

With that I’ll turn the call back to Mike.

Mike:

Thank you, Kevin.

As Kevin reviewed, financial performance in the second quarter was very strong. Perhaps the clearest metric is the Voice of Customer Platform revenue that increased 38% year-over-year showing accelerated migration from legacy pencil and paper business to the digital Real-time feedback. A recent new win early in this third quarter is a classic example of tangible points of differentiation that has been created by NRC Health VoC platform. A large health system selected NRC Health VoC platform head-to-head against the Press Ganey legacy approach. While wins against Press Ganey are more and more common, this new NRC client is noticeable in that it represents the largest contract value win for the Company this year.

This completes our prepared remarks, so operator I will now ask you to open the call to questions.

Closing Statement – Mike:

Thank you for your time today. We look forward to reporting our progress next quarter. 

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