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): May 7, 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))

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. □

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

Item 2.02. Results of Operations and Financial Condition.

On May 7, 2019, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended March 31, 2019. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

On May 8, 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 March 31, 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/m6/p/b2o44bov.

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 May 7, 2019.

(99.2)       Script for conference call and online Web simulcast, held May 8, 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: May 8, 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

FIRST QUARTER 2019 RESULTS

LINCOLN, Nebraska (May 7, 2019) — National Research Corporation (NASDAQ: NRC) today announced results for the first quarter of 2019.

● Net New Sales of $4.1 million

● Net Income increased to $8.2 million

● 650+ core clients achieve Contract Value CAGR of 20%

Commenting on recent performance, Michael D. Hays, chief executive officer of National Research Corporation said, “The Company’s shift from its legacy mix of business in favor of our VoC platform with embedded tools such as Transparency and Care Transitions, has surpassed 20% CAGR for our 650+ core clients. This group of clients now accounts for $101 million of contract value, up from $53 million at year-end 2015.”

Revenue for the quarter ended March 31, 2019 was $31.5 million, compared to $31.0 million for the same quarter in 2018. Net income for the quarter ended March 31, 2019, was $8.2 million, compared to $7.3 million for the quarter ended March 31, 2018. Diluted earnings per share increased to $0.32 for the common stock (formerly Class A) for the quarter ended March 31, 2019, from diluted earnings per share of $0.17 for Class A shares and $1.01 for Class B shares for the quarter ended March 31, 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 first quarter financial performance, Kevin Karas, chief financial officer of National Research Corporation, said, “We achieved record high operating margins in the first quarter, due in large part to variable cost savings driven by the shift in our revenue mix from legacy solutions to VoC platform revenue. On a cumulative basis, through the first quarter of 2019, this shift in revenue mix represents over $12 million in lower variable cost of product expense since the end of 2015. Our 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 first quarter of 7% over prior year.”

NRC Announces First Quarter 2019 Results

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May 7, 2019

A listen-only simulcast of National Research Corporation’s 2019 first quarter conference call will be available online at http://edge.media-server.com/m6/p/b2o44bov on May 8, 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 First Quarter 2019 Results

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May 7, 2019

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended March 31,
	2019			2018
Revenue	$	31,480		$	31,017
Operating expenses:
Direct		11,654			12,909
Selling, general and administrative		7,707			7,867
Depreciation and amortization		1,415			1,283
Total operating expenses		20,776			22,059
Operating income		10,704			8,958
Other income (expense):
Interest income		6			45
Interest expense		(570	)		(8	)
Other, net		(280	)		(28	)
Total other income (expense)		(844	)		9
Income before income taxes		9,860			8,967
Provision for income taxes		1,664			1,661
Net income	$	8,196		$	7,306
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Common (formerly Class A)	$	0.33		$	0.17
Class B	$	--		$	1.04
Diluted Earnings Per Share:
Common (formerly Class A)	$	0.32		$	0.17
Class B	$	--		$	1.01
Weighted average shares and share equivalents outstanding
Common (formerly Class A) - Basic		24,766			20,884
Class B - Basic		--			3,527
Common (formerly Class A) - Diluted		25,509			21,837
Class B - Diluted		--			3,630

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NRC Announces First Quarter 2019 Results

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May 7, 2019 

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	March 31, 2019			December 31, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,641		$	12,991
Accounts receivable, net		15,888			11,922
Income taxes receivable		217			348
Other current assets		4,127			3,149
Total current assets		22,873			28,410
Net property and equipment		13,968			14,153
Goodwill		57,877			57,831
Other, net		9,853			7,638
Total assets	$	104,571		$	108,032
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable and line of credit	$	5,464		$	3,667
Accounts payable and accrued expenses		4,101			3,447
Accrued compensation		4,017			5,798
Income taxes payable		1,763			636
Dividends payable		4,724			17,113
Deferred revenue		18,241			16,244
Other current liabilities		928			204
Total current liabilities		39,238			47,109
Non-current liabilities		42,594			41,840
Total liabilities		81,832			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 30,009,919 in 2019 and 29,917,667 in 2018, outstanding 24,864,391 in 2019 and 24,800,796 in 2018		30			30
Additional paid-in capital		158,247			157,312
Retained earnings (accumulated deficit)		(102,867	)		(106,339	)
Accumulated other comprehensive loss, foreign currency translation adjustment		(2,551	)		(2,916	)
Treasury stock		(30,120	)		(29,004	)
Total shareholders’ equity		22,739			19,083
Total liabilities and shareholders’ equity	$	104,571		$	108,032

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EX-99.2

Exhibit 99.2

Mike: 

Thank you, ___________, and welcome everyone to National Research Corporation’s 2019 first 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.

Contract value growth in our Voice of the Customer digital platform continues with more and 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.

After Kevin shares with us his prepared remarks regarding financial performance, we’ll discuss how the Voice of the Customer platform is evolving.

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

Kevin

Thank you, Mike.

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Total contract value at the end of the first quarter 2019 totaled $130.1 million, representing 7% growth over the same period in the prior year. Healthcare system clients with agreements for multiple solutions represented 25% of our client base at the end of the first quarter 2019, up from 23% at the same time last year. Total contract value for our digital Voice of the Customer platform solutions increased to $79.1 million, compared to $59.4 million at the end of the first quarter of 2018.

First quarter 2019 revenue was $31.5 million, an increase of 1.5% over the first quarter 2018. First quarter revenue for our digital Voice of the Customer platform solutions increased to 58% of total revenue compared to 45% of total revenue in the first quarter of 2018.

Consolidated operating income for the first quarter 2019 was $10.7 million or 34% of revenue, compared to $9.0 million or 29% of revenue for the same period last year.

Total operating expenses of $20.8 million decreased by 6% in comparison to the prior year.

Direct expenses decreased by 10% to $11.7 million for the first quarter 2019, compared to $12.9 million for the same period in 2018. Direct expenses as a percent of revenue were 37% for the first quarter 2019 compared to 42% in 2018.

3

Direct expenses decreased due in large part to variable cost of product savings driven by the continued shift in our revenue mix from legacy solutions to Voice of the Customer platform revenue. The expense savings over the past three years have been significant, with variable direct expenses as a percentage of revenue decreasing to 18% for the first quarter of 2019 compared to 24% in the first quarter of 2016. These savings have provided incremental cash flow for reinvestment in the business and increased returns to shareholders.

Selling, general and administrative expenses decreased to $7.7 million for the first quarter 2019, compared to $7.9 million for the same period in 2018. SG&A expenses were 24% of revenue for the first quarter in 2019 and 25% of revenue for the first quarter in 2018.

Selling, general and administrative expenses decreased primarily as a result of a reduction in the legal and accounting costs associated with the Recapitalization in 2018 partially offset by increased software and platform hosting expenses.

4

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

Other income and expense changed from $9,000 of net other income in the first of quarter of 2018 to $844,000 of net other expense in the first quarter of 2019. This change was primarily due to increased interest expense from the new term loan originated in April 2018 and foreign exchange rates changes on the revaluation of intercompany transactions.

The Company’s income tax expense was $1.7 million for the first quarter 2019 and 2018. The effective tax rate was 17% for the first quarter of 2019, compared to an effective rate of 19% for the same period in 2018. The decrease in the effective rate is primarily due to non-deductible Recapitalization expenses that were incurred in the first quarter of 2018 and increased tax benefits from the exercise of options and dividends paid to non-vested shareholders in the first quarter of 2019 compared to 2018.

Net income for the first quarter was $8.2 million in 2019, compared to $7.3 million in 2018.

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

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Mike:

Thank you, Kevin.

As Kevin reported, our VoC Platform now accounts for over half of our revenue. That said, we understand reported consolidated top-line revenue makes it hard to track and fully comprehend the transformation of the business and growth in the VoC platform.

To provide more visibility, let me highlight an interesting fact. Today, 650 client organizations account for $101 million or 78% of NRC Health’s $130 million of contract value. At year-end 2015, this group accounted for $53 million in contract value. The doubling of contract value among today’s core clients in three years or so has been driven by the VoC platform’s expanding solution offerings. While we have yet to fully digitize 100% of this group’s current NRC spend, these 650 clients--some long standing, some recent--have compounded annual contract value growth rate of over 20%.

As we have transitioned the business over the past three years or so by divesting and de-emphasizing select products, while at the same time converting legacy experience spend to our Voice of the Customer platform, the underlaying double-digit growth among core clients has been masked. As we work through this transition, growth rate will become more visible from reported top-line revenue.   

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This completes our prepared remarks, so operator I will now ask 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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