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):

November 5, 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)	(Zip Code)

(402) 475-2525

(Registrant's telephone number, including area code)

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

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 November 5, 2019, National Research Corporation, a Wisconsin corporation (the "Company"), issued a press release announcing its financial and operating results for the third quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein. On November 6, 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 September 30, 2019. A copy of the script for such conference call and simulcast is furnished as Exhibit 99.2 to this report. An archive of such conference call and simulcast and the related question and answer session will be available online at https://edge.media-server.com/mmc/p/to3vagfu.
Item 9.01	Financial Statements and Exhibits.
	(d)	Exhibits.
	EXHIBIT NUMBER	EXHIBIT DESCRIPTION
	99.1 99.2	National Research Corporation press release announcing its financial and operating results for the third quarter ended September 30, 2019. National Research Corporation script for the conference call and online Web simulcast held November 6, 2019.
	The information contained in Items 2.02 and 9.01 of this report and the exhibits hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
	The information in Items 2.02 and 9.01 of this report and the exhibits hereto may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements are made based on the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results or events may differ from those anticipated by forward-looking statements. Please refer to the italicized paragraph at the end of the attached press release and various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission for information concerning risks, uncertainties, and other factors that may affect future results.

SIGNATURE

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.

	NATIONAL RESEARCH CORPORATION
	(Registrant)
Date: November 6, 2019	By:	/s/ Kevin R. Karas
		Kevin R. Karas
		Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary

EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT DESCRIPTION
99.1 99.2	National Research Corporation press release announcing its financial and operating results for the third quarter ended September 30, 2019. National Research Corporation script for the conference call and online Web simulcast held November 6, 2019.

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

THIRD QUARTER 2019 RESULTS

LINCOLN, Nebraska (November 5, 2019) — National Research Corporation (NASDAQ:NRC) today announced results for the third quarter of 2019.

In comparison to the third quarter of 2018:

● Record sales—Net New Sales of $10.0 million

● Total Contract Value increased to $140.5 million up 11%

● Revenue increased 8% to $32.5 million

● Operating Income increased 11% to $10.2 million

● Voice of the Customer (VoC) platform revenue increased by 35%

Commenting on recent performance, Michael D. Hays, chief executive officer of National Research Corporation said, “Several of the largest and most prestigious health systems in the country switched to NRC’s Voice of the Customer platform in the third quarter, setting a new sales record. The pipeline for the balance of 2019 and 2020 is equally impressive.”

Revenue for the quarter ended September 30, 2019, was $32.5 million, compared to $30.0 million for the same quarter in 2018. Net income for the quarter ended September 30, 2019, was $8.1 million, compared to $7.0 million for the quarter ended September 30, 2018. Diluted earnings per share increased to $0.31 for the common stock (formerly Class A) for the quarter ended September 30, 2019, from diluted earnings per share of $0.27 for the quarter ended September 30, 2018.

Regarding the Company’s third quarter financial performance, Kevin Karas, chief financial officer of National Research Corporation, said, “Our sales performance continued to gain momentum with our net new sales year-to-date increasing by 28% compared to the first three quarters of 2018. 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 third quarter 2019 of 11% over the prior year. VoC platform contract value has grown by 33% over the third quarter of 2018 and now represents 66% of total contract value.”

NRC Announces Third Quarter 2019 Results

Page 2

November 5, 2019

A listen-only simulcast of National Research Corporation’s 2019 third quarter conference call will be available online at http://edge.media-server.com/mmc/p/to3vagfu on November 6, 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.

-END-

NRC Announces Third Quarter 2019 Results

Page 3

November 5, 2019

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue	$	32,465		$	30,013		$	95,359		$	89,047
Operating expenses:
Direct expenses		12,109			11,780			35,269			35,685
Selling, general and administrative		8,706			7,679			24,732			23,486
Depreciation and amortization		1,430			1,388			4,285			3,996
Total operating expenses		22,245			20,847			64,286			63,167
Operating income		10,220			9,166			31,073			25,880
Other income (expense):
Interest income		10			3			24			57
Interest expense		(510	)		(544	)		(1,613	)		(990	)
Other, net		89			(242	)		(330	)		222
Total other income (expense)		(411	)		(783	)		(1,919	)		(711	)
Income before income taxes		9,809			8,383			29,154			25,169
Provision (benefit) for income taxes		1,690			1,391			5,446			2,923
Net income	$	8,119		$	6,992		$	23,708		$	22,246
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.33		$	0.28		$	0.95		$	0.76
Class B	$	--		$	--		$	--		$	1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.31		$	0.27		$	0.92		$	0.73
Class B	$	--		$	--		$	--		$	1.27
Weighted average shares and share equivalents outstanding
Common (formerly Class A) - basic		24,827			24,671			24,794			23,184
Class B - basic		--			--			--			3,527
Common (formerly Class A) - diluted		25,741			25,526			25,624			24,083
Class B - diluted		--			--			--			3,628

-END-

NRC Announces Third Quarter 2019 Results

Page 4

November 5, 2019

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	8,358		$	12,991
Accounts receivable, net		15,308			11,922
Income taxes receivable		556			348
Other current assets		2,348			3,149
Total current assets		26,570			28,410
Net property and equipment		13,696			14,153
Goodwill		57,896			57,831
Other, net		9,487			7,638
Total assets	$	107,649		$	108,032
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable and line of credit	$	4,133		$	3,667
Accounts payable and accrued expenses		4,281			3,447
Accrued compensation		5,192			5,798
Income taxes payable		14			636
Dividends payable		4,735			17,113
Deferred revenue		19,133			16,244
Other current liabilities		824			204
Total current liabilities		38,312			47,109
Notes payable, net of current portion		30,977			34,176
Other non-current liabilities		9,385			7,664
Total liabilities		78,674			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 30,100,762 in 2019 and 29,917,667 in 2018, outstanding 24,920,050 in 2019 and 24,800,796 in 2018		30			30
Additional paid-in capital		160,524			157,312
Retained earnings (accumulated deficit)		(96,817	)		(106,339	)
Accumulated other comprehensive loss, foreign currency translation adjustment		(2,442	)		(2,916	)
Treasury stock		(32,320	)		(29,004	)
Total shareholders’ equity		28,975			19,083
Total liabilities and shareholders’ equity	$	107,649		$	108,032

-END- 

EX-99.2

Exhibit 99.2

Mike:

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

The highlight of the third quarter was clearly our accelerating sales momentum which actually set a net new sales record of $10 million comprised of a number of referenceable wins including one, if not the largest, client of PRC. Now in the early days of the fourth quarter, one, if not the, most prestigious client of Press Ganey, has switched to NRC Health.

I will add some additional comments after Kevin shares with us the details of our financial performance in the quarter, Kevin

Kevin

Thank you, Mike.

Total contract value at the end of the third quarter 2019 ended at $140.5 million, representing 11% growth over the same period in the prior year. Healthcare system clients with agreements for multiple solutions represented 27% of our client base at the end of the third quarter of 2019, up from 24% at the same time last year. Total contract value for our digital Voice of the Customer platform solutions increased to $93.0 million, compared to $69.8 million at the end of the third quarter of 2018.

2

Third quarter 2019 revenue was $32.5 million, an increase of 8% over the third quarter 2018. Third quarter revenue for our digital Voice of the Customer platform solutions increased to 64% of total revenue compared to 51% of total revenue in the third quarter of 2018.

Consolidated operating income for the third quarter 2019 was $10.2 million or 31% of revenue, compared to $9.2 million also 31% of revenue for the same period last year.

Total operating expenses of $22.2 million for the quarter increased by 7% in comparison to the prior year.

Direct expenses increased by 3% to $12.1 million for the third quarter 2019, compared to $11.8 million for the same period in 2018. Direct expenses as a percent of revenue were 37% in the third quarter 2019 compared to 39% in 2018.

3

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 higher salary and benefit costs in the customer service and information technology areas partially offset by lower variable costs due in 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 third quarter of 2019 compared to 20% in the third quarter of 2018.

Selling, general and administrative expenses increased to $8.7 million for the third quarter 2019, compared to $7.7 million for the same period in 2018. SG&A expenses were 27% of revenue for the third quarter in 2019 compared to 26% of revenue for the third quarter in 2018.

Selling, general and administrative expenses increased in 2019 due to increased salary and benefit costs, legal and accounting expenses, software license and platform hosting expense, and marketing program expenses. These were partially offset by lower contracted services.

Depreciation and amortization expense was $1.4 million for the third quarter of both 2019 and 2018.

4

Other income and expense changed from $783,000 of net other expense in the third of quarter of 2018 to $410,000 in the third quarter of 2019. This decrease in other expense was primarily due to revaluation on intercompany transactions due to changes in the foreign exchange rate.

The Company’s income tax expense was $1.7 million for the third quarter 2019 compared to $1.4 million in 2018. The effective tax rate was 17% for the third quarter in both 2019 and 2018.

Net income for the third quarter was $8.1 million in 2019, compared to $7.0 million in 2018. 

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

Mike:

Thank you, Kevin.

Our Total Contract Value, a key indicator of future revenue, provided you visibility to double-digit growth in the quarter after having been diluted by divesting and de-emphasizing a number non-core of offerings.

5

NRC product focus is now all about Voice of the Customer platform, our well-established revenue growth engine with year-to-date revenue growth of 35% in 2019 over 2018

Continuing this growth is a combination of executing against three levers that are working well. First, converting current clients to the VOC platform. Second, winning new logos from PRC and Press Ganey and third, capitalizing on the VOC installed base by adding value and additional use cases of the platform resulting in increased average contract value. All of these three levers are working well.

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. 

6