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):

February 11, 2020

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 February 11, 2020, National Research Corporation, a Wisconsin corporation (the "Company"), issued a press release announcing its financial and operating results for the fourth quarter and year ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein. On February 12, 2020, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the quarter and year ended December 31, 2020. 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/c88rjqy6.
Item 9.01	Financial Statements and Exhibits.
	(d)	Exhibits.
	EXHIBIT NUMBER	EXHIBIT DESCRIPTION
	99.1	National Research Corporation press release announcing its financial and operating results for the fourth quarter and year ended December 31, 2019.
	99.2	National Research Corporation script for the conference call and online Web simulcast held February 12, 2020.
	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: February 12, 2020	By:	/s/ Steven D. Jackson
		Steven D. Jackson
		President

EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT DESCRIPTION
99.1 99.2	National Research Corporation press release announcing its financial and operating results for the fourth quarter and year ended December 31, 2019. National Research Corporation script for the conference call and online Web simulcast held February 12, 2020.

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

2019 FOURTH QUARTER AND YEAR-END RESULTS

LINCOLN, Nebraska (February 11, 2020) — National Research Corporation (NASDAQ:NRC) today announced 2019 fourth quarter and year-end financial results.

Fourth quarter 2019 compared to the fourth quarter 2018:

● Total Contract Value increased to $144.8 million, up 10%

● Revenue increased 6% to $32.6 million

● Operating Income increased 27% to $12.0 million

2019 calendar year results compared to 2018:

● Net New Sales of $27.7 million, up 18%

● Revenue increased 7% to $128.0 million

● Operating Income increased 22% to $43.0 million

● Voice of the Customer platform contract value surpassed $100 million, a 31% increase

Commenting on recent performance, Michael D. Hays, chief executive officer of National Research Corporation, said, “Our performance throughout the year reflects strong gains across the continuum of care where we witnessed growth in new customer acquisition and increased spend from existing customers which further validated increasing momentum for NRC’s industry-leading Voice of the Customer platform.

Revenue for the quarter ended December 31, 2019, was $32.6 million, compared to $30.6 million for the same quarter in 2018. Net income for the quarter ended December 31, 2019, was $8.7 million, compared to $7.8 million for the quarter ended December 31, 2018. Diluted earnings per share increased to $0.34 for the common stock (formerly Class A) for the quarter ended December 31, 2019, from diluted earnings per share of $0.30 for the quarter ended December 31, 2018.

NRC Announces Fourth Quarter 2019 Results

Page 2

February 11, 2020

Regarding the Company’s financial performance, Kevin Karas, chief financial officer of National Research Corporation, said, “The significant growth in contract value, combined with the continued shift towards our higher margin VoC platform solutions, translated into strong financial performance with record revenue and operating income in the fourth quarter 2019. On a year-to-date basis, we increased net new sales by 18% over 2018 driven by the compelling value proposition of our VoC platform solutions.”

A listen-only simulcast of National Research Corporation’s 2019 fourth quarter conference call will be available online at http://edge.media-server.com/mmc/p/c88rjqy6 on February 12, 2020, 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 Fourth Quarter 2019 Results

Page 3

February 11, 2020

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2019			2018			2019			2018
Revenue	$	32,623		$	30,639		$	127,982		$	119,686
Operating expenses:
Direct expenses		11,166			11,892			46,435			47,577
Selling, general and administrative		8,241			7,885			32,973			31,371
Depreciation and amortization		1,254			1,467			5,539			5,463
Total operating expenses		20,661			21,244			84,947			84,411
Operating income		11,962			9,395			43,035			35,275
Other income (expense):
Interest income		13			6			37			62
Interest expense		(478	)		(522	)		(2,091	)		(1,513	)
Other, net		(132	)		661			(462	)		885
Total other income (expense)		(597	)		145			(2,516	)		(566	)
Income before income taxes		11,365			9,540			40,519			34,709
Provision for income taxes		2,667			1,739			8,113			4,662
Net income	$	8,698		$	7,801		$	32,406		$	30,047
Earnings per share of common stock:
Basic earnings per share:
Common (formerly Class A)	$	0.35		$	0.32		$	1.30		$	1.08
Class B	$	--		$	--		$	--		$	1.31
Diluted earnings per share:
Common (formerly Class A)	$	0.34		$	0.30		$	1.26		$	1.04
Class B	$	--		$	--		$	--		$	1.27
Weighted average shares and share equivalents outstanding
Common (formerly Class A) - basic		24,852			24,684			24,809			23,562
Class B - basic		--			--			--			3,527
Common (formerly Class A) - diluted		25,715			25,534			25,652			24,448
Class B - diluted		--			--			--			3,628

-END-

NRC Announces Fourth Quarter 2019 Results

Page 4

February 11, 2020

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	December 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	13,517		$	12,991
Accounts receivable, net		11,639			11,922
Income taxes receivable		69			348
Other current assets		3,932			3,149
Total current assets		29,157			28,410
Net property and equipment		13,530			14,153
Goodwill		57,935			57,831
Other, net		10,063			7,638
Total assets	$	110,685		$	108,032
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable and line of credit	$	4,378		$	3,667
Accounts payable and accrued expenses		4,913			3,447
Accrued compensation		6,086			5,798
Income taxes payable		366			636
Dividends payable		5,239			17,113
Deferred revenue		16,648			16,244
Other current liabilities		525			204
Total current liabilities		38,155			47,109
Notes payable, net of current portion		29,795			34,176
Other non-current liabilities		9,843			7,664
Total liabilities		77,793			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 30,151,574 in 2019 and 29,917,667 in 2018, outstanding 24,947,500 in 2019 and 24,800,796 in 2018		30			30
Additional paid-in capital		162,154			157,312
Retained earnings (accumulated deficit)		(93,357	)		(106,339	)
Accumulated other comprehensive loss, foreign currency translation adjustment		(2,209	)		(2,916	)
Treasury stock		(33,726	)		(29,004	)
Total shareholders’ equity		32,892			19,083
Total liabilities and shareholders’ equity	$	110,685		$	108,032

-END-

EX-99.2

Exhibit 99.2

Mike:

Thank you, ___________, and welcome everyone to National Research Corporation’s 2019 fourth quarter and year-end earnings call. My name is Mike Hays, the Company’s CEO and joining me on the call today is Linda Stacy, our VP of Finance and Steve Jackson, President.

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

Linda.

Linda:

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, Linda, and again, welcome everyone. Today, Steve Jackson, NRC’s President will provide opening remarks related to the fourth quarter and calendar year 2019. Steve.

Steve:

Thanks, Mike. As you may have noticed in last night’s press release, we continue to see a favorable market response for NRC’s industry-leading, Voice the Customer platform. Thanks to support from customers—new and old—we finished the year with more than $100 million of contract value now on residing on the solution.

NRC’s unique capabilities and proven ability to generate significant (and immediate) value are the reason why leading health systems such as Partners Healthcare, Allina Health, Beaumont Health and others turned to NRC in Q4 2019 to accelerate their transformation.

2

After Linda shares with us her prepared remarks regarding financial performance, we’ll discuss how our business continues to evolve.

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

Linda

Thank you, Steve.

Total contract value at the end of the fourth quarter 2019 ended at $144.8 million, representing a 10% growth over the same period in the prior year. We had record annual net new sales of $27.7 million for 2019, up 18% over 2018. Healthcare system clients with agreements for multiple solutions represented 27% of our client base at the end of the fourth 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 $100.2 million, compared to $76.4 million at the end of the fourth quarter of 2018.

Fourth quarter 2019 revenue was $32.6 million, an increase of 6% over the fourth quarter 2018. Fourth quarter revenue for our digital Voice of the Customer platform solutions increased to 67% of total revenue compared to 53% of total revenue in the fourth quarter of 2018.

3

We received notice in December 2019, that we met qualification requirements for the Nebraska Advantage LB312 Act by meeting certain investment and full-time equivalent employee thresholds in the year ended 2017. This tax incentive act allows us to get direct refunds of sales tax on qualified property, as well as earn investment credit and employment credits that can be claimed through credits of Nebraska income tax, employment tax, and sales tax on non-qualified property. In December, we recorded cumulative adjustments for direct refunds and credits earned through the year ending December 31, 2019, which reduced operating expenses by approximately $1.9 million.

Consolidated operating income for the fourth quarter 2019 was $12.0 million or 37% of revenue, compared to $9.4 million or 31% of revenue for the same period last year.

Total operating expenses of $20.7 million for the 4^th quarter 2019 decreased by 3% compared to the prior year.

Direct expenses decreased 6% to $11.2 million for the fourth quarter 2019, compared to $11.9 million for the same period in 2018. Direct expenses as a percent of revenue were 34% in the fourth quarter 2019 compared to 39% in 2018.

4

Direct expenses decreased primarily due to a reduction in variable costs. Variable costs are lower 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 16% for the fourth quarter of 2019 compared to 19% in the fourth quarter of 2018. Fixed expenses decreased slightly primarily due to state tax incentives.

Selling, general and administrative expenses increased to $8.2 million for the fourth quarter 2019, compared to $7.9 million for the same period in 2018. Selling, general and administrative expenses were 25% of revenue for the fourth quarter 2019 compared to 26% of revenue for the fourth quarter 2018.

Selling, general and administrative expenses increased in 2019 primarily due to a sales tax accrual that was recorded when we became aware that a state sales tax liability was both probable and able to be estimated due to sales taxes that should have been collected from customers in 2019 and certain previous years.

5

Depreciation and amortization expense decreased to $1.3 million for the fourth quarter 2019 compared to $1.5 million for the same period in 2018 primarily due to state tax incentives.

Other income and expense changed to $597,000 of other net expense in the fourth of quarter of 2019 compared to $146,000 of other net income in the fourth quarter of 2018. This increase 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 $2.7 million for the fourth quarter 2019 compared to $1.7 million in 2018. The effective tax rate was 23% for the fourth quarter 2019 compared to 18% for the same period in 2018 primarily due to decreased tax benefits from the exercise of options and dividends paid to non-vested shareholders and higher projected state taxes in 2019 period.

Net income for the fourth quarter 2019 was $8.7 million, compared to $7.8 million in 2018.

….

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

6

Steve

Thank you, Linda.

As we look to the start of 2020 and a new decade, we find health systems’ leaders confronted with growing complexity as they transition from an encounter-based to relationship-centric model of care.

Paramount to this change is the need to better understand and respond to “what matters most” to the many constituents today’s organizations serve, be they patients, residents, health-plan members, prospective consumers, employers, employees, or physicians.

NRC’s Voice of the Customer Platform provides our partners with the flexibility and agility necessary to advance their strategy at all touchpoints along the consumer journey.

For marketers, our purpose-built solutions are illuminating the key factors that define a brand’s promise. At Virtua Health, in New Jersey, NRC’s insights propelled a successful re-brand that united an organization and provided confidence to the community that healthcare can be both high-tech and high touch.

7

For digital officers focused on expanding the accessibility of healthcare’s front-door, NRC’s tools are driving gains in market share and improving search engine optimization. Last year, Orlando Health reported breakthrough performance with a new patient appointment being booked every nine days for physicians using NRC’s star ratings program.

For experience officers, each touchpoint is also now being scanned for positive and negative signals. Coupled with NRC’s dimensions of human understanding such as age, race, ethnicity, language, etc., health systems are better able to evolve their services based on the micro-segments they serve. At Parkview Health in Fort Wayne, Indiana, this resulted in more insight in 90 days than they previously gained over a full calendar year.

For population health leaders, NRC’s VOC offering can be further tailored to ask the right question at the right time. Houston Methodist reported significant labor savings and improved outcomes in 2019 by being able to scan for at-risk patients that may be susceptible to a preventable readmission and take immediate action.

Lastly, for time-pressed executives, they can rest assured knowing that in the decade ahead, NRC’s VOC platform will provide a single source of experience truth, regardless of where care is delivered or received.

8

We look forward to sharing our progress in subsequent calls.

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.

9