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 5, 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 Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
$0.001 Par Value Common Stock	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 May 5, 2020, National Research Corporation, a Wisconsin corporation (the "Company"), issued a press release announcing its financial and operating results for the first quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein. On May 6, 2020, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the first quarter ended March 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/zorgr63b.
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 first quarter ended March 31, 2020.
	99.2	National Research Corporation script for the conference call and online Web simulcast held May 6, 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: May 6, 2020	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	National Research Corporation press release announcing its financial and operating results for the first quarter ended March 31, 2020.
99.2	National Research Corporation script for the conference call and online Web simulcast held May 6, 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

FIRST QUARTER 2020 RESULTS

LINCOLN, Nebraska (May 5, 2020) — National Research Corporation (NASDAQ: NRC) today announced results for the first quarter of 2020.

● Revenue increased 8% to $33.9 million

● Net Income increased 43% to $11.8 million

● Net New Sales of $5.7 million

● Voice of the Customer platform recurring contract value reaches $102.9 million

Revenue for the quarter ended March 31, 2020, was $33.9 million, compared to $31.5 million for the same quarter in 2019. Net income for the quarter ended March 31, 2020, was $11.8 million, compared to $8.2 million for the quarter ended March 31, 2019. Diluted earnings per share increased to $0.46 for the quarter ended March 31, 2020, from diluted earnings per share of $0.32 for the quarter ended March 31, 2019. Results for the quarter included an approximately $0.4 million income tax benefit compared with $1.7 million in income tax expense for the first quarter of 2019.

Regarding the Company’s first quarter financial performance, Kevin Karas, chief financial officer of National Research Corporation, said, “We achieved strong financial performance in the first quarter with minimal impact from COVID-19. However, given the uncertainty surrounding COVID-19, we assume future growth trends are unlikely to follow those of the past several years.

A listen-only simulcast of National Research Corporation’s 2020 first quarter conference call will be available online at http://edge.media-server.com/mmc/p/zorgr63b on May 6, 2020, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately one hour later and continue for 30 days.

NRC Announces First Quarter 2020 Results

Page 2

May 5, 2020

For more than 39 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. COVID-19 is a significant risk factor and the impact on our business is dependent on the duration and spread of the outbreak in the United States and Canada and resulting government mandates and recommendations, which are difficult to predict. The severity and duration of any such impacts on our business cannot be predicted at this time. 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 First Quarter 2020 Results

Page 3

May 5, 2020

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended March 31,
	2020			2019
Revenue	$	33,860		$	31,480
Operating expenses:
Direct		12,546			11,654
Selling, general and administrative		8,749			7,707
Depreciation and amortization		1,371			1,415
Total operating expenses		22,666			20,776
Operating income		11,194			10,704
Other income (expense):
Interest income		11			6
Interest expense		(465	)		(570	)
Other, net		630			(280	)
Total other income (expense)		176			(844	)
Income before income taxes		11,370			9,860
Income tax provision (benefit)		(385	)		1,664
Net income	$	11,755		$	8,196
Earnings Per Share of Common Stock:
Basic Earnings Per Share	$	0.47		$	0.33
Diluted Earnings Per Share	$	0.46		$	0.32
Weighted average shares and share equivalents outstanding
Basic		24,972			24,766
Diluted		25,725			25,509

-END-

NRC Announces First Quarter 2020 Results

Page 4

May 5, 2020

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	10,021		$	13,517
Accounts receivable, net		17,403			11,639
Income taxes receivable		580			69
Insurance receivable		2,771			--
Other current assets		4,164			3,932
Total current assets		34,939			29,157
Net property and equipment		12,655			13,530
Goodwill		57,746			57,935
Other, net		10,515			10,063
Total assets	$	115,855		$	110,685
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable	$	4,631		$	4,378
Accounts payable and accrued expenses		4,947			4,687
Accrued compensation		4,913			6,086
Income taxes payable		--			366
Dividends payable		5,278			5,239
Deferred revenue		19,111			16,354
Other current liabilities		999			1,045
Total current liabilities		39,879			38,155
Notes payable, net of current portion		28,593			29,795
Other non-current liabilities		10,086			9,843
Total liabilities		78,558			77,793
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 30,412,055 in 2020 and 30,151,574 in 2019, outstanding 25,132,001 in 2020 and 24,947,500 in 2019		30			30
Additional paid-in capital		165,631			162,154
Retained earnings (accumulated deficit)		(86,880	)		(93,357	)
Accumulated other comprehensive loss, foreign currency translation adjustment		(3,333	)		(2,209	)
Treasury stock		(38,151	)		(33,726	)
Total shareholders’ equity		37,297			32,892
Total liabilities and shareholders’ equity	$	115,855		$	110,685

-END-

EX-99.2

Exhibit 99.2

Thank you, ___________, and welcome everyone to National Research Corporation’s 2020 first quarter earnings call. My name is Kevin Karas, the Company’s Chief Financial Officer. I will be handling the call myself today from my home like most of you.

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

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.

Before reviewing first quarter performance, I would like, on behalf of all NRC associates, to extend a heartfelt thank you to our customers and front-line caregivers around the world who are working tirelessly to save lives and keep communities safe during the COVID-19 pandemic.

As we are all aware, this public health crisis is likely to have an extended financial impact on most sectors of the economy and healthcare is no exception.

We have no unique perspective which would allow us to forecast the depth, duration or specific impact on our clients or the Company and will refrain on this and future communication with investors from speculating. Given this uncertainty, our only assumption is that the Company’s sales, revenue and margin expansion are unlikely to follow the growth trends of the past.

Regarding the facts of our Q1 performance, recurring contract value at the end of the first quarter 2020 ended at $140.4 million, representing an 11% growth over the same period in the prior year. Healthcare system clients with agreements for multiple solutions represented 28% of our client base at the end of the first quarter of 2020, up from 25% at the same time last year. Recurring contract value for our digital Voice of the Customer platform solutions increased to $102.9 million, compared to $77.6 million at the end of the first quarter of 2019.      

First quarter 2020 revenue was $33.9 million, an increase of 8% over the first quarter 2019. First quarter revenue for our digital Voice of the Customer platform solutions increased to 69% of total revenue compared to 58% of total revenue in the first quarter of 2019.

2

Consolidated operating income for the first quarter 2020 was $11.2 million or 33% of revenue, compared to $10.7 million or 34% of revenue for the same period last year.

Total operating expenses of $22.7 million for the first quarter 2020 increased by 9% compared to the prior year.

Direct expenses increased 8% to $12.5 million for the first quarter 2020, compared to $11.7 million for the same period in 2019. Direct expenses remained at 37% of revenue in the first quarter 2020 and 2019.

Direct expenses increased primarily due to an increase in fixed expenses partially offset by a decrease in variable expenses. Fixed expenses increased primarily due to higher salary and benefit costs and contracted services in the customer service and information technology areas. 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 15% for the first quarter of 2020 compared to 18% in the first quarter of 2019.

3

Selling, general and administrative expenses increased to $8.7 million for the first quarter 2020, compared to $7.7 million for the same period in 2019. Selling, general and administrative expenses were 26% of revenue for the first quarter 2020 compared to 24% of revenue for the first quarter 2019.

Selling, general and administrative expenses increased in 2020 primarily due to higher salary and benefit costs, increased software and platform hosting expenses, and additional legal and accounting costs primarily due to an insurance refund received in 2019 for legal expenses associated with the recapitalization.

Depreciation and amortization expense remained at $1.4 million for the first quarters 2020 and 2019.

Other income and expense changed to $176,000 of other net income in the first of quarter of 2020 compared to $844,000 of other net expense in the first quarter of 2019. This increase in other income was primarily due to revaluation on intercompany transactions due to changes in the foreign exchange rate and decreased interest expense due to the declining balance on our term loan.

4

The Company had an income tax benefit of $385,000 for the first quarter 2020 compared to $1.7 million of expense in 2019. The effective tax rate was a (3)% benefit for the first quarter 2020 compared to 17% expense for the same period in 2019 primarily due to increased tax benefits from the exercise and vesting of share-based compensation awards partially offset by higher projected state taxes in 2020 period.

Net income for the first quarter 2020 was $11.8 million, compared to $8.2 million in 2019.

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

Closing Statement

Until our next call, our thoughts and support are with those who are on the front lines battling this pandemic.

Thank you for your time today.

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