National Research (NRC) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, detailing financial performance and position for the period ended September 30, 2019 Condensed Consolidated Financial Statements This section presents key financial data, including revenue, net income, balance sheet figures, and cash flows, demonstrating year-over-year growth Condensed Consolidated Balance Sheet Data (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total current assets | $26,570 | $28,410 | | Total assets | $107,649 | $108,032 | | Total current liabilities | $38,312 | $47,109 | | Total liabilities | $78,674 | $88,949 | | Total shareholders' equity | $28,975 | $19,083 | Condensed Consolidated Income Statement Data (in thousands, except per share amounts) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $32,465 | $30,013 | $95,359 | $89,047 | | Operating income | $10,220 | $9,166 | $31,073 | $25,880 | | Net income | $8,119 | $6,992 | $23,708 | $22,246 | | Diluted EPS (Common) | $0.31 | $0.27 | $0.92 | $0.73 | Condensed Consolidated Cash Flow Data (Nine months ended Sep 30, in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,974 | $25,936 | | Net cash used in investing activities | ($3,429) | ($4,858) | | Net cash used in financing activities | ($30,575) | ($48,193) | | Change in cash and cash equivalents | ($4,633) | ($27,460) | Notes to Condensed Consolidated Financial Statements This section details accounting policies, revenue recognition, lease standard adoption, debt structure, and other significant financial disclosures - The company derives a majority of its revenues from annually renewable subscription-based service agreements, which are generally cancelable on short or no notice without penalty[39] - Effective January 1, 2019, the company adopted the new lease standard (Topic 842), recording $2.3 million of right-of-use assets and $2.4 million of lease liabilities upon transition[47][48] Disaggregated Revenue by Timing (in thousands) | Revenue Type | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Subscription services recognized ratably over time | $84,460 | $77,746 | | Services recognized at a point in time | $4,231 | $2,923 | | Fixed, non-subscription recognized over time | $2,083 | $2,561 | | Unit price services recognized over time | $4,585 | $5,817 | | Total revenue | $95,359 | $89,047 | - The company's credit agreement includes a $40 million term loan and a $15 million revolving line of credit. As of September 30, 2019, the company was in compliance with all financial covenants[63][66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, attributing revenue growth to customer sales and improved operating income, while affirming strong liquidity Results of Operations This section analyzes revenue growth, expense management, and the resulting increase in operating income for the nine-month period Q3 2019 vs. Q3 2018 Performance (in millions) | Metric | Q3 2019 | Q3 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $32.5 | $30.0 | +8.2% | | Direct Expenses | $12.1 | $11.8 | +2.8% | | SG&A Expenses | $8.7 | $7.7 | +13.4% | Nine Months 2019 vs. 2018 Performance (in millions) | Metric | Nine Months 2019 | Nine Months 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $95.4 | $89.0 | +7.1% | | Direct Expenses | $35.3 | $35.7 | -1.2% | | SG&A Expenses | $24.7 | $23.5 | +5.3% | - Direct expenses as a percentage of revenue decreased from 40.1% to 37.0% for the nine-month period, mainly due to lower variable costs like postage, printing, and paper from increased use of digital survey methodologies[105] Liquidity and Capital Resources This section details the company's liquidity position, including cash, credit lines, and cash flow from operations, and discusses changes in shareholders' equity - Principal sources of liquidity as of September 30, 2019, included $8.4 million of cash and cash equivalents, a $15.0 million unused line of credit, and a $15.0 million delayed draw term note available for acquisitions or stock repurchases[111] Cash Flow Summary (Nine months ended Sep 30, in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Provided by operating activities | $28,974 | $25,936 | | Used in investing activities | ($3,429) | ($4,858) | | Used in financing activities | ($30,575) | ($48,193) | - Shareholders' equity increased by $9.9 million to $29.0 million at September 30, 2019, from $19.1 million at December 31, 2018. The increase was primarily driven by net income of $23.7 million, partially offset by dividends declared of $14.2 million[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to market risk exposures since the prior Annual Report on Form 10-K - There are no material changes to the disclosures regarding market risk exposures from the Annual Report on Form 10-K for the year ended December 31, 2018[137] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with new internal controls implemented for lease accounting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[138] - The company implemented new internal controls related to the adoption of the new lease standard (Topic 842), but no other changes materially affected, or are reasonably likely to materially affect, internal control over financial reporting[139][140] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings, not expected to materially impact financial statements - The company is involved in routine claims and litigation but does not believe the resolution will have a materially adverse effect on its consolidated financial statements[141] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since the prior Annual Report on Form 10-K - There have been no material changes to the company's risk factors as set forth in the Annual Report on Form 10-K for the year ended December 31, 2018[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased during Q3 2019, with 280,491 shares remaining available under the repurchase program - No Common Stock was repurchased during the three-month period ended September 30, 2019[143] - The remaining number of shares of Common Stock that could be purchased under the stock repurchase authorization was 280,491 as of September 30, 2019[143] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including XBRL financial statements and officer certifications - The exhibits filed with the report include financial statements in XBRL format and certifications from the CEO and CFO[149][151]