National Research (NRC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Presents the unaudited condensed consolidated financial statements for the period ended September 30, 2021 Condensed Consolidated Balance Sheets Total assets grew to $156.2 million, driven by increased cash, while shareholders' equity rose to $83.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $52,482 | $34,690 | | Total current assets | $72,726 | $54,112 | | Goodwill | $61,614 | $57,255 | | Total assets | $156,186 | $133,423 | | Liabilities & Equity | | | | Total current liabilities | $39,170 | $31,681 | | Total liabilities | $73,058 | $69,108 | | Retained earnings (deficit) | ($42,701) | ($61,375) | | Total shareholders' equity | $83,128 | $64,315 | Condensed Consolidated Statements of Income Revenue grew 12.8% YoY in Q3 2021 to $37.8 million, though YTD net income slightly decreased due to higher taxes Income Statement Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $37,767 | $33,477 | $109,656 | $98,503 | | Operating Income | $13,138 | $12,021 | $37,396 | $32,490 | | Net Income | $9,657 | $9,578 | $27,833 | $29,048 | | Diluted EPS | $0.38 | $0.37 | $1.08 | $1.13 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $34.3 million, boosting end-of-period cash to $52.5 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,270 | $24,419 | | Net cash used in investing activities | ($6,797) | ($2,175) | | Net cash used in financing activities | ($9,680) | ($13,582) | | Change in cash and cash equivalents | $17,792 | $8,338 | | Cash and cash equivalents at end of period | $52,482 | $21,855 | Notes to Condensed Consolidated Financial Statements Details key events including the PatientWisdom acquisition, a segment structure change, and a higher effective tax rate - In March 2021, the company changed its operating segments from six to one to reflect a change in the corporate reporting structure[29] - On January 4, 2021, the company acquired PatientWisdom, Inc for $5.0 million in cash, resulting in $4.3 million of goodwill[57][60] - The effective tax rate for the nine-month period increased to 23.0% in 2021 from 8.1% in 2020, mainly due to decreased tax benefits from share-based compensation awards[64] Revenue by Timing of Recognition (Nine Months Ended Sep 30, in thousands) | Revenue Type | 2021 | 2020 | | :--- | :--- | :--- | | Subscription services recognized ratably over time | $101,867 | $90,101 | | Services recognized at a point in time | $2,046 | $2,456 | | Fixed, non-subscription recognized over time | $2,014 | $1,740 | | Unit price services recognized over time | $3,729 | $4,206 | | Total revenue | $109,656 | $98,503 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Discusses revenue growth driven by new sales, increased operating expenses, and the company's strong liquidity position - The company's workforce remains intact and highly engaged, with the vast majority working remotely, and limited company-related travel resumed in Q3 2021[96] Results of Operations Q3 revenue grew 12.8% YoY to $37.8 million, with rising SG&A expenses due to higher salary and service costs - Q3 2021 revenue increased 12.8% to $37.8 million compared to Q3 2020, primarily due to new customer sales and recovery from COVID-19 related reductions in the prior year[102] - Q3 2021 SG&A expenses increased 19.7% to $9.5 million, driven by higher salary and benefit costs ($440k), a favorable tax ruling in 2020, and increased contracted services ($217k)[104] - For the nine months ended Sep 30, 2021, revenue increased 11.3% to $109.7 million, also due to new customer sales and increased sales to the existing client base[109] Liquidity and Capital Resources The company maintains strong liquidity with $52.5 million in cash, unused credit facilities, and increased working capital - Principal sources of liquidity as of September 30, 2021, included $52.5 million in cash, a $30 million unused line of credit, and a $15 million unused delayed draw term note[116] - Working capital increased to $33.6 million at September 30, 2021, from $22.4 million at December 31, 2020, mainly due to a $17.8 million increase in cash and cash equivalents[118][119] - The company was in compliance with its credit agreement covenants, including a minimum fixed charge coverage ratio of 1.10x and a maximum cash flow leverage ratio of 3.00x[136] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures have occurred since the 2020 Annual Report on Form 10-K - There are no material changes to the market risk disclosures from the company's 2020 Form 10-K[145] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[146] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[147] PART II. OTHER INFORMATION Legal Proceedings Ongoing litigation is not expected to have a material adverse effect on the company's financial condition - The company is involved in routine claims and litigation, but management does not expect them to have a material adverse effect on its financial condition[148] Risk Factors Refers to the significant risk factors detailed in the 2020 Annual Report on Form 10-K - Significant risk factors are described in the company's Annual Report on Form 10-K for the year ended December 31, 2020[149] Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q3 2021, with 280,491 shares remaining authorized for buyback - No Common Stock was repurchased during the third quarter of 2021[150] - As of September 30, 2021, 280,491 shares remain available for purchase under the company's stock repurchase program[150] Exhibits Lists the exhibits filed with the report, including CEO/CFO certifications and iXBRL financial statements - The exhibits filed with this report include CEO and CFO certifications and iXBRL formatted financial statements[154]