National Research (NRC) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2022 Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2022, showing revenue growth but decreased net income and operating cash flow Condensed Consolidated Balance Sheets Total assets decreased slightly to $153.2 million as of March 31, 2022, primarily due to reduced cash and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $47,290 | $54,361 | | Total current assets | $68,921 | $73,707 | | Total assets | $153,154 | $157,540 | | Liabilities & Equity | | | | Total current liabilities | $41,569 | $40,388 | | Total liabilities | $71,668 | $72,203 | | Total shareholders' equity | $81,486 | $85,337 | | Total liabilities and shareholders' equity | $153,154 | $157,540 | Condensed Consolidated Statements of Income Q1 2022 revenue grew 8.4% to $38.4 million, but net income and diluted EPS declined due to higher operating expenses Q1 2022 vs Q1 2021 Income Statement (in thousands, except per share amounts) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $38,441 | $35,464 | | Total operating expenses | $26,744 | $23,444 | | Operating income | $11,697 | $12,020 | | Net income | $8,539 | $9,232 | | Diluted Earnings Per Share | $0.34 | $0.36 | Condensed Consolidated Statements of Cash Flows Operating cash flow significantly decreased to $8.3 million, with substantial cash used in financing for share repurchases and dividends Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,290 | $14,408 | | Net cash used in investing activities | ($2,542) | ($4,238) | | Net cash used in financing activities | ($12,858) | ($1,429) | | Change in cash and cash equivalents | ($7,071) | $8,764 | - Significant cash outflows from financing activities in Q1 2022 included $6.7 million for share repurchases and $3.0 million for dividend payments, which were not present in Q1 2021[27] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition from subscriptions, debt, increased effective tax rate, and acquisition payments - The company is a leading provider of analytics and insights for healthcare organizations in the U.S. and Canada, focusing on patient and employee experience[28] - The majority of revenues are derived from annually renewable, subscription-based service agreements[34] Revenue Disaggregation by Timing (in thousands) | Revenue Type | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Subscription services recognized ratably over time | $35,449 | $33,054 | | Services recognized at a point in time | $1,181 | $323 | | Fixed, non-subscription recognized over time | $586 | $579 | | Unit price services recognized over time | $1,225 | $1,508 | | Total revenue | $38,441 | $35,464 | - The effective tax rate increased to 25.3% in Q1 2022 from 20.5% in Q1 2021, primarily due to decreased tax benefits from share-based compensation awards and higher state income taxes[59] - The company's long-term debt consists of a term loan with a balance of $25.6 million as of March 31, 2022, with the company in compliance with all financial covenants[61][65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial results, noting revenue growth, decreased operating margin, and a slight decline in Recurring Contract Value Results of Operations Q1 2022 revenue increased 8.4% to $38.4 million, but operating income and margin declined due to higher expenses, with RCV also decreasing Q1 2022 vs Q1 2021 Key Metrics (in thousands, except percentages) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $38,441 | $35,464 | 8.4% | | Operating income | $11,697 | $12,020 | (2.7)% | | Operating margin | 30.4% | 33.9% | (10.3)% | | Recurring Contact Value | $147,574 | $149,490 | (1.3)% | - Revenue growth was driven by new customer sales and increased conference revenue[90] - Operating income and margin decreased due to growth in salary and benefit costs, investments in Human Understanding Solutions, workforce automation, and building renovations[94] - The decline in Recurring Contract Value was partly due to a strategy to focus on growing core digital solutions, which resulted in the elimination of certain legacy offerings, though core digital solutions experienced positive RCV growth[96] Liquidity and Capital Resources The company maintains strong liquidity with $47.3 million in cash and available credit, planning significant capital expenditures for headquarters renovations - As of March 31, 2022, principal sources of liquidity included $47.3 million of cash, a $30 million unused line of credit, and a $15 million delayed draw term note[99] - The final $2.0 million payment for the PatientWisdom acquisition was made in January 2022 from cash on hand[105] - The company estimates future costs for its headquarters building renovations to be $14.5 million in 2022 and $7 million in 2023, expected to be funded through operating cash flows[106] - During Q1 2022, the company repurchased 166,692 shares of its Common Stock for an aggregate of $6.7 million[117] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures were reported compared to the prior Annual Report on Form 10-K - There were no material changes to the disclosures regarding market risk exposures from the last Annual Report on Form 10-K[120] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management concluded that as of the end of the period, the company's disclosure controls and procedures were effective[121] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[122] PART II. OTHER INFORMATION This section covers other information including legal proceedings, risk factors, equity sales, and exhibits for the reporting period Item 1. Legal Proceedings The company is involved in routine legal claims, not expected to materially impact financial position or results - The company is involved in routine claims and litigation, but management does not expect them to have a material adverse effect[124] Item 1A. Risk Factors This section refers to risk factors from the prior Annual Report on Form 10-K, with no new significant risks identified - Significant risk factors are described in the Annual Report on Form 10-K for the year ended December 31, 2021[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q1 2022 stock repurchase activity, including 166,962 shares bought back and remaining availability Common Stock Repurchases in Q1 2022 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 – Jan 31, 2022 | 41,962 | $41.69 | | Feb 1 – Feb 28, 2022 | 125,000 | $39.43 | | Mar 1 – Mar 31, 2022 | - | - | - As of March 31, 2022, the maximum number of shares that may yet be purchased under the plan is 1,981[129] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and financial statements in iXBRL format - Filed exhibits include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 1350, as well as financial statements in iXBRL format[134]