National Research Q2 2023 Earnings Report

National Research EPS Results

• Actual EPS: $0.29
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

National Research Revenue Results

• Actual Revenue: $36.16 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

National Research Announcement Details

• Quarter: Q2 2023
• Date: 8/1/2023
• Time: N/A
• Conference Call Date: Wednesday, August 2, 2023
• Conference Call Time: 11:00AM ET

National Research (NASDAQ:NRC) provides analytics and insights that facilitate measurement and enhancement of the patient and employee experience. Its portfolio of subscription-based solutions provides actionable information and analysis to healthcare organizations across a range of mission-critical, constituent-related elements, including patient experience, service recovery, care transitions, employee engagement, reputation management, and brand loyalty. The company also offers marketing solutions that allow the tracking of awareness, perception, and consistency of healthcare brands; assessment of competitive differentiators; and enhanced segmentation tools to evaluate needs, wants, and behaviors of communities through real-time competitive assessments and enhanced segmentation tools. In addition, it provides experience solutions, such as patient experience, employee engagement, health risk assessments, care transition, and improvement tools. Further, the company provides reputation solutions that allow healthcare organizations to share a picture of their organization and ensure that timely and relevant content informs consumer decision-making; and governance solutions for not-for-profit hospital and health system boards of directors, executives, and physician leadership. National Research Corporation was founded in 1981 and is headquartered in Lincoln, Nebraska.

National Research Q2 2023 Earnings Call Transcript

Key Takeaways

• Expansion of the sales force and marketing spend drove a 53% increase in new sales of the Human Understanding Program in Q2 2023 versus Q2 2022.
• One-third of program clients are new logos, while two-thirds represent existing partners, with a 12% contract value growth for upsells to current clients.
• Q2 2023 revenue declined by 3% year-over-year due to the closure of Canadian operations and discontinuation of non-core solutions, but total remaining contract value (TRCV) ended at $146.6 million, including a 1% core TRCV increase.
• Operating income fell 19% year-over-year on lower revenue and $0.9 million in marketing investments, yet cost-alignment initiatives improved gross margin by 2.4% and operating margin by 1.2% sequentially.
• In Q2 2023 the company allocated $4.2 million to innovation and growth, $3 million to dividends, and $1.8 million to share repurchases, maintaining its capital allocation priorities.

[Operator]

Hello, and welcome to today's National Research Corporation Second Quarter 2023 Earnings Call. My name is Bailey, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'd now like to pass the conference over to Kevin Curas, Chief Financial Officer. Please go ahead.

[Speaker 1]

Thank you, Bailey, and welcome, everyone, to National Research Corporation's 2023 Second Quarter Earnings Call. My name is Kevin Karas, the company's CFO. And joining me on the call today is Linda Stacy, our Vice President of Finance. Before we continue, I'd like to ask Linda to review conditions related to any forward looking statements that may be made As part of today's call. Linda?

[Speaker 2]

Thank you, Kevin. 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 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, Kevin.

[Speaker 1]

Thanks, Linda, and again, welcome, everyone. Over the past several quarters, we have significantly expanded our sales force and marketing spend, focused on supporting the rollout of our human understanding Well, it's early days. The material expansion of sales and marketing resources has been very effective in building A stronger sales pipeline and in the Q2 of 2023, we gained momentum in converting opportunities, Which resulted in a 53% increase in new sales compared to the Q2 of 2022. Today, 1 third of our Human Understanding Program clients are from new logos, with 2 thirds representing adoption of the program from current partner organizations. Contract value growth for human understanding program adoption by existing clients It's been 12%, which is in line with results from the successful rollout of our real time solution several years ago.

[Speaker 1]

Let me turn the call back over to Linda to review our financial performance and then open the call for questions.

[Speaker 2]

Thank you, Kevin. Revenue for the Q2 of 2023 decreased compared to the Q2 of 2022 by 3%, partially attributed to the closure of our Canadian operations and discontinuation of other non core solutions. We ended the quarter with $146,600,000 in TRCV, including a 1% increase in TRCV for our core solutions. Our TRC metric represents the total revenue projected under all renewable contracts for their respective next annual renewal periods assuming the up sells, down Price increases or cancellations measured as of the most recent quarter end. Operating income decreased by 19 for the Q2 of 2023 compared to the Q2 of 2022, primarily due to the decline in revenue And growth and marketing expenses of $906,000 to expand brand recognition and support sales development.

[Speaker 2]

We have been focusing on the alignment of our cost structure with business requirements, and the results were positive this quarter. Although we increased spending for sales and marketing expansion, We were able to reduce consolidated operating expenses, resulting in a 2.4% gross margin and a 1 point 2% operating income margin improvement in the 2nd quarter as compared to the Q1 of 2023. We are implementing other cost alignment changes that will enable continued quarterly margin improvement in future quarters. The effective tax rate in the Q2 of 2023 was 23% compared to 25% in 2022, primarily due to increased tax benefits from the exercise of share based compensation awards. The company's Board of Directors maintain its capital allocation priorities of funding innovation and growth investments, including merger and acquisition activity, As well as internal projects, shareholder dividends and share repurchases during 2023.

[Speaker 2]

In the Q2 of 20 The company funded $4,200,000 for innovation and growth, dollars 3,000,000 for dividend payments and $1,800,000 for share repurchases. That concludes my comments for this morning. I'll now turn the call back to you, Kevin.

[Speaker 1]

This completes our prepared remarks. So Bailey, I will ask you to open the call to any questions.

[Operator]

Thank There are currently no registered questions. So I'd like to pass the call back to the management team for any closing remarks.

[Speaker 1]

Thank you. Just would like to close by thanking everyone for your time today, And we look forward to sharing our results again next quarter.