Attached files
| file | filename |
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| 8-K - NATIONAL RESEARCH CORP | v173593_8k.htm |
| EX-99.1 - NATIONAL RESEARCH CORP | v173593_ex99-1.htm |
Mike:
Thank
you, ___________, and welcome everyone to National Research Corporation’s
year-end 2009 conference call. My name is Mike Hays, the Company’s
CEO, and joining me on the call today is Pat Beans our CFO.
Before we
commence our remarks, I would ask Pat to review conditions related to any
forward-looking statements that may be made as part of today’s
call. Pat.
Pat:
Thank
you, Mike.
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. With that, I’ll turn it back to you, Mike.
Mike:
Thank
you, Pat.
First let
me just highlight a couple of items before we review fourth quarter and year-end
2009 financial results.
As we
previously reported, NRC Picker is materially increasing its sales
force. As of today, NRC Picker’s sales force headcount stands at 26,
a more than four-fold increase from early 2009. While these new
associates are far from up to speed, NRC Picker nevertheless registered a vast
improvement this past quarter with fourth quarter net new contracts surpassing
the first three quarters combined.
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The
growth trajectory of NRC Picker will be enhanced further given our planned
change to its business model which involves moving from transaction-based
pricing to an annual or multi-year subscription model. Furthermore,
this subscription-based pricing strategy envisions annual enhancements to
deliverables with corresponding price increases. Our desire is to
duplicate the revenue stability, visibility, and systematic upside in pricing we
experience in our other subscription-based business units.
I will
now turn the call back to Pat to review financial performance of the fourth
quarter and year-end
Pat
Thank
you, Mike.
Fourth
quarter results showed vastly improved growth rates over the past few
quarters. Revenue was $13.8 million, up 14% compared to the prior
year. Operating margin was 24% with operating income at $3.3 million,
up 12% over the prior year. Net income was $2.2 million, up 18%, and
diluted earnings per share were $0.33, up 18%.
Growth
was driven by double digit revenue and operating income growth in our Healthcare
Market Guide and NRC Picker Canada divisions, along with the addition of the
2008 acquisition of the MIV division. In addition, as stated during
the last call, we started expansion of the NRC Picker sales team and will
continue to invest in the sales expansion program across the
company.
Healthcare
Market Guide’s great third quarter sales contributed to the 52% revenue growth
for the division in the fourth quarter. Ticker had a strong fourth
quarter sales, as well, adding 32 new clients, double what they had added during
any previous quarter during 2009. Much of the revenue from these new
clients will be recognized in calendar year 2010 highlighting the revenue
momentum and margin expansion going forward.
NRC
Picker Canada also had double digit revenue growth, not only this quarter, but
for the year driven by new clients and expansion of services to existing
clients.
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In
addition to the units just highlighted, My InnerView registered 21% top-line
growth during the year. During the fourth quarter, we also saw
improvement and stabilization in revenue for both the NRC Picker and TGI
divisions which, we believe, reflects a change in the economic
environment.
Operating
expenses were $10.5 million for the quarter, up $1.3 million or 14% compared to
the fourth quarter 2008. This is largely the result of the addition
of MIV. Moving forward, we expect to see some additional leverage
with any increases in revenue. Our operating margin was 24% for the
quarter, the same as the third quarter of 2009. Our goal is 25%
operating margin.
The
direct costs for the quarter were $5.5 million or 40% of revenue, which is down
slightly from the prior year’s quarter in both absolute dollars and as a
percentage of revenue. Lower direct costs as a percent of revenue
are, in part, driven by MIV’s lower level of direct expense as a percent of
revenue and the margin expansion achieved in the Ticker division. All
of the divisions have done a good job of reducing or holding direct cost
expenses as a percent of revenue.
The
selling general and administrative expenses for the quarter were $4 million or
29% of revenue. This is up $1.3 million compared to the prior year,
70% of which was driven by the acquisition of MIV, and only a small part of
MIV’s expenses reflected in the last year expenses, and the expansion of the MIV
sales force. On an annual basis, SG&A expenses were two
percentage points higher as a percent of revenue compare to 2008.
The
depreciation and amortization expenses for the quarter were $928,000, or 7% of
revenue. The drivers of the increase in depreciation and amortization
were the acquisition of MIV and the related amortization of the intangible
assets and the depreciation of equipment in the amount of $176,000.
Interest
expense increased $70,000 during the quarter compared to the same period in
2008, also related to the acquisition of MIV.
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This
brings us to net income which, for the year, increased to $8.5 million, up
14%.
The
diluted earnings per share increased to $0.33 for the quarter, up 18% over the
prior year same quarter. For the year, the diluted earnings per share
were $1.26, up 16%.
Cash flow
from operations for the year 2009 was $13.7 million. The Company had
an ending cash balance at December 31, 2009, of $2.5 million.
In review
of the year 2009, we have increased both our top line revenue and earnings per
share, but have not attained our goal. That said, we are optimistic
that NRC Picker and TGI will register growth rates in 2010. This
optimism is founded, in part, on TGI’s increased conference attendance which is
returning to 2008 levels and NRC Picker’s sales expansion which has been
referenced.
With that
let me turn the call back to Mike.
Mike
Thanks,
Pat.
With 2009
closed and 2010 out of the gate, let me outline the major 2010 agenda items for
each business unit.
As
mentioned, NRC Picker, our largest business unit, will maintain a 30-person
sales team representing a four-fold increase over 2009. In addition,
NRC Picker will evolve to a subscription-based model representing incremental
revenue from current clients while creating a unique offering to the market at
large.
4
Payer
Solutions will experience lower Medicare Advantage revenue in
2010. However, by capitalizing on this group’s expertise and
capacity, we will in the second quarter launch a major new product now being
market tested with community hospitals and academic medical
centers.
Our
Ticker division will continue to expand rapidly by adding new enhancements that
will drive increasing spend from current subscribers, as well as increase market
share from the current 21% penetration of its addressable market.
MyInnerView’s
primary focus for the year centers on simplifying and repackaging its offering.
Once completed and rolled out, the subscription-based pricing will represent a
20% annual price increase, on average, across 8,000 client
facilities.
And
finally, The Governance Institute will roll out a good/better/best membership
offering tailored to various market segments so as to increase penetration from
its current 20% of addressable market.
None of
the agenda items highlighted represent new ideas. Rather, each are
tangible initiatives currently resourced that are rolling out in
2010.. A few common threads you’ll notice are packaging, enhanced
value, and new product development. I have spoken before about our
highly refined methods of listening to the needs of the market and the talented
associates that bring solutions to life. Throughout 2010, we will
witness the fruits of those efforts.
At a
corporate level, we continue to focus on optimizing and developing
talent. To this end, we have added depth to our leadership bench with
Amy Ostermeyer joining the Company. Amy is charged with talent
management and will become a critical resource for business units’ leadership
development talent allocation efforts.
Also at
the corporate level, we allocate capital and will remain focused in 2010 on
maintaining a prudent balance of organic growth, acquisitions, shares
repurchase, and returning to shareholders income via dividends.
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In
closing and before I open the call for questions, I want to announce that this
week, I gifted 2.5 million shares of my personal holdings of NRC stock to a
two-year Grantor Remaining Annuity Trust or GRAT. As you know, a GRAT
is a common estate planning method for assets one believes will have material
appreciation.
_______________,
I would now like to open the call to questions.
Closing
Statement
Thanks
you for your time today. Pat and I look forward to speaking with you
again next quarter.
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