National Research Corporation (NRC), a leading provider of analytics and insights in the healthcare industry, has demonstrated its commitment to humanizing healthcare and empowering its clients to better understand and engage with the individuals they serve. With a strong focus on innovation, strategic partnerships, and operational excellence, NRC is well-positioned to capitalize on the growing demand for comprehensive healthcare solutions.
Business Overview
NRC's purpose is to support healthcare organizations in their understanding of each unique individual, not just as point-in-time insights, but as an ongoing relationship. The company's end-to-end solutions enable its clients to gain a longitudinal understanding of how life and health intersect, with the goal of developing lasting, trusting relationships. NRC's 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.NRC's client base primarily consists of the top 400 healthcare systems in the United States, who are facing increasing pressure to improve health outcomes, control costs, retain qualified employees, and expand market share, all while navigating a rapidly changing regulatory landscape. The company's ability to measure what matters most and systematically capture, analyze, and deliver insights based on self-reported information from patients, families, and consumers is critical in today's healthcare market.
Financials
For the fiscal year ended December 31, 2023, NRC reported annual revenue of $148,580,000 and net income of $30,971,000. The company's annual operating cash flow was $38,113,000, and its annual free cash flow was $22,334,000. These strong financial results demonstrate NRC's ability to consistently deliver value to its clients and shareholders.In the first quarter of 2024, NRC reported revenue of $35,313,000, a slight decrease of 3% compared to the same period in the prior year. The company's operating income for the quarter was $8,760,000, with a net income of $6,359,000. NRC's operating cash flow for the quarter increased to $12,037,000, up from $7,753,000 in the first quarter of 2023.
Recurring Contract Value and Geographic Breakdown
NRC's recurring contract value, which represents the total revenue projected under all renewable contracts for their respective next annual renewal periods, stood at $139,548,000 as of March 31, 2024, a decrease of 5% compared to the prior year period. This decline was primarily due to a lack of growth in new contracts to replace losses, although the company's retention rate remained fairly consistent.Geographically, NRC's revenue is generated in the United States, which accounted for $35,313,000, or 100%, of the company's total revenue in the first quarter of 2024. The company does not currently have any operations or revenue contributions from outside the United States.
Strategic Initiatives and Outlook
To drive future growth and shareholder value, NRC has outlined several key strategic initiatives:1. Doubling the company's total addressable market (TAM) through portfolio additions, acquisitions, and partnerships. 2. Achieving double-digit annual revenue growth. 3. Expanding operating margins. 4. Creating significant value for investors.
To execute on these goals, NRC is focused on combining its historical strengths, including healthcare expertise, trusted thought leadership, and unrivaled client service, with an expanding portfolio of products and innovative new technologies, such as generative AI. The company is also investing in its sales team and sales approach to accelerate pipeline growth and conversion.
NRC's leadership team is highly aligned with these strategic objectives and is committed to delivering on them. The company is making progress, with plans to soon introduce new tools and insights across patient, customer, and employee experience solutions, as well as AI-enhanced healthcare-specific solutions later this year.
Risks and Challenges
While NRC has a strong track record of success, the company faces several risks and challenges that investors should be aware of. These include the potential for non-renewal of client service contracts, increased competition and pricing pressure, the impact of global conflicts and economic downturns, and the ability to attract and retain key talent.Additionally, the company's reliance on technology and the potential for cyber-attacks or system failures could pose risks to its operations and client relationships. NRC's ability to maintain effective internal controls and manage its intellectual property and proprietary technology is also crucial to its long-term success.
Liquidity
As of March 31, 2024, NRC had approximately $40 million in net debt, with $23 million available on its line of credit and $56 million available under its delayed draw term loan facility. The company expects net debt to increase over the balance of the year as it invests in organic innovation, growth initiatives, and strategic acquisitions.NRC's capital allocation priorities include funding organic innovation and growth investments, maintaining its quarterly dividend, and opportunistically repurchasing shares. The company has demonstrated a commitment to prudent financial management and maintaining a strong balance sheet to support its strategic initiatives.