Company Overview
National Research Corporation, doing business as NRC Health (NASDAQ:NRC), is a leading provider of advanced analytics and insights that empower healthcare organizations to deliver exceptional patient and employee experiences. With a rich history spanning over three decades, NRC Health has established itself as a trusted partner in the pursuit of humanizing healthcare through data-driven solutions.
History and Evolution
Founded in 1981 and headquartered in Lincoln, Nebraska, NRC Health initially focused on providing research and consulting services to healthcare systems. The company started as a healthcare research and consulting firm, offering market research and business intelligence services to healthcare organizations. Over the years, NRC Health has evolved its offerings to encompass a comprehensive suite of innovative products and services, including performance measurement, analytics, and governance education.
During the 1980s and 1990s, NRC Health successfully navigated the challenges of the healthcare industry, continuously adapting its services to meet the changing needs of its clients. In the 2000s, the company expanded its portfolio of solutions, moving beyond traditional market research to offer a wide range of services, including patient experience measurement, employee engagement surveys, and reputation management. To enhance its capabilities and broaden its reach, NRC Health made strategic acquisitions during this period.
Mission and Strengths
NRC Health's mission is to help healthcare organizations understand and address the needs of the individuals they serve, with the ultimate goal of fostering lasting relationships and enhancing overall well-being. The company has remained committed to this mission throughout its history, establishing a strong reputation for innovation, data-driven insights, and deep partnerships with its clients.
One of the key strengths of NRC Health is its ability to leverage cutting-edge technology and data-driven insights to provide a holistic view of the healthcare experience. The company's solutions span the entire continuum of care, from patient onboarding to post-discharge follow-up, enabling healthcare providers to gain a deeper understanding of their patients and employees. This approach has proven instrumental in driving meaningful improvements in patient satisfaction, employee engagement, and operational efficiency.
Financials
NRC Health's financial performance has been solid, with the company reporting consistent revenue growth and profitability in recent years. In the fiscal year 2023, the company generated revenue of $148.58 million, a 4.6% increase over the previous year, and reported net income of $30.97 million. The company's annual operating cash flow for the fiscal year 2023 was $38.11 million, with a free cash flow of $22.33 million.
However, in the most recent quarter, NRC Health faced some challenges. The company reported revenue of $35.82 million, representing a 6% decrease compared to the same quarter in the previous year. Net income for the quarter was $5.69 million, a 27.7% decrease year-over-year. These decreases were mainly attributed to lower recurring revenue in the existing client base and higher interest expenses.
NRC Health operates primarily in the United States and does not have significant international operations.
Liquidity
The company's financial stability is reflected in its strong balance sheet. As of December 31, 2023, NRC Health had a debt-to-equity ratio of 0.75 and held $6.65 million in cash and cash equivalents. The company's current ratio and quick ratio both stand at 0.67, indicating its ability to meet short-term obligations.
NRC Health has access to substantial credit facilities to support its operations and growth initiatives. As of September 30, 2024, the company had a $30 million revolving credit facility, of which $25 million was available. Additionally, NRC Health has a $75 million delayed draw term loan facility, with $39 million available as of the same date.
Product Segments
NRC Health operates through two main product segments: subscription-based services and one-time specified services.
The subscription-based services segment, which represents the majority of NRC's revenue, includes performance measurement and improvement services, healthcare analytics, and governance education services. These services are provided under annually renewable subscription agreements that are generally cancelable on short or no notice without penalty. The recurring nature of this revenue stream provides NRC with a stable foundation.
The one-time specified services segment involves NRC performing specific services for clients at a single point in time, for a fixed payment upon completion. This on-demand work supplements the core subscription offerings.
It's worth noting that NRC's recurring contract value declined in 2024 compared to 2023, primarily due to a lack of growth in new contracts to replace losses, despite the company maintaining a fairly consistent retention rate. This decline in recurring revenue is an area of concern that NRC will need to address moving forward.
Resilience and Adaptability
Despite the challenges posed by the COVID-19 pandemic, NRC Health has demonstrated resilience and adaptability. In 2021, the company faced the disruption of the healthcare industry and its own operations due to the pandemic. However, NRC Health quickly adapted its services to support its clients during this challenging time, continuing to invest in its technology and data analytics capabilities. The company's solutions have been instrumental in helping healthcare organizations navigate the evolving landscape, as they strive to maintain high-quality care and foster strong connections with their patients and employees.
Future Outlook
Looking ahead, NRC Health is well-positioned to capitalize on the growing demand for innovative healthcare technology solutions. The company's recent acquisitions and strategic partnerships have strengthened its capabilities, allowing it to provide a more comprehensive suite of services to its clients. Additionally, the company's ongoing investment in research and development is expected to yield new, cutting-edge solutions that will further enhance the healthcare experience.
However, NRC Health faces challenges in sustaining its recurring revenue growth, which will be crucial for maintaining its profitability and cash flow generation going forward. The company's ability to innovate and expand its subscription-based offerings will be a key factor in determining its future performance.
Conclusion
In conclusion, NRC Health's commitment to transforming the healthcare industry through data-driven insights and human-centric solutions makes it a compelling investment opportunity. Despite recent challenges in revenue growth, the company's strong financial foundation, resilient business model, and forward-looking strategy position it for potential success in the ever-evolving healthcare landscape. As NRC Health continues to adapt to market demands and invest in innovative solutions, it remains a significant player in shaping the future of healthcare experiences.