Q1 2020 Earnings Call

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Greetings and welcome to the first quarter 2020 conference call. During the presentation. All participants will be no listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question please but the one.

Followed by the four on your telephone if at any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Wednesday may six 2020.

I would now like to turn the conference over to Kevin Congress Chief Financial Officer. Please go ahead.

Thank you Kelly and welcome everyone to National Research corporations 2000, 2021st on Earth quarter earnings call. My name is Kevin Paris, The company's Chief Financial Officer.

I'll be handling the call myself today from my home like many of you.

Before continuing I'd like to review conditions related to any forward looking statements that may be made as part of todays call.

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.

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.

Before reviewing first quarter performance I would like on behalf of all NRC associates.

Extend a heartfelt thank you to our customers in front line care givers around the world are working tirelessly to save lives and keep community say during the cobot 19 Pandemics.

As we're all aware this public health crisis is likely to have an extended financial impact on most sectors of the economy and health care is no exception.

We have no unique perspective, which would allow us to forecast the depth duration or specific impact on our clients or the company and well refrain on this and future communication with investors from speculating.

Given this uncertainty are only assumption is that the company sales revenue and margin expansion are unlikely to follow the growth trends of the past.

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Regarding the facts of our first quarter performance.

Recurring contract value at the end of the first quarter 2020 ended at 140.4 million, representing an 11% growth over the same period last year.

Health care system clients with agreements for multiple solutions represented 28% of our client base at the end of the first quarter of 2020.

Up from 25% at the same time last year.

Recurring contract value for our digital voice of the customer platform solutions increased to 102.9 million compared to 77.6 million at the end of the first quarter of 29 teams.

First quarter 2020 revenue was 33.9 million an increase of 8% over the first quarter 2019.

First quarter revenue for our digital voice to the customer platform solutions increased to 69% of our total revenue compared to 58% total revenue in the first quarter of 2019.

Consolidated operating income for first quarter, 2020 was 11.2 million or 33% of revenue compared to 10.7 million or 34% of revenue for the same period last year.

Total operating expenses of 22.7 million for the first quarter of 2020 increased by 9% compared to prior year.

Direct expenses increased 8% to 12.5 million for the first quarter 2020, compared to 11.7 million for the same period last year.

Direct expenses remained at 37% of revenue in both the first quarter of 2020 and of 29 team.

Our direct expenses increased primarily due to an increase in fixed expenses, partially off crees offset by a decrease in variable expenses.

Fixed expenses increased primarily due to higher salary and benefit costs and contracted services and the customer service and information technology areas.

Variable costs were lower due in large parts of the continued shift of our revenue mix from legacy solutions to voice of the customer platform revenue.

Variable direct expenses as a percent of revenue decreased.

To 15% for the first quarter of 2020 compared to 18% in the first quarter 2019.

Selling general and administrative expenses increased 8.7 million for the first quarter of 2020 compared to 7.7 million for the same period in 2019.

Selling general and administrative expenses were 26% of revenue for the first quarter 2020 compared to 24% of revenue.

For the first quarter last year.

Selling general and administrative expenses increased.

Legal and accounting costs, primarily due to insurance refund received in 2019 for legal expenses associated with the recapitalization.

Our depreciation and amortization expense remained at $1.4 million for both the first quarter of 2020 and of 2019.

Our other income and expense changed to $176000 of other net income in the first quarter 2020 compared to $844000 other net expense.

In the first quarter of 29 team.

This change was primarily due to the revaluation on intercompany transactions due to changes in the foreign exchange rate and decreased.

Interest expense due to the declining balance on our term loan.

The company had an income tax benefit of $385000 for the first quarter of 2020 compared to $1.7 million of expense in 2019.

The effective tax rate was a 3% benefit for the first quarter of 2020 compared to 17%.

Effective rate in the same period of 2019.

Primarily due to increased tax benefits from the exercise and vesting of share based compensation awards, partially offset by higher projected state taxes in 2020.

Net income for the first quarter 2020 was 11.8 million compared to 8.2 million in 2019.

This completes their prepared remarks, Kelly I will now ask you to open the call to questions.

Thank you if you like to register that question. Please press Star one followed by the four on your telephone you will hear what Cetone Proplet knowledge of the class. If your question has been add to that you would like to we're talking about anticipation. Please proceed to one followed by the C. Once again, if he would like to register for question. Please press Star one followed by the filler.

Well again as a reminder, it's one for if he would like to register for question.

It appears we haven't no phone questions at the front there.

Okay. Thank you Kelly in closing I'd, just like to say until our next call our thoughts and support or with those who are on the front lines battling. This pandemic. Thank you for your time today.

That does conclude the conference copper today, we thank you for your participation now they are that you. Please disconnect your line.

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