Q4 2021 National Research Corp Earnings Call
Speaker 1: with a focus on our future trajectory.
Our future trajectory.
Speaker 1: The foundation of our growth strategy builds upon our past work digitizing the collection of patient feedback, which, as you are aware, shortens cycle times in delivering insights to our clients and represents the views of far greater number of patients.
The foundation of our growth strategy builds upon our past work digitizing the collection of patient feedback, which as you are aware shorten cycle times and delivering insights to our clients and represents the views a far greater number of patients.
Speaker 1: These innovations from legacy approaches to capture and customer feedback have driven increased retention and spend from current clients and new logo wins against Press Gaining.
These innovations from legacy approaches to capture and customer feedback have driven increased retention and spend from current clients and new logo wins against press ganey.
Speaker 1: To this foundation of digitizing the measurement of experience of a person's past health care encounters, NRC Health has added the capability and capacity to have a dialogue with patients before the health care visit to understand their preferences, fears, and expectations for their upcoming appointments.
To this foundation of digitizing the measurement of experience of a person's past healthcare encounters NRC health has added the capability and capacity to have a dialogue with patients before the healthcare visit to understand their preferences fears and expectations for.
Are there upcoming appointment.
Armed with this understanding and care teams can personalized care delivery, resulting in each patient being treated as a unique person.
Speaker 1: Armed with this understanding, care teams can personalize care delivery resulting in each patient being treated as a unique person.
Speaker 1: Uniqueness is an important outcome of healthcare delivery, given consumers cite healthcare as the most consequential, personal, and expensive of all services. And given such, we know from national studies, 87% of consumers in the United States expect personalized care.
Uniqueness is an important outcome of healthcare delivery, given consumer site health care as the most consequential personal and expensive of all services and given such we know from National studies, 87% of consumers in the United States expect personalized care.
Speaker 1: We have branded our ability to enable the delivery of personalized care for all patients as our human understanding program.
We have branded our ability to enable the delivery of personalized care for all patients as our human understanding program.
The business case is basically delivering personalized care improves clinical outcomes reduces costs and creates lasting patient provider relationships.
Speaker 1: The business case is basic. Delivering personalized care improves clinical outcomes, reduces costs, and creates lasting patient-provider relationships.
Speaker 1: All healthcare organizations, of course, are aware of this business need.
All health care organizations of course are aware of this business needs and strive to better understand those that they serve so as to treat each patient uniquely.
Speaker 1: strive to better understand those that they serve so as to treat each patient uniquely.
Speaker 1: To this end, some health care systems are doing better than others.
To this end some health care systems are doing better than others.
In fact, we have Benchmarked every major health care organization in the 200 largest U S markets and performance ranges from zero percent.
Speaker 1: In fact, we have benchmarked every major health care organization in the 200 largest US market.
Speaker 1: And performance ranges from 0% of patients feeling they were treated as unique.
Patients feeling they were treated was unique.
Two a few select organizations, where 100% of patients report everyone in the organization did so.
Speaker 1: to a few select organizations where 100% of patients report everyone in the organization did so.
Speaker 1: Net promoter scores were 82, an amazingly high NPS.
Net promoter scores, we're 82, an amazingly high NPS.
Speaker 1: and patients were 12 times more likely to be a promoter of these top performing health systems.
And patients were 12 times more likely to be a promoter of these top performing health systems at the lower end of the range. We documented in extremely low NPS of negative 50.
Speaker 1: At the lower end of the range, we documented an extremely low NPS of negative 50%
And these lower performing health systems patients were 13 times more likely to be at to tractor.
Speaker 1: In these lower performing health systems, patients were 13 times more likely to be a detractor of that brand.
That brand.
These benchmarks reconfirm the need for improvement and magnify the value of <unk> offerings, which is to enable partner organizations to treat every patient is unique.
Speaker 1: These benchmarks reconfirm the need for improvement and magnify the value of NRC's offerings, which is to enable partner organizations to treat every patient as unique.
Speaker 1: The Human Understanding Program enables personalization by pushing relevant and contextual patient information to our partner organization's workflow tool.
The human understanding program enables personalization by pushing relevant and contextual patient information to our partner organizations workflow tools, which ensures the right care team member.
Speaker 1: which ensures the right care team member has the right information at the right time to make each interaction with the patient smarter and personalized.
Has the right information at the right time to make each interaction with the patient smarter and personalized.
Speaker 1: Furthermore, patient spheres, preferences, and expectations are routinely updated and appended to that person's lifetime record.
Furthermore, patient spheres preferences and expectations are routinely updated independent to that person's lifetime record, creating an even more robust ever evolving motion picture of every individual.
Speaker 1: creating an even more robust, ever-evolving motion picture of every individual.
The impact is notable and client organizations that have deployed our human understanding program.
Speaker 1: The impact is notable in client organizations that have deployed our human understanding program. These client organizations have enabled personalized care delivery at scale.
These client organizations have enabled personalized care delivery at scale improved care coordination and patient engagement has become more effective.
Speaker 1: improved care coordination, and patient engagement has become more effective.
Speaker 1: In essence, the person has been treated by all in all interactions as unique. With that, I would now turn the call back to the person.
In essence, the person who has been treated by all in all interactions is unique.
With that I would now turn the call back over to Kevin.
Thank you Mike.
I am pleased to report solid fourth quarter results and the continuation of our strong performance for the year as we continued to achieve double digit revenue and operating income growth.
Speaker 1: I am pleased to report solid fourth quarter results in the continuation of our strong performance for the year as we continue to achieve double digit revenue and operating income growth.
Speaker 1: Our 2021 annual revenue growth of 11% represented our highest annual growth rates since 2012.
Our 2021 annual revenue growth of 11% represented our highest annual growth rate since 2012.
We also increased 2021 full year operating income by 18% over 2020 and increased operating margin to 34% up from 32% in 2020.
Speaker 1: We also increased 2021 full year operating income by 18% over 2020, and increased operating margin to 34% up from 32% in 2020.
We ended 2021 with $150 9 million and total recurring contract value or <unk>.
Speaker 1: We ended 2021 with $150.9 million in total recurring contract value, or TRCB.
<unk> represents 12 months of revenue from our current client contracts, which are essentially all fixed price subscription agreements.
Speaker 1: TRCV represents 12 months of revenue from our current client contracts, which are essentially all fixed price subscription agreements.
Speaker 1: Our 2021 ending TRCB increased by 4% over the prior year, compared to an annual increase of 6% in 2020.
Our 2021, ending <unk> increased by 4% over the prior year.
Compared to an annual increase of 6% in 2020.
The decline in <unk> growth rate in 2021 was impacted by our strategy to continue to evolve our business mix as we focus on growing our digital core solutions.
Speaker 1: The decline in TRCV growth rate in 2021 was impacted by our strategy to continue to evolve our business mix as we focus on growing our digital core solution.
Speaker 1: while at the same time eliminating certain legacy or non-core solutions.
At the same time, eliminating certain legacy or noncore solutions.
Speaker 1: Decisions we made to eliminate certain legacy offerings over the next year for our Canadian and insurance pair markets resulted in a decrease to TRCV at $4.2 million.
Decisions, we made to eliminate certain legacy offerings over the next year for our Canadian and insurance payer markets resulted in a decrease to <unk> $4 $2 million.
Speaker 1: With that, our adjusted 2021 TRCV growth rate, without those eliminations, was 7%.
With that our adjusted 2021 Trc the growth rate without those eliminations was 7%.
The combination of higher growth rates from our digital core offerings and elimination of certain noncore offerings increased.
Speaker 1: The combination of higher growth rates from our digital coroff
Speaker 1: and elimination of certain on-core offerings increased.
Speaker 1: TRCV for our digital course solutions to represent 85% of total recurring contract value at the end of 2021, up from 57% at the end of 2018. TRCV for our digital course solutions to represent 85% of total recurring contract value at the end of 2018.
<unk> for our digital core solutions to represent 85% of total recurring contract value at the end of 2021.
From 57% at the end of 2018.
Speaker 1: Again, our growth strategy continues to focus on our organic growth levers of increasing revenue from our core offerings within our existing client base, as well as adding new clients to increase market share.
Again, our growth strategy continues to focus on our organic growth levers of increasing revenue from our core offerings within our existing client base as well as adding new clients to increase market share.
With respect to our existing client base, we saw a continued increase in our client retention rate as well as an increase in clients utilizing multiple solutions.
Speaker 1: With respect to our existing client base, we saw continued increase in our client retention rate, as well as an increase in clients utilizing multiple solutions.
Speaker 1: up to 32% from a level of 28% at the beginning of the year. While this-
Up to 32%.
From a level of 28% at the beginning of the year.
While this increase was very positive we still have a significant addressable market opportunity within our client base for increased penetration and growth.
Speaker 1: We still have a significant addressable market opportunity within our client base for increased penetration and growth.
Our new sales declined from $29 5 million in 2000 $20 million to $22 million in 2021, which we believe was primarily attributed to fewer new sales opportunities related to the continued impact of COVID-19 for our clients.
Speaker 1: Our new sales declined from 29.5 million in 2020 to 22 million in 2021, which we believe was primarily attributed to fewer new sales opportunities related to the continued impact of COVID for our...
Speaker 1: Operating income grew over the prior year by 26% and 18%. Respectively for the fourth quarter and the full year of 2021.
Operating income grew over the prior year by 26% and 18% respectively for the fourth quarter and the full year of 2021.
As we generate revenue growth the efficiencies inherent in our subscription model continued to drive operating leverage and margin improvements a hallmark of our financial performance.
Speaker 1: As we generate revenue growth, the efficiencies inherent in our subscription model continue to drive operating leverage and margin improvements. A hallmark of our price.
We also benefited from focus and discipline in managing our cost structure in 2021.
Speaker 1: We also benefited from focusing discipline in managing our cost structure in 2021.
Net income for the fourth quarter and the full year of 2021 increased by 17% and 1% respectively over the same periods in 2020.
Speaker 1: Net income for the fourth quarter and the full year of 2021 increased by 17% and 1% respectively over the same periods in 2020.
Speaker 1: The lower net income increase relative to the increase in operating income was due to changes in our effective tax rate.
The lower net income increase relative to the increase in operating income was due to changes in our effective tax rate.
The effective tax rate for both the fourth quarter at year end of 2021 increased to 23%.
Speaker 1: The effective tax rate for both the fourth quarter and year end.
Speaker 1: to twenty three percent!
Speaker 1: That's compared to 17% and 10% respectively for the same periods.
That's compared to 17% and 10% respectively for.
For the same periods in 2020.
Speaker 1: Mainly due to decreased tax benefits from the exercise and investing of Sharebase Compensation Rewards.
Mainly due to decreased tax benefits from the exercise and vesting of share based compensation rewards.
Speaker 1: and from higher state income taxes in 2021.
And from higher state income taxes in 2021.
Our annual cash flow from operations was $46 3 million in 2021 compared to $40 6 million in 2020, an increase of 14%.
Speaker 1: Our annual cash flow from operations was 46.3 million in 2021, compared to 40.6 million in 2020, an increase of 14%.
Speaker 1: The company ended 2021 with a cash balance of 54.4 million.
The company ended 2021 with a cash balance of $54 4 million.
Speaker 1: Up from 34.7 million at the end of 2020.
Up from $34 7 million at the end of 2020.
The company's board of directors has established priorities for capital allocation.
Speaker 1: The company's board of directors has established priorities for capital allocation with funding of NFS
With funding of innovation and growth investments, including both M&A activity as well as internal projects as our preferred use of capital.
Speaker 1: including both M&A activity as well as internal projects as our preferred
The company funded $7 6 million for innovation and growth purposes in 2021.
Speaker 1: The company funded 7.6 million for innovation and growth purposes in 2021.
Speaker 1: Next in priority and capital allocation is for quarterly dividends and share repercussions.
Next in priority in capital allocation is for quarterly dividends and share repurchases in 2021, we paid $9 2 million in quarterly dividends to shareholders.
Speaker 1: In 2021, we paid 9.2 million in quarterly dividends to shareholders and 4.6 million.
And $4 6 million for share repurchases.
Speaker 2: That concludes my comments for this morning. I'll now turn the call back to my...
That concludes my comments for this morning, I'll now turn the call back to Mike.
Thank you Kevin We will report our partners' adoption of our human understanding program as a key growth lever in future earnings calls as well we would ask that you look for additional human understanding program announcements as time unfolds.
Speaker 1: Thank you, Kevin. We will report our partners adoption of our human understanding program as a key growth lever in future earnings calls as well. We would ask that you look for additional human understanding program announcements as time unfolds. It's actually.
It's actually <unk>.
<unk> our prepared remarks, so operator I'd now ask you to open the call to questions. Please.
Speaker 1: completes our prepared remarks. So operator right now ask you to open the call to questions please.
Speaker 3: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove a question, it is star followed by two. Again, to ask a question, it is star followed by one. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking a question.
Thank you. Thank you I would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to ask a question.
Stall followed by <unk>.
Again to ask a question, it's a star followed by one.
As a reminder, if you are using a speaker phone. Please remember to pick up Johan before asking a question.
Speaker 3: So our first question comes in from George D. Anglo from Alpine Peaks Capital. Your line is now open, please go ahead.
Our first question comes in from the Anglo from Alpine peaks capital. Your line is now open. Please go ahead.
Hey, good morning, guys. Thanks for taking my question I was just wondering how.
Speaker 4: Hey, good morning guys. Thanks for kicking my question. I was just wondering how much was the sales environment this quarter impacted by hospitals busy with with Omicron?
How much was the sales environment this quarter impacted by hospitals busy with with omicron.
Speaker 1: Clearly, our partner organizations for the most part are swamped, right? So, I'll head down on Payton Care, which of course is where it should be. However, we are seeing an increased number of meetings that are being accepted in our sales level of activity is starting to increase, especially over a year ago. So, I believe the markets are opening up. The community is applying for the whole world, no matter what carbon procurement is internal. No, not in particular. All the people who aç to help in the community and??????????? tomay?n in others are getting
Clearly our partner organizations for the most part are swapped rate. So all heads down on patient care, which of course is where it should be.
However, we are seeing an increased number of meetings that are being accepted and our sales level of activity is starting to increase especially over a year ago. So I believe the markets are opening up.
But clearly it's have a dampening effect over the last 18 odd months.
Speaker 1: Clearly it's have a dampening effect over the last 18 odd months.
Speaker 4: Got it. And would you say that, you know, as much as you can comment for the first quarter, is it, is that something you're still seeing with things kind of opening up in terms of the sales?
Got it and so would you say that.
As much as you can comment for the first quarter as it does that something youre still seeing with things kind of opening up in terms of the sales.
Yes, I think as the.
Speaker 1: COVID has peaked in about 40% of the population. We are seeing an increased appetite to get on about looking at different programs for voice of the customer. Clearly we're not there in every market in the United States as we all hopefully will be soon. So I think the trend is more on the positive side in terms of tailwinds versus headwinds.
Covid peak has peaked and about 40% of the population we are seeing an increased appetite to get on about.
Looking at different programs for voice of the customer.
Clearly, we're not there in every market in the United States as we all hope we will be soon so I think the trend is.
More on the positive side in terms of <unk> versus headwinds.
Got it thanks, and if I could ask another question.
Speaker 4: on it. Thanks. And if I could ask another question. So thanks for the comments on human understanding.
So thanks for the comments on human understanding.
Speaker 4: I'm excited to hear about that new product. Is that gonna be structured more as an option that clients add on to existing products or is it gonna be more separate from the current offering?
Excited to hear about that new product is that going to be structured more as an option that clients add ons to existing products or is it going to be more separate from the current offering.
Speaker 1: It builds on the base of digitization of the collection, the voice of the customer. So as part and parcel one could not purchase human understanding without the baseline digital data collection, will you refer to as real time. We will.
It builds on the base of Digitization of the collection of the voice of the customer so it's part and parcel one could not.
Purchased human understanding without the baseline digital data collection, where you referred to as real time.
We will.
<unk>.
When we reach mass deployment, which will be here in <unk>.
Speaker 1: When we reach mass deployment, which will be here in probably mid-year, I would guess, we will start versioning the rollout, meaning that it will be an embedded offering to all clients that want to take part of that in one-fail swoop.
Probably mid year I would guess, we will start version in the rollout, meaning that it will be a embedded offering to all clients that want to take part of that at one in one fell swoop.
Speaker 1: The rollout strategy is not unlike what we had for our real-time product, which over the course of three years, we essentially converted the vast majority, if not all, that are going to convert to the real-time platform. I would assume that we will see a similar migration with over perhaps a three-year period. The lift from human understanding will have been realized.
The rollout strategy is not unlike what we had for our real time product, which over the course of three years, we essentially converted.
The vast majority if not all of that are going to convert.
Two the real time platform I would assume that we will see a similar migration with over perhaps a three year period.
The lift from human understanding will have been realized.
Got it.
I think.
Speaker 4: I think recently you guys had talked about pricing, and we're seeing that across the economy. Can you get a little color on conversations that you're having with your customers around pricing right now?
Recently, you guys had talked about.
Pricing and we're seeing that across the economy can you can you give a little color on conversations that youre, having with your customers around pricing.
Right now.
Okay.
We haven't seen a lot of pushback I mean.
Speaker 1: We haven't seen a lot of push back. I mean The sales environment has not been as robust as it was pre-coated so maybe we'll see something different on a go-forward basis
The sales environment has not been as robust as it was pre COVID-19 . So maybe we will see something different on a go forward basis.
Speaker 1: But the value of the product offerings that we have really have protected this on any cannibalization that may exist in the marketplace Given the pressures that healthcare organizations have for example on their labor costs. So as of right now while every
But the value of the product offerings that we have really a protected us on any cannibalization that may exist in the marketplace given the pressures that health care organizations have for example on their labor costs. So as of right now while every.
Speaker 1: deal we get is a competitive deal, so I don't want to suggest it by any means, easy street. Price really has not been the determining factor. It's been more about the innovation we're bringing to the marketplace, and that seems to have maintained or provided some pricing power.
Will we get as a competitive deal. So I don't want to suggest it's by any means easy Street.
Price really has not been the determining factor it's been more about the innovation, we're bringing to the marketplace and that seems to have maintained or provided some pricing power.
Thanks, a lot guys.
Thank you Sir.
As a reminder, if you would like to ask a question to start followed by one on your telephone keypad.
Speaker 3: As a reminder, if you would like to ask a question to start followed by one on your telephone keypad.
There are currently no more questions why 10. So at this time I will close the conference call over to the management team for closing remarks.
Speaker 3: There are currently no more questions waiting, so at this time I will pass the conference call over to the management team for closing remarks.
Speaker 1: Thank you, operator, and thank you all today that have been listening on our call. We look forward to reporting progress next quarter. Again, thank you for your time.
Thank you operator, and thank you all today that had been listening on our call. We look forward to reporting progress next quarter again. Thank you for your time.
That concludes today's conference call. Thank you for your participation you may now disconnect your line.
Speaker 3: That concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Yeah.
Okay.