National Research (NRC) - 2024 Q2 - Quarterly Report

Revenue and Expenses - Revenue for the three months ended June 30, 2024, decreased by $1.1 million (3%) to$ 35.021 million compared to $36.161 million in the same period of 2023, primarily due to decreased US recurring revenue from the existing client base[75]. - Direct expenses for the three months ended June 30, 2024, increased by$ 113,000 (1%) to $13.422 million compared to$ 13.309 million in 2023, with variable expenses as a percentage of revenue at 15% in 2024 and 14% in 2023[75][76]. - Selling, general, and administrative expenses decreased by $745,000 (6%) to$ 11.221 million in the three months ended June 30, 2024, primarily due to reduced salary and benefit costs from workforce reduction[75][77]. - Operating income for the three months ended June 30, 2024, decreased by $500,000 (5%) to$ 8.865 million compared to $9.365 million in 2023, reflecting the decline in revenue[75][77]. - Total other expense for the three months ended June 30, 2024, increased by$ 620,000, primarily due to lower interest income and higher interest expense from borrowings[78]. - Recurring Contract Value for the six months ended June 30, 2024, declined by $8.135 million (6%) to$ 138.434 million compared to $146.569 million in 2023, mainly due to a lack of growth in new contracts[79][83]. Cash Flow and Working Capital - Cash provided by operating activities increased by$ 2.236 million (13%) to $18.824 million for the six months ended June 30, 2024, compared to$ 16.588 million in 2023[79]. - As of June 30, 2024, the company had a working capital deficit of $28.8 million, an increase from$ 11.8 million on December 31, 2023, primarily due to decreases in cash and trade accounts receivable[86]. Dividends and Share Repurchase - The company paid cash dividends of $5.8 million in the six months ended June 30, 2024, with dividends of$ 2.9 million declared in the three months ended June 30, 2024[87]. - No shares were repurchased during the three months ended June 30, 2024, leaving 1,095,850 shares available for repurchase under the 2022 Program[98]. Debt and Borrowings - As of June 30, 2024, the outstanding balance on the Term Loan was $15.4 million, with a fixed interest rate of 5% and payable in monthly installments through May 2027[90]. - As of June 30, 2024, the outstanding balance on the Delayed Draw Term Loan was$ 17.9 million, with principal payments due in monthly installments of $226,190 through April 2027[92]. - The company had$ 9.0 million of borrowings outstanding and the availability to borrow an additional $21.0 million on the Line of Credit as of June 30, 2024[91]. - The weighted average interest rate on borrowings on the Line of Credit during the three-month and six-month periods ended June 30, 2024 was 7.67% and 7.68%, respectively[91]. - The company is required to maintain a minimum fixed charge coverage ratio of 1.10x and a cash flow leverage ratio of 3.00x or less throughout the term of the Credit Facilities[93]. - The Credit Agreement was amended in June 2023 to exclude building renovation costs from the fixed charge coverage ratio calculation, increasing the exclusion limit from$ 25 million to $27.5 million[96]. - The company had the availability to borrow an additional$ 56.0 million on the Delayed Draw Term Loan as of June 30, 2024[92]. Lease Obligations and Tax Liabilities - As of June 30, 2024, the company had fixed lease payments of $672,000 for operating leases and$ 12,000 for finance leases payable within 12 months[97]. - The liability for gross unrecognized tax benefits related to uncertain tax positions was $2.1 million as of June 30, 2024[97]. Credit Facilities - The Credit Facilities are secured by a first-priority lien on substantially all of the company's and its guarantors' present and future assets[94].