What changed in NATIONAL RESEARCH CORP's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of NATIONAL RESEARCH CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+204 added−153 removedSource: 10-K (2025-03-17) vs 10-K (2024-02-27)
Top changes in NATIONAL RESEARCH CORP's 2024 10-K
204 paragraphs added · 153 removed · 128 edited across 7 sections
- Item 7. Management's Discussion & Analysis+72 / −55 · 45 edited
- Item 1A. Risk Factors+63 / −40 · 36 edited
- Item 1. Business+46 / −35 · 28 edited
- Item 1C. Cybersecurity+7 / −9 · 5 edited
- Item 5. Market for Registrant's Common Equity+8 / −7 · 7 edited
Item 1. Business
Business — how the company describes what it does
28 edited+18 added−7 removed49 unchanged
Item 1. Business
Business — how the company describes what it does
28 edited+18 added−7 removed49 unchanged
2023 filing
2024 filing
Biggest changeOur value proposition incorporates the benefits to clients derived from our deep subject matter expertise that has been built from helping healthcare organizations over the past 40 years. Our platform includes features and capabilities built specifically for healthcare providers, including a library of performance improvement content which can be tailored to the provider based on their specific customer feedback profile.
Biggest changeOur platform includes features and capabilities built specifically for healthcare providers, including a library of performance improvement content which can be tailored to the provider based on their specific customer feedback profile. 5 Table of Contents Experienced senior management team led by our founder. Our senior management team has extensive industry and leadership experience. Michael D.
Experience Solutions – Our Experience solutions are provided on a subscription basis via a cross-continuum multi-mode digital platform that collects and measures data and then delivers business intelligence that our clients utilize to improve patient experience, engagement, and loyalty.
Patient Experience Solutions – Our Experience solutions are provided on a subscription basis via a cross-continuum multi-mode digital platform that collects and measures data and then delivers business intelligence that our clients utilize to improve patient experience, engagement, and loyalty.
We engage in marketing activities that enhance our brand visibility in the marketplace, generate demand for our solutions and engage existing clients.
We engage in marketing activities that generate demand for our solutions, engage existing clients and enhance our brand visibility in the marketplace.
These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), “believes,” “expects,” “may,” “could,” “anticipates,” “estimates,” “plans,” “intends,” or the use of words such as “would,” “will,” “may,” “could,” “goal,” “focus,” or “should,” or other words of similar import.
These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), “believes,” “expects,” “may,” “could,” “anticipates,” “estimates,” “plans,” “creates,” “intends,” or the use of words such as “would,” “will,” “may,” “could,” “goal,” “focus,” or “should,” or other words of similar import.
We have achieved a market leadership position through our more than 40 years of industry innovation and experience, as well as our long-term, recurring revenue relationships (solutions that are used or required by a client each year) with many of the healthcare industry’s largest organizations.
We believe we have achieved a market leadership position through our more than 40 years of industry innovation and experience, as well as our long-term, recurring revenue relationships (solutions that are used or required by a client each year) with many of the healthcare industry’s largest organizations.
Patient experience data can also be collected on a periodic basis using Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) compliant mail and telephone survey methods for regulatory compliance purposes and to monitor and measure improvement in CAHPS survey scores.
Patient experience data can also be collected on a periodic basis using Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) compliant email, mail and telephone survey methods for regulatory compliance purposes and to monitor and measure improvement in CAHPS survey scores.
Our 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.
Our 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, rounding, and brand loyalty.
Over 260 of the top 400 healthcare systems based on net patient revenue are currently using one or more of our solutions. Our client base provides a unique network effect to share best practices among existing clients and to attract new clients. Our existing client base also provides a significant organic growth opportunity to upsell and cross sell additional solutions.
Over 250 of the top 400 healthcare systems based on net patient revenue are currently using one or more of our solutions. Our client base provides a unique network effect to share best practices among existing clients and to attract new clients. Our existing client base also provides a significant organic growth opportunity to upsell and cross sell additional solutions.
We believe that we can accelerate our growth through (1) increasing scope of services and sales of our existing solutions to our existing clients (or cross-selling), (2) winning additional new clients through market share growth in existing market segments, (3) developing and introducing new solutions to new and existing clients, and (4) pursuing acquisitions of, or investments in, firms providing products, solutions or technologies which complement ours.
We believe that we can grow revenue and earnings through (1) increasing scope of services and sales of our existing solutions to our existing clients (or cross-selling), (2) winning additional new clients through market share growth in existing market segments, (3) developing and introducing new solutions to new and existing clients, and (4) pursuing acquisitions of, or investments in, firms providing products, solutions or technologies which complement ours.
We provide access to such materials through our website as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission. Reports and amendments posted on our website do not include access to exhibits and supplemental schedules electronically filed with the reports or amendments. 6 Table of Contents
We provide access to such materials through our website as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission (the “SEC”). Reports and amendments posted on our website do not include access to exhibits and supplemental schedules electronically filed with the reports or amendments.
Factors that could affect actual results or outcomes include, without limitation, the following factors: ● The possibility of non-renewal of our client service contracts, reductions in services purchased or prices, and failure to retain key clients; ● Our ability to compete in our markets, which are highly competitive with new market entrants, and the possibility of increased price pressure and expenses; ● The likelihood that a pandemic will adversely affect our operations, sales, earnings, financial condition and liquidity; ● The likelihood that global conflicts will adversely affect our operations, sales, earnings, financial condition and liquidity; ● The effects of an economic downturn; ● The impact of consolidation in the healthcare industry; ● The impact of federal healthcare reform legislation or other regulatory changes; ● Our ability to attract and retain key managers and other personnel; ● The possibility that our intellectual property and other proprietary information technology could be copied or independently developed by our competitors; ● Our ability to maintain effective internal controls; ● The possibility for failures or deficiencies in our information technology platform; ● The possibility that we or our third-party providers could be subject to cyber-attacks, security breaches or computer viruses; and ● The factors set forth under the caption “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.
Factors that could affect actual results or outcomes include, without limitation, the following factors: ● The possibility of non-renewal of our client service contracts, reductions in services purchased or prices, and failure to retain key clients; ● Our ability to compete in our markets, which are highly competitive with new market entrants, and the possibility of increased price pressure and expenses; ● The possibility that our solutions and technology do not perform as expected ● The possibility that our acquisitions and partnerships do not achieve the increased demand/profitability expected; ● The likelihood that a pandemic will adversely affect our operations, sales, earnings, financial condition and liquidity; ● The likelihood that global conflicts will adversely affect our operations, sales, earnings, financial condition and liquidity; ● The effects of an economic downturn; ● The impact of consolidation in the healthcare industry; ● The impact of federal healthcare and budget legislation, executive orders, cost-saving measures, and other regulatory changes; ● Our ability to attract and retain key managers and other personnel; ● The possibility that our intellectual property and other proprietary information technology could be copied or independently developed by our competitors; ● Our ability to maintain effective internal controls; ● The possibility for failures or deficiencies in our information technology platform; ● The possibility that we or our third-party providers could be subject to cyber-attacks, security breaches or computer viruses; and ● The factors set forth under the caption “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.
Our solutions enable our clients to both satisfy patient survey compliance requirements and design experiences to build loyalty and improve the wellbeing of the people and communities they care for. Human Capital As of December 31, 2023, we employed a total of 435 associates. None of our associates are represented by a collective bargaining unit.
Our solutions enable our clients to both satisfy patient survey compliance requirements and design experiences to build loyalty and improve the wellbeing of the people and communities they care for. 6 Table of Contents Human Capital As of December 31, 2024, we employed a total of 368 associates. None of our associates are represented by a collective bargaining unit.
In this Annual Report on Form 10-K, statements regarding the value and utility of, and market demand for, our service offerings, future opportunities for growth with respect to new and existing clients, our future ability to compete and the types of firms with which we will compete, future consolidation in the healthcare industry, future adequacy of our liquidity sources, future revenue sources, future revenue growth, future revenue estimates used to calculate recurring contract value, the expected impact of economic factors, including interest rates and inflation, future capital expenditures including, without limitation, our headquarters renovation costs, and the timing, amount, and sources of cash to fund such capital expenditures, future stock repurchases and dividends, the expected impact of pending claims and contingencies, the future outcome of uncertain tax positions, our future use of owned and leased real property, and the expected impact of global conflicts, among others, are forward-looking statements.
In this Annual Report on Form 10-K, statements regarding the value and utility of, and market demand for, our service offerings, future opportunities for growth with respect to new and existing clients, our future ability to compete and the types of firms with which we will compete, future consolidation in the healthcare industry, future adequacy of our liquidity sources, future revenue sources, future revenue, expenses, and margins, future revenue estimates used to calculate recurring contract value, the expected impact of economic factors, including interest rates and inflation, future capital expenditures including, without limitation, our headquarters renovation costs, and the timing, amount, and sources of cash to fund such capital expenditures, future stock repurchases and dividends, the expected impact of pending claims and contingencies, the future outcome of uncertain tax positions, our future use of owned and leased real property, the expected impact of the appointment of Trent Green as our Chief Executive Officer and as a director, both effective June 1, 2025, and the expected impact of global conflicts, among others, are forward-looking statements.
Strategic campaigns and programs focus on (1) ensuring coverage of prospective clients via targeted advertising and account-based campaigns, (2) elevating client value evidence and success stories to an executive level profile, (3) engaging key stakeholders with content, programming and events and (4) amplifying thought leadership through public and media relations programs that include earning placement in national media and trade publications, securing podium presentations at key industry events, and winning awards on behalf of us and our executives.
Strategic campaigns and programs focus on (1) ensuring coverage of prospective clients via targeted advertising and account-based campaigns, (2) elevating client value evidence and success stories to an executive level profile, (3) engaging key stakeholders with content, programming and events and (4) amplifying thought leadership through public and media relations programs that include earning placement in national media and trade publications, securing podium presentations at key industry events, and winning awards on behalf of us and our executives. 4 Table of Contents Competition The healthcare information and market research services industry is highly competitive.
Our primary competitors among such specialty firms include Press Ganey, which we believe has significantly higher annual revenue than us, and several other organizations that we believe have less annual revenue than us.
Our primary competitors among such research firms include Press Ganey and Qualtrics, both of which we believe have significantly higher annual revenue than us, and several other organizations that we believe have less annual revenue than us.
Our ten largest clients collectively accounted for 15%, 15%, and 14% of our total revenue in 2023, 2022 and 2021, respectively.
Our ten largest clients collectively accounted for 17%, 15%, and 15% of our total revenue in 2024, 2023 and 2022, respectively.
Since our founding in 1981, we have focused on meeting the evolving information needs of the healthcare industry through internal product development, as well as select acquisitions. We are a Delaware corporation headquartered in Lincoln, Nebraska. Human Understanding Solutions NRC Health recognizes that behind every person is a story.
Since our founding in 1981, we have focused on meeting the evolving information needs of the healthcare industry through internal product development, as well as select acquisitions. We are a Delaware corporation headquartered in Lincoln, Nebraska. Human Understanding Solutions Healthcare experiences are human experiences.
Government Regulation According to the Centers for Medicare and Medicaid Services (“CMS”), health expenditures in the United States were approximately $4.5 trillion in 2022, or $13,493 per person. In total, health spending accounted for 17% of the nation’s Gross Domestic Product in 2022.
Government Regulation According to the Centers for Medicare and Medicaid Services (“CMS”), health expenditures in the United States were approximately $4.9 trillion in 2023, or $14,570 per person. In total, health spending accounted for 18% of the nation’s Gross Domestic Product in 2023.
We believe the primary competitive factors within our market include quality of service, timeliness of delivery, unique service capabilities, credibility of provider, industry experience, and price.
We believe the primary competitive factors within our market include quality and focus of service, timeliness of delivery, unique service capabilities, the ability to release innovative solution updates, breadth of solutions, credibility of provider, industry experience, and price.
Competition The healthcare information and market research services industry is highly competitive. We have traditionally competed with healthcare organizations’ internal marketing, market research, and/or quality improvement departments which create their own performance measurement tools, and with relatively small specialty research firms which provide survey-based healthcare market research and/or performance assessment.
We have traditionally competed with healthcare organizations’ internal marketing, market research, and/or quality improvement departments which create their own performance measurement tools, and with other research firms which provide survey-based healthcare market research and/or performance assessment.
The primary solution categories include Marketing, Reputation, and Experience. 2 Table of Contents Marketing Solutions – Our Marketing solutions are subscription-based services that allow for improved tracking of awareness, perception, and consistency of healthcare brands; real-time assessment of competitive differentiators; and enhanced segmentation tools to evaluate the needs, wants, and behaviors of communities through real-time competitive assessments and enhanced segmentation tools.
Our digital solutions consist of four primary solution categories – Patient Experience, Consumer Experience, Employee Experience, and Market Experience –which can be implemented both collectively as an enterprise solution or individually to meet specific needs within the organization. 2 Table of Contents Market Experience Solutions – Our Marketing solutions are subscription-based services that allow for improved tracking of awareness, perception, and consistency of healthcare brands; real-time assessment of competitive differentiators; and enhanced segmentation tools to evaluate the needs, wants, and behaviors of communities through real-time competitive assessments and enhanced segmentation tools.
We believe that our industry leadership position, exclusive focus on the healthcare industry, cross-continuum presence, comprehensive portfolio of solutions and relationships with leading healthcare providers position us to compete in this market. 4 Table of Contents Although only a few of these competitors have offered specific services that compete directly with our solutions, many of these competitors have substantially greater financial, information gathering, and marketing resources than us and could decide to increase their resource commitments to our market.
Although only a few of these competitors have offered specific services that compete directly with our solutions, many of these competitors have substantially greater financial, information gathering, and marketing resources than us and could decide to increase their resource commitments to our market.
We are not including the information contained on or available through our website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
We acknowledge that our efforts will be ongoing and must continually be re-evaluated. Available Information More information regarding NRC Health is available on our website at www.nrchealth.com. We are not including the information contained on or available through our website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
Experienced senior management team led by our founder. Our senior management team has extensive industry and leadership experience. Michael D. Hays, our Chief Executive Officer and President, founded NRC Health in 1981. Prior to launching the Company, Mr. Hays served as Vice President and as a Director of SRI Research Center, Inc. (now known as the Gallup Organization).
Hays, our Chief Executive Officer and President, founded NRC Health in 1981. Prior to launching the Company, Mr. Hays served as Vice President and as a Director of SRI Research Center, Inc. (now known as the Gallup Organization). Helen Hrdy was appointed as our Chief Operating Officer in October 2024. Prior to this position Ms.
Helen Hrdy was appointed as our Chief Customer Officer in January 2024. Prior to this position Ms. Hrdy served as our Chief Growth Officer for three years and our Senior Vice President, Customer Success, for eight years.
Hrdy served as our Chief Customer Officer since January 2024, Chief Growth Officer for three years and our Senior Vice President, Customer Success, for eight years. Andy Monnich has served as our Chief Corporate Development Officer since January 2024. Mr.
The Governance Institute Our Governance solutions, branded as The Governance Institute (“TGI”), serves not-for-profit health system boards of directors, executives, and physician leadership.
At every turn Huey is there with the goal of making healthcare a more intentional and human experience for healthcare organizations and the people they serve. 3 Table of Contents The Governance Institute Our Governance solutions, branded as The Governance Institute (“TGI”), serves not-for-profit health system boards of directors, executives, and physician leadership.
They have track records of success in similar positions at leading healthcare information and technology companies such as Press Ganey, Perceptyx, Episource, PatientPop, and Practicing Excellence. 5 Table of Contents Resources Our success depends in part upon our data collection processes, research methods, data analysis techniques and internal systems, and procedures that we have developed specifically to serve clients in the healthcare industry.
Upon the effectiveness of Mr. Green's appointment as Chief Executive Officer, Mr. Hays will transition to the role of Chairman. Resources Our success depends in part upon our data collection processes, research methods, data analysis techniques and internal systems, and procedures that we have developed specifically to serve clients in the healthcare industry.
For additional information on our operating segment and our revenue and assets by geographic area, see Note 13, “Segment Information,” to our consolidated financial statements. 3 Table of Contents Markets Growth Strategy We believe that the value proposition of our current solutions, combined with the favorable alignment of our solutions with emerging market demand, positions us to benefit from multiple growth opportunities.
Markets Growth Strategy We believe that the value proposition of our current solutions, on the whole positions us to benefit from multiple growth opportunities.
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Our end-to-end solutions enable our clients to understand what matters most to each person they serve – before, during, after, and beyond clinical encounters – to gain a longitudinal understanding of how life and health intersect, with the goal of developing lasting, trusting relationships.
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Our expertise is Human Understanding®. We believe that every healthcare encounter is fundamentally a human experience. That’s why our holistic healthcare experience management framework is designed to drive the most human healthcare experiences for everyone . Patients. Consumers. Employees. Communities .
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We help our partners get to know each person they serve - their behaviors, preferences, wants, and needs—not as point-in-time insights, but as an ongoing relationship. With the complexity and demands associated with healthcare delivery today, seeing the whole picture is now more important than ever.
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Our comprehensive platform is a next-generation suite of Artificial Intelligence (“AI”)-enabled products that create a natural way to collect, analyze, and deliver feedback. By leveraging advanced technology and deep insights, we ensure each interaction becomes a meaningful moment of connection and care.
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The end-to-end Human Understanding solutions are designed to help capture and act on what matters most to patients and their families, frontline employees, and the broader community hospitals and health systems serve. The Human Understanding solutions deliver the capabilities needed to turn strategic aspiration into action in critical focus areas.
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NRC Health has built a comprehensive experience management stack to create a game-changing platform with the goal of driving the most human healthcare experiences for everyone – from patients and caregivers to consumers and communities.
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Each set of capabilities unlocks Human Understanding at the right time and place to improve care, enhance performance, and catalyze growth. Our digital solutions consist of three primary solution categories which can be implemented both collectively as an enterprise solution or individually to meet specific needs within the organization.
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Employee Experience Solutions – Our Employee Experience solutions give care teams the tools to make a difference and unite around a shared sense of purpose. These tools support healthcare organizations attract and retain the best talent and give leaders the information, tools and support they need to create engagement and open communication throughout the employee lifecycle.
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In January 2024, Jason Hahn, Christophe Louvion, and Andy Monnich joined our management team as Chief Revenue Officer, Chief Product Technology Officer and Chief Corporate Development Officer, respectively.
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Real-time department level reporting and analytics with configurable action plans help measure improvement at every level and support next-best actions in the moment. Consumer Experience Solutions – Our Consumer Experience solutions help to reduce healthcare friction and build loyalty, to win and retain more patients.
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Most of our associates work remotely. We attract a passionate team of associates who care deeply about making a difference in advancing “Human Understanding” in healthcare. We consider our relationships with our associates to be good.
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Our goal is to support healthcare organizations ensure that encounters beyond the clinical setting complement an exceptional care experience, rather than tarnish it. Our solutions capture feedback across the healthcare journey, drive choice to build volume, and co-design experiences and services with scalable feedback through Community Insights. Community Insights brings the voice of the consumer into strategic and operational decision-making.
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We are committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, genetic information, ancestry, veteran status, or disability. We are an equal opportunity employer committed to inclusion and diversity. Available Information More information regarding NRC Health is available on our website at www.nrchealth.com.
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Through actionable insights and custom research studies in just a few weeks, healthcare leaders can inform the most pressing healthcare business challenges, and identify customer behaviors, needs, expectations, and experiences to enable Human Understanding®. Huey AI - Healthcare experiences are human experiences. Huey, our AI engine built for Human Understanding®, serves as a healthcare experience management companion.
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It’s embedded in our new suite of advanced solutions on our integrated experience platform.
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We believe that our focus on the healthcare industry, extensive portfolio of solutions, motivated sales force, and relationships with leading healthcare providers position us to compete in this market.
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Our value proposition incorporates the benefits to clients derived from our deep subject matter expertise that has been built from helping healthcare organizations over the past 40 years.
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Monnich has worked in product and corporate development in the healthcare, financial services, and education industries, including for The Company as Senior Vice President - Strategy and Corporate Development, as Managing Director and Co-Founder of Connect, and as Chief Strategy Officer at Practicing Excellence.
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On February 26, 2025, our Board of Directors appointed Trent Green as our Chief Executive Officer and to serve as a director, both effective June 1, 2025. Mr. Green brings more than 25 years of healthcare leadership experience, most recently serving as Chief Executive Officer of Amazon One Medical and previously as Chief Operating Officer of Legacy Health.
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Most of our associates work remotely. Our goal is to help customers bring Human Understanding® to healthcare, for their patients and communities. Our associates are at the heart of achieving that goal so we promise that same Human Understanding® to each other.
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We focus less on titles and more on the unique skills and perspectives each person brings to the organization. Our employment practices are based on the qualifications of each individual and appropriate job-related standards. We consider our relationships with our associates to be good. We believe living Human Understanding® in the workplace is the job of every associate.
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Each associate is asked to take charge of their own education, self-awareness, opportunity, and growth in the topics of diversity, equity, inclusion & belonging. All leaders are expected to support associates in development efforts and be role models in inclusive behavior, leading their teams with Human Understanding®. We believe each associate and applicant should feel understood and welcomed.
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The Associate Experience team and Associate Lifecycle Belonging committee coordinate activities and opportunities for everyone on these topics, and act as advocates of a workplace culture full of Human Understanding®. As we focus on Human Understanding® in the workplace, we have considered what creating and cultivating a workplace full of Human Understanding® means.
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We have realized that demonstrating Human Understanding® as associates is so much larger than just honoring and recognizing personal characteristics such as race, age, gender, marital status, background, or creed. Our passions, pastimes, families, pets, politics, and communities impact how we see the world. This in turn impacts how we understand or misunderstand one another.
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The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. 7 Table of Contents
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
36 edited+27 added−4 removed81 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
36 edited+27 added−4 removed81 unchanged
2023 filing
2024 filing
Biggest changeIn addition, the adoption of AI and other emerging technologies may become significant to operational results in the future. While AI and other technologies may offer substantial benefits, they may also introduce additional risk. We use AI for certain limited processes and expect our AI usage to increase in the future.
Biggest changeAdditional costs will be incurred to further develop and improve our information technology platforms. 10 Table of Contents In addition, changing technologies including AI and other emerging technologies may become significant to operational results in the future.
There can be no assurance that we will continue to compete successfully against existing or new competitors. 7 Table of Contents Because our clients are concentrated in the healthcare industry, our revenue and operating results may be adversely affected by changes in regulations, a business downturn or consolidation with respect to the healthcare industry.
There can be no assurance that we will continue to compete successfully against existing or new competitors. 8 Table of Contents Because our clients are concentrated in the healthcare industry, our revenue and operating results may be adversely affected by changes in regulations, a business downturn or consolidation with respect to the healthcare industry.
The market price and trading volume of our common stock has historically been and may continue to be highly volatile, and investors in our common stock may experience a decrease in the value of their shares, including decreases that are in response to factors beyond our control, including, but not limited to: ● Variations in our financial performance and that of similar companies; ● Regulatory and other developments that may impact the demand for our services; ● Reaction to our press releases, public announcements and filings with the Securities and Exchange Commission; ● Client, market and industry perception of our services and performance; ● Actions of our competitors; ● Changes in earnings estimates or recommendations by analysts who follow our stock; ● Loss of key personnel; ● Investor, management team or large shareholder sales of our stock; ● Changes in accounting principles; and ● Variations in general market, economic and political conditions or financial markets.
The market price and trading volume of our common stock has historically been and may continue to be highly volatile, and investors in our common stock may experience a decrease in the value of their shares, including decreases that are in response to factors beyond our control, including, but not limited to: ● Variations in our financial performance and that of similar companies; ● Regulatory and other developments that may impact the demand for our services; ● Reaction to our press releases, public announcements and filings with the SEC; ● Client, market and industry perception of our services and performance; ● Actions of our competitors; ● Changes in earnings estimates or recommendations by analysts who follow our stock; ● Loss of key personnel; ● Investor, management team or large shareholder sales of our stock; ● Changes in accounting principles; and ● Variations in general market, economic and political conditions or financial markets.
As a result, the Trusts and these other entities, through the trustees or special power holders, have the power to indirectly control decisions such as whether to issue additional shares or declare and pay dividends and can control matters requiring shareholder approval, including the election of directors and the approval of significant corporate matters such as change of control transactions.
As a result, the Trust and these other entities, through the trustees or special power holders, have the power to indirectly control decisions such as whether to issue additional shares or declare and pay dividends and can control matters requiring shareholder approval, including the election of directors and the approval of significant corporate matters such as change of control transactions.
Our failure to anticipate clients’ expectation and needs, adapt to emerging technological trends, or design efficient and effective information technology platforms, could result in lower utilization, loss of customers, damage to customer relationships, reduced revenue and profits, refunds to customers and damage to our reputation.
Our failure to anticipate clients’ expectations and needs, adapt to emerging technological trends, or design efficient and effective information technology platforms, could result in lower utilization, loss of customers, damage to customer relationships, reduced revenue and profits, refunds to customers and damage to our reputation.
Furthermore, we expect competition for qualified personnel to become more intense as competition in our industry increases. We cannot assure you that we will be able to recruit, retain and motivate a sufficient number of qualified personnel to compete successfully.
Furthermore, we expect competition for qualified personnel to become more intense as competition in our industry increases. We cannot assure you that we will be able to recruit, retain and motivate a sufficient number of qualified personnel to compete successfully. While we expect Mr.
These third-party providers may also experience security breaches or interruptions to their information technology hardware and software infrastructure and communications systems that could adversely impact us. 10 Table of Contents Under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, implementing regulations promulgated by the U.S.
These third-party providers may also experience security breaches or interruptions to their information technology hardware and software infrastructure and communications systems that could adversely impact us. Under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, implementing regulations promulgated by the U.S.
Substantially all contracts are renewable annually at the option of our clients. Client contracts are generally cancelable on short notice without penalty; however we are entitled to payment for services through the cancellation date. To the extent that clients fail to renew or defer their renewals, we anticipate our results may be materially adversely affected.
The majority of our contracts are renewable annually at the option of our clients. Client contracts are generally cancelable on short notice without penalty; however we are entitled to payment for services through the cancellation date. To the extent that clients fail to renew or defer their renewals, we anticipate our results may be materially adversely affected.
The effects of such influence could be to delay or prevent a change of control of the Company unless the terms are approved by the Trusts and these other entities. 12 Table of Contents The market price of our common stock may be volatile and shareholders may be unable to resell shares at or above the price at which the shares were acquired .
The effects of such influence could be to delay or prevent a change of control of the Company unless the terms are approved by the Trust and these other entities. 14 Table of Contents The market price of our common stock may be volatile and shareholders may be unable to resell shares at or above the price at which the shares were acquired .
Our primary competitors include Press Ganey, which we believe has significantly higher annual revenue than us, and several other firms that provide similar services in the market we serve.
Our primary competitors include Press Ganey and Qualtrics, both of which we believe has significantly higher annual revenue than us, and several other firms that provide similar services in the market we serve.
Inflation may increase our costs without a corresponding increase in our contract revenue due to fixed contract arrangements, which could result in decreased margins and profitability. 8 Table of Contents We face several risks relating to our ability to collect the data on which our business relies.
Inflation may increase our costs without a corresponding increase in our contract revenue due to fixed contract arrangements, which could result in decreased margins and profitability. We face several risks relating to our ability to collect the data on which our business relies.
We rely on a limited number of key clients for a substantial portion of our revenue. Our ten largest clients collectively accounted for 15%, 15%, and 14% of our total revenue in 2023, 2022 and 2021, respectively.
We rely on a limited number of key clients for a substantial portion of our revenue. Our ten largest clients collectively accounted for 17%, 15%, and 15% of our total revenue in 2024, 2023 and 2022, respectively.
Additionally, in 2023, we experienced increased costs including salary and benefits costs in sales and client support, software costs, contracted services, costs associated with our building improvements and equipment purchases and we expect inflationary pressures to continue in 2024.
Additionally, in recent years, we experienced increased costs including salary and benefits costs in sales and client support, software costs, contracted services, costs associated with our building improvements and equipment purchases and we expect inflationary pressures to continue in 2025.
Civil unrest, political instability or uncertainty, military activities, utility service breakdowns or broad-based sanctions, should they continue for the long term or escalate, could interrupt our contractors’ ability to provide services and require our associates to perform the services or replace the contractors which could have an adverse effect on our operations and financial performance, including higher volatility in foreign currency exchange rates, increased use of less cost-efficient resources and negative impacts to our business resulting from deteriorating general economic conditions.
Civil unrest, political instability or uncertainty, military activities (including the conflicts in the Ukraine and the Middle East, and as a result of any escalation of tensions between China and Taiwan), utility service breakdowns or broad-based sanctions, should they continue for the long term or escalate, could interrupt our contractors’ ability to provide services and require our associates to perform the services or replace the contractors which could have an adverse effect on our operations and financial performance, including higher volatility in foreign currency exchange rates, increased use of less cost-efficient resources and negative impacts to our business resulting from deteriorating general economic conditions.
Further, we cannot predict the impact of the military actions and any heightened military conflict or geopolitical instability that may follow, including additional sanctions or countersanctions, heightened inflation, cyber disruptions or attacks, higher energy costs, and supply chain disruptions. General economic factors could adversely impact our profitability.
Further, we cannot predict the impact of the military actions and any heightened military conflict or geopolitical instability that may follow, including additional sanctions or countersanctions, heightened inflation, cyber disruptions or attacks, higher energy costs, and supply chain disruptions.
Additionally, laws, regulations and standards relating to corporate governance and public disclosure are subject to varying interpretations and continue to develop and change. If we misinterpret or fail to comply with these rules and regulations, our legal and financial compliance costs and net income may be adversely affected. 14 Table of Contents
Additionally, laws, regulations and standards relating to corporate governance and public disclosure are subject to varying interpretations and continue to develop and change. If we misinterpret or fail to comply with these rules and regulations, our legal and financial compliance costs and net income may be adversely affected. We may change our dividend policy at any time.
Healthcare providers may react to these cost pressures and other uncertainties by curtailing or deferring purchases, including purchases of our services. Moreover, there has been consolidation of companies in the healthcare industry, a trend which we believe will continue to grow.
In addition, large private purchasers of healthcare services are placing increasing cost pressure on providers. Healthcare providers may react to these cost pressures and other uncertainties by curtailing or deferring purchases, including purchases of our services. Moreover, there has been consolidation of companies in the healthcare industry, a trend which we believe will continue to grow.
Additional costs will be incurred to further develop and improve our information technology platforms. Our systems and those of our external service providers could be exposed to damage or interruption from fire, natural disasters, which may increase in frequency and severity due to climate change, energy loss, telecommunication failure, security breach and computer viruses.
Our systems and those of our external service providers could be exposed to damage or interruption from fire, natural disasters, which may increase in frequency and severity due to climate change, energy loss, telecommunication failure, security breach and computer viruses.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, including with the implementation of our internal controls in acquired companies, our business and operating results could be harmed and we could fail to meet our financial reporting obligations, which also could have a negative impact on our reputation .
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, including with the implementation of our internal controls in acquired companies, our business and operating results could be harmed and we could fail to meet our financial reporting obligations, which also could have a negative impact on our reputation . 13 Table of Contents Our growth strategy includes future acquisitions, partnerships and/or investments which involve inherent risk.
However, if we are unable to successfully implement and utilize such emerging technologies as effectively as competitors or our customers are able to use AI as a replacement to our services, the Company may be negatively affected in the larger marketplace.
However, if we are unable to successfully anticipate, develop, implement and utilize such emerging technologies as effectively as competitors or our customers are able to use AI as a replacement to our services, our results of operations may be negatively affected.
Any one of the above situations could have a material adverse effect on our business, financial condition, results of operations and reputation. 9 Table of Contents If we or our third-party service providers sustain cyber-attacks or other privacy or data security incidents that result in security breaches that disrupt our operations or result in the unintended dissemination of protected personal information or proprietary or confidential information or Artificial Intelligence ( “ AI ” ) impacts our demand for, or providing of, services, we could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm and other serious negative consequences.
If we or our third-party service providers sustain cyber-attacks or other privacy or data security incidents that result in security breaches that disrupt our operations or result in the unintended dissemination of protected personal information or proprietary or confidential information or AI impacts our demand for, or providing of, services, we could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm and other serious negative consequences.
Our growth strategy includes future acquisitions and/or investments which involve inherent risk. In order to expand services or technologies to existing clients and increase our client base, we have historically, and may in the future, make strategic business acquisitions and/or investments that we believe complement our business.
In order to expand services or technologies to existing clients and increase our client base, we have historically, and may in the future, make strategic business acquisitions, partnerships with other organizations and/or investments that we believe complement our business.
As of February 13, 2024, approximately 38.6% of our outstanding common stock was owned by the Trusts and approximately 46.2% of our outstanding common stock was held by the Trusts and other entities controlled by trustees or special power holders for the benefit of members of Mr. Hays’ family.
As of February 28, 2025, approximately 37.5% of our outstanding common stock was owned by the Trust and approximately 46.8% of our outstanding common stock was held by the Trust and other entities controlled by trustees or special power holders for the benefit of members of Mr. Hays’ family.
Hays, our Chief Executive Officer and President. However, over the years Mr. Hays, for estate planning purposes, gifted and/or transferred almost all of his directly owned shares to trusts for the benefit of his family. Currently, the principal holders of shares previously owned by Mr. Hays are the Common Property Trust and the Amandla MK Trust (collectively the “Trusts”).
However, over the years Mr. Hays, for estate planning purposes, gifted and/or transferred almost all of his directly owned shares to trusts for the benefit of his family. Currently, the principal holder of shares previously owned by Mr. Hays is the Common Property Trust (the “Trust”).
Any system failure, inability to upgrade or update, or security breach (including cyber-attacks) related to our information technology systems may also impact third parties that we rely on in our business and could result in a hinderance to the services provided by the Company or such third parties, as the case may be, and may have a material adverse effect on our business.
Any system failure, inability to upgrade or update, or security breach (including cyber-attacks) related to our information technology systems may also impact third parties that we rely on in our business and could result in a hinderance to the services provided by the Company or such third parties, as the case may be, and may have a material adverse effect on our business. 11 Table of Contents We cannot ensure that we or our third-party service providers will be able to identify, prevent or contain the effects of cyber-attacks or other cybersecurity risks that bypass our security measures or disrupt our information technology systems or business.
However, hardware, software or applications we develop or procure from third parties may contain defects in design, manufacturer defects or other problems that could unexpectedly compromise information security.
We have security technologies, processes and procedures in place to protect against cybersecurity risks and security breaches. However, hardware, software or applications we develop or procure from third parties may contain defects in design, manufacturer defects or other problems that could unexpectedly compromise information security.
It is possible that these types of changes could materially impact our net income and cash flows. Significant judgment is required in determining our annual income tax expense and in evaluating our tax positions.
Tax laws and regulations, including rates of taxation, are subject to revisions by individual taxing jurisdictions. It is possible that these types of changes could materially impact our net income and cash flows. Significant judgment is required in determining our annual income tax expense and in evaluating our tax positions.
Our overall effective income tax rate is a function of the federal and local tax rates and the geographic mix of our income before taxes in the jurisdictions in which we operate. Changes in tax rates could negatively impact our net income. Tax laws and regulations, including rates of taxation, are subject to revisions by individual taxing jurisdictions.
Our overall effective income tax rate is a function of the federal and local tax rates and the geographic mix of our income before taxes in the jurisdictions in which we operate. The new administration has indicated a desire to amend the federal tax laws. Changes in tax rates could negatively impact our net income.
Damage to our reputation or loss of our clients’ confidence in our services for any of these, or any other reasons, could adversely impact our business, revenues, financial condition, and results of operations, as well as require additional resources to rebuild our reputation. 11 Table of Contents Our operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk.
Damage to our reputation or loss of our clients’ confidence in our services for any of these, or any other reasons, could adversely impact our business, revenues, financial condition, and results of operations, as well as require additional resources to rebuild our reputation.
We could be negatively impacted by the global conflicts or similar events. The aforementioned areas of conflict, and any expansion of such conflicts, could adversely affect our business and operations. We outsource certain software development services to third parties in the Ukraine. Since the onset of the active Russian-Ukraine conflict, our contractors have been able to continue their work.
We could be negatively impacted by the global conflicts or similar events. Global conflicts or any expansion of such conflicts, could adversely affect our business and operations. From time-to-time we outsource certain software development services to third parties outside of the United States, including in the Ukraine.
Due to the nature of the services we offer, we are subject to significant commercial, trade and privacy regulations.
Our operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk. Due to the nature of the services we offer, we are subject to significant commercial, trade and privacy regulations.
Future legislative changes, including additional provisions to control healthcare costs, improve healthcare quality and expand access to health insurance, could result in lower reimbursement rates and otherwise change the environment in which providers and payers operate. In addition, large private purchasers of healthcare services are placing increasing cost pressure on providers.
The healthcare industry is extensively regulated by both state and federal government. Future legislative changes, including additional provisions to control healthcare costs, improve healthcare quality and expand access to health insurance, could result in lower reimbursement rates and otherwise change the environment in which providers and payers operate. Recently, members of the U.S.
Some of our employees work remotely, which may increase the cybersecurity risks to our business, including an increased demand for information technology resources, increased risk of phishing, and other cybersecurity risks.
No assurance can be given that such strategies and offerings will be successful and will not harm our reputation, financial condition, and operating results. 12 Table of Contents Some of our employees work remotely, which may increase the cybersecurity risks to our business, including an increased demand for information technology resources, increased risk of phishing, and other cybersecurity risks.
In addition, volatility in the equity markets could impair our financial position in general terms and our ability to effectively capitalize on potential merger and acquisition opportunities. Risks Related to our Common Stock Our principal shareholders effectively control the Company. A majority of our common stock and voting power was historically owned and/or held by Michael D.
If we are unsuccessful in increasing our revenue or we do not reduce costs sufficiently, our margins will continue to be compressed. Risks Related to our Common Stock Our principal shareholders effectively control the Company. A majority of our common stock and voting power was historically owned and/or held by Michael D. Hays, our Chief Executive Officer and President.
However, those services could be more negatively impacted in the future.
Historically, our contractors located in areas of conflict (including in the Ukraine) have been able to continue their work. However, those services could be more negatively impacted in the future.
Karas, our Senior Vice President Finance, Treasurer, Secretary and Chief Financial Officer has announced his retirement, effective March 31, 2024. The retirement of Mr. Karas may result in a lack of continuity or operational issues. 13 Table of Contents Like many other companies, we experienced higher attrition rates in the last three years.
Stacy has been temporarily appointed as Interim Principal Financial Officer, these departures or departures of other key executive may result in lack of continuity, operational issues and we may not realize the expected benefits and results from compensation structures we have put in place. 15 Table of Contents Like many other companies, we experienced higher attrition rates in the last several years.
Removed
We cannot ensure that we or our third-party service providers will be able to identify, prevent or contain the effects of cyber-attacks or other cybersecurity risks that bypass our security measures or disrupt our information technology systems or business. We have security technologies, processes and procedures in place to protect against cybersecurity risks and security breaches.
Added
House of Representatives have started to weigh a series of legislative proposals targeting Medicaid, Medicare, and other entitlement programs as part of a broader campaign to reduce federal spending, President Trump has issued a number of executive orders intended to reduce government spending, and we expect there will be continued proposals targeting reimbursement methodologies and the number of individuals eligible for government healthcare programs.
Removed
In January 2024, we announced the appointment of four newly created executive officer positions: Helen Hrdy as Chief Customer Officer, Jason Hahn as Chief Revenue Officer, Christophe Louvion as Chief Product Technology Officer, and Andy Monnich as Chief Corporate Development Officer.
Added
There have also been proposals calling for repeal or reform of the Affordable Care Act.
Removed
These newly appointed executives reflect one of our investments to achieve our strategic initiatives, which include capturing expanded market opportunities through serving clients across increasingly interconnected patient, customer, and employee experience markets.
Added
Any of these or related actions by state or federal governments could significantly reduce federal or state spending on the Medicaid and Medicare programs, constitute a fundamental change in the federal role in healthcare, change the nature of the entitlements offered by Medicaid and Medicare, or reduce or delay the payments made to both non-profit and for profit healthcare systems by Medicaid and Medicare, any of which could have a material effect on the revenues of our customers, resulting in harm to the demand for our solutions and our ability to collect subscriptions and fees owed to us, which could negatively impact our business, financial condition, cash flows, and results of operations.
Removed
We may not be successful in achieving our strategic initiatives within the timeframe we expect or at all, such executives may leave, or we may not realize the expected benefits and results from compensation structures we have put in place. Additionally, Kevin R.
Added
In addition, the new administration has stated its intention to impose new or increased tariff rates on imported goods from a number of countries, including China, Canada, Mexico, and the EU.
Added
Such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign government may result in increased costs and worsening economic conditions and could have an adverse impact on our results of operations. 9 Table of Contents General economic factors could adversely impact our profitability.
Added
Although we plan to continue to invest in research and development, including through acquisitions, in order to enhance our technology and new and existing solutions.
Added
Additionally, while AI and other technologies may offer substantial benefits, they may also introduce additional risks and raise ethical, technological, legal, regulatory, and other issues that may negatively affect the demand for our solutions.
Added
Any one of the above situations could have a material adverse effect on our business, financial condition, results of operations and reputation.
Added
New solution offerings involve inherent risk. We have made substantial investments to develop new solution offerings and technologies, including AI enhanced offerings. We expect to continue investing significant resources in developing new technologies, tools, features, and solutions. At the same time, our competitors are rapidly developing their technologies and services, and our offerings may not be able to compete effectively.
Added
Our new solutions have a high degree of risk, as each involves strategies and technologies which we have limited or no prior development or operating experience.
Added
There can be no assurance that customer demand for such initiatives will exist or be sustained at the levels that we anticipate, or that they will generate sufficient revenue to offset any new expenses or liabilities associated with these new investments.
Added
Further, our development efforts with respect to new solution offerings and technologies could distract management from current operations and will divert capital and other resources from our more established solution offerings and technologies.
Added
Even if we are successful in developing new solution offerings or technologies, regulatory authorities may subject us to new rules or restrictions in response to our innovations that could increase our expenses or prevent us from successfully commercializing new solution offerings or technologies.
Added
At the same time, if we do not realize the expected benefits of our investments, our business, financial condition and operating results may be harmed. If we do not invest in commercially successful and innovative technologies, we may not realize the expected benefits of those investments.
Added
In addition, volatility in the equity markets could impair our financial position in general terms and our ability to effectively capitalize on potential merger and acquisition opportunities. We have established a strategic partnership and intend to continue to establish strategic partnerships with third parties to enhance our solution offering.
Added
We currently depend on our partner’s technology to perform certain services for our customers. As a result, these services may not be provided in the manner or on the time schedule we currently expect, which may negatively impact our business operations. In addition, we cannot control the amount and timing of resources our partners may devote to their technology enhancements.
Added
Furthermore, there is no assurance that our partner-provided services will be purchased by our customers. Our partners may terminate their agreements with us for cause under certain circumstances and may elect not to renew our agreements, which could discontinue our ability to use their technologies and could result in our partners pursuing competing solutions.
Added
If our partners terminate or breach our agreements with them or otherwise fail to complete their obligations in a timely manner, it may have a detrimental effect on our financial position by reducing or eliminating the potential for us to receive technology access and perform our contractual obligations to our customers.
Added
These factors could have a material adverse effect on our business, financial condition and results of operations. If we are unable to achieve a proper revenue to cost ratio our profitability could decrease Our ability to achieve our goals and earnings growth depends on our ability to grow our revenue and achieve the appropriate cost structure for our revenues.
Added
Our revenue and margins have decreased in recent years. We have invested in product development, leadership and recruiting in an effort to increase revenue. During the second quarter of 2025 we expect to recognize compensation expense of $4.9 million (based on the price of our common stock on February 28, 2025) for Mr. Green's signing bonus.
Added
In addition, we expect to recognize compensation expense of approximately $608,000 (based on the price of our common stock on February 28, 2025) per quarter for Mr. Green's equity grant beginning in June 2025 and continuing through the third anniversary of the grant. In light of Mr.
Added
Green's hiring and compensation, we expect to terminate the existing long-term incentive program for our executive leadership team with the consent of the impacted participants and adopt a new incentive program during the second quarter of 2025, which could result in additional expenses. We have also adjusted spending in certain areas to reduce costs.
Added
Green will begin serving as our Chief Executive Officer and as a director on June 1, 2025, his start date may be delayed or may never occur.
Added
In December 2024, Linda Stacy left her position as our Principal Accounting Officer, in January 2025, Christophe Louvion, left his position as our Chief Product Technology Officer, and in March 2025, Jason Hahn left his position as Chief Revenue Officer. While Ms.
Added
We have historically paid quarterly dividends to holders of our common stock.
Added
Although we expect to continue to pay dividends to holders of our common stock, the declaration and amount of any future dividends is subject to approval of our Board of Directors and various risks and uncertainties, including, but not limited to, our cash flow and cash needs, compliance with applicable law, restrictions on the payment of dividends under existing or future financing arrangements, changes in tax laws relating to corporate dividends, and deterioration in our financial condition or results of operations.
Added
Accordingly, our dividend policy may change at any time without notice, and our Board of Directors may determine to terminate payment of dividends, or reduce the amount or frequency of dividend payments, and we may not pay dividends at our historical rates or at all. 16 Table of Contents
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
5 edited+2 added−4 removed11 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
5 edited+2 added−4 removed11 unchanged
2023 filing
2024 filing
Biggest changeOur Enterprise Risk Management Committee (ERMC), which includes certain associates with data privacy, information security, and cybersecurity experience, supports our Board of Directors in this oversight. The ERMC reports to the Audit Committee of the Board of Directors.
Biggest changeOur Enterprise Risk Management Committee (ERMC), which includes certain associates with data privacy, information security, and cybersecurity experience, supports our Board of Directors in this oversight. The ERMC reports to the Audit Committee of the Board of Directors. The ERMC manages the ERMP and provides regular updates to the Audit Committee regarding our key risks and ERMP developments.
Ewell serves as an advisor to our leadership team, assisting them in optimizing security measures, mitigating risk, fortifying defenses, and minimizing vulnerabilities. Dr. Ewell develops written policies and procedures and conducts training to ensure our entire organization is well-protected.
Spencer serves as an advisor to our leadership team, assisting them in optimizing security measures, mitigating risk, fortifying defenses, and minimizing vulnerabilities. Ms. Spencer develops written policies and procedures and conducts training to ensure our entire organization is well-protected.
Our Chief Security and Privacy Officer (“CSPO”) also reports to the Audit Committee on a regular basis, providing an Information Security Report, which includes information such as our information system risk profile, our top risk challenges, and security initiatives and strategies. Additionally, the ERMC communicates emerging risks and the mitigation of those risks to the Audit Committee, among other things.
Our Vice President of Privacy Compliance also reports to the Audit Committee on a regular basis, providing an Information Security Report, which includes information such as our information system risk profile, our top risk challenges, and security initiatives and strategies. Additionally, the ERMC communicates emerging risks and the mitigation of those risks to the Audit Committee, among other things.
He is responsible for overseeing and executing the strategic plan for our data protection program, information security systems, compliance, computer networks and business continuance/disaster recovery. Additionally, Dr. Ewell actively participates in project management duties and manages information security integration efforts, working closely with internal teams, vendors, subcontractors, and clients. Dr.
She is responsible for overseeing and executing the strategic plan for our data protection program, information security systems, compliance, computer networks and business continuance/disaster recovery. Additionally, Ms. Spencer actively participates in project management duties and manages information security integration efforts, working closely with internal teams, vendors, subcontractors, and clients. Ms. Spencer has over twenty years in cybersecurity, privacy, and compliance.
Significant cybersecurity matters, and strategic risk management decisions are elevated to the overall Board of Directors to enable oversight and guidance on critical cybersecurity issues. 15 Table of Contents Our CSPO, Dr. Cris V. Ewell is an ERMC member and has primary responsibility for our Information Security Program, including the maintenance and enforcement of our security policies. Dr.
Significant cybersecurity matters, and strategic risk management decisions are elevated to the overall Board of Directors to enable oversight and guidance on critical cybersecurity issues. 17 Table of Contents Our Vice President of Privacy Compliance, Jen Spencer, is an ERMC member and has primary responsibility for our Information Security Program, including the maintenance and enforcement of our security policies. Ms.
Removed
The ERMC manages the ERMP and provides regular updates to the Audit Committee regarding our key risk tolerance scorecard results and ERMP developments.
Added
Her primary job responsibilities include security, privacy, and compliance including AI data governance. Ms. Spencer works on several working groups through H-ISAC, Women in Bio, and Women in AI Governance. Prior to NRC she was the CIO/CISO/CPO for the Rochester RHIO and Manager of Information Security and GRC with Excellus Health Plan.
Removed
Ewell has over 25 years of experience in information security and spent over 20 years in CISO or equivalent roles. He previously held CISO positions at PEMCO Corporation, Seattle Children’s Hospital and University of Washington Medicine before joining us as our Chief Security and Privacy Officer.
Added
She graduated from Rochester Institute of Technology (RIT) with an eMBA and a master’s in science in IT Security. She earned her paralegal certificate from Stony Brook University and holds several industry certifications. Ms. Spencer is also an adjunct professor at RIT, the University of Virginia and the Blue Ridge Virginia Governor's School.
Removed
He has worked as an Adjunct Professor specializing in risk management and operational controls courses throughout his career. Dr. Ewell is an Associate Professor currently teaching graduate information and technology security courses at City University of Seattle.
Removed
He was named as one of the Top 100 CISOs by CISOs Connect in 2021 and Becker’s Hospital Review CISO’s to know in 2018-2020.
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeIn February 2021, we began leasing 19,300 square feet of space in Lincoln, Nebraska for our mail survey processing operations that were previously housed at our headquarters.
Biggest changeWe are currently renovating the building and expect renovations to be complete in 2025.We are leasing 19,300 square feet of space in Lincoln, Nebraska for our mail survey processing operations that were previously housed at our headquarters.
Item 2. Properties Our headquarters is located in an owned office building in Lincoln, Nebraska, of which 62,000 square feet have been used for operations. Our credit facilities are secured by this property and our other assets. We are currently renovating the building and expect renovations to be complete in 2025.
Item 2. Properties Our headquarters is located in an owned office building in Lincoln, Nebraska, of which 62,000 square feet have been used for operations. Our credit facilities are secured by this property and our other assets.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
7 edited+1 added−0 removed3 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
7 edited+1 added−0 removed3 unchanged
2023 filing
2024 filing
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1) Oct 1 – Oct 31, 2023 14,823 41.91 14,823 1,809,218 Nov 1 – Nov 30, 2023 180,633 41.83 180,633 1,628,585 Dec 1 – Dec 31, 2023 166,281 41.02 166,281 1,462,304 Total 361,737 361,737 (1) Shares were repurchased pursuant to the 2022 program.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number Of Shares that May Yet Be Purchased Under the Plans or Programs Oct 1 – Oct 31, 2024 24,186 18.18 24,186 676,447 Nov 1 – Nov 30, 2024 114,762 18.84 114,762 561,685 Dec 1 – Dec 31, 2024 253,976 18.28 253,976 307,709 Total 392,924 392,924 (1) The average price paid per share includes commission paid on stock repurchases and excludes excise tax incurred on stock repurchases.
See Item 12 in Part III of this Annual Report on Form 10-K for certain information concerning shares of our common stock authorized for issuance under our equity compensation plans. 17 Table of Contents The following graph compares the cumulative 5-year total return provided shareholders on our common stock relative to the cumulative total returns of the NASDAQ Composite Index and the Russell 2000 Index.
See Item 12 in Part III of this Annual Report on Form 10-K for certain information concerning shares of our common stock authorized for issuance under our equity compensation plans. 19 Table of Contents The following graph compares the cumulative 5-year total return provided shareholders on our common stock relative to the cumulative total returns of the NASDAQ Composite Index and the Russell 2000 Index.
The payment and amount of future dividends, if any, is at the discretion of our Board of Directors and will depend on our future earnings, financial condition, general business conditions, alternative uses of our earnings and cash and other factors. On February 13, 2024, there were approximately 10 shareholders of record and approximately 13,981 beneficial owners of our common stock.
The payment and amount of future dividends, if any, is at the discretion of our Board of Directors and will depend on our future earnings, financial condition, general business conditions, alternative uses of our earnings and cash and other factors. On February 28, 2025, there were approximately 10 shareholders of record and approximately 13,981 beneficial owners of our common stock.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2018, and our relative performance is tracked through December 31, 2023.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2019, and our relative performance is tracked through December 31, 2024.
In May 2022, our Board of Directors authorized the repurchase of 2,500,000 shares of common stock (the “2022 Program”). The table below summarizes repurchases of common stock during the three-month period ended December 31, 2023.
In May 2022, our Board of Directors authorized the repurchase of 2,500,000 shares of common stock (the “2022 Program”). The 2022 Program has no set expiration date. The table below summarizes repurchases of common stock during the three-month period ended December 31, 2024.
Cash dividends in the aggregate amount of $36.3 million, $20.9 million, and $12.2 million were declared in 2023, 2022 and 2021 respectively.
Cash dividends in the aggregate amount of $11.3 million, $36.3 million, and $20.9 million were declared in 2024, 2023 and 2022 respectively.
The stock price performance included in this graph is not necessarily indicative of future stock price performance. 12/18 12/19 12/20 12/21 12/22 12/23 National Research Corporation Common Stock 100.00 175.47 114.29 112.20 102.99 112.89 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85
The stock price performance included in this graph is not necessarily indicative of future stock price performance. 12/19 12/20 12/21 12/22 12/23 12/24 National Research Corporation Common Stock 100.00 65.14 63.94 58.70 64.34 29.28 NASDAQ Composite 100.00 144.92 177.06 119.45 172.77 223.87 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93
Added
For the quarter ended December 31, 2024, commission paid totaled $7,858 and excise tax expense totaled $72,452. (2) Shares were repurchased pursuant to the 2022 program.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
45 edited+27 added−10 removed19 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
45 edited+27 added−10 removed19 unchanged
2023 filing
2024 filing
Biggest changeSelling, general and administrative expenses increased in 2023 compared to 2022 primarily due to growth in marketing initiative expenses of $2.8 million to expand brand recognition and support sales development, increased salary and benefit costs of $1.5 million in sales and client support, increased travel costs of $512,000, additional technology services of $736,000 partially offset by a reduction in innovation investments of $1.1 million and decreased building demolition costs of $384,000 related to the remodel of our headquarters.
Biggest changeSelling, general and administrative expenses decreased in the 2024 period compared to the 2023 period primarily due to decreases in marketing expenses of $2.0 million, web hosting and other software services of $287,000, consulting fees of $304,000, professional development and training of $200,000, and bad debt expense of $175,000 partially offset by increased salary and benefit costs of $1.2 million from investments in strategic leadership, product development and sales teams and increased recruiting expenses of $255,000.
The Credit Facilities are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our and our guarantors’ present and future assets (including, without limitation, fee-owned real property, and limited, in the case of the equity interests of foreign subsidiaries, to 65% of the outstanding equity interests of such subsidiaries).
The Credit Facilities were secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our and our guarantors’ present and future assets (including, without limitation, fee-owned real property, and limited, in the case of the equity interests of foreign subsidiaries, to 65% of the outstanding equity interests of such subsidiaries).
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Notwithstanding our working capital deficit on December 31, 2023, we believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.
Notwithstanding our working capital deficit on December 31, 2024, we believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.
See Notes 1 and 3 to our consolidated financial statements for a description of our revenue recognition policies. 19 Table of Contents Valuation of Goodwill and Identifiable Intangible Assets Intangible assets include customer relationships, trade names, technology, and goodwill.
See Notes 1 and 3 to our consolidated financial statements for a description of our revenue recognition policies. 21 Table of Contents Valuation of Goodwill and Identifiable Intangible Assets Intangible assets include customer relationships, trade names, technology, and goodwill.
We enter into purchase orders in the normal course of business, but these purchase obligations do not exceed one year. 24 Table of Contents Stock Repurchase Program In May 2022, our Board of Directors approved the 2022 Program with a repurchase authorization of 2,500,000 shares of common stock.
We enter into purchase orders in the normal course of business, but these purchase obligations do not exceed one year. Stock Repurchase Program In May 2022, our Board of Directors approved the 2022 Program with a repurchase authorization of 2,500,000 shares of common stock.
At December 31, 2023, we assessed our current market capitalization compared to book value, forecasts and margins in our last quantitative impairment testing.
At December 31, 2024, we assessed our current market capitalization compared to book value, forecasts and margins in our last quantitative impairment testing.
The payment and amount of future dividends, if any, is at the discretion of our Board of Directors and will depend on our future earnings, financial condition, general business conditions, alternative uses of our earnings and cash and other factors. Capital Expenditures We paid cash of $15.8 million for capital expenditures in the year ended December 31, 2023.
The payment and amount of future dividends, if any, is at the discretion of our Board of Directors and will depend on our future earnings, financial condition, general business conditions, alternative uses of our earnings and cash and other factors. Capital Expenditures We paid cash of $15.4 million for capital expenditures in the year ended December 31, 2024.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Pursuant to the Credit Agreement, we are required to maintain a minimum fixed charge coverage ratio of 1.10x for all testing periods throughout the term(s) of the Credit Facilities, which calculation excludes, unless our liquidity falls below a specified threshold, (i) any cash dividend in a fiscal quarter that, together with all other cash dividends paid or declared during such fiscal quarter, exceeds $5.5 million in total cash dividends paid or declared, (ii) the portion of the purchase price for any permitted share repurchase of our shares paid with cash on hand, (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand, and (iv) up to $25 million of costs associated with our building renovation from or after January 1, 2023 .
Pursuant to the Credit Agreement, we were required to maintain a minimum fixed charge coverage ratio of 1.10x for all testing periods throughout the term(s) of the Credit Facilities, which calculation excluded, unless our liquidity fell below a specified threshold, (i) any cash dividends in a fiscal quarter that, together with all other cash dividends paid or declared during such fiscal quarter, exceeded $5.5 million in total cash dividends paid or declared, (ii) the portion of the purchase price for any permitted share repurchase of our shares paid with cash on hand, (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand, and (iv) up to $27.5 million of costs associated with our building renovation from or after January 1, 2023.
Our material cash requirements include the following contractual and other obligations: Dividends Cash dividends in the aggregate amount of $36.3 million, $20.9 million and $12.2 million were declared in 2023, 2022 and 2021 respectively. Dividends were paid from cash on hand and borrowings on our line of credit.
Our material cash requirements include the following contractual and other obligations: Dividends Cash dividends in the aggregate amount of $11.3 million, $36.3 million and $20.9 million were declared in 2024, 2023 and 2022 respectively. Dividends were paid from cash on hand and borrowings on our line of credit.
As of December 31, 2023, the remaining number of shares of common stock that could be purchased under the 2022 Program was 1,462,304 shares. Recent Accounting Pronouncements There are no recently issued accounting pronouncements we believe will have a material impact on our financial position, results of operations or cash flows. 25 Table of Contents
As of December 31, 2024, the remaining number of shares of common stock that could be purchased under the 2022 Program was 307,709 shares. Recent Accounting Pronouncements There are no recently issued accounting pronouncements we believe will have a material impact on our financial position, results of operations or cash flows. 27 Table of Contents
See the Consolidated Statements of Cash Flows included in this report for the detail of our operating cash flows. 22 Table of Contents We had a working capital deficit of $11.8 million and surplus of $10.3 million on December 31, 2023 and 2022, respectively.
See the Consolidated Statements of Cash Flows included in this report for the detail of our operating cash flows. 24 Table of Contents We had a working capital deficit of $16.3 million and $11.8 million on December 31, 2024 and December 31, 2023, respectively.
We are obligated to pay ongoing unused commitment fees quarterly in arrears pursuant to the Line of Credit and the Delayed Draw Term Loan facility at a rate of 0.20% per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility.
As of December 31, 2024, we were obligated to pay ongoing unused commitment fees quarterly in arrears at a rate of 0.20% per annum based on the actual daily unused portions of the Line of Credit and the Delayed Draw Term Loan facility.
The 2022 Program may be suspended, modified, or discontinued at any time and we have no obligation to repurchase any amount of common stock in connection with the 2022 Program. The 2022 Program has no set expiration date. During 2023, we repurchased 462,140 shares of our common stock for an aggregate of $19.1 million under the 2022 Program.
The 2022 Program may be suspended, modified, or discontinued at any time and we have no obligation to repurchase any amount of common stock in connection with the 2022 Program. The 2022 Program has no set expiration date. During 2024, we repurchased 1,154,595 shares of our common stock for an aggregate of $30.8 million under the 2022 Program.
Cash used in investing activities primarily consisted of purchases of property and equipment including computer software and hardware, building improvements, and furniture and equipment. Cash used in financing activities consisted of payments for borrowings under the term note, line of credit and finance lease obligations.
Cash used in investing activities primarily consisted of payments for the acquisition of Nobl Health and purchases of property and equipment including computer software and hardware, building improvements, and furniture and equipment. Cash used in financing activities consisted of payments for borrowings under the Term Loan, Delayed Draw Term Loan, Line of Credit and finance lease obligations.
Our recurring contract value metric represents the total revenue projected under all renewable contracts for their respective next annual renewal periods, assuming no upsells, downsells, price increases, or cancellations, measured as of the most recent quarter end.
Our retention rate decreased 4% in 2024 compared to 2023. Our recurring contract value metric represents the total revenue projected under all renewable contracts for their respective next annual renewal periods, assuming no upsells, downsells, price increases, or cancellations, measured as of the most recent quarter end.
These expenditures consisted mainly of computer software development for our Human Understanding solutions and building renovations to our headquarters. We estimate future costs related to our headquarters building renovations to be $11.6 million in 2024 and $1.4 million in 2025, which we expect to fund through operating cash flows and borrowings on the line of credit.
These expenditures consisted mainly of computer software development for our Human Understanding solutions and building renovations to our headquarters. We estimate future costs related to our headquarters building renovations to be $5.8 million in 2025, which we expect to fund through operating cash flows and borrowings on the Line of Credit and Delayed Draw Term Loan.
Debt Our amended and restated credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) includes (i) a $30,000,000 revolving credit facility (the “Line of Credit”), (ii) a $23,412,383 term loan (the “Term Loan”) and (iii) a $75,000,000 delayed draw-down term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”).
Debt As of December 31, 2024, our amended and restated credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) included (i) a $30.0 million revolving credit facility (the “Line of Credit”), (ii) a $23.4 million term loan (the “Term Loan”) and (iii) a $75.0 million delayed draw-down term facility (the “Delayed Draw Term Loan” and, together with the Line of Credit and the Term Loan, the “Credit Facilities”).
We may use the Delayed Draw Term Loan to fund any permitted future business acquisitions or repurchases of our common stock and the Line of Credit to fund ongoing working capital needs and for other general corporate purposes.
As of December 31, 2024, we could use the Delayed Draw Term Loan to fund dividends, any permitted future business acquisitions, capital expenditures or repurchases of our common stock. As of December 31, 2024, the Line of Credit was available to fund ongoing working capital needs and for other general corporate purposes.
We concluded that a triggering event had not occurred which would require an additional interim impairment test to be performed as it is not more likely than not that an impairment loss had been incurred at December 31, 2023. 20 Table of Contents Key Financial Metrics and Results of Operations The following table sets forth, for the periods indicated, selected financial information derived from our consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics.
We concluded that it is not more likely than not that an impairment loss had been incurred at December 31, 2024. 22 Table of Contents Key Financial Metrics and Results of Operations The following table sets forth, for the periods indicated, selected financial information derived from our consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics.
We also used cash to repurchase shares of our common stock for treasury and to pay dividends on common stock. This was partially offset by cash provided from the proceeds from the exercise of share-based awards, borrowings on the line of credit and delayed draw term loan.
We also used cash to repurchase shares of our common stock for treasury, to pay dividends on common stock and for payment of payroll tax withholdings on options exercised. This was partially offset by cash provided from borrowings on the Line of Credit and Delayed Draw Down Term loan.
(In thousands, except percentages) Year Ended December 31, Percentage Increase (Decrease) 2023 2022 2021 2023 over 2022 2022 over 2021 Revenue $ 148,580 $ 151,568 $ 147,954 (2 ) 2 Direct expenses 56,015 57,049 52,350 (2 ) 9 Selling, general, and administrative 46,621 42,699 38,960 9 10 Depreciation, amortization and impairment 5,899 5,277 6,374 12 (17 ) Operating income 40,045 46,543 50,270 (14 ) (7 ) Total other income (expense) (83 ) (3,728 ) (1,649 ) (98 ) 126 Provision for income taxes 8,991 11,015 11,155 (18 ) (1 ) Effective Tax Rate 22 % 26 % 23 % (4 ) 3 Operating Margin 27 % 31 % 34 % (4 ) (3 ) Recurring Contract Value 141,855 146,839 150,937 (3 ) (3 ) Cash provided by operating activities 38,113 36,265 46,344 5 (22 ) Revenue.
(In thousands, except percentages) Year Ended December 31, Percentage Increase (Decrease) 2024 2023 2022 2024 over 2023 2023 over 2022 Revenue $ 143,060 $ 148,580 $ 151,568 (4 ) (2 ) Direct expenses 56,933 56,015 57,049 2 (2 ) Selling, general, and administrative 44,911 46,621 42,699 (4 ) 9 Depreciation, amortization and impairment 6,022 5,899 5,277 2 12 Operating income 35,194 40,045 46,543 (12 ) (14 ) Total other income (expense) (2,504 ) (83 ) (3,728 ) 2,917 (98 ) Provision for income taxes 7,907 8,991 11,015 (12 ) (18 ) Effective Tax Rate 24 % 22 % 26 % (2 ) (4 ) Operating Margin 25 % 27 % 31 % (2 ) (4 ) Recurring Contract Value 133,218 141,855 146,839 (6 ) (3 ) Cash provided by operating activities 34,625 38,113 36,265 (10 ) 5 Revenue.
Our cash flows from operating activities consist of net income adjusted for non-cash items including depreciation, amortization, and impairments, reclassification of cumulative foreign currency translation adjustment into earnings, deferred income taxes, share-based compensation and related taxes, reserve for uncertain tax positions, loss on disposal of property and equipment and the effect of working capital changes.
Our cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes, share-based compensation and related taxes, reserve for uncertain tax positions, change in fair value of contingent consideration, loss on disposal of property and equipment and the effect of working capital changes.
We are also required to maintain a cash flow leverage ratio of 3.00x or less for all testing periods throughout the term(s) of the Credit Facilities.
We were also required to maintain a cash flow leverage ratio of 3.00x or less for all testing periods throughout the term(s) of the Credit Facilities. As of December 31, 2024, we were in compliance with our financial covenants.
See Note 7, "Income Taxes", to the Consolidated Financial Statements contained in this report for income tax related information. We generally do not make unconditional, non-cancelable purchase commitments.
Taxes The liability for gross unrecognized tax benefits related to uncertain tax positions was $2.2 million as of December 31, 2024. See Note 7, "Income Taxes", to the Consolidated Financial Statements contained in this report for income tax related information. Purchase Commitments We generally do not make unconditional, non-cancelable purchase commitments.
Cash provided by operating activities was also partially offset by decreased net income net of non-cash items.
Cash provided by operating activities decreased primarily due to decreased net income net of non-cash items, partially offset by working capital changes.
As of December 31, 2023, our principal sources of liquidity included $6.7 million of cash and cash equivalents, up to $30 million of unused borrowings under our line of credit and an additional $56 million on our delayed draw term note. Of this cash, $155,000 was held in Canada.
As of December 31, 2024, our principal sources of liquidity included $4.2 million of cash and cash equivalents, up to $30 million of unused borrowings under our Line of Credit and an additional $24 million on our Delayed Draw Term Loan.
The Credit Agreement contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default. The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of our common stock and acquisitions, subject in each case to certain exceptions.
The negative covenants include, among other things, restrictions regarding the incurrence of indebtedness and liens, repurchases of our Common Stock and acquisitions, subject in each case to certain exceptions. The New Credit Agreement also contains certain financial covenants with respect to minimum fixed charge coverage ratio and maximum cash flow leverage ratio.
See Note 7, “Income Taxes,” to our Consolidated Financial Statements contained in this report for additional information on the change in the effective tax rates. Recurring Contact Value . Recurring contract value declined in 2023 compared to 2022 primarily from our strategy to focus on our core digital solutions and lower net sales, although the trend improved later in 2023.
See Note 7, “Income Taxes,” to our Consolidated Financial Statements contained in this report for additional information on the change in the effective tax rates. Recurring Contact Value . Recurring contract value declined in 2024 compared to 2023 primarily due to the lack of growth in new contracts to replace losses.
The change was primarily due to decreases in cash and cash equivalents and trade accounts receivable and an increase in the current portion of notes payable. These were partially offset by increases in prepaid expenses primarily due to the timing of our annual business insurance payment.
The change was primarily due to decreases in cash and cash equivalents and trade accounts receivable, and prepaid expenses due to the timing of our annual business insurance payment and other service agreements and increases in accrued wages, accrued expenses and deferred revenue.
Critical Accounting Policies and Estimates The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein.
Upon the effectiveness of Mr. Green’s appointment as Chief Executive Officer, Mr. Hays will transition to the role of Chairman. Critical Accounting Estimates The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein.
The effective tax rate decreased primarily due to lower state income taxes of approximately $864,000 which fluctuate based on various apportionment factors and rates for the states we operate in, the non-deductible reclassification of the cumulative foreign currency translation adjustment of $539,000 in 2022 and increased tax benefits of $250,000 from the share-based compensation awards.
The effective tax rate increased primarily due to an increase in the effective rate related to state income taxes which fluctuates based on various apportionment factors and rates for the states we operate in, increased provision for uncertain tax positions and decreased tax benefits from the share-based compensation awards.
Interest on the Line of Credit and Delayed Draw Term Loan accrues and is payable monthly. 23 Table of Contents Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2025. The Line of Credit did not have a balance at December 31, 2023 and we had the availability to borrow $30,000,000.
We had the availability to borrow an additional $24 million on the Delayed Draw Term Loan at December 31, 2024. 25 Table of Contents As of December 31, 2024, principal amounts outstanding under the Line of Credit were due and payable in full, at maturity, in May 2027.
A summary of our operating and finance lease obligations as of December 31, 2023 can be found in Note 10, "Leases", to the Consolidated Financial Statements contained in this report. Taxes The liability for gross unrecognized tax benefits related to uncertain tax positions was $2.0 million as of December 31, 2023.
As of December 31, 2024, we had fixed lease payments of $624,000 and $10,000 for operating and finance leases, respectively payable within 12 months. A summary of our operating and finance lease obligations as of December 31, 2024 can be found in Note 10, "Leases", to the Consolidated Financial Statements contained in this report.
Principal payments are due in monthly installments of $226,190 through April 2027 and a balloon payment for the remaining balance of $10.2 million is due in May 2027. We had the availability to borrow an additional $56.0 million on the Delayed Draw Term Loan at December 31, 2023.
As of December 31, 2024, principal payments were due on the Delayed Draw Term Loan in monthly installments of $318,790 through May 2027 and a balloon payment for the remaining balance of $39.4 million was due in May 28, 2027.
Variable expenses as a percentage of revenue were 15% and 14% in 2023 and 2022, respectively. Fixed expenses decreased $1.9 million primarily due to decreased salary and benefit costs from workforce reduction and automation partially offset by increased contracted services to support our Human Understanding solutions and higher travel costs. Selling, general and administrative expenses .
Fixed expenses increased $895,000 primarily due to higher contracted services to support investments in our Human Understanding solutions partially offset by decreased salary and benefit costs from workforce changes and automation and state tax incentive adjustments.
The weighted average borrowings on the Line of Credit for year ended December 31, 2023 was $1.7 million. The weighted average interest rate on borrowings on the Line of Credit during the year ended December 31, 2023 was 7.67%. The outstanding balance on the Delayed Draw Term Loan was $19.0 million at December 31, 2023.
The weighted average interest rate on borrowings on the Line of Credit during the years ended December 31, 2024 and 2023 were 7.52% and 7.67%, respectively.
Borrowings under the Delayed Draw Term Loan and Line of Credit, if any, bear interest at a floating rate equal to the 30-day Secured Overnight Financing Rate (“SOFR”) plus 235 basis points (7.68% at December 31, 2023).
As of December 31, 2024, borrowings on the Term Loan, Delayed Draw Term Loan and Line of Credit, accrued interest at a floating rate equal to the SOFR plus 235 basis points (6.9% at December 31, 2024), which is payable monthly. The outstanding balance on the Term Loan was $14.3 million at December 31, 2024.
Interest income increased $652,000 from additional money market funds investments and interest expense decreased $347,000 from the declining balance on our term loan partially offset from interest expense due to drawing on the line of credit.
Total other expense increased in the 2024 period compared to the 2023 period primarily due to higher interest expense of $1.7 million mainly from borrowings on our Line of Credit and Delayed Draw Term Loan, as well as the increased interest rate on our Term Loan, and lower interest income of $695,000 from decreased money market funds investments.
Cash and cash equivalents decreased mainly due to the repurchase of shares of our common stock for treasury. We also borrowed on our delayed draw term loan to fund the share repurchases which increased the current portion of notes payable. Trade accounts receivable decreased due to timing of billing and collections, as well decreases in our overall recurring contract value.
Cash and cash equivalents decreased mainly due to the repurchase of shares of our common stock for treasury and cash paid to fund the Nobl acquisition, which was also funded by borrowings on our Line of Credit and Delayed Draw Term Loan.
The delayed draw term note can only be used to fund permitted future business acquisitions or repurchasing our common stock.
All outstanding principal and interest on the New Delayed Draw Term Loan are due and payable in full at the maturity date, February 6, 2030. The Delayed Draw Term Loan can only be used to refinance certain existing term indebtedness, fund dividends, capital expenditures, permitted future business acquisitions, or repurchasing our common stock.
Depreciation, amortization and impairment expenses increased in 2023 compared to the 2022 period primarily due to additional depreciation expense from shortening the estimated useful lives of certain building assets and increased software investment amortization. Operating income and margin .
Depreciation, amortization and impairment expenses increased in 2024 compared to the 2023 period due to increased software investment amortization and intangible amortization from the Nobl acquisition partially offset by less building, furniture and computer equipment depreciation.
The outstanding balance on the Term Loan was $17.8 million at December 31, 2023 and is payable in monthly installments of $462,988 through May 2027. The Term Loan bears interest at a fixed rate per annum of 5%.
As of December 31, 2024, principal payments were due in monthly installments of $92,800 through May 2027 and a balloon payment for the remaining balance of $11.6 million was due May 28, 2027. The outstanding balance on the Delayed Draw Term Loan was $48.5 million at December 31, 2024.
In future periods we expect total other expense to increase due to an expected decrease in interest income resulting from reduced money market fund investments and increased interest expense due to borrowings on our line of credit and delayed draw term loan. Provision for income taxes and effective tax rate .
Other expense is expected to increase in future periods due to additional borrowings on our Delayed Draw Term Loan. Additionally, starting in August 2024 the Term Note changed from a fixed interest rate of 5% per annum to a floating rate.
Removed
Revenue in 2023 decreased compared to 2022 with reductions in US revenue of $2.2 million and Canadian revenue of $793,000 due to the closure of our Canadian office. US recurring revenue in our existing client base decreased $819,000 which included $439,000 attributed to elimination of a non-core solution.
Added
On February 26, 2025, our Board of Directors appointed Trent Green as our Chief Executive Officer and to serve as a director, both effective June 1, 2025. Mr. Green brings more than 25 years of healthcare leadership experience, most recently serving as Chief Executive Officer of Amazon One Medical and previously as Chief Operating Officer of Legacy Health.
Removed
US recurring revenue decreased from new customer sales by $1.4 million and from non-recurring revenues by $4,000. We do not expect Canadian revenues in the future due to the closure of the Canadian office. Direct expenses . Variable expenses increased $906,000 in 2023 compared to 2022 primarily from higher data collection expenses.
Added
Revenue in 2024 decreased compared to 2023 by $5.5 million. This was mainly from decreased recurring revenue in our existing client base. Of this decrease, 34% was from our non-core solutions. We view total Recurring Contract Value, or TRCV, a measure of revenue under all renewable contracts for their respective annual renewal periods, as a leading indicator of revenue expectations.
Removed
We expect salary and benefit costs to increase in 2024 due to our new executive officer positions and changes to our commission structure, although we hope to have meaningful offsets from ongoing efficiency and cost controls. 21 Table of Contents Depreciation, amortization and impairment .
Added
TRCV declined for several quarters prior to the fourth quarter of 2024, when it increased slightly. We believe the expansion of our product and services portfolio during 2024, along with a broader sales effort, led to improved sales and retention in the fourth quarter compared with the prior several quarters.
Removed
Operating income and margin decreased in 2023 compared to 2022 primarily due to a decline in revenue and growth in marketing and technology investments and higher data collection expenses. Total other income (expense ).
Added
There is a lag between changes in TRCV (next twelve months) and revenue (trailing twelve months). Generally, if we are able to sustain growth in TRCV, we would expect revenue growth to follow within the next few quarters (and vice versa). However, intervening events may affect this general expectation. Direct expenses .
Removed
Total other expense decreased in 2023 compared to 2022 primarily due to the reclassification of the cumulative foreign currency translation adjustment of $2.6 million to other expense as a result of the substantial liquidation of our Canadian subsidiary in December 2022.
Added
Variable expenses increased $23,000 in the 2024 period compared to the 2023 period primarily from higher conference expenses partially offset by decreased hourly labor and data collection expenses. Variable expenses as a percentage of revenue were 16% and 15% in the 2024 and 2023 periods, respectively.
Removed
Provision for income taxes decreased in 2023 compared to 2022 primarily due to decreased taxable income.
Added
During the fourth quarter of 2024, we reduced our workforce to align with lower revenue, which is expected to lower these fixed expenses in future periods. We expect to continue to invest in providing innovative solutions to our clients, which could cause direct expenses to fluctuate as a percentage of revenue. Selling, general and administrative expenses .
Removed
Cash provided by operating activities increased primarily due to working capital changes, mainly consisting of changes in deferred revenue and trade accounts receivable primarily due to timing of initial billings and collections for new and renewal contracts, changes in accrued expenses, wages and bonuses mainly due to decreased bonuses and reductions in accruals for paid time off due to a new unlimited plan, partially offset by changes in prepaid expenses and other current assets primarily due to the timing of our annual business insurance payment and growth in operating lease assets and liabilities due to changes in our leases and a reassessment.
Added
While we continue to invest in product development and sales, our goal is to drive efficiencies and savings in overall costs to offset such investments.
Removed
In June 2023, the Credit Agreement was amended to exclude our costs associated with our building renovation from or after January 1, 2023 from the fixed charge coverage ratio calculation.
Added
We expect a substantial portion of the benefits of our lower expense run rate for the fourth quarter of 2024 to continue into 2025, partially offset by increased compensation expense of our new CEO, including an expected charge during the second quarter of 2025, of approximately $4.9 million (based on the price of our common stock at February 28, 2025) for Mr.
Removed
All obligations under the Credit Facilities are to be guaranteed by each of our direct and indirect wholly owned domestic subsidiaries, if any, and, to the extent required by the Credit Agreement, direct and indirect wholly owned foreign subsidiaries. As of December 31, 2023, we were in compliance with our financial covenants.
Added
Green's signing bonus and quarterly non-cash charges of approximately $608,000 (based on the price of our common stock on February 28, 2025) for Mr. Green's equity grant beginning in June 2025 and continuing through the third anniversary of the grant. In light of Mr.
Removed
Leases We have lease arrangements for certain computer, office, printing and inserting equipment as well as office and data center space. As of December 31, 2023, we had fixed lease payments of $678,000 and $23,000 for operating and finance leases, respectively payable within 12 months.
Added
Green's hiring and compensation, we expect to terminate the existing long-term incentive program for our executive leadership team with the consent of the impacted participants and adopt a new incentive program during the second quarter of 2025, which could result in additional expenses. 23 Table of Contents Depreciation, amortization and impairment .
Added
We expect our depreciation and amortization to increase slightly given continued software and intangible amortization, as well as depreciation on the building renovations when completed in 2025. Operating income and margin . Operating income and margin decreased in 2024 compared to 2023 primarily due to the decline in revenue while direct expenses and depreciation and amortization increased.
Added
In the near term, we expect operating income and margin to increase due to revenue and cost initiatives, excluding the impact of the compensation charge described above. Total other income (expense).
Added
All borrowings currently bear interest at a floating rate, which is currently equal to the one-month Term SOFR plus a percentage per annum determined by our cash flow leverage ratio, ranging from 2.25% to 2.75%. Provision for income taxes and effective tax rate . Provision for income taxes decreased in 2024 compared to 2023 primarily due to decreased taxable income.
Added
Working capital changes mainly consisted of changes in deferred contract costs primarily due to the timing of commissions and incentives and related amortization and changes in prepaid expenses and other current and noncurrent assets primarily due to the timing of our annual business insurance and other service agreements.
Added
These changes were partially offset by the decrease in the current portion of notes payable due to the amendment of our credit agreement in 2024.
Added
Trade accounts receivable decreased due to timing of billing and collections, as well as decreases in our overall recurring contract value. Accrued expenses and accrued wages and bonuses increased primarily due to the accrual of annual incentives and timing of payments.
Added
As of December 31, 2024, we had no borrowings outstanding and the availability to borrow $30.0 million on the Line of Credit. The weighted average borrowings on the Line of Credit for the years ended December 31, 2024 and 2023 were $8.5 million and $1.7 million, respectively.
Added
In February 2025, we entered a new credit agreement (the “New Credit Agreement”) with a group of lenders and FNB that amends and restates the terms of our existing Credit Facility, as amended.
Added
The New Credit Agreement provides for (i) a $30,000,000 revolving credit facility (the “Revolving Loan”) and (ii) a $110,000,000 delayed draw-down term facility (“the “New Delayed Draw Term Loan” and, together with the Revolving Loan, the “New Credit Facilities”).
Added
The New Delayed Draw Term Loan includes an accordion feature that, so long as no event of default exists or would exist after giving effect to such increase, allows us to request an increase in the New Delayed Draw Term Loan of up to the lesser of (x) $25,000,000 and (y) our EBITDA as of the preceding four fiscal quarters, exercisable in increments of $10,000,000 (or the remaining available amount of the accordion, if less).
Added
Interest accrues and is payable monthly on the New Delayed Draw Term Loan and the Revolving Loan at a floating rate equal to the one-month Term SOFR plus a percentage per annum determined by our cash flow leverage ratio, ranging from 2.25% to 2.75%.
Added
Principal amounts outstanding under the Revolving Loan are due and payable in full at maturity at February 6, 2028.
Added
Principal amounts outstanding under the New Delayed Draw Term Loan are due and payable monthly during the term of the New Delayed Draw Term Loan, in equal monthly installments to amortize the aggregate outstanding principal balance by (i) 5% during each of the first three years and (ii) 7.5% during each of the fourth and fifth years following the date of such loan.
Added
We are obligated to pay ongoing unused commitment fees quarterly in arrears at a percentage per annum determined by our cash flow leverage ratio, ranging from 0.15% to 0.30%, based on the actual daily unused portions of the Revolving Loan and the New Delayed Draw Term Loan, respectively.
Added
The New Credit Facilities are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our present and future assets (including, without limitation, fee-owned real property). The New Credit Agreement contains customary representations, warranties, affirmative and negative covenants (including financial covenants) and events of default.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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2023 filing
2024 filing
Biggest changeBorrowings under our Delayed Draw Term Loan and Line of Credit, if any, bear interest at a floating rate equal to the 30-day SOFR plus 235 basis points. Interest rate changes for borrowings under our Delayed Draw Term Note and Line of Credit do not affect the fair value of the related debt but affect future earnings and cash flows.
Biggest changeInterest rate changes for borrowings under our Term Loan, Delayed Draw Term Note and Line of Credit do not affect the fair value of the related debt but affect future earnings and cash flows. Borrowings under the Delayed Draw Term Note, and Line of Credit may not exceed $75 million and $30.0 million, respectively.
The change in interest expense resulting from a hypothetical change of 100 basis points of the benchmark index rate applied to the maximum borrowings available under the Line of Credit and the balance outstanding under the Delayed Draw Term Loan at December 31, 2023 would increase or decrease future earnings and cash flows by approximately $370,000 annually.
The change in interest expense resulting from a hypothetical change of 100 basis points of the benchmark index rate applied to the maximum borrowings available under the Line of Credit and the balance outstanding under the Term Loan and Delayed Draw Term Loan at December 31, 2024 would increase or decrease future earnings and cash flows by approximately $592,000 annually.
At December 31, 2023, our fixed-rate Term Loan totaled $17.8 million. Based on a sensitivity analysis, a hypothetical one percent per annum change in market interest rates as of December 31, 2023, would impact the estimated fair value of our fixed-rate Term Loan outstanding at December 31, 2023 by approximately $300,000.
At December 31, 2024, the carrying amount of our contingent consideration liability was $859,000. Based on a sensitivity analysis, a hypothetical one percent per annum change in market interest rates as of December 31, 2024, would impact the estimated fair value and carrying amount of our contingent consideration liability at December 31, 2024 by approximately $5,000.
Borrowings under the Line of Credit and Delayed Draw Term Note may not exceed $30.0 million and $75.0 million, respectively. There were no borrowings outstanding under the Line of Credit at December 31, 2023. We had $19.0 million of borrowings outstanding under the Delayed Draw Term Note at December 31, 2023.
We had $48.5 million of borrowings outstanding under the Delayed Draw Term Note and no borrowings outstanding on our Line of Credit at December 31, 2024. The outstanding balance on the Term Loan was $14.3 million at December 31, 2024.
We are exposed to interest rate risk with both our fixed-rate Term Loan and variable rate Delayed Draw Term Note and Line of Credit. Interest rate changes for borrowings under our fixed-rate Term Loan would impact the fair value of such debt, but do not impact earnings or cash flow.
We are exposed to interest rate risk with our variable rate Term Loan, Delayed Draw Term Note and Line of Credit and our contingent consideration liability. Borrowings under our Term Loan, Delayed Draw Term Loan and Line of Credit, if any, bear interest at a floating rate equal to the 30-day SOFR plus 235 basis points.
Added
Our contingent consideration liability associated with our Nobl acquisition is adjusted to fair value at each reporting date, using a discounted cash flow model. Interest rate changes would impact the fair value of our contingent consideration liability but do not impact cash flow or total future expense.