National Research Corp. Q3 FY2022 earnings call

• Growth in interest and adoption of the human understanding program, with several client adoptions in Q3. • Annual symposium in August was extremely successful, drawing over 500 attendees. • Sales pipeline growing due to increased interest in the human understanding program; hiring sales associates to accelerate growth. • TRCV was $148 million at quarter end; core solution TRCV grew 2% year-over-year. • Revenue in Q3 2022 decreased, but US revenue increased. • Operating income declined 15% in Q3 2022 due to lower revenue and higher expenses. • Board prioritizes capital allocation for innovation and growth investments, with $9.3 million funded in first nine months of 2022, plus dividends and share repurchases.

During the third quarter, total recurring contract value (TRCV) was $148 million. TRCV decreased by 2% over the prior year, but core solution TRCV grew 2% compared to September 30, 2021. Revenue in Q3 2022 decreased primarily due to a $660,000 reduction from the closure of the Canadian location; US revenue increased by $584,000. For the first nine months of 2022, revenue was $113.4 million, a 3% increase from 2021, while net income decreased to $25.2 million from $27.8 million in the prior year.

• Focus on funding innovation and growth investments including M&A and internal projects as preferred use of capital.

Q: Can you give more info on human understanding clients, upsells or new clients?

A: Added more than four clients; two existing clients added the program, two new clients joined.

Q: Update on sales force and changes?

A: Focus on increasing number of sales associates to align with growing pipeline.

Q: Pipeline color on upsells and new client adds?

A: Pipeline opportunities fairly split between upsell/cross sell of existing clients and new organizations.

Q: Are expenses discrete investments or permanent?

A: Marketing expenses are significant and will continue; some automation investments are discrete one-time investments.