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spk04: Good morning or good afternoon all, and welcome to the National Research Corporation First Quarter Earnings Call. My name is Adam and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor to Linda Stacey to begin. So Linda, please go ahead when you are ready.
spk00: Thank you, Adam, and welcome everyone to National Research Corporation's 2024 First Quarter Earnings Call. My name is Linda Stacey, the company's Principal Financial Officer And joining me on the call today are Mark Scudder from our Executive Leadership Team and Helen Hurdy, our Chief Customer Officer. Before we continue, I'd like to point out this conference call includes forward-looking statements related to the company that involve risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the facts that could affect the company's future results, please see the company's filings with the Securities and Exchange Commission. With that, I'll turn it over to Mark.
spk02: Thanks, Linda. Today we'll talk about markets and strategy, and then organizational changes and investments, and then our financial results and outlook. To start, we have big financial goals over the next several years. First, doubling our total addressable market through portfolio additions, acquisitions, and partnerships. Second, double-digit annual revenue growth. Third, expanding our margins. And fourth, creating significant value for investors. The leadership team is highly aligned to these goals and we're very motivated to deliver. And the strategy for doing that is to combine historical strengths, healthcare DNA founded on decades of benchmarks and trusted thought leadership, unrivaled client service, and a mission-driven organization with an expanding portfolio of products and innovative new technologies. We think the combination of technology and specific healthcare insights is important in our market and to enhance outcomes and experiences for everyone in the healthcare journey while improving our clients' bottom lines. Our clients generally come from the top 400 healthcare systems in the United States. They're under enormous pressure to improve health outcomes, control costs, retain qualified employees, and expand market share, all while dealing with increasing regulation. The challenge for patients and consumers of healthcare is no less significant as all of us navigate the changing landscape. For our clients, The projected value of patients has never been higher, measuring both estimated lifetime spend and as an influencer of other consumers' choice of their provider. At the same time, the cost of losing qualified caregiving associates has never been greater. Meanwhile, they have competition among healthcare systems and from new entrants like never before. There are correlations between consumer, patient, and associate experiences that impact loyalty, outcomes, and reputation. Therefore, the insights we deliver can improve lives and our clients' revenue and costs. We've talked with our clients, and the way we're going to do that is through a broader experience perspective, greater strategic alignment, innovation, and actionable insights that deliver more value. To deliver on these goals, we are filling portfolio gaps to provide enterprise-wide experience solutions offering clear thought leadership at a strategic level, applying a generative AI overlay across all of our solutions, and aggressively building our sales team and sales approach. We're already making progress on these goals. We'll soon be in the market with new tools and insights across patient customer and employee experience solutions. Our AI and product teams are working with customers to prioritize and roll out a new generation of solutions to enhance care and improve experiences, and we expect to be in the market with AI-enhanced healthcare-specific solutions later this year. We also have exciting developments in our associate team, which Helen will cover in a few minutes. And one last thing I'd like to mention is pace. One of our key organizational themes is now. We're accelerating decision-making and streamlining as many processes as possible. This benefits our clients and our associates as more resources are devoted to high value activities and the successes compound. With the changes and investments we're making, we believe we're well positioned to capitalize on all of our goals. And now I'll turn it over to Helen.
spk01: Thanks, Mark. We had an exciting first quarter. This was a quarter of transformation where the groundwork was laid for us to achieve new benchmarks in providing customer value, engineering excellence, and operational agility. Our revenue team has moved under the executive leadership of Jason Hahn. During the quarter, we've added several new leaders and sales associates, restructured compensation plans, changed territory coverages, and implemented new training programs. We think these additional investments and focused expertise will help accelerate pipeline growth and conversion. All service functions are under my leadership. The restructure allows the team members to have more time to focus on strategy with their client base, and it gives them the opportunity to increase their interaction levels and depth of contacts within the client organizations. We've also expanded our executive rounding. We previously announced the addition of Jennifer Barron who will be joining us soon from serving as the chief experience officer at UC Davis Health. Jennifer will be instrumental in expanding our thought leadership programs and providing peer-level executive support to our clients. Christophe Louvian is the executive leader of our product and technology teams. Our technology teams have been reorganized into small, nimble teams with defined product domains that allow for autonomy and customer centricity. We've also invested in new AI and product leadership to ensure we will be delivering innovative AI solutions to our clients at a pace unmatched before. As a leadership team, we've developed company-wide goals and objectives that align with our strategic goals. The company is working together to streamline, automate, innovate, and create operational excellence. I'll now turn it back to Linda to discuss the financial results and outlook.
spk00: Thanks, Helen. Our financial results were consistent with our expectations and relatively flat year over year. Our focus remains on executing our strategic plan. The main levers for revenue and expenses are reaching an expanded TAM or total addressable market by broadening our CX, PX, EX solutions as a portfolio across all of healthcare. as well as a generative AI overlay across all of our products. We expect this to double our TAM. As part of this effort, we expect to increase our IT investment, especially in AI, over several quarters, rolling out new products developed through internal innovation, acquisitions, and partnerships through an expanded sales force that we expect to grow substantially with a steady build over the next two to three years. From a revenue perspective, given the sales cycle and multi-year contract model prevalent in our industry, we expect sales from new products and additional sales associates to ramp a few quarters behind the initial cost, but to generate TRCD of several times the annual investment. Our goal will be to offset as much of the ramp-up cost as possible through a combination of internal process improvement, AI to replace manual tasks, and a tightly managed procurement. From a balance sheet perspective, as of March 31st, 2024, we had approximately 40 million of net debt, 23 million available on the line of credit, and 56 million available under the delayed draw term loan facility. We expect net debt to increase over the balance of the year for the reasons explained above, but to remain at a comfortable level. We are continuing to follow our capital allocation priorities to fund organic innovation and growth investments, dividends, and share repurchases. For the first quarter of 2024, our operating cash flows increased to $12 million compared to $8 million in 2023. During the quarter, we funded $4 million for innovation and growth, including facilities improvements, and the company returned $18 million to stockholders through dividends and stock repurchases. We retained flexibility to be opportunistic with our capital decisions, with approximately $11 million remaining in our facilities investment to be funded over the next three to four quarters We will gain additional flexibility beginning early in 2025 as those investments are completed. Overall, we are making good progress on our plan and remain committed to developing the solutions our clients want and providing the high level of service they have come to expect. That concludes my comments for this morning. Thank you for your time today. Operator, I will now ask you to open the call to any questions.
spk04: Thank you. As a reminder, if you would like to ask a question today, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure your headset is fully plugged in and unmuted locally.
spk03: Final call for questions, that's star one on your telephone keypad. As we have no questions, I'll hand the call back to the management team for any closing remarks.
spk00: Thank you, Adam. Thank you all for joining our call today. We look forward to sharing our results again next quarter.
spk04: This concludes today's call. Thank you very much for your attendance. You may now disconnect.
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