What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-04 compared with 2021-03-05 · 205 added, 241 removed, 886 unchanged (33% of the section changed)

Financial Statements and Supplementary Data

Quarterly Financial Data (Unaudited)

The following table sets forth selected financial information for each of the eight quarters in the two-year period ended December 31, 2020.

This unaudited information has been prepared on the same basis as the consolidated financial statements and includes all normal recurring adjustments necessary to present fairly this information when read in conjunction with our audited consolidated financial statements and the notes thereto.

(In thousands, except per share data)

Quarter Ended

Insurance recoveries

Direct expenses

Selling, general and administrative expenses

Depreciation, amortization and impairment

Operating income

Other income (expense)

Provision for income taxes

Earnings per share of common stock:

Basic earnings per share

Common (formerly class A)

Dilutive earnings per share

Common (formerly class A)

Weighted average shares outstanding –

Common (formerly class A)

Weighted average shares outstanding –

Common (formerly class A)

Report of Independent Registered Public Accounting Firm

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Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of National Research Corporation and subsidiary (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’

equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control –

We have audited the accompanying consolidated balance sheets of National Research Corporation and subsidiary (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’

equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control –

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

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Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of sufficiency of audit evidence over new and modified subscription-based service agreement terms

Sufficiency of audit evidence over new and modified subscription-based service agreement terms

As discussed in Notes 1 and 3 to the consolidated financial statements, revenue consists of service arrangement contracts with customers that can include more than one separately identifiable performance obligation.

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Subscription-based service agreements represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period.

We identified the evaluation of sufficiency of audit evidence over the key terms within new and modified subscription-based service agreements as a critical audit matter.

We identified the evaluation of the sufficiency of audit evidence over the key terms within new and modified subscription-based service agreements as a critical audit matter.

Specifically, the nature and extent of procedures performed over the key terms within the new and modified subscription-based service agreements required subjective auditor judgment as recognition of revenue by the Company is dependent on the accuracy of the key terms within the related information technology (IT) application used to calculate revenue.

The key terms within the new subscription-based service agreements include description of service, transaction price, renewal price and contract term, and the key terms within the modified subscription-based service agreements are the transaction price and contract term.

The key terms within the new subscription-based service agreements included the description of service, transaction price, renewal price and contract term, and the key terms within the modified subscription-based service agreements were the transaction price and contract term.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over the accuracy of key terms within the IT application, including the identification of key terms.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s subscription-based service revenue process, including controls over the agreements entered into during the current year, and the determination of the transaction price and contract term when the agreement was modified during the current year.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s subscription-based service revenue process, including controls related to the key terms within the new and modified subscription-based service agreements.

We also tested certain internal controls over the accurate input of the underlying key terms of the subscription-based service agreement into the related IT application.

For a sample of revenue transactions, we compared the key terms used in the revenue calculation to the underlying contract with the customer.

We evaluated the sufficiency of audit evidence obtained over the key terms within new and modified subscription-based service agreements by assessing the results of procedures performed, including the nature and extent of audit effort.

We have served as the Company’s auditor since 1997.

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Deferred contract costs, net

Deferred income taxes

$ 157,540  

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Accrued expenses

Income taxes payable

Dividends payable

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Common stock, $ 0.001 par value;

authorized 60,000,000 shares, issued 30,775,154 in 2020 and 30,151,574 in 2019, outstanding 25,390,968 in 2020 and 24,947,500 in 2019

authorized 110,000,000 shares in 2021 and 60,000,000 shares in 2020, issued 30,898,600 in 2021 and 30,775,154 in 2020, outstanding 25,361,409 in 2021 and 25,390,968 in 2020

Additional paid-in capital

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Treasury stock, at cost;

5,384,186 Common shares in 2020 and 5,204,074 Common shares in 2019

5,537,191 Common shares in 2021 and 5,384,186 Common shares

Total shareholders’

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$ 37,260  

$ 32,406  

Earnings per share of common stock:

Basic earnings per share

Common (formerly Class A)

$ 1.47  

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$ 1.30  

$ 1.31  

Diluted earnings per share

Common (formerly Class A)

$ 1.46  

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$ 1.26  

$ 1.27  

Weighted average shares and share equivalents outstanding

Common (formerly Class A) - basic

25,422  

1 unchanged sentence

24,809  

Class B - basic

Common (formerly Class A) - diluted

25,640  

1 unchanged sentence

25,653  

Class B - diluted

See accompanying notes to consolidated financial statements.

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(In thousands)

$ 37,466  

$ 37,260  

$ 32,406  

Other comprehensive income (loss):

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Comprehensive income

$ 37,490  

$ 37,070  

$ 33,113  

See accompanying notes to consolidated financial statements.

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$ 157,312  

$ 77,574  

$ ( 106,339 )

$ 19,083  

Purchase of 218,344 class A and 3,677 class B shares of treasury stock

Issuance of 468,318 class A and 9,296 class B common shares for the exercise of stock options

Issuance of 3,496 class A restricted common shares, net of (forfeitures)

Purchase of 87,203 shares of treasury stock

Issuance of 227,902 common shares for the exercise of stock options

Issuance of 6,005 restricted common shares

Non-cash stock compensation expense

Settlement of class B restricted common shares and stock options in connection with Recapitalization for cash of $ 3,271 and 90,369 class A common shares

Settlement of class B common shares in connection with Recapitalization ( 3,527,246 class B common shares exchanged for $ 69,099 cash and 3,527,246 class A common shares)

118,335  

Retirement of 4,328,552 class B common shares in connection with Recapitalization

204,060  

Dividends declared of $ 1.13 and $ 0.60 per A and B common share, respectively

Cumulative effect adjustment for adoption of ASC 606, net of income tax

Dividends declared of $ 0.78 per common share

Other comprehensive income, foreign currency translation adjustment

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$ 162,154  

$ ( 106,339 )

$ 32,892  

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Issuance of 630,373 common shares for the exercise of stock options

Issuance of 6,005 restricted common shares

Forfeiture of 6,793 restricted common shares

Non-cash stock compensation expense

Dividends declared of $ 0.21 per common share

Other comprehensive income, foreign currency translation adjustment

Other comprehensive loss, foreign currency translation adjustment

37,260  

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$ 64,315  

Purchase of 180,112 shares of treasury stock

Issuance of 630,373 common shares for the exercise of stock options

Forfeiture of 6,793 restricted common shares

Purchase of 153,005 shares treasury stock

Issuance of 116,753 common shares for the exercise of stock options

Non-cash stock compensation expense

Dividends declared of $ 0.48 per common share

Other comprehensive income, foreign currency translation adjustment

( 190 )  

Other comprehensive income, foreign currency translation adjustment

37,466  

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Trade accounts receivable

Prepaid expenses and other current assets

Prepaid expenses and other current and long-term assets

Operating lease assets and liability, net

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Purchases of property and equipment

Acquisition consideration

Insurance proceeds for damaged property

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Cash flows from financing activities:

Payments related to Recapitalization

Proceeds from issuance of note payable

40,000  

Borrowings on line of credit

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Proceeds from the exercise of stock options

Payment of employee payroll tax withholdings on share-based awards exercised

Payment of payroll tax withholdings on share-based awards exercised

Repurchase of shares for treasury

Payment of dividends on common stock

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19,671  

21,173  

Cash and cash equivalents at beginning of period

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Supplemental disclosure of non-cash investing and financing activities:

Common stock (formerly class A) issued in the Recapitalization in exchange for then-existing class B shares and options.

$ 121,371  

Finance lease obligations originated for property and equipment

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$ 3,618  

Deferred acquisition consideration

$ 1,950  

See accompanying notes to consolidated financial statements.

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or similar terms), is a leading provider of analytics and insights that facilitate measurement and improvement of the patient and employee experience while also increasing patient engagement and customer loyalty for healthcare organizations in the United States and Canada.

Our purpose is to establish human understanding.

Our purpose is to enable human understanding.

Our solutions enable health care organizations to understand what matters most to each person they serve.

Our portfolio of solutions represents a unique set of capabilities that individually and collectively provide value to our clients.

The solutions are offered at an enterprise level through the Voice of the Customer ("VoC") platform, The Governance Institute, and legacy Experience solutions. 

Principles of Consolidation

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Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014 - 09, Revenue from Contracts with Customers and all related amendments (“ASC 606”

or “new revenue standard”) using the modified retrospective method for all incomplete contracts as of the date of adoption.

We applied the practical expedient to reflect the total of all contract modifications occurring before January 1, 2018 in the transaction price and performance obligations at transition rather than accounting for each modification separately.

Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

As discussed in more detail below and under “Deferred Contract Costs”, the largest impact of implementing the new revenue standard was the deferral and amortization of direct and incremental costs of obtaining contracts.

In addition, there were other revisions to revenue recognition primarily related to performance obligation determinations and estimating variable consideration.

We recorded a transition adjustment of approximately $ 2.7 million, net of $ 814,000 of tax, to the opening balance of retained earnings.

We derive a majority of our revenues from our annually renewable subscription-based service agreements with our customers, which include performance measurement and improvement services, healthcare analytics and governance education services.

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Our revenue arrangements with a client may include combinations of more than one service offering which may be executed at the same time, or within close proximity of one another.

We combine contracts with the same client into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated together, consideration in one contract depends on another contract, or services in one or more contracts are a single performance obligation.

We combine contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated together.

For contracts that contain more than one separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations.

The stand-alone selling prices are based on an observable price for services sold to other comparable clients, when available, or an estimated selling price using a cost-plus margin or residual approach.

The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost-plus margin or residual approach.

We estimate the amount of total contract consideration we expect to receive for variable arrangements based on the most likely amount we expect to earn from the arrangement based on the expected quantities of services we expect to provide and the contractual pricing based on those quantities.

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and 4 ) unit-priced service agreements.

Subscription-based services - Services that are provided under subscription-based service agreements are usually for a twelve month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the client.

These agreements are renewable at the option of the client at the completion of the initial contract term for an agreed upon price increase each year.

These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the client as the client receives and consumes the benefits throughout the contract period.

Subscription-based services - Services that are provided under subscription-based service agreements are usually for a twelve - month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the customer.

These agreements are renewable at the option of the customer at the completion of the initial contract term for an agreed upon price increase each year.

These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period.

Accordingly, subscription services are recognized ratably over the subscription period.

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We are entitled to a fixed payment upon completion of the service.

Under these arrangements, we recognize revenue at the point in time we complete the service and it is accepted by the client.

Under these arrangements, we recognize revenue at the point in time we complete the service and it is accepted by the customer.

Fixed, non-subscription services –

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Unit-price services –

These arrangements typically require us to perform certain services on a periodic basis as requested by the client for a per-unit amount which is typically billed in the month following the performance of the service.

These arrangements typically require us to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service.

Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

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Deferred contract costs, net is stated at gross deferred costs less accumulated amortization.

We defer commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable client contract.

In 2020, we began providing information technology development work for certain clients specific to their implementation, which are capitalized as deferred contract costs.

We defer commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable customer contract.

Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from three to five years.

The contract term was estimated by considering factors such as historical client attrition rates and product life.

The amortization period is adjusted for significant changes in the estimated remaining term of a contract.

We have elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of one year or less.

Prior to 2018, all commissions and incentives were expensed as incurred.

We recorded a transition adjustment on January 1, 2018 as an increase to retained earnings of $ 2.6 million, net of $ 776,000 of tax, to reflect $ 3.4 million of commissions and incentives related to contracts that began prior to 2018, net of accumulated amortization.

The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract. 

An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration we expect to receive net of the expected future costs directly related to providing those services.  We have elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of one year or less.

We deferred incremental costs of obtaining a contract of $ 1.9 million, $ 3.7 million and $ 3.6 million in the years ended December 31, 2021, 2020 and 2019, respectively.

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Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016 - 13,  

Measurement of Credit Losses on Financial Instruments.

This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

The adoption of this standard did not have an impact on our consolidated financial statements.

The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable, determined based on our historical write-off experience, current economic conditions and reasonable and supportable forecasts about the future.

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Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The COVID- 19 pandemic has resulted in an increase in accounts receivables as some clients have delayed payments or are slower paying due to such clients’

cash-flow issues.

The following table provides the activity in the allowance for doubtful accounts for the years ended December 31, 2021, 2020 and 2019 (in thousands):

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Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

All of our goodwill is allocated to our reporting units, which are the same as our operating segments.

All of our goodwill is allocated to our reporting unit, which is the same as our operating segment.

Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

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If the carrying value of the reporting unit exceeds the fair value, then goodwill is written down by this difference.

We performed a qualitative analysis as of October 1, 2020 and determined the fair value of each reporting unit likely exceeded the carrying value.

We performed a qualitative analysis as of October 1, 2021 and determined the fair value of our reporting unit likely exceeded the carrying value.

No impairments were recorded during the years ended December 31, 2021 or 2019.

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As a result, we tested for impairment of the Canada reporting unit’s goodwill at December 31, 2020.

We recognized an impairment of $ 714,000 for the excess of the Canada reporting unit’s carrying value over the fair value, using discounted cash flows.

The remaining balance of goodwill of our Canada reporting unit at December 31, 2020 was $ 1.6 million.

Changes in the actual amount or timing of cash flows or other assumptions used to discount cash flows to estimate fair value of the Canada reporting unit could result in additional impairment.

We recognized an impairment of $ 714,000 for the excess of the then Canada reporting unit’s carrying value over the fair value, using discounted cash flows.

In March 2021, we changed our operating segments from six to one to reflect a change in corporate reporting structure to the Company’s Chief Executive Officer and chief operating decision maker.

In connection with this change, our previous reporting units were combined into one reporting unit.

We performed an interim qualitative analysis immediately before and after the reorganization and concluded that the fair value of our reporting units likely exceeded the carrying values and no impairments were recorded.

Following the reorganization, we considered the current and expected future economic and market conditions, including the impact of the COVID- 19 pandemic, on our reporting unit.

We also assessed our current market capitalization compared to book value, forecasts and margins in our last quantitative impairment testing.

We concluded that a triggering event has 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, 2021.

Insurance Recoveries

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Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

In 2021, we adopted ASU 2019 - 12, Simplifying the Accounting for Income Taxes (Topic 740 ).

Among other clarifications and simplifications related to income tax accounting, this ASU simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences. 

The adoption of this standard had no material impact to our consolidated financial statements.

Share-Based Compensation

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$ 1,224  

$ 1,514  

Amount of related income tax benefit

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At certain times, cash equivalent balances may exceed federally insured limits.

We adopted Accounting Standards Update (“ASU”) 2016 - 02, Leases (Topic 842 ) (“Topic 842”

or the “New Leases Standard”) effective January 1, 2019 using a modified retrospective transition and did not adjust prior periods.

We elected practical expedients related to existing leases at transition to not reassess whether contracts are or contain leases, to not reassess lease classification, initial direct costs, or lease terms.

Additionally, we elected the practical expedient to account for lease and non-lease components as a single lease component for all asset classifications.

We have also made a policy election to not record short-term leases with a duration of 12 months or less on the balance sheet.

Topic 842 requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset on the balance sheet for operating leases.

We recorded $ 2.3 million of ROU assets and $ 2.3 million of lease liabilities related to operating leases at the date of transition.

The ROU assets recorded were net of $ 43,000 of accrued liabilities and prepaid expenses representing previously deferred (prepaid) rent.

There was no significant impact to the consolidated statements of income, comprehensive income, shareholders’

equity or cash flows.

Accounting for finance leases is substantially unchanged.

We determine whether a lease is included in an agreement at inception.

We recognize a lease liability and a right-of-use (“ROU”) asset on the balance sheet for our operating leases under which we are lessee.

Operating lease ROU assets are included in operating lease right-of-use assets in our consolidated balance sheet.

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When determining the appropriate incremental borrowing rate, we consider our available credit facilities, recently issued debt and public interest rate information.

Due to remote working arrangements, we reassessed our office needs and subleased our Seattle location under an agreement considered to be an operating lease beginning in May 2021.

We have not been legally released from our primary obligations under the original lease and therefore we continue to account for the original lease separately.

We recorded an ROU asset impairment charge in 2021 of $ 324,000 , which was the amount by which the carrying value of the Seattle office lease ROU asset exceeded the fair value.

We estimated the fair value based on the discounted cash flows of estimated net rental income for the office space subleased.

The ROU asset impairment charge is included in depreciation, amortization and impairment expenses.

There were no ROU asset impairment charges in 2020 or 2019.

Rent income from the sublessee are included in the statement of operations on a straight-line basis as an offset to rent expense associated with the original operating lease included in other expenses.

Fair Value Measurements

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The carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value.

All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes property and equipment, goodwill, intangibles and cost method investments, are measured at fair value in certain circumstances (for example, when there is evidence of impairment).

As of December 31, 2020 and 2019, there was no indication of impairment related to these assets, other than for the Canada reporting unit’s goodwill as discussed above.

All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes ROU assets, property and equipment, goodwill, intangibles and cost method investments, are measured at fair value in certain circumstances (for example, when there is evidence of impairment).

We estimated the fair value of the Seattle office ROU using discounted cash flows of the sublease based on management’s most recent projections, which are considered level 3 inputs in the fair value hierarchy and recorded an ROU asset impairment charge of $ 324,000 during 2021.

As of December 31, 2021 and 2020, there was no indication of impairment related to these assets, other than for the Canada reporting unit’s goodwill in December 2020 as discussed above.

We estimated the fair value of the Canada reporting unit using discounted cash flows based on management’s most recent projections which are considered level 3 inputs in the fair value hierarchy.

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Legal fees, net of estimated insurance recoveries, are expensed as incurred.

We do not believe the final disposition of claims at December 31, 2020 will have material adverse effect on our consolidated financial position, results of operations or liquidity.

A sales tax accrual of $ 775,000 was recorded in 2019 for sales taxes that should have been collected from clients in 2019 and certain previous years.

We received a revenue ruling from the state of Washington noting that our services are not subject to retail sales tax, and therefore, reversed $ 268,000 of sales tax accrual for the state of Washington in the third quarter of 2020.

We have completed voluntary disclosure agreements with certain states, remitted past due sales tax, are remitting sales tax timely, are collecting sales tax from clients and no accrual for past due sales tax remains as of December 31, 2020.

State and local jurisdictions have differing rules and regulations governing sales, use, and other taxes and these rules and regulations can be complex and subject to varying interpretations that may change over time.

As a result, we could face the possibility of tax assessment and audits, and our liability for these taxes and associated interest and penalties could exceed our original estimates.

We do not believe the final disposition of claims at December 31, 2021 will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We became self-insured for group medical and dental insurance on January 1, 2019. 

We carry excess loss coverage in the amount of $ 150,000 per covered person per year for group medical insurance. 

We do not self-insure for any other types of losses, and therefore do not carry any additional excess loss insurance. 

We carry excess loss coverage in the amount of $ 150,000 per covered person per year for group medical insurance.

We do not self-insure for any other types of losses, and therefore do not carry any additional excess loss insurance.

In addition, we had aggregate claims loss coverage with a minimum aggregate deductible of $ 3.2 million and $ 2.8 million, in 2021 and 2020, respectively.

We record a reserve for our group medical and dental insurance for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. 

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Earnings Per Share

Prior to the Recapitalization, net income per share of our former class A common stock and former class B common stock was computed using the two -class method.

Basic net income per share was computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Basic net income per share was computed using the weighted-average number of common shares outstanding during the period.

Diluted net income per share was computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period.

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The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction were the same for the holders of our former class A common stock and former class B common stock.

Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of former class A common stock was equal to one - sixth ( 1/6th ) of the amount of any such dividend or other distribution payable on each share of former class B common stock.

As a result, the undistributed earnings for each period were allocated based on the participation rights of the former class A and former class B common stock under our then-effective Articles of Incorporation as if the earnings for the year had been distributed.

As described in Note 2, we completed a Recapitalization in April 2018, resulting in the elimination of the class B common stock and settlement of all then-existing outstanding class B share-based awards and reclassification of all class A common stock to Common Stock.

The Recapitalization was effective on April 17, 2018.

Therefore, income was allocated between the former class A and class B stock using the two -class method through April 16, 2018, and fully allocated to the Common Stock (formerly class A) following the Recapitalization.

We had 65,127 , 16,221 and 93,346 options of Common Stock (former class A shares) for the years ended December 31, 2020, 2019 and 2018, respectively which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive.

We had 127,185 , 65,127 and 16,221 options of Common Stock for the years ended December 31, 2021, 2020 and 2019, respectively which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive.

(In thousands, except per share data)

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$ 32,406  

$ 4,624  

Allocation of distributed and undistributed income to unvested restricted stock shareholders

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$ 32,297  

$ 4,606  

Denominator for net income per share - basic:

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24,809  

Net income per share - basic

$ 1.48  

Net income per share –

$ 1.47  

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$ 32,297  

$ 4,606  

Denominator for net income per share - diluted:

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25,653  

Net income per share - diluted

$ 1.45  

Net income per share –

$ 1.46  

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Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019 - 12, Simplifying the Accounting for Income Taxes (Topic 740 ).

The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. 

Early adoption is permitted in interim or annual periods with any adjustments reflected as of the beginning of the annual period that includes that interim period. 

Additionally, entities that elect early adoption must adopt all the amendments in the same period. 

Amendments are to be applied prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective approach through a cumulative effect adjustment recorded to retained earnings. 

We believe the adoption will not significantly impact our results of operations and financial position.

In March 2020, FASB issued ASU No.

In March 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU No.

2020 - 04, "Reference Rate Reform (Topic 848 ):

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The amendments are effective for all entities as of March 12, 2020 through December 31, 2022.

We expect to apply the optional expedient for contract modification to account for the change in the reference rate on impacted credit facilities prospectively by adjusting the effective interest rate.

Recapitalization

On April 16, 2018, our shareholders approved, among other things, an amendment to our Amended and Restated Articles of Incorporation (the “Articles”) to effect a recapitalization (the “Recapitalization”) pursuant to which each share of our then-existing class B common stock was exchanged for one share of the our then-existing Class A common stock plus $ 19.59 in cash, without interest.

On April 17, 2018, we filed an amendment to our Articles effecting the Recapitalization, followed by an amendment and restatement of our Articles, which resulted in the elimination of our class B common stock and the reclassification of our class A common stock as a share of Common Stock, par value $ 0.001 per share (“Common Stock”).

We issued 3,617,615 shares of Common Stock and paid $ 72.4 million in exchange for all class B shares outstanding and to settle outstanding share-based awards for class B common stock.

The Common Stock continues to trade on the NASDAQ Global Market under the revised symbol “NRC.”

In connection with the Recapitalization, on April 18, 2018, we entered into a credit agreement with First National Bank of Omaha, a national banking association (“FNB”), as described in Note 8.

In October 2021, FASB issued ASU No.

2021 - 08, “Business Combinations (Topic 805 ):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.”

The amendment requires an acquirer in a business combination apply Topic 606 to recognize and measure contract assets in revenue contracts acquired in a business combination rather than fair value.

The amendment is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

We are currently evaluating the timing and the impact of adopting this new guidance on our consolidated financial statements.

On January 4, 2021, we acquired substantially all assets and assumed certain liabilities of PatientWisdom, Inc., a company with a health engagement solution that will further our purpose of operationalizing human understanding through tangible and actionable insights.

$ 3.0 million of the total $ 5.0 million all-cash consideration was paid at closing.

We paid the remaining $ 2.0 million in January 2022.

All payments were made with cash on hand.

The acquisition was accounted for as a business combination, using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.

The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date.

Amount of Identified Assets Acquired and Liabilities Assumed

($ in thousands)

Current Assets

Property and equipment

Customer related

Total assets acquired

$ 5,234  

Current liabilities

Net assets acquired

$ 4,950  

The identifiable intangible assets are being amortized over their estimated useful lives of 5 years.

The goodwill and identifiable intangible assets are deductible for tax purposes.

Goodwill related to the acquisition was primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition.

The financial results associated with the PatientWisdom assets we acquired and liabilities we assumed are included in our consolidated financial statements from the date of acquisition, although the amounts are insignificant for 2021.

Pro-forma information has not been presented because the amounts for 2021 are insignificant.

Acquisition-related costs of $ 119,000 are included in selling, general and administrative expenses for the year ended December 31, 2021.

Contracts with Customers

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$ 127,982  

Our solutions within the digital VoC platform in 2020, 2019 and 2018 accounted for 73.3 %, 62.7 % and 49.6 % of total revenue, respectively.

The remaining revenue consists of legacy Experience and Governance Solutions.

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (In thousands):

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We have elected to apply the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2020 approximated $ 205,000 , which is expected to be recognized during 2021.

Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2021 approximated $ 2.9 million of which $ 1.3 million, $ 1.1 million, and $ 587,000 is expected to be recognized during 2022, 2023, and 2024, respectively.

Equity Investments

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(In thousands)

$ 62,328  

$ 61,614  

(In thousands)

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Customer related

5 - 15  

5 - 10  

Total amortizing intangible assets

12,976  

12,377  

Total intangible assets other than goodwill

$ 14,167  

$ 12,377  

$ 1,790  

Goodwill and intangible assets consisted of the following at December 31, 2020:

(In thousands)

$ 57,969  

$ 57,255  

(In thousands)

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Customer related

5 - 15  

5 - 10  

Total amortizing intangible assets

12,276  

12,057  

Total intangible assets other than goodwill

$ 13,467  

$ 12,057  

$ 1,410  

The following represents a summary of changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 (in thousands):

Balance as of December 31, 2019

$ 57,935  

Foreign currency translation

Balance as of December 31, 2020

$ 57,255  

Goodwill acquired

Foreign currency translation

Balance as of December 31, 2020

Balance at December 31, 2021

$ 61,614  

As discussed in Note 1, we recorded an impairment of $ 714,000 to the Canada reporting unit’s goodwill in December 2020.

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$ 11,155  

Federal Tax Reform

On December 22, 2017, the Tax Cut and Jobs Act (the “Tax Act”) was enacted which made broad and complex changes to the U.S.

tax code, including the following:

Reduction in the U.S.

Federal Corporate Tax Rate:

The Tax Act reduced the corporate tax rate to 21 %, effective

January 1, 2018

Availability of 100% bonus depreciation on assets placed in service after September 27, 2017

Certain stock compensation plans potentially subject to limitations on excess tax benefits

The Global Intangible Low Taxed Income (GILTI) provision

As a result of the Tax Act, we determined that we would no longer indefinitely reinvest the earnings of our Canadian subsidiary.

Our Canadian subsidiary declared a deemed dividend to the Company for $ 9.6 million and $ 3 million in 2020 and 2018, respectively.

Additionally, a withholding tax of 5% was paid for each dividend distribution.

The Tax Act subjects a U.S.

corporation to tax on its Global Intangible Low Taxed Income (“GILTI”).

Due to the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act.

Under Generally Accepted Accounting Principles, we can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into the measurement of deferred taxes.

We elected the current period expense method and have not reflected any corresponding deferred tax assets and liabilities associated with the GILTI tax in the table of deferred tax assets and liabilities.

GILTI tax has been recorded as current period expense of $ 10,000 , $ 13,000 , and $ 40,000 in 2020, 2019, and 2018, respectively.

$ 4,207  

$ 8,113  

As a result of the Tax Cut and Jobs Act (the “Tax Act”), we determined that we would no longer indefinitely reinvest the earnings of our Canadian subsidiary.

Our Canadian subsidiary declared a deemed dividend to the Company for $ 9.6 million in 2020.

Additionally, a withholding tax of 5% was paid for the dividend distribution.

We received notice in December 2019, that we met qualification requirements for the Nebraska Advantage LB312 Act (“NAA”) related to certain investment and full-time equivalent employee thresholds in the year ended 2017.

NAA provides direct refunds of sales tax on qualified property, as well as investment credits and employment credits that can be claimed through credits of Nebraska income tax, employment tax, and sales tax on non-qualified property.

We will receive direct refunds of Nebraska sales tax on qualified property incurred from 2014 to 2023.

We expect to receive direct refunds of Nebraska sales tax on qualified property incurred from 2014 to 2023.

Investment credits started to accumulate in 2014 and can be earned through 2023.

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In 2019, we recorded cumulative adjustments for direct refunds and credits earned through the year ending December 31, 2019, which reduced operating expenses by approximately $ 1.9 million.

For the year ended December 31, 2020, adjustments for credits reduced operating expenses by approximately $ 435,000 .

For the year ended December 31, 2021 and 2020, adjustments for credits reduced operating expenses by approximately $ 473,000 and $ 435,000 , respectively.

In addition, income tax credits of $ 10,000 , $ 45,000 and $ 24,000 were recorded as a reduction to income tax expense for the years ended December 31, 2021, 2020 and 2019, respectively.

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Goodwill Impairment

Tax depreciation method change

Withholding tax on repatriation of foreign earnings

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Employer payroll tax deferral

Foreign tax credit from repatriation

Uncertain tax positions

Gross deferred tax assets

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Repatriation withholding

Unrealized translation gain on intercompany loan

Deferred tax liabilities

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The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, contains numerous income tax provisions.

As a result of the CARES Act, we have deferred $ 1,323,000 of employer social security tax payments into future years.

As a result of the CARES Act, we had deferred $ 1.3 million of employer social security tax payments as of December 31, 2020.

In accordance with the CARES Act, we paid half of this liability in December 2021, and we expect to pay the remaining $ 656,000 in December 2022.

We have had no other impacts to our consolidated financial statements or related disclosures from the CARES Act.

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We made the assessment that due to our Canadian subsidiary’s decreased projected future income and the lower US tax rate compared to the Canadian tax rate, it was unlikely we would realize this asset.

We had an unrecognized tax benefit at December 31, 2020 and 2019, of $ 768,000 and $ 592,000 , respectively, excluding interest of $ 15,000 and $ 7,000 at December 31, 2020 and 2019, respectively.

We had an unrecognized tax benefit at December 31, 2021 and 2020, of $ 1.1 million and $ 768,000 , respectively, excluding interest of $ 19,000 and $ 15,000 at December 31, 2021 and 2020, respectively.

Of these amounts, $ 918,000 and $ 668,000 at December 31, 2021 and 2020, respectively, represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate.

The change in the unrecognized tax benefits for 2020 and 2019 is as follows:

The change in the unrecognized tax benefits for 2021 and 2020 was as follows:

(In thousands)

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Balance of unrecognized tax benefits at December 31, 2021

$ 1,075  

We file income tax returns in the U.S.

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$ 26,547  

Our credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) was amended and restated on May 28, 2020 and includes (i) a $30,000,000 revolving credit facility (the “Line of Credit”), (ii) a $ 33,002,069 term loan (the “Term Loan”) and (iii) a $ 15,000,000 delayed draw-dawn term facility (the “Delayed Draw Term Loan”

Our credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) was amended and restated on May 28, 2020 and includes (i) a $ 30,000,000 revolving credit facility (the “Line of Credit”), (ii) a $ 33,002,069 term loan (the “Term Loan”) and (iii) a $ 15,000,000 delayed draw-down term facility (the “Delayed Draw Term Loan”

and, together with the Line of Credit and the Term Loan, the “Credit Facilities”).

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The May 2020 amendment increased the Line of Credit from $15,000,000 to $30,000,000.

The amended Term Loan revised the remaining payments for the existing balance outstanding of $33,002,069 to monthly installments of $ 462,988 through May 2025, with a balloon payment due at maturity in May 2025.

The Term Loan is payable in monthly installments of $ 462,988 through May 2025, with a balloon payment due at maturity in May 2025.

The Term Loan bears interest at a fixed rate per annum of 5 %.

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Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2023.

There were no borrowings on the Line of Credit during 2020.

There have been no borrowings on the Delayed Draw Term Loan since origination.

As of December 31, 2021, and December 31, 2020, the Line of Credit did not have a balance.

We did not borrow on the Line of Credit during 2021.

We have not borrowed on the Delayed Draw Term Loan since origination.

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, respectively.

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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.

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 terms 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 $ 5,500,000 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, and (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand.

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 $ 5,500,000 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, and (iii) the portion of any acquisition consideration for a permitted acquisition paid with cash on hand.

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.

As of December 31, 2020, we were in compliance with our financial covenants.

As of December 31, 2021, we were in compliance with our financial covenants. 

Scheduled maturities of notes payable at December 31, 2021 are as follows:

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All of our existing stock option awards and unvested stock awards have been determined to be equity-classified awards. We account for forfeitures as they occur.

As described in Note 2, we completed a Recapitalization in April 

2018 which, among other things, settled all then-existing outstanding class B share-based awards and resulted in the elimination of the class B common stock.

As a result, we accelerated vesting of all outstanding class B share-based awards, resulting in accelerated share-based compensation of $ 331,000 in the year ended December 31, 2018.

All outstanding class B share-based awards were then settled for the same stock to cash proportion of the class B common stock described in Note 2, less the exercise price, if any, which approximated the awards’

intrinsic values.

Our 2001 Equity Incentive Plan provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of our former class A common stock and 300,000 shares of our former class B common stock.

Stock options granted could have been either nonqualified or incentive stock options.

Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant.

Due to the expiration of the 2001 Equity Incentive Plan, at December 31, 2015, there were no shares of stock available for future grants.

Our 2004 Non-Employee Director Stock Plan, as amended (the “2004 Director Plan”), is a nonqualified plan that provides for the granting of options with respect to 3,000,000 shares of our Common Stock and, prior to the Recapitalization, 500,000 shares of our former class B common stock.

The 2004 Director Plan provides for grants of nonqualified stock options to each of our directors who we do not employ.

Beginning in 2018, on the date of each annual meeting of shareholders, options to purchase shares of Common Stock equal to an aggregate grant date fair value of $ 100,000 are granted to each non-employee director that is elected or retained as a director at each such meeting.

On the date of each annual meeting of shareholders, options to purchase shares of Common Stock equal to an aggregate grant date fair value of $ 100,000 are granted to each non-employee director that is elected or retained as a director at each such meeting.

Stock options vest approximately one year following the date of grant and option terms are generally the earlier of ten years following the date of grant, or three years from the termination of the outside director’s service.

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We have accounted for grants of 2,219,670 shares of Common Stock under the 2004 Director Plan using the date of grant as the measurement date for financial accounting purposes.

Our 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”), as amended, provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of Common Stock and, prior to the Recapitalization, 300,000 shares of our former class B common stock.

Stock options granted may be either incentive stock options or nonqualified stock options.

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We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the year ended December 

The following table summarizes stock option activity under 2006 Equity Incentive Plan and the 2004 Director Plan for the year ended December 

Outstanding at December 31, 2020

6 unchanged sentences

$ 38.38  

$ 32.28  

Outstanding at December 31, 2021

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As of December 31, 2021, the total unrecognized compensation cost related to non-vested stock option awards was approximately $ 1.1 million which was expected to be recognized over a weighted average period of 2.37 years.

There was $ 1.7 million in cash received from stock options exercised for the year ended December 31, 2020 and no cash received from options exercised in 2019 or 2018.

We recognized $ 680,000 , $ 934,000 and $ 1.1 million of non-cash compensation for the years ended December 31, 2020, 2019, and 2018, respectively, related to options, which is included in direct and selling, general and administrative expenses.

The actual tax benefit realized for the tax deduction from stock options exercised was $ 6.3 million, $ 2.0 million and $ 3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

There was $ 446,000 and $ 1.7 million in cash received from stock options exercised for the years ended December 31, 2021 and 2020, respectively and no cash received from options exercised in 2019.

We recognized $ 607,000 , $ 680,000 , and $ 934,000 of non-cash compensation for the years ended December 31, 2021, 2020, and 2019, respectively, related to options, which is included in direct and selling, general and administrative expenses.

The actual tax benefit realized for the tax deduction from stock options exercised was $ 862,000 , $ 6.3 million, and $ 1.9 million for the years ended December 31, 2021, 2020, and 2019, respectively.

During 2021 and 2019 we granted 12,698 and 6,005 non-vested shares of Common Stock, respectively, under the 2006 Equity Incentive Plan.

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We recognized $ 17,000 , $ 23,000 , and $ 290,000 of non-cash compensation for the years ended December 31, 2021, 2020, and 2019, respectively, related to this non-vested stock, which is included in direct and selling, general and administrative expenses.

The actual tax benefit realized for the tax deduction from vesting of restricted stock was $ 235,000 and $ 168,000 for the years ended December 31, 2020 and 2018, respectively.

No restricted stock vested during the year end December 31, 2019.

The actual tax benefit realized for the tax deduction from vesting of restricted stock was $ 235,000 for the year ended December 31, 2020.

No restricted stock vested during the year end December 31, 2021 and 2019.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plans for the year ended December 

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$ 38.30  

( 6,793 )  

$ 36.80  

Outstanding at December 31, 2021

12,698  

$ 42.92  

As of December 31, 2021, the total unrecognized compensation cost related to non-vested stock awards was approximately $ 436,000 and is expected to be recognized over a weighted average period of 4.00 years.

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Short-term lease cost

Sublease income

Total net lease cost

1 unchanged sentence

$ 1,096  

$ 1,200  

In 2020, we adjusted the useful life of the operating right of use assts associated with our Atlanta, Georgia and Markham, Ontario office leases based on the expectation that we will vacate the office space before the end of the lease term.

We recorded rent expense in connection with our operating leases of $ 779,000 in 2018.

Supplemental balance sheet information related to leases (in thousands):     

Operating leases:

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$ 1,308  

$ 1,628  

Current operating lease liabilities

6 unchanged sentences

$ 1,042  

$ 1,014  

Computer Equipment

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Weighted average remaining lease term (in years):

Operating leases  

Finance leases  

Operating leases

Finance leases

Weighted average discount rate:

Operating leases  

4.40 %  

Finance leases  

3.38 %  

Operating leases

Finance leases

Supplemental cash flow and other information related to leases were as follows (in thousands):

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Lease obligations, net of current portion

In addition to the above, we have an operating lease for office space commencing February 2021 which requires monthly base rent payments of $ 14,288 through January 2024. 

Undiscounted cash receipts due under the sublease agreement at December 31, 2021 are as follows (in thousands):

Operating Lease

Total minimum lease receipts

Related Party

Until January 2020, one of our directors served as an officer and director of Ameritas Life Insurance Corp.

(“Ameritas”) and continues to service on the board of directors of Ameritas.

A director who began serving on our board in May 2021, served as chief executive officer of Allina Health during 2021, a not -for-profit healthcare system.

In connection with its routine business operations, Allina Health purchases certain of our products and services.

Total revenue we earned from Allina Health in year ended December 31, 2021 approximated $ 1.7 million.

A director, who served on our board through October 2021, also served as an officer and director of Ameritas Life Insurance Corp.

(“Ameritas”) until January 2020 and continued to serve on the board of directors of Ameritas until October 2021.

In connection with our regular assessment of our insurance-based associate benefits, which is conducted by an independent insurance broker, and the costs associated therewith, we purchase dental and vision insurance for certain of our associates from Ameritas.

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In connection with our regular assessment of our liability coverage, during 2020 we began purchasing directors and officers and employment practices liability insurance through IMA Financial Group.

Total payments for these services totaled $ 1.1 million with $ 478,000 recorded as expense in 2020.

During 2017, we acquired a cost method investment in convertible preferred stock of PX (see Note 4 ).

Also in 2017, we paid $ 250,000 to acquire certain perpetual content licenses from PX for content we include in certain of our subscription services.

We also have an agreement with PX which commenced in 2016 under which we act as a reseller of PX services and receive a portion of the revenues.

Total payments for these services totaled $ 1.1 million in 2020.

During 2017, we acquired a cost method investment in convertible preferred stock of Practicing Excellence.com, Inc., a privately-held Delaware Corporation (“PX”), which is included in other non-current assets and is carried at cost, adjusted for changes resulting from observable price changes in orderly transactions of the same investment in PX, if any. 

We also have an agreement with PX which commenced in 2016 under which we act as a reseller of PX services and PX receives a portion of the revenues.

The total revenue earned from the PX reseller agreement in the years ended December 31, 2021, 2020, and 2019 was $ 35,000 , $ 294,000 , and $ 578,000 , respectively.

We will no longer earn revenue under this agreement after September 30, 2021 due to termination of the reseller agreement.

We no longer earn revenue under this agreement after June 30, 2021 due to termination of the reseller agreement.

Associate Benefits

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Segment Information

Our six operating segments are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria from the FASB guidance on segment disclosure.

The six operating segments are Experience, The Governance Institute, Market Insights, Transparency, National Research Corporation Canada and Transitions, which offer a portfolio of solutions that address specific needs around market insight, experience, transparency and governance for healthcare providers, payers and other healthcare organizations.

In March 2021, we changed our operating segments from six to one to reflect a change in corporate reporting structure to the Company’s Chief Executive Officer and chief operating decision maker.

The table below presents entity-wide information regarding our revenue and assets by geographic area (in thousands):

United States

$ 144,987  

$ 130,305  

$ 124,369  

$ 147,954  

$ 133,277  

$ 127,982  

Long-lived assets:

United States

$ 83,722  

$ 77,448  

$ 78,906  

$ 83,833  

$ 79,311  

$ 81,528  

Total assets:

United States

Subsequent Event

$ 3.0 million of the total $ 5.0 million all-cash consideration was paid at closing.

We are required to pay the remaining $ 2.0 million no later than February 1, 2022, subject to offset for indemnification claims as provided in the purchase agreement.

The closing payment was funded, and we expect to fund the deferred portion of the purchase price, with cash on hand.

$ 153,879  

$ 128,319  

$ 95,668  

15,017  

$ 157,540  

$ 133,423  

$ 110,685  

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data