What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-03 compared with 2022-03-04 · 116 added, 120 removed, 971 unchanged (20% of the section changed)

23 unchanged sentences

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.

19 unchanged sentences

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 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.

3 unchanged sentences

Lincoln, Nebraska

March 4, 2022

March 3, 2023

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

52 unchanged sentences

Common stock, $ 0.001 par value;

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

authorized 110,000,000 shares, issued 30,922,181 in 2022 and 30,898,600 in 2021, outstanding 24,628,173 in 2022 and 25,361,409 in 2021

Additional paid-in capital

4 unchanged sentences

Treasury stock, at cost;

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

6,294,008 Common shares in 2022 and 5,537,191 Common shares in 2021

Total shareholders’

32 unchanged sentences

Interest expense

Reclassification of cumulative foreign currency translation adjustment into earnings

Total other income (expense)

8 unchanged sentences

$ 37,466  

$ 37,260  

Earnings per share of common stock:

18 unchanged sentences

(In thousands)

$ 37,466  

$ 37,260  

$ 32,406  

Other comprehensive income (loss):

Cumulative translation adjustment

Cumulative foreign currency translation adjustment

Reclassification of cumulative foreign currency translation into earnings

Other comprehensive income (loss)

Comprehensive income

$ 37,490  

$ 37,070  

$ 33,113  

See accompanying notes to consolidated financial statements.

6 unchanged sentences

$ 162,154  

$ ( 106,339 )

$ 32,892  

Purchase of 87,203 shares of treasury stock

Purchase of 180,112 shares of treasury stock

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  

3 unchanged sentences

$ 64,315  

Purchase of 180,112 shares of treasury stock

Purchase of 153,005 shares treasury stock

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

Forfeiture of 6,793 restricted common shares

Non-cash stock compensation expense

Dividends declared of $ 0.48 per common share

Other comprehensive loss, foreign currency translation adjustment

Other comprehensive income, foreign currency translation adjustment

37,466  

4 unchanged sentences

Purchase of 756,817 shares treasury stock

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

Issuance of 23,581 common shares for the exercise of stock options

Non-cash stock compensation expense

Dividends declared of $ 0.84 per common share

Other comprehensive income, foreign currency translation adjustment

Other comprehensive income, foreign currency translation adjustment

Reclassification of cumulative foreign currency translation adjustment into earnings

31,800  

13 unchanged sentences

Depreciation, amortization and impairment

Reclassification of cumulative translation adjustment into earnings

Deferred income taxes

22 unchanged sentences

Cash flows from financing activities:

Borrowings on line of credit

21,000  

Payments on line of credit

Payments on notes payable

3 unchanged sentences

Payment of payroll tax withholdings on share-based awards exercised

Payment of deferred acquisition consideration

Repurchase of shares for treasury

2 unchanged sentences

Effect of exchange rate changes on cash

( 182 )  

Net increase (decrease) in cash and cash equivalents

19 unchanged sentences

Finance lease obligations originated for property and equipment

Stock tendered to the Company for cashless exercise of stock options in connection with equity incentive plans

Purchase of property and equipment in accounts payable and accrued expenses  

$ 1,109  

Stock tendered to the Company for cashless exercise of stock options in connection with equity incentive plans

$ 1,088  

12 unchanged sentences

“us”

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 enable human understanding.

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

Our purpose is to humanize healthcare and support organizations in their understanding of each person they serve not as point-in-time insights, but as an ongoing relationship We believe that understanding the story is the key to unlocking the highest-quality and truly personalized care.

Our end-to-end solutions enable health care organizations to understand what matters most to each person they serve –

before, during, after, and outside of clinical encounters –

to gain a longitudinal understanding of how life and health intersect, with the goal of developing lasting, trusting relationships.

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

6 unchanged sentences

Translation of Foreign Currencies

Gains and losses related to transactions denominated in a currency other than the functional currency of the country in which we operate and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income.

Our Canadian subsidiary uses Canadian dollars as its functional currency.

It translates its assets and liabilities into U.S.

We translate its assets and liabilities into U.S.

dollars at the exchange rate in effect at the balance sheet date.

It translates its revenue and expenses at the average exchange rate during the period.

We include translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’

We translate its revenue and expenses at the average exchange rate during the period.

We included foreign currency translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’

During December 2022, we substantially liquidated our investment in Canada.

As a result, we reclassified the cumulative foreign currency translation adjustment balance into earnings and recognized a net cumulative foreign currency translation loss of $ 2.6 million, which is included in Other income (expense), net in our Consolidated Statements of Income.

Any future currency changes, will be recognized in Other income (expense), net in our Consolidated Statements of Income.

Revenue Recognition

25 unchanged sentences

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

Subscription services are typically billed annually in advance but may also be billed on a quarterly and monthly basis.

Subscription services are typically billed either annually or quarterly in advance but may also be billed on a monthly basis.

One-time services –

3 unchanged sentences

Fixed, non-subscription services –

These arrangements typically require us to perform an unspecified amount of services for a fixed price during a fixed period of time.

These arrangements typically require us to perform an unspecified amount of services for a fixed price during a fixed period of time.

Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs.

8 unchanged sentences

A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract.

Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

Deferred Contract Costs

2 unchanged sentences

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 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.

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.

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 $ 454,000 , $ 1.9 million and $ 3.7 million in the years ended December 31, 2022, 2021 and 2020, respectively.

Deferred contract costs, net of accumulated amortization was $ 2.4 million and $ 3.8 million at December 31, 2022 and 2021, respectively.

In 2021 we changed our sales compensation structure, reducing the incremental costs associated with obtaining a contract, decreasing the amount of incremental costs to defer and the balance of deferred contract costs.

Total amortization by expense classification for the years ended December 31, 2022, 2021 and 2020 was as follows:

26 unchanged sentences

Costs incurred during the preliminary project and post-implementation stages, as well as software maintenance and training costs are expensed as incurred.

We capitalized approximately $ 2.8 million and $ 2.7 million of costs incurred for the development of internal-use software for the years ended December 31, 2021 and 2020, respectively.

We capitalized approximately $ 3.6 million, $ 2.8 million and $ 2.7 million of costs incurred for the development of internal-use software for the years ended December 31, 2022, 2021 and 2020, respectively.

When a software license is included in a cloud computing arrangement and we have the legal right, ability and feasibility to download the software, it is accounted for as software, included in property and equipment, and amortized.

If a software license is not included or we do not have the ability or feasibility to download software included in a cloud computing arrangement, it is accounted for as a service contract, which is expensed to direct expenses or selling, general and administrative expenses during the service period.

Effective January 1, 2020, we prospectively adopted ASU 2018 - 15, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350 - 40 ).

This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

The adoption did not significantly impact our results of operations and financial position.

We provide for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives.

We use the straight-line method of depreciation and amortization over estimated useful lives of three to ten years for furniture and equipment, three to five years for computer equipment, one to five years for capitalized software, and seven to forty years for our office building and related improvements.

We use the straight-line method of depreciation and amortization over estimated useful lives of two to ten years for furniture and equipment, three to five years for computer equipment, one to five years for capitalized software, and seven to forty years for our office building and related improvements.

Software licenses are amortized over the term of the license.

15 unchanged sentences

We review intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing the impairment assessment, we will first assess qualitative factors to determine whether it is necessary to recalculate the fair value of the intangible assets with indefinite lives.

If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, we calculate the fair value using a market or income approach.

If the carrying value of intangible assets with indefinite lives exceeds their fair value, then the intangible assets are written-down to their fair values.

When performing the impairment assessment, we will first assess qualitative factors to determine whether it is necessary to determine the fair value of the intangible assets with indefinite lives.

If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of an indefinite-lived intangible is less than its carrying amount, we calculate the fair value using a market or income approach.

If the carrying value of the indefinite-lived intangible asset exceeds its fair value, then the intangible asset is written-down to its fair value.

We did not recognize any impairments related to indefinite-lived intangibles during 2022, 2021 or 2020.

7 unchanged sentences

No impairments were recorded during the years ended December 31, 2022 or 2021.

A substantial portion of the revenue earned by our Canadian subsidiary is concentrated with one customer. While the customer has exercised its option to extend its existing contract to September 2022, during December 2020 we chose not to enter into a new contract with this customer or otherwise extend the term of the contract beyond September 2022.

We subsequently announced that we would close the Canada office at the end of the contract. 

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

A substantial portion of the revenue earned by our Canadian subsidiary was concentrated with one customer. While the customer exercised its option to extend its existing contract to September 2022, during December 2020 we chose not to enter into a new contract with this customer or otherwise extend the term of the contract beyond September 2022.

We closed the Canada office at the end of the contract in September 2022. 

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

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 March 2021, we changed our operating segments from six to one to reflect a change in the way we operated and managed our business, including changes to our 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.

94 unchanged sentences

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 Seattle office ROU asset 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, 2022 and 2021, there was no indication of impairment related to these assets.

As discussed above, we recognized an impairment of $ 714,000 for the then Canada reporting unit’s goodwill at December 31, 2020.

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.

4 unchanged sentences

We do not believe the final disposition of claims at December 31, 2022 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 are self-insured for group medical and dental 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.

In addition, we had aggregate claims loss coverage with a minimum aggregate deductible of $ 4.7 million, $ 3.2 million and $ 2.8 million, in 2022, 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. 

47 unchanged sentences

$ 1.45  

Recent Accounting Pronouncements Not Yet Adopted

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

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

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. 

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.

17 unchanged sentences

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.

19 unchanged sentences

Deferred revenue

$ 15,198  

$ 17,213  

Significant changes in contract assets and contract liabilities during the years ended December 31, 2022 and 2021 are as follows (in thousands):

8 unchanged sentences

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, 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.

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, 2022 approximated $ 1.6 million of which $ 972,000 , $ 621,000 , and $ 15,000 is expected to be recognized during 2023, 2024, and 2025, respectively.

Equity Investments

16 unchanged sentences

27,828  

12,561  

Property and equipment at cost

8 unchanged sentences

Depreciation and amortization expense related to property and equipment, including assets under capital lease, for the years ended December 31, 2022, 2021, and 2020 was $ 5.1 million, $ 5.7 million, and $ 6.5 million, respectively.

We capitalize interest expense on major construction and development projects while in progress.

Interest capitalized for 2022 was $ 216,000 .

We did not capitalize interest in 2021 or 2020.

There were no significant impairments in property and equipment during 2022, 2021, and 2020.

1 unchanged sentence

Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following at December 31, 2021:

 Goodwill and intangible assets consisted of the following at December 31, 2022:

(In thousands)

7 unchanged sentences

5 - 15  

5 - 10  

Total amortizing intangible assets

15 unchanged sentences

5 - 15  

5 - 10  

Total amortizing intangible assets

8 unchanged sentences

$ 57,255  

Foreign currency translation

Balance as of December 31, 2020

$ 57,255  

Goodwill acquired

Foreign currency translation

Balance at December 31, 2021

Balance as of December 31, 2021

$ 61,614  

There were no changes in goodwill during 2022 from the net carrying amount of $ 61,614 at December 31, 2021.

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

1 unchanged sentence

Estimated future amortization expense for 2023, 2024, and 2025 is $ 140,000 , $ 140,000 and $ 140,000 , respectively.

No amortization expense is projected beyond 2025.

For the years ended December 31, 2022, 2021, and 2020, income before income taxes consists of the following:

23 unchanged sentences

$ 4,207  

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.

As a result of the Tax Cuts 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 $ 1.4 million and $ 9.6 million in 2022 and 2020, respectively.

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 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.

These credits can be claimed against Nebraska income taxes or through sales tax on non-qualified property through 2028.

The employment credits are earned from 2017 through 2023, and they can be claimed against Nebraska payroll taxes through 2028.

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.

Due to the closure of the Canadian office, we also processed a return of capital from the Canadian subsidiary to the Company of $ 1.2 million.

We qualify for tax incentives through the Nebraska Advantage LB312 Act (“NAA”).

The 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.

For the year ended December 31, 2022, 2021 and 2020, adjustments for credits reduced operating expenses by approximately $ 510,000 , $ 473,000 and $ 435,000 , respectively.

8 unchanged sentences

Foreign tax rate differential

( 24 )  

State income taxes, net of federal benefit and state tax credits

3 unchanged sentences

Uncertain tax positions

Nondeductible expenses (income) related to recapitalization

Reclassification of cumulative translation adjustment into earnings

Goodwill Impairment

12 unchanged sentences

Uncertain tax positions

Research & experimental expenditures

Gross deferred tax assets

13 unchanged sentences

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.

In accordance with the CARES Act, we paid half of this liability in December 2021, and paid 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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into U.S.

The IRA includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions.

After evaluating the provisions included under the IRA, the Company does not expect the provisions to have a material impact to the Company’s consolidated financial statements.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

4 unchanged sentences

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, 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 Tax Act amended Section 174 rules for the federal tax treatment of research or experimental (“R&E”) expenditures paid or incurred during the taxable year.

The new Section 174 rules require taxpayers to capitalize and amortize specified R&E expenditures over a period of five years (attributable to domestic research) or 15 years (attributable to foreign research), beginning with the midpoint of the taxable year in which the expenses are paid or incurred.

 Software development costs are expressly included in the definition of specified R&E expenditures after 2021.

 Due to this change in legislation the Company has deferred costs of $ 3.5 million for tax purposes, resulting in a deferred tax asset of $ 856,000 at December 31, 2022.

The Company also recorded a deferred tax asset of $ 52,000 related to software development costs included in the overall fixed asset deferred tax liability.

We had an unrecognized tax benefit at December 31, 2022 and 2021, of $ 1.6 million and $ 1.1 million, respectively, excluding interest of $ 25,000 and $ 19,000 at December 31, 2022 and 2021, respectively.

Of these amounts, $ 1.3 million and $ 918,000 at December 31, 2022 and 2021, 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 2022 and 2021 was as follows:

6 unchanged sentences

Balance of unrecognized tax benefits at December 31, 2021

$ 1,075  

Reductions due to lapse of applicable statute of limitations

20 unchanged sentences

$ 22,269  

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”

Our amended and restated credit agreement (the “Credit Agreement”) with First National Bank of Omaha (“FNB”) was amended and restated on September 30, 2022 and 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”).

The Delayed Draw Term Loan may be used to fund any permitted future business acquisitions or repurchases of our Common Stock and the Line of Credit can be used to fund ongoing working capital needs and for other general corporate purposes.

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

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

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.

The amended Term Loan revised the remaining payments for the then existing outstanding balance at September 30, 2022 to monthly installments of $ 462,988 through May 2027.

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

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30 -day London Interbank Offered Rate plus 225 basis points ( 2.35 % at December 31, 2021).

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30 -day Secured Overnight Financing Rate (“SOFR”) plus 235 basis points ( 6.10 % at December 31, 2022).

Interest on the Line of Credit accrues and is payable monthly.

Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2025.

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.

As of December 31, 2022, the Line of Credit did not have a balance.

There were no borrowings on the Line of Credit during 2022.

There have been no borrowings 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.

3 unchanged sentences

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, 2021, we were in compliance with our financial covenants. 

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, 2022, we were in compliance with our financial covenants.

Scheduled maturities of notes payable at December 31, 2022 are as follows:

$ 4,529  

13,023  

Share-Based Compensation

33 unchanged sentences

$ 13.17  

$ 38.38  

Outstanding at December 31, 2022

14 unchanged sentences

$ 25,912  

$ 8,280  

Intrinsic value of stock options vested (in thousands)

3 unchanged sentences

As of December 31, 2022, the total unrecognized compensation cost related to non-vested stock option awards was approximately $ 1.2 million which was expected to be recognized over a weighted average period of 2.63 years.

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.

No shares of non-vested Common Stock were granted during the year ended December 31, 2020.

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.

No cash was received for stock options exercised for the year ended December 31, 2022.

We recognized $ 1.1 million, $ 607,000 , and $ 680,000 of non-cash compensation for the years ended December 31, 2022, 2021, and 2020, 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 $ 160,000 , $ 862,000 , and $ 6.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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

No shares of non-vested Common Stock were granted during the years ended December 31, 2022 or 2020.

As of December 31, 2022, we had 12,698 non-vested shares of Common Stock outstanding under the 2006 Equity Incentive Plan.

These shares vest over five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested.

These shares vest five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested.

The fair value of the awards is calculated as the fair market value of the shares on the date of grant.

1 unchanged sentence

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.

No restricted stock vested during the years end December 31, 2022 and 2021.

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

4 unchanged sentences

$ 42.92  

$ 38.30  

Outstanding at December 31, 2022

18 unchanged sentences

$ 1,096  

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.

In 2020, we adjusted the useful life of the operating right of use assets 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.

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

1 unchanged sentence

Operating ROU assets

$ 1,308  

Current operating lease liabilities

2 unchanged sentences

$ 1,313  

$ 1,357  

Finance leases:

7 unchanged sentences

Property and equipment under finance lease, net

$ 1,278  

Current obligations of finance leases

1 unchanged sentence

Total finance lease liabilities

$ 1,271  

Weighted average remaining lease term (in years):

23 unchanged sentences

Related Party

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.

Hays, our Chief Executive Officer and director, is an owner of approximately 13% of the equity interests of Nebraska Global Investment Company LLC (“Nebraska Global”). 

We purchased certain services from Don’t Panic Labs, LLC, which was a subsidiary of Nebraska Global for a portion of the year ended December 31, 2022. 

The total value of these purchases was $ 196,000 in the year ended December 31, 2022.

A director who began serving on our board in May 2021, also served until her retirement at the end of 2021  as chief executive officer of Allina Health, 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.

Total revenue we earned from Allina Health in the 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.

15 unchanged sentences

Segment Information

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.

Our Canada office was closed in 2022.

As a result, no Canadian revenue is expected to be generated after 2022.

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

22 unchanged sentences

$ 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