nrc20230930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ________ to ________

Commission File Number 001-35929

National Research Corporation

(Exact name of Registrant as specified in its charter)

Delaware		47-0634000
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

	1245 Q Street, Lincoln, Nebraska 68508
	(Address of principal executive offices) (Zip Code)

	(402) 475-2525
	(Registrant’s telephone number, including area code)

Securities registered pursuant to 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	NRC	The NASDAQ stock market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Common Stock, $.001 par value, outstanding as of November 3, 2023: 24,558,330

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NATIONAL RESEARCH CORPORATION

FORM 10-Q INDEX

For the Quarter Ended September 30, 2023

			Page No.

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Income	4
		Condensed Consolidated Statements of Comprehensive Income	5
		Condensed Consolidated Statements of Shareholders’ Equity	6-7
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9-20

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21-26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

	Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	27

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

	Item 5.	Other Information	28

	Item 6.	Exhibits	29

	Signatures		30

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Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “us” or similar terms), “believes,” “expects,” “may,” “could,” “anticipates,” “estimates,” “plans,” “intends,” or the use of words such as “would,” “will,” “may,” “could,” “goal,” “focus,” or “should,” or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. In this Quarterly Report on Form 10-Q, statements regarding the value and utility of, and market demand for, our service offerings, future opportunities for growth with respect to new and existing clients, our future ability to compete and the types of firms with which we will compete, future consolidation in the healthcare industry, future adequacy of our liquidity sources, future revenue sources, future revenue growth, future revenue estimates used to calculate recurring contract value, the expected impact of economic factors, including inflation, future capital expenditures including, without limitation, our headquarters renovation costs, and the timing, amount, and sources of cash to fund such capital expenditures, future stock repurchases and dividends, the expected impact of pending claims and contingencies, the future outcome of uncertain tax positions, our future use of owned and leased real property, the expected impact of global conflicts, and the expected impact of the COVID-19 pandemic or other similar outbreak, among others, are forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include, without limitation, the following factors:

●	The possibility of non-renewal of our client service contracts, reductions in services purchased or prices, and failure to retain key clients;

●	The likelihood that the COVID-19 or other similar outbreak will adversely affect our operations, sales, earnings, financial condition and liquidity;

●	Our ability to compete in our markets, which are highly competitive with new market entrants, and the possibility of increased price pressure and expenses;

●	The likelihood that ongoing global conflicts will adversely affect our operations, sales, earnings, financial condition and liquidity;

●	The effects of an economic downturn;

●	The impact of consolidation in the healthcare industry;

●	The impact of federal healthcare reform legislation or other regulatory changes;

●	Our ability to attract and retain key managers and other personnel;

●	The possibility that our intellectual property and other proprietary information technology could be copied or independently developed by our competitors;

●	The possibility for failures or deficiencies in our information technology platform;

●	The possibility that we or our third-party providers could be subject to cyber-attacks, security breaches or computer viruses; and

●

The factors set forth under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, as such section may be updated or supplemented by Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q (including this Report) and various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

Shareholders, potential investors and other readers are urged to consider these and other factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included are only made as of the date of this Quarterly Report on Form 10-Q and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as required by the federal securities laws.

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PART I – Financial Information

ITEM 1. Financial Statements

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts and par value)

	September 30, 2023			December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,828		$	25,026
Trade accounts receivable, less allowance for doubtful accounts of $85 and $65, respectively		14,467			14,461
Prepaid expenses		5,738			2,386
Income taxes receivable		341			733
Other current assets		369			1,110
Total current assets		24,743			43,716

Net property and equipment		25,589			17,248
Intangible assets, net		1,506			1,611
Goodwill		61,614			61,614
Deferred contract costs, net		1,641			2,441
Deferred income taxes		4			14
Operating lease right-of-use assets		1,163			556
Other		3,876			3,261
Total assets	$	120,136		$	130,461

Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of notes payable	$	4,665		$	4,491
Line of credit		5,000			-
Accounts payable		1,424			1,153
Accrued wages and bonuses		5,029			4,551
Accrued expenses		4,603			3,983
Dividends payable		2,947			2,956
Deferred revenue		16,238			15,198
Other current liabilities		899			1,085
Total current liabilities		40,805			33,417

Notes payable, net of current portion and unamortized debt issuance costs		14,164			17,690
Deferred income taxes		4,543			5,274
Other long-term liabilities		2,752			2,047
Total liabilities		62,264			58,428

Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued		-			-
Common stock, $0.001 par value; authorized 110,000,000 shares, issued 30,956,479 in 2023 and 30,922,181 in 2022, outstanding 24,562,068 in 2023 and 24,628,173 in 2022		31			31
Additional paid-in capital		176,714			175,453
Retained earnings (accumulated deficit)		(36,482	)		(25,184	)
Treasury stock, at cost; 6,394,411 and 6,294,008 common stock in 2023 and 2022, respectively		(82,391	)		(78,267	)
Total shareholders’ equity		57,872			72,033
Total liabilities and shareholders’ equity	$	120,136		$	130,461

See accompanying notes to condensed consolidated financial statements

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for per share amounts, unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022

Revenue	$	37,945		$	37,691		$	110,579		$	113,424

Operating expenses:
Direct		14,633			14,524			42,222			43,062
Selling, general and administrative		11,802			10,762			35,552			32,159
Depreciation and amortization		1,555			1,296			4,469			3,902
Total operating expenses		27,990			26,582			82,243			79,123

Operating income		9,955			11,109			28,336			34,301

Other income (expense):
Interest income		256			15			779			34
Interest expense		(160	)		(288	)		(594	)		(923	)
Other, net		(12	)		11			(27	)		(69	)

Total other income (expense)		84			(262	)		158			(958	)

Income before income taxes		10,039			10,847			28,494			33,343

Provision for income taxes		2,163			2,549			6,381			8,184

Net income	$	7,876		$	8,298		$	22,113		$	25,159

Earnings Per Share of Common Stock:
Basic Earnings Per Share	$	0.32		$	0.34		$	0.90		$	1.01
Diluted Earnings Per Share	$	0.32		$	0.33		$	0.89		$	1.00

Weighted average shares and share equivalents outstanding:
Basic		24,560			24,716			24,574			25,014
Diluted		24,695			24,847			24,715			25,147

See accompanying notes to condensed consolidated financial statements

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2023		2022			2023		2022

Net income	$	7,876	$	8,298		$	22,113	$	25,159
Other comprehensive income (loss):
Foreign currency translation adjustment		-		(185	)		-		(233	)
Other comprehensive income (loss)	$	-	$	(185	)	$	-	$	(233	)

Comprehensive Income	$	7,876	$	8,113		$	22,113	$	24,926

See accompanying notes to condensed consolidated financial statements.

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands except share and per share amounts, unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Treasury Stock			Total
Balances at December 31, 2022	$	31	$	175,453	$	(25,184	)	$	(78,267	)	$	72,033
Purchase of 49,296 shares treasury stock		-		-		-			(1,983	)		(1,983	)
Issuance of 20,938 shares of common stock for the exercise of stock options		-		300		-			-			300
Non-cash stock compensation expense		-		304		-			-			304
Dividends declared of $0.12 per share of common stock		-		-		(2,953	)		-			(2,953	)
Net income		-		-		6,964			-			6,964
Balances at March 31, 2023	$	31	$	176,057	$	(21,173	)	$	(80,250	)	$	74,665
Purchase of 43,723 shares treasury stock		-		-		-			(1,828	)		(1,828	)
Issuance of 20,000 shares of common stock for the exercise of stock options		-		284		-			-			284
Non-cash stock compensation expense		-		305		-			-			305
Dividends declared of $0.12 per share of common stock		-		-		(2,949	)		-			(2,949	)
Net income		-		-		7,273			-			7,273
Balances at June 30, 2023	$	31	$	176,646	$	(16,849	)	$	(82,078	)	$	77,750
Purchase of 7,384 shares treasury stock		-		-		-			(313	)		(313	)
Non-cash stock compensation expense		-		68		-			-			68
Dividends declared of $1.12 per share of common stock		-		-		(27,509	)		-			(27,509	)
Net income		-		-		7,876			-			7,876
Balances at September 30, 2023	$	31	$	176,714	$	(36,482	)	$	(82,391	)	$	57,872

See accompanying notes to condensed consolidated financial statements.

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands except share and per share amounts, unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balances at December 31, 2021	$	31	$	173,942	$	(36,112	)	$	(2,375	)	$	(50,149	)	$	85,337
Purchase of 166,962 shares treasury stock		-		-		-			-			(6,679	)		(6,679	)
Non-cash stock compensation expense		-		285		-			-			-			285
Dividends declared of $0.24 per common share		-		-		(6,047	)		-			-			(6,047	)
Other comprehensive income, foreign currency translation adjustment		-		-		-			51			-			51
Net income		-		-		8,539			-			-			8,539
Balances at March 31, 2022	$	31	$	174,227	$	(33,620	)	$	(2,324	)	$	(56,828	)	$	81,486
Purchase of 427,329 shares treasury stock		-		-		-			-			(15,475	)		(15,475	)
Non-cash stock compensation expense		-		334		-			-			-			334
Dividends declared of $0.24 per common share		-		-		(5,944	)		-			-			(5,944	)
Other comprehensive income (loss), foreign currency translation adjustment		-		-		-			(99	)		-			(99	)
Net income		-		-		8,322			-			-			8,322
Balances at June 30, 2022	$	31	$	174,561	$	(31,242	)	$	(2,423	)	$	(72,303	)	$	68,624
Purchase of 99,453 shares treasury stock		-		-		-			-			(3,646	)		(3,646	)
Issuance of 23,581 common shares for the exercise of stock options		-		310		-			-			-			310
Non-cash stock compensation expense		-		291		-			-			-			291
Dividends declared of $0.24 per common share		-		-		(5,926	)		-			-			(5,926	)
Other comprehensive income (loss), foreign currency translation adjustment		-		-		-			(185	)		-			(185	)
Net income		-		-		8,298			-			-			8,298
Balances at September 30, 2022	$	31	$	175,162	$	(28,870	)	$	(2,608	)	$	(75,949	)	$	67,766

See accompanying notes to condensed consolidated financial statements.

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	Nine months ended
	September 30,
	2023			2022
Cash flows from operating activities:
Net income	$	22,113		$	25,159
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment		4,469			3,902
Deferred income taxes		(721	)		(1,765	)
Reserve for uncertain tax positions		250			336
Non-cash share-based compensation expense		677			910
Loss on disposal of property and equipment		-			1
Net changes in assets and liabilities:
Trade accounts receivable		(6	)		(1,655	)
Prepaid expenses and other current assets		(3,257	)		(97	)
Deferred contract costs, net		800			988
Operating lease assets and liabilities, net		(75	)		(9	)
Accounts payable		230			(557	)
Accrued expenses, wages and bonuses		493			127
Income taxes receivable and payable		392			660
Deferred revenue		1,040			161
Net cash provided by operating activities		26,405			28,161

Cash flows from investing activities:
Purchases of property and equipment		(12,009	)		(7,869	)
Proceeds from the sale of property and equipment		1			-
Net cash used in investing activities		(12,008	)		(7,869	)

Cash flows from financing activities:
Borrowings on line of credit		5,000			-
Payments on notes payable		(3,373	)		(3,208	)
Payment of debt issuance costs		(8	)		-
Payments on finance lease obligations		(279	)		(355	)
Proceeds from the exercise of share-based awards		584			-
Payment of employee payroll tax withholdings on share-based awards exercised		-			(190	)
Repurchase of shares for treasury		(4,100	)		(25,299	)
Payment of deferred acquisition consideration		-			(1,950	)
Payments of dividends on common stock		(33,419	)		(15,035	)
Net cash used in financing activities		(35,595	)		(46,037	)

Effect of exchange rate changes on cash and cash equivalents		-			(224	)
Change in cash and cash equivalents		(21,198	)		(25,969	)
Cash and cash equivalents at beginning of period		25,026			54,361
Cash and cash equivalents at end of period	$	3,828		$	28,392

Supplemental disclosure of cash paid for:
Interest expense, net of capitalized amounts	$	600		$	941
Income taxes	$	6,484		$	8,947
Supplemental disclosure of non-cash investing and financing activities:
Stock tendered to the Company for cashless exercise of stock options in connection with equity incentive plans	$	-		$	311
Purchase of property and equipment in accounts payable and accrued expenses	$	1,819		$	242
Repurchase of shares for treasury in accounts payable and accrued expenses	$	24		$	-

See accompanying notes to condensed consolidated financial statements.

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NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and basis of presentation

National Research Corporation, doing business as NRC Health (“NRC Health,” the “Company,” “we,” “our,” “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. 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.

Our condensed consolidated balance sheet at December 31, 2022 was derived from our audited consolidated balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

Information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2023.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and our wholly-owned subsidiary, National Research Corporation Canada. All significant intercompany transactions and balances have been eliminated.

Our Canadian subsidiary uses Canadian dollars as its functional currency. We translate its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. 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’ equity through December 2022. During December 2022, we substantially liquidated our investment in Canada. As a result, we reclassified the cumulative foreign currency translation adjustment balance into earnings in 2022. Currency translation changes after 2022 are recognized in Other income (expense), net in our Condensed Consolidated Statements of Income.

Revenue Recognition

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. Such agreements are generally cancelable on short or no notice without penalty. See Note 2 for further information about our contracts with customers. We account for revenue using the following steps:

	●	Identify the contract, or contracts, with a customer;
	●	Identify the performance obligations in the contract;
	●	Determine the transaction price;
	●	Allocate the transaction price to the identified performance obligations; and
	●	Recognize revenue when, or as, we satisfy the performance obligations.

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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 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 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. We only include some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We consider the sensitivity of the estimate, our relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement. Our revenue arrangements do not contain any significant financing element due to the contract terms and the timing between when consideration is received and when the service is provided.

Our arrangements with customers consist principally of four different types of arrangements: 1) subscription-based service agreements; 2) one-time specified services performed at a single point in time; 3) fixed, non-subscription service agreements; 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 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. Subscription services are typically billed either annually or quarterly in advance but may also be billed on a monthly basis.

One-time services – These agreements typically require us to perform a specific one-time service in a particular month. 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 customer.

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. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch-up adjustment which could impact the amount and timing of revenue for any period.

Unit-price services – 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.

Revenue is presented net of any sales tax charged to our clients that we are required to remit to taxing authorities. We recognize contract assets or unbilled receivables related to revenue recognized for services completed but not invoiced to the clients. Unbilled receivables are classified as receivables when we have an unconditional right to contract consideration. 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.

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Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. We defer commissions and incentives, including payroll taxes, and certain implementation costs 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 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 $69,000 and $68,000 in the three-month periods ended September 30, 2023 and 2022, respectively. We deferred incremental costs of obtaining a contract of $301,000 and $410,000 in the nine-month periods ended September 30, 2023 and 2022, respectively.

SEC Form 10-Q filed by National Research Corporation