Financial Performance - Revenue for Q2 2025 was NOK 1.8 billion, matching the revenue of NOK 1.8 billion in Q2 2024[8] - EBIT for Q2 2025 was NOK 60 million, a significant improvement compared to NOK -742 million in Q2 2024[8] - The EBIT margin for Q2 2025 was 3.4%, a substantial increase from -42% in Q2 2024[8] - The company is confident in achieving an EBIT margin above 2.0% for the full year 2025[6] Order Backlog and Intake - Order intake for Q2 2025 was NOK 1.8 billion, up from NOK 1.3 billion in Q2 2024[8] - The order backlog reached NOK 9.0 billion, compared to NOK 7.8 billion in Q2 2024[8] - The company expects revenue to be below NOK 7 billion for 2025, but anticipates solid order backlog to drive revenue growth in 2026 and beyond[6] Operational Review by Country - NRC Group Norway's revenue for Q2 2025 was NOK 546 million, compared to NOK 494 million in Q2 2024, with an EBIT of NOK 26 million versus NOK -199 million[28] - NRC Group Sweden's revenue for Q2 2025 was NOK 619 million, up from NOK 438 million in Q2 2024, and EBIT improved to NOK 17 million from NOK -60 million[36] - NRC Group Finland's revenue for Q2 2025 was NOK 606 million, down from NOK 823 million in Q2 2024, but EBIT improved significantly to NOK 30 million from NOK -468 million[44] Tender Pipeline - The company has a tender pipeline of NOK 25 billion across all three countries [65]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company reported a net loss of $0.1 million in Q2 2025, a significant decline from prior year's net income, primarily due to increased SG&A expenses and reduced operating cash flow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $141.4 million by June 30, 2025, while total liabilities rose to $120.1 million, leading to a decrease in shareholders' equity to $21.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$141,387** | **$132,539** | | Cash and cash equivalents | $5,274 | $4,233 | | Net property and equipment | $42,232 | $38,269 | | Goodwill | $66,152 | $66,152 | | **Total Liabilities** | **$120,059** | **$101,255** | | Notes payable, net | $80,957 | $62,684 | | Deferred revenue | $15,603 | $15,786 | | **Total Shareholders' Equity** | **$21,328** | **$31,284** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 saw a slight revenue decrease and an 82% drop in operating income to $1.6 million, resulting in a net loss of $0.1 million due to increased SG&A expenses Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $34,038 | $35,021 | $67,588 | $70,334 | | Operating Income | $1,588 | $8,865 | $10,184 | $17,625 | | Net Income (Loss) | $(106) | $6,175 | $5,681 | $12,534 | | Diluted EPS | $(0.01) | $0.26 | $0.25 | $0.52 | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity decreased to $21.3 million by June 30, 2025, primarily due to treasury stock repurchases and dividend payments, partially offset by net income - Key activities impacting shareholders' equity in the first six months of 2025 include the purchase of 689,445 shares of treasury stock for a total of **$10.7 million** and the declaration of dividends totaling **$5.5 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to $5.5 million for H1 2025, while financing activities provided $1.5 million, driven by debt borrowings offset by share repurchases and dividends Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,507 | $18,824 | | Net cash used in investing activities | $(5,996) | $(9,408) | | Net cash provided by (used in) financing activities | $1,530 | $(15,584) | | **Change in cash and cash equivalents** | **$1,041** | **$(6,168)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail declining subscription revenue, a surging Q2 2025 effective tax rate, new credit agreement terms, and the grant of 700,000 non-vested stock awards under a new incentive plan - Subscription services, the main revenue source, decreased to **$31.2 million** in Q2 2025 from **$33.1 million** in Q2 2024[55](index=55&type=chunk) - The effective tax rate for Q2 2025 surged to **118%** from **26%** in Q2 2024, mainly due to deductible limitations on executive compensation related to cash bonuses[56](index=56&type=chunk) - In February 2025, the company entered a new credit agreement, including a **$30.0 million** revolving facility and a **$110.0 million** delayed draw-down term facility[58](index=58&type=chunk) - Under the new 2025 Omnibus Incentive Plan, **700,000** non-vested shares of common stock were granted during the first six months of 2025[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 2025 revenue decline and 82% operating income drop to decreased recurring revenue and increased executive compensation, while maintaining liquidity despite a working capital deficit [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2025 revenue declined 3% to $34.0 million, while SG&A expenses surged 58% due to executive compensation, leading to an 82% drop in operating income Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $34,038 | $35,021 | (3)% | | Selling, general, and administrative | $17,734 | $11,221 | 58% | | Operating income | $1,588 | $8,865 | (82)% | - The increase in Q2 2025 SG&A expenses was primarily driven by a **$7.6 million** rise in salary and benefits, which included **$6.6 million** in cash bonuses and increased non-cash share-based compensation under new executive arrangements[97](index=97&type=chunk) - Total Recurring Contract Value (TRCV) was **$137.0 million** at June 30, 2025, a **1% decrease** from **$138.4 million** at June 30, 2024, but has increased sequentially in each of the first two quarters of 2025[95](index=95&type=chunk)[102](index=102&type=chunk)[109](index=109&type=chunk) - Effective June 1, 2025, Trent Green became the new Chief Executive Officer[92](index=92&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through cash and credit facilities despite a $10.6 million working capital deficit, prioritizing innovation, growth, dividends, and share repurchases - Principal sources of liquidity as of June 30, 2025, are **$5.3 million** in cash, **$30 million** available on the Revolving Loan, and **$27.6 million** available on the Delayed Draw Term Loan[112](index=112&type=chunk) - The company had a working capital deficit of **$10.6 million** at June 30, 2025, which is significantly impacted by large deferred revenue balances[115](index=115&type=chunk) - Capital allocation priorities are: 1) funding innovation and growth (including M&A), and 2) quarterly dividends and share repurchases[111](index=111&type=chunk) - The company paid **$6.0 million** for capital expenditures in H1 2025, mainly for software development and building renovations, with an additional **$2.7 million** estimated for the rest of 2025[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk exposures have occurred since the disclosures in the 2024 Annual Report on Form 10-K - There are no material changes to the disclosures regarding market risk exposures from the company's 2024 Form 10-K[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that as of the end of the period, the company's disclosure controls and procedures were **effective**[135](index=135&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[138](index=138&type=chunk) [PART II. OTHER INFORMATION](index=30&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, which management does not expect to have a material adverse effect on its financial position or operations - The company is involved in routine claims and litigation, but management does not expect them to have a **material adverse effect**[53](index=53&type=chunk)[139](index=139&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) Significant risk factors are referenced from the company's Annual Report on Form 10-K for the year ended December 31, 2024 - Significant risk factors are described in the Annual Report on Form 10-K for the year ended December 31, 2024[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A new stock repurchase program for up to 1.0 million shares or $20 million was approved in April 2025, with 381,736 shares repurchased in Q2 - A new stock repurchase program for up to **1.0 million shares** (not to exceed **$20 million**) was authorized in April 2025[130](index=130&type=chunk) Share Repurchases for Q2 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1 – May 31, 2025 | 159,760 | $12.95 | | Jun 1 – Jun 31, 2025 | 221,976 | $16.42 | | **Total** | **381,736** | **N/A** | [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025[145](index=145&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including certifications and iXBRL-formatted financial statements

Core Insights - National Research Corporation (NRC) shares have declined 10% since the earnings report for Q2 2025, contrasting with a 0.7% decline in the S&P 500 index during the same period [1] - The company reported adjusted net income per share of 28 cents, an increase from 26 cents in the same quarter last year [1] Financial Performance - NRC's revenues for Q2 2025 were $34 million, down 2.8% from $35 million in the previous year [2] - The company experienced a net loss of $0.1 million compared to a net income of $6.2 million in Q2 2024, primarily due to one-time executive compensation expenses [2][6] - Adjusted net income, excluding non-recurring items, rose slightly to $6.4 million from $6.1 million year-over-year [2] - Adjusted EBITDA for the quarter was $10.3 million, with a margin of 30.3%, indicating stable profitability when excluding unusual items [3] Recurring Revenue and Growth - Total recurring contract value (TRCV) grew 2% sequentially, marking the third consecutive quarter of growth and the strongest gain since early 2021 [4] - Improvements in salesforce effectiveness, customer retention, and product offerings contributed to this growth [4] Leadership and Strategic Direction - New CEO Trent S. Green expressed optimism about the company's future, highlighting customer enthusiasm and a commitment to high-touch service [5] - The reinstatement of quarterly earnings calls aims to enhance transparency and communication with shareholders [5] Executive Compensation Impact - The net loss was significantly influenced by $6.6 million in non-recurring executive compensation expenses related to leadership transitions [6] - SG&A expenses increased to $17.7 million from $11.2 million year-over-year, reflecting the impact of compensation costs [6] Shareholder Returns - NRC repurchased 381,736 shares at an average price of $14.96 during the quarter, returning $16.1 million to shareholders through dividends and buybacks year-to-date [7] - A quarterly dividend of 12 cents per share was declared, payable on October 10, 2025 [7] Balance Sheet Overview - As of June 30, 2025, NRC had $5.3 million in cash, an increase from $4.2 million at the end of 2024 [8] - Total debt rose to $81 million from $62.7 million, indicating greater leverage [8] - Shareholders' equity decreased to $21.3 million from $31.3 million, primarily due to treasury stock purchases and net losses [8]

Financial Data and Key Metrics Changes - Total Recurring Contract Value (TRCV) increased by 2% sequentially, marking the third consecutive quarter of sequential growth and the highest growth rate since early 2021 [8][9] - Adjusted EBITDA margin remains strong at 30%, reflecting disciplined cost management and operational efficiency [10][11] - The company repurchased 382,000 shares, approximately 2% of outstanding stock, at an average price of $14.96 per share during the quarter [12] Business Line Data and Key Metrics Changes - The company experienced the strongest year-to-date sales since 2021, with increased win rate percentage and average win size year-over-year [9] - Retention rates improved due to the strength of the customer success organization, indicating better customer satisfaction and loyalty [10] Market Data and Key Metrics Changes - The top 400 largest healthcare systems represent the target market, which has shown signs of recovery post-pandemic but faces budget pressures [12][13] - The competitive environment remains challenging, but the company's value proposition resonates with customers [12] Company Strategy and Development Direction - The company aims to enhance its market position by focusing on deeper, human-centered connections between healthcare providers and patients [7][8] - Plans for capital allocation include continuing dividends and share repurchases while funding organic growth opportunities and potential mergers and acquisitions [12] Management's Comments on Operating Environment and Future Outlook - The new CEO emphasized the importance of understanding the unique pressures and regulations of healthcare organizations as a competitive advantage [17][18] - The company is in the early stages of developing a strategic plan, with a focus on sustainable growth and long-term margin improvement [19][20] Other Important Information - The company is actively searching for a new Chief Financial Officer, indicating a focus on strengthening the executive team [13][14] - The CEO highlighted the importance of a high-touch customer success model, which differentiates the company from competitors [18] Q&A Session Summary Question: What is the current status of the sales organization? - The sales organization is being reorganized under Jason Rao, with positive momentum reflected in the size of the pipeline and new customer acquisitions [14][15] Question: How does the company differentiate itself in the competitive environment? - The company differentiates through deep healthcare experience and a high-touch customer success model, which builds trust and accelerates value realization for clients [16][17][18] Question: Are there any material investments planned? - The CEO is excited about future value creation opportunities but is still in the early stages of assessing specific investment plans or timelines [19][20]

[Q2 2025 Financial & Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20%26%20Operational%20Highlights) The company reported strong Q2 2025 momentum with sequential TRCV growth, stable adjusted EBITDA margins, and continued capital returns to shareholders despite a net loss due to non-recurring items [CEO Statement & Business Momentum](index=1&type=section&id=CEO%20Statement%20%26%20Business%20Momentum) The CEO highlighted strong Q2 2025 momentum, positive customer feedback, and 2% sequential TRCV growth, the highest since Q1 2021 - The new CEO is encouraged by Q2 momentum, customer feedback, and the product portfolio's reception. The company is reinstating its quarterly earnings call[2](index=2&type=chunk) - **Total recurring contract value (TRCV) grew 2% sequentially**, marking the third consecutive quarter of growth and the highest rate since Q1 2021[3](index=3&type=chunk) - Growth drivers include improved new logo sales, cross-sells, and customer retention, credited to a stronger sales team and customer service organization[3](index=3&type=chunk) [Financial Performance & Adjustments](index=1&type=section&id=Financial%20Performance%20%26%20Adjustments) Q2 2025 net margin was 0% due to non-recurring executive compensation, while adjusted EBITDA margin remained stable at 30% due to cost controls - A **net margin of 0%** for Q2 was caused by non-recurring cash bonuses and equity grants for executive leaders following the founder-led leadership transition[4](index=4&type=chunk) - Excluding special items, the **adjusted EBITDA margin was 30%** in Q2, remaining stable over the past year due to cost controls and higher revenue per FTE[4](index=4&type=chunk) [Capital Allocation](index=1&type=section&id=Dividends%20and%20Stock%20Repurchases) The company declared a $0.12 per share quarterly dividend and repurchased 381,736 shares, returning $16.1 million to shareholders year-to-date - A quarterly cash dividend of **$0.12 per share** was declared, payable on October 10, 2025[5](index=5&type=chunk) - In Q2 2025, the company repurchased **381,736 shares** at a weighted average price of **$14.96 per share**[5](index=5&type=chunk) - A total of **$16.1 million** was returned to shareholders during 2025 through dividends and stock repurchases[5](index=5&type=chunk) [Financial Statements](index=3&type=section&id=Financial%20Statements) The company's Q2 2025 financial statements show a revenue decline and net loss, alongside increased assets and liabilities, and decreased shareholder equity [Unaudited Condensed Consolidated Statements of Income](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 revenue decreased to $34.0 million, resulting in a net loss of $0.1 million or ($0.01) per share, a significant decline from Q2 2024 Q2 2025 vs Q2 2024 Income Statement (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $34,038 | $35,021 | -2.8% | | Operating Income | $1,588 | $8,865 | -82.1% | | Net Income (Loss) | $(106) | $6,175 | -101.7% | | Diluted EPS | $(0.01) | $0.26 | -103.8% | Six Months Ended June 30, 2025 vs 2024 (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $67,588 | $70,334 | -3.9% | | Operating Income | $10,184 | $17,625 | -42.2% | | Net Income | $5,681 | $12,534 | -54.7% | | Diluted EPS | $0.25 | $0.52 | -51.9% | [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $141.4 million, while total liabilities rose to $120.1 million, leading to a decrease in shareholders' equity to $21.3 million Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $5,274 | $4,233 | | Total current assets | $25,320 | $19,600 | | Total assets | $141,387 | $132,539 | | **Liabilities & Equity** | | | | Total current liabilities | $35,926 | $35,858 | | Notes payable, net | $80,957 | $62,684 | | Total liabilities | $120,059 | $101,255 | | Total shareholders' equity | $21,328 | $31,284 | [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP adjustments reveal a positive adjusted net income and stable adjusted EBITDA, providing a clearer view of underlying operational profitability [Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income](index=5&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20to%20Adjusted%20Net%20Income) Adjusting Q2 2025 GAAP net loss for non-recurring executive compensation results in an Adjusted Net Income of $6.4 million, or $0.28 per diluted share Q2 Adjusted Net Income Reconciliation (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) | $(106) | $6,175 | | Non-recurring executive compensation | $6,640 | - | | Adjusted Net Income | $6,373 | $6,132 | | Adjusted Diluted EPS | $0.28 | $0.26 | [Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA](index=6&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20to%20Adjusted%20EBITDA) Q2 2025 Adjusted EBITDA was $10.3 million with a 30.3% margin, demonstrating stable profitability consistent with prior periods Adjusted EBITDA and Margin Trend (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net income (loss) | $(106) | $5,787 | $6,175 | | Add back: Non-recurring exec comp | $6,640 | - | - | | Adjusted EBITDA | $10,302 | $10,335 | $10,335 | | Adjusted EBITDA Margin | 30.3% | 30.8% | 29.5% |

[PART I – Financial Information](index=5&type=section&id=PART%20I%20%E2%80%93%20Financial%20Information) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, including the balance sheets, statements of income, shareholders' equity, and cash flows, along with accompanying notes. The statements reflect a decrease in net income and cash from operations compared to the prior year period [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The company's financial position shows a slight increase in total assets to $135.2 million and an increase in total liabilities to $105.5 million as of March 31, 2025. For the first quarter, revenue decreased to $33.6 million from $35.3 million year-over-year, and net income fell to $5.8 million from $6.4 million. Cash from operating activities significantly decreased from $12.0 million to $6.6 million Condensed Consolidated Balance Sheet Highlights (in thousands of USD) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,502 | $4,233 | | Total current assets | $20,402 | $19,600 | | Total assets | $135,175 | $132,539 | | Total current liabilities | $37,774 | $35,858 | | Total liabilities | $105,503 | $101,255 | | Total shareholders' equity | $29,672 | $31,284 | Condensed Consolidated Statements of Income (in thousands of USD, except per share amounts) | Account | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $33,551 | $35,313 | | Operating income | $8,596 | $8,760 | | Net income | $5,787 | $6,359 | | Diluted Earnings Per Share | $0.25 | $0.27 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands of USD) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,646 | $12,037 | | Net cash used in investing activities | ($2,986) | ($4,138) | | Net cash used in financing activities | ($5,391) | ($12,854) | | Change in cash and cash equivalents | ($1,731) | ($4,954) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's significant accounting policies, including revenue recognition primarily from subscription-based services. Key events include entering a new credit agreement in February 2025. The company operates as a single reportable segment. The effective tax rate increased to 25% from 22% YoY due to lower tax benefits from share-based compensation and higher state taxes - The majority of revenues are derived from annually renewable, **subscription-based service agreements**, which are recognized ratably over the subscription period[34](index=34&type=chunk)[38](index=38&type=chunk) Revenue by Type (in thousands of USD) | Revenue Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Subscription services recognized ratably over time | $31,042 | $33,271 | | Services recognized at a point in time | $1,741 | $1,421 | | Fixed, non-subscription recognized over time | $645 | $495 | | Unit price services recognized over time | $123 | $126 | | **Total revenue** | **$33,551** | **$35,313** | - In February 2025, the company entered a new credit agreement, which includes a **$30.0 million revolving credit facility** and a **$110.0 million delayed draw-down term facility**[59](index=59&type=chunk) - The effective tax rate for Q1 2025 was **25%**, compared to **22%** for Q1 2024. The increase was mainly due to decreased tax benefits from share-based compensation awards and higher state income taxes[58](index=58&type=chunk) - The company determined it has a **single operating and reportable segment**, as the business is managed on a consolidated basis and all solutions provide similar analytics and insights to healthcare organizations[81](index=81&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 5% year-over-year revenue decrease in Q1 2025, primarily from reduced recurring revenue, though operating margin improved to 26% from 25% due to cost controls. The company appointed Trent Green as the new CEO, effective June 1, 2025, which will result in significant one-time and ongoing compensation expenses. Despite a working capital deficit, liquidity is considered sufficient through cash, operating cash flows, and available credit facilities [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Revenue for Q1 2025 decreased by $1.8 million (5%) compared to Q1 2024, driven by a $2.1 million decline in recurring revenue from existing clients. Total Recurring Contract Value (TRCV) was down 4% YoY but showed sequential quarterly growth. Operating expenses decreased, leading to a slight improvement in operating margin from 25% to 26%. The company anticipates significant compensation charges in Q2 2025 related to the new CEO and other executive awards Financial Performance Comparison (in thousands of USD) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $33,551 | $35,313 | (5)% | | Operating income | $8,596 | $8,760 | (2)% | | Operating margin | 26% | 25% | 1 ppt | | Recurring Contract Value | $134,371 | $139,548 | (4)% | - The revenue decrease was mainly from a **$2.1 million drop in recurring revenue** from the existing client base, partially offset by a **$353,000 increase from new clients**[92](index=92&type=chunk) - The appointment of new CEO Trent Green is expected to result in a **$3.6 million charge in Q2 2025** for his signing bonus, plus quarterly non-cash charges of approximately **$447,000 for his equity grant**[94](index=94&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, primary liquidity sources included $2.5 million in cash, $26.5 million available on the Revolving Loan, and $47.6 million on the Delayed Draw Term Loan. Cash from operations decreased to $6.6 million from $12.0 million YoY. The company completed its 2022 stock repurchase program and authorized a new 1.0 million share program in April 2025. Capital expenditures for 2025 are estimated at $3.7 million, mainly for headquarters renovations - Capital allocation priorities are **1) funding innovation, growth, and M&A**, and **2) quarterly dividends and share repurchases**[100](index=100&type=chunk) - Principal sources of liquidity as of March 31, 2025, include **$2.5 million cash**, **$26.5 million unused borrowings** under the Revolving Loan, and an additional **$47.6 million on the Delayed Draw Term Loan**[101](index=101&type=chunk) - The company repurchased **307,709 shares for $5.0 million** in Q1 2025, completing the 2022 program. A new program to repurchase up to **1.0 million shares** was approved in April 2025[118](index=118&type=chunk)[119](index=119&type=chunk) - Future costs for headquarters building renovations are estimated to be **$3.7 million in 2025**, funded through operating cash flows and borrowings[108](index=108&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk exposures from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been **no material changes** to the company's market risk exposures since the 2024 Annual Report on Form 10-K[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter - Management, with the participation of the CEO, concluded that the company's **disclosure controls and procedures were effective** as of the end of the period covered by this report[122](index=122&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[125](index=125&type=chunk) [PART II – Other Information](index=28&type=section&id=PART%20II%20%E2%80%93%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, other information, and exhibits for the reporting period [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in certain claims and litigation arising in the normal course of business. Management does not believe the final disposition of these claims will have a material adverse effect on its financial position, operations, or liquidity - The company is periodically involved in claims and litigation from the normal course of business, which are **not expected to have a material adverse effect**[126](index=126&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, indicating no new significant risk factors are being reported - The significant risk factors are described in the Annual Report on Form 10-K for the year ended December 31, 2024[127](index=127&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company repurchased 307,709 shares of common stock, completing its 2022 repurchase program. In April 2025, the Board of Directors approved a new stock repurchase authorization for up to 1.0 million shares, not to exceed $20 million Common Stock Repurchases (Q1 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 – Jan 31, 2025 | 26,894 | $16.87 | | Feb 1 – Feb 28, 2025 | 120,704 | $16.92 | | Mar 1 – Mar 31, 2025 | 160,111 | $15.14 | | **Total** | **307,709** | | - In April 2025, the Board approved a new stock repurchase program (the "2025 Program") for up to **1.0 million shares**, with a maximum dollar amount of **$20 million**[132](index=132&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) The company states that during the first quarter of 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - **No director or officer adopted or terminated a Rule 10b5-1 trading arrangement** during the first quarter of 2025[133](index=133&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, including the CEO's offer letter, certifications required by the Securities Exchange Act, and the interactive data files (iXBRL) - The exhibits filed with the report include the offer letter for new CEO Trent Green, CEO certifications pursuant to Rule 13a-14(a) and Section 1350, and financial statements formatted in Inline XBRL[138](index=138&type=chunk)

Core Insights - National Research Corporation (NRC) shares increased by 12.8% following the earnings report for Q1 2025, outperforming the S&P 500's 0.7% growth during the same period, although NRC stock has seen a slight decline of 0.6% over the past month compared to the broader market's 1.6% drop [1] Financial Performance - For Q1 2025, NRC reported earnings per share (EPS) of $0.25, down from $0.27 a year earlier, with revenues of $33.6 million, reflecting a 5% decline from $35.3 million in the prior year [2] - Net income for the quarter was $5.8 million, a 9% decrease from $6.4 million in the same quarter last year, while operating income was $8.6 million, slightly below the $8.7 million reported in Q1 2024 [3] Cost Management - Total operating expenses decreased to $25 million from $26.6 million a year earlier, driven by lower direct and selling, general and administrative (SG&A) costs, with direct expenses down 6% to $13.1 million and SG&A expenses down 8% to $10.4 million [5] - Interest expense surged by 49% year over year to $0.9 million, attributed to increased debt utilization, including a new $3.5 million drawdown from its line of credit during the quarter [6] Business Metrics - A positive aspect of the quarter was the sequential growth in total recurring contract value, marking the second consecutive quarter of improvement, indicating potential future revenue growth [4] - Deferred revenues remained stable at $15.5 million, suggesting consistent contracted business levels without significant short-term expansion [10] Management Insights - CEO Michael D. Hays highlighted the progress in rebuilding NRC's sales force, which has positively impacted pipeline, win rates, and total sales, and emphasized the need for a differentiated market message and broader product offerings [7] - COO Helen Hrdy was credited for implementing operational efficiencies that support growth investments while returning value to shareholders [8] Shareholder Returns - NRC completed its existing share repurchase program and authorized a new plan for up to one million shares, reflecting a commitment to shareholder returns [12] - The company declared a quarterly dividend of $0.12 per share, payable on July 11 to shareholders of record as of June 27, indicating a balanced approach to reinvestment and direct returns to shareholders [12]

Financial Performance - Revenue for Q1 2025 was $33,551,000, a decrease of 4.99% from $35,313,000 in Q1 2024[9] - Operating expenses declined to $24,955,000, down 6.02% from $26,553,000 in the previous year[9] - Net income for Q1 2025 was $5,787,000, a decrease of 9.00% compared to $6,359,000 in Q1 2024[9] Dividends and Share Repurchase - The Board declared a quarterly cash dividend of $0.12 per share, payable on July 11, 2025[5] - A new share repurchase program was approved to buy back up to one million additional shares[6] Assets and Equity - Cash and cash equivalents decreased to $2,502,000 from $4,233,000 at the end of 2024[11] - Total assets increased to $135,175,000 from $132,539,000 at the end of 2024[11] - Shareholders' equity decreased to $29,672,000 from $31,284,000 at the end of 2024[11] Growth and Expansion - Total recurring contract value increased sequentially for the second consecutive quarter, indicating revenue growth momentum[3] - The company is accelerating its sales force expansion to leverage broader product offerings[3]

Revenue and Financial Performance - Revenue for 2024 decreased by $5.5 million to $143.06 million, a decline of 4% compared to 2023, primarily due to decreased recurring revenue from the existing client base [135]. - Total Recurring Contract Value (TRCV) declined to $133.22 million, down 6% from 2023, with a retention rate decrease of 4% [135][143]. - Operating income decreased to $35.19 million, a 12% decline from 2023, with an operating margin of 25% [135][140]. - Cash provided by operating activities decreased to $34.63 million, down 10% from 2023 [135][146]. Expenses - Direct expenses increased to $56.93 million, with variable expenses as a percentage of revenue rising to 16% from 15% in 2023 [135][137]. - Selling, general, and administrative expenses decreased by $1.71 million to $44.91 million, primarily due to reduced marketing and consulting expenses [135][138]. - Total other expense increased by $2.42 million, primarily due to higher interest expenses and lower interest income [135][141]. Cash and Working Capital - As of December 31, 2024, the company had $4.2 million in cash and cash equivalents, with an unused borrowing capacity of up to $30 million under its Line of Credit [145]. - The company reported a working capital deficit of $16.3 million as of December 31, 2024, compared to $11.8 million in 2023 [149]. Capital Expenditures and Investments - Capital expenditures for 2024 totaled $15.4 million, primarily for software development and headquarters renovations, with an estimated $5.8 million planned for 2025 [153]. - The company plans to invest in innovative solutions, which may cause fluctuations in direct expenses as a percentage of revenue [137]. Debt and Credit Facilities - As of December 31, 2024, the outstanding balance on the Term Loan was $14.3 million, with principal payments due in monthly installments of $92,800 through May 2027 [155]. - The outstanding balance on the Delayed Draw Term Loan was $48.5 million, with monthly principal payments of $318,790 due through May 2027 [156]. - The company had a $30.0 million revolving credit facility available as of December 31, 2024, with no borrowings outstanding [157]. - The weighted average interest rate on borrowings under the Line of Credit was 7.52% for 2024, compared to 7.67% for 2023 [157]. - The company is required to maintain a minimum fixed charge coverage ratio of 1.10x and a cash flow leverage ratio of 3.00x or less under the Credit Agreement [159]. Share Repurchase and Dividends - The company repurchased 1,154,595 shares of common stock for an aggregate of $30.8 million during 2024, leaving 307,709 shares available for repurchase under the 2022 Program [170]. - Cash dividends declared amounted to $11.3 million, $36.3 million, and $20.9 million for the years 2024, 2023, and 2022 respectively [152]. Tax and Interest Rate Considerations - The liability for gross unrecognized tax benefits related to uncertain tax positions was $2.2 million as of December 31, 2024 [167]. - Interest rate changes could impact future earnings and cash flows by approximately $592,000 annually based on a hypothetical 100 basis points change in the benchmark index rate [174].

Core Insights - Trent Green, CEO of Amazon-owned One Medical, will leave to become CEO of National Research Corporation (NRC Health) effective June 1 [1][4] - Green's departure from One Medical is set for April 4, following nearly three years with the company [2][3] - Under Green's leadership, One Medical expanded geographically, opened new offices, and integrated services for Amazon Prime members [3] Company Developments - NRC Health focuses on healthcare experience management and aims to enhance personalized, data-driven solutions under Green's leadership [4] - Green expressed excitement about leading NRC Health during a transformative period and emphasized the importance of innovative solutions for healthcare experiences [5] Financial Context - Amazon's acquisition of One Medical for $3.9 billion in July 2022 aimed to reinvent healthcare through a tech-powered primary care model [5] - In February 2024, Amazon announced job cuts in its healthcare units, including One Medical, as part of efforts to save $100 million and reduce operating losses [6]