NRC Health (NRC) - 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
Company: National Research Corporation (d/b/a NRC Health)
Reporting Period: Fiscal Year Ended December 31, 2025
Business Overview: NRC Health provides subscription-based healthcare experience management solutions, including patient experience, employee engagement, market research, and governance services. The company operates as a single reporting segment focused on the U.S. healthcare market.
Key Developments: The company underwent significant executive leadership changes in 2025, including the appointment of Trent Green as CEO and Shane Harrison as CFO. NRC Health also acquired Nobl Health in July 2024 to expand its rounding and feedback solutions.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Revenue | $137.4 million | $143.1 million | (4.0%) |
| Operating Income | $22.6 million | $35.2 million | (35.8%) |
| Net Income | $11.6 million | $24.8 million | (53.2%) |
| Diluted EPS | $0.50 | $1.04 | (51.9%) |
| Operating Margin | 16.4% | 24.6% | -820 bps |
| Adjusted EBITDA | $40.2 million | $41.6 million | (3.4%) |
| Operating Cash Flow | $26.5 million | $34.6 million | (23.6%) |
| Total Debt (Notes Payable) | $79.4 million | $62.8 million | +26.3% |
| Cash & Equivalents | $4.1 million | $4.2 million | (2.4%) |
| Working Capital | ($16.4 million) Deficit | ($16.3 million) Deficit | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by $5.7 million primarily due to lower recurring revenue from the existing customer base, attributed to retention challenges prior to 2025.
- Margin Compression: Operating margin declined from 24.6% to 16.4%. This was driven by a $9.9 million increase in Selling, General, and Administrative (SG&A) expenses, largely due to $6.6 million in non-recurring executive compensation bonuses and $3.0 million in stock-based compensation related to leadership transitions.
- Debt Structure: In February 2025, the company entered a new credit agreement featuring a $30 million revolving facility and a $110 million delayed draw term loan. The outstanding balance on the term loan increased to $79.4 million to fund operations and dividends.
- Customer Concentration: The top 10 customers accounted for 20% of total revenue in 2025, up from 17% in 2024.
Guidance, Outlook, and Risks
Outlook: Management expects revenue, operating margin, and operating cash flow to grow in 2026. This outlook is supported by an increase in Total Recurring Contract Value (TRCV), which reached an all-time high of $152.0 million as of March 4, 2026 (up from $144.1 million at year-end). The company cites improved retention and a lower expense run rate as key drivers.
Capital Allocation: The Board increased the quarterly cash dividend to $0.16 per share in Q4 2025. The company completed its 2025 stock repurchase program (1.0 million shares) and has no remaining authorization under the 2022 or 2025 programs.
Key Risks:
- Customer Retention: Heavy reliance on contract renewals; failure to retain key customers could materially impact results.
- Competition: Highly competitive market with larger rivals (Press Ganey, Qualtrics) and potential price pressure.
- Cybersecurity: Risks related to data breaches, ransomware, and third-party vendor failures, particularly given the sensitive nature of healthcare data.
- Regulatory Environment: Changes in federal healthcare legislation (Medicare/Medicaid) could reduce customer budgets.
Investor Verification Checklist
- TRCV Sustainability: Verify if the recent growth in Total Recurring Contract Value ($152M) translates into actual revenue growth in 2026, given the lag between TRCV and recognized revenue.
- Expense Run Rate: Confirm that the elevated SG&A expenses from 2025 leadership transitions are truly non-recurring and that the "lower expense run rate" cited by management is sustainable.
- Debt Covenants: Monitor compliance with the new credit agreement covenants, specifically the minimum fixed charge coverage ratio (1.10x) and cash flow leverage ratio (3.50x).
- Customer Concentration: Assess the risk associated with the top 10 customers representing 20% of revenue and the potential impact of any single large non-renewal.
- Dividend Coverage: Evaluate the ability to sustain the increased dividend ($0.16/share) given the working capital deficit and reliance on debt facilities for liquidity.