10-K: NRC Health Reports 2025 Revenue Decline, Eyes 2026 Growth

National Research Corporation (NRC Health) reported a decrease in 2025 revenue and operating income but anticipates growth in 2026 driven by record Total Recurring Contract Value and strategic initiatives.

Summary

• Revenue for 2025 decreased by 4% to $137.39 million from $143.06 million in 2024.
• Operating income declined by 36% to $22.59 million in 2025 from $35.19 million in 2024.
• Net income decreased to $11.60 million in 2025 from $24.78 million in 2024.
• Total Recurring Contract Value (TRCV) increased by 8% to $144.14 million in 2025 from $133.22 million in 2024, reaching an all-time high of $152.0 million as of March 4, 2026.
• The company expects revenue, operating margin, and operating cash flow to grow in 2026, attributing this to TRCV growth and a lower expense run rate.
• Significant changes in senior management occurred in 2024 and 2025, alongside new product development, the acquisition of Nobl Health, and sales force reconstitution.
• The quarterly cash dividend was increased from 12 cents to 16 cents per share, effective January 2026.
• The company completed two stock repurchase programs in 2025, buying back 1.34 million shares for $20.69 million and 1.0 million shares for $15 million.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a mixed report. While 2025 financial results show significant declines in revenue and profitability, the strong growth in Total Recurring Contract Value and positive management outlook for 2026 suggest a potential turnaround, supported by strategic management changes and product innovation.

Positives

• Total Recurring Contract Value (TRCV) increased by 8% to $144.14 million in 2025 and reached an all-time high of $152.0 million as of March 4, 2026, indicating strong future revenue potential.
• Anticipates revenue, operating margin, and operating cash flow growth in 2026 due to TRCV momentum and efficiency measures.
• Increased quarterly cash dividend from 12 cents to 16 cents per share, commencing January 2026, demonstrating confidence in future cash flows.
• Completed two stock repurchase programs in 2025, repurchasing a total of 2.34 million shares for an aggregate of $35.69 million, returning capital to shareholders.
• Made significant changes in senior management, developed innovative new products, and reconstituted a motivated sales force in 2024 and 2025.
• Acquired Nobl Health in July 2024, expanding its portfolio with innovative rounding solutions.
• Obtained HITRUST i1 and AI Security certifications in Q4 2025, enhancing cybersecurity posture.
• Maintained effective internal controls over financial reporting as of December 31, 2025.

Negatives

• Revenue decreased by 4% from $143.06 million in 2024 to $137.39 million in 2025.
• Operating income decreased by 36% from $35.19 million in 2024 to $22.59 million in 2025.
• Net income decreased by 53.2% from $24.78 million in 2024 to $11.60 million in 2025.
• Operating margin declined from 25% in 2024 to 16% in 2025.
• Selling, general, and administrative expenses increased by 22% to $54.81 million in 2025, primarily due to $6.6 million in executive leadership transition bonuses and $3.0 million in stock compensation.
• Total other expense increased by 89% to $4.75 million in 2025, mainly due to higher interest expense from the Delayed Draw Term Loan.
• Cash provided by operating activities decreased by 24% to $26.45 million in 2025 from $34.63 million in 2024.
• Experienced higher attrition rates in the last several years, potentially leading to higher costs to attract, train, and retain associates.

Risks

• Dependence on contract renewals, including retention of key customers, for a large share of revenue, with the top ten customers accounting for 20% of total revenue in 2025.
• Operating in a highly competitive market with new entrants, consolidation among existing competitors (e.g., Press Ganey, Qualtrics), and potential for increased price pressure and expenses.
• The possibility that solutions and technology do not perform as expected.
• Acquisitions and partnerships may not achieve the expected increased demand or profitability.
• Potential negative impact from outbreaks or pandemics on operations, sales, earnings, financial condition, and liquidity.
• Adverse effects from global conflicts or tariffs on operations, sales, earnings, financial condition, and liquidity, particularly impacting outsourced software development services.
• General economic factors, such as an economic downturn, rising interest rates, and inflationary pressures, could reduce demand for services, slow customer payments, or lead to defaults.
• Concentration of customers in the healthcare industry makes the company vulnerable to changes in regulations, business downturns, or consolidation within the industry.
• Inability to attract and retain key managers and other personnel could adversely affect business.
• Intellectual property and other proprietary information technology could be copied or independently developed by competitors, as the company relies on copyright and trade secret laws rather than patents for most IP.
• Failures, interruptions, or deficiencies in information technology and communications systems could negatively impact business and operating results.
• Cyber-attacks or other privacy or data security incidents could result in security breaches, disrupt operations, lead to unintended dissemination of protected information, significant liability, and reputational harm, with AI potentially making attacks more difficult to anticipate.
• New solution offerings, including AI-enabled offerings, involve inherent risks such as lack of customer demand or failure to generate sufficient revenue.
• Remote work arrangements may increase cybersecurity risks, including unauthorized access to sensitive information and increased exposure to phishing.
• Reputational harm from failure to maintain high ethical standards, untimely service, violations of laws, or information security breaches.
• Operations are subject to laws and regulations (e.g., HIPAA) that impose significant compliance costs and create reputational and legal risk.
• Ineffective internal controls could have a negative impact on business, results of operations, and reputation.
• Future acquisitions, partnerships, and/or investments involve inherent risks such as integration challenges, unanticipated costs, loss of key associates, and failure to achieve projected synergies.
• Inability to achieve a proper revenue to cost ratio could lead to decreased profitability, as revenue and margins have decreased in recent years.
• Principal shareholders (Hays family trusts) effectively control the company, with approximately 46.8% of outstanding common stock, giving them significant influence over corporate decisions.
• The market price of common stock may be volatile, and shareholders may be unable to resell shares at or above the acquisition price.
• Operating results may fluctuate, potentially causing the stock price to decline.
• Increases in income tax rates, changes in income tax laws or regulations, or unfavorable resolutions of tax matters could adversely impact profitability.
• Failure to comply with public company regulations could adversely impact profitability.
• The dividend policy may change at any time, and the Board of Directors may determine to terminate or reduce dividend payments.

Future Outlook

The company expects revenue, operating margin, and operating cash flow to grow in 2026. This positive outlook is driven by the sustained growth in Total Recurring Contract Value (TRCV), which reached an all-time high of $152.0 million as of March 4, 2026, and a lower expense run rate resulting from efficiency measures and technology support optimization. The company plans to continue investing in research and development, including through acquisitions, to enhance technology and new solutions, while acknowledging risks associated with emerging technologies like AI.

Management Comments

• Our purpose is to humanize healthcare and support organizations in their understanding of each unique individual.
• Our commitment to Human Understanding helps leading healthcare systems improve their operations through understanding each person they serve not as point-in-time insights, but as an ongoing relationship.
• We believe access to, analysis of, and acting on our extensive individual-driven information is increasingly valuable as healthcare providers need to better understand and engage the people they serve to create long-term relationships, build loyalty, and improve processes.
• With TRCV growing and a lower expense run rate, we expect revenue, operating margin, and operating cash flow to grow in 2026.
• We believe living Human Understanding in the workplace is the job of every associate.

Industry Context

StockSavvy.ai notes that NRC Health operates within the highly competitive healthcare information and market research services industry, which is undergoing significant transformation towards value-based payment models and increased consumer engagement. The company's focus on 'Human Understanding' and its AI-enabled platform aligns with the broader industry trend of leveraging technology to enhance patient experience and operational efficiency. The increasing cost pressures on healthcare providers and the entry of customer-centric organizations from other verticals underscore the growing demand for solutions that build loyalty and improve outcomes. NRC Health's cross-continuum positioning is increasingly important as the healthcare landscape moves towards more collaborative and integrated service models.

Comparison to Industry Standards

• NRC Health competes with larger firms like Press Ganey and Qualtrics, which are noted to have significantly higher annual revenue, indicating NRC Health operates in a market with established, well-resourced competitors.
• The company's long-tenured focus on the healthcare industry (nearly 45 years) and extensive portfolio of solutions are presented as competitive strengths, differentiating it from general market research or software providers.
• Over 250 of the top 400 healthcare systems in the U.S. (based on net patient revenue) use one or more of NRC Health's solutions, suggesting a strong penetration among leading healthcare organizations, which could be a benchmark for customer acquisition and retention in the sector.
• The company's highly scalable and visible subscription-based revenue model, with ongoing customer renewals, is a favorable characteristic often sought in SaaS and information services industries, providing a degree of revenue predictability compared to project-based models.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in certain claims and litigation arising in the normal course of business.
• Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.
• Management does not believe the final disposition of claims at December 31, 2025, will have a material adverse effect on consolidated financial position, results of operations, or liquidity.
• Legal proceedings, claims, inquiries, and investigations can impose a significant burden on management and employees, may include costly defense and settlement costs, and could cause harm to reputation and brand.

Related Party Transactions

• The Common Property Trust and other entities controlled by trustees or special power holders for the benefit of Chairman Michael D. Hays' family owned approximately 46.8% of the outstanding common stock as of February 28, 2026.
• This concentration of ownership provides these entities with the power to indirectly control and significantly influence decisions requiring shareholder approval, including the election of directors and the approval of significant corporate matters such as change of control transactions.

Stakeholder Impact

• **Shareholders:** Experienced decreased revenue and profitability in 2025, but benefit from an increased quarterly dividend (16 cents per share starting Jan 2026) and significant stock repurchase programs ($35.69 million in 2025). The Hays family trusts' 46.8% ownership provides them with significant control.
• **Employees (Associates):** The company employed 357 associates as of December 31, 2025, with most working remotely. The company emphasizes 'Human Understanding' and associate development, but higher attrition rates in recent years could lead to increased costs for attraction and retention.
• **Customers:** Benefit from new AI-enabled products and solutions, improved customer experience due to efficiency measures, and the acquisition of Nobl Health's rounding solutions. The company's ability to maintain high-quality data collection and service delivery is crucial for customer retention.
• **Management:** Significant changes in senior management occurred in 2024 and 2025, including new CEO, COO, CFO, and other executive appointments, with associated non-recurring compensation expenses.
• **Creditors:** The new Credit Agreement (February 2025) includes a $110 million Delayed Draw Term Loan and a $30 million Revolving Loan, collateralized by substantially all assets. The company was in compliance with financial covenants as of December 31, 2025.

Next Steps

• Continue to increase scope of services and sales of existing solutions to existing customers (cross-selling).
• Win additional new customers through market share growth in existing market segments.
• Develop new solutions and expand use cases to new and existing customers.
• Pursue acquisitions of, or investments in, firms providing complementary products, solutions, or technologies.
• Publicly update forward-looking statements to reflect subsequent events or circumstances as required by federal securities laws.
• File the definitive proxy statement for the 2026 Annual Meeting of Shareholders with the SEC within 120 days after December 31, 2025.
• Evaluate the effect of adopting ASU 2024-03 (Disaggregation of Income Statement Expenses) for annual reporting periods beginning after December 15, 2026.
• Evaluate the effect of adopting ASU 2025-06 (Targeted Improvements to the Accounting for Internal-Use Software) for annual reporting periods beginning after December 15, 2027.
• Settle the remaining contingent consideration liability related to the Nobl acquisition in January 2026.
• Pay the increased quarterly cash dividend of 16 cents per share commencing with the dividend payable in January 2026.

Key Dates

Recommendation

While NRC Health reported a significant decline in 2025 financial performance, including revenue, operating income, and net income, the strong growth in Total Recurring Contract Value (TRCV) to an all-time high and management's explicit expectation for revenue and operating margin growth in 2026 provide a forward-looking positive signal. The strategic management changes, product innovation, and shareholder-friendly actions like increased dividends and stock repurchases suggest a proactive effort to turn the business around. However, the past year's underperformance and the competitive, regulated healthcare market warrant a 'hold' rather than a 'buy' until the anticipated 2026 growth materializes and demonstrates sustained improvement.

Keywords

Healthcare technology, Patient experience, Consumer experience, Employee experience, Market experience, Healthcare analytics, Customer loyalty, Human Understanding, AI-enabled products, SEC 10-K, Financial performance, Corporate governance, Risk management, Subscription services, Total Recurring Contract Value, NRC Health, Nobl Health, Cybersecurity, HIPAA compliance, Stock repurchase, Dividends, Executive compensation, Internal controls, Healthcare industry trends, Value-based purchasing, CAHPS surveys