National Research Q2 Earnings Call Highlights

National Research (NASDAQ:NRC), operating as NRC Health, reported second-quarter results marked by 11% year-over-year growth in total recurring contract value, while management said investments in implementation, customer success and product development supported a large customer deployment and future growth initiatives.

Total Recurring Contract Value, or TRCV, reached $151.9 million at June 30, up 11% from a year earlier. Revenue increased approximately 4% year over year and 2% sequentially, while adjusted EBITDA totaled $9.4 million, representing a 27% margin.

CEO Trent Green said the company’s Experience business delivered mid-teens TRCV growth, supported by strong bookings activity in the first half. The Governance Institute, or TGI, recorded its strongest bookings performance in seven years and increased TRCV by nearly 10% year over year.

Revenue recognition change affected quarterly growth

CFO Shane Harrison said second-quarter revenue growth included an approximately two-percentage-point headwind from a change in revenue recognition for certain reputation management solutions. NRC replaced a third-party vendor for parts of those offerings, and the new arrangement requires the company to record revenue on a net basis rather than recognize vendor costs as expenses.

Harrison said the annual impact is about $1.5 million and that the accounting change does not alter the company’s TRCV reporting, which continues to use a gross treatment. The revenue effect was most pronounced in the second quarter and is expected to lessen in the third and fourth quarters.

Management said TRCV growth is expected to lead reported revenue as implementations ramp, particularly for larger multi-site customers. The company’s previously disclosed landmark customer win began recognizing revenue in July, according to Green.

“We brought on the first 25 hospitals and a number of ambulatory sites earlier this month,” Green said. “We’ll bring on the next tranche of facilities in October, and we’ll be fully deployed by the end of the year.”

Green added that the customer also purchased NRC’s rounding platform, though that product is not yet included in TRCV and is expected to begin in the second half of 2027.

Margins held steady amid investment

Adjusted EBITDA margin was essentially unchanged from the first quarter, as NRC expanded delivery teams and continued product and platform investments. Adjusted EBITDA was down three percentage points, or $900,000, from the prior-year period, Harrison said, citing higher operating expenses tied to implementation capacity, customer success, product development and normalized corporate expenses after the company’s executive-team buildout in 2025.

Management expects third-quarter revenue to rise sequentially, while adjusted EBITDA margin is projected to remain near first-half levels because the company’s annual customer conference will occur in September. NRC expects EBITDA margin improvement in the fourth quarter as revenue scales and expenses normalize from the third quarter.

Adjusted net income was $6.9 million, or $0.31 per diluted share. Harrison said the majority of adjustments related to accelerated vesting of restricted shares and cash payments to offset personal taxes for three executives, actions intended to honor the original terms of 2025 share grants.

The company expects an effective tax rate of roughly 40% in the third and fourth quarters, following an unusual second-quarter tax provision. For longer-term modeling, Harrison said NRC generally expects an effective tax rate in the high-20% range, while cash taxes tend to run in the lower-to-mid-20% range.

Governance, cross-selling and AI highlighted

Green characterized The Governance Institute as a strategic asset that provides access to healthcare system CEOs and general counsel, helping NRC build awareness of its broader product suite. TGI represents about 10% of NRC’s business, he said, and management does not expect it to be a major driver of overall revenue in the near term, though it sees growth potential.

NRC has established a dedicated sales team for TGI, which Green said had not existed previously. He said the business benefits from a network effect among healthcare leaders and has opportunities to regain membership levels that were previously higher.

The company also emphasized cross-selling as a growth opportunity. Green said roughly 70% of NRC customers currently buy only one product, leaving room to expand relationships across its Experience, Market Insights and governance offerings.

During the quarter, NRC launched ambient listening with agentic artificial intelligence in its rounding solution. Green said the feature is designed to let frontline leaders remain present during patient interactions while AI captures and organizes conversations, identifies themes and surfaces service-recovery opportunities.

Management said the AI-enabled rounding capability is included within the current rounding subscription rather than sold as a separate SKU. Green said NRC is evaluating potential premium AI offerings over time, while also using AI internally to improve the efficiency of customer success and implementation teams.

Pipeline grew as competitive landscape shifts

Green said NRC’s sales pipeline increased 60% year over year during the second quarter, while sales activity, including on-site meetings, rose 35%. However, average deal size in the pipeline declined, which he attributed to the sizes of organizations currently seeking solutions.

Management also cited uncertainty following Qualtrics’ acquisition of Press Ganey, which closed May 18. Green said some active request-for-proposal processes have paused while buyers assess the combined company’s offerings and platform strategy.

“We offer certainty where there is uncertainty,” Green said, adding that NRC is continuing to emphasize its rounding platform, The Governance Institute and Market Insights offerings as complementary components of a broader experience and brand-improvement strategy.

Capital allocation included dividend and repurchases

Second-quarter free cash flow was $62,000, an improvement of $4.2 million from the prior-year period, as executive cash bonuses and capital spending related to headquarters renovations declined year over year.

NRC paid its regular quarterly dividend of $0.16 per share and repurchased approximately 397,000 shares under its existing $60 million authorization. Harrison said the company will continue to weigh internal investment, potential acquisitions and repurchases as it seeks to compound free cash flow per share over time.

About National Research (NASDAQ:NRC)

National Research Corp (NASDAQ: NRC), also known as NRC Health, is a healthcare analytics and performance improvement company specializing in patient and employee experience measurement. The company's cloud-based platform enables healthcare providers to collect real-time feedback through patient satisfaction surveys, post-discharge outreach, and employee engagement tools. NRC Health integrates clinical, operational and financial data to deliver actionable insights that support quality improvement initiatives and value-based care programs.

Since its founding in the early 1990s and headquartered in Lincoln, Nebraska, National Research has expanded beyond its regional roots to serve more than 1,600 hospitals and 12,000 care sites across the United States and Canada.

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